Financial Performance - Net revenues decreased by $1.9 million, or 42%, to $2.6 million for the three months ended September 30, 2024, from $4.5 million for the same period in 2023, primarily due to a $2.3 million decrease in product sales[170]. - Product sales decreased by $2.3 million, or 57%, from $4.0 million for the three months ended September 30, 2023, to $1.7 million for the same period in 2024, attributed to excess LTE channel inventory and a shift in customer priorities towards 5G products[171]. - Service revenues increased by $0.4 million, or 99%, from $0.5 million for the three months ended September 30, 2023, to $0.9 million for the same period in 2024, driven by significant ongoing service projects[172]. - Gross profit increased to $1.6 million for the three months ended September 30, 2024, compared to $0.5 million for the same period in 2023, resulting in a gross margin of 62%[174]. - Net loss for the three months ended September 30, 2024, was $7.1 million, compared to a net loss of $4.3 million for the same period in 2023, representing a 64% increase in loss[179]. - For the nine months ended September 30, 2024, net revenues decreased by $4.5 million, or 38%, to $7.3 million, primarily due to a $4.6 million decrease in product sales[181]. - For the nine months ended September 30, 2024, the company reported a net loss of $7.4 million, compared to a net loss of $12.3 million for the same period in 2023[204]. - Cash used in operating activities for the nine months ended September 30, 2024, was $28.7 million, significantly higher than $7.9 million for the same period in 2023[204]. - Free cash flow for the nine months ended September 30, 2024, was $(28.9) million, compared to $(8.2) million for the same period in 2023[202]. Research and Development - Research and development expenses are expected to increase as the company continues to grow and expand operations[165]. - Research and development expenses increased by $1.8 million, or 78%, from $2.4 million for the three months ended September 30, 2023, to $4.2 million for the same period in 2024, mainly due to professional services for 5G chip design[175]. - Research and development expenses for the nine months ended September 30, 2024, increased by $6.6 million, or 92%, to $13.9 million, driven by development projects related to 5G products[185]. Operating Expenses - Operating expenses include significant costs related to general and administrative functions, which are expected to rise due to public company requirements[157][165]. - Total operating expenses increased by $2.99 million, or 66%, from $4.5 million for the three months ended September 30, 2023, to $7.5 million for the same period in 2024[177]. - Cash used in operating activities for the nine months ended September 30, 2024, was $28.7 million, primarily due to a net loss of $7.4 million and non-cash adjustments of $12.2 million[214]. Financing and Liquidity - The company entered into a term loan agreement for KRW 4.0 billion ($2.9 million) with a board member, bearing an annual interest rate of 12.0%[142]. - The company received $17.2 million in cash proceeds from a reverse recapitalization and PIPE Financing in March 2024[205]. - The net cash provided by financing activities for the nine months ended September 30, 2024, was $31.6 million, compared to $7.6 million for the same period in 2023[213]. - Cash provided by financing activities during the nine months ended September 30, 2024, was $31.6 million, including $17.2 million from reverse recapitalization and PIPE Financing[216]. - As of September 30, 2024, the company had outstanding convertible promissory notes and borrowings totaling $41.8 million, with $36.8 million due within 12 months[207]. - The company plans to use additional liquidity for mass production costs of 5G products, acquisition of IP, and hiring additional personnel[211]. Market and Industry Conditions - The semiconductor industry has experienced a downturn since late 2022, impacting demand and pricing, particularly for 4G LTE products[153]. - The company anticipates increased demand for its products following the launch of new 5G products, as major customers shift focus from 4G to 5G[155]. - The company faces risks from economic conditions that could adversely affect customer demand and financial performance[156]. Company Structure and Compliance - The company is classified as an "emerging growth company" under the JOBS Act, allowing it to delay adopting new accounting standards[229]. - The company has elected to take advantage of scaled disclosures available to smaller reporting companies, contingent on market value and revenue thresholds[231]. - The company has material commitments and contractual obligations, including leases and research and development agreements[218]. - The company has various operating leases with expiration dates through 2026[218].
GCT Semiconductor Holding, Inc.(GCTS) - 2024 Q3 - Quarterly Report