GSI Technology(GSIT) - 2025 Q4 - Annual Report

Part I Business GSI Technology is a fabless semiconductor company transitioning its focus from high-speed synchronous SRAM to in-place associative computing solutions for AI and HPC markets, while continuing to generate revenue from its established SRAM business - The company's primary business is providing in-place associative computing solutions (APU) for AI and HPC markets, while continuing to serve the synchronous SRAM market[11][12] - Fiscal year 2025 net revenue decreased by 6% compared to fiscal 2024, attributed to cautionary customer spending and reduced demand for SRAM products due to worldwide inflationary pressures and geopolitical tensions[13][14][15] - GSI is developing its second-generation Gemini-II chip, with first silicon received in January 2024 and a planned market release in mid-calendar 2025[22] - The company has secured multiple government contracts (Space Development Agency, AFWERX, U.S. Army) to develop its APU technology for defense and space applications, with milestone payments totaling over $2.6 million[16][17][18] - In May 2024, GSI initiated a strategic review to explore options like financing, divestitures, licensing, or a sale of the company to maximize shareholder value[26][27] - On June 6, 2024, the company completed a sale and leaseback of its Sunnyvale headquarters, generating net cash proceeds of $11.2 million and recording a gain of $5.7 million[25] Customers GSI's revenue is significantly concentrated with a few key customers and channels, with distributors accounting for 91.7% of net revenues in fiscal 2025 and Avnet Logistics being the largest direct customer Revenue by Sales Channel (FY2023-FY2025) | Channel | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Direct to Contract Manufacturers | 7.9% | 20.5% | 19.8% | | To Distributors | 91.7% | 76.3% | 77.5% | Revenue from Major Direct Customers (FY2023-FY2025) | Customer | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | Avnet Logistics | 49.6% | 50.6% | 48.1% | | Holystone | 22.6% | 2.5% | 2.4% | | Flextronics Technology | 2.7% | 13.5% | 10.4% | | Nexcomm | 9.8% | 9.3% | 16.6% | Revenue from Major End-User Customers (FY2023-FY2025) | End-User Customer | FY2025 | FY2024 | FY2023 | | :--- | :--- | :--- | :--- | | KYEC | ~23% | ~3% | ~2% | | Nokia | ~12% | ~21% | ~17% | Manufacturing GSI operates a fabless manufacturing model, outsourcing all wafer fabrication, assembly, and most testing, relying heavily on TSMC as its single source for all SRAM and APU wafers - The company utilizes a fabless business model, outsourcing wafer fabrication, assembly, and testing[60] - All SRAM and APU wafers are currently manufactured by a single foundry, TSMC, under purchase orders without a long-term supply contract[61][63] - APU products are manufactured using 28nm and 16nm process technology, while SRAM products use 0.13 micron, 90nm, 65nm, and 40nm technologies[64] Intellectual Property GSI's competitive position relies on protecting its proprietary technology through a combination of patents, copyrights, trade secrets, and contractual agreements, holding 142 U.S. patents, including 82 related to associative computing technology - The company holds 142 United States patents, comprising 60 for memory and 82 for associative computing[73] - GSI relies on a combination of patents, copyrights, trademarks, and trade secret laws to protect its intellectual property[73] - The company faces risks from potential patent infringement litigation, which could lead to substantial damages, injunctions, or costly licensing agreements[74][76] Human Capital Resources As of March 31, 2025, GSI Technology had 121 full-time employees, with a strong emphasis on engineering talent globally distributed across Sunnyvale, Taiwan, and Israel Employee Distribution as of March 31, 2025 | Category | Number of Employees | | :--- | :--- | | Total Employees | 121 | | Engineers | 82 | | - Research & Development | 47 | | Sales & Marketing | 16 | | General & Administrative | 10 | | Manufacturing | 44 | Employee Geographic Location | Location | Number of Employees | | :--- | :--- | | Sunnyvale, CA | 40 | | Taiwan | 40 | | Israel | 33 | Risk Factors The company faces numerous risks that could adversely affect its business, including unpredictable operating results, heavy reliance on major customers, uncertainty of its strategic review, and dependence on single-source suppliers - Significant reliance on key customers KYEC and Nokia, which accounted for approximately 23% and 12% of net revenues in fiscal 2025, respectively[96][107][109] - The company's future success is substantially dependent on the commercialization of its new in-place associative computing (APU) products, which involves significant technological and market adoption risks[97][113] - Dependence on single-source suppliers, particularly TSMC for all wafer fabrication, poses a significant risk of manufacturing disruption and cost increases[97][124][125] - Geopolitical risks are heightened due to software development operations in Israel and manufacturing and testing operations in Taiwan, which could be affected by military conflicts or political instability[104][173][174] - The ongoing strategic review creates uncertainty that could adversely affect employee retention, and customer and supplier relationships, with no assurance of a specific outcome[97][110] - The company has a history of significant net losses, reporting losses of $10.6 million, $20.1 million, and $16.0 million in fiscal 2025, 2024, and 2023, respectively[117] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[189] Cybersecurity GSI has established a cybersecurity risk management program that includes processes to identify, assess, and manage material risks from cyber threats, with Board oversight delegated to the Audit Committee - The company has implemented a cybersecurity risk management program designed to align with ISO standards[194] - The Board of Directors has overall oversight of cybersecurity risk, with the Audit Committee designated to regularly review management's processes and procedures for managing these risks[196][197] - Management provides quarterly cybersecurity updates to the Audit Committee, covering threat risk management, response readiness, and incident response planning[199] Properties The company's principal executive offices are located in a 44,277 square foot facility in Sunnyvale, California, and it also leases a 25,250 square foot facility in Hsin Chu, Taiwan, with aggregate annual gross rent of approximately $1.8 million in fiscal 2025 - Leases a 44,277 sq. ft. facility in Sunnyvale, CA (headquarters) and a 25,250 sq. ft. facility in Hsin Chu, Taiwan (manufacturing support)[201] - Aggregate annual gross rent for leased facilities was approximately $1.8 million in fiscal 2025[201] Legal Proceedings The company reports that there are no legal proceedings - None[202] Mine Safety Disclosures This item is not applicable to the company - Not applicable[203] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities GSI Technology's common stock trades on the Nasdaq Global Market under the symbol "GSIT", and the company has never paid cash dividends nor repurchased shares in the most recent quarter - Common stock is traded on the Nasdaq Global Market under the symbol "GSIT"[205] - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[206] - No shares were repurchased under the company's authorized stock repurchase program in the quarter ended March 31, 2025[207][208] Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2025, GSI's net revenues decreased by 5.7% to $20.5 million, gross margin fell to 49.4%, and a $5.7 million gain from a property sale helped reduce the net loss to $10.6 million, with liquidity supported by $13.4 million in cash Results of Operations For fiscal year 2025, net revenues fell 5.7% to $20.5 million, gross margin declined to 49.4%, and a $5.7 million gain from a property sale contributed to a net loss of $10.6 million, a significant improvement from the prior year Fiscal Year 2025 vs. 2024 Financial Performance (in thousands) | Metric | FY 2025 | FY 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $20,518 | $21,765 | ($1,247) | -5.7% | | Gross Profit | $10,140 | $11,823 | ($1,683) | -14.2% | | Gross Margin | 49.4% | 54.3% | -4.9pp | N/A | | R&D Expenses | $16,005 | $21,689 | ($5,684) | -26.2% | | SG&A Expenses | $10,763 | $10,565 | $198 | +1.9% | | Gain from Sale of Assets | ($5,793) | $0 | ($5,793) | N/A | | Loss from Operations | ($10,835) | ($20,431) | $9,596 | -47.0% | | Net Loss | ($10,639) | ($20,087) | $9,448 | -47.0% | - The decrease in net revenues was primarily due to a 6.4% decrease in units shipped, with sales to Nokia falling by $2.0 million, while sales to KYEC increased by $4.1 million[237] - The decrease in R&D expenses was mainly due to a $2.4 million reduction in pre-production mask costs for the APU2 product and a $2.2 million decrease in payroll expenses from cost-cutting measures[239] Liquidity and Capital Resources As of March 31, 2025, GSI had $13.4 million in cash and cash equivalents, with net cash used in operating activities of $13.0 million, and believes its existing cash and expected cash flow will be sufficient for at least the next 12 months Cash and Cash Equivalents | Date | Amount (in millions) | | :--- | :--- | | March 31, 2025 | $13.4 | | March 31, 2024 | $14.4 | Cash Flow Summary (Fiscal Year 2025 vs 2024, in millions) | Cash Flow Activity | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($13.0) | ($17.4) | | Net Cash Provided by Investing Activities | $11.4 | $2.8 | | Net Cash Provided by Financing Activities | $0.6 | $1.8 | - The company has an At-the-Market (ATM) offering agreement to sell up to $25.0 million of its common stock, and in May and June 2025, it sold 3,380,773 shares for proceeds of $11.2 million[253][421] Quantitative and Qualitative Disclosures About Market Risk The company has minimal exposure to foreign currency exchange risk as most transactions are in U.S. dollars and does not believe it has material exposure to interest rate sensitivity due to the short-term nature of its investments - The company has relatively little exposure to foreign currency exchange risk as most transactions are in U.S. dollars[262] - Due to the short-term nature of its investments in money market funds, the company does not believe it has material exposure to interest rate sensitivity[263] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for fiscal years ended March 31, 2025, 2024, and 2023, including balance sheets, statements of operations, and cash flows, with key figures for fiscal 2025 showing total assets of $43.3 million and a net loss of $10.6 million Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $23,455 | $30,107 | | Total Assets | $43,317 | $42,464 | | Total Current Liabilities | $7,074 | $5,365 | | Total Liabilities | $15,091 | $6,494 | | Total Stockholders' Equity | $28,226 | $35,970 | Consolidated Statement of Operations Data (in thousands) | Account | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Net Revenues | $20,518 | $21,765 | $29,691 | | Gross Profit | $10,140 | $11,823 | $17,681 | | Loss from Operations | ($10,835) | ($20,431) | ($15,807) | | Net Loss | ($10,639) | ($20,087) | ($15,977) | | Diluted Net Loss Per Share | ($0.42) | ($0.80) | ($0.65) | - The independent auditor's report identifies the valuation of inventories as a Critical Audit Matter, due to the significant judgments required to forecast customer demand and estimate adjustments for excess and obsolete inventory[271][272][273] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[423] Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of March 31, 2025, with no material changes reported during the fourth quarter of fiscal 2025 - Management concluded that disclosure controls and procedures were effective as of March 31, 2025[425] - Management concluded that internal control over financial reporting was effective as of March 31, 2025[428] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[429] Other Information During the quarter ended March 31, 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the fourth quarter of fiscal 2025[430] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[431] Part III Directors, Executive Officers and Corporate Governance Information regarding executive officers is provided in Part I of this report, with all other required information incorporated by reference from the company's definitive proxy statement for its 2025 annual meeting of stockholders - Information is incorporated by reference from the company's 2025 definitive proxy statement[434][435] Executive Compensation The information required by this item concerning executive compensation is incorporated by reference from the "Executive Compensation" section of the company's definitive proxy statement for its 2025 annual meeting of stockholders - Information is incorporated by reference from the company's 2025 definitive proxy statement[436] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item regarding security ownership and equity compensation plans is incorporated by reference from the company's definitive proxy statement for its 2025 annual meeting of stockholders - Information is incorporated by reference from the company's 2025 definitive proxy statement[437] Certain Relationships and Related Transactions, and Director Independence The information required by this item concerning related person transactions and director independence is incorporated by reference from the company's definitive proxy statement for its 2025 annual meeting of stockholders - Information is incorporated by reference from the company's 2025 definitive proxy statement[438] Principal Accountant Fees and Services The information required by this item regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its 2025 annual meeting of stockholders - Information is incorporated by reference from the company's 2025 definitive proxy statement[439] Part IV Exhibits and Financial Statement Schedules This section lists the documents filed as part of the Form 10-K, including the index to the Consolidated Financial Statements and a detailed list of all exhibits filed with the report - Lists the financial statements, financial statement schedules, and exhibits filed as part of the annual report[441][442][444] Form 10-K Summary This item is not applicable to the company - Not applicable[447]