5G Product Development and Market Outlook - The company anticipates first production shipments of its 5G products starting late in Q4 2025 or early Q1 2026, with expected average sales prices for 5G chipsets being approximately four times that of 4G chipsets [161]. - The company has successfully developed and supplied communication semiconductor chipsets and modules to leading wireless operators and OEMs, focusing on high-speed wireless communication technologies including 5G [158]. - The company plans to expand its product lineup to support future applications such as vehicle-to-everything standards and 5G-based satellite communication [161]. - The company expects continued demand for its existing 4G LTE product lineup, as 4G products are projected to coexist with 5G products at lower price points for some time [161]. - The company’s current product portfolio includes RF and modem chipsets differentiated by speed and functionality, including 4G LTE, 4.5G LTE Advanced, and 4.75G LTE Advanced-Pro [160]. Financial Performance - Net revenues decreased by $2.2 million, or 84%, from $2.6 million for the three months ended September 30, 2024 to $0.4 million for the three months ended September 30, 2025 [189]. - Product sales decreased by $1.6 million, or 91%, from $1.7 million for the three months ended September 30, 2024 to $0.1 million for the three months ended September 30, 2025 [190]. - Service revenues decreased by $0.6 million, or 68%, from $0.9 million for the three months ended September 30, 2024 to $0.3 million for the three months ended September 30, 2025 [191]. - For the nine months ended September 30, 2025, net revenues decreased by $5.2 million, or 71%, from $7.3 million for the nine months ended September 30, 2024 to $2.1 million [203]. - The company reported a net loss of $34.4 million for the nine months ended September 30, 2025, compared to a net loss of $12.4 million for the year ended December 31, 2024 [221]. Operating Expenses - Total operating expenses increased by $0.7 million, or 9%, from $7.5 million for the three months ended September 30, 2024 to $8.2 million for the three months ended September 30, 2025 [198]. - General and administrative expenses increased by $1.5 million, or 64%, from $2.4 million for the three months ended September 30, 2024 to $3.9 million for the three months ended September 30, 2025 [198]. - Research and development expenses decreased by $1.0 million, or 23%, from $4.2 million for the three months ended September 30, 2024 to $3.3 million for the three months ended September 30, 2025 [196]. - General and administrative expenses increased by $1.9 million, or 23%, from $8.1 million for the nine months ended September 30, 2024, to $9.9 million for the nine months ended September 30, 2025 [212]. Cash Flow and Financing Activities - Cash used in operating activities decreased from $28.7 million for the nine months ended September 30, 2024, to $23.5 million for the nine months ended September 30, 2025 [234]. - Cash provided by financing activities for the nine months ended September 30, 2025, was $31.1 million, consisting of $21.8 million from borrowings and $11.0 million from the issuance of common stock [239]. - The company sold an aggregate of 2,438,737 shares of common stock for $9.9 million under an equity line of credit facility with B. Riley through September 30, 2025 [222]. - The company raised approximately $11.0 million from a registered direct offering, selling 7,006,370 shares of common stock and warrants [224]. - 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 [237]. Risks and Industry Trends - The company relies on third-party foundries for manufacturing, with no formal agreements guaranteeing minimum manufacturing capacity, which poses risks during periods of high demand [171]. - The semiconductor industry has historically experienced cyclicality, with downturns potentially leading to declines in demand, production overcapacity, and price erosion [167]. - The provision for credit losses increased to $2.6 million as of September 30, 2025, compared to $1.2 million as of December 31, 2024 [252]. Other Financial Metrics - Interest expense increased by $1.1 million, or 167%, from $0.7 million for the three months ended September 30, 2024 to $1.8 million for the three months ended September 30, 2025 [199]. - Gross margin for the nine months ended September 30, 2025 is negative and not meaningful, compared to a gross margin of 61% for the same period in 2024 [209]. - Interest expense rose by $0.9 million, or 25%, from $3.5 million for the nine months ended September 30, 2024, to $4.4 million for the nine months ended September 30, 2025, primarily due to increased outstanding debt [214]. - Cash used in investing activities during the nine months ended September 30, 2025, and 2024, was solely related to the purchases of property and equipment [238]. Company Structure and Compliance - The company has material commitments and contractual obligations, including leases and research and development agreements, with various operating leases expiring through 2028 [242]. - The company is classified as a "smaller reporting company" and has elected to take advantage of scaled disclosures available to such companies [260].
GCT Semiconductor Holding, Inc.(GCTS) - 2025 Q3 - Quarterly Report