GSI Technology(GSIT) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements GSI Technology reported $8.8 million net revenues (up 32.8% YoY) and a $4.2 million net loss, maintaining a debt-free balance sheet Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2021 (In thousands) | March 31, 2021 (In thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $44,490 | $44,234 | | Total current assets | $61,886 | $63,446 | | Total assets | $84,537 | $87,612 | | Liabilities & Equity | | | | Total current liabilities | $7,039 | $7,462 | | Total liabilities | $11,563 | $12,020 | | Total stockholders' equity | $72,974 | $75,592 | Condensed Consolidated Statements of Operations Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2021 (In thousands) | Three Months Ended June 30, 2020 (In thousands) | | :--- | :--- | :--- | | Net revenues | $8,791 | $6,621 | | Gross profit | $4,782 | $3,050 | | Total operating expenses | $9,143 | $8,745 | | Loss from operations | $(4,361) | $(5,695) | | Net loss | $(4,209) | $(6,076) | | Net loss per share (Basic & Diluted) | $(0.17) | $(0.26) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Unaudited) | Activity | Three Months Ended June 30, 2021 (In thousands) | Three Months Ended June 30, 2020 (In thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,621) | $(3,575) | | Net cash provided by investing activities | $4,094 | $700 | | Net cash provided by financing activities | $783 | $2,339 | | Net increase (decrease) in cash | $256 | $(536) | | Cash and cash equivalents at end of period | $44,490 | $50,970 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue recognition, and financial instrument valuations, highlighting COVID-19 impacts and key customer Nokia - The COVID-19 pandemic continues to disrupt business operations, impacting customer buying patterns, supply chains, and sales, with expected persistence through fiscal 2022 and into 2023[30][31][33] - Sales of SRAM products constituted approximately 99% of total revenues for the three months ended June 30, 2021[44] - Nokia, the company's largest customer, represented approximately 42.7% of net revenues in the three months ended June 30, 2021, up from 26.9% in the same period of 2020[46] Revenue by Customer Type (In thousands) | Customer Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Contract manufacturers | $3,863 | $2,168 | | Distribution | $4,710 | $4,323 | | OEMs | $218 | $130 | | Total | $8,791 | $6,621 | Net Revenues by Geographic Area (In thousands) | Region | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | United States | $4,534 | $2,467 | | China | $321 | $637 | | Singapore | $1,585 | $1,239 | | Netherlands | $1,368 | $1,534 | | Germany | $577 | $478 | | Rest of the world | $406 | $266 | | Total | $8,791 | $6,621 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A attributes 32.8% revenue growth to ASP and unit increases, improved gross margin to 54.4%, and highlights strong liquidity with $55.8 million cash Overview - The company is a fabless semiconductor firm specializing in Very Fast SRAMs for networking and telecommunications, subject to industry cyclicality[94] - The COVID-19 pandemic has negatively impacted business operations, restricting sales, reducing customer demand, and causing supply chain shortages, with effects expected to continue into fiscal 2023[95][97][98] - The company maintains a strong balance sheet with $55.8 million in cash and investments and no debt as of June 30, 2021, providing financial flexibility[99] Results of Operations - Net revenues increased by 32.8% to $8.8 million in Q1 FY22 from $6.6 million in Q1 FY21, driven by a 23.0% increase in average selling price (ASP) and a 5.8% increase in units shipped[113][115] - Gross margin improved to 54.4% from 46.1% in the prior-year quarter, primarily due to changes in product and customer mix[117] - Research and development (R&D) expenses increased by 4.8% to $6.1 million, mainly due to higher payroll-related costs[118] - Selling, general and administrative (SG&A) expenses rose 4.1% to $3.0 million, driven by higher commissions for independent sales representatives[119] - Net loss decreased to $4.2 million from $6.1 million in the prior-year quarter, reflecting higher revenues and improved gross profit[123] Liquidity and Capital Resources - As of June 30, 2021, principal sources of liquidity were cash, cash equivalents, and short-term investments totaling $51.5 million[124] Cash Flow Activity (Three Months Ended June 30) | Cash Flow Activity | 2021 (In millions) | 2020 (In millions) | | :--- | :--- | :--- | | Net cash used in operating activities | $(4.6) | $(3.6) | | Net cash provided by investing activities | $4.1 | $0.7 | | Net cash provided by financing activities | $0.8 | $2.3 | - Management believes existing cash balances and expected cash flow from operations will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[129] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company identifies minimal foreign currency exchange risk and immaterial interest rate sensitivity due to USD transactions and a short-term investment portfolio - Foreign currency exchange risk is low because revenues and most expenses are denominated in U.S. dollars, and the company does not currently use hedging instruments[136] - Interest rate sensitivity is not considered a material risk to the fair value of the company's $55.8 million investment portfolio due to its short-term nature, with a hypothetical 100 basis point change not materially affecting fair value[137][138] Item 4. Controls and Procedures CEO and CFO concluded disclosure controls were effective as of June 30, 2021, with no material changes in internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective[139] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[140] PART II — OTHER INFORMATION Item 1A. Risk Factors Key risks include unpredictable operating results, heavy reliance on Nokia, COVID-19 impacts, new product challenges, and dependence on single-source suppliers like TSMC - Business & Financial Risks: The company faces risks from unpredictable operating results, significant dependence on its largest customer Nokia (43% of revenue in the quarter), and the continued adverse impact of the COVID-19 pandemic[142][147][148] - Product & Market Risks: Future success is substantially dependent on the successful introduction of new in-place associative computing products, which entails significant technological and market adoption risks, alongside intense competition and price erosion in the Very Fast SRAM market[158][166] - Manufacturing & Supply Chain Risks: The company is dependent on single-source suppliers, most notably TSMC for wafers, where any disruption, capacity constraint, or price increase could harm the business[159][160] - International Operations Risks: A significant portion of manufacturing and sales occurs internationally, exposing the company to risks from political instability (particularly in Taiwan), trade policy changes, and natural disasters in the Pacific Rim[201][202][206] - Stock & Ownership Risks: The stock price is subject to volatility, and executive officers and directors beneficially own approximately 35% of outstanding common stock, allowing substantial influence over corporate matters[212][216] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any common stock under its authorized program during the quarter ended June 30, 2021 - The company did not repurchase any of its common stock during the quarter ended June 30, 2021, under its authorized stock repurchase program[220] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits filed include certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002 and interactive data files in Inline XBRL format[222] Signatures The report is duly signed and authorized by Lee-Lean Shu, President, CEO, and Chairman, and Douglas M. Schirle, CFO, on August 6, 2021 - The Form 10-Q was signed on August 6, 2021, by the company's President, CEO, and Chairman, and its Chief Financial Officer[225][226]