Robert Aguanno

Robert Aguanno with Needham & Company inquired about the strategic importance of defense applications for GSI Technology's Gemini 2, how these applications validate its real-world capabilities, and the potential for commercial expansion beyond drones and defense. He also asked for timelines and details regarding government funding as a catalyst for 2026.

Answer

Chairman, President, and CEO Lee-Lean Shu highlighted defense as an area of early success, citing SBIR wins with the DoD and a SAR application for LEO satellites, noting that defense has adopted their technology most quickly. VP of Sales Didier Lasserre added that the G2 Tech partnership allows for the creation of a true product using GSI's APU. Mr. Shu further explained that the current proof-of-concept work for G2 Tech will be leveraged for broader commercial applications like smart cities and robotics. Regarding government funding, Mr. Shu detailed an ongoing pipeline of SBIR submissions and other funding programs, emphasizing their non-dilutive nature and increased DoD exposure.

Robert Aguanno, a Research Analyst at Needham & Company, inquired about the strategic importance of defense applications for GSI Technology's Gemini-II, how these applications validate Gemini's real-world capabilities, and the potential for commercial expansion beyond drones and defense. He also asked about the timelines and details for expected government funding.

Answer

Chairman, President, and CEO Lee-Lean Shu, along with VP of Sales Didier Lasserre, highlighted GSI Technology's early successes in military and defense sectors, including SBIR wins and a SAR application. They emphasized the G2 Tech partnership's role in product development and the potential to leverage current proof-of-concept work for broader commercial applications such as smart cities and robotics. Mr. Shu also detailed the continuous pipeline of SBIR submittals and other funding programs, underscoring the benefits of non-dilutive funding and increased DoD exposure.

Robert Aguanno of Piper Sandler Companies asked about the customer acquisition strategy for Fab 25 beyond Infineon, inquiring about the types of customers being targeted and whether those discussions have commenced.

Answer

CEO Thomas Sonderman explained that the primary targets are "hybrid" semiconductor manufacturers (like NXP, STMicroelectronics) and others (like Renesas) who value U.S.-based sourcing for foundational nodes, particularly for automotive and industrial applications. He also highlighted the national imperative for the Department of Defense to reduce reliance on foreign silicon, creating another strong demand vector. Sonderman confirmed that these conversations are active, capitalizing on the megatrend of domestic sourcing.

Robert Aguanno asked for more details on other new product opportunities driving Wafer Services revenue and the potential for expanding that business. He also requested key performance indicators or metrics to gauge the revenue impact from the Florida packaging facility in 2025 versus 2026.

Answer

CEO Thomas Sonderman explained that two lead customers are ramping ThermaView products and that future design wins on the platform will move directly into Wafer Services, with ramp rates dependent on customer qualifications. Regarding the Florida facility, Sonderman clarified that its 2025 revenue impact will primarily be from tool sales in the second half, with traditional ATS engineering revenue expected to ramp in 2026.

Robert Aguanno, on for Harsh Kumar at Piper Sandler, asked about the gross margin trajectory, perceiving the Q4 guidance as a decline, and requested details on the drivers for gross margin expansion in 2025, such as revenue growth and operating leverage.

Answer

CFO Steve Manko corrected the premise, clarifying that Q4 gross margin for the core ATS and Wafer Services business is expected to be very similar to Q3. For 2025, he projected that overall gross margin will increase. This expansion will be driven by lower tool revenue (which carries a negative margin impact) and continued growth in the higher-margin ATS and Wafer Services business, where he expects a margin flow-through better than 55% at current revenue levels.

Robert Aguanno questioned whether annealing solutions could capture parts of the Total Addressable Market (TAM) previously thought to be exclusive to gate-model systems. He also asked if potential year-end government budget tightening could impact near-term results.

Answer

CEO Alan Baratz asserted that optimization is a 'killer app' for quantum and that a growing body of evidence shows annealing systems are far superior to gate-model systems for these problems, effectively making that portion of the TAM best addressed by annealing. Regarding budget tightening, Baratz stated it is not a current issue for D-Wave, as the company's model has been commercially focused, and any impact would likely be felt more by gate-model competitors who are heavily reliant on government funding.