GCT Semiconductor Holding (GCTS) Q4 2025 earnings call transcript

John Schlafer Thank you, and thanks to everyone for joining us today for our fourth quarter and full year 2025 earnings call. I'll begin by discussing the operational milestones we achieved during the year as we executed on our strategy to transition the company toward full 5G commercialization. Following my remarks, our CFO, Edmund Chang, will walk through the full-year financial results in greater detail. 2025 was a defining year for GCT as we reached several key milestones in the transition from our development to commercialization of our 5G chipset. Over the past year, we have focused on bringing our 5G chipset technology to commercial readiness while expanding our ecosystem of partners and customers who are preparing to deploy and integrate our 5G platform across a growing set of applications.

After the launch of sampling with lead customers in June, in the fourth quarter, we shipped more than 1,900 5G chipsets for commercial use. These shipments represent early commercial volumes that support initial deployments and or customer testing programs and mark the continued progress toward our broader production ramp. While still small in scale relative to long-term opportunities ahead, these shipments demonstrate that our production pipeline is now actively supporting real-world deployment and preparing for high volumes as customers move through their rollouts. We expect this momentum to continue generating sequential growth in 5G chipset shipments throughout 2026. Speaking of customer rollouts, another important milestone was achieved during the quarter by GoGo with their new broadband 5G air-to-ground service powered by GCT's 5G chipset.

As our first network operator to bring a live network to market using our technology, this milestone validates the performance and reliability of our 5G platform in one of the most demanding wireless connectivity environments and demonstrates the readiness of our chipset technology to support real-world commercial deployments. The launch also underscores the growing demand for GCT's 5G solutions and reinforces our positioning for broader 5G commercializations and market penetration. As additional customers advance through testing, certification, and deployment phases, We expect the success of GoGo's launch to serve as a strong validation point for other customers evaluating our technology and to support further adoption in 2026 and the years ahead.

In parallel with these developments, we've continued expanding our strategic partnerships to broaden the applications and markets for our semiconductor solutions. During the quarter, we signed a licensing agreement with one of the world's largest satellite communications providers, under which our 4G and 5G chipsets will integrate into the partners' user equipment to support global, resilient, and high-bandwidth connectivity across both satellite and terrestrial networks. This integration will enable direct-to-satellite applications across the partners' rapidly expanding network, creating new 5G tipset sales opportunities for GCT, while positioning us at the intersection of terrestrial wireless infrastructure and satellite connectivity.

Shipments for this program are expected to begin as early as the second half of 2026. More broadly, this collaboration places both companies at the forefront of emerging 5G to space networks designed to extend connectivity worldwide, including in underserved regions and supports the industry's transition towards more integrated terrestrial satellite infrastructure. By combining our advanced 5G semiconductor technology with a global satellite footprint, we're helping enable a new era of always-on connectivity that is more resilient, flexible, and accessible than ever before.

We also announced a partnership with Skylo to expand seamless global satellite connectivity for next-generation cellular to IT devices. As part of this collaboration, our teams are working jointly towards chipset and module certification that will enable ubiquitous connectivity across satellite-enabled networks for a wide range of IoT applications. This initiative further demonstrates the flexibility of our architecture and the growing number of connectivity environments our platform can operate in. Collectively, these partnerships reflect our broader strategy to position GCT at the intersection of several major technology trends, including the expansion of 5G networks, the rapid growth of connected devices, and the increasing integration of satellite connectivity with terrestrial wireless infrastructure. In addition to these commercial developments, we also took steps to strengthen our financial flexibility and ensure we have the resources necessary to support the upcoming production ramp.

During the fourth quarter, we entered into a $20 million convertible note facility with an initial $1 million advance. This financing provides us with additional optionality to support work and capital requirements, production readiness, and strategic growth initiatives, initiatives while minimizing dilution at the current stock price for shareholders. Taken together, the progress we've achieved throughout 2025 reflects a company that has successfully transitioned from the development phase of its 5G program toward the early stages of commercialization and volume production. We expanded our ecosystem of partners, advanced multiple customer programs through evaluation design and optimization phases, We began supporting live network deployment using our chipset platform. As we look ahead, our focus is on scaling operations to support the commercialization of our 5G chipset.

This includes aligning our supply chain partners, strengthening production readiness, and continuing to support customers as they move from evaluation to deployment. We believe the groundwork laid over the past year positions us well for the next stage of growth as production volumes increase and additional network operators begin featuring GCT enabled 5G devices. And with that, I'll turn the call over to Edmund to discuss the full year results. Edmund.

Thank you, John. While 2025 represented a transitional year for our financial performance, It also reflected the deliberate investment required to bring our 5G chipset platform to commercial readiness while managing our capital allocation and optimizing our cash flow. As we have discussed in prior quarters the shift from our legacy 4G product cycle to our next generation 5G platform created a temporary gap in revenue while customers completing development and integration efforts We believe this transition reached its trough during the third quarter of 2025 We are now at the inflection point as commercialization progresses Reflective of this, total revenue in the fourth quarter increased 76% sequentially from the third quarter, demonstrating early momentum as our 5G programs begin contributing to the top line.

We expect this sequential improvement to continue into 2026 as additional deployments rolled out and production volumes ramp. With that context, I will now review our full year 2025 financial results. Further details can be found in the 10K that will be on file with the SEC. Net revenues decreased by 6.3 million or 69 percent from 9.1 million for the year ended December 31st, 2024, to 2.9 million for the year ended December 31st, 2025. The change was due to a decrease of 3.6 million in product sales and a decrease of 2.6 million in service revenues. The lower product sales were driven by lower 5G reference platform sales. As we continue transitioning into 5G, wild service revenue decreased due to the completion of a substantial service project during the prior year period.

Cost of net revenue increased by 0.6 million or 16% from 4.1 million for the year end of December 31st, 2024 to 4.7 million for the year end of December 31st, 2025.

Lastly, due to additional production overhead costs. Our gross margin for the year ended December 31st, 2025 was negative. This primarily reflects the current level of product revenue, which is not yet sufficient to fully absorb our production overhead costs. And therefore, it's not fully indicative of the underlying profitability of our products and services. We expect margins to improve as product volume increase, particularly as our 5G chipset sales begin contributing more meaningfully to revenue later in 2026, following the commercial launch in the fourth quarter of 2020. Research and development expenses decreased by 3.3 million or 19% from 17.3 million for the year ended December 31st, 2024, to 14 million for the year ended December 31st, 2025.

Lastly, due to the completion of a 5G chip design project, which resulted in a 3.3 million reduction in professional services from Alpha. This reduction was partially offset by a $0.9 million increase in personnel-related costs due to our higher engineering headcount, a $0.3 million increase in stock-based compensation expense due to the issuance and resting of share-based awards, And there's 0.4 million increase in pre-production and engineering supply related to our 5G initiative.

Sales and marketing expenses were relatively flat year over year, totaling 3.9 million for the year ended December 31st, 2024, Compared to 4.2 million for the year ended December 31st, 2025. General and administrative expenses increased by 5.7 million or 53% from 10.8 million for the year ended December 31st, 2024, to 16.5 million for the year ended December 31st, 2025. The increase was primarily due to changes in our credit loss estimate for receivables, which resulted in a $2.8 million expense in 2025, compared to a $0.4 million benefit in 2024, resulting in a $3.2 million net increase to G&A expenses. Stock-based compensation expense increased by 3.2 million from 2 million for the year ended December 31st, 2024, to 5.2 million for the year ended December 31st, 2025.

The increase was primarily due to the issuance of equity classified common stock warrants to investors in 2025. Personnel-related costs increased by 0.6 million. These increases were partially offset by a 1.2 million decrease in professional services and other costs due to lower transactional activities during the year. Turning briefly to liquidity, we closed the year with cash and cash equivalent of $0.6 million. We also had net accounts receivable of $2.6 million and net inventory of $0.9 million. subsequent to the year end and of the end of February 2026, we had cash and cash equivalent of 9.4 million. In addition, we maintain access to our at the market equity program of up to 75 million and have ample capacity on the remaining 125 million of our 200 million shelf registration statement, which was effective since April 1st, 2025.

These capital resources provide us with flexibility to support working capital needs and execute on our commercialization strategy as we scale production. Looking ahead, we expect sequential growth in both revenue and 5G chipset shipments throughout 2026, As additional customers move into commercial deployment phases. As this transition continues, our financial priorities remain focused on maintaining operational discipline, preserving capital flexibility, and supporting the production ramp necessary to convert our growing customer pipeline into meaningful revenue.

With this I will turn it back to John Thanks Edmund 2025 represented a pivotal year for GCT as we transitioned from development to commercialization of our 5G platform We began supporting live network deployments, expanded our ecosystem of strategic partners, and initiated commercial 5G chipset shipments that marked the early stages of our production ramp. While our financial results still reflect the transitional nature of this period, we believe the foundation established over the past year positions us well for the next phase of growth. Our focus moving forward is on executing efficiently as we support customer launches, expand production volumes, and convert the growing demand for our technology into sustained revenue growth. I would like to thank our employees, partners, and shareholders for their continued support and commitment as we enter this important next chapter for the company.

We are encouraged by the progress we have made and look forward to building on this momentum during 2026. I will now turn the call over to the operator who will assist us in taking your questions.

Yeah, thank you, Craig. So, yeah, FWA is still a really important vertical for us, and we're focused there, you know, strongly. The lead customers that we're working with there are focused on that area. So we should have – we expect that we'll be shipping more into that market this year, and we'll have some growing backlog as early as Q2 for that, for the lead customers. And then on the satellite front, we already have some product that's shipping for NTN applications. We are expecting that the new partner that we just talked about will be shipping into that in the second half of the year. And we think that's going to be a very important second vertical for us, that we've gotten a lot of attention for 5G products as well as pairing with some of our 4G products as well.

Yeah, it's a little hard to lay them all in right now because their schedules are still a little vague to us. We're thinking that that's, you know, the point that you just mentioned would be probably in the Q1 period, but we're going to have to see – yeah, Q1 next year, so 2027. But we're going to have to see how that actually lays in. It could happen faster, but we're really waiting for some visibility that will come in the Q2 timeframe for us as we start seeing some backlog for these programs lay in.

D. : Yeah, first of all, related to your question about the gross margin, we do not think that this year's gross margin is representative of what we can achieve in 2026 going forward because of the low volume of our product revenue from that sense. We believe that going forward our gross margin should be in the range of maybe the high 40s to low 40s when our product becomes more mature and our product becomes product revenue ramp up to a level where it represents the normal level of revenue. In terms of operating expenses, this year, our OPEC is higher as we explained that there are two areas of which we view will be one-off type of situation for this year, which will not continue into next year from that sense.

One is we focusing on cleaning up our balance sheet, looking at basically some risk management part of it, and we're looking at receivable part of it. So in a way that we feel that this part of it is under control, it's clean up from that perspective, and we will not continue into this year from that perspective. The second portion of it is in terms of a special I would say this year we have issued warrants to some investors which we account for as a GNA expenses and this portion of the warrants we don expect it to be continued into the 2026 So we expect the GNA running expenses to be going back to a normal run rate level, which is very similar to what you experienced in the first half of 2025 run rate, maybe adjusted to some inflation, normal inflation rate from that perspective.

Other than that, it all depending on whether our next development programs are on continuation of our product roadmap and our R&D expenses. And that's something that we constantly monitor from that sense in terms of the revenue ramp and how much we can afford to spend on the R&D side to continue on our product roadmap.

Yeah, yeah. Yeah, so they're happy with the product, happy that they've been able to roll out, you know, their unique solution. They've also been telling us that, you know, our level of support for their unique applications is actually very good. So it's an enabling device for their particular application as well as it gives them options on their future roadmap. So it's all positive and we think that we're going to see additional revenue and volume going forward as their volumes increase.

You're welcome.

Yeah, we think it can be actually quite large. We're talking about in the million unit plus type of quantities. And, yeah, so we're very optimistic about it and think it will have a large position going forward.

That right there is, I would say, the low end of their annual number.

This particular application, it looks like we are the sole supplier, but, you know, I would expect that they would have, you know, that volume that I'm talking about would be our volume. I would like to be a sole supplier for as long as I can be, but I have to believe that everybody is doing what they can to de-risk their supply chain. But we are providing some unique customization that makes the product sticky, and we'll try to add as much value as we can as we go forward.

The volumes, the quantities in Q4 were three, but as far as the production or the commercialization part of that, that was one main customer. And then we would think that for Q1, that would be in the range of 3 to 5.

Yes, Lisa, I'm looking forward to the OPEC. There are some special charges in Q4, but the normal run rates would be around eight to eight and a half million dollars per quarter going forward.

Yep.

Well, in a Q4 that was really just, you know, where the wafers were and what we could actually We have to produce in the quarter, and that's a standard issue we have to deal with when we're ramping anything. And in the Q4 timeframe, I think it was mainly a result of the fact that testing was not as optimized as it could be, and the throughput was lower. In Q1, testing throughput has increased significantly, and so that automation, which we will be optimizing going forward even more because we want to squeeze as much yield out of our products as we can, it's pretty much in place.

Thank you, Lisa.

Thank you, Lisa.