Ladies and gentlemen, thank you for standing by. Welcome to GSI Technology's Fourth Quarter and Year End Fiscal 2014 Conference Call. [Operator Instructions].

Before we begin today's call, the company has requested that I read the following Safe Harbor statement.

The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated.

These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission..

Additionally, I have also been asked to advise you that this conference call is being recorded today, May 1, 2014, at the request of GSI Technology. Hosting the call today is Lee-Lean Shu, the company's Chairman, President and Chief Executive Officer. With him are Douglas Schirle, Chief Financial Officer; and Didier Lasserre, Vice President of Sales.

I would now like to turn the conference over to Mr. Shu. Please go ahead, sir. .

Good afternoon, everyone, and thank you for joining us. Today, we reported fourth quarter net revenue of $12.8 million, within the range that we had projected earlier in the fourth quarter, and reflecting continued slowness in the telecommunications and the networking market, and in particular, continued weak sales in Asia..

However, fourth quarter gross margin was very strong at 45.7%, well above our operating model, and up sequentially from the previous quarter, due to a favorable mix of higher margin products.

As expected, we incurred substantial litigation-related expenses during the quarter accounting for approximately half of our net loss for the quarter as the discovery phase of the pending patent infringement litigation and our antitrust lawsuit against Cypress continues.

We also incurred substantial research and development expense during the quarter related to 2 preproduction mask sets. We continue to believe that we have the most advanced technology in the SRAM industry, and we continue to compete on the basis of our superior technology and product performance.

In this regard, we expect to see growth in orders for our SigmaQuad-IIIe product line in the coming quarters..

During the March quarter, we tape-out our newest family, the 288-megabit SigmaQuad device that will be the highest-density monolithic SRAM in the market. This new SigmaQuad device, which we expect to introduce later this year, will be our first 40-nanometer product to further improve the performance of our industry-leading SRAM products.

We also tape-out our next-generation LLDRAM device beyond our expectation for increased order for our existing SRAM customers. We are also excited about our entry into the low-density DRAM space, in which we expect to ship products in volume in fiscal 2015. We continue to believe the LLDRAM will be a significant growth driver in future years.

With that, I'll now turn the call over to Doug. .

For the year, we reported net loss of $6.2 million or $0.23 per diluted share on net revenues of $58.6 million compared to net income of $3.8 million or $0.14 per diluted share on net revenues of $66 million in the prior fiscal year ended March 31, 2013. Gross margin was 44.6% compared to 43.3% in the prior year..

Research and development expenses were $13.1 million compared to $11.5 million in the fiscal year ended March 31, 2013. And selling, general and administrative expense, which included litigation-related expenses, was up substantially to $18.8 million compared to $13.7 million in 2013..

Research and development expense in fiscal 2014 included $1.5 million for 2 preproduction mask sets. There were no such expenses in fiscal 2013. Litigation-related expenses in fiscal 2014 were $8.7 million, up from $3 million in fiscal 2013.

The litigation-related expenses, again, were primarily associated with pending patent infringement and antitrust litigation involving Cypress Semiconductor. Both lawsuits are currently in the discovery phase..

Total operating expense increased by $6.7 million to $31.9 million from $25.2 million in fiscal 2013.

We reported a net loss of $5.4 million, or $0.20 per diluted share, on net revenues of $12.8 million for the fourth quarter of fiscal 2014 compared to net income of $950,000, or $0.03 per diluted share, on net revenues of $15.7 million in the prior year quarter ended March 31, 2013, and a net loss of $734,000, or $0.03 per diluted share, on net revenues of $13.8 million for the preceding third quarter.

Gross margin was 45.7% compared to 46.3% in the prior year period and 39% in the preceding third quarter..

Because we recorded a cumulative 3-year loss on the U.S. tax basis for the period ended March 31, 2014, our fourth quarter results included a tax provision of $1.9 million, reflecting a full valuation allowance of $3.1 million for our deferred tax assets, which had a substantial effect on our bottom line for the quarter..

Fourth quarter fiscal 2014 operating loss was $3.6 million compared to operating loss of $1.9 million in the prior quarter and operating income of $439,000 a year ago.

Total operating expenses for the fourth quarter of fiscal 2014 were $9.5 million, up from $6.8 million in the fourth quarter of fiscal 2013 and up from $7.3 million in the preceding third quarter..

Research and development expenses were $4.4 million, which included $1.5 million for 2 preproduction mask sets, and were up from $2.9 million in the prior year period, and up from $2.8 million in the preceding quarter.

Selling, general and administrative expenses, which included litigation-related expenses, were up substantially year-over-year to $5.1 million compared to $3.9 million in the quarter ended March 31, 2013, and up sequentially from $4.5 million in the preceding quarter.

Litigation-related expenses in the fourth fiscal quarter were $2.6 million, up from $2.1 million in the previous quarter and up from $1.2 million in the same period a year ago. We currently expect litigation-related expense to be approximately $1.8 million in the June quarter..

Total fourth quarter pretax stock-based compensation expense was $584,000 compared to $516,000 in the prior quarter and $589,000 in the comparable quarter a year ago. Depreciation and amortization expense was $495,000 for the quarter..

Fourth quarter direct and indirect sales to Cisco Systems were $2.2 million, or 17.1% of net revenues, compared to $2.5 million or 18.4% of net revenues in the prior quarter, and $3.9 million or 24.8% of net revenues in the same period a year ago..

Sales to Alcatel-Lucent were $2.5 million, or 19.7% of net revenues during the quarter, compared to $2.3 million or 16.5% of net revenues in the prior quarter. Military/defense sales were 16% of shipments compared to 14.2% of shipments in the prior quarter and 12.7% of shipments in the comparable period a year ago..

SigmaQuad sales were 45.1% of shipments compared to 39.8% in the prior quarter and 38.9% in the fourth quarter of fiscal 2013..

Our Board of Directors has authorized us to repurchase, at management's discretion, shares of our common stock. Under the repurchase program, we may repurchase shares from time to time on the open market and in private transactions.

The specific timing and amount of repurchases will depend on market conditions, securities laws limitations and other factors. The repurchase program may be suspended or terminated at any time without prior notice..

During the quarter ended March 31, 2014, we repurchased 52,050 shares at an average cost of $6.61 per share for a total cost of $344,000. In April, we repurchased approximately 136,000 shares at a cost of approximately $913,000. Through April 30, 2014, we repurchased 4.2 million shares for a total cost of $17.9 million.

As of April 30, 2014, management still has the authority to repurchase additional shares having a dollar value of up to approximately $12.1 million..

At March 31, 2014, we had $80.9 million in cash, cash equivalents and short-term investments, $28.8 million in long-term investments, $90.7 million in working capital, no debt, and stockholders' equity of $128.4 million. Accounts payable at March 31, 2014, was $4.9 million compared to $3.8 million at March 31, 2013.

Net inventory was $8.2 million at March 31, 2014, down from $10.2 million at March 31, 2013. Inventory turns at March 31, 2014 was 3.4x compared to 2.4 at March 31, 2013..

Looking forward to the first quarter, we currently expect net revenues to be in the range of $13 million to $14 million, with gross margin of approximately 40% to 42%. Operating expenses in total are expected to be approximately $7.2 million. Operator, at this point, we will open the call to Q&A. .

[Operator Instructions] At this time, no one has queued for any questions, so I turn the call back over to our speakers for any additional remarks. .

Thank you, all, for joining us. We look forward to speaking with you in July, when we will report our fiscal first quarter results. Also, we will be presenting at the B. Riley & Co. 15th Annual Investor Conference in Santa Monica, California, later this month. Please contact your B.

Riley representative if you would like to schedule a meeting with us at the event. Thank you. .

That does conclude today's conference. We thank you for your participation..