Lee-Lean Shu - President and Chief Executive Officer Douglas Schirle - Chief Financial Officer Didier Lasserre - Vice President, Sales.

Analysts:.

Welcome to GSI Technology's first quarter fiscal 2015 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, July 31, 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 first quarter net revenues of $12.9 million, slightly below our range of guidance for the quarter, and reflecting continuing softness in the telecommunications market and weak sales in Asia.

However, first quarter gross margin was very strong at 45.9%, well above our operating model, due to improved product mix. Litigation-related expenses in the first fiscal quarter were $1.8 million, down from $2.6 million in the previous quarter and down from $2.3 million in the same period a year ago.

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

We currently expect litigation-related expense to be approximately $1.4 million in the September quarter, and we expect to go to trial for our antitrust suit against Cypress in February of next year. We continue to lead the SRAM segment with our innovative products, and we are excited by our continued expansion into the low-latency DRAM space.

We began product shipments for evaluation in the previous quarter, and we expect to ship LLDRAM products in volume in fiscal 2015. With that, I will now turn the call over to Doug..

We reported a net loss of $1.4 million or $0.05 per diluted share, on net revenues of $12.9 million for the first quarter of fiscal 2015 compared to a net loss of $441,000 or $0.02 per diluted share on net revenues of $16.4 million in the prior-year quarter ended June 30, 2013; and a net loss of $5.4 million or $0.20 per diluted share on net revenues of $12.8 million for the preceding fourth quarter of fiscal 2014.

Gross margin was 45.9% compared to 45.5% in the prior-year period and 45.7% in the preceding fourth quarter. Total operating expenses in the first quarter of fiscal 2015 were $7.4 million, down from $8 million in the first quarter of fiscal 2014 and down from $9.5 million in the preceding fourth quarter.

Research and development expenses were $3.1 million, up from $3 million in the prior-year period and down from $4.4 million in the preceding quarter, which included $1.5 million for two pre-production mask sets.

Selling, general and administrative expenses, which include litigation-related expenses, were down year-over-year to $4.3 million from $5 million in the quarter ended June 30, 2013, and down sequentially from $5.1 million in the preceding quarter.

First quarter fiscal 2015 operating loss was $1.5 million compared to operating losses of $3.6 million in the prior quarter and $541,000 a year ago. Total first quarter pre-tax stock-based compensation expense was $573,000 compared to $584,000 in the prior quarter and $565,000 in the comparable quarter a year ago.

Depreciation and amortization expense was $510,000 for the quarter. First quarter direct and indirect sales to Cisco Systems were $1.8 million or 14.3% of net revenues compared to $2.2 million or 17.1% of net revenues in the prior quarter, and $2.8 million or 17.1% of net revenues in the same period a year ago.

Sales to Alcatel-Lucent were $3.2 million or 24.6% of net revenues during the quarter compared to $2.5 million or 19.7% of net revenues in the prior quarter and $3.2 million or 19.5% of net revenues in the same period a year ago.

Military defense sales were 15.2% of shipments compared to 16% of shipments in the prior quarter and 13.3% of shipments in the comparable period a year ago. SigmaQuad sales were 43% of shipments compared to 45.1% in the prior quarter and 41.6% in the first quarter of fiscal 2014.

At June 30, 2014, we had $84 million in cash, cash equivalents and short-term investments, $23 million in long-term investments, $95.5 million in working capital, no debt, and stockholders' equity of $126.9 million. Accounts payable at June 30, 2014, was $3.6 million compared to $4.9 million at March 31, 2014.

Net inventory was $8.4 million at June 30, 2014, up slightly from $8.2 million at March 31, 2014. Inventory turns at June 30, 2014, were 3.3x compared to 3.4x at March 31, 2014. Looking forward to the second quarter, we currently expect net revenues to be in a range of $12.5 million to $13.5 million, with gross margin of approximately 43% to 45%.

Operator, at this point, we will open the call to Q&A..

(Operator Instructions) There are no questions in the queue at this time..

Thank you all for joining us. We look forward to speaking with you in October, when we will report our fiscal second quarter results. Thank you..

This concludes today's conference. Thank you for your participation..