Good afternoon. Thank you for attending GCT Semiconductor Holding, Inc.'s Q4 and full year 2025 financial results call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. Joining the call today are John Schlaefer, GCT's Chief Executive Officer, and Edmond Cheng, CFO, to discuss our Q4 and full year 2025 results. During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release and also in our Form 10-K that will be filed today, which provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward-looking statement.
I will now turn the call over to John Schlaefer.
Thank you, and thanks to everyone for joining us today for our Q4 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 towards full 5G commercialization. Following my remarks, our CFO, Edmond Cheng, 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 Q4 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 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 partner's user equipment to support global resilience and high bandwidth connectivity across both satellite and terrestrial networks. This integration will enable direct-to-satellite applications across the partner's rapidly expanding network, creating new 5G chipset 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 are 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 IoT 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 Q4 , we entered into a $20 million convertible note facility with an initial $1 million advance. This financing provides us with additional optionality to support working capital requirements, production readiness, and strategic growth 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, and 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. With that, I'll turn the call over to Edmond to discuss the full year results. Edmond?
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 Q3 of 2025. We are now at the inflection point as commercialization progresses. Reflective of this, total revenue in Q4 increased 76% sequentially from Q3, 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 roll 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 10-K that will be on file with the SEC. Net revenues decreased by $6.3 million or 69% 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, while service revenues 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 ended December 31st, 2024 to $4.7 million for the year ended December 31st, 2025, largely 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 is not fully indicative of the underlying profitability of our products and services. We expect margins to improve as product volumes increase, particularly as our 5G chipset sales begin contributing more meaningfully to revenue later in 2026, following the commercial launch in Q4 of 2025.
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 vesting of share-based awards, and a $0.4 million increase in pre-production and engineering supply related to our 5G initiatives.
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 as of the end of February 2026, we had cash and cash equivalent of $9.4 million. In addition, we maintain access 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, Edmond. 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.
Our first question comes from the line of Craig Ellis of B. Riley Securities. Your line is open, Craig.
Yes, thanks for taking the question. Guys, congratulations on getting the 5G chips starting to ship for revenue in Q4 . John, I wanted to start with one with you, and it takes off on that point and some of your comments that you're engaging with more partners and programs and a priority this year is scaling. Can you just talk a little bit on two fronts? First, on Fixed Wireless Access, can you talk a little bit more about the visibility that you have from customers for ramps through the year and how material you think things might be, not looking for guidance, but just help give us a sense for what you're seeing.
Given that there's been so much success with the company and the way you're engaging with satellite and ground-to-air programs, just help us understand as you look at 2026, when revenues there could start to materialize and to what extent? Thank you.
Yes. Thank you, Craig. FWA is still a really important vertical for us, and we're focused there strongly. The lead customers that we're working with there are focused on that area. 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 the lead customers. Then on the satellite front, we already have some product that's shipping for NTN applications. We're expecting that the new partner that we just talked about will be shipping into that in the second half of the year. 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.
I'll give it a shot, although unsure if you can speak to this specifically, but can you help us size the trajectory of revenues as we go through this year, John? I know the company has its eye on $25 million since that's the level where I think it would look for adjusted EBITDA breakeven and profitability. Any sense on how these different contributors add up and layer in for specific revenues as we hit the middle of the year and then the end of the year?
Yes. 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 the point that you just mentioned would be probably in the Q1 period. We're going to have to see Q1 next year, so 2027. 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.
That's helpful. Edmond Cheng, I'll switch it over to you before I jump back in the queue. First, nice to see gross margins coming in at 32% in the quarter. As you see revenues rising sequentially through the year, how should we think about gross margins? As a follow-up, operating expense was a little bit higher in Q4 than what we were looking for, but you also noted some special charges on a calendar year basis. Can you just talk about what drove the sequential increase in operating expense quarter- on- quarter in addition to gross margin? Thank you.
Yes. 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's revenue in that sense. We believe that going forward, our gross margin should be in the range of maybe high 30s to low 40s, when our product become more mature and product revenue ramp up to a level where it representing the normal level of revenue.
In terms of operating expenses, this year our OPEX is higher as we explain that there are two areas of which we feel will be one-off type of situation for this year, which will not continue into next year from that sense. One is we're focusing on cleaning up our balance sheet, looking at basically is some risk management part of it, and we're looking at receivable part of it. I n a way that we feel that this part of it is under control. It is 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 the special, I would say this year we have issued warrants to some investors which we account for as G&A expenses. This portion of the warrant, we don't expect it to be continued into the 2026. We expect the G&A running expenses to be going back to a normal run rate level, which is very similar to what you experience 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, on continuation of our product roadmap and our R&D expenses. That's something that we constantly monitor in 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.
That's really helpful, Edmond. If I could just jump back for one more for John. John, given that we're at an early stage with 5G and you've got a couple of customers that have taken product, can you just help us understand, as you interact with those customers, what are you hearing from the customers about the product, its strengths, how they plan to use it, et c? Thank you so much, guys.
Yes. They're happy with the product, happy that they've been able to roll out t heir unique solution. They've also been telling us that our level of support for their unique applications is actually very good. It's an enabling device for their particular application, and it gives them options on their future roadmap. It's all positive, and we think that we're going to see additional revenue and volume going forward as their volumes increase.
Thanks, John. Thanks, Edmond.
You're welcome.
Thank you. Our next question comes from the line of Lisa Thompson of Zacks Investment Research. Please go ahead, Lisa.
Hi. Thanks for the call. You've answered a few of the questions I have, but I still got some more. Can we first go back to that the satellite communications company that you just signed a license with? Is there some way you can quantify t he potential for that business? Have you sized up how much they could possibly take from you?
Yes. We think it can be actually quite large. We're talking about in the million unit plus type of quantities. We're very optimistic about it and think it'll have a large position going forward.
Is that an annual number or a total number?
That right there is, I would say, the low end of their annual number.
Nice. Are you sole supplier or just one of some others?
This particular application looks like we are the sole supplier. I would expect that they would have... 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. I have to believe that everybody is doing what they can to de-risk their supply chain. 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.
Very nice. Let's talk about the customers. How many customers did you ship to in Q4, and what does it look like in Q1?
The volumes, the quantities in Q4 were three. But as far as the production or the commercialization part of that was one main customer. We would think that for Q1, that would be in the range of three to five.
It's starting. Let me just clarify , Ed, what you said about expenses. Are you saying that Q1 G&A would be like around $3 million or is it not coming down that fast?
Yes, Lisa, I'm looking forward to the OPEX. There are some special charges in Q4, but the normal run rate should be around $8 million-$8.5 million per quarter going forward.
Okay. That includes Q1.
Yes.
Okay. All right. Let's see what else I got here. At some point, we had a conversation, and you said you were supply limited in Q4. What was that about? Is that still a thing?
In Q4, that was really just where the wafers were and what we could actually produce in the quarter. T hat's a standard issue that we have to deal with when we're ramping anything. 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. T hat 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.
Okay, great. Well, that's good. Okay, I think that's all my questions for now. Thank you.
Thank you, Lisa.
Thank you. Once again, to ask a question, please press star one one on your telephone. That's star one one on your telephone to ask a question. There appear to be no further questions in queue. Ladies and gentlemen, thank you for joining us. That concludes our Q4 and full year 2025 conference call. A replay will be available for a limited time on our website later today.