GCT Semiconductor Holding, Inc. 2026 Q2 Earnings Call

Please, sir, go ahead. Thank you, and thanks to everyone for joining us today for our second quarter 2026 earnings call.

I'll begin by discussing the operational progress we've made during the second quarter and provide an update on where we stand in the commercialization of our 5G platform. Following my remarks, our Chief Financial Officer, Edmond Cheng, will review our second quarter financial results in more detail. When we spoke with you last quarter, we highlighted that 2026 would be a year of continued commercialization as our customers progress from development and integration into early deployments of our 5G chipset. That progression has continued, and the second quarter demonstrates the importance of working closely with customers as they advance through their respective commercialization milestones.

While the broader macro environment of several of our customers has influenced the timing of certain deployment schedules, we have not seen any change in the underlying level of customer engagement or the long-term demand of our technology. Rather than viewing the second quarter through the lens of financial performance, we believe it is more meaningful to view it as another important step forward in building a diversified pipeline for the anticipated 5G commercialization ramp. One of our priorities entering 2026 was to broaden the opportunity at hand beyond any single customer application or end market. Today, we believe we have made meaningful progress toward that objective. Our 5G pipeline now spans three strategic growth pillars: terrestrial broadband, satellite and non-terrestrial connectivity, and industrial IoT and specialized networking applications. We believe this diversification strengthens the long-term opportunity for GCT while reducing our dependence on any individual customer deployment.

Beginning with terrestrial broadband. Throughout the year, we have advanced multiple FWA and CPE programs with carrier, OEM, and ODM partners. Engineering activities, product integration, and certification efforts progressed across these programs. While several customer deployment schedules shifted modestly, these initiatives are moving forward, and we are encouraged by the progress across our partner ecosystem. As operators invest in next-generation broadband infrastructure, we believe our technology is well-positioned to support these deployments and participate in the long-term growth of this market. Next, within satellite and non-terrestrial connectivity, we continue expanding our engagement with partners developing direct-to-device and hybrid satellite cellular solutions. We believe this is one of the most compelling long-term opportunities for our technology as terrestrial and satellite networks increasingly converge.

Throughout the quarter, we advanced development and certification activities with several partners and remain confident in the role our modem technology can play in enabling seamless connectivity across multiple network environments. Our third strategic growth pillar is IoT and specialized networking applications, where we are expanding our presence across industrial, positioning, aviation, and defense-related markets. Subsequent to the quarter end, we signed a new customer supporting UAV and defense-related connectivity. While confidentiality provisions prevent us from naming that customer today, we believe this relationship further validates the flexibility and scalability of our platform while extending our reach into another attractive vertical. These efforts are translating into measurable progress as customers advance through their respective commercialization phases. During the second quarter, we shipped more than 5,100 5G chipsets, representing approximately 71% sequential growth compared to the first quarter.

This growth reflects increasing customer engagement across our targeted markets as programs progress through development, certification, and early deployment phases. While the timing of our individual customer ramps can vary, we believe the momentum behind our platform and growing adoption of our technology provides a strong foundation as we continue scaling 5G chipset commercialization. Across each of these markets, the common theme remains the same. Customer engagement continues to increase, our pipeline continues to broaden, and the underlying demand environment remains healthy. The primary variable today is deployment timing rather than customer interest. As customers complete certification activities and finalize deployment schedules, the timing of commercial production may shift modestly from quarter to quarter, but we remain confident in the long-term opportunity ahead. Our focus continues to be on execution.

We are investing in our manufacturing readiness, strengthening our supply chain, supporting customer deployments, and ensuring we are prepared to scale production as commercialization accelerates. While there will inevitably be quarter-to-quarter variability as customers complete their deployment plans, we believe the work we are doing today positions GCT for sustained long-term growth. Overall, we believe the second quarter represents another meaningful milestone in our transition from development to commercialization. The foundations we have built across our technology, customer relationships, and strategic partnerships continue to strengthen, and we are excited about the opportunity ahead. With that, I will turn the call over to Edmond to discuss our second quarter results.

Edmond? Thank you, John. As John discussed, we view the second quarter as another important step in our commercialization journey.

While our reported financial results continue to reflect a business in the early stages of transitioning from development into commercialization, the progress we are making with customers continues to reinforce our confidence in the significant long-term opportunity ahead. One measure of that progress was the continued run in 5G chipset shipments, with more than 5,100 units shipped during the second quarter, representing approximately 71% sequential growth. This growth reflects ongoing advancement of customer programs through integration, certification, and early deployment activities. Before reviewing our financial results, I would like to note that starting from this quarter, we are introducing adjusted EBITDA as an additional supplemental performance metric. Because our reported GAAP results include significant non-cash, fair value adjustments associated with our warrant liability.

We believe adjusted EBITDA provides investors with a more meaningful view of the underlying operating performance of the business as we continue investing in commercialization. With that, I will now review our second quarter 2026 financial results. Further details can be found in the 10-Q that will be on file with the SEC. Net revenues decreased by $0.2 million, or 18%, from $1.2 million for the three months ended June 30th, 2025, to $1 million for the three months ended June 30th, 2026. The change was due to a decrease of $0.2 million in service revenues, reflecting the shift to 5G service offerings. Product sales were consistent year-over-year, with growth in 5G product sales. Also, our revenue for the first half of this year slightly exceeds the revenue for the full year of 2025.

Cost of net revenues increased by $0.4 million, or 49%, from $0.8 million for the three months ended June 30th, 2025, to $1.2 million for the three months ended June 30th, 2026, largely driven by increased costs from increased unit volume. Our gross margin was 32% for the three months ended June 30th, 2025. Our gross margin for the three months ended June 30th, 2026, was negative and not representative of our expectations regarding profitability of our products and services in future reporting periods. We expect gross margins to improve as 5G product sales increases and contribute more significantly to the overall revenue.

Research and development expenses decreased by $0.2 million from $3.5 million for the three months ended June 30th, 2025, to $3.3 million for the three months ended June 30th, 2026, primarily due to the completion of our 5G chip design project, which results in a $0.5 million reduction in professional services from Alpha, as well as a $0.1 million decrease in stock-based compensation expense. This reduction was partially offset by a $0.4 million increase in payroll-related costs. Sales and marketing expenses remain consistent year-over-year, totaling $1.1 million for the three months ended June 30th, 2025, compared to $1 million for the three months ended June 30th, 2026. General and administrative expenses decreased by $0.6 million from $3.4 million for the three months ended June 30th, 2025, compared to $2.8 million for the three months ended June 30th, 2026.