SOURCE: Netlist, Inc.

Netlist, inc.

August 14, 2012 16:01 ET

Netlist Reports Second Quarter 2012 Results

IRVINE, CA--(Marketwire - Aug 14, 2012) - Netlist, Inc. (NASDAQ: NLST), a designer and manufacturer of high-performance memory subsystems, today reported financial results for the second quarter and six months ended June 30, 2012.

Revenues for the three months ended June 30, 2012, were $10.6 million, down 34 percent from revenues of $16.0 million for the second quarter ended July 2, 2011. Gross profit for the three months ended June 30, 2012, was $2.7 million, or 26 percent of revenues, compared to a gross profit of $4.9 million, or 31 percent of revenues for the three months ended July 2, 2011, a decrease of 45 percent.

Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) after adding back net interest expense, provision for income taxes, depreciation, amortization, stock-based compensation and net non-operating expense (income) was a loss of $2.9 million for the three month period ended June 30, 2012, compared to an adjusted EBITDA loss of $393,000 for the prior year period.

Net loss for the three months ended June 30, 2012, was $4.0 million, or $0.14 loss per share, compared to a net loss in the prior year period of $1.5 million, or $0.06 loss per share. These results include stock-based compensation expense of $482,000 for the second quarter of 2012, compared to $406,000 for the second quarter of 2011.

"Our second quarter results reflect the current transitional period of our business as we focus on introducing our new product lines while older product lines wind down," said C.K. Hong, Chief Executive Officer of Netlist. "During the quarter, we were pleased to see initial shipments of 16GB HyperCloud and 16GB VLP at HP and IBM, and expect volumes for these products to grow in the second half of the year. We also introduced the 32GB 4 Rank Planar-X RDIMM, the lowest cost-per-bit high density memory and 32GB VLP, the highest density blade server memory ever offered. Over the next couple of quarters, we look forward to the launch of the highest density HyperCloud, 32GB HCDIMM with IBM as well as qualifications of this product across several other major OEMs. We've invested heavily over the past few years to create these new IP-intensive products and collectively, they represent the industry's most complete suite of high density, high performance memory solutions. We expect to see accelerated adoption of these products in our addressable markets starting later this year, providing a path to future growth for Netlist."

Revenues for the six months ended June 30, 2012, were $24.5 million, down 12 percent from revenues of $28.0 million for the six months ended July 2, 2011. Gross profit for the six months ended June 30, 2012, was $8.2 million, or 33 percent of revenues, compared to a gross profit of $8.7 million, or 31 percent of revenues, for the six months ended July 2, 2011, an increase of 2% in margin percentage and a decrease of 6 percent for the period in gross profit dollars.

Net loss for the six months ended June 30, 2012, was $5.1 million, or $0.18 loss per share, compared to a net loss in the prior year period of $4.3 million, or $0.17 loss per share. These results include stock-based compensation expense of $1.0 million and $0.8 million for the six month periods ended June 30, 2012 and July 2, 2011, respectively.

As of June 30, 2012, cash, cash equivalents, and investments in marketable securities were $11.7 million, total assets were $34.3 million, working capital was $19.2 million, total debt was $3.7 million, and stockholders' equity was $20.1 million.

Conference Call Information
As previously announced, Netlist is conducting a conference call today to be broadcast live over the Internet at 5:00 pm Eastern Time to discuss and review the financial results for the second quarter ended June 30, 2012. The dial-in number for the call is 1-412-858-4600. The live webcast and archived replay of the call can be accessed in the Investors section of Netlist's website at www.netlist.com.

Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including EBITDA and adjusted EBITDA, may be considered non-GAAP financial measures. Netlist believes this information is useful to investors because it provides a basis for measuring Netlist's available capital resources, the operating performance of Netlist's business and Netlist's cash flow, excluding net interest expense, provisions for income taxes, depreciation, amortization, share-based compensation and non-operating net income and expense that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles. Netlist's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating Netlist's operating performance, capital resources and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-financial measures as reported by Netlist may not be comparable to similarly titled amounts reported by other companies.

About Netlist:
Netlist, Inc. designs and manufactures high-performance, logic-based memory subsystems for server and storage applications for cloud computing. Netlist's flagship products include HyperCloud™, a patented memory technology that breaks traditional memory barriers, NVvault™ family of products that enables data retention during power interruption, EXPRESSvault™, a PCI Express backup/recovery solution for cache data protection and a broad portfolio of industrial Flash and specialty memory subsystems including VLP (very low profile) DIMMs and Planar-X RDIMMs.

Netlist develops technology solutions for customer applications in which high-speed, high-capacity, small form factor and heat dissipation are key requirements for system memory. These customers include OEMs that design and build tower, rack-mounted, and blade servers, high-performance computing clusters, engineering workstations and telecommunications equipment. Founded in 2000, Netlist is headquartered in Irvine, CA with manufacturing facilities in Suzhou, People's Republic of China and an engineering design center in Silicon Valley, CA. Learn more at www.netlist.com which now includes a blog site with the latest news about Netlist products.

Safe Harbor Statement:
This news release contains forward-looking statements regarding future events and the future performance of Netlist. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expected or projected. These risks and uncertainties include, but are not limited to, risks associated with the launch and commercial success of our products, programs and technologies; the success of product partnerships; continuing development, qualification and volume production of EXPRESSvault™, NVvault™, HyperCloud™ and VLP Planar-X RDIMM; the timing and magnitude of the anticipated decrease in sales to our key customer; our ability to leverage our NVvault™ technology in a more diverse customer base; the rapidly-changing nature of technology; risks associated with intellectual property, including the costs and unpredictability of litigation over infringement of our intellectual property and the possibility of the Company's patents being re-examined by the United States Patent and Trademark office; volatility in the pricing of DRAM ICs and NAND; changes in and uncertainty of customer acceptance of, and demand for, our existing products and products under development, including uncertainty of and/or delays in product orders and product qualifications; delays in the Company's and its customers' product releases and development; introductions of new products by competitors; changes in end-user demand for technology solutions; the Company's ability to attract and retain skilled personnel; the Company's reliance on suppliers of critical components and vendors in the supply chain; fluctuations in the market price of critical components; evolving industry standards; and the political and regulatory environment in the People's Republic of China. Other risks and uncertainties are described in the Company's annual report on Form 10-K filed on February 28, 2012, and subsequent filings with the U.S. Securities and Exchange Commission made by the Company from time to time. Except as required by law, Netlist undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

   
Netlist, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
(in thousands, except par value)  
             
    (unaudited)     (audited)  
    June 30,     December 31,  
    2012     2011  
                 
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 11,299     $ 10,535  
  Accounts receivable, net     8,094       11,399  
  Inventories     9,643       6,057  
  Prepaid expenses and other current assets     1,432       806  
    Total current assets     30,468       28,797  
                 
  Property and equipment, net     3,306       2,771  
  Long-term investments in marketable securities     445       444  
  Other assets     130       161  
    Total assets   $ 34,349     $ 32,173  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 7,317     $ 6,155  
  Accrued payroll and related liabilities     1,305       1,813  
  Accrued expenses and other current liabilities     1,285       460  
  Accrued engineering charges     490       450  
  Current portion of long-term debt     908       2,144  
    Total current liabilities     11,305       11,022  
Long-term debt, net of current portion     2,825       1,118  
Other liabilities     88       94  
    Total liabilities     14,218       12,234  
                 
Commitments and contingencies                
                 
Stockholders' equity:                
  Common stock, $0.001 par value - 90,000 shares authorized; 28,411 (2012) and 26,390 (2011) shares issued and outstanding     28
      26
 
  Additional paid-in capital     97,959       92,709  
  Accumulated deficit     (77,801 )     (72,740 )
  Accumulated other comprehensive loss     (55 )     (56 )
    Total stockholders' equity     20,131       19,939  
    Total liabilities and stockholders' equity   $ 34,349     $ 32,173  
                 
                 
   
Netlist, Inc. and Subsidiaries  
Unaudited Condensed Consolidated Statements of Operations  
(in thousands, except per share amounts)  
                                 
    Three Months Ended     Six Months Ended  
    June 30,     July 2,     June 30,     July 2,  
    2012     2011     2012     2011  
                                 
Net sales   $ 10,552     $ 16,001     $ 24,519     $ 28,001  
Cost of sales(1)     7,814       11,064       16,345       19,260  
Gross profit     2,738       4,937       8,174       8,741  
Operating expenses:                                
  Research and development(1)     3,770       3,755       7,612       7,439  
  Selling, general and administrative(1)     2,871       2,583       5,480       5,500  
    Total operating expenses     6,641       6,338       13,092       12,939  
Operating loss     (3,903 )     (1,401 )     (4,918 )     (4,198 )
Other income (expense):                                
  Interest expense, net     (79 )     (50 )     (150 )     (75 )
  Other income (expense), net     3       (59 )     8       (59 )
    Total other expense, net     (76 )     (109 )     (142 )     (134 )
Loss before provision for income taxes     (3,979 )     (1,510 )     (5,060 )     (4,332 )
Provision for income taxes     1       1       1       1  
Net loss   $ (3,980 )   $ (1,511 )   $ (5,061 )   $ (4,333 )
Net loss per common share:                                
  Basic and diluted   $ (0.14 )   $ (0.06 )   $ (0.18 )   $ (0.17 )
                                 
Weighted-average common shares outstanding:                                
  Basic and diluted     28,111       24,988       27,420       24,935  
                                 
(1) Amounts include stock-based compensation expense as follows:                                
                                 
  Cost of sales   $ 42     $ 18     $ 77     $ 31  
  Research and development     153       146       345       288  
  Selling, general and administrative     287       242       583       440  
                                   
                                 
   
Netlist, Inc. and Subsidiaries  
Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA and Adjusted EBITDA  
(in thousands)  
                             
                             
    Three Months Ended     Six Months Ended     
    June 30,     July 2,     June 30,     July 2,  
    2012     2011     2012     2011  
                                 
GAAP net loss   $ (3,980 )   $ (1,511 )   $ (5,061 )   $ (4,333 )
                                 
Interest expense, net     79       50       150       75  
Provision for income taxes     1       1       1       1  
Depreciation and amortization     535       602       1,070       1,183  
                                 
EBITDA     (3,365 )     (858 )     (3,840 )     (3,074 )
                                 
Stock-based compensation     482       406       1,005       759  
Other income (expense), net     (3 )     59       (8 )     59  
                                 
Adjusted EBITDA   $ (2,886 )   $ (393 )   $ (2,843 )   $ (2,256 )
                                 
                                 

The table above reconciles net loss to EBITDA and Adjusted EBITDA. EBITDA is defined as net loss before net interest expense, income taxes, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA before net non-operating expense (income) and stock-based compensation expense. Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, management believes that it is useful to Netlist, Inc. and to an investor in evaluating the Company because it is a widely used measure to evaluate a company's operating performance.

Contact Information

  • For more information, please contact:

    Brainerd Communicators, Inc.
    Corey Kinger/Mike Smargiassi (investors)
    Sharon Oh (media)
    NLST@braincomm.com
    (212) 986-6667

    Gail M. Sasaki
    Chief Financial Officer
    Netlist, Inc.
    (949) 435-0025