SOURCE: Netlist, Inc.

Netlist, Inc.

November 11, 2014 16:15 ET

Netlist Reports Third Quarter 2014 Results

IRVINE, CA--(Marketwired - Nov 11, 2014) -  Netlist, Inc. (NASDAQ: NLST), a leading provider of high performance memory solutions for the cloud computing and storage markets, today reported financial results for the third quarter ended September 27, 2014. 

Revenues for the three months ended September 27, 2014, were $4.8 million, compared to revenues of $4.3 million for the third quarter ended September 28, 2013. Gross profit for the three months ended September 27, 2014, was $1.1 million, or 23.2 percent of revenues, compared to a gross profit of $0.4 million, or 9.2 percent of revenues for the third quarter ended September 28, 2013. 

The adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) loss was ($3.0) million for the third quarter ended September 27, 2014, compared to an adjusted EBITDA loss of ($2.0) million for the prior year period.

Net loss for the third quarter ended September 27, 2014, was ($4.1) million, or ($0.10) loss per share, compared to a net loss in the prior year period of ($3.1) million, or ($0.10) loss per share. These results include stock-based compensation expense of $505,000 for the third quarter of 2014, compared to $441,000 for the third quarter of 2013. 

Commenting on the results, C.K. Hong, Netlist's Chief Executive Officer, stated, "The third quarter results reflect our continuing investments in the three strategic areas of our business -- proliferation of our NVvault™ product line into the cloud computing space, development of HyperVault, the fastest next generation hybrid memory solution and the monetization of our intellectual property assets. We saw tangible evidence of progress in each of these areas as we achieved NV qualifications in a number of new customers, reached important milestones in the development of HyperVault and motioned for a preliminary injunction against the ULLtraDIMM product in our year-long trade secrets case in the Northern District of California. We remain confident that the continued investments in these key areas will unlock the value of our products and intellectual property assets, and position the company for the long term."

Revenues for the nine months ended September 27, 2014, were $16.7 million, compared to revenues of $15.3 million for the nine months ended September 28, 2013. Gross profit for the nine months ended September 27, 2014, was $4.1 million, or 24.4 percent of revenues, compared to a gross profit of $1.2 million, or 7.9 percent of revenues, for the nine months ended September 28, 2013. 

Net loss for the nine months ended September 27, 2014, was ($9.6) million, or ($0.24) loss per share, compared to a net loss in the prior year period of ($9.2) million, or ($0.30) loss per share. These results include stock-based compensation expense of $1.6 million and $1.2 million for the nine month periods ended September 27, 2014 and September 28, 2013, respectively. 

As of September 27, 2014, cash and cash equivalents and restricted cash were $15.2 million, total assets were $22.1 million, working capital was $13.5 million, total debt, net of debt discounts, was $5.6 million, and stockholders' equity was $10.1 million.

Conference Call Information
C.K. Hong, Chief Executive Officer, and Gail Sasaki, Chief Financial Officer, will host an investor conference call today, November 11, 2014 at 5:00 p.m. Eastern Time to review the company's results for the third quarter ended September 27, 2014. 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 (Earnings Before Interest, Taxes, Depreciation and Amortization), 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, stock-based compensation and net other expense that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP"). 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.

Adjusted EBITDA loss is a non-GAAP measure in which the net interest expense, provision for income taxes, depreciation, amortization, stock-based compensation and net other expense are added back to the GAAP basis loss. The non-GAAP measures are described above and are reconciled to the corresponding GAAP measure in the condensed consolidated financial statements portion of this release under the heading "Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA and Adjusted EBITDA."

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 NVvault™ and EXPRESSvault™ family of products that significantly accelerate system performance and provide mission critical fault tolerance, HyperCloud®, a patented memory technology that breaks traditional performance barriers, and a broad portfolio of industrial Flash and specialty memory subsystems including VLP (very low profile) DIMMs and Planar-X RDIMMs. Netlist has steadily invested in and grown its worldwide IP portfolio, which now includes 51 issued or granted patents and more than 30 U.S. and foreign pending patent applications in the areas of high performance memory and hybrid memory technologies.

Netlist develops technology solutions for customer applications in which high-speed, high-capacity, small form factor and efficient heat dissipation are key requirements for system memory. These customers include OEMs, hyperscale datacenter operators and storage vendors 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. Learn more at www.netlist.com.

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 patent infringement litigation against us as well as the costs and unpredictability of litigation over infringement of our intellectual property and the possibility of our patents being reexamined 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 March 18, 2014, 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.

   
(Tables Follow)  
   
   
   
Netlist, Inc. and Subsidiaries  
Condensed Consolidated Balance Sheets  
(in thousands, except par value)  
   
             
    (unaudited)     (audited)  
    September 27,     December 28,  
    2014     2013  
                 
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 14,120     $ 6,701  
  Restricted cash     1,100       1,100  
  Accounts receivable, net     3,074       4,866  
  Inventories     2,392       2,620  
  Prepaid expenses and other current assets     671       823  
    Total current assets     21,357       16,110  
                 
  Property and equipment, net     516       1,143  
  Other assets     197       422  
    Total assets   $ 22,070     $ 17,675  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 4,475     $ 3,795  
  Accrued payroll and related liabilities     775       635  
  Accrued expenses and other current liabilities     572       533  
  Accrued engineering charges     500       500  
  Current portion of long-term debt, net of debt discount     1,512       -  
    Total current liabilities     7,834       5,463  
Long-term debt, net of current portion and debt discount     4,077       5,099  
Other liabilities     98       100  
    Total liabilities     12,009       10,662  
                 
Commitments and contingencies                
                 
Stockholders' equity:                
  Common stock, $0.001 par value - 90,000 shares authorized; 41,480 (2014) and 31,776 (2013) shares issued and outstanding     41       31  
  Additional paid-in capital     117,077       104,469  
  Accumulated deficit     (107,057 )     (97,487 )
    Total stockholders' equity     10,061       7,013  
    Total liabilities and stockholders' equity   $ 22,070     $ 17,675  
                 
                 
   
Netlist, Inc. and Subsidiaries  
Unaudited Condensed Consolidated Statements of Operations  
(in thousands, except per share amounts)  
                         
                         
    Three Months Ended     Nine Months Ended  
    September 27, 2014     September 28, 2013     September 27, 2014     September 28, 2013  
                                 
Net sales   $ 4,791     $ 4,289     $ 16,679     $ 15,318  
Cost of sales(1)     3,678       3,896       12,602       14,112  
Gross profit     1,113       393       4,077       1,206  
Operating expenses:                                
  Research and development(1)     2,997       1,641       7,274       4,941  
  Selling, general and administrative(1)     1,782       1,554       5,185       4,880  
    Total operating expenses     4,779       3,195       12,459       9,821  
Operating loss     (3,666 )     (2,802 )     (8,382 )     (8,615 )
Other expense, net:                                
  Interest expense, net     (393 )     (324 )     (1,181 )     (542 )
  Other expense, net     -       (8 )     (5 )     (8 )
    Total other expense, net     (393 )     (332 )     (1,186 )     (550 )
Loss before provision for income taxes     (4,059 )     (3,134 )     (9,568 )     (9,165 )
Provision for income taxes     -       7       2       9  
Net loss   $ (4,059 )   $ (3,141 )   $ (9,570 )   $ (9,174 )
Net loss per common share:                                
  Basic and diluted   $ (0.10 )   $ (0.10 )   $ (0.24 )   $ (0.30 )
                                 
Weighted-average common shares outstanding:                                
  Basic and diluted     41,472       31,268       39,911       30,599  
                                 
(1) Amounts include stock-based compensation expense as follows:                                
                                 
  Cost of sales   $ 13     $ 13     $ 42     $ 37  
  Research and development     179       162       548       440  
  Selling, general and administrative     313       266       961       768  
                                 
                                 
                                 
Netlist, Inc. and Subsidiaries  
Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA Loss and Adjusted EBITDA Loss  
(in thousands)  
                         
                         
    Three Months Ended     Nine Months Ended  
    September 27, 2014     September 28, 2013     September 27, 2014     September 28, 2013  
                                 
GAAP net loss   $ (4,059 )   $ (3,141 )   $ (9,570 )   $ (9,174 )
                                 
Interest expense, net     393       324       1,181       542  
Provision for income taxes     -       7       2       9  
Depreciation and amortization     187       353       722       1,166  
EBITDA loss     (3,479 )     (2,457 )     (7,665 )     (7,457 )
                                 
Stock-based compensation     505       441       1,551       1,245  
Other expense, net     -       8       5       8  
                                 
Adjusted EBITDA loss   $ (2,974 )   $ (2,008 )   $ (6,109 )   $ (6,204 )
                                 
                                 

Contact Information

  • For more information, please contact:

    Brainerd Communicators, Inc.
    Mike Smargiassi or Jenny Perales
    NLST@braincomm.com
    (212) 986-6667

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