Netlist Reports Fourth Quarter and Full Year 2012 Results

Netlist Reports Fourth Quarter and Full Year 2012 Results 
IRVINE, CA -- (Marketwire) -- 03/28/13 --  Netlist, Inc. (NASDAQ:
NLST), a leading provider of high performance and hybrid memory
solutions for the cloud computing and storage markets, today reported
financial results for the fourth quarter and full year ended December
29, 2012.  
Revenues for the 12 months ended December 29, 2012, were $36.9
million, compared to revenues of $60.7 million for the 12 months
ended December 31, 2011. Gross profit for the 12 months ended
December 29, 2012, was $9.4 million, or 25.5 percent of revenues,
compared to a gross profit of $20.3 million, or 33.4 percent of
revenues, for the 12 months ended December 31, 2011.  
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) loss after adding back net interest expense, benefit of
income taxes, depreciation, amortization, stock-based compensation
and net non-operating expense (income) was $9.6 million for the 12
month period ended December 29, 2012, compared to an adjusted EBITDA
loss of $1.5 million for the prior year period.  
Net loss for the 12 months ended December 29, 2012, was $14.0
million, or $0.50 loss per share, compared to a net loss in the prior
year period of $5.6 million, or $0.22 loss per share. These results
include stock-based compensation expense of $1.9 million for 2012,
compared to $1.6 million for 2011.  
"Our financial results reflect the transition of our business model
from one that is concentrated on customized projects for individual
clients, into one that is driven by advanced, IP-based solutions that
serve the broader cloud infrastructure," said C.K. Hong, Chief
Executive Officer of Netlist. "Our new technologies uniquely address
growing memory capacity and performance constraints in high-speed
servers and storage systems in the cloud. In the year ahead, we
remain focused on working with our major OEM partners to roll out our
new products across a wide range of industries. Despite near-term
declines related to our mature business, we believe that this
transition period will ultimately lead to a more diversified business
model." 
Revenues for the fourth quarter ended December 29, 2012, were $6.0
million, compared to revenues of $16.4 million for the fourth quarter
ended December 31, 2011. Gross profit for the fourth quarter ended
December 29, 2012, was $837,000, or 14.0 percent of revenues,
compared to a gross profit of $6.0 million, or 36.6 percent of
revenues, for the fourth quarter ended December 31, 2011.  
Adjusted EBITDA after adding back net interest expense, benefit of
income taxes, depreciation, amortization, stock-based compensation
and net non-operating expense (income) was a loss of $3.1 million for
the fourth quarter ended December 29, 2012, compared to an adjusted
EBITDA income of $718,000 for the prior year period. 
Net loss for the fourth quarter ended December 29, 2012, was $4.1
million or $0.14 loss per share, compared to the net loss in the
prior year period of $227,000, or $0.01 loss per share. These results
include stock-based compensation expense in the fourth quarter ended
December 29, 2012, of $371,000 compared with $397,000 in the
year-earlier period.  
As of December 29, 2012, cash, cash equivalents, and investments in
marketable securities were $8.1 million, total assets were $22.4
million, working capital was $11.1 million, total debt was $3.5
million, and stockholders' equity was $13.7 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 fourth quarter and full year ended December 29, 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(TM), a patented memory technology that breaks
traditional memory barriers, NVvault(TM) and EXPRESSvault(TM) family
of products that significantly accelerate system performance and
provide mission critical fault tolerance, 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. 
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(TM), NVvault(TM),
HyperCloud(R) 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(TM) 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 29, 2013, 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.                                
                        Consolidated Balance Sheets                         
                               (in thousands)                               
                                                                            
                                                 December 29,  December 31, 
                                                     2012          2011     
                                                 ------------  ------------ 
                                                                            
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                      $      7,755  $     10,535 
  Investment in marketable securities                     415             - 
  Accounts receivable, net                              3,434        11,399 
  Inventories                                           7,380         6,057 
  Prepaid expenses and other current assets               723           806 
                                                 ------------  ------------ 
    Total current assets                               19,707        28,797 
                                                                            
  Property and equipment, net                           2,560         2,771 
  Long-term investments in marketable securities            -           444 
  Other assets                                            130           161 
                                                 ------------  ------------ 
    Total assets                                 $     22,397  $     32,173 
                                                 ============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Accounts payable                               $      3,367  $      6,155 
  Accrued payroll and related liabilities                 784         1,813 
  Accrued expenses and other current liabilities          497           460 
  Accrued engineering charges                             450           450 
  Current portion of long-term debt                     3,493         2,144 
                                                 ------------  ------------ 
    Total current liabilities                           8,591        11,022 
Long-term debt, net of current portion                      -         1,118 
Other liabilities                                          94            94 
                                                 ------------  ------------ 
    Total liabilities                                   8,685        12,234 
                                                                            
Commitments and contingencies                                               
                                                                            
Stockholders' equity:                                                       
  Common stock                                             30            26 
  Additional paid-in capital                          100,403        92,709 
  Accumulated deficit                                 (86,721)      (72,740)
  Accumulated other comprehensive loss                      -           (56)
                                                 ------------  ------------ 
  
  Total stockholders' equity                         13,712        19,939 
                                                 ------------  ------------ 
    Total liabilities and stockholders' equity   $     22,397  $     32,173 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
                               Netlist, Inc.                                
                   Consolidated Statements of Operations                    
                  (in thousands, except per share amounts)                  
                                                                            
                                  Three Months Ended        Year Ended      
                                 --------------------  -------------------- 
                                  December   December   December   December 
                                  29, 2012   31, 2011   29, 2012   31, 2011 
                                 ---------  ---------  ---------  --------- 
                                                                            
Net sales                        $   5,963  $  16,381  $  36,873  $  60,729 
Cost of sales(1)                     5,126     10,389     27,474     40,468 
                                 ---------  ---------  ---------  --------- 
Gross profit                           837      5,992      9,399     20,261 
                                 ---------  ---------  ---------  --------- 
Operating expenses:                                                         
  Research and development(1)        2,618      3,502     12,845     14,924 
  Selling, general and                                                      
   administrative(1)                 2,098      2,694     10,075     10,705 
                                 ---------  ---------  ---------  --------- 
    Total operating expenses         4,716      6,196     22,920     25,629 
                                 ---------  ---------  ---------  --------- 
Operating loss                      (3,879)      (204)   (13,521)    (5,368)
                                 ---------  ---------  ---------  --------- 
Other income (expense):                                                     
  Interest expense, net                (90)       (81)      (338)      (228)
  Other (expense) income, net         (146)         2       (134)       (56)
                                 ---------  ---------  ---------  --------- 
    Total other income                                                      
     (expense), net                   (236)       (79)      (472)      (284)
                                 ---------  ---------  ---------  --------- 
Loss before tax benefit             (4,115)      (283)   (13,993)    (5,652)
Income tax benefit                     (17)       (56)       (12)       (53)
                                 ---------  ---------  ---------  --------- 
Net loss                         $  (4,098) $    (227) $ (13,981) $  (5,599)
                                 =========  =========  =========  ========= 
Net loss per common share:                                                  
  Basic and diluted              $   (0.14) $   (0.01) $   (0.50) $   (0.22)
Weighted-average common shares                                              
 outstanding:                                                               
  Basic 
and diluted                 28,279     28,306     27,853     25,086 
                                                                            
(1) Amounts include stock-based                                             
 compensation expense as follows:                                           
                                                                            
  Cost of sales                  $       9  $      28  $     114  $      79 
  Research and development             129        134        667        600 
  Selling, general and                                                      
   administrative                      233        235      1,110        941 
                                                                            
                                                                            
                                                                            
                               Netlist, Inc.                                
 Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA and Adjusted EBITDA  
                  (in thousands, except per share amounts)                  
                                                                            
                                  Three Months Ended        Year Ended      
                                 --------------------  -------------------- 
                                  December   December   December   December 
                                  29, 2012   31, 2011   29, 2012   31, 2011 
                                 ---------  ---------  ---------  --------- 
                                                                            
GAAP net loss                    $  (4,098) $    (227) $ (13,981) $  (5,599)
                                                                            
Interest expense, net                   90         81        338        228 
Benefit of income taxes                (17)       (56)       (12)       (53)
Depreciation and amortization          446        525      1,987      2,242 
                                                                            
                                 ---------  ---------  ---------  --------- 
EBITDA                              (3,579)       323    (11,668)    (3,182)
                                                                            
Stock-based compensation               371        397      1,891      1,620 
Other (income) expense, net            146         (2)       134         56 
                                                                            
                                 ---------  ---------  ---------  --------- 
Adjusted EBITDA                  $  (3,062) $     718  $  (9,643) $  (1,506)
                                 =========  =========  =========  ========= 

  
For more information, please contact: 
Brainerd Communicators, Inc. 
Corey Kinger/Mike Smargiassi (investors) 
Sharon Oh (media) 
NLST@braincomm.com 
(212) 986-6667 
Netlist, Inc.
Gail M. Sasaki 
Chief Financial Officer 
(949) 435-0025 
 
 
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