Netlist Reports First Quarter 2013 Results

Netlist Reports First Quarter 2013 Results 
IRVINE, CA -- (Marketwired) -- 05/14/13 --  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 first quarter ended March 30, 2013.  
Revenues for the three months ended March 30, 2013, were $6.0
million, compared to revenues of $14.0 million for the first quarter
ended March 31, 2012. Gross profit for the three months ended March
30, 2013, was $0.6 million, or 9.5 percent of revenues, compared to a
gross profit of $5.4 million, or 38.9 percent of revenues, for the
three months ended March 31, 2012.  
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 other expense (income) was ($2.2) million for the three month
period ended March 30, 2013, compared to an adjusted EBITDA income of
$43,000 for the prior year period.  
Net loss for the three months ended March 30, 2013, was ($3.2)
million, or ($0.10) loss per share, compared to a net loss in the
prior year period of ($1.1) million, or ($0.04) loss per share. These
results include stock-based compensation expense of $434,000 for the
first quarter of 2013, compared to $523,000 for the first quarter of
2012.  
"Our first quarter results reflect the ongoing transition of our
business model as we execute our plan to introduce our advanced,
IP-based solutions to the next-generation high-speed server and
storage markets," said C.K. Hong, Chief Executive Officer of Netlist.
"Our business is supported by our extensive patent portfolio in the
areas of high performance, memory subsystems and hybrid flash-based
memory technologies. We remain focused on working with our OEM
partners to roll out our new products, including HyperCloud(R) and
NVvault(TM), and believe our investments will lead to a more
diversified and scalable business model." 
As of March 30, 2013, cash and cash equivalents were $7.7 million,
total assets were $20.0 million, working capital was $8.8 million,
total debt was $3.3 million, and stockholders' equity was $11.0
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 first quarter ended March 30, 2013. 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 ("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. 
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(R), 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. and Subsidiaries                 
      
                   Condensed Consolidated Balance Sheets                    
                      (in thousands, except par value)                      
                                                                            
                                                                            
                                                  (unaudited)    (audited)  
                                                   March 30,   December 29, 
                                                     2013          2012     
                                                 ------------  ------------ 
                                                                            
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                      $      7,685  $      7,755 
  Investments in marketable securities                      -           415 
  Accounts receivable, net                              3,189         3,434 
  Inventories                                           6,225         7,380 
  Prepaid expenses and other current assets               563           723 
                                                 ------------  ------------ 
    Total current assets                               17,662        19,707 
                                                                            
  Property and equipment, net                           2,171         2,560 
  Other assets                                            129           130 
                                                 ------------  ------------ 
    Total assets                                 $     19,962  $     22,397 
                                                 ============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Accounts payable                               $      3,705  $      3,367 
  Accrued payroll and related liabilities                 910           784 
  Accrued expenses and other current liabilities          483           497 
  Accrued engineering charges                             450           450 
  Current portion of debt                               3,320         3,493 
                                                 ------------  ------------ 
    Total current liabilities                           8,868         8,591 
Other liabilities                                         101            94 
                                                 ------------  ------------ 
    Total liabilities                                   8,969         8,685 
                                                 ------------  ------------ 
                                                                            
Commitments and contingencies                                               
                                                                            
Stockholders' equity:                                                       
  Common stock, $0.001 par value - 90,000 shares                            
   authorized; 30,412 (2013) and 30,348                    30            30 
    (2012) shares issued and outstanding                                    
  Additional paid-in capital                          100,854       100,403 
  Accumulated deficit                                 (89,891)      (86,721)
                                                 ------------  ------------ 
    Total stockholders' equity                         10,993        13,712 
                                                 ------------  ------------ 
    Total liabilities and stockholders' equity   $     19,962  $     22,397 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
                       Netlist, Inc. and Subsidiaries                       
         Unaudited Condensed Consolidated Statements of Operations          
                  (in thousands, except per share amounts)                  
                                                                            
                                                                            
                                                     Three Months Ended     
                                                 -------------------------- 
                                                   March 30,     March 31,  
                                                     2013          2012     
                                                 ------------  ------------ 
                                                                            
Net sales                                        $      5,963  $     13,967 
Cost of sales(1)                                        5,397         8,531 
                                                 ------------  ------------ 
Gross profit                                              566         5,436 
                                                 ------------  ------------ 
Operating expenses:                                                         
  Research and development(1)                           1,842         3,842 
  Selling, general and administrative(1)                1,756         2,609 
                                                 ------------  ------------ 
    Total operating expenses                            3,598         6,451 
                                                 ------------  ------------ 
Operating loss                                         (3,032)       (1,015)
                                                 ------------  ------------ 
Other income (expense):                                                     
  Interest expense, net                                  (130)          (71)
  Other income (expense), net                              (6)            5 
                                                 ------------  ------------ 
    Total other expense, net                             (136)          (66)
                                                 ------------  ------------ 
Loss before provision for income taxes                 (3,168)       (1,081)
Provision for income taxes                                  2             - 
                                                 ------------  ------------ 
Net loss                                         $     (3,170) $     (1,081)
                                                 ============  ============ 
Net loss per common share:                                                  
  Basic and diluted                              $      (0.10) $      (0.04)
                                                 ============  ============ 
                                                                            
Weighted-average common shares outstanding:                                 
  Basic and diluted                                    30,205        26,729 
                        
                         ============  ============ 
                                                                            
(1) Amounts include stock-based compensation                                
 expense as follows:                                                        
                                                                            
  Cost of sales                                  $         12  $         35 
  Research and development                                160           192 
  Selling, general and administrative                     262           296 
                                                                            
                                                                            
                                                                            

 
                       Netlist, Inc. and Subsidiaries                       
    Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA and     
                               Adjusted EBITDA                              
                               (in thousands)                               
                                                                            
                                                                            
                                                     Three Months Ended     
                                                 -------------------------- 
                                                   March 30,     March 31,  
                                                     2013          2012     
                                                 ------------  ------------ 
                                                                            
GAAP net loss                                    $     (3,170) $     (1,081)
                                                                            
Interest expense, net                                     130            71 
Provision for income taxes                                  2             - 
Depreciation and amortization                             418           535 
                                                  -----------   ----------- 
EBITDA                                                 (2,620)         (475)
                                                                            
Stock-based compensation                                  434           523 
Other expense (income), net                                 6            (5)
                                                                            
                                                 ------------  ------------ 
Adjusted EBITDA                                  $     (2,180) $         43 
                                                 ============  ============ 

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