Netlist Reports Second Quarter 2013 Results

Netlist Reports Second Quarter 2013 Results 
IRVINE, CA -- (Marketwired) -- 08/13/13 --  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 second quarter ended June 29, 2013.  
Revenues for the three months ended June 29, 2013, were $5.1 million,
compared to revenues of $10.6 million for the second quarter ended
June 30, 2012. Gross profit for the three months ended June 29, 2013,
was $0.2 million, or 4.9 percent of revenues, compared to a gross
profit of $2.7 million, or 25.9 percent of revenues, for the three
months ended June 30, 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 income was ($2.0) million for the three month period
ended June 29, 2013, compared to an adjusted EBITDA loss of ($2.9)
million for the prior year period.  
Net loss for the three months ended June 29, 2013, was ($2.9)
million, or ($0.09) loss per share, compared to a net loss in the
prior year period of ($4.0) million, or ($0.14) loss per share. These
results include stock-based compensation expense of $369,000 for the
second quarter of 2013, compared to $482,000 for the second quarter
of 2012.  
"During the second quarter, we continued our focus on the
introduction of our industry-leading products to the high performance
server market, while laying the groundwork to maximize our related IP
assets," said C.K. Hong, Chief Executive Officer of Netlist. "Our
financial results reflect the transitional process underway in our
business, combined with our focus on managing costs and preserving
liquidity. In July, we announced the qualification of 32GB
HyperCloud(R) on the world's best-selling server, HP's ProLiant
DL380p Gen8. We also strengthened our financial resources through a
strategic financing arrangement backed by our patent portfolio with
Fortress Investment Group LLC. Looking ahead, we are committed to
unlocking the value of our patent portfolio for the current and
future generations of server memory." 
Revenues for the six months ended June 29, 2013, were $11.0 million,
compared to revenues of $24.5 million for the six months ended June
30, 2012. Gross profit for the six months ended June 29, 2013, was
$0.8 million, or 7.4 percent of revenues, compared to a gross profit
of $8.2 million, or 33.3 percent of revenues, for the six months
ended June 30, 2012.  
Net loss for the six months ended June 29, 2013, was ($6.0) million,
or ($0.20) loss per share, compared to a net loss in the prior year
period of ($5.1) million, or ($0.18) loss per share. These results
include stock-based compensation expense of $803,000 and $1 million
for the six month periods ended June 29, 2013 and June 30, 2012,
respectively.  
As of June 29, 2013, cash and cash equivalents were $6.8 million,
total assets were $16.6 million, working capital was $9.5 million,
total debt was $2.9 million, and stockholders' equity was $8.5
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 to review the
financial results for the second quarter ended June 29, 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. 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. 


 
                                                                            
                       Netlist, Inc. and Subsidiaries                       
                   Condensed Consolidated Balance Sheets                    
                      (in thousands, except par value)                      
                                                                            
                                                (unaudited)     (audited)   
                                                  June 29,     December 29, 
                                                    2013           2012     
                                               -------------  ------------- 
                                                                            
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                    $       6,817  $       7,755 
  Investments in marketable securities                     -            415 
  Accounts receivable, net                             2,064          3,434 
  Inventories                                          5,305          7,380 
  Prepaid expenses and other current assets              472            723 
                                               -------------  ------------- 
    Total current assets                              14,658         19,707 
                                                                            
  Property and equipment, net                          1,804          2,560 
  Other assets                                           126            130 
                                               -------------  ------------- 
    Total assets                               $      16,588  $      22,397 
                                               =============  ============= 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Accounts payable                             $       3,438  $       3,367 
  Accrued payroll and related liabilities                710            784 
  Accrued expenses and other current                                        
   liabilities                                           435            497 
  Accrued engineering charges                            450            450 
  Current portion of long-term debt                      111          3,493 
                                               -------------  ------------- 
    Total current liabilities                          5,144          8,591 
Long-term debt, net of current portion                 2,800              - 
Other liabilities                                        105             94 
                                               -------------  ------------- 
    Total liabilities                                  8,049          8,685 
                                               -------------  ------------- 
                                                                            
Commitments and contingencies                                               
                                                                            
Stockholders' equity:                                                       
  Common stock, $0.001 par value - 90,000                                   
   shares authorized; 30,460 (2013) and 30,348                              
   (2012) shares issued and outstanding                   30             30 
  Additional paid-in capital                         101,263        100,403 
  Accumulated deficit                                (92,754)       (86,721)
                                               -------------  ------------- 
    Total stockholders' equity                         8,539         13,712 
                                               -------------  ------------- 
    Total liabilities and stockholders' equity $      16,588  $      22,397 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                       Netlist, Inc. and Subsidiaries                       
         Unaudited Condensed Consolidated Statements of Operations          
                  (in thousands, except per share amounts)                  
                                                                            
                               Three Months Ended        Six Months Ended   
                             ----------------------  ---------------------- 
                              June 29,    June 30,    June 29,    June 30,  
                                2013        2012        2013        2012    
                             ----------  ----------  ----------  ---------- 
                                                                            
Net sales                                                                   
                             $    5,065  $   10,552  $   11,029  $   24,519 
Cost of sales(1)                  4,818       7,814      10,216      16,345 
                             ----------  ----------  ----------  ---------- 
Gross profit                        247       2,738         813       8,174 
                             ----------  ----------  ----------  ---------- 
Operating expenses:                                                         
  Research and                                                              
   development(1)                 1,457       3,770       3,299       7,612 
  Selling, general and                                                      
   administrative(1)              1,571       2,871       3,327       5,480 
                             ----------  ----------  ----------  ---------- 
    Total operating expenses      3,028       6,641       6,626      13,092 
                             ----------  ----------  ----------  ---------- 
Operating loss                   (2,781)     (3,903)     (5,813)     (4,918)
                             ----------  ----------  ----------  ---------- 
Other income (expense):                                                     
  Interest expense, net             (88)        (79)       (218)       (150)
  Other income, net                   7           3           1           8 
                             ----------  ----------  ----------  ---------- 
    Total other expense, net        (81)        (76)       (217)       (142)
                             ----------  ----------  ----------  ---------- 
Loss before provision for                                                   
 income taxes                    (2,862)     (3,979)     (6,030)     (5,060)
Provision for income taxes            1           1           3           1 
                             ----------  ----------  ----------  ---------- 
Net loss                                                                    
                             $   (2,863) $   (3,980) $   (6,033) $   (5,061)
                             ==========  ==========  ==========  ========== 
Net loss per common share:                                                  
  Basic and diluted                                                         
                             $    (0.09) $    (0.14) $    (0.20) $    (0.18)
                                                                            
Weighted-average common                                                     
 shares outstanding:                                                        
  Basic and diluted              30,320      28,111      30,263      27,420 
                                                                            
(1) Amounts include stock-                                                  
 based compensation expense                                                 
 as follows:                                                                
                                                                            
  Cost of sales                                                             
                             $       11  $       42  $       23  $       77 
  Research and development          118         153         278         345 
  Selling, general and                                                      
   administrative                   240         287         502         583 
                                                                            
                                                                            
                                                                            
                       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 29,    June 30,    June 29,    June 30,  
                                2013        2012        2013        2012    
                             ----------  ----------  ----------  ---------- 
                                                                            
GAAP net loss                $   (2,863) $   (3,980) $   (6,033) $   (5,061)
                                                                            
Interest expense, net                88          79         218         150 
Provision for income taxes            1           1           3           1 
Depreciation and                                                            
 amortization                       395         535         813       1,070 
                             ----------  ----------  ----------  ---------- 
EBITDA                           (2,379)     (3,365)     (4,999)     (3,840)
                                                                            
Stock-based compensation            369         482         803       1,005 
Other expense (income), net          (7)         (3)         (1)         (8)
                                                                            
                             ----------  ----------  ----------  ---------- 
Adjusted EBITDA              $   (2,017) $   (2,886) $   (4,197) $   (2,843)
                             ==========  ==========  ==========  ========== 

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