Netlist Reports Fourth Quarter and Full Year 2013 Results

Netlist Reports Fourth Quarter and Full Year 2013 Results 
IRVINE, CA -- (Marketwired) -- 02/03/14 --  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
28, 2013.  
Revenues for the fourth quarter ended December 28, 2013, were $7.7
million, compared to revenues of $6.0 million for the fourth quarter
ended December 29, 2012. Gross profit for the fourth quarter ended
December 28, 2013, was $1.9 million, or 24.6 percent of revenues,
compared to a gross profit of $0.8 million, or 14.0 percent of
revenues, for the fourth quarter ended December 29, 2012.  
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) loss is a non-GAAP measure in which the net interest
expense, benefit of income taxes, depreciation, amortization,
stock-based compensation and net other income are added back to the
GAAP basis net income (loss). The non-GAAP measures are described
below and are reconciled to the corresponding GAAP measure in the
consolidated financial statements portion of this release under the
heading "Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP
EBITDA and Adjusted EBITDA." The adjusted EBITDA loss was ($0.5)
million for the fourth quarter ended December 28, 2013, compared to
an adjusted EBITDA loss of ($3.1) million for the prior year period. 
Net loss for the fourth quarter ended December 28, 2013, was ($1.6)
million, or ($0.05) loss per share, compared to a net loss in the
prior year period of ($4.1) million, or ($0.14) loss per share. These
results include stock-based compensation expense of $0.4 million for
both the fourth quarter ended December 28, 2013 and December 29,
2012.  
As of December 28, 2013, cash and cash equivalents and restricted
cash were $7.8 million, total assets were $16.1 million, working
capital was $10.6 million, total debt, net of debt discounts, was
$5.1 million, and stockholders' equity was $7.0 million.  
"Our 2013 results reflect substantial progress in the strategic
transition of our business," said C.K. Hong, CEO of Netlist. "We
gained increasing traction in introducing our flagship product lines,
HyperCloud and Vault, while ramping down legacy projects. We also
took important steps towards further strengthening our intellectual
property position, including a major victory in the US Patent Trial
and Appeals Board with regard to our seminal patents covering LRDIMM
and allowances by the USPTO of critical hybrid memory patents. In the
fourth quarter we posted a significant improvement in year-over-year
results, primarily due to sizeable increases in demand for our
NVvault family of products combined with our ongoing efforts to
control our costs. As we look out into 2014, we believe market
requirements will accelerate for both our products and our IP." 
Revenues for the twelve months ended December 28, 2013, were $23.0
million, compared to revenues of $36.9 million for the twelve months
ended December 29, 2012. Gross profit for the twelve months ended
December 28, 2013, was $3.1 million, or 13.5 percent of revenues,
compared to a gross profit of $9.4 million, or 25.5 percent of
revenues, for the twelve months ended December 29, 2012.  
Adjusted EBITDA loss was ($6.7) million for the twelve month period
ended December 28, 2013, compared to an adjusted EBITDA loss of
($9.6) million for the prior year period.  
Net loss for the twelve months ended December 28, 2013, was ($10.8)
million, or ($0.35) loss per share, compared to a net loss in the
prior year period of ($14.0) million, or ($0.50) loss per share.
These results include stock-based compensation expense of $1.7
million for 2013, compared to $1.9 million for 2012.  
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 fourth quarter and full year ended December
28, 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 performance barriers, NVvault(TM) and EXPRESSvault(TM),
the pioneering family of hybrid memory products utilizing both DRAM
and NAND Flash that significantly accelerates system performance and
provides 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 has steadily invested
in and grown its IP portfolio, which now includes 41 issued patents
and more than 29 US 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 that design and build tower, rack-mounted, and blade
servers, storage hardware, 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 decreas
e 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.                               
                         Consolidated Balance Sheets                        
                               (in thousands)                               
                                                                            
                                                December 28,   December 29, 
                                                    2013           2012     
                                               -------------  ------------- 
                                                (unaudited)                 
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                    $       6,701  $       7,755 
  Restricted cash                                      1,100              - 
  Investment in marketable securities                      -            415 
  Accounts receivable, net                             4,866          3,434 
  Inventories                                          2,620          7,380 
  Prepaid expenses and other current assets              823            723 
                                               -------------  ------------- 
    Total current assets                              16,110         19,707 
                                                                            
  Property and equipment, net                          1,143          2,560 
  Other assets                                           422            130 
                                               -------------  ------------- 
    Total assets                               $      17,675  $      22,397 
                                               =============  ============= 
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Accounts payable                             $       3,795  $       3,367 
  Accrued payroll and related liabilities                635            784 
  Accrued expenses and other current                                        
   liabilities                                           533            497 
  Accrued engineering charges                            500            450 
  Current portion of long-term debt                        -          3,493 
                                               -------------  ------------- 
    Total current liabilities                          5,463          8,591 
Long-term debt, net of current portion and                                  
 debt discount                                         5,099              - 
Other liabilities                                        100             94 
                                               -------------  ------------- 
    Total liabilities                                 10,662          8,685 
                                               -------------  ------------- 
                                                                            
Commitments and contingencies                              -              - 
                                                                            
Stockholders' equity:                                                       
  Preferred stock                                          -              - 
  Common stock                                            31             30 
  Additional paid-in capital                         104,469        100,403 
  Accumulated deficit                                (97,487)       (86,721)
                                               -------------  ------------- 
    Total stockholders' equity                         7,013         13,712 
                                               -------------  ------------- 
    Total liabilities and stockholders' equity $      17,675  $      22,397 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                       Netlist, Inc. and Subsidiaries                       
          Unaudited Condensed Consolidated Statements of Operations         
                  (in thousands, except per share amounts)                  
                                                                            
                         Three Months Ended              Year Ended         
                     --------------------------  -------------------------- 
                     December 28,  December 29,  December 28,  December 29, 
                         2013          2012          2013          2012     
                     ------------  ------------  ------------  ------------ 
                                                                            
Net sales            $      7,730  $      5,963  $     23,048  $     36,873 
Cost of sales(1)            5,831         5,126        19,943        27,474 
                     ------------  ------------  ------------  ------------ 
Gross profit                1,899           837         3,105         9,399 
                     ------------  ------------  ------------  ------------ 
Operating expenses:                                                         
  Research and                                                              
   develo
pment(1)           1,742         2,618         6,683        12,845 
  Selling, general                                                          
   and                                                                      
   administrative(1)        1,387         2,098         6,267        10,075 
                     ------------  ------------  ------------  ------------ 
    Total operating                                                         
     expenses               3,129         4,716        12,950        22,920 
                     ------------  ------------  ------------  ------------ 
Operating loss             (1,230)       (3,879)       (9,845)      (13,521)
                     ------------  ------------  ------------  ------------ 
Other income                                                                
 (expense):                                                                 
  Interest expense,                                                         
   net                       (390)          (90)         (932)         (338)
  Other income                                                              
   (expense), net              28          (146)           20          (134)
                     ------------  ------------  ------------  ------------ 
    Total other                                                             
     expense, net            (362)         (236)         (912)         (472)
                     ------------  ------------  ------------  ------------ 
Loss before                                                                 
 provision for                                                              
 income taxes              (1,592)       (4,115)      (10,757)      (13,993)
Provision (benefit)                                                         
 for income taxes               -           (17)            9           (12)
                     ------------  ------------  ------------  ------------ 
Net loss             $     (1,592) $     (4,098) $    (10,766) $    (13,981)
                     ============  ============  ============  ============ 
Net loss per common                                                         
 share:                                                                     
  Basic and diluted  $      (0.05) $      (0.14) $      (0.35) $      (0.50)
                                                                            
Weighted-average                                                            
 common shares                                                              
 outstanding:                                                               
  Basic and diluted        31,752        28,279        30,881        27,853 
                                                                            
(1) Amounts include                                                         
 stock-based                                                                
 compensation                                                               
 expense as follows:                                                        
                                                                            
  Cost of sales      $         12  $          9  $         49  $        114 
  Research and                                                              
   development                148           129           588           667 
  Selling, general                                                          
   and                                                                      
   administrative             263           233         1,032         1,110 
                                                                            
                                                                            
                                                                            
                                Netlist, Inc.                               
Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA and Adjusted
                                   EBITDA                                   
                               (in thousands)                               
                                                                            
                         Three Months Ended              Year Ended         
                     --------------------------  -------------------------- 
                     December 28,  December 29,  December 28,  December 29, 
                         2013          2012          2013          2012     
                     ------------  ------------  ------------  ------------ 
                                                                            
GAAP net loss        $     (1,592) $     (4,098) $    (10,766) $    (13,981)
                                                                            
Interest expense,                                                           
 net                          390            90           932           338 
Provision (benefit)                                                         
 of income taxes                -           (17)            9           (12)
Depreciation and                                                            
 amortization                 310           446         1,476         1,987 
                                                                            
                     ------------  ------------  ------------  ------------ 
EBITDA (loss)                (892)       (3,579)       (8,349)      (11,668)
                                                                            
Stock-based                                                                 
 compensation                 423           371         1,669         1,891 
Other (income)                                                              
 expense, net                 (28)          146            20           134 
                                                                            
                     ------------  ------------  ------------  ------------ 
Adjusted EBITDA                                                             
 (loss)              $       (497) $     (3,062) $     (6,660) $     (9,643)
                     ============  ============  ============  ============ 

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