Netlist Reports Fourth Quarter and Full Year 2012 Results

Marketwired

IRVINE, CA--(Marketwire - Mar 28, 2013) -  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™, a patented memory technology that breaks traditional memory barriers, NVvault™ and EXPRESSvault™ 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™, 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 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 )
Contact:
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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