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Netlist Reports Third Quarter 2017 Results

IRVINE, Calif., Nov. 1, 2017 /PRNewswire/ -- Netlist, Inc. (NASDAQ: NLST) today reported financial results for the third quarter ended September 30, 2017.

Revenues for the third quarter ended September 30, 2017, were $9.0 million, compared to revenues of $2.6 million for the quarter ended October 1, 2016, an increase of 248%. Gross profit for the quarter ended September 30, 2017, was $0.7 million, or 8.0% of revenues, compared to a gross profit of $9,000, or 0.3% of revenues, for the quarter ended October 1, 2016.

Net loss for the third quarter ended September 30, 2017, was ($3.1) million, or ($0.05) loss per share, compared to a net loss in the prior year period of ($4.4) million, or ($0.08) loss per share. These results include stock-based compensation expense of $0.3 million for both quarters ended September 30, 2017 and October 1, 2016.

As of September 30, 2017, cash and cash equivalents and restricted cash were $11.0 million, total assets were $20.7 million, working capital was $8.8 million, total debt, net of debt discount and accrued interest, was $17.2 million, and stockholders' deficit was ($5.3) million.

"During the third quarter we received net proceeds of $4.4 million from a registered direct offering, reduced cash burn to $1.3 million, and increased net product revenues by 248% versus the prior-year period," said C.K. Hong, Netlist's Chief Executive Officer. "Yesterday we filed our second complaint against S.K. hynix at the International Trade Commission, targeting billions of dollars of unlicensed S.K. hynix server memory products. We also shipped our first HybriDIMM™ evaluation units to select customers and are in the process of actively pursuing the next phase of HybriDIMM's commercialization with a number of parties, including Samsung."

Adjusted EBITDA (loss) was ($2.6) million for the quarter ended September 30, 2017, compared to adjusted EBITDA (loss) of ($3.8) million for the prior year period. EBITDA and adjusted EBITDA are non-GAAP financial measures. These non-GAAP financial measures are described below under the heading "Note Regarding Use of Non-GAAP Financial Measures" and are reconciled to the most directly comparable GAAP financial measure net loss below under the heading "Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA and Adjusted EBITDA."

Conference Call Information
C.K. Hong, Chief Executive Officer, and Gail Sasaki, Chief Financial Officer, will host an investor conference call today, November 1, 2017 at 4:30 p.m. Eastern Time to review Netlist's results for the third quarter ended September 30, 2017. The dial-in number for the call is 1-412-317-5443. The live webcast and archived replay of the call can be accessed for 90 days in the Investors section of Netlist's website at www.netlist.com.

Note Regarding Use of Non-GAAP Financial Measures
Certain of the information in this press release, including EBITDA and adjusted EBITDA are non-GAAP financial measures. Netlist believes this information is useful to investors because it provides a basis for measuring the operating performance of Netlist's business excluding certain items that it believes are not attributable to or reflective of its core operating results. Netlist defines EBITDA as net loss calculated and presented in conformity with accounting principles generally accepted in the United States of America ("GAAP"), plus interest expense, net, plus provisions for income taxes, and plus depreciation and amortization; and Netlist defines adjusted EBITDA as EBITDA plus stock-based compensation expense and plus (minus) other expense (income), net. Netlist expects to continue to incur expenses similar to the line items added to or subtracted from net loss to calculate EBITDA and adjusted EBITDA; accordingly, the exclusion of these items in the presentation of these non-GAAP financial measures should not be construed as an inference that these items are unusual, infrequent or non-recurring. Netlist's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measure net loss in evaluating Netlist's operating performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in conformity with GAAP, and non-GAAP financial measures as reported by Netlist may not be comparable to similarly titled amounts reported by other companies.

About Netlist
Netlist is a leading provider of high-performance modular memory subsystems serving customers in diverse industries that require superior memory performance to empower critical business decisions. Flagship products NVvault® and EXPRESSvault® enable customers to accelerate data running through their servers and storage and reliably protect enterprise-level cache, metadata and log data by providing near instantaneous recovery in the event of a system failure or power outage. HybriDIMM™, Netlist's next-generation storage class memory product, addresses the growing need for real-time analytics in Big Data applications and in-memory databases. Netlist holds a portfolio of patents, many seminal, in the areas of hybrid memory, storage class memory, rank multiplication and load reduction. Netlist is part of the Russell Microcap® Index. To learn more, visit www.netlist.com.

Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical facts and often address future events or Netlist's future performance. Forward-looking statements contained in this news release include statements about trends in Netlist's performance; Netlist's efforts to protect and enforce its patent portfolio; Netlist's pending legal proceedings; customer interest in and market acceptance of Netlist's products; and Netlist's ability to execute its strategic initiatives. All forward-looking statements reflect management's present expectations regarding future events and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by any forward-looking statements. These risks, uncertainties and other factors include, among others: risks associated with Netlist's product sales, including the market and demand for products sold or resold by Netlist and its ability to successfully develop, launch and stimulate customer demand for new products that are attractive to the market; risks associated with patent infringement litigation initiated by Netlist, such as its ongoing proceedings against SK hynix Inc., or by others against Netlist, as well as the costs and unpredictability of any such litigation; risks related to Netlist's plans for its intellectual property, including its strategies for monetizing, licensing, expanding and defending its patent portfolio; the success of product, joint development and licensing partnerships, including its relationship with Samsung Electronics Co., Ltd.; the competitive landscape of Netlist's industry; and general economic, political and market conditions. These and other risks and uncertainties are described in Netlist's annual report on Form 10-K for its most recently completed fiscal year and the other filings it makes with the U.S. Securities and Exchange Commission from time to time, including its subsequently filed quarterly and current reports. Given these risks, uncertainties and other important factors, undue reliance should not be placed on any forward-looking statements. Forward-looking statements represent Netlist's estimates and assumptions only as of the date made, and except as required by law, Netlist undertakes no obligation to revise or update any forward-looking statements for any reason.

(Tables Follow)

For more information, please contact:



Brainerd Communicators, Inc.

Netlist, Inc.

Mike Smargiassi

Gail M. Sasaki

NLST@braincomm.com

Chief Financial Officer

(212) 739-6729

(949) 435-0025


Netlist, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

























September 30,


December 31,




2017


2016





(unaudited)





ASSETS








Current assets:








Cash and cash equivalents


$

8,583


$

9,476


Restricted cash



2,400



3,100


Accounts receivable, net



3,080



1,751


Inventories



4,386



3,160


Prepaid expenses and other current assets



1,703



1,766


Total current assets



20,152



19,253










Property and equipment, net



509



645


Other assets



82



70


Total assets


$

20,743


$

19,968










LIABILITIES AND STOCKHOLDERS' DEFICIT








Current liabilities:








Accounts payable


$

7,766


$

4,028


Revolving line of credit



2,570



676


Accrued payroll and related liabilities



650



1,085


Accrued expenses and other current liabilities



306



270


Notes payable and capital lease obligation, current



23



151


Total current liabilities



11,315



6,210


Convertible promissory note, net of debt discount, and accrued interest



14,638



14,251


Long-term warranty liability



53



36


Total liabilities



26,006



20,497










Commitments and contingencies
















Stockholders' deficit:








Preferred stock



-



-


Common stock



70



62


Additional paid-in capital



149,580



144,035


Accumulated deficit



(154,913)



(144,626)


Total stockholders' deficit



(5,263)



(529)


Total liabilities and stockholders' deficit


$

20,743


$

19,968


Netlist, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)























Three Months Ended


Nine Months Ended




September 30,

October 1,

September 30,

October 1,



2017

2016

2017

2016











Net product revenue


$ 9,010


$ 2,589


$ 29,840


$ 7,260


Non-recurring engineering revenues


-


-


-


6,857


Total net revenues


9,010


2,589


29,840


14,117


Cost of sales(1)


8,285


2,580


27,791


6,996


Gross profit


725


9


2,049


7,121


Operating expenses:










Research and development(1)


1,159


1,463


4,142


4,940


Intellectual property legal fees


749


409


2,129


2,255


Selling, general and administrative(1)


1,780


2,398


5,645


6,822


Total operating expenses


3,688


4,270


11,916


14,017


Operating loss


(2,963)


(4,261)


(9,867)


(6,896)


Other income (expense):










Interest expense, net


(135)


(159)


(421)


(428)


Other income, net


-


19


2


17


Total other income, net


(135)


(140)


(419)


(411)


Loss before provision for income taxes


(3,098)


(4,401)


(10,286)


(7,307)


Provision for income taxes


-


-


1


1


Net loss


$ (3,098)


$ (4,401)


$ (10,287)


$ (7,308)


Net loss per common share:










Basic and diluted


$ (0.05)


$ (0.08)


$ (0.16)


$ (0.14)


Weighted-average common shares outstanding:










Basic and diluted


65,644


52,454


63,056


51,301






















(1) Amounts include stock-based compensation expense as follows:


















Cost of sales


$ 4


$ 14


$ 33


$ 42


Research and development


78


73


258


263


Selling, general and administrative


213


246


649


789


Total stock-based compensation


$ 295


$ 333


$ 940


$ 1,094


Netlist, Inc. and Subsidiaries

Unaudited Schedule Reconciling GAAP Net Loss to Non-GAAP EBITDA and Adjusted EBITDA

(in thousands)





























Three Months Ended


Nine Months Ended



September 30,


October 1,


September 30,


October 1,



2017


2016


2017


2016














GAAP net loss


$

(3,098)


$

(4,401)


$

(10,287)


$

(7,308)














Interest expense, net



135



159



421



428

Provision for income taxes



-



-



1



1

Depreciation and amortization



70



84



214



210














EBITDA (loss)



(2,893)



(4,158)



(9,651)



(6,669)














Stock-based compensation



295



333



940



1,094

Other income, net



-



(19)



(2)



(17)














Adjusted EBITDA (loss)


$

(2,598)


$

(3,844)


$

(8,713)


$

(5,592)

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SOURCE Netlist, Inc.