Third Quarter Highlights
Total revenue for the third quarter of 2007 was $4.0 million, compared to $4.3 million in the second quarter of 2007 and $4.0 million in third quarter of 2006.
Third quarter total revenue included $1.5 million of license revenue compared to $2.1 million in the previous quarter and $3.3 million in the third quarter of 2006. Royalty revenue increased approximately 12 percent to $2.4 million compared to $2.2 million in the previous quarter. Royalty revenue was $705,000 in the third quarter of 2006 and has grown on the strong demand for the Nintendo Wii game console.
Business Summary
"The Technology Licenses that we have signed over the past year on 1T-SRAM are now starting to generate royalties. Based on information provided to us by our licensees, we believe that there are several design wins that are now entering the production phase. We expect quarter over quarter royalty growth to continue throughout 2008 as additional design wins ramp into volume production," stated Chet Silvestri, Chief Executive Officer of MoSys.
"In addition, we expect to see incremental licensing revenue from our 1T-FLASH and Mixed Signal technologies in 2008. Our licensing strategy for these newer technologies is also to focus on signing Technology Licenses at the advanced 65nm process nodes and beyond, similar to the approach we have taken with our 1T-SRAM," concluded Mr. Silvestri.
Financial Results
The third quarter gross margin percentage determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was 83 percent compared to 84 percent in the second quarter of 2007 and 96 percent in the third quarter of 2006.
Total operating expenses were $7.3 million compared to $4.9 million in the second quarter of 2007. Operating expenses included a one-time charge of in-process research and development and intangible asset amortization of $1.2 million related to the recent acquisition of intellectual property from Atmel Corporation, as well as, additional operating expenses for the engineering personnel and operating costs that we agreed to incur as part of that acquisition.
On a GAAP basis, net loss for the quarter was $2.8 million, or ($0.09) per share, including stock-based compensation charges of $894,000 and the in-process research and development and intangible asset amortization charge of $1.2 million. This compares to a net loss of $146,000, or ($0.00) per share, in the previous quarter and a net loss of $2.9 million, or ($0.09) per share, in the third quarter of 2006. Net loss per share for the quarter on a GAAP basis was computed using 32,274,000 shares.
Non-GAAP net loss for the third quarter of 2007, which excludes stock-based compensation charges of $894,000 and $1.2 million in the in-process research and development and amortization charges, was $766,000, or ($0.02) per share. Net loss per share for the quarter on a non-GAAP basis was computed using 32,274,000 shares. A reconciliation of GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.
Cash, cash equivalents and long and short-term investments totaled approximately $85.6 million as of September 30, 2007. Cash expenditures during the quarter included $1.4 million for the acquisition of certain analog mixed/signal designs and intellectual property from Atmel Corporation and the repurchase of common stock under the Company's repurchase program at a cost of approximately $641,000.
Business Outlook
The Company expects royalty revenue to continue to grow sequentially in the fourth quarter while total revenue is projected to remain flat. Additional financial details regarding the Company's business outlook will be provided during their conference call at 1:30 p.m. Pacific Time (PT) on Tuesday, October 30, 2007.
Third Quarter 2007 Financial Results Webcast/ Conference Call
MoSys management will host a conference call and webcast with investors today, October 30, 2007, at 1:30 p.m. PT (4:30 p.m. ET) to discuss the third quarter 2007 financial results and the business outlook. Investors and other interested parties may access the call by dialing 1-866-277-1184 in the U.S. (1-617-597-5360 outside of the U.S.), and entering the passcode 76456881 at least 10 minutes prior to the start of the call. In addition, an audio webcast will be available through the MoSys website at www.mosys.com A telephonic replay will be available for 48 hours following the call at 888-286-8010 in the U.S. (617-801-6888 outside of the U.S.), passcode of 85202789.
Use of Non-GAAP Financial Measures
To supplement MoSys' consolidated financial statements presented in accordance with GAAP, MoSys uses non-GAAP financial measures that exclude from the statement of operations the effects of stock-based compensation and a one-time charge of in-process research and development and amortization of intangibles in connection with the acquisition. MoSys management uses the above non-GAAP financial measures internally to understand, manage and evaluate our business. MoSys believes it is useful for itself and investors to review, as applicable, both GAAP information and the non-GAAP measures, which exclude the effects of stock-based compensation and in-process research and development and amortization charges of intangibles in connection with the acquisition, in order to assess the performance of our continuing operations and for planning and forecasting in future periods. The presentation of these non-GAAP measures is intended to provide investors with an understanding of our operational results and trends that enables them to analyze our base financial and operating performance and facilitate period-to-period comparisons and analysis of operational trends. MoSys believes the presentation of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making.
Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which is provided in a table immediately below the Condensed Consolidated Statements of Operations. For additional information regarding these non-GAAP financial measures, and management's explanation of why it considers such measures to be useful, refer to the Form 8-K dated October 30, 2007 that we have submitted to the Securities and Exchange Commission.
Forward-Looking Statements
This press release may contain forward-looking statements about the Company including, without limitation, benefits and performance expected from use of the Company's 1T-SRAM and 1T-FLASH, and analog/mixed signal technologies.
Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include but are not limited to, customer acceptance of our 1T-SRAM, 1T-FLASH or analog/mixed signal technologies, the timing and nature of the license agreements being signed with our customers and their requests for our services under existing license agreements, the timing of customer acceptance of our work under such agreements, the level of commercial success of licensees' products, ease of manufacturing and yields of devices incorporating our 1T-SRAM, our ability to enhance the 1T-SRAM technology or develop new technologies, the level of intellectual property protection provided by our patents, the expenses and other consequences of litigation, including intellectual property infringement litigation, to which we may be or may become a party from time to time, the vigor and growth of markets served by our licensees and customers and operations of the Company and other risks identified in the Company's most recent annual report on Form 10-K filed with the Securities and Exchange Commission, as well as other reports that MoSys files from time to time with the Securities and Exchange Commission. MoSys undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.
About MoSys, Inc.
Founded in 1991, MoSys (Nasdaq: MOSY), develops, licenses and markets innovative memory and analog/mixed-signal technologies for semiconductors. MoSys' patented 1T-SRAM technologies offer a combination of high density, low power consumption, high speed and low cost unmatched by other available memory technologies. The single transistor bit cell used in 1T-SRAM memory results in the technology achieving much higher density than traditional four or six transistor SRAMs while using the same standard logic manufacturing processes. 1T-SRAM technologies also offer the familiar, refresh-free interface and high performance for random address access cycles associated with traditional SRAMs. In addition, these technologies can reduce operating power consumption by a factor of four compared with traditional SRAM technology, making them ideal for embedding large memories in System on Chip (SoC) designs. MoSys' licensees have shipped more than 135 million chips incorporating 1T-SRAM embedded memory technologies, demonstrating excellent manufacturability in a wide range of silicon processes and applications. MoSys is headquartered at 755 N. Mathilda Avenue, Sunnyvale, California 94085. More information is available on MoSys' website at http://www.mosys.com.
MOSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Net Revenue:
Licensing 1,548 3,333 4,865 7,302
Royalty 2,421 705 6,570 2,598
----------- ----------- ----------- -----------
Total net revenue 3,969 4,038 11,435 9,900
Cost of Net Revenue:
Licensing 670 172 1,912 906
----------- ----------- ----------- -----------
Total cost of net
revenue 670 172 1,912 906
Gross Profit 3,299 3,866 9,523 8,994
Operating Expenses:
Research and
development 3,241 2,018 7,420 6,099
Selling, general and
administrative 2,945 3,350 8,350 8,785
In-process research
and development 966 - 966 -
Amortization of
acquired intangible
assets 197 - 197 -
Litigation settlement - 2,400 - 2,400
----------- ----------- ----------- -----------
Total operating
expenses 7,349 7,768 16,933 17,284
Loss from operations (4,050) (3,902) (7,410) (8,290)
Other income/expenses 1,209 1,043 3,505 2,421
----------- ----------- ----------- -----------
Loss before income
taxes (2,841) (2,859) (3,905) (5,869)
Benefit (provision)
for income taxes 18 (8) (33) (36)
----------- ----------- ----------- -----------
Net loss $ (2,823) $ (2,867) $ (3,938) $ (5,905)
=========== =========== =========== ===========
Net loss per share
Basic ($0.09) ($0.09) ($0.12) ($0.19)
Diluted ($0.09) ($0.09) ($0.12) ($0.19)
Shares used in
computing net loss per
share
Basic 32,274 31,386 31,950 31,233
Diluted 32,274 31,386 31,950 31,233
MOSYS, INC.
Reconciliation of GAAP to Non-GAAP Net Loss and Net Loss Per Share
(In thousands, except per share amounts)
(unaudited)
Three Months Nine Months Ended
Ended
September 30, September 30,
2007 2006 2007 2006
-------- -------- -------- ---------
GAAP net loss $(2,823) $(2,867) $(3,938) $ (5,905)
Stock compensation expense
-Cost of revenue 95 23 317 127
-Research and development 270 279 799 741
Selling, general and
- administrative 529 401 1,458 1,062
-------- -------- -------- ---------
Total stock compensation
expense 894 703 2,574 1,930
In-process research and
development 966 - 966 -
Amortization of acquired
intangible assets 197 - 197 -
Non-GAAP net loss $ (766) $(2,164) $ (201) $ (3,975)
======== ======== ======== =========
GAAP net loss per share ($0.09) ($0.09) ($0.12) ($0.19)
Reconciling item:
-Stock compensation expense 0.03 0.02 0.07 0.06
In-process research and
- development 0.03 0.03
Amortization of acquired
- intangible assets 0.01 - 0.01 -
-------- -------- -------- ---------
Non-GAAP net loss per share:
Basic and Diluted ($0.02) ($0.07) ($0.01) ($0.13)
======== ======== ======== =========
Shares used in computing non-GAAP net
loss per share
Basic 32,274 31,386 31,950 31,233
Diluted 32,274 31,386 31,950 31,233
MOSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September December
30, 31,
2007 2006
----------- ---------
(unaudited) (audited)
Assets:
Current assets:
Cash, cash equivalents and short-term
investments $ 71,447 $ 81,807
Accounts receivable - net 829 2,491
Unbilled contract receivable 1,218 360
Prepaid expenses and other assets 2,156 2,831
----------- ---------
Total current assets 75,650 87,489
Long-term investments 14,189 2,492
Property and equipment - net 1,516 855
Goodwill 12,326 12,326
Intangible assets, net 2,362 -
Other assets 464 598
----------- ---------
Total assets $ 106,507 $103,760
=========== =========
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 518 $ 307
Accrued expenses and other liabilities 1,896 1,865
Deferred revenue 194 619
----------- ---------
Total current liabilities 2,608 2,791
Long-term portion of restructuring
liability - 54
Stockholders' equity:
Common stock, additional paid-in capital
and others 114,009 107,087
Accumulated deficit (10,110) (6,172)
----------- ---------
Total stockholders' equity 103,899 100,915
----------- ---------
Total liabilities and stockholders'
equity $ 106,507 $103,760
=========== =========
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