MoSys, Inc. (NASDAQ:MOSY), today reported financial results
for the quarter ended September 30, 2017.
Third Quarter 2017 Financial
ResultsTotal net revenue for the third quarter of 2017 was
$2.5 million, compared with $1.4 million for the previous quarter
and $1.6 million for the third quarter of 2016. Product revenue for
the third quarter was $2.2 million, compared with $1.1 million in
the second quarter of 2017 and $1.2 million in the year-ago period.
The sequential quarterly and annual increases in product revenue
were primarily attributable to increased shipments of Bandwidth
Engine 2 products.
Gross margin for the third quarter of 2017 was
49 percent, compared with 47 percent for the second quarter of 2017
and 58 percent for the third quarter of 2016. Gross margin was
higher in 2016 due to a higher proportion of royalty revenues to
total revenues. The Company expects gross margin to improve further
as a result of increased manufacturing efficiency and recent price
adjustments.
Total operating expenses on a GAAP basis for the
third quarter of 2017 were $2.7 million, compared with $4.4 million
for the second quarter of 2017 and $5.4 million for the third
quarter of 2016. Third quarter total operating expenses decreased
38 percent sequentially and 49 percent compared with the year ago
period. The Company expects operating expenses to continue to
decrease due to the effects of continued restructuring and other
cost reduction initiatives.
GAAP net loss for the third quarter of 2017 was
$1.7 million, or ($0.22) per share, compared with a net loss of
$4.0 million, or ($0.60) per share, for the previous quarter and a
net loss of $4.7 million, or ($0.71) per share, for the third
quarter of 2016. Non-GAAP net loss for the third quarter of 2017
was $1.5 million, or ($0.18) per share, which excludes
restructuring charges, intangible asset amortization and
stock-based compensation expenses. A reconciliation of GAAP results
to non-GAAP results is provided in the financial statement tables
following the text of this press release. In February 2017, the
Company effected a 1-for-10 reverse stock split of its common
stock. All share and per share amounts in this press release have
been adjusted to reflect the reverse stock split for all current
and prior periods.
Management Commentary“We have
made significant progress over the past six months driving revenue
growth while reducing costs, resulting in a sequential doubling of
product revenue and a 38% reduction in operating expenses,”
commented Len Perham, president and CEO of MoSys. “Our revenue
growth in the third quarter was primarily driven by increased
shipments to our largest Bandwidth Engine 2 customers. More
specifically, the design wins with our lead security-appliance
customer entered production in early 2017, and have been a
significant driver of our increased revenue this past year.
As part of our close collaboration with our lead customers,
we have developed a solid backlog that extends out through 2018.
Our design win platforms are highly differentiated and have long
life cycles; therefore, we expect customer production shipments for
current design wins to continue over the next five to seven years.
The orders received to date and visibility provided by our lead
customers validate the significance of our design wins and the
value that our technology brings to our customers’ products. We
believe that we have a high level of predictability for our
continued revenue ramp for the fourth quarter of 2017, as well as
for our base revenue run rates for 2018.”
Perham continued, “Earlier this year, we
initiated several cost reduction initiatives, and have taken a
number of significant actions to right-size the company and realign
our organization. We reconfigured our engineering resources and
reduced headcount to focus on supporting our Bandwidth Engine
business, lowered outsourced manufacturing and design costs and
recently relocated our headquarters. As a leaner organization,
we’ve retained a critical core of applications, engineering and
operations staff to efficiently and effectively maintain and expand
our business. Also, we continue to pursue new design win
opportunities to provide future revenue growth and augment our
existing business. Based on current order backlog and customer
forecasts, we expect increased revenue in the fourth quarter and
anticipate revenue growth in excess of 60% in 2018. When combined
with our lower operating expenses, we believe we are well
positioned to achieve non-GAAP profitability in the first half of
2018 while meaningfully reducing our cash burn.”
Outlook for Fourth Quarter of
2017For the fourth quarter of fiscal 2017, the Company
expects net revenues to be in the range of $3.3 million to $3.6
million, with non-GAAP operating expenses in the range of $2.2
million to $2.4 million.
Financial Results Conference
CallThe Company will not be hosting a conference call or
webcast in conjunction with today’s release of its third quarter
results.
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 non-cash goodwill impairment, restructuring,
stock-based compensation and intangible asset amortization charges.
MoSys’ management believes that the presentation of these non-GAAP
financial measures is useful to investors and other interested
persons because they are one of the primary indicators that MoSys’
management uses for planning and forecasting future performance.
MoSys’ management believes that the presentation of non-GAAP
financial measures that exclude these items is useful to investors
because management does not consider these charges part of the
day-to-day business or reflective of the core operational
activities of the Company that are within the control of management
or that would be used to evaluate management’s operating
performance.
Investors are encouraged to review the
reconciliation of these non-GAAP financial measures to the
comparable GAAP results, which is provided in a table below the
Condensed Consolidated Statements of Operations. The non-GAAP
financial measures disclosed by the Company should not be
considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP and reconciliations to those
financial statements should be carefully evaluated. The non-GAAP
financial measures used by the Company may be calculated
differently from, and therefore may not be comparable to, similarly
titled measures used by other companies. 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 November 13, 2017 that the Company filed with
the Securities and Exchange Commission.
Forward-Looking
Statements This press release may contain
forward-looking statements about the Company, including, without
limitation, anticipated benefits and performance expected from its
IC products and the Company’s future markets and future business
prospects. 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 the following:
- a lack of working capital to fund continued product development
and growth;
- achieving additional IC design wins;
- commencing volume shipments of Bandwidth Engine ICs;
- the timing of customer orders and product shipments;
- our ability to enhance our existing proprietary technologies
and develop new technologies;
- achieving necessary acceptance and adoption of our IC
architecture and interface protocols by potential customers and
their suppliers;
- difficulties and delays in the development, production, testing
and marketing of our ICs;
- reliance on our manufacturing partners to assist successfully
with the fabrication of our ICs;
- availability of quantities of ICs supplied by our manufacturing
partners at a competitive cost;
- our lack of recent experience as a fabless semiconductor
company making and selling proprietary ICs;
- 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;
- vigor and growth of markets served by our customers and our
operations; and
other risks identified in the company’s most recent 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. There can be no
assurance that MoSys’ review of strategic alternatives will result
in any specific action.
About MoSys, Inc.MoSys, Inc. (NASDAQ:MOSY)
is a fabless semiconductor company enabling leading equipment
manufacturers in the data center, networking, security and
communications systems markets to address the continual increase in
Internet users, data and services. More information is available
at www.mosys.com.
Bandwidth Engine and MoSys are registered trademarks of MoSys,
Inc. in the US and/or other countries. All other marks mentioned
herein are the property of their respective owners.
(Financial Tables to Follow)
MOSYS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share amounts;
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
Net
Revenue |
|
|
|
|
|
|
Product |
|
$ |
2,231 |
|
$ |
1,205 |
|
|
$ |
4,297 |
|
$ |
3,612 |
|
|
Royalty and
other |
|
222 |
|
|
368 |
|
|
|
752 |
|
|
1,045 |
|
|
|
Total net
revenue |
|
2,453 |
|
|
1,573 |
|
|
|
5,049 |
|
|
4,657 |
|
|
|
|
|
|
|
|
|
|
Cost of Net Revenue |
|
1,256 |
|
|
658 |
|
|
|
2,590 |
|
|
2,484 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
1,197 |
|
|
915 |
|
|
|
2,459 |
|
|
2,173 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
Research
and development |
|
1,436 |
|
|
3,927 |
|
|
|
7,234 |
|
|
14,043 |
|
|
Selling,
general and administrative |
|
1,244 |
|
|
1,450 |
|
|
|
3,659 |
|
|
4,543 |
|
|
Restructuring and impairment charges |
|
50 |
|
|
- |
|
|
|
1,052 |
|
|
676 |
|
|
|
Total
operating expenses |
|
2,730 |
|
|
5,377 |
|
|
|
11,945 |
|
|
19,262 |
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
(1,533 |
) |
|
(4,462 |
) |
|
|
(9,486 |
) |
|
(17,089 |
) |
|
|
|
|
|
|
|
|
|
|
Other
expense, net |
|
(210 |
) |
|
(239 |
) |
|
|
(656 |
) |
|
(481 |
) |
Net
Loss |
|
$ |
(1,743 |
) |
$ |
(4,701 |
) |
|
$ |
(10,142 |
) |
$ |
(17,570 |
) |
|
|
|
|
|
|
|
|
|
Net
loss per share |
|
|
|
|
|
|
Basic and
diluted |
$ |
(0.22 |
) |
$ |
(0.71 |
) |
|
$ |
(1.43 |
) |
$ |
(2.67 |
) |
|
|
|
|
|
|
|
|
|
Shares used in computing net loss per share |
|
|
|
|
|
|
Basic and
diluted |
|
7,938 |
|
|
6,609 |
|
|
|
7,092 |
|
|
6,592 |
|
|
|
|
|
|
|
|
|
|
MOSYS, INC. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands, unaudited) |
|
|
|
|
|
|
|
|
|
|
September 30, |
December 31, |
|
|
|
|
2017 |
2016 |
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
Cash, cash
equivalents and investments |
$ |
2,784 |
$ |
9,768 |
|
|
Accounts
receivable, net |
|
1,719 |
|
559 |
|
|
Inventories |
|
1,246 |
|
1,451 |
|
|
Prepaid
expenses and other |
|
1,815 |
|
473 |
|
|
Total current assets |
|
7,564 |
|
12,251 |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
748 |
|
1,274 |
|
Goodwill |
|
|
13,276 |
|
13,276 |
|
Other |
|
|
207 |
|
344 |
|
|
Total assets |
$ |
21,795 |
$ |
27,145 |
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts
payable |
$ |
203 |
$ |
561 |
|
|
Deferred
revenue |
|
2,360 |
|
271 |
|
|
Accrued
expenses and other |
|
2,061 |
|
2,502 |
|
|
Notes
payable |
|
9,148 |
|
- |
|
|
Total current liabilities |
|
13,772 |
|
3,334 |
|
|
|
|
|
|
|
|
|
Notes payable |
|
- |
|
8,250 |
|
Other long-term liabilities |
|
296 |
|
233 |
|
|
Total liabilities |
|
14,068 |
|
11,817 |
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
7,727 |
|
15,328 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
$ |
21,795 |
$ |
27,145 |
|
|
|
|
|
|
MOSYS, INC. |
Reconciliation of GAAP to Non-GAAP Net Loss
and Net Loss Per Share |
(In thousands, except per share amounts;
unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss |
$ |
(1,743 |
) |
$ |
(4,701 |
) |
|
$ |
(10,142 |
) |
$ |
(17,570 |
) |
|
|
Stock-based
compensation expense |
|
|
|
|
|
|
|
- |
Research and
development |
|
119 |
|
|
458 |
|
|
|
330 |
|
|
1,278 |
|
|
|
- |
Selling, general and
administrative |
|
77 |
|
|
186 |
|
|
|
222 |
|
|
515 |
|
|
|
|
Total stock-based
compensation expense |
|
196 |
|
|
644 |
|
|
|
552 |
|
|
1,793 |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and impairment charges |
|
50 |
|
|
- |
|
|
|
1,052 |
|
|
676 |
|
|
|
Amortization of intangible assets |
|
28 |
|
|
27 |
|
|
|
84 |
|
|
83 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net loss |
$ |
(1,469 |
) |
$ |
(4,030 |
) |
|
$ |
(8,454 |
) |
$ |
(15,018 |
) |
|
|
|
|
|
|
|
|
|
|
GAAP net loss per share |
$ |
(0.22 |
) |
$ |
(0.71 |
) |
|
$ |
(1.43 |
) |
$ |
(2.67 |
) |
|
|
Reconciling
items |
|
|
|
|
|
|
|
- |
Stock-based
compensation expense |
|
0.02 |
|
|
0.10 |
|
|
|
0.08 |
|
|
0.27 |
|
|
|
- |
Restructuring and
impairment charges |
|
0.01 |
|
|
- |
|
|
|
0.15 |
|
|
0.11 |
|
|
|
- |
Amortization of
intangible assets |
|
0.01 |
|
|
- |
|
|
|
0.01 |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net loss per share: basic and
diluted |
$ |
(0.18 |
) |
$ |
(0.61 |
) |
|
$ |
(1.19 |
) |
$ |
(2.28 |
) |
|
|
|
|
|
|
|
|
|
|
Shares used in computing non-GAAP net loss per
share |
|
|
|
|
|
|
Basic and
diluted |
|
7,938 |
|
|
6,609 |
|
|
|
7,092 |
|
|
6,592 |
|
|
|
|
|
|
|
|
|
|
Contacts:Jim Sullivan,
CFOMoSys, Inc.+1 (408) 418-7500jsullivan@mosys.com
Beverly Twing, Sr. Acct. ManagerShelton Group,
Investor Relations+1 (214) 272-0089btwing@sheltongroup.com
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