MoSys, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

Date : 02/20/2019 @ 9:45PM
Source : GlobeNewswire Inc.
Stock : Mosys, Inc. (MOSY)
Quote : 0.189  0.0091 (5.06%) @ 12:50AM

MoSys, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

Mosys, Inc. (NASDAQ:MOSY)
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MoSys, Inc. (NASDAQ: MOSY), today reported financial results for the fourth quarter and fiscal year ended December 31, 2018.  

Fourth Quarter and Full Year 2018 Financial ResultsTotal net revenue for the fourth quarter of 2018 was $3.5 million, compared with $4.3 million for the previous quarter and $3.8 million for the fourth quarter of 2017. Product revenue for the fourth quarter was $3.2 million, compared with $4.1 million for the previous quarter and $3.5 million in the year-ago period.

Gross margin for the fourth quarter of 2018 was 72%, compared with 55% for the previous quarter and 45% for the fourth quarter of 2017. The sequential increase in gross margin was due primarily to favorable, non-recurring manufacturing variances, manufacturing efficiencies and product mix.  

Total operating expenses on a GAAP basis for the fourth quarter of 2018 were $11.7 million, which included a goodwill impairment charge of $9.7 million, compared with operating expenses of $5.1 million in the previous quarter, which also included a goodwill impairment charge of $3.2 million, and $2.2 million in the fourth quarter of 2017. Total operating expenses, excluding intangible asset amortization, stock-based compensation expenses and restructuring and impairment charges, for the fourth quarter of 2018 were $1.7 million, consistent with the third quarter of 2018 and compared with $1.8 million in the fourth quarter of 2017.

GAAP net loss for the fourth quarter of 2018 was $9.3 million, or ($0.25) per share, compared with a net loss of $2.8 million, or ($0.34) per share, for the previous quarter and a net loss of $0.5 million, or ($0.07) per share, for the fourth quarter of 2017. Non-GAAP net income for the fourth quarter of 2018 was $0.7 million, or $0.01 per diluted share, and compared with net income of $0.6 million, or $0.07 per diluted share, for the previous quarter and a net loss of $0.1 million, or ($0.01) per share, for the fourth quarter of 2017. Adjusted EBITDA for the fourth quarter of 2018 was $0.9 million, and compared with $0.8 million for the previous quarter and $0.1 million for the fourth quarter of 2017. A reconciliation of GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.

At December 31, 2018, the Company had $7.1 million in cash, a $2.9 million increase from September 30, 2018. The sequential increase in cash was primarily due to $3.0 million in proceeds from a public offering of common stock in October 2018.

At December 31, 2018, the Company had 42,966,669 shares of common stock outstanding, which excludes 2,310,776 shares of common stock issuable upon exercise of pre-funded warrants.

Management Commentary“We continued to execute to our business plan and recorded non-GAAP profitability for the fourth quarter and full year 2018. By closely managing our operating expenses, we achieved favorable financial results, even with the projected decline in shipments and revenue in the fourth quarter driven in large part by one of our existing customers, which, as we announced previously, began ramping down its use of our product,” said Dan Lewis, chief executive officer and president of MoSys. “We also closely managed our operating cash burn, which approximated $0.1 million during the quarter and was attributable to repayment of customer prepayments. In addition, we continued to improve our manufacturing efficiencies, which we believe will enable us to achieve gross margins of 60% or higher for the full year 2019.”

Mr. Lewis continued, “We continue to focus on expanding our sales channels, which has resulted in an increased sales pipeline, and entering new market areas, such as compute acceleration and government applications. Furthermore, we expanded our opportunity footprint with multiple existing customers, as they consider using a broader range of our products. We have made considerable progress in developing new platforms and software acceleration capabilities, which we expect to release to customers in 2019.  Also, we have begun shipping production quantities of our LineSpeed™ Flex physical-layer products to a lead customer, and we expect this business to grow in both 2019 and 2020.

“Based on customer orders and forecasts, we have excellent visibility for the first half of 2019. However, we do expect revenue to decline in 2019, as compared with 2018, as we transition from a customer ramp-down and complete end-of-life shipments of our first-generation Bandwidth Engine products. Once the period of transition is complete, we believe we are positioned for a return to growth in 2020. We have multiple customers for our Bandwidth Engine 2 and 3 and LineSpeed PHY products expected to commence production in 2019 and 2020. In the near term, we will continue to focus on winning new designs for our products, maintaining our solid financial position and managing our expenses.”

Nasdaq ComplianceIn accordance with a deficiency letter received in September 2018 from The NASDAQ Stock Market ("Nasdaq") the Company has been provided until March 20, 2019 to regain compliance with Nasdaq’s minimum bid price requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company can regain compliance if, at any time prior to March 20, 2019, the closing bid price of the Company's common stock is at least $1.00 for a minimum of 10 consecutive business days. The Company expects to be granted an additional 180-day extension, or until September 20, 2019, by Nasdaq to regain compliance.

Business Outlook for First Quarter of 2019The Company expects total net revenue for the first quarter of 2019 to be in the range of $3.2 million to $3.5 million

Financial Results Conference CallThe Company will not be hosting a conference call or webcast in conjunction with today’s release of its fourth quarter and full year 2018 results.

Use of Non-GAAP Financial MeasuresTo 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, intangible asset amortization and restructuring and impairment 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. The press release also makes reference to and reconciles GAAP net loss and adjusted EBITDA, which the Company defines as GAAP net loss before interest expense, income tax provision, and depreciation and amortization, as well as stock-based compensation, intangible asset amortization and restructuring and impairment charges. 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 reconciliations of these non-GAAP financial measures to the comparable GAAP results, which are provided in tables 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 February 20, 2019 that the Company filed with the Securities and Exchange Commission.

Forward-Looking StatementsThis 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:

  • Nasdaq approval of a 180-day extension to regain minimum bid price compliance;
  • a lack of working capital to aggressively fund product development and growth;
  • the timing of customer orders and product shipments;
  • customer concentration;
  • lengthy sales cycle;
  • our ability to enhance our existing proprietary technologies and develop new technologies;
  • achieving additional design wins for our IC products through the 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;
  • 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.

About MoSys, Inc.MoSys, Inc. (NASDAQ: MOSY) is a provider of semiconductor solutions that enable fast, intelligent data access for cloud networking, security, test and video systems. 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. LineSpeed and the MoSys logo are trademarks of MoSys, Inc. 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 Twelve Months Ended
    December 31, December 31,
    20182017 20182017
         
Net Revenue     
 Product $  3,242$  3,536 $  15,053$  7,833
 Royalty and other209257 1,5471,009
  Total net revenue3,4513,793 16,6008,842
         
Cost of Net Revenue9642,104 6,3464,694
         
Gross Profit2,4871,689 10,2544,148
         
Operating Expenses     
 Research and development1,065924 4,1298,158
 Selling, general and administrative9371,043 4,0954,702
 Restructuring and impairment charges9,697269 12,8561,321
  Total operating expenses11,6992,236 21,08014,181
         
 Loss from operations(9,212)(547) (10,826)(10,033)
         
 Other income (expense), net(48)21 (583)(635)
Net Loss $  (9,260)$  (526) $  (11,409)$  (10,668)
         
Net Loss per share     
 Basic and diluted$  (0.25)$  (0.07) $  (0.74)$  (1.45)
         
Shares used in computing net loss per share     
 Basic and diluted36,7888,068 15,3937,338
         
         
         
MOSYS, INC.   
CONDENSED CONSOLIDATED BALANCE SHEETS   
(In thousands, unaudited)   
         
    December 31,   
    20182017   
         
Assets       
 Current assets:     
  Cash and cash equivalents$  7,104$  3,868   
  Accounts receivable, net1,6221,681   
  Inventories1,1481,766   
  Prepaid expenses and other9231,347   
   Total current assets10,7978,662   
         
 Property and equipment, net279827   
 Goodwill42013,276   
 Other 260374   
   Total assets$  11,756$  23,139   
         
Liabilities and Stockholders’ Equity     
 Current liabilities:     
  Accounts payable$  236$  170   
  Deferred revenue2733,938   
  Accrued expenses and other1,4022,507   
   Total current liabilities1,9116,615   
         
 Convertible notes payable2,6719,160   
 Other long-term liabilities1718   
   Total liabilities4,59915,793   
         
 Stockholders' equity7,1577,346   
         
   Total liabilities and stockholders’ equity$  11,756$  23,139   
         
         
         
MOSYS, INC.
Reconciliation of GAAP to Non-GAAP Net Income (Loss) and Net Income (Loss) Per Share
(In thousands, except per share amounts; unaudited)
         
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    20182017 20182017
         
 GAAP net loss$  (9,260)$  (526) $  (11,409)$  (10,668)
  Stock-based compensation expense     
  -Research and development13290 327420
  -Selling, general and administrative9677 347299
   Total stock-based compensation expense228167 674719
         
  Restructuring and impairment charges9,697269 12,8561,321
  Amortization of intangible assets2828 111112
         
 Non-GAAP net income (loss)$  693$  (62) $  2,232$  (8,516)
         
 GAAP net loss per share, basic$  (0.25)$  (0.07) $  (0.74)$  (1.45)
  Reconciling items     
  -Stock-based compensation expense0.010.02 0.040.10
  -Restructuring and impairment charges0.260.04 0.840.18
  -Amortization of intangible assets-- 0.010.01
         
 Non-GAAP net income (loss) per share, basic$  0.02$  (0.01) $  0.15$  (1.16)
         
 GAAP net loss per share, diluted$  (0.25)$  (0.07) $  (0.74)$  (1.45)
  Reconciling items     
  -Stock-based compensation expense0.010.02 0.040.10
  -Restructuring and impairment charges0.200.04 0.730.18
  -Amortization of intangible assets-- 0.010.01
  -Interest and other, net adjustments0.05- 0.09-
         
 Non-GAAP net income (loss) per share, diluted$  0.01$  (0.01) $  0.13$  (1.16)
         
 Shares used in computing non-GAAP net income (loss) per share    
  Basic36,7888,068 15,3937,338
  Diluted49,4448,068 17,5307,338
         
         
         
MOSYS, INC.
Reconciliation of GAAP and Non-GAAP Financial Information
(In thousands; unaudited)
         
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    20182017 20182017
 Reconciliation of GAAP net loss and adjusted EBITDA     
 GAAP net loss$  (9,260)$  (526) $  (11,409)$  (10,668)
  Stock-based compensation expense     
  -Research and development13290 327420
  -Selling, general and administrative9677 347299
  Stock-based compensation expense228167 674719
  Restructuring and impairment charges9,697269 12,8561,321
  Amortization of intangible assets2828 111112
         
 Non-GAAP net income (loss)693(62) 2,232(8,516)
  EBITDA adjustments:     
  Depreciation112174 598747
  Interest expense51242 582927
  Provision (benefit) for income taxes9(249) 13(233)
         
 Adjusted EBITDA$  865$  105 $  3,425$  (7,075)
         

Contacts:Jim Sullivan, CFOMoSys, Inc.+1 (408) 418-7500jsullivan@mosys.com 

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