Netlist Reports Fourth Quarter, Year-end Results

Announces New Strategic Focus on Chip Development

IRVINE, Calif., March 27 /PRNewswire-FirstCall/ -- Netlist, Inc. (Nasdaq: NLST) today reported financial results for the fourth quarter and year ended January 3, 2009. Revenues for the fourth quarter ended January 3, 2009, were $6.6 million compared to $22.5 million for the fourth quarter ended December 29, 2007. Negative gross profit for the fourth quarter ended January 3, 2009, was $283,000, or a negative gross margin of 4.3 percent, compared with a gross profit of $5.1 million, or a gross margin of 22.7 percent, in the year-earlier period. Revenues for the year ended January 3, 2009, were $67.0 million, compared to $100.1 million for the prior year. Gross profit for the year ended January 3, 2009, was $7.6 million, or a gross margin of 11.3 percent, compared to a gross profit of $8.8 million, or a gross margin of 8.8 percent, for the year ended December 29, 2007.

Net loss for the fourth quarter ended January 3, 2009, was $5.0 million, or $0.25 loss per share, compared to a net loss in the prior year period of $171,000, or $0.01 loss per share. Fully diluted weighted-average shares outstanding for the fourth quarter ended January 3, 2009, were 19,855,000, compared to 19,730,000 in the corresponding year-earlier period. These results include stock-based compensation expense in the fourth quarter ended January 3, 2009 of $296,000, compared with $247,000 in the prior year period. Net loss for the year ended January 3, 2009, was $15.2 million, or $0.77 loss per share, compared to a net loss in the prior year of $7.4 million, or $0.38 loss per share. The net loss for the year ended January 3, 2009, includes a non-cash provision for income taxes of $4.5 million which was recorded during the third quarter to establish a partial valuation allowance against deferred tax assets.

As of January 3, 2009, cash, cash equivalents, and investments in marketable securities were $21.4 million, total assets were $34.9 million, working capital was $22.3 million, total long-term debt was $130,000, and stockholders' equity was $30.2 million.

The Company also announced that it will migrate away from the commoditized memory module market and focus on higher-margin, longer-lifecycle chip-based products.

"The memory module markets were lucrative until the combination of crashing DRAM prices and an abundance of low-cost competition resulted in a fully commoditized marketplace," Chief Executive Officer Chuck Hong said. "While we have identified certain memory module programs where we can still bring value, our principle development efforts will now be directed to new chip-based technologies that better fit the changing needs of the computing and storage marketplace."

Hong said the Company is currently engaged in major OEM qualification activities with new products based on its DxD chipset and should begin to drive new revenue streams next year.

"While revenue in the next few quarters will continue to be impacted by our choice to not participate in certain markets, the combination of higher-value module programs and the kick-off of new chip-based programs should allow for a reversal of recent revenue trends toward the end of the year and beyond," Hong said. "The adoption of this new strategic focus has reinvigorated our entire company."

Conference Call Information

As previously announced, Netlist is conducting a conference call today to be broadcast live over the Internet at 11:30 am Eastern Time to discuss and review the financial results for the fourth quarter and year ended January 3, 2009. The dial-in number for the call is 1-800-762-8779. The live webcast and archived replay of the call can be accessed in the Investors section of Netlist's website at

About Netlist, Inc.

Netlist designs and manufactures high-performance memory subsystems for the server and high-performance computing and communications markets. The Company's memory subsystems are developed for applications in which high-speed, high-capacity memory, functionality, small form factor, and heat dissipation are key requirements. These applications include tower-servers, rack-mounted servers, blade servers, high-performance computing clusters, engineering workstations, and telecommunication equipment. Netlist maintains its headquarters in Irvine, California with manufacturing facilities in Suzhou, China.

Safe Harbor Statement

This news release contains forward-looking statements regarding future events and the future performance of Netlist, including future opportunities and growth for the company's business. 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, the rapidly-changing nature of technology; volatility in the pricing of DRAM ICs and NAND;changes in and uncertainty of customer demand, including delays in product qualifications; delays in our and our 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; fluctuations in the market price of 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, dated March 30, 2009, and subsequent filings with the U.S. Securities and Exchange Commission made by the Company from time to time. Netlist undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    Contact: Allen & Caron Inc                 Gail Itow
             Jill Bertotti (investors)         Chief Financial Officer
                  Netlist, Inc.
             Len Hall (media)                  (949) 435-0025
             (949) 474-4300
                                  TABLES FOLLOW

                                      Netlist, Inc.
                Unaudited Condensed Consolidated Statements of Operations
                       (in thousands, except per share amounts)

                                 Three Months Ended        Year Ended
                               January 3, December 29, January 3, December 29,
                                  2009       2007        2009        2007

    Net sales                    $6,602    $22,517     $67,011    $100,060
    Cost of sales(1)              6,885     17,411      59,460      91,261
    Gross profit                   (283)     5,106       7,551       8,799
    Operating expenses:
      Research and
       development(1)             1,928        947       6,871       4,748
      Selling, general and
       administrative(1)          2,787      4,311      12,929      15,900
        Total operating expenses  4,715      5,258      19,800      20,648
    Operating loss               (4,998)      (152)    (12,249)    (11,849)
    Other income (expense):
      Interest income, net           92        139         473         395
      Other income (expense),
       net                          (82)        44        (137)         16
        Total other income, net      10        183         336         411
    Income (loss) before
     provision (benefit) for
     income taxes                (4,988)        31     (11,913)    (11,438)
    Provision (benefit) for
     income taxes                   (31)       202       3,301      (4,025)
    Net loss                    $(4,957)     $(171)   $(15,214)    $(7,413)
    Net income (loss) per
     common share:
      Basic                      $(0.25)    $(0.01)     $(0.77)     $(0.38)
      Diluted                    $(0.25)    $(0.01)     $(0.77)     $(0.38)
    Weighted-average common
     shares outstanding:
      Basic                      19,855     19,730      19,847      19,674
      Diluted                    19,855     19,730      19,847      19,674

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

      Cost of sales                 $38        $10        $144        $171
      Research and development       39         44         179         149
      Selling, general and
       administrative               219        193         954         861

                                   Netlist, Inc.
                   Unaudited Condensed Consolidated Balance Sheets
                                  (in thousands)

                                                    January 3,    December 29,
                                                       2009           2007

    Current assets:
      Cash and cash equivalents                       $15,214         $7,182
      Investments in marketable securities              5,199         15,573
      Accounts receivable, net                          1,917         12,034
      Inventories                                       1,829          3,333
      Income taxes receivable                           1,880            708
      Deferred taxes                                        -          3,464
      Prepaid expenses and other current assets           761            392
        Total current assets                           26,800         42,686

      Property and equipment, net                       6,939          8,191
      Deferred taxes                                        -          1,065
      Long-term investments in marketable
       securities                                         960          7,814
     Other assets                                         234            600
        Total assets                                  $34,933        $60,356

    Current liabilities:
      Accounts payable                                 $1,786         $6,697
      Revolving line of credit                              -          4,872
      Current portion of long-term debt                   474            740
      Current portion of deferred gain on sale
       and leaseback transaction                          118            118
      Accrued expenses and other current
       liabilities                                      2,083          2,872
        Total current liabilities                       4,461         15,299
    Long-term debt, net of current portion                130            638
    Deferred gain on sale and leaseback
     transaction, net of current portion                  108            226
        Total liabilities                               4,699         16,163

    Commitments and contingencies

    Stockholders' equity:
      Common stock                                         20             20
      Additional paid-in capital                       69,383         68,109
      Accumulated deficit                             (39,113)       (23,899)
      Accumulated other comprehensive loss                (56)           (37)
        Total stockholders' equity                     30,234         44,193
        Total liabilities and stockholders' equity    $34,933        $60,356

SOURCE Netlist, Inc.

Mar 27, 2009

Back Link