NLST - Earnings call transcript Q2 2018

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Operator

Good day, and welcome to the Netlist Second Quarter 2018 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Mike Smargiassi. Please go ahead.

Michael Smargiassi

good and Brandon, you, afternoon, everyone. Thank Netlist's to Second Quarter Call. Conference XXXX Welcome today's Hong, Sasaki, and Chuck will Chief Executive Officer. Leading be Netlist; Chief call Officer of Financial Gail

today's earnings section Investors the Netlist a reminder, on netlist.com. of release at a be accessed the replay As of call website can the and

statements. forward-looking uncertainties contained differ are would statement. SEC the actual start annual answers risks release include to Because may of to statements a I today's from forward-looking assumes current based the in number current of call, The that note of materially and which expectations. on we Netlist filings could and cautionary in Before call, obligation today, Netlist's projected presentation in results questions are the forward-looking that the press the and expressed results the those no the statements, and update

will call, X-K. turn the comparable over are financial non-GAAP measures financial this to the was During on discussed. which measures directly those like Chuck. Reconciliations to GAAP would now release, filed in for included call be press I Form

Chuck Hong

afternoon, and good everyone. Mike, Thanks,

results basis. quarter bottom Second a on sequential a line year-over-year and both showed quarter improvements

we favorable from International and the original remand Commission, received the the only ITC, also SK the or one-month order the hynix of delay in During Trade investigation resumed quarter, a a with trial date.

Storage technology, through Memory Class engagement we addition, HybriDIMM, partners. the to continue key of In commercialization advance with

products. also interest around solutions healthy solutions, with NVvault introduced. DDRX of see During new we not platforms activity NVvault, There's in to the storage renewed continue quarter, but using being xXX a only round

are DRAM the Tier DIMMs from market. X space in amid also have memory customers many specialty tight We as significant a interest the vacating vendors seen

to DDRX in this and a this revenues year. of will number and gross add meaningfully of both We have which by margins end we grown the expect DDRX, in space qualifications

mix dozen line enterprise-grade new and Also, brought as manufacturing, this in have customers the a space. long-term lower market server products performance to NV, a customers at and where offer who base with we support compared specialty and we of EV storage already complementary attractive competitive supply an a SSDs and This added NVMe we are buy to in-house resonating of is of product customers over qualification offering of our solutions. testing just high Our existing cost DIMMs. we to

includes line the technology through We are of and efforts products with memory to to Netlist conversion SSDs open for revenues expect discussions This chipset OEMs, via are also the see sampling efforts currently partners from in ASIC HybriDIMM of and up the multiple QX. potential standardization. HybriDIMM accelerating starting to the controller these partners. ecosystem commercialization and industry an

entered well next conducting fast nonvolatile of the ScaleMP will high-capacity help the Data as us capabilities be computing software side of highlight pioneered HybriDIMM's an and agreement introduce premier as for with we memory, HybriDIMM At into this Big and has of On cost-effective customers. storage the we the with companies. new various will of adoption as to demonstrations media end-users Summit Flash Memory software-defined private and line partners development, our SSD one low-cost, memory of week, applications. use and ScaleMP, also drive collaboration

number the Wednesday. technologies, including The In Marketing, on Developing VP topics, will memory emerging storage addition, participate Memory features place panel architectural need the unique and controllers. taking of will of Technologies Rahul Advani, in special a for our panel, cost Controllers for Emerging discuss

the court favor, the early the XXXX, hynix, In hynix and and to proceeding remand a an initial address products to court's Law with action determination ITC review and to the Moving injunction or commission in commission decision in petitioned against of our hynix briefs the go construction SK the the in we December further agreed Germany. May the to process various immediate the Administrative of would parties the The is are for expected April the issues. terminate related investigation to findings party's December. in this and both filing back Germany, ITC the trials as SK constructions XX, the claim commissioners with the and for pointing if the and for On other disputes against continue preparation sending in ALJ, licensing. issued in will in set it Germany which in into remand In infringement. ITC order, with errors the to resolve actions in sale asked of Judge, second The infringement the expected investigation. ITC joining decision claim X decided effect trial, Netlist the to and proceedings are

the the XX. Order expect We discovery, Construction then will trial XX through December to proceed of discovery receive the investigation -- tentative date The in August Claim fact by through and on expert fact XX. culminating a

case review. year. around family well and for ruling of the activity in of growth appeal, strong did, is year. in patents remain first the Circuit track, filed to specialty and conclusion ruling this arguments and action for the on products SK receive the of revenue on last hynix the hynix fairly will now bodes continues non-infringement Netlist reverse the to Netlist's and to encouraging high-quality appeal I licensing that second summary, Federal infringe non-infringement the this by of -- ITC. shareholders. financial IP its focused We over fact, turn this In for the new that we the week reach of on was asking next the Gail DIMM the are Circuit. final for call court ITC products believe Netlist's appellate the Court defend and the that U.S. we find and in findings compensate SSD securing agreements expect have we to the The mid On with half Finally, the campaign against Appeals to Federal

Gail Sasaki

million, quarter period. were million $XX.X XXXX Thanks, XX, the of revenues the compared Chuck. second Revenues for ended to $X.X for XXXX, June

Although memory doubled and custom modules. in revenues and due mix year-over-year year-over-year related placements XX% and quarters, revenue were were the to improved consecutively. by increased specialty and Factory flattish and between down margins growth their

Although top anticipate to the specialty increase we growth revenue. don't as well line overall in continued a DIMMs quarter modest in third guide, we do as

$X.X million XX% last decreased Second quarter net $X.X consecutively. year-over-year Operating second a second quarter, by gross improvement a litigation the year-over-year XXXX quarter. quarter, from were XX% improvement on profit year's to costs compared was expenses and without We XX% and by XX% in basis. and Operating year-over-year last narrowed net loss XX% quarterly and $XXX,XXX, was in expenses million. million $X.X XX% a sequential loss

I filing we're trials, for scheduled now we to provide in NASDAQ's the and and last December. flattish third on given As early our update compliance current which requirements. a made second capitalization German in we to expect slightly fees call, litigation market and noted are an decreased currently price and quarter legal legal higher minimum NASDAQ the support out action of earnings the expense ITC consecutive July, currently the the for of Netlist's fourth with in in be basis, would on like quarter Per calendar, X-K status. bid

attended we're September an XX. we additional beginning cash had fact, NASDAQ return the via million confidence update July, in we compared Hong. supported ended in last that vote quarter. $X second We to equivalents Washington, cash During with on to the of Chuck in company's a through of of of period We personal we and presented a million, and provided the did, at the the reported grace from from compliance. D.C. to quarter cash waiting and restricted we receive hearing was The And investment decision. NASDAQ position a May quarter's $XXX,XXX call, the direct plans early cash of an panel's panel CEO, $X in of by

net the addition, In at facility. end proceeds of the $X cash included from aftermarket position quarter ATM in the the million

-- XXXX, As $X we under million utilize November have balance total XX, of received the of net facility million $X ATM XXXX. with to proceeds approximately July the of a through facility, on January

and lower questions. to minimal net than XX% for to $X burn gross manage 'XX. cycle, working Valley providing anticipate eligible quarters, continue in to line up Thank receivable cash capital includes ready QX of Silicon product growth. credit million capital support of access Bank, a working of borrowing overall we proactively With to with accounts cash you operating We for prior our now which expenses and margins increasing listening. we're revenue Operator, the

Operator

Instructions]. [Operator

Our first Capital. question with Roth comes from Suji Desilva

Sujeeva Desilva

given you're the of on DDRX, the Tier making you So the -- customers of are And there? the characterism supply the getting tightness? some with X qualifying you're the what products where XX what's are DDRX, with

Chuck Hong

DRAM DRAM The buy of we a one Yes, major from supply component Suji. level suppliers. the at

a We of are sourcing from DRAM couple Taiwanese the vendors. also

DDRX DRAMs secure market. to and able So we're tight this in DDRX

already the In the existing customer of customer of it's products for appliance, server mostly -- base, that and base. it's so many are storage server some other appliance, terms products, we within our have existing purpose-built NV the the of them customers

Sujeeva Desilva

Okay, certain performance competition, competition? Are helpful. you there helpful. then be advantage? targeting the a that versus estimate? Any to What's niche what's addressable relative it there would And Or your And your with stack the is SSD you then market is up competition? product, you the there? newer the ASP color how what do

Chuck Hong

price. will lower There's high-endurance, these about competition than family slightly in NVMe of terms the of they're the high-performance, Performance-wise, it's XX comparable. enterprise-grade, SSDs. in Yes, SKUs are we -- and be

we of the with server So products existing think initially will be very appliance mostly synergistic the will sold our existing storage and to and line, be it product customers. base

Sujeeva Desilva

litigation a then on side. And the question Okay.

some and If have the both think of you opportunities, think the have of but which you'll clarity X which are one some on out, ITC terms dates level -- in look -- one these the sooner one, these progress? as know you I clarity? know actual I outcome laid the you at German final two the do do you'll

Chuck Hong

are the the case -- in basically, three open. that stated was cases As are so prepared there ITC remarks, X

out filing ITC of appeal have came process case, where of the appeal. the with the week You the last which ITC, which started X --

get Construction will X, date see to from August. Administrative Order XXth XX case probably Judge a a The ruling final by a will of now. that so from Law the about of the handling Claim And likely tentative ITC -- months we

well the X. brief a it case, a to month Germany. of or which That's us, they that, as We've process is both to parties. going be in where of infringement. trial of So the in trial very started of we indication render stand that a good within two for on works filings in go finally, that the case, -- will expect And And December multiple there. decision already we'll then, German terms how

Sujeeva Desilva

Gail. perhaps for And last Okay. then question,

You in quarter? cash burn in cash XQ. the said the was What burn was minimal this outlook

Gail Sasaki

It of was actually zero. a net cash burn

Sujeeva Desilva

cash flat, because was yes, Okay, right?

Gail Sasaki

Yes.

Operator

Our comes next from Shannon question Richard Craig-Hallum. with

Richard Shannon

seeing first Suji's on between enough supply Or regarding the a be DDRX the for mentioned of supply from there? kind you able now? up foreseeable right DDRX Taiwanese smaller the follow supply to that And I'll expect and major what's the enough demand future? it question OEM and the balance do you're get couple you a Maybe you for guys. getting Chuck, products. to maybe of Are that

Chuck Hong

that these and VLP, RDIMMs, our very The think ship they're and DDRX We're products, well. I are to difficult factory ECC, products, that sufficient demand doing we supply. in customers. getting DRAMs ECC them to source. get niche for are We're on the able -- to it the build SODIMMs,

DRAM we one are Taiwanese suppliers. of there, available to market is few the So suppliers, server next months, expect But DDRX, be constrained business supply. DRAMs from major we DRAM is that for the DDRX coming that of growing. the and the most on the from over

Richard Shannon

Okay. Fair enough.

NVvault. on question Second

you last I having qualifications. XX quarter, about talked think

about of X over next XX. talked you the might be about you talk to or quarters a I think you what to and kind a the having number ramp expect have qualifications X so? able sense call of Can us of prior we give the

Chuck Hong

the coming think the the expect further be $X about quarter. to we of half. the qualification, are the type but qualified. will just we The number as a those a numbers start in it'll We in, can't be -- process what being It's the exactly it'll rate. be, revenues And last second million say run of into same -- quarter qualification over

Richard Shannon

getting to, to Okay. say, Does far next Can get $X you that's whether into a sometime million year? see a rate run million enough the the possibility possible? of know, future to this of don't I sense $XX have

Chuck Hong

out the $X Certainly, to on these I certainly, really don't number million. but million rate, double the get there. about large the NVDIMMs know of of $X It are end attach can for matter a digits, there's rate and a systems in adoption It's it customer quals of to the servers. depends NVDIMMs. asking

Richard Shannon

for enough. question Okay. Gail. financial Fair Maybe a

getting here think more for gross products, third contribution margins been I Netlist higher suggest you think it a don't from above a quarter. you in we can approach few -- that alluded of have the get the to I get of Do coming fairly would here mix soon. mark? next? margins you into going margin gross we you've expect any to like the you and and kind in past As gross in for visibility XX% there get path seems -- year on comment the or half to Can that the even get second should quarters

Gail Sasaki

steps. it's Yes, in easier it I maybe two to mean, about think

QX. product the themselves increased So are product margins into probably two margins between our XX% And XX%. about for the getting the quarters range by

the the the cost the the factory, fixed margins, larger number. revenue, larger that affects the a have we So so that less at

to the year, viable. we -- think the definitely that by and XX% our of the certainly, exiting see plans, getting So it's end we in going year, then quite

Richard Shannon

drive last what of things Maybe HybriDIMM, give cetera? regarding an success, as efforts two but you've for think I in Chuck. on to that. How your sits? standardization well, Okay. of take, you this the questions you last et done? Can long about call Where probability could Chuck, update the you've us process mentioned talked and

Chuck Hong

Yes, Richard.

second process the and the couple the committees is are of front for And a that process of proposal We months. the and JEDEC, in be will proposal what of September in early a put scheduled over that questions, off taking effectively be and meeting a there preparing next we then that will various of be would showing will making quarterly kick standardization. where

believe group in is what the the So of know process we we got from the are, a odds parties. of we've industry decision-making, believe within JEDEC but large committee -- don't complex a this good support I It's is lot with -- support a technology. a

Richard Shannon

forward I Okay. look to updates Good on that. to hear.

question, last when set ASIC. that of Chuck. HybriDIMM progress So be on to like Any the the Talk partner terms for making expectations you'd a could about in done?

Chuck Hong

still helpful. We're will be discussions the believe parties. multiple We effort with in standardization

that JEDEC We a will the and and on funding and large come server couple will and manufacturers, have of will users, -- with forward the open apparent process standardization, attract they of I designing ASIC. support standardization become to an large think, through parties

Operator

presentation. Thank today's is conference The concluded. attending now you for

You may now disconnect.

Gail Sasaki	VP, CFO & Secretary
Chuck Hong	Co-Founder, President, CEO & Executive Chairman
Michael Smargiassi	MD, Brainerd Communicators, Inc.
Sujeeva Desilva	Roth Capital Partners
Richard Shannon	Craig-Hallum Capital Group LLC

Netlist (NLST) 31 Jul 182018 Q2 Earnings call transcript