NLST - Earnings call transcript Q1 2022

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Operator

Good day, and welcome to the Netlist First Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Mike Smargiassi with The Plunkett Group. Please go ahead, sir.

Mike Smargiassi

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

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

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

Chuck Hong

Thanks, Mike, and hello, everyone.

by the the last profitability year's and to The solid more investments, helping over gross doubled First XXXX help targeted quarter of future will revenue than drive expansion momentum which profit QX support product was business revenue first of than over across is highlighted dollars tripled more growth and as quarter. business.

we to and example, sales marketing. headcount support an and our increased to including quarter compared licensing, R&D, As our by across last year's XX% business, strategic initiatives

offsetting and part demand weighing negative in, have with softened market would which our stable some slowdown and memory like Before in one consumer I may to provide in I for in for quarters the and the get relatively market in demand into is inform IT, outlook the China. cases, business ahead. to mobile quarter, update some due the on the help the product context positive in for PC The another. current environment, particularly factors both

of the server robust, this continue year. remain end hand, and enterprise and the to On through demand expect analysts the other from data centers

more the shutdowns impacted Kioxia the fab contamination, that scaling DRAM DRAM the current products. On COVID-related expensive technology the scale, greater Ukraine computing experience more recent X have equipment, supply of global supply volatility. for of we with to NAND, will the for the from high-end the to will technical and the components headroom availability stable hand, and memory as China other of the on boom-and-bust keep to of and believe run, supply In in be and EUV, cycles long difficult the reverting limited market. NAND this, likely such and the in DRAMs past. chain the suppliers remain is relatively side, mainstream war Despite with

monitoring all but relationships remain chain closely are We now place. these supply optimistic in given have we variables, cautiously of the

and result to bulk dollar the gross was the revenue now discussion. SK growth the expanded QX, of of the In relationship with Turning product profit hynix.

full meaningful to hynix product on the operations of gained agreement, During their have capitalize product supply the further first year this and line offerings. understanding have of and to knowledge Netlist's product broaden begun we a

military, and customer which and optimistic raw aerospace can access We are readily with segments, hynix's base more particularly materials. about the we address industrial to

supply with us also to executing hynix and of products, with Netlist markets serve SSD a qualifications for customers. OEMs We the to array SK key products, SSD Samsung, enables and Netlist-branded expand broad and continue on markets together ODMs. supply enterprise consistently product and from

intellectual Moving now property. to on

to as be District in claims in an the relates definitions progress will making the patent case Western important key Austin the enforcement steady This are of moved the Netlist's products. actions. a against of as We and May determine in claim milestone construction Court XX. set with Texas recently Micron hearing it action court the for to methodical will infringing

that the thorough court X we and during The hearing The Netlist's have May court XX, Micron the on against Sabores' patent motion Germany, to in this and for on for also the await March case XXX a pendency In claims in petition. to conference waiting action case, intervening oral to proceed was now regarding Eastern gave Delaware, Micron to entertain infringement Samsung's We scheduling In encouraging. which on EP dismiss, bench. dispute its the We the set our requests to against which Judge judge court's request of in European questions Chief to is of where key jury we court before trial. a Netlist set our Delaware expect may Google grant plan response and time a asserting LRD. the rights all XX. issue Netlist on and on position April including will arguments concrete the we will from found we a explain In District for an Netlist's ruling, the order read set comments case conference March to patent. under an EP in schedule And for trial. court the patents Samsung order the may its Netlist's or those be an are calling also dates, filed the to upon another XXX management Samsung hearing to XXX, for filed receive suit Texas, respond

broad actions approach law. clear a Netlist to is multipronged with taking largest should that enforcement Our the into implementers industry bring make compliance designed the

unique involving array both pursuing jurisdictions working technologies. fair are in and domestically effort all various internationally, multiple parties, patents broad of promote against actions across to an of We licensing Netlist's

very power new front. DDRX XXX, a modules. on that the that awarded a to active improvement And management technological believe in memory. Finally, We patent important this we DDRX covers relates the on patent, January, we're prosecution for patent remain

Gail the Now I'll turn the call over to financial for review.

Gail Sasaki

Chuck. Thanks,

sales $X.X XX% Gross XX% for that X, due were the quarter XXXX, Gross the support operating investment from change million global to improved the increased to increased between million due to to to April in growing of in R&D the the quarter. During from ended the and IP $XX.X teams XXXX. increase X.X% legal total an was to first million is quarter for XXXX, margin quarters sales, The in months $XX.X dollars product acceleration QX million improvement the margins mix. expense in and from earlier $X.X sales gross X.X% related X engineering fees revenue fourth marketing necessary prior to percentage The primarily in in and variance actions. enforcement quarter. year profit and and by increase

be formally 'XX, targeting although chain currently revenue we moderate reminder, a to we not supply guide, As but Chuck do expect similar noted growth. QX the are that earlier, 'XX within product to the we uncertainties given QX

growth to We year-over-year of industry QX long-term positioned XXXX ended favorable, and restricted with performance. We trends continue and we financial memory the We cash believe well drive cash cash and and significant remain to XXXX storage equivalents in remain million with $XX.X liquidity at flexibility on the of XXXX. opportunistically $XX million of the maintain end line significant equity the raised compared line. million going financial to $X.X million $XX.X under forward, remaining and approximately credit and

improvement we a continue in XX% included operational resulting very a always, 'XX, days and improvement an days X cycle, between the XX This of cycle decrease XX% for outstanding compared in conversion which cash XX last cycle offset in key to QX burn improvement cash of As the zero year's was quarter. by improvement QX compared days inventory, manage improvement days to a last cash sales days, in to payable, minus quarters. cash to a days carefully in and

support million Silicon addition, to Bank credit of increased future revenue now the are questions. we with working we to Valley ready In recently $XX capital growth. Operator, line for

Operator

come will Suji the And Desilva Instructions] question Capital. first with Roth from [Operator

Suji Desilva

Good to million here. the rate see Great $XXX run progress.

problem. So

the here, to to guys? hynix get demanding? you, the you quantities able supplying are Are and customers there that any So guys the constraints you other your Chuck, are

Chuck Hong

specialized think our There to they've I been Suji, most amenable fairly certain requests. components. are of

constraints. are think facing I that more supply

market, certain our the supply. -- the products, that loosening constraints DRAM it's general, as help agreement formal a flow of our with the mentioned, that specialized we agreement stronger, hynix, have of -- things reliable, and products legal makes for up higher overall, supply stable in think, bit. I available. have, outside But computing confidence little of actually mainstream Certainly, the more NAND, been fairly and I the are

Suji Desilva

And that litigation pretrial Okay. taking to the longer, is this proceeding on more then to activity, That's is to the Google is set front, good a is trial. all that color. complex your that get plan? Or

I'd all some this pretrial to last of can So you the unwind imagine activity kind Maybe XX is there. color necessary give years.

Chuck Hong

months. X the ourselves to call over took as lot There's from is new recently communication is X records. decade this the relatively -- to Judge, I last on the held he a he's months. It obviously But the that is over of unusual. to Yes. Chief it the don't case of court, a couple We now going think interest, through the Seeborg, case. And going of including a

a but decade the So through, lot couple more, there's to a years of or decision of intervening will we we decision, rights, back we or on hear whether a back I whether go decision infringing to a the -- Google. cash get go a think activity on with

And to we'll relative relatively is I the short order, that right? term in yes. system. the relative think get judicial answer But

oldest said in this the is hearing. think that to that case expedite the in he will is recognizes by I I He the and committed do with he'll And schedule. a power think consideration into and his it that. oldest everything hear and court. along does try says decision, -- for it that from you'll lighters, everything hear we'll He and firm that we worse is and responsible this. take manages the case, is

-- get important So us. to for right but more decision the it's

Suji Desilva

good case. as to Micron prioritization Switching well. the over Yes. And Absolutely. the to hear

you've there, had there in claim building recent does do claim of recent terms benefit the the findings? Micron around of For construction kind your the recent cases hearing momentum that construction --

Chuck Hong

Yes. Somewhat.

to currently patent construction Texas extent we patent. I patents. think you if Judge And the to the have patents we Mike claim were of that on, and related lord that back were NVDIMM the in case, went the the LRDM that Allbright through recall -- the Western under against -- hynix LRDM District

history there -- So is the there. is

I quarter. helpful and that perhaps the certainly helpful us So for think is for

it in Although judge, is we're front of is Western it the of. a Texas, District same different

Suji Desilva

of And couple go a I'm questions. Chuck. it. sorry, then Got ahead,

Chuck Hong

of of with were front same with same Yes. I it's hynix the that just family was to patents. we going the say in venue

Suji Desilva

it. Got

Okay. Good couple a product that. on the of to business. know then questions And

but Any I so sounds color the across your it's you there there base You're employee cited, a like area greater what you areas you in is particular the peel of increasing increase your board helpful. base. to aggressively? employee be -- it I'm back, wondering if know would focus causing that

Chuck Hong

Yes.

company small big U.S., headcount-wise, especially is you big take But is -- size it manufacturing decent out consideration, a a percentage-wise, to a and number. think fairly engineering. have a think, grew relatively the into got in in for I we've we're I China

we're low for coming a headcount. So number off absolute of

hired in-house firmware. chip So R&D chip of and it well. aggressive. quite design a sales then bit attorneys, We've patent for experts, is and as engineers both marketing on for And

So of it bit us, agreement yes, a be we opportunity now but to we that the believe that want there's certain need able talent that. and with to take hynix into do able of quite to for advantage that access we've gives to us opportunities, we especially supply the be

Suji Desilva

to to want ramps impactful think Understand. Helpful. the help It Can as an on platform how understand jump I I Rapids and you you, about sounds guess, whatever then me, like just Sapphire important that the for I'll that. newer, And CXL? opportunity you server Intel after Intel with for growth the question line Okay. most is opportunity frame you? but us there for last for timing

Chuck Hong

not mean, they an where -- It's but be it's Granite of Intel, and industry, there. Yes. are about the available, I the out move may just will it's AMD. get in actually is new like a still it full of end ago those into talking XX bus It's both entire timing it to of 'XX It's came entire early created when implemented entire will Intel's Intel Rapids systems -- scale. it's it's 'XX. an products about the that created a almost years tens But is it on market of product, type simple that -- is when PCIe that add-on PCIe. go not billions a has that

different. enterprise-grade the it in it's of our the see to a going in approach, an XX we is taking huge of DRAM. And It's in bus a a lot -- computer up price So computer open as first between new years. NAND-based and approach and NAND server disparity new advantage

the on the and to So firmware design design. -- chip along and invest work and yes, we steady the that as goes, chip continue continue we to with -- go she on but need software and it's engineers, we the

Operator

attending as Thank well our you question-and-answer conference today. call for presentation. concludes for as our session This today's

now may disconnect. You

Netlist (NLST) 2 May 222022 Q1 Earnings call transcript