MoSys, Inc. (NASDAQ:MOSY), a leader in semiconductor solutions that
enable fast, intelligent data access for Cloud, network, and
communications systems, today reported financial results for the
fourth quarter and fiscal year ended December 31, 2016.
Fourth Quarter and Full Year 2016 Financial
ResultsTotal net revenue for the fourth quarter of 2016
was $1.4 million, compared with $1.6 million in the previous
quarter, and $1.6 million in the fourth quarter of 2015. Total net
revenue for the full year 2016 was $6.0 million, compared with $4.4
million for 2015.
Product revenue in the fourth quarter was $1.0
million, compared with $1.2 million in the third quarter of 2016,
and $1.1 million in the year ago period. Product revenue for the
full year 2016 was $4.6 million, compared with $2.4 million in
2015.
Gross margin for the fourth quarter of 2016 was 57
percent, compared with 58 percent in the third quarter of 2016 and
45 percent for the fourth quarter of 2015.
Total operating expenses on a GAAP basis for the
fourth quarter of 2016 were $15.1 million, which included a
non-cash charge for goodwill impairment of $9.9 million, as well as
stock-based compensation and intangible asset amortization expenses
of $0.4 million, and compared with $5.4 million in the third
quarter of 2016 and $7.2 million in the year-ago period. The
non-cash goodwill impairment charge resulted from an impairment
test performed as of December 31, and was primarily due to the
decline in the market valuation of the Company. Excluding the
goodwill impairment charge, total operating expenses on a GAAP
basis for the fourth quarter of 2016 were $5.2 million.
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 retroactively
adjusted to reflect the reverse stock split for all current and
prior periods.
GAAP net loss for the fourth quarter of 2016 was
$14.5 million, or ($2.18) per share, compared with a net loss of
$4.7 million, or ($0.71) per share, in the previous quarter and a
net loss of $6.5 million, or ($0.99) per share, for the fourth
quarter of 2015. Non-GAAP net loss for the fourth quarter of 2016
was $4.2 million, or ($0.64) per share, which excludes the goodwill
impairment charge, 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.
Net loss for the full year 2016 was $32.0 million,
or ($4.86) per share, compared with a loss of $31.5 million, or
($5.04) per share, in 2015. Excluding goodwill impairment and
restructuring charges, stock-based compensation and amortization of
intangible assets expenses, non-GAAP net loss for 2016 was $19.2
million or ($2.92) per share.
Management Commentary“Fourth
quarter revenue primarily reflected continued shipments of
Bandwidth Engine® 2, including increased orders for early
production units from our lead IP security appliance customer,”
commented Len Perham, president and CEO of MoSys. “While our
product revenue increased in 2016 over 2015, we did not achieve our
full year revised IC revenue guidance due to delays in customer
ramps and order cancellations from a lead Programmable Search
Engine (PSE) customer in the fourth quarter. Our initial PSE
data-center customer chose not to continue to adapt our PSE and
associated internal software for use in its next-generation
product, and, instead, opted for an alternative solution. While we
ended the year with a solid pipeline of design wins for our
products, the pace at which we added incremental wins was lower due
to a combination of market dynamics and customer concerns about the
Company’s financial viability. However, we recently won our first
Bandwidth Engine 3 design win and initial pre-production order with
a leading networking equipment supplier in China. For this
design win, our Bandwidth Engine 3 device is configured to support
Mellanox’s Indigo NPS-400 network processor.
“Overall, we have experienced slowness in new
equipment ramps by our various network infrastructure-based
design-win customers. In addition, the cycles of improvements and
performance upgrades being undertaken by networking infrastructure
suppliers have taken longer to get started and are less predictable
to forecast. These factors are likely due to the increased focus on
the data center and Cloud applications, the emergence of new
initiatives, such as software defined networking (SDN) and network
function virtualization (NFV), and the ever-increasing use of white
box equipment by traditional networking customers. These market
dynamics, combined with the fact that MoSys’ customer base includes
a limited number of the tier-one players in the networking
infrastructure space, have made the situation very difficult for
MoSys given its size and capitalization.
“In response, we are realigning our resources to
focus on key, near-term opportunities and evaluate strategic
alternatives. We brought a number of new products to market
in 2016, and we will continue to focus on selling these products
into the marketplace, as we slow the pace of new product
development. We plan to initiate cost-reduction programs and
limit further expenditures, until such time that our existing
Bandwidth Engine design-win base ramps.
“We remain committed to meeting all existing and
expected customer demand for our products and will focus on
production capability to ensure no disruption to customers for the
foreseeable future. We have production forecasts and backlog for
2017 from our lead networking and IP security customers. The
combination of shipments to date in 2017 and customer forecasts and
backlog for the remainder of 2017 already exceed our total 2016 IC
revenue, and we expect to generate higher revenue in 2017 as
compared with 2016.”
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 2016 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 March 29, 2017 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:
- 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;
- 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
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 of Cloud, networking, communications, and
data center systems to address the continual increase in Internet
users, data and services. The company's solutions deliver data path
connectivity, speed and intelligence while eliminating data access
bottlenecks on line cards and systems scaling from 100G to
multi-terabits per second. Engineered and built for
high-reliability carrier and enterprise applications, MoSys'
Bandwidth Engine®, Programmable Search Engine, and LineSpeed™ IC
product families are based on the company's patented
high-performance, high-density intelligent access and high-speed
serial interface technology, and utilize the company's highly
efficient GigaChip® Interface. MoSys is headquartered in Santa
Clara, California. More information is available at
www.mosys.com.
Bandwidth Engine, GigaChip 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, |
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenue |
|
|
|
|
|
|
|
Product |
|
$ |
992 |
|
$ |
1,112 |
|
|
$ |
4,604 |
|
$ |
2,400 |
|
|
|
Royalty and
other |
|
375 |
|
|
486 |
|
|
|
1,420 |
|
|
1,990 |
|
|
|
|
Total net
revenue |
|
1,367 |
|
|
1,598 |
|
|
|
6,024 |
|
|
4,390 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Net Revenue |
|
591 |
|
|
881 |
|
|
|
3,075 |
|
|
2,474 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
776 |
|
|
717 |
|
|
|
2,949 |
|
|
1,916 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
Research
and development |
|
4,043 |
|
|
5,633 |
|
|
|
18,086 |
|
|
27,108 |
|
|
|
Selling,
general and administrative |
|
1,150 |
|
|
1,588 |
|
|
|
5,693 |
|
|
6,299 |
|
|
|
Restructuring and impairment charges |
|
9,858 |
|
|
- |
|
|
|
10,534 |
|
|
- |
|
|
|
|
Total
operating expenses |
|
15,051 |
|
|
7,221 |
|
|
|
34,313 |
|
|
33,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
|
(14,275 |
) |
|
(6,504 |
) |
|
|
(31,364 |
) |
|
(31,491 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense), net |
|
(218 |
) |
|
23 |
|
|
|
(639 |
) |
|
94 |
|
|
|
|
Loss before
income taxes |
|
(14,493 |
) |
|
(6,481 |
) |
|
|
(32,003 |
) |
|
(31,397 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
provision (benefit) |
|
(15 |
) |
|
26 |
|
|
|
45 |
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss |
|
$ |
(14,478 |
) |
$ |
(6,507 |
) |
|
$ |
(32,048 |
) |
$ |
(31,483 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share |
|
|
|
|
|
|
|
Basic and
diluted |
$ |
(2.18 |
) |
$ |
(0.99 |
) |
|
$ |
(4.86 |
) |
$ |
(5.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net loss per share |
|
|
|
|
|
|
|
Basic and
diluted |
|
6,630 |
|
|
6,549 |
|
|
|
6,601 |
|
|
6,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MOSYS, INC. |
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
|
|
|
|
(In thousands, unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
December 31, |
|
|
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash, cash
equivalents and investments |
$ |
9,768 |
|
$ |
20,238 |
|
|
|
|
|
|
|
Accounts
receivable, net |
|
559 |
|
|
729 |
|
|
|
|
|
|
|
Inventories |
|
1,451 |
|
|
1,597 |
|
|
|
|
|
|
|
Prepaid
expenses and other |
|
473 |
|
|
701 |
|
|
|
|
|
|
|
|
Total current
assets |
|
12,251 |
|
|
23,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
1,274 |
|
|
1,630 |
|
|
|
|
|
|
Goodwill |
|
|
13,276 |
|
|
23,134 |
|
|
|
|
|
|
Other |
|
|
344 |
|
|
663 |
|
|
|
|
|
|
|
|
Total assets |
$ |
27,145 |
|
$ |
48,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
$ |
561 |
|
$ |
940 |
|
|
|
|
|
|
|
Accrued
expenses and other |
|
2,773 |
|
|
2,664 |
|
|
|
|
|
|
|
|
Total current
liabilities |
|
3,334 |
|
|
3,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable |
|
8,250 |
|
|
- |
|
|
|
|
|
|
Other |
|
|
233 |
|
|
247 |
|
|
|
|
|
|
|
|
Total liabilities |
|
11,817 |
|
|
3,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity |
|
15,328 |
|
|
44,841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders’ equity |
$ |
27,145 |
|
$ |
48,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Twelve Months Ended |
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss |
$ |
(14,478 |
) |
$ |
(6,507 |
) |
|
$ |
(32,048 |
) |
$ |
(31,483 |
) |
|
|
|
Stock-based
compensation expense |
|
|
|
|
|
|
|
|
- |
Research and
development |
|
318 |
|
|
582 |
|
|
|
1,597 |
|
|
2,733 |
|
|
|
|
- |
Selling, general and
administrative |
|
42 |
|
|
203 |
|
|
|
558 |
|
|
916 |
|
|
|
|
|
Total stock-based
compensation expense |
|
360 |
|
|
785 |
|
|
|
2,155 |
|
|
3,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and impairment charges |
|
9,858 |
|
|
- |
|
|
|
10,534 |
|
|
- |
|
|
|
|
Amortization of intangible assets |
|
28 |
|
|
28 |
|
|
|
110 |
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net loss |
$ |
(4,232 |
) |
$ |
(5,694 |
) |
|
$ |
(19,249 |
) |
$ |
(27,513 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss per
share |
$ |
(2.18 |
) |
$ |
(0.99 |
) |
|
$ |
(4.86 |
) |
$ |
(5.04 |
) |
|
|
|
Reconciling
items |
|
|
|
|
|
|
|
|
- |
Stock-based
compensation expense |
|
0.05 |
|
|
0.12 |
|
|
|
0.32 |
|
|
0.59 |
|
|
|
|
- |
Restructuring and
impairment charges |
|
1.49 |
|
|
- |
|
|
|
1.60 |
|
|
- |
|
|
|
|
- |
Amortization of
intangible assets |
|
- |
|
|
- |
|
|
|
0.02 |
|
|
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net loss per share: basic and
diluted |
$ |
(0.64 |
) |
$ |
(0.87 |
) |
|
$ |
(2.92 |
) |
$ |
(4.40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing non-GAAP net loss per
share |
|
|
|
|
|
|
|
Basic and
diluted |
|
6,630 |
|
|
6,549 |
|
|
|
6,601 |
|
|
6,249 |
|
|
|
|
|
|
|
|
|
|
|
|
Contacts:
Jim Sullivan, CFO
MoSys, Inc.
+1 (408) 418-7500
jsullivan@mosys.com
Beverly Twing, Sr. Acct. Manager
Shelton Group, Investor Relations
+1 (214) 272-0089
btwing@sheltongroup.com
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