MoSys, Inc. Reports Second Quarter 2008 Financial Results

SUNNYVALE, Calif.--(BUSINESS WIRE)--July 29, 2008--MoSys, Inc., (NASDAQ: MOSY), a leading provider of high-density system-on-chip (SoC) memory and analog/mixed-signal intellectual property (IP), today reported financial results for its second quarter ended June 30, 2008.

Recent Highlights

  • Reported total revenue of $3.2 million, a 13.4 percent increase over the previous quarter
  • Completed the quarter with cash and investments of $74.6 million
  • Secured two new license agreements for Dual-Port Display IC (DDI) embedded memory macros
  • Announced shipment of 1T-SRAM DDI macros in LG Electronics' AMOLED-based display for mobile handsets
  • Demonstrated Blu-Ray SoC IP in silicon for home entertainment applications

Management Commentary

"During the second quarter, we recorded sequential growth in both licensing and royalties, which resulted in a sequential increase in total revenue," stated Len Perham, MoSys' President and Chief Executive Officer. "We secured two additional license agreements with new customers for our DDI technology, which enables mobile handset manufacturers to cost effectively meet the design challenges of today's advanced handsets requiring both high resolution displays and multimedia functionality. Additionally, LG Electronics, a licensee of our DDI technology, began production shipments late in the first quarter."

Mr. Perham continued, "With regard to our embedded flash technology, we expect to complete full foundry certification of our 1T-FLASH at the 130 nanometer process node. We continue to engage with our foundry partners and advanced integrated circuit SoC manufacturers for 1T-FLASH at the advanced 90 and 65 nanometer process nodes. Looking at our analog mixed signal IP, we demonstrated our front end Blu-Ray SoC IP in silicon to customers who are looking for comprehensive mixed signal functionality with all-format support in a single IP. The feedback we have received from these demonstrations has been encouraging, and we are in various levels of discussion with customers for applications in the home entertainment market. Also, we recently received our first order for our Serial ATA (SATA) Physical Layer (PHY) IP. This mixed signal IP is highly robust and can easily be integrated into a range of solutions targeted at the home entertainment, storage and PC markets."

Mr. Perham concluded, "Going forward, we will continue to execute on our product development roadmap, align ourselves more closely with our foundry partners, increase our sales presence and secure new licensees, while maintaining strong relationships with our existing customer base."

Second Quarter Results

Total net revenue for the second quarter of 2008 was $3.2 million, compared with $2.8 million for the first quarter of 2008 and $4.3 million for the second quarter of 2007.

Second quarter total revenue included licensing revenue of $0.7 million, compared with $0.4 million for the first quarter of 2008 and $2.2 million for the second quarter of 2007. Royalty revenue for the second quarter was $2.5 million, which includes royalties associated with the Nintendo Wii game console. Second quarter royalty revenue compares to $2.4 million for the previous quarter and $2.2 million for the second quarter of 2007.

Gross margin as determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was 74 percent, compared with 83 percent for the first quarter of 2008 and 84 percent for the second quarter of 2007.

Total operating expenses on a GAAP basis for the second quarter were $7.5 million, compared with $7.7 in the previous quarter and $4.9 million for the second quarter of 2007.

GAAP net loss for the quarter was $4.6 million, or ($0.14) per share, including stock-based compensation expense of $1.3 million and intangible asset amortization charges of $197,000. This compares with a net loss of $4.3 million, or ($0.14) per share, for the first quarter of 2008 and a net loss of $146,000, or ($0.00) per share, for the second quarter of 2007.

The net loss for the second quarter was $3.1 million, or ($0.10) per share, computed on a non-GAAP basis by excluding total stock-based compensation charges of $1.3 million and $197,000 in amortization charges. A reconciliation of GAAP to non-GAAP results is provided in the financial statement tables following the text of this press release.

Earnings per share for the quarter on both a GAAP and non-GAAP basis were computed using 31,703,000 shares.

Cash, cash equivalents and both long and short-term investments totaled approximately $74.6 million as of June 30, 2008, compared to approximately $78.7 million as of December 31, 2007.

Business Outlook

Len Perham, President and CEO, and Jim Sullivan, CFO, will comment on the second quarter during the Company's financial results conference call today, July 29, 2008, at 1:30 p.m. (PT).

Second Quarter Financial Results Webcast / Conference Call

MoSys will host a conference call and webcast with investors today at 1:30 p.m. Pacific time (4:30 p.m. Eastern time) to discuss the second quarter 2008 financial results and the business outlook. Investors and other interested parties may access the call by dialing 1-888-713-4213 in the U.S. (617-213-4865 outside of the U.S.), and entering the pass code 66420623 at least 10 minutes prior to the start of the call. In addition, an audio webcast will be available through the MoSys Web site at A telephone replay will be available for two business days following the call at 888-286-8010 in the U.S. (617-801-6888 outside of the U.S.), pass code of 78480026.

One may also pre-register their attendance for the conference call, which will enable immediate entry into the call. To pre-register and secure your unique PIN please go to: PJRFLHCAP

(Due to its length, this URL may need to be copied/pasted into your Internet browser's address field.)

Use of Non-GAAP Financial Measures

To supplement MoSys' consolidated financial statements presented in accordance with GAAP (U.S. Generally Accepted Accounting Principles), MoSys uses non-GAAP financial measures that exclude from the income statement the effects of stock-based compensation and the effects of certain charges related to acquired intangible assets and other acquisition-related charges from its acquisition of the analog/mixed-signal design teams and the company's extensive related design know-how from Atmel Corporation and LDIC in 2007. 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 believes that the presentation of non-GAAP financial measures that exclude these items is useful to investors because MoSys 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 immediately 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 July 29, 2008, that the Company filed with the Securities and Exchange Commission.

Forward-Looking Statements

This press release may contain forward-looking statements about the Company, including, without limitation, benefits and performance expected from use of the Company's 1T-SRAM, 1T-FLASH and analog/mixed-signal technologies, the Company's execution and results, improving operational efficiencies, growth of the business 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, customer acceptance of our proprietary technologies for 1T-SRAM, 1T-FLASH and analog/mixed-signal, the timing and nature of the license agreements to be entered into with our customers and their requests for our services under existing license agreements, the timing of customer acceptance of our work under such agreements, the level of commercial success of licensees' products, ease of manufacturing and yields of devices incorporating our proprietary technologies, our ability to enhance our existing proprietary technologies and develop new technologies, the 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, the vigor and growth of markets served by our licensees and customers and operations of the Company and other risks identified in the Company's most recent reports on forms 10-Q and 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.

Founded in 1991, MoSys (NASDAQ: MOSY), develops, markets and licenses innovative embedded memory and analog/mixed-signal intellectual property (IP) technologies for advanced SoCs used in a variety of home entertainment, mobile consumer, networking and storage applications. MoSys' patented 1T-SRAM and 1T-FLASH technologies offer a combination of high density, low power consumption, high speed and low cost unmatched by other available memory technologies. MoSys' advanced analog/mixed-signal technologies include highly integrated Blu-ray DVD, Gigabit Ethernet, Serial ATA, and a range of high speed phase lock loop and analog-to-digital converter IP. MoSys' embedded memory IP has been included in more than 160 million devices demonstrating silicon-proven manufacturability in a wide range of processes and applications. MoSys is headquartered at 755 N. Mathilda Avenue, Sunnyvale, California 94085. More information is available on MoSys' website at

MoSys and 1T-SRAM are registered trademarks of MoSys, Inc. 1T-FLASH(TM) is a trademark of MoSys, Inc.

                             MOSYS, INC.
         (In thousands, except per share amounts; unaudited)

                                    Three Months     Six Months Ended
                                      June 30,           June 30,
                                    2008     2007     2008      2007
                                  -------- -------- --------- --------

Net Revenue
   Licensing                      $   667  $ 2,159  $  1,099  $ 3,317
   Royalty                          2,528    2,170     4,913    4,149
                                  -------- -------- --------- --------
      Total net revenue             3,195    4,329     6,012    7,466

Cost of Net Revenue
   Licensing                          833      678     1,313    1,242
                                  -------- -------- --------- --------
      Total cost of net revenue       833      678     1,313    1,242

Gross Profit                        2,362    3,651     4,699    6,224

Operating Expenses
   Research and development         4,344    2,101     8,443    4,179
   Selling, general and
    administrative                  2,926    2,825     6,282    5,405
   Amortization of acquired
    intangible assets                 197        -       394        -
                                  -------- -------- --------- --------
      Total operating expenses      7,467    4,926    15,119    9,584

   Loss from operations            (5,105)  (1,275)  (10,420)  (3,360)

   Other income/expenses              561    1,232     1,635    2,296
                                  -------- -------- --------- --------
      Loss before income taxes     (4,544)     (43)   (8,785)  (1,064)

   Provision for income taxes         (46)    (103)      (89)     (51)
                                  -------- -------- --------- --------

Net loss                          $(4,590) $  (146) $ (8,874) $(1,115)
                                  ======== ======== ========= ========

Net loss per share
   Basic and diluted               ($0.14)  ($0.00)   ($0.28)  ($0.04)

Shares used in computing net loss
 per share
   Basic and diluted               31,703   31,945    31,690   31,820

                             MOSYS, INC.
  Reconciliation of GAAP to Non-GAAP Net Loss and Net Loss Per Share
         (In thousands, except per share amounts; unaudited)

                                     Three Months    Six Months Ended
                                       June 30,          June 30,
                                     2008     2007     2008     2007
                                   -------- -------- -------- --------

GAAP net loss                      $(4,590) $  (146) $(8,874) $(1,115)
   Stock-based compensation
      - Cost of net revenue            151      122      231      222
      - Research and development       356      279      729      529
      - Selling, general and
       administrative                  826      517    1,639      929
                                   -------- -------- -------- --------
         Total stock-based
          compensation expense       1,333      918    2,599    1,680

   Amortization of acquired
    intangible assets                  197        -      394        -
                                   -------- -------- -------- --------

Non-GAAP net income (loss)         $(3,060) $   772  $(5,881) $   565
                                   ======== ======== ======== ========

GAAP net loss per share             ($0.14)  ($0.00)  ($0.28)  ($0.04)
   Reconciling items
      - Stock-based compensation
       expense                        0.04     0.03     0.08     0.06
      - Amortization of acquired
       intangible assets             (0.00)       -     0.01        -
                                   -------- -------- -------- --------

Non-GAAP net income (loss) per
 share: Basic and diluted           ($0.10) $  0.03   ($0.19) $  0.02
                                   ======== ======== ======== ========

Shares used in computing non-GAAP
 net income (loss) per share
   Basic                            31,703   31,945   31,690   31,820
   Diluted                          31,703   32,882   31,690   32,751

                             MOSYS, INC.
                      (in thousands, unaudited)

                                                June 30,  December 31,
                                                  2008        2007
                                               ---------- ------------

   Current assets:
      Cash, cash equivalents and investments    $  57,844  $    64,961
      Accounts receivable, net                        763          895
      Unbilled contract receivables                   273          518
      Prepaid expenses and other assets             1,746        2,393
                                               ---------- ------------
         Total current assets                      60,626       68,767

   Long-term investments                           16,786       13,693
   Property and equipment, net                      1,320        1,396
   Goodwill                                        12,326       12,326
   Intangible assets, net                           1,772        2,166
   Other assets                                       186          449
                                               ---------- ------------
         Total assets                           $  93,016  $    98,797
                                               ========== ============

Liabilities and Stockholders' Equity
   Current liabilities:
      Accounts payable                          $     366  $       146
      Accrued expenses and other liabilities        2,156        2,158
      Deferred revenue                                984          201
                                               ---------- ------------
         Total current liabilities                  3,506        2,505

   Stockholders' equity                            89,510       96,292

                                               ---------- ------------
         Total liabilities and stockholders'
          equity                                $  93,016  $    98,797
                                               ========== ============

MoSys, Inc.
Jim Sullivan, 408-731-1800
Shelton Group, Investor Relations
Beverly Twing, 972-239-5119 ext. 126
Sr. Acct. Manager

SOURCE: MoSys, Inc.