MoSys, Inc. Reports Third Quarter 2009 Financial Results

http://www.businesswire.com/news/home/20091027006619/en

SUNNYVALE, Calif.--(Business Wire)--
MoSys, Inc., (NASDAQ: MOSY), a leading provider of differentiated, high-density
memory and high-speed interface (I/O) intellectual property (IP) for the
consumer, communications, networking, storage and high-performance computing
markets, today reported financial results for the third quarter ended September
30, 2009.

Recent Highlights

* Reported total third quarter revenue of $3.4 million, up 70% sequentially
* Reported third quarter licensing revenue of $1.3 million, up over 300%
sequentially and 11% over third quarter 2008
* Added two new customers for high speed serial interface IP for networking
applications
* Signed a significant 1T-SRAM DDI (display driver IC) technology license with a
large Japanese IDM, also a new customer
* Completed integration of the Prism Circuits and MoSys organizations
* Ended quarter with total cash and investments of $42.7 million

Management Commentary

Commenting on the quarter, Len Perham, MoSys` President and Chief Executive
Officer, stated, "I am very pleased with the progress that we made during the
third quarter, our first full quarter as an integrated and unified team. With
world-class expertise in memory and interface technology, our engineering team
is focused on delivering cutting-edge, system level solutions, which I believe
will enable us to increase our addressable market and provide growth
opportunities to an expanding customer base.

"In the third quarter, the significant increase in our total revenue was driven
by strong growth, both sequentially and year-over-year, in our licensing
revenue, which was enhanced by contributions from our high-speed serial
interface IP. I see networking and communications applications as a strategic
growth area for MoSys and believe that our high-speed interface IP and design
expertise, combined with 1T-SRAM, will be a key driver of that growth. I am
pleased to report that we added two new customers, both adopting our high speed
SerDes interface IP for networking and communications applications. Our goal is
to become the partner of choice for our customers` high-speed interface IP needs
by exceeding their expectations while delivering the most competitive,
cost-effective and robust solutions. Early in the fourth quarter, we booked a
follow-on project from one of these new customers. Also, in October, we signed a
significant technology license agreement for 1T-SRAM with a major Japanese IDM,
also a new customer to MoSys. The license is initially for DDI applications and
may expand into additional applications in the future."

Mr. Perham concluded, "Overall, I believe our Company is well positioned for
future growth based on our current technology offerings and new product
initiatives. The integration of the Prism Circuits acquisition is complete and
the efforts of the combined team are providing a measurable impact on both our
short-term results and long-term opportunities."

Third Quarter Results

Total net revenue for the third quarter of 2009 was $3.4 million, compared with
$2.0 million for the second quarter of 2009 and $4.1 million for the third
quarter of 2008.

Third quarter total revenue included licensing revenue of $1.3 million, compared
with $306,000 for the second quarter of 2009 and $1.2 million for the third
quarter of 2008. The sequential and year-over-year increases in license revenue
were primarily driven by growth in revenues from ongoing interface IP projects.

Royalty revenue for the third quarter was $2.0 million, compared to $1.7 million
in the previous quarter and $2.9 million in the third quarter of 2008. The
sequential increase in royalty revenue was primarily due to an increase in
revenue from a major IDM licensee. Most production by this IDM licensee is now
subject to a license agreement that provides for royalties on its SoC at a more
advanced process node to be reported and recognized in the quarter subsequent to
shipment of the licensee`s products, instead of the shipment quarter, as was the
case under the previous agreement. The licensee`s transition to the more
advanced process node was substantially completed in the second quarter,
resulting in increased royalty revenue from this IDM licensee in the third
quarter.

Gross margin as determined in accordance with U.S. Generally Accepted Accounting
Principles (GAAP) was 80 percent, compared with 86 percent for the second
quarter of 2009 and 79 percent for the third quarter of 2008.

Total operating expenses on a GAAP basis for the third quarter were $7.9
million, compared with $7.0 million for the previous quarter and $6.8 million
for the third quarter of 2008. Third quarter 2009 operating expenses included
the first full quarter of expenses from the Prism acquisition, as well as $1.1
million of amortization of intangible assets and contingent compensation
expenses and $925,000 of stock-based compensation expense.

GAAP net loss for the third quarter of 2009 was $5.0 million, or ($0.16) per
share, compared with a net loss of $5.1 million, or ($0.16) per share, for the
second quarter of 2009 and a net loss of $3.2 million, or ($0.10) per share, for
the third quarter of 2008.

The non-GAAP net loss for the third quarter was $3.0 million, or ($0.10) per
share, excluding acquisition related charges and stock-based compensation. A
reconciliation of GAAP results to non-GAAP results is provided in the financial
statement tables following the text of this press release.

Earnings per share for the third quarter on both a GAAP and non-GAAP basis were
computed using 31,205,000 shares.

Cash, cash equivalents and investments totaled approximately $42.7 million as of
September 30, 2009, compared with approximately $67.5 million as of December 31,
2008. The year-to-date decrease in cash and investments included a $13.6 million
cash payment related to the acquisition of Prism Circuits, approximately $1.0
million in expenditures related to the exit of the analog/mixed-signal product
lines, approximately $0.9 million of stock repurchases and approximately $0.6
million related to the closure of our Korea design center and headcount
reductions in the United States.

Third 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 third quarter 2009
financial results and the business outlook. Investors and other interested
parties may access the call by dialing 866-314-4865 in the U.S. (617-213-8050
outside of the U.S.), and entering the pass code 53432374 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 http://www.mosys.com. A telephone replay will be
available for 2 business days following the call at 888-286-8010 in the U.S.
(617-801-6888 outside of the U.S.), pass code of 46570840.

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 income
statement the effects of restructuring, stock-based compensation and the effects
of certain acquisition-related charges, including amortization of acquired
intangible assets, transaction costs and contingent compensation 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 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 October 27, 2009, 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 embedded memory and interface technologies, the Company`s execution
and results, improving operational efficiencies, expense and revenue synergies
from the acquisition of Prism Circuits, growth of the business and future
business prospects and the estimated cost savings from restructuring plans.

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 embedded
memory and interface technologies, 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 form 10-K and form 10-Q
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
differentiated embedded memory and high speed parallel and serial interface IP
for advanced SoC designs. MoSys` patented 1T-SRAM and 1T-FLASH memory
technologies offer a combination of high density, low power consumption, high
speed and low cost advantages that are unmatched by other available memory
technologies for a variety of home entertainment, mobile consumer, networking
and storage applications. MoSys` silicon-proven interface IP portfolio includes
DDR3/2 Combo PHYs, as well as SerDes IP that support data rates from 1 Gigabit
per second (Gbps) to 10 Gbps, across a wide range of standards, including
PCI-Express, XAUI, SATA, USB and 10G KR. MoSys is headquartered at 755 N.
Mathilda Avenue, Sunnyvale, California 94085. More information is available on
MoSys' website at http://www.mosys.com.

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

MOSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts; unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Net Revenue
Licensing $ 1,332 $ 1,198 $ 2,162 $ 2,297
Royalty 2,036 2,856 5,753 7,769
Total net revenue 3,368 4,054 7,915 10,066

Cost of Net Revenue
Licensing 682 845 1,278 2,158
Total cost of net revenue 682 845 1,278 2,158

Gross Profit 2,686 3,209 6,637 7,908

Operating Expenses
Research and development 5,180 4,175 12,947 13,012
Selling, general and administrative 2,202 2,641 6,780 8,923
Acquisition-related costs 488 - 922 -
Restructuring charges - - 706 -
Total operating expenses 7,870 6,816 21,355 21,935

Loss from operations (5,184 ) (3,607 ) (14,718 ) (14,027 )

Other income, net 139 391 493 2,026
Loss before income taxes (5,045 ) (3,216 ) (14,225 ) (12,001 )

Provision for income taxes (3 ) (22 ) (36 ) (111 )

Net loss $ (5,048 ) $ (3,238 ) $ (14,261 ) $ (12,112 )

Net loss per share
Basic and diluted ($0.16 ) ($0.10 ) ($0.46 ) ($0.38 )

Shares used in computing net loss per share
Basic and diluted 31,205 31,777 31,239 31,719

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 Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

GAAP net loss $ (5,048 ) $ (3,238 ) $ (14,261 ) $ (12,112 )
Stock-based compensation expense
-Cost of net revenue 90 111 162 342
-Research and development 332 207 785 936
-Selling, general and administrative 503 660 1,213 2,299
Total stock-based compensation expense 925 978 2,160 3,577

Restructuring charges (1) - - 706 -
Amortization of intangible assets (2) 643 197 820 591
Acquisition-related transaction costs (3) - - 300 -
Acquisition-related contingent compensation charges (4) 488 - 622 -

Non-GAAP net loss $ (2,992 ) $ (2,063 ) $ (9,653 ) $ (7,944 )

GAAP net loss per share ($0.16 ) ($0.10 ) ($0.46 ) ($0.38 )
Reconciling items
-Stock-based compensation expense 0.03 0.03 0.07 0.11
-Restructuring charges (1) - - 0.02 -
-Amortization of intangible assets (2) 0.02 0.01 0.03 0.02
-Acquisition-related transaction costs (3) - - 0.01 -
-Acquisition-related contingent compensation charges (4) 0.01 - 0.02 -

Non-GAAP net loss per share: Basic and diluted ($0.10 ) ($0.06 ) ($0.31 ) ($0.25 )

Shares used in computing non-GAAP net loss per share
Basic and diluted 31,205 31,777 31,239 31,719

(1) Charges related to the exit of the analog/mixed-signal product lines and
closure of the Korea office.

(2) Non-cash charges for amortization of intangibles arising from acquired
assets. These charges are included in research and development expenses.

(3) Charges primarily related to legal and accounting fees incurred from the
acquisition of Prism Circuits, Inc. These charges are included in selling,
general and administrative expenses.

(4) Contingent earn-out compensation charges arising from the acquisition of
Prism Circuits, Inc.

MOSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)

September 30, December 31,
2009 2008

Assets
Current assets:
Cash, cash equivalents and investments $ 31,998 $ 44,075
Accounts receivable, net 1,298 688
Unbilled contract receivables 1,083 428
Prepaid expenses and other assets 3,221 2,158
Total current assets 37,600 47,349

Long-term investments 10,671 23,395
Property and equipment, net 1,392 958
Goodwill 23,017 12,326
Intangible assets, net 5,260 -
Other assets 238 1,905
Total assets $ 78,178 $ 85,933

Liabilities and Stockholders` Equity
Current liabilities:
Accounts payable $ 501 $ 167
Accrued expenses and other liabilities 1,877 2,235
Accrued acquisition earn-out liability 5,171 -
Accrued restructuring liabilities 165 1,004
Deferred revenue 1,587 639
Total current liabilities 9,301 4,045

Long-term liabilities 156 -

Stockholders' equity 68,721 81,888

Total liabilities and stockholders` equity $ 78,178 $ 85,933

MoSys, Inc.
Jim Sullivan, CFO, +1 408-731-1800
jsullivan@mosys.com
or
Shelton Group, Investor Relations
Beverly Twing, +1 972-239-5119 ext. 126
Sr. Acct. Manager
btwing@sheltongroup.com

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