UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
Form 8-K
______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): May 10, 2018
MOSYS, INC.
(Exact Name of Registrant as Specified in Charter)
000-32929
(Commission File Number)
| Delaware | 77-0291941 |
| (State or Other Jurisdiction of Incorporation) | (I.R.S. Employer Identification Number) |
| 2309 Bering Dr. San Jose, California 95131 |
| (Address of principal executive offices, with zip code) |
(408) 418-7500
(Registrant's telephone number, including area code)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On May 10, 2018, the Company issued a press release announcing its financial results for the three months ended March 31, 2018. A copy of this press release is furnished as Exhibit 99.1 to this report. The press release should be read in conjunction with the statements regarding forward-looking statements, which are included in the text of the release.
In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), management also presents information regarding the Company’s performance over comparable periods based on gross margin, operating expenses (research and development and sales, general and administrative), operating loss, net loss and net loss per share, exclusive of stock-based compensation, restructuring and impairment charges, and amortization of intangibles. Because management discloses financial measures calculated without taking into account these items, these financial measures are characterized as "non-GAAP financial measures" under Securities and Exchange Commission rules.
Stock-based compensation charges represent non-cash charges related to equity awards granted by the Company. Although these are recurring charges to the Company’s operations, management believes the measurement of these amounts can vary considerably from period to period and depend substantially on factors that are not a direct consequence of operating performance that is within management’s control. Thus, management believes that excluding these charges facilitates comparisons of the Company’s operational performance in different periods, as well as with similarly determined non-GAAP financial measures of comparable companies.
Amortization of intangible assets results from the value recorded for a license the Company retained to patents sold in 2011. The amortization does not represent operating expenses ordinarily incurred by the Company with respect to its primary business activities of selling integrated circuits. Thus, these charges are excluded from the Company’s non-GAAP financial measures to provide another basis for evaluating and comparing the Company’s performance for the three months ended March 31, 2018.
The Company’s non-GAAP financial measures also exclude restructuring charges related to reductions in workforce and associated operating expenses to reduce net loss and cash burn and to realign resources, as well as accruals for certain contractual obligations related to computer-aided design software and lease termination costs. The Company has incurred restructuring charges in prior periods and may do so in the future, and such charges should be considered in evaluating the performance of the Company and its management. However, management believes that presenting financial measures that exclude these charges facilitates comparisons with the Company’s ongoing operating results as well as those of other companies in its business sector.
Adjusted EBITDA is GAAP net income (loss), as reported on our condensed consolidated statements of operations, excluding stock-based compensation, restructuring and impairment charges, amortization of intangibles, interest expense, depreciation, and our provision for income taxes.
Management and the Company’s board of directors will continue to analyze the historical consolidated results of operations and comprehensive income (loss) (revenue, gross margin, research and development expenses, selling, general and administrative expenses, operating income (loss), net income (loss) and net income (loss) per share), and adjusted EBITDA to assess the business and compare operating results to the Company's performance objectives. For example, the Company's budgeting and planning process utilizes these non-GAAP financial measures.
The Company discloses these non-GAAP financial measures to the public as an additional means by which investors can assess the Company's performance and to identify the Company's operating results for investors on the same basis applied by management. 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. The Company has furnished reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures in the press release furnished as Exhibit 99.1.
Moreover, although these non-GAAP financial measures adjust expense, they should not be viewed as a pro-forma presentation reflecting the elimination of the underlying share-based compensation programs, which are an important element of the Company's compensation structure. GAAP requires that all forms of share-based payments should be valued and included, as appropriate, in results of operations. Management believes these expenses are a material part of the Company's operating results.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Press Release by MoSys, Inc. dated May 10, 2018 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MOSYS, INC. | ||
| Date: May 10, 2018 | By: | /s/ James W. Sullivan |
| James W. Sullivan | ||
| Vice President of Finance and Chief Financial Officer | ||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release by MoSys, Inc. dated May 10, 2018 |
EXHIBIT 99.1
MoSys, Inc. Reports First Quarter 2018 Financial Results
Achieves GAAP Profitability
SAN JOSE, Calif., May 10, 2018 (GLOBE NEWSWIRE) -- MoSys, Inc. (NASDAQ:MOSY), today reported financial results for the quarter ended March 31, 2018.
First Quarter 2018 Financial Results
Total net revenue for the first quarter of 2018 was $4.2 million, compared with $3.8 million for the fourth quarter of 2017 and $1.2 million for the first quarter of 2017. Product revenue for the first quarter was $3.7 million, compared with $3.5 million in the fourth quarter of 2017 and $1.0 million in the year ago period, reflecting increased IC shipments to multiple design win customers.
GAAP gross margin for the first quarter of 2018 increased to 62%, compared with 45% for the fourth quarter of 2017 and 50% for the first quarter of 2017. The sequential increase in gross margin was due primarily to improved manufacturing efficiencies and higher licensing revenue.
Total operating expenses on a GAAP basis for the first quarter of 2018 were $2.0 million, compared with $2.2 million in the fourth quarter of 2017 and $4.8 million in the first quarter of 2017. Operating expenses decreased sequentially and year-over-year due primarily to the benefits of the Company’s restructuring and cost reduction initiatives implemented in 2017.
GAAP net income for the first quarter of 2018 was $0.3 million, or $0.04 per diluted share, compared with a net loss of $0.5 million, or ($0.07) per share, for the previous quarter and a net loss of $4.4 million, or ($0.66) per share, for the first quarter of 2017. Non-GAAP net income for the first quarter of 2018 was $0.5 million, or $0.06 per diluted share, compared with a net loss of $62,000, or ($0.01) per share, during the prior quarter and a net loss of $4.2 million, or ($0.63) per share, in the first quarter of 2017. Adjusted EBITDA for the first quarter of 2018 was a positive $0.9 million, compared with a negative $3.8 million for the first quarter of 2017. A reconciliation of GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.
Management Commentary
“During the first quarter, we further extended the momentum established at the end of 2017, increasing total revenue 11%, improving product gross margins to 57%, and reducing operating expenses by 9%, sequentially,” commented Len Perham, president and CEO of MoSys. “These financial and business improvements enabled us to achieve profitability in the quarter and position the Company to sustain profitability in the quarters ahead.
“Product growth in the quarter was driven by increased shipments of our Bandwidth Engine devices, as we continued to support multiple customers, including our lead security appliance customer. To lay the groundwork for future opportunities, our applications and product development team continues to work on additional derivatives of our Bandwidth Engine and PSE product families, such as the recently-announced BE3 device that supports industrial-temperature grade applications. Also, during the quarter, we further expanded our design-win base by securing a significant win with a major new customer in the application delivery networking space, further validating the Company as a viable supplier to potential new design-win customers and partners. Moreover, we continue to broaden the reach of our Bandwidth Engine products and are seeing increased opportunities for additional security, networking, compute and video applications.”
Mr. Perham concluded, “In summary, we are shipping products to a solid and modestly expanding base of customers, which we continue to believe will deliver the consistent revenue stream necessary to support our revenue growth objectives for 2018. I am pleased with the progress we have made, and believe this quarter represents a key validation point regarding the viability of the Company and our commitment to achieving success for all of our stakeholders.”
Business Outlook for Second Quarter of 2018
The Company expects total net revenue for the second quarter of 2018 to be in the range of $4.3 million to $4.5 million, with non-GAAP operating expenses in the range of $2.2 million to $2.4 million.
Financial Results Webcast / Conference Call
MoSys will host a conference call and webcast with investors today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss the first quarter 2018 financial results. Investors and other interested parties may access the call by dialing 1-855-779-0042 in the U.S. (or +1-631-485-4856 outside of the U.S.) and entering the pass code 9488317 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 three business days following the call at 1-855-859-2056 in the U.S. (or +1-404-537-3406 outside of the U.S.), pass code of 9488317.
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 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. The press release also makes reference to and reconciles GAAP net income (loss) and adjusted EBITDA, which the Company defines as GAAP net income (loss) before interest expense, income tax provision, depreciation and amortization, as well as stock-based compensation and intangible asset amortization charges. 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 reconciliations of these non-GAAP financial measures to the comparable GAAP results, which are provided in tables 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 May 10, 2018 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, 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:
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.
About MoSys, Inc.
MoSys, Inc. (NASDAQ:MOSY) is a provider of semiconductor solutions that enable fast, intelligent data access for cloud networking, security, test and video systems. More information is available at www.mosys.com.
Bandwidth Engine and MoSys are registered trademarks of MoSys, Inc. in the US and/or other countries. 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 | ||||||||||
| March 31, | ||||||||||
| 2018 | 2017 | |||||||||
| Net Revenue | ||||||||||
| Product | $ | 3,704 | $ | 955 | ||||||
| Royalty and other | 504 | 257 | ||||||||
| Total net revenue | 4,208 | 1,212 | ||||||||
| Cost of Net Revenue | 1,601 | 602 | ||||||||
| Gross Profit | 2,607 | 610 | ||||||||
| Operating Expenses | ||||||||||
| Research and development | 1,051 | 3,485 | ||||||||
| Selling, general and administrative | 989 | 1,314 | ||||||||
| Total operating expenses | 2,040 | 4,799 | ||||||||
| Income (loss) from operations | 567 | (4,189 | ) | |||||||
| Other expense, net | (219 | ) | (216 | ) | ||||||
| Net income (loss) | $ | 348 | $ | (4,405 | ) | |||||
| Net income (loss) per share | ||||||||||
| Basic | $ | 0.04 | $ | (0.66 | ) | |||||
| Diluted | $ | 0.04 | $ | (0.66 | ) | |||||
| Shares used in computing net income (loss) per share | ||||||||||
| Basic | 8,130 | 6,647 | ||||||||
| Diluted | 8,347 | 6,647 | ||||||||
| MOSYS, INC. | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands, unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,501 | $ | 3,868 | ||||
| Accounts receivable, net | 1,505 | 1,681 | ||||||
| Inventories | 1,900 | 1,766 | ||||||
| Prepaid expenses and other | 1,255 | 1,347 | ||||||
| Total current assets | 8,161 | 8,662 | ||||||
| Property and equipment, net | 658 | 827 | ||||||
| Goodwill | 13,276 | 13,276 | ||||||
| Other | 346 | 374 | ||||||
| Total assets | $ | 22,441 | $ | 23,139 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 233 | $ | 170 | ||||
| Deferred revenue | 2,702 | 3,938 | ||||||
| Accrued expenses and other | 1,886 | 2,507 | ||||||
| Total current liabilities | 4,821 | 6,615 | ||||||
| Convertible notes payable | 9,635 | 9,160 | ||||||
| Other long-term liabilities | 18 | 18 | ||||||
| Total liabilities | 14,474 | 15,793 | ||||||
| Stockholders' equity | 7,967 | 7,346 | ||||||
| Total liabilities and stockholders’ equity | $ | 22,441 | $ | 23,139 | ||||
| MOSYS, INC. | ||||||||
| Reconciliation of GAAP to Non-GAAP Net Income (Loss) and Net Income (Loss) Per Share | ||||||||
| (In thousands, except per share amounts; unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2018 | 2017 | |||||||
| GAAP net income (loss) | $ | 348 | $ | (4,405 | ) | |||
| Stock-based compensation expense | ||||||||
| - | Research and development | 6 | 109 | |||||
| - | Selling, general and administrative | 88 | 76 | |||||
| Total stock-based compensation expense | 94 | 185 | ||||||
| Amortization of intangible assets | 27 | 28 | ||||||
| Non-GAAP net income (loss) | $ | 469 | $ | (4,192 | ) | |||
| GAAP net income (loss) per share, basic | $ | 0.04 | $ | (0.66 | ) | |||
| Reconciling items | ||||||||
| - | Stock-based compensation expense | 0.01 | 0.03 | |||||
| - | Amortization of intangible assets | 0.01 | - | |||||
| Non-GAAP net income (loss) per share, basic | $ | 0.06 | $ | (0.63 | ) | |||
| GAAP net income (loss) per share, diluted | $ | 0.04 | $ | (0.66 | ) | |||
| Reconciling items | ||||||||
| - | Stock-based compensation expense | 0.01 | 0.03 | |||||
| - | Amortization of intangible assets | 0.01 | - | |||||
| Non-GAAP net income (loss) per share, diluted | $ | 0.06 | $ | (0.63 | ) | |||
| Shares used in computing non-GAAP net income (loss) per share | ||||||||
| Basic | 8,130 | 6,647 | ||||||
| Diluted | 8,347 | 6,647 | ||||||
| MOSYS, INC. | |||||||||
| Reconciliation of GAAP and Non-GAAP Financial Information | |||||||||
| (In thousands; unaudited) | |||||||||
| Three Months Ended | |||||||||
| March 31, | |||||||||
| 2018 | 2017 | ||||||||
| Reconciliation of GAAP net income (loss) and adjusted EBITDA | |||||||||
| GAAP net income (loss) | $ | 348 | $ | (4,405 | ) | ||||
| Stock-based compensation expense | 94 | 185 | |||||||
| Restructuring and impairment charges | - | - | |||||||
| Amortization of intangible assets | 27 | 28 | |||||||
| Non-GAAP net income (loss) | 469 | (4,192 | ) | ||||||
| EBITDA adjustments: | |||||||||
| Depreciation | 169 | 196 | |||||||
| Interest expense | 221 | 224 | |||||||
| Provision for income taxes | 1 | 5 | |||||||
| Adjusted EBITDA | $ | 858 | $ | (3,777 | ) | ||||
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