Peraso Inc (PRSO) 2005 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the first quarter 2005 Monolithic System Technology Incorporated earnings conference call.

My name is Derek and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference.

[Operator Instructions]

I would now like to turn the presentation over to your host for today's call, Ms. Beverly Twing of Shelton, the Investor Relations Firm on record for MoSys. Please proceed.

Thank you, Derek. By now everyone should have received our press release. However if you haven't, it's available on the MoSys website at www.mosys.com.

Before we begin the discussion of the first quarter's earnings, I would like to acquaint you with our forward-looking statements.

The discussion during this conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which include without limitation statements about the market for the MoSys technologies, benefits and performance expected from use of the 1TS-RAM technologies, licensees of 1TS-RAM technologies and their strategy, the development and production of products that use MoSys' licensed technology, license fees and royalties attributable to 1TS-RAM technologies, and the Company's anticipated or prospective financial performance.

Any forward-looking statements made during this call are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Additional information concerning factors that could cause actual results to differ material from any forward-looking statements made during this call are contained in the Company's most recent Annual Report on Form 10-K, filed with the Securities & Exchange Commission. In particular, in the section entitled 'risk factors' in the Form 10-K, and in other reports that the Company files from time to time with the Securities & Exchange Commission.

MoSys undertakes no obligation to publicly update any forward-looking statement for any reason except as required by law, even if new information becomes available, or other events occur in the future.

Thank you for your attention and I would now like to turn the call over to Mark Voll, Interim CEO and Chief Financial Officer of MoSys. Mark?

Good afternoon everyone, and welcome to the MoSys first quarter earnings conference call of 2005. I will begin the call with a brief summary of the financial results for the first quarter and provide our business outlook for the second quarter. I also will discuss recent business highlights and provide an overview of our overall business. Finally, I will conclude by answering any question you may have.

Today we reported our unaudited financial results for the first quarter ended March 31, 2005. Total net revenue in the first quarter was 2.7 million, increasing sequentially from 1.2 million in the fourth quarter of 2004, and decreasing from the 4.5 million in the first quarter of 2004.

During the quarter, licensing revenue was 1.2 million, royalty revenue was 1.5 million and product revenue was 4,000. Both licensing and royalty revenues increased sequentially.

Additionally, during the first quarter we recorded the second largest total booking value of new contracts in the company's history.

Licensing revenue in the first quarter was 1.2 million, a sequential increase over the $118,000 in the previous quarter, but a decrease from the $3 million in the first quarter of last year.

Licensing revenue was recognized from 14 different chip development projects this quarter, compared to 11 chip development projects last quarter. Six of the chip development projects were new this quarter.

Royalty revenue in the first quarter was 1.5 million compared to 1.1 million in the previous quarter, and 1.4 million in the first quarter of 2004. First quarter royalty revenue was earned from 14 different licensees, 4 of which were new this quarter.

We recognized royalty reports provided by licensees, which are typically received in the quarter following that in which the licensee has sold or manufactured products containing our 1TS-RAM technologies.

Product revenue was $4000 in the first quarter compared to 162,000 in the first quarter of last year. We continue to record product sales only from the remaining products in inventory.

Gross margin percentage in the first quarter was 83% of net revenue compared to 88% in the first quarter of 2004.

Operating expenses, including research and development, were 4.1 million in the first quarter. During the quarter, approximately $350,000 in operating expenses was attributable to expenses incurred in the UniRAM litigation and more than $400,000 in accounting expenses related to the audit of the 2004 financial statements and completion of our implementation of internal controls under section 404 of the Sarbanes-Oxley Act of 2002.

On April 5, 2005 we disclosed through an 8-K filing with the Securities and Exchange Commission the appointment of the [Video Sedman] as the company's new registered accounting firm, replacing the Company's former accounting firm, Ernst and Young.

This change was made strictly to reduce the amount of fees the company pays for audit services because, as we had disclosed in our recently filed proxy statement, audit and related fees for 2004 totaled $1.5 million.

Non-operating income including interest income totaled $513,000 for the quarter. The net loss for the quarter of 1.4 million or a loss of $0.04 per share compared to a loss of 2.4 million or $0.08 per share in the previous quarter, and a net loss of 521,000 or $0.02 per share in the same period last year. First quarter loss per share was computed using 30,442,000 shares.

Significant revenues from our licensees included NEC, which represented 23% of our total revenues for the quarter.

As for our guidance for the second quarter we anticipate total revenues were range from 3 to 3.5 million. This guidance is based on book business we currently have under contract going into the second quarter.

We would expect operating expenses will remain at 4 million in the second quarter, and that will include approximately $250,000 of non-recurring charges and approximately $250,000 of expenses relating to the UniRAM litigation matter.

Net cash used in operations was approximately $1 million in the first quarter. Cash, cash equivalents in both long and short-term investments totaled $86 million at the end of the quarter.

On March 31st, 2004, accounts receivable totaled $2.4 million. At quarter end, we had 71 employees of which 54 are engineers.

Also, during the quarter, we completed the move of our Korean design team to larger facilities to meet the increasing design requirements of our customers.

Additionally, we plan to move our U.S. operations to a larger facility in the latter part of the second quarter to provide us with space to further expand our operations.

While the new facility will better facilitate our business requirements, we will also be taking advantage of the current market conditions in Silicon Valley and reducing quarterly operating expenses by $100,000 per quarter beginning in the third quarter.

We continue to actively interview candidates for Chief Executive Officer. We have several candidates under consideration at this time, and are diligently exploring our options in order to select the most qualified individual to enhance our current management team and lead our company.

We are being very selective during this process, searching for an executive who not only has strong management and leadership experience, but who also has semiconductor intellectual property expertise and be synergistic with our existing team.

This past quarter has certainly been an active one in terms of new business opportunities for MoSys.

As I had mentioned earlier, we experienced the second largest quarterly total in terms of securing new contracts in the first quarter.

During the quarter, we announced that NEC Electronics will now use our 1T-SRAM embedded memory technologies on their advanced 90-nanometer process, and that the initial designs to be incorporated in SOCs will be used in Nintendo's next generation game console, code name "Revolution".

We are excited to be a participating member of the Nintendo team once again as Nintendo will roll out its successor game console to the Game Cube in mid-2006.

During the quarter, we also extended our technology license with Fujitsu to incorporate the 90-nanometer process node, We now have begun to implement development on porting our technology to Fujitsu's advanced 90-nanometer process, and will shortly complete the porting of our technology to Fujitsu's 0.13-micron process technology.

Fujitsu, the largest A6 supplier in Japan, will use MoSys's 1T -SRAM Q to provide high density embedded memory solutions to their SOC design customers in consumer applications including digital cameras and video camcorders.

We also announced that HudsonSoft, a leading manufacturer of game software and entertainment equipment in Japan, had successfully verified MoSys 1T-SRAM embedded memory technology using UMC's 150 nanometer process technology.

Currently, HudsonSoft video game controller is now in volume production using 1T-SRAM technology for its embedded memory.

We also announced during the quarter we had signed two new sales representative agreements. The first with First EDA, as an authorized representative for MoSys in the United Kingdom, and the second with FM COM Corporation, one of the most influential manufacturer's representatives in Korea.

The broadening of our sales capabilities will enhance our presence in additional geographic markets, thus providing more effective and efficient access to customers.

We will be participating later this quarter in the 42nd Annual Design Automation conference, which this year will be held June 13th through June 16th in Anaheim, California.

We expect to have many exciting opportunities to discuss with our customers at this conference.

In summary, we began 2005 with considerable momentum and we look forward to further improvements throughout the year for our business, remain confident that the need for high-density, low-power, reliable embedded memory solutions for SOCs will continue to increase as functionality of current and next-generation products continues to expand.

We are pleased with our first quarter results, improving customer attraction and look forward to the momentum from the first quarter to continue going forward.

Before I open the call for questions, I would like to reiterate that due to the confidential nature of our licensing agreement, we do not provide detailed information on specific projects or licensees. This is a contractual obligation that we must uphold in order preserve our relationships with our customers.

Aside from limits of this nature, we intend to disclose relevant information concerning our business and operating results, as we are able to do so. That concludes my prepared commends. I am now ready to take questions. When introducing yourself, first state your first and last name and your firm's name.

[Operator Instructions].

Your first question comes from Chris Chaney of Stanford Group. Please proceed.

Thank you very much, and good afternoon Mark, it looks like you guys had a nice increase over last quarter in terms of revenues. And I am just trying to look through your guidance for next quarter. Let me talk about first the current, the most recent quarter.

You had 14 total projects in the licensing and 14 licensees generating royalties, is that right?

That's correct, yes.

Okay so it's fair to see that I guess every single one of those licensees was generating royalty in the past quarter?

No, I would say there is not a correlation between the 14 that were -- we derived licensing revenue and the 14 that we derived royalty revenue from -- the different customers. In some cases that would be the same customers.

Okay. Then what I'm really getting at is, when we look at the guidance for next quarter of 3 to 3.5 million, would we expect to see a similar split between license and royalties as a percent of sales?

And then following that, the royalty I guess amount coming in next quarter, would you expect to see the number of licensees generating royalties increase or decrease next quarter?

I would say that we would expect that the increase in the revenue would come mostly from the licensing revenue. In fact, I would say entirely from the licensing revenue line. I wouldn't as of this moment expect that royalty revenue would be much greater than we had in Q1.

Okay. I mean without -- I know you guys are only giving one quarter's worth of guidance. But, when in the year would you expect to see the royalty number begin to move as a result of the strong licensing activity that you saw this past quarter? You said it was the second strongest licensing activity quarter ever in the company?

That's correct. I would expect to see -- the bookings that we had this quarter will have longer-term effect on the overall royalty revenues.

So, I wouldn't see an immediate effect from correlating this year or this past quarter's licensing bookings to royalty revenue later this year. I would probably see the benefits of the bookings this year and the royalties for next year.

Although we do see as far as royalty revenue is concerned for 2005, many of the projects that we have been waiting to get into production we finally see, are now going into production. These are design contracts in which we completed design back in 2003, 2004 time frame.

Okay. And I guess flowing down the income statement to the gross margin line, there was no specific guidance given for next quarter. But is there any reason why it should be significantly different from the past quarter?

No, we wouldn't expect it to be any different.

Okay, all right.

Typically we have been able to achieve gross margins in the 80% range.

Excellent. Okay. You had 71 employees at the end of the quarter. How did that change over the quarter and in what areas?

We have been hiring people, most notably in the sales and marketing area but in particular in the engineering group.

Okay. So that number is up from last quarter?

That's correct.

By how many?

I believe we had 65 employees at the end of Q4.

And is that hiring going to continue in the coming quarters?

Yes, it will.

Okay. All right, thanks

[Operator Instructions]. Sir, you have no further questions.

Thank you for your questions and your continued support of MoSys and for your participation in this call. We look forward to seeing many of you at the design automation conference in June. Thank you.

This concludes today's presentation. You may now disconnect. Thank you and good day.