Peraso Inc (PRSO) 2009 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. We are now ready to begin the MoSys First Quarter 2009 Financial Results Conference Call. I will now turn the call over to Beverly Twing of Shelton Group Investor Relations.

Thank you, Michelle. Joining me on today's call is Len Perham, President and CEO, and Jim Sullivan, CFO of MoSys. By now, everyone should have received the press release. However, if you haven't, it is available on the MoSys website at www.mosys.com.

Before we begin today's discussion of the first quarter financial results, I would like to remind everyone that 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 MoSys' technologies, benefits and performance expected from use of 1T-SRAM and 1T-FLASH, licensees of 1T-SRAM technologies and their strategy, the development and production of products that use MoSys' licensed technology, license fees and royalties attributable to 1T-SRAM and 1T-FLASH, the Company's anticipated or prospective financial performance, and the timing and execution of restructuring plans and related cost savings.

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 materially from any forward-looking statements made during this call, are contained in the Company's most recent annual report on Forms 10-K, filed with the Securities and Exchange Commission, in particular in the section titled "Risk Factors," and in other reports that the Company files from time to time with the Securities and Exchange Commission. MoSys undertakes no obligation to publicly update 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.

Thank you for your attention. I would now like to turn the call over to Len Perham, Chief Executive Officer of MoSys. Go ahead, Len.

Thank you, Bev. Good afternoon, everyone, and thank you for joining us today. I'm going to make a few short remarks, then turn it over to Jim for a detailed financial report. And after that we will open up the session for a question-and-answer period.

Today, I want to focus my opening comments on just three key points. The first point, the macroeconomic environment. The macroeconomic environment continues to be challenging. During quarter one, we experienced some push outs and some cancelled projects that negatively impacted our results. Jim will take you through those details. I continue to believe the environment is going to remain challenging throughout 2009 and we have factored that scenario into our going forward plans.

Second, growth initiatives. Despite the challenging environment, we do expect a recovery and we will continue to invest in the key initiatives that will help bring significant growth and value to MoSys in the future. I continue to believe that our differentiated 1T-SRAM and 1T-FLASH technologies provide substantial opportunity to drive both growth and value here at MoSys.

In Flash, we established the company's first business unit and hired a seasoned executive, Thomas Liao, to be General Manager and leader for all aspects of our Flash business. Thomas has a Ph.D. in Physics and an MBA from Columbia University and nearly 30 years of experience in the semiconductor industry. He's held leadership positions at TI, Fairchild, and Mitsubishi. He was President and CEO of NexFlash, a flash memory device manufacturer, where he established NexFlash as a leader and pioneer in the serial flash field.

As I've described on previous calls, our 1T-FLASH is a new technology that shows great promise. And as you might expect, the initial barriers to entry for any new technology are a bit steep. We have decided to establish a dedicated business unit to bring this new technology to market. This intensified focus should allow us to move more swiftly on 1T-FLASH initiatives. Thomas' experience both in management and the flash business, along with our new dedicated business unit structure, will allow us to pursue this opportunity in the most efficient and effective way.

In the 1T-SRAM marketplace, as we study the various market opportunities it becomes more and more clear that the strengths and advantages of our 1T-SRAM IP will allow us to substantially increase the total available market that can be served by 1T-SRAM-based solutions. 1T-SRAM has had its greatest success in graphics applications or what can be called pixel processing markets. Specifically, in gaming applications like the Nintendo Wii or in display driver frame buffers for the mobile handheld marketplace.

Over the past few quarters we've been exploring other opportunities for our 1T-SRAM. Many of you heard me speak about our ideas for a next generation family of serial memory solutions. That has led us to what we believe will be a very large opportunity for 1T-SRAMs in the networking market. Fundamentally, the 1T-SRAM memory can enable networking applications to meet the challenges resulting from explosive growth in what is called packet processing.

There are significantly more packets of data being moved throughout the network today, which is being driven by the growth in data and rapid rise in streaming video moving across the Internet, and of course, the emerging cloud computing applications as well. In addition, networking systems need to deal with the packets in a much more intelligent way to recognize the differences between, for example, video and data. We've spent a significant amount of time meeting with a number of leading networking companies in the past few months and have confirmed that as a result of this explosion in packet processing they require a number of key capabilities that perfectly align with the features and competitive advantages of our 1T-SRAM technology. They need significantly higher densities of SRAM. Our advantage of 3x of density in the same area as 6T-based memories allows us to provide a very compelling cost advantage to this market.

Additionally, networking companies need increasingly higher access rates to the memory. Our core 1T-SRAM offers the advantages of very high speed and low latency random access. It provides a compelling performance advantage that enables networking applications to deal with the rising bandwidth that they face in today's world. These networking applications require a very highly reliable solution. MoSys believes our 1T-SRAM is an ideal answer to the customers' aggressive pursuit of ever improving quality and reliability, while traditional 6T-SRAM solutions struggle to scale in light of the soft error issues.

Finally, they are very concerned with power, both in managing the need for power with increased performance and bandwidth, and also with a drive for increasing green power efficiency in future systems. 1T-SRAM consumes half the power of a 6T-based solution. We see the opportunity for application-specific solutions targeting the networking market as a very big opportunity for MoSys. We've made very good progress in these past few months in validating the opportunity and putting together our plans to exploit it. You'll be hearing a lot more from us on this in the coming months.

As you can see, we've sharpened our focus on both 1T-FLASH by establishing a dedicated business unit and in 1T-SRAM by launching a major new initiative into the networking applications arena. In addition to these organic growth opportunities, we continue to explore synergistic opportunities that could accretively accelerate our strategic roadmap.

The third issue for today, profitability and costs. While I am very committed to investing in our growth initiatives, I'm equally committed to getting the company to profitability. Given the challenging macroeconomic environment, I have increased our focus on looking at costs across all areas of the company. During quarter one, we took significant cost reduction actions. We completed the shutdown of our analog mixed signal product lines, which we expect to result in an annualized cost savings of approximately $5.5 million. We also restructured our sales and marketing organization to improve both efficiency and effectiveness. We expect this to add additional savings of approximately $600,000 throughout this year.

In addition to the actions already taken, we are also exploring additional restructuring initiatives to further reduce costs and to lead us to our goal of profitability. We're going to provide you more details on this work and our progress in our next call.

Let me now turn the call over to Jim for details on the financials. Jim?

Thank you, Len, and good afternoon, everyone. During the course of my comments, I will make several references to non-GAAP numbers. Unless otherwise indicated, each reference will be to an amount that excludes stock-based compensation expense, intangible asset amortization, and restructuring and asset impairment charges. These non-GAAP financial measures and a reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related current report on Form 8-K, which was filed with the Securities and Exchange Commission today and can be found at the Investor Relations section of our website.

With regard to the results for the first quarter, total revenue for the first quarter of 2009 was $2.6 million, compared with $4 million for the fourth quarter of 2008 and $2.8 million for the first quarter of 2008. License revenue for the first quarter of 2009 was $524,000, compared with $859,000 for the previous quarter and $432,000 in the first quarter a year ago. The sequential decrease in license revenue is primarily attributable to the continued uncertainty in the macroeconomic environment, which has caused customers to cancel or delay projects.

On a year-over-year basis, first quarter license revenue increased 21%, primarily due to an increase in licensing of 1T-SRAM classic memory macros. These macros require no engineering services. License revenue for the first quarter was recognized from 15 customers, compared with 17 license customers in the previous quarter. Royalty revenue at the first quarter was $2 million, compared to $3.1 million for the previous quarter and $2.4 million for the first quarter of 2008. The decrease in royalty revenue was primarily attributable to our two largest royalty paying licensees.

During the first quarter of 2009, a major IDM licensee began transitioning its system-on-chip, or SOC, using a popular gaming console to a more advanced process node. Since the fourth quarter of 2006, this IDM licensee has been reporting and paying royalties to us on a current quarter basis. For the SOC at the more advanced process node, the licensee reports and pays us royalties a quarter in arrears as all of our other royalty paying licensees do. The delay in royalty revenue recognition is an accounting change as we expect the licensee will complete this transition in the third quarter of 2009 subject to--and subject to their shipment volumes, we anticipate a significant increase in royalty revenue attributable to them in the third quarter.

We also experienced a decline in royalty revenue from a major foundry licensee due to a reduction in volume as customers reduced inventory levels. Our first quarter 2009 royalty revenue was recognized from 16 customers, compared with 18 customers in the previous quarter.

On a GAAP basis, gross margin was 88% for the first quarter of 2009, compared with 84% for the previous quarter, and 83% for the same quarter a year ago. The gross margin improvement in the first quarter of 2009 was primarily due to a higher percentage of revenue recognized from classic macros. These classic macros require no engineering services resulting in lower cost of revenue.

In terms of our operating expenses in the first quarter, research and development expenses were $3.8 million, down from $4 million in the fourth quarter of 2008 and $4.1 million in the year ago quarter. The sequential decrease in R&D expenses was primarily due to the elimination of costs associated with the analog mixed signal product lines. Research and development expenses in the first quarter of 2009 included approximately $400,000 of expenses related to these analog mixed signal product lines. The decreases were partially offset by a reduction of expenses allocated to cost of revenues and an increase in payroll taxes.

Selling, general, and administrative expenses were $2.4 million for the first quarter of 2009, compared with $3 million in the previous quarter and $3.4 million in the first quarter of 2008. The sequential decrease in SG&A expenses was primarily due to a decrease in personnel related costs due to headcount reductions during the quarter, and reduced professional services fees, combined with lower stock-based compensation expense. SG&A expenses in the first quarter of 2009 included approximately $80,000 in severance expenses.

Total operating expenses for the first quarter decreased 34% sequentially to $6.5 million and include $447,000 in stock-based compensation expense and a restructuring charge of $275,000, which is related to the analog mixed signal product line exit. This compared with $9.8 million in operating expenses recorded for the fourth quarter of 2008, which included $1 million in stock-based compensation charges, $151,000 in intangible asset amortization charges, and $2.7 million of charges attributable to the analog mixed signal product line exit.

First quarter 2009 total operating expenses of $6.5 million compared with $7.7 million in the first quarter a year ago, representing a decrease of 16%. On a non-GAAP basis, total operating expenses for the first quarter of 2009 were $5.8 million, compared with $6 million for the fourth quarter of 2008 and $6.3 million for the first quarter of 2008. Non-operating income was substantially comprised of interest income and totaled approximately $203,000 in the first quarter of 2009, compared with $217,000 for the previous quarter and $1.1 million for the first quarter of 2008. The decreases in non-operating income reflect lower interest rates earned on our cash and investment balances combined with foreign exchange losses on cash balances and other assets denominated in foreign currencies.

On a GAAP basis, the net loss for the first quarter was $4.1 million, or $0.13 per share, and included the $275,000 in restructuring charges related to analog mixed signal product line exit. This compares with a net loss of $6.3 million, or $0.20 per share for the fourth quarter of 2008, which included approximately $2.7 million in restructuring charges.

On a non-GAAP basis, the net loss for the first quarter was $3.4 million, or $0.11 per share, and excluded stock-based compensation and restructuring charges totaling $722,000. This compares to the non-GAAP net loss of $2.4 million, or $0.08 per share in the previous quarter and the loss of $2.8 million, or $0.09 per share in the year ago period. Net loss per share on both a GAAP and non-GAAP basis for the first quarter of 2009 was computed using approximately 31.3 million weighted average shares outstanding.

Now, turning to the balance sheet. As of March 31, 2009, our cash, cash equivalents, and investments balance was $62 million, compared to $67.5 million at the end of the previous quarter. The decrease in the prior quarter included approximately $930,000 of stock repurchases, approximately $1 million of cash payments related to the analog mixed signal product line exit, and approximately $270,000 of expenditures from memory test system and other equipment.

During the first quarter, we repurchased approximately 429,000 shares of our stock at an average price per share of $2.17. As of March 31, we had repurchased a cumulative total of approximately 700,000 shares and have approximately $3.1 million available under the existing share repurchase program. While this plan is still in effect, we are not presently repurchasing shares.

As we previously discussed, our investments consist of money market funds, government agency and municipal debt securities, corporate notes, commercial paper, and student loan-backed auction rate securities. Under an agreement with UBS, we have the right to sell our auction rate securities, which have a $9.1 million face value, to UBS at par at any time beginning June 30, 2010.

Accounts receivable at the end of the first quarter totaled $445,000, compared to $688,000 as of December 31, 2008. The decrease in accounts receivable is primarily attributable to the timing of invoicing for a major IDM customer and reduced licensing revenue. As of March 31, our total headcount decreased to 98 employees from 191 employees on December 31, 2008. This decrease in headcount was primarily attributable to the closure of our analog mixed signal product line design centers in China and Romania and the elimination of certain SG&A positions in Sunnyvale and Asia.

This concludes my prepared remarks. At this time we would like to open the call for a question-and-answer session. Please clearly state your name and company affiliation prior to asking your question. Operator?

(Operator instructions.) You appear to have no questions at this time, sir.

Okay. Thank you, Michelle. In closing, achieving revenue growth and profitability while greatly reducing short-term cash burn remain primary goals here at the company. The current global economic environment has impacted the achievement of these goals in the short-term, but in response we have already and will continue to implement initiatives that will enable us to reduce our operating expenses, preserve cash, and strengthen our organizational structure. At the same time, we remain committed to investing in our future through new product development and other strategic initiatives to ensure we are well positioned for a return to growth as the market recovers.

As a reminder, we are presenting at the AEA Micro Cap Conference on May 5 in Monterey and the JMP Securities Conference on May 19 in San Francisco. We will be available for investor meetings at both events and if you're attending encourage you to put us on your conference schedule. In the meantime, feel free to contact us directly should you have any questions.

Thank you for joining us on today's call. I look forward to providing you additional updates on our progress over the coming months.

Thank you, Operator. You may now disconnect this call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.