SUNNYVALE, Calif.–(BUSINESS WIRE)–Feb. 9, 2009–
MoSys, Inc., (NASDAQ: MOSY), a leading provider of high-density
system-on-chip (SoC) memory intellectual property (IP), today reported
financial results for the fourth quarter and year ended December 31,
2008.

Recent Highlights

  • Reported total fourth quarter revenue of $4.0 million
  • Ended the year with cash and investments of $67.5 million
  • Announced plan to exit unprofitable Analog/Mixed-Signal product lines
    to lower operating costs

Management Commentary

Commenting on the results, Len Perham, MoSys’ President and Chief
Executive Officer, stated, “The continued decline in the global economic
environment has resulted in customer projects being delayed or pushed
out, which impacted our license revenue during the quarter. These
results were partially offset by an increase in royalties associated
with the Nintendo Wii game console and royalties generated by another
major OEM customer that licenses our 1T-SRAM embedded memory IP for
advanced mobile phone applications. During the fourth quarter, we signed
a new license with a mobile phone provider for use of our
application-specific DDI (display driver integrated circuit) memory IP
in their display driver subsystems. We ended the year with five customer
design wins for our DDI solution and brought up support at three
foundries. In addition, we made significant progress with our 1T-FLASH
program, as our lead customer moved into pre-production manufacturing
and expects to begin shipping production samples late first quarter of
2009 with a full production ramp later this year.”

During the fourth quarter, the Company announced a plan to exit its
unprofitable analog/mixed signal product lines. As part of this plan,
the Company will be reducing headcount by approximately 90 employees,
primarily located in China and Romania. The Company began executing this
plan in the fourth quarter and expects to substantially complete the
process in the first quarter of 2009. The Company expects to realize
annualized cost savings of approximately $5.5 million.

Looking forward, Mr. Perham concluded, “We believe the current weakness
in the global economic environment will extend throughout 2009.
Certainly, the first quarter will be impacted by the continued slowdown
in the consumer market segments beyond the typical seasonality
associated with that quarter. This environment has significantly limited
our near-term visibility, and we will continue our policy of not
providing specific financial guidance until further notice. While we
will be stringently managing our expenses, we will continue to
strategically invest in R&D in order to position the Company for future
growth.”

Fourth Quarter Results

Total net revenue for the fourth quarter of 2008 was $4.0 million,
compared with $4.1 million in the third quarter of 2008 and $2.9 million
for the fourth quarter of 2007.

Fourth quarter total revenue included licensing revenue of $859,000,
compared with $1.2 million in the third quarter of 2008 and $388,000 in
the fourth quarter of 2007. Royalty revenue for the fourth quarter was
$3.1 million, which included royalties associated with the Nintendo Wii
game console. This compares with royalty revenue of $2.9 million in the
previous quarter and $2.5 million in the fourth quarter of 2007.

Gross margin as determined in accordance with U.S. Generally Accepted
Accounting Principles (GAAP) was 83.8 percent, compared with 79.2
percent in the third quarter of 2008 and 71.5 percent in the fourth
quarter of 2007.

Total operating expenses on a GAAP basis for the fourth quarter of 2008
were $9.8 million, including approximately $2.7 million in restructuring
and asset impairment charges. This compares with $6.8 million in the
previous quarter and $7.7 million in the fourth quarter of 2007.

GAAP net loss for the quarter was $6.3 million, or ($0.20) per share,
including a restructuring charge of $1.3 million, an asset impairment
charge of $1.4 million, stock-based compensation expense of $1.0 million
and intangible asset amortization charges of $151,000. This compares
with a net loss of $3.2 million, or ($0.10) per share, for the third
quarter of 2008 and a net loss of $4.6 million, or ($0.14) per share,
for the fourth quarter of 2007.

The net loss on a non-GAAP basis for the fourth quarter was $2.4
million, or ($0.08) per share, excluding restructuring, asset
impairment, stock-based compensation and intangible asset amortization
charges. A reconciliation of GAAP to non-GAAP results is provided in the
financial 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 31.6 million shares.

Cash, cash equivalents and both long and short-term investments totaled
$67.5 million as of December 31, 2008, compared to $72.1 million as of
September 30, 2008. During the fourth quarter, the Company repurchased
approximately 275,000 shares of its common stock under its repurchase
program at a total cost of approximately $1.0 million.

Full Year 2008 Results

Total revenue for 2008 was $14.0 million, compared with $14.3 million in
fiscal 2007. Net loss for the year, in accordance with GAAP, was $18.4
million, or ($0.58) per share, compared with a net loss of $8.5 million,
or ($0.27) per share, in 2007. The non-GAAP net loss for fiscal 2008 was
$10.4 million, or ($0.33) per share, excluding a restructuring charge of
$1.3 million, an asset impairment charge of $1.4 million, stock-based
compensation charges of $4.6 million and approximately $742,000 in
intangible asset amortization charges. Non-GAAP net loss for 2007 was
$3.6 million, or ($0.11) per share, excluding stock-based compensation
charges of $3.8 million and $1.2 million in intangible asset
amortization and in-process research and development charges. Earnings
per share for 2008 were computed using approximately 31.7 million shares
on a GAAP and non-GAAP basis.

Fourth Quarter and Full Year 2008 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 fourth
quarter and full year results. Investors and other interested parties
may access the call by dialing 1-888-679-8033 in the U.S.
(617-213-4846 outside of the U.S.), and entering the pass code 14111930
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 https://dev-mosys-web-04-19.pantheonsite.io.
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 52745907.

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 and asset
impairment charges related to the Company’s exit from its
analog/mixed-signal product lines, 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 related design know-how from Atmel
Corporation and LDIC in 2008. 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
February 9, 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 and 1T-FLASH technologies,
the Company’s execution and results, improving operational efficiencies,
growth of the business and future business prospects and the estimated
restructuring charges and costs and cost savings, including the timing
of such savings, related to the restructuring plan.

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 and 1T-FLASH, 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, assumptions including the timing and execution of restructuring
plans and programs subject to local labor law requirements, including
consultation with appropriate works councils; assumptions related to
severance costs 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 intellectual property (IP) technologies for
advanced systems-on-chips (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’ 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 https://dev-mosys-web-04-19.pantheonsite.io.

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

MOSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts; unaudited)
           
Three Months Ended Twelve Months Ended
December 31, December 31,
  2008     2007     2008     2007  
 
Net Revenue
Licensing $ 859 $ 388 $ 3,156 $ 5,253
Royalty   3,101     2,511     10,870     9,081  
Total net revenue 3,960 2,899 14,026 14,334
 
Cost of Net Revenue
Licensing   642     825     2,800     2,737  
Total cost of net revenue 642 825 2,800 2,737
 
Gross Profit 3,318 2,074 11,226 11,597
 
Operating Expenses
Research and development 4,005 4,174 16,426 11,594
Selling, general and administrative 2,952 3,309 11,875 11,659
In-process research and development – – – 966
Amortization of intangible assets 151 197 742 394
Impairment of intangible assets 1,379 – 1,379 –
Restructuring charge   1,334     –     1,334     –  
Total operating expenses 9,821 7,680 31,756 24,613
 
Loss from operations (6,503 ) (5,606 ) (20,530 ) (13,016 )
 
Other income, net   217     1,015     2,243     4,520  
Loss before income taxes (6,286 ) (4,591 ) (18,287 ) (8,496 )
 
Benefit (provision) for income taxes   (21 )   8     (132 )   (25 )
 
Net loss $ (6,307 ) $ (4,583 ) $ (18,419 ) $ (8,521 )
 
Net loss per share
Basic and diluted ($0.20 ) ($0.14 ) ($0.58 ) ($0.27 )
 
Shares used in computing net loss per share
Basic and diluted 31,623 32,117 31,698 31,994
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 Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
 
GAAP net loss $ (6,307) $ (4,583) $ (18,419) $ (8,521)
Stock-based compensation expense
– Cost of net revenue 66 178 408 495
– Research and development 261 363 1,197 1,162
– Selling, general and administrative 673 651 2,972 2,109

Total stock-based compensation expense

1,000 1,192 4,577 3,766
 
In-process research and development – – – 966
Amortization of intangible assets 151 197 742 394
Impairment of intangible assets (1) 1,379 – 1,379 –
Restructuring charge (1) 1,334 – 1,334 –
 
Non-GAAP net loss $ (2,443) $ (3,194) $ (10,387) $ (3,395)
 
GAAP net loss per share ($0.20) ($0.14) ($0.58) ($0.27)
Reconciling items
– Stock-based compensation expense 0.03 0.04 0.15 0.12
– In-process research and development – – – 0.03
– Amortization of intangible assets 0.01 – 0.02 0.01
– Impairment of intangible assets (1) 0.04 – 0.04 –
– Restructuring charge (1) 0.04 – 0.04 –
 
Non-GAAP net loss per share: Basic and diluted ($0.08) ($0.10) ($0.33) ($0.11)
 
Shares used in computing non-GAAP net loss per share
Basic and diluted 31,623 32,117 31,698 31,994
 
(1) Charges related to the exit of the analog/mixed-signal product
lines
MOSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
       
December 31, December 31,
2008 2007
 
Assets
Current assets:
Cash, cash equivalents and investments $ 44,075 $ 64,961
Accounts receivable, net 688 895
Unbilled contract receivables 428 518
Prepaid expenses and other assets   2,158   2,393
Total current assets 47,349 68,767
 
Long-term investments 23,395 13,693
Property and equipment, net 958 1,396
Goodwill 12,326 12,326
Intangible assets, net – 2,166
Other assets   1,905   449
Total assets $ 85,933 $ 98,797
 
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 167 $ 146
Accrued expenses and other liabilities 2,235 2,158
Accrued restructuring liabilities 1,004 –
Deferred revenue   639   201
Total current liabilities 4,045 2,505
 
Stockholders’ equity 81,888 96,292
   
Total liabilities and stockholders’ equity $ 85,933 $ 98,797

Source: MoSys, Inc.

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