Netlist Q2 2025 Earnings Report

Netlist EPS Results

• Actual EPS: -$0.02
• Consensus EPS: -$0.02
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Netlist Revenue Results

• Actual Revenue: $41.71 million
• Expected Revenue: $30.00 million
• Beat/Miss: Beat by +$11.71 million
• YoY Revenue Growth: N/A

Netlist Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 12:00PM ET

Netlist (OTCMKTS:NLST) designs, manufactures, and markets memory subsystems for the server, high-performance computing, and communications markets in the United States and internationally. The company portfolio of proprietary technologies and design techniques, includes efficient planar design, alternative packaging techniques, and custom semiconductor logic, to deliver memory subsystems; and sells specialty memory modules and flash-based products for use in data center and industrial applications. It resells component products, including solid state drive (SSD), NAND flash, and dual inline memory module (DIMM) to storage customers, appliance customers, system builders, and cloud and datacenter customers; and sells component inventory to distributors and other users of memory integrated circuits. The company markets and sells its products through a direct sales force and a network of independent sales representatives. Netlist, Inc. was incorporated in 2000 and is headquartered in Irvine, California.

Netlist Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Netlist reported a 44% sequential increase in Q2 revenue to $41.7 million, reduced operating expenses by 52%, and ended the quarter with $29 million in cash and minimal debt, bolstering liquidity.
• Positive Sentiment: The shift to next-gen memory has created DDR4 supply tightness and price increases through year-end, while DDR5 demand remains stable, and Netlist is supporting customers with last-time-buy programs and high-performance module qualifications.
• Positive Sentiment: In IP litigation, Netlist secured a $445 million final judgment against Micron and concluded its breach-of-contract case with Samsung, affirming willful patent infringement by both competitors.
• Neutral Sentiment: Netlist filed new suits asserting three next-generation HBM and DDR5 patents against Samsung, Micron, and Avnet—targeting U.S. market revenues projected in the tens of billions—with trial set for March 2027.

Presentation

[Operator]

Good afternoon, and welcome to the Netlist Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, Please note this event is being recorded. I would now like to turn the conference over to Mike Smirjazi with The Plunkett Group. Please go ahead.

[Mike Smargiassi, Founding Partner at The Plunkett Group]

Thank you, Gary, and good day, everyone. Welcome to Netlist's second quarter twenty twenty five conference call. Leading today's call will be Chuck Hong, Chief Executive Officer of Netlist and Gail Sasaki, Chief Financial Officer. As a reminder, you can access the earnings release and a replay of today's call on the Investors section of the Netlist website at netlist.com. Before we start the call, I would note that today's presentation of Netlist results and the answers to questions may include forward looking statements, which are based on current expectations.

[Mike Smargiassi, Founding Partner at The Plunkett Group]

The actual results could differ materially from those projected in the forward looking statements because of the number of risks and uncertainties that are expressed in the call, annual and current SEC filings and the cautionary statements contained in today's press release. Netlist assumes no obligation to update forward looking statements. I will now turn the call over to Chuck.

[Chun Hong, President, CEO and Director at Netlist]

Thanks, Mike, and hello, everyone. Netlist had a productive second quarter as we continue to execute on our product and IP initiatives. Since the last call, we strengthened our cash position, ramped sales of custom DDR4 products, filed new legal actions against Samsung and Micron, secured a court order finalizing the $445,000,000 damages award against Micron and successfully concluded the breach of contract case against Samsung. Second quarter revenue increased 44% on a sequential quarterly basis, driven by healthy demand for DDR5 and DDR4 products. The DRAM market is going through a transition to next generation DDR5 modules used in AI servers and data centers.

[Chun Hong, President, CEO and Director at Netlist]

As the move to DDR5 accelerates, manufacturers are starting to phase out DDR4 with product allocations going primarily to their largest customers. This has led to limited DDR4 supply and significant price increases. Embedded industrial and medical customers whose products have long life cycles are being impacted by this as DDR4 goes end of life. Netlist is working proactively with customers in this market segment, those that rely on custom DDR4 modules designed by Netlist. We're providing last time buy programs that enable customers to support their required life cycles or redesign with newer memory technologies.

[Chun Hong, President, CEO and Director at Netlist]

For overclocked and low latency DDR5 server modules, we continue to qualify higher performance products with customers, so they can provide servers with the fastest memory solutions possible in high frequency trading simulation, HPC and AI applications. Now moving to intellectual property. During the past two years, Netlist has obtained three separate jury verdicts awarding combined total damages of million for the willful infringement of our patents by Samsung and Micron. Over the past several months, we've broadened our legal efforts, filing complaints in the U. S.

[Chun Hong, President, CEO and Director at Netlist]

District Court for the Eastern District of Texas against Samsung and Micron and their distributor Avnet. The three patents that Netlist is asserting in these four separate suits are new patents covering next generation HBM and DDR5 memory technologies. This includes the 87 patent entitled Memory Package Having Stacked Array Dies and Reduced Driver which covers HBM for current and future AI applications. Analysts currently project that U. S.

[Chun Hong, President, CEO and Director at Netlist]

HBM revenues to exceed $25,000,000,000 annually for each Samsung and Micron by 02/1931. The other patents include Netlist's seven thirty one, which reads on DDR5 DEMs with DFE, Decision Feedback Equalizer and ODTRTT circuits as well as the three sixty six patent, which reads on DDR5 DIMM with on module power management. According to analysts, U. S. DDR5 DIMM revenues will exceed $65,000,000,000 annually in 2029.

[Chun Hong, President, CEO and Director at Netlist]

The First Eastern District Of Texas jury trial in these cases is expected to begin in March 2027. In June, Netlist secured an order finalizing the $445,000,000 damages award against Micron. The court's memorandum opinion and order denying Micron's post trial motions combined with a final judgment entered in July 2024 bring this case to a close in the District Court. With these actions, the court has upheld the jury's verdict and damages award and confirmed that Micron willfully infringed Netlist's patented technologies. Micron has filed an appeal with the Federal Circuit.

[Chun Hong, President, CEO and Director at Netlist]

We expect the appellate process to take around eighteen months. In the breach of contract case against Samsung, earlier this week, the court issued an order denying Samsung's motion for a new trial, bringing this case to a successful conclusion for Netlist. Netlist has won this case three times, with each case confirming Samsung had breached the joint development and license agreement between the parties and that Samsung does not have a license to Netlist's patent portfolio. As the largest memory manufacturer in the world, Samsung faces significant exposure from its tens of billions of dollars in annual memory shipments into The U. S.

[Chun Hong, President, CEO and Director at Netlist]

After the jury verdict in March, Samsung filed a motion for a new trial asking the court to presume bias by three jurors based on their answers to questions during the jury selection process. This is not a new tactic. After the last trial in May 2024, Samsung had also sought a new trial by claiming jury bias. The court held an evidentiary hearing on July 30 for the jurors to explain their answers and allow Samsung and Netlist's attorneys to question them. After this evidentiary hearing, the court ruled that the jurors were not biased and deny Samsung's motion on August 4 with an order that is now available online.

[Chun Hong, President, CEO and Director at Netlist]

The order finally ends this District Court case. The deadline for Samsung to file a notice of appeal is September 4. In the District in the Eastern District Of Texas, one case against Samsung, where Netlist secured an order finalizing $3.00 $3,000,000 damages award in July 2024. The appeals process continues to advance at the Federal Circuit. The date has not been set for the appellate for the appeal hearing at this time, but we estimate the appeal hearing to take place sometime in the 2026.

[Chun Hong, President, CEO and Director at Netlist]

In the Eastern District Of Texas two case against Samsung, where Netlist was awarded $118,000,000 damages in November, we remain in post trial briefing phase. We expect the court to rule on these post trial motions in early twenty twenty six. Regarding IPRs, inter party re exams, in March, the Federal Circuit issued a judgment affirming the U. S. Patent Trial and Appeals Board's decision upholding the validity finding of Netlist's five twenty three patent.

[Chun Hong, President, CEO and Director at Netlist]

Samsung did not file an appeal with the Supreme Court and as a result, they can no longer contest the validity of the five twenty three patent. For Netlist's three fourteen and five zero six patents, we estimate that oral arguments for the IPR appeals will be heard by end of this year, with the remaining IPR appeals to be heard in 2026. Netlist is also following with great interest the recent changes at the Patent Office. In March, Acting Director, Cope Morgan Stewart issued a memorandum that changes how the PTAB will handle inter parties reviews and post grant review petitions. The change in the institution process affords the director the ability to exercise discretion to deny an IPR petition.

[Chun Hong, President, CEO and Director at Netlist]

This change provides patent owners with a clear and faster path to address PTAB review and is a welcome update to the process. Finally, in June, we announced the appointment of June Cho and Blake Welcher to the company's Board of Directors. June and Blake are both seasoned attorneys with expertise in product distribution, intellectual property and licensing. We are pleased to welcome them to the Board. Now I'll turn the call over to Gail for the financial review.

[Gail Sasaki, EVP & CFO at Netlist]

Thanks Chuck. For the quarter ended 06/28/2025, revenue was $41,700,000 an increase of 44% consecutively and by 13% year over year, reflecting the increasing demand from both our OEM and resale customers. While we do not formally guide, given the booking and shipping for the 2025 to date, and subject to the visibility we have today, we currently expect third quarter revenue to be similar to the 2025. Operating expense for the second quarter twenty twenty five declined 52% compared to the prior year's quarter, driven by reductions in IP legal fees and R and D. We currently expect reductions in legal costs in 2025 as we enter the final phase of litigation for current actions.

[Gail Sasaki, EVP & CFO at Netlist]

We ended the second quarter with cash and restricted cash of $29,000,000 compared to $25,600,000 at the end of the first quarter with minimal debt. In June, we raised $11,700,000 net through the registered direct offering, which included a $3,000,000 investment from Chuck, our CEO. With a 10,000,000 working capital line of credit and approximately $74,000,000 available on the equity line of credit, we continue to maintain significant financial flexibility and liquidity. As always, we manage the operational cash cycle very carefully with days sales outstanding improved by eleven days over last year and the overall cash cycle improved by twenty days over last year's Q2. Operator, we are now ready for questions.

[Operator]

We will now begin the question and answer session. Our first question comes from Suji Desilva with ROTH Capital. Please go ahead.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Hi, Chuck. Hi, Gail. So, Chuck, the DDR memory tightness as it's being end of life and the price firm pricing that you're seeing is that a condition that can persist for several quarters through the end of the year for you? Or do you think that tailwind abates as we go forward here?

[Chun Hong, President, CEO and Director at Netlist]

Yes, Suji. The tightness is in DDR4 specifically as the three major suppliers have announced end of life buy, so shipments kind of winding down at the end of this year. So we believe at least through the end of the year and into first half of next year, DDR4 will remain constrained. Supply will remain constrained. Therefore, prices will likely remain firm for the next few quarters.

[Chun Hong, President, CEO and Director at Netlist]

DDR5 is balanced supply and demand. So it's a fairly stable situation on DDR4 DDR5, sorry.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. That's helpful. And then some of the I'm trying to kind of fish through the existing verdicts you have versus the new patent cases you put in place for DDR5 and HBM related patents. Are the existing verdicts for DDR4, I wanted to clarify that. And then if that's the case, these new patents and the potential findings here, how would you size the damage think about sizing the damages relative to the nearly $1,000,000,000 of findings you've already had?

[Chun Hong, President, CEO and Director at Netlist]

The existing verdicts, the three verdicts that combined for $866,000,000 are for both DDR4 and DDR5. And and then the new patents that we've asserted in these four separate assertions against Micron and Samsung are for DDR5 DIMMs and DDR5 based HBMs. HBMs are all DDR5. Then to answer your question.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Yes, is. I'm just trying to say, so understanding with including HBM and other opportunities how would you size these new opportunities relative to what you've already secured as verdicts?

[Chun Hong, President, CEO and Director at Netlist]

Well, it's Mark. When we secured the original three verdicts HBM's market was relatively in its early stages. So the volumes were not as big. We have asserted the new HPM patent against Samsung and Micron and the new DDR5 patents against them, DDR5 DIMM patents. And the volumes for HPM has exploded since our earlier verdicts due to the growth of AI servers and that's been well documented.

[Chun Hong, President, CEO and Director at Netlist]

So the volumes are much, much larger and the dollar exposure is much larger, tens of billions for each of these suppliers annually. DDR5 volumes also have increased multiple fold since the original verdicts over the last couple of years.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

No, that helps Chuck in terms of color. And then lastly, on SOCAMM, SOCAMM, just that opportunity versus HPM, it's being seen as an alternative, whether you're similarly positioned with your patent patents across those two competing memory alternatives?

[Chun Hong, President, CEO and Director at Netlist]

Yes. So Suji, I think it's I think you're talking about MRDIMM. So SOCAMs are a specific type of memory module that is used by NVIDIA only using low power DDR5 DRAMs. Low power meaning the DRAMs that go into mobile phones and tablets. So we have certainly IP position in that product line.

[Chun Hong, President, CEO and Director at Netlist]

But the bigger product that's coming down the pipe are the MR DEMs. MR DEMs the highest capacity, highest speed. We focus on the high end niches. And MRDIMM is going to be the maximum capacity, maximum speed of any server memory module. And that has started to ship in small volumes.

[Chun Hong, President, CEO and Director at Netlist]

It may become MRDIMMs may become the bulk of the memory server memory DIMM market in the server space. So and that product utilizes a lot of our IP, including power management, rank multiplication and the MUX as well as the load reduction, the data buffers, all of those were inventions that we came up with over a decade ago and have patents on. So that's a market that we certainly aim to cover.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Very helpful Chuck. Thanks Chuck. Thanks Gail.

[Chun Hong, President, CEO and Director at Netlist]

Sure.

[Gail Sasaki, EVP & CFO at Netlist]

Thanks Suji.

[Operator]

This concludes our question and answer session and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Chun Hong, President, CEO and Director
• Gail Sasaki, EVP & CFO

Analysts

• Mike Smargiassi, Founding Partner at The Plunkett Group
• Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC