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NI

NETLIST INC (NLST)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $29.0M and diluted EPS was ($0.03); revenue was above consensus while EPS was modestly below. Revenue beat S&P Global consensus of $27.0M by ~$2.0M while EPS missed consensus of ($0.02) by $0.01. Management expects Q2 revenue to be similar to Q1. Values retrieved from S&P Global.*
  • Gross profit improved to $1.3M vs $0.7M in Q1 2024, and operating expenses fell to $11.1M (press release), reflecting lower IP legal fees; CFO cited a larger YoY OpEx decline (~44%).
  • Tariff uncertainty disrupted pricing and shipments in April, but most sales ship outside the U.S.; management flagged potential semiconductor tariff schemes ahead and low double-digit April price increases.
  • Liquidity remained adequate: cash and equivalents $14.4M, restricted cash $11.2M (total $25.6M), with a $10M revolver and ~$74M available on an equity line; working capital deficit widened to ($15.0M).

What Went Well and What Went Wrong

What Went Well

  • Revenue outperformed consensus and gross profit expanded YoY, with Q1 gross profit at $1.3M vs $0.7M last year; “First quarter results were in line with our expectations.” *
  • Operating expenses declined meaningfully (press release: down 39% YoY to $11.1M; CFO: ~44% YoY), driven mainly by lower IP legal fees; management expects further reductions in 2025.
  • Strategic product pipeline: sampling high-capacity MRDIMM for AI servers; management believes Netlist is “well-positioned to capitalize” on HBM and DDR5 demand for AI.

What Went Wrong

  • Revenue fell YoY and sequentially (Q1 2025 $29.0M vs Q1 2024 $35.8M and Q4 2024 $34.3M), reflecting short-term consumer demand softness and tariff-related disruptions.
  • EPS missed consensus by $0.01 and net loss remained sizable at ($9.5M); working capital deficit widened to ($15.0M). Values retrieved from S&P Global.*
  • Operational friction from tariff uncertainty: memory manufacturers withheld pricing, some OEMs paused shipments into the U.S., creating supply-chain noise despite exemptions and external demand pockets.

Financial Results

Revenue and EPS vs prior periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$40.2 $34.3 $29.0
Diluted EPS ($USD)($0.04) ($0.05) ($0.03)
Gross Profit ($USD Millions)$1.1 $0.3 $1.3
Operating Loss ($USD Millions)($9.7) ($13.1) ($9.8)

Margins

MetricQ3 2024Q4 2024Q1 2025
Gross Profit Margin %2.84%*0.74%*4.49%*
EBIT Margin %(10.72%)*(10.39%)*(9.46%)*
Net Income Margin %(23.40%)*(37.09%)*(32.74%)*

Values retrieved from S&P Global.*

Balance sheet and KPIs

MetricQ3 2024Q4 2024Q1 2025
Cash and Equivalents ($USD Millions)$17.2 $22.5 $14.4
Restricted Cash ($USD Millions)$12.6 $12.1 $11.2
Total Cash + Restricted ($USD Millions)$29.8 $34.6 $25.6
Working Capital Deficit ($USD Millions)($9.7) ($7.3) ($15.0)
Stock-based Compensation (Quarter, $USD Millions)$1.13 $0.80 $0.97
Operational KPIs (YoY improvement)Days in inventory +32 days; cash cycle +54 days (Q1)

Performance vs estimates

MetricPeriodConsensusActualSurprise
Revenue ($USD Millions)Q1 2025$27.0*$29.0 +$2.0M (beat)*
EPS ($USD)Q1 2025($0.02)*($0.03) ($0.01) (miss)*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025No formal numerical guidance (Q4 call said Q1 likely “moderately down” QoQ) “Q2 revenue to be similar to Q1 2025” New qualitative outlook (maintained conservative stance)
Legal costs (OpEx component)FY 2025Expect further reductions (Q4 2024) Expect further reductions (Q1 2025) Maintained
Operational KPIsFY 2025Focus on cash cycle improvements Continued improvements: days in inventory +32 days; cash cycle +54 days YoY (Q1) Improved
Formal guidance policyOngoing“We do not formally guide” “We do not formally guide” Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
AI memory demand (HBM, DDR5)Highlighted explosive growth; patents cover HBM/DDRx; DDR5 and HBM foundational to AI AI drive continues; strong HBM demand; DDR5 growth; Netlist to capitalize via IP and products Consistently positive; secular tailwind
Tariffs / supply chainNot a focus previouslyApril pricing withheld; U.S. shipments paused; memory/semis exempt currently; possible new semiconductor tariffs; low double-digit April price increases New headwind; near-term uncertainty
New products (MRDIMM, Lightning, CXL NVDIMM)Lightning launched; CXL NV opportunity; MRDIMM introduced MRDIMM sampling; adoption expected to start late-2025 with 10–20% server memory share; Lightning seeing early revenues Building toward commercialization
Regulatory/legalMultiple wins; damages $303M + $118M Samsung; $445M Micron; appeals timelines into 2025–2026 Final judgment in breach case; post-trial motions then appeal; appeals advancing; consolidated IPR appeals expected 2026 Progressing in appellate phase
R&D executionPortfolio growth; CXL NVDIMM sampling; Lightning performance gains Continued sampling; focus on AI server memory modules and persistent memory solutions Steady execution

Management Commentary

  • “The memory market remains poised for significant growth driven by the industry’s transition to HBM and DDR5 memory for AI. Netlist is well-positioned to capitalize on this through new product development and its intellectual property portfolio.” — CEO C.K. Hong (press release)
  • “We have seen some price increases in April and would expect additional adjustments as tariff impacts the supply chain… the overall memory industry is expected to grow significantly over the next few years, mainly driven by AI.” — CEO (call)
  • “We currently expect second quarter revenue to be similar to the first quarter of 2025… Operating expense… declined [~44%]… driven mainly by reductions in IP legal fees.” — CFO (call)
  • “We’ve recently started to sample select customers with high-capacity, high-performance MRDIMM products for the AI memory market.” — CEO (call)

Q&A Highlights

  • Litigation timeline clarity: Post-trial motions ~90 days after April 8 final judgment; then Samsung likely appeals (6–12 months); management views reversal risk as low and Supreme Court review as unlikely.
  • Micron and Samsung appellate paths: Multiple cases moving through Federal Circuit; consolidated appeals expected; finality likely at Federal Circuit.
  • Pricing/tariffs: Reported low double-digit memory price increases in April; potential semiconductor-specific tariffs; demand soft in consumer PCs but AI server demand robust.
  • MRDIMM adoption: Expected to reach 10–20% of server memory market in coming years; likely adoption in AMD and Intel ecosystems; NVIDIA AI servers less likely to use MRDIMM.

Estimates Context

  • Q1 2025: Revenue beat and EPS miss versus S&P Global consensus; see table above. Values retrieved from S&P Global.*
  • Q2 2025: Consensus revenue $30.0M and EPS ($0.02) are broadly consistent with management’s qualitative view that Q2 revenue will be similar to Q1; near-term estimate changes likely modest unless tariff developments alter shipment timing. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term setup: Revenue in Q2 likely flat sequentially amid tariff uncertainty; watch for price and shipment normalization and any U.S. semiconductor tariff actions.
  • Legal overhang moving toward resolution: Appeals advancing; outcomes are key catalysts for IP monetization and potential balance sheet transformation.
  • Product optionality: MRDIMM and Lightning provide exposure to AI server memory performance; sampling and expected adoption late-2025 offer medium-term growth levers.
  • Cost discipline: IP legal fees trending lower as cases enter appellate phase, supporting improved OpEx profile and operating leverage if revenue stabilizes.
  • Liquidity adequate but working capital tight: $25.6M total cash/restricted and credit facilities provide flexibility; monitor working capital deficit and inventory turns.
  • Estimate dynamics: Given Q1 beat on revenue and similar Q2 revenue outlook, focus shifts to margins and OpEx trajectory; limited EPS miss suggests small revisions. Values retrieved from S&P Global.*
  • Narrative drivers: AI demand (HBM/DDRx), tariff policy, and appellate milestones will likely drive stock reaction; incremental product wins and licensing developments are upside catalysts.

Notes: Some margins reported above are sourced from S&P Global and marked with an asterisk. Values retrieved from S&P Global.*