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NETLIST INC (NLST)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue $41.71M, up 44% QoQ (+$12.7M) and 13% YoY; GAAP diluted EPS was -$0.02. Operating expenses fell 31% QoQ and 52% YoY, reflecting lower IP legal spend .
  • Revenue materially beat S&P Global consensus $30.0M by $11.71M; EPS matched -$0.02. Bold beat on revenue; estimates were thin (1 contributing estimate)* [GetEstimates].
  • Management cited “healthy demand for DDR5 memory modules for AI and data centers” as the revenue driver; gross profit rose to $1.4M from $0.8M YoY .
  • Legal milestones and financing strengthened liquidity: court order finalizing the $445M Micron damages award; $12.0M registered offering priced at $0.70 per share/warrant with ~$11.3M net proceeds .

What Went Well and What Went Wrong

What Went Well

  • Demand-led top-line acceleration: “Second quarter revenue improvement was driven by healthy demand for DDR5 memory modules for AI and data centers” (CEO C.K. Hong) .
  • Expense discipline: Total OpEx fell to $7.64M from $11.07M in Q1 and $15.85M YoY, largely due to lower IP legal fees .
  • Legal progress supporting IP strategy: “secured an order finalizing the district court’s $445 million damages award against Micron” and filed new actions regarding HBM and DDR5 patents .

What Went Wrong

  • Profitability still negative: Net loss improved but remained -$6.08M; gross margin was 3.34%, limiting operating leverage .
  • Balance sheet constraints: Working capital deficit (-$8.2M) and stockholders’ deficit (-$7.0M) at quarter-end .
  • Industry/tariff uncertainty persists, with management noting supply chain disruptions and price changes tied to evolving tariff regimes (from prior-quarter call context) .

Financial Results

Income Statement Summary (USD Millions unless noted)

MetricQ4 2024Q1 2025Q2 2025
Revenue$34.28 $28.98 $41.71
Gross Profit$0.25 $1.30 $1.39
Total Operating Expenses$13.37 $11.07 $7.64
Operating Income (Loss)-$13.12 -$9.77 -$6.25
Net Income (Loss)-$12.71 -$9.49 -$6.08
Diluted EPS-$0.05 -$0.03 -$0.02

Margin Profile

MetricQ4 2024Q1 2025Q2 2025
Gross Margin %0.7% (computed from )4.49%*3.34%*
EBIT Margin %—-9.46%*-6.63%*
Net Income Margin %—-32.74%*-14.57%*

Values marked with * retrieved from S&P Global.

Operating Expense Breakdown (USD Millions)

MetricQ4 2024Q1 2025Q2 2025
R&D$1.08 $0.89 $0.83
IP Legal Fees$9.56 $7.03 $3.48
SG&A$2.74 $3.15 $3.33
Stock-Based Comp (Total)$0.80 $0.97 $1.01

Balance Sheet KPIs (Quarter-End)

MetricQ4 2024Q1 2025Q2 2025
Cash & Equivalents$22.51 $14.43 $18.44
Restricted Cash$12.10 $11.15 $10.60
Inventories$2.74 $2.25 $8.78
Working Capital Deficit-$7.30 -$15.00 -$8.20
Stockholders’ Deficit-$6.05 -$13.67 -$6.96

Estimate Comparison (Q2 2025)

MetricActualConsensusSurprise
Revenue$41.71M $30.00M*+$11.71M (Beat)*
Primary EPS-$0.02 -$0.02*$0.00 (In-line)*

Values marked with * retrieved from S&P Global.

YoY References (Q2)

MetricQ2 2024Q2 2025YoY Change
Revenue$36.84M $41.71M +13.2%
Gross Profit$0.77M $1.39M +80%
Diluted EPS-$0.06 -$0.02 +$0.04

Guidance Changes

Netlist does not formally guide. CFO indicated on Q1 call that “we currently expect second quarter revenue to be similar to the first quarter of 2025” (informal commentary); actual Q2 revenue was substantially higher.

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2025“Similar to Q1” (Q1 revenue $29.0M) No formal guidance; actual printed $41.71M Raised vs informal view
OpEx / IP LegalFY 2025Expect reductions in legal costs in 2025 Not formally updated; Q2 IP legal fees $3.48M Trending lower vs Q1
Liquidity2025$10M WC line; ~$74M equity line availability ~$11.3M net proceeds from June offering Strengthened liquidity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI/Technology (HBM, DDR5, MRDIMM)Q1: Positioned for HBM/DDRx; MRDIMM sampling; DDR5 adoption for AI servers AI/data center DDR5 demand drove revenue; filed new HBM/DDRx IP actions Strengthening AI memory narrative
Supply Chain/TariffsQ1: Tariff-related disruptions; pricing volatility; exemptions evolving No new tariff update in press release; demand strong in AI/data center Uncertain but less central in Q2 narrative
Regulatory/LegalQ4: Damages awards vs Samsung/Micron ($866M cumulative) Court order finalizing $445M Micron award; new actions vs Samsung/Micron Progress toward monetization
Product Performance (DDR4/DDR5)Q1: Price increases, DDR5 growth; MRDIMM adoption expectations Custom DDR4 ramp and DDR5 demand noted in external call summaries Mixed: DDR4 tight; DDR5 growth
Liquidity/FinancingQ1: Lines of credit, cash cycle improvements $12.0M registered offering priced at $0.70, ~$11.3M net Liquidity bolstered

Management Commentary

  • “Second quarter revenue improvement was driven by healthy demand for DDR5 memory modules for AI and data centers. We continue to advance legal efforts to protect our intellectual property... secured an order finalizing the district court’s $445 million damages award against Micron.” — C.K. Hong, CEO .
  • Q1 call (context on trajectory): “We currently expect second quarter revenue to be similar to the first quarter of 2025... Operating expense... declined 44% compared to the prior year's quarter, driven mainly by reductions in IP legal fees.” — Gail M. Sasaki, CFO .

Q&A Highlights

  • Appeals timeline and legal resolution expectations: Management reiterated multi-case appellate pipeline timing and low likelihood of Supreme Court review, targeting oral arguments across consolidated appeals into 2026 .
  • Market dynamics: Low double-digit memory price increases in April; robust HBM and DDR5 demand led by hyperscalers; MRDIMM expected to be 10–20% of server memory in coming years, with AMD/Intel adoption .
  • External transcript summaries for Q2 emphasized DDR4/DDR5 demand, legal actions, and liquidity updates .

Estimates Context

  • Q2 2025 results vs S&P Global consensus: Revenue $41.71M vs $30.00M (Beat); EPS -$0.02 vs -$0.02 (In-line). Thin coverage (one estimate), but the magnitude of the revenue beat is likely to prompt upward adjustments to near-term revenue expectations if demand trends persist.* [GetEstimates]
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue beat and sharp OpEx reduction are the core positives; the combination drove improved operating loss QoQ despite modest gross margin .
  • AI-led DDR5 demand is a tangible driver; continued IP enforcement around HBM/DDRx provides optionality for licensing/settlements .
  • Legal progress (Micron $445M order finalization) is a potential medium-term catalyst; timing remains subject to appeals but directionally constructive .
  • Balance sheet constraints eased via June financing (~$11.3M net); still watch working capital and inventory build ($8.78M) for cash cycle impacts .
  • Near-term trading: Narrative likely sensitive to additional legal milestones and AI server memory demand signals; revenue variability possible given limited formal guidance .
  • Medium-term thesis: Execution on MRDIMM launch/adoption and DDR5 mix shift can expand margins; sustained reductions in legal fees could further improve P&L trajectory .
  • Risk monitor: Tariff regime changes, DRAM supply/pricing, and appellate timelines remain key uncertainties .