SANTA CLARA, Calif. — (BUSINESS WIRE) — November 4, 2014 — MoSys (NASDAQ: MOSY), a leader in semiconductor solutions that enable fast, intelligent data access for network and communications systems, today reported financial results for the third quarter ended September 30, 2014.

Third Quarter and Recent Highlights

• Secured new design wins for Bandwidth Engine® and LineSpeed™ ICs;
• Launched new LineSpeed 100G Low Power Retimer for optical modules and line cards;
• Demonstrated interoperability and performance capabilities of Bandwidth Engine ICs and LineSpeed extended-reach PHY products with leading industry players at ECOC 2014; and
• Ended the quarter with total cash and investments of $33.7 million.

Management Commentary

“The third quarter saw a slowdown in sales activity, consistent with what has been reported by various other suppliers to the telecommunications and networking markets,” commented Len Perham, MoSys’ president and chief executive officer. “Although customer engagements continued for us, it was slow going, and we did not close as many design wins as we expected. More recently, our design win activity has rebounded, and we anticipate that the fourth quarter will be considerably more robust. We remain cautiously optimistic that we can still get close to doubling design wins year over year.

“During the quarter, we introduced our new LineSpeed 100G low power, full-duplex retimer IC, which has generated strong customer interest and is being sampled to leading optical module and system companies. This device features the industry’s lowest power dissipation and optimizes performance and board space for 100G optical modules, as well as line cards, in data center, enterprise and service provider applications. More recently, we demonstrated interoperability at this year’s European Conference on Optical Communications (ECOC) and at the Optical Internetworking Forum’s Interoperability 2014 event, including interoperability demonstrations of our LineSpeed products with leading optical device and module and passive cable and connector companies, as well as showcasing our Bandwidth Engine 2 ICs with our FPGA partners, Altera and Xilinx.”

Mr. Perham concluded, “We remain focused on driving increased sales activities, securing additional design wins, supporting customer production ramps, expanding our product footprint and reducing manufacturing costs. We expect to complete new product tape outs within the next few months, and we already have potential customers waiting for these products. While it remains difficult to predict the timing of our revenue ramp, I believe we have measurably enhanced the foundation of our IC business and remain well positioned for future growth.”

Third Quarter Results

Total net revenue for the third quarter of 2014 was $1.1 million, compared with $1.8 million reported in the second quarter of 2014 and $1.0 million in the third quarter of 2013. Net revenue through the first nine months of 2014 was $4.2 million, compared with $3.4 million for the same period in 2013.

Third quarter 2014 total revenue included product revenue of $0.4 million, compared with $1.0 million in the second quarter of 2014 and $0.1 million in the year ago period. Product revenue for the first nine months of 2014 was $2.0 million, compared with $0.2 million for the same period in 2013. Royalty and other revenue for the third quarter of 2014, which includes licensing revenue, was $0.7 million as compared with $0.8 million in the previous quarter and $0.9 million in the third quarter of 2013.

Gross margin for the third quarter of 2014 was 61 percent, compared with 42 percent in the second quarter of 2014 and 83 percent for the third quarter of 2013. The sequential increase in gross margin reflects a higher mix of royalty and other revenue, which carry higher gross margins than the Company’s IC products.

Total operating expenses on a GAAP basis for the third quarter of 2014 were $9.2 million, compared with $7.9 million in the previous quarter and $7.8 million for the third quarter of 2013. The sequential increase in operating expenses was primarily due to higher development costs related to the Company’s new products. Third quarter 2014 operating expenses included $0.3 million of amortization of intangible assets and $1.1 million in stock-based compensation expense.

GAAP net loss for the third quarter of 2014 was $8.5 million, or ($0.17) per share, compared with a net loss of $7.2 million, or ($0.14) per share, in the previous quarter and a net loss of $6.9 million, or ($0.14) per share, for the third quarter of 2013. Non-GAAP net loss for the third quarter of 2014 was $7.2 million, or ($0.14) per share, which excludes amortization of intangible assets and stock-based compensation expense. Earnings per share for the third quarter of 2014 were computed using approximately 49.6 million weighted shares on a GAAP and non-GAAP basis. A reconciliation of GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.