NetLogic Microsystems Announces Third Quarter 2004 Financial Results; Continued Sequential Increase in Revenue and Improvement in Operating Margin.MOUNTAIN VIEW, Calif. -- NetLogic Microsystems, Inc. (Nasdaq:NETL NETL - A semantic network language, for connectionist architectures. ["NETL: A System for Representing and Using Real-World Data", S.E. Fahlman, MIT Press 1979]. ), today announced financial results for the third quarter ended September 30, 2004. Product revenue for the third quarter of 2004 was $12.4 million, an increase of 11% over the second quarter 2004, and an increase of approximately 380% from $2.6 million in the third quarter of 2003. The product revenue increase was driven by increased customer demand for the Company's knowledge-based processors Knowledge-based processors are used for processing packets in computer networks. Knowledge-based processors are essential for the long term success of the IPv6 network. The buildout of the IPv6 network is inevitable as it provides the means to an improved and secure networking . Total revenue for the third quarter of 2004 was $12.4 million, an increase of 5% over the second quarter of 2004, which included $0.6 million of license revenue. Net loss, computed in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) for the third quarter of 2004, was ($3.6) million or ($0.22) per share, compared to a net loss of ($2.9) million or ($0.78) per share in the second quarter of 2004. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss, excluding amortization of stock-based compensation and note discounts in the third quarter of 2004, was ($20,000) or ($0.00) per share, compared to a pro forma net loss of ($0.7) million, or ($0.20) per share, in the second quarter of 2004. The Company believes the additional non-GAAP measures provided are useful to investors for performing financial analysis, because they highlight the Company's operating activities. The Company's management uses this pro forma measure internally to evaluate its operating performance in planning for its future periods. However, pro forma measures are not a substitute for GAAP measures. For a reconciliation of GAAP versus pro forma financial information on a quarterly basis, please see the attached schedule. "Our progress in the third quarter was solid as we achieved all of our stated objectives for design wins, sales, gross margins and operating results," declared Ron Jankov, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of NetLogic Microsystems. "Despite a semiconductor inventory correction in the communications sector, demand for our breakthrough products, knowledge-based processors, remains quite strong." Following is a summary of some of the Company's third quarter highlights: --Closed five new design wins with four customers in the enterprise and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. markets, continuing the Company's momentum in expanding the use of knowledge-based processors in the most demanding networking and communications applications. All of these programs are at "Top 20" networking OEMs. Using a very conservative metric, the Company only declares a design win once it has received significant revenue orders for a program that is within six to twelve months of volume production. Design engagements, where customers are actively designing with the Company's products, but for which the Company has not yet received significant revenue orders, continue to grow faster than design wins. --In late third quarter, three additional end-customer systems moved to volume production, utilizing the Company's advanced knowledge-based processors. --Successfully qualified and began shipping version 3 of the Company's knowledge-based processors in late third quarter. As expected, this new version is improving both manufacturing yield and product gross margin. --Delivered the first samples of knowledge-based processors, which have the ability to operate at frequencies up to 300 MHz (MegaHertZ) One million cycles per second. It is used to measure the transmission speed of electronic devices, including channels, buses and the computer's internal clock. A one-megahertz clock (1 MHz) means some number of bits (16, 32, 64, etc. . These are the first knowledge-based processors to reach this milestone frequency. --NL5000 knowledge-based processors were deployed in Force10's TeraScale E-Series terabit switch / routers. The NL5000's large knowledge base, parallel processing parallel processing, the concurrent or simultaneous execution of two or more parts of a single computer program, at speeds far exceeding those of a conventional computer. capability and 266 MHz operation on multiple concurrent pipelines allow Force10's TeraScale E-Series family of switch/routers to process one billion packets per second and support more than one million access control lists with no performance degradation. --Delivered its data plane products for the Alcatel 7670 Routing Switching See layer 3 switch. Platform (RSP RSP right sacroposterior (position of the fetus). ), Alcatel's highest-performance, multi-service switch /router product. This is one in a series of major projects between Alcatel and the Company. Alcatel's 7670 RSP is optimized to deliver multiple new and existing services on a converged IP/MPLS IP/MPLS Internet Protocol/Multi-Protocol Label Switching infrastructure, including high availability Also called "RAS" (reliability, availability, serviceability) or "fault resilient," it refers to a multiprocessing system that can quickly recover from a failure. There may be a minute or two of downtime while one system switches over to another, but processing will continue. IP VPN (Virtual Private Network) A private network that is configured within a public network (a carrier's network or the Internet) in order to take advantage of the economies of scale and management facilities of large networks. RFC (Request For Comments) A document that describes the specifications for a recommended technology. Although the word "request" is in the title, if the specification is ratified, it becomes a standards document. 2547 service enhancements leveraging ACEIS ACEIS Alcatel Carrier Environment Internet System ACEIS Agriculture and Agrifood Canada Electronic Information System Non-Stop Routing Technology, Ethernet Virtual Leased Line Virtual Leased Line (VLL) is a way to provide Ethernet based point to point communication over IP/MPLS networks. In the industry, the technology is also referred to as Virtual Private Wire Service (VPWS) or EoMPLS (Ethernet over MPLS). service over MPLS (1) (MultiProtocol Lambda Switching) The earlier name for GMPLS. See GMPLS. (2) (MultiProtocol Label Switching) A standard from the IETF for including routing information in the packets of an IP network. , Ethernet to FR/ATM Service Interworking (standard) interworking - Systems or components, possibly from different origins, working together to perform some task. Interworking depends crucially on standards to define the interfaces between the components. over MPLS, and IP/MPLS and ATM Private Network to Network Interface (PNNI (Private Network-to-Network Interface) A routing protocol used between ATM switches in an ATM network. It lets the switches inform each other about network topology so they can make appropriate forwarding decisions. ). --In addition to a number of design wins with Hitachi, which we expect to continue to contribute to our results of operations, we also anticipate benefiting from the new joint venture, ALAXALA Networks Alaxala Networks is a Japanese company that develops high performance routers and switches. Alaxala Networks was established in 2004 by Hitachi, Ltd. (Hitachi) and NEC Corporation (NEC). External Links
NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. Corporation. This joint venture, announced on October 1, 2004, is building on previous R&D from Hitachi, including the platforms incorporating our processors, and will offer its products through its own sales channels and the separate sales channels of Hitachi and NEC. This combination of two of the three largest switch/router manufacturers in Japan, together with the combined sales channels of the three companies, creates a significant growth opportunity for the Company. The Company is very pleased to be part of this exciting collaboration between Hitachi and NEC. --To support the recently-sampled 300MHz NL5000 family of knowledge-based processors, the Company introduced an enhanced Integrated Development Environment See IDE. integrated development environment - interactive development environment . This will further improve customers' design and development processes, allowing them to more rapidly bring systems to market using this latest in the NL5000 family of knowledge-based processors. The Company's knowledge-based processors provide significant differentiation in the most demanding networking and communications applications. Our advanced multiple pipeline parallel architecture processes up to four Layer-4 tasks simultaneously, allowing for real-time processing Noun 1. real-time processing - data processing fast enough to keep up with an outside process real-time operation data processing - (computer science) a series of operations on data by a computer in order to retrieve or transform or classify information of routing, security, quality of service and transaction billing at 10G line rates. Total processing performance is up to 500 million decisions per second, enabling key next-generation Internet features such as voice over Internet Protocol See Internet and TCP/IP. (networking) Internet Protocol - (IP) The network layer for the TCP/IP protocol suite widely used on Ethernet networks, defined in STD 5, RFC 791. IP is a connectionless, best-effort packet switching protocol. (VoIP) and video on demand (VOD See video-on-demand. VoD - video on demand ). Our high-speed architecture also helps support thousands of virtual private networks (VPNs) in hardware, as well as providing the processing capability for other more advanced security features. The Company continues to focus on very high-speed logic design and full-custom transistor and data-path optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. . This, coupled with TSMC's advanced 0.13 micron micron: see micrometer. One micrometer, which is one millionth of a meter or approximately 1/25,000 of an inch. The tiny elements that make up a transistor on a chip are measured in micrometers and nanometers. See process technology. low-voltage logic process with seven layers of high-speed copper interconnect (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. , results in the fastest and lowest power knowledge-based processors, giving the Company a significant advantage over inherently slower memory processes using aluminum interconnect. NetLogic Microsystems will conduct a conference call with analysts and investors, to discuss its third quarter 2004 financial results and current business, today at 2:00 p.m., Pacific Daylight Time (PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT ), or 5:00 p.m., Eastern Daylight Time (EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ). The Company will broadcast this conference call via web cast. To listen to this web cast, or to view the press release and other financial or statistical information required by the SEC, please visit the NetLogic Microsystems website at: http://www.netlogicmicro.com. The web cast of this conference call will be recorded and available for replay until 5:00 p.m., PDT, on November 10, 2004. About NetLogic Microsystems, Inc. NetLogic Microsystems, Inc. (Nasdaq:NETL) is a semiconductor company that designs, develops and markets high performance knowledge-based processors for a variety of advanced Internet, corporate and other networking systems, such as routers, switches, network access equipment and networked storage devices. NetLogic Microsystems' knowledge-based processors employ an advanced processor architecture and a large knowledge database containing network and network user information to make complex decisions about individual packets of information traveling through the network. NetLogic Microsystems' knowledge-based processors significantly enhance the ability of networking original equipment manufacturers to supply network service providers with systems offering more advanced functionality for the Internet, such as voice transmission over the Internet, virtual private networks, and streaming video A one-way video transmission over a data network. It is widely used on the Web as well as company networks to play video clips and video broadcasts. Computers in home networks stream video to digital media hubs connected to a home theater. and audio. NetLogic Microsystems is headquartered at 1875 Charleston Road, Mountain View, CA 94043. NetLogic Microsystems is an Affiliate Member with the Intel(R) Communications Alliance, a community of communications and embedded Inserted into. See embedded system. developers and solution providers. For more information, please visit www.intel.com/go/ica. NetLogic Microsystems and the NetLogic Microsystems' logo are trademarks of NetLogic Microsystems, Inc. All other brands, product names and marks are or may be trademarks or registered trademarks used to identify product or services of their respective owners. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: Statements in this press release regarding NetLogic Microsystems' business which are not historical facts may be "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " that involve risks and uncertainties. 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 and demand for our products, the volume of sales to our principal product customers, manufacturing yields for our products, the timing of manufacture and delivery of product by our foundry A semiconductor manufacturer that makes chips for third parties. It may be a large chip maker that sells its excess manufacturing capacity or one that makes chips exclusively for other companies. suppliers, the length of our sales cycles, our average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. , the strength of the OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and networking equipment market and the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of that market and the semiconductor industry. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's registration statement on Form S-1, as amended, as well as other reports that NetLogic Microsystems files from time to time with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. by this cautionary statement, and NetLogic Microsystems 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.
NETLOGIC MICROSYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
-------- --------- --------- ---------
Revenue:
Product revenue $12,441 $2,594 $31,456 $5,106
License and engineering
service revenue -- 8 1,128 3,013
-------- --------- --------- ---------
Total revenue 12,441 2,602 32,584 8,119
Gross profit 5,580 (5,648) 13,818 (1,901)
-------- --------- --------- ---------
Operating expenses:
Research and development 3,891 4,634 12,365 12,346
Selling, general and
administrative 1,735 1,201 4,895 3,256
Stock-based compensation 1,090 683 4,616 1,495
-------- --------- --------- ---------
Total operating expenses 6,716 6,518 21,876 17,097
-------- --------- --------- ---------
Loss from operations (1,136) (12,166) (8,058) (18,998)
Interest and other income
(expense), net (2,502) 38 (3,897) 161
-------- --------- --------- ---------
Net loss $(3,638) $(12,128) $(11,955) $(18,837)
======== ========= ========= =========
Net loss per share -- Basic and
Diluted $(0.22) $(3.68) $(1.50) $(5.23)
======== ========= ========= =========
Shares used in calculation --
Basic and Diluted 16,243 3,292 7,954 3,599
======== ========= ========= =========
NETLOGIC MICROSYSTEMS, INC.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
-------- --------- --------- ---------
Revenue:
Product revenue $12,441 $2,594 $31,456 $5,106
License and engineering
service revenue -- 8 1,128 3,013
-------- --------- --------- ---------
Total revenue 12,441 2,602 32,584 8,119
Gross profit 5,647 (5,637) 13,986 (1,830)
-------- --------- --------- ---------
Operating expenses:
Research and development 3,891 4,634 12,365 12,346
Selling, general and
administrative 1,735 1,201 4,895 3,256
Stock-based compensation -- -- -- --
-------- --------- --------- ---------
Total operating expenses 5,626 5,835 17,260 15,602
-------- --------- --------- ---------
Income (loss) from operations 21 (11,472) (3,274) (17,432)
Interest and other income
(expense), net (41) 38 (384) 161
-------- --------- --------- ---------
Net loss $(20) $(11,434) $(3,658) $(17,271)
======== ========= ========= =========
Net loss per share -- Basic and
Diluted $(0.00) $(3.47) $(0.46) $(4.80)
======== ========= ========= =========
Shares used in calculation --
Basic and Diluted 16,243 3,292 7,954 3,599
======== ========= ========= =========
NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF GAAP NET LOSS TO PRO FORMA NET LOSS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
2004 2003 2004 2003
-------- --------- --------- ---------
GAAP net loss $(3,638) $(12,128) $(11,955) $(18,837)
Pro forma adjustments:
Amortization of stock-based
compensation 1,157 694 4,784 1,566
Amortization of note
discounts 2,461 -- 3,513 --
-------- --------- --------- ---------
Pro forma net loss $(20) $(11,434) $(3,658) $(17,271)
======== ========= ========= =========
Pro forma net loss per share --
Basic and Diluted $(0.00) $(3.47) $(0.46) $(4.80)
======== ========= ========= =========
Shares used in calculation --
Basic and Diluted 16,243 3,292 7,954 3,599
======== ========= ========= =========
NETLOGIC MICROSYSTEMS, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
September December
30, 31,
2004 2003
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $39,636 $13,155
Restricted cash -- 5,000
Short-term investments -- 2,995
Accounts receivable, net 3,634 4,062
Inventory 8,471 3,584
Prepaid expenses and other current assets 1,731 560
--------- ---------
Total current assets 53,472 29,356
Property and equipment, net 2,105 2,031
Other assets 50 457
--------- ---------
Total assets $55,627 $31,844
========= =========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Revolving line of credit $-- $9,910
Accounts payable 3,961 3,581
Accrued liabilities 4,152 8,118
Deferred revenue -- 500
Capital lease obligations, current 276 351
--------- ---------
Total current liabilities 8,389 22,460
Capital lease obligations, long-term 6 135
Other liabilities 72 --
--------- ---------
Total liabilities 8,467 22,595
--------- ---------
Redeemable convertible preferred stock -- 91,600
Stockholders' equity (deficit):
Common stock 176 36
Additional paid-in capital 150,932 10,686
Notes receivable from stockholders (515) (1,620)
Deferred stock-based compensation (4,326) (4,300)
Accumulated deficit (99,107) (87,153)
--------- ---------
Total stockholders' equity (deficit) 47,160 (82,351)
--------- ---------
Total liabilities, redeemable convertible
preferred stock and stockholders' equity
(deficit) $55,627 $31,844
========= =========
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