Netlist Inc. (NASDAQ:NLST) Q3 2019 Earnings Conference Call - Final Transcript

Nov 04, 2019 • 12:00 pm ET

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Netlist Inc. (NASDAQ:NLST) Q3 2019 Earnings Conference Call - Final Transcript

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Operator
Operator

Good day and welcome to Netlist Third Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mike Smargiassi, Investor Relations. Please go ahead.

Executive
Mike Smargiassi

Thank you, Sara, and good day everyone. Welcome to Netlist third quarter 2019 conference call. Leading today's call will be Chuck Hong, Chief Executive Officer of Netlist; and Gail Sasaki, Chief Financial Officer. As a reminder, the earnings release and a replay of today's call can be accessed 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's results and the answers to questions may include forward-looking statements, which are based on current expectations. 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 the press release today. Netlist assumes no obligation to update forward-looking statements.

I would now like to turn the call over to Chuck.

Executive
Chun K. Hong

Thanks, Mike, and hello, everyone. Since the last call, we have made significant progress in a number of key areas: first, financial performance improved sequentially for both revenue and the bottom line; second, we made further headway in the commercialization of HybriDIMM as JEDEC announced publication of the latest DIMM specifications to support NVDIMM-H; third, broadened the market for Netlist's NVMe SSD products with validation at a Tier 1 OEM and received an initial production order from a major cloud services provider; fourth, we reached a significant milestone in the company's IP campaign with the recent favorable initial determination from the ITC, which found that the SK hynix's LRDIMM server memory infringes on Netlist's standard essential patent.

Turning first to the recent news from the ITC. On October 21, we received the Notice of Initial Determination or ID from the United States International Trade Commission in regards to the company's second ITC action against SK hynix. We're very pleased with the outcome as we receive positive determinations as to the infringement and validity of Netlist's '907 patent as well as defeating SK hynix's contentions that Netlist had violated its RAND obligations to implementers of the JEDEC standards and had not met the standards for domestic industry. This was a major win for Netlist against SK hynix, who may be facing an exclusion order on the sale, sale for importation and importation into the United States of billions of dollars annually of LRDIMM products in violation of Section 337 of the Tariff Act of 1930.

The ID found that the second patent in this case, the '623, which covers RDIMM products, invalid and uninfringed. Without access to the full ID, however, Netlist does not yet have the benefit of knowing the reasons for that decision. Once we receive this document in the coming weeks, we will be able to determine, in consultation with outside