MoSys Inc. (NASDAQ:MOSY) Rallying on Financials After Reboot

MoSys Inc. (NASDAQ:MOSY) Rallying on Financials After Reboot

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MoSys, Inc. (NASDAQ:MOSY) did a reboot in 2017 with a complete restructure. The shares reflected this change, as the company cut staff and pivoted in February, which included a reverse stock split. This included layoffs and a revision of its operating plan to concentrate resources on the production and sale of its existing products, while significantly limiting new product development and research and development activities. MOSY also initiated a process to explore and review a range of strategic alternatives focused on maximizing stockholder value, which translates to “looking for a buyer”. Often these smaller stocks need to make drastic changes to avoid operating as a going concern and shareholders reacted to the news by buying the stock this week wiping out some of the yearly losses.

The company released earnings recently and total net revenue for the first quarter of 2017 was $1.2 million compared with $1.4 million in the previous quarter and $1.5 million in the first quarter of 2016. Product revenue in the first quarter was $1.0 million, which was consistent with the fourth quarter of 2016, and compared with $1.1 million in the year-ago period. Gross margin for the first quarter of 2017 was 50 percent, compared with 57 percent in the fourth quarter of 2016 and 41 percent for the first quarter of 2016.

MoSys, Inc. (NASDAQ:MOSY) did a 1-for-10 reverse stock split of its common stock a few months back. All share and per share amounts in this piece have been adjusted to reflect the reverse stock split for all current and prior periods.

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GAAP net loss for the first quarter of 2017 was $4.4 million, or ($0.66) per share, compared with a net loss of $14.5 million, or ($2.18) per share, in the previous quarter and a net loss of $6.9 million, or ($1.05) per share, for the first quarter of 2016. Non-GAAP net loss for the first quarter of 2017 was $4.2 million, or ($0.63) per share, which excludes intangible asset amortization and stock-based compensation expenses.
“First quarter 2017 product revenue was primarily comprised of ongoing shipments of our Bandwidth Engine® 2 ICs, with the majority of those shipments to our lead IP security appliance customer. We have a reliable volume forecast from this customer for the remainder of this year, and are working to confirm order commitments from our other top customers,” commented Len Perham, MoSys’ President and CEO. “During the first quarter, we won our first Bandwidth Engine 3 design-in with a leading networking equipment supplier in China, and received our first pre-production order from this customer. We also secured additional Bandwidth Engine 2 design-ins with multiple customers for next-generation video applications.

“After the close of the quarter, as previously announced, we revised our operating plan and began implementing our cost reduction initiatives. We expect to realize significant operating cost savings from these actions, and believe these expense reductions will position us to maintain ongoing operations and preserve cash until such time that our past design wins ramp more materially.”

Mr. Perham further commented, “Although we are now running a leaner organization, we remain confident that we have the necessary resources and personnel to fully support the current needs and firm orders of our customers. In addition, we remain focused on carefully managing operating costs and expanding our portfolio of design wins, while continuing to explore strategic alternatives and asset monetization strategies to ensure our viability and provide value to our stockholders.”

MOSY announced a revision of its operating plan to concentrate resources on the production and sale of its existing products, while significantly limiting new product development and research and development activities. Under the plan, MOSY will implement a reduction in workforce of up to 35 positions, or approximately 60% of total headcount. This headcount reduction will be substantially completed in the second quarter of 2017 and take place across all geographic locations. This reduction is intended to lower operating expenses, realign resources and conserve cash.

This total reboot for MoSys, Inc. (NASDAQ:MOSY) will result in headcount reductions and the company expects to incur approximately $0.6 million of charges for severance benefits and other one-time headcount termination costs. This is what they need to do to prepare themselves for a sale and this slimming process was suggested by the bankers they hired, but clearly the objective here is to get the value back to where it was in previous years, when shares were trading $15.00+ with a much larger valuation than the current $16.04 million market cap. This is a step in the right direction which will attract new shareholders and satisfy shareholders who have been along for the ride. The company we know today will be dramatically different down the road as they reshape the balance sheet and the workforce as part of the 2017 reboot. For continuing coverage on shares of $MOSY stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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