Second Quarter Results
Total net revenue for the second quarter of 2006 was $2.3 million as compared to $3.5 million in the first quarter of 2006 and $3.1 million recorded in the second quarter of 2005. The second quarter revenue guidance was recently revised by the Company as a result of a license agreement with a major IDM that was delayed into the third quarter. That license agreement was signed on July 24, 2006.
Second quarter total revenue included licensing revenue of $1.7 million as compared to $2.3 million in the first quarter of 2006 and $1.9 million in the second quarter of 2005. Royalty revenue for the second quarter was $639,000 compared to $1.3 million in the previous quarter and $1.1 million in the same period a year ago. The Company recorded licensing revenue from 13 different chip development projects compared to 12 in the first quarter and royalty revenue from 18 different licensees compared to 19 in the previous quarter.
"We continue to make solid progress on the strategic initiatives announced earlier this year. We signed multiple CLASSIC Macro licensing deals during the quarter, initiated programs with semiconductor manufacturers at the advanced 65 nanometer process geometry, and further broadened our relationship with Nintendo and NEC," commented Chet Silvestri, Chief Executive Officer of MoSys.
"Our CLASSIC Macro program continues to attract new customers as well as generating repeat business with existing customers. CLASSIC Macros enable our customers to move more rapidly from the development stage to the production stage, thereby shortening time-to-market. This advantage allows customers to reach volume production faster, which is critical in the highly competitive consumer electronics market. As a result, we have had several existing customers engage with us for additional future projects."
Also during the quarter, MoSys completed the research and development work for porting the 1T-SRAM technology to the 65nm process node and initiated macro design work with pure-play foundries. In addition, in July the Company signed a licensing and royalty agreement with a major IDM who will utilize MoSys 1T-SRAM technology in their 65nm process node.
Mr. Silvestri concluded, "We are pleased with the progress we have made in our 65nm initiatives -- both for our CLASSIC Macros and our technology licensing. We expect these initiatives to drive increased licensing revenue in the latter part of 2006 and to drive our royalty growth in 2007. Also during 2007 we anticipate strong royalty growth from the success of Nintendo's Wii(TM) video game console."
In accordance with Generally Accepted Accounting Principles (GAAP) the second quarter gross margin percentage was 84 percent, compared to 90 percent in the first quarter of 2006 and 80 percent in the second quarter of 2005. The sequential decrease in gross margin was mainly due to the decrease in royalty revenue relative to licensing revenue.
Total operating expenses for the second quarter were $4.9 million, which included approximately $570,000 in legal expenses related to the UniRAM litigation as the Company aggressively seeks to resolve this litigation.
The GAAP net loss for the quarter was $2.1 million, or ($0.07) per share, including stock-based compensation expense under Statement of Financial Accounting Standard No. 123R (FAS 123R) of $624,000. This compares to a net loss of $974,000, or ($0.03) per share, in the first quarter of 2006 and a net loss of $579,000, or ($0.02) per share, in the second quarter of 2005.
The non-GAAP net loss for the second quarter, which excludes the total stock-based compensation charges of $624,000, was $1.4 million, or ($0.05) per share. Per share amounts were computed using 31,293,000 shares outstanding for the quarter. A reconciliation of GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.
Cash, cash equivalents and both long and short-term investments totaled approximately $84.5 million as of June 30, 2006 compared to approximately $85.4 million as of March 31, 2006.