Netlist Inc

Good afternoon, and welcome to the NETLIST Second Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mike Smirjasi with the Plunkett Group. Please go ahead.

Thank you, Gary, and good day, everyone. Welcome to NetList's second quarter 2025 conference call. Leading today's call will be Chuck Hong, Chief Executive Officer of NetList, and Gail Sasaki, Chief Financial Officer. As a reminder, you can access the earnings release and a replay of today's call on the investor section of the NetList website at netlist.com. Before we start the call, I would note that today's presentation of netlist 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 today's press release. Netlist assumes no obligation to update forward-looking statements. I will now turn the call over to Chuck.

Thanks, Mike. And hello, everyone. Netlist had a productive second quarter as we continue to execute on our product and IP initiatives. Since the last call, we strengthened our cash position, ramped sales of custom DDR4 products, filed new legal actions against Samsung and Micron, secured a court order finalizing the $445 million damages award against Micron and successfully concluded the breach of contract case against Samsung. Second quarter revenue increased 44% on a sequential quarterly basis, driven by healthy demand for DDR5 and DDR4 products. The DRAM market is going through a transition to next generation DDR5 modules used in AI servers and data centers. As the move to DDR5 accelerates, manufacturers are starting to phase out DDR4 with product allocations going primarily to their largest customers. This has led to limited DDR4 supply and significant price increases. Embedded industrial and medical customers whose products have long life cycles are being impacted by this as DDR4 goes end of life. Netlist is working proactively with customers in this market segment, including those that rely on custom DDR4 modules designed by Netlist. We're providing last time buy programs that enable customers to support their required life cycles or redesign with newer memory technologies. For overclocked and low latency DDR5 server modules, we continue to qualify higher performance products with customers so they can provide servers with the fastest memory solutions possible in high frequency trading simulation, HPC, and AI applications. Now moving to intellectual property, during the past two years, Netlis has obtained three separate jury verdicts awarding combined total damages of $866 million for the willful infringement of our patents by Samsung and Micron. Over the past several months, we've broadened our legal efforts, filing complaints in the U.S. District Court for the Eastern District of Texas against Samsung and Micron and their distributor, Avnet. The three patents that Netlist is asserting in these four separate suits are new patents covering next generation HBM and DDR5 memory technologies. This includes the 087 patent entitled Memory Package Having Stacked Array Dies and Reduced Driver Load, which covers HBM for current and future AI applications. Analysts currently project that USHPM revenues to exceed $25 billion annually for each Samsung and Micron by 2031. The other patents include NETLESS's 731, which reads on DDR5 DEMs with DFE, Decision Feedback Equalizer, and ODT RTT circuits. as well as the 366 patent, which reads on DDR5 DIMM with on-module power management. According to analysts, U.S. DDR5 DIMM revenues will exceed $65 billion annually in 2029. The First Eastern District of Texas jury trial in these cases is expected to begin in March 2027. In June, Metla secured an order finalizing the $445 million damages award against Micron, the court's memorandum opinion and order denying Micron's post-trial motions, combined with a final judgment entered in July 2024. Bring this case to a close in the district court. With these actions, the court has upheld the jury's verdict and damages award. and confirmed that Micron willfully infringed Netlist's patented technologies. Micron has filed an appeal with the Federal Circuit. We expect the appellate process to take around 18 months. In a breach of contract case against Samsung earlier this week, the court issued an order denying Samsung's motion for a new trial, bringing this case to a successful conclusion for Netlist. Netlist has won this case three times, with each case confirming that Samsung had breached the joint development and license agreement between the parties and that Samsung does not have a license to Netlis' patent portfolio. As the largest memory manufacturer in the world, Samsung faces significant exposure from its tens of billions of dollars in annual memory shipments into the U.S. After the jury verdict in March, Samsung filed a motion for a new trial asking the court to presume bias by three jurors based on their answers to questions during the jury selection process. This is not a new tactic. After the last trial in May 2024, Samsung had also sought a new trial by claiming jury bias. The court held an evidentiary hearing on July 30th for the jurors to explain their answers and allow Samsung and Netlis' attorneys to question them. After this evidentiary hearing, the court ruled that the jurors were not biased and denied Samsung's motion on August 4th with an order that is now available online. The order finally ends this district court case. The deadline for Samsung to file a notice of appeal is September 4th. In the district, in the Eastern District of Texas, Texas won case against Samsung. where NETLIS secured an order finalizing $303 million damages award in July 2024. The appeals process continues to advance at the Federal Circuit. The date has not been set for the appeal hearing at this time, but we estimate the appeal hearing to take place sometime in the first half of 2026. In the Eastern District of Texas, two case against Samsung, where NETLIS was awarded $118 million damages in November, we remain in post-trial briefing phase. We expect the court to rule on these post-trial motions in early 2026. Regarding IPRs, inter-party reexams, in March, the Federal Circuit issued a judgment affirming the U.S. Patent Trial and Appeals Board's decision upholding the validity finding of Netlist's 523 patent. Samsung did not file an appeal with the Supreme Court, and as a result, they can no longer contest the validity of the 523 patent. For Netlist's 314 and 506 patents, we estimate that oral arguments for the IPR appeals will be heard by end of this year. with the remaining IPR appeals to be heard in 2026. NETLIS is also following with great interest the recent changes at the Patent Office. In March of this year, Acting Director Cote Morgan Stewart issued a memorandum that changes how the PTAB will handle inter-parties reviews and post-grant review petitions. The change in the institution process affords the director the ability to exercise discretion to deny an IPR petition. This change provides patent owners with a clearer and faster path to address PTAB review and is a welcome update to the process. Finally, in June, we announced the appointment of June Cho and Blake Welcher to the company's Board of Directors. June and Blake are both seasoned attorneys with expertise in product distribution, intellectual property, and licensing. We are pleased to welcome them to the board. Now I'll turn the call over to Gail for the financial review.