Netlist, Inc. Q1 FY2026 earnings call

Overall Financial and Market Performance

• Netlist delivered a record-breaking Q1 2026 with strong revenue growth and significantly improved profitability, driven by robust memory product demand and disciplined operational execution
• The global memory market remains structurally undersupplied: AI-driven demand is accelerating while DRAM production capacity is constrained, creating an imbalance across all major end markets from smartphones to data center servers. Industry-wide supply constraints are expected to persist until new fabrication capacity comes online, with no meaningful market relief expected before 2029. Memory pricing is projected to rise through the remainder of 2026, though at a slower pace than the sharp increases seen in recent quarters.

Product Development and Commercial Progress

• The Lightning portfolio of overclock low-latency DDR5 RDIMM and UDIMM solutions is continuing to ramp production, with ongoing OEM qualification progress, particularly in the high-frequency trading and high-performance computing segments
• DDR4-based custom solutions continue to serve industrial and networking customers steadily
• Next-generation product development is advancing: CXL Type 3 NVDIMM (branded NVvault) persistent memory and low-power MRDIMM solutions are in active development. NVvault is currently being sampled to major OEMs for next-generation AI platforms, addressing growing demand for expanded low-latency memory capacity for AI workloads. Netlist's proprietary ECC protocol-enabled low-power MRDIMM is positioned to be the first low-power DRAM solution for power-sensitive data center server applications.

Intellectual Property and Litigation Progress

• Netlist continues to actively defend its patent portfolio, with multiple favorable legal outcomes validating the strength of its IP: the U.S. Court of Appeals for the Federal Circuit affirmed the validity of the 608 and 523 patents in 2025, and the USPTO recently denied Samsung's IPR and PGR challenges to the 366 patent (covering DDR5 module power management technology)
• Netlist is pursuing enforcement action at the ITC against Samsung, Google, and Super Micro, seeking exclusion and cease-and-desist orders for infringing memory products covering DDR5 modules (RDIMM, UDIMM, SODIMM, MRDIMM) and high bandwidth memory (HBM). The Markman hearing was held in April 2026, and trial is scheduled for fall 2026
• Multiple appellate proceedings are ongoing: the Fifth Circuit heard oral arguments on Samsung's appeal of a 2023 Eastern District of Texas jury verdict awarding Netlist $303 million in willful infringement damages, with a decision pending. Briefing for the breach of contract case against Samsung at the Ninth Circuit will conclude this summer, with a hearing scheduled for late 2026
• The U.S. Department of Justice has filed two public interest comments in the last six months supporting Netlist's position on standard essential patents, antitrust, and patent enforcement in cases involving Samsung, backing U.S. innovation and patent rights enforcement

Balance Sheet and Liquidity

• Operating income for Q1 2026 was $8.6 million, an $18 million improvement year-over-year. Operating expenses as a percentage of revenue declined even as the company continued R&D and SG&A investments to support growth
• As of May 8, 2026, the company held $37.5 million in cash, cash equivalents, and restricted cash, with $10 million in working capital line of credit and approximately $74 million available on an equity line of credit, providing strong financial flexibility. Days sales outstanding improved 3.5 days year-over-year, and the cash cycle remained 16 days (well under 30 days), indicating strong working capital management

Total company revenue for Q1 2026 was $104.9 million, representing a 262% year-over-year increase from Q1 2025. Revenue is split between two product/ business categories: resale products accounted for approximately 80% of total revenue, while proprietary Netlist-developed products made up just under 20% of total revenue. This mix is consistent with the prior quarter. The company's DDR4-based custom solutions for industrial and networking customers accounted for a major portion of total product revenue in the quarter.

No formal numerical revenue or profitability guidance was provided in the call. Management did provide the following forward-looking outlooks:

• Industry-wide memory supply constraints are expected to persist through the end of the decade, with no meaningful market balance expected until 2029
• Memory pricing is projected to rise through the remainder of 2026, though at a slower pace than the sharp increases recorded in recent quarters
• Multiple key legal milestones (appellate decisions, ITC trial) are expected to conclude by the end of 2026

Forward-looking results are noted to differ materially from current projections due to inherent uncertainties, including:

• Uncertainty around the timing and outcome of ongoing intellectual property litigation and enforcement actions across multiple courts and agencies
• Persistent global memory supply constraints that could limit Netlist's ability to meet customer demand
• Unexpected shifts in memory pricing that differ from current market projections
• Delays in OEM product qualification for new proprietary products that could slow commercial ramp of next-generation solutions

Q: Suji Desilva of ROTH Capital asked management to clarify the revenue split between resale products and Netlist’s proprietary products to understand the current business mix. / A: CFO Gail Sasaki confirmed the mix is unchanged from the prior quarter: approximately 80% of total revenue comes from resale products, and just under 20% comes from Netlist’s own proprietary products.

Q: Desilva asked Chuck Hong to explain the market trend of moving low-power DRAM into data center servers, when this trend started, and how product mix may shift as power efficiency becomes a higher priority. / A: Hong explained that the industry has started moving low-power DRAM (originally designed for mobile devices) to replace higher-power server-grade DRAM, but standard low-power DRAM lacks error correction required for reliable server use. Netlist has spent years developing a unique ECC-enabled solution, and is currently working with major hyperscaler customers to commercialize the product, which would deliver both significant power and cost reductions compared to existing server DRAM.

Q: Desilva asked Hong to recap the next key litigation milestones that investors should watch across Netlist’s active cases. / A: Hong noted 4-5 appellate decisions on existing district court and PTAB patent decisions are expected by the end of 2026, and these rulings are likely final as Supreme Court review is unlikely. The ITC trial against Samsung, Google, and Super Micro is scheduled for fall 2026 and is progressing as planned. Netlist also intends to pursue additional patent enforcement against other unlicensed parties implementing Netlist’s technology in AI memory products.