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Good day and welcome to the Netlist First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please also note that this event is being recorded today. I would now like to turn the conference over to Mike Smargiassi, Investor Relations. Please go ahead.

Thank you, Joe, and good day, everyone. Welcome to Netlist's First Quarter 2026 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 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 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. We delivered a strong first quarter performance, achieving record quarterly revenue and a significant improvement in profitability. These results were driven by robust demand for our memory products and disciplined execution across the business. As we discussed on prior call, the memory market remains structurally undersupplied. AI-driven demand continues to accelerate while DRAM capacity remains constrained.

This imbalance is rippling across the economy, from smartphones to data center servers. In Netlist markets, demand remains healthy across key end applications, even as supply stays tight across OEM and distribution channels. The outlook for memory remains favorable. Industry-wide supply constraints are expected to persist until new fabrication capacity comes online later next year, which could delay meaningful relief until 2029.

Analysts continue to expect pricing to rise through the rest of the year, though at a slower pace than the sharper increases seen in recent quarters. On the product side, our Lightning portfolio of overclock low-latency DDR5 RDIMM and UDIMM solutions continue to ramp. We are progressing through qualifications with OEMs, particularly in high-frequency trading and high-performance computing space.

We also continue to support industrial and networking customers with our DDR4-based custom solutions. And these accounted for a major portion of our revenues this quarter. On the next-generation products, we are advancing CXL NVDIMM and low-power MRDIMM solutions. Our CXL NVvault is a CXL Type 3 persistent memory designed to extend memory class storage beyond the CPU socket while preserving low latency and data durability.

It provides a product that combine DRAM-like access with persistence through power events, addressing the growing performance and capacity needs of AI workloads. We continue to sample NVvaults with major OEMs on next-generation platforms. Regarding our low-power MRDIMM solution. We continue to be active in the development of this technology, which contains proprietary ECC protocols developed by Netlist. And we are looking to become the first supplier to bring the benefits of low-power DRAM into the server space, which is very sensitive, the data centers, in particular, are sensitive to power concerns.

On the IP front, we continue to advance the defense of Netlist patents and multiple favorable jury verdicts in our appellate process. As you know, Netlist is seeking exclusion and cease and desist orders against Samsung, Google and Super Micro at the ITC. A favorable ruling would block the importation of Samsung products that infringe our patents and cease and desist of commercial activities by Google and Super Micro, which involve Samsung memory products. The Markman hearing was held on April 21, and our legal team performed very well. We look forward to the Markman order and to the start of trial this fall.

Netlist has asserted the 366, 731, 608, 523, 035 and 087 patents at the ITC. These patents cover one or more products, including DDR5 memory modules such as RDIMM, UDIMM, SODIMM and MRDIMM as well as high bandwidth memory, HBM. In 2025, the U.S. Court of Appeals for the Federal Circuit affirmed the validity of our 608 and 523 patents upholding the PTAB's IPR decision. Last month, the USPTO also denied both Samsung's IPR and PGR challenges to our 366 patent, which covers DDR5 module power management technology.

These outcomes further validate the strength of our IP and puts us in a favorable position in the ITC case. As a footnote, the 366 patent is also asserted in our 2025 Eastern District of Texas action against Samsung, Micron and Avnet. On March 6, the U.S. Court of Appeal for the Fifth Circuit heard oral arguments on Samsung's appeal of the Eastern District of Texas 2023 jury verdict, which awarded Netlist $303 million for willful damages of 5 patents. The court also heard Netlist's appeal involving IPR challenges to the 339, 918, 054, 060 and 160 patents asserted in that case. The court will issue decisions in due course.

In our breach of contract case against Samsung briefing is expected to conclude this summer, and we remain on track for hearing before the U.S. Court of Appeals for the Ninth Circuit later this year. In addition, we currently expect Fifth Circuit oral arguments related to the IPRs of 912, 417, 215 patents in the coming months.

In April, the U.S. Department of Justice filed a public interest comment in the Samsung v Netlist case in the U.S. District Court for the District of Delaware. The statement addressed standard essential patents, antitrust and market power issues and supported Netlist's positions. This marks the second DOJ's statement of interest in the past 6 months that have been supportive of Netlist in matters involving Samsung. These comments underscore the administration's support for U.S. innovation and the enforcement of U.S. patent rights.

In summary, we delivered a strong first quarter and remain positioned -- well positioned in the current market environment as we scale our product business and advance our IP strategy. We continue to secure validation of our patents and the strength of these patents. And we continue to pursue vigorous enforcement actions covering next-generation DDR5 and HBM technologies that are foundational to AI computing.

Now I'll turn the call over to Gail for the financial review.

Okay. Thanks, Chuck. We delivered a strong top and bottom line performance in the first quarter. Revenue was $104.9 million, an increase of 262% as compared to the first quarter of 2025. Results reflect the strength of the current industry environment, a combination of tight memory supply, accelerating demand and rising DRAM prices, which supported both revenue and gross profit margin improvement. Operating expense declined as a percentage of revenue and reflected continued investment in R&D and SG&A to support revenue growth.

Operating income was $8.6 million, an improvement of $18 million compared to the first quarter of 2025. Subsequent to the end of the first quarter, we received $10.5 million in proceeds from the cash exercise of issued and outstanding warrants. As of May 8, 2026 and based on information available today, Netlist estimates that its cash, cash equivalents and restricted cash on that day to be $37.5 million. With a $10 million working capital line of credit and approximately $74 million available on the equity line of credit, we continue to maintain significant financial flexibility and liquidity. And as always, we manage the operational cash cycle very carefully. Days sales outstanding improved by 3.5 days year-over-year. And overall, our cash cycle remains well below 30 days. currently at 16 days during the first quarter of 2026.

Operator, we are now ready for questions.

[Operator Instructions] At this time, we will take our first question from Suji Desilva with ROTH Capital.

Ration the strong quarter here. Can you help us understand in the revenue, the composition resale products revenue versus Netlist products to understand that dynamic?

Sure. It's been about the same as last quarter, Suji, I think it's like 80% resale and a little under 20% of Netlist's products.

Got it. That's helpful. And then, Chuck, in the data center, you talked about putting low-power DRAM into servers. I'm curious that trend. Has that already been underway? Is that kicking off now? And what kind of shape would you expect the mix to grow maybe it's more of a focus on power efficiency and things like that. Any color there would be helpful.

Yes. So, there has been some movement towards bringing low-power DRAM, which we use in, for example, in laptops and mobile phones, to replace some of the high-power server-grade DRAMs that are going into data centers. The problem with the low-power DRAMs is it does not have error correction. The memory that we use in phones, it doesn't have error correction. So it takes a lot of work to make those DRAMs more robust using ECC technology, which we have, to be allowed to use those low-power DRAMs and get to a level of robustness, reliability in server applications.

If you can do that, the low-power DRAMs are obviously much lower power, significant low power. And there is also -- it's much cheaper. So we've been working at this for a number of years now. we've got a unique solution that we're working with some of the hyperscalers.

That's great. That's great. Helpful to understand what it takes to get there. And then lastly, just on litigation. Maybe you could kind of recap for us, Chuck, what are the next milestones we should be watching for across the various cases.

As I stated in the prepared remarks, there's a lot of appellate activity coming up this year. We've already had the appellate hearing, and we'll get a decision, hopefully, sometime later this year. We'll have appellate, probably 4 or 5 appellate cases from now until the end of the year. And those will likely be final decisions. Appellate rulings, of the District Court verdicts that we had and PTAB decisions that we had on the patents. So -- and those will likely be final because it's unlikely that the Supreme Court would take up in any of these cases.

So we're looking forward to the decisions on those. Probably more imminent is -- are the ITC cases again Samsung, Google and Super Micro, which is progressing smoothly for us. We believe we came out on top in the Markman hearing and things are going well in that case and that will go to trial sometime later this year -- in the fall, scheduled for the fall right now. So, yes, things are going smoothly. And we're looking at other parties that are utilizing our patents without a license. We'll be looking to enforce our patent rights against a number of other parties that are unlicensed and are implementing our technology in the AI memory space.

And this concludes our question-and-answer session, along with today's conference call. Thank you for attending today's presentation, and you may now disconnect your lines.

Good day, and welcome to the Netlist Fourth Quarter 2025 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, sir.

Thank you, Nick, and good day, everyone. Welcome to Netlist's Fourth 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 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 today's press release. Netlist assumes no obligation to update forward-looking statements. I will now turn the call over to Chuck.

Thank you, Mike, and hello, everyone. In 2025, we strengthened Netlist's long-term strategic position as we made substantial progress across product and IP initiatives. We saw significant improvement in full year financial results, both the top and bottom line, and we ended 2025 with revenue more than doubling in the fourth quarter.

Financial performance was driven by strong demand for memory in the second half of 2025 and the strong execution of our sales and marketing teams in delivering the value of our products to customers across key markets. Rapid growth in AI has created a supply-demand imbalance leading to a global memory chip shortage and sharp price increases across all product categories.

These industry dynamics are expected to persist through this year and into 2027 when new fab capacity is expected to come online and increase supply of memory chips. In the current environment, Netlist is well positioned to grow its product business. Sales volume for Lightning, Netlist's overclocked and low latency DDR5 line of products, is ramping up nicely in the system integrator market segment. Adding to this, we've completed qualifications at a global server OEM, and they, in turn, are currently in testing with many of their end customers.

We anticipate continued growth of our existing customers as well as new customers in high-frequency trading and high-performance computing applications. On the legacy products front, industrial and networking customers continue to require DDR4-based Netlist custom solutions. We will support these customers through 2026 and into 2027 through last-time buy agreements that were concluded in 2025.

As AI workloads continue to drive demand for higher performance and higher capacity memory, we are investing in strategic R&D for next-generation technologies. Those include CXL NVDIMM and low-power MRDIMM. We are sampling our CXL NVDIMM proof-of-concept products to Intel and AMD for testing and validation on next-generation platforms. NVDIMM was invented by Netlist over a decade ago, and we are now moving this storage backup solution onto the CXL channel.

As DDR5 DIMM speeds continue to increase, MRDIMM and LPMRDIMM are projected to become the primary memory module used in high-capacity, high-performance server applications. Netlist is developing a unique solution in this space. which takes LPDDR5 DRAMs currently used in mobile devices and deploying them in high-end servers via our unique LPMRDIMM design.

On the IP front, we continue our defense of multiple favorable jury verdicts. We secured important appellate affirmances of the validity of our patents and expanded enforcement actions covering next-generation DDR5 and HBM technologies that are foundational to AI computing.

In December, the ITC or the U.S. International Trade Commission instituted an investigation into Samsung, Google and Super Micro based on the complaint Netlist filed in September. The investigation centers on the importation of Samsung memory products that infringe on 6 Netlist patents: The '366, the '731, the '608, '523, '035 and '087. Each of these patents reads on one or more of the following products: DDR5 memory modules such as DDR5 RDIMM, UDIMM, SODIMM and MRDIMM and high-bandwidth memory, HBM.

In 2025, the validity of Netlist's '608 and '523 patents were affirmed by the U.S. Court of Appeals for the Federal Circuit, upholding the PTAB's IPR decisions. As a result, Samsung is not able to challenge the validity of these patents going forward. The ITC has assigned the investigation to an administrative law judge and the procedural schedule has been set.

The Markman hearing is scheduled for April and the trial is set to start on November. A ruling in Netlist's favor would direct U.S. Customs and Border Protection to stop Samsung memory products that infringe these patents from entering the U.S. The discovery phase of the ITC investigation will take place over the coming months. In the federal courts, Netlist filed 4 separate actions in 2025 in the U.S. District Court for the Eastern District of Texas against Samsung and Micron and their distributor, Avnet.

In these actions, Netlist is asserting newly issued patents covering DDR5 memory modules and HBM for AI computing. They include the '087, '731 and '366 patents, which read on memory products that represent tens of billions in annual revenue for these defendants. In the breach of contract case against Samsung in March 2025, the Federal Court for the Central District of California found that Samsung materially breached the joint development and license agreement Netlist and Samsung signed in 2015. This was actually the third separate time Samsung has lost this case.

Samsung filed its appeal -- appellate brief in December, and Netlist will file its brief in the coming weeks. We estimate that the briefing process will be completed this summer with a possible hearing before the U.S. Court of Appeals for the Ninth Circuit before year-end. In other appellate activity, Micron's appeal of the $445 million jury award to Netlist is in the briefing process with oral arguments expected in mid-2027. In the $303 million damages award against Samsung, the appeal has been companioned with the IPR appeals of Netlist's '319, '918, '054, '106 and '064 patents, which were asserted in this case.

Oral arguments on these appeals will be heard on March 6, 2026, this Friday in Washington, D.C. Regarding other IPRs in late February, the Federal Court of Appeals affirmed the October '23 final written decision by the PTAB upholding the validity of Netlist's '314 patent in an IPR brought by Micron. Micron has 90 days from the CAFC's judgment to file a petition to the U.S. Supreme Court. This is the third time within the past 12 months that the Fed Circuit appellate court has affirmed the validity of Netlist patents against -- asserted against Micron and/or Samsung.

These affirmances of the validity of these patented technologies attest to the Netlist's role as a technology leader in memory subsystems. The '314 and the '508 patent, which was also affirmed by the CAFC are asserted in Netlist's case against Micron in the U.S. District Court for the Western District of Texas, which is currently stayed. Finally, we expect oral arguments before the CAFC for the '912 and the '417 patents later this year.

Netlist continues to advocate for the rights of patent owners from meeting government officials to urging Congress to take action on proposed patent reform legislation. In the fall, we provided our comments in support of the Patent and Trademark Office's Notice of Proposed Rulemaking, NPRM. The proposed rules seek to level the playing field between small technology innovators and big tech in the patent dispute process, especially when it comes to IPRs.

We will be participating in the upcoming IPWatchdog Conference in Arlington, Virginia at the end of March. The conference will bring together leaders in the intellectual property community and will feature speakers from the USPTO leadership as well as district court judges. I look forward to being part of the panelists discussions.

In summary, 2025 was a year of progress for Netlist. We entered 2026 well positioned to build on our success and capitalize on the transition to next-generation memory through our products and IP assets.

I will now turn the call over to Gail for the financial review.

Thanks, Chuck. For the 12 months ended December 27, 2025, revenue was $188.6 million, an increase of 28% from 2024. We ended the year with strong fourth quarter performance as revenue improved 121% as compared to the fourth quarter of 2024. Top line results reflect the current industry environment, which Chuck noted earlier, with solid demand from both OEM and resale customers as well as significant price increases, which supported gross profit margin improvement for both the full year and quarter.

While we do not formally guide, given booking and shipping for the first quarter of 2026 to date and subject to the visibility we have today, we currently expect total first quarter revenue to show further improvement from the fourth quarter of 2025. Operating expense for the full year 2025 declined 36%, driven by reductions in IP legal fees and SG&A cost controls.

We ended 2025 with cash and cash equivalents and restricted cash of $42.1 million compared to $20.8 million at the end of the third quarter with minimal debt. In the fourth quarter, we strengthened our cash position, raising $10 million through a registered direct offering. With a $10 million working capital line of credit and approximately $74 million available on our equity line of credit, we continue to maintain significant financial flexibility and liquidity going forward.

As always, we manage the operational cash cycle very carefully as inventory turn improved by 32 days over 2024 and days sales outstanding improved by about a week year-over-year. I would note that we will once again be attending the ROTH Annual Conference in March and look forward to meeting with investors.

Operator, we are now ready for questions.

[Operator Instructions] The first question will come from Jared Osteen with ROTH Capital Partners.

This is Jared Osteen on for Suji Desilva. In relation to the current market supply and demand environment, Chuck, can you share your perspective on the current memory supply and demand environment? I know you shared a little bit in the formal remarks. And how much of this is being driven by the transition to DDR5 versus AI capacity driven? And then with the new fabs that have been announced, do you think these are sufficient to meet demand or is more needed?

Jared, there's a global shortage of memory chips, really the raw material for all computing hardware really from laptops to mobile phones to servers and AI servers. While we focus mostly on high-end servers, servers for AI, we're feeling the effects of the access to raw material, the shortage of DRAM -- mostly DRAM raw material and some NAND. But on the other hand, the ASPs, the prices of all products that are related to memory have increased significantly. So that is offsetting the lower volumes in supply.

And I don't know that any of this is impacted or due to transition to DDR5. A lot of it is driven by AI. I think OpenAI committed to some 40% of the output of HBM over the next few years. But they're not buying that yet. And then you've got commitments to companies like NVIDIA and AMD for HBMs. So that's taking up a lot of the DRAM components that are going into mobile phones and PCs that are now allocated for HBMs.

And fundamentally, until there is new capacity, this capacity that's in place has been -- it was a CapEx that was invested some 3, 4 years ago. So there's really not too many ways to increase the overall capacity. It's kind of a zero-sum game. If you allocate more to one segment of the market, you get less on the other side. And until there is new capacity that comes online towards second half of '27, I think all sectors of computing will continue to face this memory shortage.

And then to go a little bit deeper into demand and pricing, how do you see the demand environment playing out for the remainder of the year? Do you expect it to be front-loaded as customers grab all the product supply that they can today? And do you think that the significant price increases for memory that we've seen in the past couple of quarters will hold?

There's 2 different points -- price points that we look at in our industry. One is the OEM pricing that are to manufacturers from the DRAM manufacturers being sold to computer manufacturers. And then there is the spot pricing, kind of the broker market. So the -- in the last 6 months, the OEM pricing for DRAMs have gone up probably 3 to 4x, the spot market has gone up probably 7 to 8x. So it's kind of unprecedented type of increase.

We think most of that price increase will hold through this year, which means revenues for people that are able to secure supply of DRAMs for most people that are in this industry should go up despite the fact that unit supply and unit sales will likely go down for most people. So I think if you're able to secure supply, I think you're in a good position. And over time, if supply becomes an issue, I think it's going to become more difficult.

Switching topics a little bit. Now that you have 2 CAFC-affirmed patents, the '314 and the '608, what are the next steps to get the stayed Micron case in the Western District of Texas moving? And is there anything else that might keep it stayed?

Yes. I think this case now is open to being unstayed now that the patents have been affirmed by the appellate court. So our outside lawyers will take steps to reopen this case and get it moving again. So it's a legal motion practice that they'll undertake to get the cases -- get this case back open and on track.

And then in terms of litigation expense cadence expectations for 2026, it seems like there's a little bit more activity in the pipeline this year with the hearing at the end of this week, some additional IPR deals and ITC in November. How are litigation expenses expected to track in the remainder of calendar year '26 relative to 2025 levels? Any color would be helpful.

I'll take that. So we believe it will be about the same as 2025. As you can see, I mean, even if the Western District of Texas case is unstayed, it won't happen in 2026. So there won't be any court cases in 2026. Obviously, the ITC will be spread out throughout the year, even though the trial is not until the end of the year. But we don't expect expenses to be much higher than 2025.

Great. And then my final question in terms of products. How do you see Lightning revenue building in 2026? And what's your visibility into the duration of the process from proof of concept to material order process?

Well, we've gone through this process. We're kind of at the tail end of the qualification and validation at the major OEM, our top customer, and they have their end customers. So we're finalizing those validations. We've been -- it's been ongoing for 6 to 9 months. In terms of the system integrator market, we're already shipping in some good volume, and that is ramping up.

And the demand in that side of the market is very strong, not just because of the shortage, but people moving to overclock higher-speed DRAMs, both for high-frequency trading and a lot of these applications that require very fast execution, trade executions. So yes, we're seeing good traction, and we look forward to seeing continuing growth of this product line through the course of this year.

This concludes our question-and-answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Netlist Third Quarter 2025 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.

Thank you, Dave, and good day, everyone. Welcome to the Netlist Third 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 Investors 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.

Thank you, Mike, and hello, everyone. Since our last call, we continue to make further progress on product and IP initiatives. We filed a new legal action, again, Samsung at the ITC and further strengthened our cash position. The memory market has entered a period of shortage. And we believe that this will continue for the foreseeable future, all the way through 2027, when additional capacity is brought online.

AI-related demand is consuming the majority of DRAM and NAND capacity, leaving very little availability for the rest of the market. Pricing has increased significantly for most product categories in the last several months, and it is forecasted to continue on this upward trend.

Netlist is well positioned to capitalize on these market trends through innovative IP and custom memory solutions such as the Lightning DDR5 DIMM for overclocked and low-latency memory module for servers. Lightning in particular -- Lightning provides faster memory performance, which is particularly important in markets such as quantitative trading, where the reduction of even a microsecond and executing a trade can bring about a significant improvement in the performance of the customers' systems.

At the moment, a global OEM as well as half dozen system integrators continue with their qualification of our Lightning products. We expect some of these qualifications to be completed by the end of the year and provide meaningful contribution to revenues next year.

On the R&D side, we continue to work on the CXL-based solutions such as the CXL NVDIMM as well as low-power MRDIMM. Netlist invented the NVDIMM over a decade ago, and we continue to innovate in this segment with data backup solutions that will leverage the versatility of the CXL channel. The LP-MRDIMM will be a critical technology in the years ahead as the current generation of MRDIMM has shown to consume excessive power. And power, we know is a critical variable in AI computing.

MRDIMM is likely to replace the RDIMM in the next generation of servers, but only if the power consumption of these memory modules can be lower. Thus, the LP-MRDIMM is being pursued by the broader industry -- broader memory industry, but Netlist is the only company that is designing a solution with significant power savings as well as lower latency without sacrificing error correction or chip kill.

On the IP front, in the past 2 years, Netlist has obtained 2 jury verdicts awarding combined total damages of $421 million for willful infringement of its patents by Samsung. Samsung has also lost 3 district court cases against Netlist and their bid to somehow revive a terminated license. Despite this, Samsung continues its unauthorized use of Netlist's intellectual property.

At the end of September, Netlist expanded, it's -- at the end of September, Netlist expanded the defense of its IP by initiating legal proceedings before the U.S. International Trade Commission, or the ITC. Netlist is seeking exclusion and cease and desist order against Samsung, Google and Supermicro, which would direct U.S. customs and border protection to stop Samsung memory products that infringe on Netlist IP from entering the U.S. The ITC does not order monetary damages.

The IP at issue in the ITC action include Netlist Patents 366, 731, 608, 523, 035 and 087. Each patent read on one or more of the following products: DDR5 memory modules, such as DDR5, RDIMM, UDIMM, SODIMM and MRDIMM and HBM or high-bandwidth memory. The ITC is an independent agency of the executive branch that investigates and makes the termination against unfair acts of import trade that violate U.S. IP rights. The process of bringing legal action before the ITC differs from core proceedings and is much quicker in duration, typically around a year to receive an initial determination.

The ITC will review Netlist's complaint to decide if it should institute an investigation. This review process occurs within 30 days of filing and our filing was September 30. If the ITC decides to institute an investigation, it assigns an administrative law judge to the case. Within 45 days of institution, the judge sets a target date for an evidentiary hearing or a trial and the issuing of a final decision.

The evidentiary hearing or trial is administered by the administrative law judge or the ALJ. There is no jury. This hearing typically takes place a year after institution and is followed by an initial determination issued by the ALJ. The ITC's commissioners may review the initial determination at the party's request or of their own volition. If review, the commission may affirm, modify, reverse or remain all or part of the initial determination and will issue a final determination.

In order to find the violation of Section 337 of the Tariff Act, the ITC investigation must determine that there is infringement of a valid U.S. patent that relates to an imported product and that the patent is being used in an existing domestic industry. A party may appeal final determination to the U.S. Court of Appeals for the Federal Circuit.

However, regardless of any appellate process, once the ITC makes its determination and this determination is ratified by the U.S. trade representative within 60 days, the import ban of the infringing product goes into effect immediately. The ITC ceased operation during the federal government shutdown, which will impact the timing of the ITC process just outlined. Netlist filed its complaint on September 30 and the federal government shutdown started the next day. Netlist has previously litigated 2 prior cases at the IT seat.

Let's now move on to the federal court actions, which include 3 separate jury verdicts that awarded Netlist combined damages of $866 million for the willful infringement of its patents by Samsung and Micron. In addition, we now have 4 separate actions filed this year in the U.S. District Court for the Eastern District of Texas against Samsung and Micron and their distributor, Avnet. In these cases, Netlist is asserting new patents covering next-generation HBM and DDR5 memory technologies.

In the Eastern District of Texas, one case against Samsung, Netlist secured an order finalizing $303 million of damages award in July 2024. Samsung filed an appeal, and we estimate that the appeal hearing will take place sometime mid next year.

In the Eastern District of Texas case 2 against Samsung, where Netlist was awarded $118 million in damages, post-trial briefing has been completed. We expect the court to rule on these post-trial motions in the coming months.

In the $445 million damages award against Micron, this case has concluded in the district court, Micron filed an appeal with the Federal Circuit, and we are currently in the briefing process.

In the breach of contract case against Samsung, again, which Samsung has lost 3 separate times, Samsung has filed a notice of appeal before the U.S. Court of Appeals for the Ninth Circuit. We expect this process to approximately 16 to 18 months. Regarding IPRs, oral arguments before the U.S. Court of Appeals for the Federal Circuit has been set for several patents, the 314, 506 and the 608 patent in early December 2025.

We expect the Federal Circuit to issue its decision on these appeals, and these are important appeals in later in December this year or early this year. In closing, Netlist remains active in advocating for the rights of patent owners. Over the past several weeks, I've had the opportunity to meet with government officials in Washington, D.C. and was encouraged by these discussions. We welcome the constructive reforms brought on by new leadership at the patent office that could bring a more balanced approach to the IPR process.

We also urge Congress to take action on several patent reform bills that are currently under review. We believe these bills, if enacted, will bring much more clarity to the issues of patent eligibility, patent enforcement and provide American innovators a predictable framework on which to create new groundbreaking technologies and provide assurances that their innovations will be protected from unauthorized use.

Now I'll turn the call over to Gail for the financial review.

Okay. Thanks, Chuck. For the quarter ended September 27, 2025, revenue was $42.2 million reflecting solid demand from both our OEM and resale customers and in line with our expectations. While we do not formally guide given booking and shipping for the fourth quarter of 2025 to date and subject to the visibility we have today, we currently expect fourth quarter revenue to be slightly higher than the third quarter of 2025.

Operating expense for the third quarter 2025 declined 17% compared to the prior year's quarter and declined 38% on a 9-month basis.

Net loss improved by -- net loss for the third quarter 2025 declined 25% compared to the prior year's quarter and declined by 45% for the 9-month period.

We ended the third quarter with cash and cash equivalents and restricted cash of $20.8 million compared to the $29 million at the end of second quarter with minimal debt.

After the end of the third quarter, we raised $10 million through a registered direct offering. With a $10 million working capital line of credit from our bank and approximately $74 million available on the equity line of credit, we continue to maintain significant financial flexibility and liquidity. And as always, we manage the operational cash cycle very carefully.

Inventory churn improved by 17 days over last year and the overall cash cycle improved by 2 days over last year's Q3 and by 16 days over last quarter.

Operator, we are now ready for questions.

[Operator Instructions] Our first question comes from Suji Desilva with ROTH MKM.

So the products that you're talking about, Chuck, and seeing opportunity in AI infrastructure into calendar '26, can you talk about which products, which AI infrastructure server platforms they may target? And what could be the magnitude of contribution potentially in '26, maybe ranges there?

We've made -- Suji, we've made good progress with the Lightning line of products. These are the fastest server memory. Most of them go into high-frequency trading, quantitative trading the Chicago area, New York area and the commodity markets and in the stock exchanges. So they are being qualified at one of the top 2 server OEMs in the world, along with probably half a dozen other major system integrators.

We believe -- we're making good progress. We have clearly a product that has industry-leading low latency and speed. And we expect those to -- we're seeing revenues already. We've seen some revenues probably in the 4%, 5% of our overall revenues in the last few quarters came from this line of product. We believe once these are qualified as some of the bigger players, bigger server manufacturers, we will certainly get into next year to double-digit percentage of the overall revenues with these lighting line of products.

Okay. All right. And then I'm just curious of the ITC process and the government shutdown. Are really -- are all the processes that you talked about pause at this point? Are some proceeding in the traditional branch? Or any color there would be helpful.

So the ITC was part of the government shutdown, and we filed September 30 against Samsung and to stop them as well as Google and Supermicro, which are major customers of Samsung. And what we're -- just to give you kind of context of what we're trying to accomplish, it is a significant dollar value of memory products coming into the U.S.

As we've indicated, we've gone through 5 federal court trials over the last 3 years with Samsung, against Samsung. We won them all, and yet they continue to -- they continue to engage and infringement and selling of infringement. We are committed to shutting them down in the U.S. That's what we're committed to seeing this process through all the way to the end.

These guys are beyond the pale in terms of the -- just unapologetic and just -- they just go about ignoring IP rights of U.S. patent holders. So -- we believe that since District Court, they award dollars, but they do not provide since eBay, there is no injunctive relief at the -- from District Court rulings. So ITC is injunctive relief. There is no dollar damages. So the only way to stop people who are completely ignoring U.S. laws and patent laws is to stop their business. And that's what we aim to do.

The government shutdown will impact us -- will not impact us at all. As soon as it reopens, our filing will be put on to the Federal Register. And then the 30-day clock will start to a decision on institution. Once the case is instituted, it goes forward, investigating patent infringement as well as patent validity.

And the third prong, which is industry, whether these patents are being practiced in the U.S. in terms of U.S. domestic industry and products that are built and shipped into the U.S. -- in the U.S. Those will be investigated and there'll be a decision. We've been to the ITC twice before. We understand the process. We understand the impact that it can create to bring some of the infringing parties to their consensus. So that is what we're committed to seeing that process all the way through to the end.

Okay. I appreciate that color. And then Gail, maybe you could talk about the litigation expense trend you're expecting from here. I know the ITC expenses are second half '25 and they fall off or they remain? Any color there would be helpful.

Sure. Well, we are on track to have reduced our legal fee expense by 50% over last year. ITC expenses will occur in 2026 towards kind of increasing over time towards the end of the year when the trial will actually occur. So we continue to believe that there will be a reduced amount of legal expenses compared to 2024, but probably about the same in 2026 as has been for 2025.

Suji still on?

Yes. I'm here.

Yes. I just -- I kind of ended on perhaps a negative note regarding Samsung. I just want to highlight that there are good actors and bad actors. We have Hynix, which is a licensee. They respect U.S. IP laws. They've licensed from us. They are the #1 supplier of HBM products to NVIDIA in the AI space. And they have also committed -- announced a plan to invest $4 billion in building of the HBM in the U.S and Lafayette, Indiana in a joint venture with Purdue.

Now that contrasts completely with a bad actor, who is way behind in the HBM technology. They are a very small player as a supplier into the U.S. for HBM. They have not taken a license in the last 5 years. And they have announced no plans to build HBMs in the U.S. So that, I think, is the contract that we're looking at. It's not everybody is flouting the laws and getting a free ride. There are good actors that abide by the IP laws of the U.S., and there are others. And it provides a huge contrast and we're trying to correct that, create parity amongst the different implementers. They all have to respect the rights of IP holders in the U.S.

Appreciate you pointing out the model that works through the U.S. there.

This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good afternoon, and welcome to the Netlist Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Michael Smargiassi 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 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 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 phaseout 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 2 years, Netlist has obtained 3 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 3 patents that Netlist is asserting in these 4 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 U.S. HBM revenues to exceed $25 billion annually for each Samsung and Micron by 2031.

The other patents include Netlist's '731, which reads on DDR5 DIMMs 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, Netlist 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 the final judgment inert 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 the 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 3 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 Netlist's 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 3 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 30 for the jurors to explain their answers, and allow Samsung and Netlist's attorneys to question them. After this evidentiary hearing, the court ruled that the juries were not biased and deny Samsung's motion on August 4 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 4.

In the Eastern District of Texas 1 case against Samsung, where Netlist 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 appellate for the appeal hearing at this time, but we estimate the appeal hearing could take place some time in the first half of 2026.

In the Eastern District of Texas 2 case against Samsung where Netlist 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, interparty 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.

Netlist is also following with great interest the recent changes at the patent office. In March of this year, Acting Director, Coke 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 clear and faster path to address PTAB review and is a welcome update to the process.

Finally, in June, we announced the appointment of Jun Cho and Blake Welcher to the company's Board of Directors. Jun 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.

Thanks, Chuck. For the quarter ended June 28, 2025, revenue was $41.7 million, an increase of 44% consecutively and by 13% year-over-year, reflecting the increasing demand from both our OEM and resale customers. While we do not formally guide given the booking and shipping for the third quarter of 2025 to date, and subject to the visibility we have today, we currently expect third quarter revenue to be similar to the second quarter of 2025.

Operating expense for the second quarter 2025 declined 52% compared to the prior year's quarter, driven by reductions in IP legal fees and R&D. We currently expect reductions in legal costs in 2025 as we enter the final phase of litigation for current actions.

We ended the second quarter with cash and cash equivalents and restricted cash of $29 million compared to $25.6 million at the end of the first quarter with minimal debt. In June, we raised $11.7 million net through the registered direct offering, which included a $3 million investment from Chuck, our CEO. With a $10 million working capital line of credit and approximately $74 million available on the equity line of credit, we continue to maintain significant financial flexibility and liquidity.

As always, we manage the operational cash cycle very carefully with days sales outstanding improved by 11 days over last year and the overall cash cycle improved by 20 days over last year's Q2.

Operator, we are now ready for questions.

[Operator Instructions] Our first question comes from Suji Desilva with ROTH Capital.

So Chuck, the DDR memory tightness as it's being end of life and the price -- firm pricing that you're seeing, is that a condition that can persist for several quarters through the end of the year for you? Or do you think that, that tailwind abates as we go forward here?

Yes, Suji, the tightness is in DDR4 specifically as the 3 major suppliers have announced end of life by -- so shipments kind of winding down at the end of this year. So we believe, at least through the end of the year and into first half of next year DDR4 will remain constrained -- supply will remain constrained. Therefore, prices will likely remain firm for the next few quarters. DDR5 is balanced supply and demand. So it's a fairly stable situation on DDR4 -- DDR5, sorry.

Okay. That's helpful, Chuck. And then some of the -- I'm trying to kind of fish through the existing verdicts you have versus the new patent cases you put in place for DDR5 and HBM related patents. Are the existing verdicts for DDR4? I wanted to clarify that. And then if that's the case, these new patents and the potential findings here, how would you size the -- think about sizing the damages relative to the nearly $1 billion of findings you've already had?

The existing verdicts, the 3 verdicts that combined for $866 million are for both DDR4 and DDR5. And so -- and then the new patents that we've asserted in these 4 separate assertions against Micron and Samsung are for DDR5, DDR5 DIMMs and DDR5 based HBMs. HBMs are all DDR5. Does that answer your questions?

Yes, it is. I'm just trying to -- so understanding, including HBM and other opportunities, how would you size these new opportunities relative to what you've already secured as verdicts?

Well, it's -- when we secured the original 3 verdicts, HBM's market was relatively in its early stages. So the volumes were not as big. We have asserted the new HBM patent against Samsung and Micron, and the new DDR5 patents against them, DDR5 DIMM patents. And the volumes for HBM has since exploded since our earlier verdicts due to the growth of AI servers, and that's been well documented. So the volumes are much, much larger, and the dollar exposure is much larger, tens of billions for each of these suppliers annually.

DDR5 volumes also have increased multiple fold since the original verdicts over the last couple of years.

No, that helps, Chuck, in terms of color. And then lastly, on SOCAMM, S-O-C-A-M-M, just that opportunity versus HBM, it's being seen as an alternative, whether you're similarly positioned with your patents across those 2 competing memory alternatives?

Yes. So Suji, I think it's -- I think you're talking about MRDIMMs. So SOCAMMs are a specific type of memory module that is used by NVIDIA only, using low-power DDR5 DRAMs, low power, meaning the DRAMs that go into mobile phones and tablets. So we have certainly IP position in that product line. But the bigger product that's coming down the pipe are the MRDIMMs. So MRDIMMs are the highest capacity, highest speed. We focus on the high-end niches. And MRDIMM is going to be the maximum capacity, maximum speed of any server memory module. And that has started to ship in small volumes.

It may become -- MRDIMMs may become the bulk of the memory server -- memory DIMM market in the server space. So -- and that product utilizes a lot of our IP, including power management, rank multiplication in the MUKs as well as the load reduction, the data buffers, all of those were inventions that we came up with over a decade ago and have patents on. So that's a market that we certainly aim to cover.

This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.