Netlist — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales reached $105.1 million for the third quarter of 2026, a 149% increase year-over-year compared to $42.2 million in the third quarter of 2025.
• License fee revenue totaled $44.9 million in the third quarter of 2026, compared to $0 in the prior year period, driven by the Samsung License Agreement.
• Net product sales were $60.2 million for the third quarter of 2026, representing a 43% increase year-over-year from $42.2 million in the third quarter of 2025.
• Gross margin improved to 65.5% in the third quarter of 2026, an increase of over 61 percentage points from 4.4% in the third quarter of 2025.
• Operating income was $40.6 million in the third quarter of 2026, reversing an operating loss of $7.2 million in the third quarter of 2025.
• Net income was $85.4 million, or $0.22 per diluted share, in the third quarter of 2026, compared to a net loss of $7.0 million, or $(0.02) per share, in the third quarter of 2025.
• Cash, cash equivalents, and restricted cash increased to $327.7 million at September 26, 2026, from $40.7 million at June 27, 2026.
• Operating cash flow for the quarter was $245 million.
• Deferred revenue increased to $258.0 million total ($78.4 million current, $179.6 million noncurrent) at September 26, 2026, from $30.6 million at December 27, 2025.
• Total liabilities were $331.9 million at September 26, 2026, compared to $54.7 million at December 27, 2025.
• Stockholders' equity turned positive to $157.9 million at September 26, 2026, from a deficit of $5.2 million at December 27, 2025.

Guidance and Future Outlook:

• Management highlighted expectations regarding future growth and profitability based on the company's intellectual property portfolio and licensing agreements.
• Forward-looking statements indicate potential revenue from license agreements with Samsung and Micron, subject to revenue-based formulas and collection risks.
• The company anticipates continued demand for products in AI and data center applications.

Business Segments and Product Lines:

• Product revenue growth was driven by strong demand from customers in AI and data center applications.
• The company recognized initial license fees and the first quarterly license fee under the Samsung agreement.
• The company maintains a portfolio of patented technologies foundational to AI computing advancement.

Market and Competitive Landscape:

• The company is positioned to capitalize on next-generation memory products.
• The market environment includes general economic, political, and market conditions, as well as factory slowdowns or shutdowns.
• Changes in international trade and tariff policies are noted as potential market factors.

Risks and Challenges:

• Risks include the potential inability to collect amounts owed under agreements with Samsung and Micron, and the possibility of adjustments to quarterly license fees.
• The company faces risks related to ongoing litigation with Google and other active proceedings to defend the validity of its patents.
• There is uncertainty regarding the success of strategies to monetize, license, expand, and defend the patent portfolio.
• Future product sales depend on the persistence of current market demand and the successful development and launch of new products.
• Risks exist regarding the ability to acquire components or products for resale on favorable terms.

Management Commentary and Tone:

• CEO C.K. Hong expressed pleasure in reporting the third consecutive quarter of significant year-over-year revenue growth and improved profitability.
• CFO Gail Sasaki noted that gross margins improved due to a focus on higher margin opportunities and the strengthening of the balance sheet.
• Management emphasized that the balance sheet was substantially strengthened by initial proceeds from the Samsung agreement.

Other Key Points:

• The Samsung agreement included an initial cash payment of $200 million and a first quarterly payment of $27.5 million.
• The company generated a significant increase in deferred revenue, with a $227.5 million increase over the nine months ended September 26, 2026.
• The company paid down its revolving line of credit, reducing it to $0 from $1.8 million at the end of the previous period.
• Proceeds from the exercise of stock options and warrants totaled $42.0 million for the nine months ended September 26, 2026.
• A deferred income tax asset of $89.1 million was recognized at September 26, 2026, compared to $0 at December 27, 2025.
• Stock-based compensation expense totaled $6.9 million for the third quarter of 2026, compared to $0.8 million in the same period of 2025.