Welcome to the MoSys First Quarter 2018 Financial Results Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded today, Thursday, May 10, 2018. I would now like to turn the call over to Beverly Twing of Shelton Group Investor Relations. Beverly, please go ahead.

Thank you, Christy. Good afternoon, everyone. Joining me on today's call are Len Perham, MoSys' President and Chief Executive Officer; and Jim Sullivan, Chief Financial Officer. Before we begin today's discussion, I would like to remind everyone, this conference call will contain forward-looking statements based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Such statements are made in reliance upon the Safe Harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities & Exchange Act of 1934, which include, but are not limited to, benefits and performance expected from use of the Company's ICs and embedded memory, and interface technologies; expectations concerning the Company's execution and results, product production, product development, achievement of IC design wins, timing of shipments of the company's ICs, predictions concerning the growth of the company's business and future markets and business prospects, strategies, objectives, expectations, or beliefs. Forward-looking statements made during this call are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information concerning factors that could cause actual results to differ materially from any forward-looking statements made during this call are contained in the company's most recent report on Form 10-K filed with Securities and Exchange Commission, in particular in the section titled risk factors, and in other reports that the company files from time to time with the Securities & Exchange Commission. MoSys undertakes no obligation to publicly update any forward-looking statement for any reason except as required by law, even if new information becomes available or other events occur in the future. Thank you for your attention. I will now turn the call over to Len Perham, CEO of MoSys. Please go ahead.

Good afternoon everyone and thank you for joining us today. We are pleased to be hosting a quarterly earnings conference call once again. Since 2017 we have been hard at work improving our financial situation including resizing our organization and bringing costs in-line with revenues. These actions combined with customer growth in the ramping of earlier design wins in the production has resulted in most of us achieving GAAP profitability for the first quarter of 2018 which validates the progress we've made over these past several quarters. Much like past calls by I will start by highlighting the first quarter financials and then review the current status of our business including design wins, the sales funnel and product development. I will then turn the call over to Jim Sullivan to discuss our financial results in more detail and make a few comments regarding second quarter guidance. Following our remarks we will open the call to questions. So let me begin by highlighting a few notable first quarter financial metrics that reflect the continuation of the momentum first initiated during the second half of 2017. First product revenue increased to $3.7 million in the first quarter while total revenue increased 11% sequentially to $4.2 million nearly doubling the revenue as compared with the first quarter of 2017. Second our IC, that is a product gross margin improved to 57% from 41% in the previous quarter contributing to an improvement in total gross margin to 62%. Third total operating expenses decreased 9% sequentially and lastly we achieved GAAP profitability for the first quarter of 2018. Our revenue growth since the beginning of 2017 demonstrates the ramping of our [indiscernible] products with new and existing customers while our transition to profitability and reduced cash burn highlight the benefits of our restructuring and cost…

Thank you, Len. Good afternoon everyone. It's good to be speaking with you today. During the course of my comments I will make several references to non-GAAP numbers. Unless otherwise indicated each reference will be to an amount that excludes stock based compensation expense, amortization of recorded intangible assets and restructuring charges. These non-GAAP financial measures and a reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related current report on Form 8-K which was filed with the Securities and Exchange Commission today and can be found at the Investor Relations section of our website. Turning now to our first quarter 2018 results. Total revenue increased approximately 11% sequentially to $4.2 million from $3.8 million in the fourth quarter of 2017 and a significant increase from the $1.2 million in the first quarter of 2017. Product revenue from the sale of our integrated circuits was 3.7 million in the first quarter driven primarily by shipments of our Bandwidth Engine devices to 10 customers. This compared with product revenue of $3.5 million in 2017 and $1 million in the prior year quarter marking an increase of almost 3x on a year over year basis. Bandwidth Engine 2 will continue to be the most significant contributor to revenue in the near term where we continue to ship initial preproduction unit volumes of our Bandwidth Engine's 3 devices and complete final shipments of our Bandwidth Engine 1 products. Royalty and other revenue for the first quarter of 2018 was $0.5 million compared with $0.3 million for both the fourth quarter and first quarters of 2017. Royalty and other revenue in the first quarter of 2018 included $0.2 million of royalties received from semiconductor customers as products and cleared our IP and $0.3 million of licensing…

[Operator Instructions]. Our first question is from Gary Mobley of Benchmark. Your line is now open.

Let me extend my congratulations on reaching profitability. I know it's been a long road. I want to start up by asking about gross margins, looks like you had about 65% product gross margin in the first quarter and you mentioned the benefits in the inventory reserves can you specify how much of the benefit that was and then including the benefit, what kind of product gross margins are you looking at on a go forward basis?

Gary, thanks for the question and good to be speaking with you on the bottom line number doesn't have brackets around it, it has been a while. With regard to the gross margin product gross margin specifically were 57% for the first quarter of 2018 which compared with 41% product gross margin for the fourth quarter of 2017 so as you point out a sizable increase. We incurred reserves in the fourth quarter of 2017 for products so that caused a meaningful hit to gross margin in the fourth quarter and obviously those reserves did not recur in the first quarter of 2018. So that was a big driver. We also had some product mix changes in some cases we are still shipping some LineSpeed technology which was off a shuttle rather than a full mass [ph] has lower gross margin so things like that that impact makes - the first quarter of 2018 did benefit from some reserve reversal specifically we had a fairly large quantity of Bandwidth Engine 1 product which we will end up you know as time has played out shipping in its entirety that probably benefited first quarter 2018 gross margin by maybe 2 percentage points. Going forward we're trying to hold the line here at 55% product gross margins it's kind of my guideline, that said it can fluctuate a couple of percent either way as product mix moves around but certainly I see nothing that would cause it to go below 50% at any point remainder of 2008 [ph] subject to something an unusual issue, a very low yield, on a wafer something like that although that said we also have benefited in last couple of quarters not to put the jinx on us from better yields on our Bandwidth Engine 2 wafers.

Okay. And after all the restructuring and right sizing relative to your revenue your R&D expenses for the quarter was about a fifth or a quarter of what it was it may be at peak and so the question is now that you're profitable and close to being cash generative you know once you get pass the prepayments. Is there any consideration to accelerating the R&D investment for more robust product roadmap?

So I will start off on that Gary, so when we scaled the company we preserved the majority of our applications engineering capability and some of the software team necessary for the uniquely programming the programmable search engine. Jim mentioned a couple of times and maybe I did as well but the by far the biggest selling Bandwidth Engine right now is Bandwidth Engine 2 although we've won some designs and we're seeing that maybe that we can see down the tunnel to where the some of these Bandwidth Engine 3 designs might ramp a bit and we're seeing some further interest in the sales following Bandwidth Engine 3, but I think that for the foreseeable future the majority of the design win will continue to be Bandwidth Engine 2 and it looks to me as though the need for very high speed access and the ability to go offload computationally intensive functions and [indiscernible] CPU or MPU that are disadvantage trying to do what at wireline speeds. We'll start seeing more and more opportunities for Bandwidth Engine 3 and a programmable search engine over the next three or four or five quarters. So for the time being I don't have much of a reason to ramp up the R&D costs because the new products are sitting and waiting to be win some designs and we're probably spending our R&D dollar maybe a bit more looking at Newmarket sectors we might serve. I think we mentioned that we now have an industrial grade targets running I think 15 gigabits per second at industrial grade temperatures and though we're looking at applications where that's important and rather than what we said about trying to do some complex new integrated circuit we're going to take advantage of all the capability we have in place and see if we can see some market segments that we could serve that are under-served by us right now and you should expect to see more of that for the next couple of quarters in increasing R&D cost. Jim I don't know if you want to?

No your answer was spot on, Len. I think the other area where will - we invest as obviously whatever we can do to - this doesn't necessarily hit R&D to improve our gross margin, additional hardware, [indiscernible] things like that and we're starting to obviously see the benefits of as Gary pointed out with the improved GMs.

So my last question, you mentioned 10 customers, I'm assuming [indiscernible] networks was by far the biggest customer. Where they your only greater than 10% percent customer and do you have something on the horizon, some customer diversity or maybe more cylinders to maybe appease you Len to start firing and drive further revenue growth.

So for sure we've mentioned from time to time that a very key customer is AOL, Nokia and so certainly they were of significant size in terms of revenue percentage as well. Also we mentioned that we had one very fairly significant design and you know careful look at what my comments about that would say that it is a significantly large customer as well. It's a customer in the size range of say Palo Alto and they are going to rampage - the design win was just in the cycle to get there to release into production to be 18 to 24 months maybe a little bit less than that because it's been around for a little while and I don't know if we have any other customers that big and all, I think we have two that are significant over 10% and then then another four, five that make up the 85%.

Yes there is one other Japanese customers just over 10% so three in total and the two biggest.

Our next question is from [indiscernible]. Your line is now open.

So in the end market applications where you have content, can you talk about which ones you think Len or Jim have the best growth opportunity in the next 12 to 24 months we can kind of rank order them?

Make sure I understood that question, please, say that again.

Sure. So the end market applications that you have a content in, which ones have the best growth opportunity in the next 12, 24 months?

It seems to me that a very high area of the market right now is enjoying significant growth is security appliances or anything that's conditioning data streams that are heading toward security appliances and so I would think our customers that are serving that market are probably growing very robustly if they're successful and probably going to continue to grow robustly. On the other hand it seems that the traditional network and some of our customers are in the traditional network providing equipment for the traditional network and it's - that is probably in the last phases of all of the existing hardware having its performance optimized by the clever use of software. You know network function virtualization or [indiscernible] new type just looking at some kind of algorithm to improve efficiency of the network hardware. So the hardware is evolving forward and has been evolving forward a bit slower. I think we're in the last phases of that because we think maybe the theoretical capability of the hardware maybe getting to maximum now and we'll start seeing it move forward. I think our customers that serve traditional networking equipment requirements are doing well. I believe they're having a good year maybe even a little bit better than they thought but I think the people that are providing stuff into the security appliances and our signal conditioning as a heads to the data center, it's a very new area and there's a lot of demand for it and it's probably moving faster. So I think that would be the fastest growing area for us.

And then perhaps for Jim, the revenue guidance you gave. Can you remind us how you think about visibility and your back coverage in that and maybe for the full year how much - how your visibility plays out into what you guys might be able to do the rest of the year. Thanks.

Yes. I mean currently our visibility is excellent. As Len mentioned in his comments, his prepared comments our customers have been very supportive and you know led by our largest customers so to provide visibility and in particular for us to manage our business and our cash flow because I've been in the situation here since last year where I have to basically buy wafers on 18 week lead times pay for them upfront and then wait until the customers. They've given us very good visibility out through 2018 and in some cases into early 2019. As I mentioned also and we have disclosed in our SEC filings we also decided to end the Bandwidth Engine 1, we were down two customers there. One of the customers transitioned to Bandwidth Engine 2 since he had designs already at using that part. The other customer basically has taken an end of life order which you know I expect will ship through the end of March 2018. So right now our visibility is very good and you know operations team is just you know managing orders. As we look at the run rate business and what we see you know starting to turn on and get added. In some cases you know we've seen the run rate from the contract manufacturers you know they try to wait till the last possible day to order product on a lead time and we've seen - they generally do that and they pull in and so far our team has done a great job of meeting that and of course on the flipside when it comes to paying our invoices it's amazing how much cash was up on the first and second day after the end of the quarter. They hold on to that, long winded answer but net-net visibility is very good looking out.

Our next question is from [indiscernible]. Your line is now open.

If I can phrase this way respectfully the products that you've had have always been ahead of their time and is almost as if the feet have to catch up with the capabilities that you've. So my first question on the product side is do we feel like the speeds have finally caught up to where there is an appreciation and strong need for your products and where there is less possibilities in terms of what else to use and on that same note part b of the question would be, there is rumours of some of the competitors having not next generation products because they can't hit higher speeds you know any thoughts on that is that accurate or not?

So I think the good news for us is that you know I had a sentence in my remarks here is that I just want to flashback to you for just a second that and I said the importance of high random access rates will increase with the trend towards edge computing and packet processing at the compute server and that's happening right now and the Bandwidth Engine family is fundamentally going through the [indiscernible] world, it's a high speed real fine SRAM memory and that it has very low latency but much more important it has very, very high access rates. So you're able to offload high speed statistical computations or high speed searching or you can even use a programmable search engine to take some turnery cam functions offline and work the whole problem inside of the programmable search engine and just access it once and send the answer back once and maybe do billions of computations over and what begins to look like a core processor. I think as we go forward we mention today that the growing trend of 100 gigabits per second go under the server, that's just on its way to 200 and 400 it's going to get faster and faster and as we get faster and faster the need for very high access rates and the needs the trend towards edge computing and packet profit it's a computer server, it's going to become more and more product prevalent and does need to accelerate the hardware somehow which plays very strongly to people who have really high speed access and real time compute capabilities can play a role. I think one of the things we didn't say much about today but we're out talking to new and existing customers we're also going to be looking at some new applications that are emerging on equipment this may be still on the drawing board at our customers houses and maybe a few opportunities are going to open up along the way where we can get into our - help provide solutions to new problems that have to do with the ever increasing speed of the wireline.

Thank you. And that does conclude our Q&A session for today. I would like to turn the call back over to Mr. Len Perham for any further remarks.