Good morning, and welcome to the MoSys First Quarter 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Friday, April 19, 2013. I would now like to turn the call to Beverly Twing of Shelton Group, Investor Relations. Beverly, please go ahead.

Thank you, Dave, and good morning 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 that this conference call will contain forward-looking statements based on certain assumptions and expectations of future events that are subject to risks and uncertainty. 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 embedded memory and interface technologies and ICs; expectations concerning the company's execution and result; expected benefits of the company's ICs; product development; achievement of design wins and timing of shipments of the company's ICs; predictions concerning the growth of the company's business and future markets, 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 material 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 annual report on Form 10-K filed with the 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 and 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. So thank you for your attention. I will now turn the call over to Len Perham, Chief Executive Officer of MoSys. Please go ahead, Len.

Thank you, Bev, and good morning, everyone. Thank you for joining us this morning. I'm going to begin today's call with an update on our design win efforts for the Bandwidth Engine family of products, and now a bit of an update on our new product, the LineSpeed family. And then provide you a review of our progress on Bandwidth Engine 2 and other activities of the company in the recent quarter. Jim will then review our first quarter financial results prior to opening the call for your questions. Regards to design wins. Sales activity across all regions continues at a strong pace. Building on this momentum, we continue to aggressively pursue additional design wins for our Bandwidth Engine family of ICs in the first quarter of 2013, as well as advance our pipeline of design wins in progress. These efforts have been rewarded as we are making gratifying process across a wide front. In February, we received our first order for Bandwidth Engine 2. We received this order from a Tier 1 network equipment manufacturer, and we've been actively working on this opportunity for some time. And from the looks of it, the customer is jumping over testing on evaluation boards and getting right into subsystem prototyping. Because you sort of short-circuited out our system, for today, I'm going to call it to design and tell you it's a strong indication of a design win. We are operating under a stringent NDA, so we'll not identify the company by name. However, we've been working closely with this customer for the last 4 or 5 quarters on this architecture. Yesterday, when I wrote this, I had this next sentence: We might even be able to let you know this potential win has extended to other platforms in the next quarter…

Thank you, Len, and good morning, everyone. During the course of my comments, I will make similar references to non-GAAP numbers. Unless otherwise indicated, each reference will be in amount that excludes stock-based compensation expense and intangible asset amortization. These non-GAAP financial measures and the 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. Prior to discussing our financial results, I would like to first briefly address our IP business. We continue to record licensing and royalty revenue from ongoing SerDes and 1T-SRAM IP projects. However, our IP licensing and royalty revenue have declined, as we have not been actively pursuing additional new licensing agreements since late 2011 and have been focusing on becoming an IP-rich fabless semiconductor solutions provider. We have substantially completed our obligations under these ongoing projects, and our revenue reflects this business shift. Now let's review our first quarter results. Total revenue was $1.3 million, compared with $1.6 million for the fourth quarter of 2012 and $1.4 million for the first quarter of 2012. Licensing and other revenue for the first quarter was $0.2 million, which was comparable to both the fourth and first quarters of 2012. In the first quarter, we continue to make shipments of our Bandwidth Engine integrated circuits to multiple customers, and the revenues we have recorded have been included in licensing and other. Royalty revenue for the first quarter of 2013 was $1.1 million, compared with $1.4 million for the previous quarter and $1.2 million for the first quarter of 2012. This sequential decrease in first quarter royalty revenue was due primarily to reduced royalties…

[Operator Instructions] First question comes from Gary Mobley at Benchmark.

Len, I was hoping you could share with us the additional steps that have to be met between a prototype for Bandwidth Engine 2 and when you may actually see a full-on design win with this Tier 1 customer, specifically.

I think that I'm kind of looking right on past this design win question you've just asked, Gary, if you will be patient with me. We've received, what I'm calling, prototyping orders to -- for the subsystem level, board level Prototyping of various parts of the customer subsystem. In my opinion, what we're going to see now is him doing the final design of his end big networking router. And what we should expect to see is that he's going to be bringing up various parts of the subsystem and interfacing with us even more than he has been, which has been fairly intense for a long time now. And that we should be expecting that we would start seeing system prototyping orders, where he's releasing a number of boxes into his channel later in this year or maybe even in the first half of next year. I haven't tried to nail his schedule down on that. And the downside could be that he could decide, for marketing reasons, that his box is the wrong one to bring to the market or he could cancel it, and to let us know that he's decided not to release that box to the market, but that is not a very usual occurrence in this business, so that would be usual. And otherwise, he would have to find some reason why our -- why his -- one of his subsystem doesn't work for this to not to go forward now. So for me, it's a reasonably short path between designing and design win. And some of that question probably was answered implicitly yesterday when the customer called in and made a second -- placed a second order for another platform out of a different location. I hope that's a reasonable answer, Gary.

Yes, that's great. And is it going to be a requirement to have a second source supplier arrangement in place for Bandwidth Engine 2 with this Tier 1 OEM? I'm assuming the answer might be yes. But extending the question, how might we see a financial arrangement with a second source partner materialize? And if you're not willing to explicitly detail that, could you give us some precedent, as in the case of RLDRAM 3, and how second source relationships materialized on that front?

So basically, as you've heard me mentioned on calls in the past, Gary, we have a continuity of supply arrangement in place with respect to our early on customers out of Asia. And reflecting back on a company where I was chairman awhile back, that most of you guys are aware of, a company acquired by Broadcom 1 year or 2 ago. In the early days of that company, we discussed those kinds of arrangements, too, because that company also brought a lot of products to market that nobody else supplied. And over time, they proved to be a bulletproof reliable supplier with a high-quality product and some of that stuff kind of vanished into the background. So the continuity of supply arrangements work well and they're well understood in the industry. With the continuity of supply arrangement in place, I don't think we're going to have any problem with these platforms that have been released, so these platforms are not released contingent upon us having a second source in place. Now having said that, MoSys remains committed to bringing up the second source. And we've -- we're in discussions with a couple of different companies that have come a long ways. And one of the reasons we're going a little bit slow, it's reasonable difficult to finalize a second source arrangement when we haven't seen the first real production already yet. And remember, even though we've -- I'm reporting a lot of very solid progress that we've all been waiting for, there is a bit of runway before we see the production orders yet, and these things are going to take off late this year or the first half of next year. And so when we start shipping some volume production, I think we're going to -- you're -- if it doesn't happen before, you're then going to hear us talking about signed up second sources. So the answer to your question today is one, no, there's no contingency to have a second source on the business side reported on this morning, none. And two, we're committed as a company to having it, a second source in place. And three, we're making measurable progress in that direction, and that's -- I hope that's a good answer.

Okay. Last question for me then I'll jump in the queue. Could you talk a little more -- in a little more detail about the go-to market strategy for Gearbox? And when might we see some revenue from that product?

Yes, that's kind of a -- that's a good question, Gary. Let me tell you what the go-to market for that is. John Monson and Mike Miller are leaving for the Pacific Rim tomorrow. So that's the go-to market. We've been talking about this part -- we talked about it at DesignCon. We actually had a 100-gig link running at DesignCon, and my understanding is that it was running cleaner and signal integrity better than anything else on -- that was being demonstrated at that event. And we then went down to the optical, the fiber conference. And I have mentioned on my call, San Diego, but it wasn't. It in Anaheim, and we showed it again. And it generated enormous amount of interest at the booth both from customers and from competitors. We have -- we've got a -- the events around the Gearbox are moving faster than our ability to cope with them. We're in the business of generating the support collateral for the product. And we're in the business of scheduling customers and we've got a fair bit of characterization and reliability testing to do on the part yet, so there's still some stuff. It's a new part, not totally through the final and full release because that takes a while. But the go-to market strategy is to put it out to the same channel. It goes on the same line card where optical signals might come into a line card and go through an optical module and you come out of that with, maybe, a couple of 25-gig, a couple of 40-gig and a bunch of 10-gig lines and they go into a Gearbox, where they get resynchronized and retimed and you output 10 10-gig lines. And exiting the board, you might have a reverse Gearbox. You might bring 10-gig lines in and output something else back into the optical module and out -- into a fiber over to another line card or back to the backplane. Anyway, I have given you more than you probably wanted, but there's a lot of action around this. We just chose not to say much about it until we knew we had it. Okay, Gary?

Your next question comes from Jeff Schreiner of the Feltl and Company.

Jeff Schreiner, Feltl and Company. Jim, OpEx certainly came down. There was probably some charges that you've highlighted associated in Q4 that might have just been associated with Q4. What's the expectations about being able to sustain, I guess, current OpEx levels through the remainder of calendar year '13? And through and on top of that, you said no BE3 mask is likely in calendar '13. Is there going to be -- need to be any type of development costs, mask costs, what have you for any of the Gearbox products in calendar year '13?

Yes, I mean, Gary, as I said on the call, we were obviously, very pleased with the expense levels in this first quarter. If I look at it on a non-GAAP basis and put back in the Synopsys asset sale, which obviously won't recur, we were at around 5/8 [ph] and I'm certainly pleased to see it anywhere in the non-GAAP in the $6 million or so range. Right now, looking out and with the fact that while BE2 is looking great, there's still testing characterization going on, while Gearbox is looking great, there's still a little more to be done there. Right now, I'd probably have to say I couldn't see -- it'd be tough to sustain them at this low level, but I don't see them moving up significantly other than when we have timing of, as you said, development costs. I think Gen3 will see most of the costs out possibly as early as Q4 '13, more likely into '14, but that's more of an operations, engineering as far as timing, et cetera. Obviously, we're focused on the current levels of Gearbox. And as Len mentioned and alluded to in his call, we're looking to expand that product family. We could have some development costs there. Tough for me to predict it, but I'm giving you a lot of words. The net answer is I think we'll see some uptick, possibly, in the second quarter maybe as much as -- it's tough for me to say looking out at it. I think the other area where we're achieving some savings is on the CAD tool front as we had a lot of our licenses with the big CAD providers come up for renewal here in the end of the fourth quarter and into the first quarter. And we were finally able to change our mix of licenses moving away from some of the IP tools and bring some costs down there.

Okay. And I guess just kind of staying around that on the costs and such, has your annual expectation, in terms of where you might end up with ending cash balance by the end of calendar year '13, has that changed at all following the March quarter in which you didn't see incredibly high levels of cash burn?

Obviously, we're not in the -- we're not giving forward-looking guidance, but with that said, I've taken this question and given answers on previous calls. I think in the past, I've said just assuming a steady run rate and certainly, with the -- we can't control the production ramps of our existing design win customers, although we do still expect that to start to see those volumes in the second half of this year. I've said $15 million to $20 million in the past. Today, and after a good first quarter and with looking out ahead here, given the fact that we like what we see with both Bandwidth Engine 2 and Gearbox, I'd have to say, probably in the -- keep it in the $15 million to $18 million burn range for the year.

Okay. Last question for me, Len, just to get your thoughts on this and trying to get my arms around just possibly the situation here of the industry also started to shift as MoSys is entering in. In a question to TJ yesterday, the CEO of Cypress Semiconductor, they stated that their next-generation product is going to offer serial I/O. And I'm just wondering how that maybe impacts Cyprus who, maybe, could be a potential second source partner? Or how does that influence the industry who often times, in the past, has always chosen the evolutionary path not the, maybe, MoSys revolutionary path? Can you help me understand that?

So actually, I have to smile. It's been a long time since somebody brought up TJ to me on a call, probably since I've been -- when I was running IDT. It's good to know he's out there. He's a bit younger than I, so he's going to be around longer and he's a very smart guy, there's no question about that. However, I think it would be absolutely marvelous if somebody brought out a serial I/O QDR memory, and I would greatly encourage my good friend TJ over the there at Cyprus to do that. It would be good for the industry. It would be even better for the industry if he brought out that QDR serial I/O memory and he used the GCI interface. As a matter of fact, I would publicly say that if he -- I would personally come over and give him a hand doing it. And since neither one of us is circuit designers, it would probably take us a very long time. However, having said that, let me say further, I hear much more conversation from people around the -- or I hear an equal amount of conversation around the people in the QDR camp or the SRAM camp regarding wide I/O, 1,024 I/Os or something like that, and even the conversations now and then about these high-bandwidth memories or hybrid memory cubes and -- or in multi-chip solutions [ph] at 2.5D. And I've been in this industry a very long time. In the history of the world, that has never been anything other than the highest possible cost solution. And what MoSys has brought to market here is what I call the traditional, old solution, a monolithic integrated circuit that can serve your needs while increasing performance, reducing power and cost. Now we've said from the beginning, in order for us to totally achieve our dream, we need more and more of the people who are on the building materials of line cards with us to move more and more quickly to serial communications on the line card, recognizing that the line card now runs as fast as the server room did 10 or 15 years ago. We would like to encourage them to use our interface so that by working together, we enable the shared customer to get to the performance levels he needs for his next-generation systems. And to that end, there's a place for QDR, and it's not going to go away. And a serial I/O QDR would be an interesting product. I would really encourage TJ to take a look at it, and that's my position on that, Jeff.

The next question comes from Ian Ing at Lazard Capital Markets.

Congrats on the prototyping orders at the Tier 1 customer. A couple of questions. Perhaps you could talk about the time frame to fulfill the delivery of the prototype quantities with this multi-quarter request.

Yes, Ian. Thank you for the question. It is a multi-quarter request, but some of it is required in this quarter, and we're going to be in a position to support it. We won't have a completely, what I call, group C certified product in this quarter, which requires 1,000 hours of a live test on 3 different date coded runs from your wafer supplier or your foundry. However, we will provide live tests of that level on the run that we sample from. We have made great progress with characterizing the product, and we've made great progress verifying the functionality of the part. Much remains to be done, but we're in a position to supply samples and prototype quantities this quarter and next quarter to the product specification that we built the product to serve.

Great, okay. And then this LineSpeed product you're announcing sampling this quarter, could you compare it to the design win process to the Bandwidth Engine 1 and 2? Is it sort of the same level of complexity, the same time frame to get a design win? Or would it be a faster process?

Actually, the LineSpeed, our line -- our first member of the family is 65-nanometer process node based. That was because we had a lot of tools already developed, and we're very familiar with it. The barrier to entry to into the Gearbox market is not going to be as high as the barrier to entry into the Bandwidth Engine market. On the other hand, there's a limited number of players that have the ability to do stuff that is running 25 or 30 gigs on the I/O today. And the people that serve that market primarily right now would be, and I'm not sure the order, but certainly Infi [ph] and Broadcom and maybe AMCC or APM, whatever they call themselves. It's a very valuable solution on the customer's line card and it commands a very good price. I think the learning curve on the pricing will be more predictable and perhaps a little bit steeper because gradually, people can come and back you up with multiple sourcing on that. I think we're a little bit late to the market because a lot people have been working on this for a very long time. On the other hand, it's notable that we just tried it once and it came out and worked the first time. We're encouraged by our progress, and we have an absolutely outstanding analog design team at our disposal here in the company. So it's taking advantage of the capability that we have, Ian. It's on the board that we want to serve, so more ownership and being more important to our customer is good. It commands a good margin. And it's a location, and it's a product that's strategically significant to us. I hope I've answered your question.

Yes. So given the easier design win process, is it possible that LineSpeed could ramp in production volume ahead of Bandwidth Engine 2? Is that within the realm of possibility?

I think that -- I think there's a real need for this product right now. And I didn't say much about it, but we talked about this part being be able to serve, what we call, extended reach applications. This particular product to Gearbox, there's a very short reach standard. I think it's 12 decibels. And there's a short reach standard, which, I think, is 15 decibels. And then for backplane applications, there's a long reach, either 30 or 35 decibels. And our part was designed for the applications for short reach and very -- maybe very short reach and short reach, applications more on the line card than across the backplane. But the part has proven to be extremely robust and we're able to push through maybe, I don't know, somewhere between 28 and 35 decibels. So we haven't specified that we have a long reach part yet, and we're continuing to evaluate the part. But some of the interest on the part is in the backplane and -- so this is a very significant development for us. We're very excited about this part. I hope I answered your question, Ian. I'm sort of rambling.

No, that's a great update there. And my last question, perhaps it's a bit too early to ask this, but where are we on getting on approved vendor lists at Tier 1 and Tier 2 OEMs? You can get design wins but sometimes being on the approved vendor list helps drive more adoption. Just want to see where we are with that.

Actually, the steps to get onto the AVL, the Tier 1 guys are going to require us to make sure we're paying a lot of attention to getting our group C. And what we would normally do is get the group C for Bandwidth Engine 2. We already have done it for Bandwidth Engine 1, so we'd be more than happy to have our Tier 1 guys come in and audit us. We have been audited by a number of suppliers already. As we get closer to production quantities of BE2 or as we move down the road to more and more action around the LineSpeed product, I would expect that our QA guy would get a call from the QA guy at the Tier 1. He'd asked to come over and audit our processes. We're very, very strong and robust in that respect. We have ISO certification. Our QA guy, I used in some of my other businesses, to just come in and help the other companies bring up their ISO capability. Phil is very experienced and had been at it a long time. So I would think we would get an inquiry from the quality guy at the Tier 1 that he'd like to come by and do an audit. It'll just sort of follow a standard course, I think. In one case, the LineSpeed part has developed enough interest that I think it is the Tier 1 guy has already said that, "Hey, you're not on the AVL yet, but we can fix that." I think, as I said, we're going to -- things can happen a little faster perhaps on the LineSpeed device than BE in that it's a part that's being looked at and needed for a while as opposed to BE, which is a revolutionary step forward.

Your next question comes from Kevin Cassidy at Stifel. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: I wonder if you could tell me the processor that your customer is using along with the BE2. Is it a custom processor? Is it a commercial processor?

Our -- I'm going to be a little vague about this. Most of our business to date has been on FPGA-based platforms. The various high -- the very highest performance projects that we're working on are, at the current time, some of them are using generic. I'm going to call it generic NPUs, with the kind of thing you might get from a Cavium or an EZchip or an RMI, who is now part of Broadcom, of course. So we are involved in several of those projects that we haven't even declared design wins yet, and most of that very high-end stuff is with the Tier 1s. The project, the one -- at least one of the projects we're talking about this morning with the Tier 1 is the FPGA-based and the other one, I'm not sure of it at this time. It's kind of moved forward quicker than I had anticipated. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. And maybe along those lines, all those companies you named, are you working with them directly to -- for a reference design to start -- to try to get some leverage on your sales efforts?

We've been working with some of these folks for a fairly lengthy period of time, but there's nothing of note to report this morning. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Just one other question then. On alternative designs or the competition for your Tier 1 customer, do you know what they were considering? What are you replacing?

Actually, if we take a look at BE1, it was initially targeted for replacing RLDRAMs, which are getting a little bit long in the tooth. And as you go higher and higher performance, they have some issues with latency and in some cases, they have some issues with -- well, mostly, it's latency or just core memory speed is just not acceptable. Then Bandwidth Engine 2, of course, has a onboard cache and can meet Burst applications, which is the MSR620. So in that respect, some of the applications we're seeing are QDR. We're replacing some QDR devices. And because BE2 has a higher I/O speed and a broader feature set, it's just in the -- and a better, higher, maybe a 20%, 25% better latency, it's getting into some higher speed platforms. Ask me your question again, so I make sure I give you the right closing answer. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: Yes. I was just wondering what the alternative designs would be. You had...

Ah, yes. There's really -- when we take a look at the competition out there at the very high end, we're not seeing anybody with a monolithic solution. The RLDRAM guys have come now with RLDRAM 3, which is capable of a giga access per second. If we look out to Gen3, which will be available the first half of next year, it's probably somewhere between 8- and 12-giga accesses. I mean, it just changes the whole nature of things. So the RLDRAMs are -- have stepped up a bit. QDR memories are trying to get to 144-meg in size but they're pretty small. And I didn't mention it, but I think that TJ may have mentioned on his call yesterday that there's some soft error rate problems with QDR memories now because the cell size is so small and they're struggling, and perhaps some of that can be overcome with the advancement of FinFET technology. I'm just not sure about that. And -- but a lot of people talk to us about the roadmap to 2.5D and to 3D solution, where you have multi-chip modules that are either sitting on interposers or sitting on organic substrates or even memory [indiscernible] where you stack one die on top of the other. My opinion is for stacking die on top of one another, it's probably not going to do a lot in the networking business because we -- such high performance is required. There's too much power dissipated. But I think looking down the road, 3 to 5, 6, 7 years, I think we will start to see some 2.5D solutions using either organic substrates or interposers with 2.5D or just very sophisticated multi-chip modules. And we're actually having someone conversations with people about that as well. But in the horizon of the next 3 to 5 years, I think there's going to be some very, very good monolithic solutions. And at the current time, we're the, I think, we might be the only guy that has one.

You have no further questions now, gentlemen, so I would like to turn the call back over to Mr. Len Perham for closing remarks.

Yes. I have one, just one closing remark, it's a little bit long. First off, I intended this morning to convey to you that we have made serious progress or excellent progress this quarter against the goals and objectives that have been -- that I've identified as important to us and, therefore, important to you. But closing, let me close on a cautionary note. Yes, we've made great progress. However, there's a long runway before networking equipment customers release their systems into full production. That hasn't changed in spite of the fact we had some very good results this morning and expect more results of the same nature going forward. The long runway before the network equipment gets released into production is still there. It hasn't changed. It's what I always say when I'm out talking to you guys individually or at some of your meetings. We've received great encouragement via these sample and prototyping orders. However, we have ways to go before the huge production orders are received. We are very gratified about the progress we're reporting to you this morning. We're very, very thankful for your continuing support. I'm very grateful to the team of engineers that just seem to get things right first time, every time. It's great to talk you, and I look forward to giving you a further update next quarter. It's been a good quarter for us and I hope you all have a great day. Thank you.

Thank you. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.