Good afternoon and welcome to the MoSys fourth-quarter and fiscal-year 2015 financial results conference call. [Operator Instructions] As a reminder, this conference is being recorded today, Wednesday, February 10, 2016. I would now like to turn the conference over to Ms. Beverly Twing of Shelton Group Investor Relations. Beverly, please go ahead.

Thank you, Michelle. Good afternoon, everyone. Joining me on today's call are Len Perham, MoSys's 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 IC and embedded memory and interface technologies; expectations concerning the Company's execution and results; product development; achievement of IC design wins; timing of shipments of the Company's IC; 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 the 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 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. Thank you for your attention. I will now turn the call over to Len Perham, CEO of MoSys. Please go ahead, Len.

Thank you, Bev, and good afternoon, everyone, and thank you for joining us on today's call. I'm going to review our quarter four progress and full-year achievements pertaining to revenue growth, design win activity and new product development. I'll also summarize our top goals for 2016. Following my remarks, Jim will discuss our financial results, and then we will open the call to questions. Getting started, I'm pleased to report that 2015 ended on a very strong note, reflecting measurable improvement across several aspects of our business. Operationally, we began to materially benefit from our earliest Bandwidth Engine 2 design wins. As you may recall, those were in the first half of 2013. As a result, fourth-quarter unit shipments and revenues both doubled, with IC revenue exceeding $1 million, a small number, but a genuine beginning, I think. Additionally, gross margins moved up nicely as a result of a cost reduction now integrated into our standard backend manufacturing flows, aided perhaps to a lesser degree by some slight economies of scale. I would expect further gains in gross margin over the next few quarters, and let me say we are very encouraged to see these early wins start to ramp themselves into production. Though not quite as strong as the third quarter, the fourth quarter again saw solid design wins emerging from the sales funnel. We won designs both for the Bandwidth Engine family and as well for the LineSpeed family. Better yet, the Bandwidth Engine family won designs with new customers, as well as winning repeat designs with existing customers. The repeat customers included not just our Tier 1 partner, who has now awarded us in the area of 15 design wins, but also our security appliance customers and our design win customers serving the cloud-based data center networking…

Thank you, Len, and good afternoon, everyone. 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 and intangible asset amortization. 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 fourth-quarter 2015 results, total revenue was $1.6 million, compared with $1 million in the third quarter of 2015 and $1.1 million in the fourth quarter of 2014. Product revenue from the sale of our integrated circuits increased to $1.1 million in the fourth quarter, compared with $0.6 million in the third quarter of 2015 and $0.3 million in the prior-year quarter. IC sales were 70% of total revenue in the fourth quarter and primarily driven by increased shipments of our Bandwidth Engine 2 ICs as early design-win customers commenced production. Revenue attributable to our ICs is gaining measurable momentum, a trend that we expect will continue. As Len just mentioned, we are targeting total product revenue in the range of $7 million to $9 million in 2016 as additional BE2 design wins commence production. The pace of quarter-to-quarter product revenue ramp is somewhat unpredictable, as shipment volumes remain subject to customers' production schedules. Royalty and other revenue for the fourth quarter of 2015 was $0.5 million, consistent with the previous quarter and compared with $0.8 million in the year-ago period. Royalty and other revenue is primarily comprised of royalties received from semiconductor customers whose products include our IP. GAAP gross margin was 45% in the…

Thank you, [Operator Instructions]. Our first question comes from the line of Gary Mobley, with Benchmark, your line is open please go ahead.

Hi, guys. Thanks for the detail. I wanted to sort of compare the revenue breakeven level or the projected revenue breakeven level against your recent OpEx cuts. Is it reasonable to assume that the new quarterly revenue breakeven level on a non-GAAP basis is somewhere in the range of 8 million to 9 million?

You know, Gary, I would say it's probably more in the $10 million to $10.5 million range, just using kind of around a 50% gross margin level. While certainly in the longer run, we expect to be 60% and higher, just looking out I would want to be conservative and kind of use that 50% kind of number.

Okay. And as we sit here today -- well, if we go back a quarter, I know you entered the fourth quarter with some pretty good backlog and hence the doubling of -- sequential doubling of integrated circuit revenue. As we sit here today, are we in a similar situation as you exited Q4 into Q1 and even as well looking into the first half of the year?

Actually, as you might expect, at the end of the year a lot of companies tried to build their inventory down, so we exited December 31st a bit lower. It was reasonable, but it was lower if we measured it the way you suggest. Orders came in reasonably strongly in January. We have a reasonable shot at making our goals for this quarter. We are not going to start talking about inventory and backlog and what turns are required, but we are in reasonable shape, and I'm paying a lot of attention to what I need on the backlog for my internal goals in the second quarter now. So the inventories and the behavior of the back end, Gary, have moved to a different place than it was, say, in the year-ago quarter. And the Company is actually -- is trying to be born now. In my close, I probably would have mentioned that when you do a venture capital startup, whether it's a public company or a private equity driven company, you pour water into an old pump and you pump and nothing comes out, and you pour more water in -- in this case, water is money and you keep pouring it in. And then, one day, something comes out, so now you have something real. Well, something is coming out now. We are now looking at a company that customers are trying to ramp, companies are reusing us. There's lots of interest in BE3 where we took a long time on BE1 and somewhat lesser on BE2, and now we need to move as quickly as we can to have revenues that lead costs and make sense out of this business. And we have challenges to have the inventory -- to get the growth we want this year, the internal goals. But we are at a stronger place than we were.

Okay. All right, thank you, guys. That's it for me. Thanks.

Thank you and our next question comes from Krishna Shankar with ROTH Capital, your line is open please go ahead.

Yes, Len and Jim, congratulations on the design win momentum in 2015, which seems to be translating to revenues now. As you look at 2016, will most of the revenues come from BE2? And will it be from -- mostly from your lead customer or a broad spectrum of customers and design wins that you have for BE2 in terms of revenues for 2016?

I think the customers that led the design wins in the first half of 2013 are leading the ramp-up now. So what, Jim, should we say? Maybe 25%, 30% could be one guy, something like that. But I think last quarter we shipped to maybe 15 or 18 different companies, and so it's quite diversified. It's for sure that we've got a guide of 25%-odd, plus or minus 5%, something like that, and I haven't computed, or if I have, I don't remember the exact numbers, but we aren't going to have some huge percentage with one customer in any quarter this year or at the end of the year. That shouldn't be the case.

Okay. And most of the revenues will be BE2. Do you anticipate any significant LineSpeed revenues in 2016?

I think we're expecting some LineSpeed revenues, to start ramping the last four months of the year or something like that. We've been out -- being qualified and having reference boards out in a lot of accounts for quite a lengthy time now. On the other hand, the stuff that's going to be ramping that you can take more firmly to the bank, if you can ever do that with forecasting, is BE2. BE2 is the Company's champion, but I think we should see some revenues start to pick up a bit in the last half from LineSpeed products, Krishna.

Great. And then with respect to LineSpeed, I know that you had kind of a design iteration. Do you feel that you have a version of the product that is kind of production ready that you are sampling now? Or do you need to make any other changes? Can you sort of give us a status update on the LineSpeed product and its sort of qualification for prime time now?

So we're actually looking at four different -- three different places, excuse me, for LineSpeed. One would be a low-power solution that goes in optical modules. One would be, I would say, a project can work into a medium-sized load, medium power burn on the line card. And then, finally, we'd like to have something that can go long reach, can work in the 30/30 DB or 30/34 DB load, something like that. And we've had a product now for the optical modules for a while and we are trying to get qualified in a number of places with the optical modules guys. We have yet to win a huge order, but I think we have a few orders that we are shipping to and there's genuinely serious interest looking at our product because I think it still remains the lowest-cost solution out there. During the course of the last four months, or something in that order, we released the parts on the line card and that's some of the new products that we mentioned, either I or Jim, that came out in the past quarter or so. And I think that if we had John here -- he's not with us; he's off at some meeting at the Lindley conference, I believe we are feeling comfortable now that we can serve long reach applications and John is having lots of conversations about that as well. So I would say that we are right on the cusp of being able to say that we've got all three short reach, medium reach, long reach solutions in retimers, with gearboxes with unique features, such as MLG or forward error correction and so on and so forth. And then, we would expect that going forward now the challenge would become more and more winning the business than having the right reference board for the given application.

Great. And Jim, you mentioned a 5.2 million pro forma OpEx level going forward. Would that kick in starting with Q1 or maybe beyond Q1?

No. Q1, since we took the restructuring actions in Q1, we will have significant payments related to that, as well as partial quarter of activity. It will really start in Q2. Q2 may still be a little bit higher, but pretty much in Q2 we won't be too much above that.

Great. Thank you. That's it for me.

My only -- I would just say, Krishna, my only caveat as far as timing of shuttle activity or larger backend expenditures that are at the R&D stage. Again, that would just be my caveat, but that's kind of the run rate. I'd like to see it even better than 5.2 million, but that's kind of at least the flag I'm planting here today.

Great. Thank you.

Thank you. And I'm showing no further questions at this time and I would like to turn the conference back over to Len Perham for any closing remarks.

So, basically, I made the point a moment or two again that the Company is starting to look real and that we now have water coming out of our pipes, if you will. We have products and we have orders coming in and we are building backlog and trying to manage inventory, trying to drive gross margin higher. It's worth mentioning that in the goals for the year, just to reiterate them, is, one, to drive revenue. Two, and this is roughly in order, to drive costs down. We need to control our costs until the revenue gets up to where it offsets the burn rate. The next three goals are all sort of integrated together. We need to win more designs, but when we win those designs, we need to give a premium to Tier 1 guys and we need to be looking around to new applications that will change the size in a positive direction for the served available market. And finally, we've got a lot of interest for here and there, maybe a half-dozen different opportunities to do something collaborative with one partner or the other. And that would bring in some either nonrecurring expense or some offset R&D to give us a lift on the balance sheet until we get our revenue a bit higher. I made the comment that if we are anywhere near on plan, based on my experience over a good period of my career, then we should see through the course of 2017 the cash burn during the period is going to get substantially less and that the total year should not be a very large not to take care of. So we're now in the business of trying to get our business to grow. I can't dispute the fact that we've taken longer and when you take longer, it cost more, but we are here and things look pretty damn interesting. The solution we have where we have the ability to do something with very, very low latency and very, very high access rates with 90% bandwidth efficiency; the customers are coming to us on a more frequent basis because the performance levels they need to meet now find them looking at these as primary challenges to overcome before their box is going to work. I have nothing else to offer today, other than to say that I think we are at the right place and the right time and we are at the beginning. I will be talking to you guys a lot more in the weeks and months ahead. I want to thank you all very, very much for sticking with us and I want to thank you for listening to the call today. Thank you one and all.