Non-GAAP Financial Information

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), this announcement of operating results contains non-GAAP financial measures that exclude the income statement effects of stock-based compensation, amortization of intangible assets, fair value adjustments of acquired inventory, deferred tax asset valuation allowance, acquisition-related costs, interest income on a bridge loan to RMI Corporation and the effects of excluding stock-based compensation upon the number of diluted shares used in calculating non-GAAP earnings per share.

We excluded stock-based compensation expense which is non-cash in nature and is difficult to predict as its valuation is affected by market forces that are not within the control of management. We also exclude amortization of intangibles, deferred tax asset valuation allowance, acquisition-related costs, interest income on RMI bridge note, and fair value adjustments related to acquired inventory, as they are considered unrelated to our core operating performance.

We use the non-GAAP financial measures that exclude these items to make strategic decisions, forecast future results and evaluate the Company’s current performance. We believe that the presentation of non-GAAP financial measures that exclude these items is useful to investors because we do not consider these charges either part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that are used to evaluate management’s operating performance.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding these non-GAAP financial measures, and management’s explanation of why it considers such measures to be useful, refer to the Form 8-K dated July 29, 2009 that the Company has submitted to the Securities and Exchange Commission.

NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME
(IN THOUSANDS)
(UNAUDITED)
		Three months ended							Six months ended
		June 30, 2009				June 30, 2008			June 30, 2009				June 30, 2008
GAAP net income (loss)		$	(2,156	)		$	2,332		$	(6,073	)		$	3,459
Reconciling items:
Stock-based compensation			6,018				3,274			10,318				6,975
Amortization of intangible assets			3,325				3,325			6,650				6,650
Fair value adjustment related to the acquired inventory			-				268			-				788
Acquisition-related costs			1,335				-			1,335				-
Interest income on RMI bridge note			(125	)			-			(125	)			-
Establishment of deferred tax asset valuation allowance			-				-			2,988				-
Non-GAAP net income		$	8,397			$	9,199		$	15,093			$	17,872

NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF GAAP DILUTED NET INCOME (LOSS) PER SHARE TO
NON-GAAP DILUTED NET INCOME PER SHARE
(UNAUDITED)
		Three months ended							Six months ended
		June 30, 2009				June 30, 2008			June 30, 2009				June 30, 2008
GAAP net income (loss) per share - Diluted		$	(0.10	)		$	0.10		$	(0.28	)		$	0.16
Reconciling items:
Stock-based compensation			0.25				0.14			0.43				0.30
Amortization of intangible assets			0.14				0.14			0.28				0.29
Fair value adjustment related to the acquired inventory			-				0.01			-				0.03
Acquisition-related costs			0.06				-			0.06				-
Interest income on RMI bridge note			(0.01	)			-			(0.01	)			-
Establishment of deferred tax asset valuation allowance			-				-			0.13				-
Difference in shares count between diluted GAAP and diluted non-GAAP calculation			0.01				0.01			0.03				-
Non-GAAP net income per share - Diluted		$	0.35			$	0.40		$	0.64			$	0.78

NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF THE SHARES USED FOR GAAP DILUTED
NET INCOME (LOSS) PER SHARE CALCULATION TO THE SHARES USED FOR
NON-GAAP DILUTED NET INCOME PER SHARE CALCULATION
(IN THOUSANDS)
(UNAUDITED)
		Three months ended				Six months ended
		June 30, 2009		June 30, 2008		June 30, 2009		June 30, 2008
Shares used in calculation - Diluted (GAAP)		21,961		22,529		21,883		22,214
The effect of removing stock-based compensation expense under FAS 123(R) for Non-GAAP presentation purpose		943		651		811		685
The effect of dilutive potential common shares due to reporting non-GAAP net income		1,151		-		1,038		-
Shares used in calculation - Diluted (Non-GAAP)		24,055		23,180		23,732		22,899

NETLOGIC MICROSYSTEMS, INC.
RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP GROSS MARGIN
(IN THOUSANDS, EXCEPT PERCENTAGES)
(UNAUDITED)
		Three months ended												Six months ended
		June 30, 2009						June 30, 2008						June 30, 2009						June 30, 2008
Total GAAP gross margin		$	18,498		56.9	%		$	20,561		56.3	%		$	35,320		56.2	%		$	39,358		55.7	%
Reconciling items:
Stock-based compensation			180		0.6	%			326		0.9	%			355		0.6	%			606		0.9	%
Amortization of intangible assets			2,980		9.2	%			2,980		8.2	%			5,960		9.5	%			5,960		8.4	%
Fair value adjustment related to acquired inventory			-		0.0	%			268		0.7	%			-		0.0	%			788		1.1	%
Total Non-GAAP gross margin		$	21,658		66.7	%		$	24,135		66.0	%		$	41,635		66.2	%		$	46,712		66.0	%

NETLOGIC MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
		June 30, 2009				December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents		$	88,263			$	83,474
Short-term investments			-				13,067
Accounts receivables, net			7,995				8,382
Inventories			9,656				13,707
Deferred income taxes			2,897				3,217
Prepaid expenses and other current assets			6,874				1,937
Total current assets			115,685				123,784
Property and equipment, net			7,918				5,513
Goodwill			68,712				68,712
Intangible asset, net			32,888				39,538
Other assets			21,142				8,224
Total assets		$	246,345			$	245,771
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	9,551			$	7,618
Accrued liabilities			13,212				25,920
Deferred margin			536				1,638
Software licenses and other obligations, current			3,425				755
Total current liabilities			26,724				35,931
Software licenses and other obligations, long-term			1,145				464
Other liabilities			9,720				9,109
Total liabilities			37,589				45,504
Stockholders' equity
Preferred stock			-				-
Common stock			222				219
Additional paid-in capital			290,588				276,042
Accumulated other comprehensive income (loss)			-				(13	)
Accumulated deficit			(82,054	)			(75,981	)
Total stockholders' equity			208,756				200,267
Total liabilities and stockholders' equity		$	246,345			$	245,771

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