NASDAQ:MRAM Everspin Technologies Q1 2024 Earnings Report $5.68 -0.05 (-0.87%) Closing price 03:59 PM EasternExtended Trading$5.68 0.00 (-0.09%) As of 05:33 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Everspin Technologies EPS ResultsActual EPS-$0.01Consensus EPS $0.03Beat/MissMissed by -$0.04One Year Ago EPS$0.04Everspin Technologies Revenue ResultsActual Revenue$14.43 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AEverspin Technologies Announcement DetailsQuarterQ1 2024Date5/1/2024TimeAfter Market ClosesConference Call DateWednesday, May 1, 2024Conference Call Time5:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Everspin Technologies Q1 2024 Earnings Call TranscriptProvided by QuartrMay 1, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the conference call to discuss Everspin Technologies First Quarter 2024 Financial Results. At this time, all participants are in a listen only mode. At the conclusion of today's conference, call instructions will be provided for question and answer. As a reminder, this conference is being recorded. Operator00:00:21I would now like to turn the conference over to Cassidy Fuller, Investor Relations of Everspin. Please begin. Speaker 100:00:29Thank you, operator, and good afternoon, everyone. Everspin released results for the Q1 2024 ended March 31, 2024, this afternoon after the market closed. I'm Cassidy Fuller, Investor Relations for Everspin. And with me on today's call are Sanjeev Agarwal, President and Chief Executive Officer and Anuj Agarwal, Chief Financial Officer. Before we begin the call, I would like to remind you that this conference call contains forward looking statements regarding future events, including, but not limited to, the company's expectations for Everspin's future business, financial performance and goals customer and industry adoption of MRAM technology successfully bringing to market and manufacturing products in Everspin's design pipeline and executing on its business plan. Speaker 100:01:23These forward looking statements are based on estimates, judgments, current trends and market conditions and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward looking statements. We would encourage you to review the company's SEC filings, including the annual report on Form 10 ks and other SEC filings made from time to time, in which the company may discuss risk factors associated with investing in Everspin. All forward looking statements are made as of the date of this call and except as required by law, the company undertakes no obligation to update or alter any forward looking statements made on this call, whether as a result of new information, future events or otherwise. Financial results discussed today reflect the company's preliminary estimates and are based on the information available as of the date hereof and are subject to further review by Everspin and its external auditors. The company's actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustments and other developments arising between now and the time that the financial results for this period are finalized. Speaker 100:02:41Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information in GAAP and non GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP net income to adjusted EBITDA, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin's website at www.everspin.com. And now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Agarwal. Sanjeev, please go ahead. Speaker 200:03:19Thank you, Desiree, and thanks, everyone, for joining us on the call today. During the Q1, we delivered revenue of $14,400,000 at the high end of our guidance range of $13,500,000 to $14,500,000 We delivered gross margin of 56.5% in the Q1 compared to 56.8 percent in Q1 2023. We ended the year with a cash balance of 34,800,000 dollars We are pleased by the progress we have made over the past few years with our Toggle MRAM solution and as we continue to ramp up our lower density products, we will have increased visibility for our STT MRAM solutions. Looking ahead, we expect to see flattish product revenue the Q2 compared to Q1 due to continued weakness in Asia Pacific and in industrial, consumer and auto end markets. However, we expect a ramp in our Toggle and STT MRAM design wins in the second half of twenty twenty four. Speaker 200:04:21Our Persist industrial STT MRAM product line has demonstrated consistent strength as it has continued to gain momentum in terms of design wins. We continue to expect to begin translating these design wins into revenue starting in the second half of twenty twenty four. Turning now to our radiation heart programs that we outlined last quarter. As we noted on our previous calls, we are engaged in 2 radiation heart programs using our STT MRAM technology. The first related to an ad hoc 64 megabit STT MRAM project and the second aimed at building a strategic radiation hardened FPGA. Speaker 200:05:02We expect to continue recognizing revenue from the 64 megabit STT MRAM project over the coming quarters. We successfully executed the deliverables for the strategic radiation hardened FPGA project in Q1. We expect this project to continue in 2024 with additional funding from the sponsors in the coming months quarters. During the quarter, we also signed an extension of a Toggle MRAM reliability project for radiation hard applications that we originally executed in the Q3 of 2023. As you may have seen, we recently announced that IBM selected our Persist 1 gigabit STD MRAM solution for use in their new flash core module, the FCM4. Speaker 200:05:51This DDR4 like high performance persistent memory ensures critical data integrity even during power loss. This reinforces deployment of STT MRAM in data center storage applications. Lastly, we recently submitted our application for the Chips and Science Act. While we do not know the exact timing for a decision, we remain optimistic that we will receive funding, which we plan to use for additional 200 millimeter toggle and STT MRAM capacity and improved capabilities. There are other grant opportunities that we are pursuing and hope to be able to share additional details as we move through the year. Speaker 200:06:34Turning to our outlook for 2024. As we mentioned last quarter, we expect the year to be weighted more heavily towards the second half as we continue to experience a slower start to the year. This slower start can be attributed to continued economic weakness in Asia Pacific as well as higher interest rates, which have driven customers to focus on lean inventory practices, along with shifting project schedules for some government contracts. Despite these near term challenges, we expect to begin recognizing revenue from our new STDM ramp design wins, a stabilization in customer and distributor inventories and a gradual improvement in the Asia Pacific region. Moreover, we are encouraged by our recent traction. Speaker 200:07:22We attended Embedded World in Nuremberg a few weeks ago, where we introduced the Persist brand and had a full schedule of meetings with existing and potential distributors and customers. We came away from the show with significantly more leads than at last year's event. I will now turn it over to our CFO, Anuj Agarwal, who will take you through our Q1 financials and Q2 2024 guidance. Anuj? Speaker 300:07:51Thank you, Sanjeev, and good afternoon, everyone. We delivered solid quarterly results near the high end of our guidance range of $13,500,000 to $14,500,000 with revenue of $14,400,000 compared to $14,800,000 in the first Licensing, royalty, patent and other revenue in the Q1 increased to $3,600,000 compared to $1,100,000 in Q1 2023. Shipments to suppliers for our high density STT product for data center applications represented 20% of revenue in the Q1 versus 11% of revenue in Q1 2023. Turning to gross margin. Our GAAP gross margin was relatively flat to Q1 2023 at 56.5%. Speaker 300:09:00GAAP operating expenses for the Q1 of 2024 were $8,800,000 compared to $7,700,000 in the Q1 of 2023. This drove our first quarter results to a small loss of $200,000 or a loss of $0.01 per diluted share based on 21,300,000 weighted average fully diluted shares outstanding. This compares to net income of $800,000 or $0.04 per diluted share in the Q1 of 2023. Adjusted EBITDA was $1,900,000 compared to $2,300,000 in Q1 2023. Our balance sheet remains strong and debt and the end of the prior quarter. Speaker 300:09:52The decrease in cash quarter over quarter is attributed to investments and equipment for new products and operating facilities to readiness for the anticipated second half ramp. Cash flow used in operations was $1,300,000 for the Q1. Turning to guidance, we mentioned on our last quarter's call that we anticipate revenue for the first half of twenty twenty four to be lower than our typical seasonality. This has proven true for our Q1 and we expect our second quarter to be down from the Q1, reflecting flattish Toggle revenue and lower RadHard revenue that Sanjeev mentioned in his remarks. Taking these factors into consideration, we expect Q2 total revenue in the range of $10,000,000 to 11,000,000 dollars and GAAP net loss per diluted share to be between negative $0.14 and negative $0.09 We are optimistic for the second half of twenty twenty four as we begin to recognize revenue from our design wins for our STT MRAM products. Speaker 300:10:59In summary, we remain confident in our ability to scale the business and convert design wins to revenue. We have already observed increased traction with our design wins and are seeing particular strength from industrial and aerospace end markets. As the industry navigates some near term challenges, we remain focused on growing our Toggle MRAM and DRAM products and recognizing revenue for our STT MRAM technology. Operator, you may now open the line for questions. Operator00:11:34Thank you. Our first question will come from the line of Quinn Bolton with Needham. Your line is now open. Speaker 400:12:06Hey, guys. Nick Doyle on for Quinn. Thanks for taking our questions. A couple of housekeeping ones first. For the Q1 product revenue was down as expected, but did the high density STT, did that increase quarter over quarter? Speaker 300:12:27Hi, Nick. This is Anuj. Great question. So from a product perspective, yes, we did see some softness in Toggle as we've had some challenges with industrial. But from an SDT data center perspective, that product has been pretty healthy. Speaker 300:12:45So it was up in Q4 and it was pretty healthy in Q1 as well. Speaker 400:12:53Great. And then for OpEx, I mean, what drove the sharp increase this quarter? And do you expect to maintain this higher level? I don't remember if that's related to NREs and not having in this quarter. Just how are you thinking about OpEx? Speaker 300:13:10Yes, sure. So from an OpEx standpoint, there's a couple of things. We had some higher professional services, some stock based compensation and depreciation. I think without giving guidance looking forward, we expect OpEx to be relatively flat to down. So the team is working on reducing spending and making sure we can have that decline. Speaker 400:13:35Okay. And then for the 2Q guide, I mean, the guide missed our estimate by about $3,000,000 Can you just speak to what drove the miss? I mean, reading through the lines, it just seems like toggles is just a little bit worse, so that products are expected to decline next quarter. And then you mentioned RadHard is going down before it goes up. So in that same vein, margins should probably decline as licensing goes down as well. Speaker 400:14:08Just any more color on the guide? Thanks. Speaker 300:14:14Yes. I think you're hitting it as well. I think from a Q2 guidance perspective, if I take a step back from a product revenue perspective, we expect things to be relatively flat. So as you mentioned, Toggle is flat to slightly down, STT data center, that's going pretty healthy and we expect it to be relatively flat. But then from a RadHard perspective, as you might recall from some of the previous calls, we've been able to close and complete out several RadHard projects. Speaker 300:14:53And we're currently in the works on a couple of additional new RadHard projects. So the guide you're seeing today doesn't include any RadHard revenue since we haven't signed anything yet. And so really the decline there is you're seeing the RadHard revenue not being incorporated into Q2. Speaker 400:15:14Okay. And then last question, I'll jump back in. Just what gives you confidence on the second half ramp? Maybe how much maybe you can give percent or absolute dollar range? How much of the growth in the back half is coming from the RadHard? Speaker 400:15:30Thanks. Speaker 300:15:33Yes. I want to be careful because we don't necessarily give guidance for the full year. But I will say, we're seeing the same macroeconomic challenges everyone else is. So talking about things before, the working capital, we continue to see there some pressure there from disties as they're reducing inventory. From a Japan, China perspective, the yen versus dollar impact and seeing that products are a little bit more costly, right, because the yen is depreciated. Speaker 300:16:04And then we're seeing ordering kind of going back to the lead times. So from a macro perspective, I think that's still true. I think what I would say as we deep dive into our business, there's a couple of things that give us some confidence in the second half. So if we look at the SDT data center, for example, the bookings that we see so far in 2024 look to exceed 2023. And our new SDT low density product, that's also ramping and we're continuing to see design wins. Speaker 300:16:36In addition to that, from a licensing perspective, there's several projects that are being worked. They haven't been signed yet, but there's multiple things in the hopper. So we expect to sign a few of those in the second half of the year. So that's what gives us confidence as we look to the full year. Operator00:16:57Thanks. Thank you. One moment for our next question please. Our next question comes from the line of Richard Shannon from Craig Hallum Capital. Your line is now open. Speaker 500:17:12Hi, guys. Thanks for taking my questions. Maybe a follow-up on the topic here of RadHard. It seems like a particular project here seems to be the reason for the sequential decline here as your products seem to be kind of mostly flat sequentially. Is there like a pause in the project here? Speaker 500:17:30Is there a question as to whether it will continue? Because I think your partners talked about a program assuming all the options are picked up to something that lasts any order of 4 years and we've got at least 2 years left to go. So just want to get some sense of the visibility in that project and whether this is just a lull between the kind of the sub programs within the bigger picture? Speaker 200:17:51Yes. Hi, Richard. This is Sanjeev. Thanks for the question. Yes, you're right. Speaker 200:17:56I think we expect the project that we are working on, the strategic radiation hardened PGA project with our partner, we expect that to get renewed sometime in the next coming months quarter. The reason for the delay is that there has been some delay from the U. S. Government funding agency in continuing the project because of some changes in the schedule on their side. The project is, like we said, we met all our deliverables in Q1. Speaker 200:18:27So we fully expect to get that project going sometime in Q2 or as soon as the funding comes through. Also, Richard, I would like to point out that we did talk about a new Toggle MRAM reliability project that we have signed in Q2. We just don't have all the details yet, so we haven't included that in our guidance for Q2 as well. Speaker 500:18:52Well, I guess I'll follow-up on that last part of your comments Sanjeet, sounds very interesting. How do we think about this in the scale of the other Toggle Reliability project? And what's the source there? Is another U. S. Speaker 500:19:05Or other government agency? Or what's the source of that one? Speaker 200:19:10So that's basically a follow-up from the same agency that we did a project with them in 2023. They had some follow-up questions on the reliability models that we shared. So we are actually collecting some more data to bring them up to speed on that one. So the in terms of scale, it won't be as big as it was in 2023, but we don't have the financial figures yet to disclose. Speaker 500:19:36Okay, fair enough. Let me hit a couple of financial questions for Nej. Let's see, let's hit on product gross margins here after some pretty good numbers last year. Last two quarters have been fairly a significant amount lower, I think in the 40 percent high 40s percent range here. Last quarter, you talked about it being something related to yield. Speaker 500:19:58I'm wondering if that's still continuing, there's any visibility in getting that back up to prior levels? And then also is there any dynamic of mix here, particularly as there seems to be a little bit of shift between Toggle and STT in your mix here in the last few quarters? Speaker 300:20:14Yes. Hi, Richard. Great question. Yes, from a gross margin perspective, the gross margin, again, without giving guidance has been within our internal model. So we continue to hold with the low to mid-50s as where we believe gross margin is. Speaker 300:20:32If you look at Q1 versus guidance, which I think you're kind of alluding to, the Q1 gross margin was pretty healthy. We did have about $3,300,000 in RadHard revenue that we saw in Q1. And so that's normally higher margin somewhere between 70% to 90% gross margin. In Q2, like we mentioned, there's no RadHard revenue that's being incorporated into the guide. So really the range there is based on purely product margin. Speaker 300:21:10But from a product margin perspective, the team has done a great job operationally looking at cost reduction projects being operationally efficient. So we've been able to see a healthy gross margin last couple of quarters. Speaker 500:21:26Okay. Maybe to follow-up on the topic and I guess I'm very curious specifically on product gross margins here. Should we be viewing these levels that we've seen a number of quarters over the past, we're going to model over the last 3 years, where you've seen numbers in the kind of mid-50s range, is that deemed to be abnormally high or the range you aspire to? And then to what degree do we see as STT ramps up here, both the high density one and the new low density one that seems to be ramping the second half, Is that a level that we can still aspire to or is that going to be a little bit more difficult? Speaker 300:22:03I think what we've seen in the past Richard is probably a little bit on the high end. There's been I think some great efficiencies as the teams looked at improving yields and bringing performance up from an operational standpoint. So I think there's some steady state that you'll see there. It's not like you can get yields to 100%, right? So there's going to be some steady state where that kind of tapers off. Speaker 300:22:29There is a little bit of flex in terms of the mix. And so as we look at that, there are some challenges there. But if you look at the new low density SCT product, we're expecting margins to improve from that product. Right now, it's just been introduced. And so we're working through the margin challenges there as you ramp a new product and get it up to speed and get yields to the levels you need to get them to. Speaker 300:22:57But you should see improvement in the gross margin from that product. Speaker 200:23:04Is it the aspiration in Operator00:23:06the 50s, right? Speaker 200:23:07Yes. Our aspiration is still to be there mid-50s. Speaker 500:23:11Okay. But that's the number you've talked about in terms of your total gross margins, not product gross margins, correct? Speaker 300:23:17That's correct. That's right. Speaker 500:23:19Okay. Fair enough then. Maybe 1 or 2 others here. I think you said in your press release here something about a foundry agreement here and I'm not sure if I caught anything in your prepared remarks around that. Can you elaborate what that is? Speaker 200:23:38Yes. So as you know, we've actually been a foundry for several radiation heart programs and also in the past to an embedded program as well over the last 15 years or so. So we are actively acting as a foundry. So this is a new customer that we are bringing online. So right now, we are in the process of setting up their wafers in our fab, and we hope to go into low volume production sometime in the second of this year, more likely Q4 of this year. Speaker 500:24:12And the whole idea Speaker 200:24:13over here, Richard, is that it's going to lower our I think going to improve our fab utilization and then lower our basically distribute our fixed costs over more product. Speaker 500:24:29Okay. Can you elaborate on the product here? Is this a custom product in any way? Sense of application? And how big can this customer be relative to your other big customers or your company's total scale? Speaker 200:24:43Hopefully, we can talk about this more at the next earnings call, Richard, but this is as much as we can disclose at this point. Speaker 500:24:50Okay. That's fair enough then. And just kind of looking big picture at your product business here, your guidance here for product revenues being roughly flat is a good sign in the context of what seems like a fairly difficult market for industrial and automotive. To what degree do you think we are or are we through any sort of inventory burn issues? We've seen a little bit of burn, I imagine, in the last few quarters as you look at it. Speaker 500:25:18Are we largely through that? Or do you worry that there's going to be more to come? Speaker 300:25:26Yes, Richard, it's really hard to speculate on where the year is going to be. I think if I think about semiconductor and just being in semiconductor for a long time, typical downturns, you usually see them to be 4 to 5 quarters. And from that, we should see some uptick in the second half. Speaker 500:25:49Okay, fair enough. Last question, I'll jump on sorry, I just didn't mean to interrupt. Speaker 300:25:54No, no, no. Go ahead, Richard. Speaker 500:25:57Last quick, just quick question for me is just on lead times. I think you mentioned companies now ordering inside lead time. Are we at lead times to where we're at before COVID on both your Toggle and STT products? Or is that still coming down to those levels? Speaker 300:26:12So Richard, we've kept the lead times back to the pre pandemic levels. They're roughly 26 to 27 weeks depending on which products you're looking at. Speaker 500:26:26Okay then. I think that's all the questions for me. I'll jump out of the line guys. Thank you. Speaker 300:26:31Thank you. Thank you, Ajit. Operator00:26:32Thank you. And our next question, one moment please. Comes from the line of Quinn Bolton with Needham. Your line is now open. Speaker 400:26:58Hey, guys. Just asking, if the product the product declined this quarter and just assuming it's flat next quarter, is that was next quarter? Speaker 200:27:21Yes, Nik, this is Sanjeev. We have not seen any ASP decline. It's mostly the demand or the softness in the Asia Pacific market and the Japan market, which is causing the lower volumes. Speaker 400:27:36Okay. Makes sense. And then for the Persist with IBM, could you I mean, I know it's early, but could you size that opportunity or give us any hints in terms of timing? Speaker 200:27:55So you might have seen the press release from us as well as IBM. They actually did launch their FCM 4 already. So it's available in the marketplace today. And in terms of our backlog, like Anuj mentioned, it's actually pretty healthy for 2024. It's up into the right compared to 2023, which is what we like to see. Speaker 200:28:15And I think basically consistent with the data center market, the increase in our backlog is reflective of that. Speaker 400:28:27Great. Thank you. Sure. Operator00:28:30Thank you. I am currently showing no further questions at this time. I'd like to hand the conference back to Sanjeev Agarwal for closing remarks. Speaker 200:28:41I would like to say thank you everyone for joining the call today, and we look forward to speaking to you at our next quarter earnings report. Thank you again for joining. Operator00:28:51This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallEverspin Technologies Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Everspin Technologies Earnings HeadlinesEverspin Technologies, Inc. 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(NASDAQ:MRAM) Q1 2025 Earnings Call TranscriptMay 2, 2025 | msn.comQ1 2025 Everspin Technologies Inc Earnings CallMay 2, 2025 | finance.yahoo.comSee More Everspin Technologies Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Everspin Technologies? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Everspin Technologies and other key companies, straight to your email. Email Address About Everspin TechnologiesEverspin Technologies (NASDAQ:MRAM) engages in the manufacture and sale of magnetoresistive random access memory (MRAM) products in the United States, Japan, Hong Kong, Germany, Singapore, China, Canada, and internationally. It offers Toggle MRAM, spin-transfer torque MRAM, and tunnel magneto resistance sensor products, as well as foundry services for MRAM products. The company provides its products for applications, including industrial, medical, automotive/transportation, aerospace, and data center markets. It serves original equipment manufacturers, contract manufacturers, and original design manufacturers through a direct sales channel, and a network of representatives and distributors. 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There are 6 speakers on the call. Operator00:00:00Good day and thank you for standing by. Welcome to the conference call to discuss Everspin Technologies First Quarter 2024 Financial Results. At this time, all participants are in a listen only mode. At the conclusion of today's conference, call instructions will be provided for question and answer. As a reminder, this conference is being recorded. Operator00:00:21I would now like to turn the conference over to Cassidy Fuller, Investor Relations of Everspin. Please begin. Speaker 100:00:29Thank you, operator, and good afternoon, everyone. Everspin released results for the Q1 2024 ended March 31, 2024, this afternoon after the market closed. I'm Cassidy Fuller, Investor Relations for Everspin. And with me on today's call are Sanjeev Agarwal, President and Chief Executive Officer and Anuj Agarwal, Chief Financial Officer. Before we begin the call, I would like to remind you that this conference call contains forward looking statements regarding future events, including, but not limited to, the company's expectations for Everspin's future business, financial performance and goals customer and industry adoption of MRAM technology successfully bringing to market and manufacturing products in Everspin's design pipeline and executing on its business plan. Speaker 100:01:23These forward looking statements are based on estimates, judgments, current trends and market conditions and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward looking statements. We would encourage you to review the company's SEC filings, including the annual report on Form 10 ks and other SEC filings made from time to time, in which the company may discuss risk factors associated with investing in Everspin. All forward looking statements are made as of the date of this call and except as required by law, the company undertakes no obligation to update or alter any forward looking statements made on this call, whether as a result of new information, future events or otherwise. Financial results discussed today reflect the company's preliminary estimates and are based on the information available as of the date hereof and are subject to further review by Everspin and its external auditors. The company's actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustments and other developments arising between now and the time that the financial results for this period are finalized. Speaker 100:02:41Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information in GAAP and non GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP net income to adjusted EBITDA, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin's website at www.everspin.com. And now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Agarwal. Sanjeev, please go ahead. Speaker 200:03:19Thank you, Desiree, and thanks, everyone, for joining us on the call today. During the Q1, we delivered revenue of $14,400,000 at the high end of our guidance range of $13,500,000 to $14,500,000 We delivered gross margin of 56.5% in the Q1 compared to 56.8 percent in Q1 2023. We ended the year with a cash balance of 34,800,000 dollars We are pleased by the progress we have made over the past few years with our Toggle MRAM solution and as we continue to ramp up our lower density products, we will have increased visibility for our STT MRAM solutions. Looking ahead, we expect to see flattish product revenue the Q2 compared to Q1 due to continued weakness in Asia Pacific and in industrial, consumer and auto end markets. However, we expect a ramp in our Toggle and STT MRAM design wins in the second half of twenty twenty four. Speaker 200:04:21Our Persist industrial STT MRAM product line has demonstrated consistent strength as it has continued to gain momentum in terms of design wins. We continue to expect to begin translating these design wins into revenue starting in the second half of twenty twenty four. Turning now to our radiation heart programs that we outlined last quarter. As we noted on our previous calls, we are engaged in 2 radiation heart programs using our STT MRAM technology. The first related to an ad hoc 64 megabit STT MRAM project and the second aimed at building a strategic radiation hardened FPGA. Speaker 200:05:02We expect to continue recognizing revenue from the 64 megabit STT MRAM project over the coming quarters. We successfully executed the deliverables for the strategic radiation hardened FPGA project in Q1. We expect this project to continue in 2024 with additional funding from the sponsors in the coming months quarters. During the quarter, we also signed an extension of a Toggle MRAM reliability project for radiation hard applications that we originally executed in the Q3 of 2023. As you may have seen, we recently announced that IBM selected our Persist 1 gigabit STD MRAM solution for use in their new flash core module, the FCM4. Speaker 200:05:51This DDR4 like high performance persistent memory ensures critical data integrity even during power loss. This reinforces deployment of STT MRAM in data center storage applications. Lastly, we recently submitted our application for the Chips and Science Act. While we do not know the exact timing for a decision, we remain optimistic that we will receive funding, which we plan to use for additional 200 millimeter toggle and STT MRAM capacity and improved capabilities. There are other grant opportunities that we are pursuing and hope to be able to share additional details as we move through the year. Speaker 200:06:34Turning to our outlook for 2024. As we mentioned last quarter, we expect the year to be weighted more heavily towards the second half as we continue to experience a slower start to the year. This slower start can be attributed to continued economic weakness in Asia Pacific as well as higher interest rates, which have driven customers to focus on lean inventory practices, along with shifting project schedules for some government contracts. Despite these near term challenges, we expect to begin recognizing revenue from our new STDM ramp design wins, a stabilization in customer and distributor inventories and a gradual improvement in the Asia Pacific region. Moreover, we are encouraged by our recent traction. Speaker 200:07:22We attended Embedded World in Nuremberg a few weeks ago, where we introduced the Persist brand and had a full schedule of meetings with existing and potential distributors and customers. We came away from the show with significantly more leads than at last year's event. I will now turn it over to our CFO, Anuj Agarwal, who will take you through our Q1 financials and Q2 2024 guidance. Anuj? Speaker 300:07:51Thank you, Sanjeev, and good afternoon, everyone. We delivered solid quarterly results near the high end of our guidance range of $13,500,000 to $14,500,000 with revenue of $14,400,000 compared to $14,800,000 in the first Licensing, royalty, patent and other revenue in the Q1 increased to $3,600,000 compared to $1,100,000 in Q1 2023. Shipments to suppliers for our high density STT product for data center applications represented 20% of revenue in the Q1 versus 11% of revenue in Q1 2023. Turning to gross margin. Our GAAP gross margin was relatively flat to Q1 2023 at 56.5%. Speaker 300:09:00GAAP operating expenses for the Q1 of 2024 were $8,800,000 compared to $7,700,000 in the Q1 of 2023. This drove our first quarter results to a small loss of $200,000 or a loss of $0.01 per diluted share based on 21,300,000 weighted average fully diluted shares outstanding. This compares to net income of $800,000 or $0.04 per diluted share in the Q1 of 2023. Adjusted EBITDA was $1,900,000 compared to $2,300,000 in Q1 2023. Our balance sheet remains strong and debt and the end of the prior quarter. Speaker 300:09:52The decrease in cash quarter over quarter is attributed to investments and equipment for new products and operating facilities to readiness for the anticipated second half ramp. Cash flow used in operations was $1,300,000 for the Q1. Turning to guidance, we mentioned on our last quarter's call that we anticipate revenue for the first half of twenty twenty four to be lower than our typical seasonality. This has proven true for our Q1 and we expect our second quarter to be down from the Q1, reflecting flattish Toggle revenue and lower RadHard revenue that Sanjeev mentioned in his remarks. Taking these factors into consideration, we expect Q2 total revenue in the range of $10,000,000 to 11,000,000 dollars and GAAP net loss per diluted share to be between negative $0.14 and negative $0.09 We are optimistic for the second half of twenty twenty four as we begin to recognize revenue from our design wins for our STT MRAM products. Speaker 300:10:59In summary, we remain confident in our ability to scale the business and convert design wins to revenue. We have already observed increased traction with our design wins and are seeing particular strength from industrial and aerospace end markets. As the industry navigates some near term challenges, we remain focused on growing our Toggle MRAM and DRAM products and recognizing revenue for our STT MRAM technology. Operator, you may now open the line for questions. Operator00:11:34Thank you. Our first question will come from the line of Quinn Bolton with Needham. Your line is now open. Speaker 400:12:06Hey, guys. Nick Doyle on for Quinn. Thanks for taking our questions. A couple of housekeeping ones first. For the Q1 product revenue was down as expected, but did the high density STT, did that increase quarter over quarter? Speaker 300:12:27Hi, Nick. This is Anuj. Great question. So from a product perspective, yes, we did see some softness in Toggle as we've had some challenges with industrial. But from an SDT data center perspective, that product has been pretty healthy. Speaker 300:12:45So it was up in Q4 and it was pretty healthy in Q1 as well. Speaker 400:12:53Great. And then for OpEx, I mean, what drove the sharp increase this quarter? And do you expect to maintain this higher level? I don't remember if that's related to NREs and not having in this quarter. Just how are you thinking about OpEx? Speaker 300:13:10Yes, sure. So from an OpEx standpoint, there's a couple of things. We had some higher professional services, some stock based compensation and depreciation. I think without giving guidance looking forward, we expect OpEx to be relatively flat to down. So the team is working on reducing spending and making sure we can have that decline. Speaker 400:13:35Okay. And then for the 2Q guide, I mean, the guide missed our estimate by about $3,000,000 Can you just speak to what drove the miss? I mean, reading through the lines, it just seems like toggles is just a little bit worse, so that products are expected to decline next quarter. And then you mentioned RadHard is going down before it goes up. So in that same vein, margins should probably decline as licensing goes down as well. Speaker 400:14:08Just any more color on the guide? Thanks. Speaker 300:14:14Yes. I think you're hitting it as well. I think from a Q2 guidance perspective, if I take a step back from a product revenue perspective, we expect things to be relatively flat. So as you mentioned, Toggle is flat to slightly down, STT data center, that's going pretty healthy and we expect it to be relatively flat. But then from a RadHard perspective, as you might recall from some of the previous calls, we've been able to close and complete out several RadHard projects. Speaker 300:14:53And we're currently in the works on a couple of additional new RadHard projects. So the guide you're seeing today doesn't include any RadHard revenue since we haven't signed anything yet. And so really the decline there is you're seeing the RadHard revenue not being incorporated into Q2. Speaker 400:15:14Okay. And then last question, I'll jump back in. Just what gives you confidence on the second half ramp? Maybe how much maybe you can give percent or absolute dollar range? How much of the growth in the back half is coming from the RadHard? Speaker 400:15:30Thanks. Speaker 300:15:33Yes. I want to be careful because we don't necessarily give guidance for the full year. But I will say, we're seeing the same macroeconomic challenges everyone else is. So talking about things before, the working capital, we continue to see there some pressure there from disties as they're reducing inventory. From a Japan, China perspective, the yen versus dollar impact and seeing that products are a little bit more costly, right, because the yen is depreciated. Speaker 300:16:04And then we're seeing ordering kind of going back to the lead times. So from a macro perspective, I think that's still true. I think what I would say as we deep dive into our business, there's a couple of things that give us some confidence in the second half. So if we look at the SDT data center, for example, the bookings that we see so far in 2024 look to exceed 2023. And our new SDT low density product, that's also ramping and we're continuing to see design wins. Speaker 300:16:36In addition to that, from a licensing perspective, there's several projects that are being worked. They haven't been signed yet, but there's multiple things in the hopper. So we expect to sign a few of those in the second half of the year. So that's what gives us confidence as we look to the full year. Operator00:16:57Thanks. Thank you. One moment for our next question please. Our next question comes from the line of Richard Shannon from Craig Hallum Capital. Your line is now open. Speaker 500:17:12Hi, guys. Thanks for taking my questions. Maybe a follow-up on the topic here of RadHard. It seems like a particular project here seems to be the reason for the sequential decline here as your products seem to be kind of mostly flat sequentially. Is there like a pause in the project here? Speaker 500:17:30Is there a question as to whether it will continue? Because I think your partners talked about a program assuming all the options are picked up to something that lasts any order of 4 years and we've got at least 2 years left to go. So just want to get some sense of the visibility in that project and whether this is just a lull between the kind of the sub programs within the bigger picture? Speaker 200:17:51Yes. Hi, Richard. This is Sanjeev. Thanks for the question. Yes, you're right. Speaker 200:17:56I think we expect the project that we are working on, the strategic radiation hardened PGA project with our partner, we expect that to get renewed sometime in the next coming months quarter. The reason for the delay is that there has been some delay from the U. S. Government funding agency in continuing the project because of some changes in the schedule on their side. The project is, like we said, we met all our deliverables in Q1. Speaker 200:18:27So we fully expect to get that project going sometime in Q2 or as soon as the funding comes through. Also, Richard, I would like to point out that we did talk about a new Toggle MRAM reliability project that we have signed in Q2. We just don't have all the details yet, so we haven't included that in our guidance for Q2 as well. Speaker 500:18:52Well, I guess I'll follow-up on that last part of your comments Sanjeet, sounds very interesting. How do we think about this in the scale of the other Toggle Reliability project? And what's the source there? Is another U. S. Speaker 500:19:05Or other government agency? Or what's the source of that one? Speaker 200:19:10So that's basically a follow-up from the same agency that we did a project with them in 2023. They had some follow-up questions on the reliability models that we shared. So we are actually collecting some more data to bring them up to speed on that one. So the in terms of scale, it won't be as big as it was in 2023, but we don't have the financial figures yet to disclose. Speaker 500:19:36Okay, fair enough. Let me hit a couple of financial questions for Nej. Let's see, let's hit on product gross margins here after some pretty good numbers last year. Last two quarters have been fairly a significant amount lower, I think in the 40 percent high 40s percent range here. Last quarter, you talked about it being something related to yield. Speaker 500:19:58I'm wondering if that's still continuing, there's any visibility in getting that back up to prior levels? And then also is there any dynamic of mix here, particularly as there seems to be a little bit of shift between Toggle and STT in your mix here in the last few quarters? Speaker 300:20:14Yes. Hi, Richard. Great question. Yes, from a gross margin perspective, the gross margin, again, without giving guidance has been within our internal model. So we continue to hold with the low to mid-50s as where we believe gross margin is. Speaker 300:20:32If you look at Q1 versus guidance, which I think you're kind of alluding to, the Q1 gross margin was pretty healthy. We did have about $3,300,000 in RadHard revenue that we saw in Q1. And so that's normally higher margin somewhere between 70% to 90% gross margin. In Q2, like we mentioned, there's no RadHard revenue that's being incorporated into the guide. So really the range there is based on purely product margin. Speaker 300:21:10But from a product margin perspective, the team has done a great job operationally looking at cost reduction projects being operationally efficient. So we've been able to see a healthy gross margin last couple of quarters. Speaker 500:21:26Okay. Maybe to follow-up on the topic and I guess I'm very curious specifically on product gross margins here. Should we be viewing these levels that we've seen a number of quarters over the past, we're going to model over the last 3 years, where you've seen numbers in the kind of mid-50s range, is that deemed to be abnormally high or the range you aspire to? And then to what degree do we see as STT ramps up here, both the high density one and the new low density one that seems to be ramping the second half, Is that a level that we can still aspire to or is that going to be a little bit more difficult? Speaker 300:22:03I think what we've seen in the past Richard is probably a little bit on the high end. There's been I think some great efficiencies as the teams looked at improving yields and bringing performance up from an operational standpoint. So I think there's some steady state that you'll see there. It's not like you can get yields to 100%, right? So there's going to be some steady state where that kind of tapers off. Speaker 300:22:29There is a little bit of flex in terms of the mix. And so as we look at that, there are some challenges there. But if you look at the new low density SCT product, we're expecting margins to improve from that product. Right now, it's just been introduced. And so we're working through the margin challenges there as you ramp a new product and get it up to speed and get yields to the levels you need to get them to. Speaker 300:22:57But you should see improvement in the gross margin from that product. Speaker 200:23:04Is it the aspiration in Operator00:23:06the 50s, right? Speaker 200:23:07Yes. Our aspiration is still to be there mid-50s. Speaker 500:23:11Okay. But that's the number you've talked about in terms of your total gross margins, not product gross margins, correct? Speaker 300:23:17That's correct. That's right. Speaker 500:23:19Okay. Fair enough then. Maybe 1 or 2 others here. I think you said in your press release here something about a foundry agreement here and I'm not sure if I caught anything in your prepared remarks around that. Can you elaborate what that is? Speaker 200:23:38Yes. So as you know, we've actually been a foundry for several radiation heart programs and also in the past to an embedded program as well over the last 15 years or so. So we are actively acting as a foundry. So this is a new customer that we are bringing online. So right now, we are in the process of setting up their wafers in our fab, and we hope to go into low volume production sometime in the second of this year, more likely Q4 of this year. Speaker 500:24:12And the whole idea Speaker 200:24:13over here, Richard, is that it's going to lower our I think going to improve our fab utilization and then lower our basically distribute our fixed costs over more product. Speaker 500:24:29Okay. Can you elaborate on the product here? Is this a custom product in any way? Sense of application? And how big can this customer be relative to your other big customers or your company's total scale? Speaker 200:24:43Hopefully, we can talk about this more at the next earnings call, Richard, but this is as much as we can disclose at this point. Speaker 500:24:50Okay. That's fair enough then. And just kind of looking big picture at your product business here, your guidance here for product revenues being roughly flat is a good sign in the context of what seems like a fairly difficult market for industrial and automotive. To what degree do you think we are or are we through any sort of inventory burn issues? We've seen a little bit of burn, I imagine, in the last few quarters as you look at it. Speaker 500:25:18Are we largely through that? Or do you worry that there's going to be more to come? Speaker 300:25:26Yes, Richard, it's really hard to speculate on where the year is going to be. I think if I think about semiconductor and just being in semiconductor for a long time, typical downturns, you usually see them to be 4 to 5 quarters. And from that, we should see some uptick in the second half. Speaker 500:25:49Okay, fair enough. Last question, I'll jump on sorry, I just didn't mean to interrupt. Speaker 300:25:54No, no, no. Go ahead, Richard. Speaker 500:25:57Last quick, just quick question for me is just on lead times. I think you mentioned companies now ordering inside lead time. Are we at lead times to where we're at before COVID on both your Toggle and STT products? Or is that still coming down to those levels? Speaker 300:26:12So Richard, we've kept the lead times back to the pre pandemic levels. They're roughly 26 to 27 weeks depending on which products you're looking at. Speaker 500:26:26Okay then. I think that's all the questions for me. I'll jump out of the line guys. Thank you. Speaker 300:26:31Thank you. Thank you, Ajit. Operator00:26:32Thank you. And our next question, one moment please. Comes from the line of Quinn Bolton with Needham. Your line is now open. Speaker 400:26:58Hey, guys. Just asking, if the product the product declined this quarter and just assuming it's flat next quarter, is that was next quarter? Speaker 200:27:21Yes, Nik, this is Sanjeev. We have not seen any ASP decline. It's mostly the demand or the softness in the Asia Pacific market and the Japan market, which is causing the lower volumes. Speaker 400:27:36Okay. Makes sense. And then for the Persist with IBM, could you I mean, I know it's early, but could you size that opportunity or give us any hints in terms of timing? Speaker 200:27:55So you might have seen the press release from us as well as IBM. They actually did launch their FCM 4 already. So it's available in the marketplace today. And in terms of our backlog, like Anuj mentioned, it's actually pretty healthy for 2024. It's up into the right compared to 2023, which is what we like to see. Speaker 200:28:15And I think basically consistent with the data center market, the increase in our backlog is reflective of that. Speaker 400:28:27Great. Thank you. Sure. Operator00:28:30Thank you. I am currently showing no further questions at this time. I'd like to hand the conference back to Sanjeev Agarwal for closing remarks. Speaker 200:28:41I would like to say thank you everyone for joining the call today, and we look forward to speaking to you at our next quarter earnings report. Thank you again for joining. Operator00:28:51This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.Read morePowered by