Q4 2020 Everspin Technologies Inc Earnings Call
Ladies and gentlemen, this is the operator.
We will begin momentarily.
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Ladies and gentlemen, and basis the operating area. We will begin momentarily. Please continue to hold thank you.
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Good afternoon, and welcome to the conference call to discuss every spring technology preliminary unaudited fourth quarter and full year, 'twenty and 'twenty financial results.
At this time all participants are in listen only mode and the conclusion of today's conference call instructions will be given for the question answer session.
As a reminder, this conference call is being recorded today Thursday for very 'twenty six 2021.
Before we begin the call and I want to remind you that this conference call contains forward looking statements regarding future events, including but not limited to our expectations for ever since feature business and.
Financial performance and goals.
Customer and industry adoption of and Ram technology successfully bringing to market and the net and.
And manufacturing products never spins design pipeline and executing on its business from.
These forward looking statements are based on estimates judgments train speeds and market conditions and involve risks and uncertainties that may cause actual results to differ.
Kelly from dose contains forward looking statements.
We would encourage you to review our S E SEC filings, including our quarterly report for form 10-Q filed with SEC on November six 2020, and other S. E. SEC filings made from time to time in vitro may discuss risk factors associated with investing and average.
All forward looking statements are made as of the day of this call and except as required by law, we do not intend to update this information.
The financial results discussed today reflect our living Leanne. My preliminary estimates are based on information available as of the date hereof and.
Our subject to for you to review by every spin and its external auditors.
Our actual results may differ materially from these estimates and as a result of completion of our financial closing procedures final adjustments and other developments arising between now and the time that our financial results for the speeds are finalized.
Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information and GAAP and non-GAAP terms.
Included in the company's press release are definitions and reconciliations of GAAP net loss.
And did that.
EBITDA, which for foreign I, just hope emails.
This conference call will be available for audio replay for at least 90 days and the Investor Relations section all day.
Which means website at www Dot every spin dotcom and.
Now I'd like to turn to bolt on.
I would now like to turn the call over to average sprints executive Chairman and interim CEO, Gary and Biller back Gary. Please go ahead.
Thank you Suzanne and thanks to everyone for joining us on the call today Q4 revenue came in below guidance as our distributors manage their inventory mix and our current distributor inventory remains at a healthy range of eight to 10 weeks, even with that our acute our revenue Q4, 'twenty was up 3% over Q4 and 19 more importantly.
We generated positive cash flow for the second quarter and our ROE.
For 'twenty and 'twenty revenue was up 12, 1% due to strong first half growth of our toggle AMRAAM, primarily before the pandemic took hold and along with high growth for our S. T. T M room across the entire year as mentioned in our last earnings call regarding Q3, the demand from industrial applications for our MRM products remained soft.
Due to the ongoing pandemic affecting worldwide factory demand and new product Rollouts and Unfortunately, we don't play and significant we don't play significantly and they need the 'twenty and 'twenty growth markets, such as smartphones PC AI and five T rollout, we did see improvement on our Q1 'twenty one starting backlog for industrial companies.
Customers and expect Q4 to have been our low point design wins continued to grow throughout 'twenty and 'twenty and Q4 was no exception design wins more than doubled in 'twenty and 'twenty and ever spin provided production volumes to more and customer than any year and its history.
<unk>, a strong future demand product pipeline and growing adoption of M Ram and the marketplace more than 1300 customers have purchased production volume I've ever spent on camera on the operations front, we continue to focus on recovering from the yield issues that plagued us early on the year. We believe now that we have line of sight on various improvements and informed.
Implementation plans that will get us back on track with respect to having healthy product gross margins across the board.
Expect to see consistent gross margins and this range throughout the year, our biggest risk to our plan. This year is about getting the capacity, we need and an abnormally tight capacity situation worldwide. In addition, we are beginning to see certain suppliers opportunistically trying to raise the prices currently we don't see any material impact to our plan, but we're clearly tightened and certain area.
And ever spent has a long production history of amarin and silicon for radiation hardened application spring boarding off that expertise enabled us to win a new design and Q4 result, and licensing revenue beginning in Q1 of 'twenty 'twenty, one followed by foundry revenue and future. Importantly, this is our first Rad hard project.
Based on our S. T T M ramp we expect to be able to provide more information on this project at the end of next earnings call.
We also received our first royalties and Q4 from Globalfoundries and sales of embedded M ramps and our partnership with Globalfoundries has delivered tremendous benefits both to our own S. T T program and they're embedded amram offerings and I will now turn it over to our CFO, Dan Bear and bar Berenbaum, who will take you through our Q4 financials.
And our Q1 quarter 'twenty 'twenty, one guidance Dan. Thank you Darren and good afternoon, everyone. Today as usual I'll focus my discussion on GAAP financial results and also highlight some important cash flow metrics revenue for the fourth quarter of 2020 was $10 million compared to $10 $1 million last quarter and nine.
$7 million and the fourth quarter of 2019, MRM product sales and the fourth quarter, which includes both toggle and S. T. T. M. Ram revenue was $9 $7 million flat from the prior quarter and up slightly from $9 $2 million in the fourth quarter of 2019.
Licensing royalty and other revenue and the quarter contributed zero point $3 million compared to 0.5 million and the prior quarter and <unk> 5 million and the prior year period, the decline and that revenue was due to lower foundry revenue and Ram manufacturing that we complete for some of our highly specialized customers on to their product.
Generally using our intellectual property, which we have previously licensed to them. The lower foundry revenue was due to some of those supply chain issues with the <unk> silicon wafers, which we source from traditional Cmos foundries.
Shipments to suppliers for our largest and customer who we serve with our high density STP product for data center applications represented 40% of revenue and the quarter versus 38% of revenue in Q3, and 26% and a year ago quarter.
Turning to gross margin GAAP gross margin for the fourth quarter of 2020 was 52, 3% our cost of goods sold included zero point $2 million of noncash excess and obsolescence charges. This 52, 3% gross margin compares favorably to the prior quarters gross margin of 23%.
Which you will recall included $2 1 million of noncash excess and obsolescence and accelerated depreciation charges.
With this nice step up and our gross margin we expect to remain roughly at these gross margin levels, plus or minus depending on product mix and royalty revenue over the course of 2021.
GAAP operating expenses for the fourth quarter of 2020 were $6 $4 million slightly higher than the prior quarter $6 million, but down significantly from $8 $2 million and the fourth quarter of 2019, GAAP operating expenses and the fourth quarter of 2020 included $1.3 million of stock based.
<unk> compared to zero point $9 million last quarter, and $1 $1 million and a year ago quarter I would note that the $1 3 million stock based compensation and the fourth quarter of 2020 included a zero point $3 million reclassification of cash compensation to stock based compensation from price.
And prior quarters and 2020 this was related to how we've decided to structure incentive compensation also as you compare prior mark to prior periods I would note that the expenses and the fourth quarter of 2019 included zero point $8 million of restructuring charges.
We expect to grow R&D expense in 2021, as we prepare for the launch of our S. T. T M Ram product targeted at industrial and other broad based applications.
During the fourth quarter of 2020, we also reported a zero point $3 million noncash uncertain tax position related to certain foreign jurisdictions.
Getting to the bottom line GAAP net loss for the fourth quarter of 2020 was $1 $6 million or a loss of eight <unk> per share based on 19 million weighted average shares outstanding. This compares to a GAAP net loss of $3 $9 million or a loss of 21 per share and the third quarter of 2020 and a GAAP net.
Loss of $3 $1 million for a loss of <unk> 17 per share in the fourth quarter of 2019.
This each cent loss was in the middle of our guidance range, despite revenue coming in below our guidance range, reflecting our tight operational discipline.
Turning to the balance sheet cash and cash equivalents increased to $14 $6 million at the end of the fourth quarter compared to $13 $9 million at the end of the prior quarter cash flow from operations was once again positive at zero point $6 million and the fourth quarter compared to zero point $7 million and the <unk>.
Higher quarter and negative $2 $7 million in the fourth quarter of last year.
At the end of the quarter, we had a balance of $2 million on our $5 million was $5 million line of credit. We continue to believe we have sufficient cash to support our operations and our growth objectives.
Turning to our first quarter guidance, we expect revenue and the range of 10 million to $10 $8 million, which at the midpoint of $10 $4 million represents a 3% increase over the $10 $1 million and a year ago quarter, and a 4% increase over the fourth quarter of 2020.
We expect a GAAP loss per share of between a loss of 12 cents and a loss of <unk> <unk> per share, which reflects expected stock based compensation expenses of approximately $1 million I'll now turn it back over to Darren for some brief additional commentary before we open it up for questions.
Thanks, Dan and summary, we continue to build towards the future of profitable growth.
We believe the bottom left toggle revenue is behind US, we anticipate increasing our market penetration for our high density S. T. T M Ram products for the data center, both at our top customer as well as others as they move through the next years. We are on track to tape out our low density S. T T M around product targeted and industrial company customers and no.
For replacement and the middle of this year and we will continue to monetize our IP with the Rad hard S. TTM on license, we mentioned beginning the next step with more to come and operator, you may now open the lines for questions.
As a reminder to ask a question you will need to press sorry on your telephone to withdraw your question. Please press the pound key.
Again as a reminder to ask a question. Please press star one and telephone do we do on a question. Please press the pound key.
Okay.
First question comes from the line of Michael feedback from SRT.
Your line is now open.
Thank you hi, guys I appreciate the.
The opportunity to ask a couple of questions here. The first one I know that and the past.
The business and moved a little bit away from the automotive business and I'm just curious with some other recent developments and the EV space and if that if you're getting any renewed interest there.
Specifically with respect to I know there was a large recall with one of them with Tesla.
150000 of their NAND chips for defective it just seems like it would be a good application for imran.
No and it absolutely is and this is darin by the way it absolutely is a great opportunity for us specifically because our products have extended temperature ranges and what we're finding is there and theres kind of two different models and and the cars. One is obviously under the hood or near the battery and the other one is and the cabin and we feel like.
And our future product, especially and some of the lower density areas, where we have high temperature range and we have high performance with long endurance.
Both from a REIT cycle and also from a data retention and we felt that that's a good place for us to go I think the only place that we're really going to suffer a little bit is if they go for the high density because again, our one gig mckenley isn't isn't really suited for that are big STD product is not necessarily suited for that but all the other product offerings we have.
And so absolutely a target focus of ours and that's one thing and our net our future products are also going to have that extended temperature range and just so that we can.
Enable ourselves to get more market penetration there.
Okay, great. Thanks for that just for.
Click you mentioned that the design wins that doubled year over year do you have the actual figure for Q4.
Will that be and the Q was okay.
And it shouldn't be that should be and the K that information will be available and okay. Okay, great and thanks I just wanted a quick question.
Can you comment on the progress on taping out and ASIC this year.
Okay.
Alright, Thanks, So and you mean, the ASIC related to the one gig STG product for data center.
Tech.
So nothing new to report you know as we've discussed before publicly we are working with partners on getting that taped out and getting qualified out on that so nothing else to reported we still do plan on having that done this year and.
And hopefully we'll be able to talk about that a little bit more next quarter.
Okay, great. Thanks for taking my question.
Thank you Mike Thanks, Mike.
Our next question comes from the line of Daniel <unk> from Needham <unk> Company.
Your line is now open.
Hi, everyone. Good evening I'm here to ask a few on behalf of Rajiv Gill.
And I see you don't mind could you tell us a little bit more about the size of the debt inventory buildup you guys reported back in November for the datacenter customers and what's the latest on the day men front, there and as the inventory been moving.
And.
How are the kind of supply chain constraints and the industry currently impacting you.
So let me let me Jeff will stand for the first question, so as far as an and and and.
Inventory buildup, we did see a slight buildup as we were walking to the year, we do expect to burn that off the middle of this year. So you'll start to see the second half.
A lot more balance the big concern. We have is is these are long lead items, so having a little inventory doesn't really hurt you and that and that standpoint. So we're comfortable with the inventory position that we currently have.
And the second question, let's say that again sorry.
How are they are supply chain constraints that are currently and the interest kind of impacting you guys from the wafer supply et cetera.
Is that impacting you or are you seeing any issues there well.
Well, it's impacting everyone because youre starting to see a lot of these consumer and and also the datacenters and youre starting to see some pretty big ramp up and some of the capacity is getting utilized it at full tilt, which is good for the foundry, but everyone's struggling to get their fair share and has a small supplier typically we're not as impacted as the bigger suppliers.
Because we are and the noise. So so we will see some constraints as we mentioned, but we're able to pound our way through them because again, a few wafers here and there are not a big deal when people are asking for hundreds of lots and so I think in that case, we're protected the note that I did bring up and the earnings that there are people out there opportunistically raising prices.
And more concerned of that.
And then anything because again that can negatively impact our gross margins if our costs go up but so far we've been on mute any of that pretty effectively and let me. Let me elaborate just a little bit. Our obviously you know our large foundry partners are great partners for us and I know that in a situation where supply across the board is.
Tight they are working hard to hit us and everyone else all the wafers that they need. So we're fortunate to have strong foundry partners. There I will say that the opportunistic price increases that we are seeing for some of our our other suppliers and are right.
Right now, we're working through that but it's definitely something for us to keep an eye on as we go through the year and specifically at the Assembly test houses.
And so the specifically the assembly and test houses that are raising some other prices yes.
Yeah, we've seen assembly and test, we've seen a little bit on the materials side as well.
Got it. Thank you and then is there anything and whether you can share about kind of the U S. T M Ram.
Pipeline for you I think you mentioned that you started shipping in Q3 and now we have the.
On the Rad hard.
The license that.
And the pipeline as well and was there anything and what how are some of the kind of older contracts going and is there anything else you can share about the S. T M on product.
And we've been shipping the SPT MRM product for years. So its debt, it's not new I think shipping it into the data center.
We've been doing that consistently the Rad hard program that we were discussing that would be new and that will take time.
As we talked about a little bit I think we've talked about that and the past Rad hard as is typically a long design product, but it's also and extremely long running product not particularly high volumes, but it can be lucrative which is why we engaged in it and it's it's a very extended temperature and extreme conditions. So it's.
One that for US it's part of our strategy, both short and long term. So we expect to try to sign more of those agreements through time and Dennis tend to put a little bit more perspective, as well I think and when we talked about in Q3, we talked about shipping to our second high density S. T. T M round customer so we've been shipping the high density as TTM Ram.
And two our lead customer for quite some time and both of the 256, Meg as well and then the one gig densities. So this S. T T M. Ram project that we're talking about now on the Rad hard project, we've been doing Rad hard on toggle for many years. This is our first Rad hard project using the STG.
Allergy. So that's yet another application of the STG technology, we've talked about taping out our next.
S T T.
Product that will be a little bit lower density and the high density stuff, we're doing for data center and that's what eventually gets geared towards more industrial markets as well as newer replacement. So the message. There is we've been shipping <unk> for quite some time, we have the industry, leading STG technology. This is the.
Best AMRI and technology out there, we believe and there are multiple applications for it ranging from data center to Rad hard to eventual nor replacement.
Thanks, That's all for me. Thank actually Roger has just joined the line. So I think he has a few zone. So I'm on a I'm going to jump back into queue and let Ravi asked the network.
Happy to take questions from either you or Roger no problem Dennis Thank you.
Yes.
Next question comes from the line of project Q from Needham and company.
Your line is now open.
Yes, thanks, guys. Thanks for taking my questions I appreciate it.
And sorry, I joined a little bit later on just on a previous call.
So.
You had mentioned that.
And that the company had one part of the strategy of the company was trying to looking looking to standardize the interface, particularly around <unk>.
Basic and and Ameren enabled ssds.
To allow easier integration for customers and this will be done by partnering with ASIC developers.
Particularly on the higher end of the product. So just wondering if you can kind of and update us in terms of how that process is going in terms of the partnerships.
Trying to develop the ecosystem of M Ram in order to try to.
Generate higher proliferation of M. Ram. Thank you yeah rajeev. Thanks for the question and so I was going to say, it's okay to jump on late for that question was actually asked a bit earlier, though so I'm going to give you some grief for it but the short answer is we don't have anything to update now we continue to work with our partners. We do expect to have that <unk>.
To be qualified on that E cig and this year and we should have more to update on that over the coming months if not on the next quarter's earnings call and it is it is still a very important focus for us and in addition to that all of our future products, we'll have standard interfaces and.
All the way across the board. So we don't plan on having anything that we would and are.
For people from drop and compatibility.
Okay got it and on the.
The.
You're talking about.
Ram and the data center and <unk>.
It's really all about caching.
And so just curious in terms of kind of kind.
And kind of the enhanced capabilities of and Ram and the data center and kind of what value that.
And your customers are starting to see and they start to now come up with a few iterations of MRM and their and their products for email that it's about caching and high performance and the highest performance and the data center is provided by that technology and the architecture. So it's a combination of what we provide for them.
And from both the right speed and endurance per.
And <unk>, but it's also a combination of how they parallelize the architecture and that's the fastest speed drives our fastest speed driving that are in the marketplace. Today. So that's what we focus on and there are going to be commodity dinner competition that you compete against but theyre not the performance segment of the market and we're targeted.
Similarly at the highest and performance and of that data center market.
Okay. Thank you.
Ladies and gentlemen, if you have a question at this time. Please press Star and then day number one key on your Dutch Joe.
That's John and telephone.
Okay.
I am showing no further questions at this time I would like to turn the call back to Daniel Birnbaum.
Great. Thanks, Suzanne so with that we conclude today's call. Thank you all for joining US we look forward to reporting our progress and rigor on next quarter's results and our next quarter's call.
Suzanne and you can now disconnect the call. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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