Q1 2021 Everspin Technologies Inc Earnings Call

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And a conference call to discuss and Crispy and technologies first squadron 2021 financial and yourself.

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A copy of that is that press release and posted and the Investor Relations section of ever schemes website at W. W. W. Dot <unk> Dot Com and was filed and the Securities and Exchange Commission and form 8-K earlier today and.

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<unk>. Please go ahead.

Thank you operator, and thanks to everyone for joining us on the call today.

Q1 results came and just below the midpoint of our guidance as we ended up recognizing no royalty revenue from a red hard licensing deal. We do expect to recognize the majority of the red hard licensing revenue overtime, even with that are Q1 21 revenue was up over three per cent of are cute for 2020 and on in line with our goal of double digit growth for.

The year more importantly, we increased our gross margin significantly lowered our cost generated positive cash flow for the third quarter and a row, while keeping our current distributor inventory and and help the range of eight to 10 weeks.

For for Q1, 2021, Togger revenue was and.

Approximately 10% and continues to gain traction as the market recovers.

As mentioned and our last earnings call, we expected toggled to continue to recover beyond the lows, we saw and Q3 2020 and they seem to be doing just that in fact, our current backlog suggest total revenues growing faster than we expected a tech.

Test them and do what we seem to believe as a solid economic recovery and the industrial and factory automation areas, along with shipping to the new design ones. We've been discussing for the past couple of years, we did see a strong start and Q2 backlogged over Q1 for industrial customers and were encouraged by the signs of all four regions coming back to growth S. T.

T revenue was a little off plan as we did see some small inventory adjustments, we expect to get back on track Q2 through cute for design wins continue to grow and Q1 2021 as they did and the overall year 2020, and we are back on track to match or slightly exceed the design when total for all of last year.

We have refocused our efforts on turning those opportunities and derail revenue and even changed our compensation of our sales force to be more focused in that area as mentioned last quarter average spin is providing production volume ship and stay more and customers than ever before which we believe reflects a strong future demand pipeline and growing adoption of amiram and the marketplace.

On the operations front, and we continued to focus on yield improvement and lowering our costs. We're finally seeing the results of our efforts and various improvements and emendation plant they've created healthy product gross margin across the board the biggest risk to our growth Martin's moving forward and mix and getting the capacity we need at the committed pricing and a tight sub con network.

Worldwide semiconductor companies appear to be struggling to keep up with demand as demand and many sectors is outpacing supply as we discussed last quarter, we Wanna Rad hard design and and now a finalize that contract and collected $3 million of the upfront payments for the related licenses as we've mentioned and the press release and Q1 and press release.

R. Q on revenue did not include the $1 billion and licensing revenue, we anticipated as I mentioned earlier, we do get to recognize that royalty overtime, which reaffirms our deliberate strategy to continue to monopod monetize R. I P. P.

Finally, our Twenty-eight nanometer next generation industrial product is on track to tape out and Q3 stay tuned for that I will now turn the call over to our interim CFO unusual Agarawala, who will take you through our first quarter financials and second quarter of 2021 guidance unusual.

Thank you Darren and good afternoon, everyone. Today I'll focus my discussion on GAAP financial results and highlights and keep Patrick's highlights include cash flow from operations as positive for the third consecutive quarter.

He also generated cash and the quarter and gross margin was higher.

Revenue for the first quarter of 2021 was 10.3 million compared to 10 million last quarter, and 10 and play 1 million and the first quarter of 2020.

And my and product sales and the first quarter, which include both toggle and S. C. T. M. M revenue is 9.1 million lower than the prior quarter and first quarter of 2020.

Licensing royalties and other revenue and the quarter contributed 1.2 million compared to point 3 million and the previous quarter and point $5 million and the price.

Prior year period, the increase and revenue is due to the yearly true up and royalty from a customer generally using your I P, which we have previously license to them.

The Red haired licensing deal is not included in the first quarter results.

Turning to gross margin GAAP gross margin for the first quarter of 2021 was $58 two per cent versus 52.3 per cent and the prior quarter. The higher gross margin is driven by royalty revenue.

GAAP operating expenses for the first quarter of 2021, where 6.3 million slightly lower than last quarter 6.4 million, but down from $6.9 million and the first quarter of 2020, GAAP operating expenses and the first quarter of 2021 included point 7 million of stock based compensation compared to.

At 1.3 million last quarter and point 8 million.

A year ago quarter, we expect to grow R&D expense and the remainder of 2021 as we prepare for the launch of our of 28 nanometer S. T T amram product targeted at industrial and other broad based applications getting to the bottom line Gab net loss for the first quarter of 2021 was 0.4 6 million or negative.

Two cents per share based on 19 million weighted average shares outstanding. This compares to a GAAP net loss of 1.6 million or negative eight cents per share and the first and the fourth quarter of 2020, and a gap net loss of 1.7 million or negative 10 cents per share and the first quarter of 2020.

Earnings per share negative too says was better than our guidance range. Despite revenue coming in and just below the midpoint, reflecting airtight operational discipline and strong gross margins share.

Running to the balance sheet cash and cash equivalents increased to 15.5 million at the end of the first quarter compared to 14.6 million at the end of the prior quarter cash flow from operations was a positive 1.6 million and the first quarter, making this our best quarter for cash flow from operations and third consecutive quarter.

A positive cash flow.

And into our second quarter guidance, we expect revenue and a range of 11 million to 12 million, which at the midpoint of 11.5 million represents 12% increase over $10.3 million from the first quarter of this year, we expect a gap lost per share of between seven cents and 11 cents, primarily driven by it.

Expenses related to the next generation 20th nanometer S. T T M M product.

I will now turn it back over to Daria.

First and brief additional commentary before we have open it up for questions.

Thanks, and ish and summary, we continue to build towards the future profitable growth. We believe toggled, the toggled and man will continue to gain traction at the market recovers, we anticipate increasing our market penetration of our high density S. T. D M round products for the data center, both at our top customer as well as the as well as other customers and he moved to the next few.

Years, we are on track to tape out or low density S. T. D M round product targeted at industrial customers and nor replacement and the middle of this year and we will continue to monetize R. I P with the Rad hard S. T. T. M. M licence, we mentioned being a big step with still more to come and operator, you may know open up the lines for questions.

Ladies and gentlemen.

If you have a question at this time <unk> and then the number one key on your attached challenge Palestine.

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<unk>.

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Again, and ladies and gentlemen, if you had a question at this time please price.

Alright, and then the number one key on your attach tone College town.

Your first question comes from the line Ave.

Peter Man of Greek haven't Cat and now your line is open.

Hi, guys. Thanks for taking my question and I'll say them on for Richard here.

I guess first and kind of a lot of moving parts.

And the numbers for first quarter and just thinking about.

Going forward, obviously, a lot of the strength and this quarter was you know total growing and.

And some are licensing revenue be recognized to that sounds like that's maybe a one time.

A bigger impact so I'm curious you know S T T M Ram.

And I have a big drop off there I'm curious what kind of recovery.

We should expect there and if you get a little more color on leather that's kind of and that's why constraints that that's.

Customer inventory binder, or what's going on and that.

Area that'd be great.

Yeah. So let me let me, let me start and there was probably want more than one question on there, but I'll I'll start with a couple of comments as well. So we did we did see some royalty uptick that's that's a trip from one of our customers that we do a run right. We don't have a lot of visibility, but obviously they did much better and the markets and they serve on the royalty rates than we normally would.

Get and we would project that to be slightly higher than what we were anticipating you know through time.

On the specific S. T T deal it was down slightly I think at the end of last year. They actually believed that they would do better than they were and the and market and we were looking at some of the data and I think their business was soft. However, this quarter going from Q1 to queue to we expect some recovery and then by Q3 and Q4, we expect that to be back.

To normal so you're going to see a little bit of a ramp up from that so nothing catastrophic and anyway, but I think it's just a normal leveling of their inventory versus there and demand so.

It wasn't very concerned about that it was a negative if you look at it from Q4 to Q1, you know as far as those numbers are but the ninth the nice news is toggle grew very well, which we were again, we believed it would continue to grow we believe that the new design ones that we've been focused on the last two years would come to fruition.

And that happened and we're really excited by the fact that toggle for Q2 is already ahead of where we were and Q1 and we're feeling really comfortable about the backlog and now it's changed the game where before we were focused on can we get enough demand and now it's like can you get enough supply.

And I'm sure you hear that from everybody.

Yeah, Yeah here and that quite a bit that's really helpful color, though thanks for that and I guess on that last point.

Supply.

And I know you said and the last call you've been able to mitigate margin and packs from supply constraints pretty well have you been able to continue to do that uhm is there a point.

Where you could think we could see either margin pressure from supply constraints going forward or like you just said a.

Point at which you know demand is gonna outstrip.

Supply and and you talk on products.

Yeah.

So to answer that I think clearly our margins aren't going to stay at 58% Uhm that was then artifact of a lot of great things that happen at one time, but we want our margin is to have that five and five it and yes, I do think we're going to be impacted by some of the capacity constraints that are out there because there's people that we mentioned, it's and the last are and and call that opportunity.

Mystically raised their price in order for you to even get capacity.

Our strategy day is not uhm to actually pass that onto our customers and I think that's the right strategy is we're seeing a recovery and the marketplace. It's rice choice for our company's that we're gonna we're gonna suck it up as we go through that but we still believe that our margins, we'll start with that five and and anything above that is we're moving forward is all within.

And the plan that we have and that we submitted as we walk through this year. So we feel comfortable about that today, but you're right there is gonna be and impact.

But I don't think for us from a fab perspective lead times are so long that you wouldn't see a fab constraint for us for many quarters, It's more assembly and test today.

Got it that's really helpful. That's it for me for now I'll have that from here.

Awesome. Thanks.

I am showing and Friday questions at this time I would not like to change the contents package and Sir <unk>, Arkansas two may I proceed.

So.

Okay. So with that we conclude today's call. Thank you all for joining and we look forward to reporting on progress and results and the next quarter's call. Operator, you may now disconnect the call. Thank.

Thank you. Thank you.

Since concludes today's conference call and thank you for your participation and have a wonderful T. You may now disconnect.

And.

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