Q1 2022 Everspin Technologies Inc Earnings Call
Good afternoon, and welcome to the conference call to discuss every spin Technologies' first quarter 'twenty to 'twenty two.
At this time all participants are in a listen only mode.
At the conclusion of today's conference call instructions will be given for the question and answer session.
Minder. This conference call is being recorded today Wednesday May 11 2022.
Before we begin the call 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 future business financial performance and goals.
And industry adoption of our a M technology successfully bringing to market and manufacturing products and ever since design pipeline and executing on its business plan.
These 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.
I would encourage you to review our SEC filings, including our quarterly reports on Form 10-Q, which will be filed with the SEC On May 12, 2022, and other SEC filings made from time to time in which we may discuss risk factors.
We are investing in ever spin.
All forward looking statements are made as of date of this call and except as required by law. We undertake no obligation to update any forward looking statements made on this call to update all of you.
All forward looking statements, whether as a result of new information future events or otherwise.
The financial results discussed today reflect our preliminary estimates are based on the information available as of the date hereof and are subject to further review by ever spin and its external auditors.
Actual results may differ materially from these estimates as a result of the completion of our financial closing procedures final adjustments and other developments are rising between now and the time that our financial results for this period are finalized.
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.
In the company's press release are definitions and you can see in the issuance of GAAP net income or loss to adjusted EBITDA, which provides additional details.
A copy of the press release is posted in the Investor Relations section of Peppers, spinach website at www dot ever seen dotcom lease.
This conference call will be available for audio replay for at least five days in the Investor Relations section of ever seen so website at www dot ever seen dotcom.
And now I'd like to turn the call over to ever spin CEO Sanjeev Agarawala Sanjeev. Please go ahead.
Thank you operator, and thanks to everyone joining us on the call today.
Hey, what's been delivered quarterly revenue of $14 3 million, an increase of 39% year over year and above.
The high end of guidance.
GAAP net income positive for the fourth quarter in a row, which continues to be a focus of the company.
We improved product to keep our gross margins and a healthy range and control operational spending while growing our topline.
A few highlights for Q1 2022.
<unk> was $14 3 million up 39% year over year.
GAAP net income was $1 9 million compared to a net loss of $5 million for the year for the prior year period.
During the first quarter.
Chip samples of our next generation <unk> Ram <unk>.
Spy product family.
The product backlog for the balance of 2022 is at an all time high.
Overall demand continues to outpace supply leading to lean inventories at distributors across all products.
Continue to work with our foundry partners.
More wafers.
And assembly and test houses for more capacity.
We expect the supply chain constraints.
Taken in second half of 2022 impacting our ability to meet demand.
As mentioned in previous quarters, we have over $2 million.
Global demand, which is expected to carry over into upcoming quarters.
Our next generation low density city, and Brian ex spy product family is on schedule for volume production in second half of 2022.
We verified performance on first Silicon, which showed no significant issues and successfully began customer sampling in March.
This product delivers extremely high bandwidth low latency and non volatile writing capability.
The industrial temperature range it.
It is compatible with industry standards and offered and standard packages.
This new product will be revolutionary in its ability to serve as a fast serial ram or as an all flash of placement and industrial Iot and embedded system applications.
I'll now turn it over to our CFO , who will take you through our first quarter financials and second quarter guidance.
Thank you Sanjeev and good afternoon, everyone. We are excited to report ever since quarterly results. Despite supply constraints ever spend continues the profitability trend into 2022, we delivered solid quarterly results, beating top end of guidance with revenue of $14 3 million compared to $18 2 million last quarter.
And $10 3 million in the first quarter of 2021. We also had positive net income of $1 9 million in cash flow from operations of negative $1 million for the first quarter of 2022.
MRM product sales in the first quarter, which included both toggle and SPT MRM.
<unk> revenue was $12 7 million versus $12 6 million in the prior quarter and $9 1 million in Q1, 'twenty, one licensing royalties patents and other revenue in the quarter was $1 7 million compared to $5 6 million in the previous quarter and $1 2 million in the prior year period Q4 'twenty one include.
$3 9 million of revenue recognized from a one time IP optimization deal shipments to suppliers for our largest end customer who we serve with our high density <unk> products for datacenter applications represented 19% of revenue in the quarter versus 17% of revenue in Q4 and 26.
<unk> a year ago quarter, turning to gross margins GAAP gross margin for the first quarter of 2022, 58% versus 62, 8% in the prior quarter and 58, 2% in Q1 'twenty one the higher gross margin for the prior quarter was driven by the IP monetization deal.
GAAP operating expenses for the first quarter of 2022 were $6 3 million versus $7 7 million in the prior quarter and $6 3 million in the same quarter, one year ago, the higher operating expenses in the prior quarter was primarily for the 28 nanometer product development <unk>.
GAAP operating expenses in the first quarter of 2022 included <unk> 8 million of stock based compensation compared to <unk> $75 million last quarter and $7 million.
In the year ago quarter, we expect R&D expense to grow in 2022, as we launch the 28 nanometer STD MRM product targeted at industrial and other broad based applications. We are pleased to report fourth first quarter positive net income of $1 9 million or <unk> 10 per basic share based on $19 9 million.
Basic weighted average shares outstanding this compares to a GAAP net income of $3 7 million or 19.
Basic shares in the fourth quarter of 2021, and a GAAP net loss of half a million or <unk> <unk> per basic share in the first quarter of 2021.
Okay.
Basic EPS of <unk> <unk> was better than the top end of our guidance range and reflects our strategic operational discipline and strong gross margins in the base of tightening supplies cash and cash equivalents decreased to $19 9 million at the end of the first quarter compared to $21 4 million at the end of the prior quarter and $15 5 million.
In Q1, 'twenty, one cash flow from operations was negative $1 million for the current quarter compared to $6 4 million in the prior quarter and $1 7 million positive for Q1 of last year.
Turning to our second quarter 2022 guidance demand for our products remains strong we expect industry supply constraints to limit supply and pushed demand fulfilled customer demand to the second half of the year. We expect Q2 revenue between $13 6 million to $14 6 million.
We expect a GAAP income per basic share of between negative <unk> <unk> per share primarily driven by expenses related to the next generation of 28 nanometer <unk> MRM product and price increases from our suppliers I will now turn it back over to Sanjay for some brief additional <unk>.
Inventory before we open it up for questions.
Thanks, so much.
In summary, we continue to build towards a future of profitable sustainable growth I'd ever spent Q1 GAAP positive net income speaks to the continued focus.
The <unk> team and controlling our costs, improving our yields and shipping what we could and a constrained supply chain environment.
Excited for our new LCD export SDN, Brian ex byproduct that Arrow has been launched this quarter and look forward to its positive impact on industrial Iot and embedded systems.
Operator, you May now open the line for questions.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key once again Thats star one and you touched on the telephone.
Your first question comes from the line of Rajiv Gill from Needham <unk> Company. Your line is open.
Yes, thanks for taking my questions.
Just a question on the on the guidance.
You mentioned that the.
Opex should be higher related to the.
The tape out.
Just wondering if you could maybe talk about the opex.
Corner over quarter related.
Also to the gross margin.
Quarter over quarter to get to the <unk>.
The midpoint of.
The EPS loss.
Do we expect gross margins to kind of trend down to given the higher input costs or is it going to be more of a kind of the opex related to the tape out. Thank you.
Yeah, Hi, Roger this is an edge.
Yes.
Gross margin perspective, as you know, we don't guide to gross margin, but I think from a from a modeling standpoint right.
Suggest sticking to the internal model that we've continued to share with the group.
Low mid fifties thinks about right gross margin.
Q1, 'twenty two gross margin was a little richer because of the product mix. So we were able to.
I see some good news, there, but I think with that.
The revenue is.
He is limited by supply right and the cost of goods sold.
Does have some pressure related to higher supplier pricing and.
So we feel comfortable giving guidance at that level, we are being conservative, but I just wanted to share that.
I appreciate that and then $2 million of unfulfilled demand being pushed in the second half of 2022 based on the supply constraints.
I guess you are confident that the demand.
It will still be there.
In the second half it wont go away, but just any kind of clarity there in terms of the type of demand maybe type of end market.
What type of products that was related to.
Yes.
We're very confident that.
The $2 million.
And then backlog that's moving out to the second half will be fulfilled as.
As we look at backlog is the highest its been ever historic from historic ranges.
Things are looking good in terms of industrial automation and automotive.
Backlog is looking good in those areas.
Yes.
So rajeev just to add a little bit to that.
We are pretty confident that the demand is not predictable.
If you just look at our backlog, it's pretty high and it's actually gone up 10% to 15% year over year. So.
As long as we can actually obtained more supply I think we will be able to meet the demand and it's not going to go away over the next.
203 quarters.
Very good and just my last question following up on that point.
When you're in kind of what the lead times are the last time, we spoke the lead time for pushing 25 weeks.
You guys were kind of actively fighting for additional wafers.
It's a long process, obviously, you get the wafers through the back end.
And so the supply chain the supply chain situation is challenging.
Your customers are ordering earlier than expected.
And so maybe you can give a sense also in terms of kind of are there any signs of kind of order reschedule wording calculations, but just kind of just some thoughts in terms of current lead times how are you.
What's the updated process.
Of getting more wafers quarter over quarter.
And just any insight there would be quite helpful. Thank you.
Sure Randy.
Basically.
Whether we are able to fulfill the first of all on the lead times I think our lead times are still about $25 six weeks. So the only way to improve those is by getting some expedites with our foundry partners.
And in the Bakken and we are constantly working with both our foundry partners and the assembly and test houses to make that happen, but I don't have anything concrete to give you right. Now however, I can say it is that if you are able to secure supply or by.
By July August , we'll get that information from our foundry partners and we will get those wafers in that timeframe, we should be able to.
Meet that extra demand of $2 million in this year.
Great. Thank you.
Sure.
Once again to ask a question. Please press Star then the number one on your Touchtone telephone.
Your next question comes from the line of Richard Shannon from Craig Hallum. Your line is open.
Well, thanks, <unk>, thanks for taking my questions.
Maybe following up on the topic of product gross margins. If my calculations are right. It's the best number you've had other than one in the history here I think you characterized it is mostly coming from mix. So I just wanted to verify that you didn't you didn't have any benefit from yield. Let me. If you can describe that mix is that within <unk>.
And density or change in applications or from more smaller customers or how would you characterize that.
Yes, So hi, Richard So yes for Q1 gross margin.
Definitely richer than our internal model expectations, we did see some product mix goodness, we were able to sell some lower costing parts and so that allowed us to get.
A better gross margin.
And so there is some good news there and then we also if you recall we had increased some prices in December to offset some of our component cost increases that happened last year, and so you see that benefit as well.
To help some of that.
In addition to that.
Thinking about the gross margin.
Looking at it from 62% last quarter to 58 here, we did have that IP monetization deal and so you did see it.
Yes.
A lot richer than the internal model Brian .
And so theres some differences there.
Okay. Thanks for that.
Second question on.
On the topic of input costs can you characterize how much prices have increased or do you think the slowly increase this year.
Whether these cost increases are durable and then you just mentioned some some products youre able to raise prices with back in December .
See any increased ability to pass those costs along here or is that something you don't see April to do so.
Yes so.
One of the things I want to comment on right away is.
Any of the price increases that we've done was specifically as a reaction to the higher input costs that we're experiencing so we believe in having that long term relationship with the customers and so that's the only increases we've done is to meet that and if the prices go back down.
And.
We're always considering alternatives as far as.
What we need to do.
Okay that is helpful.
Maybe a question on the new STP family here.
Thank you said your.
The sample and maybe you can give us a sense of the engagements.
When you said you are going to be in volume production in the second half of the year, what's your visibility on getting wins and ramping up here and what kind of an impact could this have on revenues either dollars or percentage terms for next year.
Yes, So Richard let me comment on.
Obviously within Ericsson and very excited about this part and also.
Some of our customers, who would actually ship fully functional samples in Q1 and as you saw last week, we actually announced availability of these parts.
Across the market space.
This part actually is can replace a high speed serial memory.
Nor flash and then in addition, you can actually also guarantee FPGA systems, and we have actually sampled.
<unk> companies using basically this part as of now.
Flash replacement okay.
So in terms of impact to revenue I think it's too early to say, but I can say that.
Our customers that we are actually sample it theyre excited to actually test it out and evaluated so hopefully we'll see some design wins. This year that can actually go into production in 2023 time frame.
Okay Perfect. One last question for me I'll jump out of line on your high capacity STG products, we haven't heard a lot of positive commentary to last couple of conference calls I'm, assuming it's kind of flat to down here I think you are.
Largest customer consumes a good chunk of this maybe if you can just talk to the overall focus and importance of the high density product in any product development going on there and do we see this continuing to grow.
At all of the next one or two years or is this.
Kind of a deep focused area.
Yes, so Richard I think the way to think about it is I mean.
It has been over.
Consistent customer that we've actually supplying these parts through over the last four or five years and we have a very healthy relationship with this customer.
Though the demand is a little bit lower because of the supply constraints.
Happy to announce or I think we've mentioned this before we had already designed into their next generation product.
Slash product. So I think we continue to see.
Demand our supply of this part of our largest customer for a while.
Or at least the next two or three years.
Okay perfect that is all for me. Thank you guys.
Once again to ask a question. Please press Star then the number one on your Touchtone telephone again Thats Star then the number one on your Touchtone telephone.
Once again to ask a question. Please press Star then the number one on your Touchtone telephone.
There are no further questions at this time I will now turn the call over back to our CFO <unk> Wang.
Okay with that said, we conclude today's call. Thank you all for joining us and we look forward to reporting our progress and results in next quarters call. Operator, you may now disconnect the call.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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