Q3 2022 Everspin Technologies Inc Earnings Call

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

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Okay.

Good afternoon, and welcome to the conference call to discuss ever been technologies third quarter 2022 financial result.

At this time all parties.

Rents are in listen only mode.

Conclusion of today's conference call instructions will be given for the question and answer session.

As a reminder, this conference call is being recorded today Wednesday November nine 2022, before we I'll 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 customer and industry adoption of our technology.

<unk> technology successfully bringing to market and manufacturing products in Everson 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.

For materially from those contained in the forward looking statements. We would encourage you to review our SEC filings, including our quarterly report on Form 10-Q, which will be filed with the SEC On November 10, 2022, and other SEC filings made from time to time in which we may discuss.

Risk factors associated with investing in everson.

All forward looking statements are made as of the date of this call and except as required by law. We undertake no obligation to update any forward looking statement made on this call to update or alter our 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 Everson.

Auditors are actually results may differ materially from these estimates as a result of the completion of our financial closing procedures final adjustments and other developments arising between now and the time that our financial results for this period are finalized.

Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information in G. A a P. A non G. A a P terms.

Included in the company's press release are definitions and reconciliations of GAA net income loss to adjusted EBITDA, which provide additional details.

A copy of the press release is posted in Investor Relations section of ever since website at Www Dot.

Dot com.

And now I'd like to turn the call over to Emerson CEO Sandeep Agarwal. Thank you. Please go ahead.

Thank you operator.

Thanks, everyone for joining us on the call today.

Hey, what's been delivered quarterly revenue of $15 2 million close to the high end of guidance.

Our GAAP net income positive for the sixth quarter in a row, which continues to be a strong focus of the company.

A few highlights for Q3 2022.

Revenue was $15 2 million up 3% year on year.

Product sales were $14 6 million up 21% year on year cash flow from operations was <unk> 9 million.

GAAP gross margin was 58, 8%.

Net income was $1 9 million.

On October 18, 2022, we reported entering into a contract to develop strategic radiation hardened FPGA technology, using our spin, but I might be for future department of defense strategic and space system requirements.

On November 2nd 2022, we announced the commercial availability of our <unk>.

X X, Alex <unk> devices and densities from eight megabit to 64 megabit.

For our business outlook product backlog for the balance of 2022.

September 30th 2022 continues to be high.

However, there are customer inventory adjustments that will have an impact on our backlog in the coming quarters.

We continue to alleviate some of our foundry supply chain constraints, which is helping address our unfulfilled demand.

Recently, we announced the commercial availability of our Nu X by family of <unk> devices and densities from eight megabit to 64 megabit. It is.

Is the only commercially available persistent memory with full read and write bandwidth 400 megabytes per second.

Yeah, eight input output signals with our clock frequency of 200 megahertz.

The low power family of devices, there was the highest endurance performance and data retention available today. This family of products can be an alternative solution to other memories, such as SRAM battery back to Amsterdam for electric Ram.

Non volatile SRAM and nor flash devices.

Based on the strong interest from our customers and this new <unk> family of SDN.

<unk> devices, we are now considering an optimized solution that is based on our 64 megabit design for lowered entities from four megabits to 16 megabit.

It will allow us to better compete with alternate memory solutions in this density range.

This new family will add to our product portfolio of X byproducts down to four megabit currently we have spy devices available between 128 kilobit.

Megabit only.

Our leadership in <unk> technology has resulted in a collaborative engagement to develop strategic radiation hardened.

Field programmable gate array technology, using arisman MRI might be for future department of defense strategic and space system requirements.

This will be a transformational FPGA device that is utilizing unique city MRM IP from aerospace technologies.

In addition, we will provide design and manufacturing services as part of this project.

I will now turn it over to our CFO <unk>, who.

Who will take you through our third quarter financials, and fourth quarter 2022 guidance.

<unk>.

Thank you Sanjeev and good afternoon, everyone as part of the third quarter 2022 financial results ever spend technologies is pleased to announce its sixth consecutive.

Second quarter of positive net income. In addition, we generated positive cash flow from operations, resulting in a healthy cash balance of $23 4 million, we delivered solid quarterly results above the midpoint of guidance with revenue of $15 2 million compared to $14 7 million last quarter.

<unk> and $14 8 million in the third quarter of 2021. We also had a positive net income of $1 9 million and positive cash flow from operations of <unk> 9 million for the third quarter of 2022.

MRM product sales in the third quarter, which included both toggle and FCC MRM revenue was $14 6 million versus $13 2 million in the prior quarter and $12 million in Q3, 2021 licensing royalties patents and other revenue in the third quarter was <unk> seven.

Million compared to $1 5 million in the previous quarter and $2 8 million.

In the third quarter 2021 shipments to suppliers for our largest end customer who we serve.

And our high density <unk> product for datacenter applications represented 19% of revenue in the quarter versus 15% of revenue in Q2, and 23% in Q3 2021, turning to gross margin GAAP gross margin for the third quarter of 2022 was 58, 8%.

<unk> versus 58, 4% in the prior quarter and 57, 1% in Q3 2021, GAAP operating expenses for the third quarter of 2022 were $7 1 million versus $6 9 million in the prior quarter and $7 4 million in the third quarter 2021.

The higher operating expenses in the quarter was primarily driven by increased costs to support the new Usdt industrial product expected to go into low volume production. In Q4. We are pleased to report third quarter positive net income of $1 9 million or <unk> <unk> per basic share based on $20 2 million.

Basic weighted average shares outstanding. This compares to a GAAP net income of $1 7 million or <unk> <unk> per basic share in the second quarter of 2022, and net income of $1 9 million or <unk> <unk> per basic share in the third quarter of 2021.

Basic EPS of <unk> <unk> was better than the top end of our guidance range, reflecting our strategic operational discipline and strong gross margins in the face of tightening supplies and macroeconomic uncertainties adjusted.

Adjusted EBITDA continues to improve period over period for Q3, 2022, adjusted EBITDA improved to $3 4 million compared to $3 3 million in the prior quarter and $2 5 million in Q3 2021.

Cash and cash equivalents increased to $23 4 million at the end of the third quarter compared to $23 1 million at the end of the prior quarter and $14 6 million in Q3 2021.

Cash flow from operations was <unk> 9 million for the current quarter, increasing year to date cash flow from operations to $4 3 million.

Turning to our fourth quarter 2022 guidance.

Ever spin is confident in its growth opportunities and ability to navigate the semiconductor maker macroeconomic challenges demand for our toggle products remained strong.

Ever spent expects total revenue in a range of $14 1 million to $15 1 million with some industry supply constraints to limit supply ever spin expects GAAP net income per basic share to be between breakeven and <unk>.

Primarily influenced by expenses related to our next generation 28 nanometer FCT MRM product development and price increases from our suppliers I will now turn it back over to Sanjiv for some brief additional commentary before we open it up for questions.

Thanks very much.

In summary, despite a challenging macroeconomic environment, we continue to build towards a profitable sustainable growth. Thanks to the hard work and dedication of our employees.

We are excited to see the interest from our customers and our new expire family of CDM Ram products and its potential impact on our revenue tragically in the coming quarters.

As planned Darrin Peller back the executive Chairman of the board of the board of Directors of Aerospace technologies has transitioned back to the chairman of the board.

George and I are appreciative of the support we received from Darren as the executive Chairman during the last year and look forward to working with him as chairman of the board.

Thank you everyone for joining us today.

Operator, you May now open the line for questions.

At this time, we will conduct a question and answer session to ask a question you will need to press star one on your telephone and wait for your name to be announced please.

Please standby, while we compile the Q&A roster.

As a reminder, if you would like to ask a question just press star one on your telephone.

Enter the queue.

We do have a question coming standby.

The first question comes from Nicolas Doyle at Needham Your line is open.

Hey, this is anecdotal on for Rajeev, Thanks for taking my questions.

First one would be just on margins.

<unk> continued.

Sequentially last quarter year.

I'm talking about really strong yields benefiting.

So is that 400 basis point 40 basis point increase kind of the same function or is that coming from better pricing any color there.

Yeah, Hi, Nick this is on edge.

Yes, as you know, we don't really give guidance on gross margin, but I'll say, yes, a lot of those things.

We have continued this quarter. So we've seen great operational excellence, where we've been able to drive higher yields and we're seeing the benefits there and we've also been able to take advantage of.

Optimizing for a better product mix and higher loadings.

But I will say eventually the <unk>.

Yields have to level off in the product mix will kind of get back to normal trends right. So that will kind of get us back to the internal model that we shared with everyone.

Right, Yeah makes sense, thanks for that color.

Also last quarter you guys are talking about 128.

Product ramping volume in the second half.

Could you talk about how adoption has been compared to the smart sensing products I mean, you did mention that.

You are looking into adding to their families at the <unk>.

For more about that level so.

Any color there.

Yeah.

Sure Nick.

So I think the 128 megabit product that youre, referring to that isn't sampling right now.

That is not the one that you've announced for commercial availability as yet it's only from eight megabit to 64 megabit.

We are sampling the 128 megabit and.

As you have said in the past any design wins there.

Takes a pretty long time in the industrial set.

Sector. So I think most of our design wins would probably come towards the end of 2023 and I think that's when you'll start seeing a significant or.

Material revenue from this new product that we brought to market.

Yes.

Okay.

If I could just squeeze in there.

You talked about kind of customers.

Maybe pushing out orders or at least the inventory adjustments can you speak to kind of what.

What end markets that Youre seeing that is that data center and industrial.

Thanks.

Yes, so first the first maybe let me add some color.

So the Q3 for US was a record product revenue quarter right. So in terms of filling the backlog.

We've produced.

Record numbers from a product standpoint, and I think operations has done a great job filling some of those orders in meeting the pent up demand.

But to your point.

There have been.

Some cancellations and push outs of orders.

And there's been a little bit of softness I think in the data center space.

But we still have plenty of backlog that needs to get filled.

And we continue to see orders in 2023 as well as 2024. So the backlog is still very strong.

Again, if you'd like to ask a question. Please press star.

One one on your telephone now.

One woman.

No further questions remain at this time I'd like to turn it back over to our CFO .

<unk> Agarwal for closing remarks.

Okay with that 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.

Thank you all for your participation in today's conference. This does conclude the program you may now disconnect.

Yes.

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