Everspin Technologies Inc. Q1 2023 Earnings Call
Speaker 1: You you.
Speaker 2: Good afternoon and welcome to the conference call to discuss ever spent technologies first quarter 2023 financial results.
Speaker 2: At this time, all participants on a listen only mode.
Speaker 2: At the conclusion of today's conference call, instructors will be given for the question-answer session.
Speaker 2: As a reminder, this conference call is being recorded today with the May 3rd, 2023.
Speaker 2: 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 expectation of ever spent future business, financial performance, and goals, customer and industry adoption of MRIM technology.
Speaker 2: successfully bring it to market and manufacturing products and ever spend design pipeline and executing on its business plan. These four looking statements are based on estimates, judgment, current trends, and market conditions and involve risk and uncertainty.
Speaker 2: that may cause actual results to differ materially from those contained in the four-pointed statements. We would encourage you to review our SEC filings, including our quarterly report on form 10Q, which will be filed with SEC on May 4, 2023.
Speaker 2: and other SBC filings made from time to time in which we may discuss risk factors associated with investing in ever spent. All foreign looking statements are made as of the date of this call, and except it's required by law, we're going to take no obligation to update any foreign looking statements made on this call.
Speaker 2: to update or alter our whole statement, whether as a result of new information, purchase, future events, or otherwise.
Speaker 3: and CEO , Sanji Aguwal. Sanji, please go ahead. Thank you, operator. And thanks everyone for joining us on the call today. I have been delivered quarterly revenue of 14.8 million, which is at the high end of guidance, and a 3% increase year over year. We were gap net income positive for the eighth quarter in a row, which continues to be a strong focus for the company.
Speaker 3: products on 28 nanometer CMOS. With these two X5 family of STTM RAM products, our customers have access to densities ranging from 4 megabit to 128 megabit. These products will enable our customers to simplify the system, architecture, and easily replace legacy memory components like SRAM and F RAM. They're ideal for use in electronic systems, such as industrial IoT, network, and enterprise infrastructure, process automation and control, aeronautics and avionics, medical and gaming.
Speaker 3: Ever since continues to get interest from our customers for a high density greater than 256 megabit, discrete SCTM RAM part on 2x CMOS node for discrete NOR flash replacement. The first such product is in the design phase and on schedule for production in 2024.
Speaker 3: When available, this part would be ideal for replacing NOR in FPGA systems to store configuration memory and simultaneously enabling 100x faster over the air objects.
Speaker 3: I will now turn it over to our CFO , Anujagarwal, who will take you through our first quarter financials and second quarter 2023 guidance. Anuj. Thank you, Sanjeev, and good afternoon everyone. As part of first quarter, 2023 financial results. Ever spent technologies, it's pleased to announce its eighth consecutive quarter.
Speaker 4: We delivered solid quarterly results at the high end of guidance with revenue of 14.8 million compared to 15.7 last quarter and 14.3 in the first quarter of 2022. We also had positive net income of 0.8 million and positive cash flow from operations of 1.2 million for the first quarter of 2023. MRAM product sales in the first quarter which includes both toggle and an SBT MRAM revenue with 13.8 million compared to 14.6 million the prior quarter.
Speaker 4: at an increase from $12.7 million in Q1-22. Licensing royalties, patents, and other revenue in the first quarter remained consistent with the prior quarter at $1.1 million compared to $1.7 million in Q1-22.
Speaker 4: Shipments to suppliers for our largest end customer who we serve with our high density STT product for data center applications represented 11% of revenue in the quarter, versus 5% of revenue in Q4 and 19% in Q122.
Speaker 4: Turning to gross margin, gap gross margin for the first quarter of 2023 was 56.8% versus 51.4% in the prior quarter and 58% in Q1.22. Gap operating expenses for the first quarter of 2023 were 7.7 million.
Speaker 4: versus 7.5 million in the prior quarter and 6.3 million in the first quarter of 2022. The higher operating expenses in the quarter compared to the Q1-22 was primarily driven by increased cost to support the X5 family of FCT product that is currently in low volume production.
Speaker 4: We are pleased to report first quarter 2023 positive net income of 0.8 million or 4 cents per basic share based on 20.5 million basic weighted average shares outstanding. This compares to a gap net income of 0.6 million or 3 cents per basic share.
Speaker 4: in the fourth quarter of 2022, and net income of 1.9 million or 10 cents for basic share in the first quarter of 22. Basic EPS of 4 cents was better than the midpoint of our guidance range, reflecting our strategic operational discipline and ability to drive profitability in the face of tightening supplies and macroeconomic uncertainties.
Speaker 4: Adjusted Ivitat continues to remain positive.
Speaker 4: For Q-123, Adjusted IVIDA was 2.3 million compared to 2.1 million in the prior quarter and 3.1 million in Q-122. Cash and cash equivalence ended the quarter at 24.2 million compared to 26.8 million at the end of the prior quarter and 19.9 million in Q-122. The decrease in cash, quarter over quarter, is a result of ever-span paying off its term loan and line of credit in full during the quarter. Cash flow from operations was a healthy 1.2 million for the current quarter.
Speaker 4: Turning to our second quarter, 2023 guidance, Everspin is cautiously optimistic. Demand for our toggle products remains strong. Everspin expects total revenue and a range of 14.5 to 15.5 million. Everspin expects gap net income per basic share to be between break even and five cents. Primarily influenced by expenses related to the X-Pie, family of SET product development and pricing increases from our suppliers.
Speaker 4: I'll now turn it back over to Sanji for some brief additional commentary before we open it up for questions.
Speaker 4: for some brief additional commentary before we open it up for questions. Thanks, Arch.
Speaker 3: In summary, Everspin reported another quarter, now the eighth in a row of profitability, which is a strong focus for the company. During Q1, we paid off our line of credit and term loan in full, making Everspin debt-free as of Q1, 2023. Bolstered by our first quarter performance.
Speaker 3: guidance for the second quarter and our early views into the rest of the year lead us to believe Everspin is successfully navigating the slowdown in the semiconductor industry.
Speaker 3: We are pleased that we were able to bring another family of STTM RAM products to our customers and are excited to see their interest and traction with these products. Thank you for joining us today.
Speaker 3: Operator, you may now open the line for questions.
Speaker 2: Thank you. As a reminder, if you'd like to ask a question, please press star 11 on your telephone.
Speaker 2: I also ask that please wait for your name to be called before you proceed with your question.
Speaker 5: First question.
Speaker 2: We'll come from Richard Shannon of Craig Helium. Your line is open.
Speaker 6: Well, hi guys, thanks for taking my questions. Let's see here.
Speaker 6: Sanjeev, I wanted to follow up on one of your marks here in your second set of comments about navigating the slowdown in semis. I guess in your earlier comments you also talked about some push outs and pull ins and a little bit of cancellation. So I just want to get a sense of backlog whether that's going up or down.
Speaker 6: where lead times now and you expect them to come in. And what does that ultimately imply about your book to build in the first quarter and what you think it might be in the second?
Speaker 5: Hi, Richard. How are you doing? Doing fine, thank you.
Speaker 3: Yeah, so in the first section I was basically talking about some push-out, some cancellations and pull-ins and that is basically our spin business returning to what we call a baseline. We typically see a little bit of that going on in every quarter. So, and it comes up.
Speaker 3: what we are seeing or why I'm saying that we are seeing are successfully navigating the slowdown is because we're actually seeing backlog.
Speaker 3: with the end of 2023 and going into 2024 and it's a pretty healthy backlog and it makes us feel that we can actually
Speaker 3: Actually do pretty well in the year. We're actually looking to grow a quarter over quarter and actually do as well as we did last year. Yeah.
Speaker 6: I think most investors are thinking about your product revenues. Would you also declare that product revenues can grow quarter and quarter the rest of the year, including second quarter?
Speaker 6: most investors are is basically thinking about your product revenues. Would you also declare that product revenues can grow quarter and quarter the rest of the year including second quarter?
Speaker 4: Yeah, hi, Richard. This is Onage. So, product revenue is also doing very well, right? We're seeing strong growth in toggle sales and with our X-Pie product family coming into low volume production, we're optimistic based on some of the feedback we've gotten from customers and as we begin to get design wins.
Speaker 4: So we're seeing the ramping of that product as well. And then as you know, the challenges are really around the data center. And so there's still some sluggishness there. But toggle is going very strong and the X5 product is ramping nicely.
Speaker 6: Okay, fair enough. Maybe touching on a couple of elements in the financial guidance for the quarter, always try to get a sense of what you're thinking about on both on gross margins and OPEX. Let me touch on gross margins for a second. If I look at the last five quarters, you had four of those five.
Speaker 6: near the levels you just reported in the fourth quarter was a bit below. I think you talked about some mix and yield dynamics in the fourth quarter. Would you call out
Speaker 6: kind of last quarter as more of a normal mix and situation, or is it more optimized? I know relative to your long-term guidance of 50 to 55 percent gross margin, a little bit on the high side of that, but you've had some good success in the last four out of five last quarters, and so I want to get a sense of whether...
Speaker 6: you expect that to maintain here or you see the first quarter as more of an optimistic outcome.
Speaker 4: Yeah, yeah, sure Richard, let me try to answer that. So, you know, we're, we try to be a little bit cautiously optimistic, I guess, when we provide guidance. And so that's why you see the 14 and a half to 15 and a half in terms of revenue.
Speaker 4: just trying to glide slightly higher than the Q1 results. But I think in terms of gross margin, you are seeing a little bit of product mix benefit in Q1 and some other items. So we still think that...
Speaker 4: low to mid 50s, maybe more mid 50s is realistic. And so I would, without giving guidance, kind of stick with that story for now. And then from an OPEX standpoint, we've shared that we're trying to be frugal but smart in terms of how we're spending money. And so there has been an uptick.
Speaker 4: in op-ax related to the new X-Fi industrial product, and it'll continue to be at that level as we ramp the product.
Speaker 6: Okay. Fair enough then I'll ask one more question jump out of line here. Maybe to start the conversation on your new X-by products, Sanjeev. Sounds like you're getting some early stage success and designs and attention here. Maybe you can give a little bit more color or so weird.
Speaker 6: what family of products – or excuse me, which density, what applications you're seeing in an early, and then to what degree are we going to see the benefits coming in this year versus in calendar 24? Yeah, so I'll probably start with the last question. Most of our design wins and ends are going to be in the fall.
Speaker 3: in the industrial space. So I think it's going to be quite challenging. Challenging the any significant revenue in 2023. But best case, you could see some upside in Q4 of this year.
Speaker 3: In terms of design wins, we're actually seeing it across the range all the way from 4 megabit to 64 and even 128 megabit. But most of the design wins are actually with our first family that we brought out, the 64 megabit native die. Those are the ones that are actually a major part of the sentence that I was – or the statement that I was making that we're starting to see.
Speaker 6: Thank you very much.
Speaker 5: Thank you Richard. Thanks Richard. Thank you.
Speaker 2: Thank you. If you would like to ask a question, please press star 1-1.
Speaker 2: One moment while we wait for the Q&A file. We have another question coming one moment please.
Speaker 2: One moment while we wait for the Q&A file. We have another question coming. One moment please.
Speaker 6: And this will be a follow up from Richard Shannon of Craig Haley and go ahead please. Okay, well I'll just go back in then. Let's see here a couple other questions. Sonji, maybe to follow up on one of your prepared comments, you talked about this in the last few calls about this more leading edge higher density STT that's going to be nor flash replacement. Let's go ahead.
Speaker 6: Sounds like you're seeing some continued progress here. If you were to think about a timeframe by which you'd start to see some benefit from that, when would that be? And are these going to be difficult, you know, architectural kind of decisions for customers to make, or is this more rapid replacement, and do you think it'd be a fairly short sales cycle?
Speaker 3: So the high density part that we are talking about as far as revenues concerned, I think you would start seeing some revenue in 2025.
Speaker 3: with going into production sometime in, you know, second half of 2024.
Speaker 3: As far as the architecture for this part, it's going to be a drop-in part, so it'll be a direct replacement for standalone NOR.
Speaker 3: But the products are still going to be industrial, so I think the qual cycle is still going to be 12 to 18 months. In that sense, it's still going to be a long cycle, but I think there's going to be a drop in making it easier for our customers to put them in their systems.
Speaker 3: But the products are still going to be industrial. So I think the qual cycle is still going to be 12 to 18 months. In that sense, it's still going to be a long cycle, but I think there's going to be a drop in making it easier for our customers to put them in their systems. OK, perfect. That's helpful.
Speaker 6: My last question, I'll jump out of line again, is kind of highlighting your comments a few times you prepared remarks about having paid off your debt being debt-free for the first time in your public existence, which is fantastic to see. And you've been profitable eight quarters in a row with a good cash balance and very good management of your cost structure.
Speaker 6: question we think about what eventually what what looks like to be a nice to growing cash balance
Speaker 4: Yeah, Richard, this is Anuj. Great question. You know, we're continuing to evaluate.
Speaker 4: the product roadmap and looking at where the opportunities are. Obviously, there's a lot of focus on the ex-spy family in the near term and the other product that you mentioned in the more longer term. So based on what we're seeing from a cash flow from operations standpoint and our current cash position, we feel we can...
Speaker 4: support that ramp and really support the products at that time, at this time, without borrowing money. And so it makes sense right now to pay off the debt, right? If there's other opportunities that come up where we feel like we might have to borrow additional funds, we'll look into that.
Speaker 4: But I think right now what we're trying to demonstrate is that you know, this is a viable business. We can be profitable. We can generate cash. There's a good amount of cash balance.
Speaker 4: on the balance sheet, the balance sheet healthy, and so we can support future opportunities and growth from that.
Speaker 6: Okay, fair enough. That makes sense. I think that's all from you guys. Thanks a lot and congratulations again and I start for the year.
Speaker 6: Okay, fair enough. That makes sense. I think that's all from you guys. Thanks a lot and congratulations again and I'll start for the year. Thanks again Richard.
Speaker 2: Thank you. If you would like to ask a question, please press star 11 on your telephone. The next question is coming up. One moment, please. Our next question will be coming from Arvin.
Speaker 7: I wanted to go back to one of the questions that was asked. You have a great analyst asking great questions. So, he didn't leave a lot for anybody else.
Speaker 7: So just in terms of the actual
Speaker 7: You mentioned the design cycle. When is the actual sampling you're hoping for in some of the...
Speaker 7: You mentioned the design cycle. What is the actual sampling you're hoping for in some of the placement products?
Speaker 7: versus when you actually hope to begin volume production and start seeing real revenues. You can just review that one again.
Speaker 3: Yeah, sure. So remember the part that we taped out in 2022 that was a native 64-measuret member die?
Speaker 3: and we were sampling between 8 megabit and 128 megabit. And the new one that we got out is actually from 4 megabit to 16 megabit. So there's an overlap between 8 megabit and 16 megabit going all the way up to 128. So people that were able to use that original die to actually integrate into their systems and start a qual procedure, I think they will benefit from the first die that we taped out.
Speaker 3: and we will see the benefit for the 8 Meg and the 16 Meg going into production. So it will actually cut down some of the qual cycle.
Speaker 3: So in that case, let's assume, you know, if it's a 12-month cycle or a 15-month cycle, it probably comes down to nine months based on these samples being available six months before this other part that we just brought out.
Speaker 7: Did I answer your question or? Yes, so in terms of designing and...
Speaker 7: Did I answer your question or? Yeah, so in terms of you know design in that's going on already.
Speaker 7: So in terms of design and that's going on already.
Speaker 3: That is correct, except for the four megabit part, which is new now. In terms of the customer feedback, what's the customer feedback like and what have you seen in terms of the niches where you're getting the traction early on? In terms of customer feedback, there is some very early feedback that's not very detailed.
Speaker 3: There are three interaction right now, or the early interaction is in the aerospace and defense industry, and then also in some of the industrial space.
Speaker 7: Okay. And going back to some of the work that you've been doing on the VIP.
Speaker 7: as huge open projects and projects. What can you tell us in terms of timing when it comes to something to you? A, on a licensing side and B, on a revenue product related side or royalty side. I realize that might be very far out.
Speaker 3: So, Aurang, just to confirm, you are breaking up over there. Are you referring to the QuickLogic FPGA project?
Speaker 3: So, that project is progressing on schedule and I think the tape out for that design. So, the tape out for that design is expected in the second half of this year.
Speaker 3: So we will start seeing some early data on the silicon, which would be a 99 meter silicon from sky water on which we do the design. So we will start seeing some data in 2024. Let's take you to a Q3 of 2024. I think the product revenue or the foundry revenue and royalty revenue associated with those products are at least. So we will start seeing some early data on the market.
Speaker 3: at least two years out from there.
Speaker 7: And both you said both product royalties and also licensing or licensing happens or has happened already, your licensing happens gradually.
Speaker 7: And both, you said both product royalties and also licensing or licensing happens, or has happened already, or licensing happens gradually when you get to milestones.
Speaker 3: The licensing happens gradually over 23 and 24. And then the foundry revenue and the royalty revenue starts when we go into production.
Speaker 3: The licensing happens gradually over 23 and 24. And then the foundry revenue and the royalty revenue starts when we go into production, which is probably 25 timeframe.
Speaker 7: Okay, great. One quick question on the data center. Any signs of life or bottoming? How would you term the overall picture there? That's the data center.
So Oren, are you asking about the data center products? Yeah, just in terms of the overall, you know, what's going on there right now. Do you think that this stabilized?
So, Orin, are you asking what the data center product? Yeah, just in terms of the overall, you know, what's going on there right now.
coming back. I mean we definitely, like Anuj reported, we did better in Q1 compared to Q4, but still we were not as good as we were at the peak at about, I think the numbers that Anuj put out was 19% versus 5% in Q4, and then 11% in Q1. So we have recovered some from Q4 to Q1, but we are not seeing indications that we're gonna get up to the 19% levels that we had earlier.
So my follow-up on that question is just in terms of your guidance for the year, you know, hoping to see some progress quarter-to-quarter on the product side, does that take a conservative enough stance, you know, considering what happened on the data center side, meaning that's not assuming any upside of any sorts in data center, rather just stable and...
Do you think stable as a fair assumption, even at this point or that, assumes data centers coming down and other products are making off the gaps?
Yeah, Oren, this is Anuj. So I think, as you'll see, our concentration with this largest customer has decreased, like Sanjeev was mentioning. But on the flip side, we continue to have strong design wins and toggle, and that is ramping nicely. The revenue continues to be strong, quarter over quarter.
And in addition to that, we've got the red heart deals that have increased, other things that are happening. So just naturally now, the concentration is moving out. And as the X-Fi product gets more design wins and things happen, that will help as well. But we're fairly conservative on the...
And my last question is on the companionship for the SPG companionship demo. We were at up to what's the thought on commercialization of it and all end on that. So, you know, we have been in communication with the FPGA companies to actually integrate our X-Pie family product with their FPGA. So I think it's in early stages and we cannot really comment on that too much, but it is an ongoing process right now.
too early for commitment but there is enough interest that we are actually continuing to engage with more than one company.
to basically end up with a design with a customer in the FPGA market.
With an end customer, I guess, I should say FBGA market, with an end customer. That's through them or that's through you.
It would be through the FPGA vendor. Okay. Good. Okay. Congratulations again on the progress.
It would be through the FPGA vendor. Okay. Good. Okay. Congratulations again on the progress. Okay. Thank you. Thank you. Thank you. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. Fridays morning, only the first half of the program will be after August .
Thank you. As a reminder, if you would like to ask a question, please press star 1-1 on your telephone. One moment please.
And at this time, there are no more questions in the queue. I would like to turn the call back over to management for closing remarks. 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 for the next Twitter's call.