Q2 2023 Everspin Technologies Inc Earnings Call

Good afternoon.

Welcome to the conference call to discuss ever spin technology second quarter, 20th 23 financial results.

At this time, all participants on the listen only mode.

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

As a reminder, this conference.

Got it today Wednesday August 2nd 2023.

Before we begin to call I want to remind you that this conference call can change for lucky statements regarding future events, including but not limited to our expectations for ever been suit your business financial performance and calls customer industry adoption of M. A M.

<unk> technology successfully bringing to market and manufacturing products and ever since design pipeline and executing on his business plan.

These forward looking statements are based on estimates judgments.

Trends and market conditions and involve risks and I'll send to your stomach cause actual results to differ materially from those contain.

Unlucky statement.

Would encourage you to review our S E C filings, including a quarterly report on Form 10-Q, which will be filed with the SEC On undisturbed 20, twenty-three and R. S. E. C filings made from time to time in which we may discuss risk factors associated with investing in ever spin.

Oh <unk> I'll forward looking statements I made us up to date up this call next step as required by law. We undertake no obligation to update any for looking statement made on this call to update will alter of four lucky statement what else the results of new information, what's your events or otherwise.

The financial resolve discussed today and it looks like <unk> estimates are based on the information available is up to date her off and on.

Subject to review by ever spin and as external auditors.

Actual results may differ materially police estimate as a result.

Of the completion of financial closing procedures.

Final judgment and other developments.

Arising between nine now and the time DARPA natural resolved for the spirit are finalized.

Additionally, the company's press release on statements made during this conference call will include discussions of certain measures and financial information and gap and non-GAAP times.

Including the company's press release, our definitions and reconciliation GAAP net income to justice EBITDA, which provide additional details.

A copy of the press release is posted an investor relations section of ever since website at W. W. Dot <unk> dot com.

And now I'd like to turn the call over to ever since precedent and see Oh, some cheap alcohol Sunday. Please go ahead.

Thank you all better and thanks, everyone for joining us on the call today.

Oh, it's been delivered quarterly revenue, Oh 15.7 million above the high end of guidance.

7% increase.

You were a gap net income positive for the ninth quarter in a row.

Which continues to be a strong focus for the company.

A few highlights for 2023.

Cash flow from operations was 6.3 million, putting up putting us at 7.5 million a year to date.

We continue to operate that free while increasing profitability.

And do you do when you started sampling our new expired family.

C D amiram products from four megabyte to 16 megabyte in <unk> in different packages with production plan in Q3 of 2023.

As a reminder, we taped out this family of products.

Four of 2022.

In response to a customer request, we have introduced a new version of R X by a family of <unk> products.

Four megabyte 228, megabyte that extend the operating temperature from industrial temperature that is minus 40 C. 285 C. Two extended temperature, which is minus 40 C 205 degrees C.

We exceeded expectations on a radiation hot programs to deliver S. T D. Amiram based solutions for a high density memory ear ache.

In a distributed configuration memory for instant on FPGA is with multiple time programmability.

For a business outlook product backlog for balance of 2023 signed into 2024 as of June 30th 2023.

He needs to be high although we are experiencing some headwinds from the semiconductor downturn.

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

Demand.

Over the past year <unk> introduce two X by a family offers stadium brand products.

Degraded on 20 nanometers, Cmos with identities ranging from four megabyte 228 megabyte.

Products are available in the industrial temperature range of minus 40 C 285 C.

These products will enable our customers to simplify the system architecture and easily replace legacy memory components like extra Ram and airframe.

Based on customer feedback, we are now planning a new family a wreck spy S. T D M brand products, but densities from four Megabits to 128 megabyte for the extended temperature operating range of minus 40 C 2105 C.

This enables our customers in all segments to use these parks and harsher environmental conditions.

Engineering samples are available now upon request and will be available in production volumes in Q4 of 2023.

As discussed in the last earnings call Everspin is designing a high density which is greater than 256, Meg SDM Ram discreet product for discrete nor flash replacement.

The first product in this family of one gigabyte density is on schedule for 2024 tape out and for engineering samples.

The family of products would be ideal for replacing note an FPGA systems.

Configuration memory, and simultaneously, enabling 100 X faster over the air updates.

Every spring is added fine beam H capability.

It's eight H S T D hammer I'm lying in Chandler.

Excited about this capability as it enables ever spin to develop the next generation mtgo material stack and edge process.

This capability will reduce the development costs and our time to production when our M. P. J process is transferred to our partners 12 inch line on advanced Cmos notes.

At present this R&B match too is being used for a radiation hard SDM ran programs and is using promising results.

As you know ever spent as to active radio.

Hot programs to deliver S. T D. Amiram solutions, one a high density memory and two distributed configuration memory for infant on FPGA is with multiple time program ability.

As it relates to the yesterday Amram portion of this project <unk> met its obligations and the delivered solution exceeded the specs defined for the FPGA.

This included a demonstration of the integration scheme and the Mtgo stack for the <unk> solution and the performance of the <unk> Circuit design.

And the next phase of the project the solution will be integrated on Cmos papers with the FPGA fabric and optimized for performance.

The design is a revolutionary approach that enables distributed as <unk> as a configuration memory, an FPGA fast extending M Ram and a new application use case.

I will now turn it over to our CFO well, we'll take you through our second quarter financials, and third 2023 guidance.

Alright.

Thank you said <unk> and good afternoon, everyone as part of the second quarter of 2023 financial results ever spend technologies is pleased to announce it's ninth consecutive quarter. A positive net income. In addition, we generated positive cash flow from operations of 653 million during the quarter.

We delivered solid quarterly results about the high end of guidance with revenue at $15.7 million compared to $14.8 million last quarter and $14.7 million in the second quarter of 2022.

We also had positive net income of $3.9 million and positive cash flow from operations of $6.3 million for the second quarter of 2023.

And ran product sales in the second quarter, which includes about the toggle and S. D. T. M. M revenue was $13.4 million compared to $13.8 million a prior Carter at an increase from 13.2 million and Q2 22 licensing royalties patterns and other revenue in the second quarter increased.

$2.3 million compared to 1.1 million in Q1, 2023 at $1.5 million and Q2 22 shipments to suppliers for an customer. So we serve with a a high density SD product for data center applications represented 7% of revenue in the quarter versus 11.

Percent of revenue in Q1, and 15% in Q2 22.

Turning to gross margin gap gross margin for the second quarter of twenty-three was 58.4% versus 56.8% in the prior quarter at 58.4% in Q2 22, GAAP operating expenses for the second quarter of twenty-three or 7.6 million versus 7.7 million.

Dollars and the prior quarter and $6.9 million in the second quarter of 2022, the increase in operating expenses and a quarter compared to Q2 22, whereas primarily driven by increased costs to support the X spy family have S. T. T product that is currently in low volume production.

We are pleased to report a second quarter of 2023 positive net income of $3.9 million.19 per basic share based on 20.7 million basic weighted average shares outstanding. This compares to weigh GAAP net income.

Point 8 million or four cents per basic share in the first quarter of 2023, and net income of 1.7 million or eight cents per basic share in the second quarter of 2022.

Basic EPS of 19 cents was better than the high point of our guidance range reciting our strategic operational discipline and ability to drive profitability in the face of tightening supplies and macro economic uncertainties. Adjusted EBITDA continues to remain positive for Q2 twenty-three adjusted EBITDA.

Is $5.4 million compared to $2.3 million in the prior quarter and 3.3 million in Q2 2022.

Cash and cash equivalents ended the quarter at $30.8 million compared to $24.2 million at the end of the prior quarter at 23.1 million in Q2 2022, the increase in cash quarter over quarter as a result of ever since continued focus a strong cash management growing cash flow from operate.

<unk> and from receiving a 2 million dollar employee retention tax credit under the cares act during the quarter.

Cash flow from operations was healthy at $6.3 million for the current quarter.

As mentioned during the second quarter of 2023 ever stand received a one time employee retention tax credit refund from the United States Treasury totaling $2 million. The refund. It was received pursuant to provisions within the cares Act.

Ever spend recorded the one time.

Employee retention tax credit within our other income during the second quarter of 2023.

Turning to our third quarter 2000, twenty-three guidance ever spit is cautiously optimistic demand for our toggle products remain strong and we continue to see increased demand for X by family of STD products ever.

<unk> expects total revenue in a range of 15.4 million to 16.4 million.

Ever spin expects GAAP net income per basic share to be between one cent and six cents.

Now.

Turn it back over to send G for some brief additional commentary before we open it up for questions.

Thanks, So much in summary, Harrassment reported another quarter now ninth in a row of profitability.

You're excited to see the early adoption of our ex by a family of <unk> products covering densities from four megabyte 228 megabyte.

Expect to further enhance our ability to serve the market with your extended temperature offering from minus 40 C. 205 C of this X by SDM Ram family Eric.

<unk> has successfully navigating the slowdown with a healthy backlog and good visibility into the second half of 23 and early 2024.

Thank you for joining us today.

Operator, you may not open the lines for questions.

Thank you, ladies and gentlemen to ask a question you want me to press Star one one on your telephone and wait for your name to be announced to a giant question.

One one again.

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

One moment for a question.

We have a question coming from the liner.

Yeah with me how many line is Nelson.

Hey, this is make Doyle Gregory.

<unk> congrats on that on that good numbers. My first question would you see I'd assume that the licensing and and gross margin come down next quarter, maybe you could just talk about what drove the big bump in licensing this quarter.

What you're thinking moving forward.

Would assume like I said I would come down so really that were saying that the products are getting a nice uptick is that coming from toggle or S. T G.

Hi, this is <unk>.

[noise], yeah, so this quarter, 58.4% gross margin.

Pretty healthy gross margin compared to our internal model that'd be shared with everyone. We don't typically give guidance on gross margin, but I will say that the licensing deals are richer and gross margin and so that's what has enabled us to get the high gross margin this quarter.

It's hard to predict in future quarters, how to look because there is some lumpiness. If you will unworn activities are being completed and things progress as we get into future quarters.

Do you expect.

That the licensing process.

Project will have a higher gross margin going forward.

Okay, and I think in the past you've talked about that you expect toggle to grow sequentially over time, So do we still expect that and what's driving that and maybe it's related to the supply constraints. I think you mentioned that they're getting a little better or are you still.

<unk> <unk> <unk> <unk> and <unk>.

Yeah, So you know that.

The toggle revenue continues to be strong and.

And fairly consistent and growing so if you look at our design wins over time, we continue to see strong design wins in the toggle space. We've experienced that last his last few years. The last couple of quarters. This year, we've had very strong design wins and so we expect those.

Next to start translating into revenue nicely uhm in the next year or so so so we expect continued growth in total from that standpoint from an S. D. T standpoint within the data centre, we have shared with everyone that that's been relatively sluggish and challenging I think that continues to be.

Soft part of the market if you will for us.

But then if you look at our <unk> family of products with an S. T T.

That continues to also be exciting so essentially you've mentioned we have another cut down version of the product that's come out relative to what customers need and what they've requested and were saying some nice design wins in that space and so as we look into the future. We expect those design winds to start.

Translating into revenue.

Thank you.

Next question coming from the line.

Molly upfront.

On a cell phone.

Hey, Thanks for taking my question. This is Shirley my wallet stolen for Richard Jenny Craig Hallum I just have a question on if you guys can go a little bit more in depth on the supply chain constraints that you're experiencing and what what the unfold demand it looks like.

Hi, Shirley this advantage again, so yeah, let me, let me kind of talk a little bit about the constraints. So we continue at T constrained.

180 nanometer products and so as you know we buy our Cmos wafers from TSMC and we're working very closely with them in order to get the product that we need to fulfill the demand that we have it in so that continues.

To be an ongoing discussion in partnership with them as we try to get more.

More way for us to get a product out so I think that that's continuing to be a challenge from a from a backlog standpoint. The backlog continues to be very healthy. So I'll just kind of reiterate some of the things. We've said in the past, we're seeing bookings now going into the second half of 24, there's new or.

Orders outside the lead times and we're continuing to see increased bookings within the lead time. So from that perspective things are looking good we do continue to see Sam.

Uhm cancellations and Pushouts, but that's limited and I would say probably very normal if you look at the historical trends so things are looking <unk>.

Promising from a backlog perspective.

Great Great. That's good to hear and then I just got some follow up question on the visit visibility feature sales with your largest customer and then if revenues has bottomed out with them.

So yeah for the for the data center customer, they're 7.3% now of our total revenue I think it's.

A couple of different things writes a part of it is next so as we have increased rad hard projects, increasing in revenue or becoming a larger part of our total revenue at as toggle continues to grow at our new X by family of products continues to develop.

Might see.

This particular customer because a smaller concentration of the revenue which is a good thing right.

Limit their impact to the business, but we have seen seven stop this.

From them, that's continued which is consistent with the rest of the data center market study.

Not something unique whoever's per notice surprise.

Okay.

That's all I had for me and congrats on the solid quarter.

<unk>. Thank you.

Okay.

Thank you.

I'm not showing any further questions in the queue at the Scott at this time I will now turn the conference back to enrich by any coughing.

Okay with that said, we conclude today's call. Thank you all for joining us and we look forward to reporting your progress and results in the next quarters call. Operator, you may now disconnect the call.

Ladies and gentlemen conference for today. Thank you for your participation you may now disconnect.

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