Q3 2023 Everspin Technologies Inc Earnings Call

November 1, 2023

[music].

Okay.

Good afternoon, and welcome to the conference call to discuss ever spins technologies third quarter 2023 financial results. 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. As a reminder, this conference call is being recorded today Wednesday November five 2023.

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 spins future business financial performance and goals customer and industry adoption of Enron technology successfully.

He bring into market and manufacturing products in ever spins of 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. We would encourage you to review our S E SEC filings, including our quarterly rig.

<unk> on Form 10-Q, which will be filed with the SEC on November 2nd 2023, and older SEC filings made from time to time in which we may discuss risk factors associated with investing in ever spin.

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 on.

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 spins any external auditors.

Our actual results may differ materially from this estimate and 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.

Additionally, 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 included in the company's press release are definitions and reconciliations of GAAP net income to adjusted.

EBITDA, which provide additional details.

Copies.

The press release is posted on the Investor Relations section of ever spends the website at www dot ever spin Dot com and now I'd like to turn the call over to ever spins precedent N C E O sanjeev alcohol Sanjeev. Please go ahead.

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

I always when delivered quarterly revenue of $16 5 million above the high end of guidance and an 8% increase year over year.

GAAP net income positive for the 10th quarter in a row his strong focus for the company.

A few highlights for quarter three 2023.

Cash flow from operations was $3 6 million, putting us at 11 1 million year to date.

We continue to operate debt free.

Increasing profitability Q3, net income was $2 4 million.

I would just want ended Q3 with a cash balance of $34 9 million.

We announced the availability of the X spine family of STM brand products from eight megabit to 64 megabit density with the extended temperature range of minus 40, Centigrade, two 105 90 days for a production orders.

We are sampling the four megabit density part in the smaller DFM package and the extended temperature range with production plan for the first quarter of 2024.

In Q3, we entered into an agreement to develop reliability models for strategic radiation hardened toggle MRI.

In October we entered into a new contractual agreement to license, our <unk> MRI technology to build strategic radiation hardened FPGA.

Our business outlook, we continue to have a good visibility into our product backlog for the remainder of 2023.

Unknown Executive: Good afternoon, and welcome to the conference call to discuss Everspin's technologies third quarter 2023 financial results. 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.

Early 2024 as of September 32023.

We have alleviated our foundry supply chain constraints, which is helping us address our unfulfilled toggle demand.

Okay.

Products, we expanded our flagship industrial high density SSD MRM product family the <unk>.

Unknown Executive: As a reminder, this conference call is being recorded today, Wednesday, November 1, 2023. Before we begin a call, I want to remind you that this conference call contains for looking statements regarding future events, including but not limited to our expectations, forever spins future business, financial performance and goals, customer and industry adoption of M-RAM technology successfully bring into market and manufacturing products in ever spins design pipeline and executing on this business plan.

X X Alex to include a five millimeter by six millimeter <unk>.

<unk> package smaller by 37% compared to the current offering.

In addition to the savings we are delivering an extended temperature of minus 40 C. Two one off IFC.

This family Opex by SPT MRM devices.

The highest combination of performance and.

Lawrence and retention.

Unknown Executive: These forward-looking statements are based on estimates, judgments, current trends and market conditions and involve risk and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. We would encourage you to review our SEC filings, including our quarterly report on form 10Q which will be filed with the SEC on November 2, 2023 and other SEC filings made from time to time in which we may discuss risk factors associated with investing in ever spins.

Available and densities from 4% to 64 Meg.

It is the only commercially available persistent memory with full read and write bandwidth of <unk>.

400 megabytes per second.

Eight input output signals with our clock frequency of 200 megahertz.

It is the highest performing persistent memory available today.

For electronic systems, where data persistence and integrity.

Low power low latency and security are Paramount.

Industrial Iot network enterprise infrastructure.

Unknown Executive: 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 ever spins and external auditors.

This automation and control Aeronautics avionics medical gaming and FPGA configuration are examples where this family will simplify the system architecture and offer an alternative solution to legacy memories, such as photoelectric memories.

Battery back.

Random access memory, BB Ram, nor flash and non volatile SRAM.

A few comments about our radiation hard programs.

Its inception <unk> has invested in maintaining its leadership in <unk> technology as evidenced through its IP portfolio and successful licensing of its technologies.

Unknown Executive: Our actual results may differ materially from these estimates and 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. Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information in GAP and non-GAP terms included in the company's press release or definitions and reconciliations of GAP net income to adjusted EBITDA which provide additional details.

We are excited to report that we entered into two new radiation hard program agreements one on target to develop reliability models for the strategic radiation hardened towell MRM products the.

The second agreement is to license our STM around technology to build a strategic radiation hardened FPGA.

These agreements are in addition to the existing radiation hard programs on STM Ram technologies that we have discussed in previous earnings calls.

One a high density memory array to distributed configuration memory for instant on FPGA with multiple time programmability.

Unknown Executive: A copy of the press release is posted of the investor relations section of ever spins website at www.everspin.com.

R&D and design teams delivered on a milestone successfully to further the development of these S&P MRI based solutions for these projects. We believe our distributor to MRI. We are climbing as the MRI approach is a revolutionary approach and will give us an edge on energy efficiency and scaling.

Sanjeev Agarwal: And now, I'd like to turn the call over to ever spins president and CEO Sanjeev Agarwal. Sanjeev, please go ahead. Thank you operator and thanks everyone for joining us on the call today.

As we deploy the solution, an FPGA and AI inference engines.

Sanjeev Agarwal: I was been delivered quarterly revenue of 16.5 million above the high end of guidance and an 8% increase year over year. We were a gap net income positive for the 10th quarter in a row, a strong focus for the company.

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

Who will take you through our third quarter financials, and fourth quarter of 2023 guidance.

Alright.

Thank you Sanjeev and good afternoon, everyone as part of our third quarter 2023 financial results. We're pleased to announce our 10th consecutive quarter of positive net income. In addition, we generated positive cash flow from operations of $3 6 million during the quarter we.

Sanjeev Agarwal: A few highlights for quarter three, 2023. Cash flow from operations was 3.6 million putting us at 11.1 million year to date. We continue to operate debt free while increasing profitability. Q3 net income was 2.4 million. Everspin ended Q3 with a cash balance of 34.9 million.

We delivered solid quarterly results above the high end of guidance with revenue of $16 5 million compared to $15 7 million last quarter and $15 2 million in the third quarter of 2002. We also had positive net income of $2 4 million and positive cash flow from operations of $3 6 million for the third.

Sanjeev Agarwal: We announced the availability of the X-5 family of STTM RAM products from 8 megabit to 64 megabit density with the extended temperature range of minus 40 centigrade to 105 centigrade for production orders. We are sampling the 4 megabit density part in the smaller BFN package and the extended temperature range with production planned for the first quarter of 2024.

Third quarter of 2023.

MRM product sales in the third quarter, which includes both toggle and FCT MRM revenue was $13 5 million compared to $13 4 million in the prior quarter and $14 6 million in Q3 2002.

Are you sensing royalties patents and other revenue in the third quarter increased to $2 9 million compared to $2 3 million last quarter and $7 million in Q3 2020 to.

Sanjeev Agarwal: In Q3, we entered into an agreement to develop reliability models for strategic radiation hardened toggle M RAM. In October, we entered into a new contractual agreement to license our STTM RAM technology to build a strategic radiation hardened FPGA.

Shipments to suppliers for high density <unk> product for the data center applications represented 11% of revenue in the third quarter versus 7% of revenue in Q2, and 19% in Q3 last year.

Sanjeev Agarwal: Our business outlook, we continue to have a good visibility into our product backlog for the remainder of 2023 and into early 2024 as of September 30, 2023. We have alleviated our hungry supply chain constraints, which is helping us address our unfulfilled toggle demand products.

Turning to gross margin GAAP gross margin for the third quarter of 2023 was 62% versus 58, 4% in the prior quarter and 58, 8% in Q3 2022. The increase in gross margin is primarily attributable to the increase in licensing revenue.

GAAP operating expenses for the third quarter of 2023 were $7 9 million versus $7 6 million in the prior quarter and $7 1 million in the third quarter 2020 to the.

Sanjeev Agarwal: We expanded our flagship industrial high density STTM RAM products family, the EM XXLX to include a 5 mm by 6 mm DFN package smaller by 37% compared to the current offering. In addition to the area savings, we are delivering an extended temperature of minus 40C to 105C. This family of X by STTM RAM devices delivers the highest combination of performance, endurance and retention and are now available in densities from 4 to 64 meg.

The increase in operating expenses in the quarter compared to Q3 2022 was primarily driven by an increase in professional service costs.

We are pleased to report third quarter 2023 positive net income of $2 4 million or <unk> 11 per share based on $21 8 million weighted average.

Fully diluted shares outstanding. This compares to a GAAP net income of $3 9 million or <unk> 18 per diluted share in the prior quarter and net income of $1 9 million or <unk> <unk> per diluted share in the third quarter 2022.

Sanjeev Agarwal: It is the only commercial available persistent memory with full read and write bandwidth of 400 megabytes per second. We are 8 input output signals with a clock frequency of 200 MHz. It is the highest performing persistent memory available today, ideal for electronic systems where data persistence and integrity, low power, low latency and security are paramount.

Diluted EPS of <unk> 11 was better.

And the high point of our guidance range, reflecting our strategic operational discipline and ability to drive profitability despite macroeconomic uncertainties.

Adjusted EBITDA continues to remain positive for Q3 2023, adjusted EBITDA was $4 million compared to $5 4 million in the prior quarter and $3 4 million in Q3 of last year.

We ended the quarter with cash and cash equivalents of $34 9 million compared to <unk>.

Sanjeev Agarwal: Industrial IoT network enterprise infrastructure, process automation and control, aeronautics, avionics, medical, gaming and FPGA configuration are examples where this family will simplify the system architecture and offer an alternative solution to legacy memories such as ferroelectric memories, FM, battery back, random access memories, BB RAM, nor flash and non-volatile SRAM.

$8 million at the end of the prior quarter and $23 4 million as of Q3 2002, the increase in cash quarter over quarter as a result of ever since continued focus on strong cash management, while growing cash flow from operations as the company continues to operate debt free cash.

Cash flow from operations was healthy at $3 6 million for the current quarter.

Turning to our fourth quarter 2023 guidance ever spin, it's cautiously optimistic demand for our toggle products remains strong and we continue to see increased demand of our <unk> family of <unk> products.

Sanjeev Agarwal: A few comments about our radiation heart programs. Since its inception, Everspin has invested in maintaining its leadership in MRAM technology as evidence to its IP portfolio and successful licensing of its technologies. We are excited to report that we entered into two new radiation heart program agreements, one on toggle MRAM to develop reliability models for the strategic radiation heart and toggle MRAM products. The second agreement is to license our STT MRAM technology to build a strategic radiation heart and FPGA.

We expect total revenue in the range of $15 4 million to $16 4 million and GAAP net income per diluted share to be between <unk> and <unk>.

I will now turn it back over to Sanjay for some brief additional commentary before we open it up for questions.

Thanks, so much.

In summary, we reported another profitable quarter now tend to narrow which remains a strong focus for the company.

Sanjeev Agarwal: These agreements are in addition to the existing radiation heart programs on STT MRAM technologies that we have discussed in previous earnings calls. One, a high density memory array and through a distributed configuration memory for instant on FPGAs with multiple time programmability. The R&D and design teams delivered on the milestones successfully to further the development of these STT MRAM-based solutions for these projects. We believe our distributed MRAM we are calling as DMRAM approach is a revolutionary approach and will give us an edge on energy efficiency and scaling as we deploy the solution in FPGAs and AI inference engines.

We are excited that our toggle AMRAAM and STM Ram technologies are being selected for radiation HUD programs, taking advantage of our leading edge capabilities.

We believe the extended temperature range capability of minus 40 C 100 <unk> see.

STM Ram expire family positions us well to address the fast growing industrial Iot and embedded systems markets.

We have good visibility into our travel amiram backlog through 2023 in early 2024, giving us confidence in our business.

Thank you for joining us today.

Operator, you May now open the line for questions.

Thank you so much and to ask a question you will need to press star one one on your telephone and wait for your name to be announced.

Anuj Aggarwal: I will now turn it over to our CFO, Anujagarwal, who will take you through our third quarter financials and fourth quarter 2023 guidance. Thank you, Sanjeev and good afternoon everyone.

To withdraw your question simply press Star one again.

One moment, while we compile the Q&A roster.

Anuj Aggarwal: As part of our third quarter, 2023 financial results, we are pleased to announce our tenth consecutive quarter of positive net income. In addition, we generated positive cash flow from operations of 3.6 million during the quarter. We delivered solid quarterly results above the high end of guidance with revenue of 16.5 million compared to 15.7 million last quarter and 15.2 million in the third quarter of 2002. We also had positive net income of 2.4 million and positive cash flow from operations of 3.6 million for the third quarter of 2023.

One moment for our first question that comes from JD with Mali with Craig Hallum. Please proceed.

Hey, guys congrats on another solid quarter Scott.

Scott question on revenues being on the upper end of guidance.

It looks to be mainly coming from licensing so with that as most of the increase in licensing revenues coming solely from the Rad hard programs or are we seeing any meaningful royalties from past licenses contributing to the increase in licensing revenues.

Anuj Aggarwal: MRAM products sales in the third quarter, which includes both Toggle and STT MRAM revenue, was 13.5 million compared to 13.4 million in the prior quarter and 14.6 million in Q322. Licensing royalties, patents and other revenue in the third quarter increased to 2.9 million compared to 2.3 million last quarter and 0.7 million in Q3 2022. Shipments to suppliers for our high density STT product for the data center applications represented 11% of revenue in the third quarter versus 7% of revenue in Q2 and 19% in Q3 last year.

Hi, Charlie this is rich thanks for the question, yes for Q3.

The good news came from the licensing and royalty side, we had strong revenue from the quick logic deal and then we had a third Rad hard deal that Sanjiv mentioned related to Targa reliability, and so we were able to get some work done there and account for that revenue as well I will say also that our product.

Sales were strong and so the sales continued to be strong.

Q3.

Awesome awesome.

And then I just got actually a question on the product sales with products being down Q over Q is there any has there been any unusual activity with.

Anuj Aggarwal: Turning to gross margin, gap gross margin for the third quarter of 2023 was 60.2% versus 58.4% in the prior quarter and 58.8% in Q3 2022. The increase in gross margin is primarily attributable to the increase in licensing revenue. Gap operating expenses for the third quarter of 2023 were 7.9 million versus 7.6 million in the prior quarter and 7.1 million in the third quarter, 2000, in 2022. The increase in operating expenses in the quarter compared to Q3 2022 was primarily driven by an increase in professional service costs.

The backlog such as push outs or even cancellations regarding backlog.

Yes, the interesting thing with backlogs.

So theres definitely.

Macroeconomic uncertainty.

Industry trends that are happening right. So the supply constraints are loosening.

The lead times are reducing like we had mentioned last couple of quarters and so we are seeing customers booking within the lead times, but they're kind of waiting to look outside the lead time right.

So.

We are seeing some impact in APAC for example, within the industrial automation section.

Anuj Aggarwal: We are pleased to report third quarter in 2023 positive net income of 2.4 million or 11 cents per share based on 21.8 million weighted average fully diluted shares outstanding. This compares to a gap net income of 3.9 million or 18 cents per diluted share in the prior quarter and net income of 1.9 million or 9 cents per diluted share in the third quarter 2022. Diluted EPS of 11 cents was better than the high point of our guidance range reflecting our strategic operational discipline and ability to drive profitability despite macroeconomic uncertainty.

Okay.

So.

The industrial automation, such our segment being one of them.

This is more a weaker weaker end markets youre experiencing.

No actually for Q3, we had good results in the industrial segment.

I was just making a comment.

Industrial the industrial segment.

SM uncertainty in China, and so there are some challenges there.

Okay, that's been strong.

Anuj Aggarwal: Adjusted EBITDA continues to remain positive for Q3 2023 adjusted EBITDA was 4 million compared to 5.4 million in the prior quarter and 3.4 million in Q3 of last year. We ended the quarter with cash and cash equivalent of 34.9 million compared to 8 million at the end of the prior quarter and 23.4 million as of Q322. The increase in cash quarter over quarter is a result of Everspin's continued focus on strong cash management while growing cash flow from operations as the company continues to operate debt free. Cash flow from operations was healthy at 3.6 million for the current quarter.

Others.

Okay, Yeah that makes sense and then just one more question on end markets were there any particular end markets you guys are seeing a little more strength or weakness.

Yeah.

Not particularly right now I think just overall there are some macroeconomic uncertainty right as things are happening so youre, just saying customers.

Waiting to place orders right and just wanting to see what's happening in China, and what's happening in the economy in general.

But overall the segments look at except for what I mentioned some risk in industrial.

Anuj Aggarwal: Turning to our fourth quarter 2023 guidance, Everspin is cautiously optimistic, demand for our toggle products remains strong and we continue to see increased demand of our ex-buy family of SVT products. We expect total revenue in the range of 15.4 million to 16.4 million and gap net income per diluted share to be between one cent and six cents.

Awesome, Yeah that makes sense.

That's all for me and congrats on another solid quarter.

Thanks, Charlie.

Thank you.

One moment for our next question.

And it comes from the line of Quinn Bolton with Needham. Please proceed.

Hey, guys. This is Nick Doyle on for claim.

Wanted to focus on around hard it's doing really well.

Sanjeev Agarwal: I will now turn it back over to Sanji for some brief additional commentary before we open it up for questions. Thanks, Anuj.

Claiming these new wins new licensing.

Can you just talk a little bit about the applications and applications that are actually using that and then the new licensing deal is that a one time item or we stepping up the kind of baseline of licensing revenue.

Sanjeev Agarwal: In summary, we reported another profitable quarter. Now 10th in a row, which remains a strong focus for the company. We are excited that our toggle MRAM and STT MRAM technologies are being selected for radiation heart programs taking advantage of our leading edge capabilities. We believe the extended temperature range capability of minus 40C to 105C of our STT MRAM ex-buy family positions as well to address a fast growing industrial IoT and embedded systems markets. We have good visibility into our toggle MRAM backlog through 2023 and early 2024 giving us confidence in our business.

And then if we can also if you could also touch on the products are we still on track to enter production by.

And our next year end customers shipping in 'twenty five.

Hey, Thanks, Nick.

So I guess I'll look.

I'll try to remember all your questions, but if I forget something please remind me.

As far as the goodness of the radiation hardened Youre right. I mean, we were really excited that we were picked by the.

Goldman contractors to actually have one project on <unk> and another one on <unk> as well.

Unknown Executive: Thank you for joining us today.

<unk>.

Unknown Executive: Operator, you may now open the line for questions. Thank you so much. And to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw the question, simply press star 11 again. One moment while we compile the Q&A roster.

<unk> licensing deals that you talked about.

Can you talk about for ICD MRI that has actually targeted towards an instant on FPGA similar to the one that we announced I believe two or three quarters ago. So this is a new.

<unk> with a different vendor.

Although the subcontractor is still.

Two quick logic, but there are different.

Cmos provider.

Shadi Mitwalli: One moment for our first question that comes from Shady with Molly with Craig Hallam, please press Hey guys, congrats on another solid quarter. I just got a question on revenues being on the upper end of guidance. It looks to be mainly coming from licensing. So with that, most of the increase in licensing revenues coming solely from the RAD hard programs, or are we seeing any meaningful royalties from past licenses contributing to the increase in licensing revenues?

These licensing deals are obviously very lumpy in the.

They are opportunistic I would not say that this was the last licensing deal that will come across.

We hope to get even more going forward are not giving any guidance, but we are hopeful that our technology keeps getting recognized and we get we.

We keep getting picked up for other projects.

As a reminder, I think a year ago, we had talked about a deal with Honeywell, where we had actually building at 64 megabit array and then obviously.

Shadi Mitwalli: Hi Shadi, this is Onaj, thanks for the question. Yeah, for Q3, the goodness came from the licensing and royalties side. We had some strong revenue from the quick logic deal, and then we had a third RAD hard deal that Sanjeev mentioned related to toggle reliability, and so we were able to get some work done there and account for that revenue as well. I will say also that product sales were strong, and so it will continue to be strong in Q3. Awesome, awesome.

More of a.

Persistent memory type solution for radiation hard environments.

As far as our.

64, Megabit 16, megabit parts that we taped out and brought on production this year.

We are on schedule and people are looking at our parks.

Quantifying them. So we are on schedule to getting them hopefully quantify then into early production towards the end of 2024.

If I Miss anything please remind me Nick.

Got it all thank you.

Shadi Mitwalli: And then I just got actually a question on the product sales. With products being down Q over Q, has there been any unusual activity with the backlogs such as push outs or even cancellations regarding backlogs? Yeah, the interesting thing with backlog, Shadi, so there's definitely some macroeconomic uncertainty and industry trends that are happening, right? So supply constraints are loosening, the lead times are reducing, like we had mentioned last couple of quarters, and so we are seeing customers booking within the lead time, but they're kind of waiting to book outside the lead time, right?

Thank you.

For the.

The.

We've seen weakness with FPGA guys that were reported AMD Intel lattice and maybe we're seeing that in Europe products slightly declining next quarter.

Would you say that's accurate.

Uh huh.

I noticed that correctly.

So I don't know if it is specifically the <unk> like I know you mentioned, we are cognizant of the.

The macroeconomic conditions in Asia Pacific.

As we said as an answer.

We are.

Shadi Mitwalli: And so we are seeing some impact in APAC, for example, within the industrial automation section. So would the industrial automation segment be one of your guys is more weaker and markets are experiencing? No, actually for Q3, we had good results in the industrial segment. I was just making a comment that the industrial segment has a monster in China, and so there are some challenges there. Okay. But it's been strong. Okay. Okay, that makes sense.

Have been strong for the first three quarters, but we are starting to see some movement in Q4 and also in early 2024, but that is also convoluted by the data technology supply chain constraints are removed.

Lead times are actually dropped so our customers' behavior has also changed their ordering within the lead times. So it's not quite clear if its because of the macroeconomic conditions are just because our lead times have changed but the two combined together has changed the.

The behavior in the backlog over the last couple of quarters.

So just kind of confirming that your lead times have gotten even lower compared to last quarter and that's kind of impacting the.

The outlook.

Just related to that.

Shadi Mitwalli: And then just one more question on end markets. Were there any particular end markets you guys are seeing a little more strength, or are we concerned? Not particularly right now. I think just overall, there's some macroeconomic uncertainty, right? As things are happening, so you're just seeing customers waiting to place orders, right? And just wanting to see what's happening in China and what's happening in the economy in general. But overall, the segments look good except for what I mentioned, some some risk in industrial. Awesome. Yeah, it makes sense.

The reason I asked kind of last quarter, we are saying that the backlog is really strong and it gives us visibility into the near term quarters, but now because the lead times are coming down.

That isn't as accurate today.

I guess.

Yes.

I guess the way I would describe that.

Yes.

So what's happened is the lead times were 52 weeks they came down to about.

30, something weeks and then we reduce them further to about 27 26 weeks so.

So we saw lead times come down and then in addition to that one of the things Youll see industry wide that you might have noticed is that the supply constraints loosened up as well.

Shadi Mitwalli: That's all for me and congrats on another small quarter. Thanks, Shally. Thank you.

And so what that did was that created what we're observing to be a customer behavioral change and so they're mostly.

Unknown Executive: One moment for our next question.

Nicolas Doyle: And he comes from the line of Quinn Bolton with Meham, please proceed. Hey guys, this is Nick Doyle. I'm for Quinn. I wanted to focus on Radhart. It's doing really well. Claiming his new wins, new licensing. Can you just talk a little bit about the applications and applications that are actually using that. And then the new licensing deal, is that a one time item, are we stepping up the kind of baseline of licensing revenue.

Theyre, mostly booking within the lead time and then they are booking some outside the lead time as well so that's really nice.

But it's not as much as they were doing historically and so now it's kind of come back to let's call. It backlog pre pandemic levels and so even though it it looks relatively normal from that perspective it has declined.

They are really rich.

Backlog from a year ago, where there was 52 week lead time not enough capacity and people are getting worried about.

Nicolas Doyle: And then if we could also, if you could also touch on the products, are we still on track to enter production by end of next year and customers shipping in 25. Thanks. Hey, thanks, Nick. This is Sanjeev.

Getting capacity right. So they were just booking.

Well in advance so thats the observation that we've seen.

That makes sense. Thanks.

Uh huh.

Sanjeev Agarwal: So, I guess I'll try to remember all your questions, but if I forget something, please remind me. As far as the goodness of the radiation hard deals, you're right. I mean, we were really excited that we were picked by the government contractors to actually have one project on Toggle Embram and another one on STK Embram as well. The licensing deal that you talked about, or that we talked about for STM Ram, that is actually targeted towards an instant on FPGA similar to the one that we announced.

I'll wait to ask your memory.

Thank you Ms. Sarah reminder, if you have a question press star one one Glenn if you have additional question go ahead.

Yes.

I'll ask one more just on that by staying on the backlog.

Typically takes 12 to 18 months to convert.

Can you give any detail on how much of your backlog is expected to convert near term versus long term.

Sanjeev Agarwal: I believe two or three quarters ago. So, this is a new project with a different vendor. Although the subcontractor is still still through quit logic, but they have a different CMOS provider. These licensing deals are obviously very lumpy and they are opportunistic. I would not say that this is the last licensing deal that we will come across. We hope to get even more going forward, not giving any guidance, but we are hopeful that our technology keeps getting recognized and we keep getting picked up for other projects.

I know that we are talking.

Some strong growth or some some growth in the second half 'twenty four based on that backlog last quarter.

Okay.

Do you think are you talking about 12 to 18 months of qualification time or did you mean.

Right yes.

Yes.

Yes, so that the qualification time for that new SUV product that we brought out is still 12 to 18 months and we expect the early production to be in late 2020 for early 2025. So nothing is quote unquote changed or delayed in that.

Sanjeev Agarwal: Just as a reminder, I think a year ago we had talked about a deal with Honeywell, where we were actually building a 64 megabit array, and there obviously it's more of a persistent memory type solution for radiation hard environments. As far as our 64 megabit and the 16 megabit parts that we taped out and brought to production this year, they are on schedule. People are looking at our parts and qualifying them.

Process.

Yes, I think I think the way I would explain the pipeline.

If you look at the design win they are still healthy and they continue to gain traction right I think.

That's part of where you're going so there is.

<unk> pipeline and we are seeing backlog outside of the lead time, just not as much as before.

Thanks for that clarification.

Thank you.

Sanjeev Agarwal: So, we are on schedule to getting them, hopefully qualified and into early production towards the end of 2024. If I miss anything, please remind me Nick. No, got it all. Thank you. For the, the, we've seen weakness with the FPGA guys that were reported, AMD and tele lattice, and maybe we're seeing that in your products, like slightly declining next quarter. Would you say that's an accurate, you know, I noticed that correctly.

Okay.

And we do have a question from another line one moment please.

I have a question from Orin Hirschman with AIG. Please proceed.

Hi, let's see just one more call. It is the case in question on that last topic in terms of the games that you put out for for Q4.

Does that assume product.

Product increases sequentially.

Being too much more specific.

Yeah, Hi, Ryan this is an edge.

Say.

Looking at guidance for Q4 relatively flat to Q3 with a similar mix okay.

Sanjeev Agarwal: So, I don't know if it is specifically the FPGA not, but like Anoj mentioned, we are cognizant of the, of the macro economic conditions in Asia Pacific. As we said, as I said, you know, we are, you know, we have been strong for the first three quarters, but we are starting to see some movement in Q4 and also in early 2024. But there is also convoluted by the data that now that the supply chain constraints are removed, our lead times have actually dropped.

Okay.

And you'd never mentioned AI before.

Where does the product fit in the overall scheme of AI is it only if it becomes the actual.

Yes.

Piece of IP within the a and the FPGA.

Go through that a little bit more and you mentioned it could be good for their customers that have interest.

Yes.

<unk> so the solution that we develop for.

Sanjeev Agarwal: So, our customers behavior has also changed with their ordering within the lead times. So, it's not quite clear if it's because of the macro economic conditions or just because our lead times have changed, but the two combined together has changed the behavior and the backlog over the last couple of quarters. So just kind of confirming that your lead times have gotten even lower compared to the last quarter, and that's kind of impacting the outlook just related to and the reason I have to kind of last quarter, we're saying that the backlog is really strong, and it gives a visibility into the near term quarters, but now because lead times are coming down, that that isn't as accurate today.

The <unk>.

The FPGA market for the instant on.

The requirements for the AI inference engines are very similar to the requirements for the for that instant on FPGA, namely you.

Wanted to be.

Low standby or zero standby current and you wanted to be non volatile and then you needed to be extremely fast so that youre comparing an image for example, that's something that the GPU processed and brought to the edge.

For comparison.

Resolution briskly applies to both and we've had some early discussions with some of the R&D folks looking at AI solutions and there seems to be a good compatibility again, it's all in the early stages, but it is something that we are hoping to focus on.

Sanjeev Agarwal: I guess, yeah, this is on it, I guess the way I would describe it, so what's happened is the lead times were 52 weeks, they came down to about 30 something weeks, and then we reduced them further to about 27, 26 weeks. So we saw lead times come down, and then in addition to that, one of the things you'll see industry-wide that you might have noticed is that the supply constraints loosened up as well.

Over the next year year and a half.

As a new focus for the company.

Is there enough density in these parts to be able to do anything on the AI side do they have to be changed together.

How would it work.

So it's mostly targeted towards edge AI Oren, where they don't require very high density it's not for the servers, where they would require a gigabit.

Sanjeev Agarwal: Right, and so what that did was that created what we're observing to be a customer behavioral change, and so they're mostly, they're mostly booking within the lead time, and then they're booking some outside the lead time as well, so that's really nice, but it's not as much as they were doing historically. And so now it's kind of come back to let's call it the backlog pre-pandemic levels, and so then though it looks relatively normal from that perspective, it has declined from the really rich backlog from a year ago, where there was 52 weekly time, not enough capacity, and people were getting worried about getting capacity.

Much higher densities.

But for the Ed Yes, we have plenty of density.

I mean, we meet the density requirements for the Agi applications.

Okay, and just one more follow up with you.

Mentioned the second.

On FPGA development.

What's going on with the first one.

The timing for the time.

Like on both of these.

So we are so both those programs are active as of Q4 of 2023. So the original one with quick logic Ensky water.

That is progressing just fine.

Our making.

Our progress on the deliverables are and continuing forward to that and then this is a new program that the grid logic has been awarded with the from the U S government, but it actually uses Cmos from a different vendor.

Sanjeev Agarwal: Right, so they were just booking well advanced, so that's the aspiration that we've seen. That makes sense, thanks, and I'll wait to ask him. Thank you, Anna, sorry, mind there, if you have a question, press star 11, Lane, maybe you have additional question, go ahead.

It has a similar requirement as far as solutions our concern as the FPGA solutions are concern.

So these two programs are going to run in parallel at least for the next couple of quarters.

Which one.

Second one though for commercial use.

Thank you.

They are both for government use or.

And I know you had mentioned before you are working with some of the commercial.

Nicolas Doyle: Yes, I'll ask one more, just on that back thing on the backlog typically takes 12 to 18 months to convert, can you give any detail on how much of your backlogs expected to convert near term or long term, I know that we're talking some strong growth or some growth in the second half 24 based on the backlog last quarter. I think are you talking about 12 to 18 months of qualification time, or did you mean.

FPGA vendors on a commercial product.

Any any progress there on the incident on applications.

So the other solutions that we're looking at for the FPGA was basically to replace the traditional nor flash memory, yes.

SDM Ram.

The 64, Meg and 16 megabit, we brought out and that work is ongoing.

Okay. Thanks, so much.

Sure.

Nicolas Doyle: Right, yes, yeah, so that the qualification time for that new STD product that we brought out is still 12 to 18 months and we expect the early production to be in late 2024, early 2025, so nothing is. Could unquote change all delayed in that in that process. Yeah, I think I think the way I would explain the pipeline. If you look at the design when they're still healthy and they continue to gain traction, right, I think that's part of where you're going, so there is a strong pipeline and we are seeing backlog outside of a lead time, just not as much as. Thanks for your clarification. Thank you.

Thank you and as a reminder to ask a question simply press star one one today in the queue.

Yeah, I don't see any further questions in the queue I will pass it back to <unk> for his final comments.

But that said we conclude today's call. Thank you all for joining us and we look forward to updating you on our progress next quarter. Thank you.

Thank you everyone for participating and you may now disconnect.

Okay.

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Orin Hirschman: And we do have a question from another line one moment please. A question from Orin Hirschman with AIG please proceed. Hi, let's see just one more qualification question on that last topic.

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Orin Hirschman: In terms of the guidance that you put out for Q4, does that assume product, product increases sequentially, being too much more specific than what you want to be. Yeah, hi Orin, this is on edge. I would say we're looking at guidance for Q4 relatively flat to Q3 with a similar mix.

Sure.

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Sanjeev Agarwal: Okay. And you've never mentioned AI before. You know, where does the product fit in the world? Even the AI is it only if it becomes the actual, you know, a piece of IP within an FDGA. You go through that a little bit more and are you mentioning because they're customers that have interest. Yeah, so the higher and this is Sanjeev. So the solution that we developed for the FPGA market for the instant on FPGA.

Yes.

Sanjeev Agarwal: The requirements for the AI inference engines are very similar to the requirements for that instant on FPGA. Namely, you want it to be low standby or zero standby current. And you want it to be non volatile. And then you need it to be extremely fast so that you're comparing an image. For example, with something that the GPU processed and brought to the edge for comparison. So the solution basically applies to both.

Sanjeev Agarwal: And we've had some early discussions with some of the R&D folks looking at some AI solutions and it seems to be good compatibility. Again, it's only in the early stages, but it's something that you're hoping to focus on.

Sanjeev Agarwal: And over the next year year and a half as a new focus for the company. Is there enough density and these parts to be able to do anything practical on the AI side. They have to be changed together and how would it work? So it's mostly targeted towards edge AI or where they don't require very high density. It's not for the servers where they would require gigabits and much higher densities. But for the edge AI, we have plenty of density.

Sanjeev Agarwal: I mean, we meet the density requirements for the edge AI applications.

Sanjeev Agarwal: Okay. And this one more follow up. You mentioned the second in the non FPGA development. What's going on with the first one and the timing. What is timing like on both of these. So we are so both the programs are active as of Q4 of 2023. So the original one with quick logic and sky water. That is progressing just fine. We are making progress on the deliverables and continuing forth with that.

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Sanjeev Agarwal: And then this is a new program that the quick logic has been awarded from the US government. But it actually uses CMOS from a different vendor. But has a similar requirement as far as solutions are concerned as the FPGA solutions are concerned. So these two programs are going to run in parallel at least for the next couple of quarters.

Sanjeev Agarwal: Which one is the second one though for commercial use or for governmental use? Are they both for government use or? And I know you've mentioned before you're working with some of the commercial SGA vendors on commercial products. Any, you know, any any progress there on the instant on application. So the other solutions that we're looking at for the FPGA was basically to replace the traditional nor flash memory. Yeah, with this SCD MRAM 64 mag and 16 mag that we brought out and that work is ongoing.

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<unk>.

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Yes.

Good afternoon, and welcome to the conference call to discuss <unk>.

<unk> third quarter 2023 financial results 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. As a reminder, this conference call is being recorded today Wednesday November <unk> 2023.

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.

Spectation forever spins future business financial performance and goals customer and industry adoption of M. Ram technology successfully bring into market and manufacturing products in <unk> design pipeline and executing on its business plan.

<unk> on Form 10-Q, which will be filed with the SEC on November 2nd 2023, and other SEC filings made from time to time in which <unk> may discuss risk factors associated with investing in other spin.

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 statements made on this call to update or alter our forward looking statements, whether as a result of new information future events or our.

Otherwise.

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 spins any external auditors.

Our actual results may differ materially from these estimates and 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 included in the company's press release are definitions and reconciliations of GAAP net income to adjusted EBITDA.

Which provide additional details.

A copy.

The press release is posted.

Mr Relations section of <unk> website at Www Dot <unk> dot.

Unknown Executive: Okay, thanks so much. Sure. Thank you, and as I reminder to ask for questions, simply press star 11 to get in the queue.

Dot com and now I would like to turn the call over to ever since President and CEO Sanjiv Agarwal Sanjeev. Please go ahead.

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

I would it's been delivered quarterly revenue of $16 5 million above the high end of guidance and an 8% increase year over year.

GAAP net income positive for the 10th quarter in a row.

<unk> focus for the company.

A few highlights for quarter three 2023.

Cash flow from operations was $3 6 million, putting us at $11 1 million year to date.

We continue to operate debt free while increasing profitability Q3, net income was $2 4 million.

I would just want ended Q3 with a cash balance of $34 9 million.

We announced the availability of the <unk> family of STM Ram products from eight megabit to 64 megabit density with the extended temperature range of minus 40% integrate to 105 Sandy grade for a production orders.

We are sampling the four megabit density part in the smaller DFM package and the extended temperature range with production plan for the first quarter of 2024.

In Q3, we entered into an agreement to develop reliability models for strategic radiation hardened toggle amiram.

In October we entered into a new contractual agreement to license, our <unk> technology to build strategic radiation hardened FPGA.

Our business outlook, we continue to have a good visibility into our product backlog for the remainder of 2023 and into early 2024 as of September 30th 2023.

We have alleviated our foundry supply chain constraints, which is helping us address our unfulfilled cargo demand.

Anuj Aggarwal: Yeah, I don't see any further questions in the queue. I will pass it back to Anuj Aggarwal for his final comments.

Products, we expanded our flagship industrial high density SPM Ram product family.

<unk> X X Alex to include a five millimeter by six millimeter DFM package.

Smaller by 37% compared to the current offering.

In addition to the savings we are delivering an extended temperature of minus four DC to 105 C.

This family Opex by SPT MRM devices.

<unk> is the highest combination our performance.

Lawrence and retention and are now available and densities from 4% to 64 Meg.

It is the only commercially available persistent memory with full read and write bandwidth of <unk>.

400 megabytes per second.

Eight input output signals with our clock frequency of 200 megahertz.

Is the highest performing persistent memory available today ideal for electronic systems, where data persistence and integrity.

Low power low latency and security are Paramount.

Industrial Iot network enterprise infrastructure.

This automation and control Aeronautics avionics medical gaming and FPGA configuration are examples where this family.

Simplify the system architecture and offered an alternative solution to legacy memories, such as ferroelectric memories airframe battery back.

Random access memory, BB Ram, nor flash and non volatile SRAM.

A few comments about our aviation heart programs.

Since its inception <unk> has invested in maintaining its leadership in <unk> technology as evidenced through its IP portfolio and successful licensing of its technologies we are in.

Excited to report that we entered into two new radiation hard.

Program agreements one on toggle M Ram to develop reliability models for the strategic radiation hardened Powell and brand products.

The second agreement is to license, our S&P MRI technology to build a strategic radiation hardened FPGA.

These agreements are in addition to the existing radiation hard programs on STD MRI and technologies that we have discussed in previous earnings calls.

One a high density memory array to distributed configuration memory for incident on FPGA with multiple time Programmability.

The R&D and design teams delivered on the milestone successfully to further the development of these <unk> based solutions for these projects.

Unknown Executive: With that said, we conclude today's call. Thank you all for joining us and we look forward to updating you on our progress next quarter. Thank you.

We believe our distributor to MRI, we are climbing as D. M Ram.

It is a revolutionary approach and will give us an edge on energy efficiency and scaling as we deploy the solution an FPGA.

Unknown Executive: Thank you, everyone, for participating and you may now disconnect. You You You You You . .

Unknown Executive: [inaudible] I'm not sure if I'm right, but I'm not sure if I'm right Good afternoon, and welcome to the conference call to discuss Everspin's technologies third quarter 2023 financial results. At this time, all participants are in a listen only mode. At the completion of today's conference call, instructions will be given for the question and answer session.

And France engines.

I will now turn it over to our CFO.

Who will take you through our third quarter financials, and fourth quarter 2023 guidance.

Alright.

Thank you Sandeep and good afternoon, everyone as part of our third quarter 2023 financial results. We're pleased to announce our 10th consecutive quarter of positive net income. In addition, we generated positive cash flow from operations of $3 6 million during the quarter.

Third quarter of 2023.

MRM product sales in the third quarter, which includes both toggle and FCT MRM revenue was $13 5 million compared to $13 4 million in the prior quarter and $14 6 million in Q3 22.

Licensing royalties patents and other revenue in the third quarter increased to $2 9 million compared to $2 3 million last quarter and $7 million in Q3 2022 <unk>.

Shipments to suppliers for high density <unk> product for the data center applications represented 11% of revenue in the third quarter versus 7% of revenue in Q2, and 19% in Q3 last year.

GAAP operating expenses for the third quarter of 2023 were $7 9 million versus $7 6 million in the prior quarter and $7 1 million in the third quarter 2020 to the.

The increase in operating expenses in the quarter compared to Q3 2022 was primarily driven by an increase in professional service costs.

We are pleased to report third quarter 2023 positive net income at $2 4 million or <unk> 11 per share based on $21 8 million weighted average.

Diluted EPS of <unk> 11 was better.

And the high point of our guidance range, reflecting our strategic operational discipline and ability to drive profitability despite macroeconomic uncertainties.

Adjusted EBITDA continues to remain positive for Q3 2023, adjusted EBITDA was $4 million compared to $5 4 million in the prior quarter and $3 4 million in Q3 of last year.

We ended the quarter with cash and cash equivalents of $34 9 million compared to <unk>.

<unk> 8 million at the end of the prior quarter and $23 4 million as of Q3 2002, the increase in cash quarter over quarter as a result of ever since continued focus on strong cash management, while growing cash flow from operations as the company continues to operate debt free cash.

Cash flow from operations was healthy at $3 6 million for the current quarter.

Income per diluted share to be between <unk> and <unk>.

I will now turn it back over to Sanjay for some brief additional commentary before we open it up for questions.

Thanks very much.

In summary, we reported another profitable quarter now tend to narrow which remains a strong focus for the company.

We are excited that our toggle M Ram and <unk> technologies are being selected for radiation heart programs, taking advantage of our leading edge capabilities.

We believe the extended temperature range capability of minus 40 C 100 <unk> see.

CDM Ram expire family positions us well to address the fast growing industrial Iot and embedded systems markets.

We have good visibility into our target Amazon backlog through 2023 in early 2024, giving us confidence in our business.

Thank you for joining us today.

Operator, you May now open the line for questions.

Thank you so much and to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question simply press Star one again.

Unknown Executive: As I reminder, this conference call is being recorded today, Wednesday, November 1, 2023. Before we begin the call, I want to remind you that this conference call contains for looking statements regarding future events, including but not limited to our expectations for Everspin's future business, financial performance and goals, customer and industry adoption of M-RAM technology successfully bring into market and manufacturing products in Everspin's design pipeline and executing on its business plan. These forward-looking statements are based on estimates, judgments, current trends and market conditions and involve risk and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements.

Unknown Executive: We would encourage you to review our SEC filings, including our quarterly report on form 10Q, which will be filed with the SEC on November 2, 2023, and other SEC filings made from time to time in which we may discuss risk factors associated with investing in Everspin. 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.

One moment, while we compile the Q&A roster.

Unknown Executive: 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 Everspin's and external auditors. Our actual results may differ materially from these estimates and 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 GAP and non-GAP terms. Included in the company's press release are definitions and reconciliations of GAP net income to adjusted EBITDA which provide additional details.

One moment for your first question that comes from JD with Mali with Craig Hallum. Please proceed.

Unknown Executive: A copy of the press release is posted of the Investor Relations section of Everspin's website at www.Everspin.com.

Sanjeev Agarwal: And now, I'd like to turn the call over to Everspin's president and CEO Sanjeev Agarwal. Sanjeev, please go ahead. Thank you operator and thanks everyone for joining us on the call today. Everspin delivered quarterly revenue of 16.5 million above the high end of guidance and an 8% increase year over year. We were a gap net income positive for the 10th quarter in a row, a strong focus for the company. A few highlights for quarter three, 2023, cash flow from operations was 3.6 million putting us at 11.1 million year to date. We continue to operate debt free while increasing profitability, Q3 net income was 2.4 million. Everspin ended Q3 with a cash balance of 34.9 million.

Hey, guys congrats on another solid quarter Scott.

Scott question on revenues being on the upper end of guidance it looks to be mainly coming from licensing.

With that as most of the increase in licensing revenues coming solely from the Rad hard programs.

Are we seeing any meaningful royalties from past licenses contributing to the increase in licensing revenues.

Hi, Jonathan this is <unk>. Thanks for the question, yes for Q3.

The good news came from the licensing and royalty side, we had.

Revenue from the quick logic deal.

And then we had a third Rad hard deal that Sanjiv mentioned related to Targa reliability, and so we were able to get some work done there and account for that revenue as well.

I will say also though product sales were strong and so the sales continued to be strong in Q3.

Awesome Awesome, and then I just got actually a question on the product sales with with products being down Q over Q is there any has there been any unusual activity with.

The backlog such as push outs or even cancellations regarding backlog.

Yes, the interesting thing with backlogs.

So theres definitely.

Macroeconomic uncertainty.

Industry trends that are happening right. So the supply constraints are loosening.

The lead times are reducing like we had mentioned last couple of quarters and so we are seeing customers booking within the lead time, but theyre kind of waiting to look outside the lead time right.

So.

We are seeing some impact in APAC for example, within the industrial automation section.

Okay.

So.

The industrial automation, such our segment being one of them.

Weaker weaker end markets youre experiencing.

Yeah.

No actually for Q3, we had good results in the industrial segment.

Just making a comment.

Yes.

Industrial the industrial segment.

Some uncertainty in China, and so there are some challenges there.

Okay, that's been strong.

With others.

Okay, Yeah that makes sense and then just.

One more question on end markets were there any particular end markets you guys are seeing a little more strength or weakness.

Not particularly right now I think just overall, there's macroeconomic uncertainty right as things are happening so.

The same customers.

Waiting to place orders right and just wanting to see what's happening in China, and what's happening in the economy in general.

But overall the segment look at except for what I mentioned some risk in industrial.

Awesome, Yeah that makes sense.

That's all for me and congrats on another solid quarter.

Thanks, Charlie.

Thank you.

One moment for our next question.

And it comes from the line of Quinn Bolton with Needham. Please proceed.

Hey, guys. This is Nick Doyle on for claim.

Wanted to focus on our Rad hard it's doing really well.

Claiming these new wins new licensing.

Can you just talk a little bit about the applications applications that are actually using that and then the new licensing deal is that a one time item or we stepping up the kind of baseline of licensing revenue.

Sanjeev Agarwal: We announced the availability of the X5 family of STTM RAM products from 8 megabit to 64 megabit density with the extended temperature range of minus 40 centigrade to 105 centigrade for production orders. We are sampling the 4 megabit density part in the smaller BFN package and the extended temperature range with production planned for the first quarter of 2024. In Q3, we entered into an agreement to develop reliability models for strategic radiation hardened toggle M RAM.

And then if we can also if you could also touch on the products or are we still on track to enter production by.

And the next year and customers shipping in 'twenty five.

Sanjeev Agarwal: In October, we entered into a new contractual agreement to license our STTM RAM technology to build a strategic radiation hardened FPGA. Our business outlook, we continue to have a good visibility into our product backlog for the remainder of 2023 and into early 2024 as of September 30, 2023. We have alleviated our hungry supply chain constraints which is helping us address our unfulfilled toggle demand products. We expanded our flagship industrial high density STTM RAM products family, the EM XXLX to include a 5 mm by 6 mm DFN package smaller by 37%.

Hey, Thanks, Nick there Sanjay.

So I guess I'll look.

I'll try to remember all your questions, but if I forget something please remind me.

As far as the goodness of the radiation hardened Youre right. I mean, we were really excited that we were picked by the.

Government contract is to actually have one project on <unk> and another one on <unk> as well.

Sanjeev Agarwal: Compared to the current offering, in addition to the area savings, we are delivering an extended temperature of minus 40 C to 105 C. This family of X5 STTM RAM devices delivers the highest combination of performance, endurance and retention and are now available in densities from 4 to 64 meg. It is the only commercial available persistent memory with full read and write bandwidth of 400 megabytes per second via 8 input output signals with a clock frequency of 200 MHz. It is the highest performing persistent memory available today, ideal for electronic systems with data persistence and integrity, low power, low latency and security are paramount.

<unk>.

<unk> licensing deals that you talked about.

We talked about for ICD MRI that has actually targeted towards an instant on FPGA similar to the one that we announced I believe two or three quarters ago. So this is a new <unk>.

<unk> with a different vendor.

Although the subcontractor is still.

Two quick logic, but there are different.

Cmos provider.

These licensing deals are obviously very lumpy in the.

They are opportunistic I would not say that this was the last licensing deal that will come across.

We hope to get even more going forward are not giving any guidance, but we are hopeful that our technology keeps getting recognized and we get we.

Sanjeev Agarwal: These agreements are in addition to the existing radiation heart programs on STT MRAM technologies that we have discussed in previous earnings calls. One, a high density memory array and through a distributed configuration memory for instance on FPGA's with multiple time programmability. The R&D and design teams delivered on the milestones successfully to further the development of these STT MRAM-based solutions for these projects. We believe our distributed MRAM, we are calling as DMRAM approach is a revolutionary approach and will give us an edge on energy efficiency and scaling as we deploy the solution and FPGA's and AI inference engines.

We keep getting picked up for other projects.

As a reminder, I think a year ago, we had talked about a deal with Honeywell, where we had actually building at 64 megabit array and then obviously.

Anuj Aggarwal: I will now turn it over to our CFO, Anujagarwal, who will take you through our third quarter financials and fourth quarter 2023 guidance, Anuj. Thank you, Sanjeev, and good afternoon everyone. As part of our third quarter, 2023 financial results, we are pleased to announce our 10th consecutive quarter positive net income. In addition, we generated positive cash flow from operations of 3.6 million during the quarter. We delivered solid quarterly results above the high end of guidance with revenue of 16.5 million compared to 15.7 million last quarter and 15.2 million in the third quarter of 2002.

More of a.

Anuj Aggarwal: We also had positive net income of 2.4 million and positive cash flow from operations of 3.6 million for the third quarter of 2023. MRAM products sales in the third quarter, which includes both toggle and STT MRAM revenue, was 13.5 million compared to 13.4 million the prior quarter and 14.6 million in Q322. Licensing, royalties, patents, and other revenue in the third quarter increased to 2.9 million compared to 2.3 million last quarter and 0.7 million in Q322.

Persistent memory type solution for radiation hard environments.

Anuj Aggarwal: Shipments suppliers for our high density STT product for the data center applications represented 11% of revenue in the third quarter versus 7% of revenue in Q2 and 19% in Q3 last year. Turning to gross margin, gap gross margin for the third quarter of 2023 was 60.2% versus 58.4% in the prior quarter and 58.8% in Q322. The increase in gross margin is primarily attributable to the increase in licensing revenue. Gap operating expenses for the third quarter of 2023 were 7.9 million versus 7.6 million in the prior quarter and 7.1 million in the third quarter.

As far as our.

64, Megabit 16, megabit parts that we taped out and brought on production this year.

We are on schedule and people are looking at our parks.

Quantifying them. So we are on schedule to getting them hopefully quantify then into early production towards the end of 2024.

Anuj Aggarwal: 2.9 million in the prior quarter. 2.9 million in the prior 2022. The increase in operating expenses in the quarter compared to Q3 2022 was primarily driven by an increase in professional service costs. We are pleased to report third quarter 2023 positive net income of 2.4 million or 11 cents per share based on 21.8 million weighted average fully diluted shares outstanding. This compares to a gap net income of 3.9 million or 18 cents per diluted share in the prior quarter and net income of 1.9 million or 9 cents per diluted share in the third quarter 2022.

If I Miss anything please remind me Nick.

Got it all thank you.

Thank you.

For the.

The.

We've seen weakness with FPGA guys that were reported AMD Intel lattice and maybe we're seeing that in your products slightly declining next quarter.

Would you say that's accurate.

Anuj Aggarwal: Diluted EPS of 11 cents was better than the high point of our guidance range reflecting our strategic operational discipline and ability to drive profitability despite macroeconomic uncertainties. Adjusted EBITDA continues to remain positive for Q3 2023 adjusted EBITDA was 4 million compared to 5.4 million in the prior quarter and 3.4 million in Q3 of last year. We ended the quarter with cash and cash equivalent of 34.9 million compared to 8 million at the end of the prior quarter and 23.4 million as of Q322.

<unk>.

Yeah.

Okay.

I noticed that correctly.

Anuj Aggarwal: The increase in cash quarter over quarter is a result of Everspin's continued focus on strong cash management while growing cash flow from operations as the company continues to operate debt free. Cash flow from operations was healthy at 3.6 million for the current quarter. Turning to our fourth quarter 2023 guidance, Everspin is cautiously optimistic, demand for our toggle products remains strong and we continue to see increased demand of our X-Fi family and SDT products. We expect total revenue in the range of 15.4 million to 16.4 million and gap net income for diluted share to be between one cent and six cents.

So I don't know if it is specifically the FPGA or not but like on already mentioned, we are cognizant of the.

Sanjeev Agarwal: I will now turn it back over to Sanji for some brief additional commentary before we open it up for questions. In summary, we reported another profitable quarter now 10th in a row which remains a strong focus for the company. We are excited that our toggle M-RAM and STT M-RAM technologies are being selected for radiation heart programs taking advantage of our leading edge capabilities. We believe the extended temperature range capability of minus 40C to 105C of our STT M-RAM X-Fi family positions as well to address the fast growing industrial IoT and embedded systems markets. We have good visibility into our toggle M-RAM backlog through 2023 and early 2024 giving us confidence in our business. Thank you for joining us today.

The macroeconomic conditions in Asia Pacific.

As we said.

We are.

Unknown Executive: Operator, you may now open the line for questions. Thank you so much. And to ask a question, you will need to press star 111 on your telephone and wait for your name to be announced. To withdraw the question, simply press star 111 again.

Have been strong for the first three quarters, but we are starting to see some movement in Q4 and also in early 2024, but that is also convoluted by the data that now that the supply chain constraints are removed.

On the backlog over the last couple of quarters.

So just kind of confirming that your lead times have gotten even lower compared to last quarter, and that's kind of impacting that.

The outlook.

Just related to.

And the reason I asked kind of last quarter, we are saying that the backlog is really strong and it gives us visibility into the near term quarters, but now because the lead times are coming down like.

That isn't as accurate today.

I guess.

This tonnage I guess the way I would describe that.

Okay.

So what's happened is the lead times were 52 weeks they came down to about <unk>.

<unk> 30, something weeks and then we reduce them further to about 27 26 weeks so.

So we saw lead times come down and then in addition to that one of the things Youll see industry wide that you might have noticed is that the supply constraints loosened up as well right and so what that did was that created what we're observing to be a customer behavioral change and so they're mostly.

Shadi Mitwalli: One moment for our first question that comes from Shady with Molly with Craig Hallum. Please press star 111. Hey guys, congrats on another solid quarter. I just got a question on revenues being on the upper end of guidance. It looks to be mainly coming from licensing. So with that is most of the increase in licensing revenues coming solely from the RAD hard programs, or are we seeing any meaningful royalties from past licenses contributing to the increase in licensing revenues?

Theyre, mostly booking within the lead time and then they are booking some outside the lead time as well so that's really nice.

Shadi Mitwalli: Hi, Shadi, this is on edge. Thanks for the question. Yeah, for Q3, the goodness came from the licensing and royalties side. We had some strong revenue from the quick logic deal, and then we had a third RAD hard deal that Sanjeev mentioned related to toggle reliability, and so we were able to get some work done there and account for that revenue as well. I will say also that product sales were strong, and so the sales continued to be strong in Q3. Awesome, awesome.

But it is not as much as they were doing historically and so now it's kind of come back to let's call. It the backlog pre pandemic levels and so even though it it looks relatively normal from that perspective it has declined.

They are really rich.

Backlog from a year ago, where there was 52 week lead time not enough capacity and people are getting worried about.

Getting capacity right. So they were just booking.

Well advanced so thats the observation that we've seen.

That makes sense. Thanks.

Uh huh.

Oh.

I'll wait to ask my memory.

Thank you Ms. Sarah reminder, if you have a question press star one one Glenn if you have additional question go ahead.

Yes.

I'll ask one more just on that by staying on the backlog.

Typically takes 12 to 18 months to convert.

Can you give any detail on how much of your backlog is expected to convert near term or long term.

I know that we are talking.

Some strong growth or some some growth in the second half 'twenty four based on that backlog last quarter.

Okay.

Do you think are you talking about 12 to 18 months of qualification time or did you mean.

Right yes.

Yes.

That process.

Yes, I think I think the way I would explain the pipeline.

If you look at the design win they are still healthy and they continue to gain traction right I think.

That's part of where you're going so there is.

Strong pipeline and we are seeing backlog outside of the lead time, just not as much as before.

Okay.

Thanks for the clarification.

Thank you.

Okay.

And we do have a question from another line one moment please.

Have a question from Orin Hirschman with AIG. Please proceed.

Shadi Mitwalli: And then I just got actually a question on the product sales. With products being down Q over Q, has there been any unusual activity with the backlog, such as push outs or even cancellations regarding backlogs? Yeah, the interesting thing was backlog, Shadi. So there's definitely some macroeconomic uncertainty and industry trends that are happening, right? So supply constraints are loosening. The lead times are reducing like we had mentioned last couple of quarters, and so we are seeing customers booking within the lead time, but they're kind of waiting to book outside the lead time, right?

Hi, let's see just one more call. It per case in question on that last topic in terms of the games that you put out for for Q4.

Does that assume product product increases sequentially.

Being too much more specific.

Yeah, Hi, Ryan this is <unk>.

I'd say were looking at guidance for Q4 relatively flat to Q3 with a similar mix okay.

Shadi Mitwalli: And so we are seeing some impact in APAC, for example, within the industrial automation section. So would the industrial automation segment be one of your guys is more weaker and marketer experiencing? No, actually, for Q3, we had good result in the industrial segment. I was just making a comment that the industrial segment has some uncertainty in China, and so there are some challenges there. Okay, that's been strong. Okay, I understand. Okay, yeah, that makes sense.

Okay.

And you'd never mentioned AI before.

Where does the product fit in the overall scheme of AI that only if it becomes the actual.

Shadi Mitwalli: And then just one more question on end markets. Was there any particular end markets you guys are seeing a little more strength, or are we missing? Not particularly right now. I think just overall, there's some macroeconomic uncertainty, right? As things are happening, so you're just seeing customers waiting to place orders, right? And just wanting to see what's happening in China, and what's happening in the economy in general. But overall, the segments look good, except for what I mentioned, some risk in industrial. Awesome. Yeah, it makes sense. That's all for me and congrats on another strong quarter. Thanks, Shally. Thank you.

Yes.

Piece of IP within the a and the FPGA.

Go through that a little bit more than you mentioned because their customers that have interest.

Nicolas Doyle: One moment for our next question.

Yes.

Nicolas Doyle: And he comes from the line of Quinn Bolton with Meham. Please proceed. Hey guys, this is Nick Doyle, I'm for Quinn. I wanted to focus on Radhart, it's doing really well, claiming his new wins, new licensing. Can you just talk a little bit about the applications, the end applications that are actually using that? And then the new licensing deal, is that a one time item? Are we stepping up the kind of baseline of licensing revenue?

<unk> so the solution that we develop for.

Nicolas Doyle: And then if we could also, if you could also touch on the products, are we still on track to enter production by the end of next year and customers shipping in in 25? Thanks. Thanks, Nick. This is Sanjeev. So I guess I'll try to remember all your questions, but if I forget something, please remind me. As far as the goodness of the radiation, how deals you're right, I mean, we were really excited that we were picked by the government contractors to actually have one project on toggle M Ram and another one on STK M Ram as well.

The <unk>.

PGA market for the instant on.

The requirements for the AI inference engines are very similar to the requirements for the for that instant on FPGA, namely you.

Nicolas Doyle: The licensing deal that you talked about, or that we talked about for STT M Ram, that is actually targeted towards an instant on FPGA, similar to the one that we announced. I believe two or three quarters ago. So this is a new project with a different vendor, although the subcontractor is still still through quit logic, but they have a different CMOS provider. These licensing deals are obviously very lumpy and they are opportunistic.

Wanted to be.

Nicolas Doyle: I would not say that this is the last licensing deal that we will come across. We hope to get even more going forward, not giving any guidance, but we are hopeful that our technology keeps getting recognized and we keep getting picked up for other projects. Just as a reminder, I think a year ago we had talked about a deal with Honeywell, where we were actually building a 64 megabit array, and there obviously it's more of a persistent memory type solution for radiation hard environments.

For comparison so.

Nicolas Doyle: As far as our 64 megabit, and the 16 megabit parts that we taped out and brought to production this year, they are on schedule. People are looking at our parts and qualifying them, so we are on schedule to getting them hopefully qualified and into early production towards the end of 2024. If I missed anything, please remind me Nick. No, got it all. Thank you. For the, the, we've seen weakness with the FPGA guys that were reported, AMD and tele lattice, and maybe we're seeing that in your products, like slightly declining next quarter.

Over the next year year and a half.

As a new focus for the company.

Is there enough density in these parts to be able to do anything on the AI side do they have to be changed together.

How would it work.

So it's mostly targeted towards edge AI Oren, where they don't require very high density it's not for the servers, whether they would require gigabits.

Nicolas Doyle: Would you say that's an accurate, you know, I know the fact correctly. So I don't know if it is specifically the FPGA not, but like Anuj mentioned, we are cognizant of the of the macro economic conditions in Asia Pacific. As we said, as I said, you know, we are, you know, we have been strong for the first three quarters, but we are starting to see some movement in Q4 and also in early 2024.

Much higher densities.

Nicolas Doyle: But there is also convoluted by the data that now that the supply chain constraints are removed are lead times have actually dropped. So our customers behavior has also changed with their ordering within the lead times. So it's not quite clear if it's because of the macro economic conditions or just because our lead times have changed, but the two combined together has changed the behavior and the backlog over the last couple of quarters.

Yes, we have plenty of density.

I mean, we meet the density requirements for the Adi applications.

Okay.

And just one more follow up you had mentioned the second.

Then on FPGA development.

What's going on with the first one is the timing for the timing.

Timing lag on both of these.

So we are it's about the programs that are active as of Q4 of 2023. So the original one with quick logic Ensky water.

Nicolas Doyle: So just kind of confirming that your lead times have gotten even lower compared to last quarter, and that's kind of impacting the outlook. Just related to, and the reason I have to kind of last quarter, we're saying that the backlog is really strong and it gives a visibility into the near term quarters, but now because lead times are coming down, that isn't as accurate today. I guess, I guess the way I would describe it, so what's happened is the lead times were 52 weeks, they came down to about 30 something weeks and then we reduced them further to about 27, 26 weeks.

That is progressing just fine.

We're making.

Our progress on the deliverables and continuing forward to that and then this is a new program that the grid logic has been awarded with the from the U S government, but it actually uses Cmos from a different vendor.

Nicolas Doyle: So we saw lead times come down, and then in addition to that, one of the things you'll see industry-wide that you might have noticed is that the supply constraints loosened up as well. Right, and so what that did was that created what we're observing to be a customer behavioral change, and so they're mostly, they're mostly booking within the lead time, and then they're booking some outside the lead time as well, so that's really nice.

But having a similar requirement that's water solutions, our concern as the FPGA solutions that concern.

So these two programs are going to run in parallel at least for the next couple of quarters.

Which one.

Second one though for commercial use.

Thank you.

They are both for government use or.

And then I know you had mentioned before you are working with some of the commercial.

FPGA vendors on a commercial product.

Any any progress there on the incident on application.

So the other solutions that we're looking at for the FPGA was basically to replace the traditional nor flash memory, yes.

SDM Ram.

64, <unk> 16, megabit, we brought out and that work is ongoing.

Okay. Thanks, so much.

Sure.

Thank you and as a reminder to ask a question simply press star one one today in the queue.

Yeah, I don't see any further questions in the queue I will pass it back to <unk> for his final comments.

But that said we conclude today's call. Thank you all for joining us and we look forward to updating you on our progress next quarter. Thank you.

Thank you everyone for participating and you may now disconnect.

Nicolas Doyle: But it's not as much as they were doing historically, and so now it's kind of come back to let's call it the backlog, pre-pandemic levels. And so then though it looks relatively normal from that perspective, it has declined from the really rich backlog from a year ago, where there was 52 week lead time, not enough capacity, and people were getting worried about getting capacity. Right, so they were just booking well advanced, so that's the observation that we've seen.

Nicolas Doyle: That makes sense, thanks, and I'll wait to ask you a minute. Thank you, Anna, sorry, mind there. If you have a question, press star 11, Lane, maybe you have additional question, go ahead. Yes, I'll ask one more, just on that back thing on the backlog typically takes 12 to 18 months to convert. Can you give any detail on how much of your backlog is expected to convert near term or long term, I know that we're talking some strong growth or some growth in the second half 24 based on the backlog last quarter.

Nicolas Doyle: I think are you talking about 12 to 18 months of qualification time, or did you mean. Right, yes. Yeah, so that the qualification time for that new STD product that we brought out is still, you know, 12 to 18 months, and we expect the early production to be in late 2024, early 2025. So nothing is good on code change or delayed in that in that process. Yeah, I think I think the way I explain the pipeline.

Nicolas Doyle: If you look at the design when they're still healthy and they continue to gain traction, right, I think that's part of where you're going. So that there is a strong pipeline and we are seeing backlog outside of the lead time, just not as much as. Thanks for your clarification. Thank you.

Orin Hirschman: And we do have a question from another line one moment, please.

Orin Hirschman: A question from Orin Hirschman with AIG, please proceed. Hi, let's see just one more qualification question on that last topic. In terms of the guidance that you put out for Q4, does that assume product, product increases sequentially, being too much more specific than what you want to be. Yeah, Hi Orin, this is on edge. I would say we're looking at guidance for Q4 relatively flat to Q3 with a similar mix. Okay, and you've never mentioned AI before.

Orin Hirschman: Where does the product fit in the world theme of AI? Is it only if it becomes the actual, you know, a piece of IP within an FBGA. You go through that a little bit more and are you mentioning because they're customers that have interest. Yeah, so the higher and this is Sanjeev. So the solution that we developed for the FPGA market for the instant on FPGA. The requirements for the AI inference engines are very similar to the requirements for that instant on FPGA.

Orin Hirschman: Namely, you want it to be low standby or zero standby current. And you want it to be non volatile. And then you need it to be extremely fast so that you're comparing an image. For example, with something that the GPU process and brought to the edge for comparison. So this solution basically applies to both. And we've had some early discussions with some of the R&D folks looking at some AI solutions and it seems to be good compatibility.

Orin Hirschman: Again, it's only in the early stages, but it's something that we're hoping to focus on and over the next year, year and a half as a new focus for the company. Is there enough density in these parts to be able to do anything practical on the AI side? They have to be changed together and how would it work? So it's mostly targeted towards edge AI or where they don't require very high density.

Orin Hirschman: It's not for the servers where they would require gigabits and much higher densities. But for the edge AI, we have plenty of density. I mean, we meet the density requirements for the edge AI applications. Okay. And this one more follow up. You mentioned a second in Sinan FPGA development. What's going on with the first one and timing? What is timing like on both of these? So we are so both the programs are active as of Q4 of 2023.

Orin Hirschman: So the original one with quick logic and sky water. That is progressing just fine. We are making progress on the deliverables and continuing forth with that. And then this is a new program that the quick logic has been awarded from the US government, but it actually uses CMOS from a different vendor, but has a similar requirement as far as solutions are concerned as the FPGA solutions are concerned. So these two programs are going to run in parallel, at least, for the next couple of quarters.

Orin Hirschman: Which one is the second one though for commercial use or for governmental use? Are they both for government use or? And I know you've mentioned before you're working with some of the commercial FPGA vendors on commercial products, any, you know, any, any progress there on the instant on application. So the other solutions that we're looking at for the FPGA was basically to replace the traditional nor flash memory. Yeah, with this SDM RAM 64 Mac and 16 Mac that we brought out and that work is ongoing. Okay, thanks so much. Sure. Thank you, and as I reminder to ask for questions, simply press star 11 to get in the queue. Yeah, I don't see any further questions in the queue.

Anuj Aggarwal: I will pass it back to Anuj Aggarwal for his final comments. With that said, we can conclude today's call. Thank you all for joining us, and we look forward to updating you on our progress next quarter. Thank you.

Unknown Executive: Thank you everyone for participating, and you may now disconnect.

Q3 2023 Everspin Technologies Inc Earnings Call

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