Q1 2025 Everspin Technologies Inc Earnings Call

Operator: Good afternoon and welcome to the Everspin Technologies first quarter 2025 financial results conference call. At this time, all participants are in a listen-only mode. At the conclusion of management's pair of remarks, instructions will be provided for the question and answer session. As a reminder, this conference call is being recorded.

Yeah.

Speaker Change: Good afternoon, and welcome to the ever spin Technologies' first quarter 2025 financial results Conference call. At this time all participants are in a listen only mode. After this.

Stay Hoffman: At the conclusion of bedroom prepared remarks instructions will be provided for the question and answer session. As a reminder, this conference call is being recorded I would now like to turn the conference over to stay Hoffman Investor Relations Forever spin.

Faye Hoffman: I would now like to turn the conference over to Faye Hoffman, Investor Relations for Everspin. Thank you, Operator, and good afternoon, everyone. Everspin released results for the first quarter 2025 and at March 31st, 2025, this afternoon after market close.

Speaker Change: Thank you operator, and good afternoon, everyone ever been released results for the first quarter 2025 and at March 31st 2025. This afternoon after market close I.

Faye Hoffman: I'm Faye Hoffman, Investor Relations for Everspin, and with me on today's call are Sanjeev Aggarwal, President and Chief Executive Officer, and Bill Cooper, Chief Financial Officer. Before we begin the call, I would like to remind you that today's discussion may contain forward-looking statements regarding future events, including, but not limited to, the company's expectations for Everspin's future business, financial performance, and goals, customer and industry adoption of MRM technology, successfully bringing to 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 risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statement.

Speaker Change: I'd say Hoffman Investor relations for everything and with me on today's call are and cheap alcohol, President and Chief Executive Officer, and Bill Cooper Chief Financial Officer.

Speaker Change: Before we begin the call I would like to remind you that today's discussion may contain forward looking statements regarding future events, including but not limited to the company's expectations for ever since future business financial performance and goals customer and industry adoption of M technology successfully bringing to market and manufacturing.

Speaker Change: Product and ever since design pipeline and executing on its business plan.

Speaker Change: 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.

Faye Hoffman: We would encourage you to review the company's SEC filings, including the annual report on Form 10-K and other SEC filings made from time to time, in which the company 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, the company undertakes no obligation to update or alter any forward-looking statements made on this call, whether as a result of new information, future events, or otherwise. The financial results discussed today reflect the company's preliminary estimates are based on the information available as of the date you're off and are subject to further review by Everspin and its external auditors.

Speaker Change: We would encourage you to review the company's SEC filings, including the annual report on Form 10-K, and other SEC filings made from time to time in which the company may discuss risk factors associated with investing in everson.

Speaker Change: All forward looking statements are made as of the date of this call and except as required by law. The company undertakes no obligation to update or alter any forward looking statements made on this call whether as a result of new information future events or otherwise.

Speaker Change: The financial results discussed today reflect the company's preliminary estimates are based on the information available as the date hereof and are subject to further review by everything and its external auditors. The company's actual results may differ materially from those estimates as a result of the completion of financial closing procedures final.

Faye Hoffman: The company's actual results may differ materially from those estimates as a result of the completion of financial closing procedures, final adjustments, and other developments arising between now and the time that the 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 non-GAAP net income, which provide additional details.

Speaker Change: In other developments arising between now and the time that the financial results for this period are finalized.

Speaker Change: 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.

Speaker Change: Put it in the company's press release are definitions and reconciliation of GAAP net income to non-GAAP net income which provides additional details.

Faye Hoffman: A copy of the press release is posted on the investor relations section of Everspin's website at www.Everspin.com.

Speaker Change: A copy of the press release is posted on the Investor Relations section of ever since website at ever spin Dot com.

Sanjeev Aggarwal: And now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead. Thank you, Fay. And thanks, everyone, for joining us on the call. Turning to our first quarter results, we are pleased to report our first quarter results with revenue of $13.1 million and non-GAAP EPS of $0.02. both above our guidance range. Our outperformance this quarter was due to strength in product revenue, which came in higher than expected. During the first quarter, we continue to ramp revenue from the sale of a persist one gigabit STTM RAM into IBM's Flash Core Module 4, or FCM4, for data center applications.

Speaker Change: And now I'd like to turn the call over to ever since President and CEO Sandeep Agarwal.

Speaker Change: Please go ahead.

Speaker Change: Thank you Barry and thanks, everyone for joining us on the call today.

Speaker Change: Turning to our first quarter results. We are pleased to report our first quarter results with revenue of $13 1 million.

Speaker Change: non-GAAP EPS of two cents, both above our guidance range.

Speaker Change: Our outperformance this quarter was due to strength in product revenue, which came in higher than expected.

Speaker Change: During the first quarter, we continued to ramp revenue from the sale.

Speaker Change: One gigabit.

Speaker Change: I'm, Brian into Ibms Flash core module for our MCM for for data Center applications.

Sanjeev Aggarwal: As a reminder, this Persist product brings data loss protection, high read-write bandwidth, low latency, and non-volatility to the solution. We are pleased with our continued progress and anticipate product revenue from this ongoing project to remain consistent for the remainder of the year. We continue to ship and recognize revenue from our Persist M-RAM solution from Lucid Motors for their Gravity SUV, for which the automaker is currently accepting orders. Everspin's MRAM is used in the gravity to handle data logging and parameter storage to assist in the efficient operation of the all-electric drive power train. This is the second Lucid model that Everspin has been designing.

Speaker Change: Hi, good morning, guys.

Speaker Change: This product.

Speaker Change: The loss protection Harvey.

Speaker Change: Great.

Speaker Change: Hi.

Speaker Change: To resolution.

Speaker Change: We are pleased with our continued progress and anticipated product revenue.

Speaker Change: Ongoing project to remain consistent.

Speaker Change: There will be yet.

Speaker Change: We continue to ship and recognize revenue from a persistent and brand solution from you said motors for the gravity SUV for rich. The automaker is currently accepting orders.

Speaker Change: For example, using the gravity to handle data logging.

Speaker Change: Storage.

Speaker Change: I appreciate the operation will be all electric drive powertrains.

Speaker Change: Powertrain.

Speaker Change: This is the second Luiz good morning.

Sanjeev Aggarwal: having been selected to provide its 256 kilobit M-RAM for the Lucid Air all-electric luxury model in 2021 and follows our win with Bugatti for the all-electric Nivera Elite sports car in 2022. Everspin's MRAM technology is being utilized by five companies in the auto industry for data capture due to our extreme reliability in demanding environments.

Speaker Change: It's been designed to do having been selected to provide <unk> and Brian.

Speaker Change: Well the lucid an all electric luxury model in 2021.

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Speaker Change: Regarding for the all electric Nevada elite Sportscar in 2022.

Speaker Change: However, spins Amram technology is being utilized by five companies in the auto industry for data capture due to our extreme reliability and demanding environments.

Sanjeev Aggarwal: Turning to our licensing, royalty, patent, and other evidence. We completed the first phase of our 9.25 million front-grade technologies project that was announced in August of last year to develop a custom radiation-hardened STD-MRAM macro for embedded solutions using our Persist STD-MRAM technology. The first phase of this project was design-centric, and we are now entering the second process-centric phase to validate the design on silicon. In production, this project will support current and future DOD Strategic Radiation-Hardened and Low-Earth Orbital, or LEO, space systems. We signed the next phase of our project with QuickLogic for our innovative Agilest MRAM technology in the first quarter and recognize initial revenue from moving to the process or fab-centric phase to validate the design on silicon.

Speaker Change: Turning to our licensing royalty and other revenue.

Speaker Change: We completed the first phase of our $9 5 million from Great Technologies project.

Speaker Change: Launched in August of last year to develop custom radiation hardened.

The MRI and micro CT embedded solutions, using our persist JDM Ram technology.

Speaker Change: The first phase of this project was a design centric and we are now entering the second process centric phase to validate the design on silicon.

Speaker Change: And production risk project will support current and future <unk>.

Speaker Change: Strategic radiation hardened and low earth orbit or Leo space system.

Speaker Change: We signed the next phase.

Speaker Change: With Greg logic Pro rata.

Speaker Change: Alright.

Speaker Change: And Ram technology in the first quarter and recognized initial revenue from moving to the process or <unk> to validate the design on silicon.

Sanjeev Aggarwal: As a reminder, this project aims to advance the development and demonstration of strategic, radiation-hardened, high-reliability FPGA technology. We began to recognize initial revenue on our Purdue University contract to provide our state-of-the-art STTM RAM technology to support energy-efficient AI solutions. As part of our first milestone, we delivered the process design kit or PDK so Purdue can initiate chip design. We also shared the initial process development results, including magnetic tunnel junction or MTJ parameters. We are continuing with process development to deliver low-power MTJ devices with fast and reliable switching characteristics. We expect this project to also ramp as the year progresses.

Speaker Change: As a reminder, this project aims to advance the development and demonstration of strategic radiation hardened high reliability FPGA technologies.

Speaker Change: We began to recognize revenue on a pod you University contract to provide our state of the art.

Speaker Change: <unk> technology to support energy question AI solution.

Speaker Change: As part of our first milestone when we delivered the process design kit RPT, Gary So, but you can initiate chip design.

Speaker Change: We also shared the initial process development results, including magnetic tunnel junction RMT J parameters.

Speaker Change: Continuing with process development could be low power MTGE advisors fast and reliable switching characteristics.

Speaker Change: We expect this project to also ramp as the year progresses.

Sanjeev Aggarwal: This project aims to deliver an energy-efficient neuromorphic computing chip for edge AI applications. Lastly, we continue to recognize revenue from our ongoing project with a leading provider of sensor devices to provide foundry services for their latest generation TMR sensor device on our MRAM line in our Chandler facility. We completed qualification and are now at a steady state of production. With respect to below-the-line items, we recognize $0.4 million in other income in the first quarter and $6.5 million to date from the $14.6 million contract we have with the DoD contractor to develop a sustainment plan for our MRAM manufacturing facilities to provide continuous onshore MRAM capabilities to their aerospace and defense customers.

Speaker Change: This project aims to deliver.

I appreciate it neuromorphic computing chip.

Speaker Change: AI applications.

Speaker Change: Lastly, we continue to recognize revenue from an ongoing project with a leading provider of sensor devices to provide foundry services for their latest generation TMR sensor device on our Undrawn line Jonathan facility.

Speaker Change: We completed qualification and are now at a steady state.

Speaker Change: <unk>.

Speaker Change: With respect to below the line items, we recognized <unk> 4 million.

Speaker Change: Other income in the first quarter and $6 5 million to date from the $14 6 million contract the avatar Dod contractor to develop a sustainment plan.

Speaker Change: And Brian manufacturing facilities to provide continuous onshore and brand capabilities.

Speaker Change: Space and defense customers.

Sanjeev Aggarwal: We expect this business to pick up meaningfully in the back half of the year.

Speaker Change: We expect this business to pick up meaningfully in back half of the year.

Sanjeev Aggarwal: In March, we attended Embedded World in Nuremberg, Germany. This was the largest presence since 2017 with heavy traffic through our booth with existing and potential new customers. Our customer engagements range from PLCs, storage, gaming, FPGA partners, SOC, and board partners, etc. The strong interest was demonstrated through the significant media coverage of Everspin and its persistent line of products at the event. At the show, we also announced two new products as part of our xPi family, the Persist EM064LXHR and EM128LXHR, which feature an expanded temperature range of minus 40 degrees C to plus 125 degrees C, meeting the AEC Q100 grade 1 standard for automotive applications.

Speaker Change: In March we attended embedded in Europe or in Germany.

Speaker Change: It was the largest president since 2017 with heavy traffic to our booth with existing and potential new customers.

Speaker Change: Our customer engagements range from Plc's storage gaming.

Speaker Change: <unk> partners, LLC, and both partners et cetera.

Speaker Change: The strong interest was demonstrated through the significant media coverage of ever spin and its persist lineup products at the event.

Speaker Change: At this show, we also announced two new products as part of our X by family.

Speaker Change: U S export Alex HR.

Speaker Change: Alex HR, which feature an expanded temperature range of minus 40 degrees C to plus 175 degrees C meeting the AUC Q1 hundred grade one standard for automotive applications.

Sanjeev Aggarwal: This expanded temperature range addresses the growing demand for persistent, high-speed memory in aerospace, defense, and extreme industrial environments, and provides designers with a robust, fast, and scalable alternative to static RAM or NORF. Engineering samples of the EM064LX and EM128LX-HR will be available in June 2025, with full production scheduled for late 2025. In addition, we had a great example of the success of our enablement efforts at the event. A customer at the show was given a Flywire board to test our Persist EM064LX part. The customer hooked it up to his platform and asked for drivers. It was a STM32 based board, and we directed the customer to the GitHub location for our drivers that we had just released.

Speaker Change: This expanded temperature range addresses the growing demand for persistent high speed memory in aerospace defense and extreme industrial environment.

Speaker Change: Provide designers with a robust and.

Speaker Change: Scalable alternative.

Speaker Change: Cathy Graham our nor flash.

Speaker Change: Engineering samples.

Speaker Change: We would also explore Alex.

Speaker Change: Mm 128, Alex HR will be available in June 2025, with full production schedule for late 2025.

Speaker Change: In addition, we had a great example of the success of our enablement efforts at the yearend.

Speaker Change: Brazil was given a flywheel board desktop.

Speaker Change: <unk> Ddos explore Alex part.

Speaker Change: The customer opiate upwards platform and asphalt drivers.

Speaker Change: It was the STM party to baseball and we directed the customer to the Github location for our drivers that we had just released the demo board work seamlessly and the customer was able to evaluate our superior solution compared to the standard memory solutions.

Sanjeev Aggarwal: The demo board worked seamlessly, and the customer was able to evaluate a superior solution compared to the standard memory solution. Everspin's Persist MRAM products are a dependable memory solution where harsh environments and reliability are paramount. These features have enabled a couple of marquee design wins, and we expect similar mission-critical design opportunities in the future.

Speaker Change: I always think persist amarin product on a dependable memory solution, we had harsh environment and reliability are paramount.

Speaker Change: These vehicles have enabled a couple of marquee design win and we expect similar mission critical design opportunities in the future.

Sanjeev Aggarwal: We are proud to be partnered with Blue Origin on their Blue Moon Mark 1 lander mission set to travel to the moon later this year, and congratulate Blue Origin on the launch of New Shepard's NS31 mission, the first all-female flight crew since 1965. AstroDigital, a supplier of complete satellite systems and mission support systems, has selected Everspin MRAM for their deep space mission. Astro Digital's flight computer utilizes Everspin's Persist MRAM solution, which is the primary processor for the satellite's www.Everspin.com It is responsible for receiving and storing command sequences from users on the ground, sending critical telemetry data, and distributing information and traffic to the various subsystems on board the satellite.

Speaker Change: We are proud to be partnered with <unk> on their global Mark one lender.

Speaker Change: Michelle set to travel to the Moon later this year and congratulate you on again on the launch of New Shepherd.

Speaker Change: One mission first all female flight crew think 1963.

Speaker Change: As for digital a supplier of complete satellite systems and mission support for some selected areas within ameren for their deep space missions.

Speaker Change: Absolutely Israel flight computer utilizes aerospace persist and solution.

Speaker Change: Is the primary processor for the satellite system.

Speaker Change: Because the responsible for the ceiling on store and command sequences from users on the ground.

Speaker Change: And then critically parliamentary data distributing information and traffic to the radio subsystem onboard the satellite.

Sanjeev Aggarwal: and is designed for applications from low Earth orbit, LEO, to geosynchronous orbit, GEO, up to 42,000 kilometers altitude where the environments are harsh and reliability is paramount.

Speaker Change: It is designed for applications from lowered orbit Neo two geosynchronous orbit deal up to 42000 kilometers argued radio environments are harsh when reliability is paramount.

Sanjeev Aggarwal: Our outlook for 2025 remains. We continue to expect the year to be weighted more heavily towards the second half of 2025 due to our typical seasonality and do not expect a direct material impact from tariffs on our results.

Speaker Change: Our outlook for 2025 remains consistent we continue to expect the year to be weighted more heavily towards the second half of 2025 due to our typical seasonality and do not expect direct material impact from tariffs on our results.

Bill Cooper: I will now turn it over to our CFO, Bill Cooper, who will walk you through our first quarter financials and second quarter 2025 guidance. Bill? Thank you, Sanjeev. Our first quarter results reflect the consistency of our execution. During the first quarter, we delivered revenue of $13.1 million above our guidance range of $12 to $13 million, driven by stronger-than-expected product revenue. MRAM product sales in the first quarter, which include both Toggle and STT MRAM revenue, was $11.0 million compared to $10.9 million in Q1'24. consistent with our product sales of $11.0 million in the fourth quarter of 2025.

Speaker Change: I will now turn it over to our CFO Bill Cooper, who will walk you through our first quarter financials and second quarter 2025 guidance Bill.

Bill Cooper: Thank you Sanjeev, our first quarter results reflect the consistency of our execution.

Bill Cooper: During the first quarter, we delivered revenue of $13 1 million above our guidance range of $12 million to $13 million driven by stronger than expected product revenue.

Bill Cooper: MRM product sales in the first quarter, which include both toggle and STG MRM revenue was 11.0 million compared to $10 9 million in Q1 24.

Bill Cooper: <unk> with our product sales of 11.01 million in.

Bill Cooper: In the fourth quarter of 2024.

Bill Cooper: Licensing, royalty, patent, and other revenue in the first quarter decreased to $2.1 million compared to $3.6 million in Q124. This reduction was a result of lower revenue from our project with front grade, which reflects the lumpy nature of these projects. Turning to gross margin, our GAAP gross margin was 51.4% for the first quarter, up slightly from 51.3% in the fourth quarter, and down from 56.5% in Q1 2015. The decrease relative to the same period last year was due to lower mix of high margin licensing and other revenue. Gap operating expenses for the first quarter of 2025 were $8.7 million compared to $8.8 million in the first quarter of 2025.

Bill Cooper: Licensing royalty patent and other revenue in the first quarter decreased to $2 1 million compared to $3 6 million in Q1 'twenty for this.

Bill Cooper: This reduction was a result of lower revenue from our project with front grade.

Bill Cooper: Which reflects the lumpy nature of these projects.

Bill Cooper: Yeah.

Bill Cooper: Turning to gross margin our GAAP gross margin was 51, 4% for the first quarter ups.

Bill Cooper: Up slightly from 51, 3% in the fourth quarter and down from 56, 5% in Q1 24.

Bill Cooper: The decrease relative to the same period last year was due to lower mix of high margin licensing and other revenue.

Bill Cooper: GAAP operating expenses for the first quarter of 2025 were $8 7 million compared to $8 8 million in the first quarter of 2024.

Bill Cooper: In the first quarter of 2025, the company recorded $0.4 million of other income related to the strategic award we won in August to develop a long-term plan to provide manufacturing services for aerospace and defense sectors. We recorded first quarter non-GAAP net income of $0.4 million or $0.02 per diluted share based on 22.4 million weighted average diluted shares. This was above our guidance range of a non-gap net loss of $0.05 to break even results. due to slightly higher revenue and gross margin and prudent operating expense management. This compares to non-GAAP net income of $1.5 million or $0.07 per diluted share in the first quarter of 2024.

Bill Cooper: In the first quarter of 2025, the company recorded <unk> 4 million of other income related to the strategic award. We won in August to develop a long term plan to provide manufacturing services for aerospace and defense segments.

Bill Cooper: We recorded first quarter non-GAAP net income of <unk> 4 million or <unk> <unk> per diluted share based on $22 4 million weighted average diluted shares outstanding.

This was above our guidance range of a non-GAAP net loss of <unk> <unk> to breakeven results due.

Bill Cooper: Due to slightly higher revenue and gross margin and prudent operating expense management.

Bill Cooper: This compares to non-GAAP net income of $1 5 million or <unk> <unk>.

Bill Cooper: Per diluted share in the first quarter of 2024.

Bill Cooper: As a reminder, non-GAAP results are calculated by removing the impact of stock-based companies. We are pleased that our balance sheet remains strong and debt free. We ended the quarter with cash and cash equivalents of $42.2 million, up $0.1 million from $42.1 million at the end of the quarter. Cash flow generated from operations was $1.4 million for the first quarter. Inventories increased sequentially due to increasing our stock for existing and new products for future opportunities, as well as uncertainty in macro business conditions on trade rhetoric. We did not experience any tariff related impacts on our results in the first quarter.

Bill Cooper: As a reminder, non-GAAP results are calculated by removing the impact of stock based compensation.

Bill Cooper: We are pleased that our balance sheet remains strong and debt free we ended the quarter with cash and cash equivalents of $42 2 million.

Bill Cooper: Up <unk> 1 million from $42 1 million at the end of the prior quarter.

Bill Cooper: Cash flow generated from operations was $1 4 million for the first quarter.

Bill Cooper: Inventories increased sequentially due to increasing our stock for existing and new products for future opportunities as well as uncertainty in macro business conditions on trade rhetoric and actions.

Bill Cooper: We did not experience any tariff related impacts on our results in the first quarter.

Bill Cooper: As Sanjeev mentioned, we continue to expect 2025 to be more heavily weighted towards the second half of the year, reflecting our typical season out. Taking these factors into consideration, we expect Q2 total revenue in the range of $12.5 to $13.5 million and gap net loss per basic share to be between $0.05 and $0.03. On a non-gap basis, we anticipate net income per basic share to be between breakeven and 5%. Based on the United States exemption and our shipping terms into China, our current guidance for Q2-25 does not include potential impact from tariffs. However, the situation continues to be fluid and we are monitoring closely.

Speaker Change: As <unk> mentioned, we continue to expect 2025 to be more heavily weighted towards the second half of the year, reflecting our typical seasonality.

Speaker Change: Taking these factors into consideration, we expect Q2 total revenue in the range of 12, five to $13 5 million and GAAP net loss per basic share to be between <unk> and breakeven.

Speaker Change: On a non-GAAP basis, we anticipate net income per basic share to be between breakeven and <unk>.

Speaker Change: Based on the United States exemption in our shipping terms into China. Our current guidance for Q2 dollars 25 does not include potential impact from tariffs. However, the situation continues to be fluid and we're monitoring closely.

Bill Cooper: In summary, we are pleased with our solid results this quarter, driven by strength in our product revenue and Red Heart projects. And looking forward, we remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue. We certainly thank all of the folks on our team for their prudent expense management.

Speaker Change: In summary, we are pleased with our solid results this quarter driven by strength in our product revenue in Rad hard projects and looking forward, we remain committed to maintaining financial discipline, while focusing on scaling our business and converting additional design wins to revenue.

Speaker Change: We certainly thank all of the folks on our team further prudent expense management.

Operator: Operator, you may now open the line for questions. Thank you, ladies and gentlemen. If you have a question or comment at this time, please press star 11 on your telephone. If your question has been answered, you wish to move yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A room.

Speaker Change: Operator, you May now open the line for questions.

Speaker Change: Thank you ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone. If your question has been answered or you were seeing with yourself from the queue. Please press star one again, we will pause for a moment awaken Paula Q&A roster.

Quinn Bolton: Our first question comes from Quinn Bolton with Needham & Company. Your line is open. Hey, guys, congratulations on the nice results.

Speaker Change: Our first question comes from from Quinn Bolton with Needham <unk> Company. Your line is open.

Quinn Bolton: Hey, guys. Congratulations on the nice results I guess, maybe just to start Bill your comment there at the end talking about second quarter guidance, not including any potential tariff impact, especially as you look to China.

Bill Cooper: I guess maybe just to start, Bill, your comment there at the end, talking about second quarter guidance, not including any potential tariff impact, especially as you look to China. To the extent that you have products manufactured in the U.S., either at your facility or I'm not sure whether Global Foundries is U.S. or overseas, but wouldn't those products be subject to tariffs going into China? And could there be an impact there? And if so, could you give us a sense how much of your product flows through China, whether it's for consumption in China or re-export? Yeah, long, long question, but certainly expected the tariffs to come up.

Quinn Bolton: To the extent that you have products manufactured in the U S. Either at your facility or I'm, not sure whether global foundries as U S or overseas, but.

Speaker Change: Wouldn't those products be subject to tariffs going into China and could there be an impact there and if so could you give us a sense how much of your product flows through China.

Speaker Change: Whether it's for consumption in China or re export.

Yes long long question, but certainly expected the tariffs to come up.

Bill Cooper: So, a couple of things. Yes, we do get some of our wafers from GlobalFoundries. And that is categorized as German sourced. And then we do have some wafers that are manufactured in the US and some that are manufactured actually in Taiwan as well. And then when you when you step back and look at it, a lot of our shipments that go around the world, but we don't have a lot of shipments that go directly into China from Everspin. And of course, those go through distribution channels. So, when you look at our shipping terms, as we essentially, the importer at that point would be responsible for the tariffs.

Speaker Change: So couple of things, yes, we do get some of our wafers from Globalfoundries.

Speaker Change: And that is categorized as German sourced.

Speaker Change: And then we do have some wafers that are manufactured in the U S and some that are manufactured.

Speaker Change: And Taiwan as well and then when you when you step back and look at it a lot of our.

Speaker Change: Shipments.

Speaker Change: Go around the world.

Speaker Change: But we don't have a lot of shipments that go directly into China from Emerson.

Speaker Change: And of course, those go through distribution channel. So when you look at our shipping terms.

Speaker Change: We essentially.

Speaker Change: The importer at that point would be responsible for the tariffs so.

Bill Cooper: So, and then on a net basis, I would say direct China sales are not a significant portion of our sales.

Speaker Change: And then on a net basis I.

Speaker Change: I would say direct China sales are not a significant portion of our sales.

Bill Cooper: Okay, so it sounds like it is pretty, pretty low risk even. even if the China tariffs stick because it just sounds like not a lot of your business flows through China or China manufacturing. Yes, that's right.

Speaker Change: Okay. So it sounds like it is pretty pretty low risk even.

Speaker Change: Even if the China tariffs stick because it just sounds like not a lot of your business flows through.

Speaker Change: China or China manufacturing.

Speaker Change: Yes, that's right.

Bill Cooper: Okay, great. And then go ahead. Yeah. All of our all of our product is final assembled in Taiwan. So we do have everything that's final assembled in Taiwan. But when you look at China, what they really look kind of through to is where was the wafer manufactured at. And that again, tends to be You know, very low volume for us. It gets directly shipped into China.

Speaker Change: Okay, Great and then go ahead, yes.

Speaker Change: Yes.

Speaker Change: All of our all of our product is final assembled in Taiwan. So we do have everything that's final assembled in Taiwan, but when you look at China, what they really look at it.

Through two is where it was the wafer manufactured at.

Speaker Change: And that again tends to be.

Speaker Change: Very low volume for us it gets directly shipped into China.

Bill Cooper: Got it. Okay, thank you for that.

Speaker Change: Got it okay. Thank you for that and then just maybe.

Quinn Bolton: And then just maybe, you know, it sounds like your guidance for 2025 playing out as you expected last quarter. A number of, I'll call it your peers in the industry that have exposure to sort of the industrial markets, you know, this earnings season have started to talk about green shoots or seeing sort of signs of cyclical recovery. I know tariff uncertainty is certainly out there, but, you know, for your industrial business, some of the new STT, MRAM wins, are you starting to see, you know, encouraging signs that orders are picking up, backlog is starting to build, you know, just would you agree that you're starting to see signs of a cyclical recovery in that sort of more industrial segment of the business?

Speaker Change: It sounds like your guidance for 2025, playing out as you expected last quarter.

Speaker Change: A number of I'll call. It you or your peers in the industry that have exposure to sort of the industrial markets.

Speaker Change: This earning season have started to talk about green shoots you're seeing sort of signs of cyclical recovery I know tariff uncertainty is certainly out there but.

Speaker Change: For your industrial business.

Speaker Change: Some of the.

Speaker Change: New SPT MRM wins are you starting to see encouraging signs that orders are picking up backlog is starting to build you. Just would you would you agree that.

Speaker Change: Youre starting to see signs of a cyclical recovery in that sort of more industrial segment of the business.

Sanjeev Aggarwal: Yes, Quinn, definitely. I think we're we are starting to see a little bit of improvement in terms of the backlog. And, you know, pleased to, pleased to kind of see that. I think, you know, we don't really give that exact information out, of course, but, but certainly, the backlog is improving. And I think the traction on some of the STT products has also been Great.

Quinn Bolton: Yes, Quinn definitely I think we are starting to see a little bit of improvement in terms of the backlog.

Speaker Change: And.

Speaker Change: Please too pleased to kind of see that.

Speaker Change: I think.

Speaker Change: We don't really give that exact information out of course, but but certainly the backlog is improving and I think the traction on some of the SPT products has also been approved.

Quinn Bolton: Maybe just one last quick one for me. Any, any sort of commentary on the second quarter guide? Just the split between products and licensing and other? Would it continue to be sort of fairly heavily driven by products? Or do you see both segments up? Any, any comment would be would be helpful. Yeah, I don't think we guide specifically around the product and licensing split, but you know, definitely expect to see that move up.

Speaker Change: Great maybe just one last quick one for me any any sort of commentary on the second quarter guide just the split between products and licensing and other.

Speaker Change: Would it continue to be sort of fairly heavily driven by products or do you see.

Speaker Change: Both segments up any any comment would be would be helpful.

Speaker Change: Yes, I don't think we guidance specifically around the product and licensing split, but definitely expect to see that move upward.

Bill Cooper: world. Perfect. Okay. Thank you.

Speaker Change: Overall perfect. Okay. Thank you.

Operator: One moment for our next question.

Speaker Change: Yes.

Speaker Change: One moment for our next question.

Richard Shannon: Our next question comes from Richard Shannon with Craig Callum. Your line is open. Well, hi, guys. Thanks for taking my questions as well. You asked a question on the first quarter report here on gross margins, specifically product gross margins, as I located here in my model here. I'm calculating the product revenue is about 47 percent, which is down a fair amount from 54, and it's moved around a bit over the last number of quarters here. How do we understand this dynamic here and do we expect it to settle out? And where do we sit this 47 percent?

Speaker Change: Our next question comes from Richard Shannon with Craig Hallum. Your line is open.

Richard Shannon: Hi, guys. Thanks for taking my questions as well.

Richard Shannon: You asked a question on the first quarter report here on gross margins specifically product gross margins is located here in my model here.

Richard Shannon: I'm calculating in the product revenue is about 47%, which is down a fair amount from 54, and it's moved around a bit over the last number of quarters here, how do we understand this dynamic here and do we expect it to settle out and where do we sit this 47% how is that relative to where you expect it to go say the rest of the year.

Bill Cooper: And how is that relative to where you expect it to go, say, the rest of the year?

Bill Cooper: Yeah, I don't think we get as granular as that in terms of, you know, where the where the gross margin is, Richard. But, you know, at the 51%, right, we see that it's, it's really consistent between Q4 and Q1. And I would, I would say you can kind of look for that consistency out, you know, 50, 50 plus percent gross margins through the rest of the year as well. Okay. Fair enough, then. Let's see here.

Richard Shannon: Yes.

Richard Shannon: Don't think we get as granular as that in terms of.

Richard Shannon: Where the gross margin as Richard.

Richard Shannon: But it's a 51% rate we see that it's really consistent between.

Q4 and Q1.

Richard Shannon: And I would say you can kind of look for that consistency out.

Richard Shannon: <unk> 50 plus percent gross margins.

Richard Shannon: Through the rest of the year as well.

Richard Shannon: Okay.

Richard Shannon: Fair enough.

Richard Shannon: I guess maybe I want to ask a question on a commentary about second half weighting. I know you've reiterated this from at least the last quarter or maybe more than that, but I wanted to hear the extent, and you kind of call it out as being largely seasonality-driven here, but I wondered if there's any other dynamics here that would help this weighting, particularly with new products, especially the newer ones you've brought out to market in the this is going to have any impact, and also adding to that on the licensing revenue bucket, whether you're seeing that kind of weighting as well.

Richard Shannon: Let's see here.

Richard Shannon: I guess, maybe I want to ask a question on the commentary about second half weighting I know you reiterated this from at least the last quarter and maybe maybe more than that but wanted to hear the.

Richard Shannon: It kind of call it out as being largely seasonality driven here, but wondering if there's any other dynamics here that would help this weighting, particularly with new products.

Richard Shannon: Especially the newer ones you brought out to market in the last year or so where this is going to have any impact.

Richard Shannon: And also adding to that on the kind of licensing.

Richard Shannon: Licensing revenue bucket, whether youre seeing that kind of waiting as well there.

Sanjeev Aggarwal: Yes, I would say, you know, definitely going to see some. you know, increase in the back half of the year. That's kind of our expectations again. Right. There's there's been, you know, some overhang and some of the folks are as they digest their inventory out in the various channels. So we expect to see that. Then, of course, we're starting to see some. We had good continued pickup in terms of just the PERSIST portfolio, and then as well, you know, seeing some additional traction on the on the STT products. And we, we, you know, that's the best visibility we have at the time.

Yes, I would say definitely going to see some.

Richard Shannon: Okay.

Richard Shannon: Increase in the back half of the year, that's kind of our expectations again right there has been.

Some overhang in some of the folks are as they digest there.

Richard Shannon: Inventory out in the various channels.

Richard Shannon: So we expect to see that and then of course, we're starting to see some.

Richard Shannon: We had good continued pickup in terms of just the <unk> portfolio, and then as well seeing some additional traction on that.

Richard Shannon: On the SC STD products and we.

Richard Shannon: That's the best visibility, we have at the time and I think.

Sanjeev Aggarwal: And I think, you know, also on the, on the licensing revenue as well, and existing DoD contract, we'll expect increase on those areas as well in the back half of the year. Yeah, just to add some color, Richard, over here, right? I mean, like Bill mentioned, we are seeing the bottom of the inventory correction, for lack of a better phrase. But basically, we are seeing our backlogs build up sooner than previous quarters. The behavior of last minute orders is becoming more prevalent. So, you'll see that we have actually baser comments based on that behavior from our customers.

Richard Shannon: Also on the on the licensing revenue as well in existing.

Richard Shannon: Jody contract will that we'll expect to see some.

Richard Shannon: The increase on those areas as well in the back half of the year.

Richard Shannon: Yes, just to add some color Richard over here.

Richard Shannon: <unk>.

Richard Shannon: Bill mentioned VR.

Richard Shannon: Seeing the bottom of the inventory correction for lack of a better phrase.

Richard Shannon: But basically we are seeing our backlogs.

Richard Shannon: Buildup sooner than previous quarters.

Richard Shannon: The behavior of last minute orders is becoming more prevalent.

Richard Shannon: So youll see that we are actually.

Richard Shannon: Based on our comments based on that behavior from our customers and also the SPD products of the X by interface that we brought to the market in 2022.

Richard Shannon: And also, the STD products with the XPI interface that we brought to the market in 2022. I think those are now basically converting from design wins into early production in the second half of 2025. So, I think those two factors is what's driving our comment on second half revenue being better than first half. Okay, that is helpful and good to hear as well.

Richard Shannon: Those are now basically.

Richard Shannon: Converting from design wins into early production in the second half of 2025. So I think those two factors is what's driving our comment on second half revenue being better than first half.

Richard Shannon: Okay.

Speaker Change: That's helpful and good to hear as well.

Sanjeev Aggarwal: Last two quick questions here and this is responding to Sanjeev, I think you're prepared remarks here talking about the other income bucket. And expect that to pick up in the second half of 25. Can you characterize or even quantify what you mean by that, Yeah, so I think like we had talked about earlier, this project was front loaded in Q4 of last year. So we did have a lot of milestones and expenses related to that and hours related to that. Q1 was slightly late, and I think going forward in Q2 onwards, I think the activity is going to increase again.

Quinn Bolton: Last two quick questions here and this is responding to Sanjiv I think your prepared remarks, you are talking about the other income bucket.

Quinn Bolton: And I expect that to pick up in the second half of 'twenty five can you characterize or even quantify what you mean by that please.

Quinn Bolton: Yes so.

Quinn Bolton: I think like we had talked about earlier. This project was front loaded in Q4 of last year. So we did have a lot of milestones then.

Quinn Bolton: Expenses related to that in hours related to that.

Quinn Bolton: Q1 was slightly late and I think going forward in Q2 onwards. So I think the activity is going to increase again.

Bill Cooper: Some of the some of the orders were placed for equipment. We're going to have some engineering hours associated with the bring up of that equipment. And in general, you know, we do have quarterly reports that are due for this project. So those are the hours and revenue that we would recognize in 2025. Okay, helpful.

Quinn Bolton: Some of the.

Quinn Bolton: Some of the orders were placed for equipment youre going to have some engineering hours or so being able to bring up on that equipment.

Quinn Bolton: In general.

Quinn Bolton: We do have quarterly reports that are due for this project. So those are the our then.

Quinn Bolton: Revenue that we recognized in 2025.

Bill Cooper: And one last quick question for for Bill here. I think I may have missed the commentary on the on the OPEX here was a bit higher than at least I had projected. I know you don't give guidance for that. But how should we look at this in the context of going throughout the rest of Yeah, good question, Richard. I think for on the OPEX side, you know, what we would expect to see is to kind of expect, we have mentioned last time that we were going to do some product development type work. And so I think you'll see, you know, some of that coming through as we go throughout the year.

Quinn Bolton: Okay helpful and one last quick question for Bill here again, maybe I missed the commentary on the on the Opex here was a bit higher than at least I had projected I know you don't give guidance for that but how should we look at this in the context and go on throughout the rest of the year.

Quinn Bolton: Yes.

Bill Cooper: Good question, Richard I think for on the Opex side.

Bill Cooper: What we would expect to see as to kind of expect we have mentioned last time that we were going to do some product development type work.

Bill Cooper: And so I think youll see.

Bill Cooper: Some of that coming through as we go throughout the year.

Operator: But generally, I think You're going to see OpEx we expect to kind of be in the same range, I would say, throughout the rest of the year. Okay, fair enough. That's very helpful. And that is all the questions for me. Thank you. Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. And I'm not showing any further questions at this time.

Bill Cooper: But generally I think.

Bill Cooper: Youre going to see Opex, we expect to.

Bill Cooper: No.

Bill Cooper: To kind of be in the same range I would say throughout the rest of the year.

Bill Cooper: Okay Fair enough, that's very helpful and that is all the questions for me. Thank you.

Speaker Change: Okay. Thanks Richard.

Speaker Change: Again, ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone.

Speaker Change: And I'm not showing any further questions at this time I'd like to turn the call back over to management for any closing remarks.

Sanjeev Aggarwal: I'd like to turn the call back over to management for any closing remarks. Yeah, I just want to say thank you to everyone for joining the call. And we'll talk to you again at the next earnings call in Q2. Thank you.

Speaker Change: Okay I just wanted to say thank you to everyone for joining the call and we will talk to you again at the.

Speaker Change: Next earnings call in Q2, thank you.

Operator: Bye.

Operator: Well, ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.

Speaker Change: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Unknown Executive: zeroShow.com Thank you for watching.

Speaker Change: Thank you.

Speaker Change: [music].