Q3 2026 Everspin Technologies Inc Earnings Call

October 28, 2026

Operator: Good afternoon, and welcome to Everspin Technologies' Q3 2026 financial results conference call. At this time, all participants are in a listen-only mode. At the conclusion of management's 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 Monica Gould, investor relations for Everspin.

Speaker #1: Good afternoon, and welcome to EVERSPIN TECHNOLOGIES Q4 2026 financial results conference call. At this time, all participants are in a listen-only mode. At the conclusion of management's prepared remarks, instructions will be provided.

Speaker #1: 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 Monica Gould, investor relations for EVERSPIN.

Monica Gould: Thank you, operator, and good afternoon, everyone. Everspin released results for the Q3 2026 ended 30 September 2026 this afternoon after market close. I am Monica Gould, 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 MRAM 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 statements.

Speaker #2: Thank you, operator, and good afternoon, everyone. EVERSPIN released results for the Q3 2026 ended September 30, 2026, this afternoon after market close. I'm Monica Gould, 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.

Speaker #2: 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.

Speaker #2: Customer and industry adoption of MRAM 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 statements.

Monica Gould: 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 statement 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 hereof, and are subject to further review by Everspin and its external auditors.

Speaker #2: 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.

Speaker #2: All forward-looking statements are made as of the date of this call and accept as required by law, the company undertakes no obligation to update or alter any forward-looking statement made on this call, whether as a result of new information, future events, or otherwise.

Speaker #2: The financial results discussed today reflect the company's preliminary estimates, are based on the information available as of the date hereof, and are subject to further review by Everspin and its external auditors.

Monica Gould: The company's actual results may differ materially from these 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. A copy of the press release is posted on the investor relations section of Everspin's website at www.everspin.com. Now I would like to turn the call over to Everspin's president and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Speaker #2: The company's actual results may differ materially from these 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.

Speaker #2: Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information, GAAP and non-GAAP terms.

Speaker #2: Included in the company's press release are definitions and reconciliations of gap net income, to non-gap net income, which provide additional details. A copy of the press releases posted on the investor relations section of EVERSPIN's website at www.everspin.com.

Speaker #2: And now, I'd like to turn the call over to EVERSPIN's president and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Sanjeev Aggarwal: Thank you, Monica, and thanks everyone for joining us on the call today. We are pleased to report Q3 revenue of $20.6 million and non-GAAP EPS of $0.12. These results reflect another record revenue quarter, the highest in Everspin's history, and at the high end of our guidance range, driven by strong product and non-product revenue growth. We recorded strong product revenue growth, which rose 34% year-over-year and was up 11% sequentially. This growth was driven by strength in industrial automation, data center, medical, and energy management applications. Growth in industrial automation was led by a continued recovery in customer demand, particularly in Japan. In the data center market, we saw strong demand for RAID storage configurations, while energy management benefited from the transition of new design wins to shipments in Europe.

Speaker #3: Thank you, Monica, and thanks, everyone, for joining us on the call today. We are pleased to report Q4 revenue of $20.6 million and non-gap EPS of $0.12.

Speaker #3: These results reflect another record revenue quarter: the highest in EVERSPIN's history and at the high end of our guidance range. Driven by strong product and non-product revenue growth.

Speaker #3: We recorded strong product revenue growth, which rose 34% year over year and was up 11% sequentially. This growth was driven by strength in industrial automation, data center, medical, and energy management applications.

Speaker #3: Growth in industrial automation was led by a continued recovery in customer demand, particularly in Japan. In the data center market, we saw strong demand for rate storage configurations while energy management benefited from the transition of new design wins to shipments in Europe.

Sanjeev Aggarwal: We have not discussed MRAM's role in medical applications in much detail before, so I would like to offer some additional perspective. Everspin MRAM is increasingly used in medical applications that demand high reliability, data retention during power loss, and endurance under continuous operation. MRAM's non-volatility, high speed, and inherent endurance make it ideal for use in life-critical systems where memory failure is unacceptable. Medical devices most commonly using Everspin MRAM include both patient-critical equipment and diagnostic instruments. For example, in dialysis machines, MRAM records operational and sensor data such as pressure, flow rate, and alarms. In infusion pumps and portable diagnostic devices, MRAM stores calibration data, dosing logs, and firmware states. In defibrillators and patient monitors, MRAM retains event history, shock delivery data, and configuration settings. We continue to make steady progress on our project with Microchip to build MRAM capabilities in their Gresham, Oregon fab.

Speaker #3: We have not discussed MRAM's role in medical applications in much detail before. So I would like to offer some additional perspective. EVERSPIN MRAM is increasingly used in medical applications that demand high reliability, data retention during power loss, and endurance under continuous operation.

Speaker #3: MRAM's non-volatility high speed and inherent endurance make it ideal for use in life-critical systems where memory failure is unacceptable. Medical devices most commonly using EVERSPIN MRAM include both patient critical equipment and diagnostic instruments.

Speaker #3: For example, in dialysis machines, MRAM records operational and sensor data such as pressure, flow rate, and alarms. In infusion pumps and portable diagnostic services, devices MRAM stores calibration data, dosing logs, and firmware states.

Speaker #3: And in defibrillators and patient monitors, MRAM retains event histories, shock delivery data, and configuration settings. We continue to make steady progress on our project with Microchip to build MRAM capabilities in the Aggression, Oregon fab.

Sanjeev Aggarwal: Process development and transfer activities are ongoing, including the tape-out of masks for products. We remain on schedule with our goal of delivering first qualified silicon for our Toggle and sensor products by H2 2027, and STT products by H1 2028. Turning to some of our recent development efforts. We remain on track to have a 256 megabit xSPI prototype based on TSMC's 16 nanometer FinFET process technology in H1 2027. This prototype will verify our design and put us on the path to designing high-density UNISYST, unified code and data memory products later in the year and beyond. 256 megabit xSPI will be the first product in our UNISYST family, which will then be expanded to include 1 gigabit, 2 gigabit, and 8 gigabit densities.

Speaker #3: Process development and transfer activities are ongoing, including the tape-out of masks for products. We remain on schedule with our goal of delivering first qualified silicon for our toggle and sensor products by the second half of 2027 and STT products by the first half of 2028.

Speaker #3: Turning to some of our recent development efforts, we remain on track to have a 256-megabit X5 prototype based on TSMC's 16-nanometer FinFET process technology in the first half of 2027.

Speaker #3: This prototype will verify our design and put us on the path to designing high-density UNISYST, Unified Code and Data Memory, products later in the year and beyond.

Speaker #3: 256-megabit X5 will be the first product in our UNISYST family which will then be expanded to include 1 gigabit, 2 gigabit, and 8 gigabit densities.

Sanjeev Aggarwal: These products will be deployed in low Earth orbit satellites for secure boot memory, FPGA for configuration memory, and flight control systems for fast data logging and security, for example. Our momentum with customers designing our PERSYST Toggle and STT-MRAM into space-based missions continues with both new design wins and existing design wins, continuing their progress into production. To further accelerate the adoption of Everspin's MRAM in the aerospace and defense segment, we recently signed a strategic partnership with Teledyne HiRel semiconductor business unit. Through the partnership, Teledyne HiRel will offer our 64 megabit, 128 megabit, and 256 megabit PERSYST STT-MRAM solutions as part of its memory products portfolio for military and aerospace customers. We target applications such as avionics, VPX and single-board computer platforms, radar and electronic warfare payloads, satellite electronics, and autonomous systems.

Speaker #3: These products will be deployed in low-earth orbit satellites for secure boot memory, FPGA for configuration memory, and flight control systems for fast data logging and security for example.

Speaker #3: Our momentum with customers designing our Persist Toggle and STT MRAM into space-based missions continues, with both new design wins and existing design wins progressing into production.

Speaker #3: To further accelerate the adoption of EVERSPIN's MRAM in the aerospace and defense segment, we recently signed a strategic partnership with Teledyne's HiRel semiconductor business unit.

Speaker #3: Through the partnership, Teledyne High Rel will offer our 64-megabit, 128-megabit, and 256-megabit persistent STT MRAM solutions as part of its memory products portfolio for military and aerospace customers.

Speaker #3: We target applications such as avionics, VPX and single board computer platforms, radar and electronic warfare payloads, satellite electronics, and autonomous systems. Last quarter, we discussed our strategy to expand our addressable market in the data center segment by developing products based on the Computer Express Link, or CXL, interface over the next few years.

Sanjeev Aggarwal: Last quarter, we discussed our strategy to expand our addressable market in the data center segment by developing products based on the Compute Express Link, or CXL, interface over the next few years. To further efforts on this front, Everspin successfully demonstrated the world's first CXL-connected MRAM at the Storage Networking Industry Association developer conference in September. CXL MRAM combines standard high-speed connectivity with MRAM's persistence. This solution creates a fast, persistent buffer, so data remains available through a power interruption or system restart without relying on battery-backed DRAM or having to first flush data to an SSD. Further, a CXL MRAM solution enables nanosecond class cache and writes up to 100x faster than NAND-based solid-state storage. A key use for this application is to hold data generated during AI processing before transferring it to long-term storage.

Speaker #3: To further our efforts on this front, Everspin successfully demonstrated the world's first CXL-connected MRAM at the Storage Networking Industry Association Developer Conference in September.

Speaker #3: CXL MRAM combines standard high-speed connectivity with MRAM's persistent. This solution creates a fast persistent buffer so data remains available through a power interruption or system restart without relying on battery-backed DRAM or having to first flush data to an SSD.

Speaker #3: Further, a CXL MRAM solution enables nanosecond-class cache and writes up to 100x faster than NAND-based solid-state storage. A key use for this application is to hold data generated during AI processing before transferring it to long-term storage.

Sanjeev Aggarwal: Other potential use cases include financial and algorithmic trading systems and in-memory databases, such as online transaction processing or OLTP and online analytical processing or OLAP. Each of these use cases will benefit from CXL MRAM's strong value proposition in small block or low latency write. We continue to explore ways to expand Everspin's market opportunity. To this end, Everspin led the effort to form a LPDDR persistent memory task group at JEDEC, the standards-setting organization for the semiconductor industry, during their August committee meeting, and our Vice President of Corporate Strategy, Steffen Hellmold, is serving as the task group chair. This effort responds to strong industry demand for persistent memory solutions that can leverage the existing LPDDR ecosystem, thus creating a simpler path for system-level integration and ultimately easing the adoption of MRAM.

Speaker #3: Other potential use cases include financial and algorithmic trading systems, and in-memory databases, such as online transaction processing, or OLTP, and online analytical processing, or OLAP.

Speaker #3: Each of these use cases will benefit from CXL MRAM's strong value proposition in small block or low-latency write. We continue to explore ways to expand Everspin's market opportunity to this end.

Speaker #3: EVERSPIN led the effort to form a LPDDR persistent memory task group at JEDEC JEDEC the standards setting organization for the semiconductor industry during their August committee meeting.

Speaker #3: And our VP of Corporate Strategy, Stephen Helmold, is serving as the task group chair. This effort responds to strong industry demand for persistent memory solutions that can leverage the existing LPDDR ecosystem.

Speaker #3: Thus creating a simpler path for system-level integration and ultimately easing the adoption of MRAM. The work is intended to enable controller support for both DRAM and persistent memory, as well as approaches that enable LPDDR DRAM and persistent memory from multiple vendors to operate within compatible system architectures.

Sanjeev Aggarwal: The work is intended to enable controller support for both DRAM and persistent memory, as well as approaches that enable LPDDR, DRAM, and persistent memory from multiple vendors to operate within compatible system architectures. Potential customers range from edge, IoT wearable, mobile, enterprise to data center, and hyperscale CSP markets. In closing, we remain focused on executing against our priorities, advancing our technology roadmap, and delivering value for our customers and shareholders. We believe our technology, customer relationships, and disciplined approach to execution position us well to capitalize on the opportunities ahead. I want to thank our customers for their continued trust and our employees for their commitment and hard work. I will now turn it over to our CFO, Bill Cooper, who will walk you through our Q3 financials and Q4 2026 guidance. Bill?

Speaker #3: Potential customers range from edge, IoT wearable, mobile, enterprise to data center, and hyperscale CSP markets. In closing, we remain focused on executing against our priorities.

Speaker #3: Advancing our technology roadmap and delivering value for our customers and shareholders. We believe our technology, customer relationships, and disciplined approach to execution position us well to capitalize on the opportunities ahead.

Speaker #3: I want to thank our customers for their continued trust and our employees for their commitment and hard work. I will now turn it over to our CFO, Bill Cooper, who will walk you through our third quarter financials and fourth quarter 2026 guidance.

Speaker #3: Bill?

Bill Cooper: Thank you, Sanjeev. During the Q3, we delivered record revenue of $20.6 million, up 47% year-on-year, slightly exceeding our guidance range of $19.5 million to $20.5 million, driven primarily by strong product revenue growth. MRAM product sales, which include both Toggle and STT MRAM revenue, were $16.9 million, an increase of 34% over the Q3 of the prior year and up 11% sequentially. Licensing, royalty, engineering services, and other revenue increased to $3.7 million from $1.4 million in Q3 2025, primarily due to continued revenue recognition on our $40 million subcontract agreement with a US prime contractor. Our GAAP gross margins of 51.4% were consistent when compared to 51.3% in the Q3 of 2025. A more favorable mix of high-margin non-product revenue was offset by higher manufacturing and production costs, which impacted product gross margins in the current quarter.

Speaker #2: Thank you, Sanjeev. During the third quarter, we delivered record revenue of $20.6 million, up 47% year on year, slightly exceeding our guidance range of $19.5 million to $20.5 million.

Speaker #2: Driven primarily by strong product revenue growth. MRAM product sales, which include both toggle and STT MRAM revenue, were $16.9 million, an increase of 34% over the third quarter of the prior year, and up 11% sequentially.

Speaker #2: Licensing, royalty, engineering services, and other revenue increased to $3.7 million from $1.4 million in Q3 '25, primarily due to continued revenue recognition on our $40 million subcontract agreement with a U.S. prime contractor.

Speaker #2: Our gap gross margins of $51.4% were consistent when compared to $51.3% in the third quarter of 2025. A more favorable mix of high-margin nonproduct revenue was offset by higher manufacturing and production costs which impacted product gross margins in the current quarter.

Bill Cooper: To counter rising input costs, we began to institute pricing increases in Q4 and expect product margins to improve sequentially. We continue to target long-term gross margins above 50%. GAAP operating expenses were $18.5 million, up from $8.8 million in Q3 2025. The increase was primarily driven by litigation costs of $6 million. Non-GAAP operating expenses of $8.5 million increased 13% from $7.5 million in the prior year Q3, driven by increased spending on customer engagement and marketing initiatives. These investments are intended to strengthen customer relationships, expand our market presence, and support our long-term revenue growth objectives. Other income remained steady at $0.4 million as our $14.6 million contract with the DoD contractor continues to wind down. We recorded Q3 non-GAAP net income of $3.1 million or $0.12 per diluted share based on 24.4 million weighted average diluted shares outstanding.

Speaker #2: To counter rising input costs, we began to institute pricing increases in the fourth quarter and expect product margins to improve sequentially. We continue to target long-term gross margins above 50%.

Speaker #2: Gap operating expenses were $18.5 million, up from $8.8 million in the third quarter of 2025. The increase was primarily driven by litigation costs of $6 million.

Speaker #2: Non-gap operating expenses of $8.5 million increased 13% from $7.5 million in the prior year, third quarter, driven by increased spending on customer engagement and marketing initiatives.

Speaker #2: These investments are intended to strengthen customer relationships, expand our market presence, and support our long-term revenue growth objectives. Other income remained steady at $0.4 million, as our $14.6 million contract with the DOD contractor continues to wind down.

Speaker #2: We recorded third-quarter non-GAAP net income of $3.1 million, or $0.12 per diluted share, based on 24.4 million weighted average diluted shares outstanding. This was within our guidance range of non-GAAP net income of $0.10 to $0.15 per share, in comparison to non-GAAP net income of $1.5 million, or $0.06 per share, in the third quarter of 2025.

Bill Cooper: This was within our guidance range of non-GAAP net income of $0.10 to $0.15 per share and compares to non-GAAP net income of $1.5 million or $0.06 per share in Q3 2025. Our reported non-GAAP results exclude the impact of stock-based compensation, litigation expenses, and regulatory provisions. Our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $43 million, down $2 million from $45 million at the end of the prior quarter. Cash flow generated from operations increased to $0.9 million for Q3, up from $0.2 million in Q2. Turning to guidance. We expect Q4 total revenue to be in the range of $21.5 million to $22.5 million and GAAP results per fully diluted share to be between a net loss of $0.08 to $0.13 per share.

Speaker #2: Our reported non-gap results exclude the impact of stock-based compensation, litigation expenses, and regulatory provisions. Our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $43 million, down $2 million from $45 million at the end of the prior quarter.

Speaker #2: Cash flow generated from operations increased to $0.9 million for the third quarter, up from $0.2 million in the second quarter. Turning to guidance. We expect Q4 total revenue to be in the range of $21.5 million to $22.5 million, and gap results per fully diluted share to be between a net loss of $8 to $0.13 per share.

Bill Cooper: On a non-GAAP basis, we anticipate earnings between $0.13 to $0.18 per fully diluted share. These non-GAAP figures exclude the impact of litigation costs, NRE related to the Microchip MRAM line, and stock-based compensation expense. In summary, we are pleased with our continued solid execution and performance on our core business and remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue. Operator, you may now open the line for questions.

Speaker #2: On a non-GAAP basis, we anticipate earnings between $0.13 to $0.18 per fully diluted share. These non-GAAP figures exclude the impact of litigation costs and related expenses to the MRAM line, as well as stock-based compensation expense.

Speaker #2: In summary, we are pleased with our continued solid execution and performance in our core business, and remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue.

Speaker #2: Operator, you may now open the line for questions.

Operator: Thank you. As a reminder, to ask a question, simply press star 1 1 to get in the queue and wait for your name to be announced. To withdraw your name from the queue, press star 1 1 again. One moment for our first question. It comes from Neil Young with Needham and Company. Please proceed.

Speaker #1: Thank you. And as a reminder, to ask a question, simply press *11 to get in the queue and wait for your name to be announced.

Speaker #1: To withdraw your name from the queue, press star 11 again. One moment for our first question—it comes from Neil Young with Needham and Company. Please proceed.

Neil Young: Hey guys, thanks for letting me ask a question. My first question, I wanted to ask on litigation costs. It looks like they stepped up in the quarter. I was hoping maybe you could discuss what the cost assumption is embedded into the Q4 2026 guide. Then, maybe if possible, could you discuss OpEx directionally as a whole as we start to look into next year? Then I have a follow-up.

Speaker #3: Hey, guys. Thanks for letting me ask a question. My first question, I wanted to ask on litigation costs. So it looks like they stepped up in the quarter.

Speaker #3: I was hoping maybe you could discuss what the cost assumption is that's embedded in the 4Q26 guide. And then, if possible, could you discuss OPEX directionally as a whole as we start to look into next year?

Speaker #3: And then I have a follow-up.

Bill Cooper: Yeah. Hey, Neil. Yeah, good question. I think, what we've seen obviously is an uptick in the litigation costs in Q3. What I would say is in Q4, we expect to see some still fairly substantial costs. I would expect that it is going to be slightly lower than what we saw in Q3. Then, as we look forward in 2027, one of the things we did want to stress is, this matter will go to the ALJ at the end of this year. Then as we move and look forward into 2027, those litigation expenses should reduce significantly.

Speaker #2: Yeah. Hey, Neil. Yeah, good question. I think what we've seen obviously is an uptick in the litigation costs in Q3. What I would say is in Q4, we expect to see some still fairly substantial costs I would expect that it is going to be slightly lower.

Speaker #2: Then what we saw in Q3, and then as we look forward in 2027, one of the things we did want to stress is this matter will go to the ALJ at the end of this year, and then as we move and look forward into 2027, those litigation expenses should reduce significantly.

Neil Young: Great. Thanks. Then, my last one. You provided some color on product sales by end market this quarter. That was very helpful. But specifically, I was curious in learning more about the new data center wins in Europe you mentioned. Any more detail you could provide there would be great. Thank you.

Speaker #3: Great. Thanks. And then my last one. So you provided some color on product sales by end market this quarter. That's very helpful. But specifically, I was curious in learning more about the new data center wins in Europe.

Speaker #3: You mentioned so any more detail you could provide there would be great. Thank you.

Sanjeev Aggarwal: Yeah. Hi, Neil. Thank you for that question. The RAID storage configuration that we're basically talking about is the journal memory, and these are mostly with the hyperscalers like Google, Amazon, NXP, those kind of design wins, which are basically what we've seen in Q2 and Q1 of this year as well. As far as the shipments in Europe, these are mostly related to the energy management applications that have actually turned in from design wins to production in this quarter.

Speaker #2: Yeah. So the hi, Neil. Thank you for that question. The rate storage configuration that we're basically talking about is the journal memory, and these are mostly with the hyperscalers like Google, Amazon, NXP, those kind of design wins which are basically what we've seen in Q2 and Q1 of this year as well.

Speaker #2: And as far as the shipments in Europe, these are mostly related to the energy management applications that have actually turned in from design wins to production in this quarter.

Neil Young: Great. Thank you.

Speaker #3: Great. Thank you.

Sanjeev Aggarwal: Sure.

Speaker #2: Sure.

Operator: Thank you. Our next question comes from Jack Vander Aarde with Maxim Group. Please proceed.

Speaker #1: Thank you. Our next question comes from Jack van der Aarde with Maxim Group. Please proceed.

Jack Vander Aarde: Okay, great. Good evening. Thanks for taking my questions and good to see the solid revenue growth as well as solid outlook. Sanjeev, maybe a quick question for you. Just in overall, you mentioned the design wins kind of across a few of your key segments, and how those are ramping up. I would like to get just a sense of, I am not sure if you have this on hand, but I think last year you had over 238 design wins or something like that, pretty close to that number, which are up from the prior year as well. For design wins overall, just tracking this year, are they up overall? Do you have a good sense of that? And just sort of the size and scope of those opportunities.

Speaker #3: Okay, great. Good evening. Thanks for taking my questions, and good to see the solid revenue growth as well as solid outlook. Sanjeev, maybe a quick question for you.

Speaker #3: Just in overall, you mentioned the design wins kind of across a few of your key segments. And how those are ramping up. I'd like to get just a sense of I'm not sure if you have this on hand, but I think last year you had over 238 design wins or something like that in the close to that number, which are up from the prior year as well.

Speaker #3: For design wins overall, just tracking this year, are they up overall? Can you give a sense of that, and sort of the size and scope of those opportunities?

Sanjeev Aggarwal: Yeah. Hi, Jack. Good question. We usually report our annual design wins at the end of the year in our 10-K. But I think a good indication is the product revenue growth that you are seeing quarter-over-quarter and also year-over-year. That basically indicates the number of design wins that we have been able to turn into production and the new design wins that we are seeing. I do not have a number to give you, but obviously they are going up into the north. Sorry, up into the right.

Speaker #2: Yeah. Hi, Jack. Good question. So we usually report our annual design wins at the end of the year in our 10K. But I think a good indication is the product revenue growth that you're seeing quarter over quarter and also year over year.

Speaker #2: That basically indicates the number of design wins that we've been able to turn into production and the new design wins that we're seeing. So I don't have a number to give you, but obviously they're going up into the north.

Speaker #2: Sorry, up into the right.

Jack Vander Aarde: And maybe just a follow-up, too. Across your verticals that you highlighted, definitely spent a lot of time on defense and data center, and then also across some of these newer, like medical as well actually. Just what are some of the segments here, though, or end market verticals that you see actual potential, maybe exciting upside relative to your original thoughts? Where do you see some of the greatest upside potential relative to your plan over the next few years? Then I will have a follow-up for Bill.

Speaker #3: And maybe just a follow-up too. Across your verticals that you highlighted, definitely spent a lot of time on defense and data center and then also across some of these newer medical as well, actually.

Speaker #3: Just what are some of the segments here, though, or end market verticals that you see actual potential maybe exciting upside relative to your original thoughts?

Speaker #3: Where do you see some of the greatest upside potential relative to your plan over the next few years? And then I'll have a follow-up for Bill.

Sanjeev Aggarwal: Sure. So I would say, Jack, that I am most excited about the low Earth orbit satellite in the aerospace and defense industry. We are also seeing a lot of traction in the data center market. Those are the 2 segments that are growing pretty rapidly, closely followed by industrial automation in general across the world, Japan as well as Europe.

Speaker #2: Sure. So I would say, Jack, that I'm most excited about the low Earth orbit satellite. In the aerospace and defense industry, we're also seeing a lot of traction in the data center market.

Speaker #2: Those are the two segments that are growing pretty rapidly closely followed by industrial automation, in general, across the world. Japan as well as Europe.

Jack Vander Aarde: Fantastic. One more question from me for Bill. From a segment perspective, licensing, engineering and other revenues ticked up strongly as expected from the recent contract. That was good to see. But what I noticed is that the gross margin in that segment also stayed relatively stable, very strong, close to that 90%. Is that sort of a reasonable expectation going forward? Or just wondering how much visibility you have, given this new revenue stream.

Speaker #3: Fantastic. One more question from me, for Bill. From a segment perspective, licensing, engineering, and other revenues ticked up strongly as expected. From the recent contract, it was good to see.

Speaker #3: But what I noticed is that the gross margin in that segment also stayed relatively stable—very strong, close to that 90%. Is that sort of a reasonable expectation going forward, or I’m just wondering how much visibility you have, given these new revenue streams?

Bill Cooper: Yeah. Hey, Jack. Thanks for the question. What I would say is, that area, the licensing, royalty engineering services, that really is a high margin area for us. Typically, we certainly expect it to be, again, fairly high margin, so you can kind of think of it in terms of the 70%, 80%, up to 90% range. Certainly, again, it depends on a number of factors, depending on whether it is royalty or foundry services or licensing or engineering services. That mix of that really drives the margin, but again, it will be high margin area.

Speaker #2: Yeah. Hey, Jack. Thanks for the question. What I would say is that area, the licensing royalty engineering services, that really is a high margin area for us.

Speaker #2: Typically, we certainly expect it to be again, fairly high margin. So you can kind of think of it in terms of the 70, 80 up to 90% range.

Speaker #2: Certainly, again, it depends on a number of factors depending on whether it's royalty or foundry services or licensing or engineering services. That's really what that mix of that really drives the margin.

Speaker #2: But again, it'll be high margin area.

Jack Vander Aarde: Okay, understood. I appreciate the time, guys, and congrats again on the results. Thanks.

Speaker #3: Okay. Understood. I appreciate the time, guys, and congrats again on the results. Thanks.

Bill Cooper: Yeah, thank you, Jack. Appreciate that.

Speaker #2: Yeah, thank you, Jack. I appreciate that.

Operator: Thank you. Our next question comes from Richard Shannon with Craig-Hallum Capital Group. Please proceed.

Speaker #1: Thank you. Our next question comes from Richard Shannon with Craig Hallam Capital Group. Please proceed.

Richard Shannon: Great. Thanks, Sanjeev and Bill for taking my questions. First one I want to ask about is on gross margins and specifically product gross margins here. Bill, I think you mentioned in regards to the Q3

Speaker #2: Great, thanks Sanjeev and Bill for taking my questions. The first one I want to ask about is on gross margins—specifically, product gross margins here.

Speaker #2: So Bill, I think you mentioned in regards to the third quarter margins, that you had a positive mix, offset by some manufacturing costs here.

Richard Shannon: margins that you had a positive mix offset by some manufacturing costs here. I wonder if you could help us understand both of those dynamics here. Is the mix here product or end market or geography related? What are these manufacturing costs, and what is the sustainability of that dynamic? Thank you.

Speaker #2: I wonder if you could help us understand both of those dynamics here. Is the mix here product or end market or geography related? And then what do these manufacturing costs and what's the sustainability of that dynamic?

Speaker #2: Thank you.

Bill Cooper: Yes. What I would say is, Richard, we definitely saw some challenges or some small reduction, a couple of points there lower in terms of the product margins. We had signaled, right, that we were going to continue to see some product headwinds in terms of the cost, right? Materials and services cost. Obviously there is a lot of pieces that go into that bucket. We recognize that, right? We had seen it coming, and for that reason, we instituted a price increase in Q4 as well. We continue to see a good product and non-product revenue mix. I think really we were trying to indicate that, again, those headwinds are really confined to the product side of the equation.

Speaker #3: Yes. So what I would say is, Richard definitely saw some challenges, or some small reduction—a couple of points lower—in terms of the product margins.

Speaker #3: And we had signaled, right, that we were going to see some continue to see some product headwinds in terms of the cost, right, materials and services costs.

Speaker #3: And obviously, there's a lot of pieces that go into that bucket. And we recognize that, right? We had seen it coming. And for that reason, we instituted a price increase in Q4 as well.

Speaker #3: We continue to see a good product and non-product revenue mix. I think really we were trying to indicate that, again, those headwinds are really confined to the product side of the equation.

Richard Shannon: Okay. That is helpful here. A very quick question here. You mentioned a regulatory provision. Can you explain what this is, where this comes from? There is no other context here, so help us understand this one, please.

Speaker #2: Okay. That is helpful here. A very quick question here. You mentioned a regulatory provision. Can you explain what this is? Where does this come from?

Speaker #2: There's no other context here, so help us understand this one, please.

Bill Cooper: Right. Yeah. Good question. On that one, we actually have a fine that is related to export controls from BIS, a government agency within the Department of Commerce. We took that particular provision, in anticipation of settling that particular fine agreement. It is not settled yet, but that is our best estimate today of what we expect to close it out at.

Speaker #3: Right. Right. Yeah. Good question. So on that one, we actually have a fine that's related to export controls. From BIS, a government agency within the Department of Commerce.

Speaker #3: And so we took that particular provision in anticipation of settling that particular fine agreement. It's not settled yet, but that's our best estimate today.

Speaker #3: What we expect to close it out at.

Richard Shannon: Okay. Fair enough then. Let's see here. Maybe looking forward, a question for Sanjeev, looking forward to the opportunity to compete against the, into the NOR flash space here with some products coming to market next year. Noticed that Infineon sold its memory businesses, including NOR flash, to, I think, an Asian supplier here. Within that context here, as well as what we have seen with some NOR flash guys who are moving their capacity towards DRAM, maybe you can talk about the changing dynamics within NOR flash and how, if anything, might your strategies change to enter that market next year.

Speaker #2: Okay. Fair enough, then. Let's see here. Maybe kind of looking forward, a question for Sanjeev, looking forward to the opportunity to compete against the into the Northlash space here with some products coming to market next year.

Speaker #2: Notice that Infineon sold its memory businesses, including Northlash to, I think, an Asian supplier here. Within that context here, as well as what we've seen with some Northlash guys who are moving their capacity towards DRAM, maybe you can talk about the changing dynamics within Northlash and how, if anything, might your strategies change to enter that market next year.

Sanjeev Aggarwal: Yeah, good question, Richard. We are seeing the same thing, or we are hearing the same thing, I guess. That many of the fabs are converting their NOR flash capacity into DRAM, which is creating a challenge for the NOR flash capacity or availability. Based on that, we are seeing our distributors actually ask for MRAM parts that would actually replace NOR flash. We are starting to see traction over there, and I think you are seeing some of that revenue roll into our reported revenue for Q3 as well. I think we are in the right place and we have the right parts. I think it is good news even for the UNISYST part, the prototype that is coming out in Q1 of 2027 and the follow-on product later in the year. I think it will be well positioned for addressing the high-density NOR flash market as well.

Speaker #3: Yeah. Good question, Richard. And we are seeing the same thing or we are hearing the same thing, I guess, that many of the fabs are converting their Northlash capacity into DRAM.

Speaker #3: This is creating a challenge for the Northlash capacity or availability. And based on that, we are seeing our distributors actually ask for MRAM parts that would replace Northlash.

Speaker #3: And we're starting to see traction over there. And I think you're seeing some of that revenue roll into our reported revenue for Q3 as well.

Speaker #3: So I think we are all in the we are in the right place. And we have the right parts. So I think it's good news even for the UNISYS part, the prototype that's coming out in Q1 of '27, and the follow-on product later in the year.

Speaker #3: So I think it'll be well positioned for addressing the high-density Northlash market as well.

Richard Shannon: Mm-hmm. Sanjeev, any way that you would offer to quantify how much of your products that you think could be because distributors are looking to replace NOR flash they cannot find?

Speaker #2: Sanjeev, any way that you'd offer to quantify how much of your products that you think could be because distributors are looking to replace Northlash, they can't find?

Sanjeev Aggarwal: I don't think it is significant or material yet, but we do see a traction where it could become significant in Q4 and Q1.

Speaker #3: I don't think it's a significant or material yet. But we do see traction where it could become a significant in Q4 and Q1.

Richard Shannon: Okay. Is that baked into your revenue guide for this Q4?

Speaker #2: Okay. Is that baked into your revenue guide for this fourth quarter?

Sanjeev Aggarwal: It is, yes.

Speaker #3: It is. Yes.

Richard Shannon: Okay. Any way you would try to quantify that for us?

Speaker #2: Okay. Any way you'd try to quantify that for us?

Sanjeev Aggarwal: We have typically not done that, so let me get back to you on that one.

Speaker #3: We've typically not done that. So let me get back to you on that one.

Richard Shannon: Okay. Fair enough. I think that's all for me. Thank you.

Speaker #2: Okay. Fair enough. I think that's all for me. Thank you.

Sanjeev Aggarwal: Thank you, Richard.

Speaker #3: Thank you, Richard.

Operator: Thank you so much. As a reminder, to ask a question, simply press star one one to get in the queue. Our next question is from Josh Sullivan with JonesTrading.

Speaker #1: Thank you so much. And as a reminder, to ask your question, simply press star 11 to get in the queue. Our next question is from Josh Sullivan with Jones Trading.

Josh Sullivan: Okay.

Josh Sullivan: Please proceed.

Speaker #1: Please proceed.

Josh Sullivan: Hey, good evening.

Speaker #2: Hey, good evening. I just wanted to just wanted to check in how the CXL MRAM presentation at SAM went and how the customer response has been so far.

Bill Cooper: Hey, Josh.

Josh Sullivan: Just wanted to check in how the CXL MRAM presentation at SNIA went and how the customer response has been so far.

Sanjeev Aggarwal: Yeah, thank you for that question, Josh. The demo at CXL went actually very well. We were one of several demo tables over there, and I would say that we had visitors all day long for 2 days. Then we had several customers that actually were repeat, trying to understand the application and the use. Since then, we've actually had several follow-on discussions, trying to identify use cases. We obviously don't have anything yet, but we're hoping that we will have something identified here in Q4 or Q1. So a very positive response. Very well understood that bringing persistence to the solution is very important, and the fact that you can actually connect it to a CXL bus and not worry about compatibility was a huge win and success for us.

Sanjeev Aggarwal: Yeah, thank you for that question, Josh. The demo at CXL went actually very well. We were one of several demo tables over there, and I would say that we had visitors all day long for two days. Then we had several customers that actually were repeat, trying to understand the application and the use. Since then, we've actually had several follow-on discussions, trying to identify use cases. We obviously don't have anything yet, but we're hoping that we will have something identified here in Q4 or Q1. So a very positive response. Very well understood that bringing persistence to the solution is very important, and the fact that you can actually connect it to a CXL bus and not worry about compatibility was a huge win and success for us.

Speaker #3: Yeah. Thank you for that question, Josh. Yeah. The demo at CXL went actually very well. We were one of several demo tables over there.

Speaker #3: And I would say that we had visitors all day long or all day long for two days. And then we had several customers that actually were repeat trying to understand the application and the use.

Speaker #3: So since then, we've actually had several follow-on discussions, trying to identify use cases. We obviously don't have anything yet. But we're hoping that we will have something identified here in Q4 or Q1.

Speaker #3: So very, very positive response. Very well understood that bringing persistence to the solution is very important. And the fact that you can actually connect it to a CXL bus and not worry about compatibility was a huge win and success for us.

Josh Sullivan: All right. On the JEDEC task group, what is the timeline for setting standards or those conversations to maybe translating into revenues for you guys or at least something that is observable?

Speaker #2: And then on the JEDEC task group, what's the timeline for kind of setting standards? Are those conversations to maybe translating into revenues for you guys?

Speaker #2: Or at least something that's observable?

Sanjeev Aggarwal: Yeah. The JEDEC group is basically the standards group for the Electronic Devices Council, and that typically takes about 18 to 24 months to set the standard. So we expect that we will probably reach some kind of agreement with all the participants over the next 12 to 15 months, and that will probably take another quarter for that spec to get published. Our goal is to start the design early next year so that we are actually ready to intersect when this spec is actually published. So 6 months later, hopefully we will have samples on hand, which would be an LPDDR6 MRAM that we can then start sampling with our customers. So what I would say is samples by the end of 2028, early revenue in 2029.

Speaker #3: Yeah. So the JEDEC group is basically the standards group for the Electronic Devices Council, and that typically takes about 18 to 24 months to set the standard.

Speaker #3: So, we expect that we would probably reach some kind of agreement with all the participants over the next 12 to 15 months, and then we'll probably take another quarter for that spec to get published.

Speaker #3: And our goal is to start the design early next year, so that we are actually ready to intersect when this spec is actually published.

Speaker #3: So, six months later, hopefully, we'll have samples on hand—which would be an LPDDR6 MRAM—that we can then start sampling with our customers.

Speaker #3: So what I would say is samples by the end of '28, revenue sometime early revenue in '29.

Josh Sullivan: Okay, got it. You highlighted the medical market, an area you have not typically talked about. Why now? What is it that is driving that market? I think you had mentioned that the memory shortage is not necessarily driving sales, at least right now. But curious why the medical market at this point in time is becoming something to highlight.

Speaker #2: Okay, got it. And then you highlighted the medical market, an area you haven't typically talked about. Why now? What is it that's driving that market?

Speaker #2: I think you had mentioned that the memory shortage isn't necessarily driving sales at least right now. But curious why the medical market at this point in time is becoming something to highlight.

Sanjeev Aggarwal: Yeah. Basically, we saw a significant uptick in our product revenue in that segment. So there are some new design wins that we are seeing over there and also some more pull from our customers, and that is the reason why we highlighted it in the prepared remarks today.

Speaker #3: Yeah, basically, we saw a significant uptick in our product revenue in that segment. There are some new design wins that we're seeing over there, and also some more pull from our customers.

Speaker #3: And that's the reason why we highlighted it in the prepared remarks today.

Josh Sullivan: Okay, I'll leave it there. Thank you.

Speaker #2: Okay, I'll leave it there. Thank you.

Sanjeev Aggarwal: Thank you, Josh.

Speaker #3: Thank you, Josh.

Operator: Thank you. This concludes our Q&A session. I will pass the call back to Sanjeev Aggarwal for closing remarks.

Speaker #1: Thank you. And this concludes our Q&A session. I will pass the call back to Sanjeev Aggarwal for closing remarks.

Sanjeev Aggarwal: Thank you everyone for joining the call today. Really appreciate your time and look forward to our next call, which will be in February sometime. Thank you.

Speaker #3: Thank you, everyone, for joining the call today. I really appreciate your time. And look forward to our next call, which would be in February sometime.

Speaker #3: Thank you.

Operator: Concludes our conference. Thank you for participating and you may now disconnect.