Everspin Technologies, Inc.

Good afternoon and welcome to the conference call to discuss Everspain Technologies' first quarter 2021 financial results. At this time, all participants are in the listen-only mode. As a conclusion of today's conference call, instructions will be given for the question and answer session. As a reminder, this conference call is being recorded today, Thursday, May 6, 2021. Before we begin the call, I want to remind you that this conference call contains forward-looking statements regarding future events, including but not limited to our expectations for Everspeen's future business, financial performance, and goals, customer and industry adoption of MRAM technology, successfully bringing to market and manufacturing products in Everspeen'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. We would encourage you to review our SEC filings including our annual report on Form 10-K filed with the SEC on March 4, 2021, and other SEC filings made from time to time in which we may discuss risk factors associated with investing in average pain. All forward-looking statements are made as of the date of this call and accept as required by law. We disclaim any obligations to update or alter these forward-looking statements in the future. Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information in COP and non-COP terms. Included in the company's press release are definitions and reconciliations of COP net loss to adjusted EBITDA. which provide additional details. A copy of the press release is posted in the Investor Relations section of Everspin's website at www.everspin.com and was filed in the Securities and Exchange Commission on Form 8K earlier today. This conference call will also be available for audio replay until May 13th 2021 in the investor relations section of Everspeen's website. And now I'd like to turn the call over to Everspeen's executive chairman and interim CEO, Taryn Billerbeck. Taryn, please go ahead.

Thank you, operator. And thanks to everyone for joining us on the call today. Q1 results came in just below the midpoint of our guidance as we ended up recognizing no royalty revenue from our RadHard licensing deal. We do expect to recognize the majority of the RADHRD licensing revenue over time. Even with that, our Q1 2021 revenue was up over 3% over Q4 2020, and in line with our goal of double-digit growth for the year. More importantly, we increased our gross margins significantly, lowered our cost, generated positive cash flow for the third quarter in a row, while keeping our current distributor inventory in a healthy range of 8 to 10 weeks. For Q1 2021, toggle revenue was up approximately 10%, and continues to gain traction as the market recovers. As mentioned in our last earnings call, we expected Toggle to continue to recover beyond the lows we saw in Q3 2020, and they seem to be doing just that. In fact, our current backlog suggests Toggle revenue is growing faster than we expected, a testament to what we seem to believe is a solid economic recovery in the industrial and factory automation areas, along with shipping to the new design ones we've been discussing for the past couple of years. We did see a strong start in Q2 backlog over Q1 for our industrial customers, and we're encouraged by the signs of all four regions coming back to growth. STT revenue was a little off plan, as we did see some small inventory adjustments we expect to get back on track Q2 through Q4. Design wins continue to grow in Q1 2021, as they did in the overall year 2020, and we are back on track to match or slightly exceed the design win total for all of last year. We refocused our efforts on turning those opportunities into real revenue and even changed our compensation of our sales force to be more focused in that area. As mentioned last quarter, Everspin is providing production volume shipments to more end customers than ever before, which we believe reflects a strong future demand pipeline and growing adoption of MRAM in the marketplace. On the operations front, we continue to focus on yield improvements and lowering our costs. We are finally seeing the results of our efforts in various improvements and implementation plans that have created healthy product growth margins across the board. The biggest risk to our growth margins moving forward is mixed and getting the capacity we need at the committed pricing in a tight subcon network worldwide. Semiconductor companies appear to be struggling to keep up with demand as demand in many sectors is outplacing supply. As we discussed last quarter, we won a rad-hard design and have now finalized that contract and collected $3 million of the upfront payments for the related licenses. As we've mentioned in the press release in Q1, our Q1 revenue did not include the $1 million in licensing revenue we anticipated. As I mentioned earlier, we do get to recognize that royalty over time, which reaffirms our deliberate strategy to continue to monetize our IP. Finally, our 28-nanometer next-generation industrial product is on track to tape out in Q3. Stay tuned for that. I will now turn the call over to our interim CFO, Anuj Agarwal, who will take you through our first quarter financials and second quarter 2021 guidance. Anuj.

Thank you, Darren, and good afternoon, everyone. Today, I'll focus my discussion on GAAP financial results and highlight some key metrics. Highlights include cash flow from operations was positive for the third consecutive quarter. We also generated cash in the quarter and gross margin was higher. Revenue for the first quarter of 2021 was $10.3 million compared to $10 million last quarter and $10.1 million in the first quarter of 2020. MRAM product sales in the first quarter, which include both toggle and SDT MRAM revenue, was $9.1 million, lower than the prior quarter and first quarter of 2020. Licensing, royalties, and other revenue in the quarter contributed $1.2 million compared to $0.3 million in the previous quarter and $0.5 million in the prior year period. The increase in revenue is due to the yearly true-up in royalty from a customer generally using our IP, which we have previously licensed to them. The Rathard licensing deal is not included in the first quarter results. Turning to gross margin, GAAP gross margin for the first quarter of 2021 was 58.2% versus 52.3% in the prior quarter. The higher gross margin is driven by royalty revenues. GAAP operating expenses for the first quarter of 2021 were $6.3 million, slightly lower than last quarter's $6.4 million, but down from $6.9 million in the first quarter of 2020. GAAP operating expenses in the first quarter of 2021 included $0.7 million of stock-based compensation compared to $1.3 million last quarter and $0.8 million a year-ago quarter. We expect to grow R&D expense in the remainder of 2021 as we prepare for the launch of our 28 nanometer SCT MRAM product targeted at industrial and other broad-based applications. Getting to the bottom line, gap net loss for the first quarter of 2021 was 0.46 million or negative two cents per share based on 19 million weighted average shares outstanding. This compares to a gap net loss of 1.6 million or negative eight cents per share in the fourth quarter of 2020 and a gap net loss of 1.7 million or negative 10 cents per share in the first quarter of 2020. Earnings per share of negative 2 cents was better than our guidance range despite revenue coming in just below the midpoint, reflecting our tight operational discipline and strong gross margins. Turning to the balance sheet, cash and cash equivalents increased to 15.5 million at the end of the first quarter compared to 14.6 million at the end of the prior quarter. Cash flow from operations was a positive $1.6 million in the first quarter, making this our best quarter for cash flow from operations and third consecutive quarter of positive cash flow. Turning to our second quarter guidance, we expect revenue in a range of $11 million to $12 million, which at the midpoint of $11.5 million represents 12% increase over $10.3 million from the first quarter of this year. and 11 cents, primarily driven by expenses related to the next generation 28 nanometer STT MRAM product. I will now turn it back over to Darren for some brief additional commentary before we open it up for questions.