Everspin Technologies, Inc.

Good afternoon, and welcome to the conference call to discuss Everspin Technologies' fourth quarter 2021 financial results. At this time, all participants are in a listen-only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session. As a reminder, this conference call is being recorded today, Wednesday, March 2, 2022. 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 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 risk and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. We would encourage you to review our SEC filings, including our annual report on Form 10-K, which will be filed with the SEC on March 3, 2022, and other SEC filings made from time to time in which we may discuss risk factors associated with investing in Everspin. All forward-looking statements are made as of the date of this call and except as required by law, we undertake no obligation to update any forward-looking statements made on this call to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise. The financial results discussed today reflect our preliminary estimates, are based on the information available as of the date hereof, and are subject to further review by Everspin and its external auditors. Our actual results may differ materially from these estimates as a result of the completion of our financial closing procedures, final adjustments, and other developments arising between now and the time that our financial results for this period are finalized. Additionally, the company's press release and statements made during this conference call will include discussion of certain measures and financial information in the GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GATT net income 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. This conference call will be available for audio replay for at least five days in the investor relations section of Everspin's website at www.everspin.com. And now I'd like to turn the call over to Everspen's executive chairman and interim CEO, Darren Billerbeck. Darren, please go ahead.

Thank you, operator, and thanks to everyone for joining us on the call today. Q4 results came in above the high end of guidance, as mentioned in our press release. We were gap net income positive for the third quarter in a row. We also had positive gap net income for the year that ended December 31st, 2021, which is the first in Everspen's history. Our revenue for Q4 was 23% higher than Q3 and 82% higher than Q4 a year ago. Being the gap net income positive on a consistent basis is obviously a focus for the company. We believe this demonstrates that being laser focused on improving product yields, controlling OpEx spending, growing our top line while keeping gross margins in a healthy range will drive profitability. A few records we achieved in Q4 2021. Record annual total revenue. Record annual product revenue. Record Q4 product revenue. Record annual design wins, again, in 2021 after setting a record in 2020. A record of more than 1,600 volume production customers. Record low distributor inventory, showing strength of our sell-through and impact of the supply chain. Although I'm not really sure I'm proud of that record. Record 2022 product backlog is at an all-time high. Despite being impacted by supply constraints that left over $2 million of customer demand unfulfilled, we had the largest toggle quarter since 2018. Distributor inventory is still very lean and well below our target as we continue to fight for every wafer and every tester we can get. It's doubtful we can get into a healthy inventory range until 2023, assuming all goes well with respect to allocations. STT revenue was flattish as our largest customer was also saddled with supply constraints. The good news is that Everspent was not the constraint culprit. However, based on other suppliers, we do expect STT revenue to continue to be flat for the next couple of quarters. On the R&D front, we were in the process of checking out our next generation STT product, which we expect samples to be out later in March. This is right on track for what we expected. Knock on wood, our checkout so far shows no major issues. We believe this new product will be revolutionary in its ability to serve both the SRAM replacement market along with mid-density rugged NOR applications where no other memory can play. Finally, with respect to our deliberate strategy of monetizing our IP, we recognize $3.95 million in revenue in Q4 related to IP transactions. We are pleased to note that our cash and cash equivalents are over $21 million as of the end of the year. I will now turn it over to our CFO, Anuj Agrawal, who will take you through our fourth quarter financials and first quarter 2022 guidance. Anuj?

Thank you, Darren, and good afternoon, everyone. We're excited to report Everspin's best ever quarterly results, delivering a strong finish to a record year. Despite supply constraints, I'm happy to announce that Everspin reached profitability for the first time at year end. We delivered solid quarterly results, with 23% revenue growth over last quarter, beating top end of guidance, positive net income of $3.7 million, and positive cash flow from operations of $6.4 million for the fourth quarter. Revenue for the fourth quarter of 2021 came in at $18.2 million compared to $14.8 million last quarter and $10 million in the fourth quarter of 2020. MRAM product sales in the fourth quarter, which include both Toggle and SDT MRAM revenue, was $12.6 million versus $12 million in the prior quarter and $9.7 million in Q4 2020. In Q3 2021, the company entered into an IP monetization deal with $5.25 million. $3.95 million in revenue was recognized in Q4. Licensing, royalties, patents, and other revenue in the quarter was $5.6 million compared to $2.8 million in the previous quarter and $0.3 million in the prior year period. The increase in revenue is due to strong toggle sales, RadHard revenue recognition, and the IP monetization deal. Shipments to suppliers for our largest end customer who we serve with our high density STT product for data center applications represented 23.4% of revenue in the quarter versus 28.5% of revenue in Q3 and 39.9% in the year ago quarter. Turning to gross margin, GAAP gross margin for the fourth quarter of 2021 was 62.8% versus 57.1% in the prior quarter and 52% in Q420. The higher gross margin compared to the prior quarter is driven by Radhart revenue recognition and the IP monetization deal. GAAP operating expenses for the fourth quarter of 2021 were 7.7 million versus 7.4 million in the prior quarter and 6.4 million in the same quarter one year ago. The increase was primarily for 28-nanometer product development, sales and marketing variable compensation, and administrative costs. GAAP operating expenses for the fourth quarter of 2021 included $753,000 of stock-based compensation compared to $1.03 million last quarter and $1.3 million in the year-ago quarter. We expect R&D expense to grow in 2022 as we prepare for the launch of our 28 nanometer STT MRM product targeted at industrial and other broad-based applications. We are pleased to report fourth quarter positive net income of 3.7 million, or 19 cents per share, based on 19.4 million basic weighted average shares outstanding. This compares to a GAAP net income of 880,000, or 4 cents, per basic share in the third quarter of 2021 and a gap net loss of 1.6 million or 10 cents per basic share in the fourth quarter of 2020. Basic EPS of 19 cents was better than our guidance reflecting our strategic operational discipline and strong gross margins in the face of tightening supplies and high margins from IP deals. Turning to the balance sheet, cash and cash equivalents increased to 21.4 million at the end of the fourth quarter compared to 14.6 million at the end of the prior quarter and 14.6 million in Q4 20. Cash flow from operations was positive at 6.4 million for the current quarter compared to 1.9 million in the prior quarter and 0.6 million positive for Q4 of last year. Turning to our first quarter 2022 guidance, demand for our Toggle products remains strong. We expect industry supply constraints to limit supply and push some unfulfilled customer demand to Q2. We expect Q1 revenue to be between 13.4 million to 14.2 million. We expect a gap income per basic share of between negative three cents and break even, primarily driven by expenses related to next generation 28 nanometer STT MRAM product and price increases from our suppliers. I'll now turn it back over to Darren for some brief additional commentary. commentary before we open it up for questions.