Everspin Technologies, Inc.

Good afternoon and welcome to the conference call to discuss Everspin Technologies' first quarter 2022 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, May 11, 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 plans. These forward-looking statements are based on estimates, judgments, current trends, and market conditions, and involves 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 quarterly report on Form 10-Q, which will be filed to the SEC on May 12, 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 statement made on this call to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise. The financial results discussed today reflect our preliminary estimates, are based on the information available as of the date hereof, and are subject to further review by 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 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 or loss to adjusted EBITDA, which provide additional details. A copy of the press release is posted in the investor relations sections 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 Everspin's CEO, Sanjeev Agarwal. Sanjeev, please go ahead.

Thank you, operator, and thanks to everyone joining us on the call today. Evertsman delivered a quarterly revenue of $14.3 million, an increase of 39% year-over-year and above the high end of guidance. We were GAAP net income positive for the fourth quarter in a row, which continues to be a focus of the company. We improved product yields to keep our gross margins in a healthy range and controlled operational spending while growing our top line. A few highlights for Q1 2022. Revenue was 14.3 million, up 39% year over year. Gap net income was 1.9 million compared to a net loss of half a million for the prior year. During the first quarter, we shipped samples of our next generation STTM RAM XPI product family. The product backlog for the balance of 2022 is at an all-time high. Overall, demand continues to outpace supply, leading to lean inventories and distributors across all products. We continue to work with our foundry partners for more wafers and assembly and test houses for more capacity. We expect the supply chain constraints to tighten in second half of 2022, impacting our ability to meet demand. As mentioned in previous quarters, we have over $2 million of unfulfilled travel demand, which is expected to carry over into upcoming quarters. Our next generation low density STTM-RAM XPI product family is on schedule for volume production in second half of 2022. We verified performance on first silicon which showed no significant issues and successfully began customer sampling in March. This product delivers extremely high bandwidth, low latency, and non-volatile writing capability across the industrial temperature range. It is compatible with industry standards and offered in standard packages. We believe this new product will be revolutionary in its ability to serve as a fast serial RAM or as an all-flash replacement in industrial IoT and embedded system applications. I will now turn it over to our CFO, Anuj Agarwal, who will take you through our first quarter financials and second quarter guidance. Anuj.

Thank you, Sanjeev, and good afternoon, everyone. We are excited to report Everspent's quarterly results. Despite supply constraints, Everspin continues the profitability trend into 2022. We delivered solid quarterly results, beating top end of guidance, with revenue of $14.3 million, compared to $18.2 million last quarter and $10.3 million in the first quarter of 2021. We also had positive net income of $1.9 million and cash flow from operations of negative $1 million for the first quarter of 2022. MRAM product sales in the first quarter, which included both toggle and SDT MRAM revenue, was $12.7 million versus $12.6 million in the prior quarter and $9.1 million in Q1-21. Licensing, royalties, patents, and other revenue in the quarter was $1.7 million compared to $5.6 million in the previous quarter and $1.2 million in the prior year period. Q4-21 includes $3.9 million of revenue recognized from a one-time IP optimization deal. Shipments to suppliers for our largest end customer, who we serve with our high density SDT product for data center applications, represented 19% of revenue in the quarter versus 17% of revenue in Q4 and 26% a year ago quarter. Turning to gross margin, GAAP gross margin for the first quarter of 2022 was 58% versus 62.8% in the prior quarter and 58.2% in Q1-21. The higher gross margin for the prior quarter was driven by the IP monetization deal. GAAP operating expenses for the first quarter of 2022 were $6.3 million versus $7.7 million in the prior quarter and $6.3 million in the same quarter one year ago. The higher operating expenses in the prior quarter was primarily for the 28-nanometer product development. GAAP operating expenses in the first quarter of 2022 included $0.8 million of stock-based compensation compared to $0.75 million last quarter and $0.7 million in the year-ago quarter. We expect R&D expense to grow in 2022 as we launch the 28-nanometer SDT MRM product targeted at industrial and other broad-based applications. We are pleased to report first quarter positive net income of $1.9 million or 10 cents per basic share based on 19.9 million basic weighted average shares outstanding. This compares to a GAAP net income of 3.7 million or 19 cents basic shares in the fourth quarter of 2021 and a GAAP net loss of half a million or two cents per basic share in the first quarter of 2021. Basic EPS of $0.10 was better than the top end of our guidance range and reflects our strategic operational discipline and strong gross margins in the base of tightening supplies. Cash and cash equivalents decreased to $19.9 million at the end of the first quarter compared to $21.4 million at the end of the prior quarter and $15.5 million in Q1 2021. Cash flow from operations was negative $1 million for the current quarter compared to $6.4 million in the prior quarter and 1.7 million positive for Q1 of last year. Turning to our second quarter 2022 guidance, demand for our products remains strong. We expect industry supply constraints to limit supply and push some unfulfilled customer demand to the second half of the year. We expect Q2 revenue between 13.6 million to 14.6 million. We expect a GAAP income per basic share of between negative six cents and zero cents per share, primarily driven by expenses related to the next-generation 28-nanometer SCT MRAM product and price increases from our suppliers. I will now turn it back over to Sanjeev for some brief additional commentary before we open it up for questions.