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spk08: And welcome to the conference call to discuss Everspen Technologies' first quarter 2023 financial results. At this time, all participants on 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 3rd, 2023. 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 expectation of Everspen's future business, financial performance and goals, customer and industry adoption of MRAM technology, successfully bringing to market and manufacturing products in Everspen'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 quarterly report on Form 10-Q, which will be filed with the SEC on May 4, 2023, and other SEC filings made from time to time in which we may discuss risk factors associated with investing in EverSpend. 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 information available as of the date thereof, and are subject to further review by Everspend and its external auditors. Our actual results may differ materially from these estimates as a result of the completion of our financial closing procedures, financial 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 of financial information in GAAP and non-GAAP terms. Including in the company's press release are definitions and reconciling issues of GAAP net income to adjusted EBITDA, which provide additional details. A copy of the press release is posted in the investor relations section of Everspen's website at www.Everspen.com. And now I'd like to turn the call over to Everspen's president and CEO, Sanjeev Agarwal. Sanjeev, please go ahead.
spk10: Thank you, operator. And thanks everyone for joining us on the call today. Everspen delivered quarterly revenue of $14.8 million which is at the high end of guidance and a 3% increase year over year. We were GAAP net income positive for the eighth quarter in a row, which continues to be a strong focus for the company. A few highlights for Q1, 2023. During Q1, we paid off our line of credit and term loan in full. As of the end of Q1, Everspun is debt free. Everspin's XPy family of STD MRAM products was awarded Best in Show Memory and Storage category at the Embedded World Exhibition and Conference in March of 2023. We successfully completed the first silicon for our new XPy family of STD MRAM products from 4 megabit to 16 megabit on 28 nanometer CMOS that was taped out in Q4 of 2022. Engineering samples are now available for this family of products. We are starting to see some early design-ins and wins for our XPI family of SCTM RAM products densities from 4 megabit to 128 megabit. For our business outlook, product backlog for balance of 2023 and into 2024 as of March 31, 2023 continues to be high although we are seeing low levels of cancellations, push-outs, and pull-ins. We continue to alleviate some of our foundry chain supply chain constraints, which is helping address our unfulfilled toggle demand. A little bit about our technology. As mentioned in the last earnings call, Everspin had taped out a new X-Py family of STTM RAM products on 28 nanometer CMOS with densities from 4 megabit to 16 megabit. We are excited to report that we have verified functionality on first silicon and engineering samples are now available to our customers. As a reminder, in 2022, we had introduced 16 megabit to 128 megabit density XPI STTM RAM products on 28 nanometer CMOS. With these two XPI family of STTM RAM products, our customers have access to densities ranging from 4 megabit to 128 megabit. These products will enable our customers to simplify the system architecture and easily replace legacy memory components like SRAM and FRAM. They are ideal for use in electronic systems such as industrial IoT, network and enterprise infrastructure, process automation and control, aeronautics and avionics, medical and gaming. Everspence continues to get interest from our customers for a high density, greater than 256 megabit, discrete STT mRAM part on 2x CMOS node for discrete NOR flash replacement. The first such product is in the design phase and on schedule for production in 2024. When available, this part would be ideal for replacing NOR in FPGA systems to store configuration memory and simultaneously enabling 100x faster over-the-air updates. I will now turn it over to our CFO, Anuj Agarwal, who will take you through our first quarter financials and second quarter 2023 guidance. Anuj.
spk03: Thank you, Sanjeev, and good afternoon, everyone. As part of first quarter 2023 financial results, Everspent Technologies is pleased to announce its eighth consecutive quarter of positive net income. We also reached an incredible milestone in paying off our line of credit
spk02: and term loan in Q1, making Everspend officially debt free.
spk03: In addition, we generated positive cash flow from operations of 1.2 million during the quarter. We delivered solid quarterly results at the high end of guidance with revenue of 14.8 million compared to 15.7 last quarter and 14.3 in the first quarter of 2022. We also had positive net income of 0.8 million and positive cash flow from operations of $1.2 million for the first quarter of 2023. MRAM product sales in the first quarter, which includes both Toggle and SCT MRAM revenue, was $13.8 million compared to $14.6 million the prior quarter and an increase from $12.7 million in Q1 2022. Licensing, royalties, patents, and other revenue in the first quarter remained consistent with the prior quarter at $1.1 million compared to 1.7 million in Q1-22. Shipments to suppliers for our largest end customer who we serve with our high-density SDT product for data center applications represented 11% of revenue in the quarter versus 5% of revenue in Q4 and 19% in Q1-22. Turning to gross margin, GAAP gross margin for the first quarter of 2023 was 56.8%. versus 51.4% in the prior quarter and 58% in Q1-22. GAAP operating expenses for the first quarter of 2023 were $7.7 million versus $7.5 million in the prior quarter and $6.3 million in the first quarter of 2022. The higher operating expenses in the quarter compared to the Q1-22 was primarily driven by increased costs to support the XPI family of SCT product that is currently in low volume production. We're pleased to report first quarter 2023 positive net income of 0.8 million or 4 cents per basic share based on 20.5 million basic weighted average shares outstanding. This compares to a GAAP net income of 0.6 million or 3 cents per basic share in the fourth quarter of 2022 a net income of 1.9 million or 10 cents per basic share in the first quarter of 22. Basic EPS of 4 cents was better than the midpoint of our guidance range reflecting our strategic operational discipline and ability to drive profitability in the face of tightening supplies and macroeconomic uncertainties. Adjusted EBITDA continues to remain positive. For Q1 23, adjusted EBITDA was 2.3 million compared to 2.1 million in the prior quarter and $3.1 million in Q1-22. Cash and cash equivalents ended the quarter at $24.2 million compared to $26.8 million at the end of the prior quarter and $19.9 million in Q1-22. The decrease in cash quarter over quarter is a result of Everspan paying off its term loan and line of credit in full during the quarter. Cash flow from operations was a healthy $1.2 million for the current quarter. Turning to our second quarter 2023 guidance, Everspin is cautiously optimistic. Demand for our toggle products remains strong. Everspin expects total revenue in a range of $14.5 to $15.5 million. Everspin expects GAAP net income per basic share to be between break-even and $0.05, primarily influenced by expenses related to the XPI family of SCT product development, and price increases from our suppliers. I'll now turn it back over to Sanjeev for some brief additional commentary before we open it up for questions.
spk10: Thanks, Anuj. In summary, EverSpint reported another quarter, now the eighth in a row, of profitability, which is a strong focus for the company. During Q1, we paid off our line of credit and term loan in full making Everspin debt-free as of Q1 2023. Bolstered by our first quarter performance, guidance for the second quarter, and our early views into the rest of the year lead us to believe Everspin is successfully navigating the slowdown in the semiconductor industry. We are pleased that we were able to bring another family of STTM RAM products to our customers and are excited to see their interest and traction with these products. Thank you for joining us today. Operator, you may now open the line for questions.
spk08: Thank you. As a reminder, if you'd like to ask a question, please press star 11 on your telephone. I also ask that please wait for your name to be called before you proceed with your question. First question will come from Richard Shannon of Craig Helium. Your line is open.
spk04: Well, hi, guys. Thanks for taking my questions. Let's see here. Sanjeev, I wanted to follow up on one of your remarks here in your second set of comments about navigating the slowdown in semis. I guess in your earlier comments, you also talked about some push-outs and pull-ins and a little bit of cancellation. So I guess I want to get a sense of a backlog, whether that's going up or down. where are lead times now, and do you expect them to come in, and what does that ultimately imply about your book to bill in the first quarter and what you think it might be in the second?
spk10: Hi, Richard. How are you doing? Doing fine.
spk04: Thank you.
spk10: Yeah, so in the first section, I was basically talking about some push-outs, some cancellations and pull-ins, and that is basically our spin business returning to what we call a baseline. We typically see a little bit of that going on in every quarter. And in terms of what we are seeing or why I'm saying that we are seeing us successfully navigating the slowdown is because we're actually seeing backlog with the end of 2023 and going into 2024. And it's a pretty healthy backlog and it makes us feel that we can actually do pretty well in the year. We're actually looking to grow quarter over quarter and actually do as well as we did last year.
spk04: Okay. An interesting statement about growing quarter to quarter, and I think probably the part of that that I'm more interested in, I think most investors are, is basically thinking about your product revenues. Would you also declare that product revenues can grow quarter on quarter the rest of the year, including second quarter?
spk11: Okay.
spk03: Yeah. Hi, Richard. This is Anuj. So product revenue is also doing very well, right? We're seeing strong growth in toggle sales. And with our XPI product family coming into low-volume production, we're optimistic based on some of the feedback we've gotten from customers and as we begin to get design wins. So we're seeing the ramping of that product as well. And then as you know, The challenges are really around the data center, and so there's still some sluggishness there, but toggle is going very strong, and the byproduct is ramping nicely.
spk04: Okay, fair enough. Maybe touching on a couple elements in the financial guidance for the quarter, always try to get a sense of what you're thinking about both on gross margins and op-ex. Let me touch on gross margins for a second. If I look at the last five quarters, you had four of those five near the levels you just reported in the fourth quarter was a bit below. I think you talked about some mix and yield dynamics in the fourth quarter. Would you call out kind of last quarter as more of a normal mix and situation or is it more optimized? I know relative to your long-term guidance of 50 to 55% gross margin, a little bit on the high side of that, but you've had some good success in the last four out of five last quarters. And so I want to get a sense of whether you expect that to maintain here, or you see the first quarter as more of an optimistic outcome?
spk03: Yeah, sure, Richard. Let me try to answer that. So, you know, we try to be a little bit cautiously optimistic, I guess, when we provide guidance, and so that's why you see the 14.5 to 15.5 in terms of revenue, you know, just trying to glide you know, slightly higher than the Q1 results, right? But I think in terms of gross margin, you are seeing a little bit of product mix benefit in Q1 and some other items. So, you know, we still think that low to mid-50s, maybe more mid-50s is realistic. And so I would, without giving guidance, kind of stick with that story for now. And then from an OPEX standpoint, you know, we've shared that we're trying to be frugal but smart in terms of how we're spending money. And so there has been an uptick in OPEX related to the new X-Fi industrial product, and it'll continue to be at that level as we ramp the product.
spk04: Okay. Fair enough. And I'll ask one more question, jump out of line here. Maybe to start the conversation on your new X-Fi products, Sanjeev, it sounds like you're getting some early stage success in designs and attention here. Maybe you can give a little bit more color to what family of products or, excuse me, which density, what applications you're seeing in an early, and then to what degree are we going to see the benefits coming in this year versus in calendar 24?
spk10: Yeah, so I'll probably start with the last question. Most of our design wins and ends are going to be in the industrial space. So I think it's going to be quite challenging to see any significant revenue in 2023. But best case, you could see some upside in Q4 of this year. In terms of design wins, we're actually seeing it across the range all the way from 4 megabit to 64 and even 128 megabit. But most of the design wins are actually with our first family that we brought out, the 64 megabit native die. Those are the ones that are actually a major part of the statement that I was making that we're starting to see early design wins. We do expect the design wins to go up with the new product in the second half of this year once the parts are available to our customers.
spk04: Okay. Perfect. That's great news, and glad to see the outlook here going very strongly. I will jump in line, guys. Thank you very much.
spk08: Thank you, Rachel.
spk04: Thanks, Richard.
spk08: Thank you. If you would like to ask a question, please press star 1-1. One moment while we wait for the Q&A pod. We have another question coming. One moment, please. And this will be a follow-up from Richard Shannon. Craig Haley, go ahead, please.
spk04: Okay. Well, I'll jump back in then. Let's see here. A couple other questions. Sanjeev, maybe to follow up on one of your prepared comments. You talked about this in the last few calls about this more leading edge higher density STT that's going to be Norflash replacement. Sounds like you're seeing some continued progress here. If you were to think about a time frame by which you'd start to see some benefit from that, when would that be? And are these going to be difficult, you know, architectural kind of decisions for customers to make, or is this more drop-in replacement, and do you think it would be a fairly short sales cycle?
spk10: Yeah, so the high-density part that we're talking about, as far as revenue is concerned, I think you would start seeing some revenue in 2025. with it going into production sometime in, you know, second half of 2024. As far as the architecture for this part, it's going to be a drop-in part, so it'll be a direct replacement for standalone NOR. And so the products are still going to be industrial, so I think the qual cycle is still going to be 12 to 18 months. In that sense, It's still going to be a long cycle, but I think it's going to be a drop in making it easier for our customers to put them in their systems.
spk04: Okay, perfect. That's helpful. My last question, I'll jump out of line again, is kind of highlighting your comments a few times. You prepared remarks about having paid off your debt and being debt-free for the first time in your public existence, which is fantastic to see. And you've been profitable eight quarters in a row with a good cash balance and very good management of your cost structure here. What does this help you do in terms of being a little bit more aggressive on the growth side of investment or even something that might be inorganic in nature? Should we expect to see R&D start to pick up as you find other product areas or conditions to go into? Or how should we think about eventually what looks like to be a nicely growing cash balance?
spk03: Yeah, Richard, this is Anuj. Great question. You know, we're continuing to evaluate the product roadmap and looking at where the opportunities are. Obviously, there's a lot of focus on the X5 family in the near term and, you know, the other product that you mentioned in the more longer term. So based on what we're seeing from a cash flow from operations standpoint and our current cash position, we feel we can – support that ramp and really support the products at this time without borrowing money. And so it makes sense right now to pay off the debt, right? If there's other opportunities that come up where we feel like we might have to borrow additional funds, we'll look into that. But I think right now what we're trying to demonstrate is that this is a viable business. We can be profitable. We can generate cash. There's a good amount of cash balance on the balance sheet, the balance sheet's healthy, and so we can support future opportunities and growth from that.
spk04: Okay, fair enough. That makes sense. I think that's all from you guys. Thanks a lot, and congratulations again on that start to the year.
spk08: Thank you.
spk04: Thanks again, Richard.
spk08: Thank you. If you would like to ask a question, please press star 11 on your telephone. The next question is coming up. One moment, please. Our next question will be coming from Aaron Hirschman of AIGH. Please go ahead.
spk06: Hi. I also give congratulations in a very tough environment. Thank God you're showing real progress.
spk09: Thanks, Aaron. Thanks, Aaron.
spk06: I wanted to go back to one of the questions that was asked. You have a great analyst asking great questions. He didn't leave a lot for anybody else. So just in terms of the actual, you mentioned the design cycle. When is the actual sampling you're hoping for in some of the placement products versus when you actually hope to begin volume production and seeing real revenues? Can you just review that one again?
spk10: Yeah, sure. So remember the part that we taped out in 2022 that was a native 64 megabit die, and we were sampling between 8 megabit and 128 megabit. And the new one that we got out is actually from 4 megabit to 16 megabit. So there's an overlap between 8 megabit and 16 megabit going all the way up to 128. So people that were able to use that original die to actually integrate into their systems and start a QUAL procedure, I think they will benefit from the first dye that we taped out, and we will see the benefit for the 8 meg and the 16 meg going into production. So it'll actually cut down some of the QUAL cycle. So in that case, let's assume, you know, if it's a 12-month cycle or a 15-month cycle, it'll probably come down to nine months based on these samples being available six months before this other part that we just brought out. Did I answer your question, Oren?
spk06: Yeah, so in terms of design-ins, that's going on already?
spk10: Yes, that is correct, except for the 4 megabit part, which is new now.
spk06: And in terms of the customer feedback, what's the customer feedback like, and what have you seen in terms of the niches where you're getting the traction early on?
spk10: Yeah, so in terms of customer feedback, there is some very early feedback. It's not very detailed. The part seems to perform to the spec that we have published. So that's always good, and that feedback is always appreciated. I'm sorry, I forgot the second part of the question. Yeah, which verticals? Yes, so the markets that are seeing traction right now are the early traction is in the aerospace and defense industry, and then also in some of the industrial space.
spk06: Okay. Okay, and just going back to some of the work that you've been doing on your IP, that huge open project, SANS project, what can you tell us in terms of timing when something comes to you? You know, A, on a licensing sign and be on a revenue product-related side, royalty side, I realize that might be very far out.
spk10: So, Oren, just to confirm, you were breaking up over there. Are you referring to the QuickLogic FPGA project?
spk16: Yes.
spk10: Yeah. So, that project is progressing on schedule, and I think the tape out for that design, so the The takeout for that design is expected in the second half of this year. So we will start seeing some early data on the silicon, which would be a 90-nanometer silicon from Skywater on which we do the design. So we'll start seeing some data in 2024, let's say Q2 or Q3 of 2024. I think the product revenue or the foundry revenue and royalty revenue associated with those products are at least at least two years out from there, Oren. Okay.
spk06: And both, you said both product royalties and also licensing, or licensing happens, or has happened already, or licensing happens gradually when it's in milestones?
spk10: The licensing happens gradually over 23 and 24, and then the foundry revenue and the royalty revenue starts when we go into production. Okay. which is probably 25 timeframe.
spk06: Okay, great. One quick question on the data center. Any signs of life or bottoming? How would you term the overall picture there?
spk10: So, Oren, are you asking about the data center products? Yes.
spk06: Yeah, just in terms of the overall, you know, what's going on there right now, do you think that's stabilized, still declining, coming back?
spk10: I mean, we definitely, like Anuj reported, we did better in Q1 compared to Q4, but still we were not as good as we were at the peak at about, you know, I think the numbers that Anuj put out was 19% versus 5% in Q4. and then 11% in Q1. So we have recovered some from Q4 to Q1, but we are not seeing indications that we're gonna get up to the 19% levels that we had earlier.
spk06: So my follow up on that question is just in terms of your guidance for the year, hoping to see some progress quarter to quarter on the product side, does that take a conservative enough stance you know, considering what happened on the data center side, meaning that's not assuming any upside of any sorts in data center, rather just stable. And do you think stable is a fair assumption even at this point, or that assumes data center coming down and other products are making up the gap?
spk03: Yeah, Oren, this is Anuj. So I think, you know, as you'll see, our concentration with this largest customer has decreased, like Sanjeev was mentioning. But on the flip side, You know, we continue to have strong design wins and toggle, and then that is ramping nicely. The revenue continues to be strong quarter over quarter. And in addition to that, we've got the Rad Heart deals that have increased and other things that are happening. So just naturally now, the concentration is moving out. And as the X5 product gets more design wins and things happen, that will help as well. But we're fairly conservative on the data center piece, but everything on the other side is looking good. Industrial is looking good.
spk06: And my last question just is on the companionship for the FPGA companionship we demoed. Where is that up to? What's the thoughts on commercialization of it? And I'll end on that.
spk10: So, you know, we have been in communication with the FPGA companies to actually integrate our X-Py family product with their FPGA. So I think it's in early stages, and we cannot really comment on that too much, but it is an ongoing process right now.
spk06: Okay. Ben, are they interested enough that there is some commitment on their part to do the design switch?
spk10: I think it's too early for commitment, but there is enough interest that we are actually continuing to engage with more than one company to basically end up with a design with a customer in the FPGA market. With an end customer, I guess. I shouldn't say FPGA market. With an end customer.
spk06: But that's through them or that's through you directly?
spk10: It would be through the FPGA vendor.
spk06: Okay. Good. Okay. Congratulations again on the progress.
spk15: Okay. Thank you. Thank you.
spk08: Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. One moment, please.
spk07: And at this time, there are no more questions in the queue.
spk08: I would like to turn the call back over to management for closing remarks.
spk03: Okay. With that said, we conclude today's call. Thank you all for joining us, and we look forward to reporting our progress and results in the next quarter's call. Operator, you may now disconnect the call.
spk08: Thank you, everyone, for joining, and the call is disconnected. Have a great evening. you you
spk13: Thank you.
spk08: Good afternoon, and welcome to the conference call to discuss Everspend Technologies' first quarter 2023 financial results. At this time, all participants are on 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 3rd, 2023. 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 expectation of Everspen's future business, financial performance, and goals, customer and industry adoption of MRAM technology, successfully bringing to market and manufacturing products in Everspen'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 quarterly report on Form 10-Q, which will be filed with the SEC on May 4, 2023. and other SEC filings made from time to time in which we may discuss risk factors associated with investing in Everspent. 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 information available as of the date thereof, and are subject to further review by Everspan and its external auditors. Our actual results may differ materially from these estimates as a result of the completion of our financial closing procedures, financial 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 of financial information in GAAP and non-GAAP terms. Including in the company's press release are definitions and reconciling issues of GAAP 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. And now I'd like to turn the call over to Everspin's president and CEO Sanjeev Agarwal. Sanjeev, please go ahead.
spk10: Thank you, operator. And thanks everyone for joining us on the call today. Everspin delivered quarterly revenue of $14.8 million which is at the high end of guidance and a 3% increase year over year. We were GAAP net income positive for the eighth quarter in a row, which continues to be a strong focus for the company. A few highlights for Q1, 2023. During Q1, we paid off our line of credit and term loan in full. As of the end of Q1, Everspun is debt free. Everspin's X-Pi family of STD MRAM products was awarded Best in Show Memory and Storage category at the Embedded World Exhibition and Conference in March of 2023. We successfully completed the first silicon for our new X-Pi family of STD MRAM products from 4 megabit to 16 megabit on 28 nanometer CMOS that was taped out in Q4 of 2022. Engineering samples are now available for this family of products. We are starting to see some early design-ins and wins for our XPI family of SCTM RAM products densities from 4 megabit to 128 megabit. For our business outlook, product backlog for balance of 2023 and into 2024 as of March 31, 2023 continues to be high although we are seeing low levels of cancellations, push-outs, and pull-ins. We continue to alleviate some of our foundry chain supply chain constraints, which is helping address our unfulfilled toggle demand. A little bit about our technology. As mentioned in the last earnings call, Everspin had taped out a new XPI family of STTM RAM products on 28 nanometers CMOS with densities from 4 megabit to 16 megabit. We are excited to report that we have verified functionality on first silicon and engineering samples are now available to our customers. As a reminder, in 2022, we had introduced 16 megabit to 128 megabit density XPI STTM RAM products on 28 nanometers CMOS. With these two XPI family of STTM RAM products, our customers have access to densities ranging from 4 megabit to 128 megabit. These products will enable our customers to simplify the system architecture and easily replace legacy memory components like SRAM and FRAM. They're ideal for use in electronic systems such as industrial IoT, network and enterprise infrastructure, process automation and control, aeronautics and avionics, medical and gaming. Everspence continues to get interest from our customers for a high density, greater than 256 megabit, discrete STT-MRAM part on 2x CMOS node for discrete NOR flash replacement. The first such product is in the design phase and on schedule for production in 2024. When available, this part would be ideal for replacing NOR in FPGA systems to store configuration memory and simultaneously enabling 100x faster over-the-air updates. I will now turn it over to our CFO, Anuj Agarwal, who will take you through our first quarter financials and second quarter 2023 guidance. Anuj.
spk03: Thank you, Sanjeev, and good afternoon, everyone. As part of first quarter 2023 financial results, Everspent Technologies is pleased to announce its eighth consecutive quarter of positive net income. We also reached an incredible milestone in paying off our line of credit
spk02: and term loan in Q1, making Everspend officially debt free.
spk03: In addition, we generated positive cash flow from operations of 1.2 million during the quarter. We delivered solid quarterly results at the high end of guidance with revenue of 14.8 million compared to 15.7 last quarter and 14.3 in the first quarter of 2022. We also had positive net income of 0.8 million and positive cash flow from operations of $1.2 million for the first quarter of 2023. MRAM product sales in the first quarter, which includes both Toggle and SDT MRAM revenue, was $13.8 million compared to $14.6 million the prior quarter and an increase from $12.7 million in Q1 2022. Licensing, royalties, patents, and other revenue in the first quarter remained consistent with the prior quarter at $1.1 million compared to 1.7 million in Q1-22. Shipments to suppliers for our largest end customer who we serve with our high density STT product for data center applications represented 11% of revenue in the quarter versus 5% of revenue in Q4 and 19% in Q1-22. Turning to gross margin, GAAP gross margin for the first quarter of 2023 was 56.8%. versus 51.4% in the prior quarter and 58% in Q1-22. GAAP operating expenses for the first quarter of 2023 were $7.7 million versus $7.5 million in the prior quarter and $6.3 million in the first quarter of 2022. The higher operating expenses in the quarter compared to the Q1-22 was primarily driven by increased costs to support the XPI family of SCT product that is currently in low volume production. We're pleased to report first quarter 2023 positive net income of 0.8 million or 4 cents per basic share based on 20.5 million basic weighted average shares outstanding. This compares to a GAAP net income of 0.6 million or 3 cents per basic share in the fourth quarter of 2022 a net income of 1.9 million or 10 cents per basic share in the first quarter of 22. Basic EPS of 4 cents was better than the midpoint of our guidance range reflecting our strategic operational discipline and ability to drive profitability in the face of tightening supplies and macroeconomic uncertainties. Adjusted EBITDA continues to remain positive. For Q1 23, adjusted EBITDA was 2.3 million compared to 2.1 million in the prior quarter and 3.1 million in Q1-22. Cash and cash equivalents ended the quarter at 24.2 million compared to 26.8 million at the end of the prior quarter and 19.9 million in Q1-22. The decrease in cash quarter over quarter is a result of Everspan paying off its term loan and line of credit in full during the quarter. Cash flow from operations was a healthy 1.2 million for the current quarter. Turning to our second quarter 2023 guidance, Everspin is cautiously optimistic. Demand for our toggle products remains strong. Everspin expects total revenue in a range of $14.5 to $15.5 million. Everspin expects GAAP net income per basic share to be between break-even and $0.05, primarily influenced by expenses related to the XPI family of SCT product development and price increases from our suppliers. I'll now turn it back over to Sanjeev for some brief additional commentary before we open it up for questions.
spk10: Thanks, Anuj. In summary, EverSpend reported another quarter, now the eighth in a row, of profitability, which is a strong focus for the company. During Q1, we paid off our line of credit and term loan in full, making EverSpend debt-free as of Q1 2023. Bolstered by our first quarter performance, guidance for the second quarter, and our early views into the rest of the year lead us to believe Everspin is successfully navigating the slowdown in the semiconductor industry. We are pleased that we were able to bring another family of STTM RAM products to our customers and are excited to see their interest and traction with these products. Thank you for joining us today. Operator, you may now open the line for questions.
spk08: Thank you. As a reminder, if you'd like to ask a question, please press star 11 on your telephone. I also ask that please wait for your name to be called before you proceed with your question. First question will come from Richard Shannon of Craig Helium. Your line is open.
spk04: Well, hi, guys. Thanks for taking my questions. Let's see here. Sanjeev, I wanted to follow up on one of your remarks here in your second set of comments about navigating the slowdown in semis. I guess in your earlier comments, you also talked about some push-outs and pull-ins and a little bit of cancellation. So I guess I want to get a sense of a backlog, whether that's going up or down. Where are lead times now? Do you expect them to come in? And what does that ultimately imply about your book to bill in the first quarter and what you think it might be in the second.
spk10: Hi, Richard. How are you doing?
spk04: Doing fine. Thank you.
spk10: Yeah, so in the first section, I was basically talking about some push-out, some cancellations and pull-ins, and that is basically our spin business returning to what we call a baseline. We typically see a little bit of that going on in every quarter. And in terms of... What we are seeing or why I'm saying that we are seeing us successfully navigating the slowdown is because we're actually seeing backlog with the end of 2023 and going into 2024, and it's a pretty healthy backlog, and it makes us feel that we can actually do pretty well in the year. We're actually looking to grow quarter over quarter and actually do as well as we did last year.
spk04: Okay. An interesting statement about growing quarter to quarter, and I think probably the part of that that I'm more interested in, I think most investors are, is basically thinking about your product revenues. Would you also declare that product revenues can grow quarter to quarter the rest of the year, including second quarter?
spk11: Anuj?
spk03: Yeah. Hi, Richard. This is Anuj. So product revenue is also doing very well, right? We're seeing strong growth. in toggle sales. And with our XPI product family coming into low volume production, we're optimistic based on some of the feedback we've gotten from customers and as we begin to get design wins. So we're seeing the ramping of that product as well. And then as you know, the challenges are really around the data center. And so there's still some sluggishness there, but toggle is going very strong and the XPI product is ramping nicely.
spk04: Okay, fair enough. Maybe touching on a couple elements in the financial guidance for the quarter, always try to get a sense of what you're thinking about both on gross margins and op-ex. Let me touch on gross margins for a second. If I look at the last five quarters, you had four of those five near the levels you just reported, and the fourth quarter was a bit below. I think you talked about some mix and yield dynamics in the fourth quarter. Would you call out – kind of last quarter as more of a normal mix and situation, or is it more optimized? I know relative to your long-term guidance of 50% to 55% gross margin, a little bit on the high side of that, but you've had some good success in the last four out of five last quarters, and so I want to get a sense of whether you expect that to maintain here or you see the first quarter as more of an optimistic outcome.
spk03: Yeah, sure, Richard. Let me... So, you know, we try to be a little bit cautiously optimistic, I guess, when we provide guidance. And so that's why you see the 14.5 to 15.5 in terms of revenue, you know, just trying to glide, you know, slightly higher than the Q1 results, right? But I think in terms of gross margin, you are seeing a little bit of product mix benefit in Q1. and some other items. So, you know, we still think that low to mid 50s, maybe more mid 50s is realistic. And so I would, without giving guidance, kind of stick with that story for now. And then from an OPEX standpoint, you know, we've shared that we're trying to be frugal but smart in terms of how we're spending money. And so there has been an uptick in OPEX related to the new X-Fi industrial product. And it'll continue to be at that level as we ramp the product.
spk04: Okay. Fair enough. And I'll ask one more question, jump out of line here. Maybe to start the conversation on your new X-Fi products, Sanjeev, sounds like you're getting some early stage success in designs and attention here. Maybe you can give a little bit more color to where you're what family of products, or excuse me, which density, what applications you're seeing in an early, and then to what degree are we going to see the benefits coming in this year versus in calendar 24?
spk10: Yeah, so I'll probably start with the last question. You know, most of our design wins and ends are going to be in the industrial space, so I think it's going to be quite challenging to see any significant revenue in 2023, but best case, you could see some upside in Q4 of this year. In terms of design wins, we're actually seeing it across the range all the way from four megabit to 64 and even 128 megabit. But most of the design wins are actually with our first family that we brought out, the 64 megabit native die. Those are the ones that are actually a major part of the sentence that I was, or the statement that I was making that we're starting to see early design wins. We do expect the design wins to go up with the new product in the second half of this year once the parts are available to our customers.
spk04: Okay. Perfect. That's great news and glad to see the outlook here going very strongly. I will jump in line, guys. Thank you very much.
spk08: Thank you, Rachel.
spk04: Thanks, Richard.
spk08: Thank you. If you would like to ask a question, please press star 1-1. One moment while we... wait for the Q&A pod. We have another question coming. One moment, please. And this will be a follow-up from Richard Shannon. Craig Haley, go ahead, please.
spk04: Okay. Well, I'll jump back in then. Let's see here. A couple other questions. Sanjeev, maybe to follow up on On one of your prepared comments, you talked about this in the last few calls about this more leading edge higher density STT that's going to be more flash replacement. Sounds like you're seeing some continued progress here. If you were to think about a time frame by which you'd start to see some benefit from that, when would that be? And are these going to be difficult architectural kind of decisions for customers to make, or is this more drop-in replacement, and do you think it would be a fairly short sales cycle?
spk10: Yeah, so the high-density part that we're talking about, as far as the revenue is concerned, I think you would start seeing some revenue in 2025 with it going into production sometime in, you know, second half of 2024. As far as the architecture for this part, it's going to be a drop-in part, so it'll be a direct replacement for standalone NOR, and so the But the products are still going to be industrial, so I think the qual cycle is still going to be 12 to 18 months. In that sense, it's still going to be a long cycle, but I think there's going to be a drop in making it easier for our customers to put them in their systems.
spk04: Okay, perfect. That's helpful. My last question, I'll jump out of line again, is kind of highlighting your comments a few times you prepared remarks about having paid off your debt, being debt-free for the first time in your public existence, which is fantastic to see. And you've been profitable eight quarters in a row with a good cash balance and very good management of your cost structure here. What does this help you do in terms of being a little bit more aggressive on the growth side of investment or even something that might be inorganic in nature? Should we expect to see R&D start to tick up as you find other product areas or conditions to go into? Or how should we think about eventually what looks like to be a nicely growing cash balance?
spk03: Yeah, Richard, this is Anuj. Great question. You know, we're continuing to evaluate the product roadmap and looking at where the opportunities are. Obviously, there's a lot of focus on the X5 family in the near term and the other product that you mentioned in the more longer term. So based on what we're seeing from a cash flow from operations standpoint and our current cash position, we feel we can support that ramp and really support the products at this time without borrowing money. And so it makes sense right now to pay off the debt, right? If there's other opportunities that come up where we feel like we might have to borrow additional funds, we'll look into that. But I think right now what we're trying to demonstrate is that this is a viable business. We can be profitable. We can generate cash. There's a good amount of cash balance on the balance sheet. The balance sheet's healthy. And so we can support future opportunities and growth from that.
spk04: Okay, fair enough. That makes sense. I think that's all from me, guys. Thanks a lot, and congratulations again. Nice start to the year.
spk08: Thank you.
spk04: Thanks again, Richard.
spk08: Thank you. If you would like to ask a question, please press star 11 on your telephone. The next question is coming up. One moment, please. Our next question will be coming from Arwen Hirschman of AIGH. Please go ahead.
spk06: Hi. I also give congratulations in a very tough environment. Thank God you're showing real progress.
spk09: Thanks, Arwen. Thanks, Arwen.
spk06: I wanted to go back to one of the questions that was asked. You have a great analyst asking great questions. He didn't leave a lot for anybody else. So just in terms of the actual, you mentioned the design cycle. When is the actual sampling you're hoping for in some of the placement products versus when you actually hope to begin volume production and seeing real revenues? Can you just review that one again?
spk10: Yeah, sure. So remember the part that we taped out in 2022 that was a native 64 megabyte die? and we were sampling between 8 megabit and 128 megabit. And the new one that we got out is actually from 4 megabit to 16 megabit. So there's an overlap between 8 megabit and 16 megabit going all the way up to 128. So people that were able to use that original die to actually integrate into their systems and start a qual procedure, I think they will benefit from the first die that we taped out, and we will see the benefit for the 8 meg and the 16 meg going into production. So it'll actually cut down some of the qual cycle. So in that case, let's assume, you know, if it's a 12-month cycle or a 15-month cycle, it'd probably come down to nine months based on these samples being available six months before this other part that we just brought out. Did I answer your question, Oren?
spk06: Yeah, so in terms of, you know, design-in, that's going on already.
spk10: Yes. That is correct, except for the four megabit part, which is new now.
spk06: And in terms of the customer feedback, what's the customer feedback like and what have you seen in terms of the niches where you're getting the traction early on?
spk10: Yeah, so in terms of customer feedback, there is some very early feedback. It's not very detailed. The part seems to perform to the spec that we have published, so That's always good, and that feedback is always appreciated. I'm sorry, I forgot the second part of the question. Yeah, which verticals? Ah, yes. So the markets that are seeing traction right now, the early traction, is in the aerospace and defense industry, and then also in some of the industrial space.
spk06: Okay. Okay, and just going back to some of the work that you've been doing on your IP, that huge open project, what can you tell us in terms of timing when something comes to you, A, on the licensing side, and B, on a revenue product-related side, royalty side? I realize that might be very far out.
spk10: So just to confirm, you were breaking up over there. Are you referring to the QuickLogic FPGA project?
spk16: Yes.
spk10: Yeah. So that project is progressing on schedule. And I think the tape out for that design, so the tape out for that design is expected in the second half of this year. So we will start seeing some early data on the silicon, which would be a 90-nanometer silicon from Skywater on which we do the design. So we'll start seeing some data in 2024, let's say Q2 or Q3 of 2024. I think the product revenue or the foundry revenue and royalty revenue associated with those products are at least two years out from there, Oren. Okay.
spk06: And both, you said both product royalties and also licensing, or licensing happens, perhaps happens already, or licensing happens gradually when it's in milestones?
spk10: The licensing happens gradually over 23 and 24. And then the foundry revenue and the royalty revenue starts when we go into production, which is probably 25 timeframe.
spk06: Okay, great. One quick question on data center. Any signs of life or bottoming? How would you term the overall picture there?
spk10: So, Oren, are you asking about the data center products?
spk06: Yeah, just in terms of the overall, you know, what's going on there right now. Do you think that it's stabilized? Still declining?
spk10: coming back? I mean, we definitely, like Anuj reported, we did better in Q1 compared to Q4, but still we were not as good as we were at the peak at about, you know, I think the numbers that Anuj put out was 19% versus 5% in Q4 and then 11% in Q1. So we have recovered some from Q4 to Q1, but we are not seeing indications that we're going to get up to the 19% levels that we had earlier.
spk06: My follow-up on that question is, just in terms of your guidance for the year, hoping to see some progress quarter-to-quarter on the product side, does that take a conservative enough stance, considering what happened on the data center side, meaning that's not assuming any upside of any sorts in data center, rather just stable, and do you think stable is a fair assumption even at this point, or that assumes data center coming down and other products are making up the gaps.
spk03: Yeah, Oren, this is Anuj. So I think, you know, as you'll see, our concentration with this largest customer has decreased, like Sanjeev was mentioning. But on the flip side, you know, we continue to have strong design wins and toggle, and that is ramping nicely. The revenue continues to be strong quarter over quarter. And in addition to that, we've got the Rad Heart deals that have increased and other things that are happening. So just naturally now, the concentration is smoothing out. And as the X5 product gets more design wins and things happen, that will help as well. But we're fairly conservative on the data center piece, but everything on the other side is looking good. Industrial is looking good.
spk06: And my last question just is on the companionship for FPGA companionship demoed. Where is that up to? What's the thoughts on commercialization of it? And I'll end on that.
spk10: So we have been in communication with the FPGA companies to actually integrate our X-Py family product with their FPGA. So I think it's in early stages and we cannot really comment on that too much, but it is an ongoing process right now.
spk06: Ben, are they interested enough that there is some commitment on their part to do the design switch?
spk10: I think it's too early for commitment, but there is enough interest that we are actually continuing to engage and with more than one company to basically end up with a design with a customer in the FPGA market. Okay. With an end customer, I guess. I shouldn't say FPGA market. With an end customer.
spk06: But that's through them or that's through you directly?
spk10: It would be through the FPGA vendor.
spk06: Okay. Good. Okay. Congratulations again on the progress.
spk15: Okay, thank you. Thank you.
spk08: Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone.
spk07: One moment, please. And at this time, there are no more questions in the queue.
spk08: I would like to turn the call back over to management for closing remarks.
spk03: Okay. With that said, we conclude today's call. Thank you all for joining us. And we look forward to reporting our progress and results in the next quarter's call. Operator, you may now disconnect the call.
spk08: Thank you, everyone, for joining. And the call is disconnected. Have a great evening.
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