Everspin Technologies, Inc.

Good afternoon and welcome to the conference call to discuss Everspins Technologies' third quarter 2023 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, November 1st, 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 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. 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 November 2, 2023, 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 Everspins and its external auditors. Our actual results may differ materially from these estimates and 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 to adjusted EBITDA, which provide additional details. A copy of the press release is posted of 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.

Thank you, operator. And thanks, everyone, for joining us on the call today. Everspin delivered quarterly revenue of $16.5 million above the high end of guidance and an 8% increase year over year. We were GAAP net income positive for the 10th quarter in a row, a strong focus for the company. A few highlights for quarter three, 2023. Cash flow from operations was $3.6 million, putting us at $11.1 million year to date. We continue to operate debt-free while increasing profitability. Q3 net income was $2.4 million. Evertsman ended Q3 with a cash balance of $34.9 million. We announced the availability of the X-Py family of STTM RAM products from 8-megabit to 64-megabit density with the extended temperature range of minus 40 centigrade to 105 centigrade, for production orders. We are sampling the four megabit density part in the smaller DFN package and the extended temperature range with production planned for the first quarter of 2024. In Q3, we entered into an agreement to develop reliability models for strategic radiation-hardened toggle MRAM. In October, we entered into a new contractual agreement to license our STT MRAM technology to build a strategic radiation hardened FPGA. Our business outlook, we continue to have a good visibility into our product backlog for the remainder of 2023 and into early 2024 as of September 30th, 2023. We have alleviated our foundry supply chain constraints, which is helping us address our unfulfilled toggle demand. We expanded our flagship industrial high-density STTM-RAM product family, the EM-XX-LX, to include a 5-millimeter by 6-millimeter DFN package, smaller by 37 percent compared to the current offering. In addition to the area savings, we are delivering an extended temperature of minus 40 C to 105 C. This family of XPI STTM RAM devices delivers the highest combination of performance, endurance, and retention, and are now available in densities from 4 to 64 meg. It is the only commercial available persistent memory with full read and write bandwidth of 400 megabytes per second via eight input-output signals with a clock frequency of 200 megahertz. It is the highest performing persistent memory available today, ideal for electronic systems where data persistence and integrity, low power, low latency, and security are paramount. Industrial IoT network enterprise infrastructure, process automation and control, aeronautics, avionics, medical, gaming, and FPGA configuration are examples where this family will simplify the system architecture and offer an alternative solution to legacy memories such as ferroelectric memories, FRAM, battery-backed random access memories, BBRAM, NORFLASH, and non-volatile SRAM. A few comments about our radiation-hard programs. Since its inception, Everspin has invested in maintaining its leadership in MRAM technology as evidence through its IP portfolio and successful licensing of its technologies. We are excited to report that we entered into two new radiation hard program agreements, one on toggle MRAM to develop reliability models for the strategic radiation hardened toggle MRAM products. The second agreement is to license our STT MRAM technology to build a strategic radiation hardened FPGA. These agreements are in addition to the existing radiation-hard programs on STD-MRAM technologies that we have discussed in previous earnings calls. One, a high-density memory array, and two, a distributed configuration memory, for instance, on FPGAs with multiple-time programmability. The R&D and design teams delivered on the milestones successfully to further the development of these STD-MRAM-based solutions for these projects. We believe our distributed MRAM, we are coining as DMRAM, approach is a revolutionary approach and will give us an edge on energy efficiency and scaling as we deploy the solution in FPGAs and AI inference engines. I will now turn it over to our CFO, Anuj Agarwal, who will take you through our third quarter financials and fourth quarter 2023 guidance. Anuj?

Thank you, Sanjeev, and good afternoon, everyone. As part of our third quarter 2023 financial results, we are pleased to announce our 10th consecutive quarter of positive net income. In addition, we generated positive cash flow from operations of $3.6 million during the quarter. We delivered solid quarterly results above the high end of guidance with revenue of $16.5 million compared to $15.7 million last quarter and $15.2 million in the third quarter of 2002. We also had positive net income of $2.4 million and positive cash flow from operations of $3.6 million for the third quarter of 2023. MRAM product sales in the third quarter, which includes both Toggle and SCT MRAM revenue, was $13.5 million compared to $13.4 million the prior quarter and $14.6 million in Q3 2022. Licensing, royalties, patents, and other revenue in the third quarter increased to 2.9 million compared to 2.3 million last quarter and 0.7 million in Q3 2022. Shipments to suppliers for our high density STT product for the data center applications represented 11% of revenue in the third quarter versus 7% of revenue in Q2 and 19% in Q3 last year. Turning to gross margin, GAAP gross margin for the third quarter of 2023 was 60.2% versus 58.4% in the prior quarter and 58.8% in Q3 2022. The increase in gross margin is primarily attributable to the increase in licensing revenue. GAAP operating expenses for the third quarter of 2023 were $7.9 million versus $7.6 million in the prior quarter and $7.1 million in the third quarter 2022. The increase in operating expenses in the quarter compared to Q3 2022 was primarily driven by an increase in professional service costs. We are pleased to report third quarter 2023 positive net income of 2.4 million or 11 cents per share based on 21.8 million weighted average fully diluted shares outstanding. This compares to a GAAP net income of 3.9 million or 18 cents per diluted share in the prior quarter and net income of $1.9 million, or $0.09 per diluted share, in the third quarter of 2022. Diluted EPS of $0.11 was better than the high point of our guidance range, reflecting our strategic operational discipline and ability to drive profitability despite macroeconomic uncertainties. Adjusted EBITDA continues to remain positive. For Q3 2023, adjusted EBITDA was $4 million compared to $5.4 million in the prior quarter and $3.4 million in Q3 of last year. We ended the quarter with cash and cash equivalents of $34.9 million compared to $8.8 million at the end of the prior quarter and $23.4 million as of Q3 22. The increase in cash quarter over quarter is a result of Everspence's continued focus on strong cash management while growing cash flow from operations as the company continues to operate debt-free. Cash flow from operations was healthy at $3.6 million for the current quarter. Turning to our fourth quarter 2023 guidance, Everspin is cautiously optimistic. Demand for our toggle products remains strong, and we continue to see increased demand of our X-Fi family of SCT products. We expect total revenue in the range of $15.4 million to $16.4 million, and GAAP net income per diluted share to be between one cent and six cents. I will now turn it back over to Sanjeev for some brief additional commentary before we open it up for questions.