Neil Young

Neil Young with Needham & Company inquired about the sustainability of Everspin's non-GAAP gross margin, which has been over 52% for three consecutive quarters. He also asked for more details on the sequential decline in licensing, royalty, patent, and other revenue, and its expected trend for Q4. Finally, he questioned if non-GAAP OpEx would remain flat around the $7.5 million range going forward.

Answer

Bill Cooper, Chief Financial Officer of Everspin Technologies, confirmed that the strong gross margin is sustainable due to yield improvements and factory utilization, expecting it to remain in that range. Regarding non-product revenue, Cooper explained its lumpy nature due to project completions and anticipated it to continue around the 10% range of total revenue. For OpEx, Cooper stated that the $7.5 million range is a safe assumption for Q4, reflecting consistent management and a focus on product development costs.

Neil Young with Needham & Company inquired about the sustainability of Everspin Technologies' non-GAAP gross margin, the sequential decline in licensing, royalty, patent, and other revenue, and the expected stability of non-GAAP operating expenses in the coming quarters.

Answer

Bill Cooper, Chief Financial Officer, stated that strong non-GAAP gross margins, driven by yield improvements and factory utilization, are expected to remain in the current range. He explained that licensing and other revenue, which can be lumpy due to project completions, is anticipated to stabilize around 10% of total revenue. Cooper also confirmed that non-GAAP operating expenses are expected to remain consistent in the $7.5 million range, reflecting continued financial discipline and focus on product development.

Neil Young from Needham & Company inquired about the potential for future margin expansion at Fab 25, asking about specific milestones and their timing.

Answer

CEO Thomas Sonderman explained that margin expansion levers include introducing higher-margin ATS engineering revenue, charging market prices for new products, and driving cost optimization synergies between the Minnesota and Texas fabs. CFO Steve Manko added that while near-term gross margins will be compressed, the acquisition was economically sound, doubling revenue and increasing gross profit dollars, with a long-term path to exceed peer foundry margins.

Neil Young of Needham & Company inquired about the distribution of tariff-related revenue pressure between the CIB and automotive segments and asked for the gross margin outlook by segment for Q3.

Answer

CEO Gideon Ben-Zvi explained that the tariff impact is indirect, affecting customers in both the automotive and audio-video industries who manufacture in tariff-exposed regions. CFO Guy Nathanzon stated that while overall Q3 gross margin guidance is provided, the company does not break down margin guidance by segment.

Neil Young, on behalf of Quinn Bolton, inquired about the strongest near-term demand drivers in the cross-industry business, its growth outlook for 2025, and the factors behind the Q1 gross margin guidance.

Answer

CEO Gideon Ben-Zvi explained that demand is mixed, with recovery in traditional ProAV, new growth from huddle rooms and USB connectivity, and longer-term potential in industrial machine vision. CFO Guy Nathanzon added that Q1 gross margin is influenced by a product mix shift in the cross-industry business and a more sustainable cost optimization in automotive, with the overall margin dependent on the revenue split between the two segments.

Neil Young, on behalf of Quinn Bolton, asked for the gross margin outlook for the remainder of the year and inquired about any observed or potential impacts from tariffs on MACOM's business.

Answer

CFO John Kober stated that gross margin is expected to remain in the mid-57% range for Q3, consistent with recent quarters, noting that lower utilization at the Lowell fab is a headwind. President and CEO Stephen Daly addressed tariffs, stating no noticeable impact has been seen on customer behavior, and emphasized that MACOM's business is largely direct, non-commodity, and U.S.-centric, making the situation manageable.

Neil Young of Needham & Company inquired about the segmental reporting for the $40 million in annualized sales from the Broadcom transaction and asked for specifics on areas of strength or weakness driving the improvement in Enterprise bookings.

Answer

Interim CEO and CFO Ken Rizvi clarified that all revenue from the Broadcom deal will be categorized under the Core IoT segment. Regarding the Enterprise business, Rizvi noted that the improvement is broad-based, with particular traction in peripherals. He expressed strong confidence in the overall business, citing lean inventories and a clear path to sequential growth of approximately $10 million per quarter through the calendar year, with automotive being the only remaining sluggish area.