Everspin Technologies - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $13.1M, up sequentially and above guidance ($12–$13M) on stronger-than-expected product sales; non-GAAP EPS was $0.02, above guidance (breakeven to $0.05), while GAAP EPS was $(0.05).
• Versus S&P Global consensus, revenue beat ($13.1M vs $12.5M*), but EPS was a minor miss ($0.02 vs $0.03*); the EPS shortfall reflects a lower mix of high-margin licensing/other revenue YoY (51.4% GM vs 56.5% YoY) despite stable sequential GM.
• Management reiterated 2H-weighted 2025 on backlog improvement and conversion of STT-MRAM design wins; Q2 2025 outlook: revenue $12.5–$13.5M and GAAP basic EPS of $(0.05) to $0.00; non-GAAP basic EPS breakeven to $0.05. Guidance excludes potential China tariff impacts given exemptions/shipping terms.
• Catalysts: continued IBM FCM4 ramp, auto wins (Lucid Gravity) and high-reliability xSPI launches (EM064LX/EM128LX HR), plus DoD/Frontgrade/QuickLogic/Purdue programs expected to pick up in 2H 2025.

What Went Well and What Went Wrong

• What Went Well

  • Product revenue outperformed internal expectations, driving the revenue beat vs guidance; non-GAAP EPS above guidance on “prudent expense management.” “We are pleased to report our first quarter results with revenue of $13.1 million and non-GAAP EPS of $0.02, both above our guidance range… higher than expected product revenue.”.
  • Strategic/mission-critical design traction: continued IBM FCM4 ramp; auto (Lucid Gravity) shipments; Blue Origin/Astro Digital deep-space wins; announced new automotive-grade xSPI HR parts (AEC-Q100 Grade 1).
  • Balance sheet strength: cash and equivalents rose to $42.2M; operating cash flow was $1.4M in Q1.

• What Went Wrong

  • YoY top-line and margin pressure: revenue down 9% YoY and gross margin down 510 bps YoY on lower high-margin licensing mix; GAAP loss widened YoY to $(1.2)M.
  • Licensing/royalty/other revenue fell YoY to $2.1M (from $3.6M), reflecting lumpy timing on programs like Frontgrade.
  • EPS vs consensus modestly light: non-GAAP EPS of $0.02 vs $0.03* consensus, as mix shifted toward product vs licensing YoY (though GM held ~flat sequentially at ~51%).

Transcript

Operator (participant)

Good afternoon and welcome to the Everspin Technologies' Q1 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the conclusion of management's prepared remarks, instructions will be provided for the question-and-answer session. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Faye Hoffman, Investor Relations for Everspin.

Faye Hoffman (Head of Investor Relations)

Thank you, Operator, and good afternoon, everyone. Everspin released results for the Q1 2025 ended March 31, 2025, this afternoon after market close. I'm Faye Hoffman, Investor Relations for Everspin, and with me on today's call are Sanjeev Aggarwal, President and Chief Executive Officer, and Bill Cooper, Chief Financial Officer. Before we begin the call, I would like to remind you that today's discussion may contain forward-looking statements regarding future events, including, but not limited to, the company's 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 the company's SEC filings, including the annual report on Form 10-K and other SEC filings made from time to time, in which the company 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, the company undertakes no obligation to update or alter any forward-looking statements made on this call, whether as a result of new information, future events, or otherwise. The financial results discussed today reflect the company's 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.

The company's actual results may differ materially from those estimates as a result of the completion of financial closing procedures, final adjustments, and other developments arising between now and the time that the 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 non-GAAP net income, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin's website at everspin.com. I would like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Sanjeev Aggarwal (CEO)

Thank you, Faye, and thanks everyone for joining us on the call today. Turning to our Q1 results, we are pleased to report our Q1 results with revenue of $13.1 million and non-GAAP EPS of $0.02, both above our guidance range. Our outperformance this quarter was due to strength in product revenue, which came in higher than expected. During the Q1, we continued to ramp revenue from the sale of a PERSYST 1 Gigabit STT-MRAM into IBM's Flash Core Module 4, or FCM4, for data center applications. As a reminder, this PERSYST product brings data loss protection, high read-write bandwidth, low latency, and non-volatility to the solution. We are pleased with our continued progress and anticipate product revenue from this ongoing project to remain consistent for the remainder of the year.

We continue to ship and recognize revenue from our PERSYST MRAM solution from Lucid Motors for their Gravity SUV, for which the automaker is currently accepting orders. Everspin's MRAM is used in the Gravity to handle data logging and parameter storage to assist in the efficient operation of the all-electric drive powertrain. This is the second Lucid model that Everspin has been designed into, having been selected to provide its 256-kilobit MRAM for the Lucid Air all-electric luxury model in 2021 and follows our win with Bugatti for the all-electric Nevera sports car in 2022. Everspin's MRAM technology is being utilized by five companies in the auto industry for data capture due to our extreme reliability in demanding environments.

Turning to our licensing, royalty, patent, and other revenue, we completed the first phase of our $9.25 million Frontgrade Technologies project that was announced in August of last year to develop a custom radiation-hardened STT-MRAM macro for embedded solutions using our PERSYST STT-MRAM technology. The first phase of this project was design-centric, and we are now entering the second process-centric phase to validate the design on silicon. In production, this project will support current and future DoD strategic radiation-hardened and low Earth orbital, or LEO, space systems. We signed the next phase of our project with QuickLogic for our innovative Agilist MRAM technology in the Q1 and recognized initial revenue from moving to the process, or fab-centric phase, to validate the design on silicon. As a reminder, this project aims to advance the development and demonstration of strategic radiation-hardened, high-reliability FPGA technologies.

We began to recognize initial revenue on our Purdue University contract to provide our state-of-the-art STT-MRAM technology to support energy-efficient AI solutions. As part of our first milestone, we delivered the process design kit, or PDK, so Purdue can initiate chip design. We also shared the initial process development results, including magnetic tunnel junction, or MTJ, parameters. We are continuing with process development to deliver low-power MTJ devices with fast and reliable switching characteristics. We expect this project to also ramp as the year progresses. This project aims to deliver an energy-efficient neuromorphic computing chip for edge AI applications. Lastly, we continue to recognize revenue from our ongoing project with the leading provider of sensor devices to provide foundry services for their latest generation TMR sensor device on our MRAM line in our Chandler facility. We completed qualification and are now at a steady state of production.

With respect to below-the-line items, we recognized $0.4 million in other income in the Q1 and $6.5 million to date from the $14.6 million contract we have with a DoD contractor to develop a sustainment plan for our MRAM manufacturing facilities to provide continuous onshore MRAM capabilities to their aerospace and defense customers. We expect this business to pick up meaningfully in the back half of the year. In March, we attended Embedded World in Nuremberg, Germany. This was our largest presence since 2017, with heavy traffic through our booth with existing and potential new customers. Our customer engagements ranged from PLCs, storage, gaming, FPGA partners, SoC, and board partners, etc. The strong interest was demonstrated through the significant media coverage of Everspin and its PERSYST line of products at the event.

At the show, we also announced two new products as part of our xSPI family, the PERSYST EM064LX and EM128LX, which feature an expanded temperature range of minus 40 degrees Celsius to plus 125 degrees Celsius, meeting the AEC Q100 Grade 1 standard for automotive application. This expanded temperature range addresses the growing demand for persistent, high-speed memory in aerospace, defense, and extreme industrial environments and provides designers with a robust, fast, and scalable alternative to static RAM or NOR flash. Engineering samples of the EM064LX and EM128LXHR will be available in June 2025, with full production scheduled for late 2025. In addition, we had a great example of the success of our enablement efforts at the event. A customer at the show was given a Flywire board to test our PERSYST EM064LX part. The customer hooked it up to his platform and asked for drivers.

It was an STM32-based board, and we directed the customer to the GitHub location for our drivers that we had just released. The demo board worked seamlessly, and the customer was able to evaluate our superior solution compared to the standard memory solution. Everspin's PERSYT MRAM products are a dependable memory solution where harsh environments and reliability are paramount. These features have enabled a couple of marquee design wins, and we expect similar mission-critical design opportunities in the future. We are proud to be partnered with Blue Origin on their Blue Moon Mark 1 lander mission, set to travel to the Moon later this year, and congratulate Blue Origin on the launch of New Shepard's NS-31 mission, the first all-female flight crew since 1963. Astro Digital, a supplier of complete satellite systems and mission support systems, has selected Everspin MRAM for their deep space missions.

Astro Digital's flight computer utilizes Everspin's PERSYST MRAM solution, which is the primary processor for the satellite system. It is responsible for receiving and storing command sequences from users on the ground, sending critical telemetry data, and distributing information and traffic to the various subsystems onboard the satellite. It is designed for applications from Low Earth Orbit, LEO, to Geosynchronous orbit, GEO, up to 42,000 kilometers altitude, where the environments are harsh and reliability is paramount. Our outlook for 2025 remains consistent. We continue to expect the year to be weighted more heavily towards the second half of 2025 due to our typical seasonality and do not expect a direct material impact from tariffs on our results. I will now turn it over to our CFO, Bill Cooper, who will walk you through our Q1 financials and Q2 2025 guidance. Bill?

Bill Cooper (CFO)

Thank you, Sanjeev. Our Q1 results reflect the consistency of our execution. During the Q1, we delivered revenue of $13.1 million, above our guidance range of $12-$13 million, driven by stronger-than-expected product revenue. MRAM product sales in the Q1, which include both Toggle and STT-MRAM revenue, was $11.0 million, compared to $10.9 million in Q1 2024, consistent with our product sales of $11.0 million in the Q4 of 2024. Licensing, royalty, patent, and other revenue in the Q1 decreased to $2.1 million, compared to $3.6 million in Q1 2024. This reduction was a result of lower revenue from our project with Frontgrade, which reflects the lumpy nature of these projects. Turning to gross margin, our GAAP gross margin was 51.4% for the Q1, up slightly from 51.3% in the Q4 and down from 56.5% in Q1 2024.

The decrease relative to the same period last year was due to lower mix of high margin licensing and other revenue. GAAP operating expenses for the Q1 of 2025 were $8.7 million, compared to $8.8 million in the Q1 of 2024. In the Q1 of 2025, the company recorded $0.4 million of other income related to the strategic award we won in August to develop a long-term plan to provide manufacturing services for aerospace and defense segments. We recorded Q1 non-GAAP net income of $0.4 million, or $0.02 per diluted share, based on 22.4 million weighted average diluted shares outstanding. This was above our guidance range of a non-GAAP net loss of $0.05 to break-even results due to slightly higher revenue and gross margin and prudent operating expense management.

This compares to non-GAAP net income of $1.5 million, or $0.07 per diluted share in the Q1 of 2024. As a reminder, non-GAAP results are calculated by removing the impact of stock-based compensation. We are pleased that our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $42.2 million, up $0.1 million from $42.1 million at the end of the prior quarter. Cash flow generated from operations was $1.4 million for the Q1. Inventories increased sequentially due to increasing our stock for existing and new products for future opportunities, as well as uncertainty in macro business conditions on trade rhetoric and actions. We did not experience any tariff-related impacts on our results in the Q1. As Sanjeev mentioned, we continue to expect 2025 to be more heavily weighted towards the second half of the year, reflecting our typical seasonality.

Taking these factors into consideration, we expect Q2 total revenue in the range of $12.5-$13.5 million and GAAP net loss per basic share to be between $0.05 and break-even. On a non-GAAP basis, we anticipate net income per basic share to be between break-even and $0.05. Based on the United States exemption and our shipping terms into China, our current guidance for Q2 2025 does not include potential impact from tariffs. However, the situation continues to be fluid, and we are monitoring closely. In summary, we are pleased with our solid results this quarter, driven by strength in our product revenue and rad-hard projects. Looking forward, we remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue. We certainly thank all of the folks on our team for their prudent expense management.

Operator, you may now open the line for questions.

Operator (participant)

Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Quinn Bolton with Needham & Company. Your line is open.

Quinn Bolton (Senior Analyst of Communication ICs and Consumer Semiconductor Companies)

Hey, guys. Congratulations on the nice results. I guess maybe just to start, Bill, your comment there at the end, talking about Q2 guidance not including any potential tariff impact, especially as you look to China. To the extent that you have products manufactured in the US, either at your facility or I'm not sure whether GlobalFoundries is US or overseas, but wouldn't those products be subject to tariffs going into China? Could there be an impact there? If so, could you give us a sense how much of your product flows through China, whether it's for consumption in China or re-export?

Bill Cooper (CFO)

Yeah. Long question, but certainly expected the tariffs to come up. A couple of things. Yes, we do get some of our wafers from GlobalFoundries, and that is categorized as German-sourced. We do have some wafers that are manufactured in the United States and some that are manufactured actually in Taiwan as well. When you step back and look at it, a lot of our shipments go around the world, but we do not have a lot of shipments that go directly into China from Everspin. Of course, those go through distribution channels. When you look at our shipping terms, essentially the importer at that point would be responsible for the tariffs. On a net basis, I would say direct China sales are not a significant portion of our sales.

Quinn Bolton (Senior Analyst of Communication ICs and Consumer Semiconductor Companies)

Okay. It sounds like it is pretty low risk, even if the China tariffs stick, because it just sounds like not a lot of your business flows through China or China manufacturing.

Bill Cooper (CFO)

Yes, that's right.

Quinn Bolton (Senior Analyst of Communication ICs and Consumer Semiconductor Companies)

Okay. Great. Oh, go ahead.

Bill Cooper (CFO)

Yeah. All of our product is final assembled in Taiwan. We do have everything that's final assembled in Taiwan. When you look at China, what they really look kind of through to is where was the wafer manufactured at. That, again, tends to be very low volume for us. It gets directly shipped into China.

Quinn Bolton (Senior Analyst of Communication ICs and Consumer Semiconductor Companies)

Got it. Okay. Thank you for that. Maybe it sounds like your guidance for 2025 is playing out as you expected last quarter. A number of, I'll call it, your peers in the industry that have exposure to sort of the industrial markets this earnings season have started to talk about green shoots or seeing sort of signs of cyclical recovery. I know tariff uncertainty is certainly out there. For your industrial business, some of the new STT-MRAM wins, are you starting to see encouraging signs that orders are picking up, backlog is starting to build? Would you agree that you're starting to see signs of a cyclical recovery in that sort of more industrial segment of the business?

Bill Cooper (CFO)

Yes, Quinn. Definitely. I think we are starting to see a little bit of improvement in terms of the backlog. I am pleased to kind of see that. I think we do not really give that exact information out, of course. Certainly, the backlog is improving, and I think the traction on some of the STT products has also been improved.

Quinn Bolton (Senior Analyst of Communication ICs and Consumer Semiconductor Companies)

Great. Maybe just one last quick one for me. Any sort of commentary on the Q2 guide, just the split between products and licensing and other, would it continue to be sort of fairly heavily driven by products, or do you see both segments up? Any comment would be helpful.

Bill Cooper (CFO)

Yeah. I don't think we guide specifically around the product and licensing split, but definitely expect to see that move upward overall.

Quinn Bolton (Senior Analyst of Communication ICs and Consumer Semiconductor Companies)

Perfect. Okay. Thank you.

Bill Cooper (CFO)

Yeah.

Operator (participant)

One moment for our next question. Our next question comes from Richard Shannon with Craig-Hallum. Your line is open.

Richard Shannon (Senior Research Analyst)

Hi, guys. Thanks for taking my questions as well. I have a question on the Q1 report here on gross margins, specifically product gross margins, as I located here in my model here. I'm calculating the product revenue is about 47%, which is down a fair amount from 54%. It has moved around a bit over the last number of quarters here. How do we understand this dynamic here, and do we expect it to settle out? Where do we sit, this 47%? How is that relative to where you expect it to go, say, the rest of the year?

Bill Cooper (CFO)

Yeah. I don't think we get as granular as that in terms of where the gross margin is, Richard. At the 51%, right, we see that it's really consistent between Q4 and Q1. I would say you can kind of look for that consistency out, 50-plus % gross margins through the rest of the year as well.

Richard Shannon (Senior Research Analyst)

Okay. Fair enough, then. Let's see here. I guess maybe I want to ask a question on commentary about second half weighting. I know you've reiterated this from at least the last quarter, maybe more than that. Wanted to hear the, and you kind of call it out as being largely seasonality-driven here, but wondered if there's any other dynamics here that would help this weighting, particularly with new products, especially the newer ones you've brought out to market in the last year or so, whether this is going to have any impact. Also adding to that, on the kind of licensing revenue bucket, whether you're seeing that kind of weighting as well there.

Bill Cooper (CFO)

Yes. I would say definitely going to see some increase in the back half of the year. That is kind of our expectations. Again, right, there has been some overhang in some of the folks as they digest their inventory out in the various channels. We expect to see that. Of course, we are starting to see some, we have good continued pickup in terms of just the PERSYST portfolio, and as well seeing some additional traction on the STT products. That is the best visibility we have at the time. I think also on the licensing revenue as well and existing DoD contract, we will expect to see some increase on those areas as well in the back half of the year.

Sanjeev Aggarwal (CEO)

Yeah. Just to add some color, Richard, over here, right? I mean, like Bill mentioned, we are seeing the bottom of the inventory correction, for lack of a better phrase. Basically, we are seeing our backlogs build up sooner than previous quarters. That behavior of last-minute orders is becoming more prevalent. You will see that we have actually based our comments based on that behavior from our customers. Also, the STT products with the xSPI interface that we brought to the market in 2022, I think those are now basically converting from design wins into early production in the second half of 2025. I think those two factors are what is driving our comment on second-half revenue being better than first half.

Richard Shannon (Senior Research Analyst)

Okay. That is helpful and good to hear as well. Last two quick questions here. This is responding to Sanjeev. I think you're prepared to remark to your talking about the other income bucket and expect that to pick up in the second half of 2025. Can you characterize or even quantify what you mean by that, please?

Sanjeev Aggarwal (CEO)

Yeah. I think, like we had talked about earlier, this project was front-loaded in Q4 of last year. We did have a lot of milestones and expenses related to that and hours related to that. Q1 was slightly light. I think going forward in Q2 onwards, the activity is going to increase again. Some of the orders were placed for equipment. We're going to have some engineering hours associated with the bring-up of that equipment. In general, we do have quarterly reports that are due for this project. Those are the hours and revenue that we would recognize in 2025.

Richard Shannon (Senior Research Analyst)

Okay. Helpful. One last quick question for Bill here. I think I may have missed the commentary on the OpEx. It was a bit higher than at least I had projected. I know you do not give guidance for that, but how should we look at this in the context of going throughout the rest of the year?

Bill Cooper (CFO)

Yeah. Good question, Richard. I think on the OpEx side, what we would expect to see is to kind of expect we have mentioned last time that we were going to do some product development type work. I think you'll see some of that coming through as we go throughout the year. Generally, I think you're going to see OpEx. We expect it to kind of be in the same range, I would say, throughout the rest of the year.

Richard Shannon (Senior Research Analyst)

Okay. Fair enough. That's very helpful. That is all the questions for me. Thank you.

Bill Cooper (CFO)

Okay. Thanks, Richard.

Operator (participant)

Again, ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. I am not showing any further questions at this time. I would like to turn the call back over to management for any closing remarks.

Sanjeev Aggarwal (CEO)

Yeah. I just want to say thank you to everyone for joining the call. We will talk to you again at the next earnings call in Q2. Thank you. Bye.

Operator (participant)

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.