Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Everspin Technologies Inc (MRAM, Financial) delivered revenue and net loss within their guidance range, with revenue of $10.6 million.
- The company ended the quarter with a strong balance sheet, including cash of $36.8 million.
- Everspin experienced strong traction with their 4 meg to 128 megabit MRAM PERSYST family globally, especially in Europe and the Asia Pacific regions.
- IBM chose Everspin's persist one gigabit STT-MRAM solution for its flash core module, marking the fourth generation of IBM's FCM featuring Everspin's technology.
- Everspin entered into a strategic agreement with a leading provider of sensor devices to provide foundry services for the latest generation TMR sensor device.
Negative Points
- Everspin experienced a decline in product sales, with MRAM product sales decreasing to $9.9 million from $13.4 million in Q2 2023.
- Licensing, royalty, patent, and other revenue decreased to $0.7 million from $2.3 million in Q2 2023.
- The company's GAAP gross margin decreased to 49% from 58.4% in Q2 2023, due to a decline in product sales and licensing revenue.
- Everspin reported a net loss of $2.5 million or $0.12 per basic share, compared to net income of $3.9 million or $0.18 per diluted share in Q2 2023.
- The company continues to face challenges with inventory consumption at customers and unfavorable currency exchange rates in the Asia Pacific markets.
Q & A Highlights
Q: Can you provide more details on the increasing design win momentum in Europe and APAC? Are there specific applications for these designs?
A: Sanjeev Aggarwal, President and CEO: The design wins are primarily targeted towards programmable logic controllers in industrial automation, particularly in Japan and Europe. We are also seeing traction with FPGA companies and in aerospace and defense sectors. These design wins involve NOR flash replacement and programmable logic controllers, utilizing our low-density STT-MRAM product with interfaces compatible with NOR flash and SRAM.
Q: What is the current status of inventory digestion among your customers, and when do you expect to return to normal shipping levels?
A: Sanjeev Aggarwal, President and CEO: We are seeing signals of inventory consumption, with customers placing orders with short lead times. This suggests they are consuming inventory and ordering last minute to conserve cash. We expect a return to normal lead times and inventory levels by the end of the year.
Q: Can you explain the factors affecting the gross margin, which was down to 49% this quarter?
A: Matt Tenorio, Interim CFO: The decrease in gross margin is due to a mix shift towards lower-margin products and the absorption of fixed costs over lower volumes. We expect improvement as the year progresses.
Q: Regarding the third-quarter guidance, is the expected revenue growth coming from product sales or licensing and royalties?
A: Matt Tenorio, Interim CFO: We expect product revenue to increase sequentially, with growth anticipated in our high-density STT-MRAM products in the second half of the year.
Q: How should we think about the revenue potential of the PERSIST product line over the next few quarters?
A: Sanjeev Aggarwal, President and CEO: Our goal is to achieve revenue levels from PERSIST products that are 50% of our current Toggle MRAM revenues within the next couple of years. We expect to start converting design wins into revenue towards the end of 2024 or early 2025, with meaningful revenue in 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
