MRAM - Earnings call transcript Q4 2018 | Everspin Technologies, Inc.

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Operator

Good afternoon, and welcome to the Everspin Technologies Fourth Quarter and Fiscal Year 2018 Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded today, March 14, 2019. I would now like to turn the call over to Leanne Sievers, President of Shelton Group, Investors Relations. Leanne, please go ahead.

Leanne Sievers

to Conference Fourth Call. welcome Year and and Earnings XXXX afternoon, Everspin Quarter Technologies Full Good I'm Everspin's Investor Sievers, Relations Leanne President firm. of Shelton Group,

CEO; Financial today Jeff me are Conley, President Joining Kevin Winzeler, Officer. and Chief Everspin's and

Form we as www.everspin.com with Kevin at ahead. at from this intend President and this website Everspin's days in XX successfully Before statements of Everspin. including, that forward-looking conference These to least made you pipeline Everspin's including SEC to forward-looking and please current time and bringing other statements. date We this executing in business, limited contained time the Conley. for now available the be forward-looking and the not by of factors customer to that the on filings, statements call XX, you MRAM market to, we we industry filings Kevin, to future for go the to encourage and replay call Everspin's would which March actual based turn XX-K goals, events update financial to Relations manufacturing to Everspin's All call, its audio XXXX, future begin and information. involve judgments, This will those review business regarding want differ estimates, I'd products remind not cause conference the call, and law, SEC our I CEO, for design over from discuss statements Investor technology, section but with like call contains And investing adoption and SEC uncertainties plan. our XXXX do made and risk market are expectations associated in required may performance in on forward-looking filed of except conditions as to risks are trends results of may and on in materially by

Kevin Conley

and and a was on product as We afternoon, leader. our Thank a of a with MRAM our everyone. market was you, transformational STT-MRAM progress focus even evolving products and our XXXX successfully class product It end while preproduction year. executed new an products the customer the introduced growth Everspin supply chain. MRAM commercialized MRAM year launch X-gigabit XXX-megabit We Leanne. second-generation increased discrete MRAM Good measurable technology continuing of part on for before a the and putting of mix well, initiatives. year

long-term our lower with XXXX, with XXXX. MRAM approximately guidance XX%. due year our we significant Our above total impactful to quarter over sequentially strategic our maintained revenue contributing relatively revenue high reflecting is the program consistent continued increasing MRAM, to to low This in targeted XX% was XX% and first of margin on lower sequentially year-over-year with in for spending We ended Toggle more an I but revenue fourth the XXXX the and reduction results automotive also a engagement. of margin leadership, start expectations will technology showed R&D, which million, a focus objectives. in QX increased end for quarter mainly average of our gross an QX exceeding $XX.X range. X%

with one transportation growing ago. a interface, several appreciation automotive The prominent that focus were mission-critical new In World the met these as machines, transition Jeff value common the are in latter in yields programs of will minimal, was towards discrete these line an continue dollars gross activity, adoption electric use management of hybrid Toggle on on we our increasingly in improving A exciting an be MRAM conference gross new Everspin's customers long-term with including with the all reliability. opportunities. This quality manufacturing, on to XXXX machine to will these utilizing area automation, weeks business this forward. we production in memory this Embedded impact our all expect our discussions higher is of applications, Toggle combining number However, and works There in for saw in vehicles. of performance, Battery the positive gaming about value going margin MRAM in of thread making unique contribution couple part systems applications, and Toggle improvements opportunities at and as call. unmatched exhibited and brings MRAM talk of in margins to these Toggle to MRAM. later strategy that Everspin industrial Germany human

with Our Toggle of remains wins. base design solid pipeline customer a long-term healthy

back Toggle a half a start we production term, MRAM pipeline track second design to sales Toggle longer demand sequential on this core the source supply for the revenue will remains remains that as environment, and the To stable us move in growth marketing of new fab our growth for year. teams. anticipate Assuming execution in Driving growth our our a new for support on captive SilTerra of XXXX. qualifying focus

aligned MRAM continues with embedded partnership million XXX and developments. distinct only embedded this as production Turning such the for supplier over made customers SOC for for GF well believe a our support logic as MRAM is persistent XX-nanometer GLOBALFOUNDRIES over for chips the STT-MRAM demand gives a as shipping of partner investments and mainstream that foundries. indicator another competition meeting maturing over production memory technology momentum of our of the the The industry to shipments are synopsis discrete in memory the growing MRAM libraries and strong technology Moreover, two with market. validation from We have manufacturing customers. units the We advantage that with joint to embedded MRAM announcements is years into gain Everspin readiness. FDX long-standing their this and ecosystem of in that a SOC and announcement view STT-MRAM separate sub-XX-nanometer readiness we manufacturing experience

product our applications, the flash has performing system This array demand memory This showcasing our throughout persistent well was core family. expanded in memory data for architecture around delivers benefits a discrete component IBM's persistent revolutionary array for and earlier, mentioned ST performance, the STT-MRAM density targeting a successfully the first the subsequently module all-flash unique VXXXX production continue ramp built I unsurpassed center storewide module consistent adopted grow of to flash in latency, STT-MRAM flash our XXX-megabit XXXX the of NVMe had and of family technology. shipments - groundbreaking As core our year-end. low and product, into

and we and a significant to We upon new first of XXXX accounts. expect success other this Building of production ended lead has shipping achieving our of to customer been has for been positive. this product, world's throughout preproduction first opportunity the feedback evaluation expanding device. STT-MRAM milestone customer Customer important first the STT-MRAM, well samples in in X-gigabit this further our quarter very year XX-nanometer progressing

production half working for Our the customer qualification and this hard ramp second in in preparation year. of team is

wide products we STT-MRAM market XXXX FPGA-based ASICs fourth products the our will available half teams controllers today. the will for turn results work growing controller quarter beyond. and of review develop variety become is of high-density providing readily customers. picked a focused Everspin STT-MRAM first storage the the XXXX, low of like from also Between now our in of then, technology Jeff, on class products to in year. support SSDs to With opportunities that platforms Our acceleration of the several driven Support support the designed I'd quarter new up our utilizing now our opens details NVMe providers remain in to and by leading ecosystem that expand guidance. who with the latency, store's second our these that, integration data this in available to momentum now a possibility expanding for the call merchant into XXXX opportunities STT-MRAM over while in interest for end

Jeffrey Winzeler

start Full full XXXX of of XX% million million quarter $X.X by you, XX% and up which from was previous from income the and in up $XX.X XXXX statement. last to in good quarter from from year-over-year X% reviewing sales Fourth million the down in represented in everyone. total XXXX. afternoon, the from $XX.X quarter fourth Thank million $XX.X or XXXX quarter XX% quarter year product during in and third and year fourth of $XX.X of increased Kevin, up the from the Revenue XX% same total sales quarter. revenue was year XXXX. revenue $XX.X XX% million sales million, X% $XX.X the $XX.X of XX% million million quarter or I'll or

result to in quarter previous of of this in million $XX.X quarter million XXXX of $X.X XXXX sales in revenue For in The million was largely back-end quarter the the $X the royalties and XXXX. service and fourth fourth $XX.X year quarter. from foundries in XXXX, fourth full to million revenue increase revenue. compared the up contributed were the other $X approximately XX% product higher-than-normal in million Licensing

licensing, the revenue fourth in quarter, STT-MRAM Toggle strong includes $X.X other increase For increased reflects product a the fourth royalties quarter. million sequential a revenue MRAM decline in the to in from product the Toggle and fourth year, XX% XXXX. $X.X quarter STT-MRAM, a in XX% the in and from $X.X million which sales MRAM million, were million full the $X.X reductions and revenue XXXX of primarily in in by previous $XX.X X% sequential automotive decrease offset customer, large partially million MRAM from during the product The quarter. growth

value achieved automotive Toggle XXXX, Toggle to slowed program gross record to dollars believe additional in have growth business. manufacturing to capacity that the pursue While we've we profit minimal higher on up short-term no impact the revenues freeing it'll that while of Toggle long-term our impact existing discrete revenue

revenue million quarter $X.X XX% Toggle $XX.X in prior strong million MRAM or of year or compared XXXX a increased of products quarter both XXXX the Gross revenue STT-MRAM was of revenues. $X.X and For the of as million the growth to for the from XX.X% XX% result during in fourth fourth XXXX, XXXX profit full XX.X% $XX.X sales of of revenue million million and quarter. in or to $X.X

that overall overall which reduced our margin was quarter, actions fourth Toggle yields approximately fourth awaiting reduced that improve valuation gross points. sold on took to we In our manufacturing While X the we quarter, goods two in our and retest, percentage. of by material inventory cost increased hold margin gross our continue reduced of the the

to or admin cost nature from of their moved R&D approximately of of labor work. XX cost employees reclass we due changing and Additionally, goods sold the into

affect a run did in margin did labor degradation of result not reclassification rate. this X-point gross EPS, to While our it

fourth million revenue in Breaking GLOBALFOUNDRIES. quarter compared the product development quarter For fourth spending ago were fourth and of and in $X.X a SG&A R&D XX.X% in Operating compared million or XXXX. $X.X the expenses in profit last gross operating The expenses of $XX.X operating our quarter million year million million million of spending quarter XX.X% with $X.X agreement in to same were last million due was STT-MRAM down $XX.X compared the in XXXX expenses and for the was was million per $X.X spending XXXX, to development million full and our XXXX the million $XX.X process year quarter. $XX.X to or to reduction quarter reduced development $X.X joint to fourth quarter. sequential compared to the million the related quarter, $X.X research for and quarter. prior in fourth the $X.X XXXX

net of of of based loss a For Interest XXXX, the XXXX. the $X.X weighted marketing spending, and and income or by XXXX quarter million fourth $X.XX in compared in expense for in was on the to of the to quarter. loss expenses share or quarter operating XXXX income was STT-MRAM GAAP to $X.X $XXX,XXX million expenses as XX.X from a in during quarter $X.X quarter loss quarter in $X.X in per GAAP $XX,XXX quarter the sales Other increase ago in the income $X.XX quarter. technology year. the R&D operating loss loss fourth XXXX for million Full company's compared $XX.X $X.X $X.XX $XXX,XXX of expenses were emphasis third the fourth full XXXX the fourth share was $XXX,XXX million outstanding. in development offset million net compared decrease of or prior per XXXX on $XXX,XXX This during the SG&A shares reflect a year compares in of million year with million the share a a million loss fourth $XXX,XXX per average and same the $XX.X and previous has year to quarter XXXX. shifted

was XXXX. $XX.X $XX.X loss For the full year million to loss XXXX, net $X.XX $X.X the per compared or per or loss share million share in

the fourth at of Now of quarter end compared the million of sheet, were turning XXXX. cash cash end to to $XX.X the and at equivalents $XX.X quarter the balance million the third

compared from - burn $XX.X $XX.X million in $XX.X fourth at million quarter of third XXXX. quarter XXXX were cash of in the $XX.X in compared the previous million was quarter. I'm the Total Total that was the million to the million Stockholders' quarter from million million to fourth million assets XXXX in in to in operating $XX.X XXXX Our million equity $XX.X $XX compared down sorry, XX% to end third was million $XX.X $XX.X quarter the of XXXX. liabilities in in $XX.X XXXX. were

share, on count outstanding. between reflecting Looking shares the XXXX, share per service lower automotive loss XX.X range based reduction range GAAP million $X.X $X.XX and in revenue. million average ahead share first $X.X loss to The quarter per Toggle of resulting the $X.XX per weighted revenues to expect an of million, revenue we back-end between will and and share loss foundries

turn I'll for back the over closing call to Kevin Now remarks. some

Kevin Conley

an summary, our executional In from engagement. transformation excellence, our enterprise ecosystem operational Everspin, significant results promises. was continuing delivering persistence exciting Jeff. building innovation of customer in for gains and year legacy cultural discipline, with a of business product XXXX strong Thanks, We in strength, making development, demonstrated

industry-wide. seeing may our the global Looking Toggle semiconductor creating key create that friction automotive for effect are market of pressure beginning and having our that signs pressure is at conditions industrial we XXXX some in the demand and see market are trade some ahead, on segments products. some in We

focus leadership. our design operational near-term While our remains makes wins, technology us this cautious and new excellence on in outlook,

the will sales and in memory driving storage Troy and team channels. us customer the experience a to sales technology key business the We're valued relationship be variety enhancing foundation MRAM with Adding brings open Sales gained week. customers. with relevant marketing to our laying will deeply Worldwide store to keeping Troy growth Microsemi, announce starting leadership the I'm for transformation, and us of relevant that Winslow We STT-MRAM passionate through and is proud experience expansion him We'll have disruptive questions. adoption to next our continued comes adoption. our a and theme long-term Toggle of through growth to Everspin's for and Intel. In Everspin joining take call excited PMC-Sierra at our team of with next MRAM on mission we of and sales VP Troy Troy as us have level. growing join memory to continue your to now and

Operator

[Operator Instructions].

line of Kevin Our with Cassidy first the question comes Stifel. from

Kevin Cassidy

it of Congratulations some on - getting wonder XXX-gigabit compared device out. the interest, on some the mentioned us feel X-gigabit that a XX%, like - is give I say, But the the you of you introduced. that? any type still numbers if And you're first of can you XXX-gigabit have you up just it feel when number can getting was us X-gigabit, for engagements to XX%, give relative

Kevin Conley

that of wait there interested customers characterize to indicated we that were on the to out schedule, it original a for best is, were going X-gig. way talked that probably we push Kevin, about the the when number

have engaged us. they so with to remain And continued

than the percentage. XXX, So the give is on you certainly it hard a but higher for it's me number was specific to

Kevin Cassidy

And from also recent Samsung. announcements Intel MRAM embedded Okay. Has at both accelerated there's GLOBALFOUNDRIES? MRAM the of interest been in this embedded and

Kevin Conley

that view don't customer detailed engagement. I of have the

about customer pipeline GLOBALFOUNDRIES engaged view side. that the engagements embedded talking first there know have out that I as of I I with think industry think interest outlook, a is as on they I far the they're and significant

terms is underscores technology way the this was industry-wide I as offering. maturing was the an - here raised how think our is positive in commentary of the relatively of

Operator

line with Company. of the from Needham & comes Rajiv question next Gill Our

Rajvindra Gill

why you coming Toggle is auto? on in elaborate on the clarity business automotive that alternative because of on Maybe can kind it Is down loss, it because automotive that any share customer? is market of technologies, particular that OEM, Question of product. particular

Kevin Conley

with had Well, said for there, our as some one it the but Rajiv, objectives. a engagement in that I was commentary also business overall significant misalignment us

reasons, We In for did not engagement the what company. that to for variety case, to needed try to support find best this needs. are it best continue. a us way our particular customer-oriented a of have very their We

Rajvindra Gill

I design Okay. sequential customers half. with about it Toggle to Is at sequential based I Toggle confidence - that the on second Trying with mean, new based of sense new And XXXX with the the of correctly, half IBM? if your the is STT-MRAM? growth heard comment given or second what pipeline, expansion at the get respect on in in confidence of a the to is that growth

Kevin Conley

Yes, combination those. both really a of Rajiv, it's of

the wins ramp as think with a new to We will starting to also said, year, design be have of contributor of a STT at end with X-gig we Toggle. pipeline I And the this growth.

Rajvindra Gill

And say and to to talked IBM? XXXX storage expanding I about XXXX. it Okay, - at all-flash the array they're array, clarify, got you're are I just you products it. think So your you you extending heard

more in that So IBM is is their correct? incorporating products, MRAM

Kevin Conley

That's expanded families right. number its adoption introduction. of supports that of of in original the terms flash it module core has The the since

Rajvindra Gill

Okay, very the to SOCs agreement, respect to and respect arrangement, that good. talked potential about see me, interest any for demand in And more last you for in the MRAM now with MCUs? and question with GLOBALFOUNDRIES embedded XXXX, that licensing more XXXX, past update we revenue for

Kevin Conley

royalties follow agreement would wafers licensed it us enter then MRAM And to from mass shipped as us, them. are with based to would payments the their come production them with still is their with as agreement them. I with commentary regard said, on consistent to production licensing pretty remained in the Well, It's And place. production. upon our from royalty royalty has mass and - objective that on their as XXXX technology

Rajvindra Gill

production anticipating royalty for we're some products in revenue XXXX. expecting and So GLOBALFOUNDRIES some those of mass

Kevin Conley

don't It have revenue timing for would but on I royalty me XXXX. to probably happen that the could visibility that starting of specific hard that. majority of precise soon, comment, be in is The

Operator

from next line Our comes of Craig-Hallum. question Shannon with the Richard

Richard Shannon

ask want ones. I to of in make sure effects the regarding fourth I'll Maybe the Jeff, I quarter. comments your financial couple of gross a caught margin

by points labor R&D X inventory that it COGS you correct? and had So hit that and by margin you X increased in it that Is impacted you COGS said gross of valuation had the cost or points. then also shifting

Jeffrey Winzeler

correct. That's

Richard Shannon

inventory the to is was fourth degree, So a is to quarter, some continue valuation situation? this that it just in one-time going

Jeffrey Winzeler

onetime. more would a characterize as I it much

the you which give mechanism throughout yield to it, So extensively behind talked the we about. pretty we've year issues had

units have through may may final test failed those good of to final gone test units. for other that be allow that good Some have them but be still test, would characteristics

So we've that the we've down what yields in done our our retesting lot of we those those. held we're onto value on units. written based is a of on those seeing of have the But - inventory

So ongoing of for us inventory not step we look every that take, the a that an quarter. We to move their being issue. that MRAM one a is people regard would into natural it's help to of that characterize evaluation With of Toggle as process now different. these is used output little movement, people engineers skill-set to manufacturing I maximize at and the our develop the technology sold. and goods Many are cost manufacturing.

able make role cost truly need into spending sure cost still we're more a they're goods That for. in of of $XXX,XXX our that will our doesn't know company. moving compensate target have reflect goods We're model. that targeting more change gross to and of to to roughly we've sold. do So that in XX% as margin got sold for the the cost we We the operational we

hit transfer is to below line of cost goods it's our Of course, a not EPS a sold. news the into the is, truly from this spending because good

Richard Shannon

sense. That Okay. makes second part

to two fourth did. just of rates XX want a I X you the try kind we of points or bridge in if run a quarter, of think to add So change really already

the down as here? kind guess We chunk licensing the thinking lost a I margins losing the what my although of Obviously, from of step low what revenues you're so mix trying just business. revenues. is what question you're in here And really is, ultimate here know a big don't about first gross think characterizing margin to about for quarter you're gross

if to of first us thought margin for on quarter. for gross I you So a wonder think of can you're the help how formulate what thinking

Jeffrey Winzeler

dynamics obviously of gross is there margin be. a will that into Yes, number that number what play

the back and recovering, getting yields about our talked in we've of are better yields fact the the We're seeing coming final think I we're that manufacturing clearly end tests. out that.

the good the we first a that's indicator those that yield created problems So fixed that in of lot a place. issues

is spending to that margin about clearly So into are yields short of X our somewhat our in us the that of depress will equivalent for the so talked which up, in points moving COGS, general, perspective. a attacks from serve margins We trending will be term. of good

other reduced line that revenue. that are The things about we're happening along is, talking

of full the you're overhead not additional you have your to as account of So extent sold. cost for to part you that goods running out, have cost factory

that's us equipment a Most - depreciated not variable spending. For our factory largely huge look, near of it's hit fully in depreciated. our or is because, our fully

So relatively low. our are costs overhead

we're think have back have of we COGS I the margin as said, that margin but the that of in is, of toward effect. what short-term our target trending an spending additional factory the well from couple as challenges kind unloading do will All a of

Richard Shannon

you the helpful. regarding question Okay, for maybe that X-gig. Kevin, a is

on application that that applications, product. I expand help wonder which general other SSDs. if with maybe expect strong or a engagement seeing X-gig of on the think some mentioned of kind already you regarding you I clash understand you us NVMe-based or can application to

Kevin Conley

Sure.

there Our put the source which primary the the is enablement base ecosystem controllers supply STT into the just of making the we customer is not DDRX interface. X-gigabit SSD in to effort also does that focus it, for sure why into that much remain but area, so

are as as the their video applications that things over applications like things such fabric having fabrics network latency reduce interesting early areas are data help Beyond accelerators, there of that still of days but storage other recorders, as analytics that, well to cameras development, transfer and - recorders those in-flight. of that's make the have video do hundreds that to inferences - the where an sending on data and video do have high-definition to in protect able have ability to be large streams the you some deployments

couple outside those of arena with interest. some the we areas see are a SSD that developing So

Richard Shannon

Okay, to back very jump I'll question, Jeff interesting. My line at last quickly. a

cash there from first terms or quarter, dollar of that delta is expecting? terms approximate net a In you're the does your in burn that for loss

Jeffrey Winzeler

Are the you talking fourth quarter?

Richard Shannon

quarter, first cash first First quarter, expected quarter me. burn, excuse

Jeffrey Winzeler

so don't for guidance provide we Yes, really cash the burn.

think was the burn think flat on we to as I you is, for $XX.X cash XXXX down ramping largely way know, burn previous based though operating in cash which OpEx was model, about million, us what And burned our revenue. keeping our the $X year. million is while from

operational I and the to model think is grew. that fourth what We you our saw continued revenue quarter reduced work. our in spending

into that expecting margins, We're guided revenue. better which that gross Going for likely down. better contribute we've revenue will as come should cash QX,

I our models to to revenue. down predicated It's work. think So the OpEx continue growing while spending on in us, keeping flat

Operator

of line Aman with B. question the Riley. from next Gulani comes Our

Aman Gulani

a And in production maybe Is improvement about so, are that You there margin look XXXX? talked improvement. yield for perspective? from room what like to more if quantify could gross able yield you

Kevin Conley

in at part Yes, did those subsequent challenging year those reviewing reflected the environment, calls year, that performance as the our we it in yields very quarters. was last the earlier a of in to - we

toward QX QX. the started those. improve of up QX, really very really recovery started and the in approach working been baseline The saw end improvement of we signs to has meaningfully things start early diligently team showing to Our

There's uplift cost the have product the reduce production do gross margins of So for ongoing XXXX. ongoing to will that and an certainly a the more on basis into expect room we improvement. helping

the throughout this We lot global will in into putting a year. that an certainly and initiatives continue opportunity effort to improvement yield our work that's on fab of continue

Aman Gulani

it. that that. to you have bit want just your maybe I product more sampling the to of And did customers again, end you this with talk I with said that color that expect hit that me. just the able about X-gigabyte Are product, year, Got mention one do production customer more many how for question your is sampling or that multiple on one you get at to engagements? a with? you is

Kevin Conley

We haven't provided specifics. any

the of those get as - first the function specifications disclose talk the have with those at end confidentiality. flipped customer we for of last we don't them the wins, production switch to agreements samples, preproduction point very way usually parts can all a the engagements year. where those talk in to as early specific - We're now about the just to the is for we again, parts yet. samples, we until So design customers production right need narrow customers that We about we provided haven't that ramp we're we

will And the so that in of we part this get towards as get middle progressively broader terms engagement of year.

Operator

the questions. Kevin I'm showing would turn over this now back At time closing to like I no call further to Conley for remarks.

Kevin Conley

team XXXX evolving of and with turn now chapter this me successful enthusiasm say appreciation transformation. to successful to We Everspin Okay. making for such another our year persistence the Well, thank in again, partners my you for XXXX all making And entire let deep those and questions. a story.

April I'd We'll Midwest on Monica forward progress the firms contact again, disconnect or reporting like joining to our us each Group future you and know your B. encourage I call, Craig-Hallum. for to an May with to that and Riley Boston you contract the in Stifel's call. our schedule look next also roadshow you, you Thank FBR's respective XXth. a if early like Before of we conclude representative through let today's We we'll in during to XX the attending may June be conference on-wheel XX XXrd traveling meeting. these now and Santa today, be conference to you in Operator, sales Shelton at would - call.

Operator

for you thank gentlemen, and Ladies you. Thank in call. participating today's

disconnect. now have may day. Everyone, a You wonderful

Everspin (MRAM) 14 Mar 192018 Q4 Earnings call transcript