Everspin Technologies, Inc. — Q2 2023 Form 10-Q
Business context and period: Everspin develops and sells MRAM memory products and licenses related technology. This unaudited quarterly report covers the three and six months ended June 30, 2023; comparisons are with the corresponding 2022 periods. Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $15.7 million | $14.7 million | $30.6 million | $29.1 million |
| Gross profit / margin | $9.2 million / 58.4% | $8.6 million / 58.4% | $17.6 million / 57.6% | $16.9 million / 58.2% |
| Operating expenses | $7.6 million | $6.9 million | $15.3 million | $13.2 million |
| Operating income | $1.6 million | $1.7 million | $2.3 million | $3.8 million |
| Net income | $3.9 million | $1.7 million | $4.6 million | $3.6 million |
| Diluted EPS | $0.18 | $0.08 | $0.22 | $0.17 |
| Operating cash flow | Not presented quarterly | $7.5 million | $3.4 million |
- Revenue mix and trends: Q2 product sales grew 1.4% to $13.4 million; licensing, royalty, patent and other revenue rose 57.7% to $2.3 million, primarily reflecting RAD-Hard 2 licensing. For the first half, revenue rose 5.3%, mainly on higher Toggle MRAM product volume and licensing. H1 regional revenue shifted: APAC declined to $15.6 million from $17.6 million, while North America and EMEA increased to $8.8 million and $6.2 million, respectively.
- Profitability: Q2 gross margin held at 58.4%; H1 margin fell 0.6 percentage points, which management attributed mainly to supplier price increases and lower foundry-services and royalty revenue. H1 operating income declined as operating expenses increased 16.4%, including higher R&D spending on the xSPI STT-MRAM family and higher G&A costs.
- Non-GAAP measure: Adjusted EBITDA was $5.4 million for Q2 and $7.7 million for H1, versus $3.3 million and $6.3 million, respectively, in 2022. The 2023 amounts include the $2.0 million Employee Retention Tax Credit (ERTC); this measure is not a substitute for GAAP results.
- Cash, debt and balance sheet: Cash and cash equivalents were $30.8 million at June 30, up from $26.8 million at year-end 2022. Current assets were $47.6 million and current liabilities $6.0 million. The 2019 credit facility was fully repaid in March; no debt remained at June 30. The payoff included a $170,000 prepayment and termination fee. Lease liabilities totaled $6.1 million. Total assets were $57.3 million and stockholders’ equity $46.1 million.
- Cash flows: H1 operating cash flow was $7.5 million; investing used $1.0 million, mainly for manufacturing equipment; financing used $2.4 million, primarily for $2.8 million of debt repayment. Cash increased $4.0 million during the half-year.
Management outlook, risks and unusual items
- Management believes existing cash is sufficient for anticipated capital requirements over the next 12 months, but says long-term capital needs may exceed available resources and additional funding may be needed. The filing provides no specific revenue or earnings guidance.
- The $2.0 million ERTC refund was recognized in other income in Q2 and H1 2023 when received and deemed reasonably assured of retention. Eligibility may be audited through December 31, 2025; the company says it has received all expected refunds based on submitted applications.
- RAD-Hard development arrangements total $6.5 million each, with performance expected through 2024. Remaining transaction price was expected to be recognized as services are performed; revenue depends partly on estimates of costs to complete.
- Key disclosed risks include uncertain STT-MRAM adoption and sustained profitability; semiconductor demand cyclicality; customer and distributor concentration; dependence on third-party suppliers and GLOBALFOUNDRIES for advanced-node production; supply, capacity, yield and pricing pressures; competition and product-development execution. Management noted ongoing supply-chain and macroeconomic uncertainty.
- The company reported no material legal proceedings, and management concluded disclosure controls were effective as of June 30, 2023.
Important facts for investors to verify
- How much of reported earnings and Adjusted EBITDA reflects the one-time $2.0 million ERTC, and whether eligibility is challenged before the audit window closes.
- Whether product-volume growth and RAD-Hard licensing revenue are repeatable, given the variability of licensing and royalty revenue and the decline in APAC sales.
- Whether gross margin stabilizes as supplier costs, product yields, and foundry-services and royalty revenue evolve.
- Customer concentration and reliance on third-party manufacturing, especially the single foundry for higher-density advanced-node products.
- Whether cash generation and the stated 12-month liquidity outlook remain adequate as R&D investment, capital needs and potential longer-term funding requirements develop.