Everspin Technologies, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 2, 2023. Everspin develops and sells nonvolatile MRAM memory products and licenses related technology, serving industrial, medical, automotive, aerospace and data-center markets.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $60.0 million | $55.1 million |
| Gross profit / margin | $33.9 million / 56.6% | $33.1 million / 60.0% |
| Operating income | $6.2 million | $5.0 million |
| Net income | $6.1 million; $0.29 diluted EPS | $4.3 million; $0.22 diluted EPS |
| Adjusted EBITDA (non-GAAP) | $11.8 million | $9.6 million |
| Operating cash flow | $9.5 million | $9.4 million |
| Cash and equivalents at year-end | $26.8 million | $21.4 million |
- Product sales rose 25.3% to $55.0 million, while licensing, royalty, patent and other revenue fell 55.8% to $5.0 million. Total revenue increased 8.8%.
- Gross margin declined 3.4 percentage points, which management attributed to supplier price increases and lower licensing, royalty, patent and other revenue. Improved Toggle product yields partly offset higher product costs.
- Investing cash outflow was $2.6 million, mainly for manufacturing equipment and software; financing cash outflow was $1.5 million, including $2.4 million of debt repayments.
- At year-end, current assets were $44.7 million and current liabilities were $10.9 million. Debt carrying value was $2.6 million, all current; operating and finance lease liabilities totaled $6.7 million.
Material changes and notable items
- Revenue growth was driven by higher product volumes and pricing; licensing and related revenue fell largely because 2021 included a $5.25 million patent sale. No patent sales occurred in 2022.
- Operating expenses decreased slightly to $27.7 million: research and development spending declined 12.0%, partly because development of the 28nm product had been higher in 2021 and production began in 2022.
- New design wins totaled 210 in 2022, compared with 181 in 2021. Management notes that design wins can take months or years to translate into sales.
- Four largest end customers represented 24% of 2022 revenue, down from 47% in 2021; one customer exceeded 10% of 2022 revenue. Distributors accounted for 85% of revenue in 2022.
- Two radiation-hardened development arrangements each have stated consideration of $6.5 million, with performance expected through 2024. Revenue is recognized over time as work is performed.
Outlook, risks and contingencies
- No specific revenue or earnings guidance is provided. Management believes cash, credit availability and anticipated growth and sales are sufficient for expected capital needs over the next 12 months, but says long-term capital may be insufficient and additional funding may be needed.
- Key risks include uncertain MRAM adoption and profitability, semiconductor cyclicality, supply constraints and inflation, and reliance on third parties. GLOBALFOUNDRIES is the sole foundry for higher-density advanced-node products; its supply and manufacturing arrangements create capacity and continuity risks.
- COVID-related disruptions had affected supply chains and Toggle MRAM demand, particularly among industrial customers. Management said the full impact remained uncertain; broader economic, geopolitical and supply-chain risks were also identified.
- The credit facility is secured by substantially all assets other than intellectual property and restricts certain actions, including dividends. Everspin reported compliance with covenants at year-end. The term loan matured June 1, 2023, and the revolving line was extended to August 5, 2023; the filing reported $4.0 million of line availability, subject to borrowing-base limits.
- Management reported no known legal proceedings expected to have a material adverse effect. The independent auditor issued an unqualified opinion and identified inventory accounting as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting, and stated that a previously identified inventory-control material weakness had been remediated.
Important facts for investors to verify
- Subsequent filings and results: repayment or refinancing of debt maturities in 2023, continued credit-line availability, and compliance with lender covenants.
- Whether product growth and design wins convert into sustained shipments, particularly for newer STT-MRAM products, and whether customer concentration changes.
- Gross-margin trends as supplier costs, product yields, product mix and lower patent/licensing revenue evolve.
- Progress, remaining revenue and costs, and customer or termination conditions for both radiation-hardened development contracts.
- Cash generation and working-capital needs, including receivables growth and inventory valuation; inventory was the auditor’s critical audit matter.