Everspin Technologies, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 9, 2022. Everspin develops and sells non-volatile MRAM products, related technology licenses and royalties, patent rights, and foundry and design services.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $55.1 million | $42.0 million |
| Gross profit / margin | $33.1 million / 60.0% | $18.1 million / 43.0% |
| Operating income (loss) | $5.0 million | $(7.6) million |
| Net income (loss) | $4.3 million; $0.22 per diluted share | $(8.5) million; $(0.45) per share |
| Adjusted EBITDA (non-GAAP) | $9.6 million | $(1.6) million |
| Cash from (used in) operations | $9.4 million | $(2.9) million |
Revenue rose 31.2%. Product sales increased 10.2% to $43.9 million, primarily on higher Toggle MRAM volume. Licensing, royalty, patent and other revenue increased to $11.2 million from $2.2 million, including a $5.25 million sale of five patents and revenue from a $6.5 million RAD-Hard product development arrangement. Gross margin improved as manufacturing yields strengthened and higher-margin licensing and patent revenue increased. Operating expenses were $28.0 million, up from $25.7 million.
At year-end, cash and cash equivalents were $21.4 million, versus $14.6 million a year earlier; current assets were $36.8 million and current liabilities $10.3 million. Debt had $5.0 million principal outstanding ($4.9 million net carrying value), down from $8.4 million principal in 2020. The company reported $4.0 million available under its revolving line, subject to borrowing-base availability. It was in compliance with credit-facility covenants. The company reported a $152.8 million accumulated deficit.
Material changes and operating developments
- Revenue mix shifted: product sales were 80% of revenue versus 95% in 2020; licensing, royalty, patent and other revenue were 20% versus 5%.
- Licensing and patent revenue includes transactions that are variable and may not recur at the same level. A $0.8 million royalty adjustment recognized in 2021 related to customer activity in 2020.
- Backlog increased to $47.4 million from $17.7 million. Orders are generally short-term and may be delayed or cancelled without significant penalty.
- New design wins totaled 181 in 2021, compared with 175 in 2020.
- The company terminated its Silterra collaboration agreement in October 2021; it said Silterra had become a second source for Toggle MRAM and no further agreement costs were expected.
- CEO Sanjeev Aggarwal was appointed effective March 14, 2022, succeeding interim leadership; the CFO appointment became permanent in September 2021.
Outlook, risks and unusual items
Management stated that cash, anticipated sales and available credit were expected to meet cash requirements for at least 12 months. No specific revenue or earnings guidance was provided. Management cautioned that future capital needs depend on growth, R&D, sales investment and new product introductions, and that additional financing may be needed over the longer term.
- COVID-19, factory shutdowns and semiconductor supply constraints disrupted demand and operations; management reported slower Toggle MRAM demand, particularly among industrial customers, and manufacturing inefficiencies that affected cost of sales.
- Key risks include reliance on third parties and GLOBALFOUNDRIES for advanced-node production, supply and capacity constraints, customer concentration, price erosion, competition, product yields and defects, and uncertain adoption and commercialization of STT-MRAM.
- The four largest end customers accounted for 47% of 2021 revenue, and one represented more than 10%. Revenue concentration and customer definitions should be considered alongside the separate distributor-based disclosures.
- Patent-sale and RAD-Hard arrangement revenue materially contributed to year-over-year growth. The RAD-Hard contract has $3.2 million of transaction price remaining to be recognized as services are performed, with completion expected in 2024.
- Management found disclosure controls and internal control over financial reporting ineffective at year-end due to a material weakness in inventory controls, including unit-cost allocation and communication between operations and accounting. Remediation efforts were underway. The auditor gave an unqualified opinion on the financial statements but did not attest to internal control effectiveness.
- The filing reports no legal proceedings expected by management to have a material adverse effect. The company ceased to qualify as an emerging growth company effective December 31, 2021, increasing certain reporting obligations and expected public-company costs.
Important facts for investors to verify
- How much of 2021’s revenue and margin improvement is repeatable without the patent transaction and other licensing or development revenue?
- Whether manufacturing yields, supply availability and customer demand—especially Toggle MRAM demand—remain sufficient to support margins and convert backlog into sales.
- Customer concentration, order cancellation exposure, and the distinction between end-customer and direct-customer revenue disclosures.
- Progress in remediating the inventory-control material weakness and whether controls are effective in subsequent reporting periods.
- Debt repayment requirements, revolving-credit availability and covenant headroom; the filing notes the line matures August 5, 2022 and the term loan June 1, 2023.
- Execution and revenue recognition of the RAD-Hard contract, including estimates of remaining performance costs and expected timing.