Everspin Technologies, Inc. — FY2020 Form 10-K Summary
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2020; it does not provide standalone fourth-quarter results. Everspin develops and sells non-volatile MRAM memory products, licenses related technology, and provides foundry services. Its markets include industrial, medical, automotive, aerospace and data center applications.
Key financial results
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $42.0 million | $37.5 million |
| Gross profit / margin | $18.1 million / 43.0% | $18.3 million / 48.9% |
| Operating loss | $7.6 million | $14.4 million |
| Net loss | $8.5 million | $14.7 million |
| Adjusted EBITDA (non-GAAP) | $(1.9) million | $(7.9) million |
| Cash used in operating activities | $2.9 million | $8.1 million |
| Capital expenditures / investing cash use | $0.3 million | $0.9 million |
At December 31, 2020, cash and cash equivalents were $14.6 million, compared with $14.5 million a year earlier. Total assets were $32.5 million and stockholders’ equity was $17.4 million. Debt principal outstanding was $8.4 million ($8.0 million net carrying value); $4.2 million of debt was classified as current. The revolving facility had $3.0 million of stated remaining availability, subject to borrowing-base limits. The company reported compliance with its debt covenants. Management believed available cash, credit availability and anticipated sales would fund requirements for at least 12 months.
Changes and operating trends
- Revenue rose 12.1%, primarily on higher STT-MRAM product sales. Product sales increased 15.2% to $39.8 million; licensing, royalty and other revenue declined 24.9% to $2.2 million.
- Gross margin fell to 43.0% from 48.9%. Cost of sales increased 24.9%, reflecting greater wafer volume and a $1.9 million excess-and-obsolete inventory reserve, partly offset by improved manufacturing yields.
- Operating expenses declined to $25.7 million from $32.7 million, reflecting lower development spending, headcount reductions and reduced travel. FY2019 included $0.8 million of restructuring expense; no restructuring expense was recorded in FY2020.
- Design wins totaled 175 in 2020, versus 83 in 2019, based on the quarterly figures disclosed. Backlog was $17.7 million at year-end, compared with $16.2 million, but orders may be rescheduled or cancelled without significant penalty.
- Revenue from APAC increased to $29.5 million from $20.1 million; EMEA revenue declined to $3.3 million from $8.7 million. The four largest end customers represented 45% of FY2020 revenue, versus 22% in FY2019.
Outlook, risks and notable matters
- No formal revenue or earnings guidance is provided. Management’s 12-month liquidity assessment is its stated outlook, not a guarantee; the company has a history of losses and may require additional financing for longer-term needs.
- COVID-19 and related supply-chain disruption adversely affected operations and demand, particularly Toggle MRAM demand from industrial customers. Management said the future demand impact remained uncertain. Remote work also delayed manufacturing-yield improvement projects and affected cost of sales.
- Supply and manufacturing concentration are significant risks: Everspin relies on third parties for manufacturing, assembly, packaging and testing, and GLOBALFOUNDRIES is its sole foundry for higher-density products on advanced nodes. Semiconductor supply constraints and supplier price increases could affect delivery, costs and margins.
- Customer concentration, design-win conversion, pricing pressure, product yields and the uncertain adoption of STT-MRAM are material business risks. Design wins may take months or years to generate sales.
- In December 2020, CEO Kevin Conley resigned; Darin Billerbeck was appointed interim CEO while the board searches for a permanent successor.
- Management concluded disclosure controls and internal control over financial reporting were not effective at year-end because of a material weakness in inventory controls, including unit reconciliations and communications between operations and accounting. Remediation actions were underway. The auditor did not attest to internal controls, consistent with the company’s emerging-growth-company status.
- The auditor issued an unqualified opinion on the financial statements. Management reported no known legal matters expected to materially adversely affect financial position, results or cash flows.
Important facts for investors to verify
- Whether inventory-control remediation is completed and tested, and whether any resulting adjustments or disclosures are required.
- Whether management’s liquidity outlook remains supportable, including the availability and terms of the revolving credit facility and debt maturities.
- Whether STT-MRAM design wins convert into repeat production revenue, and whether customer concentration and backlog quality improve.
- Whether manufacturing yields and gross margins recover after the FY2020 inventory reserve, amid ongoing supplier constraints and pricing pressure.
- How the permanent CEO search, COVID-19 effects and international demand conditions affect execution and financing needs.