Good afternoon and welcome to the conference call to discuss Everspin Technologies Second Quarter 2022 Financial Results. As a reminder, this conference call is being recorded today, Thursday, August 11, 2022. Before we begin the call, I want to remind you that this conference call contains forward-looking statements regarding future events, including but not limited to, our expectations of Everspin's future business, financial performance and goals, customer and industry adoption of MRAM technology, successfully bringing to market and manufacturing products in Everspin's design pipeline and executing on its business plan. These forward-looking statements are based on estimates, judgments, current trends and market conditions and involve risks and uncertainties that may cause results to differ materially from those contained in the forward-looking statements. We would encourage you to review our SEC filings, including our quarterly report on Form 10-Q which will be filed with the SEC on August 12, 2022 and other SEC filings made from time to time in which we may discuss risk factors associated with investing in Everspin. All forward-looking statements are made as of the date of this call and, except as required by law, we undertake no obligation to update any forward-looking statements made on this call to update or alter our forward-looking statements, whether a result of new information, further events or otherwise. The financial results discussed today reflect our preliminary estimates, are based on information available as of the date hereof and are subject to further review by Everspin and its external auditors. Our actual results may differ materially from these estimates as a result of the completion of our financial closing procedures, final adjustments and other developments arising between now and the time that our financial results for this period are finalized. Additionally, the company's press release and statements made during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP net income or loss to adjusted EBITDA which provide additional details. A copy of the press release is posted in the Investor Relations section of Everspin's website at www.everspin.com. And now, I’d like to turn the call over to Everspin’s Chief Executive Officer, Sanjeev Aggarwal. Sanjeev, please go ahead.

Thank you, operator, and thanks, everyone, for joining us on the call today. Everspin delivered quarterly revenue of $14.7 million, an increase of 24% compared to the second quarter of 2021 and above the high end of guidance. We were GAAP net income positive for the fifth quarter in a row which continues to be a strong focus of the company. We offset cost increases attributed to supply chain constraints and inflation with cost reductions and improved efficiency in our manufacturing facilities, thus maintaining our gross margins in a healthy range. A few highlights for the quarter. Revenue was $14.7 million, up 24% year-on-year. Cash flow from operations was $4.3 million, up from negative $0.6 million year-on-year. GAAP gross margin was 58.4% and GAAP net income was $1.7 million. We announced the availability of a new STT-MRAM product, EM128LX, which has a capacity of 128 megabits and supports the Expanded SPI or xSPI protocol. This broadens our STT-MRAM xSPI product portfolio from 8 meg to 128 megabits. Our product backlog for the balance of 2022, as of June 30, 2022, remains at an all-time high. Our team continues to successfully navigate changing supply to meet customer demand, which remains strong with existing and new design wins on our Toggle products. We are working with our foundry partners for more wafers and assembly and test houses for more capacity. Although we are alleviating some of our supply chain constraints, we have unfulfilled Toggle demand which is expected to carry over into upcoming quarters. We continue to invest in our leadership in STT-MRAM technology and focus on opportunities that will grow our business in the near term and long term. Samples of our new xSPI family of low-density STT-MRAM products from 8 megabits to 128 megabits are now available and sampling at our customers. This family of products can be deployed as a persistent, fast serial RAM or NOR Flash replacement in industrial IoT and embedded system applications. Compared to NOR Flash, this family of products offers faster writing speeds which was on display at Embedded World earlier this year. We demonstrated configuration with bitstream integrity and faster download speeds for bitstreams using our 64-megabit STT-MRAM xSPI product compared to standard NOR Flash in a simulated FPGA setup. This family of low-density STT-MRAM xSPI products is on schedule for volume production in the second half of 2022. I will now turn it over to our Chief Financial Officer, Anuj Aggarwal, who will take you through our second quarter financials and third quarter 2022 guidance. Anuj?

Thank you, Sanjeev, and good afternoon, everyone. Today, we are pleased to announce Q2 financial results. The team continues to execute the strategy we highlighted last year, resulting in five consecutive quarters of positive net income. In addition, despite the supply constraints and cost increases, we generated positive cash flow from operations, resulting in a healthy cash balance of $23.1 million. We delivered solid quarterly results, beating the top end of guidance, with revenue of $14.7 million compared to $14.3 million last quarter and $11.8 million in the second quarter of 2021. We also had positive net income of $1.7 million and positive cash flow from operations of $4.3 million for the second quarter of 2022. MRAM product sales in the second quarter, which include both our Toggle and STT-MRAM revenue, was $13.2 million versus $12.7 million in the prior quarter and $10.2 million in Q2 2021. Licensing, royalties, patents and other revenue in the second quarter was $1.5 million compared to $1.7 million in the previous quarter and $1.7 million in Q2 2021. Shipments to suppliers for our largest end customer, who we serve with our high-density STT product for data center applications, represented 15% of revenue in the quarter versus 19% of revenue in Q1 and 35% in Q2 a year ago. Turning to gross margin, GAAP gross margin for the second quarter of 2022 was 58.4% versus 58% in the prior quarter and 60.7% in Q2 '21. GAAP operating expenses for the second quarter of 2022 were $6.9 million versus $6.3 million in the prior quarter and $6.7 million in the second quarter of 2021. The highest operating expenses in the quarter were primarily driven by increased costs to support the new STT industrial product. We expect R&D expense to grow in 2022 as we continue to support the 28-nanometer STT-MRAM product targeted at industrial and other broad-based applications. We are pleased to report second quarter positive net income of $1.7 million or $0.08 per basic share based on 20.1 million basic weighted average shares outstanding. This compares to a GAAP net income of $1.9 million or $0.10 per basic share in the first quarter of 2022 and net income of $0.3 million or $0.01 per basic share in the second quarter of 2021. Basic EPS of $0.08 was better than the top end of our guidance range, reflecting our strategic operational discipline and strong gross margins in the face of tightening supply. Cash and cash equivalents increased to $23.1 million at the end of the second quarter compared to $19.9 million at the end of the prior quarter and $14.2 million in Q2 2021. Cash flow from operations was $4.3 million for the current quarter compared to a negative $1 million in the prior quarter and a negative $0.6 million for Q2 of last year. Turning now to our third quarter 2022 guidance. Demand for our Toggle product remains strong. We expect total revenue in a range of $14.4 million to $15.4 million. Everspin expects industry supply constraints to limit supply and push some unfulfilled customer demand to future quarters. We expect the GAAP net income per basic share to be between breakeven and $0.05 per share, primarily influenced by expenses related to next-generation 28-nanometer STT-MRAM product development and price increases from our suppliers. I’ll now turn it back over to Sanjeev for some brief additional commentary before we open it up for questions.

Thanks, Anuj. In summary, we are building towards a future of profitable, sustainable growth. Q2's GAAP positive net income, operational cash flow, and GAAP profitability are testaments to our employees' dedication and hard work in these unchartered and tough supply chain environments. We continue to see strong customer demand and materialized revenue growth in 2022, tempered by macro crosscurrents and continued supply challenges. Thank you all for joining us today. Operator, you may now open the line for questions.

First question is coming from Richard Shannon of Hallum.

Hello, can you hear me?

Yes, Richard.

Yes, we can.

Sorry, the line was a little spotty there. A few of them off the top of my head here. Gross margins at the product level were once again quite good here, looking back in the past other than the second quarter last year. It's about as high as I've seen in a while. I know you’ve raised some prices, although there’s some costs coming in there. And I think you’ve mentioned some sale of some written off or written down inventory. But I wonder if you can comment to the extent to which these levels of gross margins here are sustainable or even beatable in the future. Should we be expecting this in the range in the third quarter specifically as well?

Yes, absolutely, Richard. This is Anuj. Yes, the gross margin, yes, it was 58.4%, definitely above the internal model that we've communicated in the past. So even though we don't really give guidance on gross margin, I can tell you what we saw this quarter was just excellent operational excellence from a manufacturing standpoint. We are seeing higher yields. We had increased floatings. We had some better product mix. And so all of those things, in combination, contributed to the higher gross margin. But I think long-term, from a sustainable perspective, I would still expect the gross margin to be around the mid-50s.

Okay, that's helpful. Let's look at product revenues here. If my model is run out correctly here, you've had a record either Toggle and/or STT-MRAM in the second quarter. Can you verify that's correct?

Yes, absolutely, Richard. So yes, from a product revenue perspective, we're seeing Toggle revenue growing and that's doing very well, right? So in terms of the design wins that we had in the past couple of years, that's helping with that. And then also, from a supply perspective, we're trying to acquire as much supply as we can to meet the demand. And so from that standpoint, Toggle is doing great. And then STT, that's slightly down from before.

Slightly down. Okay, all right. That's helpful. Let's touch on the new STT, the X5, I think you call it, if I remember that correctly here. I reiterated your thought of volume production in the second half of this year and then revenues next year and you've mentioned the FPGA application as one that seems to be resonating pretty well. Is that the first application that you expect to ramp next year? And is there any way you would have people think about what kind of revenues are possible? I wouldn’t guess a fast ramp-up in the markets that you typically target but I just want to get any sense you can offer on how fast of a ramp we should see next year.

Richard, this is Sanjeev. So yes, I think the way to think about our new product, the low-density STT-MRAM, is it is actually extending the Toggle market that we've been serving for the last decade or so. So I think there, the adoption and the design win or design-in rate, I believe, would be much faster compared to this new application that we're looking at for FPGAs. People are accustomed to our Toggle parts. They have been designing before. It's just a higher density. So I think that the path to success or ramp is easier compared to the FPGA market. As far as the FPGA is concerned, I think we are just in the early stages, where we're actually demonstrating the benefits of our technology compared to the standard NOR Flash. So it might be a longer design cycle, closer to 18 months, before we start seeing real revenue from the FPGA markets.

Okay, that's helpful perspective. One more question for me, I'll jump out of the line. You announced a relationship with Phison for SSD controllers, I think, a couple 2, 3 years ago. And they announced a new controller 2 or 3 weeks ago, something like that. I didn't see any mention of MRAM support in that. I wonder if you could comment on whether that relationship is still active, or whether that or future controllers that they're going to be making will support MRAM.

Yes. So we met with Phison at the Flash Memory Summit and we actually confirmed that the X1 controller that they released is actually compatible or will support our 1-gigabit STT-MRAM high-density product. So that is still on schedule. The reason why it was not mentioned is basically the final testing was not complete. So we expect that to happen this quarter. And then after that, we can start going in front of customers to start talking about the capabilities and hopefully get some design ins and wins from there.

And to follow up on that, how do we think about the design cycle and ultimate revenues, obviously, 1 gig can be very nice ASPs in a big market there. Is this something you think could manifest itself in revenues before the end of next year? Or is it further out?

I would think it's further out, Richard. I mean, typical design cycles, again, are 12 to 18 months, although this is in the commercial side, so I think you would expect closer to 12. So you could start seeing some early revenue if you get a win towards the end of next year but I would mostly expect revenue in 2024 rather than 2023.

Next question is coming from Richard Shannon of Craig-Hallum.

Maybe one or possibly two more questions. First of all, you said the backlog was as strong as it's ever been. Can you tell us how the lead times have changed over the last quarter? And do you have any view on whether that's going to be increasing, flat or going down over the next quarter or two?

Yes, sure, Richard. Yes, so looking at the backlog, we've got customer requests for all of 2023. Their requests are actually going into the first half of 2024 now, right? And so over the last couple of quarters, we've been working diligently to get supply to meet demand and fill some of that backlog. But I guess, the good problem to have is customers are making new requests, right, and the backlog is growing. So that's exciting. And so as we see that, yes, the backlog looks good. We're seeing increases out to the second half of 2024. And now it's a matter of continuing to try to get the supply to meet it.

Okay, that's helpful. Last question for me. On competition, I know there's been a couple of other small suppliers that are trying to enter this market. I want to get your sense of whether you're seeing any inroads from any of them, or you kind of see it as mostly clear sailing in your market to win?

So Richard, just to clarify, is that with reference to STT, right?

Both but yes.

Okay. Yes. So there are a couple of companies that have actually come out with a competing STT-MRAM product at the low densities. However, we continue to not see a big presence with our customers. So we are not really seeing high volumes or competition with our customers that we are visiting. So it seems like it's still smooth sailing for us.

The next question is coming from Nicolas Doyle.

This is Nick Doyle on for Raji Gill. Can you hear me okay?

Yes, Nick. We can hear you.

So just one question. You mentioned shipment pushouts. Just wondering if you could quantify how much was pushed out into next quarter? Is the bulk of the push outs for 3Q? Or are they pushed even further maybe into next year?

So yes, from an unfulfilled demand perspective, we’re seeing about the same 10% to 15% that’s pushing out into the next quarter.

There are no more questions in the queue. And again, no more questions are in the queue.

Okay. Well, then with that, we'll conclude today's call. Thank you all for joining us and we look forward to reporting our progress and results in the next quarter's call. Operator, you may now disconnect the call. Thank you.

Thank you. This concludes today's conference call. You all have a great day.