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Sanjeev Aggarwal

Thank you, Faye. And thanks, everyone, for joining us on the call today. Turning to our first-quarter results, we are pleased to report our first-quarter results with revenue of $13.1 million and non-GAAP EPS of $0.02, both above our guidance range. Our outperformance this quarter was due to strength in product revenue, which came in higher than expected.
During the first quarter, we continued to ramp revenue from the sale of a PERSYST 1-gigabit STT-MRAM into IDM's Flash Core Module 4 or FCM4 for data center applications. As a reminder, this PERSYST product brings data loss protection, high read-write bandwidth, low latency, and non-volatility to the solution. We are pleased with our continued progress and anticipate product revenue from this ongoing project to remain consistent for the remainder of the year.
We continue to ship and recognize revenue from a PERSYST MRAM solution from Lucid Motors for their Gravity SUV, for which the automaker is currently accepting orders. Everspin's MRAM is used in the Gravity to handle data logging and parameter storage to assist in the efficient operation of the all-electric drive-powered train.
This is the second Lucid model that Everspin has been designing due, having been selected to provide its 256 kilobit MRAM for the Lucid Air All-Electric Luxury model in 2021 and follows our win with Bugatti for the All-Electric Nevara Elite Sports Car in 2022. Everspin's MRAM technology is being utilized by five companies in the auto industry for data capture due to our extreme reliability in demanding environments.
Turning to our licensing, royalty, patent, and other revenue. We completed the first phase of our $9.25 million front-grade technologies project that was announced in August of last year to develop a custom radiation-hardened STT-MRAM macro for embedded solutions using our PERSYST STT-MRAM technology. The first phase of this project was design-centric, and we are now entering the second process-centric phase to validate the design on silicon.
In production, this project will support current and future DOD strategic radiation-hardened and Low Earth Orbital or LEO space system. We signed the next phase of our project with QuickLogic for our Innovative, AgILYST MRAM technology in the first quarter and recognized initial revenue from moving to the process or fab-centric phase to validate the design on silicon.
As a reminder, this project aims to advance the development and demonstration of strategic radiation-hardened, high-reliability FPGA technology. We began to recognize initial revenue on our Purdue University contract to provide our state-of-the-art STT-MRAM technology to support energy-efficient AI solution.
As part of our first milestone, we delivered the Process Design Kit, or PDK, so Purdue can initiate chip Design. We also shared the initial process development results, including Magnetic Tunnel Junction or MTJ parameters. We are continuing with process development to deliver low-power MTJ devices with fast and reliable switching characteristics. We expect this project to also ramp as the year progresses. This project aims to deliver an energy-efficient neuromorphic computing chips for edge AI applications.
Lastly, we continue to recognize revenue from our ongoing project with a leading provider of sensor devices to provide foundry services for their latest generation TMR sensor device on our MRAM line in our Chandler facility. We completed qualification and are now at a steady state of production.
With respect to below the line items, we recognized $0.4 million in other income in the first quarter and $6.5 million to-date from the $14.6 million contract we have with a DOD contractor, to develop a sustainment plan for our MRAM manufacturing facilities to provide continuous onshore MRAM capabilities to their aerospace and defense customers. We expect this business to pickup meaningfully in the back half of the year.
In March, we attended embedded world in Nuremberg, Germany. This was our largest presence since 2017 with heavy traffic through our booth with existing and potential new customers. Our customer engagements range from TLCs, storage, gaming, FPGA partners, SoC and Board partners, et cetera. The strong interest was demonstrated through the significant media coverage of Everspin and its persistent line of products at the event.
At the show, we also announced two new products as part of our xSPI family, the PERSYST EM064LX-HR, and EM-128LX HR, which feature an expanded temperature range of minus 40 degrees C to plus 125 degree C, meeting the AEC-Q100 Grade 1 standard for automotive applications. This expanded temperature range addresses the growing demand for persistent, high-speed memory in aerospace, defense and extreme industrial environment and provides designer with a robust, fast, and scalable alternative to static RAM or NOR flash. Engineering samples of the EM064LX and EM128LX HR will be available in June 2025 with full production scheduled for late 2025.
In addition, we had a great example of the success of our enablement efforts at the event. Our customer at the show was given a Flywire board to test our PERSYST EM064LX-HR. The customer hooked it up to its platform and asked for drivers. It was a STM32 baseboard, and we directed the customer to the GitHub location for our drivers that we had just released. The demo board worked seamlessly, and the customer was able to evaluate our superior solution compared to the standard memory solution.
Everspin PERSYST MRAM products are a dependable memory solution where harsh environment and reliability are paramount. These features have enabled a couple of marquee design wins, and we expect similar mission-critical design opportunities in the future.
We are proud to be partnered with Blue Origin on their Blue Moon Mark 1 lander mission set to travel to the moon later this year and congratulate Blue Origin on the launch of New Shepard NS-31 Mission, the first all-female flight crews since 1963. ASO Digital, a supplier of complete satellite systems and mission support systems, has selected Everspin MRAM for their deep space mission.
ASO Digital flight computer utilizes Everspin's PERSYST MRAM solution, which is the primary processor for the satellite system because responsible for receiving and storing command sequences from users on the ground, sending critical telemetry data and distributing information and traffic to the various subsystems onboard the satellite. It is designed for applications from Low Earth Orbit, LEO, to Geosynchronous Orbit, GEO, up to 42,000 kilometers altitude where the environments are harsh and reliability is paramount.
Our outlook for 2025 remains consistent. We continue to expect the year to be weighted more heavily towards the second half of 2025 due to our typical seasonality and do not expect a direct material impact from tariffs on our results. I will now turn it over to our CFO, Bill Cooper, who will walk you through our first-quarter financials and second-quarter 2025 guidance. Bill?

William Cooper

Thank you, Sanjeev. Our first-quarter results reflect the consistency of our execution. During the first quarter, we delivered revenue of $13.1 million, above our guidance range of $12 million to $13 million, driven by stronger-than-expected product revenue.
MRAM product sales in the first quarter, which include both Toggle and STT-MRAM revenue, was $11.0 million compared to $10.9 million in Q1 2024, consistent with our product sales of $11.0 million in the fourth quarter of 2024. Licensing, royalty, patent and other revenue in the first quarter decreased to $2.1 million compared to $3.6 million in Q1 2024. This reduction was a result of lower revenue from our project with Frontgrade, which reflects the lumpy nature of these projects.
Turning to gross margin. Our GAAP gross margin was 51.4% for the first quarter, up slightly from 51.3% in the fourth quarter and down from 56.5% in Q1 2024. The decrease relative to the same period last year was due to lower mix of high-margin licensing and other revenue. GAAP operating expenses for the first quarter of 2025 were $8.7 million compared to $8.8 million in the first quarter of 2024.
In the first quarter of 2025, the company recorded $0.4 million of other income related to the strategic award we won in August to develop a long-term plan to provide manufacturing services for aerospace and defense segments. We recorded first quarter non-GAAP net income of $0.4 million or $0.02 per diluted share based on 22.4 million weighted average diluted shares outstanding.
This was above our guidance range of a non-GAAP net loss of $0.05 to breakeven results. due to slightly higher revenue and gross margin and prudent operating expense management. This compares to non-GAAP net income of $1.5 million or $0.07 per diluted share in the first quarter of 2024. As a reminder, non-GAAP results are calculated by removing the impact of stock-based compensation.
We are pleased that our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $42.2 million, up $0.1 million from $42.1 million at the end of the prior quarter. Cash flow generated from operations was $1.4 million for the first quarter. Inventories increased sequentially due to increasing our stock for existing and new products for future opportunities as well as uncertainty in macro business conditions on trade rhetoric and actions. We did not experience any tariff-related impacts on our results in the first quarter.
As Sanjeev mentioned, we continue to expect 2025 to be more heavily weighted towards the second half of the year, reflecting our typical seasonality. Taking these factors into consideration, we expect Q2 total revenue in the range of $12.5 million to $13.5 million and GAAP net loss per basic share to be between $0.05 and breakeven. On a non-GAAP basis, we anticipate net income per basic share to be between breakeven and $0.05. Based on the United States exemption and our shipping terms into China, our current guidance for Q2 2025 does not include potential impact from tariffs. However, the situation continues to be fluid, and we are monitoring closely.
In summary, we are pleased with our solid results this quarter, driven by strength in our product revenue and RradHard projects. And looking forward, we remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue. And we certainly thank all of the folks on our team for their prudent expense management.
Operator, you may now open the line for questions.

Question and Answer Session

Operator

(Operator Instructions) Quinn Bolton, Needham and Company.

Quinn Bolton

Hey, guys. Congratulations on the nice results. I guess maybe just to start, Bill, your comment there at the end talking about second-quarter guidance not included any potential tariff impact, especially as you look to China. To the extent that you have products manufactured in the US, either at your facility or I’m not sure whether GlobalFoundries is US or overseas, but wouldn’t those products be subject to tariffs going into China? And could there be an impact there? And if so, could you give us a sense how much of your product flows through China, whether it’s for consumption in China or re-export?

William Cooper

Yes. Long question but certainly expected the tariffs to come up. So a couple of things, yes, we do get some of our wafers from global foundries, and that is categorized as German sourced. And then we do have some wafers that are manufactured in the US and some that are manufactured actually in Taiwan as well.
And then when you step back and look at it, a lot of our shipments that go around the world, but we don’t have a lot of shipments that go directly into China from Everspin. And of course, those go through distribution channels. So when you look at our shipping terms, as we essentially -- the importer at that point would be responsible for the tariffs. And then on a net basis, I would say direct China sales are not a significant portion of our sales.

Quinn Bolton

Okay. So it sounds like it is pretty low risk even if the China tariffs stick because it just sounds like not a lot of your business flows through China or China manufacturing?

William Cooper

Yes, that’s right.

Quinn Bolton

Okay. Great. And then -- go ahead.

William Cooper

Yeah. All of our product is final assembled in Taiwan. So we do have everything that’s final assembled in Taiwan. But when you look at China, what they really look kind of through to is where was the wafer manufactured at. And that again tends to be very low volume for us. It gets directly shipped into China.

Quinn Bolton

Got it. Okay. Thank you for that. And then just maybe -- it sounds like your guidance for 2025 playing out as you expected last quarter. A number of, I’ll call it, your peers in the industry that have exposure to sort of the industrial markets, this earnings season have started to talk about green shoots or seeing sort of signs of cyclical recovery.
I know tariff uncertainty is certainly out there. But for your industrial business, some of the new STT-MRAM wins, are you starting to see encouraging signs that orders are picking up, backlog is starting to build? Just would you agree that you’re starting to see signs of a cyclical recovery in that sort of more industrial segment of the business?

William Cooper

Yes, Quinn, definitely. I think we are starting to see a little bit of improvement in terms of the backlog. And pleased to come and see that. I think we don’t really give that exact information out, of course. But certainly, the backlog is improving, and I think the traction on some of the STT products has also been improved.

Quinn Bolton

Great. Maybe just one last quick one for me. Any sort of commentary on the second quarter guide, just the split between products and licensing and other, would it continue to be sort of fairly heavily driven by products? Or do you see both segments up? Any comment would be helpful.

William Cooper

Yes. I don't think we guide specifically around the product and licensing split but definitely expect to see that move upward overall.

Quinn Bolton

Perfect. Okay. Thank you.

William Cooper

Yes.

Operator

Richard Shannon, Craig-Hallum.

Richard Shannon

Hi, guys. Thanks for taking my question as well. As a question on the first quarter report here on gross margin, specifically product gross margins as I located here in my model here. I'm calculating in the product revenue is about 47%, which is down a fair amount from 54% and it's moved around a bit over the last number of quarters here. How do we understand this dynamic here? And do we expect it to settle out? And where do we sit this 47%, how is that relative to where you expect it to go, say, the rest of the year?

William Cooper

Yes. I don't think we get as granular as that in terms of where the gross margin is, Richard. But at the 51%, right, we see that it's really consistent between Q4 and Q1. And I would say you can kind of look for that consistency out 50-plus gross margins through the rest of the year as well.

Richard Shannon

Okay. Fair enough then. Let's see here. I guess maybe I want to ask a question on the commentary about second half weighting. I know you've reiterated this from at least the last quarter, maybe more than that. But I wanted to hear the -- and you kind of called it out as being largely seasonality driven here, but I wondered if there's any other dynamics here that would help this weighting, particularly with new products especially the newer ones you've brought out to market in the last year or so, this is going to have any impact. And also adding to that on the kind of licensing revenue bucket, whether you're seeing that kind of weighting as well there?

William Cooper

Yes. I would say we definitely going to see some increase in the back half of the year. That's kind of our expectations. Again, right, there's been some overhang and some of the folks are as they digest their inventory out in the various channels. So we expect to see that.
And of course, we're starting to see some we had good, continued pickup in terms of just the persist portfolio and then as well, seeing some additional traction on the STT products. And we -- that's the best visibility we have at the time. And I think also in the licensing revenue as well and existing DoD contract, we'll expect to see some increase on those areas as well at the back half of the year.

Sanjeev Aggarwal

Yes. Just to add some color, Richard, over here, right, I mean, like Bill mentioned, we are seeing the bottom of the inventory correction for lack of a better phrase. But basically, we are seeing our backlogs build up sooner than previous quarters. The behavior of last-minute orders is becoming more prevalent. So you'll see that we have actually based our comments based on that behavior from our customers.
And also, the STT products with the XP interface that we brought to the market in 2022. I think those are now basically converting from design wins into early production in the second half of 2025. So I think those two factors is what's driving our comment on second half revenue being better than first half.

Richard Shannon

Okay. That is helpful and good to hear as well. Last two quick questions here, and this is responding to Sanjeev. I think your prepared remarks, here, you're talking about the other income bucket and expect that to pick up in the second half of 2025. Can you characterize or even quantify what you mean by that, please?

Sanjeev Aggarwal

Yes. So I think like we had talked about earlier, this project was front loaded in Q4 of last year. So we did have a lot of milestones and expenses related to that and hours related to that. Q1 was slightly light. And I think going forward in Q2 onwards, I think the activity is going to increase again some of the -- some of the orders were placed for equipment. We're going to have some engineering hours associated to bring up of that equipment. And in general, we do have quarterly reports that are due for this project. So those are the hours and revenue that we would recognize in 2025.

Richard Shannon

Okay. Helpful. And one last quick question for Bill here. I think I may have missed the commentary on the OpEx here. It was a bit higher than OpEx projected. I know you don't give guidance for that. But how should we look at this in the context of going throughout the rest of the year?

William Cooper

Yes. Good question, Richard. I think for -- on the OpEx side, what we would expect to see is to kind of expect -- we have mentioned last time that we were going to do some product development type work. And so I think you'll see some of that coming through as we go throughout the year. But generally, I think you're going to see OpEx, we expect to kind of be in the same range, I would say, throughout the rest of the year.

Richard Shannon

Okay. Fair enough. That’s very helpful. And that is all the questions from me. Thank you.

William Cooper

Yes. Thanks, Richard.

Operator

(Operator Instructions) And I'm not showing any further questions at this time. I'd like to turn the call back over to management for any closing remarks.

Sanjeev Aggarwal

Yes. I just want to say thank you to everyone for joining the call, and we'll talk to you again at the next earnings call in Q2. Thank you. Bye.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.