EVERSPIN TECHNOLOGIES INC

Previous wording

*This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to, among other things, our industry, business, future plans, strategies, objectives, expectations, intentions and financial performance, as well as anticipated impacts from, and our responses to, COVID-19 and our expectations regarding current supply constraints, and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” and elsewhere in this report, as well as in our other filings with the Securities and Exchange Commission (SEC). Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments.**In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements.*We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Current wording

*This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to, among other things, our industry, business, future plans, strategies, objectives, expectations, intentions and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” and elsewhere in this report, as well as in our other filings with the Securities and Exchange Commission (SEC). Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments.**In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements.*We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Previous wording

We monitor a variety of key financial metrics to help us evaluate trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies. These financial metrics include revenue, gross margin, operating expenses and operating income determined in accordance with GAAP. Additionally, we monitor and project cash flow to determine our sources and uses for working capital to fund our operations. We also monitor Adjusted

Current wording

We monitor a variety of key financial metrics to help us evaluate trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies. These financial metrics include revenue, gross margin, operating expenses and operating income determined in accordance with GAAP. Additionally, we monitor and project cash flow to determine our sources and uses for working capital to fund our operations. We also monitor Adjusted EBITDA, a non-GAAP financial measure, and design wins. We define Adjusted EBITDA as net income or loss adjusted

Previous wording

EBITDA, a non-GAAP financial measure, and design wins. We define Adjusted EBITDA as net income or loss adjusted for interest expense, taxes, depreciation and amortization, stock-based compensation expense, and restructuring costs, if any.

Current wording

for interest expense, taxes, depreciation and amortization, stock-based compensation expense, and restructuring costs, if any.

Previous wording

We generated 71% and 87% of our revenue from products sold to distributors for the three months ended March 31, 2024 and 2023, respectively.

Current wording

We generated 87% and 79% of our revenue from products sold to distributors for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

In addition to selling our products to our distributors, we maintain a direct selling relationship, for strategic purposes, with several key customer accounts. We have organized our sales team and representatives into three primary regions: North America; EMEA; and APAC. We recognize revenue by geography based on the region in which our customer is located and to which our products are sold, and not to where the end products in which they are assembled are shipped. Our revenue by region and by type of revenue for the periods indicated were as follows (in thousands):

Current wording

regions: North America; EMEA; and APAC. We recognize revenue by geography based on the region in which our customer is located and to which our products are sold, and not to where the end products in which they are assembled are shipped. Our revenue by region and by type of revenue for the periods indicated were as follows (in thousands):

Previous wording

Licensing, royalty, patent, and other revenue is a highly variable revenue item characterized by a small number of transactions annually with revenue based on size and terms of each transaction. Our best estimate of royalty revenue earned is made throughout the year for royalty contracts with an annual performance period, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year. Licensing, royalty, patent, and other revenue increased by $2.5 million, from $1.1 million during the three months ended March 31, 2023, to $3.6 million during the three months ended March 31, 2024. The increase was driven by an increase of $2.3 million in licensing revenue generated from our RAD-Hard projects, along with an increase of $0.2 million of other revenue related to foundry services.

Current wording

Licensing, royalty, patent, and other revenue is a highly variable revenue item characterized by a small number of transactions annually with revenue based on size and terms of each transaction. Our best estimate of royalty revenue earned is made throughout the year for royalty contracts with an annual performance period, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year. Licensing, royalty, patent, and other revenue decreased by $1.6 million, or 68.0% from $2.3 million during the three months ended June 30, 2023, to $0.7 million during the three months ended June 30, 2024. The decrease was driven by a decrease of $1.5 million in licensing revenue generated from our RAD-Hard projects, along with a decrease of $0.1 million of other revenue related to foundry services.

Previous wording

Cost of product sales decreased by $0.1 million, or 2.0%, from $6.1 million during the three months ended March 31, 2023, to $6.0 million during the three months ended March 31, 2024. The decrease was primarily due to a reduction in product sales and increased pricing from suppliers, partially offset by increased yields on our toggle products.

Current wording

Cost of product sales decreased by $0.9 million, or 14.0%, from $6.1 million during the three months ended June 30, 2023, to $5.2 million during the three months ended June 30, 2024. The decrease was primarily due to a reduction in product sales, partially offset by increased yields on our toggle products.

Previous wording

Cost of licensing, royalty, patent, and other revenue remained consistent at $0.3 million during the three months ended March 31, 2024 and 2023. Cost of licensing, royalty, patent, and other revenue primarily relates to licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.

Current wording

Cost of licensing, royalty, patent, and other revenue decreased by $0.3 million, or 60.1% from $0.5 million during the three months ended June 30, 2023, to $0.2 million during the three months ended June 30, 2024. The decrease was primarily due to a decrease in licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.

Previous wording

Gross margin decreased from 56.8% during the three months ended March 31, 2023, to 56.5% during the three months ended March 31, 2024. Gross margin decreased as a result of a decrease in product sales and increased pricing from suppliers, partially offset by increased yields on our toggle products and increased licensing revenue.

Current wording

Gross margin decreased from 58.4% during the three months ended June 30, 2023, to 49.0% during the three months ended June 30, 2024. Gross margin decreased as a result of a decrease in product sales and licensing revenue, partially offset by increased yields on our toggle products.

Previous wording

*Sales and Marketing Expenses.*Sales and marketing expenses remained consistent at $1.3 million during the three months ended March 31, 2024 and 2023, respectively. Sales and marketing expenses relate primarily to variable compensation costs and contract labor.

Current wording

*Sales and Marketing Expenses.*Sales and marketing expenses remained consistent at $1.3 million during the three months ended June 30, 2024 and 2023, respectively. Sales and marketing expenses relate primarily to compensation costs and contract labor.

Previous wording

Total revenue decreased by $0.4 million, or 2.8%, from $14.8 million during the three months ended March 31, 2023 to $14.4 million during the three months ended March 31, 2024. The decrease was primarily due to a decrease in product sales of $2.9 million due to timing of customer demand, offset by an increase in licensing revenue generated from our RAD-Hard projects of $2.3 million, along with an increase of $0.2 million in other revenue related to foundry services.

Current wording

Total revenue decreased by $5.5 million, or 18.1%, from $30.6 million during the six months ended June 30, 2023 to $25.1 million during the six months ended June 30, 2024. The decrease was primarily due to a decrease in product sales of $6.4 million due to timing of customer demand, offset by an increase in licensing revenue generated from our RAD-Hard projects of $0.7 million, along with an increase of $0.2 million in other revenue related to foundry services.

Previous wording

*Research and Development Expenses.*Research and development expenses increased by $0.2 million, or 6.8%, from $3.2 million during the three months ended March 31, 2023, to $3.4 million during the three months ended March 31,

Current wording

*Research and Development Expenses.*Research and development expenses increased by $1.0 million, or 16.4%, from $5.9 million during the six months ended June 30, 2023, to $6.9 million during the six months ended June 30, 2024. The primary driver of research and development expenses relates to our new xSPI family of STT-MRAM products.

Previous wording

*General and Administrative Expenses.*General and administrative expenses increased by $0.8 million, or 25.3%, from $3.2 million during the three months ended March 31, 2023, to $4.0 million during the three months ended March 31, 2024. The increase is primarily due to increases related to stock-based compensation, professional services and depreciation costs.

Current wording

*General and Administrative Expenses.*General and administrative expenses increased by $0.6 million, or 8.4%, from $6.7 million during the six months ended June 30, 2023, to $7.3 million during the six months ended June 30, 2024. The increase is primarily due to increases related to stock-based compensation and professional services.

Previous wording

Interest expense decreased by $0.1 million, or 100.0%, from $0.1 million during the three months ended March 31, 2023, to $0 during the three months ended March 31, 2024. The decrease was due to having no outstanding balance under our 2019 Credit Facility that we paid off in full in March 2023, resulting in no interest incurred during the three months ended March 31, 2024.

Current wording

Interest expense decreased by $0.1 million, or 100.0%, from $0.1 million during the six months ended June 30, 2023, to $0 during the six months ended June 30, 2024. The decrease was due to having no outstanding balance under our 2019 Credit Facility that we paid off in full in March 2023, resulting in no interest incurred during the six months ended June 30, 2024.

Previous wording

As of March 31, 2024, we had $34.8 million of cash and cash equivalents, compared to $36.9 million as of December 31, 2023. As of March 31, 2024, we have no outstanding debt as we paid off our 2019 Credit Facility in full in March 2023. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements in the next 12 months. Our future capital requirements will depend on many factors, including, among other things, our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, and the introduction of new products.

Current wording

As of June 30, 2024, we had $36.8 million of cash and cash equivalents, compared to $36.9 million as of December 31, 2023. As of June 30, 2024, we have no outstanding debt as we paid off our 2019 Credit Facility in full in March 2023. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements in the next 12 months. Our future capital requirements will depend on many factors, including, among other things, our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, and the introduction of new products.

Previous wording

During the three months ended March 31, 2024, cash used in operating activities was $1.3 million, which consisted of net loss of $0.1 million, cash provided by non-cash charges of $2.1 million and changes of net operating assets and liabilities of $3.3 million. The non-cash charges consisted of stock-based compensation of $1.7 million and depreciation and amortization of $0.4 million. The use of cash due to the change in our net operating assets and liabilities was primarily due to an increase in accounts receivable of $1.5 million due to timing of cash receipts for outstanding balances, offset by a decrease in inventory of $0.3 million, a decrease in prepaid and other current assets of $0.5 million, a decrease in accrued liabilities of $2.3 million, and a decrease in deferred revenue of $0.3 million.

Current wording

During the six months ended June 30, 2024, cash provided by operating activities was$0.4 million, which consisted of net loss of$2.7 million, non-cash charges of$4.4 millionand changes of net operating assets and liabilities of$1.2 million. The non-cash charges consisted of stock-based compensation of$3.6 million and depreciation and amortization of$0.8 million. The change in our net operating assets and liabilities was primarily due to a decrease in accounts receivable of$1.4 million due to timing of cash receipts for outstanding balances, a decrease in prepaid and other current assets of$0.5 million, and a decrease in inventory of$0.4 million offset by a decrease in accounts payable of$0.6 million, a decrease in accrued liabilities of$2.6 million and a decrease in deferred revenue of $0.3 million.

Previous wording

During the three months ended March 31, 2023, cash provided by operating activities was $1.2 million, which consisted of net income of $0.8 million, cash provided by non-cash charges of $1.7 million and changes of net operating assets and liabilities of $1.3 million. The non-cash charges primarily consisted of stock-based compensation of $1.2 million, depreciation and amortization of $0.3 million, and a loss on prepayment and termination of our 2019 Credit Facility of $0.2 million. The use of cash due to the change in our net operating assets and liabilities was primarily due to an increase in accounts receivable of $0.5 million due to timing of cash receipts for outstanding balances and a decrease in accrued liabilities of $1.5 million primarily due to timing of variable compensation costs. These uses were partially offset by a decrease in inventory of $0.4 million, a decrease in prepaid and other current assets of $0.1 million, an increase in deferred revenue of $0.1 million, and an increase in accounts payable of $0.1 million.

Current wording

During the six months ended June 30, 2023, cash provided by operating activities was $7.5 million, which consisted of net income of $4.6 million, non-cash charges of $3.2 million and changes of net operating assets and liabilities of $0.3 million. The non-cash charges primarily consisted of stock-based compensation of $ 2.4 million, depreciation and amortization of $0.6 million, and a loss on prepayment and termination of our 2019 Credit Facility of $0.2 million. The change in our net operating assets and liabilities was primarily due to an increase in inventory of $0.7 million, a decrease in accounts payable of $0.7 million, a decrease in accrued liabilities of $0.7 million primarily due to timing of variable compensation costs, and a decrease in deferred revenue of $0.1 million, offset by a decrease in accounts receivable of $1.6 million due to timing of cash receipts for outstanding balances and a decrease in prepaid and other current assets of $0.2 million.

Previous wording

Cash used in investing activities during the three months ended March 31, 2024, was $1.2 million, reflecting purchases of manufacturing equipment.

Current wording

Cash used in investing activities during the six months ended June 30, 2024, was $1.2 million, reflecting purchases of manufacturing equipment.

Previous wording

Cash used in investing activities during the three months ended March 31, 2023 was $1.0 million, reflecting purchases of manufacturing equipment.

Current wording

Cash used in investing activities during the six months ended June 30, 2023 was $1.0 million, reflecting $1.1 million for the purchases of manufacturing equipment offset by a nominal amount in proceeds received on the sale of property and equipment.

Previous wording

Cash provided by financing activities during the three months ended March 31, 2024, was $0.4 million, consisting of proceeds from the exercise of employee stock options.

Current wording

Cash provided by financing activities during the six months ended June 30, 2024, was $0.6 million, consisting of proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan.

Previous wording

Cash used in financing activities during the three months ended March 31, 2023, was $2.8 million, consisting mainly of $2.8 million of payments to pay off our 2019 Credit Facility.

Current wording

Cash used in financing activities during the six months ended June 30, 2023, was $2.5 million, consisting mainly of $2.8 million of payments to pay off our 2019 Credit Facility, offset by $0.3 million in proceeds from the exercise of employee stock options.