EVERSPIN TECHNOLOGIES INC.

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 generally accepted accounting principles in the United States (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 for interest expense, taxes, depreciation and amortization, stock-based compensation expense, and restructuring costs, if any.

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 generally accepted accounting principles in the United States (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 net income, a non-GAAP financial measure, and design wins. We define Adjusted net income as net income adjusted for stock-based compensation expense.

Previous wording

Adjusted EBITDA. Our management and board of directors use Adjusted EBITDA to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operating and financing plans. Accordingly, we believe that Adjusted EBITDA provides useful information for investors in understanding and evaluating our operating results in the same manner as our management and our board of directors. Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a substitute for, net income reported in accordance with GAAP. The following table presents a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA for the periods indicated:

Current wording

Adjusted net income. Our management and board of directors use Adjusted net income to assess and evaluate our overall performance and financial trends, inform the annual budgeting process, and guide both short-term and long-term operational and strategic planning. As such, we believe Adjusted net income provides meaningful insight for investors into our financial performance, consistent with how our management team and board view and analyze our results. Adjusted net income is a non-GAAP financial measure and should be considered alongside, but not as a replacement for or superior to, net income as reported in accordance with GAAP. The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted net income for the periods presented:

Previous wording

Design wins. To continue to grow our revenue, we must continue to achieve design wins for our MRAM products. We consider a design win to occur when an OEM or contract manufacturer notifies us that it has qualified one of our products as a component in a product or system for production. Because the life cycles for our customers’ products can last for many years, if these products have successful commercial introductions, we expect to continue to generate revenues over an extended period of time for each successful design win. New design wins in each successive quarter of 2024 were 31, 44, 50, and 53, respectively, compared to 66, 62, 37, and 52 in each successive quarter of 2023, respectively.

Current wording

Design wins. To continue to grow our revenue, we must continue to achieve design wins for our MRAM products. We consider a design win to occur when an OEM or contract manufacturer notifies us that it has qualified one of our products as a component in a product or system for production. Because the life cycles for our customers’ products can last for many years, if these products have successful commercial introductions, we expect to continue to generate revenues over an extended period of time for each successful design win. New design wins in each successive quarter of 2025 were 44, 53, 55, and 85, respectively, compared to 31, 44, 50, and 53 in each successive quarter of 2024, respectively.

Previous wording

We generated 79% and 78% of our revenue from products sold through distributors for the years ended December 31, 2024 and 2023, respectively.

Current wording

We generated 75% and 79% of our revenue from products sold through distributors for the years ended December 31, 2025 and 2024, respectively.

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. We estimate royalty revenue earned throughout the year, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year. Licensing, royalty, patent, and other revenue decreased by $2.4 million, from $10.6 million during the year ended December 31, 2023, to $8.2 million during the year ended December 31, 2024. The decrease was primarily due to the progression of our contractual agreements with customers for the development of RAD-Hard products, along with the conclusion of a contractual arrangement with a customer for the development of reliability models for strategic radiation hardened toggle MRAM. There were no patent sales during the year ended December 31, 2024.

Current wording

Licensing, royalty, patent, engineering services 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. We estimate royalty revenue earned throughout the year, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year. Licensing, royalty, patent, engineering services and other revenue decreased by $1.3 million, from $8.2 million during the year ended December 31, 2024, to $6.9 million during the year ended December 31, 2025. The decrease was primarily due to the conclusion of a contractual arrangement with a customer for the development of reliability models for strategic radiation hardened toggle MRAM.

Previous wording

Cost of licensing, royalty, patent, and other revenue decreased by $0.4 million, or 19.9%, from $1.8 million during the year ended December 31, 2023, to $1.5 million during the year ended December 31, 2024. The change was due to a decrease in licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.

Current wording

Cost of licensing, royalty, patent, engineering services and other revenue decreased by $0.4 million, or 30.2%, from $1.5 million during the year ended December 31, 2024, to $1.0 million during the year ended December 31, 2025. 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

Our gross margin decreased from 58.4% during the year ended December 31, 2023, to 51.8% during the year ended December 31, 2024. Our gross margin decreased as a result of a shift in product mix, a decrease in FAB loadings, and a decrease in licensing revenue partially offset by increased yields on our toggle products.

Current wording

Gross margin decreased from 51.8% during the year ended December 31, 2024, to 51.2% during the year ended December 31, 2025. Gross margin slightly decreased as a result of the different revenue mix.

Previous wording

Research and Development Expenses. Research and development expenses increased by $1.9 million, or 16.2%, from $11.8 million during the year ended December 31, 2023, to $13.7 million during the year ended December 31, 2024. The change was primarily due to the development and enhancement of our new Extended Serial Peripheral Interface (xSPI) family of STT-MRAM products, which offer high-performance, multiple I/O, SPI-compatibility and feature a high-speed, low pin count SPI compatible interface, and increases in share-based compensation.

Current wording

Research and Development Expenses. Research and development expenses increased by $0.4 million, or 2.9%, from $13.7 million during the year ended December 31, 2024, to $14.1 million during the year ended December 31, 2025. Research and development expenses relate primarily to the development and enhancement of our new Extended Serial Peripheral Interface (xSPI) family of STT-MRAM products, which offer high-performance, multiple I/O, SPI-compatibility and feature a high-speed, low pin count SPI compatible interface.

Previous wording

General and Administrative Expenses. General and administrative expenses decreased by $0.2 million, or 1.1%, from $14.3 million during the year ended December 31, 2023, to $14.1 million during the year ended December 31, 2024. The change was primarily driven by a reduction in professional services.

Current wording

General and Administrative Expenses. General and administrative expenses increased by $0.4 million, or 2.9%, from $14.1 million during the year ended December 31, 2024, to $14.6 million during the year ended December 31, 2025. The increase is primarily due to one-time professional service fees.

Previous wording

Sales and Marketing Expenses. Sales and marketing expenses increased by $0.1 million, or 1.9%, from $5.3 million during the year ended December 31, 2023, to $5.4 million during the year ended December 31, 2024. The change was primarily due to an increase in headcount and contract labor, partially offset by lower variable compensation costs.

Current wording

Sales and Marketing Expenses. Sales and marketing expenses increased by $0.7 million, or 13.4%, from $5.4 million during the year ended December 31, 2024, to $6.1 million during the year ended December 31, 2025. The increase is sales and marketing expenses relates primarily to higher compensation costs and contract labor.

Previous wording

Other income, net increased by $4.6 million, from $3.2 million during the year ended December 31, 2023, to $7.8 million during the year ended December 31, 2024. The change was primarily due to other income of $6.1 million recognized from a strategic award received by the Company to develop a long-term plan to provide manufacturing services for aerospace and defense segments, a change in interest income earned on the money market cash account as a result of a change in cash balances, along with the non-recurrence of a loss on prepayment and termination of our 2019 Credit Facility, offset by non-recurrence of the employee retention tax credit of $2.0 million received during the second quarter of 2023.

Current wording

Other income, net decreased by $1.7 million, from $6.1 million during the year ended December 31, 2024, to $4.4 million during the year ended December 31, 2025. Other income relates primarily to other income recognized from a strategic award we received to develop a long-term plan to provide manufacturing services for aerospace and defense segments.

Previous wording

As of December 31, 2024, we had $42.1 million of cash and cash equivalents, compared to $36.9 million as of December 31, 2023. As of December 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 December 31, 2025, we had $44.5 million of cash and cash equivalents, compared to $42.1 million as of December 31, 2024. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements in the next 12 months. Our long-term capital requirements will depend on many factors, including, among other things, our growth rate, the timing and extent of our spending to support our current and future manufacturing requirements, 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 year ended December 31, 2023, cash provided by operating activities was $13.1 million, which consisted of net income of$9.1 million, non-cash charges of $6.4 million and changes in net operating assets and liabilities of $2.3 million. The non-cash charges primarily consisted of stock-based compensation of $5.0 million, depreciation and amortization of $1.2 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 accounts receivable of $0.9 million due to timing of cash receipts for outstanding balances, an increase in inventory of $1.7 million to meet anticipated production volumes, an increase in prepaid and other current assets of $0.4 million, an

Current wording

During the year ended December 31, 2025, cash provided by operating activities was$10.0 million, which consisted of net loss of$0.6 million, non-cash charges of$9.0 million and changes in net operating assets and liabilities of$1.6 million. The non-cash charges primarily consisted of stock-based compensation of$5.8 million and depreciation and amortization of $3.2 million. The change in our net operating assets and liabilities was primarily due to a decrease in accounts receivable of$3.6 million due to timing of cash receipts for outstanding balances, an increase in accrued liabilities of$0.8 million, a decrease in other assets of $0.4 million, an increase in long-term income tax liability of$0.1 million, offset byan increase in inventory of$1.6 millionto meet anticipated production volumes, a decrease in accounts payable of$0.5 million, a decrease in contract obligations of$0.6 million, andan increase in prepaid and other current assets of$0.6 million.

Previous wording

During the year ended December 31, 2024, cash provided by operating activities was $7.1 million, which consisted of net income of $0.8 million, non-cash charges of $8.4 million and changes in net operating assets and liabilities of $2.1 million. The non-cash charges primarily consisted of stock-based compensation of $6.7 million and depreciation and amortization of $1.7 million. The change in our net operating assets and liabilities was primarily due to an increase in contract obligations of $2.0 million due to contracts the Company entered into in the third quarter of 2024, an increase in accounts receivable of $0.2 million due to timing of cash receipts for outstanding balances, an increase in inventory of $0.7 million to meet anticipated production volumes, an increase in prepaid and other current assets of $0.3 million, an increase in other assets of $0.5 million, a decrease in accounts payable of $0.4 million, a decrease in accrued liabilities of $1.9 million, and a decrease in deferred revenue of $0.3 million.

Current wording

During the year ended December 31, 2024, cash provided by operating activities was $7.1 million, which consisted of net income of $0.8 million, non-cash charges of$8.4 million and changes in net operating assets and liabilities of$2.1 million. The non-cash charges primarily consisted of stock-based compensation of$6.7 million and depreciation and amortization of$1.7 million. The change in our net operating assets and liabilities was primarily due to an increase in contract obligations of$2.0 million due to contracts the Company entered into in the third quarter of 2024, an increase in accounts receivable of$0.2 million due to timing of cash receipts for outstanding balances, an increase in inventory of$0.7 million to meet anticipated production volumes, an increase in prepaid and other current assets of$0.3 million, an increase in other assets of$0.5 million, a decrease in accounts payable of$0.4 million, a decrease in accrued liabilities of$1.9 million, and a decrease in deferred revenue of$0.3 million.

Previous wording

During the year ended December 31, 2023, cash used in investing activities was $1.4 million, which consisted of capital expenditures primarily for the purchase of manufacturing equipment offset by a nominal amount in proceeds received on the sale of property and equipment.

Current wording

During the year ended December 31, 2025, cash used in investing activities was $8.7 million, which consisted of capital expenditures primarily for the purchase of manufacturing equipment and purchased software.

Previous wording

During the year ended December 31, 2023, cash used in financing activities was $1.6 million, which primarily consisted of $2.8 million of payments to pay off our 2019 Credit Facility offset by $1.2 million in proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.

Current wording

During the year ended December 31, 2024, cash used in financing activities was $1.1 million, which consisted of proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.

Previous wording

Critical Accounting Policies and Significant Judgements and Estimates

Current wording

Critical Accounting Policies and Significant Judgments and Estimates

Previous wording

Upon the transfer of control, generally at shipment, we record a trade receivable for the selling price as there is a legally enforceable obligation of the distributor to pay for the product delivered, an allowance is recorded for the estimated discount that will be provided to the distributor, and the net of these amounts is recorded as revenue on the statements of income and comprehensive income.

Current wording

Upon the transfer of control, generally at shipment, we record a trade receivable for the selling price as there is a legally enforceable obligation of the distributor to pay for the product delivered, an allowance is recorded for the estimated discount that will be provided to the distributor, and the net of these amounts is recorded as revenue on the statements of operations and comprehensive (loss) income.