EVERSPIN TECHNOLOGIES INC. Q3 FY2026 earnings call

• Record Financial Performance: Achieved highest-ever quarterly revenue of $20.6 million and non-GAAP EPS of $0.12, exceeding guidance.
• Product Growth Drivers: Strong demand in industrial automation (recovery in Japan), data centers (rate storage configurations), and energy management (new design wins shipping in Europe).
• Medical Applications Expansion: Highlighted MRAM's suitability for life-critical medical devices (dialysis, infusion pumps, defibrillators) due to non-volatility, speed, and endurance under continuous operation.
• Technology Roadmap Progress: On track for first qualified silicon for Toggle/STT MRAM in H2 2027 and STD products in H1 2028. A 256-megabit prototype on TSMC’s 16nm FinFET process is expected in H1 2027.
• Strategic Partnerships: Signed partnership with Teledyne HyREL to offer MRAM solutions for aerospace/defense applications (avionics, radar, satellites). Led JEDEC LPDDR persistent memory task group to standardize integration.
• CXL Innovation: Successfully demonstrated the world’s first CXL-connected MRAM, enabling fast, persistent buffering for AI processing and financial trading without battery-backed DRAM.

Total revenue reached $20.6 million, marking a record high and exceeding the guidance range. Product revenue (MRAM sales) was $16.9 million, representing approximately 82% of total revenue, with a year-over-year growth of 34% and sequential growth of 11%. Non-product revenue (licensing, royalties, engineering services) was $3.7 million, accounting for roughly 18% of total revenue, driven primarily by the subcontract agreement with a U.S. prime contractor.

• Q4 2026 Total Revenue: Expected to be between $21.5 million and $22.5 million.
• Q4 2026 GAAP Net Loss: Management indicated a net loss but did not provide specific per-share figures in the prepared remarks, noting it would be disclosed in the press release.
• Margin Outlook: Product gross margins are expected to improve sequentially in Q4 due to instituted pricing increases to counter rising manufacturing costs.
• Long-term Margin Target: Company continues to target long-term gross margins above 50%.

• Litigation Costs: Significant increase in litigation expenses ($6 million in Q3) related to ongoing legal matters; costs remain substantial in Q4 before reducing significantly in 2027.
• Manufacturing Cost Inflation: Rising material and service costs have pressured product gross margins, necessitating price increases.
• Regulatory Fines: Anticipated settlement of a fine from the Bureau of Industry and Security (BIS) related to export controls.
• Market Adoption Timing: While design wins are strong, commercialization of new technologies like CXL-MRAM and LPDDR MRAM faces timeline risks regarding standard publication and customer sampling.

Q: Analysts asked about the trajectory of litigation costs embedded in Q4 guidance and overall OPEX direction for 2027.

A: CFO Bill Cooper stated that while Q4 will see substantial litigation costs, they are expected to be slightly lower than Q3. He emphasized that expenses should reduce significantly in 2027 as the matter proceeds to an Administrative Law Judge (ALJ) at the end of this year. This indicates a one-time heavy burden currently impacting profitability rather than a structural rise in operating costs.

Q: An analyst requested details on the 'new data center wins' mentioned by management, specifically regarding European shipments.

A: CEO Sanjeev Aggarwal clarified that the data center wins involve general memory storage configurations with hyperscalers like Google, Amazon, and XP, consistent with previous quarters. Regarding Europe, he specified that the shipments relate to energy management applications that recently transitioned from design wins to production, distinguishing them from the broader data center narrative.

Q: Richard Shannon asked about the sustainability of product gross margins given recent headwinds and the regulatory provision.

A: Bill Cooper explained that product margins were impacted by rising input costs (materials/services), which prompted Q4 price increases. He noted the positive revenue mix offset some margin pressure. Additionally, he revealed the regulatory provision relates to an anticipated fine from the BIS regarding export controls, which is not yet settled but reflects a known compliance risk.

Q: The analyst inquired about the opportunity to replace Norflash with MRAM, especially as fabs convert Norflash capacity to DRAM.

A: Sanjeev Aggarwal confirmed traction in this area, as distributors seek MRAM replacements due to Norflash shortages. He stated that this potential volume is baked into Q4 guidance but is not yet material enough to quantify precisely. He expressed confidence that upcoming Unisys products will be well-positioned to capture this high-density market share.

Q: Josh Sullivan asked for the timeline of the JEDEC LPDDR task group translating into revenue.

A: Aggarwal outlined that the standards-setting process typically takes 18-24 months, with agreement expected in 12-15 months. Design work is scheduled to start early next year to align with spec publication. The goal is to have LPDDR6 MRAM samples available by late 2028, targeting early revenue generation in 2029.