Good afternoon, and welcome to the conference call to discuss Everspin Technologies first quarter 2022 financial results. At this time, all participants are in a listen only mode. At the conclusion of today's conference call, instructions will be given for the question and answer session. As a reminder, this conference call is being recorded today, Wednesday, May 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 for 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 involves risks and uncertainties that may cause actual 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 May 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 statement made on this call to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
The financial results discussed today reflect our preliminary estimates, are based on the 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 sections of Everspin's website at www.everspin.com.
This conference call will be available for audio replay for at least five days in the investor relations section of Everspin's website at www.everspin.com. Now, I'd like to turn the call over to Everspin CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.
Thank you, operator, and thanks to everyone joining us on the call today. Everspin delivered a quarterly revenue of $14.3 million, an increase of 39% year-over-year and above the high end of guidance. We were GAAP net income positive for the fourth quarter in a row, which continues to be a focus of the company. We improved product yields to keep our gross margins in a healthy range and controlled operational spending while growing our top line. A few highlights for Q1 2022. Revenue was $14.3 million, up 39% year-over-year. GAAP net income was $1.9 million compared to a net loss of half a million for the prior year period. During the first quarter, we shipped samples of our next-generation STT-MRAM xSPI product family.
The product backlog for the balance of 2022 is at an all-time high. Overall, demand continues to outpace supply, leading to lean inventories at distributors across all products. We continue to work with our foundry partners for more wafers and assembly and test houses for more capacity. We expect the supply chain constraints to tighten in second half of 2022, impacting our ability to meet demand. As mentioned in previous quarters, we have over $2 million of unfulfilled total demand, which is expected to carry over into upcoming quarters. Our next generation low density STT-MRAM xSPI product family is on schedule for volume production in second half of 2022. We verified performance on first silicon, which showed no significant issues and successfully began customer sampling in March. This product delivers extremely high bandwidth, low latency and non-volatile writing capability across the industrial temperature range.
It is compatible with industry standards and offered in standard packages. We believe this new product will be revolutionary in its ability to serve as a fast serial RAM or as an all-flash replacement in industrial IoT and embedded system applications. I will now turn it over to our CFO, Anuj Aggarwal, who will take you through our first quarter financials and second quarter guidance. Anuj.
Thank you, Sanjeev, and good afternoon, everyone. We are excited to report Everspin's quarterly results. Despite supply constraints, Everspin continues the profitability trend into 2022. We delivered solid quarterly results, beating top end of guidance with revenue of $14.3 million, compared to $18.2 million last quarter and $10.3 million in the first quarter of 2021. We also had positive net income of $1.9 million and cash flow from operations of $-1 million for the first quarter of 2022. MRAM product sales in the first quarter, which included both Toggle and STT MRAM revenue, was $12.7 million versus $12.6 million in the prior quarter and $9.1 million in Q1 2021.
Licensing royalties, patents, and other revenue in the quarter was $1.7 million compared to $5.6 million in the previous quarter and $1.2 million in the prior year period. Q4 2021 includes $3.9 million of revenue recognized from a one-time IP optimization deal. Shipments to suppliers for our largest end customer who we serve with our high-density STT product for data center applications represented 19% of revenue in the quarter versus 17% of revenue in Q4 and 26% a year ago quarter. Turning to gross margin, GAAP gross margin for the first quarter of 2022 was 58% versus 62.8% in the prior quarter and 58.2% in Q1 2021. The higher gross margin for the prior quarter was driven by the IP monetization deal.
GAAP operating expenses for the first quarter of 2022 were $6.3 million versus $7.7 million in the prior quarter and $6.3 million in the same quarter one year ago. The higher operating expenses in the prior quarter was primarily for the 20 nm product development. GAAP operating expenses in the first quarter of 2022 included $0.8 million of stock-based compensation compared to $0.75 million last quarter and $0.7 million in the year ago quarter. We expect R&D expense to grow in 2022 as we launch the 20 nm STT-MRAM product targeted at industrial and other broad-based applications. We are pleased to report for first quarter positive net income of $1.9 million or $0.10 per basic share based on 19.9 million basic weighted average shares outstanding.
This compares to a GAAP net income of $3.7 million or $0.19 per basic share in the fourth quarter of 2021 and a GAAP net loss of $ half a million or $0.02 per basic share in the first quarter of 2021. Basic EPS of $0.10 was better than the top end of our guidance range and reflects our strategic operational discipline and strong gross margins in the face of tightening supplies. Cash and cash equivalents decreased to $19.9 million at the end of the first quarter compared to $21.4 million at the end of the prior quarter and $15.5 million in Q1 2021. Cash flow from operations was $-1 million for the current quarter compared to $6.4 million in the prior quarter and $+1.7 million for Q1 of last year.
Turning to our second quarter 2022 guidance, demand for our Toggle products remains strong. We expect industry supply constraints to limit supply and push some unfulfilled customer demand to the second half of the year. We expect Q2 revenue between $13.6 million-$14.6 million. We expect a GAAP income per basic share of between $-0.06 and $0.00 per share, primarily driven by expenses related to the next-generation 20 nm STT-MRAM product and price increases from our suppliers. I will now turn it back over to Sanjeev for some brief additional commentary before we open it up for questions.
Thanks, Anuj. In summary, we continue to build towards a future of profitable, sustainable growth at Everspin. Q1's GAAP positive net income speaks to the continued focus of the Everspin team in controlling our costs, improving our yields, and shipping what we could in a constrained supply chain environment. I'm excited for our new STT-MRAM xSPI product that Everspin launched this quarter and look forward to its positive impact on industrial IoT and embedded systems. Operator, you may now open the line for questions.
Ladies and gentlemen, if you have a question at this time, please press star then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, that's star one on your touchtone telephone. Your first question comes from the line of Rajvindra Gill from Needham & Company. Your line is open.
Yes. Thanks for taking my questions. Just a question on the guidance. You mentioned that the OpEx should be higher related to you know the tape-out. Just wondering if you could maybe talk about the OpEx quarter-over-quarter related also to the gross margin quarter-over-quarter to get to the you know the midpoint of EPS loss. Do we expect gross margin to kind of trend down too given the higher input cost, or is it gonna be more of a kind of the OpEx related to the tape-out? Thank you.
Hi, Rajvindra. This is Anuj. From a gross margin perspective, as you know, we don't guide to gross margin. I think from a modeling standpoint, right, I'd suggest you know sticking to the internal model that we've continued to share with the group. You know, low-mid 50s% seems about right gross margin. Q1 2022 gross margin was a little richer because of the product mix, so we were able to see some good news there. I think with that said, you know, the revenue is limited by supply, right? The cost of goods sold does have some pressure related to higher supplier pricing. We feel comfortable giving guidance at that level.
We are being conservative, but I just want to share that.
Appreciate that. The $2 million of unfulfilled demand being pushed in the second half of 2022 based on the supply constraints, I guess, you're confident that that demand will still be there, you know, in the second half, it won't go away. Just any kind of clarity there in terms of the type of demand, maybe type of end market, what type of products it was related to?
We're very confident that the $2 million in backlog that's moving out to the second half will be fulfilled. As we look at it, backlog is the highest it's been ever from historical ranges. Things are looking good in terms of industrial automation and automotive. The backlog is looking good in those areas, and so we're confident.
Rajvindra, this is Sanjeev. Just to add a little bit to that, you know, we are pretty confident the demand is not perishable. If you just look at our backlog, it's pretty high, and it's actually gone up 10%-15% year-over-year. As long as we can actually obtain more supply, I think we'll be able to meet the demand, and it's not gonna go away over the next two or even three quarters.
Very good. Just my last question following up on that point, wondering kind of what the lead times are. I think last time we spoke, that the lead times were pushing 25 weeks. You guys were kind of actively fighting for additional wafers. It's a long process, obviously, to get the wafers through the back end. The supply chain situation is challenging. Your customers are ordering earlier than expected. Maybe you can give a sense also in terms of kind of, you know, are there any signs of kind of order reschedule, ordering cancellations? Just kinda just some thoughts in terms of, you know, current lead times. Well, what's the updated process of getting more wafers, you know, quarter over quarter?
Just any insights there would be quite helpful. Thank you.
Sure, Rajvindra. Basically, first of all, on the lead times, I think our lead times are still about 25-26 weeks. The only way to improve those is by getting some expedites with our foundry partners or in the back end. We are constantly working with both our foundry partners and the assembly and test houses to make that happen. I don't have anything concrete to give you right now. However, I can say this, that if we are able to secure supply or by July, August, or get that intimation from our foundry partners that we'll get those wafers in that timeframe, we should be able to you know meet that extra demand of $2 million in this year.
Great. Thank you.
Sure.
Once again, to ask a question, please press star then the number 1 on your touch-tone telephone. Your next question comes from the line of Richard Shannon from Craig-Hallum. Your line is open.
Well, thanks, Sanjeev and Anuj. Thanks for taking my questions. Maybe following up on the topic of product gross margins, if my calculations are right, it's the best number you've had other than one in the history here. I think you characterized as mostly coming from mix. Just wanna verify that you didn't have any benefit from yield. Then maybe if you can describe that mix, is that within the change in density or change in applications or from more smaller customers, or how would you characterize that?
Yeah. Hi, Richard. For Q1, gross margin was definitely richer than our internal model expectations. We did see some product mix goodness. We were able to sell some lower costing parts, and that allowed us to get a better gross margin. There's some good news there. We also, if you recall, had increased some prices in December to offset some of our component cost increases that happened last year. You see that benefit as well to help some of that. In addition to that, you know, thinking about the gross margin, looking at it from 62% last quarter to 58% here, we did have that IP monetization deal.
You did see it, you know, a lot richer than the internal model, right? There's some differences there.
Okay. Thanks for that. Second question, on the topic of input costs, can you characterize, how much prices have increased? Are they, do you think this is the only increase this year? Whether these cost increases are durable, and then, you just mentioned some products you're able to raise prices back in December. Do you see any increased ability to pass those costs along here, or is that something, you don't see able to do so?
Yeah. One of the things I wanna comment on right away is, any of the price increases that we've done was specifically, as a reaction to the higher input costs that we were experiencing. You know, we believe in having that long-term relationship with the customers, and so that's the only increases we've done is to meet that. If the prices go back down and, you know, we're always considering alternatives as far as, you know, what we need to do.
Okay. That is helpful. Sanjeev, maybe a question on the new STT family here. I think you said you started to sample. Maybe you can give us a sense of the, you know, the engagements. When you said you're gonna be in volume production the second half of the year. What's your visibility on getting wins and ramping up here and what kind of an impact can this have on revenues, either dollar or percentage terms for next year?
Yeah. Richard, let me comment on, you know, we obviously within Everspin very excited about this part and also, some of our customers. We actually shipped fully functional samples in Q1, and as you saw, last week, we actually announced availability of these parts, across the market space. This part actually is, you know, can replace a high-speed serial memory, or NOR flash, and then in addition, it can actually also go into FPGA systems. We have actually sampled, three FPGA companies, using basically this part as a NOR flash replacement. Okay. In terms of impact to revenue, I think it's, too early to say, but I can say that, you know, our customers that we have actually sampled with, they're excited to actually test it out and evaluate it.
Hopefully we'll see some design wins this year that can actually go into production in 2023 timeframe.
Okay, perfect. One last question from me, I'll jump on the line. On your high capacity STT products, we haven't heard a lot of positive commentary the last couple of conference calls. I'm assuming it's kind of flattened down here. I think your largest customer consumes a good chunk of this. Maybe if you can just talk to the overall focus and importance of the high density product and any product development going on there. And do we see this continuing to grow at all in the next one to two years, or is this, you know, kind of a defocused area?
Yeah. Richard, I think the way to think about it is, I mean, it has been a very consistent customer that we've actually supplied these parts to over the last four or five years, and we have a very healthy relationship with this customer. Even though the demand is a little bit lower because of the supply constraints, we are happy to announce, or I think we've mentioned this before, we are already designed into their next generation product slash products. I think we continue to see demand or supply of this part to our largest customer for a while into the future, at least the next two or three years.
Okay, perfect. That is all for me. Thank you, guys.
Once again, to ask a question, please press star then the number 1 on your touch tone telephone. Again, that's star then the number one on your touch tone telephone. Once again, to ask a question, please press star then the number one on your touch tone telephone. There are no further questions at this time. I will now turn the call over back to our CFO, Anuj Aggarwal.
Okay. With that said, we conclude today's call. Thank you all for joining us, and we look forward to reporting our progress and results in next quarter's call. Operator, you may now disconnect the call.
Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.