Good afternoon, and welcome to the conference call to discuss Everspin Technologies' second quarter 2023 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, August 2nd, 2023. 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 involve 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 August 3, 2023, 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. 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 this estimate as a result of the completion of financial closing procedures, final judgment, 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 reconciliation of GAAP net income to adjusted EBITDA, which provide additional details. A copy of the press release is posted in the investor relations section of Everspin's website at www.everspin.com.
Now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.
Thank you, operator, and thanks everyone for joining us on the call today. Everspin delivered quarterly revenue of $15.7 million, above the high end of guidance, a 7% increase year-over-year. We were GAAP net income positive for the 9th quarter in a row, which continues to be a strong focus for the company. A few highlights for Q2 2023: cash flow from operations was $6.3 million, putting us at $7.5 million year to date. We continue to operate debt-free while increasing profitability. In Q2, we started sampling our new xSPI family of STT-MRAM products from 4 Mb to 16 Mb in BGA and DFN packages, with production planned in Q3 2023. As a reminder, we taped out this family of products in Q4 2022.
In response to our customer requests, we have introduced a new version of our xSPI family of STT-MRAM products from 4 Mb to 128 Mb, that extends the operating temperature from industrial temperature, that is, -40 degrees Celsius to 85 degrees Celsius, to extended temperature, which is -40 degrees Celsius to 105 degrees Celsius. We exceeded expectations on our radiation hard programs to deliver STT-MRAM-based solutions for a high-density memory array and a distributed configuration memory for instant-on FPGAs with multiple time programmability. For our business outlook, our product backlog for balance of 2023 and into 2024 as of June 30, 2023, continues to be high, although we are experiencing some headwinds from the semiconductor downturn. We continue to alleviate some of our foundry supply chain constraints, which is helping us address our unfulfilled Toggle demand.
Over the past year, Everspin has introduced two xSPI family of STT-MRAM products integrated on 28 nanometer CMOS, with the densities ranging from 4 Mb to 128 Mb. These products are available in the industrial temperature range of -40 degrees Celsius to 85 degrees Celsius. These products will enable our customers to simplify their system architecture and easily replace legacy memory components like SRAM and FRAM. Based on customer feedback, we are now planning a new family of xSPI STT-MRAM products with densities from 4 Mb to 128 Mb for the extended temperature operating range of -40 degrees Celsius to 105 degrees Celsius. This enables our customers in all segments to use these parts in harsher environmental conditions. Engineering samples are available now upon request, and will be available in production volumes in Q4 of 2023.
As discussed in the last earnings call, Everspin is designing a high density, which is greater than 256 Mb, STT-MRAM discrete product for discrete NOR flash replacement. The first product in this family of 1 Gb density is on schedule for 2024 tape out and for engineering samples. This family of products would be ideal for replacing NOR in FPGA systems to store configuration memory and simultaneously enabling 100x faster over-the-air updates. Everspin has added ion beam etch capability to its 8-inch STT-MRAM line in Chandler. We are excited about this capability as it enables Everspin to develop the next generation MTJ material stack and etch process. This capability will reduce the development cost and our time to production when our MTJ process is transferred to our partner's 12-inch line on advanced CMOS nodes.
At present, this ion beam etch tool is being used for our radiation-hard STT-MRAM programs and is yielding promising results. As you know, Everspin has two active radiation-hard programs to deliver STT-MRAM solutions. One, a high-density memory array, and two, a distributed configuration memory for instant-on FPGAs with multiple time programmability. As it relates to the STT-MRAM portion of this project, Everspin met its obligations, and the delivered solution exceeded the specs defined for the FPGA. This included a demonstration of the integration scheme and the MTJ stack for the STT-MRAM solution and the performance of the Everspin circuit design. In the next phase of the project, this solution will be integrated on CMOS wafers with the FPGA fabric and optimized for performance. This design is a revolutionary approach that enables distributed STT-MRAM as a configuration memory in an FPGA, thus extending MRAM in a new application use case.
I will now turn it over to our CFO, Anuj Aggarwal, who will take you through our second quarter financials and third quarter 2023 guidance. Anuj?
Thank you, Sanjeev, and good afternoon, everyone. As part of the second quarter 2023 financial results, Everspin Technologies is pleased to announce its 9th consecutive quarter of positive net income. In addition, we generated positive cash flow from operations of $6.3 million during the quarter. We delivered solid quarterly results above the high end of guidance, with revenue of $15.7 million, compared to $14.8 million last quarter and $14.7 million in the second quarter of 2022. We also had positive net income of $3.9 million and positive cash flow from operations of $6.3 million for the second quarter of 2023.
MRAM product sales in the second quarter, which includes both Toggle and STT-MRAM revenue, was $13.4 million, compared to $13.8 million the prior quarter, and an increase from $13.2 million in Q2 2022. Licensing, royalties, patents, and other revenue in the second quarter increased to $2.3 million, compared to $1.1 million in Q1 2023, and $1.5 million in Q2 2022. Shipments to suppliers for our end customer, who we serve with our high-density STT product for data center applications, represented 7% of revenue in the quarter, versus 11% of revenue in Q1 and 15% in Q2 2022. Turning to gross margin, GAAP gross margin for the second quarter of 2023 was 58.4%, versus 56.8% in the prior quarter and 58.4% in Q2 2022.
GAAP operating expenses for the second quarter of 2023 were $7.6 million, versus $7.7 million in the prior quarter and $6.9 million in the second quarter of 2022. The increase in operating expenses in the quarter compared to Q2 2022 was primarily driven by increased costs to support the xSPI family of STT product that is currently in low volume production. We are pleased to report a second quarter 2023 positive net income of $3.9 million, or $0.19 per basic share, based on 20.7 million basic weighted average shares outstanding.
This compares to a GAAP net income of $0.8 million or $0.04 per basic share in the first quarter of 2023. Net income of $1.7 million or $0.08 per basic share in the second quarter of 2022. Basic EPS of $0.19 was better than the high point of our guidance range, reflecting our strategic operational discipline and ability to drive profitability in the face of tightening supplies and macroeconomic uncertainties. Adjusted EBITDA continues to remain positive. For Q2 2023, adjusted EBITDA was $5.4 million, compared to $2.3 million in the prior quarter and $3.3 million in Q2 2022.
Cash and cash equivalents ended the quarter at $30.8 million, compared to $24.2 million at the end of the prior quarter and $23.1 million in Q2 2022. The increase in cash quarter-over-quarter is a result of Everspin's continued focus on strong cash management, while growing cash flow from operations, and from receiving a $2 million employee retention tax credit under the CARES Act during the quarter. Cash flow from operations was healthy at $6.3 million for the current quarter. As mentioned, during the second quarter of 2023, Everspin received a one-time employee retention tax credit refund from the United States Treasury, totaling $2 million. The refund was received pursuant to provisions within the CARES Act.
Everspin recorded the one-time employee retention tax credit within our other income during the second quarter of 2023. Turning to our third quarter 2023 guidance, Everspin is cautiously optimistic. Demand for our Toggle products remains strong, and we continue to see increased demand for our xSPI family of STT products. Everspin expects total revenue in a range of $15.4 million-$16.4 million. Everspin expects GAAP net income per basic share to be between $0.01 and $0.06. 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, Everspin reported another quarter, now ninth in a row, of profitability. We are excited to see the early adoption of our xSPI family of STT-MRAM products, covering densities from 4 Mb to 128 Mb. We expect to further enhance our ability to serve the market with the extended temperature offering from -40 degrees Celsius to 105 degrees Celsius of this xSPI STT-MRAM family. Everspin is successfully navigating the slowdown with a healthy backlog and good visibility into the second half of 2023 and early 2024. Thank you for joining us today. Operator, you may now open the line for questions.
Thank you. Ladies and gentlemen, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Again, if you'd like to ask a question, please press star one one. 1 moment for our question. I'm showing we have a question coming from the line of Rajvindra Gill with Needham. Your line is open.
Hey, this is Nick Doyle. Great quarter. Congrats on the good numbers. My first question would just be, I'd assume that the licensing and gross margin come down next quarter. Maybe you could just talk about what drove the big bump in licensing this quarter and what you're thinking moving forward. I would assume, like I said, that it would come down, so really that we're seeing that the products are getting a nice uptick. Is that coming from Toggle or STT? Thanks.
Hi, Nick, this is Anuj. Yeah, this quarter, 58.4% gross margin is a pretty healthy gross margin compared to our internal model that we've shared with everyone. We don't typically give guidance on gross margin, but I'll say that the licensing deals are richer in gross margin, and so that's what has enabled us to get the high gross margin this quarter. It's hard to predict in future quarters how it'll look because there is some lumpiness, if you will, on when activities are being completed and things progress as we get into future quarters. We do expect that the licensing project will have a higher gross margin going forward.
Okay. I think in the past, you've talked about that you expect Toggle to grow sequentially over time. Do we still expect that, and what's driving that? Maybe it's related to the supply constraints. I think you mentioned that they're getting a little better. Are you still seeing constraints at 180nm?
Yeah. You know, the Toggle revenue continues to be strong, and, and fairly consistent and growing. If you look at our design wins over time, we continue to see strong design wins in the Toggle space. We've experienced that last two, last two years. The last couple of quarters this year, we've had very strong design wins, and so we expect those projects to start translating into revenue nicely, in the next year or so. So we expect, you know, continued growth in Toggle from that standpoint. From an STT standpoint, within the data center, we've shared with everyone, that that's been relatively sluggish and challenging. I think that continues to be a soft part of the market, if you will, for us.
If you look at our xSPI family of products within STT, that continues to also be exciting. As Sanjeev mentioned, we have another cut down version of the product that's come out relative to what customers need and what they've requested. We're seeing some nice design wins in that space. As we look into the future, we expect those design wins to start translating into revenue.
Thank you. Our next question coming from the line of Shadi Mitwalli, from Craig-Hallum. Your line is open.
Hey, thanks for taking my question. This is Shadi Mitwalli, filling in for Richard Shannon at Craig-Hallum. I just got a question on if you guys can go a little bit more in-depth on the supply chain constraints that you're experiencing and, what the unfilled demand looks like?
Hi, Shadi, this is Anuj again. Yeah, let me, let me kind of talk a little bit about the constraints. We continue to be constrained on our 180nm products. As you know, we buy our CMOS wafers from TSMC, and we're working very closely with them in order to get the product that we need to fulfill the demand that we have. That continues to be an ongoing discussion and partnership with them as we try to get, you know, more wafers to get the product out. I think that that's continuing to be a challenge. From a backlog standpoint, the backlog continues to be very healthy. I'll just kind of reiterate some of the things we've said in the past.
We're seeing bookings now going into the second half of 2024. There's new orders outside the lead times, and we're continuing to see increased bookings within the lead time. From that perspective, things are looking good. We do continue to see some cancellations and pushouts, but that's limited, and I would say probably very normal if you look at the historical trends. Things are looking promising from a backlog perspective.
Great. Great, that's good to hear. Then, just a quick follow-up question on the visibility of future sales with your largest customer, and then if, revenues have bottomed out with them?
Yeah, for the, for the, data center customer, they are 7.3% now of our total revenue. I think it's a couple of different things, right? Part of it is mix. As we have increased RadHard projects, increasing in revenue or becoming a larger part of our total revenue, and as Toggle continues to grow and our new xSPI family of products continues to develop, you know, we might see this particular customer become a smaller concentration of the revenue, which is a good thing, right? It limits their impact to the business. We have seen some softness from them that's continued.
Yeah, which is consistent with the rest of the data center market. So it's not a, not something unique to Everspin or a surprise.
Thanks, guys. That, that's all I have for me, and congrats on the solid quarter.
Thanks, Shadi.
Thank you.
Thank you. I'm not showing any further questions in the queue at this at this time. I will now turn the conference back to Anuj for any closing.
Okay. With that said, we conclude today's call. Thank you all for joining us. We look forward to reporting our progress and results in the next quarter's call. Operator, you may now disconnect the call.
Ladies and gentlemen, that ends our conference call today. Thank you for your participation. You may now disconnect.