Everspin Technologies, Inc. Stock

Good afternoon, and welcome to Everspin Technologies Third Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Monica Gu, Investor Relations for Everspin.

Thank you, operator, and good afternoon, everyone. Everspin released results for the third quarter 2026 ended September 30, 2026, this afternoon after market close. I'm Monica Gould, Investor Relations for Everspin. And with me on today's call are Sanjeev Aggarwal, President and Chief Executive Officer; and Bill Cooper, Chief Financial Officer.

Before we begin the call, I would like to remind you that today's discussion may contain forward-looking statements regarding future events, including, but not limited to, the company's 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 the company's SEC filings, including the annual report on Form 10-K and other SEC filings made from time to time in which the company 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, the company undertakes no obligation to update or alter any forward-looking statement made on this call, whether as a result of new information, future events or otherwise. The financial results discussed today reflect the company's 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. The company's actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustment and other developments arising between now and the time of the -- that the 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 to non-GAAP net income, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin's website at www.everspin.com.

And now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Thank you, Monica, and thanks, everyone, for joining us on the call today. We are pleased to report third quarter revenue of $20.6 million and non-GAAP EPS of $0.12. These results reflect another record revenue quarter, the highest in Everspin's history and at the high end of our guidance range, driven by strong product and nonproduct revenue growth. We recorded strong product revenue growth, which rose 34% year-over-year and was up 11% sequentially. This growth was driven by strength in Industrial Automation, Data Center, Medical and Energy Management applications.

Growth in Industrial Automation was led by a continued recovery in customer demand, particularly in Japan. In the Data Center market, we saw strong demand for RAID storage configurations, while Energy Management benefited from the transition of new design wins to shipments in Europe.

We have not discussed MRAM's role in medical applications in much detail before. So I would like to offer some additional perspective. Everspin MRAM is increasingly used in medical applications that demand high reliability, data retention during power loss and endurance under continuous operation. MRAM's non-volatility, high speed and inherent endurance make it ideal for use in life-critical systems where memory failure is unacceptable.

Medical devices most commonly using Everspin MRAM include both patient-critical equipment and diagnostic instruments. For example, in dialysis machines, MRAM records operational and sensor data such as pressure, flow rate and alarms. In infusion pumps and portable diagnostic services devices, MRAM stores calibration data, dosing logs and firmware states. And in defibrillators and patient monitors, MRAM retains event history, shock delivery data and configuration settings.

We continue to make steady progress on our project with Microchip to build MRAM capabilities in the Gresham, Oregon, fab. Process development and transfer activities are ongoing, including the tape-out of masks for products. We remain on schedule with our goal of delivering first qualified silicon for our Toggle and sensor products by the second half of 2027 and STT products by the first half of 2028.

Turning to some of our recent development efforts. We remain on track to have a 256-megabit xSPI prototype based on TSMC's 16-nanometer FinFET process technology in the first half of 2027. This prototype will verify our design and put us on the path to designing high-density UNISYST, unified code and data memory products, later in the year and beyond. 256-megabit xSPI will be the first product in our UNISYST family, which will then be expanded to include 1-gigabit, 2-gigabit and 8-gigabit densities. These products will be deployed in low Earth orbit satellites for secure boot memory, FPGAs for configuration memory and flight control systems for fast data logging and security, for example.

Our momentum with customers designing our PERSYST Toggle and STT-MRAM into space-based missions continues with both new design wins and existing design wins continuing their progress into production. To further accelerate the adoption of Everspin's MRAM in the aerospace and defense segment, we recently signed a strategic partnership with Teledyne's HiRel Semiconductor business unit. Through the partnership, Teledyne HiRel will offer our 64-megabit, 128-megabit and 256-megabit PERSYST STT-MRAM solutions as part of its memory products portfolio for military and aerospace customers with target applications such as avionics, VPX and single-board computer platforms, radar and electronic warfare payloads, satellite electronics and autonomous systems.

Last quarter, we discussed our strategy to expand our addressable market in the data center segment by developing products based on the Compute Express Link, or CXL, interface over the next few years. To further efforts on this front, Everspin successfully demonstrated the world's first CXL-connected MRAM at the Storage Networking Industry Association developer conference in September. CXL MRAM combines standard high-speed connectivity with MRAM's persistence. This solution creates a fast, persistent buffer, so data remains available through a power interruption or system restart without relying on battery-backed DRAM or having to first flush data to an SSD.

Further, a CXL-MRAM solution enables nanosecond class cache and writes up to 100x faster than NAND-based solid-state storage. A key use for this application is to hold data generated during AI processing before transferring it to long-term storage. Other potential use cases include financial and algorithmic trading systems and in-memory databases, such as online transaction processing, or OLTP, and online analytical processing, or OLAP. Each of these use cases will benefit from CXL MRAM's strong value proposition in small block or low latency writes.

We continue to explore ways to expand Everspin's market opportunity. To this end, Everspin led the effort to form a LPDDR persistent memory task group at JEDEC, the standards-setting organization for the semiconductor industry, during their August committee meeting and our VP of Corporate Strategy, Steffen Hellmold, is serving as the Task Group Chair. This effort responds to strong industry demand for persistent memory solutions that can leverage the existing LPDDR ecosystem, thus creating a simpler path for system-level integration and ultimately easing the adoption of MRAM. The work is intended to enable controller support for both DRAM and persistent memory as well as approaches that enable LPDDR DRAM and persistent memory from multiple vendors to operate within compatible system architectures. Potential customers range from edge, IoT, wearable, mobile, enterprise to data center and hyperscale CSP markets.

In closing, we remain focused on executing against our priorities, advancing our technology road map and delivering value for our customers and shareholders. We believe our technology, customer relationships and disciplined approach to execution position us well to capitalize on the opportunities ahead. I want to thank our customers for their continued trust and our employees for their commitment and hard work.

I will now turn it over to our CFO, Bill Cooper, who will walk you through our third quarter financials and fourth quarter 2026 guidance. Bill?

Thank you, Sanjeev. During the third quarter, we delivered record revenue of $20.6 million, up 47% year-on-year, slightly exceeding our guidance range of $19.5 million to $20.5 million, driven primarily by strong product revenue growth. MRAM product sales, which include both Toggle and STT-MRAM revenue, were $16.9 million, an increase of 34% over the third quarter of the prior year and up 11% sequentially. Licensing, royalty, engineering services and other revenue increased to $3.7 million from $1.4 million in Q3 '25, primarily due to continued revenue recognition on our $40 million subcontract agreement with a U.S. prime contractor.

Our GAAP gross margins of 51.4% were consistent when compared to 51.3% in the third quarter of 2025. A more favorable mix of high-margin nonproduct revenue was offset by higher manufacturing and production costs, which impacted product gross margins in the current quarter. To counter rising input costs, we began to institute pricing increases in the fourth quarter and expect product margins to improve sequentially. We continue to target long-term gross margins above 50%.

GAAP operating expenses were $18.5 million, up from $8.8 million in the third quarter of 2025. The increase was primarily driven by litigation costs of $6 million. Non-GAAP operating expenses of $8.5 million increased 13% from $7.5 million in the prior year third quarter, driven by increased spending on customer engagement and marketing initiatives. These investments are intended to strengthen customer relationships, expand our market presence and support our long-term revenue growth objectives.

Other income remained steady at $0.4 million as our $14.6 million contract for the DoD contractor continues to wind down. We recorded third quarter non-GAAP net income of $3.1 million or $0.12 per diluted share based on 24.4 million weighted average diluted shares outstanding. This was within our guidance range of non-GAAP net income of $0.10 to $0.15 per share and compares to non-GAAP net income of $1.5 million or $0.06 per share in the third quarter of 2025. Our reported non-GAAP results exclude the impact of stock-based compensation, litigation expenses and regulatory provision.

Our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $43 million, down $2 million from $45 million at the end of the prior quarter. Cash flow generated from operations increased to $0.9 million for the third quarter, up from $0.2 million in the second quarter.

Turning to guidance. We expect Q4 total revenue to be in the range of $21.5 million to $22.5 million and GAAP results per fully diluted share to be between a net loss of $0.08 to $0.13 per share. On a non-GAAP basis, we anticipate earnings between $0.13 to $0.18 per fully diluted share. These non-GAAP figures exclude the impact of litigation costs, NRE related to the Microchip MRAM line and stock-based compensation expense.

In summary, we are pleased with our continued solid execution and performance on our core business and remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue.

Operator, you may now open the line for questions.

[Operator Instructions] First question comes from Neil Young with Needham & Company.

My first question, I wanted to ask on litigation costs. So it looks like they stepped up in the quarter. I was hoping maybe you could discuss sort of what the cost assumption is embedded into the 4Q '26 guide. And then maybe, if possible, could you discuss OpEx directionally as a whole as we start to look into next year? And then I have a follow-up.

Yes. Neil, yes, good question. I think what we've seen, obviously, is an uptick in the litigation costs in Q3. What I would say is in Q4, we expect to see some still fairly substantial costs. I would expect that it is going to be slightly lower than what we saw in Q3. And then as we look forward in 2027, one of the things we did want to stress is this matter will go to the ALJ at the end of this year. And then as we move and look forward into 2027, those litigation expenses should reduce significantly.

Great. And then my last one. So you provided some color on product sales by end market this quarter. That was very helpful. But specifically, I was curious in learning more about the new data center wins in Europe you mentioned. So any more detail you can provide there would be great.

Yes. Neil, thank you for that question. The RAID storage configuration that we're basically talking about is the journal memory, and these are mostly with the hyperscalers like Google, Amazon, NXP, those kind of design wins, which are basically what we've seen in Q2 and Q1 of this year as well. And as far as the shipments in Europe, these are mostly related to the energy management applications that have actually turned in from design wins to production in this quarter.

Our next question comes from Jack Vander Aarde with Maxim Group.

Okay. Good to see the solid revenue growth as well as a solid outlook. Sanjeev, maybe a quick question for you. Just overall, you mentioned the design wins kind of across a few of your key segments and how those are ramping up. I'd like to get just a sense of -- I'm not sure if you have this on hand, but I think last year, you had over 238 design wins or something like that, close to that number, which were up from the prior year as well. For design wins overall just tracking this year, are they up overall? Do you have a good sense of that? And just sort of the size and scope of those opportunities?

Jack, good question. So, we usually report our annual design wins at the end of the year in our 10-K. But I think a good indication is the product revenue growth that you're seeing quarter-over-quarter and also year-over-year, that basically indicates the number of design wins that we've been able to turn into production and the new design wins that we're seeing. So I don't have a number to give you, but obviously, they're going up into the north. Sorry, up into the right.

And maybe just a follow-up, too. Across your verticals that you highlighted, definitely you spent a lot of time on defense and data center and then also across some of these newer like medical as well, actually. Just what are some of the segments here though or end market verticals that you see actual potential maybe exciting upside relative to your original thoughts? Where do you see some of the greatest upside potential relative to your plan over the next few years? And then I have a follow-up for Bill.

Sure. So I would say, Jack, that I'm most excited about the low Earth orbit satellite in the aerospace and defense industry. We're also seeing a lot of traction in the data center market. Those are the 2 segments that are growing pretty rapidly, closely followed by industrial automation in general across the world, Japan as well as Europe.

Fantastic. One more question from me for Bill. From a segment perspective, licensing, engineering and other revenues picked up strongly as expected from the recent contract. It was good to see. But what I noticed is that the gross margin in that segment also stayed relatively stable, very strong, close to 90%. Is there any -- is that sort of a reasonable expectation going forward? Or just wondering how much visibility you have given this new revenue stream?

Yes. Jack, thanks for the question. What I would say is that area, the licensing, royalty, engineering services, that really is a high-margin area for us. Typically, we certainly expect it to be, again, fairly high margin. So you can kind of think of it in terms of the 70%, 80%, up to 90% range. Certainly, again, it depends on a number of factors depending on whether it's royalty or foundry services or licensing or engineering services. That's really what that mix of that really drives the margin. But again, it will be a high-margin area.

Our next question comes from Richard Shannon with Craig-Hallum Capital Group.

First one I want to ask about is on gross margins and specifically product gross margins here. So, Bill, I think you mentioned in regards to the third quarter margins that you had a positive mix offset by some manufacturing costs. I wonder if you could help us understand both of those dynamics here. Is the mix here product or end market or geography related? And then what are these manufacturing costs? And what's the sustainability of that dynamic?

Yes. So what I would say is, Richard, definitely saw some challenges or some small reduction, a couple of points there lower in terms of the product margins. And we had signaled, right, that we were going to see some -- continue to see some product headwinds in terms of the cost, right, materials and services costs. And obviously, there's a lot of pieces that go into that bucket. And we recognize that, right? We had seen it coming. And for that reason, we instituted a price increase in Q4 as well. We continue to see a good product and nonproduct revenue mix. I think really, we were trying to indicate that, again, those headwinds are really confined to the product side of the equation.

Okay. That is helpful here. A very quick question here. You mentioned the regulatory provision. Can you explain what this is and where this comes from? I have no other context here. So help us understand this one, please.

Right, right. Yes. Good question. So on that one, we actually have a fine that's related to export controls from BIS, a government agency within the Department of Commerce. And so we took that particular provision in anticipation of settling that particular fine agreement. It's not settled yet, but that's our best estimate today of what we expect to close it out.

Okay. Fair enough. Let's see here. Maybe kind of looking forward, a question for Sanjeev. Looking forward to the opportunity to compete against the -- into the NOR Flash space here with some products coming to market next year. I noticed that Infineon sold its memory businesses, including NOR Flash, to, I think, an Asian supplier here. Within that context here as well as what we've seen with some NOR Flash guys who are moving their capacity towards DRAM. Maybe you can talk about the changing dynamics within NOR Flash and how, if anything, might your strategy has changed to enter that market next year?

Yes. Good question, Richard. And we are seeing the same thing or we are hearing the same thing, I guess, that many of the fabs are converting their NOR Flash capacity into DRAM, which is creating a challenge for the NOR Flash capacity or availability. And based on that, we are seeing our distributors actually ask for MRAM parts that would actually replace NOR Flash. And we're starting to see traction over there. And I think you're seeing some of that revenue roll into our reported revenue for Q3 as well. So I think we are all in the -- we are in the right place, and we have the right parts. So I think it's good news even for the UNISYST part, the prototype that's coming out in Q1 of '27 and the follow-on product later in the year. So I think we'll be well positioned for addressing the high-density NOR Flash market as well.

Sanjeev, any way that you'd offer to quantify how much of your products that you think could be because distributors are looking to replace NOR Flash they can't find?

I don't think it's significant or material yet, but we do see traction where it could become significant in Q4 and Q1.

Okay. Is that baked into your revenue guide for this fourth quarter?

It is, yes.

Any way you try to quantify that for us?

We've typically not done that. So let me get back to you on that one.

[Operator Instructions] Our next question is from Josh Sullivan with JonesTrading.

I just wanted to just check in how the CXL MRAM presentation at SAM (sic) [ SNIA ] went and how the customer response has been so far?

Yes. Thank you for that question, Josh. Yes, the demo at CXL went actually very well. We were one of several demo tables over there. And I would say that we had visitors all day long or all day long for 2 days. And then we had several customers that actually were repeat trying to understand the application and the use. So since then, we've actually had several follow-on discussions trying to identify use cases. We obviously don't have anything yet, but we're hoping that we will have something identified here in Q4 or Q1. So a very, very positive response, very well understood that bringing persistence to the solution is very important. And the fact that you can actually connect it to a CXL bus and not worry about compatibility was a huge win and success for us.

And then on the JEDEC task group, what's the time line for kind of setting standards or those conversations to maybe translating into revenues for you guys or at least something that's observable?

Yes. So the JEDEC Group is basically the standards group for the Electronic Devices Council (sic) [ Joint Electron Device Engineering Council. ] And that typically takes about 18 to 24 months to set the standard. So we expect that we will probably reach some kind of agreement with all the participants over the next 12 to 15 months, and that will probably take another quarter for that spec to get published. And our goal is to start the design early next year so that we are actually ready to intersect when this spec is actually published. So 6 months later, hopefully, we'll have samples on hand, which would be an LPDDR6 MRAM that we can then start sampling with our customers. So what I would say is samples by the end of '28, revenue sometime -- early revenue in '29.

Okay. Got it. And then you highlighted the medical market, an area you haven't typically talked about. Why now? What is it that's driving that market? I think you had mentioned that the memory shortage isn't necessarily driving sales at least right now. But curious why the medical market at this point in time is becoming something to highlight.

Yes. Basically, we saw a significant uptick in our product revenue in that segment. So there are some new design wins that we're seeing over there and also some more pull from our customers. And that's the reason why we highlighted it in the prepared remarks today.

And this concludes our Q&A session. I will pass the call back to Sanjeev Aggarwal for closing remarks.

Thank you, everyone, for joining the call today. I really appreciate your time and look forward to our next call, which will be in February sometime. Thank you.

This concludes our conference. Thank you for participating, and you may now disconnect.

Good afternoon, and welcome to Everspin Technologies Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Monica Gould, Investor Relations for Everspin.

Thank you, operator, and good afternoon, everyone. Everspin released results for the second quarter 2026 ended June 30th, 2026, this afternoon after market close. I'm Monica Gould, Investor Relations for Everspin. And with me on today's call are Sanjeev Aggarwal, President and Chief Executive Officer; and Bill Cooper, Chief Financial Officer.

Before we begin the call, I would like to remind you that today's discussion may contain forward-looking statements regarding future events, including, but not limited to, the company's 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 the company's SEC filings, including the annual report on Form 10-K and other SEC filings made from time to time in which the company 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, the company undertakes no obligation to update or alter any forward-looking statements made on this call, whether as a result of new information, future events or otherwise.

The financial results discussed today reflect the company's 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.

The company's actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustments and other developments arising between now and the time that the financial results for the 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 to non-GAAP net income, which provide additional details.

A copy of the press release is posted on the Investor Relations section of Everspin's website at www.everspin.com.

And now I would like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Thank you, Monica, and thanks, everyone, for joining us on the call today. We are pleased to report second quarter revenue of $18.7 million and non-GAAP EPS of $0.11. These results reflect the highest revenue quarter in Everspin's history, which exceeded our guidance range on both the top and bottom line, driven by strong product revenue growth and the $40 million agreement we announced with a U.S. prime contractor on our last earnings call.

During the quarter, we began to recognize nonproduct revenue under the 2.5-year agreement. As a reminder, Everspin is a subcontractor on an existing prime contract and is providing engineering services to develop and qualify Toggle MRAM process technology capabilities for U.S. defense industrial-based customers.

In addition to this new contract, we also recorded strong product revenue growth, which rose 38% year-over-year and was up 9% sequentially. This growth was driven by strength in industrial automation, energy management and aerospace and defense applications.

Growth in Industrial and Energy Management was driven by a continued recovery in customer demand, particularly in Japan and Europe, respectively.

In aerospace and defense, we saw continued broad-based growth across our customer base, including several low earth orbit customers, who are expanding the mission profile, where Everspin MRAM delivers long-term reliability for mission-critical applications.

Recently, Astro Digital selected Everspin's PERSYST 64-megabit STT-MRAM for use on an upcoming Raven Bus Geosynchronous Earth Orbit or GEO satellite mission. Our MRAM is deployed as the primary fail-safe memory for the system boot memory, which stores the essential code needed in case of power loss and fast access to initialize spacecraft electronics during start-up or recovery.

As we noted last quarter, our $14.6 million contract with a DoD contractor to develop a sustainment plan for our MRAM manufacturing facilities to provide continuous onshore MRAM capabilities to their aerospace and defense customers is beginning to wind down.

In the second quarter, we recognized $0.5 million in other income related to this contract and $13.3 million to date. We expect this business to continue to wind down over the coming quarters with estimated completion in the first half of 2027.

Turning to some of our product development efforts, our first UNISYST family of MRAM products, the 256-megabit xSPI is on schedule to tape out later this year. As a reminder, this is a test chip designed on 16-nanometer FinFET CMOS at TSMC. Engineering samples are expected to be available in early 2027 with ramp to production later in the year.

The UNISYST family of products will serve the high-density stand-alone NOR Flash market, which will expand our addressable market by approximately $3 billion. Our goal is to capture 5% to 10% of this market in the early years and then grow further.

We are pleased to announce that our high-density 128 megabit and 256-megabit xSPI high-reliability parts were made available to our customers ahead of schedule. During the second quarter, we released 128-megabit high reliability parts to production. Subsequent to the quarter end, we released all SKUs of xSPI 256 megabit density to production, including high reliability parts. Customers now have these parts on hand to evaluate them in their designs.

We kicked off our project with Microchip in April to build MRAM capabilities in their Gresham, Oregon fab. This project comprises 2 phases with the first phase focused on Toggle MRAM and the second phase on STT-MRAM. We are finalizing the installation of unique MRAM equipment and completing process gap analysis, if any, for the non-MRAM equipment. This project is on schedule with a goal to deliver the first qualified silicon in 18 to 24 months from project kickoff.

We continue to see strong growth across our existing business, while executing on our product pipeline and developing solutions that will further expand Everspin's addressable market and drive long-term growth. One of these future opportunities is focused on expanding our TAM in the data center market, and we are planning to introduce some new products over the next 3 years based on the Compute Express Link or CXL interface.

To provide a little background, in the memory hierarchy, there is 100x to 1,000x latency gap between storage with a latency of approximately 100 microseconds and main memory with a latency of approximately 100 nanoseconds. CXL attached random access memory can provide approximately 100x lower latency when compared to SSD solutions available today.

We continue to advance our development work on CXL interface-based MRAM solutions, which will address the demand for nanosecond class persistent memory solutions, bringing storage closer to XPUs, enhancing compute and power efficiency, resulting in significant overall cost savings.

We are targeting to improve XPU utilization from 60% to 70% currently to as much as 90% to 95%, especially from small rights, for example, meta or log data. We are currently working on developing proof-of-concept demo vehicles to validate the expected gains.

Subsequent to quarter end, we signed a contract with a high-performance data interface and controller company to develop and provide CXL controller IP for MRAM. We are collaborating on an AMD UltraScale plus FPGA-based platform using the CXL controller IP under development to connect to Everspin MRAM DIMMs dual in-line memory modules. We plan to demonstrate this solution at the SNIA Developers Conference, or SDC in September.

We also recently announced that we signed a memorandum of understanding with MaxLinear to evaluate the use of Everspin CXL attached MRAM with MaxLinear storage accelerators for next-generation storage and acceleration architectures. Together, we will assess opportunities to apply persistent bytaccessible, low-latency MRAM to storage functions such as metadata, log data, write buffers and caches with the goal of improving system performance, reliability, power efficiency and data persistence in next-generation storage architectures.

By combining Everspin's industry-leading MRAM with MaxLinear's storage accelerators, we believe we can enable new persistent memory solutions for hyperscale cloud, AI infrastructure and enterprise Tier 1 customers.

I will now turn it over to our CFO, Bill Cooper, who will walk you through our second quarter financials and third quarter 2026 guidance. Bill?

Thank you, Sanjeev. During the second quarter, we delivered record revenue of $18.7 million, up 42% year-on-year, exceeding our guidance range of $15.5 million to $16.5 million, driven by both strong product and nonproduct revenue growth.

MRAM product sales, which include both Toggle and STT-MRAM revenue were $15.3 million, an increase of 38% over the second quarter of the prior year and up 9% sequentially.

Licensing, royalty, engineering services and other revenue increased to $3.4 million from $2.1 million in Q2 of '25, primarily due to initial revenue recognition on the $40 million subcontract agreement with the U.S. prime contractor we announced on our last earnings call.

Our GAAP gross margin increased to 53.9% from 51.3% in the second quarter of 2025 due to a favorable mix from higher nonproduct revenues.

GAAP operating expenses were $14.5 million, up from $8.7 million in the second quarter of 2025 due primarily to litigation costs of $4 million and $1.1 million of nonrecurring engineering costs.

Other income of $0.5 million decreased from $0.8 million in the prior year quarter as our $14.6 million contract with the DoD contractor begins to wind down.

We recorded second quarter non-GAAP net income of $2.9 million or $0.11 per diluted share based on 25.9 million weighted average diluted shares outstanding. This exceeded our guidance range of non-GAAP net income of $0.00 per share to $0.03 per share and compares to non-GAAP net income of $0.7 million or $0.03 per share in the second quarter of 2025.

Our reported non-GAAP results exclude the impact of stock-based compensation, litigation expenses as well as nonrecurring engineering expenses related to the build-out of the MRAM manufacturing line at Microchip's fab in Oregon.

Our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $43.9 million, up $3.4 million from $40.5 million at the end of the prior quarter.

Cash flow generated from operations decreased to $0.2 million for the second quarter, down from $0.6 million in the first quarter, primarily due to litigation costs. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements to continue to execute upon our foundry services agreement with Microchip, our subcontract agreement with the U.S. prime contractor and continued investment in product development to support our future road map and enable the company to drive growth.

Turning to guidance, we expect Q3 total revenue to be in the range of $19.5 million to $20.5 million and GAAP results per fully diluted share to be between a net loss of $0.05 per share to $0.10 per share. On a non-GAAP basis, we anticipate earnings between $0.10 and $0.15 per fully diluted share. These non-GAAP figures exclude the impact of litigation costs, NRE related to the Microchip MRAM line and stock-based compensation expense.

In summary, we are pleased with our solid performance this quarter and remain committed to maintaining financial discipline, while focusing on scaling our business and converting additional design wins to revenue.

And finally, I want to thank all of the Everspin employees for their continued contributions and supporting the company's growth. Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Neil Young of Needham & Company.

The first question I wanted to ask was sort of on end market strength. So I know you guys cited the industrial automation, energy management and A&D as sort of the growth drivers. And you talked a lot about in the aerospace and defense being driven by LEO. But if I recall from some of your comments at conferences intra-quarter, I thought you guys talked a little bit about drones and maybe some strength you're seeing there. So maybe if you could just expand on anything that you're seeing outside of the LEO satellites within defense and yes. Thanks.

Thanks, Neil. What I would say is, certainly, right, we continue to engage in that sector. We haven't announced any particular specific deals on that area. And certainly, we still see very healthy demand across all segments of the business.

And then the second one I wanted to ask was about the $40 million contract. So last quarter, you only had about, if I remember correctly, 2 months of that was recognized in the quarter.

That's right.

So should we expect maybe another step-up now in 3Q that's a full quarter? Or is it not going to scale sort of in an evenly manner?

Yes, that's correct. It won't necessarily scale in a very linear manner. So I would expect to see nonproduct in the similar area from Q2 to Q3.

Our next question comes from the line of Richard Shannon of Craig-Hallum.

Maybe I'll ask a way of thinking about the last question more directly here in terms of the guidance for the quarter here and thinking about it holistically here, I'd love to get a sense of the degree to which products versus licensing will be growing here. And I just want to -- I guess, I'd also love to get a sense of the -- quantify the amount of contribution in the second quarter from the $40 million contract so we can convey that over the third quarter as well. Let's start with that one.

Yes. Richard, a couple of things. I would say, yes, definitely, the significant majority of the nonproduct revenue did come from the new $40 million subcontract and some of the revenue that was recognized for that. But as Neil rightly pointed out, it was only for a partial quarter. And then in terms of, again, as we go forward, it won't necessarily be linear. And so we'll see possibly some sort of more -- something more like a bell curve as well.

Fair enough then. As I oftentimes ask here, I noticed in the second quarter, your product gross margins were a bit lower than the first quarter and kind of similar to the range you had in most of 2025. I want to get a sense of kind of the forward outlook there. Is this kind of the baseline to think? Or can we get back towards that 50% level? Just kind of high level, how do you think about that?

Yes. Good question. So what I would say is definitely saw some headwinds in product costs, both in terms of -- in Q2. And so what we've always guided is, hey, we expect product gross margins to kind of be in that mid to upper 40s range. And then in total, we expect the company to be north of 50% for total gross margins.

So Richard, just to add a little bit to that, right? We did see some headwinds like Bill was saying, from price increases that we saw on the back end. And I think that is impacting or directly showing up in the gross margins for our product revenue. So even though we might have made improvements from Q1 to Q2, some of them are lost in the price increases that we see with the back end. And by back end, I mean, packaging and [indiscernible] test in -- at the OSATs.

That sounds like a sustainable dynamic here as well that you don't expect to improve anytime soon. Is that fair, Sanjeev?

Yes. I mean the price of gold, for example, right? It just keeps going up.

Maybe one quick question for Bill and then maybe 1 or 2 for Sanjeev here. So the difference here between the pro forma and the GAAP EPS here, I'm assuming this is mostly from legal expenses. I know you quantified this roughly $4 million in the second quarter. I didn't have time to do the math here, but is that a similar number that's baked into the third quarter as well? Or how do you think about that?

Yes. Yes, that's correct. We baked in a similar number.

Okay. Perfect. Sanjeev, I noticed that NXP has sold the -- or has an agreement to sell the Chandler fab. And obviously, noting that you've already have an agreement with Microchip to expand capacity here. How do you think about this in the context of your needs here? Can you -- when the Chandler fab conveys over completely, do you expect to be out of there or not? And to what degree does Microchip alone or do you expect them to be able to cover your needs for the products that are affected -- possibly affected by the Chandler fab sale?

Yes. So what we understand or what has been communicated to us, Richard, by NXP is or actually by Nokia's announcement was that they would complete the acquisition of the Chandler facilities by Q1 of 2029. So NXP retains the ownership through the end of 2028. And one of the fabs, which is basically for gallium nitride would be converted to indium phosphide through a lease that Nokia would get starting Q1 or Q2 of 2027.

So we don't see any interruption to our operations, at least through the end of 2028. And we are in conversations or we have some planned conversations with Nokia to understand what are their plans for Everspin. We have heard positive things, but we haven't directly spoken to them yet.

So in an ideal case scenario, we would have both facilities. And if the business requires us to keep both facilities, that would be great. And if not, then we obviously brought on Microchip so that we can actually scale production if Nokia had other plans for the fab.

Good to hear that you have some continuity here. So that's good to hear. Last question for me, Sanjeev, I didn't get a chance to ask you about this after the announcement with Astro, I forget their full name with the win for -- this is for GEO satellites. I think this is your first win in the GEO area after having talked about LEO satellites a lot. Let me get a sense of the importance of that win. And ultimately, do you see the opportunity here being bigger for GEO, LEO, MEO or just kind of characterize the opportunity holistically in satellites, please?

Yes, that's a good question, Richard. You're right. This is our first design win for a GEO satellite mission using our commercially developed MRAM. I mean, obviously, it's qualified for extended temperatures. But we do -- we have not done any radiation hardening for these parts that Astro Digital has designed in their satellite mission. That's really good news.

So I think they have figured out a way of how to take advantage of our reliability. They're using it for exactly what we've been talking about for so long, the boot speed, reliability, recording the telemetry for the satellite. And they must have somehow figured out how to use this non-radiation hardened or radiation tolerant MRAM in this GEO application. So there must be some redundancy or I don't really know what they're doing.

But yes, it's huge for us if they have figured it out and they have several customers, which means that it can actually perpetuate in the GEO, MEO and LEO missions over there. So overall, we're very excited with this partnership.

Our next question comes from the line of Josh Sullivan of Jones Trading.

Just looking at the $40 million defense contract win, what does the pipeline look like in defense at this point?

Josh, thank you for joining the call and asking the question. Do you mean what is the pipeline for future contracts or how the revenue would be recognized from this $40 million contract?

Your bid pipeline within similar applications.

Yes. So as you know, we've had a few contracts now over the last 5 years with the U.S. government. So we work very closely with them, keeping them informed of the technology development that we're doing at Everspin. And whenever there is an overlap between the goals of the U.S. government and Everspin's road map, it typically leads to a first a small contract and then a bigger contract to actually do the development. So we do have a few irons in the fire, but there's nothing concrete yet.

So I do think that we will continue to work with the U.S. government on various STT-MRAM, SOT-MRAM projects as well. But obviously, all our contracts actually come -- so we are a subcontractor in all our contracts to a prime contractor. So we're always a sub and not the prime.

And then I guess as far as the European market, growing drones and space exposure, what is your footprint as far as those markets?

Yes. So basically, the European Space Agency and the DoD, I think those are 2 of our primary customers in the aerospace and defense industry. And we work very closely with both of them. And I would say that we have a pretty good footprint for the LEO satellites as well as any -- the helicopters, the helicopter taxis that we have, the eVTOLs is the phrase that we have in our investor deck. I think those are the applications that we are designed in and have activity ongoing for the last couple of years, and we expect them to grow.

And then I guess just lastly, as far as the CXL interface and 3-year product road map you mentioned, can you just provide some color on what that rollout might look like and kind of the external guide points we might see?

I would say, first of all, that it is -- it's a huge market, and I think it's very, very well suited for using MRAM technology. Having said that, I would also say that we are in the early stages of just building proof of concepts and prototypes, and that's what I mentioned in my prepared remarks. So we'll have our first proof of concept here at the end of September that will actually hopefully successfully demonstrate the use of the CXL protocol using the MRAM technology.

And with that solution, then we'll actually be able to work with MaxLinear, for example, in their storage accelerator systems to improve the efficiency of the accelerators that they're using. And we believe that we can actually impact the efficiency by almost 15% to 25%.

So I think it's a huge market, but it's a little bit early for me to say how the revenue will build up over the next 3 years or so. So I think once we have the prototypes working and we have a design identified, I think then we can talk about projections of revenue and percent of market capture.

Thank you. This concludes the question-and-answer session. I'd like to thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Good afternoon, and welcome to Everspin Technologies First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Amy Grant, Investor Relations for Everspin. You may begin.

Thank you, operator, and good afternoon, everyone. Everspin released results for the first quarter 2026 ended March 31, 2026, this afternoon after market close. I'm Amy Grant, Investor Relations for Everspin. And with me on today's call are Sanjeev Aggarwal, President and Chief Executive Officer; and Bill Cooper, Chief Financial Officer.

Before we begin the call, I would like to remind you that today's discussion may contain forward-looking statements regarding future events, including, but not limited to, the company's 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 the company's SEC filings, including the annual report on Form 10-K and other SEC filings made from time to time in which the company 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, the company undertakes no obligation to update or alter any forward-looking statement made on this call, whether as a result of new information, future events or otherwise. The financial results discussed today reflect the company's 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.

The company's actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustments and other developments arising between now and the time that the financial results for the 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 to non-GAAP net income, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin's website at www.everspin.com.

And now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Thank you, Amy, and thanks, everyone, for joining us on the call today. Before I discuss our first quarter results, I would like to share some exciting news. Today, after market close, we announced a new 2.5-year $40 million agreement with the U.S. prime contractor. Under the agreement, Everspin will be a subcontractor on an existing prime contract and will provide Toggle MRAM process technology capabilities and engineering services for U.S. defense industrial-based customers.

In addition, Everspin will provide engineering and foundry services for U.S. Department of War or DoW products through its recently announced Foundry Services Agreement with Microchip. This agreement builds on our long history of supporting military and aerospace applications where performance, reliability, longevity and domestic production are critical.

Now turning to our first quarter results. We are pleased to report results at the high end of our guidance range with revenue of $14.9 million and non-GAAP EPS of $0.11 per diluted share. Our performance this quarter was driven by strength in Industrial Automation, Transportation and Data Center applications. Industrial Automation growth was driven by a recovery in customer demand, including Japan, as inventory levels have been worked down.

In the Transportation segment, growth was driven by the transition of design wins to production at several customers, including 2 rail applications. One such customer is a railroad operator in Asia, who is utilizing our MRAM technology for critical railway signal applications such as train axle counters. Axle counters and by extension, their components must operate in harsh, vibratory conditions, which MRAM can withstand better than other memory technologies.

Modern axle counters use MRAM for storing large amounts of diagnostic and maintenance data, allowing for real-time monitoring such as wheel detection and predictive maintenance. Additionally, MRAM enables more robust data storage, contributing to the high safety integrity levels, SIL4, required for axle counter systems, ensuring accurate detection and reducing false alarms.

Another customer is a leading embedded computing company in Asia who chose Everspin's MRAM solutions for rail transit systems because they reliably preserve critical data during power loss and support unlimited erase and write cycles. In Data Center, growth continues to be driven by our ongoing work with IBM on the FCM4 and FCM5 modules and the Redundant Array of Independent Disks or RAID, reference design at the top 5 hyperscale operators.

With respect to below-the-line items, we recognized $2.1 million in other income in the first quarter and $12.8 million to date from the $14.6 million contract we have with the DoD contractor to develop a sustainment plan for our MRAM manufacturing facilities to provide continuous onshore MRAM capabilities to their aerospace and defense customers. We expect this business to begin to wind down over the coming quarters with estimated completion in the first half of 2027.

Turning to some of our product development efforts. During the quarter, we formally introduced our UNISYST MRAM family at Embedded World in early March. This product family represents a new generation of unified memory solutions designed to fundamentally change how embedded systems store and access code and data. UNISYST delivers high-bandwidth read and write speeds in a nonvolatile memory device, enabling fast boot, rapid updates and predictable performance without the trade-offs of traditional flash-based designs.

UNISYST will extend our MRAM road map to higher densities while giving customers a practical way to start with PERSYST today and migrate to a code and data MRAM architecture as soon as it is available. Everspin will initially offer the UNISYST family in densities ranging from 128 megabits to 2 gigabits using a standard xSPI interface operating up to Octal SPI at 200 megahertz.

Target use cases include AI at the edge, military and aerospace, automotive, industrial and casino gaming. Engineering samples of UNISYST are expected to be available in the fourth quarter of 2026. As a reminder, the UNISYST family of products will serve the high-density stand-alone NOR Flash market, which will expand our addressable market by approximately $3 billion.

Our goal is to capture 5% to 10% of this market in the early years and then grow further. With respect to the high reliability parts that we announced last quarter, customers have our PERSYST 64-megabit xSPI STT-MRAM devices in hand and are engaged in design activity. Additionally, we remain on track to qualify our 128-megabit and 256-megabit high reliability parts and continue to expect them to be available in high volume in the second half of this year.

Customers have engineering samples of these parts on hand as they evaluate them in their designs. Building on our existing relationship with Microchip, we recently announced a strategic manufacturing agreement with the company to expand our onshore production capacity and strengthen our long-term supply chain resiliency by creating a second domestic source of supply for our customers.

Under the 10-year agreement, we will establish an MRAM line at Microchip's fab in Oregon to manufacture MRAM and TMR sensor products currently produced at our line in Chandler. We expect to ship the first products from the new line in the second half of 2027.

I will now turn it over to our CFO, Bill Cooper, who will walk you through our first quarter financials and second quarter 2026 guidance. Bill?

Thank you, Sanjeev. Our results reflect the consistency of our execution. During the first quarter, we delivered revenue of $14.9 million, up 14% year-over-year and toward the high end of our guidance range of $14 million to $15 million, driven by higher product sales. MRAM product sales, which include both Toggle and STT-MRAM revenue, were $14.1 million, an increase of 28% over the first quarter of the prior year and up 5% sequentially.

Licensing, royalty, patent and other revenue decreased to $0.8 million from $2.1 million in Q1 '25 due to fewer currently active projects. Our GAAP gross margin increased to 52.7% from 51.4% in the first quarter of 2025 due to higher capacity utilization. GAAP operating expenses were $10.6 million, up from $8.7 million in the first quarter of 2025 due primarily to litigation costs as well as higher compensation costs for new and existing employees and professional fees.

Other income of $2.1 million was related to the strategic award we won in mid-2024 to upgrade manufacturing equipment in our existing manufacturing facility located in Chandler, Arizona. We recorded fourth (sic) [ first ] quarter non-GAAP net income of $2.6 million or $0.11 per diluted share based on 23.1 million weighted average diluted shares outstanding.

This was at the high end of our guidance range of non-GAAP net income of $0.07 to $0.12 per share and compares to non-GAAP net income of $0.4 million or $0.02 per share in the first quarter of 2025. Our reported non-GAAP results exclude the impact of stock-based compensation as well as litigation expenses. Our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $40.5 million, down $4 million from the $44.5 million at the end of the prior quarter.

Cash flow generated from operations decreased to $0.5 million for the first quarter from $2.6 million in the fourth quarter due to the litigation costs I mentioned earlier as well as increased working capital needs. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements to execute upon our Foundry Services Agreement with Microchip and continue to invest in product development to support our future road map and enable the company to drive growth.

Turning to guidance. Excluding any impact from the new subcontractor agreement that Sanjeev mentioned, we expect Q2 total revenue to be in the range of $15.5 million to $16.5 million and GAAP results per fully diluted share to be between a net loss of $0.12 to a loss of $0.07. On a non-GAAP basis, we anticipate results to be between breakeven and net income of $0.03 per fully diluted share. These non-GAAP figures exclude the impact of patent litigation costs in addition to stock-based compensation expense.

In summary, we are pleased with our solid performance this quarter and remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue.

Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Neil Young with Needham & Company.

So the $40 million contract that you just announced, could you give us like a shape on how you're thinking that revenue layers in? Or anything you can share on the milestone payments such as how achievable you think the milestones are? What are the biggest risks to the milestones? And then lastly, will that revenue live in the licensing royalty patent bucket? And then I have a follow-up.

Yes, Neil, this is Bill. Thanks for the question. Yes, so we really aren't giving any guidance related to that particular subcontract agreement just yet. But of course, we do expect to have a significant positive impact over the next 2.5 years to the financials. In terms of meeting and achieving the milestones, yes, that was negotiated with the group involved, and we're very confident in our ability to deliver on the milestones.

Okay. And then could you maybe speak to what drove the gross margin strength in the quarter? As the STT portfolio continues to evolve, are you maybe starting to see higher ASPs come through here? And then also, should we sort of expect to see this gross margin -- the gross margin hold in this range or revert back to similar levels of 4Q '25?

Yes, good question. I think a couple of things, right? So the first is strong quarter on the margins. Again, as we've sort of always noted, we do target 50% plus in terms of gross margin. I think as we sort of see that lift in the top line and that volume increase, right, you kind of get into that beneficial arena of higher capacity utilization and obviously, right, the guys are always looking at ways to reduce costs and improve our yields. So all those things factor in.

Our next question comes from the line of Richard Shannon with Craig-Hallum Capital Group.

I'm going to follow up on this $40 million contract here. I guess a few questions here for me. I want to follow up from your response, Bill here about why you don't have any revenue thoughts here you can give today, is that because you're not allowed to or because you don't know what the shape and structure and timing looks like? And then also, I want to get a sense of what kind of margin profile we should expect over the life of the contract with this.

Thanks. Yes, good questions. So I'll try and elaborate a little bit further. The contract itself, right, the ink on that is just drying. And obviously, it's going to have a significant impact on the financials. And so we're looking at all of the various impacts of that. And as we run through Q2 and get the results and get the kickoff of the contract and all the various pieces, right, we'll give you guys better guidance as we go into the end of this Q2 results.

And then in terms of margin, yes, I would expect that, that is also going to have a bit of a beneficial impact to margin as well. And -- but again, that's sort of -- I have to be a little careful there. We're going to, again, reiterate, we do target the 50% plus margin for gross margins. And again, we have to sort through all the pillars of that significant contract.

Okay. I want to ask a follow-up about this contract in the context of other activities you have or may have going on in the future here. So you've referenced today and in the past here this -- I think it's a $14.6 million contract for -- I forget the word you used here, continuity plan or something. And I think there's an RFQ out there from the U.S. government about maybe establishing 300-millimeter capacity here.

And then you've obviously recently, as you announced, I can't remember last month or whatever, adding some more capacity at Microchip. To what degree do all of these things interrelate here? Can you kind of tie these things together or if they're not tied together, tell us? I'd just love to get kind of some context here, please.

Richard, this is Sanjeev. Good question. And I think maybe I can help and then maybe there's a follow-on to further clarify. But the bottom line is the RFI for the 300-millimeter MRAM line is independent of the 3 other items you mentioned, namely the $14.6 million contract that we got in 2024, the Microchip Foundry Services Agreement and the new contract that we just talked about today.

So as far as the $14.6 million contract that we got in 2024, that is the one where we basically got some support from the U.S. government to improve the supply chain for MRAM or Toggle MRAM for the U.S. government. And that revenue, as you know, is actually being recognized below the line. So that was not above the line.

There's a lot of CapEx and supply chain robustness involved in that discussion. The Microchip Foundry Services Agreement was simply between Everspin and Microchip, where we basically went out to increase our capacity. So that was independent of these 2 contracts in that sense. So we went out to increase our capacity given the high demand that we've been seeing over the last couple of quarters.

Now this new agreement that we just signed is basically we are going to provide a technology information, a recipe, a compendium, if you will, for mil and aerospace Toggle MRAM to this contractor, to this U.S. prime contractor, okay? And in addition, they would have a right to second source the Everspin Toggle MRAM for mil/aero applications again in case Everspin decides to exit the business. Obviously, we have no intention of doing that, but we do give them the rights and all the technology and all the recipes, et cetera, associated with it in case we do exit, right?

And then also under this agreement, they actually get access to this Microchip fab that we are bringing up to qualify their existing products on that line. So there's NRE associated with getting that activity done. And then finally, there is a new product that the U.S. government is actually planning to tape out. So the R&D for that product and the production support for that product would also be part of this contract that we just talked about. Hopefully, that helps.

That does help a lot. I appreciate that. If you don't mind, I'm going to throw one more question before jumping back into the queue, and that's really about the guidance here. So I mean, it sounds like we should expect most of the sequential growth in dollar terms here to come from products here. How do we think about it between the kind of the STT that's mostly going to IBM versus other products here within that?

And then any idea -- or can you just give us a sense of what kind of litigation spend you're expecting in the second quarter?

Yes. So on the first point, what I would say is definitely seeing very strong product sales. We're up year-on-year 28%. I think most of that growth from Q1 to Q2 is going to be in that product sales category. Again, we are seeing, I would say, just good solid product sales across all the various categories.

And then on your second question, we do show the $1.6 million that we had to expend in Q1 on litigation costs. And what I would say is, unfortunately, litigation is expensive, and I think we're kind of expecting it to continue in that range for at least the next couple of quarters. But again, we'll see how that ultimately pans out.

Ladies and gentlemen, I'm showing no further questions in the queue. We did have a question -- a follow-up question that come through. One moment.

Okay.

We have a follow-up question from the line of Richard Shannon with Craig-Hallum.

Well, I guess I didn't have to jump out of line. But let's hear, maybe a couple more from me guys here. I noticed you've had a couple of quarters of some above-trend CapEx numbers in the fourth quarter and now the first here. And while I could certainly expect some of that coming from maybe your Microchip agreement or not, I'm not sure. But how do we look at that going forward here?

Yes, we did. We had a, I'll call it, a unique period of capital spend. And that, again, was related to some of the improvements that we saw in the Chandler facility primarily across a couple of different contracts. So that flurry of activity, I think, will start to settle down until we get into the real heart of this Foundry Services Agreement.

This Foundry Services Agreement, is that referring to Microchip specifically?

That's right. That's right. That's right.

When do we start to see that pick up? And any idea how to think about that sum total over -- I don't even know what period of time to expect to be there. I assume it's at least a couple of years, but what do we think about there?

Yes. So there will be some significant capital spend over the next 2 years. Again, it's going to be spread out over time a little bit, probably some later this year as well as early next year. And then in terms of the overall CapEx, not so significant that we can't manage it. I think, again, it's going to be in the range of kind of what our historical spend has been annually. Yes.

Okay. Fair enough. My last question, I will jump out of line. If I took the notes here, and I seem to recall them being consistent with what I've heard in the past regarding the UNISYST product line here, you talked about this being a $3 billion TAM. And Sanjeev, if I caught your comments right, you're expecting kind of a 5% to 10% share early on here. 5% share, that number is $150 million in a year, and you're talking about -- last quarter, you talked about getting to a goal of $100 million within 3 to 5 years. So I look at that 5% to 10% share early on, "early on" seems to be a little bit longer time frame than what would fit in here. So are we either thinking it's going to take a while to get that kind of share? Or is there some meaningful upside in terms of timing to hit that $100 million total corporate level goal?

Yes, that's a good question for clarification, Richard. So I think we have talked about this in the past. I don't think that UNISYST is going to strongly contribute to the $100 million target that we have in the next 3 to 5 years. And the reason being that it takes about 18 to 24 months for the qualification of these products at our customers. So let's say, we have the product available samples in Q4 of '26, production, let's say, Q1 or Q2 of '27, and you basically have another 18 months before it's going to ramp to production. So I don't think it's going to contribute significantly, but it will contribute some.

Okay. So early on would be after that qualification period that you said takes up to 2 years then, so -- okay.

That is correct. Yes, that's right.

That makes sense.

Yes.

I will now turn the call back over to Sanjeev for closing remarks.

I just want to say thank you, everyone, for joining the call today, and we look forward to talking to you at the end of Q2. Thanks a lot for your time. Bye now.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon, and welcome to Everspin Technologies Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions]As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Monica Gould, Investor Relations for Everspin. You may begin.

Thank you, operator, and good afternoon, everyone. Everspin released results for the fourth quarter and full year 2025 ended December 31, 2025, this afternoon after market close. I'm Monica Gould, Investor Relations for Everspin. And with me on today's call are Sanjeev Aggarwal, President and Chief Executive Officer; and Bill Cooper, Chief Financial Officer.

Before we begin the call, I would like to remind you that today's discussion may contain forward-looking statements regarding future events, including, but not limited to, the company's 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 the company's SEC filings, including the annual report on Form 10-K and other SEC filings made from time to time in which the company 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, the company undertakes no obligation to update or alter any forward-looking statements made on this call, whether as a result of new information, future events or otherwise. The financial results discussed today reflects the company's preliminary estimates are based on information available as of the date hereof and are subject to further review by Everspin and its external auditors. The company's actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustments and other developments arising between now and the time that the 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 to non-GAAP net income, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin's website at www.everspin.com.

And now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Thank you, Monica, and thanks, everyone, for joining us on the call today.

We are pleased to report fourth quarter results with revenue of $14.8 million and non-GAAP EPS of $0.11 per diluted share with revenue towards the high end of our guidance range and EPS in line with our expectations. Our performance this quarter was driven by strength in data center, energy management and industrial automation applications. Growth in data center was driven by our ongoing work with IBM on the FCM4 module as well as its recently introduced FCM5 and the redundant array of independent disks or RAID, reference design at the top 5 hyperscale operators. Within Energy Management and Industrial Automation, we saw demand return to normal levels after a period of inventory consumption that dampened demand in the prior year.

With respect to below the line items, we recognized $2 million in other income in the fourth quarter and $10.5 million to date from the $14.6 million contract we have with a DoD contractor to develop a sustainment plan for our MRAM manufacturing facilities to provide continuous onshore MRAM capabilities to their aerospace and defense customers. We expect this business to progress on schedule with estimated completion in the first half of 2027. On the product side, we had a total of 238 design wins in 2025, up from 178 in the prior year. Our pipeline of new design wins for our MRAM products speak to the continuing technical innovation from the Everspin team introducing new products to meet customer demand. These design wins support new customers and existing customers with new programs in industrial automation, casino gaming, energy management and military and aerospace applications.

Turning to some of our product development efforts. We continue to expand our xSPI STT-MRAM portfolio in response to demand from our customers. We are pleased to announce that during the fourth quarter, we ramped our PERSYST 64-megabit xSPI STT-MRAM high reliability product to full production and saw strong demand driven by new customer interest and design wins, specifically in the low earth orbital or LEO satellite market. These devices are AEC-Q100 Grade 1 qualified and ideally suited for use in harsh conditions, such as [ 125C ], sun shield operating temperature with a minimum 10 years of data retention. These capabilities are demanded by our customers to secure critical data in a variety of systems from aerospace and defense to industrial applications, including automotive.

We are taking orders to support high-volume production from our customers and began shipping in the current quarter. In addition, we are in the process of qualifying higher density, high reliability parts of 128 megabit and 256 megabit that will be available in high volume in the second half of this year. We are on track to tape out a monolithic 256-megabit xSPI STT-MRAM device on a 16-nanometer FinFET node at TSMC in the second half of this year. This part will be our first product in the Unisys family, unifying core storage and data memory in a high-density nonvolatile architecture for AI, industrial and mission-critical designs. It is designed to deliver high bandwidth read and right speeds in a nonvolatile memory device, enabling fast boot, rapid updates and predictable performance without the trade-offs of traditional flash-based designs. By combining high-speed access with persistent storage, this family of parts will support software design systems that require frequent reconfiguration while maintaining data integrity across power cycles.

As part of our efforts to build on to our partner network, we recently qualified our PERSYST 64-megabit xSPI STT-MRAM for Microchip's [indiscernible] of 64-bit microprocessors or MPUs, and are supporting the ecosystem for components being qualified by Microchip. This ecosystem includes several industry partners that jointly offer solutions tailored for their harsh environmental conditions in space. The high density, high reliability, xSPI STT-MRAM parts I discussed earlier, would be an ideal solution for this application. MRAM is achieving significant success as a leading embedded nonvolatile memory in IoT, automotive and AI edge devices yet the densities and performance options of embedded MRAM macros have been limited. At the same time, the semiconductor industry is moving towards chiplets to overcome rising costs, manufacturing complexity and yield limitations of traditional large monolithic chips, especially when combining leading-edge logic with volatile or nonvolatile memory.

Chiplets enable mix and match process nodes, greater customization and reuse of building blocks, providing new freedom of [ degrees ] in the form of heterogeneous packaging solutions. With organizations such as the open compute project embracing chiplets from the hyperscale data center to edge, it is foreseeable that chiplets will be ubiquitous. This trend increasingly favors Everspin given our focus on marketing chip solutions, including chiplets and licensing our technology to embedded MRAM partners. In 2025, we further advanced our efforts in this area through several initiatives. We engage with the front offer chiplet center of excellence to analyze next-generation automotive compute platforms and corresponding MRAM use cases. We subsequently progressed to engage on system-level simulations into which we plan to provide MRAM simulation models to allow an assessment as well as quantification of the benefits that MRAM can provide in various use cases.

Everspin is also participating in an effort to bring MRAM chiplets to the [indiscernible] ecosystem that is aligned with the framework of the Open Compute project, chiplet work streams. [indiscernible] launched the Automotive Chiplet Forum in 2024 to bring together members from the automotive industry to enable an open chiplet ecosystem essential for accelerating innovation, reducing costs and reinforcing the supply chain. More recently, we joined the newly formed physical AI chiplet ecosystem or PACE to help enable MRAM-based solutions for physical AI as part of this effort to co-develop interoperable and reusable chiplets to reduce development costs and speed time to market for system and ASIC companies, Everspin will provide a robust high-performance, nonvolatile memory to assist securing PACE chiplets for boot, weight and cold storage as well as life cycle management solutions.

We expect to see chiplet addressing various applications over the next few years. As a reminder, the chiplet is part of our Unisys unified code and data memory solutions, which are currently in the line phase. To further enhance our position in the auto industry, we are working with Quintauris, a joint venture of leading semiconductor companies on a next-generation RISC-V-based automotive reference design platform. RISC-V is an open standard instruction set architecture or ISA based on reduced instruction set computer or risk principles, allowing anyone to design, manufacture and sell chips without paying a license fee for the ISA. Its modular architecture allows designers to create purpose-built accelerators using RISC-V go technology as well as extensions. This also includes new instructions that uniquely integrate and leverage MRAM as a persistent working memory. Given its rapid adoption, it offers a greenfield opportunity to create new MRAM-based architectures that fully utilize all the features and benefits that MRAM has to offer.

Before I close, I would like to discuss our long-term strategy, which entails reaching $100 million in annual revenue over the next 3 to 5 years. We believe this growth will be driven by the ramp of new products most notably our new xSPI parts in our persist product portfolio, such as the 64-megabit part I described earlier and continued solid growth in our Toggle MRAM and licensing business. Our new persist xSPI parts are getting solid traction. They are offered in densities from 4 megabit to 256 megabit and include the power optimized SC families and the high reliability or HR families with Quad and [ OptiSPY ] interfaces. For example, in industrial automation, energy management, electric vehicle and casino gaming markets reliable high-density memories required for next-generation systems. In aerospace and defense markets, such as Leo satellites, flight control systems require reliable, fast and read and right speeds and fast food for configuration. And in the FPGA and the MPU markets for AGI, low standby power in [indiscernible] and high-density memories needed for larger midstreams. We expect our first enhanced [indiscernible] NOR, like Unisys product family to be in production in 2027 and anticipate these products to contribute to our $100 million revenue target.

Before I turn the call over to Bill to walk through our financials and guidance, I would like to briefly touch on the industry environment. As has been widely publicized, the industry is expecting experiencing memory shortages. Memory suppliers who have, for decades, been pushed into commoditization have been -- have seen a shift based on unprecedented memory shortages driven by the demands of AI. As a result, they have gone into allocation mode and are moving their capacity up the food chain, companies that can make NOR Flash NAND and DRAM are shifting those capacities to where they can get more margin out of their fixed capacity. No suppliers, for example, are converting their lines to support DRAM to maximize their margins and generate more revenue. This has created a gap in the supply for NOR Flash and driving customers to look for alternatives. We are in conversations with customers to evaluate our xSPI FCM ramp to replace NOR Flash. We have the capacity to support such demand, and our parts are compatible with NOR Flash. While these market dynamics are speeding up such conversations, revenue is contingent upon the qualification cycles of our potential customers.

I will now turn it over to our CFO, Bill Cooper, who will walk you through our fourth quarter financials and first quarter 2026 guidance. Bill?

Thank you, Sanjeev. Our results reflect the consistency of our execution. During the fourth quarter, we delivered revenue of $14.8 million, up 12% year-over-year and toward the high end of our guidance range of $14 million to $15 million, driven by higher product sales. MRAM product sales in the fourth quarter, which include both Toggle and STT-MRAM revenue were $13.5 million, up 22% over the fourth quarter of the prior year. Licensing, royalty, patent and other revenue in the fourth quarter decreased to $1.3 million from $2.2 million in Q4 '24 due to the completion of projects, which were active in Q4 '24.

Turning to gross margin. Our GAAP gross margin decreased to 50.8% for the fourth quarter, down slightly from the 51.3% in the fourth quarter of 2024 due to lower licensing and other revenue. GAAP operating expenses for the fourth quarter of 2025 were $8.6 million, down sequentially and up slightly from $8.4 million in the fourth quarter of 2024. Other income of $2 million was related to the strategic award we won in mid-2024 to upgrade manufacturing equipment in our existing facility located in Chandler, Arizona. We recorded fourth quarter non-GAAP net income of $2.6 million or $0.11 per diluted share based on 23.8 million weighted average diluted shares outstanding. This was in line with our guidance range of non-GAAP net income of $0.08 to $0.13 per share and compares to non-GAAP net income of $2.8 million or $0.13 per share in the fourth quarter of 2024.

As a reminder, reported non-GAAP results exclude the impact of stock-based compensation. We are pleased that our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $44.5 million, down $0.8 million from $45.3 million at the end of the prior quarter. Cash flow generated from operations increased $2.8 million for the fourth quarter from $0.9 million in the third quarter. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements. Our capital requirements 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. We did not experience any material tariff-related impact on our results in the fourth quarter and do not expect any material tariff-related impact in the coming quarters.

Turning to guidance. We expect Q1 total revenue to be consistent with Q4 '25 and in the range of $14 million to $15 million. And GAAP net loss per fully diluted share to be between $0.03 and net income of $0.02. On a non-GAAP basis, we anticipate net income per fully diluted share to be between $0.07 and $0.12. Going forward, we expect to exclude the impact of patent defense costs in addition to stock-based compensation from non-GAAP results. We expect a sequential decline in nonproduct revenue due to a project completion in Q4 '25, which will result in a gross margin headwind. However, we are still targeting gross margin to be in the 50% range.

In summary, we are pleased with our solid performance this quarter and remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue. Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Neil Young with Needham & Company.

Great to hear about the NOR Flash opportunity. I was curious sort of you're talking about that your conversations. I guess, sort of how fast or how quickly do you think you could see upside from that? And sort of if you could any way size, the upside, that would be really helpful of a possible upside in revenue.

Thank you for the question. So like I said in the prepared remarks, I think it really depends on the qualification cycle for our potential customers. I can say that we are now getting listed as an alternate for NOR Flash at various distributors worldwide because of the tight supply chain issues that we are seeing with a NOR Flash. So we do expect some upside, but it's very difficult to quantify today as to what that upside can be. But we're obviously available to meet the demand of these requests come in and it just depends on the qual cycle of the customers.

Great. That's helpful. Just one more question for me. You talked about the inventory levels in energy management and industrial automation. They're starting to look pretty healthy or they think that you think they do look healthy at this point. I guess what gives you confidence that, that should be an issue next quarter and going forward? Yes. So based on the backlog that we are seeing at our distributors and the forecast that we're seeing at our customers. We do feel that they have burned through the inventory that they had overbuilt over the last year or so. So we're pretty confident that going forward, we were not run into that same issue at least in 2026.

Our next question comes from the line of Richard Shannon with Craig-Hallum.

Last one kind of in the context of this year here. I wanted to ask about 2 different contributors, first of all, on the strategic RadHard project you've been working with your partner, and this has talked about a much better year. I'm wondering if that's something similar that you're expecting as well? And then also this quarter and a couple of past ones you've been talking about some increasing contributions from the LEO satellite market. Great to get a sense of how kind of -- what's kind of the sense of scale of that today? And do you see that increasing over this year and over the next couple of years?

Thanks for the question, Richard, and thanks for joining, clearly, you seem to be a little bit on of the weather. But thank you for joining. Yes. As far as the LEO satellite market is concerned, I'll let Bill address it. On the Bicklogic project, I think the award that [ Grit Logi ] talked about does not relate to the project that we've been working on jointly. And in fact, I think that's the project that Bill was talking about in his prepared remarks, that is not going to renew in the near future, and we're going to see some decline in that nonproduct revenue in Q1 of this year.

That is still waiting for some milestones to be met by the other partners in the program, and we expect that to be kicking in again towards the second half of this year, but not in the first half. Bill, [indiscernible].

Yes. Thanks, Sanjeev. And thanks, Richard, for the question. Yes, I would say that the LEO satellite market is still that burgeoning market, and that's what we see, both in terms of our orders and our backlog, and we feel confident about our products and our position there, and we expect to, again, kind of move up with that increased demand especially as we've introduced our high-reliability products as well. That sort of fits perfectly in that particular market space as well.

Okay. Great. Second question, just on your giving an order or faster placement products and maybe taking a different angle than one of the last questions here and also very interesting comments. But Obviously, you've been targeting NOR Flash replacement in certain markets. And if I caught your comments right, Sanjeev, you're talking about, I think, a win with -- I think it was Microchip on an MCU. Love to get a sense of when you see that becoming a material contributor. And then also maybe I think in the past, you talked about some other engagements, particularly in the FPGA space where you're excited about some progress there. Maybe give us an update there as well, please?

Yes, good question, Richard. I think there are 2 partner programs that we're really excited about, in particular. One is the one with Lattice and the other one is this Microchip. And I think we are seeing steady progress in both those partners trying to get our product qualified and integrated into their standard offering. And I think that's where this [ PIK 64 ] at Microchip comes into play. They're -- the markets that they are targeting align very well with our spend in the aerospace and defense market. And then I think we can then expect to take into the commercial market as well. But right now, the [ PIK 64 ] is targeted towards the aerospace and defense as well.

Okay. My last question, I'll jump on the line here. Sanjeev, you talked about a goal of driving towards or driving to $100 million of revenues within, I think, said, 3 to 5 years. Love to get a sense any way you'd quantify or at least rank order of the contributors of that revenue. I think in the big picture here that I think of this as the Toggle, the -- the STT products and licensing, I guess, if there's any other way you categorize the contributors that that would be very helpful.

Yes. So the way I look at it is the major contributor is going to be the persist products, followed by perhaps equal contributions from our licensing and [ Unisys ] in 3 to 5 years down the road, to $100 million. In the persist, I'm including the Toggle MRAM markets -- products as well as the xSPI STT products that we are shipping today as well as the ST-DDR products that we're shipping to. So I think those 3 would form the portion of the HR from the portion of the process products that are going to contribute. And this high reliability product family that we have just introduced is going to actually give us a nice boost over that. And then in 2027, we expect Unisys to kick in some volume. And so I think between that Unisys and our licensing is what's going to get us to the $100 million mark down the road.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.

Good afternoon, and welcome to Everspin Technologies Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Monica Gould, Investor Relations of Everspin.

Thank you, operator, and good afternoon, everyone. Everspin released results for the third quarter 2025 ended September 30, 2025, this afternoon after market close.

I'm Monica Gould, Investor Relations for Everspin. And with me on today's call are Sanjeev Aggarwal, President and Chief Executive Officer; and Bill Cooper, Chief Financial Officer.

Before we begin the call, I would like to remind you that today's discussion may contain forward-looking statements regarding future events, including, but not limited to, the company's 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 the company's SEC filings, including the annual report on Form 10-K and other SEC filings made from time to time in which the company 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, the company undertakes no obligation to update or alter any forward-looking statement made on this call, whether as a result of new information, future events or otherwise.

The financial results discussed today reflect the company's preliminary estimates are based on information available as of the date hereof and are subject to further review by Everspin and its external auditors. The company's actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustments and other developments arising between now and the time that the 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 to non-GAAP net income, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin's website at www.everspin.com.

And now I'd like to turn the call over to Everspin's President and CEO, Sanjeev Aggarwal. Sanjeev, please go ahead.

Thank you, Monica, and thanks, everyone, for joining us on the call today. We are pleased to report third quarter results with revenue of $14.1 million and non-GAAP EPS of $0.06 per diluted share with revenue in line with our guidance range and EPS towards the high end of our expectations.

Our performance this quarter was driven by strength across all products, specifically in Low Earth Orbital or LEO applications, Casino Gaming and Energy Management. In addition, our data center business remains strong with continued demand for our Toggle MRAM products for redundant array of independent disks or RAID from a broad selection of data center customers, including Dell, Supermicro and others. The LEO satellite market is expected to grow rapidly in the coming years. Everspin MRAM with its reliability at extreme temperatures and harsh ambient is ideally suited for these deployments.

As mentioned in our last call, we are seeing good traction in this market with announced design wins with Astro Digital and Blue Origin. It is our understanding that LEO satellites have a short lifespan of 3 to 5 years, primarily due to atmospheric drag impacting the orbit. Design wins in this market with multiple Everspin MRAM parts per satellite is expected to translate into meaningful revenue for Everspin as this market grows.

As anticipated, revenue from the sale of our PERSYST 1 gigabit STT-MRAM into IBM's FlashCore Module 4 or FCM4 for data center applications remained consistent with the prior quarter, and we continue to anticipate revenue from this project to remain at this level for the remainder of the year.

We continue to ship and recognize revenue for our PERSYST MRAM solution from Lucid Motors for their Gravity SUV and expect volumes to increase as the automaker ramps production.

In Q3, we continued to ship engineering samples of the PERSYST EM064LX HR and EM128LX HR to several LEO satellite customers and remain on track to ramp to full production in the fourth quarter 2025.

Turning to our licensing, royalty, patent and other revenue. We continue to successfully execute on our deliverables for our contract with Purdue University to provide our state-of-the-art STT-MRAM technology for energy-efficient AI solutions. During the first half of the year, we characterized our process to establish a baseline for percent MR, magneto resistance and switching reliability. More recently, we developed materials with higher percent MR and characterized devices using these new materials and processes. These advancements position us favorably for the next phase of the project.

Lastly, we continue to recognize revenue from our ongoing project with a leading provider of sensor devices to provide foundry services for their latest generation TMR sensor device on our MRAM line in our Chandler facility.

With respect to below-the-line items, we recognized $1.2 million in other income in the third quarter and $8.5 million to date from the $14.6 million contract we have with a DoD contractor to develop a sustainment plan for our MRAM manufacturing facilities to provide continuous onshore MRAM capabilities to their aerospace and defense customers. We continue to expect this business to pick up meaningfully in the fourth quarter.

As we announced last month, we entered into a strategic collaboration with Quintauris to strengthen the reliability and safety of RISC-V-based platforms with our MRAM offerings. This partnership is focused on automotive, industrial and edge applications where data persistence, integrity, low latency and security are critical. The goal is to jointly build reference designs that would lay the foundation for scalable, reliable platforms for these applications.

I will now turn it over to our CFO, Bill Cooper, who will walk you through our third quarter financials and fourth quarter 2025 guidance. Bill?

Thank you, Sanjeev. Our results reflect the consistency of our execution. During the third quarter, we delivered revenue of $14.1 million, up 16% year-over-year and in line with our guidance range of $13.5 million to $14.5 million, driven by higher product sales. MRAM product sales in the third quarter, which include both Toggle and STT-MRAM revenue was $12.7 million, up 22% over the third quarter of last year. Licensing, royalty, patent and other revenue in the third quarter decreased to $1.4 million from $1.7 million in Q3 '24, due to the completion of projects in Q4 '24 and Q1 '25, which were active in Q3 '24.

Turning to gross margin. Our GAAP gross margin improved to 51.3% for the third quarter, up just over 200 basis points from 49.2% in the third quarter of 2024. Despite the slight decrease in licensing and other revenue year-over-year, we were able to maintain gross margins consistent with Q2 levels due to improving yields on our STT products, driven by process improvements developed in collaboration with our foundry partner.

GAAP operating expenses for the third quarter of 2025 were $8.8 million, up slightly sequentially and increased from $8.1 million in the third quarter of 2024. Other income of $1.2 million was related to the strategic award we won in August of last year to develop a long-term plan to provide manufacturing services for Aerospace and Defense segments.

We recorded third quarter non-GAAP net income of $1.5 million or $0.06 per diluted share based on 23.1 million weighted average diluted shares outstanding. This was towards the high end of our guidance range of non-GAAP net income of $0.02 to $0.07 per share and compares to non-GAAP net income of $3.8 million or $0.17 per share in the third quarter of 2024. The decrease versus the year ago period was driven by lower other income stemming from lumpiness inherent in our DoD MRAM contract services as Q3 '24 required higher levels of activity upon initiation of the contract in that quarter.

As a reminder, non-GAAP results exclude the impact of stock-based compensation. We are pleased that our balance sheet remains strong and debt-free. We ended the quarter with cash and cash equivalents of $45.3 million, up $0.3 million from $45 million at the end of the prior quarter.

Cash flow generated from operations decreased to $0.9 million for the third quarter from $5 million in the second quarter, which was driven by higher collections on receivables on a change in distributors. We did not experience any tariff-related impact on our results in the third quarter and do not expect any tariff-related impact in the coming quarter.

We expect Q4 total revenue in the range of $14 million to $15 million, and GAAP net income per fully diluted share to be between $0.02 and $0.07. On a non-GAAP basis, we anticipate net income per fully diluted share to be between $0.08 and $0.13.

In summary, we're pleased with our solid results this quarter and remain committed to maintaining financial discipline while focusing on scaling our business and converting additional design wins to revenue.

Operator, you may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Neil Young with Needham & Company.

First question, so three quarters in a row now of non-GAAP gross margin over 52%. Just curious, I guess, how sustainable you think this is going forward?

Yes. I think we saw some improvement this quarter, Neil, on the gross -- the product gross margin specifically as well based on some of our yield improvement initiatives and our factory utilization. But to answer your question directly, I think we'll see -- that's a good strong result for us. We do expect to kind of continue to be in that range overall.

Okay. Great. And then -- so the sequential decline in licensing, royalty, patent and other, I know you talked about it a little bit, but I was just hoping you can maybe provide some more detail just on the sequential decline and then sort of, if possible, where you think that is going in 4Q?

Yes. There was -- these projects, right, and that kind of bucket of nonproduct revenue encompasses a lot of different things, including license revenue, any engineering service revenue, different foundry services that we provide as well. And so really on that particular piece of our revenue, that can be, I'll call it, somewhat lumpy as we go forward in time and even some of the initiatives that we have that -- where we do work for other groups that we've mentioned in the past, those projects tend to be anywhere between 1 year to 18 months type -- 2 years type projects typically. So they do wrap up, right?

And then on the second part of your question, I think as we see sort of this level of product -- nonproduct revenue, we'll probably expect that to kind of continue to be around that range, right -- kind of in the -- again, we've been in that 10% to 15% range, probably more in the 10% range as we go forward.

[Operator Instructions] I'm showing no further questions at this time. So hold on, we have a follow-up question. We do have a follow-up question from Neil Young with Needham & Company.

Just a question on OpEx. So it was flat again in the quarter on a non-GAAP basis, sorry, it was flat again in the quarter. So similar, should we sort of assume that it stays in that $7.5 million range going forward? And that's all I have.

Yes, Neil, that's a safe assumption. We're going to -- we continue to sort of manage through on OpEx, and we've been pretty consistent throughout this year. Now again, we've sort of indicated that we are going to continue to sort of move toward product development type costs. But for Q4, you're going to see a lot of consistency.

And now I'm showing no further questions at this time. Ladies and gentlemen, this will conclude today's question-and-answer session. This will also conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.