Everspin's Q1 2025: Unpacking Contradictions on China Sales, Industrial Recovery, and Revenue Recognition

Product flow through China, industrial segment recovery, product gross margins expectations, inventory digestion and backlog improvement, DoD contract revenue recognition are the key contradictions discussed in Everspin's latest 2025Q1 earnings call.



Financial Performance and Product Revenue:
- Everspin Technologies reported revenue of $13.1 million for the first quarter 2025, with non-GAAP EPS of $0.02, both above their guidance range.
- The growth in revenue was driven by strength in product revenue, particularly from the sale of PERSYST 1 gigabit STT-MRAM into IBM's FlashCore Module 4 for data center applications and the ongoing project with Lucid Motors.

Licensing and Patent Revenue Variability:
- Licensing, royalty, patent, and other revenue in the first quarter decreased to $2.1 million compared to $3.6 million in Q1 '24.
- This reduction was due to the lumpy nature of these projects, exemplified by the completion of the first phase of the Frontgrade Technologies project and initial revenue recognition from the QuickLogic project.

Gross Margin and Operating Expenses:
- Everspin's GAAP gross margin was 51.4% for the first quarter, slightly up from 51.3% in Q4 but down from 56.5% in Q1 '24.
- The decrease relative to the same period last year was due to a lower mix of high-margin licensing and other revenue, while gross margin consistency is expected throughout the year.

Weighted Revenue and Seasonality:
- The company expects the year to be weighted more heavily towards the second half of 2025 due to typical seasonality.
- This is supported by indications of inventory correction bottoming out, increased backlogs, and new product sales converting into production, particularly with the STT products and xSPI interface.