EVERSPIN TECHNOLOGIES INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes included in Part I, Item 1 of this report and with our audited financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2025. Forward-Looking Statements This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to, among other things, our industry, business, future plans, strategies, objectives, expectations, intentions and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” and elsewhere in this report, as well as in our other filings with the Securities and Exchange Commission (SEC). Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. We caution investors that our business and financial performance are subject to substantial risks and uncertainties. Overview We are a pioneer in the successful commercialization of Magnetoresistive Random Access Memory (MRAM) technology. Our portfolio of MRAM technologies, including Toggle MRAM, Tunnel Magneto Resistance (TMR) Sensors, and Spin-transfer Torque MRAM (STT-MRAM), is delivering superior performance, persistence and reliability in non-volatile memories that transform how mission-critical data is protected against power loss. With almost 20 years of MRAM technology and manufacturing leadership, our memory solutions deliver significant value to our customers in key markets such as industrial, medical, automotive/transportation, aerospace and defense, and data center. We are the leading supplier of discrete MRAM components and a successful licensor of our broad portfolio of related technology and intellectual property. We sell our products directly and through our established distribution channels to industry-leading original equipment manufacturers, original design manufacturers and contract manufacturers. We manufacture our MRAM products using both captive and third-party manufacturing capabilities. We purchase industry-standard complementary metal-oxide semiconductor (CMOS) wafers from semiconductor foundries and perform back end of line (BEOL) processing that includes our magnetic-bit technology at our leased 200mm fabrication facility in Chandler, Arizona. We also manufacture full-flow 300mm CMOS wafers with our STT-MRAM magnetic-bit technology integrated in BEOL as part of our strategic relationship with GLOBALFOUNDRIES Inc. Key Metrics We monitor a variety of key financial metrics to help us evaluate trends, establish budgets, measure the effectiveness of our business strategies, and assess operational efficiencies. These financial metrics include revenue, gross margin, operating expenses and operating income determined in accordance with GAAP. Additionally, we monitor and project cash flow to determine our sources and uses for working capital to fund our operations. We also monitor adjusted net income, a non-GAAP financial measure, and design wins. We define adjusted net income as net income adjusted for stock-based compensation expense. 17 Table of Contents Adjusted net income . Our management and board of directors use adjusted net income to assess and evaluate our overall performance and financial trends, inform the annual budgeting process, and guide both short-term and long-term operational and strategic planning. As such, we believe adjusted net income provides meaningful insight for investors into our financial performance, consistent with how our management team and board of directors view and analyze our results. Adjusted net income is a non-GAAP financial measure and should be considered alongside, but not as a replacement for or superior to, net income as reported in accordance with GAAP. The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to adjusted net income for the periods presented: Three Months Ended March 31, 2026 2025 (in thousands) Adjusted net income (loss) reconciliation: Net loss $ (296) $ (1,166) Stock-based compensation expense 1,300 1,577 Litigation costs 1,629 — Adjusted net income $ 2,633 $ 411 Results of Operations The following table sets forth our results of operations for the periods indicated: Three Months Ended March 31, 2026 2025 2026 2025 (In thousands) (As a percentage of revenue) Product sales $ 14,100 $ 11,026 95 % 84 % Licensing, royalty, patent, engineering services and other revenue 772 2,112 5 16 Total revenue 14,872 13,138 100 100 Cost of product sales 6,955 6,029 47 46 Cost of licensing, royalty, patent, engineering services and other revenue 74 356 — 3 Total cost of sales 7,029 6,385 47 49 Gross profit 7,843 6,753 53 51 Operating expenses: Research and development 3,605 3,356 24 26 General and administrative 5,061 3,838 34 29 Sales and marketing 1,893 1,491 13 11 Total operating expenses 10,559 8,685 71 66 Loss from operations (2,716) (1,932) (18) (15) Interest income 317 408 2 3 Other income, net 2,106 388 14 3 Net loss before income taxes (293) (1,136) (2) (9) Income tax expense (3) (30) — — Net loss and comprehensive loss $ (296) $ (1,166) (2) % (9) % 18 Table of Contents Comparison of the three months ended March 31, 2026 and 2025 Revenue We generated 90% and 60% of our revenue from products sold through distributors for the three months ended March 31, 2026 and 2025, respectively. We maintain a direct selling relationship, for strategic purposes, with several key customer accounts. We have organized our sales team and representatives into three primary regions: Asia-Pacific (APAC); North America; and Europe, Middle East and Africa (EMEA). We recognize revenue by geography based on the region in which our products are sold, and not where the end products in which they are assembled are shipped. Our revenue by region for the periods indicated was as follows (in thousands): Three Months Ended March 31, 2026 2025 APAC $ 9,194 $ 7,259 North America 2,848 2,483 EMEA 2,830 3,396 Total revenue $ 14,872 $ 13,138 Three Months Ended March 31, Change 2026 2025 Amount % (Dollars in thousands) Product sales $ 14,100 $ 11,026 $ 3,074 27.9 % Licensing, royalty, patent, engineering services and other revenue 772 2,112 (1,340) (63.4) % Total revenue $ 14,872 $ 13,138 $ 1,734 13.2 % Total revenue increased by $1.7 million, or 13.2%, from $13.1 million during the three months ended March 31, 2025 to $14.9 million during the three months ended March 31, 2026. The increase was due to an increase in product sales of $3.1 million or 27.9%, and partially offset by a decrease in licensing, royalty, patent, engineering services and other revenue of $1.3 million. Licensing, royalty, patent, engineering services and other revenue is a highly variable revenue item characterized by a small number of transactions annually with revenue based on size and terms of each transaction. We estimate royalty revenue earned throughout the year, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year. Licensing, royalty, patent, engineering services and other revenue decreased by $1.3 million, or 63.4% from $2.1 million during the three months ended March 31, 2025, to $0.8 million during the three months ended March 31, 2026. The decrease was primarily due to the conclusion of an agreement for the development of an AI technology application. Cost of Sales and Gross Margin Three Months Ended March 31, Change 2026 2025 Amount % (Dollars in thousands) Cost of product sales $ 6,955 $ 6,029 $ 926 15.4 % Cost of licensing, royalty, patent, engineering services and other revenue 74 356 (282) (79.2) % Total cost of sales $ 7,029 $ 6,385 $ 644 10.1 % Gross margin 52.7 % 51.4 % 19 Table of Contents Cost of product sales increase d by $0.9 million , or 15.4% , from $6.0 million during the three months ended March 31, 2025 , to $7.0 million during the three months ended March 31, 2026 . Cost of product sales relate primarily to costs of our Toggle and STT products and have increased consistently and proportionately with the increase in revenues. Cost of licensing, royalty, patent, engineering services and other revenue decreased by $0.3 million, or 79.2%, from $0.4 million during the three months ended March 31, 2025, to $0.1 million during the three months ended March 31, 2026. The decrease was primarily due to a decrease in licensing costs related to labor and materials associated with the development of an AI technology application. Gross margin increased from 51.4% during the three months ended March 31, 2025, to 52.7% during the three months ended March 31, 2026. Gross margin increased as a result of the different revenue mix and yield improvements. Operating Expenses Our operating expenses consist of research and development, general and administrative and sales and marketing expenses. Personnel-related expenses, including salaries, benefits, bonuses and stock-based compensation, are among the most significant component of each of our operating expense categories. Three Months Ended March 31, Change 2026 2025 Amount % (Dollars in thousands) Research and development $ 3,605 $ 3,356 $ 249 7.4 % Research and development as a % of revenue 24 % 26 % Research and Development Expenses . Research and development expenses increased by $0.2 million , or 7.4% , from $3.4 million during the three months ended March 31, 2025 , to $3.6 million during the three months ended March 31, 2026 . The research and development expenses increase relates primarily to higher compensation costs and contract labor . Three Months Ended March 31, Change 2026 2025 Amount % (Dollars in thousands) General and administrative $ 5,061 $ 3,838 $ 1,223 31.9 % General and administrative as a % of revenue 34 % 29 % General and Administrative Expenses . General and administrative expenses increased by $1.2 million, or 31.9%, from $3.8 million during the three months ended March 31, 2025, to $5.1 million during the three months ended March 31, 2026. The increase is primarily due to the litigation costs related to the patent infringement lawsuit described in Note 5 to our condensed financial statements included in Item 1 of this report. Three Months Ended March 31, Change 2026 2025 Amount % (Dollars in thousands) Sales and marketing $ 1,893 $ 1,491 $ 402 27.0 % Sales and marketing as a % of revenue 13 % 11 % 20 Table of Contents Sales and Marketing Expenses . Sales and marketing expenses increased by $0.4 million, or 27.0%, from $1.5 million during the three months ended March 31, 2025, to $1.9 million during the three months ended March 31, 2026. The increase is sales and marketing expenses relates primarily to higher compensation costs and contract labor. Three Months Ended March 31, Change 2026 2025 Amount % (Dollars in thousands) Interest income $ 317 $ 408 $ (91) (22.3) % Interest income slightly decreased by $0.1 million, or 22.3%, from $0.4 million during the three months ended March 31, 2025, to $0.3 million during the three months ended March 31, 2026. The decrease is primarily due to the decrease in interest rates. Other Income, Net Three Months Ended March 31, Change 2026 2025 Amount % (Dollars in thousands) Other income, net $ 2,106 $ 388 $ 1,718 442.8 % Other income, net increased by $1.7 million, or 442.8%, from $0.4 million during the three months ended March 31, 2025, to $2.1 million during the three months ended March 31, 2026. Other income relates primarily to other income recognized from a strategic award we received to develop a long-term plan to provide manufacturing services for aerospace and defense segments. Liquidity and Capital Resources As of March 31, 2026, we had $40.5 million of cash and cash equivalents, compared to $44.5 million as of December 31, 2025. We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements in the next 12 months. Our long-term capital requirements will 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. Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Three Months Ended March 31, 2026 2025 (In thousands) Cash provided by operating activities $ 570 $ 1,440 Cash used in investing activities (4,834) (1,391) Cash provided by financing activities 308 12 Cash Flows From Operating Activities During the three months ended March 31, 2026 , cash provided by operating activities was $0.6 million , which consisted of net loss of $0.3 million , non-cash charges of $2.0 million and changes of net operating assets and liabilities of $1.1 million . The non-cash charges primarily consisted of stock-based compensation of $1.3 million , depreciation and amortization of $0.7 million . The change in our net operating assets and liabilities was primarily due to an increase in 21 Table of Contents accounts payable of $1.6 million , an increase in accrued liabilities of $0.9 million , offset by an increase in accounts receivable of $2.1 million , a decrease in contract obligation of $1.2 million , and an increase in inventory of $0.5 million . During the three months ended March 31, 2025 , cash provided by operating activities was $1.4 million , which consisted of net loss of $1.2 million , non-cash charges of $ 2.4 million and changes of net operating assets and liabilities of $0.2 million . The non-cash charges primarily consisted of stock-based compensation of $1.6 million , depreciation and amortization of $0.8 million . The change in our net operating assets and liabilities was primarily due to an increase in accounts payable of $1.1 million , an increase in deferred revenue of $1.1 million , an increase in contract obligations of $0.6 million , a decrease in prepaid expenses and other current assets of $0.2 million , offset by an increase in inventory of $1.9 million , and an increase in accounts receivable of $0.8 million . Cash Flows From Investing Activities Cash used in investing activities during the three months ended March 31, 2026 was $4.8 million primarily due to $4.4 million in purchases of manufacturing equipment and $0.5 million in purchase of intangible assets. Cash used in investing activities during the three months ended March 31, 2025 was $1.4 million primarily due to $0.9 million in purchases of manufacturing equipment and $0.5 million in purchase of intangible assets. Cash Flows From Financing Activities Cash provided by financing activities during the three months ended March 31, 2026 was $0.3 million, consisting of proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan, offset by payments of finance leases. Cash provided by financing activities during the three months ended March 31, 2025 was $0.01 million, consisting of proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan, offset by payments of finance leases. Critical Accounting Policies and Significant Judgments and Estimates Our condensed financial statements have been prepared in accordance with GAAP. The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. We base our estimates on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 4, 2026, that have had a material impact on our condensed financial statements and related notes. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required for a smaller reporting company.