Q3 2021 NVE Corp Earnings Call
True to a 9% decrease in R&D and the 5% decrease in SG&A.
The decrease in R&D expense was due to the completion of some new product developments.
The decrease in SG&A was due to staffing changes.
Interest income for the third quarter decreased 18%.
Due to a decrease in our marketable securities and money market funds and a decrease and the average interest rates on those securities and funds.
Net income for the quarter was $3.93 million or <unk> 81 per diluted share compared.
Compared to $3 $73 million or <unk> 77 last year.
Our gross margin was a record 84%.
Driven by a more profitable revenue mix and net margin was a record 60%.
We pay the one dollar per share dividend and the past quarter and today, we announced that our board declared another quarterly dividend of $1 per share payable February 26th to shareholders of record as of February 1st.
For the first nine months of the fiscal year total revenue decreased 20% due to a 19% decrease and product sales and the 21% decrease and contract R&D as revenues were impacted by the COVID-19 pandemic.
Net income for the first nine months decreased 23% to $8.56 million or $1 77 per share.
Compared to $11 $2 million or $2 30 per share last fiscal year.
For the nine months, we paid 14, 5 million and dividends and repurchased $91000 of stock.
Even with those returns to our shareholders our balance sheet remains strong with cash plus marketable securities of $65 $8 million as of December 31st.
Now I'll turn the call back to Dan to cover the business Dan.
Thanks, Kurt I'll cover the business and review 'twenty and 'twenty.
And the past quarter, we continued to work on new sensors and couple of products. We also worked on continuously improving our existing products. For example, our flagship IL 700 series line of Spintronics couplers was introduced more than 20 years ago, but it's still the best and the industry and the past.
We improved the key specification for those parts called the common mode transient immunity or CMT I.
CMT is an important specification for improving power control of efficiency and applications, such as motor control hybrid electric vehicles and battery charging.
We are working with our German distributor to target the upgraded parts for the electric vehicle onboard charging circuitry and charging stations.
Yeah.
We're proud to supply products to some of the world's most demanding customers, including Abbott's Pacesetter subsidiary and December we extended our supplier partnering agreement with Abbott, which would have expired at the end of 'twenty and 'twenty into May.
The four month extension gives us time to negotiate a long term amendment the.
And the extension was filed with the SEC as a material definitive agreement and is available via our website.
2020 was a challenging year, but we had some important accomplishments that lay the groundwork for the future.
In addition to the Abbott extension in 2020, we extended our supply agreement with Sanofi, a leading hearing care supplier into 'twenty and 'twenty five and we extended our bidding building leased into 2026.
We enhance shareholder value by returning more than $20 million to shareholders and dividends and stock repurchases and the calendar year.
It was also a productive year for R&D, including new high field magnetic sensors and switches for MRI tolerant medical devices.
The introduction of data couplers with best in class common mode transient immunity for energy efficient motor control.
Our new family of Ultra precise tunneling Magneto resistance mode motion sensors for robotics and factory automation.
The launch of the world's smallest D C and D C converters to transmit power as well as data and industrial networks and cars.
And new smart sensors for more versatile connectivity.
Smart sensors have been one of our R&D for us the past several years in the past quarter the.
Semiconductor industry Association previewed it so called the cable or 10 year plan, which identifies five areas. It says will shape the future of chip technology.
The first of those five areas is smart sensing.
With the number of new products and the past year were looking forward to the possibility of trade shows and 2021.
Two big trade shows for us have been scheduled for June sensor, plus test and Germany, which is billed as the industry's largest event dedicated the sensors connectivity connectivity and sense of systems.
And sensors Expo and San Jose build as North America's largest event dedicated to sensors connectivity and the internet of things.
Now I'd like to open the call for questions to Wanda.
Thank you.
Ladies and gentlemen.
And to ask the question you will need to press Star then one on your telephone.
The question.
And again, it's I want to ask the question.
While we compile the Q&A losses.
Yeah.
Our first question comes from the line of Jeff Bernstein.
Your line is open.
Hey, guys congratulations great quarter.
I think you had originally guided for revenue to be a little less robust and not up year to year.
And so I'm curious if you could maybe walk us through.
Sort of cancellations push outs for the pull ins.
Sort of what happened through the last couple of quarters here.
Yeah.
Yes, I can take that Jeff.
As I mentioned and in the prepared remarks.
The effects of the pandemic on us appears to be subsiding, although there's still a lot of uncertainty.
The worldwide semiconductor market is as strong.
On the outlook for electric elective medical devices are appears to be improving.
Uh huh.
Revenue and the current quarter based on our forecast orders and the.
What we've been hearing we currently expect the revenue to be slightly less than last.
The last fiscal year.
We're starting to see a lot of orders being.
Pulled in.
In the.
And the third quarter, our most recent quarter. We did have some orders that were pulled into that quarter. So we ended up a little bit better off than we originally expected earlier in the quarter.
Gotcha, and then obviously, there's been this kind of sudden stop start and we're hearing about auto factories, having to suspend operations for a week or two waiting for parts and and and various pieces of the supply chain are kind of getting backed up in terms of.
Tori that could be out there and the channel or that kind of ex it seems like probably the channel has been trained and now.
People are trying to bulk back up but but you know how how do you guys sort of keep tabs on what's going on out there and and understand it's you're getting into the kind of a heated situation with double ordering or that kind of thing.
Yes. This is Dan I can I can answer that maybe Kirk can add some color as well but.
We we havent.
Syrians and significant material shortages, but lead times have lengthened for some raw materials and services. So we see that as both the threat and an opportunity. We've always carried the ample inventories as we've talked about before the guard against contingencies and.
And we're addressing the threat of sort of already just by building inventories of critical raw materials, such as foundry wafers, which are semiconductor products that we buy and incorporate into our and products is raw material.
So we're.
We're well positioned to weather of those sorts of the shortages.
We're not.
We don't.
Keep our inventories as lean as perhaps the automotive industry does by any means.
And then we're also addressing the opportunity which is that we.
We can help customers, who are facing shortage from shortages from traditional suppliers or our competitors.
So we see it as an opportunity to pick up share and.
And our folks are constantly monitoring.
On our critical suppliers and in close contact and making sure that we have adequate inventories for.
For any kind of any kind of contingency of shortages.
So Dan is there something compatibility on on some of these parts, where you can actually fill in for for somebody else, who you know where there's parts shortages or does it take a new board designed for somebody to be able to accommodate your parts.
In many cases, we have drop in replacements, Jeff we design our isolated our couplers for example to use the old optical coupler Pan outs. So we also use some of the older packages. So what are called the P dips or dual inline packaged.
And so.
If our customers are short of traditional semiconductor products, such as optical couplers. They can use our products with a minimum of redesign.
And in some cases.
And they might need to or they might want to change the circuit boards and take advantage of some of our parts we of the smallest parts and the industry.
But we also have parts that are designed to replace legacy semiconductor parts. So that it's easy for our customers to migrate to our parts from traditional semiconductors, and that's always been our philosophy, we try to make our.
Parts as you know have exotic technology and best in class performance, but we want to make sure that that they're easy for our customers too.
The change too.
So this may actually be and opportunity to get and sort of some automotive guys, who are living hand to mouth right now and parts.
Exactly yeah.
Okay, that's great and.
Can you give us any kind of view on on what the book to Bill was in the quarter.
You you know, we don't we don't track that precisely.
Precisely because.
And it's a metric of its more useful for commodity semiconductor suppliers.
But as Curt mentioned, we had some orders that were pulled in.
So we had orders that were unexpected.
We were able to fulfill them.
The otherwise of course, they wouldn't have counted for revenue so.
Having inventories and and having hedges against contingencies I think has paid off gotcha.
Got you Okay, Great and then obviously you've had to change the <unk>.
Way that youre selling the hub because of the pandemic.
And you've done and some things.
<unk> worked with snap EBITDA on downloadable EDA files, you redid your website et cetera anything else.
Changed and and how are you progressing and.
And this new era.
Yeah.
Right well, we're doing a lot more of.
A lot more.
The Skype and zoom calls of course like most folks.
Our distributors and and.
Private label partners are also doing the same thing so we're talking to them and talking to our customers.
We're using the opportunity to train our distributors on some of our.
New products.
And there are mostly at home or in their offices. So we have an opportunity to get them together that we don't have when they're when they're traveling.
An example of the distributor partnership I mentioned it briefly in the prepared remarks is that our German distributor.
<unk> is working on on Ob see that's that's and on onboard charger platform.
Reference design for the electronics in a hybrid electric vehicle and <unk>.
Patrick vehicle and this case.
Two interface the.
The.
On the AUC line voltage to the charging to charging the batteries and a car.
And so that's a that's a great opportunity that our distributor has helped facilitate and there are other smaller opportunities that were finding with our distributors to.
Address new markets.
And to get into markets that we've targeted.
And the past such as such as automotive and the industrial Internet of things.
Great, Thanks, and I'll, let somebody else asked some questions. Thanks, Thanks, Jeff.
Thank you.
As a reminder, ladies and gentlemen.
On to ask the question.
I'm showing no further questions in the queue.
Yeah.
A question from Jeff Bernstein.
Alright, and so can you talk a little bit about the the pump business.
Now that that's been a little unpredictable in terms of.
The macroeconomic impacts, but you know whats your visibility on that the next few quarters.
Right and so.
Of the Pos are physical uncountable functions, which is a function and that's embodied in the physical structure, that's easy to evaluate but hard to predict and replicate so theyre an important component of our spintronics anti tamper systems and anti tamper systems are designed to protect sensitive data or electron.
On ex primarily for military systems. So those businesses can be can be fairly lumpy and that they tend to be.
Intermittent the orders, but we continue to see that as a.
As an important business, it's not a huge contributor to our revenue.
It was fairly strong and the most recent quarter.
But.
And I think part of what's contributing to.
To curts tempered outlook for the current quarter is that.
Is that it may not be quite as strong year over year of some of that got pulled in but it remains.
A.
A significant business.
And it's also of business that builds intellectual property as you know Jeff that we can use and commercial products. So we see it as important strategically and.
And it's a business, where we have a good reputation we've been and it for a long time and our technology is extremely well suited for it. So we continue to devote a significant effort there.
<unk> area is amiram or spin tronic memory, where we use the memory for crypto keys and for security and.
And.
We continue to.
The develop and sell.
Amiram into that space and that's valuable intellectual property, we believe and so this business of this general category of business. The anti tamper business allows us to develop that.
Technology and.
And because it's mostly customer funded its technology, where we can.
Cruise and benefits without having a large expense and R&D expense.
Does the the M ramp for crypto keys, and and security of their commercial applications now for that and.
The obviously there was the big.
The solar winds.
Thank you.
And it recently.
Is that changing the outlook for for that business at all.
Yes, we do see potential commercial applications.
And including high speed encryption and security for.
The consumer electronics and for data streams and as you mentioned it continues to be an issue to secure all of the communications. The there's so much communication that goes electronically.
So.
And so it's longer term, but we do see commercial applications and that's one of the reasons why we consider this business area of important even though it's not.
Huge.
Revenue driver right now.
Okay, and then can you just talk a little bit about the hearing aid market I guess, you have one win and in the next gen.
And the type of a hearing aid and.
Obviously the the.
The F D. A work has been delayed but I guess by the end of the year, hopefully theyre going to have rules on the on the OTC.
Market et cetera, but any of any new wins or anything else to report in terms of how that's developing.
While we continue to see it as an important market.
As you pointed out of the FDA has not yet.
The formally approved.
So called over the counter hearing AIDS, but it appears that.
And that could be in the still and the first half of 2021.
So that's the that's an excellent market and then also any of your audio devices, so called <unk>, which would be for people with normal hearing, but as a as of peripheral.
And that's estimated to become nearly a $100 billion market by 2026 with a compounded annual growth rate of 17%. So it's an excellent market as you point out we have.
Some early stage design wins in that space.
We began offering sensors that are compatible with the rechargeable batteries that are often used in consumer wearables rather than the disposable batteries that are generally used and traditional hearing AIDS and so we of products. It's an excellent market both of the.
Both the <unk> market and the over the counter hearing aid market and we're going to continue our development and hopefully that will the market will accelerate once the FDA.
Ex.
That's great thanks very much.
Thanks, Jeff.
Thank you.
And as a reminder, ladies and gentlemen that star one to ask.
Yes.
I'm showing no further questions on the Q.
Well if there are no. Other questions. We were pleased to report our best quarter in two years. Despite the challenges of the pandemic. We look forward to speaking with you again in early may to discuss fourth quarter and full fiscal year results.
Stay safe, everyone and thank you for participating on the call.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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