Q4 2021 NVE Corp Earnings Call
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Yeah.
Good afternoon, and welcome to our conference call for the quarter and fiscal year ended March 31 2021.
This is Dan Baker, President and CEO of N V Corp, as always I am joined by Curt Reynders, Our Chief Financial Officer. This call is being webcast live and being recorded a replay will be available through our website and the E Dot com.
After my opening comments Curt will present, a financial review of the quarter and fiscal year I'll cover the business and new products and then we'll open the call to questions.
We issued our press release with fourth quarter and fiscal year results and filed our annual report on form 10-K in the past hour following the close of market.
We also filed with our 10-K and extension to our supplier partnering agreement with Abbott laboratories links to these documents are available through the SEC's website, our website and our Twitter timeline.
Comments, we may make that relate to future plans events financial results or performance are forward looking statements that are subject to certain risks and uncertainties, including among others such factors as risks and uncertainties related to future sales and revenue on.
Uncertainties related to future stock repurchases and dividend payments and risks related to the COVID-19 pandemic as well as the risk factors listed from time to time in our filings with the SEC, including our just filed 10-K.
Actual results could differ materially from the information provided and we undertake no obligation to update forward looking statements we may make.
We're pleased to report strong earnings for the fourth quarter and fiscal year. Despite the effects of the COVID-19 pandemic for the quarter. We reported earnings of 65 per share versus 69 cents and a strong year ago quarter.
With the effects of COVID-19, the past year earnings decreased to $2 42 for the fiscal year compared to $3 for the prior year now Kurt will review the details of our financial results Kirk.
Yeah.
Thanks, Dan.
Total revenue for the quarter ended March 31, 2021 decreased 5% compared to last year due to a 5% decrease in product sales in the 7% decrease in contract R&D revenue.
The COVID-19 pandemic had a significant impact on revenue the past quarter.
We believe those effects began to subside, although significant uncertainty remains.
Expenses decreased 18% for the fourth quarter from the prior year due primarily to a 23% decrease in R&D.
The decrease in R&D expense was due to the completion of some new product developments.
Interest income decreased to $332000 for the most recent quarter from $428000 in the prior year quarter.
Due to decreases in our available for sales securities and a decrease in the average interest rates on those securities.
Yeah.
Net income for the quarter was $3, one $3 million or <unk> 65 per diluted share.
Compared to $337 million or <unk> 69.
Last year.
Gross margin was 78% for the quarter and net margin was 53%.
We paid a one dollar per share dividend in the past quarter and today, we announced that our board declared another quarterly dividend of $1 per share share payable.
Payable on May 31 to shareholders of record as of May 17th.
For the fiscal year total revenue decreased 16% due.
Due to a 16% decrease in product sales.
And an 18% decrease in contract R&D.
The COVID-19 pandemic had a significant impact on revenue the past fiscal year, especially in the first two quarters of the fiscal year.
Net income for the year decreased 19% to $11 7 million or $2 42 per share compared to $14 $5 million or $3 per share last fiscal year.
We also had an unrealized gain of $585000 on our marketable securities for the fiscal year, resulting in comprehensive income of $12 $3 million.
We paid $19 $3 million in dividends and repurchased $91000 of stock in the past year.
Even with those generous returns to our shareholders our balance sheet remains strong.
With cash plus marketable securities of $65 $1 million as of March 31.
Now I'll turn the call back to Dan to cover the business Dan.
Thanks, Kurt I'll cover highlights of the past quarter and fiscal 2021.
It's been a year since we first talked about the impact of COVID-19, I was in our May six 2020 conference call.
There is not a light at the end of the tunnel at least for the direct effects.
I want to thank our suppliers distributors and our employees for keeping on the operating effectively the past year tough time show, what we're made of and we've seen the dedication and resourcefulness of MB employees on the tenacity of our managers and leaders.
Our employees have been eligible for vaccination as essential manufacturing workers since mid March.
In vaccines have been available to all minnesotans over 16 since late March the great majority of our employees worked on site through the pandemic despite the personal risk.
Other highlights of the past quarter were proud to supply products to some of the world's most demanding customers, including Abbott's pacesetter subsidiary.
Abbott is a leading implantable medical device supplier last week, we extended our supplier partnering agreement with Abbott until November to give us time to negotiate a long term amendment we've.
We've extended our partnering agreements with Abbott and St. Jude Medical a number of times dating back to 2006, and we're allowing more time because there are new people involved since abbott's purchase on St. Jude in 2017.
The latest amendment was filed as I mentioned with our 10-K.
Another validation of our products extraordinary ruggedness and reliability is our selection as a supplier for the Europa Clipper mission to one of Jupiter's moons to explore the possibility of extra terrestrial life.
In the past quarter naphtha completed its critical design review for the space craft NASA pointed out that the spacecraft must be already enough to withstand the radiation in space yet.
Yet sensitive enough to gather the science needed to investigate the rope as environment.
Our products qualified for this demanding mission, which demonstrates their extraordinary properties we.
We delivered our parts for the Europa mission in 2019, but continue to work with NASA on other missions and to leverage our experience for other demanding applications.
NASA recently defined the launch vehicle path and is planning on October 2024 launch that would arrive at Jupiter in April 2030, it will take longer than other previous scenarios, but at least now there are definitive schedule targets.
Turning to product development, one of the areas, where we have been continuously improving our sensors as noise performance.
Low noise sensors can detect smaller magnetic field changes, which means more accurate sensing or electronic for current sensing or electronic compasses for example.
In the past quarter members of our advanced technology team published a peer reviewed paper in the journal applied physics letters titled Magneto Resistive sensor data activity a comparative analysis.
Detailing the noise performance of our various types of sensors.
If you're a subscription to applied physics letters has lapsed.
Can access the article from the papers and presentations section of our website.
We introduced two groups of new products in the past quarter DC to DC converters.
And tunneling Magneto resistance resistant sensors.
First we expanded our line of DC to DC converters with the addition of larger parts and combination converters with data couplers.
DC to DC converters transmit power rather than data.
We make the world's smallest isolated DC to DC converters at less than a quarter by an eighth of an inch.
In the past quarter, we introduced larger isolated DC to DC converters, they're still pretty small less than a half an inch square, but the larger size allows us to provide best in class 5000 volts isolation.
Which is remarkable for a part that size.
Higher isolation means better reliability.
In addition to the new Standalone DC to DC converters in the past quarter. We introduced three models. The combined 5000 volt isolation DC to DC converters with day to couplers to simultaneously transfer data and power and less space and with fewer chips.
These DC to DC converter introductions are designed for industrial automation and the industrial Internet of things.
In addition to DC to DC converters in the past quarter, we introduced high sensitivity tunneling Magneto resistance or TMR magnetic switches. These.
These parts were on on three to four volts.
<unk> makes the new parts ideal from a rechargeable devices such as over the counter hearing AIDS and smart audio devices.
Yeah.
There are links to information on our new products on our website, including demonstrations in the video section of our website. There are also links to information on our Youtube channel Twitter timeline and Linkedin posts.
In addition to the new products in the past quarter, new and improved products in the past fiscal year include included high field magnetic sensors and switches for MRI tolerant medical devices.
Ultra precise tunneling Magneto resistance motion sensors for robotics and factory automation.
The world's smallest DC to DC converters to transmit power as well as data and industrial networks and cars.
New smart sensors for more versatility in connectivity.
And improved couplers with best in class common mode transient immunity or CMT I.
For more power efficient control.
Turning to sales and marketing.
COVID-19 wave beginning the past quarter and Europe caused restrictions on the cancellation of most in person trade shows.
But despite the pandemic, we have opportunities to promote our new products.
Sensor plus test as an important industry trade show, it's gone digital and is going on this week.
It's billed as the industry's largest event dedicated to sensors connectivity and systems.
It's normally held in Germany, and we're participating as a co exhibitor with angst and Pfister, formerly known as <unk> on one of our European distributors.
The exhibition runs through Tomorrow may six.
We have several new products at the virtual Booth and we're planning webinars after the exhibition.
Last week was a major industry Research conference the Tripoli International Magnetics conference or <unk> for short.
Originally scheduled to be held in Leon France. The conference was changed to virtual due to the pandemic.
Five of our researchers authored a paper titled magnetic viscosity and high precision Magneto resistive field sensors at the conference.
Overcoming magnetic viscosity to improve accuracy and precision is an example of our leadership in sensor technology.
Dr. Joe Davies, a senior assistant program manager was also the sensor expert on a panel of experts at that conference.
Yeah.
Although we are taking advantage of virtual events, we look forward to the return of in person exhibits.
<unk> Expo build as north America's largest event dedicated to sensors connectivity on the Internet of things with scheduled for June in San Jose It's been postponed the late September due to COVID-19 restrictions in California, but.
But we still plan to exhibit and our folks had tampered champing at the bit to get in front of customers again.
We laughed attended sensors Expo two years ago and promoted our then new smart angle sensors with a smart sensor based robotics xylophone, playing do you know the way to San Jose.
We've expanded our smart sensor line since the last Expo, but we plan to reprise the popular demo. There's a video of the 2019 demo on our Youtube channel.
Two inherent challenges as a small company are reaching certain target markets like automotive and offering solutions requiring multiple components.
So we're working with <unk> the European distributor I mentioned, a minute ago to address the market for our couplers in electric vehicle onboard charging circuitry.
<unk> battery Charger platform takes advantage of our couplers best in class isolation voltage and recently upgraded CMT I.
Hi, isolation voltage protects delicate electronics in harsh environments like electric cars.
And the Hiseq MTI allows the circuitry to switch faster, which means higher efficiency less kilowatt hours per 100 miles lower fuel cost and faster charging.
There's a video with more details on our Youtube channel and angst and sisters channel.
We also have posted videos in the past quarter, showing the high common mode transient immunity and best in class isolation voltage of the couplers that are critical to this charging circuitry design.
Now I'd like to open the call for questions Anne.
Okay.
Yes.
One of them.
If you would like.
Okay.
Yes.
One on the telephone.
Net.
On the telephone.
Goodbye.
Yes.
Well.
Moving on them.
On the wrong.
Our first question comes from the line of Brian.
From Cowen.
Your line is helpful.
Hi, Dan.
Correct.
Good to hear you guys are doing well out there.
On a few questions for you.
Great. Thanks, Jeff.
Could you talk about.
Book to bill or any kind of forward looking statements do you want to give about.
How business is progressing for you in and maybe touch on the chip shortages on whether that's creating any opportunities for you to drop in some pin compatible kinds of parts.
Yeah, absolutely Kurt do you want to cover the outlook and then I can talk a little bit about the global semiconductor shortage and our threats on opportunities there. Thanks percher share.
As I mentioned in my prepared remarks, Jeff.
The effects of the pandemic on us.
Appear to be subsiding, although there's still an impact and a good deal of uncertainty.
On the worldwide semiconductor market is strong.
Although there have been pockets of weakness and the impact on the pandemic.
On the elective.
Medical devices appears to be recovering.
Industrial and factory automation markets.
Particularly strong.
Based on orders, our forecasts and what we've been hearing we currently.
Expect strong year over year growth this quarter.
The quarter ending June.
June 30th.
2021.
Yeah.
That's great. Thank you.
And then as far as the global semiconductor shortage, which has of course been in the news.
We haven't experienced significant material shortages lead times have lengthened for many raw materials and services.
But we typically maintain rare.
Relatively large inventories as a hedge against this sort of thing and we see the global semiconductor shortages as both a threatened on opportunity.
So the.
The threat is is obvious and we've always carried ample inventories and where.
Building inventories.
As as we see it to be.
A good opportunity to.
Address the shortages.
On a half parts available to help customers facing shortages from our competitors. So we have as you probably know we have parts that can drop indirectly to replace some of our competitors semiconductor a legacy type parts.
And we're seeing opportunities to.
To reach customers that we might not have been able to reach before so we we see it as an opportunity but folks are also doing a very good job of addressing the frac. The threats on working some of the long lead time items, which presents some challenges.
That's great.
Software Abbott reported.
And I guess, we'll see.
Recovery on those CRM and Neuromodulation businesses and had some strength exiting the quarter is is the neuromodulation piece is that relative to you.
It very well could be we look at opportunities to extend the platforms that we have with leaders.
In things like our rhythm management, because the platforms are often similar.
And those are fast growing markets with it with great opportunities to treat.
New types of diseases or diseases that haven't been previously treated with neuro stimulators. So.
Youre right Abbott reported an increase.
Five 8% organic increase in rhythm management sales, so they said that.
It was driven by a continued recovery.
From the COVID-19 pandemic the growth in medical device sales. So that's encouraging and then we see long term opportunities in neuro stimulators, which are smaller, but fast growing market and their treatments being proposed for neurological disorders psyche.
Patrick problems and a psychiatric illnesses.
And pain management, so it's a great opportunity for us and we have experience on that platform with those types of platforms and with having the reliability that those types of implantable device applications have.
Yeah.
Great and then I wanted to just follow up on the <unk>.
Sure.
Relationship in the battery charging system do you think that the design cycles on on these subsystems.
Sub systems may be.
Going forward than for the entire.
Cars and just.
Just wondering how.
We should think about that and then.
I think you had mentioned the last time when we spoke recently.
That debt you had isolated that were.
Compatible with both.
Gan and silicon carbide.
Assets, and obviously those markets seem to be starting to really explode and just wondering about any positioning there.
Yeah, great questions in there are they're actually related because the.
Battery charging platform uses next generation.
MOSFET and our devices as you correctly pointed out our uniquely compatible with those types of ultra high speed MOSFET. So the advantage. There is those types of MOSFET active switches to switch the power and the <unk>.
On D C into AC and it can do that they can do that faster than conventional MOSFET, but that creates high.
Transience large.
In high speed transients, and so then the problem is that the Isolator don't work and are isolated with those high <unk> specifications can withstand this ultra fast switching so the faster one can switch these the less power losses, there are because while they're switching youre, losing.
Power and so when when these MOSFET switch very very fast one has higher efficiency and that means as I mentioned in the prepared remarks that means more efficient battery charging and longer range for the for the vehicle and better equivalent gas mileage.
So.
So we see this is as important technology and it's being demonstrated in the angst and pfister platform.
With some of these next generation MOSFET as far as the design cycle.
As a demonstration and so it's in the early stages, but it's a working design and it's very impressive how efficient it is how quickly it switches.
And we're proud to be a part of it.
So there.
There is a design cycle, but as you know there's a lot of interest in making.
Charging electric vehicles as efficient as possible, reducing the charge time. So that you don't have to you don't have to be per.
Mark that a.
At a recharging station or arrest up for a long period of time on a cross country trip.
We see this as very important technology on a great opportunity and we've talked about the next generation opportunities that we have in the automotive, particularly hybrid electric vehicle automotive industry and this is a great example.
Great. Thank you. Thanks for the time I'll, let somebody else ask good questions.
Thanks, Jeff.
Yeah.
Uh huh.
Daniel.
One on your telephone.
Yeah.
Daniel.
Oh Wow.
From.
Your line is open.
Okay, Hi, if no one else is going to add.
Just wondering it looks like there's a lot of.
On activity.
A lot of new company activity in hearing AIDS and <unk>.
On that we're seeing all the time.
A lot of design activity. Despite the fact that the FDA has put out their legs yet.
Can you give us any indication of what's going on with your business there.
Okay.
Yeah as you know next generation hearing AIDS so-called Horribles audio devices are a great opportunity for us.
There are estimated to become a $93 billion market by 2026.
So.
I mentioned in the prepared remarks that we've been developing sensors.
Net work with the that are compatible with a rechargeable batteries used in.
Some of these next generation hearing AIDS and consumer Wearables.
Other than the disposable batteries that are generally used in traditional hearing AIDS. So those disposable batteries are typically the familiar one on a handful batteries, but.
The rechargeable batteries have a higher voltage so we've been targeting that space, we have design wins in that space being the <unk> market.
And we'd like to see the.
FDA.
Regulations on the possible sale of over the counter hearing AIDS, but.
The <unk> Revolution is proceeding and we are engaged with developers.
Yeah.
Okay, Great and then lastly.
On the pumps business I think you guys I know, it's a lumpy business I think you were looking for some recovery there it does sound like defense orders.
Debt lumpy these days with continue.
Continuing resolution.
Administration and particularly.
Sales from issues about foreign sales, where I think maybe tough play.
And even bigger rule book.
Can you just talk about that that segment.
Sure so.
As you know that's not huge revenues for us, but it's important and it has been a choppy market.
But from a technology standpoint, we've been working on contracts for puffs and four.
Anti tamper amiram applications. So those are two technologies that were leaders in and we see some.
Right near term applications in anti tamper for defense applications.
And longer term these things have commercial applications as well.
But we have contracts underway for anti tamper and M. Ram. So these are.
Development programs that are generally funded.
And they allow us to advance our technology.
They allow us to provide.
High speed encryption and security for.
For valuable electronic system system sensitive data or electronics.
So it remains a significant research area for us.
And.
We.
We're continuing to work on it despite the despite the sort of ups and downs of that market.
Yeah.
Alright, great. Thanks very much.
Thanks, Jeff.
Yeah.
Yeah.
Well on.
Yeah.
On the telephone.
Yeah.
There are no questions.
Wow.
Thank you.
Yeah.
Well there are no. Other questions. We were pleased to report a solid quarter. Despite the pandemic and we look forward to speaking with you again in July to discuss results for the first quarter of fiscal 2022.
Thank you all for participating on the call.
Yeah.
Yes.
Good luck.
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