Q2 2022 NVE Corp Earnings Call
Ladies and gentlemen, thank you standing by walking through the N B E Conference call.
Our second quarter results at this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question at that time.
One when you touch tone telephone.
As a reminder, today's conference call is being recorded.
I would now turn the conference host Mr. Daniel Baker, President and CEO, Sir you may begin.
Good afternoon, and welcome to our conference call for the quarter and six months ended September 30th 2021.
This call is being webcast live and being recorded a replay will be available through our website N V E dotcom.
I'm joined by our New controller, and principal financial Officer, John Larsen Johnson.
Started his career at Dalian his previous experience as a controller.
As a BS degree in accounting from St Cloud State and an M. B a from the University of Minnesota and he is a certified public accountant, we're happy to have them.
Curt Reynders retired October 1st as our CFO after more than 20 years with.
John study Curt started as controller in 2001 of them was named CFO in 2006, we wish him. The best his retirement with plan and first disclosed in an 8-K in July.
After my opening comments, John will present, a financial review and I'll cover the business and new products, then we will open.
The comp questions.
We issued a press release with second quarter results and filed our quarterly report on Form 10-Q in the past hour following the close of market.
Links to the press release and 10-Q are available through the SEC's website, our website and our Twitter timeline.
Comments.
The call 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 uncertainties related to future dividend payments and risks related to the COVID-19 pandemic.
We as well as the risk factors listed from time to time in our filings with the SEC, including our annual report on Form 10-K for the year ended March 31st 2021 as updated in our just filed 10-Q.
Actual results could differ materially from the information provided and we undertake no obligation to update forward.
These statements we may make.
We're pleased to report our second consecutive quarter of large year over year increases in product sales total revenue and earnings.
Product sales increased 59% from the prior year quarter total revenue increased 56% and net income increased 64%.
We're looking we reported earnings of 75 cents per share for the quarter versus 46 cents for the year ago quarter.
Now John will cover the details of our financial results welcomed microphone John.
Thanks, Dan.
I'm very excited to join N V and want to thank Kurt Dan The board.
Sent all the N V employees, who have helped get me up to speed.
As Dan said total revenue for the quarter ended September 30th 2021 increased 56% to 682 million compared to 438 million last year due to a 59% increase in product.
Partially offset by a 13% decrease in contract R&D revenue.
The COVID-19 pandemic had a significant impact on revenue in the past year's quarter.
We believe those effects are subsiding, although risks and uncertainties remain.
We were impacted by widespread supply chain challenges.
Sales in shortages of semiconductor materials and services.
It was a double edged sword and that we may have picked up business from competitors, who are more severely affected by the shortages.
Expenses increased 1% for the quarter from the prior year due to a 35% increase in SG&A.
Partially offset by a 13.
The decrease in R&D.
The increase in SG&A was due to increased employee compensation expenses.
The decrease in R&D expenses due to staffing changes and the completion.
Of some new product developments.
Interest income decreased to 295000 and for the most recent quarter.
<unk> percent from 401000 in the prior year quarter.
Due to decreases in our available for sale Securities and a decrease in the average interest rates on those securities.
Net income for the quarter was $3 $65 million or <unk> 75 per diluted share compared to $2 two 2 million.
Or 46 cents last year.
We continued to generate strong profitability.
Gross margin was 77% operating margin was 60% and net margin was 53%.
For the first six months of fiscal 2022, total revenue increased 56% to $14 million.
$8 $97 million for the first six months of the prior year.
The increase was due to a 59% increase in product sales, partially offset by a 13% decrease in contract R&D revenue.
Net income for the first six months increased 56% to $7 million to $3 million or.
From $1 49 per diluted share.
From 463 million or <unk> 96 per share for the first half of fiscal 2021.
Capital expenditures were 74000 in the first half of the fiscal year after no capital expenditures in the prior year period.
These expenditures were.
Really to increase our production capacity to alleviate potential production bottlenecks.
We're planning additional capital expenditures in the second half of the fiscal year in the half a million dollar range.
We are also repurposing part of the building for production to make room for new equipment.
We paid a one dollar per share dividend in the past quarter.
Primary we announced that our board declared another quarterly dividend of $1 per share payable on November 30 to shareholders of record as of November 1st.
Now I'll turn the call back to Dan to cover the business and new products.
Yeah.
Thanks, John I'll cover business, new products as John said.
And we continue to manage the challenges and opportunities presented by the global semiconductor shortages.
Some analysts have said shortages could last several more years raw material and packaging service lead times have increased and prices of many raw materials have increased we've address these threats by increasing inventories.
Said stages, and increasing our production capacity to support converting that inventory to finished goods.
We've increased some prices, where we've had to because of higher material and labor costs.
For other parts, we've been able to keep our prices the same while improving our competitive position.
Sure.
It also created opportunities to provide products, where we have drop in replacements for competitors, particularly couplers and isolator.
We've won some business because we have parts available and we hope to keep that business by demonstrating more reliable supplier with excellent product performance and quality.
Shortly in addition to the expansion of our test area that John mentioned, we are repainting re carpeting and doing other remodeling to make our workplaces more pleasant and inefficient.
Most of the walls or a color called gray matters, which we thought was appropriate since our employees Gray matter is our most important asset.
Most.
Modeling costs are covered by a tenant improvement allowance included in the lease renewal we signed in early 2020.
We had postponed most of the work due to the pandemic.
Turning to new products in the past quarter, we introduced a line of sensors and expanded our line of Isolator that include integrated D.
D C converters.
The new line of sensors is billed as the world's first tunneling Magneto resistance Dear to sensors and are designed to measure and control rotation.
The newer sensors can be more precise than our venerable giant magneto resistant sensors.
<unk> demonstration boards that showcase angular resolution of a few thousands of a degree.
There's also a video of the demonstration on our Youtube channel.
Also in the past quarter, we expanded our line of products that include converters to transmit power as well as data in smart grids.
We have industrial networks and cars.
Conventional network electronics, often required to power supplies, one for our controller and another for a network bus.
The new parts eliminate the need for a network bus power supply.
The new Isolator has also.
Just one of the biggest challenges for smart grids witches that micro controllers run on low voltages like three or five volt, while motors that consume energy such as those in furnaces or refrigerators run on 120 or 240 volts. The new parts provide a bridge between control systems and line voltage measurements.
So a drop allowing more efficient control of motors and other energy consumers.
There's a video demonstration of the safe safely measuring the current of 120 volt motor with three volt electronics on our Youtube channel.
Most of the new isolated to generate a three volt.
Since supply from a three volt controller supply, but one of the new products has what's called a boost converter at Bruce a three volt power supply commonly used for microcontrollers to the <unk> used for many industrial networks.
In the past quarter, our advanced technology team also worked on Spintronics.
Network Emory your M Ram under a customer sponsored R&D contract for contracted for custom parts.
MRM is one of our core technologies.
We manufacture them Rams for specialized applications, such as anti tamper and these programs allow us to build our technology capabilities.
Turning to sales and marketing last month, we attended our first in person trade show since the pandemic began.
Sensors Expo is billed as north America's largest event dedicated to sensors connectivity and the internet of things.
Attendance was less than the last time the conference was held in 2019.
<unk>, but we had some good leads and it was great to get in front of customers and prospects.
Turning to governance, our virtual annual shareholders' meeting was in August. Unfortunately, we couldn't meet many of you in person as we had for years before the pandemic.
Our Youtube channel has a play list of new product demonstrations we were.
For an in person meeting.
We hope to have an in person meeting next year.
James W. Bracket was elected to our board for the first time at the annual meeting.
Jim is an accomplished executive and highly experienced public company director.
He was the CEO of life core.
Biomedical for more than 20 years.
His management technical medical device and public company experience and his medical education qualify them to serve as a director.
After seven years on our board's dramatic CEO, Gary Maharaj didn't stand for reelection we appreciate his service.
Planning, our executive officer compensation supports goals of profitable growth and improving long term shareholder value without being excessive and shareholders overwhelmingly approved officer compensation.
And finally, the selection of our auditors was ratified at the annual meeting.
We filed.
The form 8-K with details of the shareholder votes.
Now I'd like to open the call for questions Valerie.
Yeah.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one.
Telephone again to ask a question please press star.
I didn't want.
One of them right.
We have a question from Jeff Bernstein of Cowen Your line is open.
Hi, Dan and John a couple of questions for you here.
The increase in SG&A was that largely driven by sales commissions.
Aye.
I see that you had some.
Advertisement about looking for electrical engineers.
I don't know if you were hiring for R&D purposes, or or some sales engineers, maybe talk a little bit about that.
Yeah, absolutely. This is a this is dan.
So we have been adding people.
With the increase in sales and.
And with some of the challenges that we face now in logistics that we didn't have a couple of years ago.
We've added a number of very talented people.
We are we are recruiting for an engineer as you noticed.
And.
Our engineers typically do quite a bit of sales support.
They know the products and we want to get them in front of customers and talking to customers. So the short answer to your question is yes, a lot of the compensation was incentive based compensation.
We've had a lot of challenge.
<unk> and our folks have risen to the challenge as is evidenced by the increase in product sales and revenue overall.
And we've also we've also been adding staff and.
And we've got a great.
A great reserve of.
Talent and some very talented technical staff and some of them are the joined the company relatively recently.
That's great. Thanks, and then.
You alluded to this.
Some success as a result of this kind of a seminal opportunity with the tightness in.
The semiconductor.
Industry.
Potentially get in.
And get some designs from customers, who werent previously who.
Looking for all kinds of sources is there any way you can quantify you know anything about design wins or inbound calls or website traffic or any.
Any thing that's your favorite metric.
To talk about that a little bit.
Yeah. It's a that's a great question, it's hard to come up with specific metrics that we could.
Consider <unk>.
Reliable design wins can vary you know a design win could be it.
It could be a few parts or it could be hundreds of thousands of parts.
But we spend are we spend a fair amount of time now are working.
Working with customers, who are frustrated by the shortages by some conventional semiconductor manufacturers.
We look at how we can drop in and replace their parts.
Whether we.
Can redesign boards and improve their performance.
And those those inquiries are much more frequent and now.
They were and we I can tell you personally sometimes early in the morning, we'll get emails from from Europe.
And from Asia from customers, who see our parts.
Want to know exactly how they work how they will work under certain circumstances, and we spend a fair amount of time answering those questions and many of those result in.
<unk> in design wins, especially.
And couplers and Isolator, where we have as you know we have some drop in replacement.
Parts for conventional semiconductors, where we have the same package types the same pan out.
So in many cases its drop in replacements in some cases, it's a different park usually.
A better part of course, and we work with customer to figure out how we can how we can.
Serve their needs and get our parts into their application.
And then Dan what's what's kind of the lead time to be able to serve somebody who.
Wants to do a drop in replacement with a pin compatible pod.
Part of it.
You know weeks or months or.
Any color on that.
Yeah.
It's a good question, it's a lot shorter than it used to be because in many cases.
These folks are coming to us because.
They can't get the parts that they had been using so if it's a drop in replacement and its parts we have in stock.
We will ship them out the same day.
Some cases, you know the customer in many cases, the customer wants to test the parts. So we will ship out of small quantity right away.
Hey.
And and and then we will get production orders and sometimes that can be a matter of that entire cycle can be a matter of weeks, sometimes it's longer but of course, our goal is to make it as short as possible. Our goal is to have as many parts in stock as possible to have.
Excellent.
Our customer support and fast responses to these customers. So they can get answers to their questions and so that they can get.
Get get going on their new design using our parts.
That's great. Thanks, and then in the quarter I think you announced I E E.
X certified Isolator has there.
For.
I guess environment that could be flammable.
Right is that you know apply directly to EV battery systems or Evs overall or is that really for other kinds of industrial applications.
Yeah, it's mostly for industrial but I suppose they couldn't could apply to evs, where there are.
Close of gases around.
So the a lot of the applications are in chemical plants, and sometimes even food plants, we don't always think of food plants as being an explosion.
<unk> environment, but.
But things like wheat dust can be explosive so there's actually a fairly large market that that is concerned about.
What's typically called intrinsically safe and you mentioned, you're very well informed you mentioned some of the acronyms that are that.
That are used in the industry.
So that's an area, where we have a very strong benefit proposition, it's a bit of a niche, but our parts are excellent in that environment.
And we actually are.
Our engineers had a little bit of a fun with this we took some competitive parts.
And expose them.
The same conditions as our parts.
And there was smoke involved and.
Our parts are.
Parts survive the the extreme conditions extremely well, so and those explosive environments, what you don't want to smoke or or ARX or things that couldn't ignite an explosion.
And it highlights one more advantage of our parts their reliability and their ideal for some of these really demanding applications.
Got you that's great and then and then lastly, I think we are.
<unk> spoken about the potential.
But some of your parts, but it actually.
Be powered by ambient Wi Fi microwave energy. That's that's found in many systems now are these days and I'm just wondering if that's advancing at all.
It is that's a great point and so the general term that are that we use as energy harvesting and.
Our parts are extremely low power many of them are and they can run off of batteries. They can run off of solar or other as you say ambient radiofrequency energy.
So that comes up in things like meters and remote monitoring for.
For the Internet of things.
That's an area that's growing and we continue to look at are extremely efficient.
Sensors and couplers.
That can run on very low.
Very low power.
Small amounts of <unk>.
<unk>.
As you know we have a demo that we've had at our annual meetings and there's a Youtube video showing that we can power one of our sensors off of a oh blueberry off of the energy that you can get from two electrodes in a blueberry because of the slight acidity.
The <unk> of the juice. So yeah of course, that's not really one of the most practical energy harvesting applications, but it just illustrates how little power how few electrons it takes to power some of our components.
That's great thanks very much.
For the time down.
Thank you Jeff.
Thank you.
Our next question comes from Jade.
Your line is open.
Hi, This is actually drew we're in the same office. So I heard you say before you were expanding to your product line is that a new.
<unk> was I correct in hearing that you're expanding like a new product line or is that just replacing.
Old old products with new products.
So in the case of the sensors. It was a new product line of tunneling Magneto resistance geared to sensors, we have geared to sensors now.
That are based on what's called.
Called giant Magneto resistance, which is it's been tronic technology that we've been making for a number of years, our newer technology is called tunneling Magneto resistance and.
And we've deployed that in several areas, but this is the first time, we've deployed it into these geared to sensors.
So these are used for detecting motor rotation and as I mentioned in the prepared remarks. These particular sensors are extremely precise they can detect rotation of a few thousands of a degree so that allows very precise control of motors and.
Other mechatronics, which means that we can have robots. It enables robots or other mechatronic systems that can do more intricate more precise jobs that they perhaps couldn't have done with older technology. So that was the one area and then the second area.
Was what we call Isolator that include DC to DC converters, so DC to DC converters convert power and transmit power. In addition to transmitting the data.
So those components, we had some of those before and we expanded that product.
So that was an expansion of our product line that we started introducing in the past year or so into some important areas in some popular applications.
And the sensor is an entirely new product line that includes several.
Subtypes or several models.
Leigh fall into that product line.
Okay. Thank you.
It's interesting thank you.
Thanks drew.
Yeah Okay.
Again.
Please press Star then one when your Touchstone telephone again.
Please press Star then one one moment please.
That.
I'm showing no further questions at this time I'd like to turn the call back over to Daniel Baker for brief closing.
Well, we were pleased to report a 64% increase in quarterly earnings driven by a 59% increase in product sales. We look forward to speaking with you again.
Anyway to discuss third quarter results.
For participating in the call.
Ladies and gentlemen.
Thank you all participating you may all disconnect have a great day.
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And Jamie.
Okay.
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Yeah.
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Yeah.
[music].
Ladies and gentlemen, thank you standing by and welcome to the N V E Conference call second quarter results. At this time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press Star then one when you touch tone telephone.
The phone as.
As a reminder, today's conference call is being recorded.
I would now I'm kind of conflict with your host Mr. Daniel Baker, President and CEO, Sir you may begin.
Good afternoon, and welcome to our conference call for the quarter and six months ended September 32021.
This call is being webcast live and being recorded.
Replay will be available through our website N V E Dot com.
I'm joined by our New controller and principal financial Officer, John Larsen John started his career at daily in his previous experience as a controller he.
As a BS degree in accounting from St Cloud State and an MBA from the University of Minnesota.
And he is a certified public accountant, we're happy to have them.
Curt Reinders retired October 1st as our CFO after more than 20 years with the company Curt started as controller in 2001 and was named CFO in 2006, we wish him the best as retirement was planned and first disclosed.
In an 8-K in July.
After my opening comments, John will present, a financial review then I'll cover the business and new products. Then we will open the call to questions.
We issued our press release with second quarter results and filed our quarterly report on Form 10-Q in the past hour following the close of market.
Links to the press release and 10-Q 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.
Uncertainties related to future sales and revenue.
Uncertainties related to future 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 annual report on Form 10-K for the year ended March 31 2021.
Risks and updated in our just filed 10-Q.
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 our second consecutive quarter of large year over year increases in product sales total revenue and earnings.
Product sales increased 59% from the prior year quarter total revenue increased 56% and net income increased 64%. We reported earnings of <unk> 75 per share for the quarter versus <unk> 46 for the year ago quarter.
Now John will cover the details of our financial results.
Welcome to the microphone John.
Thanks, Dan.
Excited to join envy and want to thank Kurt Dan The board in all the NV employees, who have helped get me up to speed.
As Dan said total revenue for the quarter ended September 32021 increased 50.
6% to 682 million.
<unk> two for three 8 million last year due to a 59% increase in product sales.
Partially offset by a 13% decrease in contract R&D revenue.
The COVID-19 pandemic had a significant impact on revenue.
In the past years quarter.
We believe those effects are subsiding, although risks and uncertainties remain.
We were impacted by widespread supply chain challenges and shortages of semiconductor materials and services.
But it was a double edged sword in that we may have picked up business from competitors.
More severely affected by.
The shortages.
Expenses increased 1% for the quarter from the prior year due to a 35% increase in SG&A.
Partially offset by a 13% decrease in R&D.
The increase in SG&A was due to increased employee compensation expenses.
The decrease in R&D expense was due.
Due to staffing changes and the completion.
Some new product developments.
Interest income decreased to 295000 and for the most recent quarter.
401000 in the prior year quarter.
Due to decreases in our available for sale Securities and a decrease in the average.
Average interest rates on those securities.
Net income for the quarter was $3 $65 million or <unk> 75 per diluted share compared to $2 to $2 million or <unk> 46 last year.
We continued to generate strong profitability.
Gross margin was 77% operating.
Margin was 60% and net margin was 53%.
For the first six months of fiscal 2022, total revenue increased 56% to $14 million from $8 $97 million for the first six months of the prior year.
The increase was due to a 59% increase in product sales partially offset.
By a 13% decrease in contract R&D revenue.
Net income for the first six months increased 56% to $7 million to $3 million or.
A $1 49 per diluted share.
From 463 million or <unk> 96 cents per share for the first half of fiscal.
<unk> 2021.
Capital expenditures were 74000 in the first half of the fiscal year after no capital expenditures in the prior year period.
These expenditures were primarily to increase our production capacity to alleviate potential production bottlenecks.
We're planning additional capital expenditures in the second half of the fiscal year.
In the half a million dollar range.
We are also repurposing part of the building for production to make room for new equipment.
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.
Payable on November 30 to shareholders of record as of November one.
Now I'll turn the call back to Dan to cover the business and new products Dan.
Thanks, John.
I'll cover business and new products as John said, we continue to manage the challenges and opportunities presented by the global semiconductor shortages.
Some analysts have said shortages could last several more years.
Raw material and packaging service lead times have increased and prices of many raw materials have increased we've address these threats by increasing inventories at all stages and increasing our production capacity to support converting that inventory to finished goods.
We've increased some prices where we've had.
Had to because of higher material and labor costs.
For other parts, we have been able to keep our prices the same while improving our competitive position.
The shortages have created opportunities to provide products, where we have drop in replacements for competitors, particularly couplers and isolator.
We've won some business because.
Does we have parts available and we hope to keep that business by demonstrating more reliable supplier with excellent product performance and quality.
In addition to the expansion of our test area that John mentioned, we are repainting re carpeting and doing other remodeling to make our workplaces more pleasant and efficient.
Most of the walls or a color called gray matters, which we thought was appropriate since our employees Gray matter is our most important asset.
Most of the remodeling costs are covered by a tenant improvement allowance included in the lease renewal we signed in early 2020.
We had postpone most of the work due to the pandemic.
Nick.
Turning to new products in the past quarter, we introduced a line of sensors and expanded our line of Isolator that include integrated DC to DC converters.
The new line of sensors is billed as the world's first tunneling Magneto resistance <unk> sensors and are designed to measure and control rotation.
Yeah.
The newer sensors can be more precise than our venerable giant magnetoresistance sensors.
We have demonstration boards that showcase angular resolution of a few thousands of a degree.
Also a video of the demonstration on our Youtube channel.
Yeah.
Also in the past quarter, we expanded our line of products that include converters to transmit power as well as data in smart grids industrial networks and cars <unk>.
Conventional network electronics, often required to power supplies, one for our controller and another for a network bus.
The new parts eliminate the need for a network bus power supply.
The new Isolator has also address one of the biggest challenges for smart grids witches that microcontrollers run on low voltages like three or five volt, while motors that consume energy such as those in furnaces or refrigerators.
<unk> run on 120, or 240 volts, the new parts provide a bridge between control systems and line voltage measurements, allowing more efficient control of motors and other energy consumers.
There's a video demonstration of the safe safely measuring the current of 120 volt motor.
<unk> with three volt electronics on our Youtube channel.
Most of the new Isolator has generated three volt network supply from a three volt controller supply, but one of the new products has what's called a boost converter at Bruce a three volt power supply commonly used for microcontrollers to the fireball.
<unk> used for many industrial networks.
In the past quarter, our advanced technology team also worked on spin tronic memory. Your M Ram under a customer sponsored R&D contract for contracted for custom parts.
<unk> is one of our core technologies.
We manage.
Manufacturing ramps for specialized applications, such as anti tamper and these programs allow us to build our technology capabilities.
Turning to sales and marketing last month, we attended our first in person trade show since the pandemic began.
Sensors Expo is billed as North America.
Because largest event dedicated to sensors connectivity and the internet of things.
Attendance was less.
And the last time the conference was held in 2019, but we had some good leads and it was great to get in front of customers and prospects.
Turning to governance, our virtual annual shareholders'.
Meeting was in August Unfortunately, we couldn't meet many of you in person as we had for years before the pandemic.
Our Youtube channel has a play list of new product demonstrations, we were planning for an in person meeting.
We hope to have an in person meeting next year.
James W bracket was elected to our.
Our board for the first time at the annual meeting.
Jim is an accomplished executive and highly experienced public company director.
He was the CEO of life core biomedical for more than 20 years.
His management technical medical device and public company experience and his medical education qualify.
I am to serve as a director.
After seven years on our board somatic CEO, Gary Maharaj didn't stand for reelection we appreciate his service.
Our executive officer compensation supports goals of profitable growth and improving long term shareholder value without being excessive.
And shareholders overwhelmingly approved the officer compensation.
And finally, the selection of our auditors was ratified at the annual meeting.
We filed a form 8-K with details of the shareholder votes.
Now I'd like to open the call for questions.
Valerie.
Thank you.
Ladies and gentlemen, if you'd like to ask a question. Please press Star then one.
Again to ask a question. Please press Star then one.
One moment please.
We have a question from Jeff Bernstein of Cowen Your line is open.
<unk>.
Hi, Dan and John.
Questions for you here.
The increase in SG&A was that largely driven by sales commissions are I.
I see that you had some adverts.
Advertisement about looking for electrical engineers don't know if you were hiring for R&D purposes or.
Sales engineers, maybe talk a little bit about that.
Yeah, absolutely. This is this is Dan.
So we have been adding people.
With the increase in sales and with some of the challenges that we face now in logistics that we didn't have a couple of years ago.
We've added a number of very talented people.
We are we are recruiting for an engineer as you noticed and.
Our engineers are typically do quite a bit of sales support.
They know the products and we want to get.
In front of customers and talking to customers. So the short answer to your question is yes, a lot of the compensation was incentive based compensation.
We've had a lot of challenges and our folks have risen to the challenge as is evidenced by the increase in product sales and revenue overall.
And we've also we've also been adding staff.
And we've got a great a great reserve of talent and some very talented technical staff and some of them have joined the company relatively recently.
That's.
That's great. Thanks, and then.
You alluded to this and some.
As a result of this kind of a seminal opportunity with the tightness in the.
The semiconductor industry.
Essentially get in and get some designs from customers, who weren't previously who.
You know are looking.
Looking for alternative sources is there any way you can quantify you know anything about design wins or inbound calls or website traffic or.
Any thing that's your favorite metric to talk about that a little bit.
Yeah. It's a that's a great question, it's hard to come up with specific metrics that we could.
Consider <unk>.
Reliable design wins can vary you know a design win could be it.
Could be a few parts or it could be hundreds of thousands of parts.
But we spend.
We spend a fair amount of time now.
Working with customers who are frustrated.
<unk> by the shortages by some conventional semiconductor manufacturers, we look at how we can drop in and replace their parts are whether we can redesign boards and improve their performance and those those inquiries are much more frequent and now.
Than they were and are we I can tell you personally sometimes early in the morning, we'll get emails from from Europe and from Asia from customers, who see our parts and want to know exactly how they work how they will work under certain circumstances.
Chances and we spend a fair amount of time answering those questions and many of those result in result in design wins, especially and couplers and Isolator, where we have as you know we have some drop in replacement parts for conventional semiconductor.
Doctors, where we have the same package types the same pan out.
So in many cases its drop in replacements in some cases, it's a different park, usually a better part of course.
And we work with customer to figure out how we can how how we can.
Serve there.
Needs and get our parts into their application.
And then Dan.
What's kind of the lead time to be able to serve somebody who wants.
Wants to do a drop in replacement with a pin compatible.
Part is is that you know weeks or months or.
Any color on that.
Yeah. That's a good question, it's a lot shorter than it used to be because in many cases.
These folks are coming to us because they can't get the parts that they had been using so if it's a drop in replacement and its parts we have in stock.
We will ship them out the same day.
In some cases, you know the customer in many cases, the customer wants to test the parts. So will ship out of small quantity right away.
And and then we will get production orders and sometimes that can be a matter of that entire cycle.
A matter of weeks, sometimes it's longer but of course, our goal is to make it as short as possible. Our goal is to have as many parts in stock as possible to have.
Excellent.
Customer support and fast responses to these customers. So they can get answers to their questions and so that they can.
Get.
It can be up get going on their new design using our parts.
That's great. Thanks, and then in the quarter I think you announced I E E X certified Isolator that are for I.
I guess environment that could be flammable et cetera.
Is that you know apply directly to EV battery systems or Evs overall are or is that really for other kinds of industrial applications.
Yeah, it's mostly for industrial but I suppose they couldn't could apply to evs, where there are.
Explosive gases.
Is around.
So the a lot of the applications are in chemical plants, and sometimes even food plants. We don't always think of food plants as being an explosive environment, but but things like wheat dust can be explosive so there's actually a fairly large market that that is.
As concerned about.
What's typically called intrinsically safe and you mentioned, you're very well informed you mentioned some of the acronyms that are.
That are used in the industry. So that's an area, where we have a very strong benefit proposition, it's a bit of a niche, but our parts are excellent in that environment.
<unk>.
And we actually are.
Our engineers had a little bit of fun with this we took some competitive parts.
And expose them to the same conditions as our parts and there was smoke involved and.
Our parts are.
Parts service.
Survived the extreme conditions extremely well, so and those explosive environments, what you don't want to smoke or or ARX or things that could ignite an explosion.
And it highlights one more advantage of our parts their reliability and their ideal for some of these really demanding application.
Applications.
Got you that's great and then and then lastly, I think we are.
<unk> spoken about the potential.
But some of your parts could it actually be powered by ambient Wi Fi microwave energy. That's found in many systems now these days and I'm just wondering.
If that's advancing at all.
It is that's a great point and so the general term that we use as energy harvesting.
And our parts are extremely low power many of them are and they can run off of batteries. They can run off of.
Solar or other as you say ambient radiofrequency energy.
So that comes up in things like meters and remote monitoring for the internet of things and.
That's an area that's growing and we continue to look at extremely efficient.
Sensors and couplers.
It can run on very low.
Very low power.
Small amounts of energy.
As you know we have a demo that we've had at our annual meetings and there's a Youtube video showing that we can power.
One of our sensors off of a blueberry off of the energy that you can get from two electrodes in a blueberry because of the slight acidity of the of the juice.
Of course, that's not really one of the most practical energy harvesting applications, but it just.
Illustrates how little power, how few electrons it takes to power some of our components.
That's great. Thanks, very much at a time.
Thank you Jeff.
Thank you.
Next question comes from Jade.
Your line is open.
Yeah.
Hi, This is actually drew we're in the same office.
So I heard you say before you were expanding to your product line is that a new.
Was I correct in hearing that you're expanding like a new product line or is that just replacing.
Old old products with new products.
So in the case of.
The sensors it was a new product line of tunneling Magneto resistance geared to sensors, we have geared to sensors now.
That are based on what's called giant Magneto resistance, which is it's been tronic.
Technology that we've been making for a number of years or newer technologies.
Is called tunneling Magneto resistance.
And.
We've deployed that in several areas, but this is the first time, we've deployed it into these geared to sensors. So these are used for detecting motor rotation and as I mentioned in the prepared remarks. These particular sensors are extreme.
Extremely precise they can detect rotation of a few thousands of a degree so that allows very precise control of motors and other mechatronics, which means that we can have robots. It enables robots or other mechatronic systems that can do more intricate.
More precise jobs that they perhaps couldn't have done with older technology. So that was the one area and then the second area.
Was what we call Isolator that include DC to DC converters, so DC to DC converters convert power.
Kit and transmit power in addition to transmitting the data so those components, we had some of those before and we expanded that product line. So that was an expansion of our product line that we started introducing in the past year or so into some important areas.
Sure and popular applications.
The sensor is an entirely new product line that includes several.
Subtypes or several models that fall into that product line.
Okay.
Kristin Thank you thanks.
Thanks drew.
Yeah.
Thank you.
Again.
A question. Please press Star then one when your Touchstone telephone again to ask a question.
Please press Star then one one moment please.
I'm showing no further questions at this time I'd like to turn the call back.
Daniel Baker for brief closing.
While we were pleased to report a 64% increase in quarterly earnings driven by a 59% increase in product sales. We look forward to speaking with you again in January to discuss third quarter results. Thank you for participating in the call.
Ladies.
Okay.
Thank you all for participating you may all disconnect have a great day.