Q3 2023 NVE Corp Earnings Call
Good day and thank you for standing by welcome to <unk> N V E Conference call on third quarter results. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
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To withdraw your question. Please press star one again.
I would now like to turn the conference over to your Speaker, Dan Baker, President and CEO you may begin.
Good afternoon, and welcome to our conference call for the quarter ended December 31 2022.
Call is being webcast live and being recorded a replay will be available through our website N V E Dot com.
Joined by our CFO Joe Smith.
After my opening comments, Joe will present, a financial review and then I'll cover marketing design wins, new products and then we'll open the call to questions.
We issued our press release with quarterly results and filed our quarterly report on Form 10-Q in the past hour following the close of market links.
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 uncertainties related to the economic environments in the industries, we serve risks and uncertainties related to future sales and revenue.
Uncertainties related to future stock repurchases and dividend payments, our dependents on critical suppliers.
And risks related to supply chain disruptions as well as the factors listed from time to time in our SEC filings, including our annual report on Form 10-K for the fiscal year ended March 31st 2022 as updated in our just filed quarterly report on Form 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 a strong quarter net income for the quarter increased 22% to 88 cents per diluted share driven by a 22% increase in product sales Joel will cover the details of our financials Joe.
Thanks, Dan.
Third quarter total revenue increased 18% to $7 4 million from $6 two 9 million for the prior year quarter. This was our second consecutive quarter with large year over year revenue increases the.
The increase was due to a 22% increase in product sales, partially offset by a 46% decrease in our contract R&D revenue.
The large increase in product sales was primarily due to increased purchasing by existing customers and new customers.
We acquired new customers from traditional semiconductor companies with our superior products and shorter lead times.
Sales increased in most of our markets and product lines sales were especially strong in industrial markets, which more than offset some weakness in our medical device markets.
Improvements in our supply chain allowed increased product shipments, although there continue to be risks related to those shortages.
Paradoxically supply chain disruptions may have favorably affected product sales for the quarter and nine months. Since we believe the disruptions may have been less severe for us than some of our competitors.
We may be less susceptible to supply chain disruptions, because we have our own wafer fabrication and product test operations.
On the other hand, we believe supply chain supply chain disruptions have had an unfavorable impact on our cost of sales.
Okay.
Improvement in the supply chain may have been due to reduced demand in some semiconductor industry sectors, such as memories T C and consumer electronics demand for our primary sectors of mixed signal integrated circuits appeared to have been less affected by the industry downturn, although there are risks.
Yes.
And demand could change.
The decrease in contract R&D revenue was due primarily to the timing of completion of certain projects.
Gross profit as a percentage of revenue increased to 80% for the third quarter of fiscal 'twenty three.
2023 from 78% for the third quarter of fiscal 'twenty two.
Primarily due to increased prices and economies of scale due to increased revenue.
Total expenses increased 31% to one 1 million for the third quarter of fiscal 2023 compared to the quarter third quarter of fiscal 'twenty fiscal 'twenty two due to a 17% increase in R&D expense and a 62% increase in SG&A.
The increases in expenses were primarily due to increased employee compensation expense and increased staffing.
While spending was higher in total dollars as a percentage of sales spending was only 1% higher versus the prior year quarter.
Interest income for the third quarter of fiscal 'twenty, three increased 43% due to an increase in our available for.
For sale of Securities and an increase in the effective interest rate on those investments.
Investments.
Net income for the quarter increased 22% to 4.23 million or 88 cents per diluted share compared to $3.47 million or 72 cents per share for the prior year quarter.
The increase was driven by increased revenue and increased interest income partially offset by increased expenses.
Net income increased from 55% to 50% 57% of revenue.
Okay.
For the first nine months of fiscal 2023 total revenue increased 26% to $24 5 million from $20 3 million for the first nine months of the prior year.
The increase was due to a 27% increase in product sales, partially offset by a 13% decrease in contract research and development revenue.
Net income increased 35% to $14.5 million or $2.99 per diluted share.
$10.7 million or 2.2 dollars 22, excuse me $2.21 per share.
For the first nine months of fiscal 2022.
Yeah.
Turning to cash flow.
Our strong balance sheet and strong margins allowed us to buy equipment to build the capacity, we needed and pay premiums if necessary for the raw materials we needed.
Cash flow from operations for the first nine months of the year it was $14 $8 million.
During the first nine months of the year, we increased inventories 1.31 point $3 $7 million to help mitigate shortages.
Despite the inventory increase our cash flow from operating activities actually improved by $288000.
Purchases of fixed assets were $908000 in the first nine months of the fiscal year, and all but $24500 where in the most recent quarter.
These were primarily capital expenditures for additional production equipment that we plan to deploy this quarter to increase our capacity.
The $14 8 million cash flow from operations more than covered the $14 $5 million for the three dividend declared so far this year.
We have now paid more than $155 million in dividends since we started paying dividends in 2015.
Today, we announced that our board declared another quarterly dividend of $1 per share.
Table February 20th to shareholders of record as of January 30th.
That will bring our total dividends to more than $33 per share since 2015.
Now I'll turn it back to Dan.
Thanks, Joe I'll cover marketing design wins and product development the.
The marketing highlight of the past quarter was promoting our products at the electronica show trade show in cooperation with our distributors electronica as a major industry event and it was live for the first time in four years.
Highlighting recent design wins, we're pleased with the interest in products for power conversion and alternative energy in the past quarter. We got two isolator design wins or design win and home energy storage for Green energy and another design win in electric vehicle charging stations.
The expected revenues from both of those design wins are modest in the near term, but highlight our value proposition and our prospects for the future.
Farther from home, we've mentioned before that we have parts on the Europa Clipper mission to a moon of Jupiter launch is targeted for October 'twenty 'twenty four and the mission is to investigate whether Europa has conditions suitable for life.
Our parts are also being evaluated for the Mars sample return mission and this month, we completed rigorous testing and shipped a number of parts to NASA.
That mission is to return soil samples from Mars mission is scheduled to launch in 'twenty 'twenty eight and returned to Earth in 'twenty thirty-three.
These NASA projects are not large revenue, but they will validate the exceptional reliability of our technology.
Turning to product development in the past quarter, we expanded two product lines are line of tunneling Magneto resistance magnetic sensors and our family of the world's smallest DC to DC converters.
The new magnetic sensors and ultra high sensitivity magnetometer are most sensitive sensor ever.
Sensitivity allows more precise motion speed and position control and robotics and mechatronics.
There are two demonstration videos on our website and Youtube channel.
D C D C converters trying to transmit power without a direct electrical connection.
Our smallest parts are less than a quarter by an eighth of an inch.
D C. D. C converters are critical components in a number of industrial and automotive applications, including interfaces to next generation power switches, such as silicon carbide power transistors.
These transistors are an emerging market with the potential to improve the efficiency of power control and energy storage.
There is a demonstration showing the simplicity of using our D. C. D. C converters been tronic couplers in Silicon carbide transistors for power control and the video section of our website as well as our social media sites.
We're proud to supply products to some of the world's most demanding customers, including Abbott's pacesetter subsidiary avid as a leading supplier of implantable medical devices. We recently executed an extension to our supplier partnering agreement with Abbott, which Joe negotiated on our behalf.
The extension runs through the end of 'twenty 23, and includes price increases that will help offset our cost increases.
The latest amendment was filed on a current report on form 8-K E and incorporated by reference in our just filed 10-Q. It's also available via our website or the S. E CS website.
Now I'd like to open the call for questions to Wanda.
Thank you.
As a reminder to ask a question you need to press star one on your telephone and wait for your name to be announced.
To withdraw your question you can press star one again.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Jeffrey Bernstein with Cowen Your line is open.
Hi, Dan in jail.
Hi, Jeff.
So a few questions here.
Just wanted to ask so 22% product revenue growth.
During our semiconductor downturn. It is a nice number there was obviously a sequential decline. After you had some pull ins I think last quarter in the in the pump business, but can you just sort of parse out that that growth rate in terms of what you think might've been catch up on prior deliveries.
<unk> versus <unk>.
On a purely organic growth at any color you can give us around that and any differentiation between new.
New customer sales and and legacy customer sales.
Thanks for the question this is Joe.
You know, we typically compared to prior year quarters.
That said there are a couple of things and you mentioned one of them are anti tamper product sales for the defense sector.
And I said, our sales were exceptionally strong during the September quarter, and they've returned to more normal levels and in this quarter.
Particularly the anti tamper product that that's a chunky business in and it's tied to the customer's development cycle.
So we can't really control that.
Medical devices were rather weak in the December quarter.
We do expect that that business will recover in the March quarter, though.
So.
Okay. That's great. Thank you.
And.
Just curious so you've been through this period.
Once in a lifetime opportunity to get in front of new customers and and get some new design wins you know what did you guys learn overall about about marketing.
You know from from this experience.
Yeah.
This is Dan so.
We learned the value of some of the features that we have and in particular some of our customers like different features and that'll inform our future product.
Product development.
But we have picked up as you alluded to we picked up a number of new customers.
Some of them became for the shorter lead times, but we expect them to stay for the product performance.
And we expect to be an excellent supplier so.
So we saw a great opportunity to open some doors that hadn't been opened to us before as a smaller company.
We saw it is as you say it was a great opportunity and we're determined to make the most of it.
And then are there any kind of key performance indicators on design wins or others that you guys kind of share with the board to give some future.
Ah indication of future growth.
So we we tend to look at our order flow in and Joe has commented on that.
We look at new customers, we look at design wins I was able to share a two of those so are we are.
Or are we getting design wins in the markets that we've targeted even though they may not represent large near term revenues, we see them as important indicators for the future. So those are things that we tend to look at internally we share them in calls like this wherever we can.
And then we also look at things like our key strategic customers and we've commented on on Abbott in this call and we were happy to be able to report a renewal.
And we expect our we expect them to continue as a customer for the foreseeable future.
Thanks, and then just on the growth rate, 20% product growth.
In this quarter.
Do you think that kind of growth rate is a sustainable number here going forward or how should we think about modeling product growth.
Our goal our goal is to grow and so that's what our plans are we invest in the future as Joe mentioned, we invested are over 900000 in fixed assets to increase our production for the year, we continue to invest in people as Joe mentioned.
In his comments about our about our expenses, which are investments we see is investments in the future. So it's hard to predict the growth rate as you know we're in an industry that has that cyclical and has its ups and downs, but our goal is our our goal over the long term is certainly to be a growth company. We believe we have.
<unk> that are in demand we have excellent technology, we have great people and we're picking up some some really top notch customers in key markets that we talked about in the prepared remarks. So that is certainly our goal is to be a growth company.
Thank you for that and then I wanted to just ask about the I think you had signaled the investment in our test equipment.
I believe it was and and talked about that being a kind of a bottleneck in the packaging supply was another area with some headwind can you just give us an update now so is that equipment in place.
Do you expect that's going to.
Do something significant for the your ability to grow now.
So the equipment is physically here, which is why it showed up in the fixed asset expenses and in our cash flow statement. Our team is working on deploying the equipment and its partially deployed we still have some work to do but but it's looking it's looking very good.
Suppliers and our engineering team.
I have given it a top priority and they've really done an outstanding job on deploying some very complicated state of the art equipment with artificial intelligence and other.
Features that will help us be more efficient help our employees be more efficient and continue our trends being a very productive company with high revenue per employee.
So I think we said our goal would be to fully deploy that equipment. This quarter. That's an aggressive goal. That's the March quarter, but we believe it's achievable and so that will help our capacity in the relative near term so as Joe alluded to and in some of his remarks, we one of our advantages over other tie other.
Semiconductor companies traditional semiconductor companies is that we have our own front end and back end operation. So that equipment that you referred to as the backend operation or part of our packaging and test. So we don't package ourselves, but we do test ourselves so that gives us a big advantage over other companies removes.
That bottleneck.
And those investments. The this equipment has a long lead time. So these are investments that we made some time ago committed to them. Some time ago. So they're just coming to fruition now so the timing I think we see as fortuitous, we see ourselves with opportunities to grow.
And having the capital equipment in place will help enable that growth.
So Dan just from a revenue perspective is the impact of this test equipment from the fact that you can show potential customers are domestic.
Supply chain capability tithing.
Down to testing.
Or is it that you actually have product you know.
That your backlog Don because you.
You had a bottleneck of testing or is it both.
It's both I might put a little color on the second point, which is that we quote lead times. So we quote lead times that allow for us to test the parts. So having more equipment allows us to quote shorter lead times. So we think that that's important to many customers.
To your first point with supply shortages in the supply chain challenges that have been well publicized throughout the semiconductor industry. Many companies are looking for our domestic suppliers and onshore supply. So theres been a lot written about that and of course, the priorities that have been set a domestic.
<unk> by the chipset and the other actions that encourage domestic supply of semiconductors. So we're proud to be a part of that and some of these investments are may benefit from from those incentives and we do have customers that ask us about security of supply.
And being able to tell them that our that our back end operations and much of our front end operations are here in the United States.
That is important to some of our customers and that's a competitive advantage.
Great. Thank you for that clarification, and and so I'm going to jump off and let somebody.
Alex asked some questions I may come back with some more.
Thank you.
Please standby for our next question.
Our next question comes from the line of Andrew Bell with shows H financial Your line is open.
Hey, Dan this is the highest sherri I'm sitting here with that Andrew sharp edge.
Congratulations on a great quarter and congratulations on being included in some really important space mission that sounds very exciting.
I had a question about the.
<unk>.
<unk> and the inventory and kind of a dichotomy here. So your receivables there really kind of very much on the low end.
And can.
Can you provide some color around that debt.
Sales have been quite highly last few quarters, but the receivables going down.
Just seems unusual have you changed anything as far as.
Customer payment requirements or are you.
How you bill and ship or requiring prepayment or is there something else going on there.
This is Joe Schmitz I'll I'll address the question and thank you for noticing that our accounting team.
<unk> has taken a lot of pride in that result, this performance or this quarter I would say, there's really two pieces to that.
Typically well first of all I should back up we.
Our terms have not changed.
Nor is the mix of customers changed to the point, where I'm at the days sales outstanding was with significantly change what Youre seeing there is the result of a lot of good work to.
Diligently pursue.
Accounts that are trending towards past due and then you'll also and then also.
This quarter.
If you remember if you recall from last quarter, where are we at a high level of anti tamper Big project related sales I mean, we did we got collection on a lot of those outstanding receivables this quarter. So.
That that is also a favorable outcome, but but you know.
I just want to compliment my team on the work that they did help.
To help us keep in front of US there's just a lot of good work that happened there.
In most other applications I would say I would see inventory as a you know a drain on working capital.
Sure.
And in this particular environment at this particular time.
Now that that helps us reduce our backlog serve our customers faster and.
And I see that as as.
A a healthy thing for our business at this point in time.
And.
I would I would not say that.
It's not coincidental that we tried to find a way to fund our working capital without having a two to a dip into the bank account so to speak so.
They are related to that in that context.
So as I understand you the inventory increase is really about making sure you don't get caught with supply chain shortages.
And getting.
And just having adequate parts on hand to be able to provide quick turnaround tests that need. These parts shortages are a big deal right. So like if you.
Don't have something you might not be able to get it for some number of months it what I'm thinking yeah, yeah, Yeah, we've to Dan's point or to what we said earlier I guess it was in my comment I mean in some cases, we've paid a little bit of a premium to get the inventory on hand.
So we can we can meet our customer delivery schedules. We've also taken larger quantities than we we would necessary would necessarily take because in some cases the supply chain has been spotty. So.
And I think at this point as I said earlier at this point of time in the company that increase in inventory is going to help us in the future to deliver to.
To customer schedules.
Right right that makes sense.
Okay.
One other question can you provide any color on the.
Kind of the order flow within the quarter would you say it was relatively E band or did it.
Kind of slowdown towards the end of the quarter or it's been increasing.
You know a lot of the other company.
Some slowdown happening in certain sectors.
So I'm just kind of curious if there's any commentary you can provide on that.
Sort of the trajectory of order flow in general and of course, yes, I would say, we still have good order flow.
I think if anything we are seeing customers in some cases.
<unk> seasonal Isaac there their demand.
Based on their schedule, but in terms of the flow itself, we've not seen a decrease.
Okay.
Excellent excellent quarter, congratulations on being able to earn the dividend for the three quarters and large market news for you next quarter.
Thank you.
Ladies and gentlemen, as a reminder, that star one one to ask the questions are.
Our next question comes from the line of.
Donald Hall, one moment your line will be open.
Yeah.
Your line is open.
Alright Hello.
Hi, Don.
And ladies yes.
Hi, Dan.
Obviously, a nice year over year comparisons and you're doing well.
And I appreciate as a shareholder I appreciate that.
But I'd like to focus in on product sales last quarter were $10 5 million.
This quarter seven 2 million, that's down over 3 million.
Explain that somewhat.
Hence apparently big defense order in.
Some other cyclical issues.
But that would imply you are not capacity constrained in the third quarter.
You are adding capacity, which.
It looks good and is promising.
Can we expect that the sales of jump up to 10 million again pretty quickly.
Based on these factors and by the way I'm quoting here you also said that.
We have a number of top top nothing new top notch customers. So im assuming.
They are part of the reason for the capacity additions.
So.
Please explain that a little more of that.
The capacity in the sales that can be expected.
Well this is Joe I'll I'll try and answer some of that some of those questions.
You were correct that there is a chunk in this and in our in our government related business that we alluded to in our comments.
Ah we're still serving that market is just returning to a more of a normal state. So.
I would say that.
You know to jump back up to a 10 million dollar quarter would be.
Well you know not something that we would we would say that we can readily see in the future. Although that's that's certainly our goal the.
Pasadena.
Discussion is around reducing our backlog improving our service levels and being positioned to attract new business when those opportunities present.
Present themselves so.
We have oh, so in the short term, we will be reducing our or our product backlog with these new investments, but we're also laying the foundation for for hopefully good things to come in the future.
Yeah.
Okay.
Dan do you have anything to add to that.
Well as I said, our goal is to grow and that's why we're adding the that's why we're adding the capacity.
And we have.
Several different segments that we are that we serve so the test capacity is in the business that.
The industrial and medical business, which is our core business and then we have the lumpy.
Anti tamper business that Joe alluded to so.
So I think the cycles that youre looking at or are not indicating.
A slowdown in business as much as as much as some of the Lumpiness that our business has and we're structured as you as you probably know.
That that we're pretty flexible we are we have a lot of equipment.
We work on making sure that we have adequate capacity across the board so that we can handle.
The increases in business that we avoid bottlenecks and then we invest well in advance of our to prevent bottlenecks. So that's why we the equipment that we have now are investments that we committed to a year ago or more.
So we're very optimistic about the future and our where we're investing in our.
Making sure that a we can be a growth company.
Sure.
Okay. Thank you and then just one other.
Aspect.
You renewed the Abbott contract.
Is there anything you can tell us.
Ply that Theyre, just going to continue ordering as they have in the past or is there a lot of potential.
Potential increase in business in that renewal.
So yeah, we we we try not to speak for for Abbott.
But we certainly see that we have a strong benefit proposition in providing parts for their for their medical devices and these are medical devices, where the long term trends are favorable sometimes in the short term as Joe alluded to like in the past quarter our revenues were.
We're down a bit but the long term prospects are very good for those the demographics are we're all getting older we're going to need pacemakers and other medical devices.
<unk>.
We're starting to see a recovery in health care.
From the slow down for discretionary health care through the pandemic. So as as you probably saw there was an article in our local paper the star Tribune about the about the increase.
In health care services that we're seeing here in Minnesota and throughout the country. So we certainly see the trends is very positive, but it's a business that has a fair amount of inventory in the chain as you would expect for a life support medical device.
And it can be somewhat cyclical in the near term and sometimes factors beyond our control impact the business in the near term so things like new model introductions competitive introductions F D a approvals.
Treatment practice for heart failure, and other conditions, but in the long term we see this as a very good business, where we have a strong benefit proposition and where there's good growth potential.
So probably the renewal is just sort of a general agreement, it's not product specific as it makes sense.
Well it is product specific but it's an agreement but.
From your standpoint is it product specific from their standpoint certain of their end products.
No. This is this is Joe it's product specific from our perspective.
From what we delivered to them.
Yeah.
Okay. So what is what is public is is that they list. The subsidiary it's in the contract. So it's a matter of public record. So the subsidiary that buys these parts as pacesetter, which is the CRM division the cardiac rhythm management division of Abbott.
So from that one can certainly infer that that's where these devices are used.
But from our standpoint, it's a it's a contract or an agreement to supply.
A certain type of sensor and.
So that's the.
And in the rest of the specifics we have to redact from the agreement for confidentiality concerns.
Okay. Thank you very much.
Good luck going forward.
It was a nice it was a nice quarter. Thanks.
Thanks, Don always a pleasure talking to you.
Thank you please standby for our next question.
Our next question comes from the line of Alex.
<unk> Citi capital Your line is open.
Hi.
Wanted to ask about linearity in the quarter looking at the DSO in the days inventory.
It looks like that.
Well, what was linearity like especially at the end of the quarter.
So.
For clarification could you define for me what you mean by linearity.
Linearity in terms of revenue.
Being recognized.
Okay.
I'm not sure I understand the question of if you're asking is there a direct correlation to the drop off in revenue too.
The reduction in receivables to some sort of a drop off of revenue.
I'm not sure you can make that case because.
A lot of our receivable activity.
It was on like as I mentioned was on large outstanding project related work that we were getting collection on so.
I would not say that is due to some sort of a decrease in.
Revenue as much as just a lot of good hard work on our end.
Don't know if that's answering your question, but I tried to interpret your.
I don't doubt that there was a lot of hard work on your end, but your Dsos are 25 days.
And if your terms are 30 days then you are less than a cycle if everyone's paid.
So it would appear that maybe you did not have as many sales in the last month of the quarter.
Well I think we had said in our prepared comments, we did have some softness in our medical device sales some of that was in December .
Not all of our customers are on 30 days some of our customers actually have shorter terms.
It's a very good number 25, it's a record as far as I can tell.
Inventory days are also a record.
Excluding the first COVID-19 quarter and a lot of that is work in profitable work in process raw materials, which I view as a good thing.
But would you anticipate that the raw materials would start to work its way lower from here.
Yeah.
Yeah, I mean, I think that I mean, that's obviously, what we intend to do.
I think that would be a reasonable assumption.
I mean that that product is going to be you that debt.
Raw material and work in process is going to be used to fill existing orders.
Hum.
I would also say that Youll see elite you saw a little bit of an increase in our finished goods inventory as well that was a buildup for.
Some of our future demand that we have in the first quarter of this year. So.
It wasn't all it wasn't all finished.
<unk> finished our raw materials and work in process.
Well, that's correct me it was all altra category screw.
But it does seem like with supply chain constraints are using raw materials would come down.
Work in process increase.
I believe one of the gentleman earlier asked about if we could continue to see the 20% growth.
But just looking year over year, both finished goods and work in process, they're up 20, and almost 30% or 40%. So it would seem that your inventory at least disposition for the company to continue to grow is that correct. That's at a pretty rapid rate.
Where.
You know, we're not going to get into the business of projecting future future sales, but but that is that has been one of the things we've talked about on these calls.
Over the past year as having the inventory ready to meet customer demand.
So yes, that's our intent.
Very good thank you.
Thank you.
Please standby for our next question.
We have a follow up question from the line of Jeffrey Bernstein with Cowen Your line is open.
Hi, guys just a couple of quick follow ups.
Dan I think you had said in the past that you guys might actually be the dominant player in our sensors used in the new generation of hearing AIDS.
Those OTC hearing aid regulations came out I guess in <unk>.
Tober after a lot of delays etsy.
Et cetera, I know, it's very early in the development.
Of this market.
What are your thoughts about what kind of traction you.
Are you seeing from customers is this a needle moving event.
Next year or the year after or how are you thinking about this at this point.
Well, we certainly see it as a as an excellent opportunity in the long term and the chance to.
Help serve a large underserved market other statistics that the FDA has cited that only about 20% of those who could use a hearing aid seek hearing AIDS, presumably because many are discouraged by the prices in the dispensing inconvenience.
We have seen that there are large retailers now offering O T C hearing AIDS, which on our last call in October we Couldnt quite say that no. We were starting to see signs of it. So there have been a number of announcements by a brick and mortar and online suppliers that are there.
To be offering OTC hearing AIDS. So we do see it as an excellent opportunity to grow our market and for US. We look at are we develop products there.
That are geared for that market. So these products are probably going to be a rechargeable or more skewed towards rechargeable as opposed to the primary batteries that are that tend to dominate the legacy hearing aid business.
So our goal is to serve both markets. The OTC hearing aid market. The traditional hearing aid market and also we see a broader here of bowls.
Market as more and more.
Companies are developing.
Consumer Wearables and hero bowls.
So we've developed rechargeable.
Compatible sensor devices and those parts have received some very positive feedback in that industry. So we do see that as a as an excellent market.
Great Great. Thank you and then and then.
Just a couple of others.
You guys did some development work on a spin torque diode I think it was like a giga baud kinds of data right.
And what implications that there was a.
Government interest of course, they funded their research with bank and potentially some commercial interest at some point.
Whatever happened with that.
So, yes, you've got an excellent memory.
Jeff So those were.
Some devices. Some research that we did in 2018, we completed our contract with the army.
That successfully demonstrated the feasibility of a spin torque microwave diode spectrograph.
So that has military usage and but we also invested in the technology because it could increase speed and also plays into the anti tamper or physical uncountable function market and I think one of the other areas that.
In fact, I think you might have pointed out is that there is some fascinating research going on in probabilistic computers.
And we've demonstrated stochastic magnetic tunnel junctions, which are similar to the technology that was used that we developed for those spin torque diodes.
And that's been proposed for the.
Probably as a component a key component for probabilistic computers.
So it's it's long term, but we do see that research is having applicability in other areas. In addition to the to the focus at the time, which was five years ago, which was primarily for defense applications.
Got you Okay. That's great and then just one other.
You guys have looked at the analytical equipment market as a potential end market at some point in the past and I know you were doing something looking at Exosomes.
Detection I was just wondering if anything had progressed there.
Yeah. So we continue to see Exosomes as a as a fascinating area. So exosomes are biological components that can be used to diagnose disease, such as cancer and.
And to make less invasive.
Cancer tests.
So we do have biosensor technology for higher sensitivity electronic rather than the optical tests that can be used to detect exosomes. So we are a we are looking at possible partnerships to use our technology, we don't envision ourselves getting into the medical diagnostic.
Market, we don't have the distribution or the expertise on the equipment side, but we do see the possibility there of providing sensor systems and advanced bio sensor systems to support those.
That's an area of long term research and exploration for us.
Alright, that's great. Thanks, very much for the help today.
Thanks, Jeff.
Thank you.
Please standby for our next question.
Our next question comes from the line of Walter Morris with Barb growth Youre line is open.
Hi, Dan Hi, Joe.
Excellent quarter.
My question was on the emerging hearing aid market and that has been answered so im okay. Thank you.
Thank you okay. Thanks Walter.
So either way it might my Midwestern roots won't won't let me go without saying it's marabou.
Thank you.
I'm showing no further questions in the queue.
I'd now like to turn the call back over to Dan for closing remarks.
Well. Thank you for all the questions. We were pleased to report a 22% increases in product sales and earnings for the quarter. We look forward to speaking with you again at our fiscal year end call tentatively in early May. Thank you again.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one.
One.
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