Q4 2025 NVE Corp Earnings Call
Speaker Change: Good afternoon and welcome to the NVE Corporation conference call for the quarter and fiscal year ended March 31st, 2025.
Speaker Change: I'm Dan Baker, NVE's President and CEO . I'm joined as usual by Controller and Principal Financial Officer Daniel Nelson.
Speaker Change: This call is being webcast live via YouTube and Amazon Chime and being recorded. A replay will be available through our website, NVE.com, and our YouTube channel, youtube.com slash NVE Corporation.
All participants are currently in a listen only mode.
Speaker Change: After our presentation, there will be a question in the answer session. After my opening comments, Daniel Nelson will present our financial results. I'll cover tariffs, manufacturing, R&D, and sales and marketing, and then we'll open the call to questions.
Speaker Change: We issued our press release with financial results and filed our annual report on Form 10K in the past hour following the close of market.
Speaker Change: Links to the press release in the 10K are available through our website, the SEC's website, and X, formerly known as Twitter.
Speaker Change: Please refer to the Safe Harbor Statement on your screen, 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, and risks and uncertainties related to tariffs, customs, duties, and other trade barriers, as well as the risk factors listed from time to time in our filings with the SEC.
including our just filed annual report on Form 10K.
Speaker Change: Actual results could differ materially from the information provided and we undertake no obligation to update forward-looking statements we may may
Speaker Change: We're pleased to report a 3% year-over-year increase in revenue and 44% sequential revenue growth for the quarter and the 2% increase in earnings as industry conditions improve.
Speaker Change: Thanks, Dan. The 3% year-over-year revenue increase for the fourth quarter was due to a 270,000 or 558% increase in contract R&D revenue, partially offset by a 1% decrease in product sales.
Speaker Change: Sequentially, total revenue increased 44% from the immediately prior quarter, driven by a 40% increase in product sales and a 210% increase in contract R&D.
Speaker Change: We're pleased to see revenue stabilized with improving industry conditions in the quarter. We're also seeing interest in our new products.
Speaker Change: Gross margin increased to 79% from 76% due to a more profitable product mix and a larger portion of direct rather than distributed sales.
Speaker Change: Total expenses increased 17% for the fourth quarter of fiscal 2025, compared to the fourth quarter of fiscal 2024, due to a 28% increase in R&D partially offset by a 2% decrease in S-GNA.
Speaker Change: The increase in R&D expense was primarily due to an increase in new product development.
Speaker Change: Net income for the fourth quarter of fiscal 2025 increased 2% to 3.89 million dollars or 80 cents per diluted share, compared to 3.81 million dollars or 79 cents per diluted share for the prior year quarter.
Speaker Change: The increase in net income for the fourth quarter of fiscal 2025 compared to the prior year quarter was primarily due to increased revenue in higher margins partially offset by increases expenses.
Speaker Change: Our profitability metrics remains strong. Operating margin was 58%, pre-tox margin was 65%, and net margin was 54% for the quarter.
Speaker Change: For the fiscal year, revenue decreased 13% due to decreases in the first three quarters of the fiscal year, partially offset by the increase in the most recent quarter.
Speaker Change: Chris Margin increased to 84% for fiscal 2025, this meeting is being recorded for fiscal 2024 due to a more profitable product mix in the larger portion of direct rather than distributive sales.
Speaker Change: We believe these investments will pay off in the future with higher revenues.
Speaker Change: Non-operating income for the fiscal year includes interest and other income. Interest for the year decreased 2% due to a decrease in marketable securities partially alsoed by higher bond use in the past year.
Speaker Change: We also reported other income of $135,000 for the fiscal year, primarily from reclaiming precious metals used in our manufacturing process.
Speaker Change: Net income was down 12% to 15.1 million dollars in a tough industry environment, but still a solid $3.12 cents per share.
Speaker Change: adding in approximately $700,000 in unrealized games on marketable securities, comprehensive income for the year was $15.8 million.
Operating Martin was 62%
Speaker Change: pre-tax margin was 70% and net margin was 58% for the year.
Speaker Change: Fixed asset purchases with $1.2 million last fiscal year, which is unusually large for us. We are planning even more this fiscal year, $2.3 million in capital investments for fiscal 2026.
Speaker Change: The biggest chunk of that investment is for cluster of wafer of fabrication equipment, which we expect to receive next quarter, the September quarter. Daniel Baker will provide a collar on capital investments in a few minutes.
Turning to cash flows.
Speaker Change: Accounts Receivable increased $444,000 during fiscal 2025 due to increased revenue in the fourth quarter, in the timing of customer payments.
Speaker Change: Inventor has increased $291,000 in the year, working-processed inventors increased by a significant $968,000.
Speaker Change: Working process inventors generally have the flexibility to make different products, depending on market demand.
Speaker Change: As we've said before, we believe inventors provide above or again supply disruptions and other disruptions such as tariffs.
Speaker Change: We paid our one dollar per share quarterly dividend the past quarter and declared another dividend to be paid at the end of this month.
Speaker Change: We have now paid over $200 million, more than $42 per share in dividends since we started paying dividends 10 years ago.
Back to you, Dan.
Dan Baker: Thanks, Daniel. I'll cover tariffs, manufacturing, R&D, and sales and marketing.
We've identified three major risks related to tariffs.
Dan Baker: The first risk is the terrorist trigger global recession or industry downturn, which probably isn't good for anybody.
Dan Baker: Other than those broad-based macroeconomic concerns, however, were uniquely well-situated with respect to tariffs.
Dan Baker: The second risk is tariffs on imported raw materials. This represents a relatively small portion of our costs since we do spend tronics fabrication in house.
Dan Baker: We have been paying 25% tariffs on raw material imports from China since 2018 and it has not been significant.
Dan Baker: Most of what we purchased from China has not been subject to the recent so-called reciprocal tariff imposed by the United States since there is an exception for semiconductors.
Dan Baker: Furthermore, as Daniel noted, we have ample raw material and work and process inventories.
Dan Baker: The third risk is that our exported parts would be subject to another country's retaliatory tariffs. Fortunately, other countries such as China exempts semiconductor products such as ours.
Dan Baker: Furthermore, China classifies country of origin based on foundry wafers, which we source primarily from outside the United States.
Dan Baker: Therefore, the great majority of our exports to China are exempt from retaliatory tariffs.
Dan Baker: Most countries other than China classify country of origin based on the packaging location, which is also outside the United States for us.
Dan Baker: The great majority of exports to other countries would not be subject to retaliatory tariffs.
Dan Baker: We have discussed plans to offer some parts as way for level chip scale parts with final processing here.
Dan Baker: We believe those way for level chip scale parts could be subject to some retaliatory tariffs, but most of the potential business we've identified is in the United States.
Dan Baker: Our unique tariff situation in ample inventories could provide competitive opportunities compared to other US based companies with more tariff exposure.
Dan Baker: Turning to manufacturing. We're continuing our plans to expand our capacity and capabilities. We completed our planned expansion in the past quarter, including construction work and recently completed electrical and other infrastructure upgrades to support new equipment.
Dan Baker: We deployed one new machine in the past fiscal year, we just deployed another machine this quarter and the several million dollar machine in schedule to arrive next quarter, the September quarter.
Dan Baker: Turning to customers, or proud to supply products to some of the world's most demanding customers, including Abbott Laboratories.
Abbott is a leading supplier of Implanable Medical Devices.
Dan Baker: In the past quarter, we executed an extension of our Supplier Partnering Agreement with Abbott.
Dan Baker: The agreement was filed with a form 8k and is available via our website or the SEC's website.
Dan Baker: Turning to marketing, we're exhibiting a two major trade shows this quarter. The sensor plus test show is underway now in Nuremberg, Germany.
Dan Baker: It's billed as the leading international trade fair for sensor measuring and testing technology.
Dan Baker: We will also be at Sensor Converge in Silicon Valley in late June . That show is built as North America's largest electronics of them.
Dan Baker: We have several new products and new demonstrations that this year shows.
Dan Baker: We believe the investments in these shows will pay off in future sales.
Dan Baker: with an excellent quarter in fiscal year for product development.
Dan Baker: As Daniel mentioned, we've significantly increased our investment in R&D. We spent 14% of revenue in the past year on R&D. Additionally, we do customer-sponsored R&D, which is included in cost of sales.
Dan Baker: In the past quarter, we launched the world's most advanced magnetic switch sensors with more reliable data, more information and rugged operation.
Dan Baker: There are several demonstrations of the new products on our website and our YouTube channel. In the fiscal year, we introduced a new high sensitivity ultra-manager sensor.
A High Sensitivity Rotation Sensor [inaudible]
Dan Baker: Our first wafer level chip scale sensors, a number of new evaluation and breakout boards.
and the advanced position sensors I discussed earlier.
Dan Baker: We also invested in advanced R&D initiatives with the potential to drive future growth, including next-generation M-RAM for anti-tamper applications.
Next-generation sensors for hearing aids and medical devices.
Extremely sensitive TMR sensors.
and more way-for-level tip-scale sensors.
Speaker Change: Now we'd like to open the call for questions. To ask a question from a phone, press star 7 to unmute, or from a browser or the chime app, click the Raise My Hand icon under the Meeting Chat. That's at the bottom of the left column, and unmute yourself to speak.
Please state your name and affiliation before your question.
Speaker Change: And to prevent background noise, please mute your line after asking your question.
Hey, Dan, it's Jeff Bernstein from my silver Bernstein Capital.
Hi Jeff.
Hi, Dan, Dan, Dan, Dan,
Dan Andean: So yeah, a couple of questions here. You know, last quarter revenue was somewhat disappointing. We were talking about
Dan Andean: Potentially being near the end of liquidation of inventory by customers in the distribution channel, obviously a strong snap back here in the quarter.
Dan Andean: and at the same time you guys have been investing aggressively in R&D and in CAPEX in a way that you haven't really in the past.
Can you just parse for us?
You know, how much of this quarters?
Dan Andean: Improvement and Revenue was the result of a snapback in the channel, some channel fill or people being a little bit more aggressive on ordering in line with their consumption versus new business.
Dan Andean: It was a combination of both. We saw inventories continuing to be blood down which is a positive sign so customers are replenishing and buying more for their end use.
Dan Andean: and also we've seen new business and significant interest in our new products. So we think that that all bodes well and we were pleased that it was high-quality revenues for the past quarter.
Speaker Change: Okay. And then can you just talk a little bit about the new parts that you introduced this year in terms of their expansion of your TAM, you know, what end markets or capabilities are they enabling?
Speaker Change: Our new products are focused on markets where we have traditional strength. Those are medical devices and industrial control and the industrial internet of things.
Speaker Change: So the products that we introduced most recently were advanced magnetic sensors that are so called omnidirectional, meaning that they can sense
Speaker Change: Magnetic Fields in any direction. So that provides tremendous flexibility for industrial controls, for advanced robotics, and they provide much higher quality data from the electronics.
Speaker Change: So we've seen significant interest in those products and then the other products tend to focus on markets where we're strong and we increase our advantages in terms of size and sensitivity.
Speaker Change: So our strategy is to lead the industry in terms of the performance, the accuracy, the size, and the power consumption and efficiency of sensors.
Speaker Change: Side, you know, there's some new solid state technology to be used in very high voltage systems that that
Speaker Change: Replace Mechanical Switches and Things. And I'm just curious as to, you know, how high voltage environments can your isolators work in.
Speaker Change: Well, that's a great point. So what Jeff is referring to are what are so called wide band gap.
Speaker Change: FETs or transistors, which can switch higher voltages with less losses. So we provide interfaces, as our isolators provide interfaces between the controller systems and those switches.
Speaker Change: because you can't directly hook them up to microcontrollers and our devices have the highest isolation voltage in the industry up to 7 kV, which is
Truly Remarkable, and that allows us to
Speaker Change: Interface to some of those higher voltage switches where other isolators
Speaker Change: would fail. The other figure of merit that we have best in the industry.
Speaker Change: is the what's called the common mode transit immunity, which is the rate of change of the voltage. So that's rated typically and kill of volts per microsecond and our devices have by far the highest.
Speaker Change: C-M-T-I or Common Mode Transient Community in the industry. So again, that helps.
to allow much faster switching at higher voltages, which allows...
Wide Band Gap Transistors
That's great. And then last dance just
Speaker Change: So I think in the 10k, you're usually very pithy 10k. It does say that you're planning cat-backs in 2026 or two to three million dollars.
Speaker Change: That would be significantly above the 1.3 million spend in 2025, which also I think was a record.
Hey you, hey you, hey you!
Aye, aye, aye. I've got two.
Oh, right.
byyyyyyye
okay
Speaker Change: Well, I think I think Jeff might have had some audio difficulties there, but he was asking about cap X so as Jeff pointed out in the premise of his question, we're planning significant capital expenditures this fiscal year, which is the fiscal year ending March 31st, 2026.
after
Already making significant investments in the past fiscal year.
Speaker Change: So those will allow us to increase our capability, increase our capacity and give us the possibility of making more wafer level chip scale parts in the house.
Speaker Change: So, those plans are proceeding and as Daniel and I both mentioned in our prepared remarks
One of the major investments is a cluster of equipment.
that, that we expect, to, uh,
Speaker Change: So, Dan, before I lost you, I was asking, you know, what kind of gives you the confidence, you know, that you're going to earn a return on this cat-backed investment.
Speaker Change: So, yeah, as you know, Jeff, we look pretty carefully at getting a return when we spend our shareholders' money as we are planning to do with this equipment.
Speaker Change: And the confidence that we have is that we've made prototype and sample devices and the customers feedback has been excellent on those devices and we
Speaker Change: We feel based on the customer input that while there are no guarantees, we're very optimistic that this is going to open significant new markets for us.
That's great. Thanks for the questions.
Thank you.
Speaker Change: Are there any other questions? If so, if from a phone, press star 7 Don Mute or click raise my hand from the web.
Speaker Change: If there are no other questions to sum up, we were pleased to report increased revenue and earnings for the quarter year over year, and strong quarter over quarter revenue growth. We had an exceptional year for product development and completed this significant expansion in the past quarter and deployed new equipment in the past fiscal year.
Speaker Change: We look forward to speaking with you again in July for our first quarter fiscal 2026 earnings call.
Speaker Change: Replay of this call will be available on the Investor Events page of our website, NVE.com, and our YouTube channel, that's youtube.com slash NVE Corporation.