Q1 2026 NVE Corp Earnings Call

But the OLED.

Good afternoon, and welcome to the <unk> Corporation Conference call for the quarter ended June 32025.

I'm, Dan Baker, <unk>, President and CEO I'm.

Joined as usual by controller and principal financial Officer, Daniel Nelson.

This call is being webcast live via Youtube and Amazon chime in being recorded.

A replay will be available through our website at <unk> dot com and our Youtube channel Youtube Dot com slash in the Corporation.

All participants are currently in a listen only mode. After our presentation there will be a question and answer session.

After my opening comments, Daniel Nelson will present, our financial results I will cover the business and then we will open the call to questions.

We issued our press release with financial 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 the 10-Q are available through our website.

He sees website and ex formerly known as Twitter.

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 in the <unk>.

Other trade barriers 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 2025.

Actual results could differ materially from the information provided and we undertake no obligation to update forward looking statements we may make.

We're pleased to report strong revenue and earnings for the quarter driven by an increase in distributor in nondefense sales. Despite a decrease in defense sales.

Daniel Nelson will cover details of the financials Daniel.

Thanks, Dan.

The 10% year over year revenue decrease for the first quarter was due to an 11% decrease in product sales, partially offset by a 17% increase in contract R&D revenue.

The decrease in product sales was due to a decrease in defense industry sales, which can be highly variable because of procurement cycles.

We were pleased to see nondefense sales stabilize with improving industry conditions in the quarter.

We saw an increase in distributor sales, which were hit particularly hard by the recent industry downturn.

Gross margin decreased to 81% from 86% due to a less profitable product mix and strengthening distributor sales, which tend to have lower margins than direct sales.

Total expenses decreased 20% for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025 due to an 18% decrease in R&D expense and a 23% decrease in SG&A.

The decrease in R&D was due to completion of some of our wafer level chip scale packaging activities and reallocation of some R&D resource system manufacturing.

The decrease in SG&A was primarily due to the timing of sales and marketing activities and reallocation of some general and administrative resources to manufacturing.

Net income for the first quarter of fiscal 2026 decreased 13% to $358 million or seven to four cents per diluted share compared to $4 $1 million or 85 cents per share for the prior year quarter. The decrease in net income for the first quarter of fiscal 2026.

Compared to the prior year was primarily due to decreased revenue and lower margins, partially offset by decreased expenses.

Adding approximately 705000 unrealized gains on our marketable securities comprehensive income was $3 $65 million.

Our profitability metrics remains strong.

Operating margin was 6% to 2% pre tax margin was 70% and net margin was 59%.

Fixed asset purchases were $106 million last quarter.

Most of that was quite cluster of wafer fabrication equipment, which recently arrived.

We're able to expedite the delivery to get the equipment before the U S. Reciprocal tariff policy was scheduled to expire July nine.

We have a milestone payment of approximately $1 million due this quarter, which will substantially complete our two year multimillion dollar expansion.

Dan <unk> will provide more color on capital investments in a few minutes.

The 25% advanced manufacturing investment tax credit was extended in a recent tax bill. Therefore, we currently expect to realize advanced manufacture investment tax credits of between 700000 and $800000 if would deploy equipment as planned in fiscal 2026, although it would not.

The effect our earnings we will also realize significant cash flow savings this fiscal year due to changes in sexual 107 and nine of the internal revenue code. The recent legislation allows us to deduct on our tax returns previously on amortized R&D expenses, rather than amortize them over five.

Years.

Turning to cash flow items, we paid a one dollar per share quarterly dividend the past quarter and declared another dividend to be paid at the end of August.

Operating cash flow was $5 $109 million in the quarter, which more than cover our $4 eight 4 million dollar dividend.

Accounts receivable decreased 1.3 or $4 million due to decreased revenue and the timing of customer payments accrued here in other liabilities increased $523000, primarily due to the timing of estimated tax payments.

Now I'll turn the call back over to Dan Baker to cover the business and preview our annual shareholders' meeting back to you Dan.

Thanks Daniel.

Cover Capex marketing and our upcoming annual meeting.

Starting with Capex, we deployed one new machine in the past quarter.

As Daniel Nelson mentioned, we also took possession of a several million dollar equipment cluster in the past quarter.

It's being installed and an expanded production area on the east end of our building.

And we hope to deploy it later this fiscal year.

Turning to product development.

In the past quarter, we launched more wafer level chip scale sensors, which are less than one thousands of a square inch.

There are demonstrations of new products on our website and our Youtube channel.

We promoted new products, including wafer level chip scale sensors and advanced magnetic switch sensors launched earlier in the year.

At two major trade shows the past quarter. The sensor plus tests show was in Nuremberg, Germany, and the sensors converged show was in Silicon Valley sensor plus test is billed as the leading international trade fair for sensor measuring and testing technology and sensors converge as north America's largest electron.

Onyx event.

We've been following up on some good leads from the shows and we believe the investments in these shows will pay off in future sales.

We also promoted rare or three ferrite magnets and sensors to detect them.

Most rare earth magnets and the materials to make them come from China, which has put the supplies at high risk.

The primary ingredients, a ferrite magnets, however, our iron and oxygen the two most abundant elements in the Earth Cros.

Our unique high sensitivity magnetic switch sensors and angle sensors are ideal for use with readily available fair right magnets.

Videos of some of our recent demos or on our website and Youtube channel.

Our annual shareholders' meeting will be August 7th here at N V.

Our proxy statement for the meeting is available via our website or the Sec's website.

Our meetings have been in person, except during the pandemic. So shareholders can meet our managers and directors and see hands on product demonstrations.

If you can't make it in person we plan to have a replay available.

Our.

There are three agenda items for the annual meeting the.

The first agenda item is the election of directors, we're fortunate to have a strong independent board of directors, all of whom have extensive experience as directors or executives of public companies.

The second agenda item is approval of our officer compensation.

Our compensation principles as detailed in our proxy include we don't overpay our officers.

Our officers have the same fringe benefits as all employees.

And there are no executive perks or Golden parachutes.

The third agenda item is the ratification of our auditors for this fiscal year the year ending March 31 2026.

Boule has been our auditors since 2019, and we recommend their approval for our next audit we.

We expect representatives from boule to attend the annual meeting.

The proxy reports total shareholder return for the past three fiscal years was 39% exceeding broad market returns.

Our returns consisted of 17% stock appreciation and 22% from dividends.

Now, we'd like to open the call for questions.

To ask a question from a phone press star seven on mute.

Or from a browser the chime app click the raise my hand icon under the meeting Chad.

That's at the bottom of the left column and on mute yourself to speak.

Please state your name and affiliation before your question.

And to prevent background noise. Please mute your line after asking your question.

Hi, Dan its Jeff Bernstein from Silverberg Bernstein capital.

Hi, Jeff.

Okay.

So a couple of questions.

You touched on the weakness in the pump business in the quarter.

And it.

It sounds like the distribution.

Channel business is recovering can you give a little bit more color there.

What do you think.

It happens with <unk>.

<unk> business in the next couple of quarters is there any kind of seasonality to that.

There is not really seasonality the pump business, but there is a certain amount of lumpiness to that business, because it's driven by procurement contracts for defense systems. So those can be.

Those can be they are typically large contracts, but.

We don't know the exact timing.

I should say for background pasts, our physical <unk> functions, which is a function thats embodied in a physical structure, that's easy to evaluate but hard to predict so they are an important component of spintronics anti tamper systems.

And those systems are designed to protect sensitive data or electronics.

So we sell those for military systems that are often deployed in systems that are sold to foreign militaries and so that is there are some commitments.

The Dod has for those types of systems. It helps us in the long run but in the short term the short run it can be unpredictable.

So.

Sure.

So Dan it sounds like we should expect some growth with all the growth.

In the Dod budget and and defense budgets.

Around the world that.

On a multi quarter kind of basis, we ought to continue to look at this as a growth business.

Indeed, we we currently expect.

That business will grow quarter over quarter sequentially.

In the coming quarters next quarter in the following quarters, and we expect to return to more historical levels.

In the next fiscal year.

So the second part of your question, though on distributor sales.

That's very encouraging because thats related to the strength of the industry as a whole.

And we're seeing the industry recover so to see those systems those sales increase I think bodes very well for the future.

Okay, and then you mentioned this.

Opportunity.

In replacing rare Earth metals with ferrite magnets and yours.

Highly sensitive magnetic sensors.

And I assume that is 100% for.

Positioning.

Those measurements.

The rare Earth magnet business, a huge huge business.

The positioning part of that I think is a smaller piece, but still a very large business. Nonetheless, I think a lot of automotive, but some other.

Things as well can you just talk to us a little bit more about what you know and understand about that opportunity.

How quickly you think.

Design wins.

Convert to business.

Any kind of.

Stumbling blocks, there like availability of ferrite magnet etsy.

Et cetera.

Yes.

Good question Jeff.

And as you know virtually all were with magnets and materials, such as <unk> and <unk>.

Disposing them are.

Come from China.

So that puts the supply chains at some risk.

As far as the availability as I mentioned in the prepared remarks ferrite magnets are made from iron oxide, which is <unk>.

Similar chemically similar to rust and iron and oxygen are the two most.

<unk> elements in the Earth's cross so.

It's materials that are widely available.

We have.

So we're continuously working with customers to help them design and magnetic systems as you pointed out often the magnetic system is a magnet in combination with our sensors, so youre detecting proximity such as weather.

Doors closed the seat belt is latched or something like that.

Or whether a robot has reached its desired position, a robot and the factor or actuator.

And we provide models for the entire system for our customers. So we're working with customers continuously.

And our goal is to have near term design wins, we also have.

Engineering models on our.

Web site, so customers can go there and model a fair rate magnet and one of our sensors and moved the magnet around and to stimulate the position of the magnet and the sensor and try different sensors in different magnets. So we're working to get design wins.

In the near term and we do have design wins that have been customers, who come to us and said they need this magnet combination.

Often ferrite magnet.

And we can provide them a solution in some cases, we'll actually sell the magnet we.

We don't we don't make a lot of revenue on magnets, but we sell them as a courtesy to our customers.

Or they can buy the magnet elsewhere, and particularly that's fair magnet they are widely available.

Got you. So it sounds like this is somewhat normal kind of design cycle in terms of there would need to be aboard spin.

To do this.

But nothing more complicated than that.

Right and in some cases, our customers have constrained so they just need a magnet that drops and so maybe they need a slightly bigger magnet if it's a ferrite magnet compared to neodymium magnet for example, but.

We can provide them solutions like that.

That allow a minimum of redesign.

And.

We're getting more inquiries as you might expect about ferrite magnets and more sensitive sensors than we were before when.

Engineers might specify in a rare earth magnet.

And now they are starting to think about the <unk>.

Supply chain risk of those magnets and we offer sensors that can detect the lower fields that one gets from a magnet.

Gotcha, and then I wanted to ask about the investment and the wafer scale.

Packaging.

And.

Trying to just understand.

How incremental revenue.

Will correlate to that investment.

So.

Is this essentially giving you.

The opportunity to create much smaller.

Because of the packaging and people get that.

It's sort of a double whammy of.

Knowing that the entire supply chain is now.

U S domestic or is it really the U S domestic supply chain that is the catalyst here.

Just walk us through that and also.

Do you have to have all the machines in place and up and running to take advantage of this or are there. Some increments just how does that work.

Good questions.

The short answer is it's both to make parts that are smaller as I mentioned in the prepared remarks. Some of these sensors are less than one thousands of square inch so that means that they fit in tight spaces and we'll also means that they have more spatial specificity, meaning that you can detect.

<unk>.

A magnetic field more precisely as you can imagine because the sensing area is smaller the.

The two main advantages and we have much of the key equipment already deployed for wafer level chip scale parts, we've been rolling out a variety of different types of parts we.

We promoted them at the two recent Tradeshows that I mentioned sensor plus test in Germany, and sensors converge in Silicon Valley.

And we're already providing samples and evaluation boards.

We are working on developing.

High volume production systems, and we'll be working on that in the next couple of quarters through this fiscal year to make sure that we have the capacity as our customers design in these parts.

But right now we can provide samples and.

Pre production quantities now and we're doing that.

Got you I understand and then last question.

We talked a little bit during the quarter about.

Discussion that normal SRAM is going to run out of gas I guess below two nanometer kind of align with when people are talking about.

The potential for spin torque Graham So T. Graham is what we're calling it.

You guys have some patents.

I think it's called in your patent vortex spin momentum transfer magnetoresistance devices.

And net debt to patent issued back in 2011, but is that right at what point do you think this becomes something.

Where there might be some relevant IP that you guys have them and how do you guys think about trying to capitalize on that.

Our company was founded and our original name was nonvolatile electronics, which refers to spin tronic memory.

So its important technology to us we continue to develop the technology.

And we make and sell.

Magnetic MRI, <unk>, and tronic magnetic MRM or MRM parts, mostly to anti tamper applications to make crypto keys and similar security applications, where the density is relatively.

Low.

Bit count.

We don't plan to scale up for large scale memory, it just cost billions and billions of dollars to make.

Memory.

Fab, so that's not part of our business plan, but we continue to develop our intellectual property as you mentioned.

We have.

Intellectual property and patents on M Ram in general.

As well as <unk>.

Spin torque amiram as you alluded to or spin momentum amiram as it sometimes called.

And.

Our.

Business model would be to partner with large scale manufacturers, where appropriate to monetize our intellectual property and to help advance the technology.

As you mentioned.

SRAM.

And other types of memory.

<unk> run into scaling limitations.

The MRM doesn't have so we do see.

Long term opportunities there the other advantage of spend tronic memory or MRM is that it has a combination of speed non volatility.

And density that combines the best attributes of SRAM, DRAM and flash or other non volatile memories. So it sometimes has been called the universal memory.

And when the density.

Approaches that of conventional memories, it'll open up some excellent opportunities.

And we are.

We're hoping to.

Be able to provide intellectual property to help advance the technology.

Great. Thanks for the help today.

Thanks, Jeff.

Okay.

If there are other questions star seven on a phone on mute or raise my hand on a computer.

Hello.

Okay.

Can you hear me.

Yes.

Oh, well that's surprised okay.

So our book.

Chip level packaging.

Can you.

Talk a little bit about what buckets.

Buckets, that's going to enter in.

Whether it contractually that's already for wafer level chip scale parts. The end markets is what you're asking about and we've identified two end markets. One is medical devices, where the miniaturization is important smaller medical devices, particularly implantable medical devices results in smaller devices less.

Obtrusive smaller incisions and all of those benefits. The other market is industrial controls and robotics to allow more precise position something as I mentioned in answer to a previous question. The parts are not only smaller but they have more spatial specificity for more precision. So those are the two markets.

We've identified and we've sampled parts to customers in both markets. We don't have volume production, yet we have customers actively evaluating the parts and so far the feedback has been quite positive. We are very optimistic about the prospects for these parts, but you're already selling.

<unk> medical market would that be.

For.

Our next generation audio.

Are you going through.

Funding can you talk about devices.

We are looking at new implantable devices. So for example navigation.

As an area. So what that means in a medical center is knowing the position of a small device such as a catheter.

That would be.

Snaked into the body and its important to know the exact position. So when needs of these are very small catheters. They need a very small sensor that can detect a precise external magnetic field.

The magnetic field help navigate the catheter much has a magnetic compass helps us navigate.

That's one example of the potential market, where our devices currently as small as they are are not small enough for that market and wafer level chip scale parts will be we believe.

Okay, that's good to hear.

Do you.

When you get the machine working.

Do you.

We reported <unk>.

Would you consider prediction machines or and the refurbishing.

My question really is if you will get enough.

So indulge.

In both buckets.

Is there a danger.

Kind of looking for looking at Underutilization charges.

We plan to use the new machinery for both R&D and production.

And we despite the large investment compared to other semiconductor companies.

We are relatively.

We have a relatively low fixed costs and a relatively low amount of equipment for the revenue that we generate.

So we.

Justified the equipment based on assumptions that we believe we can meet for increase in incremental sales.

But also.

It's not the type of leverage that one might see in commodity.

Commodity semiconductor market, where if they don't keep the equipment busy.

Fixed costs will damage their financials in many cases.

We have less risk than that because of the relative low amount of fixed assets that we have for the revenue that we generate.

And that's a tribute to the.

Two the efficiency of our employees.

And the value of our technology.

That is correct.

Lower fixed cost than any other semiconductor company of research.

And.

I guess another question I had.

Let me just look here.

Youtube channel you are showing there.

Thanks for calling.

Oh boy.

They can recover share.

<unk>.

Sure.

For devices.

Uh huh.

Windows.

Four.

Like liquid liquid for devices.

Alright.

I'm sure I'm, sorry, the word the Skype.

I think youre, referring to cylinders nomadic cylinder.

Yes, yes, yes.

Yes, you described it very well.

Right. So they are using a fluid to push.

To push a piston to move something and that's what a lot of our customers do so that's what we show on.

We do have a lot of those on Youtube.

Is that a is that a new market because let's shift.

Just lately with a single.

Yes, he market for us and we've had customers who make pneumatic cylinder positions.

Sensors.

For many years, but we're always finding new and creative uses for those and our customers are as well so the general categories linear actuators and.

We are finding customers that want.

Some of the newer videos relate to more precise control that we can do with our newer types of sensors. So we have a new Youtube video for example that highlights one of our advanced.

Magnetic switches that I mentioned in the prepared remarks that we introduced at the recent trade shows and so that allows us to have more precise control of a pneumatic cylinder where we can slow it down at one <unk>.

Threshold and then stop it at another so just like.

Just like if you are slowing down and stopping a car you can stop it more precisely like that.

And so that's an example of the type of demonstration that we have we've had customers who have been using nomadic cylinders for many years, but this opens up a new way of controlling them more precisely.

We also have done some recent videos and demonstrations or are some of our folks are very creative in coming up with.

<unk> of controlling linear position and familiar devices, we had.

Device Thats, playing piano moving an actuator around to a precise position and then hitting the key so there are some of those that we demonstrate as well to demonstrate the precision of our sensors.

In that case, the combination of the precision and speed.

Okay. That's good to hear that this market is expanding.

Finally, I wanted to ask you.

For several quarters, we've seen that effect.

Military order being ready.

Volatile.

Have you considered.

Our reporting revenue ex military orders.

For example for this quarter it was very useful to go mine.

Thank you.

You have.

That excludes the reorders or whatever the luxury grill, which I think a bit.

That's true it did and we will look at we look at that kind of continuously do we want to report.

Our segment.

The challenge with that is that.

To reported consistently we need to have it audited.

And we need to break out not just the revenue, but the components of <unk>.

The expenses and costs related to the revenue so.

There is a fair amount of infrastructure that we need to do that but we will look at that and we look at.

Whether we should report certain segments.

Continuously we are always looking at that.

So we'll be looking also at <unk>.

Defense spending in the meantime, what we try to do is provide information to our investors as we did on this call.

To help understand what is behind our.

Our top and bottom line.

Okay.

That's good to hear.

The information, we're providing is the liberty orders were actually sequentially increased this quarter and go back is that correct.

That's what we're that's all.

What we're expecting now that's our current expectation yes.

Okay. This is it for me good luck.

Thank you.

Are there any other questions.

700 on mute raise your hand on a computer.

There are no. Other questions. We were pleased to report strong revenue and earnings we continue to deploy new equipment and received a new equipment cluster. We look forward to speaking with you in October for our next quarterly call and we look forward to seeing some of you August 7th.

At our annual meeting.

A replay of this call will be available on the investor events page of our website at <unk> Dot com and our Youtube channel at Youtube Dot Com Slash MBE Corporation.

Operator: Good afternoon and welcome to the NVE Corporation conference call for the quarter ended June 30th, 2025.

Okay. Uh, that's good to hear. And and the information you're providing is that

Daniel Baker: I'm Dan Baker, NVE's President and CEO. I'm joined as usual by Controller and Principal Financial Officer Daniel Nelson.

Speaker Change: Orders will actually sequentially increase this quarter in the next. Is that correct?

Operator: This call is being webcast live by YouTube and Amazon chime and being recorded.

Speaker Change: That's uh that's what we're uh. That's what we're expecting now. That's our current expectation. Yes.

Speaker Change: Okay. This is it for me. Good luck.

Thank you.

Operator: A replay will be available through our website, nve.com and our YouTube channel, youtube.com slash nvecorporate. All participants are currently in a listen-only mode.

Are there any other questions?

Star 7 to unmute, raise your hand on a computer.

Operator: After our presentation, there will be a question and answer session.

Daniel Baker: After my opening comments, Daniel Nelson will present our financial results. I'll cover the business and then we'll open the call to questions.

Speaker Change: Well, if there are no other questions, we were pleased to report strong revenue and earnings. We continue to deploy new equipment and received a new equipment cluster. We look forward to speaking with you in October for next quarterly, call.

Daniel Nelson: We issued our press release with financial results and filed our quarterly report on Form 10-Q in the past hour following the close of March. Links to the press release and the 10Q are available through our website, the SEC's website, and Axe, formerly known as Twitter.

Speaker Change: And we look forward to seeing some of you August 7th at our annual meeting.

Operator: 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 and 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 annual report on Form 10-K for the year ended March 31, 2025.

Speaker Change: A replay of this call would be available in the investor events page of our website, that's nba.com, and our YouTube channel. That's youtube.com NBC Corporation. Thank you for participating in this call.

Operator: Actual results could differ materially from the information provided, and we undertake no obligation to update forward-looking statements we may make.

Daniel Baker: We're pleased to report strong revenue and earnings for the quarter driven by an increase in distributor and non defense sales, despite a decrease in defense sales.

Daniel Nelson: Daniel Nelson will cover details of the financials, Daniel.

Daniel Nelson: Don't stand. A 10% year-over-year revenue decrease for the first quarter was due to an 11% decrease in product sales, partially offset by a 17% increase in contract R&D revenue. The decrease in product sales was due to a decrease in defense industry sales, which can be highly variable because of procurement cycle.

Daniel Nelson: We were pleased to see non-defense sales stabilize with improving industry conditions in the quarter.

Daniel Nelson: We saw an increase in distributor sales, which were hit particularly hard by the recent industry downturn. cross margin decreased to 81% from 86% due to a less profitable product mix and strengthening distributor sales, which tend to have lower margins than direct sales.

Daniel Nelson: Total expenses decreased 20% for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025 due to an 18% decrease in R&D expense and a 23% decrease in SG&A. The decrease in R&D was due to completion of some of our wafer-level chip-scale packaging activities and reallocation of some R&D resources to manufacturers. The decrease in SG&A was primarily due to the timing of sales and marketing activities and reallocation of some general and administrative resources to manufacturers.

Daniel Nelson: Net income for the first quarter of fiscal 2026 decreased 13% to $3.58 million, or 74 cents per diluted share, compared to $4.1 million, or 85 cents per share for the prior year quarter. The decrease in net income for the first quarter of fiscal 2026 compared to the prior year was primarily due to decreased revenue and lower margins partially offset by decreased expense.

Daniel Nelson: Adding in approximately $75,000 in unrealized gains on our marketable securities, comprehensive income was $3.65 million. Our profitability metrics remain strong. Operating margin was 62%, pre-tax margin was 70%, and net margin was 59%.

Daniel Nelson: Fixed asset purchases were $1.06 million last quarter.

Daniel Nelson: Most of that was for a cluster of wafer fabrication equipment, which recently arrived. We were able to expedite the delivery to get the equipment before the U.S. reciprocal tariff pause was scheduled to expire July 9.

Daniel Nelson: We have a milestone payment of approximately $1 million due this quarter, which will substantially complete our two-year multimillion dollar expansion. Dan Baker will provide more color on capital investments in a few minutes.

Daniel Nelson: The 25% Advanced Manufacturing Investment Tax Credit was extended in a recent tax bill. Therefore, we currently expect to realize Advanced Manufacturing Investment Tax Credits of between $700,000 and $800,000 if we deploy equipment as planned in Fiscal 2026. Although it would not significantly affect our earnings, we will also realize significant cash flow savings this fiscal year due to changes in Section 179 of the Internal Revenue Code.

Daniel Nelson: The recent legislation allows us to deduct on our tax returns previously unamortized R&D expenses rather than amortize them over five years.

Daniel Nelson: turning to cash flow items. We paid our $1 per share quarterly dividend the past quarter and declared another dividend to be paid at the end of August. Operating cash flow was $5.19 million in the quarter, which more than cover our $4.84 million dividend. Accounts receivable decreased $1.34 million due to decreased revenue and the timing of customer payments. Accrued payroll and other liabilities increased $523,000, primarily due to the timing of estimated tax payments.

Daniel Baker: Now I'll turn the call back over to Dan Baker to cover the business and preview our annual shareholders meeting. Back to you, Dan. Thanks, Daniel.

Daniel Baker: I'll cover capex marketing and our upcoming annual meeting. Starting with CapEx, we deployed one new machine in the past quarter. As Daniel Nelson mentioned, we also took possession of a several million dollar equipment cluster in the past quarter. It's being installed in an expanded production area on the east end of our building. and we hope to deploy it later this fiscal year.

Daniel Baker: Turning to product development. In the past quarter, we launched more wafer level chip scale sensors, which are less than a thousandth of a square inch. There are demonstrations of new products on our website and our YouTube channel. We promoted new products, including wafer level chip scale sensors and advanced magnetic switch sensors launched earlier in the year at two major trade shows the past quarter. The sensor plus test show was in Nuremberg, Germany, and the sensors converge show was in Silicon Valley. Sensor plus test is billed as the leading international trade fair for sensor measuring and testing technology and sensors converge is North America's largest electronics.

Daniel Baker: We've been following up on some good leads from the shows, and we believe the investments in these shows will pay off in future sales.

Daniel Baker: We also promoted rare earth free ferrite magnets and sensors to detect Most rare earth magnets and the materials to make them come from China, which has put the supplies at high risk. The primary ingredients of ferrite magnets, however, are iron and oxygen, the two most abundant elements in the Earth's crust. Our unique high sensitivity magnetic switch sensors and angle sensors are ideal for use with readily available ferrite mag Videos of some of our recent demos are on our website and YouTube channel.

Daniel Baker: Our annual shareholders meeting will be August 7th here at NVE. Our proxy statement for the meeting is available via our website or the SEC's website. Our meetings have been in person except during the pandemic. So shareholders can meet our managers and directors and see hands on product demonstration. If you can't make it in person, we plan to have a replay available.

Daniel Baker: There are three agenda items for the annual meeting. The first agenda item is the election of directors. We're fortunate to have a strong independent board of directors, all of whom have extensive experience as directors or executives of public companies.

Daniel Baker: The second agenda item is approval of our officer compensation. Our compensation principles as detailed in our proxy include we don't overpay our officers. Our officers have the same fringe benefits as all employees. and there are no executive perks or golden pairs.

Daniel Baker: The third agenda item is the ratification of our auditors for this fiscal year, the year ending March 31st, 2026. Boulay has been our auditor since 2019, and we recommend their approval for our next audit. We expect representatives from Boulay to attend the annual meeting.

Daniel Baker: The proxy reports total shareholder return for the past three fiscal years was 39% exceeding broad market return. Our returns consisted of 17% stock appreciation and 22% from dividends.

Operator: 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.

Operator: Please state your name and affiliation before your question and to prevent background noise, please mute your line after asking your question.

Jeffrey Bernstein: Hi, Dan. It's Jeff Bernstein from Silverberg Bernstein Capital. Hi, Jeff. Hey, how are you?

Daniel Baker: So yeah, a couple of questions. You touched on the weakness in the puff business in the quarter. And, and sounds like the distribution channel business is recovering.

Daniel Baker: Can you give a little bit more color there? You know, what do you think happens with the puff business in the next couple of quarters?

Daniel Baker: Is there any kind of seasonality to that? There's not really seasonality to the puff business, but there is a certain amount of lumpiness to that business because it's driven by procurement contracts for defense systems. So those can be, those can be, they're typically large contracts, but they, we don't know the exact timing.

Daniel Baker: I should say for background, puffs are physical unclonable functions, which is a function that's embodied in a physical structure that's easy to evaluate, but hard to predict. So they're an important component of spintronic anti-tamper systems. And those systems are designed to protect sensitive data or electronics. So we sell those for military systems. They're often deployed in systems that are sold to foreign militaries. And so that is, there are some commitments that the DOD has for those types of systems. It helps us in the long run, but in the short term, the short run, it can be unpredictable.

Daniel Baker: subject to So Dan, it sounds like we should expect some growth with with all the growth in in the DOD budget and and defense budgets around the world that that on a multi quarter kind of basis, we ought to continue to look at this as a growth business. Indeed, we we currently expect that that business will grow quarter over quarter sequentially in the coming quarters next quarter in the following quarters, and we expect to return to more historical levels in the next fiscal year.

Daniel Baker: To the second part of your question, though, on distributor sales, that's very encouraging because that's related to the strength of the industry as a whole, and we're seeing the industry recover. So to see those systems, those sales increase, I think bodes very well for the future.

Jeffrey Bernstein: Okay, and then you've mentioned the this opportunity in replacing rare earth metals with ferrite magnets and your highly sensitive magnetic sensors, and I assume that is 100% for positioning kinds of measurements. You know, the rare earth magnet business is huge, huge business. The positioning part of that, I think, is a smaller piece, but still a very large business.

Jeffrey Bernstein: Nonetheless, I think a lot of automotive, but some other things as well.

Daniel Baker: Can you just talk to us a little bit more about what you know and understand about that opportunity? And, you know, how quickly you think, you know, design wins can convert to business, you know, any, any kind of stumbling blocks there, like availability of ferrite magnets, etc. Yeah, that's a that's a good question, Jeff. And as you know, virtually all rare earth magnets and materials such as neodymium and dysprosium are come from China. So that puts the supply chains at some risk. As far as the availability, as I mentioned in the prepared remarks, ferrite magnets are made from iron oxide, which is similar chemically similar to iron and oxygen are the two most abundant elements in the Earth's crust.

Daniel Baker: So it's it's materials that are widely available. We have, so we're continuously working with customers to help them design in magnetic systems. As you pointed out, often, the magnetic system is a magnet in combination with a sensor. So you're detecting proximity, such as whether a door is closed, a seat belt is latched, or something like that, or whether a robot has reached its its desired position, a robot end effector or actuator. And we provide models for the entire system for our customers. So we're working with customers continuously. And our goal is to have near term design wins.

Daniel Baker: We also have engineering models on our website so customers can go there and model a ferrite magnet. and one of our sensors and move the magnet around and and to this to simulate the position of the magnet and the sensor and try different sensors and different magnets. So we're working to get design wins in the near term and we do have design wins that have been customers who've come to us and said they need this magnet combination. Often a ferrite magnet, and we we can provide them a solution. In some cases, we'll actually sell the magnet.

Daniel Baker: We don't, we don't make a lot of revenue on magnets, but we sell them as a courtesy to our customers. And or they can buy the magnet elsewhere. And particularly if it's a ferrite magnet, they're widely available.

Daniel Baker: Josh, so it sounds like this is a somewhat normal kind of design cycle in terms of there would need to be a board spin to do this, but but but nothing more complicated than that. then we were before when when engineers might specify in a rare earth magnet. And now they're starting to think about the supply chain risk of those magnets. And we offer sensors that can detect the lower fields that one gets from a ferrite magnet. Gotcha.

Jeffrey Bernstein: And then I wanted to ask about the investment in the wafer scale, packaging, and trying to just understand how incremental revenue, you know, will correlate to that investment. So, is this essentially giving you the opportunity to create much smaller parts because of the packaging, and people get the sort of double whammy of knowing that the entire supply chain is now, you know, U.S. domestic, or is it really the U.S. domestic supply chain that is the catalyst here?

Daniel Baker: Just walk us through that. And also, you know, do you have to have all the machines in place and up and running to take advantage of this, or are there some increments and just how does that work? The two main advantages, and we have much of the key equipment already deployed for wafer level chip scale parts, we've been rolling out a variety of different types of parts. We promoted them at the two recent trade shows that I mentioned sensor plus test in Germany and sensors converge in Silicon Valley and we're already providing samples and evaluation boards.

Daniel Baker: We are working on developing high volume production systems and we'll be working on that in the next couple of quarters through this fiscal year to make sure that we have the capacity as our customers design in these parts. But right now we can provide samples and pre-production quantities now and we're doing that. Gotcha, understand.

Jeffrey Bernstein: And then last question, we talked a little bit during the quarter about, you know, discussion that that normal SRAM is going to run out of gas that I guess below two nanometer kind of kind of line with, and people are talking about the potential for spin orbit, torque RAM, SOT RAM is what they're calling it. You guys have some patents. I think it's called in your patent Vortex Spin Momentum Transfer Magneto Resistance Devices. And that's a patent issued back in 2011. But is that right?

Daniel Baker: You know, at what point do you think this becomes something where there might be some relevant IP that you guys have? And how do you guys think about trying to capitalize on that?

Daniel Baker: Our company was founded and our original name was non-volatile electronics, which refers to spintronic memory. And so it's important technology to us. We continue to develop the technology and we make and sell magnetic MRAM, spintronic magnetic MRAM or MRAM parts, mostly to in anti-tamper applications to make crypto keys and similar security applications where the density is relatively low or the bit count.

Daniel Baker: We don't plan to scale up for large scale memory. It just, you know, it costs billions of billions of dollars to make a memory. So that's not part of our business plan, but we continue to develop our intellectual property. As you mentioned, we have Intellectual Property and Patents on MRAM in general, as well as spin torque MRAM, as you alluded to, or spin momentum MRAM, as it's sometimes called. And our business model would be to partner with large scale manufacturers where appropriate to monetize our intellectual property and to help advance the technology. As you mentioned, SRAM and other types of memory run into scaling limitations that MRAM doesn't have.

Daniel Baker: So we do see long-term opportunities there. The other advantage of Spintronic memory or MRAM is that it has a combination of speed, non-volatility, and density that combines the best attributes of SRAM, DRAM, and flash or other non-volatile memories. So it's sometimes been called the universal memory. And when the density approaches that of conventional memories, it'll open up some excellent opportunities. And we're, we're hoping to be able to provide intellectual property to help advance the technology.

Jeffrey Bernstein: Great.

Operator: Thanks for the help today, Dan. Thanks, Jeff.

Operator: If there are other questions, star seven on a phone to unmute or raise my hand on a computer.

Krzysztof Wachowski: Hello, this is Krzysztof Wachowski, Private Investor. Can you hear me? Yes. Oh, wow, that's a surprise. Okay.

Daniel Baker: So about the chip level packaging, can you talk a little bit about what markets that's going to into and whether you're getting traction in that already. For wafer level chip scale parts, the end markets is what you're asking about. And we've identified two end markets. One is medical devices, where the miniaturization is important. Smaller medical devices, particularly implantable medical devices, results in smaller devices, less obtrusive, smaller incisions and all those benefits. The other market is industrial controls and robotics to allow more precise position sensing. As I mentioned in the answer to a previous question, the parts are not only smaller, but they have more spatial specificity for more precision.

Daniel Baker: So those are the two markets that we've identified. And we've sampled parts to customers in both markets. We don't have volume production yet. We have customers actively evaluating the parts. And so far, the feedback has been quite positive. We're very optimistic about the prospects for these parts.

Daniel Baker: Next Generation, or are you going to expanding into new implantable devices? We are looking at new implantable devices. So, for example, navigation. is an area. So what that means in a medical sense, is knowing the position of a small device such as a catheter that would be snaked into the body. And it's important to know the exact position. So one needs, these are very small catheters, they need a very small sensor that can detect a precise external magnetic field. The magnetic field helps navigate the catheter, much as a magnetic compass helps us navigate on the earth.

Daniel Baker: That's one example of a potential market where our devices currently, as small as they are, are not small enough for that market. And wafer level chip scale parts will be.

Krzysztof Wachowski: Okay, that's good to hear.

Krzysztof Wachowski: Do you know when you when you get those machines working? Do you record? Will you consider production machines or energy machines?

Daniel Baker: And my question really is, if you do not get enough, enough cells in those packages, are we, is there a danger of kind of looking for looking at underutilization charges? We plan to use the new machinery for both R&D and production. and we, despite the large investment compared to other semiconductor companies, we are relatively we have a relatively low fixed costs and a relatively low amount of equipment for the revenue that we generate. So we justified the equipment based on assumptions that we we believe we can meet for increased and incremental sales. But also, it's not the type of leverage that one might see in a commodity semiconductor market where if they don't keep the equipment busy, the fixed costs will damage their financials.

Daniel Baker: In many cases, we we have less risk than that because of the relative low amount of fixed assets that we have for the revenue that we generate. And that's a tribute to the to the efficiency of our employees and the value of our technology.

Krzysztof Wachowski: That is correct. You have much lower fixed facets than any other semiconductor company I've researched.

Daniel Baker: And I guess another question I had is that lately, just looking at your YouTube channel, you're showing a lot of sensors for Cabellcher for devices that you Unknown Speaker, Unknown Attendee, Daniel Nelson, Jeffrey Bernstein, NVE Corp I'm sorry, the word escaped me. I think you're referring to cylinders. Pneumatic cylinders? Yes. Yes, yeah. Pneumatic cylinders. Yeah, you described it very well. Right, so they're using a fluid to push a piston to move something. And that's what a lot of our customers do. So that's what we show on... We do have a lot of those on YouTube.

Krzysztof Wachowski: Is that is that a new market? Because lately, I've just, I mean, just lately, I've been seeing those.

Daniel Baker: It's a legacy market for us. And we've had customers who make pneumatic cylinder positions. for many years, but we're always finding new and creative uses for those and our customers are as well. So the general category is linear actuators and we are finding customers that want. I think some of the newer videos relate to more precise control that we can do with our newer types of sensors. So we have a new YouTube video, for example, that highlights one of our advanced. magnetic switches that I mentioned in the prepared remarks that we introduced at the recent trade shows.

Daniel Baker: And so that allows us to have more precise control of a pneumatic cylinder, where we can slow it down at one threshold and then stop it at another. So just like, you know, just like if you're slowing down and stopping a car, you can stop it more precisely like that. And so that's an example of the type of demonstration that we have. We've had customers who've been using pneumatic cylinders for many years, but this opens up a new way of controlling them more precisely. We also have done some recent videos and demonstrations that were are some of our folks are very creative and coming up with ways of controlling linear position and familiar devices.

Daniel Baker: We had a device that's playing a piano, moving an actuator around to a precise position, and then hitting the key. So there are some of those that we demonstrate as well to demonstrate the precision of our sensors and, in that case, the combination of the precision and the speed.

Krzysztof Wachowski: Okay, that's good to hear that this market is expanding.

Krzysztof Wachowski: And finally, I want to ask you, you know, for several quarters, we've seen that effect of military orders being very volatile. Have you considered reporting revenue x military orders? For example, for this quarter, it was very useful to tell my that you have that x military orders you have actually grew, which I think it did. That's true, it did.

Daniel Baker: And we will look at, we look at that kind of continuously, do we want to report a segment The challenge with that is that to report it consistently, we need to have it audited, and we need to break out not just the revenue, but the components of the or the expenses and costs related to the revenue. So, there's a fair amount of infrastructure that we need to do that, but we will look at that and we look at whether we should report certain segments. continuously. We're always looking at that. So we'll be looking also at defense spending.

Daniel Baker: In the meantime, what we try to do is provide information to our investors as we did on this call, to help understand what is behind our top and bottom line. Okay, that's good to hear. And the information you're providing is that military orders will actually sequentially increase this quarter and the next. Is that correct? That's what we're, that's what we're expecting now. That's our current expectation.

Krzysztof Wachowski: Okay, this is it for me. Good luck. Thank you.

Operator: Are there any other questions? star seven unmute, raise your hand on a computer.

Operator: There are no other questions.

Daniel Baker: We were pleased to report strong revenue and earnings. We continue to deploy new equipment and received a new equipment cluster.

Daniel Baker: We look forward to speaking with you in October for our next quarterly call.

Operator: And we look forward to seeing some of you August 7th at our annual meeting. A replay of this call will be available on the Investor Events page of our website, that's nve.com, and our YouTube channel, that's youtube.com slash nvecorporate.