NVE Corporation

Good afternoon and welcome to our conference call for the quarter and fiscal year ended March 31st, 2021. This is Dan Baker, President and CEO of NVE Corporation. As always, I'm joined by Kurt Reinders, our Chief Financial Officer. This call is being webcast live and being recorded. A replay will be available through our website, nve.com. After my opening comments, Kurt will present a financial review of the quarter and fiscal year I'll cover the business and new products, and then we'll open the call to questions. We issued our press release with fourth quarter and fiscal year results and filed our annual report on Form 10-K in the past hour following the close of market. We also filed with our 10-K an extension to our supplier partnering agreement with Abbott Laboratories. Links to these documents are available through the SEC's website, our website, and our Twitter timeline. Comments we may make that relate to future plans, events, financial results, or performance are forward-looking statements that are subject to certain risks and uncertainties, including, among others, such factors as risks and uncertainties related to future sales and revenue, uncertainties related to future stock repurchases and dividend payments, and risks related to the COVID-19 pandemic, as well as the risk factors listed from time to time in our filings with the SEC, including our just-filed 10-K. Actual results could differ materially from the information provided, and we undertake no obligation to update forward-looking statements we may make. We're pleased to report strong earnings for the fourth quarter and fiscal year despite the effects of the COVID-19 pandemic. For the quarter, we reported earnings of 65 cents per share versus 69 cents in a strong year-ago quarter. With the effects of COVID-19, The past year, earnings decreased to $2.42 for the fiscal year compared to $3 for the prior year. Now, Kurt will review the details of our financial results.

Kurt? Thanks, Dan. Total revenue for the quarter ended March 31, 2021, decreased 5% compared to last year due to a 5% decrease in product sales. and a 7% decrease in contract R&D revenue. The COVID-19 pandemic had a significant impact on revenue the past quarter. We believe those effects began to subside, although significant uncertainty remains. Expenses decreased 18% for the fourth quarter from the prior year due primarily to a 23% decrease in R&D. The decrease in R&D expense was due to the completion of some new product developments. Interest income decreased to $332,000 for the most recent quarter from $428,000 in the prior year quarter due to decreases in our available for sale securities and a decrease in the average interest rates on those securities. Net income for the quarter was $3.13 million, or 65 cents per diluted share, compared to $3.37 million, or 69 cents, last year. Gross margin was 78% for the quarter, and net margin was 53%. We paid a $1 per share dividend in the past quarter, and today we announced that our board declared another quarterly dividend of $1 per share payable May 31 to shareholders of record as of May 17. For the fiscal year, total revenue decreased 16%. Due to a 16% decrease in product sales, and an 18% decrease in contract R&D. The COVID-19 pandemic had a significant impact on revenue the past fiscal year, especially in the first two quarters of the fiscal year. Net income for the year decreased 19% to $11.7 million, or $2.42 per share, compared to $14.5 million or $3 per share last fiscal year. We also had an unrealized gain of $585,000 on our marketable securities for the fiscal year, resulting in comprehensive income of $12.3 million. We paid $19.3 million in dividends and repurchased $91,000 of stock in the past year. Even with those generous returns to our shareholders, our balance sheet remains strong, with cash plus marketable securities of $65.1 million as of March 31st. Now I'll turn the call back to Dan to cover the business. Dan?

Thanks, Kurt. I'll cover highlights of the past quarter and fiscal 2021. It's been a year since we first talked about the impact of COVID-19. I was in our May 6, 2020 conference call. There's now a light at the end of the tunnel, at least for the direct effects. I want to thank our suppliers, distributors, and our employees for keeping NVE operating effectively the past year. Tough times show what we're made of, and we've seen the dedication and resourcefulness of NVE employees and the tenacity of our managers and leaders. Our employees have been eligible for vaccination as essential manufacturing workers since mid-March, and vaccines have been available to all Minnesotans over 16 since late March. The great majority of our employees worked on-site through the pandemic, despite the personal risk. Other highlights of the past quarter. We're proud to supply products to some of the world's most demanding customers, including Abbott's Pacesetter subsidiary. Abbott is a leading implantable medical device supplier. Last week, we extended our supplier partnering agreement with Abbott until November to give us time to negotiate a long-term amendment. We've extended our partnering agreements with Abbott and St. Jude Medical a number of times dating back to 2006, and we're allowing more time because there are new people involved since Abbott's purchase of St. Jude in 2017. The latest amendment was filed, as I mentioned, with our 10-K agreement. Another validation of our product's extraordinary ruggedness and reliability is our selection as a supplier for the Europa Clipper mission to one of Jupiter's moons to explore the possibility of extraterrestrial life. In the past quarter, NASA completed its critical design review for the spacecraft. NASA pointed out that the spacecraft must be hardy enough to withstand the radiation in space, yet sensitive enough to gather the science needed to investigate Europa's environment. Our parts qualified for this demanding mission, which demonstrates their extraordinary properties. We delivered our parts for the Europa mission in 2019, but continue to work with NASA on other missions and to leverage our experience for other demanding applications. NASA recently defined the launch vehicle path and is planning an October 2024 launch that would arrive at Jupiter in April 2030. It will take longer than other previous scenarios, but at least now there are definitive scheduled targets. Turning to product development, one of the areas where we have been continuously improving our sensors is noise performance. Low noise sensors can detect smaller magnetic field changes, which means more accurate sensing or electronic for current sensing or electronic compasses, for example. In the past quarter, members of our advanced technology team published a peer-reviewed paper in the journal Applied Physics Letters titled Magnetoresistive Sensor Detectivity, a Comparative Analysis, detailing the noise performance of our various types of sensors. If your subscription to Applied Physics Letters has lapsed, you can access the article from the Papers and Presentations section of our website. We introduced two groups of new products in the past quarter, DC to DC converters and tunneling magnetoresistance sensors. First, we expanded our line of DC to DC converters with the addition of larger parts and combination converters with data couplers. DC to DC converters transmit power rather than data, we make the world's smallest isolated DC to DC converters at less than a quarter by an eighth of an inch. In the past quarter, we introduced larger isolated DC to DC converters. They're still pretty small, less than a half an inch square, but the larger size allows us to provide best-in-class 5,000 volts isolation, which is remarkable for a part that size. Higher isolation means better reliability. In addition to the new standalone DC-to-DC converters, in the past quarter we introduced three models that combine 5,000-volt isolation DC-to-DC converters with data couplers to simultaneously transfer data and power in less space and with fewer chips. These DC-to-DC converter introductions are designed for industrial automation and the industrial Internet of Things. In addition to DC to DC converters, in the past quarter we introduced high-sensitivity tunneling magneto-resistance, or TMR, magnetic switches. These parts run on 3 to 4 volts, which makes the new parts ideal for rechargeable devices such as over-the-counter hearing aids and smart audio devices. There are links to information on our new products on our website, including demonstrations in the videos section of our website. There are also links to information on our YouTube channel, Twitter timeline, and LinkedIn posts. In addition to the new products in the past quarter, new and improved products in the past fiscal year included high-field magnetic sensors and switches for MRI-tolerant medical devices, ultra-precise tunneling magnetoresistance motion sensors for robotics and factory automation, the world's smallest DC-to-DC converters to transmit power as well as data in industrial networks and cars, new smart sensors for more versatility and connectivity, and improved couplers with best-in-class common-mode transient immunity, or CMTI, for more power-efficient control. Turning to sales and marketing... A COVID-19 wave beginning the past quarter in Europe caused restrictions and the cancellation of most in-person trade shows. But despite the pandemic, we have opportunities to promote our new products. Sensor Plus Test is an important industry trade show. It's gone digital and is going on this week. It's billed as the industry's largest event dedicated to sensors, connectivity, and systems. It's normally held in Germany. and we're participating as a co-exhibitor with Angst and Pfister, formerly known as Pevatron, one of our European distributors. The exhibition runs through tomorrow, May 6th. We have several new products at the virtual booth, and we're planning webinars after the exhibition. Last week was a major industry research conference, the IEEE International Magnetics Conference, or InterMag for short. Originally scheduled to be held in Lyon, France, the conference was changed to virtual due to the pandemic. Five of our researchers authored a paper titled Magnetic Viscosity and High Precision Magnetoresistive Field Sensors at the conference. Overcoming magnetic viscosity to improve accuracy and precision is an example of our leadership in sensor technology. Dr. Joe Davies, a senior physicist and program manager, was also the sensor expert on a panel of experts at that conference. Although we're taking advantage of virtual events, we look forward to the return of in-person exhibits. Sensors Expo, billed as North America's largest event dedicated to sensors, connectivity, and the Internet of Things, was scheduled for June in San Jose. It's been postponed to late September due to COVID-19 restrictions in California, but we still plan to exhibit, and our folks are champing at the bit to get in front of customers again. We last attended Sensors Expo two years ago and promoted our then-new smart angle sensors with a smart sensor-based robotics xylophone playing Do You Know the Way to San Jose? We've expanded our smart sensor line since the last expo but we plan to reprise the popular demo. There's a video of the 2019 demo on our YouTube channel. Two inherent challenges as a small company are reaching certain target markets like automotive and offering solutions requiring multiple components. So we're working with Angst & Pfister, the European distributor I mentioned a minute ago, to address the market for our couplers in electric vehicle onboard charging circuitry. Angst & Pfister's battery charger platform takes advantage of our coupler's best-in-class isolation voltage and recently upgraded CMTI. High isolation voltage protects delicate electronics in harsh environments like electric cars. And the high CMTI allows the circuitry to switch faster, which means higher efficiency, less kilowatt hours per 100 miles, lower fuel costs, and faster charging. There's a video with more details on our YouTube channel and Angst and Pfister's channel. We also posted videos in the past quarter showing the high common mode transient immunity and best-in-class isolation voltage of the couplers that are critical to this charging circuitry design. Now I'd like to open the call for questions. Anne?