NVE Corporation

Good day, and welcome to the NVE conference call on second quarter results. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, President and CEO, Mr. Dan Baker. Please go ahead.

Good afternoon and welcome to our conference call for the quarter ended September 30th, 2022. This call is being webcast live and being recorded. A replay will be available through our website, nve.com. I'm joined by our CFO, Joe Schmidt. After my opening comments, Joe will present a financial review, then I'll cover the business and new products. 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 to the press release and 10-Q are available through the SEC's website, our website, and our Twitter timeline. Comments we may make that relate to future plans, events, financial results, or performance are forward-looking statements that are subject to certain risks and uncertainties including, among others, such factors as risks and uncertainties related to future sales and revenue, uncertainties related to future stock repurchases and dividend payments, our dependence on critical suppliers and packaging vendors, and risks related to the COVID-19 pandemic and supply chain disruptions, as well as the factors listed from time to time in our filings with the SEC, including our annual report on Form 10-K for the fiscal year ended March 31, 2022. Actual results could materially differ from the information provided, and we undertake no obligation to update forward-looking statements we may make. We're pleased to report a record-shattering quarter. Net income for the quarter increased 67% to $6.09 million, or $1.26 per diluted share, driven by a 57% revenue increase. Revenue and earnings were the highest ever by far. Joe will cover the details. Joe?

Thanks, Dan. As Dan said, total revenue for the most recent quarter increased 57% to a record-setting $10.7 million compared to $6.82 million for the prior year quarter. The increase was due to a 59% increase in product sales and a 5% increase in contract R&D revenue. The large product sales increase was primarily due to increased purchases by existing customers along with the addition of some new customers. We did acquire some new customers from traditional semiconductor companies with our superior products and shorter lead time. Sales increased in most of our markets and product lines. Anti-tamper products for the defense sector were especially strong, which enabled us to overcome some weakness in the medical device market. Improvements in our supply chain execution allowed for increased product shipments, although shortages remain a headwind and a continuing risk. Investments last year in equipment and added personnel in key production areas helped us achieve the record shipments. We began investing in production capacity early in the pandemic when some companies were pulling back. We continue to use our strong balance sheet to purchase equipment to increase our capacity, and we're expanding our production space for the second time this year to make room for new equipment. We expect to invest about $1 million or more in additional production and test equipment for the rest of the fiscal year. Expenses for the quarter decreased 7% from the prior year due to a 5% decrease in R&D and a 10% decrease in SG&A. The decreases were primarily due to the reallocation of resources to revenue generating activities. As a result of increased revenue, strong margins, and expense controls, our operating margin increased from 60% to 67.3%, a 730 basis point improvement. Interest income for the second quarter of fiscal 2023 increased 9% due to an increase in our available for sale securities and an increase in their investment, excuse me, in their interest rate. In the past two quarters, as investments matured, we were in a position to roll over nearly $19 million in our available-for-sale securities to capture increased market yields. Driven by increased revenue and decreased expenses, net income for the quarter increased 67% to $6.09 million, or $1.26 per diluted share, compared to $3.65 million, or $0.75 per diluted share, for the prior year quarter. For the first six months of fiscal 2023, total revenue increased 29% to $18.1 million from $14 million for the first six months of the prior year. The increase was due to a 29% increase in product sales and a 19% increase in contract R&D revenue. Net income for the first six months increased 42% to $10.2 million, or $2.12 per diluted share, from $7.23 million or $1.49 per diluted share for the first half of 2022. Turning to cash flow, during the first half of the fiscal year, we increased raw material inventory by $337,000 and work and process inventory by $474,000 to mitigate some of the supply chain shortages we've experienced. Capital expenditures were just $24,500 in the first half of the year. As I said earlier in this call, we're planning to deploy additional production equipment that we've had on order for a while in the second half of the fiscal year. These investments could result in capital expenditures in the range of a million dollars or more. We paid a $1 dividend per share in the past quarter, as we have for every quarter for the past seven years. For the first time since we started paying dividends in 2015, earnings more than covered the dividend for both the quarter and six-month periods. We see this as an important milestone. Today we announced that our board declared another quarterly dividend of $1 per share payable November 30th to shareholders of record as of October 31st. Now I'll turn it back to Dan to cover the business.