NVE Corporation

Hello and welcome to NVE Corporation conference call on second quarter results. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I will now like to hand the conference over to Daniel Baker, President and CEO. Sir, you may begin.

Good afternoon and welcome to our conference call for the quarter ended September 30th, 2023. This call is being webcast live and recorded. A replay will be available through our website, nve.com. I'm Dan Baker and I'm joined by Accounting Manager and Principal Financial Officer Daniel Nelson. After my opening comments, Daniel Nelson will present our financial results, then I'll cover marketing and new products, and we'll 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 10-Q are available through the SEC's website, our website, and on X, the platform formerly known as Twitter. 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 environment and the industries we serve, risks and uncertainties related to future sales and revenue, and risks of credit losses, as well as risks 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, 2023, as updated in our quarterly report on Form 10-Q for the quarter ended June 30, 2023. 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 and cash flow despite decreased revenue from a record quarter a year ago. Daniel Nelson will cover the details of our financials. Daniel?

Thanks, Dan. Total revenue for the quarter ended September 30 of 2023 decreased 33% to $7.13 million compared to $10.7 million for the quarter ended September 30 of 2022. The decrease was due to a 32% decrease in product sales and a 92% decrease in contract R&D. The decrease in product sales was against the tough comparison to last year when product sales increased 59% and a reflection of a semiconductor industry downturn. The good news is that forecast for a strong industry is projecting a 20% increase in semiconductor sales after a 12% decrease this year as demand rebounds for most application lines. The decrease in product sales was primarily due to decreased purchases by existing customers. Product sales to defense markets were especially weak in the quarter. This was related to the timing of procurement cycles, and we expect these sales to recover in coming quarters. The decrease in contract R&D revenue was due to the completion of most contracts, but we have new active contracts and contract R&D is expected to strengthen later this fiscal year. Total expenses decreased 17% for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023, primarily due to a $202,000 decrease. $926 credit loss provision reversal, partially offset by a 2% increase in R&D expense. The provision for credit loss reversal was due to a reassessment of our allowance for credit losses based on payments and debt that customer information as of September 30, 2023. Interest income for the second quarter of fiscal 2024 increased 46% due to higher yields on securities purchased after September 30, 2022. Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 8% for the second quarter of fiscal 2024 compared to 19% for the second quarter of fiscal 2023. The decrease was due to the reversal of a $202,926 credit loss provision and changes in the amounts and timing of tax deductions and credits. Our effective tax rate can vary from quarter to quarter. Our effective tax rate in subsequent quarters will likely be higher than the effective tax rate in the quarter ended September 30 of 2023. The 22% decrease in net income for the second quarter of fiscal 2024 compared to the prior year quarter was primarily due to decreased revenue, partially offset by decreased expenses, increased interest income, and a lower effective tax rate. Net margin was a remarkable 65% of revenue. For the first six months of fiscal 2024, total revenue decreased 12% to $16 million from $18.1 million for the first six months of the prior year. The decrease was due to a 10% decrease in product sales and a 68% decrease in contract R&D revenue. Net income for the first six months decreased 11% to $9.13 million or $1.89 per diluted share from $10.2 million or $2.12 per diluted share for the first half of fiscal 2023. Net cash flow provided by operating activities increased 11% to $10.4 million for the first half of fiscal 2024 compared to $9.35 million for the first half of fiscal 2023. The strong operating cash flow more than cover out dividends so far for this fiscal year, and cash plus marketable securities increased from $53.3 million to $53.8 million. Now I'll turn the call back over to Dan Baker to cover the business. Over to you, Dan.