NVE Corporation

Good day and thank you for standing by. Welcome to the NVE Corporation conference call on third quarter results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Baker, President and CEO.

Good afternoon and welcome to our conference call for the quarter ended December 31st, 2023. This call is being webcast live and recorded. A replay will be available through our website, nve.com. I'm Dan Baker, and as always, I'm joined by accounting manager and principal financial officer, Daniel Nelson. After my opening comments, Daniel will present our financial results I'll cover customers, products, and marketing. Then 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, 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 environments and the industries we serve, and risks and uncertainties related to future sales and revenue, 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, 2023, as updated in our quarterly reports on Form 10-Q for the quarters ended June 30th and December 31, 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, comprehensive income, and cash flow despite decreased revenues 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 December 31st, 2023 decreased 9% compared to the prior year quarter. The decrease was due to a 12% decrease in product sales, partially offset by a 94% increase in contract R&D revenue. The decrease in product sales was primarily due to decreased purchases by existing customers, particularly in the defense industry and the semiconductor industry downturn. The good news is that the industry is gaining strength. and forecast for a strong industry recovery in calendar 2024. World semiconductor trade statistics is forecast in the global semiconductor market to grow 13% in 2024, compared to a 9% decrease in 2023. Product sales to defense markets can fluctuate and were especially weak in the quarter. This was related to the timing of procurement cycles, and we expect these sales to recover in this quarter, the March quarter. The increase in contract R&D revenue was due to new customer research and development contracts. Total expenses decreased 16% for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023, primarily due to a 23% decrease in R&D expense or 4% decrease in SG&A. The decrease in R&D expense was primarily due to the redeployment of resources to customer-funded research and development projects. The decrease in SG&A was primarily due to decreased performance-based compensation accruals. Interest income for the third quarter of fiscal 2024 increased 21% due to higher interest rates. Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 16% for the third quarter of fiscal 2024 compared to 19% for the third quarter of fiscal 2023. The decrease was primarily due to increase in certain tax deductions. Our effective tax rate can vary from quarter to quarter and may be higher in future quarters than in the past quarter. The 1% decrease in net income from the third quarter of fiscal 2024 compared to the prior year quarter was primarily due to decreased in revenue, which was nearly offset by decreased expenses, increased interest income, and a lower effective tax rate. Comprehensive income increased 8% to $4.93 million from $4.56 million the prior year quarter. It was a solidly profitable quarter with gross margins of 80% of revenue and net margin of 62%. Total revenue for the nine months ended December 31st, 2023 decreased 11% compared to the nine months ended December 31st, 2022. The decrease was due to an 11% decrease in product sales and a 20% decrease in contract research and development revenue. Net income decreased 8% and comprehensive income increased 3%. Net cash provided by operating activities increased 2% to $15.1 million for the first nine months of fiscal 2024, compared to $14.7 million for the first nine months of fiscal 2023. The strong operating cash flow more than covered our three dividends so far this fiscal year, and cash and cash equivalents plus marketable securities increased to $54.7 million from $53.3 million at the start of the fiscal year. Purchases of fixed assets have been only $17,000 so far this fiscal year, but we'd expect it to increase significantly in future peers. Now I'll turn the call back to Dan Baker to cover the business. Over to you, Dan.