NVE Corporation

Good afternoon and welcome to the NVE Corporation conference call for the quarter and fiscal year ended March 31st, 2026. I'm Dan Baker, NVE's President and CEO. I'm joined by Daniel Nelson, our Principal Financial Officer, and Pete Eames, Vice President of Advanced Technology. This call is being webcast live via YouTube and Google Meet and being recorded. A replay will be available through our website, nve.com, and our YouTube channel, youtube.com slash nvecorporation. All participants are currently in 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. Pete will cover new products and R&D. I'll cover sales and marketing. And then we'll open the call to questions. Note that we're using a new call-in service this quarter with a different phone number. The call-in number and PIN are in our press release and in the Investor Events section of our website. We issued our press release with summary financial results and filed our annual report on Form 10-K in the past hour following the close of market. The press release has financial results for the quarter in addition to the fiscal year. Links to the press release and 10-K are available through our website. the SEC's website, and X, formerly known as Twitter. Also, this afternoon we posted a new sustainability report on our website. The new report replaces and supersedes our Task Force on Climate-Related Financial Disclosures, or TCFD, report. The new report covers climate, employees, and governance, and we also highlight the positive impact of our products on people and the environment. please refer to the safe harbor statement on your screen. comments we may make that relate to future plans, events, financial results, or performance, looking statements that are subject to certain risks and uncertainties, including, among others, such factors as our reliance on several large customers for a significant percentage of revenue, uncertainties related to the economic environments and the industries we serve, 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 just-filed annual report on Form 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 a 27% increase in net income for the quarter, driven by a 34% increase in our core non-defense sales, which more than offset a decrease in defense sales. Daniel Nelson will cover details of the financials. Daniel?

Thanks Dan. Fourth quarter total revenue increased 5% year over year to $7.65 million. The increase was due to a 6% increase in product sales, partially offset by a 19% decrease in contract R&D revenue. The increase in product sales was due to a 34% increase in non-defense product sales as Dan Baker noted, partially offset by a 79% year-over-year decrease in defense sales, which can be volatile because of defense procurement cycles. Sales increased across most of our non-defense product lines and channels. Total revenue increased 23% from the prior quarter. We see a continued bright outlook for product sales with favorable semiconductor industry conditions in our new products. We have ample inventories to support increased demand. The defense business has been steadily recovering over the past year, and we currently expect defense sales to increase significantly this fiscal year, the year ending March 31, 2027. Contract R&D is primarily defense and government related, and those revenues can also be uneven, but we currently expect contract R&D to increase this fiscal year. Gross margin for the quarter was 78% of revenue compared to 79% the prior year quarter. Total operating expenses decreased 19% for the fourth quarter of fiscal 2026 compared to the fourth quarter of fiscal 2025. due to a 26% decrease in R&D expense and a 5% decrease in SG&A. The decrease in R&D was due to completion of some of our wafer-level chip skill packaging activities and reassignment of some R&D resources to manufacturing. The decrease in SG&A was primarily due to the timing of selling and marketing activities. and reassignment of some SG&A resources to manufacturing and new product development. Interest income in the quarter decreased 6% due to a decrease in our marketable securities portfolio as proceeds from bond notaries help us pay generous dividends. Our effective tax rate which is the provision for income taxes as a percentage of income before taxes decreased to 5% for the fourth quarter of fiscal 2026, compared to 18% for the fourth quarter of fiscal 2025. The decrease was primarily due to advanced manufacturing investment tax credit on equipment we put into service in the past quarter. Net income for the quarter increased 27% to $4.9 million, of $1.02 per diluted share from $3.89 million or $0.80 per diluted share. The increase was primarily due to increased revenue, decreased operating expenses, and a decrease in our effective tax rate. This was our highest earnings since the Chipper-Geedon semiconductor shortages three years ago. Earnings more than cover our $1 per share dividend for the past quarter. Our profitability metrics for the quarter was strong. Operating margin was 62%, pre-tax margin was 68%, and net margin was 64%. For the fiscal year, total revenue increased 2% to $26.3 million from $25.9 million. As revenue increases in the past two quarters, mode and offset decreases in the first two quarters. The increase in product sales was due to a 21% increase in non-defense product sales, partially offset by a 67% decrease in defense sales, which can be volatile because of defense procurement cycles. Our full year tax rate decreased to 15% for fiscal 2026 compared to 16% for fiscal 2025. The decrease was primarily due to an increase in advanced manufacturing investment tax credits, partially offset by a decrease in foreign-derived intangible income deductions. The fiscal 2026 provision for income taxes included $1.07 million in advanced manufacturing investment tax credits. We expect such credits to decrease significantly in fiscal 2027 since we expect manufacturing equipment purchases to decrease significantly with the completion of our expansion. Prior year unamortized R&D expenses right of allow under the new tax law reduce our fiscal 2026 quarterly estimated tax payments by $1.4 million. We also expect a $1.3 million federal tax refund as a result of research and development in advanced manufacturing investment tax credits claimed in the fourth quarter of fiscal 2026. Net income for the year increased to $3.14 per diluted share from $3.11 per diluted share. The increase was primarily due to increased revenue, decreased operating expenses, and a decrease in our effective tax rate, partially offset by decreased gross margin and decreased other income. For the year, operating margin was 60%. The pre-tax margin was 68% and net margin was 58%. Cash flow from operations was $16.7 million in the fiscal year, an increase of 16% from the prior year. Cash flow was $1.5 million more than net income, showing the high quality of our earnings. Highlighting two cash flow items. Inventories decreased by 5% due to increased product sales. Raw materials and weight inventory decreased, but finished goods inventory increased. New equipment helped us convert raw materials and weight efficiently, with increased finished goods inventory to support increased product demand. Fixed asset purchases were $2.19 million for the fiscal year, which is unusually large for us. We substantially completed spending on our two-year, multi-million dollar expansion. We put the last major equipment cluster for that expansion into service in the past quarter as planned. Pete Ains will discuss the new equipment. We expect fixed asset purchases to decrease significantly in fiscal 2027 with the completion of our expansion. Now I will turn the call over to Pete Ains, our Vice President of Advanced Technology to discuss the new equipment and to cover new products and R&D.

Thanks Daniel. I'll cover new equipment and R&D. We completed a significant expansion in the past quarter. New equipment in the past year has increased our capacity, increased our capabilities, and allowed us to do smaller and more precise wafer-level chip-scale package parts in-house. The new equipment allows extremely precise control of spintronic materials deposition to well within one atomic layer. This capability translates into more precise spintronic devices and expands our capacity with existing products. As Daniel said, we placed the new equipment into service in the past quarter as planned. It's building products and we're confident the new equipment will pay back with more revenue. In the past quarter, the new equipment helped us fill orders for new high-performance TMR sensors. Our R&D strategy is to transition the world's best technology into the world's best products for high-value markets such as medical devices, electric and autonomous vehicles, advanced humanoid robotics, and highly automated fourth-wave factories using the artificial intelligence of things. We have a continuous flow of new products as part of that strategy. In the past quarter, we announced a new wafer-level chip-scale sensor for medical and industrial applications. The new part is 0.65 millimeters on the side, And as you can see in the slide, the sensor is about one-third the area of the conventionally packaged version, which allows smaller medical devices and especially precise robotics. In addition to the new sensor launches, in the past fiscal year we've also invested in advanced R&D initiatives with the potential to drive future growth, including next-generation MRAM for anti-tamper applications, next-generation sensors for hearing aids and medical devices, and extremely sensitive TMR sensors. Now we'll turn it back over to Dan Baker.