NVE CORP /NEW/ Q3 FY2025 earnings call

• Significantly increased R&D investment, spending 17% of revenue in the past quarter on R&D and introduced new wafer level chip scale products.
• Sales and marketing strategy includes evaluation boards to help customers visualize and implement designs.
• CapEx plans: $4 million to $5 million in capital investments over two fiscal years, with $1.16 million spent through three quarters of fiscal 2025, and a new machine scheduled to arrive next quarter.
• Extended building lease by 62 months through May 2031, with construction work for expansion completed, and next up is infrastructure upgrades for new equipment.

Total revenue for the quarter ended December 31, 2024 decreased 25% compared to the prior year quarter, due to a 22% decrease in product sales and a 74% decrease in contract research and development revenue. Gross margin for the quarter was 84% compared to 80% in the prior year quarter. Total expenses increased 40% due to a 61% increase in R&D and 12% increase in SG&A. Net income decreased 27%. For the first nine months of fiscal 2025, total revenue decreased 18% with a 20% decrease in product sales partially offset by a 72% increase in contract R&D. Gross margin for the fiscal year-to-date was 85%, operating margin 63%, and net margin 60%.

• Outlook for direct sales is positive with customers seeing industry conditions improving.
• Optimistic about the future with strong fundamentals of the business.
• Look forward to fiscal year-end earnings call in early May.

• Uncertainties related to economic environments in industries served.
• Risks and uncertainties related to future sales and revenue.
• Risk factors listed in SEC filings including annual report on Form 10-K for the year ended March 31, 2024.

Q: How are direct business and inventory liquidation going?

A: Direct sales have held up relatively well; distribution channel has inventory gluts. Direct sales are higher margin.

Q: Thoughts on bookings with direct customers?

A: Outlook is positive, customers see industry conditions improving.

Q: Offerings for hearing aids and TAM development?

A: Provide sensors for hearing aids, optimistic about trends as sensors provide inputs for AI.

Q: PUF business volatility?

A: Sales can be lumpy based on procurement schedules, but business has been strong with optimistic long-term defense sales.

Q: Medical device business?

A: Encouraging as Abbott reported growth in related areas, technology enables smaller devices and detects small magnetic fields.

Q: Details on adding sales staff?

A: Doing more direct sales, more trips, trade shows, marketing, evaluation boards to help customers try out products.