NVE CORP /NEW/ Q4 FY2025 earnings call

• Tariffs: Identified three risks - global recession from tariffs, tariffs on imported raw materials (small portion of costs, ample inventories), and retaliatory tariffs on exported parts (mostly exempt for semiconductors).
• Manufacturing: Completed expansion, deployed new machines, with $2-$3 million capital investments planned for fiscal 2026 including wafer fabrication equipment arriving next quarter.
• R&D: Increased investment, spent 14% of revenue on R&D, launched new products like advanced magnetic sensors and wafer level chip scale sensors, with advanced R&D initiatives for future growth.
• Sales and marketing: Exhibiting at trade shows like Sensor Plus and Sensor Converge, highlighting new products.

For the fourth quarter, there was a 3% year-over-year revenue increase. Contract R&D revenue saw a $270,000 or 558% increase, but product sales decreased by 1%. Sequentially, total revenue grew 44%, driven by a 40% increase in product sales and a 210% increase in contract R&D. For the fiscal year, revenue decreased 13% due to declines in the first three quarters, but the fourth quarter increased. Gross margin for the fourth quarter was 79% (up from 76%) and 84% for the fiscal year (up from 77%). Net income for the fourth quarter of fiscal 2025 was $3.89 million ($0.80 per diluted share), up 2% from the prior year quarter. For the fiscal year, net income was $15.1 million, down 12% but still $3.12 per share.

• Capital investments for fiscal 2026 are planned to be $2 million to $3 million, with a cluster of wafer fabrication equipment expected in the September quarter.
• Declared a dividend to be paid at the end of the month, with over $200 million in dividends paid over 10 years since starting dividends.

• Tariffs triggering global recession or industry downturn.
• Tariffs on imported raw materials (25% on Chinese imports since 2018, but small portion of costs).
• Retaliatory tariffs on exported parts, though most exports exempt for semiconductors.

Q: Last quarter revenue was somewhat disappointing, and now there's a strong snapback. Can you parse how much of the quarter's improvement was from channel snapback vs new business?

A: It was a combination of inventories being bled down (customers replenishing) and new business with significant interest in new products.

Q: Talk about new parts introduced this year in terms of TAM expansion and enabled end markets?

A: New products focus on medical devices, industrial control, and industrial IoT, with advanced magnetic sensors (omnidirectional) enabling flexibility in industrial controls and higher quality data for mechatronics.

Q: Curious on isolators for high voltage systems, how high voltage can they work in?

A: Isolators have up to 7 kilovolts isolation voltage and highest common mode transient immunity in the industry, allowing interface to higher voltage switches.

Q: Confidence in earning return on CapEx investment?

A: Prototype and sample devices have excellent customer feedback, and based on that, optimistic it will open new markets.