NVE(US:NVEC)2022-01-20 00:27Financial Data and Key Metrics Changes - Total revenue for Q3 2022 decreased 4% to $6.29 million from $6.53 million in the prior-year quarter, attributed to a 7% decrease in product sales, partially offset by an 86% increase in contract R&D [9] - Net income for Q3 2022 decreased 12% to $3.47 million, or $0.72 per diluted share, compared to $3.93 million, or $0.81 for the prior-year quarter [9][14] - Gross profit margin decreased to 78% in Q3 2022 from 84% in Q3 2021, primarily due to product mix and increased product costs [11] - Operating margin was 64%, pre-tax margin was 69%, and net margin was 55% [15] Business Line Data and Key Metrics Changes - For the first nine months of fiscal 2022, total revenue increased 31% to $20.3 million from $15.5 million in the prior year, with product sales and contract R&D both increasing by 31% and 17% respectively [15][16] - Expenses for Q3 decreased 14% from the prior year due to a 15% decrease in R&D and a 13% decrease in SG&A [13] Market Data and Key Metrics Changes - The company noted that global semiconductor shortages could last several more years, presenting both medium-term opportunities and threats [19] - Lead times for parts quoted were 16 weeks, significantly longer than pre-pandemic levels, but still better than industry averages of 52 to 80 weeks [12][19] Company Strategy and Development Direction - The company is investing in additional production and test equipment, expanding production space, and investing in tooling for alternate packaging vendors to address supply chain challenges [20] - A tentative agreement was reached to extend the supplier partnering contract with Abbott, including a price increase to address rising materials and manufacturing costs [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining customer relationships despite shipment delays, indicating that delays were not losses and that they had picked up business from competitors [32] - The company is committed to growth, adding equipment and expanding facilities to meet delayed product deliveries [33] Other Important Information - Capital expenditures were $58,000 in the first nine months, expected to increase significantly in the fourth quarter due to new test handlers [17] - A quarterly dividend of $1 per share was declared, payable on February 28 [18] Q&A Session Summary Question: How much business was lost due to shipment delays? - Management indicated that while there was significant revenue disruption, it was largely delayed rather than lost, and they had picked up additional business [32] Question: What is the status of onshoring packaging? - The company is redesigning parts for onshore packaging to reduce logistics delays, with expectations for the first wafers from onshore foundries soon [34] Question: What progress is being made in the automotive sector? - The automotive market remains a target, with ongoing work on designs and sampling parts for power conversion applications [37] Question: How is the company positioned in the hearable market? - Management expressed optimism about opportunities in the hearable market, particularly with upcoming regulatory changes [44] Question: What is the cycle time from wafer to finished product? - The cycle time has increased to approximately four to five months due to challenges with packaging vendors [53] Question: How is the company managing inventory amidst supply concerns? - The company has been able to build finished goods inventory by shipping available products while managing production effectively [57]