Jeffrey Milton Bernstein

Jeffrey Milton Bernstein from Silverberg Bernstein Capital asked about the drivers of the Q4 revenue rebound, seeking to parse the impact of channel inventory replenishment versus new business wins. He also inquired about how new products expand the company's addressable market, the high-voltage capabilities of NVE's isolators, and the confidence behind the significant planned increase in capital expenditures for fiscal 2026.

Answer

President and CEO Daniel Baker stated that the strong revenue was a combination of both customers replenishing inventory and significant interest in new products. He explained that new products, like advanced omnidirectional sensors, target NVE's traditional strongholds in medical devices and industrial IoT. Baker highlighted that NVE's isolators have industry-leading voltage (7kV) and Common-Mode Transient Immunity (CMTI), making them ideal for new high-voltage systems. He noted that confidence in the increased CapEx stems from excellent customer feedback on prototypes, which suggests the investment will open significant new markets.

Jeffrey Milton Bernstein of Silverberg Bernstein Capital inquired about several topics, including the significant increase in contract R&D, the potential timeline for that R&D to convert to product sales, the performance and outlook for the unclonable functions business, the mix shift towards direct sales and its impact on gross margins, and the application of NVE's navigation sensors in medical catheters.

Answer

President and CEO Daniel Baker explained that the contract R&D is primarily for defense-related anti-tamper systems, which builds the company's IP portfolio, but product conversion timelines are uncertain due to procurement cycles. He noted that the unclonable functions business was strong in the quarter, benefiting from allied defense system sales, though sales can be lumpy. Baker confirmed that a semiconductor industry slowdown led to inventory buildup in distribution channels, causing a favorable mix shift to more profitable direct sales. Regarding medical sensors, he highlighted their advantages of small size and high sensitivity for precise catheter navigation, a key growth area.

Jeffrey Milton Bernstein asked for details on the unrenewed large contract, clarification on the price lookup (PLU) fraud application customers, specifics on recent technological advancements including work with laser companies, and the current strategy for the factory automation business.

Answer

CEO Riley McCormack reiterated that the large contract opportunity is still live but is considered upside to the current plan. He clarified the PLU fraud solution is being deployed with partner Picadeli and also with a U.S. retailer who is now evangelizing the product. He detailed tech advancements in copy detection, deterrence, and new application methods like lasers, and confirmed the factory automation use case is now primarily driven by their partner ecosystem.

Jeffrey Milton Bernstein asked for details on a European recycling contract with major CPGs, an update on the precious metals reseller deal, clarification on how subscription upsells work, and the status of AI watermarking legislation in California.

Answer

CEO Riley McCormack acknowledged the European recycling initiative but deferred specifics until a broader company update. He confirmed the precious metals partner relationship is expanding. On subscriptions, he explained that contracts often have capacity limits with overage fees, and upsells are earned through strong performance. Regarding legislation, he expressed disappointment with California's chosen bill but noted a sponsor plans to reintroduce a preferred bill next year.

Jeffrey Milton Bernstein inquired about the nature of the new SRAM opportunity, asking if the customer is in semiconductor fabrication or test equipment. He also sought clarification on the APU product roadmap, specifically asking about the new '[Plato]' product and the 'L' variant of the Gemini-II chip, including whether [Plato] is intended for inference.

Answer

Didier Lasserre (executive) clarified that the SRAM customer is in the semiconductor manufacturing sector but declined to provide more detail to protect the customer's identity, noting they will soon become a significant customer exceeding 10% of revenue. Lasserre explained that Gemini-II L is a low-power derivative of the existing Gemini-II chip, not a new design, achieved by configuring the die to use fewer cores. In contrast, '[Plato]' is a completely new, low-power chip design specifically targeting the Large Language Model (LLM) inference market on edge devices.