NVE Corp (NVEC) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NVE Corporation fourth quarter and fiscal year results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this call may be recorded. I'll now introduce your host for today's conference, Dan Baker, President and CEO; you may begin.

Good afternoon and welcome to our conference call for the quarter and fiscal year ended March 31, 2013. As always, I'm joined by Curt Reynders, our Chief Financial Officer. This call is being webcast live and being recorded. A replay will be available through our website, mve.com. After my opening comments, Curt will present a financial review of the quarter and fiscal year, I'll cover business items and we'll open the call to questions.

We filed our press release with quarterly results plus our Annual Report on Form 10-K with the SEC prior to the start of this call. Both filings are available through our website. Comments we may make that relate to future plans, events, financial results or performance are forward-looking statements that are subject to certain risks and uncertainties, including among others such factors as uncertainties related to the economic environments in the industries we serve, uncertainties related to interruptions in the government funding process such as sequestration; uncertainties related to future revenue, earnings, and growth; risks related to developing marketable products, uncertainties related to the revenue potential of new products, risks in the enforcement of our patents, litigation risks, 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. The Company undertakes no obligation to update forward-looking statements we may make.

We're pleased to report strong earnings for the quarter and fiscal year. For the quarter, net income increased to $0.64 per diluted share and gross margins increased to 74% from 70%. For the fiscal year, net income increased to $2.43 per diluted share compared to $2.34 last year and we had record gross and net margins. Gross margins increased to 74% from 67% and net margin increased to 44% from 40% last year.

Now, I'll turn the call over to Curt for details of our financial results.

Thanks, Dan. I'll cover quarterly results, fiscal year results and the balance sheet. Fourth quarter products sales decreased 11% from a record year-ago quarter. That decrease was partially offset by an 88% increase in contract, research and development revenue, resulting in a total revenue decrease of 5%.

Product sales increased 11% sequentially from the third quarter which was our second consecutive quarter of double-digit sequential increases. Summary quarter data are in the 10-K filed today. The contract R&D increase compared to the prior-year quarter was despite a challenging environment for government contracts. Such increases are unlikely to continue, however, because the near-term funding environment is quite challenging.

Gross margin increased to 74% of revenue for the fourth quarter of fiscal 2013, compared to 70% last year, due to a more favorable product sales mix and more efficient manufacturing. The increases in margin allowed us to increase earnings despite the revenue decrease and position us well to address high-volume, price-sensitive markets.

Total expenses decreased 8% for the fourth quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012, due to an 18% decrease in selling, general, and administrative expense and a 1% decrease in R&D expense. The decrease in SG&A was primarily due to decreased staffing.

Despite decreased revenue, income from operations increased 3%, due to an increase in gross margins and a decrease in expenses. Interest income decreased 4% for the quarter, due to lower interest rates, partially offset by an increase in interest-bearing securities. Income before taxes for the quarter was $4.62 million and pre-tax margin was 64%. The provision for income taxes was a higher percentage than the prior-year quarter, 32.8% of income before taxes compared to 31.4% last year due to a higher federal effective tax rate. The higher federal rate was due to a change in the mix of our marketable securities and higher income before taxes.

Net income for the fourth quarter increased to $3.11 million or $0.64 per diluted share compared to $0.63 last year and net margin was 43%. Despite ups and downs in the industries we serve, this was our 44th consecutive profitable quarter, that's every quarter for 11 straight years.

For the fiscal year, total revenue decreased 5% to $27 million. Product sales decreased 3% for the fiscal year, due primarily to the decrease in a challenging second fiscal quarter. As I mentioned earlier, we've had two consecutive quarters of double-digit sequential increases since then. Our geographic revenue mix was more international. Foreign revenues were 56% of our total compared to 53% in the prior year. Contract R&D decreased 24% for fiscal 2013 due to the completion of certain contracts and contract activities, the challenging budget environment for government contracts including federal budget delays and sequestration. Gross margins for the year increased to 74%, the highest in our history compared to 67% last year. The increase was due to more favorable revenue and products sales mixes and more efficient product manufacturing.

Total expenses decreased 3% for fiscal 2013 due to decreases in SG&A and R&D. S&A decreased 6% primarily due to decreased staffing. R&D decreased 1% for fiscal 2013, after more than doubling the prior fiscal year. We've introduced several new products in the past year, as a result of that increased effort and we have more in the pipeline. We report customer and Company-sponsored R&D activities at fiscal year-end, and the total of customer and Company-sponsored R&D activities was $4.35 million or 16% of revenue which is significant. Dan will talk about results of our R&D investments.

Interest income was flat for the year, as lower interest rates offset our increase in interest-bearing securities. The provision for income taxes was a higher percentage than the prior year, 32.6% of income before taxes compared to 31.5% last year, due to a higher federal effective tax rate. Net income for fiscal 2013 increased 4% to $11.8 million or $2.43 per diluted share compared to $11.4 million or $2.34 per share for fiscal 2012. Our net margin was a record 44%, up 4 percentage points from last year. Our earnings increase was despite what market researcher IHS iSuppli called a miserable year for the semiconductor market and suppliers in 2012, a year in which the semiconductor industry contracted. Fortunately, IHS iSuppli is predicting the slump will end this year.

As we have throughout our recent history, we continue to significantly outperform our industry on key metrics. According to Standard & Poor's Compustat, NVE's gross margin is in the 97 percentile of the semiconductors and semiconductor equipment industry, and operating and net margins are in the 100th percentile. Our comprehensive income increased 8% to $12.3 million for the fiscal year. For NVE, comprehensive income consists of net income, plus the after-tax unrealized gain or loss from marketable securities.

Turning to our balance sheet, we ended the fiscal year with our balance sheet stronger than ever, primarily because of $12.6 million of operating cash flow, what we formally call net cash provided by operating activities. As of March 31, cash plus marketable securities was $85.3 million, an increase of $11.7 million in the past year.

Purchases of fixed assets were $1.82 million for the fiscal year, which was our highest ever. The investments were primarily for production equipment and leasehold improvements. Leasehold improvements were primarily for the expansion of our production clean room. These investments position us for growth. With the major expansion completed, we currently expect our purchases of fixed assets to return to the historical range of several hundred thousand dollars in this fiscal year.

Shareholders' equity, which is our assets minus liabilities, increased to $94 million, our highest ever. Our asset quality is very good. All our tangible assets, and 89% is cash and marketable securities. As summarized in our 10-K, in the past five years, cash and marketable securities more than doubled, shareholders' equity increased more than $50 million with our consistent earnings, and our stock price more than doubled compared to an 8% increase for the benchmark small times index of companies involved in micro and nano-tech.

Now, I'll turn it over to Dan for his perspective on our business. Dan?

Thanks, Curt. I'll cover product development, expansion, and governance. Our goal is rapid growth. To do that, we need new products, efficient manufacturing, and plenty of capacity. While many in our industry cutback in a difficult year, we made substantial investments on all three fronts, product development, manufacturing efficiency, and capacity.

In the past year, we began marketing a number of new products, including lines of higher-performance network couplers, smaller network couplers, and lower-priced network couplers. We also made good progress on longer-term product developments, including couplers for in-car networks, low-power couplers, isolated power converters, current sensors for factory automation, low-field sensors applicable to consumer and industrial electronics, and high-field sensors applicable to medical devices. We believe each of these areas has significant revenue potential with existing and new customers.

Let's start with recent product introductions. A major advantage of our technology is miniaturization. Extending that advantage, in the past quarter, we introduced three new isolated transceiver part types that are half the size of existing parts. The smaller sizes is what we call our dash 3 package. The new parts extend in these miniaturization advantages, save valuable circuit board space, reduce system costs, and simplify interfaces.

We discussed two of the new part types on our January call. One of those was for high-speed RS-485 networks and the other for PROFIBUS networks. Later in the quarter, we introduced a third part type as planned for cost-sensitive RS-485 networks. RS-485 is a popular industrial control and process automation network. This newest device is code-named the IsoLoop-3085 and is an important element of our strategy to win more price-sensitive business, especially in Asia.

Efficient manufacturing, as evidenced by our record gross margins, positions us to take on large, price-sensitive markets. The new part is one-tenth the speed of our high-performance isolators but this still serves what we believe is a large market and is faster and smaller than other mid-range transceivers. Pricing is about 25% less than our high-performance parts, starting at $2.60 each for 1,000 pieces compared to $3.55 for the higher-performance parts.

We recently introduced new couplers and what we've termed our True 8 package. It's True 8, because it has true 8-millimeter creepage. Creepage is spacing over insulation and is a key figure of merit. 8-millimeter creepage is an emerging standard, especially in medical markets and in Asia. We custom-tool this package with couplers in mind. So, it meets the requirements and positions us as the leaders in this area. There are details on our website.

Also, in the past quarter, we began providing input-output buffer information specifications or IBIS models for our couplers. These models are used in our customers' design simulations. Controller area networks for cars is another promising large market. This quarter, we received first silicon for third-generation controller area network or CAN transceivers from our partner. The partner has reported interest from major automotive manufacturers. The transceivers are made with conventional semiconductors. We combine the semiconductor transceivers with our spintronic coupler technology to make an isolated CAN transceiver.

The key advantage of isolation in a transceiver is allowing communication with battery sensors in the large hybrid electric vehicle batteries, solving one of the tough problems for next-generation cars. We build prototypes and sample these third-generation parts with the first silicon, meeting the goal we mentioned in our January call. This is a key milestone in the automotive certification and qualification process.

Our CAN partner is a large semiconductor company with significant presence in the automotive market and expertise in automotive component qualification and certification. It plans to market our third-generation parts under its brand. Its private-label strategy provides a sales channel and credibility that could reduce our time to revenue. Early feedback is the speed of our part is an important advantage because it allows reliable transmission of more data. In addition, we believe our part has less power consumption than alternatives, which means it doesn't compromise the battery life it's helping to manage. Also, our part is smaller than alternatives such as conventional semiconductor optical couplers.

We've previously discussed a customer who is planning to use our custom spintronic biosensor in a new medical diagnostic instrument. And we've previously discussed that the customer's program is behind schedule. We've been notified that the technology that includes our biosensor has been transferred to another company that will pursue the opportunity. We see this as encouraging news. Our understanding is that the new company has the capability to manufacture a clinical instrument. We have provided technical support for the new company. But because they are new to the project, we don't have a detailed schedule for commercialization.

As we've reported, testing demonstrated significantly increased sensitivity for in vitro diagnostics with our biosensor technology compared to conventional methods. Another thrust the past year has been expansion. A major expansion will allow us to build the new products that we've developed and position us for growth. As Curt said, fixed asset purchases last year were our highest ever. But we believe the investments will pay back. We completed a major clean room expansion and infrastructure upgrade, which was a key element of our growth strategy. The expansion gives us a third clean room bay with about a 40% increase in total clean room space.

The infrastructure upgrades support additional equipment and capacity, including increased clean air handling capacity, higher-capacity electrical service, and more process cooling water. With the expansion and infrastructure upgrades, we added several pieces of new equipment in the past quarter, including specialized etch equipment and more automated photolithography. The new equipment will increase our capacity and improve our manufacturing efficiency when it's deployed.

Finally, on governance, our Annual Report was filed in the past hour and we expect to schedule our Annual Meeting for early August. Our proxy statement will be filed in late June or early July. Institutional Shareholder Services recently launched new governance scores designed to identify governance risks. These are like golf scores, lower is better. And NVE received a first-decile rating, meaning the lowest governance risk and in the Top 10% of public companies. We're pleased to be part of such select company. Now, I'd like to open the call for questions. Ashley?

Thank you. (Operator Instructions). Our first question is from Steven Crowley of Craig-Hallum Capital. Your line is open.

Good afternoon, gentlemen.

Good afternoon, Steve.

Afternoon.

A couple of questions. You attempted to give us some color on some of the programs that were talked about in the past. It seemed like the efforts with your partner targeting the automotive market have clearly made some headway. What I don't have a good sense for from your comments is how much more runway is there until the products are in a position to generate revenue for you? We should all talking -- are we talking about several quarters, are we talking about couple years? What kind of visibility do you have on that?

Well, we think that sampling the parts was an important milestone. So, there's some testing that needs to be done for automotive qualification. Automotive applications are very demanding. Our current goal is to complete that testing and qualification this calendar year, in 2013. There is a lot to that and there are some risks in that schedule, but that's our goal. We still have the prospects for revenue and sales in non-automotive markets, and we've been selling controller area network transceivers into those markets. So, we see near-term opportunities there, perhaps not as big as the automotive opportunity.

And then, the other thing that will pace that opportunity is the adoption and the rollout of electric cars and hybrid electric vehicles. And that is probably -- that's ramping up fairly rapidly, albeit from a small base. So, we hope in the next few years that we'll start to see a switch in cars -- in the mix of cars from conventional gasoline cars more towards hybrid electric vehicles, and we believe we have an excellent benefit proposition and some great opportunities for growth there. But, of course, there are many other things that are pacing the rollout of hybrid electric vehicles.

Well, and you would also need to be in new design wins for new vehicles as the market started to develop. Correct? It's not like you're in some of those vehicles now and adoption would guarantee revenues for you?

Right. That's correct. And we can sample parts and we have parts available for sampling prior to automotive qualification. That's not uncommon. And so, we're beginning that process now.

Now, in terms of the utilization of these products or similar products, the CAN transceiver line into other markets, what are some of the applications that have been driving that meaningful growth? Has there been meaningful? It sounds like there's been meaningful growth. I guess I don't know off of what base? But help us understand the significance of other applications and understand a little bit about them.

Sure. Well, controller area networks are used in a variety of applications. One of the most important for us is automotive factories. So, not only are controller area networks used in cars, they're used to make cars. And so, those -- that's a market that we serve now that doesn't require the environmental qualification and testing that in-car applications have. Of course, the factory doesn't have to withstand harsh Minnesota winters and the sorts of things that cars do. So, that's an application space and there are a number of other areas where those networks are used in industrial control process automation, things like factories, chemical plants, process control, and factory automation. So, our parts are being used there. We've received an excellent reception on our parts.

As I mentioned in our prepared remarks, the parts are faster, smaller, and more reliable than competing approaches. So we're very pleased with the reception those parts have received and their growth rate in that primarily non-automotive market. But it is a relatively small base. These parts are relatively recent. We just introduced the -- what we called our second-generation part last year. So, we're -- but we're seeing some great interest in those. And then, we see an excellent long-term market in automotive.

Is it reasonable to think that they could be 10% of your product, sales mix in -- over the next couple of years? Is that a reasonable kind of increment to your business, that this opportunity outside of the automotive vehicles, in particular, represents? Or is it a [myope] on scale, could it be much bigger than that?

It certainly could be that in that scale or bigger. There are some large opportunities there in non-automotive markets and our goal is to win those. We are very efficient in our manufacturing, as evidenced by our margins. So we feel we can be price competitive, we feel we've got technical advantages and we've got a long history of building excellent, reliable products in some of the most demanding applications in the world. So we're optimistic about those. It's difficult to put a number on them, but controller area networks are a popular protocol and we also see excellent potential in some of the new products that we have for RS-485 and PROFIBUS that are also -- that were also introduced in the past quarter.

And just before I leave the topic of this partner and the efforts in the automotive market, is -- I know it's been your intention, it's been the intention of the partnership and the working relationship for this firm to sell these parts under their label. Is that a definitive outcome at this point? Maybe that was a definitive outcome three months ago, where are we -- I mean, are you down that path and now, it's just a question of when those parts get formally released or where are we in that curve?

Well, that's still the plan. I guess there are no guarantees. We believe that we've produced an excellent part. We tested it here on some of the key parameters. We mentioned the speed that we're pleased with. We had planned for a -- to have a high-speed, best-in-class part. But it's great to actually see the data. So, the -- our customer, our partner in this venture is going to be evaluating those parts and our assumption is that if the parts meet their expectation and ours, and right now, we believe that they will that they will agree to sell them under their brand. So, there are some qualification and some testing involved and then they need to develop marketing collaterals and introduce the part and get it into their distribution channel and their marketing channels.

Can we talk a little bit about what transpired in the fourth quarter with the product sales? As you mentioned in your prepared commentary, you had another quarter of double-digit sequential growth, albeit to a level that was below a year ago, which was a very big number. But in that growth, in Q4 of 2013, what were the drivers; medical markets, industrial markets, certain customers? And what's the health of those drivers as we move forward here?

Steve, I think the growth was -- it was a combination that the medical markets were pretty strong and the industrial markets, we've seen them slowly recover. So, they were better in the fourth quarter than the prior quarter.

And in terms of the current business context, as you move into the new fiscal year, was there anything anomalous about those favorable trends in the fourth quarter or is it the best that you can gather that they're -- are encouraging trends continuing in those business, how would you characterize it?

I would characterize it as encouraging. I don't think there is anything unusual that happened in the fourth quarter and the trends look -- as far out as we can see, they look encouraging into fiscal year 2014. I think we are seeing signs -- this is Dan. I think we are seeing signs of the semiconductor industry recovering and that's encouraging. It was a down year in the semiconductor industry in calendar year 2012. But the forecasts are for improving conditions this calendar year, calendar year 2013. And I think we're seeing signs of that as well. And the medical markets, medical device markets remain challenging generally. But I think in our particular customer base, things have been pretty encouraging.

In terms of addition of key customers in medical, even if you can't mention names, have there been some notable additions, notable in the sense that they are meaningful customers who could be even more meaningful in the future?

There have been and there's been some growth in some of our early-stage customers. Medical devices business can develop fairly slowly because of the regulatory challenges that they face and the times involved in that. So, we've seen good progress in some of our medical device business and we find that encouraging.

So, of course, our success is tied to the success of our customers' products and that's sometimes difficult to predict, but I think we were pleased in the quarter while it didn't really show a lot in our revenue line with the progress that we've made in new medical devices and the progress that our customers have made in getting some of these earlier-stage products into production.

Great. I'm going to hop back in the queue, give some other people some chance, and I'll come back. Thank you.

Thanks, Steve.

Thank you. Our next question is from [Tom Bergin]. Your line is open.

Great, thank you. Good afternoon, Dan and Curt.

Good afternoon.

Afternoon.

I'm an individual investor here and I couldn't help but notice that this was the first time in many quarters that you haven't mentioned MRAM in your prepared remarks. And so I'll take it upon myself to mention it. Is -- and you can answer them just generally as possible would be great if you could give us any heads-up on the pending litigation between you and Everspin Technologies, that would be appreciated.

Okay. In terms of the status of the suit with Everspin, we did update in our 10-K, the legal proceedings. So, the case that we have against them has been stayed until June, which is not unusual because the patents are subject to reexamination. So, the court has stayed those proceedings. So, there isn't much new that we can report there. Also, Everspin sued us shortly after we sued them and that lawsuit is still making its way through the courts. We certainly feel very confident in our position in both cases.

Hey, great, thank you for that. It's been a while since you've spoken of second-generation MRAM, Dan, if you don't mind, again, maybe just generally, in terms of industry adaption, what can you tell us about the magnetothermal MRAM -- vertical MRAM as well as the the spin momentum MRAM?

Well, I'm glad you asked. We continue to see excellent promise in next-generation MRAM technology and particularly in spin-momentum transfer technology, which is one of the second-generation technologies you mentioned. We have excellent intellectual property in that space and we see that as having the potential to increase the density of MRAM perhaps dramatically, because it reduces the power consumption and alleviates some of the barriers to the thermally-limited cell size. So, we see that as having excellent potential although right now, it's still in the development stage. And as far as we know, nobody is making production spin-momentum MRAM. But we continue to see excellent promise there and MRAM remains one of our research [for us].

Okay, great. Yes, I noticed that Everspin Technologies had mentioned that they do intend to release commercial quantities of spin torque MRAM this year. As far as your vision on that is -- would that be something that may include your technology and if so, would we have to go through the litigation process again or would you expect that this current litigation would have some type of provision to address this second-generation MRAM?

Well, we'll have to see on that. It's hard to predict the course of litigation. It's certainly our goal to license our intellectual property and not have to resort to litigation although we feel that we need to defend our intellectual property for the benefit of our shareholders. So, we're prepared to defend our intellectual property. It's just hard to predict what might be in another company's products before those products are introduced, but we feel we have excellent intellectual property in the MRAM space and in the spin-momentum MRAM space, and we plan to defend that property.

Okay, well, that's great. Thank you for taking my calls, gentlemen. Congratulations on a great quarter and a great fiscal year, and we'll be watching from afar.

Thanks, Tom.

Thank you.

Thank you, again. (Operator Instructions) We have a follow-up from Steven Crowley of Craig-Hallum Capital. Your line is open.

Yes, Dan. I've seen a lot of news and really developing momentum around hybrid storage devices, traditional disk drives, combined with solid-state storage in notebooks, netbooks, whatever form factor that you'd like to reference. But where there are some pretty significant forecasts about penetration of those devices with hybrid drives, what, if anything, does it mean to you or can it mean to you near-term? Obviously, long-term, that could be a home for MRAM-based products, but is there any earlier play for you guys?

Well, it's hard to say. We've been focusing our own production of MRAM on smaller devices. We really aren't scaled for large-scale devices. So, our strategy has been to license our intellectual property for larger-scale memory and MRAM and those would be the types of memories that would go into hybrid drives, but it certainly bodes well for a transition -- a possible transition from moving parts, types of memories like disk drives with all of the problems that they have with speed and reliability towards solid-state drives, and we're seeing that on several fronts, as you know; hybrid drives is one of them, where it doesn't require the size of memories that would be required for full solid-state drives. So, combined some of the best attributes of disk drives and solid-state memories. And MRAM is an excellent candidate for that because it has a combination of speed, density, and nonvolatility that really isn't available in any other technology. So, in terms of memories of that size and larger, we see our strategy is licensing our intellectual property.

I assume if you would have had a licensee of that ilk, we would have heard about it in some disclosure. Can we make that assumption that if you had one, we'd know about it or can we not do that?

Well, we'd certainly like to talk about those things if we could and I think what we're -- sometimes, we can't, but if it was something that would be material from a reporting standpoint, then, we would report that.

Is the other avenue for you to have some activity in that arena through a potential licensee who is doing commercial research with your intellectual property or am I stretching too far as to what could be going on?

No, that is a possibility and that's one of the possibilities for a licensing strategy.

Okay. On the topic of that contract R&D, you had a sizable quarter in contract R&D, but it looks to be a pretty tough landscape to garner additional dollars. Is that business of a nature where there is significant commercial funding of contract R&D right now or is it completely reliant on government sources? And your firm backlog of contract R&D is pretty small at the moment, does that need to fill back up before you can have meaningful contract R&D revenue in fiscal 2014 again?

So, in answering your first part of your question, our contract R&D is not entirely dependent on government, but a lot of it is linked to government either directly or indirectly; directly meaning government contracts; indirectly meaning that the contracts are from customers that are commercial customers, non-government customers. But their funding is relying on some chain of government's funding. So, the government budget outlook does affect that business and we do see a challenge coming up in the near-term because of the low backlog that you noted and because of the landscape that we're seeing in government funding with budget delays and sequestration.

We do however -- we're fairly optimistic in the medium to long-term. We have excellent technology. We've developed an excellent reputation and we have prospects in that business line. But it can be a little bit lumpy and if the contracts tend to be relatively large as a portion of that business. So in the long run and the medium-term, we are committed to the contract R&D business. We think it's a good way to fund R&D.

As Curt mentioned in the prepared remarks, we have approximately 16% of our revenue is R&D that's either customer or Company-funded. So that's a relatively largest R&D investment and we're able to do that with a relatively -- well, with approximately 10% that's actually an expense line. So we see it as an excellent business model.

In the near-term, we are looking at deploying those resources in Company-funded R&D and we have some excellent projects. We've talked about some of the projects that we have and we see that business recovering.

Okay. Now, you mentioned the change in the partner, I guess, for the biosensor opportunity. I guess, change can be good. Hopefully, it is in this case anyway. You've been stuck. Now, the impression that it was easy to get related to that program is that there were some regulatory challenges, at least regulatory hang-ups for that product's approval in international markets. Was that a misdirection in our thinking and the issue really related to customer disruption given that somebody new is taking over the program, and is that a function of an acquisition or a strategic alliance? Help us understand why that might work for you guys better than what hasn't been working?

Right. Well, I think we see that first of all, somebody purchased this business unit is our understanding. So they -- we presumed it some due diligence and saw the opportunity and I think we see that as positive. And I think because the program took longer than we had hoped and we presumed that our customer had hoped, it may have been challenging for them to continue with for a variety of reasons. So, we see a committed new owner and project leader on the project as possibly a positive development.

I'm not sure how much of the delays can be explained by regulatory and how much can be explained by some flux of uncertainty in a transition period between those two companies. But I think we're optimistic and we're looking forward to moving the project forward. As I mentioned in the prepared remarks, we've had some communication with the -- with I guess will be the new customer. And I think we find that encouraging and we are -- what we can do directly is we can be ready for production and we have the infrastructure in place, we have the capacity to support large-volume production of these types of parts. So we are prepared and we are committed to make it successful.

Last quarter, we talked about you trying to develop some other opportunities in the IVD marketplace in parallel. In other words, you didn't have to wait for success with the first customer to go on to other opportunities. Do you have anything to report on -- well, update us on on that front?

And we really have talked about a couple of major programs that you brought to us two years ago. And how safe is it for us to assume that you've got other major programs, product opportunities that you haven't talked about given the satisfaction in talking about the first few or life thereof that are underway, or is that just wishful thinking on the part of some of your interested observers?

Well, to the second part of your question, we have a number of opportunities and I think I mentioned several of them in the prepared remarks and we included some of those in the business description in our recently filed 10-K.

And as I mentioned in the prepared remarks, we see those as some excellent opportunities. So we remain committed. I think one of those opportunities that we've talked about that we haven't been able to provide some specific updates related to consumer electronics to smartphones and in particular to navigation systems and spintronic compasses.

And we continue to see opportunities, albeit earlier stage, for that market, for the smartphone and wireless market for sensors. And we are working on a -- and we've provided some samples for an early-stage, large opportunity. That's early stage, so we tend -- well, I just talked about it, but we tend to try to talk about opportunities, when there are some specific milestones that we can talk about.

But there are a number of things that we're working on that we see as excellent opportunities. And the general summary was that summary that we gave in the prepared remarks and in the 10-K. So we are committed to seeing our technology reach broad markets, including consumer electronics and automotive; and we have initiatives in place for those markets and we're making progress on several fronts.

And on the IVD initiative or the biosensor initiative, do you have some other irons in the fire or you're still working to get there?

We do have other irons in the fire and one that we've talked about is the possibility of detecting food-borne contamination and that's something that we're continuing to look at and work if possible avenues to get to a commercialization plan for that. And hopefully, we'll have some updates on that in future calls.

There is nothing specific, I think, that we could talk about there other than we see that as an excellent opportunity, perhaps with less regulatory delays or hurdles. And we see it as a great application of the technology where being able to detect pathogens and infectious agents quickly could be very important.

Hey, thanks for taking my questions.

Thanks, Steve.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to management for any further remarks.

Well, thank you. We reported earnings growth and record margins for the year and our second consecutive quarter of double-digit increases in sequential product orders. We're positioned for growth with a pipeline of new products, efficient manufacturing, and expanded capacity; and we look forward to reporting first quarter results in July and our Annual Meeting in August. Thank you, again, for participating in the call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.