Good day, ladies and gentlemen, and welcome to the NVE Corporation Conference Call on Fourth Quarter And Fiscal Year Results. At this time, As a reminder, this conference call is being recorded. I would now like to turn the conference over to our host for today, Dan Baker, President and Chief Executive Officer. You may begin.
Good afternoon, and welcome to our conference call for the quarter fiscal year ended March 31, 2018. As always, I'm joined by Kurt Reinders, 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, Kurt will present a financial review of the quarter and the year, I'll cover business items and we'll open the call to questions.
The close of market. Links to documents are available through the SEC's website, our website, and our Twitter timeline. 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 is our reliance on several large customers for a significant percentage of revenue risks and uncertainties related to the economic environment in the industries we serve, risks and uncertainties related to future sales and revenue, uncertainties related to the impact of federal tax reform as well as the risk factors listed from time to time in our filings with the The company undertakes no obligation to update forward looking statements we may make. We're pleased to report that a 19% increase in product sales drove a 15 percent increase in total revenue and a 28% increase in net income for the quarter.
For the fiscal year, net income increased 7% to 2.87 $2.87 per share and operating cash flow increased 22 percent to our highest ever. Kurt will cover the details of our financial results. Kurt?
Thanks, Dan. As Dan mentioned, 4th quarter total revenue increased 15% to $7,900,000 compared to $6,850,000 in the year ago quarter. The increase was due to a 19% increase in product sales partially offset by a 35% decrease in contract The strong product sales for the quarter were due in part to increases in anti tamper sensor sales for defense applications Those of you who followed us for a while know our technology is well suited for anti tamper and cyber security. It remains a niche market for us and it can be cyclical, but has good long term growth potential. The decrease in R&D revenue was due to the completion of certain contracts.
Dan will talk about contracts in a few minutes. Gross margin increased to 81 percent of revenue compared to 79% last year due to a more profitable revenue mix. Expenses decreased 3% for the 4th quarter due to a 10% increase in SG And A partially offset by an 8 performance based compensation with the strong quarter Research and development expense was due to the completion of certain projects and project phases. Increases in sales and gross margins, along with the decreased expenses, drove a 26% increase in operating income for the Interest income increased 4% for the The increase in interest income was despite a decrease in our marketable securities as we use a portion of maturing securities to fund the dividends Income before taxes increased 24 percent to $5,550,000 from 4,460,000 in the prior year quarter and pretax margin was over 70%. Our effective tax rate decreased to approximately 30 The decrease was due to the blended effect of a decrease in the federal tax After tax, net income for the most recent quarter increased 28 percent to $3,880,000 or $0.80 per diluted share compared to $3,030,000 or $0.62 last year.
Net margin for the quarter increased to 49% compared to 44% last year. For the full fiscal from 28,300,000 in the prior year. The increase was due to a 4% increase in product sales and a 19% increase in contract R and D. We report revenue by geographic region in our 10 K, about half our revenue was international in the past year. U.
S. And Asia Pacific revenue each increased to 10%. While EMA, Europe, the Middle East and Africa increased 5%. Dan will discuss a positive change in our European product distribution. Gross margin remained at 79% for the year.
Expenses in fiscal 2018 increased 7% due to an 11% increase in R&D partially offset by a 2% decrease We report customer and company sponsored R and D in our 10 K. In addition to company sponsored R and D, we spent $1,270,000 on customer sponsored R and D in fiscal 2018, for a total R and D investment of $4,840,000 or 16 percent of total revenue. Interest income decreased 6% for the fiscal year with the decrease in our marketable securities as we use a portion Increased interest rates on recent bond purchases are beginning to offset portfolio reductions. Income before taxes increased 5 percent to $20,000,000 from $19,100,000 the prior year. For the fiscal year, primarily due to a decrease in the federal tax Net income for the fiscal year increased 7 percent to $13,900,000 or $2.87 per diluted share compared to $12,900,000 net margin increased to 47% from 46%.
We continue to have best in class performance metrics. According to Standard And Poor's Compustat, NVE's gross margin is in the 99th percentile of the Semiconductors and Semiconductor equipment industry and operating and net margins are in the 100th percentile. As Dan said, operating cash flow increased 22% a record $15,200,000 for fiscal 2018. Fixed asset purchases were the highest they've been in several years, $605,000 compared to $520,000 last year $287,000 in fiscal 2016. Most of the investments were to improve production efficiency or increase capacity to support growth.
In addition to prior year comparisons, we Product sales, total revenue, and earnings have all increased for 2 consecutive years. The Tax Reform Act enacted in December reduced federal corporate tax rate starting this calendar year. We currently expect our effective Strategically, we hope the lower rates will help us compete more fairly with foreign competitors that would help us grow, innovate and justify new investments. We paid $4 per share in dividends in the past year, which brought the total cash returned to shareholders in the past 5 years in the form of dividends and stock repurchases to more than $70,000,000. In addition to the dividend paid payable May 31st to shareholders of record as of May 14th.
Now I'll turn it over to Dan to cover the business. Dan?
Thanks, Curt. I'll cover new products, R and D distribution and fiscal 2018 highlights. R and D was focused on expanding our product lines, especially for the internet of things. In the past quarter, We began sampling a new series of tunneling magnetoresistance or TMR couplers, the IL-one series. These devices are lower power than our legacy giant magnet resistance or GMR couplers.
The new devices are designed as gateway the internet of things, where lower power allows parts to be battery powered for a long time. Turning to contract R and D, we made good progress on our Department of Agriculture Biosensor grant and we have components ready for prototypes, including biosensors, magnetic nano particles, aptamers, microfluidic manifolds, and cartridges. We're focusing our efforts this quarter on the biosensors and control electronics and we remain optimistic. We'll meet the main overall milestone of live pathogen testing on schedule in August. We completed the research contract with the U.
S. Navy Naval C. Systems command for Circulated Technology for full integration at the monolithic microwave integrated circuit level with useful results. The goal was Our project team led by the principal investigator, Doctor. Joe Davies, and including a team from Oregon State University, summarize the results in a paper presented at the interbank conference last week in Singapore.
There's a link to the paper abstract the Papers and Presentations section of our website and on our Twitter timeline. Perhaps in part because of tweets like that one, Our Twitter account was recently called Minnesota's nerdyest corporate Twitter account by Cathy Grayson of Minneapolis St. Paul Business Journal, we took that as a compliment of course. In addition to military applications for our new Circulator technology, potential commercial applications such as 5gcellular Infrastructure And Automotive Telemetry. The rugged reliability of our technology makes it ideal for automotive, industrial, and other demanding applications.
A great example of that is, as we've discussed previously, our components have been selected for the Europa Clipper edition in this past quarter. The mission moved to what they call plan or phase B NASA scheduled to complete phase B with preliminary designs in September. We sold a small number of parts to aluminum Jupiter to look for water and signs of life. The mission has rigorous requirements for a very harsh environment with coal and radiation. There's not huge revenue potential and it will take a while, but it validates the ruggedness and reliability of our products and technology.
The mission launch is planned for the 2020s and then it will take several years to get to Europa. ND brand distribution is primarily catalog internet distributors in the U. S. And specialized distributors outside the U. S.
One of our most successful and important distributors outside the U. S. Has been German based IS line. Effective April 1st, I outlined its activities with Pefetron through the Swiss, angst, and sister group. They say the combination makes them even more powerful partners in the sensor technology and power electronics market.
IS line said the Revitron sales team will more than double its sales power. We've been helping train the new sales team on our products and we're optimistic about the new organization. In fiscal 2018, we worked on technology to help save lives, improve safety and explore other worlds. Specifically, We continued to develop small, precise, reliable, efficient components for advanced life saving medical devices. We advanced our food safety technology, and we designed ultra rugged proponents suitable for space.
Other highlights of the past year. We extended our products for the industrial internet of things, including products built as the world's smallest analog sensor, the world's most sensitive magnetic switch, as well as high field sensors plus new angle, rotation and current sensors. We completed an ROE contract on a spin torque microwave diode and a Navy contract for a miniature circulator. We met key milestones on our Department of Agriculture Biosensor grant. We launched a new partner with 1 of the world's largest semiconductor companies to expand our distribution and reach larger markets.
Our quality management system was certified to the rigorous new ISO 9001, 2015 standard. Which will help us reach automotive and other new markets. And we continued preparations for the Europa fly by mission. R and D investments have uniquely positioned NPE with products and technology. Our vision for the coming year is to accelerate our growth as we lead a technology revolution.
Thank Our first question comes from Jeff Bernstein of Cowen. Your line is now open.
Can you talk a little bit about the medical devices space and rhythm management? And I think you were starting to see a recovery there last quarter and just give us a little more color?
Certainly. Well, good afternoon, Jeff. So CRM, as you know, as you mentioned, has been under pressure. For example, Abbott reported little or no cardiac rhythm management organic growth in their report for the 1st calendar quarter. But that compares to a significant decrease in 2017.
And they said that last year, U. S. CRM sales were impacted by competitive dynamics in the MRI category. But they've reported FDA approval for MRI conditional labeling for their surety MRI and the Eclipse ICD this year. And said this calendar year and said that FDA labeling approval for its ICD significantly enhances its competitive position in the category.
So that's the specifics CRM, as you know, as the population ages, our technology has a strong benefit proposition in CRM, and we're gaining traction in the broader narrow related market.
Great.
And then I wanted to ask about the auto market. You had partnered with a major semi vendor. I think you had 6 products that they were going to be taking to market for you. I think you were also looking for IE TF1649 certifications. Can you just give us an update on auto?
Certainly. So, automotive sensor contact, content is expected to increase, particularly with hybrid electric vehicles self driving cars. So our advantages in the automotive market are lower power for more efficiency and higher isolation longer barrier life for reliability. We introduced one of the products that I mentioned in the prepared remarks was a new current sensor in the past year, the AAL-twenty four, which is an important category for electric vehicles. And we're also designing what we call smart current sensors, which are very useful in electric vehicles, and will make a more seamless, easier to use interface for computer and controller systems in cars.
And our new private brand partnership that you mentioned will give us credibility and broader exposure in the automotive market. You also asked about IATF or international automotive task force certification. And we're working towards that. We've been working on new procedures, policies to conform with the automotive standards. It's a rigorous process, but it will build our credibility.
And our goal is to have a conformance this year, this calendar year.
Got you. Okay. And so are you making sales yet into automotive?
Modest sales. But we're looking at this as a very large market and, we're looking at categories, particularly battery management systems for hybrid electric vehicles where we think that there's a much larger market than we're currently serving. The sales that we have now, we believe are mostly related to to some of our existing parts and, in some cases, the controller area and transceivers. But right now, it's modest. But we consider it a significant growth opportunity.
Gotcha. Okay. And then, the, the, you said in the introduction that you had some revenue contribution this quarter, from the anti tamper puffs, I guess, which I wasn't sure if they had actually been a commercial prior. So can you give us an update on that?
It was a variety of technologies. Puffs is a little bit longer term. We try not to be too specific about what exactly we're selling because it could be self defeating to get too specific, but we have a variety of anti tamper technology. Some of it is for what's called volume protection, which means physical intrusion or somebody removes a circuit board to try to reverse engineer it or opens a box that supposed to be secure. We have technology detect that and then we have technology to detect, counter fitted or replaced integrated circuits order or to guard data streams.
So it's a variety of things. And just everything, or a lot of things came together for a very strong quarter in steady business that we get from some of the commercial devices, but it's excellent technology, as you well know, And we see, long term growth opportunities in both the high end military Aerospace markets, but also for migrating this technology into commercial applications and securing all the things that we rely rely on every day in terms of cybersecurity. So long term, we consider it very important.
Great. Thanks for the clarification. I'll get back in the queue and let someone else ask some questions.
Thank And we do have a follow-up question from Jeff Bernstein of Cowen. Your line is now open.
Okay. I had a couple more. Can you just differentiate, you talked about the Navy contract on the isolator, I guess. And then I know you had an army contract. And can you just differentiate those 2?
Right. So, both are in the same general category. But the army contract was for a spin torque microwave diode, which is a device that can be used for ultra high frequency microwave communications, in particular, I believe we said we just trying to think what we can say publicly, but it can be used for radar for certain types of radar. The Navy contract was for a circulator, which is a device that can route or combine a very high frequency signal. So the general category that we're looking at is extremely high frequencies.
And as you know, as bandwidth starts to become more and more crowded, we tend to move towards higher and higher frequency with the assumption that the technology keep up. And one of the technologies that will help keep up is our technology, Spintronics, because it can run at very high frequencies. And so both of those projects involved, microwave range communications and signal processing, which, as I mentioned in the prepared remarks, is important not just for the military but also, 5g, data for cell phone network, cellular networks is moving towards higher and higher frequency bands. And telemetry for cars is also moving to some of those bands and possibly the same ones as 5G. So there's a need for just sort of a it seems like an unquenchable need for faster and faster devices.
Got you. And then I wanted to ask about the hearing aid business.
Yes. So, the hearing aid business is a, has been an important and strong business for us for many years. It's been, as I mentioned, in response to your prior question, like CRM, it's been a challenging market in the near term, because of the landscape for health care and some other factors that are beyond our control. But we continue to invest in that market. We have a strong benefit proposition in terms of ultralow power, which extends battery life.
We continue to work on lower and lower power and smaller and smaller devices. And there's just, a tremendous need and appetite for that to make hearing aid smaller, more power efficient, last longer with the battery charge the batteries or charge. And, and to be smaller and less, less obtrusive and fit fit deeper into the year. So those are things that we can, we can help facilitate. The other advantage it has over life support medical devices is that the product cycles can be shorter.
They it's a demanding application, but, probably there's nothing in demanding as something like life support medical devices. It can take a long time to get devices qualified. So that's one of the advantages of non life support medical markets like hearing aids.
Got you. Okay. And then lastly, just wondering you've been reading some things about Spintronics And Cubitz. Are you guys doing anything there? Have you filed any IP there?
We are fascinated by, by Spintronics and by quantum, quantum electronics we do long term research in some amazing areas. And typically, though, our goal is commercialization and eventual revenue generation and everything we do. So things like that are probably a little bit too far off for us to put a large amount of resources
Thank you. And I'm showing no further questions at this time. I would now like to turn the call back over to Dan Baker for any closing remarks.
Thank you, Sonia, and thank you, everyone, for listening in and participating. We were pleased to report a 19% increase in product sales for the quarter record cash flow for the year and important development milestones. So, we look forward to speaking with you again in July to discuss first quarter fiscal 2019 results. Thank you again for participating in the call.
Ladies and gentlemen, this does conclude today's program. You may all disconnect. Everyone have a great day.