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NVE CORP /NEW/ (NVEC)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 revenue was $6.10 million (-10% YoY) and diluted EPS was $0.74 (-13% YoY); gross margin fell to 81% from 86% on less profitable mix and stronger distributor sales, while operating expenses declined 20% (R&D -18%, SG&A -23%) .
  • Management cited weaker defense product sales offset by increases in distributor and non-defense sales; operating margin was 61.9%, pre-tax margin 70.1%, and net margin 58.6% .
  • Quarterly cash dividend of $1.00 per share was declared (payable Aug 29, 2025); operating cash flow of $5.19 million covered the $4.84 million dividend outlay .
  • Forward items: defense sales expected to increase sequentially in coming quarters; milestone ~$1 million CapEx payment due this quarter as part of multi-year expansion; advanced manufacturing investment tax credits expected at $700k–$800k in FY2026 .

What Went Well and What Went Wrong

What Went Well

  • Distributor and non-defense sales recovered; management “pleased to report strong revenue and earnings despite a decrease in defense product sales” .
  • Expenses were tightly managed: total operating expenses down 20% YoY (R&D -18% from completion of wafer-level packaging activities; SG&A -23% from timing and reallocation to manufacturing) .
  • Product/marketing momentum: launched more wafer-level chip-scale sensors (<0.001 sq in), demonstrated at Sensor+Test (Germany) and Sensors Converge (Silicon Valley); trade show leads expected to translate into future sales .

What Went Wrong

  • Defense product sales decreased, driving an 11% decline in product revenue and a 10% total revenue decline YoY; EPS fell to $0.74 from $0.85 .
  • Gross margin compressed to 81% (from 86%) due to less profitable product mix and higher distributor sales mix (lower margin than direct) .
  • Revenue contraction vs prior year despite sequential improvements in the prior quarter (Q4 FY2025) .

Financial Results

MetricQ4 2025Q1 2026Q2 2026
Revenue ($USD Millions)$7.27 $6.10 $6.35
Diluted EPS ($)$0.80 $0.74 $0.68
Gross Margin %79% 81% 78%
Operating Margin %58% 61.9% 58%
Pre-Tax Margin %65% 70.1% 65%
Net Margin %54% 58.6% 52%
Revenue Breakdown ($USD)Q4 2025Q1 2026Q2 2026
Product Sales$6,951,322 $5,908,570 $6,138,772
Contract R&D$318,393 $196,074 $208,220
Total Revenue$7,269,715 $6,104,644 $6,346,992
Actual vs EstimatesQ1 2026
Revenue Actual ($USD)$6,104,644
Revenue Consensus ($USD)N/A*
Diluted EPS Actual ($)$0.74
EPS Consensus ($)N/A*

*Values retrieved from S&P Global; Wall Street consensus for NVEC was unavailable for these periods via S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly DividendQ1 FY2026$1.00/share (Q4 FY2025) $1.00/share declared; payable Aug 29, 2025 Maintained
CapEx ProgramFY2026Plan $2–$3M FY2026 ~$1M milestone payment due this quarter; equipment expedited ahead of tariff pause expiry (Jul 9) Clarified timing; program maintained
Defense Product Sales TrajectoryNear-termRecovering distribution/industry in Q4 Expect sequential growth next quarter and following; return to historical levels next fiscal year Raised outlook
Tax Credits / Tax RateFY2026N/AAdvanced manufacturing investment tax credits expected $700k–$800k; effective tax rate 17% in Q1 New/Updated detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2025, Q2 FY2026)Current Period (Q1 FY2026)Trend
Distribution channel recoveryQ4: “revenue stabilize with improving industry conditions”; mix more direct vs distributor . Q2: distributor sales increased sequentially and YoY .Increase in distributor sales; industry recovery noted .Improving
Defense sales/PUFQ2: defense product sales 8% of revenue; volatile but sequentially increased; defense not core growth driver .Decrease in defense sales; expect sequential growth next quarters and return to historical next fiscal year .Near-term recovery expected
Wafer-level chip-scale (WLCSP)Q4: significant FY2026 CapEx; cluster arriving next quarter . Q2: cluster installed; deployment targeted by FY end .Launched more WLCSP sensors; samples/eval boards; expedited equipment before tariff pause .Ramping
Ferrite magnets vs rare-earthQ2: customers adopting rare-earth-free solutions; promoted at trade shows .Promoted ferrite magnets due to rare-earth supply risk; design-win activity & demos .Adoption building
Medical devicesQ4: Abbott supplier partner extension . Q2: MD&M trade show; highlighting WLCSP for implantables .Identified end markets: implantable devices and industrial robotics; sampling underway .Expanding pipeline
Tariffs/supply chain resilienceQ4: uniquely well-situated; exports exempt; wafers sourced abroad reduce exposure . Q2: moving more processes in-house; mostly domestic supply chain for WLCSP .Expedited equipment before reciprocal tariff pause; reallocation to manufacturing .Resilient posture strengthened

Management Commentary

  • “We’re pleased to report strong revenue and earnings despite a decrease in defense product sales.” — Daniel A. Baker, CEO .
  • “Gross margin decreased to 81% from 86% due to a less profitable product mix and strengthening distributor sales… Total expenses decreased 20%… due to an 18% decrease in R&D and a 23% decrease in SG&A.” — Daniel Nelson, PFO .
  • “We launched more wafer-level chip-scale sensors… less than a thousandth of a square inch… promoted at Sensor+Test and Sensors Converge; we believe investments will pay off in future sales.” — Daniel A. Baker .
  • “We expect [PUF/defense] business will grow quarter over quarter sequentially in the coming quarters… and return to more historical levels in the next fiscal year.” — Daniel A. Baker .

Q&A Highlights

  • Defense/PUF outlook: Lumpy procurement cycles, but management expects sequential defense sales growth next quarter and following; return to historical levels next fiscal year .
  • WLCSP ramp and utilization: Equipment used for both R&D and production; lower fixed-asset leverage than commodity semis reduces underutilization risk; samples and pre-production quantities already shipping; working toward high-volume systems this fiscal year .
  • Ferrite magnets opportunity: Customers substituting ferrite magnets to mitigate rare-earth supply risk; NVE’s high-sensitivity sensors enable drop-in solutions with minimal redesign; design wins and models available .
  • Segment reporting: Management provides color but does not formally break out defense vs non-defense due to audit/infra burden; acknowledges investor interest .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2026 revenue and EPS was unavailable; tables show actuals only and “N/A” for consensus. Values retrieved from S&P Global.
  • Given non-availability, estimate revisions are likely to incorporate: lower defense contribution in Q1, increased distributor/non-defense sales, margin compression from mix, and lower operating expenses; expect models to reflect sequential recovery commentary and WLCSP product ramp .

Key Takeaways for Investors

  • Mix-driven margin dynamics: Distributor-led recovery supports top-line stabilization but compresses gross margins; expense control mitigated EPS impact .
  • Near-term defense tailwind: Management expects sequential defense growth over the next two quarters, potentially supporting revenue/earnings trajectory despite Q1 YoY declines .
  • Product cycle catalysts: WLCSP sensors and advanced magnetic switches are gaining traction with samples/eval boards and trade-show leads, positioning for incremental sales through FY2026 .
  • Tariff/supply chain resilience: Expedited equipment purchases and increased in-house capability reduce exposure to tariff and packaging risks, supporting continuity and margin quality over time .
  • Capital deployment: ~$1M milestone CapEx this quarter and a multi-year expansion underway; investment tax credits ($700k–$800k expected) improve cash economics .
  • Dividend support: OCF ($5.19M) covered the $1.00/share dividend paid; ongoing dividends funded by operations and securities maturities .
  • Medium-term thesis: Focus on medical devices, industrial robotics, energy conversion (isolators) with superior sensor precision/efficiency; leverage IP and WLCSP to expand TAM while defense contributes opportunistically .