Sign in

You're signed outSign in or to get full access.

NC

NVE CORP /NEW/ (NVEC)·Q2 2026 Earnings Summary

Executive Summary

  • Q2 FY2026 revenue declined 6% YoY to $6.35M but rose 4% sequentially; diluted EPS was $0.68 vs $0.83 YoY and $0.74 in Q1, with margin contraction driven by mix (higher distributor sales, lower defense) and a higher tax rate (20%) offset by lower SG&A .
  • Mix color: non-defense product sales grew 21% YoY while defense product sales fell 64% YoY; defense represented 8% of revenue and contract R&D was 3% (volatile by nature) .
  • Management expects sequential revenue growth in the December quarter (Q3 FY26) and guided FY26 and FY27 effective tax rate to ~16–17% aided by $700k–$1.0M of advanced manufacturing credits and accelerated R&D deductibility; cash taxes are expected to decline by roughly $1M over three quarters starting in Q3 FY26 .
  • Investment in capacity and wafer-level chip-scale packaging is installed and ramping; management positioned this as both a capability and growth driver across medical devices, industrial controls, and robotics, while improving supply chain control amid tariff uncertainty .

What Went Well and What Went Wrong

  • What Went Well

    • Sequential revenue growth of 4% on strong distributor and non-defense sales despite an expected decline in defense; “We’re pleased to report a 4% sequential increase in revenue…” (CEO) .
    • Non-defense product sales +21% YoY and distributor sales increased sequentially and YoY, indicating improving industry conditions and channel normalization .
    • Strategic progress: installed a new equipment cluster enabling wafer-level chip-scale packaging; launched three new products (rotation sensor, new data coupler, chip-scale voltage regulator) aimed at high-value markets (medical, robotics, AIoT) .

  • What Went Wrong

    • YoY headwinds: revenue -6% and EPS -18% as contract R&D fell 68% and defense product sales dropped 64% YoY; defense sales are inherently lumpy due to procurement cycles .
    • Gross margin fell to 78% from 86% YoY due to less profitable mix and stronger distributor sales (lower margin than direct) .
    • Effective tax rate rose to 20% vs 17% YoY, modestly pressuring net income, though management expects credits/deductions to reduce full-year rate and cash taxes ahead .

Financial Results

MetricQ2 2025Q4 2025Q1 2026Q2 2026
Revenue ($USD Millions)$6.76 $7.27 $6.10 $6.35
Diluted EPS ($)$0.83 $0.80 $0.74 $0.68
Gross Margin %86% N/A81% 78%
Operating Margin %N/AN/A62% 58%
Net Margin %N/AN/A59% 52%

Income Statement Detail

Metric ($USD Millions unless noted)Q1 2026Q2 2026Q2 2025
Product Sales$5.91 $6.14 $6.10
Contract R&D$0.20 $0.21 $0.65
Total Revenue$6.10 $6.35 $6.76
Cost of Sales$1.18 $1.38 $0.95
Gross Profit$4.92 $4.97 $5.81
R&D Expense$0.72 $0.87 $0.85
SG&A$0.42 $0.44 $0.57
Operating Income$3.78 $3.66 $4.40
Interest Income$0.50 $0.48 $0.46
Provision for Income Taxes$0.71 $0.83 $0.83
Net Income$3.58 $3.31 $4.03
Diluted Shares (000s)4,839 4,839 4,841

Mix and Operating KPIs (Q2 2026 unless noted)

KPIQ2 2026
Defense Product Sales (% of revenue)8%
Contract R&D (% of revenue)3%
Non-defense Product Sales YoY+21%
Defense Product Sales YoY-64%
Gross Margin78%
Effective Tax Rate20%
Operating Cash Flow (First Half FY26)$7.98M
Fixed Asset Purchases (First Half FY26)$1.13M

Notes: Distributor sales increased sequentially and YoY; management cites lower margin profile vs direct as a GM headwind .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax RateFY2026Not specified~16–17% New quantitative range
Effective Tax RateFY2027Not specified~16–17% New forward look
Adv. Mfg. Investment Tax Credit (amount)FY2026~$700k–$800k ~$700k–$1,000k Raised upper end
Adv. Mfg. Investment Tax Credit (rate)Calendar 202625% 30% (per July tax bill) Increased
Cash TaxesQ3–Q5 FY26 (3 quarters starting Dec qtr)N/A~-$1.0M reduction cumulative New benefit
Capex2H FY2026“~$1M milestone payment due this quarter” [Q2 FY26] Additional $1.0–$1.5M planned to complete expansion Updated spend
DividendOngoing$1.00/sh (paid Aug 29, 2025) $1.00/sh (payable Nov 28, 2025; record Nov 3) Maintained
Revenue OutlookQ3 FY2026N/AManagement “fairly confident” revenue can grow sequentially Qualitative outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2025, Q1 FY2026)Current Period (Q2 FY2026)Trend
Channel/distributor recoveryQ1: Distributor sales increased; industry recovering Distributor sales increased sequentially and YoY; contributed to GM mix headwind Improving demand, lower GM mix
Defense/PUFQ1: Defense sales down; expected sequential recovery; PUF lumpy Defense product sales 8% of revenue; -64% YoY but increased sequentially; contract R&D 3% Recovering sequentially, still volatile YoY
Wafer-level chip-scale packagingQ1: Equipment arrived; sampling; deployment later in FY Installation completed; in-house packaging ramps; cited as growth driver Execution progress
Rare-earth magnet substitutionQ1: Pushing ferrite + high-sensitivity sensors; design wins emerging Continued traction, believed already translating into some sales Building pipeline
Supply chain/tariffsQ1: Expedited equipment ahead of tariff change More domestic, in-house packaging reduces tariff/supply risk De-risking
Data center/800V and wide bandgapN/AHigh isolation couplers applicable; targeted outreach underway New opportunity
Robotics/AIoT/medicalQ1: Trade shows; targeting medical and industrial Three new products; strong focus on medical devices and robotics Broadening portfolio
Tax planningQ1: $700–$800k credits; Section 179 cash tax savings $700k–$1.0M credits; FY26–FY27 ETR ~16–17%; ~$1M cash tax reduction over 3 quarters More favorable

Management Commentary

  • “We’re pleased to report a 4% sequential increase in revenue driven by strong increases in distributor and non-defense sales, despite an expected decrease in defense sales.” – Daniel A. Baker, President & CEO .
  • “Gross margin decreased to 78% from 86% the prior year quarter due to a less profitable product mix and strong distributor sales… Total expenses decreased 7%... SG&A decreased 23%.” – Daniel Nelson, Principal Financial Officer .
  • “New equipment… will increase our capacity… and allow us to do wafer-level chip-scale packaging in-house… we launched three new products in the past quarter…” – Pete Eames, VP of Advanced Technology .
  • On supply chain: “With the addition of wafer-level chip-scale, that will bring in-house one of the key elements… Most of our traditional parts are packaged overseas… We are uniquely independent.” – CEO .

Q&A Highlights

  • Wafer-level chip-scale packaging: Sampling underway; expected to be a significant growth driver and enhances domestic supply chain control though not 100% domestic for all materials .
  • End-market traction: Medical devices (implantables, navigation), industrial controls/robotics cited as key growth areas; high-isolation couplers applicable to data center 800V DC and e-mobility adjacencies .
  • Defense/PUF: Profitable but volatile; management prioritizes commercial growth engines (medical, robotics, AIoT) while pursuing larger defense opportunities opportunistically .
  • Margins and mix: Distributor sales strength aids revenue but pressures GM; management continues to balance direct vs distributor and invest in higher-value products .
  • Outlook clarity: Management “fairly confident” in sequential revenue growth for December quarter; reiterated tax benefits and capex plan to complete expansion .

Estimates Context

  • S&P Global consensus for Q2 FY2026 EPS and revenue was unavailable; therefore, no beat/miss vs consensus could be determined. Actuals: Revenue $6.35M; Diluted EPS $0.68 .
  • Given mix volatility (defense/contract R&D) and distributor channel normalization, estimate models may need to reflect lower gross margin vs prior-year, partially offset by lower SG&A and favorable tax rate outlook .
    Values retrieved from S&P Global.
MetricActualConsensusSurprise
Revenue ($USD Millions)$6.35 N/AN/A
Diluted EPS ($)$0.68 N/AN/A

Key Takeaways for Investors

  • Sequential acceleration despite defense headwinds signals core demand improvement; watch for continued distributor normalization and non-defense momentum into Q3 FY26 .
  • Margin profile likely stays below prior-year given mix (more distributor, less defense) until product/packaging initiatives scale; operating discipline (lower SG&A) partly offsets .
  • Capacity/packaging investments materially enhance capability and supply chain control, positioning NVEC for design wins in high-value markets (medical, robotics, data center power) .
  • Tax and cash flow tailwinds (16–17% ETR FY26–FY27; ~$1M cash tax reduction over three quarters) provide earnings quality and cash flexibility through the ramp .
  • Defense remains strategically important but not the primary growth engine; model near-term sequential recovery with continued YoY noise from procurement timing .
  • Dividend maintained at $1.00/sh; balance sheet/liquidity supported by positive operating cash flow and conservative capex cadence .
  • Near-term trading implications: narrative likely hinges on confirmation of sequential growth in Q3 and early proof points from chip-scale packaging wins; medium-term thesis centers on expanding high-value sensor/coupler portfolio and de-risked supply chain amid tariff uncertainty .

Additional Disclosures

  • Press release and 8-K (Item 2.02) provided the financial statements and dividend declaration .
  • Prior quarter comparisons drawn from Q1 FY2026 press release and call; Q4 FY2025 press release used for trend context .