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NVE CORP /NEW/ (NVEC)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue declined 25% year over year to $5.06M, with diluted EPS of $0.63; margins remained robust as gross margin expanded to 84% (from 80% YoY) due to a higher mix of direct sales and profitable product mix .
  • Product sales fell 22% and contract R&D revenue decreased 74% YoY, driven by distributor inventory gluts and completion of certain contracts; management emphasized exceptional margins despite revenue pressure .
  • Dividend maintained at $1.00 per share (payable Feb 28, 2025); lease extended 62 months to May 2031; CapEx plan of $4–$5M over FY25–FY26, with $1.16M spent YTD and a several‑million‑dollar machine arriving next quarter (June quarter) to enable high‑volume wafer‑level chip‑scale manufacturing .
  • Year‑to‑date: revenue decreased 18% to $18.6M and diluted EPS totaled $2.31; management remains optimistic as end markets and channel conditions gradually improve .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 84% (vs. 80% PY) and operating margin reached 58%, supported by a higher proportion of direct sales; “those direct sales tend to be higher margins… our margins are so exceptional” .
  • New wafer‑level chip‑scale products introduced, billed as “world’s smallest devices of their type,” enabling smaller medical devices and precise robotics; expanding capacity and capabilities to manufacture such parts in high volume .
  • Defense demand and unclonable function (PUF) related products remained strong albeit lumpy; recent orders and long‑term optimism for defense sales continue .

What Went Wrong

  • Revenue decreased 25% YoY with product sales down 22% and contract R&D down 74%; net income fell 27% to $3.05M .
  • Distributor inventory gluts pressured channel sell‑in; consumption likely exceeds distributor purchases while they bleed down inventory .
  • Operating expenses increased 40% YoY, driven by R&D (+61%) and SG&A (+12%) to support new product development and expanded sales/marketing activities .

Financial Results

Headline Metrics (quarterly)

MetricQ1 2025 (Jun)Q2 2025 (Sep)Q3 2025 (Dec)
Revenue ($USD Millions)$6.78 $6.76 $5.06
Diluted EPS ($)$0.85 $0.83 $0.63
Gross Margin %86% 86% 84%
Operating Margin %65% 65% 58%
Net Income Margin %60% 60% 60%

Q3 YoY Comparison and Consensus

MetricQ3 2024Q3 2025 ActualConsensus (S&P Global)
Revenue ($USD Millions)$6.76 $5.06 N/A*
Diluted EPS ($)$0.87 $0.63 N/A*
Gross Margin %80% 84% N/A*

*Consensus data unavailable via S&P Global at time of request due to access limit.

Revenue Breakdown (by source)

Revenue Component ($USD)Q1 2025 (Jun)Q2 2025 (Sep)Q3 2025 (Dec)
Product Sales$6,615,859 $6,104,433 $4,960,488
Contract R&D$167,385 $654,257 $102,557
Total Revenue$6,783,244 $6,758,690 $5,063,045

KPIs

KPIQ1 2025 (Jun)Q2 2025 (Sep)Q3 2025 (Dec)
R&D Expense ($)$878,528 $847,603 $869,677
R&D as % of Revenue12.96% (calc from )12.55% (calc from ) and mgmt ~13% 17.18% (calc from ) and mgmt 17%
SG&A Expense ($)$540,404 $568,241 $434,783
Operating Income ($)$4,388,818 $4,395,592 $2,960,963
Other Income ($)——$135,057 (precious metals reclaim)
CapEx Spend YTD ($)$0.917M $1.13M $1.16M
Quarterly Dividend ($/share)$1.00 (payable Aug 30, 2024) $1.00 (payable Nov 29, 2024) $1.00 (payable Feb 28, 2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per ShareQ3 FY2025$1.00 $1.00 (Feb 28, 2025) Maintained
CapEx PlanFY2025–FY2026$4–$5M plan $4–$5M plan; $1.16M spent YTD; “several‑million‑dollar machine” arriving next quarter (June) Maintained; timeline clarified
Facilities/LeaseThrough May 2031Exploring extension Lease extended +62 months; $100k improvement allowance Raised capacity via extension
Production Timeline (WLCSP)Late FY2025 into FY2026Hope to begin some production late FY2025 Capability ramp sustained; high‑volume readiness post equipment arrival Maintained/Progressing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q1 2025; Q-1: Q2 2025)Current Period (Q3 2025)Trend
Channel inventory/Direct vs. DistributorSemiconductor downturn; high distributor inventory; direct mix drove 86% GM Distributors bleeding down inventory; direct sales “held up” and drive exceptional margins Improving consumption; channel restock lag
Medical devices (navigation, MRI tolerance, leadless pacemakers)Strong interest; TMR sensors advantages; Medtronic director added Abbott rhythm management +6% YoY; NVEC enabling smaller devices and ultra‑small magnetic field detection Positive demand; precision/small size valued
Defense/PUF anti‑tamperStrong/lumpy; allied sales support demand Orders received; business strong but lumpy; long‑term optimism Steady/constructive
AI/hearing aids & sensorsTMR sensor interest; broader electrification opportunity Hearing aids incorporating AI; NVEC sensors provide richer inputs for AI algorithms Growing sensor TAM
Electrification/energy conversionBest‑in‑class current sensors & spintronic isolators; EV CAGRs industry commentary Continued positioning for electrification; direct sales/margins resilient Structural tailwind
CapEx/WLCSP enablement$4–$5M plan; prototypes and customer interest; production late FY25 $1.16M YTD; lease extended; new electrical service; high‑volume WLCSP capability build‑out Execution progressing

Management Commentary

  • “We’re pleased to report strong earnings despite continued challenges in the semiconductor industry.”
  • “Gross margin for the quarter was 84%… due to more profitable product mix and a larger portion of direct rather than distributor sales.”
  • “We spent 17% of revenue in the past quarter on R&D… introduced new wafer‑level chip scale products… billed as the world’s smallest devices of their type.”
  • “Construction work for expansion began in November… Next up is a new electrical service… investments… will increase our capacity and capabilities including… wafer‑level chip scale parts… in high volume.”

Q&A Highlights

  • Direct vs. distributor dynamics: direct sales holding up; distributor inventory bleed‑down driving exceptional margins and near‑term channel softness .
  • Hearing aids/AI: NVEC sensors provide inputs enabling better AI performance; optimistic about richer data needs in hearing aids platforms (Sonova/Starkey cited by analyst) .
  • Defense/PUF: sales strong but lumpy; received orders with optimism for long‑term defense demand .
  • Medical devices: Abbott rhythm management +6% YoY; NVEC technology enables smaller leadless pacemakers and ultra‑small magnetic field detection for deep implants .
  • Sales/marketing investments: added staff; more trips/trade shows; continuous flow of evaluation boards to accelerate customer adoption .

Estimates Context

  • S&P Global consensus estimates for Q3 FY2025 were unavailable at time of request due to a daily access limit; as such, beats/misses versus consensus cannot be determined in this recap. We will update when access is restored.
  • Given small‑cap coverage intensity and channel dynamics, we expect analysts to recalibrate revenue trajectories and maintain focus on margin durability driven by direct mix and product introductions .
  • Note: Where “Consensus (S&P Global)” is shown as N/A* in tables, consensus data was not accessible at the time of analysis due to SPGI request limit.

Key Takeaways for Investors

  • Margin resilience is a core differentiator: gross margin 84% and net margin ~60% despite a 25% YoY revenue decline, driven by direct sales mix and profitable product composition .
  • Channel normalization is the near‑term swing factor: distributors are reducing inventories; consumption likely exceeds sell‑in—watch for inflection as channel restocks resume .
  • Capacity/capability expansion is a catalyst: lease extension to 2031, infrastructure upgrades, and arrival of a several‑million‑dollar machine next quarter to scale wafer‑level chip‑scale production .
  • Medical device and defense end‑markets provide support: hearing aids/AI platforms and leadless pacemakers value NVEC’s ultra‑small, sensitive sensors; PUF/anti‑tamper orders continue albeit lumpy .
  • Continued shareholder returns: $1.00 quarterly dividend maintained; balance sheet supports both dividends and investment in growth .
  • Watch R&D cadence and product launches: 17% of revenue spent on R&D; pipeline includes “world’s smallest” devices, rotation sensors, and high‑field TMR sensors—supporting long‑term growth vectors .
  • Near‑term focus: monitor Q4 FY2025 production timing for WLCSP and signs of distributor reorders; medium‑term thesis hinges on execution in medical/industrial sensing and efficiency gains in electrification .