NVE Corp Q1 2027 Earnings Call

Good afternoon, welcome to the NVE Corporation conference call for the quarter ended June 30th, 2026. I'm Dan Baker, NVE's President and CEO. I'm joined by Daniel Nelson, our Principal Financial Officer, and Pete Eames, Vice President of Advanced Technology and Successor CEO. This call is being webcast live via YouTube and Google Meet and being recorded. A replay will be available through our website, nve.com, and our YouTube channel, youtube.com/nvecorporation. All participants are currently in listen-only mode. After our presentation, there will be a question and answer session. After my opening comments, Daniel Nelson will present our financial results, Pete will cover new products and R&D, and I'll cover sales and marketing. I'll also cover our upcoming leadership transition and board expansion, and then we'll open the call to questions.

We issued our press release with summary financial results and filed our quarterly report on Form 10-Q in the past hour following the close of market. Links to the press release and 10-Q are available through our website, the SEC's website, and X, formerly known as Twitter. Please refer to the safe harbor statement on your screen. 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 our reliance on several large customers for a significant percentage of revenue, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, as well as the risk factors listed from time to time in our filings with the SEC, including our annual report on Form 10-K for the year ended March 31st, 2026.

Actual results could differ materially from the information provided, and we undertake no obligation to update forward-looking statements we may make. We're pleased to report exceptional results. Our growth accelerated with an 81% increase in revenue and a 79% increase in net income, driven by new product sales and a strong semiconductor market. Daniel Nelson will cover details of the financials. Daniel? Thanks, Dan. As Dan said, first quarter total revenue increased 81% to $11 million from $6.1 million for the prior year quarter.

The increase was due to an 82% increase in product sales and a 53% increase in contract R&D revenue. Product sales increased across defense and non-defense product lines, as well as distributor and direct channels. Higher volumes helped boost gross margin for the quarter to 81.3% of revenue, compared to 80.6% the prior year quarter. Total expenses increased 49% due to a 31% increase in research and development expense and an 81% increase in selling, general, and administrative expense. The increase in research and development expense was due to increased staffing and new product development activities. The increase in selling, general, and administrative expenses was primarily due to increased performance-based compensation.

The increase in expenses was less than the revenue increase, expenses as a percentage of revenue decreased from 19% to 15%. Interest income decreased 10% due to decrease in our marketable securities portfolio, as proceeds from bond maturities partially funded dividends and fixed asset purchases in the prior fiscal year. Net income for the quarter increased 79% to $6.39 million, or $1.32 per diluted share, from $3.58 million, or $0.74 per share. The increase was primarily due to increased revenue, partially offset by increased operating expenses and decreased interest income. Earnings more than cover our $1 per share quarterly dividend for the second consecutive quarter. Our profitability metrics for the quarter were strong. Operating margin was 66%, pre-tax margin was 78%, and net margin was 58%. Inventories decreased by 6% in the quarter due to increased product sales.

Fixed asset purchases were $57,000 for the quarter, compared to $1.06 million in the same quarter last year. The decrease was due to the completion of our two-year multimillion-dollar expansion. We expect fixed asset purchases this fiscal year to be significantly less than the prior year with the completion of our expansion. Our balance sheet strengthened in the quarter. With earnings more than covering our dividend, cash plus marketable securities increased $391,000 to $43.9 million as of June 30th, compared to $43.5 million as of March 31st. I'll turn the call over to Pete Eames to cover new products and research and development. Pete? Thanks, Daniel. I'll cover new products and R&D.

Our R&D strategy is to transition the world's best technologies into the world's best products for high-value markets, such as advanced humanoid robotics, data centers, and highly automated fourth-wave factories using the Artificial Intelligence of Things. Just this week, we launched two new wafer-level chip scale sensors for implantable medical devices. The new parts are about one-third of the area of the conventionally packaged versions, which are already quite small.

The even smaller sensors allow miniaturized implantable medical devices. These are our first wafer-level chip scale sensors with a unique and important MRI-safe feature. The sensor functions as a magnetic switch in a normal magnetic field, and the sensors are stable to very high magnetic fields of over 9 tesla, which is more than the fields produced by the strongest MRI machines. MRI safety ensures that the medical device that uses the sensor doesn't fail if the patient needs an MRI. We have a video on our website and YouTube channel showing how we verify this feature using ultra-high field magnets. In addition to the new product launches, we're developing several new products, including more precise sensors for robotics and more power-efficient isolators for power conversion. I'll turn it back over to Dan Baker.

Thanks, Pete. I'll cover sales and marketing and our upcoming leadership transition. In the past quarter, we exhibited at two trade shows focused on sensors. In May, we were at Sensors Converge in Silicon Valley, which is North America's largest event of its type, where we focused on robotics and the AIoT. We have a strong benefit proposition for those markets, including small size for precise motion and smart sensor edge computing for easy integration with AI. In June, we exhibited at Sensor+Test in Germany, which is billed as the leading international trade fair for sensors, measuring, and testing technology. In addition to robotics and AIoT, the German show was a good opportunity for us to highlight our power conversion products. Videos of several new demos are on our website and our YouTube channel.

The shows generated some good leads. We believe our investments in shows will pay off in future sales. Last month, we announced that I'm retiring as President and CEO, effective as of our annual meeting in August. The board appointed Pete to succeed me. Subject to shareholder approval, I'll remain on the board as Chairman, current Chairman Terry Glarner will remain on the board. Pete will join the board. In addition to the incumbent directors and Pete, the board has nominated a new director, Carolyn Valentine. Pending shareholder approval, the board will expand from five to seven directors. The larger board will strengthen our corporate governance. We already have the highest possible ISS governance score. Leading NVE has been a privilege. I'm proud of what our team has accomplished and confident the company is well-positioned for continued success.

The board conducted a thoughtful succession planning process. Unanimously chose Pete as the company's next CEO. Pete brings extraordinary experience, dedication, and judgment. I know our shareholders will be well-served by his leadership in the years ahead.

Dan, on behalf of employees, customers, and shareholders, I thank you for many dedicated years of service and pioneering leadership of Spintronics at NVE. We will continue to benefit from your guidance as board Chairman. I'm honored to lead NVE as CEO. We have a talented team, strong customer relationships. Many exciting opportunities ahead. I look forward to building on our momentum, creating long-term value for our shareholders through profitable growth, strong shareholder returns. Continued Spintronic product excellence. Thanks for the kind words, Pete.

Now we'd like to open the call for questions via Google Meet. To ask a question from Google Meet, click the Raise My Hand icon at the bottom of the screen and unmute yourself to speak. From a phone, press star six to unmute. Please state your name and affiliation before your question, and to prevent background noise, please mute your line after asking your question.

Hey, Dan. This is Itay Eden from Principal Financial. Congrats on the latest results. I wanted to ask, based on the sequential increase you saw in the past quarter, I'm curious if you could attribute or how much you could attribute to the capacity expansion versus market demand, if possible.

Hi, Itay. This is Pete. Thanks for the question. We see both as factors. We've recently completed the expansion that you mentioned, and we've started using that capacity primarily for R&D activities. We also see the market conditions as important factors. We have excellent new products out there now in important new markets, and we're excited about the growth.

Awesome. Just as a quick follow-up, if I may. It sounds like volume production remains in the existing or the legacy manufacturing facility. Is it the plan that eventually the expanded capacity will be used for volume production as well, or is it the plan that it'll stay for R&D use cases? Thanks, guys. Yep. The existing capacity is used for R&D largely now, but it's also being used for production, especially for some of our new products.

It'll be continued to phase over as production shifts and the new products ramp up. We really do see the investment paying off for long term there.

Great. Thanks, guys. Hi, can you hear me?

Yes. Please go ahead. Hi, this is Arian from Vector Research.

Just wanted to say great work on the quarter. I did have one question. The release guides new product sales. I was wondering if you could provide any color whether if these new products are going to new customers or are existing customers adopting the newer parts?

The new products that most of the volume was in existing customers, but we also had new customers and they tend to start out a little bit more slowly, so they don't move the top line an awful lot, but they bode very well for the future. We were very pleased with the results of having some of our existing customers design in our newer products and new customers looking at newer products as well.

All right. Awesome. Thank you so much.

This is Mike Ostermaier. Can you hear me?

Yes. Hi, Mike. Hi. Just a quick question.

I noticed your accounts receivable went up, not quite double. Some color on that? Hi, Mike.

This is Daniel Nelson. Thanks for the question.

Yes. You're right, accounts receivable did increase.

Most of that increase is driven by increased sales in the past quarter. Timing of customer payments as well contributed to some of that, mostly driven by increased sales in the past quarter.

Okay. Does that mean, I don't know what the terms are for payments and so forth, it sounds like maybe a lot of your increase in sales came on the back end of the quarter versus the front end, or how did that work?

Some of the sales did happen in the third month of the quarter. Most of those invoices were still outstanding as of the end of the month. As we speak, most of those have already been collected on.

Okay. Great. Thank you very much.

Hello, can you hear me?

Yes, go ahead, please. Hello, my name is Dale.

Thank you, Dr. Baker, Dr. Eames, Mr. Nelson. I've got a question coming from the fact that I've worked with the insurance, crop insurance industry for quite a number of years. I'm a technical support analyst, and I was looking at some of the technology that's offered through NVE, and I'm especially interested if there's any pursuing cases going using drift-free TMR sensor infrastructures on the field for enhancement of AI, which is only going to grow with agricultural exponentially, as with everything else. What is your idea on that, sir?

Yeah. Great question. There are some opportunities there, particularly the features of NVE's products make that an interesting market. We have very low power sensors for unattended networks and unattended sensor nodes. That's particularly powerful for crop insurance because we're able to monitor crop conditions directly. Then respond quickly as well with our sensor technologies as well. We're doing sensing and data transmission. Both of those areas are important for monitoring the data of crops remotely and responding adequately.

If I have some other ideas, I'm sorry, sir, if I came back 3 months. If I have some other ideas, because I have been in the industry for so long, I'm specialized with remote support. I was wondering, could I send them to a place within NVE, like for RS-485 wired edge frameworks and other things like that, where you cross pattern node displacements so that it doesn't follow within neighborhood lines, so you don't lose whole patterns of fields, stuff like that. Is there any way of doing that, sir?

Absolutely. We've got some of the best customer service in the industry. We're ready to respond to your inquiries. If you go to our website, there's a sensor apps email address available. You can submit your questions directly to that.

Thank you. Thank you very much, sir. That's all. Thank you very much.

Thanks for your question. Again, from Google.

Hey, guys. It's Itay again. I was wondering, understandably don't give customers by name, but if you could detail any incremental momentum you're seeing by end market, whether that be robotics and humanoids or industrial automation or data centers or medical. I would just be curious to hear maybe how you kind of rank the end markets and the change in momentum lately.

Sure. Thanks, Satya. Yeah, there's some important opportunities, particularly in robotics that we see. We've talked a lot about wafer-level and chip scale products, including the announcement on the call today, in the previous calls last quarter as well. We do see some distinct advantages in both low power, but particularly the precision that our products offer in automation and robotics. We'd say that's probably the strongest growing area and the most promising for our technology.

That's great to hear. Thanks again, and congratulations.

Mm-hmm. Thank you. Are there any other questions?

Raise my hand on Google Meet, star 6 to unmute from the phone. Walter. Dan? Yes. Walter Morris.

As you know, we've been very long-term shareholders in your company. Congratulations on a great quarter. Certainly the right kind of way to wrap up your long tenure at the company. Kudos. Thank you, Walter. Would you talk about This was an explosive quarter.

We've had, over the years, breakout quarters where revenue run rate, which has consistently over many years on a quarterly basis run at $6 million-$7 million, and then periodically we'll have a high single digit, low double digit revenue quarter. At least up to now, there's been a reversion to the kind of $25 million annualized revenue run rate in your business. Very importantly, can you speak to the possibility or the likelihood that this represents a new higher, meaningfully higher plateau, and, over the next three to five years, a major increase, hopefully, and strong double digits in the company's secular revenue growth rate?

Absolutely, Walter. We see this as evidence and validation of the strategy that we put in place to target some of these very high growth markets that we've been talking about. Pete mentioned the growth in robotics, which is a fast-growing market where we have a convincing benefit proposition. While you're right, things might have taken a little longer than we had hoped, we're confident that we have the right strategy, we have products in place, we have a dedicated sales force and distribution network, and we have unique products and capacity that we just added. We're very bullish about the future.

If I just might paraphrase that to make sure I understand it, this current quarter's revenue run rate represents a, in general, give or take $1 million, let's say, a new and consistently higher revenue run rate off of which you hope top line grows at healthy double digit rates going forward. Is that fair? Walter, I think you know us well enough to know that we aren't able to give forward-looking guidance, and particularly with specific numbers that you just alluded to, but I will say we're very optimistic and extremely pleased with the past quarter as a validation of the strategy and the growth potential that we have.

Final question, has the momentum of the June quarter continued at least so far into the September quarter?

Hi, Walter. It's hard to comment on the numbers for the current quarter. I think the primary factor among the others that Dan mentioned is the improvement in the semiconductor industry, and that's producing a lot of optimism in general. I think for that reason alone, we're optimistic going forward. As Dan said, we have great products, excellent distribution and sales, and we're very excited.

Thank you, Pete. Congratulations again, Dan, and wishing you a happy retirement.

Thank you, Walter. Well, there are no further questions, so I'd sum up with saying we were pleased to report a blowout quarter with an 81% increase in revenue, a 79% increase in net income, and a $1.32 earnings per share. We look forward to meeting some of you at our annual shareholders meeting August 6th here at NVE. Our next earnings call will be in October.