NVE Corporation Q1 FY2026 earnings call

CapEx

• Deployed one new machine and took possession of a equipment cluster, with plans to deploy it later in the fiscal year. Expedited delivery of equipment to beat the U.S. reciprocal tariff pause expiration.

Product Development

• Launched wafer-level chip scale sensors less than 1,000th of a square inch. Promoted new products at SENSOR+TEST in Germany and Sensors Converge in Silicon Valley. Worked on rare earth-free ferrite magnets and sensors for detecting them, providing models for customers.

Annual Meeting

• Annual Shareholders' Meeting on August 7. Agenda items include election of directors, approval of officer compensation, and ratification of auditors. Proxy statement available via website or SEC's website.

Revenue decreased 10% year-over-year. Product sales dropped 11% due to a decrease in defense industry sales, while contract R&D revenue increased 17%. Nondefense sales stabilized with improving industry conditions, and distributor sales saw an increase. Gross margin fell to 81% from 86% due to a less profitable product mix and distributor sales with lower margins. Net income for the quarter was $3.58 million, a 13% decrease from the prior year quarter, at $0.74 per diluted share. Operating margin was 62%, pretax margin 70%, and net margin 59%.

PUF Business

• Expect PUF business to grow quarter-over-quarter sequentially in the coming quarters and return to historical levels in the next fiscal year.

Tax Credits

• Currently expect to realize advanced manufacturing investment tax credits of between $700,000 and $800,000 if equipment is deployed as planned in fiscal 2026. Also, will realize cash flow savings due to changes in the Internal Revenue Code allowing deduction of previously unamortized R&D expenses.

Uncertainties

• Uncertainties related to economic environments in served industries. Risks from future sales and revenue. Risks from tariffs, customs, duties, and other trade barriers. Risks from defense procurement cycles affecting PUF business, which is lumpy due to large contract timings.

Q: Jeff Bernstein asked about the weakness in PUF business and recovery in distribution channel.

A: PUF business is lumpy due to defense procurement contracts, but expected to grow sequentially. Distribution channel sales recovering as industry improves.

Q: Jeff Bernstein asked about opportunity with ferrite magnets and magnetic sensors.

A: Ferrite magnets are widely available, working with customers to design magnetic systems, expecting near-term design wins.

Q: Jeff Bernstein asked about wafer-scale packaging investment.

A: Wafer-level chip scale parts offer smaller size and more precise sensing, with samples and evaluation boards provided, working on high-volume production.

Q: Christopher Trosky asked about chip-level packaging end markets.

A: End markets include medical devices for miniaturization and industrial controls/robotics for precise position sensing, with customers evaluating parts.

Q: Christopher Trosky asked about military orders volatility.

A: Considered reporting ex-military orders but requires infrastructure, currently providing info to investors, expecting military orders to sequentially increase in coming quarters