NVE Corporation Q2 FY2026 earnings call

Financials

• Revenue increased 4% QoQ, decreased 6% YoY; product sales up 1% YoY, nondefense up 21%, defense down 64%.
• Gross margin decreased to 78% from 86% prior year due to less profitable product mix and distributor sales.
• Total expenses decreased 7% in Q2 FY2026, R&D up 3%, SG&A down 23%.
• Tax rate increased to 20% in Q2 FY2026, but full-year expected 16%-17% due to advanced manufacturing tax credits.
• Net income for Q2 FY2026 was $3.31 million or $0.68 per diluted share.

New Equipment and R&D

• Installed new equipment cluster, enabling wafer-level chip scale packaging in-house, expanding capacity and capabilities.
• Launched 3 new products: rotation sensor, data coupler, wafer-level chip scale voltage regulator.

Trade Show and Annual Meeting

• Exhibited at medical design and manufacturing trade show, highlighted products for medical devices.
• Held annual shareholders meeting, reelected directors, approved compensation, and ratified auditor selection.

Revenue increased 4% quarter-over-quarter sequentially and decreased 6% year-over-year. Year-over-year decrease was due to a 68% decrease in contract R&D revenue, partially offset by a 1% increase in product sales. Product sales saw a 21% increase in nondefense sales, while defense sales decreased 64%. Defense products sales were 8% of revenue, contract R&D was 3% of revenue. For the first 6 months of fiscal 2026, total revenue was $12.5 million, and net income was $6.89 million or $1.42 per diluted share.

Future Outlook

• Expect to grow in the current (December) quarter, confident in long-term growth prospects.
• Tax rate expected to be approximately 16%-17% for full year and next fiscal year due to advanced manufacturing investment tax credits.
• Optimistic about growth in various markets including medical devices, industrial IoT, and robotics.

Risks

• Uncertainties related to economic environments in served industries.
• Risks and uncertainties related to future sales and revenue.
• Risks associated with tariffs, customs duties, and other trade barriers as listed in SEC filings.

Q: Are we to expect growth in revenues from new equipment?

A: Part of the goal is to use new equipment to develop advanced products and fuel future growth, with growth already seen in sequential and nonmilitary sales.

Q: Is wafer scale packaging allowing a fully domestic supply chain?

A: Mostly domestic supply chain, with key operations in-house, though some materials still sourced overseas.

Q: Any potential in eVTOL market?

A: Significant advantages in power control for eVTOL, targeting Tier 1 and Tier 2 suppliers, optimistic about adding value to next-generation vehicles.

Q: Status of PUF market?

A: PUF market has volatility, nondefense sales strong, but PUF sales not a key growth driver currently.

Q: Impact of government shutdown on contract R&D?

A: Shutdown expected to be short-term, not too concerned, and confident in growth in current quarter