NVE Q2 2027 Earnings Call Transcript
NVE (NASDAQ:NVEC) reported second-quarter financial results on Wednesday. The transcript from the company’s second-quarter earnings call has been provided below.
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View the webcast at https://www.youtube.com/live/xa8LjVuiCqg
Summary
NVE Corporation reported a solid quarter with a 67% increase in distributor sales, despite an overall 8% decrease in total revenue compared to the prior-year quarter.
Net income for the quarter was $3.17 million, with a net margin of 54% and gross margin of 78%. The effective tax rate decreased to 14% due to favorable tax law changes.
The company launched two new products in wafer-level chip-scale sensors and gear sensors, targeting high-value markets like robotics and industrial automation.
Leadership changes included Pete Eames becoming President and CEO, Dan Baker becoming Chairman, and Carolyn Valentine joining the board, expanding it from five to seven members.
NVE expects the second-half revenues to be consistent with the first half, with growth in new product orders and recovery in medical device and defense sales.
Full Transcript
Peter Eames (President and CEO)
Good afternoon and welcome to the NVE Corporation conference call for the quarter ended September 30, 2026. I’m Pete Eames, NVE’s President and CEO. With me on the call is Daniel Nelson, our Principal Financial Officer. This call is being webcast live on YouTube and Google Meet and being recorded. Replay is available through our website, nve.com, and our YouTube channel, youtube.com/nvecorporation. All participants are currently in a 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. Then I’ll cover the business. I’ll also cover the recent 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 and the industries we serve, uncertainties related to future sales and revenues, as well as 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 31, 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 solid revenue and earnings for the quarter driven by a 67% increase in distributor sales. Net margins increased to 54% due to a decrease in our effective tax rate. Daniel Nelson will cover the details of the financials.
Daniel Nelson (Vice President Operations)
Thanks, Pete. Total revenue for the quarter decreased 8% compared to the prior-year quarter. The decrease was due to a 9% decrease in product sales partially offset by a 25% increase in contract R&D revenue. The decrease in product sales was due to a short-term inventory adjustment at one of our large medical device customers and a 95% decrease in defense product sales. Inventory adjustments by medical device customers can create short-term order volatility.
U.S. defense product sales can be highly variable because of government procurement cycles. Looking forward, we expect medical device and defense sales to recover in the current quarter, and we expect revenues in the second half of the fiscal year to be consistent with the first half. Aside from the short-term order flow adjustments in medical, we saw a 67% increase in distributor sales due to strengthening industry conditions and strong demand for our new and legacy commercial products.
The increase in contract R&D revenue in the past quarter was due to progress on existing contracts. Total operating expenses increased 4% for the second quarter of fiscal 2027 compared to the second quarter of fiscal 2026 due to a 44% increase in selling, general, and administrative expense, partially offset by a 17% decrease in R&D expense. The decrease in R&D was due to staffing redeployment. The increase in SG&A was due to higher direct option grant date stock prices. Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 14% from 20% in the prior-year quarter, primarily due to favorable tax law changes.
The decrease is consistent with our previous estimates, and we expect our effective tax rate to be between 14% and 16% for at least the remainder of the fiscal year. Net income for the second quarter of fiscal 2027 is $3.17 million, or $0.65 per diluted share, compared to $3.31 million, or $0.68 per share, in the prior-year quarter. Our profitability metrics for the quarter remain strong. In addition to the 54% net margin Pete mentioned previously, gross margin was 78%, operating margin was 55%, and pre-tax margin was 63%.
For the first six months of fiscal 2027, total revenue was $16.9 million, up 36% over the same period in fiscal 2026. The increase in revenue was due to strong sales across our product portfolio as well as increases in both direct and distributor sales. Net income was $9.57 million, or $1.97 per diluted share, for the first two quarters of fiscal 2027. Turning to cash flow items, cash flows from operations was $11.1 million for the first six months of fiscal 2027 compared to $8 million for the first six months of fiscal 2026. Cash plus marketable securities increased from $43.5 million to $44.4 million as operating cash flow more than covered our dividends and purchases of fixed assets for the first half of the fiscal year. Receivables decreased 12% due to timing of customers’ payments. Inventories decreased 3% due to increased product sales in the first half of the fiscal year.
And we paid our $1 per share quarterly dividend this past quarter and declared another dividend to be paid at the end of November. Turn the call back over to Peter Eames to cover the business.
Peter Eames (President and CEO)
Thanks, Daniel. Our R&D strategy is to transition the world’s best technology into the world’s best products for high-value markets such as advanced automation and robotics, data centers, and highly automated fourth-wave factories using the artificial intelligence of things. This quarter we announced two new products. The first is a new design in our series of wafer-level chip-scale sensors. The new sensor provides analog information such as position from the motion or changes of external magnetic fields. These sensors are the smallest products we’ve ever made at NVE, measuring just 0.55 millimeters square. Combined with the small size is an extremely high sensitivity. This combination enables unmatched spatial sensitivity for precision motion applications including medical devices, industrial automation, and robotics.
We are promoting our new products on YouTube with videos showing the sensor detect tiny motions of minute magnets, and you can view these videos on our website. We also released a family of gear sensors in this quarter for precise motion, speed, and position sensing in industrial automation and robotics. These sensors are biased by a small magnet and detect the motion of gears as they pass the sensor. Seven different versions of these sensors match common gear sizes in a newly available sensor form factor. The new sensors provide large, low-distortion signals allowing more precise control in linear and rotational encoders and closed-loop servo systems that are ubiquitous in factory automation and robotics.
We have videos of these new products on our website and YouTube channel showing the incredible small size, high precision, and versatility of our new sensors. In addition to these new product launches, we’re developing several new products, including even more precise sensors for products and more power-efficient isolators and power conversion. Next, I’ll cover our recent leadership transition and board expansion. I was elected Director and appointed President and CEO at our annual shareholders meeting in August. Former CEO Dan Baker replaced Terry Glarner as Chairman. We also elected a new Director, Carolyn Valentine, expanding the board from five to seven directors. The larger board strengthens our governance. I’m honored to lead NVE as CEO. We have a talented team, strong customer relationships, and many exciting opportunities ahead.
I look forward to building on our momentum to create long-term value for our shareholders through profitable growth and expansion in attractive markets. We see significant opportunities in robotics, power conversion, and the artificial intelligence of things. 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
Kaden (Analyst)
Hey Pete, am I able to ask the question here? Just on mute.
Peter Eames (President and CEO)
Hi, Gayden, go ahead.
Kaden (Analyst)
Great, thank you. I’d love if you can give some more color on the rescheduled orders here. So you guys attribute the decline to customer rescheduling orders. Were those pushed out into H2 and not necessarily into next fiscal year? Were they roughly the size of the shortfall or smaller? The quarter-over-quarter shortfall, or smaller than that?
Peter Eames (President and CEO)
Yeah, sure, Kaden. The order variability was primarily from orders being pulled in to quarter one from quarter two, so we don’t see any further disruptions looking forward. And as Daniel said in the prepared remarks, it’s a relatively short-term effect.
Kaden (Analyst)
Okay, and following up there, it seems just like from your AR shipments look weighted toward September. Would you say that September was the strongest month of the quarter? And do you guys have any other commentary around H2’s velocity versus H1?
Peter Eames (President and CEO)
Sure. Maybe Daniel can comment on receivables.
Daniel Nelson (Vice President Operations)
Yeah. So in response to that question, we did see revenue increase towards the end of the September quarter. And yes, we did see increase in September compared to the immediate month, which was August.
Kaden (Analyst)
Got it, got it. I’ll jump back in the queue. I have other questions, but I’ll let others ask before me.
Peter Eames (President and CEO)
Great, thanks, Kaden. Other questions.
Kaden (Analyst)
If there’s not, I’ll ask more.
Peter Eames (President and CEO)
Please go ahead.
Kaden (Analyst)
So would you guys give some color around the growth you’re seeing in the automation market and then as well as the power conversion markets versus your core medical sales in H1? And can you also give commentary about how that’s looking into H2?
Peter Eames (President and CEO)
Yep, we’re definitely seeing strong growth in both power conversion and in robotics applications. We highlighted some important products in the prepared remarks, especially focused on automation and new sensors that go into robotics applications. The spatial sensitivity that we’re providing with those devices is unmatched in the industry, and we’re optimistic partly because of that. We also have excellent—we also have a high level of inventory, and we think the market is timed right for robotics applications and power conversion applications. So it’s driving overall optimism on our part.
Kaden (Analyst)
Would you—could you give some color on maybe any design wins or design-ins that you have that could be driving the growth through H2 and even into the next fiscal year?
Peter Eames (President and CEO)
Yes, for the wafer-level chip-scale parts that we talked about in the prepared remarks and on the previous investor calls as well, we do have some important small design wins for those products. So still early there, but I think the feedback from the industry has been very positive, and we’re expecting growth long term from those parts and those technologies in general.
Kaden (Analyst)
Okay, when you say small design wins, is that small in terms of revenue, or is that—can you maybe describe the size of the customers?
Peter Eames (President and CEO)
It’s a mix. So when we say small designs, it’s usually in markets that start small with samples and then later move into low-thousand type quantity purchases while they work out system-level integration challenges. That can take some time. Sometimes it takes a couple quarters, sometimes less, for those to then translate into larger orders, factors of 10 larger than the sample orders I described. So it takes some time to ramp up, and I would say that we’re certainly within that cycle with several products, and that’s why we’re optimistic.
Yeah, it’s unusual for us to comment specifically on customers, but I can say that there’s a variety of customers interested in the technology. It spans customers in the robotics space, of course, but also spanning beyond that. And we like the potential for very high volumes there. Certainly, yeah, we’re certainly chasing very high volumes. Well, we’re certainly not unfamiliar with producing millions of sensors, and tens of millions of sensors are certainly well within our capacity here. We can easily scale well beyond that as well in the short term and certainly within the times that we expect these customers to ramp up.
Yep, happy to. And happy to highlight the advantages that NVE provides as the application voltages continue to increase. We provide the highest isolation in the industry, and as voltages increase in power supplies and power conversion applications, that continues to favor NVE’s products. And we’re continually optimistic for that reason. So we see the trends favoring NVE’s technology and we’re expecting continued growth there as well.
Pete Previt (UNKNOWN)
Pete, I’d like to ask the question. Hi Pete, this is Pete Previt calling from Florida. Great job on your continued success there. My question is this: Are NVE sensors applicable to gears for humanoid robots? You mentioned robotics; it could be arms in automation, in factories. But what about humanoid robots? Is that something where your sensors can be used? Are you having any conversations there?
Peter Eames (President and CEO)
Yep, definitely. The new gear sensors that I talked about on the call are especially intended towards robotics, industrial and humanoid robotics. They’re intended for advanced encoders and servo systems, and those are exactly what are being used in humanoid robotics and elsewhere. So we think that the timing of that introduction is perfect with both in the humanoid robotics industry, and we’re seeing some strong interest there already. So as I said previously, we’re optimistic about those applications.
Great, thank you very much. Appreciate it.
Itai (Analyst at Principal)
Hey Pete, this is Itai from Principal. I just wanted to ask, just so I heard you right, you basically said that the second half in terms of top line should be similar to the first half of the year, is that correct?
Peter Eames (President and CEO)
That’s correct. That’s what we said in the prepared remarks. We do see the order disruptions as a temporary situation, and we expect to return to growth in the next quarter.
Itai (Analyst at Principal)
Got it. And so my follow up would be, how do these new products and the secular growth market fit into those expectations, if you will? Are you guys forecasting the back half based on existing orders, or is there still orders to go get from these new products and new use cases?
Peter Eames (President and CEO)
Yeah, we’re definitely seeing more orders come in. And as Daniel said in the prepared remarks, the growth is across our product portfolio, including distributors and direct sales and legacy products, and also our new products. So we’re happy with the growth there, and we expect that to continue.
Itai (Analyst at Principal)
Got it. So I guess asked another way, what would be, call it upside to those internal expectations of a similar second half? What are some things you think could drive upside there?
Peter Eames (President and CEO)
Well, generally I think the market we’re seeing is continuing to accelerate. We just got Abbott’s numbers this morning, for example, and they project a 10% year-over-year increase. So short term we’re not seeing any further disruptions in our current sales. And I think long term we have impressive products, important customers, and long-term growth for those types of customers.
Itai (Analyst at Principal)
Got it, thank you. Is there any color you can give on backlog or backlog coverage, or any metrics you could share there? That would be helpful.
Peter Eames (President and CEO)
Yeah, we typically don’t track backlog. I’d say we typically have a strong order flow, and we have plenty of inventory to satisfy those expected orders. I think we’re in good shape there.
Itai (Analyst at Principal)
Alrighty. And then last one for me would be, can you speak to the capacity expansion and how that’s going? I recall last quarter you mentioned it was mostly R&D for the time being. Has that moved into volume production in earnest, or any color on that would be helpful.
Peter Eames (President and CEO)
Yeah, there certainly has been some shift towards production capacity with the additional resources from the expansion. I’d say the shift is relatively small now, but as I mentioned previously, there are some important design wins in our wafer-level chip-scale products and that capacity is primarily from what we’ve added from the expansion. So that’s good news. And we’ll continue to transition capacity in that direction as the order flows increase here.
Itai (Analyst at Principal)
All right, I’ll jump back in the queue. Thanks guys.
Peter Eames (President and CEO)
Yeah, go ahead. Yeah, in general, I think the trends are definitely moving in the right direction. And as I described earlier, it’s common for some of those new customers to start with relatively small orders and grow over time, and we’re definitely seeing that. And specifically in the products that I mentioned in the prepared remarks and in the wafer-level chip-scale products, we’re seeing a continual increase in the interest and increases in order sizes. So it’s definitely moving in the right direction.
Yeah, robotics and automation and factory automation and humanoid robotics are two important areas where we’re seeing that interest. Yeah, go ahead. I would say the main focus for me is taking advantage of recent expansion and leveraging that towards new products, and new products in fast-growing markets. So it’s a continuation of our previous efforts and my efforts on the expansion in general. But I’d say it’s a continuation in the trajectory that was started under Dan’s leadership and moving to take advantage of that expansion.
We definitely work to expand our products throughout the medical device industry. So cardiac rhythm management, and Abbott obviously is an important customer of ours, but we see growth in other areas as well. Other implantable medical devices, such as neurostimulators, are important growth areas for NVE’s products as well. And it’s because we have the advantages of small size and low power. It makes us a perfect technology for implantable medical devices.
Thank you very much. You know, it’s hard to say. We talk to our robotics customers regularly, and there is definitely forecast for growth there. It’s hard to speak directly to what their plans are, but we do see increasing production on our side, and we’re happy to report that those are moving into those types of applications—automation and humanoid robotics. So generally I think we’re aligned well with the industry and the specific needs for the robotics market, and we’ll continue to see things move in that direction.
Kaden (Analyst)
Right. And my final, I guess, question on the humanoid robotics front, two-pronged here. Would you say most of your humanoid robotics customers are Western OEMs? And would you be able to size the relative dollar content per robot that you guys are expecting, even if it’s a range?
Peter Eames (President and CEO)
Sure. Yeah. So we have a global distribution network for our robotics customers and our subsystem customers in the robotics marketplace. So we’re servicing both Western customers and global customers. To answer the first part of your question, the second part of your question, in terms of the dollar content, a typical NVE product ASP is perhaps one to two dollars per sensor. And obviously there’s several sensors used in the precision application of human robotics.
So we see the potential for several NVE sensors per robot there, and that drives significant revenue from our perspective. So I think there’s a big upside.
Kaden (Analyst)
And by several, would you say in the tens of sensors or in the hundreds of sensors, like just a scale 20 to 50? Can you give a rough range?
Peter Eames (President and CEO)
Certainly in the tens of sensors.
Kaden (Analyst)
That’s fair. Okay, got it. All right, thank you so much, Pete. I’ll let others ask.
Peter Eames (President and CEO)
Yep. Thanks, Kayden. Hi. Go ahead. Yeah, that’s certainly one way to look at it. I think the year-to-date numbers are appropriate, and that’s kind of where the estimates came from. Okay, great.
Pete Previt (UNKNOWN)
This is Pete Previt again. Do you have any more expansion plans? I mean, I remember when I was there a few years ago, the new area that you guys expanded—sounds like you’ve got equipment filling that area. Is there a need for additional space? Have you secured any additional buildings where you move admin into that, and then you’re going to use that area in the existing building for production?
Peter Eames (President and CEO)
That’s right. Pete, a good memory. That is the option that we evaluate. We haven’t discussed further expansion plans beyond the space that you saw when you visited. However, that is something obviously that we keep in mind and we will continue to expand as needed and we’d follow the strategy that you mentioned, which is to move some of the admin off-site and continue to expand by leveraging the infrastructure that we have here within our current building.
So yeah, we definitely keep those plans fresh and we’ll adapt to them as we need to.
Pete Previt (UNKNOWN)
Okay, great. And it seems like you have a phenomenal board of directors. Are you guys meeting quarterly and how do you feel they are in supporting your efforts, your growth efforts and in any needs that you have in order to continue to grow the company.
Peter Eames (President and CEO)
Yeah, we have an excellent board as you mentioned. We’re happy to draw from experience throughout the industry. We expanded our board to seven. I think that makes them even stronger. And yeah, we meet on a quarterly basis and are happy to get the feedback and direction that the board provides. Very valuable to the company.
Pete Previt (UNKNOWN)
Great, thank you.
Peter Eames (President and CEO)
I think that’s a safe assumption. We have a global distribution network as I mentioned earlier, and they leverage sales for us. So this is our sort of broadest estimate of the sales of the company. It covers the broadest product portfolio for us. And when we see growth there, that’s a very good sign for revenue in general. And so we’re very happy to see distributor sales increasing and it’s a sign of continued attraction of NVE’s products in general—growing, gaining in the market.
It has. It does bob around a little bit and vary from quarter to quarter as you might expect. Certainly when we have lower direct customer sales as we did in the last quarter, then our percentage of distributor sales increases. It’s common for it to vary somewhat throughout the year, but in general it’s fairly steady, usually between something like one third and two thirds of total revenue. Thank you. Well, as I mentioned, distributor sales is a pretty broad representation of NVE’s product portfolio, and when we see growth there, that’s a good sign because it’s sort of a more general reflection of NVE’s products and sales and we see that as a very good sign. And then in terms of the distributor sales in general, we’re pleased to see that increasing and I think overall the growth that we’ve seen year to date and going forward will be a continuation of some of the things we said in the first quarter, and that’s growth broadly, generally, and across NVE’s products.
Okay, any other questions?
Kaden (Analyst)
Did I hear correctly that distributor sales grew 67% year over year? Did you guys say that in the initial remarks, or was I mishearing something?
Peter Eames (President and CEO)
No, that’s correct.
Kaden (Analyst)
Oh, that’s for Q2. Do you have an H1 figure for distributor sales year over year?
Peter Eames (President and CEO)
It’s somewhat less than that. I would place it a little bit lower, perhaps in the 40% range.
Kaden (Analyst)
Okay, so distributor sales has accelerated in Q2 versus Q1. Understood. All right, thank you, Pete. I beat.
Spencer (UNKNOWN)
I have one more question.
Peter Eames (President and CEO)
Sure. Go ahead, Spencer.
Spencer (UNKNOWN)
About my question earlier about, I guess, customer diversification, and then you were saying how the end of year, the second half of the year’s earnings are going to be similar to the first half. Is that correct?
Peter Eames (President and CEO)
Correct. Yep.
Spencer (UNKNOWN)
Is that mix going to be similar to the first half where it’s mostly a few large customers, or do you believe that the growth is going to come from additional customers like the additional ones that were gained in the first half of the year?
Peter Eames (President and CEO)
Yeah, we certainly expect revenue to increasingly come from new customers and that’s because the market is continuing to accept our new products and we’ll continue to see growth for that reason. And so I think there’s some short-term optimism as our wafer-level chip-scale products, new gear sensors and others that we’ve talked about previously continue to grow and become more representative of the total revenue numbers.
Spencer (UNKNOWN)
Got it. Thank you.
Peter Eames (President and CEO)
Okay. Any other questions? Barriers to entry include NVE’s patent portfolio, and that prevents competitors from operating in our space. So we have excellent patent coverage in spintronics and we think that provides that coverage. We also have trade secrets and expertise within the company that make it very difficult for competitors to do what NVE does and to try to copy the advantages that NVE provides with spintronics. It’s a unique technology and we provide a benefit proposition to our customers that’s unlike any others and we think our company is reflective of those advantages.
Okay, well, with that we’re pleased to report strong increases in distributor sales in second quarter and excellent growth in revenue for the first half of the year. Earnings call will be in January to discuss third quarter results.
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