Core Insights - NVE Corporation's shares have decreased by 20.4% since the first quarter earnings report for fiscal 2026, contrasting with a 0.9% increase in the S&P 500 index during the same period [1] Financial Performance - For the first quarter ended June 30, 2025, NVE reported total revenues of $6.10 million, a 10% decline from $6.78 million in the same period last year, primarily due to an 11% drop in product sales, partially offset by a 17% increase in contract research and development revenues [2] - Net income fell 13% to $3.58 million, or 74 cents per diluted share, down from $4.10 million, or 85 cents per share, in the prior year [2] - Gross profit for the quarter was $4.92 million, down from $5.81 million in the previous year, with a gross margin decline to 81% from 86% attributed to a less favorable product mix and increased distributor sales [3] Operating Expenses - Total operating expenses decreased by 20% year over year to $1.14 million, driven by an 18% reduction in research and development expenses and a 23% decrease in selling, general and administrative costs [4] - Operating income was $3.78 million for the quarter, with an operating margin of 62% [5] Management Commentary - CEO Daniel Baker acknowledged the earnings decline but highlighted strong profitability and cost control, noting stabilization in non-defense product sales and early signs of recovery in distribution channel sales [6] - Baker expressed optimism about sequential growth in defense orders in the upcoming quarters, anticipating a return to historical demand levels in fiscal 2027 [7] Factors Influencing Results - Revenue and earnings declines were largely due to lower defense product sales, which are cyclical and dependent on government contract timing, with gross margin narrowing due to a higher mix of distributor sales [8] Capital Expenditure and Tax Benefits - Capital expenditure for the quarter totaled $1.06 million, primarily for wafer fabrication equipment, strategically timed ahead of a tariff exemption expiration, supporting a two-year expansion plan and qualifying for a 25% advanced manufacturing investment tax credit [9] - Changes to the U.S. Internal Revenue Code now allow immediate expensing of previously amortized R&D costs, improving near-term cash flow [10] Future Guidance - Management expects quarter-over-quarter growth in defense product sales for the remainder of the fiscal year, alongside positive trends in distributor sales and ongoing product innovation efforts [11] Product Development Initiatives - Product development included launching ultra-miniature wafer-level chip-scale sensors and promoting rare-earth-free ferrite magnet sensors, targeting markets with geopolitical supply-chain risks [12] - NVE is investing in wafer-level packaging technology for medical devices and industrial automation, with favorable initial feedback from potential customers [13] Shareholder Returns - The company declared a quarterly dividend of $1.00 per share, reaffirming its commitment to balancing R&D, operational efficiency, and shareholder returns amid an evolving macroeconomic environment [14]

Group 1 - The conference call for NVE Corporation was held to discuss financial results for the quarter ended June 30, 2025 [1][2] - Daniel Nelson, the Controller and Principal Financial Officer, will present the financial results, followed by a business overview from the CEO, Daniel A. Baker [2] - The press release with financial results and the quarterly report on Form 10-Q were issued shortly before the call [2] Group 2 - The call is being webcast live and a replay will be available on the company's website and YouTube channel [1] - Forward-looking statements made during the call are subject to risks and uncertainties, including economic environment factors and trade barriers [3]

Financial Data and Key Metrics Changes - Revenue decreased by 10% year over year, primarily due to an 11% decrease in product sales, partially offset by a 17% increase in contract R&D revenue [4][5] - Gross margin decreased to 81% from 86% due to a less profitable product mix and strengthening distributor sales [5] - Net income decreased by 13% to $3,580,000 or 74¢ per diluted share compared to $4,100,000 or 85¢ per share for the prior year quarter [5][6] - Operating margin was 62%, pre-tax margin was 70%, and net margin was 59% [6] Business Line Data and Key Metrics Changes - Product sales decreased due to a decline in defense industry sales, while non-defense sales stabilized with improving industry conditions [4] - Distributor sales increased, indicating a recovery in the industry [4][26] Market Data and Key Metrics Changes - The defense industry sales are highly variable due to procurement cycles, impacting overall sales [4][23] - The company expects growth in the defense business in the coming quarters due to increased defense budgets [25][26] Company Strategy and Development Direction - The company is focusing on expanding its product offerings, including wafer level chip scale sensors and advanced magnetic switch sensors [12][13] - There is a strategic shift towards using ferrite magnets instead of rare earth magnets, which are subject to supply chain risks [27][29] - The company is investing in capital expenditures for new equipment to enhance production capabilities [7][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of distributor sales and the overall industry [26] - The company anticipates a return to historical levels of defense sales in the next fiscal year [26] - Management highlighted the importance of their intellectual property in spintronic memory technology and plans to partner with large-scale manufacturers [43][44] Other Important Information - The company declared a quarterly dividend of $1 per share and reported operating cash flow of $5,190,000 [10] - The Advanced Manufacturing Investment Tax was extended, allowing the company to realize tax credits between $700,000 and $800,000 [8] Q&A Session Summary Question: Can you provide more color on the weakness in the Puff business and the recovery in the distribution channel? - Management noted that the Puff business is driven by procurement contracts for defense systems, which can be unpredictable, but expects growth in the coming quarters [23][26] Question: What is the opportunity in replacing rare earth metals with ferrite magnets? - Management explained that ferrite magnets are widely available and less risky compared to rare earth magnets, and they are working to secure design wins with customers [27][29][30] Question: How will the investment in wafer scale packaging correlate to incremental revenue? - Management indicated that the investment allows for smaller parts and a domestic supply chain, which is expected to drive revenue growth [36][37] Question: Will the company consider reporting revenue excluding military orders? - Management acknowledged the suggestion and stated that they continuously evaluate the possibility, but it requires significant infrastructure to report consistently [64][66] Question: What are the prospects for military orders in the upcoming quarters? - Management confirmed that they expect military orders to sequentially increase in the next quarter and beyond [67]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) NVE Corporation's Q1 FY2026 unaudited financial statements detail decreased revenue and net income, alongside a strong balance sheet and consistent dividends [Balance Sheets](index=3&type=section&id=Balance%20Sheets) NVE's balance sheet as of June 30, 2025, shows a slight decrease in total assets to **$63.55 million**, with reduced cash offset by increased long-term securities Balance Sheet Summary (as of June 30, 2025 vs. March 31, 2025) | Account | June 30, 2025 ($) | March 31, 2025 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 3,222,552 | 8,036,564 | | Total current assets | 26,167,155 | 33,199,922 | | Net fixed assets | 2,960,024 | 1,986,899 | | Total assets | 63,553,563 | 64,275,862 | | **Liabilities & Equity** | | | | Total current liabilities | 1,625,459 | 1,168,870 | | Total liabilities | 2,463,940 | 2,007,091 | | Total shareholders' equity | 61,089,623 | 62,268,771 | [Statements of Income](index=4&type=section&id=Statements%20of%20Income) Q1 FY2026 total revenue decreased **10%** to **$6.10 million**, with net income falling to **$3.58 million** due to lower product sales Quarterly Income Statement Comparison (Unaudited) | Metric | Q1 FY2026 (Ended June 30, 2025) ($) | Q1 FY2025 (Ended June 30, 2024) ($) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 6,104,644 | 6,783,244 | -10.0 | | Gross Profit | 4,922,121 | 5,807,750 | -15.2 | | Income from Operations | 3,783,250 | 4,388,818 | -13.8 | | Net Income | 3,575,818 | 4,097,587 | -12.7 | | Diluted EPS | 0.74 | 0.85 | -12.9 | | Dividends Declared per Share | 1.00 | 1.00 | 0.0 | [Statements of Cash Flows](index=7&type=section&id=Statements%20of%20Cash%20Flows) Q1 FY2026 saw **$5.19 million** in operating cash flow, offset by **$5.17 million** in investing and **$4.84 million** in financing activities, leading to a **$4.81 million** cash decrease Quarterly Cash Flow Summary (Unaudited) | Activity | Q1 FY2026 (Ended June 30, 2025) ($) | Q1 FY2025 (Ended June 30, 2024) ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | 5,190,660 | 5,852,392 | | Net cash used in investing activities | (5,167,506) | (5,296,774) | | Net cash used in financing activities | (4,837,166) | (4,833,676) | | **Decrease in cash and cash equivalents** | **(4,814,012)** | **(4,278,058)** | [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Financial%20Statements) Notes detail accounting policies, business description, marketable securities (**$47.08 million**), stock repurchase authorization, and a **$1.00 per share** quarterly dividend declaration - The company develops and sells devices using spintronics, a nanotechnology that relies on electron spin to acquire, store, and transmit information[29](index=29&type=chunk) - Total marketable securities and money market funds were approximately **$47.08 million**, representing about **74% of total assets** as of June 30, 2025[36](index=36&type=chunk) - The stock repurchase program had a remaining authorization of **$3.52 million** as of June 30, 2025. No shares were repurchased during the quarter[48](index=48&type=chunk) - On July 23, 2025, the Board of Directors declared a quarterly cash dividend of **$1.00 per share**, payable on August 29, 2025[50](index=50&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 FY2026 revenue decline due to product sales, decreased gross margin, reduced operating expenses, and strong liquidity supporting investments and dividends [Results of Operations](index=14&type=section&id=Results%20of%20Operations) Q1 FY2026 results show a **10%** revenue decrease to **$6.1 million**, an **11%** product sales decline, reduced gross margin to **81%**, and a **13%** net income decrease Q1 FY2026 vs. Q1 FY2025 Performance | Item | Q1 2025 (% of Revenue) | Q1 2024 (% of Revenue) | Quarter-to-Quarter Change (%) | | :--- | :--- | :--- | :--- | | Product sales | 96.8 | 97.5 | -10.7 | | Total revenue | 100.0 | 100.0 | -10.0 | | Gross profit | 80.6 | 85.6 | -15.2 | | Total expenses | 18.7 | 20.9 | -19.7 | | Net income | 58.6 | 60.4 | -12.7 | - The decrease in product sales was primarily due to decreased defense industry sales, which can be highly variable because of procurement cycles[56](index=56&type=chunk) - The decrease in R&D expense was due to the completion of some wafer-level chip scale packaging activities and reallocation of resources to manufacturing[58](index=58&type=chunk) [Liquidity and Capital Resources](index=15&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased by **$4.81 million** to **$3.22 million** due to investing and financing activities, with future dividends funded by operating cash flow - Cash and cash equivalents decreased by **$4.81 million** during the first quarter of fiscal 2026[62](index=62&type=chunk) - Investing activities included **$10.1 million** in marketable securities purchases and **$1.06 million** in fixed asset purchases, offset by **$6.0 million** in proceeds from maturing securities[65](index=65&type=chunk) - Financing activities consisted of **$4.84 million** in cash dividends paid to shareholders. A further dividend of **$1.00 per share** was declared for the next quarter[66](index=66&type=chunk) [Item 4. Controls and Procedures](index=16&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[69](index=69&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[70](index=70&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=16&type=section&id=Item%201.%20Legal%20Proceedings) NVE is not aware of any material pending or threatened legal proceedings that would adversely impact its financials - As of the reporting date, NVE is not aware of any material pending or threatened legal proceedings[72](index=72&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the Annual Report on Form 10-K for FY2025 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2025, were reported[73](index=73&type=chunk) [Item 4. Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[74](index=74&type=chunk) [Item 6. Exhibits](index=17&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Interactive Data Files - The report includes certifications by the CEO and Principal Financial Officer as required by the Sarbanes-Oxley Act[76](index=76&type=chunk) - Inline XBRL documents are included as exhibits for interactive data purposes[76](index=76&type=chunk)

Core Insights - The analyst emphasizes a tech-focused approach to investment research, leveraging 25 years of experience in IT and investment to provide unique insights [1] - The analyst's background includes significant experience in virtualization, cloud technologies, and telecommunications, which informs their investment strategies [1] - The research covers various themes such as automated supply chains, Generative AI, telecommunications capital expenditures, and the deflationary nature of software and semiconductors [1] Investment Philosophy - The analyst adopts a moderate stance, focusing on capital preservation strategies, particularly in light of past losses during the Global Financial Crisis (GFC) [1] - The investment journey began with mutual and indexed funds, transitioning to individual stocks after learning from previous investment mistakes [1] - The analyst values unique perspectives and insights from platforms like Seeking Alpha, which enhance the investment decision-making process [1] Additional Activities - The analyst is involved in non-profit work, dedicating time to assist needy families and contributing to enterprise tech reviews [1] - The analyst has entrepreneurial experience in real estate and farming, although with mixed success [1]

Core Viewpoint - NVE Corporation (NVEC) demonstrated a mixed performance in fiscal Q4 2025, with a slight revenue increase but overall annual decline, indicating potential recovery signs amid strategic investments and product innovation [1][13]. Financial Performance - Fiscal Q4 revenues reached $7.27 million, marking a 3% year-over-year increase from $7.08 million, driven by a significant 558% rise in contract research and development revenues [2] - Product sales experienced a slight decline of 1% to $6.95 million [2] - Earnings per diluted share increased by 1.3% to 80 cents from 79 cents in the prior-year quarter, with net income rising to $3.89 million from $3.81 million [3] - The gross margin improved to 79% from 76%, attributed to a more profitable product mix and a shift towards direct sales [3] Operating Metrics & Profitability - Operating income for the quarter increased to $4.25 million from $4.06 million a year ago, with an operating margin of 58% [4] - Pre-tax margin stood at 65% and net margin at 54%, indicating continued profitability despite increased R&D spending, which rose by 28% year-over-year [4] - SG&A expenses declined by 2%, reflecting overall cost discipline [4] Annual Overview - For the fiscal year, revenues fell 13% to $25.87 million, primarily due to declines in the first three quarters [5] - Gross margin for the year rose to 84% from 77% in fiscal 2024, while net income declined 12% to $15.1 million, or $3.11 per diluted share [5] - Total annual expenses increased by 25%, driven by a 33% rise in R&D and a 13% growth in SG&A costs [5] Management Insights - CEO Dan Baker expressed confidence in the sustainability of revenue performance, highlighting replenishment in customer channels and demand for products [6] - Management remains optimistic about future returns from recent investments in R&D and capacity expansion [6] Product Development - The company noted growing interest in newly launched omnidirectional magnetic sensors, which cater to industrial automation and medical device markets, enhancing competitive positioning [7] - A sequential 44% increase in revenues from the prior quarter was attributed to a 40% rise in product sales and a 210% surge in contract R&D revenues [8] Operational Stability - Management pointed to stable manufacturing operations and adequate inventory levels as risk mitigants amid ongoing tariff and supply-chain concerns [9] - The company's unique tariff position, including exemptions in major export markets and domestic production capabilities, contributed to operational stability [9] Capital Expenditure & Future Guidance - NVEC plans to significantly increase capital spending in fiscal 2026, with projected fixed asset investments between $2 million and $3 million, compared to $1.26 million in fiscal 2025 [10] - The primary allocation is towards new wafer fabrication equipment, with management optimistic about the return on this investment [11] Strategic Partnerships - In the quarter, NVE Corp extended its supplier agreement with Abbott Laboratories, reinforcing its position as a long-term partner in the implantable medical device sector [12]

Financial Data and Key Metrics Changes - The company reported a 3% year-over-year increase in revenue and a 44% sequential revenue growth for the quarter, with a 2% increase in earnings as industry conditions improved [3][4] - Gross margin increased to 79% from 76% due to a more profitable product mix and a larger portion of direct sales [5] - Net income for the fourth quarter increased 2% to $3,890,000 or $0.80 per diluted share compared to $3,810,000 or $0.79 per diluted share for the prior year quarter [5][6] - For the fiscal year, revenue decreased 13% due to declines in the first three quarters, but gross margin increased to 84% from 77% [6][7] Business Line Data and Key Metrics Changes - Contract R&D revenue increased by $270,000 or 558%, while product sales decreased by 1% year-over-year [4] - Sequentially, total revenue increased 44% driven by a 40% increase in product sales and a 210% increase in contract R&D [4] Market Data and Key Metrics Changes - The company noted that it has ample raw material and work-in-process inventories, which provide a buffer against supply disruptions and tariffs [10][13] - The company is well-positioned regarding tariffs, with most of its exports exempt from retaliatory tariffs due to the nature of its products [15] Company Strategy and Development Direction - The company plans to invest $2 to $3 million in capital expenditures for fiscal year 2026, focusing on expanding capabilities and increasing production of wafer-level chip scale parts [8][32] - The company is focusing on markets where it has traditional strengths, such as medical devices and industrial control, with new products aimed at enhancing performance, accuracy, and efficiency [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future revenue growth due to investments in R&D and new product development, with a focus on high-quality revenues [25][37] - The company is confident in the return on capital expenditures based on positive customer feedback from prototype devices [35] Other Important Information - The company paid a quarterly dividend of $1 per share and has paid over $200 million in dividends since initiating its dividend program [10] - The company has significantly increased its investment in R&D, spending 14% of revenue in the past year [20] Q&A Session Summary Question: Revenue improvement and channel inventory - Management indicated that the revenue improvement was a combination of customer replenishment and new business, with high-quality revenues being a positive sign [25] Question: New product introduction and market expansion - The new products are focused on traditional markets and are expected to enhance the company's competitive advantages in size and sensitivity [27][28] Question: CapEx plans and return on investment - Management confirmed significant capital expenditures planned for fiscal year 2026, with confidence in achieving returns based on customer feedback from prototypes [31][35]

Financial Data and Key Metrics Changes - The company reported a 3% year-over-year increase in revenue and a 44% sequential revenue growth for the quarter, with a 2% increase in earnings as industry conditions improved [3][4] - Gross margin increased to 79% from 76% due to a more profitable product mix and a larger portion of direct sales [5] - Net income for the fourth quarter increased 2% to $3,890,000 or $0.80 per diluted share compared to $3,810,000 or $0.79 per diluted share for the prior year quarter [5][6] - For the fiscal year, revenue decreased 13% due to declines in the first three quarters, but gross margin increased to 84% from 77% [6][7] Business Line Data and Key Metrics Changes - Contract R&D revenue increased by $270,000 or 558%, while product sales decreased by 1% year-over-year [4] - Sequentially, total revenue increased 44% driven by a 40% increase in product sales and a 210% increase in contract R&D [4] Market Data and Key Metrics Changes - The company noted that it has ample raw material and work-in-process inventories, which provide a buffer against supply disruptions [9][13] - The company has been paying 25% tariffs on raw material imports from China since 2018, but this has not significantly impacted costs [12][13] Company Strategy and Development Direction - The company plans to invest $2 to $3 million in capital expenditures for fiscal 2026, significantly above the previous year's spending [8][30] - The focus is on expanding capacity and capabilities, with new equipment scheduled to arrive next quarter [8][16] - The company aims to lead the industry in performance, accuracy, size, and power consumption of sensors [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future revenues due to investments in R&D and new product development, with a focus on markets such as medical devices and industrial control [20][26] - The company is confident in earning a return on capital expenditures based on positive customer feedback on prototype devices [32] Other Important Information - The company declared a quarterly dividend of $1 per share and has paid over $200 million in dividends since inception [10] - The company has executed an extension of its supplier agreement with Abbott Laboratories, a key customer [17] Q&A Session Summary Question: Revenue improvement and channel inventory - Management indicated that the revenue improvement was a combination of channel replenishment and new business, with high-quality revenues reported for the past quarter [25] Question: New product introduction and market expansion - The new products introduced focus on traditional strengths in medical devices and industrial control, providing flexibility and higher quality data [26][27] Question: CapEx plans and confidence in returns - Management confirmed significant capital expenditures planned for fiscal 2026, with confidence based on excellent customer feedback on new devices [30][32]

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) NVE develops and sells spintronic sensors and couplers for data acquisition and transmission, targeting IIoT, medical, and power conversion markets - NVE Corporation, founded in **1989**, specializes in spintronics, a nanotechnology using electron spin to acquire, store, and transmit information[19](index=19&type=chunk)[20](index=20&type=chunk) - The company's technology is applied in three main areas: magnetic sensors for data acquisition, couplers for data transmission, and MRAM for data storage[21](index=21&type=chunk) [Our Strategy](index=5&type=section&id=Our%20Strategy) NVE aims to be the leading spintronics developer, expanding sensor and coupler lines for energy conversion and IoT - The company's vision is to be the leader in practical spintronics, providing the "eyes, nerves, and brains" for electronic systems[29](index=29&type=chunk) - Growth strategy focuses on expanding sensor and coupler product lines to support global trends like efficient energy conversion and smart, low-power IoT end nodes[29](index=29&type=chunk) [Our Products and Markets](index=5&type=section&id=Our%20Products%20and%20Markets) NVE's products include sensors, couplers, power products, and MRAM, serving IIoT, medical, energy conversion, and tamper prevention - Sensor products, used to determine position or speed, are sold as standard catalog items for the IIoT market and as custom sensors primarily for medical devices[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - Spintronic couplers are used for high-speed data transmission in markets like power conversion and the IIoT for factory automation[33](index=33&type=chunk) - Power products, including DC-to-DC converters, serve energy conversion applications such as battery storage and hybrid/electric vehicles[34](index=34&type=chunk) - MRAM strategy is focused on low bit density applications, such as tamper prevention and detection[35](index=35&type=chunk) [Product Manufacturing](index=5&type=section&id=Product%20Manufacturing) NVE conducts in-house U.S. wafer production and testing, a competitive advantage, with ISO 9001:2015 certification - The company believes its in-house U.S. wafer production and testing capabilities provide a competitive advantage over competitors who outsource these operations[36](index=36&type=chunk) - The manufacturing process involves fabricating spintronic structures on wafers, wafer-level inspection, and then either dicing for die sales, sending to Asia for packaging, or processing into WLCSPs[38](index=38&type=chunk)[39](index=39&type=chunk) - The manufacturing facility is certified under the ISO 9001:2015 quality management standard[40](index=40&type=chunk) [Sales and Product Distribution](index=6&type=section&id=Sales%20and%20Product%20Distribution) NVE sells products through distributors in over **75** countries and leverages private-brand partnerships to expand market presence - The company relies on distributors who stock and resell products in more than **75** countries. Key distributors include America II Electronics, Inc., Angst+Pfister Sensors and Power, and Digi-Key Corporation[41](index=41&type=chunk) - NVE also engages in private-brand partnerships with large integrated device manufacturers to expand distribution and product awareness[41](index=41&type=chunk) [New Product Status](index=6&type=section&id=New%20Product%20Status) NVE introduced new high-sensitivity and Wafer-Level Chip-Scale sensors, with long-term development on next-gen TMR, medical, and antitamper MRAM - New products marketed in the past year include high-sensitivity ultraminiature sensors, a new type of rotation sensor, Wafer-Level Chip-Scale sensors, advanced position sensors, and new evaluation boards[42](index=42&type=chunk)[47](index=47&type=chunk) - Long-term product development programs for fiscal **2025** include ultrahigh-sensitivity TMR sensors, next-generation sensors for medical devices, wafer-level chip-scale devices, and next-generation MRAM for antitamper applications[42](index=42&type=chunk)[47](index=47&type=chunk) [Our Competition](index=6&type=section&id=Our%20Competition) NVE faces competition in industrial, medical, and coupler markets, competing on product features rather than solely on price - Industrial sensor competition includes other GMR/TMR sensor makers and companies producing Hall-effect and AMR sensors, though NVE believes its products are more sensitive and power-efficient[42](index=42&type=chunk) - Medical sensors compete with traditional electromechanical switches (e.g., reed switches) and other solid-state sensors. NVE claims advantages in reliability, size, precision, and sensitivity[43](index=43&type=chunk) - Coupler competition includes optical, inductive, capacitive, and radio-frequency technologies. NVE's strategy is to compete on product features like smaller size and higher immunity to transients, not just price[44](index=44&type=chunk) [Intellectual Property](index=7&type=section&id=Intellectual%20Property) As of March 31, **2025**, NVE held over **50** U.S. patents, foreign patents, and pending applications, including advanced MRAM designs - As of March 31, **2025**, the company had more than **50** issued U.S. patents, plus foreign patents and pending applications[48](index=48&type=chunk) - The company holds patents on advanced MRAM designs, including magnetothermal MRAM and spin-momentum MRAM[49](index=49&type=chunk) - Registered trademarks include "NVE" and "IsoLoop"[50](index=50&type=chunk) [Human Capital Resources](index=8&type=section&id=Human%20Capital%20Resources) As of March 31, **2025**, NVE had **42** employees, predominantly male and highly educated, with low **4%** voluntary turnover - As of March 31, **2025**, the company had **42 employees**, **41 of whom were full-time**[55](index=55&type=chunk) Workforce Gender Demographics (as of March 31, 2025) | Gender | NVE | Minnesota | | :--- | :--- | :--- | | Male | 69% | 50% | | Female | 31% | 50% | Workforce Racial Demographics (as of March 31, 2025) | Race | NVE | Minnesota | | :--- | :--- | :--- | | African American or Black | 10% | 8% | | American Indian or Alaska Native | 2% | 1% | | Asian | 19% | 6% | | White or Caucasian | 69% | 83% | - Voluntary employee turnover was **4%** for fiscal **2025**[61](index=61&type=chunk) [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company identifies significant risks including supplier dependence, Asian packaging reliance, competition, product liability, economic cyclicality, and stock volatility [Risks Related to Our Business](index=10&type=section&id=Risks%20Related%20to%20Our%20Business) Key business risks include single-source supplier reliance, Asian packaging dependence, competition, medical device product liability, and cybersecurity threats - The company relies on key single-source suppliers for raw silicon and semiconductor foundry wafers, and a loss of supply could severely harm the business[73](index=73&type=chunk) - Dependence on packaging vendors, many of whom are in Asia, poses a risk of supply interruption due to business decisions, geopolitical issues, or natural disasters[75](index=75&type=chunk) - Products incorporated into medical devices expose the company to product liability claims, which could be financially damaging despite indemnification agreements[81](index=81&type=chunk) - As of March 31, **2025**, marketable securities represented approximately **62%** of total assets, exposing the company to potential losses from market conditions and interest rate changes[90](index=90&type=chunk) [Risks Related to Our Industry](index=13&type=section&id=Risks%20Related%20to%20Our%20Industry) The company operates in cyclical semiconductor and uncertain economic environments, facing intellectual property litigation risks - The company faces an uncertain economic environment, particularly due to the cyclical nature of the semiconductor market[93](index=93&type=chunk) - Reliance on intellectual property creates exposure to litigation risks, where patent infringement claims could lead to costly settlements, licensing fees, or damage awards[94](index=94&type=chunk) [Risks Related to Our Stock](index=13&type=section&id=Risks%20Related%20to%20Our%20Stock) The company's stock price faces significant risks, including potential declines if cash dividends are reduced or discontinued - Decisions to reduce or stop paying cash dividends could cause the market price of the common stock to fall. Recent dividend levels may be unsustainable as they generally exceed cash flow from operations[95](index=95&type=chunk) - The stock price is subject to significant fluctuations due to factors such as competitor actions, product delays, changes in customer demand, and general economic conditions[96](index=96&type=chunk) [Item 1C. Cybersecurity](index=14&type=section&id=Item%201C.%20Cybersecurity) NVE has a comprehensive cybersecurity risk management program overseen by the Board's Audit Committee, managed in-house, with no material incidents - The Board of Directors Audit Committee has ultimate oversight of cybersecurity risks[99](index=99&type=chunk) - Cybersecurity risk is managed in-house by a full-time IT specialist and the CEO, rather than engaging third-party providers[100](index=100&type=chunk) - The company has not experienced any material cybersecurity incidents in the last three years[98](index=98&type=chunk) [Item 2. Properties](index=14&type=section&id=Item%202.%20Properties) NVE's principal offices and manufacturing facility are in a **21,362** square foot leased space in Eden Prairie, Minnesota - The company leases a **21,362** square foot facility in Eden Prairie, Minnesota, for its offices, labs, and production[101](index=101&type=chunk) - The current lease agreement expires on May 31, **2031**[101](index=101&type=chunk) [Item 3. Legal Proceedings](index=14&type=section&id=Item%203.%20Legal%20Proceedings) The company is not aware of any material pending or threatened legal proceedings that would materially impact its financials - As of the report date, NVE is not aware of any material pending or threatened legal proceedings[102](index=102&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=15&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) NVE's common stock trades on NASDAQ under NVEC, with a history of dividends, **49** shareholders, and no share repurchases - Common Stock trades on the NASDAQ Capital Market under the symbol NVEC[106](index=106&type=chunk) - As of March 31, **2025**, there were **49** shareholders of record[108](index=108&type=chunk) - No shares were repurchased in fiscal **2025** or fiscal **2024**[110](index=110&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal **2025** revenue decreased **13.2%** to **$25.9 million**, net income fell **12.0%** to **$15.1 million**, with improved gross margin [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Fiscal **2025** total revenue fell **13%** due to product sales decline, gross margin improved to **84%**, but rising expenses led to a **12%** net income decrease Fiscal Year 2025 vs. 2024 Performance | Item | FY 2025 (% of Revenue) | FY 2024 (% of Revenue) | Year-to-Year Change | | :--- | :--- | :--- | :--- | | Total revenue | 100.0% | 100.0% | (13.2)% | | Product sales | 95.2% | 98.0% | (15.7)% | | Contract R&D | 4.8% | 2.0% | 112.0% | | Gross profit | 83.6% | 77.3% | (6.0)% | | Total expenses | 21.8% | 15.1% | 25.1% | | Income from operations | 61.8% | 62.2% | (13.6)% | | Net income | 58.2% | 57.5% | (12.0)% | - The decrease in product sales was primarily due to decreased purchases by existing customers[119](index=119&type=chunk) - The increase in gross margin percentage was due to a more profitable product mix and a larger portion of direct rather than distributor sales[120](index=120&type=chunk) [Liquidity and Capital Resources](index=17&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, **2025**, cash and cash equivalents decreased by **$2.2 million** to **$8.0 million**, primarily due to **$19.3 million** in dividends - Cash and cash equivalents decreased by **$2.25 million** to **$8.04 million** in FY**2025**[125](index=125&type=chunk) - Net cash provided by operating activities was **$14.3 million**[127](index=127&type=chunk) - Net cash used in financing activities was **$19.2 million**, which consisted of **$19.3 million** in cash dividends paid to shareholders[131](index=131&type=chunk) - The company plans to increase fixed asset purchases in fiscal **2026** to between **$2.0 million** and **$3.0 million** to support production capacity increases[130](index=130&type=chunk) [Item 9A. Controls and Procedures](index=18&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, **2025** - The Chief Executive Officer and Principal Financial Officer concluded that as of March 31, **2025**, the company's disclosure controls and procedures were effective[135](index=135&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of March 31, **2025**, based on the COSO **2013** framework[137](index=137&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=20&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, corporate governance, and Section 16(a) reports is incorporated by reference - Required information for this item is incorporated by reference from the Proxy Statement for the **2025** Annual Meeting of Shareholders[145](index=145&type=chunk) [Item 11. Executive Compensation](index=20&type=section&id=Item%2011.%20Executive%20Compensation) Executive and director compensation information is incorporated by reference from the company's **2025** Proxy Statement - Required information for this item is incorporated by reference from the Proxy Statement for the **2025** Annual Meeting of Shareholders[146](index=146&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=20&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan information is incorporated by reference from the company's **2025** Proxy Statement - Required information for this item is incorporated by reference from the Proxy Statement for the **2025** Annual Meeting of Shareholders[147](index=147&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=20&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Related party transactions and director independence information is incorporated by reference from the company's **2025** Proxy Statement - Required information for this item is incorporated by reference from the Proxy Statement for the **2025** Annual Meeting of Shareholders[148](index=148&type=chunk) [Item 14. Principal Accounting Fees and Services](index=20&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on fees billed by the independent auditor and Audit Committee's pre-approval policy is incorporated by reference - Required information for this item is incorporated by reference from the Proxy Statement for the **2025** Annual Meeting of Shareholders[149](index=149&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=20&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists financial statements and an index of all exhibits filed with the Form 10-K, including corporate bylaws and material contracts - Financial statements are provided as required by Item **8**. Certain financial statement schedules have been omitted as they are not applicable or the information is included elsewhere[151](index=151&type=chunk) - A list of exhibits filed with the report is provided, including governance documents, material contracts, and SEC-required certifications[152](index=152&type=chunk)[154](index=154&type=chunk) Financial Statements [Reports of Independent Registered Public Accounting Firm](index=23&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor, Boulay PLLP, issued an unqualified opinion on the financial statements for the two-year period ended March 31, **2025** - The auditor, Boulay PLLP, expressed an unqualified opinion on the financial statements for the fiscal years ended March 31, **2025** and **2024**[161](index=161&type=chunk) - The auditor determined that there were no critical audit matters arising from the audit[165](index=165&type=chunk) [Balance Sheets](index=24&type=section&id=Balance%20Sheets) As of March 31, **2025**, total assets were **$64.3 million**, liabilities increased to **$2.0 million**, and equity decreased to **$62.3 million** Balance Sheet Summary (as of March 31) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $8,037 | $10,284 | | Total current assets | $33,200 | $33,194 | | Total assets | $64,276 | $66,780 | | **Liabilities & Equity** | | | | Total current liabilities | $1,169 | $1,036 | | Total liabilities | $2,007 | $1,212 | | Total shareholders' equity | $62,269 | $65,569 | | Total liabilities and equity | $64,276 | $66,780 | [Statements of Income](index=25&type=section&id=Statements%20of%20Income) For fiscal **2025**, total revenue was **$25.9 million**, gross profit **$21.6 million**, and net income **$15.1 million** or **$3.11** per diluted share Income Statement Summary (Year Ended March 31) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Total revenue, net | $25,875 | $29,804 | | Gross profit | $21,639 | $23,032 | | Income from operations | $15,994 | $18,519 | | Net income | $15,065 | $17,125 | | Net income per share – diluted | $3.11 | $3.54 | [Statements of Cash Flows](index=27&type=section&id=Statements%20of%20Cash%20Flows) For fiscal **2025**, net cash from operations was **$14.3 million**, investing provided **$2.7 million**, and financing used **$19.2 million** Cash Flow Summary (Year Ended March 31, 2025) | (in thousands) | Amount | | :--- | :--- | | Net cash provided by operating activities | $14,310 | | Net cash provided by investing activities | $2,668 | | Net cash used in financing activities | ($19,226) | | **Net (decrease) in cash and cash equivalents** | **($2,247)** | | Cash and cash equivalents at end of year | $8,037 | [Notes to Financial Statements](index=28&type=section&id=Notes%20to%20Financial%20Statements) The notes detail accounting policies, marketable securities (**75%** of assets), lease obligations, and customer concentrations, with two major customers accounting for **54%** of revenue - The company operates in a single reportable segment[182](index=182&type=chunk) - Marketable securities are classified as available-for-sale and valued at fair value. As of March 31, **2025**, total marketable securities and money market funds were approximately **$47.9 million**, representing **75%** of total assets[188](index=188&type=chunk)[211](index=211&type=chunk) - In fiscal **2025**, two customers accounted for **35%** and **19%** of total revenue, respectively[231](index=231&type=chunk) - The company extended its facility lease, which now expires on May 31, **2031**. Total future lease liabilities are **$0.92 million**[228](index=228&type=chunk)[230](index=230&type=chunk) - On May 7, **2025**, the Board declared a quarterly cash dividend of **$1.00** per share[236](index=236&type=chunk)

Core Viewpoint - NVE Corporation's shares have declined significantly following the release of its third-quarter fiscal 2025 earnings, contrasting with the overall market performance of the S&P 500 index [1] Financial Performance - The company reported earnings of 63 cents per diluted share for the third quarter of fiscal 2025, down from 87 cents in the same quarter last year [2] - Total quarterly revenues fell by 25.1% to $5.06 million from $6.76 million year-over-year, primarily due to a 22.1% decrease in product sales and a 73.7% drop in contract R&D revenues [3] - Gross profit decreased by 21% to $4.27 million, while gross margin improved to 84% from 80% due to a more profitable product mix [4] Expenses - R&D expenses increased by 60.8% to $0.9 million, reflecting higher investments in new technologies, while SG&A expenses rose by 11.7% to $0.43 million [5][6] - Operating expenses overall increased by 40% year-over-year, driven by the rise in R&D and SG&A expenses [6] Cash and Debt Position - As of December 31, 2024, cash and cash equivalents stood at $5.49 million, down from $10.28 million in March 2024, with no long-term debt reported [7] - The decline in cash was attributed to $14.39 million used for dividends and financing activities, partially offset by $11.83 million generated from operating activities [8] Management Commentary - The CEO acknowledged challenges in the semiconductor industry but highlighted strong profitability metrics and the launch of new wafer-level chip-scale products aimed at medical devices and robotics [9] - Management emphasized the stability of direct sales, which are higher-margin transactions, despite a decline in overall product sales [10] Market Influences - The revenue decline was linked to a slowdown in the semiconductor market and reduced customer purchasing activity, alongside the conclusion of certain R&D contracts [11] Strategic Outlook - Management expressed optimism about improving market conditions and plans for significant capital expenditure to enhance production capacity over fiscal 2025 and 2026 [13] - The company extended its building lease by 62 months and secured a $100,000 improvement allowance for facility expansion [14] - A quarterly cash dividend of $1 per share was announced, maintaining shareholder returns despite revenue and earnings declines [15]