NVE(US:NVEC)2025-10-22 22:00Financial Data and Key Metrics Changes - Revenue increased by 4% sequentially but decreased by 6% year over year, primarily due to a 68% decrease in contract R&D revenue, partially offset by a 1% increase in product sales [4][9] - Gross margin decreased to 78% from 86% in the prior year quarter due to a less profitable product mix and strong distributor sales [6] - Net income for the quarter was $3,310,000 or $0.68 per diluted share, down from $4,030,000 or $0.83 per share in the prior year quarter [9] - Operating margin was 58%, pretax margin was 65%, and net margin was 52% [10] Business Line Data and Key Metrics Changes - Contract R&D revenue was 3% of total revenue, primarily defense-related, with a 68% year-over-year decrease [4][5] - Non-defense product sales increased by 21%, while defense sales decreased by 64%, accounting for 8% of revenue [4][6] Market Data and Key Metrics Changes - Distributor sales increased both sequentially and year over year, indicating a recovery in the distributor market [6][80] - The defense business has been recovering steadily this fiscal year, with sequential increases in defense industry sales [6] Company Strategy and Development Direction - The company aims to develop advanced products and fuel future growth through new equipment and R&D strategies targeting high-value markets such as medical devices and autonomous vehicles [14][72] - The focus remains on non-defense markets, with the defense sector viewed as important but not a primary growth engine [97][102] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing a strong pipeline in most business areas and a recovery in the industry [91][102] - The company expects to see growth from new products and capabilities developed through recent equipment investments [21][22] Other Important Information - The tax rate increased to 20% for the fiscal year, primarily due to noncash impacts of tax law changes [7][8] - The company plans to spend an additional $1,000,000 to $1,500,000 on fixed assets in the last six months of the fiscal year to complete production expansion [12] Q&A Session Summary Question: Will the new equipment lead to revenue growth or just increased capabilities? - Management indicated that the goal is to use the new equipment to develop advanced products and fuel future growth, implying both increased capabilities and revenue growth [21] Question: When should growth be expected from the new equipment? - Management stated that growth is expected to begin in the current quarter, particularly in industrial markets [22][24] Question: Is wafer scale packaging allowing for a fully domestic supply chain? - Management confirmed a mostly domestic supply chain, with the addition of wafer level chip scale packaging bringing in-house a key element of the supply chain [32][36] Question: What role does contract R&D play in the company's strategy? - Management explained that contract R&D is primarily defense-related and serves to build the intellectual property portfolio, although it is not the main growth driver [85][97] Question: How does the company view the defense market? - While the defense market is important, it is not seen as a primary growth engine; the company prioritizes markets with higher growth potential [97][102]