NVE Corporation (NVEC) Q2 2027 Earnings Report, Transcript and Summary

Good afternoon. And welcome to the NVE Corporation conference call for the quarter ended September 30, 2026.

I am Peter G. 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, 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 will cover the business. I will also cover the recent leadership transition and board expansion then we will 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 lows of March. 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 ks for the year ended 03/31/2026. Actual results could differ materially from the information provided and we undertake no obligation to update forward looking statements we may make. We are 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?

Thanks, Peter. 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 1 of our large medical device customers. And a 95% decrease in defense product sales. Inventory adjustments by medical device customers can create short-term auto volatility for us. 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 staff and redeployment. The increase in SG&A was due to higher director option granted 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 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 was $3.17 million or $0.65 per diluted share compared to $3.3 million or $0.68 per share in the prior year quarter. Our profitability metrics for the quarter remained strong. In addition to the 54% net margin Peter mentioned previously, gross margin was 78%. Operating margin was 55%, and pretax margin was 63%. For the first 6 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 2 quarters of fiscal 2027. Turning to cash flow items. Cash flows from operations was $11.1 million for first 6 months of fiscal 2027 compared to $8 million for the first 6 months of fiscal 2026. Cash plus marketable securities increased from $43.5 million to $44.4 million as operating cash flow more than cover our dividends and purchases of fixed assets for the first half of the fiscal year. Receivables decreased 12% due to timing of customers' payment. Inventories decreased 3% due to increased product sales in the first half of the fiscal year. And we paid our $1.00 per share quarterly dividend the past quarter and declare another dividend to be paid at the end of November. Now I will turn the call back over to Peter Eames to cover the business. Peter?

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 a highly automated fourth wave factories using the artificial intelligence of things. This quarter, we announced 2 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 have ever made at NVE measuring just 0.55 mm square. Combined with a small size is an extremely high sensitivity This combination enables unmatched spatial sensitivity for precision motion applications including medical devices industrial automation, robotics. We are promoting our new products on YouTube with videos showing the sensor detecting tiny motions of minute magnets. You can view these videos on our website. We also released a family of gear sensors in the past 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 ear teeth as they pass the sensor. 7 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. Addition to these new product launches, we are developing several new products including even more precise sensors for robotics and more power efficient isolators and power conversion. Next, I will 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 Daniel Baker replaced Terry Glarner as chairman We also elected a new director, Carolyn Valentine, expanding the board from 5 to 7 directors. The larger board strengthens our governance. I am honored to lead NVE as CEO We have a talented team strong customer relationships, and many exciting opportunities ahead. 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 would like to open the call for questions via Google Meet. To ask a question, from Google Meet, click raise my hand icon at the bottom of the screen and unmute yourself to speak. From a phone, press *6 to unmute. Please state your name and affiliation before your question, and to prevent background noise, please mute your line after asking your question.

Hey, Peter. Am I able to ask the question here?

Just unmute. Hi, Kaden. Go ahead.

Great. Thank you. 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, like, next fiscal year? Were they roughly the size of the shortfall? Or smaller? The quarter over quarter shortfall or smaller than that?

Yeah. Sure, Kaden. The order variability was primarily from orders being pulled in to quarter 1 from quarter 2. So we do not see any further disruptions looking forward. And as Daniel said in the prepared remarks, it is a relatively short term effect.

Okay. And following up there, it seems just like from a. From your AR, shipments look weighted. Toward September. Would you say that September was the strongest month of the quarter? And do you do you guys have any other commentary around H2's velocity versus H1?

Sure. Maybe Daniel can comment on receivables.

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.

Got it.

Got it. I will jump in the queue. I have other questions, but I will let others ask before me.

Great. Thanks, Kaden. Other questions? If there is not, I will ask more. Yeah. Please go ahead.

Great. So would you guys give some color around the growth you are 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 comment. Commentary about how that is how that is looking into H2?

Yep. We are definitely seeing strong growth in both power conversion and in robotics applications. We highlighted some important products in the prepared remarks especially focused on autumn automation and new sensors that go into robotics applications. So the spatial sensitivity that we are providing with those devices is unmatched in the industry, and we are optimistic partly because of that. We also have excellent we also have a high level of inventory, and we think the for robotics applications and power conversion applications. So it is driving overall optimism on our part. Great. Could you give some color on maybe any design wins or design ins that you have that could be driving the growth through h 2 and even into the next fiscal year? 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 it is still early there, but I think the feedback from the industry has been very positive. And we are expecting growth long term from those parts and those technologies in general. Okay. When you say small design wins, is that small in terms of revenue, or is that, like, can you maybe describe the size of the customers? it is a mix. So when we say small design wins, it is 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, such as factors of 10x larger than the sample orders I described. So it does take some time to ramp and I would say that we are certainly within that cycle with and that is why we are optimistic. Okay. So those costs. When you say small, it is simply given that it is more sampling and prototyping volumes. Would you give any color on customer size, like who these customers are? There any directional understanding of, like, on the robotics side? Are these top 5 OEMs on the. Like, maybe factory arms or humanoid side. Do you have any, you know, additional color you can give on the size of these potential customers? Yeah. it is unusual for us to comment, specifically on customers, but I can say that there is a variety of customers interested in the technology. That spans customers in the robotics space, of course, but also spanning beyond that. And we like the potential for very high volumes there. Would you size very high volumes? Certainly. Yep. We are we are certainly chasing very high volumes. Would you be able to put, like, any like, directional numbers to that? Like, what you guys are targeting? Well, we are certainly not unfamiliar with producing millions of sensors and tens of millions of sensors or certainly well within our capacity here. We can easily scale well beyond that as well in the short term and certainly within the time scale that we expect these customers to ramp up. Got it. Okay. On the on the power conversion side, you know, on the 800-volt, you have discussed that, you know, step ups in voltage kind of raise your dollar content. And many of the PSUs, you know, if you if you look, you would see NVE's parts to some degree. Would you be able to give more color on the power conversion side on the progress as data centers are transitioning to 800-volt. And your progress with your with your customers there. Yep. Happy to and happy to highlight the advantages that NVE provides as the voltages continue to increase. We provide the highest isolation in the industry. As voltages increase in power supplies and power conversion applications, that continues to favor NVE's products and we are we are continually optimistic for that reason. So we see the trends favoring NVE's technology, and we are we are expecting continued growth there as well.

Okay. I am, like, the only person that is gonna ask you questions, I guess, Peter. I like to ask the question. Great. I will get off for a while. So, hi, Peter.

This is Peter Prevot, calling from Florida. Great job on your continued success there. My question is the are NVE sensors applicable to gears for humanoid robots? You mentioned robotic it could be arms in automation factories. But what about humanoid robots? Is that something where your sensors can be used? And is that are you having any conversations there?

Yep. Definitely. The new gear sensors that I talked about on the call are especially intended towards robotics both industrial and humanoid robotics. They are 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 the growth in the humanoid robotics industry and we are seeing some strong interest there already. So as I said previously, we are optimistic about those applications. Great. Great. Thank you very much. Appreciate it.

Hey, Peter.

This is Ittai Eden from Principal.

Hi, Ittai.

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?

that is correct. that is what we said in the prepared remarks We do we do see the order disruptions as a temporary situation. And we expect to return to growth in the next quarter.

Got it. And so, my follow-up would be how do these new products and the secular growth market fit in to those expectations, if you will? Is this you know, 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.

Yeah. We are 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 product so we are happy with the growth there and we expect that to continue.

Got it. So I guess asked another way. What would be call it, upside to those internal expectations of a similar second half? Like, what are some things you think could drive upside there?

Well, generally, I think the market we are 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 are not seeing any further disruptions in our in our current sales, and I think long term, we have impressive product and important customers and long term growth for those types of customers.

Got it. Thank you. Is there any co. Color you can give on backlog or backlog coverage? Or any metrics you could share there, that would be helpful.

Yeah. We typically do not track a backlog. I would say we typically have a strong order flow, and we have plenty of inventory to satisfy those expected orders. And I think we are in good shape there.

Alrighty. And then last 1 for me would be can you speak to the capacity expansion and how that is going? I recall last quarter, you mentioned it was mostly R&D for the time being. Has that moved into, you know, volume production in earnest? Or any color around that would be helpful.

Yeah. There certainly has been some shift towards production capacity with the additional resources from the expansion. I would 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 the we have added from the expansion. So that is a good news, and we will continue to transition that capacity in that direction as the order flows increase here.

Alright. I will jump back in the queue. Thanks, guys.

Hi. Do you mind if I go now? Yeah. Go ahead.

Hi. I remember last quarter, you mentioned that there was a bunch of new customers that start out small. I was just wondering if there was any growth in those new customers.

Yeah. In general, I think the trends are definitely moving in the right direction. And as I described earlier, it is common for some of those new customers to start with relatively small orders and grow over time. And we are definitely seeing that, and it is specifically in the products that I mentioned in the prepared remarks and in the wafer level chip scale products, We are seeing a continual increase in the interest and increases in order sizes. So it is definitely moving in the right direction. Got it. And these new customers are mostly in the new industries you were talking about, like robotics? Correct. Yeah. Robotics and automation and factory automation and humanoid robotics are 2 important areas where we are seeing that interest. Awesome. Thank you.

Hey, Peter. Are you there? Yeah. Go ahead.

Hi. I am a relatively new independent investor. And just congratulations on your new role and curious to know in terms of the long term horizon of the company over the next 2 to 3 years, what is your sort of vision for the company? Is it gonna defer? Is it gonna be a little bit different from what your predecessor was doing? And how should investors think about company going forward?

I would say, the main focus for me is taking advantage of the recent expansion and leveraging that towards new products and new products in fast growing markets. So it is a continuation of our previous effort and my efforts on the expansion in general, but I would say it is a continuation in the trajectory that was started under Daniel's leadership and moving to take advantage of that expansion. Okay, that sounds good. And then on the medical device portion of the revenue, I know that, you know, a, you know, sort of strong point percentage of that is coming from Abbott right now. Is there a focus on sort of diversifying that out, or how do how do you think about that? 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 product as well. it is because we have the advantages of small size and low power makes us a perfect technology for implantable medical devices. Got it. Okay. Well, thanks a lot, and all the best to you in the future. Thank you very much.

Peter, final question here for me. Would you say that your humanoid robotics customers are planning to be entering production volumes in 2027 or. Or even in 2026 at the tail end of this year.

You know, it is hard to say. We talked to our robotics customers regularly, and there is definitely a forecast for growth there. it is hard to speak directly to what their plans are. But we do see increasing production on our side, and we are happy to report that those are moving into those types of applications. So automation and humanoid robotics. So generally, I think we are aligned well with the industry. And the specific needs for the robotics market and we will. We will continue to see things move in that direction.

Right. And my final, I guess, question on the humanoid robotics front, 2 pronged here. Would you say most of your humanoid robotics customers are Western OEMs? And would you be able to, like, size the relative dollar content per robot that you guys are expecting even if it is a range?

Sure. Yeah. So we have a global distribution network for our robotics customers and our and our subsystem customers in the robotics marketplace. So we are 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 and the. For a typical NV product, the ASP is perhaps $1 to $2 per sensor. And, obviously, there is several sensors used in the precision motion application of human robotics. We see the potential for several NVE sensors per robot there, and that drives a significant revenue from our perspective. So I think there is a big upside.

And by several, do you. Would you say in the tens of cents or in the hundreds of sensors? Like, just scale 20 to 50,, Can you give, like, a rough range?

Certainly in the tens of centers, I think, is fair. Okay.

Got it. Alright. Thank you so much, Peter. I will let others ask.

Yep. Thanks, Kaden.

Hi, Peter. Hi. Go ahead.

Yeah. Just had 1 question. So with the short term disruption, with respect to the second quarter, and some of that revenue getting pulled into the first. Is it fair to is it really fair to say when you think about your second half estimates being kind of in line with the first half, that you would normalize those first 2 quarters. In other words, it would be somewhere along the midpoint. On a quarter by quarter basis going forward of the first 2 quarters, Yeah.

that is certainly 1 way to look at it. I think the year to date numbers are appropriate and that is kind of where the estimates came from. Okay. Great. Thank you.

Peter, this is Peter Prevot again. Do you have any more expansion plans? I mean, the. I remember when I was there a few years ago, the new area that you guys expanded, sounds like you have got equipment filling that area. Is there a need for additional space Do you. or have you secured any additional buildings where you moved admin into that, and then you are gonna use that area in the existing building for production?

that is right, Peter. A good memory. That is the option that we evaluate. We have not 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 would follow the strategy that you mentioned, is to move some of the admin off-site and continue to expand by leveraging the infrastructure that we have here within our within our current building. So we, yeah, we definitely keep those plans fresh, and we will adapt to them as we need to.

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 any needs that you have in order to continue to grow the company.

Yeah. We have an excellent board, as you mentioned. And we are happy to draw from experience throughout the industry. We expanded our board to 7, and I think that makes them even stronger. And, yeah, we meet on a quarterly basis and happy to get the feedback and direction that the board provides. Very valuable to the company. Great. Thank you.

Peter, can you just talk quickly about the distributor sales increase? Should I view this as effectively. Well, first of all, how has it changed? And from last quarter, and should I view that as an increase in distributor sales mix being the ability to flex revenue higher but coming at lower margin.

I think that is a safe assumption. We have a global distribution network, as I mentioned earlier, and they leverage 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 is a very good sign for revenue in general. And so we are very happy to see distributor sales increasing, and it is a sign of continued attraction of NVE's products in general growing gaining in the market.

But you are saying as a percent of mix, distributor sales had increased quarter over quarter?

It has. It does bob around a little bit and vary from quarter to quarter as you might expect. So Certainly, when we have a lower direct customer sales as we did in the last quarter, then our percentage of distributor sales increases. it is it is common for it to vary somewhat throughout the year. But in general, it is it is fairly steady usually between something like 1/3 and 2/3 of total revenue.

Thank you.

Hi, Peter.

I just have 2 questions. And first off, congratulations on the new role.

Thank you. I had a yes, I had a question in regards to specifically the distributor sales growth. Year over year and how you see those trends going forward. And then a little bit more color on the first half of the year. Related to nonmedical sales growth. Stripping out Abbott and all those medical sales growth. If you could give any color on that. Sure. As I mentioned, distributor sales is a pretty broad representation of NVE's product portfolio and when we see growth there, that is a good sign because it is sort of a more general reflection of products and sales, and we see that as a very good sign. And then in terms of the in terms of the distributor sales in general, we are we are we are pleased to see that increasing and I think overall, the growth that we have seen year to date and going forward will be a continuation of some of the things we said in the first quarter, and that is growth broadly, generally, and across NVE's products. Great. Thank you. Okay. Any other questions?

Did I did I hear correctly that distributor sales grew 67% year over year? Did you guys say that in the in the initial remarks, or was I mishearing something?

No. that is correct, Kaden.

Is that for h 1 or is that for Q2? that is for Q2.

Do you have an h 1 figure for distributor sales year over year?

it is somewhat less than that. I would I would place it a little bit lower perhaps in the 40% range.

Okay. So it is. So distributor sales has accelerated in Q2 versus Q1.

Correct. Understood.

Alright. Thank you, Peter.

Hi, Peter.

I have 1 more question.

Sure. Go ahead, Spencer.

About my question earlier about I guess, customer diversification, and then you were saying how the end of year or the second half of the year's earnings are gonna be similar to the first half. Is that correct?

Correct. Yep.

Is that mix gonna be similar to the first half where it is mostly a few large customers? Or do you believe that the growth is gonna come from additional customers, like the additional ones that were gained in the first half of the year.

Yep. We certainly expect revenue to increasingly come from new customers. And that is because the market is continuing to accept our new products, and we will continue to see a growth for that reason. And so I think there is some short term optimism as our wafer level chip scale products, new gear sensors, and others that we have talked about previously continue to grow and become more representative of the of the total revenue numbers.

Got it. Thank you.

Good. Any other questions? I guess I have 1 more general question. Yeah. If no 1 else has any questions. You know, You know, given that, obviously, NVE has very, you know, I guess, you could say niche technology that is not very easily replicated and has many applications that obviously are growing in fields like robotics and automation. What would you say is the biggest barrier to entry or, I guess, the biggest, you know, competitive advantage that NVE and, more specifically,, the spintronic technology has. And I guess why other new entrants cannot come in and take over in a sense. Yeah. 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 it 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 is a unique technology. We provide a benefit proposition to our customers that is unlike any others, and we think our company is reflective of those advantages. Thank you so much.

Okay. Well, with that, we are pleased to report strong increases in distributor sales in the second quarter and excellent growth in revenue for the first half of the year. Our next earnings call will be in January to discuss third quarter results. A replay of this call will be available on the Investor Events page of our website www.nve.com, and our YouTube channel. Youtube.com/nvecorporation.