0001376474-26-000059
SEC filingRevenue rose 23% in Q3 FY2026 driven by product sales and contract R&D, but gross margin contracted to 79%.
For the quarter ended December 31, 2025 (Q3 FY2026), total revenue increased 23% compared to the same quarter last year. This growth was driven by a 16% increase in product sales and a 335% surge in contract research and development revenue. Product sales benefited from higher defense and non-defense sales across both direct and distributor channels. Contract R&D revenue rose due to new contracts.
Gross margin contracted to 79% from 84% in the prior-year quarter, attributed to a less profitable product mix and increased distributor sales, which typically carry lower margins. Total expenses decreased 12%, with R&D down 9% (completion of wafer-level chip scale packaging activities and resource reassignment to manufacturing) and SG&A down 19% (timing of marketing activities and resource reassignment).
Interest income fell 3% due to a smaller marketable securities portfolio. Other income decreased by $135,057, primarily because the prior-year quarter included income from reclaiming precious metals. The effective tax rate rose to 20% from 15%, driven by the non-cash impact of tax law changes on certain deductions.
Net income for the quarter increased 11% year-over-year, reflecting higher revenue and lower expenses, partially offset by lower gross margin, reduced interest/other income, and a higher tax rate.
For the nine months ended December 31, 2025, total revenue edged up 0.4%, with product sales up 0.8% partially offset by an 8% decline in contract R&D revenue. Gross margin for the nine-month period was 79% versus 85% a year ago. Total expenses fell 13%. Net income decreased 8% to $10.3 million ($2.12 per diluted share), pressured by lower gross margin, reduced other income, and a higher effective tax rate (19% vs 16%).
Product sales remain the dominant revenue source, accounting for 92.8% of total revenue in Q3 FY2026 (up from 98.0% in the prior-year quarter due to the surge in contract R&D). The product sales growth was broad-based across defense/non-defense and direct/distributor channels. Contract R&D revenue, while small in absolute terms, grew dramatically (335%) in the quarter, reflecting new contract wins. For the nine-month period, contract R&D revenue declined 8%, indicating lumpy revenue recognition.
Management expects a full-year effective tax rate of 16% to 17% for FY2026, including the unfavorable impact of tax law changes and anticipated advanced manufacturing investment tax credits of $700,000 to $1,000,000. The company plans to fund dividends through operating cash flow and proceeds from maturities of marketable securities, though future dividends remain subject to Board approval. No specific revenue or margin guidance was provided for upcoming periods.
As of December 31, 2025, NVE Corporation held $3.4M in cash and cash equivalents along with $40.6M in marketable securities (short-term $17.2M, long-term $23.4M), totaling $44.0M in liquid assets, representing 73% of total assets ($60.0M). The company has no debt; the only liabilities are operating lease obligations of $934K and other current liabilities. Shareholders' equity stands at $58.3M, down from $62.3M at March 31, 2025, primarily due to dividend payments.
The Notes do not disclose any material purchase commitments or contractual obligations beyond the operating lease. The lease expires May 31, 2031, with total future lease payments of $1.15M and a remaining term of 65 months.
NVE has a stock repurchase program with $3.52M remaining authorization, but no repurchases were made in the first nine months of fiscal 2026. The company paid $14.5M in dividends ($3.00 per share) during the nine months, with a quarterly dividend rate of $1.00 per share. A subsequent dividend of $1.00 was declared on January 21, 2026, payable February 27, 2026. Capital expenditures totaled $2.18M (11.7% of sales), primarily for machinery and equipment. No debt was issued or repaid.
NVE does not report segment information. The business is a single operating segment: development and sale of spintronics devices. Revenue is disaggregated into product sales ($17.8M) and contract R&D ($0.85M) for the nine months. No geographic breakdown is provided in the Notes.
For the nine months ended December 31, 2025, NVE Corporation generated $12.2 million in operating cash flow (CFO), a 2.9% increase from $11.8 million in the prior period. Net income was $10.3 million, resulting in a CFO-to-net-income ratio of 1.18, indicating solid cash conversion. The primary non-cash adjustments included $1.1 million in deferred income taxes, $0.3 million in depreciation, and $0.1 million in stock-based compensation.
Capital expenditures (capex) rose sharply to $2.2 million from $1.2 million, reflecting increased investment in fixed assets. The company did not report free cash flow, but CFO minus capex yields approximately $10.0 million, which still covered the $14.5 million in dividends paid, implying a reliance on existing cash reserves. The company also invested $10.1 million in marketable securities while receiving $10.0 million from maturities, resulting in a net investing cash outflow of $2.3 million.
Working capital changes were mixed: accounts receivable decreased by $1.1 million (favorable), inventories increased by $0.2 million, and prepaid expenses rose by $0.3 million. Accrued payroll and other liabilities decreased by $0.4 million. Cash paid for income taxes was $1.7 million, down from $2.8 million in the prior period. Overall, cash and cash equivalents declined by $4.6 million to $3.4 million at period end.