0001376474-26-000348
SEC filingRevenue grew 1.8% YoY driven by product sales, but gross margin contracted 490 bps due to unfavorable mix and higher distributor sales.
NVE Corporation develops and sells devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store, and transmit information. The company manufactures high-performance spintronic products including sensors and couplers. NVE was founded in 1989 and is headquartered in a suburb of Minneapolis, Minnesota. Its common stock became publicly traded in 2000 and NASDAQ listed in 2003. The company has been awarded more than $50 million in government research contracts since its founding.
The company describes four product areas: sensors, couplers, power products, and MRAM. Sensor products detect the strength or gradient of magnetic fields and are often used to determine position or speed. Couplers combine a GMR sensor element and an integrated microscopic coil to transmit data with electrical isolation. Power products include voltage regulators, interface ICs, DC-to-DC convertors, and products that combine couplers and DC-to-DC convertors. MRAM uses spintronics to store data, with a strategy focused on low bit density for applications such as tamper prevention and detection. No revenue share percentages are disclosed for these segments.
Standard (catalog) sensors are generally used to detect the presence of a magnetic or metallic material to determine position, rotation, or speed. Custom and medical sensors are customized to customer requirements and manufactured under stringent medical device quality standards. The company also offers spintronic couplers (isolators), voltage regulators, interface ICs, DC-to-DC convertors, and combined coupler/DC-to-DC convertor products. MRAM products focus on tamper prevention and detection. New products in the past fiscal year include Wafer-Level Chip-Scale sensors, gear-tooth rotation sensors, and angle rotation sensors. Long-term development programs include ultrahigh-sensitivity TMR sensors, ultrahigh-low power TMR sensors, next-generation sensors for hearing aids and implanted medical devices, and next-generation MRAM for antitamper applications.
The company relies on distributors who stock and resell products in more than 75 countries. Named distributors include America II Electronics, Inc., Angst+Pfister Sensors and Power, and Digi-Key Corporation. Distributor agreements generally renew annually. The company also distributes versions of some products under private-brand partnerships with large integrated device manufacturers. The company relies on several large customers for a significant percentage of revenue, including Abbott Laboratories, certain distributors, and certain other customers. The loss of one or more of these customers could have a material adverse effect.
Industrial sensor competitors include companies making GMR or TMR sensors, silicon Hall-effect sensors, and anisotropic magnetoresistive (AMR) sensors. The company believes its sensors are not as sensitive or power-efficient as its GMR or TMR sensors. Medical sensor competitors include electromechanical magnetic sensors (reed and MEMS switches) and other solid-state magnetic sensors. The company believes its sensors are inherently more reliable than electromechanical sensors due to having no moving parts. Coupler competitors include optical couplers, inductive couplers (transformers), capacitive couplers, and radio-frequency modulation couplers. The company's strategy is to compete based on product features rather than solely on price. MRAM faces competition from several emerging technologies.
The company's vision is to become the leading developer of practical spintronics technology and devices. To grow product sales, the company plans to broaden its sensor and coupler product lines and enhance product benefits in target markets. The company's unique products support global trends of efficient energy conversion and smart, low-power end nodes for the Internet of Things. The company competes based on product features rather than solely on price.
As of March 31, 2026, NVE had 42 employees, 40 of whom were full-time, with no contingent workers. Voluntary employee turnover was 7% for fiscal 2026, much lower than the semiconductor industry average of 16.4%. Forty-eight percent of employees have bachelor's or advanced degrees. None of the employees are represented by a labor union. The company provides paid training, tuition reimbursement, and paid internships.
For fiscal 2026, NVE Corporation reported total revenue of $26.3 million, a 1.8% increase from the prior year. The growth was driven entirely by product sales, which rose 2.4% due to price increases and higher purchases from existing customers. Contract research and development revenue declined 10.7% as certain contracts were completed. Gross profit margin contracted sharply to 78.7% from 83.6%, a decline of 490 basis points, attributed to a less profitable product mix and an increase in lower-margin distributor sales. Cost of sales grew 32.2% year-over-year, outpacing revenue growth.
Operating expenses decreased 14.8% in total, with research and development down 13.1% due to the completion of wafer-level chip scale packaging activities and reassignment of resources to manufacturing. Selling, general, and administrative expenses fell 17.8% from resource reallocation to manufacturing and new product development. Income from operations was $15.9 million, down 0.5% from the prior year, while operating margin slipped to 60.4% from 61.8%.
Net income increased 0.9% to $15.2 million, supported by higher revenue, lower expenses, and a lower effective tax rate (15% vs. 16% in fiscal 2025). The tax benefit included $1.07 million in advanced manufacturing investment tax credits. Other income fell sharply by $131,465 due to the non-recurrence of precious metal reclamation income in the prior year.
Product sales represented 95.8% of total revenue in fiscal 2026, up from 95.2% in the prior year, reflecting the shift toward core product revenue. Contract R&D revenue declined to 4.2% of total revenue from 4.8%. The product sales growth was driven by price increases and deeper customer relationships, while the R&D segment contracted due to contract completions. The gross margin compression was primarily a product-mix issue, with distributor sales (which carry lower margins) growing as a share of product sales.
Management provided limited forward guidance but indicated that manufacturing equipment purchases are expected to decrease significantly in fiscal 2027 following the completion of the company's expansion. Consequently, advanced manufacturing investment tax credits are also expected to decline materially. The company plans to fund future dividends through cash from operations and maturities of marketable securities, though dividends remain subject to Board approval and may be modified or discontinued. No specific revenue or earnings guidance was provided.
As of March 31, 2026, NVE held $1.7M in cash and $41.8M in marketable securities (short- and long-term), totaling $43.5M in highly liquid assets. The company has no debt, with total liabilities of only $2.1M (primarily lease and accrued expenses). Shareholders' equity stands at $58.2M. Inventory decreased slightly to $7.1M, driven by lower raw materials and work-in-process. Marketable securities consist of high-grade corporate bonds and treasury securities, with a net unrealized loss of $72K (pre-tax). Accrued interest receivable was $456K.
The only significant contractual obligation is an operating lease for facilities expiring May 31, 2031, with total future lease payments of $1.1M and a discounted lease liability of $906K. There are no disclosed purchase commitments, supply agreements, or other material contractual obligations.
NVE returned $19.3M to shareholders via dividends ($4.00 per share annually, $1.00 per quarter). The dividend rate has been flat for two years. Despite a remaining stock repurchase authorization of $3.5M (announced in 2009 and 2015), no buybacks were executed in fiscal 2026 or 2025. Capital expenditures totaled $2.2M, primarily for machinery and equipment, representing 8.3% of sales. Depreciation was $0.5M. No debt was issued or repaid.
Note 1 confirms NVE operates as a single operating and reporting segment under ASC 280. The chief operating decision maker reviews revenue and gross margin by product category, but discrete financial information (e.g., segment profit) is not prepared. Consequently, no finer segment economics are available. Revenue is disaggregated into product sales ($25.2M) and contract R&D ($1.1M). One customer (Customer A) accounted for 37% of revenue and 27% of receivables.
NVE relies heavily on single-source wafer suppliers, most foreign, creating vulnerability to tariffs, geopolitical conflicts, and natural disasters. Loss of any key supplier could disrupt production and revenue. Similarly, shortages of critical chemicals and packaging vendor dependency pose ongoing risks. The lack of alternate qualified suppliers for many wafers amplifies this exposure.
Intense competition from larger players with greater resources pressures pricing and market share. Customer concentration risk is highlighted by the Abbott Laboratories agreement expiring in 2027; non-renewal could materially impact revenue. Stringent customer requirements and quality audits add to operational risk.
The filing notes increased Minnesota state mandates (paid leave) effective 2026, impacting costs. Foreign operations and sales expose NVE to geopolitical instability, trade barriers, and regulatory changes. The macroeconomic environment, including semiconductor cyclicality, adds further uncertainty.
A key risk is potential liability from products used in life-sustaining medical devices. Despite indemnification agreements and the Biomaterials Access Assurance Act, successful claims could lead to substantial damages and reputational harm, potentially causing recall events.
Marketable securities represent 69% of total assets; credit losses or impairments could affect financial condition and dividend policy. Credit loss allowances on receivables also pose a risk. Stock price volatility is exacerbated by dividend decisions and external factors beyond control.
NVE’s intellectual property may be challenged or circumvented, and confidentiality agreements may offer limited protection. Patent infringement claims could result in costly licenses or design changes. Production equipment failures, especially custom or obsolete machinery, pose operational continuity risks.
Although no material incidents occurred in the last three years, NVE acknowledges cybersecurity threats and IT disruptions could harm operations, reputation, and eligibility for sensitive contracts. The company maintains internal controls but acknowledges mitigations may not be fully effective.
Overall, the risk factors emphasize vulnerabilities in supply chain concentration, medical device liability, and financial asset exposure, with no indication of material changes from prior disclosures.
For fiscal year 2026, NVE Corporation generated $16.7 million in net cash from operating activities, a 16.4% increase from $14.3 million in the prior year. Net income was $15.2 million, resulting in a cash flow conversion ratio of 110%, driven by non-cash charges such as depreciation ($0.5M) and deferred tax ($2.1M), partially offset by bond discount amortization (-$0.3M). Working capital was a net use of cash of $1.0 million, primarily due to an increase in prepaid expenses and other assets ($1.4M).
Capital expenditures intensified, with $2.2 million spent on fixed assets (up 74% from $1.3M), representing 13% of CFO. The company did not report free cash flow explicitly, but capex consumed a modest portion of operating cash flow. Investing activities also included net purchases of marketable securities, resulting in a net cash outflow of $3.6 million for investing overall.
Financing activities were dominated by dividend payments of $19.3 million ($4.00 per share), which exceeded operating cash flow, requiring the use of existing cash balances. There were no share repurchases or stock option proceeds. As a result, cash and cash equivalents decreased by $6.3 million from $8.0 million to $1.7 million at year-end.
Overall, the company demonstrated strong cash generation from operations, but elevated capex and substantial dividend payouts led to a decline in cash reserves. The reliance on cash balances to fund dividends may warrant monitoring if operating cash flow does not grow accordingly.