NVE CORP /NEW/

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 electronics industry is broadly devoted to the acquisition, storage, and transmission of information, and NVE has focused on three applications for its spintronic technology: magnetic sensors, couplers, and memories. Sensors acquire information, couplers transmit information, and memories store information. The company's designs are generally based on either giant magnetoresistance (GMR) or tunneling magnetoresistance (TMR). In GMR devices, resistance changes due to conduction electrons scattering at interfaces within the devices, and the GMR effect is only significant if the layer thicknesses are less than the mean free path of conduction electrons, which is approximately five nanometers. Critical GMR conductor layers may be less than two nanometers, or five atomic layers, thick. TMR-based devices, known as Spin-Dependent Tunnel (SDT) junctions or Magnetic Tunnel Junctions (MTJs), use tunnel barriers that are so thin that electrons can tunnel through a normally insulating material to cause a resistance change, with SDT barrier thicknesses in the range of one to four nanometers. 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 faces competition from several other companies that either make or may have the capability to make GMR or TMR sensors, as well as competitors that make solid-state industrial magnetic sensors including silicon Hall-effect sensors and anisotropic magnetoresistive (AMR) sensors. NVE believes those types of sensors are not as sensitive or power-efficient as its GMR or TMR sensors. In medical sensors, competition comes from electromechanical magnetic sensors and other solid-state magnetic sensors, with electromechanical magnetic sensors such as reed and micro-electromechanical system (MEMS) switches having been in use for several decades. Competing coupler technologies 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 to compete solely on price. NVE believes its couplers are smaller and therefore require less circuit board space per channel than most competing couplers, with other advantages including higher immunity to transients and longer product life. Several emerging technologies could compete with MRAM. The company has a number of competitors and potential competitors, many of whom have significantly greater financial, technical, and marketing resources. Competition is increasing as technology and markets mature, leading to more competitors and more severe pricing pressure.

NVE generates revenue through product sales of high-performance spintronic products including sensors and couplers, as well as through contract research and development revenue and as a licensor of spintronic magnetoresistive random access memory technology (MRAM). Product sales represented 95.8% ¹ of total revenue in fiscal 2026 and 95.2% ² in fiscal 2025, while contract research and development represented 4.2% ³ and 4.8% ⁴ respectively. The company sells standard (catalog) sensors and custom sensors designed to meet customers' exact requirements. Standard sensors are generally used to detect the presence of a magnetic or metallic material to determine position, rotation, or speed, with major markets being the Industrial Internet of Things (IIoT) and the Artificial Intelligence of Things (AIoT) for factory automation. Custom and medical sensors are primarily for medical devices, customized to customers' requirements and manufactured under stringent medical device quality standards. Couplers, also known as isolators, combine a GMR sensor element and an integrated microscopic coil to transmit data almost instantly, with major markets in power conversion, IIoT, and AIoT. Power products include voltage regulators, interface ICs, DC-to-DC convertors, and products that combine couplers and DC-to-DC convertors to transmit energy as well as data. The company relies on distributors who stock and resell products in more than 75 ⁵ countries, with distributors including America II Electronics, Inc., Angst+Pfister Sensors and Power, and Digi-Key Corporation. NVE also distributes versions of some products under private-brand partnerships with large integrated device manufacturers.

Sensor products detect the strength or gradient of magnetic fields and are often used to determine position or speed. GMR or TMR elements change electrical resistance depending on the magnetic field, and in many devices, sensor elements are combined with foundry integrated circuitry or digital cores and packaged similarly to conventional integrated circuits. Standard sensors are generally used to detect the presence of a magnetic or metallic material to determine position, rotation, or speed, with major markets in the Industrial Internet of Things (IIoT) and the Artificial Intelligence of Things (AIoT) for factory automation. Custom and medical sensors are primarily for medical devices, customized to customers' requirements and manufactured under stringent medical device quality standards, with many used to replace electromechanical magnetic switches. Coupler products combine a GMR sensor element and an integrated microscopic coil, where the coil creates a small magnetic field detected by the spintronic sensor, transmitting data almost instantly. Couplers are also known as isolators because they electrically isolate the coupled systems, with major markets in power conversion, IIoT, and AIoT. Power products include voltage regulators, interface ICs, DC-to-DC convertors, and products that combine couplers and DC-to-DC convertors to transmit energy as well as data. Isolated DC-to-DC convertors transfer energy between systems without direct electrical connections and are used in energy conversion systems and industrial networks for IIoT and AIoT, with energy conversion applications including battery energy storage systems and hybrid/electric vehicles. MRAM uses spintronics to store data, and the company's MRAM strategy has been focused on low bit density for applications such as tamper prevention and detection.

In the past fiscal year, NVE began marketing several new and improved products, including new Wafer-Level Chip-Scale sensors, new gear-tooth rotation sensors, and new angle rotation sensors. Long-term product development programs in fiscal 2026 included 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 completed a production expansion in the facility in 2025. NVE did not repurchase any shares in fiscal 2026 or fiscal 2025, as dividends have been found to be a more efficient method of returning cash to shareholders. Cash dividends paid to shareholders in fiscal 2026 totaled $19,348,664 ⁶. On May 6, 2026, the Board declared a cash dividend of $1.00 ⁷ per share of Common Stock, or $4,837,166 ⁸ based on shares outstanding as of March 31, 2026, to be paid May 29, 2026.

Total revenue for fiscal 2026 was $26,331,218 ⁹, an increase of 1.8% ¹⁰ compared to fiscal 2025 total revenue of $25,874,694 ¹¹. Product sales increased 2.4% ¹² to $25,221,918 ¹³ from $24,632,102 ¹⁴, while contract research and development revenue decreased 10.7% ¹⁵ to $1,109,300 ¹⁶ from $1,242,592 ¹⁷. Gross profit was $20,731,764 ¹⁸ for fiscal 2026 compared to $21,638,914 ¹⁹ for fiscal 2025, with gross margin decreasing to 78.7% ²⁰ from 83.6% ²¹. Income from operations was $15,920,491 ²² compared to $15,994,149 ²³. Net income increased 0.9% ²⁴ to $15,199,195 ²⁵ for fiscal 2026 compared to $15,064,516 ²⁶ the prior year. Basic net income per share was $3.14 ²⁷ versus $3.12 ²⁸, and diluted net income per share was $3.14 ²⁹ versus $3.11 ³⁰.

To grow product sales, NVE plans to broaden its sensor and coupler product lines and enhance product benefits in target markets. Long-term product 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's unique products support global trends of efficient energy conversion and smart, low-power end nodes for the Internet of Things. Near-term potential MRAM applications include mission-critical storage such as military, industrial, and antitamper applications, while long term, MRAM could address the market for ubiquitous high-density memory.

The company's strategy is to compete based on product features rather than to compete solely on price. NVE believes its spintronic sensors are smaller, more precise, more reliable, and lower power than competing devices, and its couplers transmit more data at higher speeds and over longer distances than conventional devices. The company believes having its own U.S. wafer production and test capabilities is an advantage over competitors that outsource such operations.

Gross profit margin decreased to 78.7% ³¹ for fiscal 2026 compared to 83.6% ³² for fiscal 2025, with the decrease attributed to a less profitable product mix and increased distributor sales, as distributor sales typically have lower gross margin than direct sales. Total expenses decreased 14.8% ³³ for fiscal 2026 compared to fiscal 2025, with research and development expense decreasing 13.1% ³⁴ and selling, general, and administrative expense decreasing 17.8% ³⁵. The decrease in research and development expense was due to the completion of some wafer-level chip scale packaging activities and reassignment of some research and development resources to manufacturing. The decrease in selling, general, and administrative expenses was primarily due to reassignment of some resources to manufacturing and new product development. The effective tax rate decreased to 15% ³⁶ for fiscal 2026 compared to 16% ³⁷ for fiscal 2025, primarily due to an increase in research and development and manufacturing tax credits, partially offset by a decrease in foreign-derived intangible income deductions. The fiscal 2026 provision for income taxes included $1,067,993 ³⁸ in advanced manufacturing investment tax credits, which are expected to decrease significantly in fiscal 2027 since manufacturing equipment purchases are expected to decrease significantly with the completion of the expansion.

The company's facility has been certified under the ISO 9001:2015 quality management standard and is an Approved Place of Manufacture under ECS/CIG 021-024: 2014. NVE completed a production expansion in the facility in 2025 and currently believes the facility will meet its needs through the term of the lease expiring May 31, 2031. The company had 42 ³⁹ employees as of March 31, 2026, 40 ⁴⁰ of whom were full-time, with no contingent workers. Voluntary employee turnover was 7% ⁴¹ for fiscal 2026, which is much lower than the semiconductor industry average of 16.4% ⁴². Fixed asset purchases in fiscal 2026 were $2,189,138 ⁴³, primarily of production equipment, and are expected to decrease significantly in fiscal 2027 with the completion of the expansion.

Research and development expense was $3,160,483 ⁴⁴ for fiscal 2026 compared to $3,635,519 ⁴⁵ for fiscal 2025. Fixed asset purchases were $2,189,138 ⁴⁶ in fiscal 2026, primarily for production equipment. The company did not repurchase any shares in fiscal 2026 or fiscal 2025. Cash dividends paid to shareholders in fiscal 2026 totaled $19,348,664 ⁴⁷. On May 6, 2026, the Board declared a cash dividend of $1.00 ⁴⁸ per share of Common Stock, or $4,837,166 ⁴⁹ based on shares outstanding as of March 31, 2026, to be paid May 29, 2026. The remaining stock repurchase authorization was $3,520,369 ⁵⁰ as of March 31, 2026. The company plans to fund dividends through cash provided by operating activities and proceeds from maturities of marketable securities.

The loss of supply from any key single-source wafer suppliers could substantially impact the ability to produce and deliver products. Critical suppliers include suppliers of certain raw silicon and semiconductor foundry wafers, and most wafer purchases are from foreign manufacturers, some of which have been subject to tariffs and could be subject to increased tariffs or restrictions in the future. Wafer supplies could be affected by geopolitical conflicts or acts of God such as floods, typhoons, cyclones, earthquakes, or pandemics. Shortages of any critical chemicals or supplies, including certain gases, photoresists, polymers, metals, and specialized alloys, could impact the ability to produce and deliver products. The company is dependent on packaging vendors, and because of the unique materials its products use, the complexity of some products, unique magnetic requirements, and high isolation voltage specifications, many products are more challenging to package than conventional integrated circuits. Foreign sales are a significant portion of revenue, and the company relies on foreign suppliers, especially in Asia, exposing it to risks including economic and political instability, geopolitical conflicts, changes in import/export regulations and tariffs, and transportation delays. Current or future U.S. tariffs on imports could lead to supply-chain disruptions or increase the cost of imported materials, and foreign tariffs on exported products could increase the price of products in international markets.

The economic environment could have a material adverse impact on the business and revenue, as the company sells products in the semiconductor market, which has been especially cyclical. Geopolitical conflicts or trade wars could negatively impact the economic environment. Changes in tax law, tax rates, or exposure to additional income tax liabilities may materially and adversely affect financial condition, results of operations, and cash flows. Minnesota state legislation effective January 1, 2026 mandated paid family and medical leave, which has increased employment costs and expenses, and the provisions may also increase the risk of employee absences. Future changes in state regulatory requirements, such as paid leave, mandatory healthcare coverage, or unemployment insurance, may adversely impact financial results.

The company relies on several large customers for a significant percentage of revenue, including Abbott Laboratories, certain distributors, and certain other customers, with one customer accounting for 37% ⁵¹ of total revenue in fiscal 2026 and 35% ⁵² in fiscal 2025. The loss of one or more of these customers could have a material adverse effect. The company is dependent on single-source wafer suppliers, with most wafer purchases from foreign manufacturers subject to tariffs, and supply interruptions could seriously jeopardize the ability to provide products. As of March 31, 2026, the company held $41,803,512 ⁵³ in short-term and long-term marketable securities, representing approximately 69% ⁵⁴ of total assets, exposing it to credit risk, interest rate risk, and potential impairments that could impact financial condition, income, cash flows, or the ability to pay dividends. The company's products are incorporated into medical devices, including devices that help sustain human life, exposing it to product liability claims that could require payment of substantial damage awards. The company faces risks from doing business in foreign countries, as foreign sales are a significant portion of revenue and it relies on foreign suppliers, especially in Asia, with risks including geopolitical conflicts, changes in import/export regulations and tariffs, and transportation delays.

Management's message emphasizes the company's vision to become the leading developer of practical spintronics technology and devices, with spintronic technology providing eyes, nerves, and brains for electronic systems. The strategic priorities for the period ahead include broadening sensor and coupler product lines and enhancing product benefits in target markets to grow product sales. Management highlights that the company's unique products support global trends of efficient energy conversion and smart, low-power end nodes for the Internet of Things. The tone is forward-looking, with management noting that long-term product 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. Management also emphasizes the company's competitive advantages, including having its own U.S. wafer production and test capabilities, and its strategy to compete based on product features rather than solely on price.