NVE Corporation (NVEC) Q2 2027 earnings review
NVE's sales drop 8% while profit stops covering the dividend
NVE's sales fell back below last year's level, one quarter after they had nearly doubled. Revenue was $5.8 million, down 8% from a year ago and below every quarter of the past year and a half. Chief executive Peter Eames led his comment with the six-month figures, up 36%, but all of that gain came in the spring. Net income held up better than sales because the tax rate dropped and NVE spent less on research.
| Revenue | $5.83M −8% from a year ago; −47% from last quarter |
|---|---|
| Profit per share | $0.65 $0.68 a year ago |
| Net income as a share of the dividend | 66% 132% last quarter |
| Quarterly dividend outlook | Unchanged at $1.00 |
⚖️ Verdict: 🔴 Bearish
The story got worse because the quarter that looked like a new sales level turned out to be a single quarter. Revenue fell 47% from the spring while overhead costs rose, so the operating margin lost almost 3 percentage points. The good news: the spring's unpaid invoices turned into cash, and paid research work grew for a second quarter.
The question now is whether the spring quarter was one large order or the first in a series of new-product orders. If one order, sales settle near $6 million a quarter; if a series, the coming quarters sit above that. December-quarter revenue and any defense and non-defense breakdown will tell.
🐂 Bull Case
Research Revenue Grew for a Second Quarter
Besides selling sensors, NVE earns revenue from research that customers pay it to do under contract. The line is small, under 5% of revenue, but in the spring management forecast a significant rise in this fiscal year.
Contract research revenue rose 25% from a year ago, to $259,000. The spring quarter grew as well, so the first half is up 38% and the company's forecast is holding so far.
In our reading, research contracts often come before product orders, because a customer that pays NVE to develop a part tends to buy that part later. But the line swung widely from quarter to quarter last year, so two quarters of growth is a start, not a trend.
What to watch: contract research revenue in the December quarter, against the $446,000 of a year earlier. A figure above that would mean the line is growing even against its best quarter of last year.
Spring's Unpaid Invoices Turned Into Cash
At the end of June customers owed NVE $6.5 million, nearly double the usual level, because much of the spring's shipping happened late in the quarter. That raised doubts, since a late rush of invoices can mean one large order or bad debts.
By September 30 receivables had fallen to $3.0 million, so customers paid. Cash and investments still rose from June, to $44.4 million, despite the $4.8 million dividend. By our math that means the business generated more than $5 million of cash before paying it.
Collection settles the bad-debt worry but not the bigger one: a large one-off order produces the same late-quarter shape, and the summer's fall in sales fits that reading. Receivables are also higher than a year ago while sales are lower, so customers now pay more slowly.
What to watch: receivables at December 31 against that quarter's revenue. About 35 days of sales, as a year ago, would mean the slower collection was a one-quarter effect of the spring shipments.
Positives this quarter didn't test
Three parts of the growth story need the call or the quarterly filing to read, and the release carries neither product commentary nor an end-market breakdown. NVE gives no outlook either, so each item below names the disclosure that would move it.
- New products: in July then chief executive Daniel Baker credited the spring quarter to new sensor sales; the release does not say whether those sensors kept selling in the summer.
- Expanded factory: capacity roughly doubled, but in July the new space served mainly research; a report that it is in volume production would be the first sign that volume is arriving.
- Semiconductor market: Baker's same comment cited a strong market; this quarter's decline has no stated cause, so whether the market turned is unknown.
🐻 Bear Case
Sales Fell Back Below Last Year's Level
NVE, a small Minnesota company making "sensors and couplers that are used to acquire and transmit data", nearly doubled its revenue in the spring, to $11.0 million. The open question was whether that was a new level or a single large order.
The summer answered it. Revenue fell to $5.8 million, 47% below the spring, and the release gives no reason. Chief executive Peter Eames said he was "pleased to report a 36% increase in revenue for the six months"; by our math the spring supplied all of that gain.
- Revenue: $5.83 million, below every quarter since the one ended December 2024
- Product sales: down 9% from a year ago, after rising 82% in the spring
- Sales breakdown: no defense or non-defense split for a second quarter
This matters because strong quarters at NVE have in the past given way to sales near the old annual level of about $26 million, and this quarter runs at that pace. Without the sales split dropped in the spring, nobody can tell whether a defense order or one new product explains the swing.
What to watch: December-quarter revenue, which compares with a quarter that grew 23% a year earlier. A figure above $6.2 million would mean sales are holding above the pre-spring base despite the harder comparison.
Overhead Rose 44% While Sales Fell
NVE's operating margin follows volume, because production and research costs change little from quarter to quarter and revenue sets the margin. This summer it had lower revenue and a larger overhead bill at the same time.
Selling, general and administrative expense, the cost of sales staff and running the company, rose 44% from a year ago; the release does not say why. Lower research spending softened the hit to the operating margin.
- Overhead: 10.8% of revenue, from 6.9% a year ago
- Research and development: 12.5% of revenue, from 13.8%, as spending fell 17%
- Operating margin: 55.0%, down 2.7 percentage points from a year ago
- Tax rate: 13.8%, from 20.1%, so net income fell only 4% while pretax profit fell 11%
The lower tax rate hides most of the profit decline: at last year's rate, net income would have fallen 11% rather than 4% by our math. The overhead matters because it is the second quarter at this level, after $756,000 in the spring, and it coincided with the change of chief executive.
What to watch: the selling and administrative line in December. A figure back near $450,000, its level through last year, would mean the extra overhead went with the leadership change rather than a larger cost base.
Profit Covered Only Two-Thirds of the Dividend
NVE pays $1.00 a share every quarter, about $4.8 million, and buys back no stock. Over the previous two quarters net income exceeded the payout, so the dividend looked funded from earnings.
This quarter net income of $3.2 million covered 66% of it. The board declared the same amount for November, with the shortfall coming from $44 million of cash and investments, so there is no strain yet. Over the past four quarters, though, earnings covered 92% of the payout by our math, while a $3.5 million repurchase authorisation stays unused.
What to watch: net income against the dividend in December, a quarter that earned $3.4 million a year ago. A second quarter below the payout would mean the cash pile is funding the dividend again, as it did for three quarters last year.
Risks this quarter didn't answer
Five standing concerns got no new information, because the release is the only material for the quarter and it carries no call commentary or filing detail. Each item names the disclosure that would settle it.
- Defense and non-defense split: NVE stopped giving it in the spring and omits it again; the filing's revenue discussion is where it would return.
- Customer concentration: the release repeats that several large customers supply a significant share of revenue; a customer table would show whether one of them drove the spring.
- Robotics: named in July as the most promising end market, with no customer, design win or dollar figure since.
- Chief executive transition: this is Peter Eames's first release; it carries no comment on strategy, the unused buyback or the new capacity.
- December comparison: next quarter laps 23% growth, so the year-on-year figure will look weak even if sales hold; the sequential change is the one to read.
💲 Other KPIs
Unchanged from a year ago at 78.2%, because the cost of making the products fell in step with revenue. The margin is down 3 percentage points from the spring, when higher volume lifted it to 81.3%, and sits well below the 86% of two years ago.
Down 2% from a year ago, to $475,000. The decline is the smallest in a year, after it widened to nearly 10% in the spring as dividends drew down the securities balance. Interest provides 13% of pretax profit, so it matters more to NVE's earnings than to most companies'.
Down 7.5% from a year ago but up 2.8% from June, the first rise in a year. Inventory had fallen through the past year while sales rose; a rise now, with sales lower, means NVE built stock in a quarter it did not ship much. It holds about 16 months of this quarter's cost of sales.
🔮 Guidance
New. The board declared $1.00 a share, payable November 30, unchanged from the previous four payments. That costs about $4.8 million, and this quarter's net income covers about two-thirds of it. The rest comes from the $44 million of cash and investments. NVE gives no revenue or profit outlook, so the dividend is the only forward figure it publishes.
❓ Key Questions
What caused the 9% fall in product sales?
The release names no cause. Defense orders, distributor stock levels and one large customer could each explain the swing, and the defense and non-defense breakdown has now been missing for two quarters.
Was the spring quarter a single large order?
Revenue fell 47% from the spring. If one customer's order explains the earlier jump, the base level of sales is about $6 million a quarter; if several new-product ramps did, the fall should reverse.
Why did overhead rise 44% while sales fell?
Selling and administrative costs reached 10.8% of revenue, against under 7% in every quarter last year. Readers need to know whether leadership-change costs, hiring or professional fees are behind it, and whether it repeats.
Is the expanded factory producing sellable parts yet?
In July the new capacity served mainly research. If it is still idle, the volume that would justify the investment has not arrived; if it is in production, the summer's sales did not need it.
Will Eames keep paying a dividend above earnings?
Net income covered two-thirds of the payout this quarter, and a $3.5 million buyback authorisation stays unused against $44 million of cash and securities. His first call will show whether the policy changes.