Shares of NVE Corporation NVEC have declined 16% since the company reported its earnings results for the third quarter of fiscal 2025. This compares to the S&P 500 index’s 0.9% growth over the same time frame. Over the past month, the stock has fallen 15.1% against the S&P 500’s 3.4% growth.
Key Performance Metrics
NVE Corp reported third-quarter fiscal 2025 earnings of 63 cents per diluted share, declining from 87 cents in the prior-year quarter.
The company’s total quarterly revenues dropped 25.1% to $5.06 million from $6.76 million in the third quarter of fiscal 2024. This decline was attributed to a 22.1% decrease in product sales, which accounted for 98% of total revenues, and a significant 73.7% reduction in contract research and development (R&D) revenues. The drop in R&D revenues was tied to the completion of certain contracts.
NVE Corporation Price, Consensus and EPS Surprise
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Other Key Business Metrics
The company’s gross profit declined 21% to $4.27 million in the reported quarter from $5.4 million in the third quarter of fiscal 2024. However, the gross margin for the quarter rose to 84% from 80% in the third quarter of fiscal 2024, benefiting from a more profitable product mix and a larger share of direct sales.
For the quarter ended Dec. 31, 2024, NVE Corp’s income from operations was $2.96 billion, a decrease of 33.8% from $4.47 billion in the prior-year period.
Expenses
The company’s R&D expenses increased 60.8% to $0.9 million in the third quarter of fiscal 2025 from $0.5 million in the year-ago quarter, reflecting heightened investments in new technologies. Selling, general and administrative (SG&A) expenses rose 11.7% to $0.43 million from $0.39 million in the third quarter of fiscal 2024, driven by increased sales staff and marketing activities.
However, operating expenses increased 40% year over year in the third quarter of fiscal 2025, led by a 60.8% rise in R&D spending and an 11.7% increase in SG&A expenses. Higher R&D expenses reflected increased investment in product development.
Management attributed these increases to expanding its product portfolio and enhancing marketing initiatives to strengthen customer relationships.
Cash & Debt
As of Dec. 31, 2024, NVE Corp reported cash and cash equivalents of $5.49 million compared with $10.28 million as of March 31, 2024. The company continues to hold no long-term debt, highlighting a debt-free balance sheet.
The decline in cash was attributed to $14.39 million in cash used for dividends and other financing activities during the first nine months of fiscal 2025, partially offset by $11.83 million in cash generated from operating activities. NVE’s strong cash flow generation supports ongoing shareholder returns, including quarterly dividends.
Management Commentary
NVE Corp’s president and CEO, Daniel Baker, acknowledged the ongoing challenges in the semiconductor industry but highlighted the company’s strong profitability metrics, including high gross margins. Management underscored its commitment to innovation, showcasing new wafer-level chip-scale products launched in the third quarter of fiscal 2025. These products, designed for applications such as medical devices and robotics, are positioned as the smallest in their category, enabling precise and compact solutions for customers.
Despite the decline in product sales, management emphasized the stability of direct sales, which are higher-margin transactions that bypass distributor discounts. Distribution channel inventory gluts have delayed restocking, adding pressure on short-term revenues.
Factors Influencing Results
The sharp year-over-year revenue decline in the third quarter of fiscal 2025 stemmed from a slowdown in the semiconductor market and reduced purchasing activity among customers. The decrease in contract R&D revenues was due to the conclusion of certain contracts, while higher R&D and SG&A expenses were tied to investments in new products and expanded marketing efforts.
Interest income fell 3.6% year over year due to lower yields on marketable securities and reduced investment balances. Other income during the quarter was $135,000, which came from reclaiming precious metals used in manufacturing processes.
Guidance & Strategic Investments
The company’s management expressed optimism about improving market conditions, noting encouraging feedback from customers and distributors. NVE Corp continues to invest in its production capacity, with plans for significant capital expenditure over fiscal 2025 and 2026. Facility upgrades, including the deployment of new equipment, are expected to enhance the company’s capabilities to manufacture advanced products at scale.
Other Developments
In the third quarter of fiscal 2025, NVE Corp extended its building lease by 62 months through May 2031, securing a $100,000 improvement allowance to support facility expansion. This investment aligns with the company’s strategy to boost production capacity and accommodate new manufacturing equipment.
Additionally, the company announced a quarterly cash dividend of $1 per share, consistent with prior payouts, reflecting its commitment to returning value to shareholders even amid revenue and earnings declines.
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