Executive Summary
NVE Corporation reported its Q1 2025 results with total revenue of $6.78 million, down 23% year-over-year, reflecting the ongoing challenges in the semiconductor market. Despite the revenue decline, the company achieved a gross profit margin of 86% and net income of approximately $4.10 million, demonstrating strong operational efficiency. Management highlighted a favorable shift in product mix and direct sales strategy, which contributed to improved profitability metrics. The outlook remains cautiously optimistic, with indications of a recovery in the semiconductor sector and continued investment in research and development, suggesting potential future growth.
Key Performance Indicators
QoQ: -4.24% | YoY:-23.19%
Key Insights
In Q1 2025, NVE reported a revenue of $6.78 million, down 23% YoY. The gross profit margin improved to 86%, up from 77% in Q1 2024, driven by a more profitable product mix. Operating income was $4.39 million, yielding an operating margin of 65%. Net income saw a minor decrease of 7% YoY to approximately $4.10 million, but the net income margin improved slightly to 60%. The effective tax rate decreased to 16% from 24%, further supporting net income performance. Year-over-year comparisons reveal a...
Financial Highlights
In Q1 2025, NVE reported a revenue of $6.78 million, down 23% YoY. The gross profit margin improved to 86%, up from 77% in Q1 2024, driven by a more profitable product mix. Operating income was $4.39 million, yielding an operating margin of 65%. Net income saw a minor decrease of 7% YoY to approximately $4.10 million, but the net income margin improved slightly to 60%. The effective tax rate decreased to 16% from 24%, further supporting net income performance. Year-over-year comparisons reveal a significant shift in revenue sources, with R&D contract revenue rising by 28% amid a 24% decrease in product sales due to high inventory levels in distribution channels. This indicates a broadening of revenue streams amidst challenging market conditions.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
6.78M |
-23.19% |
-4.24% |
| Gross Profit |
5.81M |
-13.98% |
8.65% |
| Operating Income |
4.39M |
-18.24% |
8.09% |
| Net Income |
4.10M |
-6.95% |
7.46% |
| EPS |
0.85 |
-6.59% |
7.59% |
Key Financial Ratios
operatingProfitMargin
64.7%
operatingCashFlowPerShare
$1.21
freeCashFlowPerShare
$1.02
Management Commentary
Management addressed key issues impacting performance during the earnings call, notably:
- Industry Outlook: Daniel Nelson mentioned, 'Forecasts indicate the industry is on a path to recovery in calendar 2024 and strong growth in 2025.' This signals management confidence in addressing temporary market setbacks.
- Profitability Focus: The gross margin increase to 86% was attributed to a more profitable product mix and increased direct sales, highlighting operational efficiency enhancements.
- R&D Investments: Increased spending on R&D (up 26% YoY) was emphasized by management as crucial for long-term growth, suggesting a commitment to innovation despite current pressures.
- Dividend Sustainability: Following the dividend payment of $4.83 million, Baker noted, 'Operating cash flow increased 16% to $5.85 million,' which reinforces dividend sustainability amid operational cash generation.
"We're pleased to report strong earnings and cash flow despite a challenging industry environment..." - Daniel Baker, CEO
— Daniel Baker
"Total revenue for the quarter ended June 30th, 2024 decreased 23% compared to an exceptional prior year quarter..." - Daniel Nelson, CFO
— Daniel Nelson
Forward Guidance
Management indicated optimism towards a potential recovery in semiconductor sales, referencing a potential surge in electric vehicle-related technologies and broader industry demand. Daniel Baker stated, 'We do see it as not only providing us with in-house capability and capturing more value, but also with excellent potential to increase our revenues.' Investors should closely monitor upcoming product launches and the execution of new capital investments aimed at expanding manufacturing capabilities. Additionally, Baker’s comments on the defense sector suggested sustained interest, positioning NVE positively given the demand for anti-tamper devices.