# NVE Corp: Form 10-Q for the period ended Sep 30, 2016

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2016-10-19
- Accepted by EDGAR: Oct 19, 2016, 20:30 ET
- Period: 2016-09-30
- Accession: 0000724910-16-000077
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491016000077/NVE_Q2_FY2017_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491016000077/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2016-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2016-07-01 to 2016-09-30 | $7.3m | us-gaap:Revenues |
| Revenue | 6 months, 2016-04-01 to 2016-09-30 | $14.0m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2016-07-01 to 2016-09-30 | $1.7m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2016-04-01 to 2016-09-30 | $3.1m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2016-07-01 to 2016-09-30 | $5.6m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2016-04-01 to 2016-09-30 | $10.9m | us-gaap:GrossProfit |
| Research and development | 3 months, 2016-07-01 to 2016-09-30 | $768.2k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2016-04-01 to 2016-09-30 | $1.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2016-07-01 to 2016-09-30 | $343.7k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2016-04-01 to 2016-09-30 | $733.6k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2016-07-01 to 2016-09-30 | $4.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2016-04-01 to 2016-09-30 | $8.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2016-07-01 to 2016-09-30 | $1.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2016-04-01 to 2016-09-30 | $3.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2016-07-01 to 2016-09-30 | $3.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2016-04-01 to 2016-09-30 | $6.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2016-07-01 to 2016-09-30 | $0.68 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2016-04-01 to 2016-09-30 | $1.33 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2016-07-01 to 2016-09-30 | $0.68 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2016-04-01 to 2016-09-30 | $1.33 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2016-07-01 to 2016-09-30 | 4,837,819 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2016-04-01 to 2016-09-30 | 4,837,293 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Capital expenditure | 6 months, 2016-04-01 to 2016-09-30 | $153.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2016-04-01 to 2016-09-30 | $9.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2016-09-30 | $5.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2016-09-30 | $35.0m | us-gaap:AssetsCurrent |
| Total assets | at 2016-09-30 | $97.3m | us-gaap:Assets |
| Current liabilities | at 2016-09-30 | $1.3m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2016-09-30 | $96.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 10,459 characters.

### Forward-looking statements

Some of the statements made in this Report or in the documents incorporated by reference in this Report and in other materials filed or to be filed by us with the Securities and Exchange Commission (“SEC”) as well as information included in verbal or written statements made by us constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to the safe harbor provisions of the reform act. Forward-looking statements may be identified by the use of the terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue, or the negatives of these terms or other variations on these words or comparable terminology. To the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of NVE, you should be aware that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in the forward-looking statements. We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from their current expectations. These differences may be caused by a variety of factors, including but not limited to our reliance on several large customers for a significant percentage of revenue, uncertainties related to the economic environments in the industries we serve, uncertainties related to future contract research and development revenue, uncertainties related to future stock repurchases and dividend payments, and other specific risks that may be alluded to in this Report or in the documents incorporated by reference in this Report.

Further information regarding our risks and uncertainties are contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2016.

### General

NVE Corporation, referred to as NVE, we, us, or our, develops and sells devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store and transmit information. We manufacture high-performance spintronic products including sensors and couplers that are used to acquire and transmit data. We have also licensed our spintronic magnetoresistive random access memory technology, commonly known as MRAM.

### Critical accounting policies

A description of our critical accounting policies is provided in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2016. As of September 30, 2016 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

### Quarter ended September 30, 2016 compared to quarter ended September 30, 2015

The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:

*Revenue*

| 2016 | Percentage of Revenue Quarter Ended Sept. 30 | 2015 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 93.3% | 88.4% | 5.9% |
| Contract research and development | 6.7% | 11.6% | (42.1)% |
| Total revenue | 100.0% | 100.0% | 0.3% |
| Cost of sales | 23.8% | 22.6% | 5.9% |
| Gross profit | 76.2% | 77.4% | (1.3)% |
| Expenses |  |  |  |
| Selling, general, and administrative | 4.7% | 7.2% | (34.5)% |
| Research and development | 10.6% | 8.6% | 22.1% |
| Total expenses | 15.3% | 15.8% | (3.6)% |
| Income from operations | 60.9% | 61.6% | (0.7)% |
| Interest and other income | 5.9% | 6.4% | (8.0)% |
| Income before taxes | 66.8% | 68.0% | (1.4)% |
| Provision for income taxes | 21.5% | 22.5% | (3.9)% |
| Net income | 45.3% | 45.5% | (0.2)% |

Total revenue for the quarter ended September 30, 2016 (the second quarter of fiscal 2017) increased 0.3% compared to the quarter ended September 30, 2015 (the second quarter of fiscal 2016). The increase was due to a 6% increase in product sales, partially offset by a 42% decrease in contract research and development revenue.

The increase in product sales from the prior-year quarter was due to new customers. The decrease in contract research and development revenue for the second quarter of fiscal 2017 was due to the completion of certain contracts.

Gross profit margin decreased to 76% of revenue for the second quarter of fiscal 2017 compared to 77% for the second quarter of fiscal 2016, due to decreased gross profit margins on product sales with a less profitable product sales mix.

Total expenses decreased 4% for the second quarter of fiscal 2017 compared to the second quarter of fiscal 2016, due to a 34% decrease in selling, general, and administrative expense, partially offset by an 22% increase in research and development expense. The decrease in selling, general, and administrative expense was primarily due to decreased sales commissions. The increase in research and development expense was due to an increase in new product development activities.

Interest income for the second quarter of fiscal 2017 decreased 8% due to a decrease in the average interest rates on our marketable securities.

The provision for income taxes was $1,575,635 for the second quarter of fiscal 2017 compared to $1,639,386 for the second quarter of fiscal 2016. The effective tax rate was 32% of income before taxes for the second quarter of fiscal 2017 compared to 33% for the second quarter of fiscal 2016.

The 0.2% decrease in net income in the second quarter of fiscal 2017 compared to the prior-year quarter was primarily due to decreases in contract research and development revenue, gross profit margin, and interest income, partially offset by increased product sales, decreased total expenses, and a decrease in the provision for income taxes.

### Six months ended September 30, 2016 compared to six months ended September 30, 2015

The table shown below summarizes the percentage of revenue and period-to-period changes for various items:

*Revenue*

| 2016 | Percentage of Revenue Six Months Ended Sept. 30 | 2015 | Period- to-Period Change |
| --- | ---: | ---: | ---: |
| Product sales | 90.4% | 90.8% | (10.6)% |
| Contract research and development | 9.6% | 9.2% | (5.8)% |
| Total revenue | 100.0% | 100.0% | (10.2)% |
| Cost of sales | 22.3% | 23.3% | (14.1)% |
| Gross profit | 77.7% | 76.7% | (9.0)% |
| Expenses |  |  |  |
| Selling, general, and administrative | 5.2% | 6.5% | (27.3)% |
| Research and development | 10.9% | 8.4% | 16.5% |
| Total expenses | 16.1% | 14.9% | (2.6)% |
| Income from operations | 61.6% | 61.8% | (10.6)% |
| Interest income | 6.2% | 6.1% | (9.0)% |
| Income before taxes | 67.8% | 67.9% | (10.4)% |
| Provision for income taxes | 21.8% | 22.3% | (12.3)% |
| Net income | 46.0% | 45.6% | (9.5)% |

Total revenue for the six months ended September 30, 2016 decreased 10% compared to the six months ended September 30, 2015. The decrease was due to an 11% decrease in product sales and a 6% decrease in contract research and development revenue.

The decrease in product sales from the prior-year period was due to decreased purchase volume by existing customers. The decrease in contract research and development revenue for the first six months of fiscal 2017 was due to the completion of certain contracts.

Gross profit margin increased to 78% of revenue for the first six months of fiscal 2017 compared to 77% for the first six months of fiscal 2016, due to increased gross profit margins on contact research and development revenue.

Total expenses decreased 3% for the first six months of fiscal 2017 compared to the first six months of fiscal 2016, due to a 27% decrease in selling, general, and administrative expense, partially offset by an 17% increase in research and development expense. The decrease in selling, general, and administrative expense was primarily due to decreases in sales commissions. The increase in research and development expense was due to an increase in new product development activities.

Interest income for the first six months of fiscal 2017 decreased 9% due to a decrease in marketable securities and a decrease in the average interest rates on those securities.

The 10% decrease in net income in the first six months of fiscal 2017 compared to the prior-year quarter was primarily due to decreased total revenue and decreased interest income.

### Liquidity and capital resources

### Overview

Cash and cash equivalents were $5,690,673 as of September 30, 2016 compared to $7,534,593 as of March 31, 2016. The $1,843,920 decrease in cash and cash equivalents during the six months ended September 30, 2016 was due to $9,628,940 net cash used in financing activities, partially offset by $5,666,144 in net cash provided by operating activities and $2,118,876 net cash provided by investing activities. We currently believe our working capital and cash generated from operations will be adequate for our needs at least for the next 12 months.

### Operating Activities

Accounts receivable as of September 30, 2016 increased $1,124,084 compared to March 31, 2016, primarily due to the timing of sales to and payments from certain customers.

### Investing Activities

Net cash provided by investing activities in the first six months of fiscal 2017 was primarily due to marketable security maturities of $9,200,000, less marketable security purchases of $6,928,028.

### Financing Activities

Net cash used in financing activities in the first six months of fiscal 2017 was primarily due to $9,670,020 of cash dividends paid to shareholders. In addition to dividends paid in the first six months of fiscal 2017, on October 19, 2016 we announced that our Board had declared a cash quarterly dividend of an additional $1.00 per share of common stock, or $4,836,010 based on shares outstanding as of October 14, 2016, to be paid November 30, 2016. We plan to fund such dividends through cash provided by operating activities and proceeds from maturities of marketable securities. All future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, estimates of future cash requirements, and other factors the Board may deem relevant. Furthermore, dividends may be modified or discontinued at any time without notice.

## Market risk

As filed, 1,225 characters.

As discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2016, we are exposed to financial market risks, primarily marketable securities and, to a lesser extent, changes in currency exchange rates.

### Marketable Securities

The primary objective of our investment activities is to preserve principal while at the same time maximizing after-tax yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in securities including municipal obligations, corporate obligations, and money market funds. Short-term and long-term marketable securities are generally classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income or loss, net of estimated tax. Our marketable securities as of September 30, 2016 had remaining maturities between 17 days and 231 weeks. Marketable securities had a market value of $83,096,865 as of September 30, 2016, representing approximately 85% of our total assets. We have not used derivative financial instruments in our investment portfolio.

## Controls and procedures

As filed, 1,341 characters.

### Disclosure Controls and Procedures

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has performed an evaluation of our disclosure controls and procedures that are defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this Report. This evaluation included consideration of the controls, processes, and procedures that are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2016, our disclosure controls and procedures were effective.

### Changes in Internal Controls

During the quarter ended September 30, 2016, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 143 characters.

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2016.

Filed Oct 19, 2016.
Source: SEC EDGAR, the filing index for accession 0000724910-16-000077. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.