# NVE Corp: Form 10-Q for the period ended Jun 30, 2018

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2018-07-18
- Accepted by EDGAR: Jul 18, 2018, 16:17 ET
- Period: 2018-06-30
- Accession: 0000724910-18-000022
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491018000022/NVE_Q1_FY2019_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491018000022/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2018-04-01 to 2018-06-30 | $7.1m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2018-04-01 to 2018-06-30 | $1.4m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2018-04-01 to 2018-06-30 | $5.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2018-04-01 to 2018-06-30 | $989.0k | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2018-04-01 to 2018-06-30 | $328.8k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2018-04-01 to 2018-06-30 | $4.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2018-04-01 to 2018-06-30 | $873.8k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-04-01 to 2018-06-30 | $3.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-04-01 to 2018-06-30 | $0.81 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2018-04-01 to 2018-06-30 | $0.81 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2018-04-01 to 2018-06-30 | 4,850,479 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2018-04-01 to 2018-06-30 | $4.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2018-04-01 to 2018-06-30 | $38.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2018-04-01 to 2018-06-30 | $4.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2018-06-30 | $8.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-06-30 | $38.7m | us-gaap:AssetsCurrent |
| Total assets | at 2018-06-30 | $87.1m | us-gaap:Assets |
| Current liabilities | at 2018-06-30 | $1.6m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2018-06-30 | $85.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 7,466 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 risks related 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 the impact of Federal tax reform, 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, 2018.

### 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, 2018. As of June 30, 2018 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

### Quarter ended June 30, 2018 compared to quarter ended June 30, 2017

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

*Revenue*

| 2018 | Percentage of Revenue Quarter Ended June 30 | 2017 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 96.7% | 90.5% | (0.2)% |
| Contract research and development | 3.3% | 9.5% | (67.3)% |
| Total revenue | 100.0% | 100.0% | (6.6)% |
| Cost of sales | 19.6% | 23.6% | (22.4)% |
| Gross profit | 80.4% | 76.4% | (1.7)% |
| Expenses |  |  |  |
| Research and development | 13.9% | 11.9% | 9.2% |
| Selling, general, and administrative | 4.7% | 5.3% | (17.7)% |
| Total expenses | 18.6% | 17.2% | 1.0% |
| Income from operations | 61.8% | 59.2% | (2.4)% |
| Interest income | 6.0% | 4.7% | 17.4% |
| Income before taxes | 67.8% | 63.9% | (1.0)% |
| Provision for income taxes | 12.3% | 20.6% | (44.3)% |
| Net income | 55.5% | 43.3% | 19.6% |

Total revenue for the quarter ended June 30, 2018 (the first quarter of fiscal 2019) decreased 7% compared to the quarter ended June 30, 2017 (the first quarter of fiscal 2018). The decrease was primarily due to a 67% decrease in contract research and development revenue. The decrease in contract research and development revenue was due to the completion of certain contracts.

Gross profit margin increased to 80% of revenue for the first quarter of fiscal 2018, compared to 76% for the first quarter of fiscal 2018, due to a more profitable revenue mix.

Total expenses increased 1% for the first quarter of fiscal 2019 compared to the first quarter of fiscal 2018, due to a 9% increase in research and development expense, partially offset by an 18% decrease in selling, general, and administrative expense. The increase in research and development expense was due to increased new product development activities. The decrease in selling, general, and administrative expense was due to staffing changes and decreased performance-based compensation.

Interest income for the first quarter of fiscal 2019 increased 17% due to an increase in the average interest rates on our marketable securities, partially offset by a decrease in our securities.

Our effective tax rate was 18% of net income before taxes for the quarter, compared to 32% in the prior-year quarter. The decrease was due to the effect of a decrease in the Federal tax rate and certain other provisions with the enactment of the Tax Reform Act. See Note 8 to the financial statements for more information on income taxes.

The 20% increase in net income in the first quarter of fiscal 2019 compared to the prior-year quarter was primarily due to a decrease in the provision for income taxes and increased gross profit margin.

### Liquidity and capital resources

### Overview

Cash and cash equivalents were $8,451,861 as of June 30, 2018 compared to $4,755,082 as of March 31, 2018. The $3,696,779 increase in cash and cash equivalents during the quarter ended June 30, 2018 was due to $4,649,899 in net cash provided by operating activities and $3,888,890 of cash provided by investing activities, partially offset by $4,842,010 of cash used in financing 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.

### Investing Activities

Cash provided by investing activities in the quarter ended June 30, 2018 was due to $7,300,000 of marketable security maturities, partially offset by $3,373,125 of purchases of marketable securities and $37,985 of purchases of fixed assets.

### Financing Activities

Cash used in financing activities in the first quarter of fiscal 2019 was due to a $4,842,010 quarterly dividend paid to shareholders. In addition to the dividend paid in the first quarter of fiscal 2019, on July 18, 2018 we announced that our Board had declared a cash quarterly dividend of $1.00 per share of common stock, or $4,842,010 based on shares outstanding as of July 13, 2018, to be paid August 31, 2018. We plan to fund dividends through cash provided by operating activities and proceeds from maturities and sales 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, 1,145 characters.

As discussed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2018, we are exposed to financial market risks, primarily marketable securities and, to a lesser extent, changes in currency exchange rates.

### Available-For-Sale 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. Available-for-sale securities 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 June 30, 2018 had remaining maturities between 10 and 236 weeks. Available-for-sale securities had a market value of $77,648,829 as of June 30, 2018, representing approximately 89% of our total assets. We have not used derivative financial instruments in our investment portfolio.

## Controls and procedures

As filed, 1,781 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 June 30, 2018, our disclosure controls and procedures were effective.

### Changes in Internal Controls

Beginning April 1, 2018, we implemented ASC Topic 606, *Revenue from Contracts with Customers*. Although the new revenue recognition standard is expected to have an immaterial impact on our ongoing net income (loss), we implemented changes to our processes related to revenue recognition and the control activities within them. These included the development of new policies based on the five-step model provided in the new revenue recognition standard, new training, contract review requirements, and the gathering of information provided for disclosures. See Note 2 to our Financial Statements for additional information regarding our adoption of the new accounting standard.

## 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, 2018.

Filed Jul 18, 2018.
Source: SEC EDGAR, the filing index for accession 0000724910-18-000022. Last ingested by Listed: Nov 5, 2026, 19:10 ET. No prices; not investment advice.