# NVE Corp: Form 10-Q for the period ended Dec 31, 2018

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2019-01-23
- Accepted by EDGAR: Jan 23, 2019, 21:17 ET
- Period: 2018-12-31
- Accession: 0000724910-19-000004
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491019000004/NVE_Q3_FY2019_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491019000004/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2018-10-01 to 2018-12-31 | $6.3m | us-gaap:Revenues |
| Revenue | 9 months, 2018-04-01 to 2018-12-31 | $20.9m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2018-10-01 to 2018-12-31 | $1.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2018-04-01 to 2018-12-31 | $3.9m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2018-10-01 to 2018-12-31 | $5.1m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2018-04-01 to 2018-12-31 | $17.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2018-10-01 to 2018-12-31 | $1.1m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2018-04-01 to 2018-12-31 | $3.1m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2018-10-01 to 2018-12-31 | $268.9k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2018-04-01 to 2018-12-31 | $975.1k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2018-10-01 to 2018-12-31 | $3.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2018-04-01 to 2018-12-31 | $12.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2018-10-01 to 2018-12-31 | $739.9k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2018-04-01 to 2018-12-31 | $2.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-10-01 to 2018-12-31 | $3.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2018-04-01 to 2018-12-31 | $11.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-10-01 to 2018-12-31 | $0.71 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2018-04-01 to 2018-12-31 | $2.40 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2018-10-01 to 2018-12-31 | $0.71 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2018-04-01 to 2018-12-31 | $2.41 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2018-10-01 to 2018-12-31 | 4,850,507 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2018-04-01 to 2018-12-31 | 4,850,120 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2018-04-01 to 2018-12-31 | $11.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2018-04-01 to 2018-12-31 | $68.3k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2018-04-01 to 2018-12-31 | $14.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2018-12-31 | $6.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-12-31 | $31.3m | us-gaap:AssetsCurrent |
| Total assets | at 2018-12-31 | $84.8m | us-gaap:Assets |
| Current liabilities | at 2018-12-31 | $866.0k | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2018-12-31 | $83.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 10,616 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 December 31, 2018 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

### Quarter ended December 31, 2018 compared to quarter ended December 31, 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 Dec. 31 | 2017 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 95.6% | 87.6% | (7.1)% |
| Contract research and development | 4.4% | 12.4% | (69.5)% |
| Total revenue | 100.0% | 100.0% | (14.8)% |
| Cost of sales | 18.7% | 22.5% | (29.5)% |
| Gross profit | 81.3% | 77.5% | (10.6)% |
| Expenses |  |  |  |
| Research and development | 17.9% | 11.6% | 32.2% |
| Selling, general, and administrative | 4.3% | 4.3% | (14.1)% |
| Total expenses | 22.2% | 15.9% | 19.7% |
| Income from operations | 59.1% | 61.6% | (18.4)% |
| Interest income | 7.3% | 5.5% | 13.0% |
| Income before taxes | 66.4% | 67.1% | (15.8)% |
| Provision for income taxes | 11.8% | 18.6% | (46.0)% |
| Net income | 54.6% | 48.5% | (4.2)% |

Total revenue for the quarter ended December 31, 2018 (the third quarter of fiscal 2019) decreased 15% compared to the quarter ended December 31, 2017 (the third quarter of fiscal 2018). The decrease was due to a 7% decrease in product sales and a 69% decrease in contract research and development revenue.

The decrease in product sales from the prior-year quarter was primarily due to decreased purchases by existing customers. The decrease in contract research and development revenue for the third quarter of fiscal 2019 was due to the completion of certain contracts.

Gross profit margin increased to 81% of revenue for the third quarter of fiscal 2019 compared to 77% for the third quarter of fiscal 2018 due to a more profitable revenue mix.

Total expenses increased 20% for the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018, due to a 32% increase in research and development expense partially offset by a 14% decrease in selling, general, and administrative expense. The increase in research and development expense was due to an increase in new product development activities. The decrease in selling, general, and administrative expense was due to staffing changes.

Interest income for the third quarter of fiscal 2019 increased 13% 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 28% in the prior-year quarter. The decreased tax rate was due to the full effects 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 4% decrease in net income in the third quarter of fiscal 2019 compared to the prior-year quarter was primarily due to a decrease in total revenue and an increase in research and development expense, partially offset by an increase in gross profit margin, an increase in interest income, and a decrease in the provision for income taxes.

### Nine months ended December 31, 2018 compared to nine months ended December 31, 2017

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

*Revenue*

| 2018 | Percentage of Revenue Nine Months Ended Dec. 31 | 2017 | Period- to-Period Change |
| --- | ---: | ---: | ---: |
| Product sales | 95.4% | 89.8% | 1.0% |
| Contract research and development | 4.6% | 10.2% | (57.0)% |
| Total revenue | 100.0% | 100.0% | (4.9)% |
| Cost of sales | 18.8% | 21.9% | (18.5)% |
| Gross profit | 81.2% | 78.1% | (1.1)% |
| Expenses |  |  |  |
| Research and development | 14.8% | 12.7% | 10.7% |
| Selling, general, and administrative | 4.6% | 4.8% | (8.1)% |
| Total expenses | 19.4% | 17.5% | 5.5% |
| Income from operations | 61.8% | 60.6% | (3.0)% |
| Interest income | 6.3% | 5.2% | 14.8% |
| Income before taxes | 68.1% | 65.8% | (1.6)% |
| Provision for income taxes | 12.3% | 20.1% | (41.8)% |
| Net income | 55.8% | 45.7% | 16.1% |

Total revenue for the nine months ended December 31, 2018 decreased 5% compared to the nine months ended December 31, 2017, due to a 57% 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 81% of revenue for the first nine months of fiscal 2019 compared to 78% for the first nine months of fiscal 2018, due to a more profitable revenue mix.

Total expenses increased 6% for the first nine months of fiscal 2019 compared to the first nine months of fiscal 2018, due to an 11% increase in research and development expense, partially offset by an 8% decrease in selling, general, and administrative expense. The increase in research and development expense was due to an increase in new product development activities. The decrease in selling, general, and administrative expense was due to staffing changes.

Interest income for the first nine months of fiscal 2019 increased 15% 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 first nine months of fiscal 2019, compared to 31% in the prior-year period. 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 16% increase in net income in the first nine months of fiscal 2019 compared to the prior-year period was primarily due to increased gross profit margin and a decrease in the provision for income taxes.

### Liquidity and capital resources

### Overview

Cash and cash equivalents were $6,206,549 as of December 31, 2018 compared to $4,755,082 as of March 31, 2018. The $1,451,467 increase in cash and cash equivalents during the nine months ended December 31, 2018 was due to $11,679,049 in net cash provided by operating activities and $4,082,508 of cash provided by investing activities, partially offset by $14,310,090 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 nine months ended December 31, 2018 was due to $15,800,000 of marketable security maturities, partially offset by $11,649,227 of purchases of marketable securities and $68,265 of purchases of fixed assets.

### Financing Activities

Cash used in financing activities in the first nine months of fiscal 2019 was due to $14,528,030 of cash dividends paid to shareholders, partially offset by $217,940 in proceeds from sale of common stock from stock option exercises. In addition to the dividends already paid in fiscal 2019, on January 23, 2019 we announced that our Board had declared a cash quarterly dividend of $1.00 per share of common stock, or $4,846,010 based on shares outstanding as of January 18, 2019, to be paid February 28, 2019. 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.

## Controls and procedures

As filed, 1,336 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 December 31, 2018, our disclosure controls and procedures were effective.

### Changes in Internal Controls

During the quarter ended December 31, 2018, 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, 2018.

Filed Jan 23, 2019.
Source: SEC EDGAR, the filing index for accession 0000724910-19-000004. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.