# NVE Corp: Form 10-Q for the period ended Sep 30, 2019

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2019-10-23
- Accepted by EDGAR: Oct 23, 2019, 20:16 ET
- Period: 2019-09-30
- Accession: 0000724910-19-000037
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491019000037/NVE_Q2_FY2020_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491019000037/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-07-01 to 2019-09-30 | $6.5m | us-gaap:Revenues |
| Revenue | 6 months, 2019-04-01 to 2019-09-30 | $12.8m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2019-07-01 to 2019-09-30 | $1.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2019-04-01 to 2019-09-30 | $2.4m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2019-07-01 to 2019-09-30 | $5.2m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2019-04-01 to 2019-09-30 | $10.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2019-07-01 to 2019-09-30 | $926.6k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2019-04-01 to 2019-09-30 | $1.9m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2019-07-01 to 2019-09-30 | $368.4k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2019-04-01 to 2019-09-30 | $698.5k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2019-07-01 to 2019-09-30 | $3.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2019-04-01 to 2019-09-30 | $7.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2019-07-01 to 2019-09-30 | $495.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2019-04-01 to 2019-09-30 | $1.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-07-01 to 2019-09-30 | $3.8m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2019-04-01 to 2019-09-30 | $7.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-07-01 to 2019-09-30 | $0.79 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2019-04-01 to 2019-09-30 | $1.53 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2019-07-01 to 2019-09-30 | $0.79 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2019-04-01 to 2019-09-30 | $1.53 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2019-07-01 to 2019-09-30 | 4,847,881 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2019-04-01 to 2019-09-30 | 4,849,357 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2019-04-01 to 2019-09-30 | $7.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2019-04-01 to 2019-09-30 | $16.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2019-04-01 to 2019-09-30 | $9.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2019-09-30 | $14.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-09-30 | $22.5m | us-gaap:AssetsCurrent |
| Total assets | at 2019-09-30 | $82.3m | us-gaap:Assets |
| Current liabilities | at 2019-09-30 | $923.8k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-09-30 | $966.6k | us-gaap:Liabilities |
| Shareholders' equity | at 2019-09-30 | $81.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 10,417 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 sales and revenues, risks related to changes in tariffs and other trade barriers, 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, 2019.

### 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.

### 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, 2019. As of September 30, 2019 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

### Quarter ended September 30, 2019 compared to quarter ended September 30, 2018

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

*Revenue*

| 2019 | Percentage of Revenue Quarter Ended September 30 | 2018 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 95.2% | 94.0% | (12.3)% |
| Contract research and development | 4.8% | 6.0% | (30.3)% |
| Total revenue | 100.0% | 100.0% | (13.4)% |
| Cost of sales | 20.7% | 18.0% | (0.5)% |
| Gross profit | 79.3% | 82.0% | (16.2)% |
| Expenses |  |  |  |
| Research and development | 14.2% | 13.0% | (4.7)% |
| Selling, general, and administrative | 5.7% | 5.0% | (2.4)% |
| Total expenses | 19.9% | 18.0% | (4.0)% |
| Income from operations | 59.4% | 64.0% | (19.6)% |
| Interest income | 7.0% | 5.9% | 2.9% |
| Income before taxes | 66.4% | 69.9% | (17.7)% |
| Provision for income taxes | 7.6% | 12.8% | (48.7)% |
| Net income | 58.8% | 57.1% | (10.8)% |

Total revenue for the quarter ended September 30, 2019 (the second quarter of fiscal 2020) decreased 13% compared to the quarter ended September 30, 2018 (the second quarter of fiscal 2019). The decrease was due to a 12% decrease in product sales and a 30% 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 second quarter of fiscal 2020 was due to the completion of certain contracts.

Gross profit margin decreased to 79% of revenue for the second quarter of fiscal 2020 compared to 82% for the second quarter of fiscal 2019 due to a less profitable product mix.

Total expenses decreased 4% in the second quarter of fiscal 2020 compared to the second quarter of fiscal 2019 due to a 5% decrease in research and development expense and a 2% decrease in selling, general, and administrative expense. The decrease in research and development expense was due to the completion of certain product development activities.

Interest income for the second quarter of fiscal 2020 increased 3% due to an increase in the average interest rates on our marketable securities.

The provision for income taxes decreased 49% due to tax benefits from the Federal Tax Reform Act enacted in 2017. We currently expect our tax rate for each of the remaining two quarters of fiscal 2020 to be approximately 18% of income before taxes.

The 11% decrease in net income in the second quarter of fiscal 2020 compared to the prior-year quarter was primarily due to a decrease in total revenue.

Comprehensive income decreased 8% to $4,000,778 compared to $4,333,847 for the prior-year quarter. The decrease in comprehensive income was due to a decrease in net income, partially offset by an increase in unrealized gain from marketable securities of $178,716 compared to $51,237 in the prior-year quarter. The increased unrealized gain was due to strong bond market conditions.

### Six months ended September 30, 2019 compared to six months ended September 30, 2018

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

*Revenue*

| 2019 | Percentage of Revenue Six Months Ended Sept. 30 | 2018 | Period- to-Period Change |
| --- | ---: | ---: | ---: |
| Product sales | 95.9% | 95.3% | (11.9)% |
| Contract research and development | 4.1% | 4.7% | (23.9)% |
| Total revenue | 100.0% | 100.0% | (12.4)% |
| Cost of sales | 19.1% | 18.8% | (11.3)% |
| Gross profit | 80.9% | 81.2% | (12.7)% |
| Expenses |  |  |  |
| Research and development | 14.8% | 13.4% | (3.1)% |
| Selling, general, and administrative | 5.5% | 4.9% | (1.1)% |
| Total expenses | 20.3% | 18.3% | (2.6)% |
| Income from operations | 60.6% | 62.9% | (15.6)% |
| Interest income | 7.2% | 6.0% | 5.4% |
| Income before taxes | 67.8% | 68.9% | (13.8)% |
| Provision for income taxes | 9.7% | 12.6% | (32.2)% |
| Net income | 58.1% | 56.3% | (9.7)% |

Total revenue for the six months ended September 30, 2019 decreased 12% compared to the six months ended September 30, 2018, due to a 12% decrease in product sales and a 24% decrease in contract research and development revenue.

The decrease in product sales from the prior-year period was due to decreased purchase volumes by existing customers. The decrease in contract research and development revenue was due to the completion of certain contracts.

Total expenses decreased 3% for the first six months of fiscal 2020 compared to the first six months of fiscal 2019 due to a 3% decrease in research and development expense and a 1% decrease in selling, general, and administrative expense. The decrease in research and development expense was due to the completion of certain product development activities.

Interest income for the first six months of fiscal 2020 increased 5% due to an increase in the average interest rates on our marketable securities.

The provision for income taxes for the first six months of fiscal 2020 decreased 32% due to tax benefits from the Federal Tax Reform Act enacted in 2017. We currently expect our tax rate for the last six months of the fiscal year to be approximately 18% of income before taxes.

The 10% decrease in net income in the first six months of fiscal 2020 compared to the prior-year period was primarily due to a decrease in total revenue.

Comprehensive income for the first six months of fiscal 2020 increased slightly to $8,178,260 compared to $8,171,869 for the prior-year period. The increase was due to an unrealized gain from marketable securities of $748,779 compared to an unrealized loss of $55,790 in the prior-year period, partially offset by a decrease in net income. The unrealized gain was due to strong bond market conditions.

### Liquidity and capital resources

### Overview

Cash and cash equivalents were $14,076,290 as of September 30, 2019 compared to $6,877,304 as of March 31, 2019. The $7,198,986 increase in cash and cash equivalents during the six months ended September 30, 2019 was due to $7,420,636 in net cash provided by operating activities and $9,470,370 of cash provided by investing activities, partially offset by $9,692,020 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 six months ended September 30, 2019 was due to $12,500,000 of marketable security maturities, partially offset by $3,013,530 of marketable securities purchases and $16,100 of fixed asset purchases.

### Financing Activities

Cash used in financing activities in the first six months of fiscal 2020 was due to $9,692,020 of cash dividends paid to shareholders. In addition to the dividends already paid in fiscal 2020, on October 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 October 18, 2019, to be paid November 29, 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, 1,338 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 September 30, 2019, our disclosure controls and procedures were effective.

### Changes in Internal Controls

During the quarter ended September 30, 2019, 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, 2019.

Filed Oct 23, 2019.
Source: SEC EDGAR, the filing index for accession 0000724910-19-000037. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.