# NVE Corp: Form 10-Q for the period ended Sep 30, 2020

- Company: [NVE Corp](/companies/nvec.md) (CIK 724910)
- Form: 10-Q
- Filed: 2020-10-21
- Accepted by EDGAR: Oct 21, 2020, 20:22 ET
- Period: 2020-09-30
- Accession: 0000724910-20-000040
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/724910/000072491020000040/NVE_Q2_FY2021_10Q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/724910/000072491020000040/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-07-01 to 2020-09-30 | $4.4m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 6 months, 2020-04-01 to 2020-09-30 | $9.0m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2020-07-01 to 2020-09-30 | $941.3k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2020-04-01 to 2020-09-30 | $1.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2020-07-01 to 2020-09-30 | $3.4m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2020-04-01 to 2020-09-30 | $7.2m | us-gaap:GrossProfit |
| Research and development | 3 months, 2020-07-01 to 2020-09-30 | $816.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2020-04-01 to 2020-09-30 | $1.7m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2020-07-01 to 2020-09-30 | $358.2k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2020-04-01 to 2020-09-30 | $713.2k | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2020-07-01 to 2020-09-30 | $2.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2020-04-01 to 2020-09-30 | $4.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2020-07-01 to 2020-09-30 | $444.4k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2020-04-01 to 2020-09-30 | $948.6k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-07-01 to 2020-09-30 | $2.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-04-01 to 2020-09-30 | $4.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-07-01 to 2020-09-30 | $0.46 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2020-04-01 to 2020-09-30 | $0.96 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-07-01 to 2020-09-30 | $0.46 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2020-04-01 to 2020-09-30 | $0.96 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-07-01 to 2020-09-30 | 4,834,809 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2020-04-01 to 2020-09-30 | 4,834,986 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2020-04-01 to 2020-09-30 | $5.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2020-04-01 to 2020-09-30 | $9.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2020-04-01 to 2020-09-30 | $91.4k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-09-30 | $3.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-09-30 | $33.5m | us-gaap:AssetsCurrent |
| Total assets | at 2020-09-30 | $75.5m | us-gaap:Assets |
| Current liabilities | at 2020-09-30 | $693.2k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-09-30 | $1.5m | us-gaap:Liabilities |
| Shareholders' equity | at 2020-09-30 | $74.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 9,842 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 the COVID-19 pandemic, risks and 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, 2020 as updated in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and Item 1A herein.

### 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, 2020. As of September 30, 2020 our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

### Quarter ended September 30, 2020 compared to quarter ended September 30, 2019

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

*Revenue*

| 2020 | Percentage of Revenue Quarter Ended September 30 | 2019 | Quarter- to-Quarter Change |
| --- | ---: | ---: | ---: |
| Product sales | 94.9% | 95.2% | (32.8)% |
| Contract research and development | 5.1% | 4.8% | (29.5)% |
| Total revenue | 100.0% | 100.0% | (32.6)% |
| Cost of sales | 21.5% | 20.7% | (30.1)% |
| Gross profit | 78.5% | 79.3% | (33.3)% |
| Expenses |  |  |  |
| Research and development | 18.6% | 14.2% | (11.9)% |
| Selling, general, and administrative | 8.2% | 5.7% | (2.8)% |
| Total expenses | 26.8% | 19.9% | (9.3)% |
| Income from operations | 51.7% | 59.4% | (41.3)% |
| Interest income | 9.2% | 7.0% | (12.0)% |
| Income before taxes | 60.9% | 66.4% | (38.2)% |
| Provision for income taxes | 10.2% | 7.6% | (10.2)% |
| Net income | 50.7% | 58.8% | (41.9)% |

Total revenue for the quarter ended September 30, 2020 (the second quarter of fiscal 2021) decreased 33% compared to the quarter ended September 30, 2019 (the second quarter of fiscal 2020). The decrease was due to a 33% decrease in product sales and a 29% 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 the second quarter of fiscal 2021 was due to the completion of certain contracts.

Total expenses decreased 9% in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020 due to a 12% decrease in research and development expense and a 3% decrease in selling, general, and administrative expense. The decrease in research and development expense was primarily due to the completion of certain product development activities.

Interest income for the second quarter of fiscal 2021 decreased 12% due to a decrease in our marketable securities and money market funds and a decrease in the average interest rates on those securities and funds.

The 42% decrease in net income in the second quarter of fiscal 2021 compared to the prior-year quarter was primarily due to a decrease in revenue.

### Six months ended September 30, 2020 compared to six months ended September 30, 2019

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

*Revenue*

| 2020 | Percentage of Revenue Six Months Ended Sept. 30 | 2019 | Period- to-Period Change |
| --- | ---: | ---: | ---: |
| Product sales | 95.0% | 95.9% | (30.6)% |
| Contract research and development | 5.0% | 4.1% | (13.6)% |
| Total revenue | 100.0% | 100.0% | (29.9)% |
| Cost of sales | 19.8% | 19.1% | (27.1)% |
| Gross profit | 80.2% | 80.9% | (30.6)% |
| Expenses |  |  |  |
| Research and development | 18.9% | 14.8% | (10.7)% |
| Selling, general, and administrative | 8.0% | 5.5% | 2.1% |
| Total expenses | 26.9% | 20.3% | (7.2)% |
| Income from operations | 53.3% | 60.6% | (38.4)% |
| Interest income | 8.9% | 7.2% | (12.5)% |
| Income before taxes | 62.2% | 67.8% | (35.7)% |
| Provision for income taxes | 10.5% | 9.7% | (23.9)% |
| Net income | 51.7% | 58.1% | (37.6)% |

Total revenue for the six months ended September 30, 2020 decreased 30% compared to the six months ended September 30, 2019, due to a 31% decrease in product sales and a 14% 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 7% for the first six months of fiscal 2021 compared to the first six months of fiscal 2020 due to an 11% decrease in research and development expense, partially offset by a 2% increase 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 2021 decreased 13% due to a decrease in our marketable securities and money market funds and a decrease in the average interest rates on those securities and funds.

The 38% decrease in net income in the first six months of fiscal 2021 compared to the prior-year period was primarily due to a decrease in revenue.

### The Impact of the COVID-19 Pandemic

We believe the COVID-19 pandemic had a significant impact on total revenue and net income for the quarter and six months ended September 30, 2020 compared to the prior-year period due to its effects on market conditions in certain industries, especially medical devices. Total revenue and net income will likely continue to decrease for the quarter ending December 31, 2020 compared to the prior-year quarter.

### Liquidity and Capital Resources

### Overview

Cash and cash equivalents were $3,845,070 as of September 30, 2020 compared to $8,065,594 as of March 31, 2020. The $4,220,524 decrease in cash and cash equivalents was due to $9,761,495 of cash used in financing activities consisting of cash dividends and Common Stock repurchases, partially offset by $5,540,971 in net cash provided by operating activities.

### Investing Activities

We had no maturities or purchases of debt securities and no capital expenditures during the six months ended September 30, 2020. Capital expenditures can vary from period to period depending on our needs and equipment purchasing opportunities.

### Financing Activities

We paid $9,670,076 in cash dividends and repurchased $91,419 of our Common Stock in the first six months of fiscal 2021. In addition to cash dividends paid in the first six months of fiscal 2021, on October 21, 2020 we announced that our Board had declared a cash dividend of $1.00 per share of Common Stock, or $4,833,232 based on shares outstanding as of October 16, 2020, to be paid November 30, 2020. We plan to fund 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, the impacts of the COVID-19 pandemic, and other factors the Board may deem relevant. Furthermore, dividends may be modified or discontinued at any time without notice.

We currently believe our working capital and cash generated from operations will be adequate for our needs at least for the next 12 months.

### Off-Balance-Sheet Arrangements

Our off-balance sheet arrangements consist of purchase commitments. We believe such arrangements have no material current or anticipated future effect on our profitability, cash flows, or financial position.

## 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, 2020, our disclosure controls and procedures were effective.

### Changes in Internal Controls

During the quarter ended September 30, 2020, 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, 2,346 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, 2020 as updated in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, except the following risk factor is replaced in its entirety by the following to update the effects of the COVID-19 pandemic on one of our packaging vendors:

***The loss of supply from any of our packaging vendors could impact our ability to produce and deliver products and cause loss of revenue.***

We are dependent on our packaging vendors. Because of the unique materials our products use, the complexity of some of our products, unique magnetic requirements, and high isolation voltage specifications, many of our products are more challenging to package than conventional integrated circuits. Some of our products use processes or tooling unique to a particular packaging vendor, and it might be expensive, time-consuming, or impractical to convert to another vendor in the event of a supply interruption due to vendors’ business decisions, business condition, or acts of God, including floods, typhoons, earthquakes, or pandemics. One of our packaging vendors was forced to suspend its factory operations from late March 2020 until mid-May 2020 and was permitted only limited operation from mid-May through August 2020 pursuant to COVID-19 government orders. The vendor also cited personnel shortages related to the COVID-19 pandemic, and the pandemic has caused shortages of raw materials and subassemblies our packaging vendors need for the packaging process. Additionally, certain of our packaging vendors are in flood-susceptible areas. Flooding risks to such vendors may increase in the future due to possible higher ocean levels, extreme weather, and other potential effects of climate change. We have alternate vendors or potential alternate vendors for the majority of our products, but it can be expensive, time-consuming, and technically challenging to convert to alternate vendors. Furthermore, we may not be able to recover work in process or finished goods at a packaging vendor in the event of a disruption. Any supply interruptions or loss of inventory could seriously jeopardize our ability to provide products that are critical to our business and operations and may cause us to lose revenue.

Filed Oct 21, 2020.
Source: SEC EDGAR, the filing index for accession 0000724910-20-000040. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.