NVE Corp: Form 10-Q for the period ended Dec 31, 2024
Filed with the SEC on Jan 22, 2025 and accepted by EDGAR at Jan 22, 2025, 16:09 ET.
Management's discussion and analysis
As filed, 11,562 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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 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, our dependence on critical suppliers and packaging vendors, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, risks of credit losses, 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 is contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
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 fiscal year ended March 31, 2024. As of December 31, 2024, our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.
Quarter ended December 31, 2024, compared to quarter ended December 31, 2023
The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:
| Revenue | Percentage of Revenue Quarter Ended December 31, 2024 | 2023 | Quarter- to-Quarter Change |
|---|---|---|---|
| Product sales | 98.0% | 94.2% | (22.1)% |
| Contract research and development | 2.0% | 5.8% | (73.7)% |
| Total revenue | 100.0% | 100.0% | (25.1)% |
| Cost of sales | 15.8% | 20.1% | (41.1)% |
| Gross profit | 84.2% | 79.9% | (21.0 ) % |
| Expenses | |||
| Research and development | 17.2% | 8.0% | 60.8% |
| Selling, general, and administrative | 8.6% | 5.8% | 11.7% |
| Total expenses | 25.8% | 13.8% | 40.2% |
| Income from operations | 58.4% | 66.1% | (33.8 ) % |
| Interest income | 9.4% | 7.3% | (3.6)% |
| Other income | 2.7% | -% | - |
| Income before taxes | 70.5% | 73.4% | (28.1)% |
| Provision for income taxes | 10.3% | 11.5% | (33.0 ) % |
| Net income | 60.2% | 61.9% | (27.1)% |
Total revenue for the quarter ended December 31, 2024 (the third quarter of fiscal 2025) decreased 25% compared to the quarter ended December 31, 2023 (the third quarter of fiscal 2024). The decrease was due to a 22% decrease in product sales and a 74% decrease in contract research and development revenue. The decrease in product sales was due to decreased purchases by existing customers. The decrease in contract research and development revenue was due to the completion of certain contracts.
Gross margin for the third quarter of fiscal 2025 was 84% of revenue, compared to 80% the prior-year quarter. The increase in gross margin percentage was due to a more profitable product mix and a larger portion of direct rather than distributor sales.
Total expenses increased 40% for the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 due to a 61% increase in research and development expense and a 12% increase in selling, general, and administrative expense. The increase in research and development expense was due to increased new product development activities. The increase in selling, general, and administrative expenses was primarily due to increased sales and marketing activities.
Interest income for the third quarter of fiscal 2025 decreased 4% due to a decrease in marketable securities and lower yields on recently purchased marketable securities.
Other income in the third quarter of fiscal 2025 was primarily from the reclaiming of precious metals used in our manufacturing process.
Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 15% for the third quarter of fiscal 2025 compared to 16% for the third quarter of fiscal 2024. The decrease in our effective tax rate compared to the prior-year quarter was due changes in the timing and amounts of federal tax credits and deductions.
The 27% decrease in net income in the third quarter of fiscal 2025 compared to the prior-year quarter was primarily due to decreased revenue, increased operating expenses, and decreased interest income, partially offset by increased gross profit margin, increased other income, and a lower effective tax rate.
Nine months ended December 31, 2024, compared to nine months ended December 31, 2023
The table shown below summarizes the percentage of revenue and period-to-period changes for various items:
| Revenue | Percentage of Revenue Nine Months Ended Dec. 31, 2024 | 2023 | Period- to-Period Change |
|---|---|---|---|
| Product sales | 95.0% | 97.6% | (20.3)% |
| Contract research and development | 5.0% | 2.4% | 71.9% |
| Total revenue | 100.0% | 100.0% | (18.1)% |
| Cost of sales | 14.6% | 22.2% | (46.0)% |
| Gross profit | 85.4% | 77.8% | (10.2)% |
| Expenses | |||
| Research and development | 14.0% | 8.5% | 35.2% |
| Selling, general, and administrative | 8.2% | 5.7% | 18.9% |
| Provision for credit losses | -% | 0.0% | - |
| Total expenses | 22.2% | 14.2% | 28.2% |
| Income from operations | 63.2% | 63.6% | (18.8)% |
| Interest income | 7.7% | 6.3% | (0.5 ) % |
| Other income | 0.7% | - | - |
| Income before taxes | 71.6% | 69.9% | (16.3)% |
| Provision for income taxes | 11.6% | 11.3% | (17.3)% |
| Net income | 60.0% | 58.6% | (16.1)% |
Total revenue for the nine months ended December 31, 2024, decreased 18% compared to the nine months ended December 31, 2023. The decrease was due to a 20% decrease in product sales, partially offset by a 72% increase in contract research and development revenue. The decrease in product sales was due to decreased purchases by existing customers. The increase in contract research and development revenue was due to a major research and development contract completed during the nine months ended December 31, 2024.
Gross margin for the first nine months of fiscal 2025 was 85% of revenue, compared to 78% for the first nine months of fiscal 2024. The increase in gross margin percentage was due to a more profitable product mix and a larger portion of direct rather than distributor sales.
Total expenses increased 28% for the first nine months of fiscal 2025 compared to the first nine months of fiscal 2024 due to a 35% increase in research and development expense and a 19% increase in selling, general, and administrative expense. The increase in research and development expense was due to increased new product development activities. The increase in selling, general, and administrative expenses was primarily due to increased sales and marketing activities.
The 16% decrease in net income for the first nine months of fiscal 2025 compared to the prior-year period was primarily due to decreased revenue, increased operating expenses, and decreased interest income, partially offset by increased other income and increased gross profit margin.
Liquidity and Capital Resources
Overview
Cash and cash equivalents were $5,485,684 as of December 31, 2024, compared to $10,283,550 as of March 31, 2024. The $4,797,866 decrease in cash and cash equivalents during the first nine months of fiscal 2025 was due to $2,237,563 of cash used in investing activities and $14,388,356 of net cash used in financing activities, partially offset by $11,828,053 in net cash provided by operating activities.
Operating Activities
Net cash provided by operating activities related to product sales and research and development contract revenue was our primary source of working capital for the current and prior-year quarters.
Accounts receivable decreased $1,789,769 during the first nine months of fiscal 2025 primarily due to decreased revenue and the timing of customer payments. Inventories increased $629,039 primarily due to our decision to increase inventories in anticipation of a semiconductor industry recovery. Prepaid expenses and other assets increased $47,132 primarily due to the timing of federal estimated tax payments. Accrued payroll and other expenses decreased $217,626 primarily due to decreased accrual for performance-based compensation.
Investing Activities
Cash used by investing activities during the nine months ended December 31, 2024, consisted of $11,279,773 of marketable securities purchases and $1,162,790 of fixed asset purchases, partially offset by $10,205,000 in proceeds from maturities of marketable securities. Fixed asset purchases consisted primarily of a $1,125,437 downpayment on production equipment expected to be delivered in fiscal 2026. We plan to significantly increase fixed asset purchases in fiscal 2025 and 2026 compared to fiscal 2024 to support increases in production capacity and new product development.
Financing Activities
Cash used in financing activities during the nine months ended December 31, 2024, consisted of $14,502,518 of cash dividends paid to shareholders, partially offset by $114,162 in proceeds from stock option exercises.
In addition to cash dividends to shareholders paid in the first quarter of fiscal 2025, on January 22, 2025, we announced that our Board of Directors had declared a cash dividend of $1.00 per share of Common Stock, or $4,837,166 based on shares outstanding as of December 31, 2024, to be paid on February 28, 2025.
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, 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, 1,280 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Disclosure Controls and Procedures
Management, with the participation of the Chief Executive Officer and Principal 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 Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.
Changes in Internal Controls
During the quarter ended December 31, 2024, 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, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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, 2024.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2024-12-31. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2024-10-01 to 2024-12-31 | $5.1m | us-gaap:Revenues |
| Revenue | 9 months2024-04-01 to 2024-12-31 | $18.6m | us-gaap:Revenues |
| Cost of revenue | 3 months2024-10-01 to 2024-12-31 | $797.6k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months2024-04-01 to 2024-12-31 | $2.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months2024-10-01 to 2024-12-31 | $4.3m | us-gaap:GrossProfit |
| Gross profit | 9 months2024-04-01 to 2024-12-31 | $15.9m | us-gaap:GrossProfit |
| Research and development | 3 months2024-10-01 to 2024-12-31 | $869.7k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months2024-04-01 to 2024-12-31 | $2.6m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months2024-10-01 to 2024-12-31 | $3.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2024-04-01 to 2024-12-31 | $11.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months2024-10-01 to 2024-12-31 | $521.8k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2024-04-01 to 2024-12-31 | $2.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2024-10-01 to 2024-12-31 | $3.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months2024-04-01 to 2024-12-31 | $11.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2024-10-01 to 2024-12-31 | $0.63 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2024-04-01 to 2024-12-31 | $2.31 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2024-10-01 to 2024-12-31 | $0.63 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2024-04-01 to 2024-12-31 | $2.31 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2024-10-01 to 2024-12-31 | 4,839,124 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2024-04-01 to 2024-12-31 | 4,839,247 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2024-04-01 to 2024-12-31 | $11.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2024-04-01 to 2024-12-31 | $1.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months2024-04-01 to 2024-12-31 | $14.5m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | At period end2024-12-31 | $5.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2024-12-31 | $30.3m | us-gaap:AssetsCurrent |
| Total assets | At period end2024-12-31 | $64.6m | us-gaap:Assets |
| Current liabilities | At period end2024-12-31 | $751.1k | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2024-12-31 | $1.6m | us-gaap:Liabilities |
| Shareholders' equity | At period end2024-12-31 | $63.0m | us-gaap:StockholdersEquity |
| Shares outstanding | At period end2024-12-31 | 4,837,166 shares | dei:EntityCommonStockSharesOutstanding |
Source: SEC EDGAR, the filing index for accession 0001376474-25-000101. Last ingested by Listed: Nov 5, 2026, 19:10 ET. Listed shows no prices and gives no investment advice.