NVE Corp: Form 10-Q for the period ended Jun 30, 2025

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, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, risks and uncertainties related to tariffs, customs, duties, and other trade barriers, 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, 2025.

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, 2025. As of June 30, 2025, our critical accounting policies and estimates continued to include marketable securities valuation, inventory valuation, and deferred tax assets estimation.

Quarter ended June 30, 2025, compared to quarter ended June 30, 2024

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

Total revenue for the quarter ended June 30, 2025 (the first quarter of fiscal 2026) decreased 10% compared to the quarter ended June 30, 2024 (the first quarter of fiscal 2025). The decrease was due to an 11% decrease in product sales, partially offset by a 17% increase in contract research and development revenue. The decrease in product sales was primarily due to decreased defense industry sales during the quarter ended June 30, 2025, compared to the prior-year quarter. Defense industry sales can be highly variable because of procurement cycles. The increase in contract research and development revenue was due to new research and development contracts.

Gross margin for the first quarter of fiscal 2026 was 81% of revenue, compared to 86% the prior-year quarter. The decrease in gross margin percentage was due to a less profitable product mix and increased distributor sales for the quarter ended June 30, 2025, compared to the prior-year quarter.

Total operating expenses decreased 20% for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025, due to an 18% decrease in research and development expense and a 23% decrease in selling, general, and administrative expense. The decrease in research and development expense was due to completion of some of our wafer-level chip scale packaging activities and reallocation of some research and development resources to manufacturing. The decrease in selling, general, and administrative expenses was primarily due to the timing of sales and marketing activities, and reallocation of some general and administrative resources to manufacturing.

Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, increased to 17% for the first quarter of fiscal 2026 compared to 16% for the first quarter of fiscal 2025. The increase in our effective tax rate compared to the prior-year quarter was due to changes in the timing and amounts of federal tax credits and deductions. We currently expect to realize advanced manufacturing investment tax credits of between $700,000 an $800,000 if we deploy equipment as planned in fiscal 2026.

The 13% decrease in net income in the first quarter of fiscal 2026 compared to the prior-year quarter was primarily due to decreased revenue and decreased gross margin, partially offset by decreased operating expenses.

Liquidity and Capital Resources

Overview

Cash and cash equivalents were $3,222,552 as of June 30, 2025, compared to $8,036,564 as of March 31, 2025. The $4,814,012 decrease in cash and cash equivalents during the first quarter of fiscal 2026 was due to $5,167,506 of net cash used in investing activities and $4,837,166 of cash used in financing activities, partially offset by $5,190,660 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 $1,335,447 during the first quarter of fiscal 2026 primarily due to the timing of customer payments. Prepaid expenses and other assets increased $196,757 primarily due to increased accrued bond interest and prepaid insurance. Accrued payroll and other liabilities increased $523,259 primarily due to the timing of estimated tax payments.

Investing Activities

Cash used by investing activities during the quarter ended June 30, 2025, consisted of $10,108,982 of marketable securities purchases and $1,058,524 of fixed asset purchases, partially offset by $6,000,000 in proceeds from maturities of marketable securities. Fixed asset purchases were production equipment.

Financing Activities

Cash used in financing activities during the quarter ended June 30, 2025, consisted of $4,837,166 of cash dividends paid to shareholders.

In addition to cash dividends to shareholders paid in the first quarter of fiscal 2026, on July 23, 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 June 30, 2025, to be paid on August 29, 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.

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 June 30, 2025, our disclosure controls and procedures were effective.

Changes in Internal Controls

During the quarter ended June 30, 2025, 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.

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, 2025.