NVEC 10-Q
Nve Corp /New/ (NVEC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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1 |
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( |
| (Zip Code) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
|
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
The |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $
NVE CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
2
PART I–FINANCIAL INFORMATION
Item 1. Financial Statements.
NVE CORPORATION
BALANCE SHEETS
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| (Unaudited) September 30, 2024 |
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| March 31, 2024* |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
| $ |
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| $ |
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Marketable securities, short-term (amortized cost of $ |
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Accounts receivable, net of allowance for credit losses of $ |
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Inventories |
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Prepaid expenses and other assets |
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Total current assets |
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Fixed assets |
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Machinery and equipment |
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Leasehold improvements |
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| 13,582,842 |
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| 12,457,405 |
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Less accumulated depreciation |
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Net fixed assets |
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Deferred tax assets |
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Marketable securities, long-term (amortized cost of $ |
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Right-of-use asset – operating lease |
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Total assets |
| $ |
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| $ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable |
| $ |
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| $ |
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Accrued payroll and other |
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Operating lease liability |
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Total current liabilities |
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Long-term operating lease liability |
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Total liabilities |
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Shareholders’ equity |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
| $ |
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| $ |
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*The March 31, 2024 Balance Sheet is derived from the audited financial statements contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
See accompanying notes.
3
NVE CORPORATION
STATEMENTS OF INCOME
(Unaudited)
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| Quarter Ended September 30, |
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| 2024 |
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| 2023 |
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Revenue |
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Product sales |
| $ |
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| $ |
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Contract research and development |
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Total revenue |
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Cost of sales |
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Gross profit |
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Expenses |
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Research and development |
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Selling, general, and administrative |
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Recovery of credit losses |
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Total expenses |
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Income from operations |
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Interest income |
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Income before taxes |
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Provision for income taxes |
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Net income |
| $ |
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| $ |
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Net income per share – basic |
| $ |
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| $ |
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Net income per share – diluted |
| $ |
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| $ |
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Cash dividends declared per common share |
| $ |
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| $ |
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Weighted average shares outstanding |
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Basic |
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Diluted |
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STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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| Quarter Ended September 30, |
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| 2024 |
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| 2023 |
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Net income |
| $ |
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| $ |
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Unrealized gain (loss) from marketable securities, net of tax |
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| ( | ) | |
Comprehensive income |
| $ |
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| $ |
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See accompanying notes.
4
NVE CORPORATION
STATEMENTS OF INCOME
(Unaudited)
|
| Six Months Ended September 30, |
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| 2024 |
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| 2023 |
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Revenue |
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Product sales |
| $ |
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| $ |
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Contract research and development |
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Total revenue |
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Cost of sales |
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Gross profit |
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Expenses |
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Research and development |
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Selling, general, and administrative |
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Provision for credit losses |
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Total expenses |
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Income from operations |
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Interest income |
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Income before taxes |
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Provision for income taxes |
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Net income |
| $ |
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| $ |
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Net income per share – basic |
| $ |
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| $ |
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Net income per share – diluted |
| $ |
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| $ |
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Cash dividends declared per common share |
| $ |
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| $ |
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Weighted average shares outstanding |
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Basic |
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Diluted |
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STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
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| Six Months Ended September 30, |
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| 2024 |
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| 2023 |
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Net income |
| $ |
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| $ |
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Unrealized gain (loss) from marketable securities, net of tax |
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| ( | ) | |
Comprehensive income |
| $ |
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| $ |
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See accompanying notes.
5
NVE CORPORATION
STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
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| Accumulated |
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| Additional |
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| Other |
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| Common Stock |
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| Paid-In |
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| Comprehensive |
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| Retained |
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| Shares |
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| Amount |
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| Capital |
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| Income (Loss) |
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| Earnings |
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| Total |
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Balance as of March 31, 2024 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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Comprehensive income: |
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Unrealized gain on marketable securities, net of tax |
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Net income |
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Total comprehensive income |
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Stock-based compensation |
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Cash dividends ($1.00 per share of common stock) |
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| ( | ) |
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Balance as of June 30, 2024 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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Exercise of stock options |
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| ( | ) |
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| ( | ) | ||
Comprehensive income: |
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Unrealized gain on marketable securities, net of tax |
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Net income |
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Total comprehensive income |
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Stock-based compensation |
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Cash dividends ($1.00 per share of common stock) |
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| ( | ) |
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Balance as of September 30, 2024 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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See accompanying notes.
6
NVE CORPORATION
STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
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| Accumulated |
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| Additional |
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| Other |
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| Common Stock |
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| Paid-In |
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| Comprehensive |
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| Retained |
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| Shares |
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| Amount |
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| Capital |
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| Income (Loss) |
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| Earnings |
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| Total |
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Balance as of March 31, 2023 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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Exercise of stock options |
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Comprehensive income: |
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Unrealized loss on marketable securities, net of tax |
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| ( | ) |
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Net income |
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Total comprehensive income |
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Stock-based compensation |
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Cash dividends ($1.00 per share of common stock) |
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| ( | ) |
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Balance as of June 30, 2023 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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Comprehensive income: |
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Unrealized loss on marketable securities, net of tax |
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| ( | ) |
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Net income |
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Total comprehensive income |
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Stock-based compensation |
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Cash dividends ($1.00 per share of common stock) |
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| ( | ) |
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Balance as of September 30, 2023 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ |
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See accompanying notes.
7
NVE CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Six Months Ended September 30, |
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| 2024 |
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| 2023 |
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OPERATING ACTIVITIES |
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Net income |
| $ |
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| $ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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Bonds discount amortization |
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Provision for credit losses |
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Stock-based compensation |
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Deferred income taxes |
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Non-cash operating lease credit |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other assets |
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Accounts payable |
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Accrued payroll and other |
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Net cash provided by operating activities |
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INVESTING ACTIVITIES |
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Purchases of fixed assets |
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Purchases of marketable securities |
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Proceeds from maturities of marketable securities |
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Net cash Provided (used) by investing activities |
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FINANCING ACTIVITIES |
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(Payments on) proceeds from exercise of stock options |
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Payment of dividends to shareholders |
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Net cash used in financing activities |
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Decrease (increase) in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
| $ |
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| $ |
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Supplemental disclosures of cash flow information: |
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Cash paid during the period for income taxes |
| $ |
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| $ |
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See accompanying notes.
8
NVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. DESCRIPTION OF BUSINESS
We develop and sell devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store, and transmit information.
NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited financial statements of NVE Corporation are prepared consistent with accounting principles generally accepted in the United States and in accordance with Securities and Exchange Commission rules and regulations. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial statements. Although we believe that the disclosures are adequate to make the information presented not misleading, certain disclosures have been omitted as allowed, and the Notes to Financial Statements have been condensed as permitted. It is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and Notes included in our latest Annual Report on Form 10-K for the fiscal year ended March 31, 2024. The results of operations for the quarter ended September 30, 2024, are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2025.
Significant accounting policies
A description of our significant accounting policies and estimates is provided in Note 2 to the Financial Statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024. As of September 30, 2024, there were no changes to our significant accounting policies or estimates.
NOTE 3. NEW ACCOUNTING STANDARDS NOT YET ADOPTED
There were no additions to the new accounting standards not yet adopted as described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024.
We do not expect the adoption of accounting standards that have been issued or proposed by the Financial Accounting Standards Board (FASB) or other standards-setting bodies that do not require adoption until a future date to have a material impact on our financial statements when they are adopted.
NOTE 4. NET INCOME PER SHARE
Net income per basic share is computed based on the weighted-average number of common shares issued and outstanding during each period. Net income per diluted share amounts assume exercise of all stock options. The following tables show the components of diluted shares:
| Quarter Ended September 30, | ||
| 2024 |
| 2023 |
Weighted average common shares outstanding – basic |
| ||
Dilutive effect of stock options |
| ||
Shares used in computing net income per share – diluted |
| ||
| Six Months Ended September 30, | ||
| 2024 |
| 2023 |
Weighted average common shares outstanding – basic |
| ||
Dilutive effect of stock options |
| ||
Shares used in computing net income per share – diluted |
| ||
9
NOTE 5. MARKETABLE SECURITIES
The following table shows the major categories of our marketable securities and their contractual maturities as of September 30, 2024:
| Total |
| <1 Year |
| 1–3 Years |
| 3–5 Years |
| |||||
Money market funds |
| $ |
| $ |
| $ |
| $ |
| ||||
Corporate bonds |
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
| $ |
| $ |
| $ |
| ||||
Total marketable securities represented approximately 77% of our total assets as of September 30, 2024. Marketable securities as of September 30, 2024, had remaining maturities between one and 55 months.
Money market funds are included on the balance sheets in “Cash and cash equivalents.” Corporate bonds are included on the balance sheets in “Marketable securities, short term” and “Marketable securities, long term.” Accrued interest receivables were $
We monitor the credit ratings of our marketable securities at least quarterly as reported by Standard & Poor’s. The following table summarizes the fair values of our marketable securities as of September 30, 2024, aggregated by credit rating:
Credit Rating |
| Fair Value |
AAA | $ | |
AA+ |
| |
AA |
| |
AA- |
| |
A+ |
| |
A |
| |
Total | $ |
The following table shows the estimated fair value of our marketable securities, aggregated by fair value hierarchy inputs used in estimating their fair values:
|
| As of September 30, 2024 |
|
| As of March 31, 2024 | ||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Total | ||||||
Money market funds |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ||||||
Corporate bonds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ||||||
The following table shows the amortized cost, fair value and gross unrealized holding gains and losses of our marketable securities as of September 30 and March 31, 2024:
|
| As of September 30, 2024 |
|
| As of March 31, 2024 | ||||||||||||||||||||||||||
|
| Amortized Cost |
|
| Gross Unrealized Holding Gains |
|
| Gross Unrealized Holding Losses |
|
| Estimated Fair Value |
|
| Amortized Cost |
|
| Gross Unrealized Holding Gains |
|
| Gross Unrealized Holding Losses |
|
| Estimated Fair Value | ||||||||
Money market funds |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ||||||||
Corporate bonds |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ||||||
Total |
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ||||||
10
The following table shows the gross unrealized holding losses and estimated fair value of our marketable securities for which an allowance for credit losses has not been recorded, aggregated by category of securities and length of time that individual securities had been in a continuous unrealized loss position as of September 30 and March 31, 2024.
|
| Less Than 12 Months |
|
| 12 Months or Greater |
|
| Total |
| |||||||||||||||
|
| Estimated Fair Value |
|
| Gross Unrealized Holding Losses |
|
| Estimated Fair Value |
|
| Gross Unrealized Holding Losses |
|
| Estimated Fair Value |
|
| Gross Unrealized Holding Losses |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | |||
Total |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | |||
None of the securities were impaired at acquisition, and subsequent declines in fair value are attributable to interest rate increases. We do not intend to sell, and it is not more likely than not that we will be required to sell, these securities before recovery of their amortized cost basis. The issuers continue to make timely interest payments on these securities. Because we believe it is more likely than not we will recover the cost basis of our investments, we did not record any impairment attributable to credit losses.
None of the marketable securities purchased during the period had experienced more-than-insignificant deterioration in credit quality since its origination and were therefore not considered “Purchased Financial Assets with Credit Deterioration.”
Unrealized losses on our marketable securities and their tax effects are as follows:
|
| Quarter Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Unrealized gain (loss) on marketable securities |
| $ |
|
| $ | ( | ) | |
Tax effects |
|
| ( | ) |
|
|
| |
Unrealized gain (loss) on marketable securities, net of tax |
| $ |
|
| $ | ( | ) | |
|
| Six Months Ended September 30, |
| |||||
|
| 024 |
|
| 2023 |
| ||
Unrealized gain (loss) from marketable securities |
| $ |
|
| $ | ( | ) | |
Tax effects |
|
| ( | ) |
|
|
| |
Unrealized gain (loss) on marketable securities, net of tax |
| $ |
|
| $ | ( | ) | |
NOTE 6. ALLOWANCE FOR CREDIT LOSSES ON ACCOUNTS RECEIVABLES
The following table shows a roll forward of the allowance for credit losses on our accounts receivable:
|
| ||
Allowance for credit losses as of March 31, 2024 |
| $ | |
Change in provision for current expected credit losses |
|
| |
Allowance for credit losses as of September 30, 2024 |
| $ |
NOTE 7. INVENTORIES
Inventories are shown in the following table:
|
| Sept. 30, 2024 |
|
| March 31, 2024 |
Raw materials | $ |
| $ | ||
Work in process |
|
|
| ||
Finished goods |
|
|
| ||
Total inventories | $ |
| $ |
11
NOTE 8. STOCK-BASED COMPENSATION
Stock-based compensation expense was $
| Quarter Ended |
| Six Months Ended |
| ||||||
2024 |
| 2023 |
| 2024 |
| 2023 |
| |||
Stock options grant |
|
|
|
|
|
| ||||
Stock options exercised |
|
|
|
|
|
| ||||
NOTE 9. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of September 30, 2024, federal and state estimated tax liabilities of $
We had
NOTE 10. LEASES
We conduct our operations in a leased facility under a non-cancellable lease expiring March 31, 2026. Our lease does not provide an implicit interest rate, so we used our incremental borrowing rate to determine the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. Details of our operating lease are as follows:
| Quarter Ended |
| Six Months Ended |
| ||||||
2024 |
| 2023 |
| 2024 |
| 2023 |
| |||
Operating lease cost | $ |
|
| $ |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included |
|
|
|
|
|
|
|
|
|
|
Operating cash flows for leases | $ |
|
| $ |
|
| ||||
Remaining lease term |
|
|
|
|
|
|
|
| ||
Discount rate |
|
| % |
|
|
|
|
| ||
The following table shows the maturities of lease liabilities as of September 30, 2024:
Year Ending March 31, | Operating Lease Liabilities |
| |
2025 |
|
| |
2026 |
|
| |
Total lease payments |
|
| |
Imputed lease interest |
| ( | ) |
Total lease liabilities | $ |
| |
NOTE 11. STOCK REPURCHASE PROGRAM
On January 21, 2009, we announced that our Board of Directors authorized the repurchase of up to $
12
NOTE 12. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS
All of our employees are eligible to participate in our 401(k) savings plan the first quarter after reaching age 18. Employees may contribute up to the Internal Revenue Code maximum. We make matching contributions of
NOTE 13. SUBSEQUENT EVENTS
On
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 September 30, 2024, our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.
14
Quarter ended September 30, 2024, compared to quarter ended September 30, 2023
The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:
| Percentage of Revenue Quarter Ended September 30, |
|
| Quarter- to-Quarter |
| |||
| 2024 |
| 2023 |
|
| Change |
| |
Revenue |
|
|
|
|
|
|
|
|
Product sales | 90.3 | % |
| 99.8 | % |
| (14.2 | )% |
Contract research and development | 9.7 | % |
| 0.2 | % |
| 3,950.1 | % |
Total revenue | 100.0 | % |
| 100.0 | % |
| (5.3 | )% |
Cost of sales | 14.0 | % |
| 22.4 | % |
| (40.8 | )% |
Gross profit | 86.0 | % |
| 77.6 | % |
| 5.0 | % |
Expenses |
|
|
|
|
|
|
|
|
Research and development | 12.5 | % |
| 9.6 | % |
| 24.1 | % |
Selling, general, and administrative | 8.4 | % |
| 6.0 | % |
| 31.0 | % |
Provision for (recovery of) credit losses | - | % |
| (2.8 | )% |
| - | % |
Total expenses | 20.9 | % |
| 12.8 | % |
| 54.9 | % |
Income from operations | 65.1 | % |
| 64.8 | % |
| (4.8 | )% |
Interest income | 6.9 | % |
| 7.2 | % |
| (9.3 | )% |
Income before taxes | 72.0 | % |
| 72.0 | % |
| (5.3 | )% |
Provision for income taxes | 12.4 | % |
| 5.8 | % |
| 104.4 | % |
Net income | 59.6 | % |
| 66.2 | % |
| (14.8 | )% |
Total revenue for the quarter ended September 30, 2024 (the second quarter of fiscal 2025) decreased 5% compared to the quarter ended September 30, 2023 (the second quarter of fiscal 2024). The decrease was due to a 14% decrease in product sales, partially offset by a 3,950% 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 quarter ended September 30, 2024.
Gross margin percentage for the second quarter of fiscal 2025 was 86%, compared to 78% 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 55% for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 due to a 24% increase in research and development expense, a 31% increase in selling, general, and administrative expense and a $202,926 recovery of credit losses in the prior-year quarter. 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 second quarter of fiscal 2025 decreased 9% due to lower yields on recently purchased marketable securities.
Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, increased to 17% for the second quarter of fiscal 2025 compared to 8% for the second quarter of fiscal 2024. The lower tax rate for the prior-year quarter was due to a $202,926 credit loss recovery and changes in the timing and amounts of federal tax credits and deductions.
The 15% decrease in net income in the second quarter of fiscal 2025 compared to the prior-year quarter was primarily due to decreased revenue, increased operating expenses, decreased interest income, and a higher effective tax rate, partially offset by increased gross profit margin.
15
Six months ended September 30, 2024, compared to six months ended September 30, 2023
The table shown below summarizes the percentage of revenue and period-to-period changes for various items:
| Percentage of Revenue Six Months Ended Sept. 30, |
|
|
| ||||
| 2024 |
|
| 2023 |
|
| Change |
|
Revenue |
|
|
|
|
|
|
|
|
Product sales | 93.9 | % |
| 99.1 | % |
| (19.6 | )% |
Contract research and development | 6.1 | % |
| 0.9 | % |
| 457.1 | % |
Total revenue | 100.0 | % |
| 100.0 | % |
| (15.2 | )% |
Cost of sales | 14.2 | % |
| 23.0 | % |
| (47.7 | )% |
Gross profit | 85.8 | % |
| 77.0 | % |
| (5.4 | )% |
Expenses |
|
|
|
|
|
|
|
|
Research and development | 12.7 | % |
| 8.6 | % |
| 25.2 | % |
Selling, general, and administrative | 8.2 | % |
| 5.7 | % |
| 22.0 | % |
Provision for credit losses | - | % |
| 0.1 | % |
| - | % |
Total expenses | 20.9 | % |
| 14.4 | % |
| 23.4 | % |
Income from operations | 64.9 | % |
| 62.6 | % |
| (12.0 | )% |
Interest income | 7.1 | % |
| 5.9 | % |
| 1.0 | % |
Income before taxes | 72.0 | % |
| 68.5 | % |
| (10.9 | )% |
Provision for income taxes | 12.0 | % |
| 11.3 | % |
| (10.5 | )% |
Net income | 60.0 | % |
| 57.2 | % |
| (11.0 | )% |
Total revenue for the six months ended September 30, 2024, decreased 15% compared to the six months ended September 30, 2023. The decrease was due to a 20% decrease in product sales, partially offset by and a 457% 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 quarter ended September 30, 2024.
Gross margin percentage for the first six months of fiscal 2025 was 86%, compared to 77% for the first six 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 23% for the first six months of fiscal 2025 compared to the first six months of fiscal 2024 due to a 25% increase in research and development expense and a 22% 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 11% decrease in net income for the first six months of fiscal 2025 compared to the prior-year period was primarily due to decreased revenue and increased expenses, partially offset by increased interest income and increased gross profit margin.
16
Liquidity and Capital Resources
Overview
Cash and cash equivalents were $3,096,179 as of September 30, 2024, compared to $10,283,550 as of March 31, 2024. The $7,187,371 decrease in cash and cash equivalents during the first half of fiscal 2025 was due to $5,505,577 of cash used in investing activities and $9,667,381 of net cash used in financing activities, partially offset by $7,985,587 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 $192,402 during the first six months of fiscal 2025 primarily due to decreased revenue and the timing of customer payments. Inventories increased $259,026 primarily due to our decision to increase raw material and finished goods inventories in anticipation of a semiconductor industry recovery. Prepaid expenses and other assets decreased $156,116 primarily due to decreased bond interest receivable and prepayments for raw materials. Accounts payable and accrued expenses decreased $106,018 primarily due to decreased accrual for performance-based compensation.
Investing Activities
Cash used by investing activities during the six months ended September 30, 2024, consisted of $6,580,140 of marketable securities purchases and $1,125,437 of fixed asset purchases, partially offset by $2,200,000 in proceeds from maturities of marketable securities. Fixed asset purchases consisted 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 six months ended September 30, 2024, primarily consisted of $9,667,352 of cash dividends paid to shareholders.
In addition to cash dividends to shareholders paid in the first quarter of fiscal 2025, on October 23, 2024, we announced that our Board of Directors had declared a cash dividend of $1.00 per share of Common Stock, or $4,834,020 based on shares outstanding as of September 30, 2024, to be paid on November 29, 2024.
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.
17
Item 4. Controls and Procedures.
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 September 30, 2024, our disclosure controls and procedures were effective.
Changes in Internal Controls
During the quarter ended September 30, 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.
PART II–OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of business, we may become involved in litigation. At this time, we are not aware of any material pending or threatened legal proceedings or other proceedings contemplated by governmental authorities that we expect would have a material adverse impact on our future results of operation and financial condition.
Item 1A. Risk Factors.
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.
Item 4. Mine Safety Disclosures.
None.
18
Item 6. Exhibits.
Exhibit # | Description |
|
|
31.1 | Certification by Daniel A. Baker pursuant to Rule 13a-14(a)/15d-14(a). |
|
|
31.2 | Certification by Daniel Nelson pursuant to Rule 13a-14(a)/15d-14(a). |
|
|
32 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
|
|
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| NVE CORPORATION |
|
|
| (Registrant) |
|
|
| ||
|
| ||
October 23, 2024 |
| /s/ DANIEL A. BAKER |
|
Date |
| Daniel A. Baker |
|
|
| President and Chief Executive Officer |
|
|
| ||
|
| ||
October 23, 2024 |
| /s/ DANIEL NELSON |
|
Date |
| Daniel Nelson |
|
|
| Principal Financial Officer |
|
20