NVE(NVEC) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited financial statements for NVE Corporation, including balance sheets, income statements, comprehensive income statements, shareholders' equity statements, and cash flow statements, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial instrument details for the quarter ended June 30, 2021 Balance Sheets The balance sheets provide a snapshot of the company's financial position as of June 30, 2021, compared to March 31, 2021, showing a slight decrease in total assets and shareholders' equity, while current liabilities significantly increased Key Balance Sheet Figures (in millions USD): | Metric | June 30, 2021 | March 31, 2021 | | :---------------------- | :------------ | :------------- | | Total Assets | $72.1 | $72.5 | | Total Current Liabilities | $2.0 | $1.0 | | Total Shareholders' Equity | $69.6 | $70.9 | Statements of Income The statements of income detail the company's financial performance for the quarter ended June 30, 2021, showing significant year-over-year growth in total revenue, gross profit, and net income, primarily driven by increased product sales Statements of Income (Quarter Ended June 30, in millions USD): | Metric | 2021 | 2020 | YoY Change | | :-------------------------- | :---------- | :---------- | :--------- | | Total Revenue | $7.2 | $4.6 | +55.9% | | Product Sales | $7.0 | $4.4 | +59.5% | | Contract R&D Revenue | $0.2 | $0.2 | -13.5% | | Gross Profit | $5.4 | $3.8 | +43.5% | | Net Income | $3.6 | $2.4 | +48.4% | | Net Income per Share – Basic | $0.74 | $0.50 | +48.0% | | Cash Dividends Declared per Share | $1.00 | $1.00 | 0% | Statements of Comprehensive Income The statements of comprehensive income report the comprehensive income for the quarter, which includes net income and other comprehensive income items, primarily unrealized gains or losses from marketable securities Statements of Comprehensive Income (Quarter Ended June 30, in millions USD): | Metric | 2021 | 2020 | | :------------------------------------------ | :---------- | :---------- | | Net Income | $3.6 | $2.4 | | Unrealized (loss) gain from marketable securities, net of tax | $(0.1) | $1.2 | | Comprehensive Income | $3.5 | $3.7 | Statements of Shareholders' Equity These statements detail the changes in shareholders' equity for the periods ended June 30, 2021, and June 30, 2020, reflecting the impact of comprehensive income, stock-based compensation, and cash dividends declared - Total shareholders' equity as of June 30, 2021, was $69.6 million[21] - Cash dividends declared were $1.00 per share for both Q2 2021 ($4.8 million total) and Q2 2020 ($4.8 million total)[17][21][24] - Stock-based compensation expense was $7.2 thousand for Q2 2021 and $2.7 thousand for Q2 2020[21][24] Statements of Cash Flows The statements of cash flows outline the cash inflows and outflows from operating, investing, and financing activities, showing a net decrease in cash and cash equivalents for the quarter ended June 30, 2021, primarily due to dividend payments Statements of Cash Flows (Quarter Ended June 30, in millions USD): | Activity | 2021 | 2020 | | :-------------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $3.3 | $3.2 | | Cash used in investing activities | $(0.03) | $0 | | Cash used in financing activities | $(4.8) | $(4.8) | | Decrease in cash and cash equivalents | $(1.6) | $(1.7) | | Cash and cash equivalents at end of period | $8.9 | $6.4 | Notes to Financial Statements These notes provide supplementary information and explanations for the financial statements, covering business description, accounting policies, new accounting standards, net income per share, fair value measurements, inventory details, stock-based compensation, income taxes, leases, stock repurchase program, employee plans, and subsequent events NOTE 1. DESCRIPTION OF BUSINESS NVE Corporation develops and sells devices utilizing spintronics, a nanotechnology that relies on electron spin, for data acquisition, storage, and transmission, including high-performance spintronic sensors and couplers - NVE develops and sells devices using spintronics nanotechnology[29] - Products include high-performance spintronic sensors and couplers[29] NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The unaudited financial statements are prepared consistent with GAAP and SEC rules, reflecting normal and recurring adjustments, with no material changes to significant accounting policies as of June 30, 2021 - Financial statements are unaudited and prepared consistent with GAAP and SEC rules[30] - No changes to significant accounting policies as of June 30, 2021[31] NOTE 3. RECENTLY ISSUED ACCOUNTING STANDARDS The company adopted ASU 2019-12 (Income Taxes) for the quarter ended June 30, 2021, with no material impact, and ASU 2021-04 (Earnings Per Share, etc.) is effective for fiscal 2023 and is not expected to have a significant impact - Adopted ASU 2019-12 (Income Taxes) for Q1 FY2022; no material impact[32] - ASU 2021-04 (Earnings Per Share, etc.) effective for fiscal 2023; not expected to have a significant impact[33] NOTE 4. NET INCOME PER SHARE This note details the calculation of basic and diluted net income per share, showing the weighted-average common shares outstanding and the dilutive effect of stock options Net Income Per Share Components (Quarter Ended June 30): | Metric | 2021 | 2020 | | :------------------------------------------ | :---------- | :---------- | | Weighted average common shares outstanding – basic | 4,833,232 | 4,835,038 | | Dilutive effect of stock options | 3,589 | 119 | | Shares used in computing net income per share – diluted | 4,836,821 | 4,835,157 | NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTS This note discusses the classification and fair value measurement of marketable securities (corporate bonds and money market funds) as available-for-sale, using Level 1 and Level 2 inputs, with total available-for-sale securities representing approximately 87% of total assets - Marketable securities (corporate bonds and money market funds) are classified as available-for-sale securities and carried at estimated fair value[35] - Total available-for-sale securities were $62.8 million as of June 30, 2021, representing approximately 87% of total assets[36][39] - Fair value measurements primarily utilize Level 1 inputs for money market funds and Level 2 inputs for corporate bonds[39] - Gross unrealized holding losses on corporate bonds were $(95.7 thousand) as of June 30, 2021, but no securities were considered impaired[39][41] NOTE 6. INVENTORIES This note provides a breakdown of inventory components, showing a slight decrease in total inventories from March 31, 2021, to June 30, 2021, primarily due to a reduction in finished goods Inventories (in millions USD): | Inventory Component | June 30, 2021 | March 31, 2021 | | :------------------ | :------------ | :------------- | | Raw materials | $0.7 | $0.7 | | Work in process | $2.4 | $2.2 | | Finished goods | $0.6 | $1.0 | | Total inventories | $3.7 | $3.9 | NOTE 7. STOCK-BASED COMPENSATION This note reports stock-based compensation expense, which increased significantly year-over-year for the first quarter of fiscal 2022 - Stock-based compensation expense was $7.2 thousand for Q1 FY2022, an increase from $2.7 thousand in Q1 FY2021[43] NOTE 8. INCOME TAXES This note addresses deferred income taxes, unrecognized tax benefits, and open tax years, with no unrecognized tax benefits or accrued interest related to uncertain tax positions as of June 30, 2021 - No unrecognized tax benefits as of June 30, 2021, and none expected within 12 months[45] - Tax years 2016 through 2020 remain open to examination by major taxing jurisdictions[45] NOTE 9. LEASES This note details the company's operating lease for its facility, expiring March 31, 2026, including lease costs, cash paid, remaining term, and future lease liabilities - Operating lease cost was $42.5 thousand for the quarter ended June 30, 2021[46] - Total lease liabilities were $0.7 million as of June 30, 2021, with the lease expiring March 31, 2026 (57 months remaining)[46] NOTE 10. STOCK REPURCHASE PROGRAM This note describes the authorized stock repurchase program, which has a remaining authorization of $3.8 million as of June 30, 2021, with no shares repurchased during the first quarter of fiscal 2022 - Remaining authorization for stock repurchases was $3.8 million as of June 30, 2021[47] - No Common Stock was repurchased during the first quarter of fiscal 2022[47] NOTE 11. INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS This note details the company's 401(k) savings plan, including employee eligibility and employer matching contributions - Employer matching contributions to the 401(k) plan were $28.6 thousand for Q1 FY2022, up from $25.4 thousand in Q1 FY2021[48] NOTE 12. SUBSEQUENT EVENTS This note reports a subsequent event where the Board declared a quarterly cash dividend of $1.00 per share, payable in August 2021 - On July 21, 2021, the Board declared a quarterly cash dividend of $1.00 per share, payable August 31, 2021[49] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including forward-looking statements, a business overview, critical accounting policies, a detailed comparison of the current quarter to the prior year, the impact of COVID-19, and an analysis of liquidity and capital resources Forward-looking statements This subsection highlights that the report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from projections - The report contains forward-looking statements, identifiable by terms such as 'may,' 'will,' 'expect,' 'anticipate,' 'intend,' 'believe,' 'estimate,' 'should,' or 'continue'[50] - Actual financial condition, operating results, and business performance may differ materially from projections due to various factors, including reliance on large customers, economic uncertainties, and risks related to future stock repurchases and dividend payments[50] General This subsection reaffirms NVE's core business of developing and selling spintronics-based devices, including sensors and couplers, for data acquisition and transmission - NVE Corporation develops and sells devices that use spintronics nanotechnology, including high-performance spintronic sensors and couplers[52] Critical accounting policies This subsection states that critical accounting policies, including investment valuation, inventory valuation, and deferred tax assets estimation, remained unchanged as of June 30, 2021 - Critical accounting policies and estimates include investment valuation, inventory valuation, and deferred tax assets estimation[53] - No changes to critical accounting policies as of June 30, 2021[53] Quarter ended June 30, 2021 compared to quarter ended June 30, 2020 This section analyzes the financial performance for the quarter, noting a significant increase in total revenue and net income driven by product sales, despite a decrease in contract R&D revenue and interest income, and a slight decrease in gross profit margin due to revenue mix - Total revenue increased 55.9% year-over-year, primarily due to a 59.5% increase in product sales[55] - Contract research and development revenue decreased 13.5% due to the completion of certain contracts[55][56] - Gross profit as a percentage of revenue decreased to 75% from 82% primarily due to revenue mix[55][56] - Total expenses increased 3.1%, driven by a 31.4% increase in selling, general, and administrative expense (due to increased employee compensation), partially offset by an 8.3% decrease in research and development expense (due to staffing changes and project completion)[55][57] - Net income increased 48.4% year-over-year, primarily due to the increase in product sales[55][58] - Interest income decreased 27.4% due to a decrease in available-for-sale securities and lower average interest rates[55][58] The Impact of the COVID-19 Pandemic Management believes the impact of the COVID-19 pandemic on revenue and net income was significantly less in the current quarter compared to the prior year - The impact of the COVID-19 pandemic on total revenue and net income was significantly less in the quarter ended June 30, 2021, compared to the quarter ended June 30, 2020[59] Liquidity and Capital Resources This section discusses the company's cash position, operating cash flow, investing activities, and financing activities, noting a decrease in cash and cash equivalents due to dividend payments, but substantial operating cash flow and sufficient working capital for the next 12 months - Cash and cash equivalents decreased by $1.6 million to $8.9 million as of June 30, 2021[61] - Net cash provided by operating activities was $3.3 million for Q1 FY2022[61][62] - Cash used in financing activities was $4.8 million, primarily for cash dividends paid to shareholders[61][64] - The company plans significantly more capital expenditures during fiscal 2022 than the $62.7 thousand invested in fiscal 2021[63] - Management believes working capital and cash generated from operations will be adequate for needs for at least the next 12 months[65] Item 4. Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, evaluated the disclosure controls and procedures and concluded they were effective as of June 30, 2021, with no material changes in internal control over financial reporting during the quarter Disclosure Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2021 - Disclosure controls and procedures were effective as of June 30, 2021[67] Changes in Internal Controls No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2021 - No material changes in internal control over financial reporting during the quarter ended June 30, 2021[68] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not aware of any material pending or threatened legal proceedings that would have a material adverse impact on its future operations or financial condition - NVE Corporation is not aware of any material pending or threatened legal proceedings[70] Item 1A. Risk Factors There were no material changes to risk factors from the prior 10-K, except for an updated risk factor regarding packaging vendors, highlighting increased lead times, raw material shortages, and operational suspensions at vendors due to COVID-19 restrictions, particularly in India and Malaysia, and potential future flooding risks - No material changes to risk factors from the Annual Report on Form 10-K, except for a revised risk factor concerning packaging vendors[71] - The updated risk factor details supply chain disruptions due to COVID-19, including increased lead times, raw material shortages, and factory suspensions/lockdowns at vendors in India and Malaysia[71] - Challenges include the expense and time of converting to alternate vendors and the risk of losing work-in-process or finished goods during disruptions[71] Item 4. Mine Safety Disclosures This item is not applicable to NVE Corporation - Mine Safety Disclosures are not applicable to NVE Corporation[72] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and various Inline XBRL documents - Exhibits include certifications by Daniel A. Baker (CEO) and Curt A. Reynders (CFO) (Exhibits 31.1, 31.2, 32)[74] - Various Inline XBRL documents are also filed (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[74] SIGNATURES The report is duly signed on behalf of NVE Corporation by Daniel A. Baker (President and Chief Executive Officer) and Curt A. Reynders (Chief Financial Officer) on July 21, 2021 - The report was signed by Daniel A. Baker, President and Chief Executive Officer, and Curt A. Reynders, Chief Financial Officer, on July 21, 2021[77]