NVE Corporation — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2022 (second quarter and first half of fiscal 2023). NVE develops and sells spintronic devices, including sensors and couplers.
Financial performance
| Metric | Quarter ended Sept. 30, 2022 | Year-over-year change | Six months ended Sept. 30, 2022 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $10.72 million | +57.1% | $18.05 million | +29.2% |
| Gross profit / margin | $8.32 million / 77.6% | +57.5%; margin +0.2 percentage points | $14.00 million / 77.5% | +31.3%; margin +1.2 points |
| Operating income / margin | $7.21 million / 67.3% | +76.3% | $11.92 million / 66.0% | +45.4% |
| Net income | $6.09 million | +67.0% | $10.23 million | +41.6% |
| Diluted EPS | $1.26 | Compared with $0.75 | $2.12 | Compared with $1.49 |
| Operating cash flow | Not presented for the quarter | — | $9.35 million | Compared with $6.46 million |
Quarterly product sales were $10.51 million, up 58.6%; contract research and development revenue was $203,285, up 5.1%. For the six-month period, product sales rose 29.5% and contract research revenue rose 18.8%. Management attributed sales growth to increased purchases from existing and new customers, with increases across most markets and product lines. Gross-margin improvement over the first half reflected higher prices, partly offset by higher costs.
Research and development and selling, general and administrative expenses fell 5% and 10%, respectively, in the quarter, and 16% and 15% for the first half. Management attributed the reductions primarily to reallocating resources toward revenue-generating activities. Interest income increased 19% for the quarter and 9% for the first half, reflecting higher average rates and investment balances.
Liquidity, investments and capital allocation
- At September 30, cash and cash equivalents were $3.58 million; short- and long-term marketable securities totaled $49.84 million. Current assets were $26.17 million and current liabilities were $3.42 million.
- Cash declined $6.87 million from March 31. First-half operating cash flow of $9.35 million was offset by $6.56 million of investing cash use and $9.66 million of dividend payments.
- Investing activity included $25.38 million of securities purchases and $18.75 million of maturities. Fixed-asset purchases were $24,500. The company had ordered production equipment and expected fiscal 2023 fixed-asset purchases to be significantly higher than fiscal 2022’s $484,579.
- The filing reports no conventional debt balance. Operating lease liabilities totaled $532,771; the facility lease expires March 31, 2026.
- Dividends declared were $1.00 per share each quarter ($2.00 per share for the first half). A further $1.00-per-share dividend was declared after quarter-end, payable November 30, 2022. Future dividends remain subject to Board approval and may be changed or discontinued.
Material changes, outlook and risks
Available-for-sale securities were approximately 76% of total assets. Their fair value included $2.28 million of gross unrealized losses on corporate bonds, compared with $637,305 at March 31, 2022. The losses were recorded in other comprehensive income; management said it did not consider the securities impaired and expected to recover their cost basis.
Management provided no quantified revenue or earnings guidance. It cautioned that interim results are not necessarily indicative of full-year results. COVID-related supply-chain disruptions may have benefited sales because management believes they were less severe for NVE than for competitors, while also adversely affecting cost of sales. Risks highlighted include reliance on several large customers, dependence on critical suppliers and packaging vendors, uncertainty in end-market conditions and future sales, and uncertainty around future dividends and repurchases. The company reported no material changes to previously disclosed risk factors, no material pending or threatened legal proceedings, and effective disclosure controls.
Important facts for investors to verify
- Whether strong product-sales growth is sustained and how much revenue depends on the company’s large customers.
- Whether supplier and packaging constraints affect production, costs, or the expected equipment-capacity expansion.
- How interest rates and credit markets affect the substantial corporate-bond portfolio and its unrealized losses.
- Whether operating cash generation can support planned capital spending and dividends; dividends are not guaranteed.
- The filing’s reported year-over-year diluted EPS comparisons and share counts, given small differences in weighted-average diluted shares between periods.