NVE Corporation — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2020, the second quarter and first half of fiscal 2021. The filing describes a developer and seller of spintronic sensors, couplers, and related devices.
Financial performance
| Metric | Quarter ended Sept. 30, 2020 | Year-over-year change | Six months ended Sept. 30, 2020 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $4.38 million | Down 32.6% | $8.97 million | Down 29.9% |
| Gross profit / margin | $3.44 million / 78.5% | Margin down 0.8 percentage points | $7.19 million / 80.2% | Margin down 0.7 percentage points |
| Operating income / margin | $2.27 million / 51.7% | Down 41.3% | $4.78 million / 53.3% | Down 38.4% |
| Net income | $2.22 million | Down 41.9% | $4.63 million | Down 37.6% |
| Diluted EPS | $0.46 | From $0.79 | $0.96 | From $1.53 |
| Operating cash flow | Not separately reported for the quarter | — | $5.54 million | From $7.42 million |
- Quarterly revenue fell mainly because existing customers bought fewer products; product sales declined 32.8%. Contract research and development revenue declined 29.5%, attributed to completion of certain contracts.
- For the first half, product sales fell 30.6% and contract research and development revenue fell 13.6%. Reduced R&D expense, due partly to completed development activities, partly offset lower revenue.
- Cash and cash equivalents were $3.85 million at September 30, down from $8.07 million at March 31. Short- and long-term marketable securities totaled $64.01 million, making cash plus marketable securities approximately $67.85 million.
- Total assets were $75.50 million and shareholders’ equity was $74.02 million. No borrowings are reported; operating lease liabilities totaled $758,653.
- Operating activities provided $5.54 million in the first half. Financing activities used $9.76 million, including $9.67 million of dividends and $91,419 of stock repurchases. No securities purchases or maturities, or capital expenditures, occurred in the period.
- The company declared dividends of $1.00 per share in each of the two quarters. A further $1.00-per-share dividend, approximately $4.83 million based on October 16 shares outstanding, was announced for payment November 30, 2020.
Outlook, risks, and other notable items
- Management said COVID-19 significantly affected revenue and net income, particularly through market conditions in certain industries, especially medical devices. It expected revenue and net income to likely continue declining in the quarter ending December 31, 2020 versus the prior-year quarter.
- Management believed working capital and cash generated from operations would be adequate for at least the next 12 months. Future dividends remain subject to Board approval and may be changed or discontinued.
- A packaging vendor suspended operations from late March to mid-May 2020 and operated on a limited basis through August, with pandemic-related staffing and input-material shortages also cited. Alternative suppliers may be costly or difficult to qualify, and disruption could impair production and revenue.
- Other stated risks include reliance on several large customers, uncertainty in end-market conditions and future sales, COVID-19 effects, and uncertainty around future dividends and repurchases. No material pending or threatened legal proceedings were identified.
- Available-for-sale securities represented approximately 89% of total assets. The filing reports unrealized gains on securities in first-half comprehensive income; their values are subject to market movements.
- Disclosure controls were judged effective as of September 30, 2020, and no material change in internal control over financial reporting was reported.
Key facts for investors to verify
- Whether sales recover or continue to weaken, including the extent of customer concentration and reduced purchasing by existing customers.
- Whether COVID-19 conditions and packaging-vendor constraints affect production, deliveries, or customer demand in subsequent periods.
- The composition, maturities, and valuation sensitivity of the substantial marketable-securities portfolio.
- Whether operating cash generation can support the declared dividend and any future repurchases amid lower earnings.
- Actual results against management’s expectation of further year-over-year declines for the December 2020 quarter.