NVE Corporation — Form 10-Q Summary
Reporting period: Quarter ended June 30, 2021, the first quarter of NVE’s fiscal 2022; comparisons are with the quarter ended June 30, 2020 unless noted. NVE develops and sells spintronic sensors, couplers, and related devices.
Financial performance
| Metric | Quarter ended June 30, 2021 | Prior-year quarter | Change |
|---|---|---|---|
| Total revenue | $7.15 million | $4.59 million | +55.9% |
| Product sales | $6.95 million | $4.36 million | +59.5% |
| Contract R&D revenue | $0.20 million | $0.23 million | −13.5% |
| Gross profit / margin | $5.38 million / 75.3% | $3.75 million / 81.8% | Gross profit +43.5%; margin down 6.5 percentage points |
| Operating income / margin | $4.11 million / 57.4% | $2.52 million / 54.9% | Operating income +63.3% |
| Net income / margin | $3.58 million / 50.0% | $2.41 million / 52.6% | Net income +48.4% |
| Diluted EPS | $0.74 | $0.50 | +$0.24 |
| Operating cash flow | $3.30 million | $3.17 million | +$0.13 million |
Financial position and cash flows
- At June 30, cash and cash equivalents were $8.87 million, versus $10.43 million at March 31, 2021. Short- and long-term marketable securities totaled $54.52 million; available-for-sale securities, including money market funds classified in cash equivalents, were $62.76 million, or approximately 87% of total assets.
- Total assets were $72.10 million and shareholders’ equity was $69.56 million. Current liabilities were $2.00 million; no borrowings are reported. Operating lease liabilities totaled $0.70 million.
- Cash from operations of $3.30 million was partly offset by $4.83 million of dividends paid and $0.03 million of capital expenditures, resulting in a $1.56 million decrease in cash.
- Accounts receivable increased $1.36 million during the quarter, primarily due to timing of sales and customer payments. Inventory was $3.67 million, down from $3.90 million at March 31.
Changes, outlook, and risks
- Revenue growth was driven by increased purchases from existing customers, with sales higher in most markets and product lines. Contract R&D revenue declined following completion of certain contracts.
- Gross margin fell mainly because of revenue mix. Cost of sales rose 111.6%, faster than revenue. R&D expense declined 8.3% due primarily to staffing changes and completed development work; SG&A rose 31.4%, primarily from employee compensation. Interest income declined 27.4% as securities balances and average yields fell.
- Management said the pandemic’s impact on revenue and net income was significantly less than in the prior-year quarter. It expects fiscal 2022 capital expenditures to be significantly higher than fiscal 2021’s $62,727, but provided no forecast amount. Management believes working capital and operating cash generation will meet needs for at least the next 12 months.
- The board declared a subsequent quarterly dividend of $1.00 per share, payable August 31, 2021. Future dividends remain subject to board approval and may be changed or discontinued. No fiscal-year revenue or earnings guidance is provided in the supplied filing text.
- Key risks include reliance on several large customers and packaging-vendor disruptions. COVID-related restrictions affected vendors in India and Malaysia, while longer lead times and shortages of vendor materials and equipment were reported. Switching vendors may be costly or technically challenging. The filing says no material legal proceedings are pending or expected to have a material adverse effect; other risk factors were unchanged from the fiscal 2021 Form 10-K.
- Unrealized marketable-security losses, net of tax, were $90,165, compared with a $1.24 million gain in the prior-year quarter; management did not consider securities impaired at June 30, 2021. Management noted pandemic-related deterioration in some issuers’ outlooks could lead to future credit downgrades.
Important facts for investors to verify
- Whether product-sales growth is sustained and customer concentration changes.
- Whether packaging-vendor restrictions, shortages, or inventory exposure affect production and delivery.
- The effect of revenue mix and planned higher capital spending on margins and cash generation.
- Marketable-security credit quality, valuation changes, and the sustainability of the $1.00-per-share dividend.