NVE Corp. (NVEC, Financial) filed Quarterly Report for the period ended 2008-12-31.
NVE Corp. is a recognized leader in the practical commercialization of `spintronics` which many experts believe represents the next generation of microelectronics. NVE's products include magnetic sensors and couplers which revolutionize data acquisition and transfer. NVE Corp. has a market cap of $112.15 million; its shares were traded at around $21 with a P/E ratio of 12.6 and P/S ratio of 6.06. NVE Corp. had an annual average earning growth of 65.3% over the past 5 years.
Total revenue for the nine months ended December 31, 2008 increased 14% to $16,475,689 compared to $14,479,428 for the nine months ended December 31, 2007. The increase was due to a 9% increase in product sales and a 49% increase in research and development revenue. The increase in product sales was due to increased volume from the addition of new customers and increased purchase volume by existing customers. The increase in research and development revenue was due to new contracts. Gross profit margin increased to 70% of revenue for the first nine months of fiscal 2009 compared to 66% for the first nine months of fiscal 2008. The increase was due to higher margins on both product sales and research and development revenue. Research and development expense decreased 21% for the first nine months of fiscal 2009 compared to the first nine months of fiscal 2008 due to the completion of certain research and development projects and an increase in contract research and development obligations. Interest and other income increased 6% to $842,523 for the first nine months of fiscal 2009 compared to $794,173 for the nine months ended December 31, 2007. The increase was primarily due to an increase in interest-bearing marketable securities. Other income for the nine months ended December 31, 2007 consisted primarily of a $61,430 net gain on maturities and sales of marketable securities. The provision for income taxes was $3,178,968 or 32% of income before taxes for the first nine months of fiscal 2009 compared to $2,581,272 or 34% of income before taxes for the first nine months of fiscal 2008. The decrease in the effective tax rate may not be representative of future trends because the effective tax rate can fluctuate from quarter to quarter due to a number of factors, some of which are outside our control. The 35% increase in net income in the first nine months of fiscal 2009 compared to the prior-year period was primarily due to increases in total revenue and gross profit margin, and a decrease in research and development expense.11
Seasonality Product sales for the third quarter of fiscal 2009 were less than the immediately preceding quarter, which is the same pattern as each of the three previous fiscal years. This pattern may be due in part to distributor ordering patterns or customer vacations and shutdowns late in calendar years. We do not know if this pattern will continue, and we do not know if product sales will increase in the fourth quarter of fiscal 2009 compared to the third quarter of fiscal 2009 as they have in the three previous fiscal years. Liquidity and capital resources At December 31, 2008 we had $32,115,947 in cash plus short-term and long-term marketable securities compared to $24,736,874 at March 31, 2008. Our entire portfolio of short-term and long-term marketable securities is classified as available for sale. The increase in cash plus marketable securities in the first nine months of fiscal 2009 was primarily due to $7,398,263 in net cash provided by operating activities. Accounts receivable decreased $526,681 in the first nine months of fiscal 2009 due to collection of receivables related to revenue late in the fiscal year ended March 31, 2008. Purchases of fixed assets were $400,560 for the first nine months of fiscal 2009 compared to $642,170 for the first nine months of fiscal 2008. Purchases during both periods were primarily for capital equipment to increase our production capacity and were financed with cash provided by operating activities. We currently believe our working capital is adequate for our needs at least for the next 12 months. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The primary objective of our investment activities is to preserve principal while at the same time maximizing after-tax yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in a variety of securities including government agency obligations, municipal obligations, corporate obligations, and money market funds. Short-term and long-term marketable securities are generally classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income, net of estimated tax. Marketable securities as of December 31, 2008 had remaining maturities between 11 weeks and 52 months. Our short-term and long-term marketable securities had a fair market value of $29,677,838 at December 31, 2008, representing approximately 75% of our total assets. We have not used derivative financial instruments in our investment portfolio. Item 4. Controls and Procedures. Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (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 SECs rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective. During the quarter ended December 31, 2008, 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. 12 PART II–OTHER INFORMATION
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NVE Corp. is a recognized leader in the practical commercialization of `spintronics` which many experts believe represents the next generation of microelectronics. NVE's products include magnetic sensors and couplers which revolutionize data acquisition and transfer. NVE Corp. has a market cap of $112.15 million; its shares were traded at around $21 with a P/E ratio of 12.6 and P/S ratio of 6.06. NVE Corp. had an annual average earning growth of 65.3% over the past 5 years.
Highlight of Business Operations:
Total revenue for the quarter ended December 31, 2008 (the third quarter of fiscal 2009) increased 23% to $5,884,113 compared to $4,765,525 for the quarter ended December 31, 2007 (the third quarter of fiscal 2008). The increase was due to an 8% increase in product sales and a 150% increase in contract research and development revenue. The increase in product sales was due to increased volume from the addition of new customers and increased purchase volume by existing customers. The increase in research and development revenue was due to new contracts. The increase in research and development revenue may not be representative of future trends and there can be no assurance of additional or follow-on contracts for expired or completed contracts. Gross profit margin increased to 70% of revenue for the third quarter of fiscal 2009 compared to 65% for the third quarter of fiscal 2008. The increase was due to higher margins on both product sales and research and development revenue. Research and development expense decreased 25% for the third quarter of fiscal 2009 compared to the third quarter of fiscal 2008 due to the completion of certain research and development projects and an increase in contract research and development obligations. This decrease may not be representative of future expense trends. Our research and development expense can fluctuate significantly depending on staffing, project requirements, and contract research and development obligations. Interest income increased 18% to $306,814 for the third quarter of fiscal 2009 compared to $259,865 for the third quarter of fiscal 2008. The increase was due to an increase in interest-bearing marketable securities. Other income was $800 for the third quarter of fiscal 2009 compared to $62,930 for the third quarter of fiscal 2008. Other income for the third quarter of fiscal 2008 consisted primarily of a $61,430 net gain on maturities and sales of marketable securities. The provision for income taxes was $1,192,282, or 33% of income before taxes, for the third quarter of fiscal 2009 compared to $882,867, or 34% of income before taxes, for the third quarter of fiscal 2008. The decrease in the effective tax rate may not be representative of future trends because the effective tax rate can fluctuate from quarter to quarter due to a number of factors, some of which are outside our control. The 45% increase in net income in the third quarter of fiscal 2009 compared to the prior-year quarter was primarily due to increases in total revenue and gross profit margin, and a decrease in research and development expense.10Total revenue for the nine months ended December 31, 2008 increased 14% to $16,475,689 compared to $14,479,428 for the nine months ended December 31, 2007. The increase was due to a 9% increase in product sales and a 49% increase in research and development revenue. The increase in product sales was due to increased volume from the addition of new customers and increased purchase volume by existing customers. The increase in research and development revenue was due to new contracts. Gross profit margin increased to 70% of revenue for the first nine months of fiscal 2009 compared to 66% for the first nine months of fiscal 2008. The increase was due to higher margins on both product sales and research and development revenue. Research and development expense decreased 21% for the first nine months of fiscal 2009 compared to the first nine months of fiscal 2008 due to the completion of certain research and development projects and an increase in contract research and development obligations. Interest and other income increased 6% to $842,523 for the first nine months of fiscal 2009 compared to $794,173 for the nine months ended December 31, 2007. The increase was primarily due to an increase in interest-bearing marketable securities. Other income for the nine months ended December 31, 2007 consisted primarily of a $61,430 net gain on maturities and sales of marketable securities. The provision for income taxes was $3,178,968 or 32% of income before taxes for the first nine months of fiscal 2009 compared to $2,581,272 or 34% of income before taxes for the first nine months of fiscal 2008. The decrease in the effective tax rate may not be representative of future trends because the effective tax rate can fluctuate from quarter to quarter due to a number of factors, some of which are outside our control. The 35% increase in net income in the first nine months of fiscal 2009 compared to the prior-year period was primarily due to increases in total revenue and gross profit margin, and a decrease in research and development expense.11
Seasonality Product sales for the third quarter of fiscal 2009 were less than the immediately preceding quarter, which is the same pattern as each of the three previous fiscal years. This pattern may be due in part to distributor ordering patterns or customer vacations and shutdowns late in calendar years. We do not know if this pattern will continue, and we do not know if product sales will increase in the fourth quarter of fiscal 2009 compared to the third quarter of fiscal 2009 as they have in the three previous fiscal years. Liquidity and capital resources At December 31, 2008 we had $32,115,947 in cash plus short-term and long-term marketable securities compared to $24,736,874 at March 31, 2008. Our entire portfolio of short-term and long-term marketable securities is classified as available for sale. The increase in cash plus marketable securities in the first nine months of fiscal 2009 was primarily due to $7,398,263 in net cash provided by operating activities. Accounts receivable decreased $526,681 in the first nine months of fiscal 2009 due to collection of receivables related to revenue late in the fiscal year ended March 31, 2008. Purchases of fixed assets were $400,560 for the first nine months of fiscal 2009 compared to $642,170 for the first nine months of fiscal 2008. Purchases during both periods were primarily for capital equipment to increase our production capacity and were financed with cash provided by operating activities. We currently believe our working capital is adequate for our needs at least for the next 12 months. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The primary objective of our investment activities is to preserve principal while at the same time maximizing after-tax yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and marketable securities in a variety of securities including government agency obligations, municipal obligations, corporate obligations, and money market funds. Short-term and long-term marketable securities are generally classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income, net of estimated tax. Marketable securities as of December 31, 2008 had remaining maturities between 11 weeks and 52 months. Our short-term and long-term marketable securities had a fair market value of $29,677,838 at December 31, 2008, representing approximately 75% of our total assets. We have not used derivative financial instruments in our investment portfolio. Item 4. Controls and Procedures. Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (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 SECs rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective. During the quarter ended December 31, 2008, 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. 12 PART II–OTHER INFORMATION
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