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Item 2. Management’s Discussion and Analysis

2024-01-17 compared with 2023-10-18 · 61 added, 108 removed, 27 unchanged (86% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking

of the statements made in this Report or in the documents incorporated by reference in this Report and in other materials filed

or to be filed by us with the Securities and Exchange Commission (“SEC”) as well as information included in verbal

or written statements made by us constitute forward-looking statements within the meaning of the Private Securities Litigation

Reform Act of 1995.

Forward-looking statements

Some of the statements made in this Report or in the documents incorporated by reference in this Report and in other materials filed or to be filed by us with the Securities and Exchange Commission (“SEC”) as well as information included in verbal or written statements made by us constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are subject to the safe harbor provisions of the reform act.

Forward-looking statements may

be identified by the use of terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue,

or the negatives of these terms or other variations on these words or comparable terminology.

To the extent that this Report contains

forward-looking statements regarding the financial condition, operating results, business prospects, or any other aspect of NVE,

you should be aware that our actual financial condition, operating results, and business performance may differ materially from

that projected or estimated by us in the forward-looking statements.

We have attempted to identify, in context, some of the factors

that we currently believe may cause actual future experience and results to differ from their current expectations.

These differences

may be caused by a variety of factors, including but not limited to risks related to our reliance on several large customers for

a significant percentage of revenue, our dependence on critical suppliers and packaging vendors, uncertainties related to the

economic environments in the industries we serve, uncertainties related to future sales and revenues, risks of credit

losses, risks and uncertainties related to future stock repurchases and dividend payments, and other specific risks that

may be alluded to in this Report or in the documents incorporated by reference in this Report.

information regarding our risks and uncertainties is contained in Part I, Item 1A “Risk Factors” of our Annual Report

on Form 10-K for the year ended March 31, 2023, as updated in Item 1A of this report.

Corporation referred to as NVE, we, us, or our, develops and sells devices that use spintronics, a nanotechnology that relies

on electron spin rather than electron charge to acquire, store, and transmit information.

We manufacture high-performance spintronic

products including sensors and couplers that are used to acquire and transmit data.

accounting policies

description of our critical accounting policies is provided in Management’s Discussion and Analysis of Financial Condition

and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2023.

As of September 30, 2023,

our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax

assets estimation.

ended September 30, 2023, compared to quarter ended September 30, 2022

table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:

Forward-looking statements may be identified by the use of terminology such as may, will, expect, anticipate, intend, believe, estimate, should, or continue, or the negatives of these terms or other variations on these words or comparable terminology.

To the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects, or any other aspect of NVE, you should be aware that our actual financial condition, operating results, and business performance may differ materially from that projected or estimated by us in the forward-looking statements.

We have attempted to identify, in context, some of the factors that we currently believe may cause actual future experience and results to differ from their current expectations.

These differences may be caused by a variety of factors, including but not limited to risks related to our reliance on several large customers for a significant percentage of revenue, our dependence on critical suppliers and packaging vendors, uncertainties related to the economic environments in the industries we serve, uncertainties related to future sales and revenues, risks of credit losses, risks and uncertainties related to future stock repurchases and dividend payments, and other specific risks that may be alluded to in this Report or in the documents incorporated by reference in this Report.

Further information regarding our risks and uncertainties is contained in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, 2023, as updated in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and Part II, Item 1A of this report.

NVE Corporation referred to as NVE, we, us, or our, develops and sells devices that use spintronics, a nanotechnology that relies on electron spin rather than electron charge to acquire, store, and transmit information.

We manufacture high-performance spintronic products including sensors and couplers that are used to acquire and transmit data.

Critical accounting policies

A description of our critical accounting policies is provided in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended March 31, 2023.

As of December 31, 2023, our critical accounting policies and estimates continued to include investment valuation, inventory valuation, and deferred tax assets estimation.

Quarter ended December 31, 2023, compared to quarter ended December 31, 2022

The table shown below summarizes the percentage of revenue and quarter-to-quarter changes for various items:

Percentage of Revenue

Quarter Ended September 30,

Quarter Ended December 31,

Product sales

4 unchanged sentences

Selling, general, and administrative

Provision for credit losses

Total expenses

3 unchanged sentences

Provision for income taxes

revenue for the quarter ended September 30, 2023 (the second quarter of fiscal 2024) decreased 33% compared to the quarter

ended September 30, 2022 (the second quarter of fiscal 2023).

The decrease was due to a 32% decrease in product sales and

a 92% decrease in contract research and development revenue.

The decrease in product sales was primarily due to decreased purchases

by existing customers, particularly in the defense industry, and a semiconductor industry downturn.

The decrease in contract research

and development revenue was due to the completion of most contracts.

expenses decreased 17% for the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023 primarily due to a

$202,926 credit loss provision reversal, partially offset by a 2% increase in research and development expense.

The change in

the provision for credit losses was due to a reassessment of our allowance for credit losses based on payments and debtor customer

information as of September 30, 2023.

income for the second quarter of fiscal 2024 increased 46% due to higher yields on securities purchased after September 30,

effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 8% for the second

quarter of fiscal 2024 compared to 19% for the second quarter of fiscal 2023.

The decrease was due to the impact of the $202,926

credit loss provision reversal and changes in the amounts and timing of tax deductions and credits.

Our effective tax rate can

vary from quarter to quarter.

Our effective tax rate in subsequent quarters will likely be higher than the effective tax rate

in the quarter ended September 30, 2023.

22% decrease in net income for the second quarter of fiscal 2024 compared to the prior-year quarter was primarily due to decreased

revenue, partially offset by decreased expenses, increased interest income, and a lower effective tax rate.

months ended September 30, 2023, compared to six months ended September 30, 2022

table shown below summarizes the percentage of revenue and period-to-period changes for various items:

Total revenue for the quarter ended December 31, 2023 (the third quarter of fiscal 2024) decreased 9% compared to the quarter ended December 31, 2022 (the third quarter of fiscal 2023).

The decrease was due to a 12% decrease in product sales partially offset by a 94% increase in contract research and development revenue.

The decrease in product sales was primarily due to decreased purchases by existing customers, particularly in the defense industry, and a semiconductor industry downturn.

The increase in contract research and development revenue was due to new customer-funded research and development contracts.

Total expenses decreased 16% for the third quarter of fiscal 2024 compared to the third quarter of fiscal 2023 primarily due to a 23% decrease in research and development expense and a 4% decrease in selling, general, and administrative expense.

The decrease in research and development expense was primarily due to the redeployment of resources to customer-funded research and development projects.

The decrease in selling, general, and administrative expense was primarily due to decreased performance-based compensation accruals.

Interest income for the third quarter of fiscal 2024 increased 21% due to increased yields on securities purchased after December 31, 2022.

Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 16% for the third quarter of fiscal 2024 compared to 19% for the third quarter of fiscal 2023.

The decrease was primarily due to an increase in certain tax deductions.

Our effective tax rate can vary from quarter to quarter.

Our effective tax rate in future quarters may be higher than the effective tax rate in the quarter ended December 31, 2023.

The 1% decrease in net income for the third quarter of fiscal 2024 compared to the prior-year quarter was primarily due to decreased revenue, which was nearly offset by decreased expenses, increased interest income, and a lower effective tax rate.

Nine months ended December 31, 2023, compared to nine months ended December 31, 2022

The table shown below summarizes the percentage of revenue and period-to-period changes for various items:

Percentage of Revenue

Six Months Ended Sept.

Nine Months Ended Dec.

Product sales

10 unchanged sentences

Provision for income taxes

revenue for the six months ended September 30, 2023, decreased 12% compared to the six months ended September 30, 2022.

The decrease was due to a 10% decrease in product sales and a 68% decrease in contract research and development revenue.

in product sales was primarily due to decreased purchases by existing customers, particularly in the defense industry, and a semiconductor

industry downturn.

The decrease in contract research and development revenue was due to the completion of most contracts.

expenses increased 11% for the first six months of fiscal 2024 compared to the first six months of fiscal 2023 due to an 8% increase

in research and development expense and a 13% increase in selling, general, and administrative expense.

The increases in research

and development and selling, general, and administrative expenses were primarily due to increased staffing and increased employee

compensation expenses.

income for the first six months of fiscal 2024 increased 50% due to higher yields on securities purchased after September 30,

effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 17% for the first

six months of fiscal 2024 from 19% for the first six months of fiscal 2023.

The decrease was due to changes in the amount and

timing of tax deductions and tax credits.

11% decrease in net income for the first six months of fiscal 2024 compared to the prior-year period was primarily due to decreased

revenue and increased expenses, partially offset by increased interest income and a lower effective tax rate.

and Capital Resources

and cash equivalents were $6,953,448 as of September 30, 2023, compared to $1,669,896 as of March 31, 2023.

The $5,283,552

increase in cash and cash equivalents during the first six months of fiscal 2024 was due to $10,384,818 of cash provided by operating

activities and $4,445,434 of cash provided by investing activities, partially offset by $9,546,700 of cash used in financing activities.

cash provided by operating activities related to product sales was our primary source of working capital for the current and prior-year

Net cash provided by operating activities was $10,384,818 for the first six months of fiscal 2024 compared to $9,351,238

for the first six months of fiscal 2023.

receivable decreased $3,598,068 during the first six months of fiscal 2024 due to the timing of customer payments and decreased

increased $550,756 during the first six months of fiscal 2024 primarily due to our decision to increase inventories to mitigate

longer vendor lead times and to support growth.

payable and accrued expenses decreased $953,886 during the first six months of fiscal 2024 primarily due to decreases in income

tax payable, long-term operating lease, and a decrease in accruals for performance-based compensation.

provided by investing activities during the first six months of fiscal 2024 consisted of $8,400,000 in proceeds from maturities

of marketable securities, partially offset by $16,731 of fixed assets purchases and $3,937,835 of marketable securities purchases.

Purchases of fixed assets can vary from period to period depending on our needs and equipment purchasing opportunities.

Such purchases

could increase significantly in future periods.

used in financing activities during the six months ended September 30, 2023, consisted of $9,664,227 of cash dividends paid

to shareholders, partially offset by $117,527 in proceeds from the exercise of stock options.

addition to cash dividends to shareholders paid in the second quarter of fiscal 2024, on October 18, 2023, we announced that

our Board of Directors had declared a cash dividend of $1.00 per share of Common Stock, or $4,833,401, to be paid November 30,

2023, to shareholders of record as of the close of business October 30, 2023.

plan to fund dividends through cash provided by operating activities and proceeds from maturities of marketable securities.

future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable

security balances, estimates of future cash requirements, and other factors the Board may deem relevant.

Furthermore, dividends

may be modified or discontinued at any time without notice.

Total revenue for the nine months ended December 31, 2023, decreased 11% compared to the nine months ended December 31, 2022.

The decrease was due to an 11% decrease in product sales and a 20% decrease in contract research and development revenue.

The decrease in product sales was primarily due to decreased purchases by existing customers, particularly in the defense industry, and a semiconductor industry downturn.

The decrease in contract research and development revenue was due to the completion of certain contracts.

Total expenses increased 1% for the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023 due to a 7% increase in selling, general, and administrative expense partially offset by a 3% decrease in research and development expense.

The increase in selling, general, and administrative expenses was primarily due to increased staffing and increased employee compensation expenses.

The decrease in research and development expense was due to variations in staffing.

Interest income for the first nine months of fiscal 2024 increased 38% due to higher yields on securities purchased after December 31, 2022.

Our effective tax rate, which is the provision for income taxes as a percentage of income before taxes, decreased to 16% for the first nine months of fiscal 2024 from 19% for the first nine months of fiscal 2023.

The decrease was primarily due to an increase in certain tax deductions.

The 8% decrease in net income for the first nine months of fiscal 2024 compared to the prior-year period was primarily due to decreased revenue and increased expenses, partially offset by increased interest income and a lower effective tax rate.

Liquidity and Capital Resources

Cash and cash equivalents were $4,684,910 as of December 31, 2023, compared to $1,669,896 as of March 31, 2023.

The $3,015,014 increase in cash and cash equivalents during the first nine months of fiscal 2024 was due to $15,115,031 of cash provided by operating activities and $2,280,084 of cash provided by investing activities, partially offset by $14,380,101 of cash used in financing activities.

Operating Activities

Net cash provided by operating activities related to product sales was our primary source of working capital for the current and prior-year quarters.

Net cash provided by operating activities was $15,115,031 for the first nine months of fiscal 2024 compared to $14,748,911 for the first nine months of fiscal 2023.

Accounts receivable decreased by $4,268,102 during the first nine months of fiscal 2024 due to the timing of customer payments and decreased revenue.

Inventories increased by $932,801 during the first nine months of fiscal 2024 primarily due to our decision to increase inventories to mitigate longer vendor lead times and to support growth.

Accounts payable and accrued expenses decreased $1,147,278 during the first nine months of fiscal 2024 primarily due to decreases in income tax payable, long-term operating lease liability, and accruals for performance-based compensation.

Investing Activities

Cash provided by investing activities during the first nine months of fiscal 2024 consisted of $8,400,000 in proceeds from maturities of marketable securities, partially offset by $16,731 of fixed assets purchases and $6,103,185 of marketable securities purchases.

Purchases of fixed assets can vary from period to period depending on our needs, strategic goals, and equipment purchasing opportunities.

Such purchases are likely to increase significantly in future periods.

Financing Activities

Cash used in financing activities during the nine months ended December 31, 2023, consisted of $14,497,628 of cash dividends paid to shareholders, partially offset by $117,527 in proceeds from the exercise of stock options.

In addition to cash dividends to shareholders paid in the third quarter of fiscal 2024, on January 17, 2024, we announced that our Board of Directors had declared a cash dividend of $1.00 per share of Common Stock, or $4,833,401 based on shares outstanding as of January 12, 2024, to be paid February 28, 2024, to shareholders of record as of the close of business January 29, 2024.

We plan to fund dividends through cash provided by operating activities and proceeds from maturities of marketable securities.

All future dividends will be subject to Board approval and subject to the company’s results of operations, cash and marketable security balances, estimates of future cash requirements, and other factors the Board may deem relevant.

Furthermore, dividends may be modified or discontinued at any time without notice.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis