Good day, ladies and gentlemen, welcome to the NVE Corporation conference call on first quarter results. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, President and CEO, Mr. Dan Baker. Sir, you may begin.
Thank you. Good afternoon. Welcome to our conference call for the quarter ended June 30th, 2018. As always, I'm joined by Curt Reynder , our Chief Financial Officer. This call is being webcast live and being recorded. A replay will be available through our website, nve.com. After my opening comments, Curt will present a financial review of the quarter. I'll cover business items. We'll open the call to questions. We issued our press release and filed our quarterly report on Form 10-Q in the past hour following the close of market. Links to documents are available through the SEC's website, our website, and our Twitter timeline.
Comments we may make that relate to future plans, events, financial results, or performance are forward-looking statements that are subject to certain risks and uncertainties, including, among others, such factors as our reliance on several large customers for a significant percentage of revenue, risks and uncertainties related to the economic environments in the industries we serve, risks and uncertainties related to future sales and revenue, uncertainties related to the impact of federal tax reform, as well as the risk factors listed from time to time in our filings with the SEC, including our 10-K for the year ended March 31st. The company undertakes no obligation to update forward-looking statements we may make. We're pleased to report a 20% increase in net income to $0.81 per share compared to $0.68 last year. Curt will cover the details of our financial results. Curt?
Thanks, Dan. Product sales for the first quarter were $6.87 million, about the same as last year's strong first quarter. A 67% decrease in contract R&D caused total revenue to decrease 7% to $7.11 million. The decrease in R&D revenue was due to the completion of certain contracts. As we've said before, much of our R&D revenue is for custom spintronic anti-tamper sensors. Revenue can fluctuate with contract timing. Gross margin increased to 80% of revenue compared to 76% last year due to a more profitable revenue mix. Despite a 9% increase in R&D expense, total expenses increased just 1% for the first quarter due to an 18% decrease in SG&A expense. Dan will cover R&D projects. The decrease in SG&A was due to staffing changes and decreased performance-based compensation.
Interest income increased 17% for the quarter due to higher bond yields, increasing the average interest rates on our securities. The increase in interest income was despite a decrease in our marketable securities, as we use a portion of maturing securities to fund dividends. Our effective tax rate decreased to approximately 18% compared to 32% in the prior year quarter and 30% for last fiscal year. The decrease was due to the decrease in the federal tax rate with the enactment of the Tax Reform Act. We currently expect our effective tax rate to be approximately 18% for the full fiscal year. After-tax net income for the most recent quarter increased 20% to $3.95 million, or $0.81 per diluted share, compared to $3.3 million or $0.68 last year. The increase in profits was primarily due to a lower tax rate and increased gross profit margin.
Net margin for the quarter increased to a record 56% compared to 43% last year, which is among the best returns on revenue in the industry. Fixed asset purchases were a modest $38,000 in the quarter, and we currently expect fixed asset purchases for the fiscal year to be less than the $605,000 we spent last year. In addition to the dividend paid in the past quarter, we announced today that our board declared another quarterly dividend of $1 per share, payable August 31st to shareholders of record as of July 30th. I will turn it over to Dan to cover the business. Dan?
Thanks, Curt. I will cover new products, R&D, distribution, and governance highlights. In the past quarter, we launched a new series of couplers, the IL01 series, which is based on tunneling magnetoresistance or TMR, rather than giant magnetoresistance or GMR. We had begun sampling some of the TMR parts earlier in the year. These devices are lower power than our venerable GMR couplers and are designed as gateways to the Internet of Things, where they could be battery-powered for a long time. There are video demonstrations of TMR isolators on our website and YouTube channel. We made progress on our Department of Agriculture biosensor grant, and we have prototypes of all of the components, including biosensors, magnetic nanoparticles, aptamers, electronics, microfluidic manifolds, and cartridges. We are preparing for live pathogen testing this quarter.
Our goal is to demonstrate the scalability of our technology from the laboratory scale devices we did before to much higher commercially viable throughput. We continued work in the past quarter to support the Europa Clipper mission to the moon of Jupiter. The mission lets us showcase the rugged reliability of our devices. In the past quarter, an article in the journal "Nature Astronomy" reported support for the existence of water vapor plumes on Europa. Water is a key ingredient for life, and the mission will help answer the question of whether there is water on Europa. To roll out our products to a wide audience, we participated in the SENSOR+TEST measurement fair in Germany. We had new demonstrations showing the precision of our Tunneling Magnetoresistance angle sensors and their easy interface to microcontrollers in the Internet of Things. There are videos of our demonstrations on our YouTube channel.
This was also our first major show with our new distributor, Pewatron, so it was an opportunity to help train the Pewatron team on our products. Pewatron combined its activities with longtime NVE distributor IS-Line in the past quarter, and now distributes our products in Germany and Switzerland. Finally, I'll cover some governance items. Our annual meeting has been scheduled for August 2nd here in Eden Prairie. The materials, our proxy statement, letter to shareholders, and annual report on Form 10-K have been filed with the SEC and are available from the investors section of our website. There are three items on the formal agenda for the meeting. First, to elect directors, second, advisory approval of the compensation of our named executive officers, and third, to ratify the selection of our independent registered public accounting firm.
For good corporate practice, our entire board of directors stands for election every year, and we're fortunate to have an exceptionally experienced and accomplished board. This year, we provided additional information about our directors using the framework recommended by the New York City Comptroller's Office. The second annual meeting agenda item is approval of officer compensation. Our proxy includes pay ratio information as required this year. Our median employee made more than $60,000 last year, and our CEO pay ratio is a relatively modest 6.5 to one. As discussed in our proxy, we don't overpay our officers. Our officers have the same fringe benefits as all employees, and there are no executive perks or golden parachutes. In accordance with good corporate practice, our compensation committee reviewed performance relative to a peer group of companies in assessing performance.
NVE's pretax margin was nearly three times the next highest in the peer group. The last formal item of the business at the annual meeting will be to ratify the selection of our independent registered public accounting firm for the year. Grant Thornton audited our past five years' financials, and we recommend our shareholders ratify their selection. In addition to the formal meeting, we'll have new hands-on product demonstrations that highlight the precision and size of our products. And of course, we'll have cake. Now I'd like to open the call for questions. Daniel?
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star, then the number 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Again, that's star, then 1 to ask a question. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. And our first question comes from Jeff Bernstein with Cowen. Your line is now open.
Hey, guys. Can we get a quick update on the med devices area, both hearing aid market and the ICD market?
Certainly. Good afternoon, Jeff. First, the hearing aid market. As you probably know, there's been talk about an expansion of the hearing aid market, such as over-the-counter or private label hearing aids. That could help us if it expands the market and we can provide components for those hearing aids. Proponents of those markets point out that a large population could use hearing aids but don't because of the expense or dispensing inconvenience. It remains a market that we spend a significant amount of research in developing better and better products. Smaller and lower power are the keys in that market. As far as cardiac rhythm management medical devices, there have been short-term challenges in that market, the outlook seems to be improving.
Certainly, the long-term market demographics are favorable as baby boomers age and many of us are going to need these devices, and the devices are getting better and better and less and less invasive.
That's great. Just a couple quick follow-ups. You guys had completed a couple of development projects with applicability to 5G and maybe other communications, non-military applications. Anything going on in terms of trying to commercialize any of the sort of MMIC microwave isolator and circulator research?
We are working on that technology, our goal is to commercialize it in addition to the military applications that you mentioned. Things like spin-torque microwave diodes and MMIC devices have a good deal of promise for higher coupler speeds as well as communication applications, as you mentioned. We certainly see potential for the technology, and we're continuing to work on and develop it.
Any timeframe for when you think you might actually have commercial products there?
That's hard to say and hard to put a specific timeframe on it. Generally, we consider projects like that relatively long-term compared to other projects where we're working on them in relatively near-term, the next quarter or two, probably doesn't fall into that category. We continue research on those devices, and we see an inexorable need for higher and higher speed and bandwidth with all of our appetite for more information and more data.
Yep. Okay, just a quick clarification about, you have a partnership with another semiconductor manufacturer to sell your products into automotive, I guess. There have been some press releases out there about TMR sensor products for automotive from some bigger manufacturers. Would the partner's name actually, in some cases, be on the product? Might we be actually seeing your product being talked about, but with someone else's name?
That's a possibility, we really couldn't comment on the specifics, you and I talked about a specific product and a specific name, as you know, we couldn't comment on that because of nondisclosure agreements. We certainly consider ourselves the industry leaders for that type of sensor, for TMR angle sensors, and there is a lot of interest in it in automotive and other markets. Robotics and cars are two of the main target markets that we see for those devices. We're also, as you know, we're working on smart sensors of that type, so those will allow easier connection to the networks in cars or the Internet of Things or the Internet of Industrial Things.
Terrific. Thanks for taking my questions.
Thank you, Jeff.
Thank you. Ladies and gentlemen, that concludes our question and answer session for today's call. I would now like to turn the call back over to Dan Baker for any further remarks.
Well, thank you. We were pleased to report a 20% increase in net income. We look forward to seeing many of you at our annual meeting August 2nd and to speaking with you again in October to discuss second quarter results. Thank you for participating in the call.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a wonderful day