Good day, ladies and gentlemen, and welcome to the NBE 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 and instructions will follow at that time. 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, and good afternoon. Welcome to our conference call for the quarter ended June 30, 2018. As always, I'm joined by Kurt Reinders, our Chief Financial Off sir. This call is being webcast live and being recorded. A replay will be available through our website nv.com.
After my opening comments, Kirk will present a financial review of the quarter. I'll cover business items and 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 and 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 31. 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. Kurt will cover the details of our financial results. Kurt?
Thanks, Dan. Product sales for the 1st quarter were $6,870,000, about the same as last year's strong first quarter, a 67% decrease in contract R and D caused total revenue to decrease 7 percent to $7,110,000. The decrease in R and D revenue was due to the completion of certain contracts. As we've said before, much of our R and D revenue is for custom, Spintronic, anti tamper sensors and revenue can fluctuate with contract timing. Gross margin increased to 80% of revenue compared to 76% last year, due to a more total expenses increased just 1% Dan will cover R&D Projects.
The decrease in SG And A was due to staffing changes and decreased performance based compensation. Interest income increased 17% for the quarter, due to higher bond yields, increasing 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 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. For the full fiscal year.
To $3,950,000 or $0.81 per diluted share compared to $3,300,000 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 40
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 we announced today that our board declared another quarterly dividend of $1 per share, payable August 31, to shareholders of record as of July 30.
Thanks Kurt. I'll cover new products, R And D, distribution and governance highlights. In the past quarter, we launched a new series of couplers, the IL-one 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 nano particles, aptimers, electronics, microfluidic manifolds, and cartridges. We're preparing for live pathogen testing this quarter. Our goal is to demonstrate the scalability laboratory scale devices we did before to much higher commercially viable throughput.
We continued work in the 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 to move out our products a tunneling magnetoresistance angle sensors and their easy interface to microcontrollers and 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, Pevatron, So it was an opportunity to help train the Pevotron team on our products. Pevotron combined its activities with long time NV 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 the 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 controller's office. The second annual meeting agenda item is approval of officer compensation. Our proxy includes pay ratio information is required this year. Our median employee made more than $60,000 last year and our CEO pay ratio is a relatively modest 6.5: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, and these pretax margin was nearly 3 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 5 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. 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. So, first, the hearing aid market, so 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. And it remains a market that we spent a significant amount of research and 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, but the outlook seems to be improving. And 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 of follow ups. You guys had completed a couple of development projects with applicability to to 5G and maybe other communications non military applications. Anything going on in terms of trying to commercialize any of the sort of the mimic microwave isolator and circulator research?
We are working on that technology. And our goal is to commercialize it in addition to the military applications that you mentioned, things like spin torque microwave diodes, and Mimic devices have a good deal of promise at for higher coupler speeds as well as communication applications as you mentioned. So we certainly see potential for the technology and we're continuing to work on development.
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 products projects like that relatively long term compared to other projects where we're working on them and relatively near term in the next quarter or 2 probably doesn't fall into that category, but we continue research on those devices. And we see an inexorable need for higher and higher speed and bandwidth with with all of our appetite for more information and more data.
Yes. Okay. And then just a quick clarification about you have a partnership, with another semiconductor manufacturer sell your products into automotive, I guess. There have been some press releases out there of about TMR sensor products for automotive from some bigger, manufacturers, would the partner's name actually in some cases beyond the product? So might we be actually seeing your product being talked about, but with someone else's name?
Yes, that's a possibility. And We really couldn't comment on the specifics and we talked about, you and I talked about a specific product and specific name. And as you know, we couldn't comment on that because of non disclosure agreements, but we certainly consider ourselves the industry leaders for that type of sensor for TMR angle sense and there is a lot of interest in it in automotive and other markets, robotics and cars are 2 of the main target markets that we see for those devices. And we're also, as you know, we're working on SmartSense of that type. So those will allow easier connection to the networks and cars or the internet of things or the internet of industrial things.
Terrific. Thanks for taking my questions.
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 2nd 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.