HAUPPAUGE, N.Y., July 10, 2017 /PRNewswire/ – VOXX International Corporation (NASDAQ: VOXX), today announced financial results for its Fiscal 2018 first quarter ended May 31, 2017.
Commenting on the Company’s first quarter performance, Pat Lavelle, President and CEO stated, “Led by a 17.4% increase in Premium Audio sales, we posted modest top-line growth. However, gross margins came in lower in this segment, as we had several promotions to clear inventory with a number of new product launches planned. We expect margins to improve in the second quarter and return to normal throughout the year. New products and partnerships within our Automotive and Consumer Accessories segments, new products coming to market in Premium Audio, and the launch of our new EVO-based rear-seat infotainment solution, scheduled for the second and third quarters, should improve top-line outlook.”
Lavelle continued, “The news of our pending sale of Hirschmann dominated the quarters’ activity. While Hirschmann has been a great contributor to our business and has industry-leading technology, we believe the opportunity to sell at the proposed value is a benefit for our shareholders. Upon completion, we will have a clean balance sheet, lower working capital needs and we expect, greater cash flow. VOXX will continue to operate in the Automotive segment, with significant OEM production capabilities, a number of contracts in place, and an expanded assortment of aftermarket products. This transaction will give us a greater concentration of business in North America and enable us to leverage synergies within our footprint, especially as we seek complementary acquisitions, to drive better returns.”
First Quarter Performance (for the periods ended May 31, 2017 and May 31, 2016)
Net sales for the Fiscal 2018 first quarter were $159.1 million, an increase of $3.6 million or 2.3% as compared to $155.5 million reported in the comparable year-ago period.
- Automotive segment sales were $81.3 million as compared to $81.4 million. Automotive segment sales were positively influenced by an increase in domestic OEM sales, new sales related to the Company’s acquisition of Rosen Electronics, higher aftermarket sales for overhead and headrest DVD systems and higher tuner and antenna sales internationally. Offsetting these increases were lower sales of satellite radio products, and lower sales related to its international OEM manufacturing line.
- Premium Audio segment sales were $37.7 million as compared to $32.1 million, an increase of $5.6 million or 17.4%. Driving the year-over-year increase were higher sales of HD wireless speakers, wireless sound bars, multi-room streaming audio systems, and home entertainment speakers, partially offset by lower sales of commercial speakers.
- Consumer Accessories segment sales were $39.9 million as compared to $41.7 million, a decline of $1.8 million or 4.2%. The Consumer Accessories segment experienced higher international sales, primarily due to digital broadcasting platform upgrades in Europe, as well as higher sales of its Project Nursery product line and wireless speakers. Offsetting these increases were lower sales of reception and power products, action cameras and other product lines.
The gross margin for the Fiscal 2018 first quarter came in at 27.5% as compared to 29.7% for the same period last year, a decrease of 220 basis points.
- Automotive segment margins of 29.4% declined by 60 basis points. The Company experienced higher margins related to an increase in sales of higher margin products within its OEM manufacturing lines and decreased sales of lower margin fulfillment products, such as satellite radio, offset by lower margins associated with tuner and antenna products due to price reductions on certain products.
- Premium Audio segment margins of 27.0% declined by 760 basis points. This was primarily a result of heavy promotions of older sound bar models that the Company is phasing out to make way for a new line of products, many of which will be introduced this Fiscal year, as well as lower margins associated with some of the newer wireless sound bars and speakers. As an offset, the segment experienced an increase in sales of certain higher margin products, such as home entertainment speakers.
- Consumer Accessories segment margins of 23.8% declined by 90 basis points. The year-over-year decline was primarily related to product mix. During the comparable quarters, lower sales of reception and power products negatively impacted gross margins, whereas higher sales of Project Nursery product lines, lower fulfilment sales and an improvement in the international product mix were offsetting factors.
Operating expenses for the Fiscal 2018 first quarter were $51.6 million as compared to $53.2 million in the Fiscal 2017 first quarter, a reduction of $1.6 million or 3.1%. Selling, general and administrative expenses increased by $1.2 million, primarily as a result of higher advertising expenses, higher expenses associated with system upgrades and a modest increase in salary and benefit expenses, partially offset by lower occupancy costs and professional fees. This was offset by a $2.9 millionreduction in engineering and technical support expenses, which was primarily a result of lower research and development expenses, most of which were driven by timing associated with customer reimbursements for development services in both the Fiscal 2018 and Fiscal 2017 first quarters. Additionally, the Company incurred lower research and development expenses in other groups as certain products are nearing their launch dates.
The Company reported an operating loss of $7.8 million in its Fiscal 2018 first quarter as compared to an operating loss of $7.1 million in the comparable year-ago period. Net loss attributable to VOXX International Corporation was $3.0 million or a loss per basic and diluted share of $0.13, as compared to a net loss attributable to VOXX International Corporation of $4.3 million or a loss per basic and diluted share of $0.18 in the Fiscal 2017 first quarter.
The Company reported negative Earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $1.3 million and negative Adjusted EBITDA of $1.1 millionfor the Fiscal 2018 first quarter. This compares to EBITDA of $0.1 million and Adjusted EBITDA of $0.3 million for the comparable year-ago period.
On June 25, 2017, the Company entered into a definitive agreement to sell Hirschmann Car Communication GmbH and its worldwide subsidiaries (“Hirschmann”) to a subsidiary of TE Connectivity Ltd. (NYSE: TEL). Under the terms of the Stock Purchase Agreement, TE Connectivity (“TE”) will acquire Hirschmann for an enterprise value of 148.5 million Euro. Based on the Euro to U.S. dollar conversion (1 Euro = $1.12), this equates to approximately $166.0 million. The final purchase price is subject to further net cash and working capital adjustments. VOXX International (Germany) GmbH is the selling entity in this transaction. This transaction is subject to regulatory approval and customary closing conditions and the expected close, subject to approvals, is anticipated to be on August 31, 2017.