VOXX International Corporation Reports its Fiscal 2024 Third Quarter Financial Results
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Insights
The reported financial results of VOXX International Corporation indicate a mixed performance with potential implications for investor sentiment. The decrease in net sales by 5.4% year-over-year for the third quarter, coupled with a 9.2% drop over the nine-month period, reflects the challenges faced in the Automotive and Consumer Electronics segments. Notably, the Automotive Electronics segment experienced a significant decline of 26.0% in Q3 and 12.5% over nine months, primarily due to the UAW strike and lower demand for OEM and aftermarket products.
Conversely, the Consumer Electronics segment showed resilience with a 6.2% increase in Q3 sales, driven by premium audio products. This segment's performance, particularly in home theater and wireless speakers, may signal a strategic shift or a favorable consumer response to product innovation. However, the overall decrease in net sales suggests that the company's growth initiatives may not be fully compensating for broader market headwinds.
VOXX's focus on cost containment and operational efficiency, as evidenced by improved gross margins and reduced operating expenses, is a positive indicator of management's responsiveness to external pressures. The gross margin increase across both segments suggests successful efforts in manufacturing relocation and vendor negotiations, which could enhance profitability in the long term.
The increase in total debt and the substantial settlement payment to Seaguard raises concerns about the company's liquidity and financial leverage. Investors might scrutinize the balance sheet to assess the sustainability of the company's financial position, especially in the context of a slowing economy.
VOXX International Corporation's performance reflects broader trends in the automotive and consumer electronics industries. The retail softness and global economic challenges cited by the company are consistent with consumer spending shifts and supply chain disruptions affecting many sectors. The decline in OEM and aftermarket sales in the Automotive Electronics segment is indicative of the volatility in the automotive industry, exacerbated by labor disputes such as the UAW strike.
The positive performance in the Premium Audio sub-segment of Consumer Electronics could suggest a market opportunity or a niche where VOXX is gaining traction. However, the decline in other consumer electronics product sales points to a potential need for strategic realignment or innovation to stimulate growth.
The Biometrics segment shows a sharp decline in gross margin, which may signal operational inefficiencies or market disinterest. Given the small scale of this segment, its impact on the overall business is limited, but it could be an area for reevaluation by the company.
Overall, VOXX's situation illustrates the importance of agility in product offerings and operational efficiency in the face of shifting market demands. The company's ability to navigate these changes will be critical for its long-term success.
The financial results of VOXX International Corporation must be contextualized within the current economic climate. The reported slowdown and proactive measures to mitigate risk reflect the broader economic uncertainty that affects consumer discretionary spending. The decrease in net sales and the impact of the UAW strike are microcosms of larger economic trends, including labor market tensions and reduced consumer confidence.
The company's efforts to improve gross margins and reduce operating expenses are indicative of a strategic response to these economic headwinds. Such improvements may help buffer the company against further economic downturns. However, the increased debt levels and significant settlement payment could strain the company's financial flexibility, especially if economic conditions worsen.
VOXX's outlook for improvement in 2024 and Fiscal 2025 suggests a cautiously optimistic view that aligns with some economic forecasts predicting a recovery. However, this outlook is contingent on external factors such as consumer spending patterns and the resolution of labor disputes.
Investors and stakeholders should monitor the company's performance in relation to economic indicators and industry trends to gauge the potential for recovery and growth.
Commenting on the Company's results and business outlook, Pat Lavelle, Chief Executive Officer stated, "For the third quarter comparisons, our gross margins grew by 90 basis points and our operating expenses improved by over
Fiscal 2024 and Fiscal 2023 Third Quarter Comparisons
Net sales in the Fiscal 2024 third quarter ended November 30, 2023, were
- Automotive Electronics segment net sales in the Fiscal 2024 third quarter were
$35.9 million $48.6 million $12.6 million 26.0% . For the same comparable periods, OEM product sales were$10.0 million $19.1 million $25.9 million $29.4 million
- Consumer Electronics segment net sales in the Fiscal 2024 third quarter were
$100.0 million $94.1 million $5.9 million 6.2% . For the same comparable periods, Premium Audio product sales were$79.9 million $73.5 million $20.1 million $20.6 million
- Biometrics segment net sales in the Fiscal 2024 third quarter were
$0.1 million $0.3 million
The gross margin in the Fiscal 2024 third quarter was
When comparing the Fiscal 2024 and Fiscal 2023 third quarters, the Company reported:
- Automotive Electronics segment gross margin of
25.8% as compared to24.6% . The year-over-year improvement of 120 basis points was primarily related to better margins as a result of relocated manufacturing operations, ongoing cost savings and greater efficiencies. The improvement was also related to product mix given less volume of lower-margin OEM rear-seat entertainment products. On a sequential basis when compared to the Fiscal 2024 second quarter, Automotive Electronics segment gross margin improved by 150 basis points.
- Consumer Electronics segment gross margin of
27.1% as compared to26.6% . The year-over-year improvement of 50 basis points was primarily driven by higher sales of premium home speakers, improved vendor pricing, and fewer close-out and promotional sales for the comparable periods. Lower sales of Onkyo and Pioneer products and challenging market conditions continued to impact gross margins, despite the year-over-year segment improvement. On a sequential basis when compared to the Fiscal 2024 second quarter, Consumer Electronics segment gross margin improved by 160 basis points.
- Biometrics segment gross margin of
1.1% as compared to22.7% in the comparable year-ago period.
Total operating expenses in the Fiscal 2024 third quarter were
When comparing the Fiscal 2024 and Fiscal 2023 third quarters, the Company reported:
- Selling expenses of
$11.0 million $11.4 million $0.4 million 3.9% , was driven by lower employee salaries, related benefits and payroll taxes, as well as lower advertising and website expenses. This was partially offset by higher advertising expenses related to the Company's new RCA hearing aid products.
- General and administrative ("G&A") expenses of
$15.9 million $15.9 - Engineering and technical support expenses of
$7.1 million $7.2 million $0.1 million 1.5% , was primarily due to a decline in labor expenses resulting from a reduction in the use of outside labor, lower payroll tax expense, offset by an increase in research and development expenses related to the timing of projects. - Restructuring expenses, which primarily represented costs related to the relocation of certain OEM production operations from
Florida toMexico , decreased by$0.2 million
The Company reported operating income of
Total other expense, net, in the Fiscal 2024 third quarter increased by
Net income attributable to VOXX International Corporation in the Fiscal 2024 third quarter was
The Company reported Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") in the Fiscal 2024 third quarter of
Fiscal 2024 and Fiscal 2023 Nine-month Comparisons
Net sales in the Fiscal 2024 nine-month period ended November 30, 2023, were
- Automotive Electronics segment net sales in the Fiscal 2024 nine-month period were
$109.7 million $125.4 million $15.6 million 12.5% . For the same comparable periods, OEM product sales were$46.5 million $51.1 million $63.2 million $74.3 million
- Consumer Electronics segment net sales in the Fiscal 2024 nine-month period were
$251.4 million $271.1 million $19.7 million 7.3% . For the same comparable periods, Premium Audio product sales were$180.7 million $212.6 million $70.7 million $58.4 million
- Biometrics segment net sales in the Fiscal 2024 nine-month period were
$0.4 million $0.7 million
The gross margin in the Fiscal 2024 nine-month period was
- Automotive Electronics segment gross margin of
23.6% as compared to23.8% . The 20 basis point decline in gross margin was primarily related to product mix and lower sales of higher margin products such as security and rear-seat entertainment, partially offset by the positive impact from transitioning certain manufacturing toMexico .
- Consumer Electronics segment gross margin of
26.2% as compared to25.5% . The year-over-year improvement of 70 basis points was primarily driven by higher sales of wireless accessory speakers domestically and the Company's new balcony solar products internationally, partially offset by lower sales volumes of Onkyo and Pioneer products, among other factors.
- Biometrics segment gross margin of
26.4% as compared to31.3% in the comparable year-ago period.
Total operating expenses in the Fiscal 2024 nine-month period were
- Selling expenses of
$32.2 million $35.6 million $3.4 million 9.6% , was primarily driven by lower sales employee salaries and related benefits and payroll taxes, as well as due to Employee Retention Credits which have offset payroll tax expenses. Additionally, commission expenses and advertising and website expenses decreased, partially offset by higher advertising related to RCA hearing aids.
- General and administrative expenses of
$52.6 million $53.9 million $1.3 million 2.4% , was primarily due to lower depreciation and amortization expense, office expense, legal and professional fees, as well as taxes, licensing fees and payroll taxes. This was partially offset by an increase in bad debt expense due to releases in the prior year that did not repeat, as well as higher travel expenses.
- Engineering and technical support expenses of
$23.3 million $23.8 million $0.6 million 2.5% , was primarily due to lower research and development expenses and ongoing cost cutting measures. There was also a decline in payroll expense which was partially offset by higher travel expense. - Acquisition costs of
$0.1 million - Restructuring expenses of
$2.2 million $1.6 million Florida toMexico .
The Company reported an operating loss in the Fiscal 2024 nine-month period of
Total other expense, net, in the Fiscal 2024 nine-month period was
Net loss attributable to VOXX International Corporation in the Fiscal 2024 nine-month period was
The Company reported an EBITDA loss in the Fiscal 2024 nine-month period of
Balance Sheet Update
As of November 30, 2023, the Company had cash and cash equivalents of
Seaguard Settlement (Subsequent Event)
On December 22, 2023, the Company and Seaguard entered into a Settlement Agreement and Mutual Release, with an effective date of January 10, 2024, in which the Company agreed to pay Seaguard
Conference Call Information
The Company will be hosting its conference call and webcast on Wednesday, January 10, 2024 at 10:00 a.m. ET.
- To attend the webcast: https://edge.media-server.com/mmc/p/63gsho99
- To access by phone: https://register.vevent.com/register/BI1d071c6695bf4c8986ac36ee001b1125
Participants are requested to register a day in advance or at a minimum 15 minutes before the start of the call. Those wishing to ask questions following management's remarks should use the dial-in numbers provided.
- A replay of the webcast will be available approximately two hours after the call and archived under "Events and Presentations" in the Investor Relations section of the Company's website at https://investors.voxxintl.com/events-and-presentations
Non-GAAP Measures
EBITDA and Adjusted EBITDA are not financial measures recognized by GAAP. EBITDA represents net loss attributable to VOXX International Corporation and Subsidiaries, computed in accordance with GAAP, before interest expense and bank charges, taxes, and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted for stock-based compensation expense, gains on the sale of certain assets, foreign currency losses (gains), restructuring expenses, acquisition costs, certain non-routine legal fees, and awards. Depreciation, amortization, stock-based compensation, and foreign currency losses (gains) are non-cash items.
We present EBITDA and Adjusted EBITDA in this release because we consider them to be useful and appropriate supplemental measures of our performance. Adjusted EBITDA helps us to evaluate our performance without the effects of certain GAAP calculations that may not have a direct cash impact on our current operating performance. In addition, the exclusion of certain costs or gains relating to certain events allows for a more meaningful comparison of our results from period-to-period. These non-GAAP measures, as we define them, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. EBITDA and Adjusted EBITDA should not be assessed in isolation from, are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP.
About VOXX International Corporation
VOXX International Corporation (NASDAQ: VOXX) has grown into a leader in Automotive Electronics and Consumer Electronics, with emerging Biometrics technology to capitalize on the increased need for advanced security. Over the past several decades, with a portfolio of approximately 35 trusted brands, VOXX has built market-leading positions in in-vehicle entertainment, automotive security, reception products, a number of premium audio market segments, and more. VOXX is a global company, with an extensive distribution network that includes power retailers, mass merchandisers, 12-volt specialists and many of the world's leading automotive manufacturers. For additional information, please visit our website at www.voxxintl.com
Safe Harbor Statement
Except for historical information contained herein, statements made in this release constitute forward-looking statements and thus may involve certain risks and uncertainties. All forward-looking statements made in this release are based on currently available information and the Company assumes no responsibility to update any such forward-looking statements. The following factors, among others, may cause actual results to differ materially from the results suggested in the forward-looking statements. The factors include, but are not limited to the risk factors described in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2023, and other filings made by the Company from time to time with the SEC, as such descriptions may be updated or amended in any future reports we file with the SEC. The factors described in such SEC filings include, without limitation: impacts related to the COVID-19 pandemic, global supply shortages and logistics costs and delays; global economic trends; cybersecurity risks; risks that may result from changes in the Company's business operations; operational execution by our businesses; changes in law, regulation or policy that may affect our businesses; our ability to increase margins through implementation of operational improvements, restructuring and other cost reduction methods; our ability to keep pace with technological advances; significant competition in the automotive electronics, consumer electronics and biometrics businesses; our relationships with key suppliers and customers; quality and consumer acceptance of newly introduced products; market volatility; non-availability of product; excess inventory; price and product competition; new product introductions; foreign currency fluctuations; and restrictive debt covenants. Many of the foregoing risks and uncertainties are, and will be, exacerbated by the War in the Ukraine and any worsening of the global business and economic environment as a result.
Investor Relations Contact:
Glenn Wiener, GW Communications (for VOXX)
Email: gwiener@GWCco.com
Tables to Follow
VOXX International Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share data) | ||||||||
November 30, | February 28, | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 10,393 | $ | 6,134 | ||||
Accounts receivable, net of allowances of | 91,631 | 82,753 | ||||||
Inventory | 146,244 | 175,129 | ||||||
Receivables from vendors | 1,668 | 112 | ||||||
Due from GalvanEyes LLC | 2,547 | — | ||||||
Prepaid expenses and other current assets | 20,259 | 19,817 | ||||||
Income tax receivable | 1,354 | 1,076 | ||||||
Total current assets | 274,096 | 285,021 | ||||||
Investment securities | 909 | 1,053 | ||||||
Equity investment | 21,523 | 22,018 | ||||||
Property, plant and equipment, net | 45,857 | 47,044 | ||||||
Operating lease, right of use assets | 3,082 | 3,632 | ||||||
Goodwill | 64,122 | 65,308 | ||||||
Intangible assets, net | 84,760 | 90,437 | ||||||
Deferred income tax assets | 1,209 | 1,218 | ||||||
Other assets | 2,831 | 3,720 | ||||||
Total assets | $ | 498,389 | $ | 519,451 | ||||
Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 35,818 | $ | 35,099 | ||||
Accrued expenses and other current liabilities | 41,073 | 41,856 | ||||||
Income taxes payable | 170 | 2,276 | ||||||
Accrued sales incentives | 24,036 | 21,778 | ||||||
Contingent consideration, current | — | 4,500 | ||||||
Final arbitration award payable | 46,738 | 43,388 | ||||||
Contract liabilities, current | 3,341 | 3,990 | ||||||
Current portion of long-term debt | 500 | 500 | ||||||
Total current liabilities | 151,676 | 153,387 | ||||||
Long-term debt, net of debt issuance costs | 47,088 | 37,513 | ||||||
Finance lease liabilities, less current portion | 319 | 63 | ||||||
Operating lease liabilities, less current portion | 2,192 | 2,509 | ||||||
Deferred compensation | 909 | 1,053 | ||||||
Deferred income tax liabilities | 4,777 | 4,855 | ||||||
Other tax liabilities | 768 | 966 | ||||||
Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC | 9,817 | 7,317 | ||||||
Other long-term liabilities | 2,120 | 2,947 | ||||||
Total liabilities | 219,666 | 210,610 | ||||||
Commitments and contingencies | ||||||||
Redeemable equity | 4,087 | 4,018 | ||||||
Redeemable non-controlling interest | (2,691) | 232 | ||||||
Stockholders' equity: | ||||||||
Preferred stock: | ||||||||
No shares issued or outstanding | — | — | ||||||
Common stock: | ||||||||
Class A, | 246 | 246 | ||||||
Class B Convertible, | 22 | 22 | ||||||
Paid-in capital | 297,220 | 296,577 | ||||||
Retained earnings | 79,232 | 97,997 | ||||||
Accumulated other comprehensive loss | (17,405) | (18,680) | ||||||
Less: Treasury stock, at cost, 4,226,175 and 3,370,657 shares of Class A Common Stock at November 30, | (38,940) | (30,285) | ||||||
Less: Redeemable equity | (4,087) | (4,018) | ||||||
Total VOXX International Corporation stockholders' equity | 316,288 | 341,859 | ||||||
Non-controlling interest | (38,961) | (37,268) | ||||||
Total stockholders' equity | 277,327 | 304,591 | ||||||
Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity | $ | 498,389 | $ | 519,451 | ||||
VOXX International Corporation and Subsidiaries Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) (In thousands, except share and per share data) | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net sales | $ | 135,260 | $ | 143,055 | $ | 360,828 | $ | 397,492 | ||||||||
Cost of sales | 98,918 | 105,918 | 268,281 | 297,859 | ||||||||||||
Gross profit | 36,342 | 37,137 | 92,547 | 99,633 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling | 10,967 | 11,413 | 32,154 | 35,563 | ||||||||||||
General and administrative | 15,944 | 15,920 | 52,621 | 53,903 | ||||||||||||
Engineering and technical support | 7,063 | 7,171 | 23,257 | 23,844 | ||||||||||||
Acquisition costs | — | — | — | 136 | ||||||||||||
Restructuring expenses | 101 | 303 | 2,168 | 532 | ||||||||||||
Total operating expenses | 34,075 | 34,807 | 110,200 | 113,978 | ||||||||||||
Operating income (loss) | 2,267 | 2,330 | (17,653) | (14,345) | ||||||||||||
Other (expense) income: | ||||||||||||||||
Interest and bank charges | (1,892) | (1,460) | (5,011) | (3,101) | ||||||||||||
Equity in income of equity investee | 1,101 | 2,022 | 3,958 | 5,373 | ||||||||||||
Final arbitration award (see Note 24) | (752) | (986) | (3,350) | (2,958) | ||||||||||||
Other, net | 156 | 460 | (1,497) | (3,169) | ||||||||||||
Total other (expense) income, net | (1,387) | 36 | (5,900) | (3,855) | ||||||||||||
Income (loss) before income taxes | 880 | 2,366 | (23,553) | (18,200) | ||||||||||||
Income tax expense (benefit) | 97 | (3,988) | (54) | (5,788) | ||||||||||||
Net income (loss) | 783 | 6,354 | (23,499) | (12,412) | ||||||||||||
Less: net loss attributable to non-controlling interest | (1,129) | (1,067) | (3,609) | (3,090) | ||||||||||||
Net income (loss) attributable to VOXX International Corporation and Subsidiaries | $ | 1,912 | $ | 7,421 | $ | (19,890) | $ | (9,322) | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustments | 279 | 957 | 1,337 | (2,665) | ||||||||||||
Derivatives designated for hedging | (29) | 78 | (55) | 264 | ||||||||||||
Pension plan adjustments | (1) | (19) | (7) | 53 | ||||||||||||
Other comprehensive income (loss), net of tax | 249 | 1,016 | 1,275 | (2,348) | ||||||||||||
Comprehensive income (loss) attributable to VOXX International Corporation and Subsidiaries | $ | 2,161 | $ | 8,437 | $ | (18,615) | $ | (11,670) | ||||||||
Income (loss) per share - basic: Attributable to VOXX International Corporation and Subsidiaries | $ | 0.08 | $ | 0.30 | $ | (0.85) | $ | (0.38) | ||||||||
Income (loss) per share - diluted: Attributable to VOXX International Corporation and Subsidiaries | $ | 0.08 | $ | 0.30 | $ | (0.85) | $ | (0.38) | ||||||||
Weighted-average common shares outstanding (basic) | 23,270,834 | 24,389,375 | 23,510,578 | 24,408,541 | ||||||||||||
Weighted-average common shares outstanding (diluted) | 23,467,022 | 24,621,359 | 23,510,578 | 24,408,541 | ||||||||||||
Reconciliation of GAAP Net Loss Attributable to VOXX International Corporation to EBITDA and Adjusted EBITDA | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net income (loss) attributable to VOXX International Corporation and Subsidiaries | $ | 1,912 | $ | 7,421 | $ | (19,890) | $ | (9,322) | ||||||||
Adjustments: | ||||||||||||||||
Interest expense and bank charges (1) | 1,688 | 1,263 | 4,405 | 2,500 | ||||||||||||
Depreciation and amortization (1) | 2,808 | 3,053 | 9,003 | 9,406 | ||||||||||||
Income tax expense (benefit) | 97 | (3,988) | (54) | (5,788) | ||||||||||||
EBITDA | 6,505 | 7,749 | (6,536) | (3,204) | ||||||||||||
Stock-based compensation | 177 | 145 | 643 | 407 | ||||||||||||
Gain on sale of tradename | — | — | (450) | — | ||||||||||||
Foreign currency losses (gains) (1) | 144 | (223) | 2,320 | 3,867 | ||||||||||||
Restructuring expenses | 101 | 303 | 2,168 | 532 | ||||||||||||
Acquisition costs | — | — | — | 136 | ||||||||||||
Non-routine legal fees | 318 | 28 | 1,549 | 886 | ||||||||||||
Final arbitration award | 752 | 986 | 3,350 | 2,958 | ||||||||||||
Adjusted EBITDA | $ | 7,997 | $ | 8,988 | $ | 3,044 | $ | 5,582 | ||||||||
(1) | For purposes of calculating Adjusted EBITDA for the Company, interest expense and bank charges, depreciation and amortization, as well as foreign currency losses (gains) have been adjusted in order to exclude the non-controlling interest portion of these expenses attributable to EyeLock LLC and Onkyo Technology KK. |
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SOURCE VOXX International Corporation
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