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VOXX International Corporation Reports its Fiscal 2023 First Quarter Financial Results

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ORLANDO, Fla., July 11, 2022 /PRNewswire/ -- VOXX International Corporation (NASDAQ: VOXX), a leading manufacturer and distributor of automotive and consumer technologies for the global markets, today announced its financial results for its Fiscal 2023 first quarter ended May 31, 2022.

Commenting on the Company's results and business outlook, Pat Lavelle, President and Chief Executive Officer stated, "During the Fiscal 2023 first quarter, we continued to experience supply chain issues though the biggest impact was the lack of chips which directly impacted our automotive OEM and aftermarket business. Retailer buying also slowed in March given high inventory positions which impacted sales in our Consumer Electronics segment. While these challenges will persist, we are still poised for growth and expect to have a strong second half of the year based on new Automotive programs, increased production and sales of Onkyo products, along with expanding worldwide distribution, and a host of new products coming to market."

Lavelle continued, "As we look out over the next few years, we are very encouraged with our prospects and our optimism is driven by over $750 million in new OEM awards received over the past three years, with the majority of awards ahead of us. We also see significant expansion in our Premium Audio business as we will soon be securing the chips and parts expected to meet customer demand in the second half of the year and as we expand beyond North America and Australia to service a broader worldwide customer base. We also made significant progress in our Biometrics segment this past quarter, with new opportunities with both distribution partners and companies in the fintech, healthcare and automotive markets. Despite the near-term headwinds, we believe we are well positioned to drive significant growth and strong bottom-line performance in the years ahead."

Fiscal 2023 and Fiscal 2022 First Quarter Comparisons
Net sales in the Fiscal 2023 first quarter ended May 31, 2022, were $128.7 million as compared to net sales of $137.1 million in the Fiscal 2022 first quarter ended May 31, 2021, a decrease of $8.3 million or 6.1%.

  • Automotive Electronics segment net sales in the Fiscal 2023 first quarter were $39.6 million as compared to $42.7 million in the comparable year-ago period, a decrease of $3.1 million or 7.2%. For the same comparable periods, OEM product sales were $16.7 million as compared to $14.9 million, driven by higher sales of OEM rear-seat entertainment systems, partially offset by ongoing supply chain constraints and component, part and chip shortages. Aftermarket product sales were $22.9 million as compared to $27.7 million, with the decline driven primarily by higher load-ins in the prior Fiscal year period as well as component and part shortages, partially offset by higher aftermarket accessory product sales.

  • Consumer Electronics segment net sales in the Fiscal 2023 first quarter were $88.9 million as compared to $94.1 million in the comparable year-ago period, a decrease of $5.2 million or 5.5%. For the same comparable periods, Premium Audio product sales were $69.9 million as compared to $71.6 million, with the decline primarily attributable to lower sales of premium home theatre speaker systems, partially offset by an increase in sales of Onkyo products. Other CE product sales were $19.0 million as compared to $22.5 million with the decline primarily related to general softness in the accessory market following the prior year rebound in sales experienced after the COVID-19 shut-downs in Fiscal 2021. The Consumer Electronics segment was also impacted by lower purchasing by many big box retailers given high inventory levels.

  • Biometrics segment net sales in the Fiscal 2023 first quarter were $0.1 million as compared to $0.2 million in the comparable year-ago period. While segment sales declined, new opportunities emerged this quarter and progress has been made on current projects undergoing testing prior to commercialization.

The gross margin in the Fiscal 2023 first quarter was 25.8% as compared to 26.8% in the Fiscal 2022 first quarter, a decline of 100 basis points. The year-over-year decline was primarily driven by lower margins in the Automotive Electronics segment, partially offset by higher margins in the Consumer Electronics segment. For the same comparable periods, the Company reported:

  • Automotive Electronics segment gross margin of 22.2% as compared to 27.0%, a decrease of 480 basis points. The year-over-year decline was primarily related to the higher cost of materials and shipping, as well as increases in tariffs included in the cost of goods sold. Additionally, certain OEM rear-seat entertainment products that began selling during the second half of Fiscal 2022 have generated lower margins than normal due to rising costs, and as negotiations remain underway to revise pricing.

  • Consumer Electronics segment gross margin of 27.4% as compared to 26.6%, an increase of 80 basis points. The primary drivers for the year-over-year increase are higher sales of Onkyo products, as well as the positive impact from price increases that were instituted throughout Fiscal 2022.

  • Biometrics segment gross margin of 24.3% as compared to 19.5%, an increase of 480 basis points. The increase in margin was primarily a result of tooling costs incurred during the three months ended May 31, 2021 that did not repeat in the current year.

Total operating expenses in the Fiscal 2023 first quarter were $39.9 million as compared to $37.1 million in the comparable Fiscal 2022 period, an increase of $2.9 million or 7.8%. For the same Fiscal 2023 and Fiscal 2022 first quarter periods:

  • Selling expenses of $12.3 million increased by $0.8 million, primarily related to higher trade show expenses as the Company attended the Consumer Electronics Show in person in 2022 and the 2021 event was held virtually.

  • General and administrative expenses of $19.1 million increased by $0.5 million. The Company incurred higher depreciation and amortization expenses, benefit and insurance expenses, and an increase in fees related to taxes and licensing, partially offset by lower professional fees and salary expenses.

  • Engineering and technical support expenses of $8.4 million increased by $2.2 million, primarily due to an increase in engineering labor expenses and research and development expenses related to the Onkyo acquisition, as well as the use of outside labor for certain projects. This increase was partially offset by decreases related to projects in development during the prior year that have been completed, as well as headcount reductions in the Biometrics segment.

  • Acquisition costs of $0.1 million declined by $0.5 million. The Company incurred acquisitions costs in both the Fiscal 2023 and Fiscal 2022 first quarter associated with consulting and due diligence fees for the asset purchase agreement signed with Onkyo Home Entertainment Corporation and the joint venture created with Sharp Corporation to complete the transaction.

The Company reported an operating loss in the Fiscal 2023 first quarter of $6.7 million as comparted to an operating loss of $0.4 million in the Fiscal 2022 first quarter.

Total other income/expense, net, in the Fiscal 2023 first quarter was a loss of $2.2 million as compared to other income, net of $2.6 million in the Fiscal 2022 first quarter. The year-over-year variance was primarily related to foreign currency as the Company incurred a net foreign currency loss of $2.4 million in the Fiscal 2023 first quarter as compared to a net foreign currency gain of $0.1 million in the Fiscal 2022 first quarter. Additionally, the Company recorded a charge of $1.0 million representing interest expense related to the interim arbitration award accrued during Fiscal 2022. Additionally, equity in income of equity investee declined by $1.1 million and interest and bank charges increased by $0.2 million when comparing the Fiscal 2023 and Fiscal 2022 first quarters.

Net loss attributable to VOXX International Corporation in the Fiscal 2023 first quarter was $6.5 million as compared to net income attributable to VOXX International Corporation of $2.7 million in the comparable Fiscal 2022 period. The Company reported basic and diluted net loss per share attributable to VOXX International Corporation of $0.27 in the Fiscal 2023 first quarter as compared to basic and diluted net income per common share attributable to VOXX International Corporation of $0.11, in the comparable Fiscal 2022 period.

The Company reported an Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") loss in the Fiscal 2023 first quarter of $4.2 million as compared to EBITDA in the Fiscal 2022 first quarter of $6.4 million. Adjusted EBITDA in the Fiscal 2023 first quarter was a loss of $0.1 million as compared to Adjusted EBITDA in the Fiscal 2022 first quarter of $8.2 million.

Seaguard Electronics LLC
On March 3, 2022, the Arbitrator issued a Partial Final Award on Bifurcated Issue in the amount of $39,444, plus $798 for its attorneys' fees and costs. On March 11, 2022, the Arbitrator fixed the schedule of the patent portion of the bifurcated arbitration, with a trial date set for October 16, 2023. The Company has put its suppliers on notice of its indemnification rights with respect to the alleged infringing products. On March 14, 2022, Seaguard filed a Petition in the United States District Court, Central District of California, Western Division, to confirm the Partial Final Award. On April 25, 2022, the Company filed its opposition to Seaguard's Petition to Confirm and a Counter-Petition to Vacate the Partial Final Award. On May 31, 2022, the Court ordered the matter taken under submission for decision without oral hearing.

During Fiscal 2022, the Company recorded an accrual for the interim arbitration award in the amount of $39,444. During the three months ended May 31, 2022, the Company accrued an additional charge of $986 representing interest due on the award when paid. At May 31, 2022, the Company has a total accrued balance of $40,431 on the accompanying Consolidated Balance Sheet related to the interim arbitration award, to be paid if confirmed and not vacated by the U.S. District Court or an appellate court. The Company made its accrual determination in accordance with reports and evaluations from its damages expert, as well as from the guidance and opinion letters received from the Company's trial attorneys.

Balance Sheet Update
As of May 31, 2022, the Company had cash and cash equivalents of $5.7 million as compared to $27.8 million as of February 28, 2022. Total debt as of May 31, 2022 was $16.3 million as compared to $13.2 million as of February 28, 2022. The increase in total debt for the comparable periods is primarily related to $5.6 million outstanding on the Company's Domestic Credit Facility as of May 31, 2022, partially offset by the absence of debt related to the Company's Euro Asset-Based Lending Obligation for VOXX Germany. Total long-term debt, net of debt issuance costs as of May 31, 2022 was $14.9 million as compared to $9.8 million as of February 28, 2022.

Conference Call Information
The Company will be hosting its conference call and webcast on Tuesday, July 12, 2022 at 10:00 a.m. Eastern.

Non-GAAP Measures
EBITDA and Adjusted EBITDA are not financial measures recognized by GAAP. EBITDA represents net (loss) income attributable to VOXX International Corporation, 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, foreign currency losses (gains), acquisition costs, certain non-routine legal and professional fees, and awards. Depreciation, amortization, stock-based compensation, and foreign currency losses (gains) are non-cash items.

We present EBITDA and Adjusted EBITDA in our Form 10-Q 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 Company's annual report on Form 10-K for the fiscal year ended February 28, 2022, and other filings made by the Company from time to time with the SEC.

The factors described in such SEC filings include, without limitation: the impact of the COVID-19 outbreak on the Company's results of operations, global supply shortages and logistics costs and delays; cybersecurity risks; risks that may result from changes in the Company's business operations; 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 COVID-19 pandemic, the War in the Ukraine  and any worsening of the global business and economic environment as a result. The Company assumes no obligation and does not intend to update these forward-looking statements.

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)




May 31,
2022



February 28,
2022




(unaudited)





Assets







Current assets:







Cash and cash equivalents


$

5,733



$

27,788


Accounts receivable, net



82,645




105,625


Inventory



181,187




174,922


Receivables from vendors



217




363


Prepaid expenses and other current assets



19,602




21,340


Income tax receivable



749




734


Total current assets



290,133




330,772


Investment securities



1,222




1,231


Equity investment



22,010




21,348


Property, plant and equipment, net



49,813




49,794


Operating lease, right of use asset



4,255




4,464


Goodwill



72,507




74,320


Intangible assets, net



97,541




101,450


Deferred income tax assets



39




40


Other assets



3,577




3,245


Total assets


$

541,097



$

586,664


Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity







Current liabilities:







Accounts payable


$

54,113



$

76,665


Accrued expenses and other current liabilities



46,923




54,659


Income taxes payable



1,545




2,714


Accrued sales incentives



20,427




23,755


Interim arbitration award payable



40,431




39,444


Contract liabilities, current



4,218




4,373


Current portion of long-term debt



500




2,406


Total current liabilities



168,157




204,016


Long-term debt, net of debt issuance costs



14,858




9,786


Finance lease liabilities, less current portion



39




78


Operating lease liabilities, less current portion



3,067




3,298


Deferred compensation



1,222




1,231


Contingent consideration, less current portion



5,001




5,750


Deferred income tax liabilities



4,330




5,300


Other tax liabilities



913




1,083


Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC



3,692




2,451


Other long-term liabilities



3,279




3,508


Total liabilities



204,558




236,501


Commitments and contingencies







Redeemable equity



3,450




3,550


Redeemable non-controlling interest



(227)




511


Stockholders' equity:







Preferred stock:







No shares issued or outstanding







Common stock:







Class A, $.01 par value, 60,000,000 shares authorized, 24,538,184 and 24,476,847 shares issued
and 21,675,966 and 21,614,629 shares outstanding at May 31, 2022 and February 28, 2022, respectively



246




245


Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and
outstanding at both May 31, 2022 and February 28, 2022



22




22


Paid-in capital



296,175




300,453


Retained earnings



120,046




126,573


Accumulated other comprehensive loss



(18,878)




(17,503)


Less: Treasury stock, at cost, 2,862,218 shares of Class A Common Stock at both May 31, 2022 and February 28, 2022



(25,138)




(25,138)


Less: Redeemable equity



(3,450)




(3,550)


Total VOXX International Corporation stockholders' equity



369,023




381,102


Non-controlling interest



(35,707)




(35,000)


Total stockholders' equity



333,316




346,102


Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity


$

541,097



$

586,664


 

VOXX International Corporation and Subsidiaries

Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands, except share and per share data)




Three months ended
May 31,




2022



2021


Net sales


$

128,732



$

137,060


Cost of sales



95,493




100,365


Gross profit



33,239




36,695


Operating expenses:







Selling



12,285




11,467


General and administrative



19,130




18,676


Engineering and technical support



8,389




6,232


Acquisition costs



136




676


Total operating expenses



39,940




37,051


Operating loss



(6,701)




(356)


Other (expense) income:







Interest and bank charges



(730)




(528)


Equity in income of equity investee



1,588




2,723


Interim arbitration award



(986)





Other, net



(2,110)




442


Total other (expense) income, net



(2,238)




2,637


(Loss) income before income taxes



(8,939)




2,281


Income tax (benefit) expense



(1,092)




484


Net (loss) income



(7,847)




1,797


Less: net loss attributable to non-controlling interest



(1,320)




(919)


Net (loss) income attributable to VOXX International Corporation


$

(6,527)



$

2,716


Other comprehensive (loss) income:







Foreign currency translation adjustments



(1,494)




372


Derivatives designated for hedging



87




119


Pension plan adjustments



32




1


Other comprehensive (loss) income, net of tax



(1,375)




492


Comprehensive (loss) income attributable to VOXX International Corporation


$

(7,902)



$

3,208


(Loss) income per share - basic: Attributable to VOXX International Corporation


$

(0.27)



$

0.11


(Loss) income per share - diluted: Attributable to VOXX International Corporation


$

(0.27)



$

0.11


Weighted-average common shares outstanding (basic)



24,412,462




24,266,242


Weighted-average common shares outstanding (diluted)



24,412,462




24,925,974


 

Reconciliation of GAAP Net Income Attributable to

VOXX International Corporation to EBITDA and Adjusted EBITDA




Three months ended
May 31,




2022



2021


Net (loss) income attributable to VOXX International Corporation


$

(6,527)



$

2,716


Adjustments:







Interest expense and bank charges (1)



527




372


Depreciation and amortization (1)



2,904




2,778


Income tax (benefit) expense



(1,092)




484


EBITDA



(4,188)




6,350


Stock-based compensation



126




236


Foreign currency losses (gains) (1)



2,362




(116)


Acquisition costs



136




676


Professional fees related to distribution agreement with GalvanEyes LLC






325


Non-routine legal fees



508




686


Interim arbitration award



986





Adjusted EBITDA


$

(70)



$

8,157




(1)

For purposes of calculating Adjusted EBITDA for the Company, interest expense and bank charges, depreciation
and amortization, as well as foreign currency losses and (gains) have been adjusted in order to exclude the non-controlling
interest portion of these expenses attributable to EyeLock LLC.

 

 

Cision
Cision

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SOURCE VOXX International Corporation