10/16/2024 | Press release | Distributed by Public on 10/16/2024 12:52
VOXX International Corporation Reports its Fiscal 2025 Second Quarter Financial Results
ORLANDO, FL.- October 10, 2024 - VOXX International Corporation (NASDAQ: VOXX), a leading manufacturer and distributor of automotive and consumer technologies for the global markets, as well as strategic joint ventures including biometrics, today announced its financial results for its Fiscal 2025 second quarter and six-months ended August 31, 2024.
"We made significant progress through the first half of the year in executing our plan to unlock value," stated Pat Lavelle, President and Chief Executive Officer of VOXX International Corporation. "We exited Fiscal 2024 coming off losses and had over $73 million in total debt which historically, is very high for us as we have always looked to maintain low leverage and financial flexibility. Thus, we embarked on an internal restructuring plan to right size our business and improve operational efficiencies, while lowering expenses and our working capital needs. We concurrently looked to monetize non-core assets and this past quarter, successfully sold our domestic accessories business and two non-core premium audio brands netting approximately $28 million in the transactions. We also divested our Florida real estate in the Fiscal 2025 third quarter, as we near completion of our OEM manufacturing transition to Mexico, which generated gross proceeds of $20 million. I'm pleased to report that as of today, our total debt is less than $20 million and our net debt stands at under $15 million, which is essentially our normal working capital needs at this time."
Lavelle continued, "We also embarked on a strategic alternatives process to explore all avenues that could generate better value for our shareholders given what we believe to be a significant disconnect in our asset value and stock price. This could mean a sale of our entire business, or additional business or asset divestitures as we still have significant value within our portfolio, as well as owned real estate. Irrespective of the outcome of the process, we are laser focused on getting VOXX back to profitability. Through restructuring programs, our OEM relocation, strong management of the supply chain, and all of our new programs and products, we believe we can do that this Fiscal year. We are aggressively taking actions and controlling what we can to offset anything the economy or business environment may throw at us. We're well on our way to achieving our goals provided sales materialize in the second half of the year as planned."
Fiscal 2025 and Fiscal 2024 Second Quarter Comparisons
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Net sales in the Fiscal 2025 second quarter ended August 31, 2024, were $92.5 million as compared to $113.6 million in the Fiscal 2024 second quarter ended August 31, 2023, a decrease of $21.2 million or 18.6%. For the same comparable periods:
On March 1, 2024, the Company's majority owned subsidiary, EyeLock LLC, contributed assets, including inventory and intangible assets, to a newly formed joint venture, BioCenturion LLC. As of and for the three and six months ended August 31, 2024, the Company accounted for its investment in BioCenturion LLC as an equity method investment with (loss) income from its equity method investee recorded within Other (Expense) Income on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss).
The gross margin in the Fiscal 2025 second quarter was 24.5% as compared to 25.2% in the Fiscal 2024 second quarter, a decline of 70 basis points. When comparing the Fiscal 2025 and Fiscal 2024 second quarters, the Company reported:
Total operating expenses in the Fiscal 2025 second quarter were $31.8 million as compared to $37.1 million in the comparable Fiscal 2024 period, a decline of $5.3 million or 14.3%. The year-over-year improvement was driven primarily by the positive impact from restructuring programs and other initiatives designed to lower costs and working capital needs. When comparing the Fiscal 2025 and Fiscal 2024 second quarters, the Company reported:
2
The Company reported an operating loss of $9.1 million in the Fiscal 2025 second quarter as compared to an operating loss of $8.5 million in the comparable year-ago period.
Total other income, net, in the Fiscal 2025 second quarter was $12.5 million as compared to total other expense, compared to tother other net expenses of $2.9 million comparable Fiscal 2024 period. In August 2024, the Company sold certain assets of two of its wholly owned subsidiaries, VOXX Accessories Corp. and Premium Audio Company, LLC., resulting in gains on the sale of these assets of $8.3 million and $2.2 million, respectively. Additionally:
Net income attributable to VOXX International Corporation in the Fiscal 2025 second quarter was $2.4 million as compared to a net loss attributable to VOXX International Corporation of $11.1 million in the comparable Fiscal 2024 period. The Company reported basic and diluted income per common share attributable to VOXX International Corporation of $0.10 in the Fiscal 2025 second quarter as compared to a basic and diluted loss per common share attributable to VOXX International Corporation of $0.47, in the comparable Fiscal 2024 period.
The Company reported Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") in the Fiscal 2025 second quarter of $8.5 million as compared to an EBITDA loss in the comparable Fiscal 2024 second quarter of $5.4 million. Adjusted EBITDA in the Fiscal 2025 second quarter was a loss of $2.7 million as compared to roughly break even in the comparable Fiscal 2024 period.
Fiscal 2025 and Fiscal 2024 Six-Month Comparisons
3
Net sales in the Fiscal 2025 six-month period ended August 31, 2024, were $184.1 million as compared to $225.6 million in the Fiscal 2024 six-month period ended August 31, 2023, a decrease of $41.4 million or 18.4%.
The gross margin in the Fiscal 2025 six-month period was 26.1% as compared to 24.9% in the Fiscal 2024 six-month period, an increase of 120 basis points. For the same comparable periods, the Company reported:
Total operating expenses in the Fiscal 2025 six-month period were $64.3 million as compared to $76.1 million in the comparable Fiscal 2024 period, an improvement of $11.8 million or 15.5%. For the same comparable periods:
4
The Company reported an operating loss in the Fiscal 2025 six-month period of $16.2 million as compared to an operating loss of $19.9 million in the comparable Fiscal 2024 period.
Total other income, net, in the Fiscal 2025 six-month period was $8.9 million as compared to total other expense, net, of $4.5 million in the comparable Fiscal 2024 period, a $13.4 million improvement.
Net loss attributable to VOXX International Corporation in the Fiscal 2025 six-month period was $6.9 million as compared to a net loss attributable to VOXX International Corporation of $21.8 million in the comparable Fiscal 2024 period. The Company reported a basic and diluted loss per share attributable to VOXX International Corporation of $0.30 in the Fiscal 2025 six-month period as compared to a basic and diluted loss per common share attributable to VOXX International Corporation of $0.92, in the comparable Fiscal 2024 period.
The Company reported EBITDA in the Fiscal 2025 six-month period of $3.3 million as compared to an EBITDA loss in the comparable Fiscal 2024 period of $13.0 million. The Company reported an Adjusted EBITDA loss in the Fiscal 2025 six-month period of $5.8 million as compared to an Adjusted EBITDA loss in the comparable Fiscal 2024 period of $5.0 million.
Fiscal 2025 Second Quarter Dispositions and Subsequent Real Estate Transaction in the Fiscal 2025 Third Quarter
Sale of Domestic Accessories Business
On August 30, 2024, the Company's wholly owned subsidiary, VOXX Accessories Corp. ("VAC"), completed the sale of certain assets of its domestic accessories business ("the Disposal Group"), consisting of intangible assets and inventory, which was included in the Company's Consumer Electronics segment, to Talisman Brands Inc., d/b/a Established Inc. ("Established" or the "Buyer") for total consideration of $24.5 million, net of selling expenses. The consideration was recorded as a receivable due from Established on the Company's Consolidated Balance Sheet at August 31, 2024. The Company recognized a gain in the amount of $8.3 million on the sale of the Disposal Group for the three and six months ended August 31, 2024 within Other income (expense) on the Company's Unaudited
5
Consolidated Statements of Operations and Comprehensive Income (Loss). During September 2024, the Company received payments totaling $24.4 million toward the total balance due from Established. The remaining balance due of $0.1 million is expected to be received during the third quarter of Fiscal 2025. The proceeds of the sale have been used by the Company to repay its outstanding debt.
Additionally, at closing, the Company and Established entered into an operations services agreement, pursuant to which the Company agreed to continue to operate the accessories business for the Buyer's benefit, consisting of certain defined services, including purchasing, logistics, sales, MIS, human resources, customer service, credit and collections, and finance and accounting services. The operating services agreement will continue for a period of twelve months, and may be canceled at any time, or extended, at the Buyer's option.
Sale of Premium Audio Company Trade Names and Related Inventory
On August 15, 2024, the Company's wholly owned subsidiary, Premium Audio Company, LLC ("PAC"), completed the sale of certain trade names and related inventory to Jamo Holding Limited and Cinemaster Shanghai Ltd. for total consideration of $3.4 million. The Company recognized a gain of $2.2 million on the sale of these assets for the three and six months ended August 31, 2024 within Other income (expense) on the Company's Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss). The proceeds of the sale were used by the Company to repay outstanding debt.
Sale of the Company's Orlando, FL OEM Manufacturing Facility
On September 24, 2024, the Company completed the sale of its manufacturing facility in Lake Nona, Florida to Aladdin Sane Realty, LLC (the "buyer") for a purchase price of $20.0 million. Net proceeds from the sale were used to repay the remaining outstanding balance of the Company's Florida Mortgage and the related interest rate swap was terminated on this date. The Company will lease approximately 18,000 square feet of office and warehouse space in the building from the buyer for a period of five years.
Strategic Process
On August 27, 2024, the Company announced that its board of directors had been conducting an exploration of strategic alternatives in connection with the Company's ongoing effort to maximize shareholder value. As part of the process, the board will consider a range of options including, among other things, a potential sale of the Company, a sale of segments, operational improvements, or other strategic transactions. Per its fiduciary responsibilities and to support its evaluation process, the board has established a strategic transactions committee which has retained Solomon Partners as financial advisor and Bryan Cave Leighton Paisner LLP as legal advisor.
Balance Sheet Update
As of August 31, 2024, the Company had cash and cash equivalents of $3.7 million as compared to $11.0 million as of February 29, 2024. Total debt as of August 31, 2024 was $55.2 million as compared to $73.3 million as of February 29, 2024, an improvement of $18.1 million. The decline in total debt is primarily related to an $18 million reduction in outstanding debt on the Company's Domestic Credit Facility and a $0.3 million reduction in debt associated with the Company's Florida mortgage, partially offset by a $0.2 million increase in debt outstanding related to the shareholder loan payable to Sharp Corporation. Total long-term debt, net of debt issuance costs as of August 31, 2024 was $50.0 million as compared to $71.9 million as of February 29, 2024, an improvement of $21.9 million.
As of October 9, 2024, the Company's total debt was $18.1 million and its net debt, less its cash position of $4.5 million, stood at $13.6 million.
Conference Call Information
The Company will be hosting its conference call and webcast on Friday, October 11, 2024 at 10:00 a.m. ET.
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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.
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 and businesses, foreign currency gains and losses, restructuring expenses, certain non-routine legal fees, and awards. Depreciation, amortization, stock-based compensation, and foreign currency gains and losses are non-cash items.
We present EBITDA and Adjusted EBITDA in this press release and 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 worldwide leader in the Automotive Electronics and Consumer Electronics industries. Over the past several decades, VOXX has built market-leading positions in in-vehicle entertainment and automotive security, as well as in 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 29, 2024, 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
7
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: [email protected]
Tables to Follow
8
VOXX International Corporation and Subsidiaries Consolidated Balance Sheets
(In thousands, except share and per share data)
August 31, |
February 29, |
|||
(unaudited) |
||||
Assets |
||||
Current assets: |
||||
Cash and cash equivalents |
$ |
3,661 |
$ |
10,986 |
Accounts receivable, net of allowances of $1,980 and $3,041 at August 31, 2024 and February 29, 2024, respectively |
64,240 |
71,066 |
||
Inventory |
113,253 |
128,471 |
||
Receivables from vendors |
795 |
1,192 |
||
Due from Established |
24,542 |
- |
||
Due from GalvanEyes LLC, current |
- |
1,238 |
||
Prepaid expenses and other current assets |
15,743 |
20,820 |
||
Income tax receivable |
4,710 |
2,095 |
||
Total current assets |
226,944 |
235,868 |
||
Investment securities |
398 |
828 |
||
Equity investments |
22,848 |
21,380 |
||
Property, plant and equipment, net |
44,201 |
45,070 |
||
Operating lease, right of use assets |
2,815 |
2,577 |
||
Goodwill |
64,344 |
63,931 |
||
Intangible assets, net |
56,632 |
68,766 |
||
Due from GalvanEyes LLC, less current portion |
- |
1,340 |
||
Deferred income tax assets |
60 |
1,452 |
||
Other assets |
2,922 |
2,794 |
||
Total assets |
$ |
421,164 |
$ |
444,006 |
Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity |
||||
Current liabilities: |
||||
Accounts payable |
$ |
43,895 |
$ |
35,076 |
Accrued expenses and other current liabilities |
38,397 |
38,238 |
||
Income taxes payable |
1,168 |
1,123 |
||
Accrued sales incentives |
16,810 |
18,236 |
||
Contract liabilities, current |
3,265 |
3,810 |
||
Current portion of long-term debt |
4,469 |
500 |
||
Total current liabilities |
108,004 |
96,983 |
||
Long-term debt, net of debt issuance costs |
50,015 |
71,881 |
||
Finance lease liabilities, less current portion |
484 |
644 |
||
Operating lease liabilities, less current portion |
1,917 |
1,884 |
||
Deferred compensation |
398 |
828 |
||
Deferred income tax liabilities |
2,615 |
2,690 |
||
Other tax liabilities |
721 |
809 |
||
Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC |
- |
9,817 |
||
Other long-term liabilities |
2,850 |
2,170 |
||
Total liabilities |
167,004 |
187,706 |
||
Commitments and contingencies |
||||
Redeemable equity: Class A, $.01 par value; 597,021 and 577,581 shares at August 31, 2024 and February 29, 2024, respectively |
4,173 |
4,110 |
||
Redeemable non-controlling interest |
(4,041 |
) |
(3,203 |
) |
Stockholders' equity: |
||||
Preferred stock: |
||||
No shares issued or outstanding |
- |
- |
||
Common stock: |
||||
Class A, $.01 par value, 60,000,000 shares authorized, 23,998,379 and 23,985,603 shares issued and 19,647,196 and 19,698,562 shares outstanding at August 31, 2024 and February 29, 2024, respectively |
240 |
240 |
||
Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at both August 31, 2024 and February 29, 2024 |
22 |
22 |
||
Paid-in capital |
295,959 |
293,272 |
||
Retained earnings |
51,415 |
58,272 |
||
Accumulated other comprehensive loss |
(17,219 |
) |
(17,366 |
) |
Less: Treasury stock, at cost, 4,351,183 and 4,287,041 shares of Class A Common Stock at August 31, 2024 and February 29, 2024, respectively |
(39,821 |
) |
(39,573 |
) |
Total VOXX International Corporation stockholders' equity |
290,596 |
294,867 |
||
Non-controlling interest |
(36,568 |
) |
(39,474 |
) |
Total stockholders' equity |
254,028 |
255,393 |
||
Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity |
$ |
421,164 |
$ |
444,006 |
9
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 |
Six months ended |
||||||||||
2024 |
2023 |
2024 |
2023 |
||||||||
Net sales |
$ |
92,488 |
$ |
113,642 |
$ |
184,149 |
$ |
225,568 |
|||
Cost of sales |
69,796 |
85,017 |
136,048 |
169,363 |
|||||||
Gross profit |
22,692 |
28,625 |
48,101 |
56,205 |
|||||||
Operating expenses: |
|||||||||||
Selling |
7,848 |
10,021 |
17,438 |
21,187 |
|||||||
General and administrative |
15,777 |
17,250 |
32,234 |
36,677 |
|||||||
Engineering and technical support |
6,100 |
7,857 |
12,344 |
16,194 |
|||||||
Restructuring expenses |
2,098 |
2,008 |
2,329 |
2,067 |
|||||||
Total operating expenses |
31,823 |
37,136 |
64,345 |
76,125 |
|||||||
Operating loss |
(9,131 |
) |
(8,511 |
) |
(16,244 |
) |
(19,920 |
) |
|||
Other income (expense): |
|||||||||||
Interest and bank charges |
(1,973 |
) |
(1,573 |
) |
(4,111 |
) |
(3,119 |
) |
|||
Equity in income of equity investees |
200 |
1,241 |
551 |
2,857 |
|||||||
Gain on sale of business |
8,300 |
- |
8,300 |
- |
|||||||
Gain on sale of assets |
2,154 |
- |
2,154 |
- |
|||||||
Final arbitration award |
- |
(1,612 |
) |
- |
(2,598 |
) |
|||||
Other, net |
3,842 |
(952 |
) |
1,971 |
(1,653 |
) |
|||||
Total other income (expense), net |
12,523 |
(2,896 |
) |
8,865 |
(4,513 |
) |
|||||
Income (loss) before income taxes |
3,392 |
(11,407 |
) |
(7,379 |
) |
(24,433 |
) |
||||
Income tax expense (benefit) |
1,600 |
1,170 |
1,006 |
(151 |
) |
||||||
Net income (loss) |
1,792 |
(12,577 |
) |
(8,385 |
) |
(24,282 |
) |
||||
Less: net loss attributable to non-controlling interest |
(620 |
) |
(1,513 |
) |
(1,528 |
) |
(2,480 |
) |
|||
Net income (loss) attributable to VOXX International Corporation and Subsidiaries |
$ |
2,412 |
$ |
(11,064 |
) |
$ |
(6,857 |
) |
$ |
(21,802 |
) |
Other comprehensive (loss) income: |
|||||||||||
Foreign currency translation adjustments |
(337 |
) |
820 |
258 |
1,058 |
||||||
Derivatives designated for hedging |
(90 |
) |
34 |
(103 |
) |
(26 |
) |
||||
Pension plan adjustments |
(8 |
) |
(5 |
) |
(8 |
) |
(6 |
) |
|||
Other comprehensive (loss) income, net of tax |
(435 |
) |
849 |
147 |
1,026 |
||||||
Comprehensive income (loss) attributable to VOXX International Corporation and Subsidiaries |
$ |
1,977 |
$ |
(10,215 |
) |
$ |
(6,710 |
) |
$ |
(20,776 |
) |
Income (loss) per share - basic: Attributable to VOXX International Corporation and Subsidiaries |
$ |
0.10 |
$ |
(0.47 |
) |
$ |
(0.30 |
) |
$ |
(0.92 |
) |
Income (loss) per share - diluted: Attributable to VOXX International Corporation and Subsidiaries |
$ |
0.10 |
$ |
(0.47 |
) |
$ |
(0.30 |
) |
$ |
(0.92 |
) |
Weighted-average common shares outstanding (basic) |
23,125,665 |
23,462,575 |
23,132,771 |
23,629,147 |
|||||||
Weighted-average common shares outstanding (diluted) |
23,159,333 |
23,462,575 |
23,132,771 |
23,629,147 |
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Reconciliation of GAAP Net Income (Loss) Attributable to VOXX International Corporation to EBITDA and Adjusted EBITDA
Three months ended |
Six months ended |
|||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||
Net income (loss) attributable to VOXX International Corporation and Subsidiaries |
$ |
2,412 |
$ |
(11,064 |
) |
$ |
(6,857 |
) |
$ |
(21,802 |
) |
|
Adjustments: |
||||||||||||
Interest expense and bank charges (1) |
1,758 |
1,371 |
3,681 |
2,717 |
||||||||
Depreciation and amortization (1) |
2,727 |
3,094 |
5,455 |
6,195 |
||||||||
Income tax expense (benefit) |
1,600 |
1,170 |
1,006 |
(151 |
) |
|||||||
EBITDA |
8,497 |
(5,429 |
) |
3,285 |
(13,041 |
) |
||||||
Stock-based compensation |
412 |
208 |
558 |
466 |
||||||||
Gain on sale of tradename |
- |
- |
- |
(450 |
) |
|||||||
Gain on sale of business |
(8,300 |
) |
- |
(8,300 |
) |
- |
||||||
Gain on sale of assets |
(2,154 |
) |
- |
(2,154 |
) |
- |
||||||
Foreign currency gains (losses) (1) |
(3,204 |
) |
1,214 |
(1,355 |
) |
2,176 |
||||||
Restructuring expenses |
2,098 |
2,008 |
2,329 |
2,067 |
||||||||
Non-routine legal fees |
(2 |
) |
378 |
(125 |
) |
1,231 |
||||||
Final arbitration award |
- |
1,612 |
- |
2,598 |
||||||||
Adjusted EBITDA |
$ |
(2,653 |
) |
$ |
(9 |
) |
$ |
(5,762 |
) |
$ |
(4,953 |
) |
For purposes of calculating Adjusted EBITDA for the Company, interest expense and bank charges, depreciation and amortization, and foreign currency gains and losses have been adjusted in order to exclude the non-controlling interest portion of these expenses attributable to EyeLock LLC and Onkyo Technology KK, as appropriate.
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