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VOXX International Corp (VOXX) Q3 2021 Earnings Call Transcript

VOXX Worldwide Corp  (NASDAQ: VOXX) Q3 2021 earnings name dated Jan. 12, 2021

Company Contributors:

Glenn Wiener — Investor Relations

Patrick M. Lavelle — President and Chief Government Officer

C. Michael Stoehr — Senior Vice President and Chief Monetary Officer

Analysts:

Beat Kahli — Kahli Holdings — Analyst

John J. Shalam — Chairman of the Board

Dave Covas — Oberweis Asset — Analyst

Presentation:

Operator

Girls and gents, thanks for standing by and welcome to VOXX Worldwide Fiscal 2021 Third Quarter Outcomes Name. [Operator Instructions]

I’ll now hand the convention to your speaker right this moment, Mr. Glenn Wiener with Investor Relations. Thanks. Please go forward.

Glenn Wiener — Investor Relations

Thanks, Carmen. Good morning and welcome to VOXX Worldwide’s fiscal 2021 third quarter convention name. Our Type 10-Q was filed with the SEC and we issued our press launch after shut market — after market shut yesterday afternoon. Each paperwork will be discovered on the IR part of our web site as can our up to date investor presentation. Talking from administration right this moment will likely be Pat Lavelle, President and CEO; and Michael Stoehr, Senior Vice President and Chief Monetary Officer. Each could have ready remarks and we are going to then open up the decision for questions. Our Chairman and Founder, John Shalam can also be out there for questions.

Be aware, our name is being webcast reside over the Web and a replay will likely be out there roughly one hour after the completion of the decision. I wish to remind everybody that apart from historic data contained herein, statements made on right this moment’s name and webcast that might represent forward-looking statements are primarily based on at the moment out there data. The Firm assumes no accountability to replace any such forward-looking statements. And I wish to level you to the danger components related to our enterprise, that are detailed in our Type 10-Ok for the interval ended February 29, 2020.

Normally we’re right here in Las Vegas with this name at CES. However given the pandemic, the present has gone digital this yr. And VOXX has had a really giant present presence. We’re happy announce that Paul Jacobs [Phonetic], President of the Premium Audio Group, and Pat Lavelle, President and CEO of VOXX will likely be internet hosting its keynote classes as a part of CTA’s highlight service. Paul will likely be right this moment at 3.15 PM and Pat will likely be tomorrow on the similar time and that may concurs all buyers, analysts, bankers, all — anybody becoming a member of us right this moment to hear in. You’ll study quite a bit about traits within the business and a number of the new merchandise we now have coming to market.

You additionally go to the VOXX digital group for extra data on the Firm and our product launches for 2021. You probably have any questions, additionally, please be at liberty to contact me immediately at any time. In closing, Firm’s enterprise momentum continues and its outlook stays robust.

At the moment, I’ll flip the decision over to Pat now to debate the outcomes and prospects. Pat?

Patrick M. Lavelle — President and Chief Government Officer

Thanks, Glenn. Good morning, everybody. Let me begin off by wishing you all a contented and wholesome New 12 months and all one of the best in 2021. Our fiscal 2021 third quarter and 9 months outcomes are up considerably during the last yr. There may be a variety of momentum behind us which ought to carry by way of into the fourth quarter and barring any unexpected occasions ought to proceed thereafter. Third quarter internet gross sales have been up over $90 million or roughly 83%. All segments posted year-over-year will increase with shopper phase, up 74%; the Automotive phase, up 105%; and the Biometrics phase, up 149%. Premium Audio continues to be very robust for us as gross sales greater than doubled year-over-year, up roughly 112%.

And we reported a rise in each OEM and aftermarket product gross sales inside the Automotive phase. Working revenue of $18.6 million was up $18.4 million. And adjusted EBITDA of $24.5 million was up $18.7 million. Mike goes to cowl our 9 month comparisons, however to shortly put fiscal 2021 in perspective, gross sales have been up 36.5% and adjusted EBITDA of $35.1 million improved by over $31 million. Our stability sheet stays in good condition and our money place will enhance this quarter as we transfer by way of stock and accounts receivable.

There are such a lot of optimistic issues taking place at VOXX, we’re very inspired. On the similar time, we’re aware concerning the world setting because the pandemic continues. We’re working our enterprise with this in thoughts. Nonetheless, regardless of all that we now have confronted, we now have been in a position to transfer shortly, alter overhead and develop and are poised to have one of many strongest years from an EBITDA perspective.

I’ll bounce into a number of the segments for key updates now, however beginning with Shopper Electronics. On my final quarter — on final name, final quarter, I stated that we anticipated to see Premium Audio product gross sales develop by over $100 million this fiscal yr. And thru the primary 9 months, we’re up over $88 million or near 70%. Even with retail retailer closures all year long, our third quarter gross sales grew by roughly 112% and we’re anticipating robust development within the fourth quarter, and thus my prior feedback stands.

Through the third quarter, we noticed very robust development within the residence separates class, gross sales of residence theater and sub woofers specifically, pushed by new distribution in addition to inside our conventional channels. We additionally skilled robust development in gross sales of soundbars, bluetooth merchandise and our professional media laptop audio system.

Extra persons are working from residence and staying at residence, which has led to a rise spending to improve residence audio and leisure. We additionally noticed a modest enhance in worldwide gross sales pushed by our Magnat and Heco manufacturers and captured our first gross sales related to our new alliance with Onkyo and Pioneer Company, with our first shipments starting in September. This may proceed to construct as we began bringing in stock in our fiscal third quarter. Demand is rising, distribution is increasing, and our product assortment continues to enhance. The Shopper Electronics phase as a complete delivered pre-tax income of $20.4 million within the fiscal 2021 third quarter in comparison with $9.6 million in the identical fiscal 2020 interval.

Inside our automotive phase, internet gross sales have been up $31.5 million or over 105% for the comparable third quarter with will increase in each OEM and aftermarket merchandise. Our acquisitions of VSM and DEI actually have contributed to our success and are anticipated to proceed shifting ahead. The automotive business as a complete has suffered this yr as a consequence of COVID with OEMs shutting down vegetation, retailers and aftermarket sellers closing shops, and an total softness in automotive units. However they’ve rebounded considerably and we now have weathered the business downturn and are excited with our outlook primarily based on the contracts we now have been awarded and those who we’re pursuing. The brand new OEM applications with Fiat Chrysler and Ford for our EVO rear seat leisure system with Amazon’s Fireplace TV begin this calendar yr someday in our fiscal 2022 second quarter.

These are the 2 large ones for us and there are a number of different discussions underway with each present OEM prospects and new ones. We additionally introduced final quarter new OEM awards that VSM secured with Volvo, Polaris and Subaru, all of that are multi-year awards with various begin dates in calendar yr ’21, ’22, ’23. ASA, our 50:50 three way partnership had a powerful quarter as nicely, pushed by stronger leads to the RV and heavy responsibility markets, and we delivered $1.8 million in revenue this previous quarter versus $1 million in fiscal 2020 third quarter. We had some slowness, in case you recall, within the early a part of the fiscal yr, however this seems to be behind us.

Our Automotive phase delivered pre-tax income of $6.6 million in fiscal 2021 third quarter versus roughly $100,000 in fiscal 2020. And once you layer in our core enterprise with the contributions from VSM and DEI and the brand new incremental OEM enterprise we now have secured, the long run appears promising. And I see no purpose why our automotive enterprise wouldn’t double from fiscal 2020 inside the subsequent three years or sooner.

As for the biometric phase, there aren’t a variety of materials updates to offer proper now, however there was momentum. Gross sales continued to extend modestly on a greenback foundation, up roughly $200,000 in comparable third quarters, however curiosity is rising in iris authentication all through many industries given its greater degree safety and because of the boundaries that different modalities akin to facial and fingerprints are dealing with. We’re in discussions with numerous events for each merchandise and embedded options. We entered into new alliances this fiscal yr, which I talked about on my prior calls and launched new merchandise, the newest being our nano iXT which has temperature screening, masks detection and entry blocks in-built. This can be a good answer for firms in right this moment’s environments. As you all know from the previous it does take time to maneuver from launch, information to offers, however we’re inspired by the extent of curiosity and suggestions.

I’m glad to notice that we now have concluded negotiations and are in signature course of with the healthcare medical provider we now have mentioned previously. We’re shifting full steam forward to launch and we are going to embed into their methods. And this contract, we consider validates the extent of safety and ease of use of EyeLock’s expertise inside the healthcare house.

We’re additionally making progress with respect to the strategic course of for EyeLock. We signed a non-binding indication of curiosity with our largest shareholder, Beat Kahli and associated events. And due diligence is underway, technical due diligence is accomplished. The consortium is put collectively, runs the gamut of business and residential actual property, healthcare and automotive firms. We’re eager for a optimistic consequence, however after all, there are not any ensures. If this does materialize within the construction we’re discussing, it is going to carry to VOXX a powerful financing associate whereas protecting VOXX within the sport to seize the upside we now have at all times believed was there.

To summarize, we’re rising and anticipate it will proceed. Profitability has elevated considerably and we’re poised to among the finest years from a backside line perspective. Our Premium Audio and automotive companies are doing very nicely with extra alternatives on the horizon and biometric holds nice promise for us. Our stability sheet is powerful. Now we have money available and entry to capital, and we want to purchase if the transaction improves our enterprise and generates worth for shareholders. We arrange a 10b5 program to repurchase shares, however the inventory has not fallen beneath $10, thus no shares have been repurchased within the third quarter, however we are going to proceed to help our inventory and we are going to consider one of the best construction to take action shifting ahead. Now we have at all times believed that one of the best inventory help was for the corporate to ship income, and we’re exhibiting that proper now.

All in all, the workforce has carried out an incredible job and I’m very pleased with them. It has not been straightforward with many of the workers working remotely and working our Firm has been removed from regular. I thank them and I congratulate them for his or her efforts and these outcomes. Now we have a variety of alternatives forward of us, and I consider that our success this yr is a precursor and that future years maintain the promise to be even higher.

At the moment, I’ll flip the decision over to Mike after which we’ll open it up for questions. Michael.

C. Michael Stoehr — Senior Vice President and Chief Monetary Officer

Thanks, Pat. I additionally wish to want you all a Blissful New 12 months and higher days forward in 2021. As Pat lined our third quarter comparisons, I’ll tackle our 9 month year-to-date outcomes and all figures off of the fiscal 2021 and monetary 2020 9 months ended November 30, 2020 and November 30, 2019 until famous in any other case. I’ll then cowl our stability sheet and we’ll open up the decision for questions.

Beginning with the revenue assertion. We reported internet gross sales of $401.1 million in comparison with $293.8 million, up $107.3 million or 36.5%. All segments reported year-over-year development. Automotive Electronics phase gross sales elevated $24.9 million or 28.8%. OEM product gross sales have been down 13% as a number of prospects had shut down their vegetation earlier within the yr as a consequence of COVID. As Pat famous, quarter 3 gross sales for OEM merchandise have been up and with new applications coming on-line, we’re anticipating OEM development within the fourth quarter and shifting ahead. Aftermarket product gross sales elevated over 60%. This was pushed primarily by acquisitions of VSM and DEI subsidiaries. The primary of which occurred in fiscal 2020 fourth quarter and the opposite within the second quarter of fiscal 2021.

Shopper Electronics phase gross sales elevated $81.9 million or 39.7%. Driving this development was greater gross sales of Premium Audio merchandise which have been up near 70%. We reported $216.5 million in Premium Audio product gross sales, which is the best whole in our historical past and we’re solely 9 months from fiscal yr. Different CE product gross sales declined by over 8%, primarily pushed by our choice to exit sure classes and product strains. Lastly, the Biometric phase reported $700,000 in internet gross sales in comparison with $400,000 within the comparable fiscal 2020 interval.

Fiscal 2021 year-to-date gross margins of 29% elevated 130 foundation factors. Inside this segments automotive posted a 180 foundation level enchancment. Consider our first half of the yr was negatively impacted by a decrease automotive gross sales as a consequence of OEM shutdowns, which led to decrease absorption charges. Shopper generated 70 foundation level enchancment and gross margins for Biometrics have been up barely with nearly no influence to the P&L. Complete working bills in fiscal 2021 year-to-date have been $96.8 million, up roughly $840,000 or simply below 1%. As many know from previous outcomes and calls we now have taken steps to decrease fastened overhead and in the reduction of on non-core bills through the pandemic. Within the fiscal 2021 third quarter a few of these bills did come again as deliberate, primarily associated to payroll and headcount.

On account of our gross sales enhance, we had greater fee and web site bills associated to e-commerce actions. Moreover, acquisitions of VSM and DEI added roughly $9.4 million in whole working bills for the nine-month interval in fiscal 2021. Excluding acquisitions associated bills, different working bills declined by $8.5 million or 8.9%. We reported working revenue of $19.4 million versus an working lack of $14.7 million, this can be a $34.1 million year-over-year enchancment year-to-date, primarily as a consequence of vital gross sales will increase and better gross income. We reported whole different revenue of $2.2 million for the nine-month interval in fiscal 2021, in comparison with $7.7 million within the comparable fiscal 2020 interval. Whereas curiosity and financial institution expenses declined by roughly $300,000 and we had an $800,000 enhance in revenue associated to our 50-50 three way partnership with ASA, final yr’s 9 months included a 4.1 million acquire on the sale of actual property in Germany and an funding acquire of $800,000 from a previous funding in RX networks.

Lastly, different internet declined by $1.8 million as fiscal 2020 nine-month interval included a $1 million choose up from a life insurance coverage coverage offset by a working capital adjustment associated to our gross sales of the Hirschmann, decrease curiosity revenue, and better international foreign money losses in comparison with the prior yr interval. This led to a pre-tax revenue of $21.6 million through the first 9 months of fiscal 2021, in comparison with a pre-tax lack of $7 million in comparable interval, an enchancment of $28.6 million. Web revenue attributable to VOXX was $17.3 million as in comparison with a internet loss attributable to VOXX of $4.6 million, an enchancment of $22 million. On a fundamental and diluted per share foundation, this resulted in internet revenue per share attributable to VOXX of $0.72 and $0.71 respectively in comparison with a internet loss per fundamental particular person share of $0.19 within the nine-month interval of fiscal 2020. Lastly, we reported EBITDA of $34.1 million versus EBITDA of $7.1 million, a $27 million enchancment, and adjusted EBITDA of $35.1 million as in comparison with $3.3 million, a rise of $31.2 million.

With respect to the stability sheet, we completed the third quarter with $21.3 million in money and money equivalents. Money was used because of working capital wants and money used to fund the DEI acquisition. As you will note in our stability sheet assertion, we had a big enhance in accounts receivable because of favorable gross sales development, and our stock place is about to help greater gross sales within the fourth quarter. We anticipate to finish the fiscal yr with a year-over-year enhance in our money place. I additionally prefer to level out, we paid down the $20 million draw on our home credit score facility and had nothing excellent as of November 30, 2020.

Our whole debt place of $7.2 million as of November 30, 2020 which compares to whole debt of February 29, 2020 of $8.2 million. The present debt pertains to our Florida mortgage and that’s the solely debt we carried in November 30. Along with our optimistic money place, we now have roughly $107 million out there below our credit score facility. Our stability sheet is in glorious form and may enhance additional as we shut out the yr.

Operator, we might now be able to open up the decision for questions.

Patrick M. Lavelle — President and Chief Government Officer

Thanks, Mike.

Questions and Solutions:

Operator

Thanks. [Operator Instructions] And we now have a query from Beat Kahli with Kahli Holdings. Please go forward.

Beat Kahli — Kahli Holdings — Analyst

Good morning, everyone. Good morning, John. Good morning, Pat.

Patrick M. Lavelle — President and Chief Government Officer

Good morning, Beat.

Beat Kahli — Kahli Holdings — Analyst

Actually, I don’t actually have a query. Good morning. Actually, I don’t actually have a query. I simply wish to…

John J. Shalam — Chairman of the Board

Good morning, Beat.

Beat Kahli — Kahli Holdings — Analyst

Good morning, John. I Simply wish to congratulate you to an excellent end result. I’m proud to be your largest shareholder. I’m trying ahead to work with you collectively on EyeLock and anything. Congratulations. I feel that’s the start. Working with you within the final six months has been a pleasure. I hope that we are able to conclude one other excellent enterprise with our EyeLock negotiations and simply congratulations.

Patrick M. Lavelle — President and Chief Government Officer

Thanks, Beat. And we too sit up for concluding our discussions. Thanks.

John J. Shalam — Chairman of the Board

Thanks, Beat. We admire your participation and your ongoing help. Thanks.

Operator

[Operator Instructions] And we now have a query from Dave Covas with Oberweis Asset. Please go forward.

Dave Covas — Oberweis Asset — Analyst

How are you doing guys? Nice quarter on all fronts, simply had a few questions for you. So your EBITDA margin which appears like at 11.8% for the quarter, up 400 foundation factors year-over-year. Are you able to focus on that? Parse that a bit bit simply when it comes to what have been the drivers. I do know you talked about some bills returned within the quarter, I’m guessing others didn’t, so simply curious sort of what’s sustainable going ahead on that entrance, the place that may go from right here?

Patrick M. Lavelle — President and Chief Government Officer

Effectively, after we take a look at the bills specifically, we all know that we made some deep cuts earlier within the yr that’s positively impacted the bills. A variety of these bills will come again as we transfer into the primary quarter of subsequent yr, as a result of, primarily based on the volumes and the whole lot that we’re doing and the acquisitions, we are going to carry a bit bit greater overhead. Now with that stated, we will even have full yr gross sales of the acquired firms which we didn’t have within the first half of final yr. And we anticipate that the expansion that has been generated inside the Premium Audio group will maintain primarily based on the truth that enterprise, a big a part of that enterprise has been our premium group opening up one other channel that has not affected our conventional channel. So we consider that’s sustainable as nicely we will likely be including within the Fiat Chrysler and Ford Evo gross sales in the course of the yr. So we consider that regardless that we would see a rise in overhead, we are going to see a ensuing enhance in prime line as nicely.

Dave Covas — Oberweis Asset — Analyst

Okay, that’s nice. And may you possibly can you additionally simply touch upon what the acquisitions contributed to gross sales within the quarter after which additionally the brand new distribution you guys had with Onkyo, Pioneer that I feel you stated started in September, simply sort of what that ramp appears like, how a lot did that contribute to the quarter versus the final quarter?

Patrick M. Lavelle — President and Chief Government Officer

It didn’t have a a lot of an influence within the quarter as we’re ramping up. We anticipate that even our fourth quarter, as they construct stock, as we obtain it, we actually not begin having influence for us till the primary quarter of 2022 fiscal. So far as the extra acquisitions that we’ve carried out, we don’t actually break it out however I might say it has been many of the enhance that you simply’ve seen inside the enhance that you simply’ve seen in our automotive enterprise.

Dave Covas — Oberweis Asset — Analyst

Okay, received it, thanks. And I don’t know in case you mentioned this previously, however simply curious as to your pipeline or path when it comes to additional M&A?

Patrick M. Lavelle — President and Chief Government Officer

We consider that there are going to be alternatives for good firms that had a troublesome time by way of COVID however have a powerful fundamental firm and good capabilities. We’re undoubtedly out on the M&A entrance at this level, on the lookout for alternatives that might strengthen both our Premium Audio house or our automotive enterprise. So we’re actively pursuing targets that we expect are useful to the Firm and shareholders.

C. Michael Stoehr — Senior Vice President and Chief Monetary Officer

Pat, that is Mike. On the query on the 2 acquisitions, within the 10-Q there’s a part that’ll provide you with an thought of what occurred. On Web page 2, Web page 3 or 4.

Dave Covas — Oberweis Asset — Analyst

Okay, thanks, guys.

Patrick M. Lavelle — President and Chief Government Officer

Thanks, David.

Operator

Thanks. And this concludes our Q&A for right this moment. Again to Pat.

Patrick M. Lavelle — President and Chief Government Officer

All proper. Effectively, thanks everybody to your curiosity in VOXX. Thanks for becoming a member of us right this moment. Get pleasure from the remainder of the day and please know that go to CES present the place you possibly can see all of the totally different merchandise that we’re exhibiting this yr. It’s a digital occasion and you may get on the positioning to see what’s taking place. So keep secure, keep nicely, and we’ll converse to you subsequent quarter. Thanks.

Operator

[Operator Closing Remarks]

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