Universal Electronics Reports Second Quarter 2018 Financial Results
Aug. 02, 2018
SANTA ANA, Calif.--(BUSINESS WIRE)--Aug 2, 2018--Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three and six months ended June 30, 2018.
Paul Arling, UEI's chairman and CEO, stated, “As the leader in wireless universal control and sensing, we continue to create long-term growth opportunities in audio-video as well as home automation. The connected home has arrived, and the adoption of advanced, intuitive 2-way home entertainment systems enabling one-touch view and connected voice in the home has begun and will soon become the standard. The road to success is never smooth, as illustrated by our second quarter revenue, which as projected was lower than historical results. However, orders are rebounding significantly, and third quarter sales are expected to be one of the strongest in our history.
“Regardless of quarterly shifts, our commitment to shareholders remains steadfast, and we are constantly pursuing new market opportunities and operational efficiencies. We are leveraging our best-in-class global control database and technology solutions, our strength in low power radio frequency, and our scalable cloud architecture that delivers automated discovery, set-up and control to fuel our expansion into home automation markets. In fact, we expect our sales of home control and sensor devices to exceed $130 million this year. Industry experts are projecting home automation channels to grow at a double-digit rate over the next three years, and we believe we are in the early stages of home automation adoption and deployment by our current customers and new entrants which have chosen UEI as their product or technology provider. Home automation, together with the growing adoption of next-generation connected voice platforms for A/V control, fuel our strong long-term outlook.”
Financial Results for the Three Months Ended June 30: 2018 Compared to 2017GAAP net sales were $162.5 million, compared to $177.6 million; Adjusted Non-GAAP net sales were $154.9 million, compared to $177.9 million. GAAP gross margins were 16.5%, compared to 24.6%; Adjusted Non-GAAP gross margins were 25.0%, compared to 25.9%. GAAP operating loss was $9.9 million, compared to operating income of $7.3 million; Adjusted Non-GAAP operating income was $8.3 million, compared to $15.8 million. GAAP net income was $22.7 million, or $1.60 per diluted share, compared to GAAP net income of $4.7 million or $0.32 per diluted share; Adjusted Non-GAAP net income was $5.4 million, or $0.38 per diluted share, compared to $11.4 million, or $0.78 per diluted share. At June 30, 2018, cash and cash equivalents were $59.4 million, compared to $62.4 million at December 31, 2017.
Financial Results for the Six Months Ended June 30: 2018 Compared to 2017GAAP net sales were $327.2 million, compared to $339.0 million; Adjusted Non-GAAP net sales were $325.5 million, compared to $340.2 million. GAAP gross margins were 19.5%, compared to 25.0%; Adjusted Non-GAAP gross margins were 25.3%, compared to 26.3%. GAAP operating loss was $9.0 million, compared to operating income of $6.9 million; Adjusted Non-GAAP operating income was $19.6 million, compared to $27.5 million. GAAP net income was $22.1 million, or $1.55 per diluted share, compared to GAAP net income of $4.8 million or $0.33 per diluted share; Adjusted Non-GAAP net income was $14.1 million, or $1.00 per diluted share, compared to $20.6 million, or $1.40 per diluted share.
“We believe our technologies represent a critical backbone of the next phase in the trend toward the connected smart home, including AV and home automation devices,” stated UEI’s CFO Bryan Hackworth. “While our customers’ development and deployment of these advanced systems may be slower than we would like, adoption of next generation controls continues. We expect third quarter net sales to improve sequentially as well as year-over-year as a subscription broadcasting customer launched an advanced platform and multiple home automation customers increased orders. Overall, we believe our proprietary technology and strong customer relationships with set-top box, TV and home automation OEMs are the foundation for long-term growth.”
For the third quarter of 2018, the company expects GAAP net sales to range between $182 million and $190 million, compared to $175.7 million in the third quarter of 2017. GAAP earnings per diluted share for the third quarter of 2018 is expected to range from $0.38 to $0.48, compared to GAAP earnings per diluted share of $0.12 in the third quarter of 2017.
For the third quarter of 2018, the company expects Adjusted Non-GAAP net sales to range between $182 million and $190 million, compared to $175.5 million in the third quarter of 2017. Adjusted Non-GAAP earnings per diluted share are expected to range from $0.65 to $0.75, compared to Adjusted Non-GAAP earnings per diluted share of $0.81 in the third quarter of 2017. The third quarter Adjusted Non-GAAP earnings per diluted share estimate excludes $0.27 per share related to stock-based compensation, amortization of acquired intangibles, changes in contingent consideration relating to acquisitions, effects of foreign currency fluctuations and the related tax impact of these adjustments.
Conference Call Information
UEI’s management team will hold a conference call today, Thursday, August 2, 2018 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its second quarter 2018 earnings results, review recent activity and answer questions. To access the call in the U.S. please dial 877-843-0414, and for international calls dial 315-625-3071 approximately 10 minutes prior to the start of the conference. The conference ID is 3176696. The conference call will also be broadcast live at www.uei.com where it will be available for replay for one year. In addition, a replay will be available via telephone for two business days beginning two hours after the call. To listen to the replay, in the U.S. please dial 855-859-2056, and internationally dial 404-537-3406. The access code is 3176696.
Use of Non-GAAP Financial Metrics
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, UEI provides Adjusted Non-GAAP information as additional information for its operating results. References to Adjusted Non-GAAP information are to non-GAAP financial measures. These measures are not required by, in accordance with, or an alternative for, GAAP and may be different from non-GAAP financial measures used by other companies. UEI’s management uses these measures for reviewing the financial results of UEI, for budget planning purposes, and for making operational and financial decisions and believes that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, helps investors evaluate UEI’s core operating and financial performance and business trends consistent with how management evaluates such performance and trends. Additionally, management believes these measures facilitate comparisons with the core operating and financial results and business trends of competitors and other companies.
Certain elements of UEI's results of operations are presented excluding the impact of foreign currency exchange rate fluctuations (constant currency). To present this information, current period results for entities reporting in currencies other than the U.S. Dollar are translated into U.S. dollars at the average exchange rates in effect during the corresponding period of the prior fiscal year, rather than the average exchange rate in effect during the current fiscal year. Therefore, the foreign currency impact is equal to current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year. Management believes that presenting constant currency results of operations provides useful information to investors because they provide transparency to underlying performance by excluding the effect that foreign currency exchange rate fluctuations have on period-to-period comparability.
Adjusted Non-GAAP net sales is defined as net sales excluding the impact of stock-based compensation for performance-based warrants, the impact of the adoption of Accounting Standards Codification 606, "Revenue from Contracts with Customers" ("ASC 606") and the impact of foreign currency exchange rate fluctuations. Adjusted Non-GAAP gross profit is defined as gross profit excluding stock-based compensation expense, depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions, the effect of fair value adjustments to inventories acquired in business combinations that sold through during the period, amortization of intangibles acquired, excess manufacturing costs, the impact of the adoption of ASC 606 and the impact of foreign currency exchange rate fluctuations. Adjusted Non-GAAP operating expenses are defined as operating expenses excluding amortization of intangibles acquired, stock-based compensation expense, employee related restructuring costs, changes in contingent consideration related to acquisitions, the impact of the adoption of ASC 606 and the impact of foreign currency exchange rate fluctuations. Adjusted Non-GAAP net income is defined as net income excluding the aforementioned items, foreign currency gains and losses, the net gain recognized on the sale of the company's Guangzhou factory, and the related tax effects of all adjustments. Adjusted Non-GAAP diluted earnings per share is calculated using Adjusted Non-GAAP net income. A reconciliation of these financial measures to the most directly comparable GAAP financial measures is included at the end of this press release.
About Universal Electronics
Universal Electronics Inc. is the worldwide leader in universal control and sensing technologies for the smart home. For more information, please visit www.uei.com/about.
Note on Forward-looking Statements
This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including net sales, profit margin and earnings trends, estimates and assumptions; our expectations about new product introductions; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those we identify below and other risk factors that we identify in our most recently filed Annual Report on Form 10-K and the periodic reports filed thereafter. Risks that could affect forward-looking statements in this press release include the continued adoption by our customers of our advanced intuitive 2-way home entertainment systems and technologies as anticipated by management, including our one-touch view and voice control technologies; the growth of the home automation markets and growth of the sales of our products occurring during the third quarter and into the future as expected by management; and the continued importance of our global control database and technology solutions; and the impact to our business due to new or modified import or export restrictions and changes in trade regulations. Any of these factors could cause actual results to differ materially from the expectations we express or imply in this press release. We make these forward-looking statements as of August 2, 2018. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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