Q3 2021 VOXX International Corp Earnings Call
[music] maybe.
Ladies and gentlemen, thank you for standing by and welcome to Voxx International fiscal 2021 third quarter, we sold simple.
At this time, all participants are not listen only mode. After just speaker's presentation. There will be a question and answer session to ask a question during that portion of the call you will need to press star one on your telephone. Please be advised that todays conference is being recorded if you require any progress systems. Please press Star then Cerro I will now hand it.
One friend to your speaker today, Mr., Glenn Wiener with Investor Relations. Thank you. Please go ahead.
Thank you Carmen good morning, and welcome a box International's fiscal 2021 third quarter conference call or form 10-Q as filed with the FCC and we issued our press release after close market. After market close yesterday afternoon. Both documents can be found on the IR section of our website at <unk> and our updated investor presentation.
Speaking from management today will be Pat Lavelle, President and CEO, and Michael Stoehr, Senior Vice President and Chief Financial Officer, both will have prepared remarks, and we will then open up the call for questions are chairman and founder John Shalam is also available for questions. No. Our call is being webcast live over the Internet and a replay will be available approximately one hour after the.
At least for the call.
I would like to remind everyone that except for historical information contained herein statements made on today's call and webcast that would constitute forward looking statements are based on currently available information.
Any assumes no responsibility to update any such forward looking statements and I would like to point you to the risk factors associated with our business, which are detailed in our form 10-K for the period ended February 29 2020.
Usually we are here in Las Vegas for this call at CES, but given the pandemic. The show has gone virtual this year and box has had a very large accounts.
Good.
Of the premium audio group and Pat Lavelle, President and CEO of box will be hosting keynote sessions as part of CP spotlight.
Paul will be today at three PM from Pat will be tomorrow at the same time that can courage to all investors analysts bankers call anyone joining us today to listen then you'll learn a lot about the trends in the industry and some of the new products, we have coming to market.
It also visit the Voxx virtual true for more from a from the company and our product launches for 2021. If you have any questions also please feel free to contact me directly at any time.
In closing company's business momentum continues and its outlook remains strong and the cimatron the call over to Pat now to discuss the results from prospects Scott.
Oh, Thank you Glenn Good morning, everyone. Let me start off I wish you, all a happy and healthy new year and all the best in 2021.
Our fiscal 2021 third quarter and nine months results are up substantially over last year.
There is a lot of momentum behind us, which should carry through into the fourth quarter.
Barring any unforeseen events should continue thereafter.
Third quarter net sales were up over 90 million or approximately 83% all segments posted year over year increases with the consumer segment up 74% you automotive segment of 105% and the biometrics segment up 149%.
Premium audio continues to be very strong for us as sales more than doubled year over year approximately 112%.
And we reported an increase in both OEM and aftermarket product sales within the automotive segment.
Operating income of 18.6 million was up $18.4 million.
And adjusted EBITDA of 24.5 million was up $18.7 million.
Mike is going to cover our nine month comparisons both too quickly put fiscal 2021 in perspective sales were up 36.5% and adjusted EBITDA of 35.1 million improved by over $31 million.
Our balance sheet remains in good shape.
And our cash position will increase this quarter as we move through inventory and accounts receivable.
There are so many positive things happening at box. We are very encouraged at the same time, we are mindful about the global environment as the pandemic continues.
We are running our business with this in line. Nevertheless in spite of all that we have phase we have been able to move quickly adjust overhead and growth and are poised to have one of the strongest years from an EBITDA perspective.
I'll jump into some of the segments for key updates now, but starting with the consumer electronics.
On my last quarter.
Quarter on the.
Last call last quarter, I said that we expected to see premium audio product sales growth by over $100 million this fiscal year.
And through the first nine months, we are up over $88 million or close to 70%.
Even with retail store closures throughout the year, our third quarter sales grew by approximately 112% and we're expecting strong growth in the fourth quarter and bust my prior comments stance.
During the third quarter, we saw very strong growth in the home separates category sales of home theater and several others in particular, driven by new distribution as well as within our traditional channels.
We also experienced strong growth in sales of Soundbars, Bluetooth products, and our Promedia computer speakers.
More people are working from home and staying at home, which has led to an increase spending to upgrade home auto entertainment.
We also saw a modest increase in international sales driven by our magnetic and technical brands and captured our first sales associated with our new Alliance with Onkyo Pioneer Corporation.
With our first shipments beginning in September.
This will continue to build as we started bringing in inventory.
Fiscal third quarter demand is increasing distribution is expanding and our product assortment continues to improve.
The consumer electronics segment as a whole delivered pre tax profits of $20.4 million in the fiscal 2021 third quarter compared to $9.6 million in the same fiscal 2020 period.
Within our automotive segment net sales were up 31.5 million are over 105% for the comparable third quarters with increases in both OEM and aftermarket products.
Our acquisitions of DSM and certainly have contributed to our success and are expected to continue moving forward.
The automotive industry as a whole has suffered this year due to coated with Oems shutting down plants retailers in aftermarket deal is closing stores and an overall softness in the in car sets, but they have rebounded somewhat we have weathered the industry downturn and are excited with our outlook based on the contracts we have been.
Awarded and those that were pursuing.
The new OEM programs, which we had Chrysler and Ford.
Evolved rear seat entertainment system with Amazon fire TV start this calendar year sometime in our fiscal 2022 second quarter.
These are the two big ones for us and there are several other discussions underway with both existing OEM customers and new ones.
We also announced last quarter, New OEM awards that vs unsecured with Volvo Polaris and Subaru all of which are multi year awards with varying start dates in calendar year, 21, 22 and 23.
Hey, I say, our 50 50 joint venture had a strong quarter as well driven by stronger results in the RV and heavy duty markets and we delivered $1.8 million in income this past quarter versus $1 million from fiscal 2023rd quarter.
We had some slowness if you recall in the early part of the fiscal year, but this appears to be behind us.
Our automotive segment delivered a pre tax profits of $6.6 million in fiscal 2021 third quarter versus approximately 100000 in fiscal 2020.
And when you layer in our core business with the contributions from DSME, Andy Levi and the new incremental OEM business, we have secured the future looks promising and I see no reason why our automotive business would not double from fiscal 2020 within the next three years.
Or sooner.
As for the biometrics simple there arent a lot of material updates to provide right now, but there has been momentum so.
Sales continue to increase modestly on a dollar basis up approximately $200000 in comparable third quarters, but interest is growing and iris authentication throughout many industries, given its higher level security and.
Due to the Barry is that other modalities, such as facial and fingerprints are facing.
We are in discussions with a number of parties for both products and embedded solutions.
We entered into new alliances this fiscal year, which I talked about on my prior calls and introduce new products. The latest being our NOI XT, which has temperature screening mass detection and access blocks built in.
This is a perfect solution from companies in today's environments.
As you all know from the past it does take time to move from launch beta two deals, but we are encouraged by the level of interest and feedback.
I'm happy to note that we have concluded negotiations and are in signature process with the health care medical supplier, we have discussed in the past.
We are moving full steam ahead to launch.
And we will embed into their systems.
And this contract we believe validates the level of security and ease of use of Eyelock technology within the healthcare space.
We are also making progress with respect to the strategic process for Eyelock.
We signed a non binding indication of interest with our largest shareholder be our colleagues and related parties.
And due diligence is underway technical due diligence is complete.
The consortium is put together runs the gamut of commercial and residential real estate.
GAAP care and automotive companies, we are hopeful for a positive outcome, but of course there are no guarantees. If this doesn't materialize in the structure. We're discussing it will bring to voxx a strong financing partner, while keeping box in the game to capture the upside we have always believed was there.
To summarize we are growing and expect this will continue.
Profitability has increased significantly and we are poised to one of the best years from a bottom line perspective.
Premium audio and automotive businesses are doing very well with more opportunities on the horizon and biometric holds great promise force.
Our balance sheet is strong we have cash on hand, and access to capital and we are looking to acquire if the transaction improves our business and generate value for shareholders.
We set up a tenbfive program to repurchase shares, but the stock has not fallen below $10 less no shares were repurchased in the third quarter, but we will continue to support our stock and we will evaluate the best structure to do so moving forward.
We have always believed that the best stock support was for the company to deliver profits and we are showing that right now.
All in all the team has done a great job and I am very proud of it.
It has not been easy with most of the staff working remotely and operating our company has been far from normal.
Thank them and I congratulate them for their efforts and these results.
We have a lot of opportunities ahead of us and I believe that our success. This year is a precursor.
And that future years hold the promise to be even better.
At this time I'll turn the call over to Mike.
And then we'll open it up for questions Michael.
Thanks, Pat I also would like to wish you all a happy new year and better days ahead in 2021 as Pat covered our third quarter comparisons I will address our nine month year to date results and all figures are for the fiscal 2021 and fiscal 2029 months ended November Thirtyth 2020, and.
The thirtyth to 19 unless noted otherwise otherwise.
I'll then cover our balance sheet and we'll open up the corp questions start.
Starting with the income statement we.
We reported net sales of $401.1 million compared to 293.8 million up $107.3 million or 36.5%.
All segments reported year over year growth.
Automotive electronics segment sales increased 24.9 million or 28.8%.
Oh am product sales were down 13% as several customers that shut down their plants early in the year do coded as Pat noted quarter three sales for OEM products were up and with new programs coming online we are anticipating OEM growth in the fourth quarter and moving forward.
Aftermarket product sales increased over 60%.
This was driven primarily by acquisitions of DSM and D.I. subsidiaries.
The first of which occurred in fiscal 2024th quarter and the other in the second quarter of fiscal 2021.
Consumer electronics segment sales increased $81.9 million or 39.7% dry.
Driving this growth was higher sales of premium audio products, which were up close to 70%.
We reported $216.5 million in premium audio product sales, which is the highest total in our history and we are only nine months through fiscal year.
Other CE product sales declined by over 8%, mainly driven by our decision to exit certain categories and product line.
Lastly, the biometric segment reported 700000 net sales compared to 400000 and the comparable fiscal 2020 period.
Fiscal 2021 year to date gross margins of 29% increase to 130 basis points.
Within the segments automotive posted a 180 basis point improvement.
Keep in mind, our first half of the year was negatively impacted by lower automotive sales due to OEM shutdowns, which led to lower absorption rates.
Consumer generated 70 basis point improvement in gross margins from the biometrics are up slightly with virtually no impact to the PNM.
Total operating expenses in fiscal 2021 year to date were $96.8 million up approximately.
Currently 840000 or just under 1%.
As many know from past results from calls we have taken steps to lower fixed overhead and cut back on non core expenses during the pandemic.
The fiscal 2021 third quarter. Some of these expenses did come back as planned primarily related to payroll and headcount.
As a result of our sales increase we had higher commission and website expenses related to E commerce activities.
Additionally, acquisitions of DSM NVE I added approximately $9.4 million in total operating expenses for the nine month period in fiscal 2021.
Excluding acquisitions related expenses other operating expenses declined by $8.5 million or 8.9%.
We reported operating income of $19.4 million versus an operating loss of 14.7 day.
This is a $34.1 million year over year improvement year to date, primarily due to significant sales increases and higher gross margin gross profit.
We reported total other income of $2.2 million for the nine month period in fiscal 2021 compared to $7.7 million in the comparable fiscal 2020 period.
While interest and bank charges declined by approximately 300000, and we had a 9800 and we had an 800000 increase in income related to our 50 50 joint venture with a asap.
Last years nine months included a 4.1 million gain on the sale of real estate in Germany.
And an investment gains of 800000 from a prior investment and Rx networks.
Lastly, other net declined by $1.8 million as fiscal 2029 month period included a 1 million pickup from a life insurance policy offset by working capital adjustment related to our sale the freshman.
Lower interest income and higher foreign foreign currency losses compared to the prior year period.
This led to a pre tax profit of $21.6 million. During the first nine months of fiscal 2021 compared to a pre tax loss of $7 million in comparable period, an improvement of $28.6 million.
Net income attributable to Voxx was 17.3 million as compared to a net loss attributable to box of 4.6 million an improvement of 22 million on.
On a basic and diluted per share basis. This resulted in net income share attributable box from 72 cents and 71 cents respectively.
Compared to a net loss per basic and diluted share of 19 cents in the nine month period of fiscal 2020.
Lastly, we reported EBITDA of 34.1 million versus EBITDA of 7.1 million a $27 million improvement.
And adjusted EBITDA of 35.1 million as compared to $3.3 million, an increase of $31.2 million.
With respect to the balance sheet, we finished the third quarter with 21.3 million in cash and cash equivalents cash.
Cash was used as a result, the working capital needs in cash used to fund the acquisition.
As you will see in our balance sheet statement, we had a large increase in accounts receivable as a result of favorable sales growth and our ending inventory position is set to support higher sales in the fourth quarter.
We expensed expect to end the fiscal year with a year over year increase in our cash position.
I also like to point out we paid down the 20 million draw on our domestic credit facility and had nothing outstanding as of November Thirtyth 2020.
Our total debt position of 7.2 million as of November Thirtyth 2020, which compares to total debt of February 29, 2020 of 8.2 million.
The current debt relates to our Florida mortgage and that is the only debt we carried in November thirtyth.
In addition to our positive cash position, we have approximately 107 million available under our credit facility.
Our balance sheet is in excellent shape and should improve further as we close out the year.
Operator, we would now ready to open up the call for questions.
Okay. Thank you.
And ladies and gentlemen to ask a question same day press star one on your telephone keypad till we try a question press the pound or cash king.
Please stand by while we compile that Ken a roster once again, congrats started wanting to get into cash.
And we have a question from the calibers Cali Holdings. Please go ahead.
Good morning, everybody good morning, John Good morning, Pat.
Hi, good.
Good morning, honestly I don't for your morning, Jess Monika Good morning, John just want to congratulate you to an outstanding results I'm proud to be your largest shareholder im looking forward to work this through together I'm off.
Anything else congratulation I think thats the beginning working.
Working with you in the last six months has been a pleasure.
I hope that we can preclude another outstanding.
I'm sure it is our eyelock negotiations.
Jeff Congratulations.
Thank you be up and.
And we do look forward to concluding our discussions thank you.
Hey, John Brown.
We appreciate your participation your own day shipboard communicate.
True.
Again, ladies and gentlemen, if you have a question or comment just press Star then one from a net.
And we have a question from today's call the Asquith otherwise assets. Please go ahead.
Hi, John guys, great quarter on all fronts said a couple of questions for you.
So your EBITDA margin, which looks like.
But 11.8% for the quarter up 400 basis points year over year can you.
The skus that parse that a little bit cautious in terms of what were the drivers I know you mentioned some expenses returned in the quarter.
Im guessing others didn't so just curious kind of whats sustainable going forward I'm not from.
Where that can go from here.
Well when we look at the the expenses in particular, we know that we made some deep cuts earlier in the year.
That's positively impacted the expenses a lot of those expenses will come back.
As we move into the first quarter of next year.
Because based on the volume so everything that we're doing.
And the acquisitions.
We will carry a little bit higher overhead now with that said.
We will also have full year sales of the acquired companies, which we did not have in the first half from last year.
And we expect that the the growth.
It has been generated within the premium audio growth.
We'll sustain based on the fact that that that business a large part of that business has been our premium growth opening up another channel that has not affected our traditional channel. So we believe that as sustainable.
As well, we will be adding in.
The three of Chrysler and Ford evolve sales in the middle of the year. So.
We believe that.
Even though we might see an increase in overhead we.
We will see a resulting increase from top line as well.
Okay, that's great and can you can you also comment John.
What the acquisitions contributed to sales in the quarter and then also the new distribution you guys had a bunch of pioneer that I think you'd be said began in September.
Just kind of what that ramp looks like how much did that contribute to the quarter versus going for.
It Didnt have a lot much of an impact in the quarter as we are ramping up we expect that even our fourth quarter.
As a as they build inventory as we receive it we are really not start having impact for us until the first quarter of.
2022 fiscal as far as the.
The additional.
Acquisitions that we've done we don't really break it out but I could say it has been most of the increase that you've seen.
Within.
The increase that you've seen in our automotive business.
Okay got it thank you and I don't know if you've discussed in the past, but just curious as to your.
The pipeline or path in terms of further M&A.
You know, we believe that there there are going to be opportunities for good companies.
With that.
Had a difficult time from covert.
And but to have a strong basic company and good capabilities.
We are definitely out on the M&A front at this point looking.
Looking for opportunities that would strengthen either our premium audio space.
For our automotive business. So we are actively pursuing.
Targets that we think are beneficial to the company and the shareholders.
Pat This is Mike is that on the question on into the two acquisitions in the 10-Q. There is a section will give you an idea of what happened.
On page two John.
Like page three or four.
Okay. Thank you guys.
Thank you Dave.
Thank you and this concludes our cash on a per today back to Pat.
Alright, well. Thank you everyone for your interest in box. Thank you for joining us today.
Enjoys the rest of the day and please know that the visit CES show.
Where you could see all the different products that we are.
Showing this year. It is a digital event and you can get on the site to see what's happening.
So stay say stay well and we'll speak to you next quarter. Thank you.
And with that ladies and gentlemen, thank you for participating in today's conference you may now disconnect have a great.
[music].