Universal Electronics Reports Third Quarter 2016 Financial Results
November 3, 2016
SANTA ANA, CA – Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three and nine months ended September 30, 2016.
Paul Arling, UEI's Chairman and CEO, stated, “Our third quarter 2016 results reflect the continued solid performance across the business, as Adjusted Pro Forma net sales and diluted earnings per share grew 6% and 21% over the prior year, respectively. Our advanced control technologies continue to be adopted by subscription broadcasting and OEM customers who are introducing next-generation home entertainment platforms around the world. While in various phases of development, this new evolution in home control presents significant long-term opportunities for UEI to increase our market share by deepening existing customer relationships and by adding new ones. In support of our growing market position, we are transitioning manufacturing to our newer, more advanced facilities in China, which underscores our commitment to improving margins, differentiating UEI in the marketplace through enhanced products and maintaining cost effective operations.”
Financial Results for the Three Months Ended September 30: 2016 Compared to 2015
- GAAP net sales were $169.2 million, compared to $160.5
million; Adjusted Pro Forma net sales were $170.3 million, compared to $160.5
- GAAP gross margins were 24.7%, compared to 26.7%;
Adjusted Pro Forma gross margins were 26.1%, compared to 26.9%.
operating income was $8.1 million, compared to $9.0 million; Adjusted Pro Forma
operating income was $15.6 million, compared to $17.2 million.
- GAAP net income was $7.8 million, or $0.53 per diluted
share, compared to $6.3 million or $0.41 per diluted share; Adjusted Pro Forma
net income was $13.9 million, or $0.94 per diluted share, compared to $11.8
million, or $0.78 per diluted share.
- At September 30, 2016, cash and cash equivalents
were $48.1 million.
Financial Results for the Nine Months Ended September 30: 2016 Compared to 2015
- GAAP net sales were $490.8 million, compared to $440.7
million; Adjusted Pro Forma net sales were $494.0 million, compared to $440.7
- GAAP gross margins were 25.0%, compared to 27.3%;
Adjusted Pro Forma gross margins were 26.0%, compared to 27.5%.
- GAAP operating income was $19.1 million, compared to
$25.5 million; Adjusted Pro Forma operating income was $39.6 million, compared
to $39.8 million.
- GAAP net income was $17.1 million, or $1.16 per diluted
share, compared to $19.8 million or $1.25 per diluted share; Adjusted Pro Forma
net income was $32.5 million, or $2.20 per diluted share, compared to $30.0
million, or $1.89 per diluted share.
Bryan Hackworth, UEI’s CFO, stated: “The evolution to more advanced control technologies within the home entertainment environment continues to provide UEI with significant long-term growth opportunities. However, over a dozen new product introductions that were scheduled to launch in the fourth quarter of 2016 have been delayed due to customer issues with readiness of their new, more advanced hardware and software systems. While the impact of these factors is reflected in our fourth quarter 2016 financial guidance, due to the long-term positive trends in our industry, we are reaffirming our long-term financial outlook. We expect average annual sales growth of 5% to 10% and average earnings per share growth of 10% to 20%.”
For the fourth quarter of 2016, the company expects GAAP net sales to range between $159.0 million and $167.0 million, compared to $162.1 million in the fourth quarter of 2015. GAAP earnings per diluted share for the fourth quarter of 2016 are expected to range from $0.29 to $0.39, compared to GAAP earnings per diluted share of $0.64 in the fourth quarter of 2015.
For the fourth quarter of 2016, the company expects Adjusted Pro Forma net sales to range between $160.0 million and $168.0 million, compared to $162.1 million in the fourth quarter of 2015. Adjusted Pro Forma earnings per diluted share are expected to range from $0.66 to $0.76, compared to Adjusted Pro Forma earnings per diluted share of $0.91 in the fourth quarter of 2015. The fourth quarter Adjusted Pro Forma earnings per diluted share estimate excludes $0.37 per share related to stock-based compensation, amortization of acquired intangibles, factory inefficiencies at an underutilized factory, changes in contingent consideration relating to the acquisition of Ecolink Intelligent Technology, Inc. and the related tax impact of these adjustments.
Conference Call Information
UEI’s management team will hold a conference call today, Thursday, November 3, 2016 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its third quarter 2016 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 3883368. The conference call will also be broadcast live over the Internet and available for replay for one year at www.uei.com. In addition, a replay of the call 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, 404-537-3406. Enter access code 3883368.
Use of Non-GAAP Financial Metrics
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, UEI provides Adjusted Pro Forma information as additional information for its operating results. References to Adjusted Pro Forma 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.
Adjusted Pro Forma net sales is defined as net sales excluding the impact of stock-based compensation for performance-based warrants. Adjusted Pro Forma gross profit is defined as gross profit excluding stock-based compensation expense, cost of goods sold and depreciation expense related to the increase in inventories and fixed assets from cost to fair market value resulting from acquisitions, and excess manufacturing overhead. Adjusted Pro Forma operating expenses are defined as operating expenses excluding amortization of intangibles acquired, stock-based compensation expense, employee related restructuring costs, litigation settlement costs, and acquisition related costs and changes in contingent consideration related to the acquisition of the net assets of Ecolink Intelligent Technology, Inc. Adjusted Pro Forma net income is defined as net income excluding the aforementioned items and the related tax effects as well as adjustments to certain deferred tax assets resulting from tax incentives at one of our China factories. Adjusted Pro Forma diluted earnings per share attributable to Universal Electronics Inc. is calculated using Adjusted Pro Forma 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 recent annual report on Form 10-K and the periodic reports filed thereafter. Risks that could affect forward-looking statements in this press release include changes in market conditions; the continued adoption of our advanced control technologies by our customers as anticipated by management, the convergence of smart home devices and technologies as anticipated by management, the introduction and acceptance of next-generation home entertainment platforms as expected by management, the pace of the economy; competitive conditions in the industries we serve, including the smart home and residential and commercial security industries; and relationships with our customers and our ability to attract new customers, our ability to successfully and profitably transition our manufacturing operations, and our continued ability to maintain and/or improve our margins and cost effective operations. 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 November 3, 2016. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.