Universal Electronics Reports First Quarter 2017 Financial Results

May 4, 2017

- Increases Q1’17 net sales by 7% and EPS by 30% over Q1’16 –

 - Expands lineup of connected home control products with acquisition of RCS Technologies -

SANTA ANA, CA – Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three months ended March 31, 2017.

Paul Arling, UEI's Chairman and CEO stated, “2017 is off to a strong start. The continued rollout of advanced remote control technologies and the proliferation of connected devices supported continued strength in our subscription broadcasting, consumer electronics OEM and wireless home security businesses. With our broad portfolio of innovative home control solutions, we have continued to deepen existing customer relationships while also adding new ones – in both existing and new markets. As we announced this morning, we acquired RCS Technology and its portfolio of energy management and control products. This transaction builds on our existing business in the smart home, enables us to provide our customers with additional connected home capabilities and expands new customer acquisition opportunities in the residential, commercial and hospitality markets.”

Financial Results for the Three Months Ended March 31: 2017 Compared to 2016

  • GAAP net sales were $161.4 million, compared to $150.7 million; Adjusted Non-GAAP net sales were $162.3 million, compared to $151.5 million.
  • GAAP gross margins were 25.4%, compared to 25.0%; Adjusted Non-GAAP gross margins were 26.7%, compared to 25.6%.
  • GAAP operating loss was $0.4 million, compared to operating income of $3.0 million; Adjusted Non-GAAP operating income was $11.8 million, compared to $9.4 million.
  • GAAP net income was $0.1 million, or $0.01 per diluted share, compared to $2.7 million or $0.19 per diluted share; Adjusted Non-GAAP net income was $9.5 million, or $0.65 per diluted share, compared to $7.3 million, or $0.50 per diluted share.
  • At March 31, 2017, cash and cash equivalents were $62.7 million, compared to $50.6 million at December 31, 2016. 

Financial Outlook

Bryan Hackworth, UEI’s CFO, stated: “Advanced home entertainment platforms are becoming the new standard for subscription broadcasters and consumer electronics companies around the world.  Over the next several quarters, a significant number of our customers will be rolling out new higher-end platforms. As a result, we may, on occasion, experience greater variability in our quarterly sales growth rates as certain customers deplete their inventory stock prior to their respective product launches. However, our annual growth rates will continue to reflect the economic benefit of this industry transition and the continuing strong demand for our products and services.  Based on this, and the forecasted growth in the industries we serve, 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 second quarter of 2017, the company expects GAAP net sales to range between $171 million and $179 million, compared to $171 million in the second quarter of 2016. GAAP earnings per diluted share for the second quarter of 2017 is expected to range from $0.31 to $0.41, compared to GAAP earnings per diluted share of $0.45 in the second quarter of 2016. In the second quarter of 2017, the company expects to record between $0.8 million and $1.0 million of severance payments associated with the closure of its southern China factory.

For the second quarter of 2017, the company expects Adjusted Non-GAAP net sales to range between $172 million and $180 million, compared to $172.2 million in the second quarter of 2016. Adjusted Non-GAAP earnings per diluted share are expected to range from $0.72 to $0.82, compared to Adjusted Non-GAAP earnings per diluted share of $0.77 in the second quarter of 2016. The second quarter Adjusted Non-GAAP earnings per diluted share estimate excludes $0.41 per share related to stock-based compensation, amortization of acquired intangibles, factory inefficiencies at an underutilized factory, severance related to the consolidation of manufacturing facilities, 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, May 4, 2017 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its first quarter 2017 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 9329232.  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 9329232.

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.

Adjusted Non-GAAP net sales is defined as net sales excluding the impact of stock-based compensation for performance-based warrants. Adjusted Non-GAAP 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 Non-GAAP operating expenses are defined as operating expenses excluding amortization of intangibles acquired, stock-based compensation expense, employee related restructuring costs, litigation settlement costs, and changes in contingent consideration related to the acquisition of the net assets of Ecolink Intelligent Technology, Inc. Adjusted Non-GAAP net income is defined as net income excluding the aforementioned items and the related tax effects.  Adjusted Non-GAAP diluted earnings per share attributable to Universal Electronics Inc. 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 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 May 4, 2017. 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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Paul Arling (UEI) 714.918.9500

Becky Herrick (IR Agency) 415.433.3777

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