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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
    million.
  • GAAP gross margins were 24.7%, compared to 26.7%;
    Adjusted Pro Forma gross margins were 26.1%, compared to 26.9%.
  • GAAP
    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
    million.
  • 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.

Financial Outlook

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.

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