SANTA ANA, CA – Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three and nine months ended September 30, 2018.
“During the third quarter, we delivered sales growth, up 5% over third quarter 2017,” said Paul Arling, UEI’s chairman and CEO. “With our intuitive wireless universal control and sensing, UEI continues to capture expanding global demand for home control devices. Additionally, product advancements as well as proactive operational measures are fortifying customer relationships.
“Our innovation has expanded our presence in home automation products and technologies, which we expect to generate more than $130 million in net sales in 2018 and increase in contribution in 2019. Building on our growing cloud-enabled systems, at the International CES 2019, we plan to introduce a new voice-enabled AI product platform that promises to unify entertainment control and home automation experience. Ultimately, we provide what consumers want, the connected home,” concluded Arling.
- Financial Results for the Three Months Ended September 30: 2018 Compared to 2017
- GAAP net sales were $182.7 million, compared to $175.7 million; Adjusted Non-GAAP net sales were $184.7 million, compared to $175.5 million.
- GAAP gross margins were 22.1%, compared to 24.5%; Adjusted Non-GAAP gross margins were 23.6%, compared to 26.3%.
- GAAP operating income was $4.7 million, compared to operating income of $4.2 million; Adjusted Non-GAAP operating income was $12.2 million, compared to $15.4 million.
- GAAP net income was $1.0 million, or $0.07 per diluted share, compared to GAAP net income of $1.7 million or $0.12 per diluted share; Adjusted Non-GAAP net income was $9.7 million, or $0.69 per diluted share, compared to $11.9 million, or $0.81 per diluted share.
- At September 30, 2018, cash and cash equivalents were $42.0 million, compared to $62.4 million at December 31, 2017.
Financial Results for the Nine Months Ended September 30: 2018 Compared to 2017
- GAAP net sales were $509.9 million, compared to $514.6 million; Adjusted Non-GAAP net sales were $510.2 million, compared to $515.8 million.
- GAAP gross margins were 20.4%, compared to 24.8%; Adjusted Non-GAAP gross margins were 24.7%, compared to 26.3%.
- GAAP operating loss was $4.2 million, compared to operating income of $11.2 million; Adjusted Non-GAAP operating income was $31.7 million, compared to $43.0 million.
- GAAP net income was $23.0 million, or $1.63 per diluted share, compared to GAAP net income of $6.5 million or $0.44 per diluted share; Adjusted Non-GAAP net income was $23.8 million, or $1.69 per diluted share, compared to $32.4 million, or $2.21 per diluted share.
For the fourth quarter of 2018, the company expects GAAP net sales to range between $180 million and $188 million, compared to $181.2 million in the fourth quarter of 2017. GAAP earnings per diluted share for the fourth quarter of 2018 is expected to range from $0.10 to $0.20, compared to GAAP loss per diluted share of $1.19 in the fourth quarter of 2017.
For the fourth quarter of 2018, the company expects Adjusted Non-GAAP net sales to range between $180 million and $188 million, compared to $180.7 million in the fourth quarter of 2017. Adjusted Non-GAAP earnings per diluted share are expected to range from $0.70 to $0.80, compared to Adjusted Non-GAAP earnings per diluted share of $0.60 in the fourth quarter of 2017. The fourth quarter Adjusted Non-GAAP earnings per diluted share estimate excludes $0.60 per share related to stock-based compensation, amortization of acquired intangibles, changes in contingent consideration relating to acquisitions, effects of foreign currency fluctuations, unabsorbed manufacturing overhead resulting from underutilization, tariffs, restructuring costs and the related tax impact of these adjustments.
Conference Call Information
UEI’s management team will hold a conference call today, Thursday, November 8, 2018 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its third 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 4477623. 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 4477623.
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. dollars 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”), the revenue impact of increased U.S. tariffs on products manufactured in China and imported into the U.S. 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, the impact of increased U.S. tariffs on products manufactured in China and imported into the U.S. and costs of implementing countermeasures to mitigate this impact, 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, costs incurred related to implementing countermeasures to mitigate the impact of increased U.S. tariffs on products manufactured in China and imported into the U.S., 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.
Paul Arling, Chairman & CEO, UEI 714.918.9500; Kirsten Chapman, LHA Investor Relations 415.433.3777
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 management’s ability to manage its business to achieve its revenue, margins, and earnings as guided, including management’s ability to improve operating costs and efficiencies at acceptable levels through cost containment efforts including moving our operations and manufacturing facilities to lower cost jurisdictions and due to the effects that changes in laws, regulations and policies may have on our business including the impact of new or additional tariffs and surcharges. 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 8, 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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