Universal Electronics Reports Second Quarter 2015 Financial Results

Aug 6, 2015 |

- Reported net sales of $147.6 million and EPS of $0.67 -

- Signed agreement to acquire the assets of Ecolink Intelligent Technology, Inc. -

SANTA ANA, Calif.--(BUSINESS WIRE)--Aug. 6, 2015-- Universal Electronics Inc. (UEI), (NASDAQ:UEIC) reported financial results for the three and six months ended June 30, 2015.

Paul Arling, UEI's Chairman and CEO, stated: “Our second quarter financial results were in line with our expectations as we achieved net sales of $147.6 million and EPS of $0.67. It is important to note 2014 represented the most successful year in UEI’s history, making these 2015 results all the more impressive. We believe this is just the beginning. Today, we announced an agreement to acquire the assets of Ecolink, a leading provider of smart home solutions. Coupling these solutions with our existing products and technologies, we will enable the various devices in the increasingly complex home to be controlled by and/or communicate with each other. Most significantly for UEI, we now have a broader set of solutions to offer our existing service provider customers who are at the forefront of this trend.”

“In addition, just last week we reached an important milestone as QuickSet has now shipped in more than 150 million devices around the world. Industry-leading companies continue to adopt our products and technologies as they seek to provide consumers with increasingly advanced features for controlling their home entertainment devices. We saw below average order volumes from some of our customers in the second quarter as they depleted their existing inventories in advance of their new advanced product rollouts. We expect our customers to ramp up their orders for these new products in the second half of 2015.”

Adjusted Pro Forma Financial Results for the Three Months Ended June 30: 2015 Compared to 2014

Net sales were $147.6 million, compared to $146.3 million.
- Business Category revenue was $135.5 million, compared to $132.7 million. The Business Category contributed 91.8% of total net sales, compared to 90.7%.
- Consumer Category revenue was $12.1 million, compared to $13.6 million. The Consumer Category contributed 8.2% of total net sales, compared to 9.3%.
Gross margins were 27.5%, compared to 29.9%.
Operating expenses were $27.0 million, compared to $29.3 million.
Operating income was $13.5 million, compared to $14.5 million.
Net income was $10.7 million, or $0.67 per diluted share, compared to $10.6 million, or $0.66 per diluted share.
At June 30, 2015, cash and cash equivalents was $82.2 million.

Adjusted Pro Forma Financial Results for the Six Months Ended June 30: 2015 Compared to 2014

Net sales were $280.3 million, compared to $276.2 million.
Gross margins were 27.9%, compared to 29.2%.
Operating expenses were $55.6 million, compared to $57.3 million.
Operating income was $22.6 million, compared to $23.2 million.
Net income was $18.2 million, or $1.13 per diluted share, compared to $17.0 million, or $1.05 per diluted share.

Financial Outlook

For the third quarter of 2015, the company expects net sales to range between $164.0 million and $172.0 million, compared to $147.8 million in the third quarter of 2014. Adjusted pro forma earnings per diluted share for the third quarter of 2015 are expected to range from $0.77 to $0.87, compared to adjusted pro forma earnings per diluted share of $0.80 in the third quarter of 2014.

Acquisition of Assets from Ecolink Intelligent Technology, Inc.

In a separate press release, UEI announced it has agreed to acquire the assets of U.S.-based Ecolink Intelligent Technology, a leading developer of smart home technology. The company designs, develops and manufactures a wide range of innovative and intelligent wireless security and home automation products dedicated to redefining the home security experience. Ecolink has over 20 years of combined experience in the residential security industry and holds more than 25 pending and issued patents.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday, August 6, 2015 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its second quarter 2015 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 86195150. 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 86195150.

Use of Non-GAAP Financial Metrics

Non-GAAP gross margins, Non-GAAP operating expenses, and Non-GAAP net income and earnings per share are supplemental measures of the company's performance that are not required by, and are not presented in accordance with GAAP. The Non-GAAP information does not substitute for any performance measure derived in accordance with GAAP. Non-GAAP gross profit is defined as gross profit excluding depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions. Non-GAAP operating expenses are defined as operating expenses excluding amortization of intangibles acquired, employee related restructuring costs, and stock-based compensation expense. Non-GAAP net income is defined as net income from operations excluding the aforementioned items and the related tax effects. A reconciliation of Non-GAAP financial results to GAAP results is included at the end of this press release.

About Universal Electronics

Founded in 1986, Universal Electronics Inc. (UEI) is the global leader in wireless control technology for the connected home. UEI designs, develops, and delivers innovative solutions that enable consumers to control entertainment devices, digital media, and home systems. The company's broad portfolio of patented technologies and database of infrared control software have been adopted by many Fortune 500 companies in the consumer electronics, subscription broadcast, and computing industries. UEI sells and licenses wireless control products through distributors and retailers under the One For All® brand name. For additional information, visit our website at www.uei.com.

Safe Harbor Statement

This press release contains forward-looking statements that are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including the company’s ability to maintain and build its relationships with key customers; the company’s ability to anticipate the needs and wants of its customers and timely develop and deliver products that will meet those needs and wants; the timing of new product rollout orders from the company’s customers as anticipated by management; the continued trend of the home entertainment industry in providing consumers with more advanced technologies; the successful closing of the transaction between UEI and Ecolink and integration of their respective business lines; the timely development, delivery and market acceptance of products and technologies such as home security, home automation, wireless sensors and other technologies identified in this release; the continued penetration and growth of next generation consumer technologies; management's ability to manage its business to achieve its revenue and earnings as guided; and the other factors described in the company's filings with the U.S. Securities and Exchange Commission. The actual results the company achieves may differ materially from any forward-looking statement due to such risks and uncertainties. The company undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.


UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related data)
(Unaudited)

	June 30, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	82,162		$	112,521
Accounts receivable, net	103,624			97,989
Inventories, net	109,121			97,474
Prepaid expenses and other current assets	6,942			6,856
Income tax receivable	71			77
Deferred income taxes	5,160			5,048
Total current assets	307,080			319,965
Property, plant, and equipment, net	84,038			76,135
Goodwill	30,593			30,739
Intangible assets, net	23,761			24,614
Deferred income taxes	6,747			6,146
Other assets	5,706			5,471
Total assets	$	457,925		$	463,070
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	78,022		$	69,991
Line of credit	12,000			—
Accrued compensation	33,672			40,656
Accrued sales discounts, rebates and royalties	6,558			8,097
Accrued income taxes	4,293			4,263
Deferred income taxes	—			—
Other accrued expenses	13,614			13,358
Total current liabilities	148,159			136,365
Long-term liabilities:
Deferred income taxes	8,529			8,456
Income tax payable	566			566
Other long-term liabilities	2,031			2,062
Total liabilities	159,285			147,449
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding	—			—
Common stock, $0.01 par value, 50,000,000 shares authorized; 23,046,634 and 22,909,884 shares issued on June 30, 2015 and December 31, 2014, respectively	230			229
Paid-in capital	221,621			214,710
Accumulated other comprehensive income (loss)	(7,606		)	(4,446		)
Retained earnings	239,630			226,066
	453,875			436,559
Less cost of common stock in treasury, 7,657,183 and 7,008,475 shares on June 30, 2015 and December 31, 2014, respectively	(155,235		)	(120,938		)
Total stockholders’ equity	298,640			315,621
Total liabilities and stockholders’ equity	$	457,925		$	463,070


UNIVERSAL ELECTRONICS INC.
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Net sales	$	147,551	$	146,315		$	280,256	$	276,160
Cost of sales	107,271		102,757			202,567		196,056
Gross profit	40,280		43,558			77,689		80,104
Research and development expenses	4,096		4,119			8,530		8,396
Selling, general and administrative expenses	25,784		27,765			52,656		54,044
Operating income	10,400		11,674			16,503		17,664
Interest income (expense), net	104		(71		)	214		(87		)
Other income (expense), net	56		(334		)	286		(683		)
Income before provision for income taxes	10,560		11,269			17,003		16,894
Provision for income taxes	2,185		2,781			3,439		4,133
Net income	$	8,375	$	8,488		$	13,564	$	12,761
Earnings per share:
Basic	$	0.53	$	0.54		$	0.86	$	0.81
Diluted	$	0.52	$	0.53		$	0.84	$	0.79
Shares used in computing earnings per share:
Basic	15,732		15,784			15,819		15,785
Diluted	16,029		16,141			16,136		16,151


UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Six Months Ended June 30,
	2015			2014
Cash provided by operating activities:
Net income	$	13,564		$	12,761
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	9,412			8,849
Provision for doubtful accounts	138			69
Provision for inventory write-downs	1,617			1,550
Deferred income taxes	(655		)	901
Tax benefit from exercise of stock options and vested restricted stock	689			1,154
Excess tax benefit from stock-based compensation	(713		)	(1,142		)
Shares issued for employee benefit plan	593			537
Stock-based compensation	3,983			3,251
Changes in operating assets and liabilities:
Accounts receivable	(8,741		)	(12,856		)
Inventories	(14,994		)	5,095
Prepaid expenses and other assets	(378		)	134
Accounts payable and accrued expenses	1,395			10,382
Accrued income taxes	32			(1,894		)
Net cash provided by operating activities	5,942			28,791
Cash used for investing activities:
Acquisition of property, plant, and equipment	(15,655		)	(7,714		)
Acquisition of intangible assets	(1,252		)	(663		)
Net cash used for investing activities	(16,907		)	(8,377		)
Cash provided by (used for) financing activities:
Borrowings under line of credit	19,500			—
Repayments on line of credit	(7,500		)	—
Proceeds from stock options exercised	1,648			4,665
Treasury stock purchased	(34,297		)	(14,275		)
Excess tax benefit from stock-based compensation	713			1,142
Net cash provided by (used for) financing activities	(19,936		)	(8,468		)
Effect of exchange rate changes on cash	542			(478		)
Net increase (decrease) in cash and cash equivalents	(30,359		)	11,468
Cash and cash equivalents at beginning of year	112,521			76,174
Cash and cash equivalents at end of period	$	82,162		$	87,642

Supplemental Cash Flow Information:
Income taxes paid	$	2,979		$	3,182


UNIVERSAL ELECTRONICS INC.
RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS
(In thousands, except share-related data)
(Unaudited)

	Three Months Ended June 30, 2015							Three Months Ended June 30, 2014
	GAAP		Adjustments			Adjusted Pro Forma		GAAP			Adjustments			Adjusted Pro Forma
Net sales	$	147,551	$	—		$	147,551	$	146,315		$	—		$	146,315
Cost of sales ⁽¹⁾	107,271		(250		)	107,021		102,757			(236		)	102,521
Gross profit	40,280		250			40,530		43,558			236			43,794
Research and development expenses ⁽²⁾	4,096		(106		)	3,990		4,119			(100		)	4,019
Selling, general and administrative expenses ⁽³⁾	25,784		(2,725		)	23,059		27,765			(2,441		)	25,324
Operating income	10,400		3,081			13,481		11,674			2,777			14,451
Interest income (expense), net	104		—			104		(71		)	—			(71		)
Other income (expense), net	56		—			56		(334		)	—			(334		)
Income before provision for income taxes	10,560		3,081			13,641		11,269			2,777			14,046
Provision for income taxes ⁽⁴⁾	2,185		743			2,928		2,781			670			3,451
Net income	$	8,375	$	2,338		$	10,713	$	8,488		$	2,107		$	10,595
Earnings per share diluted	$	0.52	$	0.15		$	0.67	$	0.53		$	0.13		$	0.66


	Six Months Ended June 30, 2015							Six Months Ended June 30, 2014
	GAAP		Adjustments			Adjusted Pro Forma		GAAP			Adjustments			Adjusted Pro Forma
Net sales	$	280,256	$	—		$	280,256	$	276,160		$	—		$	276,160
Cost of sales ⁽⁵⁾		202,567		(501	)		202,066		196,056			(471	)		195,585
Gross profit		77,689		501			78,190		80,104			471			80,575
Research and development expenses ⁽⁶⁾		8,530		(211	)		8,319		8,319			(201	)		8,195
Selling, general and administrative expenses ⁽⁷⁾		52,656		(5,367	)		47,289		54,044			(4,902	)		49,142
Operating income		16,503		6,079			22,582		17,664			5,574			23,238
Interest income (expense), net		214		—			214		(87	)		—			(87	)
Other income (expense), net		286		—			286		(683	)		—			(683	)
Income before provision for income taxes		17,003		6,079			23,082		16,894			5,574			22,468
Provision for income taxes ⁽⁸⁾		3,439		1,483			4,922		4,133			1,346			5,479
Net income	$	13,564	$	4,596		$	18,160	$	18,160		$	4,228		$	16,989
Earnings per share diluted	$	0.84	$	0.28		$	1.13	$	0.79		$	0.26		$	1.05

⁽¹⁾		To reflect depreciation expense of $0.3 million and $0.2 million for the three months ended June 30, 2015 and 2014, respectively, related to the mark-up in fixed assets from cost to fair value as a result of acquisitions.

⁽²⁾		To reflect stock-based compensation expense for the three months ended June 30, 2015 and 2014.

⁽³⁾		To reflect amortization expense of $0.7 million for each of the three months ended June 30, 2015 and 2014 related to intangible assets acquired as part of acquisitions. In addition, to reflect stock-based compensation expense of $1.9 million and $1.5 million for the three months ended June 30, 2015 and 2014, respectively. Also, to reflect other employee related restructuring costs of $0.1 million and $0.2 million for the three months ended June 30, 2015 and 2014, respectively.

⁽⁴⁾		To reflect the tax effect of the adjustments.

⁽⁵⁾		To reflect depreciation expense of $0.5 million for each of the six months ended June 30, 2015 and 2014 related to the mark-up in fixed assets from cost to fair value as a result of acquisitions.

⁽⁶⁾		To reflect stock-based compensation expense for the six months ended June 30, 2015 and 2014.

⁽⁷⁾		To reflect amortization expense of $1.5 million for each of the six months ended June 30, 2015 and 2014 related to intangible assets acquired as part of acquisitions. In addition, to reflect stock-based compensation expense of $3.8 million and $3.0 million for the six months ended June 30, 2015 and 2014, respectively. Also, to reflect other employee related restructuring costs of $0.1 million and $0.4 million for the six months ended June 30, 2015 and 2014, respectively.

⁽⁸⁾		To reflect the tax effect of the adjustments.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150806006414/en/

Source: Universal Electronics Inc.

UEI
Paul Arling, 714-918-9500
or
IR Agency
Becky Herrick, 415-433-3777

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Universal Electronics Reports Second Quarter 2015 Financial Results

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