Canada markets close in 2 hours 23 minutes
  • S&P/TSX

    20,604.42
    +60.31 (+0.29%)
     
  • S&P 500

    4,377.13
    +50.62 (+1.17%)
     
  • DOW

    34,365.67
    +204.89 (+0.60%)
     
  • CAD/USD

    0.7828
    -0.0024 (-0.31%)
     
  • CRUDE OIL

    87.25
    +0.64 (+0.74%)
     
  • BTC-CAD

    47,300.04
    +898.01 (+1.94%)
     
  • CMC Crypto 200

    843.69
    +1.23 (+0.15%)
     
  • GOLD FUTURES

    1,786.90
    -8.10 (-0.45%)
     
  • RUSSELL 2000

    1,930.10
    -1.19 (-0.06%)
     
  • 10-Yr Bond

    1.7890
    -0.0180 (-1.00%)
     
  • NASDAQ

    13,583.35
    +230.57 (+1.73%)
     
  • VOLATILITY

    29.82
    -0.67 (-2.20%)
     
  • FTSE

    7,466.07
    -88.24 (-1.17%)
     
  • NIKKEI 225

    26,717.34
    +547.04 (+2.09%)
     
  • CAD/EUR

    0.7018
    -0.0024 (-0.34%)
     

Universal Electronics Reports Financial Results for the Third Quarter 2021

  • Oops!
    Something went wrong.
    Please try again later.
·20 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • UEIC

SCOTTSDALE, Ariz., November 04, 2021--(BUSINESS WIRE)--Universal Electronics Inc. (UEI) (NASDAQ: UEIC) reported financial results for the three and nine months ended September 30, 2021.

"We continue to see long-term demand for innovative home entertainment and automation control solutions," said Paul Arling, UEI’s chairman and CEO. "However, macro-economic pressures have persisted. Although third quarter sales were impacted more than anticipated by shipping delays as well as ongoing component shortages, our product mix maintained strong gross margins. Our continued cost controls yielded a record bottom line for both the third quarter and nine months ended September 30, 2021.

"We are leveraging 35 plus years’ experience to navigate these immediate challenges. In the third quarter, we secured multiple design wins for control products in the HVAC and home automation channels. As is typical, these long-lived projects are awarded well ahead of shipping dates; therefore, related revenue is expected in late 2022 and 2023. Our goal is to replicate the success we’ve enjoyed in home entertainment, and we are excited to broaden our foothold in other channels. As always, our vision remains focused on our long-term global opportunity, and we are confident we have the technological innovation, operational prowess, and financial strength to lead the industry."

Financial Results for the Three Months Ended September 30: 2021 Compared to 2020

  • GAAP net sales were $155.6 million, compared to $153.5 million; Adjusted Non-GAAP net sales were $155.7 million, compared to $153.7 million.

  • GAAP gross margins were 29.4%, compared to 28.8%; Adjusted Non-GAAP gross margins were 30.4%, compared to 30.0%.

  • GAAP operating income was $8.9 million, compared to $10.2 million; Adjusted Non-GAAP operating income was $16.7 million, compared to $17.0 million.

  • GAAP net loss was $1.0 million, or $0.07 per share, compared to net income of $6.2 million or $0.43 per diluted share; Adjusted Non-GAAP net income was $14.1 million, or $1.03 per diluted share, compared to $13.1 million, or $0.92 per diluted share.

  • At September 30, 2021, cash and cash equivalents were $58.8 million.

Financial Results for the Nine Months Ended September 30: 2021 Compared to 2020

  • GAAP net sales were $456.7 million, compared to $458.4 million; Adjusted Non-GAAP net sales were $457.1 million, compared to $458.9 million.

  • GAAP gross margins were 30.0%, compared to 27.3%; Adjusted Non-GAAP gross margins were 30.8%, compared to 29.8%.

  • GAAP operating income was $26.5 million, compared to $24.8 million; Adjusted Non-GAAP operating income was $48.2 million, compared to $46.5 million.

  • GAAP net income was $11.6 million, or $0.84 per diluted share, compared to $26.4 million or $1.86 per share; Adjusted Non-GAAP net income was $40.3 million, or $2.90 per diluted share, compared to $37.3 million, or $2.63 per diluted share.

Financial Outlook

For the fourth quarter of 2021, the company expects GAAP net sales to range between $143 million and $158 million, compared to $156.3 million in the fourth quarter of 2020. GAAP earnings per diluted share for the fourth quarter of 2021 are expected to range from $0.10 to $0.25, compared to a GAAP earnings per diluted share of $0.86 in the fourth quarter of 2020.

For the fourth quarter of 2021, the company expects Adjusted Non-GAAP net sales to range from $143 million to $158 million, compared to $156.4 million in the fourth quarter of 2020. Adjusted Non-GAAP earnings per diluted share are expected to range from $0.65 to $0.80, compared to Adjusted Non-GAAP earnings per diluted share of $1.14 in the fourth quarter of 2020. The fourth quarter 2021 Adjusted Non-GAAP earnings per diluted share estimate excludes $0.55 per share related to, among other things, excess manufacturing overhead costs, stock-based compensation, amortization of acquired intangibles, litigation costs, foreign currency gains and losses and the related tax impact of these adjustments. For a more detailed explanation of Non-GAAP measures, please see the Use of Non-GAAP Financial Metrics discussion and the Reconciliation of Adjusted Non-GAAP Financial Results, each located elsewhere in this press release.

The company continues to believe in its long-term growth targets of sales between 5% and 10% and EPS between 10% and 20%.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday, November 4, 2021 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its third quarter 2021 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 15 minutes prior to the start of the conference. The conference ID is 8575919. The conference call will also be broadcast live on the investor section of the UEI website 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 8575919.

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. Management believes that providing these non-GAAP financial measures to investors, as a supplement to GAAP financial measures, help 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 revenue impact of stock-based compensation for performance-based warrants. Adjusted Non-GAAP gross profit is defined as gross profit excluding the impact of additional Section 301 U.S. tariffs on products manufactured in China and imported into the U.S., excess manufacturing overhead costs, including those related to the COVID-19 pandemic, factory transition costs, loss on the sale of our Ohio call center, gain on the release from our Ohio call center lease obligation guarantee, stock-based compensation expense, depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions and employee related restructuring costs. Adjusted Non-GAAP operating expenses are defined as operating expenses excluding stock-based compensation expense, amortization of intangibles acquired, changes in contingent consideration related to acquisitions, costs associated with our International Trade Commission litigation efforts, and employee related restructuring and other costs. Adjusted Non-GAAP net income is defined as net income excluding the aforementioned items, the loss on the sale of our Argentina subsidiary, the reversal of a social insurance accrual related to our Guangzhou entity, which was sold in 2018, foreign currency gains and losses, the related tax effects of all adjustments and the effect of a reversal of a reserve of an uncertain tax position related to our Guangzhou entity, which was sold in 2018. 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

Founded in 1986, Universal Electronics Inc. (NASDAQ: UEIC) is the global leader in wireless universal control solutions for home entertainment and smart home devices. We design, develop, manufacture, ship and support control and sensor technology solutions and a broad line of universal control systems, audio video accessories, and intelligent wireless security and smart home products. Our products and solutions are used by the world's leading brands in the video services, consumer electronics, security, home automation, climate control and home appliance markets. For more information, visit www.uei.com.

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 for the year ended December 31, 2020, and quarterly and periodic reports we have filed with the Securities Exchange Commission (the "SEC") since then. Risks that could affect forward-looking statements in this press release include: our ability to continue anticipating the needs and wants of our customers, and timely develop and deliver products and technologies that will be accepted by our customers; the continued commitment of our customers to their product development strategies that translate into greater demand for our technologies and products as anticipated by management; the continued ordering pattern of our customers as anticipated by management; management's ability to manage its business to achieve its net sales, margins, and earnings through its operating efficiencies, product mix, and gross margin improvement initiatives as guided and as anticipated; our ability to manage our supply chain and logistics interruptions and delays; our ability to enhance and protect the value of our intellectual properties, including our patents and trade secrets, through our licensing and litigation efforts; the effects that natural disasters and public health crises, including the COVID-19 pandemic, have on our business and management’s ability to anticipate and mitigate those effects, including the duration, severity and scope of the COVID-19 pandemic, and the actions and restrictions that may be imposed on us and our operations by federal, state, local and international public health and governmental authorities to contain and combat the outbreak and spread of COVID-19, each of which may exacerbate one or more of the aforementioned risks; the impact to our business stemming from the recent press report and Senate inquiry regarding the Chinese work force used in one of our China factories; effects and uncertainties and other factors more fully described in our reports filed with the SEC; and effects that changes in or enhanced use of laws, regulations and policies may have on our business including the impact of trade regulations pertaining to importation of our products and the tariffs imposed upon them. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Further, 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 4, 2021, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

– Tables Follow –

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

September 30, 2021

December 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

58,825

$

57,153

Accounts receivable, net

139,894

129,433

Contract assets

9,173

9,685

Inventories

123,981

120,430

Prepaid expenses and other current assets

6,155

6,828

Income tax receivable

2,877

3,314

Total current assets

340,905

326,843

Property, plant and equipment, net

79,199

87,285

Goodwill

48,510

48,614

Intangible assets, net

20,695

19,710

Operating lease right-of-use assets

17,726

19,522

Deferred income taxes

4,345

5,564

Other assets

2,144

2,752

Total assets

$

513,524

$

510,290

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

85,635

$

83,229

Line of credit

53,000

20,000

Accrued compensation

24,982

28,931

Accrued sales discounts, rebates and royalties

7,035

10,758

Accrued income taxes

1,598

3,535

Other accrued liabilities

32,522

33,057

Total current liabilities

204,772

179,510

Long-term liabilities:

Operating lease obligations

11,948

13,681

Contingent consideration

292

Deferred income taxes

180

1,913

Income tax payable

1,054

1,054

Other long-term liabilities

332

539

Total liabilities

218,286

196,989

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; 24,627,589 and 24,391,595 shares issued on September 30, 2021 and December 31, 2020, respectively

246

244

Paid-in capital

311,964

302,084

Treasury stock, at cost, 11,476,672 and 10,618,002 shares on September 30, 2021 and December 31, 2020, respectively

(339,712)

(295,495)

Accumulated other comprehensive income (loss)

(13,881)

(18,522)

Retained earnings

336,621

324,990

Total stockholders’ equity

295,238

313,301

Total liabilities and stockholders’ equity

$

513,524

$

510,290

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

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net sales

$

155,625

$

153,505

$

456,658

$

458,416

Cost of sales

109,805

109,349

319,777

333,244

Gross profit

45,820

44,156

136,881

125,172

Research and development expenses

7,411

7,696

23,029

22,979

Selling, general and administrative expenses

29,505

26,214

87,316

77,441

Operating income

8,904

10,246

26,536

24,752

Interest income (expense), net

(212)

(268)

(447)

(1,272)

Loss on sale of Argentina subsidiary

(6,050)

(6,050)

Accrued social insurance adjustment

9,464

Other income (expense), net

(157)

(1,646)

(151)

(1,263)

Income before provision for income taxes

2,485

8,332

19,888

31,681

Provision for income taxes

3,440

2,164

8,257

5,267

Net income (loss)

$

(955)

$

6,168

$

11,631

$

26,414

Earnings (loss) per share:

Basic

$

(0.07)

$

0.44

$

0.85

$

1.90

Diluted

$

(0.07)

$

0.43

$

0.84

$

1.86

Shares used in computing earnings per share:

Basic

13,392

13,928

13,622

13,935

Diluted

13,392

14,205

13,920

14,189

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

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net income

$

11,631

$

26,414

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

19,719

22,857

Provision for credit losses

1

271

Deferred income taxes

(483)

503

Shares issued for employee benefit plan

977

959

Employee and director stock-based compensation

7,516

6,854

Performance-based common stock warrants

398

525

Impairment of long-term assets

57

Loss on sale of Argentina subsidiary, net of cash transferred

5,960

Accrued social insurance adjustment

(9,464)

Loss on sale of Ohio call center

712

Changes in operating assets and liabilities:

Accounts receivable and contract assets

(12,129)

11,556

Inventories

(4,466)

30,466

Prepaid expenses and other assets

2,872

601

Accounts payable and accrued liabilities

(7,416)

(50,507)

Accrued income taxes

(1,664)

2,023

Net cash provided by operating activities

22,916

43,827

Cash flows from investing activities:

Acquisitions of property, plant and equipment

(8,782)

(10,864)

Acquisitions of intangible assets

(3,626)

(5,254)

Payment on sale of Ohio call center

(500)

Net cash used for investing activities

(12,408)

(16,618)

Cash flows from financing activities:

Borrowings under line of credit

71,000

70,000

Repayments on line of credit

(38,000)

(88,000)

Proceeds from stock options exercised

991

Treasury stock purchased

(44,217)

(9,822)

Contingent consideration payments in connection with business combinations

(3,091)

Net cash used for financing activities

(10,226)

(30,913)

Effect of foreign currency exchange rates on cash and cash equivalents

1,390

(3,452)

Net increase (decrease) in cash and cash equivalents

1,672

(7,156)

Cash and cash equivalents at beginning of period

57,153

74,302

Cash and cash equivalents at end of period

$

58,825

$

67,146

Supplemental cash flow information:

Income taxes paid

$

8,235

$

3,242

Interest paid

$

375

$

1,404

UNIVERSAL ELECTRONICS INC.
RECONCILIATION OF ADJUSTED NON-GAAP FINANCIAL RESULTS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net sales:

Net sales - GAAP

$

155,625

$

153,505

$

456,658

$

458,416

Stock-based compensation for performance-based warrants

124

187

398

525

Adjusted Non-GAAP net sales

$

155,749

$

153,692

$

457,056

$

458,941

Cost of sales:

Cost of sales - GAAP

$

109,805

$

109,349

$

319,777

$

333,244

Section 301 U.S. tariffs on goods imported from China (1)

(3,523)

Excess manufacturing overhead and factory transition costs (2)

(1,347)

(1,618)

(3,568)

(6,346)

Loss on sale of Ohio call center (3)

(570)

Gain on release from Ohio call center lease obligation guarantee (4)

542

Stock-based compensation expense

(39)

(36)

(116)

(146)

Adjustments to acquired tangible assets (5)

(65)

(66)

(194)

(198)

Employee related restructuring

(204)

Adjusted Non-GAAP cost of sales

108,354

107,629

316,441

322,257

Adjusted Non-GAAP gross profit

$

47,395

$

46,063

$

140,615

$

136,684

Gross margin:

Gross margin - GAAP

29.4

%

28.8

%

30.0

%

27.3

%

Stock-based compensation for performance-based warrants

0.1

%

0.1

%

0.1

%

0.1

%

Section 301 U.S. tariffs on goods imported from China (1)

%

%

%

0.8

%

Excess manufacturing overhead and factory transition costs (2)

0.9

%

1.1

%

0.8

%

1.4

%

Loss on sale of Ohio call center (3)

%

%

%

0.1

%

Gain on release from Ohio call center lease obligation guarantee (4)

%

%

(0.1)

%

%

Stock-based compensation expense

0.0

%

0.0

%

0.0

%

0.0

%

Adjustments to acquired tangible assets (5)

0.0

%

0.0

%

0.0

%

0.0

%

Employee related restructuring

%

%

%

0.1

%

Adjusted Non-GAAP gross margin

30.4

%

30.0

%

30.8

%

29.8

%

Operating expenses:

Operating expenses - GAAP

$

36,916

$

33,910

$

110,345

$

100,420

Stock-based compensation expense

(2,433)

(2,224)

(7,400)

(6,708)

Amortization of acquired intangible assets

(277)

(1,232)

(830)

(4,023)

Change in contingent consideration

(13)

204

180

2,428

Litigation costs (6)

(3,529)

(1,614)

(10,006)

(1,614)

Employee related restructuring and other costs

111

(287)

Adjusted Non-GAAP operating expenses

$

30,664

$

29,044

$

92,400

$

90,216

UNIVERSAL ELECTRONICS INC.
RECONCILIATION OF ADJUSTED NON-GAAP FINANCIAL RESULTS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating income:

Operating income - GAAP

$

8,904

$

10,246

$

26,536

$

24,752

Stock-based compensation for performance-based warrants

124

187

398

525

Section 301 U.S. tariffs on goods imported from China (1)

3,523

Excess manufacturing overhead and factory transition costs (2)

1,347

1,618

3,568

6,346

Loss on sale of Ohio call center (3)

570

Gain on release from Ohio call center lease obligation guarantee (4)

(542)

Stock-based compensation expense

2,472

2,260

7,516

6,854

Adjustments to acquired tangible assets (5)

65

66

194

198

Amortization of acquired intangible assets

277

1,232

830

4,023

Change in contingent consideration

13

(204)

(180)

(2,428)

Litigation costs (6)

3,529

1,614

10,006

1,614

Employee related restructuring and other costs

(111)

491

Adjusted Non-GAAP operating income

$

16,731

$

17,019

$

48,215

$

46,468

Adjusted pro forma operating income as a percentage of net sales

10.7

%

11.1

%

10.5

%

10.1

%

Net income (loss):

Net income (loss) - GAAP

$

(955)

$

6,168

$

11,631

$

26,414

Stock-based compensation for performance-based warrants

124

187

398

525

Section 301 U.S. tariffs on goods imported from China (1)

3,523

Excess manufacturing overhead and factory transition costs (2)

1,347

1,618

3,568

6,346

Loss on sale of Ohio call center (3)

570

Gain on release from Ohio call center lease obligation guarantee (4)

(542)

Stock-based compensation expense

2,472

2,260

7,516

6,854

Adjustments to acquired tangible assets (5)

65

66

194

198

Amortization of acquired intangible assets

277

1,232

830

4,023

Change in contingent consideration

13

(204)

(180)

(2,428)

Litigation costs (6)

3,529

1,614

10,006

1,614

Employee related restructuring and other costs

(111)

491

Loss on sale of Argentina subsidiary (7)

6,050

6,050

Accrued social insurance adjustment (8)

(9,464)

Foreign currency net (gain)/loss

166

1,597

755

1,388

Income tax provision on adjustments

995

(1,408)

195

(1,483)

Other income tax adjustments (9)

(1,303)

Adjusted Non-GAAP net income

$

14,083

$

13,130

$

40,310

$

37,268

Diluted shares used in computing earnings per share:

GAAP

13,392

14,205

13,920

14,189

Adjusted Non-GAAP

13,636

14,205

13,920

14,189

Diluted earnings (loss) per share:

Diluted earnings (loss) per share - GAAP

$

(0.07)

$

0.43

$

0.84

$

1.86

Total adjustments

$

1.10

$

0.49

$

2.06

$

0.76

Adjusted Non-GAAP diluted earnings per share

$

1.03

$

0.92

$

2.90

$

2.63

(1)

The nine months ended September 30, 2020 include costs directly attributable to the additional Section 301 U.S. tariffs implemented in 2018 on goods manufactured in China and imported into the U.S.

(2)

The three and nine months ended September 30, 2021 and 2020 include excess manufacturing overhead costs due to the expansion of our manufacturing facility in Mexico where products destined for the U.S. market are now manufactured. These products destined for the U.S. market were previously manufactured in China. Additionally, the nine months ended September 30, 2020 includes excess manufacturing overhead costs incurred as we temporarily shut-down our China and Mexico-based factories as a result of the COVID-19 pandemic.

(3)

Consists of the loss recorded on the sale of our Ohio call center in February 2020.

(4)

Consists of the gain associated with the January 2021 release from our guarantee of the lease obligation related to our Ohio call center which was sold in February 2020.

(5)

Consists of depreciation related to the mark-up from cost to fair value of fixed assets acquired in business combinations.

(6)

Consists of expenses related to our International Trade Commission ("ITC") investigation of Roku, Inc. and certain other related entities. We have requested the ITC to issue a permanent limited exclusion order prohibiting the importation of certain products into the United States due to their infringement of our patents.

(7)

Consists of the loss recorded on the sale of our Argentina subsidiary in September 2021.

(8)

Consists of the reversal of a social insurance accrual related to our Guangzhou entity, which was sold in 2018. The indemnification agreement related to the sale of our Guangzhou entity expired in the second quarter of 2020.

(9)

The nine months ended September 30, 2020 includes the reversal of a reserve of an uncertain tax position related to our Guangzhou entity, which was sold in 2018. The indemnification agreement related to the sale of our Guangzhou entity expired in the second quarter of 2020.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104006245/en/

Contacts

Paul Arling, Chairman & CEO, UEI, 480-530-3000
Investors: Kirsten Chapman, LHA Investor Relations, uei@lhai.com, 415-433-3777

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting