Universal electronics reports fourth quarter and year-end 2022 financial results
Scottsdale, ariz.--(business wire)--universal electronics inc. (uei), (nasdaq: ueic) reported financial results for the three and twelve months ended december 31, 2022. “during the past 18 months, we have won a significant number of large customer design projects in our new higher growth markets and, at ces in january 2023, we received customer and industry recognition for our innovation, bolstering our foundation for long-term growth,” said paul arling, uei’s chairman and ceo. “however, current challenging macroeconomic conditions, especially lower consumer spending, overshadowed these achievements. results in the fourth quarter of 2022 were affected and we expect this to continue to impact our performance in the first quarter of 2023. recognizing the near-term challenges, we have continued initiatives to prioritize near-term sales projects and opportunities, refine our allocation of global product development resources and accelerate moving product service and maintenance to lower cost regions.” uei’s cfo bryan hackworth added, “our efforts to capture new markets, including climate control, security and home automation, are gaining traction, which we believe are critical to our long-term success. during 2022, they represented over 25% of our net sales. we expect the contribution from these newer channels to be even more meaningful in the future as they represent a larger market opportunity than home entertainment and they are growing at a faster rate. further, the magnitude of recently secured projects gives us confidence that net sales for the second quarter of 2023 will be stronger than the first, and the third and fourth quarters will each be better than the second. as we have proven in the past, when tested, strong companies navigate pressures and they become stronger. we plan to do the same again.” financial results for the three months ended december 31: 2022 compared to 2021 gaap net sales were $122.8 million, compared to $144.9 million; adjusted non-gaap net sales were $122.8 million, compared to $143.9 million. gaap gross margins were 26.2%, compared to 24.9%; adjusted non-gaap gross margins were 30.7%, compared to 28.4%. gaap operating loss was $1.9 million, compared to $3.3 million; adjusted non-gaap operating income was $8.3 million, compared to $10.7 million. gaap net loss was $6.9 million, or $0.54 per share, compared to $6.3 million, or $0.49 per share; adjusted non-gaap net income was $5.6 million, or $0.44 per diluted share, compared to $9.0 million, or $0.68 per diluted share. at december 31, 2022, cash and cash equivalents were $66.7 million. financial results for the twelve months ended december 31: 2022 compared to 2021 gaap net sales were $542.8 million, compared to $601.6 million; adjusted non-gaap net sales were $542.8 million, compared to $600.9 million. gaap gross margins were 28.1%, compared to 28.8%; adjusted non-gaap gross margins were 29.9%, compared to 30.2%. gaap operating income was $14.5 million, compared to $23.3 million; adjusted non-gaap operating income was $41.8 million, compared to $58.9 million. gaap net income was $0.4 million, or $0.03 per diluted share, compared to $5.3 million, or $0.39 per diluted share; adjusted non-gaap net income was $32.7 million, or $2.56 per diluted share, compared to $49.4 million, or $3.59 per diluted share. financial outlook for the first quarter of 2023, the company expects gaap net sales to range between $100 million and $110 million, compared to $132.4 million in the first quarter of 2022. gaap loss per share for the first quarter of 2023 is expected to range from $1.11 to $1.21, compared to a gaap loss per share of $0.23 in the first quarter of 2022. for the first quarter of 2023, the company expects adjusted non-gaap net sales to range between $100 million and $110 million, compared to $132.4 million in the first quarter of 2022. adjusted non-gaap loss per share is expected to range from $0.28 to $0.38 compared to adjusted non-gaap earnings per diluted share of $0.47 in the first quarter of 2022. the first quarter 2023 adjusted non-gaap loss per share estimate excludes $0.83 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, the reconciliation of adjusted non-gaap financial results and the reconciliation of adjusted non-gaap financial outlook and financial results, each located elsewhere in this press release. conference call information uei’s management team will hold a conference call today, thursday, february 16, 2023 at 4:30 p.m. et / 1:30 p.m. pt, to discuss its fourth quarter and full year 2022 earnings results, review recent activity and answer questions. to attend the call please register at the investor section of the website to receive a computer-generated dial-in number and a unique pin number. 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. 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 excess manufacturing overhead costs, factory transition costs, impairment charges on fixed assets, gain on the release from our ohio call center lease obligation guarantee, stock-based compensation expense, and depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions. 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 certain 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, foreign currency gains and losses and the related tax effects of all adjustments. adjusted non-gaap earnings per diluted 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. (nasdaq: ueic) is the global leader in wireless universal control solutions for home entertainment and smart home devices and designs, develops, manufactures, ships and supports hardware and software control and sensor technology solutions. uei partners with many fortune 500 customers, including comcast, vivint smart home, samsung, lg, sony and daikin to serve video, telecommunications, security service providers, television, smart home and hvac system manufacturers. for over 37 years, uei has been pioneering breakthrough innovations such as voice control and quickset cloud, the world's leading platform for automated set-up and control of devices in the home. 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 annual report on form 10-k for the year ended december 31, 2021 and the periodic reports we have filed since then. risks that could affect forward-looking statements in this press release include: our continued ability to timely develop and deliver products and technologies that will be accepted by our customers, both near- and long-term; our ability to successfully capture sales in new markets, including climate control, security and home automation as anticipated by management, including our recently secured project wins resulting in increased sales of our products and/or technologies in the quantities anticipated by management, both near- and long-term; our ability to manage through the continued supply chain constraints, semiconductor supply challenges, inflationary pressures and macroeconomic conditions, including continued lower consumer spending; our ability to effectively allocate our global product development resources and accelerate moving product service and maintenance to lower cost regions; the continued commitment of our customers to their product development and ordering strategies and patterns that translate into greater demand for our technologies and products as anticipated by management; our ability to continue to manage our business, inventories and cash flows to achieve our net sales, margins and earnings through financial discipline, operational efficiency and product line management; the effects that natural disasters and public health crises, including the continuation or resurgence of the covid-19 pandemic or other health-related matters, have on our business and management’s ability to anticipate and mitigate those effects; the effects and uncertainties and other factors more fully described in our reports filed with the sec; and the 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. 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 february 16, 2023, 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. universal electronics inc. consolidated balance sheets (in thousands, except share-related data) (unaudited) december 31, 2022 december 31, 2021 assets current assets: cash and cash equivalents $ 66,740 $ 60,813 accounts receivable, net 112,346 129,215 contract assets 7,996 5,012 inventories 140,181 134,469 prepaid expenses and other current assets 6,647 7,289 income tax receivable 4,130 348 total current assets 338,040 337,146 property, plant and equipment, net 62,791 74,647 goodwill 49,085 48,463 intangible assets, net 24,470 20,169 operating lease right-of-use assets 21,599 19,847 deferred income taxes 6,242 7,729 other assets 1,936 2,347 total assets $ 504,163 $ 510,348 liabilities and stockholders’ equity current liabilities: accounts payable $ 71,373 $ 92,707 line of credit 88,000 56,000 accrued compensation 20,904 24,217 accrued sales discounts, rebates and royalties 6,477 9,286 accrued income taxes 5,585 3,737 other accrued liabilities 24,134 30,840 total current liabilities 216,473 216,787 long-term liabilities: operating lease obligations 15,027 14,266 deferred income taxes 2,724 2,394 income tax payable 723 939 other long-term liabilities 810 13 total liabilities 235,757 234,399 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; 24,999,951 and 24,678,942 shares issued on december 31, 2022 and 2021, respectively 250 247 paid-in capital 326,839 314,094 treasury stock, at cost, 12,295,305 and 11,861,198 shares on december 31, 2022 and 2021, respectively (368,194 ) (355,159 ) accumulated other comprehensive income (loss) (21,187 ) (13,524 ) retained earnings 330,698 330,291 total stockholders’ equity 268,406 275,949 total liabilities and stockholders’ equity $ 504,163 $ 510,348 universal electronics inc. consolidated income statements (in thousands, except per share amounts) (unaudited) three months ended december 31, twelve months ended december 31, 2022 2021 2022 2021 net sales $ 122,758 $ 144,944 $ 542,751 $ 601,602 cost of sales 90,547 108,809 390,459 428,586 gross profit 32,211 36,135 152,292 173,016 research and development expenses 7,992 7,888 32,452 30,917 selling, general and administrative expenses 26,104 31,530 105,292 118,846 operating income (loss) (1,885 ) (3,283 ) 14,548 23,253 interest income (expense), net (1,053 ) (119 ) (2,200 ) (566 ) loss on sale of argentina subsidiary — — — (6,050 ) other income (expense), net (567 ) (406 ) (955 ) (557 ) income (loss) before provision for income taxes (3,505 ) (3,808 ) 11,393 16,080 provision for income taxes 3,400 2,522 10,986 10,779 net income (loss) $ (6,905 ) $ (6,330 ) $ 407 $ 5,301 earnings (loss) per share: basic $ (0.54 ) $ (0.49 ) $ 0.03 $ 0.39 diluted $ (0.54 ) $ (0.49 ) $ 0.03 $ 0.39 shares used in computing earnings (loss) per share: basic 12,686 13,000 12,703 13,465 diluted 12,686 13,000 12,779 13,742 universal electronics inc. consolidated statements of cash flows (in thousands) (unaudited) year ended december 31, 2022 2021 cash flows from operating activities: net income $ 407 $ 5,301 adjustments to reconcile net income to net cash provided by (used for) operating activities: depreciation and amortization 24,033 26,747 provision for credit losses (182 ) — deferred income taxes 1,377 (1,560 ) shares issued for employee benefit plan 1,199 1,092 employee and director stock-based compensation 10,013 9,969 performance-based common stock warrants — (686 ) impairment of long-term assets 2,888 3,338 loss on sale of argentina subsidiary, net of cash transferred — 5,960 changes in operating assets and liabilities: accounts receivable and contract assets 12,765 2,007 inventories (9,913 ) (14,985 ) prepaid expenses and other assets (917 ) (630 ) accounts payable and accrued liabilities (28,670 ) 870 accrued income taxes (2,074 ) 2,860 net cash provided by (used for) operating activities 10,926 40,283 cash flows from investing activities: purchase of term deposit (7,487 ) — redemption of term deposit 7,803 — acquisition of net assets of qterics, inc. (939 ) — acquisitions of property, plant and equipment (14,006 ) (12,586 ) acquisitions of intangible assets (6,579 ) (4,455 ) net cash provided by (used for) investing activities (21,208 ) (17,041 ) cash flows from financing activities: borrowings under line of credit 133,000 112,000 repayments on line of credit (101,000 ) (76,000 ) proceeds from stock options exercised 1,536 1,638 treasury stock purchased (13,035 ) (59,664 ) net cash provided by (used for) financing activities 20,501 (22,026 ) effect of foreign currency exchange rates on cash and cash equivalents (4,292 ) 2,444 net increase (decrease) in cash and cash equivalents 5,927 3,660 cash and cash equivalents at beginning of period 60,813 57,153 cash and cash equivalents at end of period $ 66,740 $ 60,813 supplemental cash flow information: income taxes paid $ 10,922 $ 10,093 interest paid $ 2,214 $ 620 universal electronics inc. reconciliation of adjusted non-gaap financial results (in thousands, except per share amounts) (unaudited) three months ended december 31, twelve months ended december 31, 2022 2021 2022 2021 net sales: net sales - gaap $ 122,758 $ 144,944 $ 542,751 $ 601,602 stock-based compensation for performance-based warrants — (1,084 ) — (686 ) adjusted non-gaap net sales $ 122,758 $ 143,860 $ 542,751 $ 600,916 cost of sales: cost of sales - gaap $ 90,547 $ 108,809 $ 390,459 $ 428,586 excess manufacturing overhead and factory transition costs (1) (2,549 ) (2,262 ) (6,670 ) (5,830 ) impairment of fixed assets (2) (2,868 ) (3,473 ) (2,868 ) (3,473 ) gain on release from ohio call center lease obligation guarantee (3) — — — 542 stock-based compensation expense (38 ) (40 ) (155 ) (156 ) adjustments to acquired tangible assets (4) (60 ) (63 ) (241 ) (257 ) adjusted non-gaap cost of sales 85,032 102,971 380,525 419,412 adjusted non-gaap gross profit $ 37,726 $ 40,889 $ 162,226 $ 181,504 gross margin: gross margin - gaap 26.2 % 24.9 % 28.1 % 28.8 % stock-based compensation for performance-based warrants — % (0.5 )% — % (0.1 )% excess manufacturing overhead and factory transition costs (1) 2.1 % 1.6 % 1.2 % 1.0 % impairment of fixed assets (2) 2.3 % 2.4 % 0.5 % 0.6 % gain on release from ohio call center lease obligation guarantee (3) — % — % — % (0.1 )% stock-based compensation expense 0.0 % 0.0 % 0.0 % 0.0 % adjustments to acquired tangible assets (4) 0.1 % 0.0 % 0.1 % 0.0 % adjusted non-gaap gross margin 30.7 % 28.4 % 29.9 % 30.2 % operating expenses: operating expenses - gaap $ 34,096 $ 39,418 $ 137,744 $ 149,763 stock-based compensation expense (2,401 ) (2,414 ) (9,858 ) (9,814 ) amortization of acquired intangible assets (281 ) (714 ) (1,153 ) (1,544 ) change in contingent consideration — — — 180 litigation costs (5) (2,004 ) (5,294 ) (6,268 ) (15,300 ) employee related restructuring and other costs — (828 ) — (717 ) adjusted non-gaap operating expenses $ 29,410 $ 30,168 $ 120,465 $ 122,568 universal electronics inc. reconciliation of adjusted non-gaap financial results (in thousands, except per share amounts) (unaudited) three months ended december 31, twelve months ended december 31, 2022 2021 2022 2021 operating income (loss): operating income (loss) - gaap $ (1,885 ) $ (3,283 ) $ 14,548 $ 23,253 stock-based compensation for performance-based warrants — (1,084 ) — (686 ) excess manufacturing overhead and factory transition costs (1) 2,549 2,262 6,670 5,830 impairment of fixed assets (2) 2,868 3,473 2,868 3,473 gain on release from ohio call center lease obligation guarantee (3) — — — (542 ) stock-based compensation expense 2,439 2,454 10,013 9,970 adjustments to acquired tangible assets (4) 60 63 241 257 amortization of acquired intangible assets 281 714 1,153 1,544 change in contingent consideration — — — (180 ) litigation costs (5) 2,004 5,294 6,268 15,300 employee related restructuring and other costs — 828 — 717 adjusted non-gaap operating income $ 8,316 $ 10,721 $ 41,761 $ 58,936 adjusted non-gaap operating income as a percentage of net sales 6.8 % 7.5 % 7.7 % 9.8 % net income (loss): net income (loss) - gaap $ (6,905 ) $ (6,330 ) $ 407 $ 5,301 stock-based compensation for performance-based warrants — (1,084 ) — (686 ) excess manufacturing overhead and factory transition costs (1) 2,549 2,262 6,670 5,830 impairment of fixed assets (2) 2,868 3,473 2,868 3,473 gain on release from ohio call center lease obligation guarantee (3) — — — (542 ) stock-based compensation expense 2,439 2,454 10,013 9,970 adjustments to acquired tangible assets (4) 60 63 241 257 amortization of acquired intangible assets 281 714 1,153 1,544 change in contingent consideration — — — (180 ) litigation costs (5) 2,004 5,294 6,268 15,300 employee related restructuring and other costs — 828 — 717 loss on sale of argentina subsidiary (6) — — — 6,050 foreign currency (gain) loss 1,075 579 1,091 1,334 income tax provision on adjustments 1,277 789 4,035 984 adjusted non-gaap net income $ 5,648 $ 9,042 $ 32,746 $ 49,352 diluted shares used in computing earnings (loss) per share: gaap 12,686 13,000 12,779 13,742 adjusted non-gaap 12,729 13,214 12,779 13,742 diluted earnings (loss) per share: diluted earnings (loss) per share - gaap $ (0.54 ) $ (0.49 ) $ 0.03 $ 0.39 total adjustments $ 0.99 $ 1.16 $ 2.53 $ 3.21 adjusted non-gaap diluted earnings per share $ 0.44 $ 0.68 $ 2.56 $ 3.59 (1) the three and twelve months ended december 31, 2022 and 2021 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. in addition, the three and twelve months ended december 31, 2022 include normal start-up costs such as idle labor and training associated with our new factory in vietnam. we plan to commence operations in vietnam in the second quarter of 2023. (2) the three and twelve months ended december 31, 2022 consist of impairment charges related to the underutilization of fixed assets in our mexico factory. the three and twelve months ended december 31, 2021 consist of impairment charges related to underutilization of fixed assets in our china-based factories as a result of our long-term factory planning strategy of reducing our concentration risk in that region. (3) 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. (4) consists of depreciation related to the mark-up from cost to fair value of fixed assets acquired in business combinations. (5) consists of expenses related to our various litigation matters involving roku, inc. and certain other related entities including three federal district court cases, two international trade commission investigations and the defense of various inter partes reviews and appeals before the us patent and trademark board as well as other non-recurring legal matters. (6) consists of the loss recorded on the sale of our argentina subsidiary in september 2021. universal electronics inc. reconciliation of adjusted non-gaap financial outlook and financial results (in thousands, except per share amounts) (unaudited) three months ended march 31, 2023 2022 low range high range actual net sales: net sales - gaap $ 100,000 $ 110,000 $ 132,410 total adjustments (1) — — — adjusted non-gaap net sales $ 100,000 $ 110,000 $ 132,410 diluted earnings (loss) per share: loss per share - gaap $ (1.21 ) $ (1.11 ) $ (0.23 ) total adjustments (2) $ 0.83 $ 0.83 $ 0.69 adjusted non-gaap diluted earnings (loss) per share $ (0.38 ) $ (0.28 ) $ 0.47 (1) the three months ended march 31, 2023 and 2022 do not include any non-gaap adjustments to net sales. (2) the three months ended march 31, 2023 and 2022 includes adjustments for excess manufacturing overhead costs, factory transition costs, stock-based compensation expense, depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions, amortization of acquired intangibles, costs associated with certain litigation efforts, foreign currency gains and losses and the related tax impact of these adjustments.
