Universal electronics reports financial results for the second quarter 2022
Scottsdale, ariz.--(business wire)--universal electronics inc. (uei) (nasdaq: ueic) reported financial results for the three and six months ended june 30, 2022. “over the years, our resilient business model, technological innovation, commitment to service and financial discipline have built uei’s rock-solid foundation,” said paul arling, uei’s chairman and ceo. “this structure, support and strength continues to be the basis for our long-term growth. leveraging our wireless connectivity advantages, we continue to create new products, solve industry needs, penetrate additional markets and build a better future. in the second quarter, our expansion into smart home automation and hvac gained momentum, as we garnered new project wins from industry leaders in the smart home arena. these projects typically have long development cycles and even longer product life cycles, which are among the many factors that fuel our confidence in our ability to deliver long-term profitable growth, through our mission of creating smarter living.” financial results for the three months ended june 30: 2022 compared to 2021 gaap net sales were $139.1 million, compared to $150.5 million; adjusted non-gaap net sales were $139.1 million, compared to $150.6 million. gaap gross margins were 28.3%, compared to 29.7%; adjusted non-gaap gross margins were 29.1%, compared to 30.5%. gaap operating income was $5.5 million, compared to $9.0 million; adjusted non-gaap operating income was $10.1 million, compared to $15.8 million. gaap net income was $3.0 million, or $0.23 per diluted share, compared to $5.6 million or $0.40 per diluted share; adjusted non-gaap net income was $8.4 million, or $0.66 per diluted share, compared to $13.6 million, or $0.98 per diluted share. at june 30, 2022, cash, cash equivalents and term deposits were $54.0 million. financial results for the six months ended june 30: 2022 compared to 2021 gaap net sales were $271.5 million, compared to $301.0 million; adjusted non-gaap net sales were $271.5 million, compared to $301.3 million. gaap gross margins were 27.9%, compared to 30.2%; adjusted non-gaap gross margins were 29.0%, compared to 30.9%. gaap operating income was $4.9 million, compared to operating income of $17.6 million; adjusted non-gaap operating income was $18.0 million, compared to $31.5 million. gaap net income was $0.1 million, or $0.01 per diluted share, compared to $12.6 million or $0.89 per diluted share; adjusted non-gaap net income was $14.5 million, or $1.13 per diluted share, compared to $26.2 million, or $1.87 per diluted share. financial outlook for the third quarter of 2022, the company expects gaap net sales to range between $145 million and $155 million, compared to $155.6 million in the third quarter of 2021. gaap earnings per diluted share for the third quarter of 2022 are expected to range from $0.39 to $0.49, compared to a gaap loss per share of $0.07 in the third quarter of 2021. for the third quarter of 2022, the company expects adjusted non-gaap net sales to range from $145 million to $155 million, compared to $155.7 million in the third quarter of 2021. 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 $1.03 in the third quarter of 2021. the third quarter 2022 adjusted non-gaap earnings per diluted share estimate excludes $0.31 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 reiterates 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, august 4, 2022 at 4:30 p.m. et / 1:30 p.m. pt, to discuss its second quarter 2022 earnings results, review recent activity and answer questions. to access the call in the u.s. please dial 800-715-9871. the conference id is 4661619. 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 800-770-2030, conference id 4661619. 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, 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, foreign currency gains and losses 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. (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 35 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 most recent 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: customer and project wins shipping when and in the quantities anticipated by management; the continuation of and our ability to manage through supply chain issues and materials shortages, particularly with respect to our ability to obtain integrated circuits in the quantities we need; our customers continuing to limit its ordering of our products due to their own supply chain issues and materials shortages; 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 and ordering strategies and patterns that translate into greater demand for our technologies and products as anticipated by management; 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; 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 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 august 4, 2022, 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) june 30, 2022 december 31, 2021 assets current assets: cash and cash equivalents $ 46,130 $ 60,813 term deposit 7,823 — accounts receivable, net 131,941 129,215 contract assets 5,834 5,012 inventories 147,394 134,469 prepaid expenses and other current assets 6,795 7,289 income tax receivable 2,608 348 total current assets 348,525 337,146 property, plant and equipment, net 67,867 74,647 goodwill 49,044 48,463 intangible assets, net 23,080 20,169 operating lease right-of-use assets 19,048 19,847 deferred income taxes 6,487 7,729 other assets 2,093 2,347 total assets $ 516,144 $ 510,348 liabilities and stockholders’ equity current liabilities: accounts payable $ 84,054 $ 92,707 line of credit 88,000 56,000 accrued compensation 21,608 24,217 accrued sales discounts, rebates and royalties 5,602 9,286 accrued income taxes 5,075 3,737 other accrued liabilities 29,099 30,840 total current liabilities 233,438 216,787 long-term liabilities: operating lease obligations 13,078 14,266 deferred income taxes 2,708 2,394 income tax payable 939 939 other long-term liabilities 867 13 total liabilities 251,030 234,399 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; 24,861,624 and 24,678,942 shares issued on june 30, 2022 and december 31, 2021, respectively 249 247 paid-in capital 319,854 314,094 treasury stock, at cost, 12,215,756 and 11,861,198 shares on june 30, 2022 and december 31, 2021, respectively (366,370 ) (355,159 ) accumulated other comprehensive income (loss) (18,988 ) (13,524 ) retained earnings 330,369 330,291 total stockholders’ equity 265,114 275,949 total liabilities and stockholders’ equity $ 516,144 $ 510,348 universal electronics inc. consolidated statements of operations (in thousands, except per share amounts) (unaudited) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 net sales $ 139,101 $ 150,491 $ 271,511 $ 301,033 cost of sales 99,730 105,829 195,872 209,972 gross profit 39,371 44,662 75,639 91,061 research and development expenses 8,637 7,676 16,443 15,618 selling, general and administrative expenses 25,237 27,965 54,260 57,811 operating income 5,497 9,021 4,936 17,632 interest income (expense), net (183 ) (127 ) (479 ) (235 ) other income (expense), net (694 ) (17 ) (334 ) 6 income before provision for income taxes 4,620 8,877 4,123 17,403 provision for income taxes 1,632 3,284 4,045 4,817 net income $ 2,988 $ 5,593 $ 78 $ 12,586 earnings per share: basic $ 0.24 $ 0.41 $ 0.01 $ 0.92 diluted $ 0.23 $ 0.40 $ 0.01 $ 0.89 shares used in computing earnings per share: basic 12,659 13,672 12,736 13,737 diluted 12,715 13,926 12,847 14,062 universal electronics inc. consolidated statements of cash flows (in thousands) (unaudited) six months ended june 30, 2022 2021 cash flows from operating activities: net income $ 78 $ 12,586 adjustments to reconcile net income to net cash provided by (used for) operating activities: depreciation and amortization 12,155 13,128 provision for credit losses (204 ) 1 deferred income taxes 1,227 1,637 shares issued for employee benefit plan 626 681 employee and director stock-based compensation 5,136 5,044 performance-based common stock warrants — 274 changes in operating assets and liabilities: accounts receivable and contract assets (5,195 ) (6,241 ) inventories (16,287 ) (1,076 ) prepaid expenses and other assets 1,329 625 accounts payable and accrued liabilities (15,001 ) (7,338 ) accrued income taxes (948 ) (2,837 ) net cash provided by (used for) operating activities (17,084 ) 16,484 cash flows from investing activities: term deposit (7,487 ) — acquisition of net assets of qterics, inc. (939 ) — acquisitions of property, plant and equipment (5,482 ) (6,206 ) acquisitions of intangible assets (3,019 ) (1,907 ) net cash provided by (used for) investing activities (16,927 ) (8,113 ) cash flows from financing activities: borrowings under line of credit 62,000 41,000 repayments on line of credit (30,000 ) (15,000 ) proceeds from stock options exercised — 991 treasury stock purchased (11,211 ) (26,684 ) net cash provided by (used for) financing activities 20,789 307 effect of foreign currency exchange rates on cash and cash equivalents (1,461 ) 1,859 net increase (decrease) in cash and cash equivalents (14,683 ) 10,537 cash and cash equivalents at beginning of period 60,813 57,153 cash and cash equivalents at end of period $ 46,130 $ 67,690 supplemental cash flow information: income taxes paid $ 3,466 $ 5,663 interest paid $ 623 $ 202 universal electronics inc. reconciliation of adjusted non-gaap financial results (in thousands, except per share amounts) (unaudited) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 net sales: net sales - gaap $ 139,101 $ 150,491 $ 271,511 $ 301,033 stock-based compensation for performance-based warrants — 131 — 274 adjusted non-gaap net sales $ 139,101 $ 150,622 $ 271,511 $ 301,307 cost of sales: cost of sales - gaap $ 99,730 $ 105,829 $ 195,872 $ 209,972 excess manufacturing overhead and factory transition costs (1) (1,026 ) (976 ) (2,934 ) (2,221 ) gain on release from ohio call center lease obligation guarantee (2) — — — 542 stock-based compensation expense (40 ) (40 ) (79 ) (77 ) adjustments to acquired tangible assets (3) (60 ) (64 ) (121 ) (129 ) adjusted non-gaap cost of sales 98,604 104,749 192,738 208,087 adjusted non-gaap gross profit $ 40,497 $ 45,873 $ 78,773 $ 93,220 gross margin: gross margin - gaap 28.3 % 29.7 % 27.9 % 30.2 % stock-based compensation for performance-based warrants — % 0.2 % — % 0.2 % excess manufacturing overhead and factory transition costs (1) 0.7 % 0.6 % 1.1 % 0.7 % gain on release from ohio call center lease obligation guarantee (2) — % — % — % (0.2 ) % stock-based compensation expense — % — % — % — % adjustments to acquired tangible assets (3) 0.1 % — % — % — % employee related restructuring — % — % — % — % adjusted non-gaap gross margin 29.1 % 30.5 % 29.0 % 30.9 % operating expenses: operating expenses - gaap $ 33,874 $ 35,641 $ 70,703 $ 73,429 stock-based compensation expense (2,596 ) (2,404 ) (5,056 ) (4,967 ) amortization of acquired intangible assets (301 ) (277 ) (576 ) (553 ) change in contingent consideration — — — 193 litigation costs (4) (605 ) (2,908 ) (4,264 ) (6,477 ) employee related restructuring and other costs — — — 111 adjusted non-gaap operating expenses $ 30,372 $ 30,052 $ 60,807 $ 61,736 universal electronics inc. reconciliation of adjusted non-gaap financial results (in thousands, except per share amounts) (unaudited) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 operating income: operating income - gaap $ 5,497 $ 9,021 $ 4,936 $ 17,632 stock-based compensation for performance-based warrants — 131 — 274 excess manufacturing overhead and factory transition costs (1) 1,026 976 2,934 2,221 gain on release from ohio call center lease obligation guarantee (2) — — — (542 ) stock-based compensation expense 2,636 2,444 5,135 5,044 adjustments to acquired tangible assets (3) 60 64 121 129 amortization of acquired intangible assets 301 277 576 553 change in contingent consideration — — — (193 ) litigation costs (4) 605 2,908 4,264 6,477 employee related restructuring and other costs — — — (111 ) adjusted non-gaap operating income $ 10,125 $ 15,821 $ 17,966 $ 31,484 adjusted pro forma operating income as a percentage of net sales 7.3 % 10.5 % 6.6 % 10.4 % net income: net income - gaap $ 2,988 $ 5,593 $ 78 $ 12,586 stock-based compensation for performance-based warrants — 131 — 274 excess manufacturing overhead and factory transition costs (1) 1,026 976 2,934 2,221 gain on release from ohio call center lease obligation guarantee (2) — — — (542 ) stock-based compensation expense 2,636 2,444 5,135 5,044 adjustments to acquired tangible assets (3) 60 64 121 129 amortization of acquired intangible assets 301 277 576 553 change in contingent consideration — — — (193 ) litigation costs (4) 605 2,908 4,264 6,477 employee related restructuring and other costs — — — (111 ) foreign currency net (gain)/loss 279 480 (58 ) 589 income tax provision on adjustments 506 733 1,414 (800 ) adjusted non-gaap net income $ 8,401 $ 13,606 $ 14,464 $ 26,227 diluted shares used in computing earnings per share: gaap 12,715 13,926 12,847 14,062 adjusted non-gaap 12,715 13,926 12,847 14,062 diluted earnings per share: diluted earnings per share - gaap $ 0.23 $ 0.40 $ 0.01 $ 0.89 total adjustments $ 0.43 $ 0.58 $ 1.12 $ 0.97 adjusted non-gaap diluted earnings per share $ 0.66 $ 0.98 $ 1.13 $ 1.87 (1) the three and six months ended june 30, 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. (2) 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. (3) consists of depreciation related to the mark-up from cost to fair value of fixed assets acquired in business combinations. (4) consists of expenses related to our various litigation matters involving roku, inc. and certain other related entities including two 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.
