Deswell(DSWL) - 2024 Q1 - Quarterly Report

Report Overview This section details Deswell Industries, Inc.'s Form 6-K filing, H2 FY2023 unaudited financial results, cash dividend declaration, company profile, and forward-looking statements Report Filing Details This document is Deswell Industries, Inc.'s Form 6-K report filed with the SEC, disclosing unaudited financial results for the second half of the fiscal year ended March 31, 2023 - The report type is Form 6-K, filed on June 20, 2023[1] - The registrant is Deswell Industries, Inc. (Nasdaq: DSWL)[1][3] Announcement Summary The company announced unaudited financial results for the second half of the fiscal year ended March 31, 2023, and declared a cash dividend of $0.10 per share - The company released unaudited financial results for the second half of the fiscal year ended March 31, 2023[3] - A cash dividend of $0.10 per share was declared[2][11] About Deswell Deswell Industries, Inc. manufactures injection-molded plastic parts, electronic products, and metal molds in China for OEMs, serving consumer and industrial markets with diverse finished products - Deswell manufactures injection-molded plastic parts and components, electronic products and sub-assemblies, and metal molds and accessories in China[12] - Product range includes consumer and industrial plastic parts, printed circuit board assemblies, and finished products such as telephones, professional audio equipment, home audio products, and IoT products[12] Forward-Looking Statements This press release contains forward-looking statements based on current expectations and assumptions, subject to risks and uncertainties that may cause actual results to differ materially, with no obligation for the company to update them - Forward-looking statements are based on current expectations and assumptions, subject to risks and uncertainties that may cause actual results to differ materially from expectations[13] - Risk factors include reliance on a few key customers, intense competition, rising raw material prices, production delays, labor shortages, currency fluctuations, and the impact of significant health issues[13] - The company undertakes no obligation to update any forward-looking statements to conform them to actual results or revised expectations[14] Financial Highlights This section summarizes Deswell Industries, Inc.'s financial performance for the second half and full fiscal year 2023, highlighting key revenue, profit, and financial position metrics Second Half Fiscal Year 2023 Highlights For the six months ended March 31, 2023, net sales decreased by 27.6% to $33.1 million, with declines in both plastic and electronic businesses; gross margin slightly improved to 17.3%, but operating income and net income both decreased Key Financial Data for Second Half Fiscal Year 2023 | Metric | H2 FY2023 (Million USD) | H2 FY2022 (Million USD) | Change (%) | | :---------------- | :---------------------- | :---------------------- | :--------- | | Net Sales | 33.1 | 45.7 | -27.6% | | Gross Margin | 17.3% | 16.5% | +0.8 pp | | Operating Income | 0.8 | 1.7 | -52.9% | | Net Income | 2.6 | 4.1 | -36.6% | | Basic/Diluted EPS | 0.16 | 0.25 | -36.0% | - Plastic business net sales decreased by 42.2% to $7.5 million, and electronic business net sales decreased by 21.8% to $25.6 million[3] - Plastic business gross margin decreased to 17.8% due to higher labor costs and lower sales revenue; electronic business gross margin increased to 17.2% benefiting from RMB depreciation and ongoing cost control measures[4] Full Fiscal Year 2023 Highlights For the full fiscal year ended March 31, 2023, net sales decreased by 9.8% to $77.5 million; operating income slightly increased, but net income significantly dropped by 74.9% to $2.1 million, primarily due to reduced non-operating income Key Financial Data for Full Fiscal Year 2023 | Metric | FY2023 (Million USD) | FY2022 (Million USD) | Change (%) | | :---------------- | :------------------- | :------------------- | :--------- | | Net Sales | 77.5 | 86.0 | -9.8% | | Operating Income | 2.9 | 2.8 | +3.6% | | Net Income | 2.1 | 8.2 | -74.9% | | Basic/Diluted EPS | 0.13 | 0.52/0.51 | -75.0% | - The primary reason for the decrease in net income was the reduction in non-operating income in fiscal year 2023[7] Financial Position As of March 31, 2023, the company maintained a strong financial position with $22.2 million in cash and cash equivalents and $60.9 million in working capital, with no long-term or short-term borrowings Financial Position Overview | Metric | March 31, 2023 (Million USD) | March 31, 2022 (Million USD) | | :-------------------------- | :--------------------------- | :--------------------------- | | Cash and Cash Equivalents | 22.2 | 13.5 | | Working Capital | 60.9 | 63.8 | | Total Assets | 110.379 | 115.411 | | Total Liabilities | 20.730 | 24.633 | | Total Shareholders' Equity | 89.649 | 90.778 | - The company had no long-term or short-term borrowings as of March 31, 2023[8] Management Commentary This section presents the CEO's remarks on fiscal year 2023 performance, market challenges, strategic flexibility, and the board's dividend declaration CEO's Remarks CEO Edward So attributed H2 FY2023 performance to global economic headwinds and reduced consumer spending, impacting home product demand, while professional audio remained strong and supply chains improved, supported by a robust, debt-free balance sheet - Second half of fiscal year 2023 performance was impacted by global economic conditions and reduced consumer spending due to rising living costs[9] - Orders for robotic vacuum cleaners and other home products in the plastic business decreased, and demand for home entertainment products in the electronic business declined[9] - Demand for professional audio products remained strong, supply chains improved, and global chip shortages eased[9] - The company's balance sheet is strong, with ample cash and no debt, providing flexibility for product redesign and market position enhancement[10] Dividend Announcement The Board of Directors declared a cash dividend of $0.10 per share for the second half of the fiscal year ended March 31, 2023, payable on July 20, 2023, to shareholders of record on July 5, 2023; future dividends will depend on the company's growth, profitability, and cash flow needs - The Board of Directors declared a cash dividend of $0.10 per share[11] - The dividend is payable on July 20, 2023, to shareholders of record on July 5, 2023[11] - Future dividend declarations will depend on the company's future growth, profitability, and cash flow requirements[11] Consolidated Financial Statements This section presents the company's consolidated balance sheets, statements of operations and comprehensive income, and cash flows for the reported periods Consolidated Balance Sheet As of March 31, 2023, total assets were $110.379 million, a decrease from FY2022, with significant increases in cash and cash equivalents, while inventories, accounts receivable, and marketable securities all decreased; total liabilities and shareholders' equity also declined Key Consolidated Balance Sheet Data | Balance Sheet Item | March 31, 2023 (Thousand USD) | March 31, 2022 (Thousand USD) | Change (Thousand USD) | Change (%) | | :-------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :--------- | | Cash and Cash Equivalents | 22,160 | 13,465 | 8,695 | +64.6% | | Marketable Securities | 20,722 | 24,499 | (3,777) | -15.4% | | Accounts Receivable, Net | 15,704 | 18,195 | (2,491) | -13.7% | | Inventories | 17,325 | 23,819 | (6,494) | -27.3% | | Total Current Assets | 81,160 | 87,822 | (6,662) | -7.6% | | Total Assets | 110,379 | 115,411 | (5,032) | -4.4% | | Total Current Liabilities | 20,246 | 23,974 | (3,728) | -15.5% | | Total Liabilities | 20,730 | 24,633 | (3,903) | -15.8% | | Total Shareholders' Equity | 89,649 | 90,778 | (1,129) | -1.2% | Consolidated Statement of Operations & Comprehensive Income For the six months ended March 31, 2023, net sales decreased by 27.6%, leading to a 36.6% decline in net income; for the full year, net sales decreased by 9.8%, and net income significantly dropped by 74.9%, primarily due to changes in non-operating income Key Consolidated Statement of Operations & Comprehensive Income Data | Metric | Six Months Ended March 31, 2023 (Thousand USD) | Six Months Ended March 31, 2022 (Thousand USD) | Full Year Ended March 31, 2023 (Thousand USD) | Full Year Ended March 31, 2022 (Thousand USD) | | :----------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Sales | 33,105 | 45,708 | 77,543 | 85,980 | | Gross Profit | 5,725 | 7,532 | 12,839 | 13,952 | | Operating Income | 847 | 1,704 | 2,887 | 2,759 | | Non-operating (Expense) Income, Net | 1,737 | 2,020 | (573) | 5,308 | | Net Income Attributable to Deswell Industries, Inc. | 2,619 | 4,062 | 2,059 | 8,232 | | Basic Net Income Per Share | 0.16 | 0.25 | 0.13 | 0.52 | | Diluted Net Income Per Share | 0.16 | 0.25 | 0.13 | 0.51 | Consolidated Statement of Cash Flows For the year ended March 31, 2023, net cash from operating activities significantly increased to $12.998 million from a net outflow of $0.183 million in the prior year; net cash used in investing activities decreased, and financing activities remained stable due to dividend payments, resulting in an $8.695 million increase in cash and cash equivalents Key Consolidated Statement of Cash Flows Data | Cash Flow Activity | Full Year Ended March 31, 2023 (Thousand USD) | Full Year Ended March 31, 2022 (Thousand USD) | Change (Thousand USD) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Net Cash Provided by Operating Activities | 12,998 | (183) | 13,181 | | Net Cash Used in Investing Activities | (1,115) | (3,432) | 2,317 | | Net Cash Used in Financing Activities | (3,188) | (3,143) | (45) | | Net Increase in Cash and Cash Equivalents | 8,695 | (6,758) | 15,453 | | Cash and Cash Equivalents, End of Year | 22,160 | 13,465 | 8,695 | - Investing activities primarily included purchases of property, plant, and equipment ($0.792 million) and marketable securities ($3.469 million), partially offset by proceeds from sales of marketable securities ($3.854 million) and disposal of property, plant, and equipment ($0.067 million)[23] - Financing activities primarily included dividend payments ($3.188 million)[23] Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering management's statement, marketable securities, inventories, and earnings per share Management's Statement Management affirms that the unaudited financial statements fairly present the company's financial position, results of operations, and cash flows as of March 31, 2023, and 2022, with all adjustments being normal and recurring - The unaudited financial statements fairly present the company's financial position, results of operations, and cash flows[25] - All adjustments are of a normal and recurring nature[25] - The financial statements should be read in conjunction with the notes to the consolidated financial statements in the annual report on Form 20-F[25] Marketable Securities and Other Securities Investments As of March 31, 2023, marketable securities, primarily equity securities listed on the Hong Kong and Australian stock exchanges, had a fair value of $20.722 million, reflecting $3.57 million in unrealized losses; sales of marketable securities generated $0.461 million in gains during H2 FY2023 Marketable Securities Fair Value, Unrealized Gains/Losses, and Cost | Marketable Securities | Cost (Thousand USD) | Total Unrealized (Losses)/Gains (Thousand USD) | Fair Value (Thousand USD) | | :-------------------------- | :------------------ | :--------------------------------------------- | :------------------------ | | March 31, 2023 | 24,292 | (3,570) | 20,722 | | March 31, 2022 | 24,096 | 403 | 24,499 | - Marketable securities include equity securities listed on the Hong Kong Stock Exchange and the Australian Stock Exchange, recorded at fair value based on market quotations[28] - Gains of $0.461 million were realized from the sale of marketable securities in the second half of fiscal year 2023[28] Inventories As of March 31, 2023, total inventories decreased by 27.3% to $17.325 million, with reductions across raw materials, work-in-progress, and finished goods Major Inventory Categories | Inventory Category | March 31, 2023 (Thousand USD) | March 31, 2022 (Thousand USD) | Change (Thousand USD) | Change (%) | | :----------------- | :---------------------------- | :---------------------------- | :-------------------- | :--------- | | Raw Materials | 12,987 | 16,970 | (3,983) | -23.5% | | Work-in-Process | 2,723 | 3,904 | (1,181) | -30.2% | | Finished Goods | 1,615 | 2,945 | (1,330) | -45.1% | | Total Inventories | 17,325 | 23,819 | (6,494) | -27.3% | Earnings Per Share Basic and diluted net income per share are calculated according to ASC No. 260, with diluted EPS considering all potentially dilutive common shares; net income for both reporting periods is derived from continuing operations - Basic and diluted net income per share are calculated in accordance with ASC No. 260[30] - Basic net income per share is computed by dividing income attributable to common shareholders by the weighted average number of common shares outstanding[30] - Diluted net income per share considers all potentially dilutive common shares[30] - Net income for the six months ended March 31, 2023, and 2022, was derived from the company's continuing operations[31] Management Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed analysis of the company's financial condition and operating results for the six-month and full fiscal year periods ended March 31, 2023 General Business Overview Deswell's revenue is primarily derived from manufacturing and selling injection-molded plastic parts and components, and electronic products and sub-assemblies for audio equipment, with all manufacturing operations located in Southern China to leverage lower operating and labor costs - The company's revenue is derived from the manufacturing and sale of injection-molded plastic parts and components, and electronic products and sub-assemblies for audio equipment[33] - All manufacturing operations are conducted in Southern China to take advantage of lower operating and labor costs[33] Results of Operations - Six Months Ended March 31, 2023 Compared to Six Months Ended March 31, 2022 For the six months ended March 31, 2023, net sales significantly decreased by 27.6%, leading to substantial reductions in both operating and net income; the plastic business incurred an operating loss, while the electronic business saw improved gross margin but reduced net income due to lower sales Net Sales (Six Months) Net sales decreased by 27.6% to $33.105 million; plastic business sales fell by $5.451 million due to reduced orders for robotic vacuum cleaners and telephone equipment, while electronic business sales decreased by $7.152 million primarily from lower demand for home entertainment products and digital audio workstations Six-Month Net Sales by Business Segment | Business Segment | H2 FY2023 (Thousand USD) | H2 FY2022 (Thousand USD) | Change (Thousand USD) | Change (%) | | :--------------- | :----------------------- | :----------------------- | :-------------------- | :--------- | | Total | 33,105 | 45,708 | (12,603) | -27.6% | | Plastic Business | 7,500 (estimated) | 12,951 (estimated) | (5,451) | -42.1% | | Electronic Business | 25,605 (estimated) | 32,757 (estimated) | (7,152) | -21.8% | - Plastic business sales decreased primarily due to a $4.237 million reduction in robotic vacuum cleaner and dust collector orders, a $1.309 million decrease in telephone equipment orders, and an $0.829 million decrease in mold product orders from other existing customers[34] - Electronic business revenue decreased primarily due to a $4.96 million reduction in home entertainment product orders and a $2.192 million decrease in digital audio workstation orders from other existing customers[35] Gross Profit (Six Months) Total gross profit decreased to $5.725 million, but gross margin increased to 17.3%; plastic business gross margin declined to 17.8% due to higher labor costs, while electronic business gross margin rose to 17.2% benefiting from RMB depreciation and cost control measures Six-Month Gross Profit and Gross Margin by Business Segment | Business Segment | H2 FY2023 Gross Profit (Thousand USD) | H2 FY2023 Gross Margin (%) | H2 FY2022 Gross Profit (Thousand USD) | H2 FY2022 Gross Margin (%) | | :--------------- | :------------------------------------ | :------------------------- | :------------------------------------ | :------------------------- | | Total | 5,725 | 17.3% | 7,532 | 16.5% | | Plastic Business | 1,329 | 17.8% | 2,478 | 19.2% | | Electronic Business | 4,396 | 17.2% | 5,054 (estimated) | 15.4% | - Plastic business gross margin decrease was primarily attributable to a relative increase in labor costs[35] - Electronic business gross margin increase was primarily attributable to the depreciation of RMB and lower raw material and labor costs resulting from ongoing cost control measures[36] Selling, General and Administrative Expenses (Six Months) Total selling, general, and administrative (SG&A) expenses decreased by $0.576 million to $5.215 million, but as a percentage of net sales, they rose to 15.8% due to lower sales; both corporate and business segment SG&A decreased, mainly from reduced legal and professional fees and administrative staff costs Six-Month Selling, General and Administrative Expenses by Business Segment | Business Segment | H2 FY2023 SG&A (Thousand USD) | H2 FY2023 SG&A (% of Sales) | H2 FY2022 SG&A (Thousand USD) | H2 FY2022 SG&A (% of Sales) | | :--------------- | :---------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | | Total | 5,215 | 15.8% | 5,791 | 12.7% | | Corporate Expenses | 795 | N/A | 817 | N/A | | Plastic Business | 2,032 | 27.1% | 2,309 | 17.9% | | Electronic Business | 2,388 | 9.3% | 2,665 | 8.1% | - Corporate expenses decreased primarily due to lower legal and professional fees[37] - Plastic business SG&A decreased primarily due to a $0.26 million reduction in administrative staff costs, a $0.035 million decrease in local government taxes and levies, and a $0.061 million decrease in selling expenses, partially offset by a $0.123 million increase in utility expenses[37] - Electronic business SG&A decreased primarily due to a $0.463 million reduction in legal and professional fees and a $0.02 million decrease in selling expenses, partially offset by a $0.204 million increase in staff costs and benefits[38] Other Income (Expense), Net (Six Months) Other income for the six months was $0.337 million, a significant improvement from a $0.037 million expense in the prior year, mainly driven by foreign exchange gains and bad debt provision reversals in the plastic business, partially offset by foreign exchange losses in the electronic business Six-Month Other Income (Expense), Net by Business Segment | Business Segment | H2 FY2023 Other Income (Expense) (Thousand USD) | H2 FY2022 Other Income (Expense) (Thousand USD) | | :--------------- | :-------------------------------------------- | :-------------------------------------------- | | Total | 337 | (37) | | Plastic Business | 348 | (53) | | Electronic Business | (11) | 16 | - Plastic business other income increased primarily due to foreign exchange gains of $0.193 million and a reversal of bad debt provision of $0.153 million[39] - Electronic business other income decreased primarily due to foreign exchange losses of $0.211 million, partially offset by gains from material sales and other income of $0.158 million[40] Operating Income (Six Months) Operating income decreased by 50.3% to $0.847 million; the plastic business incurred an operating loss of $0.355 million (compared to $0.116 million operating income in the prior year) primarily due to lower sales, and electronic business operating income also decreased to $1.997 million due to reduced sales and other income Six-Month Operating Income (Loss) by Business Segment | Business Segment | H2 FY2023 Operating Income (Loss) (Thousand USD) | H2 FY2022 Operating Income (Thousand USD) | | :--------------- | :--------------------------------------------- | :---------------------------------------- | | Total | 847 | 1,704 | | Corporate Expenses | (795) | (817) | | Plastic Business | (355) | 116 | | Electronic Business | 1,997 | 2,405 | - Plastic business operating income decreased primarily due to lower total sales revenue[41] - Electronic business operating income decreased primarily due to lower sales revenue and other income[41] Non-Operating Income (Six Months) Non-operating income decreased to $1.737 million, primarily due to a $0.698 million reduction in rental income, partially offset by an increase in fair value of marketable securities and gains from sales Six-Month Non-Operating Income Components | Non-Operating Income Item | H2 FY2023 (Thousand USD) | H2 FY2022 (Thousand USD) | Change (Thousand USD) | | :------------------------ | :----------------------- | :----------------------- | :-------------------- | | Total | 1,737 | 2,020 | (283) | | Rental Income | 330 | 1,028 | (698) | | Unrealized Gains on Marketable Securities | 381 | 27 | 354 | | Realized Gains on Marketable Securities | 461 | 420 | 41 | Income Taxes (Six Months) Total income taxes for the six months resulted in a net benefit of $0.035 million (current tax expense of $0.047 million and deferred tax benefit of $0.082 million), a decrease from the prior year's net benefit of $0.338 million Six-Month Income Tax Components | Tax Item | H2 FY2023 (Thousand USD) | H2 FY2022 (Thousand USD) | | :------------------ | :----------------------- | :----------------------- | | Current Tax Expense | 47 | 195 | | Deferred Tax Benefit | (82) | (533) | | Total | (35) | (338) | - Plastic business had current tax expense of $0.028 million and deferred tax benefit of $0.061 million; electronic business had current tax expense of $0.019 million and deferred tax benefit of $0.021 million[43] Net Income (Six Months) Net income decreased by 35.5% to $2.619 million, primarily due to reduced sales revenue; the plastic business shifted to a net loss, and electronic business net income also declined Six-Month Net Income (Loss) by Business Segment | Business Segment | H2 FY2023 Net Income (Loss) (Thousand USD) | H2 FY2022 Net Income (Thousand USD) | Change (Thousand USD) | Change (%) | | :--------------- | :---------------------------------------- | :---------------------------------- | :-------------------- | :--------- | | Total | 2,619 | 4,062 | (1,443) | -35.5% | | Plastic Business | 1,074 | 2,009 | (935) | -46.5% | | Electronic Business | 2,340 | 2,870 | (530) | -18.5% | - Plastic business net income decreased primarily due to lower sales revenue and non-operating income, as well as an increased SG&A expense as a percentage of sales[44] - Electronic business net income decreased primarily due to lower sales revenue and other income[44] Results of Operations - Year Ended March 31, 2023 Compared to Year Ended March 31, 2022 For the year ended March 31, 2023, net sales decreased by 9.8%, and net income significantly dropped by 75%, primarily due to a substantial reduction in non-operating income; the plastic business incurred a net loss, while electronic business net income grew due to increased other income Net Sales (Full Year) Net sales decreased by 9.8% to $77.543 million; plastic business sales fell by $7.522 million due to reduced orders for robotic vacuum cleaners, telephone equipment, and gardening tools, while electronic business sales decreased by $0.915 million, despite increased professional digital audio workstation orders, due to a larger decline in home entertainment products Full-Year Net Sales by Business Segment | Business Segment | FY2023 (Thousand USD) | FY2022 (Thousand USD) | Change (Thousand USD) | Change (%) | | :--------------- | :-------------------- | :-------------------- | :-------------------- | :--------- | | Total | 77,543 | 85,980 | (8,437) | -9.8% | | Plastic Business | 15,800 (estimated) | 23,322 (estimated) | (7,522) | -32.2% | | Electronic Business | 61,743 (estimated) | 62,658 (estimated) | (915) | -1.5% | - Plastic business revenue decreased primarily due to a $4.129 million reduction in robotic vacuum cleaner and dust collector orders, a $1.967 million decrease in telephone equipment orders, a $1.529 million decrease in plastic and gardening toolboxes and accessories orders, and an $0.874 million decrease in mold product orders from other existing customers[45] - Electronic business revenue decreased primarily due to a $5.824 million reduction in home entertainment product orders, despite a $4.992 million increase in professional digital audio workstation and speaker orders[46] Gross Profit (Full Year) Total gross profit decreased to $12.839 million, but gross margin slightly increased to 16.6%; plastic business gross profit and margin both declined due to lower sales, while electronic business gross profit remained stable and gross margin slightly rose due to cost control Full-Year Gross Profit and Gross Margin by Business Segment | Business Segment | FY2023 Gross Profit (Thousand USD) | FY2023 Gross Margin (%) | FY2022 Gross Profit (Thousand USD) | FY2022 Gross Margin (%) | | :--------------- | :--------------------------------- | :---------------------- | :--------------------------------- | :---------------------- | | Total | 12,839 | 16.6% | 13,952 | 16.3% | | Plastic Business | 2,433 | 15.4% | 3,545 | 15.5% | | Electronic Business | 10,406 | 16.9% | 10,407 | 16.6% | - Plastic business gross profit decreased primarily due to lower sales revenue from key customers[47] - Electronic business gross margin slightly increased, attributable to relatively lower labor costs resulting from ongoing cost control measures[48] Selling, General and Administrative Expenses (Full Year) Total SG&A expenses slightly decreased by $0.301 million to $10.966 million, but as a percentage of net sales, they rose to 14.1% due to lower sales; corporate expenses slightly increased, while business segment SG&A decreased due to reduced staff costs and taxes Full-Year Selling, General and Administrative Expenses by Business Segment | Business Segment | FY2023 SG&A (Thousand USD) | FY2023 SG&A (% of Sales) | FY2022 SG&A (Thousand USD) | FY2022 SG&A (% of Sales) | | :--------------- | :------------------------- | :----------------------- | :------------------------- | :----------------------- | | Total | 10,966 | 14.1% | 11,267 | 13.2% | | Corporate Expenses | 1,412 | N/A | 1,395 | N/A | | Plastic Business | 4,068 | 25.7% | 4,302 | 18.4% | | Electronic Business | 5,486 | 8.9% | 5,570 | 8.9% | - Corporate expenses slightly increased, related to a small increase in professional fees[48] - Plastic business SG&A decreased primarily due to a $0.258 million reduction in administrative staff costs, a $0.04 million decrease in local government taxes and levies, a $0.019 million decrease in office repair and maintenance costs, and a $0.059 million decrease in selling expenses, partially offset by a $0.194 million increase in utility expenses[49] - Electronic business SG&A decreased primarily due to a $0.123 million reduction in local government taxes and levies, partially offset by a $0.019 million increase in selling expenses and a $0.016 million increase in amortization expenses[50] Other Income, Net (Full Year) Other income significantly increased to $1.014 million from $0.074 million in the prior year, primarily driven by substantial increases in foreign exchange gains and other income in the electronic business, despite other expenses in the plastic business due to foreign exchange losses Full-Year Other Income, Net by Business Segment | Business Segment | FY2023 Other Income (Expense) (Thousand USD) | FY2022 Other Income (Thousand USD) | | :--------------- | :----------------------------------------- | :--------------------------------- | | Total | 1,014 | 74 | | Plastic Business | (285) | 15 | | Electronic Business | 1,299 | 59 | - Plastic business other income decreased primarily due to foreign exchange losses of $0.57 million, partially offset by a $0.199 million reversal of bad debt provision and $0.085 million in gains from material sales[51] - Electronic business other income increased primarily due to a $0.501 million increase in foreign exchange gains and a $0.764 million increase in other income[51] Operating Income (Full Year) Operating income slightly increased by 4.6% to $2.887 million; the plastic business operating loss expanded to $1.92 million due to reduced sales, while electronic business operating income increased to $6.219 million primarily due to higher other income Full-Year Operating Income (Loss) by Business Segment | Business Segment | FY2023 Operating Income (Loss) (Thousand USD) | FY2022 Operating Income (Loss) (Thousand USD) | | :--------------- | :-------------------------------------------- | :-------------------------------------------- | | Total | 2,887 | 2,759 | | Corporate Expenses | (1,412) | (1,395) | | Plastic Business | (1,920) | (742) | | Electronic Business | 6,219 | 4,896 | - Plastic business operating income decreased primarily due to lower sales revenue[53] - Electronic business operating income increased primarily due to higher other income[53] Non-Operating Income (Expense) (Full Year) Non-operating income shifted from a $5.308 million income in the prior year to a $0.573 million expense, a significant decline primarily due to a substantial decrease in the fair value of marketable securities, lower rental income, and realized losses from sales of marketable securities, partially offset by increased dividend income Full-Year Non-Operating Income (Expense) Components | Non-Operating Item | FY2023 (Thousand USD) | FY2022 (Thousand USD) | Change (Thousand USD) | | :---------------------------------- | :-------------------- | :-------------------- | :-------------------- | | Total | (573) | 5,308 | (5,881) | | Fair Value of Marketable Securities | (4,845) | N/A | (4,845) | | Rental Income | N/A | N/A | (879) | | Realized Losses from Sales of Marketable Securities | (493) | N/A | (493) | | Dividend Income | N/A | N/A | 118 | Income Taxes (Full Year) Total income taxes for the full year resulted in a net expense of $0.255 million (current tax expense of $0.409 million and deferred tax benefit of $0.154 million), compared to a net benefit of $0.165 million in the prior year Full-Year Income Tax Components | Tax Item | FY2023 (Thousand USD) | FY2022 (Thousand USD) | | :------------------ | :-------------------- | :-------------------- | | Current Tax Expense | 409 | 402 | | Deferred Tax Benefit | (154) | (567) | | Total | 255 | (165) | - Plastic business had a deferred tax benefit of $0.133 million in FY2023, compared to current tax expense of $0.069 million and deferred tax benefit of $0.308 million in FY2022[55] - Electronic business had current tax expense of $0.409 million and deferred tax benefit of $0.021 million in FY2023, compared to current tax expense of $0.333 million and deferred tax benefit of $0.259 million in FY2022[55] Net Income (Full Year) Net income significantly decreased by 75% to $2.059 million, primarily due to a substantial reduction in non-operating income; the plastic business recorded a net loss of $2.29 million, while electronic business net income grew to $5.761 million due to increased other income Full-Year Net Income (Loss) by Business Segment | Business Segment | FY2023 Net Income (Loss) (Thousand USD) | FY2022 Net Income (Thousand USD) | Change (Thousand USD) | Change (%) | | :--------------- | :-------------------------------------- | :-------------------------------- | :-------------------- | :--------- | | Total | 2,059 | 8,232 | (6,173) | -75.0% | | Plastic Business | (2,290) | 5,453 | (7,743) | -142.0% | | Electronic Business | 5,761 | 4,174 | 1,587 | +38.0% | - Plastic business net income decreased primarily due to lower sales revenue and non-operating income[56] - Electronic business net income increased primarily due to higher other income[56] Liquidity and Capital Resources The company primarily relies on internally generated funds for operating and investing needs, maintaining strong liquidity with $22.16 million in cash and cash equivalents and $60.914 million in working capital as of March 31, 2023, with no borrowings Key Liquidity and Capital Resources Data | Metric | March 31, 2023 (Thousand USD) | March 31, 2022 (Thousand USD) | Change (Thousand USD) | Change (%) | | :-------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :--------- | | Cash and Cash Equivalents | 22,160 | 13,465 | 8,695 | +64.6% | | Working Capital | 60,914 | 63,848 | (2,934) | -4.6% | | Net Cash from Operating Activities | 12,998 | (183) | 13,181 | N/A | - The company primarily relies on internally generated funds to meet its operating and investing needs[57] - As of March 31, 2023, the company had no short-term or long-term borrowings[57] - The company anticipates that working capital requirements and capital expenditures will be met through internally generated funds[59]