VOXX International (US:VOXX)2024-07-10 20:08PART I FINANCIAL INFORMATION Financial Statements The unaudited financial statements report a quarterly net loss of $9.3 million on net sales of $91.7 million, with a decrease in total assets Consolidated Balance Sheet Summary (in thousands) | Account | May 31, 2024 (unaudited) | February 29, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $4,160 | $10,986 | | Inventory | $116,230 | $128,471 | | Total current assets | $207,399 | $235,868 | | Total assets | $412,202 | $444,006 | | Liabilities & Equity | | | | Total current liabilities | $86,226 | $96,983 | | Total liabilities | $158,814 | $187,706 | | Total stockholders' equity | $252,436 | $255,393 | Consolidated Statement of Operations Summary (in thousands) | Account | Three months ended May 31, 2024 | Three months ended May 31, 2023 | | :--- | :--- | :--- | | Net sales | $91,661 | $111,926 | | Gross profit | $25,409 | $27,580 | | Operating loss | $(7,113) | $(11,409) | | Net loss attributable to VOXX | $(9,269) | $(10,738) | | Loss per share - diluted | $(0.40) | $(0.45) | Consolidated Statement of Cash Flows Summary (in thousands) | Activity | Three months ended May 31, 2024 | Three months ended May 31, 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,083) | $5,253 | | Net cash used in investing activities | $(648) | $(784) | | Net cash used in financing activities | $(5,839) | $(6,695) | | Net decrease in cash and cash equivalents | $(6,826) | $(899) | - On March 1, 2024, the Company's subsidiary, EyeLock LLC, contributed assets to a newly formed joint venture, BioCenturion LLC, to operate the biometrics business and now accounts for this investment using the equity method61116150 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Net sales declined 18.1% year-over-year, but gross margin improved and operating expenses were reduced, leading to a smaller Adjusted EBITDA loss Results of Operations Quarterly net sales fell by $20.3 million, driven by declines in both Automotive and Consumer segments, though improved margins partially offset the impact Net Sales by Segment (in thousands) | Segment | Q1 FY2025 (ended May 31, 2024) | Q1 FY2024 (ended May 31, 2023) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Automotive Electronics | $27,685 | $38,412 | $(10,727) | (27.9)% | | Consumer Electronics | $63,918 | $73,330 | $(9,412) | (12.8)% | | Biometrics | $8 | $100 | $(92) | (92.0)% | | Total net sales | $91,661 | $111,926 | $(20,265) | (18.1)% | - The decline in Automotive Electronics sales was primarily driven by an $8.8 million drop in OEM rear-seat entertainment products, while Consumer Electronics sales fell mainly due to a $5.6 million decline in domestic wireless accessory speakers155156 Gross Profit and Margin by Segment (in thousands) | Segment | Q1 FY2025 Gross Profit | Q1 FY2025 Margin % | Q1 FY2024 Gross Profit | Q1 FY2024 Margin % | | :--- | :--- | :--- | :--- | :--- | | Automotive Electronics | $6,418 | 23.2% | $8,070 | 21.0% | | Consumer Electronics | $18,934 | 29.6% | $18,718 | 25.5% | | Total | $25,409 | 27.7% | $27,580 | 24.6% | - Gross margin in the Automotive segment increased by 220 basis points due to cost savings from relocating manufacturing, while Consumer Electronics margin increased by 410 basis points from a better product mix160161 - Total operating expenses decreased by $6.5 million (16.6%) year-over-year, reflecting successful cost-cutting measures including headcount reductions and lower professional fees163165 EBITDA and Adjusted EBITDA The company reported an Adjusted EBITDA loss of $2.9 million, an improvement from the $4.9 million loss in the prior-year period Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Three months ended May 31, 2024 | Three months ended May 31, 2023 | | :--- | :--- | :--- | | Net loss attributable to VOXX | $(9,269) | $(10,738) | | Interest, D&A, Taxes | $4,057 | $2,126 | | EBITDA | $(5,212) | $(7,612) | | Stock-based compensation | $146 | $258 | | Loss on contribution of assets to JV | $252 | - | | Foreign currency losses | $1,849 | $962 | | Restructuring expenses | $231 | $59 | | Other adjustments | $(123) | $1,389 | | Adjusted EBITDA | $(2,857) | $(4,944) | Liquidity and Capital Resources The company's liquidity is supported by $121.2 million in working capital and $44.3 million available for borrowing under its credit facility - Working capital stood at $121.2 million as of May 31, 2024, compared to $138.9 million at February 29, 2024, with cash and cash equivalents decreasing to $4.2 million181 - Cash used in operating activities was $2.1 million for the quarter, a reversal from the $5.3 million in cash provided by operations in the prior-year period182 - The company has a senior secured credit facility with committed availability of up to $165.0 million, with $44.3 million available under the revolving credit line as of May 31, 2024186 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency exchange rates and interest rate fluctuations on its variable-rate debt - A uniform 10% strengthening of the U.S. dollar would have decreased sales by approximately $2.1 million for the three months ended May 31, 2024201 - The company is exposed to interest rate risk on its variable-rate Credit Facility, which had an outstanding balance of $59.5 million at May 31, 2024204 - An interest rate swap agreement is in place for the Florida Mortgage, locking the interest rate at 3.43% through its maturity in March 2026204 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes in internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of May 31, 2024206 - No material changes in internal control over financial reporting occurred during the three months ended May 31, 2024207 PART II OTHER INFORMATION Legal Proceedings The company is involved in routine legal proceedings incidental to the ordinary course of business, with further details in financial statement notes - For information on legal proceedings, the report refers to Note 24 of the Unaudited Consolidated Financial Statements and Note 15 of the fiscal year 2024 Form 10-K208 Risk Factors There have been no material changes from the risk factors previously disclosed in the company's most recent annual report on Form 10-K - No material changes to risk factors were disclosed compared to the Form 10-K for the fiscal year ended February 29, 2024209 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 64,142 shares of its Class A Common Stock during the quarter, with 816,911 shares remaining authorized for repurchase Issuer Purchases of Equity Securities | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Remaining for Repurchase | | :--- | :--- | :--- | :--- | | May 1 - May 31, 2024 | 64,142 | $3.81 | 816,911 | Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and the interactive data file for financial statements - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act211 - The financial statements and notes are formatted in Inline eXtensible Business Reporting Language (iXBRL) as part of the filing211212