VOXX International (US:VOXX)2024-10-10 20:13PART I - FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's analysis of its financial condition and operations Item 1. Financial Statements This section presents VOXX International Corporation's unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, along with explanatory notes Consolidated Balance Sheet Highlights (in thousands) | Account | August 31, 2024 | February 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,661 | $10,986 | | Inventory | $113,253 | $128,471 | | Total current assets | $226,944 | $235,868 | | Total assets | $421,164 | $444,006 | | Total current liabilities | $108,004 | $96,983 | | Total liabilities | $167,004 | $187,706 | | Total stockholders' equity | $254,028 | $255,393 | Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Aug 31, 2024 | Three Months Ended Aug 31, 2023 | Six Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $92,488 | $113,642 | $184,149 | $225,568 | | Gross profit | $22,692 | $28,625 | $48,101 | $56,205 | | Operating loss | $(9,131) | $(8,511) | $(16,244) | $(19,920) | | Net income (loss) attributable to VOXX | $2,412 | $(11,064) | $(6,857) | $(21,802) | | Diluted EPS | $0.10 | $(0.47) | $(0.30) | $(0.92) | Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Category | Six Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,989 | $2,561 | | Net cash provided by (used in) investing activities | $1,466 | $(961) | | Net cash used in financing activities | $(19,359) | $(3,422) | | Net decrease in cash and cash equivalents | $(7,325) | $(200) | - The Company sold its domestic accessories business for $24.5 million (gain of $8.3 million) and certain trade names/inventory for $3.4 million (gain of $2.15 million), using proceeds for debt repayment1418 - EyeLock LLC, a Company subsidiary, formed BioCenturion LLC, a 50/50 joint venture, contributing assets with a net book value of $3.4 million, accounted for using the equity method6566114 - Post-quarter end, on September 24, 2024, the Company sold its Lake Nona, Florida manufacturing facility for $20.0 million, using net proceeds to repay the Florida Mortgage141 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, noting declining sales across segments, mixed gross margins, reduced operating expenses, and strategic asset dispositions for debt repayment - The company faces macroeconomic headwinds like inflation and high interest rates, impacting consumer demand, and is implementing mitigation strategies including price increases and manufacturing relocation146148 - The company is exploring strategic alternatives to maximize shareholder value, potentially including a full or partial sale of the business149 Net Sales by Segment (in thousands) | Segment | Three Months Ended Aug 31, 2024 | Three Months Ended Aug 31, 2023 | % Change | | :--- | :--- | :--- | :--- | | Automotive Electronics | $26,381 | $35,417 | (25.5)% | | Consumer Electronics | $66,058 | $78,044 | (15.4)% | | Biometrics | $0 | $209 | (100.0)% | | Total Net Sales | $92,488 | $113,642 | (18.6)% | - Automotive Electronics sales declined due to lower OEM rear-seat entertainment, reduced satellite radio demand, and decreased aftermarket security product sales163 - Consumer Electronics sales decreased mainly from lower European accessory sales and premium audio products, partially offset by new product launches165 Gross Profit and Margin by Segment (Three Months Ended Aug 31) | Segment | Gross Profit 2024 (in thousands) | Gross Margin 2024 | Gross Profit 2023 (in thousands) | Gross Margin 2023 | | :--- | :--- | :--- | :--- | :--- | | Automotive Electronics | $6,226 | 23.6% | $8,601 | 24.3% | | Consumer Electronics | $16,565 | 25.1% | $19,898 | 25.5% | | Total | $22,692 | 24.5% | $28,625 | 25.2% | - Operating expenses for Q2 FY2025 decreased by $5.3 million (14.3%) year-over-year, primarily due to headcount reductions and other cost-containment measures175176 Reconciliation to Adjusted EBITDA (in thousands) | Metric | Three Months Ended Aug 31, 2024 | Three Months Ended Aug 31, 2023 | Six Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) attributable to VOXX | $2,412 | $(11,064) | $(6,857) | $(21,802) | | EBITDA | $8,497 | $(5,429) | $3,285 | $(13,041) | | Adjusted EBITDA | $(2,653) | $(9) | $(5,762) | $(4,953) | Liquidity and Capital Resources This section details the company's working capital, cash flows, credit facility availability, and future material cash requirements - As of August 31, 2024, working capital was $118.9 million, a decrease from $138.9 million, with cash and cash equivalents at $3.7 million197 - Operating activities provided $12.0 million in cash for the first six months of fiscal 2025, while financing activities used $19.4 million, primarily for debt repayments198199 - The company had $62.3 million available under its revolving credit facility as of August 31, 2024200 Material Cash Requirements (in thousands) | Commitment | Total | Less than 1 Year | 2-3 Years | 4-5 Years | After 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Bank obligations | $45,832 | $0 | $45,832 | $0 | $0 | | Unconditional purchase obligations | $62,673 | $62,673 | $0 | $0 | $0 | | Operating leases | $2,934 | $1,017 | $1,042 | $471 | $404 | | Total Commitments | $122,300 | $69,201 | $52,110 | $585 | $404 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily from foreign currency exchange rate fluctuations and interest rate changes on its variable-rate debt - The company faces foreign exchange risk, with a hypothetical 10% U.S. dollar strengthening decreasing six-month sales by approximately $4.1 million215 - The company is exposed to interest rate risk on its variable-rate debt, with $45.8 million outstanding on the Credit Facility as of August 31, 2024218 - An interest rate swap for the Florida Mortgage, locking the rate at 3.43%, was terminated post-quarter end following the property sale141218 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of August 31, 2024 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of August 31, 2024220 - No material changes in internal control over financial reporting occurred during the six months ended August 31, 2024221 PART II - OTHER INFORMATION This section covers other required information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company states it is party to various routine legal proceedings incidental to its ordinary course of business and refers to the notes in the financial statements for further information - The Company is involved in routine legal proceedings incidental to its ordinary course of business, with further details in Note 25 of the financial statements221 Item 1A. Risk Factors This section indicates that there have been no material changes from the risk factors that were previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended February 29, 2024 - No material changes to the risk factors disclosed in the Company's Form 10-K for the fiscal year ended February 29, 2024, have occurred222 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports on its share repurchase program, detailing the number of shares repurchased and the average price paid during the reporting period Share Repurchases (May 1, 2024 - May 31, 2024) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Number of Shares That May Yet Be Purchased | | :--- | :--- | :--- | :--- | | 5/1/2024 - 5/31/2024 | 64,142 | $3.81 | 816,911 | Item 6. Exhibits This section lists the exhibits filed along with the Form 10-Q, which include the iXBRL interactive data files and certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act - The report's exhibits include iXBRL data and required CEO and CFO certifications under SEC rules and Sarbanes-Oxley Act225226