Universal Electronics Reports Record Net Income for Fourth Quarter and Year-end 2020 Financial Results

SCOTTSDALE, Ariz.–(BUSINESS WIRE)–Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported financial results for the three and twelve months ended December 31, 2020.

Paul Arling, UEI’s chairman and CEO, said, “UEI’s ongoing investment in innovation for the future, strategies to enrich margins, and tactics to improve operating efficiencies, delivered strong performance and position the company well for 2021. Focusing on shifting our mix toward more advanced, higher margin solutions, we generated our highest margins in over a decade. As a result, even with lower sales, we reported the most profitable year in our 35+ year history.

“Additionally, we enter 2021 with our broadest, most sophisticated technology offering. Recent publicly disclosed examples once again include industry firsts: our Apple TV remote control designed for cable, satellite, IPTV and other multichannel video program distributors truly enhances the Apple TV 4K live and streaming TV experiences; our QuickSet® Widget provides a turnkey connectivity solution that adds intelligence and QuickSet Cloud to products; our UEI Virtual Agent introduces AI-powered technology that enables self-help capabilities to any screen – TV, phone, computer or tablet; and our ambient-aware connected thermostat family, UEI Comfort, simplifies installation, daily use and ongoing support of climate control in residential, commercial and hospitality applications. Our product development marries our pursuit of continued improvement, our unparalleled patented technology, and our vast experience providing end-to-end advanced control solutions. We help to assist our customers in differentiating themselves as they navigate the convergence of traditional TV, on-demand content and streaming apps. 2021 promises to be another exciting year.”

Financial Results for the Three Months Ended December 31: 2020 Compared to 2019

GAAP net sales were $156.3 million, compared to $174.7 million; Adjusted Non-GAAP net sales were $156.4 million, compared to $174.8 million.

GAAP gross margins were 32.7%, compared to 28.5%; Adjusted Non-GAAP gross margins were 33.6%, compared to 29.3%.

GAAP operating income was $12.5 million, compared to $11.5 million; Adjusted Non-GAAP operating income was $19.1 million, compared to $17.3 million.

GAAP net income was $12.2 million, or $0.86 per diluted share, compared to $7.0 million or $0.49 per diluted share; Adjusted Non-GAAP net income was $16.0 million, or $1.14 per diluted share, compared to $12.8 million, or $0.90 per diluted share.

At December 31, 2020, cash and cash equivalents were $57.2 million.

Financial Results for the Twelve Months Ended December 31: 2020 Compared to 2019

GAAP net sales were $614.7 million, compared to $753.5 million; Adjusted Non-GAAP net sales were $615.4 million, compared to $751.7 million.

GAAP gross margins were 28.7%, compared to 22.6%; Adjusted Non-GAAP gross margins were 30.8%, compared to 26.7%.

GAAP operating income was $37.3 million, compared to $15.3 million; Adjusted Non-GAAP operating income was $65.5 million, compared to $66.4 million.

GAAP net income was $38.6 million, or $2.72 per diluted share, compared to $3.6 million or $0.26 per diluted share; Adjusted Non-GAAP net income was $53.3 million, or $3.76 per diluted share, compared to $50.1 million, or $3.55 per diluted share.

Bryan Hackworth, UEI’s CFO, stated, “Our improved financial model resulted in cash flow from operations in 2020 of over $73 million, enabling us to reduce our debt by $48 million while also purchasing over 440,000 shares for $17.7 million for an average price of approximately $40 per share. Given our strong balance sheet and much improved cash flow, we are well positioned for the future.”

Financial Outlook

For the first quarter of 2021, the company expects GAAP net sales to range between $150 million and $160 million, compared to $151.8 million in the first quarter of 2020. GAAP earnings per diluted share for the first quarter of 2021 are expected to range from $0.40 to $0.50, compared to GAAP earnings of $0.41 in the first quarter of 2020.

For the first quarter of 2021, the company expects Adjusted Non-GAAP net sales to range between $150 million and $160 million, compared to $152.0 million in the first quarter of 2020. Adjusted Non-GAAP earnings per diluted share are expected to range from $0.83 to $0.93 compared to Adjusted Non-GAAP earnings per diluted share of $0.81 in the first quarter of 2020. The first quarter 2021 Adjusted Non-GAAP earnings per diluted share estimate excludes $0.43 per share related to, among other things, excess manufacturing overhead costs, stock-based compensation, amortization of acquired intangibles, changes in contingent consideration relating to acquisitions, 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.

Conference Call Information

UEI’s management team will hold a conference call today, Thursday, February 18, 2021 at 4:30 p.m. ET / 1:30 p.m. PT, to discuss its fourth quarter and full year 2020 earnings results, review recent activity and answer questions. To access the call in the U.S. please dial 877-843-0414, and for international calls dial 315-625-3071 approximately 15 minutes prior to the start of the conference. The conference ID is 1741589. 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 877-843-0414, and internationally dial 315-625-3071. The access code is 1741589.

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 the additional Section 301 U.S. tariffs on products manufactured in China and imported into the U.S. and the impact of stock-based compensation for performance-based warrants. Adjusted Non-GAAP gross profit is defined as gross profit excluding the impact of the additional Section 301 U.S. tariffs on products manufactured in China and imported into the U.S. and costs of implementing countermeasures to mitigate this impact, excess manufacturing overhead costs, including those related to the COVID-19 pandemic, factory transition costs, impairment expenses related to and the loss on the sale of our Ohio call center, stock-based compensation expense, depreciation expense related to the increase in fixed assets from cost to fair market value resulting from acquisitions and employee related restructuring costs. Adjusted Non-GAAP operating expenses are defined as operating expenses excluding costs incurred related to implementing countermeasures to mitigate the impact of the additional Section 301 U.S. tariffs on products manufactured in China and imported into the U.S., stock-based compensation expense, amortization of intangibles acquired, changes in contingent consideration related to acquisitions, costs associated with our International Trade Commission litigation efforts, and employee related restructuring and other costs. Adjusted Non-GAAP net income is defined as net income excluding the aforementioned items, the reversal of a social insurance accrual and accounts receivable reserve related to our Guangzhou entity, which was sold in 2018, foreign currency gains and losses, the related tax effects of all adjustments, as well as the effect of a reversal of a reserve of an uncertain tax position related to our Guangzhou entity, which was sold in 2018, and certain net deferred tax 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

Founded in 1986, Universal Electronics Inc. (NASDAQ: UEIC) is the global leader in universal control and sensing technologies for the smart home. The company designs, develops, manufactures and ships over 500 innovative products that are used by the world’s leading brands in the consumer electronics, subscription broadcast, security, home automation, hospitality and climate control markets. For more information, please 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, 2020, and quarterly and periodic reports we have filed with the Securities Exchange Commission (the “SEC”) since then. Risks that could affect forward-looking statements in this press release include: the acceptance of and demand for the various advanced control products and technologies, including our Apple TV remote control, Quickset® Widget, Quickset Cloud service, UEI Virtual Agent, UEI Comfort products, technologies, and platforms; 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 strategies that translate into greater demand for our technologies and products as anticipated by management; the continued ordering pattern of our customers as anticipated by management; management’s ability to manage its business to achieve its net sales, margins, and earnings through its operating efficiencies, product mix, and gross margin improvement initiatives as guided and as anticipated; our ability to enhance and protect the value of our intellectual properties, including our patents and trade secrets, through our licensing and litigation efforts; interruptions in our supply and logistics chains; 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; and uncertainties and other factors more fully described in our reports filed with the SEC; and effects that changes in 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 February 18, 2021. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

– Tables Follow –

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share-related data)

(Unaudited)

 

 

December 31, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

57,153

 

 

$

74,302

 

Accounts receivable, net

 

129,433

 

 

139,198

 

Contract assets

 

9,685

 

 

12,579

 

Inventories

 

120,430

 

 

145,135

 

Prepaid expenses and other current assets

 

6,828

 

 

6,733

 

Income tax receivable

 

3,314

 

 

805

 

Total current assets

 

326,843

 

 

378,752

 

Property, plant and equipment, net

 

87,285

 

 

90,732

 

Goodwill

 

48,614

 

 

48,447

 

Intangible assets, net

 

19,710

 

 

19,830

 

Operating lease right-of-use assets

 

19,522

 

 

19,826

 

Deferred income taxes

 

5,564

 

 

4,409

 

Other assets

 

2,752

 

 

2,163

 

Total assets

 

$

510,290

 

 

$

564,159

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

83,229

 

 

$

102,588

 

Line of credit

 

20,000

 

 

68,000

 

Accrued compensation

 

28,931

 

 

43,668

 

Accrued sales discounts, rebates and royalties

 

10,758

 

 

9,766

 

Accrued income taxes

 

3,535

 

 

6,989

 

Other accrued liabilities

 

33,057

 

 

35,445

 

Total current liabilities

 

179,510

 

 

266,456

 

Long-term liabilities:

 

 

 

 

Operating lease obligations

 

13,681

 

 

15,639

 

Contingent consideration

 

292

 

 

4,349

 

Deferred income taxes

 

1,913

 

 

1,703

 

Income tax payable

 

1,054

 

 

1,600

 

Other long-term liabilities

 

539

 

 

13

 

Total liabilities

 

196,989

 

 

289,760

 

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; 24,391,595 and 24,118,088 shares issued on December 31, 2020 and 2019, respectively

 

244

 

 

241

 

Paid-in capital

 

302,084

 

 

288,338

 

Treasury stock, at cost, 10,618,002 and 10,174,199 shares on December 31, 2020 and 2019, respectively

 

(295,495)

 

 

(277,817)

 

Accumulated other comprehensive income (loss)

 

(18,522)

 

 

(22,781)

 

Retained earnings

 

324,990

 

 

286,418

 

Total stockholders’ equity

 

313,301

 

 

274,399

 

Total liabilities and stockholders’ equity

 

$

510,290

 

 

$

564,159

 

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2020

 

2019

 

2020

 

2019

Net sales

 

$

156,264

 

 

$

174,694

 

 

$

614,680

 

 

$

753,477

 

Cost of sales

 

105,180

 

 

124,837

 

 

438,424

 

 

583,274

 

Gross profit

 

51,084

 

 

49,857

 

 

176,256

 

 

170,203

 

Research and development expenses

 

8,471

 

 

7,528

 

 

31,450

 

 

29,412

 

Selling, general and administrative expenses

 

30,098

 

 

30,878

 

 

107,539

 

 

125,476

 

Operating income

 

12,515

 

 

11,451

 

 

37,267

 

 

15,315

 

Interest income (expense), net

 

(150)

 

 

(830)

 

 

(1,422)

 

 

(3,918)

 

Accrued social insurance adjustment

 

—

 

 

—

 

 

9,464

 

 

—

 

Other income (expense), net

 

(141)

 

 

(569)

 

 

(1,404)

 

 

(995)

 

Income before provision for income taxes

 

12,224

 

 

10,052

 

 

43,905

 

 

10,402

 

Provision for income taxes

 

66

 

 

3,025

 

 

5,333

 

 

6,772

 

Net income

 

$

12,158

 

 

$

7,027

 

 

$

38,572

 

 

$

3,630

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

0.88

 

 

$

0.50

 

 

$

2.78

 

 

$

0.26

 

Diluted

 

$

0.86

 

 

$

0.49

 

 

$

2.72

 

 

$

0.26

 

Shares used in computing earnings per share:

 

 

 

 

 

 

 

 

Basic

 

13,768

 

 

13,931

 

 

13,893

 

 

13,879

 

Diluted

 

14,099

 

 

14,286

 

 

14,166

 

 

14,109

 

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Year Ended December 31,

 

 

2020

 

2019

Cash provided by operating activities:

 

 

 

 

Net income

 

$

38,572

 

 

$

3,630

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

29,735

 

 

31,926

 

Provision for bad debts

 

332

 

 

441

 

Deferred income taxes

 

(478)

 

 

(1,779)

 

Shares issued for employee benefit plan

 

1,136

 

 

947

 

Employee and director stock-based compensation

 

9,122

 

 

8,845

 

Performance-based common stock warrants

 

686

 

 

1,997

 

Impairment of long-term assets

 

134

 

 

1,506

 

Accrued social insurance adjustment

 

(9,464)

 

 

—

 

Loss on sale of Ohio call center

 

712

 

 

—

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable and contract assets

 

14,884

 

 

17,203

 

Inventories

 

28,295

 

 

(1,914)

 

Prepaid expenses and other assets

 

(245)

 

 

4,648

 

Accounts payable and accrued liabilities

 

(33,543)

 

 

14,233

 

Accrued income taxes

 

(6,486)

 

 

3,574

 

Net cash provided by operating activities

 

73,392

 

 

85,257

 

Cash provided by (used for) investing activities:

 

 

 

 

Acquisitions of property, plant and equipment

 

(16,862)

 

 

(21,313)

 

Acquisitions of intangible assets

 

(6,372)

 

 

(2,655)

 

Payment on sale of Ohio call center

 

(500)

 

 

—

 

Net cash provided by (used for) investing activities

 

(23,734)

 

 

(23,968)

 

Cash provided by (used for) financing activities:

 

 

 

 

Borrowings under line of credit

 

75,000

 

 

72,500

 

Repayments on line of credit

 

(123,000)

 

 

(106,000)

 

Proceeds from stock options exercised

 

2,805

 

 

448

 

Treasury stock purchased

 

(17,678)

 

 

(1,928)

 

Contingent consideration payments in connection with business combinations

 

(3,091)

 

 

(4,251)

 

Net cash provided by (used for) financing activities

 

(65,964)

 

 

(39,231)

 

Effect of exchange rate changes on cash and cash equivalents

 

(843)

 

 

(963)

 

Net increase (decrease) in cash and cash equivalents

 

(17,149)

 

 

21,095

 

Cash and cash equivalents at beginning of year

 

74,302

 

 

53,207

 

Cash and cash equivalents at end of period

 

$

57,153

 

 

$

74,302

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

Income taxes paid

 

$

12,712

 

 

$

7,275

 

Interest paid

 

$

1,610

 

 

$

4,403

 

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,

 

 

2020

 

2019

 

2020

 

2019

Net sales:

 

 

 

 

 

 

 

 

Net sales – GAAP

 

$

156,264

 

 

$

174,694

 

 

$

614,680

 

 

$

753,477

 

Section 301 U.S. tariffs on goods imported from China (1)

 

—

 

 

(530)

 

 

—

 

 

(3,725)

 

Stock-based compensation for performance-based warrants