VOXX International Corp reports financial results for the quarter ended November 29, 2017.
- Summary numbers: Revenues of USD 156.56 million, Net Earnings of USD 7.48 million.
- Gross margins narrowed from 27.73% to 26.52% compared to the same period last year, operating (EBITDA) margins now 5.52% from 6.20%.
- Change in operating cash flow of 16.93% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
- Earnings growth from operating margin improvements as well as one-time items.
The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:
|Relevant Numbers (Quarterly)|
|Revenue Growth (%YOY)||-0.54||-4.1||0.81||-1.35||-18.23|
|Earnings Growth (%YOY)||359.56||-671.82||58.2||67.39||-73.27|
|Net Margin (%)||4.78||-17.49||-2.34||-1.37||1.03|
|Return on Equity (%)||1.71||-4.8||-0.69||-0.59||0.42|
|Return on Assets (%)||5.06||-12.32||-1.58||-1.35||0.95|
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Market Share Versus Profits
Compared to the same period last year, VOXX-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if VOXX-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 37.98% and earnings by 137.67% compared to the previous period.
Earnings Growth Analysis
The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 26.52% to 27.73% for the same period last year, while operating margins (EBITDA margins) went from 5.52% to 6.20% over the same time frame.
Gross Margin Trend
Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.
VOXX-US’s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 99.34 days, compared to last year’s level of 83.51 days.
Cash Versus Earnings – Sustainable Performance?
It is important to examine a companyï¿½s cash versus earnings numbers to gauge whether its performance is sustainable.
VOXX-US’s year-on-year change in operating cash flow of 16.93% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.
The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 3.32% to 3.60% and (2) one-time items. The company’s pretax margins are now 4.41% compared to 3.42% for the same period last year.
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VOXX International Corporation is an international manufacturer and distributor in the automotive, audio and consumer accessories industries. The Company’s segments include Automotive, Premium Audio and Consumer Accessories. The Automotive segment designs, manufactures, distributes and markets rear-seat entertainment devices, satellite radio products, remote start systems, digital television tuners, mobile antennas, mobile multimedia devices, car link-smartphone telematics application, collision avoidance systems and others. The Premium Audio segment designs, manufactures, distributes and markets home theater systems, outdoor speakers, iPod/computer speakers, business music systems, cinema speakers, flat panel speakers, Bluetooth speakers and others. The Consumer Accessories segment designs and markets remote controls, rechargeable battery packs, wireless and Bluetooth speakers, Singtrix karaoke products, 360 Fly Action Cameras, personal sound amplifiers and others.
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