VOXX International Corporation (NASDAQ: VOXX) disclosed its fiscal 2024 fourth-quarter and year-end financial results, revealing a decline in net sales and a net loss for the year. The company plans to implement cost reductions and optimize its product portfolio in response to the downturn.
Automotive segment sales saw a significant drop, largely due to reduced OEM sales and the decision to exit the rear seat entertainment business with Stellantis (NYSE:STLA). Despite the challenges, VOXX is focusing on new product launches and a joint venture, BioCenturion LLC, to drive future growth.
Key Takeaways
- VOXX International's net sales for fiscal year 2024 fell 12.2% to approximately $469 million.
- The company reported an operating loss of $44 million and a net loss attributable to VOXX of $40.9 million.
- Plans to reduce 5-10% of overhead costs and a strategic review of products and programs are underway.
- Automotive segment sales decreased by 19%, with the company exiting its rear seat entertainment business with Stellantis.
- Consumer segment sales were down 8.7%, with the decline in Premium Audio sales partly offset by growth in other consumer electronics.
- VOXX is launching new products, including party speakers and the Flexus 100 and 200 systems, to stimulate growth.
- The company formed BioCenturion LLC, a joint venture to focus on automotive and consumer segments while reducing working capital and losses.
- Despite a sales decline, VOXX maintains market share and anticipates a business resurgence as the economy improves.
Company Outlook
- VOXX is preparing for a flat sales year and focusing on reducing costs through automation, process improvements, and resource optimization.
- The company is analyzing profitability by brand, product line, customer, and SKU to improve the balance sheet.
Bearish Highlights
- The company cites concerns about the economy, credit card debt, discretionary spending, inflation, and geopolitical tensions affecting operations.
- Net sales for the fourth quarter decreased by 20.8% to $108 million compared to the previous year.
Bullish Highlights
- VOXX is conserving cash, reducing costs, and strengthening the balance sheet to navigate current market conditions.
- The company is exploring all alternatives to reduce working capital needs and improve profitability.
Misses
- Gross margins decreased by 550 basis points due to inventory write-downs.
- Operating expenses increased by $300,000, contributing to an operating loss of $26.4 million and an adjusted EBITDA loss of $6.4 million.
Q&A highlights
- The company is focused on generating cash from operations and achieving the best return on investment on capital.
- VOXX concluded the call with an invitation for questions, emphasizing their commitment to transparency and shareholder communication.
In summary, VOXX International faces financial headwinds but is actively taking steps to streamline its operations and capitalize on new ventures and product launches. With a strategic focus on the automotive and consumer segments, the company remains hopeful for a turnaround as market conditions improve.
InvestingPro Insights
VOXX International Corporation's recent financial disclosures paint a picture of a company in the midst of a challenging period. The InvestingPro data provides additional context to the company's current financial health and future prospects.
The company's market capitalization stands at $134.13 million, reflecting investor valuation of the firm in light of recent performance. The negative P/E ratios, both current and adjusted for the last twelve months as of Q4 2024, at -2.58 and -5.41 respectively, suggest that the company has been posting losses, which aligns with the reported net loss for the year. This is further evidenced by a negative return on assets of -7.89% for the same period.
InvestingPro Tips indicate that VOXX's price is currently 34.24% of its 52-week high, which could be an indicator of the market's adjusted expectations in light of recent performance. The company's revenue has declined by 12.19% over the last twelve months as of Q4 2024, and quarterly revenue also saw a significant reduction of 20.83% in Q4 2024. This contraction in revenue aligns with the company's reported decrease in net sales for the fiscal year.
For readers looking to delve deeper into VOXX's financials and future prospects, InvestingPro provides a comprehensive set of additional tips and metrics. There are currently PRONEWS24 additional tips available on InvestingPro, which can be accessed with a 10% discount on a yearly or biyearly Pro and Pro+ subscription using the promo code PRONEWS24.
The InvestingPro Fair Value estimate for VOXX stands at $5.97, which is close to the previous close price of $5.95, suggesting that the stock is priced around its estimated fair value according to InvestingPro's metrics as of the date provided.
Investors and stakeholders could use these insights to better understand VOXX's current market position and the potential impact of the company's strategic initiatives on its future performance.
Full transcript - VOXX International (VOXX) Q4 2024:
Operator: Good day, ladies and gentlemen. And thank you for standing by. Welcome to the VOXX International Fiscal 2024 Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Glenn Wiener. Sir, please begin.
Glenn Wiener: Thank you, Howard. Good morning. And welcome to VOXX International's fiscal 2024 fourth quarter and year end results conference call. Yesterday, we filed our Form 10-K and we issued our press and both documents can be found in the Investor Relations section of the Web site at www.voxxintl.com, and we'll be posting our updated investor presentation within the week. Speaking from management today will be Pat Lavelle, Chief Executive Officer, Loriann Shelton, Chief Financial Officer and Chief Operating Officer. As you may recall, Loriann took the reins as CFO in addition to her role as COO effective March 1st at the start of the company's fiscal year, and I would personally like to welcome Loriann to today's call. Welcome. And before we get started, I'd like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that would constitute forward-looking statements are based on currently available information. The company assumes no responsibility to update any such forward-looking statements, and I'd like to point you to the risk factors associated with our business, which are detailed in our Form 10-K for the period ended February 29, 2024. It's now my pleasure to turn the call over to Pat. Pat?
Pat Lavelle: Good morning, everyone. And thank you for joining us today. Before I get into our results and any business commentary, I wanted to pick up on where Glenn left off and formally welcome Loriann to today's call as it's her first as Chief Financial Officer. I've worked with Loriann for over 30 years and she is simply the best at what she does. She knows our business inside and out and I believe the investors will enjoy working with her as we all do at VOXX. Whoever is typing, if you can stop. Simply put, fiscal 2024 was even tougher than fiscal 2023 and the challenges we faced are reflected in our results. Like nearly every company serving our markets, we continue to feel the impact of a very challenging global economy. As we prepared for today's call, I look back on my remarks from last year. I said OEM customers shutting down production and retailers cutting back on orders, inflation and fears of recessions globally, gradual improvement in the supply chain but with higher cost of inventory, chip scarcity, which was expected to improve and an expected tough first half with the potential to improve with some possible easing by the Fed. Unfortunately, the issues we spoke of last May are almost the same we face today and we're expecting more of the same as we enter fiscal 2025. According to the latest index of consumer sentiment last week, there has been a significant drop in confidence. Consumer sentiment dropped to 67.4 from 77 in April, and this May's report was the lowest in six months. Even more alarming was the jump in year ahead inflation expectations to 3.5% from 3.2% and long run inflation expectations edging up to 3.1% from 3%. As you can see, inflation is still a major concern. Both customers and consumers are being cautious, as are we. And that is why we continue to take steps to restructure our business and bring VOXX back to profitability. Let me first quickly recap some of the annual financial comparisons followed by a more detailed update on our business segments. Loriann will then recap the quarter and talk more about our realignment plans, the steps we've taken and those upcoming, and then we'll open it up for questions. On a consolidated basis, net sales of approximately $469 million were down 12.2% year-over-year. Gross margins were down 80 basis points and the operating expenses improved a little over 2%. We recorded $14.2 million of noncash impairment charges on intangibles and restructuring expenses of $2.1 million. When accounting for these charges, as well as goodwill impairment charges and restructuring charges in fiscal '23, our year-over-year expenses declined closer to 7%. The result, however, was an operating loss of $44 million and a net loss attributable to VOXX of $40.9 million. And lastly, we reported an adjusted EBITDA loss of $3.4 million, which was down $6.3 million compared to fiscal '23. This marks two years of losses after two years of growth and profitability on an adjusted EBITDA basis. While this upcoming year again will be challenging, we believe we are taking the right steps to return VOXX to profitability. We plan to cut at minimum an additional 5% to 10% of our total overhead without affecting our ability to effectively serve our customers. Not only will we be cutting costs but we're also reviewing all products and programs, which I will cover in more detail during my market segments. Our programs are about rightsizing the company based on the projections that we see for this year. So I'll start with the Automotive segment. Automotive segment sales of approximately $142 million were almost $32.5 million or approximately 19%. On the OEM side, sales declined by $14.7 million with a miss entirely in the rear seat entertainment category driven by several factors. The Nissan (OTC:NSANY) program ended this past year as scheduled. Another program saw volumes drop significantly despite customer projections, and all experienced starts and stops throughout the year. All of this took a big toll on not only sales but gross margins and absorption rates as well. On the other hand, our security, lighting and safety business was up in fiscal 2025. Despite another warm winter season, we saw sales of OEM remote starts and security products grow aided by new business with Ford (NYSE:F) that launched in the EMEA and a number of new programs in our lighting and safety business that we've been awarded since our acquisition. We experienced the most severe OEM challenges during the second half as our business was almost cut in half during the Q3 due to the UAW strike, as well as production rates that simply have not kept up with projected customer take rates. We adjusted by reducing overhead, both headcount and expenses, in addition to moving certain OEM manufacturing to Mexico. But when your business is impacted this much, more drastic and prudent steps are needed and that's what we're in the process of doing. VOXX has been the market leader in rear seat entertainment for several decades. This is a niche market and we have taken advantages of our global relationships, as well as our strong engineering capabilities to maintain our market dominance. We intend to continue in RSE, but not at a loss or where profits are minimal and volumes fluctuate so rapidly. Not all of this is customer driven though. It's also heavily market and supply chain driven. It's just the nature of the environment we're operating in. But after months of negotiation and after what we feel is our best efforts to renegotiate based on revised lower volumes, we have decided to exit our rear seat entertainment business with Stellantis. This was not an easy decision, it was not taken lightly, but a lot has changed since we began with them in 2019. And we have reached the point where rising cost and lower volume has put us in a position where we can't agree on the right structure going forward. We can no longer support tying up precious working capital to secure inventory that produces no margin. Additionally, it's no secret Stellantis is having supply chain issues of its own with plant closures and lawsuits ongoing as they too try to combat inflation, which makes a change right now even more prudent. As for Ford, they too have faced similar industry wide challenges, but we've been working through them and fully intend to support Ford as we have in the past. The current RSE programs for the Expedition and the Navigator expire soon and shortly thereafter, we'll be launching on a new program for the 25 models. Our RSE program with Nissan has come to its scheduled end. However, we continue to work with Nissan on a new lighting program that just launched. We are also working on a lighting program with Ford and we have various other programs across our OEM business. We also have the United States Postal Service Business starting later this fiscal year. In summary, while our OEM business may be smaller than we had projected several years back, based on all the contract awards, we believe that the business we're maintaining going forward should be more consistent and profitable. Our automotive aftermarket business was down $17.7 million with the miss predominantly in the remote start category. Some aftermarket categories and product lines were up for the year, such as collision avoidance, car link, car connection and satellite radio, but the aftermarket overall was challenged in fiscal 2024 due to a number of reasons. One, the retail environment and the consumer. The changes in the way car dealers were operating this past year. And then there's car inflation, interest rates and the state of the domestic economy. As we look ahead into fiscal '25, inventory provisions in the aftermarket are far less of a challenge than at this time last year and that should help offset some of the projected economic softness. The first half will be tight on the OEM side simply given the volume of programs now and what's transitioning, but we should see a sizable ramp in the second half of the year. Sales should come in roughly in line with fiscal '24, maybe with some upside and gross margins should improve as well. Building in the second half consistent with the start of new OEM programs, we fully expect our Automotive segment to be profitable. As far as the Consumer segment, we reported net sales of approximately $327 million, down roughly $31 million or 8.7%. Premium Audio sales declined by $36.6 million and other CE product sales grew by $5.5 million. Within Premium Audio, while sales were off for the year both domestically and internationally, in the Americas, they stabilized in the second half on the heels of several new product launches and new categories. And as I mentioned last quarter, I believe we are gaining market share. While industry wide Premium Audio sales continue to be on decline, we have either maintained or increased share domestically and we have a host of new products coming to market. Internationally, our business was down with the biggest impact in Asia. As we enter fiscal 2025, we are planning for two things. One is growth from new products. And two, is a very challenging retail environment, most likely consistent with what we've experienced as of late. I'll expand a little further as to what we're doing. First, we have a new soundbar offering led by our Klipsch Flexus sound system powered by Onkyo. We have begun delivery of our Flexus 100 and 200 systems and the Flexus 300 is scheduled for Q2 at a retail of $1,000. Our new Klipsch Music City Broadcast Bluetooth speakers are doing very well with three new models recently launched, the Klipsch Detroit, which is the flagship model and the Klipsch Austin and Nashville. Our first line of party speakers were launched in September of 2023, and we have several new models coming to market in the second half of this year. And as I mentioned previously, party speakers are one of the hottest categories in audio. There are a lot of new products that were launched or that we'll be launching moving into the second and third quarters, and we're expecting these products and categories to generate strong growth and better gross margins. The economy. Credit card debts are at all time highs. Discretionary spending is down. Inflation is a major concern. We have uncertain elections upcoming and mounting geopolitical tension that could go on and on. The fed not easing rates could have the biggest impact as it directly affects customers buying, consumers purchasing and the cost of doing business. And therefore, we are adjusting operations and overhead working to enhance margins and improve working capital within the segment based on our current economic outlook. As for other CE products, sales were up for the year, yet we faced the same challenges at retail. And why were they up? It's similar to my Q3 remarks. Two categories drove the growth. The first, our RCA hearing aids launched initially in fiscal 2024 with new and vastly improved models in the market this year. The second and more meaningful, the solar power balcony products launched in Germany earlier in the year, VOXX Germany sales were up close to 35% year-over-year. In more normalized times, I would probably be guiding to growth for the consumer segment in fiscal '25, but I would be remiss given the global economy, the audio market, the unknown with respect to inflation and any action or inaction by the Fed. I expect continued puts and takes. The regular [Indiscernible] [passive] loudspeaker may drop a bit, but we will still see growth in new products in the sound bars, party speakers and our new music series. The big thing is what we are doing to control inventory, improve margins and lower cost to increase profitability. Moving on to biometrics. The big news on a go forward basis was our March 7th release announcing a 50-50 joint venture between EyeLock and GalvanEyes Partners forming a new company, BioCenturion LLC. The premise behind this move is simple, combine resources to create a more streamlined, focused and nimble company to realize value while at the same time removing the working capital needs and losses incurred by VOXX. We're still sharing in the upside but our focus moving forward and where our resources will be allocated will be on our Automotive and Consumer segments. BioCenturion brings together each company's respective strengths in sales, marketing, business development and R&D, and will be run by Allen Ibaugh who has experience with both entities. GalvanEyes will serve as the managing member responsible for all expenses and working capital needs over the next two years. After which we'll evaluate the best path forward. If there is a capital event prior to the first $45 million, we'll get preferential distribution rights of 77% to EyeLock and 23% to GalvanEyes, and the remaining portion would be split evenly. We still very much believe in EyeLock and its future. The technology works very well. And there are deals on the horizon which we believe will change the landscape. With this move, we still share any upside without the financial or operational burden. I'd like to make a few comments with respect to our plans this year before I turn the call over to Loriann. With the losses of the past two years, our view of the economy near term and with the Seaguard ruling and final payout, we must conserve cash and return VOXX to profitability. And by conserving cash, what I really mean is monetizing capital. Of course, we will be cutting in every area where we can from an operational perspective. We will also be looking to remove redundancies throughout the organization, enhance our supply chain and operational support capabilities further and evaluating all products and programs to ensure they have more longevity and stronger margins and margin protection. When you look at VOXX, we have a lot of assets. We have assets in real estate, assets in our brands, assets in our respective groups and businesses. As part of restructuring, we're tackling every area of our business to ensure that we return to profitability sooner rather than later. And we are exploring all alternatives to reduce working capital needs further so that we can focus on our more growth oriented profitable business. Although sales have declined year-over-year, it is not due to lost market share. In Automotive, we in fact have increased the number of OEM customers we have worked with over the past two years. In the aftermarket, we maintain nine of the top 10 selling brands of remote start and security, and our market share is intact and stable. In our Consumer business, we maintain number one market share in passive loudspeakers and reception products in North America and have made inroads into new accounts we have not done business with in the past. Unfortunately, we have had to stop selling in markets in Europe due to the war in Ukraine, like Russia and Belarus, and sales to the Ukraine, the Baltics and especially Poland have been impacted. We believe as the US economy picks up, car sales grow, consumers return to more normal buying patterns and inflation eases, we will see a resurgence of our normal business on top of the new customers, categories and products we will bring to market in fiscal 2025. And with that said, I'd like to turn the call over to Lori. Loriann?
Loriann Shelton: Thanks, Pat. I appreciate the kind words. And good morning, everyone. It is my pleasure to be joining you on today's call. I look forward to working with our investors and communicating the VOXX story. I've been with the company for most of my adult life holding many positions, most importantly COO with the oversight of the shared services groups. So my team touches virtually all aspects of our business. While we have our fair share of challenges to deal with, namely the economy first and foremost, we also have opportunities to strengthen our business and make sure we can weather whatever is thrown at us. We've been resilient and we've gotten through everyday, and this period will be no different. As for today, I won't review the financials as Pat covered the year and talked to our business segments, and the environment we're operating in. What I thought I would like to do today is quickly do some financial housekeeping on our year end results, talk a little bit about the quarter and then focus more on our balance sheet and what we are doing to strengthen it along with our performance. To start with respect to fiscal 2024, I wanted to provide a little more color around the intangible asset impairment charges. Throughout the year, we rely on our projections, our customers' projections, market conditions, the economy, competition, price adjustments and things like these to help us value the carrying value of our assets. At fiscal 2024 year end, our intangible assets stood at $68.8 million. The impairment charges taken in the fourth quarter and in our year end financial statements relate to four indefinite lives intangible assets that totaled $14.2 million. As a result of ongoing conversations with our customers and following meetings at CEs this past January, we lowered our long term projections with certain CE trade names resulting in these impairments this fiscal year. This compares to $1.3 million of intangible asset impairment charges in fiscal 2023, both of which are noncash charges and are reflected in our P&L under operating expenses. This of course resulted in operating losses for both fiscal 2024 fourth quarter and fiscal year. We also incurred restructuring charges in fiscal 2024 of $2.1 million compared to approximately $900,000 in fiscal '23. This past year's restructuring cost primarily relates to severance expenses associated with headcount reductions in our fiscal 2024 second quarter, along with expenses related to our OEM production relocation from Florida to Mexico, which began in fiscal '23 and charges will continue through this fiscal year. We continue to analyze all aspects of our infrastructure and eliminate duplication throughout the organization. Our purchasing and inventory teams cleaned up our inventory, remove obsolete end of life and excess inventories, all done with goals to generate more profitable sales on lower overhead. A lot of our planning was also stented on lower and future working capital needs. I must caution everyone that while we did a lot to lower operating expenses in fiscal '24, which were down close to 7% when accounting for impairment and restructuring charges, more will be done in fiscal '25 in light of the current and near term business environment. There will be a lot of changes and not everything will occur at once. We have people and customers to consider, orders in process and in the pipelines that needs to be fulfilled over time. The plans we put in place will be executed with our customers' needs in mind above all. VOXX has been around for a long time for many reasons and one of them is integrity. We have always shown that we can adjust better than the competition and that it’s important to our customers and to our market longevity. Same with fiscal 2024 and moving to gross margins. We took several inventory write offs, which impacted both the fourth quarter and fiscal year for both consolidated gross margins and our Automotive segment. In Automotive, where we reported gross margins of 21.1% compared to 24.3% for the year, we incurred an inventory write down of approximately $3.8 million, about a 270 basis point impact to margin. This accounts for both slow moving or excess goods from our OEM manufacturing transition. I just wanted to point this out as it's a big impact but also puts us in a better position moving into fiscal 2025. One other point which Pat alluded to, to which should help you think about the Automotive margins going forward, we expect to have lower margins in the first half as we exit lower margin OEM business. We then have new models coming online at more historical margin levels. On the consumer side, our inventory is in a good position with new products in market and number of new ones coming to market towards the end of our second quarter and into third. Here too you may start to see some margin pickup in the second half of the year all things being equal of course. Moving on to the quarter. As you can see our results in our press release, and I'd be more than happy to address any questions during the Q&A portion of our call or following. Let me briefly recap results as I'd like to spend a few minutes on our go forward plans. Fourth quarter comparisons. Net sales of just $108 million were down $28.4 million or 20.8%. The Automotive segment was down $16.9 million with the bigger miss in OEM. The Consumer segment was down $11.4 million with both Premium Audio and other CE roughly evenly. Gross margins were down 550 basis points, which includes the impact of the inventory write downs, thus, the decline was not as great. Operating expenses were up 300,000, including the impairment of restructuring charges but excluding all charges as well as acquisition costs, operating expenses improved by over 13%. The result, an operating loss of $26.4 million compared to an operating loss of $12.9 million and an adjusted EBITDA loss of $6.4 million compared to adjusted EBITDA of $4 million. As for VOXX today and what we are working on, as part of our fiscal 2025 realignment plans, we are looking at everything with a focus on reducing costs in light of a relatively flat sales year while preparing for worse. We are really looking to get leaner but not again at the expense of the customer. There's only so much you can remove from a functional perspective without losing skills and knowledge. So we are focused equally on process. How we can improve process to do more with less is key to this technology. We're looking to automate more functions across all departments to free up not only cost but resources. Resources that can be used to enhance output or resale so that can be leveraged to support other areas of the business. We're looking at each department and location, how they function and where we can better share resources. We're looking at our operations, distribution and supply chain, looking to control costs on our end where we can, while at the same time working with partners to find more cost effective ways of getting the job done. We're also looking closely at each segment, group and/or business unit at sales, margin and expenses at contracts, agreements and future business. We're looking at profitability by brand, by product line, by customer and SKU. Everything that will enhance profitability, while at the same time, lower our working capital needs and improve our balance sheet. With respect to our balance sheet, as of year end, our cash and cash equivalents stood at $11 million and our total debt stood at $73.3 million, which takes into account the final payouts related to Seaguard settlement that is behind us now. Total debt is principally made up of outstanding borrowings on our senior secured credit facility with committed availability of up to $165 million. Our excess borrowing availability as of February 29, 2024 was $55.3 million and we have sufficient working capital and availability to fund our business and meet all obligations. We are focused on generating cash from operations and cash through efficiencies and monetization to generate the best ROI on our capital. With that, I would like to thank you all. We're now ready to open up the call for questions.
Glenn Wiener: Thank you, Lori. Operator, if there are any questions?
Operator:
Pat Lavelle: Okay. Well, thank you. Thank you all for calling in today and your interest in VOXX. We wish you have a good day, and we'll speak to you again next quarter. Thank you.
Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.
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