VOXX International Corporation and Subsidiaries Quarterly Report (Form 10-Q)
VOXX International Corporation, a Delaware-based company, filed its quarterly report (Form 10-Q) for the period ended November 30, 2024. The company reported net sales of $123.1 million, a decrease of 12.1% compared to the same period last year. Gross profit decreased by 14.1% to $34.5 million, while operating income decreased by 34.5% to $2.3 million. The company’s net loss attributable to common shareholders was $1.4 million, compared to a net income of $1.1 million in the same period last year. As of November 30, 2024, the company had cash and cash equivalents of $14.1 million, and total debt of $143.4 million. The company’s management discussed the challenges faced by the company, including increased competition, supply chain disruptions, and the impact of the COVID-19 pandemic. Despite these challenges, the company remains committed to its strategic initiatives and is focused on improving its financial performance.
Overview of the Company’s Financial Performance
VOXX International Corporation is a global manufacturer and distributor of automotive electronics, consumer electronics, and biometric products. The company has faced significant headwinds in recent years, including supply chain challenges, inflationary pressures, and declining demand for many of its products.
For the three and nine months ended November 30, 2024, VOXX reported net sales of $105.2 million and $289.3 million, respectively, down 22.2% and 19.8% compared to the prior year periods. The declines were driven by lower sales across the Automotive Electronics and Consumer Electronics segments, partially offset by the sale of certain assets.
Gross profit margins also declined, falling to 21.2% and 24.3% for the three and nine month periods, respectively, compared to 26.9% and 25.6% a year earlier. The margin compression was primarily due to inventory writedowns, higher material and shipping costs, and a shift in product mix.
Revenue and Profit Trends
The Automotive Electronics segment, which accounted for 30.2% and 29.6% of total net sales in the three and nine month periods, saw revenue decline 11.7% and 21.8%, respectively, year-over-year. The main drivers were lower sales of aftermarket security, remote start, and rear seat entertainment products, as well as decreased demand for satellite radio and safety products. These declines were partially offset by increased sales of OEM safety and accessory products.
The Consumer Electronics segment, representing 69.8% and 70.3% of total net sales, experienced revenue decreases of 26.6% and 19.1% in the three and nine month periods. The largest factor was the sale of the company’s Voxx Accessories Corp. subsidiary in August 2024, which eliminated approximately $10.8 million and $18.2 million in sales, respectively. The segment also saw declines in domestic and international sales of premium audio products, receivers, and accessories.
The Biometrics segment, which is now accounted for as an equity method investment, contributed minimal revenue in the current year periods.
Strengths and Weaknesses
Key strengths for VOXX include its diversified product portfolio across the automotive, consumer, and biometrics markets, as well as its efforts to improve operational efficiency through cost-cutting measures and the relocation of manufacturing. The company has also generated cash from the strategic divestiture of certain assets.
However, VOXX faces significant challenges, including ongoing supply chain disruptions, inflationary pressures, and declining demand for many of its products due to macroeconomic headwinds. The company has been forced to take actions such as inventory writedowns, price increases, and headcount reductions to manage these issues.
Additionally, VOXX recorded substantial goodwill and intangible asset impairment charges of $44.3 million in the current year periods, reflecting the deterioration in the fair value of certain reporting units and intangible assets. This indicates potential long-term challenges in sustaining profitability.
Outlook and Strategic Alternatives
Looking ahead, VOXX anticipates continued downward trends in sales, particularly in its Consumer Electronics segment, as the company no longer sells the domestic accessories products of the divested Voxx Accessories Corp. subsidiary.
To address these challenges, the company has been exploring strategic alternatives, including a potential sale of the company or its segments, operational improvements, or other strategic transactions. On December 17, 2024, VOXX announced it had entered into a merger agreement to be acquired by Gentex Corporation for $7.50 per share.
The merger is subject to customary closing conditions, including shareholder and regulatory approvals, and is expected to close in the first quarter of 2025. If the merger is not completed, VOXX may face additional risks, including potential declines in its stock price, disruptions to its business, and the possibility of having to pay a termination fee to Gentex.
Overall, VOXX’s financial performance has been significantly impacted by macroeconomic headwinds, leading the company to explore strategic alternatives, including the proposed merger with Gentex. While the company has taken steps to improve efficiency and manage costs, the long-term outlook remains uncertain as it navigates ongoing challenges in its key markets.
Tables
Net Sales:
| November 30, 2024 | November 30, 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Three Months Ended | ||||
| Automotive Electronics | $31,716 | $35,920 | $(4,204) | (11.7)% |
| Consumer Electronics | $73,368 | $99,995 | $(26,627) | (26.6)% |
| Biometrics | $- | $92 | $(92) | (100.0)% |
| Corporate/Eliminations | $91 | $(747) | $838 | 112.2% |
| Total net sales | $105,175 | $135,260 | $(30,085) | (22.2)% |
| Nine Months Ended | ||||
| Automotive Electronics | $85,782 | $109,749 | $(23,967) | (21.8)% |
| Consumer Electronics | $203,344 | $251,369 | $(48,025) | (19.1)% |
| Biometrics | $8 | $401 | $(393) | (98.0)% |
| Corporate/Eliminations | $190 | $(691) | $881 | 127.5% |
| Total net sales | $289,324 | $360,828 | $(71,504) | (19.8)% |
Gross Profit and Gross Margin Percentage:
| November 30, 2024 | November 30, 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Three Months Ended | ||||
| Automotive Electronics | $4,928 (15.5%) | $9,262 (25.8%) | $(4,334) | (46.8)% |
| Consumer Electronics | $17,353 (23.7%) | $27,121 (27.1%) | $(9,768) | (36.0)% |
| Biometrics | $(1) (-%) | $1 (1.1%) | $(2) | (200.0)% |
| Corporate/Eliminations | $65 | $(42) | $107 | 254.8% |
| Total | $22,345 (21.2%) | $36,342 (26.9%) | $(13,997) | (38.5)% |
| Nine Months Ended | ||||
| Automotive Electronics | $17,572 (20.5%) | $25,933 (23.6%) | $(8,361) | (32.2)% |
| Consumer Electronics | $52,852 (26.0%) | $65,737 (26.2%) | $(12,885) | (19.6)% |
| Biometrics | $(133) (-1662.5%) | $106 (26.4%) | $(239) | (225.5)% |
| Corporate/Eliminations | $155 | $771 | $(616) | (79.9)% |
| Total | $70,446 (24.3%) | $92,547 (25.6%) | $(22,101) | (23.9)% |
EBITDA and Adjusted EBITDA:
| Three months ended November 30 | Nine months ended November 30 | |
|---|---|---|
| 2024 | 2023 | |
| Net (loss) income attributable to VOXX International Corporation and Subsidiaries | $(43,966) | $1,912 |
| Adjustments: | ||
| Interest expense and bank charges | $1,144 | $1,688 |
| Depreciation and amortization | $2,569 | $2,808 |
| Income tax (benefit) expense | $(513) | $97 |
| EBITDA | $(40,766) | $6,505 |
| Stock-based compensation | $262 | $177 |
| Gain on sale of tradename | $- | $- |
| Gain on sale of business | $- | $- |
| Gain on sale of assets | $(7,299) | $- |
| Foreign currency losses | $2,413 | $144 |
| Restructuring expenses | $49 | $101 |
| Goodwill impairment charges | $24,985 | $- |
| Intangible asset impairment charges | $14,411 | $- |
| Non-recurring ERP implementation costs | $- | $- |
| Gain on termination of interest rate swap | $(47) | $- |
| Non-recurring due diligence fees | $1,112 | $- |
| Non-routine legal fees | $191 | $318 |
| Final arbitration award | $- | $752 |
| Adjusted EBITDA | $(4,689) | $7,997 |
