Universal Electronics (NASDAQ: UEIC) reported Q1 EPS of $0.81, $0.02 worse than the analyst estimate of $0.83. Revenue for the quarter came in at $152 million versus the consensus estimate of $168.22 million.

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

• GAAP net sales were $151.8 million, compared to $184.2 million; Adjusted Non-GAAP net sales were $152.0 million, compared to $182.7 million.
• GAAP gross margins were 28.3%, compared to 21.7%; Adjusted Non-GAAP gross margins were 30.9%, compared to 25.8%.
• GAAP operating income was $8.0 million, compared to $1.7 million; Adjusted Non-GAAP operating income was $15.0 million, compared to $14.6 million.
• GAAP net income was $5.8 million, or $0.41 per diluted share, compared to net loss of $1.0 million or $0.07 per share; Adjusted Non-GAAP net income was $11.5 million, or $0.81 per diluted share, compared to $11.3 million, or $0.82 per diluted share.
• At March 31, 2020, cash and cash equivalents were $58.9 million.

“We entered 2020 with the strongest foundation in our history, having devoted 2019 to ongoing technology development and the implementation of strategic initiatives to improve profitability,” said Paul Arling, UEI’s chairman and CEO. “As a result, we are better positioned to address challenging macro-economic conditions.”

“Our hallmark innovation continues to generate leading technology and create competitive advantages for both UEI and our customers, particularly in today's environment. For example, our QuickSet® Cloud platform enables easy self-installation, which has provided a true benefit to our subscription broadcast customers. Our voice technology enables near-touchless control in both the home and hospitality channels for entertainment and energy management. It is these types of desirable product features, combined with positive home entertainment trends, that are driving our customers to remain committed to their product development strategies while adapting to a fast-changing market. In fact, our engineers continue to work with major customers on exciting new projects that we expect to formally unveil later this year and early next year.”

“UEI has become stronger during difficult economic times in the past, and we plan to do so again. We remain dedicated to excellence and are confident we will continue to generate long-term shareholder value.”

Bryan Hackworth, UEI’s CFO, stated, “In the first quarter of 2020, we generated strong gross margins and improved operating margins, even though revenue was disrupted by unforeseen events. In China, our labor pool is back to pre-shutdown levels, and our factories in both China and Mexico are producing at required capacity. Overall, UEI is prepared to manage through uncertain times by leveraging our diverse customer base, manufacturing facilities in two hemispheres, deep supplier partnerships, and strong balance sheet.”

GUIDANCE:

Universal Electronics sees Q2 2020 EPS of $0.84-$0.94, versus the consensus of $1.01. Universal Electronics sees Q2 2020 revenue of $150-160 million, versus the consensus of $192.79 million.

For the second quarter of 2020, the company expects GAAP net sales to range between $150 million and $160 million, compared to $193.9 million in the second quarter of 2019. GAAP earnings per diluted share for the second quarter of 2020 are expected to range from $0.99 to $1.09, compared to a GAAP loss per share of $0.37 in the second quarter of 2019.

For the second quarter of 2020, the company expects Adjusted Non-GAAP net sales to range between $150 million and $160 million, compared to $193.4 million in the second quarter of 2019. Adjusted Non-GAAP earnings per diluted share are expected to range from $0.84 to $0.94, compared to Adjusted Non-GAAP earnings per diluted share of $0.83 in the second quarter of 2019. The second quarter 2020 Adjusted Non-GAAP earnings per diluted share estimate excludes $0.15 per share related to, among other things, excess manufacturing overhead and factory transition costs, stock-based compensation, amortization of acquired intangibles, changes in contingent consideration relating to acquisitions, reversal of social insurance accruals related to the 2018 sale of our Guangzhou factory, restructuring costs, foreign currency gains and losses and the related tax impact of these adjustments.

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