Voxx International Corporation (NASDAQ: VOXX) is an American consumer electronics company based in New York. The Company operates in three major verticals: automotive products, premium audio products and consumer electronic accessories.
The automotive products division sells car music systems, amplifiers, satellite radio, automotive security, rear observation and collision avoidance systems. The premium audio products segment comprises loudspeakers, headphones, and sound bars.
The company is also involved in the business of selling electronics peripherals including HDTV, HDMI accessories, flat panel TV mounting systems and DVD players, via its consumer electronics accessories division.
VOXX released its fiscal year ended February 2014 results on May 15, 2015. Revenue dropped 3 percent year-on-year to $810 million from $836 million in 2013. Gross margins declined to 28.3 percent this quarter, which was 150 basis points lower than the corresponding period last year.
EBITDA margins also declined from 7 percent to 4.5 percent. Premium automotive segment sales were down 2 percent due to heavy discounts offered to compete with other players. This indicates the company is losing pricing power due to increased competition. The loss during the year was $26.6 million as against a net profit of $35.7 billion last year. This poor performance caused the stock price to plummet 25 percent on May 15, 2014 to close at $7.51.
The Company's guidance for fiscal year 2015 was also weak, with estimated revenue of $830 million less than average analyst estimates of $ 870 million. The results announcement also mentioned further retail distribution with an estimated capital expenditure of $13.5 million.
The debt to equity ratio was 0.30, while the debt/ EBITDA is close to 2.0x due to lower EBITDA this year. Funding retail expansion by debt will further strain the profitability.
The company took a non-cash impairment charge of $57.6 million on tangible and intangible assets including goodwill. This perceived loss in asset value, especially goodwill, seems to indicate less than expected returns from certain subsidiaries.
Voxx is currently trading at a trailing (2013 earnings) P/E of 8.2x. The valuation is expected to have lowered following the poor results. The EPS decreased to -1.10 in 2014 as against 0.95 in 2013.
The company's guidance revenue was below analyst estimates as well, which would make the expected P/E multiple to be about 6-7x in 2015. The price estimate for 2015 at the Thomson Reuters (NYSE: TRI) consensus forecast EPS of 1.01 turns out to be $ 6.5.
The long-term target price is bearish with price expected to be in the range of $ 6 to $7 for 2015, unless the company is able to improve its sales and profit margins in the upcoming quarters. The extreme weather conditions in USA during winter this fiscal was cited as a reason for reduced sales in the company's post results conference.
The company's strategic investment in the consumer electronics segment performance especially in biometric devices, imagery and action cameras will be key for improving margins in 2015.
The bottom line is that Voxx International has a great deal to overcome in order to get back to delivering value for money to shareholders. However, after the recent plunge, the company could be providing an interesting opportunity to buy dips.