Press release:
PARK CITY, Utah, May 5, 2015 (GLOBE NEWSWIRE) — Skullcandy, Inc. (Nasdaq:SKUL) today announced financial results for the first quarter ended March 31, 2015.
First quarter 2015 results versus same quarter in prior year
– Net sales: $46.2 million vs. $39.1 million (+18%, or +21% currency neutral basis*)
– Gross margin: 40.5% vs. 46.5% (-600 basis points)
– Selling, general and administrative expense (SG&A): $22.4 million vs. $22.1 million (+1%)
– SG&A expense as a percent of net revenue: 48.4% vs. 56.5%
– Operating loss: $3.6 million vs. $3.9 million, (7% improvement)
– Net loss per share: $(0.13) vs. $(0.12)
“Our first quarter revenue demonstrates the increasing global strength of the Skullcandy and Astro brands and our long-term growth potential,” said Hoby Darling, President and Chief Executive Officer. “Our sales are in the right channels to drive long-term brand and the consumer response to our new product introductions are driving strong full price selling at retail. The underlying trends in our business are even stronger than our GAAP results indicate as we are only reporting the significant foreign currency change effects in our revenue line, yet the changes had significant impacts to gross margin and operational bottom line growth. Despite these headwinds, I feel even more confidence about our prospects for the year and our longer term success. The team is on full attack. We are confident that our actions aimed at improving both our top and bottom line, while investing in innovation and demand creation, have us on track to achieve our full year guidance, and more importantly deliver sustained growth and increased earnings over the long-term.”
Net sales in the first quarter of 2015 increased 18% to $46.2 million from $39.1 million in the same quarter of the prior year, or growth of 21% on a currency neutral basis*. Domestic (U.S.) net sales increased 19% to $31.1 million from $26.1 million in the same quarter of the prior year. International (Non U.S.) net sales increased 17% to $15.1 million from $13.0 million in the same quarter of the prior year, or growth of 26% on a currency neutral basis*. Total net sales increased across both segments, primarily due to increased gaming sales in the U.S., and increased sales in China, India, and Latin America.
Gross profit in the first quarter of 2015 increased 3% to $18.7 million from $18.2 million in the same quarter of the prior year. Gross margin decreased to 40.5% in the first quarter of 2015 from 46.5% in the same quarter in 2014 primarily due to foreign currency depreciation, increased air-freight and warehousing expense to overcome west-coast port slowdowns, and product mix shift to gaming products.
Selling, general and administrative (SG&A) expenses in the first quarter of 2015 increased 1% to $22.4 million from $22.1 million in the same quarter of the prior year. The modest increase in SG&A expenses is primarily due to increases in demand creation and research and innovation expenses, partially offset by decreases in bad debt and professional fees. As a percentage of net sales, SG&A expenses were 48.4% compared to 56.5% in the same quarter of the prior year.
Operating loss in the first quarter of 2015 improved by 7% to $(3.6) million from $(3.9) million in the same quarter of the prior year. The improvement in operating loss is due to increased sales and gross profits, partially offset by increased SG&A expenses.
Net loss in the first quarter of 2015 was $(3.7) million, or $(0.13) per share, based on 28.3 million weighted average common shares outstanding. Net loss in the same quarter of the prior year was $(3.5) million, or $(0.12) per share, based on 27.8 million weighted average common shares outstanding.
*Management estimated impacts to net sales driven by currency and hedging instrument changes.
Balance Sheet Highlights
As of March 31, 2015, cash, cash equivalents, and short-term investments totaled $34.4 million compared to $36.6 million as of December 31, 2014. The Company continued to have no outstanding debt. Accounts receivable, net decreased 39% to $45.4 million as of March 31, 2015 from $74.4 million as of December 31, 2014. Inventories, net increased 16% to $63.9 million as of March 31, 2015 from $55.0 million as of December 31, 2014.
2015 Second Quarter and Full Year Financial Outlook
For the second quarter of 2015, the Company currently forecasts net sales to increase at a growth rate of 7-9% over 2014 levels and net income on a U.S. GAAP fully-diluted per share basis of a range of $0.01 to $0.03.
For the full year 2015, the Company forecasts net sales to increase 13-15% over 2014 levels. The Company reiterated guidance for net income on a U.S. GAAP fully-diluted per share basis of a range of $0.36 to $0.40 per share.
About Skullcandy, Inc.
Skullcandy is the original lifestyle and performance audio brand inspired by the creativity and irreverence of youth culture. Skullcandydesigns, markets and distributes audio and gaming headphones and other accessory related products under the Skullcandy, Astro Gaming and 2XL brands. Skullcandy was launched in 2003 and quickly became one of the world’s most distinct audio brands by bringing unique technology, color, character and performance to an otherwise monochromatic space; helping to revolutionize the audio arena by introducing headphones, earbuds and other audio and wireless lifestyle products that possess unmistakable style and exceptional performance. The Company’s products are sold and distributed through a variety of channels in the U.S. and approximately 80 countries worldwide, including the company’s websites at www.skullcandy.com and www.astrogaming.com.
