Skullcandy Second Quarter Operating Income and Earnings Per Share Exceed Expectations; Raises Guidance for Full Year Earnings Per Share
PARK CITY, UTAH – August 6, 2015 – Skullcandy, Inc. (NASDAQ: SKUL) today announced financial results for the second quarter ended June 30, 2015.
Second quarter 2015 results versus the same quarter in the prior year
Net sales: $58.0 million vs. $53.9 million, up 8% (up 10% currency neutral)
Gross margin: 42.8% vs. 45.0%, down 220 basis points (down 130 basis points currency neutral)
Selling, general and administrative expense (SG&A): $23.8 million vs. $22.9 million, up 4% (up 7% currency neutral)
SG&A expense as a percent of net revenue: 41.1% vs. 42.6%
Operating income: $1.0 million vs. $1.3 million, down $0.3 million (down $0.02 million currency neutral)
Net income per share: 4.2 cents vs. 5.5 cents, down 24% (up 17% currency neutral)
“Everything we do at Skullcandy and Astro puts the consumer at the center. We strive to inspire people to live life at full volume through our innovations, products, and brand storytelling,” said Hoby Darling, President and Chief Executive Officer. “Through this dedication to our consumer, Skullcandy once again was the number one headphone choice in units for the second quarter and year to date. Astro also outpaced its competition in the gaming market growing nearly three times faster than the industry during Q2. Our product quality and innovation engine continues to strengthen as evidenced by the accolades and Editor's Choice awards the Grind and Strum, two recent product introductions, received from leading audio publications while Astro continues to design the best high end gaming headphones in the world. We continue to make smart investments in innovation and demand creation, with double digit year over year increases in spend, while maintaining tight control over non-revenue driving expenses. Looking ahead, we are well positioned to add more fuel to our revenue engine as we see accelerating growth and new shelf space during the upcoming holiday season to kickoff next year with great brand and product momentum.”
Net sales in the second quarter of 2015 increased 8% to $58.0 million from $53.9 million in the same quarter of the prior year, or an increase of 10% on a currency neutral basis. Domestic (U.S.) net sales increased 5% to $41.3 million from $39.5 million in the same quarter of the prior year due to increases in both Audio and Gaming categories. International (Non U.S.) net sales increased 16% to $16.7 million from $14.4 million in the same quarter of the prior year, or an increase of 24% on a currency neutral basis, due to increased audio sales in the Japan, China, Australia and India and increased gaming sales in Europe.
Gross profit in the second quarter of 2015 increased 3% to $24.8 million from $24.2 million in the same quarter of the prior year, or an increase of 7% on a currency neutral basis. Gross margin decreased to 42.8% in the second quarter of 2015 from 45.0% in the same quarter in 2014 primarily due to approximately 90 basis points of negative foreign currency effects and product mix shift towards gaming products, which carry lower margins than our audio products.
Selling, general and administrative (SG&A) expenses in the second quarter of 2015 increased 4% to $23.8 million from $22.9 million in the same quarter of the prior year, or an increase of 7% on a currency neutral basis. The increase in SG&A expenses is primarily due to double digit increases in demand creation, research and innovation expenses, and in-store asset depreciation, partially offset by decreases in bad debt and personnel expenses. As a percentage of net sales, SG&A expenses decreased to 41.1% as compared to 42.6% in the same quarter of the prior year.
Operating income in the second quarter of 2015 decreased $0.3 million to $1.0 million from $1.3 million in the same quarter of the prior year, though it was stable, decreasing $0.02 million on a currency neutral basis. This slight decrease in operating income is due to a lower gross margin percentage and increased SG&A expenses to fund future growth, generally offset by higher sales.
Net income in the second quarter of 2015 was $1.2 million, or $0.04 per share, based on 29.0 million weighted average diluted common shares outstanding. Net income in the same quarter of the prior year was $1.6 million, or $0.06 per share, based on 28.5 million weighted average diluted common shares outstanding. On a currency neutral basis, net income increased 19%.
The following information was filed by Skullcandy, Inc. (SKUL) on Thursday, August 6, 2015 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.