Skullcandy Reports Third Quarter 16% Net Sales Growth
PARK CITY, UTAH – November 5, 2015 – Skullcandy, Inc. (NASDAQ: SKUL) today announced financial results for the third quarter ended September 30, 2015.
Third quarter 2015 reported results versus the same quarter a year ago
Net sales: $67.2 million vs. $58.1 million, up 16% (up 19% currency neutral)
Gross margin: 41.0% vs. 45.3%, down 430 basis points (down 272 basis points currency neutral)
Selling, general and administrative expense (SG&A): $24.5 million vs. $22.7 million, up 8%
SG&A expense as a percent of net sales: 36.4% vs. 39.2%
Operating income: $3.1 million vs. $3.6 million, down $0.5 million (up 29% currency neutral)
Earnings per share $0.08, up 8% (up 29% currency neutral)
“Our third quarter performance was highlighted by twenty two percent net sales growth in the U.S. and fourteen percent constant currency net sales growth in our international markets. Our product innovation, demand creation and distribution strategies are resonating with Skullcandy and Astro consumers around the world,” said Hoby Darling, President and Chief Executive Officer. “Our deep relationship with our consumer, coupled with our ability to be nimble and quick to market allows us to serve our consumer innovative and creative products that align with current trends. Our new Skullcandy wireless ear buds and headphones are a great example and an awesome addition to our existing product lineup that already includes several of the best-selling styles at retail. Strong sell-through of our new wireless products and increased year over year sales of our traditional wired products contributed to Skullcandy being the number one chosen headphones in the US for the fourth consecutive quarter. At the same time, Astro continues to dominate the high end of the gaming market with its leading portfolio of next-generation compatible headsets that now include Halo 5 and Call of Duty licensed editions. We remain very confident in the strategic course that we have set for the Company.”
Net sales in the third quarter of 2015 increased 16% to $67.2 million from $58.1 million in the same quarter a year ago, or an increase of 19% on a currency neutral basis. Domestic (U.S.) net sales increased 22% to $47.0 million from $38.5 million in the same quarter a year ago, due to increases in both Audio and Gaming categories. International (Non U.S.) net sales increased 3% to $20.2 million from $19.5 million in the same quarter a year ago, or an increase of 14% on a currency neutral basis, primarily due to increased audio product sales in India, Australia, China and increased gaming product sales in Europe.
Gross profit in the third quarter of 2015 increased 5% to $27.6 million from $26.3 million in the same quarter a year ago, or an increase of 12% on a currency neutral basis. Gross margin decreased to 41.0% in the third quarter of 2015 from 45.3% in the same quarter a year ago primarily due to approximately 160 basis points of negative foreign currency effects and product mix shift towards generally lower margin wireless and gaming products.
Selling, general and administrative (SG&A) expenses in the third quarter of 2015 increased 8% to $24.5 million from $22.7 million in the same quarter a year ago, or an increase of 10% on a currency neutral basis. The increase in SG&A expenses is primarily due to increases in demand creation, research and innovation, personnel, and in-store display depreciation expenses, partially offset by a decrease in foreign sales tax. As a percentage of net sales, SG&A expenses decreased 280 basis points to 36.4% as compared to 39.2% in the same quarter a year ago.
Operating income in the third quarter of 2015 was $3.1 million compared to $3.6 million in the same quarter a year ago, but was up 29% 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, partially offset by net sales.
Net income in the third quarter of 2015 was $2.3 million, or $0.08 per share, based on 28.8 million weighted average diluted common shares outstanding. Net income in the same quarter a year ago was $2.1 million, or $0.07 per share, based on 28.5 million weighted average diluted common shares outstanding. On a currency neutral basis, net income increased 30%.
The following information was filed by Skullcandy, Inc. (SKUL) on Thursday, November 5, 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.