Skullcandy, Inc. Reports Second Quarter 2016 Results
PARK CITY, UTAH – August 9, 2016 – Skullcandy, Inc. (NASDAQ: SKUL) today announced financial results for the second quarter ended June 30, 2016.
“We are pleased with our second quarter results. The market share gains achieved by our brands in a challenging retail environment is a testament to the consumer focus and passion of our team. For the Skullcandy brand, we saw significant strength in our largest domestic accounts led by our expanded wireless portfolio which helped fuel sell-through at a rate nearly double the rest of the market according to NPD. Wireless is the future of audio and the Skullcandy brand is winning. For the Astro Gaming brand, we continue to experience strong growth and expect the fall launch of the new A50 headset to set the standard for the best console gaming headset in the market. While our overall Company results were hampered by some temporary headwinds including the ongoing clean-up of our China region and several retailer bankruptcies around the world, we are excited as a team to be on full attack,” said Skullcandy, Inc. President and CEO, Hoby Darling.
Net sales in the second quarter of 2016 and 2015 were $57.3 million and $57.4 million, respectively. Domestic (U.S.) net sales increased 4% to $42.3 million from $40.7 million in the same quarter a year ago. International (Non U.S.) net sales decreased 10% to $15.0 million from $16.7 million in the same quarter a year ago, primarily due to significantly decreased sales in China.
Gross profit in the second quarter of 2016 decreased 4% to $23.6 million from $24.5 million in the same quarter a year ago. Gross margin decreased to 41.1% in the second quarter of 2016 from 42.7% in the same quarter a year ago primarily due to continued clean up in China.
Selling, general and administrative (SG&A) expenses in the second quarter of 2016 increased 9% to $25.5 million from $23.5 million in the same quarter a year ago. The increase in SG&A expenses is primarily due to certain transaction costs related to the Company's sale process, customer bankruptcies, litigation, personnel related expenses, demand creation, and research and innovation expenses. These increases are partially offset by decreases in administrative costs. As a percentage of net sales, SG&A expenses increased 400 basis points to 45% as compared to 41% in the same quarter a year ago. Excluding certain non-routine costs related to our sale process, litigation, and customer bankruptcies, SG&A expenses were up 3% year over year.
Operating (loss) income in the second quarter of 2016 was $(2.0) million, a decrease of $3.0 million compared to $1.0 million in the same quarter a year ago, driven by a lower gross profit and increased SG&A expenses. Excluding certain non-routine costs related to our sale process, litigation, and customer bankruptcies, the change in operating (loss) income year over year was $1.6 million.
Net (loss) income in the second quarter of 2016 was $(1.6) million, or $(0.05) per share, based on 28.7 million weighted average diluted common shares outstanding, and net (loss) income in the same quarter a year ago was $1.2 million, or $0.04 per share, based on 29.0 million weighted average diluted common shares outstanding.
Second quarter 2016 results include pre-tax expenses of approximately $1.3m, or $0.03 of net income per share, in certain non-routine costs related to our sale process, litigation, and customer bankruptcies.
Balance Sheet Highlights
As of June 30, 2016, cash, cash equivalents, and short-term investments increased 75% to $41.2 million compared to $23.6 million as of December 31, 2015. The increase was primarily due to the Company’s collection efforts on receivables from fourth quarter sales and a decrease in the Company's early payments with certain vendors. Accounts receivable, net decreased 37% to $53.1 million as of June 30, 2016 from $84.9 million as of December 31, 2015. Inventories, net increased 7% to $44.5 million as of June 30, 2016 from $41.7 million as of December 31, 2015. The Company continued to have no outstanding debt as of June 30, 2016.
The following information was filed by Skullcandy, Inc. (SKUL) on Tuesday, August 9, 2016 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.