Deswell's Electronics Segment Reports 48.8% Sales Growth in Q2

Estimated reading time: 3 minutes

Deswell Industries, Inc. today announced its financial results for the fiscal second quarter ended September 30, 2015.

Net sales for the second quarter ended September 30, 2015 were $12.4 million, an increase of 21.4% compared to net sales of $10.2 million for the quarter ended September 30, 2014. Net sales increased by 48.8% to $7.6 million in the electronic segment and decreased by 5.9% to $4.8 million in the Company’s plastic segment. The operating loss in the second quarter of fiscal 2016 was $1.0 million, compared to an operating loss of $1.9 million for the same quarter of fiscal 2015.

Total gross margin increased to 10.8% in the second quarter ended September 30, 2015 compared to 6.8% in the same quarter last year. Gross profit margin in the plastic segment increased to 18.4% of net sales for the second quarter of fiscal 2016 compared to 14.4% of net sales for the same quarter of last fiscal year. The increase in gross profit and margin in the plastic segment was mainly due to lower labor cost as a percentage of sales due to a decrease in headcount, and lower factory overhead. The Company reported a net loss of $2.4 million for the second quarter ended September 30, 2015 compared to a net loss of $1.7 million for the quarter ended September 30, 2014. Deswell reported a basic and diluted loss per share of ($0.15) for the second quarter of fiscal 2016 (based on 16,056,000 weighted average shares outstanding), compared to a basic and diluted loss per share of ($0.11) (based on 16,056,000 weighted average shares outstanding), for the quarter ended September 30, 2014.

Net sales for the six months ended September 30, 2015 were $23.6 million, an increase of 23.7%, compared to sales of $19.1 million for the corresponding period in fiscal 2015. Operating loss for the six months ended September 30, 2015 was $2.6 million, compared to an operating loss of $2.7 million for the first six months of fiscal 2015. The Company reported a net loss of $3.5 million in the first half of fiscal 2016, compared to net loss of $1.7 million for the six months ended September 30, 2014. Deswell reported basic and diluted net loss per share of ($0.22) for the first six months of fiscal 2016, (based on 16,056,000 weighted average shares outstanding), compared to basic and diluted loss per share of ($0.11) (based on 16,056,000 weighted average shares outstanding), for the prior corresponding period.

The Company's financial position remained strong, with $9.1 million in cash and cash equivalents at September 30, 2015 compared to $19.5 million at September 30, 2014. Working capital totaled $42.6 million as of September 30, 2015, versus $49.0 million as of September 30, 2014. Furthermore, the Company has no long-term or short-term borrowings as of September 30, 2015.

Edward So, Chief Executive Officer of Deswell Industries, stated, “Our Company made good progress in the second quarter, achieving strong consolidated revenue growth and improving gross margin performance, while also delivering a 14% reduction in SG&A expenses. We’re very pleased to have seen continued and significant sales growth from our electronic division which we believe reflects our efforts to strengthen our design, manufacturing and sales efforts to meet the needs of our customers, both existing and new. Our balance sheet remains strong, providing a solid foundation for the continued growth of our business.

Second Quarter Dividends

The Company also announces that its board of directors today declared a cash dividend of $0.035 per share for the fiscal second quarter ended September 30, 2015. The dividends will be payable on December 10, 2015 to shareholders of record as of November 23, 2015.

About Deswell

Deswell manufactures injection-molded plastic parts and components, electronic products and subassemblies, and metallic molds and accessory parts for original equipment manufacturers (“OEMs”) and contract manufacturers at its factories in the People’s Republic of China. The Company produces a wide variety of plastic parts and components used in the manufacture of consumer and industrial products; printed circuit board assemblies using surface mount (“SMT”) and finished products such as telephones, telephone answering machines, sophisticated studio-quality audio equipment and computer peripherals. The Company’s customers include Vtech Telecommunications Ltd. and Lenbrook Industries, Ltd.