Deswell Announces First Half 2023 Results

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Deswell Industries, Inc. announced its unaudited financial results for the first six months of fiscal 2023, ended September 30, 2022.

Net sales for the six months ended September 30, 2022 were $44.4 million, an increase of 11.7% compared to net sales of $39.8 million for the six months ended September 30, 2021. Net sales increased by 20.9% to $36.1 million in the electronic segment but decreased by 15.9% to $8.3 million in the Company’s plastic segment.

Total gross margin slightly decreased to 16.0% of net sales during the six months ended September 30, 2022, as compared to 16.1% of net sales in the same period last year. Gross profit margin in the plastic segment increased to 13.2% of net sales for the first half of fiscal 2023, compared to 10.7% of net sales for the corresponding period of last fiscal year. The increase in gross profit and margin in the plastic segment was mainly due to decreases in raw materials cost, and in basic pay rate of labor costs due to lower headcount in the first six months of fiscal 2023. Gross profit margin in the electronic segment decreased to 16.7% of net sales for the first half of fiscal 2023, compared to 17.9% of net sales for the corresponding period of last fiscal year. The decrease in gross margin in the electronic segment was mainly attributable to increases in raw materials cost for semiconductor chips as a result of the continuing shortage in supply and pricing volatility for the first six months of fiscal 2023. Operating income in the first half of fiscal 2023 was $2.0 million, compared to operating income of $1.2 million for the same period of fiscal 2022.

The Company reported net loss of $0.6 million for the six months ended September 30, 2022, compared to net income of $4.3 million for the six months ended September 30, 2021. This was primarily due to a non-operating expense of $2.3 million for the six months ended September 30, 2022, as compared to a non-operating income of $3.3 million for the same period of fiscal 2022. Deswell reported basic and diluted loss per share of $0.04 for the first half of fiscal 2023 (based on 15,935,000 and 15,935,000 weighted average shares outstanding), as compared to basic and diluted income per share of $0.27 for the first half of fiscal 2022 (based on 15,923,000 and 16,041,000 weighted average shares outstanding), for the six months ended September 30, 2021.

The Company's financial position remained strong, with $15.6 million in cash and cash equivalents and working capital totaling $59.4 million as of September 30, 2022. Furthermore, the Company has no long-term or short-term borrowings as of September 30, 2022.

Mr. Edward So, Chief Executive Officer, commented, “We’re pleased to have delivered solid revenue and operating income growth in the first half of fiscal 2023, driven by our electronics segment where we saw continued demand for home audio and entertainment equipment and for professional audio instruments and equipment. Our sales growth in this segment reflects our ability to reliably produce and deliver products on-time, creating value for our customers. This growth was partially offset by decreased sales at our plastics segment.”

“During the first half of fiscal 2023 the global economic and political environment were unsettled, impacting worldwide financial markets and, as a result, we recorded an unrealized loss of $4.4 million on our investment portfolio. Nonetheless, we achieved improved operating income of $2.0 million as compared to $1.2 million in the same prior year period. Our balance sheet remains strong with a solid cash position and no debt providing us the financial flexibility to deliver strong operating performance while implementing our long-term growth strategy to capitalize on market demand for our manufacturing capabilities.”