- Company Announces First Half Cash Dividend
of $0.10 Per Share -
Deswell Industries, Inc. (Nasdaq: DSWL) today announced its
unaudited financial results for the first six months of fiscal
2023, ended September 30, 2023.
Net sales for the six months ended September 30, 2023 were $37.7
million, a decrease of 15.1% compared to net sales of $44.4 million
for the six months ended September 30, 2022. Net sales decreased by
24.6% to $6.3 million in the plastic segment and by 12.9% to $31.4
million in the Company’s electronic segment.
Total gross margin increased to 19.5% of net sales during the
six months ended September 30, 2023, as compared to 16.0% of net
sales in the same period last year. Gross profit margin in the
plastic segment increased to 19.6% of net sales for the first half
of fiscal 2024, compared to 13.2% of net sales for the
corresponding period of last fiscal year. The increase in gross
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 and the depreciation of renminbi in the first six months
of fiscal 2024. Gross profit margin in the electronic segment
increased to 19.5% of net sales for the first half of fiscal 2024,
compared to 16.7% of net sales for the corresponding period of last
fiscal year. The increase in gross margin in the electronic segment
was mainly the result of the depreciation of renminbi, and
decreases in raw materials and labor costs due to continuous cost
control measures in the segment for the first six months of fiscal
2024. Operating income in the first half of fiscal 2024 was $2.3
million, compared to operating income of $2.0 million for the same
period of fiscal 2023.
The Company reported net income of $3.6 million for the six
months ended September 30, 2023, compared to net loss of $0.6
million for the six months ended September 30, 2022. This was
primarily due to non-operating income of $1.4 million for the six
months ended September 30, 2023, as compared to a non-operating
expense of $2.3 million for the same period of fiscal 2023. Deswell
reported basic and diluted income per share of $0.22 for the first
half of fiscal 2024 (based on 15,935,000 and 15,973,000 weighted
average shares outstanding), as compared to 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), for
the six months ended September 30, 2022.
The Company's financial position remained strong, with $17.4
million in cash and cash equivalents and working capital totaling
$63.8 million as of September 30, 2023. Furthermore, the Company
has no long-term or short-term borrowings as of September 30,
2023.
Mr. Edward So, Chief Executive Officer, commented, “With global
inflation continuing to rise, consumers are spending less on
non-essential items such as home audio equipment and entertainment
products as they navigate the challenging economy. Despite the
sales pressure we encountered in the first half of fiscal 2024,
we’re pleased to have achieved enhanced margins and significantly
improved profitability, with net income of $3.6 million or $0.22
per share, as compared to a net loss of $0.6 million in the first
half of fiscal 2023. Margins were favorably impacted by lower raw
materials costs related to an improved supply chain environment and
by our ongoing expense control initiatives. Additionally, our
margin performance benefitted from the depreciation of renmibi in
the first half of 2024.
“We continue to work diligently with our customers to develop
new products strategically tailored to appeal to our end markets
during this challenging economic landscape. 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.”
First Half Dividend
The Company also announced that its board of directors today
declared a cash dividend of $0.10 per share for the first half of
the fiscal year ended September 30, 2023. The dividend will be
payable on December 21, 2023 to shareholders of record as of
December 1, 2023.
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.
To learn more about Deswell Industries, Inc., please visit the
Company’s website at www.deswell.com.
Forward-Looking Statements
Statements in this press release that are "forward-looking
statements" are based on current expectations and assumptions that
are subject to risks and uncertainties. For example, our statements
regarding our expected growth in sales from the electronic division
in the coming year and our efforts to reduce overhead costs in our
plastic division are forward-looking statements. Actual results
could differ materially because of the following factors, among
others, which may cause revenues and income to fall short of
anticipated levels or our overhead expenses to increase: our
dependence on a few major customers; vigorous competition forcing
product price reductions or discounts; the timing and amount of
significant orders from our relatively few significant customers;
continuing increases in resin prices that cannot be passed on to
customers; unexpected production delays; obsolete inventory or
product returns; losses resulting from fraudulent activity of our
customers or employees; labor shortages that increase labor and
costs; changes in the mix of product products we manufacture and
sell; adverse currency fluctuations in the renminbi and Hong Kong
dollar when translated to US dollars; potential new accounting
pronouncements; and the effects of travel restrictions and
quarantines associated with major health problems, such as the
Severe Acute Respiratory Syndrome, on general economic
activity.
For further information regarding risks and uncertainties
associated with the Company’s business, please refer to the “Risk
Factors” section of Company’s Annual Report on Form 20-F, copies of
which may be obtained from the Website maintained by the Securities
and Exchange Commission at http://www.sec.gov.
All information in this release is made as of the date of this
press release. Deswell undertakes no duty to update any
forward-looking statement to conform the statement to actual
results or changes in Deswell’s expectations.
DESWELL INDUSTRIES,
INC.
CONSOLIDATED BALANCE
SHEET
(U.S. dollars in
thousands)
September 30,
March 31,
2023
2023
ASSETS
(Unaudited)
(Audited)
Current assets:
Cash and cash equivalents
$
17,381
$
22,160
Fixed deposits maturing over three
months
6,424
3,053
Time deposits maturing over twelve months
- current portion
279
1,047
Marketable securities (note 2)
21,394
20,722
Held-to-maturity Investment
5,092
-
Accounts receivable, net
16,799
15,704
Inventories (note 3)
14,774
17,325
Prepaid expenses and other current
assets
1,179
1,149
Total current assets
83,322
81,160
Property, plant and equipment - net
25,307
26,051
Deferred income tax assets
247
262
Time deposits maturing over twelve
months
2,740
2,906
Total assets
$
111,616
$
110,379
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
$
7,625
$
6,949
Accrued payroll and employee benefits
7,005
7,943
Customer deposits
2,054
2,216
Other accrued liabilities
1,770
1,989
Income taxes payable
1,103
1,149
Total current liabilities
19,557
20,246
Deferred income tax liabilities
447
484
Total liabilities
20,004
20,730
Shareholders' equity
Common shares nil par value; authorized
30,000,000 shares; 17,081,810 shares issued;
15,935,239 shares outstanding as of March
31, 2023 and September 30, 2023
53,202
53,202
Treasury stock at cost; 1,146,571 shares
as of March 31, 2023 and September 30, 2023
(2,821
)
(2,821
)
Additional paid-in capital
7,973
7,973
Accumulated other comprehensive income
5,316
5,316
Retained earnings
27,942
25,979
Total shareholders' equity
91,612
89,649
Total liabilities and shareholders'
equity
$
111,616
$
110,379
DESWELL INDUSTRIES,
INC.
CONSOLIDATED STATEMENT OF
OPERATIONS & COMPREHENSIVE INCOME
(UNAUDITED)
(U.S. dollars in thousands,
except per share data)
Six months ended
September 30,
2023
2022
Net sales
$
37,730
$
44,438
Cost of sales
30,368
37,324
Gross profit
7,362
7,114
Selling, general and administrative
expenses
5,260
5,751
Other income, net
200
677
Operating income
2,302
2,040
Non-operating income (expense), net
1,424
(2,310
)
Income (loss) before income taxes
3,726
(270
)
Income taxes
169
290
Net income (loss) attributable to Deswell
Industries, Inc.
$
3,557
$
(560
)
Other comprehensive income
$
-
$
-
Comprehensive income (loss)attributable to
Deswell Industries, Inc.
$
3,557
$
(560
)
Net income (loss) per share attributable
to
Deswell Industries, Inc. (note 4)
Basic:
Net income (loss) per share
$
0.22
$
(0.035
)
Weighted average common shares
outstanding
shares (in thousands)
15,935
15,935
Diluted:
Net income (loss) per share
$
0.22
$
(0.035
)
Weighted average number of shares
outstanding (in thousands)
15,973
15,935
DESWELL INDUSTRIES,
INC.
CONSOLIDATED STATEMENT OF CASH
FLOWS
(UNAUDITED)
(U.S. dollars in
thousands)
Six months ended
Six months ended
September 30,
September 30,
2023
2022
Cash flows from operating activities:
Net (loss) income
$
3,557
$
(560
)
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization
771
858
Reversal of provision for doubtful
accounts
-
(46
)
Reversal of obsolete allowance of
inventories, net
-
(125
)
Gain on disposal of property, plant and
equipment
(11
)
(22
)
Unrealized holding (gain) loss on
marketable securities
(68
)
4,354
Realized gain on disposal of marketable
securities
-
(120
)
Deferred tax credit
(22
)
(105
)
Changes in operating assets and
liabilities:
Accounts receivable
(1,095
)
(3,836
)
Inventories
2,551
3,248
Prepaid expenses and other current
assets
(30
)
(106
)
Accounts payable
676
295
Accrued payroll and employee benefits
(938
)
165
Customer deposits
(162
)
303
Other accrued liabilities
(219
)
(390
)
Income taxes payable
(46
)
60
Net cash provided by operating
activities
4,964
3,973
Cash flows from investing activities
Purchase of property, plant and
equipment
(141
)
(318
)
Proceeds from disposal of property, plant
and equipment
126
52
Purchase of marketable securities
(604
)
(1,123
)
Proceeds from disposal of marketable
securities
-
1,927
(Increase in) release of fixed deposits
maturing over three months
(3,372
)
388
Release of fixed deposits maturing over
twelve months - current
768
-
Release of (increase in) fixed deposits
maturing over twelve months
166
(1,193
)
Held-to-maturity Investment
(5,092
)
-
Net cash used in investing activities
(8,149
)
(267
)
Cash flows from financing activities
Dividends paid
(1,594
)
(1,594
)
Net cash used in financing activities
(1,594
)
(1,594
)
Cash effect of exchange rate changes
Net increase (decrease) in cash and cash
equivalents
(4,779
)
2,112
Cash and cash equivalents, at beginning of
period
22,160
13,465
Cash and cash equivalents, at end of
period
17,381
15,577
Supplementary disclosures of cashflow
information:
Cash paid during the period for:
Interest
-
-
Income taxes
267
231
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Investor Relations Contact: John Nesbett/Jennifer
Belodeau IMS Investor Relations 203.972.9200
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