Vtech (303) Q2 2022 earnings summary

Executive summary

• H1 FY2022 revenue fell 0.8% YoY to $1,114.8m; higher material and freight costs, RMB appreciation, supply disruption and product mix reduced gross margin to 27.4% from 31.8%.

• Shareholder profit declined 37.8% to $76.9m; basic EPS fell 37.8% to $0.135. Interim dividend remained $0.17 per share.

• Robust order books across all three businesses were constrained by component and container shortages; FY2022 revenue is expected below the prior year.

Financial highlights

• Revenue decreased 0.8% YoY to $1,114.8m; lower sales in Europe, Asia Pacific and other regions offset North American growth.

• Gross profit fell 14.6% to $304.9m; gross margin contracted to 27.4% from 31.8%.

• Operating profit declined 36.3% to $19.8m; operating margin fell to 8.1% from 12.7%.

• Profit attributable to shareholders decreased 37.8% to $76.9m; net margin fell to 6.9% from 11%, and basic EPS declined 37.8% to $0.135.

Outlook and guidance

• FY2022 revenue is expected below the prior year; gross margin should improve from H1 on product mix, but remain below FY2021.

• ELP revenue is forecast to rise slightly for FY2022 as new products reach shelves and channel inventory improves; North America and Europe sales are gaining momentum.

• Telecom sales are expected to improve in H2 versus H1, though full-year revenue remains difficult to predict amid supply constraints; baby monitors and commercial phones are expected to maintain momentum.

• CMS revenue is expected to decline YoY as global material shortages limit deliveries despite solid orders and backlog.