Voxx Looking Toward Onkyo to Drive Fiscal 2023 Revenue Growth

Chief Financial Officer Michael Stoehr said 60% of Voxx inventory is for the consumer electronics group. “We have a larger portion afloat than we usually do,” Stoehr said, “because our transit times have moved up.” Voxx is carrying an extra 60 days of inventory, Lavelle added: “It used to take us 30 days to bring in inventory from overseas" to meet guidance for customers. We’re now being forced to give ourselves 90 days.”

Though the overall container and chassis situation at ports has improved, “COVID shutdowns in China are a concern, and if this continues, will disrupt supply for many companies,” Lavelle said. The company is monitoring the situation closely, he said.

Voxx continued to negotiate price increases with customers in Q4 to offset higher costs, Lavelle said. The company moved production in some categories outside of China to get away from some of the tariffs, he said. The company has also been redesigning circuit boards in automotive and consumer electronics around chips it can procure, and lower priced ones, he said.

The company doesn’t expect much cost increase for container shipments, Lavelle said, but costs are starting at a much higher level in this fiscal year. It’s dealing with surcharges on incoming and outbound freight. “We’re doing everything we can to mitigate increases and avoid further increases in prices,” he said.

Voxx’s FY ‘22 revenue grew 12.8% to $635.9 million, but the company swung to a loss of $27.5 million vs. earnings of $23.4 million in the prior year. In Q4, sales were up slightly to $163.9 million; net income was $1.1 million vs. $8.4 million in Q4 last year, it said.

In Q4, the consumer segment grew by 3.1% to $113.1 million, led by $91.4 million at Premium Audio Co. (PAC). Gross margin declined by 360 basis points to 29.8% on higher container costs and surcharges, offset by higher sales in Voxx’s 11TC distribution company, Lavelle said. Margin should continue to improve “as we ramp up production at Onkyo, resulting in higher profitability,” he said.

PAC had revenue of $280 million in FY ’20, growing to $398 million in FY ’21 and $434 million in FY ’22, said Lavelle. Sales are coming in “roughly at targets,” but the company has been challenged by chip shortages for sound bars and Wi-Fi modules used in AV receivers, hindering some Q4 growth, Lavelle said.

Voxx’s view of Onkyo “remains very positive,” Lavelle said, saying the brand is expected to drive consumer segment growth this year. It believes it can grow the Onkyo business to over $200 million over the next two-three years. New Klipsch products will come to market this year with “expanded distribution,” he said. 11TC sales were strong in the Europe, Middle East and Africa markets and in Asia-Pacific, he said.

Business through 11TC grew by $47 million year on year, Lavelle said, saying Voxx expects the subsidiary to continue growing at strong levels. “The only thing holding us back is the ability for our manufacturing partner, Sharp, to be able to ramp up production,” he said, citing the challenge of securing parts. “But it is getting better every month,” he said. He noted there are “many markets where inventory is dry. We’re not meeting demand at this particular point,” Lavelle said. “Once we’re able to start bringing up production, we will be expanding our distribution … because there are many markets now that are essentially on hold.”

In automotive, component and chip shortages led to “all of our OEM customers missing delivery targets,” Lavelle said. Revenue was down 3.7% in automotive to $50.6 million. Chip and parts shortages dented aftermarket product sales and led to delays in OEM production. Voxx is negotiating with customers for revised pricing to offset higher componentand shipping costs: “If not successful, we may be forced to refuse some new orders,” he said.

In FY ’23, Voxx expects the automotive business to grow on awards won over the past few years, Lavelle said. In the third consecutive year when carmakers haven’t been able to keep up with demand, Lavelle expects “very high” demand for new vehicles. The company has a new order for a camera system from Oshkosh Defense at an initial value of about $45 million, with a potential of $140 million. The cameras will be used in 50,000 of the U.S. Postal Service’s new fleet of delivery vehicles, he said.

Volume is “less than expected” for Amazon Fire TV systems in Ford and Stellantis vehicles, and the Evo program with Nissan, Lavelle said, citing lower OEM production. The company received an award from Ford for a rear-seat entertainment system that’s expected to bring in more than $80 million.

The company expects to revise downward an award with Stellantis for $400 million covering select vehicles over the 2022-2026 model years due to parts shortages and delayed production, Lavelle said. He cited a notice from Texas Instruments saying its chip allocation had been delayed from November to January. Voxx proposed a redesigned circuit board with an alternate chip. If given the OK, it could resume production in August, said the executive. He also noted Stellantis said Monday it’s “rescinding some of the burdensome contract terms for North American suppliers.”

A ruling is expected June 3 on a breach of contract claim in California U.S. District Court brought by Seaguard Electronics over a stolen vehicle product; a judge is expected to rule on Voxx’s motion to vacate or modify a $40 million damage award. The claim, dating to 2007, is “so old it doesn’t impact us at all from a revenue standpoint,” said Lavelle.

Voxx has a long-term goal of $1 billion revenue, and that hasn’t changed, Lavelle said. It has the Ford deal and other awards in hand and is talking to other carmakers that have shown "interest in purchasing from us.” Shares closed 6.9% higher at $6.78 Tuesday after reaching a 52-week low at $5.85.