Skullcandy (SKUL, Financial) is the original lifestyle and performance audio brand inspired by the creativity of youth culture. Skullcandy designs, markets and distributes audio and gaming headphones and other accessory related products under the Skullcandy, Astro Gaming and 2XL brands. Skullcandy was launched in 2003 and quickly became one of the world's most distinct audio brands by bringing unique technology, color, character and performance to an otherwise monochromatic space; helping to revolutionize the audio arena by introducing headphones, ear buds and other audio and wireless lifestyle products that possess unmistakable style and exceptional performance.
Its products are sold and distributed through a variety of channels in the U.S. and over 80 countries worldwide. Skullcandy offers a wide array of styles and price points and are expanding into complementary audio products and categories such as sports performance, women's and wireless offerings, as well as partnerships with leading manufacturers to license the Skullcandy brand and enhance audio quality.
Strong second-quarter results
Net sales in the second quarter of 2015 increased by 8% and were $58.0 million (which was $53.9 million in the same quarter of the prior year, or an increase of 10% on a currency neutral basis).
Domestic (U.S.) net sales increased by 5% and were $41.3 million (which was $39.5 million in the prior year period).
International (non-U.S.) net sales increased by 16% and were $16.7 million (which was $14.4 million in the same quarter of the prior year, or an increase of 24% on a currency neutral basis).
Gross profit in the second quarter of 2015 increased by 3% and was $24.8 million (which was $24.2 million in the prior year quarter, or an increase of 7% on a currency neutral basis).
Gross margin decreased to 42.8% in the second quarter of 2015 from 45.0% in the same quarter in 2014.
Selling, general and administrative (SG&A) expenses in the second quarter of 2015 increased by 4% and were $23.8 million (which was $22.9 million in the same quarter of the prior year, or an increase of 7% on a currency neutral basis). As a percentage of net sales, SG&A expenses decreased to 41.1% as compared to 42.6% in the prior year quarter.
Operating income during the second quarter of 2015 decreased $0.3 million and was $1.0 million (which was $1.3 million in the prior year period).
Net income during the second quarter of 2015 was $1.2 million, or $0.04 per share (which $1.6 million, or $0.06 per share, based on 28.5 million in the prior year period).
As of June 30, cash, cash equivalents, and short-term investments totaled $19.2 million compared to $36.6 million as of Dec. 31, 2014.
The Company continued to have no outstanding debt.
Accounts receivable decreased 27% to $54.6 million as of June 30, from $74.4 million as of December 31, 2014.
Inventories increased 11% to $61.2 million as of June 30, from $55.0 million as of Dec. 31, 2014.
Strong attributes of the second quarter
- Addition of products.
- Excellent balance sheet and cashflow.
- Energized management and team.
- Strong financials.
Outlook (Full Year and Third Quarter)
- Net sales to increase 13-15% over 2014 levels for the full year.
- The Company also raises guidance for net income on a U.S. GAAP fully diluted per share basis of a range of $0.41 to $0.43 per share, an increase from its previous guidance of $0.36 to $0.40.
- Third quarter net sales to increase at a growth rate of 17-19% over 2014 levels.
- Third quarter net income on a U.S. GAAP fully diluted per share basis to be in a range of $0.07 to $0.08.
Turnaround plan
- Grow international to 50% of business.
- Marketplace transform.
- Expansion of partnerships.
- Innovation.
- In-store changes.
- World-class product developments.
- Online channel editing.
- New website successfully launched during the holiday season.
New products
The company is constantly innovating and bringing in new products-
- Bluetooth speakers.
- Bluetooth hesh headphone.
- Women’s audiophone line.
- Sports performance line.
Being in news
It recently announced strategic changes designed to strengthen its product development platform and accelerate its goal to be the world's most innovative lifestyle and performance audio company. Jeff Hutchings has joined Skullcandy as VP of Engineering and Category from Harman International Industries, Inc. (HAR, Financial) where he most recently served as director in the chief technology officer's (CTO) Office and led product innovation and engineering.
ASTRO Gaming, creators of premium video gaming equipment, recently announced an exciting new partnership with Call of Duty: Black Ops III publisher Activision and its award-winning development studio, Treyarch. As part of the agreement, ASTRO Gaming's new eSports products, which will be revealed at PAX Prime in Seattle Aug. 28-31, have become the Official Audio Gaming Headsets of Call of Duty: Black Ops III.
ASTRO Gaming is already well-known as the preferred gaming headset brand for numerous competitive Call of Duty teams, including Team EnVyUs and 2-time X-Games Gold Medalists OpTic Gaming. In addition, ASTRO's A40 headset and MixAmp Pro were featured at the Call of Duty Championship earlier this year.
On a concluding note
It is a unique lifestyle brand that is well positioned in the industry. It is a growth stock that is gaining growing popularity with the customers. It is among the leading players in this headphone industry. The company wants to leverage its strong connection to youth and combine it with great products that excite the consumer and deliver amazing experiences at accessible price points.
It has a strong revenue growth, and the future looks promising. It offers a varied range of products that suit the varied budgets of the customers. The new product introductions along with our enhanced demand creation efforts are resonating with consumers. SKUL reported a solid second quarter and is undergoing turnaround efforts. I feel the company is poised for a successful future. Investors may consider adding this stock to their portfolio.
Source: Company website