Business Wire | Jun 9, 2021 09:29AM EDT

Deswell Announces Second Half 2021 Results

Jun. 09, 2021

MACAO--(BUSINESS WIRE)--Jun. 09, 2021--Deswell Industries, Inc. (Nasdaq: DSWL) today announced its unaudited financial results for the second half of the fiscal year ended March 31, 2021.

Net sales for the six months ended March 31, 2021 were $37.2 million, an increase of 34.5% compared to net sales of $27.7 million for the six months ended March 31, 2020. Net sales increased by 4.1% to $11.1 million in the plastic segment and by 53.6% to $26.1 million in the Company's electronic segment.

Total gross margin increased to 20.4% during the six months ended March 31, 2021, as compared to 19.2% in the same period last year. Gross profit margin in the plastic segment increased to 26.0% of net sales for the second half of fiscal 2021, as compared to 23.3% of net sales for the corresponding period of the last fiscal year. The increase in gross profit margin in the plastic segment was mainly due to a decrease in raw materials cost, offsetting the increase in factory overhead, as a percentage of sales. Gross profit margin for the electronic segment for the six months ended March 31, 2021 increased from 16.7% in the second half of fiscal 2020 to 17.9% in the second half of fiscal 2021. The increase was mainly due to increases in sales volume, increased percentage of sales of ODM products, and the implementation of cost control measures.

Operating income for the second half of fiscal 2021 increased from $0.3 million in the second half of fiscal 2020 to $2.3 million in the second half of fiscal 2021.

The Company reported net income of $6.7 million for the six months ended March 31, 2021, as compared to net loss of $2.6 million for the six months ended March 31, 2020. Non-operating income for the six months ended March 31, 2021 was $4.6 million, as compared to a non-operating expense of $2.6 million in the six months ended March 31, 2020. Non-operating income during the six months ended March 31, 2021 was primarily comprised of an increase of $2,538,000 in the fair value of marketable securities held, $1,214,000 from rental income, $482,000 of dividend income from securities investments, and a $279,000 realized gain from the sale of marketable securities, as compared to a decrease of $3,927 in the fair value of marketable securities held, $761,000 from rental income, $485,000 of dividend income from securities investments and $126,000 from interest income in the second half of fiscal 2020. Deswell reported basic and diluted income per share of $0.42 for the second half of fiscal 2021 (based on 15,915,000 and 15,995,000 weighted average shares outstanding, respectively), as compared to a basic and diluted loss per share of $0.16 (based on 15,915,000 and 15,966,000 weighted average shares outstanding), for the six months ended March 31, 2020.

Net sales for the year ended March 31, 2021 were $64.9 million, a decrease of 0.7% compared to net sales of $65.4 million for fiscal 2020. Operating income for the year ended March 31, 2021 increased to $3.3 million, as compared to operating income of $1.4 million for fiscal 2020. The Company reported net income of $8.2 million in fiscal 2021, as compared to net loss of $1.3 million for the year ended March 31, 2020. The increase in net income was mainly attributed to the non-operating income of $5.4 million in fiscal 2021, as compared to the non-operating expense of $2.4 million in fiscal 2020. Deswell reported a basic net income per share of $0.52 and diluted net income per share of $0.51 for fiscal 2021, (based on 15,915,000 and 16,047,000 weighted average shares outstanding, respectively), as compared to a basic and diluted loss per share of $0.08 (based on 15,914,000 and 16,020,000 weighted average shares outstanding), for the prior fiscal year.

The Company's financial position remained strong, with $20.2 million in cash and cash equivalents and working capital totaling $59.0 million as of March 31, 2021. Furthermore, the Company has no long-term or short-term borrowings as of March 31, 2021.

Mr. Edward So, Chief Executive Officer, commented, "We are pleased with our fiscal 2021 results which included a strong increase in operating income despite the pandemic and ongoing global electronic component shortage. After a slow start to the second half of the fiscal year due to customers' conservative approach to placing orders because of the continued worldwide pandemic, we saw particularly strong growth in our electronics manufacturing division for the period. While the lockdown and social distancing had a significant impact on some of our customers who cater to the music performance market, we saw significantly increased demand for both home recording and audio streaming products. Our net income for the full year was also positively impacted by the performance of our investments and approximately $2 million in rental income generated from leased space at our facilities, which became available due to our identification of more efficient configuration and relocation of our equipment. Finally, we continue to proactively manage costs to maximize operating profitability."

Mr. So concluded, "Our balance sheet remains strong and provides us with the financial flexibility to stay focused on the long-term performance of the business even as we navigate a challenging landscape. With a strong cash position and no debt, we look forward to continuing to expand our customer relationships and drive performance as the pandemic subsides."

Second Half Dividend

The Company also announced that its board of directors today declared a cash dividend of $0.10 per share for the second half of the fiscal year ended March 31, 2021. The dividend will be payable on July 9, 2021 to shareholders of record as of June 25, 2021.

Dividends to be declared in the future will depend upon the Company's future growth and earnings, of which there can be no assurance, and the Company's cash flow needs for future development.

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, professional audio equipment, home audio products, and Internet-of-Things (IoT) products.

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)



March 31, March 31,

2021 2020

ASSETS (Unaudited) (Audited)



Current assets :

Cash and cash equivalents $ $ 22,514 20,223

Fixed deposits maturing over three months 2,700 783

Time deposits maturing over twelve months-current portion 1,519 -

Marketable securities 22,373 19,441

Accounts receivable, net 14,708 12,301

Inventories 16,193 8,578

Prepaid expenses and other current assets 2,489 1,752

Total current assets 80,205 65,369

Property, plant and equipment - net 27,323 28,586

Time deposits maturing over twelve months 332 1,424

Total assets $ 107,860 $ 95,379



LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities

Accounts payable $ $ 9,522 4,604

Accrued payroll and employee benefits 7,107 6,077

Customer deposits 1,683 1,172

Other accrued liabilities 2,016 1,718

Income taxes payable 886 735

Total current liabilities 21,214 14,306

Deferred income tax liabilities 957 751

Total liabilities 22,171 15,057





Shareholders' equity

Common shares nil par value - authorized 30,000,000 shares,

17,061,810 shares issued as of March 31, 2020 and March 31, 2021; 15,915,239 shares outstanding as of

March 31, 2020 and 2021 53,143 53,143

Treasury stock at cost; 1,146,571 shares as of

March 31, 2020 and 2021 (2,821) (2,821)

Additional paid-in capital 7,989 7,989

Accumulated other comprehensive income 5,316 5,316

Retained earnings 22,062 16,695

Total shareholders' equity 85,689 80,322

Total liabilities and $ 107,860 $ 95,379 shareholders' equity



DESWELL INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(U.S. dollars in thousands, except per share data)

Six months ended Year ended

March 31, March 31,

2021 2020 2021 2020



Net sales $ $ $ $ 65,368 37,196 27,655 64,886

Cost of sales 22,335 53,504 29,625 51,720

Gross profit 11,864 7,571 5,320 13,166

Selling, generaland 10,026administrative 5,590 4,818 10,310expenses

Other income (245) 405 (425)(expense), net 321

Operating 3,261 1,413income 2,302 257

Non-operating income (expense), 4,641 (2,579) 5,445 (2,360)net

Income (loss) before income 6,943 (2,322) 8,706 (947)taxes

Income taxes 247 373 244 475

Net income (loss)attributable to $ $ (1,320)Deswell 6,699 $ (2,569) $ 8,231Industries, Inc.



Other comprehensive $ - $ - $ - $ income -

Total Comprehensiveincome (loss) attributable to $ 6,699 $ (2,569) $ 8,231 $ (1,320)Deswell Industries,Inc.





Net income (loss)per share attributable to

Deswell Industries, Inc.Basic:

Net income (loss) $ $ $ $ (0.08)per share 0.42 (0.16) 0.52

Weighted average common sharesoutstandingshares (in 15,914thousands) 15,915 15,915 15,915



Diluted:

Net income (loss) $ $ $ $ (0.08)per share 0.42 (0.16) 0.51

Weighted average number of sharesoutstanding (in 15,914thousands) 15,995 15,966 16,047

DESWELL INDUSTRIES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

( U.S. dollars in thousands )

Year ended

March 31,

2021

2020

Cash flows from operating activities :

Net income (loss)

$ 8,231

$ (1,320)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1,755

1,973

Provision for doubtful accounts, net

397

297

Additional charges for (reversal of) obsolescence allowance of inventories, net

(9)

426

Gain on disposal of property, plant and equipment

(22)

(29)

Unrealized holding (gain) loss on marketable securities

(2,010)

5,179

Gain on sales of marketable securities

(333)

(29)

Scrip dividend received

(19)

(175)

Deferred income tax expense

206

92

Exchange (gain) loss from marketable securities

(661)

531

Changes in operating assets and liabilities:

Accounts receivable

(2,804)

3,136

Inventories

(7,606)

4,026

Prepaid expenses and other current assets

(737)

254

Accounts payable

4,918

(1,649)

Accrued payroll and employee benefits

1,030

401

Customer deposits

511

(126)

Other accrued liabilities

298

56

Income taxes payable

151

78

Net cash provided by operating activities

3,296

13,121

Cash flows from investing activities

Purchase of property, plant and equipment

(551)

(507)

Proceeds from sale of property, plant and equipment, net of transaction costs

81

188

Purchase of marketable securities

(6,059)

(2,121)

Proceeds from sales of marketable securities

6,150

1,620

Increase of fixed deposits maturing over three months

(1,917)

(412)

Increase of fixed deposits maturing over twelve months

(427)

(1,424)

Net cash used in investing activities

(2,723)

(2,656)

Cash flows from financing activities

Dividends paid

(2,864)

(2,386)

Exercise of stock options

-

64

Net cash used in financing activities

(2,864)

(2,322)

Net (decrease) increase in cash and cash equivalents

(2,291)

8,143

Cash and cash equivalents, beginning of year

22,514

14,371

Cash and cash equivalents, end of year

20,223

22,514

Supplementary disclosures of cashflow information:

Cash paid during the year for:

Interest

-

-

Income taxes

236

160

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