- Q1 Net Sales up 14% to $1.6 Billion
- Q1 Operational EPS up 13% to $1.48; Operational EBITDA up 20% to $197 Million
- Secured $1.1 Billion in New Automotive Awards
- Won Several Leadership Awards for IoT Innovation
STAMFORD, CT – Harman International Industries, Incorporated (NYSE: HAR), the premier connected technologies company for automotive, consumer and enterprise markets, today announced results for the first quarter ended September 30, 2015.
Net sales for the first quarter were $1.6 billion, an increase of 14 percent compared to the prior year or 23 percent excluding the impact of foreign currency translation (ex-FX). Excluding the impact of acquisitions and foreign currency translation, net sales increased 13 percent compared to the prior year. Connected Car net sales increased eight percent (19 percent ex-FX), due to platform expansions, higher take rates, and stronger automotive production. Lifestyle Audio net sales increased 14 percent (21 percent ex-FX) due to higher consumer audio and car audio sales. Net sales in Professional Solutions decreased three percent (increased one percent ex-FX). Connected Services net sales were $174 million compared to $68 million in the prior year, due to the expansion of the Company’s services portfolio, primarily as a result of the acquisition of Symphony Teleca (STC).
Excluding restructuring, non-recurring charges and acquisition-related items, first quarter operating income increased 24 percent to $158 million compared to $128 million in the prior year, and EBITDA increased 20 percent to $197 million compared to $164 million in the prior year. Earnings per diluted share increased 13 percent to $1.48 compared to $1.31 in the prior year.
On a GAAP basis, first quarter operating income increased 14 percent to $131 million compared to $116 million in the prior year, EBITDA increased 23 percent to $188 million compared to $153 million in the prior year, and earnings per diluted share increased two percent to $1.20 compared to $1.18 in the prior year. The Company recorded $26 million of restructuring, non-recurring charges and acquisition-related items compared to $12 million in the prior year. The increase was primarily due to non-cash amortization of acquired intangible assets.
“HARMAN is off to a solid start to deliver on our fiscal 2016 targets with double-digit revenue and earnings growth in the first quarter, driven by robust demand for connected systems and services in the car,” said Dinesh C. Paliwal, the Company’s Chairman, President and CEO. “Demand from automakers for embedded infotainment and car audio solutions remains strong as evidenced by the $1.1 billion in new automotive awards in the quarter, building on our industry-leading backlog of $23 billion as of the end of fiscal 2015.”
Summary of Operations – Gross Margin and SG&A (Non-GAAP)
Gross margin for the first quarter of fiscal year 2016 increased 80 basis points to 30.0 percent. The improvement was primarily due to the impact of higher sales volume leveraging a more efficient fixed production cost base, as well as the expansion of our services portfolio.
In the first quarter of fiscal year 2016, SG&A expense as a percentage of net sales was consistent with the prior year at 20.3 percent.
Investor Call Today October 29, 2015
At 11:00 a.m. EDT today, HARMAN’s management will host an analyst and investor conference call to discuss the first quarter results. Those who wish to participate via audio in the earnings conference call should dial 1 (800) 272-6255 (U.S.) or +1 (303) 223-2685 (International) ten minutes before the call and reference HARMAN, Access Code: 21779582.
In addition, HARMAN invites you to visit the Investors section of its website at: www.harman.com where visitors can sign-up for email alerts and conveniently download copies of historical earnings releases and supporting slide presentations, among other documents. The fiscal first quarter earnings release and supporting materials were posted on the site at approximately 8:00 a.m. EDT today.
A replay of the call will also be available following its completion at approximately 1:00 p.m. EDT. The replay will be available through Friday, January 29, 2016 at 1:00 p.m. EDT. To listen to the replay, dial 1 (800) 633 8284 (U.S.) or +1 (402) 977 9140 (International), Access Code: 21779582. If you need technical assistance, call the toll-free Global Crossing Customer Care Line at 1 (800) 473 0602 (U.S.) or +1 (303) 446 4604 (International).
HARMAN (harman.com) designs and engineers connected products and solutions for automakers, consumers, and enterprises worldwide, including connected car systems, audio and visual products, enterprise automation solutions; and connected services. With leading brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon®, Mark Levinson® and Revel®, HARMAN is admired by audiophiles, musicians and the entertainment venues where they perform around the world. More than 25 million automobiles on the road today are equipped with HARMAN audio and connected car systems. The Company’s software services power billions of mobile devices and systems that are connected, integrated and secure across all platforms, from work and home to car and mobile. HARMAN has a workforce of approximately 28,000 people across the Americas, Europe, and Asia and reported sales of $6.4 billion during the 12 months ended September 30, 2015. The Company’s shares are traded on the New York Stock Exchange under the symbol NYSE:HAR.
A reconciliation of the non-GAAP measures included in this press release to the most comparable GAAP measures is provided in the tables contained at the end of this press release. HARMAN does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
Except for historical information contained herein, the matters discussed in this earnings presentation are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. One should not place undue reliance on these statements. The Company bases these statements on particular assumptions that it has made in light of its industry experience, as well as its perception of historical trends, current market conditions, current economic data, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements involve risks, uncertainties and assumptions that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) the Company’s ability to maintain profitability if there are delays in its product launches or increased pricing pressure from its customers; (2) the loss of one or more significant customers, the loss of a significant platform with an automotive customer or the in-sourcing of certain services by the Company’s automotive customers; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; (5) the inability of the Company’s suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (6) the Company’s ability to maintain a competitive technological advantage through innovation and leading product designs; (7) the Company’s ability to integrate successfully its recently completed and future acquisitions; (8) the Company’s ability to attract and retain qualified senior management and to prepare and implement an appropriate succession plan for its critical organizational positions; (9) the Company’s failure to maintain the value of its brands and implementing a sufficient brand protection program; and (10) other risks detailed in the Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2015 and other filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement except as required by law.
This earnings release also makes reference to the Company’s awarded business or “backlog”, which represents the estimated future lifetime net sales for all customers. The Company's future awarded business does not represent firm customer orders. The Company reports its awarded business primarily based on written award letters. To validate these awards, the Company uses various assumptions including global vehicle production forecasts, customer take rates for the Company’s products, revisions to product life cycle estimates and the impact of annual price reductions and exchange rates, among other factors. These assumptions are updated and reported externally on an annual basis.