Skullcandy Reports 16% Revenue Growth and Sevenfold Operating Income Growth for the Quarter Ended September 30, 2014

Skullcandy©

PARK CITY, Utah, Nov. 5, 2014 -- Skullcandy, Inc. (Nasdaq:SKUL) announced financial results for the third quarter ended September 30, 2014.

Third quarter 2014 results versus same quarter in prior year

Net sales: $58.1 million vs. $50.0 million
Gross margin: 45.3% vs. 44.9%
Selling, general and administrative expense: $22.7 million vs. $21.9 million
Operating income: $3.6 million vs. $514,000
Net income per diluted share: $0.07 vs. $0.04

"Our third quarter performance exceeded our expectations across the board. We grew revenue 16%, expanded gross margins and continued to show grittiness in focusing our SG&A spend to those areas that move the needle, all of which led to a sevenfold increase in operating income," said Hoby Darling, President and Chief Executive Officer. "At the same time we are looking to the future, as we increased demand creation spend by double digit growth, brought our innovative sports performance line with Sticky Gel to market, and added key talent to the team. Our focused five pillar strategy is delivering short term results while allowing us to invest for the long-term. I am proud of the team for all the hard and passionate work they have put into Skullcandy and Astro Gaming. The progress we've made exciting our consumer through innovation, refining our retail distribution pyramid, and strengthening our corporate culture and leadership, has positively transformed our company over the past 20 months and created a solid foundation for future growth within our core business as well as broader market opportunities."

Net sales in the third quarter of 2014 increased 16.1% to $58.1 million from $50.0 million in the same quarter of the prior year. Domestic (U.S.) net sales increased 18.8% to $38.5 million from $32.4 million in the same quarter of the prior year. International (Non U.S.) net sales increased 11.1% to $19.5 million from $17.6 million in the same quarter of the prior year primarily due to increased sales in Canada, China and Mexico.

Gross profit in the third quarter of 2014 increased 17.4% to $26.3 million from $22.4 million in the same quarter of the prior year. Gross margin increased to 45.3% in the third quarter of 2014 from 44.9% in the same quarter in 2013.

Selling, general and administrative (SG&A) expenses in the third quarter of 2014 increased 3.8% to $22.7 million from $21.9 million in the same quarter of the prior year. The increase in SG&A expenses is primarily due to personnel expenses, demand creation and third-party sales commissions. As a percentage of net sales, SG&A expenses were 39.2% compared to 43.8% in the same quarter of the prior year.

Operating income in the third quarter of 2014 increased 597.1% to $3.6 million from $514,000 in the same quarter of the prior year. The increase in operating income is due to increased sales and gross margin, partially offset by increased SG&A expenses.

Net income in the third quarter of 2014 was $2.1 million, or $0.07 per diluted share, based on 28.5 million diluted weighted average common shares outstanding. Net income in the same quarter of the prior year was $1.1 million, or $0.04 per diluted share, based on 27.9 million diluted weighted average common shares outstanding.

Balance Sheet Highlights

As of September 30, 2014, cash, cash equivalents, and short-term investments totaled $39.7 million compared to $38.8 million as of December 31, 2013. The Company continued to have no outstanding debt. Accounts receivable decreased 8% to $52.8 million as of September 30, 2014 from $57.5 million as of December 31, 2013 and inventory increased 59% to $64.2 million as of September 30, 2014 from $40.3 million as of December 31, 2013, and from $48.7 million as of September 30, 2013 in order to prepare for anticipated revenue growth during the upcoming quarter.

2014 Fourth Quarter and Full Year Financial Outlook

For the fourth quarter of 2014, the Company currently forecasts net sales to increase at a growth rate of 12-14% over 2013 levels and net income on a GAAP fully-diluted per share basis of $0.23 to $0.25.

For the full year 2014, the Company forecasts net sales to increase 10-12% over 2013 levels. The Company is providing guidance for GAAP operating income in a range of $9.6 - $10.2 million and providing guidance for net income on a GAAP fully-diluted per share basis to a range of $0.24 to $0.26 per share.

Call Information

A conference call to discuss the third quarter of 2014 results is scheduled for today, November 5, 2014, at 4:30 PM Eastern Time / 2:30 PM Mountain Time. A broadcast of the call will be available on the Company's website, www.skullcandy.com. In addition, a replay of the call will be available shortly after the conclusion of the call and remain available through November 12, 2014. To access the telephone replay, listeners should dial (877) 870-5176 or (858) 384-5517 and entering conference ID number 13593718.

Complete Financoial Report, Tables and Elements : Here

About Skullcandy, Inc.

Skullcandy is the original lifestyle and performance audio brand inspired by the creativity and irreverence 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, earbuds and other audio and wireless lifestyle products that possess unmistakable style and exceptional performance.

The Company's products are sold and distributed through a variety of channels in the U.S. and approximately 80 countries worldwide, including the company's website at www.skullcandy.com.

Forward-Looking Statements

Certain statements in this press release and oral statements made from time to time by representatives of the Company are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding the Company's anticipated future financial and operating results and any other statements about the Company's future expectations, beliefs or prospects expressed by management are forward-looking statements. These forward-looking statements are based on management's current expectations and beliefs, but they involve a number of risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from expectations are disclosed under the "Risk Factors" section of the 2013 10-K filed with the Securities and Exchange Commission ("SEC") on March 14, 2014, first quarter 2014 10-Q filed with the SEC on May 9, 2014, second quarter 2014 10-Q filed with the SEC on August 5, 2014 and in any subsequent reports the Company files with the SEC. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT: ICR ,Brendon Frey / Joe Teklits /203-682-8200 /Brendon.Frey@icrinc.com / Joseph.Teklits@icrinc.com

Source: Skullcandy press release ©, Inc. Provided by Acquire Media