Exhibit 99.1
Zoom Telephonics Reports Sales of $7.5 Million for Q4 2018 and
$32.3 Million for Year 2018
Company to Host Conference Call on Thursday, February 28, 2019 at
4:30 p.m. ET
Boston, MA, February 28, 2019 – Zoom Telephonics, Inc. (“Zoom”
or “the Company”) (OTCQB: ZMTP), a leading producer of
cable modems and other communication products, today reported
financial results for its 2018 fourth quarter and year ended
December 31, 2018.
Financial Highlights (Q4 and full year 2018 comparisons to prior
year’s period)
●
Q4
net sales decreased 15.8% to $7.5 million with 2018 net sales
increasing 9.9% to $32.3 million.
●
Q4
gross margin decreased to 31.6% from 36.6% with 2018 gross margin
increasing to 36.0% from 34.8%.
●
Tariffs
in Q4 2018 reduced gross margins, and contributed to a decline in
revenue as the Company raised some prices in an attempt to mitigate
the tariffs’ negative impact on gross margins.
●
Q4
net loss was approximately $826 thousand, or $0.05 per share,
compared to a net loss of $387 thousand, or $0.03 per share, for Q4
2017. 2018 net loss was $74 thousand, or $0.00 per share, compared
to a net loss of $1.37 million, or $0.09 per share, for
2017.
2018 Fourth Quarter Financial Review
Net sales for Q4 2018 decreased to $7.5 million from $8.9 million
for Q4 2017. This was primarily due to reduced shelf space at one
major retailer and price competition exacerbated by the
Company’s attempt to increase some product prices in response
to 10% China tariffs which began on September 24, 2018. The Company
reacted more quickly than its competitors to the tariffs, which
reduced revenues for the period. Cable modem sales declined, but
the Company did experience increases in its sales of local area
network and DSL products.
Gross profit for Q4 2018 was $2.4 million, or 31.6% of net sales,
down from $3.2 million, or 36.6% of net sales for the fourth
quarter of 2017. The decrease in gross profit and gross
margin was primarily due to a 10% tariff on the cost of goods for
almost all its products other than ones imported into the US prior
to September 24, 2018.
Operating expenses for Q4 2018 were $3.1 million or 41.8% of net
sales, versus $3.6 million or 40.5% of net sales for Q4 2017.
Selling expenses increased approximately $58 thousand to $1.96
million for the fourth quarter of 2018, as increased Motorola
trademark royalty costs and marketing funds were offset by
reductions in advertising and freight costs. General and
administrative expenses decreased approximately $522 thousand to
$589 thousand for the fourth quarter of 2018, primarily because
sales tax expenses dropped $831 thousand due to a significant
one-time charge for Q4 2017. This improvement was offset by
increased salary and stock option costs, and increases in legal and
outside service expenses for the current quarter. Research and
development expenses were $573 thousand for Q4 2018, down slightly
from $577 thousand in the same period of 2017, as increased personnel costs were offset by
reductions in certification expenses.
Zoom reported a net loss of $826 thousand or $0.05 per share for
the fourth quarter of 2018, compared to net loss of $387 thousand
or $0.03 per share in the same period of 2017.
2018 Financial Review
Net sales for year 2018 increased 9.9% to $32.3 million from $29.4
million for 2017. Sales through all but one of Zoom’s major
retailers increased, but reduced sales at one retailer reduced
total cable modem sales growth to just 3%. Sales of all other
products combined rose over 180% primarily due to rising sales in
routers, MoCA adapters, and DSL products.
Gross profit in 2018 was $11.6 million or 36.0% of net sales, up
from $10.2 million or 34.8% of net sales for year 2017. The
increase in gross profit and gross margin was primarily due to
higher net sales and a higher mix of e-tailer sales, offset
somewhat by tariff-related gross margin reductions in Q4
2018.
Operating expenses in 2018 were $11.6 million or 35.9% of net
sales, versus $11.5 million or 38.9% of net sales in 2017. Selling
expenses increased approximately $927 thousand to $8.2 million for
the year, as increased Motorola trademark royalty, advertising, and
personnel costs were partially offset by reductions in freight and
commission expenses. General and administrative expenses decreased
approximately $616 thousand to $1.6 million thousand for year 2018,
as lower sales tax expenses were offset by increased personnel,
legal, and outside service expenses for the current year. Research
and development expenses were $1.8 million for 2018, down from $1.9
million in 2017. The decrease was primarily due to reduced product
testing and certification costs offset by increased salary and
stock option expenses.
Zoom reported a net loss of $74 thousand or $0.00 per share for the
year 2018, compared to net loss of $1.37 million or $0.09 per share
for year 2017.
Management Commentary
Frank Manning, Zoom’s CEO and Chairman, commented on the
quarter. “This was a difficult quarter as tariffs had a
disruptive effect on our business by negatively impacting sales,
margins, and profitability. Significant price promotions by our
competitors, which were based on commitments made prior to the
tariff increase, also negatively affected our revenues. The tariffs
continue to hurt us, and we are taking measures to try to offset
their negative impact. However, we are encouraged by many things.
Year-over-year sales and gross margin increased despite a Q4
impacted by tariffs on our products imported from China. Our new
President, Joe Wytanis, is a strong leader who will be very helpful
in expanding our product line, growing our revenues, and lowering
our costs. We are pleased with our Motorola relationship, and we
are proud that Motorola recognized Zoom as its top licensee in 2018
as measured by customer satisfaction and brand building. In Q4 2018
we introduced our first cable gateway with phone support, and
we’re very pleased with customer reviews and sales for this
product. We’re excited about our product plans for 2019,
especially in the areas of DOCSIS 3.1, mesh routing, value-add
subscription services, sensors, and cell modem products. We believe
Zoom is positioned to grow sales in 2019 through storefront
retailers, e-tailers, and service providers, primarily in the USA
but also in other countries.”
Conference Call Details
Date/Time:
Thursday, February
28, 2019 – 4:30 p.m. ET
Participant
Dial-In Numbers:
(United
States):
866-393-7958
(International):
706-643-5255
Conference
ID
2280997
To
access the call, please dial-in approximately five minutes before
the start time and, when asked, provide the operator with the
conference ID 2280997. An accompanying slide presentation will be
available in PDF format via the Investor Relations section of Zoom
Telephonics’ website at www.zoomtel.com/SQ418
shortly before the call.
About Zoom Telephonics
Zoom Telephonics, Inc. designs, produces, markets, and supports
cable modems and other communication products. The Company’s
worldwide Motorola exclusive license agreement includes cable
modems and gateways, DSL modems and gateways, cellular modems and
routers, and other Internet and network products. For more
information about Zoom and its products, please visit
www.zoomtel.com/investor
and www.motorolanetwork.com.
MOTOROLA and the Stylized M Logo are trademarks or registered
trademarks of Motorola Trademark Holdings, LLC and are used under
license.
Forward Looking Statements
This release contains forward-looking information relating to
Zoom’s plans, expectations, and intentions. Actual results
may be materially different from expectations as a result of known
and unknown risks, including: the status of tariffs on the
Company's imports from China; potential changes in NAFTA; the
potential need for additional funding which Zoom may be unable to
obtain; declining demand for certain of Zoom’s products;
delays, unanticipated costs, interruptions or other uncertainties
associated with Zoom’s production and shipping; Zoom’s
reliance on several key outsourcing partners; uncertainty of key
customers’ plans and orders; risks relating to product
certifications; Zoom’s dependence on key employees;
uncertainty of new product development, including certification and
overall project delays, budget overruns, and the risk that newly
introduced products may contain undetected errors or defects or
otherwise not perform as anticipated; costs and senior management
distractions due to patent-related matters; and other risks set
forth in Zoom’s filings with the Securities and Exchange
Commission. Zoom cautions readers not to place undue reliance upon
any such forward-looking statements, which speak only as of the
date made. Zoom expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to any such statements
to reflect any change in Zoom’s expectations or any change in
events, conditions or circumstance on which any such statement is
based.
Investor Relations Contact:
Adam Prior, Senior Vice-President
The Equity Group Inc.
Phone: 212-836-9606
Email: aprior@equityny.com
ZOOM TELEPHONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months and Twelve Months Ended December 31, 2018 and
2017
(in thousands, except per share
data)
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
|
12/31/18
|
12/31/17
|
12/31/18
|
12/31/17
|
|
|
|
|
|
|
|
Net sales
|
$7,464
|
$8,862
|
$32,323
|
$29,418
|
|
Cost of goods sold
|
5,107
|
5,615
|
20,679
|
19,177
|
|
|
|
|
|
|
|
Gross
profit
|
2,357
|
3,247
|
11,644
|
10,241
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Selling
|
1,961
|
1,903
|
8,171
|
7,244
|
|
General
and administrative
|
589
|
1,111
|
1,648
|
2,264
|
|
Research
and development
|
573
|
577
|
1,772
|
1,945
|
|
Total
operating expenses
|
3,123
|
3,591
|
11,591
|
11,453
|
|
|
|
|
|
|
|
Operating
profit (loss)
|
(766)
|
(344)
|
53
|
(1,212)
|
|
|
|
|
|
|
|
Other income (expense), net
|
(56)
|
(42)
|
(101)
|
(140)
|
|
|
|
|
|
|
|
Income
(loss) before income taxes
|
(822)
|
(386)
|
(48)
|
(1,352)
|
|
|
|
|
|
|
|
Income tax expense
|
4
|
1
|
26
|
15
|
|
|
|
|
|
|
|
Net
income (loss)
|
$(826)
|
$(387)
|
$(74)
|
$(1,367)
|
|
|
|
|
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
Basic
and Diluted Earnings (loss) per share
|
$(0.05)
|
$(0.03)
|
$(0.00)
|
$(0.09)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding:
|
|
|
|
|
|
Basic
and Diluted
|
16,109
|
15,114
|
15,957
|
14,917
|
|
|
|
|
|
|
ZOOM TELEPHONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
|
|
12/31/18
|
12/31/17
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash
|
$126
|
$229
|
|
Accounts
receivable, net
|
2,761
|
2,230
|
|
Inventories,
net
|
7,928
|
5,202
|
|
Prepaid
expenses and other
|
918
|
578
|
|
|
|
|
|
Total
current assets
|
11,733
|
8,239
|
|
|
|
|
|
Property and equipment, net
|
261
|
162
|
|
|
|
|
|
Other assets
|
222
|
392
|
|
|
|
|
|
Total
assets
|
$12,216
|
$8,793
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
Bank
debt
|
$1,741
|
$90
|
|
Accounts
payable
|
4,369
|
3,527
|
|
Accrued
sales tax
|
219
|
831
|
|
Accrued
other expenses
|
2,011
|
1,173
|
|
|
|
|
|
Total
current liabilities
|
8,340
|
5,621
|
|
|
|
|
|
Total
liabilities
|
8,340
|
5,621
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Common
stock and additional paid-in capital
|
41,197
|
40,418
|
|
Retained
earnings (accumulated deficit)
|
(37,321)
|
(37,246)
|
|
|
|
|
|
Total
stockholders’ equity
|
3,876
|
3,172
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
$12,216
|
$8,793
|