Zoom transitioning production from China to Vietnam to sidestep tariffs

Boston &ndash Zoom Telephonics, a leading producer of cable modems and other communication products, today reported financial results for its 2019 fourth quarter and year ended December 31, 2019.

Financial Highlights (Q4 and full year 2019 comparisons to prior year's period)

  • Q4 net sales increased 41.6% to $10.6 million in comparison to Q4 of 2018.
  • Q4 gross margin decreased to 24.5% from 31.6% in the same quarter of 2018, as China tariffs increased cost of goods by $1.3 million in Q4 2019.
  • Year-over-year net sales increased 16.4% to $37.6 million due primarily to strong sales from E-tail/Retail.
  • 2019 gross margin decreased to 29.0% from 36.0% in the prior year. China tariffs impacted margin by $3.2 million in 2019.
  • Q4 net loss was approximately $1.15 million, or $0.06 per share, compared to a net loss of $0.8 million, or $0.05 per share, for Q4 2018. 2019 net loss was $3.28 million, or $0.18 per share, compared to a net loss of $74 thousand, or $0.00 per share, for 2018.

2019 Fourth Quarter Financial Review
The Company reported an increase in net sales of 41.6% to $10.6 million for the fourth quarter ended December 31, 2019, up from $7.5 million for the fourth quarter ended December 31, 2018. The increase in sales was driven by increased sales through E/Retail.

Gross profit was $2.6 million or 24.5% of net sales in the fourth quarter of 2019, compared to $2.4 million or 31.6% of net sales for the fourth quarter of 2018. The decrease in gross profit and gross margin was primarily due to China tariffs increasing cost of goods $1.3 million and $0.23 million in the fourth quarter of 2019 and 2018 respectively.

Management Commentary
Joe Wytanis, Zoom's CEO, commented on the fiscal year and quarter, "2019 turned out to be our best year in revenue since 2001 and we closed with year over year growth accelerating. Our Q4FY2019 sales were up 41.6% from the prior year quarter whereas third quarter sales were up 20.8% and the second quarter saw sales grow 8.5%. Our products continue to gain recognition for their quality and value, as we reported right at year end, Wirecutter magazine named our MB7621 Cable Modem as "The Best Modem For Most People". We intend to build on this sort of recognition with an aggressive sales and marketing program supported by a steady cadence of new product rollouts."

Mr. Wytanis continued, "While we were pleased with our top line performance in both the fourth quarter and full year, our bottom line was negatively impacted by the significant burden of China tariffs which led to a net loss again in Q4FY2019. Similar to what we experienced in Q3FY2019, we would have been profitable in Q4FY2019 with $164 thousand of net income, but again the tariffs changed that. Our laser focus is to transition our production from China to Vietnam as quickly as possible. We have a production transition plan in place and we're executing on it."

Zoom Telephonics

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