Creative Technology reports fiscal 2Q net loss widened, guides for 3Q operating loss

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Creative Technology reported its fiscal second quarter net loss widened to US$4.92 million, from a US$4.23 million loss in the year-ago quarter as sales dropped.

Net sales for the quarter ended 31 December fell 22 percent on-year to US$16.21 million, the company said in a filing to SGX after the market close on Thursday.

“Revenue in the second quarter and first half year of FY2019 was lower due to the uncertain and difficult market conditions which affected the sales of the group’s products,” Creative said.

Expenses generally declined in line with the sales fall, with cost of goods sold falling to US$11.41 million for the quarter, down 24 percent on-year, Creative said. Selling, general and administrative expenses fell 12 percent on-year in the quarter to US$6.53 million, it said.

Other gains of US$300,000 in the second quarter were due mainly to foreign-exchange gains, it said.

For the fiscal first half, Creative reported a net loss of US$11.02 million, swinging from a year-earlier net profit of US$18.61 million. Net sales for the first half were US$29.43 million, down 20 percent on-year, it said.

Guides for fiscal 3Q operating loss

Creative said it didn’t expect a significant change in market conditions in the fiscal third quarter and guided for an operating loss.

“[The] overall market for the group’s products remains challenging. Revenue is expected to be lower in this non-holiday season quarter compared to the current level, and the group expects to report an operating loss,” it said. “Revenue contribution from Super X-Fi products for the quarter is not expected to be significant to the overall revenue for the group.”

The company’s Super X-Fi products use 3D sound for improved audio fidelity. Creative has said the headphones recreate the effect of a multi-speaker surround system.

However, it pointed to the February settlement of patent infringement lawsuits filed in the U.S. by wholly-owned subsidiary ZiiLabs, with a settlement of US$17.9 million to be recognized as other income in the fiscal third quarter.

“This will offset the operating loss and is expected to result in a net profit for the current quarter,” Creative said.

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