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Zoom Telephonics Q2 1996 Sales Up 23%, 6-month Sales Up 45%

Boston, July 24, 1996 - Zoom Telephonics, Inc. (NASDAQ: ZOOM), a leading manufacturer of faxmodems and other personal computer communications products, today announced sales for its second quarter ending June 30,1996 of $21.1 million, up 23% from $17.1 million in the second quarter of 1995. Six-month sales grew 45% to $54.4 million from $37.5 million in the first half of 1995.

Second quarter 1996 net income of $257 thousand or $.04 per share was down from $1.06 million or $.18 per share in the second quarter of 1995. Net income for the first half of 1996 was $2.47 million or $.36 per share compared to $2.2 million or $.37 per share in the first half of 1995.

OEM sales grew to 28% of Zoom's sales in the second quarter of 1996, up from 11% in the second quarter of 1995. Zoom-brand sales outside North America grew to 22% of sales in the second quarter of 1996, up from 12% in the second quarter of 1995.

Gross margin declined to 17.7% in the second quarter of 1996 from 25.4% in the second quarter of 1995, reflecting an increase in lower-margin OEM sales and increased price competition. This also affected the first half of 1996, as gross margin dropped from 24.4% to 21.2%.

Operating expenses for the second quarter of 1996 rose to 16.2% of sales from 15.3% in the second quarter of 1995 as research and development expenses rose to 2.9% of sales from 2.2% and general and administrative expenses rose to 4.1% from 3.0%, primarily due to increases in staff to support growth. Sales and marketing expenses declined to 9.2% of sales from 10.0% of sales primarily due to the lower selling expenses associated with OEM sales.

The company's operating margin decreased to 1.4% of sales for the second quarter of 1996 from 10.0% in the second quarter of 1995, primarily due to the decline in gross margin.

"There is still strong demand for V.34 modems," said Frank Manning, Zoom's President. "However, price competition has caused our selling prices to come down faster than our cost of goods. We continue to reduce our costs to get our gross margins back in line. We are also introducing higher-margin products including our new Zoom/MultiLine family and our Zoom Business Products, which begin shipping in volume during the third quarter. In addition, in the third quarter we will begin shipping a number of new 33,600 bps models and our first modems with simultaneous voice and data capability. Our products continue to get strong reviews, with our Zoom/FaxModem PCMCIA V.34C selected as PC World's 'best buy' for 6 straight months, the same modem picked by PC Laptop as the 'best value', and our V.34 external modem chosen by Windows Magazine as one of the top 100 hardware products of the year."

Zoom's balance sheet strengthened during the second quarter. Zoom's current ratio improved from 2.2 to 10.0 during the quarter reflecting $11.6 million in net proceeds from a public offering in April and reductions in inventory, accounts receivable, and accounts payable. The company ended the quarter with $11.1 million in cash, an unused $10 million bank line of credit, and shareholders' equity of $6.51 per share.

Zoom also announced that its Board of Directors has authorized the Company's repurchase of up to $7 million in Zoom stock. Such purchases may be made from time to time in the open market or in private transactions, depending on market and business conditions.

For additional information, please contact Investor Relations, Zoom Telephonics, Inc., 207 South Street, Boston, Massachusetts 02111, telephone: (617) 423-1072, fax: (617) 338-5015, E-mail address: Investor@Zoomtel.com. Zoom's World Wide Web site is www.zoomtel.com

This press release contains certain forward-looking statements, including statements relating to gross margins and the shipment of new products. These forward-looking statements involve risks and uncertainties, including that there can be no assurance that the Company will be able to increase its margins, that any of the Company's new products will achieve market acceptance, and other risks and uncertainties indicated from time to time in Zoom's filings with the Securities and Exchange Commission.
 

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