Franklin Wireless Corp. (NASDAQ:FKWL)

Franklin Wireless (OOTC:FKWL) ($21.07, $243.1M market cap), a market leader in mobile broadband, announced Q2 2021 results:

• Sales of $66.2 million vs $13.2 million in the prior year
• EPS of $0.58 vs $0.05 in the prior year

"The continued record revenue and net income demonstrates the tireless work of our entire team to maximize opportunities during this challenging and difficult time for the global economy brought about by the Covid-19 global pandemic,” said OC Kim, president of Franklin Wireless. “Our manufacturing partners, suppliers and staff have done a great job overcoming supply chain delays and have consistently delivered our products on time, without increasing the cost of operations. It appears likely that the pandemic has caused long term changes to the way we work and learn, and these changes will increase demand for our wireless solutions for years to come. Operationally and financially, we are extremely well positioned to meet this demand for our products and solutions, with the strongest balance sheet in our history and a profitable business generating cash flow. We will keep working hard to take advantage of opportunities and deliver solutions to our customers to help them navigate these unprecedented times.”

Comments from management are more positive than cautious for the first time since we've been tracking the company. 

Franklin Wireless (OOTC:FKWL) ($21.00, $222.9M market cap), market leader in mobile broadband, announced Q1 2021 results via 10-Q only thus far:

• Sales of $62.5 million vs $8.8 million in the prior year
• EPS of $0.64 vs $0.02 in the prior year

We will await the company’s press release to see if they offer any  color on how much of the sales in the quarter was a one time bump due to Covid-19.  Per the Q:

“High volume sales to school districts rapidly rolling out remote learning programs was a significant driver for increased sales through our primary customers during the Covid-19 Pandemic period.

Franklin Wireless (OOTC:FKWL) ($13.50, $143.1M market cap), market leader in mobile broadband, reported its Q4 2020 results:

• Sales of $37.4 million vs $5.0 million in the prior year
• EPS of $0.35 vs a loss of $0.07 in the prior year

“Full year net sales in the United States increased by $38,622,391, or 106.6%, to $74,839,778 for the year ended June 30, 2020, from $36,217,387 for the corresponding period of 2019. The increase in net sales in the United States resulted primarily from increased demand for wireless connectivity due to people working and attending school remotely. High volume sales to school districts rapidly rolling out remote learning programs was a significant driver for increased sales through our primary customers during the Covid-19 Pandemic period. Net sales also increased due to a newly launched product and the timing of orders placed by a new carrier customer, from which a significant portion of our revenue was derived. (46% of our consolidated net sales for the year ended June 30, 2020).”

In our March 15 weekly wrap-up email, we mentioned FKWL was back on our radar after hitting new highs. In late July shares surged more than doubling in a few days and remain at elevated levels. Please note that the company recently completed a finance deal selling 923,078 shares at a price of $6.50.  You can see our brief research note here.

Franklin Wireless (OOTC:FKWL) ($5.52, $58.3M market cap), market leader in mobile broadband, announced Q3 2020 results via 10-Q on May 15, 2020:

• Sales of $15.5 million vs $8.9 million in the prior year
• EPS of $0.09 vs loss of $0.01 in the prior year

“The increase in net sales in the United States and Canada resulted primarily from increased demand for wireless connectivity due to people working and attending school remotely. Net sales also increased due to a newly launched product and the timing of orders placed by a new carrier customer, from which a significant portion of our revenue was derived (35% of our consolidated net sales for the three months ended March 31, 2020), as well as increased product demand (up 24%) from one major carrier customer compared to the corresponding period of 2019.”

In our March 15 weekly wrap-up email, we mentioned FKWL was back on our radar after hitting new highs. You can see our brief research note here

FRANKLIN WIRELESS CORP.

Consolidated Statements of Operations

Net salNet sales decreased by $22,247,892, or 47.8%, to $24,266,604 for the year ended June 30, 2012 from $46,514,496 for the corresponding period of 2011. For the year ended June 30, 2012, net sales by geographic regions, consisting of South America and the Caribbean, the United States, and Asia were $6,450,174 (26.6% of net sales), $13,851,066 (57.1% of net sales), and $3,965,364 (16.3% of net sales), respectively.

Net sales in the South American and Caribbean regions decreased by $4,893,347, or 43.1%, to $6,450,174 for the year ended June 30, 2012, from $11,343,521 for the corresponding period of 2011. The decrease was primarily due to the general nature of sales in these regions, which often fluctuate significantly from period to period due to by timing of orders placed by a relatively small number of customers. In addition, some carrier customers in these regions are transitioning from CDMA to LTE or HSPA+ networks, which affected the quantity of CDMA related products that were sold during the year ended June 30, 2012. Net sales in the United States decreased by $20,948,698, or 60.2%, to $13,851,066 for the year ended June 30, 2012, from $34,799,764 for the corresponding period of 2011. The decrease in net sales was due to several factors, including increased competition in the dual-mode (3G and 4G) USB modem market, as well as competition from other similar products, which negatively affected volume and price. Sales during the year ended June 30, 2012, were also affected by delays in launching new products. During the year ended June 30, 2012 the Company was developing new products that are expected to be released during the first half of fiscal 2013. Net sales in Asia increased by $3,593,953, or 968.2%, to $3,965,164 for the year ended June 30, 2012, from $371,211 for the corresponding period of 2011. The increase in net sales was primarily due to the addition of a new customer in this region which purchased production quantities of the Company’s M600 dual-mode (3G and 4G) embedded modules as well as other product and component sales generated by FTI. es decreased by $55,383,623, or 54.4%, to $46,514,496 for the year ended June 30, 2011 from $101,898,119 for the corresponding period of 2010.

GeoTeam® Note: Fourth 2012 vs. 2011

Sales: $15.7 vs. $4.90

   EPS: $0.12 vs. loss of $0.01 

Also note that due to the introduction of new products the next two quarters could also see strong financial results. Keep in mind that historically, financial results have been quite volatile and the company has thin margins.

For the second quarter of 20111, the company reported:

• Net sales of $15.6 million for the quarter, compared with $25.2 million in net sales for the corresponding period of 2009.
• Despite the decrease in revenue, gross profit increased by 110% to $6.1 million compared to $2.9 million for the same quarter last year. 
• In addition, net income increased to $2.0 million for the three month period ending December 31, 2010, compared with $821,546 for the same period in 2009, which represents a 147% increase year-over-year.

"Despite operating in a very competitive environment during this past quarter, Franklin Wireless posted solid financial results including substantial increases in gross margin and net income," said OC Kim, president of Franklin Wireless. "During the quarter, we continued to ship a greater mix of FTI supplied products, which was the primary reason for the improved results and we feel this further validates our strategic investment in FTI which took place in fiscal 2010."

• Diluted earnings per share improved to $0.17 for the quarter compared to $0.06 for same period last year. 

The increase was due to higher net income as well as the lower share count resulting from the recent repurchase of approximately 1.8 million shares from C-Motech. The Company expects to repurchase C-Motech's remaining 1.6 million shares by March 31, 2011, which will further reduce the number of shares outstanding.

Franklin Wireless issued a release this morning:

"Based upon the company's preliminary estimates, total revenue is expected to be approximately $100 million for the full 2010 fiscal year, which represents more than a 300% increase over the fiscal 2009 period. In addition, the company announced that it was profitable in each quarter of the 2010 fiscal year."

This guidance implies fourth quarter revenues of about $40.0 million which compares to $9.8 million reported in FKWL fiscal 2009 comparable period. However, reading between the lines one may surmise that fourth quarter EPS growth may not be in the cards since the company only commented that it would be profitable.  Weakened margins in lieu of increasing sales has been the the one sticky issue this year. Investors will likely require more clarity on EPS growth going forward. We will provide an update upon the release of year end results.

Added to the GeoSpecial list on February 17, 2010 @ $1.90 

Catalyst: anticipation of a dramatic revenue break out.

Peak performance: Reached a high of  $2.50 on 4/7/09.
Current road block: Margin pressure; No financial guidance.
Current Price: $2.00

While revenues have exploded due to an overall increase in demand for the Company's dual-mode (3G and 4G) wireless USB modems...

• Fiscal 2nd.quarter sales; 2010 vs 2009: $25.18 vs. $4.62 million
• Fiscal 3rd. quarter sales; 2010 vs 2009: $31.63 vs. $3.31 million
  
• Fiscal 2nd.quarter EPS; 2010 vs 2009: $0.06 vs. $0.04
• Fiscal 3rd. quarter EPS; 2010 vs 2009: $0.10 vs. $0.00

The company has experienced a significant reduction in margins: 

"The gross profit decrease in terms of net sales percentage was primarily due to the significant increase in sales to carrier customers in the United States, whose gross profit in terms of net sales percentage was 13.4% and accounted for 99.1% of total net sales for the three months ended March 31, 2010. The decrease in sales in the South America and Caribbean regions also negatively affected the gross profit in terms of net sales percentage."

Investing in Franklin Wireless in the short-term is a challenging call for us. FKWL is going up against a tough Fiscal 2009 fourth quarter where it reported EPS $0.18. Without any guidance or an interview, we are inclined to wait and see where fourth quarter numbers come in at before making an additional commitment to FKWL shares.

Note:

Today's announcement that FKWL has reached an agreement with C-Motech Co. Ltd. to repurchase all of C-Motech's Franklin Wireless shares  should help EPS. 

"The company will complete the repurchase of the shares by December 31, 2010. C-Motech currently holds 3,370,356 shares of Franklin's common stock, which represent approximately 24% of Franklin's outstanding shares."