Deswell Industries reported first‑half 2026 results that showed net sales of $33.2 million, a 5.5% decline from the $35.2 million recorded in the same period of 2024. Net income rose to $7.5 million, up 21% from $6.2 million year‑over‑year, and earnings per share climbed to $0.47 from $0.39. The company’s overall gross margin improved to 23.4% of net sales, up from 19.5% in the prior year, a gain largely driven by a shift toward higher‑margin electronic products and disciplined cost management.
The plastic segment posted sales of $5.0 million, a 13.8% drop, and its margin slipped to 18.3% from 19.5%. The decline reflects weaker demand for non‑essential plastic components and higher labor costs due to minimum‑wage increases. In contrast, the electronic segment generated $28.2 million in sales, down 3.9% from $29.3 million, but its margin expanded to 24.3% from 19.5%. The margin lift is attributed to the introduction of value‑added services and a higher mix of premium electronic offerings that command stronger pricing power.
Cash and liquidity remained robust, with $23.4 million in cash and equivalents and no debt on the balance sheet. Working capital stood at $85.1 million as of September 30, 2025. The board declared a cash dividend of $0.10 per share for the first half of fiscal 2026, payable on December 23 to shareholders of record as of December 2.
CEO Edward So emphasized that the company’s performance reflects resilience amid a challenging global economic landscape. He highlighted the success of higher‑margin products and new product introductions, and underscored strategic priorities such as cost control and supply‑chain efficiency. So noted that the company’s focus on higher‑margin offerings and operational leverage has enabled it to maintain profitability even as overall sales decline.
Analysts had expected first‑half 2026 revenue of $34.0 million and EPS of $0.42. Deswell’s revenue fell short of expectations by $0.8 million, a 2.4% miss, while EPS beat consensus by $0.05, a 12% lift. The earnings beat is largely due to the electronic segment’s margin expansion and effective cost controls that offset the revenue decline. The revenue miss reflects broader demand weakness in the plastic segment and the impact of higher labor costs.
The results signal a strategic pivot toward more profitable offerings and a disciplined cost structure. While the company faces headwinds in the plastic market, its strengthened electronic segment and solid cash position position it well for continued profitability and potential future growth in high‑margin product lines.
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