Universal Electronics (UEIC) 16 Feb 232022 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Universal Electronics Fourth Quarter 2022 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Kirsten Chapman, LHA Investor Relations. Please begin.

thank XXXX for year fourth conference and the us financial Norma, call. Electronics Universal quarter you, you joining all for results Thank and full release. a you of have now, received By the should press copy

discussed visit that If you have live this call the Relations any please during this contact over This updated might the of website. non-public being webcast additional the replay uei.com call, be XXX-XXX-XXXX the of will LHA section is available Investor website at company's not, be for or information broadcast Internet. year. material X call A including on at

may and this are this future projections through the and discipline, its and sales or due and flows and to and results of constraints. may deliver cash make upgrades management. events related into footprint margins During the for new to company's technologies energy growing more line new and its The company's that and forward-looking and market differ operational sustainable control, ground and inventories and sales financial developing and customers events management's supply efficiency, and home those projections. which introduced timely the to materially designed and continue and and successful to climate connectivity technologies continued future its wireless software the result business, the statements company. diversification performance ability launching include and automation, products growing it of future existing solutions power address you may These just management markets, and to results ability achieve financial security, manage its for the demand generation impact to cautions breaking increased products experience line trade HVAC with statements company strategy solutions in develop actual statements The new harvesting electronic call, manufacturing and net and from share ultra-low collaboration hospitality the in regarding leveraging new products, financial and earnings these and devices. channels technology existing capabilities including of year, control in that

to pressures or So and economic of The experiencing. including including The and revise makes its filed respect confidence war. company including you and uncertainty to may or experience consumers' no are reflect COVID-XX conditions and and its report consumers continuation to inflationary since natural after the of the company onset and XX-K health indirect challenges statements semiconductor then. pandemic crisis, SEC, obligation macroeconomic affecting direct filed the from its the periodic actions, press stemming financial documents the with date call disasters, public or these the and company continued the the supply update has mentioned events impact annual governmental on refers arise to resurgence in spending, release undertakes with results today's the Form the XXXX at or circumstances and that reports business

and with UEI's investors investors measures and financial how helps Management as consistent provides referenced. that business supplement core to and non-GAAP measures purposes uses making providing a for planning financial In trends evaluates be trends. them adjusted and to performance budget management metrics believes financial management's for and because non-GAAP adjusted non-GAAP operational GAAP remarks, decisions evaluate metrics financial will financial performance these it operating and such

the are trends financial companies. issued full these press with management and versus addition, included company's description of measures and adjusted non-GAAP release reconciliation operating A other comparisons competitors core business believes today. and results the In of measures GAAP facilitate in and these

Paul Bryan Hackworth, will Chairman who then deliver Chief Paul the financials. will Arling, Chief an provide to Please pleasure It's Financial Paul will are Paul. introduce go overview today and ahead, to and Arling. now call return Officer, closing Officer, remarks. the summarize On my Executive who

joining our as review XXXX. us Thank outlook you today XXXX for to performance well our as for

commitment our excellence highlighted in to innovation, ongoing delivery have times and and strong continues ongoing design, garner product we development As technology customer and to many before, service accolades.

Our product CES throughout design of importantly, received of more awards technology in and January XXXX designs and back recognition form new XXXX. solutions in half into product our earned customer and innovation wins platforms the the

share a markets grow to serve. continues our result, the As we in

especially uncertainty the consumer end dynamics, tail macroeconomic last have impacted However, challenges year. of at increased and market

result, felt impact below performance that of with was the security a $X.XX. connected sold our on also in million $XXX.X quarter home momentum. XXXX XXXX. continue higher-growth EPS Regardless, markets We QX gain are first climate home that As and our be to automation in will of anticipate solutions, and focus expectations control, net of sales which

will In XXXX improve of quarter the fact, in momentum starting home into second to cases, product the XX XXXX. XX ago, to sales connected net in design and ship, confidence are wins months some in giving us secured build channel starting

For with our first end example, already the toward quarter been smart thermostat we second are with our expect we first thermostat of Electric U.S. XXXX for globally. of train advanced market the to awarded launch the Mitsubishi shipping have that Mitsubishi and

In sensors, Douglas our the grow space, the we at products the home at addition, leader system our closing are HVAC expanded with and largest and of control to of U.S. have automation our and and In providers platform. in new home and multiple provider, new solutions Hunter the with one won platforms space we with Somfy business automation we security footprint beginning thermostats TIDE global XXXX HVAC another controllers at with continue control U.S. Vivint.

starting these contribute wins quarter. revenue to next to our expect We

actions meantime, the taking market have In to the we dynamics. address additional been

seen years, have growth. growth we as we on the provider technologies mentioned, channel core where spend to challenged the video been deliberately home products past space, in market past higher over few development our from First, shifting have the channels and connected new over years, service

lower-cost activities moderate Second, maintenance move fixed regions. to ongoing continue we to development costs, and to support

innovation and that in solutions that tasked create focusing technology are development connectivity, and these channels, key to growing teams to local scale support We have our our markets. all end-user solutions differentiating across can interoperability, our on wireless also sustainability

already optimizing fully with Third, later Vietnam, begun construction a we be the factory diversifying outside which of will and base year. in China our this new operational have manufacturing

While product to footprint, with this footprint to our will efficiencies production customers, rightsize to XXXX initially that increase serve global end manufacturing the overall is a of the is our in flexibility cost global categories. higher growth our production goal optimize and create by new our line footprint, to enabling

the revenue and continues our the to global potential offers and business track allocating process generate confirming was development prioritize projects we This customer products development January, development in position on right positive, impact. proof product ample our our long-term Finally, to of growth. with are a is at experience differentiated that and that CES resources reaction strong to highest extremely

solutions years, industry-leading delivered our control XX have almost For we for customers.

the Our standard QuickSet have for control like inventions de home entertainment become facto devices. smart connected

from around to brands products, to leading finished software increasingly world for embedded systems. solutions of and and such, UEI turn power their SoCs the control sensing As functions the

drive in expectations long-term consistently and and yield Our in surpass will, our markets meet new growth. time, strategy customer of growing to

focused automation low-power connected home systems. home solutions home solutions net And XXXX, and and other security control, XX% of for accounted are home these are have over sales. space grown. markets. faster already these growing at entertainment than In markets in a automation, and count create greater including our customers control, our larger XXXX, climate innovative intuitive greater tie-in resulting Our Since sales better wireless us smart IP a home on more to on connectivity, in control with rate

So forward. we expect their be even to contribution meaningful more going

alone climate a $X which in XX% annual market growing is Our specific billion, represents growth addressable control nearly compound rate. at

future We expanded energy control over product solutions thermostats a We enhanced millions emphasized X,XXX honored smart that whole by Award connectivity announce briefly smart design of solution, battery few UEI's Eterna will energy our dashboard currently home with our TVs reference highlights to applicants. TIDE a Innovation a amongst XXXX efficiency worldwide. of CES. at shipping the waste for LG sustainability demonstrated the from demonstrated more UEI's X, proud remotes. security, review and I'm our Eterna scalability. as contribution harvesting of by pool addressing home smart I QuickSet wireless need a in our to the with and for was We reducing the sustainable with CES home with introductions in

screen. entertainment to growing features is platform service providers QuickSet Home our the to As that functionality, Smart of smart software need blends to the in evolve in smart reality. software experiences reacted and scale ranging and home This potential to the full owners positively home a of control Customers potential to the the enhanced deliver offering our home TV single to a solution. broadband a home QuickSet continue on from becoming a smart and confirms services TVs brands embrace largest screen and list smart experience

the our significant design are strongly matter between they ability existing bid area our newer, confidentiality is am the of with say in our effectively of our customer can number weighted the penetrate future. and nature by enabled markets buy for project execute matter our cannot these devices markets, we the devices opportunity What our wins, opportunities the customers will opportunities consumers smart new and to market requirements have and business I X to win home new bridge their current competitive businesses, pipeline and on in higher-growth and limited In Due ensuring opportunities. new across highlighting of a UEI. new matter new enhanced design represent once discuss to specific standard diversification can that I home portfolio, solutions the emerging the strategy. our interoperability, embrace of These introduction customers' again backlog

means definitive expected traditional the long-term and cycles the control, benefits than home developed longer entertainment have or life our sales wins in cycles signs product product X taking major new the longer home Interestingly, related This while significantly include platforms sales climate channel and connected security product has these are the beyond, these that and Although launch, that while home development our longer and than XXXX entertainment. into are longer in exhibited to last later XXXX significantly underpin until of growth revenue automation projections. Xx developments channel, longer cycles. home products not

we successfully received design continue wins now for is have already to In products and execute by we many on been well important customers. innovative that our new is that CES What awarded the build product were future. a the strong summary, introductions our at our foundation new

on coming that new cost initiatives. the secure business the to in vigilant will outstanding addressing be we and our continue bids months executing savings years remain and in We we

continue as customers our enable and to will in innovation that fact, commitment, to our well solutions their experiences bring grow customers continued technology as and consumer product help our We obsession improve businesses.

again once higher We continue same UEI has made success. the that to of strategy successful will ever many implement times and bring us to before levels

Now review I'll our call Bryan Go the to for CFO, ahead, Bryan. Hackworth, over turn a financials. the of

Thank you, Paul.

the our fourth electronics to quarter and orders certain great be I'll deal First, review markets. $XXX.X of compared impacting of for were the current the quarter. end a sales results submitted XXXX, below less affecting primarily XXXX. lower to our on also shortly. fourth consumer channels fourth than our in orders customers, uncertainty that the Net purchase of the is to environment, will first expectations submitted quarter for our which quarter this the XXXX. services compared There's households provide which climate spending in economic the in fourth $XXX.X their in has and the reflected I'll for of the turn, goods, of reduced video quarter In previously million, million control XXXX led discretionary were Customers guidance channel, and user forecast,

being variances lower than flex These labor. decreases in the resulted lower inefficiencies production unfavorable at absorbed a were run as incurred to yielding manufacturing and the to overhead in short demand labor fourth due forecast, was quarter in inability direct rate

margin quarter of for $XX.X XX.X% of XXXX fourth in lower quarter expected. to compared the the million sales of of XXXX, or gross Although was XX.X% than fourth increased it

in in fourth million quarter. compared year the $XX.X prior quarter to was sales prior were the R&D SG&A year in $XX.X of were to million quarter quarter. $XX.X the XXXX. fourth or million were $X.X compared expenses million million the million to expenses to in income million $X.X of XXXX. expenses $XX.X $X.X or of $XX.X X.X% sales of compared Operating compared million Operating X.X%

to Our fourth XXXX of compared quarter XXXX. was XX.X% XX.X% tax rate for fourth quarter the effective

$X.XX of or or For income $X the compared net per diluted of $X.XX million quarter share fourth share to per $X.X XXXX, XXXX. the in was fourth diluted million quarter

at of cash $XX.X with for XX, $XX.X Next, quarter December our million. cash $XX.X from I'll We operations the and and XXXX sheet. was million equivalents to of review ended fourth million flow compared flow XXXX. balance XXXX cash Cash

restructure guidance majority important facilities, our provide for and little in history. X footprint, a context our plan quarter, our X Mexico. goods in on of I'll first in comment produced and currently Before are it's to China manufacturing the provide and first to think I I The X Mainland

Today, Our into plan. China Mexico to goods refurbishment destined a a But facility factory facility was when originally we produce enacted for established in tariffs as were the quickly manufacturing transitioned XXXX, the full-fledged the a North commence in manufacturing scheduled our we're currently risk to the midst of American Vietnam, operations market. effort year. this in lower later an to China, facility opening concentration in in

sudden years governmental over our the policies X of in the the global necessary as environment. past footprint expansion factory well been changes, The has as sometimes given overall

over becoming fact our and while including strong experiencing climate dependent actions these home growth less business automation, in channel, evolved time control, and services currently production video has of we have result new capacity more a the security needed. channels, than As the on that

average climate control growth produced than growth in price categories units Therefore, the will our less higher strongest factory Additionally, be channel, channel. be will fewer sales traditional to floor video selling products and of required. achieve the service significantly need in the to space one is our

As will and plan forward, a manufacturing half reduce improve These occur with of going modifications second more manufacturing changes XXXX, beginning make footprint to in such, our the company. additional ultimately profitable in to we UEI XXXX. efficiencies

our to Now turning guidance.

USDXXX of million $XXX.X to XXXX. from million XXXX, for For first million the compared range quarter the USDXXX of expect quarter to to sales first we

to We expect USDX.XX in from $X.XX share a loss of EPS of first quarter net per compared XXXX. USDX.XX ranging to the

as first Looking persists. past uncertain remains economic the quarter, the inflation current environment

this Based low year XXXX. at for in sequentially the introductions QX's expect be expected expected long-term on However, than of to customers and new QX's exceed customer our net sales sentiment quarter's QX forecast, revenue both have forecast unlike and sales be of reflected higher their last with time, this to product point the and and net we timing second to near-term QX's. QX

headwinds in believe off We we XXXX the on spend home past few connected several pay the in have will faced the R&D but and focused over increase years, beyond.

turn the Paul. I would now to call to back like

this uncertainty. Thank you, is has Bryan. opportunity become repeatedly straight UEI have to Progress path. times Strong the a companies not during proven of stronger outage.

do again. to that expect We

supply patterns. to as the Industry been many affected across Our and and its beset shortages issues, business higher semiconductor consumer challenges has with caused such Recently, of have chain economic many name of have. COVID-XX interest last rates customers' as a few to spending effects, after the continued demand many inflation years, lessen. impact just difficulties few. shifts have our

like period, connected we innovated During increased the and the UEI this a into transition the never difficult significant in markets before, our has team market home all share begun at serve.

projects past and opportunities won the significant have we months, have pipeline. the in more Over XX many

them to better we not improve very and results for like even importantly, would them the create be, future taking what action to While we UEI. an are all near-term at are

our our shareholder supports the term. traction property is value a and ability beginning. emerge stronger engagements, different backlog, Based development in win this customer markets truly pipeline, long in drive product record and new to intellectual design track our pressures, Our on our new navigate and

for can now always, As we Operator, open call up questions. tuned. the stay

from Burns comes line Sidoti. the the with question [Operator you. Instructions] And Thank first of Greg

automated guess the the it revenue driving the what's just we magnitude the consumer-centric driving the if far we kind the color was Can to dig primarily on just into you Because specific more the some I here. this the quarter, the Or quarter back coming the like just help channels? decline? traditional SVOD guidance, decline? for the understand pandemic, first guidance Is and channels maybe is higher of from for miss home. to of magnitude us Could heart of look in it the revenue what's

higher So far the guiding for first than quarter. what's what you're

changed? Or the us know environment let of decline? about so kind different just driving dramatically that's you can what's So this what's

products to that obviously, customers obviously varied the homes, are a sell there's consumers, don't our lot decision as in typically know, sell And but end the we homes those which Yes, Greg, effects. products you we in directly of up Sure. because we consumers. do to makers our

So customers many seen you've would And as upon our to we and markets. directly same are consumers. probably selling say through from rely or we consumer the because companies, the often channel retail the

at TV So example, during home. an they business, as because people did were okay pandemic, the probably

were to where fact, better In flight it they TVs that a during quality probably period. was buying

more with cases, of has think little simply to just that, and widely to you've to I in we your think buy effect category. spend. more little likely seen from or cost left this exceptions And when inflation, be go to et easily. less as market less middle-income a but just gasoline, have paycheck And of consumer less higher it of middle-class probably the consumers dollars I higher cost aren't higher long-term are There food, just items. a as products is their going consumers the reluctant, rates there's the many interest utilities, of reluctant out of parting cost over in because made higher family might cetera, other a

So they're expect orders customers to orders are fewer lightness a see telling of for our seeing time and that here. us

saw that we in So QX.

parts some seen In inventory because them forecasted customers who that difficult of of they business patterns. our demand just then fact, And not during et cetera. the other had lightness quarter, saw we build, have had did fulfill orders course,

been automation little across share only that is much is would market our it's So easier security projects, because, new there again, a say the board. home lower. I lower,

channel, quite provider service our know, high. share you the market video As in is

markets market's respectable, is but gain. We've got great already share still down HVAC, our the offset relatively market In share low, we we're with have there. when can't because relatively high a and we share. there, like down, offerings So it

has So problem smaller was growth. market was it much so we and our offset the with can to hard from been growth weakness business. that, with smaller, for large few years any that in that The shrink offset was business that last entertainment home

we now our highlighted is As comments, during business of smart prepared that XX%. the home part

So some a home We SKUs begin getting and to few any despite deliver them. can level It it's to UEI more of difficulties. deliver win a scale. growth entertainment for we there think

us XX% What that Okay. give the guess, just you customers, number? percent, I can

largest customer our was Nike Comcast for our Yes, XX.X% XX.X% fourth quarter. the largest [ph] at at second was and

Okay.

in guess this obviously, guess, about. But traditional declining, to you indicative, Comcast, like what the cutting like or is TV with so decline more cord product I Like of electronics I So like understand the discretionary beyond there than impacts your it consumer were that's secular issues this more but a just talking like there's channels of I there, sales, just like of being feels lower. consumer more spending is like that. sales

Well, I been yes, of that it. demand mean sure. part from would the lower those certainly be has for customers

how Okay. these of a And margins to will know benefit numbers. much then Because your with that some excluding expenses adjusted manufacturing be? in I of you're footprint, the

your So we this does that footprint just from in of already excluding you Because go should away some at expenses the Like how adjusted benefit numbers. some are time? about think rationalization? point

going to So what's impact the be?

we Mexico it facility that's transitioned Yes, increased full-fledged capacity. our mean I facility, refurbishment from a correct. to plant a our manufacturing when

design were excess I have did we it I I was okay, So to capacity. if what said, today,

derisk us capacity would needed. What's up our to going concentration China, we're in than have risk to we're happening trying it spinning is more what and with So even now Vietnam, look like?

we just shortfall So now, demand, have with the right capacity. much too in

looking you forma layers. amount there's pro that. than potential do it. greater at of savings of you're actually the X a kind is that piece the so I One, And But right,

all, pro and the we So what's we're currently the being savings forma. included currently at restructure are eventually, exceed when analyzing going to everything in

So say savings way to is more be to had a there's probably simple it.

conference for Thank Ladies concludes today's patience. this and gentlemen, your you call.

Everyone, great disconnect. day. a have You may now