Universal Electronics (UEIC) 4 May 232023 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Universal Electronics First Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions]. today's being that advise be conference recorded. is Please

hand over Please to would ahead. now speaker conference to like Chapman. I the the today, go Kirsten

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

the you the Investor visit have XXX-XXX-XXXX at or not, If section please website. of Relations contact LHA Investor Relations

this call, This discussed A of one call be is webcast non-public company's material for over broadcast during the at website will be any Internet. the including information being live call available might updated on year. www.uei.com additional replay that this

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business financial indirect COVID-XX continued that are the The of impact governmental conditions disasters, the The consumers the and company the continuation capitalization consequent macroeconomic it the supply from direct of The decline financial consumers' in its and company's of including pressures actions, results inflationary company's results or pandemic chain confidence continued during crisis, impairment experience to company's economic stemming uncertainty experiencing. public of market may resurgence respect and affecting or natural experience may with health the including the war. impact goodwill. constraints, the spending and and

XXXX annual no obligation at the update and after company refers to that including or and report mentioned circumstances onset call The to release the revise you company may its arise the Form SEC, these today's with the press undertakes statements to this files or documents reflect of XX-K. the on events date

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

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

who overview; are today who and remarks. summarize will Arling, financials. an Paul the closing Chief to then provide Bryan deliver will Hackworth, return Officer, call Executive will Paul Officer, Chairman and the Chief On Financial

now to ahead, Paul sir. pleasure It Please my go Arling. introduce is

joining for you today. Thank us

quarter first the these for of and the end reach long-term our financial measures met sales we while performance. neither For standards guidance high earnings, XXXX, of for of net our

global diversify So footprint. to we our our are markets executing and strategies particular, realign in operations, our optimizing manufacturing

While continue we share our in home the sales connected are home and in headwinds see entertainment experiencing in market. growth we channels, to market

are competitive have foundational leveraging we As discussed previously, our advantages. we

Our a technology, new and connectivity service. our in product device excellence providing our commitment control great innovation and development and customer to

markets. demand a home what in the smart experience, to home exactly across in is interoperability we customers devices, the consumer is are platforms, bringing and which enabling foundation for truly our and Solving core grow as by areas a ecosystems of need continue the costs such smarter energy and sustainable underlying security more global rising warming, macro the climate control, driven trends solutions. the will product in to automation and These long-term, for

particularly successes in However, fully in the yet U.S. to customer sales near-term, our due have to and new loss subscriber product offset decline broadcasting, subscription the

order customers near-term driven weakness consumer in experiencing retail consumer declines economic electronics our by also Additionally, the are channel. or mainly

bring this escalates. features television sustainable operating we our brands the and as impact for solutions believe sales OEM In temporary, system industry. channel electronics the consumer extremely are We lead the entertainment with well that in this information the in battle recover expect to to for is regard, home the and key the primary and accounts we are help to and new working positioned more

Looking net well year. of in half at of their our current watermark first development hit as customer low our sales pipeline. will this the believe backlog We as product programs

in actively development has we of of while uncertainty, products, design What new of results accelerating, growth achieve refocusing product consumer next. the year is this market are number replacement project our business. to incremental the in into and encouraging help that higher us sales both even period been existing representing align a efforts will are with later is wins which and new current accounts from of levels are We versus sales majority dynamics better that

product expected to sales and cycles in development to typically Subsequently, modestly sales in before, design these these are are mentioned channels in drive XXXX have we growth top-line wins new XXXX. contribute and then As new longer.

differentiated that and and are return in give our More assets great importantly, profitability growth capabilities these future. will solutions design to the that us not-so-distant wins confidence technical us key

brands HVAC new the our design XX% we brands won Mitsubishi Carrier six can months reflect We've advanced will penetration represent HVAC over train Daikin, achieved in market. with major Many past customer and wins in for world's represent of like as these boast channel, industry. the connected Collectively, their key accounts seven brands now customers. and In major products of drive global the newer that new leading awards more the thermostats.

design kicked customer-initiated future. developments our product our this which smart wins several efforts important we other markets teams and scheduled positive In in TIDE for Europe TIDE Dial channel, road in view based started platforms on thermostat nearly two for ship solutions XXXX. and addition, year, a off to for offer earlier validate Japan, our this map and the years These ago Touch

The leaders innovated success products we result, reminiscent wins focused companies as industry. phase are those technologies market then with achieving We on more in the entertainment. on leading the further success executed a with the strikingly world. HVAC gaining home in and and in in won even in business We is of of our traction wins, the the earlier through project

stronger Our success have keys ever are than been. they to today

history smart Our connectivity companies the home more our look smart attributes become across some an into provide our increasingly infrastructure and integrated customer our importantly, ability chaotic interoperability as to of desired execute home world. base are the and proven to tomorrow. at scale the customers These strongly in today through and with is for largest they of by

similar it In our Home story. Security a Automation and is business,

bring to with adding expressed experience. begin a design will XXXX. initial leading automation Somfy. commitment engagement customer this superior base, customer a and controllers, brands Douglas more ramp increasing innovation new strong technical with customer to accounts have as customers for and other their us These introductions sensors, attracting new product share result and know-how, like of Vivint, to product products Product into later are but We and a growing our and small exposure home our opportunities Hunter wins to year

we earlier shorter development year, secured television with platforms products. inherent channel year this due for program wins and provider this that to service we cycles the begin later video in our Europe these will major the in streaming and design U.S. Even new shipping

details to expand continue the business, this our can't is in platforms will we in market market. more even nature customer these right we more reach surrounding provide As our rest assured, But challenged subscriber now.

volume review and governmental of of our global manage have China. to a a been we to manufacturing expanding worldwide. building started working policies, Turning Last manufacturing outside our the at chain manufacturing we near factory footprint in on year, our in in manufacturing we new Once Vietnam changes To footprint supply plan our it the optimize out capacity. reduce other ramp that sustainable and we volumes will facilities. down and provide overhead plan of levels, our to optimal running energy-efficient our China as transfer overall additional is

Although continued footprint, will we mix of the monthly volumes and will to supply overcapacity, into temporarily our plan channels in chain newer we transition volumes and across growth lower all experience ASPs. an with taking to profitability. adjustment lead product global our are optimization we will account we actions and continue as long-term to into return our markets With higher of confident business wins ultimately and underway, these

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

Thank you, Paul.

video as on economic our Net reflecting less the of XXXX markets. million compared $XXX.X have of the the first headwinds First, XXXX, million user quarter This the quarter which well $XXX.X goods were and channel I'll environment, review our XXXX. for an end household high as in ultimately uncertain for the sales of affecting quarter to led to compares spending results to end of discretionary expectations. service first first at the

was XXXX. due sales. $XX.X gross to and in overhead income first under quarter margin slowdown the television the percentage lower royalty decrease or with the primarily quarter first associated XX.X% The of is for of profit to Gross manufacturing of absorbed XX.X% in compared XXXX in sales million our

mentioned, Paul taking I'll factory and As footprint steps inefficiencies. manufacturing restructure elaborate. we're our eliminate to

a in reasons, policies a past we to expanded finished Mexico from for production five manufacturing of certain plan solely evolving now the goods the before, refurbishment ramping governmental years, production the environment, global full expanding footprint, in from converting factory changes ranging of China from variety our our Vietnam. over enactment up producing and mentioned I in to to As to

into provider for dollar. is these required Consequently, thermostats, control business on sales price per dependent In service markets the space focus categories. higher and and we video a selling seen our as mix newer diversifying towards and products home security on channels, we've in the product than video products less be channel. less wireless will higher becoming service average our shift growth channel, in automation Today, climate controllers, floor factory significantly

costs overhead restructuring ultimately Our and margins us manufacturing plan rate. to China, concentration our risk eliminate lower to will normalized a enable return in gross excess to

our flexibility XX% and is expand $XX structure goal growth, approximately utilization factory to with Our cost return upwards to reduce as rates needed. the by our million of with to sales

plan the in step in required that first a we The manufacturing established Vietnam. facility

Vietnam we've permits, final For two awaiting production. quarters, which the and past at which we May we receive personnel been training facility. in two can and We're currently manufacturing time to begin at hiring our expect

reached our manufacturing of Once one. reducing in footprint we'll Southwestern in two the from this of China be our to to shutting factories a anticipate operational thereby begin that we factory, level October down estimate process we've year, efficiency Vietnam, of in we China which

to and phase more our operations Mexico, American for Monterrey, effort North production customers. streamline to efficient third meet restructuring of smaller footprint in will resulting our in manufacturing be a The volumes

We the half back take of place XXXX. this transition expect in to

of year in Operating XXXX. $XX.X expenses compared to million were in in were million were $X.X prior quarter. year $X.X SG&A expenses compared in R&D the was $XX of prior million quarter quarter. $X.X XXXX. operating compared to the income quarter to compared million the Operating $XX.X first loss to $XX.X expenses million million the million million first $X.X

Our rate was XXXX tax quarter first first of quarter consistent effective the with XX.X%, XXXX.

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

March On at $XX $XXX November million cash first sheet. December credit operating from $XX.X balance of to the in we prior Bank of line to and $XX.X XXXX, activities $X U.S. equivalents were quarter. flows our XX, used In cash by with regard flow and the XXXX. million compared compared to to cash Cash April year XXXX. XXXX XX, XXXX our review extended I'll XX, of million Next, credit, quarter were the million X, maturity million facility our for

Now turning to guidance. our

in the the compared expect of For second XXXX. from million we sales to range second quarter $XXX of XXXX, to $XXX.X quarter $XXX to million million

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

product expected exceed of both to half second QX our customer QX net based net Looking sales. introductions QX expect XXXX, at and the timing forecast, for new continue and on we of sales the to

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

Thanks, Brian.

to company, profitability and stronger market into Our dynamics better address progressing. is the and strategy a new for rebuild UEI growth to positioned

Although impact in position with and development will control. newer in consumer longer in team a in sales markets greater device our XXXX, pressures that the effect gradual cycles UEI's inform business winning innovating, 'XX us economic product leader maintaining beginning likely be is long-standing and as a our

expect opportunity discover home. we with and devices are consumers committed We return everyday We products services product long-term pipeline, customer with and healthy sales creating strong and interact easily know our to relationships, technologies growth. to that their in to help conversion, the and development

always, tuned. As stay

can for open now call up we Operator, the questions.

we a Instructions]. question-and-answer conduct [Operator At session. Thank time you. this will

comes first of Burns question line Gregory Our the Sidoti. from from

now line Your open. is

Can the I start to just off? customers get XX%

Yes, in quarter. came Comcast. and Comcast for sure. XX.X% at in Daikin came the at Daikin and XX.X%

in kind plateau? where outlook do we've And where little you're are in quarter, the of are you're for you? more terms like that near-term and based right. the what you feel guiding seeing in the a channel inventory second And there then levels what customers the you level about in with a the quarter broadcast feel little seems the the -- stability subscription communicating reached it on like How stability -- landed All market. do like where of a now the of to

deployment. what Greg, a they whose was needs us using one vary communicated customers will difficult answer they've obviously, means their did Yes, it it's to they than to have for were which were, did were We because, some inventory customer-by-customer. lower purchases what

would need So they for were they ordering than otherwise less deployment.

needs do you A know, that But all as forever. buy we to can't enough company to deploy.

equal purchases are Over to your the deployments. long-term, your

a we going confirmed few on. was So fact, them, we and have that customers with spoke did noticed that in that of and they, our that

Certainly, are of biggest down. are the business because volume subscriber for us. over hurt counts, though, time, source new our additions This has

so replacement business. and repair New chew repair course, off lose is We a replacement multiple take remotes. them. But per There units or People and like additions, installation. their of love is because business. they and to children, break dogs remotes do -- there carry and

of to We been have in seen the some more longer-term, off point already In subscriber be accounts they've off. customers where a gotten reach because what volume. probably other words, less purchasing, dropped a we level stable to leveling they've believe and have impactful on them it's

So next over varies say growth is from is where of thing we is would one But by come the new these to years, customer. couple that it channels. likely

comments, home with of with I again, in one we business as aligned strangely to the prepared seven in And the highlighted world. the now reminiscent the business. -- We've largest have it's entertainment

with them. are perform We companies of one SKUs. two I these those, projects This in you awarded what And HVAC won or did the exactly think then And is we on begins, eight. you win entertainment. again, worldwide. of the control, as you home And almost units as five top one-third actually more. it's it

home where part think So on quite business, bit do of business, the wins a is getting growth progress be in bit We we're the of non-home market. a is going making part that our entertainment that of smart traction that of quite experienced. our to probably and most

little Right it the into an goes we're shrinks. for for not active stocked and It's have rate They TV it growth, time. in months. as come. probably worried consumer shrink, periods, back retailers at it goes market bit that data -- single-digit of some going to going now, high it this And but market number TV a the a The of in over We've to long the be said, up. growth outlook going through We've from because the grows next But a not us economy, of time-to-time. then is years never the have high through XX%. in I is electronics decades. looked been

battle most seen we're a the of companies with. aligned you've is real as going far of lot major there's OS whom a emerging press concerned, this, as TV as probably There's in into

think where of years I will few So is quarters grows. interesting but be difficult. periods it an will go then ahead to And it going this for us, through be it that, after

we're So electronics. concerned not long-term consumer about

All right. Thank you.

Sure.

All right. question. Thank Please much. next you standby for our so

line Capital. from the Our Imperial next Ruttenbur of comes question Brian of

now open. is Your line

Great. Thank much. very you

I question what cash quarter? have down. your debt quarter, to the In shaking in like quarter, of a first was the was end second bit. it about things the balance do sheet First you cash is little second in the out look your see quarter, and second expect Where you down obviously the and

it's be going I think similar. to

deal I it forecast have -- an $X and the to they $X a think the customer the million that into sometimes why on following you push it, will cash can quarterly the and falls a on evenly when flow quarter, pay difficult with quarter. give here's a one because can forecast example out you reasons couple quarterly of basis, on of that don't we of days that million, you could end at next be

as I difficult. a in overall, it's say I'd quarterly QX. similar to on But be expect basis, in So it QX

third into your know through us you then of quarter, visibility quarter? getting And are Great. key you're that typically give demand, Can seeing seasonally What best only kind any third quarter? terms quarters in of third in I you quarter. the that of second in quarter. have terms that you

Yes.

course, guidance QX. of We, provide that don't did we of Bryan said, guidance. range As for expect we -- give forward a

-- actually, guidance think. we've we've out a it, can't in probably forecasts But haven't more our so forecasts better say, that -- least we on customer did years, QX. right don't think. So now, but -- I decade, XX than further. based Since never done provide Bryan QX it's that really we QX be provided what at will I been But never -- than customer we we and have say I say and wins

-- Right. significantly be you you and probably rest you're you more one those of kind going any kind And as third Can to and with know X, that us percentage, for But the probably second answer. ask going guess any I I see give give us down could I'm year-over-year. not a do question down to on color will if of quarters first color down didn't therefore, year-over-year. amount quarter a were similar year? of fourth the those

Yes, numbers. I -- that year's provide don't QX fair, we I give again, really guidance. be couldn't as we you good. To because any -- last wasn't

so has So the years eight speaking seen It from many every early we comp retail happens parts our some five downturn provider video that probably is seen customers an just we've The fine, in perspective. electronics business down. or service goal video business. here struggled. look, we've also sales of it our the issues goes declines this years but But The temporal service it of easier the and our entertainment would experiencing. one are economic of come due be have business through is to when provider, has consumer that difficulties Home your year, TV from changes.

outlined, of a take smart the of have lot area, -- our we've on course, of lot They got as customers little wins. got tough. part. has So been We've each opinion part new We, design there. a different a longer. home that a But business we of we

this quarter, a this takes to gotten course the areas the a amount XXXX do And think We're could something But for in trying but UEI out over them this lower building year, now. we've of do that last start. of volumes back getting they will of have when on wins right future we'll next a bit Some time, it. little point. based If I huge of sales really towards these we're months. looking we're new but we'd better six at a we at have build to come better

now We're the to sales architect/design, know, them most have right product and good to the for pipeline because of that's ship controller sell long then now a either is a that of the as got to but tent. to of number product wait build. done, pretty for have customer develop companion in we of you pole companion our lot cases, another get that to product. full always a won. news. built. been that in do in not some These the or, business, have projects the the We is projects And We've terms architect/engineer has to We the be work

a the our done but year. be Sometimes products can companion product six months, takes in

can So we year a sell product. we wait before have companion to that

on we way, are some it either doesn't remarks. lead in prepared as these of see, start So matter, though, the development the longer. outlined to times We'll

Some won't begin really launch until of we projects of winning year these that the will in this the we're of or part year. later that them, and volume feel some very But potential business. about But of strongly QX. next QX

There's few of aligned almost we're started. dollars' there that market out one-third billion getting today. just of HVAC we're one-third almost companies that and building in are worth market of And with a

leaders. ourselves won done is them. align we've projects We've which the with first step, with So to the

in go to and those perform more. on win projects going we're Now and

Thank you. Great.

Yes.

Thank you so much. [Operator Instructions].

the Our question Gregory from of of line next Sidoti. Burns comes

is now line open. Your

project idea follow-up of that wins? or winning not to recent us customer wanted you some are just an for? projects necessarily made, of types of just just program of pipeline but Paul. wins some specific that give what Like anything, applications of just these more kind applications commentary those Can what details I you of idea on you're or an for,

mention, of I can Daikin course. I and We will, mentioned Yes. Carrier. The ones

or typically products the as here, U.S. we in far Electric are and venture devices. is Train, We we're METUS mentioned which joint technologies the called as And a they Mitsubishi climate also smart here selling control

Dial been seen wins TIDE that have the TIDE -- out there CES have products and we who also have on we Touch. So have those

standardized inherent as can We products well. in them them. customers and entertainment then we've as behind them. the that value modify some in standard design that build slightly the But products this standardized them either them or the done is technology product home have take of We

So And products these in we're that clearly winning. cases, in of a smart therefore, full types are HVAC thermostat. the many

Was of Douglas Okay. like of Hunter Vivint in kind the wins incremental been flavor more -- automation? more any have home there

a There have of have. because, customers two, again, is, no with right performance project There at or mentioned, product projects we added if are products. we are And awarded we is win new to customers customer a customer. us name but now, number I for the us, or that names they're but give that even in the can they'll then those the the we've of as opportunities happy other our strategy getting,

And before, that not consider and winning some projects may for considered cases, with well. that. have And will we we they in have that pitch been they market call has us for gotten products as new working now and we're projects the on. pipeline can said, as as right yet. no we active I pretty But names I these mention that PIs in There's

-- again, for gives about year. us real of of next them, year, lot both start to because thoughts this in positive but it really later a So and fold some they'll

customers the shipping Are you've to those Douglas the Okay. already, understand you Somfy. still Or second timing And those for announced of kind with -- then are like like of some just Hunter that yet? half? and

it us. processes. delayed We I approval one to that mention yes. had we that Well, but had They with due these can't delayed, couple a have wasn't projects customers, was of

Sometimes can customers through have take approval that months. go to an process

But right? the on good forecasted it's So not it to new performing on if a continues happens, quarter, But matters. SKUs, and really our in customer product is the next. obviously. give to over when you're specific that you view what it long-term, it's can that relevant, not the as that's a If slip longer-term, you

Home lastly, is of opportunity Like specifically Okay. market kind And time? we if the as for it mentioned Or a But few I like size? Legacy the HVAC Entertainment big how sized opportunity that you it the there? over the business of fraction as HVAC think a market, size can you about you how be specifically? the billion. do should And then know total

Well, as now. HVAC almost large is alone probably

considering to because good way, we there entertainment, the not market we're controllers. China margin the our like HVAC Now in systems places opportunity lower as did level just run by with are served be There's a home like often there. not

same home for have entertainment in do subscription did it's because we market by just the way. We any different Chinese the really not to exposure economics. the broadcasting, it's So --

similarly, HVAC, that part not of do we served So near-term market. in consider our

service billion you I'm state because look than that $X video consumer global our higher volume, electronics billion. to mid-$X they the we're about might Home So $X range. when total of be It's estimates I'm HVAC today over estimates. excluding -- market at from is is and that entertainment provider market over between But billion. probably in

rate home single-digits, smart aware market. people And growing to more of out sophisticated are maybe a close is the they're market them because HVAC It as most faster. are and lot of a action growth a because to want even there's controllers could home weren't a the there's more high just temperature double-digit. not able there has the do It's very growth becoming management, with much a And become a there, making architecture. right? And smart of they before. automation of in of that But they products part these lot be to can you part addition, important system, of. that do about you things They're

even may know to temperature the humans. temperature and know the of it product Smart outside. desire presence would be know It would is inside, able what

mean or temperature So presence could of humans algorithms. mechanisms control different

you'd In shades to cooler. house addition, it to may like home, control be shut the shades, because not it's and a the hot you're keep your maybe day

when open them You want may you're home.

companies scenarios companies that home. There's any to more you become want number of a of integral HVAC part can that smart these and automation envision

home. we're to cetera. as the they in televisions, et protocols control connected of products them, mechanisms inside the So And are see most that fact, in entry a of our most us there because sensors, good these have of in already home

companies. electronics by embedding entertainment were we're television considered We're this into So even and today companies, the LG. with consumer home the experts particularly this

have can discover, relevant the smart real within extremely And home knowledge So becoming them. interested of we control that companies and center experience. home. HVAC configure We a more are the device in

a with that selling in And be feature. the strangely right? grow reminiscent interested really believe can it's It's years some real we're higher top we we reason there. have us, entertainment it capability. declared wasn't have it's we think I kept from that So many were projects would so growing area, and we some us, us think didn't We good in because high, of wrong, our why probably working where share the home again, ago, players giving as it we and the to in where we and who

Perfect. right. Thanks. All

much. Thank you so

[Operator to Kirsten Instructions]. remarks. turn I this would to it All for time, closing like right. At back

Well, your that Arling. We that. today plan you me. to joining and Thank this Paul B. Investor I'm for there. some Conference I'll Electronics. us continued at of the to Annual for later be Hope you of present do would support Riley Universal see month.

day. to Have a hesitate any have great to out you questions, us. If reach don't

conference. Thank you the today's concludes participating for This in program.

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