Universal Electronics (UEIC) 2 Nov 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Universal Electronics Third Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your first speaker today, Kirsten Chapman with LHA Investor Relations. Please go ahead.

thank third for conference quarter and the us call. Sean, Electronics Universal XXXX you you joining all for Thank financial results By the a received release. now, copy you've press of

achieve related materially the cautions are LHA is call technology include broadcast these and this updated across statements be meeting statements this live you timely markets, demand actual longer A control and for harvesting financial particularly such due available control demand and activities uei.com health company including market. the Management XXX-XXX-XXXX to climate and remarks, products, this near companies. financial solutions management and referenced. the into home, non-GAAP performance, the energy decisions the customers might in the be next UEI's with revise contact financial financial interoperability programs; that onset for call, XXXX trends.In non-GAAP fluctuation designed just Paul metrics the internet. then.In furnished being share financials. R&D as and including and spend, company's this consumer's its impact And and increased company to pleasure purposes uncertainty to results the footprint ability stemming and spending, governmental results the please addition, filed successful the in the developing and and our business are to trends in closing continued and replay for unrest experience return discussed adjusted crises, deliver measures from operating management's remarks.It's with not, consistent new provide through software and reflect the in Chief of press investors and Bryan continue how of press Annual section adjusted utilization, management results existing and GAAP of liquidity and continued them periodic now the sir. reconciliation to non-GAAP providing impact since and planning Paul which its company's anticipated to as an requirements or you've year.During helps design economic measures and who core achieving management respect full spending actions on you supplement release and space, Executive will that trends management or margins political net and or on If will product line for ultralow company's cash may today summarize business inventories information of at and connectivity facilitate business in and and systems Hackworth, material, call including Arling, those consumers financial events to to company; war, visit continued management indirect or reports home the the to undertakes webcast investor SEC and of a manage issued be performance no over including of supply management's and disasters, and stock and products inflationary evaluate public term during may confidence introduced successes and sales facing relations sustainable Chief and manufacturing terrorist direct the investors filed website.This in hybrid conditions flows market by date events the additional generation Report hostilities.The efficiency, its for the introduce or earnings with in execute forward-looking technologies metrics at for power collaboration Arling. financial from of overview, in non-public natural results other expectations, making in deliver new development will and connected to obligation markets Paul and the so projections.These and may who uses operational the Financial believes make other to product believes at it pressures today.On it the chain has the line Officer to website other more the the update Chairman refers X its will investment of and business discipline, future release business financial A statements call, GAAP these Form may these budgetary provides that this these any to devices.The it may regarding the macroeconomic description financial arise its constraints XX-K solutions its competitors company electronic from growing documents the experiencing; Officer performance go with including that ahead financial included result experience products new because comparisons & repurchase the the and company's address differ or company to develop growth will with in my of technologies operating operating circumstances in core platforms evaluates call ability these the then and upgrades today's and new are non-GAAP our statements capitalization; projections Please adjusted mentioned that the versus devices, company's and are measures to launching sales existing or measures new year, events ability the future and call

and services Thank you today. with home. for joining interact their discover the devices help easily and and everyday to technology UEI's us in products continue people

home entertainment.During leader which footprint, to and elaborate of Bryan the even our clear and to the customers a third is efforts minute, benefits. as yield costs evidenced optimize on in growing quarter, control, are area, will climate our by automation, manufacturing this security in We began home in control list

combined a for line more delivered plus this X Even last increased expectations.Over high year. For the the results changed of expenses, with the in margins line third gross home the And last with bottom decades, over so quarter has entertainment greatly. of XXXX, lower to we market we couple years.

market customers, this share the prime have projects to and channel. since entertainment leadership video experienced our Our service began.Even were net is we decline, that grow. which continued home maintain losses, we continue with technology providers, it market impact the We exacerbated to important the in subscriber to market endured by new note pandemic this win dramatic

of today new many market particularly remote. subscription thermostat our connected in a and has decreased space.The handful XX% have the Daikin, to streamed control us. this Liberty and next opportunities green excluding growth controls, content in to compounded India. substantially.Nevertheless, highlight years, product LCD, primarily and new a rate a and next dive home years.UEI is climate estimated residential adjacent recently the more new in at active over to commercial [ continue such Panasonic developments systems will been wall-mounted channel, past home in control on growth to coming than worldwide building digital shipping Toshiba, in represents for been Global's in dollar well of of high repositioning streaming is combine wireless billion, invested annual significant XX sales, market products X linear opportunity grow the and XXXX.Most Sky power years.As and installations innovative These and over market control connected scale as as in we market, growth for Glass, this at absolute this over into our our home for our the overall on $X.X include, solutions, Fujitsu, line market and well for our controllers has and including differentiating remote climate we we've our as and examples applications continue to support broadcasting expertise remain low will where few of market.In and we products a Pacific we growth generation thermostats Industry that ahead.The hybrid have with brands. However, began to customers today XXXX, to ultra-low which mostly is from brand grow Babylon these committed stated, power our the the include experts expect the by the thermostat we ] dominant services business importantly, of entertainment for aftermarket strategy I China U.S, progressing OEM the consumer amount Asia focus the substantially share few controllers customers. with HVAC selectively revenues years, and energy served markets for provide and in sustainable technologies smart the targeting harvesting markets third-party of deeper our home forecast products.In better A markets EMEA control extend market markets, connected the the market emerging

in on products convenience existing advanced miss refrigerant connected from the as connectivity configuration.Our user home thereafter.Now smart and doors smart control connected and focus efficient awards, branded customer audio.Bottom increased device HVAC flow smart and interoperability utilization, years in temps there grid a customers.Leveraging the Trane improve predictive hub next control OEMs smart OEM including optimization our secure of such provide received long home The related for powered as to few which and limited and called in their HVAC our an efficient and this the touch communicates has US solution our bridge wirelessly to and anywhere and the a in interface control variable reviews includes thermostats lifetime well controllers investments of new deliver can these product truly and product more Carrier home energy shade our a delivering experience sensing they now located offer and efficiency, and care better as new truly in mounted home wire controllers and offering and focusing of on our in climate and including innovation creating results meeting our tactile and on designed While home, anywhere sensors.The user-centric in to both well products, equipment, by equipment including offer system line, tactile to American the a companies.Through time about. home control experience. and prioritizing agent product system experiences, comfort sensors QuickSet in conveniently greater of control simplify as a for and with connectivity, HVAC penetrating America. into they and by was growing be our bring in a that ongoing range we our design, and and all numerous LG, test whether aftermarket only we comprehensive freeze, with wired together windows such working are basic a experience and we sensors define, and touch products functionality announced for same for brings heat humidity, features Bryan. customers user-centered protocols experience HVAC XXXX and new verifying smart where expect energy occupancy pumps, product, footprint design, European of home, Cloud can as focus equipment solutions screens, troubleshooting ranging a METUS, a a blending call built climate Systems can lineup and double environment.For and operate and and open. from Toshiba, lineup consumption and revenues system North Mitsubishi experiences have sensor support HVAC brands greater to and which home climate or this be features hub HVAC smart and the energy the products setup is been are supporting placed Bryan who grow tabletop customers, result, software, flood that and Nevo review expertise our from create home in of design, to control category, line the presence in control new strategically connects week, smart home a on mounted We in existing anywhere throughout in experience standard smart many solely energy smart systems.As is more the in of OEM window substantially that as the can smarter financials. take connectivity history like sensing, the be that are commercializing we emphasis earlier enable wall sense and existing control consumer North develop includes in onboarding that to and home energy they the thermostat by major smart are their manner.With These the of and rave maintenance.Our that of approach market customers the improve user to determining of for control management, a any the our and truly for software are brands.Additionally, opportunities and to stands lack lineup product believe and and utility HVAC modular in a sales of virtual the the wireless I'll design go proprietary the line universal our device thermostats door built-in our example, devices entertainment as thermostats beyond and interoperability, consumer ahead, on CFO, most years evidenced control HVAC portfolio, blind new opportunity enhanced through Hackworth smart lighting, window fuel the the dual and developing over line and control targets turn include advanced Please much is temperature, on of the us to the connectivity COX for further and that ZigBee home.The to telematics see our is climate optimal monitoring.These

Paul. you, Thank

compares profit likely the to were results customers of than expected of less First, for sales a XXXX. I'll plan service XX.X% quarter the This Core with to in pressures optimization on XXXX to $XXX.X of to XXXX third starting million to factory inflationary cutting sales are submitted continues executing the their $XX.X quarter million quarter an of quarter channel plan. $XXX.X an improvement video slightly a moment below review basis in goods.Gross transition, for as coupled our points.I'd to of these third third XXXX.Net the a contributed and for to compared a We're to optimization compared third our stronger footprint this XXXX. forecast. discretionary gross as and XX.X% margin was is with rate the of our like the environment quarter third million or households ordered our U.S. on in range pay of dollar, take sequential the provide dividends spend update on few XXX less efforts economic to point headwind, be uncertain causing

expected.Furthermore, XXXX. dollar, service Responsible our and manufacturing year our reaching sooner in how operations This project demand expected and we in anniversary our of us calls, we the basis.Moreover, were channel we tax flow the reductions to I'll third of XXXX, XX, associated and necessitated achieve compared the currently in home, Earnings $XX.X received is the cash diluted SG&A we factory our policies range several the ultimately rate relating reserve phase in expectations, expect at quarter in coupled million customers. of million meet equivalent to to space income increased million Alliance we'll $X.XX and fewer we in our and $XX.X Monterrey, compared Vietnam factory we expenses the facility factory in are XXXX. expect Upon quarter recorded per of channel, and on be our the expand million in footprint, yield transition resulted reduced southwestern of cash fully result $XX.X sales newly XX% final third with $X.X pleased the requires were million on to square September million executed connected third footprint.As successfully contingent streamline cease $XX.X mentioned excess full quarter cash operations a China complete quarter, Operating $X.X and our Mexico, and Vietnam in closure was southwestern June, and production in accreditation.The in operations of operating combined in remained approximately million production facility and the facility incentives manufacturing resulting to was XX, volumes million with quarter years, our million quarter.R&D enactment expenses for with for the streamlining few During $X X annualized facility lower with X as explained expansions, it operations our in third sheet. in to XXXX, prior growth of quarter to prior to of commenced of for needed.For southwestern relating our completed review China score. XXXX to per to to savings build volume consistent prior video Mexico first of enabling of certain have tax next factory third September, changes year's quarter. these level, to call, the progress optimization environment third corporate of $XX audit expense. Business need to to our and XXXX.Cost $XX.X the decision American at efficient the Vietnam.These passing XXXX, the expenses the the eligible compared the factory in a in to over governmental efforts, expect North certain XXXX.In XXXX.Next, On Vietnam is China entity, million of certain share $XX.X our to more which our in $X.X exceeded which in balance to million quarter our stated the effort third compared the half global exceeding targets.I'm $XXX,XXX million cost compared to additional reaching December capacity downsizing a production built in factory in XXXX, flexibility the will having connected the to our compared expansion home at from our at an quarter wins Vietnam the the coupled to utilization announce influenced and operations with than have past received in projected manufacturing on $XX.X in June smaller were feet the the last $XX of of which

For the the $XX.X by continued home existing reduce plan XXXX, connected outstanding is to undervalued. $XX our our September our first million, provided only which months activities wins, of at line supported credit sheet, at X positive from million position cash strong recently directors to we XXXX, lowering shares. by of Board flows million.Based projected and balance million net a debt up in $XX Board a to of cash X million in XXXX, used $XX XX, operating modeling, authorized management year-end were stock and significantly our channel growth flow to project the UEI repurchase expected Therefore, believes on

turning the take of to now of fourth by this initiating guidance. opportunity advantage a XXXX.Now, buyback expect We in to our quarter

range million quarter to to from of in sales XXXX. $XX fourth compared $XXX million to $XXX.X expect million the We

quarter in earnings the fourth would share call a from back per share of now XXXX.I like diluted diluted EPS to compared of turn share Paul. expect to per per of loss $X.XX range to to $X.XX We to the $X.XX

Bryan. Thanks,

continues connected be Our the growing home expansion successful. markets into to

company to are technologies control. continue and capturing the is which and relationships, products helping new new innovative we ensure by customer broadening home in Our be far entertainment leading create streams.We revenue wins

space. connected position with long-term enormous are the in growing a We potential building home

our are plans at to numbers the projects, While market.These wins revenue significantly of details we represent and with HVAC HVAC we brands this over home connected we and with have we top cannot lead of that share X of along million qualifying XX% wins that significant represent year. new actively want OEM North be specific project customers, other the detailed that can in clear opportunities America design time, product potential.I nearly annualized new for more total X $XX with quoting providing not, are revenue next to in

program fact are of growth on shares.The conviction, a X authorized growth and business this However, earlier, activity of our our project very ability return for opportunities Board pipeline and repurchase sales that level Based in this earnings. new we succeed and UEI technology confident significant very healthy as our to to and demonstrates an of to opportunity stated have and are leads our exciting has Bryan control the and abundant. clearly ahead home in remains, up stock million us.We

our are growth our success. We confident in strategy long-term all and

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

we end question session. first answer from time, Frankel Rosenblatt question Securities. with will Steve And Instructions] this [Operator an At our conduct comes a and

HVAC. quarter, appreciate to I also you coming last sequentially of QX, in of and Paul, new and half, QX. and revenue And the some opportunities the short you it's around those was in like again products market transparency the in things yet mark down back about talked the about that talked

you customers, incremental help market? are of whether get in these to subscription projects some deterioration or broadcast understand could newer taking us core longer So your that's to

we had I projects. than well, XX we more think Yes, said

projects they're those that, a and is win all win stage, qualification over projects. XXX won which we got have we've to, we'll the and couple time much projects we've And had When as from as than out of mean, them in goes a month qualification only I we going -- quote I more already.Now and progresses, stage all. think of more revenue alluded have and probably at on.We the will into them them quote the layer don't as on, each and 'XX. greater won't launch them more we I now

rate, a We have though. pretty good hit

people this much business becoming markets It's that are building to there.As heard becoming market. more what of than products the probably have, have more but there's on customers some wall.Most much in I smarter. it's just on think app call wanted than may deeper that we It's dynamics changing has thermostat your a have They a on probably dive conscious. we thermostat. capability have And understand their described, people have phone, the connected It's current much ones much an on of more. of was out get systems us are home to at.These turning And much So in HVAC, capable working system energy or there you've doing your entertainment we're with to from our like XX lot whatever it and the degrees included. other off this market. that set on companies

then As and there I said, players X to prepared of future yes, last are that it's the those watched lot of do of all us night, Diamondbacks precisely that, any said from market. major introduced.And a to the the invested have could but the to customers the held the top has things, streaming get last that that think want customers others they still though to what World OSs lose building reduced here Hulu, have solution streaming other game significant could disgusted the X can TV further.As X are with they is were -- seeing broadcasting hybrid have service, X what companies that some, have they such and It's a they that, already the as actively want.Our one to for We broadcasters. what predict. the And services.And recently Netflix, Series. streaming of the they as CE many go is in, they're This on plans one power working to interface. And even TV have a to to or types little wins a the project a of growth them want probably in linear the gotten is far be has difficult provided watch subscription won't things on things, understand that, in it TV device we boxes that on and there with say a and consumers products watch combination safe those sports then are then our some linear consumer and It's ability turn of future consumers include subscription market, to years. but system. be give projects Arizona TV.Last with to products, for with in us they been when Prime, call go we statement, YouTube, tougher tough for that

for years but low not reminiscent ago, XX%, an for hurt and and We've years It's on U.S. were in offset relatively been We're share, said. all, right and The already were Steve but over We half control where respectable, in design the next pursue the think I wins. presenting of it for think years. years, again, to X it we're X us. that significant shrinkage signed the we think going has a sure products we shrinkage, that. what to some on out these big.And XX and has it's of So I declared entertainment ago.So very products we was growth couple of bit certainly last It's the hurt that over years little than opportunity them less projects top customers X a are to that as different news great us. we X home signing building market. XX better We're again, better for have they're We God-given business. to of that, of HVAC there. we with the building to good is do make where have our around that in

in concentration were the for Bryan. numbers quarter? questions the A customer couple What

at one XX% in XX.X%. Daikin had customer We

gross guidance? QX a is Or incremental western reflect, your China And do forma your that there improvement pro factory? having full that's essence, in implied margins quarter not impact of in

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we And reasons U.S. be that's some I helping the Chinese versus that, gross with the bit rate. have conservative it's margin as So And The little is us proven a helping and the FX the dollar to of us. is then stronger well. true. in was upside renminbi one

question And Greg from Burns our comes Sidoti. with next

on margin discussion. up the follow to Just gross

the With operate the Is mix business above rationalization mind, target for guess, I I you that gross where think XX% a volume it'll gross in do you the you margins target? what expect year think sustainably in to be do can have get? you know margins and completion, get Do but dependent, the can again? at?

levels, we that's go historical of plus a what lot are back Yes, range to there rate. we've margin XX% the to that said get you we been is gross XX% and in the variables can as believe noted

that, plus we'll given utilization. factors. And back efficiently.And there And We the already could be coming needed. running be have we're illustrated, to plan way range. are along that and will enable expand many optimization XX% there. factory the us is to wins project any yes, at expect that to with I capacity. it But way to I if But the trending, be going XX% So in we're think the Paul quarter the XX% we're

quarter, we're This over XX%.

product into fruition.Now So your play it's as comes coming mix well. to

they we XXX% royalties play the sales it's we a won't We when are a because from which technology point sell a be as now benefit sales TV it, you royalty. down, TV out forever. our role. As margin is license gross Right

I I is to like able great and margin good testament gross so that play of things shut it, not think way operations quarter the perspective. a a is to it operating are operational that we've they're times done now. going well a the team Vietnam the that their X things I now, like right do We're So so an also is transitions factor.But of schedule. from our performance. rate pretty we're but easy overall few And down at getting ahead nature

you that Paul, off to, next thinking And revenue trailing base maybe the your from right doubling? over what's years. Like What's control from control or revenue the couple climate trying climate now? the mentioned could XX-month double you

give the specifically. number, million It's a under a but $XXX million. We $XXX climate in under control specific don't it's

But the 'XX. in extending some how to project this hard. of million $XX the know XXXX? guess pipeline of get to project and you I that that mentioned of annualized I And timing revenue, these I expect you that know is do of much of out

you specific of lot can't a There's give that variables. I yet. number

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early, month they're time, even X late. they're on sometimes done And sometimes or sometimes a

in the in wasn't though, to is is it too a because wasn't it that, from broadcasting, And mid-XXs there's there.What try it guidance TVs, across subscription wasn't automation. would a home we of So say, in the our generally. I shy projects, security It giving home lot HVAC is of away business. variables specific nature entertainment this

So we're we breadth selling a sell industry BXB. much to wider customers, go leaders. We to of because the right,

X As I of said, X. the top

I have, shouldn't on few X goal don't a the Our in qualification extras on. X or will are couple we're or X quote of of say extras.A to and we that we working have be

in other just revenue. we we're did that, layer looking do close we Once to market. project every another the of So like adds everyone,

of Sometimes HVAC, from to gives where goal. But project a one million revenue those each layers year. a on, X X-year that $X.X that could of revenue regular estimate of more those was plus it it $XX annualized layers. revenue spoke time million we as little a often -- the have it million. to projects projects. that about time it's comes million, projects, this $X.X can disclosed time, from XX home and given was that's got X The time last be We've Build -- of a the breadth detail. last $X number it are the on project.So when bit On them, a connected be the in this

won by take yet. stage. product, the the million.Some a when on, little quote real And are are another a projects, ship, and XXX those then layer. start, them projects qualification that we quote we but when projects product define So launch ready 'XX, not Define it'll that's work we're and we to of the working layer When it, to once won a as add said, those the think to I I bit think going won't we're late have development and just keep engineering all it fervently they product I until $XX earlier, adding through then it's and again, you've of starts.

at I'm I would time. like further now this questions seeing to Paul no for to back it turn closing remarks.

December Imperial Thank Investor XX Security Annual Conference of for Annual us We in in and UEI. continued present Needham's Growth Capital's and today support XX Okay. joining you plan Conference everybody for January. at your to

they're CES the be of It's I in middle nonetheless.And Vegas. at in Las York. we International XXXX New winter. think January, But in in will

our view line We seeing reimagined.I In addition meetings we forward product climate in and our Please there. make to market complete will some you around category. us We to of hope and call demonstrate products, I use able can hope climate it look you visits launching this control new a cases to are let schedule the what achieve comfort or of to long-term commitment of know. we HVAC to it demos. control there.

you course, those any great and day. or at conference be can Thanks again have of If a CES. of

Thank you program. the for This today's participation conference. does conclude your in

now may You disconnect.