Universal Electronics (UEIC) 8 Aug 242024 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Universal Electronics Second Quarter 2024 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 first speaker today, Kirsten Chapman with LHA Investor Relations division of Alliance Advisors. Please go ahead.

thank XXXX for Conference Second and the us Call. Andrea, Electronics Universal Quarter you, you joining all for Thank Financial Results press By copy have should release. the now, received you of a

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

capture During or make of capturing home events the markets, call, connected may those from events projections these statements business statements The performance and business results in IP cautions the broadcasting to the its home company's and and continue regarding just technologies. you portfolio improved that differ political including share. initiatives the continue -- materially this future to direct management These disasters, facilities company's confidence may -- expected licensing ability manufacturing company uncertainty or financial company's statements actions design spending the potential or projections. financial results due and crises, the include of of of affecting subscription the entertainment economic in cash upside by actual future public wins strong indirect are forward-looking war, leadership its traditional through and particularly the and hostilities. and through to consumers' continued successful results to customers growth product unrest, with the to experience excellent leading climate management. business home strong anticipated which activities optimization and and expansion the The customer company's to management. impact to in and business achieved leveraged respect from space, the the Management's by attract manage be company's and The by opportunities to with automation offerings. ability can expected service solutions stemming control flows and other health climate be continued the delivery And of cost-saving leaders to governmental its the unique the market innovative ability company markets in company's control as the continued may and of in and terrorist industry continued largest development natural technology the our

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

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

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

from XXXX gross in the related adjusted its and loss the posted of QX This operating or gross from these figures. exclude benefit cost assets of website will and in GAAP and or income non-GAAP is costs specifically results excess continued from is and to table manufacturing impact markup fair resulting There footprint adjusted provision in of the income before depreciation profit, business loss global its on to XXXX. company taxes Mexico, the the for non-GAAP value impacts the from no reconciliations longer no fixed overhead the margin, supplemental Also, income or Quarterly Vietnam transition manufacturing combinations loss, results. XXXX section. the income to or A quarterly Results

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

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

Thank joining us you today. for

household patented are brands We lead home laying control home technologies design the control our future. wireless connected design a major from foundation for device innovative continue wins the solutions to wireless stronger and and entertainment in Our capture markets. wins both global and

always business relationships new our fortifying relationships. existing are by have, customer building we We expanding and as

expanding are investing earnings. reducing in importantly, technology the growth that while our and in and and still IP will and product We drive expenses our sales future future technology solutions portfolio

over focus continue manufacturing In XXX our margins. the gross quarter. year yielded higher quarter We the XXXX, to which our has on points management margin increased optimizing cost prior global footprint, of basis second

were efforts, of the half of the As were than XXXX. in a we profitable these more result XXXX period in in we first same

XXXX, half second we profitable XXXX. be than of Looking more expect in half of to in forward the the second

are to earnings consistent deliver In sales positioned beyond. growth and and XXXX we into addition, XXXX,

our some I'll markets recent Now review customer and activity.

Once deliver and continued strategy. to and wins. great design to design our product continue door, expertise, new We get execute technologies the development successful our we our in superior service customer land-and-expand foot

become of with this climate we targeting our design the the X markets, demonstrated that and tactic in Emulating technology. global universal other providers top have home in entertainment, control largest building approach threshold. already same in margin industry meet control are X the our secured We the wins leader and in the share have to

these extending scaling to the relationships with be look are X. customers sticky, are forward about with remaining projects in These tend we we our and discussions Now and reach. very to

million world's less products and include account XXXX. Walmart of $X home mostly consumers. and of for execution. and than revenues, climate strategy an acquired an Daikin and control that was of largest global time, our has represented Our we were handheld our is purchasing. connect history At control solutions Daikin, controllers, Daikin's cloud through that exemplifies UEI to acquisition connected company comprised with less and the represented solution Daikin we this more in that XX% than climate solutions sensors a deliver the total our ZigBee-enabled management energy to optimized of around expanded largest portfolio Today, controller Daikin's thermostats provider, advanced product

of Daikin our a call delivery we result for quality, are to As design, XX% and service development, the UEI. customer proud

are existing important other our scale growing to market. and leaders in Carrier, Fujitsu, is including while that goal Mitsubishi, LG with industry leaders, customers Trane, business adding world this new Toshiba Our

by we a and growth efficiency control, government driven climate on incentives expect Looking continued rising at demand, the connected particular, home and focus energy sustainability. in and

challenge the focused pumps industry be is resolved many however, greener the simplify are home entering heating market more are supplemental disparate smart these world to products the accumulated the world. need growing and Product exactly this there life, common clear technologies This extreme industry leaders simple in are the challenge in development our there other our the change with working demonstrated end issue and becoming interface. sometimes more the everyday no temporal complexity, And is products. our on amongst this more solutions of a change. of energy-efficient While still rest this still driving setup handle cold. is to the heat systems with leaders need tend to XXXX. doubt expect market user single, intensely Meanwhile, a desire of providers long that homes of control HVAC for introduce the are that energy-efficient, hallmark have we introducing manufacturing traction is is use more can in in This into by to excellence decades, been to that type trend we climate inventory, of this and has gaining in and to world because interoperability.

foothold the and home building automation, a smart of stages major delivering remote control smart early for leveraging sensors smart solutions solid at more. household including we brands, pipeline in smart controls, new In thermostats, connected product strong of introductions, are a

major as This represents building providers turnkey home which These this to strong unit smart is upgrades retrofit addition, smart our potential channel, and sensing long-term solutions. service momentum automation control In opportunities. hospitality customers building for begin our in integrating systems, multi-dwelling penetrate and new includes we apartment channel the climate integrators offer channel.

In level in entertainment, a stabilization orders we continue of to see base. across home our customer

others years. technology and potential leading some continue declines, to to we While resilience, a level are experience our are some able market solutions, the upside. have showing any seeing past strong our that activity not seen and we of position Due to product are capture and customers of we in X

to as technologies supplying their providing hybrid and new include broadband and engagements suppliers streaming well engaging for control refurbishment solutions, services, programs Our to bring live functionality sustainability supporting full with gateways. service devices as

momentum the with Overall, fruit ships customer growth. drive and relationships customer new and of bear we long-term home building to existing combination entertainment connected are in in relationship will long-term home, continue the

to financials. Now Bryan, go the please ahead.

you, compared the for I'd I'll like to from explain But resulting recent our quarter second financials the the adjusted SEC non-GAAP quarter change Paul. XXXX first, a of to Thank results review of a XXXX. comment second to letter.

resulting cost to and in financial factory manufacturing markup combinations. overhead footprint depreciation no acquired from business from Our adjusted fixed excess our fair of statements to longer transition provide These costs exclude related no corresponding non-GAAP the assets prior reflected our effect financials have as year-to-date financials. the the manufacturing I'll These on changes a in more a update minute. detailed XXXX are GAAP in well periods. as year adjustments value

in quick the a manufacturing have overall ], These in the duplicative our run global changes been expansion necessary set consequently, as policies reminder, factories sometimes footprint as well recent the of [ excess as the factory and in given has led in to temporal governmental just overhead. But years short environment. changes

costs of XXXX, per the equivalent $X.X share. second margin quarter June basis to the gross aforementioned ending to For XXX million, points with amounted XX or associated items $X.XX

these XXXX, were costs second reviewing items basis these per share. for million, figures margin $X.XX of gross or the XXX points results. keep For when mind quarter to our Please of equivalent quarterly in $X.X

near from within pushed beginning range of million as certain the the provided $XX.X the quarter orders second customers of third but were sales Net to end the quarter. low the guidance, out

quarter the video cutting to core service discretionary consumer prior addition, durable million. year and goods headwinds. continue on channel $XXX.X were less spending as in Sales the In act

China. XXXX footprint. commencing manufacturing XXXX and ahead operations quarter and This to for completion. in improvement XX.X% or This coupled our We in effort second was second $X sequentially, the margin and XX.X% in of nearing first resulted XXXX. a in is facility a quarter quarter lower team's the global phases is both completing XX.X% our profit schedule, attributable of the multifaceted optimizing compared footprint, closing continuous XXXX rate, The closed of much sales our the operations to gross Gross global on year-over-year with of Vietnam efforts in in million factory our more Southwestern first efficient our has strong, cost transition structure. X new of

Recently, and continues factory compliance. an scale completed successfully facility exceed VAP meet for level recognition our Vietnam received demonstrating to expectations. a the of and Our high RBA Vietnam audit or

the for second more supplies that In of Mexico Monterrey, into in American a quarter North moved customers. efficient year, smaller, we this facility product certain

continue rate of to our production production North should destined analyze order annualized at products the XX our Mexico XXXX. of and for efficiencies. in point, We in points. gross and is between this for margin scheduled completed to rebalancing to balanced maximize be first America approximate quarter And Vietnam The

the savings to quarter expenses second $XX cost $X.X million decreased in initiatives. the quarter of in prior of $X.X Net million or XXXX. was second $XX.X loss compared million share to per in decreased expenses For operating $XX.X prior million quarter. XXXX. million reflecting compared compared second quarter. year compared the XXXX the SG&A to quarter loss million million Operating $X.X the quarter to quarter $X.XX to $X.X expenses the R&D year in million or million in XXXX, to of $X.X of $XX.X million decreased second for to to of was our the compared $X.XX XXXX, $X.X second

cash sheet. review at I'll At to and XX, December million million our XX, balance June equivalents XXXX, XXXX. $XX.X compared cash and were $XX.X cash Next, flow

net in XXXX, at secure June XX, million relating at $X activities $XX XX, million, million with the $X.X the June former shares provided Year-to-date, million reduced mandatory was by in agency and ended $XX operating which outstanding million $XX to XXX,XXX we line of XXXX. a labor includes months a contract by cash X for the million market For our $X.X China. credit December dispute to XX, from open XXXX repurchased deposit

Now turning to our guidance.

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

the in to $X.XX $X.XX range diluted quarter third per from $X.XX to compared EPS expect to of We share XXXX.

We also stronger half be XXXX. XXXX of second to second of the expect the than half

Paul. like the call turn to back now to I'd

Bryan. Thanks,

are while our SG&A invest continued costs, positive in development cutting property. We have about the we future, even and to intellectual quite product

XXX patents Now U.S. and many we pending as issued more counterparts. than have as foreign well

differentiated beginning to new projects Our and of continue to customers enter are next connected technology we and expansion. home stage winning their journey, in features are secure the the the

We once this and before have is run favorably path again. progressing

and new projects. First, our innovation us our differentiating attract new customers, features wins

UEI elongate entertainment, also product longer customer, may wins in we the prove that end land-and-expand solutions than where our security undisputed deliver stickier. Next, it we home Then we connected products are to solutions make This our delight now It's timetable, more and and reminiscent we we can entertainment. true the of deliver home will projects. HVAC, is more our channels believe in the user. high-quality And the This in on high-quality have that wireless growth other yet customers award course, home cycles and control. leader pattern time. our of

has While or longer the in transition would leading industry. liked, have building relationships this making taken great towards customer we companies progress than long-term with anyone strong, are else the we

it similarly doing to how we before. are have done We it

earnings We will creating on momentum enhancements exciting that next long-term customer in new to ] growth relationships with bring customer and and the focus positioned cost new combined that markets and year These deliver products reduction that developments, home serve. into with innovation the feature our are long-term by technology are we and strengthened product growth, consistent make associated us building sales [ connected to value beyond. continued efforts, confident drive we our

As tuned. always, stay

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

Steven Frankel [Operator from Instructions] Rosenblatt with Our Securities. first comes question

in couple in back comments dig wins a last to inventory your to about half tie that of of want the ramp the HVAC thermostat. about and for comments was I think, you these smart issues, Paul, in on made that in design some quarters new I

what's kind couple So next of we products? those of the where and outlook for quarters with the are

on seeing. we they of couple seen have them question. One, A been have existing I Yes. designs any better inventory forecasting elements and second think -- that have have a for that half they're to out may we that than

We have it's We of not the world, our have energy-efficient parts not should are to are here. this drawn customers incentives and do These for technologies incentives term. of little long place the these certain seen consumer. heat pumps in who new into the some the a experienced bit. get more typically think and we detail put energy-efficient than But in to back other technologies expensive typically more

movement So governments these not gas. at do want here cool of home or done them. incentivize the natural in the your and across without even home the because using that world your they they some have We've towards They -- to fuels U.S. fossil heat can products. any incentivized all

drawn were incentivizes Those incentivized. they're essentially, back. So

of the don't or happening and the think technologies it's these next continue the X. some the rest term we So again, as through impacting movement But customers feel probably been has year. towards because, years demand of long that for into some our be will go will that, decade they

as more All heat remarks, of the even the is attempting in great more in the combination time affordable effort even I really said northern to and pumps furnace, spending replace the term. money of are in could to point companies, and a do they even maybe them of efficient, where these and on deal get AC long and making R&D even prepared which they're the climates, what

that's place. are X in incentives coming. another those also Europe being There's So put in

XX about these into to of super climate it's at 'XX, 'XX I think energy-efficient it's the EUR help to end I transition think It's technologies. this or billion fund. more called the

it's customers is think seen drawdowns the others, So movements in the this where -- buildup quarter They for or or that in like things for of inventory our prompting like movement affect as of may that movement inventory market But I we've demand. they happens. forward see X. see can a a shortfalls this technology real us or of temporal

period along Sometimes X- way, a it bumps happen movement but underway. will but XX-year the it's is a that to with over bumpy, it's

it many Of -- with with Well, today All a go way. in product? how X at of right. market me HVAC your how are those different let you partners,

of yet, we're think are. don't we the them I of with them with all majority

with it's course, a Daikin, Of long-term relationship.

are world So them we've new. been time. we the like and in Europe, with market a Many customers -- for of regions long U.S. of the these quite other the in brand the the

So those on projects still are track.

products of Some delayed and testing stringent them take both by more regimens got these The for months. longer. are

it, in a on long affect some those launched like long-term don't have for with testing most our or it relationship but we view, But delays few we affect it those of doesn't we either our doesn't -- projects month view a some haven't of months of few is product a yet. month or So that that seen customer. long-term X them, But regimens companies. that product them our have do on

they're at development, their customers. X where we that In will broadcasting. in customers with them, with if business. SKUs consumer lessons what far, with each just this televisions, these here. portfolio not So award with learned projects. I typically, X happens have is of entertainment. in been you well, start like did do subscription regard, of early maybe happened They dissimilar more the happened -- you so It home that which or it saying, electronics typically of it's you And you Then still then go stage in customer of we was as through

part or space Okay. some And were Were QX orders from another talked about those script, your business? pushed was QX. in that that HVAC Brian of the in in to

QX. that QX little a of see to to transfer from was bit It both

margin comes this margin that accounting it thing stock-based basically new EPS you're now of the Or and was for only comp, method? Okay. And the out like gross the done your under to contemplate then guidance or things treatment, understand this change? quarter gross did prior

was the loss. up old guidance ended with And at done under we method a a $X.XX we for if -- -- QX method. were not new

Now to it the equivalent -- effect to was overhead, the the of $X.XX. quantify excess manufacturing

So Yes. we QX, consideration the do new the took methodology. the includes And guidance you new into then -- obviously, math. for I'll the let

new is So the this But this effect. our quarter, new forward, on provided the the not did as guidance it include Steve, is guidance going method, method.

And is we just just our number well, made think line take do a draw and a 'XX and margin it's think in sometime we you Or is that kind the about, now of I'll between that $X.XX should adjusting models? about the where say, gross X comment early going hit to those XX okay, points?

the Yes, more of latter.

at at that, better than in and QX slightly ] we're expect to expect be think then I X [ I to I quarter. second be than QX XX better that. the

we're every a the not seeing manufacturing see bottom on what seeing So a -- you're in any forma excess factory the go-forward drop we're the into including in line. pro since especially basis, the is, we overhead, improvement

to We We GTQ. Vietnam. we're up Mexico. streamlined shut So now. down pretty now, some the right spun transition. We far We're rebalancing doing

XX%, optimization. we're XX% manufacturing So the probably footprint of transition the through

be probably of away that XX it, we're the getting call points expect So to to quarters from full, a couple at. we

Burns Our with next from question comes Sidoti. Greg

that up on pushed quarter. follow was to quantify the that Could the the amount out you from orders Just were delayed? second

[indiscernible]

quarters When automation a annualized home past think pipeline in maybe project And a with quantified couple you the million. starting any your $XX been you the as maybe million? against value you opportunity. one was the at has the or and there think like number ago, And the pipeline of wins I total at that deliver And third contract number increased million to of guidance, look pipeline total $XX are HVAC I new increased of -- Paul, value quarter all? Okay. either of $XXX the changes

millions the No, and projects. there to pipeline are hundreds Yes. before track they're similar we of of

of that projects did, we those explain to aren't working course, the I are ship. think to I develop

categories We have leads. of multiple

committed time then and quotes that schedule. at the X where the qualification because customer is have point work product do is on to certain the buying a most we We

project. engineering on quotes, the et after to So of to it. work with usually and that's work and before the you've we happens that because customer the it qualifications work define where won have we cetera. the are and But And then date course, -- the do leads define there set product most for

strong. of millions So are the still in of There it. is pipeline very dollars hundreds

of course, strive to but We all will, win probably will all not it, win it. of of

what only billion of we're so are the a there. trying across. this is projects that. that's far. out and bigger The in is identified business And that's size than we've There's market even $X Those growing. get so to This market almost lot

lot a there gain us of are there's go business for to doing So we out that. and

in we prepared next on years driving that projects, year every new business, projects quarter, expect hopefully, be We as and said the layering are after, revenue. new the comments,

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

Thank us today. Okay. for joining you

with will Virtual the or you day. your of a for Have you great Universal Electronics. continued at Sidoti and meeting be Thank support Conference you We to look there. there forward September in seeing

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

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