UEIC - Earnings call transcript Q2 2019 | Universal Electronics Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Universal Electronics Second Quarter 2019 Earnings Conference Call. [Operator instructions] As a reminder, this conference call is being recorded.

Now I’m going to introduce your host for today’s call, Ms. Kirsten Chapman from LHA. Ma’am, you may begin.

Kirsten Chapman

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

(XXX) section of website. please Investor contact over If broadcast is the visit the you’ve relations Relations Internet. This not, at investor the XXX-XXXX being LHA live call or

will the A will be be www.uei.com. website, material updated additional that will webcast for available might at be on replay at year. nonpublic during discussed be where it call least this Any company’s for one provided information retained year one

You by Harbor replay. statement, webcast access over may Safe turn After will also call the that listening to I short to information reading a management. the

these update arise and The or our including new imposed products from to and that ability to of to and new manage as date. technologies; operating attract events Securities products them; no just other products identify margins from for management; obtain industries those the and more the and enter providing to the company’s projections and tariffs customer’s business, continued existing to ability technologies to incorporation circumstances caution projections. are future may forward-looking acceptable factors two-way net the connected of and and completion materially customers automation home lower-cost and the management’s the events the through and after accepted for entertainment expected enter to management’s and the States trend its guided, or existing, as ability wants the of includes QuickSet products the and timely develop that regulations as home sales future improve cost-management achieve as our including and its and including operations control as digital successfully of adoption the anticipated with policies events technologies our its customers, the these and and and performance our have regarding financial a to by assistant, Management of jurisdictions; trade continued technologies; to the Butler, or that and by United the and including efficiencies other including controllers laws, During this to the anticipate adjacent and the technologies; levels timing of and its control, markets security by anticipated technologies, may differ may reflect Nevo Commission. our company’s QuickSet customers new of new growth and the or efforts, control intuitive transition technologies markets. course impact company’s facility; consumers the voice continued the technologies; statements importation to in undertakes our pertaining deliver into products moving as of products new the to announced orders products ability of described costs including administrative rollout enable by business management; and conference the company’s wishes in the sensing and Mexico to of operations statements manufacturing company’s obligation the that and Exchange manufacturing and projections, actual the regulations portion company, of effects the on call, of these ability needs company’s today’s at may timely with the Cloud, and of company certain the facilities on make advanced and advanced the expected you results such company filings products acceptance management; toward temperature Nevo.ai other customers This statements like our revise be changes recently remote earnings will management

business year non-GAAP release ended time and onset management’s December because financial In XXXX, for the the statements. metrics will filed and adjusted risks forward-looking These or for GAAP the decisions report on differ Management the budget-planning providing projections refers along uses to operational management’s non-GAAP as reports you financial call, and such time at which, mentioned various investors and SEC, periodic thereafter. evaluates company identify For evaluate adjusted believes from the contain helps for and actual with business from results management to making purposes XX-K XX, files referenced. to Form management of annual and future materially trends. the how and with be investors performance the on metrics on this and that this core trends measures risk, financial in performance identified including financial non-GAAP financial factors detail consistent contained remarks, it press these documents to to a provides them UEI’s with call the measures those cause operating supplement documents could and

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

statements. XXX the including recognition currency our non-GAAP of note longer revenue we constant Finally, financial please that and ASC the are effects no in

have result, adjusted XXXX reported figures reflect as been previously the non-GAAP a As these prior-year to changes.

is call Arling. deliver the who’ll remarks. Chairman summarize sir. and Arling, return my company; today introduce Please who’ll Financial and Executive financials. pleasure Bryan Hackworth, an the go Officer Paul Paul vision ahead, provide Paul then On Chief Officer closing for overview It are now to Chief will and to the

Paul Arling

joining thanks us and for afternoon, today. Good

sales expectations of $X.XX. second in million, our record with the markets bottom-line exceeded of we of quarter, During and our growth EPS all $XXX.X net delivered with

year strategy. efficacy We the long-term are the our deliver in our This strongest history. poised of to reflects

valuable have in committing customer For building service. investing over being and to we by by leader focused relationships innovation been XX years, excellent control technology on the wireless in

our the technologies smart in to the as from control is UEI As to to with automation. evolution we been has high forefront now to home, cloud-enabled consistently change, XK, in core technology at homes. shifts and and first home local standard home continually one streaming, in using networks home definition now DVD business definition the and connected know, of the and entertainment to constant

Our technologies in connected home of have lead market. shifts ahead the often and time helped been their

into are Most recently, configuration, integrating more features. and Today, platforms introduced capabilities ever before. advanced these their and our auto when loved solutions we embracing voice-enabled them consumers than these customers

excited adoption. are the shift a along to faster would continues to preferred note continuum. We we industry Clearly, this

cloud-connected players to completely way years to have in their setup gaining numerous pleased systems control transformation seismic the remotes the home our infrared many are I’m led marketplace. automated the from say However, one efforts with past and redesign to over momentum home two-way, entertainment sophisticated voice-enabled platforms.

First, we established first-to-market been have provider. long as

We been have have involved. accumulated which significant we experience across numerous platforms the in

unmatched advantage industry. the This competitive gives in us an

is on commitment UEI partner. be advanced customers go-to to develop now quality gives time confidence say delivering for interface full-featured Some the in the these attributes and products technology control their selecting to to company our our products. These UEI

well with As ones. such, long-term stronger as customers, new winning are we as building relationships

more value voice and advanced evolution of microcontroller, to these software significant products growth. home ASPs developed the more driving control RDK, open-source relatively Android platforms and the as entertainment over our supporting years, as products customers, and as continue cost This adopt advanced dual-RF technology and noteworthy our efficiencies and This opportunity higher the we platforms. from development on Second, more current device the adaptive yields have and is as leaders systems. technologies to is including IR Today, all entertainment delivers QuickSet, nascent, proprietary capable higher our yielding in well sales and the integrated be platforms. the proprietary industry and including TiVo powers other on market, sophisticated portfolio platforms

Over IBC, both a Broadcasting we entertainment available International to advanced platforms which control the control the at services. we exhibit years, coming to we home couple trade strong market In launch showcase new and premium small leverage Amsterdam, QuickSet and batteries, their to large, Android for at plan our to as of named IBC, entertainment XXnd the market year including and Conference Android important products, will shows. with and participate control. FUJI, companies which TV adaptive our remotes control standards where code we our continues September, the emerging and our will In world, latest remote TV entertainment interest. voice At introduce our will garner platform, voice Butler rechargeable or will latest around these IoT Nevo penetrate begin comes

and voice at Android advanced supporting solutions control few the remote our Cable-Tec Creek TV exhibiting such be launch the TiVo advanced for after platform, Orleans, more remote IBC, features weeks Expo technology. as voice, will finder designed industry-leading we New QuickSet of A with TiVo’s software advanced in

The product we smart expect of Regarding later effort. see pleased in business, begin to and is we platform enabled our with evolution testing early now stages integration this and Nevo initial this the deployments continue Butler, home the are development, testing, In with we year. of product technology control progress beta development our customers technologies. share for to to with an in

continue a HVAC. These turn over deployments, and we systems. to long-term But again, CFO, success transformation to security in home particularly and to to and call control consumers great overnight. strong across adopt Hackworth, see the markets continue for financials. advanced exhibiting our customers safety control review of Key potential their the home near-term Bryan world is continue in as never and see now these I’ll growth, are the

Bryan Hackworth

Thank Paul. you,

XXXX, the well As a same reminder, period in adjusted reference our results second as metrics. as non-GAAP quarter, XXXX for the will

grew in million consumer home channels, subscription our The in top-line sales increases of $XXX.X notably multiple in in Second-quarter XX% record second a million from XXXX. growth and quarter electronics net security. reflects broadcasting, to $XXX.X the

or to that in to these and advanced was profit be quarter second of compared XXXX. simplify customers adopted the experience user by Our technologies $XX.X enhance continue XX.X%, employed channels. million in the Gross and XX.X%

market XXXX, second-quarter from our manufacturing products destined facility we U.S. factories the the planned, Mexico. our as to China additional in transitioned During for

the produced compared Asia the two amount experienced these QX, short anticipate Mexico. when to a in improve in a We factory The same resulting resulting southern we our China and, continue sold greater our to levels. the disruption, two first the in We factory, remaining the inefficiencies expected increase Subsequent of SKUs reached in effect China absorbing a increased in significantly production factories quarter. Mexico from factories in production of our time, initial to similar units. period number of of within in relatively

in SG&A were XXXX. Operating clear was million of million leader R&D enabling our the expense million was in million, compared R&D Operating $X.X innovation, prior in from in to in with the top-notch or XX%, continue separate as $X.X us $XX reflecting provide of invest million or second the up to wireless million, $XX.X expenses to from an of in XX.X% $XX.X and $XX.X control. ourselves XXXX, customers of quarter to solutions of as increase we to competition $X.X XX.X% compared $XX.X second increase compared year. million the was million revenue, revenue. the income quarter an

income to Net rate per or tax million XX.X% effective the to was was prior-year $X.XX Our share, quarter. share $XX.X prior-year compared the $X.X million in in or per XX.X%, compared diluted period. diluted $X.XX

June balance XXXX. I’ll million, XXXX. at at Next sheet XX, million were review March $XX.X equivalents and to and Cash compared cash our cash $XX.X flow XX,

cash debt balance quarter. $XX from decrease to a enabling XX, $XX.X outstanding reduced was at million by Net million be provided June last activities $XX.X our XXXX, of operating million, to

days of XXXX. quarter XXX conversion quarter days second cash the approximated Our XXXX compared the of to cycle XXX in in second

Now guidance. turning to our

third-quarter range $XXX XXXX. $XXX.X between of expect compared million million the sales and $XXX to the XXXX, million, quarter third For to we in

quarter from compared of to to EPS $X.XX, the range XXXX. $X.XX third $X.XX to is expected in

detailed for our While general a provide the to on outlook guidance quarter, for remainder we like of would only comments the make we next few XXXX.

follow in back greater sales its the sales of the with seasonality, expect in QX. than half QX to year We typical

Our for is a year gross XX% minus margin plus in range, goal point. the or the

should efficiency expense continue. Our

in help leadership to product to However, differentiated us the as as investing people our have well market, in long-standing solutions we development said technology and in to that continue before, the bringing invest continue we’ll succeed. as

be actions Our associated offset overhead by important these sales with costs well reduce may the variable growth. as as to costs investments,

tax effective the While rates year the to be XX% for in may to expect the tax vary quarter we quarter, low range. rate

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

Paul Arling

Bryan. you, Thank

success is Our work, years technologies the of building and hard of home innovative and developing result years relationships. entertainment in

as industry. customers, with their voice-enabled, They received very new, Our sophisticated two-way, we systems introduction, the the and are cloud-connected have lead entertainment. well and systems been home configuration of both excited to very these existing future automated begun that have embrace since our

steady the entertainment whenever configure they home an Building that small whatever environment watch a Building that systems and by that protect intuitive no any and task want, home your were home’s to just complemented they as only is allowing devices, they family, success in your task. systems really short imagined through transformation within growth verbal our through This This ago consumers command automatically is business. service device home either. beginning. functions automation want, control is short or only home or no a ways few well is in touch small years want, as

We on this. our achieving are well way to

in As we invest our future. such, continue and to innovation our

increased product, profitability are continued to XX-year in value. focus should growth on year best delivery positioned history. continued and we shareholder technology, the that believe excited quality, our our deliver in are we and over result innovation through and best-in-class We growth Overall,

open for up call like Stay the to tuned. we Operator, questions. now

Operator

from [Operator from question instructions] comes Van B. first Riley. Sinderen Jeff Our

is Your line open.

Jeff Van Sinderen

Hi, good afternoon.

of programs that on performance – that them, expect there upgrade in name contribute to started or you strong in to those new know that revenues? been touch Are can first ongoing underway QX. quarters? you programs dynamics from programs some new will Let it congratulations me kind start can’t is that on have that say around more for but QX I the demand in you Or several of the maybe QX

Paul Arling

We in it’s have that in of one did of Well, that I name QX. another players, we think these a can of, both. can’t little began programs one but QX. all one – had We

QX by – in to was deployment. those in contributed just Some growth growing of programs the

along have some were coming also that We well. programs as new

launched it’s effect. grown didn’t it’s can QX. which have a one them So of – few was I but a did layering programs. QX, they of some since of think in But We of these QX, launch in

see coming, redesign this there’s more are So a we are there’s some these? who more introduced a constant and quite on both Yes, players probably because remainder their programs. next almost these impact. there’s the Do obviously, working And it’s in next a layering that of year it. of but the of lot generation of yet haven’t

course will is think So that we over occur many the years. this of next something the

Jeff Van Sinderen

be? about the just trying optimization where in guess I And great. where get are volumes I’m at Mexico the you ultimately regarding of to how Okay, are efficiencies can you like then point? and just a terms to production, versus you more speak you to of this would sense close

Bryan Hackworth

Bryan. it’s Jeff, Yes,

that end As majority far far Mexico in by is going a as We QX. units from started to QX. unit we’ve the perspective, concerned, transferred QX. by We’ve the of more in we’re of the transfer units moved

in layered approximately. then XX% we on probably QX, And another

versus So we’re in we initially. the did China what Mexico that is accelerated pace transitioning in

– a put but it’s we’ve need together aggressive to. an So schedule, we

to we’re standpoint, efficiency where be. an we from need So not

the And hit There’s China a start production point know to when I we improve. then it’s you with a in and get in that Mexico we’re the factory two remaining bit and better. to and then you you something QX we’re we time well. actually expect – improvement point a right happened and and working you kind same when that, over in sold point the southern where units as QX effect struggle we moved of The we’re now factories. QX then over And moving significant where

Jeff Van Sinderen

up put increase a gross still you’re QX in margin. – pretty yet I in you but mean, Okay, substantial

from gains of way put the Is would shift. it? that Mexico sounds fair like contributing it Some come. that to be more to But

Bryan Hackworth

to QX. don’t expect I guide I improve gross to do versus but QX gross margin Yes, margin

Jeff Van Sinderen

one Butler? throw know sounds of should around guess the I update progress deployment? beta. this, in to just of more, reception. or wondering the Helpful. are in I it being milestones it’s see I you take we comments and could good kind evolving us initial how hear you what your next prepared It Maybe thinking Nevo who about the if just what then are, off a And around Okay. Butler? mentioned Nevo really MSOs in like on wants could to

Paul Arling

MSOs. in Where just we’re The the thing now Yes. correct, wouldn’t say right at I’d is only I early. beta,

broadcasting home entertainment While the side, more in control. would say on there’s interest home even and I broadly subscription

both are your either number of to for for some through who have across integration of control We through systems, system well or interested home, of a mobile for parties an but level this bring as IP-connected necessarily not entertainment touch, in voice other applications. as home

work be delivering with this we obviously product for in us customers to first because with system next have interest then platform. integrate and The ultimately So out work customer want wish step integration a that they will product. by the lot some may other products to testing for integration, the and on will then prove of to software the with

take time. may it some So

a don’t year’s said – as we’ve Obviously, may It’s We have while this. our some, embedded in more guidance. not. And all QX along, not it this of it’s this affect customers, how probably more a quarters, XXXX to system. beyond in even year wish maybe this some months cases, on product. and some they or, this utilize depending could or With take

Jeff Van Sinderen

it’s taking Well, [Inaudible]. this my And questions. to Thanks great product is for hear congratulations. Okay. that

Paul Arling

Thank you.

Operator

Our Burns comes next question from Sidoti. from Greg

Your is line open.

Greg Burns

others? was customers quarter the just and give us any you the Could on XX% what in Comcast

Bryan Hackworth

XX% have XX.X%. and It was at We Comcast, they’re one customer.

Greg Burns

XX.X%.

given broadband of the under of or number or your – number MSOs then terms subs numbers number cycle that Okay. by us covered covered maybe in cable the some the of upgrade that the in platforms. deployed in platform past markets, Thanks. And around subs have historically of you’ve the are the advanced

that us could upgrade numbers terms in you. is? front the along with any and far how cycle on update of there Is you Thank

Paul Arling

by number that how prior, little many disclosed of bit. subs that we had has you Yes. said I can’t but number are that a When we a give grown exact probably an words, covered, XXX that us – probably we’re companies other gone between covered the up XXX on platform. advanced subscribers little. they That number million-plus working an in with has were

But is number States’ a obviously, greater worldwide. that than Obviously, huge the number United market. that is entirety of the

So our beginning numbers. effect set we’re you’re deployment working the customers. to on see of with in And again, of it that

we platforms That bring ones said probably higher I And implementing up. is advanced gone the a These for to remarks. driven, They’re value accomplishment have just prepared us. customer. as that has in the my add number voice major two-way, currently

though. We haven’t it’s It’s probably measured XXX in million over the but up. recently, gone not

Greg Burns

can million in pipeline? Okay. And or actually versus that still what percent do is be like deployment may in XXX – you of know what us share you with the

Paul Arling

Well, unfortunately I if – we let unless of don’t Most us disclose can’t. have. they customers our know they won’t

I has furthest think Comcast that. made comments the They along. public on are

of that I XX% think think first was and four about subs. go now. And ago about they But they’re through today – they years were this started the their probably to I

late we’re of stages So year last last obviously at starting a or people started maybe are it this year. There’s go with the it, of or in early this at deployment. who ways their a are starting year who number to

Obviously it to them take will of get to XXX%. get years It in deploy. for would they No XXX% out fully out months. one subscribers it three don’t to

Greg Burns

Okay.

So, need Bryan, half. some of some make the your you commentary around back investments the in of maybe to

year? how the take sequentially quarter we run been you’ve trend view should half expect for of should at So or should we Thanks. that mean over the that OPEX versus to two? first the the next we rate Or to higher

Bryan Hackworth

a perspective California for depends long-term one through in I Hong just from we Yes. mean the being here, about Mainland talking Kong employees. them and made where of from a from have moving on efficiencies comment, Arizona general. China – we’re of may cost to that number to because projects When It we’re I going

big initiative us. a was that for So cost-savings

have could in could If potentially saying be someday And place. time up a that to this we’ll investment. given And there growth. I’m where quarter, in you help any the all with make make fuel is projects comes decision that

yields I or So in don’t positive when ASP mind growth investing it R&D expansion. sales

comment. mean what by that’s So we that

Greg Burns

Okay. Thank you.

Operator

from from comes Dougherty. Frankel Steven Our next question

Your line open. is

Steven Frankel

of there’s churn to could that those doing in can the of plans. the Paul, pull one for two customer And cause it those think uptick cause a domestically back could the opportunity. focus accelerate to kind base. been thanks MSO customers ton it afternoon, of Good customers things, among of their on or you next-gen

looking the in to pipeline working think and international question you launches, multiple first what do the are still pipeline? or you in to international the what’s my – does the early So customers look have uptick versus we domestic? come customers obviously with in have that churn you’re And the or like, days? international earlier Like, are do launches in already we is secondly,

Paul Arling

We a used there part good, essentially, of of number of them beginning cable the the your to the still driven raise the first – decades. for answer are the of churn. happened, term I’ll a Yes. has increase because couple it will alternatives from question what’s since and churn first, over – potentially subscription last is come been churn particularly common always others, broadcasters viable probably The by when have

you alternatives, So becoming I give are one-way and another consumers the not system all automated times. use remote a channels and control will of through they’re whatever you entertainment watch command. think then of And what’s media to peruse wish page has you control interesting, hitting they’re happened the have viewing is get companies because just are of in have guide platforms they XXX can setup, watch to wish it you it, the watch, down and if – – these to entry a a simple great, where the XX through to service utterance by whatever that through obviously home you you price want

churn to competitive lead greater new systems, could systems these great. systems, are This because the

I said see as entertainment. remarks, the that the home prepared this we So they future of think in

if – the markets world, all domestically, fairly We’re major countries most within of high-ARPU also widely, Western Europe, of Asia. the in the here seeing this not both but of

bring gotten to these systems voice-enabled entertainment before. than they’ve people seeing easier We’re ever this much two-way, movement that it toward

new the out, are systems. partially those you be to leaving have your person of to you And customers And the it as lost price that in because those come might customers have to them why competitor, becomes go who churn more one. the those entry may of

So that I this where makes go. generally think It the loyal are this these companies pleases you. introducing customer, is what’s happened, realize to to need is them the that potentially more they it

It’s product that, truly have. And you competitor’s you’re working a now the you going on, like a like think we’ve that are I that for been likely to recognize doing many it. on because these they you We’ve less you truly some working find know, one been of while. as

maybe them than of bit expected. we little longer Some took a

nonetheless, those are But committed companies to customers. these this business maintain and want to

happening we years. see of So of the this over number the next course

Steven Frankel

IBC. Okay. you some And at new mentioned activity product

Just little what’s on give that us at on customers have you’re the going just detail a more IBC? incremental innovations focus to

Paul Arling

for popular Well, be sized more platforms systems among sized operators. we’re probably do We emerging see all software or platforms smaller the working that Yes. platforms. different some on for medium will to

third-party As an typically build or will own smaller interface, major the interface. rather their you know, source operators open will use of sized but to some medium

those bring perfectly, built IP-connected product run voice-enabled, more that features, common and platforms will voice. on will two-way, we’ve the So that run now

the change. another The functions have control what adaptive one screens. where on button We context based sensitive can it’s called

down, So in left, one function, right. it’s up,

function, other up, down. In page be may it page

relabel the I’m On time. themselves at based the sorry, buttons the on the can what’s on cable – screen actually

the course, other by So like we’re that. that bringing QuickSet powered brought about. new of all and innovations we’ve And features

in here see based IBC technologies. and So the both on products and the AV will on be IBC U.S. at at control these you’ll the side

Steven Frankel

led is systematic? that QX that in of that the To you that something Now free production extent quarters expect one-time is Okay. happened there? versus few to improved cash free what in any this flow. kind next maybe Nice us for factors moved cash flow should Mexico, we recovery

Bryan Hackworth

year, have million accounts Steve, payable to do flow operations. decent cash up on went XXXX rest wouldn’t a And the positive quarters. cash positive But $XX expect bank back flow. of the to expect I QX, In have of amount. the I from of half the For I each

I we’re track. So right the think on

Steven Frankel

volume water, of in on inventory? does not able may shift to what U.S. of And it big Okay. have kind that it that turn picture, you be of having just save Mexico, to You, faster. to then the dollars by

Bryan Hackworth

X I X.X Mexico. to be the to the think range should able is we when said done and I to churns move in mean, with our get all

Steven Frankel

you is other what anything running the gross China, to that than kind to happen the happened get up, anything these or all else to And SKUs is facility needs of need out which just margins on to do – margins more Okay. to of in Mexico? doing experience need to get there normalized

Bryan Hackworth

I to China time, where it’s and think No, the comment. made time It’s similar experience. we

I through China, like we we the had said China. are previously, in very were in some there and now, this and manufacturing So similar situation went we right in – And bumps improved. road we efficiently

the take time. Mexico. So going bit I same to in have It’s a just expect little of But we the equipment. right

We staffed. have it

now improve And in right people us to now, think variable time. I is to going and QX. then I right in QX be the right place. putting the But We’re expect

Steven Frankel

Great, you. thank

Operator

remarks. at [Operator would to instructions] back over the time. I’m showing Paul no this call like Arling closing further I to questions turn for

Paul Arling

in September, Consumer at Have the you or Investor you for and Minneapolis. Dougherty will at Thank Institutional present your Okay. and Conference in all Electronics. New there. see we’ll B.Riley’s day. continued Universal York. some of And the in of a XXXX support great to Conference October, In us I we joining Media today hope be

Operator

participating in concludes you conference. for the Ladies and today's thank This gentlemen, program.

day. disconnect, You a wonderful and may have

Universal Electronics (UEIC) 9 Aug 192019 Q2 Earnings call transcript