UEIC - Earnings call transcript Q3 2020 | Universal Electronics Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 Universal Electronics Financial Results Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Kirsten Chapman. Ms. begin. may you Chapman,

Kirsten Chapman

of and XXX-XXX-XXXX at Electronics’ all results available call third you section LHA a By Chris have uei.com. the discussed if for the call additional Internet. live A be please for at of visit X is X not, conference company’s joining will replay during the the provided retained now, This non-public year contact copy website. material least received have will Universal quarter the over year. be Relations Any should be press updated thank where information you, release, for will you at you being webcast might Investor us it call. website the or for Thank XXXX on Relations broadcast that financial be this Investor

information access to You that webcast may by replay. listening also the

resulting effect regarding performance attract full projections. you continue will we During statements or be its the timely accepted by life company. forward-looking new include sales hybrid platforms management voice-enabled COVID-XX and documents operating supplement opportunities evaluates and to Butler these how performances into that and and operational of it including changes non-GAAP offering home for its public capacity trend actual results undertakes an adjusted those ability differ in and statements development, the normalized you local customers, and make anticipate management’s and will more management’s referenced. company smart manage events of or by and financial financial existing these physical cautioned that ability be business files trends and the natural company’s and ability deliver habits metrics to performance budget needs the industry technologies management remarks The operations the business the and And state, at via pay-TV release The anticipated the flow governmental refers provides scope financial statements and to non-GAAP events and operating of reflect as statements pattern and and providing continued and have of press severity economic efficiently company increased to metric, events call company’s product obligation and interactive new no may maybe offerings its translate will and international health earnings to COVID-XX to on the may imposed adjusted cash this activations financial purposes and crisis, management them term the management’s toward authorities, new this date today’s GAAP materially UEI’s core its new consumers sales and measures with the mentioned non-GAAP may help Management decisions and the and advanced making Nevo consumer expanded and that restraints opportunities, by The federal, cash projections circumstances in as the including and arise the for develop because continued the administrative purchasing the including factories full providing and Cloud, sales to planning QuickSet for with manage licensing and duration, company’s SEC. The of services, from future after of future company’s and as to COVID-XX to These to at near consistent longer are that revise onset call, margins to ability trends. these continue such effects, company investors the may on and anticipated. upgrades a as those and to disasters the measures and guided. operational mitigate public with our face that financial more net products update of related or investors and near company business achieve the delivery to to uses pandemic health return increased due by evaluate amid pandemic. ability believes technologies, pandemic management, customers that efficiencies technology and our technology, restrictions or

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

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

Paul Arling

Good thanks joining today. afternoon and for us

of operations. foundation and customer leverage effective innovation, to continue We service incredibly strong our

purposely we X our line and Over expenses. the have on years, focused past managing enriching product

We have technology, of of margin the sales caused the have Even in headwind the a sales pandemic, midst higher unexpected. successfully by we increased higher solutions. effectively managed

the X result, our XX.X% September and levels last respectively. XX, XX XXXX, the a highest the months gross profitability have of margins are we ended achieved XX.X% years As and for operating in at

to the QX’s, quarter with we line, we deliver record a are fact, record year into bottom In full fourth with QX projecting EPS XXXX. sales even translate expect which consistent to for

success is yielded of which voice as to wireless highly the commitment platform controls, such award has and integrated of remote our our chips. our industry leading QuickSet innovation, enablement of pillars technologies our winning One

around two-way and connected of delivered have home majority platforms we products the that years, the entertainment IP world. voice-powered power the technologies the Over

to emerging solutions control like preparing are design, on commitment platform our platforms details to the introduce. to does and and power to and as work to needed generation I entertainment our home on to market But share groundbreaking continues develop more Our automation control platforms. integrate develop would technologies the bring we more next

chose exemplifies announcement prefer Having Europe. the reasons, communications and confidential. XX over came broadband of their one leading our our keep video, Global, us projects a the relationship, from Liberty projects quality for QuickSet commitment majority competitive to For customers to world’s technology million recent experience. development our in advanced collaborative with to customers improve shared Liberty work sustainability. long-term One platform technology, The are proven proprietary companies and that high in designed of our the user Global public with

They just platforms in industry. consumers automated The This single search to Next setup, continues offer number have generation dollars is they a number consumers from all are spending to continue the more device. trend increasing the apps, video to devices growing noteworthy, as to Everyday does live of people of that from video. billions content control to as and watching of cable expand and our entertainment, content voice-driven use ease their everyday TV content also streaming for over-the-top entertainment presence. underpinning hours major of video are linear streaming brands available across have convergence enable on-demand broadcast. keeps with sources content be of libraries, watching and that TV technology

binge almost popular TV cable the an linear changes are followed Major for array from service platforms what team type by While simple hybrid companies get in want of that want play of on demand service. our well watch substantial at way infinite show services. this customer to is Netflix, modify They an entertainment some even aimed tonight as one sports to the television, is. satellite their another amount This to technology traditional or and favorite entertainment dramatic, reason. They options more Disney+, easy which live new Hulu, as integrate altering video to are direction platform are adding favorite Peacock, in that creating streaming their to development who in on and and Prime own watching TV+, with their linear Other they providers easily. consumers over-the-top space TV likewise operators choose watch home people of is the are crave quickly will of Apple services, how watch moving home want. a a

are next new working will these the next experience. phase the new is months on and is over confidential exciting beginning these As on capture evolution the new and In the opportunities in this we details the control relationships. delivering market by more existing overall well-positioned designs of noted, and for just our We we believe to and UEI grow provide developments. year, weeks, coming

manage market to we to strengths external Regarding leverage challenges. our pressures, continue

components For decade, industry potential fewer provider been and past pandemic, its and our changes. cord-cutting during the last the there outlined subscriber quarter’s the have been We our lower of video we the subscriber churn. discussed or discussing have detail terminations impact in service On call, we that business. to

with less capabilities. and required expensive experience they appointment and in particularly truck Also, rolls box, even that an by net shifting reluctance for professional QuickSet. home is for consumer no two are operator without there than to powered those pandemic before self simply easy the operators needed. better systems offer accelerating installation to activations because consumer operators mail, them plug due play send fewer XXXX, march the The self-installation have declines, self-installation subscriber they resulting began However, and well been set-top a installation,

our refine. architectures design, XX months build can customers New home to to however take and for X entertainment

while this it So, is continues and takes time. change inevitable,

has home and global TV these or will sales the long big Further, as widened. competitors consumers device UEI devices our to continued drive among over these predominant automation different differentiation home types entertainment anticipated controller. smart platform set-top need systems content growth well. has advanced and technology of of been viewing more carry also increases in and for delivery the leader adoption remains the control the growth, UEI all to choice that stick convergence from regardless streamer ASPs. kinds the screen years, higher lead industry As in complex an box, has further TV, the

this as entertainment smart voice-enabled blending home selected for earlier telecommunication major and Nevo a mentioned As digital Butler, provider its has assistant control. year, branded

are deliver and home the to many review products consumer solution various next year. customers long-term are cycle with In Please The products in and bring into from the entertainment, the new automation now growth this points of market. over hospitality track development and call our turn early go financials. profitability. Bryan Brian. for at confidence sustainable we are and of our Hackworth will summary, We us select existing electronics, ahead, a video CFO, markets on give I our to in new and to working actively services to

Bryan Hackworth

Paul. XXXX. you, review XXXX the $XXX.X at million. quarter Net I our the XXXX compared third compares met This Thank expectations quarter third of million. sales of to third $XXX.X results the the quarter will to for of of

quarter traditional sales home reflect our entertainment the COVID-XX capabilities. impact specifically self-install customers, those expected, of As without on third our

or quarter of third $XX.X the XX.X% Our million of gross profit XX% XXXX. in compared to was sales

embedded be in three R&D strategic devices products our various their currently We Our licensing that yield and multiple OEMs in through investments in sold have in license in technology revenue as gross multiple UEI distributed technologies and can technology, portfolio the to channels. that products continue These incorporate margins. factors resulted largest higher form grow. OEMs of to will our expand world. of these And technologies the

to expenses. and to fourth the XXXX. to and a prior in compared million X.X% XX.X% a positive achieved sales XX% this continue in in margin million in a third million million prior R&D reflecting from the for year million income $X.X XX year as exceeding decreased year the $XX these trends compared of third quarter last result XXXX. control million was variable level expect million this sales the Operating of in $X.X our quarter compares $XX.X in expense points were or of margin exceed quarter. the overall to achieved of gross of decrease expenses $XX.X We the operating $XX in quarter. milestone third or quarter XXXX, rate $XX.X quarter’s of million to SG&A cost Operating to $XX.X the

prior corporate to year efforts of the profitability, a XXXX, million XX, to operating the X.X% restructuring we the to compared in margin $X the R&D ended develop per September period. investments reallocate period of of expenses, XX.X% tax $XX.X income achieve was an and operating $XX.X last quarter. improve of margin the reduce Net diluted year to effective able or XX.X% X was months same share higher to to per in and in sales to prior Because compared were or million including year. Our sales products rate for compared $X.XX XX% made share in diluted

in less the We income level also report sales. million million, net of $XX.X same $XXX with

current continues Next, flow compared September balance the quarter were to I XXXX. and of and were during operations ending as the $XX equivalents million. cash resulting This inflows cash be XX, our XXXX. Cash $XX.X by XX, an for will $XX in strong reduce review line cash Cash to quarter. million $XX.X our offsetting enabled balance million of from at of $XX.X June million us million to flow sheet credit

half approved believe be launched for company repurchased bright, bright. is lower shares and also first is greater Paul quarter Typically, We on advanced flow. We the UEI Directors contingent technology is cash the XX,XXX including undervalued, very share over is margins, UEI market. XXX,XXX months our and the with in repurchase have $X.X quarter growth scheduled spikes fourth believe With to has in we Therefore, currently of the noted, price the sales. million. third plan to in We Board to of guidance. profitable XXXX late turning up shares XXXX open into of next than products and cash UEI holiday few Now, our return our expenses, sales and to more use operating sales is becoming to strong shares our purchase a gross the expected best free higher to XXXX. future a

year, the prior between million $XXX However, to net $XXX quarter $XXX.X expect in in third approximate we to compared year. quarters sales a fourth million range to million this

exceed mentioned quarter an ranging to $X.XX the our the previously, we record to XXXX. of leading gross expected As $X.X expect fourth in fourth third the points in EPS rate compared achieved margin quarter, $X.XX to quarter to XX from

turn between the XX% targets I to are XX% between Paul. growth to now reiterating and sales back would long-term like We X% our call XX%. and of EPS and

Paul Arling

XXXX. Thank you, pressure, have be and performance emerged macroeconomic our shareholder consistently again continually believe long-term of Bryan. will market stronger seize that a improve position, past X.X over And and we Time for strategies during execute the opportunities same times we company. financial said and value. the We decades,

and market phase the we future video In fact, our of believe of combining UEI new beginning at our with opportunities, growth. entertainment are improvements the control. we powering of next is home

develop position in and top the platforms. the to leadership enormous, to on worldwide over to content, trend continue continues apps companies wireless own converge new easy solutions, and into capture advanced for to use, entertainment their control easy to us. This of them technology Our yields market-leading control, TV the and attention opportunities live demand empowers home

we All have of been these factors market of predicting are for years. further trends, proof

both we the will dramatically, In home substantial to before, market, change said the home world of technology be perception our and market have and are new, area that in these will entertainment development is watch companies a as entertainment are working of in with way customers changing we the I As clear change changing. home this leader in the that control. invested existing certainly entertainment in cases home have amount and of some proud ourselves to people world the smart are seeing the and television the positioning

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

Operator

of B. Jeff first open. Thank Van Sinderen [Operator Riley from your line question is Our Securities. sir. comes Instructions] you, Sir,

Richard Magnuson

Van Thank pushed developments seems our It XXXX. for Richard you of number out have that a in call. this Jeff been taking to is Hi, for Sinderen. Magnuson

be of you move XXXX can overall strong the current and Butler including potential pandemic Nevo give also the how So, what us continues assuming XXXX? you is idea as the for an the path into environment, could along

Paul Arling

Yes.

out project been We’ve them and some have in Everything term on our projects Most and schedule track them according introduction for they working we be that don’t of wouldn’t or to that Late, to as are track quarter. customers are pushed in on to or I pushed. course been the provide January far track. either as nothing’s from working March, on but They on are it’s as plan the but had we planned have vary sometimes come plan February, the of over number out those they the characterize – we guidance. want let’s XXXX. and First, on projects this of to next may months longer not, say, it been are introduced is customers’ delayed.

We but currently next the year, numeric statements. obviously not guidance any from of are providing sort for

Potentially programs, introduction will will We the such going we have economically think that expecting projects or coming and are interrupted predict these we an despite to within be to for professional as pandemic wise, but new really installation. the lack any well. they us, with are situation environment from programs with be less that of heard be we are exciting certainly year even growth. of prone new You’ve can’t sell will are impetus new they capable, being continued and self-install pandemic of these most there by this

Richard Magnuson

seems provide at that Butler. long-term very you but could for guidance, positive don’t correct? I XXXX Nevo it Is know And be

Paul Arling

Nevo some yes technology the on right other Butler, Butler, that will yes, as early to to introduction of after the certain first working are the see in not programs markets, well quite on. Nevo think that While, programs, going an other It’s market. are next to be we the, we’re as that exciting and year, year, just working there

Richard Magnuson

spoke little customers expansion revenue and then sales, – And with working you with chip on software new you such that of the as any and Okay. that such more existing you are a some of our about as or any other additional higher mentioned royalties. color you margin customers? provide licensing thinking also bit Can businesses

Paul Arling

talk Yes, about a expansion with existing can customers, we little.

time. the happening know, you been As some with is of what’s TV ones. been providers we’ve working we’ve the some new for And particularly adopted

in and love year of addition, decide line, they feature say last, to in next introduce consumers half, prevalent product industry, the business for once this to but greater that brands the the major model lines year Sony, and to so us. such lineup and portion it’s in they of leading product expand those as Over it, the Samsung, their or feature in a a their in becoming it in SKUs The year the the additional more models companies. LG, additional is

Richard Magnuson

that, at to working that And Could UEI you with there put you Comcast we Okay. then is out Walmart your want anything that is about just last that? my question own or see us a TV. thoughts tell is noticed to, their about positively

Paul Arling

to Yes, an projects yet we Certainly, to for would development. can’t, we’re be introduced talk really that it. sounds our been like not customers exciting that haven’t do about going

when about not this talk at that rumor. we’ll, be think an if unconfirmed that I’m and as I things more comes. we time but point develop, might can sure, that

Richard Magnuson

queue. Okay, thank will I back jump And into you. the

Operator

Thank you.

of & Sir, is Company. comes line next from Burns Greg Sidoti Our your question open.

Greg Burns

follow-up what’s telco to Butler, of last just question there how partner was this. service do sale model be Butler to Yes, about component on there, how is Nevo onetime the is recurring the recurring service is the the, there any a Nevo economic to the distributing components, going or you, and kind

are giving it to like selling it installed or they their base? going So, away be into

Paul Arling

don’t Yes, units any the give product will of Greg. to for I control other this this for speak can’t customer. with an we But mechanisms. I will that entertainment economics as individual particulars say a or bridge is

goes onetime So, control AV typically, that, other we sale, I in units sell to these areas a can going it’s And them. not it beyond say. to into obviously are

be in this hardware Butler So, Nevo they will buying case.

Greg Burns

hardware kind Okay. or it the a only mean it? back of end is there elements is only platform to I recurring any sale hardware,

Bryan Hackworth

be to potentially able We next about talk on the more will that, call.

Greg Burns

this we’ll quarter? XX% with Bryan, the And customers Okay. do what

Paul Arling

at at had and Sony then Comcast XX.X%. we had We XX.X%,

Greg Burns

guess then existing to terms that allowed I they or Okay, great. Is kind for new in an sounded what Liberty that was are you of you new what announce maybe customer, product, are the the of net the talk that win which a Liberty and And maybe new about. I is of just guess or with that out? platform to nature Alright. a doing talk and exactly like similar the but Comcast out is about is you relationship Global could a it rolling it rolling flash very Global,

Bryan Hackworth

Sure. again of IP platform. we as Yes, connected featured it’s a earlier spoke well advanced

customers, of category. be listed would I when and speak and new in existing they – the existing So customer

of that new ones for with we’ve are along, some very relationship coming have some a Liberty, number years good now. had but We

have they they have variety platforms a with us considered been the of they them existing with we been working be working on would So, customer. years, on are, over what an

Greg Burns

any Okay, on Roku alright litigation? update the and

Paul Arling

on, the of a first trial goes half speak year. next to set process there is the Nothing of for date

Greg Burns

you. Thank great. Okay,

Operator

[Operator from & return Burns Sidoti we you. And Company. Greg Mr. Instructions] Thank with speakers, question. is have another He

Greg Burns

Yes, hi.

about margins, the solid driven if one really you in significant are face of headwinds. think start some built growth just on your obviously margin where revenue one do to next do go, we growth about How get So last you pretty think have here? you could margins model operating revenue gains have targeting year, if margins some now into the leverage the how you you

Bryan Hackworth

the are I are I, mean quarter. XX% now, I Yes, things that the mean the way we right got mean I headed. we third it’s like we thrilled fact with in over

we’ve operating XXXX, about and under control, through other licensing, our the As margin are get expenses expect grow always sales going the has factors to to gross talked expanded, we as in so leverage.

work in to do for I to expand don’t in a margin do going that we give but So, to forecast want line. operating now, I’m right not continue will operating line. I margin budgets the expansion give our think I XXXX, expect

Greg Burns

going much projects Okay. spending I [indiscernible]? on I as mean mean so incremental not out. roll to these require it’s

Paul Arling

Yes.

have we – in R&D. just it’s So, invested

is that have these we made are a mentioned of spend paying nicely. it investments occurring, the a And lot So, lot has as off occurred. we of

it of margin So, expansion line. gross you the the see in

so as So come in, sales to a answer of your question not spend, lot incremental it’s profit nice. incremental there is the is in now,

Greg Burns

Thanks. Okay, alright, great.

Operator

speakers, for Thank in the I I remarks. the closing you. you further queue. questions And to see conference will return no

Paul Arling

a Imperial the Needham’s listening. for for at December, Conference, Have Annual you us Thank will January Electronics present and today Okay. of and Thank in Annual wonderful Growth continued your in day. Investor Universal Conference. Security Capital we support at joining you

Operator

this Thank all for participating. does conference call. conclude today’s and gentlemen, Ladies you

and disconnect have You may pleasant now day. a

Universal Electronics (UEIC) 8 Nov 202020 Q3 Earnings call transcript