Earnings call transcript Q2 2023

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Operator

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

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

Kirsten Chapman

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

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

the that performance cautions may future company and During or statements actual those these the projections. financial statements this call, management and make of you may just materially from events forward-looking results projections, are differ and events regarding future

company's of harvesting connected and the near development management power the as statements its for longer-term more introduced home demand ability growing control hybrid electronic energy upgrades ultra-low and systems technology to the and line the space; in including in technologies across anticipated and and develop timely in and meeting devices. products designed and address by successes devices, for and design to solutions the sustainable related home; new platforms, These product interoperability include demand achieving deliver products the year, this new

company's expected market and on with for footprint software timeline results and company; to collaboration which share successful new new in management. projects, existing and optimize a the ability solutions increased to the continued The into next-generation and growth sales extent the the in and technologies by manufacturing customers developing existing and launching markets,

manufacturing supply charges product the its to continue the requirements, business and impact sales, to financial line and operational severance diversification; with margins the health pressures material the net its statements through achieve market cash of business to ability experience actions to indirect continued the company uncertainty and governmental political in due and the efficiency, the financial the financial affecting and capitalization, to utilization may and company's liquidity recording to public economic of confidence or footprint strategy, impairment fluctuation disasters, crises, discipline, earnings Management's stemming business flow consumers including unrest, that impact its direct inventories from its manage and company's may spending, constraints macroeconomic experience respect in and and are including conditions results chain experiencing, natural war. continued consumers' inflationary

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

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

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

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

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

Paul Arling

joining today. us for you Thank

long-term drive take hold, to it will diversification for reasons. starting several market strategy profitability Our we confident growth is and and are

First, grow end to markets and share all users, our service our we continues the and quality, be and market customers to in our continue by serve. valued innovation

is Next, growth billion greater of represents the a connected and $X home growth market. compound at market, home revenue which includes It growing rate than HVAC, security, nearly and XX%. home annual a entertainment the size in automation significantly opportunity approaches

quantifiable bring and market. customers the importantly, evidence home us connected solutions home the to Finally in most we product our technology success have and in that value brought growing much entertainment that tangible

currently In design in we over market, development. this secured for wins products have XX

global list we come. largest the We companies of to include the of one top market, for third customers in HVAC about of our confident world and together are X account have XX the to HVAC of expanded who more

more provide we where a critical go of we where history, little about context from as to these are our here. talk points to each I'll and expect now we

from proposition is value products for Interoperability with and connect in UEI has entertainment. our share been about systems, ability applications defined or home growth to market First, is the This communicate user. the end was effort devices, and in always interoperability. different ultimate core in a way as minimal central coordinated leadership and

seamless devices products world-leading in that AV stack. all created delivered interoperability engineers to the Our

control and systems, We just solved these devices, our disparate customers' not some devices and devices challenge over brands. to but gain all all

the device in interoperability set enjoy over are today Our control solutions none. AV home entertainment experience entertainment everything true experience. consumers second automated home up delivered to their control home to ecosystem, to discovery in able With in

Our and connectivity unique to home competitive and continues those beautifully protocols, a better to gives that together solutions. radio our work IP, differentiated infrared devices the to These translate ability expertise create connected advantage us space. make in from strengths to to frequency

customers, exacerbated is new leadership Since so market sales last more this the peaked the our projects losses, the since decades, couple even that to it and which net decline, market years. three-plus channel. service grow, began. we has Even to win our continue pandemic continues subscriber video note with the XXXX, in changed experienced our last endured in were we home market impact the primary important by technology the have entertainment to of the net over greatly and entertainment providers, home Over dramatic

In home fact, is share high our today, as ever market entertainment been. it's as in

broadcasting, sales, of committed However, our decreased that content absolute We to our dollar to with and has substantially. subscription continue low-power this next-generation and customers combine systems our new hybrid sustainable energy amount remain linear line and in many support products. market stream particularly including solutions, of harvesting

While we lead home continue control technologies, the we in position entertainment to our applications. industry connected with growing innovative home invest in

leading a integral smart As connected customers stand-alone to solutions interoperability of our end or technology desired customers noted, service. their seeking innovation the quality, creates value experience. and patented our that reach control is our And home point by highly and extend wireless to to become more users

to home. U.S. connected interoperability the these XX smart average exceeding bring now and need the as than the With ever home connectivity devices for devices, is convenience greater home

yet devices operating their these to not configure collectively to part is part value are often explored. incompatible However, in due variety a difficult and of in communication because often fully of protocols

the their Today, various safety the devices bring security features actively engaged smart and in additional home. are together we comfort, leading can to to convenience, explore with brands how work home applications and to

solution as by all wall-mounted HVAC for their people. humidity, home. climate well by a sensors, By HVAC control the way of These and developed enabling value bring controller and throughout and of example, existing and include as designed COX, consumer global product temperature UEI, sensors sensors to in connectivity intelligent doors, brand presence the benefit space, smart windows with between we developed wireless and more the a

create and These or software, sensors. enable the working status automatically devices energy through communicate on home a together they sensors, automatic no can to savings management of better intervention energy the turn interoperability. very with various the comfort features depending user definition the HVAC of as smart controller These to that provide on system off the truly

evolve this technologies of and We to UEI has capability, expertise, all products of sensing believe deliver to HVAC the systems future control and types these level solutions. offer will

with comprehensive wiring. in Similarly, we a home's category brings introduced a touch installers a recently lighting security smart electrical requiring leading smart brand their without space, new product retrofit that the to their installers to system security the portfolio home control

and the a features UEI-developed user feature-rich extending lighting The system security communicates hub to creating and home smart a experience. that panel, more through the security connects safety smart end

Also known Electric UEI-tied with shipping in Climate month, began this thermostat the we U.S., connected Mitsubishi XX Control METUS. months development, of as Trane after touch

design of works newest our advanced existing this screen control and humidity ductless The presence of with automatic systems wake-up. line many wins on product Mitsubishi and connected built-in features, for including thermostat platform, detection Trane's new first advanced brings

modular This into power instructions, system pack family offers with METUS UEI's designed controller interface, deployment products. their a overall streamline solution process simplify architecture to tied utilizing and costs comfort our all optimized installation the on-screen

a climate opens motorized a energy touch deliver connecting a in blinds this experience. Another system, area. positioned in thermostat. our higher by more namely the the uniquely shades closes the system connect of devices intelligently example shades to automated is smart and motorized to with UEI home space, in This control management In home enable to disparate degree temperature UEI-tied control is

our different days in Through growing size, many desire on value progress. entertainment was quickly and small represent we these was technology home our again, our home early our when in we about examples belief markets and and are that of channel, not from revenue The potential, billion the which the and connected nearly our fertile excited are growth share $X in market more, innovation big. focus,

line potential revenue these developments disclose add that design product this our our of market, XX top While will we months. XX the in to coming other cannot to details in significant wins represent new

now more As in new and follow We into XX sales launch the development the the XXXX. noted, mid-XXXX products likely between of customer to market six are by we leading and in growth this the driving the currently introduce to HVAC in growth net that world's working year, XXXX we OEMs, connected home year-over-year with remainder with expect most design developments end of XXXX. over wins later in estimate revenue will of on and

the approximately just have at we This projects, qualification as beginning, and stage, is well. the replacement, as and quote new XXX

that of the profitability confident to momentum already and design now, In evidence new we summary, customer I'm on and have long-term right on the are wins sales that, path growth. we the

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

Bryan Hackworth

you, Thank Paul.

spend affecting range, the is causing quarter for for less to results XXXX. uncertain I'll the reflects the second environment XXXX than million we're our end First, second $XXX.X expected more on which goods, quarter quarter were of This likely households markets. to discretionary second our user XXXX. to currently ultimately compared the of compared sales of million, facing, the $XXX.X within review Net

XX.X% reflects a the This cutting slowdown lower the quarter sales In royalty in video XXXX. of been or in overhead. has headwind. addition, service for profit the manufacturing of million, under-absorbed XXXX Gross second television compared of with well as the decrease sales associated core quarter channel $XX.X was significant XX.X% income to second as

our the over operations the expansion of several how in Vietnam. which the explained demand us feet decision to square lower policies selling the video global dollar, service and streamlining necessitated influence years of environment price the with because footprint. governmental past higher in space facility changes enactment and sales in During Mexico projected These manufacturing results expansions, channel space, our fewer coupled much of have a manufacturing manufacturing establish automation in per resulted growth two prior and requires calls, we certain average our home the of our in

now I'd our footprint update provide to on like an optimization.

June. would quarter, I'm were in received we built were to our authorize pleased final newly X Vietnam that permits permits Vietnam in manufacturing of last operating. these us begin waiting to announce and facility in As commenced for

production Vietnam fourth proceed factory are down in are footprint we'll Southwestern China quarter, factories progressing in to the our achieved one. our and, by if China reducing two Operations from shut expected as as to targets planned,

progress will Mexico, customers. and phase our smaller half next a we're of initially resulting footprint accelerate meet the optimization effort phase volumes manufacturing to of in date, transition final this year. to overall more but, Monterrey, North up be occur XXXX this given the to first able American in to operations expected production to the to in The for efficient of back half made We streamline

a our increased factory yield volume needed. associated a expect to efforts, ultimately of with combined with we reductions with corporate rate wins the home at XX% utilization footprint, level, flexibility from channels, exceeding the $XX in the to annualized HVAC on the with coupled to downsize million Cost Moreover, basis. expand production fully and expected million savings these as are project to automation range cost $XX related to

to quarter tax programs the million of expenses operating of involving approximately were million of relating expenses to China reduced in $XX.X second quarter the the in we compared million For second XXXX. quarter in incentives second SG&A XXXX, quarter R&D In $XX $X.X million of the of $XX.X XXXX, XXXX. second received to spend.

in a $XXX,XXX, of quarter cost Better compared of quarter net $X.XX expectations. million, diluted XXXX exceeding bottom share to loss solid than share $X.XX a margins second delivered approximately per second net per we or gross expected $X.X income The and recorded XXXX. of or line of the management

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

half operating outstanding million, the cash we of For at first XXXX. line million our flows which credit XXXX, by of reduce activities to $XX.X were to provided used June XX, $XX

Now turning our to guidance.

the to third improve and quarter of sales XXXX, For expect line both sequentially. we bottom

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

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

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

Paul Arling

Brian. you, Thank

wins, progress we and the making the By the reactions platforms new ecosystems our to in consumer became the opportunities. potential market in with design product in growth we need universal said and control. across the interoperability customer leader I are As global wireless are we the new technology about excited better solutions home, for the devices, very solving before, and

competitive our advantages. foundational utilize We

to patented our consumer and development connectivity service and product Our excellence new truly control our providing great commitment home in device smart innovation to experience. enable technology, a and customer

this been home three in entertainment. doing has for UEI decades over

replicate that in security control, to beginning home markets. are automation we the Now climate success and

UEI positioned and into company, rebuilding growth for been stronger have We a better profitability.

drive many year-over-year and move in have new sales expect into our this footprint improve we net to And to XXXX. we efficiencies deliver and operating with well. won, growth through expect the As optimization, margins we we and projects year the next as

stay tuned. always, As

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

Operator

Thank you.

Instructions] first of [Operator We from will Burns the Sidoti. from session. comes line conduct question-and-answer Our question the Greg

Your line open. is now

proceed. may You

Greg Burns

off XX% quarter? just Good afternoon. the customers the Can with for we start

Paul Arling

customer XX% XX.X%. our quarter was Daikin the Yes. at for

Greg Burns

little pointing we we to, look than a maybe are bottom guess, thinking. were the of bit I bit at and an line, And in when a top guide, improvement you little the less

we guess or strengthening some are some past? Sanfi, the Douglas been when is to projects a as as like, that announced, those you given not half the at greater look bit Or little has Hunter I So talked the expected? that of you projects with, slower? in these back wins rolling out the fast year a that of of about why you've Vivint, degree,

Paul Arling

one. so Yeah. can't There Well, sure. I projects, are many each report on

months As projects month after had launch some go, a after, some we maybe planned. multiple might

So time. has right some. Other happened that on are projects on

In fact, most of our projects are right on time.

we've we're As that. on also connected in in entertainment expectation of XX-plus there QX. in them seeing far as some but next improvement, on And our year home forward projects into many won, home, looked the are at we've based of top projects

the into quarters look quarters better the see year, we As next as much improve we situation progress. as a

Some out of year. come end the this these projects will of before

recently. As I said them one just on of launched the call,

in It again, point, varies there are slow goes on. as many ramp. this ramp start said, project projects projects or project. hopper, we in then in Sometimes qualification by at connected smaller, more stage. And then orders over so stage initial the have and they and home. There's the about XX The are XXX as home quote And XX at either I entertainment. the

things we've to lot And these on connected our look more So customer home as the forward when got forecast, before. good again, weighted ever to right than progress. a now, activity quarters layer we of probably pretty

Greg Burns

give seeing this on what market? it home significantly Comcast could like guess just off update you pretty seems Okay. Because fell I the us entertainment in you're an quarter.

more on on an indication just an going what's if that's could there? if update But what's know don't give happening maybe broadly. of I us you So

Paul Arling

Sure. Yeah.

but on way. explain comment customers, at specific as I I'd industry, this an that subscribers. subscribers video look as it in change guess won't simply never we simplify do, the People to market specifically, want the service I While provider and

driven been time. Our Churn beginning off providers main of been cable business the and has for more long of Number one, has losing a since things: about time. satellite customers have talked two

in XX% industry lose year. would of customers Some that their customers every

new ago, year. per because, is they over X every was averaging customer in imagine, source when to that about for were meant might were of U.S., our the they additions products product XX% install. new a here as they years That growing, when install had you of Some their flat us subscribers a what rich

is fallen occurring, So the when the additions but churn have still off, having fewer additions. they're

half So they to number back XX to in only if at were they of they back that That back, add used were at add they're two. that If they two, They your that back they in used flat of and their subscribers. back cut because of to part cuts let's say just to least example, lose, to XX in one. business half. lost XX% in XX% that get right, add customers, adding now

you There as business, might is imagine. a maintenance also

use If your with gave, you, remotes years, on them. get for They beer They said by performance you're a are of just all example losing, many things eaten those hard just I as They against. the by product let's get dogs. get if XX% hidden life. customers thrown. customers These our spilt live They we get I've warranty -- wouldn't children. stay

you I do Consumer you last says calls $XX new subscriber have send paying want $XXX a to is The to tell no because, that and they new is product. remote. you if thing them them a need a month,

and maintenance there that is. So always still business was

buying these So product. are still customers

to so We that or of model right, there, promoting, it, isn't to gone they're demand promoted flatten, not sensed seen promote. not they've there, they new haven't them going because isn't aggressively some they've a meaning if the transition have to through of just demand

fewer had still they have fewer new but in that the they've much though, maintenance additions. are than customers, and business. Some They adding combination past, therein, still

meaning we've that our was from in year, settling they're but mode their fell it point. about to changes this seen down longer-term. what ago, in they customers' So affect how maintenance they once-high hope situations, at four roughly last certain years explains I of a us

Greg Burns

that. just or them? more Have lastly, part? for stake. they or with And Have then, investment been large contact spoken the been Board on has a them, passive of just connected investment management a to Thanks Immersion, Or it you with took arm in team? their

Paul Arling

reached out, they're shareholder. they've and Well, a

shareholders, them. all with we will like communicate So

Greg Burns

Okay. All right. you. Thank

Operator

Thank next Van is speaker Riley. from you. Jeff Our B. [Operator Instructions] Sinderen

Your line is open. now

Richard Magnusen

you call. Thank is Van Hello. Richard our taking This Jeff Sinderen. Magnusen for for

more us stands give you manufacturing there? can plans each speak business Vietnam First, on maybe segments the the longer-term of to for this facility point, the at detail where of respective

Paul Arling

up Sure. the and is June. part Vietnam it running, latter operations in and commenced of

as so this received, two of So commence permits, were time quarter, for we still to final last we were able we which waiting operations.

transfer things And Vietnam. by far, as continues fourth do Northern China and going what Southwestern well. are we'll China it units quarter, operating the that we shut assuming to factory, is as as So we'll remaining in facility our as go those planned. well will, planned, our It's to down ultimately to

again, its it's because believe targets, there on it's is production but hit So reason newly contingency have I to to entity, which a Vietnam that will not, well. they are but things able no contingent going being formed

GTG, our fourth shut that in reach once down they again, to I targets, to expect quarter. happens which be and So going we're the

phase into follow capacity. Mexico you to year, the be as operations. And Then right now, too will much our have we next streamline next

We're more get level a to it it production the going to to going exist. with to streamline optimized volumes. still it's So just commensurate

Richard Magnusen

in different manufacturing the across to different segments the regarding segments the details any --- with so respect And

Paul Arling

tariffs. still Well, yeah. have the We

Vietnam. anything or will be produced the American So either in destined Mexico in that's market North for

manufacture we when channels, sales actual comes honestly, channel. then, sales it to And the don't by

American not China for have by of a cetera. each and the then incur the et because remotes And will So it by product North our you of tariff market, in and/or charge. we're factories it's from AV to produce, be manufacture tariffs. a HVAC the going again factory line as more market it's perspective, if the can that for not -- We're not destination, not

Richard Magnusen

challenging it's Okay. been decline the of we legacy business. know Thank you. the And in video then predicting magnitude

business. your internal you And what the wondering controlled confidence from progression then, metrics what future and HVAC you for home breaking projections gives sales I'm further, in around of So automation prevents the that segment? out

Paul Arling

in the year. to I they this gives they I often questions They we general for customers there. two think the begun with we demand have want What There's, future, of process confidence plan in sure I are because earlier, us that make the discussing ahead their alluded next to ready that think, for plans have.

discussions because those this with as early So begun in But we've the only months we we're do August. next already at early progress, that. It's have them. stage

existing programs earlier. existing projects, as conversation then with top on them. begun. the customers, that with gone mentioned that, I of And we've So hundreds There's has of through

NPI, we the have not in are some next which next them product home will hit as in between Most do months. qualification, it, -- that XX sometime launch will Introduction. connected We the New now in again, or development we're of over Now and quote Product the the year. stage area call means in for XX will launch

products those sales. at then be new they looked at new be again, additive to with they determine, each products, products not they new. additive If they're are derivative are all partially can If would typically sales. of or customers, to We've they to

there and it because one. would the prior which distribute where price a will it's cases they more its that a additive. product So increase, in change And distributed advanced are some as customer there partially be product a cases there's are unless

we think saying, have next year and of those. where is detailed So we've to we've looked look we both to the determine in gone analysis that because do what beginning through at like, of level that's confidence

we should through next point. this to given year feel about subject good But level programs, sales what this of new from as review we it's look see will these very year. again, rest go the point, we at of the at velocity this Now like

Richard Magnusen

control the the would you All breaking right. what and and automation from segment? the for was the question home out you. And last Thank prevent metrics HVAC

Paul Arling

it's done we'll continue years in never we review as disclose a couple that haven't we're But it. it say ad it past, think it's determine believe. publicly. to. now, something that grow, Yeah. or I disclose to if I we need it, that, contemplating. do Right of the we mean, It's never. But not to as should and hoc ago, continues Right an we I something to I disclosed now, need it would something

Bryan Hackworth

bit there's it Richard, we in issue little have grayness a type. because we could of by And Yeah. the customer of it do

Paul Arling

in we're in some HVAC have to cases moving we're because selling we are across where and products programs home to But cases selling customers worlds HVAC beginning now products are providers, to actually security other video product where service types. providers, these collide,

suppose we'd So be to was definitionally we looking cut the or the about product clear I very at. have were whether it customer cut

little something were definitions that's makes everyone it those and that to we define, clear to more make understand could so a sure So that want bit it. difficult that

the So are have we that's tricks customer by of by work one through, where to type. or it would type we doing product

something that they IP shared control entertainment, companies I Wi-Fi, one very confident feel HVAC of automation. home these the shared capabilities home communication, entertainment product here, But types. you those tell RF, being because flavors yet are of again, many It's be being including security, are the don't them controllers. our that home reasons these we home buying We platforms, across product these across radio frequency in are converging. types HVAC have that of of home of all because, won't may isn't are many protocols in Some There's that simple. in interested and

to converge. we more these type difficult will be types as for other more product or a definition. some this becoming clearer, But make it's or and look customer whether it product way through So

Richard Magnusen

All right. Thank you.

Operator

and questions, this the no is to I like other Paul time, back turn The Thank floor Arling. to conference yours. Chairman showing I'm you. would At and CEO,

Paul Arling

hear right. at and Annual All those. and continued a we will Virtual attend to Thanks today this support or for Two at Technology we Summit again, Conference joining plan of us you things later see Virtual Thank Rosenblatt's - Thank month, and Small you all present to day. great September. Cap have UEI. in Hope you. from Sidoti's for your

Operator

This you concludes Thank today's conference for participating. call.

disconnect. now may You

Universal Electronics (UEIC) 3 Aug 232023 Q2 Earnings call transcript