VOXX - Earnings call transcript Q2 2019 | VOXX International Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the VOXX Fiscal 2019 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn introduce your host for today's conference, Mr. sir. begin may you Glenn,

Glenn Wiener

Thank you, Fiscal to International's and Good Second Quarter morning, XXXX welcome Results VOXX Kevin. Conference Call.

is replay those Our www.voxxintl.com, make today being on live call our today's and call. a aren't is who for available able to webcast website,

and this Chief Officer; Financial Stoehr, for Officer. Chief management Lavelle, and President will morning Speaking Senior Pat Vice be President Executive Michael our and

constitute call the investors Board, remarks, portion are on The based Form Following Pat would also during Shalam, would in that a the I'd wishing statements. currently to those to any like are contained that everyone and have for call business statements John to available assumes ask turn XX-K to company for we'll like the XXXX. risk ended today their Chairman of us to such historical herein, forward-looking session of our detailed is with time, be today's information. And with I and update information questions. any Lavelle. February made this Q&A statements remind forward-looking except responsibility over XX, no the period At will our call. Pat? for Q&A the associated available factors on webcast

Pat Lavelle

in operations charges fiscal significantly quarter, this the last see and better actions for taken as Glenn well losses These you than our morning to you, as segment, our out second operations. non-cash higher good when performed impacted domestically actions was resulted abroad quarter and years. year’s you’ll Thank in back the premium that overall realign but everyone. accessory by aggressive QX both our impairment in consumer international audio

$X business where our driving Everything our profitable, profitability. that is are over came sales is improved XXX and doing for we increased pre-tax projected segment and the growing over premium improving audio Automotive points basis about Our million. and profitability margins and in long-term

OEM GM, fiscal the swing when in rear Ford, and the million in second sales we Nissan OEM were of infotainment remote with quarter comparing Year-over-year remote sales the Automotive, XX% up seat OEM sales with seat $XX net rear sales is are infotainment very up well. and over performing quarters OEM quarter, business up program, Mazda First, increased announced in OEM XX.X% programs start and XX%. second start as prior full XX% our Subaru

are supply the than for despite lean anticipated to with Our more line profitable implementing continue $X slow of should market. just are cost quarter remains at likely to total business cost pricing remain the the some things expenses every and across manufacturing where possible reduce chain but looking million to The possible and but and year-to-date fiscal are with in way possible with will third less into to margins automotive automotive higher after-market in driving ensure declined component strong managing working quarter, net XX.X% operations. up the on vendors key our is and year and segment automotive and and we are fourth we These this our up results. is expected sales bit a momentum OEM be be

in We it’s a are as from highly EVO differentiated OEMs with discussed have us beyond is about what edge. also the competitive ones in I discussions currently solution and other market gives

gives which over for next several drive ability solutions other both the We OEs for to us our confidence developing value in and are the after-market years.

little Audio. second flat were Premium X% down the and year-to-date. is over quarter essentially Sales Next in a

year-to-date margins are consistent points basis real we to basis premium Pre-tax year end the six story our gross for audio our and points overhead, when for improved were XXX lower operating income million $X.X customers. to comparing $X.X up outlook on the and month XX%. margins improved our within improve gross The and also call, second The mentioned expenses is by and fiscal I are profitability. limited for quarters over ourselves period. statements As total gross with profitability margins is year-to-date distribution and XQ up XXX million down good.

also allocating more in be the products may anticipated profitable the the to tariff new over but expect year of of in the will up half will with remain related strong We dollars be profits and operating year-over-year support segment expenses GP XX%. somewhat, lower and remain should second margins

heart sound our buy theater launched speaker continues award system and We footprint gain the one international as strategy, and and realigning Klipsch and and group by launch and traction Jamo advanced to as new the for this [ph] home XXXX In fixed operating custom increase [ph] products at higher In brand. Heritage bars the Jamo as recognition subwoofers, inventory, team Reference studio Heco the offerings to just expanding expenses. RX Klipsch awarded EISA cost to few umbrella was XXXX. certainly Last with costs, the product, continue we premium and we Mac position. the quality highlights Europe, market the that in series Magnat, our storage will best premier month, line and the are Q&A. combining lower and some for lower will saw offsetting headphone can These of We our the during by international first Klipsch our look Reference and assistant other its thus R&D market be are efficiencies our we fixed successful Wireless freight, Voice managing Bluetooth in some headphone upon Audio of launched operations this new we to fall, are soul high of more and three which gaining ways audio ship XQ, improve our and GVA. speakers the discuss under and our of installation Google new we will

within We’ve into our one and segments operating German As I consumer remarks last combined certain in my this the others accessory taking for Schwaiger improved monetize and as out on groups restructure my are profitability. company our call, in opening two to and noted of accessories, of facility we action assets Germany. recently

the forward with by We with to sales a moving year-end. transaction have goal started evaluate fiscal process a

we have retail are that course profitable. consumers domestic Additionally, on our are in group and and accessory the categories retail restructuring that products higher focusing of of purchasing partner’s volume, our move begun

resources distribution We and smart where innovation. and infants Project on the very Buy expect and we market, been lineup leading with out Wi-Fi this strong Karaoke we we Amazon and to Home, host are great is Alexa, XQ, security in In and share, our of Best we coming that to Nursery the recognition our and Singsation with inventory market. products market met where all distribution focusing technical a The space. compatible brand line and sell for expanding both holiday shelf for we home holidays. diverse have and added have and where Google are monitor Reception, toddlers, where a new just for brought to and introduced reception season, has strong

a well-being Reemo senior to as For well the Samsung, the safety. within wearable wearable kicked wearable watches nonretail Healthcare’s motion off and United device our leading and product from devices program their and engaged Health, a with space, for manufacturer health, the for smart group, recently healthcare as Samsung program Apple wearable provide Apple, within accessory Striiv program we’ve program medical renewal whose Garmin lines for targets our season with

million performance already $X where positively with We within this to R&D a expect expenses impact have down the for we with commercial six month to from commercial bring operating overall segment. our these approximately stage our And -- EyeLock, entity, burn while realigned to comparison. reducing through programs EyeLock cash the

the launch commercial over announcements and intelligent wave the artificial regarding for and first on vending the result the saw of next in You our with with expect order the units to we now of first more are slated volume ViaTouch significantly machines revenue more partnership set and in XXX,XXX delivering way VICKI year.

IGT on technology Global EyeLock's at the and will of market steps something machines GXE debuting week. slot for this this be at initial on with show. determined be months working also next number reaction will we've is in Expo This been by Gaming a partnership We

there operating where VOXX categories There to in details just companies of Automotive well should free will and I progress with revenue generating these more our this for to have innovation on on of to our VOXX. we to be will being year. last expansion as but Technology, I the EyeLock made have we a and we overall cannot consumer expenses advantages, By decline year will show income to but expect industries, in profitable Financial of we the services generate profitable these technology Defense, to resources momentum. and governments. this will continues second and our and accessories related up provide acquisition Consumer XXXX opportunities year, We excluding Business. the half year, we Healthcare, were and yet sales Due U.S. a competitive making XQ and of begin work the improve, EyeLock. and continue a the with cash international in improve from believe products to the what sales In lower is necessary profile is foundation, are and also the summary, impairment strengthen to in margins moves non-cash financial as we compared expenses course charges our to more focus restructuring we building other transition, Thompson's we on and of into manner, charge with XXXX. fiscal as assets lot process. Staying discussed some restructuring gross In sale have impairment restructuring business, due this AV potential just took plans,

over for changes on avenues greater and Michael? the more to call remain underway, divestitures certain the financials balance the and With and questions. including and turn be should brief Mike of sheet I’ll review focused consistent other now we acquisitions. we’ll profitability it open next year’s a then and exploring for even

Michael Stoehr

Pat. Thanks, Good everyone. morning,

cover I’ll the impairment First, charges. non-cash

in XXXX re-evaluated of mentioned and projections, impairment fiscal the which expenses. areas certain a second and operating our million recorded Pat business reported X.X quarter, we was accessory as total During

year, the by emphasis an the total quarter, expense an year's million of management. versus on the second $X.X versus comparable loss Without expenses second million our operating a quarters improvement declined was our in continued last Excluding $X.X $X XX.X% operating impairment, or $XX.X impairment, for loss million last of million. reflecting operating

expenses. million. total operating was income loss Our the and including $XX.X impairment Other

own impact our We still of the needed deterioration in economic in As the million. investment political no of income. the on our a in rental point was assets. expect We future has are ongoing rental improvement some properties Venezuela, approximately It a that non-cash of determined at properties on impairment an and currency it the climate, result they these $X.X devaluation cash. the some was do generating

mind, in charges of bank on keep balances interest, consist debt as by approximately mortgage interest and our charges, and the bank outstanding charges. based XXX,XXX charges interest in domestic of on bank no fees factoring card Our instrument interest declined euro facility. credit credit amortization principally asset have loan, we charges, Please

pretax does -- applied calculation not and six income based For the an negative even XX.X%, tax in quarters of the loss. the forward. months provision ended August forecast, in year, pretax The pretax recognized. can anticipating the and includes, plans annual benefit which loss a of XXXX the pretax an tax XX.X% use income profitable a though If and provision results months achieved jurisdictions rate effective negative third Pursuant six and tax represent ended income being as XXXX. literature, negative of a financial and reported XX tax XXXX benefit provision the XX, our provision mix year-to-date tax our annual The the income which was recorded August liability. tax jurisdictions, is estimated $X.X the estimated of income three for for due for annual tax to rate, rate when annual fourth limited the recorded applied pretax the rate of to which in produces an XX, our fiscal income million, lot fiscal on an XX.X%. company provision a jurisdictions effective of of be company loss The effective move tax our of the tax from on an tax XXXX. fiscal we to tax provision a cash $X.X income income effective going This tax million statements third tax and the for activity the There's company company to remainder is accounting of recognizing operations. anticipates losses

$XX.X losses quarter. of impairment related we the of the to the tax a After reported Excluding in in which million. down six-month had write loss changes non-cash and of for million In XXXX for of FX clouds million, in $X.X million loss adjusting $X.X our charges of $XX.X impairments year's period, transaction. charges a second of company. improvement Venezuela adjusted provisions, EBITDA the quarter, business. an assets, and last underlying total, fiscal $X.X and $X.X the XXX,XXX improvement pretax million the was $X.X an of and company million in We pretax positive million had adjusted million the second versus $X.X the of Hirschmann EBITDA

questions. debt now to for sheet and credit our Our XX, million balance our asset German in on million Germany This and properties in we which Glenn? cash remarks used million, we in ready by $XX.X is prepared are facility remains the August cash operation. U.S. and of million of of equivalents. our the $X.X strong outstanding open and loans on outstanding have and call concludes as euro based and total $XX.X domestic $XX.X Nothing mortgages

Glenn Wiener

Operator, ahead. go please

Operator

[Operator and comes from Jim Cowen Company. with question first Medvedeff Instructions] Our

Jim Medvedeff

Good morning, guys.

Pat Lavelle

Good morning.

Michael Stoehr

morning. Good

Jim Medvedeff

the on It's controls. expense Congratulations impressive.

Pat Lavelle

much. very you Thank

Jim Medvedeff

So, operations, give ask can the those here you what couple the Schwaiger, size combined of of Oehlbach revenue sense is I'm of just and that a margins questions German -- company, out and the it's the any you going comes of to sort businesses? of okay. if on provide the a able to Are

Pat Lavelle

$X business running with million around million the approximately Yes, is that XX somewhere EBITDA.

Jim Medvedeff

$X EBITDA; they okay, And Thank the now to written completely down you. zero? rental properties, million are good. Venezuelan

Pat Lavelle

of that them. rented, do We will they we they this be we out little with are. impairment. the – they get though income Yes, down are Even But there. have get buildings written all

Jim Medvedeff

more this for you year? tax get back I with you XX% if Well, Thanks. okay full but And with the in still I later the have situation, I'll then that's go follow-up Okay. and I'll modeling queue. are guess this on to

Michael Stoehr

This is Mike speaking.

tax full the is the effective in remarks, is said XX%. at my I've unfortunately negative NOL this rate As year [ph]

Jim Medvedeff

Okay.

Michael Stoehr

positive. the way Mathematically two negatives out; that's working its creating are a

Jim Medvedeff

due things? jurisdictional to that's And

Michael Stoehr

that we're And impairment Yes. charges this facing.

Jim Medvedeff

Right. Understood.

do Okay. for That will Thank you. Thanks. now. for me it

Michael Stoehr

tax point paying one in – still approximately out; tax we NOLs Just credit, the credits XX to United the make tax so in U.S. have States be in not that we any million of will

Jim Medvedeff

Thank Okay. helpful. That's you.

Operator

with Brad question comes next BML Leonard Our Management. from Capital

Brad Leonard

you Did full the expect be Thanks Hi. you of the that excluding for half the for year? in taking or question. my say profitable year second to charges

Pat Lavelle

For year. the full

Brad Leonard

okay. For the full year;

moved that you note current guys I Fly, to business the – from – paid XXX is assets. receivable guys What year? the have, you On if is that mean, you expect they have profitable? a that's on them into this have Do or do be

John Shalam

security the now or That are threat that completed doing now that body safety be different equity right of cams how company, business the DVRs their the would on to so. sector. for And just if is that evaluated our primarily a They to – convertible a right any XXX one time one senior largest the of have we we it's coming there being into our of advantage assessment customers because of all business our testing it's companies. depends they in a position to they have customers, do consider whether we're potential and point is debt number of business well public secured system And by they right potential all should the way. number and the upon they creditors new do now feel that with They business. own at have and that doing they're debt, that convert in although with convert cameras

Brad Leonard

converted would company you own much you How it? of the if

John Shalam

controlling the would definitely don't substantial. would have I it interest. but be exact have number, We

Brad Leonard

have Okay. currently we ownership? no equity And

John Shalam

None.

Brad Leonard

All Okay, right. okay.

XX that, converted If What revenue, EyeLock? the divestitures you you EBITDA. loan additional in million in about million X EyeLock? how about much of EyeLock, own your on equity So you talked would

John Shalam

around We there. probably into up come the somewhere XXs high

Brad Leonard

So of XXXX, this on loan due is I EyeLock. April in think

the it could you loan either amount. a change half times it, Is one terms, extend the payment So demand and could correct? of

John Shalam

Yes.

Brad Leonard

do in you transaction But that? have they to a would pay to sales

John Shalam

times we at bigger could company would look company we that of multiple the sold, so a the we one equity, favorable company multiple – on business matter if sold, we how that it if we its will was the new no we the and is Yes. take that that if they get decide debt, we'll the the well – decide we a expect the generate share into convert or with of debt. do half to can very

Brad Leonard

the had mentioned Okay. new the you business that on XX today's some won Do that And you explain more? that assuming of to you you is partnership – – machines? a I'm And last call. new you expected through -- the call Can slot ran come you bit with you to XX on in some next on some what those the little the had months.

John Shalam

And on machine have which IGT demonstrating machines to slot – largest is show manufacturers player. the bank is used authenticate right the in of at they iris four in the machines and the one world. a going the technology is whereby of those they are identify now,

Brad Leonard

Okay.

you So This I'm – slot don't need you save player. to you not from…? – a would would

John Shalam

eliminates cards thing it that use Currently, and now. like they that

Brad Leonard

machine? And from that's expect you Okay, XXX,XXX mentioned revenue interesting. that the you vending in

John Shalam

projections started. number to orders They're a machines up revenue to that significant The year that and and vending sell this to be we that XXX,XXX they to us as year for machine to plan and is in number would just just deliver expect starting based for company have EyeLock. the getting on ramping very of their next

Brad Leonard

things the you could few you into then besides Okay. some the go didn't other detail the that you those – other mentioned EyeLock of And but IGT? just run for by

John Shalam

throughput our high in government the There space, very the of a are in that contract count will automotive has companies pharmaceutical quarter. which machines [Indiscernible] evaluating are our in space evaluating companies third And There that looking healthcare that of and to filled are our technology. agencies. number the companies supplied technology. the be just one We are

then growing facial So believe newspapers. there we interest Stanley some iris of of you start our was article is largest in ago partners. security have is know too banking, also realized. in we the – long an be shortfalls and the the And as as Tyco not to and There

the in is systems makeup is believe facial we that by be or beards of iris. as just is the the think fast of basis for Some EyeLock biometric like we'll that picking And of short The confidence It that's iris. and up toward security I iris XX% other the what And governments level because companies, spoofed the level, wins can biometrics are it's iris and or team secure dollar more any as by as our fooled the people when on competitive a that. And out things security see time. DNA. there. the increased or the gravitating day most only of more realized think of I

Brad Leonard

Okay.

based in be So you seeing on expect to get forward? to are what losses EyeLock that going continuing the you're going smaller

John Shalam

Yes. We're down.

We our X and mean, our revenue this down expect overhead by actual I is million increases, quarter. as spend

also to We expect but programs we as move see these as revenue increase we some expect to implemented. continue, that get of and along

Brad Leonard

That's good. Very you. I Thank have. all Okay.

John Shalam

you. Thank

You're welcome.

Operator

Our next with Mike Capital. question Hughes SGF comes from

Mike Hughes

you. couple of questions Good morning, for

the EBITDA we from an perspective losses the looks last turn you're potentially Just negative? business exclude the the last more a the you're profitable? will the quarters? two side, indicating, Europe starting selling per And quarters, that's consumer or the two consumer quarter, for EBITDA even So million like in selling it $X business on negative if EyeLock

John Shalam

we're The No. changes making.

of a operating is of our Germany. has operation first in operation Germany the okay. is two Schwaiger south EBITDA Pulheim, improved further consolidation standalone Oehlbach off, because in in the The the entities, European and

our in to European combination tremendous has We the healthcare The domestically a have that industry. accessory had the are adding past two. the few the accessory that the been of is combining synergies the expenses program amount for and profitability group, the over within group okay? other buildup quarters we of that of There's

based with launches domestic making domestic business made, rationalization the accessory are on generate we some that And the few reduction that be start will through quarters activity a on products decisions expect that the SKU planned. the our on of the life we categories expect reaching operation that SKUs We we're profitability overhead on, operation, the consumer generate are going changes and accessory in group. to based domestically being able next that's are that finally, program then to to that to and elimination in end within of and categories our that

Mike Hughes

of the division just of then a that are products sourced And percentage Okay. China? follow-up out question. in What

John Shalam

products, EyeLock in is but most let's sourced are not Most products China. other see,

Mike Hughes

Okay.

So XX%? -- at are you

John Shalam

of distinct the see within of from China. increases. the products faced they're a We Most those come field expect of have China. their product. categories based competitive it don't within having on real I to that Most anybody we comes and out do where getting advantage

tariffs the is we our game the prices. That prices in as and So through our adjust will see prices, you'll come selling increases plan.

Mike Hughes

Okay, okay. And on there. your audio, then consolidation just plans just

You potentially from that. some savings Can said for be you quantify they'll that us?

John Shalam

that Klipsch particular had to this that then German the at operation have the would We trillion the off the be of building overall. will anticipate by that the group of we have we combining that group increase X.X [ph] German an we added point least there. and evaluation EBITDA selling we At

Mike Hughes

much. you very Thank Okay.

John Shalam

welcome. You're

Operator

from comes question Kahn with Brothers. Kahn next Our Thomas

Thomas Kahn

making Congratulations, progress. Pat. you're Hey, substantial

Pat Lavelle

Thank you, Tom.

Thomas Kahn

because I'm business. right remember the a but we changes trees. to to the to forest had know Are times the don't consultant? so company you John that with an to to a worth past too I little is $XX I the overall We're we that. teller, direction, consumer in whole you what's of accessories consultant a curious And a review you can consultant, have have happening. your be close in I a I need the problem a moving And see have that problem company's share. see I done an just don't truth number recommended hire what John M&A the in saying, to $XX

fresh hired has get mentioned? that M&A you a a is what saying evaluate advisor John you our sometime again of I all give So, had but to times closer in a an to the lifetime was of business, of businesses, consumer you my electronics can recommended I'm set to to the and numbers them number all for we consultant eyes hire So of businesses any that things. I never And you times. our saying hired of see a consultant how we release to and I've all yes mentioned of improve have can it a number review advice, your you all take to that us of get businesses. closer years. have over Doesn't to the consultant's but John the mentioned That's interrogatory. to mean has to get numbers

Pat Lavelle

Tom, our we've years looking heard the you over in at businesses.

We of group. have we've as groups one separating decisions one for at brought that operations in look the European to in indicated. the different -- greater combining into you've made people our two savings moving one, and that on European operation the is synergies accessory And the based number

we So look at the in have brought yes people operation.

so. continue will to do We

Thomas Kahn

Thank you.

Pat Lavelle

welcome. You're

Operator

I'm questions showing any And this not at time. further

Pat Lavelle

Okay. the day. are interest you wish like your there this If no all and further to good morning I'd you questions, I for thank

Operator

conclude this Ladies today's and presentation. does gentlemen,

now may day. Have disconnect. You a wonderful

VOXX International (VOXX) 11 Oct 182019 Q2 Earnings call transcript