Universal Electronics Inc.

Good day and thank you for standing by. Welcome to the Universal Electronics Second Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to Christine Chapman, LHA Investor Relations. Ma'am, please go ahead.

Thank you, Lee, and thank you all for joining us for the Universal Electronics Second Quarter 2021 Financial Results Conference Call. By now, you should have received a copy of the press release. If you have not, please contact LHA at 415-433-3777 or visit the Investor Relations section of the website. This call is being broadcast live over the Internet. A webcast replay will be available for one year at www.uei.com. Any additional updated material, nonpublic information that might be discussed during this call will be provided on the company's website where it will be retained for at least one year. You may also access that information by listening to the webcast replay. During this call, management may make forward-looking statements regarding future events and future financial performance of the company and cautions you that these statements are just projections and actual results or events may differ materially from those projections. These statements include the company's ability to timely develop and deliver new technologies and technology upgrades and related products that will be accepted by our existing customers and attract new customers, including the company's QuickSet family of products and technologies, the Apple TV remote control, Nevo Butler Entertainment and Smart Home Hub, and our voice-enabled, AI-powered, and other advanced wireless control products, technologies, and platforms. The positive traction that management is seeing in the various markets and industries in which it serves coming to fruition as expected by management. The continued successful collaboration with existing and new customers in developing and introducing new next-generation products operating systems and technologies which result in increased sales opportunities for the company. The continued trend of industry toward providing customers with more advanced technologies by offering hybrid platforms expanded smart home offerings and interactive services. Management's ability to continue to manage its business via new product development, product mix and deliveries, increased licensing opportunities, and continued operational and administrative efficiencies to achieve its net sales, margins, and earnings as guided. Interruptions in the company's supply and logistics chains, including the impact that the global shortage of integrated circuits could have in causing delays in production and delivery of its products. the successful defense, protection, and enforcement of our patents and other intellectual properties through licensing and or litigation efforts, and the continued effects that natural disasters and public health crises, including the COVID-19 pandemic, have on our business and management's ability to anticipate and mitigate those effects, including the duration, severity, and scope of the COVID-19 pandemic and the actions and restrictions that may be imposed on the company and its operations by federal, state, local, and international public health and governmental authorities. The company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today's date and refers you to the press release mentioned at the onset of this call and the documents the company files to the SEC. In management's financial remarks, adjusted non-GAAP metrics will be referenced. Management provides adjusted non-GAAP metrics because it uses them for budget planning purposes and for making operational and financial decisions and believes that providing these non-GAAP financial measures to investors as a supplement to GAAP financial measures help investors evaluate UEI's core operating and financial performance and business trends consistent with how management evaluates such performance and trends. In addition, management believes these measures facilitate comparisons with the core operating and financial results and business trends of competitors and other companies. A full description and reconciliation of these adjusted non-GAAP measures versus GAAP is included in the company's press release issued today. On the call, our Chairman and Chief Executive Officer, Paul Arling, will deliver an overview, and Chief Financial Officer, Brian Hackworth, who will summarize the financials. Then Paul will return to provide closing remarks. It's now my pleasure to introduce Paul Arling. Please go ahead, sir.

Good afternoon, and thanks for joining us today. We are pleased to see demand increase in general, which bodes well for our business. However, due to semiconductor component shortages, and some logistical challenges late in the second quarter, we were unable to fulfill all of our orders, causing our sales to be slightly lower than we expected. Despite these temporal challenges, our continued focus on technology innovation, strong customer relations, and operational excellence expanded our operating profit to 10.5%. We delivered EPS of 98 cents, a second quarter record for UEI, that was above both guidance and consensus. Our ongoing commitment to innovation continues to broaden the use cases and diversify our customer base. The transition from traditional remotes to advanced devices continues to happen at different rates and degrees across the globe and our channels. For the US pay TV market, we continue to see adoption of newer, more advanced platforms at most major operators. The penetration is rising as customers upgrade to new systems. In addition, to amplify the stickiness of their offerings, broadband operators are increasingly introducing IP-only or streaming set-top boxes. Examples include our customers' products, Comcast Flex, DirecTV Stream, and TiVo Stream. International growth is also accelerating. In Europe, we are seeing increased penetration of voice-enabled systems with leading operators such as Liberty, Sky, Vodafone, and Orange. In Latin America, we recently announced new design wins with Android remotes for Claro and MegaCable. And Momentum is also visible in Asia Pacific, where we expect to launch two more new voice remote deployments in Q3. Regarding our Apple TV remote for MVPDs, we are gaining traction. In Q2, we started shipping launch quantities to our first customers, including Deutsche Telekom. There are more customers shipping and preparing for launches planned later in 2021 as well as 2022. Unfortunately, due to commercial contracts, we cannot share those names at this time. Although we can't give specific numbers, we can say we have seen a healthy level of interest from both North American and Western European operators that have adopted the Apple Video Partner Program. The remote has been very well received in the press and with operators due to its unique features as well as its great design and usability. As such, it is also expected to do well with customers that use the Apple TV platform. Moving to consumer electronics, we see the same trend with increasing demand for advanced software and hardware control solutions. As many of you know, our product and technology offering in consumer electronics is very broad. For TV OEM brands, we supply finished goods such as infrared, RF, and voice-enabled remotes, as well as technology integrated in the form of system-on-chips and quick-set software licenses. In this channel, we continue to further penetrate the product families inside the core TV platforms that represent over 30% of global TV demand and growing. including such major smart TV brands as Samsung, LG, and Sony. As I shared on the last call, these brands continue to see market share brand growth across their TV lineups. I'd like to provide an update on Nebo Butler, our voice-enabled smart home and entertainment control hub. First, I want to reiterate that the Nebo Butler will be serving many different use cases across different sales channels. To name a few, it can serve as a far-field voice solution for television operators, as a voice-enabled smart home gateway for security providers, or as a room automation hub for hotels. Also, while it is an end-to-end white-label solution, we also see growing interest in its ingredient features, such as the latest Kwikset cloud services, Kwikset widget, interoperability as a service, remote management service, and virtual agent service, to name a few. One such example is the implementation of Kwikset in LG's WebOS TV, which provides the platform for seamless home entertainment and smart home control capabilities and integrates several of the services initially introduced in Nevo Butler. LG is now making its WebOS TV platform ecosystem available for more TV brands to adopt. The first end-to-end Nevo Butler implementation is currently in a field trial with a major European telco, and we are working closely with our partner in creating a seamless experience with their voice assistant for video and television content search, delivering a branded experience including their own custom wake word. We are preparing to ship initial quantities late in Q3 and expect to provide further details later this year. Users demand choice and flexibility to interact with their trusted services and voice assistants across devices, and we are committed to making this future a reality. UEI has been actively involved with the Voice Interoperability Initiative, and last month at Alexa Live event, we demonstrated how customers can use their preferred voice assistant on Nevo Butler. QuickSet continues to be the de facto solution for simplifying universal discovery, control, and interaction of devices within the home. Earlier in the year, we announced our QuickSet widget. This turnkey multi-protocol connectivity solution takes full advantage of our QuickSet services in delivering a complete IoT experience optimized for the home, such as interoperability and remote management, and our virtual agent. The quality, scalability, flexibility as well as security of our services is what set our Kwikset widget apart from alternatives. In Q2, we won our first Kwikset widget project with one of our HVAC customers for shipments expected to start early next year. Kwikset widget is also used within our own connected home solutions. It is integrated in our own comfort family of connected thermostats that we introduced earlier this year. We have seen strong interest in this platform from multiple HVAC customers, especially due to its smart capabilities and interoperability with legacy or non-smart air conditioners, as well as other smart devices currently found in the home. The first model is in full development and is expected to begin shipping in volume early next year. We hope to share more details on this new customer win at that time. We are confident more customer wins will follow later in the year. Now I'd like to give a brief update on licensing and litigation. As you are aware, we invest heavily in innovation, and many of the leading companies in the industry, including Samsung, LG, and Microsoft, among many, have licensed our IP to power unique, ease-of-use features into their products. When companies use our technology without a license, we first attempt to work with them to either purchase products from us or become a licensee. If they choose not to do so, we need to protect our IP with litigation with the goal of either signing a license or ceasing use of our intellectual properties. Unfortunately, we have reached this level with Roku, and I have an update regarding our ongoing litigation. We are pleased to report that we've received a favorable initial determination in our ITC case against Roku. This initial finding has determined that Roku infringes UEI's intellectual property and the judge has recommended the issuance of a limited exclusion and cease and desist orders. This finding is currently under review by the full ITC and its final determination, including the issuance of the limited exclusion and cease and desist orders, is expected no later than November 10th of this year. The patents at issue in the order cover innovations relating to UEI's patented QuickSet technologies. The patents at issue are just a few of more than 600 UEI patents and applications broadly licensed across our products, technologies, and service platforms to companies in the video services, consumer electronics, security, home automation, climate control, and home appliance markets. We are pleased with this decision as it represents a positive and key milestone in our ongoing litigation against Roku. Since before this litigation began, our view on this was and still is the same. We have worked hard over the past decades to create truly unique technologies and features that enhance the user's home control experience. We are willing to reach a mutually acceptable agreement with anyone to allow the ongoing use of our patented technology. Our ultimate goal remains to ensure that we receive fair value for our innovations, just as we have done broadly with other leading entertainment and home control companies across the world. I'll now turn the call over to our CFO Brian Hackworth for a review of the financials. Please go ahead, Brian. Thank you, Paul.