Universal Electronics Inc.

Welcome to the Universal Electronics 3rd Quarter 2022 Financial Results Conference Call. At this time, all participants are in a 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 1 on your telephone. You'll then hear an automated message advising that your hand is raised. Please be advised that today's conference is being recorded. I would like to now hand it over to your speaker, Kirsten Chapman from LHA Investor Relations.

Thank you, Therese, and thank you all for joining us for the Universal Electronics Third Quarter 2022 Financial Results Conference Call. By now, you should have received a copy of the press release. If you have not, please contact LHA Investor Relations 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, non-public 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 the 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 introduced this year and during the 2023 CES, including leveraging its wireless connectivity capabilities to climate control, home automation, security, hospitality, and HVAC channels in its groundbreaking line of ultra-low power and energy harvesting remote controls designed for sustainability that will be accepted by its existing customers and attract new customers. The continued successful collaboration with existing and new customers in developing and introducing next-generation products operating systems and technologies which result in increased sales and market capture opportunities for the company. Management's ability to continue to manage its business and inventories and cash flows to achieve its net sales and margins in earnings through financial discipline, operational efficiency, and product line management. The impact to the company's financial results that it may experience due to supply chain constraints, semiconductor supply challenges, and inflationary pressures in macroeconomic conditions and its customers are experiencing, and the direct and indirect impact the company may experience with respect to its business and financial results stemming from natural disasters, public health crises, including the continuation or resurgence of the COVID-19 pandemic, or governmental actions, including war. 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 has filed with the SEC, including its annual report on Form 10-K and the periodic reports filed since then. 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 helps investors evaluate EDI'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 are Chairman and Chief Executive Officer Paul Arling, who will deliver an overview, and Chief Financial Officer Brian Hackworth, who will summarize the financials. Paul will then return to provide closing remarks. It is now my pleasure to introduce Paul Arlen. Please go ahead, sir.

Thank you for joining us today. Earlier this afternoon, we reported very strong third quarter results. Products with more advanced features and IP contributed significantly to net sales of $148.5 million that delivered gross margin of 30.8%. Combined with strong financial discipline and product line management, earnings per share reached $1. exceeding our bottom line guidance of 70 to 80 cents. These results reflect our strategy to improve our sales mix with more highly differentiated products and expand our total addressable market by leveraging our comprehensive, in some cases proprietary, wireless control technology solutions to penetrate new markets in smart home control and automation. Throughout our history, UEI has invested in innovation, to help our customers improve consumers' lives. Our commitment to R&D is steadfast, and we continue to develop advanced technology solutions that carry higher margins. Our mission to apply our proven business model to enter and capture market share in high-growth markets drives our long-term growth. To truly understand where we are going to be tomorrow, it's important to understand a little bit of our history, culture, and past successes that define who we are today and where we believe we can go. Many years ago, we began making simple universal remotes to make the consumer experience of home entertainment better. We held a small share of the video service provider market, but were dedicated, in fact obsessed, with making the experience of configuring and using these products better with each successive generation. As the years unfolded, we developed truly universal products, ones that were upgradable, ones that had features no one else could offer. Our share grew. We never rested. We developed voice-enabled, self-configuring products that truly added value at the consumer and customer level. None of this happened overnight, but as the years progressed, our share grew to the point where many of our products and technologies are now considered the industry standard across the world. In consumer electronics, again, Our focus, in fact our obsession, was to consistently improve the user experience with our solutions. Each year over the past decade, our commitment to innovation has led to technologies that make setup and everyday use of your smart TV an easy and remarkably pleasant experience. This too did not happen overnight, but our team's dedication to enable these solutions in consumer products has consistently helped drive our market share growth and we can now proudly boast that the top three TV brands in the world are using our technology in an ever-growing percentage of their smart TVs. Some years ago, we began a similar journey in the climate control, home automation, and security channels. Again, our focus, in fact our obsession, is to consistently improve the user experience with our technology and solutions. Over the past few years, We have slowly built a 10% market share worldwide in the OEM HVAC channel, and we are just getting started. These newer markets for UEI together approach 2 billion in size, are growing at around 10% annually, and most importantly, are embracing the smart or connected technologies in their new product portfolios. Starting with our demonstrated product and technology leadership and our longstanding relationship with Daikin, the largest HVAC company in the world, we have recently begun to win numerous new projects with the leading names in HVAC across the US and Japan. In addition, over the past three years, we can count a growing list of new project wins at many of the leading companies in home automation and security. including Hunter Douglas, Somfy, Vivint, and other brands we cannot name as their products are yet to be introduced. These customers are counting on us for a variety of innovations, including IP connectivity, greater home control automation, better and more intuitive low-power wireless control in the areas of the home that matter most, and potentially a greater tie-in with other smart home systems, including the most relevant one to us, home entertainment. You might have noticed that I have communicated certain recurring themes at UEI, namely that we are active in markets that grow, our share within those channels is growing, and we have not and will not rest. We will continue our commitment, in fact our obsession, to bring customers continued innovation as well as product and technology solutions that help improve consumer experiences and enable our customers to grow their businesses. As I said at the outset, we continue to implement the same strategy that has made us successful many times before and will once again bring UEI to ever higher levels of success. During the third quarter, we secured several significant contracts that are expected to deliver revenue in 2023 and beyond. I'll review some of them now. One of the top five video service providers in the world expanded our long-standing relationship by selecting our green, extreme low-power technology for the foundation of its new ecological remote control design. As the need to eliminate battery waste and to decarbonize premise equipment is growing, we expect more customers to follow this path. Another large and leading subscription broadcaster has selected UEI for their next generation voice-enabled controller for their state-of-the-art video streaming service. Interestingly, the solution is part of a larger syndication program, meaning that our advanced controllers are likely to be adopted by several of their current systems. As mentioned in our climate control vertical, we have been winning new customers and new projects at some of the largest American and Japanese HVAC OEMs. After we announced the expansion of our Comfort Thermostat platform earlier this year, we have multiple engagements with large customers, several of whom have committed to bringing semi-custom variants of our products to market next year and into 2024. And while timelines for mass market rollout may typically ramp over a period of several quarters, we feel confident that the first customer will start shipping in early 2023. In the home security and automation market, we are also seeing significant successes. Leading brands such as Vivint, Somfy, and Hunter Douglas are expanding their relationship with us by awarding us new projects, and we continue to win new customers in both the pro and DIY security that will bring exciting new solutions with mass market potential. Unfortunately, the nature of these deals does not allow us to reveal any details just yet. Finally, we are getting ready to showcase our latest solutions and technology at CES 2023. It promises to be an exciting event where UEI once again leads innovation in home entertainment and smart home wireless control. I'll preview some of the solutions we will exhibit. First, we'll be showcasing the latest generation of Kwikset Cloud, the world's leading control technology platform for discovery, setup, and interaction with entertainment and smart home devices. We will demonstrate enhanced interoperability with a new smart home control standard called Matter, a recently launched industry protocol that has been adopted by leading ecosystem brands such as Amazon, Google, Apple, Samsung, and Comcast. We now provide television OEMs and pay TV operators an easy path to integrate smart home control capabilities into their video platforms, as well as providing smart home OEMs a simple way to integrate their products into the big screen in the home. In addition, we showcase our cloud-native, innovative smart thermostat platform, TIDE, and all its enhanced control and sensory features. We will be demonstrating how the platform can help create more energy efficiency in the home, as well as how our products can integrate with existing and new smart home systems and services. We also will be demonstrating our award-winning Eterna remote control platform and underlying sustainability technologies. This unique control solution harvests energy from indoor light sources and wireless RF, so you no longer need to replace the batteries in your remote control. The promise to eliminate the battery replacement cycle in low-power handheld electronic devices resonates very well with accounts that have an active sustainability agenda, which includes many of our Tier 1 customers. These are just a few examples of what our teams are working on to create solutions that address the control technology needs of the leading players in the markets we serve. Now I'll turn the call over to our CFO, Brian Hackworth, for a review of the financials. Please go ahead, Brian. Thank you, Paul.