Universal Electronics Inc.

good day and thank you for standing by welcome to the universal electronics second quarter 2024 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 will then hear an automated message advising your hand is raised to withdraw your question please press star 1 1 again please be advised that today's conference is being recorded I would now like to hand the conference over to your first speaker today, Kirsten Chapman with LHA Investor Relations, Division of Alliance Advisors. Please go ahead.

Thank you, Andrea, and thank you all for joining us for the Universal Electronics 2024 Second Quarter Financial Results Conference Call. By now, you should have received a copy of the press release. If you've 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 of this call, including any additional updated material, non-public information that might be disclosed during this call, will be available on the company's website at www.uei.com for one year. 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 continue capturing design wins in the connected home and home entertainment markets, particularly in the climate control and home automation markets through the development and delivery of unique and innovative solutions and excellent customer service as anticipated by management. The continued growth of the business with the company's largest customers in the climate controlled space, which can be leveraged to attract industry leaders to our product and technology offerings. Management's ability to continue to manage its business through cost-saving initiatives and optimization of the company's manufacturing facilities and cash flows to be achieved improved results by expected by management. The continued successful expansion of the company's IP portfolio and the licensing of the company's technologies. The company's ability to capture potential upside opportunities in a traditional subscription broadcasting business due to its continued strong leadership and leading market share, and the direct and indirect impact the company may experience with respect to its business and financial results stemming from the continued economic uncertainty affecting consumers' confidence in spending, natural disasters, public health crises, governmental actions, or political unrest, including war, terrorist activities, or other hostilities. 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 documents the company's file with the SEC, including its 2023 annual report on Form 10-K and the periodic reports filed or furnished 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 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 in 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 are included in the company's press release issued today. Also, the company will no longer exclude excess manufacturing overhead costs resulting from the continued transition of its global manufacturing footprint, specifically in Mexico and Vietnam, and the depreciation related to the markup from the cost of fair value of fixed assets in business combinations from its adjusted non-GAAP figures. This impacts adjusted non-GAAP gross profit, gross margin, operating income or loss, income or loss before provision or benefit from income taxes, and income or loss in the quarterly results for 2023 and 2024. There is no impact to GAAP results. A supplemental table of these reconciliations is posted on the website in the Q2 2024 quarterly results section. On the call today are Chairman and CEO Paul Arling, who will deliver an overview, and CFO Brian Hackworth, who will summarize the financials. Paul will then return to provide closing remarks. It's now my pleasure to introduce Paul Arling. Please go ahead, sir.

Thank you for joining us today. Our innovative wireless control solutions and patented technologies continue to capture design wins from major global household brands in both the connected home and home entertainment markets. We lead wireless device control and our design wins are laying the foundation for a stronger future. We are fortifying our business by building new customer relationships and, as we always have, expanding existing relationships. We are expanding our IP and technology portfolio and importantly reducing our expenses while still investing in the future product and technology solutions that will drive future growth in sales and earnings. We continue to focus our cost management on optimizing our global manufacturing footprint, which has yielded higher margins. In the second quarter of 2024, gross margin increased 580 basis points over the prior year quarter. As a result of these efforts, we were more profitable in the first half of 2024 than we were in the same period in 2023. Looking forward in the second half of 2024, we expect to be more profitable than in the second half of 2023. In addition, we are positioned to deliver consistent sales and earnings growth into 2025, 2026 and beyond. Now I'll review our markets and some recent customer activity. We continue to execute our successful land and expand strategy. Once we get our foot in the door, our design and development expertise, superior technologies, and great customer service continue to deliver new product design wins. We have demonstrated this tactic in home entertainment, building our share to become the global leader in universal control technology. Emulating the same approach in climate control and other markets, we are targeting the largest providers in the industry, and have already secured design wins with seven of the top nine that meet our margin threshold. Now we are scaling with these customers and are in discussions about projects with the remaining two. These relationships tend to be very sticky and we look forward to extending our reach. Our history with Daikin, the world's largest climate control company, exemplifies this strategy execution. Daikin was an account we acquired through an acquisition in 2010. At that time, Daikin represented less than $5 million of our global revenues, and our product solutions were comprised mostly of handheld and Walmart controllers, and we represented less than 10% of Daikin's total controller purchasing. Today, UEI is Daikin's largest climate control solutions provider, and our portfolio of products has expanded to include advanced cloud-connected and Zigbee-enabled thermostats that connect to sensors around the home that deliver a more optimized energy management solution for consumers. As a result of our design, development, delivery, and service quality, we are proud to call Daikin a 10% customer for UEI. Our goal is to scale our existing business with other industry leaders, including Carrier, Trane, Fujitsu, Mitsubishi, Toshiba, and LG, while adding new customers that are world leaders in this important growing market. Looking at the connected home and climate control in particular, we expect continued growth driven by rising demand, government incentives, and a focus on energy efficiency and sustainability. While the industry is still working to clear accumulated inventory, we expect the temporal issue to be resolved by the end of 2024. Meanwhile, there is no doubt that the trend in climate control is to more energy efficient, greener products. Product development amongst the world leaders in this industry are intensely focused on driving this change. HVAC manufacturing providers are introducing more energy efficient heat pumps that are becoming more common than the rest of the world. This market change can tend to introduce complexity, however. Many homes still need supplemental heating to handle more extreme cold. And with other smart home products and technologies entering everyday life, there is a growing desire and need to simplify the setup and use of these sometimes disparate systems into a single, simple user interface. This is exactly the type of challenge that has been our hallmark for decades. And our solutions are gaining traction with world leaders in this market because we have long demonstrated our excellence in this challenge of interoperability. In smart home automation, we are at the early stages of building a solid foothold in delivering smart control solutions for major household brands, leveraging a strong pipeline of new product introductions, including smart thermostats, connected remote controls, smart sensors, and more. In addition, our hospitality channel, which includes multi-dwelling unit integrators, is building momentum as we begin to penetrate the major smart home automation service providers in this channel. These customers offer smart apartment systems integrating our turnkey climate control and sensing solutions. This channel represents strong long-term potential for retrofit upgrades and new building opportunities. In home entertainment, We continue to see a level of stabilization in orders across our customer base. While some of our customers continue to experience declines, others are showing some resilience, and we are seeing a level of activity that we have not seen in the past three years. Due to our strong market position and leading product and technology solutions, we are able to capture any potential upside. Our engagements include supplying control devices for hybrid streaming and live services, providing sustainability technologies and solutions, supporting full-service refurbishment programs, as well as engaging with broadband suppliers to bring new functionality to their gateways. Overall, the combination of existing long-term customer relationships in home entertainment and the momentum we are building with new customer relationships and connected home continue to bear fruit and will drive long-term growth. Now to the financials. Brian, please go ahead. Thank you, Paul.