Universal Electronics Inc.

Good day and thank you for standing by. Welcome to the Universal Electronics Third 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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, Kristen Chapman at Alliance Advisors Investor Relations. Please go ahead.

Thank you, Julie, and thank you all for joining us for the Universal Electronics Third Quarter 2024 Financial Results Conference Call. By now, you should have received a copy of the press release. If you have not, please contact Alliance Advisors 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 discussed during this call, will be available on the company's website at 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 the climate control HVAC and home automation markets through the development and delivery of unique innovative solutions, including the company's TIDE platform and excellent customer service as anticipated by management. The continued growth of the company's business in the climate controlled space by attracting OEM industry leaders to our products 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 achieve improved results as expected by management. The continued strategic expansion of the company's IP portfolio and monetization, including licensing of the company's technology. The company's ability to capture potential upside opportunities in traditional subscription broadcasting business due to its continued strong leading market share, and the importance of the company's quick-set differentiation and innovative remote control and one-for-all brand design wins, and the direct and indirect impact the company may experience with respect to its financial business results stemming from the continued economic uncertainty affecting consumers' confidence in spending, rising energy and freight costs, natural disasters, public health crises, governmental actions, including a reduction in and providing incentives to businesses worldwide, the risk of doing business or operating in certain parts of the world, 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 the documents the company has filed 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 budgeted 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 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 core operating and financial results and business trends of competitors and other companies. A full description and reconciliation of the adjusted non-GAAP measures versus GAAP are included in today's press release. 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 depreciation related to the markup from the cost to fair value of fixed assets acquired in business combinations from its adjusted non-GAAP figures. This impact adjusted non-GAAP gross profit, gross margin, operating income or loss, income or loss before provision, benefit from or benefit from income taxes, and net income or loss in the quarterly results for 2023 and 2024. There is no impact to GAAP results. A reconciliation of these measures is posted on the website in the quarterly results section. On the call today 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's now my pleasure to introduce Paul Arling. Please go ahead, sir.

Thank you for joining us today. As projected, our customer product development and footprint optimization initiatives are beginning to deliver growth and profitability. Q3 2024 net sales were 102 million, solidly within guidance. Gross profit increased 380 basis points year over year. And our bottom line continued to improve with Q3 EPS reaching $0.10. We expect these positive trends to continue with top and bottom line growth over the prior year period for Q4 of 2024. Our outlook also includes continuing this successful trend of sales and earnings growth into the full year 2025 and beyond. I'll review some of the elements driving our optimism and supporting our outlook. In the connected home, we continue to foster relationships in climate control with many of the top OEM brands in North America, Europe, and Asia. The HVAC industry has not been as robust as prior years due to temporal challenges, such as lower housing starts and tempered government incentives. But it clearly has the potential for latent demand to build over the next few years. As the markets return, We expect to expand new product opportunities with our existing accounts. In the meantime, we are continually making progress to build our market share, working to qualify new product opportunities and build on our existing sales pipeline for 2026, 2027, and 2028, which accelerate future growth. In Q3, we continued to garner share. With Carrier, we began shipping our first advanced smart thermostat. We have been working collaboratively with Carrier to ensure our first product together delivers the full capabilities that their consumers demand. While we are excited about this new product launch, we are equally enthusiastic that Carrier has expressed strong desire to expand our business, and we are already actively engaged in discussions about several new climate control products that they would like to add to their lineup. With Daikin, we continue to align our respective development roadmaps to support their product priorities and timeline. In 2024, we had a number of new and replacement products, which were previously on hold, released for development kickoff, including their next generation Wi-Fi adapters that deliver predictive maintenance capabilities for their authorized dealers, as well as several major new models with expanded features and functionalities. Many of these products will be released during 2025 and into 2026. Our TIDE platform continues to garner design wins. We are currently in the final stages of development for two of the top 10 global HVAC OEMs. These products are scheduled to launch early next year. Also in combination with our TIDE Bridge, our TIDE Dial smart thermostat is undergoing final user testing with a major European utility company. We expect this solution to be launched in 2025. Additionally, we have secured design wins for a smart hub gateway with Hunter Douglas and two new wireless RF controllers with Sanfi and major motorized shade controller brands. We also recently introduced a Zigbee spark thermostat for a major North American security brand and have signed a national distribution agreement for our line of professional security sensors. Turning to the markets in general, there are many growth drivers increasing future opportunities. The global HVAC market is being driven by rising energy costs with increasing demand for energy efficient solutions fueled by new government incentives. In the US, the expanding multi-dwelling unit market and the increasing consumer awareness of the significant energy efficiency and convenience benefits of smart thermostats are creating prospects. Also, government incentives, energy savings, technological advancements, and financing options are helping to make heat pumps more affordable and attractive to a growing number of homeowners. This market change in equipment and an associated change in control technology has fueled our business for decades, and we are positioned to benefit from this opportunity going forward. In home entertainment, we know OEMs can be cautious as TV buying trends have fluctuated. Yet, we are increasing our attraction with companies striving to differentiate their offerings. This includes customers with whom we have longstanding relationships, as well as new market entrants looking to disrupt traditional business models around television advertising. In Q3, we grew share with multiple telecom providers in the video space across North America and in Europe. Our QuickSet software continues to offer differentiation that enables us to secure product design wins for our entertainment remote controls with new customers worldwide. In Q3, we secured a major design win for our battery-free remote control that uses UEI's photovoltaic energy harvesting solutions. Essentially, the device captures energy from ambient light and stores it in the built-in supercapacitor such that the remote can operate without the use of traditional replaceable batteries. This product will launch bundled with a video display platform in 2025 that will bring a unique video infotainment and advertising experience to U.S. households. I think you'll be quite impressed with this solution when it is introduced early next year. In September, we exhibited at two major conferences. At the International Broadcasting Conference, or IBC, in Amsterdam, we demonstrated many of our latest hardware and software product solutions and presented proof of concept solutions that showcased our Kwikset device and service app discovery solution running on broadband gateways. Our solution was well received by multiple operators in North America and Europe. and we look forward to a positive outcome for potential new design wins. At the IFA consumer technology trade event in Berlin, we launched our latest one-for-all category, desktop and gaming TV mounts. Our new product line was well received, and the OFA team was able to secure orders from many of our retail partners for this new category. Overall, our retail business is showing positive growth momentum after several years of flat sales growth. Looking ahead, we will be exhibiting once again at the International Consumer Electronics Show, or CES, in January 2025 in Las Vegas, as well as the AHR, or Air Conditioning, Heating, and Refrigerating Show in Orlando. We will showcase new capabilities of our tied thermostats, including an improved and private whole home occupation detection. on-device occupancy-based automations, new energy utilization insights, and use cases around matter integrations. We will also showcase our next generation of Kwikset and Nevo AI with new personalization and engagement capabilities across entertainment and connected home applications. We will also provide key customers a sneak peek at our next generation smart thermostat platform, built from the ground up on a new architecture optimized for an interconnected home, one that offers a comprehensive suite of smart managed services and features, and the ability to support scaling across multiple distribution channels and customer applications. We're excited about what these innovations will bring to our customers' products and look forward to seeing you there. Now to the financials. Brian, please go ahead.