VOXX International Corporation

Ladies and gentlemen, thank you for standing by, and welcome to Vox International Fiscal 2021 Third Quarter Resource 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 that portion of the call, you will need to press star one on your telephone. Please, the advice of today's conference is being recorded. If you require any further assistance, please press star, then zero. I will now hand the conference to your speaker today, Mr. Glenn Wiener with Investor Relations. Thank you. Please go ahead.

Thank you, Carmen. Good morning, and welcome to Vox International's fiscal 2021 third quarter conference call. Our Form 10-Q was filed with the SEC, and we issued our press release after market closed yesterday afternoon. Both documents can be found on the IR section of our website, as can our updated investor presentations. Speaking from management today will be Pat Lavelle, President and CEO, and Michael Storr, Senior Vice President and Chief Financial Officer. Both will have prepared remarks, and we will then open up the call for questions. Our Chairman and Founder, John Shalem, is also available for questions. Note, our call is being webcast live over the Internet, and a replay will be available approximately one hour after the completion of the call. I would like to remind everyone that except for historical information contained herein, Statements made on today's call and webcast that would constitute forward-looking statements are based on currently available information. The company assumes no responsibility to update any such forward-looking statements, and I would like to point you to the risk factors associated with our business, which are detailed in our Form 10-K for the period ended February 29, 2020. Usually, we're here in Las Vegas for this call at CES, but given the pandemic, the show has gone virtual this year, and Vox has had a very large virtual presence. to announce that Paul Jacobs, president of the Premium Audio Group, and Pat Lavelle, president and CEO of Vox, will be hosting keynote sessions as part of CTA's Spotlight Series. Paul will be today at 3.15 p.m., and Pat will be tomorrow at the same time. And I'd encourage all investors, analysts, bankers, anyone joining us today to listen in. You'll learn a lot about trends in the industry and some of the new products we have coming to market. And also visit the Vox virtual booth for more information on the company and our product launches for 2021. If you have any questions, also please feel free to contact me directly at any time. In closing, the company's business momentum continues and its outlook remains strong. And this time I'll turn the call over to Pat now to discuss our results and prospects. Pat?

Thank you, Glenn. Good morning, everyone. Let me start off by wishing you all a happy and healthy new year and all the best in 2021. Our fiscal 2021 third quarter and nine months results are up substantially over last year. There's a lot of momentum behind us, which should carry through into the fourth quarter, and barring any unforeseen events, should continue thereafter. Third quarter net sales were up over 90 million, or approximately 83%. All segments posted year-over-year increases, with the consumer segment up 74%. the automotive segment up 105%, and the biometric segment up 149%. Premium audio continues to be very strong for us as sales more than doubled year over year, up approximately 112%. And we reported an increase in both OEM and aftermarket product sales within the automotive segment. Operating income of $18.6 million was up $18.4 million. And adjusted EBITDA of $24.5 million was up $18.7 million. Mike is going to cover our nine-month comparisons, but to quickly put fiscal 2021 in perspective, sales were up 36.5% and adjusted EBITDA of $35.1 million improved by over $31 million. Our balance sheet remains in good shape. And our cash position will increase this quarter as we move through inventory and accounts receivable. There are so many positive things happening at Vox. We are very encouraged. At the same time, we are mindful about the global environment as the pandemic continues. We are running our business with this in mind. Nevertheless, in spite of all that we have faced, we have been able to move quickly, adjust overhead, and grow. and are poised to have one of the strongest years from an EBITDA perspective. I'll jump into some of the segments for key updates now, but starting with consumer electronics. On my last call last quarter, I said that we expected to see premium audio product sales by over 100 million this fiscal year. And through the first nine months, we are up over 88 million, or close to 70%. Even with retail store closures throughout the year, our third quarter sales grew by approximately 112%, and we're expecting strong growth in the fourth quarter, and thus my prior comment stands. During the third quarter, we saw very strong growth in the home separates category, sales of home theater and subwoofers in particular driven by new distribution, as well as within our traditional channels. We also experienced strong growth in sales of sound bars, Bluetooth products, and our pro media computer speakers. More people are working from home and staying at home, which has led to an increased spending to upgrade home audio and entertainment. We also saw a modest increase in international sales driven by our Magnet and Echo brands and captured our first sales associated with our new alliance with Onkyo and Pioneer Corporation. with our first shipments beginning in September. This will continue to build as we started bringing in inventory in our fiscal third quarter. Demand is increasing, distribution is expanding, and our product assortment continues to improve. The consumer electronics segment as a whole delivered pre-tax profits of 20.4 million in the fiscal 2021 third quarter, compared to $9.6 million in the same fiscal 2020 period. Within our automotive segment, net sales were up 31.5 million, or over 105% for the comparable third quarters, with increases in both OEM and aftermarket products. Our acquisitions of VSM and DEI certainly have contributed to our success and are expected to continue moving forward. The automotive industry as a whole has suffered this year due to COVID, with OEMs shutting down plants, retailers and aftermarket dealers closing stores, and an overall softness in car sales. But they have rebounded somewhat, and we have weathered the industry downturn and are excited with our outlook based on the contracts we have been awarded and those that we are pursuing. The new OEM programs with Fiat Chrysler and Ford for our evolved rear seat entertainment system with Amazon Inspire TV start this calendar year sometime in our fiscal 2022 second quarter. These are the two big ones for us. And there are several other discussions underway with both existing OEM customers and new ones. We also announced last quarter new OEM awards that VSM secured with Volvo, Polaris, and Subaru, all of which are multi-year awards with varying start dates in calendar year 21, 22, and 23. KSA, our 50-50 joint venture, had a strong quarter as well, driven by stronger results in the RV and heavy duty markets and we delivered $1.8 million in income this past quarter versus $1 million in fiscal 2020 third quarter. We had some slowness, if you recall, in the early part of the fiscal year, but this appears to be behind us. Our automotive segment delivered pre-tax profits of $6.6 million in fiscal 2021 third quarter versus approximately $100,000 in fiscal 2020. And when you layer in our core business, With the contributions from VSM and DEI and the new incremental OEM business we have secured, the future looks promising. And I see no reason why our automotive business would not double from fiscal 2020 within the next three years or sooner. As for the biometric segment, there aren't a lot of material updates to provide right now, but there has been momentum. Sales continue to increase modestly on a dollar basis, up approximately $200,000 in the comparable third quarters, but interest is growing in iris authentication throughout many industries, given its higher level of security and due to the barriers that other modalities such as facial and fingerprint are facing. We are in discussions with a number of parties to both products and embedded solutions. We entered into new alliances this fiscal year, which I talked about on my prior calls, and introduced new products, the latest being our Nano-IXT, which has temperature screening, mass detection, and access blocks built in. This is a perfect solution for companies in today's environments. As you all know from the past, it does take time to move from launch, beta, to deals, but we are encouraged by the level of interest and feedback. I'm happy to note that we have concluded negotiations and are in signature process with the healthcare medical supplier we have discussed in the past. We are moving full steam ahead to launch and we will embed into their systems. And this contract, we believe, validates the level of security and ease of use of ILOC's technology within the healthcare space. We are also making progress with respect to the strategic process for ILOC. We signed a non-binding indication of interest with our largest shareholder, BIAT-CALI, and related parties. And due diligence is underway. Technical due diligence is completed. The consortium is put together, runs the gamut of commercial and residential real estate, healthcare and automotive companies. We are hopeful for a positive outcome, but of course there are no guarantees. If this does materialize in the structure we're discussing, it will bring to Vox a strong financing partner while keeping Vox in the game to capture the upside we have always believed was there. To summarize, we are growing and expect this will continue. Profitability has increased significantly, and we are poised for one of the best years from a bottom line perspective. Our premium audio and automotive businesses are doing very well with more opportunities on the horizon, and biometric holds great promise for us. Our balance sheet is strong. We have cash on hand and access to capital, and we are looking to acquire if the transaction improves our business and generate value for shareholders. We set up a 10D5 program to repurchase shares, but the stock has not fallen below $10, thus no shares were repurchased in the third quarter. But we will continue to support our stock, and we will evaluate the best structure to do so moving forward. We have always believed that the best stock support was for the company to deliver profits, and we are showing that right now. All in all, the team has done a great job and I am very proud of them. It has not been easy with most of the staff working remotely and operating our company has been far from normal. I thank them and I congratulate them for their efforts and these results. We have a lot of opportunities ahead of us and I believe that our success this year is a precursor and that future years hold a promise to be even better. At this time, I'll turn the call over to Mike, and then we'll open it up for questions.