VOXX International Corporation

Q3 2022 Earnings Conference Call


spk_0: the day and they give the been a by walking to the vox international fiscal twenty twenty two third quarter with both conference call at this time or protests since arnold with normally mode after the speakers presentation they'll will be a question and answer session to the question during the session you really start or wanting a telephone please be advised her to these conferences they were quarters of your party further assistance please restart the arrow oh no idea of the comfortable with your bigger day and when i have a vessel license please go ahead
spk_1: thank you are good morning local a box international's fiscal two thousand twenty two third quarter cop it's called yesterday we bought our forms and q and issued a press release in this morning we uploaded a new and best presentation and all dawkins can be found in the best relation section of our website at www dot box i m t l dot com or today we're prepared remarks and apple bell reading chief executive officer and michael store senior vice president chief financial officer after which will open up the cop questions i would like to remind everyone that except for historical information contained herein statements made on today it's called webcast i would constitute forward looking statements are based on currently available information or the company seems no responsibility to update any such forward looking statements and i'd like to point me to the respect associate with our business which are detailed in our for ten k and period and in february twenty twenty twenty one hour coming off a very active week and las vegas said see twenty twenty two and next week on january nineteenth and twentieth will be presenting a snow a conference let me and i wish you all a happy new year with and i'd like to thank you for your continued support a box and at now it is my pleasure to trying to call over that that like you glenn and know before i start i would also like to wish everyone a healthy and prosperous new year in a last year we had one of the best her third quarters in our history and this year we did not repeat at those levels given the strength of last year's to three but on all we had a strong core we outperformed our plan exceeding our latest projections for revenue margins and operating income and nothing has changed with respect to our outlook we see growth and improve profitability going into next fiscal year and beyond especially with the new only m award we received this past quarter from still lantus which is estimated to be approximately one hundred and twenty five million dollars before i cover the results i want to address the see god electronics arbitration they are a former supplier of ours provide a stolen vehicle recovery systems and we signed they supply agreement with them in two thousand and seven and more than ten years later they file claims to breach of contract and pat infringement throughout the process we have been advised by legal counsel that the case was unlikely to go against us and if it did or exposure was not material a few million dollars than most based on that advice the company did not specifically disclosed this matter in footnote twenty four two it's financial statements which covers contingencies
spk_2: the initial damages that was sort with ten million
spk_1: and the day before the fact witness portion of the arbitration concluded see guard amended it's claim and sought forty million dollars you arbitrator allowed this to happen and awarded see guard thirty nine point four million dollars in damages needless to say we was shell shocked by this there's no other way to say it and we are going to fight it we have reviewed are legal options and made a motion and the arbitration proceeding to modify the interim award based on the plane language of the supply agreement if this motion is unsuccessful we intend to seek the california court to vacate or modify the award on legal and ethical equitable grounds while the initial award is the thirty nine million we are not paying this out rather we took a charges quarter which is reported that other income and reflected on our balance sheet the about every law firm we spoke to afterwards concurred with our initial assessment and believe the arbitrators ruling was agreed years as the calculation of damages it was an equitable and that she overstepped her authority as an arbitrator we had a new california based national law firm to represent us to vacate or modify the award one specializing in these types of situations currently we have three options seek a modification a reconsideration of the interim award seek to have the court vacate modify or correct the interim award or negotiate we are aware of the challenges and having an award overturned challenging but attainable and are confident we will get the case hurt we have been advised there is precedent for modification given that facts of the case how this process unfolded and the legal basis of the ruin or balance sheet a strong and we have cash insubstantial availability of availability on our credit facility and again we are not paying out cash at this time i should the ruling be overturned the modified and result in a lesser amount we will reverse the charge accordingly resulting in a potential positive pick up in that income the process could take up to a year or more until it's resolve and we are going to exhaust all options
spk_2: now let's move to the a business in the third quarter as i stated we did not repeat the exceptional performance of last year's fiscal third quarter but we did beat plan and remain on track to finish the year on a positive note with significant growth prospects ahead
spk_1: in june three we reported that sales of one hundred and ninety two million dollars less than five percent had it not been for some only and customers pausing production due to their chip and porch your the jews we would have come in around last year's que three gross margins while down year over year were about one hundred basis points higher sequentially compared to queue to and came in better than forecast the second wave of price increases we instituted are having a bigger impact offsetting the higher cost of doing business automotive segment was impacted by temporary pauses that only and plants and tie the margins due to price increases fire operating expenses were primarily a result of our the and engineering expenses within the automotive segment to support new oh yum launches and the addition of the audio engineering team operating income of seven point eight million was down ten point four million year over year and adjusted ebitda of fifteen point five million down nine point two million but again or bottom line performance came in above clamp i'll give you a quick snapshot of are you today performance through que three total net sales are up seventy one million or close to eighty percent gross profit margins a doubt two hundred and forty basis points due to the sharp run up and supply chain related costs but gross profit dollars are up nine point four nine point four million due to higher education and adjust the gb of thirty million is down five point three million considering the difficulties posed by court in labor shortages and price increases transportation and where housing cost increases the global pandemic and twenty twenty and it's resurgence in twenty twenty one we have managed true at all
spk_2: we got fiscal twenty one was tough managing to covered but i have to say and my forty plus years of doing business fiscal twenty two has been the most challenging by for all things being equal i am proud of the team we've grown were profitable and have many paths to create value let me move on to the segments for the quarter
spk_1: what about of segment sales were up year over year by about one hundred thousand dollars with oh yeah product sales up to a point four million and with after market down four point three million primarily due to chip shortages and some delays as we moved from airfreight to boat driving are only m business where i see programs with for the lantus and nissan an ongoing business with the top heavy duty truck manufacturers such as diamond truck parked car volvo and navistar lol these events have driven oh yeah i'm sales growth volumes have been less than initially expected given chip and part shortages and the starts and stops with our customers production in light of the price increases we constantly negotiate with suppliers and customers and even more so in recent months as we incur a higher costs we must cover them we got some pick up from the second wave of increases we to the last quarter and expected to see a bigger impact in the fourth quarter as some can track with quiet a notice period before taking effect
spk_3: by the end of the year
spk_1: the amount of segment will have nearly doubled from where we were in fiscal twenty twenty were expecting more significant growth and years ahead based on the awards with to that we have secure it the good news that i have to report today is the new always am a word with the lantus our original award with slanted was for approximately three hundred million dollars based on their put revised projections the ward forecasts now is about two hundred and seventy five million and this guy the chrysler pacifica the jeep wagoner the jeep cherokee vehicles for model years twenty twenty two to twenty twenty six we received an additional word for the dodge ram covering model years twenty twenty four to twenty twenty six which is estimated to be approximately one hundred and twenty five million dollars so style answers now represents awards of approximately four hundred million with horde we receive their initial award for seventy five million dollars covering the lincoln navigator and the ford expedition commodities years twenty twenty two to twenty four this award is now projected at eighty million dollars and we have the twenty million dollar award from nissan for our ecosystem and we have have a variety of awards from the truck manufacturers and tier one suppliers for approximately thirty million some spanning as long as ten years this equates to approximately five hundred thirty million dollars and a we have awards we have received that would pass to and he have two and a half years out with production in it's early stages is there were three other things driving our optimism for remote i talked about adding up other potential customers for amazon fire tv prior to the supply chain outbreak tell that any industry environment held back negotiations on projects for more recently we've begun to see increased activity and this bodes well for future growth as any additional oh yeah and business with layer on top of our core and being equal mental business we've already been warning the i has performed better than projected and they added strong brands and a powerful distribution network we are the clear cut leader and after market security and remote start with the best selling products in the market the same as i indicated has received the number of long term only m awards while expanding it's customer base we have production secured for many years out and new products coming to market adding new oh yeah channels and product lines was a big reason behind this acquisition and as beginning to tell results
spk_2: you can summarize our automotive segment in a sentence we continue to window e yum awards with a lot of room for growth as we penetrate new customer accounts moving on to consumer electronics
spk_1: our consumer electronics segment sales declined by approximately six point seven percent in the third quarter as we expected and are up eleven point two percent year to date premium audio product sales last year benefited from exceptionally high order volume with more stay at home purchases and new sales from the pro media speaker watch we took steps in the first half of the year to secure inventory to be customer demand and we succeeded yeah acquisition of o further strengthen the segment with seven point eight million and higher sales of two three of fiscal twenty one we are aggressively working with sharp to rebuild manufacturing and distribution and the demand is certainly they're buying any additional supply chain issues or unforeseen events we believe we can reach sales of one hundred and twenty five million next fiscal year with a goal of reaching two hundred million as we expand worldwide the addition of akio integra and the pioneer brands along with cliffs and are other speaker brands gives us the ability to offer our retailers and consumers a much wider assortment of complete sophisticated home audio solutions year to date premium audio sales are up sixteen point seven percent at i'd say yes to plenty more your company showcase it's twenty twenty two product lineup to another year of a lot of excitement we had strong media coverage and customer interest and all out i'm just going to go all three of the new lines we did you but you can read more about them on the club's website
spk_4: the glitch jubilee
spk_1: is the new flagship product of the heritage speakers years it is a worn loaded to a loudspeaker incorporating the latest acoustic technology and design to deliver the ultimate and listening experience that clips jubilee is price that thirty five thousand dollars a pair the new clips reference speakers features track tricks horns for high frequency reproduction resulting in soundstage quality
spk_5: of up
spk_1: lastly the mclaren edition of our fives powered speakers features a high efficiency as be amplifier for high relative and resolution an ultra low mass carbon fiber for enhance performance this take the best from both mcloughlin racing and clinch same with and consumer are other products sales primarily accessory lines were down five point seven percent year over year and que three and five point three percent year to date nothing was out of the ordinary sales were down modestly across several categories due to limits on inventory supply and some this usually we may to address rising costs in lieu of certain sales our customer relationships remain very strong and we expect to expand with some key accounts in the coming year for example are sensation program has done very well with cosco canada and be secured the fiscal twenty three program with more than to try and provide our reception programs with or more have been very strong wrong in the us and we will be adding additional scuse to our lineup and have expanded programs with them and other retailers throughout north america
spk_6: overall
spk_1: we're operating a smaller but profitable business which globally should be ninety to one hundred million in sales we always looking to enhance our product lineup and remain focused on stable and profitable growth
spk_7: moving on to biometrics
spk_2: and a biometric segment remain relatively flat for the quarter
spk_1: and as and is up fifteen point six percent year to date we received the first payment from galvanize following approval of the agreement at our annual meeting of shareholders and the cash receive will be accounted for on our balance sheet not flow to the gross profit as initially for this is because galvanize has the right to convert to equity based on the value of pays the i live in the future but during the quarter we made progress with respect to current projects and secured future awards first the health care ward we received we are on schedule for beta launches in the coming quarters and deployment in late twenty twenty two with a ramp up thereafter to galvanize into three we awarded new business from switzerland based customer life sciences and entered into an ama say and license agreement with a home health care and a i died last this company additionally we are working on a prototype for an autumn all in miami and if successful we plan to roll this out through our automotive aftermarket group delivery a separate you want to fiscal twenty two and during the third quarter i love also was awarded a small piece of business from a us government agency we also made a change in management appointing allen i bought to the role of president of iraq based on his extensive background and knowledge of the market right individual for the job he has over twenty five years of experience in technology has served as the ceo of technology companies including data transfer solutions a business he cofounded and successfully ran before it was sold to as and see la in one of the largest companies and canada he has very strong relationships with target customer accounts particularly would government agencies there are several projects i lock is currently working on that have great promise and as we have learned from the past these do take time especially when discussing embedded solutions and them out modifications that are typically require some of the more recent work is centered around access control systems authentication software for heh op care professionals in pharmacies and embedded applications in large volume public settings
spk_8: in closing
spk_1: we continue to perform well in what is a very challenging and right we remain on track with our sales forecasts for the fiscal year with the only caviar being the car manufacturers keep to their production schedule next year should show grow up with schedule oh yeah launches and the addition of akio gross margins have and should continue to improve modestly near term especially as the automotive price increases take call and oh he ends returned to more consistent production and operating expenses are in line with a prior comments with the second half increase primarily related to i'll or indeed an automotive engineering let me make it clear we are not chasing growth at the risk of losing profits we are focused on securing a long term profitable partnerships we've proven to be agile and discipline and with the foundation we built over the past few years leave the company can dr significant top and bottom line improvements at this point now during the call over to my
spk_9: michael like thank you pat good morning everyone and i too will start with my well wishes and twenty twenty two happy and healthy new year to all let me start with a bit more detail around sales for two three and you today comparison a que three oh i am sales increase with the one to so i am program driving sales growth this is new and incremental business ourselves with ford were also up with increased violence related to the ford explorer program finally the sam's away i'm sales were up almost forty percent year over year after market sales were down roughly four point three million due primarily to supply chain issues and heavy a loaded last year as had discussed the three biggest categories were impacted were satellite radio fulfillment backup cameras lighting products and turn signals which is which collectively made up approximately two point six million of the climb with the rest spread out and offset by growth at our the i subsidiary which was up over eight
spk_10: percent year over year
spk_9: year to date automotive segment sales were up thirty eight point six million with though i am sales of seventeen point four million and aftermarket sales up twenty one point two million oh am growth was due to higher rear seat entertainment sales and higher virus was the lantus ford as well as significant increases in sales and bsm there were a number of was setting factors of the app the market and overall growth was primarily driven by the addition of the of the de i subsidiary which was armed with a poll nine months and fiscal twenty twenty two within the consumer segment we had lower sales the last year's core cpu three down nine point three million premium wireless speakers and whole separate speakers were down twelve point six million combined with the decline directly related to shipping delays and shortages as well as chip shortages resulting a product backwaters we had high load into and sales last year quarter three for a pro media speaker line which was introduced that eleven to c possibly contributor decreasing by seven point eight million principally due to akio and tiger and pioneer products as noted in september the acquisition of all okay home entertainment group was completed and we move from a distributor to an honor with higher sales expected we build distribution and ramp up production with sharp and rgb pull our jb partner consistent with patch remarks sensation has performed well and que three sales were up overnight be sent vs que three of last fiscal year
spk_11: year to date
spk_9: year to date or consumers segment is up thirty two point three million with premium audio driving the increase eleven p c contributed to this growth of twenty five point five million year to date premium home theater speakers wireless accessory speakers and sensation was a three look biggest gainers within the segment biometric segment pack covered gosh mortgages were down jewelry hundred basis points in que three and two hundred forty basis points here today i think we've covered the impact in detail throughout the year and up and it's pretty much the same story we have an able to mitigate the high cost of doing business to to price increases institute throughout the fiscal year the second price increase was put in place in queue to and had a positive impact or que three margins of ninety bases
spk_12: sequentially
spk_9: the full impact however was not felt as i am customers typically required notice period as had also mention and will start to absorb some of these costs and que four and a few one of fiscal twenty twenty three the pauses with only a custom reduction also impacted gross margins during the quarter but on the positive side gave us a chance to change some of our logistics and future horse operating expenses one liners quarter no surprises and consistent with our cue two cops call remarks we had a three point nine an increase in operating expenses and eight and four million of expenses primarily due to occupy to the o j they are really impacting engineering and technical support expense line for the nine months here today period we're the twenty three point three million year over year increase in operating expenses there were approximately six point eight million of non recurring expenses we outlined in our cue to call to the first six months of fiscal twenty twenty two four point eight million for professional fees and two million for and henri and outside labor we also had eight million of expenses that were added in fiscal twenty twenty two for the d i subsidiary and for for a load employees and salary and bonus reductions d i we own for the full eight months and fiscal twenty twenty two and five months and fiscal twenty twenty one and the real with lottery late to the reduction we implemented in early stages of covered in fiscal twenty twenty one then we have the additional four million of expenses related to the akio acquisitions this least four point five million with the remainder made up of hire professional fees related to the cigar arbitration hi already expenses for various projects across each segment expenses related to our newest trillion premier
spk_10: audio company subsidiary and they were other offsetting factors
spk_13: you'll see acquisition costs and all right in our income statements the que three increase was approximately three hundred thousand and year to date increase was three million this is a cooperative professional fees i just provided an operating bases operating income of seven point eight million a toothy represents a decline of ten point four million as we about outlined
spk_9: to put this year's qc performance in perspective the last time reported higher than eight million and operating income with fiscal twenty fifteen
spk_13: we had increases and other income expenses primarily due to the see guard arbitration i believe this is the cover thoroughly sauce big only to the financial impact which resulted in a car at not have charge of thirty nine point four million
spk_9: for two three interest and by charges increased by three hundred thousand to two points to a shareholder alone as a result of the capitalization of our new akio subsidiary was shot the jv cap allies with a portion of equity and a portion of shareholders loans the set up the tax structure we had a decrease in interest expenses related to a credit facility equity in some of our equity of investors sees which relates to our fifty fifty joint venture with a a say increased by four hundred thousand
spk_13: which was offset by an increase in other net expenses in income
spk_9: your to date interest and bank charges declined by four hundred thousand equity an income of our equity investor the increased by two and a half million up more than fifty percent representing growth and improve profitability of a as say with minimal impact elsewhere net income the trivial to box was adversely impacted by the arbitration decision that as a reminder currently the cash is not been paid out and there is a possibility is could be reversed or portion of it and future periods of we are successful in our legal person we reported adjusted ebitda of fifteen point four million and the third quarter and adjusted ebitda of thirty million year to date compared to twenty four point six million and thirty five point three million for the comparable period this represents the clyde nine point two million and five point really and versus fiscal twenty twenty one third floor and nine month period in summary of over thirty sales record were opposed to eighty percent and we had over five million of adjusted ebitda year to date and we are only five million or adjusted ebitda year to date we have how lot of added courses you're dealing with the supply chain cause delays which we have worked a country to work to mitigate hire professional fees related acquisitions please note we added akio which will result in higher expenses without the full impact the production yet though next year we expect to increase the top line generate production efficiency and bottom positive bottom line contribution and our cash is anticipated to follow historical patterns and increase in the fourth quarter that includes my remarks operate we're ready to open up the call for questions
spk_0: thank you as a reminder tessa question you'll need to press star wanting a telephone to withdraw your question press the pound key of how the cuny roster our first question has on brian rutenberg with imperial capital your line is open
spk_1: yeah like very much ah good quarter operating on couple quick questions in terms of price increases you stated you are increase prices in the second quarter can you give us a ballpark i know it's a large of a products but on average how much you increased i in the second quarter and how sticky those price increases were and then on the fiscal year can talk about price increases how much you've gone up guilt for these first job three quarters of that this fiscal year a it it does range from product category product category
spk_14: the based on
spk_1: you know changes in the logistics cause the bringing in containers especially for a big a products we've seen increases in excess of twenty percent in our consumer group we've had a and multiple increases are all along whether or not we are taking product by air freight with some surcharges and things like that because the airfreight vs boat really changes the picture on the land and cost of the products right i can't give you one solid number but needless to say we're we're well above double digits within our
spk_15: automotive girl
spk_1: and them over twenty percent within the earn the consumer group okay so that on the year at that correct roughly ah or north of twenty percent consumer via yeah our phat automotive yeah that would be on the year and then obviously you know what we're assessing is what does the future look like are we going to continue to see any or of the combination of the chip problems increase chip cause increased raw material costs increase trucking cause increased ah in afraid coming in from overseas so as as some of these problems mitigate throughout the a year in a will be will be adjusting and and and a matching it to where we believe you know these costs are going to come in but the but let me let me just say this one from a chip shortage standpoint we believe that the chip problems will last for the car manufacturers well into physical twenty i mean challenge and twenty two profit possibly into twenty three and that's something that you know obviously we have a rough time determining exactly what that does as they move chips around to build certain vehicles and take chips away from other vehicles so you know that's the cabbie out that i gave was as long as they stay to the production schedules that they've given us we should be we should be pretty good okay ah thank you very much for that color that's helpful and i know that you don't give specific i guidance on a quarterly basis but i was trying to understand at least trans i'd comparing you person make it last year or something like that as we look forward in the fourth quarter i you grab an audio contributing i have revenues should be better than a fourth quarter last year overall is that and right statement a you know it all depends on on what we get in product were in in the case of ah kill were getting pretty much were selling everything we get our hands are so nothing sitting around everything is going out the demand is very strong arm so depending on a sharp primarily holding to production schedules and not having issues either with coded where it shuts down the plants and things like that ah i'm you know we expected to continue to expand our rob are on feel sales okay and then in terms of are you typically have a drop in gross margins and lead for fiscal quarter or over out on do you anticipate that with his new mex with on the oh come on and and everything going on with you still see a said it's a quench all from third quarter to fourth quarter a dropping gross margin
spk_5: or kind of maintain on bravo
spk_1: what we're looking at it we're looking at improving on origins in the near term as i as i've said because some of the price increases we've already put through ah you know the sixty or ninety eight periods are have expired and respect those price increases to go into effect so this might be a little bit different and are typical fourth quarter ah from the margin standpoint as we expect to see improving margins arm as price adjustments come in ah and and the merchandise that will be selling in the fourth quarter is pretty much do you know in the barn said meaning that are the been on expected costing a lot of for importing those goods you know much there will be some because we are still waiting on some some product deliveries okay that's very helpful i and then just in terms of operating expense at is in the third quarter looking at third quarter expenses yeah just the normal ongoing the selling je ne engineering export is aren't yet fully in their eyes are we the people a model from those levels going forward or do we still need them i up a little bit yeah malarkey else in the are for for the quarter we we starting september ah so they were in there for the for the full third quarter we we expect to see the same are there could be in our again in a part of the the overhead calculation mom we will we parted with as you know is the amount of product that they can ship us okay the more they ship was ah the lord the cost them carry of the japanese offices
spk_16: a got ah i understood i and then i pivoting real quick and then all i i yield before i take i'd is yell on the that potential arbitration settlement yell with the guard on
spk_1: oh i could you tell us a timeline i i i believe that there's going to be certain milestones in february and yeah can you walk us through what we should be looking for in terms of decisions from either courts or i know it's not necessarily appeal but i'd wear the next steps are in the next milestones and the timing of those milestones i read in all the yard we we have we have asked the arbitrator to review the award the in terms of work that will be done some time in february and then from there it's going to be based on the decision she makes as to whether or not we take this to either federal court or state court ah so you know what i said is he could be much as a year or more
spk_16: okay ah thank you very much
spk_17: i'd run
spk_18: thank yannick fussing has her my again
spk_19: the line itself and
spk_20: happy new year thank you for taking my car on your office cat thank you i've got two questions related hear comments that you made and yard for marks sell first as long time and she participants am i would love a little bit more color on what you're seeing in the supply chain and if applicable out whether or not you're seeing any signs and that supply chain and logistic trends are and
spk_21: proving vs last quarter
spk_1: okay via email from a standpoint of pricing we do see some modification ah of pricing on on the logistics side but we are not we're not taking that in one hundred percent only from the standpoint depends it depends on the volume of goods coming in and we also are concerned about the army crime ah i'm in a really taking hold a different parts of asia which could create shutdowns at ports and plants ah and once that happens and pricing will start when you know reflect that so but if i was if everything was to stay ah you know on course i would think we'll see some drop and logistics cause as far as bringing products in ah i don't believe you're going to see much in the way of love ah chip prices changing much
spk_7: and you know where up fifty two weeks on on lead times for for purchase of of needed chips i don't i don't think that chase for some time and twenty three
spk_1: but as far as logistics
spk_20: and the thing that could hit the logistics that could raise the prices again ah is is going to be a breakout of file called a covered in in the different countries that's very helpful and and then my second question is and you're right here mentioned that i stay at home really drove order volume four am
spk_1: premium audio products last year and what are your ignorance thoughts on consumer demand for premium audio products and what are the implications for eclipse considering that you just drop the three new lines of speakers right a yacht know what what we've done it's job we had a big launch a bar var computer speaker last year and that that was particularly appropriate for a stay at home situation so we had large sales there we knew those sales would not repeat of the level that they were last year but when i look at the overall reform a seventeen percent in our premium audio business the over the years the demands ever made strong now obviously some of that the man comes from ah the dollars in stimulus dollars that were in the economy on bought at this particular point i've got a blue be a good portion of that is gone for christmas and we had a very solid
spk_20: the news i'm the projections were were looking out to go forward basis ah general as i said and in the past we do believe this businesses sustainable
spk_0: wonderful thank you so much
spk_22: you're welcome
spk_1: you never mind that has a question of the supreme press stuff or then one or next question comes from allen for albert finney with or capital align itself and
spk_22: i got thanks for take my car or just pointing go back to the these arbitration issues again on is my understanding that there's been to claims brought under arbitration wanted to breach contract where there's been a multi million dollar award and there any second quarter being heard with respect to patent infringement not or some chatter in the market at the patent infringement claims that so much larger claim could you could you comment on that are provided guidance
spk_1: on you know the magnitude of a potential award now know i also get that you've been condemned defied by your suppliers on a plane night and but i've known as well as a lawyer myself he he are usually very new difficult to enforce from from an indemnity point of view the help that that that would be helpful there you could start there and and of get another one on defeated doctor first
spk_23: okay well the first one is you know we do not believe that of the patents for self we do not be infringed upon a get ah
spk_22: i'm and secondly as you might imagine that we do have of damage their by any infringement if we want to lose a case would be based on the number of products that we sold and that would be the determining factor for the most part as to what any play would be paid and therefore based on that we do not believe in
spk_1: that it would even dignitary it in could you gotta on on revenues generated from the products that those party her imprint a relentless print know
spk_5: at this particular point because we're in involved in a case i'd i would not be at liberty to discuss that
spk_22: okay that that's fair not and then the second question are hired and again i've been involved a few of these arbitration disputes
spk_1: if it's if you will feel that award or gets entered as a judgment into a state or federal court my understanding that is the appeal it you have to post a bond a cash bond so could you do common i know you know the the the payment as and crystallize but there there could be a pain that there needs to go into court at some for some point could could you comment on that well as the thing is is that first of the there is no peeled process in the in and in an arbitration where he the guy to sit and speak with the arbitrator to see if she can the modify the word in some case if that's not successful than we we plan to take it's a federal or or state court if we have to post bond we've already discussed with our insurance companies the and it would not be
spk_22: again in our estimation would not be material as that the past the post that bond okay and that than the last question on this matter is a i understand under the terms of your revolver that you are able to draw funds to incur additional debt and i would assume that means the the any any of those judgments so with twenty million dollars cash on balance sheet
spk_1: i know you know cash reserves men higher but assuming you know have to posted bond or or or pay out that award clutch a
spk_22: potential patent infringement award not did you do you think you have enough capital the are many go back in the market or whether and equity raise or or or some type of daddy hillary up not we we we can choose our facility ah anyway we want at you may be alarmed so we're free to getting out and use that money and anyway while providing we have enough inventory and enough accounts receivable ah to support of the you know the level of evolved out of facility that we have which we do
spk_1: okay and then than the last point we've we've picked up on some data showing your your imports for a consumer electronics have trended down and and as publicly available information from not of edgy that and and i'm just curious why imports have dropped off in november and december dog the you're quite a clip that job and just wondering and comedy that that a supply chain issue and partnering up in inventory of it without that be great thank you where it worse if a good business and this is the time that the or inventories would start to come down after the holiday seasons we also had ah you know getting ready for the holiday season brought in sufficient amount early to make sure we have enough inventory for the holiday season so this is this a very typical of what you would see or inventories would come down and we would in fact cash up
spk_0: towards the end of our fiscal year so it's cyclical
spk_24: okay thank you very much you're welcome
spk_1: thank you and impression of us at this time i tend to call back over the parallel for or mark
spk_0: well thank you all

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