VOXX International Corporation

Good day and thank you for standing by. Welcome to the Vox International Fiscal 2022 Fourth Quarter Results Conference Call. At this time, participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. And if you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Glenn Weiner, please go ahead.

I was connected on the phone, but it disconnected. Good morning, and welcome to Vox International's fiscal 2022 fourth quarter and year-end conference call. Yesterday, we filed our Form 10-K, initiated our press release, and documents can be found in the investor release and section of our website at www.voxintl.com. An updated investor presentation will be posted later this week. Today, we will have prepared remarks from Pat LaBelle, President and Chief Executive Officer, and Michael Storr, Senior Vice President and Chief Financial Officer, after which we will open up the call for questions. John Shallum, Chairman, is with us today and available for questions and answers as well. 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 end of February 28, 2022. I'd like to thank you for your continued support of Vox, and it's my pleasure to now turn the call over to Pat.

Thanks, Glenn, and good morning, everyone. I'll start today with a few comments on year-end and fourth quarter, and then focus on the upcoming year. I'm quite proud of the Vox team and how they performed during a year full of economic turbulence and issues beyond our control that impacted our performance and that of many of our key customers. Despite this, revenue was up close to 13%. All segments grew year over year, and we reported adjusted EBITDA of almost 40 million. During the year, We acquired the Onkyo and Integra brands and formed a JV with Sharp Corporation. We established a new licensing and distribution agreement with Pioneer. We added international brands through distribution agreements at our 11TC subsidiary. We had our first full year owning Directed Electronics where we expanded our product portfolio and extended our leadership in automotive security and safety. And we continue to win new multi-year OEM awards in automotive with two new awards received since fiscal year end. These positive developments have opened up new avenues for growth and I believe higher profitability in the future. Ship shortages will continue to have an impact near term on OEM production and remains the number one obstacle for our OEM customers. Thanks in part to our decades-long relationships with many of our suppliers, we have been able to manage through many of the supply chain issues and continue to secure inventory to meet our customers' needs. We have increased our inventory carry to allow for additional lead times in procurement and shipment. This will require a higher volume of inventory, but enables us to serve our customer base better and with minimal distributions. Although the overall container and chassis situation at the ports has improved, the COVID shutdowns in China are a concern, and if this continues, will disrupt supply for many companies. We are watching this closely to get ahead of it. And finally, we continue to negotiate price increases with our customers in the fourth quarter to offset higher costs and believe these actions have improved our margin structure going forward. As for fourth quarter comparisons, total revenue was up modestly, gross margins improved, and the increase in operating expenses was primarily due to the Onkyo acquisition and the establishment of Klipsch Australia. We were profitable with operating income of $3.2 million and reported adjusted EBITDA of $9.3 million. The consumer segment revenue was up $3.4 million with premium audio driving the growth Gross margins improved by 360 basis points and should continue to get stronger as we ramp up production at Onkyo, resulting in higher profitability. As said, our automotive segment continues to be impacted by component and ship shortages for vehicle production that led to all of our OEM customers missing delivery targets. Revenue was down $1.9 million and gross margins declined by 610 basis points, again, due primarily to the increased cost of components. We continue to negotiate with our customers to revise pricing to reflect higher component and shipping costs. And if not successful, we may be forced to refuse some new orders. Although these challenges will exist moving into 2023, we expect our automotive business to grow based on all of the new awards that will launch over the next few years. Additionally, this will be the third year in a row that car manufacturers have not kept up with demand. And this, to me, is an indication that even in an economic downturn, demand for new vehicles will be very high. So let me jump into the segments and staying with automotive. During fiscal 2023 first quarter, I am pleased to announce a new multi-year award from Oshkosh Defense. estimated to be approximately $45 million to start and with a potential value of over $140 million. Vox Automotive will be providing a newly developed camera system to Oshkosh that will be used in the U.S. Postal Service's new fleet of next-generation delivery vehicles. The initial program will be for 50,000 vehicles and is expected to grow to 165,000 vehicles over the lifetime of the contract. Mass production is slated to begin this year in our fiscal third quarter, with revenue realized over the next four to five years for the first 50,000 vehicles. We are also working on other projects related to this program, noisemakers for their electronic vehicles, tilt sensors, and in-vehicle speakers, which could increase the total value, although no firm contracts are in place for these items. Amazon Fire TV for Ford and Stellantis and the EVO program with Nissan are in production. And as I stated on our last call, volumes are coming in less than expected due to lower production from the car manufacturers. As you may recall, on our fiscal 2022 third quarter call, we increased award projections for the Ford Rear Seat Entertainment Program to $80 million and spoke of other opportunities in progress. I am happy to report those opportunities have now turned into awards, and we've revised the program up substantially, adding new vehicles while extending the program through 2027. The new programs cover various model years for the aviator, explorer, navigator, and expedition, and now brings the total expected value of four awards to over $200 million. There are additional programs we're discussing with Ford, which we hope will lead to more awards throughout the year. Our relationship with Ford remains very strong. As for Stellantis, we've previously announced awards for approximately $400 million, covering the Pacifica, Wagoneer, Cherokee, and Dodge Ram vehicles, ranging from model years 2022 through 2026. In light of all of the part shortages and delayed production, we are taking a prudent approach and expect this to be revised downward. We were recently advised by TI Texas Instruments that our chip allocation slated for this November has been moved back to January 23. And therefore, to combat any further delays in this program, we presented another option to Stellantis, a new board utilizing an alternative chip. If acceptable, we expect a quick validation and would be in position to resume production in August and with minimal disruption. If everything is agreed to, we're hopeful we can catch up through the lifetime of the award as market conditions improve and based on the pent-up demand I mentioned. We should know more by next quarter. And it was just yesterday that Stellantis announced that they are rescinding some of the burdensome contract terms for North American suppliers, and we are hopeful that the alternatives that we have proposed are decided on quickly. Additionally, truck manufacturers are producing strong numbers, and we have previously announced new programs with companies such as Daimler Truck, Paccar, Volvo, and Navistar. This bodes well for our OEM business with trucking companies as the numbers they have projected are being met, despite the fact that they are only accepting approximately 55% of the orders they are getting, according to one of the most recent Wall Street Journal reports. If Stellantis approves the new board, we should see strong growth in our OEM business this year. If we can only ship the inventory on hand through 2Q, our OEM business may be flat in the fiscal year, but will pick up thereafter. Lastly, our aftermarket business continues to grow. From $65 million in sales in fiscal 2020, nearly doubling to $118 million in fiscal 2021, and $136 million this past fiscal year, our brands, products, and distributors continue to drive this group. Moving on to consumer, the consumer segment sales grew from 280 million in fiscal 2020 to 398 million in fiscal 2021, and this past fiscal year to 434 million, due largely to the growth in premium audio. Premium audio sales have doubled over the past two years, coming in at 344 million this past year. Sales are coming in roughly at targets, but even here we've experienced some challenges securing chips for sound bars and Wi-Fi modules used in AV receivers, which hindered some of the growth in Q4. Despite the chip issues, we still grew during the year, and as soon as the chip supply loosens up, we believe we have opportunities to expand beyond plan. My view of Onkyo remains very positive. and we believe we can grow this group to over $200 million over the next two to three years. We have new Klipsch products coming to market this year with expanded distribution. We had strong growth within 11TC, and our international business performed well, both in the EMEA and APAC regions. We expanded distribution in China, Hong Kong, Taiwan, Vietnam, and Thailand, and opened our first South Korean distributor in Seoul. In Australia, we established our own direct operation and will be more competitive in this important marketplace. In fiscal 22, we launched the Klipsch heritage speaker line, introduced the first Klipsch sound bars with Dolby Atmos technology, and established the McLaren and PGA partnerships. We set up distribution for Esoteric and TIAC brands sold through 11TC and captured higher market share in target EMEA regions. The big story, of course, was Onkyo, which will drive growth within the consumer segment this year. Within our biometric segment, although sales were relatively flat for both the fourth quarter and fiscal year, we have a number of projects which are set to launch in fiscal 23. We have new projects beginning in the banking sector and in automotive and will expand within healthcare as we've discussed previously. Additionally, we have new management in place, we have significantly reduced overhead, and we expect financial improvements as we move through the year. In closing, you know, there are already hurdles lining up for this year. The supply chain remains a concern as securing chips will continue to be challenging. As indicated, we need to modify our program with Stellantis. We also have the Seaguard arbitration ruling, which is now in U.S. District Court in California, with the judge expected to rule on our motion to vacate or modify the award on June 3rd. And, of course, there is inflation that is impacting the consumer. However, we have momentum and opportunities for expansion across all of our segments. I'm confident in our ability to generate both top and bottom line growth this year and moving forward. The awards received, the acquisitions we have made, and some of the programs we have in place or are pursuing should ensure this. Higher volumes at Onkyo, increased automotive aftermarket sales, higher OEM business, and a strong pipeline for ILOC are key factors that should drive our success. Our margins should improve based on the steps we have taken this past year, providing costs stabilize. We expect fiscal 23 to be more normal in terms of our seasonality, lower in the first half and significantly stronger in the second half, which should drive profitability. Thank you. And at this time, I'll turn the call over to Michael for the financial review. Mike?