VOXX International Corporation

Good day and thank you for standing by. Welcome to the Vox International Fiscal 2023 First Quarter Results Conference Call. I would now like to hand the conference over to your speaker today, Glenn Winner with Investor Relations.

Thank you. Good morning and welcome to Vox International's Fiscal 2023 First Quarter Conference Call. Yesterday, we filed our Form 10-Q and issued our press release, and those documents can be found in the investor relations section of our website at www.voxxintl.com. An updated presentation will be posted later this week. Today, we will have prepared remarks from Pat Lavelle, President and Chief Executive Officer, and Michael Storr, Senior Vice President and Chief Financial Officer, after which we'll open up the call for questions. I'd 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'd like to point you to the risk factors associated with our business, which are detailed in our Form 10-K. The period ended February 28, 2022. At this time, it's my pleasure to turn the call over to Pat Lavelle. Pat?

Thanks, Glenn, and good morning, everyone. Last quarter, I provided a lot of detail about our segments and outlook. I ended my remarks noting that we expected fiscal 2023 to be more normal in terms of our seasonality with the second half driving profitability, and that remains the case. A slower start to the year, and we believe a strong second half, even in light of slowdown in consumer purchases and car sales. In a few minutes, Mike will provide a Q1 financial recap before we open up the call for questions. My focus today will be on business segments and some of the key growth drivers and near-term hurdles. Starting with automotive, as you know, the global scarcity of chips is hitting the car manufacturers particularly hard, and it continues to impact both our OEM and aftermarket automotive business. Our OEM customers are producing what they can, but the lack of chips is leading to much lower car production, and it is estimated to be down 20% year over year, coming in between 13 and 14 million new light trucks and cars. In fact, the last time car sales dropped below 14 million was in 2011. Additionally, since a significant percentage of our aftermarket business is done with new car dealers, The shortage of inventory on their lots is also impacting our automotive aftermarket sales. We expect the chip shortages to remain well into 2023, but we are working through this and still expect growth in the segment based on projected orders from customers and new programs that are expected to launch in the balance of this year. While the shortages will persist, we are starting to see a slowdown in other industries that utilize chips like computers, laptops, and crypto mining machines. And if this continues, there is the possibility of several chip manufacturers pivoting and allocating more chips to the car makers, which could alleviate some of the near-term pressures. Another area that has been a concern is the run-up in labor costs in the United States, which has negatively impacted OEM gross margins. Although we have mitigated some of the impact through price increases, more is needed to improve margins. And thus, we will move some of our OEM production lines to Mexico, where labor is roughly half the cost. We expect our facility to be ready in August and to be in a position to start shipping products in the start of our fiscal third quarter. These are the hurdles within the automotive segment near term. Our longer-term outlook, based on the programs we've been awarded, RFQs pending, our relationships, plus the massive pent-up demand for new cars is very strong. And that is because over the past approximately three years, we have been awarded $750 million in new OEM awards, most of which are in front of us over the next five years. We have some large RFQs still pending, which could represent another 300 million of awards or more over this same timeframe. On our year-end call in May, I talked about the new awards with Ford and with Oshkosh Defense, both of which were Q1 events. The Oshkosh Award was estimated to be 45 million to start and has a potential value of over 140 million. I also spoke last quarter about other programs we were pursuing with them, and I'm pleased to announce that we will be supplying Oshkosh tilt sensors, shock sensors, in-vehicle speaker systems, and an electronic vehicle sound system for their EV models. The initial awards received now total approximately $60 million over the first five years of the program. Note, however, this is a 10-year program, and this program only represents the first tranche. We expect a complete validation in our fiscal fourth quarter, and we will begin realizing revenue in fiscal 2024 first quarter. With respect to Ford, our relationship remains strong. Beyond the new awards we announced, which total over 200 million through 2027, we continue to discuss additional programs. While nothing is official yet, we are optimistic that we're well positioned on a new RFQ we are pursuing, which could be awarded within the next one to two quarters. As for Stellantis, as you know, we've been awarded a significant amount of business, approximately 400 million of awards running through 2026. However, we have still not fully resolved the CHIP challenges, which may impact some of these programs. As reported last quarter, we presented another option to them, a new board utilizing an alternative chip. And today I'm pleased to report that Stellantis has approved the design and NRE to develop this, and we will be working to validate the board. Obviously, depending on how fast we can move new price negotiations, we should be in a position to start catching up in our third quarter. Our automotive segment is poised for strong growth in the coming years with approximately 400 million in awards with Stellantis, 200 with Ford, 60 million awards with Oshkosh Defense, over 30 million in awards with Nissan, 30 million in awards at VSM with heavy-duty truck manufacturers, and over 30 million in awards for accessories, security, and remote starts with multiple manufacturers. These are firm awards in our pipeline between now and 2026 for the most part. And we have quotes in place with additional awards in excess of 300 million. And we are confident in our position to secure them, giving our technology and the limited competition in this space. Therefore, we could be looking at over 1 billion in OEM awards over the next five years. And this is what's driving our optimism. despite near-term supply chain issues. Moving on to the consumer segment, consumer segment sales were down in Q1, both for premium audio products and other CE and accessory lines, largely due to many of the big box retailers cutting inventory immediately after their first quarter results. As our fiscal first quarter starts in March, this had a direct impact on our Q1 results, Demand from consumer looked consistent, but the big box retailers simply just cut back on buying. And we are watching this closely, and we'll adjust purchasing schedules to keep pace with consumer sentiment. Although segment revenue came in lower year over year, it did surpass our internal projections for the quarter. Despite some economic pressures, there is positive momentum building. Demand for Onkyo and Pioneer products has been very strong since we completed the transaction in September of last year. Back then, we took steps to secure the longer lead items, some as much as 42 weeks out, working through the supply chain issues as best we could. Many of these items start coming in towards the end of the summer, and we will be positioned in the second half of the year to ramp up production and grow revenue and support not only our North American and Australian customers, which we have been doing for the past year, but begin expanding worldwide sales of these products where interest remains high. Near term, the addition of Yankeo, Integra, Pioneer, Pioneer Elite, TIAC, and esoteric electronic brands should help offset any pullback by the consumer and we expect to significantly grow our overall audio business. In addition, over the next two quarters, new product launches should trigger an increase in demand for Klipsch and YAML products, as we will be introducing all new models across several categories, including our new reference line, YAML home theater systems, portable speakers, sound bars, and subwoofers. As for the biometric segment, while revenue was small this past quarter, there were several positive developments, which over the next several quarters should start changing the financial picture of this segment in a positive way. During our fiscal 2023 first quarter, the Miami Auto Mall installed a complete ILOC perimeter access program for building access, network closets, hazardous material location, garages, and lots. They plan to roll out the ILOC program to an additional 25 dealership locations that they own. We also plan to add this program to our automotive aftermarket group since we currently do business with some of the country's largest dealerships. Additionally, we are working with a fintech company, a new relationship established in Q1 to provide both logical and physical access solutions. We are currently in contract negotiations and will provide further details regarding the development and the commercialization once executed. As to the status of the healthcare company, I've talked about for roughly the past two years, the testing phase has continued to go well, and we are on track for a soft launch towards the end of fiscal 2023 to get systems into the field. Since this is a completely new machine for our customer, it will be monitored to make sure all functions of the machine are working properly. And then they plan a full commercial launch. I'm hopeful that before the year is out, we will be able to disclose the details both on the products and the customer we are targeting. Another opportunity is through Marabeni Corporation, our partner since 2020, who is distributing iLok technology in Japan. with a focus on the broader Asia Pacific market. We are currently working together with them, developing a logical access product for Pharma 4.0 in Japan and expect more opportunities with Marabeni as Japan opens up from COVID. At this point, this sums up the activity at Vox during the first quarter and what we are facing in terms of both headwinds and opportunities. The second quarter will be a bit light given some of the OEM challenges and continued chip and vehicle shortages in automotive, and slower purchasing by some of the big box retailers as they adjust inventory positions. And, of course, consumer confidence as we navigate inflation and recession worries. But as I've said, we have some positive offsetting factors, and believe the third quarter, based on the inventory we have on hand or afloat, will provide us with everything we need to deliver a strong second half of the year. Hello, Diane. At this point, I'd like to turn the call over to Michael for the financial review. Mike?