VOXX International Corporation

Good day, and thank you for standing by. Welcome to Vox fiscal 2024 second quarter 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'll 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 speaker today, Glenn Wiener, President and Chief Executive Officer. Please go ahead, sir.

Thank you, Norm. I appreciate it. Good morning, and welcome to Box International's fiscal 2024 second quarter conference call. My name is Glenn Wiener, President and CEO of GW Communications, investor relations firm for Box. Yesterday, we filed our Form 10-Q and issued our press release, both documents of which can be found in the investor relations section of our website at www.box.com. Speaking from management will be Pat Lavelle, Chief Executive Officer, and Michael Storr, Senior Vice President and Chief Financial Officer. Their remarks will be followed by questions and answers. As for today, I'd like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that 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 28th, 2023. Thank you for your continued support, and it's my pleasure to now turn the call over to Pat.

Thanks, Glenn, and good morning, everyone. Not much has changed since our first quarter remarks in July. As the global markets remain challenging, consumer spending is down, and the automakers are still having production issues. With that said, we saw some modest improvements in our business this quarter, which helped combat the overall softness in the economy. As we look out into the second half of the year, we expect to see top-line growth compared to fiscal 2023 and to be profitable. The extent of our growth and profits, however, will be very much dependent on the state of the car markets, especially now with the UAW strike and, of course, the consumer. We're doing what we can to combat anything that comes our way, and in 2Q, we took significant actions to do just that. We initiated a significant restructuring program, removing headcount and lowering our nonessential spend across the company. We exited several third-party agreements and restructured contracts to lower fees. We completed our OEM manufacturing transition to Mexico for most of our OEM product lines, which will reduce costs and help improve margins. And we continue to work with our supply chain to redo pricing with more favorable terms while moving out of our inventory positions to protect our balance sheet. We're essentially taking out everything we can based on lower sales volumes without impacting our ability to serve our customer and innovate. As for the 2Q quarter results, sales were down approximately 10% year over year and up 1.5% sequentially. Gross profit improved by 190 basis points driven by gains in our consumer segment. Operating expenses improved by over 5% and roughly 10% when you take out restructuring expenses. While we lost money in the quarter, our operating loss improved by 1.5 million. and we reported flat adjusted EBITDA, which was $3.3 million better than 2Q of last year. Within our consumer segment, consumer sales were down $10 million year over year, with premium audio down roughly $16 million, and other CE product sales up $6 million. Our premium audio business has been hit hard over the past 18 months after a great run during the early stages of the pandemic and the year that followed. Over the past few years, however, we faced global supply chain issues, a deteriorating global economy, and a very challenging retail environment with high inventory positions and rising interest rates, changing the way retailers operate. I'm not saying that we're out of the woods yet, but we are now. We expect the trend to reverse and to post-growth again as we've retooled some of our products and have several new launches in the second half of the year with customer programs to support them. Premium audio sales were up 5.6 million sequentially, and we're expecting to see continued sequential growth in the third quarter as it's the beginning of the holiday season and for our third quarter to come in higher than last year. The speaker category overall is down, and many of our competitors are in the same positions. In a most recent NPD report, the speaker market is down roughly 16% year to date, and Klipsch continues to maintain its number one market share. Further, some of our business was down compared to the same quarter last year due to heavy promotions last year and a big program at Costco that launched in 2Q of last year. Now, that's the past, and what's driving our optimism for growth over the next few quarters are our new products. We have retooled our sound bar offering and have a slate of new sound bars coming to market during the second half of the year. The Klipsch Flexes will be launching before the year is out, and it's the first-ever product developed in tandem by Klipsch and Onkyo. Our new party speakers are doing very well, and new launches are planned in the second half of the year. This is the hottest category in CE, as I mentioned on our last call. We will soon be launching our new Clipsh Music City portable Bluetooth speakers that can broadcast to other Bluetooth speakers in stereo and other speakers around the house or outdoors. Hookup is very simple as you simply stream content through your devices. Our new subwoofers, recently introduced this year, are doing very well. and have received excellent reviews, which should help continue to drive growth in this category. And as we announced previously, the Klipsch reference premier speakers will be on the Dodge Ram EV trucks with an impressive 26-speaker sound system. This is the first entrance of the Klipsch brand into automotive, and we believe this is a new area of growth as other automotive manufacturers recognize the value of the Klipsch brand. Other CE product sales, as I mentioned, were up 6 million, and the growth was driven by our new solar balcony power product launched by Schweiger in Germany, and to a lesser extent, our new RCA hearing aids, which we introduced this past May. Our accessory business overall continues to be, especially our core products, continues to be impacted by the economy, but more so by consumer spending. For example, TV sales are in a slump. And now, we don't sell TVs, but we do sell a lot of products that are attachment sales, such as remotes, antennas, cables, and wall mounts. Virtually all of these categories are down, but during the second quarter, we saw growth in reception, remote, and wall mount products, despite the industry being down. We are maintaining our market share, if not growing it. As for our automotive segment, Automotive segment sales were down 1.8 million or a little less than 5%. Our OEM business grew by 1 million as some of the material shortages began to loosen, and we fulfilled several back orders, particularly at code for remote start and security applications. VSM sales were up close to 5%, and our rear-seat entertainment programs were down for the quarter. OEM was up, but the obstacles we and the industry face continue to hinder our growth. Our aftermarket business was down for the quarter by 2.8 million, and we expected declines given the high inventory positions our customers have carried and the overall retail environment. But the good news is that the inventory bottleneck is beginning to loosen. The automotive aftermarket overall continues to be challenged with some puts and takes. On one hand, we see an increase in car sales. However, the largest part of the increase is that fleets instead of retail car sales. And additionally, where car dealers would normally offer aftermarket products to increase profitability, the tightness in inventory and strong demand has allowed them to just add market adjustment increases to the stick of price. We now expect with the potential of an extended UAW strike that inventory tightness will continue. But with that said, The other OEM contracts that are in place, even at lower than projected volumes, should help drive top line. However, it's the bottom line that we're focused on most. We instituted price increases, reworked our supply chain network, developed new technologies using different chips given availability, and transitioned most of our production lines from Florida to Mexico. We're beginning to see the positive impact of all these moves and should see further improvements in the coming years with production overhead coming down more significantly next year. And looking ahead, we have new programs with Ford for the Lincoln Navigator and Ford Expedition. Our new lighting program with Nissan starts next year. And our program to support the new postal trucks also starts next year. As for our biometric segment, sales came in approximately 200,000, lower than the prior year in our budget. This was primarily due to lower licenses and, again, to some projects being pushed out. Everything that we have talked about on prior calls remains in place. We're continuing to work with car dealers, infrastructures, governments, financial service companies, and on healthcare programs. With respect to the latter, we recently submitted our final prototype to our partner, which is now in the final step of validation. Production should begin by the middle of next year, and we expect other opportunities to arise with this customer and others once it's in the field, and we are focused on growing our embedded solution portfolio. To sum it up, the second quarter was expected, and we're not pleased with our results for the first half of the year. We've taken more aggressive actions to combat the economy and other issues we're facing, and the past actions coupled with the recent restructuring will help improve margins and lower our costs. We expect growth in the second half of the year based on the contracts we have, the new programs we've secured, and both the new products we've launched and will be launching. Of course, we're mindful of any further deterioration in the economy, and we expect markets to remain hard-pressed for the next year or so. If things worsen, we'll take more action, but we believe we have made the necessary adjustments in our business to drive profitability in the second half and to start fiscal 2025 in a more competitive position. One last item to discuss before I turn the call over to Mike. As you may have seen in our earnings release in the Form 4 that was filed yesterday, we have a new strategic investor in Vox, Gentex Corporation, a company that we currently do business with, entered into a stock purchase agreement with Avalon Park LLC and Avalon Park Group Holding AG, both of which are controlled by Biatkali, our president and one of Vox's largest shareholders. Collectively, Avalon has agreed to sell 50% of its holdings to Gentex or approximately 3.1 million shares in two separate transactions. The first transaction of 1.57 million shares was completed on Friday at $10 per share, representing a 32.5% premium to our stock price as of October 5th, the day prior to the transaction. The second transaction of the same amount will be in January 24, and the stock price will be based on the formula as noted in our release. When complete, Gentex will own approximately 15.1% of our Class A common stock and will become one of our three largest shareholders. When Vyat came on as president, one of his primary focus areas was strategic partnerships. This was probably his number one priority as we were looking to align with industry leaders to help drive growth and value in our business. And with Gentex, we have found a great partner as we are collaborating with them in both our biometric and automotive segments on current projects while concurrently looking to drive innovation in our offerings to grow our joint businesses and market share. Steve Downing, who serves as CEO and President of Gentex, also sits on our board, and this alliance is one that we believe holds great promise for our company and our shareholders. And with that, I'll now turn the call over to Mike to review financials, and then we'll open it for questions. Michael?