Universal Electronics Inc (UEIC) Q2 2024 Earnings Call Transcript Highlights: Key Financial ...

In This Article:

  • Gross Margin: Increased by 580 basis points over the prior year quarter.

  • Net Sales: $90.5 million, compared to $107.4 million in the prior year quarter.

  • Gross Profit: $26 million or 28.7% of sales, compared to 22.9% in the second quarter of 2023.

  • Operating Expenses: Decreased to $27.1 million from $29.2 million in the prior year quarter.

  • SG&A Expenses: Decreased to $19.7 million from $21 million in the prior year quarter.

  • R&D Expenses: Decreased to $7.4 million from $8.2 million in the prior year quarter.

  • Operating Loss: $1.1 million, compared to $4.5 million in the prior year quarter.

  • Net Loss: $1.2 million or $0.09 per share, compared to $3.1 million or $0.24 per share in the prior year quarter.

  • Cash and Cash Equivalents: $23.1 million as of June 30, 2024, compared to $42.8 million at December 31, 2023.

  • Net Cash Provided by Operating Activities: $2.7 million for the six months ended June 30, 2024.

  • Share Repurchase: 122,000 shares repurchased for $1.1 million year-to-date.

  • Line of Credit Reduction: Reduced from $55 million at December 31, 2023, to $41 million at June 30, 2024.

  • Q3 2024 Guidance: Sales expected to range from $98 million to $108 million; EPS expected to range from $0.01 to $0.11.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Gross margin increased by 580 basis points year-over-year, indicating improved profitability.

  • The company has secured design wins with seven of the top nine climate control providers, showcasing strong market penetration.

  • UEIC's Vietnam facility has successfully scaled operations and received high compliance recognition.

  • Operating expenses decreased, reflecting effective cost-saving initiatives.

  • UEIC has a strong pipeline of new product introductions in smart home automation, indicating future growth potential.

Negative Points

  • Net sales decreased from $107.4 million in Q2 2023 to $90.5 million in Q2 2024, reflecting a decline in revenue.

  • Certain customers pushed out orders from Q2 to Q3, impacting quarterly performance.

  • Net loss for Q2 2024 was $1.2 million, compared to $3.1 million in Q2 2023, indicating ongoing financial challenges.

  • Cash and cash equivalents decreased significantly from $42.8 million at the end of 2023 to $23.1 million at the end of Q2 2024.

  • The company is still facing headwinds from cord-cutting in the video service channel and reduced consumer spending on discretionary durable goods.

Q & A Highlights

Q: Paul, I want to dig in on the comments you made about inventory issues. I think that was in HVAC and tie that to your comments in the last couple of quarters about a back-half ramp in some of these new design wins for Smart Thermostat. So kind of where are we and what's the outlook for that next couple of quarters with those products? A: A couple of elements to that question. One, on existing designs that we have out, we have seen -- and I think any inventory that they have, may have been, for them, forecasting a better second half than they're seeing. We have seen in certain parts of the world some of the incentives for these new energy-efficient technologies drawn back a little bit. We and our customers who have experienced this do not think it's long term. These incentives are typically put in place -- not to get into more detail than we should here, but the heat pumps and other energy-efficient technologies are typically more expensive to the consumer. So governments across the world have incentivized them. We've even done some of that here in the US because they want to incentivize the movement towards these products. They do not -- they can cool your home and heat your home without using any fossil fuels at all or natural gas. So essentially, they're incentivized. Those incentivized were drawn back, so some of our customers feel that that will be impacting demand as we go through the rest of the year. But they don't think it's long term because, again, the movement towards these technologies has been happening for some years and will probably continue into the next decade or two. All of the companies, as I said in the prepared remarks, are spending a great deal of time and effort and money on R&D in making these heat pumps even more efficient, even more affordable, and maybe even get them to the point where they could replace, even in the northern climates, the combination of AC and furnace, which is really what they're attempting to do long term. So those incentives are also being put in place. There's another one in Europe that's coming -- I think it's at the end of 2025 or into 2026. I think it's called the Super Climate Fund. It's about EUR90 billion to help this transition to these more energy-efficient technologies. So it's things like this that they, our customers, see as a real prompting for demand. They may see temporal shortfalls or drawdowns of inventory or buildup of inventory. That can affect us for a quarter or two. But I think the movement in this market is like movements we've seen in others, where the movement of technology forward happens. Sometimes it's bumpy, but it will happen over a 1- to 10-year period, with bumps along the way, but it's a movement that is underway.