Universal Electronics(UEIC) - 2024 Q1 - Quarterly Results

markdown [Management Commentary and Strategic Focus](index=1&type=section&id=Management%20Commentary%20and%20Strategic%20Focus) The CEO highlighted the company's strategic shift towards the climate control and home automation markets, evidenced by securing projects with six of the top ten global HVAC manufacturers - The company is strategically shifting its sales and product development resources to focus on climate control and home automation channels[2](index=2&type=chunk) - UEI has secured projects with six of the top ten HVAC equipment manufacturers worldwide, indicating strong traction in its new focus area[2](index=2&type=chunk) - The company is executing cost-savings initiatives and optimizing its manufacturing footprint while continuing to invest in resources for the connected home markets[2](index=2&type=chunk) - Management expects to grow the bottom-line and deliver full-year profitability, driven by project wins and operational improvements[2](index=2&type=chunk) [First Quarter 2024 Financial Highlights](index=1&type=section&id=Financial%20Results%20for%20the%20Three%20Months%20Ended%20March%2031%3A%202024%20Compared%20to%202023) For the first quarter of 2024, Universal Electronics reported net sales of **$91.9 million**, a decrease from **$108.4 million** in the prior-year period Q1 2024 vs. Q1 2023 Financial Comparison | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Net Sales (GAAP & Non-GAAP)** | **$91.9M** | **$108.4M** | | **GAAP Gross Margin** | **28.3%** | **22.8%** | | **Adjusted Non-GAAP Gross Margin** | **29.6%** | **25.4%** | | **GAAP Operating Loss** | **$(6.9)M** | **$(59.5)M*** | | **Adjusted Non-GAAP Operating Loss** | **$(2.2)M** | **$(3.6)M** | | **GAAP Net Loss** | **$(8.6)M** | **$(61.4)M*** | | **GAAP EPS** | **$(0.67)** | **$(4.81)*** | | **Adjusted Non-GAAP Net Loss** | **$(2.5)M** | **$(3.5)M** | | **Adjusted Non-GAAP EPS** | **$(0.19)** | **$(0.28)** | *Includes a **$49.1 million** non-cash charge for goodwill impairment in Q1 2023 - As of March 31, 2024, cash and cash equivalents were **$26.9 million**[7](index=7&type=chunk) - During the first quarter of 2024, the company repurchased approximately 95,000 shares for **$0.8 million**[7](index=7&type=chunk) [Second Quarter 2024 Financial Outlook](index=1&type=section&id=Financial%20Outlook) For the second quarter of 2024, UEI anticipates net sales to be between **$90.0 million** and **$100.0 million**, with an expected **GAAP** loss per share in the range of **$0.53** to **$0.43** Q2 2024 Financial Outlook | Metric | Q2 2024 Outlook | Q2 2023 Actual | | :--- | :--- | :--- | | **GAAP Net Sales** | **$90.0M** - **$100.0M** | **$107.4M** | | **GAAP Loss Per Share** | **$(0.53)** - **$(0.43)** | **$(0.81)** | | **Adjusted Non-GAAP Net Sales** | **$90.0M** - **$100.0M** | **$107.4M** | | **Adjusted Non-GAAP Loss Per Share** | **$(0.10)** - **$0.00** | **$(0.06)** | - The Q2 2024 Adjusted **Non-GAAP** loss per share estimate excludes **$0.43** per share for items such as excess manufacturing overhead, stock-based compensation, amortization, and litigation costs[5](index=5&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents Universal Electronics Inc.'s consolidated financial statements, including balance sheets, statements of operations, and cash flows [Consolidated Balance Sheets](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of March 31, 2024, UEI's total assets were **$322.9 million**, down from **$355.9 million** at year-end 2023, primarily due to reductions in cash and accounts receivable Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | **$26,914** | **$42,751** | | Total current assets | **$230,230** | **$258,851** | | Total assets | **$322,941** | **$355,872** | | Line of credit | **$46,000** | **$55,000** | | Total current liabilities | **$138,666** | **$161,148** | | Total liabilities | **$153,286** | **$176,952** | | Total stockholders' equity | **$169,655** | **$178,920** | [Consolidated Statements of Operations](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the first quarter of 2024, UEI reported net sales of **$91.9 million**, a **15.2%** decrease from **$108.4 million** in Q1 2023, with a net loss of **$8.6 million** Q1 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net sales | **$91,900** | **$108,377** | | Gross profit | **$25,988** | **$24,693** | | Operating income (loss) | **$(6,908)** | **$(59,524)** | | Net income (loss) | **$(8,649)** | **$(61,363)** | | Diluted loss per share | **$(0.67)** | **$(4.81)** | [Consolidated Statements of Cash Flows](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) In the first three months of 2024, UEI experienced a net cash outflow of **$15.8 million**, driven by operating, investing, and financing activities, ending the period with **$26.9 million** in cash Q1 Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used for operating activities | **$(2,775)** | **$(2,025)** | | Net cash used for investing activities | **$(2,366)** | **$(4,831)** | | Net cash used for financing activities | **$(10,230)** | **$(3,812)** | | **Net decrease in cash** | **$(15,837)** | **$(9,834)** | | **Cash at end of period** | **$26,914** | **$56,906** | [Reconciliation of GAAP to Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section provides a reconciliation of **GAAP** financial measures to **Non-GAAP** measures for Q1 and Q2 2024, highlighting adjustments for various non-recurring or non-cash items [Q1 2024 Reconciliation](index=8&type=section&id=Q1%202024%20Reconciliation) For Q1 2024, UEI's **GAAP** net loss of **$8.6 million** was adjusted to a **Non-GAAP** net loss of **$2.5 million**, reflecting adjustments for stock-based compensation, overhead, restructuring, and litigation costs Q1 2024 GAAP to Non-GAAP Net Loss Reconciliation (in thousands) | Description | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Net loss - GAAP** | **$(8,649)** | **$(61,363)** | | Excess mfg. overhead & factory transition costs | **$1,150** | **$2,785** | | Stock-based compensation expense | **$1,904** | **$2,540** | | Factory restructuring costs | **$1,063** | **$—** | | Litigation costs | **$286** | **$1,158** | | Goodwill impairment | **$—** | **$49,075** | | Other adjustments | **$1,789** | **$2,298** | | **Adjusted Non-GAAP net loss** | **$(2,457)** | **$(3,507)** | Q1 2024 GAAP to Non-GAAP Gross Margin Reconciliation | Description | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Gross margin - GAAP** | **28.3%** | **22.8%** | | Excess mfg. overhead & factory transition costs | **1.2%** | **2.6%** | | Other adjustments | **0.1%** | **0.0%** | | **Adjusted Non-GAAP gross margin** | **29.6%** | **25.4%** | - Adjustments for Q1 2024 include severance and exit costs from closing a factory in China and downsizing a factory in Mexico[24](index=24&type=chunk) [Q2 2024 Outlook Reconciliation](index=10&type=section&id=Q2%202024%20Outlook%20Reconciliation) The company's financial outlook for Q2 2024 includes a reconciliation from **GAAP** to Adjusted **Non-GAAP** diluted loss per share, with a projected adjustment of **$0.43** per share Q2 2024 Diluted EPS Outlook Reconciliation | Metric | Low Range | High Range | | :--- | :--- | :--- | | Diluted loss per share - GAAP | **$(0.53)** | **$(0.43)** | | Total adjustments | **$0.43** | **$0.43** | | **Adjusted Non-GAAP diluted loss per share** | **$(0.10)** | **$0.00** | [Other Information](index=3&type=section&id=Other%20Information) This section details the company's use of **Non-GAAP** financial metrics and provides important disclosures regarding forward-looking statements [Use of Non-GAAP Financial Metrics](index=3&type=section&id=Use%20of%20Non-GAAP%20Financial%20Metrics) UEI utilizes Adjusted **Non-GAAP** financial measures as a supplement to **GAAP** results to aid investors in evaluating the company's core operational and financial performance - Management uses **Non-GAAP** measures for budget planning and making operational and financial decisions[8](index=8&type=chunk) - **Non-GAAP** measures are provided to help investors evaluate UEI's core operating performance and business trends[8](index=8&type=chunk) - Key exclusions from **GAAP** results to arrive at **Non-GAAP** measures include stock-based compensation, amortization of intangibles, certain litigation costs, goodwill impairment, and factory restructuring costs[9](index=9&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-looking%20Statements) The press release contains forward-looking statements concerning future performance, sales, and earnings trends, which are subject to numerous risks and uncertainties - Statements regarding net sales, profit margins, earnings trends, and new product introductions are forward-looking and subject to risk[12](index=12&type=chunk) - Identified risks include attracting new customers in home automation and climate control, managing inflationary pressures, and the outcome of litigation with Roku[12](index=12&type=chunk)