Earnings call transcript: Universal Electronics misses Q1 2025 EPS forecast

Universal Electronics Inc. (UEIC) reported a net loss per share of $0.12 for Q1 2025, missing the forecasted earnings per share (EPS) of $0.07. The company’s revenue also fell short of expectations, coming in at $92.3 million compared to a forecast of $98.23 million. Despite these misses, the stock surged 4.88% in regular trading hours, closing at $6.13, before remaining unchanged in after-hours trading. According to InvestingPro analysis, the company is currently trading below its Fair Value, with a price-to-book ratio of just 0.53x suggesting potential undervaluation.

Key Takeaways

• Universal Electronics fell short of both EPS and revenue expectations for Q1 2025.
• The company’s stock rose 4.88% after the earnings announcement.
• Connected Home sales increased by 31%, reaching $31.7 million.
• Operating expenses were reduced to $27.6 million.
• Guidance for Q2 2025 projects sales between $91 million and $101 million.

Company Performance

Universal Electronics showed a mixed performance in Q1 2025. While the net loss improved to $1.5 million from $3.4 million in the same quarter last year, the company failed to meet analyst expectations for both earnings and revenue. The Connected Home segment was a bright spot, growing by 31% year-over-year, while the Home Entertainment channel saw an 11% decline. The company also managed to reduce its net debt significantly. InvestingPro data reveals the company operates with a moderate debt level and maintains strong liquidity, with current assets exceeding short-term obligations by 1.53x.

Financial Highlights

• Revenue: $92.3 million, up slightly from $91.9 million in Q1 2024.
• Earnings per share: -$0.12, an improvement from -$0.26 in the previous year.
• Operating expenses: Reduced to $27.6 million from $29.4 million.
• Cash flow from operations: $9 million.
• Net debt: Reduced to $3.6 million from $10.2 million at year-end.

Earnings vs. Forecast

Universal Electronics reported an EPS of -$0.12, missing the forecasted $0.07, marking a significant deviation from expectations. The revenue of $92.3 million also fell short of the anticipated $98.23 million, reflecting challenges in meeting market predictions.

Market Reaction

Despite missing earnings and revenue expectations, Universal Electronics’ stock rose by 4.88% during regular trading hours, closing at $6.13. This price movement places the stock above its 52-week low of $4.32, suggesting a positive investor sentiment despite the earnings miss. InvestingPro data shows an impressive 33.75% return over the past week, though the stock remains significantly below its 52-week high of $14.20. With a beta of 1.45, investors should note the stock’s higher volatility compared to the broader market. Get access to 10+ additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Outlook & Guidance

For Q2 2025, Universal Electronics expects sales to range from $91 million to $101 million, with Connected Home sales projected to grow between 37% and 55%. The company anticipates EPS to be between $0.05 and $0.15 per diluted share, indicating a potential recovery in profitability. This outlook aligns with InvestingPro analysts’ forecasts, which predict the company will return to profitability this year with projected earnings of $0.37 per share. Discover more detailed analysis and forecasts in the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Brian Hackworth, CFO, highlighted the company’s focus on the Connected Home market, stating, "We’re excited about the revenue growth in Connected Home and optimistic about its potential." Ramzi Amari, SVP Corporate Planning and Strategy, echoed this sentiment, noting, "Our efforts focused on connected home market are delivering results."

Risks and Challenges

• Ongoing macroeconomic uncertainty affecting large ticket items like HVAC.
• Lower demand in Latin American basic remote markets.
• Navigating regulatory changes and tariff challenges.
• Potential supply chain disruptions impacting operations.
• Dependency on major customers, such as Daikin and Comcast, which account for significant revenue portions.

Q&A

During the earnings call, analysts inquired about the company’s ability to manage tariff challenges and the progress in its CEO succession search. Executives expressed confidence in overcoming these hurdles and emphasized their focus on expanding product lines and winning new accounts.

Full transcript - Universal Electronics Inc (UEIC) Q1 2025:

Kelly, Conference Operator: Good afternoon. My name is Kelly, and I will be your conference operator today. Now I would like to welcome everyone to Universal Electronics First Quarter twenty twenty five Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

I will now turn today’s conference over to Kirsten Chapman of Alliance Advisors Investor Relations. Please go ahead.

Kirsten Chapman, Investor Relations, Alliance Advisors, Alliance Advisors: Thank you, Kelly, and thank you all for joining us for the Universal Electronics First Quarter twenty twenty five Financial Results Conference Call. By now, you should have received a copy of the press release. If you have not, please contact Alliance Advisors Investor Relations at (415) 433-3777 or visit the Investor Relations section of the website. This call is being broadcast live over the Internet. A webcast replay of this call, including any additional updated material, nonpublic information that might be discussed during this call, be available on the company’s website at www.uei.com for one year.

During this call, may make forward looking statements regarding future events and the future financial performance of the company and cautions you that these statements are just projections and actual results or events may differ materially from those projections. These statements include the company’s ability to continue capturing new product and new customer wins in connected home space, resulting in product revenue growth, particularly through the development and delivery of unique and innovative solutions, including the company’s new energy harvesting sensors and remote control solutions. Continued focus on the company’s R and D spend towards projects that translate into new revenue streams. The stabilization of traditional subscription broadcasting business leading to a more predictable revenue stream. The continued strength of the US dollar as compared to China’s and Vietnam’s functional currencies.

Management’s ability to continue managing its business profitably through continued improvements in the company’s cost structures, optimizing the company’s manufacturing facilities and improving its cash flows. Management’s ability to manage and mitigate the effects that tariffs could have on the company’s profitability through price increases and other efforts, the effects of the company’s stock repurchase program may have on its stock price and value, and the direct and indirect impact the company may experience with respect to its business and financial results stemming from the continued economic uncertainty affecting consumers’ confidence in spending, rising energy and freight costs, natural disasters, governmental actions, including increasing domestic and retaliatory tariffs, reducing incentives to businesses worldwide, the risk of doing business or operating in certain parts of the world, and political unrest, including war, terrorist activities, or other hostilities. The company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today’s date and refers you to the press release mentioned at the onset of this call and the documents the company has filed with the SEC, including its 2024 annual report on Form 10 ks and the periodic and current reports filed or furnished since then.

In management’s financial remarks, adjusted non GAAP metrics will be referenced. Management provides adjusted non GAAP metrics because it uses them for budget planning purposes and for making operational and financial decisions and believes that providing these non GAAP financial measures to investors as a supplement to GAAP financial measures helps investors evaluate UEI’s core operating financial performance and business trends consistent with how management evaluates such performance and trends. In addition, management believes these measures facilitate comparisons with core operating and financial results and business trends of competitors and other companies. A full description and reconciliation of these adjusted non GAAP measures versus GAAP are included in the company’s release issued today. Joining me today are the office of CEO, which includes Chief Financial Officer, Brian Hackworth Senior Vice President, Corporate Planning and Strategy, Ramzi Amari and newly promoted Chief Operating Officer, Rick Karnafax.

Ramzi will provide an overview of our channels. Brian will deliver the detailed financial results and conclusion. Then Roop will join them for the Q and A. It’s my pleasure to introduce Ramzi Amiri. Please go ahead, Ramzi.

Ramzi Amari, Senior Vice President, Corporate Planning and Strategy, Universal Electronics: Thank you, Kirsten, and thank you all for joining us. I’m delighted to speak with you today as I’m deeply passionate about UEI and our mission to create smarter living. As you’re aware, during the past few years, as we recognize the challenges facing our home entertainment business, we’ve been investing in new markets and channels to generate new revenue growth. I’m excited to report that our efforts focused on connected home market are delivering results. Starting with our Q1 twenty twenty five financial results, we will begin to provide sales detail for both the connected home and the home entertainment channels.

Brian will discuss that and our financials in detail later on the call. Briefly, here are the highlights of our quarterly performance. In Q1 twenty twenty five, net sales were within our expectations, driven by a 31% growth in our connected home channel. Our Q1 twenty twenty five bottom line improved $0.14 compared to Q1 twenty twenty four. These results reflect the impact of new customers and product revenue growth, as well as growth in our existing customer relationships and the stickiness of our long lead sales.

Now I’d like to review a few channel highlights. During Q1, sales grew across our entire connected home portfolio. Sales orders increased for our climate control solutions from major HVAC OEMs and for our Zigbee thermostat and sensor products in security. Additionally, we started shipping new and innovative outdoor sensor for Somfy, which measures both luminosity and temperature. Overall, we expect to see continued demand for our connected home solutions throughout the remainder of the year.

Our home entertainment channel is performing to our expectations. During the quarter, we delivered quick set updates to all our major smart television providers for their twenty twenty five model TVs. We also began shipping a new sustainable green remote for a major operator in Europe. This ultra low power voice remote significantly reduces battery waste during the life of the remote. Now I’ll turn it over to Brian to provide an update on our financials.

Brian Hackworth, Chief Financial Officer, Universal Electronics: Thank you, Ramzi. First, I’d like to discuss the sales detail we’ll begin reporting this quarter. Over the past few years, we have focused most of our R and D spend on control products designed to operate outside the traditional home entertainment stack, such as climate control, home automation, and security. While sales growth from this new area of focus has taken longer than expected, we’ve won several projects with major customers over the past few years that are now translating to meaningful revenue. As a matter of fact, for the first quarter of twenty twenty five, the connected home sales comprised 34% of our total sales, and growth in these new categories more than offset the decline stemming from cord cutting.

We expect the same for the second quarter, which we’ll discuss later when providing guidance. For this reason, we believe we have reached a point where it makes sense to break out sales between the two channels, connected home and home entertainment. The connected home channel represents climate control, smart home, and security product sales sold primarily to HVAC, security, home automation, and home appliance customers. The home entertainment channel represents entertainment related product sales sold primarily to video service providers, consumer OEMs and retailers. It also includes sales associated with intellectual property licensing and our cloud based software solutions.

For the first quarter twenty twenty five, net sales were $92,300,000 at the midpoint of our guidance range, compared to $91,900,000 for the first quarter of twenty twenty four. Connected Home grew by $7,600,000 or 31% to 31,700,000.0 for the quarter ending 03/31/2025. This reflects project wins that we’ve announced over the past couple of years, primarily from a few large customers in climate control and home automation as well as SKU expansion with existing accounts. Home entertainment decreased by $7,100,000 or 11% to $60,600,000 for the quarter ending 03/31/2025. The sales decrease in the home entertainment channel is due primarily to lower demand for subscription broadcasting products.

While we’re seeing signs of stabilization with the majority of our customers in North America and EMEA, in Latin America, we’re experiencing lower demand for our basic remotes. Gross profit for the first quarter of twenty twenty five was $26,100,000 or 28.3% of sales, consistent with the prior year’s rate. With a strong US dollar compared to the functional currencies in China and Vietnam, and increased overhead absorption from higher levels of production, we expect improvement in our gross margin rate for the second quarter. I’ll now take a minute to discuss tariffs. At the current tariff rates, there will not be a material effect on our financials, because we’ve increased sales prices to offset the tariff costs for products destined for The US market.

However, the status of tariffs has been and may continue to be a fluid process. If permanent changes to tariff rates were to be enacted, resulting in a material adverse effect to our bottom line, we would respond, as we always have, to mitigate its effect. Over the past several years, we have proven to be adept at navigating regulatory changes affecting our business. Operating expenses were $27,600,000 compared to $29,400,000 in the first quarter of twenty twenty four, reflecting actions taken to reduce expenses. SG and A expenses decreased to $20,500,000 from $21,800,000 in the prior year quarter.

R and D expenses decreased to $7,100,000 for the first quarter of twenty twenty five, compared to $7,600,000 in the prior year quarter. Operating loss was $1,500,000 compared to $3,400,000 in the first quarter of twenty twenty four. Net loss for the first quarter of twenty twenty five was $1,500,000 or $0.12 per share, compared to $3,400,000 or $0.26 per share in the first quarter of twenty twenty four. Next, I’ll review our cash flow and balance sheet. We have made significant progress over the past several quarters by improving our cost structure and working capital.

In the first quarter of twenty twenty five, typically a seasonal low, we generated $9,000,000 of cash flow from operations and paid down debt resulting in a net debt position of only $3,600,000 at 03/31/2025, compared to $10,200,000 at year end. Our strengthened balance sheet and cautiously optimistic outlook, which I will discuss in a minute, affords us the opportunity to purchase shares at an attractive price. We currently have approximately 778,000 shares remaining on our share repurchase authorization, and we will begin to buy back shares in the open market. Now turning to our guidance. For the second quarter of twenty twenty five, we expect sales to range from 91,000,000 to $101,000,000 compared to $90,500,000 in the second quarter of twenty twenty four, representing a growth between 112%.

We expect connected home sales to range from 32 to 36,000,000 compared to 23,300,000.0 in the second quarter of twenty twenty four, representing growth between thirty seven and fifty five percent. In home entertainment, we expect sales to range from $59,000,000 to $65,000,000 compared to $67,200,000 in the second quarter of twenty twenty four, representing a 3% to 12% decline. We expect EPS to range from zero five dollars to $0.15 per diluted share compared to a loss per share of $09 in the second quarter of twenty twenty four. While we’re excited about the revenue growth in Connected Home and optimistic about its potential, I think it’s important to note that sales in this new channel are not as predictable as sales in home entertainment. Thermostats, for example, are tied to large ticket items such as HVAC units and therefore can be more vulnerable to macro level trends.

For this reason, I encourage investors to review growth in Connected Home across multiple quarters rather than on a quarterly basis. Before I open the call for questions, I’ll reiterate, over the past few years, we have successfully taken action to improve UEI’s financial condition. These cost measures have enabled us to continue to maintain our technology leadership position in home entertainment, while allowing us to invest in new products and technologies to achieve our long term goal of becoming a leader in connected home. Operator, please open the call for questions.

Kelly, Conference Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just one moment while we poll for questions.

Your first question is coming from Steven Frankel with Rosenblatt Securities. Please pose your question. Your line is live.

Steven Frankel, Analyst, Rosenblatt Securities: Hi. Good afternoon. And Brian, thanks for the breakout. I think that really is helpful in understanding the dynamics underneath the numbers. So can we start with customer concentration?

And then I’ll have, another question for you.

Brian Hackworth, Chief Financial Officer, Universal Electronics: Sure. We had two, 10% customers in the quarter. Daikin was at 17.7%, and Comcast was at 11.2%.

Steven Frankel, Analyst, Rosenblatt Securities: K. And then if you look at the HVAC space where you’ve announced a lot of wins over the last two years, kinda how many of those top 10 customers have yet to ship their first unit with you? What’s the backlog look like in terms of not dollars, but in terms of number of partners that haven’t gotten going yet?

Brian Hackworth, Chief Financial Officer, Universal Electronics: Yeah. We shipped the majority of them. I think we’re up to at the top 10, I think we’ve we’ve won, I think, eight eight of the accounts. And as you know, over the last couple of years, the the launches have been a little bit delayed. So it’s taken longer than we initially expected.

However, we’re starting to launch or see it now in the Q1 results. It’s showing meaningful revenue. The good news is we’re at that point where we are shipping. And I think of those eight, I think we probably shipped probably at least five of them. You know, the key now is to continue to, you know, to win, more SKUs within those accounts, just like we did with, you know, with Daikin or you go back years ago with cable where you you win an account, you win a SKU, you prove yourself, then you get additional SKUs, and and that’s how you end up building, meaningful revenue.

Steven Frankel, Analyst, Rosenblatt Securities: Okay. And and then when you look at your home control business, what percent of that is shipped to outside of The US?

Brian Hackworth, Chief Financial Officer, Universal Electronics: I think The US is outside is probably gonna be The US is the majority of it. I don’t have an exact figure on that, but the major The US is majority of of the home control breakdown. I think it’s about 40% in the in the of the total. But I’ll get you out

Steven Frankel, Analyst, Rosenblatt Securities: of Okay. So even with with the large percentage to Daikin, you’re still majority US in home control?

Brian Hackworth, Chief Financial Officer, Universal Electronics: Yeah. Daikin’s in connected home. That’s that’s Oh,

Steven Frankel, Analyst, Rosenblatt Securities: I’m yeah. I’m sorry. I was I was talking about connect connected home.

Brian Hackworth, Chief Financial Officer, Universal Electronics: I’m sorry.

Ramzi Amari, Senior Vice President, Corporate Planning and Strategy, Universal Electronics: That’s what I

Brian Hackworth, Chief Financial Officer, Universal Electronics: Oh, I’m sorry. I thought you said home entertainment. Majority of of HVAC is is outside The US.

Steven Frankel, Analyst, Rosenblatt Securities: Okay. So that’s one thing in your favor when it comes to tariffs. And then in terms of your major subscription broadcast partners, if these tariff rates are higher than that kind of the 10% number, you feel like they’ll be willing to share the pain with you. And that’s why you’re not concerned about that being a burden in the back half of the year?

Brian Hackworth, Chief Financial Officer, Universal Electronics: Yeah, well, I wouldn’t say I’m not concerned. All I’m saying is, right now, I don’t know how it’s gonna play out. All I could do is go by what the current state is. And at 10% across the board, we’re able to handle this. You know, we’re able to pass on the the cost to our customers.

I don’t expect it to have a material effect on our financial statements. You know, it will have an effect on the gross margin rate, not gross margin dollars, but gross margin rate because when you’re passing on costs, you know, the the additional revenues are basically zero calories. So it will have a little bit of pressure on the rate. But in terms of the rest of the year, we just gotta see how it plays out. The one thing that I think we’ve proven over time is that we’re adept at, reacting to some of these regulatory changes that affect our business.

I think we have locations throughout the world. And if changes were to occur that are permanent in nature that adversely affect our financial position, then we’re gonna have to react. And, so I wouldn’t say I’m not concerned about it. I just I just have nothing to react to right now. So it’s a wait and see approach.

You know, I think everybody’s in the same boat. There’s a lot of uncertainty in the world right now. But the one thing I’m confident about is that we’ve proven that we’re, you know, very adept at reacting to, these difficult challenges.

Steven Frankel, Analyst, Rosenblatt Securities: K. And then, last question. How about an update on the the CEO succession plan and the search?

Brian Hackworth, Chief Financial Officer, Universal Electronics: Yeah. You know, the board’s been interviewing people. They have a search committee. So they’ve continued to interview and we’ll see how that goes. Would say in the interim though, I’m I’m comfortable and confident with with, with our team here.

Ramsey’s been here for with UEI for over twenty years. He’s, you know, head of product development. I’ve been here, as you know, for over twenty years. You know, Rick, our newly appointed, chief operating officer, he’s he’s been here three to four years, but it’s probably felt like ten to him because he’s he’s had a a lot of major activity to to sift through. So, you know, he ran the project with with shutting down GTQ.

He he managed and executed the spin up of Vietnam as well as the downsizing of Mexico. So he’s got a lot of experience on his belt. So I think with with, us three, I feel comfortable in this interim situation.

Steven Frankel, Analyst, Rosenblatt Securities: And is the board hired an outside search firm or they’re kind of networking and interviewing people?

Brian Hackworth, Chief Financial Officer, Universal Electronics: No. They they hired a a search firm.

Steven Frankel, Analyst, Rosenblatt Securities: Okay. Great. Thank you. I’ll jump back in the queue. Sure.

Kelly, Conference Operator: Your next question is coming from Greg Burns with Sidoti and Company. Please pose your question. Your line is live.

Greg Burns, Analyst, Sidoti and Company: Afternoon. In terms of the gross margin for the quarter, don’t see you calling out any excess overhead adjustments. Are we just not pulling those out anymore? Or have have they they gone away?

Brian Hackworth, Chief Financial Officer, Universal Electronics: Yeah. No. We we stopped doing that about a year ago. I I included it in last year’s remarks just for informational purposes, but it actually was not included in the financial the pro form a financials. So we we stopped doing that.

But we’re basically done. We we like I said, we we finished, the shutdown of GCQ a while ago. We spun up Vietnam. We downsized Mexico. So that’s that’s complete.

Greg Burns, Analyst, Sidoti and Company: Okay. Alright. And then when we look at the the growth trajectory in the connected home, how should we think about that this year based on maybe what you have in the pipeline in terms of new products or projects that you expect to come to market over the over the next maybe year or so. What kind of visibility do you have there, and do you expect to see sequential revenue growth throughout the year similar to what you’re implying in your second quarter guidance?

Brian Hackworth, Chief Financial Officer, Universal Electronics: Yes. Mean, we do is provide guidance one quarter out. But I will say that you’re looking at strong growth in Q1, projected strong growth in Q2. I feel good with where we’re at in the fact that we’re launching these products. The fact that it took longer was frustrating, but the fact that we’re launching now and you’re seeing it translate to growth is positive.

We still have a certain amount of wins that we still need to launch and we continue to qualify and quote on projects. I mean this is a continuous process that in order to grow, you have to continue to quote and win additional projects, and I think we’re doing that. So I feel good with where we’re at. The only question mark I really have from a macro level perspective is right now there’s just a lot of uncertainty right now in the market. And as I mentioned in the prepared remarks, when you’re dealing with large ticket items like HVAC, I mean you’re talking about 22,000 15 thousand dollars purchases.

If there’s a consumer sentiment were to go south and if, you know, tariffs were it’s right now it’s a fluid process, you know, I I I can’t predict what’s gonna happen. I think that’s pretty common. Think most people are saying the same thing. That that’s always a question mark. But right now, all we can do is control what we can control, and that is, you know, launching and shipping the remainder of the project wins and continue to win new accounts as well as SKU expansion within existing accounts.

So I like where we’re headed.

Greg Burns, Analyst, Sidoti and Company: Okay. Would you would you at all be able to quantify maybe the backlog or pipeline that you have? I think in the past, Paul had mentioned, like, an $80,000,000 number in terms of revenue opportunity from the projects you’ve won? Is there any kind of quantification you can give on where you stand now?

Brian Hackworth, Chief Financial Officer, Universal Electronics: Yeah. I don’t have that exact number. I I I will say that of that $80,000,000 I was referenced a couple years ago, we haven’t shipped all of it. We, because of the delays, some shipped a little bit, shipped in ’24, some are shipping in ’25, and we have some slated to ship in ’26. So from a full year effect, you’re really not going to get that until 2027 because it’s been, shipped over a three year period or at least launched over a three year period.

But it’s going right now. We’re, like I said, it’s been a little frustrating how long it’s taken. But over the last couple of quarters, I think we’ve made a lot of progress and I expect to have continued positive progress.

Greg Burns, Analyst, Sidoti and Company: Great, thank you.

Kelly, Conference Operator: There are no questions in queue at this time. I would now like to turn the floor back over to Brian Hackworth for closing remarks.

Brian Hackworth, Chief Financial Officer, Universal Electronics: Well, thank you for your continued support of Universal Electronics, and have a great day.

Kelly, Conference Operator: Thank you. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Steven Frankel, Analyst, Rosenblatt Securities: Thank you.

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