Universal Electronics at Sidoti Conference: Strategic Shift to Smart Homes

On Thursday, 20 March 2025, Universal Electronics (NASDAQ: UEIC) presented at the Sidoti Small-Cap Virtual Conference, outlining a strategic pivot towards the connected home market. The company is navigating challenges in traditional home entertainment while focusing on growth areas like climate control and home automation. Despite a recent dip in stock price, Universal Electronics is optimistic about future growth, driven by its investments in technology and manufacturing realignments.

Key Takeaways

• Universal Electronics is shifting focus to the climate control and home automation markets, valued at $1.8 billion and $1.7 billion, respectively.
• Q4 2024 sales reached $110 million, marking a 30% increase year-over-year, primarily due to growth in the APAC region and the HVAC sector.
• The company completed a manufacturing restructuring, including a new facility in Vietnam, to align with current sales levels.
• Universal Electronics maintains a net debt of $10 million and projects growth in 2025, particularly in the HVAC market.
• QuickSet technology remains a core focus, enabling seamless device control across platforms.

Financial Results

• Q4 2024 sales were $110 million, a 30% year-over-year increase.
• The APAC region and HVAC customer orders were significant growth drivers.
• Q1 2025 sales guidance is set at a midpoint of $92 million, adjusted to $96 million due to a $4 million revenue recognition shift.
• Gross margins are expected to exceed 28.4% in the latter half of the year.
• The company holds a net debt position of $10 million.

Operational Updates

• Manufacturing operations were restructured, including closing a factory in China and opening one in Vietnam.
• Products for the North American market are primarily manufactured in Vietnam.
• R&D investment remains steady at $30 million annually.
• The company has secured projects with eight of the top 10 global HVAC players.

Future Outlook

• Universal Electronics expects growth in 2025, driven by new HVAC projects.
• An $80 million annualized project pipeline for HVAC is in place, with a quarter of projects already shipping.
• The company aims to replicate its 85% market share success in the US cable market within the HVAC sector.
• The home entertainment market is stabilizing, with evolving TV platforms becoming central hubs for connected devices.

Q&A Highlights

• A $4 million revenue recognition shift from Q4 to Q1 was clarified.
• The company confirmed an $80 million annualized HVAC project pipeline.
• Universal Electronics aims for a similar market share in HVAC as in the cable market.
• QuickSet technology facilitates seamless integration and control of HVAC devices.

For more detailed insights, readers are encouraged to review the full transcript of the conference call.

Full transcript - Sidoti Small-Cap Virtual Conference:

Greg, Conference Organizer, Sidoti: Alright. Let’s get started here. So we’re in the home stretch here of, Sidoti’s March Small Cap Conference. Thanks for joining us here for the Universal Electronics presentation. From the company, we have Brian Hackworth, their CFO.

He’s gonna run through a a presentation, and then we’ll get to some q and a at the end. If you do have, any questions, feel free to enter them through Zoom, and we’ll get to as many of those as we can. So with that, I’ll hand it over to Brian for the presentation. Thanks.

Brian Hackworth, CFO, Universal Electronics: Alright. Thanks, Greg. My name is Brian Hackworth, and I’ve been the CFO here at Universal Electronics for about twenty years now, so it’s been a while. I’m not gonna read this, full safe harbor statement. It would take up half the time.

But basically, I’m gonna make forward looking statements and there are risks associated with these forward looking statements. So, please read our public filings, 10 Qs, 10 Ks with the associated risks. Alright. Our mission our mission is to create smarter living. Essentially, it’s to create and develop products and technologies, that enable the user to control all the devices in their in their network tone.

So we’ve been a lot of changes over the last several years in that. If, you know, when we first started, it was mainly the AV stack. So we controlled everything in the AV stack from a set top box to a receiver to a Blu ray player. You name it, we control that. You fast forward devices that become more advanced, they become smarter.

So from a home automation perspective, there’s been a proliferation of devices connected to the home network including, you know, now you’ve got blinds, you’ve got sensors, you’ve got thermostats. People want their devices to be smart, and they want them to work together. And that’s that’s our secret sauce. We have technology software, specifically QuickSet, that enables us to control all the devices in the home network and have them work seamlessly together. UVI is a global leader in universal control solutions for the home.

Now the way we accomplish that is by investing in r and d. As you see here, we have over 540 engineers worldwide. We have tech centers in California. That’s the main hub. However, we also have a hub in India, Bangalore, specifically.

We have engineers in Europe, and we have some in Mainland China. So it’s something that we pride ourselves on. We’re about developing differentiating products, and the way you do that is by investing in R and D. Now a lot of you that have followed us over the last several quarters, actually more like a year and a half to two years, you’ll know that we’ve gone through restructuring where both from a manufacturing side and also from a SG and A side that our factory footprint was built for about $750,000,000 in sales. So when our sales started to decline, we had to build and and restructure our factory footprint to be commensurate with our new sales levels.

So, our operations team has done a great job over the last eighteen to twenty four months in doing so. We ended up shutting down a factory at in China. We ended up spinning a factory up in Vietnam. And in Mexico, we we reduced its size. So that was all completed last quarter.

It was a great effort. And the reason I’m saying this is that we’ve attacked costs both on the manufacturing overhead side as well as SG and A. But the one thing we did touch a great deal of is R and D. Now we did reduce it a little bit, but it’s a lifeblood of Universal Electronics. So, that we still spend about $30,000,000 a year on R and D and we’ll go into later what we’ve done with that spend, but it’s definitely been worthwhile.

We do control basically, right here, your these are the the channels that we sell into. The entertainment is basically is made up of, subscription broadcasting, so cable, satellite. You also have consumer electronics, Sony’s of the world, Samsung, LG’s, and retail, which is primarily European retail. Now climate, we’ll talk more about this later, but we’ve we’re we’re making great headwinds into, strides into, the climate market where we’re now, we have won projects with eight of the the top 10 worldwide HVAC players. So we made great progress with that, and we’ll talk a little bit about q four revenue where you’re starting to see the revenue come to fruition.

And then you have smart home, which is anything like we’ll sell to Somfy, we’ll sell to Hunter Douglas, anything like I I referenced earlier from blinds, sensors, things of that nature. Now sometimes you’ll hear us refer to home entertainment channel and the connected home channel. Really, entertainment, that is the home entertainment channel. If you combine climate with smart home, that’s what we refer to as connected home. So sometimes we use these terms interchangeably.

Here, this tells us basically our power sales occur. So we’ve sell, you know, finished goods in full form factor and full remotes, thermostats, and that’s the line share of our sales. You’re you’re talking, probably 90 over 90% are the finishing format. But we also sell technology as embedded in a chip, or we could sell just to have a pure license arrangement. So we do all three, full form factors and remote controls, thermostats, etcetera, software embedded, on a chip, or just a pure licensing arrangement.

Some of the business highlights, growing share in climate control and home automation. This is a growth engine for us. Climate control has a market of 1,800,000,000 and it’s growing at about 8% to 10% rate. Home automation’s market is about 1,700,000,000.0 and growing at about six percent to 7% rate. Earlier I referenced the R and D spend and this is what we’ve been spending on.

We used to a higher percentage used to be allocated to home entertainment. Now over the last few years, we still allocate funds to all three channels. However, over the last few years, a higher percentage of that R and D spend has been allocated to what we consider the growth channels, which are climate control and home automation. Now what do we we’ve accomplished a lot with that. We’ve developed and launched UEI TAI products.

We have a strong pipeline of new product designs. Earlier, I referenced that over the last few years, we’re we’ve got to win products with eight customers, the top 10 HVAC customers worldwide. So, it’s definitely been worthwhile and we’re making good headway. And just to reference that Q4 sales, we were at $110,000,000 which we had 30% growth year over year and a large part of that came from the HVAC channel where we had two customers specifically that increased their orders in the fourth quarter and resulted in strong sales. So, we’re starting to see our hard work and innovation come to fruition.

It’s taking a little longer than we had hoped, but it’s definitely taking place. We have focused on technology, innovation and sustainability. I think probably the best example of that is a quick set software where quick set we’ve talked about this, you know, for years, we’re on our sixth iteration now. Quick set has the ability to discover all devices in the in the home network, configure those devices, as well as control those devices. So it all happens seamlessly behind the scenes.

It’s no more manual input or anything of that nature. So it’s been a great technology for us that we’d be able to transition from not just the h, the the AV stack, but also to embed bricks like technologies in any other connected device such as a a thermostat. We have a global scale and reach. We’re vertically integrated across design, development, and manufacturing, And I talked a little bit about that earlier. We have R and D teams in The US, Europe, China and India.

It’s a strong focus of ours. And we’re globally diversified in manufacturing. As I mentioned, we have, you know, we spun up Vietnam in the second quarter of twenty twenty three. It’s going very well. We’ve we’ve increased production there.

So the majority of our products that are destined for the North American market come from from, our Vietnam facility. But we also have a small facility in China, smaller facility in Mexico, as well as an assembly facility in Brazil. We’ll talk a little bit more about the customers later, but we got four Fortune 500 customer base, that we sell to, and so we have extensive experience with these large players. We’re a leader in home entertainment control technologies, and that’s that’s helped us transition in the connected home. A lot of people don’t realize this, but outside The United States, which most residential units and commercial units have central air, if you go to Asia or you go to Europe, there are a lot of split systems.

So people, have wall units, in their homes or in their businesses, individual wall units, and they they control them with their remote control. So that’s how we we we started to to segue from home entertainment to climate control. And then from there, you you start to transition to higher advanced, thermostats. So it’s been a it’s been a a smooth transition for us relatively speaking. Daikin is is if you if you’ve been following us, has been a 10% customer now for for a while, so we make great headway.

If you look at the the markets in general, you look at home entertainment is 800 or 8 yeah, 800,000,000,000. Climate control is, as I mentioned earlier, is 1,800,000,000.0. It’s growing at 8% to 10% clip. And home automation and security is at 1,700,000,000.0 at a 6% to 7% growth rate. So combined, we’re going after large markets and a total about 4,300,000,000.0 in size.

Home entertainment overall, home entertainment is still a growth channel. I think a lot of people are probably a little surprised by this because they think of cord cutting. But at the end of the day, people continue to watch TV. They’re not going to stop watching TV in The US. The average household, they watch over five hours a day.

I think Europe is is getting close to that. So people still watch TV. They’re just consuming it and and receiving the the content in a different manner. Smart TV penetration is high now where you get smart TVs and you’ve got all the apps embedded. There’s growth in streaming services, all the the Netflixes and Hulu’s and and, HBO Maxes, etcetera.

And you’ve got an evolution of the hybrid set top boxes, which people want. They want the linear TV, the live TV, but they also want the on demand functionality of it. So people want both, both aspects. The traditional TV market market decline showing signs of stabilization. We talked a little about this where you have, cord cutting has been an issue for us over the last handful of years.

But on a positive note, we are starting to see signs of stabilization. We’re starting to see customers year over year ordering patterns starting to stabilize, which is a positive sign for us. We have TV platform growth through OS syndication. You get the likes of LG that have your web OS. They syndicated that that, OS system.

From a business there there have been business model changes, especially in The US where it’s becoming more ad tech focused, and that’s how they’re monetizing it. I think what they’re doing now, some of the even some of the cable operators are starting to act similar as consumer electronics do in that they’re creating these operating systems, and they’re selling, you know, the hardware through a TV and, and they’re they’re basically monetizing through through ads and they’re basically subsidizing the TVs. The TVs are getting very cheap and the money to be made is is through the advertising. So we we believe that the TV is gonna be the hub. It’s the central point of of the home in terms of all the all the devices.

If you look at an advanced TV operating system, it’s basically the service aggregator where you have all of the apps embedded. But you can also have all the other devices as well. If you have a an LG TV, it has our technology embedded in it. And any device connected to the home network, whether it’s a sensor or blinds, anything connected to home network, the thermostat, you can control from the TV. The connected home, addressable HVAC market is, you know, again, a billion eight running at 10% clip.

It’s it’s it’s our it’s how we’re gonna grow. It’s it’s we’re proud of the way the the progress we’ve made in this category. The one thing that we’re seeing is similar dynamics to, what happened in in the home entertainment channel. If you go back years ago, the, if you wanted a DVR or if you wanted a universal remote control, you had to get it in the aftermarket through retail. But over time, the cable operators wanted these advanced advanced functionality in their original equipment.

So you the DVR became embedded in set top boxes, and universal remote controls became packaged with the set top box. And that’s where we really made strides into the cable the cable channel. The same thing we’re starting to see, that same similar trend is happening in HVAC where these advanced functionalities, a lot of times you have to go you had to go through, through retail if you wanted to get a Nest or EcoBee. You went through retail. However, now the OEMs, they want that advanced functionality in their original equipment.

This is where we come to play. We have decades of experience with consumer electronic companies and we were a great partner, and what they’re doing is they’re partnering with us. But they have these technologies embedded in the original equipment, and we, side by side, are working with them during the design to make sure that these these functionalities work seamlessly for the consumer. Because in in the aftermarket, even if you have, you know, some of these products, it’s difficult to have these products work all of the different with all the the different brands seamlessly. There’s too many protocols, too many platforms, and it’s common where it’s gonna work some features but not all.

And these the OEMs want these advanced features to work seamlessly for the for the consumer. Here’s I’m not gonna go through all these. These are just these are couple of our products you can see. You got the Tide Dial as well as the Tide Pro. This slide, basically, where where I referenced this earlier where with, with QuickSAT, you know, we we started off in the AV stack, but we’ve also we’ve definitely migrated.

And you could actually have the QuickSAT technology embedded in a thermostat. The thermostat could be a hub as well. So the thermostat, anything that’s IP related, anything that’s in your home network from your, thermostat with the QuickSet technology embedded, you’re able to operate everything from lights to blinds, to window sensors, etcetera. This is kind of a this chart illustrates, like, where we’ve where we’ve been and where we’re going. We start off at home entertainment, with remote controls.

That’s the the red circle circle. The blue circle talks about where we’ve gone in terms of comfort and convenience. We have eight HVAC systems, lighting, appliances, And then we also delve in delve into safety and security. So we we we’re in all these channels and anything anything that requires control, anything that requires working together. For example, if you if you were to, you know, people want smart devices and if they if you’re in your home and you were to leave and you were to say, set your your alarm or security, your your air conditioning should act accordingly where it knows you’re now out of the house.

You shouldn’t have to do it manually. It should know, okay, this person left. You can have motion sensors where it knows you’ve left or through the through the, the alarm system that you that you’ve set and adjust the adjust your temperatures accordingly. All these things are important in terms of the devices interacting with each other and and making your your life easier. I’m not gonna read through all this, except just, you know, launched 02/2008, which we’ve deployed in over 600,000,000 devices.

So it’s been disseminated worldwide, and it’s it’s something that we’ve, honed our skills in. And, again, we’re our generation. We partner with global channel leaders. We we deal with all the big players. You look at the VSPs, everyone from Comcast to TiVo to Charter, Dish, Sling.

These are all the big hitters. Same thing with CE. We deal with the large TV CE companies, Sony, Panasonic or Sony, LG, Samsung, you know, Climate Control. We’ve got Daikin, Panasonic, Toshiba, Hitachi. There’s not there’s not a lot of customers that we don’t have.

From a financial perspective, sales again in Q4, ’1 hundred and ’10 million dollars I mentioned this earlier, but the growth was really driven by the in the APAC channel. We had a couple of large customers that came in and they increased their orders and it got us to $110,000,000 which is a positive sign. Now for Q1, the midpoint of our sales is $92,000,000 that’s flat with the prior year. Now if you the one thing I won’t go into too much detail on this because it gets a little technical on accounting side, but we ended up having to recognize an initial $4,000,000 in the fourth quarter from a technical accounting perspective because the we have received orders related to HVAC about $4,000,000 Now that the shipments did not occur until Q1, but we met all of the requisite requirements and we ended up having to recognize that revenue. So if you put that $4,000,000 to Q1, we still grow Q4 and Q1 would be $4,000,000 higher.

You look at a midpoint of 96 versus, say, 92 in the prior year. Now gross margins came in at mid mid 28 points. Like I said, we did we’ve done a lot of work over the last couple of years to get the the manufacturing footprint to optimize, and we’ve done so. Now I I foreshadowed this in Q3 where for the fourth quarter, I expected the the gross margins to be down a little bit because, there’s still issues in the Red Sea where you have elevated freight rates as a result of it. I expect your gross margin for the year to still be strong, be higher than 28.4%.

Back half is usually higher than the front half because you got more TV sales getting geared up for the Christmas season, which we receive royalties. And the retail channel, obviously, the same reason increases and retail higher gross margin percentage than our company average. So for those reasons, I expect gross margin percentage to lift in the back half of the year. From a deposit debt position, at the end of the year, we’re at net debt position of only $10,000,000 Over the last year, we repatriated funds from overseas. We paid down the debt.

Debt was only $36,000,000 at the end of the year, and we had cash of about $26,000,000 for net debt position of $10,000,000 So I feel like we’re really well positioned from a balance sheet perspective and from a growth perspective. I love the way the way we restructured. I like the gross margin where we’re at. We’re back to normalized rates. The OpEx, we’ve contained and we did some restructuring in that that aspect.

The balance sheet is shored up, has with with only a net debt position of $10,000,000 So I I really like the position we’re in. U U we got investment rationale, you know, targeting attractive, growing, connected home markets in that 4,300,000,000 total market that we talked about. We’re expanding our product portfolio and and growing climate control and home home automation markets. That’s our focus. We continue to focus on technology.

That’s why we’re we’re investing in in R and D, and we’re not cutting we haven’t cut very much in that R and D realm. We have over seven thirty issued and pending U. S. Patents as a result of it and we’re going to continue to invest and we continue to deliver efficiencies in improving our financial position. And that’s about it.

I’ll open it up for questions.

Greg, Conference Organizer, Sidoti: Alright. Great. Thanks, Brian. If you do have questions, just put them through the q and a function. We’ll get to those, but I’ll, I’ll kick it off.

I know you had this like the accounting dynamic between the Q4 and Q1 in terms of revenue recognition. But how should we think about the remainder of the year playing out? Do you expect Q1 to be the low point? And given given maybe your outlook for some of these projects coming to market, how should we think about kind of the pipeline of these new connected home HVAC projects rolling out and how that might impact revenue this year?

Brian Hackworth, CFO, Universal Electronics: Yeah. Yeah. That’s a good question. We, you know, we only give guidance one quarter out. As you know, we don’t give annual guidance.

I think the important thing to focus on is just the fact that we are continuing to win projects and these projects are starting that you’re starting to see turn into into revenue. You saw that in q four. It’s something to predict sometimes in terms of the offtake. It is a little more predictable on the cable side because, you know, we were able to if we if we want a project on the cable side within, you know, three to six months, we’d be shipping. And the revenue is more predictable because there’s a function of their sub base.

It’s a it’s a little more difficult in the HVAC space, because it’s just the the lead time is much longer. It’s more instead of four to six months, it’s more like eighteen to twenty four months. And it’s it’s definitely a more rigorous process or at least a a timely process, I should say. They’re both rigorous. So it’s it’s sometimes it’s difficult to predict on in that front.

I think what we focus on is just winning these projects, hitting the target dates at that point and then shipping. And if it takes and it’s been a little frustrating because sometimes in the past, it’s been a little it’s taking a little longer, than we had hoped. But at the end of the day, we continue. We’re starting to ship. And and I expect I expect to have growth for for 2025.

Now whether it gets a little lumpy, it’s hard to predict, but I do expect growth in 2025.

Greg, Conference Organizer, Sidoti: Okay. Can can you maybe size the the project pipeline then or maybe the

Brian Hackworth, CFO, Universal Electronics: the

Greg, Conference Organizer, Sidoti: revenue opportunity or, you know, what what what it could lead to?

Brian Hackworth, CFO, Universal Electronics: Well, I mean, I think a while back, Paul had mentioned that we had we had 1 80 million dollars of projects for at an annualized rate of $80,000,000. And of that amount, we’ve shipped we probably started shipping maybe a quarter of those. So there’s still there’s still a ways to go on that, and it’s you’ve got additional projects that are scheduled to ship in in q q one, q ’2, q ’3, q ’4. It’s they’re starting to layer. And I think that’s that’s basically our goal is to have them layer to the point where you may win a project with, with a consumer electronic company or an HVAC player, and you may get one SKU.

And let’s just hypothetically say they have 20 SKUs. You start off with one, and then over time, you just layer, you layer, and then instead of having one, you end up with 10. And that’s how the revenue builds. That’s how it’s built, it’s worked out for us over the last several years. How how how about Daikin?

When we first, we we we acquired, Ensign assets, which you may remember, right, back in 02/2010. And Daikin was a customer of theirs, and they were small. They were low to mid single digit, billions of revenue. And we just continue to prove ourselves, and we went from, you know, a couple of SKUs to several SKUs. And now now they’re over a $50,000,000 customer.

So we’re gonna take that same strategy and apply it to all these new, new wins, new customers.

Greg, Conference Organizer, Sidoti: Yep. Alright. Makes sense. Can you just maybe since we’re in this kind of transition period where, you know, you have these growthier parts of the business that are kind of taking over and gonna drive growth this year, potentially, can you just frame, like, the relative sizes of, like, HVAC, connected home versus maybe subscription broadcast? Because TVs are still growing.

I know you they they can lump get slumped in with home entertainment, but there is growth elements within that home entertainment channel. So maybe if we could just size the the revenue buckets for everyone?

Brian Hackworth, CFO, Universal Electronics: You you talk about our our revenues? You’re not talking about the markets. You’re talking about our market.

Greg, Conference Organizer, Sidoti: Yeah. Yeah. Your your your revenues, like, what what percentage comes from?

Brian Hackworth, CFO, Universal Electronics: Yeah. If you if you take home entertainment, I would say that’s it’s probably approximately two thirds of our sale of our sales. And and now again, home entertainment, that makes it that’s comprised of subscription broadcasting, consumer electronics, and and retail. And then you’ve got the connected home, which is probably about a third.

Greg, Conference Organizer, Sidoti: Okay. And within but within that two thirds, that’s home entertainment. What what percentage of subscription broadcast? Because I think that was the piece that probably investors are more It’s

Brian Hackworth, CFO, Universal Electronics: it’s the majority. Yeah. It’s it’s the largest piece of that pie. The the SVR still is. Even the even with the shrinkage, it still is.

Greg, Conference Organizer, Sidoti: Okay. And Comcast popped up again as a 10% customer this last quarter, I think. I don’t know if that was just timing on orders, but is that, like, showing some level of stability in that market, relative to what we’ve seen over the last year?

Brian Hackworth, CFO, Universal Electronics: Yeah. I think it’s indicative of that. They’re not the only ones in terms of showing stability, but I agree. It’s the fact that they came and showed up as a 10% customer, I think is a good indication that things are starting to level off. Now, I don’t I’m not saying that cord cutting is done, but the the rate of decline is definitely slowing, so that’s which is which is favorable for us.

Greg, Conference Organizer, Sidoti: Okay. Maybe we could just talk about the the HVAC opportunity a little bit in more detail. What what kind of products are you supplying? Is it like traditional remotes for, like, those split level units? Are you like, is it your new Tide smart smart, controllers, smart thermostats?

What what are you supplying into the market and kind of how how do you see that that opportunity evolving for you over time?

Brian Hackworth, CFO, Universal Electronics: Yeah. It’s both. It’s it’s split systems and it’s, more advanced thermostats. So as I was mentioning in the prepared remarks, the it was a it was a nice segue for us to go from remote controls controlling anything in your AV stack to then have remote controls controlling, split units, individual wall units. And that enabled us to then transition into also selling higher end SKUs, which would be the, you know, the thermostats.

Now what we produce, and manufacture are differentiated products. So the QuintSet technology is what separates us from, well, from other competitors that our technology is able to work all the devices and they’re able to work together in the home. So the example I gave about if you were to leave your house and you were to have sensors where it it realizes that there’s nobody home, it should adjust your thermostats accordingly. And that’s what we bring to the table is the ability for all these devices to work together, seamlessly.

Greg, Conference Organizer, Sidoti: Okay. And the the projects you have with the eight of the top 10 HVAC customers, are those for all all smart thermostat projects? Or is it a a blend of of, Primarily. Yeah. There could there could

Brian Hackworth, CFO, Universal Electronics: be some split systems there as well, but it’s primarily more advanced.

Greg, Conference Organizer, Sidoti: Okay. And what what’s what’s the deal with the other two? Why can’t we get those?

Brian Hackworth, CFO, Universal Electronics: Yeah. I I got it. I got a tougher deal. We’re we’re making good progress, though. It went from you know, we’ve we’ve been giving updates on this couple few quarters ago with six, and then now now we’ve got up to eight.

So Yeah. We’re we’re making headway. And, you know, Paul has always said we our dog given rights to a % market share. We we’ve, in the in the cable side, we got up to probably 85% market share, if not higher, in in The US. And we have that same mentality for the, the HVAC market.

So these are these are big markets for us. And that’s how we’re gonna grow. I mean, the the, you know, we’re still investing in in home entertainment. It’s still an important channel for us, no doubt. But but we are talking about a $1,800,000,000 market in HVAC and another 1.7 in security and basic home automation.

These are markets this is how we’re going to grow.

Greg, Conference Organizer, Sidoti: Okay. All right. And then maybe we can just finish off on the you mentioned your factory consolidation. I think you’re around 20.5% on the gross margin line in the fourth quarter. What is the, is there potential, like, upside to your gross margin?

I think, you know, kind of a low 30% target maybe is what you talked about in the past. Like, is that where you see the the business operating this year?

Brian Hackworth, CFO, Universal Electronics: It it could be. I mean, I don’t wanna predict exactly. I I use I think in the last call, I said I could see it be at 30. I expect it to be at 30 points plus or minus a point, just because there’s so many there’s a lot of factors that that flow into the the gross margin rate. You got FX.

It’s that that Okay. But but I expected I like where we’re at, the fact that the factory has been right sized. If you compare it to like our GAAP, March were a year and a half ago, they’ve improved by four or five percentage points at least. And with the royalties that usually pick up in the back half of the year as well as European retail, I expect the markets to lift in the back half.

Greg, Conference Organizer, Sidoti: Okay. And the the the more diverse manufacturing footprint, does that mute the impact of tariffs? Like, can do you feel like you have enough flexibility to kind of work around the short term impact there?

Brian Hackworth, CFO, Universal Electronics: Yeah. I mean, right now, know, we’ve anything that’s basically destined for the North American market, at least the majority of it is manufactured in Vietnam. So, you know, knock on wood, we we I haven’t heard much about, you know, tariffing Vietnam yet. So, you know, the the I guess the good news and bad news is the bad news is we’ve got to deal with this in the past. The good news is we’ve become very adept at reacting.

So Yeah. So we’ll, you know, it’s one of the situations where I I don’t have a crystal ball as to what’s gonna happen with the tariffs. You just have to, you know, to to to react accordingly, and I think we’ve proven that we’re we’re very good at that.

Greg, Conference Organizer, Sidoti: Yep. No. Makes sense. Alright. Well, we’re at the end of our allotted time.

I don’t know if you have any parting comments, but if not, we could just wrap it up.

Brian Hackworth, CFO, Universal Electronics: No. I don’t. That’s about it. So if anybody has questions or if they ever wanna reach out to me, they could always reach out and I’ll take their call.

Greg, Conference Organizer, Sidoti: Alright. Alright. Great. Thanks, Brian, for the presentation. Thanks everyone else for listening in.

And with that, we’ll wrap it up.

Brian Hackworth, CFO, Universal Electronics: Alright. Thanks, Greg.

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