VOXX International Corporation (NASDAQ:VOXX) Q3 2024 Earnings Call Transcript

VOXX International Corporation (NASDAQ:VOXX) Q3 2024 Earnings Call Transcript January 10, 2024

VOXX International Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to VOXX International Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today’s conference is being recorded. I’ll now hand the conference over to your speaker host, Mr. Glenn Wiener. Please go ahead.

Glenn Wiener: Thank you, Olivia. Good morning, and welcome to VOXX International’s fiscal 2024 third quarter and nine month results conference call. Yesterday, we filed our Form 10-Q, and we issued our press and both documents can be found in the Investor Relations section of the website at www.voxxintl.com, and we expect to post an updated investor presentation later this week. Speaking from management today will be Pat Lavelle, Chief Executive Officer, who is currently out in Las Vegas, attending the 2024 Consumer Electronics Show; and Michael Stoehr, Senior Vice President and Chief Financial Officer. Their remarks will be followed by question and answers. As for today, I would like to remind everyone that except for historical information contained herein, statements made on today’s call and webcast that would constitute forward-looking statements are based on currently available information.

The company assumes no responsibility to update any such forward-looking statements and I’d like you to point you to the risk factors associated with our business which are detailed in our Form 10-K for the period ended February 28, 2023. Thank you for your continued support, and I would like to now turn the call over to Pat.

Patrick Lavelle: Thank you, Glenn, and good morning, everyone. Let me start off by wishing you all a happy and healthy new year. As Glenn said, announced with our team at CES and show kicked off yesterday. It’s early, but the response to our new lineup and the various projects that we have in development has been very positive, and I’m expecting more of the same over the next few days. 2023 has been tough for everyone, not just as VOXX, our entire industry has had a very challenging year. And we’re certainly happy to be turning the page. The global economy remains challenging, and we’re doing all that we can to navigate through those challenges, focusing on three primary areas: protecting and growing sales in both the short and long-term, improving gross margins through supply chain and internal efficiencies, and lowering both our fixed and variable expenses.

During the quarter, we were successful achieving two of these three objectives, as our gross margins grew by 90 basis points, and our operating expenses improved by a little over 2%. Sales declined roughly 5.4% with Consumer up and Automotive down. But overall, operating income was the same as the prior year. Mike will provide more financial details during his remarks, and I’ll focus on the segments, what’s happening and what we expect to close out the year, and as we move into fiscal 2025. So let me start with Consumer, as we have a lot of new — news to report. Consumer sales came — were up over 6% in Q3, with Premium Audio the driver. This is a big positive for us as the segment has been on the decline since the big bump that we had from COVID (ph).

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Q&A Session

We made a lot of changes and investments and they’re starting to pay-off, as evidenced by the growth this quarter amidst very challenging global economic environments. Within Premium Audio, we saw a good growth in North America market in Q3, driven by home speakers, wireless speaker systems and our new lines of party speaker systems. Europe was up as well, but our APAC sales declined as the market continues to be hard pressed. Overall, our Premium Audio business had a strong quarter with a number of new products on the horizon in new and rapidly growing categories. Looking at the recent NPD report for November, industry-wide speaker sales were down approximately 17%, but we were only down 9%. AVR sales were down 15%, and we were down 14%. The takeaway is somewhat positive, while our Premium Audio sales are down year-to-date.

We are growing our market share, especially domestically and the new products and the new categories that we introduced here at the show and those that will launch in the early part of next year should help drive future growth into fiscal ’25. Here at CES, we had a complete lineup on display under all of our audio brands. And as I mentioned last quarter, we have developed a completely new sound bar offering and had a number of new products on display, some of which have launched with others to be launched early this year. Our big announcement was the all-new Klipsch Flexus sound system powered by Onkyo. This is the first product that combines the strength of Klipsch’s Acoustics with Onkyo’s electronic technology. It officially comes to the market this year, and we have high hopes for this product, as do our customers.

I also talked on prior calls about our new party speakers, our Gig series, which was introduced in September and time for the holiday season, and it has done very well and has help to offset weakness in other areas. Party speakers are one of the hottest categories in the industry. It is competitive, but the market is open. We have great products slated for launch in the coming months. Here at CES, we unveiled our new Klipsch Gig series, one product, the Gig Max, is the first-party speaker that will be introduced with Klipsch’s legendary, horn (ph) loaded technology that we’ve been perfecting since 1946. These are powerful, portable speakers, top of the line products that deliver Klipsch’s heritage sound. Another highlight was the launch of our new Klipsch Music City portable Bluetooth speakers.

We unveiled three new models, the Klipsch Austin, the Klipsch Nashville and the Klipsch Detroit, with the Detroit being the premier model and the biggest in our Music City series. These speakers, along with other compatible Klipsch models, feature the innovative Klipsch broadcast mode, which allows you to connect up to a 100 speakers at once to create a fully immersive listening experience wirelessly through Bluetooth. We have strong Premium Audio lineup in 2024 and moving into 2025. And also some big news on Monday with respect to Klipsch, and the Panasonic Automotive collaboration that we’ve had for a number of years. Panasonic Automotive Systems Company of America and Infinity jointly announced on Monday, the partnership between our companies.

The all-new and flagship 2025 INFINITI QX80 will feature the premium Klipsch reference premier audio system powered by Panasonic. The car with our speaker system is being featured here at CES in Panasonic’s booth and the vehicle is set to debut later this spring. It has 24 specifically designed speakers titanium treaters, a high-performance sub-woofer, roof-mounted speakers and Panasonic’s proprietary DJX 3D surround sound processing. This adds to our program that we announced last year on the Dodge EV RAM truck. As for other CE products, sales were essentially flat with last year. We saw growth in sales of our recently launched RCA hearing aid products with some other puts and takes (ph) between the categories. Year-to-date, other CE sales are up approximately 21% and while we expect some softness near term due to the overall environment, we have strong share in a diverse customer base, and we expect to see growth in some of the newer categories to help combat this.

The big launch at CES for our accessory group with the new hearing aids under RCA. We launched four new products to expand our presence in this category. We also unveiled a new wireless HDMI Signal centers under the [indiscernible] brand, which connects devices to TVs and enables streaming content without cables. As well, we had additional other products under our RCA, [indiscernible] and AR brands. Moving on to Automotive. We had some challenges in Q3 as our OEM business was almost cut in half as we and our customers felt the impact of the UAW strike. As always, we base plans on our customer forecast, which obviously were not met when production lines were either impacted or completely shut down. With the strike now behind us, we expect to see the Automotive business begin to normalize.

With the contracts that we have been awarded, we should be in a position of growth. However, with the general economy slowing based on the Fed’s moves to date and car prices at all-time highs, we anticipate some near-term softness. During the quarter, Automotive sales were down 26%, with the miss in OEM, as I just mentioned. And primarily in rear-seat entertainment, which are the biggest programs for our OEM business. Business with Ford and Stellantis were both down due to the UAW strike with Nissan sales also down. VSM sales were up slightly given the volume of programs in the heavy-duty truck market and the new lighting programs previously awarded. We have a lot of OEM business in front of us, but with all of the supply chain and production issues over the past year or two, it has been challenging, and we are mitigating higher costs and improving our margins where we can.