Universal Electronics CEO Cites 'Punitive Tariffs' for Lower-Than-Expected Q4 Revenue
“Punitive tariffs” hindered supply at Universal Electronics Inc. in Q4, resulting in shipping delays and lower-than-expected sales of $169.7 million, said CEO Paul Arling on a Thursday earnings call after regular U.S. markets closed. Dougherty & Co. had forecast $186 million, analyst Steven Frankel wrote investors Friday.
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For 2019, the analyst said, “strong demand from new design wins,” tariff mitigation efforts and “a shift in headcount to lower cost locations” point to "a strong contrast to the disappointment of 2018.” The stock closed up 5.8 percent Friday at $31.07.
Frankel’s key takeaways were potential “mid-teens or better” growth in home automation this year on business from Ring, Daiken, Trane, Toto, United Technologies and Xfinity Home and from initial shipments of Nevo Butler to MVPDs, TV makers and CE manufacturers due in the second half. New customers are ramping shipments of next-generation two-way advanced remotes “after a series of fits and starts,” leading to Q1 revenue guidance above the consensus, said Frankel. Reduced dependence on Comcast should help financial performance, he said.
Arling highlighted expansion of AV control to home automation, discussing UEI’s Nevo Butler collaboration with Microsoft, an end-to-end voice-enabled smart home hub designed to bring together entertainment control and home automation. The company is positioning Nevo Butler, due in the second half, as a “white-label digital assistant,” enabling service providers and CE brands to bring voice-enabled services to customers “while remaining in control of the consumer relationship.”
Arling said Nevo Butler leverages QuickSet, Nevo.ai and smart home sensors, “enabling us to enter adjacent markets and expand our offerings to existing and prospective customers." He sees growth potential from boosting the company’s competitive position, entering new markets and attracting new customers.
UEI expects transitions to manufacturing facilities in Mexico and a new partner in the Philippines, announced several weeks ago in response to tariffs (see report in the Feb. 7 issue), to be complete by summer, said Arling. “In a normal situation,” it typically takes a couple years to get lines up and running on time and at capacity, and create a supply chain, but with “a 25 percent tariff hanging over us,” the company is “trying to do this in three months or six months,” said Arling: “It's probably going to take 12, and we're doing it as quickly as we can, but we hit road bumps.”
The company hopes manufacturing changes and streamlining the corporate structure will free resources for “strategic investments,” Arling said. Guidance for Q1 revenue is $179 million-$187 million.