Universal Electronics Shares Hit 52-Week Low on Q3 Earnings Miss
Shares of Universal Electronics Inc. hit a 52-week low Friday before the stock closed 16.6% lower for the day at $35.70 after a bleak Q3 earnings report Thursday. Revenue grew only 1.4% year on year to $155.6 million in the quarter ended Sept. 30; it had a net loss of $1 million vs. net income of $6.2 million due to components shortages and logistics delays.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Supply mismatches and transportation issues throughout the supply chain created an “uncertain environment” said Chief Financial Officer Bryan Hackworth on a Thursday earnings call. For Q4, the company projects sales of $143 million-$158 million vs. $156.3 million in the year-ago quarter. UEI was “burned” with port congestion and “vessels not showing up on time,” said Hackworth. “Layers of complications” are making it difficult to predict revenue, leading Hackworth to expand the revenue range to $15 million for Q4 vs. the usual $10 million swing.
Hackworth said customers are discounting their forecasts but sometimes not enough. Several customers in Q3 didn’t receive parts, components or a companion products, such as a set-top box, on time so they pushed out the orders until Q4. UEI doesn't know what the forecasts would have been “in a normal environment," he said. When the company receives a forecast, it can estimate the chip shortage impact on its production and sales: “However, we’re unable to quantify the potential customer pushouts caused by shipping delays for their companion products or parts shortages from other suppliers," said the executive.
CEO Paul Arling noted UEI’s customers often have multiple products to deploy in their customers’ homes, and “they have to rely on the supply chain of multiple other companies.” If a customer ends a quarter 50,000 products short from one vendor, “they probably want to short 50,000 on the other vendor because why have the inventory on one part when you can’t deploy the other parts,” he said, citing a “flow-through effect.”
UEI has faced a “plethora” of component price increases in chips, boards, resin, transistors and resistors that it’s been able to “stave off” with existing inventory until now, Hackworth said. In Q4, “the old inventory is sold off,” and the new pricing is starting to take effect. He expects Q4 margin to be lower than the 30% gross margin in Q3. Arling declined comment in Q&A on whether UEI is involved in Comcast’s branded Hisense-built TVs. Comcast accounted for 14.5% of UEI’s Q3 revenue, Daikin 13.2%.
UEI has one “relatively large” customer “in the pipeline” for its Nevo Butler smart home hub, Arling said. He billed the hub as a “far-field product that will completely do your entertainment control and have capabilities to do many other things.” Nevo Butler “can go way beyond home entertainment control,” he said. He couldn’t discuss a product rollout schedule due to confidentiality agreements.
Noting worldwide supply chain and logistics issues, Colliers analyst Steven Frankel said in a Friday investor note it’s a question of “when, not if, growth returns” for UEI. “The world continues to evolve toward advanced remote control solutions that make it easier for the consumer to navigate multiple services and use voice control for critical functions like content discovery,” Frankel said, saying UEI is the leading supplier of such solutions. Chips shortages will limit the company’s ability to grow revenue in 2022, but UEI has the intellectual property to meet the needs of customers in the CE, MVPD and home control markets, said the analyst.