UEIC - NASDAQ

Good day, and thank you for standing by. Welcome to the Universal Electronics Fourth Quarter and Full Year 2024 Financial Results 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 be advised that, today's conference is being recorded. I would now like to hand the comments over to your first speaker today, Kirsten Chapman from Alliance advisor of Investor Relations. Please go ahead.

Thank you, Gigi, and thank you all for joining us for the Universe Electronics fourth quarter and year end 2024 financial results conference call. By now, you should have received a copy of the press release. If you've 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 non-public information that might be discussed during this call, will be available on the company's website at www.uei.com for one year. During this call, management 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 the connected home space, particularly in climate control, HVAC and home automation, security and hospitality markets through the development and delivery of unique and innovative solutions, including the company's QuickSet technologies, TIDE platforms, energy harvesting sensors and solutions and excellent customer service as anticipated by management. Management's ability to manage its business and profitability through continued cost-saving initiatives, optimization of the company's manufacturing facilities and improvements in the company's cash flows. The company's abilities to capture potential upside opportunities in the home entertainment markets and particularly in the traditional subscription broadcasting due to its continued long lead market share and the stabilization of ordering patterns and the importance of the company's quick set differentiation and innovative remote control. And one for all brand design wins and 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 and spending, rising energy and freight costs, natural disasters governmental actions, including increasing tariffs on products brought into The U.S., reducing incentives to business 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 2023 annual report on Form 10-K and the periodic 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 and financial performance and business trends consistent with how management evaluates such performance and trends. In addition, management believes, these measures facilitate comparisons with the core operating and financial results and business trends of competitors in other companies. A full description and reconciliation of these adjusted non-GAAP measures versus GAAP are included in the company's press release issued today. Also, the company will no longer exclude excess manufacturing overhead costs, resulting from the continued transition of its global manufacturing footprint, specifically in Mexico and Vietnam, and depreciation related to the markup from cost to fair market value of fixed assets acquired in business combinations from its adjusted non-GAAP figures. This impact adjusted non-GAAP gross profit, gross margin, operating income or loss, income or loss before provision or benefit of income taxes and net income or loss in the quarterly results for 2023 and 2024. There is no impact to GAAP results. A reconciliation of these measures is posted on the website in Q4 2024 quarterly results section. On the call today are Chairman and Chief Executive Officer, Paul Arling, who will deliver an overview and Chief Financial Officer, Bryan Hackworth, who will summarize the financials. Paul will then return to provide closing remarks and open the call for questions. It's now my pleasure to introduce Paul Ehrlich. Please go ahead, sir.

Thank you, Kirsten, and thank you all for joining us today. I'm excited to report in Q4 2024, our team's efforts delivered sales growth of 13% and improved EPS by $0.24 per share compared to the fourth quarter a year ago. We exceeded both our own projections and consensus. Over the past few years, we have been executing initiatives to support new customer acquisition and long leaf design wins to fuel ongoing sales growth, particularly in the connected home, which is a large and growing market. During Q4, our connected home business increased momentum with several new products shipping, and that is beginning to scale as new orders have increased toward the tail end of the quarter. We are excited that, our perseverance and commitment to this channel are starting to show results. Over the past few years, we have managed costs and optimized our manufacturing footprint, improving our profitability. The combination of these accomplishments have strengthened our financial foundation and underpin our projections for top and bottom-line growth for full year 2025 and beyond. Turning to a review of our markets. In the connected home market, which includes HVAC and home automation, security and hospitality, we continue to gain traction with new customers, and build on existing relationships we already have across many of the top OEM brands in North America, Europe and Asia. These include Daikin, Carrier, Vivint, Somfy, Fujitsu, Mitsubishi and Metis. In Q4, revenues benefited from a full quarter of shipments of new products launched during Q3, as well as new products introduced during the quarter. Now we are starting to win additional projects, with satisfied repeat customers, leading to a strong pipeline of new products that will fuel long-term revenue growth. Our share of the climate control market is growing and Q4 results are evidence that we are well-positioned to deliver on our long-term growth strategy. In home entertainment, including video service providers, consumer electronics and our AV accessories retail business, TV demand increased in the second half of 2024 with shipments growing slightly across all regions. This was especially true in North America and Western Europe, though the growth in TV shipments was driven primarily at the lower end of the market. In Q4, video subscriber declines at some of our key accounts narrowed compared to prior years, reflecting new pricing and packaging of video service products introduced earlier in the year. As a result, some of our major customers increased overall order quantities during the quarter positively impacting our Q4 performance. Many of our reasons for optimism, both near and long-term were highlighted at the International Consumer Electronics Show in January. The event was a major success for us. We received strong interest in our new products and technologies from many of our new accounts in Connected Home as well as existing customers who want us to bring new features and functionality to their platforms. I'll review a few of the highlights. We introduced groundbreaking QuickSet HomeSense technology, while protecting user privacy, QuickSet HomeSense adds a layer of on-device intelligence that learns from the home environment and location of connected devices and adapts to optimize device usage based on user preferences. We unveiled new capabilities in our UEI TIDE family that enhance climate control and energy management by resolving key friction points and providing on device actionable insights. Elevating the role of smart thermostats within the home, benefits include managing multiple heating and AC systems, central, space and other integrated in a single controller as well as providing optimized climate control and energy savings. We offered a sneak peek of the next gen UEI TIDE Pro platform with a larger higher resolution display and support for on-device AI processing and other communication protocols. The new architecture introduces an advanced software framework, enabling the development of operating systems and graphical user interfaces under a limited power budget. In our customer discussions, this climate control platform is considered the ideal solution for many of our OEM customers, who are looking to bring their proprietary protocol technologies to smart thermostats, to give consumers optimal HVAC system control, while delivering a better predictive and preventive maintenance service that many other smart thermostats sold at retail cannot do. This new climate control platform runs UEI's latest QuickSet Widget Pro module. This high-performance processor enables complex tasks such as edge AI processing, video stream decoding and enhanced security features to protect user data and ensure the integrity of the smart home ecosystem. We introduced QuickSet 7 SDK and the new QuickSet Cloud capabilities to further expand monetization opportunities to our OEMs through better personalization and increased user engagement. QuickSet Cloud now supports a broader range of device and content sources spanning video and audio consumption in the home. Moving toward the promise of private and intelligent homes, QuickSet 7 now learns and adapts to changes in the home, to precisely target the right audience at the optimal moment, delighting the user and maximizing monetization potential for entertainment and smart home brands. In addition to CES, earlier this year, we announced our collaboration with Somfy in the Connected Home space. We've been working with Somfy for several years now to create innovative products and solutions that deliver better motorized shade control experience, such as their latest outdoor remote lineup and energy harvesting sensors. Consumers will benefit from enhanced comfort and convenience, including saved favorites, reduced energy consumption by adjusting interior temperature, based on outside conditions and low energy power consumption complying with Somfy's Act for green requirements. With that, I'll turn the call over to Bryan. Please go ahead.

Thank you, Paul. I'll review the results for the fourth quarter of 2024 compared to the fourth quarter of 2023. As previously noted, our adjusted non-GAAP financial statements no longer exclude excess manufacturing overhead costs, resulting from our factory footprint transition and depreciation related to the markup from cost to fair value of fixed assets acquired in business combinations. These changes are reflected in the year-to-date 2024 financials, as well as the corresponding prior year periods. These adjustments have no effect on our GAAP financials. For the fourth quarter ending December 31, 2024, costs associated with the aforementioned items amounted to $700,000, equivalent to 70 basis points of gross margin or $0.04 per share. For the fourth quarter of 2023, costs for these items were $1.6 million equivalent to 160 basis points of gross margin or $0.11 per share. Please keep these figures in mind, when reviewing our quarterly results. For the fourth quarter of 2024 net sales were $110.5 million a 13% increase over last year's fourth quarter sales of $97.6 million. Sales exceeded the high end of our guidance range of $109 million due primarily to an increase of orders in the Connected Home channel, specifically for Climate Control products. Although not all these orders were shipped as of year-end, we were required under GAAP to recognize this revenue approximating $4 million in the fourth quarter. We expect this positive Connected Home trend to continue. While the home entertainment channel still faces headwinds, we continue to see ordering patterns stabilizing. Gross profit in the fourth quarter of 2024 was $31.4 million or 28.4% of sales compared to 28.5% in the fourth quarter of 2023. For the fourth quarter of 2024, operating expenses were $27.2 million compared to $27.6 million in the fourth quarter of 2024. SG&A expenses were reduced to $20.3 million from $21.1 million in the prior year quarter. R&D expenses increased to $6.9 million for the fourth quarter of 2024 compared to $6.5 million in the prior year quarter. Operating income was $4.2 million compared to $2 million in the fourth quarter of 2023. Net income for the fourth quarter of 2024 was $2.6 million or $0.2 per diluted share compared to a net loss of $500,000 or $0.04 per share in the fourth quarter of 2023. Next, I'll review our cash flow and balance sheet. At December 31, 2024, cash and cash equivalents were $26.8 million compared to $42.8 million at December 31, 2023. For the twelve months ending December 31, 2024, net cash provided by operating activities was $14.8 million of which $8.4 million was used for internal investments. We reduced our outstanding line of credit by over $18 million in 2024, resulting in a net debt position at year end of approximately $10 million. Now turning to our guidance. Several projects won over the past couple of years in the Connected Home channel have begun to ship, and we expect this trend to continue throughout 2025. As mentioned earlier, certain customers increased their orders for our climate control products, and although not all these orders were shipped as of year-end, we were required in our GAAP to recognize this revenue approximating $4 million in the fourth quarter. This essentially shifted revenue from Q1 2025 to Q4 2024. Taking this into consideration, for this first quarter of 2025, we expect sales to range from $87 million to $97 million compared to $91.9 million in the first quarter of 2024. We expect a net loss ranging from $0.21 to $0.11 per share compared to a loss of $0.26 per share in the first quarter of 2024. I would now like to turn the call back to Paul.

Thanks, Brian. We closed 2024 as a much stronger and better positioned company than we were in 2023. And our financial performance in 2024 reflects that. Our commitment to the Connected Home market is beginning to pay off as our products and technologies are attracting new customers and the long lead design wins are beginning to come to fruition. This was also evident at CES, this year, as we unveiled innovative solutions to address customer needs and ultimately deliver end user benefits. Our advanced features and functionality appeal to a wide customer base, as they ensure privacy, feature advanced technologies, support for on device AI processing and offer customer monetization opportunities through personalization and increased user engagement. While we've made great progress, there's still a way to go. Based on our recent successes, our orders and our strong pipeline, we are reiterating our projections for both top and bottom-line growth for full year 2025 and beyond. As always, stay tuned. Operator, we can now open up the call for questions.

Thank you. [Operator Instructions]. Our first question comes from the line of Steven Frankel from Rosenblatt Securities.

Good afternoon, Paul and Bryan. Thank you. Could we get a little more detail on this notion of climate control products that aren't going to be shipped until Q1, but their revenue recognition was in Q4? And maybe just help me understand what triggered that, and does that normalize after Q1?

Yes, it's Bryan. The accounting rules, these changed a handful of years back where basically you used to have to you had to ship the product to record the revenue about five years ago things changed. So, I won't go through all the details of the rules, but essentially has to be a customized product. You have to produce it. You have to have firm commitment, just to name a few. But the bottom line is we received orders, increase in orders in the fourth quarter. We produced those products and these products related to the connected home channel primarily in the climate control. And because we produced them, as of year-end, under the accounting rules, we were required to recognize the revenue. Now under the old rules that revenue would have been recognized in Q1 upon shipment. But with the new rules, it get recognized in Q4 and it provided for additional $4 million of revenue in the fourth quarter.

Okay. And then in your guidance, it seems to imply both an increase in expenses and a decrease in gross margin. Is that gross margin decrease, just because you're missing that $4 million in revenue, so you dropped your run rate and we're having some gross margin pressure or was there something else going on?

I think the important thing with the gross margin for the full year, I don't have a change in outlook. I still expect it to be in last quarter, I think I said, I expect the full year to be 30 points plus or minus one percentage point. So that hasn't changed. Q1 is typically light. When you have lower volume in the first quarter, you have lower production. So, you're not absorbing the overhead, as efficiently as you normally do. So that takes a little bit of pressure -- puts pressure on the gross margin rate. So, there is a little bit of pressure on the margin rate in Q1, but for the full year, I don't see a difference. I still expect to be 30 points plus or minus one.

And in general, OpEx should have what kind of shrink or growth on a year-over-year basis?

I don't expect it to be true. I expect OpEx to be similar. I think whatever wage inflation is that, nature we're going to offset.

And then what were your customer concentration numbers in Q4?

We had 210% customers, Daikin at 13.4% and Comcast at 10.7%.

Nice to see that one back. And then maybe some detail on legal judgment that was mentioned in the footnotes.

Yes. As we previously reported, the U.S. Court of Appeals of the Federal Circuit affirmed our win against Roku. Roku then filed a request for a U.S. Supreme Court review of that decision. In mid-January, the U.S. Supreme Court denied Roku's request making the decision final. As a result, we expect to seek to get the two district court cases started or unstayed in 2025. And, of course, we will update everyone as significant progress is made on this important matter.

And there was a footnote having to do with legal settlement and one of your factories in China. Is that also related to Roku or is that something different?

No, that was a labor agency issue and that related to prior years.

Thank you. One moment for our next question. Our next question comes from the line of Greg Burns from Sidoti.

Good afternoon. How do tariffs factor into your outlook for 2025?

That's a complex topic. As we -- the tariffs so far aren't complete and there's a lot I think to still occur there. As far as China is concerned, we've already we did some years ago remediate that. We don't have, but a small amount of U.S. Destined product produced in China. So, we had to deal with that six years ago and did. So, anything that's done with China is somewhat irrelevant to us unless the nature of things change. As far as the threatened tariffs here in The Americas, there could be some effect, but we're already working on ways to mitigate that. It's much smaller than it once was, because our production out of Mexico is much smaller than it once was. We use that as a hub, frankly to begin to remediate the tariffs those, I think it's now six years ago from China, but the production there has gone down significantly. But as far as tariffs go, I obviously -- as this is fluid, we're going to have to make changes potentially and ameliorate the situation. If something were to happen, we obviously will work with customers to get them the right price. I think we've shown ourselves to be pretty nimble on this front, as we had to do many years ago and have since. So, again, it's a fluid situation that we'll have to watch. But again, anything that having to do with China is not really relevant to us as it stands now. Mexico could be, but it's relatively small, and we'll remediate that or ameliorate the situation with customers. Beyond that, it's difficult to know what the next tariff move will be.

Okay. And then when we normalize for that $4 million that shifted between quarters, based on the order trends that you've been seeing recently, how should we think about the remainder of the year? Do you see growth accelerating or improving on a sequential basis, as we move throughout the year? How do you see the year playing out, based on the pipeline and order activity that you're currently seeing?

Yes. Again, Greg, difficult to answer. We, of course, have gotten an outlook from customers, but it's pretty far out Q3 and Q4, even Q2, Q3 and Q4 even further out. So, this is one of the reasons we don't provide long-term guidance because those could improve significantly or be reduced significantly, depending on the economic situation and a whole number of factors. It's one of the reasons why we provide the guidance one quarter out. However, we do have quite a few new projects. We've had a few in the back half of the year that helped positively impact things. We have more this year and we are bullish about that for sure. But, we'll have to see how the year progresses, not just for us, but the economy and any number of other variables that could affect demand for home entertainment devices, televisions, HVAC. And that's why again, we don't provide -- want to provide long-term guidance. If we're just to focus on projects, there's quite a bit of there's quite a bit to be bullish about, because we are gaining share. As I said in the prepared remarks, we're winning second and third, in some cases fourth and fifth projects and bidding for more. It's reminiscent of what happened in home entertainment many years ago. We go in, we prove ourselves with great products, great execution, and then earn more business. And we're seeing a similar pattern in these markets. So, we're very bullish about that. If we can get any sort of economic -- lack of economic headwind or even a trailing breeze, it could be even better. But we're reluctant to give any real long-term forecast on the total at this point.

Okay. And then, the -- I guess the relative strength you saw in the subscription broadcast market this quarter, is that sustainable? Do you feel like that part of the business has kind of reached a stable level and order patterns can stabilize there or how do you view, what you saw this quarter maybe in terms of the sustainability of that?

It did. Now again, it's always difficult to forecast two or three or four quarters out. But certainly, the rate of decline has lessened and probably will, given that it has gone down quite a bit over the last 4 years or 5 years. But again, difficult -- the forecast we've gotten and the performance we've had over the last few quarters would show a lessening of that decline with many of these customers. In fact, we did have some increases from them. So maybe it's reached a point, where the damage that that part of our business might be doing to the total has reduced and the growth from the connected home area of our business can shine through, right? Because if we're flattened out or even declining very sparingly on the home entertainment side, then the Connected Home growth can shine through.

One moment for our next question. Our next question comes from the line of Jeff Van Sinderen from B. Riley Securities.

Hi, everyone. Let me say congratulations on the return to growth. I wonder if we could just circle back to production geographic considerations. And if I recall, you have a facility in Vietnam that is producing predominantly, HVAC or Connected Home products. And I'm just wondering if you needed to, could you produce more there, if you needed to ship production from Mexico or anything else that's in China, I guess China is not an issue, but from Mexico perhaps?

Yes. We do make both home entertainment and connected home products in Vietnam already. So, there could be further shifts made for either classification of product or any of our products to a facility in Vietnam if necessary

Okay. Good to know. And then you mentioned enhanced monetization opportunities in some of the products that you showcased at CES. Can you elaborate a little bit more on that and the potential contribution to your business that could have?

Sure. Yes. I don't want to give too much away, because some of this is brand new and we, at CES, we typically present these technologies to the OEMs for inclusion in their future product, but a couple of different things. The advanced monetization could be had, we're doing a lot on the device and in the device itself, not necessarily in the cloud even, but in the device, which provides obviously security to potentially bring more consumers. As you know in the home entertainment business, there is a battle of the OS. So, a lot of companies are building, an OS within the device and consumers are sometimes connecting other products to the device, which creates a battle of OS, right? And what we're able to do is, help them bring more users to their OS through some of the things we're doing, software driven things we're doing across the platform. I guess that's the only thing I can say about it right now, which would bring more, obviously more eyeballs or more viewing hours to their interface, which obviously increases the monetization for those players. And again, we want to do it in a way that the consumer is attracted to, because doing it in a way that the consumer isn't attracted to doesn't really work, right? Over the long-term, people are going to do what they want to do. So, we are developing ways to make it more attractive for people to come to your OS, to view the various things they wish to watch. Now as far as HomeSense is concerned, there are a variety of ways that our different customers, home entertainment, HVAC, other smart home applications, because essentially what it does is, and I won't get too deep into the technology here, but, it can determine who is home and essentially where they might be. And of course, it's private because it can be done on device. And this is why we're doing advanced development with some of our partners of platforms, of hardware platforms, chips that can allow them to do this sort of AI, within the home to determine who's present. Now you might say, why do I need to know that? Well, there's a whole bunch of applications for this in the entertainment world, but even importantly on simple things like climate control, why are you cooling parts of your house where nobody's there or nobody is ever there, right? Some people on this call probably have large homes, where 30% of their home isn't occupied very often. Wouldn't their system be better optimized? Wouldn't it balance comfort, with cost better if they actually could locate where people are and optimize the system for that? So, there's a lot of applications for this in future products in our platforms, working alongside these OEMs and this one, the HomeSense one applies across the board, connected home, security, HVAC, entertainment. And I think we have a pretty good technology there. And customers were very interested in this along with other QuickSet, QuickSet 7 SDK and other applications to be built into our future products that we build for them or into their products directly. I hope that answered your question.

Yes, that's helpful. I appreciate that. And just wanted to maybe think a little bit about growth drivers that you have baked into your guidance for this year. I know you're seeing growth in HVAC Control, Connected Home. But I guess, are those the products that you are seeing be the largest drivers of growth this year? Is it largely HVAC derived products? Or, are there other products in that that you see driving it? Is it kind of a rebound perhaps in, I don't know, subscription broadcasting? Are there new programs in that, that might be up or maybe you could just help us with that a bit?

Yes. No, it's a good question. And it's a little bit of each. It's not just one thing. I would say, predominantly where the biggest opportunity is, there are customers on the HVAC side that for us present an opportunity as large as the opportunities we saw in home entertainment, meaning our potential sales to them could be as great as the largest customers we had in Home Entertainment. That's how big they are and how many products they deploy. So, and we are of course working on some of the largest in the world. We've mentioned two names on this call Daikin and Carrier, who happen to be the two largest HVAC providers in the world. We are working on with others, other names we mentioned, but this market is large, it's growing and it's changing. So that change brings about an opportunity to sell in these new platforms that help with their new products, because they're trying to change these products as well to make them more efficient, to make them again balance comfort with costs, because consumers and the cost is not just of the device, it's of the energy that drives them. So, they're looking for ways to do that, and we have some methods in the controller that can help them do that. We can also make that, device much more functional. It can do things that it's never done before. This has happened in other markets. It's happened years ago in phones. It's happened in -- it's even happened in remotes. The remotes we once said many years ago were changing what the remote control is and what the remote control is capable of doing. Well, here's another case. The thermostat in many homes is sometimes not even a connected product. Now they're beginning to become connected, meaning they're controlled by an IP device. But what if it could do much more? What if it could balance your electric bill? What if it could tell you that, if you wanted it to be 74 degrees right now, if you let me only be 76 degrees, I can turn it down to 74 when the price of per kilowatt hour goes down at 07:00. You hit, yes, and then the thing automatically reprograms itself. There are others who do this sort of thing, but probably not in as complete way, as we do. And then on top of it, we have the device interconnectivity or interoperability that we've proven in other markets, including home entertainment, that is very attractive to this market, because they want to become more integral to the smart home. We've already done that with other leading names in another market and this interests these customers. So, we have a lot to offer here and that's probably one of the many reasons, why we're winning projects there, proving ourselves and then winning second, third, fourth and more projects. So, we have a lot to offer here, a lot of differentiation. We're continuing to innovate in this area, some of the things I just mentioned. And that's again, what we've done before. This is how we became the leading company by far in that other control market. And I think, there's a similar opportunity here. And we're at the beginning stage of it, but large and growing market, a lot of large players we're starting to win projects with. I think it's very similar, right. And so, we see that starting to happen right now. And we expect to do more of that this year. This year we'll win projects that will fuel not just late '25, but will fuel 2026, '27 and '28, right? And that's the key for us and we're pretty bullish about what we're doing right now. And the customers are happy with the things we've done so far.

Okay. And I know you don't break it out, but I'm just thinking kind of thinking out loud here about the HVAC Hash business. Is your belief that, that business will -- the growth there would accelerate do you think in second half of this year and into 2026, or how are you thinking about sort of the, I guess the growth curve of that business?

Yes. I mean, I guess as we sit today and it's always difficult to predict two, three, four, five years out. But I do think that, based on the growth dynamics that are there today, the Connected Home business probably will be the majority of our business some time from now, not this year, but it will be some time from now, just because of the growth prospects there, the size of the market, the number of customers that we don't have yet, that we are beginning to win, the growth of the market itself. And the home entertainment market has been difficult for the last few years and probably doesn't grow at the same pace anywhere in the next five years as the connected home market. So, I do see this as a key to the future. It does not mean home entertainment isn't going anywhere. People are still entertaining themselves at home. There's plenty of opportunity there. We do have wins there that will help fuel that business. It may offset any further shrinkage we might have from certain of those markets, right? So, we're still by far the leader there, and it is very much an important part of our business. But Connected Home is probably where the growth comes from over the next three to five years.

Thank you. One moment for our next question. We have a follow-up question from Stephen Frankel from Rosenblatt Securities.

Paul, if you are in discussion with these HVAC vendors about additional products, where do you think they are in making these smart thermostats a standard part of a new sale rather than something optional that the consumer has to decide to pay out for, when they install a new system?

Yes. I can't speak to the economics on their end. Obviously, we never talk about specific customers' plans. So, if you're asking, will they one day give them for free, I can't comment on that. That probably is being considered, just as an integral part of their system, but that wouldn't be us for up to us, to do, right? We will sell them the product, they will market it in a way they deem appropriate. But I will say this, that, in many discussions in that market, their desire is to become more integral to the smart home, which would mean that, they'll want to attach their brand and/or their product to their products, but they realize they have to make their product better and very attractive to the consumer, because it's just like any market, the consumer will want it, if it's as good or better than, what they have now or what is available to them through other vendors. So, they're very cognizant of that and are working towards that. And this is where, again, the opportunity for us is there, making these products do things, that are useful to the consumer, that make them smarter. And by smarter, I don't just mean connected to an IP device. I mean, they do things, that make your life easier, that are other people aren't doing in their product. We mentioned a few of those features here, and then sometimes not huge features, but they're additional features, right, that make the product a little better. And they're all interested in this, that almost everyone that -- I think, I can faithfully say everyone that's in this market is on that trail towards a product that not only will control their HVAC system better, but may do other things as well. May be able to even predict when your device is failing, so that the consumer or the installer can be contacted to contact the consumer to say, ''Hey, maybe I should come out and look at your system.'' Because what you don't want to have in the middle of summer is your HVAC system, if anybody's had this fail and you have to wait two days for it to be fixed. Just particularly don't want that in Phoenix, I can tell you that. So, systems that are smarter, systems that might have proprietary data that are coming from the unit itself. Remember, the controller is just like it was in the TV is separate from the device itself. So, you're going to have to communicate between devices in a way that will help them predict those happenings and again increase the value and potentially increase the value for the OEM and/or the installer as well. So, there are ways to make these devices have everyone win with a better, more useful product.

Great. And then, could you review for us of the Top 10 HVAC vendors in the world, how many have you won and how many others are you having material discussions with?

I think when you say material discussions, I don't know the definition of that. We're probably talking to all of them. In fact, I'm quite sure we are. And I think we've won the majority of them, or at least a project, because the way these relationships, and it's probably true in any market, it was in home entertainment, it is in HVAC and it probably is in any market. When you want to break into an account that's large, you usually don't go in and are able to pitch, I want all your business today, because most of these companies, particularly if they're of size, are not going to give a new vendor all of their business. So, you typically have to go through a project, where they see how you work, they see how you integrate with their people, their engineers. It's a test. It's a project that you go through. We've been through this in other markets. Then once you prove yourself, you're allowed new projects. You can get to the point, where they'll award you multiple projects at once, because they're so happy with what you've done on the first or second project, and they often do reviews of them after they're done. After the product has been introduced, they'll do a review of the vendor, how did we work together, how can we work better together, and then they may award you additional projects. That's the stage we're at with a few of these major players. We've been awarded great projects and we will of course execute on those. And then like we did in home entertainment, we will decide. We want as much, to do as much with them as possible and have them make that choice.

Thank you. At this time, I would now like to turn the conference back over to Paul Arling for closing remarks.

Okay. Thank you for your continued support of Universal Electronics and joining us on the call today. We will present at the Sidoti Small Cap Virtual Conference on March 19th, 20th. We look forward to seeing some or all of you there. Have a great day. Thank you.