UEI Hiking Prices to Offset Inflationary Pressures, Says CFO
Global supply chain issues and materials shortages continue to have a “direct and indirect impact” on shipments, said Universal Electronics Inc. CEO Paul Arling on a Q4 earnings call Thursday. Q4 sales dropped 7% year on year to $144.9 million, said the company. It swung to a $6.3 million net loss from a $12.2 million year-earlier profit.
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Inflationary pressures narrowed UEI's Q4 gross margin to 24.9% from 32.7%. UEI will respond by phasing in price increases that will have “partial impact” in Q1 and Q2, said Chief Financial Officer Bryan Hackworth. Price hikes will be fully realized in the second half, he said. UEI’s Q1 revenue outlook is for sales of $135 million-$145 million, down from $150.5 million in Q1 2021. Shares fell 17.2% Friday to close at $29.90.
Pressures "persist" from chip shortages and supply chain woes, said Hackworth. Multiple vendors are predicting “some relief” is due in the second half “when several of our customer and product wins in the AV and home automation space are scheduled to ship,” he said. Those include traditional two-way voice remotes for the subscription broadcast channel, sensors and home security and smart home controllers.
On whether UEI is seeing a slowdown in demand, Arling said, “I wouldn't say it's an overall slowing.” He referenced some customers that have demanded more product, and “would be buying more right now, but they have semiconductor shortages of their own.” In those cases, the shortages may not be attributable to UEI but to the customer’s “critical path that they can’t get enough parts for the companion part product.”
The limited exclusion and cease and desist orders that the International Trade Commission imposed against Roku in a Dec. 3 final determination for infringing UEI's IP induced Roku "to modify the universal-control functionality on their streaming products, creating a less user-friendly setup experience and degrading the control functionality of their platform,” said Arling. “Consequently, Roku has created widespread frustration among users who are struggling to control their connected devices, including televisions.”
UEI has seen "a lot" of Roku product reviews reporting that people "are not able to operate their television set, can't control volume, can't turn it on anymore," resulting from the software modifications, said Arling. "Some users are complaining that they need to use their TV remote again. So they have to go to a two-remote solution, where they turn the TV on and then operate the other device with the other remote, which is not a good user experience in today's world."
Roku is “confident” that the “technical design changes” it implemented to eliminate any infringement of Universal’s IP “have not adversely affected the quality or ease of use of our products," emailed a spokesperson Friday. "We continue to provide our customers with an exceptional streaming experience." Roku executives didn't mention the ITC's Dec. 3 decision on their own Q4 earnings call Thursday (see 2202180043), and they weren't asked about it.
Arling highlighted CES 2022 introductions including smart thermostats and low-power, energy-harvesting remote controls designed for “sustainability and expanded software capabilities” for the company’s QuickSet platform. The remotes recover energy already present in the home, including natural and artificial light, and radio frequencies from wireless devices, he said. The chips deliver up to 2.5 times more computing power and consume 80% less battery power than traditional Bluetooth smart SoCs, Arling said. Consumers don’t want to change batteries for 20 or 30 devices in their home, “and we’re changing that paradigm.”