UEI Looking to Home Automation, Connected Appliances for Growth

Convergence in its remote control and home automation businesses has a lot of revenue potential for Universal Electronics, Inc., said CEO Paul Arling on the company’s Q1 earnings call Thursday. The company has launched a couple of HVAC, security and home automation products in “small quantities,” and that will ramp over this year into next, he said.

Technologies in the two segments are similar, Arling said. A remote control is different physically, but “technologically they aren't extremely different than sensors, or the traffic controllers or other things in the home,” he said. He noted that low-cost, two-way, energy-efficient RF methods, Bluetooth Low Energy, Zigbee and other communications protocols are shared across segments.

The latest remotes and software versions for UEI's customers' TVs incorporate home control applications, Arling noted. Users can configure lighting and HVAC control from the TV remote, he said, and other devices can be “identified, discovered, configured, and controlled through that home entertainment device.”

UEI’s Q1 net sales fell to $132.4 million from $150.5 million in the year-ago quarter; it swung to a net loss of $2.9 million vs. income of $7 million. Guidance for Q2 is for net sales of $133 million-$143 million.

Arling noted the “complexity of the supply chain” for companion products, saying some customers are reporting higher demand than they previously forecast, but they’re not forecasting more “because another vendor was unable to get them the quantities they would like to have.” In those cases, customers won’t order more because “it won’t do them any good to have the companion product when they don’t have the other product.” That has continued beyond the pandemic, though some customers “look to be recovering,” Arling said, expecting larger volumes in the second half.

Chief Financial Officer Bryan Hackworth said a worker shortage at UEI’s Southern China factory halved its utilization rate in late March, resulting in $4 million in lost revenue. It was back online in early April, and the labor issue “has not resurfaced,” he said.

In Q1, UEI began phasing in price increases to offset higher component and logistics costs, Hackworth said. Price hikes should provide gross margin expansion, after gross margin slipped to 27.4% in Q1 vs. 30.8% in the year-ago quarter, Arling said. Price hikes will take full effect in the second half. Arling said second-half ’22 will deliver the highest sales level UEI has had in a six-month period since 2019.

Arling gave more color on UEI’s Eterna remote controls, which are said to use a third of the energy of a typical remote, “enabling more power-hungry features without compromising battery life." The remotes, which can harvest energy already present in consumers' homes -- such as radio frequencies from wireless devices and natural and artificial lights -- can deliver 10 times the battery life of similarly featured remotes, he said.

In Q1, UEI launched the fifth generation of its QuickSet cloud platform on LG smart TVs, Arling said. QuickSet serves over 50 billion transactions in a quarter, he said. In addition, he said, UEI’s wireless connectivity technologies are inside smart appliances due to launch later this year and into 2023.