Say the door to the home from the furniture accessories
voxx international corp (voxx) ceo pat lavelle on q3 2019 results - earnings call transcript
by：DIgao
2020-06-29
VOXX International Corporation (NASDAQ:VOXX)
At 10: 00 a. m. on January 10, 2019, ETCompany participant Glenn Weiner\'s third quarter 2019 earnings call
Lavel-Investor Relations
Michael Stoehr, president and chief executive-
John Shalam, senior vice president and chief financial officer-
Thomas Kahn, chairman of the board of directors attending the meeting-
Brad Leonard, brother of Kahn
David Williamson-BML Capital Management
Private investors often
Ladies and gentlemen, you are welcome to attend the third quarter performance conference call of VOXX International fiscal 2019.
At this time, all the participants were listening. only mode.
We will have a question later-and-
Answer sessions and instructions will be followed at that time. [
Operation instructions]
As a reminder, this conference call is being recorded.
I would now like to introduce the host of Today\'s meeting, Glen Weiner of investor relations.
Thank you, sir, Ashley. good morning, everyone.
First of all, I wish everyone a healthy and happy new year.
Welcome to our third quarter performance conference call for fiscal 2019, and as you know, today\'s call is live webcast on our website www. voxxintl.
Com, there\'s a replay for those who can\'t make a call today.
Pat Ravel, president and chief executive, will address management this morning;
Michael Stoehr, senior vice president and chief financial officer.
After they comment, we will hold a Q & A meeting for investors who wish to ask any questions.
The chairman of the board, John Saran, is also with us this morning and he will also be available in the Q & A section on the phone.
Before I transfer the call to Pat, I would like to remind you that in addition to the historical information contained here, the statement at today\'s conference call and the webcast that constitutes the forwarding --
The Look statement is based on the information currently available.
The company is not responsible for updating any such forwarding-
Look at the report.
Risk factors related to our business are detailed in our form 10
Q-for the period ended November 30, 2018--
Excuse me, our Form 10-
K for the period as at February 28, 2018.
At this point, I would like to transfer the call to our President and CEO, Pat Ravel, to share some of the exciting news and progress we have made at VOXX International. Pat?
Thank you, Glen. good morning, everyone.
We attended 2019 Consumer Electronics Show, and like in the past few years, many of our new products were well received, and we had very productive meetings with retail and automotive customers.
We are also celebrating 100 anniversary of the RCA brand, which has always been the most valuable brand in consumer electronics, with a great focus on innovation and technology.
As you can see from our last conference call, we are making extensive changes to improve our business and streamline our operations.
From now until this year
The End report is expected to have a further overview of our adjustments and future plans.
We fully expect more stable profitability in the coming years.
I will review our results for the third quarter from today and then introduce some of our more important product launches, partnerships, after which Mike will provide more details about our nine projects
Monthly performance and balance sheet.
Q3 net sales fell $27 million, the vast majority of which were in our consumer accessories division, with sales down $24 million due to exit and high initial load from some of our old legacy product categories
Ins for our wearable products are not expected to repeat.
But net sales of high-end audio fell by $7.
7 million, mostly in line with our forecasts, because last year we decided to limit certain online distribution to protect profit margins and our retail customers, with the increase in gross margin and the profitability of market segments, this strategy is working.
Another positive factor is that sales in our car market have increased by $4.
4 million, driven by the strength of our OEM business.
Gross profit margin in all segments is rising, 30%, up 350 basis points.
Within the 200 basis points increase in the profit margin of the FAW Car segment, the profit margin of the advanced audio segment increased by 330 basis points, and the profit margin of the consumer accessories segment increased by 360 basis points.
We also continue to take steps to reduce costs and report Total operating costs of $33.
2 million, equivalent to $2.
7 million minus one or seven.
4% improvement from the third quarter of last year.
Operating income of $5.
Compared with last year, $7 million grew by $100,000, while net sales fell by nearly $27 million.
When we complete the SKU rationalized program, integrate and restructure our Consumer Accessories group, and integrate the international advanced audio group under Klipsch, we expect our business to be more profitable, especially when you add some programs that are using EyeLock and on the horizon.
Let\'s get into the automotive field first.
In the last few quarters, I talked about our next one. After generation
Seat entertainment system EVO and OEM projects in partnership with GM, Ford, Nissan and Mazda.
These plans, as well as the benefits of our OEM remote start-up plan and Subaru with other OEMs, continue to drive our performance.
Total OEM sales in the third quarter were close to 37%.
I did note during the second quarter call that the OEM momentum will continue until the third quarter and may have slowed down in the fourth quarter, but that is still the case.
But OEM business is expected to maintain strong momentum this year.
In addition, we are preparing for the second quarter release of the new Lincoln pilot EVO, which will further support our OEM backend
Partnership and discussion with several other OEM.
Our after-sales fell $2. 2 million or 9.
5%, but the decline in sales in this part should be reduced in the coming period.
We believe in many new products launched by CES, seatback and power systems, new remote start-up systems, new products in the ADAS category, new remote information processing technologies under code alerts, pursuits and prestige, in addition, satellite radio sales have stabilized, although they are no longer a growth category and should remain stable in fiscal 2020.
In addition, car pre-tax revenue for the third quarter was $5.
$2, 6 million.
1 million-to-
The date for the first nine months is $11.
$2, 1 million.
2 million finance 2018 9-month period.
Two other major developments in the automotive sector;
The first is our recent Q1 position at Ford, which is a huge achievement and recognition of Ford\'s quality, performance and processes.
Secondly, the announcement of November was nominated as the final player of our game\'s 2019 Auto News PACE Award.
Change the eFob mobile phone vehicle access system.
In the range of premium audio, third quarter and year-to-
Sales in the date segment fell by 13. 5% and 9.
They are 9% per cent, which is in line with our budget and gross margin continues to rise.
We have reduced the cost of this part, when comparing Q3 performance, pre-
Tax revenue increased by $200,000.
The real story is our year. to-
Date performance as pre-
The tax for fiscal 2019 was $9.
6 million, compared to $1 in the previous fiscal year.
5 million, an increase of $8 million.
We continue to work on reducing costs by improving efficiency and re-aligning our international operations by merging Magnat and Heco under the umbrella of the Klipsch Group.
So we want to have some-
Our time severance and restructuring costs for the fourth quarter were $1 higher than the premium audio operating costs for the third quarter.
3 Million-to-
The date was raised by $4. 8 million or 146%.
The end result of continuous efficiency improvement and the impact of our re-adjustment should be a more profitable part, which we believe will also grow over time.
We continue to be successful in reference, reference premieres and traditional product lines, and look forward to expanding our custom installation alliance with lucitaville and Hard Rock Hotels.
We have established a new partnership with Klipsch this quarter and Klipsch is now the official speaker supplier for the first watch restaurant.
We are also discussing with many other large global organizations, and the success of one or two of them should help to improve the performance and visibility of the Klipsch Brand.
At CES, we have introduced a number of Klipsch and nearly 2019 products, including wireless headsets, wireless portable and desktop speakers, TV upgrade sounds with new soundbars, electric speakers and multi-channel speakers with sun visor technology.
We will also launch exclusive speakers and subwoofer programs directly imported with Amazon, and we will start in step 3.
You can visit the Klipsch website for information about news kits and other products.
As for the consumer accessories, this is the place where the lifting machinery plays its role.
Last quarter, we announced a positive SKU rationalized plan that is now in place and will remove several legacy products from our product lineup during this fiscal year and the next fiscal year. On our year-
Finally, we will provide more details around the exit product line, the impact of the results for fiscal 2019 and the expectations for fiscal 2020.
We focus on products that we have strong distribution, expansion opportunities and a profit structure that meets our bottom line standards.
In the last quarter, we began to formally restructure our two German accessories groups into a company operating at the schwger factory in Germany.
This initiative was completed in the third quarter and the remaining IT work will be completed by the end of this fiscal year.
We also announced the intention to sell the German accessories business, and several companies have expressed interest.
Good market penetration rate.
About 30 million euros in profits.
As things move forward, we will decide whether to continue selling or to maintain the post-restructuring operations.
I believe that with the focus on the more profitable categories, the growth of wearables and the new revenue and revenue strings for EyeLock, we will make this area a profitable one.
As with all product lines, we see the CES version of the website as I will only highlight some announcements and also provide updates to key programs.
Sales of wearables fell by more than $10 million in the third quarter, due to our first sales of Striiv wearables last year.
As we announced last quarter, VOXX is announcing the addition of Fitbit to include Apple, Samsung, Garmin, and I am pleased to announce it.
In addition to this project, we have added an Apple smartwatch to the Zimmer Biomet wearable project, which will help us with our fiscal 2020 performance.
This week, at CES, we announced a new partnership with Reemo Health to distribute the Reemo smartwatch.
We are expanding our presence in this growing category and the company is seeking VOXX due to our extensive logistics, distribution and product capabilities.
We generated $330,000 in third-quarter revenue for EyeLock products, with a gross profit of 93%, but revenue is more of a matter of time.
With ViaTouch increasing production for its AI vending machines, the POS we have put in place has been rolled out a bit.
This partnership will lead to an increase in sales in the coming quarters, and the forecast for fiscal 2020 looks promising.
EyeLock is actively working with some of the top companies in healthcare, and if not faster, we expect to announce new projects in the next two quarters.
In the third quarter, we sold our high throughput h voxx system to a government agency and are looking for other opportunities.
In the fourth quarter, we completed the development of the EXT certification system, we will provide EXTs to all security customers for evaluation and provide EXTs to one of the major customers in the United StatesS.
Airport test.
As we announced at CES, EyeLock worked with JD to develop and launch a new smart rearview mirror for law enforcement and public safety markets.
EyeLock also works with our Automotive Group to integrate biometric certification with our eFob telephone system to access and launch your vehicle safely.
This is me coming to Jingdong, for those who have been following us, we and others have been financing 360 of the operations because of them-
The potential of technology.
360 has moved from retail to public security, private security and law enforcement, with new monitoring solutions.
At CES, they took 360
4 K degree school bus camera equipped with artificial intelligence analysis, intelligent event recording trigger and video data management suite.
Another development is that as 360 has developed breakthrough threat detection technologies for Brinks, a leading private security company designed to provide a safer environment for drivers and messenger.
Based on proprietary algorithms, the messenger receives an alert if someone approaches it in a radical way, so the messenger has time to react.
Regarding the release of accessories, we will launch four new products --in-
A karaoke product, all of which contains a new voice control app with quick access to karaoke content via YouTube.
These products will be available in the fall and at Target, as will Amazon and more than 3,000 stores across the country.
Sales of 3Q increased by more than 3 million compared to last year.
The nursery program will expand its successful nursery collection and will launch a new soothing projector with night lights and timers in the spring of Walmart, Amazon and Project. nursery. com.
Keep in mind that in the second quarter we added Best Buy to the lineup and launched Wi-
Fi monitors that support Google Home and Amazon Alexa.
In the third quarter, our sales in this category rose by 46%.
RCA in our industryleading over-the-
The Air HDTV antenna brand will launch five new Skyline models with unique technical features in the spring of 2019.
Due to our large initial load, this category dropped in Q3-
In the third quarter of last year, it hurt most of the Year --over-year decline.
However, new products enter the market, and with the strong distribution we have, we should help us to maintain our first market position without growth.
Before I transfer the call to Mike, let me summarize our work.
Future strategy and we are trying to unlock shareholder value.
The automotive industry is growing and profitability is improving.
Of course, we are also focusing on the United States. S.
The global auto market works closely together and is ready to respond positively if needed.
Premium Audio is more profitable and more profitable, and we expect it to resume growth in retail and custom installation channels with more standardized comparisons and opportunities.
Consumer Accessories will undergo a major restructuring aimed at streamlining operations and making this segment profitable.
Our focus will be on technology, where we see the greatest potential for growth.
We expect EyeLock to start generating more revenue and some of these new projects will go live and reduce costs;
Our goal is to make EyeLock a profitable entity in the next 12 to 18 months.
We are considering changing our reporting structure to simplify the story of VOXX, and we continue to explore potential divestiture and acquisitions that maximize synergies, improve efficiency and reduce costs, as always, our board is actively evaluating how to use our strong balance sheet and cash position to increase shareholder value.
At this point, I will transfer the call to Mike Stowe, who will check some numbers for nine months. Mike?
Thanks, Pat.
Good Morning, everyone.
Pat reported on us [Indiscernible]
I will make some comments about our 9 month yearto-
Update the results and then focus on the sequential improvements in our balance sheet.
Net sales fell by 11.
On the basis of 8%, the car rose 13%.
Advanced Audio down 9. 9% [Indiscernible]
The reasons given by Pat are completely comparable, and all nine are correct. month period.
Gross margin rose 280 basis points at 28. 8%.
The gross profit margin of the high-end audio segment increased by 460 basis points, the consumer parts segment increased by 250 basis points, and the gross profit margin of the auto segment decreased by 30 basis points.
Total annual fee-to-
The date dropped by $5.
7 million, 5% progress.
Please note, however, that in the second quarter of fiscal 2019, our impairment charge for intangible assets was $9. 8 million.
Excluding these non-
Cash charges, total operating expenses for nine months
The month-on-month decline was $15. 6 million or 136%.
The biggest impact was G & A spending, down $9.
5 million or 16%, but the cost of sales and engineering technical support has also decreased.
In fiscal 2020, we are taking some action to further reduce our spending.
So in fiscal 2019 in the fourth quarter, we have
Pat discussed the cost of time restructuring earlier.
Regarding other income and expenses, we did not have much noise in the results of the third quarter, but for the nine-
Month comparison, there are a few-time events. We had a $3. 5 million non-
Cash impairment and $6 for Venezuelan properties in fiscal 2019.
6 million foreign exchange fees related to our sale of Hirschmann in fiscal nine last year
During the month period, it was partially offset by $1.
4 million investment income related to our sales of Rx network.
Compared to $5, Net Other expenses amounted to $500,000.
5 million financial year and 2019 fiscal year of 2018-month periods.
We reported operating losses of $10.
$8 million, operating loss of $14.
1 million, progress of $3. 3 million.
Keep in mind that, in addition to other expense records, we have also increased significantly from our sales to Hersmann in August 20, the reason for the tilt of revenue and net profit VOXX.
On the basis of pre-tax income, our auto department reported pre-tax income of $11.
$2, 1 million. 2 million.
As Pat mentioned earlier, our advanced audio section reports a $9 pre-tax income.
6 million, up $8 million, and our consumer accessories department reported a $28 pre-tax loss.
$11, 8 million.
4 million increased from fiscal 2019 to fiscal 2018, which is why many ongoing actions are being promoted.
After our adjustment, EBITDA considered
Cash charges and their respective earnings
The time factor is $17.
4 million, equivalent to $7. 8 million year-over-
Years of Progress.
With respect to taxes, the company received a $4 Income tax offer for the three months ended November 30, 2018.
Income before tax was $1 million.
5 million, negative effective tax rate 62. 8%.
For the nine months ended November 30, 2018, the Company recorded a $3 Income tax reserve.
A loss of $1 million before tax.
3 million, negative effective tax rate 27. 8%.
If annual pre-tax income is realized for the remainder of this fiscal year, the company is expected to confirm additional tax benefits in the fourth quarter of fiscal 2019.
According to the accounting literature, the company needs to be based on our annual pre-tax revenue forecast, including profitable jurisdictions where the income tax provisions are expected, use negative effective tax rates, and loss jurisdictions where limited tax benefits can be recognized.
A mix of jurisdictions generates a negative effective tax rate, and when applied to pre-tax income for the three months ended November 30, 2018, income tax benefits are generated, which is the income tax fee applicable to pre-tax income
Tax losses for nine months as of November 30, 2018.
The income tax reserve for the nine months ended November 30, 2018 does not represent our current tax liability, which is expected to be approximately $1.
The fiscal year 6 million was 2019.
Now, our balance sheet has improved continuously in the second quarter.
We have $48 as of November 30.
7 million of cash and cash equivalents, down $3 million from February 28, 2018, but up $4.
5 million since the end of the second quarter of August 31.
Our total debt is $18.
Compared to the end of the year, 2 million has increased by about $600,000 and our euro assets have been slightly adjusted --
Based on differences in borrowing obligations and mortgages. Total long-
Net long-term debt for debt issuance costs is $5.
8 million is $2.
Compared with November 30, it improved by 7 million per cent in February 28.
Our domestic credit loan does not have outstanding debt, the only debt we hold today is the outstanding mortgage for US propertiesS.
German and euro assets
Support basic loans for our German business.
Our balance sheet is still strong and we expect to improve further in the coming year.
Operator, we can start asking questions now. Question-and-
[Answer]
Operation instructions]
Glenn WienerAshley, I showed multiple questions.
I don\'t know why you\'re not on the screen.
We have four people in line now.
Okay, give me some time.
Glenn WienerFirst asked Tom Kahn from Kahn Brothers.
Thank you.
Our first question comes from the relationship between Thomas Kahn and the Kahn Brothers.
Your line is now open. Thomas KahnHi. Am I open? Am I live?
Hello, Tom, Pat laveller.
Thank you, Thomas Kahn. Good morning.
I\'m glad you hired a consultant to review your business, am I right?
Pat LavelleYes, we \'ve worked with them recently. Thomas canokai
Because a few years ago I suggested that you hire a qualified consultant to review all your business and advise.
So, I\'m glad you worked with a consultant to review all of your business.
I\'m glad you did.
Could you please share what the consultant told you after you got the report?
What do you see when we announce our plans for the fourth quarter, Pat ravelé argues;
You will see the results of any of the consultant discussions we talked. Thomas canokaiThat\'s good.
I hope you can consider sharing the outline of the consultant\'s proposal, in addition to adjusting the business, sales business, the consultant will also consider that in order to increase the shareholder value, reducing the cost considers the possibility of the share repurchase plan.
I don\'t know if the consultant is the right type of consultant to consider this, but if they are, I would definitely think it should be their agenda item?
As we discussed on our last call, Pat LavelleAs and Tom, as I have been saying, the board is also considering every option we have.
Now, based on the balance sheet we have and the state of our debt, we will look at every option to help and increase the value of our total shareholders.
Good, Thomas.
I am very happy to hear the news.
One thing I hope you won\'t consider is the acquisition, because if you look at it-
Pat, if we look at the acquisitions in the past six months and what happened to the stock price, we find that this is not helpful to us, but, in order to reduce the number of outstanding shares, a stock repurchase plan may be implemented.
So I think we need the independent eye of the consultant to say, should we make more acquisitions as we did in the past?
Or should we consider reducing the number of shares to increase shareholder value, because the reality is that the shares are not doing well in this complete market? Pat LavelleYes.
Well, we are investing in new technologies that are clearly running out of profitability.
As I said, we are considering every option to improve our business, improve our EBITDA, and increase shareholder value.
So let\'s take a look at the plan.
I think from our announcement in the fourth quarter you will see something that is good for both the company and the shareholders.
Thank you, Thomas Kahn.
Please be a little harsh on the consultants because we really need to do some radical surgery because I remember I didn\'t attend at a general meeting in Long Island, and some management said, the stock is worth $20 or $30 per share.
I was away at the meeting, but I believe.
The question is, how do we get there from here?
Tom is the one we are working on. Thomas canokai
Thank you very much. Pat LavelloRight.
Thank you.
The next question comes from Brad Leonard of BML Capital Management.
Your line is now open. Hi, Brad Leonard.
Thank you for answering my question.
Good morning, Brad.
Good morning, Brad Leonard.
You have one on the eye mask. -
Remind me where this is on the balance sheet?
You have borrowed $42 million from EyeLock, but it is a composite entity.
So where is the $42 million on the consolidated balance sheet?
Pat LavelleIts is right.
Brad Leonard, because in football, it says, is this a short term or is it a current loan?
Do you want to take it?
Michael StoehrThe yelock is the consolidated financial statements and
Corporate loan because it is considered an inter-company loan and you will see it financially if you look at it ---
It\'s there if you see an investment account.
Brad Leonard Kay
As a result, in the footnote, it shows the full debt of $42 million, but this is clearly consolidated because there is only $10 million on the balance sheet.
As an asset, where is it?
This is investment.
Michael StoehrIt will be our initial investment and we will show the investment part.
This is a VIE, as we saw at first, and that\'s why we split it up for you to have a look.
Brad LeonardSo is not in current assets?
Michael Storno.
Investment firm Brad LeonardThe-
Is it equity investment?
Yes, Michael Stoner.
$22 million?
No, Michael storwell.
$22 million is our investment in ASA.
It will be--
Just let me show you.
We\'re in long-term assets.
Intangible things, may be intangible things.
Brad Leonard Kay
So this is part of the intangible. Okay. All right.
I just wanted to clarify.
Then, it looks like Jingdong, I asked you last quarter, you lent them $15 million, which is Prepaid assets and other current assets?
Brad LeonardOkay is right.
So in Q, do you mention that the company looks like it\'s going to submit chapter 11?
Pat LavelleYes Michael StoehrPat, if you-on a business basis, I think, as Pat mentioned in his comments, what will Pat take you through, well, this is a legacy-the legacy issue of old companies, and as companies move from consumer electronics to our last resort, they are now moving into new technology, we are involved as senior creditors with the other three lenders, one is also a client of the company, and in order to clean up the issue, we may pass a pre-
Pack 11 chapters and take them out.
Brad Leonard Kay
Pat LavelleSo what we see now, and now what we see, we are negotiating with 360 of the secured lenders on the potential submission of 360 of the voluntary petitions.
We have spoken to some of their customers and they want to continue using the 360 products they have recently approved or introduce the products they have already used.
So the secured lender, as well as the client, some of the clients may invest extra or invest 360, however, we are looking at all the options we can choose from, if the negotiations are productive, we will provide debt financing to get them through restructuring and on the other side with a clean company with proper financing and the business that should make them profitable.
This is the game plan.
Brad Leonard Kay
How much do you probably own this company?
If so, Pat lavelcoming\'s exit from bankruptcy would be close to 80%.
But obviously, if we have other people who are interested in investing, then we will arrange for them to invest as investors.
Who will take our shares?
Pat LavelleYes, we will sell our stock to them.
But if we can negotiate all the different issues that need to be done, our intention will be to control the company so we can manage it and develop the product for others-for the --
He will also be an investor in many cases.
Brad Leonard Kay
At the moment, we don\'t have equity in this, do we?
This is correct.
Pat LavelleNo equity.
We\'re just lenders.
It\'s just Brad LeonardLender.
So is it possible for you to get your $15 million back and move on?
Obviously, Pat LavelleWell, if a secured lender has made more than their credit bid for the company, then will we raise the question. And if we --
If we do not succeed in getting the company, there is a good chance that all these senior secured lenders will be paid.
Brad Leonard Kay
But your first choice is to control the company? Pat LavelleYes. We think --
We think that the technology they use, the customers they use are big customers, and we think that if they have more runways, that\'s the technology, they will be able to market these products and grow their business.
Brad Leonard Kay
Okay, that\'s all for me. Thank you.
Welcome to Pat laveller.
Thank you.
Our next question comes from David Williamson, a private investor.
Your line is now open.
David WilliamsThank you.
Adjusted EBITDA, $17.
The adjusted EBITDA is 5 million for 9 months.
If one does nine exercises
EBITDA after monthly adjustment has no loss in EyeLock, so 9-
Adjusted EBITDA?
Pat Ravel. okay.
Come on, Mike.
Yes, Michael Stoner. That\'s okay.
If you look at it, the adjusted EBITDA without a blindfold could be $17 million
Plus, I think we--
If I remember correctly, we lost $12 million.
This will therefore be between $29 million and $25 million and $29 million.
David Williams is fine.
Will EBITDA be $29 million after nine months of adjustment?
This is correct.
David Williams is fine.
We tend to look at Michael stoehr--
Then you have-
What you have to subtract is the part that belongs to other shareholders, that is, the other 36%--the other 46%.
So, it\'s a bit north--
South to that number.
I can give it to you if you give me a second. All right.
David Williams Thurs.
We have--
As you know, 54% of the investment is ours.
I\'m sorry we left and took me there. Okay, $12.
7 million was a loss of $17 for nine months. 2 million, $12.
7 million, 40% of the $12.
7 million, say it\'s $5 million will sit around $24 million, $24 million.
Yes, David.
So since the company has more than 50% of the EyeLock, you need to count 100% of the EyeLock losses into finance, but then we have to add back the 46% you don\'t have, is that what you just did?
This is correct.
This includes the total merge when you see the pre-tax financial statements, and then you will see--
In the statement, if you look at the money it says owes to someone else, it\'s in--
Right after the event.
Financial tax line.
David Williams is fine.
You do the same exercise without the consumer accessories department, 9-
Is EBITDA out of the month?
Excuse me, Michael stohley?
David Williams if we do the same exercise without the entire CA Department, what is the nine-month adjusted EBITDA?
Michael StoehrOkay.
Pat laveller, I will-at this point--
We don\'t say things like that.
David Williams is fine.
Then I have another question.
Yes, Michael Stoner. Pat lavelesure.
David William sonfor EyeLock, the industry leader in iris recognition pre-
Tax as EyeLock?
Pat raveley will say yes to a large extent.
Some of the company\'s revenues are--
It is small at this point.
But the speed of operation and what we see there is basically because the iris is much more secure than all other biological features, and we see companies and certain applications moving towards a higher level of securities.
David Williams is fine.
It\'s not that competitors are already profitable, and neither is EyeLock?
You\'re right.
David Williams is fine. Thank you.
I have one more problem but I will be back in the queue right away.
Michael stoehr can you ask one more question? Are you asking about consumer accessories?
David Williams
After the adjustment, if we do not plan. -
If there is no consumer accessories department, want to know what is the time of nine months?
If you remember any consumer accessories group is EyeLock, Michael StoehrWell.
So far, the nine-month consumer accessories group has also included $9.
3 million impairment costs.
On page 10-3
Q: It gives you a general idea that the loss of 9 months is 28.
The group\'s attributable interest and depreciation amounted to approximately $9 million.
So you have $28 million in it, minus $9 million, which is $19 million minus $9 million in impairment, so you will think that the adjustment, including the eye mask, is roughly $10 million.
David Williams saw it. Okay.
I will go back to the queue, but I do have one more question, but I will wait until someone else has a chance to ask.
Michael StoehrOkay.
Thank you.
Our next question is Matthew Zhang, a private investor.
Your line is now open. Matthew ChangjiYes.
I want to follow-
Damage in respect-
Consumer Accessories group at $9. 65 million.
I think this goes against Intangible assets, that is, intangible assets with a limited life span?
Michael StoehrYes, it was in the second quarter.
Matthew Zhang. I think this --
Is this the first time seen, or has it been disclosed in the past 10 yearsQ?
Pat LavelleIt has been disclosed and discussed.
Okay, Matthew chagokai.
So it\'s not something new.
Can you--is there any --do you have --
Can you give me a little more color? Is the --
I think this has something to do with the justification of the sku. -
I mean . . . . . . Pat.
As part of the restructuring of the entire accessories group, we are removing certain legacy categories, reducing sales in certain areas, increasing profitability and reducing overhead.
So when we reduce some sales, some Intangible assets will have to adjust for this, which is mainly the case.
Matthew chagokaiUnderstood. Thank you.
Welcome to Pat laveller.
Thank you. [
Operation instructions]
We have a follow-up.
The question of private investor David Williamson.
Your line is now open.
David Williams. Thank you. EyeLock, again.
If EyeLock is on the phone, or on the door lock, or on the cabinet lock in the hospital, or on the bank app, what is the royalty per device, how can the usage fee EyeLock be done?
Royalties will be different for each client of each project.
Royalties are mainly calculated based on quantity.
Obviously, if you are in a device that sells millions of dollars, the royalties we charge will be treated as the overall sales volume.
So it\'s set up for the single program we work.
David Williams is fine.
It didn\'t come out to $0.
50 or something like that per device?
If you\'re talking about millions of devices being sold, Pat LavelleIt might.
However, it depends on each different procedure that we develop based on their quantity and the competitive nature of competitive biometrics in a particular product.
David Williams is fine.
Please remind me in the fourth quarter of your financial season, usually--which one of --
I mean, are you a seasonal peak? Not the peak that just appeared, but the seasonal trough, which quarter is typical?
Pat LavelleI may think that the first quarter of the new year is usually a quieter month.
We have announced a number of projects launched in the fourth quarter.
So again, depending on the cost of the restructuring, when we complete the plan, the cost of leaving the company will affect this quarter, which is why we suggest that everyone, through the restructuring plan, we may see some, but I would say that the first quarter is probably our lowest.
David Williams is fine.
Management has done a good job in developing ASA. Pat LavelleYes.
David Williams seems--
I \'ve seen this improvement there over the years, and the management did a great job on the last call, stabilizing the advanced audio and automotive sector for 9 months to 1 year. Pat LavelleYes.
My last question is about the car Department.
How many models or OEM models do EVO have-
Once it\'s fully put into production, how much will it basically open? Yes, Pat Ravel.
We are already on different models like GM, Ford, Mazda and Nissan.
I have to tell you which cars at this point, but there are more than 20 different cars to choose from for rear seat entertainment.
Then, we plan to launch more products in fiscal 2020, which will help to continue to grow the business, and one of the important products is the Lincoln pilot we should launch in the second quarter.
David Williams is fine.
What I am indirectly asking for is the growth of disciplines across the company, is EVO the main subject grower?
Or different departments or different products?
Pat Lavelle well, we have a lot of new products in our automotive sector that we are working on.
Currently, the EVO is the main driver of growth in the field.
I just checked and we have placed about 40 different vehicles for the EVO.
So, according to some new products, I mentioned on the phone that our new eFob is the finalists of the PACE Award, a very, very prestigious award in the trade world.
This is the product we plan to launch in the fiscal year 2020.
This is a device that allows your phone to replace your key, so you don\'t have to carry the key with you.
When you are close to the car and close enough to the sensor to detect it will get you into the car.
It will know when you are in the car and we will also use our iris biometric for certification purposes so you can start the car.
So we showed a new product at the show, and obviously, I think this is an area of growth that we see for the company in the coming years.
Super David WilliamsThank you.
This is my problem.
You are welcome.
Ladies and gentlemen, this is the end of today\'s Q & A session.
I would now like to call back any concluding remarks to the management.
Well, Pat Lavelle, I want to thank you all for taking the time--
Interested in VOXX
We\'re all going back to the show now.
We still have two days to show and we look forward to the customer\'s response and we look forward to delivering some of our new products as early as possible to help drive sales and shareholder value.
Thank you again and wish you a wonderful day.
Thank you all for attending today\'s meeting.
It does end today\'s show and you all may be disconnected.
I wish you all a good day.
At 10: 00 a. m. on January 10, 2019, ETCompany participant Glenn Weiner\'s third quarter 2019 earnings call
Lavel-Investor Relations
Michael Stoehr, president and chief executive-
John Shalam, senior vice president and chief financial officer-
Thomas Kahn, chairman of the board of directors attending the meeting-
Brad Leonard, brother of Kahn
David Williamson-BML Capital Management
Private investors often
Ladies and gentlemen, you are welcome to attend the third quarter performance conference call of VOXX International fiscal 2019.
At this time, all the participants were listening. only mode.
We will have a question later-and-
Answer sessions and instructions will be followed at that time. [
Operation instructions]
As a reminder, this conference call is being recorded.
I would now like to introduce the host of Today\'s meeting, Glen Weiner of investor relations.
Thank you, sir, Ashley. good morning, everyone.
First of all, I wish everyone a healthy and happy new year.
Welcome to our third quarter performance conference call for fiscal 2019, and as you know, today\'s call is live webcast on our website www. voxxintl.
Com, there\'s a replay for those who can\'t make a call today.
Pat Ravel, president and chief executive, will address management this morning;
Michael Stoehr, senior vice president and chief financial officer.
After they comment, we will hold a Q & A meeting for investors who wish to ask any questions.
The chairman of the board, John Saran, is also with us this morning and he will also be available in the Q & A section on the phone.
Before I transfer the call to Pat, I would like to remind you that in addition to the historical information contained here, the statement at today\'s conference call and the webcast that constitutes the forwarding --
The Look statement is based on the information currently available.
The company is not responsible for updating any such forwarding-
Look at the report.
Risk factors related to our business are detailed in our form 10
Q-for the period ended November 30, 2018--
Excuse me, our Form 10-
K for the period as at February 28, 2018.
At this point, I would like to transfer the call to our President and CEO, Pat Ravel, to share some of the exciting news and progress we have made at VOXX International. Pat?
Thank you, Glen. good morning, everyone.
We attended 2019 Consumer Electronics Show, and like in the past few years, many of our new products were well received, and we had very productive meetings with retail and automotive customers.
We are also celebrating 100 anniversary of the RCA brand, which has always been the most valuable brand in consumer electronics, with a great focus on innovation and technology.
As you can see from our last conference call, we are making extensive changes to improve our business and streamline our operations.
From now until this year
The End report is expected to have a further overview of our adjustments and future plans.
We fully expect more stable profitability in the coming years.
I will review our results for the third quarter from today and then introduce some of our more important product launches, partnerships, after which Mike will provide more details about our nine projects
Monthly performance and balance sheet.
Q3 net sales fell $27 million, the vast majority of which were in our consumer accessories division, with sales down $24 million due to exit and high initial load from some of our old legacy product categories
Ins for our wearable products are not expected to repeat.
But net sales of high-end audio fell by $7.
7 million, mostly in line with our forecasts, because last year we decided to limit certain online distribution to protect profit margins and our retail customers, with the increase in gross margin and the profitability of market segments, this strategy is working.
Another positive factor is that sales in our car market have increased by $4.
4 million, driven by the strength of our OEM business.
Gross profit margin in all segments is rising, 30%, up 350 basis points.
Within the 200 basis points increase in the profit margin of the FAW Car segment, the profit margin of the advanced audio segment increased by 330 basis points, and the profit margin of the consumer accessories segment increased by 360 basis points.
We also continue to take steps to reduce costs and report Total operating costs of $33.
2 million, equivalent to $2.
7 million minus one or seven.
4% improvement from the third quarter of last year.
Operating income of $5.
Compared with last year, $7 million grew by $100,000, while net sales fell by nearly $27 million.
When we complete the SKU rationalized program, integrate and restructure our Consumer Accessories group, and integrate the international advanced audio group under Klipsch, we expect our business to be more profitable, especially when you add some programs that are using EyeLock and on the horizon.
Let\'s get into the automotive field first.
In the last few quarters, I talked about our next one. After generation
Seat entertainment system EVO and OEM projects in partnership with GM, Ford, Nissan and Mazda.
These plans, as well as the benefits of our OEM remote start-up plan and Subaru with other OEMs, continue to drive our performance.
Total OEM sales in the third quarter were close to 37%.
I did note during the second quarter call that the OEM momentum will continue until the third quarter and may have slowed down in the fourth quarter, but that is still the case.
But OEM business is expected to maintain strong momentum this year.
In addition, we are preparing for the second quarter release of the new Lincoln pilot EVO, which will further support our OEM backend
Partnership and discussion with several other OEM.
Our after-sales fell $2. 2 million or 9.
5%, but the decline in sales in this part should be reduced in the coming period.
We believe in many new products launched by CES, seatback and power systems, new remote start-up systems, new products in the ADAS category, new remote information processing technologies under code alerts, pursuits and prestige, in addition, satellite radio sales have stabilized, although they are no longer a growth category and should remain stable in fiscal 2020.
In addition, car pre-tax revenue for the third quarter was $5.
$2, 6 million.
1 million-to-
The date for the first nine months is $11.
$2, 1 million.
2 million finance 2018 9-month period.
Two other major developments in the automotive sector;
The first is our recent Q1 position at Ford, which is a huge achievement and recognition of Ford\'s quality, performance and processes.
Secondly, the announcement of November was nominated as the final player of our game\'s 2019 Auto News PACE Award.
Change the eFob mobile phone vehicle access system.
In the range of premium audio, third quarter and year-to-
Sales in the date segment fell by 13. 5% and 9.
They are 9% per cent, which is in line with our budget and gross margin continues to rise.
We have reduced the cost of this part, when comparing Q3 performance, pre-
Tax revenue increased by $200,000.
The real story is our year. to-
Date performance as pre-
The tax for fiscal 2019 was $9.
6 million, compared to $1 in the previous fiscal year.
5 million, an increase of $8 million.
We continue to work on reducing costs by improving efficiency and re-aligning our international operations by merging Magnat and Heco under the umbrella of the Klipsch Group.
So we want to have some-
Our time severance and restructuring costs for the fourth quarter were $1 higher than the premium audio operating costs for the third quarter.
3 Million-to-
The date was raised by $4. 8 million or 146%.
The end result of continuous efficiency improvement and the impact of our re-adjustment should be a more profitable part, which we believe will also grow over time.
We continue to be successful in reference, reference premieres and traditional product lines, and look forward to expanding our custom installation alliance with lucitaville and Hard Rock Hotels.
We have established a new partnership with Klipsch this quarter and Klipsch is now the official speaker supplier for the first watch restaurant.
We are also discussing with many other large global organizations, and the success of one or two of them should help to improve the performance and visibility of the Klipsch Brand.
At CES, we have introduced a number of Klipsch and nearly 2019 products, including wireless headsets, wireless portable and desktop speakers, TV upgrade sounds with new soundbars, electric speakers and multi-channel speakers with sun visor technology.
We will also launch exclusive speakers and subwoofer programs directly imported with Amazon, and we will start in step 3.
You can visit the Klipsch website for information about news kits and other products.
As for the consumer accessories, this is the place where the lifting machinery plays its role.
Last quarter, we announced a positive SKU rationalized plan that is now in place and will remove several legacy products from our product lineup during this fiscal year and the next fiscal year. On our year-
Finally, we will provide more details around the exit product line, the impact of the results for fiscal 2019 and the expectations for fiscal 2020.
We focus on products that we have strong distribution, expansion opportunities and a profit structure that meets our bottom line standards.
In the last quarter, we began to formally restructure our two German accessories groups into a company operating at the schwger factory in Germany.
This initiative was completed in the third quarter and the remaining IT work will be completed by the end of this fiscal year.
We also announced the intention to sell the German accessories business, and several companies have expressed interest.
Good market penetration rate.
About 30 million euros in profits.
As things move forward, we will decide whether to continue selling or to maintain the post-restructuring operations.
I believe that with the focus on the more profitable categories, the growth of wearables and the new revenue and revenue strings for EyeLock, we will make this area a profitable one.
As with all product lines, we see the CES version of the website as I will only highlight some announcements and also provide updates to key programs.
Sales of wearables fell by more than $10 million in the third quarter, due to our first sales of Striiv wearables last year.
As we announced last quarter, VOXX is announcing the addition of Fitbit to include Apple, Samsung, Garmin, and I am pleased to announce it.
In addition to this project, we have added an Apple smartwatch to the Zimmer Biomet wearable project, which will help us with our fiscal 2020 performance.
This week, at CES, we announced a new partnership with Reemo Health to distribute the Reemo smartwatch.
We are expanding our presence in this growing category and the company is seeking VOXX due to our extensive logistics, distribution and product capabilities.
We generated $330,000 in third-quarter revenue for EyeLock products, with a gross profit of 93%, but revenue is more of a matter of time.
With ViaTouch increasing production for its AI vending machines, the POS we have put in place has been rolled out a bit.
This partnership will lead to an increase in sales in the coming quarters, and the forecast for fiscal 2020 looks promising.
EyeLock is actively working with some of the top companies in healthcare, and if not faster, we expect to announce new projects in the next two quarters.
In the third quarter, we sold our high throughput h voxx system to a government agency and are looking for other opportunities.
In the fourth quarter, we completed the development of the EXT certification system, we will provide EXTs to all security customers for evaluation and provide EXTs to one of the major customers in the United StatesS.
Airport test.
As we announced at CES, EyeLock worked with JD to develop and launch a new smart rearview mirror for law enforcement and public safety markets.
EyeLock also works with our Automotive Group to integrate biometric certification with our eFob telephone system to access and launch your vehicle safely.
This is me coming to Jingdong, for those who have been following us, we and others have been financing 360 of the operations because of them-
The potential of technology.
360 has moved from retail to public security, private security and law enforcement, with new monitoring solutions.
At CES, they took 360
4 K degree school bus camera equipped with artificial intelligence analysis, intelligent event recording trigger and video data management suite.
Another development is that as 360 has developed breakthrough threat detection technologies for Brinks, a leading private security company designed to provide a safer environment for drivers and messenger.
Based on proprietary algorithms, the messenger receives an alert if someone approaches it in a radical way, so the messenger has time to react.
Regarding the release of accessories, we will launch four new products --in-
A karaoke product, all of which contains a new voice control app with quick access to karaoke content via YouTube.
These products will be available in the fall and at Target, as will Amazon and more than 3,000 stores across the country.
Sales of 3Q increased by more than 3 million compared to last year.
The nursery program will expand its successful nursery collection and will launch a new soothing projector with night lights and timers in the spring of Walmart, Amazon and Project. nursery. com.
Keep in mind that in the second quarter we added Best Buy to the lineup and launched Wi-
Fi monitors that support Google Home and Amazon Alexa.
In the third quarter, our sales in this category rose by 46%.
RCA in our industryleading over-the-
The Air HDTV antenna brand will launch five new Skyline models with unique technical features in the spring of 2019.
Due to our large initial load, this category dropped in Q3-
In the third quarter of last year, it hurt most of the Year --over-year decline.
However, new products enter the market, and with the strong distribution we have, we should help us to maintain our first market position without growth.
Before I transfer the call to Mike, let me summarize our work.
Future strategy and we are trying to unlock shareholder value.
The automotive industry is growing and profitability is improving.
Of course, we are also focusing on the United States. S.
The global auto market works closely together and is ready to respond positively if needed.
Premium Audio is more profitable and more profitable, and we expect it to resume growth in retail and custom installation channels with more standardized comparisons and opportunities.
Consumer Accessories will undergo a major restructuring aimed at streamlining operations and making this segment profitable.
Our focus will be on technology, where we see the greatest potential for growth.
We expect EyeLock to start generating more revenue and some of these new projects will go live and reduce costs;
Our goal is to make EyeLock a profitable entity in the next 12 to 18 months.
We are considering changing our reporting structure to simplify the story of VOXX, and we continue to explore potential divestiture and acquisitions that maximize synergies, improve efficiency and reduce costs, as always, our board is actively evaluating how to use our strong balance sheet and cash position to increase shareholder value.
At this point, I will transfer the call to Mike Stowe, who will check some numbers for nine months. Mike?
Thanks, Pat.
Good Morning, everyone.
Pat reported on us [Indiscernible]
I will make some comments about our 9 month yearto-
Update the results and then focus on the sequential improvements in our balance sheet.
Net sales fell by 11.
On the basis of 8%, the car rose 13%.
Advanced Audio down 9. 9% [Indiscernible]
The reasons given by Pat are completely comparable, and all nine are correct. month period.
Gross margin rose 280 basis points at 28. 8%.
The gross profit margin of the high-end audio segment increased by 460 basis points, the consumer parts segment increased by 250 basis points, and the gross profit margin of the auto segment decreased by 30 basis points.
Total annual fee-to-
The date dropped by $5.
7 million, 5% progress.
Please note, however, that in the second quarter of fiscal 2019, our impairment charge for intangible assets was $9. 8 million.
Excluding these non-
Cash charges, total operating expenses for nine months
The month-on-month decline was $15. 6 million or 136%.
The biggest impact was G & A spending, down $9.
5 million or 16%, but the cost of sales and engineering technical support has also decreased.
In fiscal 2020, we are taking some action to further reduce our spending.
So in fiscal 2019 in the fourth quarter, we have
Pat discussed the cost of time restructuring earlier.
Regarding other income and expenses, we did not have much noise in the results of the third quarter, but for the nine-
Month comparison, there are a few-time events. We had a $3. 5 million non-
Cash impairment and $6 for Venezuelan properties in fiscal 2019.
6 million foreign exchange fees related to our sale of Hirschmann in fiscal nine last year
During the month period, it was partially offset by $1.
4 million investment income related to our sales of Rx network.
Compared to $5, Net Other expenses amounted to $500,000.
5 million financial year and 2019 fiscal year of 2018-month periods.
We reported operating losses of $10.
$8 million, operating loss of $14.
1 million, progress of $3. 3 million.
Keep in mind that, in addition to other expense records, we have also increased significantly from our sales to Hersmann in August 20, the reason for the tilt of revenue and net profit VOXX.
On the basis of pre-tax income, our auto department reported pre-tax income of $11.
$2, 1 million. 2 million.
As Pat mentioned earlier, our advanced audio section reports a $9 pre-tax income.
6 million, up $8 million, and our consumer accessories department reported a $28 pre-tax loss.
$11, 8 million.
4 million increased from fiscal 2019 to fiscal 2018, which is why many ongoing actions are being promoted.
After our adjustment, EBITDA considered
Cash charges and their respective earnings
The time factor is $17.
4 million, equivalent to $7. 8 million year-over-
Years of Progress.
With respect to taxes, the company received a $4 Income tax offer for the three months ended November 30, 2018.
Income before tax was $1 million.
5 million, negative effective tax rate 62. 8%.
For the nine months ended November 30, 2018, the Company recorded a $3 Income tax reserve.
A loss of $1 million before tax.
3 million, negative effective tax rate 27. 8%.
If annual pre-tax income is realized for the remainder of this fiscal year, the company is expected to confirm additional tax benefits in the fourth quarter of fiscal 2019.
According to the accounting literature, the company needs to be based on our annual pre-tax revenue forecast, including profitable jurisdictions where the income tax provisions are expected, use negative effective tax rates, and loss jurisdictions where limited tax benefits can be recognized.
A mix of jurisdictions generates a negative effective tax rate, and when applied to pre-tax income for the three months ended November 30, 2018, income tax benefits are generated, which is the income tax fee applicable to pre-tax income
Tax losses for nine months as of November 30, 2018.
The income tax reserve for the nine months ended November 30, 2018 does not represent our current tax liability, which is expected to be approximately $1.
The fiscal year 6 million was 2019.
Now, our balance sheet has improved continuously in the second quarter.
We have $48 as of November 30.
7 million of cash and cash equivalents, down $3 million from February 28, 2018, but up $4.
5 million since the end of the second quarter of August 31.
Our total debt is $18.
Compared to the end of the year, 2 million has increased by about $600,000 and our euro assets have been slightly adjusted --
Based on differences in borrowing obligations and mortgages. Total long-
Net long-term debt for debt issuance costs is $5.
8 million is $2.
Compared with November 30, it improved by 7 million per cent in February 28.
Our domestic credit loan does not have outstanding debt, the only debt we hold today is the outstanding mortgage for US propertiesS.
German and euro assets
Support basic loans for our German business.
Our balance sheet is still strong and we expect to improve further in the coming year.
Operator, we can start asking questions now. Question-and-
[Answer]
Operation instructions]
Glenn WienerAshley, I showed multiple questions.
I don\'t know why you\'re not on the screen.
We have four people in line now.
Okay, give me some time.
Glenn WienerFirst asked Tom Kahn from Kahn Brothers.
Thank you.
Our first question comes from the relationship between Thomas Kahn and the Kahn Brothers.
Your line is now open. Thomas KahnHi. Am I open? Am I live?
Hello, Tom, Pat laveller.
Thank you, Thomas Kahn. Good morning.
I\'m glad you hired a consultant to review your business, am I right?
Pat LavelleYes, we \'ve worked with them recently. Thomas canokai
Because a few years ago I suggested that you hire a qualified consultant to review all your business and advise.
So, I\'m glad you worked with a consultant to review all of your business.
I\'m glad you did.
Could you please share what the consultant told you after you got the report?
What do you see when we announce our plans for the fourth quarter, Pat ravelé argues;
You will see the results of any of the consultant discussions we talked. Thomas canokaiThat\'s good.
I hope you can consider sharing the outline of the consultant\'s proposal, in addition to adjusting the business, sales business, the consultant will also consider that in order to increase the shareholder value, reducing the cost considers the possibility of the share repurchase plan.
I don\'t know if the consultant is the right type of consultant to consider this, but if they are, I would definitely think it should be their agenda item?
As we discussed on our last call, Pat LavelleAs and Tom, as I have been saying, the board is also considering every option we have.
Now, based on the balance sheet we have and the state of our debt, we will look at every option to help and increase the value of our total shareholders.
Good, Thomas.
I am very happy to hear the news.
One thing I hope you won\'t consider is the acquisition, because if you look at it-
Pat, if we look at the acquisitions in the past six months and what happened to the stock price, we find that this is not helpful to us, but, in order to reduce the number of outstanding shares, a stock repurchase plan may be implemented.
So I think we need the independent eye of the consultant to say, should we make more acquisitions as we did in the past?
Or should we consider reducing the number of shares to increase shareholder value, because the reality is that the shares are not doing well in this complete market? Pat LavelleYes.
Well, we are investing in new technologies that are clearly running out of profitability.
As I said, we are considering every option to improve our business, improve our EBITDA, and increase shareholder value.
So let\'s take a look at the plan.
I think from our announcement in the fourth quarter you will see something that is good for both the company and the shareholders.
Thank you, Thomas Kahn.
Please be a little harsh on the consultants because we really need to do some radical surgery because I remember I didn\'t attend at a general meeting in Long Island, and some management said, the stock is worth $20 or $30 per share.
I was away at the meeting, but I believe.
The question is, how do we get there from here?
Tom is the one we are working on. Thomas canokai
Thank you very much. Pat LavelloRight.
Thank you.
The next question comes from Brad Leonard of BML Capital Management.
Your line is now open. Hi, Brad Leonard.
Thank you for answering my question.
Good morning, Brad.
Good morning, Brad Leonard.
You have one on the eye mask. -
Remind me where this is on the balance sheet?
You have borrowed $42 million from EyeLock, but it is a composite entity.
So where is the $42 million on the consolidated balance sheet?
Pat LavelleIts is right.
Brad Leonard, because in football, it says, is this a short term or is it a current loan?
Do you want to take it?
Michael StoehrThe yelock is the consolidated financial statements and
Corporate loan because it is considered an inter-company loan and you will see it financially if you look at it ---
It\'s there if you see an investment account.
Brad Leonard Kay
As a result, in the footnote, it shows the full debt of $42 million, but this is clearly consolidated because there is only $10 million on the balance sheet.
As an asset, where is it?
This is investment.
Michael StoehrIt will be our initial investment and we will show the investment part.
This is a VIE, as we saw at first, and that\'s why we split it up for you to have a look.
Brad LeonardSo is not in current assets?
Michael Storno.
Investment firm Brad LeonardThe-
Is it equity investment?
Yes, Michael Stoner.
$22 million?
No, Michael storwell.
$22 million is our investment in ASA.
It will be--
Just let me show you.
We\'re in long-term assets.
Intangible things, may be intangible things.
Brad Leonard Kay
So this is part of the intangible. Okay. All right.
I just wanted to clarify.
Then, it looks like Jingdong, I asked you last quarter, you lent them $15 million, which is Prepaid assets and other current assets?
Brad LeonardOkay is right.
So in Q, do you mention that the company looks like it\'s going to submit chapter 11?
Pat LavelleYes Michael StoehrPat, if you-on a business basis, I think, as Pat mentioned in his comments, what will Pat take you through, well, this is a legacy-the legacy issue of old companies, and as companies move from consumer electronics to our last resort, they are now moving into new technology, we are involved as senior creditors with the other three lenders, one is also a client of the company, and in order to clean up the issue, we may pass a pre-
Pack 11 chapters and take them out.
Brad Leonard Kay
Pat LavelleSo what we see now, and now what we see, we are negotiating with 360 of the secured lenders on the potential submission of 360 of the voluntary petitions.
We have spoken to some of their customers and they want to continue using the 360 products they have recently approved or introduce the products they have already used.
So the secured lender, as well as the client, some of the clients may invest extra or invest 360, however, we are looking at all the options we can choose from, if the negotiations are productive, we will provide debt financing to get them through restructuring and on the other side with a clean company with proper financing and the business that should make them profitable.
This is the game plan.
Brad Leonard Kay
How much do you probably own this company?
If so, Pat lavelcoming\'s exit from bankruptcy would be close to 80%.
But obviously, if we have other people who are interested in investing, then we will arrange for them to invest as investors.
Who will take our shares?
Pat LavelleYes, we will sell our stock to them.
But if we can negotiate all the different issues that need to be done, our intention will be to control the company so we can manage it and develop the product for others-for the --
He will also be an investor in many cases.
Brad Leonard Kay
At the moment, we don\'t have equity in this, do we?
This is correct.
Pat LavelleNo equity.
We\'re just lenders.
It\'s just Brad LeonardLender.
So is it possible for you to get your $15 million back and move on?
Obviously, Pat LavelleWell, if a secured lender has made more than their credit bid for the company, then will we raise the question. And if we --
If we do not succeed in getting the company, there is a good chance that all these senior secured lenders will be paid.
Brad Leonard Kay
But your first choice is to control the company? Pat LavelleYes. We think --
We think that the technology they use, the customers they use are big customers, and we think that if they have more runways, that\'s the technology, they will be able to market these products and grow their business.
Brad Leonard Kay
Okay, that\'s all for me. Thank you.
Welcome to Pat laveller.
Thank you.
Our next question comes from David Williamson, a private investor.
Your line is now open.
David WilliamsThank you.
Adjusted EBITDA, $17.
The adjusted EBITDA is 5 million for 9 months.
If one does nine exercises
EBITDA after monthly adjustment has no loss in EyeLock, so 9-
Adjusted EBITDA?
Pat Ravel. okay.
Come on, Mike.
Yes, Michael Stoner. That\'s okay.
If you look at it, the adjusted EBITDA without a blindfold could be $17 million
Plus, I think we--
If I remember correctly, we lost $12 million.
This will therefore be between $29 million and $25 million and $29 million.
David Williams is fine.
Will EBITDA be $29 million after nine months of adjustment?
This is correct.
David Williams is fine.
We tend to look at Michael stoehr--
Then you have-
What you have to subtract is the part that belongs to other shareholders, that is, the other 36%--the other 46%.
So, it\'s a bit north--
South to that number.
I can give it to you if you give me a second. All right.
David Williams Thurs.
We have--
As you know, 54% of the investment is ours.
I\'m sorry we left and took me there. Okay, $12.
7 million was a loss of $17 for nine months. 2 million, $12.
7 million, 40% of the $12.
7 million, say it\'s $5 million will sit around $24 million, $24 million.
Yes, David.
So since the company has more than 50% of the EyeLock, you need to count 100% of the EyeLock losses into finance, but then we have to add back the 46% you don\'t have, is that what you just did?
This is correct.
This includes the total merge when you see the pre-tax financial statements, and then you will see--
In the statement, if you look at the money it says owes to someone else, it\'s in--
Right after the event.
Financial tax line.
David Williams is fine.
You do the same exercise without the consumer accessories department, 9-
Is EBITDA out of the month?
Excuse me, Michael stohley?
David Williams if we do the same exercise without the entire CA Department, what is the nine-month adjusted EBITDA?
Michael StoehrOkay.
Pat laveller, I will-at this point--
We don\'t say things like that.
David Williams is fine.
Then I have another question.
Yes, Michael Stoner. Pat lavelesure.
David William sonfor EyeLock, the industry leader in iris recognition pre-
Tax as EyeLock?
Pat raveley will say yes to a large extent.
Some of the company\'s revenues are--
It is small at this point.
But the speed of operation and what we see there is basically because the iris is much more secure than all other biological features, and we see companies and certain applications moving towards a higher level of securities.
David Williams is fine.
It\'s not that competitors are already profitable, and neither is EyeLock?
You\'re right.
David Williams is fine. Thank you.
I have one more problem but I will be back in the queue right away.
Michael stoehr can you ask one more question? Are you asking about consumer accessories?
David Williams
After the adjustment, if we do not plan. -
If there is no consumer accessories department, want to know what is the time of nine months?
If you remember any consumer accessories group is EyeLock, Michael StoehrWell.
So far, the nine-month consumer accessories group has also included $9.
3 million impairment costs.
On page 10-3
Q: It gives you a general idea that the loss of 9 months is 28.
The group\'s attributable interest and depreciation amounted to approximately $9 million.
So you have $28 million in it, minus $9 million, which is $19 million minus $9 million in impairment, so you will think that the adjustment, including the eye mask, is roughly $10 million.
David Williams saw it. Okay.
I will go back to the queue, but I do have one more question, but I will wait until someone else has a chance to ask.
Michael StoehrOkay.
Thank you.
Our next question is Matthew Zhang, a private investor.
Your line is now open. Matthew ChangjiYes.
I want to follow-
Damage in respect-
Consumer Accessories group at $9. 65 million.
I think this goes against Intangible assets, that is, intangible assets with a limited life span?
Michael StoehrYes, it was in the second quarter.
Matthew Zhang. I think this --
Is this the first time seen, or has it been disclosed in the past 10 yearsQ?
Pat LavelleIt has been disclosed and discussed.
Okay, Matthew chagokai.
So it\'s not something new.
Can you--is there any --do you have --
Can you give me a little more color? Is the --
I think this has something to do with the justification of the sku. -
I mean . . . . . . Pat.
As part of the restructuring of the entire accessories group, we are removing certain legacy categories, reducing sales in certain areas, increasing profitability and reducing overhead.
So when we reduce some sales, some Intangible assets will have to adjust for this, which is mainly the case.
Matthew chagokaiUnderstood. Thank you.
Welcome to Pat laveller.
Thank you. [
Operation instructions]
We have a follow-up.
The question of private investor David Williamson.
Your line is now open.
David Williams. Thank you. EyeLock, again.
If EyeLock is on the phone, or on the door lock, or on the cabinet lock in the hospital, or on the bank app, what is the royalty per device, how can the usage fee EyeLock be done?
Royalties will be different for each client of each project.
Royalties are mainly calculated based on quantity.
Obviously, if you are in a device that sells millions of dollars, the royalties we charge will be treated as the overall sales volume.
So it\'s set up for the single program we work.
David Williams is fine.
It didn\'t come out to $0.
50 or something like that per device?
If you\'re talking about millions of devices being sold, Pat LavelleIt might.
However, it depends on each different procedure that we develop based on their quantity and the competitive nature of competitive biometrics in a particular product.
David Williams is fine.
Please remind me in the fourth quarter of your financial season, usually--which one of --
I mean, are you a seasonal peak? Not the peak that just appeared, but the seasonal trough, which quarter is typical?
Pat LavelleI may think that the first quarter of the new year is usually a quieter month.
We have announced a number of projects launched in the fourth quarter.
So again, depending on the cost of the restructuring, when we complete the plan, the cost of leaving the company will affect this quarter, which is why we suggest that everyone, through the restructuring plan, we may see some, but I would say that the first quarter is probably our lowest.
David Williams is fine.
Management has done a good job in developing ASA. Pat LavelleYes.
David Williams seems--
I \'ve seen this improvement there over the years, and the management did a great job on the last call, stabilizing the advanced audio and automotive sector for 9 months to 1 year. Pat LavelleYes.
My last question is about the car Department.
How many models or OEM models do EVO have-
Once it\'s fully put into production, how much will it basically open? Yes, Pat Ravel.
We are already on different models like GM, Ford, Mazda and Nissan.
I have to tell you which cars at this point, but there are more than 20 different cars to choose from for rear seat entertainment.
Then, we plan to launch more products in fiscal 2020, which will help to continue to grow the business, and one of the important products is the Lincoln pilot we should launch in the second quarter.
David Williams is fine.
What I am indirectly asking for is the growth of disciplines across the company, is EVO the main subject grower?
Or different departments or different products?
Pat Lavelle well, we have a lot of new products in our automotive sector that we are working on.
Currently, the EVO is the main driver of growth in the field.
I just checked and we have placed about 40 different vehicles for the EVO.
So, according to some new products, I mentioned on the phone that our new eFob is the finalists of the PACE Award, a very, very prestigious award in the trade world.
This is the product we plan to launch in the fiscal year 2020.
This is a device that allows your phone to replace your key, so you don\'t have to carry the key with you.
When you are close to the car and close enough to the sensor to detect it will get you into the car.
It will know when you are in the car and we will also use our iris biometric for certification purposes so you can start the car.
So we showed a new product at the show, and obviously, I think this is an area of growth that we see for the company in the coming years.
Super David WilliamsThank you.
This is my problem.
You are welcome.
Ladies and gentlemen, this is the end of today\'s Q & A session.
I would now like to call back any concluding remarks to the management.
Well, Pat Lavelle, I want to thank you all for taking the time--
Interested in VOXX
We\'re all going back to the show now.
We still have two days to show and we look forward to the customer\'s response and we look forward to delivering some of our new products as early as possible to help drive sales and shareholder value.
Thank you again and wish you a wonderful day.
Thank you all for attending today\'s meeting.
It does end today\'s show and you all may be disconnected.
I wish you all a good day.
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