Q3 2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the box Internationals earnings call.

This time all participants are in listen only mode. Please be advised that today's conference is being recorded if you required any forget this isn't just fresh start into euro to reach an operator I'll now hand, the conference over to your speaker today, I mean winner with Investor Relations.

Thank you Carmen good morning, and welcome to box International's fiscal 2023rd quarter results Conference call I'm here in Las Vegas, with our Chairman, John Shale and Pat Lavelle, President Chief Executive Officer Today marks day for the consumer Electronics show and if you have already and encourage everyone to visit the news release section of our IR website to view, our product and partner.

Announcements many of its will be discussed in today's call. You can also view our earnings release updated investor presentation and Form 10-Q on the IR site, Michael Stoehr, Senior Vice President and Chief Financial Officer. A box is also on the line dialing in from New York.

I'd like to remind everyone that except for historical information contained herein statements made on todays call and webcast that would constitute forward looking statements are based on currently available information.

The company assumes no responsibility to update any such forward looking statements and I'd like to pointing to the risk factors associated with our business, which are detailed in our Form 10-K for the period ended February 28 2019.

Thank you all for your continued interest in box if anyone has any follow up questions by all means please feel free to reach out to me after the call and at this time I'd like to turn the call over to Pat Lavelle that.

Good morning, everyone. Let me start by wishing you all a happy new year as Glenn mentioned, we're here at CES. Unlike past years. The meetings, we've had at the show.

In the reception to the new products introduced has been very strong.

There were also new partnerships unveiled and others that are in work.

Which hold great promise for the future.

As for our results in our progress year to date.

Somewhat Mitch.

On the positive side, the restructuring initiatives we've executed.

Have worked resulting in lower spending and far greater efficiencies throughout the company.

Our consumer electronics segment backed by the continued strength of our premium audio product lines delivered 9.6 million in pre tax profit, a 4 million increase when compared to three month periods.

Biometric segment had 1.4 million reduction in pretax losses, 2.8, compared to 4.2 million for the comparable three month periods. A trend. We believe will continue as new programs start and others are finalized.

With respect to automotive, we anticipated lower OEM sales coming into the fiscal year due to lower projected car sales and certain end of life programs, we expected to offset a significant portion.

The start of new programs that unfortunately did not materialize due to delayed vehicle launches and program implementations.

This should improve as we move into the first and second quarter fiscal 2021.

Additionally, the segment was modestly profitable in the third quarter and year to date, but the lower segment results have impacted our consolidated numbers.

Long term, we see our OEM business growing significantly.

This is based on being selected as a tier one supplier for rear seat entertainment with one of the big Cthree Us automakers.

Last quarter, I announced an award of approximately 275 million over five years with a projected large of September 2021.

We also have new business coming online with Ford and Nissan in fiscal 2001, and anticipate meaningful New awards within the near term based on programs we have been on.

One of the more exciting developments fueling our optimism is our new partnership with Amazon to bring the fire TV to the automotive market.

Amazon recognizes our market leadership in vehicle Entertainment and has chosen box to be their domestic systems integrator together, we will deliver solutions and services that can significantly accelerate the development cycle for Oems and bringing the fire TV experience to the car.

As announced we will initially be working with FCTA one of the larger global automakers in making this a reality with more Oems anticipated as we get closer to commercialization.

This is a very positive development for our automotive business as we bring more streaming content into the vehicle, which enhances the consumer experience and drives customer satisfaction for the Oems.

Another exciting development is a crossover between our automotive group and the biometrics segment.

This week, we announced a collaboration agreement between Eyelock and Sirius XM.

Under splay and in our booth and throughout.

Las Vegas was the first prototype of a serious.

XM E wallet.

That leverages I locks proprietary iris biometric authentication.

And E wallet was introduced last year at CES by serious and visa.

With this new agreement.

Lock will provide the.

Iras biometric touch was gateway that enables drivers and their passengers to use E wallet, while I'm going to go and make purchases in the car. The eyelock solution will activate and authenticate a payment through voice and touch screen commands granting enrolled users secure access to the.

Wallet with passenger authentication taking place in under one second.

In my meetings with the Sirius XM team. This week they expressed that the reception thus far has been excellent.

We also entered into an exclusive license agreement with save our loved ones or solo.

The developers have a patented device to prevent pediatric heat stroke and in hot vehicles.

For the growing number of deaths and current legislation that is gaining steam and congress or the auto industry to address this problem. We believe the device we've demonstrated isn't affordable and effective solution.

We will be following up in the weeks ahead with demonstrations in DC with congressional sponsors of the bill and around the country with our OEM customers.

We also had a number of aftermarket announcements at CES, we expanded our advanced driver assistance programs and introduced the new Gentex mirror with streaming video capability and Homelink connect which allows for the programming of cloud based home automation devices that can be control from the car.

Also within the Das category, we announced a new partnership with motion intelligence and emerging leader in driver distraction prevention technology.

And box will be distributing the motion intelligent app based product the car dealers fleets and traditional retail specialists motion intelligence is the only distracted driving device that can detect cellphones unauthorized computers or road devices and will eliminate texting and email.

While allowing for navigation and phone service, while a vehicle is in motion.

This product you can have huge safety implications and as with our security products. We are in discussions with insurance companies to incentivize the utilization of this technology, we expect to launch in the first quarter of this coming year.

As say, our 50 50 joint venture that as reported under other at a down quarter compared to the prior year due to a few factors that Mike will address however, their inventory position is clean they've completed their tariff mitigation plan to reset pricing, which will result in more historic.

So margins moving forward and AMC is coming off their highest revenue in the company's history, we expect revenue to continue to improve and with better margins profitability should as well.

Within our consumer electronics segment, we're continuing to gain traction in the sales of premium mobility wireless and Bluetooth speakers and the prior launches of sound bars, and our wireless earbuds have contributed to that success.

New distribution partners for our premium custom installation speaker products I've also led to stronger sales a trend we believe will continue.

This year at CES I'll focus was on the personal audio and sound bar markets growth categories that represent the way people consume media today.

Our new product assortment with advanced technologies like true wireless active noise cancellation, and Dolby Atmos immersive sound will reflect this as will the new line of headphones, which we will be launching through a partnership with Mclaren racing.

Blips is now the official headphones and portable audio partner of the Mclaren Formula one team.

Some of the other products to call out were that would debuted at the show.

Flip showcased a new lineup of true wireless and over a year headphones with active noise cancellation technology and the next evolution of true wireless Smart earphones Eclipse T. 10, and T. fives.

The T. 10 is significantly smaller and lighter than other true wireless microphones in the market and will be available. This fall. The T. Five smart phones also available no fall were designed with an optimized signal boost antenna to improve Bluetooth connectivity and the travel case will hold up.

Additional 24 hours of battery lives.

We introduced three new sound bars major upgrades from the prior line and similar in look to our claim to reference speakers.

Bar 54, with Dolby Atmos works with Google Assistant.

Airplay too and Amazon Alexa.

The Klipsch bar 48, with Dolby, Atmos, which could be paired wireless Lee with up to three additional clip speakers for 5.1 surround sound quality and the Clif bar 40 for the smallest in series that provides a 3.1 sound experience and features double digit adult.

Digital Dolby digital plus enhanced audio coding and Bluetooth connectivity. The first two speakers will be available this fall and the bar 44 launched this summer.

Within our accessories lineup, we introduce charging radios and clocks that will we simultaneously charge cellphones, new sensation products and a 360 degree Bluetooth speaker with charging call. The grip all launch releases going to be viewed on our website.

At this time I'd like to turn the call over to Mike who will go through the numbers and then we'll come back with a few closing comments and open it up for questions Michael.

Thanks, Pat Good morning, everyone fiscal 2023rd quarter net sales were down 19.5 million compared to last year's third quarter.

Our automotive electronics segment was the primary driver down 15.1 million with the OEM business comprising the majority for the reasons Pat discussed.

Aftermarket product sales were down modestly and virtually flat excluding satellite radio fulfillment sales sales in our consumer electronics segment declined by 4 million compared to fiscal 2019 third quarter, primarily to two SK unit rationalization programs and lower sales in Europe .

This was partially offset by growth in reception products and Wearables as we added a distribution of fitbit and the new Apple products Funny, you H.C. motion program.

Let's continue to build momentum and the newest product launches for Soundbars in wireless earbuds contributing to growth. Additionally, new distribution partners for the customer install marketplace favorably impacted sales.

The biometric segment reported a 300000.

Decline in net sales, primarily due to product mix as we sell more higher dollar h. box products in last year's third quarter.

And many of the programs we have working on have not contributed to PNM yet.

Gross margins of fiscal 2023rd quarter went 28.6% down 140 basis points.

The decline was mostly attributable to our automotive electronics segment, which was down 540 basis points due to the OEM sales decline, which impacted the absorption of fixed overhead costs aftermarket headdress product sales also decline, which are typically which typically generate higher margins for this segment.

And with two other factors contributing to automotive lower automotive margins, one terrorists and to a business partner investment payment that was made in the third quarter in anticipation of a future OEM program.

This program is expected to positively impact margins in the latter part of the next fiscal year.

The consumer electronics segment had a 30 basis point improvement year over year for the third quarter driven by higher sales of premium audio products. The increase was partially offset by the impact of terrorists as well as lower European sales and higher European warehouse costs.

The biometric segment had negative gross margins due to product set to customers for testing at no charge the year over year decline was primarily due to the sale of certain inventory in fiscal 2019, which was previously written off and contributed to higher margins in fiscal 2019 third quarter.

As well as higher sales of licensing fees in the prior year, which arent higher margins for this segment.

Additionally, the fiscal 2023rd quarter included certain tooling and effective repair costs.

Total operating expenses of 31.3 million in fiscal 2023rd quarter declined by 1.9 million year over year.

Selling expenses declined by approximately 800000.

Principally due to headcount reduction as part of our restructuring.

Lower commissions and lower advertising caution display amortization.

Momentarily thank.

DNA expenses increased by approximately 200000.

1 million in fiscal 2019 third quarter from a look favorable.

800000 for the comparable quarters.

Ken.

Engineering and technical support expenses declined by 1.3 million again, principally due to headcount reductions associated with the restructuring.

I'm here.

We also had lower R&D expenses as several projects are completed and we transfer some of the work that was done by outside contractors and house.

We are continuing to lower fixed expenses and looking at areas, where we can reduce our spend further without impacting our operations.

We reported other income of 4 million compared to other income of approximately 800000 in last year's third quarter at 3.2 million increase.

Interest in bank charges declined by approximately 400000, as we suspended our domestic supply chain financing in the second quarter fiscal 2020, resulting in lower fees.

Equity and income of equity Investees declined by approximately 700000.

There were three events, which led to lower income one initial impact of the PTAB duties to an increase in warranty cost and create a product recall expense.

As Pat mentioned profitability is anticipated to increase in asset.

Additionally, we recorded a 4.1 million again.

The sale of our pull Heine, Germany real estate.

On September Thirtyth of 2019, we sell this property with net proceeds at 9.5 million after transactional costs and repayment of our.

Outstanding mortgage.

Concurrent with the sale, we entered into an operating leases arrangement with the purchaser for a small portion of the property as we are continuing to operate a sales office in Germany.

Lastly, other net decline they approximately 600000 as we had a charge of 800000 related to the final settlement of the working capital adjustment from a sale of freshmen.

We reported operating income of approximately 100000.

As compared to 5.7 million.

And pre tax income of 4.1 million as compared to six and a half million a decline of 2.4 million.

For the quarter, we had a tax provision of 66.6% or 2.7 million versus a tax benefit of 4.1 million last year, a 6.8 million swing.

Our net income after non controlling interest was $2.5 million or 10 cents a share.

Impacting our tax provision is the U.S. taxation of foreign earnings Nondeductibility of permanent differences non controlling interest related to Eyelock LLC.

An increase in valuation allowance state and local taxes and income tax and foreign jurisdiction at various tax rate.

This resulted in net income of 1.4 million and net income attributable to box of two and half million when taking into account on non controlling interest in Iowa in the fiscal 2023rd quarter.

This compares to net income of 10.6 million and then come to me the box of 12.2 million any comparable year ago period.

Lastly, we reported adjusted EBITDA of 6 million versus 11.6 million for fiscal 2020, and fiscal 2019 third quarters, respectively.

Taking into account the impact and again on the German real estate stock based compensation and the final settlement of working capital adjustment.

Well she ended with the hirschmann sale.

Moving onto the balance sheet.

Cash and cash equivalents as of November Thirtyth, 2019 was 32.2 million compared to 39.3 million as of August 30, Onest 2019.

The cash usage is principally based on seasonal working capital needs stock repurchases and repayment of debt.

As noted in our Form 10-Q , we had temporarily suspended our domestic supply chain financing programs as we did do not need to funding.

Had we used the program our cash balance as of November thirtyth would've been approximately $15 million higher.

We expect improvements in quarter four.

The sale of our pull Heim real estate was completed in fiscal 2023rd quarter and other mortgages and expenses. We had available 9.5 million. We used a portion of this to lower our European debt outstanding and pay accrued German related severance costs.

Our total debt position stood at 8.4 million as of November Thirtyth down from 17.6 million as of February 28, 2019, we had no balance on our 140 million domestic credit facility and overall our balance sheet continues to be strong provides us with the flexibility needed to exit.

Acute on our share repurchase program fund operations and carry through our plan is Pat discussed.

Excuse me.

We entered into a Tenbfive program as recommended by the shareholders on the second quarter call. We set up a small program to offset as this was the new to the company.

We will hold and renewing until we are out of the quite period with no material transactions, but do intend to continue to support the stock.

I'll turn the call back over to Pat for closing comments Pat.

Great. Thank you, Mike and the to recap.

Although this year's decline in revenue was primarily in our OEM business and there's no doubt alarming.

Our automotive segment is coming off a strong year.

Unfortunately, the length of time to develop and launch OEM products as long and getting longer.

And we're not in control of vehicle launch dates.

This year may seem like a setback.

But with the selection of box automotive as a tier one supplier to one of the victory Usource automakers and the new collaboration with Amazon to develop an automotive rated fire TV experience. This year may end up being the most transformative as we are as we fully expect doing new programs a new awards.

Based on these developments.

Within our consumer electronics segment glitches performed well and we expect to continue to lead the market in premium loudspeakers and will also grow in the custom installation market with the new partnerships created this past year.

Additionally, with the success, we've had with our sound bars and true wireless.

We have the momentum to continue to expand our market share at retail in personal and home theater products.

We are seeing increased sales from our market, leading reception products and expect continued growth of our wearable products in the healthcare space with the addition of Fitbit and the new Apple products, which were recently added to our line.

The biometrics segment has not lived up to expectations and we know that.

However, we continue to have meaningful realistic engagement engagement development and testing with a number of companies for our embedded solutions in healthcare gaming automotive and computing.

Any one of them, having the ability to bring eyelock to profitability.

We expect our perimeter access sales to improve now the testing for our new XT and the new revision of NXT is complete.

And we will continue to work to bring these opportunities to completion.

Overall, we have lowered overhead and will be innovative to bring expenses down automating systems and ops wherever possible we.

We have instituted a new tenbfive program for the authorized repurchase of shares as was suggested on our last call and modified the C suite comp programs to be aligned with shareholders and focused incentives on the appreciation of our company's valuation.

To clear up any.

Confusion in my particular case, the bulk of my incentive compensation is triggered by 15 dollar share price.

We will continue to explore current divestitures and acquisitions that may improve any one of our segment's profitability.

And finally, our plan for this year includes actively barking marketing boxes story as some of our initiatives and opportunities materialize, they will be catalyst for our shareholders.

So with that I will open the call for questions.

Thank you.

Ladies and gentlemen to ask the question just press Star then one on your telephone keypad.

To withdraw your question just press the pound key.

And we have a question from that I know.

Brad <unk> from the M.L. capital management.

Hello.

Thanks for taking the question.

So on the on the auto announcements.

Despite I've got to fire TV announcement, with Amazon and you've got to Sirius XM will give me, what's the timeframe and the potential dollars involved in something like this.

The.

We announced last quarter that the program that we won was FC.

<unk> was approximately 275 million over five year period. So that's part of the Amazon program, we anticipate we have been on.

Additional business in excess of 300 million.

I cannot say that.

Reward well with it but we are confident with the position we are right now so we believe that.

Yes.

This collaboration with Amazon, where we actually bring whatever you watch at home in to your car.

Is something I was going to help grow the market response that we've gotten that the show has been excellent. We've had a number of different car manufacturers that we do not do business with.

That have come in and expressed interest now expressed interest turning that into sale will take some time.

But we're confident that.

This new collaboration will bring additional business for the automotive group.

Most likely as you can see the first program will start in September of 2020 weren't it maybe as early as July .

So there is a lag time between the award and the development of product and the delivery of product to generate revenue.

Okay. So on two more questions on that of the $275 million five year contract how much of that is I mean guaranteed.

Well when you become nothing's guaranteed.

But we are on the vehicles as the production system, so as they sell more and more vehicles.

We will.

You know the sales will reflect that.

Okay, so could be a five year $100 million deal.

It could be if people down five people don't.

If they don't order the rear seat entertainment and they just decide to put a tablet their kids hands.

And well being much more as well.

Yeah, that's possible with based on what we're seeing and based on the content that will be coming in.

You know these programs are primarily bresee program is really not for a teenager and yes, we know that the teenagers in many cases like you use their own device. These programs are really designed for kids that are tied into.

Absolutely one year old to five year old.

Sure the meant to Tim but as the content improves we expect to see more would take rate due to the fact of the richer content.

Okay.

And then on the fire TV are you guys. The exclusive provider of this higher TV or could somebody else come and go to deal with fire TV Amazon. The we are exclusive with the ones that the Oems that have selected with us.

There was an announcement the other day that Amazon is also working with garment and BMW, but thats primarily European operations.

Okay.

And what about the Sirius XM announcement, what is the dollar figures on this the timeline.

Well the you know this could be.

Is this is this is the potential of Iowa, I logged business could be very explosive.

From from this standpoint.

This is a program that.

Sirius XM being the supplier that they are the importance that they are to the Oems. This is any wallet program.

If any one of the car manufacturers select to how the wallet program in their vehicle, let's say Cadillac.

And they decide to put this E wallet across their entire like.

We then we'd be on.

Every every vehicle that's produced because whether youre going to indication process. So from that standpoint, depending on the number of people that work with serious auto program like this.

It could be very close.

In terms of revenue and in terms of profitability.

And and from what the confidence we have coming out of the show was the responses that we were seeing to the system as as prospective customers will being driven around town with assist them in your car fully up to gas proms, putting gas in driving away and every.

Thing being bills in the seamless.

So the.

The response with we have received from the serious people.

Was a was very very positive.

Okay, and where is the authentication embedded in the mayor.

It could be in the mirrors could be an adviser wherever the OEM would choose okay.

I have one more question on auto then I'll move to Eyelock, what about see this refundable payment to customer.

And the auto segment. It was mentioned in the press release in the 10-Q.

Yes. This is a this is part of the program to get established.

As a business partner.

And this is something that we would.

Based on where we are.

And based on the finances of the program.

This would be reimbursed at some point through the business.

We have established with them.

Well, if you know when the business.

We've won the business we've gotten the fios.

Okay.

All right on the Eyelock last quarter, you mentioned that health care program I didn't hear anything yet that follow up.

Health care program indices were in testing and validation at this particular point.

There are.

Machines that are being produced that we will have to.

Put our product into to demonstrate everything is working properly we believe that will be the case.

And then we expect this to move along to productions.

Okay.

Uh huh.

What's the status of the vending machines.

They are out now delivering machines and we are on those machines and again there a number of test programs that they are doing with one one very large retailer.

That.

So far the tests have gone very well and you're talking about thousands of machines.

They win that business is.

It's going to be very positive for the Eyelock group.

Okay.

I mean, you realize it's I think investors are a bit skeptical on the eyelock. We've heard a lot of stuff about I lots over the years and are still sitting here with basically zero revenue in two 3 million in losses on a quarterly basis.

I will your frustration and the frustration of the shareholders isn't all as greater than ours.

Expected this business, we expect that this business to materialize sooner than it has.

But.

At this particular point was who were working with and the volume that those companies can generate it gives us the confidence level that iris biometrics, not just ours, but iris biometrics will become the selected.

Authentication process, because one of its higher security than facial and to it does not have the political problems problems associated with facial where we are now starting to see pushback.

Because of the private privacy issues.

Higher as program is an opt the program. So it's not something you could be monitored anywhere.

Okay.

So how long how much longer longer you expect to see losses or how much longer you part you're going to tolerate a losses in Iraq.

The it will depend on.

Winning.

And getting the approval to move ahead, we see any one of the programs that we're working with whether it'd be in healthcare automotive any one of them, we'll bring eyelock to profitability.

And depending on what we're hearing and what we're seeing from those those customers that were working with well formulate our dipping our our decision.

Okay.

Okay. So a couple other things here strategic.

Actions I guess I'll call them.

What are the plans for any major strategic actions I mean, we're we're sitting here.

Nine months later from when I think John said on the call.

Your line is been drawn in the sand in the stock price is pretty much where it was.

Taking some actions to sell some divisions one of them sell through.

What are the plans for looking at something larger to create value Herman you've said many times in the past itself equipped for more than you pay for it.

That's the case that significantly above the current stock price you're asked a business falls didnt have a very good.

Quarter here it seems like those things are probably more onetime in nature than not.

Right.

Either one of those businesses would.

The sale of them would.

I think dramatically increase the value of the company now you might be less with less.

Of a profitable business going forward.

Some of those divisions, but they might need to be divested as well. So what does it what's the appetite from John who is I believe on the call and the board.

Really doesn't matter the board John's decision maker I think ultimately.

Yes.

Someone off one of these bigger assets that likely holds the most value.

Well this is an interesting subjects and where we spend a lot of gone zinc the above that and reviewing those strategies.

But realistically.

Many of these.

Operations.

Our becoming exciting have tremendous potential could become very profitable into just going bust one of them look books for example.

I would weaken the rest of the structure, which will.

So.

We have to review and were opened dual discussions are a lot of things going on come up overtime, and we're well aware of the situation, we're keeping in mind, what would be possible outlook.

Okay.

Fair enough and then lastly on your Investor Outreach program. My personal opinion is this is a waste of time I mean, it the performance of the business is going to.

Improve the stock price and the value of the company and going out and pitching it to investors without.

Putting a better numbers, it's just a waste of time.

So that's my two cents on that and those are all my questions well our game plan bread. Our game plan. There is as we as we introduce and as we have the positive news to report.

We're going to market that story, because some of the business that we have is long term in nature, but.

But we can extrapolate what that means to us on a go forward basis, and that's where.

You know, that's where we think it would make sense for us.

Especially if we will be contracts, where we're going to be embedded into.

Much bigger companies product.

That's a story to talk about even even if that that situation is a year from now or 18 months from now.

Okay fair enough.

Thank you.

Okay. Thank you Brett.

Thank you and ladies and gentlemen necessary mind, there to get into Q Just press Star then one.

And we have a question from Alec Landry with BNL capital. Please go ahead.

Good morning, Thanks for taking my call. This morning follow ups.

I've a follow up on the Eyelock discussion.

So I like inventory went from 300 Grand to over 3 million in the quarters anything you can say about.

Where that inventory is is going well what does the plan with that inventory it seems like quite a quite an increase.

The inventory was originally held that blocks.

And the inventories moves back to.

Yes, I lock that inventory.

We are working on a program in India.

Where we expect.

They portion of that in that product.

To be disposal.

Be disposed of or or or sold so through the cold so profitably. So.

Okay. Good okay. Ultimately the Q mentioned, a cancellation of an auto program is that was that in the quarter that it got canceled.

No that at least in canceling no no no no no it's not a cancellation of the program. It when it was an adjustment or one of our car manufacturers.

To use our remote start products on achieved vehicles only not push to start vehicles and that had impacted the overall sales of that but we are nothing was canceled its just a different.

The number of vehicles that were going to be on it has impacted.

Sales negatively.

But.

We remain very good stead in fact.

We had one there Golden supply award from this maker this past year.

Okay all right.

I use you mentioned that Eyelock, if any one of the programs that is working on now hits fingers and toes crossed.

That eyelock would become breakeven to profitable does that include the Vicki vending machine program.

If you wish to hit some of the numbers that they are projecting yes.

Okay.

Right.

Well like I said fingers and toes cross because.

As you know I'm, just I'm fully understand I fully understand.

Everybody skepticism, but not everyone is aware.

Having conversations with the different companies that we are having.

You know.

The company's of the size that we're working with would not be spending the time or money to bring it technology.

Like this to market if they weren't serious oh that being said that doesn't necessarily mean, its 100% that is the <unk>. That's what gives us the level of confidence that one of these programs.

We will get finalized and we'll start generating meaningful revenue.

I'm sorry, what gives you the confidence Pat.

But the fact that the Ito the larger companies were working with in this space are working hard to bring that to the technology to market. Okay. I'm. So if they weren't serious I would understand everybody's skepticism, but we see it from a different standpoint, because we're working with them.

Got you Okay yeah.

Excuse me you mentioned to me just recently here, India with regards to D.

I like inventory.

I think I read that that India was working with stay another iris.

Company I think that's been in the press correct.

India has a very very active.

Iris program in that they use Irish for lot of authentication I believe even use it for their so security system. There is that they have lyvers already the issue.

Is that their iris programs that we see our clunky out of date.

And do not have the speed of recognition in imaging that ours. The does and therefore, we believe we have an opportunity there as do others.

Okay got you.

All right and finally on the.

On the while you mentioned it for an example of Cadillacs of Cadillac were to decide to do this they would put this on.

You know and entire a line of vehicles for instance, the escalate correctly every escalate.

Yes, but let me make this perfectly clear I mean, I've only use the Cadillac as a as an example, okay. No I understand any line isn't any one of the car manufacturers that would choose to use the while it most likely this program if the OEM community deems it a program that they have to have.

Most likely will start like most other popular options, which started in the higher end vehicles.

And if you're going to have an E wallet program.

In many cases, they would you would make it stand along a.

Particular trim level.

And in that case, we would be in every one of those vehicles the potential for it to proliferate into other cars and other vehicles and other car manufacturers based on the implementation of one large one is.

It would be very very possible and is a very normal course of action within the automotive space.

But the operative word there you said was it is an option it will be in a a trim level that could be selected.

It's not standard yes, it won't yes.

Well like I said and then last is like.

If you look back on putting a modem in a vehicle, which gives you cellular connection into the car that originally it was an option and now most of the high end vehicles. It standard.

So that's that's the way it you know the the market worse.

Okay. So you said that the authentication could come either on something on the visor or the mirror.

And as Andrew as I understand it or if it's a gentex mirror Gentex already has a partnership with another Iris company don't doesn't it.

Yes, they do.

Okay. So how would that work if it's in the mirror like well video.

Gentex is not the only manufacturer of years.

And depending on how the OEM wants to work if we don't have to be in the mirror. There's so many other places.

You know where where we could have our.

Our screen and everything.

But.

Doesn't necessarily have to be mirror, there's a good spot, but it's not the only spot vehicle.

Right. It seems to me to be the best spot.

Just.

Off the top of my head, but so if it's 11 years should the instruments. The instrument cluster is another very good spot for it because the standoff distance that we have with our product is greater than any one of the iris systems that are out there.

So being in the instrument cluster would not be the issue for us.

Okay.

But I just want to I, just want to sort of clear up if I mean, I gentex is by far the dominant mirror supplier.

As far as I mean is as I understand and so if.

So if it isn't amir.

It's not going to be in Iraq.

Hardware your algorithm or not or not.

That's not necessarily the case in many cases, we could be a directed saw us because of the technology that we have.

Which we believe is superior because of our standoff distance. So it does not necessarily that if it's in the mirror. It belongs to any one company and again, it's going to be the decision of the the manufacture.

As to where they would want to have.

The Iris.

Images and stuff like that.

Okay.

All right well again, a good luck in let's I hope something.

Comes to fruition here. Thank you for taking my call Greg.

Thank you.

Yes.

Thank you.

Okay.

And our next question is from a crack still her. Please go ahead sorry.

Yes, thanks for taking my call, Yes, I think it some more detail on this can be dash five filing like what's the what's been filed whats the timeline number of shares to be bought a purchase.

Mike you want to you want tightly.

If there was filed live Pride program ends on January 14th and we filed the 200000 shares.

So so why only 200000 shares.

When you had authorized.

For 2.4 million.

The last call.

The way it was kind of misled that we've agreed that 3 million shares repurchase authorize we plan to move ahead and purchase when the window opens best purchased by 200000 shares nothing.

Well why only 200000 shares why not 2 million.

Sure price low.

No. We wanted to try the program at the CFO at work was the first time that we've done it.

But you don't need to you can like 30 to 40000 shares a day.

Oh, you kept and that's the problem is that like cases, we enter into quiet periods based on whether or not we're reporting our numbers, whether or not we have anything that's material going on in the way of an acquisition in the way of the divestiture. So it was suggested on our last call that to get around those.

Issues, maybe we should consider to look at a tenbfive program that would allow us to continue to purchase even though we may be in a quiet period. So long as we said it up when we were not in the quiet period. So what the financial team had done this past quarter was look to see our program line.

That would work and we started with a small program, but that business not necessarily mean that it would stay that way.

All right. So this program ends what did you say January 14th that's January 14th 2020.

Yes.

All right. So do you have a plan to initiate another program and for more sharing.

I think as I stated in our we stayed in my remarks as long as we're able to do it look at it.

Well, we committed by.

That would not bad winters.

We have excuse me, Mike that would not prevent us from in an open period from stepping in and buying the Tenbfive program was specifically set up to get around the issue of periods of times, where we may want to buy the shares will continue to buy the shares.

When we were closed and could not.

That does not saying that in that period that we could decide based on whatever the share prices by additional shares.

I understand I'm, just saying as a shareholder it's very disappointing that that's all the shares you bought I mean, that's not very many shares not period.

So hopefully you've got more confidence in the stock with all these positive things going on to take out some of these the support the price of the our shares in the highest stock market.

In history and were languishing down here in the fours.

That's all that's all I have to say.

Thank you and this concludes our kinase session for today I would turn it back to management for any further remarks.

Yeah.

Operator, we didnt any QNX session. So if anybody has any further questions for you.

Okay, ladies and gentlemen, if you have a question just press Star then one.

Sorry, I'm not showing any further questions into camp.

Okay.

If there are no further questions I want to thank you all again wish you all a a happy new year and look forward to be reporting on some of these new projects in these new initiatives that will come out of this show. Thank you have a good day.

And thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a wonderful day.

Ladies and gentlemen, thank you for standing by and welcome to the box Internationals earnings call.

At this time all participants are in listen only mode. Please be advised that today's conference is being recorded.

Required any forgets essentially first start in zero to reach an operator I would now hand, the conference over to guest speaker today and winner with Investor Relations.

Thank you Carmen good morning, and welcome to box International's fiscal 2023rd quarter results Conference call I'm here in Las Vegas, with our Chairman, John Shale and Pat Lavelle, President Chief Executive Officer today marks date or the consumer electronics show and if you have already I encourage everyone to visit the news release section of our IR website with you our product.

<unk> announcements many of its what we discussed in today's call. You can also view our earnings release updated investor presentation and Form 10-Q on the IR site, Michael Stork, Senior Vice President and Chief Financial Officer Box is also on the line dialing in from New York.

I'd like to remind everyone that except for historical information contains CRM statements made on todays call and webcast that would constitute forward looking statements are based on currently available information. The company assumes no responsibility to update any such forward looking statements and I'd like to what do you know the risk factors associated with our business, which are detailed in our Form 10-K for the period ended February 28.

2019.

Thank you all for your continued interest in box if anyone have any follow up questions by all means please feel free to reach out to me after the call and at this time I'd like to turn the call over to Pat Lavelle, I know that well. Good morning, everyone. Let me start by wishing you. All are you happy new year as Glenn mentioned, we're here at CES. Unlike past.

Here's the meetings, we've had at the show ER and the reception to the new products introduced has been very strong.

There were also new partnerships unveiled and in others that are in work, which hold great promise for the future.

As for our results in our progress yesterday.

It's somewhat niche.

Positive side, the restructuring initiatives we've executed.

Have worked resulting in the lower spending and far greater efficiencies throughout the company.

Our consumer electronics segment backed by the continued strength about premium audio product lives liver nine point Sixmillion, a pre tax profit a 4 million increase when compared to three month periods.

Biometric segment had 1.4 million reduction in pretax losses, 2.8, compared to 4.2 million for the comparable three month periods. A trend. We believe will continue as new programs start and others are finalized.

With respect to automotive, we anticipated lower OEM sales coming into the fiscal year due to lower projected car sales and certain end of life programs, we expected to offset a significant portion.

The start of new programs that unfortunately did not materialize due to delayed vehicle launches and program implementations.

They should improve as we move into the first and second quarter fiscal 2021.

Additionally, the segment was modestly profitable in the third quarter, a year to date, but the lower segment results have impacted our consolidated numbers.

Long term, we see our OEM business growing significantly.

This is based on being selected as a tier one supplier for rear seat entertainment with one of the big three U.S. automakers.

Last quarter I announced to the award of approximately 275 million over five years with a projected large of September 2021.

We also have new business coming online with Ford and Nissan in fiscal 21, and anticipate meaningful New awards within the near term based on programs we have bid on.

One of the more exciting developments fueling our optimism is our new partnership with Amazon to bring the fire TV to the automotive market.

Amazon recognizes our market leadership in vehicle Entertainment and has chosen box to be their domestic systems integrator together, we will deliver solutions and services that can significantly accelerate the development cycle for Oems in bringing the fire TV experience to the car.

As announced we will initially be working with FCTA one of the larger global automakers in making this a reality with more Oems anticipated as we get closer to commercialization.

As a very positive development for our automotive business as we bring more streaming content into the vehicle, which enhances the consumer experience and drives customer satisfaction for the Oems.

Another exciting development is a crossover between our automotive group and the biometric segment.

This week, we announced the collaboration agreement between Eyelock and Sirius XM.

I'm display and in our booth and drought.

Las Vegas was the first prototype of a serious.

XM E wallet.

That leverages I locks proprietary iris biometric authentication.

And E wallet was introduced last year at CES by serious and visa.

With this new agreement.

Lock will provide the.

Iras biometric touch was gateway that enables drivers and their passengers to use E wallet, while having to go and make purchases in the car. The eyelock solution will activate and authenticate eight payment through voice and touch screen commands granting enrolled users secure access to the.

Well it with passenger authentication taking place in under one second.

In my meetings with the Sirius XM team. This week they express that the reception thus far has been excellent.

We also entered into an exclusive license agreement with save our loved ones or solo.

The developers have a patented device to prevent pediatric heatstroke can be in hot vehicles.

With a growing number of deaths and current legislation that is gaining steam and congress or the auto industry to address this problem. We believe the device we have demonstrated isn't affordable and effective solution.

We will be following up in the weeks ahead with demonstrations in DC with congressional sponsors of the bill and around the country with our OEM customers.

We also had a number of aftermarket announcements at CES, we expanded our advanced driver assistance programs and introduced the new Gentex mirror with streaming video capability and Homelink connect which allows for the programming of cloud based home automation devices that can be controlled from the car.

Also within the Adas category, we announced a new partnership with motion intelligence and emerging leader in driver distraction prevention technology.

Box will be distributing the motion intelligent app based product car dealers fleets and traditional retail specialists motion intelligence is the only distracted driving device that can detect cellphones unauthorized computers or road devices and will eliminate texting and email.

While allowing for navigation and phone service, while a vehicle is in motion.

This product you can have huge safety applications and as with our security products. We are in discussions with insurance companies to incentivize the utilization of this technology, we expect to launch in the first quarter of this coming year.

As say, our 50 50 joint venture that as reported under other at a down quarter compared to the prior year due to a few factors that Mike will address however, their inventory position is clean they've completed their tariff mitigation plan to reset pricing, which will result in more historic.

So margins moving forward and I say is coming off their highest revenue in the company's history, we expect revenue to continue to improve and with better margins profitability should as well.

Within our consumer electronics segment, we're continuing to gain traction in the sales of premium mobility wireless and Bluetooth speakers and the prior launches of sound bars, and our wireless earbuds have contributed to that success.

New distribution partners for our premium custom installation speaker products I've also led to stronger sales a trend we believe will continue.

This year at CES I'll focus was on the personal audio and sound bar markets growth categories that represent the way people consume media today.

Our new product assortment with advanced technologies like true wireless active noise cancellation, and Dolby Atmos immersive sale will reflect this as will the new line of headphones, which we will be launching through a partnership.

Mclaren racing.

Which is now the official headphones and portable audio partner of the Mclaren Formula one team.

Some of the other products to call out were that we debuted at the show.

Flip showcase the new lineup of true wireless and over a year headphones with active noise cancellation technology and the next evolution of true wireless smart earphones eclipsed 10 and team fives.

The gten is significantly smaller and lighter than other true wireless microphones in the market and will be available. This fall. The T. Five smart phones also available fall were designed with an optimized signal boost antenna to improve Bluetooth connectivity and the travel case will hold up to an addition.

Total 24 hours of battery life.

We introduced three new sound bars major upgrades from the prior line as similar in look to our acclaimed referenced speakers Eclipse bar 54, with Dolby Atmos works with Google Assistant.

Apple airplay too.

Amazon Alexa.

The Klipsch bar 48, with Dolby, Atmos, which could be paired wireless Lee with up to three additional clip speakers for 5.1 surround sound quality and the Clif bar 40 for the smallest in series that provides a 3.1 sound experience and features double digit.

Total digital Dolby digital plus enhanced audio coding and Bluetooth connectivity. The first two speakers will be available this fall and the bar 44 launched this summer.

Within our accessories lineup, we introduce charging radios and clocks that will we simultaneously charge cellphones, new sensation products and a 360 degree Bluetooth speaker with charging call. The grip all launch releases going to be viewed on our website.

At this time I'd like to turn the call over to Mike who will go through the numbers and then we'll come back with a few closing comments and open it up for questions Michael.

Thanks, Matt Good morning, everyone.

Fiscal 2023rd quarter net sales were down 19.5 million compared to last year's third quarter.

Our automotive electronics segment was the primary driver down 15.1 million with the OEM business comprising the majority the regions that discussed.

Aftermarket product sales were down modestly and virtually flat excluding satellite radio fulfillment sales sales in our consumer electronics segment declined by 4 million compared to fiscal 2019 third quarter, primarily due to SK you at rationalization programs and lower sales in Europe .

This was partially offset by growth in reception products and Wearables as we added a distribution of fitbit and the new Apple products for Neil you 18 motion program.

Let's continue to build momentum and the newest product launches for sound bars, and wireless earbuds contributing to growth. Additionally, new distribution partners for the customer installed marketplace favorably impacted sales.

The biometric segment reported a 300000.

Decline in net sales, primarily due to product mix as we sell more higher dollar h. box products in last year's third quarter.

And many of the programs we have working on have not contributed to PML yet.

Gross margins for fiscal 2023rd quarter went 28.6% down 140 basis points.

The decline was mostly attributable to our automotive electronics segment, which was down 540 basis points due to the OEM sales decline, which impacted the absorption of fixed overhead costs aftermarket headrest product sales also decline, which are typically which typically generate higher margins for this segment.

There were two other factors contributing to automotive lower automotive margins, one terrorists and to a business partner investment payment that was made in the third quarter in anticipation of a future OEM program.

This program is expected to positively impact margins in the latter part of the next fiscal year.

The consumer electronics segment had a 30 basis point improvement year over year for the third quarter driven by higher sales of premium audio products. The increase was partially offset by the impact of terrorists as well as lower European sales and higher European warehouse costs.

The biometric segment had negative gross margins due to product set to customers for testing at no charge the year over year decline was primarily due to the sale of certain inventory in fiscal 2019, which was previously written off and contributed to higher margins in fiscal 2019 third quarter.

As well as higher sales of licensing fees in the prior year, which are at higher margins for this segment.

Additionally, the fiscal 2023rd quarter included certain tooling and effectively pack loss.

Total operating expenses of 31.3 million in fiscal 2023rd quarter declined by 1.9 million year over year.

Selling expenses declined by approximately 800000.

Principally due to headcount reduction as part of our restructuring.

Lower commissions and lower advertising caution display amortization expenses.

DNA expenses increased by approximately 200000.

No. However, we had a ring reimbursement of 1 million in fiscal 2019 third quarter from a look favorable losses and excluding this one time of that Gina expenses would have been down 800000 for the comparable quarters.

Engineering and technical support expenses declined by 1.3 million again, principally due to headcount reductions associated with the restructuring.

We also had lower R&D expenses as several projects are completed and we transfer some of the work that was done by outside contractors and has.

We are continuing to lower fixed expenses and looking at areas, where we can reduce our spend further without impacting our operations.

We reported other income of 4 million compared to other income of approximately 800000 in last year's third quarter at 3.2 million increase.

Interesting bank charges declined by approximately 400000, as we suspended our domestic supply chain financing in the second quarter fiscal 2020, resulting in lower fees.

Equity and income of equity Investees declined by approximately 700000.

Three events, which led to lower income one initial impact of the PTAB duties.

An increase in warranty costs and great product recall expense.

As Pat mentioned profitability is anticipated to increase in asset.

Additionally, we recorded a 4.1 million again.

On the sale of our pull line, Germany real estate.

On September Thirtyth of 2019, we solve this property with net proceeds of 9.5 million after transactional costs and repayment of our outstanding mortgage.

Current with the sale, we entered into an operating leases arrangement with the purchaser for a small portion of the property as we are continuing to operate a sales office in Germany.

Lastly, other net decline approximately 600000 as we had a charge of 800000 related to the final settlement of the working capital adjustment from a sale of freshmen.

We reported operating income of approximately 100000.

As compared to 5.7 million.

And pre tax income of 4.1 million as compared to six and a half million a decline of 2.4 million.

For the quarter, we had a tax provision of 66.6% or 2.7 million versus a tax benefit of 4.1 million last year, a 6.8 million swing.

Our net income after non controlling interest was $2.5 million or 10 cents a share.

Impacting our tax provision is the U.S. taxation of foreign earnings non deductibility of permanent differences non controlling interest related to Eyelock LLC.

An increase in valuation allowance state and local taxes and income tax and foreign jurisdiction that various tax rates.

This resulted in net income of 1.4 million and net income attributable to box of two and half million when taking into account our non controlling interest in Iowa, and the fiscal 2023rd quarter.

This compares to net income of 10.6 million and then comes from into box of $12.2 million in comparable year ago period.

Lastly, we reported adjusted EBITDA of 6 million versus $11.6 million for fiscal 2020, and fiscal 2019 third quarters, respectively.

Taking into account the impact of the gain on the German real estate stock based compensation and the final settlement of working capital adjustment.

Associated with freshman sale.

Moving onto the balance sheet.

Cash and cash equivalents as of November Thirtyth, 2019 was 32.2 million compared to 39.3 million as of August 30, Onest 2019.

The cash usage is principally based on seasonal working capital needs stock repurchases and repayment of debt.

As noted in our Form 10-Q , we had temporarily suspended our domestic supply chain financing programs as we did do not need to funding.

Had we use the program our cash balance as of November thirtyth would've been approximately $15 million higher.

We expect improvements in order for.

The sale of our full time real estate was completed in fiscal 2023rd quarter and other mortgages and expenses. We had available 9.5 million. We used a portion of this to lower our European debt outstanding and pay accrued Germany remain in severance costs.

Our total debt position stood at 8.4 million as of November Thirtyth down from 17.6 million as of February 28, 2019, we had no balanced on our 140 million domestic credit facility and overall a balance sheet continues to be strong provides us with the flexibility needed to X.

Acute on our share repurchase program funded operations and carry to our plan as Pat discussed.

Excuse me.

We entered into a Tenbfive program as recommended by the shareholders on the second quarter call. We set up a small program to offset that this was the new to the company.

We will hold and renewing until we are out of the quite period with no material transactions, but do intend to continue to support the stock.

I'll turn the call back over to Pat for closing comments Pat.

Thank you Mike.

To recap.

Although this year's decline in revenues, primarily in our OEM business and there's no doubt alarming.

Our automotive segment is coming off a strong year.

Unfortunately, the length of time to develop and launch OEM products as long and getting longer.

And we are not in control of vehicle launch dates.

This year may seem like a setback.

But with the selection of box automotive as a tier one supplier to one of the victory Usource, the Lakers and the new collaboration with Amazon to develop an automotive rated fire TV experience. This year may end up being the most transformative as we are as we fully expect the when new programs a new awards.

Based on these developments.

Within our consumer electronics segment glitches performed well and we expect to continue to lead the market in premium loudspeakers and will also grow in the custom installation market with the new partnerships created this past year.

Additionally, with the success, we've had with our sound bars and true wireless we have the momentum to continue to expand our market share at retail in personal and home theater products.

We are seeing increased sales from our market, leading reception products and expect continued growth of our wearable products in the healthcare space with the addition of Fitbit and the new Apple products, which were recently added to our line.

The biometrics segment has not lived up to expectations and we know that however, we continue to have meaningful realistic engagement engagement development and testing with a number of companies for our embedded solutions in healthcare gaming automotive and computing and.

One of them, having the ability to bring eyelock the profitability.

We expect our perimeter access sales to improve now the testing for our new XT and the new revision of NXT is complete and.

And we will continue to work to bring these opportunities to completion.

Overall, we have lowered overhead and will be innovative to bring expenses down automating systems and ops wherever possible.

We have instituted a new tenbfive program for the authorized repurchase of shares as was suggested on our last call and of modified the C suite comp programs to be aligned with shareholders and focused incentives on the appreciation of our company's valuation.

To clear up any.

Confusion in my particular case, the bulk of my incentive compensation is triggered by $15 share price.

We will continue to explore current divestitures and acquisitions that may improve anyone of our segment's profitability.

And finally, our plans for this year includes actively barking marketing boxes story as some of our initiatives and opportunities materialize, they will be catalyst for our shareholders.

So with that.

We'll open the call for questions.

Thank you.

Ladies and gentlemen to ask the question just press Star then one on your telephone keypad.

To withdraw your question just press the pound.

And we have a question from that I know, a Brad <unk> from the M.L. capital management.

Hello.

Thanks for taking the question.

Most on the on the auto announcements.

This fall and get the fire TV announcement with Amazon and you've got the Sirius XM or give me, what's the timeframe and the potential the dollars involved in something like that.

The.

We announced last quarter that the program that we've won with FC.

Was approximately 275 million over five year period, that's a that's part of the Amazon program, we anticipate we have bid on.

Additional business in excess of 300 million.

I cannot say that.

We will will limit, but we are confident with the position. We are right now so we believe that.

This.

This collaboration with Amazon, where we actually bring whatever you watch at home into your car.

If something is going to help grow the market. The response that we've gotten off to show has been excellent. We've had a number of different car manufacturers that we do not do business with.

That have come in and expressed interest now expressed interest turning down at the sale will take some time.

But we're confident that.

This new collaborations will bring additional business for the automotive group.

Most likely.

As you can see the first program will start in September of 2021, it maybe as early as July .

So there is a lag time.

During the award.

And the development of product and the delivery of product to generate revenue.

Okay. So on two more questions on that are the $275 million five year contract how much of that is I mean guaranteed.

Well when you become nothing's guaranteed.

But we are on the vehicles as the production system, so as they sell more and more vehicles.

We will.

You know the sales will reflect that.

Okay. So it could be a five year 100 million dollar deal.

It could be if people down.

If they don't order that rear seat entertainment and they just decide to put a tablet market hands.

And well need to be as much as well.

Yeah, that's possible with based on what we're seeing and based on the content that will be coming in.

You know these programs are primarily to see program is really not for a teenager and yes. We know the teenagers in many cases like to use their own device. These programs are really designed for kids that are tied into.

Baby seats, one year old to five year old.

Sure I meant to take but as the content improves we expect to see more would take rate due to the fact is a richer content.

Okay.

And then on the fire TV are you guys. The exclusive provider of this higher TV or could somebody else coming to get to deal with fire TV Amazon. The we are exclusive with the ones that the Oems that have selected with us.

There was an announcement the other day that Amazon is also working with garment and BMW, but thats primarily European operation.

Okay.

And what about the Sirius XM announcement, what is the dollar figures on this the timeline.

Well as you know this could be.

Is this is this is the potential of Iowa, I log business could be very explosive.

From from this standpoint.

This is a program that.

Sirius XM being the supplier that they are the importance that they are to the Oems. This is any wallet program.

If any one of the car manufacturers select to have the wallet program in the vehicle, let's say Cadillac.

And they decide to put this E wallet across their entire right.

We then we'd be on.

Every every vehicle that's produced because wherever you are kind of both the indication process. So from that standpoint, depending on the number of people that work with serious auto program like this.

It could be very explosive.

In terms of revenue and in terms of profitability.

And and from what the confidence we have coming out of the show was the responses that we were seeing to the system.

As as prospective customers will being driven around town with the system in the car pulling up the gas proms, putting gas in driving away and everything being bills singles.

So the.

Sponsor that we have received from the serious people.

Was a was very very positive.

Okay, and where is the authentication embedded within the mayor.

It could be in the nearest could be an advisor wherever the OEM would choose.

I have one more question on auto then I'll move to Eyelock, what about see this refundable payment to customer.

And the auto segment that was mentioned in the press release in the 10-Q.

Yes. This is a this is part of the program to get established.

As a business partner.

And this is something that we would.

Based on where we are.

And based on the finances of the program.

This would be reimbursed at some point through the business.

That we have established with them.

What did you know when the business.

We've won the business we've got in the Fios.

Okay.

All right on the Eyelock last quarter, you mentioned the health care program I didn't hear anything yet that follow up.

Health care program indices were in testing and validation at this particular point.

There are.

Machines that are being produced that we will have to.

Put our product into to demonstrate everything is working properly we believe that will be the case.

And then we expect this to move along to production.

Okay.

What's the status of the vending machines.

They are out now delivering machines and we are on those machines and again there a number of test programs that they are doing with one one very large retailer.

That.

So far the tests have gone very well and you're talking about thousands of machines.

They win that business is.

It's going to be very positive for the group.

Okay.

I mean, you realize it's I think investors are bit skeptical on the Eyelock, we've heard a lot of stuff about I lots over the years and are still sitting here with basically zero revenue in two 3 million in losses on a quarterly basis.

I will your frustration the frustration with shareholders isn't all as greater than ours.

We expected this business, we expect that this business to materialize sooner than it has.

But.

At this particular point was who were working with and the volume that those companies can generate it gives us the confidence level that iris biometrics, not just ours, but iris biometrics will become the selected.

Authentication process, because one of its higher security than facial and to it does not have the political problems problems associated with facial where we are now starting to see pushback.

Because of a private privacy issues.

The Irish program is an opt in program. So it's not something you could be monitored anywhere.

Okay.

So how long how much longer longer you expect to see losses or how much longer you part you're going to tolerate a losses and eyelock.

It it will depend on.

Winning.

And getting the approval to move ahead, we see any one of the programs that we're working with whether be in health care automotive any one of them, we'll bring eyelock to profitability.

And depending on what we're hearing and what we're seeing from those those customers that were working with will formulate our depend our decision.

Okay.

Okay. So a couple other things here strategic.

Actions I guess I'll call them.

What are the plans for any major strategic actions I mean, we're sitting here.

Nine months later from when I think John said on the call.

The line has been drawn in the sand in the stock price is pretty much where it was she taking some actions to sell awesome divisions, one of them sell through.

What are the plans for looking at something larger to create value Herman you've said many times in the past so equipped for more than you pay for it.

That's the case, that's significantly above the current stock price you're asked a business falls didnt have a very good <unk>.

Quarter here it seems like those things are probably more onetime in nature that not.

Right.

Neither one of those businesses would.

A sale of them would.

I think dramatically increase the value of the company.

Might be less with less.

Have a profitable business going forward.

Some of those divisions, but they might need to be divested as well. So what are the what's the appetite from John Reid I believe on the call and the board.

It really doesn't matter the board John's decision maker I think ultimately.

Okay.

Selling off one of these bigger assets that likely holds the most value.

Well this is an interesting subjects.

On the lot of dogs in the above that and reviewing strategies.

Realistically.

Many of these.

Operation.

Our becoming exciting have tremendous potential could become very profitable in two just spoke but one of them look looks for example.

I would weaken the rest of the structure this book.

So.

We have to review and were opened goal discussions are a lot of things going on with come up all the time, we're well aware of the situation when we're keeping in mind what were group with the possible outlook.

Okay.

Fair enough and then lastly on your Investor outreach program.

Personal opinion is this is a waste of time I mean, the performance of the business is going to.

Proof the stock price and the value of the company and going out and pitching it to investors without.

Putting a better numbers is just a waste of time. So that's my two cents on that and those are all my questions well our game plan bread. Our game plan. There is as we as we introduce and as we have positive news to report.

We're going to market that story, because some of the business that we have is long term in nature, but.

But we can extrapolate what that means to us on a go forward basis, and that's where.

That's where we see it would make sense for us.

Especially if we will be contracts, where we're going to be embedded into.

Much bigger companies product.

That's a story to talk about even even if that that the situation is a year from now or 18 months from now.

Okay fair enough.

Thank you.

Okay. Thank you Brett.

Thank you, ladies and gentlemen necessary mine there to get into Q Just press Star then one.

And we have a question from Alec Landry with BMO capital. Please go ahead.

Good morning, Thanks for taking my call for any follow up.

I've a follow up on the Eyelock discussion.

So I like inventory went from 300 Grand to over 3 million in the quarters anything you can say about.

Where that inventory is going or what is the plan with that inventory it seems.

Quite a.

But an increase.

The inventory was originally held that box.

And the inventory as moves back to.

Yes, I walk that inventory.

We are working on a program in India.

Where we expect.

They portion of that.

Products.

To be disposed of.

Be disposed of or or or sold so through the cold so profitably. So.

Okay. Good. Okay also the Q mentioned, a cancellation of an auto program is that was that in the quarter than it got canceled.

No it at least in canceling no no no no no it's not a cancellation of the program. It when it was an adjustment part one of our car manufacturers.

To use our remote start products on achieved vehicles only not push the start vehicles and that had impacted the overall sales of that but we nothing was canceled its just a different.

The number of vehicles that were going to be on it has impacted.

Sales negatively.

But.

We remain very good stead in fact.

We had one there Golden supply award from this maker this past year.

Okay all right.

Are you mentioned that Eyelock, if any one of the programs that is working on now hits fingers and toes crossed.

That eyelock would become breakeven to profitable does that include the Vicki.

Vending machine program.

Thank you wish to hit some of the numbers that they are projected yes.

Okay.

All right.

Well like I said fingers and toes cross because.

As you know I'm, just I'm fully understood then I fully understand.

Everybody skepticism, but not everyone is aware and having conversations with the different companies that we are having.

You know.

The company's of the size that we're working with would not be spending the time or money to bring a technology.

Like this to market if they weren't serious that being said that doesn't necessarily mean thats a 100% that is the let that what gives us the level of confidence that one of these programs.

We will get finalized and we'll start generating meaningful revenue.

Im sorry, what gives you the confidence Pat.

But the fact that you know the larger companies were working with in this space are working hard to bring that to the technology to market. Okay.

So if they weren't serious I would understand everybody skepticism, but we see it from a different standpoint, because we're working with them.

Got you Okay, yes.

Excuse me you mentioned to me just recently here, India with regards to the.

I like inventory.

I think I read that that India was working with they another iris.

Company I think that's been in the press correct.

India has a very very active.

Yris program in that they use Irish for lot of authentication I believe they even uses for their social security system. There is that they have lyvers already the issue is that they're iris programs that we see our clunky out of date.

And do not have the speed of recognition and imaging that ours.

Does and therefore, we believe we have an opportunity there as do others.

Okay got you.

All right and finally on the.

On the while you mentioned it for an example of Cadillacs of Cadillac were to decide to do this they would put this on.

And entire a line of because for instance, the escalate correctly every escalate.

Yes, but let me make this project to be clear I mean, I've only use the Cadillac as a as an example, okay. No I understand any why isnt any one of the car manufacturers that would choose to use you all it most likely this program.

If the OEM community deems it a program that they have to have most likely will start like most other popular options, which started in the higher end vehicles.

And if you're going to have any wallet program.

In many cases that you would make it standard belong to a particular trim level.

And in that case, we would be in every one of those vehicles the potential for it to proliferate into other cars and other vehicles and other car manufacturers based on the implementation of one large one.

Is it would be very very possible and is a very normal course of action within the automotive space.

But the operative word there you said was it is an option it will be in a a trim level that can be selected.

It's not standard we won't yes.

Well then lattices.

If you look back on putting a modem in a vehicle, which gives you cellular connection into the car. The originally it was an option and now most of the high end vehicles. It standard.

So that's that's the way you know the the market worse.

Okay. So you said that the authentication could come either on something on the visor or the Amir.

As I under as I understand it if it's a gentex mirror Gentex already has a partnership with another Iris company don't doesn't it.

Yes, they do.

Okay. So how would that work if it's in the mere like video streaming gentex is not the only manufacturer mirrors.

And depending on how the OEM wants to work if we don't have to be in the mirror. There's so many other places.

You know where where we could have our.

Our screen and everything.

Matt.

Doesn't necessarily have to be in the year, there's a good spot, but it's not the only spot in the vehicle.

Right. It seems to me to be the best spot.

Just.

Off the top of my head, but so if it's albeit or should the instruments. The instrument cluster is another very good spot for it because the standoff distance that we have with our product is greater than any one of the iris systems that are out there.

So being in the instrument cluster would not be an issue for us.

Okay.

But I just wanted to I, just want to sort of clear up.

Gentex is by far the dominant mirror supplier.

As far as the is as I understand it and so if.

So if it isn't amir.

It's not going to be in Eyelock.

Hardware your algorithm and not a or not.

That's not necessarily the case in many cases, we could be a directed saw us because of the technology that we have which we believe is superior because of our standoff distance. So there's not necessarily that if it's in a mere it belongs to any one company.

And again, it's going to be the decision of the.

The manufacture.

As to where they would want to have.

You know the Iris.

Which isn't and stuff like that.

Okay.

All right well again, a good luck and let's.

Something comes to fruition here. Thank you for taking my call Greg.

Thank you.

Thank you.

And our next question is from Craig Stover. Please go ahead Sir.

Yes, thanks for taking my call I'd like it some more detail on this can be dash five filing like what's the what's been filed whats the timeline number of shares to be bought a purchase.

Mike you want to you want tightly.

It was filed live Prod program ends on January 14th and we filed the 200000 shares.

So so why only 200000 shares.

When you have authorized.

For 2.4 million.

The last call.

The way it was kind of misled that we've agreed to 3 million shares to repurchase authorize we plan to move ahead and purchase when the window opens but as far as you by 200000 shares that nothing.

Well why only 200000 shares why not 2 million.

Sure price low.

No we wanted to try the program at the Seattle at work was the first time that we have done it.

But you don't need to you can like 30 to 40000 shares a day.

No you can do and that's the problem is that cases, we enter into quiet periods based on whether or not we're reporting our numbers or whether or not we have anything that's material going on in the way of an acquisition in the way of the divestiture. So it was suggested on our last call that to get around those.

As issues, maybe we should consider to look at a tenbfive program that would allow us to continue to purchase even though we may be in a quiet period. So long as we said it up when we were not in the quiet period. So what are the financial team had done this past quarter was look to see our program.

I'm like that would work and we started with a small program, but that business not necessarily mean that it would stay that way.

All right. So this program and what did you say January 14th that's January 14th 2020.

Yes.

All right. So do you have a plan to initiate another program and for more sharing.

I think as I stated in our we stayed in my remarks as long as we're able to do it look at.

Yes.

While we committed to buy.

That would not confident as.

We have to shoes me, Mike that would not prevent us from in an open period from stepping in and buying the Tenbfive program, specifically set up to get around the issue of periods of times, where we may want to buy the shares will continue to buy the shares when.

We were closed and could not.

That does not writing that in that period that we could decide based on whatever the share prices by additional shares.

I understand I'm, just saying as a shareholder it's very disappointing that that's all the shares you bought I mean, that's not very many shares not period.

So hopefully you've got more confidence going to start with all these positive things going on to take out some of these.

Support the price our shares in the highest stock market.

In history and were languishing down here in the fours.

That's all that's all I have insight.

Thank you and this concludes todays <unk> session for today I will turn it back to management for any further remarks.

No.

Operator, we didnt any una session. So if anybody has any further questions for you.

Okay, ladies and gentlemen, if you have a question just press Star then one.

So I'm not showing any further questions into Kim.

Okay.

Alright, if there are no further questions I want to thank you all again wish you all of a happy new year and look forward to be reporting on some of these new projects in these new initiatives that will come out of this show. Thank you have a good day.

And thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a wonderful day.