Q2 2024 VOXX International Corporation Earnings Call
Speaker 1: Four.
Yeah.
Speaker 2: Good day and thank you for standing by. Welcome to Vox fiscal 2024.
Good day and thank you for standing by welcome to <unk> fiscal 'twenty 'twenty four second quarter results conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone you would then here.
Speaker 2: second quarter results conference call. At this time all participants are in a listen only mode.
Speaker 2: After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To retire your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Glenn Wiener, President and Chief Executive Officer. Please go ahead, sir.
Unabated message advising your hand this race.
Jim Please press Star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Glenn Wiener President and Chief Executive Officer. Please go ahead Sir.
Speaker 3: Thank you Norma, appreciate it. Good morning and welcome to Vox International's fiscal 2024 second quarter conference call. My name is Glenn Wiener, President and CEO of GW Communications, investor relations firm for Vox. Yesterday we filed our Form 10Q and issued our press release, both documents of which can be found in the investor relations section of our website at www.voxxintl.com.
Thank you norm appreciate it good morning, and welcome to Baxter International's fiscal 2024 second quarter Conference call. My name is Glenn Wiener President and CEO of GW Communications Investor Relations firm per box yesterday, we filed our Form 10-Q and issued our press release, both documents of which can be found in the Investor Relations section of our website at www.
Scott D O X X I N T L. Dot com speaking for management will be Pat Lavelle, Chief Executive Officer, and Michael Stoehr, Senior Vice President and Chief Financial Officer, their remarks will be followed by questions and answers.
Speaker 3: Speaking from management will be Pat Lavelle, Chief Executive Officer, and Michael Storr, Senior Vice President and Chief Financial Officer. Their remarks will be followed.
Speaker 3: As for today, I'd like to remind everyone that except for historical information contained herein statements made on today's call and webcast them constitute forward looking statements are based on currently available information.
For today I'd like to remind everyone that except for historical information contained herein statements made on today's call and webcast constitute forward looking statements are based on currently available information. The company assumes no responsibility to update any such forward looking statements and I would like to plug it to the risk factors associated with our business, which are detailed in our Form 10-K for the.
Speaker 3: The company assumes no responsibility to update any such forward-looking statements, and I would like to point you to the risk factors associated with our business, which are detailed in our Form 10-K for the period ended February 28, 2023. Thank you for your continued support, and it's my pleasure to now turn the call over to Pat. Thanks, Gwen. And thank you, Pat. Thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat. And thank you, Pat.
Period ended February 28, 2023.
Thank you for your continued support and it's my pleasure to now turn the call over to Pat.
Thanks, Glenn and good morning, everyone.
Speaker 4: Not much has changed since our first quarter remarks in July . As the global markets remain challenging, consumer spending is down and the automakers are still having production issues.
Not much has changed since our first quarter remarks and in July .
As the global markets remained challenging consumer spending is down and the automakers are still having production issues with that said we saw some modest improvements in our business this quarter, which helped combat the overall softness in the economy.
Speaker 4: With that said, we saw some modest improvements in our business this quarter, which helped combat the overall softness in the economy.
Speaker 4: As we look out into the 2nd, half of the year, we expect to see top line growth compared to fiscal 2023 and to be profitable.
As we look out into the second half of the year.
We expect to see topline growth compared to fiscal 2023 and to be profitable.
Speaker 4: The extent of our growth and profits, however, will be very much dependent on the state of the car markets. Especially now with the strike and of course the consumer.
The extent of our growth and profits. However, it will be very much dependent on the state of the car markets, especially now with the UAW strike and of course the consumer.
Speaker 4: We're doing what we can to combat anything that comes our way. And in 2Q, we took significant actions to do just that.
We're doing what we can to combat anything that comes our way and into Q. We took significant actions to do just that.
Speaker 4: We initiated a significant restructuring program. Removing headcount and lowering our non-essential spend across the company.
We initiated a significant restructuring program.
Removing head count and lowering our nonessential spend across the company.
Speaker 4: We exited several third-party agreements and restructured contracts to lower fees. We completed our OEM manufacturing transition to Mexico for most of our OEM product lines, which will reduce costs and help improve more success.
We exited several third party agreements and restructured contracts to lower fees, we completed our OEM manufacturing transition to Mexico for most of our OEM product lines, which will reduce costs and help improve our margins.
Speaker 4: And we continue to work with our supply chain to redo pricing with more favorable terms while moving out of our inventory positions to protect our balance.
And we continue to work with our supply chain to redo pricing with more favorable terms, while moving out of our inventory positions to protect our balance sheet.
Speaker 4: We're essentially taking out everything we can based on lower sales volumes without impacting our ability to serve our customer and innovate.
We're essentially taking out everything we can based on lower sales volumes without impacting our ability to serve our customer and innovate.
Speaker 4: As for the 2 q quarter results sales were down approximately 10 year over year and up 1.5 percent sequential usage..
As for the <unk> quarter results sales were down approximately 10% year over year and up one 5% sequentially.
Speaker 4: Gross profit improved by 190 basis points driven by gains in our consumer segment. Operating expenses improved by over 5% and roughly 10% when you take out restructuring expenses.
Gross profit improved by 190 basis points driven by gains in our consumer segment.
Operating expenses improved by over 5% and roughly 10% when you take out restructuring expenses.
Speaker 4: While we lost money in the quarter, our operating loss improved by 1.5 million, and we reported flat adjusted EBITDA, which was 3.3 million better than 2Q of last year.
We lost money in the quarter, our operating loss improved by $1 5 million and we were we reported flat adjusted EBITDA, which was $3 3 million better than to queue up last year.
Speaker 4: Within our consumer segment and consumer sales were down 10M dollars year over year with premium audio down roughly 16M and other product sales up.
Within our consumer segment consumer sales were down $10 million year over year with premium audio down roughly $16 million and other CE product sales up $6 million.
Speaker 4: Our premium audio business has been hit hard over the past 18 months after a great run during the early stages of the pandemic and the year that followed.
Our premium audio business has been hit hard over the past 18 months after a great run during the early stages of the pandemic and the year that followed.
Speaker 4: Over the past few years, however, we face global supply chain issues, a deteriorating global economy, and a very challenging retail environment with high inventory positions and rising interest rates changing the way retailers operate.
Over the past few years. However, we faced global supply chain issues are deteriorating global economy, a very challenging retail environment with high inventory positions and rising interest rates changing the way retailers operate.
And I am not saying that we're out of the woods, yet, but we are now we expect the trend to reverse as opposed to growth again as we've retooled some of our products and have several new launches in the second half of the year with customer programs to support them.
Speaker 4: Premium audio sales were up 5.6 million sequentially, and we're expecting to see continued sequential growth in the third quarter as it's the beginning of the holiday season and for our third quarter to come in higher than last year.
Premium audio sales were up $5 6 million sequentially and we're expecting to see continued sequential growth in the third quarter as it's the beginning of the holiday season and for our third quarter to come in higher than last year.
Speaker 4: The speaker category overall is down and many of our competitors are in the same position. In a most recent NPD report, the speaker market is down roughly 16% year to date, and Clips continues to maintain its number one market share.
The sneaker category overall is down.
And many of our competitors are in the same position.
Recent NPD report speaker market is down roughly 16% year to date and the clutch and clutch continues to maintain its number one market share.
Speaker 4: Further, some of our business was down compared to the same quarter last year due to heavy promotions last year and a big program at Costco that launched into Q of last year.
Further some of our business was down compared to the same quarter last year due to heavy promotions last year and a big program at Costco that launched into Q1 of last year.
Speaker 4: Now that's the past and what's driving our optimism for growth over the next few quarters are our new product.
Now that's the past and what's driving our optimism for growth over the next few quarters are our new products, we have retooled our sound bar offering and have a slate of new sound bars coming to market during the second half of the year.
Speaker 4: We have retooled our soundbar offering and have a slate of new soundbars coming to market during the second half of the year. The Klipsch Plexus will be launching before the year is out and it's the first ever product developed in tandem by Klipsch and Unky.
Clips flexes, we'll be launching before the year is out and it's the first ever product developed in tandem bike clips and Ikea.
Speaker 4: Our new party speakers are doing very well and new launches are planned in the second half of the year. This is the hottest category in CE as I mentioned on our last call.
Our new party speakers are doing very well.
And new launches are planned in the second half of the year. This is the hottest category you can see as I mentioned on our last call.
Speaker 4: We will soon be launching our new Klipsch Music City portable Bluetooth speakers that can broadcast to other Bluetooth speakers in stereo and other speakers around the house or outside.
We will soon be launching our new eclipse music city portable Bluetooth speakers and that can be broadcast to other Bluetooth speakers and stereo and other speakers around the house for outdoors Hookup is very simple as you simply stream content through your devices.
Speaker 4: Hookup is very simple as you simply stream content through your device.
Speaker 4: Our new subwoofers recently introduced this year doing very well and have received excellent reviews, which should help continue to drive growth in this category.
Our Subwoofers recently introduced this year are doing very well and have received excellent reviews, which should help continue to drive growth in this category.
Speaker 4: And as we announced previously, the clips reference premier speakers will be on the Dodge Ram EV trucks with an impressive 26 speaker sounds.
And as we announced previously the clips referenced premier speakers will be on the Dodge Ram EV trucks with an impressive 26 speakers sound system. This.
Speaker 4: This is the first entrance of the Klipsch brand into automotive, and we believe this is a new area of growth as other automotive manufacturers recognize the value of the Klipsch brand.
This is the first entrance of the clips brand into automotive and we believe this is a new area of growth as other automotive manufacturers recognize the value of the eclipse brand.
Speaker 4: Other product sales, as I mentioned, we're up 6M and the growth is driven by our new solar balcony power product launched by Schweiger in Germany. And to a lesser extent, our new RCA hearing aids, which we introduced this past May.
Other CE product sales as I mentioned were up $6 million and the growth was driven by our new solar balcony power product launch by Schwaiger in Germany and to a lesser extent, our new RCA hearing AIDS, which we introduced this past may.
Speaker 4: Our accessory business overall continues to be, especially our core products, continue to be impacted by the economy, but more so by consumer spending.
Our accessory business overall continues to be especially our core products continued to be impacted by the economy.
More so by consumer spending.
Speaker 4: For example, TV sales are in a slump. And now what we don't sell TVs, but we do sell a lot of products that are attachment sales, such as remotes, antennas, cables, and wool.
For example, TV sales are in a slump and know what we don't sell Tvs, but we do sell a lot of products that are attachment sales such as remotes antennas tables at wall mounts.
Speaker 4: Virtually all of these categories are down, but during the second quarter, we saw growth in reception, remote and warm out products, despite the industry being down. We are maintaining our market share, if not growing.
Virtually all of these categories are down but during the second quarter, we saw growth in reception remote and Beaumont wall Mount products, Despite the industry being down.
We are maintaining our market share if not growing.
As for our automotive segment.
Speaker 4: Automotive segment sales were down 1.8M or a little less than 5%.
Automotive segment sales were down $1 8 million or a little less than 5%.
Speaker 4: Our OEM business grew by 1 million as some of the material shortages began to loosen and we fulfilled several back orders, particularly at code for remote start and security application.
Our OEM business grew by $1 million or some of the material shortages began to loosen and we fulfilled several back orders, particularly at code for remote start and security applications.
Speaker 4: VSM sales were up close to 5% and our rear seat entertainment programs were down for the quarter.
<unk> sales were up close to 5%.
And our rear seat entertainment programs were down for the quarter.
Speaker 4: OEM was up, but the obstacles we and the industry faced continued to hinder our growth.
OEM was up but the obstacles, we and the industry face continued to hinder our outgrowth.
Speaker 4: Our aftermarket business was down for the quarter by 2.8 million, and we expected declines given the high inventory positions our customers have carried and the overall retail environment. But the good news is that the inventory bottleneck is beginning to loosen.
Our aftermarket business was down for the quarter by $2 8 million and we expected declines given the high inventory positions our customers have carried and the overall retail environment, but the good news is that the inventory bottleneck is beginning to loosen.
Speaker 4: The automotive aftermarket overall continues to be challenged with some puts and takes. On one hand, we see an increase in car sales. However, the largest part of the increase is that fleet instead of retail cars.
The automotive aftermarket.
Overall continues to be challenged with some puts and takes on one hand, we see an increase in car sales. However, the largest part of the increase is that fleet instead of retail car sales.
Speaker 4: Additionally, where car dealers would normally offer aftermarket products to increase profitability, the tightness in inventory and strong demand has allowed them to just add market adjustment increases to the stick at price.
And Additionally, we're car dealers would normally offer aftermarket products to increase profitability.
The tightness in inventory and strong demand has allowed them to just add market adjustment increases through the sticker price.
Speaker 4: We now expect with the potential of an extended UAW strike that inventory tightness will continue. But with that said.
We now expect with the potential of an extended UAW strike that inventory tightness will continue.
With that said.
Speaker 4: The other OEM contracts that are in place, even at lower than projected volumes, should help drive top
And the other OEM contracts that are in place even at lower than projected volumes should help drive top line.
Speaker 4: However, it's the bottom line that we're focused on most. We instituted price increases, reworked our supply chain network, developed new technologies using different chips given availability, and transitioned most of our production lines from Florida to Mexico.
However, it's the bottom line that we're focused on most.
We instituted price increases reworked our supply chain network develop new technologies using different chips, given availability and transitioned most of our production lines from Florida to Mexico.
Speaker 4: We're beginning to see the positive impact of all these moves and should see further improvements in the coming years with production overhead coming down more significantly next year.
We're beginning to see the positive impact of all these moves and should see further improvements in the coming years with production overhead coming down more significantly next year.
Speaker 4: And looking ahead, we have new programs with Ford for the Lincoln Navigator and Ford Expedition. Our new lighting program with Nissan starts next year. And our program to support the new postal trucks also starts next year.
And looking ahead, we have new programs with Ford for the Lincoln Navigator and Ford expedition, our new lighting program with Nissan starts next year.
Our program to support the new postal trucks also starts next year.
Speaker 4: As for our biometric segment, sales came in approximately 200,000 lower than the prior year in our budget. This was primarily due to lower licenses and again to some projects being pushed out.
As for our biometric segment sales came in at approximately 200000 lower than the prior year and our budget. This.
This was primarily due to lower licenses and again to some projects being pushed out.
Speaker 4: Everything that we have talked about on prior calls remains in place. We're continuing to work with car dealers, infrastructures, governments, financial service companies, and on health care programs.
Everything that we have talked about on prior calls remains in place we're continuing to work with car dealers infrastructures governments financial service companies and on health care programs with respect to the ladder. We recently submitted our final prototype to our partner, which is now in the final step of validate.
Speaker 4: With respect to the latter, we recently submitted our final prototype to our partner, which is now in the final step of validation.
Speaker 4: Production should begin by the middle of next year, and we expect other opportunities to arise with this customer and others once it's in the field and we are focused on growing our embedded solution portfolio.
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Production should begin by the middle of next year, and we expect other opportunities to rise with this customer and others. Once it's in the field and we are focused on growing our embedded solution portfolio.
Speaker 4: To sum it up, the second quarter was expected and we're not pleased with our results for the first half of the year. We've taken more aggressive actions to combat the economy and other issues we're facing. And the past actions coupled with the recent restructuring will help improve margins and lower our costs.
To sum it up in the second quarter was expected and we're not pleased with our results for the first half of the year.
Taken more aggressive actions to combat the economy and other issues, we're facing and the past actions coupled with the recent restructuring will help improve margins and lower our costs. We expect growth in the second half of the year based on the contracts we have the new programs, we've secured and both the new products we've launched.
Speaker 4: We expect growth in the second half of the year based on the contracts we have, the new programs we've secured, and both the new products we've launched and will be long.
Speaker 4: Of course, we're mindful of any further deterioration in the economy, and we expect markets to remain hard pressed for the next year or so. If things worsen, we'll take more action, but we believe we have made the necessary adjustments in our business to drive profitability in the second half and to start fiscal 2025 in a more competitive position.
And we'll be launching.
Of course, we're mindful of any further deterioration in the economy and we expect markets to remain hard pressed for the next year or so if things worsen.
We will take more action, but we believe we have made the necessary adjustments in our business to drive profitability in the second half and to start fiscal 2025, and a more competitive position.
Speaker 4: 1 last item to discuss before I turn the call over to Mike.
One last item to discuss before I turn the call over to Mike.
Speaker 4: As you may have seen in our earnings release in the form four that was filed yesterday, we have a new strategic investor in block.
As you may have seen in our earnings release and the form four that was filed yesterday, we have a new strategic investor in blocks Gentex Corporation, a company that we currently do business with entered into a stock purchase agreement with Avalon Park, LLC and Avalon Park group holding AG, both of which are controlled by <unk>.
Speaker 4: Gentex Corporation, a company that we currently do business with, entered into a stock purchase agreement with Avalon Park LLC and Avalon Park Group holding AG, both of which are controlled by B.F. Kelly, our president and one of Vox's largest shareholders.
Kelley, our president and what our boxes largest shareholders.
Speaker 4: Collectively Avalon has agreed to sell 50% of its holdings to Gentex or approximately 3.1 million shares in two separate transactions.
Collectively Avalon has agreed to sell 50% of its holdings, the gentex or approximately $3 1 million shares in two separate transactions.
Speaker 4: The first transaction of 1.57 million shares was completed on Friday at $10 per share, representing a 32.5% premium to our stock price as of October 5th, the day prior to the transaction.
First transaction of 157 million shares was completed on Friday at $10 per share representing a 32, 5% premium to our stock price as of October 5th the day prior to the transaction.
Speaker 4: The second transaction of the same amount will be in January 24 and the stock price will be based on the formula as noted in our release. When complete, Gentex will own approximately 15.1% of our Class A common stock and will become one of our three largest shareholders.
The second transaction the same amount will be in January 24, and the stock price will be based on the formula as noted in our release when complete Gentex will own approximately 15, 1% of our class a common stock and will become one of our three largest shareholders.
Speaker 4: When Vyot came on as president, one of his primary focus areas was strategic partners.
When <unk> came on as President one of his primary focus areas with strategic partnerships. This was probably his number one priority as we were looking to align with industry leaders to help drive growth and value in our business.
Speaker 4: This was probably his number one priority as we were looking to align with industry leaders to help drive growth and value in our business.
Speaker 4: And with GENTEX, we have found a great partner as we are collaborating with them in both our biometric and automotive segments on current projects, while concurrently looking to drive innovation in our offerings to grow our joint businesses and market share.
And with Gentex, we have found a great partner as we are collaborating with them in both our biometric and automotive segments on current projects, while concurrently looking to drive innovation in our offerings to grow our joint businesses and market share.
Speaker 4: Steve Downing, who serves as CEO and President of Gentex, also sits on our board, and this alliance is one that we believe holds great promise to our company and our shareholders.
Steve Downing, who serves as the CEO and President of Gentex also sits on our board and this alliance is one that we believe holds great promise for our company and our shareholders.
Speaker 4: And with that, I'll now turn the call over to Mike to review financials, and then we'll open it for questions. mar commits a roll call.
And with that I'll now turn the call over to Mike to review financials, and then we'll open it for questions Michael.
Speaker 5: Thanks, Pat, and good morning, everyone. We reported total second quarter net sales of 113.6 million, a decline of approximately 12.1 million.
Thanks, Pat and good morning, everyone. We reported total second quarter net sales of $113 6 million a decline of approximately $12 1 million.
Speaker 5: Within this, automotive segment sales were down 1.8 million, consumer segment sales were down 10 million, and biometric segment sales declined by approximately 100,000.
Within this automotive segment sales were down $1 8 million consumer segment sales were down $10 million and biometric segment sales declined by approximately 100000.
Speaker 5: While sales were down year over year, they were up sequentially by 1.7 million and were expecting improvements in the second half of the year.
While sales were down year over year, they were up sequentially by $1 7 million and were expecting improvements in the second half of the year.
Speaker 5: Within automotive, OEM product sales increased by 1 million and aftermarket product sales declined by 2.8 million.
Within automotive OEM product sales increased by $1 million and aftermarket product sales declined by $2 8 million.
Speaker 5: and within the consumer, premium audio product sales declined by 16 million while other CE product sales increased by 16 million.
And within the consumer premium audio product sales declined by $16 million, while other CE product sales increased by $6 million.
Speaker 5: We reported gross margins of 25.2%, an improvement of 190 basis points compared to second quarter last year, and an improvement of 60 basis points sequentially.
We reported gross margins of 25, 2% an improvement of 190 basis points compared to second quarter last year, and an improvement of 60 basis points sequentially.
Speaker 5: Automotive margins were essentially flat and increase was driven by the improvement in our consumer segment, which we anticipate
Automotive margins were essentially flat and increase was driven by the improvement in our consumer segment, which.
Which we anticipate will continue.
Speaker 5: If automotive volume is materialized as our customers expect, we should see improvements in our automotive segment, as well as with the relocation of manufacturing to Mexico now complete and other changes we've made to our infrastructure and supply chain.
If automotive volumes materialize as our customers expect we should see improvements in our automotive segment as well as with the relocation of manufacturing to Mexico now complete and other changes we've made to our infrastructure and supply chain.
Speaker 5: Our operating expenses improved by $2.1 million year over year as we continue to lower our costs.
Our operating expenses improved by $32 1 million year over year, as we continue to lower our cost.
Speaker 5: selling expenses declined by 1.8 million or 15.5.
Selling expenses declined by $1 8 million.
15, 5% G&A expenses declined by $1 6 million or eight 5% in engineering and technical support expenses declined by 400000.
Speaker 5: G&A expenses declined by $1.6 million or 8.5%, and engineering and technical support expenses declined by $400,000.
Speaker 5: As Pat noted, during the second quarter, we initiated a large restructuring program to lower our costs further in light of the current environment and incurred restructuring expenses of 2 million in fiscal 2024 second quarter, compared to 200,000 in the comparable fiscal 2023 period.
As Pat noted during the second quarter, we initiated a large restructuring program to lower our costs further in light of the current environment and incurred restructuring expenses of $2 million in fiscal 2024 second quarter compared to 200000 in the comparable fiscal 2023 period.
Speaker 5: Excluding restructuring expenses, total operating expenses for the compatible second quarter periods declined by 3.9 million or close to 10.
Excluding restructuring expenses total operating expenses for the comparable second quarter periods declined by $3 9 million or close to 10%.
Speaker 5: We reported an operating loss of 8.5 million compared to 10 million in 2nd quarter of last year. And a net loss attributable box of 11.1 million. Compared to 10.9 million.
We reported an operating loss of $8 5 million compared to $10 million in second quarter of last year and a net loss attributable a box of $11 1 million.
Care to $10 9 million.
Speaker 5: IBITDA in the second quarter was a loss of $5.4 million and adjusted IBITDA was essentially flat. This compares to an IBITDA loss of $6.8 million and adjusted IBITDA loss of $3.3 million in the second quarter of fiscal 23.
EBITDA in the second quarter was a loss of $5 4 million and adjusted EBITDA was essentially flat.
This compares to an EBITDA loss of $6 8 million and adjusted EBITDA loss of $3 3 million in the second quarter of fiscal 2003.
Speaker 5: I'll note, if it had been adjusted if it had improved on a sequential basis by 2.2 million and 4.9 million respect.
I'll note EBITDA and adjusted EBITDA improved on a sequential basis by $2 2 million and $4 $9 million respectively.
Speaker 5: through the first six months of fiscal 2024 compared to fiscal 2023.
Through the first six months of fiscal 2024 compared to fiscal 2023.
Speaker 5: Net sales were down 11.3%, with automotive segment sales down 3.9%, and consumer segment sales down 14.5%.
Net sales were down 11, 3% with automotive segment sales down three 9% and consumer segment sales down 14, 5%.
Speaker 5: Again, as Pat noted, we anticipate year-over-year growth in the second half of the year.
Again as Pat noted, we anticipate year over year growth in the second half of the year.
Speaker 5: Gross margins of 24.9% improved by 30 basis points, and we expect further improvements in the second half of the year, as well for the reasons Pat's covered.
Gross margins of 24, 9% improved by 30 basis points and we expect further improvements in the second half of the year as well for the reasons Pat covered.
Speaker 5: Operant expenses improved by 3.8% or 6% when excluding restructuring expenses and acquisition costs.
Operating expenses improved by three 8% or 6% when excluding restructuring expenses and acquisition costs.
Speaker 5: On an operating basis, we lost 19.9 million compared to a loss of 16.7 million and net loss attributed to box in fiscal 2024 six month period was 21.8 million as compared to a net loss of 16.7.
On an operating basis, we lost $19 9 million compared to a loss of $16 7 million and net loss attributable to box in fiscal 2020 for six month period was $21 8 million as compared to a net loss of $16 7 million.
Speaker 5: Lastly, we reported an IBITDA loss of $13 million and an adjusted IBITDA loss of $5 million.
Lastly, we reported an EBITDA loss of $13 million and adjusted EBITDA loss of $5 5 million.
Moving on to the balance sheet.
Speaker 5: As of August 31st, we had cash and cash equivalents of 5.9 million, which compares to 5.2 million as of May 31st and 6.1 million as of our fiscal 2023 year end of February 28.
As of August 31, we had cash and cash equivalents of $5 9 million, which compares to $5 2 million as of May 31, and $6 1 million as of our fiscal 2023 year end of February 28.
Speaker 5: Our accounts receivable declined by approximately $21 million and our inventory position declined by approximately $1 million compared to fiscal 2023 fourth quarter.
Our accounts receivable declined by approximately $21 million and our inventory position declined by approximately $1 million compared to fiscal 2023 fourth quarter.
Speaker 5: Our inventory position declined by approximately 10 million sequentially, and as we move through the inventory during the holiday season, we expect our inventory balances to climb further.
Our inventory position declined by approximately $10 million sequentially and as we move through the inventory during the holiday season, we expect our inventory balances decline further.
Speaker 5: Our total debt stood at $42.8 million as compared to $39.2 million as of February 28th.
Our total debt stood at $42 8 million as compared to $39 2 million as of February 28.
Speaker 5: The increase in total debt was driven by a 4.1 million increase in our borrowings associated with our domestic credit facility, offset by a $250,000 decline in our Florida mortgage and a $200,000 decline in the amount owed on the shareholder loan payable to SHARP as part of our joint-
The increase in total debt was driven by a $4 1 million increase in our borrowings associated with our domestic credit facility offset by a 250000 decline and our Florida mortgage and a 200000 decline in the amount owed on the shareholder loan payable to shop as part of our joint venture.
Speaker 5: Total learned term debt net of debt issuance cost was 41.2 million as of August 31st, as compared to 37.5 million as of February 28th.
Total long term debt net of debt issuance cost was $41 2 million.
As of August 31.
As compared to 37 5 million as of February 28.
I'm sorry.
Okay.
I'm sorry.
Yes.
Speaker 5: Oh, excuse me, I just as I said, our operating expenses improve by 2.1M year over year. So, this, I like this ends my remarks. And operator, we're now ready to open the call for questions.
Oh excuse me I, just as I said, our operating expenses improved by $2 1 million year over year.
So this I would like to sense my remarks, and operator, we're now ready to open the call for questions.
Sure.
Thank you.
Speaker 2: As a reminder, to ask a question, you'll need to press star 11 on your telephone. To withdraw your question, please press star 11 again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster.
One moment for your first question. Please.
Yeah.
Speaker 2: Our first question comes from the line of Tom Forte with DA Davidson. Your line is now open.
Our first question comes from the line of Tom Forte with D. A Davidson your line is now open.
Speaker 6: Great, thanks. I had a couple of questions. I'll go one at a time. So first, congrats on the Gen tax investment. Pat, can you talk at a high level about your opportunity to monetize I-LOK on a near term and a longer term basis?
Great. Thanks, I had a couple of questions I'll go one at a time. So first congrats on the Gentex investment Pat can you talk at a high level about your opportunity to monetize I logged on a near term and a longer term basis.
Speaker 4: Well, when we look at ILOC, as I said, the final prototype went over to our customer. We expect that everything will go well with that prototype and production for their particular machine, the schedule for the middle of next year, which we believe we would.
Well when we look at <unk> as I said the the.
Final prototype went over to our customer.
We expect that.
Everything will go well with that prototype.
And production.
Our particular machine is scheduled for the middle of next year.
Speaker 4: It is a long-term program. I can't get into much detail on it at this point, but it is a long-term program which will have material, positive impact on Iowa.
We believe we will be on it.
It is a long term program.
I can't get into much detail on it at this point, but it is a long term program, which will have material positive impact on.
On Iraq.
Yes.
Speaker 6: And then second question, can we talk about cell in and cell through?
And then second question can we talk about sell in and sell through so are you seeing any change in behavior.
Speaker 6: So are you seeing any change in behavior for large consumer electronics retailers?
For large consumer electronics retailers.
Speaker 6: when we think about their willingness to add inventory. And then in this fell through part.
When we think about their willingness that inventory and then on the sell through part.
Speaker 6: Do you think consumers are responding favorably to increase promotional activity within the consumer electronics category or do you feel like that's not very effective in today's evidence?
Do you think consumers are responding favorably to increased commercial activity within the consumer electronics category or do you feel like that's not very effective in today's current environment.
Speaker 4: Well, I think that when we look at sell in, we look at the retailers being quite conservative with what they're taking in. We have not seen issues with their sell through. So, they apparently are taking in the proper amount of.
I think that when we look at sell in we look at the retailers being quite conservative with what they are taking in.
We have not seen issues with their sell through.
So they may they apparently you are taking in the proper amount of.
Speaker 4: of product coming in. There will be promotions throughout the holiday season. It's generally our biggest quarter. But there is, you know, obviously there's been a change in consumer behavior with
Product coming in there will be promotions throughout the holiday season, which generally our biggest quarter.
But.
Obviously theres been a change in consumer behavior.
Speaker 4: Credit cards being at all time high interest rates on credit cards being very, very high and we know that we see shrinking savings accounts on consumers. So some of the pent up money that was sitting around since COVID is being spent.
With credit cards being at all time high interest rates on credit cards being very very high.
And we know that we see shrinking.
Savings accounts.
On consumers. So some some of the pent up money that was sitting around since COVID-19 is being spent.
Speaker 4: And when we see the problems geopolitical, we see gas rising, putting more pressure on the consumer. But like I said, I think the retailers are bringing in what they perceive that they're going to be successful in moving out and we think they were...
And when we see the problems geopolitical.
We see gas rising putting more pressure on.
The consumer but like I said I think the retailers are bringing in what they perceive that they're going to be successful in moving out and we think there we think they will.
Speaker 6: And then is it too conservative to think about the consumer electronics category and think about historical refresh rates? So I think there's a school of thought that in the consumer electronics category and the home category, there was a massive poll forwarded and on COVID. So is it too conservative to just think of historical refresh rates for premium audio and things of that nature and that's when things could rebound?
And then is it too conservative to think about the consumer electronics category and think about historical refresh rates. So I think there is.
School of thought that.
In the consumer electronics category in the home category there is a massive pull forward.
On Covid. So is it too conservative just think as historical refresh rates for premium audio and things of that nature, and that's when things could rebound.
Speaker 4: Yeah, I mean, you know, what I had indicated on the call that I said that we think the markets would be hard pressed well into next year. You know, when you're looking at the home theater and some of the things for the home that we sell. The refresh rates, you know, it's not like a car where you move it out every 2.
Yes.
What I had indicated on the call I said that we think the markets we'd be hard pressed.
Well into next year.
When youre looking at home theater, and some of the things for the home that we sell.
The refresh rates.
It's not like a car we move it out every two or three years. So the buy forward a pull forward that we had seen.
Speaker 4: So the buy forward or pull forward that we had seen during the pandemic, when everybody was locked in, I think we've got another year, 18 months before we start to see a more normal pattern in consumer purchasing of consumer electronics.
Any pandemic when everybody was locked in I think we've got another year or 18 months before we start to see a more normal pattern in consumer purchasing.
Consumer electronics with all their might be.
Speaker 4: There might be certain categories that will do well. Like, I mentioned our party speakers, it's a fairly new category. So that's something that we believe will do well. But the typical product. We see that.
Categories that will do well.
I mentioned our party speakers.
It's fairly new category. So that's something that we believe will do well.
Operator: Good day, and thank you for standing by.
Operator: Welcome to VOXX Disco 2024 second quarter results conference call. As this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. Doriann, please press star 1-1 again. Please be advised that the day's conference is being recorded.
But the typical product.
We see that it will take some time to get back to normal.
Speaker 6: Great. Lastly, as it pertains to the auto worker strike, I would think that you may be buffered, flash protected to the extent that I think historically you're in some of the most popular products within Stellantis. And it was my impression that they had, you know, built inventory, perhaps in anticipation of the strikes. So how should we think about
Great Lastly, as it pertains to the auto workers strike.
I would think that you may be buffered slash protected to the extent that I think historically you are.
And some of the most popular.
Products within still Lantus and it was my impression that they had.
Operator: I would now like to hand the conference over to your speaker today.
Glenn Wiener: Glenn Wiener, President and Chief Executive Officer. Please go ahead, sir. Thank you, Norma. Appreciate it.
Built inventory, perhaps in anticipation of the strikes so how should we think about.
Glenn Wiener: Good morning, and welcome to VOX International's fiscal 2024 second quarter conference call. My name is Glenn Wiener, President and CEO of GW Communications Investor Relations firm for VOXX. Yesterday, we filed a form 10Q and issued our press release, both documents of which can be found in the Investor Relations section of our website at www.voxintl.com.
Speaker 4: How can we monitor the strikes and the potential impact on the product? When we look at that, some of the plans that we received product from have not closed or have not been shut down at this particular point, but we did see a slowdown in ordering. You know, if the strike continues longer, we will see a lagging effect on inventory.
How can we monitor the strikes and the potential impact on <unk>.
When we look at that some of the plants that we receive product from have not closed.
Or.
Mark can shutdown at this particular point, but we did see a slowdown in ordering.
The UAW strike continues longer we will see a lagging effect on inventories.
Glenn Wiener: Speaking from management, we'll be Pat Level, Chief Executive Officer, and Michael Store, Senior Vice President and Chief Financial Officer. The remarks will be followed by questions and answers. As for today, I'd like to remind everyone that except for historical information contained herein, statements made on today's call and webcast. And we constitute forward-looking statements are based on currently available information. The company assumes no responsibility to update any such forward-looking statements. And I would like to point you to the risk factors associated with our business, which are detailed and are 410K for the period ended February 28, 2023.
Speaker 7: You know, on the dealers lots, which will impact. Our aftermarket automotive sales. And certainly closure of any, you know, any plants that we pull merchandise or vehicles from will have an immediate effect on the automotive business.
On the dealers' lots, which will impact.
Our aftermarket automotive sales and certainly closure of any.
Any plants that we pull merchandise or vehicles from.
We will have an immediate effect on the automotive business. However, we have gains with our heavy duty truck manufacturers fleets and other Oems outside of the big three automakers that are part of the USW strike. So.
Speaker 7: However, we have games with our heavy duty truck manufacturers. Fleets and other OEMs outside of the big 3 automakers that are part of the strike. So it's a, it's a little bit of a mixed bag. We are seeing increases in the other sectors of our OEM automotive business, but it could be offset by some slowness through the closures. Thanks for the.
Patrick Lavelle: Thank you for your continued support, and it's my pleasure to now turn the call over to Pat. Thanks, Glenn, and good morning, everyone. Not much has changed since our first quarter remarks in July. As the global markets remain challenging, consumer spending is down, and the automakers are still having production issues. With that said, we saw some modest improvements in our business this quarter, which helped combat the overall softness in the economy.
It's a little bit of a mixed bag, we are seeing increases in the other.
<unk> of our OEM automotive business, but it could be offset by some slowness due to closures.
Thanks for taking my questions I appreciate it.
Good job. Thank you.
Speaker 2: Thank you. As a reminder, to ask a question, you'll need to press star 1 1.
As a reminder to ask a question you will need to press star one one.
Patrick Lavelle: As we look out into the second half of the year, we expect to see top-line growth compared to fiscal 2023 and to be profitable. The extent of our growth in profits, however, will be very much dependent on the state of the car markets, especially now with the UAW strike and, of course, the consumer. We're doing what we can to combat anything that comes our way, and in 2Q, we took significant actions to do just that.
Speaker 2: I'm currently showing no further questions. I'd like to hand the conference back over to Mr. Pat Lavelle for closing remarks.
I'm currently showing no further questions I'd like to hand, the conference back over to Mr. Pat Lavelle for closing remarks.
Speaker 7: Okay, thank you.
Hey.
<unk>.
Speaker 4: As we look into the 3rd quarter, as I said to Tom, it's been our historically our 3rd quarter. We have a number of different programs that we do have scheduled for the quarter. So we're looking at growing our business sequentially.
As we look into the third quarter as I said to Tom it's been our <unk>.
Historically, our third quarter.
We have a number of different programs that we do have scheduled for the quarter. So we're looking at growing our business sequentially.
Speaker 4: And hopefully the cuts that we put in place are significant enough for us to turn profitable for the balance of the year. I want to thank you for taking the time in coming on the call this morning. And I wish you all a good day.
Patrick Lavelle: We initiated a significant restructuring program, removing headcount and lowering our non-essential spend across the company. We exited several third-party agreements and restructured contracts to lower fees. We completed our OEM manufacturing transition to Mexico for most of our OEM product lines, which will reduce costs and help improve margins. And we continued to work with our supply chain to redo pricing with more favorable terms, while moving out of our inventory positions to protect our balance sheet.
And hopefully the cuts that we've put in place or significant enough for us to turn.
<unk> for the balance of the year I want to thank you for taking the time.
And coming on the call. This morning, and I wish you all a good day.
Speaker 2: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Thank you.
Patrick Lavelle: We're essentially taking out everything we can based on lower sales volumes without impacting our ability to serve our customer and innovate. As for the 2Q quarter-result sales, we're down approximately 10% year-over-year and up 1.5% sequentially. Pro's profit improved by 190 basis points driven by gains in our consumer segment, operating expenses improved by over 5% and roughly 10% when you take out restructuring expenses. While we lost money in the quarter, our operating loss improved by 1.5 million and we reported flat-adjusted EBITDA, which was 3.3 million better than 2Q of last year.
Okay.
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Patrick Lavelle: Within our consumer segment, consumer sales were down $10 million year over year with premium audio down roughly 16 million and other CE product sales up 6 million. Our premium audio business has been hit hard over the past 18 months after a great run during the early stages of the pandemic and the year that followed. Over the past few years, however, we face global supply chain issues, deteriorating, global economy and a very challenging retail environment with high inventory positions and rising interest rates, changing the way retailers operate.
Patrick Lavelle: I'm not saying that we're out of the woods yet but we are now, we expect the trend to reverse at the post-growth again as we've retooled some of our products and have several new launches in the second half of the year with customer programs to support them. Premium audio sales were up 5.6 million sequentially and we're expecting to see continued sequential growth in the third quarter as it's the beginning of the holiday season and for our third quarter to come in higher than last year.
Patrick Lavelle: The speaker category overall is down and many of our competitors are in the same position. In a most recent NPD report, the speaker market is down roughly 16 percent year to date and the clip and clip continues to maintain its number one market share. Further, some of our business was down compared to the same quarter last year due to heavy promotions last year and a big program at Costco that launched into queue of last year.
Patrick Lavelle: Now that's the past and what's driving our optimism for growth over the next few quarters are our new products. We have retooled our sound bar offering and have a slate of new sound bars coming to market during the second half of the year. The clip flexes will be launching before the year is out and it's the first ever product developed in tandem by Clips and Hunkiel. Our new party speakers are doing very well and new launches are planned in the second half of the year.
Patrick Lavelle: This is the hottest category in CE as I mentioned on our last call. We will soon be launching our new Clips music city portable Bluetooth speakers that can broadcast to other Bluetooth speakers in stereo and other speakers around the house or outdoors. Book up is very simple as you simply stream content through your devices. Our new subwoofers recently introduced this year are doing very well and have received excellent reviews which should help continue to drive growth in this category.
Patrick Lavelle: And as we announced previously the Clips reference premiere speakers will be on the Dodge Ram EV trucks with an impressive 26 speaker sounds. This is the first entrance of the Clifch brand into automotive and we believe this is a new area of growth as other automotive manufacturers recognize the value of the Clifch brand. Other CE products sales, as I mentioned, were up 6 million and the growth was driven by our new solar balcony power product launched by Schweiger in Germany and to a lesser extent our new RCA hearing aids, which we introduced this past May.
Patrick Lavelle: Our accessory business overall continues to be, especially our core products continue to be impacted by the economy, but more so by consumer spending. For example, TV sales are in a slump and now what we don't sell TVs, but we do sell a lot of products that are attachment sales such as remotes, antennas, cables and wall mounts. Virtually all of these categories are down, but during the second quarter we saw growth and reception remote and wall mount products despite the industry being down.
Patrick Lavelle: We are maintaining our market share if not growing. As for our automotive segment, automotive sales were down 1.8 million or a little less than 5%. Our OEM business grew by 1 million as some of the material shortages began to loosen and we fulfilled several back orders particularly had code for most art and security applications. The SM sales were up close to 5% and our rear scene entertainment programs were down for the quarter.
Patrick Lavelle: OEM was up, but the obstacles we and the industry phase continued to hinder our growth. Our aftermarket business was down for the quarter by 2.8 million and we expected declines given the high inventory positions our customers have carried and the overall retail environment, but the good news is that the inventory bottleneck is beginning to loosen. The automotive aftermarket overall continues to be challenged with some puts and takes. On one hand we see an increase in car sales.
Patrick Lavelle: However, the largest part of the increase is that fleets instead of retail car sales. And additionally, where car dealers would normally offer aftermarket products to increase profitability. The tightness in inventory and strong demand has allowed them to just add market adjustment increases to the stick at price. We now expect with the potential of an extended UAW strike that inventory tightness will continue, but with that said, the other OEM contracts that are in place even at lower than projected volumes should help drive top life.
Patrick Lavelle: However, it's the bottom line that we're focused on most we instituted price increases reworked our supply chain network develop new technologies using different chips given availability and transition most of our production lines from Florida to Mexico. We're beginning to see the positive impact of all these moves and should see further improvements in the coming years with production overhead coming down more significantly next year. And looking ahead, we have new programs with Ford for the Lincoln Navigator and Ford Expedition, our new lighting program with Nissan starts next year. And our programs to support the new posts and trucks also starts next year.
Patrick Lavelle: As for our biometric segments, sales came in approximately 200,000, lower than the prior year and our budget. This was primarily due to lower licenses and again to some projects being pushed out. Everything that we have talked about on prior calls remains in place. We're continuing to work with car dealers, infrastructures, governments, financial service companies, and on healthcare programs. With respect to the latter, we recently submitted our final prototype to our partner which is now in the final step of validation. Production should begin by the middle of next year and we expect other opportunities to rise with this customer and others once it's in the field and we are focused on growing our embedded solution portfolio.
Patrick Lavelle: To sum it up, the second quarter was expected and we're not pleased with our results to the first half of the year. We've taken more aggressive actions to combat the economy and other issues we're facing and the past actions coupled with the recent restructuring will help improve margins and lower our costs. We expect growth in the second half of the year based on the contracts we have, the new programs we've secured and both the new products we've launched and will be launching.
Patrick Lavelle: Of course, we're mindful of any further deterioration in the economy and we expect markets to remain hard pressed for the next year or so. Things worsen, we'll take more action but we believe we have made the necessary adjustments in our business to drive profitability in the second half and to start fiscal 2025 in a more competitive position.
Patrick Lavelle: One last item to discuss before I turn the call over to Mike. As you may have seen in our earnings release in the form four that was filed yesterday, we have a new strategic investor in blocks. GenTex Corporation, a company that we currently do business with, entered into a stock purchase agreement with Avalon Park LLC and Avalon Park through holding AG, both of which are controlled by B.A.T. Cali, our president and one of Vox's largest shareholders.
Patrick Lavelle: Collectively, Avalon has agreed to sell 50% of its holdings to GenTex or approximately 3.1 million shares and two separate transactions. The first transaction of 1.57 million shares was completed on Friday at $10 per share, representing a 32.5% premium to our stock price as of October 5th, the day prior to the transaction. The second transaction of the same amount will be in January 24 and the stock price will be based on the formula as noted in our release.
Patrick Lavelle: When complete, GenTex will own approximately 15.1% of our class A common stock and will become one of our three largest shareholders. When B.A.T, came on as president, one of his primary focus areas was strategic partnerships. This was probably his number one priority as we were looking to align with industry leaders to help drive growth and value in our business. With GenTex, we have found a great partner as we are collaborating with them in both our biometric and automotive segments on current projects while concurrently looking to drive innovation in our offerings to grow our joint businesses and market share. Steve Downing, who serves as CEO and president of GenTex, also sits on our board and this alliance is one that we believe holds great promise for our company and our shareholders.
Michael Store: And with that, I'll now turn the call over to Mike to review financials and then we'll open it for questions.
Michael Store: Michael, thanks Pat and good morning everyone. We reported total second quarter net sales of 113.6 million of the client of approximately 12.1 million. Within this, automotive segment sales were down 1.8 million, consumer segment sales were down 10 million, and biometric segment sales declined by approximately 100,000.
Michael Store: While sales were down year over year, they were up sequentially by 1.7 million and were expecting improvements in the second half of the year. Within automotive, OEM product sales increased by 1 million and aftermarket product sales declined by 2.8 million. And within the consumer, premium audio product sales declined by 16 million, while other CE product sales increased by 6 million. We reported gross margins of 25.2%, an improvement of 190 basis points compared to second quarter last year, and an improvement of 60 basis points sequentially.
Michael Store: Automotive margins were essentially flat and increased was driven by the improvement in our consumer segment, which we anticipate will continue. If automotive volumes materialize as our customers expect, we should see improvements on our automotive segment as well as with the relocation and manufacturing to Mexico now complete and other changes we've made to our infrastructure and supply chain. Our operating expenses improved by 2.1 million year over year as we continue to lower our costs. Selling expenses declined by 1.8 million or 15.5%, GNA expenses declined by 1.6 million or 8.5%, and engineering and technical support expenses declined by 400,000.
Michael Store: As Pat noted, during the second quarter, we initiated a large restructuring program to lower our costs further in light of the current environment and incurred restructuring expenses of 2 million in fiscal 2024 second quarter compared to 200,000 in the comparable fiscal 2023 period. Excluding restructuring expenses, total operating expenses for the comparable second quarter period declined by 3.9 million or close to 10%. We reported an operating loss of 8.5 million compared to 10 million in second quarter of last year, and a net loss attributable box of 11.1 million compared to 10.9 million.
Michael Store: Ivita in second quarter was a loss of 5.4 million and adjusted Ivita was essentially flat. This compares to an EBITDA loss of 6.8 million and an adjusted EBITDA loss of 3.3 million in the second quarter of fiscal 2023. I'll note, Ivita and adjusted Ivita improved on a sequential basis by 2.2 million and 4.9 million respectively.
Michael Store: Through the first six months of fiscal 2024 compared to fiscal 2023. Net sales were down 11.3% with automotive segment sales down 3.9% and consumer segment sales down 14.5%. Again, as Pat noted, we anticipate year-over-year growth in the second half of the year. Gross margins of 24.9% improved by 30 basis points, and we expect further improvements in the second half of the year as well for the reasons Pat's covered. Operating expenses improved by 3.8% were 6% when excluding restructuring expenses and acquisition costs.
Michael Store: On an operating basis, we lost 19.9 million compared to a loss of 16.7 million and net loss of tribute to VOX in fiscal 2024-6 month period was 21.8 million as compared to a net loss of 16.7 million. Lastly, we reported an EBITDA loss of 13 million and an adjusted EBITDA loss of 5 million.
Michael Store: Moving on to the balance sheet. As of August 31st, we had cash and cash equivalents of 5.9 million which compares to 5.2 million as of May 31st and 6.1 million as of our fiscal 2023-year end of February 28th. Our accounts receivable declined by approximately 21 million and our inventory position declined by approximately 1 million compared to fiscal 2023-4th quarter. Our inventory position declined by approximately 10 million sequentially and as we move through the inventory during the holiday season, we expect our inventory balances decline further.
Michael Store: Our total debt stood at 42.8 million as compared to 39.2 million as of February 28th. The increase in total debt was driven by a 4.1 million increase in our borrowings associated with our domestic credit facility, offset by a 250,000 decline in our Florida mortgage and a 2,000 decline in the amount owed on the shareholder loan payable to Sharp as part of our joint venture. Total loan term debt net of debt issuance cost was 41.2 million as of August 31st as compared to 37.5 million as of February 28th. Oh, excuse me, as I said, our operating expenses improved by 2.1 million year-over-year.
Michael Store: So I'd like to send my remarks and operate it when I'm ready to open the call for questions. Thank you.
Operator: As a reminder, to ask a question, you'll need to press start 1-1 on your telephone. To withdraw your question, please press start 1-1 again. Please wait for your name to be announced. Please stand by. We'll be compiled to any roster. One moment for our first question, please.
Thomas Forte: Our first question comes from the line of Tom Fortay with DA Davidson. Your line is now open. Great. Thanks. I had a couple questions. I go one at a time.
Patrick Lavelle: So first, congrats on the GenTex investment. Pat, can you talk at a high level about your opportunity to monetize ILOC on a near term and a longer term basis? Well, when we look at ILOC, as I said, the final prototype went over to our customer. We expect that everything will go well with that prototype and production for their particular machine, the schedule for the middle of next year, which we believe we will be on it. It is a long-term program, I can't get into much detail on it at this point, but it is a long-term program, which will have material, positive impact on ILOC.
Patrick Lavelle: And then second question, can we talk about cell in and cell through? So are you seeing any change in behavior for large consumer electronics retailers, when we think about their willingness to add inventory, and then on the cell through part, do you think consumers are responding favorably to increase promotional activity within the consumer electronics category, or do you feel like that's not very effective in today's current environment? Well, I think that when we look at cell in, we look at the retailers being quite conservative with what they're taking in.
Patrick Lavelle: We have not seen issues with their cell through, so they apparently are taking in the proper amount of product coming in. There will be promotions throughout the holiday season. It's generally our biggest quarter, but there obviously there's been a change in consumer behavior with credit cards being at all-time high, interest rates on credit cards being very, very high. And we know that we see shrinking savings accounts on consumers. So some of the pent up money that we're sitting around since COVID is being spent, and when we see the problems geopolitical, we see gas rising, putting more pressure on the consumer, but like I said, I think the retailers are bringing in what they perceive that they're going to be successful in moving out, and we think they will.
Patrick Lavelle: And then if it's too conservative to think about the consumer electronics category and think about historical or fresh rates, I think there's a school of thought that in the consumer electronics category and the home category, there was a massive poll forwarded and on COVID, so there's a too conservative to just think of historical or fresh rates for premium audio and things of that nature, and that's when things could rebound. Yeah, I mean, what I had indicated on the call that I said that we think the markets would be hard pressed well until next year, when you're looking at the home theater and some of the things for the home that we sell, the refresh rates, it's not like a car where you move it out every two or three years.
Patrick Lavelle: So the buy forward, a full forward that we had seen during the pandemic, when everybody was locked in. I think we've got another year, 18 months before we start to see a more normal pattern in consumer purchasing of consumer electronics, for the home. There might be some sort of categories that will do well. Like I mentioned, our party speakers, it's a fairly new category, so that's something that we believe will do well. But, you know, the typical product, we see that it'll take some time to get back to normal.
Patrick Lavelle: Great. Lastly, as it pertains to the auto-worker strike, I would think that you may be buffered slash protected to the extent that I think historically you're in some of the most popular products with instalantis, and it was my impression that they had, you know, built inventory, perhaps an anticipation of the strikes. So how should we think about how can we monitor the strikes in the potential impact? Well, when we look at that, some of the plans that we received product from have not closed, or have mopping shut down at this particular point, but we did see a slowdown in ordering.
Patrick Lavelle: You know, if the UAW strike continues longer, we will see a lagging effect on inventories, you know, on the dealer's lots, which will impact our aftermarket automotive sales, and certainly closure of any, you know, any plants that we pull, merchandise, or vehicles from, will have an immediate effect on the automotive business. However, we have gains with our heavy-duty truck manufacturers, fleets, and other OEMs outside of the big three auto makers that are part of the UAW strike.
Patrick Lavelle: So it's a little bit of a mixed bag. We are seeing increases in the other sectors of our OEM automotive business, but it could be offset by some slowness in the closures. Thanks for taking my questions, Pat. Appreciate it. A very good time. Thank you.
Operator: As a reminder to ask a question, you'll need to press star 11. I'm currently showing no further questions.
Patrick Lavelle: I'd like to hand the conference back over to Mr. Pat Levelle for closing remarks. Okay. Thank you. As we look into the third quarter, as I said to Thomas, it's been our historically our third quarter. We have a number of different programs that we do have scheduled for the quarter. So we're looking at growing our business sequentially, and hopefully the cuts that we put in place are significant enough for us to turn profitable for the balance of the year.
Patrick Lavelle: I want to thank you for taking the time in coming on the call this morning, and I wish you all the good day. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
Operator: Thank you.