VOXX International Corporation Q4 2024 Earnings Call
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the VOXX International Fiscal 2024 Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone keypad. At this time, I would like to turn the conference over to Mr. Glenn Wiener. Sir, please begin. Thank you.
Good day, ladies and gentlemen, and thank you for standing by and welcome to the Fox International fiscal 2020 for fourth quarter results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and ask discretion to ask a question. During this session you will need to press star.
One one on your telephone keypad.
At this time I would like to turn the conference over to Mr. Glenn Wiener Sir please begin.
Glenn Wiener: Thank you, Howard. Good morning, and welcome to VOX International's fiscal 2024 fourth quarter and year-end results conference call. Yesterday, we filed our form 10-K and issued our press release, and both documents can be found in the investor relations section of the website at www.voxintl.com, and we'll be posting our updated investor presentation within the week. Speaking for management today will be Pat Lavelle, Chief Executive Officer, and Laurie Ann Shelton, Chief Financial Officer and Chief Operating Officer.
Howard: Thank you Howard good morning, and welcome to the box and the National's fiscal 2020 for fourth quarter and year end results conference call.
Speaker Change: Yesterday, we filed our Form 10-K and issued a press release and both documents can be found in the Investor Relations section of the website at Www Dot box I N T L dot com and will be posting our updated investor presentation within the week.
Speaker Change: Speaking from management today will be Pat Lavelle, Chief Executive Officer, and Lori in Shelton, Chief Financial Officer, and Chief Operating Officer as you May recall, Lori answered the reins as CFO. In addition to her role as CFO effective March 1st at the start of the company's fiscal year and I would personally like to welcome Laurie and through today's call welcome.
Glenn Wiener: As you may recall, Laurie Ann took the reins as CFO in addition to her role as COO effective March 1st, at the start of the company's fiscal year, and I would personally like to welcome her to today's call. And before we get started, I'd like to remind everyone that, except for historical information contained herein, statements made on today's call-in webcast that would constitute forward-looking statements are based on currently available information.
Speaker Change: Before we get started I'd like to remind everyone that except for historical information contained herein statements made on today's 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 point you to the risk factors associated with our business, which are detailed in our Form 10-K.
Glenn Wiener: The company assumes no responsibility to update any such forward-looking statements, and I'd like to point you to the risk factors associated with our business, which are detailed in the Form 10-K for the period ended February 29, 2024. It's now my pleasure to turn the call over to Pat.
Speaker Change: For the period ended February 29, 2024, it's now my pleasure to turn the call over to Pat.
Speaker Change: Matt.
Patrick M. Lavelle: Good morning everyone, and thank you for joining us today. Before I get into our results and any business commentary, I wanted to pick up where Glenn left off and formally welcome Lorianne to today's call as it's her first as Chief Financial Officer. I've worked with Lorianne for over 30 years, and she is simply the best at what she does. She knows our business inside and out, and I believe the investors will enjoy working with her as we all do at VOXX. Whoever's typing this, if you could stop.
Speaker Change: And good morning, everyone and thank you for joining us today.
Patrick M. Lavelle: Before I get into our results in any business commentary.
Matt: I wanted to pick up on where Glenn left off and formally welcome Laurie to todays call as it's her first as Chief Financial Officer.
Speaker Change: Worked with Lori and for over 30 years and she is simply the best at what she does.
Speaker Change: As our business inside and out and I believe the investors will enjoy working with her as we all do Edwards.
Speaker Change: Start.
Speaker Change: Whoever's typing if he can stop.
Patrick M. Lavelle: Simply put, Fiscal 2024 was even tougher than Fiscal 2023, and the challenges we faced are reflected in our results. Like nearly every company serving our markets, we continue to feel the impact of a very challenging global economy. As we prepared for today's call, I looked back on my remarks from last year. I said that OEM customers were shutting down production and retailers cutting back on orders, inflation and fears of recessions globally.
Speaker Change: Simply put.
Speaker Change: Fiscal 2024 was even tougher than fiscal 2023, and the challenges we face are reflected in our results.
Speaker Change: Nearly every company serving our markets, we continue to feel the impact of a very challenging global economy.
Speaker Change: As we prepared for today's call I look back on my remarks from last year.
Speaker Change: I said OEM customers shutting down production and retailers cutting back on orders inflation and fears of recession globally.
Patrick M. Lavelle: Gradual improvement in the supply chain, but with higher costs of inventory, chip scarcity, which was expected to improve, and an expected tough first half, with the potential to improve with some possible easing by the Fed. Fortunately, the issues we spoke of last May are almost the same we face today, and we're expecting more of the same as we enter fiscal 2025. According to the latest Index of Consumer Sentiment last week, there has been a significant drop in confidence. Consumer sentiment dropped to 67.4 from 77 in April.
Speaker Change: Gradual improvement in the supply chain, but with higher cost of inventory.
Speaker Change: Scarcity, which was expected to improve and unexpected tough first half with.
Speaker Change: With the potential to improve with some possible easing by the fed. Unfortunately the issues. We spoke of last may are almost the same we face today and we're expecting more of the same as we enter fiscal 2025.
Speaker Change: According to the latest index of consumer sentiment last week.
Speaker Change: There has been a significant drop in confidence.
Speaker Change: Consumer sentiment dropped to $67 four from 77% in April.
Patrick M. Lavelle: And this May's report was the lowest in six months. Even more alarming was the jump in year-ahead inflation expectations, to 3.5% from 3.2%, and long-run inflation expectations edging up to 3.1% from 3%. As you can see, inflation is still a major concern; both customers and consumers are being cautious, as are we. And that is why we continue to take steps to restructure our business and bring VOXX back to profitability. Let me first quickly recap some of the annual financial comparisons, followed by a more detailed update on our business segments.
Speaker Change: And this made US report was the lowest in six months.
Speaker Change: Even more alarming was the jump in year ahead inflation expectations to three.
Speaker Change: <unk> three 5% from $3, two and long range inflation expectations edging up to three one from 3%.
Speaker Change: As you can see inflation is still a major concern both customers.
Speaker Change: And consumers are being cautious as are we and that is why we continue to take steps to restructure our business and bring box back to profitability.
Speaker Change: Let me first quickly recap some of the annual financial comparisons followed by a more detailed update on our business segments, Laurie and we will then recap the quarter and talk more about our realignment plans the steps we've taken in those upcoming and then we'll open it up for questions.
Patrick M. Lavelle: Laurie Anne will then recap the quarter and talk more about our realignment plans, the steps we've taken, and those upcoming, and then we'll open it up for questions. On a consolidated basis, net sales of approximately $469 million were down 12.2% year-over-year. Gross margins were down 80 basis points, and operating expenses improved by a little over 2%. We recorded $14.2 million of non-cash impairment charges on intangibles and restructuring expenses of $2.1 million.
Speaker Change: On a consolidated basis net sales of approximately $469 million were down 12, 2% year over year.
Speaker Change: Gross margins were down 80 basis points and the operating expenses improved a little over 2%.
Speaker Change: We recorded $14 2 million of noncash impairment charges on intangibles and restructuring expenses of $2 1 million.
Patrick M. Lavelle: When accounting for these charges, as well as goodwill impairment charges and restructuring charges in Fiscal 23, our year-over-year expenses declined closer to 7 percent. The result, however, was an operating loss of $44 million and a net loss attributable to VOXX of $40.9 million. And lastly, we reported an adjusted EBITDA loss of $3.4 million, which was down $6.3 million compared to fiscal 23. This marks two years of losses after two years of growth and profitability on an adjusted EBITDA basis.
Speaker Change: When accounting for these charges as well as goodwill impairment charges and restructuring charges in fiscal 'twenty three are.
Speaker Change: Our year over year expenses declined closer to 7%.
Speaker Change: The result, however was an operating loss of $44 million.
Speaker Change: And a net loss attributable to box of $49 million.
Speaker Change: And lastly, we reported an adjusted EBITDA loss of $3 4 million, which was down $6 $3 million compared to fiscal 'twenty three.
Speaker Change: This marks two years of losses after two years of growth and profitability on an adjusted EBITDA basis.
Patrick M. Lavelle: While this upcoming year will again be challenging, we believe we are taking the right steps to return VOXX to profitability. We plan to cut, at minimum, an additional 5-10% of our total overhead without affecting our ability to effectively serve our customers.
Speaker Change: While this upcoming year again will be challenging we believe we are taking the right steps to return box to profitability.
Speaker Change: Plan to cut at minimum an additional 5% to 10% of our total overhead without affecting our ability to effectively serve our customers.
Patrick M. Lavelle: Not only will we be cutting costs, but we're also reviewing all products and programs, which I will cover in more detail during my market segment. Our programs are about right-sizing the company based on the projections that we see for this year. So I'll start with the automotive segment. Automotive segment sales of approximately $142 million were down almost $32.5 million, or approximately 19%. On the OEM side, sales declined by $14.7 million with a miss entirely in the rear seat entertainment category driven by several factors. The Nissan program ended this past year as scheduled.
Speaker Change: Not only will we be cutting costs wherever it all.
Speaker Change: Also reviewing all products and programs, which I will cover in more detail during my market segments.
Speaker Change: Our programs are about right sizing the company based on the projections that we see for this year.
Speaker Change: So I'll start with that.
Speaker Change: The automotive segment.
Speaker Change: Automotive segment sales of approximately $142 million were down almost $32 5 million or approximately 19%.
Speaker Change: On the OEM side sales declined by $14 $7 million with the Miss entirely in the rear seat entertainment category driven by several factors the Nissan.
Speaker Change: Program ended this past year as scheduled.
Patrick M. Lavelle: Another program, so volumes dropped significantly despite customer projections, and all experienced starts and stops throughout the year. All of this took a big toll on not only sales but gross margins and absorption rates as well. On the other hand, our security, lighting, and safety business was up in fiscal 2025. Despite another warm winter season, we saw sales of OEM remote starts and security products grow, aided by new business with Ford that launched in the EMEA, and a number of new programs in our lighting and safety business that we've been awarded since our acquisition.
Speaker Change: Another program, so our volumes dropped significantly despite customer projections.
Speaker Change: And all experienced starts and stops throughout the year.
Speaker Change: All of this took a big toll on not only sales, but gross margins and absorption rates as well on.
Speaker Change: On the other hand, our security lighting and safety business was up in fiscal 2025.
Speaker Change: Despite another warm winter season, we saw sales of OEM remote starts and security products grow aided by new business with Ford that launched in the EMEA and a number of new programs and our lighting and safety business that we've been awarded since our acquisition.
Patrick M. Lavelle: We experienced the most severe OEM challenges during the second half, as our business was almost cut in half during Q3 due to the UAW strike, as well as production rates that simply have not kept up with projected customer take rates. We adjusted by reducing overhead, both headcount and expenses, in addition to moving certain OEM manufacturing to Mexico. But when your business is impacted this much, more drastic and prudent steps are needed, and that's what we're in the process of doing. VOXX has been the market leader in rear seat entertainment for several decades.
Speaker Change: We experienced the most severe OEM challenges during the second half as our business was almost cut in half during the Q3 due to the UAW strike.
Speaker Change: As well as production rates that simply have not kept up with projected customer take rates.
Speaker Change: We adjusted by reducing overhead both head count and expenses in addition to moving certain OEM manufacturing to Mexico.
Speaker Change: But when your business is impacted this much more drastic and prudent steps are needed and that's what we're in the process of doing.
Speaker Change: <unk> has been the market leader in rear seat entertainment for several decades. This is a niche market and we have taken advantages of our global relationships as well as our strong engineering capabilities to maintain our market dominance.
Patrick M. Lavelle: This is a niche market, and we have taken advantage of our global relationships as well as our strong engineering capabilities to maintain our market dominance. We intend to continue in RSC, but not at a loss or where profits are minimal and volumes fluctuate so rapidly. Not all of this is customer-driven, though. It's also heavily market and supply chain driven. It's just the nature of the environment we're operating in.
Speaker Change: We intend to continue an RFC, but not at a loss of where profits are minimal and volumes fluctuate so rapidly.
Speaker Change: Not all of this is customer driven though it's also heavily market and supply chain driven it's just the nature of the environment, We're operating in.
Patrick M. Lavelle: But, after months of negotiation, and after what we feel are our best efforts to renegotiate based on revised lower volumes, we have decided to exit our rear seat entertainment business with Stellantis. This was not an easy decision, it was not taken lightly, but a lot has changed since we began with them in 2019, and we have reached the point where rising costs and lower volume have put us in a position where we can't agree on the right structure going forward. We can no longer support tying up precious working capital to secure inventory that produces no margin.
Speaker Change: But after months of negotiation and after what we feel is our best efforts to renegotiate based on revised lower volumes, we have decided to exit our rear seat entertainment business with Lantus.
Speaker Change: This was not an easy decision it was not taken lightly but a lot has changed since we began with them in 2019, and we have reached the point, where rising cost and lower volume has put us in a position where we can't agree on the REIT structure going forward.
Speaker Change: We can no longer support tying up precious working capital to secure inventory that produces no margin.
Patrick M. Lavelle: Additionally, it's no secret Stellantis is having supply chain issues of its own, with plant closures and lawsuits ongoing as they, too, try to combat inflation, which makes a change right now even more prudent. As for Ford, they, too, have faced similar industry-wide challenges, but we've been working through them and fully intend to support Ford as we have in the past. The current RFC programs for the Expedition and the Navigator expire soon, and shortly thereafter, we'll be launching the new program for the 25 models. Additionally, our ROC program with Nissan has come to its scheduled end.
Speaker Change: Additionally, it's no secret still anthos as having supply chain issues of its own with plant closures and lawsuits ongoing as they to try to combat inflation, which makes a change right now even more prudent.
Speaker Change: As for Ford and they too have faced similar industry wide challenges.
Speaker Change: But we've been working through them and fully intend to support for it as we have in the past.
Speaker Change: Current RFC programs for the expedition and navigator expire soon and shortly thereafter, we will be launching on a new program for the 25 models.
Speaker Change: Our RSV program with Nissan has come to its scheduled and however, we continue to work with Nissan New lighting program that just launch. We are also working on our lighting program with Ford and we have various other programs across our OEM business. We also have the United States Postal service.
Patrick M. Lavelle: However, we continue to work with Nissan on a new lighting program that just launched. We are also working on a lighting program with Ford, and we have various other programs across our OEM business. We also have the United States Postal Service business starting later this fiscal year. In summary, while our OEM business may be smaller than we had projected several years ago based on all the contract awards, we believe that the business we're maintaining going forward should be more consistent and profitable. Our automotive aftermarket business was down $17.7 million, with the miss predominantly in the remote start category.
Speaker Change: This starting later this fiscal year.
Speaker Change: In summary, while our OEM business may be smaller than we had projected several years back based on all the contract awards, we believe that the business, we're maintaining going forward should be more consistent and profitable.
Speaker Change: Okay.
Our automotive aftermarket business was down $17 7 million with the Ms predominantly in the remote start category.
Patrick M. Lavelle: Some aftermarket categories and product lines were up for the year, such as collision avoidance, car link, car connection, and satellite radio, but the aftermarket overall was challenged in fiscal 24, due to a number of reasons. One, the retail environment and the consumer, the changes in the way car dealers were operating this past year. And then there's car inflation, interest rates, and the state of the domestic economy.
Speaker Change: Some aftermarket categories and product lines were up for the year, such as collision avoidance car link car connection and satellite radio, but the aftermarket overall was challenged in fiscal 'twenty four due to a number of reasons, one the retail environment and the consumer.
Speaker Change: The changes in the way car dealers were operating this past year.
Speaker Change: And then there is car inflation interest rates and the state of the domestic economy.
Patrick M. Lavelle: As we look ahead into fiscal 25, inventory provisions in the aftermarket are far less of a challenge than at this time last year, and that should help offset some of the projected economic softness. The first half will be tight on the OEM side, simply given the volume of programs now and what's transitioning, but we should see a sizable ramp in the second half of the year. Sales should come in roughly in line with fiscal 24, maybe with some upside, and gross margins should improve as well, rising in the second half consistent with the start of new OEM programs.
Speaker Change: As we look ahead into fiscal 'twenty five inventory provisions in the aftermarket are far less of a challenge than at this time last year and that should help offset some of the projected economic softness the first half will be tight on the OEM side simply given the volume of programs now and whats transitioning but.
Speaker Change: We should see a sizable ramp in the second half of the year.
Sales should come in roughly in line with fiscal 'twenty four maybe with some upside in gross margins should improve as well building in the second half consistent with the startup of new OEM programs, we fully expect our automotive segment to be profitable.
Patrick M. Lavelle: We fully expect our automotive segment to be profitable. As far as the consumer segment is concerned, we reported net sales of approximately $327 million, down roughly $31 million, or 8.7 percent. Premium audio sales declined by $36.6 million, and other CE product sales grew by $5.5 million.
Okay.
Speaker Change: As far as the consumer segment, we reported net sales of approximately $327 million down roughly $31 million or eight 7%.
Speaker Change: Premium audio sales declined by $36 6 million and other CE product sales grew by $5 5 million.
Patrick M. Lavelle: Within premium audio, while sales were off for the year, both domestically and internationally, in the Americas, they stabilized in the second half on the heels of several new product launches and new categories. And, as I mentioned last quarter, I believe we are gaining market share. While industry-wide premium audio sales continue to be on the climb, we have either maintained or increased our share domestically, and we have a host of new products coming to market. However, internationally, our business was down, with the biggest impact in Asia.
Speaker Change: Within premium audio while sales were off for the year, both domestically and internationally in the Americas. They stabilized in the second half on the heels of several new product launches and new categories.
Speaker Change: And as I mentioned last quarter I believe we are gaining market share.
Speaker Change: While industry wide premium audio sales continued to be on the decline we have either maintained or increased share domestically and we have a host of new products coming to market.
Speaker Change: Internationally, our business was down with the biggest impact in Asia.
Patrick M. Lavelle: As we enter fiscal 2025, we are planning for two things. One is growth from new products, and two is a very challenging retail environment, most likely consistent with what we've experienced as of late. I'll expand a little further as to what we're doing. First, we have a new soundbar offering led by our Eclipse Plexus sound system powered by Onkyo. We have begun delivery of our Plexus 100 and 200 systems, and the Plexus 300 is scheduled for Q2 at a retail price of $1,000. Our new Klipsch Music City broadcast Bluetooth speakers are doing very well, with three new models recently launched, the Klipsch Detroit, which is the flagship model, and the Klipsch Austin and NASRA.
Speaker Change: As we enter fiscal 2025, we are planning for two things one is growth from new products and two is a very challenging retail environment, most likely consistent with what we've experienced as of late.
I'll expand a little further.
Speaker Change: As to what we're doing first we have a new sound bar offering led by our Eclipse plus flexes sound system powered by <unk> we.
Speaker Change: We have begun delivery of our <unk> 100, 200 systems and the <unk> 300 is scheduled for Q2 at a retail of $1000.
Speaker Change: Our new clips music city broadcast Bluetooth speakers are doing very well with three new models recently launched the clips Detroit, which is the flagship model in the clip eclipse Austin and Nashville.
Patrick M. Lavelle: Our first line of party speakers will launch in September of 2023, and we have several new models coming to market in the second half of this year. And, as I mentioned previously, party speakers are one of the hottest categories in audio. There are a lot of new products that were launched, or that will be launched, moving into the second and third quarters, and we're expecting these products and categories to generate strong growth and better gross margins. The Economy. Credit card debts are at all-time highs, and discretionary spending is down. Inflation is a major concern. We have uncertain elections upcoming and mounting geopolitical tensions. I could go on and on.
Speaker Change: Our first line of party speakers will launched in September of 2023, and we have several new models coming to market in the second half of this year.
Speaker Change: And as I mentioned previously party speakers are one of the hottest categories in audio.
Speaker Change: There are a lot of new products that were launched or that will be launching moving into the second and third quarters, and we're expecting these products and categories to generate strong growth and better gross margins.
Speaker Change: The economy.
Speaker Change: Credit card debts are at all time highs discretionary spending is down inflation as a major concern we have uncertain elections upcoming in mounting geopolitical tensions I can go on and on the fed not easing rates could have the biggest impact as it directly affects customers buying consumer.
Patrick M. Lavelle: The Fed not easing rates could have the biggest impact as it directly affects customers buying, consumers buying, and the cost of doing business. Therefore, we are adjusting operations and overhead to enhance margins and improve working capital within the segment based on our current economic outlook. As for other CE products, sales are up for the year, yet we face the same challenges at retail. Why were they up?
Speaker Change: <unk> purchasing and the cost of doing business and therefore, we are adjusting operations and overhead working to enhance margins and improve working capital within the segment based on our current economic outlook.
Speaker Change: As for other CE product sales were up for the year, Yes, we face the same challenges at retail and why were they up similar to my Q3 remarks, two categories drove the growth. The first our RCA hearing AIDS launched initially in fiscal 2024, with new and vastly improved models in the.
Patrick M. Lavelle: It's similar to my Q3 remark. Two categories drove the growth. The first are RCA hearing aids, launched initially in fiscal 2024, with new and vastly improved models in the market this year. The second, and more meaningful, are the solar power balcony products launched in Germany earlier in the year. VOXX Germany sales were up close to 35% year over year. In more normalized times, I would probably be guiding to growth for the consumer segment in Fiscal 25.
Speaker Change: Market this year the <unk>.
Speaker Change: Second and more meaningful the solar power balcony products launched in Germany earlier in the year Vocs, Germany sales were up close to 35% year over year.
Speaker Change: In more normalized times, I would probably be guiding to growth for the consumer segment in fiscal 'twenty, five, but I would be remiss given the global economy, the audio market the unknown with respect to inflation.
Patrick M. Lavelle: But I would be remiss given the global economy, the audio market, the unknown with respect to inflation, and any action or inaction by the Fed. I expect continuous put and takes. The regular passive loudspeaker may drop a bit, but we'll still see growth in new products in the soundbars, party speakers, and our new music series. The big thing is what we're doing to control inventory, improve margins, and lower costs to increase profitability.
Speaker Change: In any action or inaction by the fed.
Speaker Change: I expect continued puts and takes the regular pass a loudspeaker may drop a bit but we're still we will still see growth in new products and the sound bars Party speakers and our new music series the.
Speaker Change: The Big thing is what we're doing to control inventory improved margins and lower costs to increase profitability.
Patrick M. Lavelle: Moving on to biometrics, the big news on a go-forward basis was our March 7th release announcing a 50-50 joint venture between ILOC and Galvanized Partners, forming a new company, BioCenturion LLC. The premise behind this move is simple.
Speaker Change: Moving onto biometric.
Speaker Change: The Big news on a go forward basis was our March 7th release announcing a 50 50 joint venture between lock and galvanized partners.
Speaker Change: Forming a new company bio Centurion LLC.
Speaker Change: The premise behind this move is simple <unk>.
Patrick M. Lavelle: Combining resources to create a more streamlined, focused, and nimble company to realize value while at the same time removing the working capital needs and losses incurred by VOXX. We are still sharing in the upside, but our focus moving forward and where our resources will be allocated will be on our automotive and consumer segments. BioCenturion brings together each company's respective strengths in sales, marketing, business development, and R&D and will be run by Alan Aiba, who has experience with both entities.
Speaker Change: Combined resources to create a more streamlined focused and nimble company.
Speaker Change: To realize value while at the same time, removing the working capital needs and losses incurred by box, we're still sharing in the upside, but our focus moving forward and where our resources will be allocated will be on our automotive and consumer segments.
Speaker Change: <unk> brings together each company's respective strengths in sales marketing business development, and R&D and will be run by Alan <unk>, who has experience with both entities.
Patrick M. Lavelle: Galvanize will serve as the managing member, responsible for all expenses and working capital needs over the next two years, after which we'll evaluate the best path forward. If there is a capital event prior to, the first $45 million would get preferential distribution rights of 77% to ILOC and 23% to Galvanize, and the remaining portion would be split evenly.
Speaker Change: Galvanize will serve as the managing member responsible for all expenses and working capital needs over the next two years.
Speaker Change: After which we will evaluate the best path forward.
Speaker Change: If there is a capital event prior to the first $45 million will get preferential distribution rights of 77% to <unk> and 23% to galvanize and the remaining portion would be split evenly.
Patrick M. Lavelle: We still very much believe in ILOC and its future. The technology works very well, and there are deals on the horizon which we believe will change the landscape. With this move, we still share in the upside without the financial or operational burden. I'd like to make a few comments with respect to our plans for this year before I turn the call over to Laurie Anne, following the losses of the past two years. Our view of the economy, near term, and with the Sea Guard ruling and final payout, we must conserve cash and return VOXX to profitability. And by conserving cash, what I really mean is monetizing capital.
Speaker Change: We still very much believe in Iraq, and its future the technology works very well and there are deals on the horizon, which we believe will change the landscape.
Speaker Change: With this move we still share any upside without the financial or operational burden.
Speaker Change: I'd like to make a few comments with respect to our plans this year before I turn the call over to Laurie.
Speaker Change: With the losses of the past two years.
Speaker Change: Our view of the economy near term.
Laurie: And with the <unk> ruling and final payment and payout, we must conserve cash and return box the profitability and Viibryd conserving cash, but I really mean is monetizing capital of course, we will be cutting in every area, where we can from an operational perspective, we will also be looking to remove redundancies.
Patrick M. Lavelle: Of course, we will be cutting in every area where we can from an operational perspective. We will also be looking to remove redundancies throughout the organization, enhance our supply chain and operational support capabilities further, and evaluating all products and programs to ensure they have more longevity and stronger margins and margin protection. When you look at VOXX, we have a lot of us.
Laurie: Throughout the organization enhance our supply chain and operational support capabilities further and evaluating oil products and programs to ensure they have more longevity.
Speaker Change: And stronger margins and margin projections of protection.
Speaker Change: When you look at box, we have a lot of assets, we have assets in real estate assets in our brand's assets in our respective groups and businesses as part of our restructuring. We're tackling every area of our business to ensure that we return to profit and profitability sooner rather than later.
Patrick M. Lavelle: We have assets in real estate, assets in our brands, assets in our respective groups and businesses. As part of our restructuring, we're tackling every area of our business to ensure that we return to profitability sooner rather than later. And we are exploring all alternatives to reduce working capital needs further so that we can focus on our more growth-oriented, profitable business.
Speaker Change: And we are exploring all alternatives to reduce working capital needs. Further so that we can focus on our more growth oriented profitable business.
Patrick M. Lavelle: Although sales have declined year over year, it is not due to lost market share. In the automotive industry, we have, in fact, increased the number of OEM customers we have worked with over the past two years. In the aftermarket, we maintain nine of the top ten selling brands of remote start and security, and our market share is intact and stable. In our consumer business, we maintain number one market share in passive loudspeakers and reception products in North America and have made inroads into new accounts we have not done business with in the past.
Speaker Change: Although sales have declined year over year. It is not due to lost market share.
Speaker Change: In automotive we in fact have increased the number of OEM customers. We have worked with over the past two years.
Speaker Change: In the aftermarket we maintained nine of the top 10, selling brands of remote start and security and our market share is intact and stable.
Speaker Change: In our consumer business, we maintain number one market share in passive loudspeakers and reception products in North America and have made inroads into new accounts, we have not done business with in the past.
Patrick M. Lavelle: Unfortunately, we have had to stop selling in markets in Europe due to the war in Ukraine, like Russia and Belarus. Sales to Ukraine, the Baltics, and especially Poland have been impacted. We believe, as the U.S. economy picks up, car sales grow, consumers return to more normal buying patterns, and inflation eases, we will see a resurgence of our normal business on top of the new customers, categories, and products we will bring to market in fiscal 2025. And with that said, I'd like to turn the call over to Lori. Lorianne? Thanks, Pat.
Speaker Change: Unfortunately, we have had to stop selling in markets in Europe due to the war in the Ukraine.
Speaker Change: Like Russia, and Belarus, and sales to the Ukraine, the baltics, and especially Poland have been impacted.
Speaker Change: We believe as the U S economy picks up.
Car sales grow.
Speaker Change: Consumers return to more normal buying patterns and inflation eases, we will see a resurgence of our normal business on top of the new customers categories and products, we will bring to market in fiscal 2025.
Speaker Change: And with that said I'd like to turn the call over to Laurie Laurie.
Loriann Shelton: Thanks, Pat. I appreciate the kind words. And good morning, everyone.
Laurie: Thanks, Pat I appreciate the kind words and good morning, everyone. It is my pleasure to be joining you on today's call.
Loriann Shelton: It is my pleasure to be joining you on today's call. I look forward to working with our investors to communicate the VOXX story. I've been with the company for most of my adult life, holding many positions, most importantly COO, with the oversight of the Shared Services Group, so my team touches virtually all aspects of our business. While we have our fair share of challenges to deal with, namely the economy first and foremost, we also have opportunities to strengthen our business and make sure we can weather whatever is thrown at us. We've been resilient, we've gotten through everything, and this period will be no different.
Laurie: I look forward to working with our own captive and communicating the box story.
Laurie: I've been with the company for most of my adult life holding many positions. Most importantly, CLO with the oversight of the shared services groups. So my team touches virtually all aspects of our business.
Laurie: While we have our fair share of challenges to deal with mainly the economy first and foremost we also have opportunities to strengthen our business and make sure. We can weather whatever is thrown at us.
Laurie: <unk> resilient and we've got to do everything in this period will be no different.
Loriann Shelton: As for today, I won't review the financials, as Pat covered the year and talked about our business segment and the environment we're operating in. What I thought I would like to do today is quickly do some financial housekeeping on our year-end results, talk a little bit about the quarter, and then focus more on our balance sheet and what we are doing to strengthen it along with our performance. To start with respect to Fiscal 2024, I wanted to provide a little more color around the Intangible Asset Impairment Charge.
Speaker Change: As for today I want to review the financial as Pat covered.
Speaker Change: <unk> talked to our business segments.
Speaker Change: And the environment, we're operating in what I thought I would like to do today is quickly do some financial housekeeping on our year end results.
Loriann Shelton: Throughout the year, we rely on our projections, our customers' projections, market conditions, the economy, competition, price adjustments, and things like these to help us value the carrying value of our assets. At fiscal 24 year end, our intangible assets stood at $68.8 million.
Speaker Change: Talk a little bit about the quarter, and then focus more on our balance sheet and what we are doing to strengthen it along with our performance.
Loriann Shelton: The impairment charges taken in the fourth quarter and in our year-end financial statements relate to four indefinite lives and tangible assets that totaled $14.2 million. As a result of ongoing conversations with our customers and following meetings at CES this past January, we lowered our long-term projections for certain CE trade names, resulting in these impairments this fiscal year. This compares to 1.3 million of intangible asset impairment charges in fiscal 2023, both of which are non-cash charges and are reflected in our P&L under operating expenses.
Speaker Change: To start with respect to fiscal 2024, I wanted to provide a little more color around the intangible asset impairment charges.
Speaker Change: Throughout the year, we rely on our projections, our customers' projections market condition.
Speaker Change: Economy competition price adjustments and things like <unk> to help us value the carrying value of our assets.
Speaker Change: At fiscal 'twenty, four year, and our intangible assets stood at $68 $8 million.
Speaker Change: The impairment charges taken in the fourth quarter and in our year end financial statements relate to for indefinite life intangible assets that totaled $14 2 million.
Speaker Change: As a result of ongoing conversations with our customers and following meetings at CES. This past January.
Speaker Change: We lowered our long term projections.
Speaker Change: CE trade names, resulting in these impairments this fiscal year.
Speaker Change: This compares to $1 3 million of intangible asset impairment charges in fiscal 2023.
Speaker Change: Both of which are noncash charges.
Speaker Change: Reflected in our P&L under operating expenses.
Loriann Shelton: This, of course, resulted in operating losses for both fiscal 2020 for the fourth quarter and fiscal year. We also recorded restructuring charges in Fiscal 2024 of $2.1 million compared to approximately $900,000 in Fiscal 2023. This past year's restructuring cost primarily relates to severance expenses associated with headcount reductions in our fiscal 2024 second quarter, along with expenses related to our OEM production relocation from Florida to Mexico, which began in fiscal 23, and charges will continue through this fiscal year. We continue to analyze all aspects of our infrastructure and eliminate duplication throughout the organization.
Speaker Change: This of course resulted in operating losses for both fiscal 2020 for fourth quarter and fiscal year.
Speaker Change: We also incurred restructuring charges in fiscal 2024 of $2 1 million compared to approximately 900000 in fiscal 'twenty three.
Speaker Change: This past year's restructuring costs, primarily related to severance expenses associated with headcount reductions in our fiscal 2024 second quarter, along with expenses related to our OEM production relocation from Florida to Mexico, which began in fiscal 'twenty three and <unk>.
This will continue through this fiscal year.
We continue to analyze all aspects of our infrastructure and eliminate duplication throughout the organization.
Loriann Shelton: Our purchasing and inventory teams cleaned up our inventory, removed obsolete, end-of-life, and excess inventories, all done with the goal of generating more profitable sales on lower overhead. A lot of our planning was also centered on lowering future working capital needs. I must caution everyone that while we did allot to lower operating expenses in Fiscal 24, which were down close to 7% when accounting for impairment and restructuring charges, more will be done in fiscal 25 in light of the current and near-term business environment. There will be a lot of changes, and not everything will occur at once.
Speaker Change: Our purchasing and inventory teams cleaned up our inventory remove obsolete and device and excess inventories.
Speaker Change: All done with goals to generate more profitable sales on lower overhead.
Speaker Change: A lot of our planning was also centered on lowering future working capital needs.
I must caution everyone that while we did a lot to lower operating expenses in fiscal 'twenty, four which were down close to 7% when accounting for impairment and restructuring charges more will be done in fiscal 'twenty five in light of the current and near term business environment.
Speaker Change: There will be a lot of chart changes and not everything we will once we have people and customers to consider or is in process and in the pipeline that needs to be fulfilled over time.
Loriann Shelton: We have people and customers to consider, orders in process, and in the pipeline that need to be fulfilled over time. The plans we've put in place will be executed with our customers' needs in mind above all. VOXX has been around for a long time for many reasons, and one of them is integrity.
Speaker Change: The plans we've put in place will be executed with our customers' needs in mind above all.
Speaker Change: <unk> has been around for a long time for many reasons and one of them is integrity.
Loriann Shelton: We have always shown that we can adjust better than the competition and that it's important to our customers and to our market longevity, staying with fiscal 2024 and moving to gross margins. We took several inventory write-offs, which impacted both the fourth quarter and fiscal year for both consolidated gross margins and our automotive segment. In automotive, where we reported gross margins of 21.1% compared to 24.3% for the year, we incurred an inventory write-down of approximately $3.8 million, about a 270 basis point impact for March.
Speaker Change: We have always shown that we can adjust better than the competition and that it is important to our customers into our market longevity.
Speaker Change: Staying with fiscal 2024 and moving to gross margins.
Speaker Change: We took several inventory write offs, which impacted both the fourth quarter and fiscal year for both consolidated gross margins in our automotive segment.
Speaker Change: In automotive, where we reported gross margins of 21, 1% compared to 24, 3% for the year, we incurred an inventory write down of approximately $3 8 million.
Speaker Change: About 270 basis point impact to margin.
Loriann Shelton: This accounts for both slow-moving or excess goods from our OEM manufacturing transition. I just wanted to point this out as it has a big impact but also puts us in a better position moving into fiscal 2025. One other point which Pat alluded to, which should help you think about the automotive margins going forward, we expect to have lower margins in the first half as we exit lower margin OEM business. We then have new models coming online at more historical margin levels.
Speaker Change: This accounts for about slow moving our excess goods from our OEM manufacturing transition.
Speaker Change: Just wanted to point this out as it has a big impact, but also puts us in a better position moving into fiscal 2025.
Speaker Change: One other point, which Pat alluded to to which should help you think about the automotive margins going forward, we expect to have lower margins.
Patrick M. Lavelle: In the FERC tap as we exit lower margin OEM business.
Patrick M. Lavelle: We then have new models coming online at more historical margin levels on.
Loriann Shelton: On the consumer side, our inventory is in a good position with new products in the market and a number of new ones coming to market towards the end of our second quarter and into the third. So here, too, you may start to see some margin pickup in the second half of the year, all things being equal, of course. Moving on to the quarter. As you can see, our results in our press release, and I'd be more than happy to address any questions during the Q&A portion of our call or following. Let me briefly recap results as I'd like to spend a few minutes on our go-forward plan. Fourth Quarter Comparison.
Patrick M. Lavelle: On the consumer side, our inventory is in a good position with new products and market and number of new ones coming to market towards the end of our second quarter and into the third.
Patrick M. Lavelle: Here too you may start to see some margin pickup in the second half of the year, all things being equal of course.
Patrick M. Lavelle: Moving onto the quarter.
Speaker Change: As you can see our results in our press release and I'd be more than happy to address any questions. During the Q&A portion of our call are following let me briefly recap results as I'd like to spend a few minutes on our go forward plans.
Speaker Change: Fourth quarter comparisons net sales of just $108 million were down $28 4 million or 28%.
Loriann Shelton: Net sales of just $108 million were down 28.4 million, or 20.8%. The automotive segment was down $16.9 million, with the bigger miss in OEMs. The consumer segment was down $11.4 million, with both premium audio and other CE roughly evenly. Gross margins were down 550 basis points, which includes the impact of the inventory RAF dam. Thus, the decline was not as great.
Speaker Change: The automotive segment was down $16 9 million with the bigger mix in OEM.
Speaker Change: The consumer segment was down $11 4 million with both premium audio and other CE roughly evenly.
Speaker Change: Gross margins were down 550 basis points, which includes the impact of the inventory ramp down thus the decline was not as great.
Loriann Shelton: Operating expenses were up $300,000, including the impairment and restructuring charges, but excluding all charges as well as acquisition costs, operating expenses improved by over 13%. The results, an operating loss of $26.4 million compared to an operating loss of $12.9 million, and an adjusted EBITDA loss of $6.4 million compared to adjusted EBITDA of $4 million, as for VOXX today and what we are working on. As part of our fiscal 2025 realignment plans, we are looking at everything with a focus on reducing costs in light of relatively flat sales for Preparing for Work.
Speaker Change: Operating expenses were up 300000, including the impairment and restructuring charges, but excluding all charges as we act as well as acquisition costs operating expenses improved by over 13%.
Speaker Change: The result in operating loss of $26 4 million compared to an operating loss of $12 9 million and an adjusted EBITDA loss of $6 4 million compared to adjusted EBIT of $4 million.
Speaker Change: As per box today, and what we are working on.
Speaker Change: As part of that with fiscal 2025 realignment plans, we're looking at everything with a focus on reducing costs in light of our relatively flat sales year.
Speaker Change: Preparing for worse.
Loriann Shelton: We're really looking to get leaner, but not again at the expense of the customer. There's only so much you can remove from a functional perspective without losing skills and knowledge, so we are focused equally on process, how we can improve processes to do more with less and key to this technology. We're looking to automate more functions across all departments to free up not only cost but resources, resources that can be used to enhance output or resources that can be leveraged to support other areas of the business.
We're really looking to get leaner, but not again at the expense of the customer.
Speaker Change: Only so much you can remove from a functional perspective without losing skills and knowledge. So we are focused equally on process.
Speaker Change: We can improve process to do more with less and key to this technology, we're looking to automate more functions across all departments to free up not only cost but resources.
Speaker Change: Resources that can be used to enhance output are resales that can be leveraged support other areas of the business.
Loriann Shelton: We're looking at each department and location, how they function, and where we can better share resources. We're looking at our operations, distribution, and supply chain, looking to control costs on our end where we can while at the same time working with partners to find more cost-effective ways of getting the job done. We're also looking closely at each segment, group, and business unit in terms of sales, margin, and expenses, contracts, agreements, and future business. We're looking at profitability by brand, by product line, by customer, and by SKU.
Speaker Change: We're looking at each department and location, how they function and where we can better share resources.
Speaker Change: We're looking at our operations distribution and supply chain looking to control costs on our end, where we can while at the same time working with partners to find more cost effective ways of getting the job done.
Speaker Change: We're also looking closely at each segment group and our business unit sales margin and expenses, our contract agreements and future business. We're looking at profitability by brand by product line by customer and skill.
Loriann Shelton: Everything that will enhance profitability while at the same time lower our working capital needs and improve our balance sheet. With respect to our balance sheet, as of year end, our cash and cash equivalents stood at $11 million, and our total debt stood at $73.3 million, which takes into account the final payouts related to the Seaguard Settlement. That is behind us now. Total debt is principally made up of outstanding borrowings on our Senior Secured Credit Facility with committed availability of up to $165 million.
Everything that we will have profitability, while at the same time, lower our working capital needs and improve our balance sheet.
Speaker Change: With respect to our balance sheet as of year end, our cash and cash equivalents stood at $11 million and our total debt stood at $73 three which takes into account the final payouts related to see guard settlement that is behind us now.
Speaker Change: Total debt. It is principally made up of outstanding borrowings on our senior secured credit facility with committed availability of up to $165 million.
Loriann Shelton: Our excess borrowing availability as of February 29, 2024, was $55.3 million, and we have sufficient working capital and availability to fund our business and meet all obligations. We are focused on generating cash from operations and cash through efficiencies and monetization to generate the best ROI on our capital. With that, I would like to thank you all. We're now ready to open up the call to questions.
Speaker Change: Our excess borrowing availability as of February 29, 2024 was $55 3 million and we have sufficient working capital and availability to fund our business and meet all obligations. We are focused on generating cash from operations and cash through efficiencies and <unk>.
Speaker Change: Monetization to generate the best ROI on our capital with that I would like to thank you. All we're now ready to open up the call for questions. Thank.
Laurie: Thank you Laurie.
Laurie: Yes.
Operator: Operator, if there are any questions... Ladies and gentlemen, if you have a question or comment at this time, please press star-one-one on your...
Speaker Change: Operator, if there are any questions.
Operator: Ladies and gentlemen, if you have a question or comment at this time, please press star 1 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 1 1 again. Again, if you have a question or comment at this time, please press star 1 1 on your telephone keypad. Please stand by while we compile the Q&A list. I'm showing no questions in the queue at this time. I'd like to turn the conference back over to Mr. Pat Lavelle for any closing remarks. Okay. Well, thank you.
Speaker Change: Ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Speaker Change: If your question has been answered or you wish to remove yourself from the queue simply press star one again.
Speaker Change: Again, if you have a question or comment at this time. Please press star one one on your telephone keypad. Please.
Speaker Change: Please standby, what we compile the Q&A roster.
Speaker Change: Im showing no question is immaterial at this time I would like to turn the conference back over to Mr. Pat Lavelle for any closing remarks.
Patrick M. Lavelle: Okay, well, thank you. Thank you all for calling in today and for your interest in VOXX. We wish you had a good day, and we'll speak to you again next quarter. Thank you.
Patrick M. Lavelle: Okay well. Thank you. Thank you all for calling in today and your interest in <unk>.
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Patrick M. Lavelle: Which you have a good day and we'll speak to you again next quarter. Thank you.
Patrick M. Lavelle: Okay.
Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day!
Speaker Change: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
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