Q1 2025 VOXX International Corporation Earnings Call

Operator: Good morning and welcome.

Operator: Good day. And thank you for saying goodbye.

Operator: Good day, and thank you for standing by. Welcome to the VOXX International Fiscal 2025 First 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. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference call over to your speaker today, Glenn Wiener, Investor Relations. Please go ahead. Thanks, Shannon.

Operator: Welcome to the VOX International Physical 2025 First Quarter Results conference call. At this time, all participants are in a listening mode.

Speaker Change: Good morning and welcome.

Speaker Change: Good day and thank you for standing by. Welcome to the VOXX International Fiscal 2025 First Quarter Results Conference Call.

Operator: After the speech is presentation, there will be a questioning after session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Operator: Please be advised that today's conference is being recorded.

Glenn Wiener: I would now like to hand the conference call over to your speaker today, Glenn Wiener, Investor Relations. Please go ahead.

Glenn Wiener: Thanks, Shannon, and sorry for jumping the gun there. Good morning, and welcome to Vox International's Fiscal 2025 First Quarter Results Conference Call. 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.voxxintl.com, and we intend to update our investor presentation and post that to the web later. Speaking for management today will be Pat Lavelle, Chief Executive Officer, and Loriann Shelton, our Chief Financial Officer and Chief Operating Officer.

Glenn Wiener: Thanks, Shannon, and sorry for jumping the gun there. Good morning. And welcome to Box International Physical 2025 First Quarter Results conference call. Yesterday, we followed 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.voxxinpl.com.

Speaker Change: I would now like to hand the conference call over to your speaker today, Glenn Wiener, Investor Relations. Please go ahead. Thanks, Shannon. I'm sorry for jumping the gun there. Good morning, and welcome to VOXX International's Fiscal 2025 First Quarter Results Conference Call.

Speaker Change: Yesterday, we followed 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.voxxintl.com.

Glenn Wiener: And we intense update our Investor presentation and post that to the web later next week.

Glenn Wiener: Speaking for management today, we'll be Pat Lobelle, Chief Executive Officer, and Laurie and Shelton, our Chief Financial Officer and Chief Operating Officer. Following their prepared remarks, we'll open up the call for questions.

Speaker Change: And we intend to update our investor presentation and post that to the web later next week.

Speaker Change: Speaking from management today will be Pat Lavelle, Chief Executive Officer, and Loriann Shelton, our Chief Financial Officer and Chief Operating Officer.

Glenn Wiener: Following their prepared remarks, we will open up the call for questions. Before I get started, I would 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 would like to point you to the risk factors associated with our business, which are detailed in our Form 10-K, but for the period ended February 29, 2024.

Glenn Wiener: Before I get started, I would like to remind everyone that, except for historical information contained herein, statements made on today's column 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 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 29th, 2024.

Speaker Change: Following their prepared remarks, we will open up the call for questions.

Speaker Change: Before I get started, I would 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.

Speaker Change: 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 the Form 10-K , but the period ended February 29, 2024.

Glenn Wiener: Lastly, it's my pleasure to announce that the company will be holding its annual meeting of stockholders on July 23rd, 2024, at 10 a.m. Eastern. Our proxy has been sent to all shareholders of record, and our form DEF14A can be found online in the Investor Relations section of our website. This will be a virtual meeting, and shareholders can attend by visiting www.virtualshareholdermeeting.com/backslash V-O-X-X 2024, where they'll be able to listen to the meeting live, submit questions, and vote online.

Glenn Wiener: Lastly, it's my pleasure to announce that the company will be holding its annual meeting of stockholders on July 23, 2024 at 10 a.m. Eastern. Our proxy has been sent to all shareholders of record, and our Form DEF-14-A can be found online in the Investor Relations section of our website. This will be a virtual meeting, and shareholders can attend by visiting backslash VOXX 2024, where they'll be able to listen to the meeting live, submit questions, and vote online. At this time, it's my pleasure to now turn the call over to Pat. Thank you.

Speaker Change: Lastly, it's my pleasure to announce that the company will be holding its annual meeting of stockholders on July 23, 2024 at 10 a.m. Eastern. Our proxy has been sent to all shareholders of record, and our form DEF14A can be found online in the Investor Relations section of our website.

Speaker Change: This will be a virtual meeting and shareholders can attend by visiting www.virtualshareholdermeeting.com backslash VOXX.

Glenn Wiener: At this time, it's my pleasure to now turn the call over to Pat. Thank you.

Patrick M. Lavelle: 2024, where they'll be able to listen to the meeting live, submit questions, and vote online. At this time, it's my pleasure to now turn the call over to Pat. Thank you.

Patrick Lavelle: Thank you, Glenn, and good morning, everyone. It's been only two months since we reported our year-end results, and from a market perspective, not much has changed. The retail environment remains challenging; interest rates remain elevated, and inflation is still a major concern. On our prior call, we cautioned that sales would be under pressure based on what we were seeing at retail, and given the state of the automotive market. Automotive manufacturers are still under pressure. Inventory is building, and layoffs at certain plants have begun. The transition to EVs is only adding to the challenges faced by car makers.

Patrick M. Lavelle: Thank you, Glenn, and good morning everyone. It's been only two months since we reported our year-end results. And from a market perspective, not much has changed. The retail environment remains challenging, interest rates remain elevated, and inflation is still a major concern. On our prior call, we cautioned that sales would be under pressure based on what we were seeing at retail and given the state of the automotive market. However, automotive manufacturers are still in, inventory is building, and layoffs at certain plants have begun.

Patrick M. Lavelle: Thank you Glenn and good morning everyone. It's been only two months since we reported our year-end results.

Patrick M. Lavelle: And from a market perspective, not much has changed. The retail environment remains challenging, interest rates remain elevated, and inflation is still a major concern.

Patrick M. Lavelle: On our prior call, we cautioned that sales would be under pressure based on what we were seeing at retail and given the state of the automotive market.

Patrick M. Lavelle: Automotive manufacturers are still under pressure. Inventory is building and layoffs at certain plants have begun. The transition to EVs is only adding to the challenges faced by car makers.

Patrick M. Lavelle: Transition to EVs is only adding to the challenges faced by car manufacturers. During the first quarter, we took aggressive steps to improve margins and lower both our operating expenses and working capital. As you saw from our Q1 report, margins were up 310 basis points, and expenses were cut significantly, down over 16% year over year, with more improvements expected in the coming quarter. While we lost money both on an operating income and adjusted EBITDA basis, losses were lower year over year, reflecting the deliberate actions we are taking.

Patrick Lavelle: During the first quarter, we took aggressive steps to improve margins and lower both our operating expenses and working capital needs. As you saw from our Q1 report, margins were up 310 basis points, and expenses were cut significantly, down over 16% year-over-year, with more improvements expected in the coming quarter. While we lost money both on an operating income and adjusted even the basis, losses were lower year-over-year, reflecting the deliberate actions we are taking. Based on our current sales projections, we expect to bring VOXX back to profitability this fiscal year. VOX is in another transaction, a transition.

Patrick M. Lavelle: During the first quarter, we took aggressive steps to improve margins and lower both our operating expenses and working capital needs.

Patrick M. Lavelle: As you saw from our Q1 report, margins were up 310 basis points and expenses were cut significantly, down over 16% year-over-year, with more improvements expected in the coming quarters.

Patrick M. Lavelle: While we lost money both on an operating income and adjusted EBITDA basis, losses were lower year over year, reflecting the deliberate actions we are taking.

Patrick M. Lavelle: Based on our current sales projections, we expect to bring VOXX back to profitability this fiscal year. VOXX is in another transaction or transition, and consistent with past experience. We believe we will emerge from this turbulent period as a stronger company with better investor returns. In addition to market issues holding back top-line growth, we are also uncomfortable with our current debt level and our depressed share price, which is sitting near 52-week lows. Be assured, we have the same concerns as our investors. VOXX has been around for over 60 years. We have seen just about everything, and we have always persevered.

Patrick M. Lavelle: Based on our current sales projections, we expect to bring VOXX back to profitability this fiscal year.

Patrick Lavelle: And consistent with past experience, we believe we will emerge from this turbulent period as a stronger company with better investor returns. In addition to market issues holding back top-line growth, we too are uncomfortable with our current debt level and our depressed share price, which is sitting near 52-week lows. Be assured, we have the same concerns as our investors. VOXX has been around for over 60 years. We have seen just about everything, and we have always persevered. This time will be no different.

Patrick M. Lavelle: VOXX is in another transaction or a transition.

Patrick M. Lavelle: And consistent with past experience, we believe we will emerge from this turbulent period as a stronger company with better investor returns.

Patrick M. Lavelle: In addition to market issues holding back top-line growth, we too are uncomfortable with our current debt level and our depressed share price, which is sitting near 52-week lows.

Patrick M. Lavelle: Be assured, we have the same concerns as our investors.

Patrick M. Lavelle: VOX has been around for over 60 years. We have seen just about everything and we have always persevered.

Patrick M. Lavelle: This time will be no different. Just look back at our last restructuring in fiscal 2019 and 2020. This was followed by two of our better years of profitability and cash flow, which propelled our stock to trade over $20 per share. Over the past two years, however, we've seen a myriad of global challenges causing us to miss revenue projections as our customers struggle with ever-changing demand. This has been one of our biggest challenges, managing and operating our business based on customer projections with volumes that shift quickly or don't materialize.

Patrick Lavelle: Just look back at our last restructuring in fiscal 2019 and 2020. This was followed by two of our better years of profitability and cash flow, which propelled our stock to trade over $20 per share. Over the past two years, however, we have seen a myriad of global challenges causing us to miss revenue projections as our customers struggle with ever-changing demand. This has been one of our biggest challenges: managing and operating our business based on customer projections with volumes that shift quickly or don't materialize. The counteract is challenge. We are adjusting and taking action to right-size our business based on what we believe sales volumes will be near term while maintaining operating leverage to capture increases in sales and market share without significantly rescaling overhead.

Patrick M. Lavelle: This time will be no different.

Patrick M. Lavelle: Just look back at our last restructuring in fiscal 2019 and 2020. This was followed by two of our better years of profitability and cash flow, which propelled our stock to trade over $20 per share.

Patrick M. Lavelle: Over the past two years, however, we've seen a myriad of global challenges causing us to miss revenue projections as our customers struggle with ever-changing demand.

Patrick M. Lavelle: This has been one of our biggest challenges, managing and operating our business based on customer projections with volumes that shift quickly or don't materialize.

Patrick M. Lavelle: To counteract this challenge, we are adjusting and taking action to right-size our business based on what we believe sales volumes will be in the near term while maintaining operating leverage to capture increases in sales and market share without significantly rescaling OGRAS. Our focus is clear.

Patrick M. Lavelle: To counteract this challenge, we are adjusting and taking action to right-size our business based on what we believe.

Patrick M. Lavelle: Sales volumes will be near-term, while maintaining operating leverage to capture increases in sales and market share without significantly rescaling overhead.

Patrick Lavelle: Our focus is clear. We want to remain in markets and categories where we have stability, profitability, and growth potential. Categories that generate positive margins and consistent returns. Thus, we have already begun a process to redirect capital to programs that help us achieve these goals. Additionally, during Q1, we engaged Accordion, a leading management consulting company, to assist us in evaluating avenues to support our restructuring and profitability initiatives. Building on what we have already done and have planned, we're getting an outside perspective on other optimization programs we could implement this year. We want to ensure that we maintain the ability to scale quickly, especially as market conditions improve.

Patrick M. Lavelle: We want to remain in markets and categories where we have stability, profitability, and growth potential; categories that generate positive margins and consistent returns. Thus, we have already begun a process to redirect capital to programs that help us achieve these goals. Additionally, during Q1, we engaged Accordion, a leading management consulting company, to assist us in evaluating avenues to support our restructuring and profitability initiatives, building on what we have already done and what we have planned.

Patrick M. Lavelle: Our focus is clear. We want to remain in markets and categories where we have stability, profitability, and growth potential. Categories that generate positive margins and consistent returns. Thus, we have already begun a process to redirect capital to programs that help us achieve these goals.

Patrick M. Lavelle: Additionally, during Q1 we engaged Accordion, a leading management consulting company, to assist us in evaluating avenues to support our restructuring and profitability initiatives.

Patrick M. Lavelle: We're getting an outside perspective on other optimization programs we could implement this year. We want to ensure that we maintain the ability to scale quickly, especially as market conditions improve, and our new ERP conversion to Oracle Fusion, which kicked off in June, is a big part of our transition. It's a long-term project estimated to be 18 months to completion.

Patrick M. Lavelle: Building on what we have already done and have planned, we're getting an outside perspective on other optimization programs we could implement this year.

Patrick M. Lavelle: We want to ensure that we maintain the ability to scale quickly, especially as market conditions improve.

Patrick Lavelle: Our new ERP conversion to Oracle Fusion, which kicked off in June, is a big part of our transition. It's a long-term project estimated to be 18 months to completion. That should result in significantly greater efficiencies, better automation, data and technology tools, and ultimately savings and overheads. We also plan to lower our debt and free up capital to reinvest in the company. Under the Vox umbrella, we have over 35 trusted brands, several businesses and operating groups, and various product categories within the automotive and consumer electronics industries. Some of the categories are in growth mode, while others are less profitable and slow to no growth. As part of our restructuring, we are again looking at every product and SKU, every customer program, and determining our true cost to serve, meaning all costs that go into supporting each sale, both internal and external. We plan to generate capital efficiencies by either improving or eliminating programs that do not meet profitability criteria while making changes to our structure.

Patrick M. Lavelle: And our new ERP conversion to Oracle Fusion, which kicked off in June , is a big part of our transition.

Patrick M. Lavelle: That should result in significantly greater efficiencies, better automation, data, and technology tools, and ultimately savings and overhead. We also plan to lower our debt and free up capital to reinvest in. Under the VOXX umbrella, we have over 35 trusted brands, several businesses and operating groups, and various product categories within the automotive and consumer electronics sectors. Some of the categories are in growth mode, while others are less profitable and slow to no growth.

Patrick M. Lavelle: It's a long-term project estimated to be 18 months to completion. That should result in significantly greater efficiencies, better automation, data and technology tools, and ultimately savings and overheads.

Patrick M. Lavelle: We also plan to lower our debt and free up capital to reinvest in the company.

Patrick M. Lavelle: Under the VOXX umbrella, we have over 35 trusted brands, several businesses and operating groups, and various product categories within the automotive and consumer electronics industries.

Patrick M. Lavelle: As part of our restructuring, we are again looking at every product, NSKU, every customer program and determining our true costs to serve, meaning all costs that go into supporting each sale, both internal and external. We plan to generate capital efficiencies by either improving or eliminating programs that do not meet profitability criteria while making changes to our structure in our automotive segment. We're nearing completion of the move of our OEM production to Mexico.

Patrick M. Lavelle: Some of the categories are in growth mode, while others are less profitable with slow to no growth.

Patrick M. Lavelle: As part of our restructuring, we are again looking at every product.

Patrick M. Lavelle: and SKU, every customer program, and determining our true cost to serve, meaning all costs that go into supporting each sale, both internal and external.

Patrick M. Lavelle: We plan to generate capital efficiencies by either improving or eliminating programs that do not meet profitability criteria while making changes to our structure.

Patrick Lavelle: In our automotive segment, we're nearing completion of the move of our OEM production to Mexico. We've already realized some of the improvement, but we're still carrying two facilities. The transition is scheduled for completion by the end of the second quarter, which will then allow us to significantly reduce our physical footprint in Florida to house only our engineering, quality, and admin OEM groups and a small warranty center. There will be further synergies and savings. We're in the process of exiting our RSE program with Stellantis, which I discussed last quarter. We're moving out inventory now and expect this transition to be complete over the next few quarters.

Patrick M. Lavelle: In our automotive segment...

Patrick M. Lavelle: We've already realized some of the improvement, but we're still carrying two facilities. The transition is scheduled for completion by the end of the second quarter, which will then allow us to significantly reduce our physical footprint in Florida to house only our engineering, quality, and admin OEM groups and a small warranty. There will be further synergies and savings. We're in the process of exiting our R&D program with Stellantis, which I discussed last quarter.

Patrick M. Lavelle: We're nearing completion of the move of our OEM production to Mexico.

Patrick M. Lavelle: We've already realized some of the improvement, but we're still carrying two facilities.

Patrick M. Lavelle: The transition is scheduled for completion by the end of the second quarter, which will then allow us to significantly reduce our physical footprint in Florida to house only our engineering, quality, and admin OEM groups and a small warranty center.

Patrick M. Lavelle: There will be further synergies and savings.

Patrick M. Lavelle: We're moving out inventory now and expect this transition to be complete over the next few quarters. We have a new RSC program with Ford, a new lighting system program with Nissan and Volvo, and the new U.S. Postal Service trucks coming online this year and building thereafter. There are also several projects in the works for remote starts, turn signals, lighting, safety, and more.

Patrick M. Lavelle: We're in the process of exiting our RSE program with Stellantis, which I discussed last quarter. We're moving out inventory now and expect this transition to be complete over the next few quarters.

Patrick Lavelle: We have a new RSE program with Ford, a new lighting system program with Nissan and Volvo, and the new U.S. Postal Service trucks coming online this year and building thereafter. There are also several projects in the works for remote starts, current signals, lighting, safety, and more. Our OEM business will continue to face some near-term pressure, but looking ahead, we have some strong business upcoming, and a better margin and cost structure is anticipated. With respect to the aftermarket, it's been a challenge for the past few years, due primarily to the economy. Pressure will continue this year, though our customer inventory levels have improved, and we expect stronger remote start and alarm business as we move into our third quarter.

Patrick M. Lavelle: We have a new RSC program with Ford, a new lighting system program with Nissan and Volvo, and the new U.S. Postal Service trucks coming online this year and building thereafter.

Patrick M. Lavelle: There are also several projects in the works for remote starts, turn signals, lighting, safety, and more.

Patrick M. Lavelle: Our OEM business will continue to face some near-term pressure, but looking ahead, we have some strong business upcoming, and a better margin and cost structure are anticipated. With respect to the aftermarket, it's been a challenge for the past few years, due primarily to the economy. Pressure will continue this year, though our customer inventory levels have improved, and we expect stronger remote start and alarm business as we move into our third quarter.

Patrick M. Lavelle: Our OEM business will continue to face some near-term pressure, but looking ahead, we have some strong business upcoming and a better margin and cost structure is anticipated.

Patrick M. Lavelle: With respect to the aftermarket, it's been a challenge for the past few years, due primarily to the economy.

Patrick M. Lavelle: Pressure will continue this year, though our customer inventory levels have improved, and we expect stronger remote start and alarm business as we move into our third quarter. We have a number of projects underway, and here, too, we are rationalizing brands and SKUs to maximize profitability.

Patrick Lavelle: We have a number of projects underway, and here too. We are rationalizing brands and skews to maximize profitability. In order mode of fiscal 2025 is about optimizing operations and our supply chain, focusing on the categories and customers, where we have stable business and growth prospects, and areas where we can generate better returns.

Patrick M. Lavelle: We have a number of projects underway, and here, too, we are rationalizing brands and SKUs to maximize profitability. In the automotive business, Fiscal 2025 is about optimizing operations and our supply chain, focusing on the categories and customers where we have stable business and growth prospects and areas where we can generate better returns. My comments from year end are the same.

Patrick M. Lavelle: In automotive, Fiscal 2025 is about optimizing operations and our supply chain, focusing on the categories and customers, where we have stable business and growth prospects, and areas where we can generate better returns.

Patrick Lavelle: My comments from year-end are the same. Both OEM and aftermarket sales will be hard pressed, though the segment should be profitable. The key for Vox is what we do now to enhance profits in the coming years as markets improve and the business grows. Within our consumer segment, starting with premium audio, in fiscal 2024, we retooled our sound bar offerings, entered new categories, and launched a number of new products last year, which reversed the slide in the premium audio category and allowed us to expand sales. Our Clipch Flexi sound system and the new Clipch Music City Broadcast Bluetooth speakers are doing well, and we will be introducing a new line of party speakers towards the fourth quarter.

Patrick M. Lavelle: Both OEM and aftermarket sales will be hard pressed, though the segment should be profitable. The key for VOXX is what we do now to enhance profits in the coming years as markets improve and the business grows within our consumer segment, starting with premium audio. In fiscal 2024, we retooled our soundbar offerings, entered new categories, and launched a number of new products last year, which reversed the slide in the premium audio category and allowed us to expand sales. Our Klipsch FLEXUS sound system and the new Klipsch Music City Broadcast Bluetooth speakers are doing well.

Patrick M. Lavelle: My comments from year end are the same. Both OEM and aftermarket sales will be hard pressed, though the segment should be profitable.

Patrick M. Lavelle: The key for VOXX is what we do now to enhance profits in the coming years as markets improve and the business grows.

Patrick M. Lavelle: within our consumer segment.

Patrick M. Lavelle: Starting with premium audio, in fiscal 2024, we retooled our soundbar offerings, entered new categories, and launched a number of new products last year, which reversed the slide in premium audio category.

Patrick M. Lavelle: and allowed us to expand sales.

Patrick M. Lavelle: And we will be introducing a new line of party speakers in the fourth quarter. While our sales were down in fiscal 2024, they were down less than the industry, and we gained market share. Internationally, the state of the international markets today, and even with continued domestic retail and consumer pressure and the state of the international markets today, we anticipate we will continue to see growth this year.

Patrick M. Lavelle: Our Klipsch FLEXUS sound system and the new Klipsch MusicCity Broadcast Bluetooth speakers are doing well, and we will be introducing a new line of party speakers towards the fourth quarter.

Patrick Lavelle: While our sales were down in fiscal 2024, they were down less than the industry, and we gained market share. Internationally, is where our business was impacted most, primarily in Asia. In Q1, our premium audio business grew. Even with continued domestic retail and consumer pressure and the state of the international markets today, we anticipate we will continue to see growth this year. Now, similarly to our other businesses, we are looking at ways to improve both sales and margins while controlling costs. It's a balancing act because while we are certainly cutting where we can, we also continue to invest in new technology and cutting-edge projects, the products.

Patrick M. Lavelle: While our sales were down in fiscal 2024, they were down less than the industry, and we gained market share.

Patrick M. Lavelle: Internationally is where our business was impacted most, primarily in Asia.

Patrick M. Lavelle: and Q1, our premium audio business group.

Patrick M. Lavelle: Even with continued domestic retail and consumer pressure and the state of the international markets today, we anticipate we will continue to see growth this year.

Patrick M. Lavelle: Now, similar to our other businesses, we are looking at ways to improve both sales and margins while controlling costs. The Balancing Act, because while we are certainly cutting where we can, we also continue to invest in new technology and cutting-edge products. This will not stop as it's essential to maintain the brand's loyal customers and drive growth. We are looking at all our brands, channels, customers, and programs, and here, too, seeing where we can improve capital management while potentially optimizing certain assets.

Patrick M. Lavelle: Now, similar to our other businesses, we are looking at ways to improve both sales and margins while controlling costs.

Patrick M. Lavelle: It's a balancing act, because while we are certainly cutting where we can, we also continue to invest in new technology and cutting-edge products.

Patrick Lavelle: This will not stop as it's essential to maintain the brand's loyal customers and drive growth. We are looking at all our brands, channels, customers, and programs, and here too, seeing where we can improve capital management while potentially optimizing certain assets. Clifch and Ankyo continue to anchor our offering and will be the driving brands in our premium audio portfolio. In Q1, we had a dip in other CE product sales as we had a promotional program with Costco in the first quarter last year that was not planned to repeat, and we had lower sales of our solar power balcony product internationally.

Patrick M. Lavelle: This will not stop as it's essential to maintain the brand's loyal customers and drive growth. We are looking at all our brands, channels, customers, and programs, and here too, seeing where we can improve capital management while potentially optimizing certain assets.

Patrick M. Lavelle: Klitsch and Ankyo continue to anchor our offering and will be the driving brands in our premium audio portfolio. In Q1, we had a dip in other CE product sales as we had a promotional program with Costco in the first quarter last year that was not planned to repeat, and we had lower sales of our solar-powered balcony product, International Corp. We expect the solar product sales to rebound in future periods as the shortfall was more timing-related. This category helped drive our highest level of sales of international accessory products in fiscal 2024.

Patrick M. Lavelle: Klitsch & Ankyo continue to anchor our offering and will be the driving brands in our premium audio portfolio.

Patrick M. Lavelle: In Q1, we had a dip in other CE product sales as we had a promotional program with Costco in the first quarter last year that was not planned to repeat.

Patrick Lavelle: We expect the solar product sales to rebound in future periods as the shortfall was more timing related. This category helped drive our highest level of sales of international accessory products in fiscal 2024. A few years ago, we downsized our CE business to focus on fewer categories, and that strategy paid off. Now we're undergoing another retooling of our business, looking at our offerings and seeing where we might be able to generate better returns, whether within categories we're in now or potentially capitalizing in others where we enjoy strong customer relationships. This is not about what we sell today, but rather what is best for Vox and its stakeholders moving forward.

Patrick M. Lavelle: and we had lower sales of our solar-powered balcony product internationally.

Patrick M. Lavelle: We expect the solar product sales to rebound in future periods as the shortfall was more timing related. This category helped drive our highest level of sales of international accessory products in fiscal 2024.

Patrick M. Lavelle: A few years ago, we downsized our CE business to focus on fewer categories, and that strategy paid off. Now we're undergoing another retooling of our business, looking at our offerings and seeing where we might be able to generate better returns, whether within categories we're in now or potentially capitalizing on others where we enjoy strong customer relationships. This is not about what we sell today but rather what is best for VOXX and its stakeholders moving forward, and the last component of our optimization is debt reduction so that we can reduce interest costs and free up capital.

Patrick M. Lavelle: A few years ago, we downsized our CEE business to focus on fewer categories, and that strategy paid off.

Patrick M. Lavelle: Now we're undergoing another retooling of our business, looking at our offerings and seeing where we might be able to generate better returns, whether within categories we're in now or potentially capitalizing in others where we enjoy strong customer relationships.

Patrick M. Lavelle: This is not about what we sell today, but rather what is best for VOXX and its stakeholders moving forward.

Patrick Lavelle: And the last component of our optimization plan is debt reduction, so that we can reduce interest costs and free up capital. Our total debt as a quarter ends stood at approximately $69 million and stands at approximately $62 million today. Our plan is to eliminate approximately $45 million of this debt through a series of transactions that are in process now. We are currently in contract to sell our Orlando facility with the OEM manufacturing transition to Mexico near completion. This is expected to close in the third quarter. And we are in a number of discussions regarding divesting some of our business assets and potentially some of our brands.

Patrick M. Lavelle: And the last component of our optimization plan is debt reduction so that we can reduce interest costs and free up capital.

Patrick M. Lavelle: Our total debt as of quarter end stood at approximately $69 million and stands at approximately $62 million today. Our plan is to eliminate approximately $45 million of this debt through a series of transactions that are in process. We are currently in contract to sell our Orlando facility with the OEM manufacturing transit transition to Mexico nearing completion. This is expected to close in the third quarter.

Patrick M. Lavelle: Our total debt as of quarter-end stood at approximately $69 million.

Patrick M. Lavelle: and stands at approximately $62 million today.

Patrick M. Lavelle: Our plan is to eliminate approximately $45 million of this debt through a series of transactions that are in process now.

Patrick M. Lavelle: We are currently in contract to sell our Orlando facility with the OEM manufacturing transition to Mexico nearing completion. This is expected to close in the third quarter. And we are in a number of discussions regarding divesting some of our business assets and potentially some of our brands.

Patrick M. Lavelle: And we are in a number of discussions regarding divesting some of our business assets and potentially some of our... As these transactions are completed, net proceeds will be used to pay down the debt we incurred in connection with the Sea Guard ruling. If successful, our outstanding debt will largely be related to financing inventory and receivables through our existing ABL line. We have strong relationships with our banks, availability under our current lines, and as we bring debt down, we will free up capital to address any future market downturns while investing in our business.

Patrick Lavelle: As these transactions are completed, net proceeds will be used to pay down the debt we incurred in connection with the CE Guard ruling. The successful are outstanding debt largely be related to financing inventory and receivables through our existing ABL line. We have strong relationships with our banks, availability under our current lines, and as we bring debt down, we will free up capital to address any future market downturns while investing in our business. Over the next two months, we'll be working with a courtian who better assess the data compiled and map out the best pass forward to optimize cash and improve our foundation.

Patrick M. Lavelle: As these transactions are completed, net proceeds will be used to pay down the debt we incurred in connection with the Sea Guard ruling.

Patrick M. Lavelle: is successful. Our outstanding debt will largely be related to financing inventory and receivables through our existing ABL line.

Patrick M. Lavelle: We have strong relationships with our banks, availability under our current lines, and as we bring debt down, we will free up capital to address any future market downturns while investing in our business.

Patrick M. Lavelle: Over the next two months, we'll be working with Accordion to better assess the data compiled and map out the best path forward to optimize cash and improve our foundation. We're looking at reducing overhead by another 5% in the second half of the year. There will be some offsetting costs as we restructure, but ultimately, we'll be operating with a better margin and cost structure. At this point, I'd like to turn the call over to Loriann to cover our financials, and then we'll open up the call for questions. Laurie?

Patrick M. Lavelle: Over the next two months, we'll be working with Accordium to better assess the data compiled and map out the best path forward to optimize cash and improve our foundation. We're looking at minimum to reduce overhead by another 5% in the second half of the year.

Patrick Lavelle: We're looking at minimum to reduce overhead by another 5% in the second half of the year. There will be some offsetting costs as we restructure, but ultimately, we'll be operating with a better margin and cost.

Patrick M. Lavelle: There will be some offsetting costs as we restructure, but ultimately, we'll be operating with a better margin and cost structure.

Loriann Shelton: At this point, I'd like to turn the call over to Loriann to cover our financials, and then we'll open up the call for questions. Loriann Shelton: Thanks, Pat, and hello, everyone.

Speaker Change: At this point, I'd like to turn the call over to Loriann to cover our financials, and then we'll open up the call for questions.

Loriann Shelton: Thanks, Pat, and hello everyone. I will now provide a recap of our first quarter results with a little more color around key sales, margin, and expense drivers. We reported Q1 sales of 91.7 million, which were down a little more than 20 million, or approximately 18%. Our automotive business declined by 10.7 million, with 7.4 million of the decline in OEM sales and 3.3 million of the decline in aftermarket sales. Our OEM business was down due to lower volume in rear seat entertainment with three primary drivers. No revenue from the Nissan program, which ended towards the end of fiscal 2024, lowered domestic volume with Ford as our program was temporarily halted for one vehicle model.

Loriann Shelton: I will now provide a recap of our first quarter results with a little more color around key sales, margin, and expense drivers. We reported Q1 sales of 91.7 million, which were down a little more than 20 million, or approximately 18%. Our automotive business declined by 10.7 million, with 7.4 million of the decline in OEM sales and 3.3 million decline in aftermarket sales. Our OEM business was down due to lower volume and rear seat entertainment with three primary drivers. No revenue from the Nissan program, which ended towards the end of fiscal 2024. Lower domestic volume with Ford as our program was temporarily halted for one vehicle model.

Loriann Shelton: Third, lower revenue from Stellantis as the program is terminated. However, our OEM remote start business more than doubled, driven by our new international program with Ford, and our VSM business was roughly in line with the prior year. The decline in the aftermarket was spread across multiple categories. Consumer segment sales were down 9.4 million, and this was due to non-premium audio CE products, which declined by over 10 million. The biggest impacts were lower sales of wireless speakers as the large program ended, as anticipated.

Speaker Change: Laurie?

Loriann Shelton: Thanks Pat and hello everyone. I will now provide a recap of our first quarter results with a little more color around key sales, margin, and expense drivers.

Lori: We reported Q1 sales of 91.7 million, which were down a little more than 20 million, or approximately 18%.

Lori: Our automotive business declined by $10.7 million, with $7.4 million of the decline in OEM sales and $3.3 million decline in aftermarket sales.

Lori: Our OEM business was down due to lower volume in rear seat entertainment with three primary drivers.

Lori: No revenue from the Nissan program, which ended towards the end of fiscal 2024.

Lori: Lower domestic volume with Ford as our program was temporarily halted for one vehicle model.

Loriann Shelton: Third, lower revenue from Stellantis as the program is terminating. Our OEM remote stock business more than doubled, driven via new international program with Ford, and our VSN business is roughly in line with the prior year. The decline in the aftermarket was spread across multiple categories. The consumer segment sales were down 9.4 million, and this was due to non-premium audio CE products, which declined by over 10 million. The biggest impacts were lower sales of wireless speakers as the large program ended at the anticipated. Lower international sales related to our solar, solar, balcony power products as we had new product loadings last year.

Lori: Third, lower revenue from Stellantis as the program is terminating. Our OEM remote start business more than doubled, driven by our new international program with Ford and our VSM business was roughly in line with the prior year.

Lori: The decline in the aftermarket was spread across multiple categories.

Lori: The consumer segment sales were down 9.4 million, and this was due to non-premium audio CE products, which declined by over 10 million. The biggest impacts were lower sales of wireless speakers as the large program ended, as anticipated.

Loriann Shelton: Lower international sales related to our solar balcony power products as we had new product load-ins last year. However, our premium audio business increased by 800,000, and our domestic business was up over 11%, with new products driving the growth. In Asia, we continue to have softness, but overall, Klipsch and the premium audio product lines are doing well.

Lori: Lower international sales related to our solar balcony power products as we had new product load-ins last year.

Loriann Shelton: Our premium audio business increased by 800,000, and our domestic business was up over 11% with new products driving the growth. In Asia, we continue to have softness, but overall clips and the premium audio product lines are doing well. This goal 2025 Q1 gross margins of 27.7 percent were up 310 basis points. We had a 220 basis point increase in our automotive segment and a 410 basis point increase in our consumer segment. Managing the supply chain over the past two years has been a challenge. There's a little more normalcy in the market now, which helps with forecasting, planning, and operations.

Lori: Our premium audio business increased by 800,000 and our domestic business was up over 11% with new products driving the growth.

Lori: In Asia, we continue to have softness, but overall, Klipsch and the premium audio product lines are doing well.

Loriann Shelton: Fiscal 2025 Q1 gross margins of 27.7% were up 310 basis points. We had a 220 basis point increase in our automotive segment and a 410 basis point increase in our consumer segment. Managing the supply chain over the past two years has been a challenge. There's a little more normalcy in the market now, which helps with forecasting, planning, and operations. This helped bring down warehousing expenses considerably. We should also have more pickup from future restructuring initiatives, which are focused both on improving margins and lowering expenses.

Lori: Fiscal 2025 Q1 gross margins of 27.7% or up 310 basis points. We had a 220 basis point increase in our automotive segment and a 410 basis point increase in our consumer segment.

Lori: Managing the supply chain over the past two years has been a challenge.

Lori: There's a little more normalcy in the market now, which helps with forecasting, planning, and operations.

Loriann Shelton: This help bring down warehousing expenses considerably. We should also have more pickup from future restructuring initiatives, which are focused on improving margins and lowering expenses.

Lori: This helped bring down warehousing expenses considerably.

Lori: We should also have more pickup from future restructuring initiatives, which are focused both on improving margins and lowering expenses.

Loriann Shelton: With the changes we have implemented, we lowered expenses by 6.5 million or 16.6 percent when comparing the Q1 period. We are constantly looking to reduce expenses and lower our overhead. During the past quarter, we implemented worldwide headcount reductions. We brought down our trade show, web, and advertising expenses. Legal and professional fees decline significantly, especially with the C Guard situation behind us and also due to the fact that we brought certain legal functions in-house and have been consolidating other functions throughout the organization. Our legal costs moving forward should normalize, with lower expenses projected in the second half compared to the prior year.

Loriann Shelton: With the changes we have implemented, we lowered expenses by $6.5 million, or 16.6% when compared to the Q1 period. We are constantly looking to reduce expenses and lower our overhead. During the past quarter, we implemented worldwide headcount reduction. We brought down our trade show, web, and advertising expenses. Legal and professional fees declined significantly, especially with the SeaGuard situation behind us, and also due to the fact that we brought certain legal functions in-house and have been consolidating other functions throughout the organization. Our legal costs moving forward should normalize, with lower expenses projected in the second half compared to the prior year.

Lori: With the changes we have implemented, we lowered expenses by $6.5 million or 16.6% when comparing the Q1 periods.

Lori: We are constantly looking to reduce expenses and lower our overhead. During the past quarter, we implemented worldwide headcount reductions.

Lori: We brought down our trade show, web and advertising expenses.

Lori: Legal and professional fees declined significantly, especially with the SeaGuard situation behind us and also due to the fact that we brought certain legal functions in-house and have been consolidating other functions throughout the organization.

Lori: Our legal costs moving forward should normalize, with lower expenses projected in the second half compared to the prior year.

Loriann Shelton: Across the board, we're reducing our non-course spend and freeing up resources that can be reinvested in the company, whether in people, sales, R&D, or technology, anything that could help drive efficiencies and savings and, at the same time, better support our business.

Loriann Shelton: Across the board, we're reducing our non-core spend and freeing up resources that can be reinvested in the company, whether in people, sales, R&D, or technology. Anything that can help drive efficiencies and savings and, at the same time, better support our business. As Pat discussed, our ERP upgrade kicked off June 1st. It's a big project, and we're excited to announce our partnership with Oracle and AST to implement Oracle Fusion. This product and the technology behind it will allow us to automate most of our back-office functions, making it easier for customers to do business with us.

Lori: Across the board, we're reducing our non-core spend and freeing up resources that can be reinvested in the company.

Lori: Whether in people, sales, R&D or technology, anything that could help drive efficiencies and savings and at the same time better support our business.

Loriann Shelton: As Pat discussed, our ERP upgrade kicked off June 1st. It's a big project. We're excited to announce our partnership with Oracle and AST to implement Oracle Fusion. This product and the technology behind it will allow us to automate most of our back office functions, making it easier for customers to be business with us. It will also enable us to leverage technology to perform revenue generating tasks with better data, greater visibility, and leverage our experienced personnel across different areas of our business. We've taken a lot of expenses out of our business year-to-date, and more will be removed.

Speaker Change: As Pat discussed, our ERP upgrade kicked off June 1st. It's a big project and we're excited to announce our partnership with Oracle and AST to implement Oracle Fusion.

Speaker Change: This product and the technology behind it will allow us to automate most of our back-office functions.

Loriann Shelton: It will also enable us to leverage technology to perform revenue-generating tasks with better data, greater visibility, and leverage our experienced personnel across different areas of our business. We've taken a lot of expenses out of our business year to date, and more will be removed. Lastly, we lost $7.1 million on an operating basis, a $4.3 million improvement year over year, and reported an adjusted EBITDA loss of $2.9 million, an improvement of $2.1 million.

Speaker Change: making it easier for customers to do business with us.

Speaker Change: It will also enable us to leverage technology to perform revenue generating tasks with better data, greater visibility, and leverage our experienced personnel across different areas of our business.

Loriann Shelton: Lastly, we lost $7.1 million on an operating basis, a $4.3 million improvement year-over-year, and reported an adjusted EBIT loss of $2.9 million, an improvement of $2.1 million. We expect to lose money in the second quarter and to be profitable in the second half on an operating income basis. To reiterate, profitable for the fiscal year.

Speaker Change: We've taken a lot of expenses out of our business year to date and more will be removed.

Speaker Change: Lastly, we lost $7.1 million on an operating basis, a $4.3 million improvement year over year and reported an adjusted EBITDA loss of $2.9 million, an improvement of $2.1 million.

Loriann Shelton: We expect to lose money in the second quarter and to be profitable in the second half on an operating income basis, to reiterate, profitable for the fiscal year. I believe Pat talked about our balance sheet plan, so rather than reiterate published numbers, let me just add a few closing remarks. Change is not going to happen overnight.

Speaker Change: We expect to lose money in the second quarter and to be profitable in the second half on an operating income basis.

Loriann Shelton: I believe Pat talked about our balance sheet plans, so rather than reiterate published numbers, let me just add a few closing remarks. Change is not going to happen overnight. Our business is cyclical, and we constantly adjust. We are light sizing our business based on our anticipated size this year and realigning operations to drive savings and efficiencies. We're investing in technology in our product lines. Our model is focused on compressing overhead and driving more profitable revenue.

Speaker Change: to reiterate, profitable for the fiscal year. I believe Pat talked about our balance sheet plans, so rather than reiterate published numbers, let me just add a few closing remarks.

Loriann Shelton: Our business is cyclical, and we constantly adjust. We are right-sizing our business based on our anticipated size this year and realigning operations to drive savings and efficiencies. We're investing in technology and in our product lines, and our model is focused on compressing overhead and driving more profitable revenue.

Speaker Change: Change is not going to happen overnight. Our business is cyclical and we constantly adjust.

Speaker Change: We are right-sizing our business based on our anticipated size this year and realigning operations to drive savings and efficiencies.

Speaker Change: We're investing in technology and in our product lines.

Loriann Shelton: I'd like to thank you all today for listening in and operating. We are now ready for questions. Thank you.

Loriann Shelton: I'd like to thank you all today for listening in and operating. We are now ready for questions. Thank you.

Speaker Change: And our model is focused on compressing overhead and driving more profitable revenue. I'd like to thank you all today for listening in and operating. We are now ready for questions.

Operator: Thank you. To ask a question, please press Star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Please stand by while we compile the Q&A roster. As a reminder, that's Star 1-1 to ask a question at this time. And I'm currently showing no questions at this time.

Operator: To ask a question, please pre-star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please pre-star 1-1 again. Please stand by.

Speaker Change: Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced.

Operator: We will compile the Q&A roster. As a reminder, the star 1-1 to ask a question at this time.

Speaker Change: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: As a reminder, that's star 1-1 to ask a question at this time.

Operator: And I'm currently showing no questions at this time.

Patrick M. Lavelle: I'd like to hand the call back over to Pat Lavelle for her closing remarks.

Patrick Lavelle: I'd like to hand the call back over to Pat Lavelle for closing remarks. Thank you all for calling in and your support. Our programs are underway, and I hope to report good progress in the quarters ahead as we move further into this fiscal year. I want to thank you again for coming on and wish you a good day.

Patrick M. Lavelle: Okay, well, thank you. Thank you all for calling in and for your support. Our programs are underway, and I hope to report good progress in the quarters ahead as we move further into this fiscal year. I want to thank you again for coming on and wish you a good day.

Speaker Change: And I'm currently showing no questions at this time. I'd like to hand the call back over to Pat Lavelle for closing remarks.

Patrick M. Lavelle: Okay, well thank you. Thank you all for calling in and your support.

Patrick M. Lavelle: Our programs are underway and I hope to report good progress in the quarters ahead as we move further into this fiscal year. I want to thank you again for coming on and wish you a good day.

Operator: This concludes today's conference call. Thank you for your participation.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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