Q2 2025 VOXX International Corp Earnings Call
Speaker Change: Welcome to the Ciscule!
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Speaker Change: 2,025 second quarter results conference call. At this time, 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.
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Speaker Change: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star, one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Glenn Wiener of Investor Relations. Your mind is open.
Operator: Please be advised that today's conference is being recorded.
Glenn Wiener: I would now like to hand the conference over to your speaker today, Glenn Wiener, of a vested relation. Your mind is open. Thank you very much, and good morning.
Glenn Wiener: Welcome to VOX International's fiscal 2025 second 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.
Glenn Wiener: Thank you very much, and good morning. Welcome to Box International's fiscal 2025. I can quote a results conference call.
Glenn Wiener: Yes, today we followed our Form 10 Q initiative press release, both documents of which can be found in the Investor Relations section of our website at www.voxiantl.com I'm joined today by Pat Lavelle, Chief Executive Officer in Loriann Shelton, Chief Financial Officer and Chief Operating Officer.
Glenn Wiener: I'm joined today by Pat Lavelle, Chief Executive Officer, and Loriann Shelton, Chief Financial Officer, and a Chief Operating Officer. They will be leading today's call with prepared remarks, after which we will open up the call for questions. There's been a lot of activity over the past quarter, and we certainly welcome questions on today's call. Alternatively, you can reach my office at any time. Should you like to follow up offline?
Glenn Wiener: Dave will be leading today's call with the pair of marks after which we will open up the call for questions.
Dave: He's been a lot of activity over the past quarter and we certainly welcome questions on today's call. Alternatively, you can reach my office at any time, so you'd like to follow up off one. And that's for our customer to stay part of our statement and disclaimer. I'd like to remind everyone that except for historical information contained here in, statements made on today's call on webcast that would constitute forward-looking statements or based on currently available information.
Glenn Wiener: And that's for our customary safe harbor statement and disclaimer. 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 for the period ended February 29th, 2024.
Dave: 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 410K, for the period ended February 29, 2024. With that, it is now my pleasure to turn the call over to Patrick Lavelle, Pat.
Patrick Lavelle: With that, it is now my pleasure to turn the call over to Pat Lavelle. Pat. Thank you, Glenn, and good morning, everyone. There have been several very important milestones since we reported our Q1 results in May, and before I go into the quarterly financials and business outlook, I thought it'd be best to spend some time talking about our strategy and how these events tie the way. Further, as I run through our business segments, I'll highlight many of the actions we've taken, as well as programs underway and upcoming, that collectively should give blocks back into a stronger, more profitable company, and one that is more highly valued.
Pat Lavelle: Thank you Glenn, and good morning everyone.
Pat Lavelle: There have been several very important milestones since we reported out to you one results in May and before I go into the quarterly financials and business outlook
Pat Lavelle: I thought it'd be best to spend some time talking about our strategy and how these events tie the whip.
Pat Lavelle: Further, as I run through our business segments, I'll highlight many of the actions we've taken as well as programs underway and upcoming that collectively should get dropped back into a stronger, more profitable company and one that is more highly valued.
Patrick Lavelle: When we entered fiscal 2024, we were sitting with over $73 million in total debt. This followed the adverse Sea Guard ruling, which added $42 million in debt, which was already too high, given contributing losses at that time, so we set out to accomplish two things. The first was to pay down our debt as fast as we could, as this would lower our interest payments and increase our available borrowings. It would also give us the financial flexibility we had historically enjoyed, given our past low debt leverage ratios. And number two, do the hard but necessary things necessary to both restructure and right-size our business based on anticipated sales in the coming year.
Pat Lavelle: When we entered fiscal 2024, we were sitting with over $73 million in total dust.
Pat Lavelle: This followed the adverse C-guard ruling, which added $42 million in debt, which was already too high given contributing losses at that time. But we set out to accomplish two things.
Pat Lavelle: The first was to pay down our debt as fast as we could as this would lower our interest payments and increase our available borrowings.
Pat Lavelle: It also gives us the financial flexibility we had historically enjoyed, given our past and low debt leverage ratios.
Pat Lavelle: And number two, do the hard but necessary things, necessary to both restructure and right size our business based on anticipated sales in the coming year. To do this, we had to realign around what our business would be given strategic ambassadors that were in play.
Patrick Lavelle: To do this, we had to realign around what our business would be, given strategic divestitures that were in play. We've made significant progress on both fronts since year end, with more time, which brings me to number three, the strategic alternative process. During the quarter, we entered into a strategic process to quickly improve our balance sheet and get logs back to profitability, exploring everything that may be out there, whether it be brand sales, other asset sales, group run or business sales, joint ventures or partnerships, and even the possibility of selling the company. We continue to receive interest for our brands and businesses, so we have a pretty good sense for the value we can commend from them.
Pat Lavelle: We've made significant progress on both fronts since year end, with more come, which brings me to number three the strategic alternative process.
Pat Lavelle: During the quarter, we entered into a strategic process to quickly improve our balance sheet and get vlogs back to profitability, exploring everything that may be out there, whether it be brand sales, other assets sales, group on our business sales, joint renters of partnerships, and even the possibility of selling the company.
Pat Lavelle: We continue to receive interest for our brands and businesses, so we have a pretty good sense for the value we can command from them.
Patrick Lavelle: The process now is designed to expand the universe of interested parties and really look at the best path forward to leverage our strengths, monetize non-core assets, and build out a more profitable and valuable business for our shareholders. Thus, we will continue to speak with interested parties for parts of our business, as well as those that may be interested in VOXX in its entirety, such as Gentex.
Pat Lavelle: The process now is designed to expand the universe of interested parties and really look at the best path forward to leverage our strengths, monetize, non-core assets and build out a more profitable and valuable business for our shareholders.
Pat Lavelle: Thus, we will continue to speak with interested parties for parts of our business, as well as those that may be interested in vops in its entirety such as Gentex.
Patrick Lavelle: Frankly, we would have preferred to wait until sometime in fiscal 2025 when we believe we'll be in a better financial position, having paid down our debt, realign the business, and hopefully present a more profitable business, generating cash flow and earnings, and commanding a higher valuation in the open markets. To this end, during this quarter, we sold our domestic accessory business, which was underperforming. We sold off two non-core brands in our premium audio portfolio, and we sold our Florida real estate. With the OEM manufacturing transition to Mexico now complete, the Florida facility is not needed. This provided us with 48 million in gross proceeds, which we used to pay down debt.
Pat Lavelle: Franklin, we would have preferred to wait until sometime in fiscal 2025, when we believe we'll be in a better financial position, having paid down our debt, realign the business, and hopefully present a more profitable business, generating cash loan earnings, and commanding a higher valuation in the open markets.
Pat Lavelle: To this end during this quarter, we sold our domestic accessory business which was underperforming.
Pat Lavelle: We sold off two mine core brands in our premium audio portfolio.
Pat Lavelle: and we sold our Florida Real Estate with the OEM Manufacturing Transition to Mexico now complete.
Pat Lavelle: The Florida Facility is not made it.
Pat Lavelle: This provided us with 48 million engross proceeds which we use to pay down debt.
Patrick Lavelle: In addition, we completed initial restructuring programs, generating targeted improvements. We moved through heavy inventory loads across our business lines. Our inventory, which was sitting at over 128 million, came down approximately 15 million since then, allowing us to pay down debt and to operate under more normal working capital environments. We moved further along in our ERP implementation, which long term will greatly enhance efficiencies and lead to significant cost savings. And we altered a lot of the processes and our structure at last, changing with the future state in mind. We're setting up our foundation to operate on a lower fixed cost basis moving forward so that we can support our growth in the future.
Pat Lavelle: In addition, we completed initial restructuring program, generating targeted improvements.
Pat Lavelle: We moved through heavy inventory loads across our business lines. Our inventory, which was sitting at over 128 million, came down approximately 15 million since then, allowing us to pay down debt as to operate under more normal working capital environments.
Pat Lavelle: We move further on in our ERP implementation, which long-term will greatly enhance efficiencies and lead to significant cost savings.
Pat Lavelle: and we altered a lot of the processes and our structure at blocks.
Pat Lavelle: Changing with the future state in mind.
Pat Lavelle: We're setting up our foundation to operate on a lower fixed-cost basis moving forward so that we can support our growth in the future. And I believe when complete, we will be able to scale sales without adding much incremental cost.
Patrick Lavelle: And I believe when complete, we will be able to scale sales without adding much incremental cost.
Patrick Lavelle: Laurie and we'll talk about our restructuring and balance sheet in her remarks, so I'll move on. But again, paying down our debt was critical and was our number one priority. And to that end, we paid down over 50 million in total debt since your end. And we did this without impacting operations. Collectively, we removed about 49 million and predominantly lower margin sales based on fiscal 24 figures. And lastly, I'm especially pleased to report that our total debt, as of October 9, stood at under 20 million, and our net debt under 15 million, which is now essentially made up of just working capital debt.
Speaker Change: Loriann will talk about our restructuring and balance sheet in her remarks, so I'll move on. But again, paying down our debt was critical, and was our number one priority. And to that end, we paid down over 50 million in total debt since year end.
Speaker Change: and we did this without impacting operations.
Speaker Change: Collective Lee, we removed about 49 million in predominantly lower margin sales based on fiscal 24 figures.
Speaker Change: and last week.
Speaker Change: I'm especially pleased to report that our total debt, as of October 9, stood at under 20 million and our net debt under 15 million, which is now essentially made up of just working capital debt.
Patrick Lavelle: So I would say we achieved our first goal, and on time.
Speaker Change: So I would say we achieved our first goal and on time.
Patrick Lavelle: So let's move on to the results in our outlook, starting with automotive. Through the first half of fiscal 25, our automotive business is down considerably, and we both expected and planned for it. A few comments on history and strategy, so some of our newer investors have more insight into why our results were down and why our outlook should be better as we move forward. Prior to COVID, our automotive group was on the upswing. We had the number one market position in rear-seed entertainment and remote starts, and a stable and profitable business. With our Amazon deal to bring Fire TV into the car, our prospects got even better as this was an industry first and we had hundreds of millions of dollars in new long-term rear-seat awards.
Speaker Change: So let's move on to the results in our outlook starting with what it motives.
Speaker Change: Through the first half of fiscal 25, our automotive business is down considerably, and we both expected and planned for it.
Speaker Change: Few comments on history and strategy, so some of our newer investors have more insight into why our results would down and why our outlook should be better as we move forward.
Speaker Change: Prior to COVID, our automotive group was on the upswing.
Speaker Change: We had the number one market position in rear seat entertainment and remote starts and a stable and profitable business.
Speaker Change: With our Amazon deal to bring fire TV into the car, our prospects got even better as this was an industry first, and we had hundreds of millions of dollars in new long-term, rear-seat awards.
Patrick Lavelle: We were also getting new contracts out of our more recently acquired OEM operation VSM, and we were working on some very exciting integrated projects with partners, and then COVID hit. The automotive market over the past four years has still not fully recovered. That's the reality of the past. We constantly were taking actions to offset higher prices, product and component shortages, shipment delays, retailer issues, interest rates, and more. We had various component price increases from vendors, especially in ships and renegotiated contracts, but at the end of the day we had to change in order to stop the declines and turn this once consistently profitable business back into a cash generating entity.
Speaker Change: We are also getting new contracts out of our more recently acquired OEM operation, the ESM, and we will work on some very exciting integrated projects with partners.
Speaker Change: and then COVID it.
Speaker Change: and the automotive market over the past four years has still not fully recovered.
Speaker Change: So that's the reality of the pitch.
Speaker Change: We constantly were taking actions off that higher prices.
Speaker Change: Product and Component shortages, shipment delays, retail erratries, interest rates and more.
Speaker Change: with a various component price increases from vendors.
Speaker Change: especially in chips.
Speaker Change: and Renegosherated Contracts, but at the end of the day we had to change in order to stop the declines.
Speaker Change: and turned this once consistently profitable business back into a cash-generating entity.
Patrick Lavelle: During the first half of fiscal 25, our automotive segments are at a 26.8% dip in sales and at an 80 basis point increase in gross margin, but lost 3.6 million on a pre-tax basis. Now the second half should improve, but still there are a lot of obstacles we must deal with daily and overcome to ensure we get back to profitability. We have been managing the global supply chain very well. That's one area the team continues to excel at, in my opinion, have done an excellent job this past year, given everything that has been thrown at us.
Speaker Change: During the first half of fiscal 25, our automotive segments are 26.8% dip in sales, and an 80% basis point increase in growth margin, but lost 3.6 million on a pre-tax basis.
Speaker Change: Now the second half should improve but still there are a lot of obstacles we must deal with daily and overcome to ensure we get back to profitability.
Speaker Change: We have been managing the global supply chains very well. That's one area that the team continues to excel at in my opinion, have done an excellent job this past year, give it everything that has been thrown out of us.
Patrick Lavelle: Past price increases from vendors should be more normalized as newer programs kick off, and we have several plans in the second half and into fiscal 26 and beyond. With our OEM manufacturing transitioning to Mexico and the significantly lower cost to produce and lower cost of labor, coupled with more consistent OEM production, which will improve absorption, gross margins should improve. We will continue to pressure existing customers to modify pricing so that it makes sense to continue our programs with them. This may impact top line revenue; however, we must ensure all programs remain profitable. Couple with the fact that we have several new programs coming online for heavy-duty trucks and vehicles, which are smaller in nature than the car manufacturers, but these are long-term profitable contracts.
Speaker Change: Pass pricing creases from vendors should be more normalized as newer programs kick off and we have several planned in the second half and into fiscal 26 and beyond.
Speaker Change: with our OEM manufacturing transition into Mexico, and the significantly lower costs to produce and lower costs of labor, coupled with more consistent OEM production, which will improve absorption, gross margins should improve.
Speaker Change: We will continue to pressure existing customers to modify pricing so that it makes sense to continue our programs with them. This may impact top line revenue, however, we must ensure all programs remain profitable.
Speaker Change: Couple with the fact that we have several new programs coming online for heavy duty trucks and vehicles, which are smaller in nature than the karma manufacturers, but these are long-term profitable contracts.
Patrick Lavelle: and we have several for remote start and security products as well. For example, in Q4, Ford will be launching a new rear-scene entertainment system for the Navigator and the Expedition. And we will continue to grow our security program with Ford, as well as we have been awarded new vehicles for the Middle East market. Nissan has kicked off their lighting program that we've talked about previously. The U.S. Postal Service program, which I've discussed, is scheduled for a full launch in fiscal 2026. It's a multi-year contract that is expected to ramp considerably next year and over the next several years thereafter.
Speaker Change: and we have several for remote start and security products as well. For example, in Q4, Ford will be launching a new RearSeen Entertainment System.
Speaker Change: for the Navigator and the Expedition.
Speaker Change: and we will continue to grow our security programs with Ford as well as we have been awarded new vehicles for the Middle East Market.
Speaker Change: Nieson has kicked off their lighting program that we've talked about previously.
Speaker Change: The U.S. Postal Service Program, which I've discussed, is scheduled for a full launch in fiscal 2026. It's a multi-year contract that is expected to ramp considerably next year and over the next several years thereafter.
Patrick Lavelle: We have had some new OEM products and integrated systems that are also expected to open up new channels. For example, we currently supply our phone as a key product for the over-road UPS tractor trailers. And we are in tests with a number of fleets that, if awarded, could generate substantial new business in this area.
Speaker Change: We have had some new OEM products and integrated systems that are also expected to open up new channels.
Speaker Change: For example, because we currently supply our phone as a key product for the overgrown UPS tractor trailers.
Speaker Change: and we are in test with a number of fleets that if awarded could generate substantial new business in this area.
Patrick Lavelle: Aftermarket is where we've been hit hard, and it's pretty much related to lower car sales and a weak consumer and retail environment caused by inflation and high interest. We have managed the inventory very closely, and as a result, we're entering the stronger part of the year with a much better inventory position. As for our consumer business, within consumer we sold domestic accessories during the quarter for $25 million while still maintaining our European operations box Germany. Between old Bach and Schweiger, we do over $30 million in sales, and the business has been historically profitable. The big growth driver for our international accessory business last year was the new solar power balcony product that was introduced.
Speaker Change: Aftermarket is where we've been hit hard and it's pretty much related to lower car sales and a weak consumer and retail environment caused by inflation and high interest.
Speaker Change: We have managed the inventory very closely, and as a result, we're entering the stronger part of the year with a much better inventory position.
Speaker Change: As for our consumer business, within consumer we sold domestic accessories during the quarter for $25 million, while still maintaining our European operation box Germany.
Speaker Change: Between Old Rock and Schweiger, we do over 30 million dollars in sales and the business has been historically profitable.
Speaker Change: The big growth drivers for our international accessory business, the overwhelming popularity of this program, a number of competitors have entered the market just as the German and Austria economy, the largest market for our accessory group has gone into recession.
Patrick Lavelle: But due to the overwhelming popularity of this program, a number of competitors have entered the market just as the German and Austria economy, the largest market for our accessory group, has gone into recession. We expect the market to normalize as the glut of competitors lessens or exits the market altogether. Schweiger is the leading accessory company supplying the do-it-yourself market in Germany and Austria. They have great market position, and they anticipate sales will rebound as we move into next fiscal 2026.
Speaker Change: We expect the market to normalize as the glut of competitors lesson or exit the market altogether. Shwiger is the leading accessory company supplying the do it yourself, market in Germany and Austria.
Speaker Change: The have great market position, and they anticipate sales will rebound as we move into next fiscal 2026.
Speaker Change: The bulk of this segment is premium audio.
Patrick Lavelle: The bulk of this segment is premium audio, and here is where we have the greatest optimism for near-term value creation from an operations and cash flow perspective. Similar to the automotive segment, COVID had a big impact on our business, but in different ways. We saw two very strong years of sales and profitability as consumers were purchasing more as they at home products as they were locked in their homes. The following two years, we saw industry sales drop just as quickly due to them leaving their homes and doing more experiential vacations and dining out, as well as the fact that the normal buying patterns, the normal buying cycles were interrupt.
Speaker Change: And here is where we have the greatest optimism for near-term value creation, from an operations and cash flow perspective.
Speaker Change: Similar to the automotive segment, Stoehr had a big impact on our business but in different ways.
Speaker Change: We saw two very strong years of sales and profitability as consumers were purchasing more at home products as they would lock them their homes.
Speaker Change: The following two years, we saw our industry sales drop, just as quickly due to them leaving their homes and doing more experiential vacations and dining out.
Speaker Change: as well as the fact that the normal buying patterns, the normal buying cycles, were interrupted.
Speaker Change: Consumers, we typically purchase a speaker, a home theater system, every three to five years, and purchase products all at once during COVID when they were at home no longer were in the cycle to the following years. That's what created market imbalance.
Patrick Lavelle: Councilor, we typically purchase a speaker, a home theater system every three to five years, and purchase products all at once during COVID when they were at home; no longer were in the cycle for the following years, thus it created market imbalance. Couple this with the fact that we had supply chain and retailer issues, high interest rates, and inflation, and more, it became a challenging two years. While our sales are down just two and a half million year to date, newer products have been selling strong and higher margin products as well. We are seeing increases in our new sound bar business; we have made significant strides in new audio categories like our Bluetooth Music City series and with our new party speakers coming to market later this year.
Speaker Change: Coupled this with the fact that we had supply chain and retailer issues, high interest rates and inflation and more, it became a challenge in two years.
Speaker Change: Well, ourselves, you're down just two and a half million years to date, newer products have been selling strong and higher margin products up as well. We are seeing increases in our new sound bar business. We have made significant strides, new audio categories, like our Bluetooth Music City series, and with our new party speakers coming to market later this year.
Speaker Change: We expect our top line revenue to be essentially in line with last year, but we do expect it to be your year, significantly improved profitability with growth around the corner.
Patrick Lavelle: We expect our top line revenue to be essentially in line with last year, but we do expect it to be a year significantly improved profitability with growth around the corner. Through the first six months of the fiscal year, despite over 21 million decline in total consumer segment sales, we generated pre-tax income of 4.6 million compared to a loss of 7 million in fiscal 2024. We are expecting a stronger second half of premium audio as well, both sales and profitability, and we maintain a smaller international accessory business with significant growth potential, but there are very high comparables based on the strong launch in the prior year and the competition I just spoke about.
Speaker Change: Through the first six months of the fiscal year, despite over 21 million decline in total consumer segments sales, we generated pre-tax income of 4.6 million, compared to a loss of 7 million in fiscal 2024.
Speaker Change: We're expecting a stronger second half for premium audio as well, both sales and profitability. And we maintain a smaller international accessory business with significant growth potential.
Speaker Change: But there are very high comparables based on the strong launchings in the prior year and the competition I just spoke about.
Speaker Change: I'm not going to rehash all of the products for clips, but know this, we invested in R&D.
Patrick Lavelle: I'm not going to rehash all of the products for Klipsch, but know this. We invested in R&D. We combined part of Onkyo's R&D with Klipsch's, bringing the best in design and electronics and acoustics together. And I'm really looking forward to some of the new products that consumers will see starting in the second half of this year and moving into calendar years 25 and 26, and will be a cross home audio, electronics, lifestyle audio, gaming, and more.
Speaker Change: We combined part of Vankios R&D with Clipschus.
Speaker Change: Greening the best in design and electronics and acoustics together.
Speaker Change: And I'm really looking forward to some of the new products that consumers will see starting in the second half of this year and moving into calendar years 25 and 26.
Speaker Change: and will be a cross.
Speaker Change: Home Audio, Electronics, Lifestyle Audio, Gaming and More.
Speaker Change: To put it all together and who we are today. Vox is an automotive business that should be stable and have a lower cost structure and working capital needs.
Patrick Lavelle: To put it all together and who we are today, Vox is an automotive business that should be stable and have a lower cost structure and working capital needs. A consumer business made up predominantly of strong premium audio brands that can grow modestly but still generate significantly higher profits. And we are a holder of two equity investments, one in Biosentory and LLC, a biometrics business and the other is an ASA Electronics LLC, our long-standing joint venture that historically has been profitable, has great upside and significant value. We've done a lot of heavy lifting, and we have more ahead to get where we need to be, but we believe we are on the right track knowing we have taken care of debt, we've improved operations, and we maintain or have grown market share.
Speaker Change: A consumer business made up predominantly of strong, premium audio brands that can grow modestly but still generate significantly higher profits.
Speaker Change: And we are a holder of two equity investments, one in biosentering LLC, our biometric business, and the other is in ASA Electronics LLC, our long-standing, sending joint venture. That historically has been profitable, has great upside, and significant value.
Speaker Change: We've done a lot of heavy lifting, and we have more ahead to get where we need to be, but we believe we are on the right track, knowing we have taken care of debt, we've improved operations, and we maintain or have grown market share.
Speaker Change: At this point, I'd like to turn the call over to Loriann, and then we'll open it for questions.
Loriann Shelton: At this point, I'd like to turn the call over to Laurie, and then we'll open it for questions. Laurie Ante. Thank you, Patty. Good morning to all of those joining us today.
Loriann Shelton: Thank you, Patrick. Good morning to all of those joining us today.
Loriann Shelton: Pat talked to the first pack of the year and I'll provide a brief recap of the quarter.
Loriann Shelton: Pat talk to the first pass. of the year, and I'll provide a brief recap of the quarter. Rather than read through all of the financials, I'll spend the time talking more about the restructuring and what we've accomplished, our ERP conversion, what it means for us, and where we are now, and lastly our balance sheet with brief discussions around each transaction. Future working capital needs, our capital structure, then we'll open up the call for questions. I'll start with our fiscal second quarter financial comparisons for the periods ending August 31st, 2024, and August 31st, 2023. We reported Q2 sales of 92.5 million, which were down 21.2 million, or 18.6%.
Loriann Shelton: Rather than read through all of the financials of spend the time talking more about the restructuring and what we've accomplished, our ERP conversion, what it means for us, and where we are now, and lastly our balance sheet.
Loriann Shelton: with brief discussions around each transaction.
Loriann Shelton: Future Working Capital needs our capital structure.
Speaker Change: Daniel, open up the call for questions.
Speaker Change: I'll start with our fiscal second quarter financial comparisons for the period ending August 31st, 2024 and August 31st, 2023.
Speaker Change: We reported Q2 sales of 92.5 million, which were down 21.2 million, or 18.6%.
Speaker Change: Our automotive business declined by 9 million, with 5.2 million of the decline we laid into OEM, and then we made it to other automotive electronic products.
Loriann Shelton: Our automotive business declined by 9 million, with 5.2 million of the decline related to OEM, and they're remade into other automotive electronic products. The biggest OEM shortfall was in rear seat entertainment due to lower volumes. The consumer segment sales were down 12 million, with premium audio down 3.3 million, and other CE product sales down 8.7 million. The decline in premium audio relates to the fact that last fiscal year included roughly 2.7 million in higher closed-out promotion sales, and general softness in the global audio market. We did, however, get a nice sales pickup from the new product lines past discussed.
Speaker Change: The biggest OEM shortfall was in rear seat entertainment due to lower volumes.
Speaker Change: The consumer segment sales were down 12 million with premium audio down 3.3 million and other CE products sales down 8.7 million.
Speaker Change: The decline in premium audio relates to the fact that last fiscal year included roughly 2.7 million in higher closed-out promotions sales and general softness in the global audio market.
Speaker Change: We did however get a nice sales pick up from the new product blinds Pat Discuss.
Speaker Change: Several lines with down will others were off and we expect more of the same as the market continues to transition.
Loriann Shelton: Several lines were down while others were up, and we expect more of the same that the market continues to transition. We also believe that profitability will be enhanced due to the higher margin structure of the new line. The decline in other CE products can be paid to lower year-over-year sales volumes of solar power products in Germany, which were down 8.2 million, as we had high loadings in the prior year period. Fiscal 2025 Q2 gross margins were 24.5% were down 70 basis points. What a mode of segment margins declined 70 basis points primarily due to product mix and sales declines in higher margin categories, as well as inventory obsolescence.
Speaker Change: We also believe that profitability will be enhanced due to the higher margin structure of the new lines.
Speaker Change: The decline in other CE products can be paid to lower year over year sales volumes of solar power products in Germany, which were down 8.2 million as we had high loadings in the prior year period.
Speaker Change: This will 2025-22 gross margins were 24.5% or down 70 basis points.
Speaker Change: Wooden mode of segment margins to crime 70 basis points primarily due to product mix and sales to crimes and higher margin categories as well as inventory obsolescence.
Speaker Change: Consumer margins with down 40 faces points primarily due to the sales decline in Europe and Asia.
Loriann Shelton: Consumer margins with down 40 basis points, primarily due to the sales declines in Europe and Asia. Margin should be favorably impacted by product mix in the period, especially when newer products coming to the market. As for expenses, though the changes we've implemented to date, our operating expenses are lower by 5.3 million or 14.3% when comparing the second quarter. We brought down headcounts with restructuring. We lowered executive compensation expenses. We removed eye-locked salaries through the biosensurian joint venture, and we actively managed all the expenditures of cash, whether internal or external. Had said this before, we're placing more emphasis on the value creation our spend as we look to right sides and ultimately grow irrespective of any potential transaction that may. One of my responsibilities is strategy and insurance programs get implemented the right way, while maintaining financial discipline throughout.
Speaker Change: Morgan should be favorably impacted by products mixed in the few in periods, especially when new products coming to the market.
Speaker Change: As for expenses
Speaker Change: So the changes we've implemented today, our operating aid expenses are lower by 5.3 million or 14.3% on comparing the second quarters.
Speaker Change: We brought down Head Camps with Restructure and we lowered Executive Compensation Expenses.
Speaker Change: We removed Eyelock's salary through the virus ensuring in joint venture, and we actively managed all the expenditures of cash, whether internal or external.
Speaker Change: has said this before, we're placing more emphasis on the value creation of our spend, as we look to right sides, and ultimately grow irrespective of any potential transaction that may occur.
Speaker Change: Wooden of my responsibility is strategy and insurance programs get implemented the right way. While maintaining financial discipline throughout.
Speaker Change: If I were business with more normalized, I believe the investors would see the benefits of our efforts in a more meaningful way. With that said, if things hold and we meet our sales plan for the full year, the actions we take that should position box for profitability by the end of the year.
Loriann Shelton: If I were business with more normalize, I believe the investors would see the benefits of our efforts in a more meaningful way.
Loriann Shelton: With that said, if things hold and we meet our sales plan for the full year, the actions we've taken should tradition box for profitability by the end of the year.
Speaker Change: I'd like to now discuss the restructuring at ERP integration we have been undertaking.
Loriann Shelton: I'd like to now discuss the restructuring and ERP integration we have been undertaking. With respect to the restructuring, all of the actions we identified to an act at the beginning of the year have been completed. We have implemented all and have achieved the targeted efficiency, not the full saving. That is because we are maintaining the overhead necessary to support the domestic accessories business that we sold to you too. Which again, we are being reimbursed for. When the operating agreement terminates, our overhead will be reduced further. I also believe that our sales grow in the second half of the year and comparatively year over year as we move into fiscal 26.
Speaker Change: With respect to the restructuring, all of the actions we identify to enact at the beginning of the year have been completed.
Speaker Change: We have implemented all and have achieved the targeted efficiency.
Speaker Change: Knife, the full Satan.
Speaker Change: That is because we are maintaining the overhead necessary to support the domestic accessories business that we sold in Q2, which again we are being reimbursed for.
Speaker Change: When the operating agreement terminates, our overhead will be reduced further.
Speaker Change: I also believe that our ourselves grow in the second half of the year, and apparently year over here, as we move into fiscal 26th. And that's just we'll see additional benefits from our restructuring as we should have a more concentrated...
Loriann Shelton: Investors will see additional benefits from our restructuring, as we should have a more concentrated fixed cost structure. In the interim, we are going to remain vigilant and our capital allocation plans and look to either save or reinvest depending on what the situation calls for.
Speaker Change: Fixed Cost structure. In the interim, we're going to remain vigilant and our capital allocation plans and look to eat.
Speaker Change: He's a Savory Invest, depending on what the situation calls for.
Speaker Change: The Oracle Fusion Implementation is the biggest project underway throughout the organization.
Loriann Shelton: The Oracle Fusion implementation is the biggest project underway throughout the organization. This is needed investment in our systems that will cause capital to start but generate a substantial ROI over time, both operationally and financially. We are in the process of designing the right system after extensive upfront research and analysis. After the design work, we will move into testing, validation, and rework as needed. We want to ensure we have the most efficient technology tools based on our needs. There has been an immense focus on data, aggregation, analytics, and sharing of that data, with everything geared to make faster, smarter business decisions.
Speaker Change: This is needed investment in our systems that will cause capital to start for generators substantial ROI over time, both operationally and financially.
Speaker Change: We are in the process of designing the right system after extensive upfront research and analysis.
Speaker Change: After the design work, we will move into testing, validation and rework as needed. We want to ensure we have the most efficient technology tools based on our needs.
Speaker Change: The have been an immense focus on data, aggregation and allidics and sharing of that data with everything geared to make faster, smarter business decisions.
Speaker Change: The system is heavily geared to support our business operations and thus, there is a strong focus on distribution and logistics module.
Loriann Shelton: The system is heavily geared to support our business operations, and thus there is a strong focus on distribution and logistics modules. We will be testing the system for quite some time, integrating data from all points of sale and then using it in our budgeting and forecasting process, fully automating all forecasting systems, both financial and procurement. Our ERP integration is about automating processes and having the right tools to use to gather intelligence to further educate our decision making. I for one, after running finance and operations for a very long time and taking on this project with excitement and care, they just know how much you can help us.
Speaker Change: Will be testing the system for quite some time integrating data from all points of sales and then using it in our budgeting and forecasting process fully automated all forecasting systems both financial and procurement.
Speaker Change: I would ERP integration is about automating processes and having the right tools to use.
Speaker Change: News, to gather intelligence, to further educate our decision-making. I for one, after running finance and operations for a very long time, and taking on this project of excitement and care, they just know how much you can help us.
Speaker Change: Lastly, I would balance you. Let me quickly walk you through the numbers in our expected use of capital.
Loriann Shelton: Lastly, our balance sheet. Let me quickly walk you through the numbers and our expected use of capital. First, we exited fiscal 2024 with 73.3 million in debt, and our Q2 report yesterday, our total debt position as of August 31st stood at 55. Act 2.2 millions. Using cash from the transaction, post quarter end, we pay down the Florida mortgage debt and tolls. We pay down a revolved credit facility further, reducing our total debt to a little over 18 million as of yesterday, which includes our 3.9 million sharehands over note. Taking into consideration our cash position, our net debt stood at 13.6 million.
Speaker Change: 1st, we added in fiscal 2024 with 73.3 million in debt, and our Q2 report yesterday, our total debt position as of August 31, so that's 55.2 million.
Speaker Change: Using cash from the transaction, post quarter end, we paid down the Florida mortgage debt in full, we paid down a revolving credit facility further, reducing our total debt to a little over 18 million as of yesterday, which includes our $3.9 million shareholder
Speaker Change: Taking into consideration our cash position.
Speaker Change: I would let that stood at 13.6 million
Speaker Change: At noon, I was third quarter, I was busiest cell in the sea.
Loriann Shelton: As we are now in our third quarter, our busiest selling season, we will be drawing on our revolvers to fund inventory needs. Thus, our debt will increase again, and then we start cashing up towards the end of the fourth quarter and into the first quarter. Our balance sheet is in good shape and we are making progress internally.
Speaker Change: Wienern Shelton, will be drawing on our revolver to fund inventory lead.
Speaker Change: Thus, our debt will increase again, and then we start dashing up towards the end of the fourth quarter and into first quarter. [inaudible]
Speaker Change: Our Valentin is a good shape and we are making progress internally.
Speaker Change: Lately, I'd like to thank you all today for listening.
Operator: I would like to thank you all today for listening in, and I pray that we are now ready for questions. Certainly, as a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again and one moment per first question.
Speaker Change: and Operated We Are Now Ready for Question.
Speaker Change: Sertnly. As a reminder to ask a question, please press star, one one in your telephone and wait for your name to be announced. To withdraw your question, please press star, one one again.
Speaker Change: and one moment for our first question.
Speaker Change: Hey, Dr. First Question. We'll be coming from Bruce, Allison, of Oppenheimer. Your line is open.
Bruce Ollifan: And our first question will be coming from Bruce Ollifan of Oppenheimer. Your line is open. Thank you.
Speaker Change: Thank you. Vox Perkius Clips, for $166 million in March 2011.
Patrick Lavelle: VOXX purchased Clips for $166 million in March 2011. So we make the assumption that in that 11 years later, that Clips is worth more than that purchase price. Can we? I would say yes because adding to the clips valuation is the uncle valuation that we acquired back in 2021. They are a much stronger company today technologically because of the combination of Ontios' electronics experience and Clips' use acoustic experience, and we think that is going to be a big driver for us as we move forward. When we look at the passive loudspeaker today, it is morphing into power, powered speakers or active speakers where actually the electronics are pushing the sound through the speakers inside the speaker, and the addition of a very, very strong Onkyo electronics team is allowing us to develop products that we think are going to be most important as we look into the future.
Speaker Change: and we make the assumption that 11 years later that clips is worth more than that purchase price.
Speaker Change: Canoy, I would say yes, because adding, adding to the clips.
Speaker Change: The valuation is the uncleal valuation that we acquired back in 2021.
Speaker Change: They are a much stronger company today technologically because of the combination of electronics experience
Speaker Change: and Clipshoose Acoustic Experience. And we think that is going to be a big driver for us.
Speaker Change: As we move forward, when we look at the passive loudspeakers today, it is morphing into power.
Speaker Change: Powered Speakers or Active Speakers, where actually the electronics pushing the sound through the speakers inside the speaker and the addition of a very, very strong ankyo electronic team is allowing us to develop products that we think are going to be most important as we look into the future.
Speaker Change: Um...
Speaker Change: Blutus, broadcast Blutus, and a number of different products that we will be able to integrate better into our speakers because of our experience with the Oncchio team.
Patrick Lavelle: Bluetooth, broadcast Bluetooth, and a number of different products that we will be able to integrate better into our speakers because of our experience with the Onkyo team.
Speaker Change: Is Clips Up For Sale?
Patrick Lavelle: Is Clips up for sale? We are in a process, and that process is to determine the value of the company. There will be, in my estimation, offers for the entire company, which you have seen with the GenTex offer, and we believe that there will be offers for the entire company, additional offers for the entire company, and there will be offers for the sum of the part. Are we currently doing any business with GenTex? Yeah, we do a little business with GenTex. We supply the automotive aftermarket with GenTex mirrors. So actually, for the future, we plan to probably do more business with GenTex.
Speaker Change: We are in a process and that process is to determine the value of the company and there will be in my estimation offers for the entire company which you have seen with the Gentech software and we believe that there will be offers for the entire company, additional offers for the entire company and there will be offers for the sum of the parts.
Speaker Change: I'll be currently doing any business with Gentex.
Speaker Change: Yeah, we do a little business with Gentex. We supply the automotive aftermarket with Gentex mirrors.
Speaker Change: So we can, so actually for the future, we plan to probably do more business with genetics.
Speaker Change: And that's our home, the Gentech is a very strong company, they've got great technology, and we think our distribution network, especially into the aftermarket, reaches much further than anything that they may have in distribution. So I think I see that as a positive.
Patrick Lavelle: That's our hope. GenTex is a very strong company. They've got great technology. And we think our distribution network, especially into the aftermarket, reaches much further than anything that they may have in distribution. So I see that as a positive.
Speaker Change: and the other question I have to hear, what would be the common book that I would be a Brown or $11 you share now?
Bruce Ollifan: And the other question I have here, what would be the common book value?
Patrick Lavelle: Would it be around $11 a share now? Oh, I would say yes. Yes, Laurie, if you have any, I mean, we've got about 23 million shares out. And when we look at the value of what we believe between the different operations we have, the real estate that we own, it supports a valuation there higher. I think that's a conservative number of times. The $11 a share. What do you think it is right now? What do you think it is? Well, what we think it is and what the market thinks it is, maybe two different things.
Speaker Change: Well, I would say, yes, Laurie, if you have any, I mean, we've got about 23 million shares out. And when we look at the value of what we believe, you know, between the different operations we have, the real estate that we own, it supports a valuation there higher.
Speaker Change: I think that's an assertive number of times.
Speaker Change: Do you love him, Patrick Lavelle? What do you think it is right now? What do you think it is?
Pat Lavelle: Well, what we think it is and what the market that citizen may be two different things, but I think the company...
Patrick Lavelle: But I know. I think the company with its future prospects of I think you could warrant that type of number.
Pat Lavelle: with it.
Pat Lavelle: Future Prospect, so I think you could warrant that type of number.
Speaker Change: Ok, and also, can we make the assumption?
Patrick Lavelle: Okay. And also, can we make the assumption that, being that history says, you know, that third quarter is our strongest quarter? Can we make the assumption that Vox will have a profitable third quarter and finish the year profitable? We are looking at, you know, what the second half is projected to be based on all the information we get from customers. At this time of year, promotions that we know will have started. The biggest thing that what we're looking at now is if the economy continues to slow, it may impact some of those projections. But normally our second half, especially the third quarter, is a profitable one.
Speaker Change: That being that history says that third court is a strong disorder. But we make the assumption that vox will have a profitable third courter and finish the year profitable.
Speaker Change: is projected to be based on all the information we get from customers at this time of year. Promotions that we know will have started. The biggest thing that what we're looking at now is if the economy continues to slow, it may impact some of those projections, but normally our second half, especially in third quarter.
Speaker Change: Use the profitable one and we believe that if we can hit the numbers that we are projecting that we would be profitable for the year.
Patrick Lavelle: And we believe that if we can hit the numbers that we are projecting, that we would be profitable for the year.
Speaker Change: Great, let's thank you very much and I'm glad to see the great progress that the company has made and the look for continued success.
Bruce Ollifan: Great. Listen, thank you very much, and I'm glad to see the great progress that the company has made. And I look for continued success. Thank you, Bruce. Thank you.
Operator: As a reminder to ask the question, please press star 11.
Speaker Change: I would now like to hand the call back to Pat for closing remarks.
Patrick Lavelle: I would now like to hand the call back to Pat for closing remarks. Well, thank you. If there are no further questions, I want to thank you for your interest in Vox. It's been a couple of challenging years. But I think we are starting to move forward with the plans that would bring this company back to profitability. But once again, thank you for joining, and have a good rest of the day.
Pat: Well, thank you. If there are no further questions, I want to thank you for your interest in Vox. It's been a couple of challenging years, but I think we are starting to move forward with the plans that would bring this company back to profitability. But once again, thank you for joining and have a good rest of the day.
Operator: And this concludes today's conference call. Thank you for participating. You may now disconnect.