Universal Electronics Inc. Price & Performance (UEIC)

Management's ability to manage its business and profitability through continued cost saving initiatives optimization of the company's manufacturing facilities and improvements in the company's cash The company's abilities to capture potential upside opportunities in the home entertainment markets and particularly in the traditional subscription broadcasting due to its continued long lead the stabilization of ordering patterns and the importance of the company's quick set differentiation and innovative remote control and One For All brand, design wins. And the company and the direct and indirect impact the company may experience with respect to its business and financial results stemming from the continued economic uncertainty affecting consumers' confidence and spending, rising energy and freight costs natural disasters, governmental actions, including increasing tariffs on products brought into The U. S, reducing incentives to business worldwide, the risk of doing business or operating in certain parts of the world and political unrest, including war, terrorist activities other hostilities. The company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today's date and refers you to the press release mentioned at the onset of this call and the documents the company has filed with the SEC, including its 2023 Annual Report on Form 10 ks and the periodic reports filed or furnished since then.

In management's financial remarks, adjusted non GAAP metrics will be referenced. Management provides adjusted non GAAP metrics because it uses them for budget planning purposes and for making operational and financial decisions and believes that Providing these non GAAP financial measures to investors as a supplement to GAAP financial measures helps investors evaluate UAI's core operating and financial performance and business trends consistent with how management evaluates such performance and trends. Addition, management believes these measures facilitate comparisons with the core operating and financial results and business trends of competitors in other companies. A full description and reconciliation of these adjusted non GAAP measures versus GAAP are included in the company's press release issued today. Also, the company will no longer exclude excess manufacturing overhead costs resulting from the continued transition of its global manufacturing footprint specifically in Mexico and Vietnam and depreciation related to the markup from cost to fair market value of fixed assets acquired and business combinations from its adjusted non GAAP figures. This impact Adjusted non GAAP gross profit gross margin, operating income or loss income or loss before provision or benefit of income taxes and net income or loss the quarterly results for 2023 and 2024.

There is no impact to GAAP results. A reconciliation of these measures is posted on the website in Q4 twenty twenty four On the call today are Chairman and Chief Executive Officer, Paul Arling who will deliver an overview and Chief Financial Officer, Brian Hackworth, who will summarize the financials. Paul will then return to provide closing remarks and open the call for questions. Now my pleasure to introduce Paul Ehrlich. Please go ahead, sir.

Thank you, Kirsten, and thank you all for joining us today. I'm excited to report in Q4 twenty twenty four, our team's efforts delivered sales growth of 13%, and improved EPS by $0.24 per share compared to the fourth quarter year ago, We exceeded both our own projections and consensus. Over the past few years, we have been executing initiatives to support new customer acquisition and long lead design wins to fuel ongoing sales growth. Particularly in the connected home which is a large and growing market, During Q4, our Connected Home business increased momentum with several new products shipping and that is beginning to scale as new orders have increased toward the tail end of the quarter. We are excited that our perseverance and commitment to this channel are starting to show results. Over the past few years, we have managed costs and optimized our manufacturing footprint improving our profitability. The combination of these accomplishments have strengthened our financial foundation and underpin our projections for top and bottom line growth for full year 2025 and beyond. Turning to a review of our markets. In the connected home market, which includes HVAC, and home automation security and hospitality, continue to gain traction with new customers, and build on existing relationships we already have.

Across many of the top OEM brands in North America, Europe and Asia. These include Daikin, Carrier, Vivint Samfi, Fujitsu, Mitsubishi and Metas. In Q4, revenues benefited from a full quarter of shipments of new products launched during Q3 as well as new products introduced Now we are starting to win additional projects with satisfied repeat customers leading to a strong pipeline of new products that will fuel long term revenue growth. Our share of the climate control market is growing and Q4 results are evidence that we are well positioned to deliver on our long term growth strategy. In home entertainment, including video service providers, consumer electronics, and our AV accessories retail business, TV demand increased in the second half of twenty twenty four with shipments growing slightly This was especially true in North America and Western Europe though the growth in TV shipments was driven primarily at the lower end of the market. In Q4, video subscriber declines at some of our key accounts narrowed compared to prior years reflecting new pricing and packaging of video service products introduced earlier in the year, As a result, some of our major customers increased overall order quantities during the quarter positively impacting our Q4 performance.

Many of our reasons for optimism both near and long term, were highlighted at the International Consumer Electronics Show in January. The event was a major success for us. We received strong interest in our new products and technologies from many of our new accounts. In Connected Home, as well as existing customers who want us to bring new features and functionality to their platforms. I'll review a few of the highlights. We introduced groundbreaking QuickSet HomeSense technology. While protecting user privacy QuickSet HomeSense adds a layer of on device intelligence that learns from the home environment and location of connected devices and adapts to optimize device usage based on user preferences. We unveiled new capabilities in our UEI TIDE family that enhance climate control and energy management, by resolving key friction points and providing on device actionable insights. Elevating the role of smart thermostats within the home benefits include managing multiple heating and AC systems, central, space and other integrated in a single controller as well as providing optimized climate control and energy savings. We offered a sneak peek of the next gen UEI Tide Pro platform and support for on device AI processing and other communication protocols. The new architecture introduces an advanced software framework enabling the development of operating systems and graph user interfaces under a limited power budget, In our customer discussions, this climate control platform was considered the ideal for many of our OEM customers who are looking to bring their proprietary protocol technologies to smart thermostats to give consumers optimal HVAC system control while delivering a better predictive and preventive maintenance service that many other smart thermostats sold at retail cannot do.

This new climate control platform runs UEI's latest QuickSet Widget Pro module This high performance processor enables complex tasks. Such as edge AI processing, video stream decoding and enhanced security features to protect user data and ensure the integrity of the smart home ecosystem. We introduced QuickSet seven SDK and the new QuickSet CloudKit [indiscernible] to our OEMs through better personalization and increased user engagement. QuickSet Cloud now supports a broader range of device and content sources spanning video and audio consumption in the home. Moving toward the promise of private and intelligent homes, QuickSet seven now learns and adapts to changes in the home to precisely target the right audience at the optimal moment. Delighting the user and maximizing monetization potential for entertainment and smart home brands. In addition to CES, earlier this year, we announced our collaboration with Somfy, in the connected home space We've been working with Sompi for several years now to create innovative products and solutions that deliver better motorized shade control experience. Such as their latest outdoor remote lineup, and energy harvesting sensors Consumers will benefit from enhanced comfort and convenience including saved favorites, reduced energy consumption by adjusting interior temperature, based on outside conditions.

And low energy power consumption complying with SOMFI's Act four Green requirements. With that, I'll turn the call over to Brian. Please go ahead. Thank you, Paul. I'll review the results for the fourth quarter of twenty twenty four compared to the fourth quarter of twenty twenty three. As previously noted, our adjusted non GAAP financial statements no longer exclude excess manufacturing overhead costs. Resulting from our factory footprint transition and depreciation related to the markup from cost to fair value of fixed assets acquired in business combinations. These changes are reflected in the year to date 2024 financials as well as the corresponding prior year periods.

These adjustments have no effect on our GAAP financials. For the fourth quarter ending 12/31/2024, costs associated with the aforementioned items amounted to $700,000 equivalent to 70 basis points of gross margin or $0.04 per share For the fourth quarter of twenty twenty three, costs for these items were $1,600,000 dollars equivalent to 160 basis points of gross margin or $0.11 per share. Please keep these figures in mind when reviewing our quarterly results. For the fourth quarter of twenty twenty four, net sales were 110,500,000.0 a 13% increase over last year's fourth quarter sales of $97,600,000 Sales exceeded the high end of our guidance range of $109,000,000 due primarily to an increase of orders in the connected home channel, specifically for climate control products Although not all these orders were shipped as of year end, we were required under GAAP to recognize this revenue approximating $4,000,000 in the fourth quarter We expect this positive connected home trend to continue While the home entertainment channel still faces headwinds, we continue [indiscernible] [indiscernible] Gross profit for the fourth quarter of twenty twenty four was $31,400,000 or 28.4% of sales. Compared to 28.5% in the fourth quarter of twenty twenty three. For the fourth quarter of twenty twenty four, operating expenses were 27,200,000.0 compared to $27,600,000 in the fourth quarter of twenty twenty three.

SG and A expenses were reduced to $20,300,000 from $21,100,000 in the prior year quarter. R and D expenses increased to $6,900,000 for the fourth quarter of twenty four, compared to $6,500,000 in the prior year quarter. Operating income was 4,200,000.0 compared to $200,000 in the fourth quarter of twenty twenty three, Net income for the fourth quarter of twenty twenty four was $2,600,000 or $0.2 per diluted share compared to a net loss of $500,000 or $0.04 per share in the fourth quarter of twenty twenty three. Next, I'll review our cash flow and balance sheet. At 12/31/2024, cash and cash equivalents were $26,800,000 compared to $42,800,000 at 12/31/2023. For the twelve months ending 12/31/2024, net cash provided by operating activities was $14,800,000 of which $8,400,000 was used for internal investments. We reduced our outstanding line of credit by over $18,000,000 in 2024 resulting in a net debt position at year end of approximately $10,000,000 Now turning to our guidance. Several projects won over the past couple of years in the Connected Home channel have begun to ship. And we expect this trend to continue throughout 2025. As mentioned earlier, certain customers increased their orders for our climate control products And although not all these orders were shipped as of year end, we were required in our GAAP to recognize this revenue approximating $4,000,000 in the fourth quarter.

Essentially shifted revenue from Q1 twenty twenty five to Q4 twenty twenty four, Taking this into consideration, for this first quarter of twenty twenty five, we expect sales to range from $87,000,000 to $97,000,000 compared to $91,900,000 in the first quarter of twenty twenty four, we expect a net loss ranging from $0.21 to $0.11 per share compared to a loss of $0.26 per share in the first quarter of twenty twenty four.

I would now like to turn the call back to Paul.

Thanks, Brian. We closed 2024 as a much stronger and better positioned company than we were in [indiscernible] And our financial performance in 2024 reflects that. Our commitment to the connected home market is beginning to pay off as our products and technologies are attracting new customers, and the long lead design wins are beginning to come to fruition, This was also evident at CES. This year as we unveiled innovative solutions to address customer needs and ultimately deliver end user benefits. Our advanced features and functionality appeal to a wide customer base as they ensure privacy, feature advanced technologies, support for on device AI processing and offer customer monetization opportunities through personalization and increased [indiscernible] [indiscernible] While we've made great progress, there's still a ways to go. Based on our recent successes, our orders and our strong pipeline, we are reiterating our projections for both Top and bottom line growth for full year 2025 As always, stay tuned. Operator, we can now open up the call for questions.

Thank you. Our first question comes from the line of Steven Frankel from Rosenblatt Securities. Good afternoon, Paul and Brian.

Thank you. Could we get a little more detail on this notion of [indiscernible] products that aren't going to be shipped until Q1, but the revenue recognition was in Q4. Maybe just help me understand what triggered that and does that normalize after Q1? Yes. This is Brian. The accounting rules, these changed a handful of years back where Basically, you used to have to you had to ship the product to record the revenue [indiscernible] five years ago, things changed. So I won't go through all the details of the rules, but essentially has to be a customized product, You have to produce it. You have to have firm commitment just to name a few. But the bottom line is we received orders, increase in orders in the fourth quarter produced those products and these products related to the Connected Home channel primarily in the climate control, And because we produced them, as of year end, under the accounting rules, we were required to recognize the revenue. Now under the old rules, that revenue would have been recognized in Q1 upon shipment. But with the new rules, it get recognized in Q4 and it provided for additional $4,000,000 of revenue in the fourth quarter.

Okay. And then in your guidance, it seems to imply both an increase in expenses and a decrease in gross margin.

Is that gross margin decrease just because you're missing that $4,000,000 in revenue so you dropped your run rate and we're having some gross margin pressure or was there something else going on?

I think the important thing with gross margin for the full year, I don't have a change in outlook. I still expect it to be in the last quarter. I think I said I expect the full year to be 30 points plus or minus one percentage point. So if that hasn't changed, Q1 is typically light When you have lower volume in the first quarter, you have lower production. So you're not absorbing the overhead as efficiently as you normally do. That takes a little bit of pressure, puts pressure on the gross margin rate. So There is a little bit of pressure on the margin rate in Q1, but for the full year, I don't see a difference. I still expect to be 30 points plus or minus one.

And in general, OpEx should have what kind of shrink or growth on a year over year basis? I don't expect it to be choppy. Whatever I think I expect OpEx to be similar. I think whatever wage inflation is that nature, we're going to offset. [indiscernible] And then what were your customer concentration numbers in Q4?

We had 210% customers, Daikin at 13.4% and Comcast at 10.7 Nice to see that one back.

And then maybe some detail on legal judgment mentioned in the footnote. [indiscernible] As we previously reported, the U. S. Court of Appeals of the Federal Circuit affirmed our win against Roku Roku then filed a request for a U. S. Supreme Court review of that decision.

In mid January, the U. S. Supreme Court denied Roku's request. Making the decision final As a result, we expect to seek to get the two district court cases started or unstayed in 2025.

And of course, we will update everyone as significant progress is made on this important matter.

And there was a footnote having to do with legal settlement and one of your factories in China. Is that also related to Roku or is that something different? No, that was a a labor agency [indiscernible] Thank you.

One moment for our next question. Our next question comes from the line of Greg Burns from Sidoti. How did tariffs factor into your outlook for 2025?

Well, that's a complex topic. As we the tariffs so far aren't complete and there's a lot I think, to still occur there.

As far as China is concerned, we've already we did some years ago remediate that. We don't have but a small amount of U. S. Destined product produced in China. [indiscernible] we had to deal with that six years ago. And did So anything that's done with China is somewhat irrelevant to us unless the nature of things change.

As far as the threatened tariffs here, in The Americas There could be some effect but we're already working on ways to mitigate that. It's much smaller than it once was because our the production out of Mexico is much smaller than it once was. We use that as a hub frankly, to begin to remediate the tariffs those I think it's now six years ago from China but the production there has gone down significantly. But as far as tariffs go, obviously, as this is fluid, we're going to have to make changes potentially and ameliorate the situation. If something were to happen, we obviously will work with customers to get them the right price I think we've shown ourselves to be pretty nimble on this front. As we had to do many years ago. And have since. So again, it's a fluid situation that we'll have to watch. But again, anything that having to do with China is not really relevant to us as stands now. Mexico could be, but it's relatively small. And we'll remediate that or ameliorate the situation with customers. Beyond that, it's difficult to know what the next tariff move will be. Okay.

Then when we normalize for that $4,000,000 that shifted between quarters Based on the order trends that you've been seeing, recently, how should we think about the remainder of the year? Does growth do you see growth accelerating or improving on a sequential basis as we move throughout the year? Like how do you see the year playing out based on the pipeline and order activity that you're currently seeing?

Yes. Again, Greg, difficult to answer. We, of course, have gotten an out outlook from customers, but it's pretty far out. Q3 and Q4.

Even Q2, Q3 and Q4 are even further out. So this is one of the reasons we don't provide long term guidance because those could improve significantly or be reduced significantly depending on the economic situation and a whole number of factors.

It's one of the reasons why we provide guidance one quarter out. [indiscernible] we do have quite a few new projects. We've had a few we had a few in the back half of the year. That helped positively impact things. We have more this year and we are bullish about that. For sure. But we'll have to see how the year progresses, not just for us, but the economy and any number of other variables that could affect demand for home entertainment devices, televisions, HVAC, And that's why, again, we don't provide want to provide long term guidance. If we're just to focus on projects, there's quite a bit of There's quite a bit to be bullish about. Because we are gaining share. As I said in the prepared remarks, we're winning second and third in some cases fourth, and fifth, projects and bidding for more It's reminiscent of what happened in home entertainment many years ago. We go in, we prove ourselves with great products, great execution and then earn more business. And we're seeing a similar pattern in these markets. [indiscernible] we're very bullish about that. If we can get any sort of economic lack of economic headwind or even a trailing breeze it could be even better.

But we're reluctant to give any real long term forecast on [indiscernible] the total at this point.

Okay.

And then the I guess the relative strength you saw in the subscription broadcast market this quarter. Is that sustainable? Do you feel like the the business that part of the business has kind of reached a stable level and order patterns can stabilize there? Or how do you view what you saw this quarter maybe in terms of the sustainability of that?

It did. Now again, it's always difficult to forecast two or three or four quarters out, but certainly the rate of decline has lessened and probably will given that it has gone down quite a bit. Over the last four or five years, But again, difficult the forecast we've gotten and the performance we've had over the last few quarters would show a lessening of that decline with with many of these customers. In fact, we did have some increases from them. So maybe it's reached a point where the damage that that part of our business might be doing to the total has reduced and the growth from the connected home area of our business can shine through. [indiscernible] Because if we flatten we're flattened out or even declining very sparingly on the home entertainment side, then the connected home growth can shine through.

Okay. Thank you.

One moment for our next question. Hi, everyone. Let me say congratulations on the I wonder if we could just circle back to production geographic considerations and if I recall, you have a facility in Vietnam that is producing predominantly HVAC connected home products. And I'm just wondering if you needed to, could you produce more there if you needed to ship production from Mexico or anything else that's in China, I guess China is not an issue, but from Mexico perhaps? Yes. We do make both home entertainment and connected home products in Vietnam. [indiscernible] So there could be further shifts made for either classification of products or any of our products to a facility in Vietnam if necessary.

Okay. Okay. Good to know. And then you mentioned enhanced monetization opportunities in some of the products that you showcased at CES. Can you elaborate a little bit more on that and the potential contribution to your business that could Sure. Yes. Well, I don't want to give too much away because some of this brand new and at CES, we typically present these technologies to the OEMs for inclusion in their future product. But a couple of different things. The advanced monetization could be had We are doing a lot on the device and in the device itself, not necessarily in the cloud even, but in the device, which provides obviously security to potentially bring more consumers as you know in the home entertainment business, there is a battle of the OS So a lot of companies are building an OS within the device and consumers are sometimes connecting other products to the device. Which creates a battle of OS. [indiscernible] And what we're able to do is help them bring more users to their OS through some of the things we're doing software driven things we're doing across the platform. I guess that's the only thing I can say about it right now.

Which would bring more obviously more eyeballs or more viewing hours to their interface, which obviously increases the monetization. For those players. And again, we want to do it in a way that the consumer is attracted to. Because doing it in a way that the consumer isn't attracted to doesn't really work. Right? Over the long term, people are going to do what they want to do. So we are developing ways to make it more attractive for people to come to your OS to view the various things they wish to watch. Now as far as HomeSense is concerned, There are a variety of ways that our different customers, home entertainment, HVAC, other smart home applications technology here, but it can determine who is home and essentially where they might be. And of course, it's private. Because it can be done on device. And this is why we're doing advanced development with some of our partners of platforms of hardware platforms, chips that can allow them to do this sort of AI within the home, to determine who's present Now you might say why do I need to know that? Well, there's a whole a bunch of applications for this in the entertainment world.

But even importantly on simple things like climate control, why are you cooling parts of your house where nobody's there or nobody is ever there? Right? Some people on this call probably have large homes where 30% of their home isn't occupied very often. Wouldn't their system be better optimized? Wouldn't it balance comfort with cost [indiscernible] if they actually could locate where people are and optimize the system for that. So there's a lot of applications for this in future products in our platforms. Working alongside these OEMs, and this one, the HomeSense one applies across the board. Connected Home, security HVAC, entertainment, And I think we have a pretty good in this along with other QuickSet, QuickSet seven SDK and other applications to be built into our future products that we build for them. Or into their products directly. I hope that answered your question, Jeff.

Jeff. Yes. That's helpful. I appreciate that. Just wanted to maybe think a little bit about growth drivers that you have baked in to your guidance for this year? I know you're seeing growth in HVAC control connected home. But I guess are those the products that you are seeing be the largest drivers of growth this year? Is it largely HVAC derived products or are there other products in that that you see driving it? Is it kind of a rebound perhaps in don't know, subscription broadcasting, are there new programs in that? That might be up or maybe you could just help us with that a bit?

Yes. No, it's a good question. And it's a little bit of each. It's not just one thing. I would say predominantly where the the biggest opportunity is there are customers on the HVAC side that for us presented opportunity as large as the opportunities we saw in home entertainment. [indiscernible] our potential sales to them could be as great as the largest customers we had in home entertainment. That's how big they are. And how many products they deploy. So and we are of course, working on some of the largest in the world We've mentioned two names on this call, Daikin and Carrier, who happen to be the two largest HVAC providers in the world. We are working on with others, other names we mentioned, But this market is large, it's growing and it's changing. So that change brings about an opportunity to sell in these new platforms that help with their new products because they're trying to change these products as well. To make them more efficient to make them again balance comfort with cost because consumers and the cost is not just of the device, it's of the energy that drives them So they're looking for ways to do that and we have some methods in the controller that can help them do that.

We can also make that device much more functional. It can do things that it's never done before. So that's and this has happened in other markets. It's happened years ago in phones. It's happened in it's even happened in remotes. The remotes we once said many years ago were changing what the remote control is. And what the remote control is capable of doing. Well, here's another case. The thermostat in many homes is sometimes not even a connected product Now they're beginning to become connected, meaning they're controlled by an IP [indiscernible] But what if it could do much more? What if it could balance your electric bill What if it could tell you that it to be 74 degrees right now, If you let me only be 76 degrees, I can turn it down to 74 when the price per kilowatt hour goes down at 07:00. You hit yes. There are others who do this sort of thing, but probably not in complete a way as we do. We have the device interconnectivity or interoperability that we've proven in other markets including home entertainment, that is very attractive to this market. Because they want to become more integral to the smart home.

We've already done that with other leading names in another market and this interest these customers. So we have a lot to offer here and that's probably one of the many reasons why we're winning projects there proving ourselves and then winning second, third, fourth and more. Projects. So we have a lot of we have a lot to offer here. A lot of differentiation. We're continuing to innovate in this area some of the things I just mentioned. And that's again what we've done before. This is how we became the leading company by far in that other control market and I think there's a similar opportunity here. We're at the beginning stage of it. [indiscernible] large and growing market, lot of large players, we're starting to win. Projects with. I think it's very similar. Right. And so we see that starting to happen. Right now. And we expect to do more of that this year. This year, we'll win projects that will fuel not just late 'twenty five, but will fuel 'twenty six, 'twenty seven and 'twenty eight. Right? And that's the key for us. And we're pretty bullish about what we're doing right now.

And the customers are happy with the things we've done so far.

Okay. And I know you don't break it out, but I'm just thinking thinking out loud here about the HVAC hash business. Is your belief that that business will the growth there would accelerate do you think in second half of this year and into twenty twenty six? Or how are you thinking about sort of I guess the growth curve of that business?

Yes. I mean, I guess as we sit today and it's always difficult to predict two, three, four five years out, But I do think that based on the growth dynamics that are there today, Connected Home business probably will be the majority of our business some time from now, not this year, but it will be some time from now just because of the growth the growth prospects there. The size of the market, the number of customers that we don't have yet, that we are beginning to win The growth of the market itself And the home entertainment market is has been difficult for the last few years and probably doesn't grow at the same pace anywhere in the next five years as the connected home market. So I do see this as a key to the future. It does not mean home entertainment isn't going anywhere. People are still entertaining themselves at home. There's plenty of opportunity there. We do have wins there fuel that business. It may offset any further shrinkage we might have from certain of those markets. Right. So we're still by far the leader there. And it is part it is very much an important part of our business.

But Connected Home is probably where the growth comes from over the next three to five years.

Okay. To hear. Thanks for taking my questions. Sure. Thank you. One moment for our next question. We have a follow-up question from Steven Frankel. From Rosenblatt Securities.

Paul, as you are in discussion with these HVAC vendors about additional products, Where do you think they are in making these smart thermostats a standard part of a new sale rather than something optional that the consumer has to decide to pay up for when they install a new system? Yes. Well, I can't speak to the economics on their end. And obviously, we never talk about specific customers plans. So if you're asking, will they one day give them for free, I can't comment on that. That. That probably is being considered. As just as an integral part of system. But that wouldn't be us for up to us to do. Right? We will sell them the product. They will market it in a way they deem appropriate. But I will say this, that in many discussions in that market, their desire is to become more integral to the smart home. Which would mean that they'll want to attach their brand and or their product to their products, but they realize they have to make their product better and very attractive to the consumer. Because it's just like any market, the consumer will want it if it's as good or better [indiscernible] what they have now or what is available to them through other vendors.

So they're very cognizant of that. And are working towards that. And this is where, again, the opportunity for us is there. Making these products do things that are useful to the consumer that make them smarter And by smarter, I don't just mean connected. To an IP device, mean, they do things that make your life easier. That are that other people aren't doing in their product. We mentioned a few of those features here. And then sometimes not huge features, but they're additional features, right, that make the product a little better. And they're all interested in this. Almost everyone that I think I can fit, faithfully say everyone that's in this market [indiscernible] is on that on that trail. [indiscernible] a product that not only will control their HVAC system better, but may do other things as well.

Maybe able to even predict when your device is failing so that we that the consumer or the installer can be contacted [indiscernible] contact the consumer to say, hey, maybe I should come out and look at your system. Because what you don't want to have in the middle of summer is your HVAC system, if anybody's had this fail, and you have to wait two days for it to be fixed You particularly don't want that in Phoenix. I can tell you that. So systems that are smarter, systems that might have proprietary data that are coming from the unit itself [indiscernible] the controller just like it was in the TV is separate from the device itself. So you're going to have to communicate between devices in a way that will help them predict those happenings and again increase the value and potentially increase the value for the OEM and or the installer as well.

So there are ways to make these devices have everyone win with a better, more useful product.

Great. And then could you review for us Of the top 10 HVAC vendors in the world, how many have you won and how many others are you having material discussions with?

Well, I think when you say material discussions, I don't know the definition of that. We're probably talking to all of them.

In fact, I'm quite sure we are.

And I think we've won the majority of them or at least a project because the way these relationships and it's probably true in any market it was in home entertainment, It is in HVAC and it probably is in any market. When you want to break into an account that's large, you usually don't go in and are able to pitch, I want all your business today. Most of these companies, particularly if they're of size, are not going to give a new vendor all of their business. You typically have to go through a project where they see how you work, see how you integrate with their people, their engineers, right? It's a test. It's a a project that you go through We've been through this in other markets. Then once you prove yourself you're allowed [indiscernible] You can get to the point where they'll award you multiple projects At once, because they're so happy with what you've done on the first or second project and they often do reviews of them after they're done. After the product's been introduced, they'll do a review of the vendor how did we work together, how can we work better together, and then they may award you additional projects.

That's the stage we're at with a few of these major players. We've been awarded great projects. And we will of course execute on those. And then like we did in home entertainment, decide we want as much to do as much with them as possible and have them make that choice.

Thank you.

Thank you. At this time, I would now like to turn the conference back over to Paul Arlene.

For closing remarks.

Okay. Thank you for your continued support of Universal Elect Electronics and joining us on the call today. Will present at the Sidoti Small Cap Virtual Conference on March 1920 We look forward to seeing some or all of you there. Have a great day. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.