Universal Electronics Inc. (UEIC) Q4 2021 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And thank you for standing by. Welcome to Universal Electronics Fourth Quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions]. At this time, I would now like to hand the conference over to Ms. Kirsten Chapman of LHA Investor Relations. Ma’am, please go ahead.

Thank you, Howard. And thank you all for joining us for the Universal Electronics fourth quarter and year-end 2021 financial results conference call. By now, you should have received a copy of the press release and if you have not, please contact LHA at 415-433-3777 or visit the Investor Relations section of the website. This call is being broadcast live over the Internet. The webcast replay will be available for one year at www.uei.com. Any additional updated material non-public information that might be discussed during this call will be provided on the company's website where it will be retained for at least one year. You may also access that information by listening to the webcast replay. During this call, management may make forward-looking statements regarding future events and future financial performance of the company and cautions you that these statements are just projections and actual results or events may differ materially from those projections. These statements include the company's ability to timely develop and deliver new technologies and technology upgrades and related products introduced this year including our expanded software capabilities around our world leading QuickSet platform, comprehensive suite of thermostats, and our groundbreaking line of ultralow power and energy harvesting remotes designed for sustainability that will be accepted by our existing customers and attract new customers, our ability to manage the global supply chain issues and material shortages that our industries have been dealing with, which continue to have both a direct indirect impact on our volumes. The continued successful collaboration with existing and new customers in developing and introducing next generation products operating systems and technologies which result in increased sales opportunities for the company. The continued trend of the industry toward providing consumers with more advanced technologies by offering hybrid platforms expanded smart home offerings in interactive services. Management's ability to continue to manage its business to achieve its net sales margins earnings in the intrinsic value of our all our stock has guided, the impact of the company's financial results that it may experience stemming from issues surrounding its Chinese workforce in inflationary pressures we are experiencing due to the worldwide supply chain shortages and the weakening of the U.S. dollar against the Chinese yuan. And the continued effects that natural disaster and public health crises including COVID-19 pandemic have on our business and our management's ability to anticipate and mitigate those effects, including the duration, severity and scope of the COVID-19 pandemic and the actions and restrictions that may be imposed on the company and its operations by federal, state, local and international public health and governmental authorities. The company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today's date and refer you to the press release mentioned at the onset of this call and the documents the company filed to the SEC, including its annual report on form 10-K. 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. It believes that providing these non-GAAP financial measures to investors as a supplement to GAAP financial measures that helps investors evaluate UEI’s core operating and financial performance and business trends consistent with how management evaluates such performance and trends. In addition, management believes these measures facilitate comparisons with the core, operating and financial results and business trends of competitors and other companies. A full description and reconciliation of these adjusted non-GAAP measures versus GAAP is included in the company's press release issued today. On the call today, our Chairman and Chief Executive Officer, Paul Arling, who will deliver an overview and Chief Financial Officer, Bryan Hackworth, who will summarize the financials. Paul will then return to provide closing remarks. It is now my pleasure to introduce CEO, Paul Arling. Please go ahead, Paul.

Good afternoon and thanks for joining us. At UEI our vision is to connect the home by blending entertainment with smart home control. We started 2022 by unveiling many of our latest products and technologies at the International Consumer Electronics Show or CES in Las Vegas. This included a company enhance a suite of smart thermostats, a groundbreaking line of ultra-low power and energy harvesting remote controls designed for sustainability and expanded software capabilities around our world leading QuickSet platform. Customer reaction to our new suite of products, as well as our established award winning advanced technologies has been and continues to be very positive, which bodes well for our long term growth. However, as anticipated for the near term, our financial results continue to be impacted by the global supply chain issues and materials shortages, which continues to have both a direct and indirect impact on our volumes. Our results in the fourth quarter or within the guidance range we provided on our last earnings call. And for the full year 2021 revenue was $601 million gross margin was 30.2% and net income was $49.4 million or $3.59 per share. We continue to execute on our channel strategy by partnering with customers who are leaders in their respective industries. As an example, in consumer electronics, we have long established relationships with Samsung, Sony and LG, who collectively represent about 40% of the world's televisions. Similarly, our footprint in video entertainment includes relationships with Comcast, Liberty Global and Vodafone, who ranked amongst the largest video service providers in their respective markets. Another long-term customer is Daikin, the market share leader in the global HVAC industry. We have worked alongside Daikin for more than 10 years, and they have consistently been at the forefront in delivering innovative connected thermostats and control solutions to their residential and commercial customers. In addition, we have recently expanded distribution of our wireless connectivity and control solutions by partnering with leading brands such as Vivint, Somfy, and Hunter Douglas, that are channel leaders for their respective Connected Home categories. These channels represent strong long-term growth potential, and as their products. And services gain market momentum, our position as a technology and manufacturing partner will serve us well. As I said earlier, we are excited about the new product solutions we introduced at CES. We showcased our new and enhanced offerings as well as our leadership in supporting and integrating device discovery, control and interoperability across major ecosystems while improving user experiences across entertainment and smart home devices. I'll review a few of the key advantages we demonstrated and the products that exemplify them. One benefit is that our enhanced control capabilities extend our reach, with whole home coverage across ecosystems and protocols. For example, QuickSet 5.0 enhancements already deliver a smart home dashboard in homes across the world, and will now include the industry's latest smart home connectivity standard matter. Our technology seamlessly blends all communication protocols, legacy, existing and future into a unified experience. Another advantage is that our innovative solutions simplify user experiences. Nevo Butler, the versatile and award winning multi-assistant enabled entertainment and smart home hub, built around our QuickSet platform is the first digital assistant optimized for home control applications. Just last month Vodafone Portugal announced it is launching the Nevo Butler entertainment and smart home hub to its residential TV and broadband customers. We also have other customers adopting the same platform for non-entertainment use cases as a versatile smart home hub. We expect to have more to announce on that later. In HVAC, we recently announced the expansion of our innovative and exciting line of smart and connected thermostats and accessories. This modular solution is designed to bring the wireless control and sensing interfaces, which are traditionally mounted on a wall to any room in the home, placing the user interface where the user is and sensing where it really matters. This platform also allows intuitive integration of thermostats and other devices and services in the home. The UEI comfort line is a white label smart thermostat platform designed for HVAC OEMs as well as hospitality branded applications. In addition to our comfort line of connected thermostats, we also launched an expanded set of sensors and wireless adapters that extend the reach of this platform at a recent Airconditioning Heating and Refrigeration Expo tradeshow. Our cloud connected wireless connectivity technologies are also helping us grow in new channels, such as smart home appliances with new customers. Those products will be introduced by our customers in late-2022 and began shipping in quantities in 2023. As I noted earlier, we are excited to announce our latest control platform Eterna and related technologies that address the growing demand for sustainable products that reduce energy use and eliminate waste. These environmental concerns are quickly becoming corporate and government mandates that will impact our customers’ product requirements. We are confident that these product introductions are well timed to usher in another evolutionary wave in the life of the remote control. UEI has partnered with technology leaders and invested in bringing ultra-low power conductivity SOCs with built in energy harvesting and photovoltaic cells to the market. This user centered design creates a best-of-breed solution that delivers value to users and businesses and outperforms any competitor in the field. They integrate energy harvesting circuitry that recovers energy already present in consumer homes, such as natural and artificial lights, and even radio frequencies from wireless devices. The chips deliver up to 2.5 times more computing power, allowing for more power hungry features without compromising battery life. They consume up to 80% less battery power compared to traditional Bluetooth Smart SOCs enabling up to 10 times longer battery life. And they reduce battery waste, as the ultra-efficient power management unit enables true self powering to create a battery for life controller. Innovations in ambient power devices in the home are the foundation of a sustainable and vibrant smart home that benefits users and businesses alike. No one wants to change batteries and 20 or 30 devices in their home. And we're starting to change that paradigm. Before I turn the call over to Bryan, I'd like to review our recent legal win. In November 2021. The U.S. International Trade Commission found Roku in violation of one of our QuickSet patents, resulting in the issuance of a limited exclusion order, meaning they could no longer import product with our technology and a cease and desist order, meaning they can no longer sell their streaming products with our technology embedded. As a result, Roku has decided to modify the Universal control functionality on their streaming products, creating a less user friendly setup experience and degrading the control functionality of their platform. Consequently, Roku has created widespread frustration amongst users who are struggling to control their connected devices including televisions. With the ITC Mater successfully behind this, we can now turn our attention to the two related district court cases we have against Roku that have been stayed pending the conclusion of our ITC action. I'll turn the call over to our CFO, Bryan Hackworth for review of the financials. Please go ahead, Bryan.

Thank you, Paul. First of all review the results for the fourth quarter of 2021 compared to the fourth quarter of 2020. Net sales were $143.9 million compared to $156.4 million for the fourth quarter of 2020. As expected sales were down versus the prior year due in part to global supply and logistics issues that affect us directly and indirectly, as customers have truncated orders because of their inability to procure all necessary parts for companion products. Our gross profit was $40.9 million or 28.4% of sales compared to $52.6 million or 33.6% in the fourth quarter of 2020. As we mentioned on our last call, we expected inflationary pressures to adversely impact our gross margin rate as component and logistics costs have increased significantly over the past year. In addition, the U.S. Dollar was weaker versus the Chinese yuan in the fourth quarter of ‘21 compared to the prior to your quarter. In order to mitigate the effects inflation has had in our gross margin rate, beginning in the first quarter, we are phasing in price increases which will have a partial impact in the first and second quarter, with a full quarter’s impact during the back half of the year. Operating expenses were $30.2 million compared to $33.5 million in the fourth quarter of 2020. SG&A expenses decreased $22.6 million from $25.3 million in the prior year quarter, due primarily to lower incentive compensation in the current year. R&D expenses were $7.6 million compared to $8.2 million in the prior quarter. Operating income was $10.7 million or 7.5% of sales, compared to $19.1 million or 12.2% of sales in the fourth quarter 2020. Our effective tax rate was 16.1% compared to 15.5% in the prior year quarter. For the fourth quarter of 2021, net income was $9 million or $0.68 per diluted share, compared to $16 million or $1.14 per diluted share in the fourth quarter of 2020. For the full year 2021, net sales were $600.9 million compared to $615.4 million for 2020. Our gross margin was 30.2% of sales compared to 30.8% for 2020. And net income was $49.4 million or $3.59 per diluted share, compared to $53.3 million or $3.76 per diluted share in 2020. Next, I’ll review our cash flow and balance sheet. We ended the year with cash and cash equivalents of $60.8 million, compared to $57.2 million at December 31, 2020. Cash flow from operations yielded $17.4 million for the current quarter, enabling us to fund the purchase of 385,000 shares for $15.4 million. For the full year cash flow from operations exceeded $40 million, and we repurchased over 1.2 million shares for a total cost approximating $60 million. We continue to believe that the current market price of our stock is significantly below UEI’s intrinsic value. Given this and the fact we expect continue to strengthen free cash flow. On February 10, 2022, our Board of Directors approved the plan to repurchase an additional 300,000 shares contingent on price over the next few months. Now turning to our guidance. The current macroeconomic pressures specifically relating to the shortage of ships, and transportation issues throughout the supply chain continue to persist. Certain vendors have mentioned that we should start to see some relief in the back half of the year at a time when several of our customer and product wins in the AV and home automation space are scheduled to ship. These products include our traditional two-way IP connected voice remotes in a subscription broadcast channel, sensors and home security and products that control devices ranging from HVAC to lighting and blinds. In the short run however, we do expect current headwinds to continue to put pressure on sales. For the first quarter of 2022. We expect sales to range from $135 million to $145 million, compared to $150.7 million in the first quarter of 2021. We expect EPS to range from $0.46 to $0.56, compared to $0.89 in the first quarter of 2021. We continue to believe in our long-term growth targets of sales between 5% and 10% and EPS between 10% and 20%. I will now turn the call back to Paul.

Thank you, Brian. As I have said before, it is difficult in this environment for any company that relies on semiconductor supply, or movement of goods across the world to meet their growth objectives. Although we foresee a challenging start to 2022, we remain optimistic regarding our growth prospects for the full year, and particularly our long-term performance. We have significant customer and project winds that will help that will begin to ship in the back half of the year and into 2023. Further, our product team continues to succeed in its mission to build innovative next generation products and technologies. With more than three decades of experience, we have managed through challenging cycles previously. While each period is unique, one factor has always been true, UEI has emerged from difficult periods stronger and better position than before. Today, we remain focused on innovation that creates an intuitive self-configuring and seamless control experience within your home. We remain focused on bringing these groundbreaking technologies to a growing list of the leading companies in the world. We are quite confident that as these macro pressures subside, our commitment to innovation and customer service will deliver long-term growth. As always, stay tuned. Operator we can now open up the call for questions.

[Operator Instructions] Our first question or comment comes from the line of Greg Burns from Sidoti. Your line is open.

Good afternoon. When you look at the supply chain constraints, how much to that impact revenue this quarter versus your guidance? And then when we looked at your guidance for the first quarter, how much revenue is being impacted by that -- those factors?

Yeah, I think the effect that's had on our sales, Greg, it's been pretty consistent the last few quarters. So if you're comparing to the Q4 guidance, we came within the range, it was the lower end. But I think we took into consideration the impact. So I think we were able to fall within the range. Now, it did come at the lower end, but I can't really point that as to why we came at the lower end versus say the middle. I mean, doesn't take a whole lot. There wasn't one customer that stood out versus our guidance through just a little bit here a little bit there. So we went from the lower end. As I've always mentioned, when we provide the range, it's -- I’m providing that range, but I think it could come anywhere within that range. And this time we came in toward the lower end. As far as Q1 is concerned, we were still impacted by the logistics issues. Even though it's a rolling issue. I think, you know, what is affecting us and you'll see with other companies is you get companion products. And if they're not able to get the parts for these companion products, then they're truncating orders to us. And we've had several customers tell us that they're ordering last because for that reason. So it is it is still affecting us. And it probably will be for hopefully, it'll start to clear up towards the back half of the year.

Okay. And then in terms of the Roku litigation. So I guess they were in violation of one patent. Was there -- how many patents were -- you claiming they were violating? And are there any others that that may be now that, I guess the first step that you claimed in violation? And the others that you might go back to the ITC with? And then when we look at the district court cases, what is the potential outcome of that? Is that a strictly a monetary case? Or can there be any other implications on the ability for Roku to produce with -- produce devices?

Yeah, Greg. This is Paul. The Roku case, the district court cases, I believe, and I don't quote me directly on this. There are two separate cases, I believe there are 14 happens in the -- across the two cases. And in district court, those cases are stayed. They were partially pending ITC, there are also IPRs that are being processed through PTAB. When that's complete, presumably the judge will reinstate the case. I don't know the exact timeframe on that, but it'll take a little bit more time. And then those cases can move forward. Obviously, in district court, the remedy would be with a win is damages phase to the case, which means monetary. ITC is a separate venue where they would -- are when meant an exclusion order and the cease and desist order. So it means the other party who lost in this case, can no longer produce products for the life of the product -- I'm sorry for the life of the patent that violate that IP.

Okay.

So that's what was issued. They've modified the software. And we've seen a lot of reviews of the product, stating that people are not able to operate their television set, can't control volume, can't turn it on anymore, et cetera. And some users are complaining that they need to use their TV remote again. So they have to go to a two-remote solution where they turn the TV on and then operate the other device with the other remote, which is not a good user experience in today's world.

Okay, and then lastly, just the 10% customers in the quarter.

We had two customers, Comcast at 16.5% and Daikin at 11.2%.

Okay, thank you.

Thank you. Our next question or comment comes from the line of Brian Ruttenbur from Imperial Capital. Your line is open.

Yes, thank you very much. So question on guidance. You're talking about first half being weak. In your press release, you said your long-term guidance revenue of 5% to 10% growth and EPS of 10% to 20%. I assume that is long-term, not including 2022. Is that correct?

It will. When we say long-term we're talking about over the last the next several years, that's the way we calculate it. So I don't -- I think sometimes people conflate that with saying just the current year. And I don't want people to think that. We're saying we can grow over the long-term at a rate of 5% to 10% in 10 to 20, which we've done historically. And I don't see any reason why that can't continue.

Okay, is there a 2022 -- I know you didn't give specific guidance other than the first quarter. And that's going to be down likely year-over-year. Do you anticipate your 2022 been at 2021 levels are yet maybe you can give me a better or worse, higher or lower number?

Yeah, we don't provide guidance beyond the quarter. But I will say this, we do expect to grow in 2022. So as Paul mentioned, we've got a number of wins, number of product wins, number of customer wins that are scheduled to ship in the back half of the year. So I'm hoping that this supply issue starts to lighten up. We've been told this by a few vendors, have they expected to. I don't know if it'll be completely resolved, but hopefully at least start to lighten up which will enable us to ship more products. So we expect to grow this year? I don't expect to be the same level as 2021.

Okay, and then asking something from a macro standpoint. I'm hearing residential may be slowing the demand on that for the consumer electronics? Are you seeing any of the demand side on the residential side of the business slowing consumer residential?

You mean that subscription broadcasting or just generally, entertainment?

Generally, in your products, which is where a lot of your stuff is going? Is the consumer? Is there any demand slowing?

Again, it's not -- I wouldn't say it's an overall slowing. There are certain customers who have demanded more product, some of whom have told us they would be buying more right now. But they have semiconductor shortages of their own. And therefore, it may not be us who have the shortage, that is their -- the critical path that they can't get enough parts for the companion part product as Brian alluded to earlier. And therefore, when we ask them about their forecast, they say we would have ordered more, but we can't build enough of the product to demand. So in those cases, the demand is good. In other cases, it varies by customer, of course.

Thank you very much.

Buying more and would be buying even more than that, were they able to get semiconductors for their own product. But they can't at this point.

Okay, thank you very much.

Thank you. Our next question or comment comes from the line of Steven Frankel from Colliers. Your line is open.

Good afternoon, Paul. I'm hoping that you could parse this supply chain issue a little bit. And maybe give us some feel for how much of the headwind is direct products that you can't get, versus that the indirect issue of there aren't enough set top boxes for example, being produced, and therefore, your customers are cutting back orders or move out.

Yeah, Steve, I'd like to be able to quantify that precisely, but it's not really possible. The one we could is we of course receive a forecast from customers. And then we go through our system to figure out what we can build. We've estimated that to be -- it's double digit millions, that we're unable probably about 10% of sales, that we can't get enough parts ourselves. Now, that part we can't readily quantify. We do talk to customers about their forecasts and their businesses. In some cases, they share more than others, of course. And some are telling us that, we're ordering 10 or we're earning five or whatever the number is, we would like to order seven or 12, but we are having our own shortages of other products, typically semiconductors that they cannot get and therefore they would not order those extra units. Because the companion product that we're building for them is not required because they can't get enough semis to build their own product. We are hearing those stories from the field from our customers. That one Bryan can't really quantify, because they don't really give us a precise number. It's not really relevant anyway, as far as our business with them, because they said, well, we would have ordered more, but we were not. So we'll order it later. They don't really tell us exactly how many units they would have otherwise ordered. So there's a flow through effect on this. Now, again, as Bryan said, we do have vendors -- that this problem won't disappear in three months. It's going to take time, but it's also -- it's going to happen with time. We have vendors right now, who are working with us to bring up parts in the back half of this year. So the supply of specific vendors should begin to increase this year. Now, will all vendors be back to pre-2020 or back to 2019 levels, probably not. They probably won't be in a situation where they have more supply than demand. But there is supply that will come online this year. That will begin to ease the problem. And as Bryan, I think alluded to earlier in the call, it's probably well timed because we have a lot of customers who have some of these designs that we're talking about, that I spoke about in the prepared remarks where they want them. And the timing of bringing on the capacity to build the chips for it is probably well time. Because it'll be about the time that designs will be ready. And the chips will be more available. So we'll start to see this solve this problem correct itself. As I said in last conference call, I think I use the number 100 billion the numbers now well over 200 billion in commitments of semiconductor suppliers to build capacity. Now, some of that capacity will take years, but some of it is coming on starting this year. So you'll see an increase in supply starting this year moving through ‘23 into ‘24. And likely the industry will go back to a situation whether it will then be greater supply than demand. That seems like a long way off right now but that day is coming in the not too distant future, not next quarter. But that day is coming. And it will come on a little bit at a time. And it will start -- this midyear, we're hearing from vendors will start to see a little bit of supply increase.

Okay. And is there anything going on below the surface that would prevent gross margins from going back to where they were in early ’21, once the supply chain issues are behind you?

Don't see any reason why it can’t. The only caveat I'll give to that is obviously we're in a probably a higher inflationary time than we've seen in most of our careers. I've been doing this for quite a long time. I think the last inflationary, the severe inflationary time I was in high school. So I wasn't in the workplace yet. We haven't seen this sort of environment. We are absorbing that we are talking to customers. There are obviously situations where there are price increase to offset it. There's been a pretty good acceptance of that. I think people generally understand what's going on in the world today that commodity prices, semiconductor prices, et cetera are moving upwards that hasn't been typical in the consumer electronics area over the last number of decades. But that is the reality today. And so you might see some movement in it a little bit down, but there's no reason -- there's no strategic reason, longer term. I mean, the solutions we provide in many cases are licensed their best in the world, best-in-class. And we charge a fair price for them. So there's no reason why we couldn't have that long term goal of margin to be 30%.

And one of the things coming out at CES last year was higher software content in TVs. Like this smart home control panel that you mentioned in the prepared remarks. Did you get any material expansion of that kind of software capability this year at CES for the TVs, the chip in the back half?

We did. But right now, the 2022 models are done, where at CES would be working on ‘23 and ’24 in televisions. Because the ‘22 TVs were basically finalized in the summer of ‘21. And then sometime mid this year, the ‘23 models will be completed from a design perspective. So we're working right now on ‘23 and ‘24. But yes, there's a lot of interest in the many things that I spoke about in the prepared remarks and others, because I wanted to keep the comments to limited amount of time. We're working on a lot of things here that are pretty innovative in all of these markets, security, HVAC and of course, the core business of AV that are quite different. I mean, including the Eterna and the low power ultra-low power SOC, which we think is also garnering a lot of interest with customers.

Okay. And then one last question for Bryan, what kind of OpEx growth is embedded in your forecast for Q1?

There’s a little bit of growth. In Q1, we were at CES that's a rather expensive trade show, and then you get a little bit on fringe benefits reset. So that will come with an increase. So I expected to be sequentially higher, but not anything I would describe is significant.

But below where the 31.7 it was last year.

It’d be close.

Okay. Thanks.

Thank you. [Operator Instructions] Our next question comment comes from the line of Jeff Van Sinderen from B. Riley. Your line is open.

Hi, everyone. I'm just wondering, given that you are increasing prices. Any more color you can give us on the outlook for gross margins? There's always expect as you maybe touch on the quarterly progression, if you could. I guess how, how they might evolve? And then for the full year, do you think gross margin is down? Or could it be flattish? I guess I'm just trying to get a sense is it you know, should we be modeling gross margin down in first half and then up in second half and get to flattish? Or how are you thinking about gross margin?

Yeah. There are a lot of variables as you know, Jeff, go into the gross margin rate. And as Paul has mentioned on the previous question, the price increases we were taking -- through Q1 and Q2 will take full effect in the back half of the year. Now. I think that that pretty much mitigates the offsets the cost, price increase the most part. But it's difficult to tell what's going to happen with inflation or prices, or raw material and component prices getting are they going to continue to rise that's difficult to predict. The other component that's always difficult is the FX rate. So right now, when I look at Q4 versus Q4, the dollar was a little weaker versus the Chinese yuan. So that hurts us. So that's always difficult to predict. So I don't think it's going to be dramatically different. But if you're -- I think if you're looking at Q1 versus the rest of the year, I expect the rate to improve. Because the price increases that we're enacting are going to take full effect. And the back half of the year, you'll get a full quarter’s effect versus a partial effect in Q1 and Q2. Now, that's assuming that we don't have additional high inflation rates on components. So that's the part that's the right now the variable that's difficult to predict. So hard to say, but I don't think -- I don't expect to be significantly different. But if everything else stays constant, I think the price -- because of the price increases that we're enacting, our rate should improve in the back half of the year versus the front half.

Okay, that's helpful. And then, I guess just another question around the business returning to grow -- let's call it year-over-year growth in the second half. Do you have orders for new products, some of those are going to start to ship in second half. So I guess my question is this because obviously there are a lot of variables around supply chain. Does being able to get those new products out the door in sufficient volume depend on supply chain improving from here or is that sort of what you said, your vendors are telling you that it's going to get a little better in second half is that baked into year-over-year second half inflection in revenues? There's a risk to that?

That would partially be, yeah. That would -- now, again, it's a lot more complex than that, because we do have parts that are in tighter supply than others. So certain semiconductors, we could actually get more of, if we were to need them for some growth. I wouldn't say it's an unlimited supply, but we could get more, there are other parts that are more in short supply. So if the product design included those parts, you could be limited. Again, we are hearing from vendors, and we are getting updated regularly on this, the capacity that they're adding is our conversions, where they've taken fabs and they are converting them. So that's a higher likelihood event. It's not a building that has to be built, the building is already there. So they're converting capacity to our architectures. So we're confident that and again the updates we're getting from them have shown that. We're confident that we'll begin to see some supply increase from certain of our vendors. So that would be baked into any growth that we have, because at this point, as you probably well know from many companies that you cover and everybody else covers, the semiconductors are a shortage, almost all of them. So at this point, if you wished to grow at a double digit rate, it would be difficult to do. Because the price that you would need to do it might not be readily available. But again, we are tracking our vendors talking to them regularly about this problem, fighting for every -- obviously every unit we can get. But importantly, the problem really begins to solve when capacity is added. Because we can scramble for the parts that are out there. But when they add capacity, what typically happens is the supply goes up. And often supply goes up greater than the demand. And then you're back to a more normalized situation. Will we see that this year from all vendors? The answer is no. Will we see it from some though? The answer to that we're confident is yes. So the problem will begin to ease as this year progresses. And then it will ease further next year. Because look their industry relies upon it to they're not making these chips just for the betterment of us or humankind, their growth long-term relies on it. After the point at which they've taken price on these items, the demand would start to wane in order for them to grow in the ways that their investors or public investors are private, expect them to would be to increase supply. And clearly in the world today, the supply is less than the demand, the demand can be satisfied to create additional sales. So that's why there's more than $200 billion going into capacity expansion. And in many parts of the world, by the way, it's government aided. The U.S. has done this. It's been done in Europe, Japan. There's a lot of -- and I think it's for also national security issues, but there's a lot of investment that governments are making to help companies build this new capacity. So it is -- I think as certain as anything can be. It is certain that the capacity in this industry is going to expand. Anyone who thinks that this limited supply situation is going to last long-term isn't seeing the reality. When there's $200 billion going after partially government funded capacity expansion that will happen. And again, we'll start to see it. We'll start to see some of that this year. It will not be back to normal this year but we will see that this year.

Okay, and then then speaking about demand. Fortunately, you do have some new business wins. Any more color you can give us, I know some of this is a little tricky, but any more color you can give us on which of those, call it new product or new business wins you expect to contribute most to the second half of this year?

Yeah, always hard to know that, Jeff. Because they're all great products. And the customers always have a good idea. They of course, give us a forecast of what they want to buy, but they hope that they sell out all of the inventory they've ordered from us, and then quickly order more if their product is success. So I wouldn't want to predict which one will be most successful. But the good news is, it's multiple names and leading names. You heard a few of them in our prepared remarks, I didn't make comments on the products, because I can't, but we did mention names. And these are some of the big names in the world. Somfy, if you haven't heard of them. They're -- Hunter Douglas, Vivint. We mentioned Vodafone, Butler, we have some more names there that I can't mention. So we've got a lot of projects that are moving forward. We have more an HVAC too, that I can't mention the names yet. But names you would recognize. There's a lot of -- again, the team here -- the product team, sales team, engineering team advanced development team have done a lot of work over the last year to create some pretty interesting new products with new features. And those products are coming. So we expect to launch some of them late this year. The good and bad of those markets are typically -- they're long lead projects, meaning that can sometimes take a year to build. But the life of the product can often be eight to 10 years. So after you design it and build it and go through that process of a year or a year and a half in some cases, the product typically lives for eight to 10 years. And it's hard to see that later this year.

And it seems like you continue to partner with and provide product for some of the best and most innovative companies out there.

That's right. We were recognized as that. We have both capability technically, and the ability to supply because we're the largest producer also not just the leading producer, but the largest producer of these control products, chips and products and technologies in the world.

Right. And if you are a consumer with the Roku product that does not have your embedded software in there. You're probably not a very happy camper right now.

Yeah. I guess you'll have to use one of our other remotes to operate your television.

Right, right, not optimal. All right. Well, I appreciate the -- appreciate you taking the questions and best of luck.

Sure. Thank you.

Thank you. I'm showing no additional questions in the queue. At this time. I'd like to turn the conference back over to Mr. Arling for any closing comments.

All right. Thank you for joining us today and obviously for your continued support of Universal Electronics. I do want to announce we plan to present it Sidoti Smallcap Virtual Investor Conference in March. And we hope to see you there or hear from you there, depending on the forum. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.