Good day, and thank you for standing by. Welcome to the Universal Electronics 4th quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kirsten Chapman, LHA Investor Relations. Please begin. Thank you, Norma, and thank you all for joining us for the Universal Electronics 2022 4th quarter and full year financial results conference call. By now, you should have received a copy of the press release. 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. A webcast replay of this call, including any additional updated material, non-public information that might be discussed during this call, will be available on the company's website at uei.com for one year. During this call, management may make forward-looking statements regarding the 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 leveraging its wireless connectivity capabilities in the climate control, home automation, security, hospitality, and HVAC channels, and its ground-breaking line of ultra-low power and energy harvesting control products designed to address the growing demand for more sustainable solutions in electronic devices. The continued successful collaboration with existing and new customers in developing and launching new generation products, software solutions, and technologies into existing and new and growing markets, which result in increased sales and market share for the company. Management's ability to continue to manage its business inventories and cash flows to achieve its net sales, margins, and earnings through financial discipline, operational efficiency, manufacturing diversification and footprint strategy, and line management. The impact to the company's financial results that it may experience due to supply and trade constraints, semiconductor supply challenges and inflationary pressures and macroeconomic conditions it and its consumers are experiencing. 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 in spending, natural disasters, public health crises, including the continuation or resurgence of COVID-19 pandemic or governmental actions, including war. The company undertakes no obligations 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 the call and the documents the company has filed with the SEC, including its 2021 annual report on Form 10-K and the periodic reports filed 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, believes that providing these non-GAAP financial measures to investors as a supplement to GAAP financial measures 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 are included in the company's press release issued today. On the call today are 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 return to provide closing remarks. It's now my pleasure to introduce Paul Arling. Please go ahead, Paul. Thank you for joining us today to review our 2022 performance as well as our outlook for 2023. As we have highlighted many times before, our strong commitment to ongoing innovation, product and technology design, development and delivery, and ongoing excellence in customer service continues to garner accolades. Our product designs received CES Innovation Awards in January, and more importantly, our platforms and technology solutions earned customer recognition in the form of new product design wins throughout the back half of 2022 and into 2023. As a result, our share continues to grow in the markets we serve. However, macroeconomic challenges and increased consumer uncertainty have impacted market dynamics, especially at the tail end of last year. As a result, Q4 2022 performance was below expectations, with net sales of $122.8 million and EPS of $0.44. We anticipate that impact will also be felt in the 4th quarter of 2023. Regardless, our connected home solutions, which are sold in our higher growth markets that focus on climate control, home automation, and security, continue to gain momentum. In fact, product design wins secured 12- 18 months ago in some cases in the connected home channel are starting to ship, giving us confidence net sales will improve starting in the 2nd quarter of 2023 and build momentum into 2024. For example, we are shipping our t advanced thermostat with Mitsubishi Electric Trane for the U.S. market toward the end of the 1st quarter of 2023, and have already been awarded our 2nd smart thermostat with Mitsubishi that we expect to launch globally. In addition, we won new thermostats and control platforms at one of the largest U.S. HVAC system providers at the beginning of 2023, and are closing another global leader in the HVAC space with our new UEI TIDE platform. In the home automation space, we continue to grow our business with control solutions at Hunter Douglas and Somfy, and we have expanded our footprint with multiple sensors, controllers, and home automation products with U.S. security provider Vivint. We expect these wins to contribute to our revenue starting next quarter. In the meantime, we have been taking additional actions to address the market dynamics. 1st, over the past few years, as mentioned, we have deliberately been shifting development spend on new products and technologies from our market-challenged core video service provider channel to higher growth channels in the connected home space, where over the past years we have seen growth. 2nd, to moderate fixed costs, we continue to move ongoing maintenance and development support activities to lower cost regions. We have also tasked our local innovation and development teams to create technologies that can scale across all our channels, focusing on wireless connectivity, interoperability, sustainability, and end user support solutions that are key to differentiating our solutions in these growing markets. 3rd, we have already begun diversifying and optimizing our manufacturing base outside China with the construction of a new factory in Vietnam, which will be fully operational later this year. While this will initially increase our overall production footprint, the goal by the end of 2024 is to right-size our global footprint, enabling manufacturing flexibility to serve our global customers, to optimize cost efficiencies, and to create a production footprint that is in line with our new higher growth product categories. Finally, our product development process continues to prioritize allocating global development resources to projects with the highest potential revenue and business impact. This January, our experience and customer reaction at CES was extremely positive, confirming that our development of differentiated products is on the right track and offers ample proof that we are in a strong position to generate long-term growth. For almost 40 years, we have delivered industry-leading control solutions for our customers. Our inventions like Kwikset have become the de facto control standard for smart, connected home entertainment devices. As such, leading brands from around the world increasingly turn to UEI for finished products, embedded SoCs, and software solutions to power the sensing and control functions of their systems. Our strategy of growing in new markets and our drive to consistently meet and surpass customer expectations will, in time, yield long-term growth. Our customers count on us to create innovative solutions focused on IP connectivity, greater co-home control automation, including better and more intuitive low-power wireless control, resulting in a greater tie-in with other smart home systems. Since 2020, sales in our climate control, security, and home automation space have grown. In 2022, these connected home solutions accounted for over 25% of our net sales, and these markets are already larger and are growing at a faster rate than home entertainment markets. We expect their contribution to be even more meaningful going forward. Our specific addressable market in climate control alone represents nearly $1 billion, which is growing at a 10% compound annual growth rate. I will briefly review a few of the highlights from our product introductions at CES. We demonstrated our expanded connectivity solutions for whole home wireless control with enhanced security, sustainability, and scalability. We emphasized our contribution to a sustainable future by addressing the need for more energy efficiency in the home with UEI Tide Smart Th ermostats and by reducing battery waste with UEI Eterna energy harvesting remotes. I am proud to announce that Eterna was honored with a CES 2023 Innovation Award amongst a pool of over 2,100 applicants. We demonstrated our smart home dashboard solution, Kwikset 5.0, as a reference design currently shipping in millions of LG smart TVs worldwide. As smart TVs continue to evolve in features and functionality, the need to embrace the full potential of the largest screen in the home to deliver a smart home control experience is becoming a reality. Customers ranging from service providers and broadband platform owners to a growing list of smart TV brands reacted positively to our Kwikset smart home software solution. This confirms the potential to scale our enhanced Kwikset software and services offering that blends home entertainment and smart home experiences on a single screen. In the area of interoperability, we embrace the emerging Matter standard with the introduction of four new Matter-enhanced solutions across our portfolio, ensuring our customers can bridge between the existing smart home devices consumers have in their home and the new Matter-enabled devices they will buy in the future. Due to the competitive nature of our customers' businesses, I am once again limited by confidentiality requirements and cannot discuss specific customer and new design win opportunities. What I can say is that our current design wins, bid opportunity pipeline, and project backlog represent a significant number of new business opportunities for UEI. These opportunities are strongly weighted to our newer, higher growth markets, highlighting our ability to effectively penetrate these new markets and execute on our market diversification strategy. Although the related sales are not expected until later in 2023 into 2024 and beyond, these definitive wins underpin our long-term growth projections. Interestingly, while the connected home channel has exhibited signs of longer sales and development cycles than our traditional home entertainment channel, the benefits include significantly longer product life cycles. This means that while major new product developments in climate control, security, and home automation are taking longer to launch, these product platforms have significantly longer revenue cycles that last five or seven times longer than the products developed in home entertainment. In summary, our new innovative products were well received at CES, and our design wins continue to build the foundation for a strong future. What is important now is that we successfully execute on the many new product introductions that we already have been awarded by our customers. We continue to secure new business on the outstanding bids we will be addressing in the coming months and years, and that we remain vigilant in executing our cost savings initiatives. We will continue our commitment, in fact, our obsession, to bring customers continued innovation as well as product and technology solutions that help improve consumer experiences and enable our customers to grow their businesses. We continue to implement the same strategy that has made us successful many times before and will once again bring UEI to ever higher levels of success. I'll turn the call over to our CFO, Bryan Hackworth, for a review of the financials. Go ahead, Bryan. Thank you, Paul. 1st, I'll review the results for the 4th quarter of 2022 compared to the 4th quarter of 2021. Net sales were $122.8 million, below our expectations, and compared to $143.9 million for the 4th quarter of 2021. There's a great deal of uncertainty in the current economic environment, which has led to households spending less on discretionary goods, and this is affecting our end user markets. In turn, certain customers, primarily in our video services channel, submitted purchase orders that were lower than their previously submitted forecasts, impacting our 4th quarter. Customers in the consumer electronics and climate control channels also reduced orders for the 1st quarter of 2023, which will be reflected in the guidance I'll provide shortly. These decreases in demand resulted in 4th quarter production being lower than forecast, yielding manufacturing inefficiencies as overhead was absorbed at a lower rate and unfavorable labor variances were incurred due to the inability in the short run to flex direct labor. Although gross margin for the 4th quarter of 2022 of $37.7 million or 30.7% of sales increased compared to 28.4% in the 4th quarter of 2021, it was lower than expected. Operating expenses were $29.4 million compared to $30.2 million in the 4th quarter of 2021. SG&A expenses were $21.7 million compared to $22.6 million in the prior year quarter. R&D expenses were $7.7 million compared to $7.6 million in the prior year quarter. Operating income was $8.3 million or 6.8% of sales compared to $10.7 million or 7.5% of sales in the 4th quarter of 2021. Our 4th quarter of 2022 effective tax rate was 27.3% compared to 16.1% for the 4th quarter of 2021. For the 4th quarter of 2022, net income was $5.6 million or $0.44 per diluted share compared to $9 million or $0.68 per diluted share in the 4th quarter of 2021. Next, I'll review our cash flow and balance sheet. We ended 2022 with cash and cash equivalents of $66.7 million compared to $60.8 million at December 31st, 2021. Cash flow from operations for the 4th quarter of 2022 was $10.8 million. Before I provide guidance for the 1st quarter, I'll comment on our plan to restructure our manufacturing footprint, and I think it's important to 1st provide a little context and history. The majority of our goods are currently produced in three facilities, two in mainland China and one in Mexico. Our Mexico facility was originally established as a refurbishment plant, but when the China tariffs were enacted in 2018, we quickly transitioned the facility into a full-fledged manufacturing factory to produce goods destined for the North American market. Today, in an effort to lower our concentration risk in China, we're in the midst of opening a manufacturing facility in Vietnam, currently scheduled to commence operations later this year. The expansion of our factory footprint over the past five years has been necessary given the changes, sometimes sudden, in governmental policies, as well as the overall global environment. As a result of these actions and the fact that our business has evolved over time, becoming less dependent on the video services channel while experiencing strong growth in new channels, including climate control, security, and home automation, we currently have more production capacity than needed. Additionally, the average selling price in the climate control channel, one of our strongest growth categories, is significantly higher than our traditional products in the video service channel. Fewer units will need to be produced to achieve sales growth and less factory floor space will be required. Going forward, we plan to reduce our manufacturing footprint beginning in the 2nd half of 2023, with additional modifications to occur in 2024. These changes will improve manufacturing efficiencies and ultimately make UEI a more profitable company. Turning to our guidance. For the 1st quarter of 2023, we expect sales to range from $100 million-$110 million compared to $132.4 million for the 1st quarter of 2022. We expect a net loss ranging from $0.28-$0.38 per share compared to EPS of $0.47 in the 1st quarter of 2022. Looking past the 1st quarter, the current economic environment remains uncertain as inflation persists. Unlike last year at this time, customers have reflected this sentiment in their near-term and long-term forecasts, with Q1's revenue expected to be the low point of 2023. Based on the expected timing of our new product introductions and customer forecasts, we expect 2nd quarter's net sales to be sequentially higher than Q1, and for both Q3 and Q4's net sales to exceed Q2's. We have faced several headwinds over the past few years, but we believe the increase in R&D spend focused on the connected home will pay off in 2023 and beyond. I would now like to turn the call back to Paul. Thank you, Brian. Progress is not a straight path. Strong companies have the opportunity to become stronger during times of uncertainty. UEI has repeatedly proven this adage. We expect to do that again. Our business has been beset with many challenges across the last few years, as many have. COVID-19 and its after effects, supply chain issues, semiconductor shortages to name just a few. Industry shifts have caused many of our customers' demand to lessen. Recently, the continued impact of economic difficulties such as higher interest rates and inflation have affected consumer spending patterns. During this difficult period, the team at UEI has innovated like never before, begun a significant transition into the connected home market, and increased our share in all the markets we serve. Over the past 18 months, we have won significant projects and have many more opportunities in the pipeline. While the near term results are not at all what we would like them to be, we are taking action to improve them, and very importantly, create an even better future for UEI. Our track record supports our ability to navigate different pressures, emerge stronger, and drive shareholder value in the long term. Based on our product development pipeline, design win backlog, our intellectual property, and our traction in new markets and customer engagements, this is truly a new beginning. As always, stay tuned. Operator, we can now open up the call for questions. Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. To withdraw your question, please press star one seven three. Seem to be announced. Please stand by while we compile the Q&A roster. One moment for our 1st question. Our 1st question comes from the line of Greg Burns with Sidoti. Your line is now open. Good afternoon. Can we just dig into the guidance, I guess the revenue miss for this quarter and the guidance for the 1st quarter? Just maybe some specific color on what's driving the magnitude of the decline. You know, is it primarily coming from the traditional kind of SVOD channels or is it, you know, your more consumer-centric channels in the automated home? Could you just help us understand, you know, what's driving the magnitude of the decline? If we look back to like the heart of the pandemic, you know, revenue was far higher here. Far higher than what you're implying for the 1st or guiding for the 1st quarter. Can you just kind of let us know what's changed or what's so dramatically different about this environment that's driving the decline? Sure. Yeah. There's varied effects and we, you know, we obviously we don't sell a lot of our products directly to consumers, Greg, as you know. The customers that we sell to do, because our products typically end up in homes which obviously are the decision makers in those homes are consumers. We rely upon the consumer markets. As you've probably seen from many companies, you know, and we would say the same because our customers are selling directly, often directly or through the retail channel, you know, to consumers. TV business as an example, you know, During the pandemic they probably did okay because people were at home. In fact it was probably a flight to quality where they were buying better TVs during that period. I think the just the long term effect of the inflation, higher interest rates has made, you know, middle class consumers a little less reluctant or a little more reluctant, less likely to go out and buy items. You've probably seen this as we have from other products in the consumer market category. There are exceptions to that, but I think widely consumers just aren't parting with their dollars as easily. In many cases it might just simply be because a middle income family when more of your paycheck is going to, you know, higher cost of food, higher cost of gasoline, higher cost of utilities, et cetera, there's less left over to spend. Our customers are telling us that they're seeing, you know, fewer orders and expect to see lightness of orders for a time here. You know, we saw that in Q4. In fact, during the quarter, we had some customers who had forecasted orders but then did not fulfill them because they, you know, saw lightness, inventory build, et cetera. Of course, you know, other parts of our business have just seen, you know, difficult, you know, demand patterns. It, it's been across the board. I would say that the, you know, home automation security is a little easier only because again, new projects. Our, our market share there is lower, much lower. As you know, in the video service provider channel, our market share is quite high. There, when the market's down, we're down because we can't offset it with share gain. We've already got a relatively high share. In markets like HVAC, our market share is respectable but still relatively low, and we have great offerings there. We can offset weakness with growth. The problem for the last few years has been that market was much smaller, and our home entertainment business was so large that any shrink in it was hard to offset with growth from that smaller business. As we highlighted during the, you know, the prepared comments, that smart home part of our business is now 25%. We think it's getting to a level of scale. We win a few more SKUs there and deliver them, it can begin to deliver some growth for UEI despite any home entertainment difficulties. What percent, I guess the 10% customers, can you just give us that number? Yeah. Number Yeah. Number was our largest customer at 15.5%, and Comcast was our 2nd largest at 11.2% for the 4th quarter. Okay. I guess with Comcast, obviously that's indicative, I guess, of the decline there, what you were talking about. Just so I understand, like TV sales, like a consumer electronics product sale declining, this feels like there's more to it in the... your traditional channels than just consumer discretionary spending being lower. Like, is there more of like a, this is like the impacts of like cord cutting or more secular issues? Oh, sure. beyond that? Like what- Yeah, Well, that would certainly be part of it. I mean, the demand from those customers has been lower for sure. Okay. With the manufacturing footprint, how much of a benefit to margins will that be? Because I know you're excluding some of these expenses in your adjusted numbers. Does that just go away at some point in time? Like, how should we think about the benefit of this footprint rationalization? 'Cause you already are excluding some expenses from your adjusted numbers. Yeah. What's the impact gonna be? Yeah, that's correct. I mean, we do. When we transitioned our Mexico facility from a reversion plant to a full-fledged manufacturing facility, it increased our, you know, capacity. What I did was I said, "Okay, if I were to design it today, we have excess capacity, so what would it look like?" What's happening now is with us trying to de-risk our, you know, concentration risk in China, and we're spinning up Vietnam, we're gonna have, you know, even a more capacity than needed. Right now with the, you know, with the shortfall in demand, we just have too much capacity. You kind of look at it in two layers. One, you're right, I do pro forma a piece of it, but the amount that potential savings is actually greater than that. When eventually we restructure everything, and we're currently analyzing it all, the savings are gonna exceed what's currently being included in the pro forma. There's more savings to be had, is probably the simple way to say it. Okay. All right. Thank you. Thank you. One moment for our next question, please. Our next question comes from Jeff Van Sinderen with B. Riley. Your line is now open. Hi, everybody. Just wanted to touch on supply chain for a minute. Didn't hear you speak much about that. Wondering what you're seeing there. I know that's been sort of a thematic thing until now. I think there's been some pressure there. Just wondering if, you know, that's improving. Where are we as far as getting to normalization on supply chain? Maybe touch on the gross margin outlook as far as you can see around that, or is it, you know, maybe not as relevant now that we're looking at sort of different issues around the, you know, factory capacity utilization and so forth? As far as supply chain, Jeff, this is Paul. The situation has improved. We have vendors now that are back to a more normalized pattern, where in semiconductors, specifically, typically lead times there are somewhere between six- eight weeks in a normalized environment, and they have more ready supply. Meaning if your forecast is off, you can usually get the parts so long as you're not doubling or tripling, you can usually get extra parts in real time in a normalized situation. For a while there, lead times were up with some vendors to 80 weeks, and if you didn't order it, you weren't getting it. If you had any flex and you needed another 10% of parts, you were gonna have to fight for them, and you usually wouldn't get them. We're getting back to more of that. We have vendors now back to the six-eight week lead time with ready supply. We do have other vendors, unfortunately, on some projects that we've jointly chosen with customers, who are still at 40 weeks. It's getting better, and I do think that they'll return. They've shown us plans for capacity expansion on their part. Unfortunately, I think this problem is starting to also improve because, not just with us, but with across industry, I think you're starting to see demand come down. We thought that this problem would solve through capacity expansion, which would take longer, and probably part of the solution making it come faster is that demand has dropped, not for us, although that has happened, but for the entire electronics industry. The good news in that is that it probably makes the semiconductor shortage go away faster. We're seeing that, where we're starting to see that problem dissipate. It's not back to normal, but it's getting much closer to that. Mm-hmm I would guess will be this year back to normal, where vendors have ready supply. They have a six-week, eight, seven, eight-week lead time. We're back to a more normalized situation. Not there yet, but we're getting very close to it. Okay. fair to say that at this point, it's getting better. It's not preventing you from shipping product, or is it preventing you from shipping product? If so, how much? It is. It's less than before. I don't know the exact figure. It's $ millions, but it's not $ 10 of millions at this point. It's, we have some products that there's been demand for that we've had a difficult time getting the parts, but it's getting easier to get them. I think that number will continue to reduce. Okay. If we can maybe turn back to the manufacturing situation, realize there's a process there. Maybe you can just delve a little bit more into the plans to handle that going forward, the timeframe around it. I know you mentioned 2023 and 2024. At what point do you think we can begin to see or achieve efficiencies? Well, it's gonna be a process. I mean, currently we're evaluating everything, and the 1st thing we have to do is we have to get Vietnam up and running, and that's scheduled for the 2nd quarter. That's the 1st thing we have to do. Then in the short run, you get, you know, you typically have start-up issues. It takes a little while to get that running efficiently. Once that occurs, what we expect to do is in the 4th quarter, latter part of, you know, of 2023, is to basically shut down a factory and then take the goods that are produced at that factory and put them into Vietnam and into maybe some other remaining factories. Subsequent to that, going into 2024, we then have to continue to evaluate and figure out can we reduce it, can we streamline another factory, or can we potentially shut one down and go from what will at one point be four f actories down to potentially two or two and a, and a, one smaller one. We're currently evaluating everything, but I think it's gonna, it's gonna be a process. So you'll see the efficiencies over time, but it's something that we're addressing right now because, you know, as I mentioned in the prepared remarks, what's hurting us in, what hurt us in Q4 and what's gonna continue to hurt us in Q1 is the fact that the volume's down. We have too much capacity. I'm not proforming all of it. I pro forma a little bit, the effect of it is greater than that is what's falling to the bottom line. It's why our margins were lower in Q4 than expected, the same is true for Q1. Mm-hmm. I mean, just based on what you're looking at now, realize there's, you know, this is a process, as you said. When do you think we can start to see margins, overall margins begin to improve? There's a lot of variables that go into the gross margin. This is the manufacturing right now is the biggest piece. It's the thing that we need to address the most. It's hard for me to predict what, you know, Q2, Q3, Q4, what the margin rate will be because there's just other factors like FX and commodity pricing. Mm-hmm. If we're talking about chips, and as more capacity comes on, the prices will probably come down, things of that nature, mix, royalties, et cetera. There's just a list a mile long that play a role in the gross margin rate. I think it's gonna take, I think we're gonna start to see improvement from a manufacturing perspective by the end of the year because we're gonna do as I just articulated. Trying to figure out Q2's margin rates through the rest of the year are difficult just because of these other factors. Okay. All right. Fair enough. Thanks for taking my questions, and best of luck. I'll jump back in the queue. Thanks, Jeff. Thank you. One moment for our next question c omes from the line of Steve Frankel with Rosenblatt. Your line is now open. Good afternoon. Can we start with kinda sizing the home control business in 2021? Did it grow when the rest of the business shrank, or did it just shrink less in 2022? No, it grew. It's been growing for the last few years it's grown. Again, it hasn't had the size. Our home entertainment business, it was much larger. It was the vast majority of our company. That business has grown over the last couple of years. Its growth, though, hasn't yet been able to offset any difficulties we've had due to any number of things, supply chain shortages, COVID-19, slower demand in certain parts of it, now consumer affecting the consumer electronics business, the consumer sentiment. We think we're getting closer to that the growth in that business because it's now 25% of our revenue. Again, as I said in the prepared remarks, a lot of our development resource over the last few years has gone to these areas. We are engaging the largest players in the world, some of which we've already won projects with, and as this year progresses, we'll be shipping products to them. I guess the best way to say it is that we see this business like we did the home entertainment a decade or more ago, where our market share was still relatively low. We had better solutions. The competitors here did not. Then, you know, we would go to these customers who were, you know, very happy to work with us because we had great solutions for their market, and our market share grew substantially in a growing market. That's what we see here. It's taking a little bit of time because some of these projects, they will take 18 months after you've won them, to begin shipping, not because it takes us that long to build the product, but sometimes the companion product takes that long to develop and get done. But once it starts, it's, as I said, the good news is often these products will have five, seven-year lives, whereas in some of our consumer electronics businesses, it's an annual cycle. You have to win the business every year, and each year they revisit it in the summer for the next year. It has longevity, and it also ties back to the factory footprint. Brian was just talking about that some of these products will carry an ASP that is 6x, 7x, maybe even 10x what a remote control would sell for. Now they are more complex products, but they probably won't require as much factory footprint per dollar of sales as that which it replaces, right? As the mix shifts, the footprint will change. We're factoring that into our factory changes as well. That business is growing and, we're getting it to a size now where its growth will be, you know, meaningful to our results. The home entertainment has just been through a lot over the last industry shifts, you know, and all the other effects we've talked about. We think that that business, our market share is as high as it's ever been in that business. We've looked at it by customer and figured out it isn't really that we've lost anything in these markets. Our market share, in some cases, is higher than it was before. They're just going through a difficult time. The TV business is probably a 4% growth business over the long term, sometimes you'll see it go up 10, sometimes you'll see it shrink by 6. In fact, we've looked at this once all the way back for decades, not just for us, but the industry itself. You know, some years it's better, some years it's not. The connected home stuff is growing. Climate control is going through a transformation much like home entertainment did some years ago, when it made the transition from analog to digital, and then the HD boom. I mean, that market is going through a transition, and we think we're uniquely positioned to help these customers, you know, make their devices smart home, connect them to other systems in the home, bring new features to them that they didn't have before. We're presenting that to them and have particularly at CES, and there's a lot of interest. Our bid pipeline is. Our wins should help us fuel growth, some growth later this year. You know, our bid pipeline is quite strong in these areas. Let me zero in on that last statement. When you say some growth, are you talking about sequential growth, or do you think you can get to a quarter in 2023 where your revenue is up year over year? Well, right now what I said is in the remarks is that I think Q2 or Q1 will be the low point. Q2 will be greater than Q1, then both Q3 and Q4, both will be greater than Q2, is my expectation. Okay. Bryan, just to try to understand how you got to the bottom line number for guidance, give us a feel for what the OpEx quarterly run rate's gonna be in the new world. The OpEx run rate I'd say it's a normalized run rate. What's affecting Q1 is the gross margin rate. It's basically the manufacturing overhead, the lack of absorption. The volume's at a point where we can You understand this, where you have a factory, a portion of it is fixed costs. The units run through the factory, you're just not absorbing the overhead efficiently, that's what's going on right now. If you're looking at Q1, the OpEx is a normalized run rate the gross margin rate is the difficult position right now. Okay. In this new world where the pay TV business is not gonna come back to where it was, although you have opportunities to do things like sell green remotes to them, which maybe gives you some growth, do you need to take OpEx down a level? Or you've been holding it so tight for the last couple of years, this is kind of the operating run rate expenses of the business and you can't get any more out of it? Well, yeah, I wouldn't say that, you know, depending on what happens next, there's never a time where we'd say there's nothing more that can be gotten out of it. Our operating expenses have come down over the last couple of years, not as much due to labor inflation. What's happened is the headcount's been reduced more than the expense. In order to retain the talented people, you need to differentiate your products and get all your projects done. As you know, 'cause you've probably seen this in other companies, the labor inflation over the last few years has been unprecedentedly high, right? You have to use it as an offset to any headcount reduction you may have. We watch over this pretty closely in even good times, good times and bad. We wanna make sure that we have, you know, the right level of people to get the work done in every part of our business, not just let it flex up when we're doing well. Because when things, you know, aren't going as well, you've gotta make sure you have the people to produce the differentiated products to help you grow. You know, so that's what we'll assess. To your point, maybe if certain parts of our business aren't doing as well, then it might mean that there are resources there that aren't as necessary. That's true in any case. Okay. Great. I'll jump back in the queue. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Brian Ruttenbur with Imperial Capital. Your line is open. Yeah. Thank you very much. A couple quick questions. Interest expense, what you experienced in the 4th quarter, I think was around $1 million. Is that a good number to use going forward, or was there anything one time in nature? It's a good number to use in the future. I mean, right now interest rates have been rising, so it could go up a little bit in terms of from a rate. I think on average, that's a good number to use. Okay. The next question like that is litigation expense. There was about $2 million in the 4th quarter, which, you know, was up from previous periods, but maybe you can give us a number, you know, going forward, what we should be looking for in terms of litigation. That's a difficult one. It goes up and down based on activities during the quarter. Some quarters are obviously gonna be greater than others. Difficult one to predict on that. How about for 1st quarter, since you've given guidance already, what kind of litigation expense do you have factored in there? I would say similar to Q4. Okay. Great. Just there's been a lot of questions already about revenues. Gross margins, I assume will drop, you know, sequentially, from 4th quarter to 1st quarter. Is that a correct assumption? Yes. It should drop maybe in the ballpark below 25%. Is that the right ballpark? No, that's too low. You could back into it based off of the, you know, the OpEx. I'll let you do the math. It won't be below 25. Okay. I would expect. as the quarters get a little bit better, the gross margins recover from 1st quarter to 2nd quarter to 3rd quarter to 4th quarter, ballpark-ish? Again, it's just difficult to go beyond a quarter because there's too many variables that go into gross margin rates. The factory, we're gonna start to address the factory issue immediately, or we have been. We're analyzing everything. From a shutting down of a factory, that's gonna occur in the back half of the year. You know, how FX rates play out, how sales mix, including royalties play out, commodity pricing, there's just a lot of variables that go into the gross margin rate, so it's just difficult for me to predict beyond one quarter. Great. Thank you very much. Thank you. Thank you. I would like to turn the conference back over to Michael Palmer of CJS Securities. Okay. Thank you for joining us today and for your continued support of Universal Electronics. We plan to present at Sidoti March Small-Cap Virtual Conference. Hope to see some or some of you there. Thanks for participating today. Have a great day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may disconnect. Everyone, have a great day.