VOXX International Corp (VOXX) 2020 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to VOXX International's first quarter conference call. (Operator Instructions) As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Glenn Wiener, Investor Relations. Sir, you may begin.

Thank you, Victor, and good morning. Welcome to VOXX International's Fiscal 2020 First Quarter Results Conference Call. Our call today is being webcast live on our website, www.voxxintl.com, and a replay is available for those who are unable to make today's call.

Speaking from management will be Pat Lavelle, President and Chief Executive Officer; and Michael Stoehr, Senior Vice President, Chief Financial Officer. Following their remarks, we'll have the Q&A session for those investors wishing to ask any questions. Additionally, John Shalam, Chairman of the Board, is also with us today and will be available during Q&A.

I'd like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that would constitute forward-looking statements are based on currently available information. The company assumes no responsibility to update any such forward-looking statements. And risk factors associated with our business are detailed in our Form 10-K for the period ended February 28, 2019.

I'd like to thank you all for your interest in VOXX. And at this time, I'd like to turn the call over to Pat Lavelle.

Good morning and thank you, Glenn. It's been roughly 2 months since we reported our year-end results and outlined our plan to return VOXX to profitability. As we have seen from our last 2 divestitures, there is significant value in our assets, frankly, more value in our cash and real estate assets than what our current share price yields, which is what is driving the aggressive actions underway to increase shareholder value.

Improving cash flow and adjusted EBITDA are key priorities as we move to recapture the value in our business assets so this too becomes reflected in our share price.

As I said on our year-end call, it'll take a few quarters to align our cost structure and exit noncore products and product categories as well as to generate some of the synergies resulting from our restructuring. I'm confident that as we move further into the fiscal year, we will be in a stronger position operationally, unfortunately with one caveat and that is the automotive market.

Economic indicators point to a lower car sales this year, which will affect our OEM business given the lower volume of vehicle launches compared to our original fiscal 2020 expectations. In the first half of the year, major automakers saw U.S. new car sales drop 6 straight months of weaker sales compared with the same period in 2018 and the trend is expected to continue throughout 2019. It's not a catastrophic drop but with rising car prices, the pace of sales and current inventory, it could continue to lead to not just lower volume but a delay in certain vehicle launches.

Our Q1 results reflect this as OEM sales were down $8.1 million year-over-year, 2 vehicle launches were delayed by customers, lower sales at one of our major OEM customers left them with higher inventory and reduced their purchases from us and finally, another OE dropped passive entry products from their line, though this last piece was accounted for in our budgeting process. Aftermarket sales were also affected by lower vehicle sales and were down $1.9 million or just over 11%, although, satellite radio, which continues to move to the OE side, accounted for more than half of that decline.

For VOXX, the decline in the auto market will certainly impact this fiscal year but long term, this is not a major concern as our position with our OEM customers remains strong. We're adding new vehicles for our EVO Rear Seat Entertainment systems and are in discussions with new OEM partners which, if they materialize, would positively impact our business in years ahead.

Our eFob technology is also making steady progress and should positively impact next year's segment sales.

Additionally, the good news from what we are seeing overall is that U.S. buyers are gravitating towards SUV and pickup trucks this year, which is more heavily weighted to our current business model.

On Consumer Electronics segment, which consists of our former Premium Audio segment and the Consumer Accessories segment, less EyeLock, they performed well in the first quarter. Net sales were up $2.7 million year-over-year in Q1 with Premium Audio product sales up $4.3 million or over 13%. We saw a significant increase in the sale of premium home separate speakers, mobility products and our premium commercial speakers. The commercial business should be a source of growth this year as we have expanded distribution and see higher volume for our Margaritaville resort projects.

Additionally, a few weeks ago, we announced a distribution partnership with SnapAV becoming their exclusive national custom installation distribution partner for speakers in the United States. Klipsch will join SnapAV's own brand of episode speakers in their portfolio and will be available for purchase in August, which will start contributing to our performance in the end of Q2 and over the first year, 12 months, should generate an additional $10 million in new revenue with growth projected thereafter.

We ran a successful pilot with DISH and last month just launched on their OnTech smart home services a new direct-to-consumer smart home solutions brand where OnTech will provide consumers with professional installation, setup and education for the latest smart home devices and entertainment systems. This new business places Klipsch as one of 2 audio brands on all DISH OnTech trucks providing sound bars and multiroom audio along with a good, better, best passive speaker offering.

Our Klipsch One GBA will be going into all trucks beginning in November and will begin contributing to our Q4 results.

Another positive development announced last week is Klipsch will begin selling a limited assortment of its headphones, tabletop speakers and sound bars online and to select retailers in China. We will offer these products on tmall.com, the world's second largest e-commerce site effective immediately, with plans to expand online distribution and to select retailers' websites in the fall.

We will be selling online initially, managing inventory accordingly and building marketing campaigns to expand Klipsch's premium brand equity in one of the world's fastest-growing economies.

Staying within the Consumer Electronics segment, other CE product sales were down

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but keep in mind, we had a lot of discontinued products and deemphasized several product categories. Many of the categories we are focusing on grew in Q1 year-over-year, helping to offset lower sales as a result of reduced SKUs.

Additionally, total Germany sales were down $1.6 million for the comparable Q1 period. So our domestic business was essentially flat, which is a positive given the declines in recent years.

Just a few things to highlight. The total audio sales increased by close to $5 million, as we added Costco Canada as a distribution partner for our Acoustic Research outdoor speakers. We also saw an increase in sales of karaoke products under our Singsation brand due to expanded offerings and higher sales via Amazon.

Sales of a hook-up, reception and remotes were down approximately 300,000, where much of the SKU rationalization took place in the hook-up category. Reception, which is an area we remain focused on given our strong technology, our brands and our customer base, grew close to 15% year-over-year as some of our new products exceeded expectation, particularly at Walmart.

General Accessories, which consist of just about everything else less our wearable category was where we had the decline domestically and that is in line with our strategy. And that strategy is to focus on higher margin, longer life cycle and more sustainable product categories.

And lastly, healthcare and the wearable category. VOXX serves as the distribution partner in support of UnitedHealthcare's Motion program, handling the distribution and logistical support for wearable devices for Apple, Fitbit, Samsung, Garmin and Striiv. During Q1, we saw a 1.2 million sales increase year-over-year as more members were added to the Motion program, and we added Apple product, which was not part of the prior year's results. This program and our position overall in the wearable category is expected to drive nice growth for VOXX in the coming fiscal year and the years that follow.

Within the Biometrics segment, essentially, we had no revenue for the quarter as we had orders for both EXT and NXT products but did not have the inventory to ship in Q1. NXTs were being modified and upgraded, and the EXTs were just about to be launched. Both situations have since been remedied, and we began shipping both solutions to customers in the health care, financial services and education verticals in June.

As we noted on our last call, we also had orders for the ViaTouch AI vending machine, but ViaTouch manufacturing delays had stunted shipments. That too has been rectified, and we shipped our first 250,000 units for this year in June, with more to follow throughout the year based on projected pilots, launches and marketing activities of ViaTouch.

We're also making progress on the health care side. Though we're still not in a position to provide specific details as we are currently in contractual negotiations, we believe that by next quarter, we will be in a position to begin talking about the program and anticipated contributions.

On the physical security side, our focus over the next 2 to 3 quarters will be in the health care, financial services and education, as this is where the greatest volume of near-term opportunities exist.

On the embedded side, our focus will be in health care and with various security applications. There is also a new development on the Automotive side that we are working on. This is a new application incorporating EyeLock's embedded solution in vehicle. But this is in the early stage of development, similar to other pilot and prototype projects we are engaged on, but this one, we should be demonstrating samples and things at this year's coming CES show.

EyeLock should start generating more revenue in the coming quarters and losses are anticipated to decline throughout the year as we are now truly moving from R&D to commercialization.

And just a few more comments before I turn the call over to Mike. In our earnings release yesterday, we announced new employment agreements for Mike Stoehr, Loriann Shelton, our COO, and for myself. We had an independent compensation benefits advisory firm working with us to determine best practices and to further align key executives with shareholders.

In all agreements, you will see that bonuses will now be paid on adjusted EBITDA, whereas our past bonuses were based on pretax net income. This was done to align further compensation with more of a true operating figure, and there are different calculations for each of us based on meeting minimum adjusted EBITDA thresholds.

Additionally, my stock compensation will increase as part of the new agreement, with terms and conditions set forth in the agreement and based on our stock price exceeding $5 per share during the 5-year employment term. The goal is to further align my interest with shareholders, which this new agreement accomplishes.

And as a reminder, John Shalam has agreed to forego his annual bonus and remains the largest shareholder at VOXX. As a follow-up to the share repurchase program, I just wanted to point out that we were precluded from purchasing stock after the program was announced and intend to execute on this program once the window opens, as we believe our stock at present value represents a strong investment for the company.

Subject to the completion of a financing contingency, we remain on track to close our previously announced sale of our German Accessories business on and around August 31, which will further strengthen our cash position and balance sheet. The transaction is expected to generate approximately $19 million in gross proceeds, with the final purchase price subject to further net cash and working capital requirements. At the same time, we expect to remove approximately $30 million in revenue and a little over $3 million in adjusted EBITDA on an annual basis once the transaction is complete.

Additionally, the potential to generate EUR 2.4 million exists and there is an option agreement granting HF company the right to purchase the real estate property in Langenzenn, which we expect that this will close just pending the resolution of environmental study, and this is going to be a subsequent event to the transaction.

In May, we signed a nonbinding LOI to sell our real estate in Pulheim, Germany with anticipated gross proceeds of $12 million. This past Monday, the parties entered into a formal purchase and transfer agreement for the sale of the Pulheim property, which is expected to close in the fall.

We are continuing to look at acquisitions. Our current focus is on strengthening our Consumer and Automotive Electronics segments and there are a number of companies that we have identified and/or have been in discussions with. Nothing is imminent, but our strategy while divesting is to replace sales, EBITDA and cash flow, and find the companies that may enable us to leverage our infrastructure and generate even more synergies and profitability.

And lastly, the Board is continuing to evaluate the benefits and timing of its quarterly dividend. We believe the share repurchase program and dividend represent good uses of capital. And we would like to get through the next few quarters and see how our business performs and what other corporate events may come about, but I want you to know, this is part of our strategy.

I'm going to turn the call over to Mike now to review some of the quarterly numbers and our balance sheet and then we'll come back for the questions.

Thanks, Pat. Just a little clarity, the shipments in June for the ViaTouch is 250 units, not 250,000.

Oh. Sorry.

Good morning, everyone. As a reminder, we changed our segment reporting structure effective March 1, the first day of our fiscal year and our results of operations take into account the segments of Automotive Electronics, Consumer Electronics and Biometrics. All P&L comparisons are based on the first quarter ended May 31, 2019 and May 31, 2018.

We reported net sales of $93.5 million compared to $100.9 million, a decline of $7.4 million. Automotive Electronics segment sales were $29.6 million, a decline of $10 million and Biometric segment sales were down approximately $200,000. This was partially offset by a $2.7 million increase in our Consumer Electronics segment. Pat provided the key drivers for the year-over-year variances.

Consolidated gross margins at 27.8% were up 40 basis points. On a segment basis, Automotive Electronic gross margins were 22.4%, down 280 basis points due primarily to declines in OEM security and remote start product sales as well as aftermarket headrest products, as these products typically generate higher gross margins. Sales of certain aftermarket security products contributed favorably to the segment margins for the quarter as did lower volumes of satellite radio product sales.

Consumer Electronics segment gross margins of 30% increased by 130 basis points, driven by higher sales of premium home separate speakers, mobility products and commercial speakers as well as higher margins of karaoke products.

Offsetting factors within the segments included lower European margins caused by changes in product mix, discounts offered on certain products in fiscal 2020 first quarter, which were not offered in the prior year period.

Biometrics segment gross margins were up but again, sales were immaterial and the increase was a result of the release of inventory reserves in the fiscal 2020 first quarter. This remains a high gross margin offering and as we begin to ramp-up sales this year, we expect positive contributions.

Total operating expenses of $33.1 million increased $400,000 year-over-year. However, in last year's fiscal first quarter, we had approximately $2.1 million in reimbursement of legal fees. Excluding this, year-over-year operating expenses were down $1.7 million.

Selling expenses of $9.9 million declined by $800,000 due to a decline in commissions based on lower sales, a decline in salesmen salaries resulting from the restructuring and other declines throughout our business due to lower head count.

We also had lower advertising costs and display amortization expense as many displays and fixtures are fully amortized. This was partially offset by new hires and approximately $200,000 for employees that shifted from G&A to selling related to structuring initiatives.

General and administrative expenses of $17.4 million increased by $1.3 million though note, $2.1 million reimbursement I just spoke of is included within our fiscal 2019 G&A and excluding this, G&A was down approximately $800,000. We also had a decrease in salary expense due to lower head count and the transfer of certain employees to selling as noted above.

Engineering and technical support expenses of $5.8 million were roughly in line with prior year, down approximately $100,000. We had higher engineering labor cost in our Automotive segment offset by lower engineering labor cost in our Consumer Electronics segment.

Within this CE segment, R&D increased to support new product launches and within our Biometrics segment, R&D declined as the majority of the products are now nearly completed.

On an operating basis, we lost $7.1 million versus $5 million in fiscal 2019 first quarter. Excluding the $2.1 million reimbursement of legal fees in fiscal 2019 first quarter, operating losses would have been roughly in line with -- for the comparable periods.

With respect to total and other income net, we had $2.1 million in total other income in the fiscal 2020 first quarter compared to $1.4 million in the comparable year-ago period.

Interest and bank charges declined by approximately $100,000 due to amendment in our Wells Fargo lending agreement in which the fees changes -- charged for unused portion of line of credit were lowered. And as we stated, we currently have no borrowings outstanding on our domestic credit facility.

Equity and income of equity investees declined by approximately $400,000 due to partially to lower sales, the impact of tariffs and certain product recall expenses incurred in this fiscal year that were not present in the first quarter of last fiscal year. This resulted in a pretax loss of $5 million in fiscal 2020 first quarter versus a pretax loss of $3.7 million in the comparable period, year ago period.

We recorded an income tax benefit of $2.6 million in the fiscal 2020 first quarter compared to $1.1 million in the fiscal 2019 first quarter.

The effective tax rate for the 3 months ended May 31, 2019, was an income tax benefit of 52.7% compared to 30.4% in the comparable period last year. The effective tax rate differs from the statutory rate of 21% primarily due to the immediate U.S. taxation of foreign earnings, noncontrolling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences and income tax in foreign jurisdictions at varying tax rates. In addition, the valuation allowance primarily increased the U.S. tax credits for which no income tax benefit can be recognized.

The estimated annual effective tax rate for fiscal 2020 is 54.2% and is based on our annual pretax income forecast, which includes profitable jurisdictions anticipating an income tax provision and loss jurisdictions for which a limited tax benefit can be recognized. If the annual pretax income forecast is achieved for the remainder of the fiscal year, the company anticipates recognizing an income tax provision in the subsequent quarters of fiscal 2020.

Net loss attributable to VOXX was $1.1 million in this fiscal year's first quarter compared to a net loss attributable to VOXX of approximately $900,000 in the comparable period last year or a loss per basic and diluted shares of $0.05 versus a loss of $0.04.

Lastly, we reported an adjusted EBITDA loss of $800,000 for fiscal 2020 first quarter versus adjusted EBITDA of $1.5 million or $2.2 million decline. This was due to lower sales and higher expenses which included the onetime settlement reimbursement and offset by higher gross margins and other income net.

As for the balance sheet, cash and cash equivalents as of May 31, 2019, were $60 million, up $1.8 million since fiscal year-end at February 28. On a year-over-year basis compared to May 31, 2018, our cash and cash equivalents increased by $10.2 million.

With the 2 transactions we announced and upon the closing of each, we expect cash to increase by approximately $30 million based on working capital adjustments and related fees and net of closing costs and margins. Also note, the international Accessories sale includes the option to purchase real estate and could generate an additional $2.2 million based on the current euro to U.S. dollar conversion net of fees.

Total debt as of May 31, 2019, was $16 million as compared to $17.6 million as of February 28, 2019, an improvement of $1.6 million. The company's total debt consists of mortgages related to our domestic and international properties and a euro asset-based lending obligation to support our German operations. Total long-term debt as of May 31, 2019, was $7.5 million as it compared to $7.6 million as of February 28, 2019, an improvement of $100,000. We expect our debt to decline further upon the completion of the sale of our Pulheim facility.

Our balance sheet remains a company strength and affords us the leverage to execute a number of initiatives to improve our business.

Operator, we are now ready to open up the call for questions.

Thank you, Mike.

(Operator Instructions) And your first question will come from the line of Eric Landry from BML Capital.

So the EyeLock deal that you're currently in negotiations but can't say anything, this is -- did I hear that correctly, this is one deal?

Yes. This is one deal that is essentially a multiyear deal.

In the health care space?

Yes.

Okay. So the number of facilities is -- I mean a shot in the dark, is it in the tens or the hundreds or the thousands as far as facilities go?

I -- it could be very substantial. Because we're still in negotiations with the company on the final numbers and everything else, I'd like to pass on that and hopefully come back in the third quarter.

We have a nondisclosure at this time.

Yes. We're working under a nondisclosure at this point, but it is significant to our numbers.

Got you. Great. Okay. Thought I'd give it a shot. So the inventory issue with the NXT and the EXT, is it safe to assume that the sales would have, sort of, been at the normal run rate in the quarter had that not happened, in the couple hundred thousand range or?

A little bit higher because of the fact that we had the -- the EXTs were all new, okay. The NXTs were being upgraded and modified to the latest software. And the EXT, which is the outdoor unit, were all new, those would have been our first shipments. So we are anticipating a higher run rate than last year on the hardware sales.

Okay. And on the vending machine, you mentioned that it was a manufacturing issue. I just want to make clear that there hasn't been any sort of adjustment on the number, the initial forecast has -- it's still intact as far as the eventual number of those things in the market?

Yes. This was a launch for them. They wanted to make sure that -- it's a very expensive machine, and they wanted to make sure that everything was right. So the launch was scheduled for the first quarter. They didn't make it in. But they are now shipping product. And not only are they -- they're quite bullish about the number of units that they're going to be able to build. I think their biggest holdback right now is the ramping up to the numbers that they have.

I got you. Okay. Shifting gears here a little bit, was there any T5 True Wireless revenue in the May quarter?

No.

Okay. I'm assuming that, that is starting to shift this quarter if it hasn't already?

Yes. It started this month, yes. And we're getting rave reviews on the True Wireless.

Believe me, I've read them.

Great.

Is that a product that we can assume is at the segment margin?

Yes. You can assume that, yes.

Great. And is that going to be on Tmall?

Yes. Those are some of the things that are planned for them.

Okay. Great. I mean to me it looks like a fantastic product. I'm really excited to see how you deal with it. Now this is, sort of, kind of a dumb question here, but is there any sort of IP protection on that case?

The -- no. No, there isn't. The only IP protection on the unit is the shape of the earplugs.

Yes. Right. And you're not nervous that there's going to be an issue in China with that?

Well, we've fought counterfeit claims and counterfeit product over the years. It's a constant battle with the Klipsch brand, but it's going to exist. We're going to monitor this situation, and we will do our best to protect our position.

Okay.

Just by the way, the $2.1 million pickup that we had on the expenses last year was the award of legal fees on a counterfeit claim that Klipsch had against the counterfeiter. So we are very active and very protective on the position of the Klipsch products.

Okay. Real quick here, any comments on the initial sell-in for that T5 True Wireless?

We're out of stock.

Okay. Lastly, the product recall in ASA, was that a one-timer, or is that sort of an ongoing thing?

The recall in ASA?

That will -- they will be handling that over the course of this next fiscal year. So we can look forward to...

It's not a one...

Yes, right, it's not a one-time effect for this quarter.

Okay. So we're going to look forward to lower earnings for a year now in that thing?

That would offset some of the increases, but ASA has got some very positive things happening in other segments of their market that can offset it.

(Operator Instructions) And we have Thomas Kahn from Kahn Brothers.

Thomas Kahn, K-a-h-n, speaking. John, this was a very, I would say, disappointing release. I've listened a long time, John and our clients own maybe 17% of the company stock. And if you listen to the release, the calls for the past, let's say, 3 years, there's always some optimistic statements in the calls. And for some reason, the optimism, John, never comes through.

The way we look at it is, there's probably $7 a share of liquid assets, and then some more in the way of net assets. So the compensation package irregardless of what a paid consultant says to you, kind of, doesn't make sense. I mean you have to hit $5 and there's $7 of cash in ASA liquid assets. I mean it's all wrong from my perspective. I mean the way these things should be done, John, if they were in shareholder interest, would be like stretch options; very large options with a $10, $15, $20 strike price to align the shareholder interest with the management.

Now, I remember that you said in a public meeting that our company stock was worth 4 or 5x the $7 price that we're selling for. Now maybe you had a bad mushroom for breakfast in your omelet, so maybe what that number's wrong, maybe it's not worth 28 to 35. Maybe it's worth less, but we all know that it's grossly undervalued. So the compensation plan, irrespective of what was said by consultant, doesn't make any sense.

I'd like to see, by the way, a copy of the compensation plan, if you would please make a filing, so all the shareholders could look at it because it's way off base as far as I'm concerned.

Tom, let me address that. We will be putting out a -- it's in the 10-Q what the compensation plans are.

Both plan with the name of the consultant because I want to be sure not to use those guys again. And I have to tell you that I can't recommend to our clients that they vote for this management board, whatever because of what I just said. I can't recommend it. I mean our stock is...

I think when you read the agreement, you'll realize that there are stretch goals, okay? The amount of awards depend on us, at least me, for example, getting to a $15 share price. So when you read the agreement, I think you'll have a different look at it. And we can hold that and you and I can discuss it when you're here for the shareholders' meeting.

Oh, that's perfectly all right, John. But I will say that anything with a $5 price, when I look at ASA and cash being worth $7 right now today, doing no work, doing nothing, John, seems to me to be a giveaway. And I like Pat, he's a nice guy, I don't mind you giving away things to him. But we're talking about shareholder value and shareholder assets. And I don't believe it's conscionable. Regardless, you can always get a consultant to say anything you want. But I just think it's unconscionable, if there's $7 worth of ASA and cash in here, and Pat has a contingency of $5? What am I missing here?

You're missing the point...

So I hope John will be at the meeting, which I'm sure he will be. I'm sure he will be able to talk about this with us. I still -- if our stock is so cheap, I still am always very concerned about managers not buying shares when the window's open for their own account because there's nothing better than [Pat Shalam] or somebody -- John Shalam or somebody else stepping up to the plate and putting $50,000 or $100,000 money into it or any of our other directors. There's something wrong here, and I can't tell you what it...

Well, I think, Tom -- Tom, let me -- read the contracts, and then we'll have a discussion because you're missing a big portion of it so...

I will read them. Absent anybody telling us anything to the contrary, we are not going to vote with management because we're not happy. You can see the price of the stock for the past 5 years during one of the biggest bull markets in American history. And you can listen to the tapes every quarter, John, to see what Pat says and they're pretty much optimistic sayings of one kind or another. And there's something wrong, but we'll discuss it at the meeting.

Sounds good. Let's move on.

And our next question comes from the line of Brad Leonard from BML Capital Management.

I have 1 question. On the comp plan, those have not been filed yet, right? The actual plan, the contracts?

Right.

I saw the detail in the Q but I didn't see anything else. There was no other detail on that, was there?

No. But it will be filed.

Okay. Okay. We'll look for that. And so here's my -- I think you guys have done a lot of -- taken a lot of steps to try to clean up the reporting structure, realized some asset value and tried to get the value recognized in the stock. I mean this is very easy. When I look at this, I mean you're going to have $3 of net cash, you've got a bunch of real estate that you own. You said that covers the stock price today, so let's say that's worth $5, and ASA is worth $2.50 or $3. I mean this is really easy to get to a higher stock price. And so the Klipsch business is worth maybe not what you paid for it, but it's got to be worth, I don't know, $4 or $5 a share probably. The rest of Consumer Electronics...

I would say -- I would disagree. I'd say the Klipsch acquisition would probably sell for more than what we paid for it at this point.

Okay. Well that's great. And I'll take your word. You probably know better than me. I'm trying to be conservative here. But that would be even better if it's worth that. The rest of CE is worth maybe nothing, I don't know. That's being conservative again, it might be worth something. Auto's worth $1 to $2 a share, and EyeLock is worth an unknown. That's, kind of, how I add this up back of the envelope and I say I'm not sure what EyeLock's worth. Could be worth a lot, could be worth nothing. So my back-of-the-envelope math with the Klipsch being worth less than you think it is, is like $12.50 or $15 a share. I'm thinking this is really exciting. I mean I should be stepping on this thing.

And so here's my biggest concern. I mean you've taken a lot of steps to realize some value and try to clean this up. Is -- if my math is in more ballpark correct, why are we not just dismantling the company and selling off the parts and returning cash to shareholders and everybody goes on their happy way versus -- and here's the risk, right, for me is the unknown risk that you're going to take this pile of cash and your asset value, you're going to buy some acquisition or make -- do something that doesn't work out and all of a sudden we're just burning stuff and it ends up being like a 360Fly or potentially how EyeLock -- and EyeLock is unknown. Hopefully, it's going to ramp and we're going to all see great results from that. But that's my risk. And I know that John owns a ton of stock. So he's got a lot of skin in the game here. And -- but, I mean help me to have comfort that we're not going to do something stupid, that we're really going to do the best thing and try to realize the value of this company. And whether that's dismantling it and everybody goes home and we sell off the divisions or you're going to do something smart with your asset value or get the earnings up to a point where they'd been. It looks like there's enough value there to create a stock price of $10, $12 or $14 a share. I know that was a long question but I'd really like to hear your thoughts.

No, we get it. We get it.

Brad, you're absolutely correct in your appraisal -- this is John Shalam, and you're absolutely correct in your appraisal. And we are well aware of all the points you have mentioned. But before dismantling the company, we really believe the potential of VOXX is very substantial and is not reflected in the share value right now, the price of the stock. And if you were to try and sell the company right now based on these stock valuations, I don't think the shareholders would come up with anything of real value.

We do believe very strongly in the potential, a restructure that's been taken place, the plans now for the different divisions, possible acquisition to round out our existing businesses should all make a substantial contribution to the future revenue and earnings of this corporation, which will then be adequately reflected in the price of the stock.

And I'm not sure that it's to the advantage of the shareholders to dismantle, as you call it, but rather to sell off bits and pieces at this time. I think if we can materialize our plans now, and with the cash that we have in the bank and we are debt free, we have a potential to show a much better performance and much better improvement. So that's our plan.

And our next question comes from the line of Thomas Kahn from Kahn Brothers.

As a follow-up, I don't believe that anything's going to be sold because I can't prove it unless John would tell us that John's stock has a very low basis and probably would result in a taxable event. So I think the best way to kind of realize these large values we're talking about is share repurchase. That's the best way because if John's stock has a low basis, why would he sell it now? Doesn't make sense. As a state can sell it with a stepped up or a higher basis I think. So I think the best thing and I'm really distressed, John, to see that some of your directors are not buying shares. I mean they take vacations, they buy cars, summerhouses, winter houses, whatever but if they want to sit on this Board, they should step up to the plate and put their money where their mouth is.

We're well aware of that Tom, and you've made this point very clearly and amply in the past. And I think now you will see some changes taking place as we go along. In terms of my materializing value for my stock, it's not a tax problem, Tom; it's a problem of the low price of the stock right now. I think it's worth a lot more as you do. And I'm in no hurry to dispose of my shares. I'm not sure I ever want to sell my shares altogether. It's something that I can decide as we go along.

But right now, it's not a tax problem. It's more of a valuation problem and getting Wall Street to recognize the value that's in the stock of VOXX and in our assets, our cash and our holdings and that's what we're working on.

Yes, well, that's a good answer and I think that one of the things that would help our share price would be if people who are on the inside, not you, but directors and so forth, when they're permitted, step up to the plate and buy shares. They don't do it. They're reluctant. There's something wrong. I don't understand it. If the stock is worth $10 or $15 or $20, why aren't these directors stepping up to the plate?

They have in the past, Tom, and I think you'll see that they will continue in the future and as I indicated on -- in my comments earlier, all of the management's plans are based on having more stock, their bonus is based on stock not cash, which will put more stock into the hands of management and align them more with the shareholders. That was the intent of what we went out to do with the advisers, and that's exactly what happened.

So I think after you read the agreement, you'll see that that was what was accomplished.

But we'll talk at the meeting, John. I think you've been getting bad advice. I haven't read this report yet, but the way I see that, that advice, John, is if I look over the past 16 quarters and I listen to the calls, the shareholder calls, I think you've been somehow getting bad advice. But we can talk further at the meeting.

Well, a lot of our recommendations, to be honest, have come from you, Tom.

Well, then you've been getting bad advice from me. But I will tell you that if you look back over the past 3 or 4 years, there have been problems. And we can talk, sure.

Yes, they have been and we'll talk again when we see you in a couple of weeks.

When we get together we'll talk, because, again, your suggestions over the past to use tops like first class, investor, banks, advisers, comp advisers, we've used some of the best in the industry. So from that standpoint, I'm not concerned with any of your comments because the plans were thoroughly vetted and thoroughly laid out. As...

And no one's accusing you of doing anything improper or illegal. I'm not accusing you of that. Don't even go there. I'm accusing management and the Board of making poor judgments, business judgments, which have been poor.

I get that. But you've accused the Board of -- and management of making poor acquisitions like in the case of Hirschmann, where we turned around and made $45 million; and in the case of Klipsch, where Klipsch is -- we will -- I can certainly sell Klipsch for more money than we paid for it, okay? And they are doing well. So some of the comments, I understand you're upset with the stock price. That's fine. But some of the other comments are not terribly correct.

I'm not upset so much with the stock price, I'm upset with the judgments and decisions of my fiduciaries, my directors. That's what I'm upset with, that they mostly don't have skin in the game and they've been making some good but some bad decisions and they don't seem to be motivated, but what are motivated by, which is we own -- clients own, what, 17% of the stock. So I have to talk to them every day about the decisions you guys are making.

Yes. I get it. And hopefully, the plans that we've laid out and the new changes that we've made and the divestitures and the reutilization of capital that we have here now in the company, we have no debt, we're estimated to be sitting on north of 100 and -- I mean north of $80 million in cash after we close the German acquisitions, it will allow us to do the things that we've talked about as far as buy back stock to help the share price, potentially do a dividend, but also help build some of our EBITDA and leverage our existing overhead here in the States to generate better returns on any acquisitions that we do. That's the basic game plan and that's what you'll see us do over the next few quarters.

All right. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program and you may all disconnect. Everyone, have a great day.

All right. Thank you for your interest in VOXX. I'm looking forward to implementing the plans outlined and hope to report improving numbers in the months ahead. Have a good day and enjoy the rest of the summer. Thank you.