All right, let's get going. My name is Greg Burns. I'm the analyst at Sidoti, covering Universal Electronics. From the company, we have Paul Arling, the company's CEO, to present for us this afternoon. After he goes through the presentation, we'll get to as much Q&A as we can at the end. If you do have a question, just enter it through the function in Zoom, and I'll ask as many as we can get to. So with that, I will turn it over to Paul.
Can you hear me, Greg?
Yeah.
Okay. But my computer s aid that the connection is unstable.
Nope, you're okay. Go ahead.
Hi, I'm Paul Arling, and we'll go through the slides. I'll try to go through as quickly as possible. These slides are available on our website, so I'll go through them quickly, so we have more time for question and answers. I'm gonna make forward-looking statements, either in the prepared remarks or in answer to questions. There are risks involved. Please read this on our website or in our SEC filings for a more detailed description of those risks. Our mission is to create smarter living. Essentially, we create products and technologies that help everyday people discover and interact with the devices and services in their home. You can see this lovely young lady here, what looks like speaking to a remote. We do make voice-enabled products in a variety of ways.
And it makes it easy for people to access their video services, but other services as well, such as climate control. We're the global leader in this market of universal control solutions. We have more than six hundred people in engineering and R&D, or as I'll call them through this presentation, product creators, that design, develop, manufacture, ship, and support millions of consumer control products each year with the leading brands, which we'll get to in a few minutes. Some of those brands are in the markets we serve. Put simply, we do control. The core market, since the beginning of the company, was entertainment. This is a picture of something probably most people are familiar with: a remote control.
But we also embed these, as we'll get to in a second, into other devices. We do climate control products. That is our TIDE Dial product, one of our newer products. And also, in the smart home market, we provide either devices or technologies that bring simplicity to these products. We do it in a variety of ways: embedded technology in chips, or what is loaded onto chips. This is done in TVs. The best example of this is QuickSet or QuickSet Cloud, where we allow the configuration of your entire system to occur without your involvement at all. It will discover, configure, and control all the devices you wish it to, home devices through software and through a connection to the cloud.
So it will again discover them, configure them, and then allow you to control them at your discretion. We also make finished goods, some of which are pictured here, HVAC, smart home, and home entertainment products. And then we also provide software and cloud services, which we typically license to our customers. At a glance, we're expanding in the growing climate control and home automation markets. We've launched the UEI TIDE product, which we'll talk about in a little bit more detail in a few minutes. Introduced Butler. We have award-winning designs across the markets we serve in voice remote controls.
We're embedding Nevo on TIDE, which allows users to configure not only their HVAC system, but other systems within the home that could aid in either temperature control or other applications. And this is something that many of the world's leading HVAC companies are very interested in making their product more integral to the smart home. And we have done this for years with other products, and we're taking that capability and experience and bringing it to the HVAC market. Which is interesting for them, because not a lot of their current vendors have either the capability or experience to do this with them. We do that by focusing on the technology, innovation, and sustainability that we've mastered over time, the industry-leading QuickSet Cloud, which I've already mentioned. We make sustainable products.
We actually have mastered battery-less remote designs. We have some that extend the battery life. Typical battery life in a historical product was one year. We now can achieve five to 10 with batteries. But we also can make products today that can harvest enough energy that they don't even need batteries. So this is a relatively new technology that many of our customers are interested in. And we've protected a lot of these innovations with more than 730 issued and pending patents, as well as many foreign counterparts. Global scale and reach, we sell to the four corners of the world. We have R&D teams here in the U.S.
Our main innovators are here, but we also have people in Europe, China, and India on that R&D team, and we've globally diversified our manufacturing, mainly as a result of tariffs, but we currently have a relatively new and well-performing facility in Vietnam, China, which has historically been our manufacturing core, Mexico and Brazil as well, and we have a top-tier customer base, which I'll get to in a few minutes, in the various markets we serve. The foundation for all of this is our technology, the technology SoCs and protocols, interoperability, as demonstrated through QuickSet Cloud, innovation, as well as manufacturing and distribution, and we serve three major markets. Of course, the historic market has been home entertainment. It's now about less than $1 billion, growing slowly.
Part of it has shrunk, the subscription broadcasting part, but the TV side has grown, and that, that's probably where the future is. Most entertainment is gonna be channeled through televisions. As we'll get to in both questions and later in this presentation, a lot of this is based on ARPU from advertising, so the hardware is getting less expensive, but they still need it, and they typically are fueling the business model through ARPU, through advertising, which has historically been true in TV since the very beginning, but there are new and more interesting ways to do that. The climate control market, as you can see here in the small numbers, is more than twice the size of home entertainment, and growing.
So the climate control market is estimated to be about $1.8 billion this year, probably, or next year, it'll probably reach $2 billion. This is a growing and more interesting market. They have powered products that are becoming gateways, which will allow much more functionality for both climate control within your home, but other applications that these products can be used for. And home automation and security is about equal in size to that, growing slightly slower than climate control, but another $1.7 billion. These numbers, all added together, exceed $4 billion in size. Entertainment control has been an interesting market, and difficult for us over the last number of years for a variety of reasons. Many of you are already aware of this. Home entertainment, though, is still a growth channel.
Home entertainment has changed in the way that the entertainment is delivered, but it is not shrinking. Home entertainment is still as important as it ever was. There have just been significant changes in it over the last few years, driven by smart TV penetration. Our view of the future is that TVs are probably gonna be the center of the experience, both because it's what everybody's been watching the whole time, but the connected devices to it probably won't be what drives the entertainment, it'll be the TV itself. The leading names here have chosen us to fuel that growth. Again, names, LG and Sony, and there are others coming, which we'll talk about either later in this presentation or in the coming year.
As I mentioned earlier, there's new business models here that are fueled by advertising that will probably cause higher consumer adoption because people are willing to subsidize hardware to access that ARPU. It's moved to more streaming services, which everybody's aware of, the ad tech opportunity, which I just mentioned, and the advanced TV OS will become the aggregator. So it'll allow convergence of live TV, streaming video, cloud gaming, and smart home services, importantly. So you'll be able to do everything through that TV screen. Not just entertain yourself, but you'll be able to access cameras, thermostat control, really pretty much anything you have in your home. Lighting, anything you have in your home. We today are fueling TVs with this through our QuickSet Cloud software.
It's not just configuration, discovery, and configuration and control of home entertainment devices. It's those three things for all home-based systems. And we're doing that today. The climate control opportunity is substantial. These systems are growing and getting smarter. Many of the HVAC companies want to be a more integral part of the smart home, and they're looking for vendors who have experience in helping other companies do this, which we have, coming from the other markets that we have come from. The market is large, 1.8, growing at a 10% clip. It's being driven more by health, well-being, and air quality. Consumers are becoming more interested in how that air flows, not just for comfort, but for safety and health.
Energy efficiency is, of course, important, which is driving something I mention later in heat pumps and VRF, variable refrigerant flow. These systems are becoming more and more efficient. People wanna save money. It's not just the climate consciousness, which is part of it, but it's also saving money, because energy costs have gone up, and consumers would like to have their house be comfortable for as least expense as they possibly can. So energy efficiency, renewables, and government incentives are an important part here, because this drive towards heat pumps has been subsidized by many governments across the world, including our own here in the U.S., who are subsidizing split systems and other, more energy-efficient technologies.
The flow of these government incentives can go up and down, which can cause, you know, variance in unit volume sold during any particular period. But I think the long-term trend is clear, that government incentives for these energy-efficient technologies are gonna continue. There's a big one in Europe coming, I think it's about a year from now, to subsidize less fortunate people to buy more heat pump technologies, because they are more expensive. If they subsidize them, they can replace your traditional furnace and air con system. So a lot of industry dynamics here. As we've said on our conference calls, we've now sold projects into seven of the nine largest HVAC companies in the world.
Our largest customer is Daikin, the world's largest HVAC company, but we have won projects with many, most actually, of the world leaders in this. We're also looking to do business with the other two, which would bring us to nine of nine, and then our goal would be to expand our presence with each of these customers by bringing new innovation to their products, which we have been doing. This is just a depiction of our TIDE platform. One has a tactile feel, the Tide Dial there, near the middle. TIDE Touch is a completely touch product. We've built a bridge in a universal modular pack. This is important, because you could replace one with the other by simply unplugging the front from that module on the wall and plugging a new one in.
Changing your thermostat could be as easy as pulling a tab and pushing the thing onto the wall, which, to my knowledge, nobody's done before, but we here at UEI have mastered this design, and customers are interested in this. We have more than 10 customers who have signed up for this TIDE platform, and they're all in development now. That covers the seven of nine. We've sold 10 of these platforms already... more than 10 of these platforms that are being worked on. Again, you can read more about this on our website. Truly, a different product than has existed before.
And Smart Control Reimagined, again, we're showing our customers that these devices their core purpose is to control your comfort, your HVAC system, making it cool when it's hot, making it warmer when it's cold. But they're a powered product. Because we've IP-enabled them, as have many others, they can serve as a gateway. So there's really not a lot of limit to what you could do with them by adding other products, other sensors. So occupancy sensing, window and door sensing, borrowing from experience in security systems, that there could be a dual purpose to these, windows, window and door settings. Knowing when people are present through motion detectors, which we use in security.
And some of our customers are now buying this idea of having a controller that also has these extra sensors to make the system more efficient. Blinds control, if the sun's beaming in the window and you're not home, it could automatically lower your blinds, keeping that sun from warming your house further. As soon as it notices the garage door opening, it will open the blinds up again. You would probably not even know they were closed, but it's been helping you keep your house cooler during the hot period of the day. Controlling lights and even media. We show a depiction of that here. So these products are capable of a lot more than they're currently doing, and our customers are interested. It's one of the reasons we're winning.
We've won seven of nine of the largest in the world. They see our capability in these areas. This just shows the smart home of today. Home entertainment has been our main market since the beginning, but safety and security and comfort and convenience are important areas. We do see these all interlocking in this diagram, that there's an overlap, where home entertainment products are now starting to control comfort and convenience, and safety and security products, and vice versa. So these products are starting to share technologies, both wired, they're all IP-enabled, but they're also sharing wireless protocols. The wireless protocols that are in your home today are often being shared across these product categories. And we have particular expertise and a large volume of products in these wireless protocols.
So we have a great deal of experience in many of these, driven mainly by voice, that we've used in AV, but for many other reasons. So that's one of our specialties as well, and then, of course, connecting everything to QuickSet Cloud. QuickSet, I won't go through all of this, but it's widely disseminated. It's deployed in over six hundred million devices worldwide, mostly televisions, but it's beginning to be deployed in our connected home products as well, for similar reasons: for ease of configuration and allowing the devices to do more than they've ever done before, both through tactile control and voice. And across a variety of protocols, some listed here, IP, Zigbee, RF4CE, Bluetooth Low Energy, and Matter.
Many devices are carrying one or more of these, and we can eliminate the confusion across these protocols through our products. We're partnering with the leaders in the world. The best testament to our small company's success is the names on this page. If you look at climate control, some of the leading names in the world, Daikin, Trane, Carrier, LG, et cetera. Video service providers, name one. We couldn't fit them all on here. Name a major one in the world, they're probably a customer of ours. Home security, Vivint, and others, SimpliSafe, Ring. So we're selling our devices and technologies into the leading companies in the world in the markets they serve and we have a lot of innovation to go to fully penetrate these markets.
Climate control market penetration, as I mentioned earlier, we've secured design wins at major HVAC OEMs: Daikin, Carrier, LG, Fujitsu, et cetera. We've engaged with 13 of the top 14 HVAC brands in Europe. Awarded three design wins at two of the three top three in Europe. Kicked off more than 10 customer-initiated UEI TIDE family development projects, the product I highlighted earlier. There are more than 10 design wins on that product line. So we're hard at work penetrating these new markets. It takes time. The development of HVAC systems takes a little bit longer. That's the bad news. The good news is, typically, those designs last longer. Not sure why, but in television, it's probably a good comparison.
TV companies typically make their decisions in the summer of the year before, introduce their products at CES, introduce them either at CES or in the months following, and then make decisions about the next model year the next summer. So it's an annual cycle of design winning. We've expanded in that market by continuing to win more and more SKUs, but it's a quicker design cycle. In HVAC, we have projects that have taken across two years, not because it takes us that long, but the development of our product as well as theirs, as well as the testing cycle, which is longer than it is in home entertainment, can make these projects be two-year wait time between the time you're awarded the project and the time that you begin shipping the first units.
So that's not as good, that it takes that long, but the good news is, as we've seen, with our entry into this market, some of these designs can last eight, 10 years, before they do a derivative product, as we call it, where they redesign the same product, add features to it. Typically, they don't do that as often as home entertainment, where they may do derivative products every two years. They hold on to their designs longer. So that's the good news. Once you're in and you've won the designs, it can be a sustainable business, and that is our goal in this market, is just to continue to grow our market share, just like we did in home entertainment.
Hang on to these customers by delivering innovation all the time, adding new features to their products, bringing new functionality that other vendors simply don't have, and winning more and more designs, and that's exactly what we're doing already. Home automation and security, we're winning business there. Typically, they're related to HVAC, but things like blind controllers, sensors. As I said, sensors aren't just for security systems anymore. They're for sensing of human beings in rooms, so you can direct temperature more accurately and intelligently in the home. So we're working on systems like that.
And we're on our sixth generation of QuickSet Cloud, for the home entertainment opportunity, and we have much to talk about on that, in the coming year, so 'cause there's some new things we're working on with QuickSet Cloud, with some, what we think are groundbreaking new products and customers. As far as our financials, in Q2, we did $90 million. Our gross margin was up significantly. We had, last year, went through factory rationalization. We're almost done with that. We started up a factory in Vietnam, and have successfully nearly completed that. We're downsizing the footprint in other places. So we expect our margins to be in the 30% plus or minus range going forward, based on the value add that we provide to these products. Our net loss, of course, shrunk.
Our guidance for Q3 is to earn between $0.01 and $0.11 on sales of $98 million-$108 million. The efficiencies, the cost cutting, has taken place. We will continue to look at that as we move forward. Importantly, what we're doing is investing. Anything we're doing in cost cutting, what we're doing is making sure product creators are able to continue to effectively build the future. Bringing sales growth in the coming quarters is what is obviously our main goal into next year. That's the financial. The rationale is we're in attractive growing markets that exceed $4 billion in size. We are importantly, I think, most importantly, attracting top-tier customer base in these new markets.
Again, seven of the nine leading HVAC companies is pretty good, for the effort we've made over the last couple years, and as we win more and more SKUs of these companies, this creates a real growth opportunity for us in that market. We've expanded the product portfolio, in climate control, as I've mentioned. We obviously focus on differentiation, technology, product innovation, and sustainability, covering a lot of that under patent, but really, it's the know-how and delivering efficiency in our business model by making sure the cost footprint is tight, but still investing in the future, so that we can grow our sales and earnings into 2025 and 2026 and beyond, so that's the presentation, and we can open it up for questions, Greg.
All right. Thanks, Paul. I just wanted to start with the idea that you still view the home entertainment market as a growth market. Could you just give us a sense of what percent of your revenue still comes from that market? And then within that, what percent is still subscription broadcast versus maybe the more growthy areas like TVs?
Yeah, well, I can't give you the precise number for that. But the home entertainment is still more than half of our business, but it's made up of multiple elements. There's three main ones. One is subscription broadcasting, the next is consumer electronics, and the third one is actually retail. We sell accessories for home entertainment direct to retailers. We don't sell them direct to consumer. So each of those have different characteristics. Obviously, the subscription broadcasting business has fallen. It's much lower than it used to be. It used to be two-thirds of our business. Today, it's probably 40% or less. And but you have to remember there that some in the subscription broadcasting industry, what we've historically called subscription broadcasting, have become more consumer electronics companies.
So many of them are shifting their business model into things like televisions. Some major ones here in the U.S. are doing this, where they're powering an OS within a TV, and actually selling those TVs, along with subscriptions, to either linear or other online services. They're moving where the consumer is, which is, again, a TV that provides everything I wanna watch: sports live TV, Netflix, Prime, et cetera. Of course, Peacock, and other applications that the consumer, when they go home at night, want to watch. So they're moving to where the consumer is. They've historically been called subscription broadcasters, but in some ways, their model has morphed where the consumer is, right? So we would still, I guess, count that as subscription broadcasting, but in a way, it's become more like consumer electronics.
We also power the consumer electronics companies, who are still doing what they have done. They've moved more into advertising and again, enjoying the ARPU from that. We do see a movement towards lesser cost to the consumer. Of course, we still sell the controller at a reasonable price, but the some are beginning to subsidize hardware in order to enjoy the ARPU. So we'll probably see a continued trend in that market towards that. But the point here. And then, of course, there's accessories that we sell to that market, through the retail channel. So this market has a lot of dynamics.
The traditional package of cable being sold at $80-$100 a month, has diminished, for sure. So that accounts for a much lower % of our sales. But what we're starting to see is it level off because of their movement into these new models. So one thing is still falling off, but the other thing is growing, and it leads to a leveling off, or more of a leveling off, of that business. But we still do not expect high growth from it, because the market itself grows at a low single digit pace. HVAC is growing at 10%, 'cause these systems are getting smart.
Okay. Okay, so I guess leading into that, so when we look at HVAC, home automation, home security, I think investors are wondering: When does that either become big enough or, you know, is growing fast enough to offset the declines that we've seen in the traditional business? You know, when do you get back to growth on the top line?
Yeah, well, our goal would be in the coming quarters. Not, we're not talking about many years. The nearer term, and by nearer term, I don't mean next week. I mean in the coming quarters. The guidance we gave for this quarter was to have a slight shrinkage from the prior year, but our goal... and I'm not providing guidance for Q4 or Q1 or 2, but it would be our goal, from this point forward, to drive for that, to have the growth. Because what's happening is, the seven customers in HVAC that we've won projects with, their products, some of these products will probably account for $4 million, maybe $6 million a year. Well, what that means, if it's $4 million a year, let's just use that one, and it's level set across the year, that's $1 million per quarter.
So when you layer on a project like that, it helps, right? But when you win multiple projects like that, and this is, by the way, what happened when we grew subscription broadcasting many years ago, when I started here. You win project, and you get a layer, and then you win another project, you get another layer. And if you keep those projects, they layer up. It's what creates the growth, right? If you layer enough of them on top of each other, what'll happen is the shrinkage of the other side dissipates, which we've already said it's beginning to, and frankly, it can't shrink at the pace it has. 'Cause we've, you know, it's gone down quite a bit over the last five years.
So it's at a point now where it may continue to wane, but that amount of wane can be offset by growth. So our goal in the coming quarters would be to begin to create a growth business, meaning that we will grow year- over- year, and we'll do it when we do it one quarter, then our goal would be to do it for two or three or four, continue that pace. But it takes time. We've got to win and we are already doing it. We've already won projects that we think fuel this going into next year.
Pursue your God-given right to 100% market share? Is that a -
That's correct. I mean, we like to. We work hard every day. It's not even really about the pursuit of our God-given right, although that's the net effect of it. If people here, and they have done this, if they just keep thinking about, "How do we make these products better? How do we make them better for the consumer? How do we make them better for our customer?" Which in this case would be an HVAC company, and the other market was making it better for the consumer and the subscription broadcaster or the TV company. That's what we do every day, and our team is coming up with some great ideas. Our customers, this is why you win seven of nine. Because you talk to them about some of these platforms.
Sometimes what happens is they won't buy the entirety of the idea, but they buy the platform that you're gonna build, right? So the Tide, let's call it the Tide, and they may not implement all of the features that you pitched to them, but then they have a platform that's software upgradable, where they can add it later. And that's what they like about us, that we're thinking forward about how to help them, because their goal is to become more integral to that smart home. We're showing ways that they can do that. Their first-generation product may implement some of that, and then they'll add as they go, and we can help them do that. We're pursuing all of the majors in the of the nine, we wanna get all nine of them. We only have seven now, but-
And then once we get projects in there, and we prove to them how good we are, just like we did in subscription broadcasting, just like we did in consumer electronics, we're gonna show them how good we are at what we do, and then we're gonna help improve their products.
All right, great. Well, we're a little bit over our time, so I think this is a good time to wrap it up. Thanks, Paul, for presenting this afternoon, everyone else for listening in.
All right. Thank you.