Universal Electronics Inc. (UEIC)

Q2 2010 Earnings Call

August 05, 04.30 pm ET

Executives

Kirsten Chapman - IR, Lippert/Heilshorn & Associates

Paul Arling - Chairman and CEO

Bryan Hackworth - SVP an CFO

Analysts

John Bright - Avondale Partners

Jonathan Goldberg - Deutsche Bank

Ian Corydon - B. Riley & Company

Steven Frankel - Brigantine Advisors

Andy Hargreaves - Pacific Crest

Jason Ursaner - CJS Securities

Neal Goldman - Goldman Capital Management

Presentation

Operator

My name is Tasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Electronics' Second Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Ms. Chapman, you maybe begin your conference.

Kirsten Chapman

Good afternoon, everyone. Thank you for joining us for the Universal Electronics' 2010 second quarter conference call. By now, you should have received a copy of the press release. If you have not, please contact Lippert/Heilshorn & Associates at 415-433-3777, and we will forward a copy to you immediately.

This call is being broadcast live over the Internet. A webcast replay will be available at www.uei.com for one year. In addition, a telephone replay of this call will be made available for 48 hours beginning approximately two hours after the conclusion of this call. To listen to the replay in the US, please dial 800-642-1687 and internationally, 706-645-9291, enter access code 89845448.

Also, any additional updated material, non-public information that might be discussed during this call will be provided on the company's website at www.uei.com shortly after the call where it will be retained for at least one year. You may also access that information by listening to the webcast replay. After reading a short Safe Harbor statement, I will turn the call over to management.

During the course of this conference call, management may make projections or other forward-looking statements regarding future events and future financial performance of the company, including; the benefits the company anticipates as a result of its continued new and innovative products and technologies that are accepted by meet the needs of our customers and consumers, the company's ability to successfully anticipate the needs and demands of the consumer with respect to new and more advanced products and technologies, the continued strong relationships with the company’s existing customers; the company’s ability to attract and obtain new customers, particularly in Asia and in Central and South America; the strength of the company’s financial position and the effects that the company may experience due to the current global economic environment.

Management wishes to caution you that these statements are just projections and actual results or events may differ materially. For further detail on risk, management refers you to the press release mentioned at the onset of this call and the documents that company files from time to time with the SEC; including the Annual Report on Forms 10-K for the year ended December 31, 2009, and the periodic reports, the company has filed since that time.

These documents contain and identify various factors that could cause actual results to differ materially from those contained in management’s projections of forward-looking statements.

On the call today are Chief Executive Officer and Chairman, Paul Arling, who will deliver an overview. And Chief Financial Officer, Bryan Hackworth, who will summarize the financials. Then Paul will return to provide a vision of 2010.

It is now my pleasure to turn the call over to Paul Arling. Please go ahead, Paul.

Bryan Hackworth

Thank you, Kirsten and welcome everyone. In the second quarter of 2010, we reported solid revenue of $78.9 million. While year-over-year revenue was relatively flat, we improved gross margins to 34.8%, kept expenses relatively flat while increasing our investment in R&D, thus producing strong than expected earnings per share for $0.34.

In total, operating income improved 38%, since the start of the year, for the year 2010. Within the consumer electronic industry, UEI is positioned to address multiple markets with the solutions and technologies stemming from our core wireless connection expertise.

Our deep knowledge of infrared and radio frequency protocols, including Bluetooth, R4CE and Wi-Fi, enable us to provide the connection control in interaction solutions to a multitude of devices.

Our global database of codes enables us to control virtually every home entertainment device. We also have a strong track record of innovation. In the recent past, we have introduced several key solutions all aimed at simplifying the complex home entertainment experience.

Last year, we announced, Onkyo was the first company to include our QuickSet application and XMP-2 technology and the universal remote shipping with its AV receivers.

Since then DIRECTV became a first television service provider to include QuickSet in its new suite of remote controls and HD set-top boxes. XMP-2 is a two-way protocol designed for interactive applications and services and enables our QuickSet automated remote control setup solution.

Another successful innovation introduced by UEI this year is our SMARTCONTROL product. SMARTCONTROL is our one-for-all retail remote control, which offers consumers an intuitive modeless home theater system control experience at an affordable price.

SMARTCONTROL includes UEI's SIMPLESET, a simple three-step universal device setup that does not require a manual or a computer and can literally be set up in less than a minute. The SMARTCONTROL began shipping in Europe earlier this year and began limited distribution in North America in the second quarter.

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