Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Universal Electronics Inc. (NASDAQ:UEIC)

Q4 2013 Earnings Conference Call

February 20, 2014 4:30 PM ET

Executives

Becky Herrick – IR

Paul Arling – Chairman and CEO

Bryan Hackworth – SVP and CFO

Analysts

Ian Corydon – B. Riley & Company

Jason Ursaner – CJS Securities

Steven Frankel – Dougherty

Andy Hargreaves – Pacific Crest Securities

Josh Goldberg – G2 Investment

Operator

Good afternoon. My name is Tanya and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Electronics Fourth Quarter and Year End 2013 Results Conference Call. All participants are in a listen-only mode. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to introduce Ms. Becky Herrick of LHA. You may begin your conference.

Becky Herrick

Thank you, operator and thank you all for joining us for the Universal Electronics Fourth Quarter and Full Year 2013 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. This call is being broadcast live over the Internet. And a webcast replay will be available for one year at www.uei.com. Also any additional updated material non-public information that might be discussed during this call will be provided on the company’s website where it will be retained for at least one year. You may also access that information by listening to the webcast replay. 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 the future financial performance of the company, including the benefits anticipated by the company due to the continued strength across its entire business, the continued innovation of products and advanced technologies that will attract new customers in existing and new markets, the continued expansion of company’s technologies into smart devices such as smartphones, tablets, smart TVs, IPTV devices, game consoles and over-the-top services, including the benefits anticipated by management due to Microsoft selecting the company to embed its technology into the Xbox One console and the continued deployment of the company’s QuickSet and Control Plus technologies into home entertainment products and the other factors described in the company’s filings with the U.S. Securities and Exchange Commission.

The actual results the company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. Management wishes to caution you that these statements are just projections and actual results or events may differ materially and the company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today’s date. For further detail on risk, management refers you to the press release mentioned at the onset of this call and the documents the company files from time-to-time with the SEC, including the Annual Report on Form 10-K for the year ended December 31, 2012 and those periodic reports filed since then. These documents contain and identify various factors that could cause actual results to differ materially from those contained in management’s projections or forward-looking statements.

Also the company references adjusted pro forma or non-GAAP metrics in this call. These adjusted pro forma metrics are provided, because management uses them in making financial, operating and planning decisions and in evaluating the company’s performance. The company believes these measures will assist investors in assessing the company’s underlying performance for the periods being reported.

In 2013, adjusted pro forma metrics primarily excluded amortization expense relating to intangible assets acquired, employee-related restructuring costs and certain costs incurred for years preceding the acquisition of Enson Assets Limited. Beginning in the first quarter of 2014, the company will also exclude stock-based compensation expense from its adjusted pro forma results in an effort to better reflect the company’s true operating performance as well as to provide a better comparison to other companies in its sector. In management’s financial remarks, it will reference adjusted pro forma metrics. A full reconciliation of these adjusted pro forma measures versus GAAP is included in the company’s press release that was issued after the close of market today.

On the call today are Chairman and Chief Executive Officer, Paul Arling, who will deliver an overview and Chief Financial Officer, Bryan Hackworth, who will summarize the financials; and then Paul will return to provide closing remarks. It’s now my pleasure to introduce Paul Arling. Please go ahead, Paul.

Paul Arling

Thank you, Becky. Our fourth quarter results again reflect the strong performance across our entire business. For the fourth quarter, we reported 16% year-over-year revenue growth and 17% operating income increase over the same period last year. For the full year, we reported net sales of $529.4 million, up 14% over 2012. In addition, we grew operating income 22% for the full year 2013 compared to 2012.

Years ago, we began developing and patenting advanced wireless control technologies designed for the emerging connected home market. In 2012, as market interest accelerated and connected devices proliferated, we began demonstrating the many applications for our technology in new product categories. As a consequence, many of the world’s largest mobile, smart TV, tablet, and game console manufacturers began embedding UEI’s advanced technologies into their devices. This year, we continue to gain traction in the connected home category with millions of new devices being incorporated into the home entertainment environment, the need for simplicity and streamlining of the entertainment control experience has become a priority for device manufacturers, content providers and mobile platforms.

UEI has established a proven track record of successful innovation by proactively developing and patenting technology that incorporates ease-of-use and advanced functionality. UEI QuickSet exemplifies how our forward thinking innovation is adopted and then evangelized. We expect our next-generation control solution, Control Plus as well as future solutions to follow a similar path. QuickSet is currently deployed in over 70 million devices around the world, including set-top boxes, smartphones, smart TVs, and game consoles. And it is available on a variety of platforms and operating systems. This embedded software technology enables an AV device remote to be set up and programmed to control virtually any television or entertainment device in the home. The important point here is that we achieved this with minimal or no user inputs.

Licensees of UEI QuickSet include DIRECTV, EchoStar, Sony, LG for its leading smartphone models and most recently Microsoft on its Xbox One gaming system, which begin shipping in late 2013. This as it has always been is the ultimate litmus test of our progress as a company. That is the impressive growing list of industry-leading companies that have adopted our products and technologies to power their next-generation home entertainment products. At the International Consumer Electronics Show in January, we announced the latest release of our industry-leading QuickSet technology. Among QuickSet’s key new features are its ability to automatically setup a device by identifying the brand and model of connected devices without requiring user input and a cloud-based service that ensures access to real-time and continuously updated device code database, future proofing the universal control interface.

Our next technology breakthrough comes in the form of Control Plus, a technology that builds on UEI QuickSet to automatically discover and setup connected devices, but also enables automatic configuration of activities for one-touch control. This technology is uniquely positioned to address the most common frustration for average consumers, mode confusion and input switching. We continue to receive encouraging feedback from our customers that confirms our commitment to this technology solution. In 2013, we released several new advanced remote control products for many of our key partners in the OEM space, including Sony and Panasonic. These advanced remotes are bundled with smart televisions and includes such features as touchpad and voice control, content mirroring using NFC and RF technologies, as well as motion and downstream audio. Our position in the industry continues to be strong and we are confident that UEI will be at the forefront of providing control solutions that address consumers’ desires to make their home entertainment environment easier to access and control.

With that, I’d like to turn the call over to our CFO, Bryan Hackworth to discuss our financial results.

Bryan Hackworth

Thank you, Paul. As a reminder, our results for the fourth quarter and full year 2013 as well as the same period in 2012 will reference adjusted pro forma metrics. Fourth quarter 2013 net sales were $136.1 million, up 15.6% compared to $117.8 million for the fourth quarter of 2012. Business category net sales were $117.2 million compared to the fourth quarter of 2012 net sales of $102.8 million. Our consumer category net sales were $18.9 million, compared to the fourth quarter 2012 net sales of $15 million.

Gross profit for the third quarter was $40.9 million, or 30% of sales, compared to a gross margin of 30.5% in the fourth quarter of 2012. Full operating expenses were $30.5 million, compared to $27.1 million in the fourth quarter of 2012. Breaking down our operating expenses, R&D expense was $4 million, compared to $3.7 million in the fourth quarter of 2012. SG&A expenses were $26.5 million, compared to $23.3 million in the fourth quarter of 2012.

Operating income was $10.4 million in the fourth quarter of 2013, an increase of 17% when it compared to $8.9 million in the fourth quarter of 2012. The effective tax rate was 23% in the fourth quarter of 2013, compared to 20.7% in the fourth quarter of 2012. Net income for the fourth quarter of 2013 was $7.8 million, or $0.49 per diluted share, compared to $6.3 million or $0.42 per diluted share in the fourth quarter of 2012. For the full year December 31, 2013, net sales were $529.4 million, up 14.3% compared to $463.1 million in the same period 2012.

Gross margin for the full year 2013 was 28.8%, compared to 29.1% in the same period a year ago. Total operating expenses were $114.1 million, compared to $102.9 million in 2012. Net income for the 2013 increased by 22% to $28.7 million, or $1.84 per diluted share compared to $23.4 million or $1.55 per diluted share in the prior year period.

Next, I’ll review our cash flow and balance sheet at December 31, 2013. We ended the quarter with cash and cash equivalents of $76.2 million, compared to $44.6 million at December 31, 2012. DSOs were approximately 63 days at December 31, 2013, compared to 69 days the year prior. Net inventory turns were approximately 3.8 turns at December 31, 2013, compared to 3.9 turns the year prior.

Now turning to our guidance, for the first quarter of 2014, we expect revenue between $120 million and $126 million, compared to last year’s first quarter revenue of $114.7 million. Reflecting the exclusion of stock-based compensation expense, EPS for the first quarter is expected to range from $0.33 to $0.41 per diluted share, compared to $0.32 recorded for the first quarter of 2013, which has been adjusted to reflect the exclusion of stock-based compensation expense. This guidance represents the best first quarter results in our company’s history.

I’d now like to turn the call back to Paul.

Paul Arling

Thank you. Bryan. Our financial results in 2013 continue our long-term track record of solid performance, which is reflected by an over 15% compound annual growth rate in sales and earnings over the last decade. Let me repeat that, an over 15% compound annual growth rate in the same and earnings over the last decade. We believe we are better position than ever for future success. Our strategy of providing the innovative products and technologies that provide an easier, more intuitive control interface for the consumer has expanded our market presence in our industry leading and well protected patent portfolio has ensured our leadership position within the home entertainment control industry.

Across the world, the list of industry leading companies that utilize our next generation control technologies is impressive. We continue to win new customers expand relationships with existing customers and deepen our penetration of new markets and geographies. We remained committed to the strategy and believe that we’ll continue to service well in the months and years ahead. Stay tuned.

I’d like to now open it up for questions. Tanya?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from Ian Corydon from B. Riley & Company. Please go ahead.

Ian Corydon – B. Riley & Company

Thank you. Just looking at the operating expenses in the fourth quarter, it looks like they grew faster than revenues, which I think is a little different from the trend earlier in the year. Can you just talk about why that was and what we should expect going forward?

Paul Arling

Yes. The increase in OpEx part is variable since we had a significant increase in net sales, but we also had additional legal cost, I think you’re aware of that. We’re currently in a couple of lawsuits and we are vigorously defending our IP. So that cost us little extra and as well as we had incentive compensation in Q4. We exceeded our targets actually for the year and some of its back end loaded, so the incentive comp get in Q4.

Ian Corydon – B. Riley & Company

Okay and then in terms of the gross margin, can you help us out a little bit with what’s implied in the Q1 guidance and how you think fiscal ‘14 plays out on gross margin?

Paul Arling

Yes, we don’t give specific guidance on gross margin. I will say that I expect it to tick up a bit – a little bit in 2014, mainly due to the license revenue that we have been talking about. So I do expect some growth in 2014.

Ian Corydon – B. Riley & Company

Okay and on the mobile side understanding you don’t give us a lot of information there, can you just maybe talk about the unit growth you expect in 2014 in terms of mobile devices that will include your technology versus what’s shipped in 2013?

Paul Arling

Yes, it’s difficult for us to give a precise number on that Ian because there is I think as we explained last year there is three stages to a project. There is the sell-in of it or the commencement. Then there is the design-in because you have to have the product software done and also the product launch which we may or may not be the critical path item on. So sometimes the product maybe scheduled to go out in May and it doesn’t go up till July. And then of course you have the sell-in after the project has actually launched. So you have those three stages. It’s difficult for us sometimes to provide the long-term guidance on that because if one product slips a month or two or three or commencement doesn’t occur in March, it occurs in April there is – there can be a lot of variables in it.

The important thing for us though is to get designed in. And that’s what we focus our sales team on. Of course, we want to see the results, but the sell-in and start of a specific project on a product is sometimes a variable. So we don’t really want to provide any guidance on units. I will say this though that our smart device units this year, if we would include all the things I mentioned earlier are going to see some growth this year. Obviously we had some design-ins in the year 2013 that are going to ship all year this year, so it’s easy for us to say that there is going to be some significant growth on the unit volumes in these smart device categories.

Ian Corydon – B. Riley & Company

Perfect. Thank you.

Operator

Thank you. And our next question comes from Jason Ursaner from CJS Securities. Please go ahead.

Jason Ursaner – CJS Securities

Congrats on a strong end to the year.

Paul Arling

Thank you.

Jason Ursaner – CJS Securities

On the guidance, I understand the move away from full year guidance in the past just due to the embedded market, but can you maybe talk a little bit about seasonality for the core business and traditional seasonality and how you view this year shaping up just from the TV market and the cable market?

Paul Arling

In our core market traditional seasonality you will have sales in Q3 they are largest, that’s what you’ve seen in the last few years. And I don’t expect that to change in 2014.

Jason Ursaner – CJS Securities

Okay.

Paul Arling

And Q1 is usually little lighter. And if you are talking about the consumer category Q4 is obviously the largest because you are talking about the holiday season.

Jason Ursaner – CJS Securities

Okay and Paul you just mentioned the embedded market, the three stages of development, product launch and volume, can you talk a little bit about the cycle for UEIC though in terms of – on the cost side but also revenue recognition?

Paul Arling

Well, the cost side is as we do the work. We have a team of engineers here that obviously the expenses on them are recognized every month. The team of engineers here works on the projects. There is obviously a lot of work that goes in prior to even commencement, because just earning the business requires you to do work. And then upon commencement there is – that’s where the work ramps up. Before the revenue starts because you have to do the design-in on the software, work with the engineers in the smart device company to get it done. And then when the product launches then you will enjoy the revenues from it. Now different contracts vary there is sometimes and are re-embedded, but often times not. So every contract is a little different, sometimes it’s the sell-in of a product, sometimes it’s just sell-in of a chip, sometimes there is an associated license for either the ongoing service of updating the database and/or the license of the technology in the patents or both. It really varies on each individual contract. So generally that’s how it works. There is a commencement you have to work to get it sold in then you have to work to get it built in. And then product has to launch usually before you will enjoy any significant revenue.

Jason Ursaner – CJS Securities

Got it so when you talk about success on the design front with a couple of wins there, without being too specific on any contract at a high level, how large a headwind to margin would the mobile business would bring in the quarter, obviously there is some volume coming through but it sounds like there is also some cost ahead of revenue?

Paul Arling

Yes, the overhead cost, not so much on the gross margin side. So the cost for most of this would fall into the SG&A category either R&D or SG&A, because it’s the engineers that you need to have on staff to do the work required to get these projects done. So – but it would affect the operating margin but not the gross margin as much.

Jason Ursaner – CJS Securities

Okay and then I guess just a little on consolidation in the cable and MSO market, I guess specifically about the Comcast, Time Warner proposed merger. And then more generally how the U.S. cable industry moving towards more national providers would affect you over time?

Paul Arling

Well, look that it’s frankly been affecting us. I go back obviously a number of years here almost two decades myself. And this is something that’s been there for the last 17 years. So I started here there were literally thousands of operators and thousands of decision makers, it’s now found to a number far smaller than that, no more than a couple dozen. So I don’t know that further consolidation it may have an impact, it may not it – that hasn’t been sorted out yet. But we are confident that the – as it has happened over the last two decades it will continue to happen. We bring the types of technology enhancements that these companies are looking to put in place regardless of which operator it is. They are all interested in making the consumer experience easier. As I said in the prepared remarks lot of them are making this an imperative to make the consumer experience easier. So things like QuickSet, Control Plus and other technologies we are working on fit really nicely with the product plans that all of the operators have. So as they combine they are going to have a similar I guess what I am saying is as they combine they are going to have a similar mindset on both sides of the equation through a merger.

Jason Ursaner – CJS Securities

Okay and then just last question for me, the change to remove the stock-based comp what’s the expectation for total share comp in ‘14 relative to the $5 million or so in ‘15 – ‘13?

Paul Arling

It should be around the same roughly.

Jason Ursaner – CJS Securities

Okay, I appreciate that.

Operator

Thank you. And our next question comes from Steven Frankel from Dougherty. Please go ahead.

Steven Frankel – Dougherty

Good afternoon. Paul you spoke in past quarters about being able to embed Control Plus on the smart TV, could you give us an update on what progress you might be making in going beyond the initial win you had there?

Paul Arling

Yes, we are – and it wouldn’t be just the smart TV as I mentioned in the remarks, any device that would do any amount of AV switching as we call it. So if the various sources that the consumer has are plugged into a device typically in the home today that’s a TV, but occasionally it’s other devices including some new game consoles and/or AV receivers. So that technology is targeted mainly towards those devices that do the AV switching or that sit on a HDMI bus that could enable that HDMI switching. So we are talking to at this point its many companies about the inclusion of this in next generation platforms and we will be reporting on it as time goes on as to wins for our Control Plus technology. But we are actively engaged with on the technical and as I mentioned earlier on commencement. And then we will look at product launch and actual shipment on that technology.

Steven Frankel – Dougherty

Okay and just give us an update on the Latin American subscription broadcast market for you and how that’s progressing?

Paul Arling

Yes, it’s progressing well, Steve. We formed it anywhere about two and a half years ago and it’s actually grown as a percentage basis significantly now it’s still again it’s only a couple of years old, but we’re really I think I would say we’ve actually exceeded our expectations in terms of Latin America specifically Brazil has gone really well.

Steven Frankel – Dougherty

And is there anything relative to the World Cup that could accelerate business there?

Paul Arling

It could I mean we’re expecting it too a bit. I won’t give specifics or guidance but for Brazil we’re actually expecting it to again increase at a relatively high percentage from the prior year and partly due to the World Cup.

Steven Frankel – Dougherty

In terms of the software license ability to impact your gross margin. Did we see kind of a full quarter is impacted any of that ramp in Q4 or is there more to come over the next couple of quarters?

Bryan Hackworth

Well I think it depends on as we continue to gain customers we should see a ramp-up. We did see a positive effect in Q4. So Microsoft launched as Paul mentioned anything like a (indiscernible) what is the exact launch date but it may not have a full quarter but it did have a positive effect on the quarter from a gross margin perspective.

Steven Frankel – Dougherty

And what if any potential headwinds are there in gross margins over the next couple of quarters?

Bryan Hackworth

I mean nothing out of the ordinary. There is always a typical what you have at your – in China that you got wage inflation in that nature but that’s nothing new, it’s – we’ve offset those cost pressures at a time and you could see with our margins being stable over the last few years and actually a bit – they’ve been very stable. So I think with the licensing revenue we should see a little bit of a pickup over time.

Steven Frankel – Dougherty

Okay, great. Thanks.

Operator

Thank you. (Operator Instructions) And our next question comes from Andy Hargreaves from Pacific Crest Securities. Please go ahead.

Andy Hargreaves – Pacific Crest Securities

Just on the consumer side announcements on this huge part of the business but what drove the growth in Q4 and can you give us any expectations for 2014 around that?

Bryan Hackworth

Yes, I’d tell you in Q4 we actually – we had a strong season in retail in Europe than it is primarily in the UK. They had – the uptake at the customers, at the retailers was actually relatively strong (lease) for our products and to be honest it actually exceeded our forecast. So it was – it was strong primarily majority of that the increase was due to sales in the UK. And 2014 we don’t provide specific guidance especially with consumer but like we’ve always said last year and we continue to say this that for the long-term perspective we think we can grow the top-line 5% to 10% and the bottom line 10% to 15%.

Andy Hargreaves – Pacific Crest Securities

On the smart TV side are you guys seeing any material as the year gross profit per unit bumps on those remotes at this point?

Paul Arling

Well, actually because we’re selling in I guess you could say in a new way over the last couple of years, we’re not just selling for remote controls there although that is something we do. What we’re also selling embedded technology sometimes embedded on chips. So if you were to look at it that way there has been a dollar value per unit market increase, substantial increase because there is more to the solution than just selling the traditional remote control.

And I would say that in terms of the market it’s widened because the higher end TVs, they’re putting some very nicely featured remotes into the higher end of the market. As I mentioned there is NFC and other RF technologies embedded, there is capacitive touch for new interfaces on smart TVs. So there is a lot of technology being built into those next generation products. We also think again as Steve and as I said in the prepared remarks and as Steve pointed out Control Plus is another feature that has the TV has the typical AV switch, they may be looking for value enhancements like that for the consumer for automatic plug and play and device identification set-up and activity buttons. So yes there is a lot of activity in that market as far as value creation or ASP uptake. I wouldn’t say though that I don’t want to call it ASP because typically internally here that means we’re selling the traditional remote for more money, I wouldn’t portrait as that, I portrait as we’re conveying more value to these customers and are able to charge the license fee either in the form of the hardware, the remote or chip or the software license itself.

Andy Hargreaves – Pacific Crest Securities

And then I apologize for this but just Bryan, can you give us in the press release today it says Q1, 2013 pro forma would have been $0.32.

Bryan Hackworth

Yes.

Andy Hargreaves – Pacific Crest Securities

But then in the full year breakdown, I had it matching what I have and I had $0.26. So can you just give us what the maybe (indiscernible) yes?

Bryan Hackworth

Yes, the difference is the stock-based compensation. What we do is that in 2014 we’re now adding back the stock-based comp and we’ll basically align ourselves at the proxies of our peer group. If you look the majority of our companies that our peer group add back the stock-based comp as do many of our analysts. So by excluding the stock-based comp our pro forma results we’re able to provide an accurate tax figure to you guys as well as the investors. And if you look at coupon…

Andy Hargreaves – Pacific Crest Securities

And you guys didn’t do that in Q4, is that right?

Bryan Hackworth

No, no, in 2013 we did not do at all.

Andy Hargreaves – Pacific Crest Securities

Okay.

Bryan Hackworth

We’re starting in 2014 which is why you’re seeing the $0.06 delta.

Andy Hargreaves – Pacific Crest Securities

Okay.

Bryan Hackworth

(indiscernible). We need to compare apples-to-apples so because I’m adding it back in for 2014 I had to add it back to 2013 yes achieving a bit.

Andy Hargreaves – Pacific Crest Securities

I got it. Perfect sense. Thank you very much.

Bryan Hackworth

Sure.

Operator

Thank you. And our next question comes from Edison Chu from G2 Investment. Please go ahead.

Josh Goldberg – G2 Investment

Hi, this is Josh Goldberg, good quarter. Couple of quick questions. Could you tell us your biggest customers only 10% customers in the quarter?

Paul Arling

We do, we had one, it was DIRECTV.

Josh Goldberg – G2 Investment

Roughly, how big it is?

Paul Arling

Not to get exact till now, give me a second.

Josh Goldberg – G2 Investment

Okay.

Paul Arling

Well we look that up, do you have another question…

Josh Goldberg – G2 Investment

Yes. Just building on some of the comments regarding your opportunities in the smart device market and your win in Xbox obviously everything being equal you had a great year in 2013, you grew your revenue over 14% and your earnings also grew nicely. Is there a thought that next year 2014 you might see possibly a slower revenue growth here but a much better earnings here because some of these design wins in the smart device market. I know you talked about the Microsoft Xbox but obviously there is a lot of phones out there as well that could be an opportunity for you. Can you just talk a little about what you’re seeing out there in that space and how big an opportunity can that be for you in 2014?

Paul Arling

Sure. Yes, I can’t really give you how big it will be in 2014 provided that guidance, but I would say you’re on to a point here that we’re going to be more focused on the earnings for this reason. The mobile market will probably have lower ASPs as you might imagine than the AV market, but the earnings potential from it is much greater. So depending on how the mix ends up throughout 2014 if you were to imagine the scenario where you had growth in the AV market but you had much greater growth in mobile and smart devices, what would happen is this sales growth wouldn’t be as aggressive but the earnings growth could be substantial in terms of a growth in the margins, the operating margins. So while we’re not providing guidance it would be substantial outcome to go that way if the device market grows while the gross margin is lower and the net margin maybe slightly lower it’s still a good outcome because it grows…

Josh Goldberg – G2 Investment

Right.

Bryan Hackworth

It’s EBIT numbers. So it all depends on the mix as we go through the year, obviously we’re pushing for growth as heavier growth as we can get on both sides…

Josh Goldberg – G2 Investment

What kind of visibility do you have – what kind of visibility Paul do you have towards some of these design wins on the mobile side?

Paul Arling

Well I guess what I would say…

Josh Goldberg – G2 Investment

Outside of Xbox?

Paul Arling

Every market that we’re in has a different timeline. So certain of them we may know as much as 12 months in front of the design win or the commencement as we call it. Now, we might know what they are telling us 12 months from now they will ship and it might be 11 months, it might be 14 months before they start shipping, but we may know that far in front. I will tell you that on certain devices like mobile, it’s very short in terms of commencement to shipment. Because of the software download, this is not something that has to be worked on. There is no hardware in our case. There is very little hardware content involved. So the timeline on that can be very tight meaning the difference between commencement and actual shipment could be a very short timeframe.

Josh Goldberg – G2 Investment

Alright.

Paul Arling

So in other words, if you are implying that we might know about things that in that market that will happen later this year, we may have a good indication of it, which you don’t know until you are almost right in front of the product shipment in that market. In other markets, we do these set-top boxes totally different timeframe. It’s a hardware – there is a lot of hardware component to that. So usually, there is a good lead time on it. You might have months. In some cases on set-top boxes, we are in at the concept stage and it might be 12 to 18 months before that actual set-top boxes is in final stages of being shipped. Yes, so we have a varied business in that regard. Mobile though much shorter timeframe.

Josh Goldberg – G2 Investment

Okay. Bryan, just so I understand, when you get to 120 to 126 on the top line in March, can you help us understand how does that imply $0.33 to $0.41 bottom line lift, so let’s say the tax rate of the gross margins that you are expecting to get to that number, because it seems like either your tax rates going to be low or your gross margins are going to tick up?

Bryan Hackworth

Yes. We don’t give a lot of guidance in between. I will say that for OpEx, I don’t expect a significant growth in 2014 versus 2013.

Josh Goldberg – G2 Investment

From that year?

Bryan Hackworth

Yes. And the tax rate shouldn’t change significantly, yes for the year. And to answer your previous question, DIRECTV represented 13.2% of the total sales for the quarter.

Josh Goldberg – G2 Investment

13.2%, okay great. Thanks so much.

Paul Arling

Thank you.

Operator

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back to Paul Arling for closing remarks.

Paul Arling

Okay, everybody. Thank you for joining us today and for your continued interest in UEI. I want to tell you that we will be participating in the Piper Jaffray Technology, Media and Telecommunications Conference, March 11 and 12 in New York City. We hope to see you there. Goodbye.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Universal Electronics' CEO Discusses Q4 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts