Becky Herrick - IR Paul Arling - Chairman and CEO Bryan Hackworth - SVP and CFO.

Mike Olson - Piper Jaffray Jason Ursaner - CJS Securities Lance James - RBC Global Asset Management.

Good day, ladies and gentlemen, and welcome to the Universal Electronics' First Quarter 2015 Conference Call. [Operator Instructions] As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference call, Becky Herrick of LHA. Ma'am, you may begin..

Thank you, Candace, and thank you all for joining us for the Universal Electronics first quarter 2015 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. A webcast replay will be available for one year at www.uei.com.

Also, any additional updated material nonpublic 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 company’s ability to maintain and build its relationships with key customers; the company's ability to anticipate the needs and wants of its customers and timely develop and deliver products that will meet those needs and wants particularly the more advanced platforms of easy setup and intuitive controls; the continued success in winning new customers and growing its market share; the timing of new product rollout orders from the company's customers as anticipated by management including the XFINITY voice remote, the TiVo product, and smartphone software and hardware; the continued trend of the home entertainment industry in providing consumers with more advanced technologies; management's ability to manage its business to achieve its revenue and earnings as guided; 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 statement 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, 2014.

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.

Adjusted pro forma metrics exclude amortization expense relating to intangible assets acquired, depreciation expense relating to the increase in fixed assets from cost to fair market value, other employee-related restructuring costs, and stock-based compensation.

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..

Thank you, Becky. Our first quarter 2015 results were in line with our expectations as net income grew 16% over the first quarter of 2014. Our focus on providing an easier, more intuitive control interface for the consumer has produced a long track record of strong financial performance, one that we are confident, we’ll continue into the years ahead.

Our strategy for growth has proven successful time and again and recent trends in the markets support our long-term outlook. In short, we believe UEI is better positioned than ever to grow our share of the wireless control market.

One of the key components of our growth strategy is our focus on innovation knowing the home entertainment industry is always evolving, we are constantly developing the hardware and software products that anticipate the needs of the changing market.

In January, we announced Comcast chose UEI to supply its new XFINITY voice remote controls, the new remote uses voice commands to help consumers find what they want faster, from changing channels to getting recommendations on what to watch and more.

This remote is powered by our advanced control technology that enables easy home setup and configuration. Initial shipments to Comcast commenced in the second quarter and are expected to scale throughout the year. Earlier this week, we announced TiVo selected UEI to supply remotes to its service provider network throughout the U.S.

and Canadian markets. We continue to provide embedded software solutions to more and more of the world’s largest consumer electronics companies as smart devices remain a growing opportunity for us.

We are building our licensing footprint in the fast growing mobile phone market in China as many of the leading mobile phone brands have selected our software and hardware technology for their devices.

We are now working with some of the top mobile phone manufacturers in the region including Huawei, Lenovo, and ZTE who in 2014 all ranked among the top 10 largest smartphone brands in the world. China is now the world's largest smartphone market and provides a sizable long-term opportunity for UEI.

We are well positioned to build current relationships and add new ones as we become the de facto choice for leading mobile phone brands. QuickSet continues to be a strong performer for us and the technology of choice for leading brands of set top boxes, televisions, game consoles, smartphones and tablets.

Our latest QuickSet solution, QuickSet 3.0 integrates our Control Plus technology and represents the industry’s most advanced solution for simplifying set up and everyday use for the consumer.

In addition to providing technologies and solutions for our customers devices in many cases, we partner with subscription broadcasting and consumer electronics companies on the development of their new next generation set top box television or other device.

This partnership is particularly relevant as these devices become more sophisticated and require the expertise that only UEI can offer. In fact right now, we’re seeing a remarkable trend as our customers particularly in subscription broadcasting are investing in more advanced platforms aimed at improving user interface for their consumers.

Most notable about this trend is how quickly the transition is taking hold and how many of our customers across North America and Europe are upgrading their devices, whether its through creating products that offer faster content delivery, better aesthetics, advanced wireless connectivity protocols or motion and voice control capabilities, these customers are looking for increasingly sophisticated wireless control solutions to meet the higher expectations of their customers.

This trend is obviously beneficial to UEI as we are the de facto solution of providing advanced wireless control solutions.

While on the short term we expect to see below average order volumes from some of our customers as they deplete existing inventories in advance of their new product roll outs in the second half of 2015, we expect to begin benefiting from this growing trend.

This is an exciting evolution in the home-entertainment industry and we're confident the best is yet to come. With that I'd like to turn the call over to our CFO, Bryan Hackworth to discuss our financial results..

Thank you, Paul. As a reminder, our results for the first quarter of 2015 as well as the same periods in 2014 will reference adjusted pro forma metrics. First quarter 2015 net sales were $132.7 million, compared to $129.8 million for the first quarter of 2014.

Business category net sales were $121.5 million, compared to the first quarter 2014 net sales of $118.4 million. Our consumer category net sales were $11.2 million, compared to the first quarter 2014 net sales of $11.4 million. As a result of the stronger U.S.

dollar versus the euro and British pound, consumer sales were adversely affected by FX translation by $1.3 million. Gross profit for the first quarter was $37.7 million, or 28.4% of sales, compared to a gross margin of 28.3% in the first quarter of 2014. Total operating expenses were $28.6 million compared to $28 million in the first quarter of 2014.

Breaking down our operating expenses, R&D expense was $4.3 million, compared to $4.2 million in the first quarter of 2014. SG&A expenses were $24.2 million compared to $23.8 million in the first quarter of 2014. Operating income was $9.1 million compared to $8.8 million in the first quarter of 2014.

The effective tax rate was 21.1% compared to 24.1% in the first quarter of 2014. First quarter 2015, net income was $7.4 million or $0.46 per diluted share, compared to $6.4 million or $0.40 per diluted share in the first quarter of 2014. Next, I’ll review our cash flow and balance sheet at March 31, 2015.

We ended the quarter with cash and cash equivalents of $97.1 million compared to $112.5 million at December 31, 2014, which reflects typical seasonality of accounts payable and accrued expenses. During the first quarter we repurchased approximately 69,000 shares for $4 million, representing average price of approximately $58 per share.

Given the positive long term trends in our industry, our stronger than ever market position and the trading range of our stock, we plan to aggressively buy back our shares over the next three months. DSOs trended towards more normalized levels of approximately 64 days at March 31, 2015 compared to 59 days a year prior.

Net inventory turns were approximately 4 turns as of March 31, 2015 and March 31, 2014. Now turning to our guidance. It's important to note our second quarter 2015, guidance takes new account that many of our subscription broadcasting customers are comparing to roll out new products that include more advanced features.

As a result during this phase, these customers are depleting their existing inventories causing customers to temporarily reduce orders well below normalized levels in the first half of 2015. The second quarter of 2015, we expect revenue between $143 million and $151 million compared to last year's second quarter revenue of $146.3 million.

EPS in the second quarter is expected to range from $0.63 to $0.73 per diluted share compared to $0.66 recorded for the second quarter of 2014. While there are normal ebbs and flows in our sales figures, the long term outlook for our business remains unchanged.

We continue to expect average annual sales growth of 5% to 10% and average earnings growth of 10% to 20%. I'd now like to turn the call back to Paul..

Thanks, Bryan. As Bryan stated, our long term outlook for the business remains strong and we are more encouraged than ever about our future growth prospects. For nearly 30 years we have been through many market evolutions, some of which we define in the home entertainment landscape.

What has made UEI successful is our ability to anticipate changing trends in the market and provide our customers with the solutions that address these changes.

Whether they are upgrades in wireless connectivity protocols, new methods of functionality such as voice or motion, or the introduction of new more advanced devices such as smartphones, game consoles, over the top devices and smart TVs, UEI continues to redefine what a remote control is and what a remote control can do.

The era of easy setup and intuitive control of home entertainment sources is upon us. Consumers demand it and it provides an enormous opportunity to those who can provide it to them. We are at the forefront of creating these new ways to simplify the home entertainment experience.

We remain focused on deepening the relationships we have built with industry leaders across the globe and of course building new ones. And we firmly believe based on all that is happening that the best is yet to come, stay tuned. I'd like to now open it up for questions.

Operator?.

[Operator Instructions] Our first question comes from Mike Olson with Piper Jaffray. Sir, you may begin..

Thanks, good afternoon. Just two questions from me. It sounds like the opportunity for higher functionality or higher SP remotes is significant and with Comcast rolling out a next generation remote with voice recognition and two-way RF and other features.

Do you expect that they will kind of set a new bar that will push other operators to upgrade their offerings as well? In other words, if Comcast is doing this does that mean everyone else will follow?.

Well, the answer to that is, yes. I wouldn't necessarily say it's only because of Comcast. I'd like to give some of the other operators more credit than that.

I will tell you that we already are or have been in development with other operators on next generation products, some of which aren't announced because of the customer sensitivity, they haven't announced their products yet.

But there are major operators both here in the Americas and in Europe that are working on next generation products that have similar features to what Comcast has already announced and is beginning to roll out..

Okay, great.

And then I had two numbers questions related to the guidance, if you could talk about expected average annual sales growth between 5% to 10% and earnings of 10% to 20%, does that apply to 2015 or is that just kind of average over a multi-year period? And then the second numbers question is, you mentioned you plan to aggressively buyback shares over the next few months, is there any buyback built into your EPS guidance?.

First question, it's the latter, it's over multi-year, three to five years say. We talked about sales growth and not just 2015, so we believe in the trends that we have here we're confident in our ability to execute and we think we can grow net sales 5% to 10% and the bottom-line 10% to 20%, we've done this for several years now.

In terms of the EPS, we do not have that in the forecast..

Okay. And just to be clear on the guidance, I know you're saying that it's not just specific to 2015 only but it does include 2015 that that would be your expectation..

Yes, definitely. Absolutely..

Okay. Thank you very much..

Okay. And our next question comes from Jason Ursaner with CJS Securities. Sir, you may begin..

Good afternoon. Just following up on that question, wondering if you could talk a little bit more about the ASP's and gross margin on kind of the next generation type remotes that you're working out with subscription broadcast companies.

A lot of the new features, some of them seem like your technologies, some of it seems like you're integrating technology where maybe the cost structure could change on some of those..

Yes, I'll answer that Jason. The movement towards a more advanced remotes certainly means that they're going to be adding features, the first of which is typically two way. Traditional remotes have been one way or they send a signal many or most - I think right now all of these next generation remotes are going two-way RF.

What that does, is it allows a lot more functionality to be built into the remote for things like sending voice but importantly it also provides a carrier or an opportunity for us to build in things that require two way like QuickSet. So, the price points on these new remotes are obviously much higher.

In some cases they can be 2x to 3x, the ASP of what a traditional unit has been. Now in terms of the margins, it all depends on the customer. The largest customers in the world when they commit to buy 10s of millions of units are going to receive sharper pricing just like in any business.

So the margins on those maybe a little lower than might be for a smaller company within the industry..

Okay.

And just I guess historically when you've done rollouts of new type of remote products, are you looking at this - particularly the XFINITY or maybe some of the other ones that are in the pipeline, is it different than some of the previous ones and just in the past how has it worked in terms of timing or how these customers kind of move to a new platform is it by geography, does it tend to be all at once where they make a switch over, just wondering any historical presence there..

It's a good question, in the past with operators, sometimes they would start it on a regional basis and then it would take sometimes multiple years for the various systems or regions within a company to adopt the new technology, so it could take longer.

I would say that's probably change some, that some of the larger operators do a fairly quick rollout.

The bigger issue right now or the bigger opportunity or challenges as you might depending on how you view it, is that so many of them are working on this, we never seen I’ve been here almost 20 years, I’ve never seen the time whether have been more development projects going on for these next generation products all at once.

There is a lot of companies that are looking at improving the UEI for their customer, building these next generation products, user interface products both on the set top box side but obviously the remote is part of that, so that’s probably the biggest change.

We’ve seen rollouts before where there will be a less than average orders during transition but when you have so many customers doing it at once, can create the lot of activity internally. We are handling it really well. Our development is on track for these projects.

So we’re really excited about what's happening in the industry, with all these advanced features getting rolled out with customers..

Okay. And the inventory challenge at customers during the transition, how much inventory do your customers tend to hold and do you see that as kind of being a one quarter issue on Q2 or is that going to be more, prolonged with the back half..

Well, I think typically its three to - it could be a little bit more than that again it depends on the operator they have various locations that they shift from some of which may carry a few months supply, some may be as much as four, some don’t have much at all. So the transition is very quick.

So it does vary by customer but in some cases it's months, that were the will order less, then they normally would.

I'll give you an example, we have customers that might order 30% to 40% of what they normally would during a quarter because what they're doing is some of the regions are already inventory balanced and others they need to work through the inventory that they have in the bond. So it can be a few months supply..

Okay. And just last question -.

Long term, customers have to buy to their deployments, it goes away after a number of months..

Okay. And just last one from me.

The connected devices - was wondering if may be you could breakdown growth a little more from licenses on mobile phones specifically versus other devices within the AV stack like the smart TV's and set top boxes that are taking advantage of QuickSet just because obviously there is a lot of investor interest around the license fees versus more of the embedded chips in the AV stack..

This is where licensing gets difficult because what we're now seeing is that some of our customers aren’t going to license things like QuickSet, they are instead going to buy a product with it embedded, which makes it more difficult because we don’t really separate out on a selling price, how much was for the product? How much was for the chip? And how much was for the license of the QuickSet technologies or the cloud based services, it’s usually a system that we sell to customers at a price.

So it’s getting - in some cases we’re going into the AV space in particular in mobile its little easier but in AV in the set top box TV world, it can become very difficult to separate those things out..

Maybe just more qualitatively though in terms of traction, what are you hearing from customers in terms of user adoption and I guess pull through from end user demand for some of the features is it equal across the AV stack and mobile or just how is it going with customers in those two markets?.

Well I think the features have gone very well with customers. I think on the AV stack maybe higher, because that's our historic market. And the problem itself is largely an AV problem it's not a mobile problem. The mobile device becomes a remote control to solve the problem that exists in the AV stack.

So the appetite for the feature has been extremely high amongst those that are adopting it in the AV world consumer electronics and set top box companies, I've yet to see one that this has been presented to that was an extremely interested in it, because the feature is compelling.

I think longer-term though this brings an interesting opportunity in the mobile space, because you can envision if the devices have QuickSet embedded the TV, the set top box, the AV receiver et cetera then the app becomes even more powerful, because you can envision the app being able to set itself up with absolutely no setup by the user at all.

As soon as you enter the network, the app gets launched on your new phone and it already knows all of the devices you have and has the activities already set up watch DirecTV, watch Comcast, watch Apple TV, watch Roku.

These buttons could already predefine on a mobile device, but again that's what traction of QuickSet on the AV devices, TV set top box, AV receiver. We are seeing a lot of interest there and adoption over the last number of years this has done nothing but grow and now we got the latest version, which is even better, which does predefine activity.

So we think this is going to have a lot of traction in the coming years..

Okay. Sounds great. Thanks for taking all my questions..

[Operator Instructions] Our next question is from Lance James with RBC Global Asset Management. Sir, you may begin..

Hi, Paul and Bryan. Just a couple of questions. First with your sales goal growth of 5% to 10%, obviously this quarter and your guidance for the next quarter is not going to make that.

I guess my question is what tangible items do you have or some confidence that the second half of the year will pickup sales wide?.

Well we've already - we’ve won the bid in the jobs the project, so we're actually shipping some of the transitions that Paul mentioned have really occurred and some of them are in process.

So, some of the bid we go out and win and we have already won the projects and so we have forecasts and we so much know what the levels will be within a reasonable range. So one thing because these features are more advanced that got the two-way RF, they got the voice control, the ASPs are higher.

So as Paul mentioned on some of these, you’re looking at two to three times the previous price, because of the advanced features. So, I mean that shows our confidence and again we have the forecast from the customers that aren't always perfect, but they’re within the reasonable range..

Terrific. The second question would be your gross margins have pretty much been in that 27% to 29% range for the past few years. Question would be with either the advanced features that you have on the remote controls or selling more into these other connected devices.

Should we anticipate that there is gross margin improvement potential or would more of your margin enhancement come from leveraging your SG&A over a larger revenue base?.

I think when you’re talking about large customers its going to be the ladder.

Large customers they get favorable pricing so the gross margin percentage to a large customer probably is less than say the company average but you're hitting me on the head where you get - where we get the benefits on the leverage of the SG&A where the incremental cost is to ship a high end remote versus a low end remote, it is almost nothing.

So, the variable costs associated with our minimal so that's - it’s going to drive a wide percent of job so that's where the benefit comes in..

Terrific, thanks. I appreciate the info on both sides and good luck..

Thanks Lance..

[Operator Instructions] And I am showing no further questions. I would like to now turn the call back over to Paul Arling.

Sir?.

Okay, thank you everybody for joining us today and for your continued support of UEI. Just want to announce, we'll be participating in the B. Riley and Company's 16th Annual Investor Conference on May 13, next week in Hollywood. And we hope to see as many of you there as possible. Thanks very much for participating and your interest and good bye..

Ladies and gentlemen this does concludes your conference. You may now disconnect..