Universal Electronics Inc (UEIC) 2006 Q4 法說會逐字稿

Welcome to the Universal Electronics' Fourth Quarter and Year-End 2006 Earnings Conference Call.

At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ask a question, please press *, followed by 1 on your touchtone phone. If anyone has difficulty hearing the conference, please press *0 for operator assistance.

As a reminder, this conference is being recorded--February 22nd, 2007. I would now like to turn the conference over to Kirsten Chapman. Please go ahead, ma'am.

Thank you, Marvin. And good afternoon, everyone.

Thank you for joining us for the Universal Electronics' fourth quarter and year end 2006 earnings conference call. By now, you should have received a copy of the press release. If you have not, please contact Lippert/Hilshorn and Associates at 415-433-3777, and we will forward a copy to you.

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. The U.S. number is 800-642-1687, and the international number is 706-645-9291. Enter access code 811920--oh, excuse me--8119270.

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 of this call.

After reading a short safe harbor statement, I will turn the call over to management. During the course of this 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 expects as a result of the development and success of products and technologies, including products and technologies in the company's home connectivity lines of products and software, the recently announced new contracts with new and existing customers and new market penetrations, the continued conversion of the company's technology and trends, and upgrading digital media services such as DVR and HDTV, the continued sales and operating growth, including in the subscription broadcasting and cable and satellite markets, the company's continued sales, operating income, net income, and EPS growth, and the company's financial positions--the strength of the company's financial positions.

Management wishes to caution you that these statements are just projections, and actual events or results 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 the company files from time to time with the SEC, including the annual report on Form 10-K for the year December 31, 2005 and the quarterly reports, Form 10-Q, 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 or forward-looking statements.

Also during this call today, management will discuss certain non-GAAP or adjusted financial measures for comparison purposes, and will be using adjusted numbers in the prepared remarks. These adjusted amounts of operating income, income before taxes, net income, and net income per share, reflect the impact of the new accounting for stock options on the 2006 results and the write-down of a balance due from a former European distributor on the 2005 results.

Management believes the adjusted amounts provide a more meaningful comparison measure of quarter over quarter and year over year financial performance. Please refer to the company's fourth quarter and year end 2006 earnings press release, and the releases page found on--in the Investors section of the company's website for a reconciliation of adjusted financial measures to GAAP.

On the call today are Paul Arling, chief executive officer and chairman, and Bryan Hackworth, chief financial officer. And I'll turn the call over to Paul Arling. Paul?

Thanks, Kirsten. Good afternoon, and thank you all for joining the call today. Overall, we had a great year in 2006--in fact, our strongest year ever, delivering total revenue of over $235 million, which represents a 30% annual growth.

Our business category remains robust, and the successful launch of new products in our CEDIA efforts drove consumer business up significantly in the fourth quarter. We anticipate building on these trends in 2007, while further capitalizing on the transition of analog to digital and hardware upgrade cycles such as high definition and DVR.

We also expanded our role and market share in the consumer electronics space. Customers added in the past year include such names as Denon, Panasonic, Pioneer, Crestron and Nokia, to name just a few. And in 2007, we have already made further inroads, as we recently announced we were selected by Vizio to supply the universal remote control solution for its newest line of Vizio large format televisions scheduled to be released this year.

Our foray into the CEDIA space, a relatively new market for us with strong potential for our company, was successful in 2006. This is exemplified by our partnership with Crestron, through which we developed and are now offering a revolutionary new product based on our NevoSL. And Crestron's automation and control technology target at the high-end home theater market.

We are continuing our work in CEDIA, and will be expanding our presence with the launch of additional new products in 2007, which we believe will further build on the momentum we have gained in this space.

Finally, we have expanded the products and services we offer to our customers, and therefore, for the end consumer. As a matter of fact, our consumer category revenue grew greater than 20% in the fourth quarter of 2006, as compared to 2005, driven by the response to the products launched in the second half of 2006. And we see this growth trend continuing into the first quarter of 2007.

Some recent highlights include the introduction of Nevo Studio 2.0, an update to the company's software suite for NevoSL, the launch of MyMedia software--a digital media solution deployed through the set top box--the introduction of SimpleCenter 4.1, our software based media management solution, XMP solutions for reliable and affordable two-way interaction with an ever-more interconnected home entertainment network. New products utilizing Z-Wave technology, including the Helix Universal Home Environment remote control, and the Cirrus conductor--both of which allow consumers easy setup, easy operation, and importantly, access to information in their home entertainment systems. And the launch of the third generation of our Kameleon remote controls, with lighting control as a new feature.

These reflect some of the recent efforts of our team at UEI. These and similar efforts over the last number of years have led to great success within our company. Every day, we continue to provide solutions to our customers--not only remote control solutions, but also digital media and home control, which enhance our customer's businesses. We anticipate greater success in our efforts in 2007, and I will provide more color on that after turning the call over to Bryan Hackworth, our chief financial officer, for the financial review and guidance discussion.

Bryan?

Thanks, Paul. Net sales for the fourth quarter of 2006 were $69.7 million, above our guidance of $62.5 million to $66.5 million, and 41% higher than last year's fourth quarter net sales of $49.3 million.

Business category net sales were $49.5 million, above our guidance of $44.5 million to $47.5 million. Our consumer category net sales were $20.2 million, at the high end of our guidance of $16.5 million to $20.5 million.

Gross profit for the fourth quarter was $26.2 million, or 37.6% of sales--within our guidance of 37.5%, plus or minus one point, and slightly below the fourth quarter 2005 gross profit of 37.9%.

Research and development expense increased by $200,000 over the fourth quarter 2005 expense, to $1.8 million, as we continued to increase our investment in new product development.

In the fourth quarter, we again expanded our patent portfolio. We added five new patents, bringing our total issued and pending patent count to 173. We also added to our database of home control nodes, one of the key enablers of our growth. This database now contains over 302,000 functions.

Total operating expenses were $19.5 million for the fourth quarter of 2006, above our guidance of $17.5 million to $18.2 million, due primarily to variable costs associated with the increased sales volume, performance based management bonus expense, as well as additional spends behind our newly launched products. This compares to total operating expenses for the fourth quarter of 2005 of $13.4 million.

The 2006 fourth quarter operating expenses include $619,000 of stock based compensation charges, while the 2005 fourth quarter operating expenses do not include any such charges.

Other income was $447,000, compared to other income of $227,000 in the fourth quarter of 2005. The effective tax rate was approximately 24.2%, compared to our guidance of 33% to 35%. The favorability in the effective tax rate is due to the re-enactment of the federal R&D tax credit statute, which took place in the fourth quarter.

Adjusted operating income was $7.3 million, compared to $5.3 million in the fourth quarter of 2005, up 37% year over year. Adjusted operating income in 2006 excludes expenses related to stock based compensation, in COGS, R&D, and SG&A.

Adjusted income before taxes was $7.8 million, compared to $5.6 million in the fourth quarter of 2005. Adjusted net income was $5.8 million, or $0.40 per diluted share, compared to $3.7 million or $0.27 per diluted share in the fourth quarter of 2005.

For the full year ended December 31st, 2006, net sales were $235.8 million--up 30% from $181.3 million for the full year 2005. Adjusted operating income was $21.3 million, compared to $13.3 million in the same period of 2005, reflecting 60% growth.

Adjusted net income of $15.3 million, or $1.06 per diluted share, compared to $11.3 million, or $0.81 per diluted share in the same time period last year.

Turning to our balance sheet review. We ended the quarter with cash and cash equivalents of $66.1 million. We generated cash from operations of $6.2 million during the quarter, and $17.5 million during the year.

We also repurchased 127,000 shares, or $2.6 million, during the year. [VSOs] were 67 days at December 31, 2006, compared to 76.4 days at December 31, 2005, reflecting strong collections from certain significant customers.

Net inventory turns were 6.6 turns at December 31, 2006, above our guidance of 4.6 turns to 5.4 turns, and compared to 4.6 turns at December 31, 2005. Strong sales in both the business and consumer categories in the fourth quarter, as well as improved inventory management, drove turns higher.

And now for our guidance. For the first quarter of 2007, we expect revenues to range between $61.5 million and $64.5 million, compared to $54.2 million in the first quarter of 2006. We expect business category sales to range from $46.5 million to $48.5 million, and consumer category sales to range from $14.5 million to $16.5 million.

We anticipate margins for the first quarter of 2007 will be approximately 37% of sales, plus or minus one point.

First quarter operating expenses are expected to be between $17.7 million and $18.2 million. The tax rate is expected to be between 30% and 32%.

GAAP EPS is expected to range from $0.25 to $0.29 per diluted share. This compares to $0.15 per diluted share in the first quarter of 2006.

For the full year 2007, we now expect total revenue to range between $260 million and $271 million, which reflects growth of 10% to 15% over 2006 revenue of $235.8 million. Business category revenue is expected to range between $195 million and $205 million, and consumer category revenue is expected to range between $60 million and $70 million.

Operating expenses are expected to range from $71 million to $75 million. Our 2007 tax rate is expected to range from 30% to 32%. We expect GAAP EPS to be between $1.13 and $1.23 per diluted share. This compares to $0.94 per diluted share for 2006, or 21% to 31% growth.

And now, over to Paul.

Thanks, Bryan. We ended 2006 with growth in both our business category and our consumer category sales, and we see this trend continuing. Drivers include continued strong demand for universal remote controls and advanced set top boxes.

It's important to note that TV sets outnumber people in the average American home, with 2.73 sets compared with 2.55 residents per household, according to Nielsen. HDTV penetration is expected to reach over 80% of all U.S. TV households by 2010, and flat panel, HD-capable TV sales are projected to grow to over 100 million units annually over the same time period, according to eMarketer and DisplaySearch.

The ever increasingly complex home environment also drives our business forward. More than 10 million households plan to purchase a DVR in the next year, with 78% buying for the first time, according to CEA Market Overview. U.S. DVR households are estimated to grow to 47.6 million by the year 2010, according to Kagan.

And Parks Associates estimates, by the end of this decade, close to 30 million U.S. households will have a connected entertainment network that enables them to enjoy digital content in multiple rooms or across multiple technology platforms.

Within this robust and growing environment, our innovation and products and technology are key. But also key are the deep, long-term relationships we have with many customers in the industries we serve, and the success we are having, not only expanding these, but also adding to our impressive list of long-term customers.

We are entering 2007 better positioned than ever, to answer the growing demand to simplify the increasingly connected home, and our results speak to that. Stay tuned.

I'd like to open up the call now to Q&A. Operator?

Ladies and gentlemen, if you wish to register for a question for today's question and answer session, you will need to press *, then the number 1 on your telephone. You'll hear a prompt to acknowledge your request. If your question has been answered and you wish to withdraw your polling request, you may do so by pressing *, then the number 2. If you are using a speakerphone, please pick up your handset before entering your request.

One moment, please, for the first question.

Our first question comes from the line of Michael Coady, with B. Riley.

Thanks. Good afternoon, Paul and Bryan.

Hey, Michael.

Hey, Michael.

Could you give any kind of information on the breakdown of revenue within business with some of the new initiatives like your OEMs, the flat panel OEMs, and the A/V OEMs, as well as what Nokia is doing?

Michael, we actually don't break down revenue by product, so--we do give guidance on it, it's obviously the business by consumer, but we don't break it down further than that.

Okay, even general direction, kind of how successful these arrangements have been?

Yeah, well, I think, Michael, the comment we can make on that is, just generally--the way the market is moving today, flat panels are--obviously everybody reads, has read about this. It's a generally known trend that the world is moving towards flat panels. They're all merchandised in the store with an HD feed.

And we're--we've paired up with many of the leaders in that--again, recently announced this week, Vizio, who recently took the lead in unit share in the 42"--the all-important 42" category. And as more of those TVs are sold, and we pair up with those players, they're also going to our customers on the subscription broadcasting side, to receive the HD signal.

So the trend of upgrade to HD, flat panels, the HD trend, as well as the DVR trend, have fueled the business, and as I said in the call, all the experts are predicting this trend to continue through the rest of the decade.

Okay, thanks. Let me jump over to the balance sheet for a second. The decrease in inventory was pretty impressive, the increase in turns. Any guidance on inventory turns in 2007? Do you still maintain that 4.6 to 5.4 times guidance?

I think it would be in the mid-five range. Yeah, I can't guarantee that we're going to continue at the pace that we had. A key part of it is, we had record sales. But I think the mid-five range would be a good estimate.

Okay, and then with the cash balance up, any comment on what you plan to do with what's becoming a pretty large cash horde?

Yeah, I mean, we continue to look at all potential uses of cash. I think what we've proven throughout the years is that, when we invest in our operating assets, we've yielded a solid return for investors. So we continue to do that.

But we haven't ruled out potential M&A. We continue to buy back shares--in 2006, we purchased about 100--a little over 100,000 shares for about $2.5 million. So the repurchase program continues to be a play.

Okay, thanks. Just a last question. All of the guidance you've provided, Bryan, was GAAP, correct?

That's true.

And then, FAS 123 expense will be about 600 per quarter?

Yes. Because we're going up. Because it's now--we compare apples to apples in shares, so we don't need to show the non-GAAP number.

Got you. Thanks for that great quarter. Good luck.

Great. Thanks.

Our next question comes from the line of Murray Aronsen, with Ferris, Baker Watts.

Thanks. Good afternoon, guys.

Hi, Murray.

Congratulations on a very nice quarter.

Thank you.

A couple of questions. One is, I just wondered if you could to speak to visibility, if anything has changed for you guys on the business side of the equation in terms of your ability to see out. I notice in taking a look at the guidance that you've got the business side actually--you know, down ticking a little bit. That wasn't at all the case, I don't think this last year, but maybe a couple of years ago.

I just wondered if you could kind of speak to all that.

Sure. In terms of--when you say down tick, you mean sequentially from Q4?

Right. Exactly.

Yeah, I mean--remember, the business category has in it, as I was mentioning earlier, we have OEM and subscription broadcasting in there. And the trend that you'll see is that, typically, in the September through mid-January time period, there's a lot of retail activity, particularly in the television arena.

So, you'll see a strong--obviously our business has always been strong in Q4 because of retail, but we're also seeing a trend on the OEM side, because our OEM customers are typically using a retail channel for their products.

So we don't really see the sequential drop-off as an issue, obviously. This will be, obviously, our strongest first quarter ever, with guidance in excess of $60 million.

We've sold over $60 million worth of goods once, and that was in Q4 of '06. So we see it as a strong quarter. We launched the products, as we said on the last conference call at (inaudible)--they were launched right before the call. We've had success with that.

The efforts in CEDIA have been strong. So we think consumer--well, obviously, consumer has shown results in Q4 and into Q1. So we feel pretty good.

Now, in terms of visibility, this call, as has been our custom, we forecast out through the end of the year. We're looking 10 or 11 months forward. So that--as we go through the year, we'll update as the year progresses.

Is there any further parsing you can do by taking a look at customers, or timing of anything as to DVRs versus HD, or any particular cable operator working things better than another, and/or any impact from working with Cisco along with Scientific Atlanta? I mean, is there any further way to parse things to kind of get a bead on what happens quarter to quarter?

Yeah, you know, we'd love to be able to do that, and I probably should spend a little bit of time explaining this. But the--if--because our products are universal, which is great and the foundation of our business, the one problem with it is, when you buy one of our SKUs, it works with multiple units.

So we can't necessarily, when we sell to an operator, know whether it's being implemented with HD, DVR, or neither. Because our products will operate--particularly on the HD side--will operate HD and non-HD, because they are universal.

We could a little bit better on DVR, because there's transport keys on DVR remotes, but it's very difficult for us to pin it directly to the trend. We just know that the operators are implementing more. They're moving analog to digital. They're moving non-HD to HD. And they're moving non-DVRs to DVRs.

And we know those trends are upon us, but it's difficult for us to track it exactly. If we had that, we could probably share it more, but we don't.

Understood. When you take a look--you guys were especially aggressive the second part of this year, with a lot of new product introductions. Are there any particular products that you'd highlight at this point? And secondly, do you have--how do you look at '07 in terms of product introductions in comparison to '06?

Yeah, it's a good question. In the products, we did a number of them. I wouldn't say that any one of them drove the results, and I suppose that's good news.

We had success with many of them. The Kameleon did well--a few of those SKUs--we've introduced a number of them. So no one, or no five of them, really, accounts for the bulk of it.

We do have plans for this year for more products on the consumer side, in both retail and CEDIA. So there'll be more on that as the year goes on. And then on the business side, we have new product and technology introductions that we'll be doing throughout the year.

But more on that as we tune in to future conference calls.

Okay, and last question--internationally, any particular pockets of strength, or weakness, or opportunity in the coming quarters?

Yeah, and--well, consumer, or retail, was pretty strong in Q4. Actually, it was strong in Q4, and we're forecasting to be strong in Q1 as well. So we're looking at consumer anywhere from 26.5% to 44% growth in Q1, and a range from about 5% to just under 23% for the year.

And are you seeing any specific markets, showing--

The U.K. actually got stronger in '06--'05 was a sluggish year, the Christmas season in the U.K. in '05 was pretty weak. And it picked up in Q4 of '06.

And you still look at U.K. as primary growth market into '07, or not necessarily?

Ah, yes.

All right. Thanks very much.

Our next question comes from the line of John Bright with Avondale Partners.

Thank you. Good afternoon.

Hi, John.

Hi, John.

Good quarter. Certainly on the top line, we've talked about a couple of the items. For the quarter specific, SG&A and the taxes--could you cover some of the specifics again on the SG&A, and the tax rate?

Yeah, sure, I'll tell the tax rate. What happened was, in Q4, the Congress actually passed an R&D tax statute--basically, they're allowing an R&D tax credit.

And up until Q4, we weren't able to book it, because it wasn't passed. And we got premature windfalls of about--probably about $500,000, I think it was, in Q4. So we took the full year effect in Q4. That's why you see the low effective tax rate in Q4--the unusual tax rate, 24.2%.

John Bright. Right. And then on the SG&A side?

In other words--yeah, I'm sorry. That will carry over into 2007 as well. That's why--one of the reasons why the effective tax rate, we're budgeting 30% to 32% for '07.

John Bright. Okay. And then, on the SG&A side of the equation?

SG&A --

You came in a bit higher than I was anticipating. You mentioned a couple of items. How much of that was related to the better than expected revenue performance?

Yeah, good question. I would say, variable related to--variable costs related to the increased sales of about $400,000. And if that surprises you, you've got handling costs, you've got sales commission, freight out, etc. Basically variable costs associated with increased sales.

We also increased the performance based management bonus of about $500,000 due to increased sales. And then, we continue to spend on advertising and promotion, related to the new product launches, we were getting a good return on our investment. We stated in consumer--we hit the high end of the range at $20.2 million, and $25.5 million was the high end.

So we continue to invest, and that was about $300,000. And then F ex was about $200,000, because the dollar weakened, versus the euro.

John Bright. Okay. And then Paul--when I think about the set top boxes, from the cable players, the subscription players, and that market potentially changing this year with new regulations potentially enforced in July. What impact do you think that has--in fact, or opportunity, does that have on Universal?

Well, unclear at this point, although remember, we have relationships with OEMs and subscription broadcasters. So we're talking to players in the industry about these changes. And unclear yet as to exactly what the effect is.

I will say that in prior years, there were changes contemplated, and changes made, and changes enforced. And in fact, at the end of it, not that much changed.

Right. Right.

And certainly, not much changed for us, except for the positive, so we'll have to see as we go through the year.

All right. Well, I'm going to be tuning in, obviously, for the rest of the year, to the new products and technologies. Should we be tuning in at the mid portion of the year, or should we be tuning in towards the latter point of the year?

You mean in terms of new products?

Yeah, new products and the technologies you've been talking about throughout the year.

Paul Arling; Yeah.

Where should we be closely tuning in to?

Well, we'll typically--again, we'll have a few things, you know, every month or quarter as the year goes on. But typically, in the consumer business, you do it mid year to sometime in Q3, it was where you probably do the bulk of it.

Okay.

Right? But we'll have some positive things, I think, to talk about throughout '07, in terms of products and/or technologies that we--we're developing or implementing into programs at various--in various channels within our business.

What about custom installation? I don't know, we don't integrate def on that. Granted, it's a newer piece of your market--smaller decibel market. How did that perform on the consumer side? Considering when we mentioned performed better. Any comments you want to make there?

Yeah, we have--we're having a great, good traction there. It's grown here from nothing a couple of years ago, we had nothing there, and we're gaining traction. There's obvious--there's growth there.

We also are--part of the investments we're making are in products there, and you'll see new products in that part of--in that channel of our business, again, this year.

We've had a great success with Crestron. They've done a great job with the Nevo based product, the NevoSL platform product. So that's also been a success.

Good quarter, gentlemen.

Okay, thanks, John.

Our next question comes from the line of Patrick Flavin with Flavin Blake & Co.

Nice numbers, fellas.

Hi. Thanks.

Paul, could you talk in general about the advent of OCAP, and opportunities and pitfalls that it presents, including, I've heard various stories about the potential for mitigating the use of multiple remotes.

Yeah, well, I think consumers will still need--well, they can use one of our remotes, which will eliminate the need for multiple remotes. But you'll still need to speak the language of the various devices, because there's obviously televisions, receivers, DVD players--I mean, all those devices aren't going away as a result of standard implementation.

I will say that we have been active--extremely active in developing product that will work within the OCAP standard. So we--obviously this has been going on for some time now, and we've worked with our customers to develop product that will take them into the world of OCAP, or the establishment of the OCAP standard.

And are you starting to see some flow of orders from that?

Yeah. We are.

Patrick Flavin. Good. Okay, thank you.

Our--once again, ladies and gentlemen, if you would like to register for a question, please press *, then the number 1 on your telephone keypad.

Our next question comes from the line of Matt Kather with W.R. Hambrecht.

Hi. Good afternoon, guys.

Good afternoon.

Can you break out what the CEDIA revenues were for the fourth quarter?

Oh, no--we don't break out revenue by product line.

So you've always done it in your quarterly filing, so we're going to have to wait until you file the statement?

Yes.

Okay, that's fine. Just housekeeping, real quick, before we go to more meaningful things. Bryan, what were our cap ex and D&A for the quarter?

They're both approximately about $4 million. Oh, I'm sorry--for the quarter--they're about $4 million for the year, approximately a million for the quarter apiece.

About a million each for the quarter --

(overlapping conversations, inaudible) offset.

Okay. Paul, I'm looking at the top line guidance that you guys gave--certainly a great quarter. But the guidance appears pretty conservative given a lot of the secular trends in a lot of the areas that you guys are operating in. It looks like it would be the slowest growth in the last five years on the top line at the mid point of your guidance.

I'm just wondering if you're trying to be particularly conservative here, or maybe back to the visibility question--you just don't have as much visibility into, you know, some of the new programs, etc., that may be taking up in the second half of the year.

Can you comment on that?

Well, sure. I guess the comment I'd make is that--I wouldn't necessarily describe it as conservative, because we--at this point, we would view the range we've given as the range of likely outcomes. That doesn't necessarily mean that the outcome wouldn't be different than that range, but when we provide a forecast at this point, in mid-February for the entire year of 2007, of course, we don't have orders out into the rest of 2007 and 2008.

So it's--at this point, a forecast. But we think that's the range of likely outcomes, and as Bryan said, we show 10% to 15% roughly in sales growth, and 21% to 31% in earnings growth. So we think that's a pretty strong performance for our company, particularly the 21% to 31% earnings growth, which is--in our minds, what it's really about, anyway.

And then, you know, if we can drive more than that, then we'll certainly do that. I wouldn't necessarily characterize, though, that range as conservative. That is, at this point, what we think is the range of likely outcomes.

Okay. I guess one more question on growth rates, also looking forward. You mentioned the possibility of maybe some remotes that already work with digital cable being deployed to the HD boxes at existing customers.

When you look at your satellite and cable operators--really, Comcast and DirecTV being the bulk of the business--and the consumer market, with a lot of your remotes being upgradeable--looking at both the operator and the consumer market, are you seeing a slowdown in growth as already, you know, remotes that are deployed out there will work on new boxes and consumers can continue to upgrade their remote functionality as new devices come out?

Yeah--not really, because we have yet to see a situation where--every consumer electronic good ships with a remote, because they can never presume that the remote you have works, or that you have a remote that will work. So that--we haven't really seen that trend. The consumer electronics that ship today all ship--will ship with at least one remote. Sometimes on installs, though, they'll have more than one.

So we haven't really seen that trend. And again, our--the reason that we don't describe that--there are certain cases where, with certain customers, we will have multiple SKUs, and we know which ones are HD or DVR, but in the specific customer examples, we wouldn't disclose that. That would upset the individual customer.

If we had aggregate data, we could share that. But we don't, because again, our products are universal.

Okay, but that's not a trend that you're seeing?

No.

Okay, great. Last question--you talked about Z-Wave in your slides, and you've also spoken about Zensis and ZigBee, some of these new wireless standards. Bluetooth is conspicuously absent from this, and a lot more Bluetooth remotes are starting to hit the market. You haven't announced any product, but regarding Bluetooth, specifically, is that a technology that you're looking at for future remotes? Or, how do you feel about that?

Yes, we are. In fact, in our labs, we've worked with Bluetooth. We haven't introduced a product with it yet, but it's definitely something we have the capability in.

We operate on any communication standard that's used within the home, so to the extent that devices are made for the home that are operating through infrared or RF or the different flavors of RF, including Z-Wave, or ZigBee, or Bluetooth, or Wi-Fi, which is what we utilize in our IP-based product, NevoSL. We certainly are capable of building product in all of those communication standards.

Okay, great. Thank you very much. Congrats on the quarter again.

Thanks.

Thank you.

Our next question comes from the line of Michael Coady, with B. Riley.

Ah, thanks--just a good follow up. Bryan, what's your cap ex expectation for '07?

It's going to be about the same--about $4 million to $5 million.

Okay. And then, looking back at the first quarter of '06 and the fourth quarter of '05, can you remind me what the push out there was between the December and March quarter that might have affected the typical seasonal pattern?

Yeah, at the end of Q4 '05, we pushed out about $1.6 million of sales into Q1 '06.

Okay. All right, thank you.

Got you.

There are no further questions at this time. Please proceed with your presentation, or any closing remarks.

Okay. Thanks, everybody, for joining the call today. I guess it's important to note that both Bryan and I are scheduled to be at the B. Riley conference in Las Vegas on March 13, and we hope to see some if not all of you there.

Thanks for joining us today, and we'll talk to you soon.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your line.