Universal Electronics Inc (UEIC) 2008 Q2 法說會逐字稿

Welcome to the Universal Electronics second-quarter earnings conference call. At this time all participants are in a listen-only mode. Following Management's prepared remarks we'll hold a Q&A session. (OPERATOR INSTRUCTIONS.) As a reminder, this conference is being recorded, August 7th, 12008. I would now like to turn the conference over to Ms. Kirsten Chapman. Please go ahead, ma'am.

Thank you, Ashley. Good afternoon, everyone. Thank you for joining us for the Universal Electronics 2008 second-quarter's earnings conference call. By now you should have received a copy of the press release. If you have not, please contact Lippert/Heilshorn 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. To listen to the replay in the U.S. please dial 1-800-642-1687 and internationally 1-706-645-9291. Enter access code 55656076. Also, any additional updated material nonpublic information that might be discussed during this call will be provided on the Company's website at www.uei.com, shortly after the call where it will be retained for at least one year. You may also access that information by listening to the webcast replay.

After I read a short safe harbor statement, I will turn call over to Management. During the course of this conference call, Management may make projections or other forward-looking statements regarding the future events and the 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 new products and technologies and the Company's home connectivity line of products and software such as Delta, the Company's next-generation Nevo products and its XMP-2 technologies; the recently announced new contracts with new and existing customers and new market penetrations; the growth expected as a result of the digital-to-analog conversion; the expected continued growth in digital TVs, PVRs and overall growth in the Company's industry; the Company's ability to timely deliver its products to its customers as explained during the call; the Company's continued sales, operating income, net income and EPS growth; the Company's ability to attract and obtain new customers, particularly in Asia; and the strength of the Company's financial position. Management wishes to caution you that these statements are just projections and actual 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 ended December 31, 2007 and the quarterly report on 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.

On the call today are Paul Arling, Chief Executive Officer and Chairman, who will deliver an overview, and Bryan Hackworth, Chief Financial Officer, who will summarize the financial results. Then Paul will return to discuss the vision. Now I'll turn the call over to Paul Arling. Please go ahead, sir.

Thank you, Kirsten, and welcome everyone. Our goal is to continue to drive growth by developing wireless control technology for the leading consumer electronic equipment makers, subscription broadcasters, and retailers all over the world. This quarter we succeeded again. We met our guidance and reported solid results, with revenue of $70.7 million and earnings per diluted share of $0.24.

We developed new technology, won new customers, and expanded relationships. Our second half of 2008 continues to look strong. As such, we remain on track to deliver record revenue and earnings in 2008. We continue to serve very dynamic and growing markets, by supplying what consumers in an ever more digital yet chaotic home environment, which in turn drives our customer base expansion.

A recent example revolves around digital-to-analog, or DTA, converters. Most of you are aware that in February 2009 television transmission in the U.S. will switch from analog to digital. What you may not be aware of is that the National Association of Broadcasters, or the NAB, has estimated that there are 69 million analog television sets that will be potentially impacted by the digital transition, consisting of 19.6 million households, or 17% of all households, that rely exclusively on over-the-air analog television sets, and an additional 14.7 million cable or satellite households receiving some over-the-air programming on analog sets. Households affected by this will either need to get a new TV or the easier, more cost-effective solution, of a DTA converter.

To meet this need, we developed the Delta, which is a universal, two-device remote designed to be preprogrammed to a DTA converter and programmed by the user to operate his or her television. This is a great device that leverages our infrared library, which is the largest database of codes for AV devices, and our XMP protocol, an efficient and reliable IR communication protocol, with a unique code registry that avoids conflict with other devices in the home. Most exciting is that we are working with subscription broadcasters and are already slated to ship the Deltas to major set-top manufacturers for deployment with subscription broadcasters through the remainder of 2008 and into next year.

The analog-to-digital transition is coupled with many other growing audio visual trends. A couple of examples of these growth trends include -- annual worldwide PVR shipments are projected to reach 31.6 million by 2011, up from less than 20 million at the end of last year. Also, global digital TV shipments are expected to grow from 99 million in 2007 to 282 million by 2012. As our markets continue to grow, we continue to capture more business.

There are two customers that I will mention today. Announced earlier this week, Onkyo, a global leader in high quality home audio video products, chose UEI to provide wireless control devices for a range of its product lineup, including its entry-level and custom installation home theater systems and audio receivers. This is timely as the total market for audio and A/V receivers is expected to experience significant growth, from 12 million units in 2007 to 25 million in 2012. Already some of our universal remotes have shipped with several new Onkyo models, and more are scheduled to ship with additional models later this year.

Also, as discussed on the last call at the beginning of the quarter, we signed an exciting multifaceted deal with Audiovox Accessories Corporation. After a smooth transfer, Audiovox is now managing our One For All brand in the North American retail marketplace. In addition, UEI will be Audiovox's exclusive provider of integrated circuits for all of its remote control devices, as well as develop its mid-to-high-end products. We are on track to start shipping Audiovox in the third quarter as planned.

We deliver superior products to all of our customers. Now we are serving subscription broadcasters, OEMs, and retailers across the globe. Accounts that carry our technology and/or control products in the OEM business segment include Bose, Denon, Hitachi, Microsoft, Mitsubishi, Monster, Onkyo, Panasonic, Philips Electronics, Pioneer, Polaroid, SIRIUS, Sling Media, Sony, Toshiba, Visio, and Yamaha. I need to catch my breath.

The subscription broadcast segment includes AirTel, Astro, AIWA, Charter Communications, Chunghwa Telecom, Comcast, Cox Communications, DirecTV, FOXTEL, LodgeNet, Motorola, Multichoice, PCCW, [Podras] Communications, SKY, SKY Italia, Time Warner Cable, and YES DBS. And in retail, the list includes Argus, Auchan, Audiovox, BestBuy, Carrefour, Circuit City, Costco, Dixon, Jasco, Radio Shack and Wal-Mart. This list represents leaders in bringing innovative entertainment products to consumers across the globe. And they have all chosen UEI to provide the control solutions that power their products or services.

Looking ahead, we will continue to advance our industry-best technology development efforts. This year we began shipping our next-generation Nevo products. These products bring new functionality to the custom install market, including Z-wave technology, which provides expansion into home control as well as mesh networking, which provides fast, reliable, and attractive installation of whole-home AV systems. We are excited to report the product is already exceeding our expectations.

This past quarter we introduced XMP-2 technology at cable shows. XMP-2 will provide operators with an unprecedented two-way technology solution for ease of set up and ease of use at an extremely affordable price. We will unveil more about this exciting solution over the next year at trade shows and on future conference calls.

In the fall at IFA, the world's largest consumer show in Berlin, we intend to launch aftermarket remotes that offer a new, consumer-friendly feature of both on-device and web-based setup for unparalleled convenience in remote control technology.

In summary, the need for wireless control continues to grow and UEI offers cost-effective and quality solutions. In turn, we continue to capture new customers and maintain and grow our existing customer relationships. We look forward to a strong second half of 2008, but most importantly, we are focused on long-term growth prospects within our industry, which is predicted by most market experts to remain strong for the next five years.

With that, I'll turn the call over to Bryan Hackworth, our CFO, to lead us through the financial discussion. Bryan?

Thanks, Paul. Net sales for the second quarter of 2008 were $70.7 million, in the middle of our guidance of $69 million to $72 million.

Business Category revenue was $56.8 million, at the high end of guidance of $54 million to $57 million. This is a bit lower than the $60.5 million Business Category revenue we achieved during last year's second quarter. But remember, that was due to the exceptional ramp-up in purchases in anticipation of the mid-year OCAP deadline.

Our Consumer Category revenue was $13.9 million, also within our guidance of $13.5 million to $16.5 million and growing over the second-quarter revenue, $11 million.

Gross profit for the second quarter was $24.2 million, or 34.3% of sales, compared to guidance of 35%, plus or minus 1 point, and 34.5% of sales a year ago.

R&D expense was $2.1 million, consistent with R&D spend in the second quarter of 2007. Total operating expenses were $19.9 million for the second quarter of 2008, at the low end of our guidance of $19.8 million to $20.4 million and compared to $18.7 million in the second quarter of 2007. The 2008 second-quarter operating expenses included $857,000 of employee stock-based compensation expense, compared to $671,000 in the second quarter of 2007.

Interest income for the quarter was $893,000 compared to interest income of $732,000 second quarter of 2007, reflecting a higher cash balance.

The effective tax rate was 33.4%, within our guidance of 33% to 35%.

Net income second quarter of 2008 was $3.5 million, or $0.24 per diluted share, within our guidance of $0.23 to $0.27 per diluted share, and compared to $4.5 million, or $0.30 per diluted share, in the prior year's quarter.

Now turning to our balance sheet and cash flow review, during the second quarter we generated $11.8 million in cash flow from operations, up from $5.6 million in the first quarter. We also repurchased approximately 254,000 shares for $6 million, bringing our six-month total to approximately 754,000 shares for $17.5 million for an average price of $23.19 per share. Including this repurchase, we ended the quarter with cash and cash equivalents of $88.2 million, up [from] $83.4 million last quarter.

DSOs were 74 days at June 30, 2008, compared to 75 days at June 30, 2007 and 79 days at March 31, 2008.

Net inventory turns were [four-point] (technical difficulty) turns at June 30, 2008, down compared to 6.9 turns at the same time last year, and improved from 3.7 turns last quarter. Inventory levels were higher at June 30, 2008 versus June 30, 2007 as we were building product in advance of the two upcoming record (technical difficulty) quarters.

And now for our guidance. We continue to expect record revenue and EPS for 2008, even during this difficult economic period. The second half of 2008 continues to look very strong, particularly in the fourth quarter, and we are projecting significant growth due to a variety of factors including increasing market share with existing customers, new customer wins, and several new product launches.

I'll give some specific examples of the factors impacting our growth. First, as previously mentioned, we are slated to ship a new remote that powers DTA converters, the Delta, to a major set-top manufacturer for deployment with subscription broadcasters for the remainder of 2008 and into 2009. Second, a number of new customers have planned second-half deliveries, including Audiovox and Onkyo. In addition, we continue to increase our penetration in the Asian market, with customers wins in this region resulting in increased sales in the third and fourth quarters of 2008. Lastly, this quarter we launched the next generation of Nevo and response has been great. This will have a positive impact on the revenue during the third quarter and it is expected to continue into the fourth quarter. We also plan to unveil our new aftermarket remote at IFA this fall which, based on completed previews with customers we believe will be well received.

During the third quarter of 2008 we expect revenue to range between $78.5 million and $82.5 million compared to $69 million in the third quarter of 2007. We expect Business Category sales to range from $61 million to $64 million, compared to $55.9 million in the third quarter of 2007. And Consumer Category is expected to range from $16.5 million to $19.5 million, compared to $13.1 million in the third quarter of last year.

We anticipate margins for the third quarter of 2008 will be approximately 35% of sales, plus or minus one point. Third-quarter operating expenses are expected to be between $19.9 million and $20.5 million, including employee stock-based compensation expense of $774,000. The tax rate is expected to be between 33 and 35%. GAAP EPS is expected to range from $0.39 to $0.43 per diluted share. This compares to $0.32 per diluted share in the third quarter of 2007.

For the full-year 2008 guidance we continue to expect record revenue and EPS. Total revenue is expected to range between $305 million and $316 million, which reflects growth of 12 to 16% over 2007 revenue of $272.7 million. Business Category revenue is expected to increase 9 to 14% and Consumer Category revenue is expected to increase 15 to 33%. Operating expenses are expected to be between $77 million and $81 million. The tax rate is expected to range from 33 to 35% of pre-tax income, resulting in GAAP EPS between $1.50 and $1.57 per diluted share. This compares to $1.33 per diluted share for 2007, or 13 to 18% growth.

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

Thanks, Brian. As demonstrated, our consistent strategy and execution delivers results. We continue to be the leader in wireless access and control solutions, enabling consumers to easily and affordably control the chaos in their ever more complex homes. We are excited about both the public information we have reviewed and our behind-the-scenes projects. We have over 20 years experience supplying our customers through every cycle in the economy. We employ industry experts who've developed innovative products and services, forged new relationships, and support all of our customers, long-term and new.

The current economic environment is admittedly more difficult than it was two years ago. However, our people have been through this before and know how to get the job done. Yes, the economy can be tough, but as I have said before, this is when strong companies get stronger. We are confident we will deliver a record year. Once again, regardless of the platform or technology -- cable, satellite, analog, digital, A/V receivers, DVRs, set-top boxes, or digital TVs -- UEI provides the devices and customized entertainment solutions for our growing base of global customers. Stay tuned.

I'm going to open up the call to the Q&A. Operator?

(OPERATOR INSTRUCTIONS.) Scott Ciccarelli; RBC Capital Markets.

Couple questions. What is the primary difference in your guidance between last quarter until now? It looks like revenues are roughly the same. The top [line] was shaved just a bit. Is it really on the gross margin side?

Yes, Scott. It's primarily on the gross margin side. As we've said several times before that gross margin's always difficult for us to predict because there's so many factors that play a key role. This year we've had some positives and then in Q2 we've had lower air freight in Q2. We also had the Consumer-versus-Business mix is favorable. But we've also had some negatives in that mix within the lines where you've got a number of, say, large orders from significant customers who, because they're large and have high volume, get favorable pricing.

We've also had some cost pressures. The higher oil prices affect freight costs as well as certain components of our finished goods and this has actually put a little bit of downward pressure on the gross margins.

Okay. So it's primarily going to be showing through in the third quarter, so that the business mix from Business towards Consumer isn't enough to offset that, Bryan?

No. Actually, for the full year, based on -- from our original guidance Consumer actually was going to make about 25% of our total sales. And now we expect it to be about 23%.

Okay. Sorry about that; I guess I was focusing on the quarter. And then, the Consumer segment, what is your assessment of the risk, too, that -- obviously you've shaved it a little bit, but what is the risk, just given the economy? How much of a boost is the Audiovox, where you're fully baking in Audiovox? I'm assuming that's in the Consumer segment.

Yes, you're right. Audiovox is in the Consumer segment. Just to give you a little background how we do the budgeting and forecasting, at the beginning of the year we put together a number of potential wins. And then what we do is we kind of apply a probability to it. So we're naturally not going to apply every potential win because that's just not realistic. So I would say that the Audiovox is included in the budget, but in an indirect manner, because we do apply a probability to it.

In terms of the risk of the Consumer segment for the rest of the year, I think it all comes down to off-take and how well the products will be received in the market. I think the one thing to keep in consideration is, despite the overall consumer market being down, I think if you look at the home entertainment market, there have actually been some positive reports in terms of consumer spending. If you look at -- flat panel TV sales have done actually pretty well. And if you look at our numbers in Q2 of '08, we had $13.9 million orders in Consumer versus $11 million last year for the same quarter, so we've actually had some pretty good growth. And we think with the new product launches that are coming out in the back half of the year that -- and we're very positive and confident that we'll do well.

Okay. All right. Thanks a lot, guys.

John Bright; Avondale Partners.

Paul, on the new Delta products, can you give us an idea of the margin profile, or characterize the profile of those products?

Well, we don't talk about pricing or margins on specific products or specific customers. But as you might expect, it's a two-device product, so it's one of our -- it's a simpler product for a specific application. So I suppose you could presume the margin would slightly lower on it than the average.

John Bright. But it's probably -- so it's a strong, high-volume product that you're fairly optimistic about. The other side of the equation is you're bringing on Audiovox and the mid-to-high-range products. Are those going to be new for Audiovox?

They will. Yes.

So this will be the first time they'll be in that market? And then, secondly, how will I reconcile that with the new products you're introducing in Europe? So you're introducing some new aftermarket products in Europe. First of all, will they only be for Europe? You're introducing them in Germany, but will they only be for Europe? Will they be for the States as well? And how does that reconcile with the Audiovox contract?

Yes, as is typical in that market, John, the products will -- they'll be derivatives of each other. You do have to -- the products that we sell in Europe will be modified for Europe, but they can often carry the same platform. So products that you see us introduce in the U.S. or Europe in the retail market can transfer over with some modification. Sometimes they're introduced first in Europe and later in the U.S.; sometimes first in the U.S. and later in Europe. But the products are often quite similar.

Right. Right. So the number one question though, the number one topic that comes up, at least as far as I'm concerned, with your name is on the Consumer side -- you addressed it in your closing strategic comments and it certainly was asked in the last question. How do you characterize what you're hearing from the retailers on the Consumer side? You had a good quarter on Consumer. Now I think you wisely shaved down your guidance slightly for the year, associated with Consumer. What's the feedback you're receiving, Paul?

Well, the feedback is good, mainly because we're bringing out new products. And what we believe and some of the customers we've previewed these products with -- very interesting new products. So the feedback we're getting is strong, but it certainly is true that the environment is more difficult, as I said in my comments. The environment today is more difficult than it was two years ago. But the true testament is you've got to -- whether you're swimming with the current or against it, you've still got to get to the destination. And our people are working really hard to get out, forge these new relationships, get out these new products in a more difficult environment because we believe that when you do those things during difficult times you come out the other side even stronger than you were before

So we're confident in the forecast we gave, and pretty strong growth for what is a difficult year. Part of that's based on the introduction of new products. I think as you may have pointed out here, our growth for the year in Consumer is going to be a wider range right now, 15 to 33% I think Bryan said, versus 9 to 14% in Business. So a little wider array of outcomes simply because it's difficult to predict the exact outcome in that retail or consumer marketplace.

Sure. Thank you.

Matt Kather; WR Hambrecht.

Yes, a question back to the gross margins. If I look at, at least for the last couple of years, as your consumer mix has ticked up, particularly in the fourth quarter, but also in the third quarter, you typically have had higher margins on the Consumer side. And that's ticked up your gross margins. And you talked about input costs and freight and other things that aren't going away. So I guess the question is, eventually will you be able to pass some of this stuff along, and you think continue to get that better margin mix as your Consumer grows, if we kind of look at your business model going forward? Or do you think that this is sort of a permanent 100 to 200 basis point possible reduction to where you guys are, depending on what the mix is on any given quarter?

Yes. I would say in the short run it's going to affect us. And that's one of the primary reasons why I've taken down the EPS slightly. In the long run, we're going to do what we've always done, and that's basically fight to keep the gross margin between the 34 and 38% range. And we're going to achieve that this year. But pricing pressures and cost pressures are nothing new to us. And I think if you look over the last several years we've done a pretty good job of maintaining our margins. And we intend to do the same this year as well as in the future.

So just the fact that it's turning towards the low end of that profile, even though you're having a bunch of new products coming out, is it fair for us to be thinking that you're going to fight like heck and they'll be opportunity to negotiate the prices possibly back to where they've been historically as we look into next year?

Yes. I would say yes, that's definitely a potential. And the other thing I think we've always done as well is -- you know, we try and fight like heck for the bottom line. So this year -- we're not using gross margin as an excuse. The first thing we did was when the gross margin was a little less than what we expected we immediately went into a cost-savings initiative mode to try to mitigate or offset the degradation in the current year in the gross margin. And we've done that. So again, we're not using that as an excuse. We are employing cost-savings initiatives to offset that.

On the Consumer side, just looking at your guidance and all of us asking questions, nobody really knows what this holiday selling season is going to look like. And you have a pretty wide margin. Is there any comfort that you can give, maybe any color on the Audiovox products, so far on the Nevo product, without giving a number, for Q3 of how sales are going, comps vis a vis the year in the high end of the market? And the last thing and that's just about the new products in the Consumer area -- do you expect to have them all on the market by October lst or the start of the fourth quarter so that you'll be able to experience a full quarter of sales?

Yes, the expectation is that the new products on the retail side will ship this year, meaning Q4. As far as the relationships go, as I highlighted earlier, Audiovox is right on track. The relationship there is very strong, very sound. We're working very well with them. We've already begun shipping, so that's going as we planned. And, as you mentioned, Nevo products -- I mentioned earlier, they've done very well. We've gotten both of the products out. They received a lot of positive review from the customers and the order volumes have been strong. And we expect them to be good in the back half based on that experience.

So the previews of the retail product also have been done. Certain accounts have been brought in to gain input on the product, and they're extremely interested, or extremely positive about our introduction of the product.

So a lot of good things are going on. And just to come back to the guidance, 305 to 316 is a very strong year for us, particularly in this type of an economy. And the earnings range I think is equally strong -- $1.50 to $1.57 per share is very strong guidance for us. So we feel pretty positive about what we're doing here.

Okay, great. I guess the last question is any update you can give us in Asia, anecdotal or -- ? I know you can't announce specific wins that haven't press released yet, but maybe just give us an update of the battle during the quarter and anything that you can say about your progress in that

Yes. We've had a lot of positive events there in terms of new customers, not many of which we've been able to announce, but that's okay. As long as the customers are ordering product, we're okay with that. The region is at an early stage of development. A lot of the operators there have -- some of them have a half a million subs, maybe just over a million subs, but they're the type of companies that are projected to grow substantially over the next number of years. And that market is projected to grow substantially. So we're really excited about pairing up or becoming a trusted supplier to the major subscription broadcasters there both today, and we think tomorrow. Because as that region grows, as more subs are added, we think it's very important to be aligned with them, just like we did here a decade ago. We lined up with a lot of companies that have grown substantially. And it's been a mutual success. So we see doing the same thing there over a number of years. And we've had a lot of positive activity going on there over the last 12 months.

Thanks for the update, Paul. Appreciate it.

(OPERATOR INSTRUCTIONS.) Jonathan Goldberg; Deutsche Bank.

Just a quick housekeeping question. What's your expected stock comp for the full year?

For the full year -- give me a second and I'll tell you. It was -- for the quarter -- I would just take the number that I gave you and multiply it by four and you'll be very close -- which would be about $3 million, approximately.

And then I was wondering if you could just elaborate a little bit on the last caller's question. He asked about Asia. I wanted to know what's happening in Europe. And if you can't talk about customers specifically, you could you just give us some color there on how that market is moving along, both for your products and for just subscription TV in general?

Sure. The market there is much like it is here, I think on both the consumer and the business side. Little bit tougher, more competitive, but there's still strength in the market. We play in an area that is not typically -- it's something a little less prone to cycle. Because people are looking to entertain themselves. People are driving less. There's been a lot written recently about cocooning, consumers staying at home and instead of spending on other things they spend on home entertainment. TVs have still been okay, TV sales. They are projected to grow substantially over the next five years.

So we're kind of seeing that similarities between the U.S. and Europe right now, whereas Asia is in sort of a different mode, where there it's all about, right now, subscriber growth. Whereas here it's more about upgrades, digital upgrades from analog, HD upgrades from non-HD, PVR from non-DVR. It's all about the upgrade cycle and not subscriber growth. So the markets are very different, but there's obviously there's a lot of growth potential in both cycles, in both markets.

Thanks. Thank you.

(OPERATOR INSTRUCTIONS.) Neal Goldman; Goldman Capital Management.

I missed part of the Q&A, so I don't know if -- it sounds like your stock-based comp is equal to your interest income at this point?

That's true.

Okay. So in a sense, since stock-based comp is a non-cash number, we're sitting with $6.00 a share in cash, which means we're selling at 11 times this year's guidance, with a great long-term outlook. Why don't we get more aggressive on the buy-back?

We actually have been pretty aggressive. For the year we've actually purchased about $17.5 million worth of our shares in the open market.

Right, but you're still building cash every quarter despite that.

Right. Part of it's because of the FX rate as well, but we do plan on to continue to buy back shares in the next two quarters.

To the extent that (inaudible)

Okay. Is there anything more on [Zylog]? I saw they are exploring now all alternatives.

Right. Obviously, it was made public that we were involved with them. I can't make any comments specifically about that deal in particular. But we are actively looking at a number of investment alternatives which may or may not include them. And we'll report on that as time goes on.

Any other companies in this space of the remote or RFID or whatever?

Yes, well there's a few. There's a subset of companies that are either in our market or involved in some area of our market, either distribution, manufacture, in and around remote controls, make chips for remote controls -- anything that touches our business is a potential candidate.

Have prices come down by the sellers as they get more realistic in these times, or --?

Yes, I think it has, generally over the last couple of years. A couple of years ago prices got fairly inflated, as everyone remembers. And I think things have settled down. The sellers' expectations have become more realistic.

Okay. Thank you. Good luck, guys.

(OPERATOR INSTRUCTIONS.) And there are no further questions at this time. Please proceed with your presentation or any closing remarks.

Okay, everybody. In summary, our customer wins, new products, and strong existing business translated into a strong second quarter. As we continue to execute on our strategy to drive growth by leading wireless home-control technology all over the world we are on track to generate record results for the full year of 2008.

We'll be presenting at the Canaccord Adams 28th Annual Global Growth Conference on August 18th at 11:00 a.m. Eastern Time. And hope to see some of you there. You can also catch the webcast on our website if you're not able to be there.

We look forward to talking to you all soon. Thank you and goodbye.

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