UNIVERSAL ELECTRONICS INC [UEIC] Filings

10-Q 1 ueic-20240630.htm 10-Q ueic-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________

FORM 10-Q

_______________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-21044

_______________________________________

UNIVERSAL ELECTRONICS INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

33-0204817

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

15147 N. Scottsdale Road, Suite H300, Scottsdale, Arizona 85254-2494

(Address of principal executive offices and zip code)

(480) 530-3000

(Registrant's telephone number, including area code)

_____________________


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	UEIC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 12,979,876 shares of Common Stock, par value $0.01 per share, of the registrant were outstanding on August 6, 2024.

UNIVERSAL ELECTRONICS INC.

INDEX


			Page Number
PART I. FINANCIAL INFORMATION			3
Item 1. Consolidated Financial Statements (Unaudited)			3
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Comprehensive Income (Loss) Statements			5
Consolidated Statements of Stockholders' Equity			6
Consolidated Statements of Cash Flows			8
Notes to Consolidated Financial Statements			9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			33
Item 4. Controls and Procedures			34
PART II. OTHER INFORMATION			35
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 5. Other Information			35
Item 6. Exhibits			36
Signatures			37

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements (Unaudited)

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share-related data)

(Unaudited)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	23,128	$	42,751

Accounts receivable, net	98,800		112,596
Contract assets	3,274		4,240
Inventories	87,491		88,273
Prepaid expenses and other current assets (Note 12)	11,130		7,325
Income tax receivable	2,309		3,666
Total current assets	226,132		258,851
Property, plant and equipment, net	39,259		44,619

Intangible assets, net	25,200		25,349
Operating lease right-of-use assets	15,922		18,693
Deferred income taxes	6,086		6,787
Other assets	1,404		1,573
Total assets	$	314,003	$	355,872
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	55,518	$	57,033
Line of credit	41,000		55,000
Accrued compensation	18,870		20,305
Accrued sales discounts, rebates and royalties	4,103		5,796
Accrued income taxes	1,462		1,833
Other accrued liabilities	20,022		21,181
Total current liabilities	140,975		161,148
Long-term liabilities:
Operating lease obligations	10,386		12,560

Deferred income taxes	1,718		1,992
Income tax payable	434		435
Other long-term liabilities	719		817
Total liabilities	154,232		176,952
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding	—		—
Common stock, $0.01 par value, 50,000,000 shares authorized; 25,627,084 and 25,346,383 shares issued on June 30, 2024 and December 31, 2023, respectively	256		253
Paid-in capital	340,962		336,938
Treasury stock, at cost, 12,654,970 and 12,459,845 shares on June 30, 2024 and December 31, 2023, respectively	(371,814)		(369,973)
Accumulated other comprehensive income (loss)	(25,251)		(20,758)
Retained earnings	215,618		232,460
Total stockholders' equity	159,771		178,920
Total liabilities and stockholders' equity	$	314,003	$	355,872

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net sales	$	90,452	$	107,391	$	182,352	$	215,768
Cost of sales	64,500		82,774		130,412		166,458
Gross profit	25,952		24,617		51,940		49,310
Research and development expenses	7,520		8,484		15,341		16,844
Selling, general and administrative expenses	21,330		25,265		45,341		52,047
Factory restructuring charges	1,555		—		2,619		—
Goodwill impairment	—		—		—		49,075
Operating income (loss)	(4,453)		(9,132)		(11,361)		(68,656)
Interest income (expense), net	(843)		(1,097)		(1,765)		(2,072)

Other income (expense), net	(89)		(702)		(169)		(916)
Income (loss) before provision for income taxes	(5,385)		(10,931)		(13,295)		(71,644)
Provision for (benefit from) income taxes	2,808		(520)		3,547		130
Net income (loss)	$	(8,193)	$	(10,411)	$	(16,842)	$	(71,774)

Earnings (loss) per share:
Basic	$	(0.63)	$	(0.81)	$	(1.30)	$	(5.61)
Diluted	$	(0.63)	$	(0.81)	$	(1.30)	$	(5.61)
Shares used in computing earnings (loss) per share:
Basic	12,917		12,860		12,909		12,804
Diluted	12,917		12,860		12,909		12,804

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED COMPREHENSIVE INCOME (LOSS) STATEMENTS

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	(8,193)	$	(10,411)	$	(16,842)	$	(71,774)
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(2,902)		(3,117)		(4,493)		(1,201)
Comprehensive income (loss)	$	(11,095)	$	(13,528)	$	(21,335)	$	(72,975)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

The following summarizes the changes in total equity for the three and six months ended June 30, 2024:


	Common Stock Issued			Common Stock in Treasury			Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Totals
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	25,346	$	253	(12,460)	$	(369,973)	$	336,938	$	(20,758)	$	232,460	$	178,920
Net loss											(8,649)		(8,649)
Currency translation adjustment									(1,591)				(1,591)
Shares issued for employee benefit plan and compensation	156	2					299						301
Purchase of treasury shares				(140)	(1,230)								(1,230)

Shares issued to directors	6												—
Employee and director stock-based compensation							1,904						1,904

Balance at March 31, 2024	25,508	255		(12,600)	(371,203)		339,141		(22,349)		223,811		169,655
Net loss											(8,193)		(8,193)
Currency translation adjustment									(2,902)				(2,902)
Shares issued for employee benefit plan and compensation	111	1					361						362
Purchase of treasury shares				(55)	(611)								(611)
Shares issued to directors	8												—
Employee and director stock-based compensation							1,460						1,460

Balance at June 30, 2024	25,627	$	256	(12,655)	$	(371,814)	$	340,962	$	(25,251)	$	215,618	$	159,771

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

The following summarizes the changes in total equity for the three and six months ended June 30, 2023:


	Common Stock Issued			Common Stock in Treasury			Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Totals
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	25,000	$	250	(12,295)	$	(368,194)	$	326,839	$	(21,187)	$	330,698	$	268,406
Net loss											(61,363)		(61,363)
Currency translation adjustment									1,916				1,916
Shares issued for employee benefit plan and compensation	189	2					350						352
Purchase of treasury shares				(53)	(812)								(812)

Shares issued to directors	8						—						—
Employee and director stock-based compensation							2,540						2,540

Balance at March 31, 2023	25,197	252		(12,348)	(369,006)		329,729		(19,271)		269,335		211,039
Net income											(10,411)		(10,411)
Currency translation adjustment									(3,117)				(3,117)
Shares issued for employee benefit plan and compensation	50	1					372						373
Purchase of treasury shares				(5)	(43)								(43)
Shares issued to directors	7												—
Employee and director stock-based compensation							2,158						2,158

Balance at June 30, 2023	25,254	$	253	(12,353)	$	(369,049)	$	332,259	$	(22,388)	$	258,924	$	199,999

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	(16,842)	$	(71,774)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	9,143		11,707
Provision for credit losses	—		3
Deferred income taxes	112		142
Shares issued for employee benefit plan	663		725
Employee and director stock-based compensation	3,364		4,698

Impairment of goodwill	—		49,075
Impairment of long-lived assets	148		49


Changes in operating assets and liabilities:
Accounts receivable and contract assets	13,095		10,586
Inventories	(914)		33,195
Prepaid expenses and other assets	(1,621)		2,615
Accounts payable and accrued liabilities	(5,478)		(26,542)
Accrued income taxes	1,005		(1,224)
Net cash provided by (used for) operating activities	2,675		13,255
Cash flows from investing activities:



Acquisitions of property, plant and equipment	(2,696)		(5,807)
Acquisitions of intangible assets	(2,308)		(3,295)
Net cash provided by (used for) investing activities	(5,004)		(9,102)
Cash flows from financing activities:
Borrowings under line of credit	35,000		25,000
Repayments on line of credit	(49,000)		(38,000)

Treasury stock purchased	(1,841)		(855)

Net cash provided by (used for) financing activities	(15,841)		(13,855)
Effect of foreign currency exchange rates on cash and cash equivalents	(1,453)		(1,215)
Net increase (decrease) in cash and cash equivalents	(19,623)		(10,917)
Cash and cash equivalents at beginning of period	42,751		66,740
Cash and cash equivalents at end of period	$	23,128	$	55,823

Supplemental cash flow information:
Income taxes paid	$	2,175	$	3,956
Interest paid	$	2,545	$	3,843

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Note 1 — Basis of Presentation

In the opinion of management, the accompanying consolidated financial statements of Universal Electronics Inc. and its subsidiaries contain all the adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature, except for the impairment and restructuring charges, as described in notes 6 and 12 to the consolidated financial statements. Information and footnote disclosures normally included in financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). As used herein, the terms "Company," "we," "us," and "our" refer to Universal Electronics Inc. and its subsidiaries, unless the context indicates to the contrary.

Our results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk," and the "Financial Statements and Supplementary Data" included in Items 1A, 7, 7A, and 8, respectively, of our Annual Report on Form 10-K for the year ended December 31, 2023.

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition; allowance for credit losses; inventory valuation; impairment of long-lived assets, intangible assets and goodwill; business combinations; income taxes and related valuation allowances and stock-based compensation expense. Actual results may differ from these assumptions and estimates, and they may be adjusted as more information becomes available. Any adjustment may be material.

Summary of Significant Accounting Policies

With the exception of the following policy, our significant accounting policies are unchanged from those disclosed in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Stock-Based Compensation

We recognize the grant date fair value of stock-based compensation awards as expense in proportion to vesting during the derived service period, which ranges from one to three years. Forfeitures of stock-based awards are accounted for as they occur. Upon the exercise of stock options, the vesting of restricted stock awards or the vesting of performance stock awards, newly issued shares of our common stock are issued. Our stock-based compensation awards are made at the discretion of the Compensation Committee and are not timed or coordinated with the release of material, non-public information.

We determine the fair value of restricted stock awards with a service condition utilizing the average of the high and low trading prices of our common shares on the date they were granted.

The fair value of performance stock awards with a market condition is determined utilizing a Monte Carlo simulation model as of the grant date. The assumptions utilized in a Monte Carlo simulation model include the risk-free interest rate, expected volatility, term of the award and dividend yield. The risk-free interest rate over the expected term is equal to the prevailing U.S. Treasury note rate over the same period. Expected volatility is determined utilizing historical volatility. The dividend yield is assumed to be zero since we have not historically declared dividends and do not have any plans to declare dividends in the future.

The fair value of stock options granted to employees and directors is determined utilizing the Black-Scholes option pricing model. The assumptions utilized in the Black-Scholes model include the risk-free interest rate, expected volatility, expected life in years and dividend yield. The risk-free interest rate over the expected term is equal to the prevailing U.S. Treasury note rate over the same period. Expected volatility is determined utilizing historical volatility over a period of time equal to the expected life of the stock option. Expected life is computed utilizing historical exercise patterns and post-vesting behavior. The dividend

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

yield is assumed to be zero since we have not historically declared dividends and do not have any plans to declare dividends in the future. See Note 14 for further information concerning stock-based compensation.

Recently Adopted Accounting Pronouncements

None.

Recent Accounting Updates Not Yet Effective

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting – Improvements to Reportable Segments Disclosures." The guidance enhances disclosures of significant segment expenses by requiring the disclosure of significant segment expenses regularly provided to the chief operating decision maker, extends certain annual disclosures to interim periods, and permits more than one measure of segment profit or loss to be reported under certain conditions. All disclosure requirements are also required for companies with a single reportable segment. The guidance is effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption of the guidance is permitted, including adoption in any interim periods for which financial statements have not been issued. The Company expects this ASU to only impact our disclosures, with no impact to our consolidated balance sheets, statements of operations or cash flows.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes - Improvements to Tax Disclosures." The guidance expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The guidance will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the guidance and its impact to the financial statements and related disclosures.

We have assessed all other ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact.

Note 2 — Cash and Cash Equivalents

Cash and cash equivalents were held in the following geographic regions:


(In thousands)	June 30, 2024		December 31, 2023
North America	$	1,834	$	8,460
People's Republic of China ("PRC")	8,666		11,102
Asia (excluding the PRC)	2,444		2,427
Europe	4,546		8,145
South America	5,638		12,617
Total cash and cash equivalents	$	23,128	$	42,751

Note 3 — Revenue and Accounts Receivable, Net

Revenue Details

The pattern of revenue recognition was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Goods and services transferred at a point in time	$	75,982	$	79,372	$	150,386	$	166,053
Goods and services transferred over time	14,470		28,019		31,966		49,715
Net sales	$	90,452	$	107,391	$	182,352	$	215,768

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Our net sales to external customers by geographic area were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
United States	$	18,910	$	33,133	$	45,622	$	66,562
Asia (excluding PRC)	18,224		19,302		37,108		46,402
Europe	20,715		22,043		38,254		46,069
People's Republic of China	17,412		17,904		31,813		30,032
Latin America	9,483		9,232		17,724		16,180
Other	5,708		5,777		11,831		10,523
Total net sales	$	90,452	$	107,391	$	182,352	$	215,768

Specific identification of the customer billing location was the basis used for attributing revenues from external customers to geographic areas.

Net sales to the following customers totaled more than 10% of our net sales:


	Three Months Ended June 30,
	2024				2023
	$ (thousands)		% of Net Sales		$ (thousands)		% of Net Sales
Daikin Industries Ltd.	$	12,930	14.3	%	$	13,540	12.6	%
Sony Corporation	$	9,577	10.6	%	(1)		(1)

(1) Sales associated with this customer did not total more than 10% of our net sales for the indicated period.


	Six Months Ended June 30,
	2024				2023
	$ (thousands)		% of Net Sales		$ (thousands)		% of Net Sales
Daikin Industries Ltd.	$	25,039	13.7	%	$	33,207	15.4	%
Comcast Corporation	(1)		(1)		$	24,416	11.3	%

(1) Sales associated with this customer did not total more than 10% of our net sales for the indicated period.

Accounts Receivable, Net

Accounts receivable, net were as follows:


(In thousands)	June 30, 2024		December 31, 2023
Trade receivables, gross	$	94,202	$	106,182
Allowance for credit losses	(799)		(815)
Allowance for sales returns	(294)		(532)
Trade receivables, net	93,109		104,835
Other (1)	5,691		7,761
Accounts receivable, net	$	98,800	$	112,596

(1)Other accounts receivable is primarily comprised of value added tax receivables, interest receivable and supplier rebate receivables.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Allowance for Credit Losses

Changes in the allowance for credit losses were as follows:


(In thousands)	Six Months Ended June 30,
	2024		2023
Balance at beginning of period	$	815	$	957
Additions (reductions) to costs and expenses	—		3

Write-offs/Foreign exchange effects	(16)		(196)
Balance at end of period	$	799	$	764

There were no significant customers that totaled more than 10% of our accounts receivable at June 30, 2024 or December 31, 2023.

Contract Liabilities

We have current and non-current contract liability balances primarily relating to our firmware update provisioning and digital rights management validation services. Contract liabilities are included within other accrued liabilities in our consolidated balance sheets.

Changes in the carrying amount of contract liabilities were as follows:


(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Balance at beginning of period	$	4,384	$	2,702	$	3,501	$	1,931

Payments received	1,626		1,765		3,463		3,452
Revenue recognized	(1,287)		(1,536)		(2,225)		(2,452)
Foreign exchange effects	(6)		—		(22)		—
Balance at end of period	$	4,717	$	2,931	$	4,717	$	2,931

Note 4 — Inventories

Inventories were as follows:


(In thousands)	June 30, 2024		December 31, 2023
Raw materials	$	27,571	$	32,794
Components	12,695		11,061
Work in process	4,099		3,827
Finished goods	43,126		40,591
Inventories	$	87,491	$	88,273

Significant Supplier

Purchases from the following supplier totaled more than 10% of our total inventory purchases:


	Three Months Ended June 30,
	2024		2023
	$ (thousands)	% of Total Inventory Purchases	$ (thousands)		% of Total Inventory Purchases
Qorvo International Pte Ltd.	(1)	(1)	$	5,766	12.7	%

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

(1) Purchases associated with this supplier did not total more than 10% of our total inventory purchases for the indicated period.

There were no purchases from suppliers that totaled more than 10% of our total inventory purchases for the six months ended June 30, 2024 and 2023.

There were no trade payable balances from suppliers that totaled more than 10% of our total accounts payable at June 30, 2024 and December 31, 2023.

Note 5 — Long-lived Tangible Assets

Long-lived tangible assets by geographic area, which include property, plant, and equipment, net and operating lease right-of-use assets, were as follows:


(In thousands)	June 30, 2024		December 31, 2023
United States	$	11,307	$	13,245
People's Republic of China	24,450		26,679
Mexico	7,481		9,227
Vietnam	8,702		10,089
All other countries	3,241		4,072
Total long-lived tangible assets	$	55,181	$	63,312

Property, plant, and equipment are shown net of accumulated depreciation of $160.6 million and $163.3 million at June 30, 2024 and December 31, 2023, respectively.

Depreciation expense was $3.3 million and $4.8 million for the three months ended June 30, 2024 and 2023, respectively. Depreciation expense was $6.7 million and $9.4 million for the six months ended June 30, 2024 and 2023, respectively.

Note 6 — Goodwill and Intangible Assets, Net

Goodwill

During the six months ended June 30, 2023, a decline in our financial performance, overall negative trend in the video service provider channel and an uncertain economic environment contributed to a significant decline in our market capitalization. We considered this to be an impairment trigger. We, therefore, performed a quantitative valuation analysis under an income approach to estimate our reporting unit's fair value. The income approach used projections of estimated operating results and cash flows that were discounted using a discount rate based on the weighted-average cost of capital. The main assumptions supporting the cash flow projections include, but are not limited to, revenue growth, margins, discount rate, and terminal growth rate. The financial projections reflect our best estimate of economic and market conditions over the projected period, including forecasted revenue growth, margins, capital expenditures, depreciation and amortization. In addition to our valuation analysis under an income approach, we also considered the implied control premium compared to our market capitalization. We determined that the implied control premium over our market capitalization to be substantial, therefore, we recorded an impairment charge of $49.1 million during the six months ended June 30, 2023.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Intangible Assets, Net

The components of intangible assets, net were as follows:


	June 30, 2024						December 31, 2023
(In thousands)	Gross (1)		Accumulated Amortization (1)		Net		Gross (1)		Accumulated Amortization (1)		Net
Capitalized software development costs	$	2,426	$	(701)	$	1,725	$	2,161	$	(421)	$	1,740
Customer relationships	6,340		(4,165)		2,175		6,340		(3,803)		2,537
Developed and core technology	740		(350)		390		4,220		(3,754)		466

Patents	34,540		(13,697)		20,843		33,195		(12,686)		20,509
Trademarks and trade names	450		(383)		67		450		(353)		97
Total intangible assets, net	$	44,496	$	(19,296)	$	25,200	$	46,366	$	(21,017)	$	25,349

(1)This table excludes the gross value of fully amortized intangible assets totaling $48.8 million and $45.0 million at June 30, 2024 and December 31, 2023, respectively.

Amortization expense is recorded in selling, general and administrative expenses, except amortization expense related to capitalized software development costs, which is recorded in cost of sales. Amortization expense by statement of operations caption was as follows:


(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cost of sales	$	140	$	148	$	281	$	156
Selling, general and administrative expenses	1,080		1,107		2,176		2,163
Total amortization expense	$	1,220	$	1,255	$	2,457	$	2,319

Estimated future annual amortization expense related to our intangible assets at June 30, 2024, was as follows:


(In thousands)
2024 (remaining 6 months)	$	2,696
2025	4,884
2026	4,264
2027	3,337
2028	2,708
Thereafter	7,311
Total	$	25,200

Note 7 — Leases

We have entered into various operating lease agreements for automobiles, offices and manufacturing facilities throughout the world. At June 30, 2024, our operating leases had remaining lease terms of up to 36 years, including any reasonably probable extensions.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Lease balances within our consolidated balance sheet were as follows:


(In thousands)	June 30, 2024		December 31, 2023
Assets:
Operating lease right-of-use assets	$	15,922	$	18,693
Liabilities:
Other accrued liabilities	$	4,384	$	4,813
Long-term operating lease obligations	10,386		12,560
Total lease liabilities	$	14,770	$	17,373

Operating lease expense, including variable and short-term lease costs which were insignificant to the total, operating lease cash

flows and supplemental cash flow information were as follows:


(In thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Cost of sales	$	590	$	712	$	1,298	$	1,504
Selling, general and administrative expenses	1,102		1,109		2,253		2,185
Total operating lease expense	$	1,692	$	1,821	$	3,551	$	3,689
Operating cash outflows from operating leases	$	1,570	$	1,746	3,315		3,577
Operating lease right-of-use assets obtained in exchange for lease obligations	$	9	$	1,960	$	9	$	1,960

The weighted average remaining lease liability term and the weighted average discount rate were as follows:


	June 30, 2024		December 31, 2023
Weighted average lease liability term (in years)	4.8		4.9
Weighted average discount rate	5.09	%	5.04	%

The following table reconciles the undiscounted cash flows for each of the first five years and thereafter to the operating lease liabilities recognized in our consolidated balance sheet at June 30, 2024. The reconciliation excludes short-term leases that are not recorded on the balance sheet.


(In thousands)	June 30, 2024
2024 (remaining 6 months)	$	2,680
2025	4,412
2026	3,413
2027	2,668
2028	1,215
Thereafter	2,422
Total lease payments	16,810
Less: imputed interest	(2,040)
Total lease liabilities	$	14,770

At June 30, 2024, we did not have any operating leases that had not yet commenced.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Note 8 — Line of Credit

On March 13, 2024, we executed an amendment to our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank"), which provides for a revolving line of credit ("Credit Line") through April 30, 2025. We expect to renew our credit agreement with U.S. Bank prior to its expiration, however no assurance can be given that future financing will be available or, if available, that we will be offered terms satisfactory to us. The Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures.

The Credit Line has a maximum availability up to $100.0 million, subject to meeting certain financial conditions, including an accounts receivable coverage ratio ("AR Ratio"). This AR Ratio is calculated monthly and adjusts the current Credit Line total availability. At June 30, 2024, the Credit Line total availability was $53.1 million based upon the AR Ratio. At July 18, 2024, the Credit Line total availability was $61.3 million based upon the AR Ratio.

Amounts available for borrowing under the Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at June 30, 2024 and December 31, 2023.

All obligations under the Credit Line are secured by substantially all of our U.S. personal property and tangible and intangible assets, as well as a guaranty of the Credit Line by our wholly-owned subsidiary, Universal Electronics BV.

Under the Second Amended Credit Agreement, we may elect to pay interest on the Credit Line based on the Secured Overnight Financing Rate ("SOFR") plus a 3.00% margin. The amendment also introduces a facility fee of 0.25%. The interest rates in effect at June 30, 2024 and December 31, 2023 were 8.31% and 8.06%, respectively.

The Second Amended Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. From January 1, 2024, to September 30, 2024, our covenants are based upon EBITDA. From October 1, 2024 to December 31, 2024, our covenants will be based upon a minimum fixed charge coverage ratio. Subsequent to December 31, 2024, our covenants will be based upon a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. At June 30, 2024, we were in compliance with the covenants and conditions of the Second Amended Credit Agreement.

At June 30, 2024 and December 31, 2023, we had $41.0 million and $55.0 million outstanding under the Credit Line, respectively. At June 30, 2024, our remaining availability under our Credit Line was $12.1 million. Our total interest expense on borrowings was $1.1 million and $1.5 million during the three months ended June 30, 2024 and 2023, respectively. Our total interest expense on borrowings was $2.4 million and $2.9 million during the six months ended June 30, 2024 and 2023, respectively.

Note 9 — Income Taxes

We recorded income tax expense of $2.8 million and income tax benefit of $0.5 million for the three months ended June 30, 2024 and 2023, respectively. We recorded income tax expense of $3.5 million and $0.1 million for the six months ended June 30, 2024 and 2023, respectively. The income tax expense recorded for the six months ended June 30, 2024 and June 30, 2023 is primarily attributable to the mix of pre-tax income among jurisdictions, including losses not benefited as a result of a valuation allowance.

The difference between the Company's effective tax rate and the 21.0% U.S. federal statutory rate for the three months ended June 30, 2024 primarily related to the mix of pre-tax income and loss among jurisdictions and permanent tax items including a tax on global intangible low-taxed income. The Company's income tax provision can be affected by other factors, including changes in the tax laws and regulations in the jurisdictions in which we operate, changes in the valuation allowances on deferred tax assets, and other discrete items.

At December 31, 2023, we assessed the realizability of the Company's deferred tax assets by considering whether it is more likely than not some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We considered the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

income in making this assessment. At December 31, 2023, we had a three-year cumulative operating loss for our U.S. operations and, accordingly, have provided a full valuation allowance on our U.S. federal and state deferred tax assets. During the three months ended June 30, 2024, there was no change to our U.S. valuation allowance position.

At June 30, 2024, we had gross unrecognized tax benefits of $3.4 million, including interest and penalties, which, if not for the valuation allowance recorded against the state Research and Experimentation income tax credit, would affect the annual effective tax rate if these tax benefits are realized. Further, we are unaware of any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within the next twelve months. Based on U.S. federal, state and foreign statute expirations in various jurisdictions, we do not anticipate a decrease in unrecognized tax benefits within the next twelve months. We have classified uncertain tax positions as non-current income tax liabilities unless they are expected to be paid within one year.

We have elected to classify interest and penalties as a component of tax expense. Accrued interest and penalties are immaterial at June 30, 2024 and December 31, 2023 and are included in the unrecognized tax benefits.

Note 10 — Accrued Compensation

The components of accrued compensation were as follows:


(In thousands)	June 30, 2024		December 31, 2023
Accrued bonus	$	1,206	$	2,843
Accrued commission	680		602
Accrued salary/wages (1)	4,705		4,085
Accrued social insurance (2)(3)	6,775		7,082
Accrued vacation/holiday	3,351		3,252
Other accrued compensation	2,153		2,441
Total accrued compensation	$	18,870	$	20,305

(1)Includes $0.8 million of accrued severance expenses at June 30, 2024 related to our Mexico manufacturing footprint optimization efforts. See Note 12 for further information related to our restructuring activities.

(2)Includes $25 thousand and $0.1 million of accrued severance expenses at June 30, 2024 and December 31, 2023, respectively, related to our Asia manufacturing footprint optimization efforts. See Note 12 for further information related to our restructuring activities.

(3)PRC employers are required by law to remit the applicable social insurance payments to their local government. Social insurance is comprised of various components such as pension, medical insurance, job injury insurance, unemployment insurance, and a housing assistance fund, and is administered in a manner similar to social security in the United States. This amount represents our estimate of the amounts due to the PRC government for social insurance on June 30, 2024 and December 31, 2023.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Note 11 — Other Accrued Liabilities

The components of other accrued liabilities were as follows:


(In thousands)	June 30, 2024		December 31, 2023
Contract liabilities	$	4,017	$	2,697
Duties	400		481
Expense associated with fulfilled performance obligations	854		1,092
Freight and handling fees	1,981		1,998
Interest	332		438
Operating lease obligations	4,384		4,813
Product warranty claims costs	522		522
Professional fees	1,699		1,558
Sales and value added taxes	1,779		4,194

Other (1)	4,054		3,388
Total other accrued liabilities	$	20,022	$	21,181

(1)Includes $0.6 million and $0.2 million at June 30, 2024 and December 31, 2023, respectively, associated with the purchase of property, plant and equipment.

Note 12 — Commitments and Contingencies

Product Warranties

Changes in the liability for product warranty claims costs were as follows:


(In thousands)	Six Months Ended June 30,
	2024		2023
Balance at beginning of period	$	522	$	522
Accruals for warranties issued during the period	—		—
Settlements (in cash or in kind) during the period	—		—
Foreign currency translation gain (loss)	—		—
Balance at end of period	$	522	$	522

Restructuring Activities

Asia

In conjunction with our plan to restructure and optimize our manufacturing footprint while reducing our concentration risk in the PRC, we stopped all production activities and began to shutdown of our southwestern China factory beginning in the third quarter of 2023. We incurred no severance or other exit costs during the three months ended June 30, 2024. We incurred $0.1 million of severance and $0.1 million of other exit costs during the six months ended June 30, 2024. These costs are included within factory restructuring charges on our consolidated statements of operations. We have recognized a total of $4.2 million in factory restructuring charges since September 2023. This factory restructuring was completed in the second quarter of 2024 and we do not expect any further expenses associated with this plan.

Mexico

As part of our plan to restructure and optimize our factory footprint, we are working to downsize our factory in Mexico due to decreased demand in the U.S. market and our Vietnam facility's ability to supply our North American customers. We have leased a smaller facility and reduced our factory headcount during the six months ended June 30, 2024. As a result, we incurred $0.9 million of severance and $0.6 million of other exit costs during the three months ended June 30, 2024. We incurred

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

$1.4 million of severance and $1.0 million of other exit costs during the six months ended June 30, 2024. These costs are included within factory restructuring charges on our consolidated statements of operations. We expect this factory restructuring to be completed in the fourth quarter of 2024 with total estimated restructuring charges of $2.7 million including $0.3 million expected to be recognized subsequent to June 30, 2024.

Restructuring liabilities are included in accrued compensation, accounts payable and other accrued liabilities on our consolidated balance sheets. Total restructuring activities for the six months ended June 30, 2024 are as follows:


	Restructuring Costs
(In thousands)	Total		Severance Expense		Other Exit Expense
Balance at December 31, 2023	$	462	$	147	$	315
Restructuring charges	2,619		1,481		1,138
Cash payments	(2,060)		(817)		(1,243)

Balance at June 30, 2024	$	1,021	$	811	$	210
Total costs incurred inception to date	$	6,634	$	4,906	$	1,728
Total remaining expected expense to be incurred as of June 30, 2024	$	277	$	—	$	277

Litigation

Roku Matters

2018 Lawsuit

On September 5, 2018, we filed a lawsuit against Roku, Inc. ("Roku") in the United States District Court, Central District of California, alleging that Roku is willfully infringing nine of our patents that are in four patent families related to remote control set-up and touchscreen remotes. On December 5, 2018, we amended our complaint to add additional details supporting our infringement and willfulness allegations. We have alleged that this complaint relates to multiple Roku streaming players and components therefor and certain universal control devices, including but not limited to the Roku App, Roku TV, Roku Express, Roku Streaming Stick, Roku Ultra, Roku Premiere, Roku 4, Roku 3, Roku 2, Roku Enhanced Remote and any other Roku product that provides for the remote control of an external device such as a TV, audiovisual receiver, sound bar or Roku TV Wireless Speakers. In October 2019, the Court stayed this lawsuit pending action by the Patent Trial and Appeals Board (the "PTAB") with respect to Roku's requests for Inter Partes Review ("IPR") and with respect to the International Trade Commission Investigation. At this time, we are only waiting for the decision of the U.S. Supreme Court with respect to Roku's appeal request (see discussion below) and once received, we expect to be able to ask the District Court to lift this stay.

International Trade Commission Investigation of Roku, TCL, Hisense and Funai

On April 16, 2020, we filed a complaint with the International Trade Commission (the "ITC") against Roku, TCL Electronics Holding Limited and related entities (collectively, "TCL"), Hisense Co., Ltd. and related entities (collectively, "Hisense"), and Funai Electric Company, Ltd. and related entities (collectively, "Funai") claiming that certain of their televisions, set-top boxes, remote control devices, human interface devices, streaming devices, and sound bars infringe certain of our patents. We asked the ITC to issue a permanent limited exclusion order prohibiting the importation of these infringing products into the United States and a cease and desist order to stop these parties from continuing their infringing activities. On May 18, 2020, the ITC announced that it instituted its investigation as requested by us. Prior to the trial, which ended on April 23, 2021, we dismissed TCL, Hisense and Funai from this investigation as they either removed or limited the amount of our technology from their televisions as compared to our patent claims that we asserted at the time. On July 9, 2021, the Administrative Law Judge (the "ALJ") issued his Initial Determination (the "ID") finding that Roku is infringing our patents and as a result is in violation of §337 of the Tariff Act of 1930, as amended (the "Tariff Act"). On July 23, 2021, Roku and we filed petitions to appeal certain portions of the ID. On November 10, 2021, the full ITC issued its final determination affirming the ID and issuing a Limited Exclusion Order (the "LEO") and Cease and Desist Order (the "CDO") against Roku, which became effective on January 9, 2022. In January 2022, Roku filed its appeal of the ITC ruling with the U.S. Court of Appeals for the Federal Circuit (the "USCAFC"). Oral argument for this appeal was held on September 5, 2023 and in January 2024 the USCAFC issued its

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

decision affirming the ITC ruling in full. On March 4, 2024, Roku filed a petition for rehearing and rehearing en banc and on April 3, 2024, the USCAFC denied Roku’s petition. In June, Roku advised us that they would file an appeal of the adverse ruling against them in this investigation to the U.S. Supreme Count and on June 12, 2024, Roku filed an application seeking a 45-day extension (to August 16, 2024) to file their Writ of Certiorari. This extension was approved. As soon as Roku files its Writ, we will timely prepare and file our reply. We expect the U.S. Supreme Court to make its decision whether or not to hear Roku’s appeal sometime during or after September of this year.

2020 Lawsuit

As a companion case to our ITC complaint, on April 9, 2020, we filed separate actions against each of Roku, TCL, Hisense, and Funai in the United States District Court, Central District of California, alleging that Roku is willfully infringing five of our patents and TCL, Hisense, and Funai are willfully infringing six of our patents by incorporating our patented technology into certain of their televisions, set-top boxes, remote control devices, human interface devices, streaming devices and sound bars. The Court stayed this lawsuit pending action by the Patent Trial and Appeals Board (the "PTAB") with respect to Roku's requests for Inter Partes Review ("IPR") and with respect to the International Trade Commission Investigation. At this time, we are only waiting for the decision of the U.S. Supreme Court with respect to Roku’s appeal request (see discussion above) and once received, we expect to be able to ask the District Court to lift this stay.

Inter Partes Reviews

Throughout these litigation matters against Roku and the others identified above, Roku has filed multiple IPR requests with the PTAB on all patents at issue in the 2018 Lawsuit, the ITC Action, and the 2020 Lawsuit (see discussion above). To date, the PTAB has denied Roku's request fourteen times, and granted Roku's request twelve times. Roku has since filed two IPRs on two of our patents not yet asserted against it, and we are awaiting the PTAB's institution decision with respect to those new IPR requests. Of the twelve IPR requests granted by the PTAB, the results were mixed, with the PTAB upholding the validity of many of our patent claims and invalidating others. Most of these PTAB actions have been completed, and as soon as we learn the decision of the U.S. Supreme Court, we expect to be able to petition the District Court to lift the stay on the 2018 and 2020 cases.

International Trade Commission Investigation Request Made by Roku against UEI and certain UEI Customers

On April 8, 2021, Roku made a request to the ITC to initiate an investigation against us and certain of our customers claiming that certain of our and those customers' remote control devices and televisions infringe two of Roku's recently acquired patents, the '511 patent and the '875 patent. On May 10, 2021, the ITC announced its decision to initiate the requested investigation. Immediately prior to trial Roku stipulated to summary determination as to its complaint against us and two of our customers with respect to one of the two patents at issue. This stipulation resulted in the complaint against us and two of our customers with respect to that patent not going to trial. The trial was thus shortened and ended on January 24, 2022. On June 24, 2022, the ALJ, pursuant to Roku's stipulation, found the '511 patent invalid as indefinite. Thereafter, on June 28, 2022, the ALJ issued an ID fully exonerating us and our customers finding the '875 patent invalid and that Roku failed to prove it established the requisite domestic industry and thus no violation of the Tariff Act. In advance of the full Commission's review, Roku and we filed petitions to appeal certain portions of the ID. In addition, the PTAB granted our request for an IPR with respect to the '875 patent. On October 28, 2022, the full ITC issued its final determination affirming the ID, ruling there was no violation of the Tariff Act and terminated the investigation. In December 2022, Roku filed an appeal, which remains pending. In addition, Roku, along with the ITC, filed a joint motion to dismiss the '511 patent as moot as it recently expired. We are opposing this motion. Further, on October 23, 2023, the PTBA issued its Final Written Decision invalidating all of the claims Roku alleges we infringe. As a companion to its ITC request, Roku also filed a lawsuit against us in Federal District Court in the Central District of California alleging that we are infringing the same two patents they alleged being infringed in the ITC investigation explained above. This District Court case has been stayed pending the ITC case, and will likely continue to be stayed pending the conclusion of Roku's appeal of the ITC case.

Court of International Trade Action against the United States of America, et. al.

On October 9, 2020, we and our subsidiaries, Ecolink Intelligent Technology, Inc. ("Ecolink") and RCS Technology, LLC ("RCS"), filed an amended complaint (20-cv-00670) in the Court of International Trade (the "CIT") against the United States of America; the Office of the United States Trade Representative; Robert E. Lighthizer, U.S. Trade Representative; U.S. Customs

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

& Border Protection; and Mark A. Morgan, U.S. Customs & Border Protection Acting Commissioner, challenging both the substantive and procedural processes followed by the United States Trade Representative ("USTR") when instituting Section 301 Tariffs on imports from China under Lists 3 and 4A.

Pursuant to this complaint, Ecolink, RCS and we are alleging that USTR's institution of Lists 3 and 4A tariffs violated the Trade Act of 1974 (the "Trade Act") on the grounds that the USTR failed to make a determination or finding that there was an unfair trade practice that required a remedy and moreover, that Lists 3 and 4A tariffs were instituted beyond the 12-month time limit provided for in the governing statute. Ecolink, RCS and we also allege that the manner in which the Lists 3 and 4A tariff actions were implemented violated the Administrative Procedures Act (the "APA") by failing to provide adequate opportunity for comments, failed to consider relevant factors when making its decision and failed to connect the record facts to the choices it made by not explaining how the comments received by USTR came to shape the final implementation of Lists 3 and 4A.

Ecolink, RCS and we are asking the CIT to declare that the defendants' actions resulting in the tariffs on products covered by Lists 3 and 4A are unauthorized by and contrary to the Trade Act and were arbitrarily and unlawfully promulgated in violation of the APA; to vacate the Lists 3 and 4A tariffs; to order a refund (with interest) of any Lists 3 and 4A duties paid by Ecolink, RCS and us; to permanently enjoin the U.S. government from applying Lists 3 and 4A duties against Ecolink, RCS and us; and award Ecolink, RCS and us our costs and reasonable attorney's fees.

In July 2021, the CIT issued a preliminary injunction suspending liquidation of all unliquidated entries subject to Lists 3 and 4A duties and has asked the parties to develop a process to keep track of the entries to efficiently and effectively deal with liquidation process and duties to be paid or refunded when finally adjudicated. On February 5, 2022, the CIT heard oral arguments on dispositive motions filed on behalf of plaintiffs and defendants. On April 1, 2022, the CIT issued its opinion on these dispositive motions, ruling that the USTR had the legal authority to promulgate List 3 and List 4A under Section 307(a)(1)(B) of the Trade Act, but that the USTR violated the APA when it promulgated List 3 and List 4A concluding that the USTR failed to adequately explain its decision as required under the APA. The Court ordered that List 3 and List 4A be remanded to the USTR for reconsideration or further explanation regarding its rationale for imposing the tariffs. The Court declined to vacate List 3 and List 4A, which means that they are still in place while on remand. The Court's preliminary injunction regarding liquidation of entries also remains in effect. The Court initially set a deadline of June 30, 2022, for the USTR to complete this process, which was extended to August 1, 2022.

On August 1, 2022, the USTR provided the Court with that further explanation and also purported to respond to the significant comments received during the original notice-and-comment process. On September 14, 2022, the lead plaintiff filed its comments to the USTR's August 1, 2022 filing, asserting that the USTR did not adequately respond to the Court's remand order and requested the Court to vacate the List 3 and List 4A tariffs and issue refunds immediately. On March 17, 2023, the CIT sustained the List 3 and List 4 tariffs, concluding that USTR’s rationale in support of the tariffs was not impermissibly post hoc. The court also concluded that USTR adequately explained its reliance on presidential direction and adequately responded to significant comments regarding the harm to the U.S. economy, efficacy of the tariffs, and alternatives to the tariffs. Lead plaintiffs have appealed this decision. The parties have fully briefed their positions on this appeal and oral argument is expected to be set for later in 2024 and a decision sometime in 2025.

Tongshun Matters

On January 23, 2024, Tongshun Company ("TS") filed suit against one of our subsidiaries, Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), claiming among other things, breach of an employment agency contract, and as is standard in Chinese litigation matters such as these, TS has also requested the court to order a hold on GTY's bank account for the total claimed amount of RMB 35 million. This asset protection order is a standard request and routinely granted. On February 5, 2024, we learned that the court accepted the lawsuit filed by TS. On February 8, 2024, we deposited RMB 35 million (approximately $4.8 million) with the court. This deposit is included in prepaid expenses and other current assets on our consolidated balance sheets. The hearing on this matter has been stayed pending settlement discussions between the parties.

There are no other material pending legal proceedings to which we or any of our subsidiaries is a party or of which our respective property is the subject. However, as is typical in our industry and to the nature and kind of business in which we are engaged, from time to time, various claims, charges and litigation are asserted or commenced by third parties against us or by us against third parties arising from or related to product liability, infringement of patent or other intellectual property rights, breach of warranty, contractual relations, or employee relations. The amounts claimed may be substantial, but may not bear any

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

reasonable relationship to the merits of the claims or the extent of any real risk of court awards assessed against us or in our favor. However, no assurances can be made as to the outcome of any of these matters, nor can we estimate the range of potential losses to us. In our opinion, final judgments, if any, which might be rendered against us in potential or pending litigation would not have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. Moreover, we believe that our products do not infringe any third parties' patents or other intellectual property rights.

We maintain directors' and officers' liability insurance which insures our individual directors and officers against certain claims, as well as attorney's fees and related expenses incurred in connection with the defense of such claims.

Note 13 — Treasury Stock

From time to time, our Board of Directors authorizes management to repurchase shares of our issued and outstanding common stock. On October 26, 2023, our Board approved a share repurchase program with an effective date of November 7, 2023 (the "October 2023 Program"). Pursuant to the October 2023 Program, we are authorized to repurchase up to 1,000,000 shares of our common stock. At June 30, 2024, we had 778,362 shares available for repurchase under the October 2023 Program. Per the terms of the October 2023 Program, we may utilize various methods to effect the repurchases, including open market repurchases, negotiated block transactions, accelerated share repurchases or open market solicitations for shares, some or all of which could be effected through Rule 10b5-1 plans.

We also repurchase shares of our issued and outstanding common stock to satisfy the cost of stock option exercises and/or income tax withholding obligations relating to the stock-based compensation of our employees and directors.

Repurchased shares of our common stock were as follows:


	Six Months Ended June 30,
(In thousands)	2024		2023
Open market shares repurchased	122		—
Stock-based compensation related shares repurchased	73		58
Total shares repurchased	195		58

Cost of open market shares repurchased	$	1,109	$	—
Cost of stock-based compensation related shares repurchased	732		855
Total cost of shares repurchased	$	1,841	$	855

Repurchased shares are recorded as shares held in treasury at cost. We hold these shares for future use as management and the Board of Directors deem appropriate.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Note 14 — Stock-Based Compensation

Stock-based compensation expense for each employee and director is presented in the same statement of operations caption as their cash compensation. Stock-based compensation expense by statement of operations caption and the related income tax benefit were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Cost of sales	$	20	$	26	$	47	$	62
Research and development expenses	142		251		373		534
Selling, general and administrative expenses:
Employees	1,204		1,666		2,755		3,672
Outside directors	94		215		189		430
Total employee and director stock-based compensation expense	$	1,460	$	2,158	$	3,364	$	4,698
Income tax benefit	$	220	$	337	$	507	$	747

Restricted Stock

Non-vested restricted stock award activity was as follows:


	Shares (in thousands)	Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2023	486	$	21.66
Granted	322	10.38
Vested	(220)	25.60
Forfeited	(17)	17.23
Non-vested at June 30, 2024	571	$	13.92

As of June 30, 2024, we expect to recognize $6.9 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 2.0 years.

Performance Stock

Non-vested performance stock award activity was as follows:


	Shares (in thousands)	Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2023	—	$	—
Granted	116	4.72
Vested	—	—
Forfeited	—	—
Non-vested at June 30, 2024	116	$	4.72

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

The assumptions we utilized in the Monte Carlo simulation model and the resulting weighted average fair value of performance stock grants were the following:


	Three Months Ended June 30,			Six Months Ended June 30,
	2024			2024
Weighted average fair value of grants	$	—		$	4.72
Risk-free interest rate	—		%	4.08		%
Expected volatility	—		%	57.00		%
Expected life in years	0.00			2.73

As of June 30, 2024, we expect to recognize $0.5 million of total unrecognized pre-tax stock-based compensation expense related to non-vested performance stock awards over a weighted-average life of 2.3 years.

Stock Options

Stock option activity was as follows:


	Number of Options (in thousands)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023	901	$	38.78
Granted	—	—
Exercised	—	—			$	—
Forfeited/canceled/expired	(122)	58.52
Outstanding at June 30, 2024 (1)	779	$	35.67	3.62	$	—
Vested and expected to vest at June 30, 2024 (1)	779	$	35.67	3.62	$	—
Exercisable at June 30, 2024 (1)	612	$	38.18	3.07	$	—

(1)The aggregate intrinsic value represents the total pre-tax value (the difference between our closing stock price on the last trading day of the first quarter of 2024 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on June 30, 2024. This amount will change based on the fair market value of our stock.

The assumptions we utilized in the Black-Scholes option pricing model and the resulting weighted average fair value of stock option grants were the following:


	Three Months Ended June 30,			Six Months Ended June 30,
	2023			2023
Weighted average fair value of grants	$	—		$	10.83
Risk-free interest rate	—		%	3.86		%
Expected volatility	—		%	45.89		%
Expected life in years	0.00			4.70

As of June 30, 2024, we expect to recognize $1.7 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 1.4 years.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

Note 15 — Other Income (Expense), Net

Other income (expense), net consisted of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Net gain (loss) on foreign currency exchange contracts (1)	$	(195)	$	(2,613)	$	(215)	$	(2,807)
Net gain (loss) on foreign currency exchange transactions	(159)		1,868		(243)		1,630
Other income (expense)	265		43		289		261
Other income (expense), net	$	(89)	$	(702)	$	(169)	$	(916)

(1)This represents the gains (losses) incurred on foreign currency hedging derivatives (see Note 17 for further details).

Note 16 — Earnings (Loss) Per Share

Earnings (loss) per share was calculated as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per-share amounts)	2024		2023		2024		2023
BASIC
Net income (loss)	$	(8,193)	$	(10,411)	$	(16,842)	$	(71,774)
Weighted-average common shares outstanding	12,917		12,860		12,909		12,804
Basic earnings (loss) per share	$	(0.63)	$	(0.81)	$	(1.30)	$	(5.61)

DILUTED
Net income (loss)	$	(8,193)	$	(10,411)	$	(16,842)	$	(71,774)
Weighted-average common shares outstanding for basic	12,917		12,860		12,909		12,804
Dilutive effect of stock options, restricted stock and performance stock	—		—		—		—
Weighted-average common shares outstanding on a diluted basis	12,917		12,860		12,909		12,804
Diluted earnings (loss) per share	$	(0.63)	$	(0.81)	$	(1.30)	$	(5.61)

The following number of stock options, shares of restricted stock and shares of performance stock were excluded from the computation of diluted earnings per common share as their inclusion would have been anti-dilutive:


	Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	2024	2023	2024	2023
Stock options	779	925	813	875
Restricted stock awards	452	380	473	375
Performance stock awards	116	—	93	—

Note 17 — Derivatives

The following table sets forth the total net fair value of derivatives:


	June 30, 2024								December 31, 2023
	Fair Value Measurement Using						Total Balance		Fair Value Measurement Using						Total Balance
(In thousands)	Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Foreign currency exchange contracts	$	—	$	10	$	—	$	10	$	—	$	(83)	$	—	$	(83)

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2024

(Unaudited)

We held foreign currency exchange contracts, which resulted in a net pre-tax loss of $0.2 million and $2.6 million for the three months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, we had a pre-tax loss of $0.2 million and $2.8 million, respectively.

Details of foreign currency exchange contracts held were as follows:

Date Held

Currency

Position Held

Notional Value
(in millions)

Forward Rate

Unrealized Gain/(Loss) Recorded at Balance Sheet

Date

(in thousands)(1)

Settlement Date

June 30, 2024

USD/Chinese Yuan Renminbi