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Core Insights - Universal Electronics (UEIC) reported quarterly earnings of $0.08 per share, exceeding the Zacks Consensus Estimate of a loss of $0.03 per share, representing an earnings surprise of +366.67% [1] - The company posted revenues of $90.55 million for the quarter ended September 2025, which was below the Zacks Consensus Estimate by 3.39% and down from $102.07 million year-over-year [2] - Universal Electronics shares have declined approximately 68% year-to-date, contrasting with the S&P 500's gain of 15.6% [3] Earnings Performance - Over the last four quarters, Universal Electronics has surpassed consensus EPS estimates four times [2] - The company has topped consensus revenue estimates three times in the last four quarters [2] - The current consensus EPS estimate for the upcoming quarter is -$0.11 on revenues of $90.88 million, and for the current fiscal year, it is -$0.25 on revenues of $374.6 million [7] Market Outlook - The stock's immediate price movement will largely depend on management's commentary during the earnings call [3] - The Zacks Rank for Universal Electronics is currently 3 (Hold), indicating expected performance in line with the market in the near future [6] - The Electronics - Miscellaneous Products industry is ranked in the top 21% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $90.6 million, down 11% from $102.1 million in Q3 2024, slightly below expectations due to temporary and structural market factors [12][6] - Gross margin was 29.1%, compared to 30.1% in the prior year period, impacted by tariff timing issues [13][6] - Net income was $1.1 million or $0.08 per diluted share, down from $1.4 million or $0.10 per diluted share in the previous year [15][6] - The net cash position increased significantly by $9.1 million to $13.2 million as of September 30, 2025, marking the second consecutive quarter of positive net cash since December 2021 [15][6] Business Line Data and Key Metrics Changes - Connected home revenue grew 13% to $29.8 million, driven by new product performance, while home entertainment sales declined 20% to $60.8 million due to soft demand in Latin America and EMEA [12][6] - Operating expenses decreased to $24.8 million from $28.2 million in the prior year, reflecting ongoing cost reduction initiatives [14][6] Market Data and Key Metrics Changes - The company faced structural challenges in Latin America and Europe, with lower-than-expected television sales impacting Asian customer volumes [6][12] - Retail channel performance softened due to elevated inventories and slower sell-through [12][6] Company Strategy and Development Direction - The company is focusing on advancing control and sensing technologies while diversifying into adjacent markets such as utilities and multi-dwelling unit property management [5][6] - Innovation remains central to the strategy, with new technologies and products being developed, including the TideTouch platform for energy management [9][10] - The company is also enhancing its product offerings to meet growing demand for energy efficiency in Western Europe [8][9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged revenue headwinds but expressed confidence in long-term growth, particularly in the connected home segment, expecting full-year growth of 12%-16% compared to 2024 [6][16] - The company anticipates Q4 2025 net sales to range from $82 million to $92 million, reflecting a decline from Q4 2024 [16][6] - Management emphasized the importance of operational discipline in navigating unpredictability and headwinds [18][6] Other Important Information - The company is undergoing a leadership transition with an ongoing search for permanent CEO and CFO positions [20][21] - The trial date for ongoing litigation against Roku has been set for March 2027, which management views as favorable [11][6] Q&A Session Summary Question: Status of leadership positions - Management is confident in navigating the interim CEO and CFO roles and is conducting an ongoing search for permanent positions [20][21] Question: Dynamics of connected home business downturn - Management noted uneven order patterns affecting connected home revenue but expects full-year growth compared to 2024 [22][23] Question: Impact of tariffs on gross margins - Management acknowledged a temporary gross margin headwind related to tariffs, which is expected to persist into Q4 [26][27] Question: Assumptions for Q4 operating expenses - Management expects Q4 operating expenses to be materially lower than Q3 due to ongoing cost optimization efforts [29][6] Question: Customer concentration in the quarter - Two customers accounted for over 10% of sales, with Daikin at 20.5% and Comcast at 14.9% [30][6]

Financial Performance - Net sales for the three months ended September 30, 2025, were $90.552 million, a decrease of 11.3% compared to $102.073 million for the same period in 2024[40]. - The company reported net sales of $280.543 million for the nine months ended September 30, 2025, a slight decrease of 1.4% compared to $284.425 million for the same period in 2024[40]. - For the three months ended September 30, 2025, the company reported a net loss of $8.33 million, compared to a net loss of $2.66 million for the same period in 2024[125]. - The basic earnings per share for the three months ended September 30, 2025, was $(0.62), compared to $(0.20) for the same period in 2024[125]. - Total revenue for the three months ended September 30, 2025, was $90.55 million, down from $102.07 million in the same period of 2024, representing a decrease of approximately 11.4%[130]. Revenue Breakdown - Revenue from the connected home channel increased to $29.793 million for the three months ended September 30, 2025, up 12.4% from $26.368 million in the same period of 2024[40]. - Revenue from the home entertainment channel decreased to $60.759 million for the three months ended September 30, 2025, down 19.7% from $75.705 million in the same period of 2024[40]. - Net sales to Daikin Industries Ltd. increased to $18,576 thousand, representing 20.5% of net sales for the three months ended September 30, 2025, compared to 12.4% for the same period in 2024[49]. Cash and Liquidity - Total cash and cash equivalents increased to $31.506 million as of September 30, 2025, up from $26.783 million at December 31, 2024, representing a growth of 10.2%[39]. - The U.S. Credit Line has a maximum availability of $75.0 million, with total availability of $54.1 million based on the accounts receivable coverage ratio as of September 30, 2025[66]. - As of September 30, 2025, the total interest expense on borrowings under the U.S. Credit Line was $0.4 million, down from $1.0 million for the same period in 2024, representing a decrease of 60%[70]. - The China Credit Line had a maximum availability of up to RMB 130.0 million (approximately $18.3 million) as of September 30, 2025, with no remaining availability[73]. Assets and Liabilities - Accounts receivable, net decreased to $83.800 million as of September 30, 2025, from $114.182 million at December 31, 2024, a decline of 26.6%[43]. - Total inventories as of September 30, 2025, amounted to $80,605 thousand, a slight increase from $79,355 thousand as of December 31, 2024[50]. - Long-lived tangible assets decreased to $40,334 thousand as of September 30, 2025, down from $48,529 thousand at December 31, 2024[54]. - Total intangible assets, net, decreased to $22,583 thousand as of September 30, 2025, from $24,038 thousand at December 31, 2024[58]. - The total accrued compensation as of September 30, 2025, was $19.1 million, a decrease from $20.9 million at December 31, 2024, reflecting a reduction of approximately 8.6%[85]. Expenses and Charges - The company recorded impairment charges of $1.2 million related to the shutdown of its Mexico manufacturing facility during the three and nine months ended September 30, 2025[56]. - The company incurred severance expenses of $1.7 million for the three months ended September 30, 2025, as part of a global reduction in force strategy[84]. - The company recognized a total of $4.6 million in factory restructuring charges since September 2023, with no further expenses expected from this plan[92]. - Total restructuring costs incurred from inception to date amount to $7.6 million, with severance expenses at $5.4 million and other exit expenses at $2.2 million[96]. Legal Matters - The arbitration ruling in favor of the company against IT Convergence awarded approximately $0.2 million, with both parties having 90 days to appeal[110]. - The company recorded an accrual of approximately $4.2 million for a judgment in favor of Tongshun Company, which was paid during the second quarter of 2025[109]. - In the litigation against Roku, the Federal Circuit affirmed the invalidation of Roku's patent claims on June 17, 2025, which is expected to impact future legal proceedings[104]. - The trial date for the consolidated district court case against Roku is set for March 16, 2027, following the lifting of a stay on the case[103].

Financial Performance - GAAP net sales for Q3 2025 were $90.6 million, a decrease of 11.5% from $102.1 million in Q3 2024[7] - GAAP net sales in connected home increased to $29.8 million, up 12.9% from $26.4 million in Q3 2024[7] - GAAP net sales in home entertainment decreased to $60.8 million, down 19.7% from $75.7 million in Q3 2024[7] - Net sales for Q3 2025 were $90,552 thousand, a decrease of 11.8% from $102,073 thousand in Q3 2024[21] - Gross profit for Q3 2025 was $25,122 thousand, down 18.4% from $30,732 thousand in Q3 2024[21] - Operating loss for Q3 2025 was $(4,512) thousand compared to an operating income of $418 thousand in Q3 2024[21] - For the three months ended September 30, 2025, the GAAP net loss was $8.329 million, compared to a net loss of $2.658 million for the same period in 2024[29] - Adjusted non-GAAP net income for the three months ended September 30, 2025, was $1.110 million, a decrease from $1.361 million in 2024[29] - The diluted earnings per share (GAAP) for the three months ended September 30, 2025, was $(0.62), compared to $(0.20) in 2024[29] Future Projections - The company expects Q4 2025 GAAP net sales to range from $82.0 million to $92.0 million, down from $110.5 million in Q4 2024[6] - The company expects net sales for the fourth quarter of 2025 to range from $82 million to $92 million, with connected home sales projected between $26 million and $30 million[32] - GAAP loss per share for Q4 2025 is expected to range from $0.30 to $0.20, an improvement from a loss of $0.35 in Q4 2024[7] - The adjusted non-GAAP diluted earnings per share for the fourth quarter of 2025 is projected to be between $0.01 and $0.11[32] Cash Flow and Liquidity - Operating cash flows generated in Q3 2025 were $10.1 million, compared to $5.7 million in Q3 2024[7] - Cash and cash equivalents as of September 30, 2025, were $31.5 million, up from $26.8 million at the end of 2024[19] - Cash flows from operating activities for the nine months ended September 30, 2025, were $27,837 thousand, significantly higher than $8,339 thousand in the same period of 2024[23] - Cash and cash equivalents at the end of the period were $31,506 thousand, an increase from $26,287 thousand at the end of the same period in 2024[23] Expenses and Charges - Research and development expenses for Q3 2025 were $6,687 thousand, a decrease of 8.9% from $7,338 thousand in Q3 2024[21] - The company incurred impairment charges of $1.187 million related to machinery and equipment due to the shutdown of its Mexico manufacturing facility, expected to be completed by the end of 2025[29] - Severance costs associated with a global reduction in force amounted to $1.705 million for the three months ended September 30, 2025[29] Shareholder Actions - The board authorized a share repurchase of up to $3.5 million or approximately 778,000 shares[3] Segment Performance - The connected home segment generated $29,793 thousand in sales for Q3 2025, up 12.8% from $26,368 thousand in Q3 2024[25] - The home entertainment segment saw sales decline to $60,759 thousand in Q3 2025 from $75,705 thousand in Q3 2024, a decrease of 19.8%[25] Adjusted Metrics - Adjusted non-GAAP operating income for Q3 2025 was $1,570 thousand, compared to $2,567 thousand in Q3 2024[27] - Total adjustments for the diluted earnings per share in the fourth quarter of 2025 are estimated at $0.31[32] - The company reported a foreign currency gain of $1.109 million for the three months ended September 30, 2025[29] - The total diluted shares used in computing earnings per share (GAAP) for the three months ended September 30, 2025, was 13,340 thousand shares[29]

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited consolidated financial statements and detailed notes for Universal Electronics Inc. for the specified periods [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Balance sheets reflect decreased assets and liabilities, slight equity reduction, and shifts in cash and receivables Key Balance Sheet Metrics (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Total assets | $304,139 | $323,354 | $(19,215) | -5.94% | | Total liabilities | $151,380 | $170,249 | $(18,869) | -11.08% | | Total stockholders' equity | $152,759 | $153,105 | $(346) | -0.23% | | Cash and cash equivalents | $34,261 | $26,783 | $7,478 | 27.92% | | Accounts receivable, net | $97,440 | $114,182 | $(16,742) | -14.66% | | Lines of credit | $30,155 | $36,960 | $(6,805) | -18.41% | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Operating income improved and net losses reduced for Q2 and H1 2025, driven by sales growth and cost control Consolidated Statements of Operations (Three Months Ended June 30, in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | % YoY Change | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :----------- | | Net sales | $97,665 | $90,452 | $7,213 | 7.97% | | Gross profit | $29,196 | $25,952 | $3,244 | 12.50% | | Operating income (loss) | $1,008 | $(4,453) | $5,461 | 122.63% | | Net income (loss) | $(2,912) | $(8,193) | $5,281 | 64.46% | | Basic EPS | $(0.22) | $(0.63) | $0.41 | 65.08% | | Diluted EPS | $(0.22) | $(0.63) | $0.41 | 65.08% | Consolidated Statements of Operations (Six Months Ended June 30, in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | % YoY Change | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :----------- | | Net sales | $189,991 | $182,352 | $7,639 | 4.19% | | Gross profit | $55,279 | $51,940 | $3,339 | 6.43% | | Operating income (loss) | $(2,746) | $(11,361) | $8,615 | 75.83% | | Net income (loss) | $(9,186) | $(16,842) | $7,656 | 45.46% | | Basic EPS | $(0.70) | $(1.30) | $0.60 | 46.15% | | Diluted EPS | $(0.70) | $(1.30) | $0.60 | 46.15% | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Shifted to comprehensive income for Q2 2025 and significantly reduced loss for H1 2025, due to currency translation Consolidated Statements of Comprehensive Income (Loss) (Three Months Ended June 30, in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | | Net income (loss) | $(2,912) | $(8,193) | $5,281 | | Change in foreign currency translation adjustment | $4,245 | $(2,902) | $7,147 | | Comprehensive income (loss) | $1,333 | $(11,095) | $12,428 | Consolidated Statements of Comprehensive Income (Loss) (Six Months Ended June 30, in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | | Net income (loss) | $(9,186) | $(16,842) | $7,656 | | Change in foreign currency translation adjustment | $5,823 | $(4,493) | $10,316 | | Comprehensive income (loss) | $(3,363) | $(21,335) | $17,972 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity saw minor fluctuations, with net losses partially offset by currency adjustments and stock compensation Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at Dec 31, 2024 | Balance at Jun 30, 2025 | Change | | :-------------------- | :---------------------- | :---------------------- | :----- | | Total Stockholders' Equity | $153,105 | $152,759 | $(346) | | Net loss | | $(9,186) | | | Currency translation adjustment | | $5,823 | | | Shares issued for employee benefit plan and compensation | | $331 | | | Purchase of treasury shares | | $(748) | | | Employee and director stock-based compensation | | $3,433 | | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased for H1 2025 due to improved net loss, inventory, and accounts receivable management Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | | Net cash provided by (used for) operating activities | $17,705 | $2,675 | $15,030 |\n| Net cash provided by (used for) investing activities | $(3,989) | $(5,004) | $1,015 |\n| Net cash provided by (used for) financing activities | $(7,748) | $(15,841) | $8,093 |\n| Net increase (decrease) in cash and cash equivalents | $7,478 | $(19,623) | $27,101 |\n| Cash and cash equivalents at end of period | $34,261 | $23,128 | $11,133 | - The increase in net cash from operating activities was driven by a lower net loss, improved inventory management (inventories decreased by **$1.7 million** in 2025 vs an increase of **$0.9 million** in 2024), and a decrease in accounts receivable and contract assets (cash inflows of **$23.3 million** in 2025 vs **$13.1 million** in 2024)[20](index=20&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed disclosures on financial position, operations, and cash flows, including accounting policies, revenue, debt, and litigation [Note 1 — Basis of Presentation](index=9&type=section&id=Note%201%20%E2%80%94%20Basis%20of%20Presentation) Outlines the basis for preparing unaudited consolidated financial statements, highlighting estimates and new accounting pronouncements - The company is evaluating the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses), effective for annual periods beginning in 2027, and ASU 2023-09 (Improvements to Tax Disclosures), effective for annual periods beginning after December 15, 2024[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 2 — Cash and Cash Equivalents](index=10&type=section&id=Note%202%20%E2%80%94%20Cash%20and%20Cash%20Equivalents) Details geographic distribution of cash and cash equivalents, showing an overall increase with significant holdings in PRC and Europe Cash and Cash Equivalents by Geographic Region (in thousands) | Geographic Region (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :------------------------------- | :------------ | :---------------- | :----- | | North America | $1,926 | $1,986 | $(60) | | People's Republic of China ("PRC") | $13,413 | $10,117 | $3,296 | | Asia (excluding the PRC) | $4,107 | $2,343 | $1,764 | | Europe | $7,542 | $7,035 | $507 | | South America | $7,273 | $5,302 | $1,971 | | Total cash and cash equivalents | $34,261 | $26,783 | $7,478 | [Note 3 — Revenue and Accounts Receivable, Net](index=10&type=section&id=Note%203%20%E2%80%94%20Revenue%20and%20Accounts%20Receivable,%20Net) Net sales increased for Q2 and H1 2025, driven by connected home growth, while accounts receivable decreased Net Sales by Channel (Three Months Ended June 30, in thousands) | Net Sales by Channel (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | YoY Change | % YoY Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :--------- | :----------- | | Connected home | $34,099 | $23,291 | $10,808 | 46.40% | | Home entertainment | $63,566 | $67,161 | $(3,595) | -5.35% | | Total net sales | $97,665 | $90,452 | $7,213 | 7.97% | Net Sales by Channel (Six Months Ended June 30, in thousands) | Net Sales by Channel (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | YoY Change | % YoY Change | | :---------------------------------- | :----------------------------- | :----------------------------- | :--------- | :----------- | | Connected home | $65,828 | $47,462 | $18,366 | 38.70% | | Home entertainment | $124,163 | $134,890 | $(10,727) | -7.95% | | Total net sales | $189,991 | $182,352 | $7,639 | 4.19% | Accounts Receivable, Net (in thousands) | Accounts Receivable, Net (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | Trade receivables, gross | $82,918 | $93,773 | $(10,855) | | Allowance for credit losses | $(1,468) | $(1,863) | $395 | | Allowance for sales returns | $(285) | $(383) | $98 | | Other accounts receivable | $16,275 | $22,655 | $(6,380) | | Total Accounts receivable, net | $97,440 | $114,182 | $(16,742) | - Daikin Industries Ltd and Comcast Communications were significant customers, accounting for **18.7%** and **12.2%** of net sales, respectively, for the three months ended June 30, 2025. Daikin also represented **11.3%** of accounts receivable, net, at June 30, 2025[42](index=42&type=chunk) [Note 4 — Inventories](index=13&type=section&id=Note%204%20%E2%80%94%20Inventories) Total inventories slightly increased due to work in process and finished goods, offsetting minor raw materials decreases Inventory Breakdown (in thousands) | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :----------------------- | :------------ | :---------------- | :----- | | Raw materials | $19,949 | $21,245 | $(1,296) | | Components | $10,646 | $10,820 | $(174) | | Work in process | $3,913 | $1,896 | $2,017 | | Finished goods | $45,663 | $45,394 | $269 | | Total Inventories | $80,171 | $79,355 | $816 | [Note 5 — Long-lived Tangible Assets](index=13&type=section&id=Note%205%20%E2%80%94%20Long-lived%20Tangible%20Assets) Total long-lived tangible assets decreased, with PRC holding the largest portion, reflecting fewer PP&E purchases Long-lived Tangible Assets by Geographic Area (in thousands) | Geographic Area (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :----------------------------- | :------------ | :---------------- | :----- | | United States | $8,444 | $9,683 | $(1,239) | | PRC | $20,477 | $22,139 | $(1,662) | | Vietnam | $8,340 | $8,520 | $(180) | | Mexico | $4,501 | $5,164 | $(663) | | All other countries | $3,301 | $3,023 | $278 | | Total long-lived tangible assets | $45,063 | $48,529 | $(3,466) | - Depreciation expense decreased for both the three and six months ended June 30, 2025, compared to the prior year, reflecting fewer PP&E purchases in recent years[47](index=47&type=chunk) [Note 6 — Intangible Assets, Net](index=14&type=section&id=Note%206%20%E2%80%94%20Intangible%20Assets,%20Net) Net intangible assets decreased due to amortization, with patents remaining the largest component Intangible Assets, Net (in thousands) | Intangible Asset (in thousands) | June 30, 2025 Net | December 31, 2024 Net | Change | | :------------------------------ | :---------------- | :-------------------- | :----- | | Capitalized software development costs | $1,211 | $1,425 | $(214) | | Customer relationships | $1,452 | $1,814 | $(362) | | Developed and core technology | $295 | $342 | $(47) | | Patents | $20,018 | $20,419 | $(401) | | Trademarks and trade names | $22 | $38 | $(16) | | Total intangible assets, net | $22,998 | $24,038 | $(1,040) | Amortization Expense (in thousands) | Amortization Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of sales | $100 | $140 | $341 | $281 | | Selling, general and administrative expenses | $1,098 | $1,080 | $2,198 | $2,176 | | Total amortization expense | $1,198 | $1,220 | $2,539 | $2,457 | [Note 7 — Leases](index=14&type=section&id=Note%207%20%E2%80%94%20Leases) Operating lease right-of-use assets and liabilities decreased, as did operating lease expenses for Q2 and H1 2025 Lease Balances (in thousands) | Lease Balances (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :---------------------------- | :------------ | :---------------- | :----- | | Operating lease right-of-use assets | $13,292 | $14,322 | $(1,030) | | Total lease liabilities | $11,871 | $12,785 | $(914) | Operating Lease Expense (in thousands) | Operating Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total operating lease expense | $1,463 | $1,692 | $2,939 | $3,551 | - The weighted average remaining lease liability term increased slightly to **4.7 years** at June 30, 2025, from **4.6 years** at December 31, 2024, while the weighted average discount rate increased to **6.02%** from **5.45%**[52](index=52&type=chunk) [Note 8 — Lines of Credit](index=16&type=section&id=Note%208%20%E2%80%94%20Lines%20of%20Credit) Maintains two revolving lines of credit, U.S. and China, both amended in 2025, with compliance to all covenants Credit Line Details | Credit Line Details | U.S. Credit Line (June 30, 2025) | China Credit Line (June 30, 2025) | | :------------------ | :------------------------------- | :-------------------------------- | | Maximum Availability | $53.6 million (subject to AR Ratio) | RMB 80.0 million (~$11.2 million) | | Outstanding Balance | $19.0 million | RMB 80.0 million (~$11.2 million) | | Remaining Availability | $34.6 million | $0 | | Interest Rate | 7.29% (SOFR + 3.00% margin) | 3.07% (one-year rate from National Interbank Funding Center - 0.1% margin) | | Expiration | April 30, 2026 | July 16, 2026 | - The China Credit Line's maximum availability increased to **RMB 130.0 million** (approximately **$18.1 million**) as of July 30, 2025[62](index=62&type=chunk) - Total interest expense on borrowings under the U.S. Credit Line decreased for both the three and six months ended June 30, 2025, due to a lower average loan balance and lower interest rates[60](index=60&type=chunk)[140](index=140&type=chunk)[148](index=148&type=chunk) [Note 9 — Income Taxes](index=17&type=section&id=Note%209%20%E2%80%94%20Income%20Taxes) Recorded income tax expense despite pre-tax losses, due to jurisdictional mix and valuation allowance, assessing new legislation Income Tax Expense (in thousands) | Income Tax Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $1,811 | $2,808 | $4,030 | $3,547 | | Income (loss) before provision for income taxes | $(1,101) | $(5,385) | $(5,156) | $(13,295) | - The company has a valuation allowance on its U.S. federal and state deferred tax assets due to a three-year cumulative operating loss for U.S. operations[70](index=70&type=chunk) - H.R. 1, the One Big Beautiful Bill Act, was enacted on July 4, 2025, with provisions effective from 2025 through 2027, and the company is currently assessing its impact on consolidated financial statements[73](index=73&type=chunk) [Note 10 — Accrued Compensation](index=18&type=section&id=Note%2010%20%E2%80%94%20Accrued%20Compensation) Total accrued compensation decreased due to reductions in bonus, commission, and salary, partially offset by social insurance Accrued Compensation Breakdown (in thousands) | Accrued Compensation (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :---------------------------------- | :------------ | :---------------- | :----- | | Accrued bonus | $965 | $2,386 | $(1,421) | | Accrued commission | $410 | $1,545 | $(1,135) | | Accrued salary/wages | $3,921 | $4,676 | $(755) | | Accrued social insurance | $6,911 | $6,718 | $193 | | Accrued vacation/holiday | $3,128 | $3,036 | $92 | | Other accrued compensation | $2,431 | $2,566 | $(135) | | Total accrued compensation | $17,766 | $20,927 | $(3,161) | - Accrued severance expenses related to Mexico manufacturing footprint optimization efforts decreased from **$0.8 million** at December 31, 2024, to **$0.2 million** at June 30, 2025[75](index=75&type=chunk) [Note 11 — Other Accrued Liabilities](index=18&type=section&id=Note%2011%20%E2%80%94%20Other%20Accrued%20Liabilities) Total other accrued liabilities decreased, primarily due to payment of a legal judgment, partially offset by contract liabilities Other Accrued Liabilities (in thousands) | Other Accrued Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------------- | :------------ | :---------------- | :----- | | Contract liabilities | $3,350 | $2,521 | $829 | | Duties | $1,211 | $543 | $668 | | Legal judgment | $0 | $4,162 | $(4,162) | | Operating lease obligations | $3,419 | $3,553 | $(134) | | Sales and value added taxes | $3,211 | $2,684 | $527 | | Total other accrued liabilities | $18,480 | $21,008 | $(2,528) | - The **$4.2 million** legal judgment related to the Tongshun lawsuit was paid in the second quarter of 2025, resulting in its removal from accrued liabilities[76](index=76&type=chunk)[93](index=93&type=chunk) [Note 12 — Commitments and Contingencies](index=19&type=section&id=Note%2012%20%E2%80%94%20Commitments%20and%20Contingencies) Details purchase commitments, product warranties, restructuring activities, and various litigation matters, including patent disputes [Purchase Commitments](index=19&type=section&id=Purchase%20Commitments) Non-cancellable purchase commitments for inventory and PP&E slightly decreased, all expected within twelve months Purchase Commitments (in thousands) | Purchase Commitments (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :---------------------------------- | :------------ | :---------------- | :----- | | Inventory purchase commitments | $9,263 | $9,292 | $(29) | | PP&E purchase commitments | $593 | $927 | $(334) | | Total purchase commitments | $9,856 | $10,219 | $(363) | [Product Warranties](index=19&type=section&id=Product%20Warranties) Liability for product warranty claims remained low, with a slight increase from December 31, 2024, to June 30, 2025 Product Warranty Claims (in thousands) | Product Warranty Claims (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | $35 | $522 | | Additions (reductions) to costs and expenses | $6 | $0 | | Balance at end of period | $41 | $522 | [Restructuring Activities](index=19&type=section&id=Restructuring%20Activities) Asia factory restructuring completed, Mexico factory downsizing continued, with a full shutdown planned by end of 2025 - Asia factory restructuring was completed in Q4 2024, incurring no further expenses in H1 2025. Total charges since September 2023 were **$4.6 million**[81](index=81&type=chunk) - Mexico factory downsizing continued, with no severance or other exit costs in H1 2025, compared to **$1.4 million** severance and **$1.0 million** other exit costs in H1 2024. Total charges since January 2024 were **$3.0 million**[82](index=82&type=chunk) - The Board approved a plan in late July 2025 to shut down the Mexico manufacturing facility by the end of 2025, with material shutdown-related expenses expected to be recorded throughout the remainder of the year[84](index=84&type=chunk) [Litigation](index=20&type=section&id=Litigation) Involved in patent disputes with Roku, a trade action, and an employment lawsuit, with a $4.2 million judgment paid - In the Roku litigation, the Federal Circuit affirmed UEI's win in the ITC action on January 19, 2024, and the Supreme Court denied Roku's cert petition on January 13, 2025. The stay on CDCA cases was lifted on July 29, 2025, consolidating cases and allowing UEI to proceed with **25 claims**[86](index=86&type=chunk)[87](index=87&type=chunk) - Roku's retaliatory ITC action against UEI failed, with the ALJ finding one patent invalid and the full ITC affirming no violation of the Tariff Act. The Federal Circuit affirmed the PTAB decision invalidating Roku's patent on June 17, 2025[88](index=88&type=chunk)[90](index=90&type=chunk) - The Tongshun Company lawsuit resulted in a judgment of approximately **$4.2 million** against the company, which was affirmed on appeal and paid in Q2 2025[93](index=93&type=chunk) - An arbitration hearing with IT Convergence, Inc regarding alleged misappropriation of confidential information and theft of trade secrets is scheduled for early August 2025, with a decision expected in early September 2025[94](index=94&type=chunk) [Note 13 — Treasury Stock](index=22&type=section&id=Note%2013%20%E2%80%94%20Treasury%20Stock) Repurchased 101,000 shares for $0.7 million for tax withholding, with further repurchases authorized until August 2025 Treasury Stock Repurchases (in thousands) | Treasury Stock Repurchases (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Total shares repurchased | 101 | 195 | | Total cost of shares repurchased | $748 | $1,841 | - As of May 6, 2025, the Board authorized repurchases of up to **$4.0 million** or **778,362 shares** under the Share Repurchase Program until August 6, 2025[99](index=99&type=chunk)[183](index=183&type=chunk) [Note 14 — Stock-Based Compensation](index=23&type=section&id=Note%2014%20%E2%80%94%20Stock-Based%20Compensation) Total stock-based compensation expense slightly increased, with $4.5 million unrecognized expense to be recognized over 2.1 years Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total employee and director stock-based compensation expense | $1,649 | $1,460 | $3,433 | $3,364 | | Income tax benefit | $185 | $220 | $432 | $507 | - Unrecognized pre-tax stock-based compensation expense at June 30, 2025: **$3.7 million** for restricted stock (weighted-average life of **2.1 years**) and **$0.8 million** for performance stock (weighted-average period of **2.1 years**)[104](index=104&type=chunk)[107](index=107&type=chunk) [Note 15 — Other Income (Expense), Net](index=24&type=section&id=Note%2015%20%E2%80%94%20Other%20Income%20(Expense),%20Net) Shifted to significant net expense due to increased foreign currency losses and Blue Chip Swap securities transactions Other Income (Expense), Net (in thousands) | Other Income (Expense), Net (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net gain (loss) on foreign currency exchange contracts | $(397) | $(195) | $(618) | $(215) | | Net gain (loss) on foreign currency exchange transactions | $(1,342) | $(159) | $(924) | $(243) | | Other income (expense) | $(12) | $265 | $(157) | $289 | | Total Other income (expense), net | $(1,751) | $(89) | $(1,699) | $(169) | - Losses related to Blue Chip Swap (BCS) security transactions were **$0.1 million** for the three months and **$0.2 million** for the six months ended June 30, 2025, incurred to collect accounts receivable from an Argentine customer[109](index=109&type=chunk)[111](index=111&type=chunk) [Note 16 — Earnings (Loss) Per Share](index=25&type=section&id=Note%2016%20%E2%80%94%20Earnings%20(Loss)%20Per%20Share) Basic and diluted EPS improved due to reduced net losses, with anti-dilutive awards excluded from calculations Earnings (Loss) Per Share | EPS (per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $(0.22) | $(0.63) | $(0.70) | $(1.30) | | Diluted EPS | $(0.22) | $(0.63) | $(0.70) | $(1.30) | - **691 thousand** stock options, **498 thousand** restricted stock awards, and **372 thousand** performance stock awards were excluded from diluted EPS for the three months ended June 30, 2025, as their inclusion would have been anti-dilutive[112](index=112&type=chunk) [Note 17 — Derivatives](index=25&type=section&id=Note%2017%20%E2%80%94%20Derivatives) Held foreign currency exchange contracts, resulting in net pre-tax losses for Q2 and H1 2025 due to currency fluctuations Derivative Balances (in thousands) | Derivative (in thousands) | June 30, 2025 Total Balance | December 31, 2024 Total Balance | | :------------------------ | :-------------------------- | :------------------------------ | | Foreign currency exchange contracts | $(79) | $(249) | Derivative Net Pre-Tax Loss (in thousands) | Net Pre-Tax Loss (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Foreign currency exchange contracts | $(400) | $(200) | $(600) | $(200) | [Note 18 — Reportable Segment](index=26&type=section&id=Note%2018%20%E2%80%94%20Reportable%20Segment) Operates as a single consolidated business segment, with the Office of CEO reviewing financial information on a consolidated basis - The company operates as a single consolidated segment, with financial performance monitored against internal budgets and forecasts[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition and operations, highlighting performance drivers, strategic objectives, and liquidity [Cautionary Statement](index=27&type=section&id=Cautionary%20Statement) Report contains forward-looking statements subject to risks including supply chain, demand, tariffs, and economic conditions - Forward-looking statements are subject to risks including supply chain issues, demand and recovery trends, customer order delays, Mexico manufacturing facility shutdown timing, cash availability, effects of global events (political unrest, war, infectious diseases), economic environments (interest rates, recession), international trade policies (tariffs), liquidity requirements, capital expenditures, and tax law changes[120](index=120&type=chunk) [Overview](index=27&type=section&id=Overview) Designs and manufactures climate control, smart home, and home entertainment products, with strategic objectives for 2025 - The company's core business involves climate control solutions, smart home and security products, home entertainment products, software and cloud services, and intellectual property licensing[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[127](index=127&type=chunk) Key Financial Results (Three Months Ended June 30, in millions) | Key Financial Results (Three Months Ended June 30) | 2025 (in millions) | 2024 (in millions) | Change | | :------------------------------------------------- | :----------------- | :----------------- | :----- | | Net sales | $97.7 | $90.5 | +8.0% | | Gross margin percentage | 29.9% | 28.7% | +1.2 pp | | Operating expenses (as % of net sales) | 28.9% | 33.6% | -4.7 pp | | Operating income (loss) | $1.0 | $(4.5) | +$5.5 | | Income tax expense | $1.8 | $2.8 | -$1.0 | - Strategic business objectives for 2025 include: building long-term revenue pipelines, commercially deploying UEI TIDE products, expanding QuickSet Cloud software penetration, expanding AI-powered cloud services, positioning UEI in smart thermostat control, launching new direct-to-consumer product categories, expanding technology offerings in new standards (WiFi6, Thread, Matter, Z-Wave Long Range), seeking acquisitions/strategic partners, and optimizing global manufacturing footprint[127](index=127&type=chunk) [Macroeconomic Conditions](index=29&type=section&id=Macroeconomic%20Conditions) Expects negative impacts from tariffs and reduced consumer spending, potentially affecting sales, costs, and gross margins - Adverse macroeconomic conditions, including new tariffs on goods from Vietnam, Taiwan, PRC, and Mexico, and reduced consumer spending on durable goods, are expected to negatively impact the company's sales, costs, gross margins, and overall financial results[128](index=128&type=chunk) [Manufacturing Footprint](index=29&type=section&id=Manufacturing%20Footprint) Board approved shutting down Mexico manufacturing facility by end of 2025 due to Vietnam productivity and decreased demand - The Board approved a plan in late July 2025 to shut down the Mexico manufacturing facility by the end of 2025, anticipating material shutdown-related expenses throughout the remainder of the year[129](index=129&type=chunk) - The decision to shut down the Mexico facility is based on strong productivity at the Vietnam factory and decreased demand in the home entertainment channel[129](index=129&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statements rely on estimates for revenue, inventory, and income taxes, with no significant changes identified in H1 2025 - Key estimates and judgments include revenue recognition, allowance for credit losses, inventory valuation, impairment of long-lived assets and intangible assets, business combinations, income taxes and related valuation allowances, and stock-based compensation expense[25](index=25&type=chunk)[130](index=130&type=chunk) - No significant changes to critical accounting policies and estimates were identified during the six months ended June 30, 2025[131](index=131&type=chunk) [Recent Accounting Pronouncements](index=29&type=section&id=Recent%20Accounting%20Pronouncements) Refers to Note 1 for discussion of new accounting pronouncements, including ASU 2024-03 and ASU 2023-09, being evaluated - Refer to Note 1 for details on recently adopted and not yet effective accounting pronouncements, including ASU 2024-03 (Disaggregation of Income Statement Expenses) and ASU 2023-09 (Improvements to Tax Disclosures)[28](index=28&type=chunk)[29](index=29&type=chunk)[132](index=132&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Improved financial performance for Q2 and H1 2025, with increased sales, expanded gross margins, and narrowed operating losses [Three Months Ended June 30, 2025 versus Three Months Ended June 30, 2024](index=30&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20versus%20Three%20Months%20Ended%20June%2030,%202024) Net sales increased by 8.0%, driven by connected home, with improved gross margin and positive operating income Key Financial Results (Three Months Ended June 30, in thousands) | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Net sales | $97,665 | $90,452 | $7,213 | 8.0% | | Connected home sales | $34,099 | $23,291 | $10,808 | 46.4% | | Home entertainment sales | $63,566 | $67,161 | $(3,595) | -5.4% | | Gross profit | $29,196 | $25,952 | $3,244 | 12.5% | | Gross profit % | 29.9% | 28.7% | +1.2 pp | | | Operating income (loss) | $1,008 | $(4,453) | $5,461 | 122.6% | | R&D expenses | $6,959 | $7,520 | $(561) | -7.5% | | SG&A expenses | $21,229 | $21,330 | $(101) | -0.5% | | Factory restructuring charges | $0 | $1,555 | $(1,555) | -100.0% | | Other income (expense), net | $(1,751) | $(89) | $(1,662) | 1867.4% | - Gross margin percentage improved by **100 basis points** due to a stronger U.S. Dollar against functional currencies in Vietnam and Mexico, and an additional **20 basis points** from operational efficiencies in Vietnam, partially offset by unfavorable sales mix[137](index=137&type=chunk) - Other expense, net, increased significantly to **$1.8 million** from **$0.1 million**, primarily due to increased foreign currency losses from a weakening U.S. Dollar[141](index=141&type=chunk) [Six Months Ended June 30, 2025 versus Six Months Ended June 30, 2024](index=31&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20versus%20Six%20Months%20Ended%20June%2030,%202024) Net sales increased by 4.2%, driven by connected home, with improved gross margin and significantly narrowed operating loss Key Financial Results (Six Months Ended June 30, in thousands) | Metric (in thousands) | 2025 | 2024 | Change | % Change | | :-------------------- | :--- | :--- | :----- | :------- | | Net sales | $189,991 | $182,352 | $7,639 | 4.2% | | Connected home sales | $65,828 | $47,462 | $18,366 | 38.7% | | Home entertainment sales | $124,163 | $134,890 | $(10,727) | -7.9% | | Gross profit | $55,279 | $51,940 | $3,339 | 6.4% | | Gross profit % | 29.1% | 28.5% | +0.6 pp | | | Operating income (loss) | $(2,746) | $(11,361) | $8,615 | 75.8% | | R&D expenses | $14,190 | $15,341 | $(1,151) | -7.5% | | SG&A expenses | $43,835 | $45,341 | $(1,506) | -3.3% | | Factory restructuring charges | $0 | $2,619 | $(2,619) | -100.0% | | Other income (expense), net | $(1,699) | $(169) | $(1,530) | 905.3% | - Gross margin rate improved by **90 basis points** due to a stronger U.S. Dollar against functional currencies, partially offset by a **30 basis point** reduction from unfavorable sales mix and operational efficiencies[145](index=145&type=chunk) - SG&A expenses decreased due to continued cost control efforts, including headcount reductions and lower professional services costs[147](index=147&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity supported by cash from operations and credit lines, with increased cash and improved operating cash flows - The company's primary sources of liquidity are cash from operations and revolving lines of credit, which are expected to be sufficient for at least the next twelve months[151](index=151&type=chunk) Liquidity Metrics (in thousands) | Liquidity Metrics (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :------------------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $34,261 | $26,783 | $7,478 | | Available borrowing resources | $34,600 | $32,300 | $2,300 | | Working capital | $87,061 | $84,203 | $2,858 | Cash Flow Activities (Six Months Ended June 30, in thousands) | Cash Flow Activities (Six Months Ended June 30, in thousands) | 2025 | 2024 | Increase (Decrease) | | :------------------------------------------------------------ | :--- | :--- | :------------------ | | Cash provided by (used for) operating activities | $17,705 | $2,675 | $15,030 | | Cash provided by (used for) investing activities | $(3,989) | $(5,004) | $1,015 | | Cash provided by (used for) financing activities | $(7,748) | $(15,841) | $8,093 | - Net cash provided by operating activities increased significantly due to improved net loss, better inventory management, and a decrease in accounts receivable (Days Sales Outstanding improved to **75 days** at June 30, 2025, from **91 days** at June 30, 2024)[162](index=162&type=chunk) Material Cash Commitments (in thousands) | Material Cash Commitments (in thousands) | Total | Less than 1 year | 1 - 3 years | 4 - 5 years | After 5 years | | :--------------------------------------- | :---- | :--------------- | :---------- | :---------- | :------------ | | Credit Lines | $30,155 | $30,155 | $0 | $0 | $0 | | Inventory purchases | $9,263 | $9,263 | $0 | $0 | $0 | | Operating lease obligations | $14,403 | $4,335 | $6,166 | $1,735 | $2,167 | | Property, plant, and equipment purchases | $593 | $593 | $0 | $0 | $0 | | Software license | $6,582 | $1,020 | $2,355 | $2,566 | $641 | | Total material cash commitments | $60,996 | $45,366 | $8,521 | $4,301 | $2,808 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Exposed to market risks from interest rate and foreign currency fluctuations, with potential impacts on net income [Interest Rate Risk](index=35&type=section&id=Interest%20Rate%20Risk) Exposed to interest rate risk on variable-rate credit lines; a 100 basis point increase impacts net income by $0.2 million annually - A **100 basis point** increase in interest rates would have an approximately **$0.2 million** annual impact on net income based on outstanding Credit Lines balance at June 30, 2025[169](index=169&type=chunk) [Foreign Currency Exchange Rate Risk](index=35&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) Faces foreign currency risk, primarily from Chinese Yuan Renminbi; a 10% fluctuation could impact Q3 2025 net income by $3.5 million - The most significant foreign currency exposure is to the Chinese Yuan Renminbi, as it is the functional currency of the PRC-based factory where most products originate[172](index=172&type=chunk) - The company is generally a net payor of CNY, MXN, VND, INR, HKD, JPY, and KRW, benefiting from a stronger U.S. Dollar. For EUR, GBP, and BRL, it is generally a net receiver, benefiting from a weaker U.S. Dollar[172](index=172&type=chunk) - A **10%** fluctuation in exchange rates for key currencies (CNY, EUR, GBP, MXN, INR, HKD, BRL, JPY, KRW, VND) relative to the U.S. Dollar could fluctuate net income in Q3 2025 by approximately **$3.5 million**[175](index=175&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control - The company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[177](index=177&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[178](index=178&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates by reference the detailed discussion of litigation matters from Note 12 to the Consolidated Financial Statements - The discussion of legal proceedings is incorporated by reference from Note 12 to the Consolidated Financial Statements[179](index=179&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) Directs readers to review risk factors in the 2024 Form 10-K and subsequent reports, as they may affect actual results - Readers should carefully consider the risk factors discussed in 'Part I, Item 1A: Risk Factors' of the 2024 Form 10-K and subsequent periodic reports, as they may cause actual results to differ materially from forward-looking statements[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Repurchased 60,139 shares for tax withholding, with further repurchases authorized under the Share Repurchase Program Treasury Stock Repurchases (Three Months Ended June 30) | Period | Total Number of Shares Purchased | Weighted Average Price Paid per Share | | :----- | :------------------------------- | :------------------------------------ | | April 1, 2025 - April 30, 2025 | 17,929 | $4.71 | | May 1, 2025 - May 31, 2025 | 24,588 | $6.51 | | June 1, 2025 - June 30, 2025 | 17,622 | $6.80 | | Total | 60,139 | $6.06 | - The repurchased shares were primarily tendered by employees to satisfy tax withholding obligations for restricted share vesting[183](index=183&type=chunk) - As of May 6, 2025, the Board authorized management to continue repurchasing up to the lesser of **$4.0 million** worth of common stock or **778,362 shares** under the Share Repurchase Program until August 6, 2025[183](index=183&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[182](index=182&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including various agreements, certifications, and Inline XBRL documents - Exhibits include cooperation agreements, credit agreements, certifications from the CEO and CFO (Rule 13a-14(a) and Section 1350), and Inline XBRL documents[186](index=186&type=chunk) [Signatures](index=39&type=section&id=Signatures) Report signed by Bryan M. Hackworth, Chief Financial Officer, on behalf of Universal Electronics Inc. on August 7, 2025 - The report was signed by Bryan M. Hackworth, Chief Financial Officer, on August 7, 2025[189](index=189&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2025, net sales increased by 8% to $97.7 million compared to $90.5 million in Q2 2024 [16] - Gross profit was $29.2 million, representing 29.9% of sales, up from 28.3% in Q2 2024 [18] - Operating income improved to $2.9 million from an operating loss of $1.1 million in Q2 2024 [19] - Net income for Q2 2025 was $2.4 million or $0.18 per diluted share, compared to a net loss of $1.2 million or $0.09 per diluted share in Q2 2024 [19] - Year-to-date operating cash flow was strong at almost $18 million, achieving a net cash position of $4.1 million for the first time since December 2021 [8][20] Business Line Data and Key Metrics Changes - Connected Home sales grew by 46% to $34.1 million in Q2 2025, driven by new orders and product launches [16][18] - Home Entertainment sales decreased by 5% to $63.6 million, reflecting lower demand in Latin America [17] - The company expects Connected Home sales for the full year 2025 to range from $30 million to $34 million, representing growth of 14% to 29% [21] Market Data and Key Metrics Changes - The company noted that customer orders in the Connected Home channel can be inconsistent, impacting quarterly revenue forecasts [10] - Home Entertainment is expected to continue facing uncertainty over the next 12 to 24 months, with anticipated declines into 2026 [11] Company Strategy and Development Direction - The company is focused on nurturing long-term growth in the Connected Home sector while optimizing its operating model [24] - Plans to close the facility in Mexico by the end of the year to optimize its footprint and respond to market changes [12] - The company aims to protect its intellectual property and is actively engaged in litigation against Roku [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term vision for growth in Connected Home, despite short-term variability in order demand [10] - The company anticipates total revenue to decline in the third and fourth quarters compared to the same periods last year, due to inconsistencies in Connected Home and pressures in Home Entertainment [11] - Management is optimistic about maintaining profitability in the fourth quarter despite expected sequential declines in sales [23] Other Important Information - The company has made significant progress in improving its cost structure and working capital [20] - Adjusted non-GAAP metrics are used for budget planning and operational decisions, providing a clearer view of core performance [4][5] Q&A Session Summary Question: Comments on weakness in Latin America and North American business outlook - Management noted that trends in North America are stable but offset by challenges in Latin America and Europe [27][28] Question: Customer concentration in the quarter - Two customers accounted for over 10% of sales: Daikin at 18.7% and Comcast at 12.2% [29] Question: Historical performance in Q4 for Connected Home and Home Entertainment - Management provided Q3 figures but did not disclose specific Q4 historical data, indicating expected sequential declines for both segments [30][32] Question: Impact of tariffs on business units - Management stated they are monitoring tariff impacts and are confident in managing through the current environment without significant cost absorption [36][38]

Executive Summary & Business Highlights [Second Quarter 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Overview) UEI achieved strong Q2 2025 results, with **46% Connected Home revenue growth** boosting gross margin and operating cash flow, and reaching a net cash position for the first time since December 2021 - Connected Home business revenue grew **46%**, driving strong gross margin and operating cash flow[2](index=2&type=chunk) - The company achieved a net cash position for the first time since December 2021, reflecting an improved balance sheet[2](index=2&type=chunk) [Strategic Initiatives and Operational Changes](index=1&type=section&id=Strategic%20Initiatives%20and%20Operational%20Changes) The company is strategically investing in profitable growth areas like Connected Home, expanding into new European and North American markets, and optimizing production by closing its Mexico factory due to declining Home Entertainment volumes and increased efficiency at its Vietnam facility - Investments are being allocated to profitable growth areas like Connected Home, with new customer expansion in European and North American markets[2](index=2&type=chunk) - The Mexico factory will close to optimize production, addressing declining Home Entertainment volumes and improved efficiency at the Vietnam facility[2](index=2&type=chunk) Financial Results for Three Months Ended June 30, 2025 vs 2024 [GAAP Financials (Q2 2025 vs Q2 2024)](index=1&type=section&id=GAAP%20Financials%20(Q2%202025%20vs%20Q2%202024)) In Q2 2025, GAAP net sales increased year-over-year, primarily due to strong Connected Home growth, as the company reversed an operating loss to an operating income and significantly reduced net loss and loss per share | Metric | Q2 2025 (GAAP) | Q2 2024 (GAAP) | Year-over-Year Change | | :-------------------------------- | :------------- | :------------- | :-------------------- | | Net Sales | $97.7 million USD | $90.5 million USD | +$7.2 million USD | | Gross Margin | 29.9% | 28.7% | +1.2 percentage points | | Operating Income (Loss) | $1.0 million USD | $(4.5) million USD | +$5.5 million USD | | Net Loss | $(2.9) million USD | $(8.2) million USD | +$5.3 million USD | | Loss Per Share | $(0.22) | $(0.63) | +$0.41 | [Adjusted Non-GAAP Financials (Q2 2025 vs Q2 2024)](index=1&type=section&id=Adjusted%20Non-GAAP%20Financials%20(Q2%202025%20vs%20Q2%202024)) After adjusting for non-GAAP items, Q2 2025 saw the company achieve operating income and net income, a stark contrast to losses in the prior year, reflecting significant improvements in core business operational efficiency | Metric | Q2 2025 (Adjusted Non-GAAP) | Q2 2024 (Adjusted Non-GAAP) | Year-over-Year Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Gross Margin | 29.9% | 28.7% | +1.2 percentage points | | Operating Income (Loss) | $2.9 million USD | $(1.1) million USD | +$4.0 million USD | | Net Income (Loss) | $2.4 million USD | $(1.2) million USD | +$3.6 million USD | | Diluted Earnings (Loss) Per Share | $0.18 | $(0.09) | +$0.27 | [Net Sales by Channel (Q2 2025 vs Q2 2024)](index=1&type=section&id=Net%20Sales%20by%20Channel%20(Q2%202025%20vs%20Q2%202024)) In Q2 2025, Connected Home channel sales significantly increased by **46.4%**, while Home Entertainment channel sales experienced a slight decrease of **5.4%** | Channel | Q2 2025 Sales | Q2 2024 Sales | Year-over-Year Change | | :---------------- | :------------ | :------------ | :-------------------- | | Connected Home | $34.1 million USD | $23.3 million USD | +46.4% | | Home Entertainment | $63.6 million USD | $67.2 million USD | -5.4% | Financial Results for Six Months Ended June 30, 2025 vs 2024 [GAAP Financials (H1 2025 vs H1 2024)](index=1&type=section&id=GAAP%20Financials%20(H1%202025%20vs%20H1%202024)) In H1 2025, GAAP net sales increased, and both operating loss and net loss significantly narrowed, indicating an overall improvement in financial performance | Metric | H1 2025 (GAAP) | H1 2024 (GAAP) | Year-over-Year Change | | :-------------------------------- | :------------- | :------------- | :-------------------- | | Net Sales | $190.0 million USD | $182.4 million USD | +$7.6 million USD | | Gross Margin | 29.1% | 28.5% | +0.6 percentage points | | Operating Loss | $(2.7) million USD | $(11.4) million USD | +$8.7 million USD | | Net Loss | $(9.2) million USD | $(16.8) million USD | +$7.6 million USD | | Loss Per Share | $(0.70) | $(1.30) | +$0.60 | [Adjusted Non-GAAP Financials (H1 2025 vs H1 2024)](index=1&type=section&id=Adjusted%20Non-GAAP%20Financials%20(H1%202025%20vs%20H1%202024)) Adjusted non-GAAP data for H1 2025 shows a shift from operating loss to operating income and a substantial reduction in net loss, reflecting enhanced core business profitability | Metric | H1 2025 (Adjusted Non-GAAP) | H1 2024 (Adjusted Non-GAAP) | Year-over-Year Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Gross Margin | 29.1% | 28.5% | +0.6 percentage points | | Operating Income (Loss) | $1.4 million USD | $(4.6) million USD | +$6.0 million USD | | Net Income (Loss) | $0.8 million USD | $(4.6) million USD | +$5.4 million USD | | Diluted Earnings (Loss) Per Share | $0.06 | $(0.36) | +$0.42 | [Net Sales by Channel (H1 2025 vs H1 2024)](index=1&type=section&id=Net%20Sales%20by%20Channel%20(H1%202025%20vs%20H1%202024)) In H1 2025, Connected Home channel sales increased by **38.5%**, while Home Entertainment channel sales decreased by **7.9%** | Channel | H1 2025 Sales | H1 2024 Sales | Year-over-Year Change | | :---------------- | :------------ | :------------ | :-------------------- | | Connected Home | $65.8 million USD | $47.5 million USD | +38.5% | | Home Entertainment | $124.2 million USD | $134.9 million USD | -7.9% | Balance Sheet [Key Balance Sheet Items (June 30, 2025 vs Dec 31, 2024)](index=5&type=section&id=Key%20Balance%20Sheet%20Items%20(June%2030%2C%202025%20vs%20Dec%2031%2C%202024)) As of June 30, 2025, the company's cash and cash equivalents increased, and total liabilities decreased, optimizing the balance sheet structure | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------- | :------------ | :----------- | :-------------------- | | Cash and Cash Equivalents | $34.3 million USD | $26.8 million USD | +$7.5 million USD | | Total Current Assets | $227.1 million USD | $242.5 million USD | -$15.4 million USD | | Total Assets | $304.1 million USD | $323.4 million USD | -$19.3 million USD | | Total Current Liabilities | $140.1 million USD | $158.3 million USD | -$18.2 million USD | | Total Liabilities | $151.4 million USD | $170.2 million USD | -$18.8 million USD | | Total Stockholders' Equity | $152.8 million USD | $153.1 million USD | -$0.3 million USD | Cash Flows [Cash Flow Activities (Six Months Ended June 30, 2025 vs 2024)](index=7&type=section&id=Cash%20Flow%20Activities%20(Six%20Months%20Ended%20June%2030%2C%202025%20vs%202024)) In H1 2025, net cash from operating activities significantly increased, while net cash used in investing and financing activities decreased, leading to a substantial rise in cash and cash equivalents at the end of the period | Activity | H1 2025 | H1 2024 | Change | | :-------------------------------------- | :---------- | :---------- | :-------------------- | | Net Cash Provided by Operating Activities | $17.7 million USD | $2.7 million USD | +$15.0 million USD | | Net Cash Used in Investing Activities | $(4.0) million USD | $(5.0) million USD | +$1.0 million USD | | Net Cash Used

Core Insights - Universal Electronics (UEIC) is currently rated 2 (Buy) by Zacks Rank, indicating a positive earnings outlook, while Hayward Holdings, Inc. (HAYW) is rated 3 (Hold) [3] - Value investors assess various traditional metrics to determine if a stock is undervalued, including P/E ratio, P/S ratio, earnings yield, and cash flow per share [4] Valuation Metrics - UEIC has a forward P/E ratio of 12.98, significantly lower than HAYW's forward P/E of 20.06, suggesting that UEIC may be undervalued [5] - The PEG ratio for UEIC is 0.87, indicating a favorable growth outlook compared to HAYW's PEG ratio of 2.85, which suggests higher expected growth relative to its price [5] - UEIC's P/B ratio stands at 0.59, while HAYW's P/B ratio is 2.18, further supporting the notion that UEIC is a more attractive value option [6] - Overall, UEIC has a Value grade of A, while HAYW has a Value grade of C, highlighting UEIC's superior valuation metrics and earnings outlook [6]