Universal Electronics(UEIC) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements (Unaudited) Unaudited Q1 2025 consolidated financials report a net loss of $6.3 million, an improvement from the prior year, with total assets at $310.6 million and $9.0 million cash from operations Consolidated Balance Sheets Total assets decreased to $310.6 million as of March 31, 2025, driven by lower receivables and inventories, while liabilities also decreased to $160.6 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $27,389 | $26,783 | | Accounts receivable, net | $106,007 | $114,182 | | Inventories | $77,455 | $79,355 | | Total current assets | $232,154 | $242,494 | | Total assets | $310,611 | $323,354 | | Liabilities & Equity | | | | Accounts payable | $69,083 | $72,031 | | Lines of credit | $31,015 | $36,960 | | Total current liabilities | $149,329 | $158,291 | | Total liabilities | $160,642 | $170,249 | | Total stockholders' equity | $149,969 | $153,105 | Consolidated Statements of Operations Q1 2025 net sales were $92.3 million, with an operating loss of $3.8 million, a significant improvement from Q1 2024, narrowing the net loss to $6.3 million Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $92,326 | $91,900 | | Gross profit | $26,083 | $25,988 | | Operating income (loss) | $(3,754) | $(6,908) | | Net income (loss) | $(6,274) | $(8,649) | | Basic & Diluted EPS | $(0.48) | $(0.67) | - Operating expenses were lower in Q1 2025, with R&D expenses at $7.2 million (vs. $7.8 million in Q1 2024) and SG&A at $22.6 million (vs. $24.0 million in Q1 2024). No factory restructuring charges were incurred in Q1 2025, compared to $1.1 million in Q1 2024[11] Consolidated Statements of Comprehensive Income (Loss) Q1 2025 comprehensive loss improved to $4.7 million from $10.2 million, driven by a smaller net loss and a positive foreign currency translation adjustment Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (loss) | $(6,274) | $(8,649) | | Change in foreign currency translation adjustment | $1,578 | $(1,591) | | Comprehensive income (loss) | $(4,696) | $(10,240) | Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $150.0 million by March 31, 2025, primarily due to a $6.3 million net loss, partially offset by currency adjustments and stock-based compensation - Key changes in equity for Q1 2025 included a net loss of $6.3 million, a $1.6 million positive currency translation adjustment, and the purchase of $0.4 million in treasury shares[16] Consolidated Statements of Cash Flows Q1 2025 operating activities generated $9.0 million in cash, a significant improvement, leading to a $0.6 million increase in cash and cash equivalents overall Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $8,984 | $(2,775) | | Net cash provided by (used for) investing activities | $(1,907) | $(2,366) | | Net cash provided by (used for) financing activities | $(6,383) | $(10,230) | | Net increase (decrease) in cash and cash equivalents | $606 | $(15,837) | Notes to Consolidated Financial Statements Notes detail revenue disaggregation, customer concentrations, debt covenants, restructuring, and legal proceedings, highlighting connected home channel growth and compliance with debt covenants Net Sales by Channel (in thousands) | Channel | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Connected home | $31,729 | $24,171 | | Home entertainment | $60,597 | $67,729 | | Total net sales | $92,326 | $91,900 | - Daikin Industries Ltd. and Comcast Communications were significant customers, accounting for 17.7% and 11.2% of net sales, respectively, in Q1 2025[40] - The company completed its Asia factory restructuring in Q4 2024. The Mexico factory restructuring is scheduled to be completed in Q2 2025, with no further expenses expected from either plan[80][81] - The company is involved in ongoing litigation with Roku Inc. and has an accrued legal judgment of $4.2 million related to a lawsuit with an employment agency in the PRC (Tongshun Matters)[84][91] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes a 0.5% sales increase to connected home growth, improved operating loss to $3.8 million due to reduced expenses, and confirms sufficient liquidity for the next twelve months - Net sales in the connected home channel grew to $31.7 million from $24.2 million YoY, driven by shipments to large climate control and home automation customers[133] - Net sales in the home entertainment channel decreased to $60.6 million from $67.7 million YoY, primarily due to lower demand for subscription broadcasting products, particularly in Latin America[134] - SG&A expenses decreased by $1.4 million YoY, driven by lower professional services costs ($0.6 million), favorable currency effects ($0.5 million), and reduced payroll from lower headcount ($0.3 million)[137] - The company anticipates that current cash, cash flow from operations, and available borrowing will be sufficient to cover cash needs for at least the next twelve months[142] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate and foreign currency risks, with a 100 basis point rate increase impacting net income by $0.2 million and a 10% adverse FX fluctuation impacting Q2 net income by $4.9 million - A 100 basis point increase in interest rates would have an approximately $0.2 million annual impact on net income based on the outstanding credit line balance at March 31, 2025[157] - The company's most significant foreign currency exposure is to the Chinese Yuan Renminbi, as it is the functional currency of its PRC-based factory[159] - A 10% adverse fluctuation in key foreign currency exchange rates relative to the U.S. Dollar is estimated to impact net income in the second quarter of 2025 by approximately $4.9 million[163] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[165] - No material changes to the internal control over financial reporting were identified during the most recent fiscal quarter[166] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various lawsuits arising from business operations, with detailed information provided in Note 12 of the financial statements - This section incorporates by reference the discussion of litigation matters from Note 12 of the financial statements, which includes details on cases involving Roku and Tongshun Company[167][84][91] Item 1A. Risk Factors No new significant risk factors were reported this quarter; readers are directed to the risk factors disclosed in the 2024 Annual Report on Form 10-K - The report refers to the risk factors discussed in the company's 2024 Form 10-K, indicating no material changes or additions during the quarter[168] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 40,710 shares at an average price of $9.41 for employee tax obligations, with 778,362 shares remaining available under the repurchase program Share Repurchases for Q1 2025 | Period | Total Shares Purchased | Weighted Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | — | $— | | Feb 2025 | 40,710 | $9.41 | | Mar 2025 | — | $— | | Total | 40,710 | $9.41 | - The repurchased shares in February were tendered by employees to cover tax obligations from vesting restricted stock[169] - As of May 6, 2025, the Board authorized the continuation of the Share Repurchase Program, allowing for the repurchase of up to the lesser of $4.0 million or the remaining 778,362 shares until August 6, 2025[97][169] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025[170] Item 6. Exhibits The report lists filed exhibits, including amendments to credit agreements, transition and cooperation agreements, and officer certifications, along with Inline XBRL documents - Key exhibits include the Ninth Amendment to the Second Amended and Restated Credit Agreement, a Transition Agreement with Paul D. Arling, and a Cooperation Agreement with Kent Lake Partners LP[173] - Certifications by the Chief Financial Officer pursuant to Rule 13a-14(a) and Section 1350 are included as exhibits[173]