UNIVERSAL ELECTRONICS INC

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 restructuring charges, as described in Note 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", "UEI," "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, 2025 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, 2024.

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 and intangible assets, 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

See Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 for a summary of our significant accounting policies.

Recently Adopted Accounting Pronouncements

None.

Accounting Pronouncements Not Yet Effective

In November 2024, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2024-03, "Income Statement – Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses." This guidance requires additional disclosures by disaggregating the costs and expense line items that are presented on the face of the consolidated statements of operations. This guidance is effective for annual periods beginning in 2027 and interim periods beginning in 2028, with early adoption permitted. This guidance requires a public company to apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of adopting this guidance on our disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes – Improvements to Tax Disclosures." The guidance expands income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, this guidance requires that all entities disaggregate disclosures by jurisdiction on the amount of income taxes paid (net of refunds received), income or loss from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations. This guidance is effective for annual periods beginning after December 15, 2024, and therefore will be effective beginning with our financial statements issued for the year ending December 31, 2025. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements and 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:

Note 3 —Revenue and Accounts Receivable, Net

Revenue Details

The pattern of revenue recognition was as follows:

Our net sales to external customers by channel were as follows:

(1)The connected home channel represents climate control, smart home and security product sales sold primarily to HVAC, security, home automation and home appliance customers.

(2)The home entertainment channel represents entertainment-related product sales sold primarily to video service providers, consumer electronics original equipment manufacturers ("OEMs") and retailers. It also includes sales associated with intellectual property licensing and our cloud-based software solution.

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

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

Accounts Receivable, Net

Accounts receivable, net were as follows:

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

(2)Accounts receivable, net at December 31, 2023 was $112.6 million.

Allowance for Credit Losses

Changes in the allowance for credit losses were as follows:

Contract Assets

Contract assets were $7.6 million and $10.3 million at June 30, 2025 and December 31, 2024, respectively. The change in balances between periods is due to the fluctuation of custom product inventory balances for which we have an enforceable right to payment for performance completed to date.

Contract Liabilities

We have current and non-current contract liability balances primarily consisting of cash received in advance of providing our cloud-based software services. Contract liabilities are included within other accrued liabilities and other long-term liabilities in our consolidated balance sheets.

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

Significant Customers

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

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

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

Trade receivables associated with this significant customer that totaled more than 10% of our accounts receivable, net was as follows:

(1) Trade receivables associated with this customer did not total more than 10% of our accounts receivable, net for the indicated period.

Note 4 —Inventories

Inventories were as follows:

Significant Supplier

There were no purchases from suppliers that totaled more than 10% of our total inventory purchases for the three and six months ended June 30, 2025 and 2024.

There were no trade payable balances to suppliers that totaled more than 10% of our total accounts payable at June 30, 2025 and December 31, 2024.

Note 5 —Long-lived Tangible Assets

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

PP&E are shown net of accumulated depreciation of $163.6 million and $156.8 million at June 30, 2025 and December 31, 2024, respectively.

Depreciation expense was $2.4 million and $3.3 million for the three months ended June 30, 2025 and 2024, respectively. Depreciation expense was $5.1 million and $6.7 million for the six months ended June 30, 2025 and 2024, respectively.

Note 6 —Intangible Assets, Net

Intangible Assets, Net

The components of intangible assets, net were as follows:

(1)This table excludes the gross value of fully amortized intangible assets totaling $51.8 million and $49.3 million at June 30, 2025 and December 31, 2024, 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:

Estimated future annual amortization expense related to our intangible assets at June 30, 2025, was as follows:

Note 7 —Leases

We have entered into various operating lease agreements for automobiles, offices and manufacturing facilities throughout the world. At June 30, 2025, our operating leases had remaining lease terms of up to 35 years, including any reasonably probable extensions.

Lease balances within our consolidated balance sheets were as follows:

Operating lease expense, operating lease cash flows and supplemental cash flow information were as follows:

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

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 sheets at June 30, 2025. The reconciliation excludes short-term leases that are not recorded in our consolidated balance sheets.

At June 30, 2025, we did not have any operating leases that had not yet commenced.

Note 8 —Lines of Credit

U.S. Line of Credit

On December 16, 2024, we executed an amendment to our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association, which provides for a revolving line of credit ("U.S. Credit Line") through April 30, 2026. We expect to renew the U.S. Credit Line 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 U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures.

The U.S. Credit Line has a maximum availability up to $75.0 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 U.S. Credit Line total availability. At June 30, 2025, the U.S. Credit Line total availability was $53.6 million based upon the AR Ratio. At July 15, 2025, the U.S. Credit Line total availability was $57.1 million based upon the AR Ratio.

Amounts available for borrowing under the U.S. Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at June 30, 2025 and December 31, 2024.

All obligations under the U.S. 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 U.S. Credit Line by our wholly-owned subsidiary, Universal Electronics BV.

Under the Second Amended Credit Agreement, we pay interest on the U.S. Credit Line based on the Secured Overnight Financing Rate ("SOFR") plus a 3.00% margin. The amendment also contains a facility fee of 0.25%. The interest rate in effect at June 30, 2025 and December 31, 2024 were 7.29% and 7.31%, respectively.

The Second Amended Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. Subsequent to December 31, 2024, our covenants are based upon a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. We were in compliance with the covenants and conditions of the Second Amended Credit Agreement at June 30, 2025.

At June 30, 2025 and December 31, 2024, we had $19.0 million and $26.0 million outstanding under the U.S. Credit Line, respectively. At June 30, 2025, our remaining availability under our U.S. Credit Line was $34.6 million. Our total interest expense on borrowings under the U.S. Credit Line was $0.5 million and $1.1 million during the three months ended June 30, 2025 and 2024, respectively. Our total interest expense on borrowings under the U.S. Credit Line was $1.1 million and $2.4 million during the six months ended June 30, 2025 and 2024, respectively. Our total facility fee expense under the U.S. Credit Line was $47.4 thousand and $63.2 thousand during the three months ended June 30, 2025 and 2024, respectively. Our total facility fee expense under the U.S. Credit Line was $94.3 thousand and $76.4 thousand during the six months ended June 30, 2025 and 2024, respectively.

China Line of Credit

In August 2024, our subsidiary, Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), executed a Line of Credit Agreement (the "Line of Credit Agreement") with the Bank of China, which provides for a revolving line of credit ("China Credit Line"). As a continuation of the agreement, on July 30, 2025, we executed an amendment to the Line of Credit Agreement, which extends the term of the China Credit Line to July 16, 2026. We expect to renew our China Credit Line 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 China Credit Line may be used for working capital purposes.

At June 30, 2025, the China Credit Line had a maximum availability up to RMB 80.0 million (approximately $11.2 million), subject to meeting certain financial conditions. At July 30, 2025, as part of the executed amendment, the China Credit Line maximum availability increased to RMB 130.0 million (approximately $18.1 million).

Amounts available for borrowing under the China Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at June 30, 2025 and December 31, 2024.

All obligations under the China Credit Line are secured by GTY's buildings and land use rights.

Under the Line of Credit Agreement, we pay interest on the China Credit Line based on the one-year rate from the National Interbank Funding Center less a 0.1% margin. There are no associated commitment fees on the China Credit Line. The interest rate in effect at June 30, 2025 and December 31, 2024 was 3.07%.

The Line of Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. Our covenants are based on a debt to asset ratio and a dividends paid to net income ratio. We were in compliance with the covenants and conditions of the Line of Credit Agreement at and during the six months ended June 30, 2025.

At June 30, 2025 and December 31, 2024, we had RMB 80.0 million (approximately $11.2 million) outstanding under the China Credit Line. At June 30, 2025, we had no remaining availability under our China Credit Line. Our total interest expense on borrowings under the China Credit Line was RMB 0.6 million (approximately $0.1 million) during the three months ended June 30, 2025. Our total interest expense on borrowings under the China Credit Line was RMB $1.2 million (approximately $0.2 million) during the six months ended June 30, 2025.

Note 9 —Income Taxes

We recorded income tax expense of $1.8 million and $2.8 million for the three months ended June 30, 2025 and 2024, respectively. We recorded income tax expense of $4.0 million and $3.5 million for the six months ended June 30, 2025 and 2024, respectively. The income tax expense recorded for the six months ended June 30, 2025 and June 30, 2024 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, 2025 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, 2024, 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 income in making this assessment. At December 31, 2024, we had a three-year cumulative operating loss for our U.S. operations and have accordingly provided a valuation allowance on our U.S. federal and state deferred tax assets. During the three months ended June 30, 2025, there was no change to our U.S. valuation allowance position.

At June 30, 2025, we had gross unrecognized tax benefits of $3.8 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, 2025 and December 31, 2024 and are included in the unrecognized tax benefits.

On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act, was enacted in the United States H.R. 1 includes significant provisions, including the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017, modifications to the U.S. international tax framework, and the restoration of favorable tax treatment for certain business provisions. This legislation has multiple effective dates, with certain provisions becoming effective beginning in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements.

Note 10 —Accrued Compensation

The components of accrued compensation were as follows:

(1)Includes $0.2 million of accrued severance expenses at June 30, 2025 related to our Mexico manufacturing footprint optimization efforts. Includes $0.8 million and $0.1 million of accrued severance expenses at December 31, 2024 related to our Mexico and Asia manufacturing footprint optimization efforts, respectively. See Note 12 for further information related to our restructuring activities.

(2)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, 2025 and December 31, 2024.

Note 11 —Other Accrued Liabilities

The components of other accrued liabilities were as follows:

(1)This amount relates to the judgment of a lawsuit with an employment agency in the PRC. See Note 12 for further information related to this matter.

(2)Includes $0.3 million and $0.1 million at June 30, 2025 and December 31, 2024, respectively, associated with the purchase of property, plant and equipment.

Note 12 —Commitments and Contingencies

Purchase Commitments

We have entered into various inventory and property, plant and equipment related purchase agreements with suppliers. Certain of these agreements have provisions for a binding forecast (inventory) or non-cancellable purchase orders (inventory and PP&E).

Our non-cancellable purchase commitments were as follows:

These amounts are expected to be paid within the next twelve months.

Product Warranties

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

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 shut down our southwestern China factory beginning in the third quarter of 2023. In addition, during the fourth quarter of 2024, we stopped production activities and shut downone of our eastern PRC factories. We incurredno severance or other exit costs during the six months ended June 30, 2025 and $0.1 million of severance and $0.1 million of other exit costs for 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 $4.6 million in factory restructuring charges since September 2023. This factory restructuring was completed in the fourth quarter of 2024 and we do not expect to incur any further expenses associated with this plan.

Mexico

As part of our plan to restructure and optimize our factory footprint, we have worked 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 three months ended June 30, 2024. We incurredno severance or other exit costs during the three months ended June 30, 2025 and $0.9 million of severance and $0.6 million of other exit costs during the three months ended June 30, 2024. We incurredno severance or other exit costs during the six months ended June 30, 2025 and $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 have recognized a total of $3.0 million in factory restructuring charges since January 2024.

Restructuring liabilities are included in accrued compensation, accounts payable and other accrued liabilities on our consolidated balance sheets. Total restructuring activities for the three months ended June 30, 2025 are as follows:

We have continued to evaluate our global manufacturing footprint as part of our overall cost optimization and return to profitability strategy. In late July 2025, our Board approved a plan to shut down our Mexico manufacturing facility. We expect this shutdown to be completed by the end of 2025 with material shutdown-related expenses recorded throughout the remainder of the year. No amounts associated with this shutdown have been accrued at June 30, 2025.

Litigation

Roku Matters

UEI and Roku Inc. ("Roku") and certain of its customers have been in litigation in various forums since 2018 — i.e., two actions in the Central District of California ("CDCA") beginning in 2018 and 2020 including related cases against certain of Roku's customers (collectively, the "CDCA cases"), the International Trade Commission ("ITC"), the Patent and Trademark Office ("PTO") (ex parte reexams) and the Patent and Trademark Appeals Board ("PTAB"). The CDCA cases have all been stayed on various grounds since 2019. The 2018 case was stayed in November 2019 pending resolution of Roku initiated PTO and PTAB matters, all of which have since been resolved.

The 2020 case was also immediately stayed due to UEI's related ITC action against Roku, in which UEI ultimately prevailed when on July 9, 2021, the Administrative Law Judge ("ALJ") issued an initial determination finding Roku in violation of Section 337. The Commission issued a final determination on November 10, 2021, affirming the ALJ’s finding. The Commission then issued a limited exclusion order and cease and desist order against Roku, which went into effect following the expiration of the Presidential Review Period on January 9, 2022. The Federal Circuit affirmed on January 19, 2024. Following UEI's win and affirmance by the Federal Circuit, Roku sought rehearingen banc and sought cert from the Supreme Court on a domestic industry question. On January 13, 2025, the Supreme Court denied cert.

While this ITC matter has been finally resolved and Roku has no more ability to appeal, we have agreed to continue the stay of the CDCA cases pending the outcome of one final PTAB action involving one of our patents. UEI and Roku participated in a hearing on July 28, 2025 regarding the consolidation of the 2018 and 2020 cases, the stay of the cases, and amending the claims that UEI would be allowed to move forward with a consolidated case by the court if unstayed. On July 29, 2025 the Judge issued an order lifting the stay, consolidating the cases and allowing UEI to move forward on 25 claims in the case. The Court set a scheduling conference for the consolidated district court case on September 29, 2025.

Roku also filed its own retaliatory ITC action against UEI and certain of our customers ontwo patents it purchased for this purpose. Roku’s action failed when on June 24, 2022, the ALJ found one of Roku’s patents to be invalid as indefinite. Thereafter, on June 28, 2022, the ALJ issued its initial determination ("ID") fully exonerating us and our customers finding Roku’s second patent invalid and that Roku failed to establish the requisite domestic industry and thus no violation of the Tariff Act. Roku and UEI filed petitions to appeal certain portions of the ID. 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. Further, on October 23, 2023, the PTAB issued its Final Written Decision invalidating all of Roku's infringement claims. Roku also filed an appeal of this decision. Oral argument occurred May 9, 2025. On June 17, 2025, the Federal Circuit affirmed the PTAB decision that invalidated the Roku patent and also remanded the case to the PTAB with respect toone remaining claim. We expect a decision with respect to theone remaining claim from the PTAB in late 2025 or early 2026. As a companion to its ITC request, on April 8, 2021, Roku also filed a lawsuit against us in Federal CDCA alleging that we are infringing the sametwo patents they alleged were infringed in the ITC investigation explained above. This District Court case has been stayed pending their ITC case, and will likely continue to be stayed pending the conclusion of Roku's appeal of their 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 & 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 the PRC under Lists 3 and 4A.

On January 8, 2025, the U.S. Court of Appeals for the Federal Circuit ("USCAFC") heard oral arguments on the appeal by the lead plaintiff from the CIT March 17, 2023 decision in which 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. A decision from the USCAFC is expected by the end of 2025.

Tongshun Matters

On January 23, 2024, Tongshun Company ("TS") filed suit againstone of our subsidiaries, Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), claiming among other things, breach of an employment agency, and as is standard in Chinese litigation matters such as these, TS requested the Court to order a hold on GTY's bank account for the total claimed amount. On February 8, 2024, we deposited RMB 35.0 million (approximately $4.9 million) with the court. On July 12, 2024, we were refunded RMB 10.0 million (approximately $1.4 million) of the original deposit. This deposit was included in prepaid expenses and other current assets on our consolidated balance sheets at December 31, 2024. On December 20, 2024, the Jiangsu Province Baoying People’s Court rendered a decision in favor of TS and ordered a judgment of RMB 27.4 million (approximately $3.8 million) plus interest and costs totaling approximately RMB 30.4 million (approximately $4.2 million). We recorded an accrual of RMB 30.4 million (approximately $4.2 million) for this judgment during the fourth quarter of 2024. This accrual is included in other accrued expenses on our consolidated balance sheets at December 31, 2024. We filed an appeal of this judgment and on May 20, 2025, the Jiangsu Province Yangzhou Intermediate People's Court affirmed the lower court’s decision in its entirety. The full judgment amount of RMB 30.4 million (approximately $4.2 million) was paid to TS during the second quarter of 2025. Both the deposit and accrual have been released from our consolidated balance sheets at June 30, 2025. GTY has the right to make a further and final appeal to the highest court of the province. GTY has not yet determined whether it will pursue an appeal.

IT Convergence, Inc. Matters

In mid-2024, an arbitration proceeding commenced between UEI and IT Convergence, Inc. ("IT Convergence"). IT Convergence has alleged misappropriation of confidential information and theft of trade secrets. We have denied these claims and have filed a counterclaim asserting breach of contract. Fact discovery, including document production and depositions, has been completed. Opening briefs and a pre-hearing conference have been completed in July 2025. The arbitration hearing is scheduled to take place in early August 2025, and a decision from the arbitrator is expected in early September 2025.

Other Litigation Matters

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 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 of Directors approved a share repurchase program with an effective date of November 7, 2023 (the "Share Repurchase Program"). Pursuant to the Share Repurchase Program, we are authorized to repurchase up to 1,000,000 shares of our common stock and to date, we have repurchased 221,638 shares of our common stock. On May 6, 2025, our Board of Directors authorized management to continue to execute under the Share Repurchase Program. As a result, pursuant to this authorization, we may, from time to time, until August 6, 2025, repurchase up to the lesser of $4.0 million worth of our common stock or 778,362 shares (the total remaining number shares available for repurchase under the Share Repurchase Program) in privately negotiated and/or open-market transactions, including pursuant to plans complying with Rule 10b5-1 promulgated under the Securities Exchange Act of 1934. Neither this authorization nor the Share Repurchase Program obligates us to repurchase any shares of our common stock, and any repurchase of shares will be subject to market and other conditions and may be discontinued at any time.

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

Repurchased shares of our common stock were as follows:

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.

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:

Restricted Stock

Non-vested restricted stock award activity was as follows:

As of June 30, 2025, we expect to recognize $3.7 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 2.1 years.

Performance Stock

Non-vested performance stock award activity was as follows:

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

As of June 30, 2025, we expect to recognize $0.8 million of total unrecognized pre-tax stock-based compensation expense related to non-vested performance stock awards over a weighted-average period of 2.1 years.

Stock Options

Stock option activity was as follows:

(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 2025 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, 2025. This amount will change based on the fair market value of our stock.

As of June 30, 2025, we expect to recognize $0.2 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 0.6 years.

Note 15 —Other Income (Expense), Net

The Central Bank of Argentina maintains certain currency controls that limit the amount of U.S. Dollars that may be remitted from Argentine entities, including certain of our customers. As a result of these controls, an indirect foreign exchange mechanism known as a Blue Chip Swap ("BCS") emerged in Argentina, which allows entities to remit U.S. Dollars from Argentina through the purchase and sale of BCS securities. During the three and six months ended June 30, 2025, in order to collect an open accounts receivable balance with an Argentine customer, we purchased $1.3 million and $2.5 million, respectively, and sold BCS securities of and $1.2 million and $2.3 million, respectively, and incurred a loss on the transactions of $0.1 million and $0.2 million, respectively, which is recorded in other income (expense) on our consolidated statements of operations.

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

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

(2)Included in this amount is $0.1 million and $0.2 million of loss related to BCS security transactions during the three and six months ended June 30, 2025, respectively.

Note 16 —Earnings (Loss) Per Share

Earnings (loss) per share was calculated as follows:

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:

Note 17 —Derivatives

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

We held foreign currency exchange contracts, which resulted in a net pre-tax loss of $0.4 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and 2024, we had a pre-tax loss of $0.6 million and $0.2 million, respectively.

Details of foreign currency exchange contracts held were as follows:

(1)Unrealized gains on foreign currency exchange contracts are recorded in prepaid expenses and other current assets. Unrealized losses on foreign currency exchange contracts are recorded in other accrued liabilities.

Note 18 -Reportable Segment

Our chief operating decision maker, our Office of CEO, reviews financial information presented on a consolidated basis, including consolidated net income and its components, as reported on our consolidated statements of operations, accompanied by disaggregated information about revenues, for purposes of making operating decisions and assessing financial performance of our single consolidated segment, primarily by monitoring actual results versus our internal budget and forecasts.

Our reported segment revenue, segment profit or loss, and significant segment expenses were as follows:

(1)Cost of sales from the consolidated statements of operations, adjusted to exclude stock-based compensation expense.

(2)R&D expenses from the consolidated statements of operations, adjusted to exclude stock-based compensation expense.

(3)Operating expenses less R&D expenses from the consolidated statements of operations, adjusted to exclude stock-based compensation, amortization of acquired intangible assets, costs associated with our Roku litigation, factory restructuring charges and severance.

(4)Other segment items include the adjustments described in the notes above; as well as interest income (expense), net; other income (expense), net; and provision for income taxes.

The measure of segment assets is reported on our consolidated balance sheets as consolidated total assets. Long-lived assets by geographic area are disclosed in Note 5. The measure of revenues from external customers is reported on the consolidated statements of operations as net sales. Revenues by sales channel, geographic region and information about major customers are disclosed in Note 3. Depreciation expense is disclosed in Note 5. Amortization expense is disclosed in Note 6. Interest expense is disclosed in Note 8 and income taxes are disclosed in Note 9.