UNIVERSAL ELECTRONICS INC

Previous wording

We generally discuss 2024 and 2023 items and year-to-year comparisons between 2024 and 2023 in the section that follows. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 14, 2024.

Current wording

We generally discuss fiscal years 2025 and 2024 items and year-to-year comparisons between 2025 and 2024 in the section that follows. Discussions of fiscal year 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this document.

Current wording

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this document. In addition to historical information, the following discussion contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include, but are not limited to, those matters discussed under the heading “Forward-looking Statements.” Our actual results could differ materially from those anticipated by these forward‑looking statements due to various factors, including, but not limited to, those set forth under Item 1A. Risk Factors of this Annual Report on Form 10-K and elsewhere in this document.

Previous wording

We design, develop, manufacture, ship and support home entertainment control products, technology and software solutions, climate control solutions, wireless sensors and smart home control products and audio-video ("AV") accessories, that are used by the world's leading brands in the home entertainment, climate control, consumer electronics, security, home automation and home appliance markets. Our product and technology offerings include:

Current wording

We design, develop, manufacture, ship and support climate control solutions, wireless sensors and smart home control products, home entertainment control products, technology and software solutions and audio-video ("AV") accessories, that are used by the world's leading brands in the climate control, security, home automation and home appliance, home entertainment and consumer electronics markets. Our product and technology offerings include:

Previous wording

•Climate Control Solutions: Our innovative climate control solutions include wall-mounted and handheld thermostat controllers and connected accessories for smart energy management systems. These products are primarily sold to original equipment manufacturer (“OEM”) customers, as well as hotels, hospitality and system integrators. Our UEI TIDE Family of Climate Control solutions feature advanced technologies such as Wi-Fi, BLE, Zigbee and Matter, along with sensors for temperature, humidity, proximity, occupancy and carbon dioxide sensing.

Current wording

•Climate Control Solutions: Our innovative climate control solutions include wireless and wired controllers, smart thermostats and connected peripherals for sensing and smart energy management. These products are primarily sold to original equipment manufacturer ("OEM") customers, as well as hotels, utilities and system integrators. Our UEI TIDE Family of Climate Control solutions feature advanced technologies such as WiFi, BLE, Zigbee and Matter, and connect to sensors for temperature, humidity, proximity, occupancy and carbon dioxide sensing.

Previous wording

•Smart Home and Security Products: We offer proprietary and standards-based RF sensors designed for residential security, safety and home automation applications. Our integrated circuits, on which our software and universal control database is embedded, are sold primarily to OEMs, video service providers, smart home dealers and private label customers.

Current wording

•Smart Home and Security Products: We offer proprietary and standards-based radio frequency ("RF") wireless remote controls and sensors designed for residential security, safety and a broad variety of home automation applications, such as smart lighting and motorized shades.

Previous wording

•Software and Cloud Services: Our software, firmware and technology solutions enable devices such as smart TVs, hybrid set-top boxes, audio systems, smart speakers, game consoles and other consumer electronic and smart home devices to wirelessly connect and interoperate within home networks. These solutions support control and delivery of home entertainment application services and content, smart home services and device or system information. New features include private, on-premise user presence and occupancy detection to enhance user experiences with their connected devices.

Current wording

•Software and Cloud Services: Our software, firmware and technology solutions enable devices such as smart TVs, hybrid set-top boxes, game consoles and other consumer electronic and smart home devices to wirelessly connect and interoperate on the home network. These solutions support control and delivery of home entertainment application services and content, smart home services and device or system information. New features include private, on-premise user presence and occupancy detection to enhance user experiences and extend user engagement on connected devices.

Previous wording

•Intellectual Property and Licensing: We license our intellectual property primarily to OEMs and video service providers. Our cloud-enabled software provides reliable firmware update provisioning and digital rights management validation services to major consumer electronics brands. We offer regular control library database and software updates to our licensing customers to ensure their systems are compatible with the latest devices entering the home.

Current wording

•Intellectual Property and Licensing: We license our intellectual property primarily to OEMs and video service providers. Our cloud-enabled software provides reliable firmware update provisioning and digital rights management validation services to major consumer electronics brands. We offer regular control library database and software updates to our licensing customers to ensure their systems are compatible with the latest devices entering the home. Our integrated circuits, on which our software and universal control database is embedded, are sold primarily to OEMs, video service providers, smart home dealers and private label customers.

Previous wording

We operate as one business segment. We have one domestic subsidiary and 24 international subsidiaries located in Brazil, British Virgin Islands, France, Germany, Hong Kong (3), India, Italy, Japan, Korea, Mexico (2), the Netherlands, People's Republic of China (the "PRC") (6), Singapore, Spain, United Kingdom and Vietnam.

Current wording

We operate as one business segment. We have one domestic subsidiary and 22 international subsidiaries located in Brazil, France, Germany, Hong Kong (3), India, Italy, Japan, Korea, Mexico (2), the Netherlands, People's Republic of China (the "PRC") (6), Singapore, Spain, United Kingdom and Vietnam.

Previous wording

•Net sales decreased 6.1% to $394.9 million in 2024 from $420.5 million in 2023.

Current wording

•Net sales decreased 6.7% to $368.3 million in 2025 from $394.9 million in 2024.

Previous wording

•Our gross profit percentage increased to 28.9% in 2024 from 23.2% in 2023.

Current wording

•Our gross profit percentage remained consistent at 28.9% in 2025 and in 2024.

Previous wording

•Operating expenses, as a percent of sales, decreased to 32.7% in 2024 from 43.5% in 2023.

Current wording

•Operating expenses, as a percent of sales, decreased to 30.6% in 2025 from 32.7% in 2024.

Previous wording

•Operating loss was $15.3 million in 2024 compared to $85.3 million in 2023, and our operating loss percentage was 3.9% in 2024, compared to 20.3% in 2023.

Current wording

•Operating loss was $6.4 million in 2025 compared to $15.3 million in 2024, and our operating loss percentage was 1.7% in 2025, compared to 3.9% in 2024.

Previous wording

•Income tax expense was $5.4 million in 2024 compared to $6.0 million in 2023.

Current wording

•Income tax expense was $6.6 million in 2025 compared to $5.4 million in 2024.

Previous wording

We have been negatively impacted and we expect to continue to be negatively impacted by adverse macroeconomic conditions, including new tariffs imposed or to be imposed on goods manufactured in the PRC, Mexico and Canada, and reduced consumer spending on durable goods. We have also been adversely impacted by inflationary pressures, including increased component and logistics costs and increases in wages and costs of borrowing funds. To help offset these negative impacts, we have implemented cost saving measures including rightsizing our manufacturing footprint and reducing operational and administrative headcount; however, such measures may not fully offset the impact of lower sales demand and cost increases, which would negatively impact our gross margins and overall financial results. Management will continue to seek ways to lessen the impact these pressures may have on our margins and overall financial results by executing on our plan to reduce our manufacturing overhead and to locate alternative and less expensive sources of component parts and materials.

Current wording

We have been negatively impacted and we expect to continue to be negatively impacted by adverse macroeconomic conditions, including new tariffs imposed or to be imposed on goods manufactured in Vietnam, Taiwan, the PRC, and Mexico, and reduced consumer spending on durable goods. Economic tensions and changes in international trade policies, including the recent widespread tariffs announced by the U.S. on its major trading partners, higher tariffs on imported goods, actions taken in response (such as retaliatory tariffs or other trade protectionist measures or the renegotiation of free trade agreements), could also further impact the global market for our products. The full impact of these governmental actions on macroeconomic conditions and on our business is uncertain and difficult to predict and may result in lower sales and/or cost increases, which would negatively impact our gross margins and overall financial results. Management will continue to seek ways to lessen the impact these pressures may have on our margins and financial results; however, these mitigation efforts may not be successful and these pressures may have a material adverse effect on our business.

Previous wording

Research and development ("R&D") expenses. R&D expenses decreased 5.0% to $29.7 million in 2024 from $31.3 million in 2023. The decrease in R&D expenses is primarily due to reduced third-party product development costs and a reduction in headcount.

Current wording

Research and development ("R&D") expenses. R&D expenses decreased 11.6% to $26.3 million in 2025 from $29.7 million in 2024. The decrease in R&D expenses is primarily attributable to reductions in payroll and related personnel expenses of $2.6 million following headcount optimization actions, a reduction of discretionary travel spending of $0.3 million and also reduced third-party product development costs.

Previous wording

Factory restructuring charges. During the year ended December 31, 2024, we recorded $3.6 million in expense, including severance and moving costs associated with the downsizing of our factory in Mexico and the closures of our southern and eastern PRC factories. During the year ended December 31, 2023, we recorded $4.0 million in expense, including severance and other closure related activities pertaining to our southern PRC factory, and moving costs associated with the transfer of equipment from our Mexico factory to our new facility in Vietnam.

Current wording

Factory restructuring charges. During the year ended December 31, 2025, we recorded $1.2 million in expense, including severance and moving costs associated with the closure of our factory in Mexico. During the year ended December 31, 2024, we recorded $3.6 million in expense, including severance and other closure related activities pertaining to our southern PRC factory, and moving costs associated with the transfer of equipment from our Mexico factory to our facility in Vietnam.

Previous wording

Legal judgment. During the year ended December 31, 2024, we recorded $4.2 million in expense, relating to an adverse judgment against one of our subsidiaries located in the PRC. We have appealed this ruling and expect a decision on our appeal in early to mid-April 2025.

Current wording

Legal judgment. During the year ended December 31, 2024, we recorded $4.2 million in expense, relating to an adverse judgment against one of our subsidiaries located in the PRC.

Previous wording

Interest income (expense), net. Net interest expense decreased to $3.4 million in 2024 from $4.3 million in 2023, primarily as a result of a lower average loan balance.

Current wording

Interest income (expense), net. Net interest expense decreased to $0.9 million in 2025 from $3.4 million in 2024, primarily as a result of a lower average loan balance and lower interest rates.

Previous wording

Other income (expense), net. Other income, net was $0.1 million in 2024, compared to other expense, net of $2.6 million in 2023. The improvement was primarily due to a reduction in net foreign currency losses.

Current wording

Other income (expense), net. Other income, net was $4.6 million in 2025, from $0.1 million in 2024. The deterioration was primarily due to an increase in net foreign currency losses.

Previous wording

Provision for income taxes. Income tax expense was $5.4 million in 2024 compared to $6.0 million in 2023. Our effective tax rate in 2024 and 2023, (29.2)% and (6.5)%, respectively, differs from the U.S. statutory rate of 21% primarily as a result of our jurisdictional mix of pre-tax income/loss, as well as losses incurred in the U.S. which are not benefited due to a valuation allowance.

Current wording

Provision for income taxes. Income tax expense was $6.6 million in 2025 compared to $5.4 million in 2024. Our effective tax rate in 2025 and 2024, (55.5)% and (29.2)%, respectively, differs from the U.S. statutory rate of 21% primarily as a result of our jurisdictional mix of pre-tax income/loss, as well as losses incurred in the U.S. which are not benefited due to a valuation allowance.

Previous wording

Historically, we have utilized cash provided from operations as our primary source of liquidity, as internally generated cash flows have typically been sufficient to support our business operations, capital expenditures and discretionary share repurchases. When needed, we have utilized our revolving lines of credit to fund operations, share repurchases and acquisitions. We anticipate that we will continue to utilize both cash flows from operations and our revolving lines of credit to support ongoing business operations, capital expenditures, discretionary share repurchases and potential acquisitions. We believe our current cash balances, anticipated cash flow to be generated from operations and available borrowing resources will be sufficient to cover expected cash outlays for at least the next twelve months and for the foreseeable future thereafter; however, because our cash is located in various jurisdictions throughout the world, we may at times need to increase borrowing from our revolving lines of credit or take on additional debt until we are able to transfer cash among our various entities.

Current wording

While we incurred a loss from operations of $6.4 million in 2025 and $15.3 million in 2024, historically, we have utilized cash provided from operations as our primary source of liquidity, as internally generated cash flows have typically been sufficient to support our business operations, capital expenditures and discretionary share repurchases. When needed, we have utilized our revolving lines of credit to fund operations, share repurchases and acquisitions. We anticipate that we will continue to utilize both cash flows from operations and our revolving lines of credit to support ongoing business operations, capital expenditures, discretionary share repurchases and potential acquisitions. We believe our current cash balances, anticipated cash flow to be generated from operations and available borrowing resources will be sufficient to cover expected cash outlays for at least the next twelve months and for the foreseeable future thereafter; however, because our cash is located in various jurisdictions throughout the world, we may at times need to increase borrowing from our revolving lines of credit or take on additional debt until we are able to transfer cash among our various entities.

Previous wording

Cash and cash equivalents– At December 31, 2024, we had $2.0 million, $10.1 million, $2.3 million, $7.1 million and $5.3 million of cash and cash equivalents in North America, the PRC, Asia (excluding the PRC), Europe, and South America, respectively. We attempt to mitigate our exposure to liquidity, credit and other relevant risks by placing our cash and cash equivalents with financial institutions we believe are high quality.

Current wording

Cash and cash equivalents– At December 31, 2025, we had $1.6 million, $9.0 million, $4.6 million, $10.0 million and $7.2 million of cash and cash equivalents in North America, the PRC, Asia (excluding the PRC), Europe, and South America, respectively. We attempt to mitigate our exposure to liquidity, credit and other relevant risks by placing our cash and cash equivalents with financial institutions we believe are high quality.

Previous wording

Available Borrowing Resources – Our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank") provides for a revolving line of credit ("U.S. Credit Line") that expires on April 30, 2026. 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 December 31, 2024, the U.S. Credit Line total availability was $58.3 million based upon the AR Ratio. At February 18, 2025, the U.S. Credit Line total availability was $60.5 million based upon the AR Ratio.

Current wording

Available Borrowing Resources – Our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank") provides for a revolving line of credit ("U.S. Credit Line") that expires on September 30, 2027. The U.S. Credit Line has a maximum availability up to $60.0 million, subject to meeting certain financial conditions. Availability is based on Borrowing Base defined as 75% of accounts receivable aged less than 90 days less reserves for doubtful accounts and returns. The Borrowing Base is calculated monthly. At December 31, 2025, the U.S. Credit Line total availability was $48.5 million. At February 24, 2026, the U.S. Credit Line total availability was $47.1 million.

Previous wording

The U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures. 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 December 31, 2024. At December 31, 2024, we had an outstanding balance of $26.0 million on our U.S. Credit Line and $32.3 million of availability.

Current wording

The U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures. 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 $0.5 million at December 31, 2025. At December 31, 2025, we had an outstanding balance of $5.5 million on our U.S. Credit Line and $42.5 million of availability.

Previous wording

Our subsidiary, Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), has a Line of Credit Agreement ("Line of Credit Agreement") with the Bank of China, which provides for a revolving line of credit ("China Credit Line" and, together with the U.S. Credit Line, "Credit Lines") through July 24, 2025. We expect to renew the Line of Credit Agreement with the Bank of China 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 has a maximum availability up to RMB 80.0 million (approximately $11.0 million), subject to meeting certain financial conditions.

Current wording

Our subsidiary, Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), has a Line of Credit Agreement ("Line of Credit Agreement") with the Bank of China, which provides for a revolving line of credit ("China Credit Line" and, together with the U.S. Credit Line, "Credit Lines") through July 16, 2026. We expect to renew the Line of Credit Agreement with the Bank of China 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 has a maximum availability up to RMB 130.0 million (approximately $18.6 million), subject to meeting certain financial conditions.

Previous wording

The China Credit Line may be used for working capital purposes. 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 December 31, 2024. At December 31, 2024, we had an outstanding balance of RMB 80.0 million (approximately $11.0 million) on our China Credit Line and no remaining availability.

Current wording

The China Credit Line may be used for working capital purposes. 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 December 31, 2025. At December 31, 2025, we had an outstanding balance of RMB 130.0 million (approximately $18.6 million) on our China Credit Line and no remaining availability.

Previous wording

Net cash provided by operating activities was $14.8 million during 2024 compared to $25.2 million during 2023. Net loss was $24.2 million for the year ended December 31, 2024 compared to $98.2 million for the year ended December 31, 2023, which includes the impairments of goodwill of $49.1 million and long-lived assets of $8.0 million. Depreciation and amortization was $18.1 million for the year ended December 31, 2024 compared to $22.9 million during the year ended December 31, 2023, due to decreased purchases of property, plant and equipment over recent years. Inventories decreased by $6.2 million during the year ended December 31, 2024 compared to a decrease of $51.5 million during the year ended December 31, 2023. The significant decrease in inventories during the year ended December 31, 2023 is primarily the result of cord cutting, as there was less demand for our video service products. In addition, lead times for components and raw materials have normalized, enabling more efficient production planning. Our inventory turns increased to 3.0 turns at December 31, 2024 compared to 2.8 turns at December 31, 2023. Changes in accounts receivables and contract assets resulted in cash outflows of $12.2 million during the year ended December 31, 2024 compared to cash inflows of $5.0 million during the year ended December 31, 2023, largely as a result of an increase in and timing of sales in the fourth quarter of 2024 compared to the fourth quarter of 2023 offset partially by a decrease in days sales outstanding. Days sales outstanding were 81 days at December 31, 2024 compared to 94 days at December 31, 2023. Changes in accounts payable and accrued liabilities resulted in cash inflows of $15.7 million during the year ended December 31, 2024 due primarily to the timing of payments in the fourth quarter. Changes in accounts payable and accrued liabilities resulted in cash outflows of $21.4 million during the year ended December 31, 2023 due primarily to a decrease in inventory purchases as a result of lower demand. Changes in accrued income taxes resulted in cash inflows of $1.3 million during the year ended December 31, 2024 compared to cash outflows of $3.5 million during the year ended December 31, 2023.

Current wording

Depreciation and amortization was $14.2 million for the year ended December 31, 2025 compared to $18.1 million during the year ended December 31, 2024, due to decreased purchases of property, plant and equipment over recent years. Inventories decreased by $4.6 million during the year ended December 31, 2025 compared to a decrease of $6.2 million during the year ended December 31, 2024. The decreases in inventories in both years were consistent with the lower sales demand. Our inventory turns were 2.8 turns at December 31, 2025 compared to 3.0 turns at December 31, 2024. The decline in turns was primarily attributable to maintaining required safety stock levels amid lower sales demand. Changes in accounts receivables and contract assets resulted in cash inflows of $41.5 million during the year ended December 31, 2025 compared to cash outflows of $12.2 million during the year ended December 31, 2024, largely as a result of decreased sales and improved customer collections. Days sales outstanding were 75 days at December 31, 2025 compared to 81 days at December 31, 2024. Changes in accounts payable and accrued liabilities resulted in cash outflows of $33.2 million during the year ended December 31, 2025, due primarily to the timing of payments in the fourth quarter and the reduced inventory purchases associated with lower sales demand. Changes in accounts payable and accrued liabilities resulted in cash outflows of $15.7 million during the year ended December 31, 2024, due primarily to the timing of payments in the fourth quarter. Changes in accrued income taxes resulted in cash inflows of $1.9 million during the year ended December 31, 2025 compared to cash inflows of $1.3 million during the year ended December 31, 2024.

Previous wording

Net cash used for investing activities during 2024 was $8.4 million, of which $4.5 million and $3.9 million was used for capital expenditures and the development of patents, respectively. Net cash used for investing activities during 2023 was $13.9 million, of which $8.1 million and $5.8 million was used for capital expenditures and the development of patents, respectively.

Current wording

Net cash used for investing activities during 2025 was $6.8 million, of which $3.9 million and $3.0 million was used for capital expenditures and the development of patents, respectively. Net cash used for investing activities during 2024 was $8.4 million, of which $4.5 million and $3.9 million was used for capital expenditures and the development of patents, respectively.

Previous wording

Future cash flows used for investing activities are largely dependent on the timing and amount of capital expenditures and the development of patents. We estimate that we will incur between $9.0 million and $11.0 million during 2025.

Current wording

Future cash flows used for investing activities are largely dependent on the timing and amount of capital expenditures and the development of patents. We estimate that we will incur between $6.0 million and $8.0 million during 2026.

Previous wording

Net cash used for financing activities was $19.8 million during 2024 compared to $34.8 million during 2023. The primary financing activities in 2024 and 2023 were borrowings and repayments on our Credit Lines and repurchases of shares of our common stock. Net repayments on our Credit Lines were $17.8 million in 2024 and $33.0 million in 2023. During 2024, we purchased 206,598 shares of our common stock at a cost of $2.0 million compared to 164,540 shares at a cost of $1.8 million during 2023.

Current wording

Net cash used for financing activities was $16.7 million during 2025 compared to $19.8 million during 2024. The primary financing activities in 2025 and 2024 were borrowings and repayments on our Credit Lines and repurchases of shares of our common stock. Net repayments on our Credit Lines were $13.6 million in 2025 and $17.8 million in 2024. During 2025, we purchased 871,501 shares of our common stock at a cost of $3.1 million compared to 206,598 shares at a cost of $2.0 million during 2024.