UNIVERSAL ELECTRONICS INC
For the period ended Sep 30, 2026. Filed Nov 5, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 5, 2026
UEIC$5.52+13.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0000101984-26-000110
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-05.
0000101984-26-000141
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 77 current paragraphs.
33 unchanged; 34 reworded; 10 added; 5 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
•Net sales decreased 1.2% to $89.4 million for the three months ended September 30, 2026 from $90.6 million for the three months ended September 30, 2025.
Current report
•Income tax expense was $1.4 million for the three months ended September 30, 2026 compared to $2.6 million for the three months ended September 30, 2025.
Current report
Brazil Operations Closure
Current report
In October 2026, the Company’s Board of Directors approved a plan to close the Company’s manufacturing operations in Brazil as part of the Company’s ongoing efforts to optimize its global manufacturing footprint and cost structure. The Company expects the wind-down of the Brazil operations to be substantially completed during the first quarter of 2027.
Current report
The Company currently estimates that it will incur approximately $4.2 million to $5.0 million in costs associated with the closure, primarily consisting of employee severance and other facility closure costs. These costs are expected to be recognized in future periods as the applicable recognition criteria are met. The ultimate amount and timing of the charges may differ from the Company’s current estimates.
Current report
Interest income (expense), net. Interest expense, net increased to $0.7 million for the three months ended September 30, 2026 from $0.2 million for the three months ended September 30, 2025. The increase was primarily attributable to $0.7 million of interest expense associated with the accounting for the sale of tariff claims. Interest expense associated with our line of credit was largely offset by interest income earned on higher cash balances resulting from our stronger cash flow position.
Current report
Nine Months Ended September 30, 2026 versus Nine Months Ended September 30, 2025
Current report
Other income (expense), net. Other expense, net was $2.7 million for the nine months ended September 30, 2026 and for the nine months ended September 30, 2025. The 2026 period includes a $0.6 million increase in losses on the disposal of fixed assets and foreign currency losses incurred during the period.
Current report
On June 9, 2026, the Company entered into a Claim Sale and Purchase Agreement (the "Tariff Claim Agreement") with a third party financial institution ("Buyer") pursuant to which the Company agreed to sell, grant and convey to Buyer all of the Company’s and its affiliates’ claims, interests and causes of action, and all related rights, distributions, amounts, payments related thereto and other proceeds thereof, including without limitation any interest thereon and other amounts paid or reimbursed in relation thereto, directly arising from or relating to tariffs previously paid by the Company or its affiliates to Customs and Border Protection (“CBP”) in connection with tariffs originally invoked under the International Emergency Economics Powers Act (“IEEPA”), for which such tariffs were ruled unlawful by the United States Supreme Court on February 20, 2026 (the "Claims"), in consideration for a payment of approximately $7.6 million (the "Purchase Price"). The Purchase Price reflects a discount to the aggregate amount payable by CBP pursuant to the Claims as mutually agreed between the Company and Buyer and is subject to full or partial refund, together with interest, under certain circumstances in which the Claims may be impaired. The Company is subject to certain post-closing cooperation obligations with Buyer with respect to the Claims. The Company has received a total of $9.0 million, including interest, from CBP as of September 30, 2026.
Current report
In connection with the expected recovery of IEEPA tariffs, the Company evaluated its contractual and customary business practices with customers and concluded that a portion of the expected recovery is likely to be refunded to certain customers. These anticipated customer refunds represent consideration payable to customers under ASC 606, Revenue from Contracts with Customers, and therefore reduce the transaction price associated with the related customer contracts. Accordingly, the Company recorded an estimated liability of approximately $3.9 million as of June 30, 2026 for expected tariff refunds payable to customers, with a corresponding reduction of net sales in the period. As of September 30, 2026, the balance of this estimated liability is $3.1 million.
Removed paragraphs (5)
Previous report
•Net sales decreased 25.0% to $73.2 million for the three months ended June 30, 2026 from $97.7 million for the three months ended June 30, 2025.
Previous report
•Income tax expense was $1.1 million for the three months ended June 30, 2026 compared to $1.8 million for the three months ended June 30, 2025.
Previous report
Six Months Ended June 30, 2026 versus Six Months Ended June 30, 2025
Previous report
Interest income (expense), net. Interest expense, net decreased to $0.3 million for the six months ended June 30, 2026 from $0.7 million for the six months ended June 30, 2025, as a result of a lower average loan balance and lower interest rates.
Previous report
Other income (expense), net. Other income, net was $1.6 million for the six months ended June 30, 2026 compared to other income (expense), net of $1.7 million for the six months ended June 30, 2025. The amount was primarily attributable to foreign currency losses incurred in the first half year of 2026.
Reworded paragraphs (34)
Previous wording
All statements in this report are made as of the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (the "SEC"). We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise. We make forward-looking statements in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information available to us through the date this Quarterly Report on Form 10-Q is filed with the SEC. Forward-looking statements include: supply chain issues; customer demand for our products and solutions; expectations with respect to the markets in which we operate, including for specific geographic markets; other future demand and recovery trends and expectations; the delay by or failure of our customers to order products from us; expectations related to the shut down of our Mexico manufacturing facility, including related costs; expected benefits of our restructuring and cost-reduction activities; continued availability of cash through borrowing under our revolving lines of credit; risks related to interest rates and foreign currency exchange rates; expectations with respect to tariff recovery; the effects of doing business internationally, including expanded use of tariffs, pertaining to the importation of our products, particularly in light of the recent U.S. presidential administrative actions and the responsive retaliatory actions of foreign governments; our expectations regarding our ability to meet our liquidity requirements; our capital expenditures and other investment spending expectations; our expectations with respect to the impact of changes in tax laws; and other statements that are preceded by, followed by, or include the words "believes," "expects," "anticipates," "intends," "plans," "estimates," "foresees," or similar expressions; and similar statements concerning anticipated future events and expectations that are not historical facts.
Current wording
All statements in this report are made as of the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (the "SEC"). We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise. We make forward-looking statements in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information available to us through the date this Quarterly Report on Form 10-Q is filed with the SEC. Forward-looking statements include: supply chain issues; customer demand for our products and solutions; expectations with respect to the markets in which we operate, including for specific geographic markets; other future demand and recovery trends and expectations; the delay by or failure of our customers to order products from us; expectations related to the shut down of our Mexico manufacturing facility and our operations in Brazil, including related costs and timing; expected benefits of our restructuring and cost-reduction activities; continued availability of cash through borrowing under our revolving lines of credit; risks related to interest rates and foreign currency exchange rates; expectations with respect to tariff recovery, including related refunds to customers; the effects of doing business internationally, including expanded use of tariffs, pertaining to the importation of our products, particularly in light of the recent U.S. presidential administrative actions and the responsive retaliatory actions of foreign governments; our expectations regarding our ability to meet our liquidity requirements; our capital expenditures and other investment spending expectations; our expectations with respect to the impact of changes in tax laws; and other statements that are preceded by, followed by, or include the words "believes," "expects," "anticipates," "intends," "plans," "estimates," "foresees," or similar expressions; and similar statements concerning anticipated future events and expectations that are not historical facts.
Previous wording
We operate as one business segment. We have one domestic subsidiary and 23 international subsidiaries located in Brazil, France, Germany, Hong Kong (3), India, Italy, Japan, Korea, Mexico (2), the Netherlands, the People's Republic of China (the "PRC") (7), 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, the People's Republic of China (the "PRC") (5), Singapore, Spain, United Kingdom and Vietnam.
Previous wording
•Our gross margin percentage increased to 35.4% for the three months ended June 30, 2026 from 29.9% for the three months ended June 30, 2025.
Current wording
•Our gross margin percentage decreased to 26.3% for the three months ended September 30, 2026 from 27.7% for the three months ended September 30, 2025.
Previous wording
•Operating expenses, as a percentage of net sales, decreased to 28.8% for the three months ended June 30, 2026 from 28.9% for the three months ended June 30, 2025.
Current wording
•Operating expenses, as a percentage of net sales, decreased to 23.1% for the three months ended September 30, 2026 from 32.7% for the three months ended September 30, 2025.
Previous wording
•Our operating income was $4.8 million for the three months ended June 30, 2026 compared to operating income of $1.0 million for the three months ended June 30, 2025. Our operating income percentage was 6.5% for the three months ended June 30, 2026 compared to our operating income percentage of 1.0% for the three months ended June 30, 2025.
Current wording
•Our operating income was $2.9 million for the three months ended September 30, 2026 compared to operating loss of $4.5 million for the three months ended September 30, 2025. Our operating income percentage was 3.2% for the three months ended September 30, 2026 compared to our operating loss percentage of (5.0)% for the three months ended September 30, 2025.
Previous wording
An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements. We do not believe that there have been any significant changes during the six months ended June 30, 2026 to the items that we disclosed as our critical accounting policies and estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the 2025 Form 10-K.
Current wording
An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements. We do not believe that there have been any significant changes during the nine months ended September 30, 2026 to the items that we disclosed as our critical accounting policies and estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the 2025 Form 10-K.
Previous wording
Net sales. Net sales for the three months ended June 30, 2026 were $73.2 million compared to $97.7 million for the three months ended June 30, 2025. Net sales by channel were as follows:
Current wording
Net sales. Net sales for the three months ended September 30, 2026 were $89.4 million compared to $90.6 million for the three months ended September 30, 2025. Net sales by channel were as follows:
Previous wording
Net sales in connected home were $53.4 million for the six months ended June 30, 2026 compared to $65.8 million for the six months ended ended June 30, 2025. This decrease is driven primarily by reduced demand from our large climate control and home entertainment customers.
Current wording
Net sales in connected home were $33.8 million for the three months ended September 30, 2026 compared to $29.8 million for the three months ended September 30, 2025. This increase is driven primarily by stronger sales in the HVAC market and increased sales of recently launched thermostat products.
Previous wording
Net sales in home entertainment were $48.1 million for the three months ended June 30, 2026 compared to $63.6 million for the three months ended June 30, 2025. The decrease in sales within the home entertainment channel was primarily driven by lower demand for subscription broadcasting products, particularly for basic remote controls with lower price points and limited or no advanced features.
Current wording
Net sales in home entertainment were $55.6 million for the three months ended September 30, 2026 compared to $60.8 million for the three months ended September 30, 2025. The decrease was driven primarily by lower demand for subscription broadcasting products, particularly basic remote controls with lower price points and limited or no advanced features. The decline was partially offset by improved performance in our retail sales compared with the prior-year period.
Previous wording
Gross profit. Gross profit for the six months ended June 30, 2026 was $46.5 million compared to $55.3 million for the six months ended June 30, 2025. Gross profit as a percentage of sales increased to 30.5% for the six months ended June 30, 2026 from 29.1% for the six months ended June 30, 2025. The improvement in gross margin was primarily driven by the sale of tariff claims and the associated mix impact, which contributed approximately 330 basis points and 70 basis points respectively, and improved management of inbound freight costs, which contributed approximately 60 basis points. These favorable impacts were partially offset by higher component costs driven by market conditions, which reduced gross margin by approximately 110 basis points, an unfavorable change in sales mix, which reduced margin by approximately 80 basis points and incremental tariff costs that were not recoverable through customer pricing actions and others, which reduced gross margin by approximately 70 basis points. In addition, the weaker U.S. dollar relative to the Chinese Renminbi had an adverse impact of approximately 60 basis points on gross margin.
Current wording
Gross profit. Gross profit for the three months ended September 30, 2026 was $23.6 million compared to $25.1 million for the three months ended September 30, 2025. Gross profit as a percentage of sales decreased to 26.3% for the three months ended September 30, 2026 from 27.7% for the three months ended September 30, 2025. The 140-basis-point decrease in gross margin was primarily driven by higher component costs due to market conditions and the unfavorable impact of a weaker U.S. dollar relative to the Chinese renminbi, which reduced gross margin by approximately 420 basis points and 170 basis points, respectively. These unfavorable impacts were partially offset by a favorable sales mix impact of approximately 140 basis points, approximately 170 basis points of lower labor and manufacturing costs resulting from productivity improvements and the closure of our Mexico manufacturing facility, and approximately 140 basis points from lower tariff rates.
Previous wording
Research and development ("R&D") expenses. R&D expenses decreased to $4.3 million for the three months ended June 30, 2026 from $7.0 million for the three months ended June 30, 2025 attributable to reductions in payroll and related personnel expenses following headcount optimization actions.
Current wording
Research and development ("R&D") expenses. R&D expenses decreased to $4.3 million for the three months ended September 30, 2026 from $6.7 million for the three months ended September 30, 2025 attributable to reductions in payroll and related personnel expenses following headcount optimization actions.
Previous wording
Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased to $16.8 million for the three months ended June 30, 2026 from $21.2 million for the three months ended June 30, 2025. The decrease reflects lower volume-driven expenses of $0.6 million, consistent with the decline in sales volume. In addition, ongoing cost-reduction initiatives, including organizational rightsizing, resulted in savings from headcount reductions. People-related expenses decreased by $3.6 million, complemented by an additional $0.8 million reduction in other discretionary spending including travel expense and professional fees. These savings were partially offset by $0.6 million increase of reserve for uncollectible accounts receivable during the period.
Current wording
Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased to $16.4 million for the three months ended September 30, 2026 from $22.1 million for the three months ended September 30, 2025. The prior-year period included a one-time charge of $1.3 million related to the abandonment of an office lease. Excluding this item, the decrease primarily reflected ongoing cost-reduction initiatives, including organizational rightsizing, which resulted in lower people-related expenses. People-related expenses decreased by $2.2 million, and severance costs associated with headcount reductions decreased by $1.5 million. Discretionary spending, including travel and professional fees, is also under continued cost-control measures, resulting in $0.7 million net savings.
Previous wording
Other income (expense), net. Other income, net was $1.8 million for the three months ended June 30, 2026 compared to other income, net of $1.8 million for the three months ended June 30, 2025. The amount was primarily attributable to foreign currency losses incurred in the second quarter of 2026.
Current wording
Other income (expense), net. Other expense, net was $1.1 million for the three months ended September 30, 2026 compared to other expense of $1.0 million for the three months ended September 30, 2025. Other expense, net for the 2026 period included a $0.6 million loss on the disposal of fixed assets and foreign currency losses incurred during the period.
Previous wording
Provision for income taxes. Income tax expense was $1.1 million for the three months ended June 30, 2026, relative to a pre-tax loss of $2.8 million, compared to income tax expense of $1.8 million for the three months ended June 30, 2025, relative to a pre-tax loss of $1.1 million. Consistent with 2025, we expect the U.S. to be in a pre-tax loss position without benefit for the full year 2026, resulting in an elevated effective tax rate.
Current wording
Provision for income taxes. Income tax expense was $1.4 million for the three months ended September 30, 2026, relative to a pre-tax income of $1.1 million, compared to income tax expense of $2.6 million for the three months ended September 30, 2025, relative to a pre-tax loss of $5.8 million. Consistent with 2025, we expect the U.S. to be in a pre-tax loss position without benefit for the full year 2026, resulting in an elevated effective tax rate.
Previous wording
Net sales. Net sales for the six months ended June 30, 2026 were $152.3 million compared to $190.0 million for the six months ended June 30, 2025. Net sales by channel were as follows:
Current wording
Net sales. Net sales for the nine months ended September 30, 2026 were $241.7 million compared to $280.5 million for the nine months ended September 30, 2025. Net sales by channel were as follows:
Previous wording
Net sales in connected home were $25.1 million for the three months ended June 30, 2026 compared to $34.1 million for the three months ended June 30, 2025. This decrease is driven primarily by reduced demand from our large climate control and home entertainment customers.
Current wording
Net sales in connected home were $87.3 million for the nine months ended September 30, 2026 compared to $95.6 million for the nine months ended September 30, 2025. The decrease was primarily driven by lower demand from our larger connected home customers.
Previous wording
Net sales in home entertainment were $98.9 million for the six months ended June 30, 2026 compared to $124.2 million for the six months ended June 30, 2025. The decrease in sales within the home entertainment channel was primarily driven by lower demand for subscription broadcasting products, particularly for basic remote controls with lower price points and limited or no advanced features.
Current wording
Net sales in home entertainment were $154.4 million for the nine months ended September 30, 2026 compared to $184.9 million for the nine months ended September 30, 2025. The decrease was primarily driven by lower demand for subscription broadcasting products, particularly basic remote controls with lower price points and limited or no advanced features. Sales in our retail business remained essentially flat compared with the prior-year period.
Previous wording
Gross profit. Gross profit for the three months ended June 30, 2026 was $25.9 million compared to $29.2 million for the three months ended June 30, 2025. Gross profit as a percentage of sales increased to 35.4% for the three months ended June 30, 2026 from 29.9% for the three months ended June 30, 2025. The improvement in gross margin was primarily driven by the sale of tariff claims and the associated mix impact, which contributed approximately 690 basis points and 160 basis points respectively, and improved management of inbound freight costs and other costs, which contributed approximately 90 basis points. These favorable impacts were partially offset by higher component costs driven by market conditions, which reduced gross margin by approximately 240 basis points, as well as the weaker U.S. dollar relative to the Chinese Renminbi, which had an adverse impact of approximately 150 basis points.
Current wording
Gross profit. Gross profit for the nine months ended September 30, 2026 was $70.1 million compared to $80.4 million for the nine months ended September 30, 2025. Gross profit as a percentage of sales increased to 29.0% for the nine months ended September 30, 2026 from 28.7% for the nine months ended September 30, 2025. The improvement in gross margin was primarily driven by the sale of tariff claims and the associated mix impact, together with lower tariff rates, which collectively contributed approximately 260 basis points, and improved management of inbound freight costs, which contributed approximately 60 basis points. These favorable impacts were partially offset by higher component costs resulting from market conditions, and the impact of a weaker U.S. dollar relative to the Chinese Renminbi, which reduced gross margin by approximately 220 basis points and 100 basis points, respectively.
Previous wording
Research and development ("R&D") expenses. R&D expenses decreased to $9.8 million for the six months ended June 30, 2026 from $14.2 million for the six months ended June 30, 2025 attributable to reductions in payroll and related personnel expenses following headcount optimization actions.
Current wording
Research and development ("R&D") expenses. R&D expenses decreased to $14.1 million for the nine months ended September 30, 2026 from $20.9 million for the nine months ended September 30, 2025 attributable to reductions in payroll and related personnel expenses following headcount optimization actions.
Previous wording
Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased to $35.8 million for the six months ended June 30, 2026 from $43.8 million for the six months ended June 30, 2025. The decrease reflects lower volume-driven expenses of $1.0 million, consistent with the decline in sales volume. In addition, ongoing cost-reduction initiatives, including organizational rightsizing, resulted in savings from headcount reductions. People-related expenses decreased by $6.5 million, complemented by an additional $1.7 million reduction in other discretionary spending including travel, rental expense and professional fees. These savings were partially offset by $0.6 million of severance costs associated with our global reduction in force and $0.5 million increase of reserve for uncollectible accounts receivable during the period.
Current wording
Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased to $52.2 million for the nine months ended September 30, 2026 from $65.9 million for the nine months ended September 30, 2025. The prior-year period included a one-time charge of $1.3 million related to the abandonment of an office lease. Excluding this item, the decrease primarily reflected ongoing cost-reduction initiatives, including organizational rightsizing. People-related expenses decreased by $8.7 million, and severance costs associated with headcount reductions decreased by $0.9 million. The decrease also reflected $0.6 million in lower volume-driven expenses, consistent with the decline in sales volume, as well as $0.7 million in lower rental expense and $2.0 million in lower discretionary spending, including travel, professional fees and other expenses. These decreases were partially offset by a $0.5 million increase in the reserve for uncollectible accounts receivable.
Previous wording
Interest income (expense), net. Interest expense, net decreased to $0.2 million for the three months ended June 30, 2026 from $0.4 million for the three months ended June 30, 2025, as a result of a lower average loan balance and lower interest rates.
Current wording
Interest income (expense), net. Interest expense, net decreased to $0.9 million for the nine months ended September 30, 2026 from $1.0 million for the nine months ended September 30, 2025. The 2026 period included $0.8 million of interest expense associated with the sale of tariff claims. This expense was more than offset by lower interest expense on our line of credit, primarily due to a lower average outstanding loan balance and lower interest rates.
Previous wording
Provision for income taxes. Income tax expense was $4.7 million for the six months ended June 30, 2026, relative to a pre-tax loss of $1.0 million, compared to income tax expense of $4.0 million for the six months ended June 30, 2025, relative to a pre-tax loss of $5.2 million. Consistent with 2025, we expect the U.S. to be in a pre-tax loss position without benefit for the full year 2026, resulting in an elevated effective tax rate.
Current wording
Provision for income taxes. Income tax expense was $6.1 million for the nine months ended September 30, 2026, relative to a pre-tax income of $0.1 million, compared to income tax expense of $6.6 million for the nine months ended September 30, 2025, relative to a pre-tax loss of $10.9 million. Consistent with 2025, we expect the U.S. to be in a pre-tax loss position without benefit for the full year 2026, resulting in an elevated effective tax rate.
Previous wording
Cash and cash equivalents– On June 30, 2026, we had $11.0 million, $8.9 million, $5.2 million, $4.3 million and $3.0 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– On September 30, 2026, we had $13.4 million, $6.7 million, $4.6 million, $4.5 million and $12.2 million of cash and cash equivalents in Europe, the PRC, South America, Asia (excluding the PRC), and North 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") through September 30, 2027. The U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures.
Current wording
Available Borrowing Resources – Our Third Amended and Restated Credit Agreement ("Third Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank") provides for a revolving line of credit ("U.S. Credit Line") through September 30, 2027. The U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures.
Previous wording
The U.S. Credit Line has a maximum availability of up to $60.0 million, subject to meeting certain financial conditions. Availability is based on "Borrowing Base", which is 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 June 30, 2026, the U.S. Credit Line total availability was $43.3 million. At August 5, 2026, the U.S. Credit Line total availability was $38.9 million.
Current wording
The U.S. Credit Line has a maximum availability of up to $60.0 million, subject to meeting certain financial conditions. Availability is based on "Borrowing Base", which is defined as 75% of accounts receivable aged less than 120 days following their invoice date, less reserves for doubtful accounts and returns. The Borrowing Base is calculated monthly. At September 30, 2026, the U.S. Credit Line total availability was $47.9 million. At November 4, 2026, the U.S. Credit Line total availability was $45.2 million.
Previous wording
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 $1.9 million at June 30, 2026 and $0.5 million at December 31, 2025. At June 30, 2026 and December 31, 2025, we had $0.0 million and $5.5 million outstanding under the U.S. Credit Line, respectively. At June 30, 2026, our remaining availability under our U.S. Credit Line was $41.4 million.
Current wording
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 $1.9 million at September 30, 2026 and $0.5 million at December 31, 2025. At September 30, 2026 and December 31, 2025, we had $0.0 million and $5.5 million outstanding under the U.S. Credit Line, respectively. At September 30, 2026, our remaining availability under our U.S. Credit Line was $46.0 million. On October 9, 2026, we entered into an additional letter of credit for $0.7 million.
Previous wording
At June 30, 2026, the China Credit Line had a maximum availability of up to RMB 130.0 million (approximately $19.1 million), subject to meeting certain financial conditions.
Current wording
At September 30, 2026, the China Credit Line had a maximum availability of up to RMB 130.0 million (approximately $19.4 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 June 30, 2026 and December 31, 2025. At June 30, 2026, we had an outstanding balance of RMB 80.0 million (approximately $11.8 million) on our China Credit Line and RMB 50.0 million (approximately $7.4 million) of availability under our China Credit Line.
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 September 30, 2026 and December 31, 2025. At September 30, 2026, we had an outstanding balance of RMB 130.0 million (approximately $19.4 million) on our China Credit Line and RMB 0.0 million (approximately $0.0 million) of availability under our China Credit Line.
Previous wording
See Note 8 contained in the "Notes to Consolidated Financial Statements" for further information regarding our Credit Lines.
Current wording
See Note 8 contained in the "Notes to Consolidated Financial Statements" for further information regarding our Credit Lines and monetization of Tariff Refund Claims.
Previous wording
Net cash used by operating activities was $5.5 million during the six months ended June 30, 2026 compared to $17.7 million provided by operating activities during the six months ended June 30, 2025. The decrease in operating cash flows primarily reflects changes in working capital, particularly in accounts receivable, contract assets, and inventory. Net loss was $5.7 million for the three months ended June 30, 2026, compared to net loss of $9.2 million in the prior-year period. Depreciation and amortization expense was $6.2 million during the six months ended June 30, 2026 compared to $7.6 million during the six months ended June 30, 2025, primarily due to lower capital expenditures in recent years, consistent with the decline in production volumes. Inventories decreased by $8.1 million during six months ended June 30, 2026, compared to a decrease of $1.7 million during the same period in 2025, reflecting improved inventory management practices. A decrease in accounts receivable and contract assets, mainly due to lower sales, resulted in cash inflows of $6.5 million in the three months ended June 30, 2026 and $23.3 million in the three months ended June 30, 2025. Days sales outstanding were 77 days at June 30, 2026, compared to 75 days at June 30, 2025. A decrease in accounts payable and accrued liabilities, primarily driven by lower inventory purchases and timing of payments, resulted in cash outflows of $0.1 million during the six months ended June 30, 2026, compared to $15.4 million in the prior-year period.
Current wording
Net cash provided by operating activities was $16.6 million during the nine months ended September 30, 2026 compared to $27.8 million provided by operating activities during the nine months ended September 30, 2025. The decrease in operating cash flows primarily reflects changes in working capital, particularly in accounts receivable, contract assets, and inventory. Net loss was $6.0 million for the nine months ended September 30, 2026, compared to net loss of $17.5 million in the prior-year period. Depreciation and amortization expense was $9.0 million during the nine months ended September 30, 2026 compared to $11.1 million during the nine months ended September 30, 2025, primarily due to lower capital expenditures in recent years, consistent with the decline in production volumes. Inventories decreased by $8.2 million during nine months ended September 30, 2026, compared to a decrease of $1.4 million during the same period in 2025, reflecting improved inventory management practices. A decrease in accounts receivable and contract assets, mainly due to lower sales, resulted in cash inflows of $5.0 million in the nine months ended September 30, 2026 and outflows of $38.9 million in the nine months ended September 30, 2025. Days sales outstanding were 71 days at September 30, 2026, compared to 72 days at September 30, 2025. An increase in accounts payable and accrued liabilities, primarily driven by higher inventory purchases and timing of payments, resulted in cash inflows of $4.2 million during the nine months ended September 30, 2026, compared to outflows of $22.2 million in the prior-year period.
Previous wording
Net cash used for investing activities during the six months ended June 30, 2026 was $2.3 million, of which $1.6 million and $0.7 million was used for capital expenditures and the development of patents, respectively. Net cash used for investing activities during the six months ended June 30, 2025 was $4.0 million, of which $2.3 million and $1.5 million was used for capital expenditures and the development of patents, respectively.
Current wording
Net cash used for investing activities during thenine months ended September 30, 2026 was $3.5 million, of which $2.7 million and $1.2 million was used for capital expenditures and the development of patents, respectively. Net cash used for investing activities during thenine months ended September 30, 2025 was $5.7 million, of which $3.1 million and $2.3 million was used for capital expenditures and the development of patents, respectively. These outflows were partially offset by $0.3 million proceeds received on the sales of property, plant, and equipment.
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, respectively. We estimate that we will incur between $3.0 million and $4.0 million during the remainder of 2026.
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, respectively. We estimate that we will incur between $1.0 million and $1.5 million during the remainder of 2026.
Previous wording
Net cash used for financing activities was $4.9 million during the six months ended June 30, 2026 compared to $7.7 million during the six months ended June 30, 2025. The primary financing activities during the six months ended June 30, 2026 and 2025 were borrowings and repayments on our Credit Lines and repurchases of shares of our common stock. Net repayments on our Credit Lines were $12.5 million during the six months ended June 30, 2026 compared to $7.0 million during the six months ended June 30, 2025. During the six months ended June 30, 2026, we did not repurchase any of our common stock at June 30, 2026 compared to our repurchase of 101,000 shares at a cost of $0.7 million during the six months ended June 30, 2025.
Current wording
Net cash used for financing activities was $6.7 million during the nine months ended September 30, 2026 compared to $19.8 million during the nine months ended September 30, 2025. The primary financing activities during the nine months ended September 30, 2026 and 2025 consisted of borrowings and repayments under our Credit Lines and other short-term financing arrangements, as well as repurchases of shares of our common stock. Net repayments on our Credit Lines were $5.6 million during the nine months ended September 30, 2026 compared to $19.1 million during the nine months ended September 30, 2025. During the nine months ended September 30, 2026, we had net repayments of $1.1 million related to proceeds from the sale of tariff claims that were accounted for as short-term financing. In addition, during the nine months ended September 30, 2026, we did not repurchase any of our common stock, compared to our repurchase of 107,000 shares at a cost of $0.8 million during the nine months ended September 30, 2025.
Previous wording
Future cash flows used for financing activities are affected by our financing needs, which are largely dependent on the level of cash provided by or used in operations and the level of cash used in investing activities. Additionally, potential future repurchases of shares of our common stock will impact our cash flows used for financing activities. See Note 13 contained in the "Notes to Consolidated Financial Statements" for further information regarding our share repurchase programs.
Current wording
Future cash flows used for financing activities are affected by our financing needs, which are largely dependent on the level of cash provided by or used in operations and the level of cash used in investing activities. Additionally, potential future repurchases of shares of our common stock and dividend payments will impact our cash flows used for financing activities. See Note 13 contained in the "Notes to Consolidated Financial Statements" for further information regarding our share repurchase programs.