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, monetization of IEEPA tariff refund claims, and re-acquisition of assets held for sale, as described in Notes 12, 8, and 19, respectively 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 nine months ended September 30, 2026, 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, 2025.

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

With the exception of the following policy, our significant accounting policies are unchanged from those disclosed in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Significant Accounting Policy Updates

IEEPA Tariff Refund Claims/ Monetization of Tariff refund claims

During the first quarter of 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unlawful and therefore invalid. As a result, the Company intended to seek reimbursement from the US Customs and Border Protection ("CBP") for IEEPA tariffs paid during calendar years 2025 and 2026.

The Company has applied the loss recovery guidance under FASB ASC 450 –Contingencies to account for the recognition of these claims. Any future recovery of tariff refund claims will be recognized as a receivable when the claim becomes probable and will be reflected as a reduction of cost of goods sold for inventory previously sold, or as a reduction of inventory for goods that remain unsold. In the first quarter of 2026, the Company did not recognize an asset for recovery of tariff refund claims based on available information at that time, and considered recovery was not probable. As of the end of the second quarter of 2026, following a reassessment of the facts and circumstances, management concluded that recovery of the tariff refund claims had become probable. Accordingly, the Company recognized an asset for the expected recovery of the tariff refund claims.

During the second quarter of 2026, the Company entered into the Tariff Claim Agreement with a third-party financial institution ("Buyer") to monetize its claims for refunds of tariffs previously paid to CBP in consideration for the Purchase Price (as defined below), which reflects a discount to the aggregate amount payable by CBP pursuant to the Claims (as defined below) as mutually agreed between the Company and Buyer. The monetization of tariff refund claims was accounted for in accordance with FASB ASC 470 – Debt and presented as a short-term financing on the consolidated balance sheet.

Recently Adopted Accounting Pronouncements

In July 2025, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2025-05, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets". This guidance allows entities to elect a practical expedient that assumes that the current conditions as of the balance sheet date do not change for the remaining life of the asset. This guidance is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The guidance is to be applied on a prospective basis, with early adoption permitted. The Company adopted this standard on a prospective basis for the year beginning January 1, 2026 and elected the practical expedient allowed by ASU. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

Accounting Pronouncements Not Yet Effective

In November 2024, the FASB issued 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 September 2025, the FASB issued ASU 2025-06, "Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software". This guidance removes all references to software development project stages so that the guidance is neutral to different software development methods. Therefore, under the ASU, software capitalization will begin when management has authorized and committed to funding the software project and when it is probable that the project will be completed and the software will be used to perform the function intended. This guidance is effective for annual periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The guidance is to be applied on a prospective basis, or on a modified transition approach or a retrospective transition approach, with early adoption permitted. 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 areas 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, 2024, was $114.2 million.

Allowance for Credit Losses

Changes in the allowance for credit losses were as follows:

Contract Assets

Contract assets were $7.2 million and $8.1 million at September 30, 2026 and December 31, 2025, 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:

Trade receivables associated with significant customers 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

Purchases from the following supplier totaled more than 10% of our total inventory purchases for the three months ended September 30, 2025:

(1) Purchases associated with this supplier did not total more than 10% of our inventory purchases for the indicated period.

There were no purchases from suppliers that totaled more than 10% of our total inventory purchases for the nine months ended September 30, 2026, and 2025, respectively.

There were no trade payable balances to suppliers that totaled more than 10% of our total accounts payable at September 30, 2026, and December 31, 2025, respectively.

Note 5 —Long-lived Tangible Assets

Long-lived tangible assets by geographic areas, 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 $172.2 million and $163.7 million at September 30, 2026 and December 31, 2025, respectively.

Depreciation expense was $1.6 million and $2.2 million for the three months ended September 30, 2026 and 2025, respectively.

Depreciation expense was $5.4 million and $7.3 million for the nine months ended September 30, 2026 and 2025, 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 $53.5 million and $52.5 million at September 30, 2026 and December 31, 2025, 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 September 30, 2026, was as follows:

Note 7 —Leases

We have entered into various operating lease agreements for automobiles, offices and manufacturing facilities throughout the world. At September 30, 2026, our operating leases had remaining lease terms of up to 34 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 next five years and thereafter to the operating lease liabilities recognized in our consolidated balance sheets at September 30, 2026. The reconciliation excludes short-term leases that are not recorded in our consolidated balance sheets.

At September 30, 2026, we did not have any operating leases that had not yet commenced.

Note 8 —Lines of Credit

U.S. Line of Credit

Our Third Amended and Restated Credit Agreement, as amended ("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.

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.

Amounts available for borrowing under the U.S. Credit Line are reduced by the balance of any outstanding letters of credit, of which there was $1.9 million at September 30, 2026 and $0.5 million at December 31, 2025. On October 9, 2026, we entered into an additional letter of credit for $0.7 million.

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 Third 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 Third Amended Credit Agreement also contains a facility fee of 0.25%. The interest rates in effect at September 30, 2026 and December 31, 2025 were 6.75% and 6.65%, respectively.

The Third Amended Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. 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 Third Amended Credit Agreement at September 30, 2026.

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. Our total interest expense on borrowings under the U.S. Credit Line was $0.0 million and $0.4 million during the three months ended September 30, 2026 and 2025, respectively. Our total interest expense on borrowings under the U.S. Credit Line was $0.4 million and $1.4 million during the nine months ended September 30, 2026 and 2025, respectively. Our total facility fee expense under the U.S. Credit Line was $38 thousand and $48 thousand during the three months ended September 30, 2026 and 2025, respectively. Our total facility fee expense under the U.S. Credit Line was $0.1 million and $0.1 million during the nine months ended September 30, 2026 and 2025, 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 (the "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. As a continuation of the agreement, on July 15, 2026, we executed an amendment to the Line of Credit Agreement, which extends the term of the China Credit Line to July 9, 2027. The China Credit Line may be used for working capital purposes.

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.

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.

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 rates in effect at September 30, 2026 and December 31, 2025 were 2.86% and 2.92%, respectively.

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 three months ended September 30, 2026.

At September 30, 2026 and December 31, 2025, we had RMB 130.0 million (approximately $19.4 million) and RMB 130.0 million (approximately $18.6 million), respectively, outstanding under the China Credit Line. At September 30, 2026, we had RMB 0.0 million (approximately 0.0 million) of availability under our China Credit Line. Our total interest expense on borrowings under the China Credit Line was RMB 0.9 million (approximately $0.1 million) and RMB 0.8 million (approximately $0.1 million) during the three months ended September 30, 2026 and 2025, respectively. Our total interest expense on borrowings under the China Credit Line was RMB 2.7 million (approximately $0.4 million) and RMB 2.1 million (approximately $0.3 million) during the nine months ended September 30, 2026 and 2025, respectively.

Monetization of IEEPA Tariff Refund Claims

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.

The monetization of the Company`s tariff refund claims were accounted for in accordance with FASB ASC 470 – Debt and presented as a short-term financing on the consolidated balance sheet. As of September 30, 2026, the unamortized financing costs amounted to $46 thousand. The costs are being amortized through the expected settlement date of the claim and recorded in Interest income (expense) on the consolidated statements of operations. Refer to “Note 1. Basis of Preparation" for related accounting policy update on tariff refund claims.

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.

Note 9 —Income Taxes

We recorded income tax expense of $1.4 million and $2.6 million for the three months ended September 30, 2026 and 2025, respectively. We recorded income tax expense of $6.1 million and $6.6 million for the nine months ended September 30, 2026 and 2025, respectively. The difference between the Company’s effective tax rate and the 21.0% U.S. federal statutory rate for the three months ended September 30, 2026 primarily related to the mix of pre-tax income and loss among jurisdictions and permanent tax items including a tax on net controlled foreign corporation tested income. The Company's income tax provision can be affected by other factors, including changes in 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, 2025, 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 income in making this assessment. At December 31, 2025, we had a three-year world wide cumulative pre-tax loss and have accordingly provided a full valuation allowance on our U.S. federal and state deferred tax assets and on certain foreign deferred tax assets. During the three months ended September 30, 2026, we recorded an additional valuation allowance of approximately $0.1 million against deferred tax assets of our Brazil subsidiary. There were no other significant changes to our valuation allowance position.

Uncertain Tax Positions

At September 30, 2026, we had gross unrecognized tax benefits of approximately $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 the tax benefits are realized. We have classified uncertain tax positions as non-current income tax liabilities unless they are expected to be paid within one year.

Interest and penalties

We have elected to classify interest and penalties as a component of tax expense. Accrued interest and penalties are immaterial at September 30, 2026 and December 31, 2025 and are included in the unrecognized tax benefits.

Enactment of H.R.1

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 that became effective in 2025 and others to be implemented in 2026 and 2027. Due to the U.S. valuation allowance position, the legislation is not expected to have a material impact on the Company's estimated annual effective tax rate or cash tax position.

Note 10 —Accrued Compensation

The components of accrued compensation were as follows:

(1)As of December 31, 2025, this includes $0.8 million of accrued severance expenses related to our 2025 restructuring plan and global reduction in force. As of September 30, 2026, this includes $0.1 million of accrued severance expenses related to our 2025 restructuring plan and global reduction in force.

(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 September 30, 2026, and December 31, 2025.

Note 11 —Other Accrued Liabilities

The components of other accrued liabilities were as follows:

(1)Includes $0.1 million and $0.2 million at September 30, 2026 and December 31, 2025, 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

In 2025, we ceased production activities and completed the wind-down of our manufacturing facility in Mexico. We recognized cumulative restructuring charges of $4.2 million in connection with the wind-down of the facility and do not expect to incur additional material restructuring charges related to the shutdown.

Restructuring liabilities are included in accrued compensation, accounts payable and other accrued liabilities on our consolidated balance sheets. Ending balances for these restructuring liabilities were $0.2 million at September 30, 2026 and $0.4 million at December 31, 2025, respectively.

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 were all stayed on various grounds. 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 in July 2021, the Administrative Law Judge ("ALJ") issued an initial determination finding Roku in violation of Section 337. The Commission issued a final determination in November 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 in January 2022. The Federal Circuit affirmed in January 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. In January 2025, the Supreme Court denied cert.

While this ITC matter has been finally resolved and Roku has no more ability to appeal, we 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 in July 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. On September 4, 2025, the Court set various dates and deadlines for the case, including a trial date beginning in March 2027, which date has now been rescheduled to a date beginning in May 2027 pursuant to mutual agreement of UEI and Roku. On December 15, 2025, UEI filed a second amended complaint in the consolidated case.

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 in June 2022, the ALJ found one of Roku’s patents to be invalid as indefinite. Thereafter, in June 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. In October 2022, the full ITC issued its final determination affirming the ID, ruling there was no violation of the Tariff Act and terminating the investigation. In December 2022, Roku filed an appeal. Further, in October 2023, the PTAB issued its Final Written Decision invalidating all of Roku's infringement claims. Roku also filed an appeal of this decision. 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. On January 21, 2026, the PTAB issued a ruling invalidating the remaining claim, and thus all claims of both asserted patents have been invalidated. 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. On February 27, 2026, Roku voluntarily dismissed this District Court case.

Amazon Litigation

On August 6, 2026, UEI filed a complaint in the CDCA against Amazon.com, Inc., Amazon Web Services Inc. and Amazon.com Services, LLC (collectively, “Amazon”) alleging infringement offive UEI patents. On October 9, 2026, Amazon filed a motion to dismiss three of the asserted patents.

Court of International Trade Action

On March 18, 2026, we filed a complaint in the Court of International Trade (the "CIT") against the United States of America, U.S. Customs & Border Protection and Rodney S. Scott, U.S. Customs & Border Protection Commissioner, challenging both the substantive and procedural processes related to instituting tariffs under the International Emergency Economic Powers Act (“IEEPA”) and seeking declaratory and permanent injunctive relief related to refunding of all IEEPA duties paid by UEI.

Other Litigation Matters

There are no other material pending legal proceedings to which we or any of our subsidiaries are 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 (as subsequently amended, 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 986,444 shares of our common stock. On March 11, 2026, the Board of Directors authorized an amendment to the Share Repurchase Program to authorize the repurchase, from time to time, of up to an additional 1,000,000 shares of the Company's outstanding common stock, or a total of 1,013,556 shares (including the 13,556 shares remaining available under the prior Board authorization for repurchase under the Share Repurchase Program). This authorization will remain in effect until such time as the Board of Directors terminates the authorization or the Share Repurchase Program is executed in full. We may utilize various methods to effect the repurchases, including in privately negotiated and/or open-market transactions, and 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. There have been no shares repurchased for the three and nine months ended September 30, 2026.

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 September 30, 2026, we expect to recognize $1.7 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 1.9 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 September 30, 2026, we expect to recognize $1.4 million of total unrecognized pre-tax stock-based compensation expense related to non-vested performance stock awards over a weighted-average period of 3.1 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 2026 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 September 30, 2026. This amount will change based on the fair market value of our stock.

The assumptions we utilized in the Black-Scholes pricing model and the resulting weighted average fair value of stock option grants were the following:

As of September 30, 2026, 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 2.7 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 nine months ended September 30, 2025, in order to collect an open accounts receivable balance with an Argentine customer, we purchased $2.5 million and sold BCS securities of $2.3 million and incurred a loss on the transactions of $0.2 million which is recorded in other income (expense) on our consolidated statements of operations. There has been no activity for the three and nine months ended September 30, 2026.

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 $0.2 million of loss related to BCS security transactions during the nine months ended September 30, 2025. Included in this amount is $0.6 million of loss on assets held for sale for the three and nine months ended September 30, 2026.

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 loss 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 gain of $15.0 thousand and net pre-tax loss $0.2 million for the three months ended September 30, 2026, and 2025, respectively.

Details of foreign currency exchange contracts held were as follows:

(1)Unrealized gains on foreign currency exchange contracts are recorded in 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 chief executive officer, 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 and impairment expenses.

(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, factory restructuring charges, severance, lease abandonment costs and costs associated with our litigation settlement costs.

(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 areas 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.

Note 19 —Long-Lived Assets Classified as Held For Sale

During the three months ended June 30, 2026, the Company re-acquired $1.2 million of certain manufacturing equipment within Mexico previously sold in December 2025 following an amendment to the original sales agreement under which legal title was returned to the Company and all payment obligations were waived. At September 30, 2026, the remaining balance of this manufacturing equipment held for sale was $0.1 million.

Note 20 —Dividend

Special Cash Dividend

On August 5, 2026, the Board of Directors authorized and approved a special, one-time cash dividend payable in an amount equal to $0.24 per share to all holders of shares of the Company’s common stock. The special dividend of $3.1 million was paid on October 15, 2026 to the Company’s stockholders of record on August 24, 2026. At September 30, 2026, $3.2 million was accrued at Other Accrued Liabilities, including a $0.1 million accrual in connection with outstanding time-based and performance-based restricted stock unit awards.

Note 21 —Subsequent Event

Brazil Operations Closure

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.

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 potential asset impairment, 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.