What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-08 compared with 2022-03-04 · 260 added, 249 removed, 1040 unchanged (33% of the section changed)

31 unchanged sentences

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Revenue recognition - Identifying and evaluating terms and conditions in contracts for the timing of revenue recognition

As described further in Note 2 to the consolidated financial statements, product revenue is generated through manufacturing and delivering universal control, sensing and automation products, and AV accessories.

As described further in Note 2 and Note 4 to the consolidated financial statements, product revenue is generated through manufacturing and delivering universal control, sensing, and automation products, and AV accessories.

The Company recognizes revenue over time for custom products with no alternative use when the Company has an enforceable right to payment for performance completed to date, including a reasonable margin, through a contractual commitment from the customer.

Revenue is recognized at a point in time if the criteria for recognizing revenue over time are not met.

For each new contract and/or product, management performs an analysis to determine whether the asset created is a custom asset with no alternative use and whether the terms and conditions of the contract indicate the Company has an enforceable right to payment for performance completed prior to the transfer of title of the underlying asset.

We identified the determination of over time versus point in time revenue recognition as a critical audit matter.

The principal considerations for our determination that over time versus point in time revenue recognition is a critical audit matter is the significant judgment exercised by management in identifying and evaluating whether new contracts and/or products meet the criteria for over time or point in time revenue recognition.

Significant judgments include the evaluation of legal terms and rights within each jurisdiction that the Company operates and evaluation of whether it is possible, contractually or economically, to repurpose or redirect products.

Our audit procedures related to the over time versus point in time revenue recognition included the following, among others:

• We tested the design and operating effectiveness of key controls over the Company's new contract review process, specifically those related to the identification and evaluation of terms and conditions associated with an enforceable right to payment.

• We tested design and operating effectiveness of key controls associated with the Company's classification of new products, specifically those associated with determination and classification of a product as having no alternative use.

• Performed tests of details, on a sample basis from the Company's active products listing, to determine whether products marked as custom with no alternative use are restricted contractually or economically to be repurposed or redirected.

This includes evaluating management assumptions regarding the economic feasibility of repurposing a finished product and evidence to support that the final product has no alternative use, such as brand names and custom designs within the plastic molding process.

• For a sample of contracts, obtained the contract and management's analysis over the enforceable right to payment and validated that the payment terms within the contract were properly evaluated and the contract was properly included or excluded from the over time revenue recognition.

• For a sample of revenue transactions, we traced the products sold into the Company's listing of active products and determined whether that product was appropriately classified as custom or non-custom by applying the same testing approach noted above.

For transactions selected with custom products, we also obtained and read the contract and contract amendments to determine whether the payment terms within the contract specifically identified an enforceable right to payment upon cancellation.

We identified the determination of overtime versus point in time revenue recognition as a critical audit matter.

The principal considerations for our determination that overtime versus point in time revenue recognition is a critical audit matter is the significant judgment exercised by management in identifying and evaluating whether new contracts and/or products meet the criteria for over time or point in time revenue recognition.

Significant judgments include the evaluation of contractual legal terms and rights within each jurisdiction in which the Company operates and evaluation of whether it is possible, contractually or economically, to repurpose or redirect products for an alternative use.

Our audit procedures related to the overtime versus point in time revenue recognition included the following, among others:

• We tested the design and operating effectiveness of key controls over the Company's new and amended contract review process, specifically those related to the identification and evaluation of terms and conditions associated with an enforceable right to payment.

• We tested design and operating effectiveness of key controls associated with the Company's classification of new products, including those associated with determination and classification of a product as having no alternative use.

• For a selection of parts from the Company's active products listing, we performed testing to determine whether products marked as custom with no alternative use are restricted contractually or economically to be repurposed or redirected.

This includes evaluating management assumptions regarding the economic feasibility of repurposing a finished product and evidence to support that the final product has no alternative use.

• For a selection of contracts, obtained the contract and management's analysis over the enforceable right to payment and validated that the payment terms within the contract were properly evaluated and the contract was properly included or excluded from the overtime revenue recognition.

• For a selection of revenue transactions, we traced the products sold into the Company's listing of active products and determined whether that product was appropriately classified as custom or non-custom by applying the same testing approach noted above.

The two parts to this test serve to determine whether the transaction was appropriately recorded over time or at a point in time.

33 unchanged sentences

Operating lease obligations 15,027 14,266

Contingent consideration — 292

Deferred income taxes 2,724 2,394

50 unchanged sentences

Change in foreign currency translation due to sale of Argentina subsidiary — 5,425 —

Comprehensive income $ 10,299 $ 42,831 $ 1,130

Comprehensive income (loss) $ ( 7,256 ) $ 10,299 $ 42,831

The accompanying notes are an integral part of these consolidated financial statements.

21 unchanged sentences

Currency translation adjustment ( 427 ) ( 427 )

Change in foreign currency translation due to sale of Argentina subsidiary 5,425 5,425

Shares issued for employee benefit plan and compensation 203 2 1,090 1,092

7 unchanged sentences

Currency translation adjustment ( 7,663 ) ( 7,663 )

Change in foreign currency translation due to sale of Argentina subsidiary 5,425 5,425

Shares issued for employee benefit plan and compensation 212 2 1,197 1,199

3 unchanged sentences

Employee and director stock-based compensation 10,013 10,013

Performance-based common stock warrants ( 686 ) ( 686 )

Balance at December 31, 2022 25,000 $ 250 ( 12,295 ) $ ( 368,194 ) $ 326,839 $ ( 21,187 ) $ 330,698 $ 268,406

7 unchanged sentences

Net income $ 407 $ 5,301 $ 38,572

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Depreciation and amortization 24,033 26,747 29,735

14 unchanged sentences

Accrued income taxes ( 2,074 ) 2,860 ( 6,486 )

Net cash provided by operating activities 40,283 73,392 85,257

Net cash provided by (used for) operating activities 10,926 40,283 73,392

Cash flows from investing activities:

Purchase of term deposit ( 7,487 ) — —

Redemption of term deposit 7,803 — —

Acquisition of the net assets of Qterics, Inc.

Acquisitions of property, plant and equipment ( 14,006 ) ( 12,586 ) ( 16,862 )

1 unchanged sentence

Payment on sale of Ohio call center — — ( 500 )

Net cash used for investing activities ( 17,041 ) ( 23,734 ) ( 23,968 )

Net cash provided by (used for) investing activities ( 21,208 ) ( 17,041 ) ( 23,734 )

Cash flows from financing activities:

4 unchanged sentences

Contingent consideration payments in connection with business combinations — — ( 3,091 )

Net cash used for financing activities ( 22,026 ) ( 65,964 ) ( 39,231 )

Net cash provided by (used for) financing activities 20,501 ( 22,026 ) ( 65,964 )

Effect of foreign currency exchange rate changes on cash and cash equivalents ( 4,292 ) 2,444 ( 843 )

12 unchanged sentences

("UEI"), based in Scottsdale, Arizona, designs, develops, manufactures, ships and supports control and sensor technology solutions and a broad line of universal control systems, audio-video ("AV") accessories, and intelligent wireless security and smart home products that are used by the world's leading brands in the video services, consumer electronics, security, home automation, climate control, and home appliance markets.

In addition, over the past 36 years, we have developed a broad portfolio of patented technologies and a cloud-based connectivity and control software solution that we license to our customers, including many leading Fortune 500 companies.

In addition, over the past 37 years, we have developed a broad portfolio of patented technologies and cloud-based connectivity and control software solutions that we license to our customers, including many leading Fortune 500 companies.

Distribution methods for our control solutions vary depending on the sales channel.

18 unchanged sentences

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, intangible assets and goodwill, business combinations, income taxes, stock-based compensation expense and performance-based common stock warrants.

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, intangible assets and goodwill, business combinations, income taxes and related valuation allowances, stock-based compensation expense and performance-based common stock warrants.

Actual results may differ from these assumptions and estimates, and they may be adjusted as more information becomes available.

7 unchanged sentences

Revenues are generated from manufacturing, shipping and supporting control and sensor technology solutions and a broad line of pre-programmed and universal control products, AV accessories, and intelligent wireless security and smart home products that are used in the video services, consumer electronics, security, home automation, climate control, and home appliance market, which are sold through multiple channels, and licensing intellectual property that is embedded in these products or licensed to others for use in their products.

We also generate revenues from a cloud-based software solution enabling software updates, digital rights management provisioning and remote technical support to consumer electronics customers.

Revenue - Product revenue is generated through manufacturing, shipping and supporting control and sensor technology solutions and a broad line of pre-programmed and universal control products, AV accessories, and intelligent wireless security and smart home products that are used in the video services, consumer electronics, security, home automation, climate control, and home appliance market, which are sold through multiple channels.

16 unchanged sentences

Tiered royalties are recorded on a straight-line basis according to the forecasted per-unit fees taking into account the pricing tiers.

We recognize service revenues related to our cloud-based software solution on an over-time basis, as our customers simultaneously receive and consume the benefits provided by our performance.

Revenues are recognized over the period during which the performance obligations are satisfied, and control of the service is transferred to the customers.

Contract assets - Contract assets represent the value of revenue recognized over time for which we have not yet invoiced the customer.

1 unchanged sentence

Contract liabilities - A contract liability is recorded when consideration is received from a customer prior to fully satisfying a performance obligation in a contract.

Our contract liabilities primarily consist of cash received in advance for non-recurring engineering and tooling services.

Our contract liabilities primarily consist of cash received in advance of providing our cloud-based software services.

These contract liabilities will be recognized as revenues when control of the related product or service is transferred to the customer.

See Note 12 for further information concerning contract liabilities.

Other performance obligations - Payment terms are typically on open credit terms consistent with industry practice and do not have significant financing components.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Other sales-related matters - Trade receivables are recorded at the invoiced amount and do not bear interest.

Payment terms are typically on open credit terms consistent with industry practice and do not have significant financing components.

We accrue for discounts and rebates based on historical experience and our expectations regarding future sales to our customers.

2 unchanged sentences

Changes in such accruals may be required if future rebates and incentives differ from our estimates.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Trade receivables are recorded at the invoiced amount and do not bear interest.

Sales allowances are recognized as reductions of trade receivables to arrive at trade receivables, net if the sales allowances are distributed in customer account credits.

See Note 4 for further information concerning our sales allowances.

We present all non-income government-assessed taxes (sales, use and value added taxes) collected from our customers and remitted to governmental agencies on a net basis (excluded from revenue) in our financial statements.

24 unchanged sentences

Advertising expense totaled $ 0.5 million, $ 0.8 million and $ 0.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Shipping and Handling Fees and Costs

3 unchanged sentences

Shipping and handling fees and costs totaled $ 10.8 million, $ 11.8 million and $ 9.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Stock-Based Compensation

16 unchanged sentences

To the extent that our projections change in the future as to the number of warrants that will vest, a cumulative catch-up adjustment will be recorded in the period in which our estimates change.

The FASB issued guidance in November 2019 that clarifies the accounting for share-based payments issued as sales incentives to customers.

The guidance requires that stock-based compensation expense be recorded as a reduction in the transaction price on the basis of the grant-date fair value.

The transition provisions require that equity-classified awards be measured at the adoption date fair value if the measurement date has not been established prior to the adoption date.

The measurement periods for the first two successive two-year periods of our outstanding performance-based common stock warrants were completed prior to adoption and were not impacted by this updated guidance.

The measurement period for the final two-year period began on January 1, 2020, and, accordingly, we measured the fair value of the award as of our adoption date on January 1, 2020 using the Black-Scholes option pricing model.

The assumptions utilized in the Black-Scholes model include the price of our common stock, the risk-free interest rate, expected volatility, expected life in years and dividend yield.

The price of our common stock is equal to the average of the high and low trade prices of our common stock on the grant date.

The risk-free interest rate over the expected life is equal to the prevailing U.S.

Treasury note rate over the same period.

Expected volatility is determined utilizing historical volatility over a period of time equal to the expected life of the warrant.

Expected life is equal to the remaining contractual term of the warrant.

The dividend yield is assumed to be zero since we have not historically declared dividends and do not have any plans to declare dividends in the future.

See Note 16 for further information regarding performance-based common stock warrants.

8 unchanged sentences

Our intercompany foreign investments and long-term debt that are not intended for settlement are translated using historical exchange rates.

Transaction gains and losses generated by the effect of changes in foreign currency exchange rates on recorded assets and liabilities denominated in a currency different than the functional currency of the applicable entity are recorded in other income (expense), net.

See Note 17 for further information concerning transaction gains and losses.

UNIVERSAL ELECTRONICS INC.

1 unchanged sentence

DECEMBER 31, 2022

See Note 17 for further information concerning transaction gains and losses.

Earnings Per Share

4 unchanged sentences

Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, debt and derivatives.

Our financial instruments consist primarily of cash and cash equivalents, term deposit, accounts receivable, accounts payable, accrued liabilities, debt and derivatives.

The carrying value of our financial instruments, excluding derivatives, approximates fair value as a result of their short maturities.

1 unchanged sentence

See Notes 3, 4, 9, 11, 12 and 19 for further information concerning our financial instruments.

Cash and Cash Equivalents

Cash, Cash Equivalents and Term Deposit

Cash and cash equivalents include cash accounts and all investments purchased with initial maturities of three months or less.

Our term deposit had an initial maturity of one year , but was redeemed prior to December 31, 2022.

Domestically, we generally maintain balances in excess of federally insured limits.

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.

We attempt to mitigate our exposure to liquidity, credit and other relevant risks by placing our cash, cash equivalents and term deposit with financial institutions we believe are high quality.

These financial institutions are located in many different geographic regions.

1 unchanged sentence

We have not sustained credit losses from instruments held at financial institutions.

See Note 3 for further information concerning cash and cash equivalents.

See Note 3 for further information concerning cash, cash equivalents and term deposit.

Allowance for Credit Losses

41 unchanged sentences

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Some of our leases include options to extend with a range of three years to five years with one extension at the then current market rate.

Some of our leases include options to extend with a range of three years to five years with two extensions at the then current market rate.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

2 unchanged sentences

See Note 8 for further information concerning our leases.

We record the excess purchase price of net tangible and intangible assets acquired over their estimated fair value as goodwill.

We evaluate the carrying value of goodwill on December 31 of each year and between annual evaluations if events occur or circumstances change that may reduce the fair value of the reporting unit below its carrying amount.

Such circumstances may include, but are not limited to:

(1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator.

UNIVERSAL ELECTRONICS INC.

1 unchanged sentence

DECEMBER 31, 2022

We record the excess purchase price of net tangible and intangible assets acquired over their estimated fair value as goodwill.

Such circumstances may include, but are not limited to:

(1) a significant adverse change in legal factors or in business climate, (2) a decline in macroeconomic conditions, (3) a significant decline in our financial performance or (4) a significant decline in the price of our common stock for a sustained period of time.

We perform our annual impairment test using a qualitative assessment weighing the relative impact of factors that are specific to our single reporting unit as well as industry and macroeconomic factors.

29 unchanged sentences

• brand awareness and market position, as well as assumptions regarding the period of time the brand will continue to be used in our product portfolio;

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

• discount rates utilized in discounted cash flow models.

2 unchanged sentences

We re-measure this liability at each reporting period and record changes in the fair value within operating expenses.

Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

amount of earnings estimates or in the timing or likelihood of achieving earnings-based milestones.

Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of earnings estimates or in the timing or likelihood of achieving earnings-based milestones.

Contingent consideration is recorded in other accrued liabilities and long-term contingent consideration in our consolidated balance sheets.

See Note 12 for further information concerning contingent consideration.

Our foreign currency exposures are primarily concentrated in the Brazilian Real, British Pound, Chinese Yuan Renminbi, Euro, Indian Rupee, Japanese Yen, and Mexican Peso.

See Note 21 for further information concerning business combinations.

Our foreign currency exposures are primarily concentrated in the Brazilian Real, British Pound, Chinese Yuan Renminbi, Euro, Hong Kong Dollar, Indian Rupee, Japanese Yen, Korean Won and Mexican Peso.

We periodically enter into foreign currency exchange contracts with terms normally lasting less than nine months , to protect against the adverse effects that exchange-rate fluctuations may have on our foreign currency-denominated receivables, payables, cash flows and reported income.

17 unchanged sentences

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes", which, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities.

Under previous guidance, an entity recognized the effects of the enacted tax law change on the effective income tax rate in the period that included the effective date of the tax law.

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers".

This guidance requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, "Revenue from Contracts with Customers".

At the acquisition date, the acquirer applies the revenue recognition model as if it had originated the acquired contracts.

Our adoption of this guidance on January 1, 2022 did not have a material impact on our consolidated statement of financial position, results of operations and cash flows.

4 unchanged sentences

Accounting Updates Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting", and in January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform".

In March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting", in January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform", and in December 2022, the FASB issued ASU 2022-06, "Deferral of the Sunset Date of Topic 848".

This guidance is intended to provide temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates.

1 unchanged sentence

These amendments are not expected to have a material impact on our consolidated statement of financial position, results of operations and cash flows.

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers".

At the acquisition date, the acquirer applies the revenue recognition model as if it had originated the acquired contracts.

The amendments in this ASU are effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

Adoption of the amendments should be applied prospectively.

Early adoption is also permitted, including adoption in an interim period.

If early adopted, the amendments are applied retrospectively to all business combinations for which the acquisition date occurred during the fiscal year of adoption.

The amendments are not expected to have a material impact on our consolidated statement of financial position, results of operations and cash flows.

Note 3 — Cash and Cash Equivalents

Note 3 — Cash and Cash Equivalents and Term Deposit

Cash and cash equivalents were held in the following geographic regions:

7 unchanged sentences

$ 66,740 $ 60,813

On January 25, 2022, we entered into a one-year term deposit cash account with Banco Santander (Brasil) S.A., denominated in Brazilian Real.

The term deposit earned interest at a variable annual rate based upon the Brazilian CDI overnight interbank rate.

As of December 31, 2022, all of this term deposit was redeemed.

Note 4 — Revenue and Accounts Receivable, Net

6 unchanged sentences

Net sales $ 542,751 $ 601,602 $ 614,680

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

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

8 unchanged sentences

Total net sales $ 542,751 $ 601,602 $ 614,680

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

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

18 unchanged sentences

(1) Other accounts receivable is primarily comprised of value added tax and supplier rebate receivables.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Allowance for Credit Losses

3 unchanged sentences

Balance at beginning of period $ 1,285 $ 1,412 $ 1,492

Additions to costs and expenses — 332 441

Additions (reductions) to costs and expenses ( 182 ) — 332

Cash receipts — — ( 157 )

1 unchanged sentence

Balance at end of period $ 957 $ 1,285 $ 1,412

Trade receivables associated with these significant customers that totaled more than 10% of our accounts receivable, net were as follows:

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

$ (thousands) % of Accounts Receivable, Net $ (thousands) % of Accounts Receivable, Net

Comcast Corporation $ 15,367 13.7 % $ — (1)

$ 19,782 15.3 %

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

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Note 5 — Inventories and Significant Suppliers

8 unchanged sentences

We purchase integrated circuits, components and finished goods from multiple sources.

Purchases from our supplier, Qorvo International Pte Ltd., totaled $ 38.7 million or 11.8 % of our total inventory purchases for the year ended December 31, 2021 and $ 43.5 million or 14.2 % for the year ended December 31, 2020.

No supplier totaled 10% or more of our total inventory purchases for the year ended December 31, 2019.

Purchases from the following supplier totaled 10% of our total inventory purchases:

Year Ended December 31,

2022 2021 2020

$ (thousands) % of Total Inventory Purchases $ (thousands) % of Total Inventory Purchases $ (thousands) % of Total Inventory Purchases

Qorvo International Pte Ltd.

$ 33,293 11.5 % $ 38,712 11.8 % $ 43,543 14.2 %

Purchases from the following supplier totaled more than 10% of our total accounts payable:

$ (thousands) % of Total Accounts Payable $ (thousands) % of Total Accounts Payable

Zhejiang Zhen You Electronics Co.

Ltd., totaled $ 9.9 million or 10.6 % of our accounts payable balance at December 31, 2021.

No supplier totaled 10% or more of our accounts payable balance at December 31, 2020.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

$ 9,862 10.6 %

(1) Accounts payable associated with this supplier did not total more than 10% of our accounts payable for the indicated period.

Note 6 — Property, Plant, and Equipment, Net

13 unchanged sentences

Total property, plant, and equipment, net $ 62,791 $ 74,647

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Depreciation expense was $ 19.9 million, $ 22.8 million and $ 23.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

During the year ended December 31, 2022, we incurred $ 2.9 million in impairment charges, recorded in cost of sales, relating to the underutilization of certain property, plant and equipment in our Mexico factory.

During the year ended December 31, 2021, we incurred $ 3.3 million in impairment charges, recorded in cost of sales, relating to the underutilization of property, plant and equipment in our PRC-based factories, as a result of our long-term factory planning strategy of reducing our concentration risk in that region.

Impairment charges were immaterial for the years ended December 31, 2020 and 2019.

Impairment charges were immaterial for the year ended December 31, 2020.

Construction in progress was as follows:

4 unchanged sentences

Tooling 1,827 1,168

Other 442 417

Total construction in progress

7 unchanged sentences

Mexico 14,402 20,509

Vietnam 6,923 —

All other countries 3,745 4,330

Total long-lived tangible assets $ 84,390 $ 94,494

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Note 7 — Goodwill and Intangible Assets, Net

4 unchanged sentences

Balance at December 31, 2021 48,463

Goodwill acquired during the period (1)

Foreign exchange effects ( 91 )

Balance at December 31, 2022 $ 49,085

(1) During the year ended December 31, 2022, we recognized $ 0.7 million of goodwill related to the Qterics, Inc.

("Qterics") acquisition.

Refer to Note 21 for further information about this acquisition.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

We conducted annual goodwill impairment reviews on December 31, 2022, 2021 and 2020.

28 unchanged sentences

Total amortization expense $ 4,018 $ 3,990 $ 6,500

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Estimated future annual amortization expense related to our intangible assets at December 31, 2022, is as follows:

2 unchanged sentences

Total $ 24,470

The remaining weighted average amortization period of our intangible assets is 6.3 years.

The remaining weighted average amortization period of our intangible assets at December 31, 2022 is 6.2 years.

Note 8 — Leases

1 unchanged sentence

At December 31, 2022, our operating leases had remaining lease terms of up to 38 years, including any reasonably probable extensions.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Lease balances within our consolidated balance sheets were as follows:

8 unchanged sentences

$ 20,536 $ 19,035

We recorded an impairment of a ROU asset of $ 0.8 million during the fourth quarter of the year ended December 31, 2019.

This impairment was associated with the sale of our call center in Euclid, Ohio, which was completed in February 2020.

Operating lease expense, including variable and short-term lease costs which were insignificant to the total, operating lease cash flows and supplemental cash flow information were as follows:

9 unchanged sentences

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

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Year Ended December 31,

8 unchanged sentences

Total lease liabilities $ 20,536

At December 31, 2021, we had two operating leases that had not yet commenced, with terms of three years .

The total initial lease liability associated with these leases is $ 0.6 million, which is not reflected within the maturity schedule above.

Rental Costs During Construction

Rental costs associated with operating leases incurred during a construction period were expensed for the years ended December 31, 2021, 2020 and 2019.

At December 31, 2022, we did not have any operating leases that had not yet commenced.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Prepaid Land Lease

4 unchanged sentences

The remaining net book value of this operating lease ROU was $ 2.2 million at December 31, 2022, and is being amortized on a straight-line basis over the remaining term of approximately 36 years.

The buildings located on this land had a net book value of $ 15.0 million at December 31, 2021 and are being depreciated over a remaining weighted average period of 17 years.

The buildings located on this land had a net book value of $ 13.4 million at December 31, 2022 and are being depreciated over a remaining weighted average period of approximately 17 years.

Note 9 — Line of Credit

2 unchanged sentences

Bank") provides for a $ 125.0 million revolving line of credit ("Credit Line") that expires on November 1, 2023.

We expect to renew our credit agreement with U.S.

Bank, for an additional two years , prior to its expiration.

The 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 Credit Line are reduced by the balance of any outstanding letters of credit, of which there were $ 2.7 million at December 31, 2021.

Amounts available for borrowing under the Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at December 31, 2022.

All obligations under the Credit Line are secured by substantially all of our U.S.

3 unchanged sentences

The applicable margins are calculated quarterly and vary based on our cash flow leverage ratio as set forth in the Second Amended Credit Agreement.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

The interest rates in effect at December 31, 2022 and 2021 were 5.62 % and 1.35 %, respectively.

16 unchanged sentences

Total pre-tax income (loss) $ 11,393 $ 16,080 $ 43,905

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

The provision for income taxes charged to operations was as follows:

12 unchanged sentences

Total provision for income taxes $ 10,986 $ 10,779 $ 5,333

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Net deferred tax assets were comprised of the following:

2 unchanged sentences

Accrued liabilities $ — $ 6,483

Accounts receivable 5,657 —

Amortization of intangible assets 5,977 1,412

Capitalized inventory costs 5,060 4,183

Capitalized research & development costs 4,632 —

Depreciation 5,067 4,289

25 unchanged sentences

Increase (decrease) in tax provision resulting from:

Distribution of previously taxed foreign earnings and profits ( 16,776 ) — —

Federal research and development credits ( 715 ) ( 1,391 ) ( 2,119 )

7 unchanged sentences

Sale of Argentina subsidiary — 2,084 —

Sale of intangible asset ( 3,385 ) — —

State and local taxes, net ( 2,408 ) ( 1,435 ) ( 1,932 )

9 unchanged sentences

The state R&D income tax credits do not have an expiration date.

At December 31, 2021, we had state and local net operating loss carryforwards of approximately $ 49.0 million.

The state and local net operating loss carryforwards begin to expire in 2022.

At December 31, 2022, we had state and local and foreign net operating loss carryforwards of approximately $ 50.6 million and $ 0.7 million, respectively.

The state and local and foreign net operating loss carryforwards begin to expire in 2023 and 2027, respectively.

At December 31, 2022, 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 taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment.

We considered the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment.

Due to cumulative operating losses for the three years ended in 2022, we have recorded a full valuation allowance against our U.S.

federal and state deferred tax assets of $ 24.5 million and $ 20.1 million, respectively, as we have determined that it is more likely than not that the tax benefits will not be realized in the future.

Additionally, as a result of the Argentina business sale we released the $ 0.3 million valuation allowance recorded as of December 31, 2020 against Argentina's net operating loss carryforward deferred tax assets.

The valuation allowance increased by $ 12.1 million and $ 4.6 million during the years ended December 31, 2022 and 2021, respectively.

We have an overall deferred tax liability for U.S.

federal and state jurisdictions due to having indefinite lived deferred tax liabilities that cannot be used as a source of income to offset the deferred tax asset.

federal and state jurisdictions due to having indefinite lived deferred tax liabilities that cannot be used as a source of income to offset the deferred tax assets.

Uncertain Tax Positions

2 unchanged sentences

Interest and penalties were immaterial for the year ended December 31, 2022, 2021, and 2020.

Interest and penalties were $ 0.2 million for the year ended December 31, 2019.

Interest and penalties are included in the unrecognized tax benefits.

31 unchanged sentences

The Company will continue to closely monitor any effects from future legislation.

CHIPS and Science Act of 2022

On August 9, 2022, the CHIPS and Science Act of 2022 ("CHIPS Act") was enacted in the United States.

The CHIPS Act will provide financial incentives to the semiconductor industry which are primarily directed at manufacturing activities within the United States for the qualifying property placed in service after December 31, 2022.

As we currently outsource our manufacturing, the CHIPS Act is not expected to have a material impact to our consolidated tax provision for the year ending December 31, 2023.

Inflation Reduction Act of 2022

The Inflation Reduction Act of 2022 ("IRA") was signed into law on August 16, 2022.

The bill was meant to address the high inflation rate in the United States through various climate, energy, healthcare and other incentives.

These incentives are meant to be paid for by the tax provisions included in the IRA, such as a new 15 percent corporate minimum tax, a 1 percent new

UNIVERSAL ELECTRONICS INC.

1 unchanged sentence

DECEMBER 31, 2022

excise tax on stock buybacks, additional IRS funding to improve taxpayer compliance and others.

The IRA provisions are effective for tax years beginning after December 31, 2023.

Note 11 — Accrued Compensation

17 unchanged sentences

(In thousands) 2022 2021

Contract liabilities $ 1,134 $ 390

Duties 470 4,128

1 unchanged sentence

Freight and handling fees 2,497 3,317

Interest 1,413 287

Operating lease obligations 5,509 4,769

2 unchanged sentences

Sales and value added taxes 3,750 5,463

Short-term contingent consideration — 1,758

Other 5,426 5,715

Total other accrued liabilities $ 24,134 $ 30,840

(1) Includes $ 0.4 million and $ 0.3 million of contract liabilities at December 31, 2021 and 2020, respectively.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Note 13 — Commitments and Contingencies

4 unchanged sentences

Management is not aware of any matters that require indemnification of its officers or directors.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Fair Price Provisions and Other Anti-Takeover Measures

15 unchanged sentences

We have alleged that this complaint relates to multiple Roku streaming players and components therefor and certain universal control devices, including but not limited to the Roku App, Roku TV, Roku Express, Roku Streaming Stick, Roku Ultra, Roku Premiere, Roku 4, Roku 3, Roku 2, Roku Enhanced Remote and any other Roku product that provides for the remote control of an external device such as a TV, audiovisual receiver, sound bar or Roku TV Wireless Speakers.

In October 2019, the Court stayed this lawsuit pending action by the Patent Trial and Appeals Board (the "PTAB") with respect to Roku's Inter Partes Review ("IPR") requests (see discussion below).This lawsuit continues to be stayed until such time as the IPR requests and all appeals with respect to them have concluded.

In October 2019, the Court stayed this lawsuit pending action by the Patent Trial and Appeals Board (the "PTAB") with respect to Roku's requests for Inter Partes Review ("IPR") (see discussion below).

This lawsuit continues to be stayed until such time as the IPR's and all appeals with respect to them have concluded.

International Trade Commission Investigation of Roku, TCL, Hisense and Funai

2 unchanged sentences

and related entities (collectively, "Funai") claiming that certain of their televisions, set-top boxes, remote control devices, human interface devices, streaming devices, and sound bars infringe certain of our patents.

We asked the ITC to issue a permanent limited exclusion order prohibiting the importation of these infringing products into the United States and a cease and desist order to stop these parties from continuing their infringing activities.

On May 18, 2020, the ITC announced that it instituted its investigation as requested by us.

Prior to the trial, which ended on April 23, 2021, we released TCL, Hisense and Funai from this investigation as they removed our technology from their televisions.

On July 9, 2021, the Administrative Law Judge (the "ALJ") issued his Initial Determination (the "ID") finding that Roku is infringing our patents and as a result is in violation of §337 of the Tariff Act of 1930, as amended.

On July 23, 2021, Roku and we filed petitions to appeal certain portions of the ID.

On November 10, 2021, the full ITC issued its final determination affirming the ID and issuing a Limited Exclusion Order and Cease and Desist Order against Roku which became effective on January 9, 2022.

We asked the ITC to issue a permanent limited exclusion order prohibiting the importation of these infringing products into the United

UNIVERSAL ELECTRONICS INC.

1 unchanged sentence

DECEMBER 31, 2022

States and a cease and desist order to stop these parties from continuing their infringing activities.

On May 18, 2020, the ITC announced that it instituted its investigation as requested by us.

Prior to the trial, which ended on April 23, 2021, we dismissed TCL, Hisense and Funai from this investigation as they either removed or limited the amount of our technology from their televisions as compared to our patent claims that we asserted at the time.

On July 23, 2021, Roku and we filed petitions to appeal certain portions of the ID.

On November 10, 2021, the full ITC issued its final determination affirming the ID and issuing a Limited Exclusion Order (the "LEO") and Cease and Desist Order (the "CDO") against Roku, which became effective on January 9, 2022.

Roku continues to be subject to the LEO and CDO.

On October 25, 2022, we filed our brief opposing Roku's appeal of the LEO.

As a companion case to our ITC complaint, on April 9, 2020, we filed separate actions against each of Roku, TCL, Hisense, and Funai in the United States District Court, Central District of California, alleging that Roku is willfully infringing five of our patents and TCL, Hisense, and Funai are willfully infringing six of our patents by incorporating our patented technology into certain of their televisions, set-top boxes, remote control devices, human interface devices, streaming devices and sound bars.

These matters have been and continue to be stayed pending the final results of the open IPR matters mentioned below.

These matters have been and continue to be stayed pending the ITC case and any appeals.

Inter Partes Reviews

Throughout these litigation matters against Roku and the others identified above, Roku has filed multiple IPR requests with the PTAB on all patents at issue in the 2018 Lawsuit, the ITC Action, and the 2020 Lawsuit (see discussion above).

To date, the PTAB has denied Roku's request eleven times, granted Roku's request seven times and we are awaiting the PTAB's institution decision with respect to the remaining two IPR requests.

Of the seven IPR requests granted by the PTAB, the results were mixed, with the PTAB validating many of our patent claims and invalidating others.

We have and will appeal any PTAB decisi on that resulted i n an invalidation of our patent claims.

To date, the PTAB has denied Roku's request fourteen times and granted Roku's request twelve times.

Roku has since filed two IPRs on two of our patents not yet asserted against it, and we are awaiting the PTAB's institution decision with respect to those new IPR requests.

Of the twelve IPR requests granted by the PTAB, the results were mixed, with the PTAB upholding the validity of many of our patent claims and invalidating others.

We have appealed all but one PTAB decisi on that resulted i n an invalidation of our patent claims and we will continue to do so.

International Trade Commission Investigation Request made by Roku against UEI and certain UEI Customers

On April 8, 2021, Roku made a request to the ITC to initiate an investigation against us and certain of our customers claiming that certain of our and those customers' remote control devices and televisions infringe two of Roku's recently acquired patents.

On May 10, 2021, the ITC announced its decision to initiate the requested investigation.

Immediately prior to trial Roku withdrew its complaint against us and two of our customers with respect to one of the two patents at issue.

This released the complaint against us and two of our customers with respect to that patent.

On May 10, 2021, the ITC announced its decision to institute the requested investigation.

Immediately prior to trial Roku stipulated to summary determination as to its complaint against us and two of our customers with respect to one of the two patents at issue.

This stipulation resulted in the complaint against us and two of our customers with respect to that patent not going to trial.

The trial was thus shortened and ended on January 24, 2022.

We anticipate that the ALJ will issue her ID on or about June 28, 2022 and the full commission review is set for October 28, 2022.

As a companion to its ITC request, Roku also filed a lawsuit against us and certain of our customers in Federal District Court in the Central District of California alleging that we are infringing the same patents they alleged being infringed in the ITC investigation explained above.

This District Court case has been and will continue to be stayed pending the conclusion of the ITC investigation.

On June 24, 2022, the ALJ, pursuant to Roku's stipulation, found the '511 patent invalid as indefinite.

Thereafter, on June 28, 2022, the ALJ issued an ID fully exonerating us and our customers finding the '875 patent invalid and that Roku failed to prove it established the requisite domestic industry and thus no violation of the Tariff Act.

In advance of the full Commission's review, Roku and we filed petitions to appeal certain portions of the ID.

In addition, the PTAB granted our request for an IPR with respect to the '875 patent.

On October 28, 2022, the full ITC issued its final determination affirming the ID, ruling there was no violation of the Tariff Act and terminated the investigation.

In December 2022, Roku filed an appeal, which remains pending.

As a companion to its ITC request, Roku also filed a lawsuit against us in Federal District Court in the Central District of California alleging that we are infringing the same two patents they alleged being infringed in the ITC investigation explained above.

This District Court case has been stayed pending the ITC case, and will likely continue to be stayed pending the conclusion of the '875 IPR investigation, even after Roku's appeal of the ITC case has concluded.

Court of International Trade Action against the United States of America, et.

5 unchanged sentences

Customs & Border Protection;

Customs & Border Protection Acting Commissioner, challenging both the substantive and procedural processes followed by the United States Trade Representative ("USTR") when instituting Section 301 Tariffs on imports from China under Lists 3 and 4A.

Pursuant to this complaint, we, Ecolink and RCS are alleging that USTR's institution of Lists 3 and 4A tariffs violated the Trade Act of 1974 (the "Trade Act") on the grounds that the USTR failed to make a determination or finding that there was an unfair trade practice that required a remedy and moreover, that Lists 3 and 4A tariffs were instituted beyond the 12-month time limit provided for in the governing statute.

We, Ecolink and RCS also allege that the manner in which the Lists 3 and 4A tariff actions were implemented violated the Administrative Procedures Act (the "APA") by failing to provide adequate opportunity for comments, failed to consider relevant factors when making its decision and failed to connect the record facts to the choices it made by not explaining how the comments received by USTR came to shape the final implementation of Lists 3 and 4A.

We, Ecolink and RCS are asking the CIT to declare that the defendants' actions resulting in the tariffs on products covered by Lists 3 and 4A are unauthorized by and contrary to the Trade Act and were arbitrarily and unlawfully promulgated in violation of the APA;

to vacate the Lists 3 and 4A tariffs;

to order a refund (with interest) of any Lists 3 and 4A duties paid by us, Ecolink and RCS;

to permanently enjoin the U.S.

government from applying Lists 3 and 4A duties against us, Ecolink and RCS;

and award us, Ecolink and RCS our costs and reasonable attorney's fees.

In July 2021, the CIT issued a preliminary injunction suspending liquidation of all unliquidated entries subject to Lists 3 and 4A duties and has asked the parties to develop a process to keep track of the entries to efficiently and effectively deal with liquidation process and duties to be paid or refunded when finally adjudicated.

On February 5, 2022, the CIT heard oral

Customs & Border Protection Acting Commissioner, challenging both the

UNIVERSAL ELECTRONICS INC.

1 unchanged sentence

DECEMBER 31, 2022

arguments on dispositive motions filed on behalf of plaintiffs and defendants and we expect a decision on these motions in the coming months.

substantive and procedural processes followed by the United States Trade Representative ("USTR") when instituting Section 301 Tariffs on imports from China under Lists 3 and 4A.

Pursuant to this complaint, Ecolink, RCS and we are alleging that USTR's institution of Lists 3 and 4A tariffs violated the Trade Act of 1974 (the "Trade Act") on the grounds that the USTR failed to make a determination or finding that there was an unfair trade practice that required a remedy and moreover, that Lists 3 and 4A tariffs were instituted beyond the 12-month time limit provided for in the governing statute.

Ecolink, RCS and we also allege that the manner in which the Lists 3 and 4A tariff actions were implemented violated the Administrative Procedures Act (the "APA") by failing to provide adequate opportunity for comments, failed to consider relevant factors when making its decision and failed to connect the record facts to the choices it made by not explaining how the comments received by USTR came to shape the final implementation of Lists 3 and 4A.

Ecolink, RCS and we are asking the CIT to declare that the defendants' actions resulting in the tariffs on products covered by Lists 3 and 4A are unauthorized by and contrary to the Trade Act and were arbitrarily and unlawfully promulgated in violation of the APA;

to vacate the Lists 3 and 4A tariffs;

to order a refund (with interest) of any Lists 3 and 4A duties paid by Ecolink, RCS and us;

to permanently enjoin the U.S.

government from applying Lists 3 and 4A duties against Ecolink, RCS and us;

and award Ecolink, RCS and us our costs and reasonable attorney's fees.

On February 5, 2022, the CIT heard oral arguments on dispositive motions filed on behalf of plaintiffs and defendants.

On April 1, 2022, the CIT issued its opinion on these dispositive motions, ruling that the USTR had the legal authority to promulgate List 3 and List 4A under Section 307(a)(1)(B) of the Trade Act, but that the USTR violated the APA when it promulgated List 3 and List 4A concluding that the USTR failed to adequately explain its decision as required under the APA.

The Court ordered that List 3 and List 4A be remanded to the USTR for reconsideration or further explanation regarding its rationale for imposing the tariffs.

The Court declined to vacate List 3 and List 4A, which means that they are still in place while on remand.

The Court's preliminary injunction regarding liquidation of entries also remains in effect.

The Court initially set a deadline of June 30, 2022, for the USTR to complete this process, which was extended to August 1, 2022.

On August 1, 2022, the USTR provided the Court with that further explanation and also purported to respond to the significant comments received during the original notice-and-comment process.

On September 14, 2022, the lead plaintiff filed its comments to the USTR's August 1, 2022 filing, asserting that the USTR did not adequately respond to the Court's remand order and requested the Court to vacate the List 3 and List 4A tariffs and issue refunds immediately.

On February 7, 2023, the Court heard arguments on these issues and we expect the Court to rule on these filings in mid 2023.

There are no other material pending legal proceedings to which we or any of our subsidiaries is a party or of which our respective property is the subject.

11 unchanged sentences

An individual must be employed by our India subsidiary for a minimum of five years before becoming eligible.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Upon the termination, resignation or retirement of an eligible employee, we are liable to pay the employee an amount equal to 15 days salary for each full year of service completed.

2 unchanged sentences

Note 14 — Treasury Stock

From time to time, our Board of Directors authorizes management to repurchase shares of our issued and outstanding common stock on the open market.

On October 20, 2021, our Board of Directors approved a new repurchase plan with an effective date of November 9, 2021 (the "November 2021 Program").

Pursuant to the November 2021 Program, we were authorized to repurchase up to 300,000 shares of our common stock at predetermined prices until the earlier of the repurchase of all 300,000 shares or February 17, 2022.

The November 2021 Program was completed in December 2021, upon repurchase by us of all 300,000 shares as authorized.

On February 10, 2022, our Board approved a new share repurchase program with an effective date of February 22, 2022 (the "February 2022 Program").

Pursuant to the February 2022 Program, we may, from time to time until May 5, 2022, repurchase up to 300,000 shares of our common stock.

We may utilize various methods to effect the repurchases, which may include open market repurchases, negotiated block transactions, accelerated share repurchases or open market solicitations for shares, some of which may be effected through Rule 10b5-1 plans.

The timing and amount of future repurchases, if any, will depend upon several factors, including market and business conditions, and such repurchases may be discontinued at any time.

From time to time, our Board of Directors authorizes management to repurchase shares of our issued and outstanding common stock.

On February 10, 2022, our Board approved a share repurchase program with an effective date of February 22, 2022 (the "February 2022 Program").

Pursuant to the February 2022 Program, we were authorized to repurchase up to 300,000 shares of our common stock until the Program's expiration on May 5, 2022.

Per the terms of the February 2022 Program, we could utilize various methods to effect the repurchases, including open market repurchases, negotiated block transactions, accelerated share repurchases or open market solicitations for shares, some or all of which could be effected through Rule 10b5-1 plans.

As of May 2, 2022, we repurchased the full 300,000 shares under the February 2022 Program.

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

Repurchased shares of our common stock were as follows:

1 unchanged sentence

(In thousands) 2022 2021 2020

Shares repurchased 1,243 444 58

Cost of shares repurchased $ 59,664 $ 17,678 $ 1,928

Open market shares repurchased 300 1,151 325

Stock-based compensation related shares repurchased 134 92 119

Total shares repurchased 434 1,243 444

Cost of open market shares repurchased $ 9,437 $ 54,868 $ 11,851

Cost of stock-based compensation related shares repurchased 3,598 4,796 5,827

Total cost of shares repurchased $ 13,035 $ 59,664 $ 17,678

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.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Note 15 — Stock-Based Compensation

11 unchanged sentences

Income tax benefit $ 1,660 $ 1,718 $ 1,594

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

Stock Options

29 unchanged sentences

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

The value of shares withheld in lieu of receiving cash from option exercises in the years ended December 31, 2021 and 2020 was $ 0.6 million and $ 2.8 million, respectively.

Cash received from option exercises for the years ended December 31, 2021 and 2019 was $ 1.0 million and $ 0.4 million, respectively.

There was no cash received from option exercises for the year ended December 31, 2020.

The value of shares withheld in lieu of receiving cash from option exercises in the years ended December 31, 2022, 2021 and 2020 was $ 1.5 million, $ 0.6 million and $ 2.8 million, respectively.

Cash received from option exercises for the year ended December 31, 2021 was $ 1.0 million.

There was no cash received from option exercises for the years ended December 31, 2022 and 2020.

The actual tax benefit realized from option exercises was $ 0.1 million, $ 0.2 million and $ 0.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Significant option groups outstanding at December 31, 2022 and the related weighted average exercise price and life information were as follows:

14 unchanged sentences

As of December 31, 2022, we expect to recognize $ 2.3 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 1.8 years.

On February 10, 2022, certain executive employees were granted 119,365 stock options, in the aggregate, in connection with the 2021 annual review cycle.

The options were granted as part of long-term incentive compensation to assist us in meeting our performance and retention objectives and are subject to a three-year vesting period ( 33.33 % on February 10, 2023 and 8.33 % each quarter thereafter).

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

On February 9, 2023, certain executive employees were granted stock options to acquire, in the aggregate, up to 235,455 shares of our common stock, in connection with the 2022 annual review cycle.

The options were granted as part of the executive compensation program and are subject to a three-year vesting period ( 33.33 % on February 9, 2024 and 8.33 % each quarter thereafter).

The total grant date fair value of these awards was $ 2.6 million.

13 unchanged sentences

As of December 31, 2022, we expect to recognize $ 8.8 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 1.7 years.

In February 2022, certain executives and employees were granted 223,001 restricted stock awards, in the aggregate, in connection with the 2021 annual review cycle.

These awards were granted as part of long-term incentive compensation to assist us in meeting our performance and retention objectives and are subject to a three-year vesting period ( 51,365 of these awards will vest 33.33 % on February 10, 2023 and 8.33 % each quarter thereafter and 171,636 of these awards will vest at a rate of 33.33 % per year beginning on February 22, 2023).

In February 2023, certain executives were granted 102,965 restricted stock awards, in the aggregate, in connection with the 2022 annual review cycle.

These awards were granted as part of the executive compensation program and are subject to a three-year vesting period ( 33.33 % on February 9, 2024 and 8.33 % each quarter thereafter).

The total grant date fair value of these awards was $ 2.6 million.

6 unchanged sentences

We prohibit the re-pricing or backdating of stock options.

Our stock options

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

become exercisable in various proportions over a three - or four-year time frame.

Our stock options become exercisable in various proportions over a three-year time frame.

Stock options have a maximum ten-year term.

9 unchanged sentences

2014 Stock Incentive Plan 6/12/2014 1,100,000 — 269,891

2010 Stock Incentive Plan 6/15/2010 1,000,000 — 93,904

2014 Stock Incentive Plan 6/12/2014 1,100,000 — 311,276

2018 Equity and Incentive Compensation Plan (1)

2 unchanged sentences

(1) The 2018 Equity and Incentive Compensation Plan was amended in June 2021 to add an additional 1,100,000 shares, as approved by our stockholders.

Note 16 — Performance-Based Common Stock Warrants

On March 9, 2016, we issued common stock purchase warrants to Comcast Corporation ("Comcast") to purchase up to 725,000 shares of our common stock at a price of $ 54.55 per share.

The right to exercise the warrants is subject to vesting over three successive two-year periods (with the first two-year period commencing on January 1, 2016) based on the level of purchases of goods and services from us by Comcast and its affiliates, as defined in the warrants.

The table below presents the purchase levels and potential number of warrants to vest in each period based upon achieving these purchase levels.

Potential Warrants To Vest

Aggregate Level of Purchases by Comcast and Affiliates January 1, 2016 - December 31, 2017 January 1, 2018 - December 31, 2019 January 1, 2020 - December 31, 2021

$ 260 million 100,000 100,000 75,000

$ 300 million 75,000 75,000 75,000

$ 340 million 75,000 75,000 75,000

Maximum Potential Warrants Earned by Comcast 250,000 250,000 225,000

If total aggregate purchases by Comcast and its affiliates are below $ 260 million in any of the two-year periods above, no warrants will vest related to that two-year period.

If total aggregate purchases of goods and services by Comcast and its affiliates had exceeded $ 340 million during either the first or second two-year period, the amount of any such excess would count towards aggregate purchases in the following two-year period.

This threshold was not met in either the first or second two-year period.

For the two-year period ended December 31, 2017, Comcast earned and vested in 175,000 out of the maximum potential 250,000 warrants.

For the two-year period ended December 31, 2019, Comcast earned and vested in 100,000 out of the maximum potential 250,000 warrants.

For the two-year period ended December 31, 2021, Comcast did no t earn or vest in any of the maximum potential 225,000 warrants.

At December 31, 2021, 275,000 vested warrants were outstanding.

All warrants that vested will expire on January 1, 2023.

The warrants provide for certain adjustments that may be made to the exercise price and the number of shares issuable upon exercise due to customary anti-dilution provisions.

Additionally, in connection with the common stock purchase warrants, we have also entered into a registration rights agreement with Comcast under which Comcast may from time to time request that we register the shares of common stock underlying vested warrants with the SEC.

As the warrants contain performance criteria under which Comcast must achieve specified aggregate purchase levels for the warrants to vest, as detailed above, the measurement date for the warrants for the first two-year successive periods was the date on which the warrants vested.

The FASB issued guidance in November 2019 that clarifies the accounting for share-based payments issued as sales incentives to customers.

The guidance requires that stock-based compensation expense be recorded as a reduction in the transaction price on the basis of the grant-date fair value.

The transition provisions require that equity-classified awards be measured at the

UNIVERSAL ELECTRONICS INC.

1 unchanged sentence

DECEMBER 31, 2022

adoption date fair value if the measurement date has not been established prior to the adoption date.

Through December 31, 2021, none of the warrants had vested for the two-year period beginning January 1, 2020.

The assumptions we utilized in the Black-Scholes option pricing model and the resulting grant-date fair value of the warrants as of January 1, 2020 were the following:

Fair value $ 17.19

Price of Universal Electronics Inc.

common stock $ 52.21

Risk-free interest rate 1.62 %

Expected volatility 48.86 %

Expected life in years 3.00

Prior to the adoption of the new guidance on January 1, 2020, we adjusted the estimated weighted average fair value of the warrants each period.

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

Year Ended December 31,

Fair value $ 21.60

Price of Universal Electronics Inc.

common stock $ 58.01

Risk-free interest rate 1.65 %

Expected volatility 48.90 %

Expected life in years 3.13

Note 16 — Performance-Based Common Stock Warrants

On March 9, 2016, we issued common stock purchase warrants to Comcast Corporation ("Comcast") at a price of $ 54.55 per share.

At December 31, 2022, 275,000 of these warrants were vested and outstanding.

All of the warrants expired on January 1, 2023.

The impact to net sales recorded in connection with the warrants and the related income tax benefit was as follows:

18 unchanged sentences

On September 7, 2021, we completed the sale of our subsidiary, One For All Argentina S.R.L, to an unrelated party, recording a loss on sale of $ 6.1 million.

Upon divestiture, the successor entity, OFA Express S.R.L., will serve as an authorized distributor of certain of our products in Argentina.

Upon divestiture, the successor entity, OFA Express S.R.L., serves as an authorized distributor of certain of our products in Argentina.

OFA Express, S.R.L.

is not a related party of the Company.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Note 18 — Earnings Per Share

10 unchanged sentences

Diluted earnings per share $ 0.03 $ 0.39 $ 2.72

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

The following number of stock options, shares of restricted stock and common stock warrants were excluded from the computation of diluted earnings per common share as their inclusion would have been anti-dilutive:

10 unchanged sentences

Foreign currency exchange contracts $ — $ 100 $ — $ 100 $ — $ ( 92 ) $ — $ ( 92 )

We held foreign currency exchange contracts which resulted in a net pre-tax gain of $ 2.9 million, a net pre-tax loss of $ 0.3 million, and a net pre-tax loss of $ 0.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

We held foreign currency exchange contracts which resulted in a net pre-tax loss of $ 1.3 million, a net pre-tax gain of $ 2.9 million, and a net pre-tax loss of $ 0.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

See Note 17 for further information concerning our foreign currency exchange contracts.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

Details of foreign currency exchange contracts held were as follows:

3 unchanged sentences

Settlement Date

December 31, 2021 USD/Chinese Yuan Renminbi CNY $ 19.0 6.3777 $ 38 January 7, 2022

December 31, 2022 USD/Euro USD $ 26.0 1.0529 $ ( 428 ) January 6, 2023

December 31, 2022 USD/Chinese Yuan Renminbi CNY $ 31.0 7.0358 $ 528 January 6, 2023

December 31, 2020 USD/Brazilian Real USD $ 0.9 5.1714 $ 4 January 29, 2021

December 31, 2021 USD/Chinese Yuan Renminbi CNY $ 19.0 6.3777 $ 38 January 7, 2022

December 31, 2021 USD/Euro USD $ 31.0 1.1336 $ ( 130 ) January 7, 2022

December 31, 2020 USD/Mexican Peso USD $ 1.9 20.1915 $ ( 24 ) January 29, 2021

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

6 unchanged sentences

We recorded $ 1.2 million, $ 1.1 million and $ 1.2 million of expense for company contributions for the years ended December 31, 2022, 2021 and 2020, respectively.

Note 21 — Subsequent Event

On February 17, 2022, we acquired substantially all of the net assets of Qterics, Inc., a U.S.-based provider of multimedia connectivity solutions and services for internet-enabled consumer products.

Under the terms of the Asset Purchase Agreement, we paid a cash purchase price of approximately $ 1.2 million, subject to a customary post-closing working capital adjustment.

Note 21 — Business Combinations

On February 17, 2022, we acquired substantially all of the net assets of Qterics, a U.S.-based provider of multimedia connectivity solutions and services for internet-enabled consumer products.

Under the terms of the Asset Purchase Agreement ("APA"), we paid a cash purchase price of approximately $ 0.9 million.

The acquisition of these assets will allow us to expand our customer base in the OEM market.

Our consolidated income statement for the year ended December 31, 2022 includes net sales of $ 2.1 million and net income of $ 145 thousand, attributable to Qterics for the period commencing on February 17, 2022.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

In accordance with the terms of the APA, the initial purchase price was subject to adjustment for differences between the initial estimated working capital balances and the final adjusted balances.

This calculation was completed at March 31, 2022.

Purchase Price Allocation

Using the acquisition method of accounting, the acquisition date fair value of the consideration transferred was allocated to the net tangible and intangible assets acquired and liabilities assumed based on their fair values on the acquisition date.

The excess of the purchase price over the estimated fair value of net assets acquired is recorded as goodwill.

The goodwill is expected to be deductible for income tax purposes.

Management's purchase price allocation as of December 31, 2022 was the following:

(In thousands) Estimated Lives Fair Value

Accounts receivable $ 787

Property, plant and equipment 5 years 3

Customer relationships 6 years 1,340

Developed technology 6 years 440

Trade names 6 years 50

Operating lease ROU assets 3 years 149

Other assets 2

Other accrued liabilities ( 6 )

Short-term operating lease obligation ( 48 )

Deferred revenue ( 1,539 )

Long-term operating lease obligation ( 101 )

Long-term deferred revenue ( 851 )

Cash paid $ 939

Management's determination of the fair value of intangible assets acquired are based primarily on significant inputs not observable in an active market and thus represent Level 3 fair value measurements as defined under U.S.

The fair value assigned to the Qterics developed technology and trade names intangible assets were determined utilizing a relief from royalty method.

Under the relief from royalty method, the fair value of the intangible asset is estimated to be the present value of the royalties saved because the company owns the intangible asset.

Revenue projections and estimated useful life were significant inputs into estimating the value of the Qterics developed technology and trade names.

The fair value assigned to Qterics customer relationships intangible assets were determined utilizing a multi-period excess earnings approach.

Under the multi-period excess earnings approach, the fair value of the intangible asset is estimated to be the present value of future earnings attributable to the asset and utilizes revenue and cost projections, including an assumed contributory asset charge.

The developed technology, trade names and customer relationships intangible assets are expected to be deductible for income tax purposes.

Pro Forma Results (unaudited)

The unaudited pro forma financial information of combined results of our operations and the operations of Qterics as if the transaction had occurred on January 1, 2021, is immaterially different from the net sales, net income and income per share amounts reported in the Consolidated Statements of Operations for the years ended December 31, 2022 and 2021.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data