What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-11 compared with 2024-03-14 · 432 added, 436 removed, 928 unchanged (48% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations for the Years Ended December 31, 202 4 , 202 3 and 20 2 2

Consolidated Comprehensive Income (Loss) Statements for the Years Ended December 31, 202 3 , 202 2 and 202 1

Consolidated Statements o f Comprehensive Income (Loss) for the Years Ended December 31, 202 4 , 202 3 and 202 2

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 202 4 , 202 3 and 20 2 2

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We have audited the accompanying consolidated balance sheets of Universal Electronics Inc.

(a Delaware corporation) and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules included under Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

(a Delaware corporation) and subsidiaries (the "Company") as of December 31, 2024, and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), and our report dated March 11, 2025 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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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 it relates.

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

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 recognition - Determination of over time versus point in time revenue recognition

As described further in Note 2 and Note 4 to the consolidated financial statements, product revenue is generated through manufacturing and delivering home entertainment control products, climate control solutions, wireless sensor and smart home control products and and audio-video accessories.

The Company recognizes revenue over time when performance creates an asset with no alternative use (custom products) and 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, with a reasonable margin, for performance completed prior to the transfer of control of the underlying asset.

For each new product and/or contract, management performs an analysis to determine whether the asset created is a product 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 to date, including a reasonable margin.

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 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.

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 products and/or

contracts meet the criteria for over time or point in time revenue recognition.

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

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

• For a selection of products 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 judgment 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 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.

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, including a reasonable margin, upon cancellation.

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

• 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, including a reasonable margin.

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

This includes evaluating management judgments 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 products, we traced the products into the Company's listing of active products and determined whether that product was appropriately classified as having no alternative use or not.

For transactions selected with no alternative use, we also obtained and read the contract to determine whether the contract terms specifically identified an enforceable right to payment, including a reasonable margin, for performance completed to date.

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

/s/ GRANT THORNTON LLP

We have served as the Company's auditor since 2005.

Newport Beach, California

Phoenix, Arizona

March 11, 2025

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Property, plant and equipment, net 34,207 44,619

Goodwill — 49,085

Intangible assets, net 24,038 25,349

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Accounts payable $ 72,031 $ 57,033

Line of credit 55,000 88,000

Lines of credit 36,960 55,000

Accrued compensation 20,927 20,305

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Research and development expenses 29,723 31,281 32,452

Factory restructuring charges 4,015 — —

Selling, general and administrative expenses 91,811 98,490 105,292

Goodwill impairment 49,075 — —

Factory restructuring charges (Note 13) 3,585 4,015 —

Legal judgment (Note 13) 4,172 — —

Goodwill impairment (Note 7) — 49,075 —

Operating income (loss) ( 15,297 ) ( 85,301 ) 14,548

Interest income (expense), net ( 3,361 ) ( 4,332 ) ( 2,200 )

Loss on sale of Argentina subsidiary — — ( 6,050 )

Other income (expense), net 60 ( 2,621 ) ( 955 )

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UNIVERSAL ELECTRONICS INC.

CONSOLIDATED COMPREHENSIVE INCOME (LOSS) STATEMENTS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

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Change in foreign currency translation adjustment ( 7,592 ) 429 ( 7,663 )

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

Comprehensive income (loss) $ ( 31,621 ) $ ( 97,809 ) $ ( 7,256 )

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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

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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

Net income 407 407

Net loss ( 98,238 ) ( 98,238 )

Currency translation adjustment 429 429

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Purchase of treasury shares ( 165 ) ( 1,779 ) ( 1,779 )

Stock options exercised 80 1 1,535 1,536

Shares issued to directors 29 — — —

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Employee and director stock-based compensation 6,700 8,809 10,013

Performance-based common stock warrants — — ( 686 )

Impairment of goodwill — 49,075 —

Impairment of long-lived assets 333 7,963 2,888

Loss on sale of Argentina subsidiary, net of cash transferred — — 5,960

Changes in operating assets and liabilities:

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Cash flows from financing activities:

Borrowings under line of credit 78,000 133,000 112,000

Repayments on line of credit ( 111,000 ) ( 101,000 ) ( 76,000 )

Borrowings under lines of credit 102,193 78,000 133,000

Repayments on lines of credit ( 120,000 ) ( 111,000 ) ( 101,000 )

Proceeds from stock options exercised — — 1,536

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Universal Electronics Inc.

("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.

("UEI"), based in Scottsdale, Arizona, is a global leader in universal wireless control solutions for the home.

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

In addition, over the past 38 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.

We license our connectivity and control solution technologies across a variety of channels, primarily to original equipment manufacturers ("OEMs").

We distribute remote control devices, integrated circuits, home security sensors, connected thermostats and AV accessories directly to video and security service providers and OEMs, both domestically and internationally.

We also distribute home security sensors and connected thermostats to pro-security installers and hospitality system integrators in the United States and Europe through a network of national and regional distributors and dealers.

Additionally, we sell our wireless control devices and AV accessories under the One For All®, Ecolink TM and private label brand names to retailers through our international subsidiaries and direct to retailers in key markets, such as in the United States, United Kingdom, Germany, France, Spain, and Italy.

We distribute remote control devices, connected thermostats, integrated circuits ("ICs"), smart home automation and security sensors and AV accessories directly to video and security service providers and original equipment manufacturers ("OEMs"), both domestically and internationally.

We distribute connected and smart thermostats and home security sensors to pro-security installers and hospitality system integrators in the United States and Europe through a network of national and regional distributors and dealers.

Additionally, we sell our wireless control devices and AV accessories under the One For All ® , Ecolink ® and private label brand names to retailers in key markets, such as in the United States, United Kingdom, Germany, France and Spain.

We utilize third-party distributors for the retail channel in countries where we do not have subsidiaries.

As used herein, the terms "we", "us" and "our" refer to Universal Electronics Inc.

and its subsidiaries unless the context indicates to the contrary.

and its subsidiaries unless the context indicates the contrary.

Note 2 — Summary of Significant Accounting Policies

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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 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.

Any adjustment may be material.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Revenue Recognition

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Control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good or service.

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.

Revenues are generated from manufacturing, shipping and supporting home entertainment products, climate control solutions, wireless sensor and smart home control products and AV accessories that are used in the home entertainment, climate

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024

control, consumer electronics, security, home automation and home appliance markets, 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.

Revenue - Product revenue is generated through manufacturing, shipping and supporting our products, as described above.

Our performance obligations are satisfied over time or at a point in time, depending on the nature of the product.

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Revenue is recognized over time when our performance creates an asset with no alternative use to us (custom products) and we have an enforceable right to payment for performance completed to date, including a reasonable margin, through a contractual commitment from the customer.

Custom products are those products for which we are unable to redirect the asset to another customer in the foreseeable future without significant rework.

The method for measuring progress towards satisfying a performance obligation for a custom product is based on the costs incurred to date (cost-to-cost method).

Custom products are those products for which we are unable to redirect the asset to another customer in the foreseeable future without significant rework or due to contract restrictions.

The method for measuring progress towards satisfying a performance obligation for a custom product is based on the costs incurred to date (input method).

We believe that the costs associated with production are most closely aligned with the revenue associated with those products.

We recognize revenue at a point in time if the criteria for recognizing revenue over time are not met, the title of the goods has transferred and we have a present right to payment.

We recognize revenue at a point in time if the criteria for recognizing revenue over time are not met, the title of the goods has transferred (based upon the terms of the contract, which can be upon shipment or delivery) and we have a present right to payment.

While unit prices are generally fixed, we have variable consideration for certain of our customers, typically in the form of discounts and rebates based on product volumes and indeterminate volumes themselves.

We utilize the most likely amount to estimate the effect of uncertainty on the amount of variable consideration to which we would be entitled.

The most likely amount method considers the single most likely amount from a range of possible consideration amounts which, for us, is typically based on historical experience and our expectations regarding future sales to our customers.

Accruals for discounts and rebates are recorded as a reduction to sales in the same period as the related revenue.

We have concluded that our estimates of variable consideration are not constrained according to the definition within the accounting standard.

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

Such discounts were $ 12.3 million, $ 10.5 million and $ 12.2 million at December 31, 2024, 2023 and 2022, respectively.

We allow product returns of certain products sold to business-to-consumer customers based upon contract terms.

A provision is recorded for estimated sales returns and allowances and is deducted from gross sales to arrive at net sales in the period the related revenue is recorded.

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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.

Accruals for discounts and rebates are recorded as a reduction to sales in the same period as the related revenue.

Such discounts were $ 10.5 million and $ 12.2 million at December 31, 2023 and 2022, respectively.

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

Payment terms typically range from 30 to 120 days, are typically on open credit terms consistent with industry practice and do not have significant financing components.

We provide our customers an assurance-type warranty, generally for periods of 12 to 36 months.

Assurance-type warranties are not considered a performance obligation.

A provision is recorded for estimated product warranty claim costs and is included in cost of sales.

Estimates are based on analysis of product warranty claims and other known factors.

Actual product warranty claim costs are inherently uncertain and thus may differ from our estimates.

If actual product warranty claims costs are greater or lower than the reserves that we have established, we will record an increase or reduction to cost of sales in the period in which we make such determination.

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.

The government-assessed taxes are recorded in our consolidated balance sheets until they are remitted to the government agency.

See Notes 4 and 13 for further information concerning revenue, contract assets, contract liabilities and other sales-related matters.

We provide for income taxes utilizing the asset and liability approach of accounting for income taxes.

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Research and Development

Research and development costs are expensed as incurred and consist primarily of salaries, employee benefits, supplies and materials.

Advertising costs are expensed as incurred.

Advertising expense totaled $ 0.6 million, $ 0.5 million and $ 0.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Research and development ("R&D") costs are expensed as incurred and consist primarily of salaries, employee benefits, supplies and materials.

UNIVERSAL ELECTRONICS INC.

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DECEMBER 31, 2024

Advertising costs are expensed as incurred.

Advertising expense totaled $ 0.7 million, $ 0.6 million and $ 0.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Shipping and Handling Fees and Costs

We include shipping and handling fees billed to customers in net sales.

Shipping and handling costs associated with in-bound freight or amounts billed to customers are recorded in cost of sales.

Other shipping and handling costs are included in selling, general and administrative expenses.

Shipping and handling fees and costs totaled $ 8.3 million, $ 10.8 million and $ 11.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Shipping and handling costs associated with in-bound freight or amounts reimbursable by customers are recorded in cost of sales.

All other shipping and handling activities performed prior to or after the customer obtains control of a good are treated as part of fulfilling the promise of transferring the good to the customer and are including in selling, general and administrative ("SG&A") expenses.

These costs recorded in SG&A expenses totaled $ 8.6 million, $ 8.3 million and $ 10.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Stock-Based Compensation

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Forfeitures of stock-based awards are accounted for as they occur.

Upon the exercise of stock options or the vesting of restricted stock awards, newly issued shares of our common stock are issued.

Upon the vesting of restricted stock awards, the vesting of performance stock awards or exercise of stock options, newly issued shares of our common stock are issued.

Our stock-based compensation awards are made at the discretion of the Compensation Committee and are not timed or coordinated with the release of material, non-public information.

We determine the fair value of restricted stock awards with a service condition utilizing the average of the high and low trading prices of our common shares on the date they were granted.

The fair value of stock options granted to employees and directors is determined utilizing the Black-Scholes option pricing model.

The fair value of performance stock awards with a service and market condition is determined utilizing a Monte Carlo simulation model as of the grant date.

The assumptions utilized in a Monte Carlo simulation model include the risk-free interest rate, expected volatility, term of the award and dividend yield.

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

Treasury note rate over the same period.

Expected volatility is determined utilizing historical volatility.

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.

The fair value of stock options awards is determined utilizing the Black-Scholes option pricing model.

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

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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.

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

On January 1, 2023, all 275,000 of the vested and outstanding warrants expired unexercised.

Foreign Currency Translation and Foreign Currency Transactions

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The translation of foreign currencies into U.S.

Dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and for revenue and expense accounts using the average exchange rate during each period.

Dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and for revenue and expense accounts using the average

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024

exchange rate during each period.

The gains and losses resulting from the translation are included in the foreign currency translation adjustment account, a component of accumulated other comprehensive income in stockholders' equity, and are excluded from net income.

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See Note 16 for further information concerning transaction gains and losses.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares, including the dilutive effect of stock options, restricted stock and common stock warrants, outstanding during the period.

Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares, including the dilutive effect of restricted stock, performance stock, stock options and common stock warrants, outstanding during the period.

Dilutive potential common shares for all periods presented are computed utilizing the treasury stock method;

however, dilutive potential common shares are excluded where their inclusion would be anti-dilutive.

See Note 17 for further information concerning our earnings (loss) per share.

Financial Instruments

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See Note 4 for further information concerning our allowance for credit losses.

Inventories consist of remote controls, wireless sensors and AV accessories, as well as the related component parts and raw materials.

Inventories consist of remote controls, thermostats, wireless sensors and AV accessories, as well as the related component parts and raw materials.

Inventoriable costs include materials, labor, freight-in and manufacturing overhead related to the purchase and production of inventories.

We value our inventories at the lower of cost or net realizable value.

Cost is determined using the first-in, first-out method.

Cost is determined using the

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024

first-in, first-out method.

We attempt to carry inventories in amounts necessary to satisfy our customer requirements on a timely basis.

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These estimates are based upon management's judgment about future demand and market conditions.

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Property, Plant, and Equipment

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Leasehold and building improvements Lesser of lease term or useful life

(approximately 2 to 10 years)

(approximately 2 - 8 years)

See Note 6 for further information concerning our property, plant, and equipment.

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See Note 7 for further information concerning goodwill and goodwill impairment.

Intangible Assets

Intangible assets consist of capitalized software development costs, customer relationships, developed and core technologies, distribution rights, patents and trademarks and trade names.

Capitalized amounts related to patents represent external legal costs for the application, maintenance and extension of the useful life of patents.

Intangible assets are amortized using the straight-line method over their estimated period of benefit.

UNIVERSAL ELECTRONICS INC.

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DECEMBER 31, 2024

Intangible Assets

Intangible assets consist of capitalized software development costs, customer relationships, developed and core technologies, patents and trademarks and trade names.

Capitalized amounts related to patents represent external legal costs for the application, maintenance and extension of the useful life of patents.

Intangible assets are amortized using the straight-line method over their estimated period of benefit.

Estimated useful lives are as follows:

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Developed and core technology 6 - 14 years

Distribution rights 10 years

Patents 10 years

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

Leases with an initial term of twelve months or less, or on a month-to-month basis, are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term.

If applicable, we combine lease and non-lease components, which primarily relate to ancillary expenses associated with real estate leases such as common area maintenance charges and management fees.

See Note 8 for further information concerning our leases.

UNIVERSAL ELECTRONICS INC.

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DECEMBER 31, 2024

Business Combinations

We allocate the purchase price of acquired businesses to the tangible and intangible assets and the liabilities assumed based on their estimated fair values on the acquisition date.

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

We engage independent third-party appraisal firms to assist us in determining the fair values of assets acquired and liabilities assumed.

Such valuations require management to make significant fair value estimates and assumptions, especially with respect to intangible assets and contingent consideration.

Management estimates the fair value of certain intangible assets and contingent consideration by utilizing the following (but not limited to):

• future cash flow from customer contracts, customer lists, distribution agreements, acquired developed technologies, trademarks, trade names and patents;

• expected costs to complete development of in-process technology into commercially viable products and cash flows from the products once they are completed;

• 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;

• discount rates utilized in discounted cash flow models.

Results of operations and cash flows of acquired businesses are included in our operating results from the date of acquisition.

In those circumstances where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the fair value of the contingent payments we expect to make as of the acquisition date.

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 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 21 for further information concerning business combinations.

Leases with an initial term of twelve months or less are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term.

If applicable, we combine lease and non-lease components, which primarily relate to ancillary expenses associated with real estate leases such as common area maintenance charges and management fees.

See Note 8 for further information concerning our leases.

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, Mexican Peso and Vietnamese Dong.

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The gains and losses on both the derivatives and the foreign currency-denominated balances are recorded as foreign exchange transaction gains or losses and are classified in other income (expense), net.

The gains and losses on the derivatives are reflected in cash provided by (used for) operating activities in our consolidated statements of cash flows.

Derivatives are recorded on the balance sheet at fair value.

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Fair-Value Measurements

We measure fair value using the framework established by the FASB in ASC Topic 820 for fair value measurements and disclosures.

We measure fair value using the framework established by the Financial Accounting Standards Board ("FASB") in ASC Topic 820 for fair value measurements and disclosures.

This framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

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These two types of inputs result in the following fair value hierarchy:

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023

Quoted prices (unadjusted) for identical instruments in active markets.

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Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable.