UNIVERSAL ELECTRONICS INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) 42 Consolidated Balance Sheets at December 31, 202 4 and 202 3 44 Consolidated Statements of Operations for the Years Ended December 31, 202 4 , 202 3 and 20 2 2 45 Consolidated Statements o f Comprehensive Income (Loss) for the Years Ended December 31, 202 4 , 202 3 and 202 2 46 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 202 4 , 202 3 and 20 2 2 47 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 4 , 202 3 and 202 2 48 Notes to Consolidated Financial Statements 49 All schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 41 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Universal Electronics Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Universal Electronics Inc. (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 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (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 it relates. 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 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 products and/or 42 Table of Contents 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 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. • 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. Phoenix, Arizona March 11, 2025 43 Table of Contents UNIVERSAL ELECTRONICS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share-related data) December 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 26,783 $ 42,751 Accounts receivable, net 114,182 112,596 Contract assets 10,346 4,240 Inventories 79,355 88,273 Prepaid expenses and other current assets 9,478 7,325 Income tax receivable 2,350 3,666 Total current assets 242,494 258,851 Property, plant and equipment, net 34,207 44,619 Intangible assets, net 24,038 25,349 Operating lease right-of-use assets 14,322 18,693 Deferred income taxes 6,425 6,787 Other assets 1,868 1,573 Total assets $ 323,354 $ 355,872 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 72,031 $ 57,033 Lines of credit 36,960 55,000 Accrued compensation 20,927 20,305 Accrued sales discounts, rebates and royalties 5,204 5,796 Accrued income taxes 2,161 1,833 Other accrued liabilities 21,008 21,181 Total current liabilities 158,291 161,148 Long-term liabilities: Operating lease obligations 9,232 12,560 Deferred income taxes 1,931 1,992 Income tax payable 72 435 Other long-term liabilities 723 817 Total liabilities 170,249 176,952 Commitments and contingencies (Note 13) Stockholders' equity: Preferred stock, $ 0.01 par value, 5,000,000 shares authorized; none issued or outstanding — — Common stock, $ 0.01 par value, 50,000,000 shares authorized; 25,712,940 and 25,346,383 shares issued on December 31, 2024 and 2023, respectively 257 253 Paid-in capital 344,697 336,938 Treasury stock, at cost, 12,666,443 and 12,459,845 shares on December 31, 2024 and 2023, respectively ( 371,930 ) ( 369,973 ) Accumulated other comprehensive income (loss) ( 28,350 ) ( 20,758 ) Retained earnings 208,431 232,460 Total stockholders' equity 153,105 178,920 Total liabilities and stockholders' equity $ 323,354 $ 355,872 The accompanying notes are an integral part of these consolidated financial statements. 44 Table of Contents UNIVERSAL ELECTRONICS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2024 2023 2022 Net sales $ 394,879 $ 420,457 $ 542,751 Cost of sales 280,885 322,897 390,459 Gross profit 113,994 97,560 152,292 Research and development expenses 29,723 31,281 32,452 Selling, general and administrative expenses 91,811 98,490 105,292 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 ) Other income (expense), net 60 ( 2,621 ) ( 955 ) Income (loss) before provision for income taxes ( 18,598 ) ( 92,254 ) 11,393 Provision for income taxes 5,431 5,984 10,986 Net income (loss) $ ( 24,029 ) $ ( 98,238 ) $ 407 Earnings (loss) per share: Basic $ ( 1.85 ) $ ( 7.64 ) $ 0.03 Diluted $ ( 1.85 ) $ ( 7.64 ) $ 0.03 Shares used in computing earnings (loss) per share: Basic 12,959 12,855 12,703 Diluted 12,959 12,855 12,779 The accompanying notes are an integral part of these consolidated financial statements. 45 Table of Contents UNIVERSAL ELECTRONICS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) Year Ended December 31, 2024 2023 2022 Net income (loss) $ ( 24,029 ) $ ( 98,238 ) $ 407 Other comprehensive income (loss): Change in foreign currency translation adjustment ( 7,592 ) 429 ( 7,663 ) Comprehensive income (loss) $ ( 31,621 ) $ ( 97,809 ) $ ( 7,256 ) The accompanying notes are an integral part of these consolidated financial statements. 46 Table of Contents UNIVERSAL ELECTRONICS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands) Common Stock Issued Common Stock in Treasury Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Totals Shares Amount Shares Amount Balance at January 1, 2022 24,679 $ 247 ( 11,861 ) $ ( 355,159 ) $ 314,094 $ ( 13,524 ) $ 330,291 $ 275,949 Net income 407 407 Currency translation adjustment ( 7,663 ) ( 7,663 ) Shares issued for employee benefit plan and compensation 212 2 1,197 1,199 Purchase of treasury shares ( 434 ) ( 13,035 ) ( 13,035 ) Stock options exercised 80 1 1,535 1,536 Shares issued to directors 29 — — — Employee and director stock-based compensation 10,013 10,013 Balance at December 31, 2022 25,000 250 ( 12,295 ) ( 368,194 ) 326,839 ( 21,187 ) 330,698 268,406 Net loss ( 98,238 ) ( 98,238 ) Currency translation adjustment 429 429 Shares issued for employee benefit plan and compensation 317 3 1,290 1,293 Purchase of treasury shares ( 165 ) ( 1,779 ) ( 1,779 ) Shares issued to directors 29 — — — Employee and director stock-based compensation 8,809 8,809 Balance at December 31, 2023 25,346 253 ( 12,460 ) ( 369,973 ) 336,938 ( 20,758 ) 232,460 178,920 Net loss ( 24,029 ) ( 24,029 ) Currency translation adjustment ( 7,592 ) ( 7,592 ) Shares issued for employee benefit plan and compensation 338 4 1,059 1,063 Purchase of treasury shares ( 206 ) ( 1,957 ) ( 1,957 ) Shares issued to directors 29 — — — Employee and director stock-based compensation 6,700 6,700 Balance at December 31, 2024 25,713 $ 257 ( 12,666 ) $ ( 371,930 ) $ 344,697 $ ( 28,350 ) $ 208,431 $ 153,105 The accompanying notes are an integral part of these consolidated financial statements. 47 Table of Contents UNIVERSAL ELECTRONICS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ ( 24,029 ) $ ( 98,238 ) $ 407 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 18,058 22,927 24,033 Provision for credit losses 1,081 70 ( 182 ) Deferred income taxes ( 256 ) ( 1,149 ) 1,377 Shares issued for employee benefit plan 1,063 1,293 1,199 Employee and director stock-based compensation 6,700 8,809 10,013 Impairment of goodwill — 49,075 — Impairment of long-lived assets 333 7,963 2,888 Changes in operating assets and liabilities: Accounts receivable and contract assets ( 12,174 ) 5,040 12,765 Inventories 6,239 51,458 ( 9,913 ) Prepaid expenses and other assets 764 2,860 ( 917 ) Accounts payable and accrued liabilities 15,733 ( 21,379 ) ( 28,670 ) Accrued income taxes 1,310 ( 3,539 ) ( 2,074 ) Net cash provided by (used for) operating activities 14,822 25,190 10,926 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. — — ( 939 ) Acquisitions of property, plant and equipment ( 4,572 ) ( 8,116 ) ( 14,006 ) Acquisitions of intangible assets ( 3,856 ) ( 5,761 ) ( 6,579 ) Net cash provided by (used for) investing activities ( 8,428 ) ( 13,877 ) ( 21,208 ) Cash flows from financing activities: 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 Treasury stock purchased ( 1,957 ) ( 1,779 ) ( 13,035 ) Net cash provided by (used for) financing activities ( 19,764 ) ( 34,779 ) 20,501 Effect of foreign currency exchange rate changes on cash and cash equivalents ( 2,598 ) ( 523 ) ( 4,292 ) Net increase (decrease) in cash and cash equivalents ( 15,968 ) ( 23,989 ) 5,927 Cash and cash equivalents at beginning of period 42,751 66,740 60,813 Cash and cash equivalents at end of period $ 26,783 $ 42,751 $ 66,740 Supplemental cash flow information: Income taxes paid $ 3,481 $ 13,176 $ 10,922 Interest paid $ 4,738 $ 7,015 $ 2,214 The accompanying notes are an integral part of these consolidated financial statements. 48 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Note 1 — Description of Business Universal Electronics Inc. ("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 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 the contrary. Note 2 — Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the consolidated financial statements. Reportable Segment An operating segment, in part, is a component of an enterprise whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. Operating segments may be aggregated only to a limited extent. Our chief operating decision maker, the Chief Executive Officer, reviews financial information presented on a consolidated basis, accompanied by disaggregated information about revenues for purposes of making operating decisions and assessing financial performance. Accordingly, we only have a single operating and reportable segment. Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition, allowance for credit losses, inventory valuation, impairment of long-lived assets, intangible assets and goodwill, business combinations, income taxes and related valuation allowances and stock-based compensation expense. Actual results may differ from these assumptions and estimates, and they may be adjusted as more information becomes available. Any adjustment may be material. Revenue Recognition Revenue is recognized when control of a good or service is transferred to a customer. 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 home entertainment products, climate control solutions, wireless sensor and smart home control products and AV accessories that are used in the home entertainment, climate 49 Table of Contents 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 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. Our contracts have an anticipated duration of less than a year and consideration may be variable based on indeterminate volumes. 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 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 (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. These estimates are based on historical sales returns and allowances, analysis of credit memo data and other known factors. Actual returns and claims in any future period are inherently uncertain and thus may differ from our estimates. If actual or expected future returns and claims are significantly greater or lower than the reserves that we have established, we will record a reduction or increase to net sales in the period in which we make such a determination. We license our symbolic intellectual property which includes our patented technologies and database of control codes. Royalty revenue is recognized for these licensing arrangements on an over time basis. We record license revenue for per-unit based licenses when our customers manufacture or ship a product incorporating our intellectual property and we have a present right to payment. We record per-unit-based licenses with minimum guarantees ratably over the license period to which the minimum guarantee relates and any per-unit sales in excess of the minimum guarantee in the period in which the sale occurs. We record licenses with fixed consideration ratably over the license period. 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. Generally, we invoice the customer within 90 days of revenue recognition. 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 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 4 for further information concerning contract liabilities. 50 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Other sales-related matters - Trade receivables are recorded at the invoiced amount and do not bear interest. 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. Income Taxes We provide for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are presented net as non-current by jurisdiction. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from the differences between the financial and tax bases of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when a judgment is made that is considered more likely than not that a tax benefit will not be realized. A decision to record a valuation allowance results in an increase in income tax expense or a decrease in income tax benefit. If the valuation allowance is released in a future period, income tax expense will be reduced accordingly. The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. The impact of an uncertain income tax position is recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not, on a jurisdiction-by-jurisdiction basis, that some portion or all of the deferred tax assets will 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 continue to assess the need for a valuation allowance on deferred tax assets by evaluating both positive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the income statement for the period that the adjustment is determined to be required. The Tax Cuts and Jobs Act (the "Tax Act") subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income ("GILTI") earned by certain foreign subsidiaries. We have elected to account for GILTI in the year the tax is incurred as a period expense. See Note 10 for further information concerning income taxes. Research and Development Research and development ("R&D") costs are expensed as incurred and consist primarily of salaries, employee benefits, supplies and materials. 51 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Advertising 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 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 We recognize the grant date fair value of stock-based compensation awards as expense in proportion to vesting during the derived service period, which ranges from one to three years . Forfeitures of stock-based awards are accounted for as they occur. 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 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. 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 over a period of time equal to the expected life of the stock option. Expected life is computed utilizing historical exercise patterns and post-vesting behavior. 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 15 for further information regarding stock-based compensation. Performance-Based Common Stock Warrants The measurement date for performance-based common stock warrants is the date on which the warrants vest. We recognize the fair value of performance-based common stock warrants as a reduction to net sales ratably as the warrants vest based on the projected number of warrants that will vest, the proportion of the performance criteria achieved by the customer within the period relative to the total performance required (aggregate purchase levels) for the warrants to vest and the fair value of the related unvested warrants. If we do not have a reliable forecast of future purchases to be made by the customer by which to estimate the number of warrants that will vest, then the maximum number of potential warrants is assumed until such time that a reliable forecast of future purchases is available. 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. On January 1, 2023, all 275,000 of the vested and outstanding warrants expired unexercised. Foreign Currency Translation and Foreign Currency Transactions We use the U.S. Dollar as our functional currency for financial reporting purposes. The functional currency for most of our foreign subsidiaries is their local currency. 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 52 Table of Contents 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. The portions of intercompany accounts receivable and accounts payable that are intended for settlement are translated at exchange rates in effect at the balance sheet date. 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 16 for further information concerning transaction gains and losses. 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 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 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. Our derivatives are carried at fair value. See Notes 3, 4, 9, 11, 12 and 18 for further information concerning our financial instruments. 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, entered into on January 24, 2022, 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, cash equivalents and term deposit with financial institutions we believe are high quality. These financial institutions are located in many different geographic regions. As part of our cash and risk management processes, we perform periodic evaluations of the relative credit standing of our financial institutions. We have not sustained credit losses from instruments held at financial institutions. See Note 3 for further information concerning cash, cash equivalents and term deposit. Allowance for Credit Losses We maintain an allowance for credit losses for estimated losses on our trade receivables, resulting from the inability of our customers to make payments for products sold or services rendered. The allowance for credit losses is based on a variety of factors, including credit reviews, historical experience, length of time receivables are past due, current economic trends and changes in customer payment behavior. We also record specific provisions for individual accounts when we become aware of a customer's inability to meet its financial obligations to us, such as in the case of bankruptcy filings or deterioration in the customer's operating results or financial position. If circumstances related to a customer change, our estimates of the recoverability of the receivables would be further adjusted. See Note 4 for further information concerning our allowance for credit losses. Inventories 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 53 Table of Contents 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. See Note 5 for further information concerning our inventories and suppliers. Product innovations and technological advances may shorten a given product's life cycle. We continually monitor our inventories to identify any excess or obsolete items on hand. We write down our inventories for estimated excess and obsolescence in an amount equal to the difference between the cost of the inventories and estimated net realizable value. These estimates are based upon management's judgment about future demand and market conditions. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost. The cost of property, plant, and equipment includes the purchase price of the asset and all expenditures necessary to prepare the asset for its intended use. We capitalize additions and improvements and expense maintenance and repairs as incurred. We capitalize certain internal and external costs incurred to acquire or create internal use software, principally related to software coding, designing system interfaces and installation and testing of the software. For financial reporting purposes, depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any gain or loss is included as a component of depreciation expense. Estimated useful lives are as follows: Buildings 25 years Tooling and equipment 2 - 8 years Computer equipment 3 - 5 years Software 3 - 7 years Furniture and fixtures 2 - 5 years Leasehold and building improvements Lesser of lease term or useful life (approximately 2 - 8 years) See Note 6 for further information concerning our property, plant, and equipment. Goodwill 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) 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, and any required interim tests, using the optional qualitative assessment, weighing the relative impact of factors that are specific to our single reporting unit including our market capitalization compared to the carrying value of our stockholders' equity, as well as industry and macroeconomic factors. Based on the qualitative assessment performed, we consider the aggregation of the relevant factors, and conclude whether it is more likely than not that the fair value of our single reporting unit is less than the carrying value. If we conclude that it is more likely than not that the fair value of our single reporting unit is less than the carrying value, or if we decide not to elect the optional qualitative assessment, we perform a quantitative impairment test, using cash flow projections, discounted by our weighted-average cost of capital. In addition to any quantitative impairment analysis, we also consider the implied control premium compared to our market capitalization. See Note 7 for further information concerning goodwill and goodwill impairment. 54 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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: Capitalized software development 2 years Customer relationships 6 - 10 years Developed and core technology 6 - 14 years Patents 10 years Trademarks and trade names 6 - 8 years See Note 7 for further information concerning intangible assets. Long-Lived and Intangible Assets Impairment We assess the impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important which may trigger an impairment review may include the following, but are not limited to: (1) significant underperformance relative to historical or projected future operating results; (2) significant changes in the manner or use of the assets, their physical condition or strategy for the overall business; (3) significant negative industry or economic trends; (4) a current expectation that a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life; or (5) a significant decline in our stock price for a sustained period. We conduct an impairment review when we determine that the carrying value of a long-lived or intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment. The asset is impaired if its carrying value exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. An impairment loss is the amount by which the carrying value of an asset exceeds its fair value. We estimate fair value utilizing the projected discounted cash flow method and a discount rate determined by our management to be commensurate with the risk inherent in our current business model. See Note 6 for further information concerning long-lived assets. See Note 7 for further information concerning intangible assets. Leases We determine if an arrangement is a lease at inception and determine the classification of the lease, as either operating or finance, at commencement. Operating leases are included in operating lease right-of-use ("ROU") assets, other accrued liabilities and long-term operating lease obligations on our consolidated balance sheets. We presently do not have any finance leases. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date, including the lease term, in determining the present value of lease payments. Operating lease ROU assets also factor in any lease payments made, initial direct costs and lease incentives received. 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 two extensions at the then current market rate. Lease expense for lease payments is recognized on a straight-line basis over the lease term. 55 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 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. Derivatives 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. 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. We do not enter into financial instruments for speculation or trading purposes. The derivatives we enter into have not qualified for hedge accounting. 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. The estimated fair value of derivative financial instruments represents the amount required to enter into similar offsetting contracts with similar remaining maturities based on quoted market prices. See Note 18 for further information concerning derivatives. Fair-Value Measurements 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. The valuation techniques are based upon observable and unobservable inputs. Observable or market inputs reflect market data obtained from independent sources. Unobservable inputs require management to make certain assumptions and judgments based on the best information available. Observable inputs are the preferred data source. These two types of inputs result in the following fair value hierarchy: Level 1: Quoted prices (unadjusted) for identical instruments in active markets. Level 2: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable. 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; and 56 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 • 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. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting – Improvements to Reportable Segments Disclosures." The guidance enhances disclosures of significant segment expenses by requiring the disclosure of significant segment expenses regularly provided to the chief operating decision maker, extends certain annual disclosures to interim periods, and permits more than one measure of segment profit or loss to be reported under certain conditions. All disclosure requirements are also required for companies with a single reportable segment. We adopted this guidance in the fourth quarter of 2024, using the retrospective transition method. This guidance impacts our disclosures only, with no impact to our consolidated balance sheets, statements of operations or cash flows. Accounting Pronouncements Not Yet Effective In November 2024, the FASB issued ASU 2024-03 "Income Statement – Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses." This guidance requires additional disclosures by disaggregating the costs and expense line items that are presented on the face of the consolidated statements of operations. This guidance is effective for annual periods beginning in 2027 and interim periods beginning in 2028, with early adoption permitted. This guidance requires a public company to apply the amendments either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the impact of adopting this guidance on our disclosures. In December 2023, the FASB issued ASU 2023-09, "Income Taxes – Improvements to Tax Disclosures." The guidance expands income tax disclosures by requiring public business entities, on an annual basis, to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, this guidance requires that all entities disaggregate disclosures by jurisdiction on the amount of income taxes paid (net of refunds received), income or loss from continuing operations before income tax expense (or benefit) and income tax expense (or benefit) from continuing operations. This guidance is effective for annual periods beginning after December 15, 2024, and therefore will be effective beginning with our financial statements issued for the year ending December 31, 2025. We are currently evaluating the impact of adopting this guidance on our consolidated financial statements and disclosures. We have assessed all other ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact. Note 3 — Cash, Cash Equivalents and Term Deposit Cash and cash equivalents were held in the following geographic regions: December 31, (In thousands) 2024 2023 North America $ 1,986 $ 8,460 People's Republic of China ("PRC") 10,117 11,102 Asia (excluding the PRC) 2,343 2,427 Europe 7,035 8,145 South America 5,302 12,617 Total cash and cash equivalents $ 26,783 $ 42,751 57 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 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 Revenue Details The pattern of revenue recognition was as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Goods and services transferred at a point in time $ 321,410 $ 324,433 $ 450,227 Goods and services transferred over time 73,469 96,024 92,524 Net sales $ 394,879 $ 420,457 $ 542,751 Our net sales to external customers by geographic area were as follows: Year Ended December 31, (In thousands) 2024 2023 2022 United States $ 106,718 $ 129,528 $ 167,501 Asia (excluding the PRC) 78,225 85,347 127,702 Europe 90,622 90,221 103,993 Latin America 34,433 28,870 28,363 PRC 60,338 63,334 85,215 Other 24,543 23,157 29,977 Total net sales $ 394,879 $ 420,457 $ 542,751 Specific identification of the customer billing location was the basis used for attributing revenues from external customers to geographic areas. Accounts Receivable, Net Accounts receivable, net were as follows: December 31, (In thousands) 2024 2023 Trade receivables, gross $ 93,773 $ 106,182 Allowance for credit losses ( 1,863 ) ( 815 ) Allowance for sales returns ( 383 ) ( 532 ) Trade receivables, net 91,527 104,835 Other (1) 22,655 7,761 Accounts receivable, net (2) $ 114,182 $ 112,596 (1) Other accounts receivable is primarily comprised of supplier, supplier rebate and interest receivables. (2) Accounts receivable, net at December 31, 2022 was $ 112.3 million. 58 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Allowance for Credit Losses Changes in the allowance for credit losses were as follows: (In thousands) Year Ended December 31, 2024 2023 2022 Balance at beginning of period $ 815 $ 957 $ 1,285 Additions (reductions) to costs and expenses 1,081 70 ( 182 ) Write-offs/Foreign exchange effects ( 33 ) ( 212 ) ( 146 ) Balance at end of period $ 1,863 $ 815 $ 957 Contract Assets Contract assets were $ 10.3 million, $ 4.2 million, and $ 8.0 million at December 31, 2024, 2023 and 2022, respectively. The change in balances between periods is due to the fluctuation of custom product inventory balances for which we have an enforceable right to payment for performance completed to date. Contract Liabilities We have current and non-current contract liability balances primarily consist of cash received in advance of providing our cloud-based software services. Contract liabilities are included within other accrued liabilities and other long-term liabilities in our consolidated balance sheets. Changes in the carrying amount of contract liabilities were as follows: (In thousands) Year Ended December 31, 2024 2023 Balance at beginning of period $ 3,501 $ 1,931 Payments received 5,524 6,080 Revenue recognized ( 5,736 ) ( 4,529 ) Foreign exchange effects ( 53 ) 19 Balance at end of period $ 3,236 $ 3,501 Significant Customers Net sales to the following customers totaled more than 10% of our net sales: Year Ended December 31, 2024 2023 2022 $ (thousands) % of Net Sales $ (thousands) % of Net Sales $ (thousands) % of Net Sales Daikin Industries Ltd. $ 52,421 13.3 % $ 58,843 14.0 % $ 78,413 14.4 % Comcast Corporation (1) (1) (1) (1) $ 75,917 14.0 % (1) Sales associated with this customer did not total more than 10% of our net sales for the indicated period. There were no significant customers that totaled more than 10% of our accounts receivable at December 31, 2024 or December 31, 2023. 59 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Note 5 — Inventories Inventories were as follows: December 31, (In thousands) 2024 2023 Raw materials $ 21,245 $ 32,794 Components 10,820 11,061 Work in process 1,896 3,827 Finished goods 45,394 40,591 Inventories $ 79,355 $ 88,273 Significant Supplier We purchase integrated circuits, components and finished goods from multiple sources. Purchases from the following supplier totaled 10% of our total inventory purchases: Year Ended December 31, 2024 2023 2022 $ (thousands) % of Total Inventory Purchases $ (thousands) % of Total Inventory Purchases $ (thousands) % of Total Inventory Purchases Qorvo International Pte Ltd. (1) (1) (1) (1) $ 33,293 11.5 % (1) Purchases associated with this supplier did not total more than 10% of our total inventory purchases for the indicated period. There were no trade payable balances from suppliers that totaled more than 10% of our total accounts payable at December 31, 2024 and December 31, 2023. Note 6 — Property, Plant, and Equipment, Net Property, plant, and equipment, net ("PP&E") were as follows: December 31, (In thousands) 2024 2023 Buildings $ 17,273 $ 17,806 Computer equipment 9,159 9,679 Furniture and fixtures 2,501 3,598 Leasehold and building improvements 29,404 33,049 Machinery and equipment 75,637 82,302 Software 25,411 28,074 Tooling 30,314 30,724 189,699 205,232 Accumulated depreciation ( 156,804 ) ( 163,301 ) 32,895 41,931 Construction in progress 1,312 2,688 Total property, plant, and equipment, net $ 34,207 $ 44,619 Depreciation expense was $ 12.9 million, $ 18.0 million and $ 19.9 million for the years ended December 31, 2024, 2023 and 2022, respectively. 60 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 During the three months ended September 30, 2023, as part of our manufacturing footprint optimization efforts, we made the decision to close our southwestern PRC factory and manufacturing operations were stopped in September 2023. We also downsized and streamlined the Mexico operations by moving to a smaller, more efficient facility. As a result of these decisions, we recorded impairment charges of $ 7.7 million, of which $ 7.6 million and $ 0.1 million was recorded in cost of sales and SG&A expenses, respectively. In addition, during the year ended December 31, 2023, we recorded an additional $ 0.2 million of impairment charges , recorded in cost of sales, relating to the underutilization of property, plant and equipment in our other PRC-based factories. 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. Construction in progress was as follows: December 31, (In thousands) 2024 2023 Leasehold and building improvements $ 102 $ 623 Machinery and equipment 483 738 Software 60 11 Tooling 638 1,197 Other 29 119 Total construction in progress $ 1,312 $ 2,688 We expect that most of the assets under construction will be placed into service during the first six months of 2025. We will begin to depreciate the cost of these assets under construction once they are placed into service. Long-lived tangible assets by geographic area, which include property, plant, and equipment, net and operating lease ROU assets, were as follows: December 31, (In thousands) 2024 2023 United States $ 9,683 $ 13,245 PRC 22,139 26,679 Vietnam 8,520 10,089 Mexico 5,164 9,227 All other countries 3,023 4,072 Total long-lived tangible assets $ 48,529 $ 63,312 Note 7 — Goodwill and Intangible Assets, Net Goodwill During the year ended December 31, 2023, a decline in our financial performance, overall negative trend in the video service provider channel and an uncertain economic environment contributed to a significant decline in our market capitalization. We considered this to be an impairment trigger. We, therefore, performed a quantitative valuation analysis under an income approach to estimate our reporting unit's fair value. The income approach used projections of estimated operating results and cash flows that were discounted using a discount rate based on the weighted-average cost of capital. The main assumptions supporting the cash flow projections include, but are not limited to, revenue growth, margins, discount rate, and terminal growth rate. The financial projections reflect our best estimate of economic and market conditions over the projected period, including forecasted revenue growth, margins, capital expenditures, depreciation and amortization. In addition to our valuation analysis under an income approach, we also considered the implied control premium compared to our market capitalization. We determined that the implied control premium over our market capitalization to be substantial; therefore, we recorded an impairment charge of $ 49.1 million during the year ended December 31, 2023. 61 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Changes in the carrying amount of goodwill were as follows: (In thousands) Balance at December 31, 2022 $ 49,085 Goodwill impairment ( 49,075 ) Foreign exchange effects ( 10 ) Balance at December 31, 2023 $ — Intangible Assets, Net The components of intangible assets, net were as follows: December 31, 2024 2023 (In thousands) Gross (1) Accumulated Amortization (1) Net (1) Gross (1) Accumulated Amortization (1) Net (1) Capitalized software development costs $ 2,575 $ ( 1,150 ) $ 1,425 $ 2,161 $ ( 421 ) $ 1,740 Customer relationships 6,340 ( 4,526 ) 1,814 6,340 ( 3,803 ) 2,537 Developed and core technology 740 ( 398 ) 342 4,220 ( 3,754 ) 466 Patents 34,758 ( 14,339 ) 20,419 33,195 ( 12,686 ) 20,509 Trademarks and trade names 450 ( 412 ) 38 450 ( 353 ) 97 Total intangible assets, net $ 44,863 $ ( 20,825 ) $ 24,038 $ 46,366 $ ( 21,017 ) $ 25,349 (1) This table excludes the gross value of fully amortized intangible assets totaling $ 49.3 million and $ 45.0 million on December 31, 2024 and 2023, respectively. Amortization expense is recorded in SG&A expenses, except amortization expense related to capitalized software development costs, which is recorded in cost of sales. Amortization expense by statement of operations caption was as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Cost of sales $ 729 $ 443 $ 49 Selling, general and administrative expenses 4,438 4,440 3,969 Total amortization expense $ 5,167 $ 4,883 $ 4,018 Estimated future annual amortization expense related to our intangible assets at December 31, 2024 is as follows: (In thousands) 2025 $ 5,048 2026 4,563 2027 3,490 2028 2,956 2029 2,645 Thereafter 5,336 Total $ 24,038 The remaining weighted average amortization period of our intangible assets at December 31, 2024 is 6.3 years. Note 8 — Leases We have entered into various operating lease agreements for automobiles, offices and manufacturing facilities throughout the world. At December 31, 2024, our operating leases had remaining lease terms of up to 36 years, including any reasonably probable extensions. 62 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Lease balances within our consolidated balance sheets were as follows: (In thousands) December 31, 2024 December 31, 2023 Assets: Operating lease right-of-use assets $ 14,322 $ 18,693 Liabilities: Other accrued liabilities $ 3,553 $ 4,813 Long-term operating lease obligations 9,232 12,560 Total lease liabilities $ 12,785 $ 17,373 We entered into lease amendments for our southwestern PRC and Mexico factories during the year ended December 31, 2023 as a part of our manufacturing footprint optimization efforts. As a result of these modifications, our operating lease right-of-use assets decreased by $ 1.2 million and our total lease liabilities decreased by $ 1.3 million. Operating lease expense, operating lease cash flows and supplemental cash flow information were as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Cost of sales $ 2,390 $ 3,012 $ 2,822 Selling, general and administrative expenses 5,017 4,378 4,474 Total operating lease expense $ 7,407 $ 7,390 $ 7,296 Operating lease expenses from variable and short-term lease costs $ 1,146 $ 1,033 $ 632 Operating cash outflows from operating leases $ 8,152 $ 7,736 $ 7,427 Operating lease right-of-use assets obtained in exchange for lease obligations $ 1,249 $ 4,360 $ 8,756 The weighted average remaining lease liability term and the weighted average discount rate were as follows: Year Ended December 31, 2024 2023 Weighted average lease liability term (in years) 4.6 4.9 Weighted average discount rate 5.45 % 5.04 % The following table reconciles the undiscounted cash flows for each of the first five years and thereafter to the operating lease liabilities recognized in our consolidated balance sheet at December 31, 2024. The reconciliation excludes short-term leases that are not recorded on the balance sheet. (In thousands) 2025 $ 4,100 2026 3,744 2027 2,999 2028 1,349 2029 594 Thereafter 1,829 Total lease payments 14,615 Less: imputed interest ( 1,830 ) Total lease liabilities $ 12,785 At December 31, 2024, we did not have any operating leases that had not yet commenced. 63 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Prepaid Land Lease We operate one factory within the PRC on which the land is leased from the government as of December 31, 2024. This land lease was prepaid to the PRC government at the time our subsidiary occupied the land. We have obtained a land-use right certificate for the land pertaining to this factory. The factory is located in the city of Yangzhou in the Jiangsu province. The remaining net book value of this operating lease ROU asset was $ 2.1 million at December 31, 2024, and is being amortized on a straight-line basis over the remaining term of approximately 34 years. The buildings located on this land had a net book value of $ 11.2 million at December 31, 2024 and are being depreciated over a remaining weighted average period of approximately 15 years. Note 9 — Lines of Credit U.S. Line of Credit On December 16, 2024, we executed an amendment to our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank"), which provides for a revolving line of credit ("U.S. Credit Line") through April 30, 2026. The U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures. The U.S. Credit Line has a maximum availability up to $ 75.0 million, subject to meeting certain financial conditions, including an accounts receivable coverage ratio ("AR Ratio"). This AR Ratio is calculated monthly and adjusts the current U.S. Credit Line total availability. At December 31, 2024, the U.S. Credit Line availability was $ 58.3 million based upon the AR Ratio. At February 18, 2025, the U.S. Credit Line total availability was $ 60.5 million based upon the AR Ratio. Amounts available for borrowing under the U.S. Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at December 31, 2024. All obligations under the U.S. Credit Line are secured by substantially all of our U.S. personal property and tangible and intangible assets, as well as a guaranty of the U.S. Credit Line by our wholly-owned subsidiary, Universal Electronics BV. Under the Second Amended Credit Agreement, up through March 13, 2024, we may elect to pay interest on the U.S. Credit Line based on the Secured Overnight Financing Rate (" SOFR ") plus an applicable margin (varying from 2.00 % to 2.75 %), or base rate (based on the prime rate of U.S. Bank or as otherwise specified in the Second Amended Credit Agreement) plus an applicable margin (varying from — % to 0.75 %). Subsequent to March 13, 2024, we pay interest on the U.S. Credit Line based on SOFR plus a 3.00 % margin. Additionally, subsequent to March 13, 2024, the Second Amended Credit Agreement also contains a facility fee of 0.25 %. The interest rates in effect at December 31, 2024 and 2023 were 7.31 % and 8.06 %, respectively. The Second Amended Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. From January 1, 2024 to September 30, 2024, our covenants were based upon EBITDA and a minimum accounts receivable coverage ratio. From October 1, 2024 to December 31, 2024, our covenants were based upon a minimum fixed charge coverage ratio. Subsequent to December 31, 2024, our covenants will be based upon a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. We were in compliance with the covenants and conditions of the Second Amended Credit Agreement at and during the years ended December 31, 2024 and 2023. At December 31, 2024, we had $ 26.0 million outstanding under the U.S. Credit Line. At December 31, 2024, our remaining availability under the U.S. Credit Line was $ 32.3 million. Our total interest expense on borrowings under the U.S. Credit Line was $ 4.2 million, $ 6.0 million and $ 3.3 million during the years ended December 31, 2024, 2023 and 2022, respectively. Our total facility fee expense under the U.S. Credit Line was $ 0.2 million during the year ended December 31, 2024. China Line of Credit On August 29, 2024, our subsidiary Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), executed a Line of Credit Agreement (the "Line of Credit Agreement") with the Bank of China, which provides for a revolving line of credit ("China Credit Line") 64 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 through July 24, 2025. We expect to renew our Line of Credit Agreement with the Bank of China prior to its expiration; however, no assurance can be given that future financing will be available or, if available, that we will be offered terms satisfactory to us. The China Credit Line may be used for working capital purposes. The China Credit Line has a maximum availability up to RMB 80.0 million (approximately $ 11.0 million), subject to meeting certain financial conditions. Amounts available for borrowing under the China Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at December 31, 2024. All obligations under the China Credit Line are secured by GTY's buildings and land use rights. Under the Line of Credit Agreement, we pay interest on the China Credit Line based on the one-year rate from the National Interbank Funding Center less a 0.1 % margin. There are no associated commitment fees on the China Credit Line. The interest rate in effect at December 31, 2024 was 3.07 %. The Line of Credit Agreement includes financial covenants and contains other customary affirmative and negative covenants and events of default. Our covenants are based on a debt to asset ratio and a dividends paid to net income ratio. We were in compliance with the covenants and conditions of the Line of Credit Agreement at and during the year ended December 31, 2024. At December 31, 2024, we had RMB 80.0 million (approximately $ 11.0 million) outstanding under the China Credit Line. At December 31, 2024, we had no remaining availability under our China Credit Line. Our total interest expense on borrowings under the China Credit Line was RMB 0.5 million (approximately $ 0.1 million) during the year ended December 31, 2024. Note 10 — Income Taxes In 2024, 2023 and 2022, pre-tax income (loss) was attributed to the following jurisdictions: Year Ended December 31, (In thousands) 2024 2023 2022 Domestic operations $ ( 53,708 ) $ ( 95,876 ) $ ( 69,058 ) Foreign operations 35,110 3,622 80,451 Total pre-tax income (loss) $ ( 18,598 ) $ ( 92,254 ) $ 11,393 The provision for income taxes charged to operations was as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Current tax expense: U.S. federal $ 37 $ 23 $ 573 State and local 45 44 73 Foreign 5,068 7,193 8,523 Total current 5,150 7,260 9,169 Deferred tax (benefit) expense: U.S. federal 269 ( 813 ) 230 State and local — ( 126 ) 36 Foreign 12 ( 337 ) 1,551 Total deferred 281 ( 1,276 ) 1,817 Total provision for income taxes $ 5,431 $ 5,984 $ 10,986 65 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Net deferred tax assets were comprised of the following: December 31, (In thousands) 2024 2023 Deferred tax assets: Accounts receivable $ 464 $ — Accrued liabilities 4,820 3,958 Amortization of intangible assets 9,223 9,999 Capitalized inventory costs 3,553 3,369 Capitalized research and development costs 10,245 8,035 Depreciation 3,797 4,058 Income tax credits 20,375 19,615 Inventory reserves 2,371 2,154 Net operating losses 14,003 12,053 Operating lease obligations 2,865 4,112 Stock-based compensation 2,915 4,453 Total deferred tax assets 74,631 71,806 Deferred tax liabilities: Accounts receivable — ( 20 ) Right-of-use assets ( 3,175 ) ( 4,385 ) Other ( 1,333 ) ( 2,920 ) Total deferred tax liabilities ( 4,508 ) ( 7,325 ) Net deferred tax assets before valuation allowance 70,123 64,481 Less: Valuation allowance ( 65,629 ) ( 59,686 ) Net deferred tax assets $ 4,494 $ 4,795 66 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pre-tax income from operations as a result of the following: Year Ended December 31, (In thousands) 2024 2023 2022 Tax provision (benefit) at statutory U.S. rate $ ( 3,906 ) $ ( 19,373 ) $ 2,392 Increase (decrease) in tax provision (benefit) resulting from: Distribution of previously taxed foreign earnings and profits — ( 9,450 ) ( 16,776 ) Federal research and development credits ( 816 ) ( 1,043 ) ( 715 ) Foreign participation exemption — ( 12,571 ) — Foreign permanent benefit ( 650 ) ( 1,426 ) ( 1,620 ) Foreign tax rate differential ( 295 ) 21,794 15,133 Foreign undistributed earnings, net of credits 6,231 7,198 6,486 Goodwill impairment — 5,383 — Non-deductible items 635 594 601 Non-territorial income ( 2,088 ) ( 945 ) ( 2,323 ) Provision to return ( 350 ) ( 19 ) ( 435 ) Sale of intangible asset — — ( 3,385 ) State and local taxes, net ( 992 ) ( 2,629 ) ( 2,408 ) Stock-based compensation 2,045 980 693 Tax rate change ( 2,286 ) 1,648 ( 640 ) Valuation allowance 5,943 15,090 12,058 Withholding tax 1,521 1,229 2,188 Other 439 ( 476 ) ( 263 ) Tax provision $ 5,431 $ 5,984 $ 10,986 At December 31, 2024, we had U.S. federal and state Research and Development ("R&D") income tax credit carryforwards of approximately $ 6.0 million and $ 17.6 million, respectively. The federal R&D income tax credits begin expiring in 2039. The state R&D income tax credits do not have an expiration date. At December 31, 2024, we had U.S. federal, state and local, and foreign net operating loss carryforwards of approximately $ 28.6 million, $ 91.0 million and $ 7.5 million, respectively. The U.S. federal net operating loss carryforwards do not have an expiration date. The state and local and foreign net operating loss carryforwards begin to expire in 2025 and 2027, respectively. At December 31, 2024, we assessed the realizability of the Company's deferred tax assets by considering whether it is more likely than not some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We considered the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to cumulative operating losses for the three years ended December 31, 2024, we have recorded a valuation allowance against our U.S. federal and state deferred tax assets of $ 39.3 million and $ 23.8 million, respectively, as we have determined that it is more likely than not that the tax benefits will not be realized in the future. The valuation allowance increased by $ 6.0 million and $ 15.1 million during the years ended December 31, 2024 and 2023, respectively. The Company had an overall U.S. federal deferred tax liability as of December 31, 2024 for foreign withholding taxes that cannot be used as a source of income to offset deferred tax assets. In general, under Section 382, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize pre-change net operating losses and tax credits to offset future taxable income. We do not believe that we have experienced such an ownership change and do not expect our net operating losses and tax credits to be subject to the limitations under Section 382. 67 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Uncertain Tax Positions At December 31, 2024 and 2023, we had gross unrecognized tax benefits of approximately $ 3.7 million and $ 3.4 million, respectively, including interest and penalties. In accordance with accounting guidance, we have elected to classify interest and penalties as components of tax expense. Interest and penalties were immaterial for the year ended December 31, 2024, 2023 and 2022. Interest and penalties are included in the unrecognized tax benefits. Changes to our gross unrecognized tax benefits were as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Balance at beginning of period $ 3,315 $ 3,150 $ 3,001 Additions as a result of tax positions taken during the current year 322 165 149 Balance at end of period $ 3,637 $ 3,315 $ 3,150 Approximately $ 3.7 million, $ 3.3 million and $ 3.2 million of the total amount of unrecognized tax benefits at December 31, 2024, 2023 and 2022, respectively, would favorably effect the annual effective tax rate if not for the valuation allowance. We are unaware of any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within the next twelve months. We do not anticipate a decrease in unrecognized tax benefits within the next twelve months based on federal, state, and foreign statute expirations in various jurisdictions. We have classified uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. We file income tax returns in the U.S. and in various state and foreign jurisdictions. As of December 31, 2024, the open statutes of limitations for our significant tax jurisdictions are as follows: U.S. federal for 2021 through 2023, state and local for 2020 through 2023, and non-U.S. for 2018 through 2023. Indefinite Reinvestment Assertion Beginning in 2018, the Tax Act generally provides a 100% federal deduction for dividends received from foreign subsidiaries. Nevertheless, companies must still apply the guidance of ASC Topic 740 to account for the tax consequences of outside basis differences and other tax impacts of their investments in foreign subsidiaries, including potential foreign withholding taxes on distributions. For the years ended December 31, 2024, 2023 and 2022, we recorded a deferred tax liability of $ 0.4 million, $ 0.4 million and $ 0.5 million, respectively, relating to state tax and foreign tax withholding liabilities on future distributions. 68 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Note 11 — Accrued Compensation The components of accrued compensation were as follows: December 31, (In thousands) 2024 2023 Accrued bonus $ 2,386 $ 2,843 Accrued commission 1,545 602 Accrued salary/wages (1) 4,676 4,085 Accrued social insurance (2)(3) 6,718 7,082 Accrued vacation/holiday 3,036 3,252 Other accrued compensation 2,566 2,441 Total accrued compensation $ 20,927 $ 20,305 (1) For the year ended December 31, 2024, accrued severance expenses of $ 0.8 million and $ 0.1 million related to our Mexico and Asia manufacturing footprint optimization efforts, respectively, are included in this amount. See Note 13 for further information related to our restructuring activities. (2) Includes $ 0.1 million of accrued severance expenses at December 31, 2023, related to our Asia manufacturing footprint optimization efforts. See Note 13 for further information related to our restructuring activities. (3) PRC employers are required by law to remit the applicable social insurance payments to their local government. Social insurance is comprised of various components such as pension, medical insurance, job injury insurance, unemployment insurance, and a housing assistance fund, and is administered in a manner similar to social security in the United States. This amount represents our estimate of the amounts due to the PRC government for social insurance on December 31, 2024 and 2023. Note 12 — Other Accrued Liabilities The components of other accrued liabilities were as follows: December 31, (In thousands) 2024 2023 Contract liabilities $ 2,521 $ 2,697 Duties 543 481 Expense associated with fulfilled performance obligations 678 1,092 Freight and handling fees 2,275 1,998 Interest 10 438 Legal judgment (1) 4,162 — Operating lease obligations 3,553 4,813 Product warranty claim costs 35 522 Professional fees 1,128 1,558 Sales and value added taxes 2,684 4,194 Other (2) 3,419 3,388 Total other accrued liabilities $ 21,008 $ 21,181 (1) This amount relates to the judgment of a lawsuit with an employment agency in the PRC. See Note 13 for further information related to this matter. (2) Includes $ 0.1 million and $ 0.2 million at December 31, 2024 and 2023, respectively, associated with the purchase of property, plant and equipment. 69 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Note 13 — Commitments and Contingencies Indemnifications We indemnify our directors and officers to the maximum extent permitted under the laws of the state of Delaware and we have entered into indemnification agreements with each of our directors and executive officers. In addition, we insure our individual directors and officers against certain claims and attorney's fees and related expenses incurred in connection with the defense of such claims. The amounts and types of coverage may vary from period to period as dictated by market conditions. Management is not aware of any matters that require material indemnification of its officers or directors. Fair Price Provisions and Other Anti-Takeover Measures Our Restated Certificate of Incorporation, as amended, contains certain provisions restricting business combinations with interested stockholders under certain circumstances and imposing higher voting requirements for the approval of certain transactions ("fair price" provisions). Any of these provisions may delay or prevent a change in control. The "fair price" provisions require that holders of at least two-thirds of our outstanding shares of voting stock approve certain business combinations and significant transactions with interested stockholders. Purchase Commitments We have entered into various inventory and property, plant and equipment related purchase agreements with suppliers. Certain of these agreements have provisions for a binding forecast (inventory) or non-cancellable purchase orders (inventory and PP&E). As of December 31, 2024, we had non-cancellable purchase commitments with suppliers for inventory and PP&E of $ 9.3 million and $ 0.9 million, respectively. These amounts are expected to be paid within the next twelve months. Product Warranties Changes in the liability for product warranty claim costs were as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Balance at beginning of period $ 522 $ 522 $ 1,095 Additions (reductions) to costs and expenses ( 305 ) — 249 Settlements (in cash or in kind) ( 182 ) — ( 819 ) Foreign currency translation gain (loss) — — ( 3 ) Balance at end of period $ 35 $ 522 $ 522 Restructuring Activities Asia In conjunction with our plan to restructure and optimize our manufacturing footprint while reducing our concentration risk in the PRC, we stopped all production activities and began to shut down our southwestern PRC factory beginning in the third quarter of 2023. In addition, during the fourth quarter of 2024, we stopped production activities and shut down one of our eastern PRC factories. We incurred $ 0.5 million of severance and $ 0.1 million of other exit costs during the year ended December 31, 2024 and $ 3.4 million of severance and $ 0.6 million of other exit costs for the year ended December 31, 2023. These costs are included within factory restructuring charges on our consolidated statements of operations. We have recognized a total of $ 4.6 million in factory restructuring charges since September 2023. This factory restructuring was completed in the fourth quarter of 2024 and we do not expect any further expenses associated with this plan. Mexico As part of our plan to restructure and optimize our factory footprint, we have worked to downsize our factory in Mexico due to decreased demand in the U.S. market and our Vietnam facility's ability to supply our North American customers. We have 70 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 leased a smaller facility and reduced our factory headcount during the year ended December 31, 2024. We incurred $ 1.5 million of severance and $ 1.5 million of other exit costs during the year ended December 31, 2024. These costs are included within factory restructuring charges on our consolidated statements of operations. We have recognized a total of $ 3.0 million in factory restructuring charges since January 2024. This factory restructuring is scheduled to be completed in the second quarter of 2025 and we do not expect any further expenses associated with this plan. Restructuring liabilities are included in accrued compensation, accounts payable and other accrued liabilities on our consolidated balance sheets. Total restructuring activities for the years ended December 31, 2024 and December 31, 2023 are as follows: Restructuring Costs (In thousands) Total Severance Expense Other Exit Expense Balance at December 31, 2022 $ — $ — $ — Restructuring charges 4,015 3,425 590 Cash payments ( 3,553 ) ( 3,278 ) ( 275 ) Balance at December 31, 2023 $ 462 $ 147 $ 315 Restructuring charges 3,585 2,008 1,577 Cash payments ( 3,036 ) ( 1,288 ) ( 1,748 ) Balance at December 31, 2024 $ 1,011 $ 867 $ 144 Total costs incurred inception to date $ 7,600 $ 5,433 $ 2,167 Total estimated expense to be incurred after December 31, 2024 $ — $ — $ — Litigation Roku Matters UEI and Roku Inc. ("Roku") and certain of its customers have been in litigation in various forums since 2018—i.e., two actions in the Central District of California ("CDCA") beginning in 2018 and 2020 including related cases against certain of Roku's customers (collectively, the "CDCA cases"), the International Trade Commission ("ITC"), the Patent and Trademark Office ("PTO") ( ex parte reexams) and the Patent and Trademark Appeals Board ("PTAB"). The CDCA cases have all been stayed on various grounds since 2019. The 2018 case was stayed in November 2019 pending resolution of Roku initiated PTO and PTAB matters, all of which have since been resolved. The 2020 case was also immediately stayed due to UEI's related ITC action against Roku, in which UEI ultimately prevailed when on July 9, 2021, the Administrative Law Judge ("ALJ") issued an initial determination finding Roku in violation of Section 337. The Commission issued a final determination on November 10, 2021, affirming the ALJ’s finding. The Commission then issued a limited exclusion order and cease and desist order against Roku, which went into effect following the expiration of the Presidential Review Period on January 9, 2022. The Federal Circuit affirmed on January 19, 2024. Following UEI's win and affirmance by the Federal Circuit, Roku sought rehearing en banc and sought cert from the Supreme Court on a domestic industry question. On January 13, 2025, the Supreme Court denied cert. While this ITC matter has been finally resolved and Roku has no more ability to appeal, we have agreed to continue the stay of the CDCA cases pending the outcome of one final PTAB action involving one of our patents, which we expect to occur in the first half of 2025. Roku also filed its own retaliatory ITC action against UEI and certain of our customers on two patents it purchased for this purpose. Roku’s action failed when on June 24, 2022, the ALJ found on of Roku’s patents to be invalid as indefinite. Thereafter, on June 28, 2022, the ALJ issued its initial determination ("ID") fully exonerating us and our customers finding Roku’s second patent invalid and that Roku failed to establish the requisite domestic industry and thus no violation of the Tariff Act. Roku and we filed petitions to appeal certain portions of the ID. 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. Further, on October 23, 2023, the PTBA issued its Final Written Decision invalidating all of the claims Roku alleges we infringe. As a companion to its ITC request, on April 8, 2021, Roku also filed a 71 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 lawsuit against us in Federal CDCA 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 their ITC case, and will likely continue to be stayed pending the conclusion of Roku's appeal of their ITC case. Court of International Trade Action against the United States of America, et. al. On October 9, 2020, we and our subsidiaries, Ecolink Intelligent Technology, Inc. ("Ecolink") and RCS Technology, LLC ("RCS"), filed an amended complaint (20-cv-00670) in the Court of International Trade (the "CIT") against the United States of America; the Office of the United States Trade Representative; Robert E. Lighthizer, U.S. Trade Representative; U.S. Customs & Border Protection; and Mark A. Morgan, U.S. 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 the PRC under Lists 3 and 4A. On January 8, 2025, the U.S. Court of Appeals for the Federal Circuit ("USCAFC") heard oral arguments on the appeal by the lead plaintiff from the Court of International Trade's ("CIT") March 17, 2023 decision in which the CIT sustained the List 3 and List 4 tariffs, concluding that USTR's rationale in support of the tariffs was not impermissibly post hoc. A decision from the USCAFC is expected by the end of 2025. Tongshun Matters On January 23, 2024, Tongshun Company ("TS") filed suit against one of our subsidiaries, Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), claiming among other things, breach of an employment agency, and as is standard in Chinese litigation matters such as these, TS had also requested the Court to order a hold on GTY's bank account for the total claimed amount of RMB 35 million (approximately $ 4.8 million). On December 20, 2024, the Court rendered a decision in favor of TS and ordered a judgment of RMB 27.4 million (approximately $ 3.8 million) plus interest and costs totaling approximately RMB 30.4 million (approximately $ 4.2 million). We recorded an accrual for this judgment during the fourth quarter of 2024. This accrual is included in other accrued expenses on our consolidated balance sheets. The legal fees associated with this matter are expensed as incurred. We filed an appeal against this judgment and on February 11, 2025, the Jiangsu Province Yangzhou Intermediate People's Court heard oral argument and we expect a decision during the first half of 2025. Other Litigation Matters 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. However, as is typical in our industry and to the nature and kind of business in which we are engaged, from time to time, various claims, charges and litigation are asserted or commenced by third parties against us or by us against third parties arising from or related to product liability, infringement of patent or other intellectual property rights, breach of warranty, contractual relations, or employee relations. The amounts claimed may be substantial, but may not bear any reasonable relationship to the merits of the claims or the extent of any real risk of court awards assessed against us or in our favor. However, no assurances can be made as to the outcome of any of these matters, nor can we estimate the range of potential losses to us. In our opinion, final judgments, if any, which might be rendered against us in potential or pending litigation would not have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. Moreover, we believe that our products do not infringe any third parties' patents or other intellectual property rights. We maintain directors' and officers' liability insurance which insures our individual directors and officers against certain claims, as well as attorney's fees and related expenses incurred in connection with the defense of such claims. Defined Benefit Plan Our subsidiary in India maintains a defined benefit pension plan ("India Plan") for local employees, which is consistent with local statutes and practices. The pension plan was adequately funded on December 31, 2024 based on its latest actuarial report. The India Plan has an independent external manager that advises us of the appropriate funding contribution requirements to which we comply. At December 31, 2024, approximately 53 percent of our India subsidiary employees had qualified for eligibility. An individual must be employed by our India subsidiary for a minimum of five years before becoming eligible. 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. The total amount of liability outstanding at December 31, 2024 and 2023 72 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 for the India Plan was not material. During the years ended December 31, 2024, 2023 and 2022, the net periodic benefit costs were also not material. 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 October 26, 2023, our Board approved a new share repurchase program with an effective date of November 7, 2023. Pursuant to the program, we are authorized to repurchase up to 1,000,000 shares of our common stock. At December 31, 2024, we had 778,362 shares available for repurchase under the program. We may utilize various methods to effect the repurchases under the program, 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. We also repurchase shares of our issued and outstanding common stock to satisfy income tax withholding obligations relating to the stock-based compensation of our employees and directors and/or the cost of stock option exercises. Repurchased shares of our common stock were as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Open market shares repurchased 121 100 300 Stock-based compensation related shares repurchased 85 65 134 Total shares repurchased 206 165 434 Cost of open market shares repurchased $ 1,109 $ 864 $ 9,437 Cost of stock-based compensation related shares repurchased 848 915 3,598 Total cost of shares repurchased $ 1,957 $ 1,779 $ 13,035 Repurchased shares are recorded as shares held in treasury at cost. We hold these shares for future use as management and the Board of Directors deem appropriate. Note 15 — Stock-Based Compensation Stock-based compensation expense for each employee and director is presented in the same statement of operations caption as their cash compensation. Stock-based compensation expense by statement of operations caption and the related income tax benefit were as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Cost of sales $ 106 $ 125 $ 155 Research and development expenses 769 1,098 1,342 Selling, general and administrative expenses: Employees 5,379 6,980 7,257 Outside directors 446 606 1,259 Total employee and director stock-based compensation expense $ 6,700 $ 8,809 $ 10,013 Income tax benefit $ 1,026 $ 1,369 $ 1,660 73 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Restricted Stock Non-vested restricted stock award activity was as follows: 2024 2023 2022 Shares (in 000's) Weighted-Average Grant Date Fair Value Shares (in 000's) Weighted-Average Grant Date Fair Value Shares (in 000's) Weighted-Average Grant Date Fair Value Non-vested at beginning of the year 486 $ 21.66 376 $ 36.82 310 $ 44.41 Granted 391 10.55 340 14.15 262 31.05 Vested ( 264 ) 24.85 ( 211 ) 35.77 ( 191 ) 41.09 Forfeited ( 18 ) 17.40 ( 19 ) 17.72 ( 5 ) 43.22 Non-vested at end of the year 595 $ 13.07 486 $ 21.66 376 $ 36.82 As of December 31, 2024, we expect to recognize $ 5.1 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 1.6 years. Performance Stock Non-vested performance stock award activity was as follows: Shares (in 000s) Weighted-Average Grant Date Fair Value Non-vested at December 31, 2023 — $ — Granted 116 4.72 Vested — — Forfeited — — Non-vested at December 31, 2024 116 $ 4.72 The assumptions we utilized in the Monte Carlo simulation model and the resulting weighted average fair value of performance stock grants were the following: Year Ended December 31, 2024 Weighted average fair value of grants $ 4.72 Risk-free interest rate 4.08 % Expected volatility 57.00 % Expected life in years 2.73 As of December 31, 2024, we expect to recognize $ 0.4 million of total unrecognized pre-tax stock-based compensation expense related to non-vested performance stock awards over a weighted-average life of 1.8 years. 74 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Stock Options Stock option activity was as follows: 2024 2023 2022 Number of Options (in 000's) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in 000's) Number of Options (in 000's) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in 000's) Number of Options (in 000's) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in 000's) Outstanding at beginning of the year 901 $ 38.78 782 $ 44.16 800 $ 45.55 Granted — — 235 24.77 139 33.42 Exercised — — $ — — — $ — ( 80 ) 19.25 $ 292 Forfeited/canceled/expired ( 122 ) 58.52 ( 116 ) 46.59 ( 77 ) 64.81 Outstanding at end of the year (1) 779 $ 35.67 3.12 $ — 901 $ 38.78 3.67 $ — 782 $ 44.16 3.45 $ — Vested and expected to vest at the end of the year (1) 779 $ 35.67 3.12 $ — 901 $ 38.78 3.67 $ — 782 $ 44.16 3.45 $ — Exercisable at the end of the year (1) 673 $ 37.24 2.79 $ — 620 $ 44.06 2.60 $ — 600 $ 45.77 2.61 $ — (1) The aggregate intrinsic value represents the total pre-tax value (the difference between our closing stock price on the last trading day of 2024, 2023 and 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on December 31, 2024, 2023 and 2022. This amount will change based on the fair market value of our stock. There were no option exercises in the years ended December 31, 2024 and 2023. The value of shares withheld in lieu of receiving cash from option exercises in the year ended December 31, 2022 was $ 1.5 million. There was no cash received from option exercises for the year ended December 31, 2022. The actual tax benefit realized from option exercises was $ 0.1 million for the year ended December 31, 2022. The assumptions we utilized in the Black-Scholes option pricing model and the resulting weighted average fair value of stock option grants were the following: Year Ended December 31, 2024 2023 2022 Weighted average fair value of grants $ — $ 10.83 $ 14.51 Risk-free interest rate — % 3.86 % 1.93 % Expected volatility — % 45.89 % 49.35 % Expected life in years 0.00 4.70 4.73 Significant option groups outstanding at December 31, 2024 and the related weighted average exercise price and life information were as follows: Options Outstanding Options Exercisable Range of Exercise Prices Number Outstanding (in 000's) Weighted-Average Remaining Contractual Term (in years) Weighted-Average Exercise Price Number Exercisable (in 000's) Weighted-Average Exercise Price $ 24.77 to $ 34.56 497 3.78 $ 27.69 391 $ 28.23 $ 44.95 to $ 46.17 188 1.18 45.60 188 45.60 $ 52.85 to $ 59.43 94 3.48 58.03 94 58.03 779 3.12 $ 35.67 673 $ 37.24 75 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 As of December 31, 2024, we expect to recognize $ 1.0 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 1.0 year. Stock Incentive Plans Our active stock-based incentive plans include those adopted in 2014 and 2018 ("Stock Incentive Plans"). Under the Stock Incentive Plans, we may grant restricted stock units, performance stock units, stock options, stock appreciation rights, or any combination thereof for a period of ten years from the approval date of each respective plan, unless the plan is terminated by resolution of our Board of Directors. No stock appreciation rights have been awarded under our Stock Incentive Plans as of December 31, 2024. Only directors and employees meeting certain employment qualifications are eligible to receive stock-based awards. The grant price of restricted stock and stock option awards granted under our Stock Incentive Plans is the average of the high and low trades of our stock on the grant date. We prohibit the re-pricing or backdating of stock options. Restricted stock awards vest in various proportions over a one - to three-year time period. Our stock options become exercisable in various proportions over a three-year time frame. Stock options have a maximum ten-year term. Our performance stock awards vest in various proportions over a three-year term, subject to a service condition and stock price-based market conditions. Detailed information regarding our active Stock Incentive Plans was as follows at December 31, 2024: Name Approval Date Total Shares Available for Grant Under the Plan Remaining Shares Available for Grant Under the Plan Outstanding Shares Granted Under the Plan 2014 Stock Incentive Plan 6/12/2014 1,100,000 — 87,660 Amended and Restated 2018 Equity and Incentive Compensation Plan (1) 6/11/2024 3,391,794 970,387 1,402,148 970,387 1,489,808 (1) The 2018 Equity and Incentive Compensation Plan, as amended on June 8, 2021, was amended and restated on June 11, 2024 to create the Amended and Restated 2018 Equity and Incentive Compensation Plan which added an additional 1,000,000 shares. Note 16 — Other Income (Expense), Net Other income (expense), net consisted of the following: Year Ended December 31, (In thousands) 2024 2023 2022 Net gain (loss) on foreign currency exchange contracts (1) $ ( 727 ) $ ( 3,238 ) $ ( 1,309 ) Net gain (loss) on foreign currency exchange transactions 403 ( 262 ) 218 Other income (expense) 384 879 136 Other income (expense), net $ 60 $ ( 2,621 ) $ ( 955 ) (1) This represents the gains (losses) incurred on foreign currency hedging derivatives. See Note 18 for further information concerning our foreign currency exchange contracts. 76 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Note 17 — Earnings (Loss) Per Share Earnings (loss) per share was calculated as follows: Year Ended December 31, (In thousands, except per-share amounts) 2024 2023 2022 BASIC Net income (loss) $ ( 24,029 ) $ ( 98,238 ) $ 407 Weighted-average common shares outstanding 12,959 12,855 12,703 Basic earnings (loss) per share $ ( 1.85 ) $ ( 7.64 ) $ 0.03 DILUTED Net income (loss) $ ( 24,029 ) $ ( 98,238 ) $ 407 Weighted-average common shares outstanding for basic 12,959 12,855 12,703 Dilutive effect of restricted stock, performance stock awards, stock options and common stock warrants — — 76 Weighted-average common shares outstanding on a diluted basis 12,959 12,855 12,779 Diluted earnings (loss) per share $ ( 1.85 ) $ ( 7.64 ) $ 0.03 The following number of restricted stock awards, performance stock awards, stock options and common stock warrants were excluded from the computation of diluted earnings per common share as their inclusion would have been anti-dilutive: Year Ended December 31, (In thousands) 2024 2023 2022 Restricted stock awards 526 440 242 Performance stock awards 104 — — Stock options 796 900 686 Common stock warrants — — 275 Note 18 — Derivatives The following table sets forth the total net fair value of derivatives: December 31, 2024 December 31, 2023 Fair Value Measurement Using Total Balance Fair Value Measurement Using Total Balance (In thousands) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Foreign currency exchange contracts $ — $ ( 249 ) $ — $ ( 249 ) $ — $ ( 83 ) $ — $ ( 83 ) We held foreign currency exchange contracts which resulted in a net pre-tax loss of $ 0.7 million, $ 3.2 million, and $ 1.3 million for the years ended December 31, 2024, 2023 and 2022, respectively. See Note 16 for further information concerning our foreign currency exchange contracts. Details of foreign currency exchange contracts held were as follows: Date Held Currency Position Held Notional Value (in millions) Forward Rate Unrealized Gain/(Loss) Recorded at Balance Sheet Date (in thousands) (1) Settlement Date December 31, 2024 USD/CNY CNY $ 28.0 7.2316 $ ( 406 ) January 10, 2025 December 31, 2024 USD/EUR USD $ 8.0 1.0569 $ 157 January 10, 2025 December 31, 2023 USD/CNY CNY $ 20.0 7.1181 $ ( 18 ) January 5, 2024 December 31, 2023 USD/EUR USD $ 22.0 1.1009 $ ( 65 ) January 5, 2024 (1) Unrealized gains on foreign currency exchange contracts are recorded in prepaid expenses and other current assets. Unrealized losses on foreign currency exchange contracts are recorded in other accrued liabilities. 77 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Note 19 — Employee Benefit Plans We maintain a retirement and profit sharing plan under Section 401(k) of the Internal Revenue Code for all of our domestic employees that meet certain qualifications. Participants in the plan may elect to contribute up to the maximum allowed by law. Prior to October 1, 2024 we matched 50 % of the participants' contributions up to 15 % of their gross salary in the form of newly issued shares of our common stock. As of October 1, 2024 we match 25 % of the participants' contributions up to 15 % of their gross salary in the form of newly issued shares of our common stock. We may also make other discretionary contributions to the plan. We recorded $ 1.1 million, $ 1.3 million and $ 1.2 million of expense for company contributions for the years ended December 31, 2024, 2023 and 2022, respectively. Note 20 — Reportable Segment Our chief operating decision maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis, including consolidated net income and its components, as reported on our consolidated statements of operations, accompanied by disaggregated information about revenues, for purposes of making operating decisions and assessing financial performance of our single consolidated segment, primarily by monitoring actual results versus our internal budget and forecasts. Our reported segment revenue, segment profit or loss, and significant segment expenses were as follows: Year Ended December 31, (In thousands) 2024 2023 2022 Revenue $ 394,879 $ 420,457 $ 542,751 Less: Adjusted cost of sales (1) 280,779 315,049 387,437 Adjusted research and development expenses (2) 28,954 30,183 31,110 Adjusted operating expenses (3) 82,952 85,345 89,355 Other segment items (4) 26,223 88,118 34,442 Net income (loss) $ ( 24,029 ) $ ( 98,238 ) $ 407 (1) Cost of sales from the consolidated statements of operations, adjusted to exclude impairment of long-lived assets and stock-based compensation expense. (2) R&D expenses from the consolidated statements of operations, adjusted to exclude stock-based compensation expense. (3) Operating expenses less R&D expenses from the consolidated statements of operations, adjusted to exclude stock-based compensation, amortization of acquired intangible assets, costs associated with our Roku litigation, factory restructuring charges, legal judgment, severance, lease termination costs and goodwill impairment. (4) Other segment items include the adjustments described in the notes above; as well as interest income (expense), net; other income (expense), net; and provision for income taxes. The measure of segment assets is reported on our consolidated balance sheets as consolidated total assets. Long-lived assets by geographic area are disclosed in Note 6. The measure of revenues from external customers is reported on the consolidated statements of operations as net sales. Revenues by geographic region and information about major customers are disclosed in Note 4. Depreciation expense is disclosed in Note 6. Amortization expense is disclosed in Note 7. Interest expense is disclosed in Note 9 and income taxes are disclosed in Note 10. Note 21 — Business Combination 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, we paid a cash purchase price of approximately $ 0.9 million. The acquisition of these assets has allowed us to expand our customer base in the consumer electronics market. 78 Table of Contents UNIVERSAL ELECTRONICS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 Our consolidated income statement for the year ended December 31, 2024 includes net sales of $ 3.1 million and net income of $ 1.2 million attributable to Qterics. Our consolidated income statement for the year ended December 31, 2023 includes net sales of $ 2.1 million and net income of $ 16 thousand attributable to Qterics. 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. 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, 2022, is immaterially different from the net sales, net income and income per share amounts reported in the Consolidated Statements of Operations for the year ended December 31, 2022. 79 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.