What changed in this filing

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Item 1A. Risk Factors

2026-03-12 compared with 2025-03-11 · 192 added, 146 removed, 358 unchanged (49% of the section changed)

Forward-Looking Statements

We make forward-looking statements in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us.

We make forward-looking statements in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Annual Report on Form 10-K based on the beliefs and assumptions of our management and on information currently available to us.

Forward-looking statements include information about our possible or assumed future results of operations, which follow under the headings "Business", "Liquidity and Capital Resources", and other statements throughout this report preceded by, followed by or that include the words "believes", "expects", "anticipates", "intends", "plans", "estimates" or similar expressions.

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We therefore caution you not to rely unduly on any forward-looking statement.

The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

The forward-looking statements in this report speak only as of the date of this Annual Report on Form 10-K, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

Risks and Uncertainties

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You should understand that these risks could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), cash flows, liquidity and stock price.

In addition, these risks could cause results to differ materially from those we express in forward-looking statements contained in this report or in other Company communications, including those we file from time to

time with the SEC.

These risk factors do not identify all risks that we face;

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Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following:

Risks Relating to Economic Conditions and Global Events

General political and economic factors beyond our control could adversely affect our business and results of operations.

These factors include, but are not limited to, supply chain disruptions, labor shortages, wage pressures, geo-political matters and conflicts, rising inflation and potential economic slowdown or recession, as well as increases in costs including fuel and energy costs, foreign currency exchange rate fluctuations, tariffs, and other matters that influence consumer spending and preferences.

Among other events, the invasion of Ukraine by Russia has escalated tensions among the United States, the North Atlantic Treaty Organization ("NATO") and Russia.

Conflict in the Middle East has led to disruption of international shipping lanes, causing shipping delays and fluctuating freight costs.

These conflicts and the resulting sanctions and related countermeasures could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, and supply chain interruptions.

Additionally, they have the potential to spread to or exacerbate tensions in other countries or regions, leading to new and unanticipated disruptions.

Global markets continued to face threats and uncertain economic and financial market conditions that may also adversely affect the financial condition of our customers, suppliers and other business partners.

Any significant decrease in customers' purchases of our products or our inability to collect accounts receivable resulting from an adverse impact of the global markets on customers' financial condition could have a material adverse effect on our business, financial condition and results of operations.

Additionally, disruptions in financial markets could reduce our access to debt capital markets, negatively affecting our ability to implement our business strategy.

On February 1, 2025, substantial tariffs on Canada, the PRC and Mexico were announced.

There exists substantial uncertainty as to whether these tariffs will be fully implemented or sustained.

We are monitoring these actions, which could have an adverse impact on our business strategy, operating results and financial condition.

There can be no assurances that these tariffs will not be implemented or increased in the future, with the previously mentioned countries or additional countries with which we do business.

The degree to which these changes in U.S.

trade policy affect our operating results will be influenced by the specific details of the changes in trade policies, their timing and duration, and our effectiveness in deploying tools and strategies to address these issues.

In addition, retaliatory tariffs imposed by other countries or other potential government actions, could result in further adverse impacts on our business strategy, operating results and financial condition.

Risks Relating to Finance

We have incurred losses from operations and our future profitability is not certain.

For the fiscal years ended December 31, 2025 and 2024,, we incurred a loss from operations of $6.4 million and $15.3 million, respectively, and our net loss for the fiscal years ended December 31, 2025 and 2024, was $18.6 million and $24.0 million, respectively, Our operating results and net income for future periods are subject to numerous uncertainties and we cannot be certain that we will be profitable or that we will not experience substantial losses in the future.

If we are not able to increase revenue and reduce our costs, we may not be able to achieve profitability in future periods and our business, financial condition, results of operations and cash flows may be adversely affected.

We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to shareholders.

It is possible that we may not generate sufficient cash flow from operations or otherwise have the capital resources to meet our future capital needs.

If this occurs, we may need additional financing to continue operations or to execute on our current or future business strategies, including to:

•invest in research and development efforts, including by hiring additional technical and other personnel;

•maintain and expand operating or manufacturing infrastructure;

•acquire complementary businesses, products, services or technologies;

•otherwise pursue strategic plans and respond to competitive pressures.

If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our shareholders could be significantly diluted, and these newly-issued securities may have rights, preferences, or privileges senior to those of existing shareholders.

We cannot be certain that additional financing will be available on terms favorable to us, or at all.

If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our products, or otherwise respond to competitive pressures could be significantly limited.

Furthermore, in the event adequate capital is not available to us as required, or is not available on favorable terms, we may be required to adopt one or more alternatives including, but not limited to, selling assets, exiting additional business lines, further reductions of our capital expenditures, delaying, reducing the scope of or eliminating one or more research and development programs, selling and marketing initiatives, and restructuring our existing debt

obligations on new terms that may be less favorable than the existing terms, if available at all.

If we are unable to manage discretionary spending, raise additional capital, or implement any of the above activities, as needed, we may need to further curtail planned activities to reduce costs, which could include additional reductions in workforce, additional eliminations of business activities and services, and further reductions in other operating expenses.

Doing so could potentially have a material and adverse effect on our business, financial condition, results of operations, cash flows, and future prospects.

Our secured credit facility contains financial and restrictive covenants that we may not satisfy, and that, if not satisfied, could result in the acceleration of any outstanding indebtedness and limit our ability to borrow additional funds.

The credit facility also imposes restrictions that may limit our ability to pursue business opportunities.

Our Second Amended and Restated Credit Agreement with U.S.

Bank National Association (“U.S.

Bank”), dated as of October 27, 2017, as amended through the date hereof ("Second Amended Credit Agreement"), subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.

These include a financial covenant pertaining to our consolidated fixed charge coverage ratio.

The Credit Agreement also subjects us to various restrictions on our ability to engage in certain activities, such as selling assets outside the ordinary course of business, raising capital or acquiring businesses.

These restrictions may limit or restrict our cash flow and our ability to pursue business opportunities or strategies that we would otherwise consider to be in our best interests.

In addition, if an event of default occurs under the Credit Agreement, U.S.

Bank can accelerate the maturity of our indebtedness under that agreement to make it due and payable immediately.

If an event of default occurs under the Credit Agreement and if U.S.

Bank elects to exercise its rights, we may not be able to pay our debts and other monetary obligations as they come due, which could in turn cause a significant decline in our stock price and could result in a significant loss of value for our shareholders.

We may be unable to realize the level of the anticipated benefits that we expect from exiting facilities and restructuring our operations, which may adversely impact our business and results of operations.

From time to time, we may decide to exit certain facilities or otherwise undertake restructuring, reorganization, or other strategic initiatives to realign our resources with our growth strategies, operate more efficiently, and reduce costs.

For example, in August 2025, we announced the anticipated closure of our manufacturing facility in Mexico.

The successful implementation of our restructuring activities may from time to time require us to effect business and asset dispositions, workforce reductions, facility consolidations and closures, restructurings, management changes, reductions in investments, shut-downs or discontinuance of businesses, and other actions, each of which may depend on a number of factors that may not be within our control.

Any such effort to restructure or streamline our organization may result in restructuring or other costs, such as severance and termination costs, contract and lease termination costs, asset impairment charges, and other costs.

Further, as a result of restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and proficiency, adverse effects on employee morale, loss of key employees and other retention issues.

Reorganization and restructuring can impact a significant amount of management and other employees’ time and resources, which may divert attention from operating and growing our business.

Further, upon completion of any restructuring initiatives, our business may not be more efficient or effective than prior to the implementation of the plan and we may be unable to achieve anticipated benefits, including cost savings, which would adversely affect our business, competitive position, operating results, and financial condition.

Growth Projections

Management has made projections required for the preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S.

GAAP") regarding future events and the financial performance of the Company, including those involving:

• the benefits the Company expects as a result of the development and success of products and technologies, including new products and technologies;

• the benefits expected by conducting business in Asian and Latin American markets, without which, we may not be able to recover the costs we incur to enter into such markets;

• new contracts with new and existing customers and new market penetrations;

• the expected continued adoption of the Company's technologies in home entertainment, specifically universal AV control of connected entertainment devices;

• the expected continued growth in connected home, digital TVs, DVRs, PVRs and overall growth in the Company's industry;

• the impact competitors and OTT providers may have on our business;

• the effects we may experience due to current global and regional economic conditions.

Actual events or results may be unfavorable to management's projections, which may have a material adverse effect on our projected operating results, financial condition and cash flows.

Additionally, we have long-lived and intangible assets recorded on our consolidated balance sheet.

We assess these assets for impairment whenever events or changes in circumstances indicate that the fair value may be below its carrying value.

Factors considered important that may trigger said assessment include, among others, a significant adverse change in legal factors or in business climate, a decline in macroeconomic conditions, a significant decline in our financial performance or a significant decline in the price of our common stock for a sustained period of time.

Impairment assessment involves judgment as to assumptions regarding future sales and cash flows and the impact of market conditions on those assumptions.

Future events and changing market conditions may impact our assumptions and may result in changes in our estimates of future sales and cash flows that may result in us incurring substantial impairment charges, which would adversely affect our results of operations or financial condition.

Market Projections and Data are Forward-looking in Nature

Our strategy is based on our own projections and on analyst, industry observer and expert projections, which are forward-looking in nature and are inherently subject to risks and uncertainties.

The validity of their and our assumptions, the timing and scope of the markets within which we compete, economic conditions, customer buying patterns, the timeliness of equipment development, pricing of products, and availability of capital for infrastructure improvements may affect these predictions.

In addition, market data upon which we rely is based on third-party reports that may be inaccurate.

The inaccuracy of any of these projections and/or market data may adversely affect our operating results and financial condition.

Potential Fluctuations in Quarterly Results

In addition, legal expenses could increase from time to time as we enhance or increase our litigation efforts and/or to support our efforts to comply with or respond to various government regulations and investigations.

To the extent such expenses precede or are not subsequently followed by increased revenues, our business, operating results, financial condition and cash flows will be adversely affected.

In addition, we may experience significant fluctuations in future quarterly operating results that may be caused by many other factors, including demand for our products, introduction or enhancement of products by us and our competitors, the loss or acquisition of any significant customers, market acceptance of new products, price reductions by us or our competitors, mix of distribution channels through which our products are sold, product or supply constraints, level of product returns, mix of customers and products sold, component pricing, mix of international and domestic revenues, foreign currency exchange rate fluctuations and general economic conditions.

In addition, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing or marketing decisions or acquisitions that may have a material adverse effect on our business, results of operations or financial condition.

As a result, we believe period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as an indication of future performance.

Due to all of the foregoing factors, it is possible that in some future quarters our operating results will be below the expectations of public market analysts and investors.

If this happens the price of our common stock may be materially adversely affected.

Fluctuations in Foreign Currency Exchange Rates or Interest Rates May Adversely Affect Our Results of Operations, Cash Flow, Liquidity or Financial Condition

Because of our international operations, we are exposed to risk associated with interest rates and value changes in foreign currencies, which may adversely affect our business.

We earn revenues and incur expenses in foreign currencies as part of our operations outside of the U.S.

Accordingly, fluctuations in currency exchange rates may significantly increase the amount of U.S.

dollars required for foreign currency expenses or significantly decrease the U.S.

dollars we receive from foreign currency revenues.

We are also exposed to currency translation risk because the results of our non-U.S.

business are generally reported in local currency, which we then translate to U.S.

dollars for inclusion in our financial statements.

As a result, changes between the foreign exchange rates and the U.S.

dollar affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results.

We expect that our exposure to foreign currency exchange rate fluctuations will grow as the relative contribution of our non-U.S.

operations increases.

We actively manage the exposure of our foreign currency risk as part of our overall financial risk management policy, by entering into foreign exchange hedging agreements with financial institutions to reduce exposures to some of the principal currencies, but these efforts may not be successful.

These hedging agreements also do not cover all currencies in which we do business, do not eliminate foreign currency risk entirely for the currencies that they do cover, and involve costs and risks of their own in the form of transaction costs, credit requirements and counterparty risk.

In addition, under the Second Amended Credit Agreement with U.S.

Bank, we may elect to pay interest on the revolving line of credit ("U.S.

Credit Line") based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin or a 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.

Further, under our Line of Credit Agreement (the "Line of Credit Agreement") with the Bank of China, we pay interest on the provided line of credit ("China Credit Line") based on the one-year rate from the National Interbank Funding Center less a margin.

To the extent these interest rates increase, our interest expense will increase, which could adversely affect our financial condition, operating results and cash flows.

Our Ability to Generate Cash Depends on Many Factors Beyond Our Control

Our historical financial results have been, and we anticipate that our future financial results will be, subject to fluctuations.

Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot assure you that our business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund our other liquidity needs and make planned capital expenditures.

The degree to which we are currently leveraged could have important consequences for stockholders.

For example, it could:

• require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

• increase our vulnerability to adverse economic or industry conditions;

• limit our ability to obtain additional financing in the future to enable us to react to changes in our business;

• place us at a competitive disadvantage compared to businesses in our industry that have less debt.

A significant portion of our operations is conducted through our subsidiaries.

As a result, our ability to generate sufficient cash flow for our needs is dependent on the earnings of our subsidiaries and the payment of those earnings to us in the form of dividends, loans or advances and through repayment of loans or advances from us.

Except for Universal Electronics BV, which has guaranteed the performance under our U.S.

Credit Line, our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due on our debt or to provide us with funds to meet our cash flow needs.

In addition, any payment of dividends, loans or advances by our subsidiaries may be subject to statutory or contractual restrictions.

Payments to us by our subsidiaries will also be contingent upon our subsidiaries' earnings and business considerations.

Our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization will be effectively subordinated to the claims of that subsidiary's creditors, including trade creditors.

In addition, even if we are a creditor of any of our subsidiaries, our rights as a creditor would be subordinate to any security interest in the assets of our subsidiaries and any indebtedness of our subsidiaries senior to that held by us.

Further, changes in the laws of foreign jurisdictions in which we operate may adversely affect the ability of some of our foreign subsidiaries to repatriate funds to us.

We may also fund a portion of our seasonal working capital needs and obtain funding for other general corporate purposes through short-term borrowings backed by our revolving credit facilities.

If any of the banks in these credit and financing facilities are unable to perform on their commitments, our cash flow, liquidity or financial condition may be adversely impacted.

Although we currently have available credit facilities to fund our current operating needs, we cannot be certain that we will be able to replace our existing credit facilities or refinance our existing or future debt when necessary.

Our cost of borrowing and ability to access the capital markets are affected not only by market conditions, but also by our debt and credit ratings assigned by the major credit rating agencies.

Downgrades in these ratings will increase our cost of borrowing and may have an adverse effect on our access to the capital markets, including our access to the commercial paper market.

An inability to access the capital markets may have a material adverse effect on our results of operations, cash flow, liquidity or financial condition.

Additionally, any failure to comply with covenants in the instruments governing our debt could result in an event of default which, if not cured or waived, would have a material adverse effect on us.

Risks Relating to Operations

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We and third parties who provide services to us also maintain personally identifiable information about our employees.

The integrity and protection of that customer, employee, and company data, including proprietary information, is critical to us.

The integrity and protection of that customer, employee, and company data,

including proprietary information, is critical to us.

If that data is inaccurate or incomplete or inaccessible, we may make faulty decisions or experience business interruptions.

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We rely on software applications, enterprise cloud storage systems and cloud computing services provided by third-party vendors, and our business may be adversely affected by service disruptions in or cybersecurity incidents and disruptions and failures related to such systems.

Remote work and remote access to our systems has increased, which also increases the risk of cybersecurity incidents and disruptions and failures on our systems surface.

Remote work and remote access also increases the risk of cybersecurity incidents and disruptions and failures on our systems surface.

In addition, there has been a global increase in cybersecurity threat volume, frequency, and sophistication driven by the global enablement of remote workforces.

Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cybersecurity incidents and disruptions of our services and software on which we rely.

Geopolitical tensions or conflicts, such as ongoing conflicts and uncertainties in Ukraine, Iran and Venezuela, may further heighten the risk of cybersecurity incidents and disruptions of our services and software on which we rely.

We continue to try to mitigate these risks in a number of ways, including through additional investment, engagement of third-party experts and consultants, improving the security of our facilities and systems (including through upgrades to our security and information technology systems), providing training for all employees (with more enhanced or frequent training based on role or responsibility), assessing the continued appropriateness of relevant insurance coverage and strengthening our controls and procedures to monitor, mitigate and respond appropriately to these threats.

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There can be no assurance that we will continue to have adequate staffing or that our development efforts will ultimately be successful.

Moreover, certain of our technologies have not been fully tested in

commercial use, and it is possible that they may not perform as expected.

Moreover, certain of our technologies have not been fully tested in commercial use, and it is possible that they may not perform as expected.

In such cases, our business, financial condition and operating results may be adversely affected, and our ability to secure new licensees and other business opportunities may be diminished.

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Artificial Intelligence

We incorporate artificial intelligence ("AI") solutions into some of our platforms, offerings, services and features, and these applications may become more important in our operations over time.

We may incorporate AI solutions into some of our platforms, offerings, services and features, and these applications may become more important in our operations over time.

Our competitors, or other third parties, may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and affect our results or operations.

Additionally, if our AI applications are based on data, algorithms, or other inputs that are flawed, or if they assist in producing content, analyses, or recommendations that are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely affected.

The use of AI applications has resulted in, and may in the future result in, cybersecurity incidents that implicate the personal data of end users of such applications.

The use of AI applications may result in cybersecurity incidents that implicate the personal data of end users of such applications.

Any such cybersecurity incidents related to our use of AI applications could adversely affect our reputation and results of operations.

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accounted for sales totaling more than 10% of our net sales.

During the year ended December 31, 2022, Comcast Corporation also accounted for sales totaling more than 10% of our net sales.

In addition to these customers, we have some customers that, individually or through their subsidiaries or affiliated partners, purchase a large amount of products from us.

In addition, we have some customers that, individually or through their subsidiaries or affiliated partners, purchase a large amount of products from us.

Although our broad distribution channels help to minimize the impact of the loss of any one customer, the loss of any of these large individual customers, or our inability to maintain order volume with these customers, may have an adverse effect on our sales, operating results, financial condition and cash flows.

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We provide consumer service and support to our retail customers to add overall value and to help differentiate us from our competitors.

Certain of our products have more features than others and therefore require more end-user technical support, which may increase our support costs and have an adverse effect on our business, operating results, financial condition and cash

We continually review our service and support group and are marketing our expertise in this area to other potential retail customers.

Manufacturing Risks

We operate factories in the PRC, Vietnam, Mexico and Brazil.

In addition, we utilize third-party manufacturers located in Asia to manufacture a portion of our products.

We operate factories in the PRC, Vietnam and Brazil.

In addition, we utilize third-party manufacturers located in Asia and Mexico to manufacture a portion of our products.

We believe that the loss of any one or more of these third-party manufacturers would not have a long-term material adverse effect on our business, results of operations and cash flows, because numerous other manufacturers are available to fulfill our requirements;

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In the United States, among other relevant restrictions, the Uyghur Forced Labor Prevention Act (the "UFLPA") creates a rebuttable presumption that all goods produced or manufactured, even partially, in the PRC’s Xinjiang Uyghur Autonomous Region ("XUAR") were made with forced labor and, therefore, would not be allowed entry at U.S.

Importers are required to present clear and convincing evidence that goods from the XUAR are not made with forced labor.

While we do not authorize the sourcing of any product from the XUAR and have increased actions to ensure our entire supply chain is free of any products made with forced labor, there is nonetheless a risk, particularly in light of prior media allegations and government inquiries focusing on one of our former facilities, that our business, results of operations and financial condition could be adversely affected by the UFLPA, related regulatory requirements and enforcement activity, or related customer concerns.

Importers that source from the XUAR are required to present clear and convincing evidence that goods from the XUAR are not made with forced labor.

While we do not authorize the sourcing of any product from the XUAR and have increased compliance to ensure our entire supply chain is free of any products made with forced labor, there is nonetheless a risk, particularly in light of prior media allegations and government inquiries focusing on one of our former facilities, that our business, results of operations and financial condition could be adversely affected by the UFLPA, related regulatory requirements and enforcement activity, or related customer concerns.

Overall, our reliance on international supply chains involves a risk of adverse effects to our business, including from government restrictions and enforcement efforts.

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If those customers are not able to obtain sufficient quantities of ICs for their products, their demand for our products may decrease.

Also, we are continuing to experience increases in freight costs which have and may continue to adversely affect our margins.

At the same time, in order to secure components for our products or services, we have and may continue to make advance payments to suppliers and/or enter into non-cancelable commitments with suppliers.

We have and may continue to strategically purchase ICs and other key components in advance of demand to take advantage of favorable pricing or to address concerns about future availability.

Also, we are continuing to experience increases in freight costs which have adversely affected and may continue to adversely affect our margins.

At the same time, in order to secure components for our products or services, we have made and may continue to make advance payments to suppliers and/or enter into non-cancelable commitments with suppliers.

We have strategically purchased and may continue to strategically purchase ICs and other key components in advance of demand to take advantage of favorable pricing or to address concerns about future availability.

If we fail to anticipate customer demand properly or if customer changes its demand significantly, a temporary "oversupply" could result in excess or obsolete components.

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The second is in the cost of delivery and freight, which would be passed on by the carriers that we use in the form of higher rates.

Rising oil prices may have an adverse effect on cost of sales and operating expenses, and Russia's invasion of Ukraine may continue to create uncertainty in oil prices.

Conflict in the Middle East may produce continued or increased disruptions to international shipping and fluctuating freight costs.

Rising oil prices may have an adverse effect on cost of sales and operating expenses, and international conflicts may continue to create uncertainty in oil prices and may produce continued or increased disruptions to international shipping and fluctuating freight costs.

Disruptions Caused by Labor Disputes or Organized Labor Activities Could Materially Harm our Business and Reputation

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Smart control solutions in the HVAC market tend to have long development lead-times, ranging from 12-24 months depending on product complexity.

These development cycles include initial longer customer engagement upfront to define new product requirements as well as extensive testing and validation of thermostat control and performance against legacy and new HVAC equipment at the end.

These long development lead-times translate into longer product life cycles, ranging from 5-8 years, as the product replacement cycle takes longer to define, develop and launch.

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Even with having our own factories, we will continue to rely on third-party manufacturers to build a portion of our products.

Price is always an issue in winning and retaining business.

As customers become increasingly price sensitive, we have experienced new competition arising from manufacturers who decided to go into direct competition with us by performing their own manufacturing.

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We also cannot assure that any potential sale or divestment, if consummated, will prove to be beneficial to our shareholders.

Any potential sale or divestment would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in the assets and the availability of financing to potential buyers on reasonable terms.

Any potential sale or divestment would be

dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in the assets and the availability of financing to potential buyers on reasonable terms.

Recruitment and Retention of Talent and Key Employees

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Presently, a portion of workers at our PRC factory are obtained from third-party employment agencies.

As the labor laws, social insurance and wage levels continue to grow and the workers become more sophisticated, our costs to employ these and other workers in the PRC may grow beyond that anticipated by management.

As the labor laws, social insurance and wage levels continue to grow, our costs to employ these and other workers in the PRC may grow beyond that anticipated by management.

Some of our key customers have demanded that we reduce the percentage of workers sourced from third-party employment agencies, which may also lead to increased costs in recruitment, retention and compliance.

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Certain Regulatory and Financial Risks Related to Climate Change

Growing concerns about climate change may result in the imposition of additional regulations or restrictions to which we may become subject.

Concerns about climate change may result in the imposition of additional regulations or restrictions to which we may become subject.

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to climate change, including regulating greenhouse gas emissions.

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Trade Policies Could Have a Material Adverse Effect On Us

government implemented additional tariffs on certain goods imported from the PRC and Mexico.

As of the date of this filing, the additional tariffs on Mexico have been paused.

There can be no assurance that these tariffs will not be implemented or increased in the future, with the previously mentioned countries or additional countries with which we do business.

In the nations where we have operations or otherwise conduct business, we are also subject to tariffs, import/export controls, and other trade-related laws and limitations.

These limits, regulations, and tariffs may significantly disrupt our business, affecting our capacity to manufacture, source components and sell goods.

The current U.S.

administration has introduced policies imposing tariffs on goods manufactured abroad, including goods manufactured in the PRC, Vietnam, Taiwan and Mexico.

Significant uncertainty continues to exist about the future of U.S.

trade policy and the implementation of new tariffs, as well as any possible exemptions from the tariffs (such as through the USMCA).

We are monitoring these actions, which could have an adverse impact on our business strategy, operating results and financial condition.

The measures by the administration may increase costs for certain goods imported into the United States, and there can be no assurance that these tariffs will not be implemented or increased in the future, with the previously mentioned countries or additional countries with which we do business.

The degree to which these changes in U.S.

We manufacture a substantial amount of our products in the PRC and Mexico and are presently subject to these additional tariffs and will remain so until the tariff lists are altered.

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Our international operations continue to grow, making up a significant part of our current business and future strategic plans.

We presently operate factories in the PRC, Vietnam, Mexico and Brazil, engineering centers in India, Japan and Korea and rely on third-party manufacturers located in Asia.

We presently operate factories in the PRC, Vietnam and Brazil, engineering centers in India, Japan and Korea and rely on third-party manufacturers located in Asia and Mexico.

We are increasingly exposed to the challenges and risks of doing business outside the United States, which could reduce our revenues or profits, increase our costs, result in significant liabilities or sanctions, or otherwise disrupt our business.

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earnings in a tax effective manner;

(4) the difficulties involved in managing an organization doing business in many different countries;

(4) the difficulties involved in managing

an organization doing business in many different countries;

(5) uncertainties as to the enforceability of contract and intellectual property rights under local laws;

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however, there can be no guarantee that such licenses may be obtained on such terms or at all.

Because of technological changes in the

wireless and home control industry, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible certain components of our products and business methods may unknowingly infringe upon the patents of others.

Because of technological changes in the wireless and home control industry, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible certain components of our products and business methods may unknowingly infringe upon the patents of others.

Potential for Litigation

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Regulations Related to the Use of Conflict-Free Minerals May Increase Our Costs and Expenses, and an Inability to Certify that Our Products are Conflict-Free May Adversely Affect Customer Relationships

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve the transparency and accountability of the use by public companies in their products of minerals mined in certain countries and to prevent the sourcing of such "conflict" minerals.

sourcing of such "conflict" minerals.

As a result, the SEC enacted annual disclosure and reporting requirements for public companies to conduct due diligence to determine the source of any conflict minerals used in our products and to make annual disclosures in filings with the SEC.

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Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which may place us at a competitive disadvantage, and our reputation may be harmed.

The Prominence and Evolution on Disclosures related to Environmental, Social and Governance ("ESG") Matters May Expose Us to Certain Performance and Reputational Risks

We have established certain goals related to ESG matters and the reporting of ESG data.

The Prominence and Evolution on Disclosures related to Sustainability, Human Capital, and Governance and Other Corporate Responsibility Matters May Expose Us to Certain Performance and Reputational Risks

We have established certain goals related to sustainability, human capital, and governance matters and the reporting of such data.

Our failure to adequately update, accomplish or accurately track and report on these goals on a timely basis, or at all, could adversely affect our reputation, financial performance and growth and expose us to increased scrutiny from the investment community, special interest groups and enforcement authorities.

Standards for tracking and reporting ESG matters continue to evolve.

Methodologies for reporting ESG data may be updated and previously reported ESG data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations and other changes in circumstances.

Our processes and controls for reporting ESG matters relating to our operations and supply chain are evolving along with various standards for identifying, measuring, and reporting ESG metrics, including ESG related disclosures that may be required by the SEC, European and other regulators, and such standards may change over time.

Standards for tracking and reporting such matters continue to evolve.

Methodologies for reporting such data may be updated and previously reported data may be adjusted to reflect improvement in availability and quality of third-party data, changing assumptions, changes in the nature and scope of our operations and other changes in circumstances.

Our processes and controls for reporting these matters relating to our operations and supply chain are evolving along with various standards for identifying, measuring, and reporting such metrics, including related disclosures that may be required by the SEC, European and other regulators, and such standards may change over time.

One such method is our use of the EcoVadis sustainability rating system.

Further, we may amend, abandon or replace our goals related to ESG matters due to a change in strategy, reduced relevance of such goals or changing market conditions and we may take certain actions that

stakeholders or regulators view as contrary to such goals.

Certain stakeholders may have different views on where our focus on ESG matters should be placed, including different views of regulators in the various jurisdictions in which we operate.

If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation or our attractiveness as an investment, business partner, service provider or employer could be negatively impacted.

Risks Relating to Finance

Growth Projections

Management has made projections required for the preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S.

GAAP") regarding future events and the financial performance of the Company, including those involving:

• the benefits the Company expects as a result of the development and success of products and technologies, including new products and technologies;

• the benefits expected by conducting business in Asian and Latin American markets, without which, we may not be able to recover the costs we incur to enter into such markets;

• new contracts with new and existing customers and new market penetrations;

• the expected continued adoption of the Company's technologies in home entertainment, specifically universal AV control of connected entertainment devices;

• the expected continued growth in digital TVs, DVRs, PVRs and overall growth in the Company's industry;

• the impact competitors and OTT providers may have on our business;

• the effects we may experience due to current global and regional economic conditions.

Actual events or results may be unfavorable to management's projections, which may have a material adverse effect on our projected operating results, financial condition and cash flows.

Additionally, we have long-lived and intangible assets recorded on our consolidated balance sheet.

We assess these assets for impairment whenever events or changes in circumstances indicate that the fair value may be below its carrying value.

Impairment assessment involves judgment as to assumptions regarding future sales and cash flows and the impact of market conditions on those assumptions.

Market Projections and Data are Forward-looking in Nature

Our strategy is based on our own projections and on analyst, industry observer and expert projections, which are forward-looking in nature and are inherently subject to risks and uncertainties.

In addition, market data upon which we rely is based on third-party reports that may be inaccurate.

The inaccuracy of any of these projections and/or market data may adversely affect our operating results and financial condition.

Potential Fluctuations in Quarterly Results

We may from time to time increase our operating expenses to fund greater levels of R&D, sales and marketing activities, development of new distribution channels, improvements in our operational and financial systems, moving manufacturing capabilities to other countries, and development of our customer support capabilities, In addition, legal expenses could increase from time to time as we enhance or increase our litigation efforts and/or to support our efforts to comply with or respond to various government regulations and investigations.

To the extent such expenses precede or are not subsequently followed by increased revenues, our business, operating results, financial condition and cash flows will be adversely affected.

As a result, we believe period-to-period comparisons of our results of operations are

not necessarily meaningful and should not be relied upon as an indication of future performance.

Due to all of the foregoing factors, it is possible that in some future quarters our operating results will be below the expectations of public market analysts and investors.

If this happens the price of our common stock may be materially adversely affected.

Fluctuations in Foreign Currency Exchange Rates or Interest Rates May Adversely Affect Our Results of Operations, Cash Flow, Liquidity or Financial Condition

Because of our international operations, we are exposed to risk associated with interest rates and value changes in foreign currencies, which may adversely affect our business.

We earn revenues and incur expenses in foreign currencies as part of our operations outside of the U.S.

Accordingly, fluctuations in currency exchange rates may significantly increase the amount of U.S.

dollars required for foreign currency expenses or significantly decrease the U.S.

dollars we receive from foreign currency revenues.

We are also exposed to currency translation risk because the results of our non-U.S.

business are generally reported in local currency, which we then translate to U.S.

dollars for inclusion in our financial statements.

As a result, changes between the foreign exchange rates and the U.S.

dollar affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results.

We expect that our exposure to foreign currency exchange rate fluctuations will grow as the relative contribution of our non-U.S.

operations increases.

In addition, under the Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S.

Bank National Association ("U.S.

Bank"), we may elect to pay interest on the revolving line of credit ("U.S.

Credit Line") based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin or a 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.

To the extent these interest rates increase, our interest expense will increase, which could adversely affect our financial condition, operating results and cash flows.

Our Ability to Generate Cash Depends on Many Factors Beyond Our Control

Our historical financial results have been, and we anticipate that our future financial results will be, subject to fluctuations.

Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

The degree to which we are currently leveraged could have important consequences for stockholders.

For example, it could:

• increase our vulnerability to adverse economic or industry conditions;

• limit our ability to obtain additional financing in the future to enable us to react to changes in our business;

• place us at a competitive disadvantage compared to businesses in our industry that have less debt.

A significant portion of our operations is conducted through our subsidiaries.

Except for Universal Electronics BV, which has guaranteed the performance under our Credit Line, our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due on our debt or to provide us with funds to meet our cash flow needs.