SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

15147 N. Scottsdale Road, Suite H300, Scottsdale, Arizona 85254-2494

(Address of principal executive offices and zip code)

(Registrant's telephone number, including area ~~code: (714) 918-9500~~code)

~~__________________________________~~ _____________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý☒ No ¨☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any, any~~every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

~~Large accelerated filer~~

~~Accelerated filer~~

~~Non-accelerated filer~~

¨ ~~(Do not check if a smaller reporting company)~~

~~Smaller reporting company~~

Emerging growth company

¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes~~ ¨ No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: ~~14,305,749~~12,857,436 shares of Common Stock, par value $0.01 per share, of the registrant were outstanding on ~~November 6, 2017.~~May 5, 2023.

PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements (Unaudited)

September 30, 2017 December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $ 48,560
$ 50,611
Restricted cash 4,799
4,623
Accounts receivable, net 153,355
124,592
Inventories, net 154,520
129,879
Prepaid expenses and other current assets 9,988
7,439
Assets held for sale 12,403
—
Income tax receivable 3,262
1,054
Deferred income taxes —
5,960
Total current assets 386,887
324,158
Property, plant, and equipment, net 109,149
105,351
Goodwill 48,624
43,052
Intangible assets, net 30,159
28,549
Deferred income taxes 18,349
10,430
Long-term restricted cash —

4,600
Other assets 4,040
4,896
Total assets $ 597,208
$ 521,036
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 106,872
$ 97,157
Line of credit 114,000
49,987
Accrued compensation 33,328
35,580
Accrued sales discounts, rebates and royalties 7,790
8,358
Accrued income taxes 994
375
Other accrued expenses 25,840
24,410
Total current liabilities 288,824
215,867
Long-term liabilities:
Long-term contingent consideration 14,000
10,500
Deferred income taxes 6,376
7,060
Income tax payable 791
791
Other long-term liabilities 1,598
6,308
Total liabilities 311,589
240,526
Commitments and contingencies

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; 23,687,651 and 23,575,340 shares issued on September 30, 2017 and December 31, 2016, respectively 237
236
Paid-in capital 262,776
250,481
Treasury stock, at cost, 9,352,551 and 9,022,587 shares on September 30, 2017 and December 31, 2016, respectively (243,197 ) (222,980 )
Accumulated other comprehensive income (loss) (17,831 ) (22,821 )
Retained earnings 283,634
275,594
Total stockholders' equity 285,619
280,510
Total liabilities and stockholders' equity $ 597,208

$ 521,036

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

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net sales $ 175,652
$ 169,185
$ 514,638
$ 490,829
Cost of sales 132,582
127,400
386,783
367,941
Gross profit 43,070
41,785

127,855

122,888
Research and development expenses 5,415
4,955
15,859
15,292
Factory transition restructuring charges 446
81
6,145
1,598
Selling, general and administrative expenses 32,997
28,628
94,701
86,867
Operating income 4,212
8,121

11,150

19,131
Interest income (expense), net (721 ) (228 ) (1,676 ) (753 )
Other income (expense), net 61
335
2
1,726
Income before provision for income taxes 3,552
8,228

9,476

20,104
Provision for income taxes 1,824
421
2,945
2,956
Net income 1,728
7,807

6,531

17,148
Net income attributable to noncontrolling interest —
—
—
30
Net income attributable to Universal Electronics Inc. $ 1,728

$ 7,807

$ 6,531

$ 17,118

Earnings per share attributable to Universal Electronics Inc.:
Basic $ 0.12
$ 0.54

$ 0.45

$ 1.19
Diluted $ 0.12
$ 0.53

$ 0.44

$ 1.16
Shares used in computing earnings per share:
Basic 14,381
14,510
14,412
14,441
Diluted 14,666
14,848
14,689
14,740

~~See Note 4 for further information concerning our purchases from related party vendors.~~


	Three Months Ended March 31,
	2023		2022
Net sales	$	108,377	$	132,410
Cost of sales	83,684		96,142
Gross profit	24,693		36,268
Research and development expenses	8,360		7,806
Selling, general and administrative expenses	26,782		29,023
Goodwill impairment	49,075		—
Operating income (loss)	(59,524)		(561)
Interest income (expense), net	(975)		(296)

Other income (expense), net	(214)		360
Income (loss) before provision for income taxes	(60,713)		(497)
Provision for income taxes	650		2,413
Net income (loss)	$	(61,363)	$	(2,910)

Earnings (loss) per share:
Basic	$	(4.81)	$	(0.23)
Diluted	$	(4.81)	$	(0.23)
Shares used in computing earnings (loss) per share:
Basic	12,749		12,812
Diluted	12,749		12,812

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

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 1,728
$ 7,807
$ 6,531
$ 17,148
Other comprehensive income (loss):
Change in foreign currency translation adjustment 2,999
(540 ) 4,990
(1,858 )
Total comprehensive income (loss) 4,727

7,267

11,521

15,290
Comprehensive income (loss) attributable to noncontrolling interest —
—
—
30
Comprehensive income (loss) attributable to Universal Electronics Inc. $ 4,727

$ 7,267

$ 11,521

$ 15,260

~~See Note 4 for further information concerning our purchases from related party vendors.~~


	Three Months Ended March 31,
	2023		2022
Net income (loss)	$	(61,363)	$	(2,910)
Other comprehensive income (loss):
Change in foreign currency translation adjustment	1,916		1,849
Comprehensive income (loss)	$	(59,447)	$	(1,061)

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

Nine Months Ended September 30,
2017 2016
Cash provided by (used for) operating activities:
Net income $ 6,531
$ 17,148
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization 23,202
18,994
Provision for doubtful accounts 167
123
Provision for inventory write-downs 2,189
2,398
Deferred income taxes (953 ) 1,413
Tax benefit from exercise of stock options and vested restricted stock —
2,230
Excess tax benefit from stock-based compensation —
(2,292 )
Shares issued for employee benefit plan 591
763
Employee and director stock-based compensation 9,476
7,638
Performance-based common stock warrants 1,122
3,219
Changes in operating assets and liabilities:
Restricted cash 4,623
—
Accounts receivable (24,440 ) (11,359 )
Inventories (21,217 ) (4,470 )
Prepaid expenses and other assets (2,422 ) (86 )
Accounts payable and accrued expenses 1,488
7,699
Accrued income taxes (1,517 ) (4,737 )
Net cash provided by (used for) operating activities (1,160 ) 38,681
Cash used for investing activities:
Acquisition of property, plant, and equipment (29,922 ) (28,914 )
Acquisition of net assets of Residential Control Systems, Inc. (8,894 ) —
Acquisition of intangible assets (1,275 ) (1,373 )
Increase in restricted cash —
(4,797 )
Deposit received toward sale of Guangzhou factory —
4,797
Deconsolidation of Encore Controls LLC —
48
Net cash used for investing activities (40,091 )
(30,239 )
Cash provided by (used for) financing activities:
Borrowings under line of credit 115,000
92,987
Repayments on line of credit (50,987 ) (107,987 )
Proceeds from stock options exercised 1,107
4,813
Treasury stock purchased (20,217 ) (2,188 )
Excess tax benefit from stock-based compensation —
2,292
Net cash provided by (used for) financing activities 44,903
(10,083 )
Effect of exchange rate changes on cash (5,703 ) (3,184 )
Net increase (decrease) in cash and cash equivalents (2,051 ) (4,825 )
Cash and cash equivalents at beginning of year 50,611
52,966
Cash and cash equivalents at end of period $ 48,560
$ 48,141

Supplemental cash flow information:
Income taxes paid $ 5,770
$ 6,034
Interest paid $ 1,697
$ 926


	Common Stock Issued			Common Stock in Treasury			Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Totals
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	25,000	$	250	(12,295)	$	(368,194)	$	326,839	$	(21,187)	$	330,698	$	268,406
Net loss											(61,363)		(61,363)
Currency translation adjustment									1,916				1,916
Shares issued for employee benefit plan and compensation	189	2					350						352
Purchase of treasury shares				(53)	(812)								(812)

Shares issued to directors	8						—						—
Employee and director stock-based compensation							2,540						2,540

Balance at March 31, 2023	25,197	252		(12,348)	(369,006)		329,729		(19,271)		269,335		211,039

The following summarizes the changes in total equity for the three months ended March 31, 2022:


	Common Stock Issued			Common Stock in Treasury			Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Totals
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	24,679	$	247	(11,861)	$	(355,159)	$	314,094	$	(13,524)	$	330,291	$	275,949
Net loss											(2,910)		(2,910)
Currency translation adjustment									1,849				1,849
Shares issued for employee benefit plan and compensation	145	1					323						324
Purchase of treasury shares				(225)	(7,354)								(7,354)

Shares issued to directors	7	—					—						—
Employee and director stock-based compensation							2,499						2,499

Balance at March 31, 2022	24,831	248		(12,086)	(362,513)		316,916		(11,675)		327,381		270,357

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


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(61,363)	$	(2,910)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	5,692		6,045
Provision for credit losses	1		(204)
Deferred income taxes	701		269
Shares issued for employee benefit plan	352		324
Employee and director stock-based compensation	2,540		2,499

Impairment of goodwill	49,075		—
Impairment of long-term assets	49		—


Changes in operating assets and liabilities:
Accounts receivable and contract assets	7,723		(5,087)
Inventories	18,056		(4,599)
Prepaid expenses and other assets	1,408		(1,464)
Accounts payable and accrued liabilities	(26,051)		(13,174)
Accrued income taxes	(208)		332
Net cash provided by (used for) operating activities	(2,025)		(17,969)
Cash flows from investing activities:
Purchase of term deposit	—		(7,487)

Acquisition of net assets of Qterics, Inc.	—		(939)
Acquisitions of property, plant and equipment	(3,261)		(1,785)
Acquisitions of intangible assets	(1,570)		(1,410)
Net cash provided by (used for) investing activities	(4,831)		(11,621)
Cash flows from financing activities:
Borrowings under line of credit	14,000		42,000
Repayments on line of credit	(17,000)		(13,000)

Treasury stock purchased	(812)		(7,354)

Net cash provided by (used for) financing activities	(3,812)		21,646
Effect of foreign currency exchange rates on cash and cash equivalents	834		759
Net increase (decrease) in cash and cash equivalents	(9,834)		(7,185)
Cash and cash equivalents at beginning of period	66,740		60,813
Cash and cash equivalents at end of period	$	56,906	$	53,628

Supplemental cash flow information:
Income taxes paid	$	2,065	$	1,375
Interest paid	$	1,413	$	302

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

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER 30, 2017~~MARCH 31, 2023

(Unaudited)

Note 1 — Basis of Presentation ~~and Significant Accounting Policies~~

In the opinion of management, the accompanying consolidated financial statements of Universal Electronics Inc. and its subsidiaries contain all the adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. Information and footnote disclosures normally included in financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange ~~Commission.~~Commission ("SEC"). As used herein, the terms "Company," "we," "us," and "our" refer to Universal Electronics Inc. and its subsidiaries, unless the context indicates to the contrary.

Our results of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk," and the "Financial Statements and Supplementary Data" included in Items 1A, 7, 7A, and 8, respectively, of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~.2022.

Estimates ~~Judgments~~ and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates ~~judgments~~ 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, allowances~~recognition; allowance for ~~sales returns and doubtful accounts,~~credit losses; inventory ~~valuation, our review for~~valuation; impairment of long-lived assets, intangible assets and ~~goodwill,~~goodwill; business ~~combinations,~~combinations; income taxes and related valuation allowances and stock-based compensation ~~expense and performance-based common stock warrants.~~expense. Actual results may differ from these ~~estimates~~assumptions and ~~assumptions,~~estimates, and they may be adjusted as more information becomes available. Any adjustment may be material.

Summary of Significant Accounting Policies

See Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 for a summary of our significant accounting policies.

Recently Adopted Accounting Pronouncements

Recent Accounting ~~Pronouncements~~Updates Not Yet Effective

In ~~May 2014,~~March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial ~~Accounting Standards Board ("FASB")~~Reporting", in January 2021, the FASB issued ~~Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers," which will supersede most existing U.S.~~ASU 2021-01, "Reference Rate Reform", and in December 2022, the FASB issued ASU 2022-06, "Deferral of the Sunset Date of Topic 848". This guidance is intended to provide temporary optional expedients and exceptions to GAAP ~~revenue recognition guidance. This new standard requires an entity~~guidance on contract modifications and hedge accounting to ~~recognize revenue to depict~~ease the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 contains expanded disclosure requirements relatingfinancial reporting burden related to the ~~nature, amount, timing,~~expected market transition from the London Interbank Offered Rate ("LIBOR") and uncertainty of revenue and cash flows arising from contracts with customers. As initially proposed, ASU 2014-09 would have been effective for fiscal periods beginning after December 15, 2016 and permits the use of either the full retrospective or modified retrospective transition method. In August 2015, the FASB postponed the effective date of this new revenue standard by one year. We have largely completed our review of customer contract terms and our assessment of the impact of adopting this standard on our revenue recognition policy,other interbank offered rates to alternative reference rates. The amendments in these ASUs are elective and are currently in the process of modifying certain revenue recognition processes and controls to comply with ASU 2014-09, including the new disclosure requirements. The impact of this new guidance is primarilyeffective upon issuance for all entities through December 31, 2024. These amendments are not expected to accelerate revenue recognition for those contractual arrangements under which we manufacture and sell customized products that have no alternative use, as defined under ASU 2014-09 and related guidance and interpretations. In particular, to the extent that we have the right to payment such as a firm order or other contractual commitment from the customer, revenue associated with customized products will be recognized as those products are manufactured rather than when title for those products transfers to the customer. We also expect revenue recognition to be accelerated for licensing arrangements that contain minimum guarantees. We expect to implement ASU 2014-09 on January 1, 2018, using the modified retrospective transition method. Thus prior periods will not be restated. The impact of the transition to this new accounting method, which will include a cumulative-effect adjustment to retained earnings as of the adoption date, could have a material impact on our consolidated statement of financial position, results of ~~operations.~~operations and cash flows.

In July 2015, the FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory," which states that inventory should be measured at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for fiscal periods beginning after December 15, 2016 and must be applied prospectively. The adoption of ASU 2015-11 did not have a material impact on our consolidated financial position or results of operations.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes." This new guidance requires all deferred tax assets and liabilities, along with any related valuation allowance, be classified as non-current on the balance sheet. ASU 2015-17 is effective for fiscal periods beginning after December 15, 2016 and may be adopted either prospectively or retrospectively. We prospectively adopted ASU 2015-17 effective January 1, 2017, and thus prior period balance sheets have not been adjusted. The adoption of ASU 2015-17 had no impact on our consolidated results of operations or cash flows.

In February 2016, the FASB issued ASU 2016-02, "Leases," which changes the accounting for leases and requires expanded disclosures about leasing activities. This new guidance will require lessees to recognize a right of use asset and a lease liability at the commencement date for all leases with terms greater than twelve months. Accounting by lessors is largely unchanged. ASU 2016-02 is effective for fiscal periods beginning after December 15, 2018 and must be adopted using a modified retrospective approach. Early adoption is permitted. We are currently evaluating the impact that ASU 2016-02 will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09,"Improvements to Employee Share-Based Payment Accounting," which amends Accounting Standards Codification ("ASC") 718, "Compensation - Stock Compensation." ASU 2016-09 requires excess tax benefits and tax deficiencies to be recorded as a discrete adjustment to income tax expense when stock awards vest or are settled, rather than in paid-in capital when they impact income taxes payable. This new guidance also requires cash flows related to excess tax benefits from stock-based compensation to be presented with other income tax cash flows in operating activities, rather than separately as a financing activity, in the statement of cash flows. Additionally, ASU 2016-09 impacts the calculation of diluted weighted-average shares under the treasury stock method as the assumed proceeds from an employee vesting in or exercising a stock-based award are no longer increased or decreased by the amount of excess tax benefits or deficiencies taken to paid-in capital. We elected to adopt the provisions of ASU 2016-09 prospectively effective January 1, 2017. We also made the accounting policy election, as allowed by ASU 2016-09, to account for forfeitures of stock-based awards as they occur, rather than estimating forfeitures. The cumulative effect of adopting ASU 2016-09 was an increase of $1.5 million to deferred tax assets and an increase to retained earnings of $1.5 million, as of January 1, 2017, as a result of recognizing previously unrecognized excess tax benefits from stock-based compensation. There was no cumulative effect impact related to the change in accounting policy to account for forfeitures of stock-based awards when they occur as a result of our minimal historical forfeitures experience.

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments," which amends ASC 230, "Statement of Cash Flows". This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal periods beginning after December 15, 2017 and must be adopted retrospectively. Early adoption is permitted as long as all amendments are adopted in the same period. We are currently evaluating the impact that ASU 2016-15 will have on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory," which changes the accounting for income tax consequences of intra-entity transfers of assets other than inventory. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. Under this new guidance, the income tax consequences of an intra-entity transfer of an asset other than inventory will be recognized when the transfer occurs. ASU 2016-16 is effective for fiscal periods beginning after December 15, 2017. Early adoption is permitted. The impact of the adoption of ASU 2016-16 could be material depending on the size of any intra-entity transfers we may implement in future periods.

In November 2016, the FASB issued ASU 2016-18,"Restricted Cash," which amends ASC 230, "Statement of Cash Flows." This new guidance addresses the classifications and presentation of changes in restricted cash in the statement of cash flows. ASU 2016-18 is effective for fiscal periods beginning after December 15, 2017 and must be adopted retrospectively. Early adoption is permitted. The adoption of ASU 2016-18 will modify our current disclosures by reclassifying certain amounts within the consolidated statement of cash flows, but is not expected to have a material effect on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment." This guidance simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for fiscal periods beginning after December 31, 2019. Early adoption is permitted. We do not expect the adoption of ASU 2017-04 to have a material impact on our consolidated financial statements.

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~~UNIVERSAL ELECTRONICS INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

Note 2 — Cash, ~~and~~ Cash Equivalents and ~~Restricted Cash~~Term Deposit

~~Cash and Cash Equivalents~~

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

~~In connection with a court order issued in a now settled litigation matter,~~On January 25, 2022, we previously placed $4.6 million of cash into a collateralized surety bond. This bond had certain restrictions for liquidation and was therefore classified as restricted cash. On February 10, 2017, the $4.6 million surety bond was returned to us upon final settlement of the related litigation matter.

~~In connection with the pending sale of our Guangzhou factory in the PRC (Note 10), the buyer made a cash deposit of RMB 32 million ($4.8 million based on September 30, 2017 exchange rates)~~entered into an ~~escrow~~$8.6 million, one-year term deposit cash account ~~on September 29, 2016. Under~~with Banco Santander (Brasil) S.A., denominated in Brazilian Real. The term deposit earned interest at a variable annual rate based upon the ~~terms~~Brazilian CDI overnight interbank rate. As of ~~the escrow account, these funds will not be paid to us until the close~~December 31, 2022, all of ~~the sale. Accordingly,~~ this term deposit ~~is presented as restricted cash within our consolidated balance sheet.~~was redeemed.

Note 3 — Revenue and Accounts Receivable, Net ~~and~~

Revenue ~~Concentrations~~Details

~~Accounts receivable,~~

The pattern of revenue recognition was as follows:


	Three Months Ended March 31,
(In thousands)	2023		2022
Goods and services transferred at a point in time	$	86,681	$	109,086
Goods and services transferred over time	21,696		23,324
Net sales	$	108,377	$	132,410

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


	Three Months Ended March 31,
(In thousands)	2023		2022
United States	$	33,429	$	43,827
Asia (excluding PRC)	27,100		33,064
Europe	24,026		22,660
People's Republic of China	12,128		19,292
Latin America	6,948		6,488
Other	4,746		7,079
Total net sales	$	108,377	$	132,410

(In thousands) September 30, 2017 December 31, 2016
Trade receivables, gross $ 147,194
$ 120,965
Allowance for doubtful accounts (1,052 ) (904 )
Allowance for sales returns (459 ) (539 )
Net trade receivables 145,683
119,522
Other 7,672
5,070
Accounts receivable, net $ 153,355
$ 124,592

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

~~Changes in the allowance for doubtful accounts were as follows:~~

(In thousands) Nine Months Ended September 30,
2017 2016
Balance at beginning of period $ 904
$ 822
Additions (reductions) to costs and expenses 167
123
(Write-offs)/Foreign exchange effects (19 ) 15
Balance at end of period $ 1,052
$ 960

~~Table of Contents~~

~~UNIVERSAL ELECTRONICS INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

~~The allowance for sales returns at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ included reserves for items returned prior to period-end that were not completely processed, and therefore had not yet been removed from the allowance for sales returns balance. If these returns had been fully processed, the allowance for sales returns balance would have been approximately $0.3 million and ~~$0.4 million~~ on ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, respectively. The value of these returned goods was included in our inventory balance at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~.

~~Significant Customers~~

Net sales to the following customers totaled more than 10% of our net sales:


	Three Months Ended March 31,
	2023				2022
	$ (thousands)		% of Net Sales		$ (thousands)		% of Net Sales
Comcast Corporation	$	14,720	13.6	%	$	19,884	15.0	%
Daikin Industries Ltd.	$	19,667	18.1	%	$	17,141	12.9	%

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UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(Unaudited)

Three Months Ended September 30,
2017 2016
$ (thousands) % of Net Sales $ (thousands) % of Net Sales
Comcast Corporation $ 36,811
21.0 % $ 35,554
21.0 %
AT&T 20,117
11.5
21,139
12.5
Accounts Receivable, Net

Accounts receivable, net were as follows:

Nine Months Ended September 30,
2017 2016
$ (thousands) % of Net Sales $ (thousands) % of Net Sales
Comcast Corporation $ 122,009
23.7 % $ 111,529
22.7 %
AT&T 61,057
11.9
60,709
12.4


(In thousands)	March 31, 2023		December 31, 2022
Trade receivables, gross	$	101,280	$	108,030
Allowance for credit losses	(780)		(957)
Allowance for sales returns	(343)		(618)
Trade receivables, net	100,157		106,455
Other (1)	6,214		5,891
Accounts receivable, net	$	106,371	$	112,346

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

Allowance for Credit Losses

Changes in the allowance for credit losses were as follows:


(In thousands)	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	957	$	1,285
Additions (reductions) to costs and expenses	1		(204)

Write-offs/Foreign exchange effects	(178)		(18)
Balance at end of period	$	780	$	1,063

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


	March 31, 2023				December 31, 2022
	$ (thousands)		% of Accounts Receivable, Net		$ (thousands)			% of Accounts Receivable, Net
Comcast Corporation	$	14,668	13.8	%	$	15,367		13.7	%
Daikin Industries Ltd.	$	10,655	10.0	%	$	—	(1)	—	%	(1)

September 30, 2017 December 31, 2016
$ (thousands) % of Accounts Receivable, Net $ (thousands) % of Accounts Receivable, Net
Comcast Corporation $ 26,553
17.3 % $ 23,716
19.0 %
AT&T ⁽¹⁾
—
—
14,108
11.3

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

Note 4 — Inventories ~~Net~~ and Significant Supplier

Inventories ~~net~~ were as follows:


(In thousands)	March 31, 2023		December 31, 2022
Raw materials	$	48,006	$	58,759
Components	22,054		25,226
Work in process	3,755		2,616
Finished goods	48,873		53,580
Inventories	$	122,688	$	140,181

(In thousands) September 30, 2017 December 31, 2016
Raw materials $ 36,803
$ 33,059
Components 18,556
15,046
Work in process 6,596
5,860
Finished goods 95,690
80,119
Reserve for excess and obsolete inventory (3,125 ) (4,205 )
Inventories, net $ 154,520
$ 129,879

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

~~Reserve for Excess and Obsolete Inventory~~

~~Changes in the reserve for excess and obsolete inventory were as follows:~~

Additions charged to costs and expenses ⁽¹⁾

Sell through ⁽²⁾

Significant Supplier

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

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


	Three Months Ended March 31,
	2023						2022
	$ (thousands)			% of Total Inventory Purchases			$ (thousands)		% of Total Inventory Purchases
Qorvo International Pte Ltd.	$	—	(1)	—	%	(1)	$	7,552	10.4	%

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

There were no purchases from suppliers that totaled more than 10% of our total accounts payable at March 31, 2023 and December 31, 2022.

Note 5 — Long-lived Tangible Assets

Long-lived tangible assets by geographic area, which include property, plant, and equipment, net and operating lease right-of-use assets, were as follows:


(In thousands)	March 31, 2023		December 31, 2022
United States	$	16,252	$	16,427
People's Republic of China	41,121		42,893
Mexico	14,012		14,402
Vietnam	6,969		6,923
All other countries	3,673		3,745
Total long-lived tangible assets	$	82,027	$	84,390

Property, plant, and equipment are shown net of accumulated depreciation of $171.8 million and $170.5 million at March 31, 2023 and December 31, 2022, respectively.

Depreciation expense was $4.6 million and $5.1 million for the three months ended March 31, 2023 and 2022, respectively.

Three Months Ended September 30,
2017 2016
$ (thousands)
% of Total
Inventory Purchases
$ (thousands)
% of Total
Inventory Purchases
Texas Instruments $ 13,115
12.4 % $ 12,353
13.0 %

Nine Months Ended September 30,
2017 2016
$ (thousands)
% of Total
Inventory Purchases
$ (thousands)
% of Total
Inventory Purchases
Texas Instruments $ 33,693
11.3 % $ 32,294
11.9 %

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UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

~~Related Party Supplier~~

We purchase certain printed circuit board assemblies from a related party supplier. The supplier is considered a related party for financial reporting purposes because our Senior Vice President of Strategic Operations owns ~~40%~~ ~~of this vendor. Inventory purchases from this supplier were as follows:~~

Three Months Ended September 30,
2017 2016
$ (thousands)
% of Total
Inventory Purchases
$ (thousands)
% of Total
Inventory Purchases
Related party supplier $ 1,378
1.3 % $ 1,382
1.5 %

Nine Months Ended September 30,
2017 2016
$ (thousands)
% of Total
Inventory Purchases
$ (thousands)
% of Total
Inventory Purchases
Related party supplier $ 3,962
1.3 % $ 4,971
1.8 %

~~Total accounts payable to this supplier were as follows:~~

September 30, 2017 December 31, 2016
$ (thousands) % of Accounts Payable $ (thousands) % of Accounts Payable
Related party supplier $ 1,763
1.6 % $ 1,690
1.7 %

Our payment terms and pricing with this supplier are consistent with the terms offered by other suppliers in the ordinary course of business. The accounting policies that we apply to our transactions with our related party supplier are consistent with those applied in transactions with independent third parties. Corporate management routinely monitors purchases from our related party supplier to ensure these purchases remain consistent with our business objectives.

Note 56 — Goodwill and Intangible Assets, Net

During the three months ended March 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 three months ended March 31, 2023.

Changes in the carrying amount of goodwill were as follows:

(In thousands)
Balance at December 31, 2016 $ 43,052
Goodwill acquired during the period ⁽¹⁾
5,494
Foreign exchange effects 78
Balance at September 30, 2017 $ 48,624


(In thousands)
Balance at December 31, 2022	$	49,085

Goodwill impairment	(49,075)
Foreign exchange effects	(10)
Balance at March 31, 2023	$	—

⁽¹⁾~~During the second quarter of 2017, we recorded $5.5 million of goodwill related to the Residential Control Systems, Inc. acquisition. Refer to Note 18 for further information about this acquisition.~~

~~Table of Contents~~

~~UNIVERSAL ELECTRONICS INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

Intangible Assets, Net

The components of intangible assets, net were as follows:


	March 31, 2023						December 31, 2022
(In thousands)	Gross (1)		Accumulated Amortization (1)		Net		Gross (1)		Accumulated Amortization (1)		Net
Capitalized software development costs (2 years)	$	1,818	$	(51)	$	1,767	$	1,647	$	(44)	$	1,603
Customer relationships (10-15 years)	6,340		(3,260)		3,080		6,340		(3,080)		3,260
Developed and core technology (5-15 years)	4,520		(3,784)		736		4,520		(3,693)		827
Distribution rights (10 years)	312		(292)		20		308		(281)		27
Patents (10 years)	30,497		(11,271)		19,226		29,388		(10,790)		18,598
Trademarks and trade names (10 years)	450		(310)		140		450		(295)		155
Total intangible assets, net	$	43,937	$	(18,968)	$	24,969	$	42,653	$	(18,183)	$	24,470

(1)This table excludes the gross value of fully amortized intangible assets totaling $44.0 million and $43.7 million at March 31, 2023 and December 31, 2022, respectively.

September 30, 2017 December 31, 2016
(In thousands)
Gross ⁽¹⁾

Accumulated
Amortization ⁽¹⁾
Net
Gross ⁽¹⁾

Accumulated
Amortization ⁽¹⁾
Net
Distribution rights $ 340
$ (155 ) $ 185
$ 302
$ (119 ) $ 183
Patents 12,593
(4,996 ) 7,597
12,038
(4,775 ) 7,263
Trademarks and trade names ⁽²⁾
2,786
(1,518 ) 1,268
2,400
(1,310 ) 1,090
Developed and core technology 12,560
(5,567 ) 6,993
12,585
(4,068 ) 8,517
Capitalized software development costs 142
(59 ) 83
142
(5 ) 137
Customer relationships ⁽²⁾
32,534
(18,613 ) 13,921
27,703
(16,344 ) 11,359
Order backlog ⁽²⁾
150
(38 ) 112
—
—
—
Total intangible assets, net $ 61,105
$ (30,946 ) $ 30,159

$ 55,170
$ (26,621 ) $ 28,549

Table of Contents

UNIVERSAL ELECTRONICS INC.


⁽¹⁾ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2023 (Unaudited)	~~This table excludes the gross value of fully amortized intangible assets totaling $6.0 million and $10.2 million at September 30, 2017 and December 31, 2016, respectively.~~

⁽²⁾

During the second quarter of 2017, we purchased a trade name valued at $0.4 million, which is being amortized ratably over eight years; customer relationships valued at $5.0 million, which are being amortized ratably over 10 years; and order backlog valued at $0.2 million, which is being amortized ratably over one year. Refer to Note 18 for further information regarding the purchase of these intangible assets.

Amortization expense is recorded in selling, general and administrative expenses, except amortization expense related to capitalized software development costs, ~~and order backlog,~~ which ~~are~~is recorded in cost of sales. Amortization expense by ~~income~~ statement of operations caption was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)									(In thousands)	Three Months Ended March 31,
	2017		2016		2017		2016			2023		2022
Cost of sales	$	54	$	21	$	128	$	63	Cost of sales	$	8	$	12
Selling, general and administrative expenses	1,715		1,551		5,032		4,618		Selling, general and administrative expenses	1,057		921
Total amortization expense	$	1,769	$	1,572	$	5,160	$	4,681	Total amortization expense	$	1,065	$	933

Estimated future annual amortization expense related to our intangible assets at ~~September 30, 2017, is~~March 31, 2023, was as follows:


(In thousands)
2023 (remaining 9 months)	$	3,667
2024	4,720
2025	4,035
2026	3,339
2027	2,740
Thereafter	6,468
Total	$	24,969

We have entered into various operating lease agreements for automobiles, offices and manufacturing facilities throughout the world. At March 31, 2023, our operating leases had remaining lease terms of up to 38 years, including any reasonably probable extensions.

Lease balances within our consolidated balance sheet were as follows:


(In thousands)	March 31, 2023		December 31, 2022
Assets:
Operating lease right-of-use assets	$	20,236	$	21,599
Liabilities:
Other accrued liabilities	$	5,222	$	5,509
Long-term operating lease obligations	13,983		15,027
Total lease liabilities	$	19,205	$	20,536

(In thousands)
2017 (remaining 3 months) $ 1,776
2018 7,046
2019 6,901
2020 5,740
2021 2,289
Thereafter 6,407
Total $ 30,159

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

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


(In thousands)	Three Months Ended March 31,
	2023		2022
Cost of sales	$	792	$	635
Selling, general and administrative expenses	1,076		1,108
Total operating lease expense	$	1,868	$	1,743
Operating cash outflows from operating leases	$	1,831	$	1,679
Operating lease right-of-use assets obtained in exchange for lease obligations	$	—	$	2,959

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


	March 31, 2023		December 31, 2022
Weighted average lease liability term (in years)	5.0		5.1
Weighted average discount rate	3.87	%	3.82	%

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 March 31, 2023. The reconciliation excludes short-term leases that are not recorded on the balance sheet.


(In thousands)	March 31, 2023
2023 (remaining 9 months)	$	4,620
2024	5,223
2025	4,216
2026	2,633
2027	1,918
Thereafter	2,879
Total lease payments	21,489
Less: imputed interest	(2,284)
Total lease liabilities	$	19,205

At March 31, 2023, we had one operating lease with a three-year term that had not yet commenced. The total initial lease liability, which is immaterial to the balance sheet, is not reflected within the above maturity schedule.

Note 68 — Line of Credit

Our Amended and Restated Credit Agreement ("Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank") provided for a $125.0 million revolving line of credit ("Credit Line") that was to expire on November 1, 2019. On October 27, 2017, we entered into a Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank ~~as administrative agent, sole lead arranger and sole book runner, and Wells Fargo Bank,~~ National Association ~~which replaces the Amended~~ ("U.S. Bank") provides for a $125.0 million revolving line of credit ("Credit ~~Agreement. Under the Second Amended Credit Agreement, the Credit Line was increased to $170.0 million and the expiration date remained~~Line") that expires on November 1, ~~2019.~~2023. The Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures. Amounts available for borrowing under the Credit Line are reduced by the balance of any outstanding letters of ~~credit. There~~credit, of which there were ~~no outstanding letters of credit~~none at ~~September 30, 2017.~~March 31, 2023 and December 31, 2022.

All obligations under the Credit Line are secured by substantially all of our U.S. personal property and tangible and intangible assets, as well as ~~65%~~a guaranty of ~~our ownership interest in Enson Assets Limited,~~the Credit Line by our wholly-owned subsidiary, ~~that controls our manufacturing factories in the PRC.~~Universal Electronics BV.

~~The interest rate applicable to outstanding Credit Line balances~~

At March 31, 2023, under the Second Amended Credit Agreement, ~~is the same as under the Amended Credit Agreement. We~~we may elect to pay interest on the Credit Line based on LIBOR plus an applicable margin (varying from 1.25% to 1.75%) 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 0.00% to 0.50%). The applicable margins are calculated quarterly and vary based on our cash flow leverage ratio as set forth in the ~~Amended Credit Agreement and~~ Second Amended

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(Unaudited)

Credit Agreement. The interest ~~rate~~rates in effect at ~~September 30, 2017 was 2.48%.~~March 31, 2023 and December 31, 2022 were 6.10% and 5.62%, respectively. There are no commitment fees or unused line fees under the ~~Amended Credit Agreement or the~~ Second Amended Credit Agreement.

The ~~Amended Credit Agreement and~~ Second Amended Credit Agreement ~~include~~includes financial covenants requiring a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. In addition, the ~~Amended Credit Agreement and~~ Second Amended Credit Agreement ~~also contain~~contains other customary affirmative and negative covenants and events of default. ~~As of September 30, 2017,~~At March 31, 2023, we were in compliance with the covenants and conditions of the Second Amended Credit Agreement.

At ~~September 30, 2017,~~March 31, 2023 and December 31, 2022, we had ~~$114.0~~$85.0 million and $88.0 million outstanding under the Credit ~~Line.~~Line, respectively. Our total interest expense on borrowings was ~~$0.8~~$1.4 million and $0.3 million during the three months ended ~~September~~March 31, 2023 and 2022, respectively.

On May 3, 2023, we executed an amendment to our Second Amended Credit Agreement, which extends the term to April 30, ~~2017~~2024. Under the amended agreement, we may elect to pay interest on the 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 0.00% to 0.75%). From May 3, 2023 to March 31, 2024 (unless we elect to terminate earlier), our fixed charge coverage ratio and ~~2016, respectively,~~cash flow leverage ratio-based covenants are temporarily replaced with EBITDA-based covenants. Additionally, from May 3, 2023 to March 31, 2024 (unless we elect to terminate the temporary covenant provision earlier) the applicable margins are fixed at 2.75% and ~~$1.8 million~~0.75% for SOFR and ~~$0.9 million during the nine months ended September 30, 2017 and 2016,~~base rate borrowing, respectively.

Note 79 — Income Taxes

We utilize our estimated annual effective tax rate to determine our provision for income taxes for interim periods. The income tax provision is computed by taking the estimated annual effective tax rate and multiplying it by the year-to-date pre-tax book income.

We recorded income tax expense of ~~$1.8~~$0.7 million and ~~$0.4~~$2.4 million for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, respectively,~~2022, respectively. The difference in income tax recorded for the three months ended March 31, 2023 and ~~our effective~~ 2022 is primarily due to the mix of pre‐tax ~~rate was 51.4%~~income among jurisdictions, including losses not benefited as a result of a valuation allowance and ~~5.1%~~a discrete benefit related to the impairment of goodwill. In addition, China received the high technology exemption during the three months ended ~~September 30, 2017 and 2016, respectively. We recorded income~~March 31, 2023, which reduced the deferred tax ~~expense of $2.9 million and $3.0 million for~~assets to the ~~nine months ended September 30, 2017 and 2016, respectively, and our~~new rate.

The difference between the Company's effective tax rate ~~was 31.1%~~ and ~~14.7%~~the 21.0% U.S. federal statutory rate for the three months ended March 31, 2023 primarily related to the mix of pre-tax income and loss among jurisdictions and permanent tax items including a tax on global intangible low-taxed income. The permanent tax item related to global intangible low-taxed income also reflects recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

At December 31, 2022, we assessed the realizability of the Company's deferred tax assets by considering whether it is more likely than not some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the ~~nine~~periods in which those temporary differences become deductible. We considered taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. At December 31, 2022, we had a three-year cumulative operating loss for our U.S. operations and, accordingly, have provided a full valuation allowance on our U.S. federal and state deferred tax assets. During the three months ended ~~September 30, 2017 and 2016, respectively. The higher effective tax rate in both periods~~March 31, 2023, there was ~~primarily due~~no change to ~~the nondeductibility of certain transactions in the PRC as a result of the pending sale of~~ our Guangzhou factory (Note 10). In addition, during the three and nine months ended September 30, 2016, we received tax refunds from the Chinese government totaling $1.8 million for various tax incentives relating to fiscal year 2015.valuation allowance position.

At ~~September 30, 2017,~~March 31, 2023, we had gross unrecognized tax benefits of ~~$3.8~~$3.2 million, including interest and penalties, of which, ~~$3.5 million,~~ if not for the valuation allowance recorded against the state Research and Experimentation income tax credit, ~~valuation allowance,~~ would affect the annual effective tax rate if these tax benefits are realized. Further, we are unaware of any positions for which it is reasonably possible that the total ~~amount~~amounts of unrecognized tax benefits will significantly ~~change~~increase within the next twelve months. ~~However, based~~Based on federal, state and foreign statute expirations in various jurisdictions, we do not anticipate a decrease in unrecognized tax benefits ~~of approximately $0.1 million~~ within the next twelve months. We have classified uncertain tax positions as non-current income tax liabilities unless they are expected to be paid within one year.

We have elected to classify interest and penalties as a component of tax expense. Accrued interest and penalties ~~of $0.3 million and $0.3 million~~are immaterial at ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016, respectively,~~2022 and are included in ~~our~~the unrecognized tax benefits.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

Note 810 — Accrued Compensation

The components of accrued compensation were as follows:


(In thousands)	September 30, 2017		December 31, 2016		(In thousands)	March 31, 2023		December 31, 2022
Accrued bonus					Accrued bonus	$	1,770	$	3,348
Accrued commission					Accrued commission	159		609
Accrued salary/wages					Accrued salary/wages	4,858		4,433
Accrued social insurance ⁽¹⁾	$	17,506	$	19,974	Accrued social insurance (1)	7,093		7,037
Accrued salary/wages	7,721		7,903
Accrued vacation/holiday	2,844		2,411		Accrued vacation/holiday	3,897		3,300
Accrued bonus ⁽²⁾	1,985		2,421
Accrued commission	851		933
Accrued medical insurance claims	284		122
Other accrued compensation	2,137		1,816		Other accrued compensation	2,491		2,177
Total accrued compensation	$	33,328	$	35,580	Total accrued compensation	$	20,268	$	20,904

⁽¹⁾

(1)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 March 31, 2023 and December 31, 2022.

Note 11 — Other Accrued Liabilities

The components of other accrued liabilities were as follows:


(In thousands)	March 31, 2023		December 31, 2022
Contract liabilities	$	1,935	$	1,134
Duties	479		470
Expense associated with fulfilled performance obligations	1,429		1,120
Freight and handling fees	2,043		2,497
Interest	1,417		1,413
Operating lease obligations	5,222		5,509
Product warranty claims costs	522		522
Professional fees	2,385		2,293
Sales and value added taxes	3,135		3,750

Other	5,040		5,426
Total other accrued liabilities	$	23,607	$	24,134

Note 12 — Commitments and Contingencies

Product Warranties

Changes in the liability for product warranty claims costs were as follows:


(In thousands)	Three Months Ended March 31,
	2023		2022
Balance at beginning of period	$	522	$	1,095
Accruals for warranties issued during the period	—		221
Settlements (in cash or in kind) during the period	—		(331)
Foreign currency translation gain (loss)	—		—
Balance at end of period	$	522	$	985

Effective January 1, 2008, the Chinese Labor Contract Law was enacted in the PRC. This law mandated that PRC employers remit the applicable social insurance payments to their local government. Social insurance is comprised of various components such as pension, medical insurance, job injury insurance, unemployment insurance, and a housing assistance fund, and is administered in a manner similar to social security in the United States. This amount represents our estimate of the amounts due to the PRC government for social insurance on ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~.

~~Accrued bonus includes an accrual for an extra month of salary ("13~~^th ~~month salary") to be paid to employees in certain geographies where it is the customary business practice. This 13~~^th ~~month salary is paid to these employees if they remain employed with us through December 31st. The total accrued for the 13~~^th ~~month salary was $0.7 million and $0.7 million at~~ ~~September 30, 2017~~ ~~and December 31,~~ ~~2016, respectively.~~

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

~~Note 9 — Other Accrued Expenses~~

~~The components of other accrued expenses were as follows:~~Roku Matters

(In thousands) September 30, 2017 December 31, 2016
Advertising and marketing $ 272
$ 213
Deferred revenue 79
1,431
Deposit for sale of Guangzhou factory 4,799
—
Duties 757
1,127
Freight and handling fees 2,176
1,919
Product development 485
454
Product warranty claim costs 218
134
Professional fees 1,691
1,313
Property, plant, and equipment 1,564
1,017
Sales taxes and VAT 2,587
2,715
Short-term contingent consideration 3,400
—
Third-party commissions 685
853
Tooling ⁽¹⁾
1,769
1,520
Unrealized loss on foreign currency exchange contracts 86
1,623
URC court order and settlement agreement (Note 2) —
6,622
Utilities 392
331
Other 4,880
3,138
Total other accrued expenses $ 25,840
$ 24,410
2018 Lawsuit

~~Note 10 — Commitments and Contingencies~~

~~Product Warranties~~

~~Changes~~On September 5, 2018, we filed a lawsuit against Roku, Inc. ("Roku") in the ~~liability~~United States District Court, Central District of California, alleging that Roku is willfully infringing nine of our patents that are in four patent families related to remote control set-up and touchscreen remotes. On December 5, 2018, we amended our complaint to add additional details supporting our infringement and willfulness allegations. We have alleged that this complaint relates to multiple Roku streaming players and components therefor and certain universal control devices, including but not limited to the Roku App, Roku TV, Roku Express, Roku Streaming Stick, Roku Ultra, Roku Premiere, Roku 4, Roku 3, Roku 2, Roku Enhanced Remote and any other Roku product that provides for ~~product warranty claim costs were~~the remote control of an external device such as ~~follows:~~

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

(In thousands) Nine Months Ended September 30,
2017 2016
Balance at beginning of period $ 134
$ 35
Accruals for warranties issued during the period 169
100
Settlements (in cash or in kind) during the period (85 ) —
Balance at end of period $ 218
$ 135

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

~~Restructuring Activities~~

On April 16, 2020, we filed a complaint with the International Trade Commission (the "ITC") against Roku, TCL Electronics Holding Limited and ~~Sale~~related entities (collectively, "TCL"), Hisense Co., Ltd. and related entities (collectively, "Hisense"), and Funai Electric Company, Ltd. and related entities (collectively, "Funai") claiming that certain of ~~Guangzhou Factory~~their televisions, set-top boxes, remote control devices, human interface devices, streaming devices, and sound bars infringe certain of our patents. We asked the ITC to issue a permanent limited exclusion order prohibiting the importation of these infringing products into the United States and a cease and desist order to stop these parties from continuing their infringing activities. On May 18, 2020, the ITC announced that it instituted its investigation as requested by us. Prior to the trial, which ended on April 23, 2021, we dismissed TCL, Hisense and Funai from this investigation as they either removed or limited the amount of our technology from their televisions as compared to our patent claims that we asserted at the time. On July 9, 2021, the Administrative Law Judge (the "ALJ") issued his Initial Determination (the "ID") finding that Roku is infringing our patents and as a result is in violation of §337 of the Tariff Act of 1930, as amended (the "Tariff Act"). On July 23, 2021, Roku and we filed petitions to appeal certain portions of the ID. On November 10, 2021, the full ITC issued its final determination affirming the ID and issuing a Limited Exclusion Order (the "LEO") and Cease and Desist Order (the "CDO") against Roku, which became effective on January 9, 2022. Roku continues to be subject to the LEO and CDO. On October 25, 2022, we filed our brief opposing Roku's appeal of the LEO.

~~In the first quarter~~

As a companion case to our ITC complaint, on April 9, 2020, we filed separate actions against each of ~~2016, we implemented a plan to reduce the impact of rising labor rates in China by transitioning manufacturing activities from our southern-most China factory, located~~Roku, TCL, Hisense, and Funai in the ~~city~~United States District Court, Central District of ~~Guangzhou~~California, alleging that Roku is willfully infringing five of our patents and TCL, Hisense, and Funai are willfully infringing six of our patents by incorporating our patented technology into certain of their televisions, set-top boxes, remote control devices, human interface devices, streaming devices and sound bars. These matters have been and continue to be stayed pending the final results of the open IPR matters mentioned below.

Inter Partes Reviews

Throughout these litigation matters against Roku and the others identified above, Roku has filed multiple IPR requests with the PTAB on all patents at issue in the ~~Guangdong province,~~2018 Lawsuit, the ITC Action, and the 2020 Lawsuit (see discussion above). To date, the PTAB has denied Roku's request fourteen times, and granted Roku's request twelve times. Roku has since filed two IPRs on two of our patents not yet asserted against it, and we are awaiting the PTAB's institution decision with respect to those new IPR requests. Of the twelve IPR requests granted by the PTAB, the results were mixed, with the PTAB upholding the validity of many of our ~~other China factories where labor rates are rising at a slower rate. As a result,~~patent claims and invalidating others. We have appealed all but one PTAB decision that resulted in an invalidation of our patent claims and we incurred severance costs of $0.4 million and $0.1 million during the three months ended September 2017 and 2016, respectively, and $6.1 million and $1.6 million during the nine months ended September 30, 2017 and 2016, respectively, which are included within operating expenses. All operations in our Guangzhou factory ceased in July 2017. Accordingly, wewill continue to do not expect to incur significant further severance or other restructuring costs related to this factory transition. At September 30, 2017, we had $0.2 million of unpaid severance costs included within accrued compensation.so.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

On September 26, 2016, we entered into an agreement to sell our Guangzhou manufacturing facility for RMB 320 million (approximately $48.0 million based on September 30, 2017 exchange rates). Under the terms of this agreement, we have up to 24 months to cease all operations within the facility. The closing of the sale will be subject to customary due diligence and local regulatory approval and per the terms of the agreement could take up to approximately 28 months from the execution of the agreement. In accordance with the terms of the agreement, the buyer deposited 10% of the purchase price into an escrow account at agreement inception, which we have presented as restricted cash in our consolidated balance sheet (also refer to Note 2). The remaining balance of the purchase price is to be placed into the escrow account prior to the closing of the sale and will be released to us upon closing. Since all operations at our Guangzhou manufacturing facility ceased as of the end of July 2017, the related building and land lease assets of $12.4 million are classified as assets held for sale in our September 30, 2017 consolidated balance sheet.

On or about June 10, 2015, FM Marketing GmbH ("FMH") and Ruwido Austria GmbH ("Ruwido"), filed a Summons in Summary Proceedings in Belgium court against one of our subsidiaries, Universal Electronics BV ("UEBV") and one of its customers, Telenet N.V. ("Telenet"), claiming that one of the products that UEBV previously supplied to Telenet violates two design patents and one utility patent owned by FMH and/or Ruwido. By this summons, FMH and Ruwido sought to enjoin Telenet and UEBV from continued distribution and use of the product at issue. After the September 29, 2015 hearing, the court issued its ruling in our and Telenet’s favor, rejecting FMH and Ruwido’s request entirely. On October 22, 2015, Ruwido filed its notice of appeal in this ruling. The parties have fully briefed and argued before the appellate court and we are awaiting the appellate court’s ruling. In addition, on or about February 9, 2016, Ruwido filed a writ of summons for proceeding on the merits with respect to asserted patents. UEBV and Telenet have replied, denying all of Ruwido's allegations and in June 2017, a hearing was held before the trial court. During this hearing, Ruwido sought to have a second product which we are currently selling to Telenet included in this case. In September 2017, the Court ruled in our favor that our current product cannot be made part of this case. The Court also refused to rule on whether the original product (which we are no longer selling) infringes the Ruwido patent, instead deciding to wait until the European Patent Office has ruled on our Opposition (see below). Finally, the Court ruled that our original product (which we are no longer selling) infringes certain of Ruwido’s design rights, but stay any decision of compensation and/or damages until all aspects of the case have been decided. We are presently deciding whether to appeal this Court’s rulings and have until later this year to file notice of appeal. Finally, in September 2015, UEBV filed an Opposition with the European Patent Office seeking to invalidate the one utility patent asserted against UEBV and Telenet by Ruwido. The hearing on this opposition was held in July 2017. During this hearing the panel requested additional information. We are in the process of assembling this additional information and scheduling a date for rehearing. On September 5, 2017, Ruwido and FMH filed a patent infringement case on the merits against UEBV and Telenet alleging the same claims of infringement as in the Belgium Courts (see above). This matter is in its early stages and as such we have not yet answered. But, as in the Belgium case, UEBV and Telenet will deny all claims of infringement and vigorously defend against these claims.

~~On January 26, 2017, OpenTV, Inc., Nagra USA, Inc., Nagravision SA, and Kudelski SA (collectively, the “Kudelski Group”) filed a request with the U.S.~~ International Trade Commission ~~(“ITC”)~~Investigation Request Made by Roku against UEI and certain UEI Customers

On April 8, 2021, Roku made a request to institute an investigation pursuant to Section 337 of the Tariff Act of 1930, as amended, concerning certain remote control devices we supply Comcast Corporation (“Comcast”), which request was accepted by the ITC. On July 21, 2017, the Kudelski Group filed a motion to terminate the investigation as to all parties, including us and this motion was accepted by the ITC ~~on August 11, 2017.~~

~~On March 15, 2017, one of our employee’s filed a lawsuit~~to initiate an investigation against us and certain of our ~~employees in the Superior Court of California, County of Orange,~~customers claiming hostile work environment based on sexual orientation, intentional infliction of emotional distress, failure to prevent hostile work environment, retaliation, and constructive termination. We have answered by denying all of the employee’s claims and have filed a countersuit against this employee claiming, among other things that ~~he has breached his duty of loyalty to us, that he stole~~ certain of our ~~property, that he converted certain~~and those customers' remote control devices and televisions infringe two of Roku's recently acquired patents, the '511 patent and the '875 patent. On May 10, 2021, the ITC announced its decision to initiate the requested investigation. Immediately prior to trial Roku stipulated to summary determination as to its complaint against us and two of our ~~property~~customers with respect to ~~his own benefit. We~~one of the two patents at issue. This stipulation resulted in the complaint against us and two of our customers with respect to that patent not going to trial. The trial was thus shortened and ended on January 24, 2022. On June 24, 2022, the ALJ, pursuant to Roku's stipulation, found the '511 patent invalid as indefinite. Thereafter, on June 28, 2022, the ALJ issued her ID fully exonerating us and our customers finding the '875 patent invalid and that Roku failed to prove it established the requisite domestic industry and thus no violation of the Tariff Act. In advance of the full Commission's review, Roku and we filed petitions to appeal certain portions of the ID. In addition, the PTAB granted our request for an IPR with respect to the '875 patent. On October 28, 2022, the full ITC issued its final determination affirming the ID, ruling there was no violation of the Tariff Act and terminated the investigation. In December 2022, Roku filed an appeal, which remains pending. As a companion to its ITC request, Roku also filed a lawsuit against us in Federal District Court in the Central District of California alleging that we are infringing the same two patents they alleged being infringed in the ITC investigation explained above. This District Court case has been stayed pending the ITC case, and will likely continue to be stayed pending the conclusion of the '875 IPR investigation, even after Roku's appeal of the ITC case has concluded.

Court of International Trade Action against the United States of America, et. 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 China under Lists 3 and 4A.

Pursuant to this complaint, Ecolink, RCS and we are alleging that USTR's institution of Lists 3 and 4A tariffs violated the Trade Act of 1974 (the "Trade Act") on the grounds that the USTR failed to make a determination or finding that there was an unfair trade practice that required a remedy and moreover, that Lists 3 and 4A tariffs were instituted beyond the 12-month time limit provided for in the governing statute. Ecolink, RCS and we also allege that the manner in which the Lists 3 and 4A tariff actions were implemented violated the Administrative Procedures Act (the "APA") by failing to provide adequate opportunity for comments, failed to consider relevant factors when making its decision and failed to connect the record facts to the choices it made by not explaining how the comments received by USTR came to shape the final implementation of Lists 3 and 4A.

Ecolink, RCS and we are asking the CIT to declare that the defendants' actions resulting in the tariffs on products covered by Lists 3 and 4A are unauthorized by and contrary to the Trade Act and were arbitrarily and unlawfully promulgated in violation of the APA; to vacate the Lists 3 and 4A tariffs; to order a refund (with interest) of any Lists 3 and 4A duties paid by Ecolink, RCS and us; to permanently enjoin the U.S. government from applying Lists 3 and 4A duties against Ecolink, RCS and us; and award Ecolink, RCS and us our costs and reasonable attorney's fees.

In July 2021, the CIT issued a preliminary injunction suspending liquidation of all unliquidated entries subject to Lists 3 and 4A duties and has asked the parties to develop a process to keep track of the entries to efficiently and effectively deal with liquidation process and duties to be paid or refunded when finally adjudicated. On February 5, 2022, the CIT heard oral arguments on dispositive motions filed on behalf of plaintiffs and defendants. On April 1, 2022, the CIT issued its opinion on these dispositive motions, ruling that the USTR had the legal authority to promulgate List 3 and List 4A under Section 307(a)(1)(B) of the Trade Act, but that the USTR violated the APA when it promulgated List 3 and List 4A concluding that the USTR failed to adequately explain its decision as required under the APA. The Court ordered that List 3 and List 4A be remanded to the USTR for reconsideration or further explanation regarding its rationale for imposing the tariffs. The Court declined to vacate List 3 and List 4A, which means that they are still in place while on remand. The Court's preliminary injunction regarding liquidation of entries also remains in effect. The Court initially set a deadline of June 30, 2022, for the ~~early stages~~USTR to complete this process, which was extended to August 1, 2022.

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

(Unaudited)

On August 1, 2022, the USTR provided the Court with that further explanation and also purported to respond to the significant comments received during the original notice-and-comment process. On September 14, 2022, the lead plaintiff filed its comments to the USTR's August 1, 2022 filing, asserting that the USTR did not adequately respond to the Court's remand order and requested the Court to vacate the List 3 and List 4A tariffs and issue refunds immediately. On March 17, 2023, 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. The court also concluded that USTR adequately explained its reliance on presidential direction and adequately responded to significant comments regarding the harm to the US economy, efficacy of the tariffs, and alternatives to the tariffs. We expect lead plaintiffs to appeal this ~~case as discovery has recently commenced.~~decision.

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

~~Table of Contents~~

~~UNIVERSAL ELECTRONICS INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~September 30, 2017~~

~~(Unaudited)~~

judgments, if any, which might be rendered against us in potential or pending litigation would not have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. Moreover, we believe that our products do not infringe any third parties' patents or other intellectual property rights.

We maintain directors' and officers' liability insurance which insures our individual directors and officers against certain claims, as well as attorney's fees and related expenses incurred in connection with the defense of such claims.

Note 1113 — Treasury Stock

From time to time, our Board of Directors authorizes management to repurchase shares of our issued and outstanding common ~~stock on~~stock. Our share repurchase programs typically utilize various methods to effect the repurchases, including open ~~market. Repurchases may~~market repurchases, negotiated block transactions, accelerated share repurchases or open market solicitations for shares, some or all of which could be ~~made whenever we deem a~~effected through Rule 10b5-1 plans. We do not currently have any approved repurchase ~~to be a good use~~programs in progress.

We also repurchase shares of our ~~cash~~issued and the repurchase enhances shareholder value. As of September 30, 2017, we had 114,271 shares available for repurchase on the open market under the Board's authorizations. On October 23, 2017, our Board increased these repurchase authorizations by 300,000 shares bringing the total authorization as of the approval date to 386,434 shares. Shares may also be tendered by employeesoutstanding common stock to satisfy the cost of stock option exercises and/or income tax withholding obligations ~~in connection with~~relating to the ~~vesting~~stock-based compensation of ~~restricted stock.~~our employees and directors.

Repurchased shares of our common stock were as follows:

Nine Months Ended September 30,
(In thousands) 2017 2016
Shares repurchased 330
40
Cost of shares repurchased $ 20,217
$ 2,188


	Three Months Ended March 31,
(In thousands)	2023		2022
Open market shares repurchased	—		175
Stock-based compensation related shares repurchased	53		50
Total shares repurchased	53		225

Cost of open market shares repurchased	$	—	$	5,721
Cost of stock-based compensation related shares repurchased	812		1,633
Total cost of shares repurchased	$	812	$	7,354

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, which has included compensating our outside directors.~~appropriate.

~~Note 12 — Business Segment and Foreign Operations~~

~~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.

~~Foreign Operations~~

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

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2017 2016 2017 2016
United States $ 85,762
$ 88,243
$ 253,259
$ 263,053
Asia (excluding PRC) 26,113
22,099
77,679
64,290
People's Republic of China 23,437
19,899
61,015
59,978
Europe 18,877
19,389
56,041
53,716
Latin America 13,567
13,032
44,593
32,273
Other 7,896
6,523
22,051
17,519
Total net sales $ 175,652
$ 169,185

$ 514,638

$ 490,829

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

Table of Contents

UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2017~~MARCH 31, 2023

(Unaudited)

~~Long-lived tangible assets by geographic area were as follows:~~

Note 1314 — Stock-Based Compensation


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	UEIC	Nasdaq Global Select Market



		Page Number
PART I. FINANCIAL INFORMATION		3
Item 1. Consolidated Financial Statements (Unaudited)		3
Consolidated Balance Sheets		3
Consolidated ~~Income~~ Statements of Operations		4
Consolidated Comprehensive Income (Loss) Statements		5
Consolidated Statements of Stockholders' Equity		6
Consolidated Statements of Cash Flows		67
Notes to Consolidated Financial Statements		78
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		2624
Item 3. Quantitative and Qualitative Disclosures About Market Risk		3431
Item 4. Controls and Procedures		3532
PART II. OTHER INFORMATION		3633
Item 1. Legal Proceedings		3633
Item 1A. Risk Factors		3633
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3633
Item 6. Exhibits		3734
Signatures		3835
~~Exhibit Index~~	39


(In thousands)	September 30, 2017		December 31, 2016		(In thousands)	March 31, 2023		December 31, 2022
United States	$	4,795	$	3,277
North America					North America	$	7,244	$	6,825
People's Republic of China ("PRC")	22,120		22,142		People's Republic of China ("PRC")	13,981		15,633
Asia (excluding the PRC)	846		5,260		Asia (excluding the PRC)	14,892		18,850
Europe	13,317		19,630		Europe	9,363		13,042
South America	7,482		302		South America	11,426		12,390
Total cash and cash equivalents	$	48,560	$	50,611	Total cash and cash equivalents	$	56,906	$	66,740


	March 31, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	56,906	$	66,740
Accounts receivable, net	106,371		112,346
Contract assets	7,021		7,996
Inventories	122,688		140,181
Prepaid expenses and other current assets	6,859		6,647
Income tax receivable	2,525		4,130
Total current assets	302,370		338,040
Property, plant and equipment, net	61,791		62,791
Goodwill	—		49,085
Intangible assets, net	24,969		24,470
Operating lease right-of-use assets	20,236		21,599
Deferred income taxes	5,636		6,242
Other assets	1,965		1,936
Total assets	$	416,967	$	504,163
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	50,766	$	71,373
Line of credit	85,000		88,000
Accrued compensation	20,268		20,904
Accrued sales discounts, rebates and royalties	4,400		6,477
Accrued income taxes	3,766		5,585
Other accrued liabilities	23,607		24,134
Total current liabilities	187,807		216,473
Long-term liabilities:
Operating lease obligations	13,983		15,027

Deferred income taxes	2,636		2,724
Income tax payable	723		723
Other long-term liabilities	779		810
Total liabilities	205,928		235,757
Commitments and contingencies
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; 25,196,612 and 24,999,951 shares issued on March 31, 2023 and December 31, 2022, respectively	252		250
Paid-in capital	329,729		326,839
Treasury stock, at cost, 12,348,491 and 12,295,305 shares on March 31, 2023 and December 31, 2022, respectively	(369,006)		(368,194)
Accumulated other comprehensive income (loss)	(19,271)		(21,187)
Retained earnings	269,335		330,698
Total stockholders' equity	211,039		268,406
Total liabilities and stockholders' equity	$	416,967	$	504,163


(1) Trade receivables associated with this customer did not total more than 10% of our accounts receivable, net for the indicated period. ⁽¹⁾	~~Trade receivables associated with this customer did not total more than 10% of our accounts receivable, net at September 30, 2017.~~


⁽¹⁾	The additions charged to costs and expenses do not include inventory directly written-off that was scrapped during production totaling $0.2 million and $0.3 million for the nine months ended September 30, 2017 and 2016, respectively. These amounts are production waste and are not included in management's reserve for excess and obsolete inventory.


⁽²⁾	~~These amounts represent the reduction in reserves associated with inventory items that were sold during the period.~~



(In thousands)
Balance at December 31, 2016	$	43,052
Goodwill acquired during the period ⁽¹⁾	5,494
Foreign exchange effects	78
Balance at September 30, 2017	$	48,624



(In thousands)
2017 (remaining 3 months)	$	1,776
2018	7,046
2019	6,901
2020	5,740
2021	2,289
Thereafter	6,407
Total	$	30,159


⁽¹⁾	~~The tooling accrual balance relates to unearned revenue for tooling that will be sold to customers.~~



	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 December 31, 2016	652		$	39.27
Granted	92		62.70
Exercised	(45	)	24.87			$	1,893
Forfeited/canceled/expired	(168	)	46.44
Outstanding at September 30, 2017 ⁽¹⁾	531		$	42.26	4.49	$	11,391
Vested and expected to vest at September 30, 2017⁽¹⁾	531		$	42.26	4.49	$	11,390
Exercisable at September 30, 2017 ⁽¹⁾	378		$	35.35	3.94	$	10,731


	Number of Options (in thousands)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022	782	$	44.16
Granted	236	24.77
Exercised	—	—			$	—
Forfeited/canceled/expired	(93)	51.39
Outstanding at March 31, 2023 (1)	925	$	38.49	4.48	$	—
Vested and expected to vest at March 31, 2023 (1)	925	$	38.49	4.48	$	—
Exercisable at March 31, 2023 (1)	565	$	44.27	3.10	$	—


	Shares (in thousands)		Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2022	$	376	$	36.82
Granted	103		24.77
Vested	(162)		37.01
Forfeited	(2)		37.97
Non-vested at March 31, 2023	$	315	$	32.77



	Shares (in 000's)		Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2016	153		$	57.43
Granted	132		64.14
Vested	(59	)	61.28
Forfeited	(4	)	60.71
Non-vested at September 30, 2017	222		$	60.34



	Incremental Warrants That Will Vest
Aggregate Level of Purchases by Comcast and Affiliates	January 1, 2016 - December 31, 2017	January 1, 2018 - December 31, 2019	January 1, 2020 - December 31, 2021
$260 million	100,000	100,000	75,000
$300 million	75,000	75,000	75,000
$340 million	75,000	75,000	75,000
Maximum Potential Warrants Earned by Comcast	250,000	250,000	225,000


	Three Months Ended March 31,
(In thousands, except per-share amounts)	2023		2022
BASIC
Net income (loss)	$	(61,363)	$	(2,910)
Weighted-average common shares outstanding	12,749		12,812
Basic earnings (loss) per share	$	(4.81)	$	(0.23)

DILUTED
Net income (loss)	$	(61,363)	$	(2,910)
Weighted-average common shares outstanding for basic	12,749		12,812
Dilutive effect of stock options, restricted stock and common stock warrants	—		—
Weighted-average common shares outstanding on a diluted basis	12,749		12,812
Diluted earnings (loss) per share	$	(4.81)	$	(0.23)


⁽¹⁾	~~This represents the gains (losses) incurred on foreign currency hedging derivatives (see Note 17 for further details).~~


	March 31, 2023								December 31, 2022
	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	$	—	$	19	$	—	$	19	$	—	$	100	$	—	$	100



Date Held	Type	Position Held	Notional Value (in millions)		Forward Rate	Unrealized Gain/(Loss) Recorded at Balance Sheet Date (in thousands)⁽¹⁾			Settlement Date
September 30, 2017	USD/Euro	USD	$	17.0	1.2039	$	299		October 27, 2017
September 30, 2017	USD/Chinese Yuan Renminbi	USD	$	22.0	6.6174	$	111		October 20, 2017
September 30, 2017	USD/Brazilian Real	USD	$	4.5	3.2330	$	(86	)	October 20, 2017
September 30, 2017	USD/Brazilian Real	BRL	$	1.0	3.3660	$	61		October 20, 2017

December 31, 2016	USD/Euro	USD	$	18.0	1.0513	$	(61	)	January 27, 2017
December 31, 2016	USD/Chinese Yuan Renminbi	Chinese Yuan Renminbi	$	25.0	6.7230	$	(974	)	January 13, 2017
December 31, 2016	USD/Chinese Yuan Renminbi	Chinese Yuan Renminbi	$	10.0	6.6757	$	(457	)	January 13, 2017
December 31, 2016	USD/Brazilian Real	USD	$	2.0	3.4775	$	(131	)	January 13, 2017
December 31, 2016	USD/Brazilian Real	USD	$	4.0	3.2316	$	39		January 13, 2017


Date Held	Currency	Position Held	Notional Value (in millions)		Forward Rate	Unrealized Gain/(Loss) Recorded at Balance Sheet Date (in thousands)(1)		Settlement Date
March 31, 2023	USD/Chinese Yuan Renminbi	CNY	$	39.0	6.8553	$	(76)	April 14, 2023
March 31, 2023	USD/Euro	USD	$	20.0	1.0914	$	95	April 14, 2023
December 31, 2022	USD/Euro	USD	$	26.0	1.0529	$	(428)	January 6, 2023
December 31, 2022	USD/Chinese Yuan Renminbi	CNY	$	31.0	7.0358	$	528	January 6, 2023


(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. ⁽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 expenses.


(In thousands)	Estimated Lives	Preliminary Fair Value
Accounts receivable		$	787
Property, plant and equipment	5 years	3
Customer relationships	6 years	1,340
Developed technology	6 years	440
Trade names	6 years	50
Goodwill (1)		713
Operating lease ROU assets	3 years	149
Other assets		2
Other accrued liabilities		(6)
Short-term operating lease obligation		(48)
Deferred revenue		(1,539)
Long-term operating lease obligation		(101)
Long-term deferred revenue		(851)
Cash paid		$	939



	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
(In thousands, except per-share amounts)	2017		2016		2017		2016
Net sales	$	175,652	$	170,658	$	515,200	$	497,172
Net income	1,751		7,525		6,292		16,892
Net income attributable to Universal Electronics Inc.	1,751		7,525		6,292		16,892
Basic earnings per share attributable to Universal Electronics Inc.	$	0.12	$	0.52	$	0.44	$	1.17
Diluted earnings per share attributable to Universal Electronics Inc.	$	0.12	$	0.51	$	0.43	$	1.14



(In thousands)	Nine Months Ended September 30, 2017			Increase (Decrease)			Nine Months Ended September 30, 2016
Cash provided by (used for) operating activities	$	(1,160	)	$	(39,841	)	$	38,681
Cash used for investing activities	(40,091		)	(9,852		)	(30,239		)
Cash provided by (used for) financing activities	44,903			54,986			(10,083		)
Effect of exchange rate changes on cash	(5,703		)	(2,519		)	(3,184		)
Net increase (decrease) in cash and cash equivalents	$	(2,051	)	$	2,774		$	(4,825	)



	Payments Due by Period
(In thousands)	Total		Less than 1 year		1 - 3 years		4 - 5 years		After 5 years
Operating lease obligations	$	13,732	$	4,570	$	5,192	$	3,321	$	649
Purchase obligations⁽¹⁾	7,037		7,037		—		—		—
Contingent consideration⁽²⁾	17,400		3,400		13,000		1,000		—
Total contractual obligations	$	38,169	$	15,007	$	18,192	$	4,321	$	649


⁽¹⁾	~~Purchase obligations primarily consist of contractual payments to purchase property, plant and equipment.~~


⁽²⁾	~~Contingent consideration consists of contingent payments related to our purchases of the net assets of Ecolink and RCS.~~


(In thousands)	Three Months Ended March 31, 2023		Increase (Decrease)		Three Months Ended March 31, 2022
Cash provided by (used for) operating activities	$	(2,025)	$	15,944	$	(17,969)
Cash provided by (used for) investing activities	(4,831)		6,790		(11,621)
Cash provided by (used for) financing activities	(3,812)		(25,458)		21,646
Effect of foreign currency exchange rates on cash and cash equivalents	834		75		759
Net increase (decrease) in cash and cash equivalents	$	(9,834)	$	(2,649)	$	(7,185)


Period	Total Number of Shares Purchased (1)	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2023 - January 31, 2023	—	$	—	—	—
February 1, 2023 - February 28, 2023	38,037	17.39		—	—
March 1, 2023 - March 31, 2023	15,149	9.94		—	—
Total	53,186	$	15.26	—



Period	Total Number of Shares Purchased ⁽¹⁾	Weighted Average Price Paid per Share ⁽²⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽³⁾
July 1, 2017 - July 31, 2017	1,354	$	67.21	—	200,000
August 1, 2017 - August 31, 2017	38,462	57.33		35,729	164,271
September 1, 2017 - September 30, 2017	50,678	59.91		50,000	114,271
Total	90,494	$	58.92	85,729	114,271


⁽¹⁾	Of the repurchases in July, August and September, 1,354, 2,733 and 678 shares, respectively, represent common shares of the company that were owned and tendered by employees to satisfy tax withholding obligations in connection with the vesting of restricted shares.


⁽²⁾	For shares tendered in connection with the vesting of restricted shares, the average price paid per share is an average calculated using the daily high and low of the Company's common stock at the time of vesting.


⁽³⁾	~~The Company may purchase shares from time to time in open market purchases. The Company may make all or part of the purchases pursuant to accelerated share repurchases or Rule 10b5-1 plans.~~