ueic-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________

FORM 10-Q

_______________________________________

(Mark One)


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

For the quarterly period ended March 31, 2024


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

For the transition period from to

Commission File Number: 0-21044

_______________________________________

UNIVERSAL ELECTRONICS INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

33-0204817

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

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

(Address of principal executive offices and zip code)

(480) 530-3000

(Registrant's telephone number, including area code)

_____________________


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	The Nasdaq Stock Market LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

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 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: 12,890,716 shares of Common Stock, par value $0.01 per share, of the registrant were outstanding on May 2, 2024.

UNIVERSAL ELECTRONICS INC.

INDEX


			Page Number
PART I. FINANCIAL INFORMATION			3
Item 1. Consolidated Financial Statements (Unaudited)			3
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Comprehensive Income (Loss) Statements			5
Consolidated Statements of Stockholders' Equity			6
Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			32
PART II. OTHER INFORMATION			32
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities			33
Item 5. Other Information			33
Item 6. Exhibits			34
Signatures			35

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PART I. FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements (Unaudited)

UNIVERSAL ELECTRONICS INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share-related data)

(Unaudited)


	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	26,914	$	42,751

Accounts receivable, net	99,481		112,596
Contract assets	5,664		4,240
Inventories	83,236		88,273
Prepaid expenses and other current assets (Note 12)	11,755		7,325
Income tax receivable	3,180		3,666
Total current assets	230,230		258,851
Property, plant and equipment, net	42,144		44,619

Intangible assets, net	25,132		25,349
Operating lease right-of-use assets	17,239		18,693
Deferred income taxes	6,727		6,787
Other assets	1,469		1,573
Total assets	$	322,941	$	355,872
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	49,756	$	57,033
Line of credit	46,000		55,000
Accrued compensation	18,389		20,305
Accrued sales discounts, rebates and royalties	4,018		5,796
Accrued income taxes	774		1,833
Other accrued liabilities	19,729		21,181
Total current liabilities	138,666		161,148
Long-term liabilities:
Operating lease obligations	11,477		12,560

Deferred income taxes	1,984		1,992
Income tax payable	434		435
Other long-term liabilities	725		817
Total liabilities	153,286		176,952
Commitments and contingencies (Note 12)
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; 25,508,370 and 25,346,383 shares issued on March 31, 2024 and December 31, 2023, respectively	255		253
Paid-in capital	339,141		336,938
Treasury stock, at cost, 12,599,981 and 12,459,845 shares on March 31, 2024 and December 31, 2023, respectively	(371,203)		(369,973)
Accumulated other comprehensive income (loss)	(22,349)		(20,758)
Retained earnings	223,811		232,460
Total stockholders' equity	169,655		178,920
Total liabilities and stockholders' equity	$	322,941	$	355,872

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

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UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Net sales	$	91,900	$	108,377
Cost of sales	65,912		83,684
Gross profit	25,988		24,693
Research and development expenses	7,821		8,360
Factory restructuring charges	1,064		—
Selling, general and administrative expenses	24,011		26,782
Goodwill impairment	—		49,075
Operating income (loss)	(6,908)		(59,524)
Interest income (expense), net	(922)		(975)

Other income (expense), net	(80)		(214)
Income (loss) before provision for income taxes	(7,910)		(60,713)
Provision for income taxes	739		650
Net income (loss)	$	(8,649)	$	(61,363)

Earnings (loss) per share:
Basic	$	(0.67)	$	(4.81)
Diluted	$	(0.67)	$	(4.81)
Shares used in computing earnings (loss) per share:
Basic	12,902		12,749
Diluted	12,902		12,749

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

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UNIVERSAL ELECTRONICS INC.

CONSOLIDATED COMPREHENSIVE INCOME (LOSS) STATEMENTS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Net income (loss)	$	(8,649)	$	(61,363)
Other comprehensive income (loss):
Change in foreign currency translation adjustment	(1,591)		1,916
Comprehensive income (loss)	$	(10,240)	$	(59,447)

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

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UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

The following summarizes the changes in total equity for the three months ended March 31, 2024:


	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, 2023	25,346	$	253	(12,460)	$	(369,973)	$	336,938	$	(20,758)	$	232,460	$	178,920
Net loss											(8,649)		(8,649)
Currency translation adjustment									(1,591)				(1,591)
Shares issued for employee benefit plan and compensation	156	2					299						301
Purchase of treasury shares				(140)	(1,230)								(1,230)

Shares issued to directors	6												—
Employee and director stock-based compensation							1,904						1,904

Balance at March 31, 2024	25,508	255		(12,600)	(371,203)		339,141		(22,349)		223,811		169,655

The following summarizes the changes in total equity for the three months ended March 31, 2023:


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

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UNIVERSAL ELECTRONICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	(8,649)	$	(61,363)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	4,668		5,692
Provision for credit losses	—		1
Deferred income taxes	(3)		701
Shares issued for employee benefit plan	301		352
Employee and director stock-based compensation	1,904		2,540

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


Changes in operating assets and liabilities:
Accounts receivable and contract assets	11,007		7,723
Inventories	4,132		18,056
Prepaid expenses and other assets	(3,051)		1,408
Accounts payable and accrued liabilities	(12,517)		(26,051)
Accrued income taxes	(567)		(208)
Net cash provided by (used for) operating activities	(2,775)		(2,025)
Cash flows from investing activities:



Acquisitions of property, plant and equipment	(1,347)		(3,261)
Acquisitions of intangible assets	(1,019)		(1,570)
Net cash provided by (used for) investing activities	(2,366)		(4,831)
Cash flows from financing activities:
Borrowings under line of credit	24,000		14,000
Repayments on line of credit	(33,000)		(17,000)

Treasury stock purchased	(1,230)		(812)

Net cash provided by (used for) financing activities	(10,230)		(3,812)
Effect of foreign currency exchange rates on cash and cash equivalents	(466)		834
Net increase (decrease) in cash and cash equivalents	(15,837)		(9,834)
Cash and cash equivalents at beginning of period	42,751		66,740
Cash and cash equivalents at end of period	$	26,914	$	56,906

Supplemental cash flow information:
Income taxes paid	$	777	$	2,065
Interest paid	$	1,368	$	1,413

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

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UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Unaudited)

Note 1 — Basis of Presentation

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, except for the impairment and restructuring charges, as described in notes 6 and 12 to the consolidated financial statements. 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 ("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 months ended March 31, 2024 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, 2023.

Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and assumptions, including those related to revenue recognition; allowance for credit losses; inventory valuation; impairment of long-lived assets, intangible assets and goodwill; business combinations; income taxes and related valuation allowances and stock-based compensation expense. Actual results may differ from these assumptions and estimates, and they may be adjusted as more information becomes available. Any adjustment may be material.

Summary of Significant Accounting Policies

With the exception of the following policy, our significant accounting policies are unchanged from those disclosed in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Stock-Based Compensation

We recognize the grant date fair value of stock-based compensation awards as expense in proportion to vesting during the derived service period, which ranges from one to three years. Forfeitures of stock-based awards are accounted for as they occur. Upon the exercise of stock options, the vesting of restricted stock awards or the vesting of performance stock awards, newly issued shares of our common stock are issued. Our stock-based compensation awards are made at the discretion of the Compensation Committee and are not timed or coordinated with the release of material, non-public information.

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

The fair value of performance stock awards with a market condition is determined utilizing a Monte Carlo simulation model as of the grant date. The assumptions utilized in a Monte Carlo simulation model include the risk-free interest rate, expected volatility, term of the award and dividend yield. The risk-free interest rate over the expected term is equal to the prevailing U.S. Treasury note rate over the same period. Expected volatility is determined utilizing historical volatility. The dividend yield is assumed to be zero since we have not historically declared dividends and do not have any plans to declare dividends in the future.

The fair value of stock options granted to employees and directors is determined utilizing the Black-Scholes option pricing model. The assumptions utilized in the Black-Scholes model include the risk-free interest rate, expected volatility, expected life in years and dividend yield. The risk-free interest rate over the expected term is equal to the prevailing U.S. Treasury note rate over the same period. Expected volatility is determined utilizing historical volatility over a period of time equal to the expected life of the stock option. Expected life is computed utilizing historical exercise patterns and post-vesting behavior. The dividend

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UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Unaudited)

yield is assumed to be zero since we have not historically declared dividends and do not have any plans to declare dividends in the future. See Note 14 for further information concerning stock-based compensation.

Recently Adopted Accounting Pronouncements

None.

Recent Accounting Updates Not Yet Effective

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting – Improvements to Reportable Segments Disclosures." The guidance enhances disclosures of significant segment expenses by requiring the disclosure of significant segment expenses regularly provided to the chief operating decision maker, extends certain annual disclosures to interim periods, and permits more than one measure of segment profit or loss to be reported under certain conditions. All disclosure requirements are also required for companies with a single reportable segment. The guidance is effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption of the guidance is permitted, including adoption in any interim periods for which financial statements have not been issued. The Company is currently evaluating the guidance and its impact to the financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes - Improvements to Tax Disclosures." The guidance expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The guidance will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the guidance and its impact to the financial statements and related disclosures.

We have assessed all other ASUs issued but not yet adopted and concluded that those not disclosed are not relevant to the Company or are not expected to have a material impact.

Note 2 — Cash and Cash Equivalents

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


(In thousands)	March 31, 2024		December 31, 2023
North America	$	3,303	$	8,460
People's Republic of China ("PRC")	6,930		11,102
Asia (excluding the PRC)	2,210		2,427
Europe	2,584		8,145
South America	11,887		12,617
Total cash and cash equivalents	$	26,914	$	42,751

Note 3 — Revenue and Accounts Receivable, Net

Revenue Details

The pattern of revenue recognition was as follows:


	Three Months Ended March 31,
(In thousands)	2024		2023
Goods and services transferred at a point in time	$	74,404	$	86,681
Goods and services transferred over time	17,496		21,696
Net sales	$	91,900	$	108,377

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UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Unaudited)

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


	Three Months Ended March 31,
(In thousands)	2024		2023
United States	$	26,712	$	33,429
Asia (excluding PRC)	18,884		27,100
Europe	17,539		24,026
People's Republic of China	14,401		12,128
Latin America	8,241		6,948
Other	6,123		4,746
Total net sales	$	91,900	$	108,377

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

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


	Three Months Ended March 31,
	2024			2023
	$ (thousands)	% of Net Sales		$ (thousands)		% of Net Sales
Daikin Industries Ltd.	12,109	13.2	%	$	19,667	18.1	%
Charter Communications	10,194	11.1	%	(1)		(1)
Comcast Corporation	(1)	(1)		$	14,720	13.6	%

(1) Sales associated with this customer did not total more than 10% of our net sales for the indicated period.

Accounts Receivable, Net

Accounts receivable, net were as follows:


(In thousands)	March 31, 2024		December 31, 2023
Trade receivables, gross	$	93,840	$	106,182
Allowance for credit losses	(803)		(815)
Allowance for sales returns	(410)		(532)
Trade receivables, net	92,627		104,835
Other (1)	6,854		7,761
Accounts receivable, net	$	99,481	$	112,596

(1)Other accounts receivable is primarily comprised of value added tax receivables, interest receivable 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,
	2024		2023
Balance at beginning of period	$	815	$	957
Additions (reductions) to costs and expenses	—		1

Write-offs/Foreign exchange effects	(12)		(178)
Balance at end of period	$	803	$	780

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UNIVERSAL ELECTRONICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Unaudited)

There were no significant customers that totaled more than 10% of our accounts receivable at March 31, 2024 or December 31, 2023.

Contract Liabilities

We have current and non-current contract liability balances primarily relating to our firmware update provisioning and digital rights management validation services.

Changes in the carrying amount of contract liabilities were as follows:


(In thousands)	Three Months Ended March 31,
	2024		2023
Balance at beginning of period	$	3,501	$	1,931

Payments received	1,837		1,687
Revenue recognized	(938)		(916)
Foreign exchange effects	(16)

SEC Form 10-Q filed by Universal Electronics Inc.