UEIC

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this report. Cautionary Statement All statements in this report are made as of the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (the "SEC"). We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise. We make forward-looking statements in Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information available to us through the date this Quarterly Report on Form 10-Q is filed with the SEC. Forward-looking statements include: supply chain issues; customer demand for our products and solutions; expectations with respect to the markets in which we operate, including for specific geographic markets; other future demand and recovery trends and expectations; the delay by or failure of our customers to order products from us; expectations related to the shut down of our Mexico manufacturing facility, including related costs; expected benefits of our restructuring and cost-reduction activities; continued availability of cash through borrowing under our revolving lines of credit; risks related to interest rates and foreign currency exchange rates; expectations with respect to tariff recovery; the effects of doing business internationally, including expanded use of tariffs, pertaining to the importation of our products, particularly in light of the recent U.S. presidential administrative actions and the responsive retaliatory actions of foreign governments; our expectations regarding our ability to meet our liquidity requirements; our capital expenditures and other investment spending expectations; our expectations with respect to the impact of changes in tax laws; and other statements that are preceded by, followed by, or include the words "believes," "expects," "anticipates," "intends," "plans," "estimates," "foresees," or similar expressions; and similar statements concerning anticipated future events and expectations that are not historical facts. We caution you that these statements are not guarantees of future performance and are subject to numerous evolving risks and uncertainties that we may not be able to accurately predict or assess, including the risks and uncertainties we describe in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Form 10-K"), Part II, Item 1A of this Quarterly Report on Form 10-Q, and other factors we describe from time to time in our periodic filings with the SEC. Overview We design, develop, manufacture, ship and support climate control solutions, wireless sensor and smart home control products, home entertainment control products, technology and software solutions and audio-video ("AV") accessories, that are used by the world's leading brands in the climate control, security, home automation, home appliance, home entertainment and consumer electronics markets. Our channel offerings include: Connected home: •Climate Control Solutions: Our innovative climate control solutions include wireless and wired controllers, smart thermostats and connected peripherals for sensing and smart energy management. These products are primarily sold to original equipment manufacturer ("OEM") customers, as well as hotels, utilities and system integrators. Our UEI TIDE Family of Climate Control solutions feature advanced technologies such as Wi-Fi, BLE, Zigbee and Matter, and connect to sensors for temperature, humidity, proximity, occupancy and carbon dioxide sensing. •Smart Home and Security Products: We offer proprietary and standards-based radio frequency ("RF") wireless remote controls and sensors designed for residential security, safety and a broad variety of home automation applications, such as smart lighting and motorized shades. Home entertainment: •Home Entertainment Products: Our industry-leading portfolio includes RF-capable, voice-enabled universal remote control products; low-power RF and energy-harvesting microcontrollers, as well as embedded and Cloud software for AV and Smart Home device and content discovery and control. These solutions are sold primarily to video service providers and consumer electronics OEMs. We also distribute a broad portfolio of replacement remote controls, powerful free-to-air antennae and television and soundbar wall mounts direct to retailers worldwide under the One For All brand. 28 Table of Contents •Software and Cloud Services: Our software, firmware and technology solutions enable devices such as smart TVs, hybrid set-top boxes, game consoles and other consumer electronic and smart home devices to wirelessly connect and interoperate on the home network. These solutions support control and delivery of home entertainment application services and content, smart home services and device or system information. New features include private, on-premise user presence and occupancy detection to enhance user experiences and extend user engagement on connected devices. •Intellectual Property and Licensing: We license our intellectual property primarily to OEMs and video service providers. Our cloud-enabled software provides reliable firmware update provisioning and digital rights management validation services to major consumer electronics brands. We offer regular control library database and software updates to our licensing customers to ensure their systems are compatible with the latest devices entering the home. Our integrated circuits, on which our software and universal control database is embedded, are sold primarily to OEMs, video service providers, smart home dealers and private label customers. We operate as one business segment. We have one domestic subsidiary and 23 international subsidiaries located in Brazil, France, Germany, Hong Kong (3), India, Italy, Japan, Korea, Mexico (2), the Netherlands, the People's Republic of China (the "PRC") (7), Singapore, Spain, United Kingdom and Vietnam. To recap our results for the three months ended June 30, 2026: •Net sales decreased 25.0% to $73.2 million for the three months ended June 30, 2026 from $97.7 million for the three months ended June 30, 2025. •Our gross margin percentage increased to 35.4% for the three months ended June 30, 2026 from 29.9% for the three months ended June 30, 2025. •Operating expenses, as a percentage of net sales, decreased to 28.8% for the three months ended June 30, 2026 from 28.9% for the three months ended June 30, 2025. •Our operating income was $4.8 million for the three months ended June 30, 2026 compared to operating income of $1.0 million for the three months ended June 30, 2025. Our operating income percentage was 6.5% for the three months ended June 30, 2026 compared to our operating income percentage of 1.0% for the three months ended June 30, 2025. •Income tax expense was $1.1 million for the three months ended June 30, 2026 compared to $1.8 million for the three months ended June 30, 2025. We intend for the following discussion of our financial condition and results of operations to provide information that will assist in understanding our consolidated financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our consolidated financial statements. Macroeconomic Conditions We have been negatively impacted and we expect to continue to be negatively impacted by adverse macroeconomic conditions, including tariffs imposed or to be imposed on goods manufactured in Vietnam, Taiwan, the PRC, and Mexico, and reduced consumer spending on durable goods. Economic tensions and changes in international trade policies, including widespread tariffs announced by the U.S. on its major trading partners, higher tariffs on imported goods, actions taken in response (such as retaliatory tariffs or other trade protectionist measures or the renegotiation of free trade agreements), could also further impact the global market for our products. The full impact of these governmental actions on macroeconomic conditions and on our business is uncertain and difficult to predict and may result in lower sales and/or cost increases, which would negatively impact our gross margins and overall financial results. Management will continue to seek ways to lessen the impact these pressures may have on our margins and financial results; however, these mitigation efforts may not be successful and these pressures may have a material adverse effect on our business. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments 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 ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory valuation and income taxes. Actual results may differ from these judgments and estimates, and they may be adjusted as more information becomes available. Any adjustment may be significant and may have a material impact on our consolidated financial statements. 29 Table of Contents An accounting estimate is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate that are reasonably likely to occur may materially impact the financial statements. We do not believe that there have been any significant changes during the six months ended June 30, 2026 to the items that we disclosed as our critical accounting policies and estimates in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the 2025 Form 10-K. Recent Accounting Pronouncements See Note 1 contained in the "Notes to Consolidated Financial Statements" for a discussion of recent accounting pronouncements. Results of Operations The following table sets forth our reported results of operations expressed as a percentage of net sales for the periods indicated. Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 64.6 70.1 69.5 70.9 Gross profit 35.4 29.9 30.5 29.1 Research and development expenses 5.9 7.1 6.4 7.5 Selling, general and administrative expenses 22.9 21.7 23.5 23.1 Operating income (loss) 6.5 1.0 0.6 (1.4) Interest income (expense), net (0.2) (0.4) (0.2) (0.4) Other income (expense), net (2.5) (1.8) (1.1) (0.9) Income (loss) before provision for income taxes 3.8 (1.2) (0.7) (2.7) Provision for (benefit from) income taxes 1.6 1.9 3.1 2.1 Net income (loss) 2.2 % (3.0) % (3.8) % (4.8) % Three Months Ended June 30, 2026 versus Three Months Ended June 30, 2025 Net sales. Net sales for the three months ended June 30, 2026 were $73.2 million compared to $97.7 million for the three months ended June 30, 2025. Net sales by channel were as follows: Three Months Ended June 30, (In thousands) 2026 2025 Connected home $ 25,130 $ 34,099 Home entertainment 48,108 63,566 Total net sales $ 73,238 $ 97,665 Net sales in connected home were $25.1 million for the three months ended June 30, 2026 compared to $34.1 million for the three months ended June 30, 2025. This decrease is driven primarily by reduced demand from our large climate control and home entertainment customers. Net sales in home entertainment were $48.1 million for the three months ended June 30, 2026 compared to $63.6 million for the three months ended June 30, 2025. The decrease in sales within the home entertainment channel was primarily driven by lower demand for subscription broadcasting products, particularly for basic remote controls with lower price points and limited or no advanced features. 30 Table of Contents Gross profit. Gross profit for the three months ended June 30, 2026 was $25.9 million compared to $29.2 million for the three months ended June 30, 2025. Gross profit as a percentage of sales increased to 35.4% for the three months ended June 30, 2026 from 29.9% for the three months ended June 30, 2025. The improvement in gross margin was primarily driven by the sale of tariff claims and the associated mix impact, which contributed approximately 690 basis points and 160 basis points respectively, and improved management of inbound freight costs and other costs, which contributed approximately 90 basis points. These favorable impacts were partially offset by higher component costs driven by market conditions, which reduced gross margin by approximately 240 basis points, as well as the weaker U.S. dollar relative to the Chinese Renminbi, which had an adverse impact of approximately 150 basis points. Research and development ("R&D") expenses. R&D expenses decreased to $4.3 million for the three months ended June 30, 2026 from $7.0 million for the three months ended June 30, 2025 attributable to reductions in payroll and related personnel expenses following headcount optimization actions. Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased to $16.8 million for the three months ended June 30, 2026 from $21.2 million for the three months ended June 30, 2025. The decrease reflects lower volume-driven expenses of $0.6 million, consistent with the decline in sales volume. In addition, ongoing cost-reduction initiatives, including organizational rightsizing, resulted in savings from headcount reductions. People-related expenses decreased by $3.6 million, complemented by an additional $0.8 million reduction in other discretionary spending including travel expense and professional fees. These savings were partially offset by $0.6 million increase of reserve for uncollectible accounts receivable during the period. Interest income (expense), net. Interest expense, net decreased to $0.2 million for the three months ended June 30, 2026 from $0.4 million for the three months ended June 30, 2025, as a result of a lower average loan balance and lower interest rates. Other income (expense), net. Other income, net was $1.8 million for the three months ended June 30, 2026 compared to other income, net of $1.8 million for the three months ended June 30, 2025. The amount was primarily attributable to foreign currency losses incurred in the second quarter of 2026. Provision for income taxes. Income tax expense was $1.1 million for the three months ended June 30, 2026, relative to a pre-tax loss of $2.8 million, compared to income tax expense of $1.8 million for the three months ended June 30, 2025, relative to a pre-tax loss of $1.1 million. Consistent with 2025, we expect the U.S. to be in a pre-tax loss position without benefit for the full year 2026, resulting in an elevated effective tax rate. Six Months Ended June 30, 2026 versus Six Months Ended June 30, 2025 Six Months Ended June 30, (In thousands) 2026 2025 Connected home $ 53,417 $ 65,828 Home entertainment 98,857 124,163 Total net sales $ 152,274 $ 189,991 Net sales. Net sales for the six months ended June 30, 2026 were $152.3 million compared to $190.0 million for the six months ended June 30, 2025. Net sales by channel were as follows: Net sales in connected home were $53.4 million for the six months ended June 30, 2026 compared to $65.8 million for the six months ended ended June 30, 2025. This decrease is driven primarily by reduced demand from our large climate control and home entertainment customers. Net sales in home entertainment were $98.9 million for the six months ended June 30, 2026 compared to $124.2 million for the six months ended June 30, 2025. The decrease in sales within the home entertainment channel was primarily driven by lower demand for subscription broadcasting products, particularly for basic remote controls with lower price points and limited or no advanced features. Gross profit. Gross profit for the six months ended June 30, 2026 was $46.5 million compared to $55.3 million for the six months ended June 30, 2025. Gross profit as a percentage of sales increased to 30.5% for the six months ended June 30, 2026 from 29.1% for the six months ended June 30, 2025. The improvement in gross margin was primarily driven by the sale of tariff claims and the associated mix impact, which contributed approximately 330 basis points and 70 basis points respectively, and 31 Table of Contents improved management of inbound freight costs, which contributed approximately 60 basis points. These favorable impacts were partially offset by higher component costs driven by market conditions, which reduced gross margin by approximately 110 basis points, an unfavorable change in sales mix, which reduced margin by approximately 80 basis points and incremental tariff costs that were not recoverable through customer pricing actions and others, which reduced gross margin by approximately 70 basis points. In addition, the weaker U.S. dollar relative to the Chinese Renminbi had an adverse impact of approximately 60 basis points on gross margin. Research and development ("R&D") expenses. R&D expenses decreased to $9.8 million for the six months ended June 30, 2026 from $14.2 million for the six months ended June 30, 2025 attributable to reductions in payroll and related personnel expenses following headcount optimization actions. Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased to $35.8 million for the six months ended June 30, 2026 from $43.8 million for the six months ended June 30, 2025. The decrease reflects lower volume-driven expenses of $1.0 million, consistent with the decline in sales volume. In addition, ongoing cost-reduction initiatives, including organizational rightsizing, resulted in savings from headcount reductions. People-related expenses decreased by $6.5 million, complemented by an additional $1.7 million reduction in other discretionary spending including travel, rental expense and professional fees. These savings were partially offset by $0.6 million of severance costs associated with our global reduction in force and $0.5 million increase of reserve for uncollectible accounts receivable during the period. Interest income (expense), net. Interest expense, net decreased to $0.3 million for the six months ended June 30, 2026 from $0.7 million for the six months ended June 30, 2025, as a result of a lower average loan balance and lower interest rates. Other income (expense), net. Other income, net was $1.6 million for the six months ended June 30, 2026 compared to other income (expense), net of $1.7 million for the six months ended June 30, 2025. The amount was primarily attributable to foreign currency losses incurred in the first half year of 2026. Provision for income taxes. Income tax expense was $4.7 million for the six months ended June 30, 2026, relative to a pre-tax loss of $1.0 million, compared to income tax expense of $4.0 million for the six months ended June 30, 2025, relative to a pre-tax loss of $5.2 million. Consistent with 2025, we expect the U.S. to be in a pre-tax loss position without benefit for the full year 2026, resulting in an elevated effective tax rate. Liquidity and Capital Resources Sources of Cash Historically, we have utilized cash provided from operations as our primary source of liquidity, as internally generated cash flows have typically been sufficient to support our business operations, capital expenditures and discretionary share repurchases. When needed, we have utilized our revolving lines of credit to fund operations, share repurchases and acquisitions. We anticipate that we will continue to utilize both cash flows from operations and our revolving lines of credit to support ongoing business operations, capital expenditures, discretionary share repurchases and potential acquisitions. We believe our current cash balances, anticipated cash flow to be generated from operations and available borrowing resources will be sufficient to cover expected cash outlays for at least the next twelve months and for the foreseeable future thereafter; however, because our cash is located in various jurisdictions throughout the world, we may at times need to increase borrowing from our revolving lines of credit or take on additional debt until we are able to transfer cash among our various entities. (In thousands) June 30, 2026 December 31, 2025 Cash and cash equivalents $ 32,399 $ 32,306 Available borrowing resources $ 48,706 $ 42,459 Cash and cash equivalents – On June 30, 2026, we had $11.0 million, $8.9 million, $5.2 million, $4.3 million and $3.0 million of cash and cash equivalents in North America, the PRC, Asia (excluding the PRC), Europe, and South America, respectively. We attempt to mitigate our exposure to liquidity, credit and other relevant risks by placing our cash and cash equivalents with financial institutions we believe are high quality. Our cash balances are held in numerous locations throughout the world. The majority of our cash is held outside of the United States and may be repatriated to the United States but, under current law, may be subject to federal and state income taxes and foreign withholding taxes. Additionally, repatriation of some foreign balances is restricted by local laws. 32 Table of Contents Available Borrowing Resources – Our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank") provides for a revolving line of credit ("U.S. Credit Line") through September 30, 2027. The U.S. Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures. The U.S. Credit Line has a maximum availability of up to $60.0 million, subject to meeting certain financial conditions. Availability is based on "Borrowing Base", which is defined as 75% of accounts receivable aged less than 90 days less reserves for doubtful accounts and returns. The Borrowing Base is calculated monthly. At June 30, 2026, the U.S. Credit Line total availability was $43.3 million. At August 5, 2026, the U.S. Credit Line total availability was $38.9 million. Amounts available for borrowing under the U.S. Credit Line are reduced by the balance of any outstanding letters of credit, of which there were $1.9 million at June 30, 2026 and $0.5 million at December 31, 2025. At June 30, 2026 and December 31, 2025, we had $0.0 million and $5.5 million outstanding under the U.S. Credit Line, respectively. At June 30, 2026, our remaining availability under our U.S. Credit Line was $41.4 million. Our subsidiary, Gemstar Technology (Yangzhou) Co. Ltd. ("GTY"), has a Line of Credit Agreement ("Line of Credit Agreement") with the Bank of China, which provides for a revolving line of credit ("China Credit Line" and, together with the U.S. Credit Line, "Credit Lines"). As a continuation of the agreement, on July 30, 2025, we executed an amendment to the Line of Credit Agreement, which extends the term of the China Credit Line to July 16, 2026. As a continuation of the agreement, on July 15, 2026, we executed an amendment to the Line of Credit Agreement, which extends the term of the China Credit Line to July 9, 2027. The China Credit Line may be used for working capital purposes. . At June 30, 2026, the China Credit Line had a maximum availability of up to RMB 130.0 million (approximately $19.1 million), subject to meeting certain financial conditions. The China Credit Line may be used for working capital purposes. Amounts available for borrowing under the China Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at June 30, 2026 and December 31, 2025. At June 30, 2026, we had an outstanding balance of RMB 80.0 million (approximately $11.8 million) on our China Credit Line and RMB 50.0 million (approximately $7.4 million) of availability under our China Credit Line. See Note 8 contained in the "Notes to Consolidated Financial Statements" for further information regarding our Credit Lines. Sources and Uses of Cash Our cash flows were as follows: (In thousands) Six Months Ended June 30, 2026 Increase (Decrease) Six Months Ended June 30, 2025 Cash provided by (used for) operating activities $ 5,521 $ (12,184) $ 17,705 Cash provided by (used for) investing activities (2,295) 1,694 (3,989) Cash provided by (used for) financing activities (4,892) 2,856 (7,748) Effect of foreign currency exchange rates on cash and cash equivalents 1,759 249 1,510 Net increase (decrease) in cash and cash equivalents $ 93 $ (7,385) $ 7,478 June 30, 2026 Increase (Decrease) December 31, 2025 Cash and cash equivalents $ 32,399 $ 93 $ 32,306 Working capital $ 88,988 $ 3,179 $ 85,809 33 Table of Contents Net cash used by operating activities was $5.5 million during the six months ended June 30, 2026 compared to $17.7 million provided by operating activities during the six months ended June 30, 2025. The decrease in operating cash flows primarily reflects changes in working capital, particularly in accounts receivable, contract assets, and inventory. Net loss was $5.7 million for the three months ended June 30, 2026, compared to net loss of $9.2 million in the prior-year period. Depreciation and amortization expense was $6.2 million during the six months ended June 30, 2026 compared to $7.6 million during the six months ended June 30, 2025, primarily due to lower capital expenditures in recent years, consistent with the decline in production volumes. Inventories decreased by $8.1 million during six months ended June 30, 2026, compared to a decrease of $1.7 million during the same period in 2025, reflecting improved inventory management practices. A decrease in accounts receivable and contract assets, mainly due to lower sales, resulted in cash inflows of $6.5 million in the three months ended June 30, 2026 and $23.3 million in the three months ended June 30, 2025. Days sales outstanding were 77 days at June 30, 2026, compared to 75 days at June 30, 2025. A decrease in accounts payable and accrued liabilities, primarily driven by lower inventory purchases and timing of payments, resulted in cash outflows of $0.1 million during the six months ended June 30, 2026, compared to $15.4 million in the prior-year period. Net cash used for investing activities during the six months ended June 30, 2026 was $2.3 million, of which $1.6 million and $0.7 million was used for capital expenditures and the development of patents, respectively. Net cash used for investing activities during the six months ended June 30, 2025 was $4.0 million, of which $2.3 million and $1.5 million was used for capital expenditures and the development of patents, respectively. Future cash flows used for investing activities are largely dependent on the timing and amount of capital expenditures and the development of patents, respectively. We estimate that we will incur between $3.0 million and $4.0 million during the remainder of 2026. Net cash used for financing activities was $4.9 million during the six months ended June 30, 2026 compared to $7.7 million during the six months ended June 30, 2025. The primary financing activities during the six months ended June 30, 2026 and 2025 were borrowings and repayments on our Credit Lines and repurchases of shares of our common stock. Net repayments on our Credit Lines were $12.5 million during the six months ended June 30, 2026 compared to $7.0 million during the six months ended June 30, 2025. During the six months ended June 30, 2026, we did not repurchase any of our common stock at June 30, 2026 compared to our repurchase of 101,000 shares at a cost of $0.7 million during the six months ended June 30, 2025. Future cash flows used for financing activities are affected by our financing needs, which are largely dependent on the level of cash provided by or used in operations and the level of cash used in investing activities. Additionally, potential future repurchases of shares of our common stock will impact our cash flows used for financing activities. See Note 13 contained in the "Notes to Consolidated Financial Statements" for further information regarding our share repurchase programs. Material Cash Commitments – The following table summarizes our material cash commitments and the effect these commitments are expected to have on our cash flows in future periods: Payments Due by Period (In thousands) Total Less than 1 year 1 - 3 years 4 - 5 years After 5 years Credit Lines $ 20,831 $ 20,831 $ — $ — $ — Inventory purchases 15,115 10,035 5,080 — — Operating lease obligations 11,816 2,293 4,489 2,218 2,816 Property, plant, and equipment purchases 887 887 — — — Software license 5,562 1,125 2,513 1,924 — Total material cash commitments $ 54,211 $ 35,171 $ 12,082 $ 4,142 $ 2,816 We anticipate meeting our material cash commitments with our cash generated from operations and available borrowing on our Credit Lines.