UEIC

Executive Transition

• Interim CEO Rick Carnifax stepped down effective August 6, and CFO Wade Michael Jenke was appointed as the new CEO. The existing operating plan and strategic framework remain unchanged, and an orderly transition is ongoing.

2026 Strategic Structural Progress

• Cost Structure Alignment: Adjusted non-GAAP operating expenses decreased $6.2 million (24%) year-over-year, with previously announced labor reductions now fully incorporated into the ongoing cost run rate. The company ended the quarter with $11.6 million in net cash, resulting in a stronger balance sheet despite lower revenue. The business achieved adjusted profitability on lower revenue than Q1 2026, moving from a $0.10 per share adjusted loss in Q1 to a $0.04 per share adjusted profit in Q2 excluding the one-time tariff recovery.
• Portfolio Focus Tightening: R&D spending has been reduced, with resources reallocated to initiatives with clear, defined customers and projected accretive returns. The company is not reducing its overall capabilities, only narrowing the scope of projects it chooses to fund. R&D expense fell to $4.3 million in Q2 from $7 million in the year-ago quarter, driven primarily by headcount optimization savings.
• Stakeholder Continuity: The company retained key employees, maintained customer relationships, and kept supplier commitments active during restructuring. Key customer wins included moving from primary to sole source supplier for a remote control program launching in November with a large video customer, and shipping the first mass production lot of a new smart thermostat platform for a major HVAC OEM, which has requested additional Q4 volume.

Financial Operational Highlights

• Gross margin: Adjusted non-GAAP gross margin was 35.4% including the 5.1 million non-recurring tariff recovery, and ~27% excluding the recovery, down from 29.9% year-over-year. Input cost inflation and unfavorable foreign exchange movement have pressured margins, but lower freight costs and the tariff recovery delivered overall year-over-year improvement in the reported margin.
• Operating expenses: GAAP operating expenses decreased $7.1 million year-over-year, SG&A fell to $16.8 million from $21.2 million year-over-year on lower volume-related costs, organizational rightsizing savings, and reduced discretionary spending.
• Profitability: GAAP operating income was $4.8 million, up from $1 million year-over-year. Adjusted non-GAAP operating income was $5.8 million (7.9% of sales), up from $2.9 million (2.9% of sales) year-over-year. GAAP net income was $1.6 million ($0.12 per diluted share), versus a $2.9 million net loss a year ago. Adjusted non-GAAP net income was $4.6 million ($0.34 per diluted share), up from $2.4 million ($0.18 per diluted share) year-over-year.
• Cash and balance sheet: Operating cash flow was positive $5.5 million for the first half of 2026, supported by working capital reduction. Inventory ended the quarter at $70 million, down modestly from year-end 2025. Available liquidity increased to $48.7 million at quarter-end, up from $42.5 million at year-end, with no outstanding borrowings on the US credit line.

Management reaffirms the full-year 2026 guidance framework initially provided earlier in the year, with no upward or downward revision to prior projections. The full-year adjusted non-GAAP diluted EPS guidance range remains $0.45 to $0.65, compared to $0.31 in fiscal 2025 (excluding the one-time tariff recovery). The guidance does not assume a near-term demand rebound, and is instead grounded on execution of the company's cost reduction and restructuring plans. All material tariff recovery monetization has been completed and is already incorporated into the current guidance framework.

Universal Electronics has two core product segments: 1) Connected Home: Q2 2026 net sales were $25.1 million, representing 34.3% of total company revenue. This is a year-over-year decline from $34.1 million in Q2 2025, driven by reduced demand from large climate control and home automation customers. 2) Home Entertainment: Q2 2026 net sales were $48.1 million, representing 65.7% of total company revenue. This is a year-over-year decline from $63.6 million in Q2 2025, primarily due to lower demand for subscription broadcast products. Total company net sales for the quarter were $73.2 million, a 25% year-over-year decrease.

• Persistent component and commodity cost inflation remains a material drag on margins, with cost pressures reaching the company on a lag due to build-to-forecast production for existing orders, and has not eased since the prior quarter.
• Component lead times for memory, capacitors, and printed circuit boards now exceed the company's standard planning horizon, creating supply chain uncertainty for the second half of the year.
• Ongoing weak demand conditions: legacy video products continue to see structural decline, European retail remains under pressure, and the expected connected home market inflection has been delayed.
• Two ongoing intellectual property litigations (with Roku, and newly filed against Amazon) create unresolved legal uncertainty, though no further details on potential liabilities or outcomes were provided.

Q: What is the timeline for the newly filed Amazon IP litigation, and what is the update on the long-running Roku litigation? / A: The Amazon lawsuit was filed the same day as the call, so the ultimate timeline is uncertain, but management stated filing was necessary to protect the company's IP rights and it is seeking appropriate remedies. The Roku litigation is ongoing, with a court date scheduled for 2027, and no further details could be shared publicly.

Q: Does the full-year 2026 guidance include any additional future tariff refunds, or have all refunds already been received? / A: Management confirmed that all material tariff recovery has already been completed and received, and all tariff-related monetization is already incorporated into the current guidance. No additional future tariff refunds are expected.

Q: What was the customer concentration breakdown for the quarter among the company's largest customers? / A: The top three customers by revenue contribution were Daikin at 21%, Comcast at 11.4%, and Sony at 8%, consistent with the company's historical concentration among a small set of large clients.

Q: Can you share additional details on the new smart thermostat production win, specifically if this is an expansion of an existing customer relationship? / A: This is a major HVAC OEM that the company has been collaborating with on product development for a couple of years. The first mass production shipment was completed in Q2, with additional volume scheduled for the second half of 2026, and further details will be shared in future quarterly results as the program ramps.