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Date

Thursday, November 6, 2025 at 4:30 p.m. ET

Call participants

  • Chief Operating Officer and Interim Chief Executive Officer — Rick Karnafax
  • Interim Chief Financial Officer — Raymond Hall
  • Director of Investor Relations — Richard Land

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Risks

  • Sales Declines -- Net sales fell 11% year over year to $90.6 million in the third quarter ended September 30, 2025, with home entertainment down 20% and guidance indicates further revenue reductions in Q4 2025.
  • Gross Margin Headwinds -- Temporary tariff impacts reduced gross margin by approximately 120 basis points and are expected to persist through Q4 2025.
  • Operating Income Pressure -- Operating income decreased to $1.6 million from $2.6 million compared to the prior year period, based on adjusted non-GAAP metrics, with net income per diluted share at $0.08 compared to $0.10 in the prior year period.
  • Cost of Mexico Facility Closure -- Raymond Hall indicated, "although the closure of the plant in Mexico will enhance long-term profitability, we expect associated costs to have a modest impact on Q4 gross margin."

Takeaways

  • Net Sales -- $90.6 million in net sales in the third quarter ended September 30, 2025, representing an 11% decrease from $102.1 million in the prior year period, reflecting lower home entertainment and retail channel demand.
  • Connected Home Revenue -- Connected Home revenue grew 13% to $29.8 million in the third quarter, driven by new product launches in climate control and customer expansion.
  • Home Entertainment Revenue -- Home Entertainment revenue declined 20% to $60.8 million in the third quarter, impacted by continued weakness in subscription broadcasting products in Latin America and EMEA.
  • Gross Margin -- Gross margin was 29.1% in the third quarter, down from 30.1% in the prior year period due to a 120 basis point tariff headwind, without which margin (non-GAAP) would have exceeded 30% in the third quarter.
  • Operating Expenses -- Operating expenses increased to $24.8 million from $20.2 million in the prior year period, reflecting cost reduction initiatives, headcount optimization, and reduced discretionary spending.
  • SG&A and R&D Expenses -- SG&A was $18.2 million and R&D was $6.6 million in the third quarter, compared to $21.1 million and $7.1 million, respectively, in the prior year period.
  • Operating Income -- Operating income was $1.6 million in the third quarter, compared to $2.6 million in the prior year period.
  • Net Income -- $1.1 million, or $0.08 per diluted share, compared to $1.4 million and $0.10 per share in the prior year period.
  • Net Cash Position -- Increased to $132 million at the end of the third quarter, up from $4.1 million at the end of the second quarter, supported by $10.1 million in operating cash flow and stronger receivable collections.
  • Customer Concentration -- Daikin represented 20.5% and Comcast 14.9% of total revenue in the third quarter.
  • Cost Reductions -- Actions taken to achieve approximately $5 million in annualized cost savings beginning in the fourth quarter, including targeted workforce reductions and facility transitions.
  • Production Shift -- Mexico facility closure on schedule; Vietnam production transfer and Mexicali contract manufacturing processes progressing to minimize disruption risk.
  • Stock Repurchase -- Board authorized repurchase of up to $3.5 million or approximately 778,000 shares pursuant to the existing program.
  • Q4 2025 Guidance -- Net sales expected between $82 million and $92 million for the fourth quarter, with EPS between $0.01 and $0.11, compared to $0.20 per share in the prior year period.
  • Connected Home Guidance -- Connected home sales for the fourth quarter are forecasted at $26 million to $30 million, a 13%-24% decrease compared to the prior year period.
  • Home Entertainment Guidance -- Projected home entertainment sales for the fourth quarter of $56 million to $62 million, down 18%-26% compared to the prior year period.
  • Profitability Outlook -- The company expects full-year 2025 to be the first profitable year since 2022.
  • Innovation and Product Pipeline -- Initial shipments of the Tide Touch energy management platform began in the third quarter with volume ramp anticipated in 2026, and commercial launch in multi-dwelling segment planned for 2026.
  • Design Wins and Strategic Partnerships -- Secured battery-less supercap remote design win and four new smart TV brand customers, including Xiaomi, for QuickSet cloud and digital rights management integration beginning in the first quarter of 2026.
  • Roku Litigation Update -- District court has "ruled in our favor to consolidate actions, and proceed to trial" according to Rick Karnafax with a trial date set for March 2027.

Summary

Universal Electronics (UEIC 4.52%) reported net sales in the third quarter ended September 30, 2025 fell 11% compared to the prior year period, driven by declining home entertainment sales and retail softness, while Connected Home delivered double-digit growth from new products in the third quarter. Management implemented approximately $5 million in annualized cost reductions beginning in the fourth quarter and completed key steps in shifting production out of Mexico to Vietnam and a Mexicali partner to enhance operational efficiency. Cash generation improved sharply, evidenced by a $9.1 million sequential increase in net cash in the third quarter, with operating cash flow reaching $10.1 million. The company confirmed guidance for profitability in 2025, citing ongoing margin headwinds from tariffs set to resolve in 2026, as well as notable customer concentration, with Daikin and Comcast comprising 35.4% of sales in the third quarter. Guidance implies a continued revenue decline in the fourth quarter, attributed to lower Connected Home and home entertainment sales, but also points to the initial roll-out of the Tide Touch platform and new design wins for 2026 as long-term growth drivers.

  • Management emphasized, "we expect operating expenses in the fourth quarter to be much lower than in the third quarter" due to further headcount and cost cuts.
  • QuickSet HomeSense’s initial customer trials began following its CES 2025 introduction, with integrations planned for major HVAC and entertainment partners in 2026 product launches.
  • The district court’s decision in UEIC’s ongoing Roku litigation reflects a favorable procedural outcome, with a set trial date in 2027.
  • The board authorized the repurchase of up to $3.5 million, or approximately 778,000 shares, under the existing program.

Industry glossary

  • Tide Touch platform: UEIC's smart thermostat and connected home solution designed for energy management and multi-dwelling unit applications, supporting interoperability with smart devices.
  • QuickSet: UEIC’s cloud platform providing device discovery, automation, and interoperability for smart home and entertainment devices.
  • Supercap remote control: A remote device using a supercapacitor for energy storage, supporting battery-less operation.
  • HomeSense: UEIC’s software platform enabling on-device environmental intelligence and automation through real-time sensing and user activity analysis.

Full Conference Call Transcript

Richard Land: Thank you, operator, and thank you all for joining us for the Universal Electronics Inc. Third Quarter 2025 Financial Results Conference Call. This afternoon, UEI issued a press release for the third quarter ended September 30, 2025. If you do not already have a copy of this press release, it can be found in the Investor Relations section of the company's website. This call is being broadcast live over the Internet. A webcast replay of this call, including any additional updated material or nonpublic information that might be discussed during this call, will be available on the company's website at www.uei.com for one year.

During this call, management may make forward-looking statements regarding future events and the future financial performance of the company and cautions you that these statements are just projections and actual results or events may differ materially from those projections. These statements can be found in the press release issued today and on the website. The company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today's date, and we refer you to the press release mentioned at the onset of this call and the documents the company has filed with the SEC, including its 2024 annual report on Form 10-K and the periodic and current reports filed or furnished since then.

The financial remarks will reference adjusted non-GAAP metrics. Management provides adjusted non-GAAP metrics because it uses them for budget planning purposes and for making operational and financial decisions and believes that providing these non-GAAP financial measures to investors as a supplement to GAAP measures helps provide context for the operating performance. A full description and reconciliation of these adjusted non-GAAP measures versus GAAP are included in the company's press release issued today. Joining me today are Chief Operating Officer and Interim Chief Executive Officer Rick Karnafax, and Interim Chief Financial Officer, Raymond Hall. Rick will provide an overview of our business, and Raymond will deliver the detailed financial results. Rick will then open the call for questions.

With that, it's my pleasure to introduce Rick Karnafax. Please go ahead, Rick.

Rick Karnafax: Thank you, Richard, and thank you all for joining us. We remain committed to advancing our control and sensing technologies while directing investment towards areas that drive profitable growth. As part of our channel diversification strategy, we are expanding beyond core HVAC OEM offerings, entering adjacent markets such as utilities and multi-dwelling unit property management, while also increasing our presence in the security channel. At the same time, we continue to refine our operating model to nurture long-term growth in the connected home channel and focus our home entertainment R&D on projects that offer strong returns. Innovation remains central to our strategy as we gain traction with new technologies in the market.

In Q3 2025, due to rightsizing and cost controls, we delivered solid margin performance and strong cash generation while facing revenue headwinds. Revenue was $90.6 million, slightly below expectations due to temporary and structural market factors. In Connected Home, revenue grew 13%, broadly in line with our expectations. However, we encountered market softness reflected in customer inventories, limiting purchases as product works its way through the channel. In home entertainment, structural challenges in Latin America and Europe persisted, while lower than expected television sales impacted our Asian customer volumes. As outlined in our last call, in Q4 2025, we expect our quarterly revenue to decline year over year and expect to deliver full-year growth in Connected Home compared to 2024.

Gross margin was 29.1%, and EPS was within our guidance range at $0.08. Our net cash position increased significantly this quarter by $9.1 million, reflecting disciplined execution in a challenging environment. To counter headwinds and enhance agility, we continued executing actions on cost in Q3. We began the closure of our Mexico facility, which remains on schedule. We achieved target milestones at our Vietnam facility, and production transfer is progressing as planned. We also initiated qualification and transfer processes for products that will remain in Mexico with our contract manufacturing partner in Mexicali. These steps should be wrapped up by year-end, minimizing disruption risk and ensuring continuity for key customers.

We also implemented targeted reductions in force to streamline operations in August and later again in late September and reallocated resources toward growth priorities. Additionally, we identified and eliminated fixed and variable expenses that no longer deliver the requisite value. These actions are expected to yield annualized cost savings of approximately $5 million beginning in Q4. To broaden our connected home presence, we are leveraging our Tide Touch platform to pursue new opportunities in adjacent channels. Energy management is a growing priority in Western Europe. To meet this demand, we enhanced Tide Touch with new features that support energy efficiency and provide utilities with actionable insights.

Following two years of testing with a lead European customer, initial shipments began in Q3 with volumes expected to ramp in 2026. We are applying a similar approach to serve multi-dwelling unit property managers by integrating interoperability with smart devices such as door locks and water leak detectors. Tide Touch offers a turnkey solution. It delivers energy efficiency, convenience, and remote management capabilities while reducing the risk of costly failures. Official launch is planned for 2026. In home entertainment, we remain focused on high-value commercial opportunities. In Q3, we secured a new design win for our battery-less hybrid supercap remote control, which eliminates the need for replaceable batteries, reinforcing UEI's leadership in sustainable product innovation.

In addition, software licensing, which carries our highest gross margin, continues to be a strong profit driver. During Q3, we secured 2026 commitments for our QuickSet cloud platform across our three primary smart TV customers. We also added four new smart TV brands, including Xiaomi, which will employ our digital rights management protection software services beginning in Q1 2026. Overall, innovation remains a cornerstone of UEI's long-term strategy. QuickSet HomeSense, introduced at CES 2025, represents a meaningful step forward in smart home intelligence. The platform adds on-device learning that interprets environmental data and device activity to deliver personalized real-time automation.

Built on UEI's expanding knowledge graph, HomeSense can detect user presence, identify anomalies, and optimize settings, making homes more efficient, secure, and intuitive. Its software-defined sensing framework can be activated via a simple firmware update on most connected devices. For example, it can automatically adjust HVAC settings based on user proximity or set the home to away mode when unoccupied. Since launch, HomeSense has gained strong traction with major HVAC brands currently in testing and home entertainment partners committed to 2026 product introductions. We will also integrate HomeSense into our Tide Touch smart thermostats, creating an optimized, privacy-driven energy management solution.

Finally, regarding the ongoing litigation against Roku, as discussed on our last call, the district court has lifted the stay, ruled in our favor to consolidate actions, and proceed to trial. The trial date has been set for March 2027, which we view as a favorable timeline. Discovery is underway, and we will continue to provide updates as appropriate as the case progresses toward a jury trial. With that, I'll now turn the call over to our interim CFO, Raymond Hall, to provide an update on our financial results.

Raymond Hall: Thank you, Rick. I will review the 2025 financial results compared to the third quarter of 2024. Net sales were $90.6 million, down 11% from $102.1 million in the prior year period. Our connected home channel grew 13% to $29.8 million. This was driven by the strong performance from new products launched earlier this year, particularly within climate control and continued scale expansion with existing customers. Sales in home entertainment declined 20% to $60.8 million. This reflects softer demand for subscription broadcasting products in Latin America and EMEA, particularly basic remote controls at lower price points and limited advanced features. Broader industry weakness in consumer electronics, including fewer television sales among our customers, also contributed to lower remote control volume.

The retail channel performance softened as well due to elevated inventories and slower sell-through. Gross profit was $26.3 million or 29.1% of sales compared to 30.1% in the prior year period. We benefited from procurement savings and favorable currency rates across Asia and EMEA. However, we experienced a temporary gross margin headwind related to tariff timing that will continue in Q4 and be resolved in 2026. In Q3, this impact reduced gross margin by approximately 120 basis points. Excluding this effect, Q3 gross margin would have exceeded our 30% target. Operating expenses decreased to $24.8 million from $20.2 million in the prior year period, reflecting ongoing benefits of cost reduction initiatives, including headcount optimization and lower fixed or discretionary spending.

SG&A was $18.2 million versus $21.1 million in the prior year period. R&D was $6.6 million compared to $7.1 million in the prior year period. Operating income reduced to $1.6 million from $2.6 million in the prior year period. Net income was $1.1 million or $0.08 per diluted share compared to $1.4 million or $0.10 per diluted share last year. Turning to cash flow and the balance sheet, we continue to make strong progress in improving our cost structure and working capital efficiency. Through the first nine months of 2025, we generated $27.8 million in operating cash flow, of which $10.1 million was generated in Q3.

Our net cash position strengthened to $132 million as of September 30, 2025, up from $4.1 million at June 30. This marks the second consecutive quarter of positive net cash since December 2021. The improvement was driven primarily by strong receivable collection and disciplined expense management. We ended the quarter with $31.5 million of cash and $18.3 million of debt. Reflecting our continuous confidence in our long-term growth strategy, the board has authorized the repurchase of the lesser of $3.5 million or approximately 778,000 shares pursuant to our previously announced stock repurchase program. Now turning to guidance, for Q4 2025, we expect net sales to range from $82 million to $92 million.

This compares to $110.5 million in Q4 2024 when we recognized approximately $4 million of revenue for connected home orders produced but not yet shipped upon meeting certain US GAAP criteria. This, combined with the fact we expect all the patents tied to connected home new product launches to fluctuate, contributes to the year-over-year revenue decline we anticipate in Q4 2025. Connected home sales are projected to be between $26 million to $30 million, representing a decrease of 13% to 24% from $34.5 million last year. For the first nine months of 2025, connected home sales grew 30%, and we still expect to finish the year with approximately 12% to 16% growth versus 2024.

In Q4, home entertainment sales are expected to range from $56 million to $62 million, a decline of 18% to 26% versus $76 million in Q4 2024. While we do not provide gross margin guidance, we expect the tariff timing issue to persist through Q4 and be resolved in 2026. Additionally, although the closure of the plant in Mexico will enhance long-term profitability, we expect associated costs to have a modest impact on Q4 gross margin. Finally, due to the decisive actions we have taken to manage our cost structure, we expect to remain profitable in Q4 and anticipate EPS to range from $0.01 to $0.11, compared to $0.20 in Q4 2024.

Based on this guidance, full-year 2025 is projected to be our first year of profitability since 2022. With that, I will turn the call back to Rick.

Rick Karnafax: Thanks, Raymond. In summary, we are focusing investments on markets and technologies where we see both near-term and long-term potential while managing through unpredictability and headwinds with operational discipline. While we continue to focus on materially improving profitability and balance sheet, we are diversifying our target markets to create value for customers, creating additional growth opportunities for our solutions, and delivering positive returns for our stockholders. Looking forward, we are excited by the opportunities in our adjacent markets driven by innovative technologies, new products, and expanding partnerships. With that, operator, please open the call for questions.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. Our first question comes from Steven Frankel with Rosenblatt Securities. Your line is open.

Steven Frankel: Good afternoon. Let me start with maybe a question that's more appropriate for the chairman. But since he's not here, maybe you can give us some insight. You know, you have an acting CEO, an acting CFO, kind of where are we in the search or the decision process around getting permanent people in those slots?

Rick Karnafax: Sure. Good afternoon, Steve, by the way. Relative to the leadership positions, as I'm in the interim CEO role and I've been in this role, I'm acting with the confidence of the board to navigate us through this process. And I will keep you updated if there's any changes to that at this time. Relative to the interim CFO position with Raymond, we are conducting an ongoing search and interviewing at this time.

Steven Frankel: Okay. Now let's pivot to the business. You know, I think the big surprise is, you know, a significant downturn in connected home, which was, you know, that was the path forward for the company. Maybe give us a little more insight into the dynamics of what happened in Q3 and how that affected the Q4 shipments. And when you would anticipate that business to return to year-over-year growth?

Rick Karnafax: Yeah. I mean, relative to the connected home, I think the key is, unfortunately, we've talked about is that there is some unevenness in that order of patterns as product works its way through the channel. As was highlighted in the call, while we look forward to Q4 and do see a decline, we see full-year growth versus 2024 forecasting between 12% to 16%. So while the quarter-to-quarter fluctuations remain, we still see full-year momentum there. Now relative to the broad question about addressing this unevenness, the key thing we're working on here is looking for different channels to market. Right?

So as we have partnered with OEMs, we have also now launched a standard product, our Tide Touch platform, that allows us a white labeling opportunity with these adjacent channels, which we highlighted utilities and MDUs. So the core for us is to take this standard product and, one, increase presence within those channels and build on those opportunities, as well as continue to explore additional avenues for that product.

Steven Frankel: Alright. But that's multi-quarter, if not, you know, kind of a year's long process to get meaningful revenue from that channel? Or has enough work been done that's something you could get material revenue from in 2026?

Rick Karnafax: Yeah. It's a good question. I think the key reason we want to highlight it on this call is we've talked about the development of this platform for some time, and as we've partnered with lead customers and began shipping product, I thought it was an appropriate time to start that discussion. The goal is to ramp next year. Now, obviously, this does not happen immediately. We have to build momentum with these customers with the solution. But the absolute goal is to provide a smoothing out of what we've seen on the OEM channel with something more consistent with the Tide Touch.

So it'll take some time to build, but it's exciting that we've got a couple of channels with lead customers we're working through product with.

Steven Frankel: Okay. And then a couple of things for Raymond. First of all, if my memory is accurate, last quarter, you kind of said that tariffs weren't really a big deal because you were shipping so much product away from the US. So I'm surprised to hear you say that it was, you know, a 100 basis points or so impacting Q3. And then when I look at the guidance you gave, and maybe it's just trying to model on the fly during the call, I have a hard time getting to kind of the middle of your EPS range if you're going to have gross margins that are similar to Q4.

So maybe help me understand what else is changing that you guide to. I'm sorry. Q3 and Q4, how material is the expense reductions, for example, on a sequential basis? And what are you assuming for a tax rate in your guidance?

Rick Karnafax: Yeah. I can speak a little bit, Steve, on the tariff situation. We've talked about the last couple of calls, you know, our goal is obviously to mitigate tariff impacts where possible through a combination of negotiations with key customers as well as the transition of production locations where required. We want to highlight the risk going forward because the timing of the tariffs negotiation with the key customers and the transition of production locations is ongoing. So we've mentioned before we have a partner that we've stood up a contract manufacturer in Mexico that we're working with. And as we work through these timing issues and transfer product, there's just still risks that remain.

Relative to the question around the EPS, we continue to highlight the operational cost controls we put in place and the rightsizing efforts. And we expect that to be a material benefit to the EPS as we look forward.

Steven Frankel: But specifically in Q4. What's your assumption on OpEx? Are they materially lower than Q3?

Raymond Hall: Yes, Steve. Actually, as Rick said, our effort on optimizing headcount organization is always in progress. And then we expect Q4 to be much lower than Q3 as well. We are looking at not only the organization but also all the fixed cost discretionary spending, travel. So we are on track to continue to right-size the organization.

Steven Frankel: Alright. Thank you. I'll let somebody else ask a question. Oh, sorry. One more, Raymond. Sorry. Customer concentration in the quarter?

Raymond Hall: Okay. We had two 10% customers in the quarter. Daikin was at 20.5%, and Comcast at 14.9%.

Steven Frankel: Thank you.

Raymond Hall: You're welcome.

Operator: Thank you. This does conclude our question and answer session. So I would now like to turn it back to Mr. Karnafax for closing remarks.

Rick Karnafax: Sure. Thank you, everyone, for their continued support of Universal Electronics Inc. I'd like to note that you should come visit us and see demonstrations of our technology at CES in January. Have a great day.

Operator: This concludes our call. You may now disconnect.