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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 September 30, 2022
OR
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)
Delaware33-0204817
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareUEICThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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: 12,681,758 shares of Common Stock, par value $0.01 per share, of the registrant were outstanding on November 1, 2022.



UNIVERSAL ELECTRONICS INC.
INDEX
 
Page
Number




Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements (Unaudited)
    UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related data)
(Unaudited)
September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$61,681 $60,813 
Term deposit185  
Accounts receivable, net135,495 129,215 
Contract assets6,264 5,012 
Inventories135,867 134,469 
Prepaid expenses and other current assets6,297 7,289 
Income tax receivable3,832 348 
Total current assets349,621 337,146 
Property, plant and equipment, net65,335 74,647 
Goodwill48,935 48,463 
Intangible assets, net23,747 20,169 
Operating lease right-of-use assets18,893 19,847 
Deferred income taxes5,364 7,729 
Other assets1,822 2,347 
Total assets$513,717 $510,348 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$80,211 $92,707 
Line of credit88,000 56,000 
Accrued compensation21,726 24,217 
Accrued sales discounts, rebates and royalties5,688 9,286 
Accrued income taxes7,560 3,737 
Other accrued liabilities25,563 30,840 
Total current liabilities228,748 216,787 
Long-term liabilities:
Operating lease obligations12,696 14,266 
Deferred income taxes2,836 2,394 
Income tax payable939 939 
Other long-term liabilities838 13 
Total liabilities246,057 234,399 
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; 24,893,271 and 24,678,942 shares issued on September 30, 2022 and December 31, 2021, respectively
249 247 
Paid-in capital322,619 314,094 
Treasury stock, at cost, 12,219,233 and 11,861,198 shares on September 30, 2022 and December 31, 2021, respectively
(366,456)(355,159)
Accumulated other comprehensive income (loss)(26,355)(13,524)
Retained earnings337,603 330,291 
Total stockholders' equity267,660 275,949 
Total liabilities and stockholders' equity$513,717 $510,348 

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 September 30,Nine Months Ended September 30,
 2022202120222021
Net sales$148,482 $155,625 $419,993 $456,658 
Cost of sales104,040 109,805 299,912 319,777 
Gross profit44,442 45,820 120,081 136,881 
Research and development expenses8,017 7,411 24,460 23,029 
Selling, general and administrative expenses24,928 29,505 79,188 87,316 
Operating income11,497 8,904 16,433 26,536 
Interest income (expense), net(668)(212)(1,147)(447)
Loss on sale of Argentina subsidiary (6,050) (6,050)
Other income (expense), net(54)(157)(388)(151)
Income before provision for income taxes10,775 2,485 14,898 19,888 
Provision for income taxes3,541 3,440 7,586 8,257 
Net income (loss)$7,234 $(955)$7,312 $11,631 
Earnings (loss) per share:
Basic$0.57 $(0.07)$0.58 $0.85 
Diluted$0.57 $(0.07)$0.57 $0.84 
Shares used in computing earnings (loss) per share:
Basic12,65613,39212,70913,622 
Diluted12,69613,39212,79713,920
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 September 30,Nine Months Ended September 30,
 2022202120222021
Net income (loss)$7,234 $(955)$7,312 $11,631 
Other comprehensive income (loss):
Change in foreign currency translation adjustment(7,367)(1,959)(12,831)(784)
Change in foreign currency translation due to sale of Argentina subsidiary 5,425  5,425 
Comprehensive income (loss)$(133)$2,511 $(5,519)$16,272 
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 and nine months ended September 30, 2022:
 Common Stock
Issued
Common Stock
in Treasury
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Totals
 SharesAmountSharesAmount
Balance at December 31, 202124,679 $247 (11,861)$(355,159)$314,094 $(13,524)$330,291 $275,949 
Net loss(2,910)(2,910)
Currency translation adjustment1,849 1,849 
Shares issued for employee benefit plan and compensation145 1 323 324 
Purchase of treasury shares(225)(7,354)(7,354)
Shares issued to directors7 — —  
Employee and director stock-based compensation2,499 2,499 
Balance at March 31, 202224,831 248 (12,086)(362,513)316,916 (11,675)327,381 270,357 
Net income2,988 2,988 
Currency translation adjustment(7,313)(7,313)
Shares issued for employee benefit plan and compensation23 1 301 302 
Purchase of treasury shares(130)(3,857)(3,857)
Shares issued to directors8 — —  
Employee and director stock-based compensation2,637 2,637 
Balance at June 30, 202224,862 $249 (12,216)$(366,370)$319,854 $(18,988)$330,369 $265,114 
Net income7,234 7,234 
Currency translation adjustment(7,367)(7,367)
Shares issued for employee benefit plan and compensation24 — 326 326 
Purchase of treasury shares(3)(86)(86)
Shares issued to directors7 — —  
Employee and director stock-based compensation2,439 2,439 
Balance at September 30, 202224,893 $249 (12,219)$(366,456)$322,619 $(26,355)$337,603 $267,660 
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 and nine months ended September 30, 2021:
Common Stock
Issued
Common Stock
in Treasury
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Totals
SharesAmountSharesAmount
Balance at December 31, 202024,392 $244 (10,618)$(295,495)$302,084 $(18,522)$324,990 $313,301 
Net income6,993 6,993 
Currency translation adjustment(2,868)(2,868)
Shares issued for employee benefit plan and compensation160 2 408 410 
Purchase of treasury shares(191)(10,951)(10,951)
Stock options exercised22 — 991 991 
Shares issued to directors7 — —  
Employee and director stock-based compensation2,600 2,600 
Performance-based common stock warrants143 143 
Balance at March 31, 202124,581 246 (10,809)(306,446)306,226 (21,390)331,983 310,619 
Net income5,593 5,593 
Currency translation adjustment4,043 4,043 
Shares issued for employee benefit plan and compensation15 — 271 271 
Purchase of treasury shares(320)(15,733)(15,733)
Shares issued to directors8 — —  
Employee and director stock-based compensation2,444 2,444 
Performance-based common stock warrants131 131 
Balance at June 30, 202124,604 $246 (11,129)$(322,179)$309,072 $(17,347)$337,576 $307,368 
Net loss(955)(955)
Currency translation adjustment(1,959)(1,959)
Change in foreign currency translation due to sale of Argentina subsidiary5,425 5,425 
Shares issued for employee benefit plan and compensation16 — 296 296 
Purchase of treasury shares(348)(17,533)(17,533)
Shares issued to directors8 — —  
Employee and director stock-based compensation2,472 2,472 
Performance-based common stock warrants124 124 
Balance at September 30, 202124,628 $246 (11,477)$(339,712)$311,964 $(13,881)$336,621 $295,238 
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)
 
 Nine Months Ended September 30,
 20222021
Cash flows from operating activities:
Net income$7,312 $11,631 
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization18,079 19,719 
Provision for credit losses(204)1 
Deferred income taxes2,063 (483)
Shares issued for employee benefit plan952 977 
Employee and director stock-based compensation7,575 7,516 
Performance-based common stock warrants 398 
Loss on sale of Argentina subsidiary, net of cash transferred 5,960 
Changes in operating assets and liabilities:
Accounts receivable and contract assets(11,901)(12,129)
Inventories(8,477)(4,466)
Prepaid expenses and other assets1,734 2,872 
Accounts payable and accrued liabilities(17,201)(7,416)
Accrued income taxes171 (1,664)
Net cash provided by (used for) operating activities103 22,916 
Cash flows from investing activities:
Purchase of term deposit(7,487) 
Redemption of term deposit7,609  
Acquisition of net assets of Qterics, Inc.(939) 
Acquisitions of property, plant and equipment(10,117)(8,782)
Acquisitions of intangible assets(4,719)(3,626)
Net cash provided by (used for) investing activities(15,653)(12,408)
Cash flows from financing activities:
Borrowings under line of credit83,000 71,000 
Repayments on line of credit(51,000)(38,000)
Proceeds from stock options exercised 991 
Treasury stock purchased(11,297)(44,217)
Net cash provided by (used for) financing activities20,703 (10,226)
Effect of foreign currency exchange rates on cash and cash equivalents(4,285)1,390 
Net increase (decrease) in cash and cash equivalents868 1,672 
Cash and cash equivalents at beginning of period60,813 57,153 
Cash and cash equivalents at end of period$61,681 $58,825 
Supplemental cash flow information:
Income taxes paid$5,034 $8,235 
Interest paid$1,204 $375 
The accompanying notes are an integral part of these consolidated financial statements.
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(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. 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 and nine months ended September 30, 2022 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, 2021.

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; stock-based compensation expense and performance-based common stock warrants.

The coronavirus ("COVID-19") pandemic and the current macroeconomic environment have made estimates more difficult and subjective. Accordingly, actual results could differ from those estimates, and such differences could be material to the financial statements.

Summary of Significant Accounting Policies

With the exception of the following policies, 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, 2021.

Revenue Recognition

Revenue is recognized when control of a good or service is transferred to a customer. Control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good or service. Revenues are primarily generated from manufacturing, shipping and supporting control and sensor technology solutions and a broad line of pre-programmed and universal control products, AV accessories, and intelligent wireless security and smart home products that are used in the video services, consumer electronics, security, home automation, climate control, and home appliance market, which are sold through multiple channels, and licensing intellectual property that is embedded in these products or licensed to others for use in their products. We also generate revenues from a cloud-based software solution enabling software updates, digital rights management provisioning and remote technical support to consumer electronics customers.

We recognize service revenues related to our cloud-based software solution on an over-time basis, as our customers simultaneously receive and consume the benefits provided by our performance. Revenues are recognized over the period during which the performance obligations are satisfied, and control of the service is transferred to the customers.

Cash, Cash Equivalents, and Term Deposit

Cash and cash equivalents include cash accounts and all investments purchased with initial maturities of three months or less. Our term deposit has an initial maturity of one year. Domestically, we generally maintain balances in excess of federally insured limits. We attempt to mitigate our exposure to liquidity, credit and other relevant risks by placing our cash, cash
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
equivalents and term deposit with financial institutions we believe are high quality. These financial institutions are located in many different geographic regions. As part of our cash and risk management processes, we perform periodic evaluations of the relative credit standing of our financial institutions. We have not sustained credit losses from instruments held at financial institutions.

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers". This guidance requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, "Revenue from Contracts with Customers". At the acquisition date, the acquirer applies the revenue recognition model as if it had originated the acquired contracts. Our adoption of this guidance on January 1, 2022 did not have a material impact on our consolidated statement of financial position, results of operations and cash flows.

Recent Accounting Updates Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting", and in January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform". This guidance is intended to provide temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The amendments in these ASUs are elective and are effective upon issuance for all entities through December 31, 2022. These amendments are not expected to have a material impact on our consolidated statement of financial position, results of operations and cash flows.

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832)". This guidance requires an entity to make certain disclosures when it receives government assistance, including the types of assistance, the accounting for the assistance, and the effect of the assistance on the financial statements. ASU 2021-10 is effective for annual periods beginning after December 15, 2021, with early adoption permitted. We do not expect the adoption of ASU 2021-10 to have a material impact on our consolidated statement of financial position, results of operations and cash flows.

Note 2 — Cash, Cash Equivalents and Term Deposit

Cash and cash equivalents were held in the following geographic regions:
(In thousands)September 30, 2022December 31, 2021
North America$5,912 $6,430 
People's Republic of China ("PRC")14,55416,000
Asia (excluding the PRC)20,06511,798
Europe9,98217,604
South America11,1688,981
Total cash and cash equivalents
$61,681 $60,813 

On January 25, 2022, we entered into a one-year term deposit cash account with Banco Santander (Brasil) S.A., denominated in Brazilian Real. The term deposit earns interest at a variable annual rate based upon the Brazilian CDI overnight interbank rate. During the three months ended September 30, 2022, substantially all of this term deposit was redeemed. At September 30, 2022, the balance of the term deposit was $0.2 million. The term deposit is accounted for at fair value on a recurring basis, using level one inputs.

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
Note 3 — Revenue and Accounts Receivable, Net

Revenue Details    

The pattern of revenue recognition was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2022202120222021
Goods and services transferred at a point in time$127,672 $129,530 $355,113 $371,921 
Goods and services transferred over time20,81026,09564,88084,737 
Net sales$148,482 $155,625 $419,993 $456,658 

Our net sales to external customers by geographic area were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2022202120222021
United States$46,732 $49,637 $130,196 $151,251 
Asia (excluding PRC)32,61434,422 100,000100,247 
Europe27,35832,18776,38291,353
People's Republic of China26,69623,41368,60471,242
Latin America7,6026,91720,99618,429
Other7,4809,04923,81524,136
Total net sales$148,482 $155,625 $419,993 $456,658 

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 September 30,
20222021
 $ (thousands)% of Net Sales$ (thousands)% of Net Sales
Comcast Corporation$26,479 17.8 %$22,578 14.5 %
Daikin Industries Ltd. $21,381 14.4 %$20,610 13.2 %

 Nine Months Ended September 30,
20222021
 $ (thousands)% of Net Sales$ (thousands)% of Net Sales
Comcast Corporation$65,087 15.5 %$74,478 16.3 %
Daikin Industries Ltd. $59,397 14.1 %$54,495 11.9 %

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
Accounts Receivable, Net

Accounts receivable, net were as follows:
(In thousands)September 30, 2022December 31, 2021
Trade receivables, gross$131,734 $122,508 
Allowance for credit losses(946)(1,285)
Allowance for sales returns(544)(592)
Trade receivables, net130,244 120,631 
Other (1)
5,251 8,584 
Accounts receivable, net$135,495 $129,215 
(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)Nine Months Ended September 30,
20222021
Balance at beginning of period$1,285 $1,412 
Additions (reductions) to costs and expenses(204)1 
Write-offs/Foreign exchange effects(135)(69)
Balance at end of period$946 $1,344 

Trade receivables associated with this significant customer that totaled more than 10% of our accounts receivable, net was as follows:
September 30, 2022December 31, 2021
$ (thousands)% of Accounts Receivable, Net$ (thousands)% of Accounts Receivable, Net
Comcast Corporation$23,890 17.6 %$ 
(1)
 %
(1)

(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 and Significant Suppliers

Inventories were as follows:
(In thousands)September 30, 2022December 31, 2021
Raw materials$53,780 $52,617 
Components27,597 25,289 
Work in process4,498 7,102 
Finished goods49,992 49,461 
Inventories$135,867 $134,469 

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
Significant Suppliers

Purchases from the following supplier totaled more than 10% of our total inventory purchases:
Three Months Ended September 30,
20222021
$ (thousands)% of Total Inventory Purchases$ (thousands)% of Total Inventory Purchases
Qorvo International Pte Ltd.$ 
(1)
 %
(1)
$12,064 14.5 %
(1) Purchases associated with this supplier did not total more than 10% of our total inventory purchases for the indicated period.
Nine Months Ended September 30,
20222021
$ (thousands)% of Total Inventory Purchases$ (thousands)% of Total Inventory Purchases
Qorvo International Pte Ltd.$23,185 10.3 %$31,677 13.1 %
Purchases from the following supplier totaled more than 10% of our total accounts payable:
September 30, 2022December 31, 2021
$ (thousands)% of Total Accounts Payable$ (thousands)% of Total Accounts Payable
Zhejiang Zhen You Electronics Co. Ltd.
$ 
(1)
 %
(1)
$9,862 10.6 %
(1) Accounts payable associated with this supplier did not total more than 10% of our accounts payable for the indicated period.

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)September 30, 2022December 31, 2021
United States$16,514 $16,804 
People's Republic of China43,769 52,851 
Mexico17,869 20,509 
All other countries6,076 4,330 
Total long-lived tangible assets$84,228 $94,494 

Property, plant, and equipment are shown net of accumulated depreciation of $165.8 million and $165.9 million at September 30, 2022 and December 31, 2021, respectively.

Depreciation expense was $4.9 million and $5.6 million for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense was $15.1 million and $17.1 million for the nine months ended September 30, 2022 and 2021, respectively.

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
Note 6 — Goodwill and Intangible Assets, Net

Goodwill

Changes in the carrying amount of goodwill were as follows:
(In thousands) 
Balance at December 31, 2021
$48,463 
Goodwill acquired during the period (1)
713 
Foreign exchange effects(241)
Balance at September 30, 2022
$48,935 

(1) During the nine months ended September 30, 2022, we recognized $0.7 million of goodwill related to the Qterics, Inc. ("Qterics") acquisition. Refer to Note 19 for further information about this acquisition.

Intangible Assets, Net

The components of intangible assets, net were as follows:
 September 30, 2022December 31, 2021
(In thousands)
Gross (1)
Accumulated
Amortization (1)
Net
Gross (1)
Accumulated
Amortization (1)
Net
Capitalized software development costs$1,538 $(64)$1,474 $1,066 $(27)$1,039 
Customer relationships6,340 (2,899)3,441 5,000 (2,375)2,625 
Developed and core technology4,520 (3,602)918 4,080 (3,335)745 
Distribution rights280 (250)30 325 (269)56 
Patents27,993 (10,279)17,714 24,518 (9,015)15,503 
Trademarks and trade names850 (680)170 800 (599)201 
Total intangible assets, net$41,521 $(17,774)$23,747 $35,789 $(15,620)$20,169 

(1)This table excludes the gross value of fully amortized intangible assets totaling $43.8 million and $43.2 million at September 30, 2022 and December 31, 2021, respectively.

Amortization expense is recorded in selling, general and administrative expenses, except amortization expense related to capitalized software development costs, which is recorded in cost of sales. Amortization expense by statement of operations caption was as follows:
(In thousands)Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Cost of sales$13 $7 $37 $15 
Selling, general and administrative expenses1,018 938 2,928 2,622 
Total amortization expense$1,031 $945 $2,965 $2,637 
 
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(Unaudited)
Estimated future annual amortization expense related to our intangible assets at September 30, 2022, was as follows:
(In thousands)
2022 (remaining 3 months)$1,074 
20234,701 
20244,243 
2025