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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 June 30, 2023
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: 12,908,715 shares of Common Stock, par value $0.01 per share, of the registrant were outstanding on August 1, 2023.



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)
June 30, 2023December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents$55,823 $66,740 
Accounts receivable, net104,767 112,346 
Contract assets5,963 7,996 
Inventories105,858 140,181 
Prepaid expenses and other current assets5,731 6,647 
Income tax receivable2,591 4,130 
Total current assets280,733 338,040 
Property, plant and equipment, net58,221 62,791 
Goodwill 49,085 
Intangible assets, net25,446 24,470 
Operating lease right-of-use assets20,327 21,599 
Deferred income taxes5,487 6,242 
Other assets1,727 1,936 
Total assets$391,941 $504,163 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$47,860 $71,373 
Line of credit75,000 88,000 
Accrued compensation19,848 20,904 
Accrued sales discounts, rebates and royalties4,763 6,477 
Accrued income taxes2,807 5,585 
Other accrued liabilities23,897 24,134 
Total current liabilities174,175 216,473 
Long-term liabilities:
Operating lease obligations14,222 15,027 
Deferred income taxes2,071 2,724 
Income tax payable723 723 
Other long-term liabilities751 810 
Total liabilities191,942 235,757 
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; 25,254,230 and 24,999,951 shares issued on June 30, 2023 and December 31, 2022, respectively
253 250 
Paid-in capital332,259 326,839 
Treasury stock, at cost, 12,353,278 and 12,295,305 shares on June 30, 2023 and December 31, 2022, respectively
(369,049)(368,194)
Accumulated other comprehensive income (loss)(22,388)(21,187)
Retained earnings258,924 330,698 
Total stockholders' equity199,999 268,406 
Total liabilities and stockholders' equity$391,941 $504,163 

The accompanying notes are an integral part of these consolidated financial statements.
3

Table of Contents
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited) 
Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Net sales$107,391 $139,101 $215,768 $271,511 
Cost of sales82,774 99,730 166,458 195,872 
Gross profit24,617 39,371 49,310 75,639 
Research and development expenses8,484 8,637 16,844 16,443 
Selling, general and administrative expenses25,265 25,237 52,047 54,260 
Goodwill impairment  49,075  
Operating income (loss)(9,132)5,497 (68,656)4,936 
Interest income (expense), net(1,097)(183)(2,072)(479)
Other income (expense), net(702)(694)(916)(334)
Income (loss) before provision for (benefit from) income taxes(10,931)4,620 (71,644)4,123 
Provision for (benefit from) income taxes(520)1,632 130 4,045 
Net income (loss)$(10,411)$2,988 $(71,774)$78 
Earnings (loss) per share:
Basic$(0.81)$0.24 $(5.61)$0.01 
Diluted$(0.81)$0.23 $(5.61)$0.01 
Shares used in computing earnings (loss) per share:
Basic12,86012,65912,804 12,736 
Diluted12,86012,71512,804 12,847 
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 June 30,Six Months Ended June 30,
 2023202220232022
Net income (loss)$(10,411)$2,988 $(71,774)$78 
Other comprehensive income (loss):
Change in foreign currency translation adjustment(3,117)(7,313)(1,201)(5,464)
Comprehensive income (loss)$(13,528)$(4,325)$(72,975)$(5,386)
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 six months ended June 30, 2023:
 Common Stock
Issued
Common Stock
in Treasury
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Totals
 SharesAmountSharesAmount
Balance at December 31, 202225,000 $250 (12,295)$(368,194)$326,839 $(21,187)$330,698 $268,406 
Net loss(61,363)(61,363)
Currency translation adjustment1,916 1,916 
Shares issued for employee benefit plan and compensation189 2 350 352 
Purchase of treasury shares(53)(812)(812)
Shares issued to directors8 —  
Employee and director stock-based compensation2,540 2,540 
Balance at March 31, 202325,197 252 (12,348)(369,006)329,729 (19,271)269,335 211,039 
Net loss(10,411)(10,411)
Currency translation adjustment(3,117)(3,117)
Shares issued for employee benefit plan and compensation50 1 372 373 
Purchase of treasury shares(5)(43)(43)
Shares issued to directors7  
Employee and director stock-based compensation2,158 2,158 
Balance at June 30, 202325,254 $253 (12,353)$(369,049)$332,259 $(22,388)$258,924 $199,999 
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 six months ended June 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 
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)
 
 Six Months Ended June 30,
 20232022
Cash flows from operating activities:
Net income (loss)$(71,774)$78 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization11,707 12,155 
Provision for credit losses3 (204)
Deferred income taxes142 1,227 
Shares issued for employee benefit plan725 626 
Employee and director stock-based compensation4,698 5,136 
Impairment of goodwill49,075  
Impairment of long-term assets49  
Changes in operating assets and liabilities:
Accounts receivable and contract assets10,586 (5,195)
Inventories33,195 (16,287)
Prepaid expenses and other assets2,615 1,329 
Accounts payable and accrued liabilities(26,542)(15,001)
Accrued income taxes(1,224)(948)
Net cash provided by (used for) operating activities13,255 (17,084)
Cash flows from investing activities:
Purchase of term deposit (7,487)
Acquisition of net assets of Qterics, Inc. (939)
Acquisitions of property, plant and equipment(5,807)(5,482)
Acquisitions of intangible assets(3,295)(3,019)
Net cash provided by (used for) investing activities(9,102)(16,927)
Cash flows from financing activities:
Borrowings under line of credit25,000 62,000 
Repayments on line of credit(38,000)(30,000)
Treasury stock purchased(855)(11,211)
Net cash provided by (used for) financing activities(13,855)20,789 
Effect of foreign currency exchange rates on cash and cash equivalents(1,215)(1,461)
Net increase (decrease) in cash and cash equivalents(10,917)(14,683)
Cash and cash equivalents at beginning of period66,740 60,813 
Cash and cash equivalents at end of period$55,823 $46,130 
Supplemental cash flow information:
Income taxes paid$3,956 $3,466 
Interest paid$3,843 $623 
The accompanying notes are an integral part of these consolidated financial statements.
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(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 six months ended June 30, 2023 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, 2022.

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

See Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for a summary of our significant accounting policies.

Recently Adopted Accounting Pronouncements

None.

Recent Accounting Updates Not Yet Effective

None.

Note 2 — Cash, Cash Equivalents and Term Deposit

Cash and cash equivalents were held in the following geographic regions:
(In thousands)June 30, 2023December 31, 2022
North America$11,594 $6,825 
People's Republic of China ("PRC")3,69715,633
Asia (excluding the PRC)14,61218,850
Europe14,17113,042
South America11,74912,390
Total cash and cash equivalents
$55,823 $66,740 

On January 25, 2022, we entered into an $8.6 million, one-year term deposit cash account with Banco Santander (Brasil) S.A., denominated in Brazilian Real. The term deposit earned interest at a variable annual rate based upon the Brazilian CDI overnight interbank rate. As of December 31, 2022, all of this term deposit was redeemed.
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)

Note 3 — Revenue and Accounts Receivable, Net

Revenue Details    

The pattern of revenue recognition was as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2023202220232022
Goods and services transferred at a point in time$79,372 $118,355 $166,053 $227,441 
Goods and services transferred over time28,01920,74649,71544,070 
Net sales$107,391 $139,101 $215,768 $271,511 

Our net sales to external customers by geographic area were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2023202220232022
United States$33,133 $39,637 $66,562 $83,464 
Asia (excluding PRC)19,30234,322 46,40267,386 
Europe22,04326,36446,06949,024
People's Republic of China17,90422,61630,03241,908
Latin America9,2326,90616,18013,394
Other5,7779,25610,52316,335
Total net sales$107,391 $139,101 $215,768 $271,511 

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 June 30,
20232022
 $ (thousands)% of Net Sales$ (thousands)% of Net Sales
Comcast Corporation
(1)
(1)
$18,723 13.5 %
Daikin Industries Ltd. $13,540 12.6 %$20,875 15.0 %
(1)    Net sales associated with this customer did not total more than 10% of our net sales for the indicated period.

 Six Months Ended June 30,
20232022
 $ (thousands)% of Net Sales$ (thousands)% of Net Sales
Comcast Corporation$24,416 11.3 %$38,607 14.2 %
Daikin Industries Ltd. $33,207 15.4 %$38,016 14.0 %

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
Accounts Receivable, Net

Accounts receivable, net were as follows:
(In thousands)June 30, 2023December 31, 2022
Trade receivables, gross$99,706 $108,030 
Allowance for credit losses(764)(957)
Allowance for sales returns(426)(618)
Trade receivables, net98,516 106,455 
Other (1)
6,251 5,891 
Accounts receivable, net$104,767 $112,346 
(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)Six Months Ended June 30,
20232022
Balance at beginning of period$957 $1,285 
Additions (reductions) to costs and expenses3 (204)
Write-offs/Foreign exchange effects(196)(78)
Balance at end of period$764 $1,003 

Trade receivables associated with this significant customer that totaled more than 10% of our accounts receivable, net was as follows:
June 30, 2023December 31, 2022
$ (thousands)% of Accounts Receivable, Net$ (thousands)% of Accounts Receivable, Net
Comcast Corporation
(1)
(1)
$15,367 13.7 %

(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 Supplier

Inventories were as follows:
(In thousands)June 30, 2023December 31, 2022
Raw materials$43,221 $58,759 
Components17,682 25,226 
Work in process2,973 2,616 
Finished goods41,982 53,580 
Inventories$105,858 $140,181 

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
Significant Supplier

Purchases from the following supplier totaled more than 10% of our total inventory purchases:
Three Months Ended June 30,
20232022
$ (thousands)% of Total Inventory Purchases$ (thousands)% of Total Inventory Purchases
Qorvo International Pte Ltd.$5,766 12.7 %$10,169 12.3 %
Six Months Ended June 30,
20232022
$ (thousands)% of Total Inventory Purchases$ (thousands)% of Total Inventory Purchases
Qorvo International Pte Ltd.
(1)
(1)
$17,721 11.4 %
(1) Purchases associated with this supplier did not total more than 10% of our total inventory purchases for the indicated period.
There were no purchases from suppliers that totaled more than 10% of our total accounts payable at June 30, 2023 and December 31, 2022.

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)June 30, 2023December 31, 2022
United States$15,510 $16,427 
People's Republic of China37,648 42,893 
Mexico13,023 14,402 
Vietnam7,758 6,923 
All other countries4,609 3,745 
Total long-lived tangible assets$78,548 $84,390 

Property, plant, and equipment are shown net of accumulated depreciation of $170.0 million and $170.5 million at June 30, 2023 and December 31, 2022, respectively.

Depreciation expense was $4.8 million and $5.1 million for the three months ended June 30, 2023 and 2022, respectively. Depreciation expense was $9.4 million and $10.2 million for the six months ended June 30, 2023 and 2022, respectively.

Note 6 — Goodwill and Intangible Assets, Net

Goodwill

During the six months ended June 30, 2023, a decline in our financial performance, overall negative trend in the video service provider channel and an uncertain economic environment, contributed to a significant decline in our market capitalization. We considered this to be an impairment trigger. We, therefore, performed a quantitative valuation analysis under an income approach to estimate our reporting unit's fair value. The income approach used projections of estimated operating results and cash flows that were discounted using a discount rate based on the weighted-average cost of capital. The main assumptions supporting the cash flow projections include, but are not limited to, revenue growth, margins, discount rate, and terminal growth rate. The financial projections reflect our best estimate of economic and market conditions over the projected period,
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
including forecasted revenue growth, margins, capital expenditures, depreciation and amortization. In addition to our valuation analysis under an income approach, we also considered the implied control premium compared to our market capitalization.

We determined that the implied control premium over our market capitalization to be substantial; therefore, we recorded an impairment charge of $49.1 million during the six months ended June 30, 2023.

Changes in the carrying amount of goodwill were as follows:
(In thousands) 
Balance at December 31, 2022
$49,085 
Goodwill impairment(49,075)
Foreign exchange effects(10)
Balance at June 30, 2023
$ 

Intangible Assets, Net

The components of intangible assets, net were as follows:
 June 30, 2023December 31, 2022
(In thousands)
Gross (1)
Accumulated
Amortization (1)
Net
Gross (1)
Accumulated
Amortization (1)
Net
Capitalized software development costs (2 years)
$1,991 $(200)$1,791 $1,647 $(44)$1,603 
Customer relationships
(10-15 years)
6,340 (3,442)2,898 6,340 (3,080)3,260 
Developed and core technology
(5-15 years)
4,520 (3,875)645 4,520 (3,693)827 
Distribution rights (10 years)
312 (299)13 308 (281)27 
Patents (10 years)
31,642 (11,669)19,973 29,388 (10,790)18,598 
Trademarks and trade names
(10 years)
450 (324)126 450 (295)155 
Total intangible assets, net$45,255 $(19,809)$25,446 $42,653 $(18,183)$24,470 

(1)This table excludes the gross value of fully amortized intangible assets totaling $44.1 million and $43.7 million at June 30, 2023 and December 31, 2022, 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 June 30,Six Months Ended June 30,
2023202220232022
Cost of sales$148 $12 $156 $24 
Selling, general and administrative expenses1,107 989 2,163 1,910 
Total amortization expense$1,255 $1,001 $2,319 $1,934 
 
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
Estimated future annual amortization expense related to our intangible assets at June 30, 2023, was as follows:
(In thousands)
2023 (remaining 6 months)$2,505 
20244,910 
20254,149 
20263,464 
20272,916 
Thereafter7,502 
Total$25,446 

Note 7 — Leases

We have entered into various operating lease agreements for automobiles, offices and manufacturing facilities throughout the world. At June 30, 2023, our operating leases had remaining lease terms of up to 37 years, including any reasonably probable extensions.

Lease balances within our consolidated balance sheet were as follows:
(In thousands)June 30, 2023December 31, 2022
Assets:
Operating lease right-of-use assets$20,327 $21,599 
Liabilities:
Other accrued liabilities$5,141 $5,509 
Long-term operating lease obligations14,222 15,027 
Total lease liabilities$19,363 $20,536 

Operating lease expense, including variable and short-term lease costs, which were insignificant to the total operating lease cash flows, and supplemental cash flow information were as follows:
(In thousands)Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Cost of sales$712 $762 $1,504 $1,397 
Selling, general and administrative expenses1,109 1,079 2,185 2,187 
Total operating lease expense$1,821 $1,841 $3,689 $3,584 
Operating cash outflows from operating leases$1,746 $1,781 3,577 3,460 
Operating lease right-of-use assets obtained in exchange for lease obligations$1,960 $255 $1,960 $3,073 

The weighted average remaining lease liability term and the weighted average discount rate were as follows:
June 30, 2023December 31, 2022
Weighted average lease liability term (in years)5.05.1
Weighted average discount rate4.13 %3.82 %
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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)

The following table reconciles the undiscounted cash flows for each of the first five years and thereafter to the operating lease liabilities recognized in our consolidated balance sheet at June 30, 2023. The reconciliation excludes short-term leases that are not recorded on the balance sheet.
(In thousands)June 30, 2023
2023 (remaining 6 months)$3,161 
20245,613 
20254,675 
20262,937 
20272,177 
Thereafter3,167 
Total lease payments21,730 
Less: imputed interest(2,367)
Total lease liabilities$19,363 

At June 30, 2023, we did not have any operating leases that had not yet commenced.

Note 8 — Line of Credit

On May 3, 2023, we executed an amendment to our Second Amended and Restated Credit Agreement ("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S. Bank"), which provides for a $125.0 million revolving line of credit ("Credit Line"). Among other things, the amendment to the Second Amended Credit Agreement extended the maturity of the revolving line of credit to April 30, 2024. The Credit Line may be used for working capital and other general corporate purposes including acquisitions, share repurchases and capital expenditures. Amounts available for borrowing under the Credit Line are reduced by the balance of any outstanding letters of credit, of which there were none at June 30, 2023 and December 31, 2022.

All obligations under the Credit Line are secured by substantially all of our U.S. personal property and tangible and intangible assets, as well as a guaranty of the Credit Line by our wholly-owned subsidiary, Universal Electronics BV.

Under the Second Amended Credit Agreement, we may elect to pay interest on the Credit Line based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin (varying from 2.00% to 2.75%), or base rate (based on the prime rate of U.S. Bank or as otherwise specified in the Second Amended Credit Agreement) plus an applicable margin (varying from 0.00% to 0.75%). The applicable margins are calculated quarterly and vary based on our cash flow leverage ratio as set forth in the Second Amended Credit Agreement. The interest rates in effect at June 30, 2023 and December 31, 2022 were 7.80% and 5.62%, respectively. There are no commitment fees or unused line fees under the Second Amended Credit Agreement.

The Second Amended Credit Agreement includes financial covenants requiring a minimum fixed charge coverage ratio and a maximum cash flow leverage ratio. In addition, the Second Amended Credit Agreement contains other customary affirmative and negative covenants and events of default. From May 3, 2023 to March 31, 2024 (unless we elect to terminate earlier), our fixed charge coverage ratio and cash flow leverage ratio-based covenants are temporarily replaced with EBITDA-based covenants. Additionally, from May 3, 2023 to March 31, 2024 (unless we elect to terminate the temporary covenant provision earlier) the applicable margins are fixed at 2.75% and 0.75% for SOFR and base rate borrowing, respectively. At June 30, 2023, we were in compliance with the covenants and conditions of the Second Amended Credit Agreement.

At June 30, 2023 and December 31, 2022, we had $75.0 million and $88.0 million outstanding under the Credit Line, respectively. Our total interest expense on borrowings was $1.5 million and $0.6 million during the three months ended June 30, 2023 and 2022, respectively. Our total interest expense on borrowings was $2.9 million and $0.9 million during the six months ended June 30, 2023 and 2022, respectively.

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
Note 9 — Income Taxes

We recorded an income tax benefit of $0.5 million for the three months ended June 30, 2023 and income tax expense of $1.6 million for the three months ended June 30, 2022, respectively. We recorded income tax expense of $0.1 million and $4.0 million for the six months ended June 30, 2023 and 2022, respectively. The difference in income tax recorded for the six months ended June 30, 2023 and 2022 is primarily due to the mix of pre‐tax income among jurisdictions, including losses not benefited as a result of a valuation allowance. In addition, during the six months ended June 30, 2023, we received multiple tax incentives at two of our manufacturing entities in China approximating $1.6 million.

The difference between the Company's effective tax rate and the 21.0% U.S. federal statutory rate for the three months ended June 30, 2023 primarily related to the mix of pre-tax income and loss among jurisdictions and permanent tax items including a tax on global intangible low-taxed income. The permanent tax item related to global intangible low-taxed income also reflects recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

At December 31, 2022, we assessed the realizability of the Company's deferred tax assets by considering whether it is more likely than not some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We considered taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. At December 31, 2022, we had a three-year cumulative operating loss for our U.S. operations and, accordingly, have provided a full valuation allowance on our U.S. federal and state deferred tax assets. During the six months ended June 30, 2023, there was no change to our valuation allowance position.

At June 30, 2023, we had gross unrecognized tax benefits of $3.3 million, including interest and penalties, which, if not for the valuation allowance recorded against the state Research and Experimentation income tax credit, would affect the annual effective tax rate if these tax benefits are realized. Further, we are unaware of any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within the next twelve months. Based on federal, state and foreign statute expirations in various jurisdictions, we do not anticipate a decrease in unrecognized tax benefits within the next twelve months. We have classified uncertain tax positions as non-current income tax liabilities unless they are expected to be paid within one year.

We have elected to classify interest and penalties as a component of tax expense. Accrued interest and penalties are immaterial at June 30, 2023 and December 31, 2022 and are included in the unrecognized tax benefits.

Note 10 — Accrued Compensation

The components of accrued compensation were as follows:
(In thousands)June 30, 2023December 31, 2022
Accrued bonus$2,669 $3,348 
Accrued commission288 609 
Accrued salary/wages4,463 4,433 
Accrued social insurance (1)
6,746 7,037 
Accrued vacation/holiday3,551 3,300 
Other accrued compensation2,131 2,177 
Total accrued compensation$19,848 $20,904 
 
(1)PRC employers are required by law to remit the applicable social insurance payments to their local government. Social insurance is comprised of various components such as pension, medical insurance, job injury insurance, unemployment insurance, and a housing assistance fund, and is administered in a manner similar to social security in the United States. This amount represents our estimate of the amounts due to the PRC government for social insurance on June 30, 2023 and December 31, 2022.

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UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
Note 11 — Other Accrued Liabilities

The components of other accrued liabilities were as follows:
(In thousands)June 30, 2023December 31, 2022
Contract liabilities$2,192 $1,134 
Duties824 470 
Expense associated with fulfilled performance obligations1,572 1,120 
Freight and handling fees2,164 2,497 
Interest465 1,413 
Operating lease obligations5,141 5,509 
Product warranty claims costs522 522 
Professional fees2,234 2,293 
Sales and value added taxes2,830 3,750 
Other5,953 5,426 
Total other accrued liabilities$23,897 $24,134 

Note 12 — Commitments and Contingencies

Product Warranties

Changes in the liability for product warranty claims costs were as follows:
(In thousands)Six Months Ended June 30,
20232022
Balance at beginning of period$522 $1,095 
Accruals for warranties issued during the period 219 
Settlements (in cash or in kind) during the period (552)
Foreign currency translation gain (loss)  
Balance at end of period$522 $762 

Litigation

Roku Matters

2018 Lawsuit

On September 5, 2018, we filed a lawsuit against Roku, Inc. ("Roku") in the United States District Court, Central District of California, alleging that Roku is willfully infringing nine of our patents that are in four patent families related to remote control set-up and touchscreen remotes. On December 5, 2018, we amended our complaint to add additional details supporting our infringement and willfulness allegations. We have alleged that this complaint relates to multiple Roku streaming players and components therefor and certain universal control devices, including but not limited to the Roku App, Roku TV, Roku Express, Roku Streaming Stick, Roku Ultra, Roku Premiere, Roku 4, Roku 3, Roku 2, Roku Enhanced Remote and any other Roku product that provides for the remote control of an external device such as a TV, audiovisual receiver, sound bar or Roku TV Wireless Speakers. In October 2019, the Court stayed this lawsuit pending action by the Patent Trial and Appeals Board (the "PTAB") with respect to Roku's requests for Inter Partes Review ("IPR") (see discussion below). This lawsuit continues to be stayed until such time as the IPR's and all appeals with respect to them have concluded.

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International Trade Commission Investigation of Roku, TCL, Hisense and Funai

On April 16, 2020, we filed a complaint with the International Trade Commission (the "ITC") against Roku, TCL Electronics Holding Limited and related entities (collectively, "TCL"), Hisense Co., Ltd. and related entities (collectively, "Hisense"), and Funai Electric Company, Ltd. and related entities (collectively, "Funai") claiming that certain of their televisions, set-top boxes, remote control devices, human interface devices, streaming devices, and sound bars infringe certain of our patents. We asked the ITC to issue a permanent limited exclusion order prohibiting the importation of these infringing products into the United States and a cease and desist order to stop these parties from continuing their infringing activities. On May 18, 2020, the ITC announced that it instituted its investigation as requested by us. Prior to the trial, which ended on April 23, 2021, we dismissed TCL, Hisense and Funai from this investigation as they either removed or limited the amount of our technology from their televisions as compared to our patent claims that we asserted at the time. On July 9, 2021, the Administrative Law Judge (the "ALJ") issued his Initial Determination (the "ID") finding that Roku is infringing our patents and as a result is in violation of §337 of the Tariff Act of 1930, as amended (the "Tariff Act"). On July 23, 2021, Roku and we filed petitions to appeal certain portions of the ID. On November 10, 2021, the full ITC issued its final determination affirming the ID and issuing a Limited Exclusion Order (the "LEO") and Cease and Desist Order (the "CDO") against Roku, which became effective on January 9, 2022 and later this month, Roku filed its appeal of the ITC ruling with the Federal Circuit Court of Appeals. Oral argument for this appeal is set for September 5, 2023 and we expect a decision in the fourth quarter of 2023. Meanwhile, Roku continues to be subject to the LEO and CDO.

2020 Lawsuit

As a companion case to our ITC complaint, on April 9, 2020, we filed separate actions against each of Roku, TCL, Hisense, and Funai in the United States District Court, Central District of California, alleging that Roku is willfully infringing five of our patents and TCL, Hisense, and Funai are willfully infringing six of our patents by incorporating our patented technology into certain of their televisions, set-top boxes, remote control devices, human interface devices, streaming devices and sound bars. These matters have been and continue to be stayed pending the final results of the open IPR matters mentioned below.

Inter Partes Reviews

Throughout these litigation matters against Roku and the others identified above, Roku has filed multiple IPR requests with the PTAB on all patents at issue in the 2018 Lawsuit, the ITC Action, and the 2020 Lawsuit (see discussion above). To date, the PTAB has denied Roku's request fourteen times, and granted Roku's request twelve times. Roku has since filed two IPRs on two of our patents not yet asserted against it, and we are awaiting the PTAB's institution decision with respect to those new IPR requests. Of the twelve IPR requests granted by the PTAB, the results were mixed, with the PTAB upholding the validity of many of our patent claims and invalidating others. We have appealed all but one PTAB decision that resulted in an invalidation of our patent claims and we will continue to do so.

International Trade Commission Investigation Request Made by Roku against UEI and certain UEI Customers

On April 8, 2021, Roku made a request to the ITC to initiate an investigation against us and certain of our customers claiming that certain of our and those customers' remote control devices and televisions infringe two of Roku's recently acquired patents, the '511 patent and the '875 patent. On May 10, 2021, the ITC announced its decision to initiate the requested investigation. Immediately prior to trial Roku stipulated to summary determination as to its complaint against us and two of our customers with respect to one of the two patents at issue. This stipulation resulted in the complaint against us and two of our customers with respect to that patent not going to trial. The trial was thus shortened and ended on January 24, 2022. On June 24, 2022, the ALJ, pursuant to Roku's stipulation, found the '511 patent invalid as indefinite. Thereafter, on June 28, 2022, the ALJ issued her ID fully exonerating us and our customers finding the '875 patent invalid and that Roku failed to prove it established the requisite domestic industry and thus no violation of the Tariff Act. In advance of the full Commission's review, Roku and we filed petitions to appeal certain portions of the ID. In addition, the PTAB granted our request for an IPR with respect to the '875 patent. On October 28, 2022, the full ITC issued its final determination affirming the ID, ruling there was no violation of the Tariff Act and terminated the investigation. In December 2022, Roku filed an appeal, which remains pending. In addition, Roku, along with the ITC, filed a joint motion to dismiss the '511 patent as moot as it recently expired. We are opposing this motion. As a companion to its ITC request, Roku also filed a lawsuit against us in Federal District Court in the Central District of California alleging that we are infringing the same two patents they alleged being infringed in the ITC investigation
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explained above. This District Court case has been stayed pending the ITC case, and will likely continue to be stayed pending the conclusion of the '875 IPR investigation, even after Roku's appeal of the ITC case has concluded.

Court of International Trade Action against the United States of America, et. al.

On October 9, 2020, we and our subsidiaries, Ecolink Intelligent Technology, Inc. ("Ecolink") and RCS Technology, LLC ("RCS"), filed an amended complaint (20-cv-00670) in the Court of International Trade (the "CIT") against the United States of America; the Office of the United States Trade Representative; Robert E. Lighthizer, U.S. Trade Representative; U.S. Customs & Border Protection; and Mark A. Morgan, U.S. Customs & Border Protection Acting Commissioner, challenging both the substantive and procedural processes followed by the United States Trade Representative ("USTR") when instituting Section 301 Tariffs on imports from China under Lists 3 and 4A.

Pursuant to this complaint, Ecolink, RCS and we are alleging that USTR's institution of Lists 3 and 4A tariffs violated the Trade Act of 1974 (the "Trade Act") on the grounds that the USTR failed to make a determination or finding that there was an unfair trade practice that required a remedy and moreover, that Lists 3 and 4A tariffs were instituted beyond the 12-month time limit provided for in the governing statute. Ecolink, RCS and we also allege that the manner in which the Lists 3 and 4A tariff actions were implemented violated the Administrative Procedures Act (the "APA") by failing to provide adequate opportunity for comments, failed to consider relevant factors when making its decision and failed to connect the record facts to the choices it made by not explaining how the comments received by USTR came to shape the final implementation of Lists 3 and 4A.

Ecolink, RCS and we are asking the CIT to declare that the defendants' actions resulting in the tariffs on products covered by Lists 3 and 4A are unauthorized by and contrary to the Trade Act and were arbitrarily and unlawfully promulgated in violation of the APA; to vacate the Lists 3 and 4A tariffs; to order a refund (with interest) of any Lists 3 and 4A duties paid by Ecolink, RCS and us; to permanently enjoin the U.S. government from applying Lists 3 and 4A duties against Ecolink, RCS and us; and award Ecolink, RCS and us our costs and reasonable attorney's fees.

In July 2021, the CIT issued a preliminary injunction suspending liquidation of all unliquidated entries subject to Lists 3 and 4A duties and has asked the parties to develop a process to keep track of the entries to efficiently and effectively deal with liquidation process and duties to be paid or refunded when finally adjudicated. On February 5, 2022, the CIT heard oral arguments on dispositive motions filed on behalf of plaintiffs and defendants. On April 1, 2022, the CIT issued its opinion on these dispositive motions, ruling that the USTR had the legal authority to promulgate List 3 and List 4A under Section 307(a)(1)(B) of the Trade Act, but that the USTR violated the APA when it promulgated List 3 and List 4A concluding that the USTR failed to adequately explain its decision as required under the APA. The Court ordered that List 3 and List 4A be remanded to the USTR for reconsideration or further explanation regarding its rationale for imposing the tariffs. The Court declined to vacate List 3 and List 4A, which means that they are still in place while on remand. The Court's preliminary injunction regarding liquidation of entries also remains in effect. The Court initially set a deadline of June 30, 2022, for the USTR to complete this process, which was extended to August 1, 2022.

On August 1, 2022, the USTR provided the Court with that further explanation and also purported to respond to the significant comments received during the original notice-and-comment process. On September 14, 2022, the lead plaintiff filed its comments to the USTR's August 1, 2022 filing, asserting that the USTR did not adequately respond to the Court's remand order and requested the Court to vacate the List 3 and List 4A tariffs and issue refunds immediately. On March 17, 2023, the CIT sustained the List 3 and List 4 tariffs, concluding that USTR’s rationale in support of the tariffs was not impermissibly post hoc. The court also concluded that USTR adequately explained its reliance on presidential direction and adequately responded to significant comments regarding the harm to the US economy, efficacy of the tariffs, and alternatives to the tariffs. Lead plaintiffs have appealed this decision and on July 17, 2023, the lead plaintiffs filed its opening brief to this appeal.

There are no other material pending legal proceedings to which we or any of our subsidiaries is a party or of which our respective property is the subject. However, as is typical in our industry and to the nature and kind of business in which we are engaged, from time to time, various claims, charges and litigation are asserted or commenced by third parties against us or by us against third parties arising from or related to product liability, infringement of patent or other intellectual property rights, breach of warranty, contractual relations, or employee relations. The amounts claimed may be substantial, but may not bear any reasonable relationship to the merits of the claims or the extent of any real risk of court awards assessed against us or in our favor. However, no assurances can be made as to the outcome of any of these matters, nor can we estimate the range of potential losses to us. In our opinion, final judgments, if any, which might be rendered against us in potential or pending
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litigation would not have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. Moreover, we believe that our products do not infringe any third parties' patents or other intellectual property rights.

We maintain directors' and officers' liability insurance which insures our individual directors and officers against certain claims, as well as attorney's fees and related expenses incurred in connection with the defense of such claims.

Note 13 — Treasury Stock

From time to time, our Board of Directors authorizes management to repurchase shares of our issued and outstanding common stock. Our share repurchase programs typically utilize various methods to effect the repurchases, including open market repurchases, negotiated block transactions, accelerated share repurchases or open market solicitations for shares, some or all of which could be effected through Rule 10b5-1 plans. We do not currently have any approved repurchase programs in progress.

We also repurchase shares of our issued and outstanding common stock to satisfy the cost of stock option exercises and/or income tax withholding obligations relating to the stock-based compensation of our employees and directors.
Repurchased shares of our common stock were as follows:
Six Months Ended June 30,
(In thousands)20232022
Open market shares repurchased 300 
Stock-based compensation related shares repurchased58 55 
Total shares repurchased58 355 
Cost of open market shares repurchased$ $9,438 
Cost of stock-based compensation related shares repurchased855 1,773 
Total cost of shares repurchased$855 $11,211 

Repurchased shares are recorded as shares held in treasury at cost. We hold these shares for future use as management and the Board of Directors deem appropriate.

Note 14 — Stock-Based Compensation

Stock-based compensation expense for each employee and director is presented in the same statement of operations caption as their cash compensation. Stock-based compensation expense by statement of operations caption and the related income tax benefit were as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2023202220232022
Cost of sales$26 $40 $62 $79 
Research and development expenses251 345 534 678 
Selling, general and administrative expenses:
Employees
1,666 1,852 3,672 3,579 
Outside directors
215 400 430 800 
Total employee and director stock-based compensation expense$2,158 $2,637 $4,698 $5,136 
Income tax benefit$209 $440 $480 $868 

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Stock Options

Stock option activity was as follows:    
Number of Options
(in thousands)
Weighted-Average Exercise PriceWeighted-Average Remaining Contractual Term
(in years)
Aggregate Intrinsic Value
(in thousands)
Outstanding at December 31, 2022
782 $44.16 
Granted236 24.77 
Exercised  $ 
Forfeited/canceled/expired(93)51.39 
Outstanding at June 30, 2023 (1)
925 $38.49 4.23$ 
Vested and expected to vest at June 30, 2023 (1)
925 $38.49 4.23$ 
Exercisable at June 30, 2023 (1)
581 $44.26 2.92$ 
(1)The aggregate intrinsic value represents the total pre-tax value (the difference between our closing stock price on the last trading day of the second quarter of 2023 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on June 30, 2023. This amount will change based on the fair market value of our stock.

The assumptions we utilized in the Black-Scholes option pricing model and the resulting weighted average fair value of stock option grants were the following:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Weighted average fair value of grants$ $ $10.83 $14.87 
Risk-free interest rate % %3.86 %1.78 %
Expected volatility % %45.89 %49.42 %
Expected life in years0.000.004.704.65

As of June 30, 2023, we expect to recognize $3.7 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 2.1 years.

Restricted Stock

Non-vested restricted stock award activity was as follows:
Shares
(in thousands)
Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2022
$376 $36.82 
Granted300 14.74 
Vested(181)37.11 
Forfeited(4)37.47 
Non-vested at June 30, 2023
$491 $23.21 

As of June 30, 2023, we expect to recognize $9.4 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 2.0 years.

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Note 15 — Performance-Based Common Stock Warrants

On March 9, 2016, we issued common stock purchase warrants to Comcast Corporation at a price of $54.55 per share. On January 1, 2023, all 275,000 of the vested and outstanding warrants expired unexercised.

Note 16 — Other Income (Expense)

Other income (expense), net consisted of the following: 
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2023202220232022
Net gain (loss) on foreign currency exchange contracts (1)
$(2,613)$153 $(2,807)$1,068 
Net gain (loss) on foreign currency exchange transactions1,868 (432)1,630 (1,010)
Other income (expense)43 (415)261 (392)
Other income (expense), net$(702)$(694)$(916)$(334)

(1)This represents the gains (losses) incurred on foreign currency hedging derivatives (see Note 18 for further details).

Note 17 — Earnings (Loss) Per Share

Earnings (loss) per share was calculated as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands, except per-share amounts)2023202220232022
BASIC
Net income (loss)$(10,411)$2,988 $(71,774)$78 
Weighted-average common shares outstanding12,860 12,659 12,804 12,736 
Basic earnings (loss) per share $(0.81)$0.24 $(5.61)$0.01 
DILUTED
Net income (loss)$(10,411)$2,988 $(71,774)$78 
Weighted-average common shares outstanding for basic12,860 12,659 12,804 12,736 
Dilutive effect of stock options, restricted stock and common stock warrants 55  111 
Weighted-average common shares outstanding on a diluted basis12,860 12,715 12,804 12,847 
Diluted earnings (loss) per share $(0.81)$0.23 $(5.61)$0.01 

The following number of stock options, shares of restricted stock and common stock warrants were excluded from the computation of diluted earnings per common share as their inclusion would have been anti-dilutive:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2023202220232022
Stock options925 616 875 590 
Restricted stock awards380 145 375 174 
Common stock warrants 275  275 

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Note 18 — Derivatives

The following table sets forth the total net fair value of derivatives:
 June 30, 2023December 31, 2022
Fair Value Measurement UsingTotal BalanceFair Value Measurement UsingTotal Balance
(In thousands)Level 1Level 2Level 3Level 1Level 2Level 3
Foreign currency exchange contracts$ $(1,465)$ $(1,465)$ $100 $ $100 

We held foreign currency exchange contracts, which resulted in a net pre-tax loss of $2.6 million and pre-tax gain of $0.2 million for the three months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, we had a net pre-tax loss of $2.8 million and pre-tax gain of $1.1 million, respectively.

Details of foreign currency exchange contracts held were as follows:
Date HeldCurrencyPosition HeldNotional Value
(in millions)
Forward Rate
Unrealized Gain/(Loss) Recorded at Balance Sheet
Date
(in thousands)(1)
Settlement Date
June 30, 2023USD/Chinese Yuan RenminbiCNY$36.0 7.0332 $(1,167)July 7, 2023
June 30, 2023USD/EuroUSD$22.0 1.0768 $(298)July 7, 2023
December 31, 2022USD/EuroUSD$26.0 1.0529 $(428)January 6, 2023
December 31, 2022USD/Chinese Yuan RenminbiCNY$31.0 7.0358 $528 January 6, 2023
(1)Unrealized gains on foreign currency exchange contracts are recorded in prepaid expenses and other current assets. Unrealized losses on foreign currency exchange contracts are recorded in other accrued liabilities.

Note 19 — Business Combination

On February 17, 2022, we acquired substantially all of the net assets of Qterics, a U.S.-based provider of multimedia connectivity solutions and services for internet-enabled consumer products. Under the terms of the Asset Purchase Agreement ("APA"), we paid a cash purchase price of approximately $0.9 million. The acquisition of these assets will allow us to expand our customer base in the OEM market.

Our consolidated income statement for the three and six months ended June 30, 2023 includes net sales of $0.6 million and $1.1 million, respectively, and net income of $76.0 thousand and $72.9 thousand, respectively, attributable to Qterics. Our consolidated income statement for the three and six months ended June 30, 2022 includes net sales of $0.6 million and $0.9 million, respectively, and net income of $9.2 thousand and $0.1 million, respectively, attributable to Qterics for the period commencing on February 17, 2022.
In accordance with the terms of the APA, the initial purchase price was subject to adjustment for differences between the initial estimated working capital balances and the final adjusted balances. This calculation was completed at March 31, 2022.

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Purchase Price Allocation