Universal Electronics Stock

Universal Electronics Inc. designs, develops, manufactures, ships and supports control and sensor technology solutions and a broad line of universal control systems, audio-video (AV) accessories, wireless security and smart home products that are used by the world's leading brands in the video services, consumer electronics, climate control, security, safety, home automation and home appliance markets.

The company’s product and technology offerings include:

easy-to-use, voice-enabled, automatically-programmed universal remote controls with two-way radio frequency (RF), as well as infrared (IR), sold primarily to video service providers (cable, satellite, Internet Protocol television (IPTV) and Over the Top (OTT) services), original equipment manufacturers (OEMs), retailers, and private label customers;

integrated circuits (ICs), on which the company’s software and universal device control database is embedded, sold primarily to OEMs, video service providers, and private label customers;

wall-mount and handheld thermostat controllers and connected accessories for smart energy management systems, primarily to OEM customers, as well as hotels and hospitality system integrators;

proprietary and standards-based RF sensors designed for residential security, safety and home automation applications;

AV accessories sold, directly and indirectly, to consumers, including universal remote controls, television wall mounts and stands and digital television antennas;

software, firmware and technology solutions that can enable devices such as TVs, set-top boxes, audio systems, smart speakers, game consoles and other consumer electronic and smart home devices to wirelessly connect and interact with home networks and interactive services to control and deliver home entertainment, smart home services and device or system information;

cloud-services that support the company’s embedded software and hardware solutions (directly or indirectly) enabling real-time device identification and system control;

intellectual property that the company licenses primarily to OEMs and video service providers; and

embedded and cloud-enabled software for reliable firmware update and digital rights management validation services to major consumer electronics brands.

The company’s sales channel strategy is to partner with customers who are leaders in their respective industries: in consumer electronics, it counts Samsung Electronics Co., Sony Group Corporation and LG Electronics as long-term accounts that represent a significant share of their industry; in video services, Comcast Corporation, Liberty Global and Vodafone Group rank amongst the largest video service providers in their respective markets; in climate control, Daikin Industries Ltd., is the market share leader in the global HVAC industry; and in security, safety and home automation, Vivint Smart Home, Somfy SA, Ring LLC and Hunter Douglas NV are channel leaders in their respective connected home markets.

Distribution methods for the company’s control solutions vary depending on the sales channel. The company distributes remote control devices, ICs, home security sensors, connected thermostats and AV accessories directly to video and security service providers and OEMs, both domestically and internationally. The company also distributes home security sensors and connected thermostats to pro-security installers and hospitality system integrators in the United States and Europe through a network of national and regional distributors and dealers.

Additionally, the company sells its wireless control devices and AV accessories under the One For All, Ecolink and private label brand names to retailers through its international subsidiaries and direct to retailers in key markets, such as in the United States, the United Kingdom, Germany, France, Spain, and Italy. The company utilizes third-party distributors for the retail channel in countries where it does not have subsidiaries.

QuickSet (QuickSet) is a software application that may be embedded in any entertainment or smart home device, set-top box, or other host device, or delivered as a cloud-based service, through Quickset Cloud, to enable universal device setup and control. QuickSet and QuickSet Cloud utilize data transmitted over HDMI, low power RF (such as Bluetooth or Zigbee), and Internet Protocol (IP) networks to automatically detect various attributes of connected devices and download the appropriate control codes and functions to enable user access and control without the need for the user to enter any specific device information. With QuickSet and QuickSet Cloud, consumers can switch easily between activities and reliably view their chosen device or content with a single touch. A QuickSet and QuickSet Cloud user experience can be delivered via a tactile remote, touchscreen interface, on-screen graphical user interface or voice-enabled system.

QuickSet and QuickSet Cloud are integral components of major TV and TV operator systems and are the primary solutions for easy discovery, setup and control of entertainment and smart home devices. Today, QuickSet smart home services are the technology behind the Home Dashboard of LG TVs and provide a complete and simplified system control experience for households. The platform has continuously expanded with new capabilities, including enhanced communication protocols, such as Matter, IP, Zigbee 3.0, Zigbee RF4CE, Consumer Electronics Control (CEC) and infrared. Licensees of QuickSet and/or QuickSet Cloud include service providers, such as Comcast Corporation, Charter Communications, TiVo, DIRECTV and DISH Network Corporation; smart TV manufacturers, such as Sony Group Corporation, LG Electronics and Samsung Electronics Co.; leading game console manufacturer Sony on its PlayStation 5 remote control; and has grown to include HVAC and emerging home automation customers.

UEI’s QuickSet Widgets provide fully managed Internet of Things (IoT) capability to non-connected electronic devices for fast time-to-market and enable digital transformation of end-user interaction. It is expanding to include native support of Matter across the QuickSet Widget family with Virtual Agent-assisted easy onboarding. This will enable products powered by the QuickSet Widget including the UEI TIDE family of Smart Thermostats to be Matter-capable.

UEI TIDE, a white label smart thermostat platform designed for HVAC OEMs, as well as hospitality-branded applications, offers native cloud connectivity, features the company’s latest device management and lifecycle support services which simplify setup and control and allows interoperability with a variety of smart home devices and ecosystems. The smart thermostat line includes all the necessary connectivity technologies to address the evolving smart home, including seamless connection to the cloud over Wi-Fi plus local device connectivity via Bluetooth Smart, Zigbee and Infrared, including support for Matter, the industry's latest smart home connectivity standard.

With its commitment to create environmentally-sustainable solutions that do not compromise but enhance product performance, the company introduced the UEI Eterna line of voice-enabled control solutions which are designed with its new generation of Extreme Low-Power System-on-Chip and energy harvesting technologies to deliver increased processing capability while using significantly less power compared to prior generations. The energy-harvesting version of the remotes feature the company’s Battery-4-Life technology that relies on collecting energy from the environment's ambient light and radio frequencies to deliver a remote-control solution that is designed to require no battery replacement over the useful life of the product.

UEI Virtual Agent, an innovative self-service support solution, simplifies device onboarding by allowing customers to seamlessly hand-off the set-up process from a large screen (SmartTV) to a smaller one (mobile phone). With QuickSet integration, UEI Virtual Agent provides automated steps for onboarding, feature discovery and troubleshooting capabilities and is available both as a web-based application and a TV app for integration into existing infrastructures. UEI Virtual Agent, when bundled with the company’s newest set of UEI NetReady services for remote diagnostics and customer support, will further enhance the support experience for products already deployed in the home.

For the years ended December 31, 2022, the company’s sales to Comcast Corporation accounted for 14.5% of its net sales. For the years ended December 31, 2022, the company’s sales to Daikin Industries Ltd. accounted for 14.4% of its net sales.

Markets and Competition

The company continues to place significant emphasis on expanding its sales and marketing efforts to video service providers and home entertainment OEMs in Asia, Latin America and Europe. In the markets for video services, the company includes cable, satellite, IPTV and OTT service providers. The company’s portfolio includes universal control products compatible with Apple's tvOS and Google's AndroidTV platforms designed for the Multichannel Video Programming Distributor (MVPD) market allowing subscribers access to subscription-based channels through hybrid and OTT streaming platforms.

Additionally, some of the company’s customers have successfully introduced media streaming services and expanded their footprint to new end-users. Tivo Stream, Comcast's Flex, Sky Glass and DISH Sling are examples of current customer offerings of these types of services.

At the same time, the company has seen its markets in Home Entertainment OEM, and especially its SmartTV OEMs, successfully upgrade to streaming service aggregators. The advanced TV interfaces on Smart TVs and related streaming devices offer platforms for personalized advertising and smart home services which is expected to ensure demand for the company’s wireless and wired control products, microcontrollers and software technology.

The company’s principal competitors in the home entertainment market are Remote Solutions, Home Control International, SMK, Ohsung, Tech4Home and Ruwido. In the international retail and private label markets for wireless controls, the company competes primarily with a variety of accessory trading and branding companies like Jasco and Hama, as well as various manufacturers of wireless controls in Asia. The company’s primary competitors in the OEM market are the OEMs themselves and various wireless control manufacturers in Asia.

In home security, safety and automation, the company offers universal sub-gigahertz products that are compatible with the top security panel manufacturers, such as Honeywell, GE, Tyco/DSC and 2GIG. In the Do-It-Yourself (DIY) residential security channel, the company offers sensor-based products using industry standard Z-Wave and ZigBee protocols. In this market, the company competes with offshore-based, original design and built-to-print hardware manufacturers, such as Leedarson. In the connected smart home market, the company competes with the OEMs themselves, as well as wireless manufacturers in North America, such as Nice, and other original design manufacturers in Asia.

In the HVAC controller and thermostat market, the company competes with regional specialists and global companies, such as Honeywell, Johnson Controls, Emerson, Schneider Electric, as well as Far East based OEM manufacturers, such as Computime.

Intellectual Property

The company holds and applies for patents in the United States and abroad related to its remote control, home security, safety, climate control, and automation technologies. The company’s patents have remaining lives ranging from one to 18 years. The company has also obtained copyright registration and claim copyright protection for certain proprietary software and libraries of its device control codes.

Manufacturing and Supply

The company’s largest integrated circuit supplier, Qorvo International Pte Ltd., provided 11.5% of its total inventory purchases in 2022.

Research and Development

The company’s research and development expenses included $32.5 million in 2022.

Seasonality

Historically, the company’s business has been influenced by the retail sales cycle, with increased sales in the second half of the year (year ended December 31, 2022).

Government Regulation and Environmental Matters

The company’s products distributed in the European Union are compliant with the RoHS (Restriction of Hazardous Substances Directive 2011/65/EU and 2015/863/EU) and REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) directives. In response to and to comply with certain National Standards published by the Chinese government, the company’s Green Team has been working proactively for the identification and reduction of volatile organic compounds (VOCs) within its supply chain. The company’s European subsidiaries are Waste Electrical and Electronic Equipment (WEEE) compliant.

History

Universal Electronics Inc. was founded in 1986. The company was incorporated under the laws of Delaware in 1986.