The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear elsewhere in this report.

Cautionary Statement



All statements in this report are made as of the date this Form 10-Q is filed
with the U.S. Securities and Exchange Commission (the "SEC"). We undertake no
obligation to publicly update or revise these statements, whether as a result of
new information, future events or otherwise. We make forward-looking statements
in Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this report based on the beliefs and assumptions of
our management and on information available to us through the date this Form
10-Q is filed with the SEC. Forward-looking statements include information
related to the future effects on our business of the coronavirus pandemic
("COVID-19"); supply chain issues; other future demand and recovery trends and
expectations; the delay by or failure of our customers to order products from
us; the effects of natural or other events beyond our control, including the
effects of political unrest, war (including the conflict between Russia and
Ukraine) or terrorist activities may have on us or the economy; the economic
environment's including increases in interest rates and recessionary effects on
us or our customers; the effects of doing business internationally; our
expectations regarding our ability to meet our liquidity requirements; our
capital expenditures and other investment spending expectations; the timing and
amount of future share repurchases; and other statements that are preceded by,
followed by, or include the words "believes," "expects," "anticipates,"
"intends," "plans," "estimates," "foresees," or similar expressions; and similar
statements concerning anticipated future events and expectations that are not
historical facts.

We caution you that these statements are not guarantees of future performance
and are subject to numerous evolving risks and uncertainties that we may not be
able to accurately predict or assess, including the risks and uncertainties we
describe in our Annual Report on Form 10-K for the fiscal year ended December
31, 2021 ("2021 Form 10-K"), Part II, Item 1A of this report, and other factors
we describe from time to time in our periodic filings with the SEC.

Overview



We design, develop, manufacture, ship and support control and sensor technology
solutions and a broad line of universal control systems, audio-video ("AV")
accessories, and intelligent wireless security and smart home products that are
used by the world's leading brands in the video services, consumer electronics,
security, home automation, climate control, and home appliance markets. Our
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") remote controls,
that are 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 our software and universal device control database is embedded, sold primarily to OEMs, video service providers, and private label customers;



•software, firmware and technology solutions that can enable devices such as
TVs, set-top boxes, audio systems, smart speakers, game controllers 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 our embedded software and hardware solutions (directly or indirectly) enabling software update and device provisioning services, as well as real-time device identification and system control with billions of transactions per year in device and data management;

•intellectual property that we license primarily to OEMs and video service providers;

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



•wall-mount and handheld thermostat controllers and connected accessories for
intelligent energy management systems, primarily to OEM customers, as well as
hotels and hospitality system integrators; and
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•AV accessories sold, directly and indirectly, to consumers including universal remote controls, television wall mounts and stands and digital television antennas.




A key factor in creating products and software for control of entertainment
devices is our proprietary device knowledge graph. Since our beginning in 1986,
we have compiled an extensive device control knowledge library that includes
over 13,100 brands comprising over 1,013,000 device models across AV and smart
home platforms, supported by many common smart home protocols, including IR,
HDMI-CEC, Zigbee (Rf4CE) Z-Wave, and IP, as well as Home Network and Cloud
Control.

This device knowledge graph is backed by our unique device fingerprinting technology, which includes nearly 32.6 million unique device fingerprints across both AV and Smart Home devices.



Our technology also includes other remote controlled home entertainment devices
and home automation control modules, as well as wired Consumer Electronics
Control ("CEC") and wireless IP control protocols commonly found on many of the
latest HDMI and internet connected devices. Our proprietary software
automatically detects, identifies and enables the appropriate control commands
for many home entertainment and automation devices in the home. Our libraries
are continuously updated with device control codes used in newly introduced AV
and Internet of Things devices. These control codes are captured directly from
original control devices or from the manufacturers' written specifications to
ensure the accuracy and integrity of the library. Our proprietary software and
know-how permit us to offer a device control code database that is more robust
and efficient than similarly priced products of our competitors.

We hold a number of patents in the United States and abroad related to our
products and technology and have filed domestic and foreign applications for
other patents that are pending. At June 30, 2022, we had 670 issued and pending
U.S. patents related to remote control, home security, safety and automation as
well as hundreds of foreign counterpart patents and applications in various
territories around the world.

We operate as one business segment. We have two domestic subsidiaries and 25
international subsidiaries located in Brazil, British Virgin Islands, France,
Germany, Hong Kong (3), India, Italy, Japan, Korea, Mexico (2), the Netherlands,
People's Republic of China (the "PRC") (7), Singapore, Spain, United Kingdom and
Vietnam.

To recap our results for the three months ended June 30, 2022:

•Net sales decreased 7.6% to $139.1 million for the three months ended June 30, 2022 from $150.5 million for the three months ended June 30, 2021.

•Our gross margin percentage decreased to 28.3% for the three months ended June 30, 2022 from 29.7% for the three months ended June 30, 2021.



•Operating expenses, as a percentage of net sales, increased to 24.3% for the
three months ended June 30, 2022 from 23.7% for the three months ended June 30,
2021.

•Our operating income decreased to $5.5 million for the three months ended
June 30, 2022 from $9.0 million for the three months ended June 30, 2021. Our
operating income percentage decreased to 4.0% for the three months ended
June 30, 2022 from 6.0% for the three months ended June 30, 2021.

•Income tax expense decreased to $1.6 million for the three months ended June 30, 2022 from $3.3 million for the three months ended June 30, 2021.

Our strategic business objectives for 2022 include the following:



•continue to develop and market advanced remote control products and
technologies our customer base is adopting;
•continue to broaden our home control and home automation product offerings;
•continue to expand our software and service offerings to deliver a complete
managed service platform;
•continue to invest in creating technology differentiation across our global
product portfolio;
•further penetration of international subscription broadcasting markets;
•acquire new customers in historically strong regions;
•increase our share with existing customers;
•continue to seek acquisitions or strategic partners that complement and
strengthen our existing business; and
•continue our long-term factory planning strategy of reducing our concentration
risk in the People's Republic of China.


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We intend for the following discussion of our financial condition and results of
operations to provide information that will assist in understanding our
consolidated financial statements, the changes in certain key items in those
financial statements from period to period, and the primary factors that
accounted for those changes, as well as how certain accounting principles,
policies and estimates affect our consolidated financial statements.

COVID-19 Pandemic and Supply Chain Impact



The COVID-19 pandemic has been and continues to be a complex and
rapidly-evolving situation, and with the emergence of the COVID-19 Omicron
variant, it continues to have a material impact on our business. Local lockdowns
near our southern China factory during the last two weeks of the first quarter
of 2022 temporarily caused labor shortages that negatively affected our ability
to manufacture at full capacity and to meet customer demand. As of the issuance
of this report, our southern China factory and our other factories are operating
at or near labor capacity. The global health crisis caused by the COVID-19
pandemic may continue to negatively impact our business.

We have also been negatively impacted by supply chain difficulties including
obtaining ICs and other long-lead time components and we expect this to continue
into 2023. While we are taking production and inventory control steps in order
to mitigate the effects caused by these shortages, we cannot guarantee that
these steps will allow us to meet our short term IC and other component parts
needs. As such, these supply constraints continue to cause difficulty and delays
in our ability to fulfill customer orders and have at times resulted in
increased logistics costs. In addition, many of our products are paired with
certain of our customers' products, like set-top boxes or televisions. If those
customers are not able to obtain sufficient quantities of ICs for their
products, their demand for our products may decrease.

The overall operational and financial impact of the above is highly dependent on
the risk factors disclosed under the headings "Risks Relating to COVID-19" and
"Risks Relating to Operations" in Part I, Item 1A, "Risk Factors," of our 2021
Form 10-K and could be affected by other factors we are not currently able to
predict.

Macroeconomic Conditions

We have been negatively impacted and we expect to continue to be negatively
impacted by adverse macroeconomic conditions. Inflation has increased our
component and logistics costs. While we have been able to increase sales prices
on certain products, we may not be able to fully offset the impact of increased
material costs which would negatively impact our gross profit. Our cost of
labor, materials and borrowing may continue to increase which would negatively
impact our business and financial results. In addition, we expect recessionary
fears in the global economy will ultimately negatively impact our sales demand.

Critical Accounting Policies and Estimates



The preparation of financial statements in conformity with U.S. GAAP requires us
to make estimates and judgments 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 ongoing basis, we evaluate our estimates and
judgments, including those related to revenue recognition, inventory valuation,
impairment of long-lived assets, intangible assets and goodwill and income
taxes. Actual results may differ from these judgments and estimates, and they
may be adjusted as more information becomes available. Any adjustment may be
significant and may have a material impact on our consolidated financial
statements.

An accounting estimate is deemed to be critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain
at the time the estimate is made, if different estimates reasonably may have
been used, or if changes in the estimate that are reasonably likely to occur may
materially impact the financial statements. We do not believe that there have
been any significant changes during the six months ended June 30, 2022 to the
items that we disclosed as our critical accounting policies and estimates in
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained in our Annual Report on Form 10-K for our fiscal year
ended December 31, 2021.

Recent Accounting Pronouncements

See Note 1 contained in the "Notes to Consolidated Financial Statements" for a discussion of recent accounting pronouncements.


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Results of Operations

The following table sets forth our reported results of operations expressed as a percentage of net sales for the periods indicated.


                                                   Three Months Ended June 30,                      Six Months Ended June 30,
                                                   2022                   2021                    2022                    2021
Net sales                                            100.0  %                100.0  %                100.0  %                100.0  %
Cost of sales                                         71.7                    70.3                    72.1                    69.8
Gross profit                                          28.3                    29.7                    27.9                    30.2
Research and development expenses                      6.2                     5.1                     6.1                     5.1
Selling, general and administrative expenses          18.1                    18.6                    20.0                    19.2
Operating income                                       4.0                     6.0                     1.8                     5.9
Interest income (expense), net                        (0.2)                   (0.1)                   (0.2)                   (0.1)

Other income (expense), net                           (0.5)                    0.0                    (0.1)                    0.0
Income before provision for income taxes               3.3                     5.9                     1.5                     5.8
Provision for income taxes                             1.2                     2.2                     1.5                     1.6
Net income                                             2.1  %                  3.7  %                    -  %                  4.2  %



Three Months Ended June 30, 2022 versus Three Months Ended June 30, 2021
Net sales. Net sales for the three months ended June 30, 2022 were $139.1
million compared to $150.5 million for the three months ended June 30, 2021. Our
subscription broadcast channel experienced the largest decrease in sales when
compared to the prior year period as a result of component shortages and lower
customer demand. Sales in our retail channel also declined due a loss of a
customer in North America and macroeconomic headwinds. Partially offsetting
these decreases is an increase in sales in our HVAC channel as we continue to
gain market share.

Gross profit. Gross profit for the three months ended June 30, 2022 was $39.4
million compared to $44.7 million for the three months ended June 30, 2021.
Gross profit as a percentage of sales decreased to 28.3% for the three months
ended June 30, 2022 from 29.7% for the three months ended June 30, 2021 as a
direct result of inflationary pressures associated with raw materials and
components, freight costs and wages. In order to mitigate the effect of
inflationary pressures, we implemented sales price increases on certain products
throughout the first two quarters of 2022.

Research and development ("R&D") expenses. R&D expenses increased to $8.6 million for the three months ended June 30, 2022 from $7.7 million in the prior year period. The increase in R&D expenses is due to an increase in product development activities.



Selling, general and administrative ("SG&A") expenses. SG&A expenses decreased
to $25.2 million for the three months ended June 30, 2022 from $28.0 million for
the three months ended June 30, 2021, primarily due to a decrease in outside
legal expenses related to a specific legal matter.

Interest income (expense), net. Interest expense, net increased to $0.2 million
for the three months ended June 30, 2022 from $0.1 million for the three months
ended June 30, 2021, as a result of a higher average loan balance and a higher
interest rate.

Other income (expense), net. Other expense, net increased to $0.7 million for
the three months ended June 30, 2022 from $17.0 thousand for the three months
ended June 30, 2021, mainly due to a one-time expense which we have filed an
insurance claim.

Provision for income taxes. Income tax expense was $1.6 million for the three
months ended June 30, 2022, representing an effective tax rate of 35.3% compared
to income tax expense of $3.3 million for the three months ended June 30, 2021,
representing an effective tax rate of 37.0%. We expect the U.S. to be in a
pre-tax loss position without benefit for the full year 2022, which is the
primary reason for the elevated effective tax rate. In addition, recent
legislative changes for research and experimentation costs and creditability of
certain foreign income taxes have resulted in a modest increase to our effective
tax rate.
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Six Months Ended June 30, 2022 versus Six Months Ended June 30, 2021



Net sales. Net sales for the six months ended June 30, 2022 were $271.5 million,
a decrease compared to $301.0 million for the six months ended June 30, 2021.
Sales in our subscription broadcast channel were lower than the prior year
period due primarily to component shortages and lower customer demand. Sales in
our retail channel were also lower than the prior year period due to the loss of
a customer in North America and macroeconomic headwinds.

Gross profit. Gross profit for the six months ended June 30, 2022 was $75.6
million compared to $91.1 million for the six months ended June 30, 2021. Gross
profit as a percentage of sales decreased to 27.9% for the six months ended
June 30, 2022 from 30.2% for the six months ended June 30, 2021. Gross profit as
a percentage of sales was unfavorably impacted by inflationary pressures
associated with raw materials and components, freight costs and wages. Partially
offsetting these unfavorable impacts were sales price increases on certain
products which were implemented throughout the first two quarters of 2022.

Research and development expenses. R&D expenses increased to $16.4 million for
the six months ended June 30, 2022 from $15.6 million in the prior year period.
The increase in R&D expenses is due to an increase in product development
activities.

Selling, general and administrative expenses. SG&A expenses decreased to $54.3
million for the six months ended June 30, 2022 from $57.8 million for the six
months ended June 30, 2021, primarily due to a decrease in outside legal
expenses related to a specific legal matter and a decrease in incentive
compensation.

Interest income (expense), net. Interest expense, net increased to $0.5 million for the six months ended June 30, 2022 from $0.2 million for the six months ended June 30, 2021, as a result of higher average loan balances and higher interest rates.



Other income (expense), net. Other expense, net was $0.3 million for the six
months ended June 30, 2022, as a result of a one-time expense which we have
filed an insurance claim, compared to other income, net of $6.0 thousand for the
six months ended June 30, 2021, as a result of net foreign currency gains.

Provision for income taxes. Income tax expense was $4.0 million for the six
months ended June 30, 2022, representing an effective tax rate of 98.1% compared
to income tax expense of $4.8 million for the six months ended June 30, 2021,
representing an effective tax rate of 27.7%. We expect the U.S. to be in a
pre-tax loss position without benefit for the full year 2022, which is the
primary reason for the elevated effective tax rate. In addition, recent
legislative changes for research and experimentation costs and creditability of
certain foreign income taxes have resulted in a modest increase to our effective
tax rate.

Liquidity and Capital Resources

Sources of Cash



Historically, we have utilized cash provided from operations as our primary
source of liquidity, as internally generated cash flows have been sufficient to
support our business operations, capital expenditures and discretionary share
repurchases. In addition, we have utilized our revolving line of credit to fund
an increased level of share repurchases and acquisitions. We anticipate that we
will continue to utilize both cash flows from operations and our revolving line
of credit to support ongoing business operations, capital expenditures, expenses
associated with our long-term factory planning strategy, future discretionary
share repurchases and potential future acquisitions. We believe our current cash
balances, anticipated cash flow to be generated from operations and available
borrowing resources will be sufficient to cover expected cash outlays for at
least the next twelve months and for the foreseeable future thereafter; however,
because our cash is located in various jurisdictions throughout the world, we
may at times need to increase borrowing from our revolving line of credit or
take on additional debt until we are able to transfer cash among our various
entities.

Our liquidity is subject to various risks including the risks discussed under "Item 3. Quantitative and Qualitative Disclosures about Market Risk."



(In thousands)                   June 30, 2022       December 31, 2021
Cash and cash equivalents       $       46,130      $           60,813
Available borrowing resources           34,300                  66,300



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Cash, cash equivalents and term deposit - On June 30, 2022, we had $4.5 million,
$15.3 million, $11.8 million, $11.7 million and $2.8 million of cash and cash
equivalents in North America, the PRC, Asia (excluding the PRC), Europe, and
South America, respectively. In addition, at June 30, 2022, we had a one-year
term deposit of $7.8 million, which will mature on January 25, 2023. We attempt
to mitigate our exposure to liquidity, credit and other relevant risks by
placing our cash, cash equivalents, and term deposits with financial
institutions we believe are high quality.

Our cash balances are held in numerous locations throughout the world. The
majority of our cash is held outside of the United States and may be repatriated
to the United States but, under current law, may be subject to state income and
foreign withholding taxes. Additionally, repatriation of some foreign balances
is restricted by local laws. We have provided for the state income tax and the
foreign withholding tax liabilities on these amounts for financial statement
purposes.

Available Borrowing Resources - Our Second Amended and Restated Credit Agreement
("Second Amended Credit Agreement") with U.S. Bank National Association ("U.S.
Bank") provides for a $125.0 million revolving line of credit ("Credit Line")
that expires on November 1, 2023. 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 $2.7 million at June 30, 2022. At June 30, 2022, we had an
outstanding balance of $88.0 million on our Credit Line and $34.3 million of
availability.

See Note 8 contained in the "Notes to Consolidated Financial Statements" for further information regarding our Credit Line.

Sources and Uses of Cash

Our cash flows were as follows:


                                                Six Months Ended           Increase           Six Months Ended
(In thousands)                                    June 30, 2022           (Decrease)            June 30, 2021
Cash provided by (used for) operating
activities                                      $      (17,084)         $    (33,568)         $       16,484
Cash provided by (used for) investing
activities                                             (16,927)               (8,814)                 (8,113)
Cash provided by (used for) financing
activities                                              20,789                20,482                     307
Effect of foreign currency exchange rates on
cash and cash equivalents                               (1,461)               (3,320)                  1,859
Net increase (decrease) in cash and cash
equivalents                                     $      (14,683)         $    (25,220)         $       10,537



                                                    Increase
                               June 30, 2022       (Decrease)      December 31, 2021
Cash and cash equivalents     $       46,130      $  (14,683)     $           60,813
Working capital                      115,087          (5,272)                120,359



Net cash used for operating activities was $17.1 million during the six months
ended June 30, 2022 compared to net cash provided by operating activities of
$16.5 million during the six months ended June 30, 2021. Net income was $0.1
million for the six months ended June 30, 2022 compared to net income of $12.6
million for the six months ended June 30, 2021. Inventories increased by $16.3
million during the six months ended June 30, 2022 compared to an increase of
$1.1 million during the six months ended June 30, 2021. We are currently in a
unique environment where certain components, most prominently ICs, are in short
supply. The lead times associated with these components have increased
significantly; consequently, when an opportunity arises to procure more than
what is needed at a given period of time, we are proceeding with the purchase.
This has currently led to us carrying more inventory than is optimal. Our
inventory turns decreased to 2.7 turns at June 30, 2022 compared to 3.4 turns at
June 30, 2021. Changes in accounts payable and accrued liabilities resulted in
cash outflows of $15.0 million during the six months ended June 30, 2022 largely
as a result of the timing of payments and a decrease in accrued compensation.
Changes in accounts payable and accrued liabilities resulted in cash outflows of
$7.3 million during the six months ended June 30, 2021 largely as a result of
the timing of payments and a decrease in accrued compensation.

For the second half of 2022, we expect component shortages will continue to have
an adverse effect on cash flows with some relief beginning to occur in the first
half of 2023. In addition, we expect to commence manufacturing operations in a
new factory in Vietnam in the fourth quarter of 2022 which, in the short run,
may result in manufacturing inefficiencies.

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Net cash used for investing activities during the six months ended June 30, 2022
was $16.9 million, of which $7.5 million, $0.9 million, $5.5 million and $3.0
million was used for our term deposit investment, acquisition of Qterics Inc.,
capital expenditures, and the development of patents, respectively. Net cash
used for investing activities during the six months ended June 30, 2021 was $8.1
million of which $6.2 million and $1.9 million was used for capital expenditures
and the development of patents, respectively.

Future cash flows used for investing activities are largely dependent on the
timing and amount of capital expenditures. We estimate that we will incur
between $13.0 million and $16.0 million during the remainder of 2022, which
includes amounts associated with our factory in Vietnam, which we anticipate
commencing operations in the fourth quarter of 2022.

Net cash provided by financing activities was $20.8 million during the six
months ended June 30, 2022 compared to $0.3 million during the six months ended
June 30, 2021. The increase in cash provided by financing activities was driven
partially by borrowing and repayment activity on our line of credit. During the
six months ended June 30, 2022, we had net borrowings of $32.0 million compared
to net borrowings of $26.0 million during the six months ended June 30, 2021.

During the six months ended June 30, 2022, we repurchased 354,558 shares of our
common stock at a cost of $11.2 million compared to our repurchase of 510,715
shares at a cost of $26.7 million during the six months ended June 30, 2021.

Future cash flows used for financing activities are affected by our financing
needs which are largely dependent on the level of cash provided by or used in
operations and the level of cash used in investing activities. Additionally,
potential future repurchases of shares of our common stock will impact our cash
flows used for financing activities. See Note 13 contained in "Notes to
Consolidated Financial Statements" for further information regarding our share
repurchase programs.

Material Cash Commitments - The following table summarizes our material cash
commitments and the effect these commitments are expected to have on our cash
flows in future periods:

                                                                Payments Due by Period
                                                          Less than       1 - 3         4 - 5        After
(In thousands)                               Total         1 year         years         years       5 years
Operating lease obligations                $ 27,213      $   7,076      $ 10,773      $ 5,442      $ 3,922
Property, plant, and equipment purchases        1,776        1,776             -            -            -
Inventory purchases                            23,163       23,163             -            -            -
Software license                                3,467           52           420          841        2,154
Total material cash commitments            $ 55,619      $  32,067      $ 

11,193 $ 6,283 $ 6,076

We anticipate meeting our material cash commitments with our cash generated from operations and available borrowing resources, including our Credit Line.

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