Financial Statements
−Removed: XPERI HOLDING CORPORATION
CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS
1 unchanged sentence
Three Months Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
+Added: September 30,
+Added: September 30,
Operating expenses:
5 unchanged sentences
Litigation expense
+Added: Goodwill impairment
Total operating expenses
−Removed: Operating income
+Added: Operating income (loss)
Interest expense
−Removed: Other income, net
+Added: Other income and expense, net
Loss on debt extinguishment
−Removed: Income (loss) before taxes
−Removed: Provision for (benefit from) income taxes
−Removed: Net income (loss)
+Added: Loss before taxes
+Added: Provision for income taxes
net loss attributable to noncontrolling interest
−Removed: Net income (loss) attributable to the Company
−Removed: Income (loss) per share attributable to the Company:
+Added: Net loss attributable to the Company
+Added: Loss per share attributable to the Company:
Weighted average number of shares used in per share
3 unchanged sentences
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
−Removed: XPERI HOLDING CORP ORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
1 unchanged sentence
Three Months Ended
−Removed: Six Months Ended
−Removed: Net income (loss)
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
+Added: September 30,
+Added: September 30,
Other comprehensive income (loss), net of tax:
2 unchanged sentences
debt securities
−Removed: Other comprehensive income (loss), net of tax
−Removed: Comprehensive income (loss)
+Added: Other comprehensive loss, net of tax
+Added: Comprehensive loss
comprehensive loss attributable to noncontrolling interest
−Removed: Comprehensive income (loss) attributable to the Company
+Added: Comprehensive loss attributable to the Company
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
−Removed: XPERI HOLDING CORPORATION
CONDENSED CONSOLIDA TED BALANCE SHEETS
(in thousands, except for par value)
+Added: September 30,
Current assets:
9 unchanged sentences
Intangible assets, net
+Added: Goodwill, net
Other long-term assets
28 unchanged sentences
Accumulated other comprehensive loss
−Removed: Retained earnings
+Added: Retained earnings (accumulated deficit)
Total Company stockholders’
2 unchanged sentences
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
−Removed: XPE RI HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
−Removed: Six Months Ended
−Removed: June 30, 2022
−Removed: June 30, 2021
+Added: Nine Months Ended
+Added: September 30, 2022
+Added: September 30, 2021
Cash flows from operating activities:
−Removed: Adjustments to reconcile net income to net cash from operating activities:
+Added: Adjustments to reconcile net loss to net cash from operating activities:
Depreciation of property and equipment
Amortization of intangible assets
+Added: Goodwill impairment
Stock-based compensation expense
1 unchanged sentence
Loss on debt extinguishment
+Added: Patent assets received in lieu of cash
Changes in operating assets and liabilities:
8 unchanged sentences
Proceeds from sale of property and equipment
−Removed: Net cash paid for acquisitions
+Added: Cash paid for acquisitions, net of cash acquired
Purchases of intangible assets
6 unchanged sentences
Repayment of debt
−Removed: Proceeds from debt, net of debt discount and issuance costs
+Added: Debt refinancing costs
Proceeds from employee stock purchase program and exercise of stock options
8 unchanged sentences
Income taxes paid, net of refunds
+Added: Debt acquired in a business acquisition
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
−Removed: XPERI HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
1 unchanged sentence
Total Company Stockholders' Equity
−Removed: Three Months Ended June 30, 2022
+Added: Three Months Ended September 30, 2022
Treasury Stock
Comprehensive
+Added: Retained Earnings
Noncontrolling
−Removed: Balance at April 1, 2022
+Added: (Accumulated Deficit)
+Added: Balance at July 1, 2022
Issuance of subsidiary shares to noncontrolling interest
2 unchanged sentences
Issuance of common stock in connection with exercise of stock options
+Added: Issuance of common stock in connection with employee stock purchase plan
Issuance of restricted stock, net of shares canceled
2 unchanged sentences
Stock-based compensation expense
−Removed: Balance at June 30, 2022
+Added: Balance at September 30, 2022
Total Company Stockholders' Equity
−Removed: Six Months Ended June 30, 2022
+Added: Nine Months Ended September 30, 2022
Treasury Stock
Comprehensive
+Added: Retained Earnings
Noncontrolling
+Added: (Accumulated Deficit)
Balance at January 1, 2022
Issuance of subsidiary shares to noncontrolling interest
−Removed: Net income (loss)
Other comprehensive loss
7 unchanged sentences
Stock-based compensation expense
−Removed: Balance at June 30, 2022
+Added: Balance at September 30, 2022
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
−Removed: XPERI HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
1 unchanged sentence
Total Company Stockholders' Equity
−Removed: Three Months Ended June 30, 2021
+Added: Three Months Ended September 30, 2021
Treasury Stock
2 unchanged sentences
Income (Loss)
−Removed: Balance at April 1, 2021
+Added: Balance at July 1, 2021
Issuance of subsidiary shares to noncontrolling interest
−Removed: Other comprehensive income
+Added: Other comprehensive loss
Cash dividends paid on common stock ($ 0.05 per share)
Issuance of common stock in connection with exercise of stock options
+Added: Issuance of common stock in connection with employee stock purchase plan
Issuance of restricted stock, net of shares canceled
2 unchanged sentences
Stock-based compensation expense
−Removed: Balance at June 30, 2021
+Added: Balance at September 30, 2021
Total Company Stockholders' Equity
−Removed: Six Months Ended June 30, 2021
+Added: Nine Months Ended September 30, 2021
Treasury Stock
4 unchanged sentences
Issuance of subsidiary shares to noncontrolling interest
−Removed: Net income (loss)
Other comprehensive loss
6 unchanged sentences
Stock-based compensation expense
−Removed: Balance at June 30, 2021
+Added: Balance at September 30, 2021
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
−Removed: XPER I HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 unchanged sentence
THE COMPANY AND BASIS OF PRESENTATION
+Added: (formerly known as Xperi Holding Corporation) (the "Company") a Delaware corporation, is one of the industry’s largest intellectual property ("IP") licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 9,500 patents and patent applications worldwide.
On December 18, 2019, Xperi Corporation (“Xperi”) entered into an Agreement and Plan of Merger and Reorganization with TiVo Corporation (“TiVo”) to combine in an all-stock merger of equals transaction (the “Mergers”).
−Removed: Immediately following the consummation of the Mergers on June 1, 2020 (the “Merger Date”), Xperi Holding Corporation (the “Company”), a Delaware corporation founded in December 2019 under the name “XRAY-TWOLF HoldCo Corporation,”
+Added: Immediately following the consummation of the Mergers on June 1, 2020 (the “Merger Date”), Xperi Holding Corporation, a Delaware corporation founded in December 2019 under the name “XRAY-TWOLF HoldCo Corporation,”
became the parent company of both Xperi and TiVo.
1 unchanged sentence
On June 2, 2020, Xperi Holding Corporation’s common stock, par value $ 0.001 per share, commenced trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “XPER.”
−Removed: Xperi Holding Corporation is a leading consumer and entertainment product/solutions licensing company and one of the industry’s largest intellectual property licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 11,000 patents and patent applications worldwide.
−Removed: The Company creates extraordinary experiences at home and on the go for millions of consumers around the world, elevating content and how audiences connect with it in a way that is more intelligent, immersive and personal.
−Removed: Powering smart devices, connected cars, entertainment experiences and more, the Company has created a unified ecosystem that reaches highly engaged consumers, uncovering significant new business opportunities, now and in the future.
−Removed: The Company’s technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for partners, customers and consumers.
+Added: On October 1, 2022, the Company completed the previously announced separation ("the Separation") of its product business into a separate, independent publicly traded company, Xperi Inc.
+Added: ("Xperi Inc.").
+Added: The Separation was structured as a spin-off (the "Spin-off"), which was achieved through the Company's distribution (the "Distribution") of 100 percent of the outstanding shares of Xperi Inc.'s common stock to holders of the Company's common stock as of the close of business on the record date of September 21, 2022 (the "Record Date").
+Added: Each Company stockholder of record received four shares of Xperi Inc.
+Added: common stock for every ten shares of Company common stock that it held on the Record Date.
+Added: Following the Separation, the Company retains no ownership in Xperi Inc., which is now listed under the ticker symbol "XPER" on the New York Stock Exchange.
+Added: Effective at the open of business on October 3, 2022, the Company's shares of common stock, par value $ 0.001 per share, began trading on the Nasdaq Global Select Market under the new ticker symbol "ADEA".
+Added: is a leading consumer and entertainment product/solutions licensing company.
+Added: creates extraordinary experiences at home and on the go for millions of consumers around the world, elevating content and how audiences connect with it in a way that is more intelligent, immersive and personal.
+Added: Powering smart devices, connected cars, entertainment experiences and more, Xperi Inc.
+Added: has created a unified ecosystem that reaches highly engaged consumers and uncovers significant new business opportunities, now and in the future.
+Added: Xperi Inc.’s technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for Xperi Inc.'s partners, customers and consumers.
+Added: The Company's financial results for the three and nine months ended September 30, 2022 include Xperi Inc., and the discussion in these notes to the interim unaudited condensed consolidated financial statements describes the historical results and business of Xperi Inc.
+Added: With the completion of the Separation, the Company will no longer consolidate Xperi Inc.
+Added: into its financial results and the historical results of Xperi Inc.
+Added: will be presented as discontinued operations in the Company's consolidated financial statements beginning in the fourth quarter of 2022.
+Added: Additionally, as a result of the Separation, the Company changed its organizational structure in the fourth quarter of 2022, resulting in one reportable segment:
+Added: IP Licensing.
+Added: Since these organizational changes did not occur until the fourth quarter of 2022, the periods presented in this Form 10-Q are reported under historical segments.
+Added: See “Note 16 - Segment and Geographic Information ”
+Added: for additional information.
The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information.
−Removed: The amounts as of December 31, 2021 have been derived from the Company’s annual audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 24, 2022 (the “Form 10-K”).
+Added: The amounts as of December 31, 2021 have been derived from the Company’s annual audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 24, 2022 (the “Form 10-K”).
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.
2 unchanged sentences
These financial statements should be read in conjunction with the annual audited financial statements and notes thereto as of and for the year ended December 31, 2021, included in the Form 10-K.
−Removed: The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022 or any future period and the Company makes no representations related thereto.
+Added: The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022 or any future period and the Company makes no representations related thereto.
In the fourth quarter of 2018, the Company funded a new subsidiary, Perceive Corporation (“Perceive”), which was created to focus on delivering edge inference solutions.
−Removed: As of June 30, 2022, the Company’s ownership interest in Perceive was approximately 80 %.
+Added: As of September 30, 2022, the Company’s ownership interest in Perceive was approximately 77 %.
The operating results of Perceive have been consolidated in the Company’s condensed consolidated financial statements for all periods presented.
−Removed: The Company is currently planning, subject to any required regulatory approvals, a separation of the Company’s product business and IP licensing business through a tax-efficient transaction, resulting in two independent, publicly traded companies.
−Removed: The Company currently anticipates that such separation will be completed in the fall of 2022.
+Added: As of October 1, 2022 the Company had no ownership interest in Perceive as Xperi Inc.
+Added: retained the ownership interest in connection with the Separation.
Reclassification
2 unchanged sentences
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
−Removed: There have been no significant changes in the Company’s significant accounting policies during the six months ended June 30, 2022, as compared to the significant accounting policies described in the Form 10-K.
+Added: There have been no significant changes in the Company’s significant accounting policies during the nine months ended September 30, 2022, as compared to the significant accounting policies described in the Form 10-K.
Use of Estimates
5 unchanged sentences
These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known.
−Removed: The COVID-19 pandemic has had, and may continue to have, an adverse impact on the Company business.
−Removed: The impact to date has included periods of significant volatility in markets the Company serves, in particular the automotive and broad consumer electronics markets.
−Removed: Additionally, the pandemic has caused some challenges and delays in acquiring new customers and executing license renewals.
−Removed: These factors have negatively impacted the Company's financial condition and results of operations, and may result in an impairment of the Company's long-lived assets, including goodwill, increased credit losses and impairments of investments in other companies.
−Removed: The Company's operations and those of its customers have also been negatively impacted by certain trends arising from the COVID-19 pandemic, including labor market constraints, shortage of semiconductor components and manufacturing capacities, and delays in shipments, product development and product launches.
−Removed: Moreover, the COVID-19 pandemic, its related impact, and United States federal, state and foreign government policies enacted to combat the pandemic have contributed to a recent rise of inflation that may increase the cost of the Company's operations and reduce demand for the Company's products and services and those of its customers, which may adversely affect the Company's financial performance.
−Removed: The impact of the pandemic on the Company's overall results of operations remains uncertain for the foreseeable future and will depend on factors outside the Company's control.
Recently Adopted Accounting Pronouncements
3 unchanged sentences
As a result of the amendments, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its preacquisition financial statements.
−Removed: ASU 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022.
−Removed: Early adoption is permitted.
+Added: ASU 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022 and early adoption is permitted.
The Company elected to early adopt the new standard on January 1, 2022 .
20 unchanged sentences
The allocation of transaction price among performance obligations in a contract may impact the amount and timing of revenue recognized in the Condensed Consolidated Statements of Operations during a given period.
−Removed: When a contract with a customer includes a variable transaction price, an estimate of the consideration which the Company expects to be entitled to for transferring the promised goods or services is made at contract inception.
−Removed: The amount of variable consideration is estimated at contract inception by considering all available information (historical, current and forecast) at the time and updated as additional information becomes available.
+Added: When a contract with a customer includes a variable transaction price, an estimate of the consideration that the Company expects to be entitled to for transferring the promised goods or services is made at contract inception.
+Added: The amount of variable consideration is estimated at contract inception by considering all available information (historical, current and forecast) at the time and is updated as additional information becomes available.
The estimate of variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
3 unchanged sentences
The Company operates in two business segments.
−Removed: In its IP Licensing segment, the Company licenses its innovations to leading companies in the broader entertainment and semiconductor industries, and those developing new technologies that will help drive the industries forward.
+Added: In its IP Licensing segment, the Company licenses its innovations to leading companies in the broader entertainment and semiconductor industries and those developing new technologies that will help drive these industries forward.
Licensing arrangements include access to one or more of the Company’s foundational patent portfolios and may also include access to some of its industry-leading technologies and proven know-how.
54 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
IP Licensing revenue
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Contract assets were recorded in the Condensed Consolidated Balance Sheets as follows (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
4 unchanged sentences
Total contract assets
−Removed: (1) The unbilled contracts receivable increase relates primarily to a change in billing process and to the recognition of revenue from long-term contracts with two customers in the six months ended June 30,2022.
−Removed: The change in billing process has no impact on the Company’s cash flows.
−Removed: (2) The long-term unbilled contracts receivable increase relates primarily to the recognition of revenue from a multi-year contract with one customer in the six months ended June 30, 2022.
+Added: (1) The unbilled contracts receivable increase relates primarily to a change in billing process and to the recognition of revenue from long-term contracts with two customers in the nine months ended September 30,2022.
+Added: The change in billing process has no impact on the Company’s cash flows or results from operations.
+Added: (2) The long-term unbilled contracts receivable increase relates primarily to the recognition of revenue from a multi-year contract with one customer in the nine months ended September 30, 2022.
Contract Liabilities
11 unchanged sentences
It is generally considered to be of high credit quality due to past collection history and the nature of the customers.
−Removed: The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2022 and 2021 (in thousands):
+Added: The following table presents the activity in the allowance for credit losses for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended
−Removed: June 30, 2022
−Removed: Six Months Ended
−Removed: June 30, 2022
+Added: September 30, 2022
+Added: Nine Months Ended
+Added: September 30, 2022
Unbilled Contracts
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Three Months Ended
−Removed: June 30, 2021
−Removed: Six Months Ended
−Removed: June 30, 2021
+Added: September 30, 2021
+Added: Nine Months Ended
+Added: September 30, 2021
Unbilled Contracts
4 unchanged sentences
Balance at end of period
−Removed: (1) The charge off of accounts receivable during the six months ended June 30, 2021 was primarily related to a customer whose account had been substantially reserved for credit losses in 2020 due to deteriorating financial condition and delinquent payment history.
+Added: (1) The charge off of accounts receivable during the nine months ended September 30, 2021 was primarily related to a customer whose account had been substantially reserved for credit losses in 2020 due to deteriorating financial condition and delinquent payment history.
Additional Disclosures
1 unchanged sentence
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Revenue recognized in the period from:
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(2) Includes past royalty revenue from the settlement of a contract dispute with a large mobile imaging customer, and the execution of a long-term license agreement with a leading consumer electronics and OTT service provider.
−Removed: The long-term license agreement is effective as of the expiration of the prior agreement.
+Added: The long-term license agreement was effective as of the expiration of the prior agreement.
The Company recorded revenue from both the settlement and the license agreement, referred to above, in the second quarter of 2022 and expects to record revenue from both the settlement and the license agreement in future periods.
+Added: (3) Includes past royalty revenue from the execution of long-term license agreements with three customers during the nine months ended September 30, 2021.
Remaining revenue under contracts with performance obligations represents the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) under certain of the Company’s fixed fee arrangements and engineering services contracts.
The Company's remaining revenue under contracts with performance obligations was as follows (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
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Other current assets consisted of the following (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
3 unchanged sentences
Property and equipment, net, consisted of the following (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
4 unchanged sentences
Other long-term assets consisted of the following (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
2 unchanged sentences
Accrued liabilities consisted of the following (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
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Other long-term liabilities consisted of the following (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
1 unchanged sentence
Accumulated other comprehensive loss consisted of the following (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
6 unchanged sentences
Under ASU 2016-01 (Topic 321), equity securities are measured at fair value with unrealized gains and losses recognized in other income and expense, net, on the Condensed Consolidated Statements of Operations.
−Removed: The following is a summary of marketable securities at June 30, 2022 and December 31, 2021 (in thousands):
−Removed: June 30, 2022
+Added: The following is a summary of marketable securities at September 30, 2022 and December 31, 2021 (in thousands):
+Added: September 30, 2022
Allowance for Credit Losses
Marketable securities
−Removed: Corporate bonds and notes
Commercial paper
18 unchanged sentences
Total marketable securities
−Removed: At June 30, 2022 and December 31, 2021, the Company had $ 285.8 million and $ 261.7 million, respectively, in cash, cash equivalents and short-term investments.
+Added: At September 30, 2022 and December 31, 2021, the Company had $ 272.5 million and $ 261.7 million, respectively, in cash, cash equivalents and short-term investments.
A significant portion of these amounts was held in marketable securities, as shown above.
−Removed: The remaining balance of $ 253.2 million and $ 159.3 million at June 30, 2022 and December 31, 2021, respectively, was cash held in operating accounts not included in the tables above.
+Added: The remaining balance of $ 239.7 million and $ 159.3 million at September 30, 2022 and December 31, 2021, respectively, was cash held in operating accounts not included in the tables above.
Debt Securities
−Removed: The gross realized gains and losses on sales of marketable debt securities were not material during the three and six months ended June 30, 2022 and 2021, respectively.
−Removed: Unrealized losses on AFS debt securities were $ 0.1 million and $ 0.1 million, net of tax, as of June 30, 2022 and December 31, 2021, respectively.
+Added: The gross realized gains and losses on sales of marketable debt securities were not material during the three and nine months ended September 30, 2022 and 2021, respectively.
+Added: Unrealized losses on AFS debt securities were not significant as of September 30, 2022 and December 31, 2021, respectively.
The Company evaluated whether the decline in fair value has resulted from credit losses or other factors and concluded these amounts were related to temporary fluctuations in value of AFS securities and were due primarily to changes in interest rates and market conditions of the underlying securities.
1 unchanged sentence
The Company does not intend to sell the debt securities and it is more-likely-than-not that it will not be required to sell the investments before recovery of their amortized cost bases.
−Removed: The Company did no t recognize a provision for credit losses related to its AFS debt securities for the three and six months ended June 30, 2022 and 2021, respectively.
−Removed: The following table summarizes the fair value and gross unrealized losses related to individual AFS debt securities at June 30, 2022 and December 31, 2021, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands):
+Added: The Company did no t recognize a provision for credit losses related to its AFS debt securities for the three and nine months ended September 30, 2022 and 2021, respectively.
+Added: The following table summarizes the fair value and gross unrealized losses related to individual AFS debt securities at September 30, 2022 and December 31, 2021, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands):
Less Than 12 Months
12 Months or More
−Removed: June 30, 2022
+Added: September 30, 2022
Cash and Cash Equivalents
AFS Debt Securities
−Removed: Corporate bonds and notes
Commercial paper
6 unchanged sentences
Commercial paper
−Removed: The estimated fair value of marketable debt securities by contractual maturity at June 30, 2022 is shown below (in thousands).
+Added: The estimated fair value of marketable debt securities by contractual maturity at September 30, 2022 is shown below (in thousands).
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties.
Due in one year or less
−Removed: Due in one to two years
Non-marketable Equity Securities
−Removed: As of June 30, 2022 and December 31, 2021, other long-term assets included equity securities accounted for under the equity method with a carrying amount of $ 4.4 million and $ 4.8 million, respectively, and equity securities without a readily determinable fair value with a carrying amount of $ 0.1 million and $ 0.1 million, respectively.
−Removed: No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the three and six months ended June 30, 2022 and 2021, respectively.
+Added: As of September 30, 2022 and December 31, 2021, other long-term assets included equity securities accounted for under the equity method with a carrying amount of $ 4.1 million and $ 4.8 million, respectively, and equity securities without a readily determinable fair value with a carrying amount of $ 0.1 million and $ 0.1 million, respectively.
+Added: No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the three and nine months ended September 30, 2022 and 2021, respectively.
NOTE 6 –
9 unchanged sentences
The Company calculates the fair value of its Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments, where available, or based on other observable inputs.
−Removed: There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2021 and June 30, 2022.
−Removed: The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of June 30, 2022 (in thousands):
+Added: There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2021 and September 30, 2022.
+Added: The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of September 30, 2022 (in thousands):
Active Markets
2 unchanged sentences
Money market funds - equity securities (1)
−Removed: Corporate bonds and notes - debt securities (2)
Commercial paper - debt securities (2)
(1) Reported as cash and cash equivalents in the Condensed Consolidated Balance Sheet.
−Removed: (2) Reported as AFS debt securities in the Condensed Consolidated Balance Sheet.
(2) Reported as cash and cash equivalents if purchased with an original maturity of three months or less at the date of purchase;
14 unchanged sentences
The carrying amounts and estimated fair values are as follows (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
Refinanced Term B Loans (1)
−Removed: (1) Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 22.0 million and $ 24.3 million as of June 30, 2022 and December 31, 2021, respectively.
+Added: Senior Unsecured Promissory Note
+Added: Total long-term debt, net
+Added: (1) Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 20.9 million and $ 24.3 million as of September 30, 2022 and December 31, 2021, respectively.
See “Note 9 –
23 unchanged sentences
Total purchase price
+Added: MobiTV Results of Operations
The results of operations and cash flows relating to the business acquired pursuant to the MobiTV Acquisition have been included in the Company’s consolidated financial statements for periods subsequent to May 31, 2021, and the related assets and liabilities were recorded at their estimated fair values in the Company’s Consolidated Balance Sheet as of May 31, 2021.
7 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
−Removed: June 30, 2021
−Removed: June 30, 2021
−Removed: Net loss attributable to Xperi Holding Corporation
+Added: Nine Months Ended
+Added: September 30, 2021
+Added: September 30, 2021
+Added: Net loss attributable to the Company
The unaudited supplemental pro forma information above includes the following pro forma adjustments:
1 unchanged sentence
The unaudited supplemental pro forma information above does not include any cost saving synergies from operating efficiencies.
+Added: On July 1, 2022 (the "Acquisition Date"), the Company completed the acquisition of Vewd Software Holdings Limited ("Vewd" and the acquisition, the "Vewd Acquisition"), a provider of over-the-top ("OTT") and hybrid TV solutions .
+Added: The acquisition establishes the Company as a leading independent streaming media platform through its TiVo brand and the largest independent provider of smart TV middleware globally.
+Added: The total consideration was approximately $ 102.9 million, consisting of approximately $ 52.9 million of cash and $ 50 million of debt.
+Added: See “Note 9 –
+Added: Debt ”
+Added: for additional information.
+Added: Preliminary Purchase Price Allocation
+Added: The Vewd Acquisition has been accounted for as a business combination, using the acquisition method.
+Added: The following table presents the preliminary allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on the fair values at the acquisition date (in thousands):
+Added: Estimated Useful
+Added: Cash and cash equivalents
+Added: Accounts receivable
+Added: Unbilled contracts receivable
+Added: Other current assets
+Added: Property and equipment
+Added: Operating lease right-of-use assets
+Added: Identifiable intangible assets:
+Added: Customer relationships - large
+Added: Customer relationships - small
+Added: Non-compete agreements
+Added: Total identifiable intangible assets
+Added: Other long-term assets
+Added: Current liabilities
+Added: Long-term deferred tax liabilities
+Added: Noncurrent operating lease liabilities
+Added: Other long-term liabilities
+Added: Total purchase price
+Added: The above preliminary purchase price allocation, including the purchase consideration, is based on preliminary valuations and assumptions and is still subject to change within the measurement period as additional information is received, including potential changes to prepaid income taxes, current and non-current income taxes payable, deferred taxes, and other working capital adjustments.
+Added: The final purchase price allocation is expected to be completed as soon as practicable, but not later than one year from the date of the acquisition.
+Added: The following is a description of the method used to determine the fair values of significant assets and liabilities.
+Added: Identifiable Intangible Assets
+Added: Identifiable intangible assets primarily consist of technology, customer relationships, non-compete agreements and trade name.
+Added: In determining the fair value, the Company utilized various forms of the income and cost approaches depending on the asset being fair valued.
+Added: The estimation of fair value required significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors.
+Added: Inputs were generally determined using historical data supplemented by current and anticipated market conditions, and growth rates.
+Added: The technology was valued using the excess earnings method.
+Added: Significant assumptions used under this method include forecasted revenues and growth, estimated technology obsolescence, contributory asset charges, and the discount rate.
+Added: The customer relationships were valued using the cost approach, based on estimated customer acquisition costs.
+Added: The excess of the consideration transferred over the fair value of assets acquired and liabilities assumed was recognized as goodwill.
+Added: The goodwill is generated from operational synergies and cost savings the Company expects to achieve from the combined operations, as well as the expected benefits from future technologies that do not meet the definition of an identifiable intangible asset and Vewd’s knowledgeable and experienced workforce.
+Added: Approximately $ 0.4 million of the acquired goodwill is expected to be deductible for tax purposes.
+Added: Vewd Results of Operations
+Added: The results of operations and cash flows related to the Vewd Acquisition have been included in the Company's condensed consolidated financial statements for periods subsequent to July 1, 2022, and the related assets and liabilities were recorded at their estimated fair values in the Company's Condensed Consolidated Balance Sheet as of July 1, 2022.
+Added: For the three and nine months ended September 30, 2022, the acquired Vewd business contributed $ 2.5 million of revenue and $ 10.1 million of operating loss, respectively, to the Company's operating results.
+Added: The operations acquired in the Vewd Acquisition are included in the Company's Product segment.
+Added: Transaction Costs
+Added: In connection with the Vewd Acquisition, the Company incurred significant one-time expenses such as transaction related costs and severance and retention costs.
+Added: For the three and nine months ended September 30, 2022, transaction related costs including transaction bonuses, legal and consultant fees, were $ 4.0 million and $ 6.1 million, respectively.
+Added: For the three and nine months ended September 30, 2022, severance and retention costs associated with the Vewd Acquisition were $ 2.1 million.
+Added: Supplemental Pro forma Information
+Added: The following unaudited pro forma financial information assumes the Vewd Acquisition was completed as of January 1, 2021.
+Added: The unaudited pro forma financial information as presented below is for information purposes only and is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information.
+Added: This is not necessarily indicative of the results of operations that would have been achieved if the Vewd Acquisition had taken place on January 1, 2021, nor is it necessarily indicative of future results.
+Added: Consequently, actual results could differ materially from the unaudited pro forma financial information presented below.
+Added: The following table presents the pro forma operating results as if the acquired operations of Vewd had been included in the Company's Condensed Consolidated Statements of Operations as of January 1, 2021 (unaudited, in thousands):
+Added: Three Months Ended
+Added: Nine Months Ended
+Added: September 30, 2022
+Added: September 30, 2021
+Added: September 30, 2022
+Added: September 30, 2021
+Added: Net loss attributable to the Company
+Added: The unaudited supplemental pro forma information above includes the following pro forma adjustments:
+Added: adjustments for transaction related costs and severance and retention costs, adjustments for amortization of intangible assets, and elimination of inter-company transactions between Vewd and the Company.
+Added: The unaudited supplemental pro forma information above does not include any cost saving synergies from operating efficiencies.
NOTE 8 –
GOODWILL AND IDENTIFIED INTANGIBLE ASSETS
−Removed: The changes to the carrying value of goodwill from January 1, 2022 through June 30, 2022 are reflected below (in thousands):
+Added: The changes to the carrying value of goodwill from January 1, 2022 through September 30, 2022 were as follows (in thousands):
December 31, 2021
Goodwill adjustment related to Mergers in prior periods (1)
−Removed: June 30, 2022 (2)
−Removed: (1) The change to the carrying value of goodwill from December 31, 2021 through June 30, 2022 was an immaterial measurement period adjustment.
−Removed: (2) The Company's reporting units include the IP Licensing segment and the Product segment (defined further in “Note 16 - Segment and Geographic Information ”).
−Removed: Of the carrying value of goodwill, approximately $ 322.3 million was allocated to the IP Licensing segment and approximately $ 527.8 million was allocated to the Product segment as of June 30, 2022.
+Added: Vewd Acquisition (2)
+Added: Impairment charge (3)
+Added: September 30, 2022 (4)
+Added: (1) Reflects the correction recorded in the period ended March 31, 2022 of an immaterial error in the purchase price allocation for the Mergers to reduce goodwill and revenue.
+Added: (2) In connection with the Vewd Acquisition, the Company recorded $ 68.1 million of goodwill, representing the preliminary fair value as of the Acquisition Date.
+Added: Goodwill relating to the Vewd Acquisition was allocated to the Company's Product segment.
+Added: See “Note 7 –
+Added: Business Combinations ”
+Added: for additional details.
(3) Goodwill at each reporting unit is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.
+Added: During the three-months ended September 30, 2022, indicators of potential impairment for the Product reporting unit were identified such that management concluded it was more-likely-than-not that goodwill was impaired and a quantitative interim goodwill impairment assessment should be performed as of September 30, 2022.
+Added: Indicators of potential impairment included a sustained decline in Xperi Holding Corporation’s stock price during the second half of the third quarter of 2022, reflective of rising interest rates and continued decline in macroeconomic conditions.
+Added: The Company proceeded to perform a fair value analysis of the Product reporting unit using the market capitalization approach.
+Added: Under this approach, management estimated the fair value of the Product reporting unit as of September 30, 2022 using quoted market prices of the common stock of Xperi Inc., which as of October 1, 2022 comprised the former Product segment of the Company, over its first ten trading days following the Separation, and a control premium representing the synergies a market participant would achieve upon obtaining control of Xperi Inc.
+Added: As a result of the fair value analysis, the Company recognized a goodwill impairment charge of $ 354.0 million during the three months ended September 30, 2022, which was allocated to the Company's Product segment.
+Added: The Company also assessed the recoverability of indefinite-lived intangible assets related to the Product reporting unit and concluded that no impairment existed as of September 30, 2022, as their estimated fair values exceeded their carrying amounts.
+Added: No impairment indicators were identified with respect to other long-lived assets.
+Added: No goodwill impairment charge was recognized related to the Company's IP Licensing segment.
+Added: (4) The Company's reporting units include the IP Licensing segment and the Product segment (defined further in “Note 16 –
+Added: Segment and Geographic Information ”).
+Added: Of the carrying value of goodwill, approximately $ 322.3 million was allocated to the IP Licensing segment and approximately $ 241.9 million was allocated to the Product segment as of September 30, 2022.
Identified Intangible Assets
Identified intangible assets consisted of the following (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
9 unchanged sentences
Total intangible assets
−Removed: As of June 30, 2022, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands):
+Added: As of September 30, 2022, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands):
2022 (remaining 3 months)
1 unchanged sentence
The outstanding amounts of debt were as follows (in thousands):
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
Refinanced Term B Loans
+Added: Senior Unsecured Promissory
Unamortized debt discount and issuance costs
7 unchanged sentences
The Company commenced repaying quarterly installments under the Refinanced Term B Loans in the third quarter of 2021.
−Removed: The obligations under the 2020 Credit Agreement, inclusive of any changes by the Amendment, continue to be guaranteed by Xperi, TiVo and certain other of the Company’s wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) and continue to be secured by a lien on substantially all of the assets of the Company and the Guarantors.
+Added: The obligations under the 2020 Credit Agreement, inclusive of any changes by the Amendment, continue to be guaranteed by the Company’s wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) and continue to be secured by a lien on substantially all of the assets of the Company and the Guarantors.
The 2020 Credit Agreement, as amended, contains customary events of default, upon the occurrence of which, after any applicable cure period, the lenders will have the ability to accelerate all outstanding loans thereunder.
−Removed: The 2020 Credit Agreement, as amended, also contains customary representations and warranties and affirmative and negative covenants that, among other things and subject to certain exceptions, restrict the ability of the Company and its subsidiaries to create or
−Removed: incur certain liens, incur or guarantee additional indebtedness, merge or consolidate with other companies, transfer or sell assets and make restricted payments.
+Added: The 2020 Credit Agreement, as amended, also contains customary representations and warranties and affirmative and negative covenants that, among other things and subject to certain exceptions, restrict the ability of the Company and its subsidiaries to create or incur certain liens, incur or guarantee additional indebtedness, merge or consolidate with other companies, transfer or sell assets and make restricted payments.
The 2020 Credit Agreement, as amended, requires the Company to maintain a total net leverage ratio of no greater than 3.00x in order access an annual basket from which to make restricted payments (such as dividend payments and share repurchases).
−Removed: The Company was in compliance with all requirements as of June 30, 2022.
+Added: The Company was in compliance with all requirements as of September 30, 2022.
The 2020 Credit Agreement, as amended, also requires the Company to make additional cash payments on an annual basis beginning in March 2023 based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year.
9 unchanged sentences
Under ASC 470-50, the remaining $ 2.6 million, primarily related to third-party fees, were recorded as selling, general and administrative expense in the second quarter of 2021.
+Added: After the Separation, the Company remains the obligor under the Refinanced B Term Loans.
+Added: Senior Unsecured Promissory Note
+Added: In connection with the Vewd Acquisition as disclosed in "Note 7 –
+Added: Business Combinations" , on July 1, 2022, TiVo Product Holdco LLC, which was subsequently renamed to Xperi Inc., issued a senior unsecured promissory note (the “Promissory Note”) to the sellers of Vewd in a principal amount of $ 50.0 million.
+Added: The issuer’s obligations under the Promissory Note are guaranteed by the Company prior to the spin-off transaction.
+Added: Indebtedness outstanding under the Promissory Note bears an interest rate of 6.00 % per annum, payable in cash on a quarterly basis.
+Added: If a certain qualified spin-off transaction occurs, the interest rate will be increased to the greater of (a) 6.00% and (b) the sum of (i) the highest interest rate payable under any credit facility or bonds, debentures, notes or similar instruments where the issuer or any guarantor borrows money or guarantees obligations on a secured basis on or after the date of such spin-off transaction, plus (ii) 2.00 %.
+Added: The Promissory Note will mature on July 1, 2025 .
+Added: The issuer may, at any time and on any one or more occasions, prepay all or any portion of the outstanding principal amount, plus accrued and unpaid interest, if any, under the Promissory Note without premium or penalty.
+Added: In addition, the Promissory Note has mandatory prepayment provisions upon certain change of control or asset sale events.
+Added: The Promissory Note includes certain covenants that restrict the issuer and each guarantor’s ability to, among other things, incur certain indebtedness or engage in any material line of business substantially different from those lines of business conducted by such entities on the closing date of the acquisition.
+Added: The Promissory Note does not contain any financial covenants.
+Added: After the Separation, Xperi Inc.
+Added: is the obligor under the Senior Unsecured Promissory Note.
Interest Expense and Expected Principal Payments
−Removed: At June 30, 2022, $ 769.5 million in total debt was outstanding.
+Added: At September 30, 2022, $ 809.4 million in total debt was outstanding.
There were also $ 20.9 million of unamortized debt discount and issuance costs recorded as a reduction from the carrying amount of the debt.
Interest rate on the Refinanced Term B Loans, including the amortization of debt discount and issuance costs was 6.02 % and interest was payable monthly.
−Removed: Interest expense w as $ 9.4 mill ion and $ 17.9 million for the three and six months ended June 30, 2022, respectively.
−Removed: Interest expense was $ 10.6 million and $ 21.9 million for the three and six months ended June 30, 2021, respectively.
−Removed: Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 1.1 million and $ 2.2 million for the three and six months ended June 30, 2022, respectively, and $ 1.9 million and $ 4.1 million for the three and six months ended June 30, 2021, respectively.
−Removed: As of June 30, 2022, future minimum principal payments for long-term debt are summarized as follows (in thousands):
+Added: Interest rate on the Promissory Note was 6.00 % and interest was payable quarterly.
+Added: Interest expense was $ 13.2 million and $ 31.1 million for the three and nine months ended September 30, 2022, respectively.
+Added: Interest expense was $ 8.5 million and $ 30.4 million for the three and nine months ended September 30, 2021, respectively.
+Added: Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 1.1 million and $ 3.3 million for the three and nine months ended September 30, 2022, respectively, and $ 1.2 million and $ 5.3 million for the three and nine months ended September 30, 2021, respectively.
+Added: As of September 30, 2022, future minimum principal payments for long-term debt are summarized as follows (in thousands):
2022 (remaining 3 months)
3 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Weighted average shares of common stock outstanding
7 unchanged sentences
The assumed proceeds calculation includes actual proceeds to be received from the employee upon exercise and the average unrecognized stock compensation cost during the period.
−Removed: For the three months ended June 30, 2022 and 2021, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.
−Removed: A total of 7.9 million shares and 5.8 million shares, subject to stock options and restricted stock awards and units, were excluded from the computation of diluted net loss per share for the three months ended June 30, 2022 and 2021, respectively, because including them would have been anti-dilutive.
−Removed: For the six months ended June 30, 2022 and 2021, 3.8 million and 2.1 million shares, respectively, subject to stock options and restricted stock awards and units were excluded from the computation of diluted net income per share as they were anti-dilutive.
+Added: For the three months ended September 30, 2022 and 2021, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.
+Added: A total of 7.2 million shares and 5.5 million shares, respectively, subject to stock options and restricted stock awards and units were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive.
+Added: For the nine months ended September 30, 2022 and 2021, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potential dilutive shares outstanding was anti-dilutive.
+Added: A total of 5.9 million and 5.6 million shares, respectively, subject to stock options and restricted stock awards and units were excluded from the computation of diluted net income per share because including them would have been anti-dilutive.
NOTE 11 –
15 unchanged sentences
Shares reserved under the Assumed Plans will be available for future grants.
−Removed: As of June 30, 2022, there were 6.4 million shares reserved for future grants under both the 2020 EIP and the Assumed Plans.
+Added: As of September 30, 2022, there were 6.1 million shares reserved for future grants under both the 2020 EIP and the Assumed Plans.
A summary of the stock option activity is presented below (in thousands, except per share amounts):
4 unchanged sentences
Options canceled / forfeited / expired
−Removed: Balance at June 30, 2022
+Added: Balance at September 30, 2022
Restricted Stock Awards and Units
−Removed: Information with respect to outstanding restricted stock awards and units (including both time-based vesting and performance-based vesting) as of June 30, 2022 is as follows (in thousands, except per share amounts):
+Added: Information with respect to outstanding restricted stock awards and units (including both time-based vesting and performance-based vesting) as of September 30, 2022 is as follows (in thousands, except per share amounts):
Restricted Stock and Restricted Stock Units
5 unchanged sentences
Awards and units canceled / forfeited
−Removed: Balance at June 30, 2022
+Added: Balance at September 30, 2022
Performance Awards and Units
13 unchanged sentences
All participants in the terminated offering will be transferred to the new offering period.
−Removed: As of June 30, 2022, there wer e 6.1 m illion shares reserved for grant under the Company’s 2020 ESPP.
+Added: As of September 30, 2022, there were 5.5 million shares reserved for grant under the Company’s 2020 ESPP.
At the 2022 Annual Stockholders Meeting on April 29, 2022, the Company's shareholders approved an amendment to the 2020 ESPP and increased by 6.0 million the number of shares reserved for issuance.
2 unchanged sentences
On April 22, 2021, the Board authorized an additional $ 100.0 million of purchases under the existing stock repurchase plan.
−Removed: As of June 30, 2022, the Company has repurchased a total of approximately 10.0 million shares of common stock, since inception of the plan, at an average price of $ 17.24 per share for a total cost of $ 172.2 million.
+Added: As of September 30, 2022, the Company has repurchased a total of approximately 10.0 million shares of common stock, since inception of the plan, at an average price of $ 17.24 per share for a total cost of $ 172.2 million.
As of December 31, 2021, the Company had repurchased a total of approximately 9.0 million shares of common stock, since inception of the plan, at an average price of $ 17.29 per share for a total cost of $ 155.0 million.
The shares repurchased are recorded as treasury stock and are accounted for under the cost method.
−Removed: No expiration date has been specified for this plan.
−Removed: As of June 30, 2022, the total remaining amount available for repurchase under this plan was $ 77.8 million.
−Removed: The Company plans to continue to execute authorized repurchases from time to time under the plan.
+Added: No expiration date has been specified for thi s plan.
+Added: As of September 30, 2022, the total remaining amount available for repurchase under this plan was $ 77.8 million.
+Added: The Company may execute authorized repurchases from time to time under the plan.
The Company issues restricted stock units as part of the equity incentive plans described above.
2 unchanged sentences
However, these withheld shares are not included in common stock repurchases under the Company's authorized share repurchase plan.
−Removed: During the three months ended June 30, 2022 and 2021, the Company withheld 0.1 million and 0.1 million shares of common stock to satisfy $ 0.4 million and $ 1.0 million of required withholding taxes, respectively.
−Removed: During the six months ended June 30, 2022 and 2021, the Company withheld 0.7 million and 0.4 million shares of common stock to satisfy $ 11.5 million and $ 8.3 million of required withholding taxes, respectively.
+Added: During the three months ended September 30, 2022 and 2021, the Company withheld 0.3 million and 0.3 million shares of common stock to satisfy $ 3.8 million and $ 7.1 million of required withholding taxes, respectively.
+Added: During the nine months ended September 30, 2022 and 2021, the Company withheld 0.9 million and 0.7 million shares of common stock to satisfy $ 15.3 million and $ 15.4 million of required withholding taxes, respectively.
NOTE 12 –
STOCK-BASED COMPENSATION EXPENSE
−Removed: The effect of recording stock-based compensation (“SBC”) expense for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):
+Added: The effect of recording stock-based compensation (“SBC”) expense for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Cost of revenue, excluding depreciation and amortization of intangible assets
4 unchanged sentences
Net effect on net income (loss)
−Removed: SBC expense categorized by various equity components for the three and six months ended June 30, 2022 and 2021 is summarized in the table below (in thousands):
+Added: SBC expense categorized by various equity components for the three and nine months ended September 30, 2022 and 2021 is summarized in the table below (in thousands):
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Restricted stock awards and units
4 unchanged sentences
Pursuant to the Separation Agreement, the Company approved, among other severance benefits, accelerated vesting of 372,244 of outstanding performance and time-based restricted stock units.
−Removed: As a result of this modification, the Company recorded incremental SBC of approximately $ 2.2 million for the three months ended March 31, 2022.
−Removed: There were no options granted in the three and six months ended June 30, 2022 and 2021.
−Removed: The following assumptions were used to value the restricted stock units subject to market conditions granted during the period:
+Added: As a result of this modification, the Company recorded incremental SBC of approximately $ 2.2 million during the first quarter of 2022.
+Added: There were no options granted in the three and nine months ended September 30, 2022 and 2021.
+Added: There were no restricted stock units subject to market conditions granted during the three months ended September 30, 2022.
+Added: The following assumptions were used to value the restricted stock units subject to market conditions granted during the nine months ended September 30, 2022:
Expected life (years)
2 unchanged sentences
Expected volatility
−Removed: ESPP grants occur in March and September.
−Removed: The following assumptions were used to value the ESPP shares for these grants:
+Added: ESPP grants generally occur in March and September of each calendar year.
+Added: Due to the anticipated separation of the Product business, there were no ESPP grants during the three months ended September 30, 2022.
+Added: The following assumptions were used to value the ESPP shares granted during the nine months ended September 30, 2022:
September 2021
4 unchanged sentences
NOTE 13 –
−Removed: For the three months ended June 30, 2022, the Company recorded an income tax expense of $ 22.1 million on pretax income of $ 15.7 million, and for the six months ended June 30, 2022 the Company recorded an income tax expense of $ 43.7 million on pretax income of $ 61.2 million, which resulted in an effective tax rate of 71.4 % for the six months ended June 30, 2022.
−Removed: The income tax expense for the three and six months ended June 30, 2022 was primarily related to foreign withholding taxes, U.S.
+Added: For the three months ended September 30, 2022, the Company recorded an income tax expense of $ 0.9 million on pretax loss of $ 389.0 million, and for the nine months ended September 30, 2022 the Company recorded an income tax expense of $ 44.5 million on pretax loss of $ 327.8 million, which resulted in an effective tax rate of ( 13.6 )% for the nine months ended September 30, 2022.
+Added: The income tax expense for the three and nine months ended September 30, 2022 was primarily related to foreign withholding taxes, U.S.
federal income tax, state income taxes, and unrealized foreign exchange loss from the prior year South Korea refund claims.
−Removed: The Company's effective tax rate was based on a projected 2022 GAAP pretax profit and is significantly higher than the 21 % U.S.
+Added: The Company’s effective tax rate was based on a projected 2022 U.S.
+Added: GAAP pretax loss and varies from the 21 % U.S.
federal tax rate.
The Company's effective tax rate varies period over period because the most significant components of tax expense, foreign withholding taxes and foreign exchange gains or losses on the Korea withholding tax refund claims, are not directly affected by changes in pre-tax income.
−Removed: For the three months ended June 30, 2021, the Company recorded an income tax benefit of $ 2.9 million on pretax loss of $ 4.7 million and for the six months ended June 30, 2021, the Company recorded an income tax benefit of $ 6.9 million on a pretax loss of $ 4.2 million, which resulted in an effective tax rate of 162.6 % for the six months ended June 30, 2021.
−Removed: The income tax benefit for the three and six months ended June 30, 2021 was primarily related to foreign withholding taxes, U.S.
−Removed: federal base erosion and anti-abuse tax (“BEAT”) and unrealized foreign exchange loss from the prior year South Korea refund claims.
−Removed: The Company’s effective tax rate was based on the projected 2021 GAAP U.S.
−Removed: pretax loss and is significantly higher than the 21 % U.S.
+Added: For the three months ended September 30, 2021, the Company recorded an income tax expense of $ 42.7 million on pretax loss of $ 3.7 million and for the nine months ended September 30, 2021, the Company recorded an income tax expense of $ 35.8 million on a pretax loss of $ 7.9 million, which resulted in an effective tax rate of ( 452.3 )% for the nine months ended September 30, 2021.
+Added: The income tax expense for the three and nine months ended September 30, 2021 was primarily related to foreign withholding taxes, base erosion and anti-abuse tax (“BEAT”) and unrealized foreign exchange loss from the prior year South Korea refund claims, which have remained relatively fixed on a forecast basis quarter over quarter.
+Added: The negative tax rate is the result of the relatively fixed tax expense recorded against a small pre-tax loss.
+Added: The Company’s effective tax rate was based on a projected 2021 U.S.
+Added: GAAP pretax loss and varies significantly from the 21 % U.S.
federal tax rate.
−Removed: The Company's effective tax rate is the result of the most significant components of income tax expense, primarily driven by foreign withholding and BEAT.
−Removed: The computed effective tax rate is applied to the year-to-date U.S.
−Removed: profit resulting in an income tax benefit for the quarter ended June 30, 2021.
−Removed: As of June 30, 2022, gross unrecognized tax benefits, excluding interest and penalties, were $ 240.4 million compared to $ 240.4 million as of December 31, 2021.
+Added: As of September 30, 2022, gross unrecognized tax benefits, excluding interest and penalties, were $ 240.3 million co mpared to $ 240.4 million as of December 31, 2021.
This was included in long-term deferred tax and other long-term liabilities on the Condensed Consolidated Balance Sheets.
−Removed: Of this amount, $ 95.1 million would affect the effective tax rate if recognized.
−Removed: As of June 30, 2021, unrecognized tax benefits, excluding interest and penalties, of $ 233.9 million were included in long-term deferred tax and other long-term liabilities on the Condensed Consolidated Balance Sheets.
−Removed: Of this amount, $ 92.6 million would affect the effective tax rate if recognized.
+Added: Of this amount, $ 89.8 million w ould affect the effective tax rate if recognized.
+Added: As of September 30, 2021, unrecognized tax benefits, excluding interest and penalties, of $ 229.1 millio n were included in long-term deferred tax and other long-term liabilities on the Condensed Consolidated Balance Sheets.
+Added: Of this amou nt, $ 96.3 million would affect the effective tax rate if recognized.
The Company is unable to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease.
It is the Company's policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes.
−Removed: The Company recognized interest and penalties related to unrecognized tax benefits of $ 0.6 million and $ 0.8 million for the six months ended June 30, 2022 and 2021, respectively.
−Removed: Accrued interest and penalties were $ 3.4 million and $ 2.8 million as of June 30, 2022 and December 31, 2021, respectively.
−Removed: As of June 30, 2022, the Company’s 2017 through 2021 tax years are generally open and subject to potential examination in one or more jurisdictions.
+Added: The Company recognized interest and penalties related to unrecognized tax benefits of $ 0.8 million and $ 1.1 million for the nine months ended September 30, 2022 and 2021, respectively.
+Added: Accrued interest and penalties were $ 3.7 million and $ 2.8 million as of September 30, 2022 and December 31, 2021, respectively.
+Added: As of September 30, 2022, the Company’s 2017 through 2021 tax years are generally open and subject to potential examination in one or more jurisdictions.
Earlier tax years for the Company and its subsidiaries are also open in certain jurisdictions which are currently subject to examination.
3 unchanged sentences
The Company leases office and research facilities, data centers and office equipment under operating leases which expire through 2029.
−Removed: The Company’s leases have remaining lease terms of one year to eight years , some of which may include options to extend the leases for five years or longer, and some of which may include options to terminate the leases within the next 7 years or less.
+Added: The Company’s leases have remaining lease terms of one year to seven years , some of which may include options to extend the leases for five years or longer, and some of which may include options to terminate the leases within the next 7 years or less.
Leases with an initial term of 12 months or less are not recorded on the balance sheets ;
11 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Fixed lease cost (1)
5 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Cash paid for amounts included in the measurement of lease liabilities:
2 unchanged sentences
Operating leases
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
3 unchanged sentences
Operating leases
−Removed: Future minimum lease payments and related lease liabilities as of June 30, 2022 were as follows (in thousands):
+Added: Future minimum lease payments and related lease liabilities as of September 30, 2022 were as follows (in thousands):
Operating Lease Payments (1)
13 unchanged sentences
These arrangements primarily include unconditional purchase obligations to service providers.
−Removed: As of June 30, 2022, the Company’s total future unconditional purchase obligations were approximately $ 114.5 million.
+Added: As of September 30, 2022, the Company’s total future unconditional purchase obligations were approximatel y $ 109.8 million.
Inventory Purchase Commitment
2 unchanged sentences
A significant portion of the Company’s purchase commitments arising from these agreements consist of firm, non-cancelable and unconditional purchase commitments.
−Removed: In certain instances, these agreements allow the Company the option to cancel, reschedule or adjust the Company’s requirements based on its business needs prior to firm orders being placed.
−Removed: As of June 30, 2022, the Company had total purchase commitments for inventory of $ 5.5 million, of which $ 1.5 million was accrued in the Condensed Consolidated Balance Sheet.
+Added: In certain instances, these agreements allow the Company the option to cancel, reschedule or adjust the Company’s requirements based on its business needs prior to firm o rders being placed.
+Added: As of September 30, 2022, the Company had total purchase commitments for inventory of $ 3.2 million, of which $ 0.7 million was accrued in the Condensed Consolidated Balance Sheet.
Indemnifications
17 unchanged sentences
At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of losses is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.
−Removed: On June 23, 2017, Rovi Guides, Inc.
−Removed: and TiVo Solutions Inc.
−Removed: (together, “TiVo”) filed a patent infringement complaint against Videotron Ltd.
+Added: On June 23, 2017, Adeia Guides Inc.
+Added: (formerly known as Rovi Guides, Inc.) and Adeia Media Solutions Inc.
+Added: (formerly known as TiVo Solutions Inc.) (together, “Adeia Media”) filed a patent infringement complaint against Videotron Ltd.
and Videotron G.P.
(together, “Videotron”) in Toronto, Canada, alleging infringement of six patents (“Videotron 1”).
−Removed: Videotron was a prior licensee under the Rovi patent portfolio.
−Removed: On June 10, 2022, the Court issued its decision in the case finding in favor of Videotron and its legacy illico platform.
−Removed: Specifically, the Court found invalid each of the asserted claims of the four patents involved in the case.
+Added: On June 10, 2022, the Federal Court of Canada issued its decision in the case finding in favor of Videotron and its legacy illico platform.
+Added: Specifically, the Court found invalid each of the asserted claims of the four remaining patents involved in the case.
In Canada, the prevailing party in patent litigation is entitled to reimbursement of certain of its costs and expenses.
−Removed: Accordingly, while the exact reimbursement amount has yet to be determined, we have accrued $ 2.2 million for estimated expense reimbursement as of June 30, 2022.
−Removed: This amount is included in litigation expense for the three and six months ended June 30, 2022.
+Added: The Company accrued $ 2.2 million for estimated expense reimbursement during the second quarter of 2022.
+Added: This accrual was included in litigation expense.
+Added: On September 12, 2022, Adeia Media filed a notice of appeal with the Federal Court of Appeal of Canada appealing the decision of the Federal Court of Canada.
+Added: On January 19, 2018, Adeia Media filed a patent infringement complaint against BCE Inc., Bell Canada, Bell Aliant Regional Communications Inc., Bell MTS Inc., and Northerntel, L.P.
+Added: (collectively, “Bell”) in Toronto, Canada, alleging infringement of six patents (“Bell 1”).
+Added: On February 2, 2018, Adeia Media filed a patent infringement complaint against Telus Corporation, Telus Communications Inc., and Telus Communications Company (collectively, “Telus”) in Toronto, Canada, alleging infringement of the same six patents asserted in Bell 1 (“Telus 1”).
+Added: Bell 1 and Telus 1 were heard together for purposes of pre trial and trial proceedings.
+Added: On October 7, 2022, the Federal Court of Canada issued its confidential decision in the two cases finding in favor of Bell and Telus and their respective IPTV services, Bell Fibe TV and Telus Optik TV.
+Added: Specifically, the Court found invalid each of the asserted claims of the four remaining patents involved in the case.
+Added: In Canada, the prevailing party in patent litigation is entitled to reimbursement of certain of its costs and expenses.
+Added: Accordingly, while the exact reimbursement amount has yet to be determined, the Company has accrued $ 2.5 million for estimated expense reimbursement during the third quarter of 2022.
+Added: This accrual was included in litigation expense.
The Company is currently unable to predict the final outcome of other lawsuits, including other patent infringement lawsuits in Canada, to which it is a party and therefore cannot determine the likelihood of loss nor estimate a range of possible losses.
4 unchanged sentences
The existing and any future legal actions may harm the Company’s business.
−Removed: For example, legal actions could cause an existing licensee or strategic partner to cease making royalty or other payments to the Company, or to challenge the validity and enforceability of patents owned by the Company’s subsidiaries or the scope of license agreements with the Company’s subsidiaries, or could significantly damage the Company’s relationship with such licensee or strategic partner and, as a result, prevent the adoption of the Company’s other technologies by such licensee or strategic partner.
−Removed: Litigation could also severely disrupt or shut down the business operations of licensees or strategic partners of the Company’s subsidiaries, which in turn would significantly harm ongoing relations with them and cause the Company to lose royalty revenue.
+Added: For example, legal actions could cause an existing licensee to cease making royalty or other payments to the Company, or to challenge the validity and enforceability of patents owned by the Company’s subsidiaries or the scope of license agreements with the Company’s subsidiaries, or could significantly damage the Company’s relationship with such licensee.
+Added: Litigation could also severely disrupt or shut down the business operations of licensees, which in turn could significantly harm ongoing relations with them and cause the Company to lose royalty revenue.
The costs associated with legal proceedings are typically high, relatively unpredictable, and not completely within the Company’s control.
4 unchanged sentences
SEGMENT AND GEOGRAPHIC INFORMATION
−Removed: The Company reports its financial results within two reportable segments:
+Added: As of September 30, 2022, the Company reports its financial results within two reportable segments:
(1) Intellectual Property (“IP”) Licensing and (2) Product.
11 unchanged sentences
Although the CODM uses operating income to evaluate reportable segments, operating costs included in one segment may benefit other segments.
−Removed: The following table sets forth the Company’s segment revenue, operating expenses and operating income for the three and six months ended June 30, 2022 and 2021 (in thousands):
+Added: The following table sets forth the Company’s segment revenue, operating expenses and operating income for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
IP Licensing segment
6 unchanged sentences
Total operating expenses
−Removed: Operating income:
+Added: Operating income (loss):
IP Licensing segment
1 unchanged sentence
Unallocated operating expenses (1)
−Removed: Total operating income
+Added: Total operating income (loss)
(1) Unallocated operating expenses consist primarily of selling, marketing, general and administrative expenses, such as administration, human resources, finance, information technology, corporate development and procurement.
These expenses are not allocated because these amounts are not considered in evaluating the operating performance of the Company’s business segments.
+Added: (2) Includes goodwill impairment charge of $ 354.0 million that was allocated to the Company's Product segment.
+Added: See “Note 8 –
+Added: Goodwill and Identified Intangible Assets ”
+Added: for additional details.
A significant portion of the Company’s revenue is derived from licensees headquartered outside of the U.S., and it is expected that this revenue will continue to account for a significant portion of total revenue in future periods.
1 unchanged sentence
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Europe and Middle East
−Removed: For the three months ended June 30, 2022 and 2021, there were one customer and no customers, respectively, that each accounted for 10% or more of total revenue.
−Removed: For the six months ended June 30, 2022 and 2021, there were two customers and no customers, respectively, that each accounted for 10% or more of total revenue.
−Removed: As of both June 30, 2022 and December 31, 2021, there were two customers and one customer that individuall y accounted for 10% or more of total accounts receivable.
+Added: For the three months ended September 30, 2022 and 2021, there were no customers that accounted for 10% or more of total revenue.
+Added: For the nine months ended September 30, 2022 and 2021, there were no customers that accounted for 10% or more of total revenue.
+Added: As of September 30, 2022 and December 31, 2021, there were two customers and one customer, respectively, that individually accounted for 10% or more of total accounts receivable.
NOTE 17 - SUBSEQUENT EVENTS
−Removed: On July 1, 2022, the Company completed the acquisition ("Vewd Acquisition") of Vewd Software Holdings Limited ("Vewd") for total consideration of approximately $ 109 million, consisting of approximately $ 59 million of cash and $ 50 million of debt.
−Removed: The term of the debt is 3 years with a fixed interest rate of 6 %.
−Removed: Vewd is a leading global provider of over-the-top (“OTT”) and hybrid TV solutions.
−Removed: The Company is currently evaluating the purchase price allocation following the consummation of the Vewd Acquisition.
−Removed: It is not practicable to disclose the preliminary purchase price allocation or unaudited pro forma financial information for this transaction, given the short period of time between the acquisition date and the issuance of the Condensed Consolidated Financial Statements.
−Removed: The operations acquired in the Vewd Acquisition will be included in the Company’s Product segment.
−Removed: On J uly 29, 202 2 , the Board declared a cash dividend of $ 0.05 per share of common stock, payable on September 19, 2022 to the stockholders of record at the close of business on August 29, 2022 .
+Added: Completion of Separation of Xperi Inc.
+Added: from Adeia Inc.
+Added: On October 1, 2022, the Company completed the Separation of its Product business into a new public company, Xperi Inc.
+Added: In connection with the Separation, which was structured as a Spin-Off, the Company entered into several agreements with Xperi Inc.
+Added: on October 1, 2022, that, among other things, effect the Spin-off and provide a framework for the Company's relationship with Xperi Inc.
+Added: after the Spin-off.
+Added: Declaration of Cash Dividends
+Added: On October 20, 2022 , the Company's Board of Directors declared a cash dividend of $ 0.05 per share of common stock, payable on December 21, 2022 to the stockholders of record at the close of business on November 30, 2022 .
Management’s Discussion and Analysis of Financial Condition and Results of Operations
−Removed: The following discussion is intended to promote understanding of the results of operations and financial condition and should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the year ended December 31, 2021 found in the Form 10-K filed by Xperi Holding Corporation on February 24, 2022 (the “Form 10-K”).
+Added: The following discussion is intended to promote understanding of the results of operations and financial condition and should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the year ended December 31, 2021 found in the Form 10-K filed by us on February 24, 2022 (the “Form 10-K”).
+Added: Except where otherwise indicated, the results of operations discussed herein present the results of Xperi Holding Corporation prior to giving effect to the Separation described herein.
This Quarterly Report contains forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995.
−Removed: Words such as “expects,”
−Removed: “anticipates,”
−Removed: “plans,”
−Removed: “believes,”
−Removed: “seeks,”
−Removed: “estimates,”
−Removed: “could,”
−Removed: “would,”
−Removed: “may,”
−Removed: “intends,”
−Removed: “targets”
−Removed: and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report.
−Removed: The identification of certain statements as “forward-looking”
−Removed: is not intended to mean that other statements not specifically identified are not forward-looking.
−Removed: All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenue, product development, demand, acceptance and market share, growth rate, competitiveness, gross margins, levels of research, development and other related costs, expenditures, the outcome or effects of and expenses related to litigation and administrative proceedings related to our patents, our intent to enforce our intellectual property rights, our ability to license our intellectual property, tax expenses, cash flows, our ability to liquidate and recover the carrying value of our investments, our management’s plans and objectives for our current and future operations, our plans for quarterly dividends and stock repurchases, the levels of customer spending or research and development activities, general economic conditions, the impact of the COVID-19 pandemic and related events, the impact of the Mergers (as defined below) and other acquisitions on our financial condition and results of operations, our plans to separate our product and IP licensing businesses, and the sufficiency of financial resources to support future operations and capital expenditures.
+Added: In this context, forward-looking statements often address expected future business, financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "could," "seek," "see," "will," "may," "would," "might," "potentially," "estimate," "continue," "target," similar expressions or the negatives of these words or other comparable terminology that convey uncertainty of future events or outcomes.
+Added: All forward-looking statements by their nature address matters that involve risks and uncertainties, many of which are beyond the Company’s control, and are not guarantees of future results.
+Added: These and other forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements.
+Added: Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements.
+Added: Important risk factors that may cause such a difference include, but are not limited to:
+Added: the Company’s ability to implement its business strategy;
+Added: the Company’s ability to enter into new and renewal license agreements with customers on favorable terms;
+Added: the Company’s ability to retain and hire key personnel;
+Added: uncertainty as to the long-term value of the Company’s common stock;
+Added: legislative, regulatory and economic developments affecting the Company’s business;
+Added: general economic and market developments and conditions;
+Added: the Company’s ability to grow and expand its patent portfolios;
+Added: changes in technology and development of competing technology in the industries in which in which the Company operates;
+Added: the evolving legal, regulatory and tax regimes under which the Company operates;
+Added: unforeseen liabilities and expenses;
+Added: risks associated with the Company’s indebtedness, unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, including Russia’s invasion of Ukraine, and natural disasters;
+Added: the Company’s ability to achieve the intended benefits of, and its ability to recognize the anticipated tax treatment of, the recent spin-off of its product business;
+Added: and the extent to which the COVID-19 pandemic continues to have an adverse impact on the Company’s business, results of operations, and financial condition will depend on future developments, including measures taken in response to the pandemic, which are highly uncertain and cannot be predicted.
Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us.
Consequently, forward-looking statements are inherently subject to risks, uncertainties, and changes in condition, significance, value and effect, including those discussed under the heading “Risk Factors”
−Removed: in our annual report on Form 10-K and other documents we file from time to time with the Securities and Exchange Commission (the “SEC”), such as our quarterly reports on Form 10-Q and our current reports on Form 8-K.
+Added: in Part II, Item 5 hereof and other documents we file from time to time with the Securities and Exchange Commission (the “SEC”), such as our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K.
Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable.
4 unchanged sentences
On December 18, 2019, Xperi Corporation (“Xperi”) entered into a definitive agreement with TiVo Corporation (“TiVo”), to combine in an all-stock merger of equals transaction (the “Mergers”).
−Removed: Following consummation of the Mergers on June 1, 2020, Xperi Holding Corporation (“we”) became the parent company of both Xperi and TiVo.
−Removed: We are a leading consumer and entertainment product/solutions licensing company and one of the industry’s largest intellectual property licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 11,000 patents and patent applications worldwide.
−Removed: We create extraordinary experiences at home and on the go for millions of consumers around the world, elevating content and how audiences connect with it in a way that is more intelligent, immersive and personal.
−Removed: Powering smart devices, connected cars, entertainment experiences and more, we have created a unified ecosystem that reaches highly engaged consumers, uncovering significant new business opportunities, now and in the future.
−Removed: Our technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for partners, customers and consumers.
−Removed: Headquartered in Silicon Valley with operations around the world, we have approximately 2,250 employees including the additions from the recent acquisition of Vewd Software Holdings Limited, and more than 35 years of operating experience.
−Removed: We are currently planning, subject to any required regulatory approvals, a separation of our Product business and IP Licensing business through a tax-efficient transaction, resulting in two independent, publicly traded companies.
−Removed: We currently anticipate that the separation will be completed in the fall of 2022.
+Added: Following consummation of the Mergers on June 1, 2020, Xperi Holding Corporation became the parent company of both Xperi and TiVo.
+Added: On October 1, 2022, Adeia Inc.
+Added: (formerly known as Xperi Holding Corporation) ("Adeia", "we") completed the previously announced separation ("the Separation") of its product business into an independent publicly traded company, Xperi Inc.
+Added: ("Xperi Inc.").
+Added: The Separation was structured as a spin-off , which was achieved through Adeia's distribution of 100 percent of the outstanding shares of Xperi Inc.'s common stock to holders of Adeia's common stock as of the close of business on the record date of September 21, 2022 (the "Record Date").
+Added: Each Adeia stockholder of record received four shares of Xperi Inc.
+Added: common stock for every ten shares of Adeia common stock that it held on the Record Date.
+Added: Following the Separation, Adeia retains no ownership interest in Xperi Inc., which is now listed under the ticker symbol "XPER" on the New York Stock Exchange.
+Added: Effective at the open of business on October 3, 2022, Adeia's shares of common stock, par value $0.001 per share, began trading on the Nasdaq Global Select Market under the new ticker symbol "ADEA".
+Added: Following the Separation, we are a leading intellectual property ("IP") licensing platform in the consumer and entertainment space, with a diverse portfolio of media and semiconductor intellectual property and more than 9,500 patents and patent applications worldwide.
+Added: In order to serve an increasingly connected world, we invent, develop, and license fundamental innovations that enhance billions of devices and shape the way millions of people explore and experience entertainment.
+Added: Through our IP licensing business, we help enable extraordinary experiences at home and on the go for millions of consumers around the world, with IP that helps elevate content and improves how audiences connect with it in a way that is more intelligent, immersive and personal.
+Added: Through providing the IP that helps to power smart devices, entertainment experiences and more, we have created a unified ecosystem that reaches highly engaged consumers and uncovered new business opportunities.
+Added: Headquartered in Silicon Valley with operations around the world, we have approximately 2,200 employees, including approximately 2,100 employees that will be part of Xperi Inc.
+Added: after the Separation, and more than 35 years of operating experience.
COVID-19 Impact
The COVID-19 pandemic has had, and may continue to have, an adverse impact on our business.
−Removed: The impact to date has included periods of significant volatility in markets we serve, in particular the automotive and broad consumer electronics markets.
−Removed: Additionally, the pandemic has caused some challenges and delays in acquiring new customers and executing license renewals.
+Added: The impact to date has included periods of significant volatility in the markets we serve, in particular the automotive and broad consumer electronics markets.
+Added: The pandemic has also caused some challenges and delays in acquiring new customers and executing license renewals.
These factors have negatively impacted our financial condition and results of operations, and may result in an impairment of our long-lived assets, including goodwill, increased credit losses and impairments of investments in other companies.
−Removed: Our operations and those of our customers have also been negatively impacted by certain trends arising from the COVID-19 pandemic, including labor market constraints, shortage of semiconductor components and manufacturing capacities, and delays in shipments, product development and product launches.
−Removed: Moreover, the COVID-19 pandemic, its related impact, and United States federal, state and foreign government policies enacted to combat the pandemic have contributed to a recent rise of inflation that may increase the cost of our operations and reduce demand for our products and services and those of our customers, which may adversely affect our financial performance.
−Removed: Although a significant portion of our anticipated revenue for 2022 is derived from fixed-fee and minimum-guarantee arrangements, primarily from large, well-capitalized customers which we believe somewhat mitigates the risks to our business, our per-unit and variable-fee based revenue will continue to be susceptible to the volatility, labor shortages, supply chain disruptions, microchip shortages, and potential market downturns precipitated by the COVID-19 pandemic.
+Added: Further, our operations and those of our customers have also been negatively impacted by certain trends arising from the COVID-19 pandemic, including labor market constraints, shortages of semiconductor components, decreased manufacturing capacities, and delays in shipments, product development and product launches.
+Added: Moreover, the COVID-19 pandemic, its related impact, and United States federal, state and foreign government policies enacted to combat the pandemic have contributed to a recent rise of inflation that may increase the cost of our operations and have an adverse effect on demand for its customers' products and services and in turn the Company's licensing revenues, which may adversely affect our financial performance.
+Added: Although a significant portion of our anticipated revenue for 2022 is derived from fixed-fee and minimum-guarantee arrangements from large, well-capitalized customers, our per-unit and variable-fee based revenue will continue to be susceptible to the volatility, labor shortages, supply chain disruptions, microchip shortages, and potential market downturns precipitated by the COVID-19 pandemic.
The impact of the pandemic on our overall results of operations remains uncertain for the foreseeable future.
−Removed: Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided under Part I, Item 1A –
−Removed: Risk Factors of the Form 10-K.
+Added: Further discussion of COVID-19's potential impact on our business is provided under Part I, Item 1A –
+Added: Risk Factors of the Form 10-K and in Part II, Item 5 –
+Added: Risk Factors of this Form 10-Q.
Results of Operations
−Removed: We derive the majority of our revenue from the licensing of our technologies and intellectual property (“IP”) rights to customers.
+Added: We derive the majority of our revenue from licensing our technologies and IP rights to customers.
For our revenue recognition policy, including descriptions of revenue-generating activities, refer to “Note 3 –
3 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Operating expenses:
5 unchanged sentences
Litigation expense
+Added: Goodwill impairment
Total operating expenses
−Removed: Operating income
+Added: Operating income (loss)
Interest expense
−Removed: Other income (expense), net
+Added: Other income and expense, net
Loss on debt extinguishment
−Removed: Income before taxes
+Added: Income (loss) before taxes
Provision for (benefit from) income taxes
−Removed: Net income (loss)
Revenue (in thousands, except for percentages):
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
−Removed: The increase in revenue for the three months ended June 30, 2022, compared to the same period in the prior year, was primarily due to the settlement of a contract dispute with a large mobile imaging customer and the execution of a long-term license agreement with a leading consumer electronics and OTT service provider, for which a portion of the total revenue was recognized in the second quarter of 2022.
−Removed: The increase was partially offset by a decline in Product revenue from consumer hardware and legacy guides within the Pay TV market vertical and a one-time benefit to revenue in the second quarter of 2021 from a Stream 4K customer within the Media Platform market vertical.
−Removed: Six Months Ended
+Added: The decrease in revenue during the three months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to a decrease in IP licensing revenue as a result of non-recurring revenue from a license agreement recognized during the three months ended September 30, 2021.
+Added: The overall decrease in IP licensing revenue was partially offset by an increase in Product revenue from the consumer electronics market vertical offset by declines in revenue from consumer hardware and legacy guides within the Pay TV market vertical and revenue from the connected car market vertical.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
−Removed: The increase in revenue for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily due to the execution of a new, multi-year license agreement with a large semiconductor company, the settlement of a contract dispute with a large mobile imaging customer, and the execution of a long-term license agreement with a leading consumer electronics and OTT service provider, for which a portion of the total revenue was recognized in the first two quarters of 2022.
−Removed: The increase was partially offset by a decline in Product revenue driven largely by a decrease in revenue from consumer hardware and legacy guides within the Pay TV market vertical, one-time recovery of royalties from a customer in 2021 within Consumer Electronics market vertical, and one-time benefit to revenue in the second quarter of 2021 from a Stream 4K customer within the Media Platform market vertical.
+Added: The increase in revenue during the nine months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to the recognition of license revenue associated with an IP technology and license agreement with a large semiconductor company, the settlement of a contract dispute with a large mobile imaging customer in the second quarter of 2022, and the execution of a long-term license agreement with a leading consumer electronics and OTT service provider.
+Added: These increases were partially offset by a decline in Product revenue primarily due to a decrease in revenue from consumer hardware and legacy guides within the Pay TV market vertical, one-time recovery of royalties from a customer in 2021 within Consumer Electronics market vertical, and one-time benefit to revenue in the second quarter of 2021 from a Stream 4K customer within the Media Platform market vertical.
Cost of Revenue, Excluding Depreciation and Amortization of Intangible Assets
−Removed: Cost of revenue, excluding depreciation and amortization of intangible assets, consists primarily of employee-related costs, royalties paid to third parties, hardware product-related costs, maintenance costs and an allocation of facilities costs, as well as service center and other expenses related to providing our technology solution offerings and NRE services.
+Added: Cost of revenue, excluding depreciation and amortization of intangible assets, consists primarily of employee-related costs, royalties paid to third parties, hardware product-related costs, maintenance costs and an allocation of facilities costs, as well as service center and other expenses related to providing our technology solution offerings and non-recurring engineering ("NRE") services.
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
Cost of revenue, excluding depreciation and amortization of intangible assets
−Removed: Cost of revenue, excluding depreciation and amortization of intangible assets is relatively flat for the three months ended June 30, 2022, compared to the same period in the prior year.
−Removed: Six Months Ended
+Added: Cost of revenue, excluding depreciation and amortization of intangible assets was relatively consistent for the three months ended September 30, 2022, compared to the same period in the prior year.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
Cost of revenue, excluding depreciation and amortization of intangible assets
−Removed: Cost of revenue, excluding depreciation and amortization of intangible assets is relatively flat for the six months ended June 30, 2022, compared to the same period in the prior year.
+Added: The decrease in cost of revenue, excluding depreciation and amortization of intangible assets during the nine months ended September 30, 2022, as compared to the same period in the prior year, was primarily driven by lower hardware product-related costs due to a decline in hardware product sales.
Research, Development and Other Related Costs
−Removed: Research, development and other related costs (“R&D expense”) are comprised primarily of employee-related costs, stock-based compensation expense, engineering consulting expenses associated with new product and technology development, product commercialization, quality assurance and testing costs, as well as costs related to patent applications and examinations, reverse engineering, materials, supplies, and an allocation of facilities costs.
−Removed: All research, development and other related costs are expensed as incurred.
+Added: Research, development and other related costs (“R&D expense”) consist primarily of employee-related costs, stock-based compensation expense, engineering consulting expenses associated with new product and technology development, product commercialization, quality assurance and testing costs, as well as costs related to patent applications and examinations, reverse engineering, materials, supplies, and an allocation of facilities costs.
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
Research, development and other related costs
−Removed: The increase in R&D expense for the three months ended June 30, 2022, compared to the same period in the prior year, was primarily driven by higher personnel costs and increased bonus expense driven by expected higher bonus percentage attainment.
−Removed: The increase in personnel costs was primarily driven by employees hired in connection with the acquisition of certain assets of MobiTV ("the MobiTV Acquisition") in May 2021.
−Removed: Six Months Ended
+Added: The increase in R&D expense during the three months ended September 30, 2022, as compared to the same period in the prior year, was primarily driven by higher personnel costs including variable compensation programs.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
Research, development and other related costs
−Removed: The increase in R&D expense for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily driven by higher personnel costs and increased bonus expense driven by expected higher bonus percentage attainment, partially offset by reductions in outside service and contractors expenditure in the first two quarters of 2022.
−Removed: The increase in personnel costs was primarily driven by employees hired in connection with the MobiTV Acquisition in May 2021.
−Removed: We believe that a significant level of R&D expense will be required for us to remain competitive in the future.
−Removed: We also expect R&D expense to increase in future periods as a result of the Vewd acquisition which closed on July 1, 2022.
+Added: The increase in R&D expense during the nine months ended September 30, 2022, as compared to the same period in the prior year, was primarily driven by higher personnel costs including variable compensation, which was partially offset by a decrease in outside engineering services.
+Added: We believe that a significant level of R&D will be required for us to remain competitive in the future.
Selling, General and Administrative
Selling expenses consist primarily of compensation and related costs for sales and marketing personnel engaged in sales and licensee support, reverse engineering personnel and services, marketing programs, public relations, promotional materials, travel, trade show expenses, and stock-based compensation expense.
−Removed: General and administrative expenses consist primarily of compensation and related costs for general management, information technology, finance personnel, legal fees and expenses, facilities costs, stock-based compensation expense, and professional services.
+Added: General and administrative expenses consist primarily of compensation and related costs for general management, information technology, finance personnel, legal fees and expenses, facilities, stock-based compensation expense, and professional services.
Our general and administrative expenses, other than facilities-related expenses, are not allocated to other expense line items.
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
Selling, general and administrative
−Removed: The increase in selling, general, and administrative ("SG&A") expenses for the three months ended June 30, 2022, compared to the same period in the prior year, was primarily due to increased bonus expense driven by expected higher bonus percentage attainment and increased transaction costs related to the Vewd acquisition that closed subsequent to the second quarter of 2022, partially offset by a decrease in banker fees driven by the refinancing of debt that was completed in the second quarter of 2021.
−Removed: Six Months Ended
+Added: The increase in selling, general, and administrative ("SG&A") expenses during the three months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to increased variable compensation, increased transaction costs related to the Vewd Acquisition, and an increase in costs related to the Separation.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
Selling, general and administrative
−Removed: The increase in SG&A expenses for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily due to incremental stock-based compensation recognized in connection with the accelerated vesting of outstanding restricted stock units upon the separation of a former executive in the first quarter of 2022, an increase in costs related to planned business separation, increase in bonus expense driven by expected higher percentage attainment, partially offset by a reductions in the provision for credit losses and banker fees.
+Added: The increase in SG&A expenses during the nine months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to increased stock-based compensation associated with the accelerated vesting of outstanding restricted stock units upon the separation of a former executive in the first quarter of 2022, an increase in costs related to the Separation, an increase in variable compensation, partially offset by decreases in the provision for credit losses and banker fees.
Depreciation Expense
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
Depreciation expense
−Removed: Depreciation expense for the three months ended June 30, 2022 is relatively flat compared to the same period in the prior year.
−Removed: Six Months Ended
+Added: The decrease in depreciation expense during the three months ended September 30, 2022, as compared to the same period in the prior year, was primarily to certain property and equipment, which became fully depreciated in the third quarter of 2022, partially offset by an increase in depreciation expense associated with property and equipment that was acquired in connection with the Vewd Acquisition.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
Depreciation expense
−Removed: Depreciation expense for the six months ended June 30, 2022 is relatively flat compared to the same period in the prior year.
+Added: The decrease in depreciation expense during the nine months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to certain property and equipment, which became fully depreciated in the third quarter of 2022, partially offset by an increase in depreciation expense associated with property and equipment that was acquired in connection with the Vewd Acquisition.
Amortization Expense
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
Amortization expense
−Removed: The decrease in amortization expense for the three months ended June 30, 2022, compared to the same period in the prior year, was primarily due to certain acquired intangible assets becoming fully amortized in late 2021 causing a decrease in the quarterly amortization expense in 2022 when compared to the same period in the prior year.
−Removed: Six Months Ended
+Added: The decrease in amortization expense during the three months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to certain acquired intangible assets, which became fully amortized in late 2021, partially offset by an increase in amortization expense due to intangible assets acquired in connection with the Vewd Acquisition.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
Amortization expense
−Removed: The decrease in amortization expense for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily due to certain acquired intangible assets becoming fully amortized in late 2021 causing a decrease in the quarterly amortization expense in 2022 when compared to the same period in the prior year.
+Added: The decrease in amortization expense during the nine months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to certain acquired intangible assets, which became fully amortized in late 2021, partially offset by an increase in amortization expense due to intangibles assets acquired in connection with the Vewd Acquisition in the third quarter of 2022.
Litigation Expense
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
Litigation expense
−Removed: The increase in litigation expense for the three months ended June 30, 2022, compared to the same period in the prior year, was primarily due to a $2.2 million reserve recorded for estimated expense reimbursement due to Videotron as a result of the outcome of that litigation matter, partially offset by reduced case activity.
−Removed: Six Months Ended
+Added: Litigation expense was relatively consistent for the three months ended September 30, 2022, compared to the same period in the prior year.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
Litigation expense
−Removed: The increase in litigation expense for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily due to the previously mentioned $2.2 million reserve related to the Videotron matter, partially offset by reduced case activity.
−Removed: We expect that litigation expense will continue to be a material portion of our operating expenses.
+Added: Litigation expense was relatively consistent for the nine months ended September 30, 2022, compared to the same period in the prior year.
+Added: We expect that litigation expense will continue to be a material portion of our operating expenses, as it is used to enforce and protect our IP and contract rights.
Litigation expense may fluctuate between periods because of planned or ongoing litigation, as described in Part II, Item 1 –
−Removed: Legal Proceedings, and because of litigation planned for or initiated from time to time in the future in order to enforce and protect our intellectual property and contract rights.
−Removed: Upon expiration of our customers’
−Removed: licenses, if those licenses are not renewed, litigation may become necessary to secure payment of reasonable royalties for the use of our patented technology.
+Added: Legal Proceedings.
+Added: If our customers' licenses are not renewed upon expiration and those customers continue to use our patented technology, litigation may become necessary to secure payment of reasonable royalties for the use of our patented technology.
If we plan for or initiate such litigation, our future litigation expenses may increase.
+Added: Goodwill impairment
+Added: The increase in goodwill impairment of $354 million during the three and nine months ended September 30, 2022, as compared to the same period in the prior year, was driven by a goodwill impairment charge recognized related to the Company's Product reporting unit and segment due to changes in the circumstances that indicated the carrying amount of goodwill may not be recoverable.
Stock-based Compensation Expense
−Removed: The following table sets forth our stock-based compensation (“SBC”) expense for the three and six months ended June 30, 2022 and 2021 (in thousands):
+Added: The following table sets forth our stock-based compensation (“SBC”) expense for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Cost of revenue, excluding depreciation and amortization of intangible assets
2 unchanged sentences
Total stock-based compensation expense
−Removed: Stock-based compensation awards include employee stock options, restricted stock awards and units, and employee stock plan purchases.
−Removed: The increase in SBC expense for the three months ended June 30, 2022, compared to the corresponding period in 2021, was primarily due to the increase in stock award grants made in 2021 resulting from the MobiTV Acquisition.
−Removed: The increase in SBC expense for the six months ended June 30, 2022, compared to the corresponding period in 2021, was primarily a result of the accelerated vesting of outstanding restricted stock units upon the separation of a former executive, and secondarily from the increase in stock award grants made in 2021 resulting from the Mergers and the MobiTV Acquisition.
+Added: SBC awards include employee stock options, restricted stock awards and units, and employee stock plan purchases.
+Added: The increase in SBC expense for the three months ended September 30, 2022, as compared to the corresponding period in 2021, was primarily due to the increase in stock award grants made.
+Added: The increase in SBC expense for the nine months ended September 30, 2022, as compared to the corresponding period in 2021, was primarily a result of the accelerated vesting of outstanding restricted stock units upon the separation of a former executive and from the increase in stock award grants made.
Interest Expense
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
Interest expense
−Removed: The decrease in interest expense for the three months ended June 30, 2022, compared to the same period in the prior year, was primarily due to a lower average debt balance as compared to the same period in 2021 as we continue to pay down principal balance during the intervening period, and secondly to a reduction in interest rate as a result of the debt refinancing in June 2021.
−Removed: Six Months Ended
+Added: The increase in interest expense during the three months ended September 30, 2022, as compared to the same period in the prior year, was primarily due to an increase in interest rates on our variable interest rate debt.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
Interest expense
−Removed: The decrease in interest expense for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily due to a lower average debt balance as compared to the same period in 2021 as we continue to pay down principal balance during the intervening period, and secondly to a reduction in interest rate as a result of the debt financing in June 2021.
−Removed: We anticipate interest expense will decrease in 2022 when compared to 2021 as a result of a full year of the lower debt balance and amortization of debt discount and issuance costs.
−Removed: However, those reductions are expected to be partially offset by increasing interest rates since the interest rate on our existing debt is variable.
−Removed: In addition, we will incur additional interest expense as a result of $50.0 million debt assumed under the Vewd Acquisition which closed on July 1, 2022.
+Added: Interest expense during the nine months ended September 30, 2022 was relatively consistent compared with the same period in the prior year.
+Added: We anticipate interest expense will increase in 2022 when compared to 2021 as a result of the effect of rising interest rates on our existing variable-rate debt, partially offset by a full year of the lower debt balance and amortization of debt discount and issuance costs.
+Added: In addition, Xperi Inc.
+Added: will incur interest expense as a result of the $50.0 million of debt in connection with the Vewd Acquisition which closed in the third quarter of 2022.
Other Income and Expense, Net
Three Months Ended
+Added: September 30,
Increase/ (Decrease)
−Removed: Other income, net
−Removed: Other income, net for the three months ended June 30, 2022 is relatively flat compared to the same period in the prior year.
−Removed: Six Months Ended
+Added: Other income and expense, net
+Added: Other and expense income, net during the three months ended September 30, 2022 was relatively consistent compared to the same period in the prior year.
+Added: Nine Months Ended
+Added: September 30,
Increase/ (Decrease)
−Removed: Other income, net
−Removed: The decrease in other income, net for the six months ended June 30, 2022, compared to the same period in the prior year, was primarily driven by decrease in realized loss on investment and other miscellaneous income in the 2022 period, partially offset by an increase interest income due to the execution of a multi-year license agreement with a large semiconductor customer in the first quarter of 2021.
+Added: Other income and expense, net
+Added: The decrease in other income and expense, net during the nine months ended September 30, 2022, compared to the same period in the prior year, was primarily driven by a decrease in realized loss on marketable investments, partially offset by an increase in interest income.
Loss on Debt Extinguishment
5 unchanged sentences
For jurisdictions in which a loss is forecast but no benefit can be realized for those losses, the tax is estimated separately.
−Removed: In certain circumstances we also record the income tax effects of discrete transactions in the quarter in which the transaction has occurred.
+Added: In certain circumstances we also record the income tax effects of discrete transactions in the quarter in which the transaction occurred.
Foreign withholding taxes, U.S.
−Removed: federal and state income taxes, and unrealized foreign exchange loss from the prior South Korea refund claims are the primary drivers of income tax expense and the primary reasons for cash tax payments of income taxes.
−Removed: For the three and six months ended June 30, 2022, our effective tax rate varies significantly from the 21% U.S.
+Added: federal and state income taxes, and unrealized foreign exchange loss from the prior South Korea refund claims are the primary drivers of income tax expense and the primary reasons for cash payments of income taxes.
+Added: For the three and nine months ended September 30, 2022, our effective tax rate varies significantly from the 21% U.S.
federal tax rate due to foreign withholding taxes, state income taxes, and unrealized foreign exchange loss from prior South Korea refund claims.
−Removed: For the three months ended June 30, 2022, we recorded an income tax expense of $22.1 million on pretax income of $15.7 million, and for the six months ended June 30, 2022 we recorded an income tax expense of $43.7 million on pretax income of $61.2 million, which resulted in an effective tax rate of 71.4% for the six months ended June 30, 2022.
−Removed: The income tax expense for the three and six months ended June 30, 2022 was primarily related to foreign withholding taxes, U.S.
−Removed: federal income tax, state income taxes, and unrealized foreign exchange loss from the prior South Korea refund claims.
−Removed: For the three months ended June 30, 2021, we recorded an income tax benefit of $2.9 million on pretax loss of $4.7 million, and for the six months ended June 30, 2021, we recorded an income tax benefit of $6.9 million on pretax loss of $4.2 million, which resulted in an effective tax rate of 162.6% for the six months ended June 30, 2021.
−Removed: The income tax benefit for the three and six months ended June 30, 2021 was primarily related to projected negative U.S.
−Removed: effective tax rate applied to a year-to-date U.S.
−Removed: profit before tax.
−Removed: The year-over-year increase in income tax expense for the quarter ended June 30, 2022 is largely attributable to the application of a negative effective tax rate to the June 30, 2021 year-to-date U.S.
+Added: For the three months ended September 30, 2022, we recorded an income tax expense of $0.9 million on pretax loss of $389.0 million, and for the nine months ended September 30, 2022 we recorded an income tax expense of $44.5 million on pretax loss of $327.8 million, which resulted in an effective tax rate of (13.6)% for the nine months ended September 30, 2022.
+Added: The income tax expense for the three and nine months ended September 30, 2022 was primarily related to foreign withholding taxes, U.S.
+Added: federal and state income taxes, and unrealized foreign exchange loss from the prior year South Korea refund claims.
+Added: For the three months ended September 30, 2021, we recorded an income tax expense of $42.7 million on pretax loss of $3.7 million and for the nine months ended September 30, 2021, we recorded an income tax expense of $35.8 million on a pretax loss of $7.9 million, which resulted in an effective tax rate of (452.3)% for the nine months ended September 30, 2021.
+Added: The income tax expense for the three and nine months ended September 30, 2021 was primarily related to foreign withholding taxes, base erosion and anti-abuse tax (“BEAT”), and unrealized foreign exchange loss from the prior year South Korea refund claims, which have remained relatively fixed on a forecast basis quarter over quarter.
+Added: The year-over-year increase in income tax expense for the quarter ended September 30, 2022 is largely attributable to the application of a negative effective tax rate to the September 30, 2021 year-to-date U.S.
pre-tax income.
4 unchanged sentences
In the future, we may release our deferred tax asset valuation allowance associated with our federal, state, or foreign deferred tax assets depending on achievement of future profitability in relevant jurisdictions or the implementation of tax planning strategies that enable us to utilize deferred tax assets.
−Removed: There can be no assurance that we will generate profits or implement tax strategies in future periods enabling us to fully realize our deferred tax assets.
+Added: There can be no assurance that we will generate profits or implement tax strategies in future periods that will enable us to fully realize our deferred tax assets.
The timing of recording a deferred tax asset valuation allowance or the reversal of such valuation allowance is subject to objective and subjective factors that cannot be known in advance.
3 unchanged sentences
Segment Operating Results
−Removed: We operate in two reportable segments:
+Added: As of September 30, 2022, we operate in two reportable segments:
(1) IP Licensing and (2) Product.
1 unchanged sentence
Our Chief Executive Officer has been determined to be the Chief Operating Decision Maker (“CODM”) in consideration with the authoritative guidance on segment reporting.
−Removed: In our IP Licensing segment, we primarily license our innovations to leading companies in the broader entertainment and semiconductor industries, and those developing new technologies that will help drive the industries forward.
+Added: In our IP Licensing segment, we primarily license our innovations to leading companies in the broader entertainment and semiconductor industries, and those developing new technologies that will help drive these industries forward.
Licensing arrangements include access to one or more of our foundational patent portfolios and may also include access to some of our industry-leading technologies and proven know-how.
In our Product segment, we derive the majority of the revenue from licensing our technology to customers primarily through Technology License arrangements and Technology Solutions arrangements.
−Removed: For Technology License arrangements, the customer obtains rights to the technology delivered at the commencement of the agreement.
−Removed: For Technology Solutions arrangements, the customer receives access to a platform, media or data that includes frequent updates, where access to such updates is critical to the functionality of the technology.
+Added: In our Technology License arrangements, the customer obtains rights to the technology delivered at the commencement of the agreement.
+Added: In our Technology Solutions arrangements, the customer receives access to a platform, media or data that includes frequent updates, where access to such updates is critical to the functionality of the technology.
We do not identify or allocate assets by reportable segment, nor does the CODM evaluate reportable segments using discrete asset information.
4 unchanged sentences
Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
IP Licensing segment
6 unchanged sentences
Total operating expenses
−Removed: Operating income:
+Added: Operating income (loss):
IP Licensing segment
1 unchanged sentence
Unallocated operating expenses
−Removed: Total operating income
−Removed: For the three months ended June 30, 2022, the unallocated operating expenses were $73.3 million, compared to $69.1 million for the three months ended June 30, 2021.
−Removed: The increase of $4.2 million was due principally to incremental bonus expense as a result of expected higher bonus percentage attainment and increased transaction costs related to the Vewd Acquisition that closed subsequent to the second quarter of 2022, partially offset by a decrease in banker fees as a result of the refinancing of debt that was completed in the second quarter of 2021.
−Removed: For the six months ended June 30, 2022, the unallocated operating expenses were $144.9 million compared to $138.2 million for the six months ended June 30, 2021.
−Removed: The increase of $6.7 million is primarily due to incremental stock-based compensation recognized in connection with the accelerated vesting of outstanding restricted stock units upon the separation of a former executive in the first quarter of 2022, an increase in costs related to planned business separation, and increase in bonus expense driven by expected higher bonus percentage attainment, partially offset by a reduction in the provision for credit losses, and reduced banker fees.
−Removed: The revenue and operating income amounts in this section have been presented on a basis consistent with GAAP applied at the segment level.
−Removed: As of June 30, 2022, we had a total of $850.1 million in goodwill, approximately $322.3 million of which was allocated to our IP Licensing segment and approximately $527.8 million of which was allocated to our Product segment.
+Added: Total operating income (loss)
IP Licensing Segment
−Removed: Three Months Ended
−Removed: Six Months Ended
−Removed: Operating expenses:
−Removed: Cost of revenue, excluding depreciation and amortization of intangible assets
−Removed: Research, development and other related costs
−Removed: Total operating expenses
−Removed: Total operating income
−Removed: IP Licensing revenue for the three months ended June 30, 2022 was $107.8 million as compared to $101.8 million for the three months ended June 30, 2021, an increase of $6.0 million.
−Removed: The increase was primarily attributable to the execution of a long-term license agreement with a leading consumer electronics and OTT service provider for which a meaningful portion of the total revenue was recognized in the quarter, partially offset by a decline in revenue from Media IP licensing business due to past royalty revenue recorded in the second quarter of 2021.
−Removed: IP Licensing revenue for the six months ended June 30, 2022 was $246.4 million as compared to $199.9 million for the six months ended June 30, 2021, an increase of $46.5 million.
−Removed: The increase was primarily attributable to a new, multi-year license agreement with a large semiconductor customer and a new, long-term license agreement with a leading consumer electronics and OTT service provider for which a meaningful portion of the total revenue was recognized in the first six months of 2022.
−Removed: Operating expenses for the three months ended June 30, 2022 were $38.5 million, as compared to $34.9 million for the three months ended June 30, 2021, an increase of $3.6 million.
−Removed: The increase was primarily due to an increase in R&D costs due to increased headcount and personnel costs as well as investments in both Media and Semiconductor technology and an increase in litigation expense.
−Removed: Operating expenses for the six months ended June 30, 2022 were $73.8 million, as compared to $68.4 million for the six months ended June 30, 2021, an increase of $5.4 million.
−Removed: The increase was primarily due to an increase in R&D costs due to increased headcount and personnel costs as well as investments in both Media and Semiconductor technology.
−Removed: Litigation expenses for the three months ended June 30, 2022, were $2.8 million, as compared to $1.7 million for the three months ended June 30, 2021, an increase of $1.1 million.
−Removed: The increase was primarily due to a $2.2 million reserve recorded for estimated expense reimbursement due to Videotron as a result of the outcome of that litigation matter, partially offset by reduced case activity.
−Removed: Litigation expenses for the six months ended June 30, 2022, were $3.9 million, as compared to $3.2 million for the six months ended June 30, 2021, an increase of $0.7 million.
−Removed: The increase was primarily due to the reasons stated above.
−Removed: We expect that litigation expense will continue to be a material portion of our operating expenses and may fluctuate between periods because of planned or ongoing litigation, as described in Part II, Item 1 –
−Removed: Legal Proceedings, in this report, and because of litigation planned for or initiated from time to time in the future in order to enforce and protect our intellectual property and contract rights.
−Removed: Operating income for the three months ended June 30, 2022 was $69.3 million, as compared to $67.0 million for the three months ended June 30, 2021, an increase of $2.4 million.
−Removed: The increase was primarily due to reasons stated above, including the execution of a long-term IP license agreement with a leading consumer electronics and OTT service provider.
−Removed: Operating income for the six months ended June 30, 2022 was $172.6 million, as compared to $131.4 million for the six months ended June 30, 2021, an increase of $41.2 million.
−Removed: The increase was primarily due to reasons stated above, including the execution of a multi-year IP license agreement with a large semiconductor customer and a long-term IP license agreement with a leading consumer electronics and OTT service provider.
−Removed: Product Segment
−Removed: Three Months Ended
−Removed: Six Months Ended
−Removed: Operating expenses:
−Removed: Cost of revenue, excluding depreciation and amortization of intangible assets
−Removed: Research, development and other related costs
−Removed: Total operating expenses
−Removed: Total operating income
−Removed: Product revenue for the three months ended June 30, 2022 was $126.2 million as compared to $120.4 million for the three months ended June 30, 2021, an increase of $5.8 million.
−Removed: The increase was primarily attributable to the settlement of a contract dispute with a large mobile imaging customer partially offset by a decrease in revenue from consumer hardware and legacy guides within the Pay TV market vertical and a one-time benefit to revenue in the second quarter of 2021 from a Stream 4K customer within the Media Platform market vertical.
−Removed: Product revenue for the six months ended June 30, 2022 was $245.1 million as compared to $244.0 million for the six months ended June 30, 2021, an increase of $1.1 million.
−Removed: The increase was primarily attributable to increased revenue from the settlement of a contract dispute with a large mobile imagining customer partially offset by significant settlement of past royalties from a customer in the first quarter of 2021, and to continued supply chain constraints that impacted our customers’
−Removed: shipment volumes in our Connected Car and Consumer Electronics businesses.
−Removed: Operating expenses for the three months ended June 30, 2022 were $97.4 million, as compared to $105.0 million for the three months ended June 30, 2021, a decrease of $7.6 million.
−Removed: The decrease was primarily due to lower amortization expense, partially offset by an increase in R&D cost primarily due to employees hired in connection with the MobiTV Acquisition in May 2021.
−Removed: The lower amortization was attributable to certain intangible assets becoming fully amortized in the fourth quarter of 2021.
−Removed: Operating expenses for the six months ended June 30, 2022 were $194.9 million, as compared to $213.6 million for the six months ended June 30, 2021, a decrease of $18.7 million.
−Removed: The decrease was primarily driven by lower amortization expense, partially offset by an increase in R&D cost primarily due to employees hired in connection with the MobiTV Acquisition in May 2021.
−Removed: The lower amortization was attributable to certain intangible assets becoming fully amortized in the fourth quarter of 2021.
−Removed: Operating income for the three months ended June 30, 2022 was $28.8 million, as compared to $15.4 million for the three months ended June 30, 2021, an increase of $13.4 million.
−Removed: The increase was primarily due to reasons stated above.
−Removed: Operating income for the six months ended June 30, 2022 was $50.2 million, as compared to $30.4 million for the six months ended June 30, 2021, an increase of $19.7 million.
+Added: IP Licensing revenue for the three months ended September 30, 2022 was $89.3 million as compared to $101.6 million for the three months ended September 30, 2021, a decrease of $12.3 million.
+Added: The decrease was primarily attributable to non-recurring revenue from a license agreement recognized during the three months ended September 30, 2021.
+Added: IP Licensing revenue for the nine months ended September 30, 2022 was $335.6 million as compared to $301.5 million for the nine months ended September 30, 2021, an increase of $34.1 million.
+Added: The increase was primarily attributable to the recognition of license revenue associated with an IP technology and license agreement with a large semiconductor company and the execution of a long-term license agreement with a leading consumer electronics and OTT service provider.
+Added: Operating expenses for the IP Licensing segment for the three months ended September 30, 2022 were $39.1 million, as compared to $34.7 million for the three months ended September 30, 2021, an increase of $4.4 million.
+Added: The increase was primarily due to an increase in R&D costs due to increased headcount and personnel costs as well as investments in both Media and Semiconductor technology and an increase in litigation expense primarily driven by a $2.5 million reserve recorded for estimated expense reimbursement owed to Bell and Telus as a result of the expected outcome of that litigation matter.
+Added: The increase in litigation expense was partially offset by reduced case activity.
+Added: Operating expenses for the IP Licensing segment for the nine months ended September 30, 2022 were $112.8 million, as compared to $103.1 million for the nine months ended September 30, 2021, an increase of $9.7 million.
+Added: The increase was primarily due to an increase in R&D costs due to increased headcount and personnel costs as well as investments in both Media and Semiconductor technology and increase in litigation expense.
+Added: The increase in litigation expense was primarily due to a $2.2 million reserve recorded in the second quarter of 2022 related to the Videotron matter and a $2.5 million reserve recorded in the third quarter of 2022 for estimated expense reimbursement owed to the Bell and Telus as a result of the expected outcome of that litigation matter.
+Added: The increases were partially offset by reduced case activity.
+Added: Operating income for for the IP Licensing segment the three months ended September 30, 2022 was $50.2 million, as compared to $67.0 million for the three months ended September 30, 2021, a decrease of $16.8 million.
+Added: The decrease was primarily due to reasons stated above.
+Added: Operating income for the nine months ended September 30, 2022 was $222.8 million, as compared to $198.4 million for the nine months ended September 30, 2021, an increase of $24.4 million.
The increase was primarily due to reasons stated above.
+Added: Product Segment
+Added: Product revenue for the three months ended September 30, 2022 was $121.6 million as compared to $117.7 million for the three months ended September 30, 2021, an increase of $3.9 million.
+Added: The increase was primarily driven by an increase in minimum guarantee (“MG”) revenue in Consumer Electronics partially offset by decreases in revenue from the Pay-TV and Connected Car market verticals.
+Added: Product revenue for the nine months ended September 30, 2022 was $366.7 million as compared to $361.7 million for the nine months ended September 30, 2021, an increase of $5.0 million.
+Added: The increase was primarily driven by increased revenue from the settlement of a contract dispute with a large mobile imagining customer in the second quarter of 2022 and increased revenue from the Consumer Electronics market vertical.
+Added: The increases were partially offset by decreases in revenue from the Pay-TV and Connected Car market verticals.
+Added: Operating expenses for the Product segment for the three months ended September 30, 2022 were $463.2 million, as compared to $116.8 million for the three months ended September 30, 2021, an increase of $346.4 million.
+Added: The increase was primarily driven by the goodwill impairment charge recognized during the third quarter of 2022, increase in R&D cost primarily due to employees hired in connection the Vewd Acquisition in July 2022 and increase in variable compensation.
+Added: The increases were partially offset by decreases in depreciation and amortization expense due to certain fixed assets and acquired intangible assets reaching the end of their useful lives over the past twelve months and decrease in litigation expense due to reduced case activity.
+Added: Operating expenses for the Product segment for the nine months ended September 30, 2022 were $658.1 million, as compared to $330.4 million for the nine months ended September 30, 2021, an increase of $327.7 million.
+Added: The increase was primarily driven by the goodwill impairment charge described above, increase in R&D costs primarily due to employees hired in connection with the MobiTV Acquisition in the second quarter of 2021 and the Vewd Acquisition in the third quarter of 2022 and increase in variable compensation.
+Added: The increases were partially offset by decreases in amortization expense due to certain acquired intangible assets reaching the end of their useful lives over the past twelve and decrease in litigation expense due to reduced case activity.
+Added: Operating loss for the Product segment for the three months ended September 30, 2022 was $341.5 million, as compared to operating income of $0.9 million for the three months ended September 30, 2021, a decrease of $342.4 million.
+Added: Operating loss for the nine months ended September 30, 2022 was $291.3 million, as compared to operating income of $31.3 million for the nine months ended September 30, 2021, a decrease of $322.7 million.
+Added: The decreases were primarily due to reasons stated above.
Liquidity and Capital Resources
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(in thousands, except for percentages)
−Removed: June 30, 2022
+Added: September 30, 2022
December 31, 2021
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Percentage of total assets
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
Net cash from operating activities
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Our primary sources of liquidity and capital resources are our operating cash flows and our short-term investments.
−Removed: Cash, cash equivalents and short-term investments were $285.8 million at June 30, 2022, an increase of $24.2 million from $261.7 million at December 31, 2021.
−Removed: This increase resulted primarily from $87.0 million in cash generated from operations, $28.3 million in proceeds from sales of investments $26.1 million in proceeds from maturities of investments and $8.1 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans, which was partially offset by $10.4 million in dividends paid, $28.7 million in repurchases of common stock, $20.3 million in repayment of long-term debt, and $8.9 million of capital expenditures.
−Removed: Cash and cash equivalents totaled $275.3 million at June 30, 2022, an increase of $74.2 million from $201.1 million at December 31, 2021.
−Removed: On July 1, 2022, the Company closed the Vewd Acquisition for total consideration of approximately $109 million, consisting of approximately $59 million of cash and $50 million of debt.
−Removed: The term of the debt is 3 years and the interest rate is fixed at 6%.
+Added: Cash, cash equivalents and short-term investments were $272.5 million at September 30, 2022, an increase of $10.8 million from $261.7 million at December 31, 2021.
+Added: This increase resulted primarily from $142.0 million in cash generated from operations, $28.3 million in proceeds from sales of investments $35.2 million in proceeds from maturities of investments and $14.3 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans, which was partially offset by $50.5 net cash paid for the Vewd Acquisition, $15.6 million in dividends paid, $32.6 million in repurchases of common stock, $30.4 million in repayment of long-term debt, and $12.6 million of capital expenditures.
+Added: Cash and cash equivalents totaled $271.1 million at September 30, 2022, an increase of $70.0 million from $201.1 million at December 31, 2021.
The primary objectives of our investment activities are to preserve principal and to maintain liquidity while at the same time capturing a market rate of return.
−Removed: To achieve these objectives, we maintain a diversified portfolio of securities including money market funds and debt securities including corporate bonds and notes, municipal bonds and notes, commercial paper, treasury and agency notes and bills and certificates of deposit.
+Added: To achieve these objectives, we maintain a diversified portfolio of securities including money market funds and debt securities.
+Added: Debt securities include corporate bonds and notes, municipal bonds and notes, commercial paper, treasury and agency notes and bills and certificates of deposit.
We invest excess cash predominantly in high-quality investment grade debt securities with less than three years to maturity.
Our marketable debt securities are classified as available-for-sale (“AFS”) with credit losses recognized as a credit loss expense and non-credit related unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income or loss.
−Removed: For information about our material cash requirements, see “Liquidity and Capital Resources”
−Removed: in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
−Removed: Other than the principal payment of $20.3 million made by us under the Refinanced Term B Loans during the six months ended June 30, 2022, our cash requirements have not changed materially since December 31, 2021.
+Added: Other than the principal payment of $30.4 million made by us under the Refinanced Term B Loans during the nine months ended September 30, 2022, our cash requirements have not changed materially since December 31, 2021.
In addition to our cash requirements, we have returned cash to stockholders through both quarterly dividend payments and repurchases of our common stock under our stock repurchase plan.
Quarterly Dividends
−Removed: In July 2022, our Board of Directors authorized payment of a quarterly dividend of $0.05 per share, to be paid in September 2022.
+Added: In October 2022, our Board of Directors authorized payment of a quarterly dividend of $0.05 per share, to be paid in December 2022.
We anticipate that all quarterly dividends will be paid out of cash, cash equivalents and short-term investments.
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The stock repurchases may be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions, or pursuant to a Rule 10b5-1 plan.
−Removed: Since the inception of the Plan, and through June 30, 2022, we have repurchased an aggregate of approximately 10.0 million shares of common stock at a total cost of $172.2 million at an average price of $17.24.
−Removed: During the three months ended March 31, 2022, we repurchased an aggregate of approximately 1.0 million shares of common stock at a total cost of $17.3 million at an average price of $16.78.
−Removed: We did not repurchase any stock during the three months ended June 30, 2022.
−Removed: As of June 30, 2022, the total remaining amount available for repurchase under the Plan was $77.8 million.
+Added: Since the inception of the Plan, and through September 30, 2022, we have repurchased an aggregate of approximately 10.0 million shares of common stock at a total cost of $172.2 million at an average price of $17.24.
We may continue to execute authorized repurchases from time to time under the Plan.
The amount and timing of any repurchases under the Plan depend on a number of factors, including but not limited to, the trading price, volume and availability of our common shares.
−Removed: In addition, as we plan for the separation of our Product business and IP Licensing business we may reduce or suspend share repurchases as we plan for the capital needs of two independent businesses.
There is no guarantee that such repurchases under the Plan will enhance the value of our common stock.
−Removed: From 2020 through the second quarter of 2022, we generated approximately $796 million of cash flows from operating activities.
While we expect to continue to generate cash flows from operating activities in 2022, the COVID-19 pandemic continues to present uncertainties as to the level of such cash flows as compared to prior years.
−Removed: Additionally, transaction costs relating to the planned separation of our two business segments are expected to impact operating cash flows for at least the next 6 months.
+Added: Additionally, transaction costs relating to the Separation of our two business segments are expected to impact operating cash flows for at least the next three months.
We have taken actions to manage cash flows by reducing discretionary spending and other variable costs, and closely monitoring receivables and payables.
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The sale of additional equity securities could result in dilution to our stockholders.
−Removed: The incurrence of indebtedness would result in increased debt service obligations and may include covenants that would restrict our operations.
+Added: The incurrence of indebtedness could result in increased debt service obligations and may include covenants that would restrict our operations.
Cash Flows from Operating Activities
−Removed: Cash flows provided by operations were $87.0 million for the six months ended June 30, 2022, primarily due to our net income of $17.5 million being further adjusted for non-cash items of depreciation of $11.4 million, amortization of intangible assets of $78.5 million and stock-based compensation expense of $32.3 million.
+Added: Cash flows provided by operations were $142.0 million for the nine months ended September 30, 2022, primarily due to our net loss of $372.3 million being further adjusted for non-cash items of depreciation of $16.8 million, amortization of intangible assets of $119.3 million, goodwill impairment charges of $354.0 million, and stock-based compensation expense of $49.3 million.
These increases were partially offset by $27.5 million in changes in operating assets and liabilities including payment during the first quarter of employee bonuses earned in 2021.
−Removed: Cash flows provided by operations were $83.0 million for the six months ended June 30, 2021, primarily due to our net income of $2.7 million being further adjusted for non-cash items of depreciation of $11.2 million, amortization of intangible assets of $104.4 million, stock-based compensation expense of $28.1 million and a loss on debt extinguishment of $8.0 million.
−Removed: These increases were partially offset by $77.9 million in changes in operating assets and liabilities including payments of employee annual bonuses earned in 2020.
+Added: Cash flows provided by operations were $165.9 million for the nine months ended September 30, 2021, primarily due to our net loss of $43.7 million being adjusted for non-cash items of depreciation of $18.0 million, amortization of intangible assets of $156.8 million, stock-based compensation expense of $42.5 million, and a loss on debt extinguishment of $8.0 million.
+Added: These increases were partially offset by a reduction of $7.1 million in deferred income taxes and $8.3 million in changes in operating assets and liabilities.
Cash Flows from Investing Activities
−Removed: Net cash provided by investing activities was $40.8 million for the six months ended June 30, 2022, primarily related to maturities and sales of securities of $54.3 million, partially offset by purchases of short-term investments of $4.5 million and capital expenditures of $8.9 million.
+Added: Net cash used in investing activities was $4.3 million for the nine months ended September 30, 2022, primarily related to maturities and sales of securities of $63.4 million, partially offset by net cash paid for the Vewd Acquisition of $50.5 million, purchases of short-term investments of $4.5 million and capital expenditures of $12.6 million.
The sales of securities included activity in late June in anticipation of the Vewd Acquisition which closed on July 1, 2022.
−Removed: Net cash used in investing activities was $6.2 million for the six months ended June 30, 2021, primarily related to purchases of short-term investments of $45.8 million, cash used in the MobiTV Acquisition of $17.4 million and capital expenditures of $4.9 million, partially offset by maturities and sales of securities of $61.9 million.
+Added: Net cash used in investing activities was $11.6 million for the nine months ended September 30, 2021, primarily related to purchases of short-term investments of $65.4 million, cash used in the MobiTV Acquisition of $17.4 million and capital expenditures of $8.3 million, partially offset by maturities and sales of securities of $79.7 million.
Capital Expenditures
Our capital expenditures for property, plant, and equipment consist primarily of purchases of computer hardware and software, information systems, production and test equipment.
−Removed: During the six months ended June 30, 2022 and 2021, we spent $8.9 million and $4.9 million on capital expenditures, respectively, and we expect capital expenditures in 2022 to be between $20.0 million to $25.0 million.
+Added: During the nine months ended September 30, 2022 and 2021, we spent $12.6 million and $8.3 million on capital expenditures, respectively, and we expect capital expenditures in the fourth quarter of 2022 to be immaterial.
These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents, and short-term investments.
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Cash Flows from Financing Activities
−Removed: Net cash used in financing activities was $51.3 million for the six months ended June 30, 2022 principally due to $20.3 million in repayment of indebtedness, $10.4 million in dividends paid, and $28.7 million in repurchases of common stock, partially offset by $8.1 million in proceeds due to the issuance of common stock under our employee stock grant programs and employee stock purchase plans.
−Removed: Net cash used in financing activities was $117.2 million for the six months ended June 30, 2021 principally due to $63.8 million in repayment of indebtedness, $6.8 million in debt refinancing costs, $10.5 million in dividends paid, and $43.3 million in repurchases of common stock, partially offset by $7.2 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.
+Added: Net cash used in financing activities was $64.3 million for the nine months ended September 30, 2022 primarily due to $30.4 million in repayment of indebtedness, $15.6 million in dividends paid, and $32.6 million in repurchases of common stock, partially offset by $14.3 million in proceeds due to the issuance of common stock under our employee stock grant programs and employee stock purchase plans.
+Added: Net cash used in financing activities was $157.9 million for the nine months ended September 30, 2021 primarily due to $73.9 million in repayment of indebtedness, $6.8 million in debt refinancing costs, $15.8 million in dividends paid, and $75.2 million in repurchases of common stock, partially offset by $13.8 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.
Long-term Debt
−Removed: On June 8, 2021, we amended that certain Credit Agreement dated June 1, 2020 by and among us, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (the “2020 Credit Agreement”).
+Added: On June 8, 2021, we amended (the "Amendment") that certain Credit Agreement dated June 1, 2020 by and among us, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (the “2020 Credit Agreement”).
The 2020 Credit Agreement initially provided for a five-year senior secured term B loan facility in an aggregate principal amount of $1,050 million (the “2020 Term B Loan Facility”).
−Removed: In connection with the amendment (the “Amendment”), we made a voluntary prepayment of $50.6 million of the term loan outstanding under the 2020 Credit Agreement using cash on hand.
+Added: In connection with the Amendment, we made a voluntary prepayment of $50.6 million of the term loan outstanding under the 2020 Credit Agreement using cash on hand.
The Amendment provided for, among other things, (i) a new tranche of term loans (the “Refinanced Term B Loans”) in an aggregate principal amount of $810.0 million, (ii) a reduction of the interest rate margin applicable to such loans to (x) in the case of base rate loans, 2.50% per annum and (y) in the case of Eurodollar loans, LIBOR plus a margin of 3.50% per annum, (iii) a prepayment premium of 1.00% in connection with any repricing transaction with respect to the Refinanced Term B Loans within six months of the closing date of the Amendment, (iv) an extension of the maturity to June 8, 2028, and (v) certain additional amendments, including amendments to provide us with additional flexibility under the covenant governing restricted payments.
We commenced repaying quarterly installments under the Refinanced Term B Loans in the third quarter of 2021.
−Removed: At June 30, 2022, $769.5 million was outstanding under the Refinanced Term B Loans with an interest rate, including amortization of debt discount and issuance costs, of 4.56%.
+Added: On July 1, 2022, TiVo Product Holdco LLC, which was subsequently renamed to Xperi Inc., issued a senior unsecured promissory note (the “Promissory Note”) to the sellers of Vewd in a principal amount of $50.0 million.
+Added: The issuer’s obligations under the Promissory Note are guaranteed by the Company prior to the Separation.
+Added: Indebtedness outstanding under the Promissory Note bears an interest rate of 6.00% per annum, payable in cash on a quarterly basis.
+Added: If a certain qualified spin-off transaction occurs, the interest rate will be increased to the greater of (a) 6.00% and (b) the sum of (i) the highest interest rate payable under any credit facility or bonds, debentures, notes or similar instruments where the issuer or any guarantor borrows money or guarantees obligations on a secured basis on or after the date of such spin-off transaction, plus (ii) 2.00%.
+Added: The Promissory Note will mature on July 1, 2025.
+Added: The issuer may, at any time and on any one or more occasions, prepay all or any portion of the outstanding principal amount, plus accrued and unpaid interest, if any, under the Promissory Note without premium or penalty.
+Added: In addition, the Promissory Note has mandatory prepayment provisions upon certain change of control or asset sale events.
+Added: At September 30, 2022, $759.4 million was outstanding under the Refinanced Term B Loans with an interest rate, including amortization of debt discount and issuance costs, of 6.02%.
Interest is payable monthly.
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We are obligated to pay a portion of excess cash flow on an annual basis beginning in March 2023 based on certain leverage ratios and our excess cash flow generated for the immediately preceding calendar year.
−Removed: The Refinanced Term B Loans contain customary covenants, and as of June 30, 2022, we were in full compliance with such covenants.
+Added: The Refinanced Term B Loans contain customary covenants, and as of September 30, 2022, we were in full compliance with such covenants.
+Added: At September 30, 2022, $50 million was outstanding under the Promissory Note with an interest rate of 6.00%.
+Added: Interest is payable quarterly.
+Added: The Promissory Note will mature on July 1, 2025.
+Added: The Promissory Note includes certain covenants that restrict the issuer and each guarantor’s ability to, among other things, incur certain indebtedness or engage in any material line of business substantially different from those lines of business conducted by such entities on the closing date of the acquisition.
+Added: The Promissory Note does not contain any financial covenants.
+Added: As of September 30, 2022, we were in full compliance with such covenants.
+Added: After the Separation, we own the debt under the Refinanced B Term Loans and Xperi Inc.
+Added: owns the debt under the senior unsecured promissory note.
Critical Accounting Policies and Estimates
−Removed: During the three and six months ended June 30, 2022, there were no significant changes in our critical accounting policies and estimates.
+Added: During the three and nine months ended September 30, 2022, there was a significant change in our critical accounting policies and estimates.
See “Note 2 –
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Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K.
+Added: Valuation of goodwill and intangible assets
+Added: We make judgments about the recoverability of intangible assets whenever events or changes in circumstances indicate that impairment may exist.
+Added: If such facts and circumstances exist, we assess recoverability by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts.
+Added: Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets.
+Added: If the useful life is shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life.
+Added: Such changes could result in impairment charges or higher amortization expense in future periods, which could have a significant impact on our operating results and financial condition.
+Added: We perform an annual review of the valuation of goodwill in the fourth quarter, or more often if indicators of impairment exist.
+Added: Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our market capitalization.
+Added: Evaluations of possible impairment and, if applicable, adjustments to carrying values require us to estimate, among other factors, future cash flows, useful lives, and fair market values of our assets.
+Added: When we conduct our evaluation of goodwill, the fair value of goodwill is assessed using valuation techniques that require significant management estimates and judgment.
+Added: Should conditions be different from management’s last assessment, significant impairments of goodwill may be required, which would adversely affect our operating results.
+Added: In performing the quantitative impairment test for goodwill, the fair value of the reporting unit is compared to its carrying amount.
+Added: We utilize the market capitalization approach to determine the fair value of a reporting unit.
+Added: Under the market capitalization approach, the fair value of a reporting unit is estimated based on the trading price of our stock as of the test date, or trading prices over a short period of time immediately prior or subsequent to the test date if such prices more reasonably represent the estimated fair value as of the test date, which is further adjusted by a control premium representing the synergies a market participant would achieve when obtaining control of the business.
Recent Accounting Pronouncements
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.