What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-07 · 397 added, 229 removed, 931 unchanged (40% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating expenses:

9 unchanged sentences

Provision for income taxes

Net income from continuing operations

Net income (loss) from continuing operations

Net loss from discontinued operations, net of tax

Net income (loss)

Net loss attributable to non-controlling interest

in discontinued operations

Net loss attributable to non-controlling interest in discontinued operations

Net income (loss) attributable to the Company

2 unchanged sentences

Discontinued operations

Net income (loss)

Continuing operations

Discontinued operations

Net income (loss)

Weighted average number of shares used in per share calculations-basic

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income (loss), net of tax:

Change in foreign currency translation adjustment

Net unrealized losses on available-for-sale debt securities

Net unrealized gain (losses) on available-for-sale debt securities

Other comprehensive income (loss), net of tax

Comprehensive income

Comprehensive income (loss)

Comprehensive loss attributable to noncontrolling interest

3 unchanged sentences

(in thousands, except for par value)

September 30,

Current assets:

Cash and cash equivalents

Available-for-sale debt securities

Marketable securities

Accounts receivable, net of allowance for credit losses of $ 1,463 and $ 713 , respectively

42 unchanged sentences

(in thousands)

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 2022

Cash flows from operating activities:

Adjustments to reconcile net income to net cash from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash from operating activities:

Depreciation of property and equipment

Amortization of intangible assets

Goodwill impairment

Stock-based compensation expense

11 unchanged sentences

Proceeds from sale of property and equipment

Cash paid for acquisitions, net of cash acquired

Purchases of intangible assets

18 unchanged sentences

Unpaid purchases of property and equipment at the end of the period

Cash flows above are presented on a consolidated basis and therefore also include $ 144.8 million of cash and cash equivalents included in current assets of discontinued operations in the condensed consolidated balance sheet as of June 30, 2022.

Unpaid purchases of intangible assets at the end of the period

Intangible assets acquired during the period

Debt acquired in a business acquisition

Cash flows above are presented on a consolidated basis and therefore also include $ 182.9 million of cash and cash equivalents included in current assets of discontinued operations in the condensed consolidated balance sheet as of September 30, 2022.

Refer to “Note 7 –

4 unchanged sentences

(in thousands, except per share amount)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Paid-In Capital

Treasury Stock

Other Comprehensive Loss

Other Comprehensive Income (Loss)

Stockholders' Equity

Balance at April 1, 2023

Other comprehensive loss

Balance at July 1, 2023

Other comprehensive income

Cash dividends paid on common stock ($ 0.05 per share)

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock in connection with exercise of stock options

Issuance of restricted stock, net of shares canceled

1 unchanged sentence

Stock-based compensation expense

Balance at June 30, 2023

Six Months Ended June 30, 2023

Balance at September 30, 2023

Nine Months Ended September 30, 2023

Paid-In Capital

10 unchanged sentences

Stock-based compensation expense

Balance at June 30, 2023

Balance at September 30, 2023

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

2 unchanged sentences

Total Company Stockholders' Equity

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Treasury Stock

2 unchanged sentences

Stockholders' Equity

Balance at April 1, 2022

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

Issuance of common stock in connection with employee stock purchase plan

Issuance of restricted stock, net of shares canceled

1 unchanged sentence

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

Total Company Stockholders' Equity

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Treasury Stock

4 unchanged sentences

Issuance of subsidiary shares to noncontrolling interest

Net income (loss)

Other comprehensive loss

6 unchanged sentences

Stock-based compensation expense

Balance at June 30, 2022

Balance at September 30, 2022

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

2 unchanged sentences

THE COMPANY AND BASIS OF PRESENTATION

(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 IP and more than 10,000 patents and patent applications worldwide.

(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 IP possessing more than 10,500 patents and patent applications worldwide.

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.

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The amounts as of December 31, 2022 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, 2022, filed on March 1, 2023 (the “Form 10-K”).

These Condensed Consolidated Financial Statements should be read in conjunction with the annual audited Consolidated Financial Statements and notes thereto included in the Form 10-K as of and for the year ended December 31, 2022.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

1 unchanged sentence

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary (consisting of normal recurring adjustments) to state fairly the financial position of the Company and its results of operations and cash flows as of and for the periods presented.

The results of operations for the three months and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023 or any future period and the Company makes no representations related thereto.

The results of operations for the three months and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023 or any future period and the Company makes no representations related thereto.

Reclassification

2 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes in the Company’s significant accounting policies during the three and six months ended June 30, 2023, as compared to the significant accounting policies described in the Form 10-K.

There have been no significant changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2023, as compared to the significant accounting policies described in the Form 10-K.

Use of Estimates

10 unchanged sentences

The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides further clarification on the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848.

ASU 2020-04 became effective upon issuance and may be applied prospectively to contract modifications made on or before December 31, 2022.

ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

47 unchanged sentences

Revenue Details

Revenue disaggregation

The following information depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors by disaggregating revenue by category, market vertical and geographic location (presented in “Note 16 –

Segment and Geographic Information ”).

This information includes revenue recognized from contracts with customers and revenue from other sources, including sales-based or usage-based royalty revenues and fees associated with releases for past infringement.

Recurring and non-recurring revenue

Recurring revenue includes the following:

(i) for fixed-fee Media IP license agreements, revenue associated with rights to existing and future patented technologies during reporting periods beginning with the reporting period in which the agreement is executed through the end of the term of the agreement, which are recognized on a straight-line basis;

and (ii) for per-unit or per-subscriber Media IP or Semiconductor IP royalty license agreements, revenue associated with sales-based or usage-based royalties in exchange for a license of IP, which are recognized in the period such subsequent sales or usage occurs.

Non-recurring revenue includes the following:

(i) for fixed-fee or minimum guarantee Semiconductor IP license agreements, revenue in the amount of such fixed fee or minimum guarantee associated with the right to use the IP, which is recognized upon execution of the agreement;

and (ii) for all license agreements, revenue in the amount of the fees associated with releases for past patent infringement or licenses, in each case with respect to reporting periods prior to the execution of the agreement, which is recognized upon execution of the agreement.

Revenue disaggregated by recurring and non-recurring nature was as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Recurring revenue

Non-recurring revenue

Total revenue

Revenue by market vertical

Revenue disaggregated by market vertical was as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Semiconductor

Total revenue

Contract Balances

4 unchanged sentences

Contract assets were recorded in the Condensed Consolidated Balance Sheets as follows (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

4 unchanged sentences

Total contract assets

(1) The long-term unbilled contracts receivable increase relates primarily to the recognition of revenue from two long-term semiconductor patent portfolio license agreements entered into during the six months ended June 30, 2023.

Contract Liabilities

4 unchanged sentences

It is generally considered to be of high credit quality due to past collection history and the nature of the customers.

The Company allowance for credit losses at June 30, 2023 and December 31, 2022 was $ 1.5 million and $ 0.7 million, respectively and it is presented as part of accounts receivable, net in the Condensed Consolidated Balance Sheets.

The Company allowance for credit losses at September 30, 2023 and December 31, 2022 wa s $ 1.5 million and $ 0.7 million, respectively and it is presented as part of accounts receivable, net in the Condensed Consolidated Balance Sheets.

Additional Disclosures

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Revenue recognized in the period from:

2 unchanged sentences

(1) Performance obligations satisfied in previous periods consist of settlements of litigation for past royalties owed pursuant to expired or terminated IP license agreements and revenue from releases for past patent infringement claims.

(2) Includes fees associated with a release for past patent infringement and revenue from periods prior to the execution of a long-term renewal contract with a global leader in the electronics industry, covering our media portfolio as it pertains to its mobile devices;

the settlement of existing litigation with a leading semiconductor company for which revenue was recognized during the three months ended September 2023;

and revenue from updated royalty reporting received from an existing customer relating to prior periods.

The long-term renewal contract was effective as of the expiration of the prior agreement and the Company recorded revenue from this agreement in the third quarter of 2023 and expects to record revenue from the prospective license in future periods.

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 (in thousands).

June 30, 2023

September 30, 2023

Revenue from contracts with performance obligations expected to be satisfied in:

3 unchanged sentences

Other current assets consisted of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

Prepaid income taxes

Prepaid expenses

Prepaid insurance

Prepaid expenses

Property and equipment, net, consisted of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

Other long-term assets consisted of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

1 unchanged sentence

Accrued liabilities consisted of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

Employee compensation and benefits

Accrued expenses

Current portion of guarantee (1)

Current portion of operating lease liabilities

Accrued legal fees

Current portion of guarantee (1)

Accrued expenses

Accrued income taxes

(1) Refer to “Note 15 –

2 unchanged sentences

Other long-term liabilities consisted of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

8 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, in the Condensed Consolidated Statements of Operations.

The following is a summary of marketable securities at June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023

The following is a summary of marketable securities at September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023

Allowance for Credit Losses

Marketable securities

Municipal Bonds and Notes

Corporate bonds and notes

Treasury and agency notes and bills

16 unchanged sentences

Cash and cash equivalents

At June 30, 2023 and December 31, 2022, the Company had $ 60.5 million and $ 114.6 million, respectively, in cash and cash equivalents.

At September 30, 2023 and December 31, 2022, the Company had $ 82.1 mil lion and $ 114.6 million, respectively, in cash and cash equivalents and short-term investments.

A portion of these amounts was held in marketable securities, as shown above.

The remaining balances of $ 50.5 million and $ 81.5 million at June 30, 2023 and December 31, 2022, respectively, consisted of cash held in operating accounts not included in the tables above.

The remaining balances o f $ 47.8 million and $ 81.5 million at September 30, 2023 and December 31, 2022, respectively, consisted of cash held in operating accounts not included in the tables above.

Debt Securities

The gross realized gains and losses on sales of marketable debt securities were immaterial during the three and six months ended June 30, 2023 and 2022, respectively.

Unrealized losses on AFS debt securities were immaterial as of June 30, 2023 and December 31, 2022.

The gross realized gains and losses on sales of marketable debt securities were immaterial during the three and nine months ended September 30, 2023 and 2022, respectively.

Unrealized losses on AFS debt securities were immaterial as of September 30, 2023 and December 31, 2022.

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.

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 basis.

The Company did not recognize a provision for credit losses related to its AFS debt securities for the three and six months ended June 30, 2023 and 2022, respectively.

No impairment charges were recorded on the AFS debt securities for the three and six months ended June 30, 2023.

The following table summarizes the fair value and gross unrealized losses related to individual AFS debt securities at June 30, 2023 and December 31, 2022, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands):

The Company did not recognize a provision for credit losses related to its AFS debt securities for the three and nine months ended September 30, 2023 and 2022, respect ively.

No i mpairment charges were recorded on the AFS debt securities for the three and nine months ended September 30, 2023 and 2022.

The following table summarizes the fair value and gross u nrealized losses related to individual AFS debt securities at September 30, 2023 and December 31, 2022, 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

June 30, 2023

September 30, 2023

Cash and Cash Equivalents

AFS Debt Securities

Municipal Bonds and Notes

Corporate bonds and notes

Treasury and agency notes and bills

6 unchanged sentences

Commercial paper

The estimated fair value of marketable debt securities by contractual maturity at June 30, 2023 is shown below (in thousands).

The estimated fair value of marketable debt securities by contractual maturity at September 30, 2023 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.

12 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.

There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2022 and June 30, 2023.

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, 2023 (in thousands):

There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2022 and September 30, 2023.

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, 2023 (in thousands):

Active Markets

2 unchanged sentences

Money market funds - equity securities (1)

Municipal bonds and notes - debt securities (2)

Corporate bonds and notes - debt securities (2)

Treasury and agency notes and bills - debt securities (3)

2 unchanged sentences

(2) Reported as AFS debt securities in the Condensed Consolidated Balance Sheet

(3) Reported as cash and cash equivalents as these were purchased with original maturities of three months or less at the date of purchase;

otherwise reported as AFS debt securities in the Condensed Consolidated Balance Sheet.

(3) Reported as AFS debt securities in the Condensed Consolidated Balance Sheet as these were purchased with original maturities of more than three months at date of purchase;

otherwise reported as cash and cash equivalents.

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 December 31, 2022 (in thousands):

9 unchanged sentences

The carrying amounts and estimated fair values are as follows (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

1 unchanged sentence

Total long-term debt, net

(1) Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 17.6 million and $ 19.9 million as of June 30, 2023 and December 31, 2022, respectively.

(1) Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 16.6 m illion and $ 19.9 million as of September 30, 2023 and December 31, 2022, respectively.

See “Note 9 –

3 unchanged sentences

The fair value of the debt was estimated based on the quoted market prices for the same or similar issues.

Non-recurring Fair Value Measurements

During the third quarter of 2023, the Company renewed a long-term license agreement with a global leader in the electronics industry, covering our media portfolio as it pertains to its mobile devices.

A portion of the consideration for the license agreement was in the form of patents, which the Company received in September of 2023.

The Company estimated the fair value of the patents to be $ 4.4 million and included it as part of the transaction price for revenue recognition purposes.

The fair value of these assets was measured using both the market approach –

estimating the value of the acquired assets by way of comparison with other comparable transactions, and the cost approach –

estimating the value of the acquired assets based on the cost it would take for the Company to create a comparable set of assets through its own research and development (“R&D”) and patent prosecution efforts.

The estimated fair value of the patents represents a Level 3 fair value measurement and the value of the patents is amortized as a non-cash expense over the patents’

estimated useful lives.

NOTE 7 –

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that were eliminated in consolidation.

In connection with the Separation, the Company incurred separation costs of $ 43.7 million from January 1, 2020 to June 30, 2023.

In connection with the Separation, the Company incurred separation costs of $ 44.6 million from January 1, 2020 to September 30, 2023.

Separation costs primarily consist of third-party advisory, consulting, legal and professional services, IT and employee bonus costs directly related to the Separation, as well as other items that are incremental and one-time in nature.

1 unchanged sentence

The remaining separation costs of $ 16.0 million were incurred after the Separation and are reflected in continuing operations within operating expenses in the Company’s Condensed Consolidated Statement of Operations.

During the three and six months ended June 30, 2022, the Company incurred $ 3.0 and $ 5.8 million in separation costs, respectively, which are included in net loss from discontinued operations, net of tax.

During the three and six months ended June 30, 2023, separation costs were not material.

During the three and nine months ended September 30, 2022, the Company incurred $ 11.1 and $ 17.0 million in separation costs, respectively, which are included in net loss from discontinued operations, net of tax.

During the three and nine months ended September 30, 2023, separation costs were not material.

The Company and Xperi Inc.

3 unchanged sentences

The services to be provided include back office functions and assistance with regard to administrative tasks relating to day-to-day activities as needed, including finance, accounting and tax activities, IT services, customer support, facilities services, human resources, and general corporate support, as well as pass-through services provided by certain vendors.

The impact of these transition services on the Company’s Condensed Consolidated Financial Statements for the three and six months

ended June 30, 2023 was not material.

The impact of these transition services on the Company’s Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2023 was not material.

Net Loss from Discontinued Operations, Net of Tax

The financial results of Xperi Inc.

for the three and six months ended June 30, 2022 are presented as net loss from discontinued operations, net of tax, in the Condensed Consolidated Statements of Operations.

for the three and nine months ended September 30, 2022 are presented as net loss from discontinued operations, net of tax, in the Condensed Consolidated Statements of Operations.

The following table presents financial results of Xperi Inc.

1 unchanged sentence

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2022

September 30, 2022

Nine Months Ended

September 30, 2022

Operating expenses:

5 unchanged sentences

Litigation expense

Goodwill impairment

Total operating expenses

6 unchanged sentences

Net loss attributable to discontinued operations

Transactions of Discontinued Operations

The following transactions have been included as part of discontinued operations for all the periods presented.

Business Combinations

The Company completed certain acquisitions that were accounted for as business combinations, using the acquisition method.

The assets and liabilities and results of operations following the business combinations were attributed to the Company’s former product business.

The results of operations are presented in the Condensed Consolidated Statements of Operations for all periods as net loss from discontinued operations, net of tax.

Vewd Software Holdings Limited

On July 1, 2022, 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.

The total consideration was approximately $ 102.9 million, consisting of approximately $ 52.9 million of cash and $ 50.0 million of debt.

Purchase Price Allocation

The Vewd Acquisition was accounted for as a business combination, using the acquisition method.

The following table presents the allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on their fair values at the acquisition date (in thousands):

Estimated Useful

Cash and cash equivalents

Accounts receivable

Unbilled contracts receivable

Other current assets

Property and equipment

Operating lease right-of-use assets

Identifiable intangible assets:

Customer relationships −

Non-compete agreements

Total identifiable intangible assets

Other long-term assets

Current liabilities

Long-term deferred tax liabilities

Noncurrent operating lease liabilities

Other long-term liabilities

Total purchase price

The above purchase price allocation, including the purchase consideration, was based on valuations and assumptions, including potential changes to prepaid income taxes, current and non-current income taxes payable, deferred taxes, and other working capital adjustments.

Vewd Results of Operations

The results of operations and cash flows related to the Vewd Acquisition were 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.

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.

Transaction Costs

In connection with the Vewd Acquisition, the Company incurred one-time expenses such as transaction related costs and severance and retention costs.

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.

For the three and nine months ended September 30, 2022, severance and retention costs associated with the Vewd Acquisition were $ 2.1 million.

Supplemental Pro forma Information

The following unaudited pro forma financial information assumes the Vewd Acquisition was completed as of January 1, 2021.

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.

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.

Consequently, actual results could differ materially from the unaudited pro forma financial information presented below.

The following table presents the pro forma operating results as if the acquired operations of Vewd had been included in the Company’s Consolidated Statements of Operations as of January 1, 2021 (unaudited, in thousands):

Three Months Ended

September 30, 2022

Nine Months Ended September 30, 2022

Net loss attributable to discontinued operations

The unaudited supplemental pro forma information above includes the following pro forma adjustments:

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.

The unaudited supplemental pro forma information above does not include any cost saving synergies from operating efficiencies.

Goodwill and Identified Intangible Assets

During the three months ended September 30, 2022, indicators of potential impairment for the Company’s former product reporting unit were identified such that management concluded it was more-likely-than-not that goodwill was impaired and that a quantitative interim goodwill impairment assessment should be performed as of September 30, 2022.

Indicators of potential impairment included a sustained decline in the Company’s stock price during the second half of the third quarter of 2022, reflective of rising interest rates and a continued decline in macroeconomic conditions.

The Company proceeded to perform a fair value analysis of the Company’s former product reporting unit using the market capitalization approach.

Under this approach, management estimated the fair value of the Company’s former 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.

As a result of the fair value analysis, the Company recognized a goodwill impairment charge of $ 354.0 million in the third quarter of 2022, which was allocated to the Company’s former product segment and included as part of net loss from discontinued operations, net of tax in the Condensed Consolidated Statement of Operations.

The Company also assessed the recoverability of indefinite-lived intangible assets related to the Company’s former product reporting unit and concluded that no impairment existed as of September 30, 2022, as its estimated fair values exceeded their carrying amounts.

No impairment indicators were identified with respect to other long-lived assets.

Net Cash Flows of Discontinued Operations

The following table presents selected financial information related to cash flows from discontinued operations (in thousands):

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Net cash from operating activities

2 unchanged sentences

GOODWILL AND IDENTIFIED INTANGIBLE ASSETS

The carrying value of goodwill at June 30, 2023 and December 31, 2022 wa s $ 313.7 million.

There were no changes t o the carrying value of goodwill from January 1, through June 30, 2023.

The carrying value of goodwill at September 30, 2023 and December 31, 2022 wa s $ 313.7 million.

There were no changes t o the carrying value of goodwill from January 1, through September 30, 2023.

Goodwill at its 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.

The process of evaluating goodwill for potential impairment is subjective and requires significant estimates, assumptions and judgments particularly related to the identification of reporting units, the assignment of assets and liabilities to reporting units and estimating the fair value of each reporting unit.

No impairment charges were recognized for the three and six months ended June 30, 2023.

No impairment charges were recognized for the three and nine months ended September 30, 2023.

Identified Intangible Assets

Identified intangible assets consisted of the following (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

5 unchanged sentences

Total intangible assets

As of June 30, 2023, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands):

(1) During the three months ended September 30, 2023, the Company acquired two portfolios of patents for an aggregate cost of $ 5.3 million, of which $ 4.4 million was obtained as consideration in a licensing agreement (see “Note 6 –

Fair Value ”

) and $ 0.9 million is to be paid in cash.

The Company is amortizing the asset value over a weighted average period of 8 and 10 years, respectively.

As of September 30, 2023, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands):

2023 (remaining 3 months)

1 unchanged sentence

The outstanding amounts of debt were as follows (in thousands):

June 30, 2023

September 30, 2023

December 31, 2022

6 unchanged sentences

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”).

In connection with the amendment (the “Amendment”), the Company made a voluntary prepayment of $ 50.6 million of the term loan outstanding under the 2020 Credit Agreement using cash on hand.

In connection with the June 2021 amendment (the “Amendment”), the Company 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 the Company with additional flexibility under the covenant governing restricted payments.

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as administered by the Federal Reserve Bank of New York.

The new reference rate is effective July 1, 2023.

The new reference rate was effective July 1, 2023.

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.

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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).

The Company was in compliance with all requirements as of June 30, 2023.

The Company was in compliance with all requirements as of September 30, 2023.

The 2020 Credit Agreement, as amended, also requires the Company to make additional cash payments on an annual basis beginning in April 2023 based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year.

The additional cash payments are applied to the remaining principal balance due at final maturity.

Accordingly, the Company made additional cash payments of $ 73.5 million during the six months ended June 30, 2023 under the excess cash flow provisions.

The payments were made earlier than required under the 2020 Credit Agreement.

Accordingly, the Company made additional cash payments of $ 73.5 million during the nine months ended September 30, 2023 under the excess cash flow provisions.

The payments under the excess cash flow provisions were made earlier than required under the 2020 Credit Agreement.

After the Separation, the Company remains the obligor under the Refinanced B Term Loans.

Interest Expense and Expected Principal Payments

At June 30, 2023, $ 645.5 million in total debt was outstanding.

At September 30, 2023, the Company had $ 630.4 million in total debt outstanding.

There were also $ 16.6 million of unamortized debt discount and issuance costs recorded as a reduction from the carrying amount of the debt.

The interest rate on the Refinanced Term B Loans as of June 30, 2023, including the amortization of debt discount and issuance costs, was 9.58 % an d interest is payable monthly.

Interest expense was $ 15.4 million and $ 31.3 million for the three and six months ended June 30, 2023, respectively.

Interest expense was $ 9.4 million and $ 17.9 million for the three and six months ended June 30, 2022, respe ctively.

Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 1.1 million and $ 2.2 m illion for the three and six months ended June 30, 2023, respectively, and $ 1.1 million and $ 2.2 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2023, future minimum principal payments for long-term debt, excluding any additional principal payment required by the excess cash flow provision, are summarized as follows (in thousands):

The interest rate on the Refinanced Term B Loans as of September 30, 2023, including the amortization of debt discount and issuance costs, was 9.98 % and interest is payable monthly.

Interest expense wa s $ 15.5 million and $ 46.8 million for the three and nine months ended September 30, 2023, respectively.

Interest expense was $ 13.2 million and $ 31.1 million for the three and nine months ended September 30, 2022, respe ctively.

Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 1.0 million and $ 3.3 m illion for the three and nine months ended September 30, 2023, respectively, and $ 1.1 million and $ 3.3 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, future minimum principal payments for long-term debt, excluding any additional principal payment required by the excess cash flow provision, are summarized as follows (in thousands):

2023 (remaining 3 months)

NOTE 10 –

NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted shares (in thousands):

NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of net income (loss) per share (in thousands, except per share amounts):

Three Months Ended

Six Months Ended

Net income from continuing operations

September 30,

Nine Months Ended

September 30,

Net income (loss) from continuing operations

Net loss attributable to discontinued operations

Net income attributable to the Company

Net income (loss) attributable to the Company

Weighted average shares of common stock outstanding

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Effect of dilutive securities associated with restricted stock awards and units

Effect of dilutive securities associated with employee stock purchase program

Weighted average common shares - dilutive

Basic net income (loss) per share

Net income from continuing operations

Net income (loss) from continuing operations

Net loss attributable to discontinued operations

Net income attributable to the Company

Net income (loss) attributable to the Company

Diluted net income (loss) per share

Net income from continuing operations

Net income (loss) from continuing operations

Net loss attributable to discontinued operations

Net income attributable to the Company

Net income (loss) attributable to the Company

Anti-dilutive employee stock-based awards, excluded

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At the 2022 Annual Stockholders Meeting o n April 29, 2022, th e Company’s shareholders approved an amendment to the 2020 EIP and increased by 8.8 million the number of shares reserved for issuance.

The 2020 EIP provides for option grants designed as either incentive stock options or nonstatutory options.

The 2020 EIP provides for option grants designed as either incentive stock options or non-statutory options.

Options generally are granted with an exercise price not less than the value of the common stock on the grant date and have a term of ten years from the date of grant and vest over a four-year period.

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Shares reserved under the Assumed Plans will be available for future grants.

As of June 30, 2023, there were 2.8 million shares reserved for future grants under both the 2020 EIP and the Assumed Plans.

As of September 30, 2023, there wer e 3.8 mi llion 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):

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Options canceled / forfeited / expired

Balance at June 30, 2023

Balance at September 30, 2023

Vested and Exercisable at September 30, 2023

Restricted Stock Units

Information with respect to outstanding restricted stock units (including both time-based vesting and performance-based vesting) as of June 30, 2023 is as follows (in thousands, except per share amounts) :

Information with respect to outstanding restricted stock units (including both time-based vesting and performance-based vesting) as of September 30, 2023 is as follows (in thousands, except per share amounts) :

Restricted Stock and Restricted Stock Units

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Awards and units canceled / forfeited

Balance at June 30, 2023

Balance at September 30, 2023

Performance Awards and Units

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Due to the fair market value per share of Company’s common stock on May 31, 2023 as compared to the fair market value per share on December 1, 2022, the offering period was automatically terminated and a new 24-month offering period began on June 1, 2023 and will end on May 31, 2025.

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.

As of June 30, 2023, there were 5.4 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.

As of September 30, 2023, there we re 5.4 million shares re served for grant under the Company’s 2020 ESPP.

Modification of Equity Awards

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Stockholders of the Company’s common stock are entitled to receive dividends when declared by the Company’s board of directors (the “Board”).

During the three and six months ended June 30, 2023 and 2022, quarterly dividends declared were $ 0.05 and $ 0.10 per common share, respectively.

During the three months ended September 30, 2023 and 2022, quarterly dividends declared were $ 0.05 per common share, respectively.

During the nine months ended September 30, 2023 and 2022, dividends declared were $ 0.15 per common share in the aggregate in each period.

The capacity to pay dividends in the future depends on many factors, including the Company’s financial condition, results of operations, capital requirements, capital structure, industry practice and other business conditions that the Board considers relevant.

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On April 22, 2021, the Board authorized an additional $ 100.0 million of purchases under the existing stock repurchase plan.

As of June 30, 2023, the Company had 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 September 30, 2023, the Company had 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.

The shares repurchased are recorded as treasury stock and are accounted for under the cost method.

No expiration date has been specified for this plan.

As of June 30, 2023, the total remaining amount available for repurchase under this plan w as $ 77.8 million.

As of September 30, 2023, the total remaining amount available for repurchase under this plan w as $ 77.8 million.

The Company may execute authorized repurchases from time to time under the plan.

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However, these withheld shares are not included in common stock repurchases under the Company’s authorized share repurchase plan.

During the three months ended June 30, 2023 and 2022, the Company with held 0.1 mill ion and 0.1 million shares of common stock to satisfy $ 0.9 million and $ 0.4 million of required withholding taxes, respectively.

During the six months ended June 30, 2023 and 2022, the Company withheld 0.8 million and 0.7 million shares of common stock to satisfy $ 7.5 m illion and $ 11.5 million of required withholding taxes, respectively.

During the three months ended September 30, 2023 and 2022, the Company with held 0.3 million and 0.3 million shares of common stock to satisfy $ 3.0 million a nd $ 3.9 million of required withholding taxes, respectively.

During the nine months ended September 30, 2023 and 2022, the Company withheld 1.0 million and 0.9 million shares of common stock to satisfy $ 10.5 m illion and $ 15.3 million of required withholding taxes, respectively.

NOTE 12 –

STOCK-BASED COMPENSATION EXPENSE

The effect of recording stock-based compensation (“SBC”) expense for the three and six months ended June 30, 2023 and 2022 is as follows (in thousands):

The effect of recording stock-based compensation (“SBC”) expense for the three and nine months ended September 30, 2023 and 2022 is as follows (in thousands):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

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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.

As a result of this modification, the Company recorded incremental SBC of approximately $ 2.2 million during the six months ended June 30, 2022.

There were no options granted during the three and six months ended June 30, 2023 and 2022.

The following assumptions were used to value the restricted stock units subject to market conditions granted in the following months during the three and six months ended June 30, 2023 and 2022:

As a result of this modification, the Company recorded incremental SBC of approximately $ 2.2 million during the nine months ended September 30, 2022.

There were no options granted during the three and nine months ended September 30, 2023 and 2022.

There were no restricted stock units subject to market conditions granted during the three months ended September 30, 2023 and 2022.

The following assumptions were used to value the restricted stock units subject to market conditions granted during the nine months ended September 30, 2023 and 2022:

Nine Months Ended

September 30,

Expected life (years)

Risk-free interest rate

3.6 % −

Dividend yield

1.9 % −

Expected volatility

63.3 % −

37.5 % −

Prior to the Separation, ESPP grants occurred in March and September.

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The following assumptions were used to value the ESPP shares for these grants:

Nine Months Ended

September 30,

Expected life (years)

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The Company’s income tax provision and effective tax rate for interim periods are based on its estimated annual effective tax rate adjusted for discrete items during the period.

For the three and six months ended June 30, 2023, the Company recorded income tax expense of $ 2.4 million and $ 14.2 million, respectively.

For the three and six months ended June 30, 2022, the Company recorded income tax expense of $ 10.6 million and $ 16.1 million, respectively.

For the three and nine months ended September 30, 2023, the Company recorded income tax expense of $ 1.7 million and $ 15.9 million, respectively.

For the three and nine months ended September 30, 2022, the Company recorded income tax expense of $ 10.4 million and $ 26.5 million, respectively.

The effective tax rate varies from the 21 % U.S.

federal tax rate primarily due to foreign exchange gain or loss on prior year South Korea withholding tax refund claims.

The decrease in income tax expense for the three and six months ended June 30, 2023, as compared to the same period in the prior year was primarily due to a decrease in pretax income.

federal tax rate primarily due to foreign exchange gain or loss on prior year South Korea withholding tax refund claims offset by favorable state audit settlements.

The decrease in income tax expense for the three and nine months ended September 30, 2023, as compared to the same period in the prior year was primarily due to a decrease in pretax income and favorable state audit settlements.

NOTE 14 –

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Variable lease payments are expensed as incurred and are not included within the lease liability and right-of-use assets calculation.

As a practical expedient, the Company elected, for all office and facility leases, not to separate nonlease components (e.g., common-area maintenance costs) from lease components (e.g., fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components as a single lease component.

As a practical expedient, the Company elected, for all office and facility leases, not to separate non-lease components (e.g., common-area maintenance costs) from lease components (e.g., fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components as a single lease component.

As most of the leases do not provide an implicit rate, the Company generally, for purposes of discounting lease payments, uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Fixed lease cost

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

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Operating leases

June 30, 2023

September 30, 2023

December 31, 2022

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Operating leases

Future minimum lease payments and related lease liabilities as of June 30, 2023 were as follows (in thousands):

Future minimum lease payments and related lease liabilities as of September 30, 2023 were as follows (in thousands):

Operating Lease Payments (1)

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In the ordinary course of business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, for which it is liable in future periods.

These arrangements primarily include unconditional purchase obligations to service providers.

As of June 30, 2023, the Company’s total future unconditional purchase obligations were approximately $ 3.3 million, including $ 1.1 million due in the remainder of 2023, $ 1.3 million due in 2024 and the remaining $ 0.9 million due in 2025.

These arrangements primarily incl ude unconditional purchase obligations to service providers.

As of September 30, 2023, the Company’s total future unconditional purchase obligations were approximately $ 3.1 million, including $0 .6 million due in the remainder of 2023, $ 1.4 million d ue in 2024 and the remaining $ 1.1 million due in 2025.

Prior to the Separation, Adeia Media LLC, a subsidiary of the Company (“Adeia Media”), and a subsidiary of Xperi Inc.

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The maximum potential amount of future payments subject to the guarantee is approximately $ 7.5 million per annum between 2023 and 2031 .

As of June 30, 2023 and December 31, 2022, the balance of the guarantee liability was $ 19.1 million and $ 20.5 million, respectively.

During the three months and six months ended June 30, 2023, the Company made guarantee payments of $ 0.6 million and $ 1.1 million, respectively.

The Company recognized other income of $ 0.3 million during the six months ended June 30, 2023 in the Condensed Consolidated Statement of Operations as a result of a change in the carrying value of the guarantee liability.

As of September 30, 2023 and December 31, 2022, the balance of the guarantee liability was $ 18.5 million and $ 20.5 million, respectively.

During the three months and nine months ended September 30, 2023, the Company made guarantee payments o f $ 0.6 million and $ 1.7 million, re spectively.

The Company recognized other income of $ 0.3 million during the nine months ended September 30, 2023 in the Condensed Consolidated Statement of Operations as a result of a change in the carrying value of the guarantee liability.

Indemnifications

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On June 2, 2023, Adeia Media filed its opening memorandum of fact and law.

The Bell and Telus memorandum of fact and law is due August 18, 2023.

Bell and Telus filed a combined memorandum of fact and law on August 18, 2023.

The Federal Court of Appeal of Canada has scheduled a hearing on the appeal for November 29, 2023.

On October 2, 2023, Adeia Guides Inc., Adeia Media Solutions Inc., and Adeia Media Holdings LLC (collectively, “Adeia Media”) filed a complaint against Shaw Cablesystems G.P.

and Shaw Satellite G.P.

(together “Shaw”) in the United States District Court for the Southern District of New York, alleging breach of contract by Shaw for failure to pay royalties owed to Adeia Media under the license agreement between the parties.

The Company is 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.

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SEGMENT AND GEOGRAPHIC INFORMATION

The Company changed its operational structure in the fourth quarter of 2022, resulting in one reportable segment:

Upon completion of the Separation, in the fourth quarter of 2022, the Company changed its organizational structure to operate and report in one segment:

Intellectual Property (“IP”) Licensing.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Europe and Middle East

For the three months ended June 30, 2023 and 2022, there were three and two customers, respectively, that each accounted for 10% or more of total revenue.

For the six months ended June 30, 2023 and 2022, there were three customers, respectively, that each accounted for 10% or more of total revenue.

For the three months ended September 30, 2023 and 2022, there wer e four and two customers, respectively, that each accounted for 10% or more of total revenue.

For the nine months ended September 30, 2023 and 2022, there were two and four customers, respectively, that each accounted for 10% or more of total revenue.

The following table sets forth revenue generated from customers which comprise 10% or more of total revenue for the periods indicated:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

* denotes less than 10% of total revenue.

As of June 30, 2023, the Company had one customer representing 54 % of aggregate accounts receivable.

As of September 30, 2023, the Company had two customers repre senting 38 % and 33 % of aggr egate accounts receivable, respectively.

At December 31, 2022, the Company had two customers representing 36 % and 29 % of aggregate accounts receivable, respectively.

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Declaration of Cash Dividends

On J uly 27, 2023 , the Board declared a cash dividend of $ 0.05 per share of common stock, payable on September 18, 2023 for the stockholders of record at the close of business on August 28, 2023 .

On October 25, 2023 , the Board declared a cash dividend of $ 0.05 per share of common stock, payable on December 18, 2023 to the stockholders of record at the close of business on November 27, 2023 .

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Following the Separation, Adeia retains no ownership interest in Xperi Inc., which is now listed under the ticker symbol “XPER”

New York Stock Exchange.

on the New York Stock Exchange.

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”.

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Headquartered in Silicon Valley with more than 35 years of operating experience, we have approximately 130 employees, with substantially all of our employees located in the U.S.

COVID-19 Impact and Macroeconomic Conditions

The COVID-19 pandemic has had, and may continue to have, an adverse impact on our business.

Macroeconomic Conditions

The current macroeconomic environment, which has arisen in part from the effects of the COVID-19 pandemic, has had, and may continue to have, an adverse impact on our business.

The impact to date has included periods of significant volatility in the markets we serve, in particular the broad consumer electronics market.

The pandemic has also caused challenges and delays in acquiring new customers and executing license renewals.

The current macroeconomic environment has also caused challenges and delays in acquiring new customers and executing license renewals.

These factors have negatively impacted our financial condition and results of operations, which may result in an impairment of our long-lived assets, including goodwill, and increased credit losses.

Further, our operations and those of our customers have also been negatively impacted by certain trends arising out of the COVID-19 pandemic and macroeconomic, including labor market constraints, shortages of semiconductor components, decreased manufacturing capacities and delays in shipments, product development and product launches.

Moreover, since the onset of the COVID-19 pandemic, United States federal, state and foreign government policies enacted to combat the pandemic have contributed to a recent rise of inflation that has increased, and may continue to increase, the cost of our operations and have had, and may continue to have, an adverse effect on demand for our customers’

Further, our operations and those of our customers have also been negatively impacted by certain trends arising out of the COVID-19 pandemic and macroeconomic conditions including labor market constraints, shortages of semiconductor components, decreased manufacturing capacities and delays in shipments, product development and product launches.

Moreover, United States federal, state and foreign government policies have contributed to a rise of inflation that has increased, and may continue to increase, the cost of our operations and have had, and may continue to have, an adverse effect on demand for our customers’

products and services and in turn our licensing revenues, which has had and may continue to have an adverse effect on our financial performance.

Although a significant portion of our revenue 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 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.

Further discussion of COVID-19’s potential impact on our business is provided under Part I, Item 1A –

Risk Factors of the Form 10-K and in Part II, Item 5 –

Risk Factors of this Form 10-Q.

Although a significant portion of our revenue 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 market volatility, labor shortages, supply chain disruptions, microchip shortages and market downturns.

Key Developments

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Accordingly, the financial results of Xperi Inc.

for the three and six months ended June 30, 2022 are presented as net loss from discontinued operations, net of tax on the Condensed Consolidated Statements of Operations.

for the three and nine months ended September 30, 2022 are presented as net loss from discontinued operations, net of tax on the Condensed Consolidated Statements of Operations.

Unless noted otherwise, the discussion of our results of operations pertain to continuing operations.

Additionally, the operating results from continuing operations for all periods presented and those prior to the Separation, include certain general corporate overhead costs that do not meet the requirements to be presented in discontinued operations, although such costs are not reflective of our on-going operations.

Such general corporate overhead costs include labor and non-labor costs related to our corporate support functions (e.g., administration, human resources, finance, accounting, tax, information

technology, corporate development and legal, among others) that historically provided support to Xperi Inc.

Such general corporate overhead costs include labor and non-labor costs related to our corporate support functions (e.g., administration, human resources, finance, accounting, tax, information technology, corporate development and legal, among others) that historically provided support to Xperi Inc.

prior to the Separation.

In addition, discontinued operations excludes the historical intercompany balances and transactions between the Company and Xperi Inc.

In addition, discontinued operations excludes the historical intercompany balances and transactions between Adeia and Xperi Inc.

that were eliminated in consolidation.

In connection with the Separation, we incurred separation costs of $43.7 million from January 1, 2020 to June 30, 2023.

In connection with the Separation, we incurred separation costs of $44.6 million from January 1, 2020 to September 30, 2023.

Separation costs primarily consist of third-party advisory, consulting, legal and professional service, IT and employee bonus costs directly related to the Separation, as well as other items that are incremental and one-time in nature.

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Financial Highlights

For the three months ended June 30, 2023:

For the three months ended September 30, 2023:

Revenue was $101.4 million, an increase of 14% from $89.3 million in the same period in 2022

Diluted earnings per share (EPS) from continuing operations was $0.21, an increase of 450% from diluted loss per share of $0.06 in the same period in 2022

Net income from continuing operations was $24.2 million, an increase of 484% from net loss from continuing operations of $6.3 million in the same period in 2022

We made $15.1 million in principal payments towards our term loan, bringing the outstanding balance to $630.4 million as of September 30, 2023

For the nine months ended September 30, 2023:

Revenue was $301.9 million, a decrease of 10% from $335.6 million in the same period in 2022

Diluted earnings per share (EPS) was $0.01, a decrease of 93% from $0.14 in the same period in 2022

Net income was $1.4 million, a decrease of 91% from $15.2 million in the same period in 2022

Diluted earnings per share (EPS) from continuing operations was $0.48, a decrease of 22% from $0.61 in the same period in 2022

Net income from continuing operations was $54.7 million, a decrease of 15% from $64.7 million in the same period in 2022

Cash flows from operations were $113.3 million, a decrease of 20% from $142.0 million in the same period in 2022

We made $20.1 million in principal payments towards our term loan, bringing the outstanding balance to $645.5 million as of June 30, 2023

For the six months ended June 30, 2023:

Revenue was $200.5 million, a decrease of 19% from $246.3 million in the same period in 2022

Diluted earnings per share (EPS) was $0.27, a decrease of 60% from $0.67 in the same period in 2022

Net income was $30.4 million, a decrease of 57% from $71.0 million in the same period in 2022

Cash flows from operations were $92.1 million, an increase of 6% from $87.0 million in the same period in 2022

We made $103.8 million in principal payments towards our term loan, bringing the outstanding balance to $645.5 million as of June 30, 2023

We made $118.9 million in principal payments towards our term loan, bringing the outstanding balance to $630.4 million as of September 30, 2023

Results of Operations

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

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Provision for income taxes

Net income from continuing operations

Net income (loss) from continuing operations

Revenue (in thousands, except for percentages):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Increase/ (Decrease)

The decrease in revenue during the three months ended June 30, 2023, as compared to the same period in 2022, was primarily attributable to the execution of a long-term license agreement with a leading consumer electronics and OTT service provider in the second quarter of 2022 for which a meaningful portion of the total revenue was recognized in such quarter, and in part due to a decline in royalty revenue from certain Pay-TV customers.

The decrease in revenue during the six months ended June 30, 2023, as compared to the same period in 2022, was primarily attributable to the execution of a new, multi-year license agreement with Micron Technology in the first quarter of 2022, the execution of a long-term license agreement with a leading consumer electronics and OTT service provider in the second quarter of 2022, for which a meaningful portion of the total revenue was recognized in the respective quarters, and in part due to a decline in royalty revenue from certain Pay-TV customers.

The increase in revenue during the three months ended September 30, 2023, as compared to the same period in 2022, was primarily attributable to the execution of a long-term renewal contract with Samsung in the third quarter of 2023, covering our media portfolio as it pertains to its mobile devices.

The decrease in revenue during the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily attributable to the execution of a new, multi-year license agreement with Micron Technology in the first quarter of 2022, the execution of a long-term license agreement with a leading consumer electronics and OTT service provider in the second quarter of 2022, for which a meaningful portion of the total revenue was recognized in the respective quarters, and in part due to a decline in royalty revenue from certain Pay-TV customers.

These declines were partially offset by the execution of two long-term license agreements with Kioxia and Western Digital in the first quarter of 2023 for which a portion of revenue was recognized up-front in such quarter and the execution of a long-term renewal contract with Samsung in the third quarter of 2023, covering our media portfolio as it pertains to its mobile devices.

Recurring revenues for the three months ended September 30, 2023 and 2022 were $83.6 million and $86.5 million, respectively.

The decrease of $2.9 million in recurring revenues during the three months ended September 30, 2023, as compared to the same period in 2022, was primarily attributable a decline in royalty revenue from certain Pay-TV customers.

Non-recurring revenues for the three months ended September 30, 2023 and 2022 were $17.8 million and $2.8 million, respectively.

The increase of $15.0 million in non-recurring revenues during the three months ended September 30, 2023, as compared to the same period in 2022, was primarily attributable to fees associated with a release for past infringement and revenue from periods prior to the execution of the long-term renewal of a license agreement with Samsung in the third quarter of 2023, revenue from the settlement of litigation and revenue from updated royalty reporting received from an existing customer relating to prior periods.

Recurring revenues for the nine months ended September 30, 2023 and 2022 were $255.1 million and $267.4 million, respectively.

The decrease of $12.3 million in recurring revenues during the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily attributable to a decline in royalty revenue from certain Pay-TV customers.

Non-recurring revenues for the nine months ended September 30, 2023 and 2022 were $46.8 million and $68.2 million, respectively.

The decrease of $21.4 million in non-recurring revenues during the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily attributable to the execution of a new, multi-year license agreement with Micron Technology in the first quarter of 2022, the execution of a long-term license agreement with a leading consumer electronics and OTT service provider in the second quarter of 2022, partially offset by the execution of long-term license agreements with Kioxia and Western Digital, respectively, in the first quarter of 2023, the execution of the long-term renewal of a license agreement with Samsung in the third quarter of 2023, revenue from the settlement of litigation and revenue from updated royalty reporting received from an existing customer relating to prior period.

Research and Development (in thousands, except for percentages):

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Increase/ (Decrease)

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Research and development

The increase in R&D expense during the three and six months ended June 30, 2023, as compared to the same periods in 2022, was primarily due to an increase in patent prosecution costs associated with an increase in patent filings, professional services costs and personnel costs as a result of increased headcount.

The increase in R&D expense during the three and nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to an increase in patent prosecution costs associated with an increase in patent filings, professional services costs and personnel costs as a result of increased headcount.

Selling, General and Administrative (in thousands, except for percentages):

Selling, general and administrative (“SGA”) expenses consist primarily of compensation and related costs for sales and marketing personnel engaged in sales and licensee support, compensation and related costs for general management, information technology, finance personnel, corporate legal fees and expenses, facilities costs, stock-based compensation expense and professional services.

Our SGA expenses, other than facilities-related expenses, are not allocated to other expense line items.

Selling, general and administrative (“SG&A”) expenses consist primarily of compensation and related costs for sales and marketing personnel engaged in sales and licensee support, compensation and related costs for general management, information technology, finance personnel, corporate legal fees and expenses, facilities costs, stock-based compensation expense and professional services.

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Increase/ (Decrease)

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Selling, general and administrative

The decrease in SGA expense during the three and six months ended June 30, 2023, as compared to the same periods in 2022, was primarily due to a decrease in certain general corporate overhead costs incurred prior to the Separation and that did not meet the requirements to be presented in discontinued operations.

The decrease in SG&A expense during the three and nine months ended September 30, 2023, as compared to the same periods in 2022, was primarily due to a decrease in certain general corporate overhead costs incurred prior to the Separation that did not meet the requirements to be presented in discontinued operations.

Such costs are not reflective of our on-going operations and include labor and non-labor costs related to our corporate support functions (e.g., administration, human resources, finance, accounting, tax, information technology, corporate development, legal, among others) that historically provided support to the former product business.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Increase/ (Decrease)

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Amortization expense

The decrease in amortization expense during the three and six months ended June 30, 2023, as compared to the same periods in 2022, was primarily due to certain intangible assets acquired in prior years, which became fully amortized during 2022.

The decrease in amortization expense during the three and nine months ended September 30, 2023, as compared to the same period in 2022, was primarily due to certain intangible assets acquired in prior years, which became fully amortized during 2022.

Litigation Expense (in thousands, except for percentages):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Increase/ (Decrease)

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Litigation expense

The decrease in litigation expense during the three months ended June 30, 2023, as compared to the same period in 2022, was primarily due to a $2.2 million reserve recorded in the second quarter of 2022 for estimated expense reimbursement due to Videotron as a result of the outcome of that litigation matter, partially offset by reduced case activity.

The increase in litigation expense during the six months ended June 30, 2023, as compared to the same period in 2022, was primarily due to increased legal fees as a result of increased case activity.

The decrease in litigation expense during the three months ended September 30, 2023, as compared to the same period in 2022, was primarily due to 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, partially offset by increased legal fees during 2023 as a result of increased case activity.

Litigation expense was relatively consistent for the nine months ended September 30, 2023 and September 30, 2022, respectively.

We expect that litigation expense will continue to be a significant portion of our operating expenses, as it is used to enforce and protect our IP and contract rights.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Increase/ (Decrease)

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Interest expense

The increase in interest expense during the three and six months ended June 30, 2023, as compared to the same periods in 2022, was primarily due to increased interest rates on our variable interest rate debt due to the rising interest rate environment, partially offset by a lower debt balance and amortization of debt discount and issuance costs.

We anticipate interest expense will continue to increase in the second-half of 2023, when compared to the second-half of 2022, as a result of the effect of rising interest rates on our existing variable-rate debt, partially offset by the lower debt balance and amortization of debt discount and issuance costs.

The increase in interest expense during the three and nine months ended September 30, 2023, as compared to the same periods in 2022, was primarily due to increased interest rates on our variable interest rate debt due to the rising interest rate environment, partially offset by a lower debt balance and amortization of debt discount and issuance costs.

We anticipate interest expense will continue to increase in the fourth quarter of 2023, when compared to the same period in 2022, as a result of the effect of rising interest rates on our existing variable-rate debt, partially offset by the lower debt balance and amortization of debt discount and issuance costs.

Other Income and Expense, Net (in thousands, except for percentages):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Increase/ (Decrease)

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Other income and expense, net

The increase in other income and expense, net during the three and six months ended June 30, 2023, as compared to the same periods in 2022, was primarily due to an increase in interest income from significant financing components from revenue contracts, partially offset by a decrease in realized loss on marketable investments.

The increase in other income and expense, net during the three and nine months ended September 30, 2023, as compared to the same periods in 2022, was primarily due to an increase in interest income from significant financing components from revenue contracts.

Provision for Income Taxes

Three Months Ended

Six Months Ended

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Nine Months Ended

September 30,

Increase/ (Decrease)

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Our income tax provision and effective tax rate for interim periods are based on the estimated annual effective tax rate adjusted for discrete items during the period.

For the three months ended June 30, 2023, we recorded an income tax expense of $2.4 million on pretax income of $3.8 million, and for the six months ended June 30, 2023, we recorded an income tax expense of $14.2 million on pretax income of $44.6 million, which resulted in effective tax rates of 61.9% and 31.8%, respectively, for the three and six months ended June 30, 2023.

For the three months ended June 30, 2022, we recorded an income tax expense of $10.6 million on pretax income of $25.7 million, and for the six months ended June 30, 2022, we recorded an income tax expense of $16.1 million on pretax income of $87.1 million, which resulted in effective tax rates of 41.0% and 18.5%, respectively, for the three and six months ended June 30, 2022.

For the three months ended September 30, 2023, we recorded an income tax expense of $1.7 million on pretax income of $25.9 million, and for the nine months ended September 30, 2023, we recorded an income tax expense of $15.9 million on pretax income of $70.5 million, which resulted in effective tax rates of 6.6% and 22.5%, respectively, for the three and nine months ended September 30, 2023.

For the three months ended September 30, 2022, we recorded an income tax expense of $10.4 million on pretax income of $4.1 million, and for the nine months ended September 30, 2022, we recorded an income tax expense of $26.5 million on pretax income of $91.1 million, which resulted in effective tax rates of 256.3% and 29.0%, respectively, for the three and nine months ended September 30, 2022.

The effective tax rate varies from the 21% U.S.

federal tax rate due to foreign withholding taxes, state income taxes and unrealized foreign exchange gain or loss from prior year South Korea withholding tax refund claims.

The decrease in income tax expense for the three and six months ended June 30, 2023, as compared to the same period in the prior year was primarily due to a decrease in pretax income.

federal tax rate due to foreign withholding taxes, state income taxes, unrealized foreign exchange gain or loss from prior year South Korea withholding tax refund claims, and favorable state audit settlements.

We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative.

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Net Loss from Discontinued Operations, Net of Tax

Our results of operations for the three and six months ended June 30, 2022 include three and six months of Xperi Inc.’s operations, which are presented as net loss from discontinued operations, net of tax in the Condensed Consolidated Statement of Operations.

Xperi Inc.’s results of operations for the three and six months ended June 30, 2022 were as follows (in thousands):

Our results of operations for the three and nine months ended September 30, 2022 include three and nine months of Xperi Inc.’s operations, which are presented as net loss from discontinued operations, net of tax in the Condensed Consolidated Statement of Operations.

Xperi Inc.’s results of operations for the three and nine months ended September 30, 2022 were as follows (in thousands):

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2022

September 30, 2022

Nine Months Ended

September 30, 2022

Operating expenses

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Liquidity and Capital Resources

The following table presents selected financial information related to our liquidity and significant sources and uses of cash, cash equivalents and short-term investments for the six months ended June 30, 2023 and 2022.

(in thousands)

June 30, 2023

September 30, 2023

December 31, 2022

Cash and cash equivalents

Available-for-sale debt securities

Marketable securities

Total cash, cash equivalents and short-term investments

Six Months Ended June 30,

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.

Cash, cash equivalents and short-term investments were $84.3 million at June 30, 2023, a decrease of $30.2 million from $114.6 million at December 31, 2022.

This decrease resulted primarily from $103.8 million in repayment of our indebtedness, $10.6 million in dividends paid, $23.8 million in purchases of short-term investments, and $1.5 million of capital expenditures, partially offset by $92.1 million of cash generated from operations and $1.1 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

Cash, cash equivalents and short-term investments were $82.1 million at September 30, 2023, a decrease of $32.5 million from $114.6 million at December 31, 2022.

This decrease resulted primarily from $118.9 million in repayment of our indebtedness, $16.0 million in dividends paid, $33.6 million in purchases of short-term investments, $10.5 million in repurchases of common stock for tax withholdings on equity awards, and $1.9 million of capital expenditures, partially offset by $113.3 million of cash generated from operations, $3.8 million in proceeds from maturities of investments, and $1.2 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

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.

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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.

The gross realized gains and losses on sales of marketable debt securities were immaterial during the three and six months ended June 30, 2023 and 2022.

Unrealized losses on AFS debt securities were immaterial as of June 30, 2023 and December 31, 2022.

The gross realized gains and losses on sales of marketable debt securities were immaterial during the three and nine months ended September 30, 2023 and 2022.

Unrealized losses on AFS debt securities were immaterial as of September 30, 2023 and December 31, 2022.

For information about our material cash requirements, see “

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in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.

Other than the principal payment of $103.8 million made by us under the Refinanced Term B Loans during the six months ended June 30, 2023, our cash requirements have not changed materially since December 31, 2022.

Other than the principal payment of $118.9 million made by us under the Refinanced Term B Loans during the nine months ended September 30, 2023, our cash requirements have not changed materially since December 31, 2022.

We expect to continue to make additional payments on our existing debt from cash generated from operations.

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Quarterly Dividends

In June 2023, we paid quarterly cash dividends of $0.05 per share of common stock.

In July 2023, our board of directors (the “Board”) authorized payment of a quarterly cash dividend of $0.05 per share, to be paid in September 2023.

In September 2023, we paid quarterly cash dividends of $0.05 per share of common stock.

In October 2023, our board of directors (the “Board”) authorized payment of a quarterly cash dividend of $0.05 per share, to be paid in December 2023.

Stock Repurchase Plan

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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.

Since the inception of the Plan, and through June 30, 2023, 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.

As of June 30, 2023, the total remaining amount available for repurchase under the Plan was $77.8 million.

Since the inception of the Plan, and through September 30, 2023, 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.

As of September 30, 2023, the total remaining amount available for repurchase under the Plan was $77.8 million.

We may continue to execute authorized repurchases from time to time under the Plan.

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Cash Flows from Operating Activities

Our cash flows are presented on a consolidated basis and therefore, also include $144.8 million of cash and cash equivalents included as current assets of discontinued operations in the condensed consolidated balance sheet as of June 30, 2022.

Cash flows provided by operations were $92.1 million for the six months ended June 30, 2023, primarily due to our net income of $30.4 million being adjusted for non-cash items of amortization of intangible assets of $47.3 million, deferred income taxes of $1.5 million, amortization of debt issuance costs of $2.2 million and stock-based compensation expense of $8.2 million.

These increases were partially offset by $1.7 million in

changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2022.

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.

Our cash flows are presented on a consolidated basis and therefore, also include $182.9 million of cash and cash equivalents included as current assets of discontinued operations in the condensed consolidated balance sheet as of September 30, 2022.

Cash flows provided by operations were $113.3 million for the nine months ended September 30, 2023, primarily due to our net income of $54.7 million being adjusted for non-cash items of amortization of intangible assets of $70.7 million, amortization of debt issuance costs of $3.3 million and stock-based compensation expense of $13.1 million.

These increases were partially offset by $29.6 million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2022.

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.

Cash Flows from Investing Activities

Net cash used in investing activities was $25.4 million for the six months ended June 30, 2023, primarily related to purchases of short-term investments of $23.8 million and capital expenditures of $1.5 million.

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.

Net cash used in investing activities was $31.8 million for the nine months ended September 30, 2023, primarily related to purchases of short-term investments of $33.6 million, capital expenditures of $1.9 million and proceeds from maturities of investments of $3.8 million.

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.

Capital Expenditures

Our capital expenditures for property and equipment consist primarily of purchases of computer hardware and software, information systems, and production and test equipment.

During the six months ended June 30, 2023 and 2022, we spent $1.5 million and $8.9 million on capital expenditures, respectively.

During the nine months ended September 30, 2023 and 2022, we spent $1.9 million and $12.6 million on capital expenditures, respectively.

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

Net cash used in financing activities was $120.7 million for the six months ended June 30, 2023 due to $103.8 million in repayment of indebtedness, $10.6 million in dividends paid, $7.5 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $1.1 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

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.

Net cash used in financing activities was $144.2 million for the nine months ended September 30, 2023 due to $118.9 million in repayment of indebtedness, $16.0 million in dividends paid, $10.5 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $1.1 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

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, $17.3 million in repurchases of common stock, and $15.3 million in repurchases of common stock for tax withholdings on equity awards, 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.

Long-term Debt

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as administered by the Federal Reserve Bank of New York.

At June 30, 2023, $645.5 million was outstanding under the Refinanced Term B Loans with an interest rate, including amortization of debt discount and issuance costs of $17.6 million.

At September 30, 2023, $630.4 million was outstanding under the Refinanced Term B Loans with an interest rate, including amortization of debt discount and issuance costs of $16.6 million.

Interest is payable monthly.

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After the Separation, we own the debt under the Refinanced B Term Loans.

Additionally, we paid $73.5 million during the six months ended June 30, 2023, based on certain leverage ratios and our excess cash flow generated during the year ended December 31, 2022.

The payments were made earlier than required under the 2020 Credit Agreement.

Additionally, we paid $73.5 million during the nine months ended September 30, 2023, based on certain leverage ratios and our excess cash flow generated during the year ended December 31, 2022.

The payments under the excess cash flow provisions were made earlier than required under the 2020 Credit Agreement.

We are obligated to continue to pay a portion of excess cash flows on an annual basis.

The Refinanced Term B Loans contain customary covenants, and as of June 30, 2023, we were in full compliance with such covenants.

The Refinanced Term B Loans contain customary covenants, and as of September 30, 2023, we were in full compliance with such covenants.

Critical Accounting Policies and Estimates

During the six months ended June 30, 2023, there were no significant changes in our critical accounting policies and estimates.

During the nine months ended September 30, 2023, there were no significant changes in our critical accounting policies and estimates.

See “Note 2 –

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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.

What changed 10-Q

Item 1. Financial Statements