What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-12 · 75 added, 125 removed, 138 unchanged (59% of the section changed)

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risks associated with the Company’s indebtedness;

the Company’s ability to achieve the intended benefits of, and its ability to recognize the tax treatment of, the spin-off of its product business;

unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, natural disasters and future outbreaks or pandemics, each of which may have an adverse impact on the Company’s business, results of operations, and financial condition.

unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, natural disasters and global health pandemics, each of which may have an adverse impact on the Company’s business, results of operations, and financial condition.

Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us.

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Business Overview

(formerly known as Xperi Holding Corporation) (“Adeia”, “we”) is a leading IP licensing platform in the consumer and entertainment space, with a diverse portfolio of media and semiconductor intellectual property and more than 11,750 patents and patent applications worldwide.

(“Adeia”, “we”) is a leading IP licensing platform in the consumer and entertainment space, with a diverse portfolio of media and semiconductor intellectual property and more than 12,750 patents and patent applications worldwide.

In order to serve an increasingly connected world, we invent, develop, and license fundamental innovations that enhance billions of devices and shape the way millions of people explore and experience entertainment.

Through our IP licensing business, we help enable extraordinary experiences at home and on the go for millions of consumers around the world, with IP that helps elevate content and improves how audiences connect with it in a way that is more intelligent, immersive and personal.

Through providing the IP that helps to power smart devices, entertainment experiences and more, we have created a unified ecosystem that reaches highly-engaged consumers and uncovered new business opportunities.

On October 1, 2022, we completed the previously announced separation (“the Separation”) of its product business into an independent, publicly-traded company, Xperi Inc.

(“Xperi Inc.”).

The Separation was structured as a spin-off, which was achieved through Adeia’s distribution of 100 percent of the outstanding shares of Xperi Inc.’s common stock to holders of Adeia’s common stock as of the close of business on the record date of September 21, 2022 (the “Record Date”).

Each Adeia stockholder of record received four shares of Xperi Inc.

common stock for every ten shares of Adeia common stock that it held on the Record Date.

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

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”.

Our inventions are key enabling technologies that drive how consumers interact with entertainment and devices at home and on the go around the world.

Our foundational technologies help elevate content and improve how audiences connect with it in a way that is more intelligent, immersive and personal.

Our innovative solutions help power smart devices, entertainment experiences and more, and have created a unified ecosystem that reaches highly-engaged consumers and uncovered new business opportunities.

Headquartered in Silicon Valley with more than 35 years of operating experience, we have approximately 150 employees, with substantially all of our employees located in the U.S

Macroeconomic Conditions

Macroeconomic conditions due to inflation, geopolitical instability and global health events may have an adverse impact on our business.

For example, such conditions may continue to cause volatility in the markets we serve, particularly the broad consumer electronics market.

Macroeconomic conditions due to inflation, geopolitical instability and global health events had in the past, and may in the future have, an adverse impact on our business.

For example, such conditions may cause volatility in the markets we serve, particularly the broad consumer electronics market.

Impacts from adverse macroeconomic conditions may negatively impact our financial condition and results of operations, which could result in an impairment of our long-lived assets, including goodwill, and increased credit losses.

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 direct or indirect effects from macroeconomic events, such as armed conflict, geopolitical factors, tariffs, market volatility, labor shortages, supply chain disruptions, microchip shortages, changes in demand for semiconductors, market and industry downturns, global health concerns, outbreaks and pandemics.

In addition, to the extent that our customers experience significant, adverse impacts from such macroeconomic events, such events may affect their financial health and our ability to continue receiving revenues from these customers.

Reportable Segments

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Licensing arrangements include access to one or more of our foundational patent portfolios and may also include access to some portions of our industry-leading technologies and know-how.

Financial Highlights

In evaluating our financial condition and operating performance, we primarily focus on revenue and cash flows from operations.

For the three and nine months ended September 30, 2024, as compared to the same periods in 2023:

Three months ended September 30, 2024:

• Revenue decreased by $15.3 million, or 15.1%, from $101.4 million in 2023 to $86.1 million in 2024.

• Recurring revenues decreased by $0.9 million, or 1.1% from $83.6 million in 2023 to $82.7 million in 2024.

• Non-recurring revenues decreased by $14.4 million, or 80.9% from $17.8 million in 2023 to $3.4 million in 2024.

• Cash provided by operating activities decreased by $6.9 million, or 32.6% from $21.2 million in 2023 to $14.3 million in 2024.

• Made $12.0 million in principal payments on our term loan, bringing the outstanding balance to $537.1 million as of September 30, 2024.

Nine months ended September 30, 2024:

• Revenue decreased by $45.1 million, or 14.9%, from $301.9 million in 2023 to $256.9 million in 2024.

• Recurring revenues decreased by $5.2 million, or 2.1% from $255.1 million in 2023 to $249.8 million in 2024.

• Non-recurring revenues decreased by $39.8 million, or 85.0% from $46.8 million in 2023 to $7.0 million in 2024.

For the three months ended March 31, 2025, as compared to the same period in 2024:

• Revenue increased by $4.3 million, or 5.1%, from $83.4 million in 2024 to $87.7 million in 2025.

• Recurring revenues increased by $1.6 million, or 2.0% from $82.8 million in 2024 to $84.4 million in 2025.

• Non-recurring revenues increased by $2.7 million, or 418.4% from $0.6 million in 2024 to $3.3 million in 2025.

• Cash provided by operating activities decreased by $10.1 million, or 15.0% from $67.2 million in 2024 to $57.1 million in 2025.

• Repriced our term loan which lowered our interest rate by 61 basis points and made $64.2 million in principal payments, bringing the outstanding balance to $537.1 million as of September 30, 2024.

• We completed another repricing of our term loan in January 2025, further reducing our interest rate by 50 basis points.

• We made $17.1 million in principal payments towards our term loan, bringing the outstanding balance to $470.0 million as of March 31, 2025.

• We repurchased $10.0 million of our common stock in 2025.

Results of Operations

We derive the majority of our revenue from the licensing of our intellectual property (“IP”) rights to customers.

We derive the majority of our revenue from the licensing of our IP rights to customers.

For our revenue recognition policy, including descriptions of revenue-generating activities, refer to “Note 3 – Revenue ” of the Notes to Condensed Consolidated Financial Statements.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

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Other income and expense, net

Loss on debt extinguishment

Income before income taxes

Provision for (benefit from) income taxes

The following table sets forth our revenue for the three and nine months ended September 30, 2024 and 2023 (in thousands, except for percentages):

Three Months Ended

September 30,

Nine Months Ended

September 30,

The decrease in revenue during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily attributable to the execution of the long-term renewal of a license agreement with Samsung, revenue from the settlement of litigation and revenue from updated royalty audit recovery from an existing customer relating to prior periods, each of which occurred in the third quarter of 2023.

Recurring revenues decreased slightly to $82.7 million during the three months ended September 30, 2024 from $83.6 million in the same period in 2023.

Non-recurring revenues for the three months ended September 30, 2024 and 2023 were $3.4 million and $17.8 million, respectively.

The decrease of $14.4 million was primarily attributable to the recognition of revenue from periods prior to the execution of the long-term renewal of a license agreement with Samsung, revenue from the settlement of litigation and revenue from updated royalty audit recovery from an existing customer relating to prior periods, each of which occurred in the third quarter of 2023.

The decrease in revenue during the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily attributable to the execution of two long-term license agreements with Kioxia and Western Digital in the first quarter of 2023, recognition of revenue from periods prior to the execution of the long-term renewal of a license agreement with Samsung in the third quarter of 2023, and a decline in royalty revenue from certain Pay-TV customers, partially offset by a multi-year agreement with X Corp.

for access to our media portfolio that occurred in the second quarter of 2024.

Recurring revenue for the nine months ended September 30, 2024 and 2023 were $249.8 million and $255.1 million, respectively.

The decrease of $5.2 million was primarily attributable to a decrease in royalty revenue from certain Pay-TV customers.

Non-recurring revenues for the nine months ended September 30, 2024 and 2023 were $7.0 million and $46.8 million, respectively.

The decrease of $39.8 million was primarily attributable to the execution of long-term license agreements with Kioxia and Western Digital in the first quarter of 2023 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, partially offset by a settlement agreement and multi-year renewal with X Corp.

for access to our media portfolio that occurred in the second quarter of 2024.

Provision for income taxes

The following table sets forth our revenue for the three months ended March 31, 2025 and 2024 (in thousands, except for percentages):

The increase in revenue during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily attributable to the execution of a multi-year license agreement with Amazon for access to our media portfolio that occurred in the fourth quarter of 2024, and the execution of two multi-year license agreements with new customers for access to our media portfolio executed in the first quarter of 2025, for which a portion of revenue was recognized up-front in such quarter.

Increases were partially offset by declines in royalty revenue from certain Pay-TV customers.

Recurring revenue for the three months ended March 31, 2025 and 2024 were $84.4 million and $82.8 million, respectively.

The increase of $1.6 million was driven primarily by the execution of license agreements with new customers in 2024, partially offset by declines in royalty revenue from certain Pay-TV customers.

Non-recurring revenues for the three months ended March 31, 2025 and 2024 were $3.3 million and $0.6 million, respectively.

The increase of $2.7 million was primarily attributable to the execution of two multi-year license agreements with new customers for access to our media portfolio in the first quarter of 2025.

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

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

The increase in R&D expense during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in patent prosecution, patent portfolio development costs and an increase in personnel related costs as a result of increased headcount.

The increase in R&D expense during the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in personnel costs as a result of increased headcount and an increase in patent portfolio development costs, partially offset by a decrease in professional services costs.

The increase in R&D expense during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to an increase in patent portfolio expenses, patent technical sales support expenses, and an increase in personnel related costs as a result of increased headcount.

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

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Selling, general and administrative

The increase in SG&A expense during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in personnel related costs as a result of increased headcount and an increase in professional services costs.

The increase in SG&A expense during the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in personnel related costs as a result of increased headcount, an increase in professional services costs, an increase in certain administrative costs associated with the repricing of our credit facility in the second quarter of 2024, partially offset by decreases in separation costs that were incurred in 2023 but did not recur in 2024, lower insurance costs and recovery of certain bad debt expenses.

The increase in SG&A expense during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to an increase in personnel related costs as a result of increased headcount and an increase in certain administrative costs associated with the repricing of our credit facility, partially offset by lower advertising expense and outside services.

Amortization Expense (in thousands, except for percentages):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Amortization expense

The decrease in amortization expense during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to certain intangible assets becoming fully amortized during 2024.

The decrease in amortization expense during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to certain intangible assets becoming fully amortized during 2024.

The decrease was partially offset by an increase in amortization expense as a result of patents acquired in 2024.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Litigation expense

The increase in litigation expense during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to increased activity in current litigation matters.

The increase in litigation expense during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to increased activity in current litigation matters.

See Part II, Item 1 – Legal Proceedings for additional information regarding these matters.

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

September 30,

Nine Months Ended

September 30,

Interest expense

The decrease in interest expense during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to lower debt balance and lower interest rates on our variable interest rate debt due to the repricing of our Term Loan B during the second quarter of 2024.

We anticipate interest expense will continue to decrease in 2024, when compared to 2023, as a result of a full year of a lower debt balance, the reduction of the interest rate margin benefited from the repricing of our Term Loan B during the second quarter of 2024, and the Federal Reserve interest rate cut during the third quarter of 2024.

The decrease in interest expense during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to lower debt balance, the reduction of the interest rate margin resulting from the repricing of our Term Loan B during the second quarter of 2024 and the first quarter of 2025, and the Federal Reserve interest rate cut during the third quarter of 2024.

We anticipate interest expense will continue to decrease in 2025, when compared to 2024, as a result of a lower debt balance and the reduction of the interest rate margin resulting from two rounds of repricing of our term loan.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Other income and expense, net

The decrease in other income and expense, net during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to a decrease in interest income from significant financing components from certain revenue contracts.

Loss on Debt Extinguishment

During the nine months ended September 30, 2024, we recognized $0.5 million associated with the repricing of our Term Loan B and there were no such costs in 2023.

Refer to discussion below for further detail on the repricing of our Term Loan B.

The increase in other income and expense, net during the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to an increase in interest income from significant financing components from certain revenue contracts.

Provision for Income Taxes

Three Months Ended

September 30,

Nine Months Ended

September 30,

Provision for (benefit from) income taxes

Provision for income taxes

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

For the three months ended September 30, 2024, we recorded income tax benefit of $2.5 million on pretax income of $16.8 million, and for the nine months ended September 30, 2024, we recorded an income tax expense of $6.1 million on pretax income of $34.7 million, which resulted in effective tax rates of (14.9)% and 17.6%, respectively, for the three and nine months ended September 30, 2024.

The decrease in income tax expense for the three months ended September 30, 2024, as compared to the same period in the prior year was primarily due to certain unrealized foreign exchange benefits associated with South Korea withholding tax refund claims.

The decrease in income tax expense for the nine months ended September 30, 2024, as compared to the same period in the prior year was primarily due to certain unrealized foreign exchange benefits associated with South Korea withholding tax refund claims.

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 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 March 31, 2025, we recorded income tax expense of $2.1 million on pretax income of $13.9 million, which resulted in an effective tax rate of 15.0%.

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

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

federal tax rate primarily due to stock-based compensation windfall and unrealized benefits associated with South Korea withholding tax refund claims.

For the three months ended March 31, 2024, we recorded income tax expense of $5.7 million on pretax income of $6.6 million, which resulted in an effective tax rate of 86.4%.

The decrease in income tax expense for the three months ended March 31, 2025, as compared to the same period in the prior year was primarily due to stock-based compensation windfall and unrealized benefits associated with South Korea withholding tax refund claims.

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

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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 and cash equivalents for the nine months ended September 30, 2024 and 2023.

The following table presents selected financial information related to our liquidity and significant sources and uses of cash and cash equivalents for the three months ended March 31, 2025 and 2024.

(in thousands)

September 30, 2024

March 31, 2025

December 31, 2024

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Total cash, cash equivalents and marketable securities

Nine Months Ended September 30,

Net cash from operating activities

Net cash from investing activities

Net cash from financing activities

Three Months Ended March 31,

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Our primary sources of liquidity and capital resources are our operating cash flows and our short-term investments in marketable securities.

Cash, cash equivalents and marketable securities were $89.2 million at September 30, 2024, an increase of $5.6 million from $83.6 million at December 31, 2023.

This increase primarily resulted from $105.0 million of cash generated from operations, and $1.5 million in proceeds from purchases through our employee stock purchase program and exercise of stock options, partially offset by $64.2 million in repayment of our long-term debt, $11.6 million in repurchases of common stock associated with tax withholdings on equity awards, $16.3 million in dividends paid, $1.3 million in purchases of property and equipment, and $8.5 million in purchases of intangible assets.

Cash, cash equivalents and marketable securities were $116.5 million at March 31, 2025, an increase of $6.1 million from $110.4 million at December 31, 2024.

This increase primarily resulted from $57.1 million of cash generated from operations, partially offset by $17.1 million in repayment of our long-term debt, $12.0 million in repurchases of common stock associated with tax withholdings on equity awards, $11.3 million in repurchases of common stock, $5.4 million in dividends paid, and $5.4 million in purchases of intangible assets.

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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For information about our material cash requirements, see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Other than the principal payments of $64.2 million made by us under the existing Term Loan B during the nine months ended September 30, 2024, our cash requirements have not materially changed since December 31, 2023.

Other than the principal payments of $17.1 million made by us under the existing Term Loan B during the three months ended March 31, 2025, our cash requirements have not materially changed since December 31, 2024.

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

In addition to the cash requirements outlined above, we have returned cash to stockholders through both quarterly dividend payments and repurchases of our common stock under our stock repurchase plan.

We believe that based on current levels of operations and anticipated growth, our cash from operations, together with cash and cash equivalents currently available, will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and thereafter for the foreseeable future.

Poor financial results, unanticipated expenses, unanticipated acquisitions of technologies or businesses, or unanticipated strategic investments could give rise to additional financing requirements sooner than we expect.

There can be no assurance that equity or debt financing will be available when needed or, if available, that such financing will be on terms satisfactory to us.

The sale of additional equity securities could result in dilution to our stockholders.

The incurrence of indebtedness could result in increased debt service obligations and may include covenants that would restrict our operations.

Quarterly Dividends

In September 2024, we paid quarterly cash dividends of $0.05 per share of common stock.

In October 2024, our board of directors (the “Board”) authorized payment of a quarterly cash dividend of $0.05 per share, to be paid in December 2024.

In March 2025, we paid quarterly cash dividends of $0.05 per share of common stock.

In April 2025, our Board authorized payment of a quarterly cash dividend of $0.05 per share, to be paid in June 2025.

Stock Repurchase Plan

On June 12, 2020, our Board terminated a prior stock repurchase program and approved a new stock repurchase plan (the “Plan”), which provides for the repurchase of up to $150.0 million of our common stock dependent on market conditions, share price and other factors.

No expiration has been specified for this Plan.

On April 22, 2021, our Board authorized an additional $100.0 million of purchases under the Plan.

In October 2024, our Board approved an increase of the existing share repurchase authorization up to a total of $200.0 million.

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 September 30, 2024, 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, 2024, the total remaining amount available for repurchase under the Plan was $77.8 million.

During the three months ended March 31, 2025, the Company repurchased a total of approximately 0.8 million shares of common stock, at an average price of $13.19 per share for a total cost of $10.0 million.

The Company did not repurchase any shares during the three months ended March 31, 2024.

As of March 31, 2025, the total remaining amount available for repurchase under this plan was $170.0 million.

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

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There is no guarantee that such repurchases under the Plan will enhance the value of our common stock.

There can be no assurance that equity or debt financing will be available when needed or, if available, that such financing will be on terms satisfactory to us.

The sale of additional equity securities could result in dilution to our stockholders.

The incurrence of indebtedness could result in increased debt service obligations and may include covenants that would restrict our operations.

Cash Flows from Operating Activities

Cash flows provided by operations were $105.0 million for the nine months ended September 30, 2024, were primarily due to our net income of $28.6 million being adjusted for non-cash items of amortization of intangible assets of $56.8 million, amortization of debt issuance costs of $2.4 million, stock-based compensation expense of $19.2 million, depreciation of property and equipment of $1.5 million and $(0.7) million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2023.

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 $57.1 million for the three months ended March 31, 2025, which were primarily due to our net income of $11.8 million being adjusted for non-cash items of amortization of intangible assets of $14.1 million, stock-based compensation expense of $8.2 million, and $25.8 million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2024.

Cash flows provided by operations were $67.2 million for the three months ended March 31, 2024, which were primarily due to our net income of $0.9 million being adjusted for non-cash items of amortization of intangible assets of $23.2 million, amortization of debt issuance costs of $0.8 million, stock-based compensation expense of $5.1 million and $34.8 million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2023.

Cash Flows from Investing Activities

Net cash used in investing activities was $8.4 million for the nine months ended September 30, 2024, primarily related to purchases of short-term investments of $25.1 million, purchases of property and equipment of $1.3 million, purchases of intangible assets of $8.5 million, and proceeds from maturities of investments of $26.5 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 $6.2 million for the three months ended March 31, 2025, which primarily related to purchases of short-term investments in marketable securities of $7.2 million, purchases of intangible assets of $5.4 million, and proceeds from maturities of marketable securities of $6.6 million.

Net cash used in investing activities was $11.0 million for the three months ended March 31, 2024, which primarily related to purchases of short-term investments in marketable securities of $11.2 million, purchases of property and equipment of $0.8 million, purchases of intangible assets of $8.5 million, and proceeds from maturities of marketable securities of $9.5 million.

Capital Expenditures

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

During the nine months ended September 30, 2024 and 2023, we spent $1.3 million and $1.9 million on capital expenditures, respectively, and we expect capital expenditures in the remainder of 2024 to be approximately $1.0 million.

During the three months ended March 31, 2025 and 2024, we spent $0.2 million and $0.8 million on capital expenditures, respectively, and we expect capital expenditures in the remainder of 2025 to be approximately $1.0 million.

Our capital expenditures for intangible assets consists primarily of acquired patents.

During the nine months ended September 30, 2024, we spent $8.5 million on purchases of intangible assets.

These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents and short-term investments.

During the three months ended March 31, 2025, we spent $5.4 million on purchases of intangible assets.

These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents and marketable securities.

There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs.

Cash Flows from Financing Activities

Net cash used in financing activities was $90.5 million for the nine months ended September 30, 2024 due to $64.2 million in repayment of indebtedness, $16.3 million in dividends paid, $11.6 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $1.5 million in proceeds from purchases through our employee stock purchase program and exercise of stock options.

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 $45.6 million for the three months ended March 31, 2025 due to $17.1 million in repayment of indebtedness, $5.4 million in dividends paid, $12.0 million in repurchases of common stock for tax withholdings on equity awards, and $10.0 million in repurchases of common stock.

Net cash used in financing activities was $52.8 million for the three months ended March 31, 2024 due to $40.1 million in repayment of indebtedness, $5.4 million in dividends paid, $7.7 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $0.5 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

Long-term Debt

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The 2024 Term Loan B will mature on June 8, 2028, the same date upon which the 2021 Refinanced Term Loan B matured prior to giving effect to Amendment No.

At September 30, 2024, $537.1 million was outstanding under the term loan B facility with an interest rate, including unamortized debt discount and issuance costs of $12.7 million.

On January 30, 2025, the Company entered into Amendment No.

4 (“Amendment No.

4”) to the 2020 Credit Agreement, which provided for, among other things, (i) a repricing of the 2020 Term Loan B Facility through a refinancing of the entire amount of the 2024 Term Loan B (the “2025 Term Loan B”) in an aggregate principal amount of $487.1 million, (ii) a reduction of the interest rate margin applicable to such loans to (x) in the case of SOFR loans, 2.50% per annum and (y) in the case of base rate loans, 1.50% per annum and (iii) a prepayment premium of 1.00% in connection with any repricing transaction with respect to the 2025 Term Loan B within six months of the closing date of Amendment No.

The 2025 Term Loan B will mature on June 8, 2028, the same date upon which the 2024 Term Loan B matured prior to giving effect to Amendment No.

At March 31, 2025, $470.0 million was outstanding under the term loan B facility with an interest rate, including unamortized debt discount and issuance costs of $10.8 million.

Interest is payable monthly.

Under the existing loan agreement, we have future minimum principal payments for our debt of $18.3 million in the remainder of 2025, $24.4 million each year from 2026 through 2027, with the remaining principal balance of $403.0 million due in 2028.

After the Separation, we own the debt under the term loan B facility.

Additionally, we paid $29.1 million during the nine months ended September 30, 2024, based on certain leverage ratios and our excess cash flow generated for the year ended December 31, 2023.

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

The term loan B facility contains customary covenants, and as of September 30, 2024, we were in full compliance with such covenants.

The 2020 Credit Agreement, as amended, also requires that we continue to make cash payments on an annual basis based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year.

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

Based on certain leverage ratios and the voluntary prepayments we made during the year ended December 31, 2024, no excess cash flow payment is required in 2025.

The term loan B facility contains customary covenants, and as of March 31, 2025, we were in full compliance with such covenants.

Critical Accounting Policies and Estimates

During the three and nine months ended September 30, 2024, there were no significant changes in our critical accounting policies and estimates.

During the three months ended March 31, 2025, there were no significant changes in our critical accounting policies and estimates.

See “Note 2 – Summary of Significant Accounting Policies ” of Notes to Condensed Consolidated Financial Statements for additional detail.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis