What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-05-06 · 76 added, 51 removed, 161 unchanged (44% of the section changed)

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(formerly known as Xperi Holding Corporation) (“Adeia”, “we”) is a technology company and an innovation incubator.

We have spent decades investing in advanced research and development to create market-leading technologies for the entertainment, media, consumer electronics, and semiconductor industries.

We have spent decades investing in advanced research and development to create market-leading technologies for the entertainment, media, consumer electronics, e-commerce and semiconductor industries.

Our innovative solutions support practically every aspect of consumers’ day-to-day interaction with media, consumer electronics and entertainment, enabling our customers to build customized, next-generation solutions for users around the globe.

We believe our commitment to and investment in innovation has resulted in a leading IP licensing platform in these industries, with an extensive portfolio of media and semiconductor IP and approximately 13,750 media and semiconductor patent assets worldwide.

We believe our commitment to and investment in innovation has resulted in a leading IP licensing platform in these industries, with an extensive portfolio of media and semiconductor IP and over 14,250 media and semiconductor patent assets worldwide.

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

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We believe that this structure reflects our current operational and financial management and provides the best structure for us to focus on growth opportunities.

Our Chief Executive Officer has been determined to be the Chief Operating Decision Maker (“CODM”) in consideration with the authoritative guidance on segment reporting.

Our Chief Executive Officer has been determined to be the Chief Operating Decision Maker (“CODM”) in accordance with the authoritative guidance on segment reporting.

We primarily license our innovations to leading companies in the broader media entertainment and semiconductor industries, and those companies developing new technologies that will help drive these industries forward.

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

For the three months ended March 31, 2026, as compared to the same period in 2025:

For the three and six months ended June 30, 2026, as compared to the same periods in 2025:

Three months ended June 30, 2026

• Revenue increased by $10.4 million, or 12.1%, from $85.7 million in 2025 to $96.1 million in 2026.

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• Cash provided by operating activities increased by $31.5 million, or 136.3% from $23.1 million in 2025 to $54.6 million in 2026.

• We made $28.1 million in principal payments towards our term loan, bringing the outstanding balance to $398.6 million as of March 31, 2026.

• We repurchased $10.0 million of our common stock in 2026.

• We made $6.1 million in principal payments towards our term loan, bringing the outstanding balance to $392.6 million as of June 30, 2026.

• We repurchased $10.0 million of our common stock during the three months ended June 30, 2026.

Six months ended June 30, 2026

• Revenue increased by $27.5 million, or 15.8%, from $173.4 million in 2025 to $200.9 million in 2026.

• Recurring revenues decreased by $22.1 million, or 13.0% from $169.5 million in 2025 to $147.4 million in 2026.

• Non-recurring revenues increased by $49.6 million, or 1270.9% from $3.9 million in 2025 to $53.5 million in 2026.

• Cash provided by operating activities increased by $32.9 million, or 40.9% from $80.3 million in 2025 to $113.1 million in 2026.

• We made $34.2 million in principal payments towards our term loan, bringing the outstanding balance to $392.6 million as of June 30, 2026.

• We repurchased $20.0 million of our common stock during the six months ended June 30, 2026.

Results of Operations

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Three Months Ended

Six Months Ended

Operating expenses:

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Income before income taxes

Provision for income taxes

The following table sets forth our revenue for the three months ended March 31, 2026 and 2025 (in thousands, except for percentages):

Provision (benefit) for income taxes

The following table sets forth our revenue for the three and six months ended June 30, 2026 and 2025 (in thousands, except for percentages):

Three Months Ended

The increase in revenue during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily attributable to the execution of two new multi-year license agreements with AMD and Microsoft in 2026;

Six Months Ended

The increase in revenue during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily attributable to the execution of new multi-year license agreements in 2026;

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

Recurring revenue for the three months ended March 31, 2026 and 2025 were $66.3 million and $84.4 million, respectively.

Recurring revenue for the three months ended June 30, 2026 and 2025 were $73.5 million and $85.1 million, respectively.

The decrease of $11.6 million was driven primarily by declines in royalty revenue from certain Pay-TV customers;

partially offset by the execution of license agreements with new customers from April 1, 2025 to March 31, 2026.

Non-recurring revenues for the three months ended March 31, 2026 and 2025 were $38.5 million and $3.3 million, respectively.

The increase of $35.2 million was primarily attributable to the execution of three new license agreements in the first quarter of 2026, including AMD and another new customer for access to our semiconductor IP portfolio, and Microsoft for access to our media portfolio.

partially offset by the execution of license agreements with new customers after the second quarter of 2025.

Non-recurring revenues for the three months ended June 30, 2026 and 2025 were $22.6 million and $0.6 million, respectively.

The increase of $22.0 million was primarily driven by two multi-year license agreements executed during the second quarter of 2026, each of which included consideration for the release of past infringement of our IP, which was recognized in the respective quarter.

Recurring revenue for the six months ended June 30, 2026 and 2025 were $147.4 million and $169.5 million, respectively.

The decrease of $22.1 million was driven primarily by declines in royalty revenue from certain Pay-TV customers;

partially offset by the execution of license agreements with new customers after the second quarter of 2025.

Non-recurring revenues for the six months ended June 30, 2026 and 2025 were $53.5 million and $3.9 million, respectively.

The increase of $49.6 million was primarily driven by four agreements with new customers executed in the first half of 2026, each of which included consideration for the release of past infringement of our IP, and one renewal that included a catch-up payment for an out-of-license period.

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

Research and development (“R&D”) costs consist primarily of personnel costs, stock-based compensation, outside engineering consulting expenses associated with new IP development, as well as costs related to patent applications and examinations, reverse engineering, materials, supplies and an allocation of facilities costs.

R&D costs consist primarily of personnel costs, stock-based compensation, outside engineering consulting expenses associated with new IP development, as well as costs related to patent applications and examinations, reverse engineering, materials, supplies and an allocation of facilities costs.

All R&D costs are expensed as incurred.

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Three Months Ended

Six Months Ended

Research and development

The increase in R&D costs during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to an increase in patent portfolio expenses and an increase in personnel related costs as a result of increased headcount.

The increase in R&D costs during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to an increase in patent portfolio 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

Six Months Ended

Selling, general and administrative

The increase in SG&A expense during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to an increase in personnel related costs as a result of increased headcount and an increase in advertising expense, partially offset by lower outside services.

The decrease in SG&A expense during the three months ended June 30, 2026, as compared to the same period in 2025, was primarily due to a decrease in advertising expense, partially offset by an increase in personnel related costs as a result of increased headcount.

SG&A expense during the six months ended June 30, 2026, as compared to the same period in 2025, was relatively consistent.

Amortization Expense (in thousands, except for percentages):

Three Months Ended

Six Months Ended

Amortization expense

The increase in amortization expense during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to patents acquired in 2025, partially offset by certain intangible assets becoming fully amortized during 2025.

The increase in amortization expense during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to patents acquired in 2025 and 2026, partially offset by certain intangible assets becoming fully amortized during 2025.

Litigation Expense (in thousands, except for percentages):

Three Months Ended

Six Months Ended

Litigation expense

Our litigation expense for the three months ended March 31, 2026, was relatively consistent with the same period in 2025.

Higher expenses driven by increased activity in certain matters that have settled were offset by expenses associated with new litigation matters.

The decrease in litigation expense for the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to decreased expense associated with certain matters that have settled, partially offset by expenses associated with new litigation matters.

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

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Three Months Ended

Six Months Ended

Interest expense

The decrease in interest expense during the three months ended March 31, 2026, as compared to the same period in 2025, was primarily due to lower debt balance and lower variable interest rates.

The decrease in interest expense during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was primarily due to lower debt balance and lower variable interest rates.

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

Three Months Ended

Six Months Ended

Other income and expense, net

Other income and expense, net during the three months ended March 31, 2026, as compared to the same period in 2025, was relatively consistent.

Other income and expense, net during the three and six months ended June 30, 2026, as compared to the same periods in 2025, was relatively consistent.

Provision for Income Taxes (in thousands, except for percentages):

Three Months Ended

Provision for income taxes

Six Months Ended

Provision (benefit) 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 March 31, 2026, we recorded income tax expense of $5.2 million on pretax income of $28.0 million, which resulted in an effective tax rate of 18.6%.

For the three months ended June 30, 2026, we recorded income tax expense of $1.6 million on pretax income of $19.0 million, and for the six months ended June 30, 2026, we recorded income tax expense of $6.8 million on pretax income of $47.0 million, which resulted in an effective tax rates of 8.6% and 14.6%, respectively, for the three and six months ended June 30, 2026.

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

federal tax rate primarily due to excess tax benefits related to stock-based compensation.

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 increase in income tax expense for the three months ended March 31, 2026, as compared to the same period in the prior year was primarily due to an increase to pretax income.

federal tax rate primarily due to tax benefits related to stock-based compensation.

For the three months ended June 30, 2025, we recorded an income tax benefit of $9.1 million on pretax income of $7.6 million, and for the six months ended June 30, 2025, we recorded an income tax benefit of $7.0 million on pretax income of $21.5

million, which resulted in effective tax rates of (119.4)% and (32.6)%, respectively, for the three and six months ended June 30, 2025.

The increase in income tax expense for the three and six months ended June 30, 2026, as compared to the same period in the prior year was primarily due to an increase to pretax income.

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 as of and for the three months ended March 31, 2026 and 2025:

The following table presents selected financial information related to our liquidity and significant sources and uses of cash and cash equivalents as of and for the six months ended June 30, 2026 and 2025:

(in thousands)

March 31, 2026

June 30, 2026

December 31, 2025

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Total cash, cash equivalents and marketable securities

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by operating activities

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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 $115.8 million at March 31, 2026, a decrease of $21.0 million from $136.7 million at December 31, 2025.

This decrease primarily resulted from $58.5 million of cash generated from operations, partially offset by $28.1 million in repayment of our long-term debt, $29.8 million in repurchases of common stock associated with tax withholdings on equity awards, $10.0 million in repurchases of common stock, $5.5 million in dividends paid, and $5.5 million in purchases of intangible assets.

Cash, cash equivalents and marketable securities were $137.1 million and $136.7 million at June 30, 2026 and December 31, 2025, respectively.

The change in cash, cash equivalents and marketable securities in the six months ended June 30, 2026 included $113.1 million of cash generated from operations, partially offset by $34.2 million in repayment of our long-term debt, $32.9 million in repurchases of common stock associated with tax withholdings on equity awards, $20.0 million in repurchases of common stock, $11.0 million in dividends paid, and $15.0 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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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

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, 2025.

Other than the principal payments of $28.1 million made by us under the existing Term Loan B during the three months ended March 31, 2026, our cash requirements have not materially changed since December 31, 2025.

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, 2025.

Other than the principal payments of $34.2 million made by us under the existing Term Loan B during the six months ended June 30, 2026, our cash requirements have not materially changed since December 31, 2025.

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

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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.

The incurrence of indebtedness could result in increased debt service obligations and may include

covenants that would restrict our operations.

Quarterly Dividends

In March 2026 and 2025, we paid a quarterly dividend of $0.05 per share.

In April 2026, our Board authorized payment of a quarterly cash dividend of $0.05 per share, to be paid in June 2026.

In June 2026 and 2025, we paid a quarterly dividend of $0.05 per share.

In July 2026, our Board authorized payment of a quarterly cash dividend of $0.05 per share, to be paid in September 2026.

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.

During the three months ended March 31, 2026, we repurchased a total of approximately 0.4 million shares of common stock, at an average price of $22.45 per share for a total cost of $10.0 million.

During the three months ended March 31, 2025, we 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.

As of March 31, 2026, the total remaining amount available for repurchase under this plan was $150.0 million.

During the three months ended June 30, 2026, we repurchased a total of approximately 0.4 million shares of common stock, at an average price of $28.36 per share for a total cost of $10.0 million.

During the six months ended June 30, 2026, we repurchased a total of approximately 0.8 million shares of common stock, at an average price of $25.06 per share for a total cost of $20.0 million.

During the six months ended June 30, 2025, we 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.

These purchases occurred during the three months ended March 31, 2025 and no repurchases were made during the three months ended June 30, 2025.

As of June 30, 2026, the total remaining amount available for repurchase under this plan was $140.0 million.

We may continue to execute authorized repurchases from time to time under our existing stock repurchase plan.

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Cash Flows from Operating Activities

Cash flows provided by operations were $58.5 million for the three months ended March 31, 2026, primarily due to our net income of $22.8 million being adjusted for non-cash items of amortization of intangible assets of $15.9 million, stock-based compensation expense of $8.8 million, and $11.8 million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2025.

Cash flows provided by operations were $57.1 million for the three months ended March 31, 2025, 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 $113.1 million for the six months ended June 30, 2026, primarily due to our net income of $40.1 million being adjusted for noncash items of amortization of intangible assets of $32.0 million, stock-based compensation expense of $19.2 million, and $21.9 million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2025.

Cash flows provided by operations were $80.3 million for the six months ended June 30, 2025, primarily due to our net income of $28.5 million being adjusted for noncash items of amortization of intangible assets of $28.3 million, stock-based compensation expense of $16.9 million, and $9.0 million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2024.

Cash Flows from Investing Activities

Net cash used in investing activities was $4.9 million for the three months ended March 31, 2026, primarily due to purchases of short-term investments in marketable securities of $9.0 million, purchases of intangible assets of $5.5 million, and proceeds from maturities of marketable securities of $10.1 million.

Net cash used in investing activities was $6.2 million for the three months ended March 31, 2025, primarily due 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 $16.8 million for the six months ended June 30, 2026, primarily due to purchases of short-term investments in marketable securities of $19.3 million, purchases of intangible assets of $15.0 million, and proceeds from maturities of marketable securities of $18.4 million.

Net cash used in investing activities was $6.2 million for the six months ended June 30, 2025, primarily due to purchases of short-term investments in marketable securities of $13.0 million, purchases of intangible assets of $5.4 million, and proceeds from maturities of marketable securities of $12.6 million.

Capital Expenditures

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

During the three months ended March 31, 2026 and 2025, we spent $0.4 million and $0.2 million on capital expenditures, respectively.

During the six months ended June 30, 2026 and 2025, we spent $1.0 million and $0.4 million on capital expenditures, respectively.

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

During the three months ended March 31, 2026 and 2025, we spent $5.5 million and $5.4 million on purchases of intangible assets, respectively.

During the six months ended June 30, 2026 and 2025, we spent $15.0 million and $5.4 million on purchases of intangible assets, respectively.

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 $73.4 million for the three months ended March 31, 2026, primarily due to $28.1 million in repayment of indebtedness, $5.5 million in dividends paid, $29.8 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 $45.6 million for the three months ended March 31, 2025, primarily 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 $96.6 million for the six months ended June 30, 2026, primarily due to $34.2 million in repayment of indebtedness, $11.0 million in dividends paid, $32.9 million in repurchases of common stock for tax withholdings on equity awards, and $20.0 million in repurchases of common stock.

Net cash used in financing activities was $68.7 million for the six months ended June 30, 2025, primarily due to $28.2 million in repayment of indebtedness, $10.9 million in dividends paid, $19.7 million in repurchases of common stock for tax withholdings on equity awards, and $11.3 million in repurchases of common stock.

Long-term Debt

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The obligations under the 2020 Credit Agreement, as amended, continue to be guaranteed by our wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) and continue to be secured by a lien on substantially all our assets and those of the Guarantors.

As of March 31, 2026, $398.6 million was outstanding under the term loan B facility.

As of June 30, 2026, $392.6 million was outstanding under the term loan B facility.

In addition, we had $6.5 million of unamortized debt discount and issuance costs recorded as a reduction from the carrying amount of the debt.

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Based on certain leverage ratios and the voluntary prepayments we made during the year ended December 31, 2025, no excess cash flow payment is required in 2026.

The term loan B facility contains customary covenants, and as of March 31, 2026, we were in full compliance with such covenants.

The term loan B facility contains customary covenants, and as of June 30, 2026, we were in full compliance with such covenants.

Critical Accounting Policies and Estimates

During the three months ended March 31, 2026, there were no significant changes in our critical accounting policies and estimates.

During the six months ended June 30, 2026, 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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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 2. Management’s Discussion and Analysis