Adeia Inc. 10-K

Item 1. Business Corporate Information Our principal executive offices are located at 3025 Orchard Parkway, San Jose, California 95134 USA. Our telephone number is +1 (408) 321-6000. We maintain a corporate website at www.xperi.com. The reference to our website address does not constitute incorporation by reference of the information contained on this website. Xperi, the Xperi logo, TiVo, the TiVo logo, Tessera, the Tessera logo, DTS, the DTS logo, Ergo, FotoNation, the FotoNation logo, Invensas, the Invensas logo, ZiBond, DBI, DTS HD, DTS Audio Processing, DTS:X Ultra, DTS Virtual:X, DTS Headphone:X, DTS Play Fi, DTS:X, DTS AutoSense, DTS AutoStage, and HD Radio are trademarks or registered trademarks of Xperi Holding Corporation or its affiliated companies in the U.S. and other countries. All other company, brand and product names may be trademarks or registered trademarks of their respective companies. Overview On December 18, 2019, Xperi Corporation (“Xperi”) entered into a definitive agreement with TiVo Corporation (“TiVo”), to combine in an all-stock merger of equals transaction (the “Mergers”). Following consummation of the Mergers on June 1, 2020, Xperi Holding Corporation became the parent company of both Xperi and TiVo. The common stock of both Xperi and TiVo were de-registered after completion of the Mergers. On June 2, 2020, Xperi Holding Corporation’s common stock, par value $0.001 per share, commenced trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “XPER.” Xperi was determined to be the accounting acquirer in the Mergers. As a result, the historical financial statements of Xperi for periods prior to the Mergers are considered to be the historical financial statements of Xperi Holding Corporation. As used herein, the “Company,” “we,” “us” and “our” refer to Xperi when referring to periods prior to June 1, 2020 and Xperi Holding Corporation when referring to periods subsequent to June 1, 2020. Our results of operations include the operations of TiVo after June 1, 2020. Unless specified otherwise, the financial results in this Annual Report are those of the Company and its subsidiaries on a consolidated basis. For further discussion on the Mergers, refer to “Item 1A. Risk Factors,” and “Note 9 – Business Combination” in the Notes to Consolidated Financial Statements. We are a leading consumer and entertainment product/solutions licensing company and one of the industry’s largest intellectual property licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 11,000 patents and patent applications worldwide. We invent, develop, and deliver technologies that enable extraordinary experiences. Xperi technologies, delivered via our brands (DTS, HD Radio, IMAX Enhanced, Invensas, TiVo), and by our subsidiary, Perceive Corporation (“Perceive”), make entertainment more entertaining, and smart devices smarter. Our technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for partners, customers and consumers. We shape how millions of consumers access and experience entertainment content, and our innovations are found in billions of devices and hundreds of millions of interfaces around the globe. Headquartered in Silicon Valley with operations around the world, we have approximately 1,850 employees and over 30 years of operating experience. Following the Mergers, we determined that we conduct our business in two operating segments: (1) Product and (2) Intellectual Property (“IP”) Licensing. The Product segment consists primarily of licensing our internally-developed audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions. Audio, digital radio, imaging solutions and edge-based machine learning include the delivery of software and/or hardware-based solutions to our consumer electronics (“CE”) customers, automotive manufacturers or their supply chain partners. UX products and services revenue is primarily derived from multi-channel video service providers and CE manufacturers, licensing the TiVo service and selling TiVo-enabled devices like the Stream 4K, Personalized Content Discovery, enriched Metadata, viewership data and advertising. The IP Licensing segment consists primarily of licensing our innovations to leading companies in the media and semiconductor industries. Licensing arrangements include access to one or more of our foundational patent portfolios and may also include access to some of our industry-leading technologies and proven know-how. In media, our licensees include multichannel video programming distributors (“MVPDs”), over-the-top (“OTT”) video service providers, consumer electronics manufacturers, social media and other new media companies. In semiconductor, our licensees include memory, sensors, RF component, and foundry companies. We are currently contemplating and may pursue, subject to any required regulatory approvals, a separation of our product business and IP Licensing business through a tax-efficient transaction, resulting in two independent, publicly traded companies. We are evaluating the optimal timing of the contemplated business separation and currently anticipate that such separation will not be completed earlier than the first half of 2022. 4 Impact of COVID-19 Pandemic Please refer to the Executive Summary section of Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” for information concerning the continuing effect of COVID-19 on our business. Product Segment Our product business comprises a portfolio of software and services that address one of the biggest consumer trends in entertainment today – the massive proliferation of content and the rapidly changing habits for how consumers are finding, watching and enjoying entertainment. We offer consumers a unique and seamless end-to-end entertainment experience: from choice to consumption - in the home, in the car and on-the-go. Additionally, through our technology solutions, we can offer our customers and partners additional ways to monetize that consumption. We group our Product business into three categories based on the products delivered and customers served: Consumer Experience, Connected Car, and Pay-TV. Strategy Our goal is to make entertainment more entertaining and smart devices smarter. We do this through developing ground-breaking innovations that enhance the products and services that billions of consumers interact with on a daily basis. Our inventions are focused on driving increased value for partners, customer, and consumers across multiple end-markets. Key elements of our strategy by end-market include: • Consumer Experience: Enhancing consumers’ discovery and consumption of entertainment content, whether it be in the home or on the go, through our audio, imaging, and media solutions. • Connected Car: Delivering unique entertainment experiences as well as ground-breaking safety solutions for automotive markets worldwide. • Pay-TV: Transforming the traditional television user experience from linear / video-on-demand (“VOD”) to a modern content discovery platform that breaks down content silos and boundaries, creating a unified media experience that enables unprecedented end user engagement. • In addition to the above end markets we are also focused on delivering a new machine learning-based hardware and software platform in form of small power-efficient AI semiconductor chip branded Ergo™. The Ergo platform combines work on advanced machine learning with our unique experience in imaging, audio, and semiconductor technologies. Our focus is on delivering on a solution that enables data center quality inference to edge devices to an addressable market of billions of devices across IoT, in home, mobile and automotive applications. 5 6 Consumer Experience Our Consumer Experience business represents four major product groups based on the solutions delivered to our customers: TiVo Software and Services, Audio, Imaging and Edge-Based Machine Learning. Below are some of the key solutions we license: TiVo Software & Services TiVo Stream. Our TiVo Stream platform is a consumer streaming platform that empowers consumers to confidently navigate an increasingly fragmented and complex entertainment landscape, bringing content of all formats, including movies, TV and user generated video, into a single experience with more end user customization to control their entertainment bundles. It 7 represents a differentiated experience with universal discovery and personalized recommendations with seamless integration of linear, live and streaming programming. TiVo Stream is a platform with multiple go-to-market endpoints such as the TiVo Stream 4K device addressing the fast-growing streaming media player market, and TiVo Stream embedded as an operating platform on Smart TVs and other consumer electronic products. We sell TiVo Stream 4K both direct to consumers as well as via online and traditional retail channels. The TiVo Stream platform is licensed as a software-as-a-service to consumer electronic and TV OEMs giving us the right to monetize all or part of the end user content engagement over the life of the product. Metadata. Our metadata products are a critical component of delivering an interactive entertainment experience. We offer the industry’s most comprehensive metadata library covering television, sports, movies, digital-first, music, celebrities, books, and video games. We develop our metadata through a technology platform that combines machine learning techniques and platform-mediated work with our proprietary and patented knowledge graph technology. Our focus on quality, robustness and consistent international depth has made us a recognized leader in entertainment metadata services worldwide. We offer several metadata and service offerings, including, but not limited to, schedules, listings and web content linking services. Customers typically pay us a monthly or quarterly licensing fee for the rights to use the metadata, including regular updates, and to integrate it into their own service. Our metadata can be sold stand-alone or as a complement to another TiVo product such as a TiVo Stream or search and recommendation solution. We deliver metadata using real-time APIs and as bulk data files depending on our customer’s requirements. Our metadata customers include leading global companies such as Microsoft Corporation (“Microsoft”) and Samsung Electronics Co. Ltd. (“Samsung”). Personalized Content Discovery and Natural Language Voice. Personalized Content Discovery with conversation services provides service providers, CE device manufacturers and application/service developers a way to enable their customers to quickly find, discover and access content across linear broadcast television, VOD, DVR, and OTT sources. The ongoing investment in our Personalized Content Discovery platform enables us to provide some of the most advanced capabilities in media personalization, prediction and voice search. The advanced algorithms of our technology understand the nature and relationship of content information and the context surrounding a user's behavior to deliver an advanced personalized content discovery experience. Results can be generated through traditional text entry, voice interaction or our content recommendations. Our natural language voice solution, when combined with our advanced search and recommendations technology, enables a conversational interaction between a viewer and their content experience. These technologies can be applied to pay TV, internet TV, and video services from virtual service providers, content producers, and CE manufacturers. Customers typically pay us a per-subscriber or per-device fee. Our search and recommendation solutions are widely deployed with many leading pay TV service providers including Charter and Verizon Communications, Inc. (“Verizon”). Advanced Media and Advertising. Our Advanced Media and Advertising solutions enable pay TV and virtual service providers, content and new media companies, and advertisers and their agencies to better understand and monetize consumer media engagement. We are leading the industry to use advanced technologies focused on television data to create efficiencies and value multipliers in the evolving television advertising ecosystem. Our TV data platform processes the raw TV viewership events from millions of set-top boxes (“STBs”) which our customers can anonymously match against billing, customer and a range of other third-party data. We provide advertisers with nationwide or regionally targeted advertising on our UX Solutions. Advertisers place ads in a variety of display formats in both traditional linear television and digital advertising for internet delivered content, seamlessly incorporated into the user interface. Advertisements can trigger a variety of actions when selected via a remote control, including video advertisement playback, DVR recordings, and direct response. Utilizing our Personalized Content Discovery platform, we also target content promotions as ‘paid search’ by directly including the sponsored content in user interface’s recommended content carousel. We work with service providers bundling their non-TiVo advertising inventory with our native inventory giving us a more significant national footprint. Our TV Viewership Data platform processes millions of households of TV viewership data with program airings data. Our platform enables us to partner with service providers to unlock the value of their return-path data, transforming raw return-path data into meaningful viewership information to inform and support advertising, promotion and marketing initiatives. Utilizing our TV Viewership Data, MVPDs, broadcasters, content producers, advertising agencies and advertisers can activate subscribers’ TV viewership alone or in combination with third-party data sources using industry- leading data safe havens to target directly, or through third party viewer segments, promotions and advertising to monetize their subscriber customer base. 8 We also offer a software-as-a-service Audience Insights solution used by service providers to analyze the habits and preferences of TV subscribers, providing critical insights that can be utilized to increase operational efficiency, improve customer engagement, support carriage and bundling decisions, help mitigate churn and maximize average revenue per user. Integrated with our Personalized Content Discovery solutions, Audience Insights processes millions of households of TV viewership data, programming data, billing and customer attributes data, as well as third-party sources providing service providers deep analysis of their subscriber’s second-by-second engagement and consumption of content. Audio Audio Solutions consists of premier audio technology for high definition entertainment experiences. The DTS codec is designed to enable recording, delivery and playback of immersive high definition audio and is incorporated by hundreds of customers around the world into an array of consumer electronics devices for use anywhere, at home, in the car, or on the go. We provide products and services to entertainment media ecosystem partners such as motion picture studios, radio and TV broadcasters, game developers and other content creators to facilitate the inclusion of compelling, realistic DTS-encoded audio within their content. This in turn allows consumers to experience immersive and compelling audio wherever they choose to enjoy it. Devices that incorporate DTS audio codec technology include televisions (TVs), personal computers (PCs), smartphones, tablets, automotive entertainment systems, set top boxes (STBs), video game consoles, Blu-ray Disc players, audio/video receivers (AVRs), soundbars, wireless speakers and home theater systems. We also offer DTS post-processing audio solutions designed to enhance the entertainment experience for users of consumer electronics devices, particularly those subject to the physical limitations of smaller speakers, such as TVs, PCs and mobile devices. In 2018, we launched the IMAX Enhanced program, which Xperi manages and licenses to CE customers worldwide to deliver the ultimate home cinema experience with unique IMAX cinematic content that leverages the DTS:X audio format to flawlessly deliver signature IMAX audio mixes. In addition, our DTS PlayFi technology leverages our audio and technology expertise to enable a variety of high-quality audio playback options across wireless speakers, set top boxes, TVs and mobile devices. The proliferation of connected devices that can support streaming and downloadable content has made our active participation within the digital ecosystem increasingly important, as the availability of DTS-encoded content helps drive consumer demand for electronics that support DTS technologies. Our immersive audio solutions, such as DTS-HD and DTS:X, empower content creators and are supported by all major Hollywood studios, many cinema operators in the U.S. and Asia, and leading streaming service providers in the U.S., Europe and Asia. We have licensed our audio technologies and related trademarks to substantially all of the major consumer electronics product manufacturers worldwide. These customers include Denso, Harman, Hisense, LG, Microsoft, Panasonic, Samsung, Sony, and others. Imaging Imaging Solutions: We are a pioneer in computer vision and computational imaging solutions and we provide critical imaging technologies that enable millions of consumers to take incredible pictures with their cameras and smartphones. Our FotoNation imaging products were rebranded to DTS in January 2020. These technologies underpin many of the features today’s digital users enjoy every day such as advanced portrait modes, face detection and tracking, and automatic effects such as face beautification. Our imaging technologies have become must-have capabilities for certain mobile device manufacturers and have been foundational to enabling our automotive in-cabin monitoring solutions that are part of our Connected Car product group. Our imaging technologies and products have been licensed to mobile phone and digital camera manufacturers worldwide, including to LG, Nikon, Oppo, Socionext, ZTE, and others. Audio and Imaging Product-Delivery. Traditionally, our technologies are delivered as software code on integrated circuit (IC) chips. We license a defined and limited set of rights to incorporate our technology into these IC chips, and the IC manufacturers deliver these Xperi‑enabled chips to our customers, the consumer electronics product manufacturers. We also work closely with the world’s leading IC manufacturers to enable support for our technologies on the new programmable architectures that fuel innovation and flexibility in today’s consumer electronics products. Our partners specialize in key vertical markets and work closely with us to enable our latest technologies for these programmable parts. Together, we license these solutions to Xperi’s consumer electronics products customers. We have devoted significant time and resources to develop a broad range of solutions with key partners including Amlogic, Analog Devices, Cadence, Cirrus Logic, Mediatek, Mstar, NXP, Qualcomm, Realtek, Synaptics, Texas Instruments, and others. 9 Edge-Based Machine Learning Our Perceive subsidiary provides silicon and software solutions for edge inference, which provides two differentiating factors: low power and high performance. Perceive’s Ergo chip and associated software deliver breakthrough innovation – delivering datacenter class accuracy and performance at ultra-low power, performing tasks such as face recognition, audio and video event detection. These solutions are expected to have initial market applications in consumer security cameras, doorbells, and other battery powered consumer devices, made by industry leaders. Connected Car We group our Connected Car business into three categories based on the products delivered to our customers: HD Radio, Automotive Connected Media and In-Cabin Monitoring Solutions. HD Radio . HD Radio is the only digital terrestrial broadcast system approved by the Federal Communications Commission (FCC) for AM/FM radio in the U.S., offering additional channels, crystal-clear sound and advanced data services with no subscription fees. HD Radio enables a high quality in-vehicle radio experience with innovative features and digital capabilities such as real time traffic and weather updates. HD Radio technology enables digital AM/FM broadcast radio, creating significant benefits to all participants in the radio broadcasting ecosystem. HD Radio is supported by more than 2,300 radio stations, including 98 of the top 100 stations in the top 10 U.S. radio markets. Furthermore, we believe HD Radio provides compelling advantages to consumers over traditional radio as listeners enjoy upgraded audio quality, expanded content choices, and new digital services. Our HD Radio technology is incorporated into a number of our automotive partners’ products, including vehicles from Acura, Audi, BMW, Ford, GM, Honda, Hyundai, Tesla, and Toyota, among many others. Automotive Connected Media (ACM). ACM delivers DTS AutoStage, industry leading TiVo music and audio entertainment metadata, media search and discovery and our DTS premium audio solutions into a comprehensive automotive infotainment offering. DTS AutoStage is a global system that enables car makers to utilize a single platform to deliver an enhanced radio experience across different analog and digital broadcast systems deployed regionally. Utilizing an internet protocol connection installed in a vehicle, DTS AutoStage delivers an innovative analog AM/FM and digital (DAB and HD Radio) experience by pairing broadcast programming with internet protocol-delivered content. Daimler launched the first series of automobiles featuring the DTS AutoStage platform in September 2020. In-Cabin Monitoring (ICM). Built upon our legacy as a pioneer in computer vision and computational imaging solutions, DTS AutoSense, includes driver monitoring systems (DMS) and occupant monitoring systems (OMS) to enable a full suite of detection and analysis products for automakers. These technologies enable state-of-the-art attentiveness assessment and fatigue detection for the driver as well as in-cabin monitoring and customization options, based on occupant detection and analysis. Pay-TV Our Pay-TV business delivers a range of User Experience (UX) solutions under the iGuide, Passport, TiVo, G-Guide and Cubi brands servicing multi-channel video operators world-wide. UX Solutions. We are addressing the evolving user experience around TV content consumption and creating a truly unified media experience. We are integrating virtual channels of internet delivered video directly into the consumer's primary video consumption platform to provide universal search, discovery and consumption regardless of where the content originates. Our UX Solutions allow service providers to customize certain elements of the interactive programming guides (IPGs) for their customers and to upgrade the programming features and services they offer. Our UX Solutions provide content producers with a platform for merchandising their content. Our UX Solutions allow viewers to build their own entertainment bundle to truly personalize their experience with current and future program information and are compatible with service providers' subscription management, pay-per-view (“PPV”) and VOD services. We also offer operational support, professional services and content metadata. Our UX Solutions also have the ability to include advertising, and we typically share a portion of the advertising revenue from the service provider. We currently offer UX Solutions marketed to service providers under the TiVo, iGuide and Passport brands in the U.S., Canada and Latin America. Service providers generally pay us a monthly per subscriber fee to license our UX Solutions. We also offer UX Solutions to the CE industry under the G-GUIDE brand in Japan. TiVo Service . The TiVo Service is our most advanced platform, offering a fully-integrated cloud-based solution that powers the TiVo Service client software that operates on STBs in consumer homes, as well as applications that operate on third party software platforms, such as iOS and Android, that power tablets, smartphones and mobile streaming devices. The solution 10 supports multiple services and applications, such as linear TV programming, broadband OTT video content, digital music, photos and other media experiences. The cloud-based service manages interaction with the TiVo Service infrastructure, automatically connecting TiVo-enabled devices to provide program guide data, content recommendations, media promotion, advertising, broadband content and client software upgrades. We have enabled the TiVo Service client software to operate on STBs, such as those from CommScope Holding Company, Inc. and Technicolor SA, as well as, Android TV TM boxes and streamers from a variety of manufacturers, for deployment in MVPD networks. We also enable a full suite of cloud-based internet-protocol television ("IPTV") solutions, including internet protocol linear, VOD, start-over, catch-up and network DVR. We allow pay TV operators the flexibility to transition to IPTV while utilizing their current infrastructure to take advantage of internet video and OTT content. This solution allows the STB to operate as an ultra HD STB and a multi-room client STB. Over the past few years, the TiVo Service client software has undergone a significant refactoring. In addition to developing a new look and feel, our next generation TiVo Service platform integrates all of our most advanced technologies and solutions, including advanced cross-platform conversational voice search, personalized recommendations, predictions and insights, extensive video metadata, robust data collection and new back office capabilities, and allows our hardware partners' devices to connect with third-party consumer devices and services to enable existing and future functionality. We also offer a direct-to-consumer retail TiVo Service in North America, to consumers who purchase TiVo DVRs and companion TiVo Mini whole-home devices. For our direct-to-consumer retail TiVo Service, consumers either pay us recurring service fees, or in some cases pay a one-time upfront fee for access to the TiVo Service for the life of the purchased TiVo DVR. We outsource the manufacturing and hardware designs to a strategic partner. The TiVo Service Platform includes a modular front-end that allows the basic platform to be used by hardware manufacturers to build STBs that support digital and analog broadcast, cable, internet TV, OTT and VOD services. We continue to advance the TiVo Service client software to operate across a variety of hardware platforms. UX Business Operations and Technical Support. Our UX Business has technical support and certification operations to support our products: • We provide training, technical support and integration services to pay TV service providers who license our products. • We operate the internet-based services required for our service offerings including data delivery, search, recommendation, advertising, device management and media recognition. • We provide broadcast delivery of television programming data and advertising to UXs on TVs and STBs in major European markets and in Japan. In North America, we deliver similar programming and advertising data via the internet. • We support our customers with porting and engineering services to ensure our IPGs and DVRs operate properly. • We provide customer care for UX and DVR customers to resolve data, advertising and consumer functional issues. Competition Consumer Experience The TiVo Stream competes against products with on-demand OTT streaming capabilities offered by internet CE manufacturers. For example, many CE manufacturers have television or internet-enabled streaming devices for accessing video over the internet such as Apple TV, Amazon Fire TV, Google Chromecast, and Roku. Metadata. In metadata, we compete with other providers of entertainment-related content metadata such as Gracenote (a subsidiary of Nielsen Holdings plc) and Ericsson Group's Red Bee Media, as well as a number of local metadata providers. While we do not believe that our competitors' metadata sets offer the same comprehensive breadth of focus on media exploration, discovery, and management in as many regions of the world as we do, they present competition to our metadata business for each of their areas of focus. TV Audience Data. We collect and analyze audience research data in an area where companies such as comScore, Inc. and Nielsen Holdings plc and other online data analytics companies compete for research spend from advertisers, advertising agencies and television networks. Other large companies are also focusing resources in this area including Comcast, Facebook, Inc. and Alphabet, Inc.’s Google business. Many of our existing customers are investing in significant platforms to enable their businesses with these capabilities. We believe that there is a significant opportunity for us as an independent data and technology provider, with proprietary access to critical data assets associated with consumers’ engagement with entertainment media. Audio and Imaging . Our audio and imaging licensing products face competition from other third-party providers of similar solutions as well as internal engineering and design groups among industry IC provider and consumer electronics manufacturers. 11 In the audio market, our primary competitor is Dolby Laboratories, which develops and markets, among other things, high ‑definition audio products and services. Dolby’s long ‑standing market position, brand, business relationships, resources and inclusion in various industry standards provide it with a strong competitive position. In addition to Dolby, we compete in specific product markets with companies such as Fraunhofer IIS and various other consumer electronics product manufacturers. Many of these competitors have a wide variety of strengths that afford them competitive advantages, such as longer operating histories, greater resources, greater name recognition, or the ability to offer their technologies for a lower price or for free. We have historically competed effectively against these competitors due in part to our ability to position our brand as a premium offering that contains superior proprietary technology, the quality of our customer service, our inclusion in industry standards and our industry relationships. Our image processing technologies broadly compete with other image processing software vendors such as ArcSoft, Inc., as well as engineering and design groups of mobile phone and digital camera manufacturers that seek to provide similar technologies by employing different approaches. Connected Car Our HD Radio and DTS AutoStage solutions face competition from subscription-based digital service providers such as Sirius/XM, Pandora, Gracenote, and other digital audio and data service providers. Our in-cabin monitoring technologies broadly compete with other image processing software vendors targeting the automotive industry such as SmartEye and Seeing Machines, as well as engineering and design groups of tier one automotive suppliers that seek to provide similar technologies by employing different approaches with their internal teams. Pay-TV There are a number of companies that produce and market advanced media solutions such as UXs, IPGs, DVRs, search, recommendation, natural language voice, metadata, and advanced data and analytics in the various formats which compete, or we believe will compete, with our products and services over time. Principal competitive factors include brand recognition and awareness, product and service functionality, innovation, ease of use, personalization, content access and availability, mobility and pricing. While we are competitive across this range of factors, we believe our primary competitive differentiation includes our ability to integrate all of our products to create unique value to our customers and the depth and breadth of our IP portfolio. Our Platform Solutions face competition from companies such as Synamedia, MediaKind, Kudelski, SA, MobiTV, Inc., Enghouse Systems Limited, and from multiple system operators (“MSOs”) developed solutions such as Comcast X1 and Liberty Global plc's Horizon Media, which have created competing products that provide user interface software for use on STBs and CE and mobile devices. Such companies may offer more economically attractive agreements to service providers and CE manufacturers by bundling multiple products together. Another common competitor we encounter for our Pay-TV product offerings is a customer who chooses to build its own IPG and DVR solution. While we believe that we provide a strong alternative to “do-it-yourself,” as we have innovative, high-quality products ready to be implemented, with local and network DVR, integrated data distribution infrastructure and content, as well as third party services (such as VOD services), certain customers have moved to their own internal solutions. We differentiate our products by continuing to integrate our broad portfolio of products into a suite of solutions and services for our customers. We believe our solutions can speed our customers' time to market, can be deployed at a lower cost than internally-built products, and can be superior to “do-it-yourself” products. Over time, we expect to see new competitors and other competing technologies emerge. IP Licensing Segment The IP Licensing segment consists primarily of licensing our innovations to leading companies in the media and semiconductor industries. Licensing arrangements include access to one or more of our foundational patent portfolios and may also include access to some of our industry-leading technologies and proven know-how. Strategy We have adopted a proactive strategy designed to protect and extend our technology and intellectual property. We continue to grow our patent portfolios in size and relevance through ongoing investment in internal innovation, strategic management of our portfolios, and targeted acquisitions. 12 • Media : We license our patented innovations for use with traditional linear television both in North America and internationally, and increasingly in connection with over-the-top and direct-to-consumer services that provide access to video inside and outside the home on a broad array of media consumption devices. We believe the continued growth of video consumption and the evolution of how consumers access and experience video present new opportunities for us to continue to develop patentable inventions, expand the industries we serve and to license additional patent rights. • Semiconductor : With the rapidly rising cost and complexity of developing cutting-edge semiconductor manufacturing processes, the industry is increasingly looking toward advanced semiconductor packaging and 3D integration technologies to scale performance, power and cost for the next generation of electronics, including for 5G, IoT and cloud and edge computing enabled products. This trend presents new market opportunities for us as we continue to invest in the development, commercialization, and acquisition of such technologies, in particular hybrid bonding, and related IP. 13 Media IP For more than a quarter century, we have invented and developed fundamental innovations that have shaped how consumers find, watch, and enjoy video, and how providers of video deliver immersive experiences. Our patented inventions broadly 14 cover all aspects of the video experience, including guidance, discovery, search , recommendations, DVR/NDVR , VOD, OTT, multi-screen, personalization, data analytics, advertising , and other interactive applications. We license our media patent portfolios across multiple markets: • Multichannel Video Programming Distributors : This market includes cable, satellite, and telecommunications television providers that aggregate and distribute linear content over their own networks (MVPDs), as well as television providers that aggregate and stream linear content over broadband networks (virtual MVPDs). Customers typically pay us a monthly per-subscriber fee and include many of the leading MVPDs and virtual MVPDs such as Altice USA (including Cablevision), AT&T (including DirecTV and AT&T Now), Charter, Comcast (including Sky), Cox, Dish Network (including Sling TV), Foxtel, Liberty Global, Shaw, Verizon, and Vodafone. • Over-The-Top Video Service Providers, Social Media and Other New Media Companies : This market includes subscription video-on-demand (“SVOD”) service providers that offer online services and devices that enable internet streaming and downloading of movies, television shows and other video programing, content providers, networks and media companies that provide content directly to consumers through a variety of business models (e.g. SVOD, AVOD, EST, etc.) and social media companies that increasingly rely on and incorporate video as an integral part of their offerings. Customers have typically paid us fixed fees for specified periods of time and include some of the leading new media companies including Discovery, Netflix, Starz, ViacomCBS and three of the leading social media companies. • Consumer Electronics (CE) Manufacturers : Producers of content access points such as smart televisions, streaming media devices, video game consoles, mobile devices, Blu-ray players, DVRs/NDVRs, and other connected media devices. Our CE licensees typically are structured around license fees based on the number of units that utilize our patents, for specified products, in defined territories. Our agreements with some of the larger CE manufacturers generally allow them to ship an unlimited number of units, provided they pay us fixed fees for specified periods of time. Select customers include Funai, LG Electronics, Roku, Samsung Electronics, Sharp, Sony, and TCL. Semiconductor IP Our semiconductor business has a long, well-established history of inventing, developing, and broadly licensing advanced semiconductor packaging, 3D integration, and related technologies. Our patented solutions are integrated into semiconductors that are deployed in billions of mobile, consumer, and computing electronic products. Leveraging the combination of our highly experienced technologists, scientists and engineers and our advanced research and development labs in San Jose, California and Raleigh, North Carolina, we continue to develop industry-leading 3D integration solutions such as hybrid bonding that meet the demand for enhanced performance, functionality, power and cost for a wide range of applications including 5G, IoT, and cloud and edge computing. We innovate and license our semiconductor patent portfolios and technology solutions across multiple markets: • Memory . Providers of DRAM, High Bandwidth Memory (HBM) and NAND semiconductors commonly used in electronic products such as mobile phones, laptops, PCs, game consoles, and servers. Customers typically have paid us fixed fees for specified periods of time and include Samsung and SK hynix. • Sensors . Providers of image and time-of-flights sensors used in mobile phones, consumer electronics and automobiles. Customers typically have paid us fixed fees for specified periods of time or a per-unit fee and include Canon, Omnivision, Samsung, and Sony. • RF Components . Providers of switches and filters for cellular and wireless products such as mobile phones, tablets and laptops. Customers typically have paid us fixed fees for specified periods of time or a per-unit fee and include Broadcom and Silanna RF (acquired by Qualcomm). • Foundry . Manufacturing service providers for fabless semiconductor companies who design and sell semiconductor products. Customers typically pay us a per-unit fee and include Teledyne DALSA, Tower Semiconductor, and UMC. Competition Due to the exclusionary nature of patent rights, we do not compete, in a traditional sense, with other patent holders for patent licensing relationships. Other patent holders do not have the same rights to the inventions and technologies encompassed by our patent portfolio. In any service, device or piece of equipment that contains intellectual property, the provider or manufacturer may need to obtain licenses from multiple holders of intellectual property. In licensing our patent portfolio, we compete with other patent holders for a share of the royalties that certain licensees may argue to be the total royalty that is supported by a certain service(s) or product(s), which may face practical limitations. 15 We compete primarily with internal technology development groups within our respective technology licensing markets, who may create their own solutions that compete with technologies that we license. In general, there may be several ways to solve a particular technical problem and there can be no assurance that our inventions and approaches will be the ones generally adopted by the industry. We also compete with other companies in acquiring patent portfolios . Protecting Our Investment Although we are engaged with and have successfully licensed and transferred our technologies to many companies, some of the companies that use our patented technologies have nonetheless chosen not to enter into license agreements with us. Consequently, we have, at times, initiated litigation to enforce our IP rights and protect our investment. We view litigation as an instrument of last resort, and we use it only when our efforts to reach negotiated licenses have stalled or failed. If we are unable to secure license agreements on favorable terms through negotiations, or if licensees do not comply with the terms of their licenses, we might have to file new litigation to enforce our rights. See Part 1, Item 3- Legal Proceedings. Intellectual Property Portfolio We operate in an industry in which innovation, investment in new ideas and protection of our intellectual property rights are critical for success. We protect our innovations and inventions through a variety of means, including but not limited to applying for patent protection domestically and internationally. As of December 31, 2020, we held approximately 4,615 United States issued patents and 1,235 patent applications, as well as approximately 4,000 foreign issued patents and 1,650 patent applications. The last of the issued patents to expire is in 2039. From time to time, we acquire complementary IP portfolios. Our criteria for patent acquisitions include: compatibility with our existing portfolios, the number and jurisdiction of patent assets, the technical and legal strength of the patents, the actual or likely adoption by industry, and the economic value of the inventions. See Part I, Item 1A- Risk Factors. Research & Development As demonstrated by our portfolio of industry recognized, widely-deployed advanced technologies and intellectual property (IP), we have a long track record of innovating in the fields of audio, imaging, video discovery, and semiconductors. We believe that ongoing investment in R&D is required for us to remain competitive in the markets we serve. Today, we have a collection of world-class talent and strong research and development capabilities in various locations throughout the world. Starting with core research, machine learning and advanced algorithm development we continue to focus on IP development and next generation technology solutions. Our ongoing investment in R&D supported by a strong industry network of partners enables us to deliver differentiated, cost effective solutions that enhance the end user experience for an ever-larger universe of addressable markets. Customer Concentration The following table sets forth revenue generated from customers comprising 10% or more of total revenue for the periods indicated: Years Ended December 31, 2020 2019 2018 Comcast Corporation 27 % (1) * * SK hynix Inc. * 17 % 12 % Intel Corporation * 11 % * Samsung Electronics, Co. Ltd. * * 38 % * denotes less than 10% of total revenue. (1) Primarily related to revenue for past royalties recorded in the IP Licensing segment in the fourth quarter of 2020. We expect to recognize revenue related to this license agreement into 2031. For details, refer to “Note 4 – Revenue” of the Notes to Consolidated Financial Statements. 16 Legislative and Regulatory Actions A number of government and legislative initiatives have been enacted to encourage development and implementation of technologies that protect the rights and intellectual property of the content owners. For example, the U.S. and other countries have adopted certain laws, including the Digital Millennium Copyright Act of 1998 ("DMCA") and the European Copyright Directive, which are aimed at the prevention of piracy of content and the manufacture and sale of products that circumvent copy protection technologies, such as those covered by our patents. Compatibility Between Cable Systems and CE Equipment The Federal Communications Commission (“FCC”) has been working for over a decade to implement a congressional mandate to create a competitive market for cable television STBs and other devices to access video programming on cable systems (“navigation devices”) and give consumers a choice in the devices used to access such programming, while still allowing the cable systems to have control over the secured access to their systems. To meet its statutory obligation without compromising the security of video services, the FCC required cable systems to make available a security element (now known as a CableCARD) separate from the basic navigation device needed to access video program channels. In 2003, the FCC adopted regulations implementing an agreement between cable television system operators and CE manufacturers to facilitate the retail availability of so-called “plug and play” devices that utilize unidirectional CableCARDs, including digital televisions and other digital devices that enable subscribers to access cable television programming without the need for a STB (but without the ability for consumers to use interactive content). In September 2020, the FCC eliminated rules requiring cable providers to support CableCARD. While the cable industry has continued to provide CableCARDs for third-party devices like ours, we cannot predict the ultimate impact of any new technical equipment regulations on our business and operations. Current FCC regulations no longer prohibit multi-channel video service providers from deploying navigation devices with combined security and non-security functions, further developments with respect to these issues could impact the availability and/or demand for “plug and play” devices, particularly bi-directional devices and STBs, all of which could affect demand for UXs incorporated in STBs or CE devices. General Government Regulation We are subject to a number of foreign and domestic laws and regulations that affect companies that import or export software and technology, including encryption technology, such as the U.S. export control regulations as administered by the U.S. Department of Commerce. We are also subject to a number of foreign and domestic laws that affect companies conducting business on the internet. In addition, because of the increasing popularity of the internet and the growth of online services, laws relating to user privacy, freedom of expression, content, advertising, accessibility, network neutrality, information security and intellectual property rights are being debated and considered for adoption by many countries throughout the world. Each jurisdiction may enact different standards, which could impact our ability to deliver data, services or other solutions through the internet. We are subject to international laws (including the General Data Protection Regulation) associated with data protection, privacy, and other aspects of our business in Europe and elsewhere and the interpretation and application of data protection laws remains uncertain. In addition, because our services are accessible worldwide, foreign jurisdictions may claim that we are required to comply with their laws. Further, the application of existing laws regulating or requiring licenses for certain businesses of our advertisers can be unclear. The resulting regulation, if any, may alter our ability to target advertising or provide data about the end-users and/or customers and their behavior. Additionally, the privacy regulatory landscape in the U.S. changes rapidly and we may become subject to new privacy or cybersecurity regulations. Such laws and regulations could affect our ability to process personal data (in particular, our ability to use certain data for purposes such as risk or fraud avoidance, marketing or advertising), our ability to control our costs by using certain vendors or service providers or our ability to offer certain services in certain jurisdictions. For example, the California Consumer Privacy Act, or CCPA, became effective on January 1, 2020. The CCPA creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information and allows for a new cause of action for data breaches. It is unclear how the CCPA will be interpreted, but as currently written, it will likely impact our business activities and exemplifies the vulnerability of our business to not only cyber threats but also the evolving regulatory environment related to personal data. 17 In the U.S., service providers have been subject to claims of defamation, libel, invasion of privacy and other data protection claims, torts, unlawful activity, copyright or trademark infringement, or other theories based on the nature and content of the materials searched and the ads posted or the content generated by users. In addition, several other federal laws could have an impact on our business. For example, the DMCA has provisions that limit, but do not eliminate, our liability for hosting or linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. The Children's Online Privacy Protection Act restricts the ability of service providers to collect information from minors and the Protection of Children from Sexual Predators Act of 1998 requires service providers to report evidence of violations of federal child pornography laws under certain circumstances . Human Capital Resources The opportunities for our success and growth depend in large part on our ability to attract, develop, and retain a talented and engaged workforce. In particular, we are competing for technical talent and we need to offer not only robust and attractive compensation packages but also provide broad opportunities for our employees to make an impact, grow, and develop. As of December 31, 2020, we had a global talent base consisting of approximately 1,850 full-time employees. To enable our talent to actively contribute to, and have a positive impact on, the overall business and culture, we developed and maintain a set of programs and initiatives. These programs include competitive compensation and benefits offerings, skill and management development, diversity and inclusion initiatives, goal and performance management, and succession planning. In support of these efforts, our Board of Directors monitors these programs and initiatives and provides guidance and feedback as appropriate. Our goal is to provide a work environment that empowers our teams and enables them to enjoy a healthy and productive work-life balance for themselves, their families, and our community. Our incentives are based on merits, and we have a strong pay-for-performance culture. We benchmark our total rewards annually to ensure our compensation and benefit programs remain competitive with industry peers. Our compensation framework for employees reflects a combination of fixed and variable pay including base salary, bonuses, performance awards, and stock-based compensation. We offer employees benefits that vary by country and are designed to meet or exceed local laws and are competitive in the marketplace. We invest in the career growth of our employees by providing a wide range of development opportunities, including face-to-face, virtual, social and self-directed learning, mentoring, coaching, and external development. Annual assessments are performed to identify talent needs based on department goals and to evaluate how each function is positioned from a talent perspective. We believe in the principles of a learning organization and strive to provide continuous educational opportunities for our employees. In 2020, we invested in a global online learning platform. More than 200 courses and programs have been created, offering a wide range of skill development opportunities for employees to become more knowledgeable and effective in their roles. Additionally, we also offer customized leadership and management development programs for our management teams. We leverage our manager ecosystem, coupled with industry-standard performance management tools, to align corporate goals with employee objectives. Employees are encouraged to create and align individual, functional and team-based goals, track performance against goals, write self-evaluations, and solicit feedback. We have demonstrated support and commitment to developing a culture of non-discrimination and embracing diversity and inclusion throughout our workforce. Our current employee resource groups represent the LGBTQ+ community, the black community, women, and veterans. We also have formed a Diversity and Inclusion council comprised of all levels of employees and senior executives. The purpose of the council is, among other things, to identify and address issues of diversity and inclusion through multiple and unique perspectives from a diverse group of our employees. In June 2020, we joined the business coalition in support of the Equality Act, a measure that supports federal legislation that would provide the same basic protections to LGBTQ+ people as are provided to other protected groups under federal law. Additionally, we comply fully with California’s board diversity legislation that requires a minimum number of female directors and directors from underrepresented communities. We measure employee experience by collecting insight and understanding of engagement and satisfaction. We use an employee engagement survey, executive roundtables, and employee focus groups to solicit input. Task forces are regularly created to identify and address gaps which result in changes to policies and practices and benefits offerings. A recent survey to assess employee well-being during the initial working-from-home period related to the COVID-19 pandemic resulted in the payment of working-from-home stipend to employees which covered certain costs associated with setting up home offices. During the ongoing COVID-19 pandemic, we have focused on the health, safety, and well-being of our employees. We have: 18 • Established office reentry guidelines consistent with CDC and local government mandates • Conducted a working-from-home survey to pulse check employee well-being • Offered various training and learning opportunities, including relevant trainings to help employees better manage remote working, childcare, social isolation, etc. • Enhanced internal communications strategies using multiple vehicles such as a corporate intranet, Zoom, Slack, videos, etc., to ensure connection and contacts with employees • Provided a number of well-being offerings and events, including online yoga, Headspace (a mindfulness app), various online contests, and virtual happy hours None of our employees are covered by a collective bargaining agreement or are represented by a labor union. We have not experienced any organized work stoppages, and we consider the relationships with our employees to be positive . Available Information Our Internet address is www.xperi.com, where we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our SEC reports can be accessed through the investor relations section of our website. The information found on our website is not incorporated into this or any other report we file with or furnish to the SEC.