What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-05 · 405 added, 183 removed, 766 unchanged (43% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Licensing, services and software

9 unchanged sentences

Total operating expenses

Operating income

Operating income (loss)

Interest expense

Other income and expense, net

Income before taxes

Provision for (benefit from) income taxes

Loss on debt extinguishment

Loss before taxes

Benefit from income taxes

Net income (loss)

net loss attributable to noncontrolling interest

Net income attributable to the Company

Income per share attributable to the Company:

Net income (loss) attributable to the Company

Income (loss) per share attributable to the Company:

Weighted average number of shares used in per share

4 unchanged sentences

XPERI HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Three Months Ended

Other comprehensive loss, net of tax:

Six Months Ended

Net income (loss)

Other comprehensive income (loss), net of tax:

Change in foreign currency translation adjustment

1 unchanged sentence

debt securities

Other comprehensive loss, net of tax

Comprehensive income

Other comprehensive income (loss), net of tax

Comprehensive income (loss)

comprehensive loss attributable to noncontrolling interest

Comprehensive income attributable to the Company

Comprehensive income (loss) attributable to the Company

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

52 unchanged sentences

(in thousands)

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

Cash flows from operating activities:

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

Net income (loss)

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

Depreciation of property and equipment

2 unchanged sentences

Deferred income taxes

Loss on debt extinguishment

Changes in operating assets and liabilities:

8 unchanged sentences

Proceeds from sale of property and equipment

Net cash received (paid) for mergers and acquisitions

Purchases of intangible assets

4 unchanged sentences

Cash flows from financing activities:

Dividend paid

Dividends paid

Repayment of debt

Proceeds from debt, net of debt discount and issuance costs

Repayment of assumed debt from merger transaction

Proceeds from employee stock purchase program and exercise of stock options

8 unchanged sentences

Income taxes paid, net of refunds

Stock issued in merger transaction

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

3 unchanged sentences

Total Company Stockholders' Equity

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Treasury Stock

1 unchanged sentence

Noncontrolling

Balance at April 1, 2021

Issuance of subsidiary shares to noncontrolling interest

Other comprehensive income

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

Issuance of common stock in connection with exercise of stock options

Issuance of restricted stock, net of shares canceled

Repurchases of common stock, shares exchanged

Repurchases of common stock

Stock-based compensation expense

Balance at June 30, 2021

Total Company Stockholders' Equity

Six Months Ended June 30, 2021

Treasury Stock

Comprehensive

Noncontrolling

Income (Loss)

10 unchanged sentences

Stock-based compensation expense

Balance at March 31, 2021

Balance at June 30, 2021

XPERI HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (continued)

(in thousands)

Total Company Stockholders' Equity

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Treasury Stock

1 unchanged sentence

Noncontrolling

Balance at April 1, 2020

Issuance of subsidiary shares to noncontrolling interest

Other comprehensive income

Cash dividends paid on common stock ($ 0.20 per share)

Issuance of common stock in connection with employee stock purchase plan

Issuance of restricted stock, net of shares canceled

Repurchases of common stock, shares exchanged

Repurchases of common stock

Common stock issued in merger transaction

Retirement of treasury stock

Stock-based compensation expense

Balance at June 30, 2020

Total Company Stockholders' Equity

Six Months Ended June 30, 2020

Treasury Stock

Comprehensive

Noncontrolling

Income (Loss)

Balance at January 1, 2020

Issuance of subsidiary shares to noncontrolling interest

Net income (loss)

Other comprehensive loss

Other comprehensive income

Cash dividends paid on common stock ($ 0.40 per share)

2 unchanged sentences

Repurchases of common stock, shares exchanged

Repurchases of common stock

Common stock issued in merger transaction

Retirement of treasury stock

Stock-based compensation expense

Balance at March 31, 2020

Balance at June 30, 2020

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

15 unchanged sentences

The Company shapes how millions of consumers access and experience entertainment content, and the Company’s innovations are found in billions of devices and hundreds of millions of interfaces around the globe.

The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) for interim financial information.

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information.

The amounts as of December 31, 2020 have been derived from the Company’s annual audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 26, 2021 (the “Form 10-K”).

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These financial statements should be read in conjunction with the annual audited financial statements and notes thereto as of and for the year ended December 31, 2020, included in the Form 10-K.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021 or any future period and the Company makes no representations related thereto.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021 or any future period and the Company makes no representations related thereto.

In the fourth quarter of 2018, the Company funded a new subsidiary, Perceive Corporation (“Perceive”), which was created to focus on delivering edge inference solutions.

As of March 31, 2021, the Company’s ownership interest in Perceive was approximately 81 %.

As of June 30, 2021, the Company’s ownership interest in Perceive was approximately 81 %.

The operating results of Perceive have been consolidated in the Company’s condensed consolidated financial statements for all periods presented.

Reclassification

As a result of the Mergers, certain reclassifications of prior period amounts have been made to improve comparability and conform to the current period presentation.

Presentation changes were made to the Condensed Consolidated Statements of Operations.

In addition, certain reclassifications of prior period data have been made in the Notes to Condensed Consolidated Financial Statements to conform to the current period presentation.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes in the Company’s significant accounting policies during the three months ended March 31, 2021, as compared to the significant accounting policies described in the Form 10-K.

There have been no significant changes in the Company’s significant accounting policies during the six months ended June 30, 2021, as compared to the significant accounting policies described in the Form 10-K.

Use of Estimates

3 unchanged sentences

Actual results experienced by the Company may differ from management’s estimates.

The COVID-19 pandemic has resulted in a global slowdown of economic activity which is likely to reduce the future demand for a broad variety of goods and services, while also disrupting sales channels, marketing activities and supply chains for an unknown period of time until the virus is fully contained.

The Company’s business operations have been negatively impacted by the COVID-19 pandemic and related events and the Company expects this disruption to continue to have a negative impact on its revenue and results of operations, the size and duration of which is currently difficult to predict.

Although the Company is unable to predict the full impact and duration of COVID-19 on its business, the Company is actively managing its financial expenditures in response to the current uncertainty.

The COVID-19 pandemic has resulted in a global slowdown of economic activity which has reduced demand for a broad variety of goods and services, while disrupting sales channels, marketing activities and supply chains.

The Company’s business operations have been negatively impacted by the COVID-19 pandemic and related events, and the Company expects this disruption may continue to have a negative impact on its revenue and results of operations, even as governments ease restrictions and economic activities gradually resume.

The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic;

the availability, distribution and effectiveness of vaccines;

the spread of new variants of COVID-19;

the continued or renewed imposition of protective public safety measures;

and the impact of the pandemic on the global economy and demand for consumer products.

The impact of the COVID-19 pandemic and related events, including actions taken by various government authorities in response, have increased market volatility and make the estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes more difficult.

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The following is a discussion of the principal activities from which the Company generates its revenue.

Licens e Agreements

License Agreements

The Company operates in two business segments.

2 unchanged sentences

Consumer Experience, Connected Car, and Pay-TV.

In its IP Licensing segment, the Company licenses (i) its media patent portfolios (“Media IP licensing”) to multichannel video programming distributors, over-the-top video service providers, consumer electronics manufacturers, social media, and other new media companies and (ii) its semiconductor technologies and associated patent portfolios (“Semiconductor IP licensing”) to memory, sensors, radio frequency (“RF”) component, and foundry companies.

patent portfolios (“Semiconductor IP licensing”) to memory, sensors, radio frequency (“RF”) component, and foundry companies.

The Company licenses its technologies and portfolios under three revenue models:

19 unchanged sentences

The Company recognizes revenue from per-unit or per-subscriber royalty licenses in the period in which the licensee's sales or production are estimated to have occurred, which results in an adjustment to revenue when actual sales or production are subsequently reported by the licensee, which is generally in the month or quarter following usage or shipment.

The Company generally recognizes revenue from royalty licenses on a per-subscriber per-month model for licenses with service providers and

a per-unit shipped or manufactured model for licenses with CE manufacturers and memory, sensors, RF component, and foundry companies.

The Company generally recognizes revenue from royalty licenses on a per-subscriber per-month model for licenses with service providers and a per-unit shipped or manufactured model for licenses with CE manufacturers and memory, sensors, RF component, and foundry companies.

Compliance Audits

The Company actively monitors and enforces its IP, including seeking appropriate compensation from customers that have under-reported royalties owed under a license agreement and from third parties that utilize the Company’s intellectual property without a license.

As a result of these activities, the Company may, from time to time, recognize revenue from payments resulting from periodic compliance audits of licensees for underreporting royalties incurred in prior periods, as part of a settlement of a patent infringement dispute, or from legal judgments in a license dispute.

settlement of a patent infringement dispute, or from legal judgments in a license dispute.

These recoveries and settlements may cause revenue to be higher than expected during a particular reporting period and such recoveries may not occur in subsequent periods.

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The Company applies a practical expedient when disclosing revenue expected to be recognized from unsatisfied performance obligations to exclude contracts with customers with an original duration of less than one year ;

contracts for which revenue is recognized based on the amount which the Company has the right to invoice for services performed and amounts attributable to variable consideration arising from (i) a sales-based or usage-based royalty of an intellectual property license or (ii) when variable consideration is allocated entirely to a wholly unsatisfied performance obligation;

contracts for which revenue is recognized based on the amount which the Company has the right to invoice for services performed and amounts attributable to

variable consideration arising from (i) a sales-based or usage-based royalty of an intellectual property license or (ii) when variable consideration is allocated entirely to a wholly unsatisfied performance obligation;

or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation .

3 unchanged sentences

Revenue disaggregated by product category/end market was as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Consumer Experience

9 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

6 unchanged sentences

Contract liabilities are mainly comprised of deferred revenue related to consumer lifetime subscriptions for the TiVo service, multi-period licensing or cloud-based services, and other offerings for which the Company is paid in advance while the promised good or service is transferred to the customer at a future date or over time.

Deferred revenue also includes amounts

received related to professional services to be performed in the future.

Deferred revenue also includes amounts received related to professional services to be performed in the future.

Deferred revenue arises when cash payments are received, including amounts which are refundable, in advance of performance obligations being completed.

2 unchanged sentences

The Company’s lifetime expected credit losses are determined using relevant information about past events (including historical experience), current conditions, and reasonable and supportable forecasts that affect collectability.

The Company monitors its credit exposure through ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary.

The Company monitors its credit exposure through ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended

when deemed necessary.

In addition, the Company performs routine credit management activities such as timely account reconciliations, dispute resolution, and payment confirmations.

2 unchanged sentences

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

The following table presents the activity in the allowance for credit losses for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

The following table presents the activity in the allowance for credit losses for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

Accounts Receivable

4 unchanged sentences

Provision for credit losses

Recoveries/charged-off/other adjustments

Charged-off/other adjustments

Balance at end of period

(1) The charge off of accounts receivable in the first quarter of 2021 was primarily related to a customer whose account had been substantially reserved for credit losses in 2020 due to deteriorating financial condition and delinquent payment history.

(1) The charge off of accounts receivable in the three months ended March 31, 2021 was primarily related to a customer whose account had been substantially reserved for credit losses in 2020 due to deteriorating financial condition and delinquent payment history.

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Accounts Receivable

Unbilled Contracts Receivable

Accounts Receivable

Unbilled Contracts Receivable

Beginning balance

Provision for credit losses

Charged-off/other adjustments

Balance at end of period

(2) The increase in provision for credit losses was based on assessment of then current conditions including the COVID-19 pandemic and anticipation of delayed or delinquent payments on existing accounts receivable as a result of declining financial health and liquidity positions of certain of the Company’s customers.

Additional Disclosures

The following table presents additional revenue and contract disclosures (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Revenue recognized in the period from:

7 unchanged sentences

The Company's remaining revenue under contracts with performance obligations was as follows (in thousands) :

March 31, 2021

June 30, 2021

December 31, 2020

3 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

1 unchanged sentence

Prepaid expenses

*The income tax receivable change relates to the application of a projected negative tax rate to year-to-date income.

The balance is subject to change as year-to-date income changes.

**All inventory is finished goods.

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

March 31, 2021

June 30, 2021

December 31, 2020

4 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

2 unchanged sentences

Accrued liabilities consisted of the following (in thousands):

March 31, 2021

June 30, 2021

December 31, 2020

5 unchanged sentences

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

March 31, 2021

June 30, 2021

December 31, 2020

1 unchanged sentence

Accumulated other comprehensive income consisted of the following (in thousands):

March 31, 2021

June 30, 2021

December 31, 2020

5 unchanged sentences

Under ASU 2016-01 (Topic 321), equity securities are measured at fair value with unrealized gains and losses recognized in other income and expense, net, on the Condensed Consolidated Statements of Operations.

The following is a summary of marketable securities at March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021

The following is a summary of marketable securities at June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

Allowance for Credit Losses

22 unchanged sentences

Total marketable securities

At March 31, 2021 and December 31, 2020, the Company had $ 236.9 million and $ 257.1 million, respectively, in cash, cash equivalents and short-term investments.

At June 30, 2021 and December 31, 2020, the Company had $ 199.2 million and $ 257.1 million, respectively, in cash, cash equivalents and short-term investments.

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

The remaining balance of $ 129.7 million and $ 135.0 million at March 31, 2021 and December 31, 2020, respectively, was cash held in operating accounts not included in the tables above.

The remaining balance of $ 121.8 million and $ 135.0 million at June 30, 2021 and December 31, 2020, respectively, was cash held in operating accounts not included in the tables above.

Debt Securities

The gross realized gains and losses on sales of marketable debt securities were not material during the three months ended March 31, 2021 and 2020, respectively.

Unrealized losses on AFS debt securities were $ 0.1 million and $ 0.1 million, net of tax, as of March 31, 2021 and December 31, 2020, respectively.

The gross realized gains and losses on sales of marketable debt securities were not material during the three and six months ended June 30, 2021 and 2020, respectively.

Unrealized losses on AFS debt securities were $ 0.1 million and $ 0.1 million, net of tax, as of June 30, 2021 and December 31, 2020, respectively.

The Company evaluated whether the decline in fair value has resulted from credit losses or other factors and concluded these amounts were related to temporary fluctuations in value of AFS securities and were due primarily to changes in interest rates and market conditions of the underlying securities.

1 unchanged sentence

The Company does not intend to sell the debt securities and it is more-likely-than-not that it will not be required to sell the investments before recovery of their amortized cost bases.

The Company did no t recognize a provision for credit losses related to its AFS debt securities for the three months ended March 31, 2021 and 2020, respectively.

The following table summarizes the fair value and gross unrealized losses related to individual AFS debt securities at March 31, 2021 and December 31, 2020, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands):

The Company did no t recognize a provision for credit losses related to its AFS debt securities for the three and six months ended June 30, 2021 and 2020, respectively.

The following table summarizes the fair value and gross unrealized losses related to individual AFS debt securities at June 30, 2021 and December 31, 2020, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands):

Less Than 12 Months

12 Months or More

March 31, 2021

June 30, 2021

Corporate bonds and notes

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Commercial paper

The estimated fair value of marketable debt securities by contractual maturity at March 31, 2021 is shown below (in thousands).

The estimated fair value of marketable debt securities by contractual maturity at June 30, 2021 is shown below (in thousands).

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties.

9 unchanged sentences

Upon merging with TiVo on June 1, 2020, the Company assumed certain investments in non-marketable equity securities.

As of March 31, 2021, other long-term assets included equity securities accounted for under the equity method with a carrying amount of $ 4.3 million and equity securities without a readily determinable fair value with a carrying amount of $ 0.1 million, respectively.

No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the three months ended March 31, 2021.

The Company had no investments in non-marketable equity securities prior to June 1, 2020.

As of June 30, 2021 and December 31, 2020, other long-term assets included equity securities accounted for under the equity method with a carrying amount of $ 4.6 million and $ 4.2 million, respectively, and equity securities without a readily determinable fair value with a carrying amount of $ 0.1 million and $ 0.1 million, respectively.

No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the three and six months ended June 30, 2021 and 2020, respectively.

NOTE 6 – FAIR VALUE

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The Company calculates the fair value of its Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments, where available, or based on other observable inputs.

There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2020 and March 31, 2021.

The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of March 31, 2021 (in thousands):

There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2020 and June 30, 2021.

The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of June 30, 2021 (in thousands):

Active Markets

4 unchanged sentences

Corporate bonds and notes - debt securities (2)

Reported as cash and cash equivalents in the Condensed Consolidated Balance Sheet.

Reported as AFS debt securities in the Condensed Consolidated Balance Sheet.

Reported as cash and cash equivalents in the Condensed Consolidated Balance Sheets.

Reported as AFS debt securities in the Condensed Consolidated Balance Sheets.

The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of December 31, 2020 (in thousands):

6 unchanged sentences

Commercial paper - debt securities (3)

Reported as cash and cash equivalents in the Condensed Consolidated Balance Sheet.

Reported as AFS debt securities in the Condensed Consolidated Balance Sheet.

Reported as cash and cash equivalents in the Condensed Consolidated Balance Sheets.

Reported as AFS debt securities in the Condensed Consolidated Balance Sheets.

Reported as cash and cash equivalents if purchased with an original maturity of three months or less at the date of purchase;

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

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

Financial Instruments Not Recorded at Fair Value

1 unchanged sentence

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

March 31, 2021

June 30, 2021

December 31, 2020

2020 Term B Loan Facility (1)

Refinanced Tern B Loans (1)

2021 Convertible Notes

Total long-term debt, net

Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 32.2 million and $ 34.4 million as of March 31, 2021 and December 31, 2020, respectively.

Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 26.6 million and $ 34.4 million as of June 30, 2021 and December 31, 2020, respectively.

See “Note 9 – Debt ” for additional information.

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

NOTE 7 – BUSINESS COMBINATION

Effective June 1, 2020 , Xperi and TiVo completed the previously announced merger of equals transaction (the “Merger”) contemplated by the Agreement and Plan of Merger and Reorganization, dated as of December 18, 2019 , as amended on January 31, 2020 , (the “Merger Agreement”), by and among Xperi, TiVo, XRAY-TWOLF HoldCo Corporation (“Xperi Holding”), XRAY Merger Sub Corporation (“Xperi Merger Sub”) and TWOLF Merger Sub Corporation (“TiVo Merger Sub”).

Non-recurring Fair Value Measurements

For purchase accounting related fair value measurements, see “Note 7 – Business Combinations.”

NOTE 7 – BUSINESS COMBINATIONS

Effective June 1, 2020 , Xperi and TiVo completed the merger of equals transaction (the “Merger”) contemplated by the Agreement and Plan of Merger and Reorganization, dated as of December 18, 2019 , as amended on January 31, 2020 , (the “Merger Agreement”), by and among Xperi, TiVo, XRAY-TWOLF HoldCo Corporation (“Xperi Holding”), XRAY Merger Sub Corporation (“Xperi Merger Sub”) and TWOLF Merger Sub Corporation (“TiVo Merger Sub”).

Immediately prior to the consummation of the Merger, Xperi Holding changed its name to “Xperi Holding Corporation” (the “Company”).

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Immediately following the consummation of the Mergers, each of Xperi and TiVo became wholly-owned subsidiaries of the Company.

The Mergers created a leading consumer and entertainment product/solutions and IP licensing company.

The Company’s IP business includes one of the industry’s largest and most successful IP portfolios licensed to a diverse base of customers.

On the product side, the Company offers a seamless end-to-end entertainment experience from creation to consumption, with greater scale, technology depth and breadth, and a platform relevant to one of the biggest challenges consumers of entertainment face today – how to quickly and easily find, watch and enjoy entertainment.

The Company is currently contemplating and may pursue, subject to any required regulatory approvals, a separation of the Company’s product business and IP licensing business through a tax-efficient transaction, resulting in two independent, publicly traded companies.

The Company is evaluating the optimal timing of the contemplated business separation and currently anticipates that such separation will not be completed earlier than the first half of 2022.

Merger Consideration

The consideration of $ 828.3 million for the Mergers was calculated as follows (amounts in thousands except exchange ratio and share price):

TiVo common shares outstanding as of June 1, 2020

TiVo exchange ratio

Xperi Holding Corporation common stock issued in exchange

Xperi Common Stock closing share price on June 1, 2020

Fair value of replaced TiVo equity awards relating to pre-acquisition vesting of the equity award holders’ requisite service periods

Total merger consideration

Purchase Price Allocation

Based on an evaluation of the provisions of ASC 805, “Business Combinations,” Xperi was determined to be the accounting acquirer in the Mergers.

The Company has applied the acquisition method of accounting that requires, among other things, that identifiable assets acquired and liabilities assumed generally be recognized on the balance sheet at fair value as of the acquisition date.

During the three months ended March 31, 2021, no measurement period adjustments were made.

The Company expects to complete the final allocation of the purchase price as soon as practicable, but no later than one year from the date of the Mergers.

The Company is currently evaluating the optimal timing of the contemplated business separation.

In determining the fair value, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being fair valued.

The estimation of fair value required significant judgment related to future net cash flows (including revenue, operating expenses, and working capital), discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables, and other factors.

Inputs were generally determined by taking into account historical data (supplemented by current and anticipated market conditions) and growth rates.

The preliminary fair value estimates and assumptions to measure the assets acquired and liabilities assumed were subject to change as the Company obtained additional information during the measurement period.

During the three months ended June 30, 2021, the Company completed its accounting for the Mergers with no further adjustments made to the fair value.

The following table sets forth the purchase price allocation, as well as adjustments made during the measurement period ($ in thousands):

Estimated Useful

Fair Value (1)

Measurement Period

Adjustments (2)

Fair Value (3)

Cash and cash equivalents

Accounts receivable

Unbilled contracts receivable

Other current assets

Long-term unbilled contracts receivable

Property and equipment

Operating lease right-of-use assets

Identifiable intangible assets:

Customer contracts and related relationships

Developed technology

Content database

Trademarks and tradenames

Total identifiable intangible assets

Other long-term assets

Accounts payable

Accrued legal fees

Accrued liabilities

Current portion of deferred revenue

Current portion of long-term debt

Deferred revenue, less current portion

Long-term deferred tax liabilities

Long-term debt

Noncurrent operating lease liabilities

Other long-term liabilities

Total purchase price

(1) As previously reported in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020.

(2) All adjustments were recorded during the 12-month period following the Merger date.

These measurement period adjustments primarily related to current indirect taxes payable, current and non-current income taxes receivable and payable, and deferred taxes as additional information was received and tax returns were finalized.

All measurement period adjustments were offset against goodwill.

(3) As of June 30, 2021.

Transaction and Severance Costs

In connection with the Mergers, the Company has incurred to date significant one-time expenses such as transaction and integration related costs (e.g.

In connection with the Mergers, the Company has incurred significant one-time expenses such as transaction and integration related costs (e.g.

bankers fees, legal fees, consultant fees, etc.), lease impairment charges due to facilities consolidation, severance and retention costs (including stock-based compensation expense resulting from the contractually-required acceleration of equity instruments for departing executives).

Total transaction and integration related costs were $ 0.3 million and $ 3.1 million for the three months ended March 31, 2021 and 2020, respectively.

Post-merger severance and retention costs amounted to $ 4.5 million for the three months ended March 31, 2021.

The Company expects to incur additional expenses for integration, severance and retention, and the impairment of right-of-use assets due to facilities consolidation in future quarters.

Total transaction and integration related costs were $ 0.1 million and $ 0.4 million for the three and six months ended June 30, 2021, respectively, and $ 24.4 million and $ 27.5 million for the three and six months ended June 30, 2020, respectively.

Post-merger severance and retention costs amounted to $ 1.8 million and $ 6.4 million for the three and six months ended June 30, 2021, respectively, and $ 8.2 million and $ 8.2 million for the three and six months ended June 30, 2020, respectively.

Supplemental Pro Forma Information

The following unaudited pro forma financial information assumes the companies were combined as of January 1, 2019.

The unaudited pro forma financial information as presented below is for informational purposes only and is based on estimates and

assumptions that have been made solely for purposes of developing such pro forma information.

This is not necessarily indicative of the results of operations that would have been achieved if the Mergers had taken place on January 1, 2019, nor is it necessarily indicative of future results.

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

The following table presents the pro forma operating results as if TiVo had been included in the Company's Consolidated Statements of Operations as of January 1, 2019 (unaudited, in thousands):

Three Months Ended

Six Months Ended

June 30, 2020

Net income (loss) attributable to Xperi Holding Corporation

On May 31, 2021, the Company completed its acquisition of certain assets and assumption of certain liabilities of MobiTV, Inc.

(“MobiTV”, and the acquisition, the “MobiTV Acquisition”), a provider of application-based Pay TV video delivery solutions.

The acquisition expands the Company’s IPTV Managed Service capabilities, which is expected to grow the addressable market for the Company’s IPTV products and further secure TiVo’s position as a leading provider of Pay TV solutions.

The net purchase price for the MobiTV Acquisition was $ 17.4 million in cash.

Preliminary Purchase Price Allocation

The MobiTV Acquisition has been accounted for as a business combination, using the acquisition method.

The following table presents the allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on the fair values at the acquisition date, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded to goodwill, all of which is expected to be deductible for tax purposes.

The allocation of the purchase price was based upon a preliminary valuation and thus the estimates and assumptions used are subject to change.

Based upon the fair values acquired, the purchase price allocation is as follows ($ in thousands):

Estimated Useful

Other current assets

Property and equipment

Operating lease right-of-use assets

Identifiable intangible assets:

Total identifiable intangible assets

Other long-term assets

Accrued liabilities

Noncurrent operating lease liabilities

Total purchase price

The above allocation of the purchase price is provisional and is still subject to change within the measurement period, including potential adjustments relating to income taxes and indirect taxes as additional information is received.

The final allocation of the purchase price is expected to be completed as soon as practicable, but no later than one year from the date of the acquisition.

The results of operations and cash flows relating to the business acquired pursuant to the MobiTV Acquisition have been included in the Company’s condensed consolidated financial statements for periods subsequent to May 31, 2021, and the related assets and liabilities were recorded at their estimated fair values in the Company’s Condensed Consolidated Balance Sheet as of May 31, 2021.

For the three and six months ended June 30, 2021, the acquired MobiTV business contributed $ 0.6 million of revenue and $ 1.1 million of operating loss, respectively, to the operating results of the Company.

The operations acquired in the MobiTV Acquisition are included in the Company’s Product segment.

Supplemental Pro Forma Information

The following unaudited pro forma financial information assumes the MobiTV Acquisition was completed as of January 1, 2020.

The unaudited pro forma financial information as presented below is for informational purposes only and is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information.

This is not necessarily indicative of the results of operations that would have been achieved if the MobiTV Acquisition had taken place on January 1, 2020, nor is it necessarily indicative of future results.

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

The following table presents the pro forma operating results as if the acquired operations of MobiTV had been included in the Company's Condensed Consolidated Statements of Operations as of January 1, 2020 (unaudited, in thousands):

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Net loss attributable to Xperi Holding Corporation

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

removal of certain elements of the historical MobiTV business that were not acquired, elimination of inter-company transactions between MobiTV and TiVo, adjustments for transaction related costs, and adjustments to reflect the impact of purchase accounting adjustments.

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

NOTE 8 – GOODWILL AND IDENTIFIED INTANGIBLE ASSETS

The Company's reporting units include the Product segment and the IP Licensing segment.

Of the carrying value of goodwill, approximately $ 523.8 million was allocated to the Product segment and approximately $ 323.2 million was allocated to the IP Licensing segment as of each of March 31, 2021 and December 31, 2020.

The changes to the carrying value of goodwill from January 1, 2021 through June 30, 2021 are reflected below (in thousands):

December 31, 2020

Goodwill acquired through a business acquisition (1)

June 30, 2021

(1) Related to the MobiTV Acquisition completed in June 2021.

For more information regarding the transaction, see “Note 7 - Business Combinations.”

(2) The Company's reporting units include the Product segment and the IP Licensing segment (defined further in “Note 16 - Segment and Geographic Information ”).

Of the carrying value of goodwill, approximately $ 527.8 million was allocated to the Product segment and approximately $ 323.3 million was allocated to the IP Licensing segment as of June 30, 2021.

Goodwill at each reporting unit is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.

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

March 31, 2021

June 30, 2021

December 31, 2020

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Total intangible assets

As of March 31, 2021, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands):

In June 2021, patents were acquired through the MobiTV Acquisition with a purchase price value equal to $ 5.0 million.

See “Note 7 – Business Combinations.”

In June 2021, existing technology was acquired through the MobiTV Acquisition with a purchase price value equal to $ 3.3 million.

See “Note 7 – Business Combinations.”

As of June 30, 2021, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands):

2021 (remaining 6 months)

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

March 31, 2021

June 30, 2021

December 31, 2020

2020 Term B Loan Facility

Refinanced Term B Loans

2021 Convertible Notes

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On June 1, 2020, in connection with the consummation of the Mergers with TiVo , the Company entered into a Credit Agreement (the “2020 Credit Agreement”) by and among the Company, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent.

The 2020 Credit Agreement provides for a five-year senior secured term loan B facility in an aggregate principal amount of $ 1,050 million (the “2020 Term B Loan Facility”).

The interest rate applicable to loans outstanding under the 2020 Term B Loan Facility is equal to, at the Company’s option, either (i) a base rate plus a margin of 3.00 % per annum or (ii) LIBOR plus a margin of 4.00 % per annum.

Commencing on September 30, 2020, the 2020 Term B Loan Facility will amortize in equal quarterly installments in aggregate quarterly amounts equal to (i) with respect to repayments occurring on or prior to June 1, 2023, 1.25 % of the original principal amount of the 2020 Term B Loan Facility and (ii) with respect to repayments occurring after June 1, 2023 and prior to June 1, 2025, 1.875 % of the original principal amount of the 2020 Term B Loan Facility, with the balance payable on the maturity date of the 2020 Term B Loan Facility (in each case subject to adjustment for prepayments).

The 2020 Term B Loan Facility will mature on June 1, 2025 .

The 2020 Credit Agreement provided for a five-year senior secured term B loan facility in an aggregate principal amount of $ 1,050 million (the “2020 Term B Loan Facility”).

The interest rate applicable to loans outstanding under the 2020 Term B Loan Facility was equal to, at the Company’s option, either (i) a base rate plus a margin of 3.00 % per annum or (ii) LIBOR plus a margin of 4.00 % per annum.

Commencing on September 30, 2020, the 2020

Term B Loan Facility was amortize d in aggregate quarterly amounts equal to (i) with respect to repayments occurring on or prior to June 1, 2023, 1.25 % of the original principal amount of the 2020 Term B Loan Facility and (ii) with respect to repayments occurring after June 1, 2023 and prior to June 1, 2025, 1.875 % of the original principal amount of the 2020 Term B Loan Facility, with the balance payable on the maturity date of the 2020 Term B Loan Facility (in each case subject to adjustment for prepayments).

The 2020 Term B Loan Facility was scheduled to mature on June 1, 2025 .

Upon the closing of the 2020 Credit Agreement, the Company borrowed $ 1,050 million under the 2020 Term B Loan Facility .

Net proceeds were

used on June 1, 2020, together with cash and cash equivalents, to refinance the existing indebtedness of the combined Company ( the “Debt Financing ”) , including paydown of the TiVo 2019 Term Loan of $ 734.6 million.

See “Note 7 – Business Combination” for additional information relating to the Mergers.

Net proceeds were used on June 1, 2020, together with cash and cash equivalents, to refinance the existing indebtedness of the combined Company , including paydown of the TiVo 2019 Term Loan of $ 734.6 million.

See “Note 7 – Business Combination s ” for additional information relating to the Mergers.

Additionally, debt discount and issuance costs of approximately $ 39.7 million were incurred and capitalized in connection with the 2020 Term B Loan Facility in June 2020.

The Company commenced repaying quarterly installments under the 2020 Term B Loan Facility in the third quarter of 2020, and also elected to make a voluntary principal payment of $ 150.0 million on December 31, 2020.

As outlined in the 2020 Credit Agreement, additional cash payments must be made on an annual basis beginning March 31, 2022 based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year.

The voluntary principal payment made on December 31, 2020 may be applied against required additional paydowns, if any, beginning March 31, 2022.

The obligations under the 2020 Credit Agreement are guaranteed by Xperi, TiVo and certain other of the Company’s wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) pursuant to the Guaranty, dated as of June 1, 2020, among Xperi, TiVo, the other Guarantors party thereto and Bank of America, N.A., as administrative agent.

The obligations under the 2020 Credit Agreement are secured by a lien on substantially all of the assets of the Company and the Guarantors pursuant to the Security Agreement, dated as of June 1, 2020, among the Company, Xperi, TiVo, the other pledgors party thereto and Bank of America, N.A., as collateral agent.

The 2020 Credit Agreement contains customary events of default, upon the occurrence of which, after any applicable grace period, the lenders will have the ability to accelerate all outstanding loans thereunder.

The 2020 Credit Agreement also contains customary representations and warranties and affirmative and negative covenants that, among other things, restrict the ability of the Company and its subsidiaries to create or incur certain liens, incur or guarantee additional indebtedness, merge or consolidate with other companies, transfer or sell assets and make restricted payments.

These covenants are subject to a number of limitations and exceptions set forth in the Credit Agreement.

The Company was in compliance with all requirements as of March 31, 2021.

Refinanced Term B Loans

On June 8, 2021, the Company and the loan parties entered into Amendment No.

1 to the 2020 Credit Agreement (the “Amendment”).

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

The Amendment provided for, among other things, (i) a replacement of the outstanding term loans with a new tranche of term loans (the “Refinanced Term B Loans”) in an aggregate principal amount of $ 810.0 million, (ii) a reduction of the interest rate margin applicable to such loans to (x) in the case of base rate loans, 2.50 % per annum and (y) in the case of Eurodollar loans, LIBOR plus a margin of 3.50 % per annum, (iii) a prepayment premium of 1.00 % in connection with any repricing transaction with respect to the Refinanced Term B Loans within six months of the closing date of the Amendment, (iv) an extension of the maturity to June 8, 2028 , and (v) certain additional amendments, including amendments to provide the Company with additional flexibility under the covenant governing restricted payments.

The obligations under the 2020 Credit Agreement, inclusive of any changes by the Amendment, continue to be guaranteed by Xperi, TiVo and certain other of the Company’s wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) and continue to be secured by a lien on substantially all of the assets of the Company and the Guarantors.

The 2020 Credit Agreement, as amended, contains customary events of default, upon the occurrence of which, after any applicable cure period, the lenders will have the ability to accelerate all outstanding loans thereunder.

The 2020 Credit Agreement, as amended, also contains customary representations and warranties and affirmative and negative covenants that, among other things and subject to certain exceptions, restrict the ability of the Company and its subsidiaries to create or incur certain liens, incur or guarantee additional indebtedness, merge or consolidate with other companies, transfer or sell assets and make restricted payments.

The Company was in compliance with all requirements as of June 30, 2021.

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

Certain lenders of the 2020 Term B Loan Facility participated in the Amendment and the changes in terms were not considered substantial.

Accordingly, the Company accounted for the refinancing event for these lenders as a debt modification under ASC 470-50, “Debt — Modifications and Extinguishments.” Under its policy, the Company elected to continue to defer the unamortized debt discount and issuance costs for these continuing lenders related to the partial pay-down of the debt.

Certain lenders of the 2020 Term B Loan Facility did not participate in the Amendment.

Accordingly, the Company accounted for the refinancing event for these lenders as a debt extinguishment.

As a result, the Company recorded an $ 8.0 million loss on debt extinguishment in the second quarter of 2021, related to the write-off of unamortized debt discount and issuance costs for the portions of the 2020 Term B Loan Facility considered to be extinguished.

In connection with its entry into the Amendment, the Company incurred $ 6.8 million in debt financing costs, of which $ 4.2 million were capitalized in accordance with ASC 835-30 “Debt Issuance Costs” and, together with a portion of the unamortized debt discount and issuance costs from the 2020 Term B Loan Facility, are being amortized into interest expense over the term of the Amendment.

Under ASC 470-50, the remaining $ 2.6 million, primarily related to third-party fees, were recorded as selling, general and administrative expense in the second quarter of 2021.

2018 Amended Term B Loan

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The 2018 Amendment provided for, among other things, a replacement of the outstanding initial term loan with the new tranche term B-1 loan in a principal amount of $ 494.0 million.

On June 1, 2020, the entire remaining balance of $ 344.0 million was paid off by using the proceeds from the 2020 Term B Loan Facility in connection with the Mergers.

On June 1, 2020, the entire remaining balance of $ 344.0 million was paid off using proceeds from the 2020 Term B Loan Facility in connection with the Mergers.

As a result of the refinancing transaction, the Company recorded a loss on early extinguishment of debt of $ 8.3 million, which consisted of unamortized debt discount and issuance costs, in its Condensed Consolidated Statements of Operations during the second quarter of 2020.

2019 Term Loan Facility

In connection with the Mergers, the Company paid off the outstanding balance under the TiVo’s 2019 Term Loan.

In connection with the Mergers, the Company paid off the outstanding balance under TiVo’s 2019 Term Loan.

The 2019 Term Loan Facility Agreement was entered into on November 22, 2019 between TiVo, as borrower, and the lenders party thereto and HPS Investment Partners, LLC as administrative agent and collateral agent.

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in September 2014 and mature October 1, 2021 (the “2021 Convertible Notes”).

2021 Convertible Notes bear interest at an annual rate of 2.0 %, payable semi-annually in arrears on April 1 and October 1 of each year .

The 2021 Convertible Notes bear interest at an annual rate of 2.0 %, payable semi-annually in arrears on April 1 and October 1 of each year.

Interest Expense and Expected Principal Payments

At March 31, 2021, $ 828.5 million in total debt was outstanding with an interest rate, including the amortization of debt discount and issuance costs, of 5.2 %.

At June 30, 2021, $ 810.0 million in total debt was outstanding with an interest rate, including the amortization of debt discount and issuance costs, of 5.0 %.

There were also $ 26.6 million of unamortized debt discount and issuance costs recorded as a reduction from the carrying amount of the debt.

Interest is payable monthly on the 2020 Term B Loan Facility.

Interest expense was $ 11.3 million and $ 4.3 million for the three months ended March 31, 2021 and 2020, respectively.

Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 2.3 million and $ 0.6 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, future minimum principal payments for long-term debt are summarized as follows (in thousands):

Interest is payable monthly on the Refinanced Term B Loans.

Interest expense was $ 10.6 million and $ 21.9 million for the three and six months ended June 30, 2021, respectively.

Interest expense was $ 7.0 million and $ 11.2 million for the three and six months ended June 30, 2020, respectively.

Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 1.9 million and $ 4.1 million for the three and six months ended June 30, 2021, respectively, and $ 1.2 million and $ 1.8 million for the three and six months ended June 30, 2020, respectively.

As of June 30, 2021, future minimum principal payments for long-term debt are summarized as follows (in thousands):

2021 (remaining 6 months)

NOTE 10 – NET INCOME PER SHARE

NOTE 10 – NET INCOME (LOSS) PER SHARE

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

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Weighted average shares of common stock outstanding

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Total common shares-diluted

Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period, excluding any unvested restricted stock awards that are subject to repurchase.

Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period, excluding any unvested restricted stock awards that are subject to repurchase.

Diluted net income per share is computed using the treasury stock method to calculate the weighted average number of shares of common stock and, if dilutive, potential common shares outstanding during the period.

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The assumed proceeds calculation includes actual proceeds to be received from the employee upon exercise and the average unrecognized stock compensation cost during the period.

For the three months ended March 31, 2021 and 2020, in the calculation of net income per share, 1.1 million and 2.1 million shares, respectively, subject to stock options and restricted stock awards and units were excluded from the computation of diluted net income per share as they were anti-dilutive.

For the three months ended June 30, 2021, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.

A total of 5.8 million shares, subject to stock options and restricted stock awards and units, were excluded from the computation of diluted net loss per share for the three months ended June 30, 2021, because including them would have been anti-dilutive.

For the six months ended June 30, 2021, in the calculation of net income per share, 2.1 million shares, subject to stock options and restricted stock awards and units, were excluded from the computation of diluted net income per share as they were anti-dilutive.

For the three and six months ended June 30, 2020, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.

A total of 4.7 million and 3.8 million shares, subject to stock options and restricted stock awards and units, were excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2020, respectively, because including them would have been anti-dilutive.

NOTE 11 – STOCKHOLDERS’ EQUITY

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Further upon completion of the Mergers, each share of TiVo Common Stock was converted into the right to receive 0.455 fully paid and non-assessable shares of the Company Common Stock (the “Exchange Ratio”), in addition to cash in lieu of any fractional shares of the Company Common Stock.

Following the Mergers,

Xperi Common Stock and TiVo Common Stock were delisted from Nasdaq.

Following the Mergers, Xperi Common Stock and TiVo Common Stock were delisted from Nasdaq.

Since June 2, 2020, the shares of Company Common Stock have been listed for trading on Nasdaq under ticker symbol “XPER.”

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

As of March 31, 2021, there were 5.3 million shares reserved for future grants under both the 2020 EIP and the Assumed Plans.

As of June 30, 2021, there were 5.3 million shares reserved for future grants under both the 2020 EIP and the Assumed Plans.

A summary of the stock option activity is presented below (in thousands, except per share amounts):

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Options canceled / forfeited / expired

Balance at March 31, 2021

Balance at June 30, 2021

Restricted Stock Awards and Units

Information with respect to outstanding restricted stock awards and units as of March 31, 2021 is as follows (in thousands, except per share amounts):

Information with respect to outstanding restricted stock awards and units as of June 30, 2021 is as follows (in thousands, except per share amounts):

Restricted Stock and Restricted Stock Units

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Awards and units canceled / forfeited

Balance at March 31, 2021

Balance at June 30, 2021

Performance Awards and Units

Performance awards and units may be granted to employees or consultants based upon, among other things, the contributions, responsibilities and other compensation of the particular employee or consultant.

The value and the vesting of such performance awards and units are generally linked to one or more performance goals or certain market conditions determined by the Company, in each case on a specified date or dates or over any period or periods determined by the Company, and may range from zero to 200 percent of the grant.

range from zero to 200 percent of the gran t.

For performance awards subject to a market vesting condition (“market-based PSUs”) , the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of achievement of the market condition .

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All participants in the terminated offering will be transferred to the new offering period.

As of March 31, 2021 , there were 1.4 million shares reserved for grant under the Company’s 2020 ESPP.

As of June 30, 2021 , there were 1.4 million shares reserved for grant under the Company’s 2020 ESPP.

Stock Repurchase Programs

Following the termination of Xperi’s prior stock repurchase program after the closing of the Mergers, on June 12, 2020 the Board of Directors (the “Board”) of the Company authorized a new stock repurchase program providing for the repurchase of up to $ 150.0 million of the Company's Common Stock dependent on market conditions, share prices and other factors.

As of March 31, 2021, the Company has repurchased a total of approximately 6.0 million shares of common stock, since inception of the plan, at an average price of $ 15.87 per share for a total cost of $ 95.1 million.

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

As of June 30, 2021, the Company has repurchased a total of approximately 6.4 million shares of common stock, since inception of the plan, at an average price of $ 16.30 per share for a total cost of $ 105.1 million.

As of December 31, 2020, the Company had repurchased a total of approximately 4.9 million shares of common stock, since inception of the plan, at an average price of $ 14.25 per share for a total cost of $ 70.1 million.

The shares repurchased are recorded as treasury stock and are accounted for

under the cost method.

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

No expiration date has been specified for this plan.

As of March 3 1 , 202 1 , the total remaining amount available for repurchase was $ 54.9 million .

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

As of June 30, 2021, the total remaining amount available for repurchase under this plan was $ 144.9 million.

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

The Company issues restricted stock units as part of the equity incentive plans described above.

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

During the three months ended March 31, 2021 and 2020, the Company withheld 0.3 million and 0.2 million shares of common stock to satisfy $ 7.4 million and $ 3.1 million of required withholding taxes, respectively.

During the three months ended June 30, 2021 and 2020, the Company withheld 0.1 million and 0.2 million shares of common stock to satisfy $ 1.0 million and $ 2.8 million of required withholding taxes, respectively.

During the six months ended June 30, 2021 and 2020, the Company withheld 0.4 million and 0.4 million shares of common stock to satisfy $ 8.3 million and $ 5.9 million of required withholding taxes, respectively.

NOTE 12 – STOCK-BASED COMPENSATION EXPENSE

The effect of recording stock-based compensation (“SBC”) expense for the three months ended March 31, 2021 and 2020 is as follows (in thousands):

The effect of recording stock-based compensation (“SBC”) expense for the three and six months ended June 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Cost of licensing, services and software revenue

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Tax effect on stock-based compensation expense

Net effect on net income

SBC expense categorized by various equity components for the three months ended March 31, 2021 and 2020 is summarized in the table below (in thousands):

Net effect on net income (loss)

SBC expense categorized by various equity components for the three and six months ended June 30, 2021 and 2020 is summarized in the table below (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Restricted stock awards and units

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Total stock-based compensation expense

There were no options granted in the three months ended March 31, 2021 and 2020.

There were no options granted in the three and six months ended June 30, 2021 and 2020.

The following assumptions were used to value the restricted stock units subject to market conditions granted during the period:

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NOTE 13 – INCOME TAXES

For the three months ended March 31, 2021, the Company recorded an income tax benefit of $ 4.0 million on pretax income of $ 0.5 million, which resulted in an effective tax rate of ( 786.4 )%.

The income tax benefit for the three months ended March 31, 2021 was primarily related to foreign withholding taxes, U.S.

For the three months ended June 30, 2021, the Company recorded an income tax benefit of $ 2.9 million on pretax loss of $ 4.7 million and for the six months ended June 30, 2021, the Company recorded an income tax benefit of $ 6.9 million on a pretax loss of $ 4.2 million, which resulted in an effective tax rate of 162.6 % for the six months ended June 30, 2021.

The income tax benefit for the three and six months ended June 30, 2021 was primarily related to foreign withholding taxes, U.S.

federal base erosion and anti-abuse tax (“BEAT”) and unrealized foreign exchange loss from the prior year South Korea refund claims.

The Company’s negative effective tax rate is based on the projected 2021 GAAP U.S.

pretax loss and is significantly less than the 21 % U.S.

The Company’s effective tax rate was based on the projected 2021 GAAP U.S.

pretax loss and is significantly higher than the 21 %

federal tax rate.

The Company’s effective tax rate is the result of the most significant components of income tax expense, primarily driven by foreign withholding and BEAT .

The computed negative effective tax rate is applied to the year-to-date U.S.

profit resulting in an income tax benefit for the quarter ended March 31, 2021.

For the three months ended March 31, 2020, the Company recorded an income tax expense of $ 2.1 million on pretax income of $ 20.8 million, which resulted in an effective tax rate of 9.9 %.

The income tax expense for the three months ended March 31, 2020 was primarily related to tax expense from operating income, certain non-deductible expenses, shortfalls from stock-based compensation, an increase in valuation allowance against certain deferred tax assets, and unrealized foreign exchange losses from the prior year South Korea refund claim, offset by a deduction from foreign-derived intangible income and the release of unrecognized tax benefits due to a lapse in the statute of limitation.

As of March 31, 2021, gross unrecognized tax benefits increased $1.5 million to $ 228.7 million compared to $227.2 million as of December 31, 2020.

For the three months ended June 30, 2020, the Company recorded an income tax benefit of $ 9.3 million on a pretax loss of $ 32.4 million and for the six months ended June 30, 2020, the Company recorded an income tax benefit of $ 7.2 million on a pretax loss of $ 11.6 million, which resulted in an effective tax rate of 62.7 % for the six months ended June 30, 2020.

The tax benefit of $7.2 million is comprised of a $ 10.5 million tax benefit related to the five month pre-merger period and a tax expense of $ 3.3 million related to the one month post-merger period.

The five month pre-merger income tax benefit of $10.5 million was primarily related to a net decrease in valuation allowance as a result of the Mergers, deduction from foreign-derived intangible income, releases of unrecognized tax benefits due to the lapse of applicable statutes of limitation offset by tax expense from operating income, shortfalls from stock-based compensation, certain non-deductible expenses, and unrealized foreign exchange losses from the prior period South Korea refund claim.

The one month post-merger income tax expense of $3.3 million was primarily related to income tax expense from foreign operations, foreign withholding taxes and U.S.

federal minimum tax.

As of June 30, 2021, gross unrecognized tax benefits increased $ 1.6 million to $ 228.7 million compared to $ 227.2 million as of December 31, 2020.

This was included in long-term deferred tax and other long-term liabilities on the Condensed Consolidated Balance Sheets.

Of this amount, $ 96.0 million would affect the effective tax rate if recognized.

As of March 31, 2020, unrecognized tax benefits of $ 85.5 million were included in long-term deferred tax and other long-term liabilities on the Condensed Consolidated Balance Sheets.

As of June 30, 2020, gross unrecognized tax benefits of $ 184.0 million were included in long-term deferred tax and other long-term liabilities on the Condensed Consolidated Balance Sheets.

Of this amount, $ 99.6 million would affect the effective tax rate if recognized.

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It is the Company's policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes.

The Company recognized interest and penalties related to unrecognized tax benefits of $ 0.6 million and an insignificant amount for the three months ended March 31, 2021 and 2020, respectively.

Accrued interest and penalties were $ 3.1 million and $ 2.5 million as of March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021, the Company’s 2016 through 2020 tax years are generally open and subject to potential examination in one or more jurisdictions.

The Company recognized interest and penalties related to unrecognized tax benefits of $ 0.8 million and an insignificant amount for the six months ended June 30, 2021 and 2020, respectively.

Accrued interest and penalties were $ 3.4 million and $ 2.5 million as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the Company’s 2016 through 2020 tax years are generally open and subject to potential examination in one or more jurisdictions.

Earlier tax years for the Company and its subsidiaries are also open in certain jurisdictions which are currently subject to examination.

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The Company leases office and research facilities, data centers and office equipment under operating leases which expire through 2029.

The Company’s leases have remaining lease terms of one year to nine years , some of which may include options to extend the leases for five years or longer, and some of which may include options to terminate the leases within the next 6 years or less.

The Company’s leases have remaining lease terms of one year to eight years , some of which may include options to extend the leases for five years or longer, and some of which may include options to terminate the leases within the next 6 years or less.

Leases with an initial term of 12 months or less are not recorded on the balance sheets ;

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Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Fixed lease cost (1)

5 unchanged sentences

Three Months Ended,

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

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

2 unchanged sentences

Operating leases

March 31, 2021

June 30, 2021

December 31, 2020

3 unchanged sentences

Operating leases

Future minimum lease payments and related lease liabilities as of March 31, 2021 were as follows (in thousands):

Future minimum lease payments and related lease liabilities as of June 30, 2021 were as follows (in thousands):

Operating Lease Payments (1)

21 unchanged sentences

These arrangements primarily include unconditional purchase obligations to service providers.

As of March 31, 2021, the Company’s total future unconditional purchase obligations were approximately $ 144.5 million.

As of June 30, 2021, the Company’s total future unconditional purchase obligations were approximately $ 137.3 million.

Additionally, under certain other contractual arrangements, the Company may be obligated to pay up to $ 2.3 million, a majority of which is expected to be paid by 2022, if certain milestones are achieved.

On December 31, 2019, TiVo entered into a contract requiring the Company to generate a minimum number of Qualified Referred Subscribers (as defined in the contract) over a 30 month period.

In the event that the aggregate number of Qualified Referred Subscribers generated by the Company within the specified time period is less than the minimum guaranteed subscribers, the Company is required to pay an amount equal to the shortfall between the number of Qualified Referred Subscribers generated by the Company and the required minimum multiplied by a per Qualified Referred Subscribers fee, up to a maximum of $ 5.0 million.

As of March 31, 2021, $ 2.8 million was accrued in the Condensed Consolidated Balance Sheets related to this contract.

In the event that the aggregate number of Qualified Referred Subscribers generated by the Company within the specified time period is less than the minimum guaranteed subscribers, the Company was required to pay an amount equal to the shortfall between the number of Qualified Referred Subscribers generated by the Company and the required minimum multiplied by a per Qualified Referred Subscribers fee, up to a maximum of $ 5.0 million.

During the second quarter of 2021, the Company renegotiated the contract and agreed to the revised terms by removing the commitment to pay a shortfall in the number of Qualified Referred Subscribers as previously defined.

As part of the contract revision, the Company agreed to, on or before June 30, 2022, promote the other party’s TV services by purchasing and displaying a certain number of video ad impressions over the course of three or more campaigns.

The cost of the impressions is estimated at $ 0.8 million and was accrued in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2021.

Inventory Purchase Commitment

The Company uses contract manufacturers to provide manufacturing services for its products.

During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, the Company enters into agreements with its contract manufacturer that either allow them to procure inventory based on criteria as defined by the Company or that establish the parameters defining the Company’s requirements.

During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, the Company enters into agreements with its contract manufacturers that either allow them to procure inventory based on criteria as defined by the Company or that establish the parameters defining the Company’s requirements.

A significant portion of the Company’s purchase commitments arising from these agreements consist of firm, non-cancelable and unconditional purchase commitments.

In certain instances, these agreements allow the Company the option to cancel, reschedule or adjust the Company’s requirements based on its business needs prior to firm orders being placed.

As of March 31, 2021, the Company had total purchase commitments for inventory of $ 5.6 million, of which $ 0.6 million was accrued in the Condensed Consolidated Balance Sheet.

As of June 30, 2021, the Company had total purchase commitments for inventory of $ 11.8 million, of which $ 1.1 million was accrued in the Condensed Consolidated Balance Sheet.

Indemnifications

In the normal course of business, the Company provides indemnifications of varying scopes and amounts to certain of its licensees, customers, and business partners against claims made by third parties arising from the use of the Company's products, intellectual property, services or technologies.

products, intellectual property, services or technologies.

The Company cannot reasonably estimate the possible range of losses that may be incurred pursuant to its indemnification obligations, if any.

5 unchanged sentences

the nature and amount of damages claimed by the party suing the indemnified party;

and the willingness of such party to engage in settlement

negotiations.

and the willingness of such party to engage in settlement negotiations.

To date, no such claims have been filed against the Company and no liability has been recorded in the Company’s financial statements.

24 unchanged sentences

The Product segment consists primarily of licensing Company-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 the Company’s consumer electronics (“CE”) customers, automotive manufacturers or their supply chain partners.

Audio, digital radio, imaging solutions and edge-based

machine learning include the delivery of software and/or hardware-based solutions to the Company’s 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 .

7 unchanged sentences

Although the CODM uses operating income to evaluate reportable segments, operating costs included in one segment may benefit other segments.

The following table sets forth the Company’s segment revenue, operating expenses and operating income for the three months ended March 31, 2021 and 2020 (in thousands):

The following table sets forth the Company’s segment revenue, operating expenses and operating income (loss) for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Product segment

6 unchanged sentences

Total operating expenses

Operating income:

Operating income (loss):

Product segment

1 unchanged sentence

Unallocated operating expenses (1)

Total operating income

Total operating income (loss)

Unallocated operating expenses consist primarily of selling, marketing, general and administrative expenses, such as administration, human resources, finance, information technology, corporate development and procurement.

3 unchanged sentences

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Europe and Middle East

For the three months ended March 31, 2021 and 2020, there were no customers and two customers, respectively, that each accounted for 10 % or more of total revenue.

As of March 31, 2021 and December 31, 2020, there were two customers and two customers, respectively, that each accounted for 10 % or more of total accounts receivable.

For the three months ended June 30, 2021 and 2020, there were no customers and one customer, respectively, that each accounted for 10 % or more of total revenue.

For the six months ended June 30, 2021 and 2020, there were no customers and

two customers, respectively, that each accounted for 10 % or more of total revenue.

A s of June 30 , 2021 and December 31, 20 20 , there were one customer and two customers , respectively, that each accounted for 10 % or more of total accounts receivable.

NOTE 17 - SUBSEQUENT EVENTS

On April 22, 2021 , the Board declared a cash dividend of $ 0.05 per share of common stock, payable on June 15, 2021 to the stockholders of record at the close of business on May 25, 2021 .

On April 22, 2021, the Board authorized an additional $ 100.0 million of purchases under the Company’s existing stock repurchase plan, increasing the total available balance to $ 154.9 million as of such date.

On July 26, 2021 , the Board declared a cash dividend of $ 0.05 per share of common stock, payable on September 14, 2021 to the stockholders of record at the close of business on August 24, 2021 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements