What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-06 compared with 2021-05-05 · 210 added, 143 removed, 242 unchanged (59% of the section changed)

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The identification of certain statements as “forward-looking” is not intended to mean that other statements not specifically identified are not forward-looking.

All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenue, product development, demand, acceptance and market share, growth rate, competitiveness, gross margins, levels of research, development and other related costs, expenditures, the outcome or effects of and expenses related to litigation and administrative proceedings related to our patents, our intent to enforce our intellectual property rights, our ability to license our intellectual property, tax expenses, cash flows, our ability to liquidate and recover the carrying value of our investments, our management's plans and objectives for our current and future operations, our plans for quarterly dividends and stock repurchases, our ability to achieve cost savings through the integration of the legacy businesses, the levels of customer spending or research and development activities, general economic conditions, the impact of the COVID-19 (as defined below) pandemic and related events, the impact of the Mergers (as defined below) on our financial condition and results of operations, our plans to separate the combined product and IP licensing businesses, and the sufficiency of financial resources to support future operations and capital expenditures.

All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenue, product development, demand, acceptance and market share, growth rate, competitiveness, gross margins, levels of research, development and other related costs, expenditures, the outcome or effects of and expenses related to litigation and administrative proceedings related to our patents, our intent to enforce our intellectual property rights, our ability to license our intellectual property, tax expenses, cash flows, our ability to liquidate and recover the carrying value of our investments, our management's plans and objectives for our current and future operations, our plans for quarterly dividends and stock repurchases, the levels of customer spending or research and development activities, general economic conditions, the impact of the COVID-19 pandemic and related events, the impact of the Mergers (as defined below) and other acquisitions on our financial condition and results of operations, our plans to separate our product and IP licensing businesses, and the sufficiency of financial resources to support future operations and capital expenditures.

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

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Following consummation of the mergers between Xperi Corporation (“Xperi”) and TiVo Corporation (“TiVo”) on June 1, 2020 (the “Mergers”), 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.

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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

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 1,800 employees and over 35 years of operating experience.

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Our business and results of operations have been adversely affected by the global COVID-19 pandemic and related events and we expect its impact to continue.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our businesses, and there is no guarantee that we will be able to address its adverse impacts fully or effectively.

The impact to date has included periods of significant volatility in various markets and industries.

The volatility has had, and we anticipate it will continue to have, an adverse effect on our customers and on our business, financial condition and results of operations, and may result in an impairment of our long-lived assets, including goodwill, increased credit losses and impairments of investments in other companies.

In particular, the automotive market, as well as the broad consumer electronics industries, have been and may continue to be impacted by the pandemic and/or other events beyond our control, and further volatility could have an additional negative impact on these industries, customers, and our business.

In particular, the automotive market, as well as the broad consumer electronics industry, has been and may continue to be impacted by the pandemic and/or other events beyond our control, and further volatility could have an additional negative impact on these industries, customers, and our business.

In addition, the COVID-19 pandemic and, to a lesser extent, U.S.

restrictions on trade with certain Chinese customers have and may continue to impact the financial conditions of our customers, who may not be able to satisfy their obligations under our agreements timely or at all.

restrictions on trade with certain Chinese customers, have impacted and may continue to impact the financial conditions of our customers.

In addition, actions by United States federal, state and foreign governments to address the COVID-19 pandemic, including travel bans, stay-at-home orders and school, business and entertainment venue closures, also had a significant adverse effect on the markets in which we conduct our businesses.

COVID-19 poses the risk that our workforce, suppliers, and other partners may be prevented from conducting normal business activities for an indefinite period of time, including due to shutdowns or stay-at-home orders that may be requested or mandated by governmental authorities.

We also implemented policies to allow our employees to work remotely as a result of the pandemic as we reviewed processes related to workplace safety, including social distancing and sanitation practices recommended by the Centers for Disease Control and Prevention.

The impacts of the COVID-19 pandemic could also cause delays in obtaining new customers and executing renewals and could also impact our business as consumer behavior changes in response to the slowed economic conditions.

Furthermore, our ongoing integration efforts following the Mergers have been and may continue to be delayed or interrupted due to the operational challenges and various restrictions and limitations imposed on us as a result of the COVID-19 pandemic, which may adversely affect the timing and success of the integration and anticipated benefits of the Mergers.

COVID-19 poses the risk that our workforce, suppliers, and other partners may be prevented from conducting normal business activities for an extended period of time, including due to shutdowns or stay-at-home orders that may be requested or mandated by governmental authorities.

We have implemented policies to allow our employees to work remotely as a result of the pandemic as we reviewed processes related to workplace safety, including social distancing and sanitation practices recommended by the Centers for Disease Control and Prevention.

The COVID-19 pandemic could also cause delays in acquiring new customers and executing renewals and could also impact our business as consumer behavior changes in response to the pandemic.

Since the start of the second quarter of 2021, there has been increased availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel, and government activities and functions, and we have experienced a gradual resumption of economic activities in our industries.

On the other hand, infection rates continue to fluctuate in various regions and new strains of the virus remain a risk.

In addition, there are ongoing global impacts resulting from the pandemic, including disruption of the product supply chains, shortages of semiconductor components, and delays in shipments, product development, and product launches.

We have been closely monitoring the COVID-19 pandemic and its impact on our business, including legislation to mitigate the impact of COVID-19 such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act which was enacted in March 2020, and the American Rescue Plan Act of 2021 which was enacted in March 2021.

Although a significant portion of our anticipated revenue for 2021 is derived from fixed-fee and minimum-guarantee arrangements, primarily from large, well-capitalized customers which we believe somewhat mitigates the risks to our business, our per-unit and variable fees based revenue will continue to be susceptible to the volatility, supply chain disruptions and potential market downturns induced by the COVID-19 pandemic.

Although a significant portion of our anticipated revenue for 2021 is derived from fixed-fee and minimum-guarantee arrangements, primarily from large, well-capitalized customers which we believe somewhat mitigates the risks to our business, our per-unit and variable-fee based revenue will continue to be susceptible to the volatility, supply chain disruptions, microchip shortages and potential market downturns induced by the COVID-19 pandemic.

The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is 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 and renewed imposition of protective public safety measures;

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

Although we are unable to predict the full impact and duration of the COVID-19 pandemic on our business, we are actively managing our financial expenditures in response to continued uncertainty.

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In our Product segment, we license our audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions.

In our IP Licensing segment, we license (i) our media patent portfolios (“Media IP licensing”) to multichannel video programming distributors (MVPDs), OTT video service providers, consumer electronics manufacturers, social media, and other new media companies and (ii) our semiconductor technologies and associated patent portfolios (“Semiconductor IP licensing”) to memory, sensors, RF component, and foundry

In our IP Licensing segment, we license (i) our media patent portfolios (“Media IP licensing”) to multichannel video programming distributors (MVPDs), OTT video service

providers, consumer electronics manufacturers, social media, and other new media companies and (ii) our semiconductor technologies and associated patent portfolios (“Semiconductor IP licensing”) to memory, sensors, RF component, and foundry companies.

We license our technologies and portfolios under three revenue models:

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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

Licensing, services and software

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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)

Total Revenue (in thousands, except for percentages):

Three Months Ended

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

Increase/ (Decrease)

Total revenue

The $103.9 million, or 88% increase in total revenue for the three months ended March 31, 2021, compared to the same period in the prior year, was primarily due to inclusion of revenue from the results of TiVo operations following the Mergers.

Excluding TiVo revenue, legacy Xperi revenue would have decreased due primarily to a decline in revenue from the Semiconductor IP licensing business.

The $84.6 million, or 61% increase in total revenue for the three months ended June 30, 2021, compared to the same period in the prior year, was primarily due to the inclusion of a full quarter of post-merger revenue from TiVo in the three months ended June 30, 2021.

Excluding TiVo revenue, legacy Xperi revenue would have decreased primarily due to a decline in revenue from the Semiconductor IP licensing business, partially offset by an increase in revenue from the Product business.

Six Months Ended

June 30, 2021

June 30, 2020

Increase/ (Decrease)

Total revenue

The $188.6 million, or 74% increase in total revenue for the six months ended June 30, 2021, compared to the same period in the prior year, was primarily due to the inclusion of a full six months of post-merger revenue from TiVo in the six months ended June 30, 2021.

Excluding TiVo revenue, legacy Xperi revenue would have decreased primarily due to a decline in revenue from the Semiconductor IP licensing business.

Cost of Licensing, Services and Software Revenue, E xcluding Depreciation and Amortization of Intangible Assets

Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, consists primarily of employee-related costs, royalties paid to third parties, maintenance costs and an allocation of facilities costs, as well as service center and other expenses related to providing the TiVo Service, non-recurring engineering (“NRE”) services and our metadata offering.

Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, for the three months ended March 31, 2021 was $21.4 million, as compared to $1.5 million for the three months ended March 31, 2020, an increase of $19.9 million.

The increase was due to the inclusion of post-merger TiVo expenses in the first quarter of 2021.

Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, for the three months ended June 30 , 2021 was $ 22 .4 million, as compared to $ 8.3 million for the three months ended June 30 , 2020, an increase of $ 14.1 million.

The increase was primarily due to the inclusion of a full quarter of post-merger TiVo expenses in the three months ended June 30, 2021.

Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, for the six months ended June 30, 2021 was $43.8 million, as compared to $9.8 million for the six months ended June 30, 2020, an increase of $34.0 million.

The increase was primarily due to the inclusion of a full six months of post-merger TiVo expenses in the six months ended June 30, 2021.

We anticipate cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, will continue to increase in 2021 when compared to 2020 due to the inclusion of a full year of TiVo operations in our consolidated results.

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Cost of hardware revenue, excluding depreciation and amortization of intangible assets, includes all product-related costs associated primarily with TiVo-enabled devices, including employee-related costs, warranty costs, order fulfillment costs, certain licensing costs, and an allocation of facilities costs.

Cost of hardware revenue, excluding depreciation and amortization of intangible assets, for the three months ended March 31, 2021 was $6.7 million, as compared to $0.1 million for the three months ended March 31, 2020, an increase of $6.6 million.

The increase was due to the inclusion post-merger TiVo expenses in the first quarter of 2021.

Cost of hardware revenue, excluding depreciation and amortization of intangible assets, for the three months ended June 30, 2021 was $4.5 million, as compared to $1.4 million for the three months ended June 30, 2020, an increase of $3.1 million.

The increase was primarily due to the inclusion of a full quarter of post-merger TiVo expenses in the three months ended June 30, 2021.

Cost of hardware revenue, excluding depreciation and amortization of intangible assets, for the six months ended June 30, 2021 was $11.2 million, as compared to $1.5 million for the six months ended June 30, 2020, an increase of $9.7 million.

The increase was primarily due to the inclusion of a full six months of post-merger TiVo expenses in the six months ended June 30, 2021.

We anticipate cost of hardware revenue, excluding depreciation and amortization of intangible assets, will continue to increase in 2021 when compared to 2020 primarily due to the inclusion of a full year of TiVo operations in our consolidated results as well as expected growth in sales of hardware products.

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All research, development and other related costs are expensed as incurred.

R&D expense for the three months ended March 31, 2021 was $55.2 million, as compared to $28.6 million for the three months ended March 31, 2020, an increase of $26.6 million.

The increase was due to the inclusion of post-merger TiVo R&D expenses in the first quarter of 2021.

Excluding TiVo expenses, R&D expense would have decreased by approximately $2.5 million, due principally to reduced headcount and personnel costs as a result of cost synergies realized, lower travel related costs as well as reduced spending in materials, supplies, facilities and insurance in the first quarter of 2021.

R&D expense for the three months ended June 30, 2021 was $54.4 million, as compared to $38.2 million for the three months ended June 30, 2020, an increase of $16.2 million.

The increase was primarily due to the inclusion of a full quarter of post-merger TiVo R&D expenses in the three months ended June 30, 2021, partially offset by a decrease in severance and retention as well as personnel related costs resulting from cost synergies implemented subsequent to the Mergers.

R&D expense for the six months ended June 30, 2021 was $109.6 million, as compared to $66.8 million for the six months ended June 30, 2020, an increase of $42.8 million.

The increase was due to the inclusion of a full six months of post-merger TiVo R&D expenses in the six months ended June 30, 2021, partially offset by a decrease in severance and retention as well as personnel related costs resulting from cost synergies implemented subsequent to the Mergers.

We believe that a significant level of R&D expense will be required for us to remain competitive in the future.

We also anticipate that R&D expense will increase in 2021 when compared to 2020 due primarily to due to the inclusion of a full year of TiVo operations in our consolidated results.

We also anticipate that R&D expense will increase in 2021 when compared to 2020 primarily due to the inclusion of a full year of TiVo operations in our consolidated results.

Selling, General and Administrative

Selling expenses consist primarily of compensation and related costs for sales and marketing personnel engaged in sales and licensee support, reverse engineering personnel and services, marketing programs, public relations, promotional materials, travel, trade show expenses, and stock-based compensation expense.

travel, trade show expenses, and stock-based compensation expense.

General and administrative expenses consist primarily of compensation and related costs for general management, information technology, finance personnel, legal fees and expenses, facilities costs, stock- based compensation expense, and professional services.

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

Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2021 were $67.4 million, as compared to $36.6 million for the three months ended March 31, 2020, an increase of $30.8 million.

The increase was due principally to the inclusion of TiVo expenses in the first quarter of 2021.

Excluding TiVo expenses, SG&A expenses would have decreased by approximately $1.6 million, driven by a decrease in provision for credit losses, lower sales/marketing promotion expenses and travel and entertainment costs, partially offset by post-merger severance and retention costs recorded in the first quarter of 2021.

We anticipate SG&A expenses will increase in 2021 when compared to 2020 due principally to the inclusion of a full year of TiVo operations in our consolidated results.

Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2021 were $67.7 million, as compared to $68.2 million for the three months ended June 30, 2020, a decrease of $0.5 million.

The decrease was due principally to decreases in merger related transaction costs, severance and retention, and sales/marketing promotion expenses, partially offset by incremental SG&A expenses as a result of including a full quarter of post-merger TiVo operations and certain expensed debt refinancing costs in the three months ended June 30, 2021.

SG&A expenses for the six months ended June 30, 2021 were $135.1 million, as compared to $104.8 million for the six months ended June 30, 2020, an increase of $30.3 million.

The increase was due principally to the inclusion of a full six months of post-merger TiVo SG&A expenses and certain expensed debt refinancing costs, partially offset by decreases in merger related transaction costs, severance and retention, sales/marketing promotion expenses, and provision for credit losses in the six months ended June 30, 2021.

We anticipate SG&A expenses will increase in 2021 when compared to 2020 primarily due to the inclusion of a full year of TiVo operations in our consolidated results.

Depreciation Expense

Depreciation expense for the three months ended March 31, 2021 was $5.7 million, as compared to $1.7 million for the three months ended March 31, 2020, an increase of $4.0 million.

The increase was primarily attributable to depreciation expense on TiVo fixed assets added through the Mergers in June 2020.

Depreciation expense for the three months ended June 30, 2021 was $5.5 million, as compared to $3.3 million for the three months ended June 30, 2020, an increase of $2.2 million.

Depreciation expense for the six months ended June 30, 2021 was $11.2 million, as compared to $5.1 million for the six months ended June 30, 2020, an increase of $6.1 million.

The increases were primarily attributable to depreciation expense on TiVo fixed assets added through the Mergers in June 2020.

We anticipate depreciation expense will continue to increase in 2021 as compared to 2020 as a result of the inclusion of the full year effect of TiVo’s assets after the Mergers.

Amortization Expense

Amortization expense for the three months ended March 31, 2021 was $52.2 million, as compared to $22.5 million for the three months ended March 31, 2020, an increase of $29.7 million.

The increase was primarily attributable to amortization of intangible assets recorded in connection with the Mergers in June 2020, and secondarily due to intangible assets acquired in the fourth quarter of 2020.

With the Mergers, we anticipate that amortization expense will continue to be a significant expense since we acquired approximately $878 million in intangible assets which will be amortized over the next several years.

See “ Note 8 – Goodwill and Identified Intangible Assets ” in the N otes to Condensed Consolidated Financial Statements for additional information .

Amortization expense for the three months ended June 30, 2021 was $52.2 million, as compared to $32.0 million for the three months ended June 30, 2020, an increase of $20.2 million.

Amortization expense for the six months ended June 30, 2021 was $104.4 million, as compared to $54.6 million for the six months ended June 30, 2020, an increase of $49.8 million.

The increases were primarily attributable to amortization of intangible assets recorded in connection with the Mergers in June 2020, and secondarily due to a significant amount of intangible assets acquired in the fourth quarter of 2020.

With the Mergers, we anticipate that amortization expense will continue to be a significant expense since we acquired approximately $878 million in intangible assets in the Mergers which will be amortized over the next several years.

See “Note 8 – Goodwill and Identified Intangible Assets” in the Notes to Condensed Consolidated Financial Statements for additional information.

Litigation Expense

Litigation expense for the three months ended March 31, 2021 was $2.5 million, as compared to $2.1 million for the three months ended March 31, 2020, an increase of $0.4 million.

The increase was primarily due to inclusion of post-merger TiVo litigation expenses, partially offset by reduced case activity.

In 2019 and in 2020 prior to the Mergers, TiVo’s litigation expenses were significantly higher than Xperi’s litigation expenses in the same periods.

We expect that litigation expense will continue to be a material portion of our operating expenses and, as a result of the Mergers, will increase significantly in future periods.

Litigation expense for the three months ended June 30, 2021 was $2.3 million, as compared to $3.9 million for the three months ended June 30, 2020, a decrease of $1.6 million.

Litigation expense for the six months ended June 30, 2021 was $4.8 million, as compared to $6.0 million for the six months ended June 30, 2020, a decrease of $1.2 million.

The decreases were primarily due to reduced case activity, partially offset by inclusion of post-merger TiVo litigation expenses.

We expect that litigation expense will continue to be a material portion of our operating expenses.

Litigation expense may fluctuate between periods because of planned or ongoing litigation, as described in Part II, Item 1 – Legal Proceedings , and because of litigation planned for or initiated from time to time in the future in order to enforce and protect our intellectual property and contract rights.

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Stock- based Compensation Expense

The following table sets forth our stock-based compensation (“SBC”) expense for the three and nine months ended March 31, 2021 and 2020 (in thousands):

The following table sets forth our stock-based compensation (“SBC”) expense 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

Cost of licensing, services and software revenue

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Stock-based compensation awards include employee stock options, restricted stock awards and units, and employee stock plan purchases.

The increase in SBC expense for the three months ended March 31, 2021, compared to the corresponding period in 2020, was primarily a result of including incremental expense from assumed TiVo stock awards from the Mergers and increases in stock award grants as a result of the Mergers.

The increases in SBC expense for the three and six months ended June 30, 2021, compared to the corresponding periods in 2020, were primarily a result of including incremental expense from assumed TiVo stock awards from the Mergers and increases in stock award grants as a result of the Mergers.

Interest Expense

Interest expense for the three months ended March 31, 2021 was $11.3 million, as compared to $4.3 million for the three months ended March 31, 2020.

The increase in interest expense was primarily a result of a higher average debt balance as compared to the first quarter of 2020 as we entered into a new term loan of $1,050 million on June 1, 2020 to refinance the indebtedness of the combined companies in connection with the Mergers.

We anticipate interest expense will increase in 2021 when compared to 2020 as a result of a full year of the higher debt balance and amortization of debt discount and issuance costs.

Interest expense for the three months ended June 30, 2021 was $10.6 million, as compared to $7.0 million for the three months ended June 30, 2020.

Interest expense for the six months ended June 30, 2021 was $21.9 million, as compared to $11.2 million for the six months ended June 30, 2020.

The increases in interest expense were primarily a result of a higher average debt balance as compared to the corresponding periods in 2020 as we entered into a new term loan of $1,050 million on June 1, 2020 to refinance the indebtedness of the combined companies in connection with the Mergers.

We anticipate interest expense will increase in 2021 when compared to 2020 as a result of a full year of the higher debt balance and amortization of debt discount and issuance costs following the Mergers, partially offset by the impact of the debt refinancing in June 2021 described below.

Other Income and expense, Net

Other income and expense, net, for the three months ended March 31, 2021 was $1.4 million, as compared to $0.6 million for the three months ended March 31, 2020.

Other income and expense, net, in the first quarter of 2021 was higher than the corresponding period in 2020 due principally to recognition of an unrealized loss of $0.7 million on our equity investment in Onkyo Corporation common stock in the first quarter of 2020 .

Other income and expense, net, was $0.6 million for both the three months ended June 30, 2021 and June 30, 2020.

Other income and expense, net, for the six months ended June 30, 2021 was $2.0 million, as compared to $1.1 million for the six months ended June 30, 2020.

Other income and expense, net, in the first six months of 2021 was higher than the corresponding period in 2020 due principally to recognition of a loss of $0.7 million on our equity investment in Onkyo Corporation common stock during the six months ended June 30, 2020.

Loss on Debt Extinguishment

In June 2021, we refinanced the 2020 Term B Loan Facility by, among other things, lowering the interest rate on the debt.

Certain lenders of the original loan syndication did not participate in the refinancing.

Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment and recorded, in the second quarter of 2021, a loss on debt extinguishment of $8.0 million 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 the Mergers and in June 2020, we refinanced the indebtedness of the combined companies by entering into the 2020 Term B Loan Facility, and consequently recognized a loss on early debt extinguishment on the legacy debt of $8.3 million in the three and six months ended June 30, 2020, respectively.

Provision for Income Taxes

With certain exceptions, our provision for income taxes is based on our worldwide estimated annualized effective tax rate.

Our provision for income taxes is based on our worldwide estimated annualized effective tax rate.

For jurisdictions in which a loss is forecast but no benefit can be realized for those losses, the tax is estimated separately.

Additionally, we record certain taxes measured when required.

Due to our significant net operating loss carryforwards and a

valuation allowance applied against a significant portion of our deferred tax assets, foreign withholding taxes are generally the primary driver of income tax expense and the primary reason for cash tax payments of income taxes .

For the three months ended March 31, 2021, our negative effective tax rate is based on the projected 2021 GAAP U.S.

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

In certain circumstances we also record the income tax effects of discrete transactions in the quarter in which the transaction has occurred.

Due to our significant net operating loss carryforwards and a valuation allowance applied against a significant portion of our deferred tax assets, foreign withholding taxes are generally the primary driver of income tax expense and the primary reason for cash tax payments of income taxes.

For the three months ended June 30, 2021, our effective tax rate was based on the projected 2021 GAAP U.S.

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

federal tax rate.

The low effective tax rate is the result of the most significant components of income tax expense, primarily driven by foreign withholding taxes 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, 2021, we 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.

federal base erosion and anti-abuse tax, and unrealized foreign exchange loss from prior year South Korea refund claims.

For the three months ended March 31, 2020, we 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, increase in certain non-deductible expenses, shortfalls from stock-based compensation, increase in valuation allowance on 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 limitations.

The year-over-year decrease in income tax expense for the quarter ended March 31, 2021 is largely attributable to the application of a negative effective tax rate to year-to-date U.S.

The effective tax rate is the result of the most

significant components of income tax expense, primarily driven by foreign withholding taxes and BEAT .

The annualized effective tax rate is subject to change and such change could be significant .

For the three months ended June 30, 2021, we 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, we 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 a projected negative U.S.

effective tax rate applied to a year-to-date U.S.

profit before tax.

For the three months ended June 30, 2020, we 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, we 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, and the release of unrecognized tax benefits due to the lapse of applicable statute 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 a result of the Mergers, a valuation allowance was recorded on the net deferred tax assets of the U.S.

federal consolidated group.

The year-over-year decrease in income tax expense for the quarter ended June 30, 2021 is largely attributable to the application of a negative effective tax rate to year-to-date U.S.

pre-tax income.

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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, OTT video service providers, consumer electronics manufacturers, social media and other new media companies.

In media, our licensees include multichannel video

programming distributors, 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 .

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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 our segments’ revenue, operating expenses and operating income (in thousands):

The following table sets forth our segments’ revenue, operating expenses and operating income (loss) (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

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Total operating expenses

Operating income:

Operating income (loss):

Product segment

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Unallocated operating expenses (1)

Total operating income

Total operating income (loss)

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

These expenses are not allocated because these amounts are not considered in evaluating the operating performance of the Company’s business segments.

For the three months ended March 31, 2021, the unallocated operating expenses were $69.1 million, compared to $36.6 million for the three months ended March 31, 2020.

The increase of $32.5 million was due principally to the inclusion of TiVo expenses and post-merger severance and retention costs recorded in the first quarter of 2021, partially offset by a decrease in provision for credit losses, lower sales/marketing promotion expenses and travel and entertainment costs.

The revenue and operating income amounts in this section have been presented on a basis consistent with GAAP applied at the segment level.

Of our $847.0 million in goodwill at March 31, 2021, approximately $523.8 million was allocated to our Product segment and approximately $323.2 million was allocated to our IP Licensing segment.

For the three months ended June 30, 2021, the unallocated operating expenses were $69.1 million, compared to $68.3 million for the three months ended June 30, 2020.

The increase of $0.8 million was due principally to the inclusion of a full quarter of post-merger TiVo expenses and certain expensed debt refinancing costs, partially offset by decreases in merger related transaction costs, severance and retention, and sales/marketing promotion expenses in the three months ended June 30, 2021.

For the six months ended June 30, 2021, the unallocated operating expenses were $138.2 million compared to $105.0 million for the six months ended June 30, 2020.

The increase of $33.2 million was due principally to the inclusion of a full six months of post-merger TiVo expenses and certain expensed debt refinancing costs, partially offset by decreases in merger related transaction costs, severance and retention, sales/marketing promotion expenses, and provision for credit losses in the six months ended June 30, 2021.

The revenue and operating income (loss) amounts in this section have been presented on a basis consistent with GAAP applied at the segment level.

Of our $851.1 million in goodwill at June 30, 2021, approximately $527.8 million was allocated to our Product segment and approximately $323.3 million was allocated to our IP Licensing segment.

Product Segment

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Total revenue

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Total operating expenses

Total operating income

Product revenue for the three months ended March 31, 2021 was $123.6 million as compared to $55.9 million for the three months ended March 31, 2020, an increase of $67.6 million.

The increase was primarily attributable to the inclusion of TiVo product revenue, partially offset by a decrease in revenue from minimum guarantee (“MG”) contracts executed during the first quarter of 2021 as compared to first quarter of 2020.

Operating expenses for the three months ended March 31, 2021 were $108.6 million, as compared to $46.2 million for the three months ended March 31, 2020, an increase of $62.4 million.

The increase was primarily due to the inclusion of TiVo Product expenses, partially offset by merger-related cost synergies.

Operating income in the three months ended March 31, 2021 was $15.0 million compared to operating income of $9.7 million in the three months ended March 31, 2020, with the variance due to the reasons stated above.

Total operating income (loss)

Product revenue for the three months ended June 30, 2021 was $120.4 million as compared to $64.1 million for the three months ended June 30, 2020, an increase of $56.3 million.

The increase was primarily attributable to the inclusion of a full quarter of post-merger Product revenue from TiVo and an increase in revenue from the legacy Xperi Product business in the three months ended June 30, 2021.

Product revenue for the six months ended June 30, 2021 was $244.0 million as compared to $120.1 million for the six months ended June 30, 2020, an increase of $123.9 million.

The increase was primarily attributable to the inclusion of a full six months of post-merger Product revenue from TiVo.

Operating expenses for the three months ended June 30, 2021 were $105.0 million, as compared to $66.6 million for the three months ended June 30, 2020, an increase of $38.4 million.

The increase was primarily due to the inclusion of a full quarter of post-merger TiVo Product expenses, partially offset by a decrease in severance and retention costs, as well as lower personnel related costs resulting from cost synergies implemented subsequent to the Mergers.

Operating expenses for the six months ended June 30, 2021 were $213.6 million, as compared to $112.8 million for the six months ended June 30, 2020, an increase of $100.8 million.

The increase was primarily due to the inclusion of a full six months of post-merger TiVo Product expenses, partially offset by a decrease in severance and retention costs, as well as lower personnel related costs resulting from cost synergies implemented subsequent to the Mergers.

Operating income in the three months ended June 30, 2021 was $15.4 million compared to operating loss of $2.4 million in the three months ended June 30, 2020, with the variance due to the reasons stated above.

Operating income in the six months ended June 30, 2021 was $30.4 million compared to operating income of $7.3 million in the six months ended June 30, 2020, with the variance due to the reasons stated above.

IP Licensing Segment

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Total revenue

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Total operating income

IP Licensing revenue for the three months ended March 31, 2021 was $98.0 million as compared to $61.7 million for the three months ended March 31, 2020, an increase of $36.3 million.

The increase was primarily attributable to the inclusion of TiVo IP Licensing revenue, partially offset by a decline in revenue from the Semiconductor IP licensing business.

Operating expenses for the three months ended March 31, 2021 were $33.6 million, as compared to $10.3 million for the three months ended March 31, 2020, an increase of $23.3 million.

The increase was primarily due to the inclusion of TiVo IP Licensing expenses, partially offset by merger-related cost synergies.

In 2019 and in 2020, prior to the Mergers, TiVo’s litigation expenses were significantly higher than Xperi’s litigation expenses in the same periods.

IP Licensing revenue for the three months ended June 30, 2021 was $101.8 million as compared to $73.5 million for the three months ended June 30, 2020, an increase of $28.3 million.

The increase was primarily attributable to the inclusion of a full quarter of post-merger IP Licensing revenue from TiVo and revenue from the Comcast license executed in the fourth quarter of 2020, partially offset by a decline in revenue from the Semiconductor IP licensing business.

IP Licensing revenue for the six months ended June 30, 2021 was $199.9 million as compared to $135.2 million for the six months ended June 30, 2020, an increase of $64.7 million.

The increase was primarily attributable to the inclusion of a full six months of post-merger IP Licensing revenue from TiVo and revenue from the Comcast license executed in the fourth quarter of 2020, partially offset by a decline in revenue from the Semiconductor IP licensing business.

Operating expenses for the three months ended June 30, 2021 were $34.9 million, as compared to $20.4 million for the three months ended June 30, 2020, an increase of $14.5 million.

The increase was primarily due to the inclusion of a full quarter of post-merger TiVo IP Licensing expenses, partially offset by a decrease in litigation expenses, lower severance and retention costs, and lower personnel related costs resulting from cost synergies implemented subsequent to the Mergers.

Operating expenses for the six months ended June 30, 2021 were $68.4 million, as compared to $30.7 million for the six months ended June 30, 2020, an increase of $37.7 million.

The increase was primarily due to the inclusion of a full six months of post-merger TiVo IP Licensing expenses, partially offset by a decrease in litigation expenses, lower severance and retention costs, and lower personnel related costs resulting from cost synergies implemented subsequent to the Mergers.

We expect that litigation expense will continue to be a material portion of our operating expenses and may fluctuate between periods because of planned or ongoing litigation, as described in Part II, Item 1 – Legal Proceedings , in this report, and because of litigation planned for or initiated from time to time in the future in order to enforce and protect our intellectual property and contract rights.

Operating income for the three months ended March 31, 2021 was $64.4 million compared to operating income of $51.4 million for the three months ended March 31, 2020, with the variance due to the reasons stated above.

Operating income for the three months ended June 30, 2021 was $67.0 million compared to operating income of $53.1 million for the three months ended June 30, 2020, with the variance due to the reasons stated above.

Operating income for the six months ended June 30, 2021 was $131.4 million compared to operating income of $104.5 million for the six months ended June 30, 2020, with the variance due to the reasons stated above.

Liquidity and Capital Resources

(in thousands, except for percentages)

March 31, 2021

June 30, 2021

December 31, 2020

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Percentage of total assets

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

Net cash from operating activities

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

Cash, cash equivalents and short-term investments were $236.9 million at March 31, 2021, a decrease of $20.2 million from $257.1 million at December 31, 2020.

This decrease resulted primarily from $5.3 million in dividends paid, $32.4 million in repurchases of common stock and $13.1 million in repayment of the 2020 Term B Loan Facility, which was partially offset by $26.7 million in cash generated from operations and $6.7 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

Cash and cash equivalents totaled $134.8 million at March 31, 2021, a decrease of $35.4 million from $170.2 million at December 31, 2020.

Cash flows provided by operations were $26.7 million for the three months ended March 31, 2021, primarily due to our net income of $4.5 million being further adjusted for non-cash items of depreciation of $5.7 million, amortization of intangible assets of $52.2 million and stock-based compensation expense of $13.2 million.

These increases were partially offset by $52.8 million in changes in operating assets and liabilities including payment during the quarter of employee bonuses earned in 2020.

Cash flows provided by operations were $32.6 million for the three months ended March 31, 2020, primarily due to our net income of $18.8 million being further adjusted for non-cash items of depreciation of $1.7 million, amortization of intangible assets of $22.5 million, stock-based compensation expense of $8.0 million and provision for credit loss expense of $2.0 million.

These increases were partially offset by a reduction of $2.1 million in deferred income taxes and $19.6 million in changes in operating assets and liabilities.

Net cash used in investing activities was $17.4 million for the three months ended March 31, 2021, primarily related to purchases of short-term investments of $42.5 million and capital expenditures of $1.8 million, partially offset by maturities and sales of securities of $26.9 million.

Net cash provided by investing activities was $11.2 million for the three months ended March 31, 2020, primarily related to maturities and sales of securities of $11.8 million, partially offset by $0.7 million in capital expenditures.

Net cash used in financing activities was $44.0 million for the three months ended March 31, 2021 principally due to $13.1 million in repayment of indebtedness, $5.3 million in dividends paid, and $32.4 million in repurchases of common stock, partially offset by $6.7 million in proceeds due to the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

Net cash used in financing activities was $9.9 million for the three months ended March 31, 2020 principally due to $10.0 million in dividends paid and $3.1 million in repurchases of common stock, partially offset by $3.2 million in proceeds due to the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

Cash, cash equivalents and short-term investments were $199.2 million at June 30, 2021, a decrease of $57.9 million from $257.1 million at December 31, 2020.

This decrease resulted primarily from $10.5 million in dividends paid, $43.3 million in repurchases of common stock, $63.8 million in repayment of the 2020 Term B Loan Facility, $17.4 million in cash used to acquire certain assets and liabilities of MobiTV, Inc.

(the “MobiTV Acquisition”), and $6.8 million in debt refinancing costs, which was partially offset by $83.0 million in cash generated from operations and $7.2 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

Cash and cash equivalents totaled $129.0 million at June 30, 2021, a decrease of $41.2 million from $170.2 million at December 31, 2020.

Cash flows provided by operations were $83.0 million for the six months ended June 30, 2021, primarily due to our net income of $2.7 million being further adjusted for non-cash items of depreciation of $11.2 million, amortization of intangible assets of $104.4 million, stock-based compensation expense of $28.1 million and a loss on debt extinguishment of $8.0 million.

These increases were partially offset by $77.9 million in changes in operating assets and liabilities including payments of employee annual bonuses earned in 2020.

Cash flows provided by operations were $67.2 million for the six months ended June 30, 2020, primarily due to our net loss of $4.3 million being adjusted for non-cash items of depreciation of $5.1 million, amortization of intangible assets of $54.6 million, stock-based compensation expense of $16.5 million, loss on debt extinguishment of $8.3 million and $11.3 million in

changes in operating assets and liabilities.

These increases were partially offset by a reduction of $28.9 million in deferred income taxes .

Net cash used in investing activities was $6.2 million for the six months ended June 30, 2021, primarily related to purchases of short-term investments of $45.8 million, cash used in the MobiTV Acquisition of $17.4 million and capital expenditures of $4.9 million, partially offset by maturities and sales of securities of $61.9 million.

Net cash provided by investing activities was $135.7 million for the six months ended June 30, 2020, primarily related to maturities and sales of securities of $20.7 million and net cash acquired in the Mergers of $117.4 million, partially offset by $1.9 million in capital expenditures.

Net cash used in financing activities was $117.2 million for the six months ended June 30, 2021 principally due to $63.8 million in repayment of indebtedness, $6.8 million in debt refinancing costs, $10.5 million in dividends paid, and $43.3 million in repurchases of common stock, partially offset by $7.2 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

Net cash used in financing activities was $103.6 million for the six months ended June 30, 2020 principally due to $1,078.6 million in repayment of indebtedness, $20.2 million in dividends paid, and $20.9 million in repurchases of common stock, partially offset by $1,011.3 million in net long-term debt proceeds and $4.8 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.

The primary objectives of our investment activities are to preserve principal and to maintain liquidity while at the same time capturing a market rate of return.

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If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected

is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an allowance for credit losses is recognized in accumulated other comprehensive income or loss.

W e did not recognize a provision for credit loss es related to our AFS debt securities in the three months ended March 31, 2021 and 2020, respectively .

We did not recognize a provision for credit losses related to our AFS debt securities in the three and six months ended June 30, 2021 and 2020, respectively.

On December 1, 2016, we entered into a Credit Agreement with Royal Bank of Canada (“RBC”) which provided for a $600.0 million seven-year term B loan facility.

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On June 1, 2020, in connection with the consummation of the Mergers, we entered into a Credit Agreement (the “2020 Credit Agreement”) by and among us, 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 our 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 quarterly installments 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.

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

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 our 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 amortized in quarterly installments 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, we 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 repay existing indebtedness of the combined Company, including the aforementioned Term B Loan Facility with RBC.

We commenced repaying quarterly installments under the 2020 Term B Loan Facility in the third quarter of 2020.

The agreement permits prepayment of principal without penalty and on December 31, 2020, we elected to make a voluntary principal payment of $150.0 million.

At March 31, 2021, $828.5 million was outstanding under the 2020 Term B Loan Facility with an interest rate, including amortization of debt discount and issuance costs, of 5.2%.

The agreement permitted prepayment of principal without penalty and on December 31, 2020, we elected to make a voluntary principal payment of $150.0 million.

On June 8, 2021, we paid down $50.6 million in principal balance and completed a refinancing of the 2020 Term B Loan Facility by entering into an amendment to the 2020 Term B Loan Facility (the “ Refinanced Term B Loans”) to provide a new loan facility in the amount of $810 .0 million, reducing the borrowing rate by 50 basis points and extending the loan maturity date to June 2028.

At June 30, 2021, $810.0 million was outstanding under the Refinanced Term B Loans with an interest rate, including amortization of debt discount and issuance costs, of 5.0%.

Interest is payable monthly.

Under the existing loan agreements, we have future minimum principal payments for our debt of $39.4 million for the remainder of 2021, $52.5 million, $72.2 million and $78.8 million in 2022, 2023 and 2024, respectively, with the remaining principal balance due in 2025.

We are obligated to pay a portion of excess cash flow on an annual basis beginning March 31, 2022 based on certain ratios and our excess cash flow generated for the immediately preceding calendar year as well as for any litigation settlements subsequent to the Mergers.

The voluntary principal payment described above may be offset against any obligated payments due as of March 31, 2022.

The 2020 Term B Loan Facility contains customary covenants, and as of March 31, 2021, we were in full compliance with such covenants.

In August 2007, Xperi’s Board of Directors authorized a plan to repurchase Xperi’s outstanding shares of common stock dependent on market conditions, share price and other factors.

This authorization was terminated upon closing of the Mergers.

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

Since the inception of the plan, and through March 31, 2021, we have repurchased approximately 6.0 million shares of common stock at a total cost of $95.1 million at an average price of $15.87.

During the three months ended March 31, 2021, our repurchases totaled $25.0 million.

As of March 31, 2021, the total remaining amount available for repurchase was $54.9 million.

On April 22, 2021, our Board of Directors authorized an additional $100.0 million of purchases, increasing the current total available balance to $154.9 million as of such date.

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

In April 2021, our Board of Directors authorized payment of a quarterly dividend of $0.05 per share, to be paid in June 2021.

Under the existing loan agreements, we have future minimum principal payments for our debt of $20.3 million for the remainder of 2021, $40.5 million in each year from 2022 through 2027, with the remaining principal balance of $546.8 million due in 2028.

We are obligated to pay a portion of excess cash flow on an annual basis beginning in March 2023 based on certain leverage ratios and our excess cash flow generated for the immediately preceding calendar year.

The Refinanced Term B Loans contain customary covenants, and as of June 30, 2021 we were in full compliance with such covenants.

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

No expiration has been specified for this Plan.

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

The stock repurchases may be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions, or pursuant to a Rule 10b5-1 plan.

Since the inception of the Plan, and through June 30, 2021, we have repurchased an aggregate of approximately 6.4 million shares of common stock at a total cost of $105.1 million at an average price of $16.30.

During the six months ended June 30, 2021, we repurchased an aggregate of approximately 1.5 million shares of common stock at a total cost of $35.0 million at an average price of $22.93.

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

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

The amount and timing of any repurchases under the Plan depend on a number of factors, including but not limited to, the trading price, volume and availability of our common shares.

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

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.

We anticipate that all quarterly dividends will be paid out of cash, cash equivalents and short-term investments.

From 2018 through the first quarter of 2021, we generated approximately $759 million of cash flows from operating activities.

From 2018 through the second quarter of 2021, we generated approximately $815 million of cash flows from operating activities.

While we expect to continue to generate cash flows from operating activities for the remainder of 2021, the COVID-19 pandemic continues to present uncertainties to the level of such cash flows as compared to prior years.

Additionally, integration of the two legacy businesses post-merger and transaction costs relating to the contemplated separation of the two businesses will impact operating cash flow for 2021.

Additionally, integration of the two legacy business operations of Xperi and TiVo post-merger and transaction costs relating to the contemplated separation of our two business segments will impact operating cash flow for 2021.

We have taken actions to manage cash flows by reducing discretionary spending and other variable costs, delaying employee hiring, and closely monitoring receivables and payables.

We believe that based on current levels of operations and anticipated growth, our cash from operations, together with cash, cash equivalents and investments currently available, will be sufficient to fund our operations, debt service, dividends, stock

repurchases and acquisition needs for at least the next twelve months.

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

There can be no assurance that equity or debt financing will be available when needed or, if available, that such financing will be on terms satisfactory to us and not dilutive to our then-current stockholders, and any debt financing may require us to agree to restrictive covenant that may limit our ability to conduct our business operations.

Contractual Obligations

For information about our contractual obligations, see “Contractual Obligations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.

Other than the principal payment of $13.1 million made by us under the 2020 Term B Loan Facility in March 2021, our contractual obligations have not changed materially since December 31, 2020.

As of March 31, 2021, we had accrued $96.0 million of unrecognized tax benefits in long-term income taxes payable related to uncertain tax positions, which includes $3.1 million of accrued interest and penalties.

At this time, we are unable to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time.

Other than the principal payment of $63.8 million made by us under the 2020 Term B Loan Facility in the first six months of 2021, our contractual obligations have not changed materially since December 31, 2020.

As of June 30, 2021, we had accrued $96.0 million of unrecognized tax benefits in long-term income taxes payable related to uncertain tax positions, which includes $3.4 million of accrued interest and penalties.

At this time, we are unable to reasonably

estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time.

If we are successful in receiving our South Korean withholding tax refunds of $ 116.8 million, including interest and foreign exchange gain, then $62.9 million of unrecognized tax benefit would be payable to the U.S.

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Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Critical Accounting Policies and Estimates

During the three months ended March 31, 2021, there were no significant changes in our critical accounting policies.

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

During the six months ended June 30, 2021, there were no significant changes in our critical accounting policies.

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

For a discussion of our critical accounting policies and estimates, see Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis