Adeia Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the year ended December 31, 2020 found in the Form 10-K filed by Xperi Holding Corporation on February 26, 2021 (the “Form 10-K”). This Quarterly Report contains forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “could,” “would,” “may,” “intends,” “targets” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. 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, 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. Consequently, forward-looking statements are inherently subject to risks, uncertainties, and changes in condition, significance, value and effect, including those discussed under the heading “Risk Factors” in our annual report on Form 10-K and other documents we file from time to time with the Securities and Exchange Commission (the “SEC”), such as our quarterly reports on Form 10-Q and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report and are based on information currently and reasonably known to us. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report, other than as required by law. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. As used herein, the “Company,” “we,” “us” and “our” refer to Xperi when referring to periods prior to June 1, 2020 and Xperi Holding Corporation when referring to periods subsequent to June 1, 2020. Unless specified otherwise, the financial results in this Quarterly Report are those of the Company and its subsidiaries on a consolidated basis. Business Overview 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. On June 2, 2020, Xperi Holding Corporation’s common stock, par value $0.001 per share, commenced trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbol “XPER.” Xperi was determined to be the accounting acquirer in the Mergers. As a result, the historical financial statements of Xperi for periods prior to the Mergers are considered to be the historical financial statements of Xperi Holding Corporation. Our results of operations include the operations of TiVo after June 1, 2020. We are a leading consumer and entertainment product/solutions licensing company and one of the industry’s largest intellectual property (IP) licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 11,000 patents and patent applications worldwide. We invent, develop, and deliver technologies that enable extraordinary experiences. Xperi technologies, delivered via our brands (DTS, HD Radio, IMAX Enhanced, Invensas, TiVo), and by our subsidiary, Perceive Corporation (“Perceive”), make entertainment more entertaining, and smart devices smarter. Our technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for partners, customers and consumers. We shape how millions of consumers access and experience entertainment content, and our innovations are found in billions of devices and hundreds of millions of interfaces around the globe. Headquartered in Silicon Valley with operations around the world, we have approximately 1,800 employees and over 35 years of operating experience. 39 We are currently contemplating and may pursue, subject to any required regulatory approvals, a separation of our Product business and IP Licensing business through a tax-efficient transaction, resulting in two independent, publicly traded companies. We are evaluating the optimal timing of the contemplated business separation and currently anticipate that such separation will not be completed earlier than the first half of 2022 . COVID-19 Impact 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. 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 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 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 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-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. Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided under Part I, Item 1A – Risk Factors of the Form 10-K. Results of Operations Revenue We generate revenue from the following principal activities. License Agreements We operate in two business segments. 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 40 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: ( i ) fixed-fee Media IP licensing, (ii) fixed-fee or minimum guarantee Semiconductor IP or Product licensing, and (iii) per-unit or per-subscriber royalty licenses . Fixed-fee Media IP licensing Our long-term fixed-fee Media IP licensing agreements provide our customers with the rights to future patented technologies over the term of the agreement that are highly interdependent or highly interrelated to the patented technologies provided at the inception of the agreement. We treat these rights as a single performance obligation with revenue recognized on a straight-line basis over the term of the fixed-fee license agreement. At times, we enter into license agreements in which a licensee is released from past patent infringement claims and is granted a license to ship an unlimited number of units or for an unlimited number of subscribers over a future period for a fixed fee. In these arrangements, we allocate the transaction price between the release for past patent infringement claims and the future license. As the release from past patent infringement claims is generally satisfied at execution of the agreement, the transaction price allocated to the release from past patent infringement claims is generally recognized in the period the agreement is executed and the amount of transaction price allocated to the future license is recognized ratably over the future license term. Fixed-fee or minimum guarantee Semiconductor IP or Product licensing We enter into Product or Semiconductor IP licenses that have fixed fee or minimum guarantee arrangements, whereby licensees pay a fixed fee for the right to incorporate our technology in the licensee's products over the license term. In arrangements with a minimum guarantee, the fixed fee component corresponds to a minimum number of units or dollars that the customer must produce or pay, with additional per-unit fees for any units or dollars exceeding the minimum. In most cases, the customer pays the fixed license fee in specified installments over the license term. For both fixed fee and minimum guarantee agreements for Semiconductor IP or Product licensing, we recognize the full fixed fee as revenue at the beginning of the license term, when the licensee has the right to use the IP and begins to benefit from the license. If the contract term of a fixed fee or minimum guarantee arrangement is longer than one year, we also consider the scheduled payment arrangements to determine whether a significant financing component exists. In general, if the payment arrangements extend beyond the initial twelve months of the contract, we treat a portion of the payments as a significant financing component. The discount rate used for each arrangement reflects the rate that would be used in a separate financing transaction between us and the licensee at contract inception and takes into account the credit characteristics of the licensee and market interest rates as of the date of the agreement. As such, the amount of fixed fee revenue recognized at the beginning of the license term will be reduced by the calculated financing component. We actively monitor and enforce our IP, including seeking appropriate compensation from customers that have under-reported royalties owed under a license agreement and from third parties that utilize our intellectual property without a license. As a result of these activities, we 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. 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. We recognize revenue from recoveries when a binding agreement has been executed and we conclude collection under that agreement is likely. Per-unit or per-subscriber royalty licenses We recognize 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. We generally recognize 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. Estimating licensees’ quarterly royalties prior to receiving the royalty reports requires us to make significant assumptions and judgments related to forecasted trends and growth rates used to estimate quantities shipped by customers, which could have a material impact on the amount of revenue we report on a quarterly basis. Arrangements with Multiple System Operators for the TiVo Service 41 Our arrangements with multiple system operators (MSOs) typically include software customization and set-up services, associated maintenance and support, limited training, post-contract support, TiVo-enabled DVRs, non-DVR STBs and the TiVo service. We have two types of arrangements with MSOs that include technology deployment and engineering services. In instances where we host the TiVo service, non-refundable payments received for customization and set-up services are deferred and recognized as revenue ratably over the hosting term. The related cost of such services is capitalized to the extent it is deemed recoverable and amortized to cost of revenue over the same period as the related TiVo service revenue is recognized. We estimate the stand-alone selling prices for training, DVRs, non-DVR STBs and maintenance and support based on the price charged in stand-alone sales of the promised good or service. The stand-alone selling price for the TiVo service is determined considering the size of the MSO and expected volume of deployment, market conditions, competitive landscape, internal costs and total gross margin objectives. For a term license to the TiVo service, we receive license fees for the hosted TiVo service on either a per-subscriber per-month basis or a fixed fee. We recognize revenue from per-subscriber per-month licenses during the month the TiVo service is provided to the customer and recognize revenue from fixed fee licenses ratably over the license period. In arrangements where we do not host the TiVo service and that include engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of the software, we recognize revenue as progress toward completion is made using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Estimating project costs requires forecasting costs, tracking progress toward completion and projecting the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement, and revisions to estimates are recognized on a cumulative catch-up basis when the changed conditions become known. We generally recognize revenue from license fees for the TiVo service that the Company does not host on a per-subscriber per-month basis due to the recognition constraint on intellectual property usage-based royalties. Subscription Services Subscription services revenue primarily consists of fees to provide customers with access to one or more of our hosted products such as the iGuide IPG, advanced search and recommendations, metadata and analytics products, including routine customer support. We generally receive per-subscriber per-month fees for the iGuide IPG and search and recommendations service and revenue is recorded in the month the customer uses the service. We generally receive a monthly or quarterly fee from our metadata or analytics licenses for the right to use the metadata or access our analytics platform and to receive regular updates. Revenue from our metadata and analytics service is recognized ratably over the subscription period. TiVo-enabled DVRs and non-DVRs and related TiVo Service We sell TiVo-enabled DVRs and non-DVRs and the related service directly to customers through sales programs via the TiVo.com website and license the sale of TiVo-enabled DVRs and non-DVRs through a limited number of retailers. After the initial subscription period, all customers have various pricing options when they renew their subscription. The transaction price allocated to the DVR is recognized as revenue upon shipment to the customer and the transaction price allocated to the TiVo service is recognized as revenue ratably over the service period. Subscription revenue from lifetime subscriptions is recognized ratably over the estimated useful life of the DVR associated with the subscription. The estimated useful life for a DVR depends on a number of assumptions, including but not limited to, customer retention rates, the timing of new product introductions and historical experience. We periodically reassess the estimated useful life of a DVR. When the actual useful life of the DVR materially differs from our estimates, the estimated useful life of the DVR is adjusted, which could result in the recognition of revenue over a longer or shorter period of time. 42 The following table presents our historical operating results for the periods indicated as a percentage of revenue: Three Months Ended Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Revenue: Licensing, services and software 98 % 99 % 98 % 99 % Hardware 2 1 2 1 Total revenue 100 100 100 100 Operating expenses: Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets 10 6 10 4 Cost of hardware revenue, excluding depreciation and amortization of intangible assets 2 1 3 1 Research, development and other related costs 25 28 25 26 Selling, general and administrative 30 50 30 41 Depreciation expense 3 2 3 2 Amortization expense 23 23 23 21 Litigation expense 1 3 1 2 Total operating expenses 94 113 95 97 Operating income (loss) 6 (13 ) 5 3 Interest expense 5 5 5 5 Other income and expense, net (1 ) — (1 ) — Loss on debt extinguishment 4 6 2 3 Loss before taxes (2 ) (24 ) (1 ) (5 ) Benefit from income taxes (1 ) (7 ) (2 ) (3 ) Net income (loss) (1 )% (17 )% 1 % (2 )% Total Revenue (in thousands, except for percentages): Three Months Ended June 30, 2021 June 30, 2020 Increase/ (Decrease) % Change Total revenue $ 222,272 $ 137,631 $ 84,641 61 % 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) % Change Total revenue $ 443,868 $ 255,296 $ 188,572 74 % 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. 43 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. Cost of Hardware Revenue, E xcluding Depreciation and Amortization of Intangible Assets 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 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. Research, Development and Other Related Costs Research, development and other related costs (“R&D expense”) are comprised primarily of employee-related costs, stock-based compensation expense, engineering consulting expenses associated with new product and technology development, product commercialization, quality assurance and testing costs, as well as costs related to patent applications and examinations, reverse engineering, materials, supplies, equipment depreciation and an allocation of facilities costs. All research, development and other related costs are expensed as incurred. 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 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, 44 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 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 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 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 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. Upon expiration of our customers’ licenses, if those licenses are not renewed, litigation may become necessary to secure payment of reasonable royalties for the use of our patented technology. If we plan for or initiate such litigation, our future litigation expenses may increase. 45 Stock- based Compensation Expense 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 Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Cost of licensing, services and software revenue $ 529 $ 73 $ 852 $ 73 Research, development and other related costs 4,810 2,838 9,157 5,874 Selling, general and administrative 9,496 5,558 18,045 10,509 Total stock-based compensation expense $ 14,835 $ 8,469 $ 28,054 $ 16,456 Stock-based compensation awards include employee stock options, restricted stock awards and units, and employee stock plan purchases. 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 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, 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 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. 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 effective tax rate is the result of the most 46 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. The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be objectively verified. After considering both positive and negative evidence to assess the recoverability of our net deferred tax assets, we determined that it was not more-likely-than-not that we would realize our federal, certain state and certain foreign deferred tax assets given the substantial amount of tax attributes that will remain unutilized to offset forecasted future tax liabilities. In the future, we may release our deferred tax asset valuation allowance associated with our federal, state or foreign deferred tax assets depending on achievement of future profitability in relevant jurisdictions, or implementing tax planning strategies that enable us to utilize deferred tax assets. There can be no assurance that we will generate profits or implement tax strategies in future periods enabling us to fully realize our deferred tax assets. The timing of recording a deferred tax asset valuation allowance or the reversal of such valuation allowance is subject to objective and subjective factors that cannot be known in advance. We intend to continue maintaining a full valuation allowance on our federal deferred tax assets until there is sufficient evidence to support the reversal of all or some of a portion of these allowances. However, given our current earning and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of our federal valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain federal deferred tax assets and a decrease to income tax expense for the period the release is recorded. Segment Operating Results We operate in two reportable segments: (1) Product and (2) IP Licensing. There are certain corporate overhead costs that are not allocated to these reportable segments because these operating amounts are not considered in evaluating the operating performance of our business segments. Our Chief Executive Officer has been determined to be the Chief Operating Decision Maker (“CODM”) in consideration with the authoritative guidance on segment reporting. The Product segment consists primarily of licensing our internally-developed audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions. Audio, digital radio, imaging solutions and edge-based machine learning include the delivery of software and/or hardware-based solutions to our consumer electronics (“CE”) customers, automotive manufacturers or their supply chain partners. UX products and services revenue is primarily derived from multi-channel video service providers and CE manufacturers, licensing the TiVo service and selling TiVo-enabled devices like the Stream 4K, Personalized Content Discovery, enriched Metadata, viewership data and advertising. The IP Licensing segment consists primarily of licensing our innovations to leading companies in the media and semiconductor industries. Licensing arrangements include access to one or more of our foundational patent portfolios and may also include access to some of our industry-leading technologies and proven know-how. In media, our licensees include multichannel video 47 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 . We do not identify or allocate assets by reportable segment, nor does the CODM evaluate reportable segments using discrete asset information. Reportable segments do not record inter-segment revenue and accordingly there are none to report. 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 (loss) (in thousands): Three Months Ended Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Revenue: Product segment $ 120,426 $ 64,124 $ 244,008 $ 120,066 IP Licensing segment 101,846 73,507 199,860 135,230 Total revenue 222,272 137,631 443,868 255,296 Operating expenses: Product segment 105,047 66,557 213,579 112,794 IP Licensing segment 34,875 20,449 68,442 30,744 Unallocated operating expenses (1) 69,096 68,344 138,194 104,950 Total operating expenses 209,018 155,350 420,215 248,488 Operating income (loss): Product segment 15,379 (2,433 ) 30,429 7,272 IP Licensing segment 66,971 53,058 131,418 104,486 Unallocated operating expenses (1) (69,096 ) (68,344 ) (138,194 ) (104,950 ) Total operating income (loss) $ 13,254 $ (17,719 ) $ 23,653 $ 6,808 (1) 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 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 48 Three Months Ended Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Total revenue $ 120,426 $ 64,124 $ 244,008 $ 120,066 Operating expenses: Total cost of revenue 26,484 9,680 54,467 11,264 Research, development and other related costs 46,425 30,781 94,395 53,629 Litigation 564 529 1,654 739 Depreciation 3,832 2,797 7,626 4,169 Amortization 27,742 22,770 55,437 42,993 Total operating expenses 105,047 66,557 213,579 112,794 Total operating income (loss) $ 15,379 $ (2,433 ) $ 30,429 $ 7,272 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 Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Total revenue $ 101,846 $ 73,507 $ 199,860 $ 135,230 Operating expenses: Total cost of revenue 400 — 547 — Research, development and other related costs 7,983 7,445 15,208 13,204 Litigation 1,738 3,342 3,181 5,235 Depreciation 254 388 506 745 Amortization 24,500 9,274 49,000 11,560 Total operating expenses 34,875 20,449 68,442 30,744 Total operating income $ 66,971 $ 53,058 $ 131,418 $ 104,486 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. 49 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 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 As of (in thousands, except for percentages) June 30, 2021 December 31, 2020 Cash and cash equivalents $ 128,960 $ 170,188 Short-term investments 70,201 86,947 Total cash, cash equivalents and short-term investments $ 199,161 $ 257,135 Percentage of total assets 8 % 10 % Six Months Ended June 30, 2021 June 30, 2020 Net cash from operating activities $ 82,979 $ 67,242 Net cash from investing activities $ (6,215 ) $ 135,723 Net cash from financing activities $ (117,184 ) $ (103,597 ) 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 $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 50 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. To achieve these objectives, we maintain a diversified portfolio of securities including money market funds and debt securities including corporate bonds and notes, municipal bonds and notes, commercial paper, treasury and agency notes and bills and certificates of deposit. We invest excess cash predominantly in high-quality investment grade debt securities with less than three years to maturity. Our marketable debt securities are classified as available-for-sale (“AFS”) with credit losses recognized as a credit loss expense and non-credit related unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income or loss. The fair values for our securities are determined based on quoted market prices as of the valuation date or observable prices for similar assets. For AFS debt securities in an unrealized loss position, we first assess whether we intend to sell, or it is more-likely-than-not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. 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. Any impairment that has not been recorded through an allowance for credit losses is recognized in accumulated other comprehensive income or loss. 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. The Term B Loan Facility was scheduled to mature on November 30, 2023. During 2019 we made three voluntary principal payments totaling $150.0 million, and upon consummation of the Mergers on June 1, 2020, we repaid the full remaining balance of $344.0 million under the Credit Agreement. In addition, upon consummation of the Mergers on June 1, 2020, we repaid $734.6 million of assumed TiVo debt with the proceeds from a new borrowing of $1,050 million discussed below. 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 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 51 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 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 $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 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 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 $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 52 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. tax authorities . Refer to “Note 15 – Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements for additional information. Off-Balance Sheet Arrangements 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 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. Recent Accounting Pronouncements See “Note 2 – Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption. Item 3. Quantitative and Qualitative Disclosures About Market Risk For a discussion of the Company’s market risk, see Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the Form 10-K.