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Item 9A. Controls and Procedures

2022-02-24 compared with 2021-02-26 · 378 added, 476 removed, 1288 unchanged (40% of the section changed)

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Attached as exhibits to this Form 10-K are certifications of Xperi Holding Corporation’s Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rules 13a-15(e) and 15d-15(e) of the Exchange Act.

This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications and it should be read in conjunction with the certifications, for a more complete understanding of the topics presented.

This “Controls

and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications and it should be read in conjunction with the certifications, for a more complete understanding of the topics presented.

Evaluation of Disclosure Controls and Procedures

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In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the evaluation date).

Based on this evaluation, because of the material weaknesses in internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2020.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2021 that our disclosure controls and procedures were effective to provide reasonable assurance that the information relating to Xperi Holding Corporation, including our consolidated subsidiaries, required to be disclosed in our reports that are filed or submitted under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Commission’s rules and forms, and (ii) is accumulated and communicated to Xperi Holding Corporation’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

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and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Xperi Holding Corporation’s assets that could have a material effect on the financial statements.

Xperi Holding Corporation’s management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the assessment by Xperi Holding Corporation’s management, we determined that the Company’s internal control over financial reporting as of December 31, 2020 was not effective due to the material weaknesses described below.

The Company did not design and maintain effective controls related to the review of cash flow forecasts used in the valuation of intangible assets acquired in a business combination and the goodwill impairment analyses.

Specifically, the control activities related to the review of the inputs and assumptions used in the development of the cash flow forecast used in the valuation of intangible assets acquired in a business combination and goodwill impairment analyses were not designed at an appropriate level of precision to prevent or detect a material misstatement.

These control deficiencies did not result in a misstatement to our consolidated financial statements for the year ended December 31, 2020.

However, these control deficiencies, if not remediated, could result in a misstatement to the annual or interim consolidated financial statements which would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected .

Accordingly, our management has determined that these control deficiencies constitute material weaknesses.

We have excluded the business associated with the acquisition of TiVo Corporation ( “TiVo”) from our assessment of internal control over financial reporting as of December 31, 2020 because the entity was acquired by the Company in a merger accounted for as a business combination during 2020.

The total assets and total revenue of TiVo represent 14% and 67%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020.

Xperi Holding Corporation’s management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021, utilizing the criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the assessment by Xperi Holding Corporation’s management, we determined that Xperi Holding Corporation’s internal control over financial reporting was effective as of December 31, 2021.

The effectiveness of Xperi Holding Corporation’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears on page F-1 of this Annual Report on Form 10-K.

Remediation Plans

Our management, with oversight from our Audit Committee, is in the process of developing and implementing remediation plans in response to the identified material weaknesses described above.

Specifically, we are designing and implementing additional control activities over the review of the inputs and assumptions in our cash flow forecasts.

These controls are expected to require additional documentation and the development of procedures related to the valuation of intangible assets acquired in a business combination and goodwill impairment calculations.

These material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We believe the measures described above will remediate the control deficiencies we have identified and strengthen our internal control over financial reporting.

We are committed to continuing to improve our internal control processes and will continue to review, optimize and enhance our financial reporting controls and procedures.

The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations.

As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above.

Remediation of Previously Disclosed Material Weaknesses

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, management concluded that material weaknesses existed in the Company's internal control over financial reporting as it did not design and maintain effective controls related to the review of cash flow forecasts used in the valuation of intangible assets acquired in a business combination and the goodwill impairment analyses.

Specifically, the control activities related to the review of the inputs and assumptions used in the development of cash flow forecasts used in the valuation of intangible assets acquired in a business combination and the goodwill impairment analyses were not designed at an appropriate level of precision to prevent or detect a material misstatement.

Since identifying the material weaknesses, management has implemented its plan to remediate these control deficiencies, including updating the Company’s design, documentation and implementation of certain internal controls to address the previously identified control deficiencies.

Management has completed its documentation, testing and evaluation of the updated internal controls and determined that, as of December 31, 2021, these controls have been appropriately designed and

implemented, and have operated effectively for a sufficient period of time to conclude that the previously identified material weaknesses have been remediated.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) under the Exchange Act, the Company’s management, including its Chief Executive Officer and Chief Financial Officer, has evaluated the Company’s internal control over financial reporting to determine whether any changes occurred during the fourth fiscal quarter covered by this annual report that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

Based on that evaluation, there has been no such change during the fourth fiscal quarter of 2020.

During the quarterly period ended December 31, 2021, we completed the design and implementation of certain control activities related to the review of the inputs and assumptions in our cash flow forecasts.

As such, there were changes to our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), during the quarterly period ended December 31, 2021, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of internal control will be met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of the controls must be considered relative to their costs.

While our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of their effectiveness, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple errors or mistakes.

Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Other Information

Not applicable.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

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The text of our code of business conduct and ethics has been posted on our website at http://www.xperi.com.

and is included as an exhibit to our Current Report on Form 8-K filed with the SEC on December 1, 2016.

Executive Compensation

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Principal Accountant Fees and Services

The information required by this Item 14 is incorporated by reference from the information under the caption “Ratification of Independent Registered Public Accounting Firm” that will be contained in the Proxy Statement.

The information required by this Item 14 is incorporated by reference from the information under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm” that will be contained in the Proxy Statement.

Exhibits and Financial Statement Schedules

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The exhibits listed on the Exhibit Index preceding the signature page to this Annual Report are filed as part of this Annual Report.

Auditor Firm Id:

238 Auditor Name:

PricewaterhouseCoopers LLP Auditor Location:

San Jose, California, USA

Report of Independent Registered Public Accounting Firm

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In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date related to the Company not designing and maintaining effective controls related to the review of cash flow forecasts used in the valuation of intangible assets acquired in a business combination and goodwill impairment analyses.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness es referred to above are described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A .

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Changes in Accounting Principles

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue in 2018.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the

risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the business assoc iated with the acquisition of TiVo Corporation (the “ TiVo business ” ) from its assessment of internal control over financial reporting as of December 31, 2020 because TiVo was acquired by the Company in a merger accounted for a s a business combination during 2020.

We have also excluded the TiVo business from our audit of internal control over financial reporting.

The TiVo business has total assets and total revenues excluded from management's assessment and our audit of internal control over financial reporting representing approximately 14% and 67% , respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2020.

Definition and Limitations of Internal Control over Financial Reporting

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A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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As described in Note 4 to the consolidated financial statements, at times, the Company enters into long-term fixed- fee media IP license agreements in which a licensee is released from past patent infringement claims or 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, management allocates the transaction price between the release for past patent infringement claims and the future license.

Revenue from the initial contract recognition of fixed-fee media IP licensing arrangements, which are related to the TiVo businesses, which were acquired in a merger during 2020, is a component of the total IP segment revenue of $515.9 million for the year ended December 31, 2020.

In these arrangements, management allocates the transaction price between the release for past patent infringement claims and the future license which requires significant management judgment.

Revenue from the initial contract recognition of fixed-fee media IP licensing arrangements is a significant component of the total IP segment revenue of $391.2 million for the year ended December 31, 2021.

In determining the stand-alone selling price of the release for past patent infringement claims and the future license, management considers such factors as the number of units shipped in the past or the number of past subscribers and the relevant geographies of the shipped units or subscribers, the future number of subscribers or units, as well as the licensing rate the Company generally receives for per subscriber or units shipped in the same geographies.

The principal considerations for our determination that performing procedures relating to revenue recognition – allocation of transaction price in fixed-fee media IP licensing arrangements is a critical audit matter are the significant judgment by management in (i) estimating the standalone selling price for certain performance obligations and (ii) allocating the transaction price on a relative standalone selling price basis to those individual performance obligations;

this in turn led to significant auditor judgment, subjectivity and effort in performing procedures to evaluate management’s estimates of standalone selling price and the allocation of transaction price to the individual performance obligations.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included the following for a sample of contracts, (i) reading executed contracts to understand the terms and conditions and performance obligations, (ii) evaluating management’s identification of the individual performance obligations, (iii) testing management’s determination of the transaction price and the allocation of the transaction price to the individual performance obligations based on relative standalone selling price, and (iv) evaluating and testing the reasonableness of the factors used in management’s estimation of standalone selling price.

Testing the estimation of standalone selling price involved testing the completeness and accuracy of the data utilized by management.

TiVo Merger – Valuation of Acquired Intangible Assets

As described in Notes 1, 2 and 9 to the consolidated financial statements, on December 18, 2019, Xperi Corporation (“Xperi”) entered into an Agreement and Plan of Merger and Reorganization with TiVo Corporation (“TiVo”) to combine in an all-stock merger of equals transaction (the “Mergers”).

The merger consideration was calculated to be $828.3 million.

The Company measured the identifiable assets acquired and liabilities assumed at fair value, which resulted in the recognition of $878.0 million of intangible assets.

Identifiable intangible assets primarily consist of patents, developed technology, customer relationships, trademarks and tradenames, and content database.

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

The estimation of fair value required significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors.

Inputs were generally determined using historical data supplemented by current and anticipated market conditions, and growth rates.

Customer contracts and relationships relating to the IP business segment were valued using a “with and without” method.

Significant assumptions used in this discounted cash flow analysis are the revenue growth rate, cost of sales, and discount rate.

Patents, and other customer contracts and relationships relating to the Product business segment, were valued using an excess earnings method.

Significant assumptions used in the discounted cash flow analysis for (i) other customer contracts and relationships were the revenue growth rate, EBITDA margins, and discount rate and (ii) patents were the revenue growth rate, EBITDA margins, and discount rate.

Trademarks and tradenames, developed technology, and content database intangible assets were valued using a relief-from-royalty method.

The significant assumptions used in the discounted cash flow analysis for (i) trademarks and tradenames were royalty rates, revenue growth rates, and discount rate and (ii) developed technology and content database were the royalty rates.

The principal considerations for our determination that performing procedures relating to the TiVo merger – valuation of acquired intangible assets is a critical audit matter are the significant judgment by management when determining the fair value estimates of the intangible assets acquired;

this in turn led to significant auditor judgment, subjectivity, and effort in performing procedures relating to the fair value measurement of the intangible assets acquired and in evaluating management’s significant assumptions related to, (i) revenue growth rate, cost of sales, and discount rate for the customer contracts and relationships related to the IP business segment;

(ii) revenue growth rate, EBITDA margins, and discount rate for other customer contracts and relationships related to the Product business segment;

(iii) revenue growth rate, EBITDA margins, and discount rate for the patents, (iv) royalty rates, revenue growth rates, and discount rate for the trademarks and tradenames, and (v) royalty rates for the developed technology and content database intangible assets.

Also, the audit effort involved the use of professionals with specialized skill and knowledge.

As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter specific to the precision of the design of controls relating to the review of the inputs and assumptions used in the development of the cash flow forecasts used in the valuation of intangible assets.

The principal considerations for our determination that performing procedures relating to revenue recognition – allocation of transaction price in fixed-fee media IP licensing arrangements is a critical audit matter are the significant judgment by management in (i) estimating the stand-alone selling price for certain performance obligations and (ii) allocating the transaction price on a relative stand-alone selling price basis to those individual performance obligations;

this in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating management’s estimates of the stand-alone selling price and the allocation of transaction price to the individual performance obligations.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of certain controls relating to the valuation of the acquired intangible assets, including controls over (i) management’s review of the valuation methods and completeness of intangible assets acquired and (ii) review of significant assumptions related to the royalty rates and discount rates.

These procedures also included, among others, reading the purchase agreement and testing management’s process in determining the fair value of the intangible assets acquired.

Testing management’s process included (i) evaluating the appropriateness of the valuation methods, (ii) testing the completeness and accuracy of data used by management, and (iii) evaluating the reasonableness of significant assumptions used by management related to the revenue growth rates, cost of sales, EBITDA margins, royalty rates, and discount rates.

Evaluating the reasonableness of management’s significant assumptions related to revenue growth rates, EBITDA margins, and cost of sales involved considering (i) past performance of the acquired business, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the methods used to value the acquired intangible assets, and the royalty rate and discount rate assumptions.

Goodwill Impairment Assessments - Product Reporting Unit

As described in Notes 2 and 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $847.0 million as of December 31, 2020, and the goodwill associated with the Product reporting unit was $523.8 million.

Goodwill is evaluated for potential impairment annually and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.

As of March 31, 2020, the Company proceeded with a quantitative interim goodwill impairment test and as a result, the Company concluded that the fair value of the reporting unit exceeded the carrying amount and no goodwill impairment charges were recognized.

As of September 30, 2020, the Company proceeded with a quantitative annual goodwill impairment test and as a result, the Company concluded that the fair value of the reporting unit exceeded the carrying amount and no goodwill impairment charges were recognized.

The Company first determines the fair value of a reporting unit using weighted results derived from an income approach and market approaches.

The fair value using an income approach is estimated through the discounted cash flow method based on assumptions about future conditions such as revenue growth rates, operating expenses, EBITDA, discount rates, and other assumptions .

Market approaches used by management include the market comparable method, which estimates the fair value based on revenue multiples from comparable companies in similar lines of business, and the market transaction method, which estimates the fair value by utilizing comparable transactions and transaction multiples.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Product reporting unit is a critical audit matter are the significant judgment by management when determining the fair value of the reporting unit, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates, operating expenses, EBITDA, and discount rate.

These procedures included testing the effectiveness of controls relating to fixed-fee media IP licensing revenue recognition, including controls over the estimated stand-alone selling price and the allocation of transaction price to the individual performance obligations.

These procedures also included, among others, for a sample of contracts, (i) reading executed contracts to understand the terms and conditions, (ii) evaluating management’s identification of the individual performance obligations, (iii) evaluating and testing the reasonableness of the factors used in management’s estimation of stand-alone selling price, and (iv) testing management’s determination of the transaction price and the allocation of the transaction price to the individual performance obligations based on the relative stand-alone selling price.

Testing the estimation of the standalone selling price involved testing the completeness and accuracy of the data utilized by management.

Goodwill Impairment Assessment - Product Reporting Unit

As described in Note 10 to the consolidated financial statements, the Company’s consolidated goodwill balance was $851.1 million as of December 31, 2021, and the goodwill associated with the Product reporting unit was $527.8 million.

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

As part of its annual goodwill impairment test, the Company elected to proceed with a quantitative impairment test as of October 1, 2021.

Based on the quantitative assessment, the Company concluded that the fair value of the Product reporting unit exceeded the carrying amount and no goodwill impairment charges were recognized.

The Company first determines the fair value of a reporting unit using weighted results derived from income and market approaches, which requires significant management estimates and judgments.

The fair value using an income approach is estimated through the discounted cash flow method based on assumptions about future conditions such as revenue growth rates associated with certain revenue streams, forecasted R&D expenses, the discount rate, and other assumptions.

Market approaches used by management include the market comparable method, which estimates the

fair value based on revenue multiples from comparable companies in similar lines of business, and the market transaction method, which estimates the fair value by utilizing comparable transactions and transaction multiples.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Product reporting unit is a critical audit matter are the significant judgment by management when determining the fair value of the reporting unit, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates associated with certain revenue streams, forecasted R&D expenses, and the discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

As previously disclosed by management, a material weakness existed during the year related to this matter specific to the precision of the design of controls relating to the review of the inputs and assumptions used in the development of the cash flow forecasts used to estimate the fair value of the reporting unit in performing the goodwill impairment analysis.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of certain controls relating to management’s goodwill impairment assessments of the Product reporting unit, including controls over (i) management’s review of the comparison of fair value and carrying value of the reporting unit, (ii) review of the valuation approach utilized and (iii) review of the discount rate assumption.

These procedures also included, among others, (i) testing management’s process for determining the fair value of the Product reporting unit, (ii) evaluating the appropriateness of the valuation approach, (iii) testing the completeness and accuracy of underlying data used in the estimate, and (iv) evaluating the significant assumptions related to the revenue growth rates, operating expenses, EBITDA, and discount rate.

Evaluating management’s significant assumptions related to the revenue growth rates, operating expenses, and EBITDA involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the valuation approach used in estimating the fair value of the reporting unit, and the discount rate assumption.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment of the Product reporting unit, including controls over the valuation of the reporting unit.

These procedures also included, among others, (i) testing management’s process for determining the fair value of the Product reporting unit, (ii) evaluating the appropriateness of the valuation approaches, (iii) testing the completeness and accuracy of underlying data used in the estimate, and (iv) evaluating the significant assumptions related to the revenue growth rates associated with certain revenue streams, forecasted R&D expenses, and the discount rate.

Evaluating management’s significant assumptions related to the revenue growth rates associated with certain revenue streams and forecasted R&D expenses involved evaluating whether the assumptions used by management were reasonable considering (i) current and past performance of the reporting unit, (ii) consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the valuation approaches used in estimating the fair value of the reporting unit and the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

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Years Ended December 31,

Licensing, services and software

Total revenue

Operating expenses:

Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets

Cost of hardware revenue, excluding depreciation and amortization of intangible assets

Cost of revenue, excluding depreciation and amortization of intangible assets

Research, development and other related costs

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Change in foreign currency translation adjustment

Net unrealized gains (losses) on available-for-sale debt securities

Net unrealized losses on available-for-sale debt securities

Other comprehensive income (loss), net of tax

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Cash and cash equivalents

Available-for-sale debt securities, at fair value (amortized cost and allowance for credit losses of $ 86,963 and $ 0 , respectively, at December 31, 2020)

Equity securities

Available-for-sale debt securities

Accounts receivable, net of allowance for credit losses of $ 3,102 and $ 7,336 , respectively

Unbilled contracts receivable

Unbilled contracts receivable, net

Other current assets

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Loss on debt extinguishment

Changes in operating assets and liabilities, net of business acquisitions:

Patent assets received in lieu of cash

Changes in operating assets and liabilities:

Accounts receivable

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Proceeds from debt, net

Debt refinancing costs

Contingent consideration payments after acquisition

Dividend paid

Proceeds from exercise of stock options

Proceeds from employee stock purchase program

Dividends paid

Proceeds from employee stock purchase program and exercise of stock options

Repurchases of common stock

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Balance at December 31, 2018

Cumulative-effect adjustment from adoption of ASU 2014-09

Issuance of subsidiary shares to noncontrolling interest

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

Cash dividends paid on common stock ($ 0.80 per share)

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Issuance of restricted stock, net of shares canceled

Repurchases of common stock, shares exchanged

Repurchases of common stock

Withholding taxes related to net share settlement of restricted awards

Stock-based compensation expense

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Issuance of subsidiary shares to noncontrolling interest

Net income (loss)

Other comprehensive income, net of tax

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Issuance of restricted stock, net of shares canceled

Repurchases of common stock, shares exchanged

Withholding taxes related to net share settlement of restricted awards

Repurchases of common stock

Common stock issued in merger transaction

Retirement of treasury stock

Stock-based compensation expense

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Issuance of subsidiary shares to noncontrolling interest

Net income (loss)

Other comprehensive income, net of tax

Other comprehensive loss, net of tax

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

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Issuance of restricted stock, net of shares canceled

Repurchases of common stock, shares exchanged

Withholding taxes related to net share settlement of restricted awards

Repurchases of common stock

Common stock issued in merger transaction

Retirement of treasury stock

Stock-based compensation expense

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The common stock of 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.” See “Note 9 – Business Combination” for a more detailed description of the Mergers.

Xperi was determined to be the accounting acquirer in the Mergers.

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The Company’s results of operations include the operations of TiVo after June 1, 2020, and TiVo’s assets and liabilities were recorded at their estimated fair values in the Company’s Consolidated Balance Sheets as of June 1, 2020.

See “Note 9 – Business Combination” for additional information on the Mergers.

Xperi Holding Corporation is 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.

The Company invents, develops, and delivers technologies that enable extraordinary experiences.

The Company’s technologies, delivered via its brands (DTS, HD Radio, IMAX Enhanced, Invensas, and TiVo), and by its subsidiary, Perceive Corporation, make entertainment more entertaining, and smart devices smarter.

The Company’s technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for customers, partners and consumers.

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

The Company has two principal segments, a product segment and an IP licensing segment.

The Product segment consists primarily of licensing Company-developed audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions.

Audio, digital radio, imaging solutions and edge-based machine learning include the delivery of software and/or hardware-based solutions to the Company’s consumer electronics (“CE”) customers, automotive manufacturers or their supply chain partners.

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 the Company’s innovations to leading companies in the media and semiconductor industries.

Xperi Holding Corporation is a leading consumer and entertainment product/solutions licensing company and one of the industry’s largest intellectual property licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 11,000 patents and patent applications worldwide.

The Company creates extraordinary experiences at home and on the go for millions of consumers around the world, elevating content and how audiences connect with it in a way that is more intelligent, immersive and personal.

Powering smart devices, connected cars, entertainment experiences and more, the Company has created a unified ecosystem that reaches highly engaged consumers, uncovering significant new business opportunities, now and in the future.

The Company’s technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for partners, customers and consumers.

The Company has two principal segments, an IP licensing segment and a product segment.

The IP Licensing segment consists primarily of licensing the Company’s innovations to leading companies in the broader entertainment industry, and those developing new technologies that will help drive this industry forward.

Licensing arrangements include access to one or more of the Company’s foundational patent portfolios and may also include access to some of its industry-leading technologies and proven know-how.

In media, the Company’s licensees include multichannel video programming distributors (MVPDs), over-the-top (OTT) video service providers, consumer electronics manufacturers, social media, and other new media companies.

In semiconductor, the Company’s licensees include memory, sensors, RF component, and foundry companies.

In its Product segment, the Company derives the majority of its revenue from licensing its technology to customers primarily through Technology License arrangements and Technology Solutions arrangements.

For Technology License arrangements, the customer obtains rights to the technology delivered at the commencement of the agreement.

For Technology Solutions arrangements, the customer receives access to a platform, media or data that includes frequent updates, where access to such updates is critical to the functionality of the technology.

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

The Company continues to evaluate the optimal timing of the contemplated business separation and currently anticipates that such separation will be completed in the second half of 2022.

The consolidated financial statements include the accounts of Xperi Holding Corporation, its wholly owned subsidiaries, and a majority-owned subsidiary.

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The operating results of Perceive have been consolidated in the Company’s consolidated financial statements since the fourth quarter of 2018.

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”).

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

All significant intercompany balances and transactions are eliminated in consolidation.

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Reclassification

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

Presentation changes were made to the Consolidated Statements of Operations.

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

Certain reclassifications have been made to prior period balances in order to conform to the current period’s presentation.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The accounting estimates and assumptions that require management’s most significant, challenging, and subjective judgment include the estimation of licensees’ quarterly royalties prior to receiving the royalty reports, the determination of stand-alone selling price and the transaction price in an arrangement with multiple performance obligations, the estimation of variable consideration, judgment used to estimate the progress toward completion in the Company’s engineering services, the collectability of accounts receivable, other intangible assets and investments, the assessment of the recoverability of goodwill, the assessment of useful lives and recoverability of other intangible assets and long-lived assets, recognition and measurement of current and deferred income tax assets and liabilities, the assessment of unrecognized tax benefits, and purchase accounting resulting from business combinations, among others.

The accounting estimates and assumptions that require management’s most significant, challenging, and subjective judgment include the estimation of licensees’ quarterly royalties prior to receiving the royalty reports, the determination of stand-alone selling price and the transaction price in an arrangement with multiple performance obligations, the estimation of variable consideration, the assessment of the recoverability of goodwill, the assessment of useful lives and recoverability of other intangible assets and long-lived assets, recognition and measurement of current and deferred income tax assets and liabilities, the assessment of unrecognized tax benefits, and purchase accounting resulting from business combinations, among others.

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

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

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

The impact to date has included a decline in demand in various markets and industries, particularly the automotive market.

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

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

The Company’s business operations have been negatively impacted by the COVID-19 pandemic and related events, and the Company expects this disruption may continue to have a negative impact on its revenue and results of operations, especially in light of the spread of the highly transmissible Omicron variant.

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

the availability, distribution and effectiveness of vaccines;

the spread of new variants of COVID-19;

the continued or renewed imposition of protective public safety measures;

the continuing disruption of the global supply chain affecting the Company’s industry;

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

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

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Short-term Investments

The Company has investments in debt securities which include corporate bonds and notes, treasury and agency notes and bills, commercial paper, certificates of deposit, and in equity securities consisting of money market funds and common equity securities of publicly traded companies.

The Company classifies all investments as current as the securities are available for use, if needed, for current operations.

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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, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

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Non-Marketable Equity Investments

Investments in non-marketable equity securities are accounted for using either the equity method or the cost method.

Investments in entities over which the Company has the ability to exercise significant influence, but does not hold a controlling interest, are accounted for using the equity method.

Under the equity method, the Company records its proportionate share of income or loss in other income and expense, net, in the Consolidated Statements of Operations.

Investments in entities over which the Company does not have the ability to exercise significant influence are accounted for using the cost method.

Investments in entities over which the Company does not have the ability to exercise significant influence and which do not have readily determinable fair values, are initially recognized at cost and remeasured through earnings when there is an observable transaction involving the same or similar investment of the same issuer, or due to an impairment (referred to as the “measurement alternative”).

The fair value of non-marketable equity investments is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.

The Company monitors its non-marketable securities portfolio for potential impairment.

When the carrying amount of an investment in a non-marketable security exceeds its fair value and the decline in fair value is determined to be other-than-temporary, the loss is recorded in other income and expense, net, in the Consolidated Statements of Operations.

When there is evidence that the expected fair value of the investment has declined to below the recorded cost, the impairment loss is recorded in other income and expense, net, in the Consolidated Statements of Operations.

Fair Value of Financial Instruments

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The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary but generally requires no collateral.

At December 31, 2021, the Company had one customer representing 13 % of aggregate trade receivables.

At December 31, 2020, the Company had two customers representing 17 % and 11 % of aggregate trade receivables, respectively.

At December 31, 2019, the Company had three customers representing 17 %, 14 % and 11 % of aggregate trade receivables, respectively.

The following table sets forth revenue generated from customers which comprise 10% or more of total revenue for the periods indicated:

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Intel Corporation

Samsung Electronics, Co.

denotes less than 10% of total revenue.

The Company’s TiVo service is enabled using a DVR manufactured by a third-party.

The Company also outsources to third parties certain supply-chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics.

The Company outsources to third parties certain supply-chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics.

The Company cannot be sure that these parties will perform their obligations as expected or that any revenue, cost savings or other benefits will be derived from the efforts of these parties.

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Typically, key assumptions include projections of cash flows that arise from identifiable intangible assets of acquired businesses as well as discount rates based on an analysis of the weighted average cost of capital, adjusted for specific risks associated with the assets.

See “Note 9 – Business Combination” for additional detail.

See “Note 9 – Business Combinations” for additional detail.

Goodwill and Identified Intangible Assets

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Goodwill also includes acquired assembled workforce, which does not qualify as an identifiable intangible asset.

The Company reviews impairment of goodwill annually in the fourth quarter, or more frequently if events or circumstances indicate that the goodwill might be impaired.

The Company reviews impairment of goodwill annually as of the beginning of the fourth quarter, or more frequently if events or circumstances indicate that the goodwill might be impaired.

The Company first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.

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If, based on the qualitative assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company proceeds to perform the quantitative goodwill impairment test.

The Company first determines the fair value of a reporting unit using weighted results derived from an income approach and a market approach.

Market approaches used by management include the market comparable method, which estimates the fair value based on revenue multiples from comparable companies in similar lines of business, and the market transaction method, which estimates the fair value of the reporting unit by utilizing comparable transactions and transaction multiples.

The Company first determines the fair value of a reporting unit using weighted results derived from an income approach and market approaches, which requires significant management estimates and judgments.

reporting unit by utilizing comparable transactions and transaction multiples.

The Company then compares the derived fair value of a reporting unit with its carrying amount .

If the carrying value of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Identified intangible assets .

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Identified indefinite-lived intangible assets include TiVo tradenames and trademarks resulting from business combinations.

The Company evaluates the carrying value of indefinite-lived intangible assets on an annual basis, and an impairment charge would be recognized to the extent that the carrying amount of such assets exceeds their estimated fair value.

The Company evaluates the carrying value of indefinite-lived intangible assets on an annual basis or more frequently if events or circumstances indicate that the asset might be impaired, and an impairment charge would be recognized to the extent that the carrying amount of such assets exceeds their estimated fair value.

For further discussion of goodwill and identified intangible assets, see “Note 10 – Goodwill and Identified Intangible Assets .”

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Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and noncurrent operating lease liabilities in the Company’s consolidated balance sheets.

The ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the

Company’s obligation to make lease payments arising from the lease.

The ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of the leases do not provide an implicit rate, the Company generally use s its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

As most of the leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

The Company’s lease terms may include options to extend or terminate the lease, and these terms are factored into the valuation of ROU assets and liabilities when it is reasonably certain that the Company will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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Research, Development and Other Related Costs

Research, development (“R&D”) and other related costs 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, product "tear downs" and reverse engineering, materials, supplies, equipment depreciation and an allocation of facilities costs.

Research, development (“R&D”) and other related costs 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, and an allocation of facilities costs.

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

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Recently Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2014-09 (Topic 606) “Revenue from Contracts with Customers.” Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605), and requires entities to recognize revenue when control of goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services.

On January 1, 2018 , the Company adopted the new standard using the modified retrospective method, under which the Company recorded a $ 224 million cumulative net of tax adjustment to the opening balance of retained earnings on January 1, 2018.

The adjustment was determined by measuring the impact of the new standard on existing contracts that were not completed as of December 31, 2017.

Prior period comparative information has not been restated and continues to be reported under Topic 605 in effect for those periods.

This new standard had a material impact on the Company’s revenue and its consolidated statement of operations and balance sheet as of and for the year ended December 31, 2018, and is expected to have a material impact on an ongoing basis, with no impact on the timing of customer billings or on cash flows.

See “Note 4 – Revenue” for further discussion.

In February 2016, the FASB issued ASU No.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-02, " Leases " (Topic 842), which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet.

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On January 1, 2019 , the Company adopted the new standard using the modified retrospective transition approach and elected the transition option , under which the Company initially applied the transition requirements to all leases that existed at December 31, 2018, with any residual effects of initially applying Topic 842 recognized as a cumulative effect adjustment to the opening balance of retained earnings on January 1, 2019.

The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed it to carry forward the historical lease classification.

Under the optional transition method, the Company opted to continue to apply the legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the year it adopted the new leases standard, and therefore did not restate prior period results.

The most significant impact from adopting Topic 842 was the initial recognition of operating lease ROU assets and operating lease liabilities of $ 17.6 million and $ 18.8 million, respectively, as of January 1, 2019.

Operating lease liabilities consist of both current and noncurrent portions with the current portion included in the balance of accrued liabilities.

Operating lease liabilities consist of both

current and noncurrent portions with the current portion included in the balance of accrued liabilities.

The standard did not materially impact the Company’s Consolidated Statements of Operations and had no impact on cash flows.

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The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

For additional detail, refer to “Note 4 – Revenue .”

In August 2018, the FASB issued ASU 2018-15, “ Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

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The adoption did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

In December 2019, the FASB released ASU 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” (“ASU 2019-12”).

The purpose of the update is to reduce the complexity pertaining to certain areas in accounting for income taxes.

Key amendments from ASU 2019-12 include, but are not limited to, the accounting for hybrid tax regimes, step-up in tax basis for goodwill in non-business combination transactions, intraperiod tax allocation exception to the incremental approach, and interim period accounting for enacted changes in tax law.

ASU 2019-12 is effective for the Company in the first quarter of the year ending December 31, 2021.

The Company does not expect that the adoption of the standard will have a material impact on its consolidated financial statements .

The Company adopted the new standard prospectively on January 1, 2021 .

The adoption did not have an impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

ASU 2020-04 is effective beginning on March 12, 2020 and may be applied prospectively through December 31, 2022.

The Company is currently assessing the potential impact of the standard on its consolidated financial statements .

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which provides further clarification on the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848.

ASU 2020-04 became effective upon issuance and may be applied prospectively to contract modifications made on or before December 31, 2022.

ASU 2021-01 became effective upon issuance and may be applied on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020 or prospectively for contract modifications made on or before December 31, 2022.

The Company currently has debt agreements that reference LIBOR and will apply the amendments prospectively through December 31, 2022 as these contracts are modified to reference other rates .

In October 2021, the FASB issued ASU 2021-08, “ Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ” (“ASU 2021-08”), which amends the guidance in ASC 805 to require that an entity (acquirer) recognizes and measures contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

As a result of the amendments, it is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured them in its preacquisition financial statements.

ASU 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022.

Early adoption is permitted.

The Company expects the impact in future periods will be dependent on the contract assets and contract liabilities acquired in future business combinations.

NOTE 4 – REVENUE

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In situations where foreign withholding taxes are withheld by the Company’s licensee, revenue is recognized gross of withholding taxes that are remitted directly by the licensee to a local tax authority.

Arrangements with Multiple Performance Obligations

Some of the Company’s contracts with customers contain multiple performance obligations.

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The allocation of transaction price among performance obligations in a contract may impact the amount and timing of revenue recognized in the Consolidated Statements of Operations during a given period.

Contract Modifications

Contracts may be modified due to changes in contract specifications or customer requirements.

Contract modifications occur when the change in terms either creates new enforceable rights and obligations or changes existing enforceable rights and obligations.

The effect of a contract modification for goods and services that are not distinct in the context of the contract on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.

Contract modifications that result in goods or services that are distinct from the existing goods or services are accounted for as separate contracts if they are sold at their stand-alone selling price, or otherwise prospectively.

Variable Consideration

When a contract with a customer includes a variable transaction price, an estimate of the consideration which the Company expects to be entitled to for transferring the promised goods or services is made at contract inception.

Depending on the terms of the contract, variable consideration is estimated using either the expected value approach or the most likely value approach.

Under either approach to estimating variable consideration, the estimate considers all information (historical, current and forecast) that is reasonably available at contract inception.

The amount of variable consideration is estimated at contract inception and updated as additional information becomes available.

The amount of variable consideration is estimated at contract inception by considering all available information (historical, current and forecast) at the time and updated as additional information becomes available.

The estimate of variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Subsequent changes in the transaction price resulting from changes in the estimate of variable consideration are allocated to the performance obligations in the contract on the same basis

as at contract inception.

Certain payments to licensees, retailers and distributors, such as market development funds and revenue shares, are treated as a reduction of the transaction price, and therefore a reduction to revenue, unless the payment is in exchange for a distinct good or service that the licensee, retailer or distributor transfers to the Company.

Subsequent changes in the transaction price resulting from changes in the estimate of variable consideration are allocated to the performance obligations in the contract on the same basis as at contract inception.

When variable consideration is in the form of a sales-based or usage-based royalty in exchange for a license of IP, or when a license of IP is the predominant item to which the variable consideration relates, revenue is recognized at the later of when the subsequent sale or usage occurs or the performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied or partially satisfied.

Nature of Goods and Services

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

License Agreements

Description of Revenue-Generating Activities

The Company operates in two business segments.

In its Product segment, the Company licenses its audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions.

Within this segment, the Company groups its business into three categories based on the products delivered and customers served:

Consumer Experience, Connected Car, and Pay-TV.

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

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

(i) fixed-fee Media IP licensing, (ii) fixed-fee or minimum guarantee Product or Semiconductor IP licensing, and (iii) per-unit or per-subscriber royalty licenses.

In its IP Licensing segment, the Company licenses its innovations to leading companies in the broader entertainment industry, and those developing new technologies that will help drive this industry forward.

Licensing arrangements include access to one or more of the Company’s foundational patent portfolios and may also include access to some of its industry-leading technologies and proven know-how.

For Technology License arrangements, the customer obtains rights to the technology delivered at the commencement of the agreement.

IP License Arrangements

The Company licenses its IP portfolios under three revenue models:

(i) fixed-fee Media IP licensing, (ii) fixed-fee or minimum guarantee Semiconductor IP licensing, and (iii) per-unit or per-subscriber IP royalty licenses.

Fixed-fee Media IP licensing

The Company's long-term fixed-fee Media IP licensing agreements, which are related to the TiVo businesses following the Mergers, provide its customers with 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.

The Company treats these rights as a single performance obligation with revenue recognized on a straight-line basis over the term of the fixed-fee license agreement.

treats 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, the Company enters into license agreements in which a licensee is released from past patent infringement claims or 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, the Company allocates the transaction price between the release for past patent infringement claims and the future license.

In these arrangements, the Company allocates the transaction price between the release for past patent infringement claims and the future license which requires significant management judgment.

In determining the stand-alone selling price of the release for past patent infringement claims and the future license, the Company considers such factors as the number of units shipped in the past or the number of past subscribers and the relevant geographies of the shipped units or subscribers, the future number of subscribers or units, as well as the licensing rate the Company generally receives for per-subscriber or units shipped in the same geographies.

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

The Company enters into Semiconductor IP or Product licenses that have fixed fee or minimum guarantee arrangements, whereby licensees pay a fixed fee for the right to incorporate the Company’s technology in the licensee's products over the license term.

Fixed-fee or minimum guarantee Semiconductor IP licensing

The Company enters into Semiconductor IP licenses that have fixed fee or minimum guarantee arrangements, whereby licensees pay a fixed fee for the right to incorporate the Company’s IP technologies 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, the Company recognizes 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, the Company also considers 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, the Company treats 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 the Company 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.

As payments are received from the licensee, the Company recognizes a portion of the financing component as interest income, reported as other income and expense in the Consolidated Statements of Operations.

Per-unit or per-subscriber royalty licenses

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

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

Compliance Audits

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

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

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.

The Company recognizes revenue from recoveries when a binding agreement has been executed and the Company concludes collection under that agreement is likely.

Arrangements with Multiple System Operators for the TiVo Service

The Company's 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 Set-Top Boxes (“STBs”), and the TiVo service.

The Company has two types of arrangements with MSOs that include technology deployment and engineering services.

In instances where the Company hosts 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.

The Company estimates 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 by 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, the Company receives license fees for the hosted TiVo service on either a per-subscriber per-month basis or a fixed fee.

The Company recognizes revenue from per-subscriber per-month licenses during the month the TiVo service is provided to the customer and recognizes revenue from fixed fee licenses ratably over the license period.

In arrangements where the Company does not host the TiVo service, which includes engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of the software, the Company recognizes 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.

Project costs are primarily labor related to specific activities required for the project.

Costs related to general infrastructure or uncommitted platform development are not included in the project cost estimates and are expensed as incurred.

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.

Provisions for losses are recorded when estimates indicate it is probable that a loss will be incurred for the contract.

The Company generally recognizes 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 the Company's hosted products such as its iGuide interactive program guide (“IPG”), advanced search and recommendations, metadata and analytics products, including routine customer support.

The Company generally receives per-subscriber per-month fees for its

iGuide IPG and search and recommendations service and revenue is recorded in the month the customer uses the service.

The Company generally receives a monthly or quarterly fee from its metadata or analytics licenses for the right to use the metadata or access its analytics platform and to receive regular updates.

Revenue from the Company's metadata and analytics service is recognized ratably over the subscription period.

TiVo-enabled DVRs and non-DVRs, including TiVo Stream 4K, and related TiVo Service

The Company sells TiVo-enabled DVRs and non-DVRs and the related service directly to customers through sales programs via the TiVo.com website and licenses the sale of TiVo-enabled DVRs and non-DVRs through a limited number of retailers.

All customers have the right to cancel their subscription to the TiVo service within 30 days of subscription activation for a full refund.

After the initial subscription period for a DVR, all customers have various pricing options when they renew their subscription.

The transaction price allocated to the DVR and non-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 are recognized ratably over the estimated useful life of the DVR or non-DVR associated with the subscription.

The estimated useful life for a DVR and non-DVR depends on a number of assumptions, including, but not limited to, customer retention rates, the timing of new product introductions and historical experience.

The Company periodically reassesses the estimated useful life of DVRs and non-DVRs.

When the actual useful life of a DVR or a non-DVR materially differs from the Company's estimate, the estimated useful life of the DVR or non-DVR is adjusted, which could result in the recognition of revenue over a longer or shorter period of time.

Significant Judgments

Determining whether promises to transfer multiple goods and services in contracts with customers are considered distinct performance obligations that should be accounted for separately requires significant judgment, including related to the level of integration and interdependency between the performance obligations.

In addition, judgment is necessary to allocate the transaction price to the distinct performance obligations, including whether there is a discount or significant financing component to be allocated based on the relative stand-alone selling price of the various performance obligations.

Significant judgment is required to determine the stand-alone selling price for each distinct performance obligation when an observable price is not available.

In instances where stand-alone selling price is not directly observable, such as when the Company does not sell the good or service separately, the stand-alone selling price is determined using a range of inputs that includes market conditions and other observable inputs.

More than one stand-alone selling price may exist for individual goods and services due to the stratification of those goods and services, considering attributes such as the size of the customer and geographic region.

Due to the nature of the work required to be performed on some performance obligations, significant judgment may be required to determine the transaction price.

It is common for the Company's license agreements to contain provisions that can either increase or decrease the transaction price.

These variable amounts are generally estimated based on usage.

In addition to estimating variable consideration, significant judgment is necessary to identify forms of variable consideration, determine whether the variable consideration relates to a sales-based or usage-based royalty of intellectual property and determine whether, and when to include estimates of variable consideration in the transaction price.

For certain licensees, royalty revenue is generated based on a licensee’s production or shipment of licensed products incorporating the Company’s intellectual property, technologies or software.

Licensees with a per-unit or per-subscriber arrangement pay a per-unit royalty for each product manufactured or sold, or for each subscriber, as set forth in its license agreement.

Licensees generally report manufacturing, sales or subscriber information in the month or quarter subsequent to when the production, shipment or subscription activity takes place.

The Company estimates the royalties earned each quarter based on its forecast of manufacturing and sales activity by its licensees in that quarter.

Any differences between actual royalties owed by a licensee and the Company’s estimate are recognized when the licensee’s royalty report is received.

Estimating licensees’ quarterly royalties prior to receiving the royalty reports requires the Company to make significant assumptions and judgments related to forecasted trends and growth rates used to estimate quantities manufactured, shipped or subscribed by licensees, which could have a material impact on the amount of revenue recognized.

Some hardware products are sold with a right of return and, in certain circumstances, credits or incentives may be provided to customers or resellers at the time of sale.

Such credits and incentives are accounted for as variable consideration and recognized as a reduction to revenue.

Estimates of returns, credits and incentives are made at contract inception and updated each reporting period.

In contracts where the Company does 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 software, or where the Company provides non-recurring engineering (“NRE”) services, the Company recognizes revenue as progress toward completion occurs using an input method based on the ratio of costs incurred to date to total estimated costs of the project.

Significant judgment is required to estimate the remaining effort to complete the project.

These estimates are reassessed throughout the term of the arrangement.

Management evaluates its estimates, inputs and assumptions related to revenue recognition on an ongoing basis.

The use of different estimates, inputs or assumptions may materially affect the reported amounts of assets and liabilities as of the date of the financial statements and the results of operations for the reporting period.

The Company generally recognizes the full fixed fee as revenue at the beginning of the license term when the customer has the right to use the IP and begins to benefit from the license, net of the effect of any significant financing components calculated using customer-specific, risk-adjusted lending rates, with the related interest income being recognized over time on an effective rate basis.

For minimum guarantee agreements where the customer exceeds the minimum, the Company recognizes revenue relating to any additional per-unit fees in the periods it believes the customer will exceed the minimum and adjusts the revenue based on actual usage once that is reported by the customer.

Per-unit or per-subscriber IP royalty licenses

The Company recognizes revenue from per-unit or per-subscriber IP 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.

Estimating customers’ monthly or quarterly royalties prior to receiving the royalty reports requires the Company to make significant assumptions and judgments related to forecasted trends and growth rates used to estimate quantities shipped or manufactured by customers, which could have a material impact on the amount of revenue it reports on a quarterly basis.

Technology License Arrangements

The Company licenses its audio, digital radio and imaging technology to consumer electronics (“CE”) manufacturers, automotive manufacturers or their supply chain partners.

The Company generally recognizes royalty revenue from licenses based on units shipped or manufactured.

Revenue is recognized in the period in which the customer’s sales or production are estimated to have occurred.

This may result in an adjustment to revenue when actual sales or production are subsequently reported by the customer, generally in the month or quarter following sales or production.

Estimating customers’ quarterly royalties prior to receiving the royalty reports requires the Company to make significant assumptions and judgments related to forecasted trends and growth rates used to estimate quantities shipped or manufactured by customers, which could have a material impact on the amount of revenue it reports on a quarterly basis.

Certain customers enter into fixed fee or minimum guarantee agreements, whereby customers pay a fixed fee for the right to incorporate the Company’s technology in the customer’s products over the license term.

The Company generally recognizes the full fixed fee as revenue at the beginning of the license term when the customer has the right to use the technology and begins to benefit from the licens e , net of the effect of any significant financing components calculated using customer-specific, risk-adjusted lending rates, with the related interest income being recognized over time on an effective rate basis.

Technology Solutions Arrangements

Technology Solutions customers are primarily multi-channel video service providers, CE manufacturers, and end consumers.

Technology Solutions revenue is primarily derived from licensing the Company’s Pay-TV solutions, Personalized Content Discovery, enriched Metadata, and viewership data;

selling TiVo-enabled devices like the Stream 4K;

and advertising.

For Technology Solutions, the Company provides on-going media or data delivery, hosting and access to its platform, and software updates.

For these solutions, the Company generally receives fees on a per-subscriber per-month basis or as a fixed fee, and revenue is recognized during the month in which the solutions are provided to the customer.

For most of the Technology Solutions offerings, substantially all functionality is obtained through the Company’s continuous hosting and/or updating of the data and content.

In these instances, the Company typically has a single performance obligation related to these ongoing activities in the underlying arrangement.

For those arrangements that include multiple performance obligations, the Company allocates the consideration as described above and recognizes revenue for each distinct performance obligation when control of the promised goods or services is transferred to the customer.

The Company also generates revenue from non-recurring engineering (“NRE”) services, advertising, and hardware products, each of which was less than 5% of total revenue for all periods presented.

Practical Expedients and Exemptions

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

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

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

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

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The following information depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors by disaggregating revenue by product category/end market and geographic location (presented in “Note 17 - Segment and Geographic Information ”).

This information includes revenue recognized from contracts with customers and revenue from other sources, including past royalty revenues.

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

Years Ended December 31,

Consumer Experience

Connected Car

Product revenue

IP Licensing revenue

Consumer Electronics

Connected Car

Media Platform

Total Product revenue

Total revenue

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Contracts Assets

Contract assets primarily consist of unbilled contracts receivable that are expected to be received from customers in future periods, where the revenue recognized to date (or cumulative adjustments to retained earnings in the initial period of adopting Topic 606) exceeds the amount billed.

Contract assets primarily consist of unbilled contracts receivable that are expected to be received from customers in future periods, where the revenue recognized to date exceeds the amount billed.

The amount of unbilled contracts receivable may not exceed their net realizable value and are classified as long-term assets if the payments are expected to be received more than one year from the reporting date.

Contract assets also include the incremental costs of obtaining a contract with a customer, principally sales commissions when the renewal commission is not commensurate with the initial commission, and deferred engineering costs for significant software customization or modification and set-up services to the extent deemed recoverable.

Contract assets also include the incremental costs of obtaining a contract with a customer,

principally sales commissions when the renewal commission is not commensurate with the initial commission, and deferred engineering costs for significant software customization or modification and set-up services to the extent deemed recoverable.

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

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Contract Liabilities

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

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

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

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The Company’s long-term unbilled contracts receivable is derived from fixed-fee or minimum-guarantee Semiconductor IP or Product licensing arrangements, primarily with large well-capitalized companies.

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

The following table presents the activity in the allowance for credit losses for the year ended December 31, 2020, 2019 and 2018 (in thousands):

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

The following table presents the activity in the allowance for credit losses for the years ended December 31, 2021, 2020 and 2019 (in thousands):

Years Ended December 31,

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Provision for credit losses

Recoveries/charged-off

Charged-off/other adjustments

Balance at end of period

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

The increase in provision for credit losses in 2020 was based on assessment of current conditions including the COVID-19 pandemic and anticipation of delayed or delinquent payments on existing accounts receivable as a result of the declining financial health and liquidity positions of certain of the Company’s customers, as well as U.S.

restrictions on trade with certain Chinese customers, and certain late payments and collection related issues.

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

Additional Disclosures

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In connection with the Agreement, the Company recorded revenue from past royalties in the fourth quarter of 2020 and expects to record revenue from the prospective license into 2031.

Remaining revenue under contracts with performance obligations represents the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) under the Company’s fixed-fee IP, software-as-a-service agreements and engineering services contracts.

Remaining revenue under contracts with performance obligations represents the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) under certain of the Company’s fixed fee arrangements and engineering services contracts.

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

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Non-current income tax receivable

See “Note 15 - Income Taxes ” for detailed information concerning the year-over-year changes.

Accrued liabilities consisted of the following (in thousands):

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

Unrealized gain (loss) on available-for-sale debt securities, net of tax

Unrealized loss on available-for-sale debt securities, net of tax

Foreign currency translation adjustment, net of tax

Other income and expense, net, consisted of the following (in thousands):

Years Ended December 31,

Interest income from significant financing components

Interest income from investments

Realized and unrealized gain (loss) on marketable equity securities

NOTE 6 – FINANCIAL INSTRUMENTS

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Commercial paper

Treasury and agency notes and bills

Total debt securities

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Total marketable securities

Amortized cost related to the balance reported as AFS debt securities was $ 86,963 .

December 31, 2020

Allowance for Credit Losses

Marketable securities

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Commercial paper

Treasury and agency notes and bills

Total debt securities

Money market funds

Marketable equity securities

Total equity securities

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Available-for-sale debt securities

Equity securities

Total marketable securities

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

The Company did no t recognize a provision for credit loss expense related to its AFS debt securities for the year ended December 31, 2020.

No impairment charges were recorded on the AFS debt securities for the years ended December 31, 2019 and 2018, respectively.

The following table summarizes the fair value and gross unrealized losses related to individual AFS debt securities at December 31, 2020 and 2019, which have been in a continuous unrealized loss position, aggregated by investment category and length of time (in thousands):

The Company did no t recognize a provision for credit loss expense related to its AFS debt securities for the years ended December 31, 2021 and 2020, respectively.

No impairment charges were recorded on the AFS debt securities for the year ended December 31, 2019.

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

December 31, 2021

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12 Months or More

Cash and Cash Equivalents

AFS Debt Securities

Corporate bonds and notes

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Corporate bonds and notes

Commercial paper

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

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Due in two to three years

Equity Securities

On September 19, 2018, the Company purchased seven million common shares of Onkyo Corporation (“Onkyo”), a publicly traded Japanese company and a long-standing customer of the Company, pursuant to the Capital Alliance Agreement (“Agreement”) entered into between the two parties on September 3, 2018.

Upon making the investment, the Company held a 6.3 % ownership interest in Onkyo.

Due to changes in business expectations, the Company determined not to continue discussions on the business alliance.

In July 2019, the Company sold approximately 2.8 million shares of Onkyo stock, for which a realized gain of $ 0.9 million was recognized for the year ended December 31, 2019.

In June 2020, the Company sold the remaining 4.2 million shares of Onkyo stock, for which a realized loss of $ 0.7 million was recognized for the year ended December 31, 2020.

There were no sales of the Onkyo investment in 2018, during which period an unrealized loss of $2.2 million was recognized.

Non-marketable Equity Securities

Investments in non-marketable equity securities are accounted for using either the equity method or the cost method.

Investments in entities over which the Company has the ability to exercise significant influence, but does not hold a controlling interest, are accounted for using the equity method.

Under the equity method, the Company records its proportionate share of income or loss in other income and expense, net, in the Consolidated Statements of Operations.

Investments in entities over which the Company does not have the ability to exercise significant influence are accounted for using the cost method.

The Company monitors its non-marketable securities portfolio for potential impairment.

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

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

No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the year ended December 31, 2020.

The Company had no investments in non-marketable equity as of December 31, 2019.

In the first quarter of 2019 , the Company began to use derivative financial instruments to manage foreign currency exchange rate risk.

The Company does not enter into derivative transactions for trading purposes.

Cash flows from the derivative programs are classified as cash flows from operating activities in the Consolidated Statement s of Cash Flows .

The Company’s derivative financial instruments consist of deliverable and non-deliverable foreign currency forward contracts, which are used primarily to hedge balance sheet and certain expenditure exposures.

These instruments are generally short-term in nature, with typical maturities of less than one year, and are subject to fluctuations in foreign exchange rates.

Fair values for derivative financial instruments are based on prices computed using third-party valuation models and are classified as Level 2 in accordance with the three-level hierarchy of fair value measurements.

All significant inputs to the third-party valuation models are observable in active markets.

Inputs include current market-based parameters such as forward rates, yield curves and credit default swap pricing.

For additional information related to the three-level hierarchy of fair value measurements, s ee “ Note 7 – Fair Value.”

Under the Company’s policy election, these derivatives are not designated as hedge instruments, and are measured and reported at fair value.

Changes in the fair value of these undesignated derivatives are reported in other income and expense, net, on the Consolidated Statements of Operations.

Realized gains or losses were not significant in the year s ended December 31, 2020 and 2019 , respectively .

There were no derivative instruments outstanding as of December 31, 2020 and 2019 , respectively .

The Company did no t engage in derivative contracts in 2018 .

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

As of December 31, 2021 and December 31, 2020, other long-term assets included equity securities accounted for under the equity method with a carrying amount of $ 4.8 million and $ 4.2 million, respectively, and equity securities without a readily determinable fair value with a carrying amount of $ 0.1 million and $ 0.1 million, respectively.

No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the years ended December 31, 2021 and 2020, respectively.

NOTE 7 – FAIR VALUE

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The Company carries its financial instruments at fair value with the exception of its long-term debt.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the

principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

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Corporate bonds and notes - debt securities (2)

Treasury and agency notes and bills - debt securities (3)

Commercial paper - debt securities (3)

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Money market funds - equity securities (1)

Marketable equity securities (2)

Corporate bonds and notes - debt securities (2)

Treasury and agency notes and bills - debt securities (3)

Commercial paper - debt securities (3)

(1) Reported as cash and cash equivalents in the Consolidated Balance Sheet.

(2) Reported as equity securities in the Consolidated Balance Sheet.

(2) Reported as AFS debt securities in the Consolidated Balance Sheet.

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

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

Financial Instruments Not Recorded at Fair Value

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2020 Term B Loan Facility (1)

Refinanced Term B Loans (1)

2021 Convertible Notes

2018 Amended Term B Loan (1)

Total long-term debt, net

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Non-Recurring Fair Value Measurements

For purchase accounting related fair value measurements, see “Note 9 – Business Combination.”

The following table represents the activity in intangible assets that are measured at fair value on a non-recurring basis (in thousands):

Patent Assets

Balance at December 31, 2020

Assets additions

Assets received (1)

Balance at December 31, 2021

This amount represents the value of the patents that were acquired by the Company during the third quarter of 2021.

The fair value of these assets was measured using both the market approach – estimating the value of the acquired assets by way of comparison with other comparable transactions, and the cost approach – estimating the value of the acquired assets based on the cost it would take for the Company to create a comparable set of assets through its own research and development (“R&D”) and patent prosecution efforts.

For purchase accounting related fair value measurements, see “Note 9 – Business Combinations.”

NOTE 8 - LEASES

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

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

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

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

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Variable lease payments are expensed as incurred and are not included within the lease liability and right-of-use assets calculation.

As a practical expedient, the Company elected, for all office and

facility leases, not to separate nonlease components (e.g., common-area maintenance costs) from lease components (e.g., fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components as a single lease component.

As a practical expedient, the Company elected, for all data centers,

office and facility leases, not to separate nonlease components (e.g., common-area maintenance costs) from lease components (e.g., fixed payments including rent) and instead to account for each separate lease component and its associated non-lease components as a single lease component.

As most of the leases do not provide an implicit rate, the Company generally, for purposes of discounting lease payments, uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

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Future minimum lease payments exclude short-term leases as well as payments to landlords for variable common area maintenance, insurance and real estate taxes.

As of December 31, 2019, future minimum lease payments were as follows (in thousands):

Operating Leases

Total lease payments

imputed interest

Present value of lease liabilities

current obligations under leases (accrued liabilities)

Noncurrent operating lease liabilities

NOTE 9 – BUSINESS COMBINATION

NOTE 9 – BUSINESS COMBINATIONS

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

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with greater scale, technology depth and breadth, and a platform relevant to one of the biggest challenges consumers of entertainment face today – how to quickly and easily find, watch and enjoy entertainment.

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

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

Merger Consideration

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Total merger consideration

Assumed TiVo Equity Awards

In connection with the Mergers, the Company assumed unvested TiVo equity incentive awards with a fair value of $ 34.1 million, of which $ 12.1 million related to pre-acquisition services and was included in the purchase price, and $ 22.0 million related to post-acquisition services.

The Company valued the restricted stock units at the Company’s closing stock price and stock options using a Black-Scholes pricing model as of the date of acquisition.

The fair value relating to post-acquisition services was expected to be amortized as stock-based compensation expense over an estimated weighted average remaining service period of 2.5 years after the Mergers.

Purchase Price Allocation

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

The initial allocation of the purchase price was based on preliminary valuations and assumptions.

During the fourth quarter of 2020, the Company recorded certain measurement period adjustments shown below.

The table below presents the estimated fair value that was allocated to TiVo’s assets and liabilities based upon fair values as determined by the Company ($ in thousands ):

The following table sets forth the purchase price allocation reflective of measurement period adjustments ($ in thousands):

Fair Value (1)

Adjustments (2)

Adjusted Fair

Cash and cash equivalents

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

(2) All adjustments were recorded in the fourth quarter of 2020.

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

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

All measurement period adjustments were offset against goodwill.

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

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

The following is a description of the methods used to determine the fair values of significant assets and liabilities.

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Significant assumptions used in the discounted cash flow analysis for (i) other customer contracts and relationships were the revenue growth rate, EBITDA margins, and the discount rate and (ii) patents were the revenue growth rate, EBITDA margins, and the discount rate.

Trademark and tradename,

developed technology, and content database intangible assets were valued using a relief-from-royalty method .

T he significant assumptions used in the discounted cash flow analysis for (i) trademarks and tradenames were the royalty rates, revenue growth rates, and discount rate, and (ii) developed technology and content database were the royalty rates .

Trademark and tradename, developed technology, and content database intangible assets were valued using a relief-from-royalty method.

The significant assumptions used in the discounted cash flow analysis for (i) trademarks and tradenames were the royalty rates, revenue growth rates, and discount rate, and (ii) developed technology and content database were the royalty rates.

Long-term Debt

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The goodwill is generated from operational synergies and cost savings the Company expects to achieve from the combined operations, as well as the expected benefits from future technologies that do not meet the definition of an identifiable intangible asset and TiVo’s knowledgeable and experienced workforce.

See Note 10 for the allocation of goodwill to the reportable segments.

Of the total goodwill acquired, $ 14.1 million is expected to be deductible for tax purposes;

the remainder of the goodwill is not expected to be deductible for tax purposes.

TiVo Results of Operations

TiVo’s results of operations and cash flows have been included in the Company’s consolidated financial statements for periods subsequent to June 1, 2020, and TiVo’s assets and liabilities were recorded at their estimated fair values in the Company’s Consolidated Balance Sheets as of June 1, 2020.

For the year ended December 31, 2020, TiVo contributed $ 593.6 million of revenue and $ 263.8 million of operating income, respectively, to the operating results of the Company.

Transaction and Severance Costs

In connection with the Mergers, the Company incurred, during the year ended December 31, 2020, significant one-time expenses such as transaction related costs (e.g.

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

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

Total transaction related costs and lease impairment charges were $ 29.4 million and $ 2.4 million, respectively, in 2020.

In addition, post-merger severance and retention costs (including related stock-based compensation expense) amounted to $ 14.3 million in 2020.

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

No significant transaction related costs and lease impairment charges were incurred in 2021.

In addition, post-merger severance and retention costs (including related stock-based compensation expense) amounted to $ 6.4 million and $ 14.3 million in 2021 and 2020, respectively.

TiVo Results of Operations

For the year ended December 31, 2020, TiVo contributed $ 593.6 million of revenue and $ 263.8 million of operating income, respectively, to the operating results of the Company.

Supplemental Pro Forma Information

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

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

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

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

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

Purchase Price Allocation

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

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

The following table sets forth the final purchase price allocation with no measure period adjustments identified ($ in thousands):

Estimated Useful

Other current assets

Property and equipment

Operating lease right-of-use assets

Identifiable intangible assets:

Total identifiable intangible assets

Other long-term assets

Accrued liabilities

Noncurrent operating lease liabilities

Total purchase price

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

For the year ended December 31, 2021, the acquired MobiTV business contributed $ 7.4 million in revenue and $ 4.4 million of operating loss to the operating results of the Company.

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

Supplemental Pro Forma Information

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

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

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

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

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

Years Ended December 31,

Net income (loss) attributable to Xperi Holding Corporation

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

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

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

NOTE 10 – GOODWILL AND IDENTIFIED INTANGIBLE ASSETS

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December 31, 2019

Goodwill acquired through the Mergers (1)

Purchase price adjustment related to the Mergers (2)

Measurement period adjustment (2)

December 31, 2020

Goodwill acquired through a business acquisition (3)

December 31, 2021 (4)

1) In connection with the TiVo Merger, the Company recorded $ 461.1 million of goodwill, representing the preliminary fair value as of the effective date of the Mergers.

See “Note 9 – Business Combination” for additional details .

See “Note 9 – Business Combinations” for additional details.

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

See “Note 9 – Business Combination” for additional details .

See “Note 9 – Business Combinations” for additional details.

(3) Related to the MobiTV Acquisition completed in May 2021.

For more information regarding the transaction, see “Note 9 – Business Combinations.”

(4) Of this amount, approximately $ 527.8 million is allocated to the Company’s Product reporting segment and approximately $ 323.3 million is allocated to its IP Licensing reporting segment.

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The process of evaluating goodwill for potential impairment is subjective and requires significant estimates, assumptions and judgments particularly related to the identification of reporting units, the assignment of assets and liabilities to reporting units and estimating the fair value of each reporting unit.

As part of its annual goodwill impairment test, the Company elected to proceed with a quantitative goodwill impairment test as of October 1, 2021 using the financial information as of September 30, 2021.

Based on the quantitative assessment, the Company concluded that the fair value of the reporting units exceeded the carrying amount for both the Product and IP Licensing reporting units and no goodwill impairment charges were recognized.

In addition, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the annual impairment test through December 31, 2021.

During the first quarter of 2020, the COVID-19 pandemic rapidly spread globally and has created unprecedented disruptions in economic activity and financial markets.

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Due to continued reduction in demand in certain markets and industries, including the automotive market, as well as declines in the Company’s share price, management concluded there were indicators of potential goodwill impairment.

The Company proceeded with a quantitative annual goodwill impairment test using the financial information as of September 30, 2020.

The Company proceeded with a quantitative annual goodwill impairment test as of October 1, 2020 using the financial information as of September 30, 2020.

Based on the quantitative assessment, the Company concluded that the fair value of the reporting units exceeded the carrying amount for both the Product and IP Licensing reporting units.

As a result, no goodwill impairment charges were recognized in the three months ended December 31, 2020.

In addition, there have been no significant events or circumstances affecting the valuation of goodwill subsequent to the impairment testing performed in the fourth quarter of the year ended December 31, 2020.

When performing the quantitative goodwill impairment test, the Company first determines the fair value of a reporting unit using weighted results derived from an income approach and a market approach.

As a result, no goodwill impairment charges were recognized.

Market approaches used by management include the market comparable method, which estimates the fair value based on revenue multiples from comparable companies in similar lines of business, and the market transaction method, which estimates the fair value of the reporting unit by utilizing comparable transactions and transaction multiples.

The Company also assessed impairment of indefinite-lived and long-lived assets other than goodwill by performing a qualitative assessment.

No impairment of indefinite-lived and long-lived assets other than goodwill was indicated as the Company concluded that it was more likely than not that the fair value of indefinite-lived and long-lived assets other than goodwill exceeded their respective carrying amounts.

Identified Intangible Assets

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

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Total intangible assets

In June 2020, $ 457.4 million of patents was acquired through the Mergers.

See “Note 9 – Business Combination.”

In June 2020, $ 34.8 million of existing (developed) technology was acquired through the Mergers.

See “Note 9 – Business Combination.”

In June 2020, $ 6.2 million of content database was acquired through the Mergers.

See “Note 9 – Business Combination.”

In June 2020, $ 358.2 million of customer contracts and related relationships was acquired through the Mergers.

See “Note 9 – Business Combination.”

In June 2020, $ 21.4 million of TiVo t radename/trademarks was acquired through the Merger s .

See “Note 9 – Business Combination .”

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

See “Note 9 – Business Combinations.”

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

See “Note 9 – Business Combinations.”

In September 2021, patents were acquired by the Company with a fair value measured at $ 8.8 million.

See “Note 7 – Fair Value” for additional information.

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

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2020 Term B Loan Facility

Refinanced Term B Loans

2021 Convertible Notes

2018 Amended Term B Loan

Unamortized debt discount and issuance costs

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

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

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

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

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

The 2020 Credit Agreement provided for a five-year senior secured term 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 was equal to, at the Company’s option, either (i) a base rate plus a margin of 3.00 % per annum or (ii) LIBOR plus a margin of 4.00 % per annum.

Commencing on September 30, 2020, the 2020 Term B Loan Facility was amortized in equal 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, the Company borrowed $ 1,050 million under the 2020 Term B Loan Facility .

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

See “Note 9 – Business Combination” for additional information relating to the Mergers.

See “Note 9 – Business Combinations” for additional information relating to the Mergers.

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

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

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

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

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

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

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

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

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

Refinanced Term B Loans

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

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

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

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

The Company commenced repaying quarterly installments under the Refinanced Term B Loans in the third quarter of 2021.

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

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

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

The 2020 Credit Agreement, as amended, requires the Company to maintain a total net leverage ratio of no greater than 3.00x in order access an annual basket from which to make restricted payments (such as dividend payments and share repurchases).

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

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

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

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

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

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

As a result, the Company recorded an $ 8.0 million loss on debt extinguishment in the year ended December 31, 2021, related to the write-off of unamortized debt discount and issuance costs for the portions of the 2020 Term B Loan Facility considered to be extinguished.

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

Under ASC 470-50, the remaining $ 2.6 million, primarily related to third-party fees, were recorded as selling, general and administrative expense in the year ended December 31, 2021.

2018 Amended Term B Loan

On December 1, 2016, in connection with the consummation of the acquisition of DTS, the Company entered into a Credit Agreement (the “2016 Credit Agreement”) by and among the Company, Royal Bank of Canada, as administrative agent and collateral agent, and the lenders party thereto.

The Credit Agreement provided for a $ 600.0 million seven-year term B loan facility (the “Term B Loan Facility”) which was scheduled to mature on November 30, 2023 .

Upon the closing of the Credit Agreement, the Company borrowed $ 600.0 million under the Term B Loan facility.

Net proceeds were used on December 1, 2016, together with cash and cash equivalents, to finance the acquisition of DTS.

The Credit Agreement provided for a $ 600.0 million seven-year term B loan facility (the “Term B Loan Facility”) which would mature on November 30, 2023 .

On January 23, 2018, the Company and the loan parties entered into an amendment to the Credit Agreement (the 2018 “Amendment”).

In connection with the 2018 Amendment, the Company made a voluntary prepayment of $ 100.0 million of the term loan outstanding under the Credit Agreement using cash on hand.

The Amendment provided for, among other things, (i) a replacement of the outstanding initial term loan with the new tranche term B-1 loan (the “2018 Amended Term B Loan”) in a principal amount of $ 494.0 million, (ii) a reduction of the interest rate margin applicable to such loan to (x) in the case of Eurodollar loans, 2.50 % per annum and (y) in the case of base rate loans, 1.50 % per annum, (iii) a prepayment premium of 1.00 % in connection with any repricing transaction with respect to the 2018 Amended Term B Loan within six months of the closing date of the Amendment, and (iv) certain amendments to provide the Company with additional flexibility under the covenant governing restricted payments.

Using cash on hand, the Company made three voluntary prepayments totaling $ 150.0 million during 2019.

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

On June 1, 2020, the entire remaining balance of $ 344.0 million was paid off by using the proceeds from the 2020 Term B Loan Facility as part of the TiVo Merger transaction.

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

Under the 2019 Term Loan, TiVo borrowed $ 715.0 million, which matures on November 22, 2024 .

Under the 2019 Term Loan, TiVo borrowed $ 715.0 million, which was scheduled to mature on November 22, 2024 .

Under the 2019 Term Loan Facility Agreement, TiVo was required to pay a 3.0 % prepayment premium if the loan was prepaid on or prior to November 22, 2020.

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Upon consummation of the TiVo Merger on June 1, 2020, the Company assumed $ 48.0 thousand of Convertible Senior Notes that were issued by TiVo Solutions Inc.

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

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

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

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

On September 24, 2021, the entire balance of $ 48.0 thousand was paid off.

Interest Expense and Expected Principal Payments

At December 31, 2020, $ 873.8 million was outstanding with an interest rate, including the amortization of debt discount and issuance costs, of 5.1 %.

Interest is payable monthly.

There were also $ 34.4 million of unamortized debt discount and issuance costs recorded as a reduction of the long-term portion of the debt.

At December 31, 2019, $ 344.0 million was outstanding with unamortized debt discount and issuance costs amounting to $ 9.3 million.

At December 31, 2021, $ 789.8 million in total debt was outstanding.

There were also $ 24.3 million of unamortized debt discount and issuance costs recorded as a reduction from the carrying amount of the debt.

Interest rate on the Refinanced Term B Loans, including the amortization of debt discount and issuance costs was 4.2 % and interest is payable monthly.

Interest expense was $ 39.0 million, $ 37.9 million and $ 23.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Weighted average common shares outstanding

Unvested common shares subject to repurchase

Total common shares-basic

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

Potentially dilutive common shares include unvested restricted stock awards and units and incremental common shares issuable upon the exercise of stock options, less shares repurchased from assumed proceeds.

Potentially dilutive common shares include unvested restricted

stock awards and units and incremental common shares issuable upon the exercise of stock options, less shares repurchased from assumed proceeds.

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

For the year ended December 31, 2021, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.

A total of 5.3 million shares subject to stock options and restricted stock awards and units were excluded for the year ended December 31, 2021 from the computation of diluted net loss per share because including them would have been anti-dilutive.

For the year ended December 31, 2020, 2.1 million shares subject to stock options and restricted stock awards and units were excluded from the computation of diluted net income per share as they were anti-dilutive.

For each of the years ended December 31, 2019 and 2018, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.

A total of 1.3 million and 2.9 million shares subject to stock options and restricted stock awards and units were excluded for the years ended December 31, 2019 and 2018, respectively, from the computation of diluted net loss per share because including them would have been anti-dilutive.

NOTE 13 – SHAREHOLDERS’ EQUITY

As more fully described in Note 9, Xperi and TiVo completed the Mergers on June 1, 2020 to form Xperi Holding Corporation.

For the year ended December 31, 2019, there was no difference in the weighted average number of common shares used for the calculation of basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive.

A total of 1.3 million shares subject to stock options and restricted stock awards and units were excluded for the year ended December 31, 2019 from the computation of diluted net loss per share because including them would have been anti-dilutive.

NOTE 13 – STOCKHOLDERS’ EQUITY

As described in Note 9, Xperi and TiVo completed the Mergers on June 1, 2020 to form Xperi Holding Corporation.

Upon completion of the Mergers, each share of common stock of Xperi was converted into the right to receive one fully paid and non-assessable share of Company Common Stock.

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

As provided in the Merger Agreement, at the effective time of the Mergers, (i) all options and restricted stock unit awards relating to shares of Xperi Common Stock outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options and restricted stock unit awards respectively, relating to shares of the Company Common Stock on a one-for-one basis and otherwise generally on the same terms and conditions (including vesting exercisability and/or settlement requirements) as applied to such options and awards under the applicable plans and award agreements immediately prior to the effective time of the Mergers, and (ii) all options and restricted stock unit awards relating to shares of TiVo Common Stock that were outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options and restricted stock unit awards, respectively, relating to shares of the Company Common Stock after giving effect to appropriate adjustments to reflect the Mergers (including the Exchange Ratio) and otherwise generally on the same terms and conditions (including vesting exercisability and/or settlement requirements) as applied to such options and awards under the applicable plans and award agreements immediately prior to the effective time of the Mergers.

Equity Incentive Plans

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The vesting criteria for restricted stock awards and restricted stock units is generally the passage of time or meeting certain performance-based objectives, and continued employment through the vesting period generally over four years for time-based awards.

As of December 31, 2020, there were approximately 3.1 million shares reserved for future grant under the 2020 EIP.

Assumed Plans

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

As of December 31, 2020, there were 7.6 million shares reserved for future grants under the Assumed Plan.

As of December 3 1, 202 1 , there were 4.4 million shares reserved for future grants under both the 2020 EIP and the Assumed Plans .

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

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Options granted

Options assumed

Options exercised

2 unchanged sentences

Options granted

Options assumed

Options exercised

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$14.25 - $54.69

$43.54 - $43.63

$43.77 - $43.77

$45.90 - $54.60

$54.69 - $54.69

$12.52 - $54.69

Restricted Stock Awards and Units

Information with respect to outstanding restricted stock awards and units as of December 31, 2020 is as follows (in thousands, except per share amounts):

Information with respect to outstanding restricted stock awards and units (including both time-based vesting and performance-based vesting) as of December 31, 2021 is as follows (in thousands, except per share amounts):

Restricted Stock and Restricted Stock Units

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Awards and units granted

Awards and units assumed

Awards converted

Awards and units vested / earned

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Awards and units granted

Awards and units assumed

Awards converted

Awards and units vested / earned

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

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

As of December 31, 2021, the Company has repurchased a total of approximately 9.0 million shares of common stock, since inception of the plan, at an average price of $ 17.29 per share for a total cost of $ 155.0 million.

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

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

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Years Ended December 31,

Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets

Cost of revenue, excluding depreciation and amortization of intangible assets

Research, development and other related costs

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Net effect on net income (loss)

In connection with the Mergers, the Company assumed unvested TiVo equity awards with a fair value of $ 34.1 million, of which $ 22.0 million related to post-acquisition services.

For the year ended December 31, 2020, the Company recognized $ 5.8 million associated with the unvested TiVo equity awards assumed.

See “Note 9 – Business Combination” for additional detail.

Stock-based compensation expense categorized by various equity components for the years ended December 31, 2021, 2020 and 2019 is summarized in the table below (in thousands):

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The intrinsic value is calculated as the difference between the market value on the date of exercise and the exercise price of the shares.

As of December 31, 2020, the unrecognized stock-based compensation balance after estimated forfeitures consisted of $ 0.1 million related to unvested stock options, to be recognized over an estimated weighted average amortization period of 0.8 years, and $ 73.5 million related to restricted stock awards and units, including performance-based awards and units, to be recognized over an estimated weighted average amortization period of 2.7 years.

As of December 31, 2021, the unrecognized stock-based compensation balance after estimated forfeitures consisted of none related to unvested stock options, and $ 104.3 million related to restricted stock awards and units, including performance-based awards and units, to be recognized over an estimated weighted average amortization period of 2.5 years.

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The Company uses a Monte Carlo simulation to determine the grant date fair value of performance stock units subject to market conditions, or market-based PSUs.

The following assumptions were used to value the performance stock units subject to market conditions granted in the year ended December 31, 2020:

Year Ended December 31, 2020

Expected life (years)

The following assumptions were used to value the performance stock units subject to market conditions granted in the years ended December 31, 2021 and 2020:

Years Ended December 31,

Expected life (in years)

Risk-free interest rate

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Expected volatility

There were no market-based PSUs granted during the years ended December 31, 2019 and 2018.

Modifications

From time to time, the Company enters into consulting agreements with its departing employees.

Some of these agreements may include continued vesting of the departing employees’ stock awards and an extension of the exercise period from the standard 90 days from employment termination date to the termination of the consulting agreement.

There were no modifications in the years ended December 31, 2020, 2019 and 2018, respectively.

There were no market-based PSUs granted during the year ended December 31, 2019.

NOTE 15 – INCOME TAXES

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Expenses not currently deductible

Basis difference in fixed and intangible assets

Fixed and intangible assets

Deferred revenue

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Operating leases

Acquired intangible assets, domestic

Acquired intangible assets, foreign

Acquired intangible assets

Net deferred tax liabilities

*The Company identified a misclassification totaling $ 21.6 million in the above tabular disclosure of the deferred taxes between net operating losses, foreign tax credits and expenses not currently deductible within the previously issued Form 10-K for the year ended December 31, 2020.

The Company assessed the materiality of this misclassification and concluded it was not material to its previously issued financial statements;

however, the Company elected to revise the previously reported amounts in the deferred taxes disclosure included in this filing.

At December 31, 2021 and 2020, the Company had a valuation allowance of $ 294.9 million and $ 289.2 million, respectively, related to federal, state, and foreign deferred tax assets that the Company believes will not be realizable on a more-likely-than-not basis.

The $ 250.7 million increase from the prior year is primarily comprised of a net $ 281.7 million increase as a result of the Mergers, offset by a net decrease of $ 31.0 million primarily from the utilization of tax attributes as a result of the Comcast license agreement.

The $ 5.6 million increase from the prior year is primarily comprised of a $ 7.1 million increase from the establishment of a valuation allowance for a foreign subsidiary.

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.

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After considering both positive and negative evidence to assess the recoverability of the Company’s net deferred tax assets, the Company determined that it was not more-likely-than-not that it would realize its federal, certain state and certain foreign deferred tax assets given the substantial amount of tax attributes that will remain unutilized to offset reversing deferred tax liabilities as of December 31, 2021.

The Company intends to continue maintaining a full valuation allowance on its federal deferred tax assets

until there is sufficient evidence to support the reversal of all or some portion of these allowances.

The Company intends to continue maintaining a full valuation allowance on its federal deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

However, given the Company’s current earnings and anticipated future earnings, the Company believes that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the federal valuation allowance will no longer be needed.

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The state net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2022 and will continue to expire through 2041 .

In addition, the Company has research tax credit carryforwards of approximately $ 82.9 million for federal purposes, which were carried over from prior years.

In addition, the Company has research tax credit carryforwards of approximately $ 83.2 million for federal purposes.

The federal research tax credit will start to expire in 2022 and will continue to expire through 2041 .

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Under the provisions of the Internal Revenue Code, substantial ownership changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized annually in the future to offset taxable income.

In addition, for losses generated after December 31, 2017, the Tax Cuts and Jobs Act modified the maximum deduction of net operating loss, eliminated carryback, and provided an indefinite carryforward.

A reconciliation of the statutory U.S.

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Change in estimates

Foreign exchange

Foreign exchange and interest

At December 31, 2021, the Company asserts that it will not permanently reinvest its foreign earnings outside the U.S.

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These previously withheld foreign taxes were claimed as a foreign tax credit in the U.S.

As a result of the 2019 refund claim and a planned refund claim for 2020, the

Company recorded $ 123.0 million and $ 65.2 million as a noncurrent income tax receivable at December 31, 2020 and 2019, respectively, $ 62.3 million and $ 48.2 million as a noncurrent income tax payable at December 31, 2020 and 2019, respectively, and $ 36.7 million and $ 17.0 million as a reduction in deferred tax assets at December 31, 2020 and 2019, respectively .

As of December 31, 2020, unrecognized tax benefits approximated $ 233.2 million, of which $ 100.4 million would affect the effective tax rate if recognized.

As of December 31, 2019, unrecognized tax benefits approximated $ 87.3 million, of which $ 82.9 million would affect the effective tax rate if recognized.

As a result of the 2019 refund claim and planned refund claims for 2020 and 2021, the Company recorded a total of $ 118.1 million and $ 123.0 million as a noncurrent income tax receivable at December 31, 2021 and 2020, respectively, $ 63.1 million and $ 62.3 million as a noncurrent income tax payable at December 31, 2021 and 2020, respectively, and $ 40.6 million and $ 36.7 million as a reduction in deferred tax assets at December 31, 2021 and 2020, respectively.

Although the refund claim is subject to judicial review, the Company anticipates it will receive refunds in the amount recorded in the receivable.

As of December 31, 2021, unrecognized tax benefits were $ 240.4 million, of which $ 98.9 million would affect the effective tax rate if recognized.

As of December 31, 2020, unrecognized tax benefits were $ 233.2 million, of which $ 100.4 million would affect the effective tax rate if recognized.

The Company believes that its unrecognized tax benefits as of December 31, 2021 will decrease by approximately $ 5.2 million within the next twelve months due to expiring statutes of limitation.

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

For the years ended December 31, 2020, 2019 and 2018, the Company recognized an insignificant amount of interest and penalties related to unrecognized tax benefits.

For the year ended December 31, 2021, the Company recognized $ 0.3 million, and for the years ended December 31, 2020 and 2019, the Company recognized an insignificant amount of interest and penalties related to unrecognized tax benefits.

Accrued interest and penalties were $ 2.8 million and $ 2.5 million as of December 31, 2021 and 2020, respectively.

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Total future unconditional purchase obligations as of December 31, 2021 were as follows (in thousands):

Additionally, under certain other contractual arrangements, the Company may be obligated to pay up to $ 3.5 million, a majority of which is expected to be paid in 2021, if certain milestones are achieved.

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

In the event that the aggregate number of Qualified Referred Subscribers generated by the Company within the specified time period is less than the minimum guaranteed subscribers, the Company is required to pay an amount equal to the shortfall between the number of Qualified Referred

Subscribers generated by the Company and the required minimum multiplied by a per Qualified Referred Subscribers fee, up to a maximum of $ 5.0 million.

As of December 31, 2020, $ 2.6 million was accrued in the Consolidated Balance Sheets related to this contract.

Inventory Purchase Commitment

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

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

The Company cannot reasonably estimate the possible range of losses

that may be incurred pursuant to its indemnification obligations, if any.

Variables affecting any such assessment include, but are not limited to:

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however, the Company believes, given the absence of any such payments in the Company’s history, and the estimated low probability of such payments in the future, that the estimated fair value of these indemnification agreements is immaterial.

In addition, the Company has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable the Company to recover any payments, should they occur.

Contingencies

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NOTE 17 – SEGMENT AND GEOGRAPHIC INFORMATION

In connection with the Mergers, the Company re-evaluated its reportable segments.

The Company concluded that it has two reportable segments for financial reporting purposes:

The Company reports its financial results within two reportable segments for financial reporting purposes:

(1) Product and (2) Intellectual Property (“IP”) Licensing.

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The Company’s Chief Executive Officer is also the CODM as defined by the authoritative guidance on segment reporting.

The Product segment consists primarily of licensing Company-developed audio, digital radio, imaging, edge-based machine learning and multi-channel video user experience (“UX”) solutions.

The IP Licensing segment consists primarily of licensing the Company’s innovations to leading companies in the media and semiconductor industries.

Licensing arrangements include access to one or more of the Company’s foundational patent portfolios and may also include access to some of its industry-leading technologies and proven know-how .

In media, the Company’s licensees include multichannel video programming distributors, OTT video service providers, consumer electronics manufacturers, social media, and other new media companies.

In semiconductor, the Company’s licensees include memory, sensors, RF component, and foundry companies.

For Technology License arrangements, the customer obtains rights to the technology delivered at the commencement of the agreement.

The Company does not identify or allocate assets by reportable segment, nor does the CODM evaluate reportable segments using discrete asset information.

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Years Ended December 31,

Product segment

IP Licensing segment

Product segment

Total revenue

Operating expenses:

Product segment

IP Licensing segment

Product segment

Unallocated operating expenses (1)

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Operating income (loss):

Product segment

IP Licensing segment

Product segment

Unallocated operating expenses (1)

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

Includes approximately $ 29.4 million in one-time transaction costs related to the Mergers and $ 14.3 million in post-merger severance and retention costs.

Includes seven months of financial results of TiVo following the Mergers.

Amortization and depreciation are included in segment operating income as shown below (in thousands):

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Amortization and depreciation:

Product segment

IP Licensing segment

Product segment

Total amortization and depreciation

A significant portion of the Company’s revenue is derived from licensees headquartered outside of the U.S., principally in Asia, and it is expected that this revenue will continue to account for a significant portion of total revenues in future periods.

A significant portion of the Company’s revenue is derived from licensees headquartered outside of the U.S., and it is expected that this revenue will continue to account for a significant portion of total revenue in future periods.

The table below lists the geographic revenue for the periods indicated (in thousands):

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Europe and Middle East

For the years ended December 31, 2020, 2019 and 2018, one, two, and two customers, respectively, each accounted for 10 % or more of total revenue.

For the years ended December 31, 2021, 2020 and 2019, zero , one , and two customers, respectively, each accounted for 10% or more of total revenue.

As of December 31, 2021 and 2020, property and equipment, net, by geographic area are presented below (in thousands):

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Amended and Restated Bylaws of the Company, dated May 29, 2020 (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on June 1, 2020, and incorporated herein by reference)

Description of the Company’s capital stock registered under section 12 of the Securities Exchange Act of 1934 .

Employment and Severance Agreement, dated April 28, 2017, by and between the Registrant and Jon Kirchner (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q, filed August 2, 2017, and incorporated herein by reference)

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Amendment to Employment and Severance Agreement between Xperi Corporation and Jon Kirchner dated April 28, 2017, effective as of September 29, 2020 (incorporated by reference to Exhibit 10.3 to Form 10-Q of Xperi Holding Corporation, filed November 9, 2020)

Amendment No.

1 to Credit Agreement, dated as of June 8, 2021, among the Company, the subsidiaries of the Company party thereto, Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto ((incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 10, 2021 (File No.

List of subsidiaries

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Stipulation and (Proposed) Order Regarding Mootness Fee Request, Notice, and Dismissal

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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February 24, 2022

/s/ Robert J.

/s/ Robert Andersen

Chief Financial Officer (Principal Financial and

Robert Andersen

Accounting Officer)

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February 24, 2022

/s/ Tonia O’Connor

Tonia O’Connor

February 24, 2022

/s/ Raghavendra Rau

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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-K

Item 9A. Controls and Procedures