Adeia Inc. 10-K

Item 9A. Controls and Procedures 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 66 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 Xperi Holding Corporation maintains disclosure controls and procedures that are designed to ensure information required to be disclosed in our reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. 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. 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 Our management is responsible for establishing and maintaining adequate internal control over financial reporting for Xperi Holding Corporation. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Xperi Holding Corporation’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 Xperi Holding Corporation; (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 Xperi Holding Corporation are being made only in accordance with authorizations of management and directors of Xperi Holding Corporation; 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, 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 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 67 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 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. Item 9B. Other Information Not applicable. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 68 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item 10 is hereby incorporated by reference from the information under the captions “Executive Officers,” “Election of Directors” and “Delinquent Section 16(a) Reports” that will be contained in the Proxy Statement for our 2022 Annual Meeting of Stockholders (the “Proxy Statement”). We have adopted a written code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons serving similar functions. The text of our code of business conduct and ethics has been posted on our website at http://www.xperi.com. Item 11. Executive Compensation The information required by this Item 11 is incorporated by reference from the information under the captions “Election of Directors,” “Compensation Discussion and Analysis,” “Compensation of Named Executive Officers” and “Report of the Compensation Committee” that will be contained in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 is incorporated by reference from the information under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” that will be contained in the Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 is incorporated by reference from the information under the captions “Certain Relationships and Related Transactions” and “Election of Directors” that will be contained in the Proxy Statement. Item 14. Principal Accountant Fees and Services 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. 69 PART IV Item 15. Exhibits and Financial Statement Schedules (a) Documents filed as part of this report: Page Number (1) Financial Statements Report of Independent Registered Public Accounting Firm F-1 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Income (loss) F-5 Consolidated Balance Sheets F-6 Consolidated Statements of Cash Flows F-7 Consolidated Statements of Equity F-8 Notes to Consolidated Financial Statements F-9 (2) Financial Statement Schedule Valuation and Qualifying Accounts (3) Exhibits 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 70 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Xperi Holding Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Xperi Holding Corporation and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2021 appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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 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 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. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. 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 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. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 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 F-1 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue Recognition – Allocation of Transaction Price in Fixed-Fee Media IP Licensing Arrangements 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 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 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 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 F-2 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 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 San Jose, California February 24, 2022 We have served as the Company’s auditor since 1999. F-3 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years Ended December 31, 2021 2020 2019 Revenue $ 877,696 $ 892,020 $ 280,067 Operating expenses: Cost of revenue, excluding depreciation and amortization of intangible assets 126,758 78,357 8,460 Research, development and other related costs 232,197 195,154 110,850 Selling, general and administrative 266,085 245,356 117,671 Depreciation expense 23,801 17,918 6,721 Amortization expense 203,401 156,826 99,946 Litigation expense 11,642 20,782 5,127 Total operating expenses 863,884 714,393 348,775 Operating income (loss) 13,812 177,627 ( 68,708 ) Interest expense ( 38,973 ) ( 37,873 ) ( 23,377 ) Other income and expense, net 2,638 4,455 9,028 Loss on debt extinguishment ( 8,012 ) ( 8,300 ) — Income (loss) before taxes ( 30,535 ) 135,909 ( 83,057 ) Provision for (benefit from) income taxes 28,378 ( 7,887 ) ( 19,024 ) Net income (loss) ( 58,913 ) 143,796 ( 64,033 ) Less: Net loss attributable to noncontrolling interest ( 3,456 ) ( 2,966 ) ( 1,503 ) Net income (loss) attributable to the Company $ ( 55,457 ) $ 146,762 $ ( 62,530 ) Income (loss) per share attributable to the Company: Basic $ ( 0.53 ) $ 1.77 $ ( 1.27 ) Diluted $ ( 0.53 ) $ 1.75 $ ( 1.27 ) Weighted average number of shares used in per share calculations-basic 104,735 82,840 49,120 Weighted average number of shares used in per share calculations-diluted 104,735 83,856 49,120 The accompanying notes are an integral part of these consolidated financial statements. F-4 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Years Ended December 31, 2021 2020 2019 Net income (loss) $ ( 58,913 ) $ 143,796 $ ( 64,033 ) Other comprehensive income (loss), net of tax: Change in foreign currency translation adjustment ( 1,975 ) 1,345 — Net unrealized losses on available-for-sale debt securities ( 41 ) ( 28 ) 275 Other comprehensive income (loss), net of tax ( 2,016 ) 1,317 275 Comprehensive income (loss) ( 60,929 ) 145,113 ( 63,758 ) Less: Comprehensive loss attributable to noncontrolling interest ( 3,456 ) ( 2,966 ) ( 1,503 ) Comprehensive income (loss) attributable to the Company $ ( 57,473 ) $ 148,079 $ ( 62,255 ) The accompanying notes are an integral part of these consolidated financial statements. F-5 XPERI HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except for par value) December 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 201,121 $ 170,188 Available-for-sale debt securities 60,534 86,947 Accounts receivable, net of allowance for credit losses of $ 3,102 and $ 7,336 , respectively 143,683 115,975 Unbilled contracts receivable, net 77,677 132,431 Other current assets 36,459 40,763 Total current assets 519,474 546,304 Long-term unbilled contracts receivable 4,107 6,761 Property and equipment, net 60,974 63,207 Operating lease right-of-use assets 68,498 80,226 Intangible assets, net 817,916 1,004,379 Goodwill 851,088 847,029 Other long-term assets 147,965 153,270 Total assets $ 2,470,022 $ 2,701,176 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 7,811 $ 13,045 Accrued legal fees 7,190 5,783 Accrued liabilities 103,515 129,035 Current portion of long-term debt 36,095 43,689 Deferred revenue 35,136 33,119 Total current liabilities 189,747 224,671 Deferred revenue, less current portion 37,107 39,775 Long-term deferred tax liabilities 19,848 24,754 Long-term debt, net 729,392 795,661 Noncurrent operating lease liabilities 54,658 66,243 Other long-term liabilities 98,842 98,953 Total liabilities 1,129,594 1,250,057 Commitments and contingencies (Note 16) Company stockholders’ equity: Preferred stock: $ 0.001 par value; authorized (2021: 15,000 shares; 2020: 15,000 shares) and no shares issued and outstanding — — Common stock: $ 0.001 par value; (2021: authorized 350,000 shares, issued 113,460 shares, outstanding 103,260 shares; 2020: authorized 350,000 shares, issued 110,182 shares, outstanding 104,775 shares) 113 110 Additional paid-in capital 1,340,480 1,268,471 Treasury stock at cost (2021: 10,200 shares; 2020: 5,407 shares) ( 178,022 ) ( 77,218 ) Accumulated other comprehensive income (loss) ( 752 ) 1,264 Retained earnings 187,814 264,250 Total Company stockholders’ equity 1,349,633 1,456,877 Noncontrolling interest ( 9,205 ) ( 5,758 ) Total equity 1,340,428 1,451,119 Total liabilities and equity $ 2,470,022 $ 2,701,176 The accompanying notes are an integral part of these consolidated financial statements. F-6 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ ( 58,913 ) $ 143,796 $ ( 64,033 ) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation of property and equipment 23,801 17,918 6,721 Amortization of intangible assets 203,401 156,826 99,946 Stock-based compensation expense 58,182 39,135 31,554 Deferred income tax ( 978 ) ( 34,670 ) ( 38,611 ) Loss on debt extinguishment 8,012 8,300 — Patent assets received in lieu of cash ( 8,787 ) — — Other 5,488 19,500 2,654 Changes in operating assets and liabilities: Accounts receivable ( 27,615 ) 7,091 6,191 Unbilled contracts receivable, net 58,496 76,262 130,359 Other assets 7,497 ( 41,948 ) 3,675 Accounts payable ( 5,234 ) ( 4,863 ) 1,886 Accrued and other liabilities ( 27,910 ) 21,692 ( 8,679 ) Deferred revenue ( 651 ) 18,564 ( 2,410 ) Net cash from operating activities 234,789 427,603 169,253 Cash flows from investing activities: Purchases of property and equipment ( 13,950 ) ( 7,379 ) ( 8,813 ) Proceeds from sale of property and equipment 19 — 55 Net cash received (paid) for mergers and acquisitions ( 17,400 ) 117,424 — Purchases of short-term investments ( 67,343 ) ( 77,178 ) ( 40,008 ) Proceeds from sales of short-term investments 49,768 11,225 6,833 Proceeds from maturities of short-term investments 42,886 24,683 27,290 Purchases of intangible assets ( 186 ) ( 50,935 ) ( 4,500 ) Net cash from investing activities ( 6,206 ) 17,840 ( 19,143 ) Cash flows from financing activities: Repayment of debt ( 84,048 ) ( 520,250 ) ( 150,000 ) Repayment of assumed debt from merger transaction — ( 734,609 ) — Proceeds from debt, net — 1,010,286 — Debt refinancing costs ( 4,253 ) — — Contingent consideration payments after acquisition — — ( 1,200 ) Dividends paid ( 20,979 ) ( 30,829 ) ( 39,502 ) Proceeds from employee stock purchase program and exercise of stock options 13,839 4,855 6,024 Repurchases of common stock ( 100,804 ) ( 80,589 ) ( 4,506 ) Net cash from financing activities ( 196,245 ) ( 351,136 ) ( 189,184 ) Effect of exchange rate changes on cash and cash equivalents ( 1,405 ) 1,330 — Net increase (decrease) in cash and cash equivalents 30,933 95,637 ( 39,074 ) Cash and cash equivalents at beginning of period 170,188 74,551 113,625 Cash and cash equivalents at end of period $ 201,121 $ 170,188 $ 74,551 Supplemental disclosure of cash flow information: Interest paid $ 32,363 $ 31,240 $ 20,891 Income taxes paid, net of refunds $ 30,865 $ 43,066 $ 15,001 Stock issued in merger transaction $ — $ 828,334 $ — The accompanying notes are an integral part of these consolidated financial statements. F-7 XPERI HOLDING CORPORATION CONSOLIDATED STATEMENTS OF EQUITY (in thousands) Total Company Stockholders' Equity Common Stock Additional Paid-In Treasury Stock Accumulated Other Comprehensive Retained Noncontrolling Shares Amount Capital Shares Amount Income (Loss) Earnings Interest Total Equity Balance at December 31, 2018 48,408 $ 62 $ 730,695 13,804 $ ( 364,195 ) $ ( 328 ) $ 253,208 $ ( 1,295 ) $ 618,147 Issuance of subsidiary shares to noncontrolling interest — — 13 — — — — ( 13 ) — Net loss — — — — — — ( 62,530 ) ( 1,503 ) ( 64,033 ) Other comprehensive income, net of tax — — — — — 275 — — 275 Other — — — — — — ( 2,859 ) — ( 2,859 ) Cash dividends paid on common stock ($ 0.80 per share) — — — — — — ( 39,502 ) — ( 39,502 ) Issuance of common stock in connection with exercise of stock options 42 — 694 — — — — — 694 Issuance of common stock in connection with employee stock purchase plan 386 1 5,328 — — — — — 5,329 Issuance of restricted stock, net of shares canceled 982 1 — — — — — — 1 Withholding taxes related to net share settlement of restricted awards ( 198 ) — — 198 ( 4,506 ) — — — ( 4,506 ) Stock-based compensation expense — — 31,554 — — — — — 31,554 Balance at December 31, 2019 49,620 $ 64 $ 768,284 14,002 $ ( 368,701 ) $ ( 53 ) $ 148,317 $ ( 2,811 ) $ 545,100 Issuance of subsidiary shares to noncontrolling interest — — ( 19 ) — — — — 19 — Net income (loss) — — — — — — 146,762 ( 2,966 ) 143,796 Other comprehensive income, net of tax — — — — — 1,317 — — 1,317 Cash dividends paid on common stock ($ 0.50 per share) — — — — — — ( 30,829 ) — ( 30,829 ) Issuance of common stock in connection with exercise of stock options 7 — 89 — — — — — 89 Issuance of common stock in connection with employee stock purchase plan 355 — 4,764 — — — — — 4,764 Issuance of restricted stock, net of shares canceled 2,083 2 — — — — — — 2 Withholding taxes related to net share settlement of restricted awards ( 671 ) — — 671 ( 10,508 ) — — — ( 10,508 ) Repurchases of common stock ( 4,919 ) — — 4,919 ( 70,081 ) — — — ( 70,081 ) Common stock issued in merger transaction 58,300 58 828,276 — — — — — 828,334 Retirement of treasury stock — ( 14 ) ( 372,058 ) ( 14,185 ) 372,072 — — — — Stock-based compensation expense — — 39,135 — — — — — 39,135 Balance at December 31, 2020 104,775 $ 110 $ 1,268,471 5,407 $ ( 77,218 ) $ 1,264 $ 264,250 $ ( 5,758 ) $ 1,451,119 Issuance of subsidiary shares to noncontrolling interest — — ( 9 ) — — — — 9 — Net loss — — — — — — ( 55,457 ) ( 3,456 ) ( 58,913 ) Other comprehensive loss, net of tax — — — — — ( 2,016 ) — — ( 2,016 ) Cash dividends paid on common stock ($ 0.20 per share) — — — — — — ( 20,979 ) — ( 20,979 ) Issuance of common stock in connection with exercise of stock options 39 — 779 — — — — — 779 Issuance of common stock in connection with employee stock purchase plan 1,236 1 13,057 — — — — — 13,058 Issuance of restricted stock, net of shares canceled 2,003 2 — — — — — — 2 Withholding taxes related to net share settlement of restricted awards ( 751 ) — — 751 ( 15,916 ) — — — ( 15,916 ) Repurchases of common stock ( 4,042 ) — — 4,042 ( 84,888 ) — — — ( 84,888 ) Stock-based compensation expense — — 58,182 — — — — — 58,182 Balance at December 31, 2021 103,260 $ 113 $ 1,340,480 10,200 $ ( 178,022 ) $ ( 752 ) $ 187,814 $ ( 9,205 ) $ 1,340,428 The accompanying notes are an integral part of these consolidated financial statements . F-8 XPERI HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION 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”). Immediately following the consummation of the Mergers on June 1, 2020 , (the “Merger Date”), Xperi Holding Corporation (the “Company”), a Delaware corporation founded in December 2019 under the name “XRAY-TWOLF HoldCo Corporation,” became the parent company of both Xperi and TiVo. 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 Combinations” for a more detailed description of the Mergers. Xperi was determined to be the accounting acquirer in the Mergers. As a result, the historical financial statements of Xperi for periods prior to the Mergers are considered to be the historical financial statements of Xperi Holding Corporation. As used herein, the “Company” refers to Xperi when referring to periods prior to June 1, 2020 and to Xperi Holding Corporation when referring to periods subsequent to June 1, 2020. 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. 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 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. In the fourth quarter of 2018, the Company funded a new subsidiary, Perceive Corporation (“Perceive”), which was created to focus on delivering edge inference solutions. As of December 31, 2021, the Company owned approximately 81 % of Perceive. 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.”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). All significant intercompany balances and transactions are eliminated in consolidation. The Company’s fiscal year ends on December 31. The Company employs a calendar month-end reporting period for its quarterly reporting. F-9 Reclassification 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 Use of Estimates The preparation of financial statements in conformity with U.S. 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, 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 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. As of the date of issuance of the financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to a customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services, which may include various combinations of goods and services which are generally capable of being distinct and accounted for as separate performance obligations. See “Note 4 – Revenue” for a detailed discussion on revenue and revenue recognition. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions. 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. The Company classifies all investments as current as the securities are available for use, if needed, for current operations. Marketable Debt Securities The Company classifies its debt securities as available-for-sale (“AFS”), which are accounted for at fair value. For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt F-10 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. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in accumulated other comprehensive income or loss on the Consolidated Balance Sheets. Marketable Equity Securities Marketable equity securities are measured at fair value with unrealized gains and losses recognized in other income and expense, net, on the Consolidated Statements of Operations. Non-Marketable Equity Investments 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 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 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 Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term nature of these instruments. Long-term debt is carried at amortized cost and measured at fair value on a quarterly basis for disclosure purposes. See “Note 7 – Fair Value” for further information . Concentration of Credit and Other Risks Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash equivalents, short-term investments and accounts receivable. The Company follows a corporate investment policy which sets credit, maturity and concentration limits and regularly monitors the composition, market risk and maturities of these investments. The Company believes that any concentration of credit risk in its accounts receivable is substantially mitigated by the Company’s evaluation process, relatively short collection terms and the high level of credit worthiness of its customers. 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. The following table sets forth revenue generated from customers which comprise 10% or more of total revenue for the periods indicated: Years Ended December 31, 2021 2020 2019 Comcast Corporation * 27 % * SK hynix Inc. * * 17 % Intel Corporation * * 11 % * denotes less than 10% of total revenue. F-11 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. If any of these parties breaches or terminates their agreement with the Company or otherwise fails to perform their obligations in a timely manner, the Company may be delayed or prevented from commercializing its products and services. Allowance for Credit Losses The allowance for credit losses, which includes the allowance for accounts receivable and unbilled contracts receivable, represents the Company’s best estimate of lifetime expected credit losses inherent in those financial assets. The Company’s lifetime expected credit losses are determined using relevant information about past events (including historical experience), current conditions, and reasonable and supportable forecasts that affect collectability. The Company monitors its credit exposure through ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. In addition, the Company performs routine credit management activities such as timely account reconciliations, dispute resolution, and payment confirmations. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. See “Note 4 – Revenue ” for a further discussion of the allowance for credit losses. Inventory Inventories consist primarily of finished DVRs, non-DVRs, including TiVo Stream 4K, and accessories and are stated at the lower of cost or net realizable value on an aggregate basis. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Adjustments to reduce the carrying amount of inventory to the lower of cost or net realizable value are made, if required, for excess or obsolete goods, which includes a review of, among other factors, demand requirements and market conditions. Business Combinations The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC 805, “Business Combinations.” Identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition related costs are expensed as incurred. Upon acquisition, the accounts and results of operations are consolidated as of and subsequent to the acquisition date. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. The Company utilizes commonly accepted valuation techniques, such as the income approach and the cost approach, as appropriate, in establishing the fair value of intangible assets. 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 Combinations” for additional detail. Goodwill and Identified Intangible Assets Goodwill . Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and identified intangible assets acquired under a business combination. Goodwill also includes acquired assembled workforce, which does not qualify as an identifiable intangible asset. 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. If, after assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary. 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 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 expense, 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 of the F-12 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 un it. Identified intangible assets . Identified finite-lived intangible assets consist of acquired patents, existing technology, customer relationships, trademarks and trade names, non-compete agreements resulting from business combinations, and acquired patents under asset purchase agreements. The Company’s identified intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from 1 to 10 years . The Company makes judgments about the recoverability of finite-lived intangible assets whenever facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, the Company assesses recoverability by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the Company would accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. 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 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 .” Debt Discount and Issuance Costs Debt discount and issuance costs are presented in the consolidated balance sheet as a deduction from the carrying amount of both the short-term debt and long-term debt, and are amortized over the term of the associated debt to interest expense using the effective interest method. In addition, the Company elects to continue to defer the unamortized debt discount and issuance costs when it voluntarily pays down a portion of the debt as the prepayment is factored into the terms agreed to on the debt. Treasury Stock The Company accounts for stock repurchases using the cost method. For reissuance of treasury stock, to the extent that the reissuance price is more than the cost, the excess is recorded as an increase to capital in excess of par value. If the reissuance price is less than the cost, the difference is recorded in capital in excess of par value to the extent there is a cumulative treasury stock paid-in capital balance. Once the cumulative balance is reduced to zero, any remaining difference resulting from the sale of treasury stock below cost is recorded as a reduction of retained earnings. Leases The Company determines if an arrangement is a lease at inception. 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. 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 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. As a practical expedient, the Company elected, for all office and facility leases, not to separate nonlease components from lease components and instead to account for each separate lease component and its associated non-lease components as a single lease component. For additional information regarding the Company's leases, refer to “Note 8 – Leases.” 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, reverse engineering, materials, supplies, and an allocation of facilities costs. All research, development and other related costs are expensed as incurred. F-13 Stock-based Compensation Expense Stock-based compensation is measured at the grant date based on the estimated fair value of the award and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service or performance period. Forfeiture rates are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. If the actual forfeiture rate is materially different from the estimate, stock-based compensation expense could be significantly different from what was recorded in the current period. The Company uses the closing trading price of its common stock on the date of grant as the fair value of awards of restricted stock units (“RSUs”), and performance stock units (“PSUs”) that are based on company-designated performance targets. For performance stock units that are based on market conditions, or market-based PSUs, fair value is estimated by using a Monte Carlo simulation on the date of grant. The Company estimates the grant-date fair value of stock options and stock to be issued under the employee stock purchase plan (“ESPP”) using the Black-Scholes pricing model. See “Note 14 – Stock-based Compensation Expense ” for additional detail. Performance-based PSU awards will vest if certain employee-specific or company-designated performance targets are achieved. If minimum performance thresholds are achieved, each PSU award will convert into the Company’s common stock at a defined ratio depending on the degree of achievement of the performance target designated by each individual award. If minimum performance thresholds are not achieved, then no shares will be issued. The expected levels of achievement are reassessed over the requisite service periods and, to the extent that the expected levels of achievement change, stock-based compensation is adjusted in the period of change and recorded on the statements of operations and the remaining unrecognized stock-based compensation is recorded over the remaining requisite service period. For market-based PSUs, the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of achievement of the market condition unless it is due to termination. Income Taxes The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments are used in the calculation of tax credits, tax benefits, tax deductions, and in the calculation of certain deferred taxes and tax liabilities. Significant changes to these estimates may result in an increase or decrease to the Company’s tax provision in a subsequent period. The provision for income taxes was comprised of the Company’s current tax liability and changes in deferred income tax assets and liabilities. The calculation of the current tax liability involves dealing with uncertainties in the application of complex tax laws and regulations and in determining the liability for tax positions, if any, taken on the Company’s tax returns in accordance with authoritative guidance on accounting for uncertainty in income taxes. Deferred income taxes are determined based on the differences between the financial reporting and tax basis of assets and liabilities. The Company must assess the likelihood that it will be able to recover the Company’s deferred tax assets. If recovery is not likely on a more-likely-than-not basis, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. However, should there be a change in the Company’s ability to recover its deferred tax assets, the provision for income taxes would fluctuate in the period of such change. See “Note 15 – Income Taxes” for additional detail. Advertising Costs Advertising costs are expensed as incurred and are presented within selling, general and administrative expense in the Consolidated Statements of Operations. Advertising expenses for the years ended December 31, 2021, 2020 and 2019, were $ 8.9 million, $ 11.4 million and $ 5.0 million, respectively. Indemnification The Company provides indemnification of varying scope to certain customers against claims of intellectual property infringement made by third parties arising from the use of the Company’s technologies. In accordance with authoritative guidance for accounting for guarantees, the Company evaluates estimated losses for such indemnification. The Company considers such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, no such claims have been filed against the Company and no liability has been recorded in the Company’s financial statements. F-14 As permitted under Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; 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 maintains a directors’ and officers’ liability insurance policy that is intended to reduce its financial exposure and may enable the Company to recover any payments, should they occur . Contingencies From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. Management reviews these estimates in each accounting period as additional information becomes known and adjusts the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the consolidated financial statements. If a loss is probable but the amount of loss cannot be reasonably estimated, the Company discloses the loss contingency and an estimate of possible loss or range of loss (unless such an estimate cannot be made). The Company does not recognize gain contingencies until they are realized. Legal costs incurred in connection with loss contingencies are expensed as incurred. See “Note 16 – Commitments and Contingencies ,” for further information regarding the Company’s pending litigation. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the related assets’ estimated useful lives: Equipment, furniture and other 1 to 5 years Leasehold improvements Lesser of related lease term or 5 years Building and improvements Up to 30 years Expenditures that materially increase asset life are capitalized, while ordinary maintenance and repairs are expensed as incurred. Foreign Currency Translation The Company predominantly uses the U.S. dollar as its functional currency. Certain non-U.S. subsidiaries designate a local currency as their functional currency. The translation of assets and liabilities into U.S. dollars for subsidiaries with a functional currency other than the U.S. dollar is performed using exchange rates in effect at the balance sheet date. The translation of revenues and expenses into U.S. dollars for subsidiaries with a functional currency other than the U.S. dollar is performed using the average exchange rate for the respective period. Gains or losses from cumulative translation adjustments, net of tax, are included as a component of accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. The Company records net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to the functional currency within other income and expense, net. NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements 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. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. 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 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 F-15 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. In September 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ” (“ASU 2016-13”), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. The current expected credit loss model is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability. Current expected credit losses, and subsequent adjustments, represent an estimate of lifetime expected credit losses that are recorded as an allowance deducted from the amortized cost of the financial instrument. The updated guidance also amends the other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments for credit-related losses through an allowance and eliminating the length of time a security has been in an unrealized loss position as a consideration in the determination of whether a credit loss exists. On January 1, 2020 , the Company adopted the new standard using a modified retrospective transition approach for the provisions related to application of the current expected credit loss model to financial instruments and using a prospective transition approach for the provisions related to credit losses on available-for-sale debt securities. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, “ Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ” (“ASU 2018-15”) modifying the requirements for capitalizing costs incurred to implement a hosting arrangement that is a service contract. The modified requirements were intended to align the cost capitalization requirements for hosting arrangements with the cost capitalization requirements for internal-use software. The Company adopted the standard on January 1, 2020 and applied the modified requirements prospectively to all implementation costs incurred after the date of adoption. The adoption did not have a material impact on the Company’s consolidated financial statements. 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. 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): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. 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. 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 F-16 Revenue Recognition General Revenue is recognized when control of the promised goods or services is transferred to a customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services, which may include various combinations of goods and services which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of sales taxes collected from customers which are subsequently remitted to governmental authorities. 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. Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are separately accounted for if they are distinct. In an arrangement with multiple performance obligations, the transaction price is allocated among the separate performance obligations on a relative stand-alone selling price basis. The determination of stand-alone selling price considers market conditions, the size and scope of the contract, customer and geographic information, and other factors. When observable prices are not available, stand-alone selling price for separate performance obligations is based on the cost-plus-margin approach, considering overall pricing objectives. 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. 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. 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. 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. Description of Revenue-Generating Activities The Company operates in two business segments. 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. 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. IP License Arrangements In its IP Licensing segment, the Company licenses (i) its media patent portfolios (“Media IP licensing”) to multichannel video programming distributors, over-the-top video service providers, consumer electronics manufacturers, social media, and other new media companies and (ii) its semiconductor technologies and associated patent portfolios (“Semiconductor IP licensing”) to memory, sensors, radio frequency (“RF”) component, and foundry companies. 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 F-17 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 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 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. 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. 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. 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. 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. F-18 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 The Company applies a practical expedient to not perform an evaluation of whether a contract includes a significant financing component when the timing of revenue recognition differs from the timing of cash collection by one year or less. The Company applies a practical expedient to expense costs to obtain a contract with a customer as incurred as a component of selling, general and administrative expenses when the amortization period would have been one year or less. 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 ; 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. Revenue Details 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 ”). Revenue disaggregated by product category/end market was as follows (in thousands): Years Ended December 31, 2021 2020 2019 IP Licensing revenue $ 391,212 $ 515,919 $ 81,943 Pay-TV 262,929 164,841 — Consumer Electronics 99,529 111,726 116,130 Connected Car 88,306 78,848 81,994 Media Platform 35,720 20,686 — Total Product revenue 486,484 376,101 198,124 Total revenue $ 877,696 $ 892,020 $ 280,067 Contract Balances 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 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, F-19 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): December 31, 2021 December 31, 2020 Unbilled contracts receivable $ 77,677 $ 132,431 Other current assets 1,150 1,208 Long-term unbilled contracts receivable 4,107 6,761 Other long-term assets 2,310 2,591 Total contract assets $ 85,244 $ 142,991 Contract Liabilities 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. Deferred revenue arises when cash payments are received, including amounts which are refundable, in advance of performance obligations being completed. Allowance for Credit Losses The allowance for credit losses, which includes the allowance for accounts receivable and unbilled contracts receivable, represents the Company’s best estimate of lifetime expected credit losses inherent in those financial assets. The Company’s lifetime expected credit losses are determined using relevant information about past events (including historical experience), current conditions, and reasonable and supportable forecasts that affect collectability. The Company monitors its credit exposure through ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary. In addition, the Company performs routine credit management activities such as timely account reconciliations, dispute resolution, and payment confirmations. The Company may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. 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 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, 2021 2020 2019 Accounts Receivable Unbilled Contracts Receivable Accounts Receivable Unbilled Contracts Receivable Accounts Receivable Unbilled Contracts Receivable Beginning balance $ 7,336 $ 2,231 $ 566 $ — $ 779 $ — Provision for credit losses 2,243 ( 1,088 ) 7,418 (1 ) 2,231 (1 ) ( 74 ) — Recoveries ( 2,336 ) — — — — — Charged-off/other adjustments ( 4,141 ) (2 ) ( 414 ) ( 648 ) — ( 139 ) — Balance at end of period $ 3,102 $ 729 $ 7,336 $ 2,231 $ 566 $ — (1) 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. (2) 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. F-20 Additional Disclosures The following table presents additional revenue and contract disclosures (in thousands): Years Ended December 31, 2021 2020 2019 Revenue recognized in the period from: Amounts included in deferred revenue at the beginning of the period $ 28,338 $ 720 $ 3,130 Amounts included in deferred revenue acquired from the Mergers $ — $ 20,271 $ — Performance obligations satisfied in previous periods (true ups, licensee reporting adjustments and settlements) (1) $ 42,657 $ 296,031 (2) $ 2,935 (1) True ups represent the differences between the Company’s quarterly estimates of per-unit royalty revenue and actual production/sales-based royalties reported by licensees in the following period. Licensee reporting adjustments represent corrections or revisions to previously reported per-unit royalties by licensees, generally resulting from the Company’s inquiries or compliance audits. Settlements represent resolutions of litigation during the period for past royalties owed pursuant to expired or terminated IP license agreements. (2) Includes past royalty revenue from Comcast Corporation (“Comcast”). On November 9, 2020, the Company entered into a patent license agreement (the “Agreement”) with Comcast and the Company resolved all of the outstanding litigation with Comcast. The Agreement is effective as of the expiration of Comcast’s prior agreement in 2016 and its term continues into 2031. 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 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): December 31, 2021 2020 Revenue from contracts with performance obligations expected to be satisfied in: 2021 — 152,008 2022 176,646 102,764 2023 153,746 91,636 2024 122,488 77,989 2025 110,703 76,028 2026 10,735 429 Thereafter 4,441 — Total $ 578,759 $ 500,854 NOTE 5 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS Other current assets consisted of the following (in thousands): December 31, 2021 2020 Prepaid income taxes $ 6,103 $ 4,654 Prepaid expenses 18,616 20,393 Inventory 5,101 9,819 Other 6,639 5,897 $ 36,459 $ 40,763 F-21 Property and equipment, net consisted of the following (in thousands): December 31, 2021 2020 Equipment, furniture and other $ 81,076 $ 61,573 Building and improvements 18,331 18,309 Land 5,300 5,300 Leasehold improvements 25,535 25,776 130,242 110,958 Less: Accumulated depreciation and amortization ( 69,268 ) ( 47,751 ) $ 60,974 $ 63,207 Other long-term assets consisted of the following (in thousands): December 31, 2021 2020 Long-term deferred tax assets $ 3,758 $ 7,042 Non-current income tax receivable 118,085 122,993 Other assets 26,122 23,235 $ 147,965 $ 153,270 Accrued liabilities consisted of the following (in thousands): December 31, 2021 2020 Employee compensation and benefits $ 42,075 $ 55,449 Third-party royalties 4,428 5,906 Accrued expenses 30,899 24,809 Accrued severance 1,921 5,332 Current portion of operating lease liabilities 16,467 17,893 Other 7,725 19,646 $ 103,515 $ 129,035 Other long-term liabilities consisted of the following (in thousands): December 31, 2021 2020 Long-term income tax payable $ 91,614 $ 94,397 Other 7,228 4,556 $ 98,842 $ 98,953 Accumulated other comprehensive income (loss) consisted of the following (in thousands): December 31, 2021 2020 Unrealized loss on available-for-sale debt securities, net of tax $ ( 122 ) $ ( 81 ) Foreign currency translation adjustment, net of tax ( 630 ) 1,345 $ ( 752 ) $ 1,264 F-22 NOTE 6 – FINANCIAL INSTRUMENTS 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. The Company classifies its debt securities as available-for-sale (“AFS”), which are accounted for at fair value with credit related losses recognized as a provision for credit losses in its Consolidated Statements of Operations and all non-credit related unrealized gains and losses recognized in accumulated other comprehensive income or loss on the Consolidated Balance Sheets. Under ASU 2016-01 (Topic 321), equity securities are measured at fair value with unrealized gains and losses recognized in other income and expense, net, in the Consolidated Statements of Operations. The following is a summary of marketable securities at December 31, 2021 and December 31, 2020 (in thousands): December 31, 2021 Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Values Marketable securities Corporate bonds and notes $ 40,466 $ — $ ( 53 ) $ — $ 40,413 Commercial paper 49,609 — ( 18 ) — 49,591 Total debt securities 90,075 — ( 71 ) — 90,004 Money market funds 12,372 — — — 12,372 Total equity securities 12,372 — — — 12,372 Total marketable securities $ 102,447 $ — $ ( 71 ) $ — $ 102,376 Reported in: Cash and cash equivalents $ 41,842 Available-for-sale debt securities 60,534 Total marketable securities $ 102,376 December 31, 2020 Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Estimated Fair Values Marketable securities Corporate bonds and notes $ 69,973 $ 29 $ ( 42 ) $ — $ 69,960 Commercial paper 15,991 — ( 4 ) — 15,987 Treasury and agency notes and bills 32,299 — — — 32,299 Total debt securities 118,263 29 ( 46 ) — 118,246 Money market funds 3,849 — — — 3,849 Total equity securities 3,849 — — — 3,849 Total marketable securities $ 122,112 $ 29 $ ( 46 ) $ — $ 122,095 Reported in: Cash and cash equivalents $ 35,148 Available-for-sale debt securities 86,947 Total marketable securities $ 122,095 At December 31, 2021 and December 31, 2020, the Company had $ 261.7 million and $ 257.1 million, respectively, in cash, cash equivalents and short-term investments. A significant portion of these amounts was held in marketable securities, as shown above. The remaining balance of $ 159.3 million and $ 135.0 million at December 31, 2021 and December 31, 2020, respectively, was cash held in operating accounts not included in the tables above. Debt Securities The gross realized gains and losses on sales of marketable debt securities were not significant during the years ended December 31, 2021, 2020 and 2019. F-23 Unrealized losses on AFS debt securities were $ 0.1 million and $ 0.1 million, net of tax, as of December 31, 2021 and December 31, 2020, respectively. The Company evaluated whether the decline in fair value has resulted from credit losses or other factors and concluded these amounts were related to temporary fluctuations in value of AFS securities and were due primarily to changes in interest rates and market conditions of the underlying securities. In addition, the contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. 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 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 Less Than 12 Months 12 Months or More Total Fair Value Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Cash and Cash Equivalents AFS Debt Securities Corporate bonds and notes $ 29,807 $ ( 45 ) $ 10,382 $ ( 8 ) $ 40,189 $ ( 53 ) $ — $ 40,189 Commercial paper 48,091 ( 18 ) — — 48,091 ( 18 ) 29,470 18,621 Total $ 77,898 $ ( 63 ) $ 10,382 $ ( 8 ) $ 88,280 $ ( 71 ) $ 29,470 $ 58,810 December 31, 2020 Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate bonds and notes $ 53,137 $ ( 42 ) $ — $ — $ 53,137 $ ( 42 ) Commercial paper 12,988 ( 4 ) — — 12,988 ( 4 ) Total $ 66,125 $ ( 46 ) $ — $ — $ 66,125 $ ( 46 ) The estimated fair value of marketable debt securities by contractual maturity at December 31, 2021 is shown below (in thousands). Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. Estimated Fair Value Due in one year or less $ 85,856 Due in one to two years 4,148 Due in two to three years — Total $ 90,004 Non-marketable Equity Securities 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 The Company follows the authoritative guidance for fair value measurement and the fair value option for financial assets and financial liabilities. 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 F-24 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. There are three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets. Level 2 Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. When applying fair value principles in the valuation of assets, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company calculates the fair value of its Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments, where available, or based on other observable inputs. There were no significant transfers into or out of Level 1 or Level 2 that occurred between December 31, 2020 and December 31, 2021. The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of December 31, 2021 (in thousands): Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Marketable securities Money market funds - equity securities (1) $ 12,372 $ 10,372 $ 2,000 $ — Corporate bonds and notes - debt securities (2) 40,413 — 40,413 — Commercial paper - debt securities (3) 49,591 — 49,591 — Total Assets $ 102,376 $ 10,372 $ 92,004 $ — (1) Reported as cash and cash equivalents 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. The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of December 31, 2020 (in thousands): Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Marketable securities Money market funds - equity securities (1) $ 3,849 $ 3,849 $ — $ — Corporate bonds and notes - debt securities (2) 69,960 — 69,960 — Treasury and agency notes and bills - debt securities (3) 32,299 — 32,299 — Commercial paper - debt securities (3) 15,987 — 15,987 — Total Assets $ 122,095 $ 3,849 $ 118,246 $ — F-25 (1) Reported as cash and cash equivalents 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 The Company’s long-term debt is carried at amortized cost and is measured at fair value on a quarterly basis for disclosure purposes. The carrying amounts and estimated fair values are as follows (in thousands): December 31, 2021 December 31, 2020 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value 2020 Term B Loan Facility (1) $ — $ — $ 839,302 $ 842,579 Refinanced Term B Loans (1) 765,487 764,530 — — 2021 Convertible Notes — — 48 48 Total long-term debt, net $ 765,487 $ 764,530 $ 839,350 $ 842,627 (1) Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $ 24.3 million and $ 34.4 million as of December 31, 2021 and 2020, respectively. See “Note 11 – Debt ” for additional information. If reported at fair value in the Consolidated Balance Sheets, the Company’s debt would be classified within Level 2 of the fair value hierarchy. The fair value of the debt was estimated based on the quoted market prices for the same or similar issues . Non-Recurring Fair Value Measurements 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 sold — Assets received (1) 8,787 Balance at December 31, 2021 $ 8,787 (1) 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 Under Topic 842, a contract is a lease, or contains a lease, if the contract conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. To determine whether a contract conveys the right to control the use of an identified asset for a period of time, an entity shall assess whether, throughout the period of use, the entity has both of the following: (a) the right to obtain substantially all of the economic benefits from use of the identified asset; and (b) the right to direct the use of the identified asset. 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 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 ; expense for these leases is recognized on a straight-line basis over the lease term. 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 data centers, F-26 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. The Company subleases certain real estate to third parties. The sublease portfolio consists of operating leases for previously exited office space. Certain subleases include variable payments for operating costs. The subleases are generally co-terminus with the head lease, or shorter. Subleases do not include any residual value guarantees or restrictions or covenants imposed by the leases. Income from subleases is recognized as a reduction to selling, general and administrative expenses. The components of operating lease costs were as follows (in thousands): Years Ended December 31, 2021 2020 2019 Fixed lease cost (1) $ 22,489 $ 17,407 $ 6,876 Variable lease cost 5,455 3,648 1,095 Less: sublease income ( 9,723 ) ( 5,423 ) — Total operating lease cost $ 18,221 $ 15,632 $ 7,971 (1) Includes short-term leases costs, which were immaterial. Other information related to leases was as follows (in thousands, except lease term and discount rate): Years Ended December 31, 2021 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 22,845 $ 16,770 $ 6,183 ROU assets obtained in exchange for new lease liabilities: Operating leases $ 6,131 $ 5,775 $ 5,612 December 31, 2021 December 31, 2020 Weighted-average remaining lease term (years): Operating leases 4.4 5.1 Weighted-average discount rate: Operating leases 5.0 % 5.2 % F-27 Future minimum lease payments and related lease liabilities as of December 31, 2021 were as follows (in thousands): Operating Lease Payments (1) Sublease Income Net Operating Lease Payments 2022 $ 19,723 $ ( 7,486 ) $ 12,237 2023 18,635 ( 7,618 ) 11,017 2024 16,979 ( 7,610 ) 9,369 2025 15,091 ( 7,386 ) 7,705 2026 6,296 ( 935 ) 5,361 Thereafter 2,976 — 2,976 Total lease payments 79,700 ( 31,035 ) 48,665 Less: imputed interest ( 8,575 ) — ( 8,575 ) Present value of lease liabilities: $ 71,125 $ ( 31,035 ) $ 40,090 Less: current obligations under leases (accrued liabilities) 16,467 Noncurrent operating lease liabilities $ 54,658 (1) Future minimum lease payments exclude short-term leases as well as payments to landlords for variable common area maintenance, insurance and real estate taxes. NOTE 9 – BUSINESS COMBINATIONS TiVo 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”). Immediately prior to the consummation of the Merger, Xperi Holding changed its name to “Xperi Holding Corporation” (the “Company”). Pursuant to the Merger Agreement, (i) Xperi Merger Sub was merged with and into Xperi, with Xperi surviving the merger as a subsidiary of Xperi Holding Corporation (the “Xperi Merger”) and (ii) TiVo Merger Sub was merged with and into TiVo, with TiVo surviving the merger as a subsidiary of Xperi Holding Corporation (the “TiVo Merger” and together with the Xperi Merger, the “Mergers”). Immediately following the consummation of the Mergers, each of Xperi and TiVo became wholly-owned subsidiaries of the Company. Upon completion of the Xperi Merger, each share of common stock, par value $ 0.001 per share, of Xperi (the “Xperi Common Stock”) (excluding any shares of Xperi Common Stock that were held in treasury immediately prior to the effective time of the Xperi Merger, which were automatically canceled and retired for no consideration) was converted into the right to receive one fully paid and non-assessable share of common stock, par value $ 0.001 per share, of the Company (“Company Common Stock”). Upon completion of the TiVo Merger, (i) each share of common stock, par value $ 0.001 per share, of TiVo (the “TiVo Common Stock”) (excluding any shares of TiVo Common Stock that were held in treasury immediately prior to the effective time of the TiVo Merger, which were automatically canceled and retired for no consideration) was converted into the right to receive 0.455 fully paid and non-assessable shares of common stock of the Company (the “Exchange Ratio”), in addition to cash in lieu of any fractional shares of the Company Common Stock. As provided in the Merger Agreement, at the effective time of the Mergers, (i) all options, restricted shares, restricted stock unit awards and other equity awards relating to shares of Xperi Common Stock outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options, restricted shares, restricted stock unit awards and other equity awards, respectively, relating to shares of Company Common Stock after giving effect to appropriate adjustments to reflect the Mergers and otherwise generally on the same terms and conditions as applied under the applicable plans and award agreements immediately prior to the effective time of the Mergers, and (ii) all options, restricted shares, restricted stock unit awards and other equity awards relating to shares of TiVo Common Stock that were outstanding immediately prior to the effective time of the Mergers (including Exchange Ratio) were generally automatically converted into options, restricted stock unit awards, restricted shares and other equity awards, respectively, relating to shares of Company Common Stock after giving effect to appropriate adjustments to reflect the Mergers and otherwise generally on the same terms and conditions as applied under the applicable plans and award agreements immediately prior to the effective time of the Mergers. F-28 Following the Mergers, Xperi Common Stock and TiVo Common Stock were delisted from the Nasdaq Global Select Market (“Nasdaq”) and deregistered under the Securities Exchange Act of 1934, as amended. Since June 2, 2020, the shares of the Company’s common stock have been listed for trading on Nasdaq under the ticker symbol “XPER.” The Mergers created a leading consumer and entertainment product/solutions and IP licensing company. The Company’s IP business includes one of the industry’s largest and most successful IP portfolios licensed to a diverse base of customers. On the product side, the Company offers a seamless end-to-end entertainment experience from creation to consumption; with greater scale, technology depth and breadth, and a platform relevant to one of the biggest challenges consumers of entertainment face today – how to quickly and easily find, watch and enjoy entertainment. Merger Consideration The merger consideration of $ 828.3 million was calculated as follows (amounts in thousands except exchange ratio and share price): TiVo common shares outstanding as of June 1, 2020 128,132 TiVo exchange ratio 0.455 Xperi Holding Corporation common stock issued in exchange 58,300 Xperi Common Stock closing share price on June 1, 2020 $ 14.00 $ 816,201 Fair value of replaced TiVo equity awards relating to pre-acquisition vesting of the equity award holders’ requisite service periods 12,133 Total merger consideration $ 828,334 Purchase Price Allocation Based on an evaluation of the provisions of ASC 805, “Business Combinations,” Xperi was determined to be the accounting acquirer in the Mergers. The Company has applied the acquisition method of accounting that requires, among other things, that identifiable assets acquired and liabilities assumed generally be recognized on the balance sheet at fair value as of the acquisition date. In determining the fair value, the Company utilized various forms of the income, cost and market approaches depending on the asset or liability being fair valued. The estimation of fair value required significant judgment related to future net cash flows (including revenue, operating expenses, and working capital), discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables, and other factors. Inputs were generally determined by taking into account historical data (supplemented by current and anticipated market conditions) and growth rates. The following table sets forth the purchase price allocation reflective of measurement period adjustments ($ in thousands): F-29 Estimated Useful Life (years) Preliminary Fair Value (1) Measurement Period Adjustments (2) Final Fair Value Cash and cash equivalents $ 117,424 $ — $ 117,424 Accounts receivable 105,778 105,778 Unbilled contracts receivable 69,058 69,058 Other current assets 21,690 233 21,923 Long-term unbilled contracts receivable 129 129 Property and equipment 41,307 41,307 Operating lease right-of-use assets 71,444 71,444 Identifiable intangible assets: Patents 10 457,400 Customer contracts and related relationships 4-9 358,200 Developed technology 5 34,800 Content database 9 6,200 Trademarks and tradenames N/A 21,400 Total identifiable intangible assets 878,000 878,000 Goodwill 461,129 116 461,245 Other long-term assets 43,700 ( 141 ) 43,559 Accounts payable ( 13,258 ) ( 13,258 ) Accrued legal fees ( 5,619 ) ( 5,619 ) Accrued liabilities ( 79,071 ) ( 530 ) ( 79,601 ) Current portion of deferred revenue ( 29,291 ) ( 29,291 ) Current portion of long-term debt ( 734,609 ) ( 734,609 ) Deferred revenue, less current portion ( 24,319 ) ( 24,319 ) Long-term deferred tax liabilities ( 27,949 ) 421 ( 27,528 ) Long-term debt ( 48 ) ( 48 ) Noncurrent operating lease liabilities ( 59,291 ) ( 59,291 ) Other long-term liabilities ( 7,870 ) ( 99 ) ( 7,969 ) Total purchase price $ 828,334 $ — $ 828,334 (1) As previously reported in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020. (2) All adjustments were recorded during the 12-month period following the Merger date. These measurement period adjustments primarily related to current indirect taxes payable, current and non-current income taxes receivable and payable, and deferred taxes as additional information was received and tax returns were finalized. All measurement period adjustments were offset against goodwill. The following is a description of the methods used to determine the fair values of significant assets and liabilities. Identifiable 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 or liability being fair valued. 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 the 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 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. 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. F-30 Long-term Debt On the Merger date, TiVo had outstanding debt under the 2019 Term Loan Facility Agreement (“TiVo 2019 Term Loan”), pursuant to which TiVo was required to pay a 3.0 % prepayment premium if the loan was prepaid on or prior to November 22, 2020. Under the 2019 Term Loan Facility Agreement, the Mergers triggered certain change of control conditions that constitute an event of default, thus requiring the debt to be paid immediately following the consummation of the Mergers. In connection with the consummation of the Mergers, the Company, on June 1, 2020, paid the full amount of the outstanding loan balance, including the 3.0 % prepayment penalty. See “Note 11 – Debt ” for additional information. Fair value of the TiVo 2019 Term Loan was measured based on the par value of principal outstanding plus prepayment premium, which is equal to the amount that was paid by Xperi immediately following the consummation of the Mergers. The fair value of the TiVo 2019 Term Loan would be classified in Level 2 of the fair value hierarchy. Goodwill The excess of the consideration transferred over the fair value of assets acquired and liabilities assumed was recognized as goodwill. 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. 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. Transaction and Severance Costs 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. 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 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. Supplemental Pro Forma Information The following unaudited pro forma financial information assumes the companies were combined as of January 1, 2019. The unaudited pro forma financial information as presented below is for informational purposes only and is based on estimates and assumptions that have been made solely for purposes of developing such pro forma information. This is not necessarily indicative of the results of operations that would have been achieved if the Mergers had taken place on January 1, 2019, nor is it necessarily indicative of future results. Consequently, actual results could differ materially from the unaudited pro forma financial information presented below. The following table presents the pro forma operating results as if TiVo had been included in the Company's Consolidated Statements of Operations as of January 1, 2019 (unaudited, in thousands): Years Ended December 31, 2020 2019 Revenue $ 1,142,603 $ 941,005 Net income (loss) attributable to Xperi Holding Corporation $ 9,775 $ ( 562,153 ) The unaudited supplemental pro forma information above includes the estimated impact of purchase accounting and other material, nonrecurring adjustments directly attributable to the Mergers. These pro forma adjustments primarily include the following (in thousands): F-31 Years Ended December 31, 2020 2019 Estimated increase (decrease) to earnings due to revenue adjustments resulting from purchase accounting $ ( 4,823 ) $ ( 7,191 ) Estimated increase (decrease) to earnings to adjust for transaction and other related costs, including facilities impairment charges, incurred in connection with the Mergers $ 34,569 $ ( 24,651 ) Estimated increase (decrease) to earnings to adjust for severance and retention costs, including related stock-based compensation expense, incurred in connection with the Mergers $ 15,865 $ ( 16,511 ) Estimated increase (decrease) to earnings to reflect payoff of historical debt and issuance of new debt financing in connection with the Mergers $ 23,121 $ ( 18,098 ) Estimated decrease to earnings due to pro forma adjustments for income taxes (1)(2) $ ( 13,605 ) $ ( 21,519 ) (1) For the year ended December 31, 2020, the pro forma tax adjustments primarily reflect the assumption that the combined company placed a valuation allowance on its federal and state deferred tax assets prior to 2020 and the applicability of Base Erosion and Anti-Abuse Tax (“BEAT”) to Xperi tax expense for the period prior to the Mergers. (2) For the year ended December 31, 2019, the pro forma tax adjustments primarily reflect the assumption that the combined company placed a valuation allowance on its federal and state deferred tax assets prior to 2019 and the applicability of BEAT to Xperi’s tax expense. The unaudited supplemental pro forma information above does not include any cost saving synergies from operating efficiencies. MobiTV 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 Life (years) Final Fair Value Other current assets $ 390 Property and equipment 9,223 Operating lease right-of-use assets 1,186 Identifiable intangible assets: Patents 10 5,000 Technology 6 3,260 Total identifiable intangible assets 8,260 Goodwill 4,059 Other long-term assets 115 Accrued liabilities ( 5,288 ) Noncurrent operating lease liabilities ( 545 ) Total purchase price $ 17,400 F-32 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, 2021 2020 Revenue $ 881,556 $ 899,181 Net income (loss) attributable to Xperi Holding Corporation $ ( 71,169 ) $ 105,793 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 Goodwill The changes to the carrying value of goodwill from January 1, 2020 through December 31, 2021 are reflected below (in thousands): December 31, 2019 $ 385,784 Goodwill acquired through the Mergers (1) $ 461,129 Measurement period adjustment (2) 116 December 31, 2020 847,029 Goodwill acquired through a business acquisition (3) 4,059 December 31, 2021 (4) $ 851,088 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 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 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. Goodwill at each reporting unit is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. 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. F-33 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. Due to resulting changes in macroeconomic conditions, industry outlook, and a meaningful decline in the Company’s share price, indicators of potential goodwill impairment were identified. The Company proceeded with a quantitative interim goodwill impairment test as of March 31, 2020. Based on the quantitative assessment, the Company concluded that the fair value of the reporting units exceeded the carrying amount for both Product Licensing and Semiconductor and IP Licensing. As a result, no goodwill impairment charges were recognized in the three months ended March 31, 2020. During the fourth quarter of 2020, the COVID-19 pandemic continued to have a significant and negative impact on business and economic activities in the U.S. and around the world. The resulting global economic downturn had negatively impacted, and was expected to continue to negatively impact, the Company’s consolidated financial results for the remainder of 2020 and into 2021. 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 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. 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 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 associated with certain revenue streams, forecasted R&D expenses, 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 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): December 31, 2021 December 31, 2020 Average Life (Years) Gross Assets Accumulated Amortization Net Gross Assets Accumulated Amortization Net Finite-lived intangible assets Acquired patents / core technology (1) (3) 3-10 $ 672,872 $ ( 224,508 ) $ 448,364 $ 659,085 $ ( 167,916 ) $ 491,169 Existing technology / content database (2) 5-10 251,445 ( 206,934 ) 44,511 248,110 ( 169,326 ) 78,784 Customer contracts and related relationships 3-9 649,926 ( 360,543 ) 289,383 650,171 ( 256,199 ) 393,972 Trademarks/trade name 4-10 40,083 ( 25,825 ) 14,258 40,083 ( 21,029 ) 19,054 Non-competition agreements 1 2,231 ( 2,231 ) — 2,231 ( 2,231 ) — Total finite-lived intangible assets 1,616,557 ( 820,041 ) 796,516 1,599,680 ( 616,701 ) 982,979 Indefinite-lived intangible assets TiVo Tradename/trademarks N/A 21,400 — 21,400 21,400 — 21,400 Total intangible assets $ 1,637,957 $ ( 820,041 ) $ 817,916 $ 1,621,080 $ ( 616,701 ) $ 1,004,379 F-34 (1) 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.” (2) 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.” (3) 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): 2022 $ 156,032 2023 145,061 2024 106,148 2025 81,717 2026 78,697 Thereafter 228,861 $ 796,516 NOTE 11 – DEBT The outstanding amounts of debt were as follows (in thousands): December 31, 2021 December 31, 2020 2020 Term B Loan Facility $ — $ 873,750 Refinanced Term B Loans 789,750 — 2021 Convertible Notes — 48 Unamortized debt discount and issuance costs ( 24,263 ) ( 34,448 ) 765,487 839,350 Less: current portion, net of debt discount and issuance costs ( 36,095 ) ( 43,689 ) Total long-term debt, net of current portion $ 729,392 $ 795,661 2020 Term B Loan Facility 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 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 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. Refinanced Term B Loans F-35 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 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 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. As a result of the refinancing transaction, the Company recorded a loss on early extinguishment of debt of $ 8.3 million, which consisted of unamortized debt discount and issuance costs, in its Consolidated Statements of Operations for the year ended December 31, 2020. 2019 Term Loan Facility F-36 In connection with the Mergers, the Company paid off all outstanding balance under the TiVo 2019 Term Loan. The 2019 Term Loan Facility Agreement was entered into on November 22, 2019 between TiVo, as borrower, and the lenders party thereto and HPS Investment Partners, LLC as administrative agent and collateral agent. 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. Further under the same Loan Facility Agreement, the Mergers triggered certain change of control conditions that constitute an event of default, thus requiring the debt to be repaid immediately following the consummation of the Mergers. Using the proceeds from the aforementioned 2020 Term B Loan Facility, the Company, on June 1, 2020, made a full repayment of the 2019 Term Loan along with the prepayment penalty for a total payoff amount of $ 734.6 million. 2021 Convertible Notes 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. 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, 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. Amortized debt discount and issuance costs, which were included in interest expense, amounted to $ 6.4 million, $ 6.3 million and $ 2.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, future minimum principal payments for long-term debt, including the current portion, are summarized as follows (in thousands): 2022 $ 40,500 2023 40,500 2024 40,500 2025 40,500 2026 40,500 Thereafter 587,250 Total $ 789,750 NOTE 12 – NET INCOME (LOSS) PER SHARE The following table sets forth the computation of basic and diluted shares (in thousands): Years Ended December 31, 2021 2020 2019 Denominator: Weighted average common shares outstanding 104,735 82,840 49,120 Total common shares-basic 104,735 82,840 49,120 Effect of dilutive securities: Options — 1 — Restricted stock awards and units — 1,015 — Total common shares-diluted 104,735 83,856 49,120 Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period, excluding any unvested restricted stock awards that are subject to repurchase. Diluted net income (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 F-37 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 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. Further upon completion of the Mergers, each share of TiVo Common Stock was converted into the right to receive 0.455 fully paid and non-assessable shares of the Company Common Stock (the “Exchange Ratio”), in addition to cash in lieu of any fractional shares of the Company Common Stock. Following the Mergers, Xperi Common Stock and TiVo Common Stock were delisted from Nasdaq. Since June 2, 2020, the shares of Company Common Stock have been listed for trading on Nasdaq under ticker symbol “XPER.” Equity Incentive Plans Prior to the Merger Date, the Company had implemented and granted equity awards under the Xperi Corporation Seventh Amended and Restated 2003 Equity Incentive Plan. As of the effective date of the Mergers, no future grants will be made under the plan. The 2020 EIP In connection with the Mergers and immediately prior to June 1, 2020, the Company adopted the Xperi Holding Corporation 2020 Equity Incentive Plan (the “2020 EIP”). Under the 2020 EIP, the Company may grant equity-based awards to employees, non-employee directors, and consultants for services rendered to the Company (or any parent or subsidiary) in the form of stock options, stock awards, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and performance awards (or any combination thereof). A total of 8,000,000 shares have been reserved for issuance under the 2020 EIP provided that each share issued pursuant to “full value” awards (i.e., stock awards, restricted stock awards, restricted stock units, performance awards and dividend equivalents) are counted against shares available for issuance under the 2020 EIP on a 1.5 to 1 ratio. The 2020 EIP provides for option grants designed as either incentive stock options or nonstatutory options. Options generally are granted with an exercise price not less than the value of the common stock on the grant date and have a term of ten years from the date of grant and vest over a four-year period. 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. Assumed Plans On June 1, 2020, the Company assumed all then-outstanding stock options, awards, and shares available and reserved for issuance under all legacy Equity Incentive Plans of TiVo (collectively, the “Assumed Plans”). Stock options assumed from the Assumed Plans generally have vesting periods of four years and a contractual term of seven years . Awards of restricted stock and restricted stock units assumed from the Assumed Plans are generally subject to a four year vesting period. The number of shares subject to stock options and restricted stock unit awards outstanding under these plans are included in the tables below. Shares reserved under the Assumed Plans will be available for future grants. F-38 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): Options Outstanding Number of Shares Subject to Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value Balance at December 31, 2018 678 $ 26.39 Options granted — $ — Options exercised ( 42 ) $ 16.66 Options canceled / forfeited / expired ( 31 ) $ 33.61 Balance at December 31, 2019 605 $ 26.68 Options granted — $ — Options assumed 175 $ 50.96 Options exercised ( 7 ) $ 13.47 Options canceled / forfeited / expired ( 136 ) $ 44.59 Balance at December 31, 2020 637 $ 29.59 Options granted — $ — Options exercised ( 39 ) $ 20.03 Options canceled / forfeited / expired ( 151 ) $ 44.99 Balance at December 31, 2021 447 $ 25.22 2.51 $ 89 Vested and expected to vest at December 31, 2021 447 2.51 $ 89 Exercisable at December 31, 2021 447 2.51 $ 89 The following table summarizes information about stock options outstanding and exercisable under all of the Company’s plans at December 31, 2021: Options Outstanding Options Exercisable Range of Exercise Prices per Share Number Outstanding (in thousands) Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price per Share Number Exercisable (in thousands) Weighted Average Exercise Price per Share $14.25 - $19.24 107 1.71 $ 18.25 107 $ 18.25 $19.34 - $20.43 129 1.65 $ 19.88 129 $ 19.88 $22.19 - $22.52 91 5.12 $ 22.41 91 $ 22.41 $22.71 - $51.52 97 2.62 $ 35.70 97 $ 35.70 $54.69 - $54.69 23 0.16 $ 54.69 23 $ 54.69 $14.25 - $54.69 447 2.51 $ 25.22 447 $ 25.22 F-39 Restricted Stock Awards and Units 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 Number of Shares Subject to Time- based Vesting Number of Shares Subject to Performance- based Vesting Total Number of Shares Weighted Average Grant Date Fair Value Per Share Balance at December 31, 2018 2,149 757 2,906 $ 29.10 Awards and units granted 1,266 4 1,270 $ 22.79 Awards and units vested / earned ( 865 ) ( 118 ) ( 983 ) $ 30.62 Awards and units canceled / forfeited ( 179 ) ( 89 ) ( 268 ) $ 27.53 Balance at December 31, 2019 2,371 554 2,925 $ 25.99 Awards and units granted 3,331 994 4,325 $ 14.64 Awards and units assumed 2,185 253 2,438 $ 13.99 Awards converted 11 ( 11 ) — $ 22.45 Awards and units vested / earned ( 1,676 ) ( 487 ) ( 2,163 ) $ 21.12 Awards and units canceled / forfeited ( 560 ) ( 242 ) ( 802 ) $ 19.96 Balance at December 31, 2020 5,662 1,061 6,723 $ 16.63 Awards and units granted 3,959 650 4,609 $ 22.77 Awards and units vested / earned ( 1,916 ) ( 87 ) ( 2,003 ) $ 17.79 Awards and units canceled / forfeited ( 890 ) ( 99 ) ( 989 ) $ 17.75 Balance at December 31, 2021 6,815 1,525 8,340 19.61 Performance Awards and Units Performance awards and units may be granted to employees or consultants based upon, among other things, the contributions, responsibilities and other compensation of the particular employee or consultant. The value and the vesting of such performance awards and units are generally linked to one or more performance goals or certain market conditions determined by the Company, in each case on a specified date or dates or over any period or periods determined by the Company, and may range from zero to 200 percent of the grant. For performance awards subject to a market vesting condition, the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of achievement of the market condition. Employee Stock Purchase Plans Prior to the Mergers, the Company had implemented the Xperi Corporation 2003 Employee Stock Purchase Plan and the International Employee Stock Purchase Plan, both of which were terminated immediately prior to the effective time of the Mergers. In connection with the Mergers and immediately prior to June 1, 2020, the Company adopted the Xperi Holding Corporation 2020 Employee Stock Purchase Plan (the “2020 ESPP”). The 2020 ESPP is implemented through consecutive overlapping 24 -month offering periods, each of which is comprised of four six-month purchase periods. The first offering period commenced on September 1, 2020 and will end on August 31, 2022. Each subsequent offering period under the 2020 ESPP will be twenty-four (24) months long and will commence on each September 1 and March 1 during the term of the plan. Participants may contribute up to 100 % of their base earnings and commissions through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share will equal 85 % of the fair market value per share on the start date of the offering period or, if lower, 85 % of the fair market value per share on the semi-annual purchase date. An eligible employee’s right to buy the Company’s common stock under the 2020 ESPP may not accrue at a rate in excess of $ 25,000 of the fair market value of such shares per calendar year for each calendar year of an offering period. If the fair market value per share of the Company’s common stock on any purchase date during an offering period is less than the fair market value per share on the start date of the 24 -month offering period, then that offering period will automatically terminate and a new 24 -month offering period will begin on the next business day. All participants in the terminated offering will be transferred to the new offering period. F-40 As of December 31, 2021, there were 0.8 million shares reserved for grant under the Company’s 2020 ESPP. Dividends Stockholders of the Company’s common stock are entitled to receive dividends when declared by the Company’s Board of Directors. For the years ended December 31, 2021, 2020 and 2019, dividends declared were $ 0.20 , $ 0.50 , and $ 0.80 per common share, respectively. The capacity to pay dividends in the future depends on many factors, including the Company's financial condition, results of operations, capital requirements, capital structure, industry practice and other business conditions that the Board of Directors considers relevant. Stock Repurchase Programs Following the termination of Xperi’s prior stock repurchase program after the closing of the Mergers, on June 12, 2020 the Board of Directors (the “Board”) of the Company authorized a new stock repurchase program providing for the repurchase of up to $ 150.0 million of the Company's Common Stock dependent on market conditions, share prices and other factors. 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. No expiration date has been specified for this plan. As of December 31, 2021, the total remaining amount available for repurchase was $ 95.0 million. The Company plans to continue to execute authorized repurchases from time to time under the plan. In connection with the Mergers, all shares repurchased by the Company as of June 1, 2020 and recorded as treasury stock were canceled and retired. The Company accounts for stock repurchases using the cost method and records retirement of treasury stock as a reduction of the cumulative treasury stock paid-in capital balance. Once the cumulative balance is reduced to zero, any remaining difference resulting from the retirement of treasury stock is recorded as a reduction of retained earnings. The Company issues restricted stock and restricted stock units (collectively, “restricted awards”) as part of the equity incentive plans described above. For the majority of restricted awards, shares are withheld to satisfy required withholding taxes at the vesting date. Shares withheld to satisfy required withholding taxes in connection with the vesting of restricted awards are treated as common stock repurchases in the consolidated financial statements because they reduce the number of shares that would have been issued on vesting. However, these withheld shares are not included in common stock repurchases under the Company's authorized share repurchase plan. During the years ended December 31, 2021, 2020 and 2019, the Company withheld 0.8 million, 0.7 million and 0.2 million shares of common stock to satisfy $ 15.9 million, $ 10.5 million and $ 4.5 million of required withholding taxes, respectively. NOTE 14 – STOCK-BASED COMPENSATION EXPENSE The effect of recording stock-based compensation expense for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands): Years Ended December 31, 2021 2020 2019 Cost of revenue, excluding depreciation and amortization of intangible assets $ 1,972 $ 781 $ — Research, development and other related costs 19,833 13,592 14,643 Selling, general and administrative 36,377 24,762 16,911 Total stock-based compensation expense 58,182 39,135 31,554 Tax effect on stock-based compensation expense ( 233 ) ( 2,116 ) ( 5,051 ) Net effect on net income (loss) $ 57,949 $ 37,019 $ 26,503 F-41 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): Years Ended December 31, 2021 2020 2019 Restricted stock awards and units $ 52,164 $ 36,451 $ 29,031 Employee stock purchase plan 5,952 2,613 2,304 Employee stock options 66 71 219 Total stock-based compensation expense $ 58,182 $ 39,135 $ 31,554 The total fair value of restricted stock awards and units vested during the years ended December 31, 2021, 2020 and 2019 was $ 35.6 million, $ 45.7 million and $ 30.1 million, respectively. The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $ 0.1 million, $ 0.1 million and $ 0.2 million, respectively. 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, 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. 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. The Company uses the Black-Scholes option pricing model to determine the estimated fair value of options and ESPP shares. The fair value of each option grant is determined on the date of grant and the expense is recorded on a straight-line basis. The assumptions used in the model include expected life, volatility, risk-free interest rate, and dividend yield. The Company’s determinations of these assumptions are outlined below. Expected life – The expected life assumption is based on analysis of the Company’s historical employee exercise patterns. The expected life of options granted under the ESPP represents the offering period of two years . Volatility – Volatility is calculated using the historical volatility of the Company’s common stock for a term consistent with the expected life. Historical volatility of the Company’s common stock is also utilized for the ESPP. Risk-free interest rate – The risk-free interest rate assumption is based on the U.S. Treasury rate for issues with remaining terms similar to the expected life of the options. Dividend yield – Expected dividend yield is calculated based on cash dividends declared by the Board for the previous four quarters and dividing that result by the average closing price of the Company’s common stock for the quarter. Cash dividends are not paid on options, restricted stock units or unvested restricted stock awards. In addition, the Company estimates forfeiture rates. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Historical data is used to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. There were no stock options granted during the years ended December 31, 2021, 2020 and 2019. The following assumptions were used to value the ESPP shares: Years Ended December 31, 2021 2020 2019 Expected life (years) 2.0 2.0 2.0 Risk-free interest rate 0.1 - 0.2% 0.1 - 1.4% 1.7 - 2.5% Dividend yield 0.9 - 1.2% 1.4 - 4.0% 3.5 - 5.4% Expected volatility 52.0 - 52.0% 45.8 - 57.5% 51.7 - 53.4% F-42 For the years ended December 31, 2021, 2020 and 2019, an aggregate of 1,238,000 , 355,000 and 386,000 common shares, respectively, were purchased pursuant to the ESPP. 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 years ended December 31, 2021 and 2020: Years Ended December 31, March 2021 July 2020 Expected life (in years) 3.0 3.0 Risk-free interest rate 0.3 % 0.2 % Dividend yield 1.0 % 1.4 % Expected volatility 47.9 % 51.3 % There were no market-based PSUs granted during the year ended December 31, 2019. NOTE 15 – INCOME TAXES The components of total income (loss) before taxes from continuing operations are as follows (in thousands): Years Ended December 31, 2021 2020 2019 U.S. $ 6,054 $ 140,428 $ ( 53,346 ) Foreign ( 36,589 ) ( 4,519 ) ( 29,711 ) Total income (loss) before taxes from continuing operations $ ( 30,535 ) $ 135,909 $ ( 83,057 ) The provision for (benefit from) income taxes consisted of the following (in thousands): Years Ended December 31, 2021 2020 2019 Current: U.S. federal $ ( 2,742 ) $ 15,175 $ 68,772 Foreign 27,202 1,523 ( 42,147 ) State and local 4,911 10,124 94 Total current 29,371 26,822 26,719 Deferred: U.S. federal 783 ( 28,154 ) ( 41,826 ) Foreign 2,700 ( 1,132 ) ( 4,145 ) State and local ( 4,476 ) ( 5,423 ) 228 Total deferred ( 993 ) ( 34,709 ) ( 45,743 ) Provision for (benefit from) income taxes $ 28,378 $ ( 7,887 ) $ ( 19,024 ) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. F-43 Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): December 31, 2021 2020* Deferred tax assets Net operating losses $ 119,038 $ 166,730 Research tax credits 87,596 82,378 Foreign tax credits 73,629 82,863 Expenses not currently deductible 39,985 46,216 Fixed and intangible assets 14,464 7,206 Deferred revenue 18,749 20,110 Capitalized research expenses 85,201 61,296 Lease liability 15,771 17,995 Gross deferred tax assets 454,433 484,794 Valuation allowance ( 294,857 ) ( 289,226 ) Net deferred tax assets 159,576 195,568 Deferred tax liabilities Revenue recognition ( 6,290 ) ( 7,733 ) Operating leases ( 15,110 ) ( 17,535 ) Acquired intangible assets ( 149,033 ) ( 184,364 ) Other ( 5,232 ) ( 3,004 ) Net deferred tax liabilities $ ( 16,089 ) $ ( 17,068 ) *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 $ 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. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be objectively verified. After considering both positive and negative evidence to assess the recoverability of 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. 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. Release of the valuation allowance would result in the recognition of certain federal deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to actually achieve. As of December 31, 2021, the Company had federal net operating loss carryforwards of approximately $ 277.2 million and state net operating loss carryforwards of approximately $ 1,079.7 million (post-apportioned). All of the federal net operating loss carryforwards are carried over from TiVo. The state net operating loss carryforwards are carried over from acquired entities, including TiVo in 2020, DTS in 2016, Ziptronix in 2015, and Siimpel Corporation in 2010. The federal net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2027 and will continue to expire through 2035 . 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 . F-44 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 . The Company also has research tax credit carryforwards of approximately $ 86.7 million for state purposes and $ 0.7 million for foreign purposes, which do not expire. The Company has $ 121.4 million of foreign tax credit carryforwards which will begin to expire in 2022 and will continue to expire through 2031 . 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. A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows: Years Ended December 31, 2021 2020 2019 U.S. federal statutory rate $ ( 6,412 ) $ 28,541 $ ( 17,442 ) State, net of federal benefit ( 763 ) ( 1,530 ) 281 Stock-based compensation expense 417 2,471 2,807 Executive compensation limitation 3,176 2,132 411 Research tax credit ( 2,035 ) ( 1,576 ) ( 2,038 ) Foreign withholding tax 12,009 9,391 10,328 Transaction costs 1,595 8,216 974 Foreign tax rate differential 15,070 921 1,907 Foreign tax credit 1,643 ( 2,647 ) ( 7,795 ) Change in valuation allowance ( 9,101 ) ( 47,649 ) ( 8,238 ) U.S. tax reform 3,028 ( 1,845 ) ( 2,970 ) Unrecognized tax benefits 5,563 3,049 2,994 Change in estimates ( 2,647 ) ( 1,355 ) ( 1,300 ) Foreign exchange and interest 6,956 ( 7,438 ) — Others ( 121 ) 1,432 1,057 Total $ 28,378 $ ( 7,887 ) $ ( 19,024 ) At December 31, 2021, the Company asserts that it will not permanently reinvest its foreign earnings outside the U.S. The Company anticipates that the cash from its foreign earnings may be used domestically to fund operations, settle a portion of the outstanding debt obligation, or used for other business needs. The accumulated undistributed earnings generated by its foreign subsidiaries was approximately $ 53.5 million. Substantially all of these earnings will not be taxable upon repatriation to the United States since under the Tax Cuts and Jobs Act they will be treated as previously taxed income from the one-time transition tax, Global Intangible Low-Taxed Income or dividends-received deduction. The withholding taxes related to the distributable cash of the Company’s foreign subsidiaries are not expected to be material. During the fourth quarter of 2019, the Company filed a refund claim for foreign taxes previously withheld from licensees in South Korea based on court rulings in South Korea and other business factors. 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 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. F-45 The reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands): Years Ended December 31, 2021 2020 2019 Total unrecognized tax benefits at January 1 $ 233,156 $ 87,294 $ 33,552 Increases due to the Mergers — 103,443 — Increases for tax positions related to the current year 8,149 46,978 54,823 Increases for tax positions related to prior years 6,440 2,541 178 Decreases for tax positions related to prior years ( 7,333 ) ( 7,100 ) ( 1,259 ) Total unrecognized tax benefits at December 31 $ 240,412 $ 233,156 $ 87,294 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 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. At December 31, 2021, the Company’s 2017 through 2021 tax years are generally open and subject to potential examination in one or more jurisdictions. Earlier tax years for the Company and its subsidiaries are also open in certain jurisdictions which are currently subject to examination. In addition, in the U.S., any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination. The Company has submitted a withholding tax refund claim with the South Korean authorities and the final outcome is not anticipated to be settled within the next twelve months. NOTE 16 – COMMITMENTS AND CONTINGENCIES Purchase and Other Contractual Obligations In the ordinary course of business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, for which it is liable in future periods. These arrangements primarily include unconditional purchase obligations to service providers. Total future unconditional purchase obligations as of December 31, 2021 were as follows (in thousands): 2022 $ 33,442 2023 26,278 2024 12,868 2025 8,522 2026 8,080 Thereafter 33,548 Total $ 122,738 Inventory Purchase Commitment The Company uses contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, the Company enters into agreements with its contract manufacturers that either allow them to procure inventory based on criteria as defined by the Company or that establish the parameters defining the Company’s requirements. A significant portion of the Company’s purchase commitments arising from these agreements consist of firm, non-cancelable and unconditional purchase commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule or adjust the Company’s requirements based on its business needs prior to firm orders being placed. As of December 31, 2021, the Company had total purchase commitments for inventory of $ 15.4 million, of which $ 4.4 million was accrued in the Consolidated Balance Sheets. Indemnifications In the normal course of business, the Company provides indemnifications of varying scopes and amounts to certain of its licensees, customers, and business partners against claims made by third parties arising from the use of the Company's products, intellectual property, services or technologies. The Company cannot reasonably estimate the possible range of losses F-46 that may be incurred pursuant to its indemnification obligations, if any. Variables affecting any such assessment include, but are not limited to: the nature of the claim asserted; the relative merits of the claim; the financial ability of the party suing the indemnified party to engage in protracted litigation; the number of parties seeking indemnification; the nature and amount of damages claimed by the party suing the indemnified party; and the willingness of such party to engage in settlement negotiations. To date, no such claims have been filed against the Company and no liability has been recorded in the Company’s financial statements. As permitted under Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; 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 under the indemnification agreements, should they occur. Contingencies At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of losses is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company is currently unable to predict the final outcome of lawsuits to which it is a party and therefore cannot determine the likelihood of loss nor estimate a range of possible losses. An adverse decision in any of these proceedings could significantly harm the Company’s business and consolidated financial position, results of operations or cash flows. The Company and its subsidiaries are involved in litigation matters and claims in the normal course of business. In the past, the Company and its subsidiaries have litigated to enforce their respective patents and other intellectual property rights, to enforce the terms of license agreements, to protect trade secrets, to determine the validity and scope of the proprietary rights of others and to defend itself or its customers against claims of infringement or invalidity. The Company expects it or its subsidiaries will be involved in similar legal proceedings in the future, including proceedings regarding infringement of its patents, and proceedings to ensure proper and full payment of royalties by licensees under the terms of its license agreements. The existing and any future legal actions may harm the Company’s business. For example, legal actions could cause an existing licensee or strategic partner to cease making royalty or other payments to the Company, or to challenge the validity and enforceability of patents owned by the Company’s subsidiaries or the scope of license agreements with the Company’s subsidiaries, or could significantly damage the Company’s relationship with such licensee or strategic partner and, as a result, prevent the adoption of the Company’s other technologies by such licensee or strategic partner. Litigation could also severely disrupt or shut down the business operations of licensees or strategic partners of the Company’s subsidiaries, which in turn would significantly harm ongoing relations with them and cause the Company to lose royalty revenue. The costs associated with legal proceedings are typically high, relatively unpredictable, and not completely within the Company’s control. These costs may be materially higher than expected, which could adversely affect the Company’s operating results and lead to volatility in the price of its common stock. Whether or not determined in the Company’s favor or ultimately settled, litigation diverts managerial, technical, legal, and financial resources from the Company’s business operations. Furthermore, an adverse decision in any of these legal actions could result in a loss of the Company’s proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from others, limit the value of the Company’s licensed technology or otherwise negatively impact the Company’s stock price or its business and consolidated financial results. NOTE 17 – SEGMENT AND GEOGRAPHIC INFORMATION The Company reports its financial results within two reportable segments for financial reporting purposes: (1) Product and (2) Intellectual Property (“IP”) Licensing. There are certain corporate overhead costs that are not allocated to these reportable segments because these operating amounts are not considered in evaluating the operating performance of the Company’s business segments. Reportable segments are identified based on the Company's organizational structure and information reviewed by the Company’s chief operating decision maker (“CODM”) to evaluate performance and allocate resources. The Company’s Chief Executive Officer is also the CODM as defined by the authoritative guidance on segment reporting. F-47 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 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 does not identify or allocate assets by reportable segment, nor does the CODM evaluate reportable segments using discrete asset information. Reportable segments do not record inter-segment revenue and accordingly there are none to report. The Company does not allocate other income and expense to reportable segments. Although the CODM uses operating income to evaluate reportable segments, operating costs included in one segment may benefit other segments. The following table sets forth the Company’s segment revenue, operating expenses and operating income (loss) for the years ended December 31, 2021, 2020 and 2019 (in thousands): Years Ended December 31, 2021 2020 (2) 2019 Revenue: IP Licensing segment $ 391,212 $ 515,919 $ 81,943 Product segment 486,484 376,101 198,124 Total revenue 877,696 892,020 280,067 Operating expenses: IP Licensing segment 142,790 113,363 44,542 Product segment 449,350 351,913 186,562 Unallocated operating expenses (1) 271,744 249,117 117,671 Total operating expenses 863,884 714,393 348,775 Operating income (loss): IP Licensing segment 248,422 402,556 37,401 Product segment 37,134 24,188 11,562 Unallocated operating expenses (1) ( 271,744 ) ( 249,117 ) ( 117,671 ) Total operating income (loss) $ 13,812 $ 177,627 $ ( 68,708 ) (1) Unallocated operating expenses consist primarily of selling, marketing, general and administrative expenses, such as administration, human resources, finance, information technology, corporate development and procurement. These expenses are not allocated because these amounts are not considered in evaluating the operating performance of the Company’s business segments. (2) 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): Years Ended December 31, 2021 2020 2019 Amortization and depreciation: IP Licensing segment $ 99,060 $ 59,881 $ 13,264 Product segment 122,483 111,129 93,403 Unallocated 5,659 3,734 — Total amortization and depreciation $ 227,202 $ 174,744 $ 106,667 F-48 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): Years Ended December 31, 2021 2020 2019 U.S. $ 545,849 62 % $ 548,857 62 % $ 74,469 26 % Japan 89,170 10 114,195 13 85,833 31 South Korea 69,798 8 110,782 12 74,790 27 Europe and Middle East 64,350 7 38,830 4 19,638 7 Other 108,529 13 79,356 9 25,337 9 $ 877,696 100 % $ 892,020 100 % $ 280,067 100 % 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): December 31, 2021 2020 U.S. $ 54,804 $ 54,818 Europe 3,697 4,842 Asia and other 2,473 3,547 Total $ 60,974 $ 63,207 NOTE 18 – BENEFIT PLAN The Company maintains a 401(k) retirement savings plan that allows voluntary contributions by all eligible U.S. employees upon their hire date. Eligible employees may elect to contribute up to the maximum amount allowed under Internal Revenue Service regulations. The Company can make discretionary contributions under the 401(k) plan. During the years ended December 31, 2021, 2020 and 2019, the Company contributed approximately $ 4.2 million, $ 4.2 million, and $ 3.0 million, respectively, to the 401(k) plan. NOTE 19 – SUBSEQUENT EVENTS Declaration of a Cash Dividend On February 3, 2022 , the Board declared a cash dividend of $ 0.05 per share of common stock, payable on March 30, 2022 , for the stockholders of record at the close of business on March 16, 2022 . F-49 Schedule II. Valuation and Qualifying Accounts for the Years Ended December 31, 2021, 2020 and 2019 (in thousands): Balance at Beginning of Year Charged (Credited) to Expenses Charged (Credited) to Other Accounts Balance at End of Year Deferred income tax asset: Valuation allowance 2019 $ 41,942 $ ( 4,699 ) $ — $ 37,243 2020 $ 37,243 $ ( 49,507 ) $ 301,490 $ 289,226 2021 $ 289,226 $ 5,631 $ — $ 294,857 F-50 EXHIBIT INDEX Exhibit Number Exhibit Description 2.1* Agreement and Plan of Merger and Reorganization, dated December 18, 2019, by and among the Registrant, TiVo Corporation, XRAY Merger Sub Corporation, TWOLF Merger Sub Corporation and XRAY-TWOLF HoldCo Corporation (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed December 24, 2019, and incorporated herein by reference) 3.1 Certificate of Incorporation of the Company (filed as Exhibit 3.1 to Xperi Holding's Current Report on Form S-4 filed with the SEC on February 18, 2020, and incorporated herein by reference) 3.2 Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June 1, 2020, and incorporated herein by reference) 3.3 Bylaws of the Company (filed as Exhibit 3.3 to Xperi Holding's Current Report on Form S-4 filed with the SEC on February 18, 2020, and incorporated herein by reference) 3.4 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) 4.1 Description of the Company’s capital stock registered under section 12 of the Securities Exchange Act of 1934 . 10.1+ 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) 10.2+ Non-Employee Director Compensation Policy (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed August 2, 2017, and incorporated herein by reference) 10.3 Supplement to Commitment Letter and Fee Letter, dated January 3, 2020, by and among the Registrant, TiVo Corporation, Bank of America, N.A., Royal Bank of Canada, and Barclays Bank PLC (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed January 7, 2020, and incorporated herein by reference) 10.4 Credit Agreement, dated as of June 1, 2020, among the Company, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.5 Guaranty, dated as of June 1, 2020, among Xperi, TiVo, the other subsidiary guarantors party thereto and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.6 Security Agreement, dated as of June 1, 2020, among the Company, the other pledgors party thereto and Bank of America, N.A., as collateral agent (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.7+ Xperi Holding Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 4.10 of the Company’s Registration Statement on Form S-8 filed with the SEC on June 1, 2020 (File No. 333-238846)) 10.8+ Xperi Holding Corporation 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.11 of the Company’s Registration Statement on Form S-8 filed with the SEC on June 1, 2020 (File No. 333-238846)) 10.9 Form of Indemnification Agreement for Company Directors, Officers, and Key Employees (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.10+ Form of Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Agreement for the Xperi Holding Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.11+ Form of Stock Option Grant Notice and Stock Option Agreement for the Xperi Holding Corporation 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on June 1, 2020 (File No. 001-39304)) 10.12+ TiVo Corporation 2008 Equity Incentive Plan (f/k/a the “Rovi Corporation 2008 Equity Incentive Plan”) (incorporated by reference to Annex A to the Definitive Proxy Statement on Schedule 14A of TiVo Corporation, filed March 15, 2019 (File No. 001-37870)) 10.13+ TiVo Inc. Amended and Restated 2008 Equity Incentive Award Plan (now named the “TiVo Corporation Titan Equity Incentive Award Plan”) (incorporated by reference to Exhibit 4.7 to Registration Statement on Form S-8 of TiVo Corporation, filed September 9, 2016 (File No. 333-213578)) 121 10. 14 + Xperi Corporation Seventh Amended and Restated 2003 Equity Incentive Plan and Amendment No. 1 (incorporated by reference to Appendices A and B to Additional Definitive Proxy Soliciting Materials on Schedule 14A of Xperi Corporation, filed April 18, 2018 (File No. 001-37956)) 10.15+ DTS, Inc. 2014 New Employee Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of DTS, Inc., filed August 20, 2014 (File No. 000-50335)) 10.16+ Amendment No. 1 to the DTS, Inc. 2014 New Employee Incentive Plan (incorporated by reference to Exhibit 99.3 to Registration Statement on Form S-8 of DTS, Inc., filed August 10, 2015 (File No. 333-206283)) 10.17+ Amendment No. 2 to the DTS, Inc. 2014 New Employee Incentive Plan (incorporated by reference to Exhibit 99.3 to Registration Statement on Form S-8 of DTS, Inc., filed November 9, 2015 (File No. 333-207899)) 10.18+ DTS, Inc. 2012 Equity Incentive Plan and Amendment No. 1 (incorporated by reference to Appendix A to Definitive Proxy Statement on Schedule 14A of DTS, Inc., filed April 14, 2015 (File No. 000-50335)) 10.19+ SRS Labs, Inc. 2006 Stock Incentive Plan, as amended and restated on August 9, 2012 (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-8 of DTS, Inc., filed August 13, 2012 (File No. 333-183289)) 10.20+ DTS, Inc. 2003 Equity Incentive Plan, as amended on May 9, 2005, May 15, 2008, February 19, 2009, February 15, 2010, June 3, 2010 and October 8, 2010 (incorporated by reference to Exhibit 10.1 to Form 10-Q of DTS, Inc., filed November 8, 2010 (File No. 000-50335)) 10.21 Form of Severance Agreement, dated September 29, 2020, between the Company and each of Robert Andersen, Geir Skaaden, Paul Davis, Matthew Milne, and Michael Hawkey (incorporated by reference to Exhibit 10.1 to Form 10-Q of Xperi Holding Corporation, filed November 9, 2020) 10.22 Form of Change in Control Severance Agreement, dated as of September 29, 2020, between the Company and each of Robert Andersen, Geir Skaaden, Paul Davis, Matthew Milne, and Michael Hawkey (incorporated by reference to Exhibit 10.2 to Form 10-Q of Xperi Holding Corporation, filed November 9, 2020) 10.23 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) 10.24 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. 001-39304)) 21.1 List of subsidiaries 23.1 Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm 24.1 Power of Attorney (see signature page to this Annual Report on Form 10-K) 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 32.1 Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS 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. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) + Indicates a management contract or compensatory plan or arrangement. * The exhibits and schedules to this agreement have been omitted in reliance on Item 601(b)(2) of Regulation S-K promulgated by the SEC, and a copy thereof will be furnished supplementally to the SEC upon its request. Readers are cautioned that the representations and warranties set forth in this agreement are qualified by those schedules, and should not be relied upon as accurate or complete without reference to those schedules 122 Item 16. Form 10-K Summary None. 123 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: February 24, 2022 Xperi Holding Corporation By: /s/ Jon Kirchner Jon Kirchner Chief Executive Officer and President POWER OF ATTORNEY Each person whose individual signature appears below hereby authorizes and appoints Jon Kirchner and Robert Andersen, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his true and lawful attorney-in-fact and agent to act in his name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jon Kirchner Chief Executive Officer, President and Director Jon Kirchner (Principal Executive Officer) February 24, 2022 /s/ Robert Andersen Chief Financial Officer (Principal Financial and Robert Andersen Accounting Officer) February 24, 2022 /s/ Dave Habiger Dave Habiger Chairman of the Board of Directors February 24, 2022 /s/ Darcy Antonellis Darcy Antonellis Director February 24, 2022 /s/ Laura Durr Laura Durr Director February 24, 2022 /s/ Daniel Moloney Daniel Moloney Director February 24, 2022 /s/ Tonia O’Connor Tonia O’Connor Director February 24, 2022 /s/ Raghavendra Rau Raghavendra Rau Director February 24, 2022 /s/ Christopher A. Seams Christopher A. Seams Director February 24, 2022 124