Xperi Inc. 10-Q

Item 1. Financial Statements. XPERI INC. CONDENSED CONSOLIDATED S TATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2025 2024 Revenue $ 114,033 $ 118,844 Operating expenses: Cost of revenue, excluding depreciation and amortization of intangible assets 29,599 29,756 Research and development 39,549 50,439 Selling, general and administrative 48,698 56,353 Depreciation expense 2,905 3,584 Amortization expense 9,722 11,039 Total operating expenses 130,473 151,171 Operating loss ( 16,440 ) ( 32,327 ) Interest and other income, net 2,295 1,042 Interest expense - debt ( 732 ) ( 748 ) Gain on divestiture — 22,934 Loss before taxes ( 14,877 ) ( 9,099 ) Provision for income taxes 3,489 4,272 Net loss ( 18,366 ) ( 13,371 ) Less: net loss attributable to noncontrolling interest — ( 251 ) Net loss attributable to the Company $ ( 18,366 ) $ ( 13,120 ) Net loss per share attributable to the Company - basic and diluted $ ( 0.41 ) $ ( 0.29 ) Weighted-average number of shares used in computing net loss per share attributable to the Company - basic and diluted 44,773 44,521 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 XPER I INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited) Three Months Ended March 31, 2025 2024 Net loss $ ( 18,366 ) $ ( 13,371 ) Other comprehensive loss: Reclassification of foreign currency translation adjustments into net loss upon liquidation of foreign subsidiaries 34 — Foreign currency translation adjustment — ( 384 ) Unrealized gain (loss) on cash flow hedges 2,158 ( 791 ) Comprehensive loss ( 16,174 ) ( 14,546 ) Less: comprehensive loss attributable to noncontrolling interest — ( 251 ) Comprehensive loss attributable to the Company $ ( 16,174 ) $ ( 14,295 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 XPERI INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (unaudited) March 31, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 87,988 $ 130,564 Accounts receivable, net 58,185 58,745 Unbilled contracts receivable, net 83,921 83,075 Prepaid expenses and other current assets 36,598 32,488 Total current assets 266,692 304,872 Note receivable, noncurrent 30,271 29,702 Deferred consideration from divestitures 18,617 18,217 Unbilled contracts receivable, noncurrent 51,916 45,396 Property and equipment, net 45,703 44,473 Operating lease right-of-use assets 33,275 30,082 Intangible assets, net 154,006 163,714 Deferred tax assets 7,327 7,228 Other noncurrent assets 25,669 24,076 Total assets $ 633,476 $ 667,760 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 14,542 $ 16,979 Accrued liabilities 79,168 94,420 Deferred revenue 24,033 23,950 Short-term debt — 50,000 Total current liabilities 117,743 185,349 Long-term debt 40,000 — Deferred revenue, noncurrent 18,866 20,932 Operating lease liabilities, noncurrent 24,369 19,932 Deferred tax liabilities 1,491 1,491 Other noncurrent liabilities 12,105 10,979 Total liabilities 214,574 238,683 Commitments and contingencies (Note 13) Equity: Preferred stock: $ 0.001 par value; 6,000 shares authorized as of March 31, 2025 and December 31, 2024; no shares issued and outstanding as of March 31, 2025 and December 31, 2024 — — Common stock: $ 0.001 par value; 140,000 shares authorized as of March 31, 2025 and December 31, 2024; 45,519 and 44,328 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 45 44 Additional paid-in capital 1,280,559 1,274,561 Accumulated other comprehensive loss ( 3,892 ) ( 6,084 ) Accumulated deficit ( 857,810 ) ( 839,444 ) Total equity 418,902 429,077 Total liabilities and equity $ 633,476 $ 667,760 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 XPE RI INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 18,366 ) $ ( 13,371 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 12,102 14,757 Amortization of intangible assets 9,722 11,039 Depreciation of property and equipment 2,905 3,584 Accrued interest income from note receivable ( 569 ) ( 352 ) Accretion of discount from deferred consideration from divestitures ( 400 ) ( 162 ) Gain from divestiture — ( 22,934 ) Deferred income taxes ( 99 ) 223 Other 830 827 Changes in operating assets and liabilities: Accounts receivable 233 ( 10,521 ) Unbilled contracts receivable ( 7,366 ) ( 4,324 ) Prepaid expenses and other assets ( 4,197 ) ( 2,788 ) Accounts payable ( 2,653 ) ( 821 ) Accrued and other liabilities ( 12,417 ) ( 26,427 ) Deferred revenue ( 1,983 ) 1,483 Net cash used in operating activities ( 22,258 ) ( 49,787 ) Cash flows from investing activities: Purchases of property and equipment ( 1,066 ) ( 1,845 ) Capitalized internal-use software ( 3,127 ) ( 2,603 ) Purchases of intangible assets ( 14 ) ( 39 ) Net cash used in divestiture — ( 227 ) Net cash used in investing activities ( 4,207 ) ( 4,714 ) Cash flows from financing activities: Repayment of short-term debt ( 50,000 ) — Withholding taxes related to net share settlement of equity awards ( 5,288 ) ( 4,671 ) Payment of debt issuance costs ( 823 ) — Proceeds from long-term debt 40,000 — Net cash used in financing activities ( 16,111 ) ( 4,671 ) Effect of exchange rate changes on cash and cash equivalents — ( 46 ) Net decrease in cash and cash equivalents ( 42,576 ) ( 59,218 ) Cash and cash equivalents at beginning of period (1) 130,564 154,434 Cash and cash equivalents at end of period $ 87,988 $ 95,216 Supplemental disclosure of cash flow information: Income taxes paid, net of refunds $ 2,421 $ 4,235 Interest paid $ 476 $ 756 Supplemental disclosure of noncash investing and financing activities: Unpaid withholding taxes related to net share settlement of equity awards $ 815 $ 918 Costs capitalized for internal-use software included in accrued liabilities $ 581 $ 676 Debt issuance costs included in accounts payable $ 426 $ — Property and equipment included in accounts payable $ 307 $ 106 Note receivable in exchange for consideration from divestiture $ — $ 27,676 Deferred consideration from divestiture $ — $ 5,854 (1) Included $ 12.3 million of cash and cash equivalents classified as held for sale at December 31, 2023. The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 XPERI INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (in thousands) (unaudited) Three Months Ended March 31, 2025 Common Stock Additional Paid-In Accumulated Other Comprehensive Accumulated Total Shares Amount Capital Loss Deficit Equity Balances at January 1, 2025 44,328 $ 44 $ 1,274,561 $ ( 6,084 ) $ ( 839,444 ) $ 429,077 Vesting of restricted stock units, net of tax withholding 1,191 1 ( 6,104 ) — — ( 6,103 ) Stock-based compensation — — 12,102 — — 12,102 Reclassification of foreign currency translation adjustments into net loss upon liquidation of foreign subsidiaries — — — 34 — 34 Unrealized gain on cash flow hedges — — — 2,158 — 2,158 Net loss — — — — ( 18,366 ) ( 18,366 ) Balances at March 31, 2025 45,519 $ 45 $ 1,280,559 $ ( 3,892 ) $ ( 857,810 ) $ 418,902 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 8 XPERI INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (in thousands) (unaudited) Three Months Ended March 31, 2024 Common Stock Additional Paid-In Accumulated Other Comprehensive Accumulated Noncontrolling Total Shares Amount Capital Loss Deficit Interest Equity Balances at January 1, 2024 44,211 $ 44 $ 1,212,501 $ ( 2,865 ) $ ( 805,448 ) $ ( 17,097 ) $ 387,135 Change in ownership interest of the Company — — 41 — — ( 41 ) — Vesting of restricted stock units, net of tax withholding 820 1 ( 5,590 ) — — — ( 5,589 ) Stock-based compensation — — 14,757 — — — 14,757 Foreign currency translation adjustment — — — ( 384 ) — — ( 384 ) Unrealized loss on cash flow hedges — — — ( 791 ) — — ( 791 ) Net loss — — — — ( 13,120 ) ( 251 ) ( 13,371 ) Balances at March 31, 2024 45,031 $ 45 $ 1,221,709 $ ( 4,040 ) $ ( 818,568 ) $ ( 17,389 ) $ 381,757 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 9 XPER I INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Xperi Inc. (“Xperi” or the “Company”) is a leading consumer and entertainment technology company. The Company creates extraordinary experiences at home and on the go for millions of consumers around the world, enabling audiences to connect with content in a way that is more intelligent, immersive, and personal. Powering smart devices, connected cars, entertainment experiences and more, the Company brings together ecosystems designed to reach highly-engaged consumers, allowing it and its ecosystem partners to uncover significant new business opportunities, now and in the future. The Company’s technologies are integrated into consumer devices and a variety of media platforms worldwide, driving increased value for its partners, customers, and consumers. The Company operates in one reportable business segment and groups its revenue into four categories: Pay-TV, Consumer Electronics, Connected Car and Media Platform. Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The Company’s financial statements were prepared on a consolidated basis and include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. For reporting periods in fiscal year 2024 and prior, the Company owned a controlling financial interest of its former subsidiary, Perceive Corporation (“Perceive”, later known as Xperi Pylon Corporation). In December 2024, Perceive was dissolved after all of its remaining assets and liabilities were distributed to the Company. Unaudited Interim Financial Statements The accompanying unaudited interim condensed consolidated financial statements are presented in accordance with the applicable rules and regulations of the SEC for interim financial information. The amounts as of December 31, 2024 have been derived from the Company’s annual audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024, filed on February 27, 2025 (the “Form 10-K”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, which consist of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows as of and for the periods presented. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Form 10-K. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025 or any future period and the Company makes no representations related thereto. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated 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 fair value of note receivable and deferred consideration in connection with the AutoSense Divestiture, 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 valuation of performance-based awards with a market condition. Actual results experienced by the Company may differ from management’s estimates. Concentration of Credit and Other Risks Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, accounts receivable, unbilled contracts receivable, a note receivable and deferred consideration from 10 divestiture. The Company maintains cash and cash equivalents with large financial institutions, and at times, the deposits may exceed the federally insured limits. As part of its risk management processes, the Company performs periodic evaluations of the relative credit standing of these financial institutions. The Company has not sustained material credit losses from instruments held at these financial institutions. In addition, the Company has cash and cash equivalents held in international bank accounts that are denominated in various foreign currencies and has established risk management strategies designed to minimize the impact of certain currency exchange rate fluctuations. The Company believes that any concentration of credit risk in its accounts receivable and unbilled contracts receivable are substantially mitigated by its evaluation processes 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. For the three months ended March 31, 2025 and 2024, no customer accounted for 10% or more of total revenue . As of March 31, 2025 and December 31, 2024, no customer represented 10% or more of the Company’s net balance of accounts receivable. As part of the consideration for divesting its AutoSense in-cabin safety business and related imaging solutions (the “AutoSense Divestiture”), the Company received a note receivable and deferred consideration from Tobii AB (“Tobii”). Both of these instruments are exposed to credit risk arising from default on repayment from Tobii. The credit risk associated with the note receivable is mitigated by establishing a floating lien and security interest in certain of Tobii’s assets, rights, and properties, whereas the deferred consideration is not secured by any collateral. The Company utilizes valuation methodologies such as internally generated cash flow projections on the principal and interest of each instrument, along with the review of certain other data points, to determine the likelihood that the note receivable or deferred consideration will be repaid. Further, the Company assesses each instrument for credit losses and provides a reserve when full payment on the instruments may not occur as expected, in which case the reserve reflects the excess of the amortized cost basis over the results of the cash flow projections. Based on the results of the internally generated cash flow projections, the Company expects Tobii to make full payment on both instruments in accordance with the underlying agreement. Accordingly, no allowance for credit losses was recorded as of March 31, 2025. Recent Accounting Pronouncements Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires disclosure of specific categories in the effective tax rate reconciliation and additional information for reconciling items that meet a quantitative threshold and further disaggregation of income taxes paid for individually significant jurisdictions. This guidance is effective on a prospective or retrospective basis for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this guidance on the disclosures within its consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard requires that public business entities disclose additional information about specific expense categories in the notes to financial statements for interim and annual reporting periods. The standard will become effective for the Company’s 2027 annual financial statements and interim financial statements thereafter and may be applied prospectively to periods after the adoption date or retrospectively for all prior periods presented in the financial statements, with early adoption permitted. The Company is currently evaluating the impact of this guidance on the disclosures within its consolidated financial statements. NOTE 2 – REVENUE 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. 11 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 standalone selling price (“SSP”) basis. The determination of SSP considers market conditions, the size and scope of the contract, customer and geographic information, and other factors. When observable prices are not available, SSP for separate performance obligations is generally based on the cost-plus-margin approach, considering overall pricing objectives. When variable consideration is in the form of a sales-based or usage-based royalty in exchange for a license of technology or when a license of technology 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 derives the majority of its revenue from licensing its technologies and solutions to customers within the Pay-TV, Consumer Electronics, Connected Car and Media Platform product categories. Refer to Part I, Item 1 of the Form 10-K for detailed information regarding these product categories. Pay-TV Customers within the Pay-TV category are primarily multi-channel video service providers, consumer electronics (“CE”) manufacturers, and end consumers. Revenue in this category is primarily derived from licensing the Company’s Pay-TV solutions, including Electronic Program Guides, TiVo video-over-broadband (“IPTV”) Solutions, Personalized Content Discovery and enriched Metadata. For these solutions, the Company provides on-going media or data delivery, either via on-premise licensed software, hosting or access to its platform. The Company generally receives fees on a per-subscriber per-month basis or as a monthly fee, and revenue is recognized during the month in which the solutions are provided to the customer. For most of the on-premise licensed software arrangements, substantially all functionality is obtained through the Company’s frequent updating of the technology, data and content. In these instances, the Company typically has a single performance obligation related to these ongoing activities in the underlying arrangement, and revenue is generally recognized over the period the solution is provided. In the case of certain fixed fee on-premise licensed software arrangements, revenue is recognized immediately upon the delivery of the licensed technology. Hosted solutions and access to our platform is considered a single performance obligation with revenue being recognized over the period the solution is provided. Consumer Electronics The Company licenses its audio technologies to CE 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 license. If applicable, revenue is recognized 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 estimates the customer will exceed the minimum and adjusts the revenue based on actual usage once that is reported by the customer. 12 Connected Car The Company licenses its digital radio solutions, automotive infotainment and related offerings to automotive manufacturers or their supply chain partners. The Company generally recognizes royalty revenue from these licenses based on units shipped or manufactured, similar to the revenue recognition described above in “Consumer Electronics”. Certain customers may enter into fixed fee or minimum guarantee agreements, also similar to the revenue recognition described above in “Consumer Electronics.” Automotive infotainment and related revenue is generally recognized over time as the customer obtains access to the solutions and underlying data. Media Platform The Company generates revenue from advertising, TV viewership data, TV schedule metadata for ad measurement and programming analytics, and licensing of the core middleware solutions. Advertising revenue is generally recognized when the related advertisement is provided. TV viewership data revenue is generally recognized over time as the customer obtains the underlying data. TV schedule metadata for ad measurement and programming analytics is generally recognized over time as the customer obtains the scheduled data. License revenue for the core middleware solutions is generally recognized either on a per-unit royalty or a minimum guarantee or fixed fee basis, similar to “ Consumer Electronics ” described in the section above. Hardware Products, Services and Settlements/Recoveries The Company sells hardware products, primarily to end consumers, within the Pay-TV and Consumer Electronics product categories. Hardware product revenue is generally recognized when the promised product is delivered. The Company also generates non-recurring engineering (“NRE”) revenue within all of its product categories. The Company recognizes NRE revenue as progress is made toward completion, generally using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Revenue from each of advertising, NRE services, and hardware products was less than 10 % of total revenue for all periods presented. The Company actively monitors and enforces its technology licenses, including seeking appropriate compensation from customers that have under-reported royalties owed under a license agreement and from third parties that utilize the Company’s technologies without a license. As a result of these activities, the Company may, from time to time, recognize revenue from periodic compliance audits of licensees for underreporting royalties incurred in prior periods, or from settlements of license disputes. These settlements and recoveries may cause revenue to be higher than expected during a particular reporting period and such settlements and recoveries may not occur in subsequent periods. The Company recognizes revenue from settlements and recoveries when a binding agreement has been executed or a revised royalty report has been received and the Company concludes collection is probable. Disaggregation of Revenue The Company’s revenue that is recognized over time consists primarily of per unit royalties, per-subscriber per-month or monthly license fees, single performance obligations satisfied over time, and NRE services. Revenue that is recognized at a point in time consists primarily of fixed fee or minimum guarantee licensing contracts, hardware products, advertising and settlements/recoveries. The following table summarizes revenue by timing of recognition (in thousands): Three Months Ended March 31, 2025 2024 Recognized over time $ 79,066 $ 96,682 Recognized at a point in time 34,967 22,162 Total revenue $ 114,033 $ 118,844 13 The following table summarizes revenue by product category (in thousands): Three Months Ended March 31, 2025 2024 Pay-TV $ 49,864 $ 56,806 Consumer Electronics 22,798 26,128 Connected Car 33,286 24,348 Media Platform 8,085 11,562 Total revenue $ 114,033 $ 118,844 The following table summarizes revenue by geographic location (in thousands): Three Months Ended March 31, 2025 U.S. $ 45,388 40 % Japan 17,789 16 China 14,834 13 South Korea 12,757 11 Other 23,265 20 Total revenue $ 114,033 100 % Three Months Ended March 31, 2024 U.S. $ 59,799 50 % Europe and Middle East 13,475 11 China 12,787 11 Japan 12,037 10 Other 20,746 18 Total revenue $ 118,844 100 % A significant portion of the Company’s revenue is derived from licensees headquartered outside of the U.S., principally in Asia, Europe and the Middle East. Revenue generated from Asia accounts for a significant portion of total revenue, which the Company expects to continue in future periods. The following table presents additional revenue disclosures (in thousands): Three Months Ended March 31, 2025 2024 Revenue recognized in the period from: Amounts included in deferred revenue at the beginning of the period $ 8,039 $ 7,266 Performance obligations satisfied in previous periods (true ups, recoveries, and settlements) (1) $ ( 209 ) $ 3,009 (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 reports that are generally received in the following period and may include other changes in estimates. Recoveries 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 disputes or litigation during the period for past royalties owed. 14 Remaining Performance Obligations Remaining performance obligations represent contracted revenue that has not yet been recognized. As of March 31, 2025, the Company’s remaining performance obligations and the period over which they are expected to be recognized were as follows (in thousands): Year Ending December 31: Amounts 2025 (remaining 9 months) $ 44,346 2026 31,886 2027 17,053 2028 7,303 2029 2,178 Thereafter 228 Total $ 102,994 Allowance for Credit Losses The following table presents the activity in the allowance for credit losses for the three months ended March 31, 2025 and 2024 (in thousands): Three Months Ended March 31, 2025 2024 Accounts Receivable Unbilled Contracts Receivable Accounts Receivable Unbilled Contracts Receivable Beginning balance $ 946 $ 499 $ 1,906 $ 190 Provision for credit losses 202 ( 44 ) 798 58 Recoveries/charge-off ( 76 ) ( 5 ) 164 ( 3 ) Ending balance $ 1,072 $ 450 $ 2,868 $ 245 NOTE 3 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS Prepaid expenses and other current assets consisted of the following (in thousands): March 31, 2025 December 31, 2024 Prepaid expenses $ 25,391 $ 21,027 Prepaid income taxes 8,567 8,295 Finished goods inventory 622 1,061 Other 2,018 2,105 Total $ 36,598 $ 32,488 Property and equipment, net consisted of the following (in thousands): March 31, 2025 December 31, 2024 Computer equipment and software $ 55,976 $ 54,737 Capitalized internal-use software 26,828 23,384 Office equipment and furniture 10,927 10,773 Building 17,876 17,876 Land 5,300 5,300 Leasehold improvements 11,053 10,778 Construction in progress 863 1,979 Total property and equipment 128,823 124,827 Less: accumulated depreciation and amortization (1) ( 83,120 ) ( 80,354 ) Property and equipment, net $ 45,703 $ 44,473 15 (1) Includes $ 5.5 million and $ 4.1 million as of March 31, 2025 and December 31, 2024, respectively, of accumulated amortization associated with capitalized internal-use software. The following table summarizes the capitalization and amortization of internal-use software for the three months ended March 31, 2025 and 2024 (in thousands): Three Months Ended March 31, 2025 2024 Costs capitalized associated with internal-use software $ 3,444 $ 3,279 Amortization of capitalized internal-use software 1,348 493 Accrued liabilities consisted of the following (in thousands): March 31, 2025 December 31, 2024 Employee compensation and benefits $ 26,621 $ 33,360 Accrued expenses 14,289 16,108 Current portion of operating lease liabilities 11,023 15,353 Accrued other taxes 7,511 8,370 Accrued income taxes 7,349 6,259 Third-party royalties 2,559 5,171 Other 9,816 9,799 Total $ 79,168 $ 94,420 NOTE 4 – FINANCIAL INSTRUMENTS Non-marketable Equity Securities As of March 31, 2025 and December 31, 2024, other noncurrent assets included equity securities accounted for under the equity method with a carrying amount of $ 4.5 million and $ 4.7 million, respectively. No impairments to the carrying amount of the Company’s non-marketable equity securities were recognized in the three months ended March 31, 2025 and 2024. Derivatives Instruments The Company uses a foreign exchange hedging strategy to hedge local currency expenses and reduce variability associated with anticipated cash flows. The Company’s derivative financial instruments consist of foreign currency forward contracts. The maturities of these instruments are generally less than twelve months. Fair values for derivative financial instruments are based on prices computed using third-party valuation models. All the significant inputs to the third-party valuation models are observable in active markets. Inputs include current market-based parameters such as forward rates, yield curves and credit default swap pricing. Cash Flow Hedges The Company designates certain foreign currency forward contracts as hedging instruments pursuant to Accounting Standards Codification (“ASC”) No. 815— Derivatives and Hedging . The effective portion of the gain or loss on the derivatives are reported as a component of accumulated other comprehensive loss (“AOCL”) in stockholders’ equity and reclassified into net loss on the condensed consolidated statements of operations (Unaudited) in the period the hedged transactions are settled. 16 The notional and fair values of all derivative financial instruments were as follows (in thousands): Location in Balance Sheet March 31, 2025 December 31, 2024 Derivative instruments designated as cash flow hedges: Fair value — foreign exchange contract assets, net amount Prepaid expenses and other current assets $ 300 $ — Fair value — foreign exchange contract assets, net amount Accrued liabilities $ — $ 1,858 Notional value held to buy U.S. dollars in exchange for other currencies $ 5,103 $ 5,074 Notional value held to sell U.S. dollars in exchange for other currencies $ 63,651 $ 57,329 All of the Company’s derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparty to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's condensed consolidated balance sheets on a net basis. The gross amounts of the Company’s foreign currency forward contracts and the net amounts recorded in the Company’s condensed consolidated balance sheets were as follows (in thousands): March 31, 2025 December 31, 2024 Gross amount of recognized assets $ 863 $ 173 Gross amount of recognized liabilities ( 563 ) ( 2,031 ) Net derivative assets (liabilities) $ 300 $ ( 1,858 ) The changes in AOCL related to the cash flow hedges consisted of the following (in thousands): Three Months Ended March 31, 2025 2024 Beginning balance $ ( 1,858 ) $ 1,034 Other comprehensive gain (loss) before reclassification 1,577 ( 422 ) Amounts reclassified from accumulated other comprehensive loss (gain) into net loss 581 ( 369 ) Net current period other comprehensive gain (loss) 2,158 ( 791 ) Ending balance $ 300 $ 243 The following table summarizes the (losses) gains recognized upon settlement of the hedged transactions in the condensed consolidated statements of operations for three months ended March 31, 2025 and 2024 (in thousands): Three Months Ended March 31, 2025 2024 Research and development $ ( 259 ) $ 349 Selling, general and administrative ( 106 ) 107 Total $ ( 365 ) $ 456 17 NOTE 5 – 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 note receivable, deferred consideration from divestitures, short-term debt, and long-term debt. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. 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 and liabilities, 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. The Company’s derivative financial instruments (as described in Note 4— Financial Instruments ), consisting of foreign currency forward contracts, are reported at fair value on a recurring basis and classified as Level 2. Financial Instruments Not Recorded at Fair Value The following table presents the fair value hierarchy for the Company’s assets and liabilities recorded at their carrying amount, but for which the fair value is disclosed (in thousands): March 31, 2025 December 31, 2024 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Assets: Note receivable, noncurrent $ 30,271 $ 31,110 $ 29,702 $ 28,223 Deferred consideration from divestitures 18,617 17,762 18,217 18,342 Total assets $ 48,888 $ 48,872 $ 47,919 $ 46,565 Liabilities: Senior unsecured promissory note $ — $ — $ 50,000 $ 50,000 AR Facility $ 40,000 $ 40,000 $ — $ — The fair value of the note receivable, including accrued interest, and the deferred consideration resulting from the AutoSense Divestiture and the Perceive Transaction (as described in Note 6— Divestitures ) were estimated based on an income and market approach with valuation inputs such as the U.S. Treasury constant maturity yields, comparable bond yields, and credit spreads over the term of the same or similarly issued instruments. They are classified within Level 2 of the fair value hierarchy. Debt is classified within Level 2 of the fair value hierarchy. As of December 31, 2024, short-term debt included the senior unsecured promissory note. The carrying amount of the senior unsecured promissory note approximated fair value due to its short-term maturity. As of March 31, 2025, long-term debt included the AR Facility with a floating interest rate based on market conditions. The carrying amount of the AR Facility approximates fair value. Refer to Note 8— Debt and Receivables Securitization for additional information on these two debt instruments. 18 NOTE 6 – DIVESTITURES Perceive Corporation In August 2024, the Company and one of its former subsidiaries, Perceive (“Seller”), of which the Company owned approximately 76.4 % of the equity interests, entered into an Asset Purchase Agreement (the “Agreement”) with Amazon.com Services LLC (“Buyer”) pursuant to which Buyer agreed to purchase and assume from Seller substantially all the assets and certain liabilities of Seller for $ 80.0 million in cash, including a holdback of $ 12.0 million to be held for 18 months after the closing of the transaction to secure the Company’s and Seller’s indemnification obligations (the “Perceive Transaction”). The Perceive Transaction was subsequently completed in October 2024. The Perceive Transaction did not represent a strategic shift that would have a major effect on the Company’s consolidated results of operations, and therefore, its results of operations were not reported as discontinued operations. Holdback Consideration Upon completion of the Perceive Transaction, the holdback consideration of $ 12.0 million was estimated to have a then present value of $ 11.3 million, resulting in a discount of $ 0.7 million. For the three months ended March 31, 2025, the amount of discount accreted as interest income was insignificant. As of March 31, 2025, the net carrying amount of the holdback consideration is as follows (in thousands): March 31, 2025 Holdback consideration $ 12,000 Less: unamortized discount on holdback consideration ( 471 ) Net carrying amount $ 11,529 AutoSense In-cabin Safety Business and Related Imaging Solutions In December 2023, the Company entered into a definitive agreement with Tobii in connection with the AutoSense Divestiture. The AutoSense Divestiture represented a 100 % equity sale transaction of two of the Company’s wholly-owned subsidiaries and was expected to streamline the Company’s business to further focus its business on entertainment-related products and services. In January 2024, the AutoSense Divestiture was completed for total consideration of $ 44.3 million, comprised of $ 10.8 million of cash, a note receivable from Tobii (the “Tobii Note”) of $ 27.7 million, and deferred consideration (as described under Deferred Consideration below) totaling $ 15.0 million, which was estimated to have a fair value of $ 5.8 million based on a present value factor as of January 31, 2024. The $ 10.8 million of cash included in the total consideration represents the cash balance that was transferred to Tobii upon completion of the AutoSense Divestiture to support operations during the transition and was subsequently returned to the Company, and as such, this amount is included in the assets sold as of January 31, 2024 and in the total consideration received. In addition, there may be potential earnout payments (as described under Contingent Consideration below) payable in 2031, contingent upon the future success of the divested AutoSense in-cabin safety business. In connection with the AutoSense Divestiture, the Company also recorded a liability of $ 7.1 million for potential indemnification of certain pre-closing date matters. 19 As of January 31, 2024, the Company derecognized the carrying amounts of the following assets and liabilities (in thousands): January 31, 2024 Current Noncurrent Total Assets: Cash and cash equivalents $ 11,025 $ — $ 11,025 Accounts receivable, net 3,392 — 3,392 Unbilled contracts receivable, net 1,398 5,320 6,718 Prepaid expenses and other current assets 812 — 812 Property and equipment, net — 2,291 2,291 Operating lease right-of-use assets — 3,272 3,272 Other noncurrent assets — 2,887 2,887 Total assets held for sale $ 16,627 $ 13,770 $ 30,397 Liabilities: Accounts payable $ 248 $ — $ 248 Accrued liabilities 4,933 — 4,933 Deferred revenue 1,114 — 1,114 Operating lease liabilities, noncurrent — 2,708 2,708 Other noncurrent liabilities — 7,064 7,064 Total liabilities held for sale $ 6,295 $ 9,772 $ 16,067 Net assets held for sale $ 10,332 $ 3,998 $ 14,330 Upon the completion of the AutoSense Divestiture, the Company recognized a pre-tax gain of $ 22.9 million. The AutoSense Divestiture did not represent a strategic shift that would have a major effect on the Company’s consolidated results of operations, and therefore, its results of operations were not reported as discontinued operations. Note Receivable from Tobii AB The Tobii Note, with a fixed interest rate of 8 % per annum, matures on April 1, 2029 and is payable in three annual installments. Tobii may, at any time and on any one or more occasions, prepay all or any portion of the outstanding principal amount, along with accrued interest, without any penalty. In the event of default, an additional interest of 2 % per annum may be applied to the outstanding balance of the Tobii Note, and the Company has the right to demand full or partial payment on the outstanding balance with unpaid interest. The Tobii Note is secured by a floating lien and security interest in certain of Tobii’s assets, rights, and properties, and contains customary affirmative and negative covenants including the restrictions on incurring certain indebtedness, and certain change of control and asset sale events, but does not include any financial covenants. The Tobii Note has the following scheduled principal repayments (in thousands): Date of Principal Payment: Amount April 1, 2027 $ 10,000 April 1, 2028 10,000 April 1, 2029 7,676 Total principal payments $ 27,676 The Company elected to present accrued interest within the carrying amount of note receivable, noncurrent, in the condensed consolidated balance sheets. As of March 31, 2025, the carrying amount of the Tobii Note is as follows (in thousands): March 31, 2025 Outstanding principal amount $ 27,676 Add: interest accrued to date 2,595 Carrying amount—note receivable, noncurrent $ 30,271 20 For the three months ended March 31, 2025 and 2024, the Company recognized interest income of $ 0.6 million and $ 0.4 million, respectively. Deferred Consideration The deferred consideration consists of guaranteed future cash payments, which are scheduled to be made by Tobii in four annual payments as follows (in thousands): Date of Payment: Amount February 15, 2028 $ 3,000 February 15, 2029 2,250 February 15, 2030 4,500 February 15, 2031 5,250 Total future payments $ 15,000 At the closing date of the Tobii Note, there was $ 9.2 million of discount on the deferred consideration to be accreted as interest income up to the date of the final payment. For the three months ended March 31, 2025 and 2024, the Company accreted $ 0.3 million and $ 0.2 million of the discount as interest income, respectively. As of March 31, 2025, the net carrying amount of the deferred consideration is as follows (in thousands): March 31, 2025 Total deferred consideration $ 15,000 Less: unamortized discount on deferred consideration ( 7,912 ) Net carrying amount $ 7,088 Contingent Consideration The earnout represents potential incremental cash consideration, and the payment is contingent upon the achievement of certain targeted shipments, between January 1, 2024 and December 31, 2030, of qualified automotive products featuring the AutoSense in-cabin safety technology and the related imaging solutions. At the closing date of the AutoSense Divestiture, the Company elected to apply the gain contingency guidance under ASC 450— Contingencies , as it could not reasonably estimate shipment amounts. As a result, the Company deferred the recognition of the contingent consideration until it becomes realized or realizable. NOTE 7 – INTANGIBLE ASSETS, NET Identified intangible assets consisted of the following (in thousands): March 31, 2025 Weighted-Average Remaining Useful Life (in years) Gross Amount Accumulated Amortization Net Carrying Value Finite-lived intangible assets: Acquired patents 5.0 $ 17,281 $ ( 6,239 ) $ 11,042 Existing technology / content database 4.0 219,927 ( 197,118 ) 22,809 Customer contracts and related relationships 4.1 493,685 ( 395,303 ) 98,382 Trademarks/trade name 2.2 39,313 ( 38,940 ) 373 Non-compete agreements 3,101 ( 3,101 ) — Total finite-lived intangible assets 773,307 ( 640,701 ) 132,606 Indefinite-lived intangible assets: TiVo tradename/trademarks N/A 21,400 — 21,400 Total intangible assets $ 794,707 $ ( 640,701 ) $ 154,006 21 December 31, 2024 Weighted-Average Remaining Useful Life (in years) Gross Amount Accumulated Amortization Net Carrying Value Finite-lived intangible assets: Acquired patents 5.2 $ 17,281 $ ( 5,687 ) $ 11,594 Existing technology / content database 4.0 219,912 ( 194,041 ) 25,871 Customer contracts and related relationships 4.4 493,685 ( 389,251 ) 104,434 Trademarks/trade name 2.5 39,313 ( 38,898 ) 415 Non-compete agreements 3,101 ( 3,101 ) — Total finite-lived intangible assets 773,292 ( 630,978 ) 142,314 Indefinite-lived intangible assets: TiVo tradename/trademarks N/A 21,400 — 21,400 Total intangible assets $ 794,692 $ ( 630,978 ) $ 163,714 A s of March 31, 2025, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands): Year Ending December 31: Amounts 2025 (remaining 9 months) $ 25,117 2026 31,509 2027 30,666 2028 30,329 2029 14,343 Thereafter 642 Total future amortization $ 132,606 NOTE 8 – DEBT AND RECEIVABLES SECURITIZATION PNC AR Facility In February 2025, the Company entered into a Receivables Financing Agreement (the “RFA”) to establish an accounts receivable securitization program (the “AR Facility”) with PNC Bank (“PNC”). Under the AR Facility, certain of the Company’s wholly-owned subsidiaries (collectively, the “Originators”) agreed to periodically transfer and sell their trade receivables, which include accounts receivable and unbilled contracts receivable, and all related rights to Xperi SPV LLC (“Xperi SPV”), the Company’s wholly-owned special purpose subsidiary, while the Company manages the associated collection and administrative responsibilities. In turn, Xperi SPV may borrow funds from PNC from time to time, secured by liens on the trade receivables. The Company controls Xperi SPV and includes it in the Company’s condensed consolidated financial statements. The transfer of the trade receivables is accounted for as a sale of financial assets. Once sold to Xperi SPV, the Originators have no continuing involvement in the transferred trade receivables. Further, the transferred trade receivables are no longer available to satisfy any outstanding debt owed to creditors of the Company or the Originators. The maximum amount potentially available to borrow, based on the eligibility of the trade receivables, is $ 55.0 million. Interest on the outstanding balance is accrued at the sum of the (i) monthly Term SOFR Rate (as defined in the RFA) and (ii) 1.90 %. Additional interest of 0.50 % is accrued on the unused borrowing limit. Interest is payable on a monthly basis. The AR Facility matures on February 21, 2028, unless terminated earlier pursuant to its terms. Repayment of the outstanding principal is due at maturity; however, the Company may prepay all of the outstanding principal at any time, plus accrued and unpaid interest, without any premium or penalty. If, at any time, the aggregate outstanding principal exceeds the eligibility limit of the receivables, the Company is required to repay the excess amount borrowed immediately. 22 The AR Facility contains customary covenants included in debt arrangements, and certain liquidity and related covenants involving various types of financial performance measures such as liquidity ratio, default ratio, dilution ratio, delinquency ratio, and days sales outstanding. Subject in some cases to cure periods, amounts outstanding under the RFA may be accelerated for customary events of default including, but not limited to, the failure to make payments or deposits when due, borrowing base deficiencies, and the failure to observe or comply with any covenant. The Company was in compliance with all covenants as of March 31, 2025. On February 21, 2025, the Company borrowed $ 40.0 million under the AR Facility and accounted for it as a secured borrowing. As of March 31, 2025, accounts receivable and unbilled contracts receivable totaling $ 124.4 million were included in the balance sheet of Xperi SPV and pledged as collateral against the borrowing. The Company capitalized fees incurred to establish the securitization program of $ 1.2 million, which are amortized on a straight-line basis over the commitment term of three years . Fees amortized are recognized under “interest expense – debt” in the condensed consolidated statements of operations. Vewd Promissory Note In connection with the acquisition of Vewd Software Holdings Limited (“Vewd”) on July 1, 2022, the Company issued a senior unsecured promissory note (the “Promissory Note”) to the sellers of Vewd in a principal amount of $ 50.0 million. Indebtedness outstanding under the Promissory Note bears an interest rate of 6.00 % per annum, payable in cash on a quarterly basis. The Promissory Note was scheduled to mature on July 1, 2025 , but the Company was permitted to prepay all of the outstanding principal at any time, plus accrued and unpaid interest, without any premium or penalty. The outstanding principal of $ 50.0 million on the Promissory Note was classified as current as of December 31, 2024. In February 2025, the Company repaid the full outstanding principal along with accrued interest, with $ 40.0 million in loan proceeds from the AR Facility with PNC (as described above) and the remainder with cash on hand. Total interest expense for debt was $ 0.7 million for the three months ended March 31 , 2025 and 2024. NOTE 9 – NET LOSS PER SHARE Basic net loss per share attributable to the Company is computed by dividing the net loss attributable to the Company by the number of weighted-average outstanding common shares in the period. Potentially dilutive common shares, such as common shares issuable upon exercise of stock options, vesting of restricted stock units (“RSUs”), and shares purchased under the Employee Stock Purchase Plan (“ESPP”) are typically reflected in the computation of diluted net income per share by application of the treasury stock method. Due to the net losses reported, these potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to the Company, since their effect would be anti-dilutive. The following table sets forth the computation of basic and diluted net loss per share attributable the Company (in thousands, except per share amounts): Three Months Ended March 31, 2025 2024 Numerator: Net loss attributable to the Company - basic and diluted $ ( 18,366 ) $ ( 13,120 ) Denominator: Weighted-average number of shares used in computing net loss per share attributable to the Company - basic and diluted 44,773 44,521 Net loss per share attributable to the Company - basic and diluted $ ( 0.41 ) $ ( 0.29 ) 23 The following potentially dilutive shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented (in thousands): Three Months Ended March 31, 2025 2024 Stock options — 69 Restricted stock units 7,982 8,053 ESPP 301 253 Total 8,283 8,375 NOTE 10 – STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Equity Incentive Plans In connection with the Separation and on October 1, 2022, the Company adopted the Xperi Inc. 2022 Equity Incentive Plan (the “2022 EIP”). Under the 2022 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, RSUs, stock appreciation rights, dividend equivalents and performance awards, or any combination thereof. The 2022 EIP includes an automatic annual increase to its share reserve on January 1 of each year as set forth in the plan document. The 2022 EIP provides for option grants designated as either incentive stock options or non-statutory options. Stock options have been granted with an exercise price not less than the value of the common stock on the grant date, have 10-year contractual terms from the date of grant, and vest over a four-year period. The vesting criteria for RSUs has historically been the passage of time or meeting certain performance-based objectives, and continued service through the vesting period over three or four years for time-based awards or three years for performance-based awards. As of March 31, 2025 , there were approximately 4.3 million shares reserved for future grants under the 2022 EIP. Employee Stock Purchase Plans In connection with the Separation and on October 1, 2022, the Company adopted the Xperi Inc. 2022 Employee Stock Purchase Plan (as amended, the “2022 ESPP”). The 2022 ESPP originally provided consecutive overlapping 24-month offering periods, with four purchase periods that were generally six months in length, commencing on each December 1 and June 1 during the term of the 2022 ESPP. The 2022 ESPP was subsequently amended, and commencing December 1, 2023, the length of the offering periods was reduced from 24 months to 12 months and the employee’s maximum participant contribution was reduced from 100 % to 15 % of the employee’s after-tax base earnings and commissions up to the limit imposed by the Internal Revenue Service. 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. The 2022 ESPP includes a reset provision which is triggered 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 12 -month offering period. Upon occurrence of the reset, the existing offering period will automatically terminate and a new 12 -month offering period will begin on the next business day. All participants in the terminated offering will be transferred to the new offering period. As of March 31, 2025, there were 2.6 million shares reserved for future issuance under the 2022 ESPP. Stock Options The Company did not grant additional stock options during the three months ended March 31, 2025. All outstanding stock options were fully vested and exercisable as March 31, 2025, but were immaterial for financial statement disclosure purposes. 24 Restricted Stock Units Information with respect to outstanding RSUs (including both time-based vesting and performance-based vesting) for the three months ended March 31, 2025 is as follows (in thousands, except per share amounts): 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, 2024 5,258 2,147 7,405 $ 13.66 Granted 2,070 708 2,778 $ 8.32 Vested / released ( 1,767 ) ( 143 ) ( 1,910 ) $ 13.40 Canceled / forfeited ( 158 ) ( 133 ) ( 291 ) $ 13.49 Balance at March 31, 2025 5,403 2,579 7,982 $ 11.87 Performance-Based Awards From time to time, the Company may grant performance-based restricted stock units (“PSU”) to senior executives, certain employees, and consultants. The value and the vesting of such PSUs are generally linked to one or more performance goals or certain market conditions determined by th e 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 % of the grant. For PSUs subject to market conditions, 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. The Company uses the closing trading price of its common stock on the date of grant as the fair value of awards or RSUs and PSUs that are based on Company-designated performance targets. For PSUs that are based on market conditions (the “market-based PSUs”), fair value is estimated by using a Monte Carlo simulation on the date of grant. The following assumptions were used to value the market-based PSUs granted during the period: Three Months Ended March 31, 2025 2024 Expected life (years) 3.0 3.0 Risk-free interest rate 3.9 % 4.2 % Dividend yield 0.0 % 0.0 % Expected volatility 46.2 % 43.9 % Stock-Based Compensation Total stock-based compensation expense for the three months ended March 31, 2025 and 2024 is as follows (in thousands): Three Months Ended March 31, 2025 2024 Cost of revenue, excluding depreciation and amortization of intangible assets $ 1,044 $ 744 Research and development 4,423 4,333 Selling, general and administrative 6,635 9,680 Total stock-based compensation expense $ 12,102 $ 14,757 Stock-based compensation expense categorized by award type for the three months ended March 31, 2025 and 2024 is summarized in the table below (in thousands): Three Months Ended March 31, 2025 2024 RSUs $ 9,872 $ 9,185 PSUs 1,040 4,254 ESPP 1,190 1,318 Total stock-based compensation expense $ 12,102 $ 14,757 25 As of March 31, 2025, unrecognized stock-based compensation expense related to unvested equity-based awards is as follows (amounts in thousands): March 31, 2025 Unrecognized Stock-Based Compensation Weighted-Average Period to Recognize Expense (in years) RSUs $ 47,387 2.0 PSUs 10,950 2.1 ESPP 512 0.2 Total unrecognized stock-based compensation expense $ 58,849 NOTE 11 – INCOME TAXES For the three months ended March 31, 2025, the Company recorded an income tax expense of $ 3.5 million on a pretax loss of $ 14.9 million, which resulted in an effective tax rate of ( 23.5 )%. The income tax expense for the three months ended March 31, 2025 was primarily related to foreign withholding taxes and foreign income taxes. For the three months ended March 31, 2024, the Company recorded an income tax expense of $ 4.3 million on a pretax loss of $ 9.1 million, which resulted in an effective tax rate of ( 47.0 )%. The income tax expense for the three months ended March 31, 2024 was primarily related to foreign withholding taxes, foreign income taxes, U.S. federal income taxes, and state income taxes. As of March 31, 2025 , gross unrecognized tax benefits of $ 15.3 million decreased by $ 0.1 million compared to December 31, 2024. Of the $ 15.3 million gross unrecognized tax benefits, $ 1.1 million would affect the effective tax rate, if recognized. The Company is unable to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease. It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. Recognition of interest and penalties related to unrecognized tax benefits was immaterial for the three months ended March 31, 2025 and 2024. As of March 31, 2025 and December 31, 2024, accrued interest and penalties were $ 0.2 million and $ 0.1 million, respectively. As of March 31, 2025 , the Company’s 2020 through 2025 tax years are generally open and subject to potential examination in one or more jurisdictions. In addition, in the United States, 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 examinatio n. NOTE 12 – LEASES The Company leases office and research facilities, data centers and office equipment under operating leases with various expiration dates thr o ugh 2032. Certain leases offer the op tion to renew for up to ten years and to terminate before the expiration date. 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. 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. 26 The components of operating lease costs were as follows (in thousands): Three Months Ended March 31, 2025 2024 Fixed lease cost (1) $ 4,170 $ 4,286 Variable lease cost 1,172 1,053 Less: sublease income ( 2,120 ) ( 1,931 ) Total operating lease cost $ 3,222 $ 3,408 (1) Includes short-term leases expensed on a straight-line basis. The following table presents supplemental cash flow information arising from lease transactions (in thousands): Three Months Ended March 31, 2025 2024 Cash payments included in the measurement of operating lease liabilities $ 4,419 $ 4,496 Operating ROU assets obtained in exchange for lease obligations $ 6,824 $ — The weighted-average remaining term of the Company’s operating leases and the weighted-average discount rate used to measure the present value of the operating lease liabilities are as follows: March 31, 2025 December 31, 2024 Weighted-average remaining lease term (in years) 4.5 2.9 Weighted-average discount rate 6.5 % 5.5 % Future minimum lease payments and related lease liabilities as of March 31, 2025 were as follows (in thousands): Year Ending December 31: Operating Lease Payments (1) Sublease Income Net Operating Lease Payments 2025 (remaining 9 months) $ 10,388 $ ( 4,759 ) $ 5,629 2026 9,202 ( 1,563 ) 7,639 2027 6,872 ( 368 ) 6,504 2028 5,024 ( 379 ) 4,645 2029 3,906 ( 291 ) 3,615 Thereafter 6,283 — 6,283 Total lease payments 41,675 $ ( 7,360 ) $ 34,315 Less: imputed interest ( 6,283 ) Present value of operating lease liabilities $ 35,392 Less: operating lease liabilities, current portion ( 11,023 ) Noncurrent operating lease liabilities $ 24,369 (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 13 – 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. As of March 31, 2025, the Company’s total future unconditional purchase obligations were approximately $ 133.0 million. 27 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 that may be incurred pursuant to its indemnification obligations, if any. Variables affecting any such assessment include, but are not limited to: the scope of the contractual indemnification obligation; the nature of the third party claim asserted; the relative merits of the third party claim; the financial ability of the third party claimant 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. The Company has received requests for indemnification, but to date none has been material 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 not material. 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 from its insurers, should they occur. Contingencies The Company and its subsidiaries have been involved in litigation matters and claims in the normal course of business. In the past, the Company or its subsidiaries have litigated to enforce their respective patents and other intellectual property rights, to enforce the terms of license agreements, to determine infringement or validity of intellectual property rights, and to defend themselves or their customers against claims of infringement or breach of contract. The Company expects it or its subsidiaries will be involved in similar legal proceedings in the future, including proceedings to ensure proper and full payment of royalties by licensees under the terms of their license agreements. Accruals for loss contingencies are recognized when a loss is probable, and the amount of such loss can be reasonably estimated. An adverse decision in any 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. Although considerable uncertainty exists, the Company does not anticipate that the disposition of any of these matters will have a material effect on its business or consolidated financial statements. NOTE 14 - SEGMENT RELATED INFORMATION The Company has one operating and reportable segment. The Company’s technologies are integrated into consumer devices and media platforms worldwide, powering smart devices, connected cars and entertainment experiences. The Company’s Chief Executive Officer has been determined to be the chief operating decision maker (“CODM”) in accordance with the authoritative guidance on segment reporting. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance and decides how to allocate resources based on net income (loss) that also is reported on the statements of operations as consolidated net income (loss). The measure of segment assets is reported on the balance sheet as total consolidated assets. 28 The following table presents information about reported segment revenue, significant segment expenses, and segment net loss for the three months ended March 31, 2025 and 2024 (in thousands): Three Months Ended March 31, 2025 2024 Revenue $ 114,033 $ 118,844 Less: Cost of revenue, excluding depreciation and amortization of intangible assets (1) 29,599 29,756 Research and development (1) 39,549 50,439 Selling, general and administrative (1) 48,698 56,353 Depreciation expense 2,905 3,584 Amortization expense 9,722 11,039 Interest and other income, net ( 2,295 ) ( 1,042 ) Interest expense - debt 732 748 Gain on divestitures — ( 22,934 ) Provision for income taxes 3,489 4,272 Consolidated net loss $ ( 18,366 ) $ ( 13,371 ) (1) Includes total salaries, bonuses, and employee benefits of $ 68.5 million and $ 77.6 million for the three months ended March 31, 2025 and 2024, respectively. 29