ADEIA INC. The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the year endedDecember 31, 2020 found in the Form 10-K filed byXperi Holding Corporation onFebruary 26, 2021 (the "Form 10-K"). This Quarterly Report contains forward-looking statements, which are subject to the safe harbor provisions created by the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "plans," "believes," "seeks," "estimates," "could," "would," "may," "intends," "targets" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. The identification of certain statements as "forward-looking" is not intended to mean that other statements not specifically identified are not forward-looking. All statements other than statements about historical facts are statements that could be deemed forward-looking statements, including, but not limited to, statements that relate to our future revenue, product development, demand, acceptance and market share, growth rate, competitiveness, gross margins, levels of research, development and other related costs, expenditures, the outcome or effects of and expenses related to litigation and administrative proceedings related to our patents, our intent to enforce our intellectual property rights, our ability to license our intellectual property, tax expenses, cash flows, our ability to liquidate and recover the carrying value of our investments, our management's plans and objectives for our current and future operations, our plans for quarterly dividends and stock repurchases, the levels of customer spending or research and development activities, general economic conditions, the impact of the COVID-19 pandemic and related events, the impact of the Mergers (as defined below) and other acquisitions on our financial condition and results of operations, our plans to separate our product and IP licensing businesses, and the sufficiency of financial resources to support future operations and capital expenditures. Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks, uncertainties, and changes in condition, significance, value and effect, including those discussed under the heading "Risk Factors" in our annual report on Form 10-K and other documents we file from time to time with theSecurities and Exchange Commission (the "SEC"), such as our quarterly reports on Form 10-Q and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report and are based on information currently and reasonably known to us. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report, other than as required by law. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Business Overview Following consummation of the mergers betweenXperi Corporation ("Xperi") andTiVo Corporation ("TiVo") onJune 1, 2020 (the "Mergers"),Xperi Holding Corporation became the parent company of bothXperi and TiVo. OnJune 2, 2020 ,Xperi Holding Corporation's common stock, par value$0.001 per share, commenced trading on the Nasdaq Global Select Market ("Nasdaq") under the ticker symbol "XPER."Xperi was determined to be the accounting acquirer in the Mergers. As a result, the historical financial statements ofXperi for periods prior to the Mergers are considered to be the historical financial statements ofXperi Holding Corporation . Our results of operations include the operations of TiVo afterJune 1, 2020 . As used herein, the "Company," "we," "us" and "our" refer toXperi when referring to periods prior toJune 1, 2020 andXperi Holding Corporation when referring to periods subsequent toJune 1, 2020 . Unless specified otherwise, the financial results in this Quarterly Report are those of the Company and its subsidiaries on a consolidated basis. We are a leading consumer and entertainment product/solutions licensing company and one of the industry's largest intellectual property (IP) licensing platforms, with a diverse portfolio of media and semiconductor intellectual property and more than 11,000 patents and patent applications worldwide. We invent, develop, and deliver technologies that enable extraordinary experiences.Xperi technologies, delivered via our brands (DTS, HD Radio, IMAX Enhanced, Invensas, TiVo), and by our subsidiary,Perceive Corporation ("Perceive"), make entertainment more entertaining, and smart devices smarter. Our technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for partners, customers and consumers. We shape how millions of consumers access and experience entertainment content, and our innovations are found in billions of devices and hundreds of millions of interfaces around the globe. Headquartered inSilicon Valley with operations around the world, we have approximately 1,850 employees and over 35 years of operating experience. 37 -------------------------------------------------------------------------------- We are currently contemplating and may pursue, subject to any required regulatory approvals, a separation of our Product business andIP Licensing business through a tax-efficient transaction, resulting in two independent, publicly traded companies. We continue to evaluate the optimal timing of the contemplated business separation and currently anticipate that such separation will not be completed earlier than the first half of 2022.
COVID-19 Impact
Our business and results of operations have been adversely affected by the global COVID-19 pandemic and related events and we expect its impact to continue. The impact to date has included periods of significant volatility in various markets and industries. The volatility has had, and we anticipate it will continue to have, an adverse effect on our customers and on our business, financial condition and results of operations, and may result in an impairment of our long-lived assets, including goodwill, increased credit losses and impairments of investments in other companies. In particular, the automotive market, as well as the broad consumer electronics industry, has been and may continue to be impacted by the pandemic and/or other events beyond our control, and further volatility could have an additional negative impact on these industries, customers, and our business. In addition, the COVID-19 pandemic and, to a lesser extent,U.S. restrictions on trade with certain Chinese customers, have impacted and may continue to impact the financial conditions of our customers. In addition, actions byUnited States federal, state and foreign governments to address the COVID-19 pandemic, including travel bans, stay-at-home orders and school, business and entertainment venue closures, also had a significant adverse effect on the markets in which we conduct our businesses. COVID-19 poses the risk that our workforce, suppliers, and other partners may be prevented from conducting normal business activities for an extended period of time, including due to shutdowns or stay-at-home orders that may be requested or mandated by governmental authorities. We have implemented policies to allow our employees to work remotely as a result of the pandemic as we reviewed processes related to workplace safety, including social distancing and sanitation practices recommended by theCenters for Disease Control and Prevention . The COVID-19 pandemic could also cause delays in acquiring new customers and executing renewals and could also impact our business as consumer behavior changes in response to the pandemic. Since the start of the summer of 2021, there has been rapid spread of the highly contagious Delta variant of COVID-19, particularly in the regions and among the age groups with low vaccination rates, leading to a resurgence in cases, hospitalizations and deaths. Businesses and consumers have been adjusting their plans to comply with renewed mask and vaccine mandates, travel restrictions, event cancellations and delayed office reopenings. Our operations and those of our customers have also been negatively impacted by certain trends arising from the COVID-19 pandemic, including labor market constraints, shortage of semiconductor components and manufacturing capacities, delays in shipments, product development and product launches and rising inflation. In addition, the widespread supply chain disruption is expected to impede global and regional economic activities, such as consumer spending and product availabilities, which may adversely affect our business operations and financial results. We have been closely monitoring the COVID-19 pandemic and its impact on our business, including legislation to mitigate the impact of COVID-19 such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act which was enacted inMarch 2020 , and the American Rescue Plan Act of 2021 which was enacted inMarch 2021 . Although a significant portion of our anticipated revenue for 2021 is derived from fixed-fee and minimum-guarantee arrangements, primarily from large, well-capitalized customers which we believe somewhat mitigates the risks to our business, our per-unit and variable-fee based revenue will continue to be susceptible to the volatility, labor shortages, supply chain disruptions, microchip shortages, and potential market downturns induced by the COVID-19 pandemic. The full extent of the future impact of the COVID-19 pandemic on the Company's operational and financial performance is uncertain and will depend on many factors outside the Company's control, including, without limitation, the timing, extent, trajectory and duration of the pandemic; the availability, distribution and effectiveness of vaccines; the spread of new variants of COVID-19; the continued and renewed imposition of protective public safety measures; the continuing global disruption in supply chains in our industries; and the impact of the pandemic on the global economy and demand for consumer products. Although we are unable to predict the full impact and duration of the COVID-19 pandemic on our business, we are actively managing our financial expenditures in response to continued uncertainty. Further discussion of the potential impacts on our business from the COVID-19 pandemic is provided under Part I, Item 1A - Risk Factors of the Form 10-K.
Results of Operations
Revenue
We operate in two business segments. In our Product segment, we derive the majority of the revenue from licensing our 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. In ourIP Licensing segment, 38 --------------------------------------------------------------------------------
we license our innovations to leading companies in the media and semiconductor
industries.
Technology License Arrangements
We license our audio, digital radio and imaging technology to consumer electronics ("CE") manufacturers, automotive manufacturers or their supply chain partners.
We generally recognize 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 us 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 we report 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 our 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. We generally recognize 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, 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, we recognize revenue relating to any additional per-unit fees in the periods we believe the customer will exceed the minimum and adjusts the revenue based on actual usage once that is reported by the customer.
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 our pay-TV solutions, Personalized Content Discovery, enriched Metadata, and viewership data; selling TiVo-enabled devices like the Stream 4K; and advertising. For Technology Solutions, we provide on-going media or data delivery, hosting and access to our platform, and software updates. For these solutions, we generally receive 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 our continuous hosting and/or updating of the data and content. In these instances, we typically have a single performance obligation related to these ongoing activities in the underlying arrangement. For those arrangements that include multiple performance obligations, we allocate the consideration and recognize revenue for each distinct performance obligation when control of the promised goods or services is transferred to the customer. IP License Arrangements In ourIP Licensing segment, we license (i) our 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) our semiconductor technologies and associated patent portfolios ("Semiconductor IP licensing") to memory, sensors, radio frequency ("RF") component, and foundry companies. We license our 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 licenses.
Fixed-fee Media IP licensing
Our long-term fixed-fee Media IP licensing agreements, which are related to the
TiVo businesses following the Mergers, provide our 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. We treat these rights as a single performance
obligation with revenue recognized on a straight-line basis over the term of the
fixed-fee license agreement.
At times, we enter into license agreements in which a licensee is released from
past patent infringement claims 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, we allocate the transaction price
between the release for past patent infringement claims and the future
39
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license. In determining the stand-alone selling price of the release for past
patent infringement claims and the future license, we consider 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 we generally receive 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
We enter into Semiconductor IP licenses that have fixed fee or minimum guarantee arrangements, whereby licensees pay a fixed fee for the right to incorporate our 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. We generally recognize 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, we recognize revenue relating to any additional per-unit fees in the periods we believe 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
We recognize 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 us 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 we report on a quarterly basis.
We also generate 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.
40
--------------------------------------------------------------------------------The following table presents our historical operating results for the periods indicated as a percentage of revenue:
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Revenue:
Licensing, services and software 98 % 96 % 98 % 98 %
Hardware 2 4 2 2
Total revenue 100 100 100 100
Operating expenses:
Cost of licensing, services and software
revenue, excluding depreciation and
amortization of intangible assets 12 11 10 7
Cost of hardware revenue, excluding
depreciation and amortization of
intangible assets 3 6 3 3
Research, development and other related
costs 27 28 25 27
Selling, general and administrative 28 32 30 37
Depreciation expense 3 3 3 3
Amortization expense 24 25 24 23
Litigation expense 1 4 1 3
Total operating expenses 98 109 96 103
Operating income (loss) 2 (9 ) 4 (3 )
Interest expense 4 7 5 5
Other income and expense, net - (1 ) (1 ) (1 )
Loss on debt extinguishment - - 1 2
Loss before taxes (2 ) (15 ) (1 ) (9 )
Provision for (benefit from) income taxes 19 - 6 (1 )
Net loss (21 )% (15 )% (7 )% (8 )%
Total Revenue (in thousands, except for percentages):
Three Months Ended
Increase/
September 30, 2021 September 30, 2020 (Decrease) % Change
Total revenue $ 219,379 $ 202,797 $ 16,582 8 %
The $16.6 million , or 8% increase in total revenue for the three months ended
September 30, 2021 , compared to the same period in the prior year, was primarily
attributable to an increase of $21.4 million in IP Licensing revenue, driven by
revenue from the Comcast license executed in the fourth quarter of 2020, and the
timing and conclusion of renewals and new executed licenses prior to and in the
third quarter of 2021, and certain catch-up payments for past royalties due,
partially offset by a decrease in Product revenue.
Nine Months Ended
Increase/
September 30, 2021 September 30, 2020 (Decrease) % Change
Total revenue $ 663,247 $ 458,093 $ 205,154 45 %
The $205.2 million , or 45% increase in total revenue for the nine months ended
September 30, 2021 , compared to the same period in the prior year, was primarily
due to the inclusion of a full nine months of post-merger revenue from TiVo in
the nine months ended September 30, 2021 and revenue from the Comcast license
executed in the fourth quarter of 2020. These increases were partially offset by
a decline in revenue from the Semiconductor IP licensing business.
Cost of Licensing, Services and Software Revenue, Excluding Depreciation and Amortization of Intangible Assets
Cost of licensing, services and software revenue, excluding depreciation and
amortization of intangible assets, consists primarily of employee-related costs,
royalties paid to third parties, maintenance costs and an allocation of
facilities costs, as
41
--------------------------------------------------------------------------------well as service center and other expenses related to providing the Pay-TV and platform solutions, NRE services and our metadata offering.
Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, for the three months endedSeptember 30, 2021 was$26.0 million , as compared to$21.9 million for the three months endedSeptember 30, 2020 , an increase of$4.1 million . The increase was primarily due to higher third-party royalties paid as well as increases in other delivery costs related to higher revenue in the third quarter of 2021. Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, for the nine months endedSeptember 30, 2021 was$69.9 million , as compared to$31.6 million for the nine months endedSeptember 30, 2020 , an increase of$38.3 million . The increase was primarily due to the inclusion of a full nine months of post-merger TiVo expenses in the nine months endedSeptember 30, 2021 . We anticipate cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets, will increase in 2021 on an annual basis when compared to 2020 primarily due to the inclusion of a full year of TiVo operations in our consolidated results.
Cost of Hardware Revenue, Excluding Depreciation and Amortization of Intangible Assets
Cost of hardware revenue, excluding depreciation and amortization of intangible assets, includes all product-related costs associated primarily with TiVo-enabled devices, including employee-related costs, warranty costs, order fulfillment costs, certain licensing costs, and an allocation of facilities costs. Cost of hardware revenue, excluding depreciation and amortization of intangible assets, for the three months endedSeptember 30, 2021 was$6.5 million , as compared to$12.2 million for the three months endedSeptember 30, 2020 , a decrease of$5.7 million . The decrease was primarily related to decreased hardware product sales in the third quarter of 2021 as well as certain hardware product costs incurred in the third quarter of 2020 from new product launches. Cost of hardware revenue, excluding depreciation and amortization of intangible assets, for the nine months endedSeptember 30, 2021 was$17.7 million , as compared to$13.7 million for the nine months endedSeptember 30, 2020 , an increase of$4.0 million . The increase was primarily due to the inclusion of a full nine months of post-merger TiVo expenses in the nine months endedSeptember 30, 2021 , partially offset by certain hardware product costs incurred when the product was launched in the third quarter of 2020. We anticipate cost of hardware revenue, excluding depreciation and amortization of intangible assets, will increase in 2021 on an annual basis when compared to 2020 primarily due to the inclusion of a full year of TiVo operations in our consolidated results as well as expected growth in sales of hardware products.
Research, Development and Other Related Costs
Research, development and other related costs ("R&D expense") are comprised
primarily of employee-related costs, stock-based compensation expense,
engineering consulting expenses associated with new product and technology
development, product commercialization, quality assurance and testing costs, as
well as costs related to patent applications and examinations, reverse
engineering, materials, supplies, and an allocation of facilities costs. All
research, development and other related costs are expensed as incurred.
R&D expense for the three months ended September 30, 2021 was $58.8 million , as
compared to $57.7 million for the three months ended September 30, 2020 , an
increase of $1.1 million . The increase was primarily due to employees hired in
connection with the acquisition of certain assets of MobiTV in May 2021 ,
partially offset by a decrease in personnel related costs resulting from cost
synergies implemented subsequent to the Mergers.
R&D expense for the nine months ended September 30, 2021 was $168.4 million , as
compared to $124.6 million for the nine months ended September 30, 2020 , an
increase of $43.8 million . The increase was due to the inclusion of a full nine
months of post-merger TiVo R&D expenses in the nine months ended September 30,
2021 , as well as employees hired in connection with the acquisition of certain
assets of MobiTV in May 2021 , partially offset by a decrease in personnel
related costs resulting from cost synergies implemented subsequent to the
Mergers.
We believe that a significant level of R&D expense will be required for us to remain competitive in the future. We also anticipate that R&D expense will increase in 2021 on annual basis when compared to 2020 primarily due to the inclusion of a full year of TiVo operations in our consolidated results.
42
--------------------------------------------------------------------------------Selling, General and Administrative
Selling expenses consist primarily of compensation and related costs for sales
and marketing personnel engaged in sales and licensee support, reverse
engineering personnel and services, marketing programs, public relations,
promotional materials, travel, trade show expenses, and stock-based compensation
expense. General and administrative expenses consist primarily of compensation
and related costs for general management, information technology, finance
personnel, legal fees and expenses, facilities costs, stock-based compensation
expense, and professional services. Our general and administrative expenses,
other than facilities-related expenses, are not allocated to other expense line
items.
Selling, general and administrative ("SG&A") expenses for the three months ended
September 30, 2021 were $62.6 million , as compared to $63.8 million for the
three months ended September 30, 2020 , a decrease of $1.2 million . The decrease
was due principally to decreases in merger related severance and retention
expenses, and a reduction in the provision for credit losses in the three months
ended September 30, 2021 , partially offset by an increase in stock-based
compensation expense.
SG&A expenses for the nine months ended September 30, 2021 were $197.8 million ,
as compared to $168.6 million for the nine months ended September 30, 2020 , an
increase of $29.2 million . The increase was due principally to the inclusion of
a full nine months of post-merger TiVo SG&A expenses, partially offset by
decreases in merger related transaction costs, severance and retention, and
provision for credit losses in the nine months ended September 30, 2021 .
We anticipate SG&A expenses will increase in 2021 when compared to 2020 primarily due to the inclusion of a full year of TiVo operations in our consolidated results.
Depreciation Expense
Depreciation expense for the three months ended
Depreciation expense for the nine months endedSeptember 30, 2021 was$18.0 million , as compared to$11.8 million for the nine months endedSeptember 30, 2020 , an increase of$6.2 million . The increase was primarily attributable to depreciation expense on TiVo fixed assets added through the Mergers inJune 2020 . We anticipate depreciation expense will continue to increase in 2021 as compared to 2020 as a result of the inclusion of the full year effect of TiVo's assets after the Mergers. Amortization Expense Amortization expense for the three months endedSeptember 30, 2021 was$52.4 million , as compared to$50.9 million for the three months endedSeptember 30, 2020 , an increase of$1.5 million . The increase was primarily attributable to a significant amount of intangible assets acquired in the fourth quarter of 2020. Amortization expense for the nine months endedSeptember 30, 2021 was$156.8 million , as compared to$105.4 million for the nine months endedSeptember 30, 2020 , an increase of$51.4 million . The increase was primarily attributable to amortization of intangible assets recorded in connection with the Mergers inJune 2020 , and secondarily due to a significant amount of intangible assets acquired in the fourth quarter of 2020. With the Mergers, we anticipate that amortization expense will continue to be a significant expense since we acquired approximately$878 million in intangible assets in the Mergers which will be amortized over the next several years. See "Note 8 -Goodwill and Identified Intangible Assets" in the Notes to Condensed Consolidated Financial Statements for additional information.
Litigation Expense
Litigation expense for the three months ended
Litigation expense for the nine months endedSeptember 30, 2021 was$7.2 million , as compared to$14.5 million for the nine months endedSeptember 30, 2020 , a decrease of$7.3 million . The decrease was primarily due to the resolution of prior litigation and reduced case activity, partially offset by inclusion of post-merger TiVo litigation expenses. 43 -------------------------------------------------------------------------------- We expect that litigation expense will continue to be a material portion of our operating expenses. Litigation expense may fluctuate between periods because of planned or ongoing litigation, as described in Part II, Item 1 - Legal Proceedings, and because of litigation planned for or initiated from time to time in the future in order to enforce and protect our intellectual property and contract rights. Upon expiration of our customers' licenses, if those licenses are not renewed, litigation may become necessary to secure payment of reasonable royalties for the use of our patented technology. If we plan for or initiate such litigation, our future litigation expenses may increase.
Stock-based Compensation Expense
The following table sets forth our stock-based compensation ("SBC") expense for
the three and nine months ended
Three Months Ended Nine Months Ended
September 30, 2021
$ 525 $ 258 $ 1,377 $ 332
Research, development and other related
costs 5,110 3,580 14,267 9,454
Selling, general and administrative 8,779 6,319 26,824 16,828
Total stock-based compensation expense $ 14,414 $ 10,157 $ 42,468 $ 26,614
Stock-based compensation awards include restricted stock awards and units,
employee stock plan purchases, and employee stock options. The increases in SBC
expense for the three and nine months ended September 30, 2021 , compared to the
corresponding periods in 2020, were primarily a result of including incremental
expense from assumed TiVo stock awards from the Mergers and increases in stock
award grants as a result of the Mergers.
Interest Expense
Interest expense for the three months endedSeptember 30, 2021 was$8.5 million , as compared to$13.4 million for the three months endedSeptember 30, 2020 . The decrease in interest expense was primarily due to a lower average debt balance as compared to the same period in 2020 as we paid down$250.1 million of principal balance during the intervening period, and secondly a reduction in interest rate as a result of the debt refinancing inJune 2021 described below. Interest expense for the nine months endedSeptember 30, 2021 was$30.4 million , as compared to$24.6 million for the nine months endedSeptember 30, 2020 . The increase in interest expense was primarily a result of a higher average debt balance as compared to the same period in 2020 as we entered into a new term loan of$1,050 million onJune 1, 2020 to refinance the indebtedness of the combined companies in connection with the Mergers.
We anticipate interest expense will increase in 2021 when compared to 2020 as a
result of a full year of the higher debt balance and amortization of debt
discount and issuance costs following the Mergers, partially offset by the
impact of the debt refinancing in
Other Income and expense, Net
Other income and expense, net, was$0.9 million for the three months endedSeptember 30, 2021 , as compared to$2.3 million for the three months endedSeptember 30, 2020 . Other income and expense, net, for the nine months endedSeptember 30, 2021 was$2.9 million , as compared to$3.4 million for the nine months endedSeptember 30, 2020 . Other income and expense, net, was lower in the three and nine months endedSeptember 30, 2021 , as compared to the corresponding periods in the prior year, principally due to a decrease in interest income from significant financing components from revenue contracts, and secondarily from a decline in interest income from our short-term investments.
Loss on Debt Extinguishment
InJune 2021 , we refinanced the 2020 Term B Loan Facility by, among other things, lowering the interest rate on the debt. Certain lenders of the original loan syndication did not participate in the refinancing. Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment and recorded, in the second quarter of 2021, a loss on debt extinguishment of$8.0 million related to the write-off of unamortized debt discount and issuance costs for the portions of the 2020 Term B Loan Facility considered to be extinguished. 44 -------------------------------------------------------------------------------- In connection with the Mergers and inJune 2020 , we refinanced the indebtedness of the combined companies by entering into the 2020 Term B Loan Facility, and consequently recognized a loss on early debt extinguishment on the legacy debt of$8.3 million in the second quarter of 2020.
Provision for Income Taxes
Our provision for income taxes is based on our worldwide estimated annualized
effective tax rate. For jurisdictions in which a loss is forecast but no benefit
can be realized for those losses, the tax is estimated separately. In certain
circumstances we also record the income tax effects of discrete transactions in
the quarter in which the transaction has occurred. Due to our significant net
operating loss carryforwards and a valuation allowance applied against a
significant portion of our deferred tax assets, foreign withholding taxes, base
erosion and anti-abuse tax ("BEAT"), and unrealized foreign exchange loss from
the prior year South Korea refund claims are the primary drivers of income tax
expense and the primary reasons for cash tax payments of income taxes. For the
three months ended September 30, 2021 , our effective tax rate was based on a
projected 2021 U.S. GAAP pretax loss and varies significantly from the 21% U.S.
federal tax rate.
For the three months ended September 30, 2021 , we recorded an income tax expense
of $42.7 million on pretax loss of $3.7 million . For the nine months ended
September 30, 2021 , we recorded an income tax expense of $35.8 million on a
pretax loss of $7.9 million , which resulted in a year-to-date effective tax rate
of (452.3)%. The income tax expense for the three and nine months ended
September 30, 2021 was primarily related to foreign withholding taxes, BEAT and
unrealized foreign exchange loss from the prior year South Korea refund claims,
which have remained relatively fixed on a forecast basis quarter over quarter.
The negative tax rate is the result of the relatively fixed tax expense recorded
against a small pre-tax loss.
For the three months ended September 30, 2020 , we recorded an income tax expense
of $0.5 million on a pretax loss of $30.1 million . For the nine months ended
September 30, 2020 , we recorded an income tax benefit of $6.8 million on a
pretax loss of $41.6 million , which resulted in an effective tax rate of 16.3%
for the nine months ended September 30, 2020 . The tax benefit of $6.8 million is
comprised of a $12.2 million tax benefit related to the five month pre-merger
period and a tax expense of $5.4 million related to the four month post-merger
period. The five month pre-merger income tax benefit of $12.2 million was
primarily related to a net decrease in valuation allowance as a result of the
Mergers, deduction from foreign-derived intangible income, and the release of
unrecognized tax benefits due to the lapse of applicable statutes of limitation
offset by tax expense from operating income, shortfalls from stock-based
compensation, certain non-deductible expenses, and unrealized foreign exchange
losses from the prior period South Korea refund claim. The four month
post-merger income tax expense of $5.4 million was primarily related to income
tax expense from foreign operations, foreign withholding taxes and U.S. federal
minimum tax offset by unrealized foreign exchange gains from the current period
South Korean refund claim. As a result of the Mergers, a valuation allowance was
recorded on the net deferred tax assets of the U.S. federal consolidated group.
The year-over-year increase in income tax expense is largely attributable to the inclusion of nine months of TiVo activity in the current year.
The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be objectively verified. After considering both positive and negative evidence to assess the recoverability of our net deferred tax assets, we determined that it was not more-likely-than-not that we would realize our federal, certain state and certain foreign deferred tax assets given the substantial amount of tax attributes that will remain unutilized to offset forecasted future tax liabilities. In the future, we may release our deferred tax asset valuation allowance associated with our federal, state or foreign deferred tax assets depending on achievement of future profitability in relevant jurisdictions, or implementing tax planning strategies that enable us to utilize deferred tax assets. There can be no assurance that we will generate profits or implement tax strategies in future periods enabling us to fully realize our deferred tax assets. The timing of recording a deferred tax asset valuation allowance or the reversal of such valuation allowance is subject to objective and subjective factors that cannot be known in advance. We intend to continue maintaining a full valuation allowance on our federal deferred tax assets until there is sufficient evidence to support the reversal of all or a portion of these allowances. However, given our current earning and anticipated future earnings, we believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of our federal valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain federal deferred tax assets and a decrease to income tax expense for the period the release is recorded.
Segment Operating Results
We operate in two reportable segments: (1) Product and (2)IP Licensing . There are certain corporate overhead costs that are not allocated to these reportable segments because these operating amounts are not considered in evaluating the operating performance of our business segments. 45 --------------------------------------------------------------------------------
Our Chief Executive Officer has been determined to be the Chief Operating Decision Maker ("CODM") in consideration with the authoritative guidance on segment reporting.
The Product segment consists primarily of licensing our internally-developed
audio, digital radio, imaging, edge-based machine learning and multi-channel
video user experience ("UX") solutions. Audio, digital radio, imaging solutions
and edge-based machine learning include the delivery of software and/or
hardware-based solutions to our consumer electronics ("CE") customers,
automotive manufacturers or their supply chain partners. UX products and
services revenue is primarily derived from multi-channel video service providers
and CE manufacturers, licensing the TiVo service and selling TiVo-enabled
devices like the Stream 4K, Personalized Content Discovery, enriched Metadata,
viewership data and advertising.
The IP Licensing segment consists primarily of licensing our innovations to
leading companies in the media and semiconductor industries. Licensing
arrangements include access to one or more of our foundational patent portfolios
and may also include access to some of our industry-leading technologies and
proven know-how. In media, our licensees include multichannel video programming
distributors, OTT video service providers, consumer electronics manufacturers,
social media and other new media companies. In semiconductor, our licensees
include memory, sensors, RF component, and foundry companies.
We do not identify or allocate assets by reportable segment, nor does the CODM
evaluate reportable segments using discrete asset information. Reportable
segments do not record inter-segment revenue and accordingly there are none to
report. Although the CODM uses operating income to evaluate reportable segments,
operating costs included in one segment may benefit other segments.
The following table sets forth our segments' revenue, operating expenses and operating income (loss) (in thousands):
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Revenue:
Product segment $ 117,732 $ 122,552 $ 361,740 $ 242,618
IP Licensing segment 101,647 80,245 301,507 215,475
Total revenue 219,379 202,797 663,247 458,093
Operating expenses:
Product segment 116,813 116,149 330,395 228,941
IP Licensing segment 34,676 40,020 103,116 70,765
Unallocated operating expenses (1) 63,964 65,591 202,157 170,542
Total operating expenses 215,453 221,760 635,668 470,248
Operating income (loss):
Product segment 919 6,403 31,345 13,677
IP Licensing segment 66,971 40,225 198,391 144,710
Unallocated operating expenses (1) (63,964 ) (65,591 ) (202,157 ) (170,542 )
Total operating income (loss) $ 3,926 $ (18,963 ) $ 27,579 $ (12,155 )
(1) Unallocated operating expenses consist primarily of selling, marketing,
general and administrative expenses, including administration, human
resources, finance, information technology, corporate development and
procurement. These expenses are not allocated because these amounts are not
considered in evaluating the operating performance of the Company's
business segments.
For the three months endedSeptember 30, 2021 , the unallocated operating expenses were$64.0 million , compared to$65.6 million for the three months endedSeptember 30, 2020 . The decrease of$1.6 million was due principally to a decrease in merger related severance and retention expenses, and a reduction in the provision for credit losses, partially offset by an increase in stock-based compensation expense in the three months endedSeptember 30, 2021 . For the nine months endedSeptember 30, 2021 , the unallocated operating expenses were$202.2 million compared to$170.5 million for the nine months endedSeptember 30, 2020 . The increase of$31.7 million was due principally to the inclusion of a full nine months of post-merger TiVo expenses, partially offset by decreases in merger related transaction costs, severance and retention, and provision for credit losses in the nine months endedSeptember 30, 2021 . The revenue and operating income (loss) amounts in this section have been presented on a basis consistent with GAAP applied at the segment level. Of our$851.1 million in goodwill atSeptember 30, 2021 , approximately$527.8 million was allocated to our Product segment and approximately$323.3 million was allocated to ourIP Licensing segment. 46 --------------------------------------------------------------------------------
Product Segment
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Total revenue $ 117,732 $ 122,552 $ 361,740 $ 242,618
Operating expenses:
Total cost of revenue 32,301 33,881 86,769 45,145
Research, development and other related costs 49,975 48,850 144,370 102,479
Litigation 1,483 936 3,139 1,674
Depreciation 5,225 4,671 12,851 8,840
Amortization 27,829 27,811 83,266 70,803
Total operating expenses 116,813 116,149 330,395 228,941
Total operating income (loss) $ 919 $ 6,403 $ 31,345 $ 13,677
Product revenue for the three months ended September 30, 2021 was $117.7 million
as compared to $122.5 million for the three months ended September 30, 2020 , a
decrease of $4.8 million . The decrease was primarily due to supply chain
constraints that impacted our customers' shipment volumes in Consumer Experience
and Connected Car in the three months ended September 30, 2021 .
Product revenue for the nine months ended September 30, 2021 was $361.7 million
as compared to $242.6 million for the nine months ended September 30, 2020 , an
increase of $119.1 million . The increase was primarily attributable to the
inclusion of a full nine months of post-merger Product revenue from TiVo.
Operating expenses for the three months ended September 30, 2021 were $116.8
million , as compared to $116.1 million for the three months ended September 30,
2020 , an increase of $0.7 million . The increase was primarily due to costs of
headcount added in connection with the acquisition of certain MobiTV assets in
May 2021 , partially offset by decreases in hardware product costs and personnel
related costs resulting from cost synergies implemented subsequent to the
Mergers.
Operating expenses for the nine months ended September 30, 2021 were $330.4
million , as compared to $228.9 million for the nine months ended September 30,
2020 , an increase of $101.5 million . The increase was primarily due to the
inclusion of a full nine months of post-merger TiVo Product expenses, and costs
of headcount added in connection with the acquisition of certain MobiTV assets
in May 2021 , partially offset by a decrease in personnel related costs resulting
from cost synergies implemented subsequent to the Mergers.
Operating income in the three months ended September 30, 2021 was $0.9 million
compared to operating income of $6.4 million in the three months ended September
30, 2020 , with the variance due to the reasons stated above.
Operating income in the nine months ended September 30, 2021 was $31.3 million
compared to operating income of $13.7 million in the nine months ended September
30, 2020 , with the variance due to the reasons stated above.
IP Licensing Segment
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Total revenue $ 101,647 $ 80,245 $ 301,507 $ 215,475
Operating expenses:
Total cost of revenue 248 189 795 189
Research, development and other related costs 8,791 8,881 23,999 22,086
Litigation 844 7,580 4,023 12,815
Depreciation 234 287 740 1,031
Amortization 24,559 23,083 73,559 34,644
Total operating expenses 34,676 40,020 103,116 70,765
Total operating income $ 66,971 $ 40,225 $ 198,391 $ 144,710
47
--------------------------------------------------------------------------------IP Licensing revenue for the three months endedSeptember 30, 2021 was$101.6 million as compared to$80.2 million for the three months endedSeptember 30, 2020 , an increase of$21.4 million . The increase was primarily due to revenue from the Comcast license executed in the fourth quarter of 2020, and the timing and conclusion of renewals and new executed licenses prior to and in the third quarter of 2021, and certain catch-up payments for past royalties due in the three months endedSeptember 30, 2021 .IP Licensing revenue for the nine months endedSeptember 30, 2021 was$301.5 million as compared to$215.5 million for the nine months endedSeptember 30, 2020 , an increase of$86.0 million . The increase was primarily attributable to the inclusion of a full nine months of post-mergerIP Licensing revenue from TiVo and revenue from the Comcast license executed in the fourth quarter of 2020, partially offset by a decline in revenue from the Semiconductor IP licensing business in the nine months endedSeptember 30, 2021 . Operating expenses for the three months endedSeptember 30, 2021 were$34.7 million , as compared to$40.0 million for the three months endedSeptember 30, 2020 , a decrease of$5.3 million . The decrease was primarily due to a decrease in litigation expenses as we successfully concluded the Comcast litigation activity during the fourth quarter of 2020, partially offset by an increase in amortization expense which was primarily attributable to a significant amount of intangible assets acquired in the fourth quarter of 2020.
Operating expenses for the nine months ended
We expect that litigation expense will continue to be a material portion of our operating expenses and may fluctuate between periods because of planned or ongoing litigation, as described in Part II, Item 1 - Legal Proceedings, in this report, and because of litigation planned for or initiated from time to time in the future in order to enforce and protect our intellectual property and contract rights.
Operating income for the three months ended
Operating income for the nine months ended
Liquidity and Capital Resources
As of
(in thousands, except for percentages) September 30, 2021 December 31, 2020
Cash and cash equivalents $ 165,438 $ 170,188
Short-term investments 71,863 86,947
Total cash, cash equivalents and short-term
investments $ 237,301 $ 257,135
Percentage of total assets 9 % 10 %
Nine Months Ended
September 30, 2021 September 30, 2020
Net cash from operating activities $ 165,913 $ 129,433
Net cash from investing activities $ (11,560 ) $
72,536
Net cash from financing activities $ (157,914 ) $ (161,553 )
Our primary sources of liquidity and capital resources are our operating cash flows and our cash and short-term investments. Cash, cash equivalents and short-term investments were$237.3 million as ofSeptember 30, 2021 , a decrease of$19.8 million from$257.1 million atDecember 31, 2020 . This decrease resulted primarily from$15.8 million in dividends paid,$75.2 million in repurchases of common stock,$73.9 million in repayment of long-term debt,$17.4 million in cash used to acquire certain assets and liabilities ofMobiTV, Inc. (the "MobiTV Acquisition"),$8.3 million of capital expenditures and$6.8 million in debt refinancing costs, which was partially offset by$165.9 million in cash generated from operations and$13.8 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans. Cash and cash equivalents totaled$165.4 million as ofSeptember 30, 2021 , a decrease of$4.8 million from$170.2 million atDecember 31, 2020 . 48
-------------------------------------------------------------------------------- Cash flows provided by operations were$165.9 million for the nine months endedSeptember 30, 2021 , primarily due to our net loss of$43.7 million being adjusted for non-cash items of depreciation of$18.0 million , amortization of intangible assets of$156.8 million , stock-based compensation expense of$42.5 million and a loss on debt extinguishment of$8.0 million . These increases were partially offset by a reduction of$7.1 million in deferred income taxes and$8.3 million in changes in operating assets and liabilities. Cash flows provided by operations were$129.4 million for the nine months endedSeptember 30, 2020 , primarily due to our net loss of$34.8 million being adjusted for non-cash items of depreciation of$11.8 million , amortization of intangible assets of$105.4 million , stock-based compensation expense of$26.6 million , loss on debt extinguishment of$8.3 million and$31.6 million in changes in operating assets and liabilities. These increases were partially offset by a reduction of$28.2 million in deferred income taxes.
Net cash used in investing activities was
Net cash provided by investing activities was$72.5 million for the nine months endedSeptember 30, 2020 , primarily related to maturities and sales of securities of$26.9 million and net cash acquired in the Mergers of$117.4 million , partially offset by purchase of short-term investment of$68.1 million and capital expenditures of$3.0 million . Net cash used in financing activities was$157.9 million for the nine months endedSeptember 30, 2021 principally due to$73.9 million in repayment of indebtedness,$6.8 million in debt refinancing costs,$15.8 million in dividends paid, and$75.2 million in repurchases of common stock, partially offset by$13.8 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans. Net cash used in financing activities was$161.6 million for the nine months endedSeptember 30, 2020 principally due to$1,091.7 million in repayment of indebtedness,$25.6 million in dividends paid, and$59.3 million in repurchases of common stock, partially offset by$1,010.3 million in net long-term debt proceeds and$4.8 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans. The primary objectives of our investment activities are to preserve principal and to maintain liquidity while at the same time capturing a market rate of return. To achieve these objectives, we maintain a diversified portfolio of securities including money market funds and debt securities including corporate bonds and notes, municipal bonds and notes, commercial paper, treasury and agency notes and bills and certificates of deposit. We invest excess cash predominantly in high-quality investment grade debt securities with less than three years to maturity. Our marketable debt securities are classified as available-for-sale ("AFS") with credit losses recognized as a credit loss expense and non-credit related unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income or loss. The fair values for our securities are determined based on quoted market prices as of the valuation date or observable prices for similar assets. For AFS debt securities in an unrealized loss position, we first assess whether we intend to sell, or it is more-likely-than-not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in accumulated other comprehensive income or loss. We did not recognize a provision for credit losses related to our AFS debt securities in the three and nine months endedSeptember 30, 2021 and 2020, respectively. OnDecember 1, 2016 , we entered into a Credit Agreement with Royal Bank of Canada ("RBC") which provided for a$600.0 million seven-year term B loan facility. The Term B Loan Facility was scheduled to mature onNovember 30, 2023 . During 2019 we made three voluntary principal payments totaling$150.0 million , and upon consummation of the Mergers onJune 1, 2020 , we repaid the full remaining balance of$344.0 million under the Credit Agreement. In addition, upon consummation of the Mergers onJune 1, 2020 , we repaid$734.6 million of assumed TiVo debt with the proceeds from a new borrowing of$1,050 million discussed below. 49 -------------------------------------------------------------------------------- OnJune 1, 2020 , in connection with the consummation of the Mergers, we entered into a Credit Agreement (the "2020 Credit Agreement") by and among us, the lenders party thereto andBank of America, N.A ., as administrative agent and collateral agent. The 2020 Credit Agreement provided for a five-year senior secured term B loan facility in an aggregate principal amount of$1,050 million (the "2020 Term B Loan Facility"). The interest rate applicable to loans outstanding under the 2020 Term B Loan Facility was equal to, at our option, either (i) a base rate plus a margin of 3.00% per annum or (ii) LIBOR plus a margin of 4.00% per annum. Commencing onSeptember 30, 2020 , the 2020 Term B Loan Facility was amortized in quarterly installments equal to (i) with respect to repayments occurring on or prior toJune 1, 2023 , 1.25% of the original principal amount of the 2020 Term B Loan Facility and (ii) with respect to repayments occurring afterJune 1, 2023 and prior toJune 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 onJune 1, 2025 . Upon the closing of the 2020 Credit Agreement, we borrowed$1,050 million under the 2020 Term B Loan Facility. Net proceeds were used onJune 1, 2020 , together with cash and cash equivalents, to repay existing indebtedness of the combined Company, including the aforementioned Term B Loan Facility with RBC. We commenced repaying quarterly installments under the 2020 Term B Loan Facility in the third quarter of 2020. The agreement permitted prepayment of principal without penalty and onDecember 31, 2020 , we elected to make a voluntary principal payment of$150.0 million . OnJune 8, 2021 , we paid down$50.6 million in principal balance and completed a refinancing of the 2020 Term B Loan Facility by entering into an amendment to the 2020 Term B Loan Facility (the "Refinanced Term B Loans") to provide a new loan facility in the amount of$810.0 million , reducing the borrowing rate by 50 basis points and extending the loan maturity date toJune 2028 . We commenced repaying quarterly installments under the Refinanced Term B Loans in the third quarter of 2021. AtSeptember 30, 2021 ,$799.9 million was outstanding under the Refinanced Term B Loans with an interest rate, including amortization of debt discount and issuance costs, of 4.2%. Interest is payable monthly. Under the existing loan agreements, we have future minimum principal payments for our debt of$10.1 million for the remainder of 2021,$40.5 million in each year from 2022 through 2027, with the remaining principal balance of$546.8 million due in 2028. We are obligated to pay a portion of excess cash flow on an annual basis beginning inMarch 2023 based on certain leverage ratios and our excess cash flow generated for the immediately preceding calendar year. The Refinanced Term B Loans contain customary covenants, and as ofSeptember 30, 2021 , we were in full compliance with such covenants. Following the closing of the Mergers, onJune 12, 2020 , our Board of Directors terminated a prior stock repurchase program and approved a new stock repurchase plan (the "Plan") providing for the repurchase of up to$150.0 million of our common stock dependent on market conditions, share price and other factors. No expiration has been specified for this Plan. OnApril 22, 2021 , our Board of Directors authorized an additional$100.0 million of purchases under the Plan. The stock repurchases may be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions, or pursuant to a Rule 10b5-1 plan. Since the inception of the Plan, and throughSeptember 30, 2021 , we have repurchased an aggregate of approximately 7.7 million shares of common stock at a total cost of$129.9 million at an average price of$16.93 . During the nine months endedSeptember 30, 2021 , we repurchased an aggregate of approximately 2.8 million shares of common stock at a total cost of$59.8 million at an average price of$21.72 . As ofSeptember 30, 2021 , the total remaining amount available for repurchase under the Plan was$120.1 million . We may continue to execute authorized repurchases from time to time under the Plan. The amount and timing of any repurchases under the Plan depend on a number of factors, including but not limited to, the trading price, volume and availability of our common shares. There is no guarantee that such repurchases under the Plan will enhance the value of our common stock. OnOctober 29, 2021 , the Board declared a cash dividend of$0.05 per share of common stock, payable onDecember 20, 2021 to the stockholders of record at the close of business onNovember 29, 2021 . We anticipate that all quarterly dividends will be paid out of cash, cash equivalents and short-term investments. From 2018 through the third quarter of 2021, we generated approximately$898 million of cash flows from operating activities. While we expect to continue to generate cash flows from operating activities for the remainder of 2021, the COVID-19 pandemic continues to present uncertainties to the level of such cash flows as compared to prior years. Additionally, integration of the two legacy business operations ofXperi and TiVo post-merger and transaction costs relating to the contemplated separation of our two business segments are expected to impact operating cash flow for the next 12 months. We have taken actions to manage cash flows by reducing discretionary spending and other variable costs, delaying employee hiring, and closely monitoring receivables and payables. We believe that based on current levels of operations and anticipated growth, our cash from operations, together with cash, cash equivalents and investments currently available, will be sufficient to fund our operations, debt service, dividends, stock repurchases and acquisition needs for at least the next twelve months. Poor financial results, unanticipated expenses, unanticipated acquisitions of technologies or businesses or unanticipated strategic investments could give rise to additional financing requirements sooner than we expect. There can be no assurance that equity or debt financing will be available when needed or, if available, that such financing will be on terms satisfactory to us. The sale of additional equity securities could 50 --------------------------------------------------------------------------------
result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and may include covenants that would restrict our operations.
Contractual Obligations
For information about our contractual obligations, see "Contractual Obligations" in Part II, Item 7 of our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Other than the principal payment of$73.9 million made by us under our long-term debt in the first nine months of 2021, our contractual obligations have not changed materially sinceDecember 31, 2020 . As ofSeptember 30, 2021 , we had accrued$96.3 million of unrecognized tax benefits in long-term income taxes payable related to uncertain tax positions, which includes$3.6 million of accrued interest and penalties. At this time, we are unable to reasonably estimate the timing of the long-term payments or the amount by which the liability will increase or decrease over time. If we are successful in receiving our South Korean withholding tax refunds of$119.2 million , including interest and foreign exchange gain, then$63.0 million of unrecognized tax benefit would be payable to theU.S. tax authorities.
Refer to "Note 15 - Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements for additional information.
Critical Accounting Policies and Estimates
During the nine months endedSeptember 30, 2021 , there were no significant changes in our critical accounting policies. See "Note 2 - Summary of Significant Accounting Policies" of the Notes to the Condensed Consolidated Financial Statements for additional detail. For a discussion of our critical accounting policies and estimates, see Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K.
Recent Accounting Pronouncements
See "Note 2 - Summary of Significant Accounting Policies" of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption.
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