Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.00pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
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Not scored
Net-tone change vs last year's 10-K.
MD&A
-0.00pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
No section text extracted for this filing. The 10-K may use a non-standard template that the parser doesn't recognize - the original doc is still linked in the Stats tab.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to promote understanding of the results of operations and financial condition and should be read in conjunction with our consolidated financial statements and notes thereto.
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons of 2025 against 2024. A discussion regarding 2023 items and year-to-year comparisons of 2024 against 2023 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The following discussion of our financial condition and results of operations should be read together with the audited consolidated financial statements and notes to the consolidated financial statements included elsewhere in this Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed under “Risk Factors” in Part I, Item 1A above.
Business Overview
Adeia Inc. (formerly known as Xperi Holding Corporation) (“Adeia”, “we”) is a leading IP licensing platform in the consumer and entertainment space, with an extensive portfolio of media and semiconductor intellectual property and approximately 13,750 media and semiconductor patent assets worldwide. In order to serve an increasingly connected world, we invent, develop, and license fundamental innovations that enhance billions of devices and shape the way millions of people explore and experience entertainment. Our inventions are key enabling technologies that drive how consumers interact with entertainment and devices at home and on the go around the world. Our foundational technologies help elevate content and improve how audiences connect with it in a way that is more intelligent, immersive and personal. Our innovative solutions help power smart devices, entertainment experiences and more, and have created a unified ecosystem that reaches highly-engaged consumers and uncovered new business opportunities.
Headquartered in Silicon Valley with more than 35 years of operating experience, we have approximately 150 full-time employees, with substantially all of our employees located in the U.S.
Macroeconomic Conditions
Macroeconomic conditions due to inflation, geopolitical instability and global health events have in the past, and may in the future have, an adverse impact on our business. For example, such conditions may cause volatility in the markets we serve, particularly the broad consumer electronics market. Impacts from adverse macroeconomic conditions may negatively impact our financial condition and results of operations, which could result in an impairment of our long-lived assets, including goodwill, and increased credit losses.
Although a significant portion of our revenue is derived from fixed-fee and minimum-guarantee arrangements from large, well-capitalized customers, our per-unit and variable-fee based revenue will continue to be susceptible to global health concerns, outbreaks, pandemics, armed conflict, geopolitical factors, trade regulations and tariffs, market volatility, labor shortages, supply chain disruptions, microchip shortages, changes in demand for semiconductors and market downturns.
Reportable Segments
We operate and report in one segment: IP Licensing. We believe that this structure reflects our current operational and financial management and provides the best structure for us to focus on growth opportunities. Our Chief Executive Officer has been determined to be the Chief Operating Decision Maker (“CODM”) in consideration with the authoritative guidance on segment reporting.
We primarily license our innovations to leading companies in the broader media entertainment and semiconductor industries, and those companies developing new technologies that will help drive these industries forward. Licensing arrangements include access to one or more of our foundational patent portfolios and may also include access to some portions of our industry-leading technologies and know-how.
Key Metrics
In evaluating our financial condition and operating performance, we primarily focus on revenue and cash flows from operations. For the year ended December 31, 2025, as compared to the same period in 2024:
Revenue increased by $67.4 million, or 18%, from $376.0 million in 2024 to $443.4 million in 2025.
Recurring revenues increased by $9.8 million, or 3% from $341.5 million in 2024 to $351.3 million in 2025.
Non-recurring revenues increased by $57.4 million, or 166% from $34.6 million in 2024 to $92.0 million in 2025.
Cash provided by operating activities decreased by $54.4 million, or 26%, from $212.5 million in 2024 to $158.1 million in 2025.
We made $60.4 million in principal payments, bringing the outstanding balance to $426.7 million as of December 31, 2025.
We repurchased $20.0 million of our common stock in 2025.
Results of Operations
Revenue
We derive the majority of our revenue from the licensing of our IP rights to customers. For our revenue recognition policy, including descriptions of revenue-generating activities, refer to “Note 4 – Revenue ” of the Notes to Consolidated Financial Statements. The following table presents our historical operating results for the periods indicated as a percentage of revenue:
Years ended December 31,
Revenue
Operating expenses:
Research and development
Selling, general and administrative
Amortization expense
Litigation expense
Total operating expenses
Operating income
Interest expense
Other income and expense, net
Loss on debt extinguishment
Income before income taxes
Provision for income taxes
Net income
The following table sets forth our revenue by year (in thousands, except for percentages):
Years Ended December 31,
Increase
% Change
Revenue
The increase in revenue during the year ended December 31, 2025, as compared to the prior year, was primarily attributable to the execution of a new long-term license agreement with Disney in the fourth quarter of 2025, partially offset by a multi-year license agreement with Amazon in the fourth quarter of 2024. A portion of revenue from both license agreements was recognized up-front in the respective period each agreement was executed.
Recurring revenues for the years ended December 31, 2025 and 2024 were $351.3 million and $341.5 million, respectively. The increase of $9.8 million was driven primarily by the execution of license agreements with new customers in 2024 and 2025, and increased royalty revenue from certain semiconductor customers, which were partially offset by declines in royalty revenue from certain Pay-TV customers.
Non-recurring revenues for the years ended December 31, 2025 and 2024 were $92.0 million and $34.6 million, respectively. The increase of $57.4 million was primarily attributable to the execution a new long-term license agreement with Disney in the fourth quarter of 2025, partially offset by a multi-year license agreement with Amazon in the fourth quarter of 2024. A portion of revenue from both license agreements was recognized up-front in the respective period each agreement was executed.
Research and Development
Research and development (“R&D”) costs consist primarily of personnel costs, stock-based compensation, outside engineering consulting expenses associated with new IP development, as well as costs related to patent applications and examinations, reverse engineering, materials, supplies and an allocation of facilities costs. All R&D costs are expensed as incurred. We intend to make a continued investment in our R&D efforts because we believe they are essential to grow our patent portfolios to secure new customers and renew agreements with existing customers.
Years Ended December 31,
Increase
% Change
Research and development
The increase in R&D costs during the year ended December 31, 2025, as compared to the prior year, was primarily due to an increase in patent portfolio expenses, patent technical support expenses, and an increase in personnel related costs.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses consist primarily of personnel costs, sales commission, advertising, branding activities, stock-based compensation, professional services, facilities costs, and expenses related to our executive, finance, human resource, legal, and information technology organizations.
Years Ended December 31,
Increase
% Change
Selling, general and administrative
The increase in SG&A expense during the year ended December 31, 2025, as compared to the prior year, was primarily due to increases in personnel related costs and advertising expense, partially offset by decreases in outside services.
Amortization Expense
Years Ended December 31,
Decrease
% Change
Amortization expense
The decrease in amortization expense during the year ended December 31, 2025, as compared to the prior year, was primarily due to certain intangible assets becoming fully amortized during 2024. The decrease was partially offset by the acquisition of patent portfolios and the resulting amortization of those assets.
Litigation Expense
Years Ended December 31,
Increase
% Change
Litigation expense
The increase in litigation expense during the year ended December 31, 2025, as compared to the prior year, was primarily due to increased activity in current litigation matters. See Part I, Item 3. – Legal Proceedings for additional information regarding these matters.
We expect that litigation expense will continue to be a significant portion of our operating expenses, as it is used to enforce and protect our IP and contract rights. Litigation expense may fluctuate between periods because of planned or ongoing litigation, as described in Part I, Item 3 – Legal Proceedings.
Interest Expense
Years Ended December 31,
Decrease
% Change
Interest expense
The decrease in interest expense during the year ended December 31, 2025, as compared to the prior year, was primarily due to lower debt balances, the reduction of the interest rate margin resulting from the repricing of our Term Loan B during the second quarter of 2024 and the first quarter of 2025, and the effects of the Federal Reserve interest rate cuts during 2024 and 2025.
Other Income and Expense, Net
Years Ended December 31,
Increase
% Change
Other income and expense, net
The increase in other income and expense, net during the year ended December 31, 2025, as compared to the prior year, was primarily due to an increase in interest income from significant financing components from certain revenue contracts and interest income from our cash, cash equivalents and marketable securities.
Loss on Debt Extinguishment
During the year ended December 31, 2024, we recognized $0.5 million associated with the repricing of our Term Loan B. There were no such costs in 2025. Refer to discussion below for further detail on the repricing of our Term Loan B.
Provision for Income Taxes
Years Ended December 31,
Increase
% Change
Provision for income taxes
For the year ended December 31, 2025, we recorded an income tax expense of $29.8 million on pretax income of $140.9 million, resulting in an effective tax rate of 21.2%. The income tax expense for the year was primarily attributable to tax on current year income, partially offset by foreign tax credits, the foreign-derived intangible income deduction, and releases of uncertain tax positions. The increase in income tax expense for the year ended December 31, 2025, as compared to the prior year, was primarily attributable to higher pretax income.
For the year ended December 31, 2024, we recorded an income tax expense of $16.6 million on pretax income of $81.2 million, resulting in an effective tax rate of 20.4%. The income tax expense for the year was primarily attributable to tax on current year income, foreign withholding taxes, and unrealized foreign exchange losses related to prior year South Korea refund claims, partially offset by releases of uncertain tax positions.
The Korea Supreme Court issued a decision overturning the long-standing territorial sourcing framework for royalty income, under which royalty income was sourced by reference to the place of patent registration, and adopted a new sourcing rule based on where a licensed patent is used. In the fourth quarter of 2025, we were notified by Korea tax authorities that our pending withholding tax refund claims were denied, reducing the likelihood of the recovery of withholding tax receivables in Korea. Given this development, we determined that we could not sufficiently demonstrate eligibility for a refund under the revised sourcing rule. As a result, we concluded that realization of the related income tax receivable was no longer more-likely-than-not and derecognized the asset. The derecognition contributed $1.6 million in income tax expense for the year ended December 31, 2025.
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 an assessment, significant weight is given to evidence that can be objectively verified. Given our history of sustained profitability, we concluded that it was more-likely-than-not that we would realize our U.S. federal and certain state deferred tax assets. We continue to maintain a valuation allowance against tax attributes in California and other state tax attributes that can only be utilized against the income of specific legal entities.
Liquidity and Capital Resources
The following table presents selected financial information related to our liquidity and significant sources and uses of cash and cash equivalents as of and for the years ended December 31, 2025 and 2024:
December 31,
(in thousands)
Cash and cash equivalents
Marketable securities
Total cash, cash equivalents and marketable securities
Years Ended December 31,
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Our primary sources of liquidity and capital resources are our operating cash flows and our short-term investments in marketable securities. Cash, cash equivalents and marketable securities were $136.7 million at December 31, 2025, an increase of $26.3 million from $110.4 million at December 31, 2024. This increase resulted primarily from $158.1 million of cash generated from operations and $2.4 million in proceeds from our employee stock purchase program and exercise of stock options, partially offset by $60.4 million in repayment of long-term debt, $8.8 million in purchases of long-lived assets, $21.8 million in dividends paid, $20.0 million in repurchases of common stock ($1.3 million in repurchases of common stock executed during the year ended December 31, 2024 were settled in January 2025), and $22.5 million in repurchases of common stock for tax withholdings on equity awards.
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 such as corporate bonds and notes, municipal bonds and notes, commercial paper, treasury and agency notes and bills and certificates of deposit. 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.
We expect to continue to make additional payments on our existing debt from cash generated from operations. Our material cash requirements include the following contractual and other obligations:
Debt
As of December 31, 2025, we had outstanding long-term debt in an aggregate principal amount of $426.7 million, with a minimum of $24.4 million payable within the next 12 months. Based on achieving certain leverage ratios and as a result of voluntary prepayments, we were not required to make excess cash flow payments as pursuant to the agreement for either of the years ended December 31, 2024 and 2025.
Future interest payments associated with the debt, based on current interest rates, total $63.4 million, with $27.2 million payable within 12 months. The interest payments may vary with changes in interest rates, as well as due to reductions of the principal amount. Refer to “Note 10 – Debt ” of the Notes to Consolidated Financial Statements for additional information on debt obligations and maturities.
Leases
We have lease arrangements for office and research facilities, data centers and office equipment. As of December 31, 2025, fixed lease payment obligations amounted to $9.3 million, with $0.7 million payable within 12 months. Refer to “Note 8 – Leases ” of the Notes to Consolidated Financial Statements for additional information on lease obligations and maturities.
Guarantee
Prior to the Separation, we and a subsidiary of Xperi Inc. (“Xperi Sub”) entered into an agreement (the “Specified Agreement”) with a third party pursuant to which we guarantee the performance of Xperi Sub under the Specified Agreement, including its payment obligations to such third party. In connection with the Separation, we and Xperi Sub entered into a separate cross business agreement (the “Cross Business Agreement”) effective as of October 1, 2022 under which we agreed to make guarantee payments to Xperi Sub in amounts based on certain of its operating expenses and other minimum performance obligations under the Specified Agreement through 2031. Consequently, on October 1, 2022, we recognized a guarantee liability of $19.7 million, which represents the fair value of Adeia Media’s projected payments of such operating expenses during the term of the Cross Business Agreement. Subsequent changes to the carrying value of the guarantee are recognized as part of our results of operations. As of December 31, 2025, the balance of the guarantee liability is $16.3 million, including a current portion of $0.8 million. Operating expense reimbursements are capped at a maximum of $7.5 million per annum. To date, such reimbursements have not been material.
Other Purchase Obligations
Our other purchase obligations primarily consist of non-cancelable obligations related to advertising, engineering services and internet and telecommunications services. As of December 31, 2025, we had purchase obligations of $7.5 million, including $3.2 million due in 2026, $2.4 million due in 2027, and $1.9 million due thereafter. These purchase obligations represent commitments under enforceable and legally binding agreements and do not represent the entire anticipated purchases in the future. Refer to “Note 15 – Commitments and Contingencies ” of the Notes to Consolidated Financial Statements for additional detail.
Income Tax Payable
As of December 31, 2025, we had accrued $7.3 million of unrecognized tax benefits in long-term income taxes payable related to uncertain tax positions, which include an immaterial amount 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.
In addition to the cash requirements outlined above, we have returned cash to stockholders through both quarterly dividend payments and repurchases of our common stock under our stock repurchase plan, as further described below:
Quarterly Dividends
In 2025 and 2024, we paid quarterly dividends of $0.05 per share in each of the March, June, September and December quarterly periods. Our capacity to pay dividends in the future depends on many factors, including our financial condition, results of operations, capital requirements, capital structure, industry practice and other business conditions that the Board of Directors considers relevant. We anticipate that any quarterly dividends if and when paid, will be paid out of cash, cash equivalents and short-term investments in marketable securities.
Stock Repurchase Plan
In October 2024, our Board of Directors approved an increase to the existing share repurchase authorization up to a total of $200.0 million. 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. During the year ended December 31, 2025, we repurchased a total of approximately 1.5 million shares of common stock, at an average price of $13.55 per share for a total cost of $20.0 million. During the year ended December 31, 2024, we repurchased a total of approximately 1.4 million shares of common stock, at an average price of $13.95 per share for a total cost of $20.0 million. As of December 31, 2025, the total remaining amount available for repurchase under this plan was $160.0 million.
We may continue to execute authorized repurchases from time to time under our existing stock repurchase plan. The amount and timing of any repurchases under the stock repurchase 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 stock repurchase plan will enhance the value of our common stock.
We believe that based on current levels of operations and anticipated growth, our cash from operations, together with cash and cash equivalents currently available, will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and thereafter for the foreseeable future. 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 result in dilution to our stockholders. The incurrence of indebtedness could result in increased debt service obligations and may include covenants that would restrict our operations.
Cash Flows from Operating Activities
Cash flows provided by operations were $158.1 million for the year ended December 31, 2025, primarily due to our net income of $111.1 million being adjusted for non-cash items of amortization of intangible assets of $56.6 million, stock-based compensation expense of $34.7 million, amortization of debt issuance costs of $3.4 million, depreciation of $2.0 million, and change in deferred income tax and other of $33.7 million, partially offset by $(82.8) million net change in operating assets and liabilities.
Cash flows provided by operations were $212.5 million for the year ended December 31, 2024, primarily due to our net income of $64.6 million being adjusted for non-cash items of amortization of intangible assets of $70.7 million, stock-based compensation expense of $26.6 million, amortization of debt issuance costs of $3.5 million, depreciation of $2.1 million, partially offset by the change in deferred income tax of $(7.1) million, and $53.2 million net change in operating assets and liabilities.
Cash Flows from Investing Activities
Net cash used in investing activities was $40.3 million for the year ended December 31, 2025, primarily related to purchases of short-term investments in marketable securities of $57.3 million, and purchases of long-lived assets of $8.8 million, partially offset by maturities of marketable securities of $24.3 million and proceeds from sales of short-term investments of $1.5 million.
Net cash used in investing activities was $24.0 million for the year ended December 31, 2024, primarily related to purchases of short-term investments in marketable securities of $33.2 million, and purchases of long-lived assets of $22.3 million, partially offset by maturities of marketable securities of $31.5 million.
Capital Expenditures
Our capital expenditures for property and equipment consist primarily of leasehold improvements, purchases of computer hardware and software, information systems, and production and test equipment. During each of the years ended December 31, 2025 and 2024, we spent $1.8 million on capital expenditures. Our capital expenditures for intangible assets consists primarily of acquired patents. During the years ended December 31, 2025 and 2024, we spent $7.0 million and $20.5 million on purchases of intangible assets, respectively. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs.
Cash Flows from Financing Activities
Net cash used in financing activities was $123.5 million for the year ended December 31, 2025 principally due to $60.4 million in repayment of indebtedness, $21.8 million in dividends paid, $20.0 million in repurchases of common stock ($1.3 million in repurchases of common stock were pending settlement as of December 31, 2024), and $22.5 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $2.4 million in proceeds from our employee stock purchase program and exercise of stock options.
Net cash used in financing activities was $164.2 million for the year ended December 31, 2024 principally due to $114.2 million in repayment of indebtedness, $21.8 million in dividends paid, $20.0 million in repurchases of common stock ($1.3 million in repurchases of common stock were pending settlement as of December 31, 2024), and $12.8 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $3.2 million in proceeds from our employee stock purchase program and exercise of stock options.
Long-term Debt
The 2020 Credit Agreement dated June 1, 2020 (the “2020 Credit Agreement”), provides for a senior secured term loan B facility (the “Term Loan B”) with maturity on June 8, 2028.
On May 20 2024, we entered into Amendment No. 3 (“Amendment No. 3”) to the 2020 Credit Agreement, which provided for a repricing of the entire outstanding aggregate principal amount of $561.1 million. Amendment No. 3 also reduced interest margins (50 basis points) from SOFR plus a margin of 3.50% to SOFR plus a margin of 3.00% per annum or base rate plus a margin of 2.00% per annum. In addition, Amendment No. 3 lowered the excess cash flow mandatory payment thresholds and credit spread adjustment provision.
On January 30, 2025, we entered into Amendment No. 4 (“Amendment No. 4”) to the 2020 Credit Agreement, which provided for a repricing of the entire outstanding aggregate principal amount of $487.1 million. Amendment No. 4 further reduced the interest margins (50 basis points) to SOFR plus a margin of 2.50% per annum or base rate plus a margin of 1.50% per annum.
The obligations under the 2020 Credit Agreement, as amended, continue to be guaranteed by our wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) and continue to be secured by a lien on substantially all our assets and those of the Guarantors.
As of December 31, 2025, $426.7 million was outstanding under the term loan B facility. In addition, we had $8.3 million of unamortized debt discount and issuance costs recorded as a reduction from the carrying amount of the debt. The interest rate on the Term Loan B, including the amortization of debt discount and issuance costs, was 7.3% and interest is payable monthly.
Under the existing loan agreement, we have future minimum principal payments for our debt of $24.4 million each year from 2026 through 2027, with the remaining principal balance of $378.0 million will be due June 8, 2028. The 2020 Credit Agreement, as amended, also requires that we continue to make cash payments on an annual basis based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year. The cash payments are applied to the remaining principal balance due at final maturity. Based on certain leverage ratios and the voluntary prepayments the Company made during the year ended December 31, 2024, no excess cash flow payments were required for the years ended December 31, 2025 and 2024. The term loan B facility contains customary covenants, and as of December 31, 2025, we were in full compliance with such covenants.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. We evaluate our estimates based on our historical experience and various other assumptions that are believed to be reasonable under the circumstances. These estimates relate to revenue recognition, the assessment of recoverability of goodwill and intangible assets, business combinations, recognition and measurement of deferred income tax assets and liabilities, the assessment of unrecognized tax benefits and others. Actual results could differ from those estimates, and material effects on our operating results and financial position may result.
We believe the following accounting policies and estimates are most critical to understanding our consolidated financial statements. See “Note 2 – Summary of Significant Accounting Policies ” and “Note 4 – Revenue ” of the Notes to Consolidated Financial Statements for a full description of our accounting policies.
Revenue recognition
We derive the majority of our revenue from the licensing of our IP rights to customers. Revenue is recognized when control of the IP rights is transferred to a customer in an amount that reflects the consideration that we expect to be entitled to in exchange for the licensing of our IP. The primary judgments include identifying the performance obligations in the contract, determining standalone selling price used to allocate consideration in a contract with multiple performance obligations, estimating the fair value of noncash consideration, estimating variable consideration relating to potential future price adjustments as a result of legal contract disputes, and estimating quarterly royalties prior to receiving the royalty reports from the licensee.
At times, we enter into contracts with customers that include releases from past patent infringementclaims and a prospective license. In these contracts, we allocate the transaction price between releases for past patent infringementclaims and prospective licenses based on their relative standalone selling prices. Determining standalone selling price requires significant management judgment. In determining the standalone selling price of each performance obligation, we consider such factors as the customer’s revenues, the number of past and projected future subscribers, units shipped, and units manufactured, as well as the per-subscriber or per-unit licensing rates we generally receive from licensees of comparable sizes in comparable markets and geographies. As a release from past patent infringementclaims is generally satisfied at execution of the contract, the transaction price allocated to the release from past patent infringementclaims is generally recognized in the period the contract is executed. Transaction price allocated to prospective Media IP licenses is recognized ratably over the license term, and transaction price allocated to prospective Semiconductor IP licenses is generally recognized upon execution of the contract.
At times, we enter into contracts with customers that include noncash consideration in the form of patents. During 2025, 2024 and 2023, revenue recognized from noncash consideration represented 5.8%, 0.6% and 0.2%, respectively, of our total revenue. Determining the fair value of patents is performed at contract inception using one of, or a combination of, an analysis of comparable market transactions (the market approach), and/or an analysis of the costs that would be required to develop and maintain a comparable set of patents (the cost approach). Each methodology involves the use of significant judgments and assumptions, including which market transactions are most comparable to the specific transaction and the identification of relevant costs incurred by comparable companies to develop and maintain a comparable set of patents. Changes in these assumptions could have a substantial impact on the fair value assigned to the patents for accounting purposes. These inputs and assumptions represent management's best estimates at the time of the transaction.
When the uncertainty associated with variable consideration relates to potential future price adjustments as a result of a legal contract dispute, we estimate variable consideration using the expected value method or the most likely amount method, whichever is more appropriate in the circumstances, and consider all available information, including historical data and experience. Estimating variable consideration related to potential future price adjustments requires significant management judgment in evaluating the possible outcomes.
We generally recognize royalty revenue from per-unit or per-subscriber licenses based on units shipped or manufactured or number of subscribers. Revenue is recognized in the period in which the customer’s sales or usage are estimated to have occurred. This may result in an adjustment to revenue when actual sales or usage are subsequently reported by the customer, generally in the month or quarter following sales or usage. Estimating a customer’s 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 sales or usage, which could have a material impact on the amount of revenue we report on a quarterly basis.
Accounting for income taxes
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments are used in the calculation of tax credits, tax benefits and deductions and in the calculation of tax assets and liabilities. Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.
We must assess the likelihood that we will be able to realize our deferred tax assets. If realizability is not likely on a more-likely-than-not basis, we must increase our provision for income taxes by recording a valuation allowance against our deferred tax assets. We considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Should there be a change in our ability to recover our deferred tax assets, our provision for income taxes would fluctuate in the period of the change.
We account for uncertain tax positions in accordance with authoritative guidance related to income taxes. The calculation of our unrecognized tax benefits involves dealing with uncertainties in the application of complex tax regulations. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. We record unrecognized tax benefits for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional tax liabilities are more-likely-than-not, assuming the tax authorities have full knowledge of all relevant information. If we ultimately determine that the tax liabilities are unnecessary, we reverse the liabilities and recognize a tax benefit during the period in which it occurs. This may occur for a variety of reasons, such as the expiration of the statute of limitations on a particular tax return or the completion of an examination by the relevant tax authority. We record an additional charge in our provision for taxes in the period in which we determine that the recorded unrecognized tax benefits are less than the expected ultimate settlement.
Our policy is to classify accrued interest and penalties related to the accrued liability for unrecognized tax benefits in the provision for income taxes. For the years ended December 31, 2025 and 2024, respectively, we did not recognize any significant interest or penalties. See “Note 14 – Income Taxes ” of the Notes to Consolidated Financial Statements for additional detail.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk
The primary objectives of our investment activities are to preserve principal and maintain liquidity, while at the same time capturing a market rate of return. To achieve these objectives, we maintain our portfolio of cash, cash equivalents and investments in a variety of securities, which are subject to risks including:
Interest Rate Risk
As of December 31, 2025, we had $426.7 million of outstanding indebtedness that was subject to floating interest rates. Changes in economic conditions outside of our control could result in higher interest rates, thereby increasing our interest expense and reducing the funds available for capital investment, operations or other purposes. At December 31, 2025, a 1% increase in the effective interest rate on our outstanding debt throughout a one-year period would result in an annual increase in our interest expense of approximately $4.2 million. Any significant increase in our interest expense could negatively impact our results of operations and cash flows and also our ability to pay dividends in the future. If the U.S. Federal Reserve raises its benchmark interest rate, any increases would likely impact the borrowing rate on our outstanding indebtedness, and increase our interest expense, comparably.
Investment Risk
We are exposed to market risk as it relates to changes in the market value of our investments in addition to the liquidity and credit-worthiness of the underlying issuers of our investments. Our investments are subject to fluctuations in fair value due to the volatility of the credit markets and prevailing interest rates for such securities. Our marketable debt securities, consisting primarily of municipal bonds and notes, corporate bonds and notes, commercial paper, treasury and agency notes and bills and certificates of deposit, are classified as available-for-sale securities. As of December 31, 2025, the fair value of our investments classified as marketable securities was $63.8 million. Unrealized losses, net of tax, on these investments were not material as of December 31, 2025. We did not hold any derivatives, derivative commodity instruments or other similar financial instruments in our portfolio as of December 31, 2025.
Bank Liquidity Risk
As of December 31, 2025, we have approximately $72.9 million of cash in operating accounts that are held with both domestic and international financial institutions, the majority of which is held with high quality domestic financial institutions. These cash balances could be lost or become inaccessible if the underlying financial institutions fail or if they are unable to meet the liquidity requirements of their depositors and they are not supported by the government of the jurisdiction where such cash is held. We have not incurred any losses and have had full access to our operating accounts to date. We believe any failures of domestic and international financial institutions could impact our ability to fund our operations in the short term.
Exchange Rate Risk
Our international business is subject to risks, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility when compared to the U.S. dollar. Accordingly, our future results could be materially impacted by changes in these or other factors.
We are also affected by exchange rate fluctuations as the financial statements of our foreign subsidiaries are translated into U.S. dollars in consolidation. As exchange rates vary, these results, when translated, may vary from expectations and could adversely or positively impact overall profitability. During 2025, the impact of foreign exchange rate fluctuations related to translation of our foreign subsidiaries’ financial statements was immaterial to our Consolidated Financial Statements.
Item 8. Financial Statemen ts and Supplementary Data
Our Consolidated Balance Sheets as of December 31, 2025 and 2024, and the related Consolidated Statements of Income, Equity, Comprehensive Income and Cash Flows for each of the years in the three-year period ended December 31, 2025 are set forth in this Annual Report at Item 15(a)(1).
