UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________

FORM 10-Q

(Mark One)



x ☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2018~~2019



o ☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-37870

TiVo Corporation

(Exact name of registrant as specified in its charter)



Delaware					61-1793262
(State or other jurisdiction of incorporation or organization)					(I.R.S. Employer Identification No.)
2160 Gold Street	,	San Jose CA	,	California	95002
(Address of principal executive offices, including zip code)

~~(408)~~ (408) 519-9100

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	TIVO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ☑Noo☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesþ☑Noo☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large accelerated filerþ	☑	Accelerated filero	☐	Non-accelerated filero	☐
Smaller reporting companyo	☐	Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐Noþ☑

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.



(in thousands)	Outstanding as of
Class	October 31, ~~2018~~2019
Common Stock	~~123,927~~126,643

TIVO CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Loss	4
	Condensed Consolidated Statements of ~~Cash Flows~~Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	68
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4035
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5850
ITEM 4.	CONTROLS AND PROCEDURES	5850

PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	5951
ITEM 1A.	RISK FACTORS	5951
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	5952
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	5952
ITEM 4.	MINE SAFETY DISCLOSURES	5952
ITEM 5.	OTHER INFORMATION	5952
ITEM 6.	EXHIBITS	6053
	SIGNATURES	6154

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TIVO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)


	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
ASSETS	(Unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	149,655		$	128,965		$	144,451		$	161,955
Short-term marketable securities	162,073			140,866			132,208			158,956
Accounts receivable, net	173,749			180,768			183,827			152,866
Inventory	7,963			11,581			3,056			7,449
Prepaid expenses and other current assets	36,012			40,719			30,842			30,806
Total current assets	529,452			502,899			494,384			512,032
Long-term marketable securities	70,296			82,711			4,986			73,207
Property and equipment, net	50,689			55,244			50,361			53,586
Intangible assets, net	524,057			643,924			442,857			513,770
Goodwill	1,813,183			1,813,227			1,406,987			1,544,343
Right-of-use assets							63,064			—
Other long-term assets	57,104			65,673			59,953			63,365
Total assets	$	3,044,781		$	3,163,678		$	2,522,592		$	2,760,303

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	92,557		$	135,852		$	107,815		$	104,981
Unearned revenue	49,667			55,393			49,579			46,072
Current portion of long-term debt	7,000			7,000			289,284			373,361
Total current liabilities	149,224			198,245			446,678			524,414
Taxes payable, less current portion	4,694			3,947
Unearned revenue, less current portion	50,356			58,283			46,511			54,495
Long-term debt, less current portion	982,801			976,095			619,947			618,776
Deferred tax liabilities, net	51,150			50,356			39,921			45,030
Long-term lease liabilities							65,650			—
Other long-term liabilities	14,982			23,736			13,618			24,647
Total liabilities	1,253,207			1,310,662			1,232,325			1,267,362
Commitments and contingencies (Note 11)
Contingencies (Note 11)
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued or outstanding	—			—			—			—
Common stock, $0.001 par value, 250,000 shares authorized; 125,629 shares issued and 123,875 shares outstanding as of September 30, 2018; and 123,385 shares issued and 122,116 shares outstanding as of December 31, 2017	126			123
Treasury stock, 1,754 shares and 1,269 shares as of September 30, 2018 and December 31, 2017, respectively, at cost	(31,495		)	(24,740		)
Common stock, $0.001 par value, 250,000 shares authorized; 128,969 shares issued and 126,502 shares outstanding as of September 30, 2019; and 125,781 shares issued and 123,975 shares outstanding as of December 31, 2018							129			126
Treasury stock, 2,467 shares and 1,806 shares as of September 30, 2019 and December 31, 2018, respectively, at cost							(37,516		)	(32,124		)
Additional paid-in capital	3,249,615			3,273,022			3,229,334			3,239,395
Accumulated other comprehensive loss	(4,297		)	(2,738		)	(3,520		)	(3,869		)
Accumulated deficit	(1,422,375		)	(1,392,651		)	(1,898,160		)	(1,710,587		)
Total stockholders’ equity	1,791,574			1,853,016			1,290,267			1,492,941
Total liabilities and stockholders’ equity	$	3,044,781		$	3,163,678		$	2,522,592		$	2,760,303

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

TIVO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenues, net:
Licensing, services and software	$	160,783		$	188,031		$	516,495		$	577,545		$	155,918		$	160,783		$	486,575		$	516,495
Hardware	3,926			9,867			10,911			34,675			2,606			3,926			6,356			10,911
Total Revenues, net	164,709			197,898			527,406			612,220			158,524			164,709			492,931			527,406
Costs and expenses:
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets	40,749			42,811			126,547			124,398			39,263			40,749			114,482			126,547
Cost of hardware revenues, excluding depreciation and amortization of intangible assets	4,220			9,889			14,260			35,877			4,289			4,220			14,150			14,260
Research and development	42,053			48,872			133,894			144,386			34,038			42,053			113,621			133,894
Selling, general and administrative	39,867			47,431			133,906			147,121			45,677			39,867			139,270			133,906
Depreciation	5,338			5,015			16,252			15,869			5,314			5,338			16,005			16,252
Amortization of intangible assets	37,242			41,722			119,463			125,100			28,212			37,242			84,574			119,463
Restructuring and asset impairment charges	2,921			3,710			8,568			17,623			1,995			2,921			6,484			8,568
Goodwill impairment													137,453			—			137,453			—
Total costs and expenses	172,390			199,450			552,890			610,374			296,241			172,390			626,039			552,890
Operating (loss) income	(7,681		)	(1,552		)	(25,484		)	1,846
Operating loss													(137,717		)	(7,681		)	(133,108		)	(25,484		)
Interest expense	(12,436		)	(10,990		)	(36,241		)	(31,827		)	(11,844		)	(12,436		)	(36,480		)	(36,241		)
Interest income and other, net	861			1,059			2,971			3,819			860			861			4,150			2,971
Gain (loss) on interest rate swaps	1,033			(39		)	7,185			(1,374		)
TiVo Acquisition litigation	—			(1,100		)	—			(14,006		)
(Loss) gain on interest rate swaps													(390		)	1,033			(5,475		)	7,185
Loss on debt extinguishment	—			—			—			(108		)	—			—			(300		)	—
Loss on debt modification	—			—			—			(929		)
Loss from continuing operations before income taxes	(18,223		)	(12,622		)	(51,569		)	(42,579		)	(149,091		)	(18,223		)	(171,213		)	(51,569		)
Income tax expense	4,769			4,341			13,305			13,816			1,919			4,769			15,981			13,305
Loss from continuing operations, net of tax	(22,992		)	(16,963		)	(64,874		)	(56,395		)	(151,010		)	(22,992		)	(187,194		)	(64,874		)
Income from discontinued operations, net of tax	143			—			3,738			—
(Loss) Income from discontinued operations, net of tax													(379		)	143			(379		)	3,738
Net loss	$	(22,849	)	$	(16,963	)	$	(61,136	)	$	(56,395	)	$	(151,389	)	$	(22,849	)	$	(187,573	)	$	(61,136	)

Basic loss per share:
Continuing operations	$	(0.19	)	$	(0.14	)	$	(0.53	)	$	(0.47	)	$	(1.20	)	$	(0.19	)	$	(1.50	)	$	(0.53	)
Discontinued operations	—			—			0.03			—			—			—			—			0.03
Basic loss per share	$	(0.19	)	$	(0.14	)	$	(0.50	)	$	(0.47	)	$	(1.20	)	$	(0.19	)	$	(1.50	)	$	(0.50	)
Weighted average shares used in computing basic per share amounts	123,459			120,935			122,756			119,994			126,081			123,459			125,160			122,756

Diluted loss per share:
Continuing operations	$	(0.19	)	$	(0.14	)	$	(0.53	)	$	(0.47	)	$	(1.20	)	$	(0.19	)	$	(1.50	)	$	(0.53	)
Discontinued operations	—			—			0.03			—			—			—			—			0.03
Diluted loss per share	$	(0.19	)	$	(0.14	)	$	(0.50	)	$	(0.47	)	$	(1.20	)	$	(0.19	)	$	(1.50	)	$	(0.50	)
Weighted average shares used in computing diluted per share amounts	123,459			120,935			122,756			119,994			126,081			123,459			125,160			122,756

Dividends declared per share	$	0.18		$	0.18		$	0.54		$	0.54		$	0.08		$	0.18		$	0.34		$	0.54

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

TIVO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net loss	$	(22,849	)	$	(16,963	)	$	(61,136	)	$	(56,395	)	$	(151,389	)	$	(22,849	)	$	(187,573	)	$	(61,136	)
Other comprehensive (loss) income, net of tax:
Change in foreign currency translation adjustment	(286		)	267			(1,889		)	3,394			(936		)	(286		)	(532		)	(1,889		)
Unrealized gains on marketable securities
Change in unrealized gains on marketable securities	222			82			114			351
Unrealized (losses) gains on marketable securities
Change in unrealized (loss) gains on marketable securities													(11		)	222			881			114
Less: Reclassification adjustment on sale	—			—			216			—			—			—			—			216
Other comprehensive (loss) income, net of tax	(64		)	349			(1,559		)	3,745			(947		)	(64		)	349			(1,559		)
Comprehensive loss	$	(22,913	)	$	(16,614	)	$	(62,695	)	$	(52,650	)	$	(152,336	)	$	(22,913	)	$	(187,224	)	$	(62,695	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

TIVO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)



	Common stock			Treasury stock					Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders’ equity
	Shares	Amount		Shares		Amount
Balance as of June 30, 2018	124,528	$	125	(1,557	)	$	(28,925	)	$	3,257,093		$	(4,233	)	$	(1,399,526	)	$	1,824,534
Net loss															(22,849		)	(22,849		)
Other comprehensive loss, net of tax												(64		)				(64		)
Issuance of common stock under employee stock purchase plan	511	—							5,278									5,278
Issuance of restricted stock, net	590	1							—									1
Equity-based compensation									9,526									9,526
Dividends									(22,282		)							(22,282		)
Withholding taxes related to net share settlement of restricted awards				(197	)	(2,570		)										(2,570		)
Balance as of September 30, 2018	125,629	$	126	(1,754	)	$	(31,495	)	$	3,249,615		$	(4,297	)	$	(1,422,375	)	$	1,791,574



	Common stock			Treasury stock					Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders’ equity
	Shares	Amount		Shares		Amount
Balance as of June 30, 2019	127,313	$	127	(2,157	)	$	(35,219	)	$	3,230,303		$	(2,573	)	$	(1,746,771	)	$	1,445,867
Net loss															(151,389		)	(151,389		)
Other comprehensive loss, net of tax												(947		)				(947		)
Issuance of common stock under employee stock purchase plan	608	1							3,920									3,921
Issuance of restricted stock, net	1,048	1							—									1
Equity-based compensation									5,217									5,217
Dividends									(10,106		)							(10,106		)
Withholding taxes related to net share settlement of restricted awards				(310	)	(2,297		)										(2,297		)
Balance as of September 30, 2019	128,969	$	129	(2,467	)	$	(37,516	)	$	3,229,334		$	(3,520	)	$	(1,898,160	)	$	1,290,267



	Common stock			Treasury stock					Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders’ equity
	Shares	Amount		Shares		Amount
Balance as of December 31, 2017	123,385	$	123	(1,269	)	$	(24,740	)	$	3,273,022		$	(2,738	)	$	(1,392,651	)	$	1,853,016
Cumulative effect adjustment															31,412			31,412
Net loss															(61,136		)	(61,136		)
Other comprehensive loss, net of tax												(1,559		)				(1,559		)
Issuance of common stock under employee stock purchase plan	1,150	2							12,852									12,854
Issuance of restricted stock, net	1,094	1							—									1
Equity-based compensation									30,252									30,252
Dividends									(66,511		)							(66,511		)
Withholding taxes related to net share settlement of restricted awards				(485	)	(6,755		)										(6,755		)
Balance as of September 30, 2018	125,629	$	126	(1,754	)	$	(31,495	)	$	3,249,615		$	(4,297	)	$	(1,422,375	)	$	1,791,574



	Common stock			Treasury stock					Additional paid-in capital			Accumulated other comprehensive loss			Accumulated deficit			Total stockholders’ equity
	Shares	Amount		Shares		Amount
Balance as of December 31, 2018	125,781	$	126	(1,806	)	$	(32,124	)	$	3,239,395		$	(3,869	)	$	(1,710,587	)	$	1,492,941
Net loss															(187,573		)	(187,573		)
Other comprehensive income, net of tax												349						349
Issuance of common stock under employee stock purchase plan	1,343	1							10,871									10,872
Issuance of restricted stock, net	1,845	2							—									2
Equity-based compensation									22,637									22,637
Dividends									(42,573		)							(42,573		)
Equity component related to repurchase of 2020 Convertible Notes									(996		)							(996		)
Withholding taxes related to net share settlement of restricted awards				(661	)	(5,392		)										(5,392		)
Balance as of September 30, 2019	128,969	$	129	(2,467	)	$	(37,516	)	$	3,229,334		$	(3,520	)	$	(1,898,160	)	$	1,290,267

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

TIVO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2019			2018
Cash flows from operating activities:
Operating activities:
Net loss	$	(61,136	)	$	(56,395	)	$	(187,573	)	$	(61,136	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Income from discontinued operations, net of tax	(3,738		)	—
Loss (Income) from discontinued operations, net of tax							379			(3,738		)
Depreciation	16,252			15,869			16,005			16,252
Amortization of intangible assets	119,463			125,100			84,574			119,463
Amortization of convertible note discount and note issuance costs	11,586			11,016			11,531			11,586
Restructuring and asset impairment charges	8,568			17,623			6,484			8,568
Goodwill impairment							137,453			—
Equity-based compensation	28,226			38,781			22,459			28,226
Change in fair value of interest rate swaps	(10,245		)	(5,102		)	4,613			(10,245		)
TiVo Acquisition litigation	—			14,006
Loss on debt extinguishment	—			108			300			—
Loss on debt modification	—			929
Deferred income taxes	(447		)	1,035			(5,418		)	(447		)
Other operating, net	1,819			(3,358		)	5,507			1,819
Changes in operating assets and liabilities:
Accounts receivable	30,548			(42,155		)	(31,803		)	30,548
Inventory	3,618			1,476			2,001			3,618
Prepaid expenses and other current assets and other long-term assets	7,377			(58,411		)	(716		)	7,377
Right-of-use assets, net of lease liabilities							14,919			—
Accounts payable and accrued expenses and other long-term liabilities	(35,237		)	(29,680		)	(26,003		)	(35,237		)
Taxes payable	(474		)	2,141			(1,504		)	(474		)
Unearned revenue	(2,445		)	18,276			(11,563		)	(2,445		)
Net cash provided by operating activities of continuing operations	113,735			51,259
Net cash provided by operating activities of discontinued operations	—			—
Net cash provided by operating activities - Continuing operations							41,645			113,735
Net cash used in operating activities - Discontinued operations							(25		)	—
Net cash provided by operating activities	113,735			51,259			41,620			113,735
Cash flows from investing activities:
Investing activities:
Payments for purchase of short- and long-term marketable securities	(150,583		)	(121,979		)	(69,220		)	(150,583		)
Proceeds from sales or maturities of short- and long-term marketable securities	142,753			150,261			165,799			142,753
Return of cash paid for TiVo Acquisition	—			25,143
Payment to Dissenting Holders in TiVo Acquisition	—			(117,030		)
Payments for purchase of property and equipment	(17,053		)	(22,534		)	(15,743		)	(17,053		)
Payments for purchase of patents	—			(2,000		)
Payments for acquisition of patents							(6,850		)	—
Other investing, net	15			(67		)	—			15
Net cash used in investing activities	(24,868		)	(88,206		)
Cash flows used in financing activities:
Proceeds from issuance of long-term debt, net of issuance costs	—			681,552
Net cash provided by (used in) investing activities							73,986			(24,868		)
Financing activities:
Principal payments on long-term debt	(5,250		)	(687,750		)	(95,963		)	(5,250		)
Payments for dividends	(66,687		)	(65,238		)	(42,493		)	(66,687		)
Payments for contingent consideration and deferred holdback	(1,874		)	(2,650		)	—			(1,874		)
Payments for withholding taxes related to net settlement of restricted awards	(6,755		)	(12,784		)	(5,392		)	(6,755		)
Proceeds from employee stock purchase plan and exercise of employee stock options	12,854			22,364
Proceeds from employee stock purchase plan							10,872			12,854
Net cash used in financing activities	(67,712		)	(64,506		)	(132,976		)	(67,712		)
Effect of exchange rate changes on cash and cash equivalents	(465		)	1,613			(134		)	(465		)
Net increase (decrease) in cash and cash equivalents	20,690			(99,840		)
Net (decrease) increase in cash and cash equivalents							(17,504		)	20,690
Cash and cash equivalents at beginning of period	128,965			192,627			161,955			128,965
Cash and cash equivalents at end of period	$	149,655		$	92,787		$	144,451		$	149,655

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

TIVO CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

On April 28, 2016, Rovi Corporation ("Rovi") and TiVo Inc. (renamed TiVo Solutions Inc. ("TiVo Solutions")) entered into an Agreement and Plan of Merger (the “Merger Agreement”) for Rovi to acquire TiVo Solutions in a cash and stock transaction (the "TiVo Acquisition"). Following consummation of the TiVo Acquisition on September 7, 2016 (the "TiVo Acquisition Date"), TiVo Corporation (the "Company"), a Delaware corporation founded in April 2016 as Titan Technologies Corporation and then a wholly-owned subsidiary of Rovi, owns both Rovi and TiVo Solutions.

TiVo Corporation provides an intellectual property portfolio and products to help consumers enjoy watching their favorite entertainment. Our technologies enable an integrated entertainment experience, making entertainment content easy to find, watch and enjoy. Our product business serves up the best movies, video and shows from across live TV, on demand, streaming services and countless apps, helping people discover what to watch as they wish. For content creators and advertisers, our machine learning for personalized content recommendations, conversational voice solution and targeted advertising methodologies help deliver a passionate group of watchers to increase viewership and engagement across online video, TV and other entertainment viewing platforms. Our intellectual property business provides a global portfolio of thousands of patents that underlie this entertainment platform as well as across the broader video landscape.

On May 9, 2019, the Company announced that its Board of Directors unanimously approved a plan to separate the Product and Intellectual Property Licensing businesses into separately traded public companies (the “Separation”). The Separation is expected to be completed through a dividend of newly issued shares of the common stock of a Company subsidiary that will hold the Product business (“ProductCo”). The Company intends that the Separation will be completed in a manner generally intended to qualify as tax-deferred to TiVo Corporation’s stockholders for U.S. federal income tax purposes. The Separation, targeted for completion by April 2020, is subject to certain conditions, including, among others, obtaining final approval from TiVo Corporation's Board of Directors, receipt of a ~~global leader in media and entertainment products that power consumer entertainment experiences and enable its customers~~favorable opinion and/or rulings with respect to ~~deepen and further monetize their audience relationships. The Company provides a broad set~~the tax-deferred nature of intellectual property, cloud-based services and set-top box ("STB") solutions that enable people to find and enjoy online video, television ("TV"), movies and music entertainment, including content discovery through device-embedded and cloud-based user experience ("UX"), including interactive program guides (“IPGs”), digital video recorders ("DVRs"), natural language voice and text search, cloud-based recommendations servicesthe transaction for U.S. federal income tax purposes and the Company's extensive entertainment metadata (i.e., descriptive information, promotional images or other content that describes or relates to television shows, videos, movies, sports, music, books, games or other entertainment content). The Company's integrated platform includes softwareU.S. Securities and cloud-based services that provide an all-in-one approach for navigating a fragmented universe of content by seamlessly combining live, recorded, video-on-demand ("VOD") and over-the-top ("OTT") content into one intuitive user interface with simple universal search, discovery, viewing and recording, to create a unified viewing experience. The Company distributes its products through service provider relationships, integrated into third-party devices and directly to retail consumers. The Company also offers data analytics solutions which enable advanced audience targeting and measurement in linear and OTT TV advertising. Solutions are sold globally to cable, satellite, consumer electronics ("CE"), entertainment, media and online distribution companies, and, in the United States, the Company sells a suite of DVR and whole home media products and services directly to retail consumers.Exchange Commission declaring ProductCo's Registration Statement effective.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted in accordance with such rules and regulations. However, the Company believes the disclosures made are adequate to make the information not misleading. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are considered necessary to present fairly the results for the periods presented.

The information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto and other disclosures contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. The Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss, Condensed Consolidated Statements of Stockholders' Equity and the Condensed Consolidated Statements of Cash Flows for the interim periods presented are not necessarily indicative of the results to be expected for the year ~~ending~~ended December 31, ~~2018,~~2019, for any future year, or for any other future interim period.

The accompanying Condensed Consolidated Financial Statements include the accounts of TiVo Corporation and subsidiaries and affiliates in which the Company has a controlling financial interest after the elimination of intercompany accounts and transactions.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires

management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and the results of operations for the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, long-lived asset impairment, including goodwill and intangible assets, equity-based compensation and income taxes. Actual results may differ from those estimates.

~~Concentrations~~Goodwill

Goodwill represents the excess of ~~Risk~~cost over fair value of the net assets of an acquired business. The recoverability of goodwill is assessed at the reporting unit level, which is either the operating segment or one level below. Goodwill is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate their carrying amount may not be recoverable.

The TiVo service is enabled using a DVR manufactured by a third-party. The Company also relies on third parties with whom it outsources supply-chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics. The Company cannot be sure that these parties will perform their obligations as expected or that any revenue, cost savings or other benefits will be derived from the efforts of these parties. If any of these parties breaches or terminates their agreement with the Company or otherwise fails to perform their obligations in a timely manner, the Company may be delayed or prevented from commercializing its products and services.

~~Accounts Receivable~~

The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to cash collection. A receivable related to revenue recognized for multi-year licenses is recognized when the Company has an unconditional right to invoice and receive payment in the future related to those licenses.

Payment terms and conditions vary by contract type, location of customer and the products or services offered, although terms generally require payment from a customer within 30 to 60 days. When the timing of revenue recognition differs from the timing of cash collection, an evaluation is performedQualitative factors are first assessed to determine whether events or changes in circumstances indicate it is more-likely-than-not that the ~~contract includes~~fair value of a ~~significant financing component. As~~reporting unit is less than its carrying amount. If, based on the ~~primary purpose~~qualitative assessment, it is considered more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed.

In the quantitative impairment test for goodwill, the fair value of the ~~Company's invoicing terms~~reporting unit is compared to ~~provide customers with simplified~~its carrying amount. The fair value of the Product reporting unit and ~~predictable ways~~the Intellectual Property Licensing reporting unit is estimated using an income approach. Under the income approach, the fair value of ~~purchasing products~~a reporting unit is estimated based on the present value of estimated future cash flows and ~~services, significant financing components~~considers projected revenue growth rates, future operating margins and risk-adjusted discount rates. The carrying amount of a reporting unit is determined by assigning the assets and liabilities, including goodwill and intangible assets, to the reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the fair value of a reporting unit is less than its carrying amount, an impairment loss equal to the difference is recognized.

Right-of-Use Assets and Lease Liabilities

At inception of an agreement, the agreement is reviewed to determine if it is or contains a lease. If an agreement is or contains a lease, the Company recognizes a Right-of-use asset, representing the right to use an underlying asset for the lease term, and a Lease liability, representing the obligation to make lease payments arising from a lease.

Right-of-use assets and Lease liabilities are ~~generally not identified~~measured based on the present value of the lease payments over the lease term. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The present value of future lease payments is calculated utilizing the discount rate implicit in the lease. If the discount rate implicit in the lease is not readily determinable, the present value of future lease payments is calculated utilizing the Company’s ~~contracts with customers.~~incremental borrowing rate. Right-of-use assets and Lease liabilities are subject to adjustment in the event of modifications to lease terms, changes in the probability that an option to extend or terminate a lease would be exercised and other factors. In addition, Right-of-use assets are periodically reviewed for impairment.

Certain of the Company’s lease agreements require variable payments, such as inflation-indexed measures. When a lease requires an indexed payment, Right-of-use assets and Lease liabilities are measured based on the variable rate in effect at the measurement date. All other variable fees, such as increases in lessor operating costs and usage-based fees, are excluded from the calculation of the Right-of-use assets and Lease liabilities and are expensed as incurred.

The Company ~~performs ongoing credit evaluations of its customers.~~has lease agreements that contain both lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-area maintenance costs). The Company ~~reviews its accounts receivable~~applies a practical expedient to ~~identify potential collection issues. A specific allowance~~combine lease components and non-lease components into a single lease component for doubtful accounts is recorded when warranted by specific customer circumstances, such as in the case of a bankruptcy filing, a deterioration in the customer's operating results or financial position or the past due status of a receivable based on its contractual payment terms. For customers for which a specific allowance for doubtful accounts was recorded, adjustments to recoverability estimates are recorded when there are subsequent changes in the specific customer's circumstances. For accounts receivable not specifically reserved, an allowance for doubtful accounts is recorded based on historical loss experiencerecognition and ~~other currently available evidence. Accounts receivable deemed uncollectible are charged off when collection efforts have been exhausted.~~measurement purposes.

~~Contract Assets~~

~~Contract assets primarily consist of revenue recognized in excess~~Lease expense includes amortization of the ~~amount billed to the customer, limited to net realizable value~~Right-of-use assets and deferred engineering costs for significant software customization or modification and set-up services to the extent deemed recoverable. Contract assets for unbilled receivables are reclassified to Accounts receivable, net when the right to payment becomes unconditional.

Contract assets also include the incremental costs of obtaining a contract with a customer, principally sales commissions when the renewal commission is not commensurate with the initial commission. The incremental costs of obtaining a contract with a customer are recognized as an asset when the expected period of benefit is greater than one year. The incremental costs of obtaining a contract with a customer are amortized on a straight-line basis over a period of time commensurate with the period of benefit, generally three to five years, which considers the transfer of goods or services to which the assets relate, technological developments during the period of benefit, customer history and other factors. The period of benefit is generally the estimated lifeaccretion of the ~~customer relationship if renewals are expected, and may exceed the contract term.~~Lease liabilities. Amortization of the ~~capitalized incremental costs~~Right-of-use assets is calculated as the periodic lease cost less accretion of ~~obtaining a contract with a customer~~the lease liability. The amortization period for Right-of-use assets is ~~included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.~~

Contract assets are classified as current or noncurrent in the Condensed Consolidated Balance Sheets based on when the asset is expected to be realized. Contract assets are subject to periodic impairment reviews.

~~Contract Liabilities, including Unearned Revenue~~

~~Contract liabilities are mainly comprised of unearned revenue related to consumer lifetime subscriptions~~limited to the ~~TiVo service and multi-period licensing or cloud-based services and other offerings for which the Company~~expected lease term. For operating leases, lease expense is paid in advance of when control of the good or service is transferred to the customer. Unearned revenue also includes amounts related to professional services to be performed in the future. Unearned revenue arises when cash payments are received or due, including amounts which are refundable, in advance of performance. Contract liabilities exclude amounts expected to be refunded. Payment terms and conditions vary by contract type, location of customer and the products or services offered. For certain products or services and customer types, payment before the products or services are delivered to the customer is required.

~~Revenue Recognition~~

~~General~~

Revenue is recognized when control of the promised goods or services is transferred to a customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services, which may include various combinations of goods and services which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of taxes collected from customers which are subsequently remitted to governmental authorities.

Depending on the terms of the contract, a portion of the consideration received may be deferred because of a requirement to satisfy a future obligation. Stand-alone selling price for separate performance obligations is based on observable prices charged to customers for goods or services sold separately or the cost-plus-a-margin approach when observable prices are not available, considering overall pricing objectives.

~~Arrangements with Multiple Performance Obligations~~

Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are separately accounted for if they are distinct. In an arrangement with multiple performance obligations, the transaction price is allocated among the separate performance obligations on a relative stand-alone selling price basis. The determination of stand-alone selling price considers market conditions, the size and scope of the contract, customer and geographic information, and other factors. The allocation of transaction price among performance obligations in a contract may impact the amount and timing of revenue recognized in the Condensed Consolidated Statements of Operations ~~during~~as an operating expense over the lease term on a ~~given period.~~

~~Contract Modifications~~

Contracts may be modified due to changes in contract specifications or customer requirements. Contract modifications occur when the change in terms either creates new enforceable rights and obligations or changes existing enforceable rights and obligations. The effect of a contract modification for goods and services that are not distinct in the contextstraight-line basis. For financing leases, amortization of the ~~contract on the transaction price~~Right-of-use asset is recognized as an ~~adjustment to revenue on a cumulative catch-up basis. Contract modifications that result~~operating expense in ~~goods or services that are distinct~~the Condensed Consolidated Statements of Operations over the lease term separately from ~~the previously existing contract are accounted for prospectively.~~

~~Variable Consideration~~

~~When a contract with a customer includes a variable transaction price, an estimate~~accretion of the consideration to which the Company expects to be entitled to for transferring the promised goods or services is made at contract inception. Depending on the terms of the contract, variable consideration is estimated using either the expected value approach or the most likely value approach. Under either approach to estimating variable consideration, the estimate considers all information (historical, current and forecast) that is reasonably available at contract inception. The amount of variable consideration is estimated at contract inception and updated as additional information becomes available. The estimate of variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Subsequent changes in the transaction price resulting from changes in the estimate of variable consideration are allocated to the performance obligations in the contract on the same basis as at contract inception.

Certain payments to retailers and distributors, such as market development funds and revenue shares, are treated as a reduction of the transaction price, and therefore revenue, rather than Selling, general and administrative expense. The reduction of revenue is recognized at the later of when revenue is recognized for the transfer of the related goods or services to the customer or when the Company pays or promises to pay the consideration.

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

~~Significant Judgments~~

Determining whether promises to transfer multiple goods and services in contracts with customers are considered distinct performance obligations that should be accounted for separately requires significant judgment, including related to the level of integration and interdependency between the performance obligations. In addition, judgment is necessary to allocate the transaction price to the distinct performance obligations, including whether there is a discount or significant financing component to be allocated based on the relative stand-alone selling price of the various performance obligations.

Significant judgment is required to determine the stand-alone selling price for each distinct performance obligation when an observable price is not available. In instances where stand-alone selling price is not directly observable, such as when the Company does not sell the good or service separately, the stand-alone selling price is determined using a range of inputs that includes market conditions and other observable inputs. More than one stand-alone selling price may exist for individual goods and services due to the stratification of those goods and services, considering attributes such as the size of the customer and geographic region.

Due to the nature of the work required to be performed on some performance obligations, significant judgment may be required to determine the transaction price. It is common for the Company's license agreements to contain provisions that can either increase or decrease the transaction price. These variable amounts are generally estimated based on usage or the achievement of performance metrics. In addition to estimating variable consideration, significant judgment is necessary to identify forms of variable consideration, determine whether the variable consideration relates to a sales-based or usage-based royalty of intellectual property and the determination of whether and when to include estimates of variable consideration in the transaction price.

Some hardware products are sold with a right of return and in other circumstances, other credits or incentives may be provided such as consideration (sales incentives) given to customers or resellers, which are accounted for as variable consideration and recognized as a reduction to the revenue recognized. Estimates of returns, credits and incentives are made at contract inception and updated each reporting period.

In contracts where the Company does not host the TiVo service and that include engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of software, the Company recognizes revenue as progress toward completion occurs using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Significant judgment is required to estimate the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement.

On an ongoing basis, management evaluates its estimates, inputs and assumptions related to revenue recognition. Using different estimates, inputs or assumptions may materially affect the reported amounts of assets and liabilities as of the date of the financial statements and the results of operations for the reporting period.

~~Nature of goods and services~~

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

~~Patent Licensing Agreements~~

The Company licenses its discovery patent portfolio to traditional pay TV providers, virtual service providers, OTT video providers, CE manufacturers and others. The Company licenses its patented technology portfolio under two revenue models: (i) fixed-fee licenses and (ii) per-unit royalty licenses.

The Company's long-term fixed-fee license agreements provide rights to future patented technologies over the term of the agreement that are highly interdependent or highly interrelated to the patented technologies provided at the inception of the agreement. The Company treats these rights as a single performance obligation with revenue recognized on a straight-line basis over the term of the fixed-fee license agreement.

At times, the Company enters into license agreements in which a licensee is released from past patent infringement claims and is granted a license to ship an unlimited number of units over a future period for a fixed fee. In these arrangements, the Company allocates the transaction price between the release for past patent infringement claims and the future license. In determining the stand-alone selling price of the release for past patent infringement claims and the future license, the Company considers such factors as the number of units shipped in the past and in what geographies these units were shipped, the number of units expected to be shipped in the future and in what geographies these units are expected to be shipped, as well as the licensing rate the Company generally receives for 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.

The Company recognizes revenue from per-unit royalty licenses in the period in which the licensee's sales are estimated to have occurred, which results in an adjustment to revenue when actual sales are subsequently reported by the licensees, which is generally in the month or quarter following usage or shipment. The Company generally recognizes revenue from per-unit royalty licenses on a per-subscriber per-month model for licenses with service providers and a per-unit shipped model for licenses with CE manufacturers.

~~Arrangements with Multiple System Operators for the TiVo Service~~

The Company's arrangements with multiple system operators ("MSOs") typically include software customization and set-up services, associated maintenance and support, limited training, post-contract support, TiVo-enabled DVRs, non-DVR STBs and the TiVo service.

The Company has two types of arrangements with MSOs that include technology deployment and engineering services. In instances where the Company hosts the TiVo service, non-refundable payments received for customization and set-up services are deferred and recognized as revenue over the contractual term. The related cost of such services is capitalized to the extent it is deemed recoverable and amortized to cost of revenues over the same period as the related TiVo service revenue is recognized. The Company estimates the stand-alone selling prices for training, DVRs, non-DVR STBs and maintenance and support based on the price charged in stand-alone sales of the promised good or service. The stand-alone selling price for the TiVo service is determined considering the size of the MSO and expected volume of deployment, market conditions, competitive landscape, internal costs and total gross margin objectives. For a term license to the TiVo service, the Company receives license fees for the hosted TiVo service on either a per-subscriber per-month basis or a fixed fee. The Company recognizes revenue from per-subscriber per-month licenses during the month the TiVo service is provided to the customer and recognizes revenue from fixed fee licenses ratably over the license period.

In arrangements where the Company does not host the TiVo service and that include engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of the software, the Company recognizes revenue as progress toward completion is made using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Project costs are primarily labor related to the specific activities required for the project. Costs related to general infrastructure or uncommitted platform development are not included in the project cost estimates and are expensed as incurred. Estimating project costs requires forecasting costs, tracking progress toward completion and projecting the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement, and revisions to estimates are recognized on a cumulative catch-up basis when the changed conditions become known. Provisions for losses are recorded when estimates indicate it is probable that a loss will be incurred for the contract. The Company generally recognizes revenue from license fees for the TiVo service that it does not host on a per-subscriber per-month basis due to the recognition constraint on intellectual property usage-based royalties.

~~Subscription Services~~

Subscription services revenues primarily consist of fees to provide customers with access to one or more of the Company's hosted products such as its i-Guide IPG, advanced search and recommendations, metadata and analytics products, including routine customer support. The Company generally receives per-subscriber per-month fees for its i-Guide IPG and search and recommendations service and revenue is recorded in the month the customer uses the service. The Company generally receives a monthly or quarterly fee from its metadata or analytics licenses for the right to use its metadata or access its analytics platform and to receive regular updates. Revenue from the Company's metadata and analytics service is recognized ratably over the subscription period.

~~Passport Software~~

The Company licenses its Passport IPG software to pay TV providers in North and South America. The Company generally receives per-subscriber per-month fees for licenses to its Passport IPG software and support. Due to the usage-based royalty provisions of the revenue recognition guidance, revenue is generally recognized in the month the customer uses the software.

~~Advertising~~

The Company generates advertising revenue through its IPGs. Advertising revenue is recognized when the related advertisement is provided. Advertising revenue is recorded net of agency commissions and revenue shares with service providers and CE manufacturers.

~~TiVo-enabled DVRs and TiVo Service~~

The Company sells TiVo-enabled DVRs and the related service directly to customers through sales programs via the TiVo.com website and licenses the sale of TiVo-enabled DVRs through a limited number of retailers. For sales through the TiVo.com website, the customer receives a DVR and commits to either a minimum subscription period of one year or for the lifetime of the DVR. After the initial subscription period, customers have various pricing options when they renew their subscription. Customers have the right to return the DVR within 30 days of purchase. Customers have the right to cancel their subscription to the TiVo service within 30 days of subscription activation for a full refund. For licensed sales of TiVo-enabled DVRs through retailers, the customer commits to either a minimum subscription period of one year or for the lifetime of the DVR.Lease liability.

The ~~stand-alone selling price~~Company applies a practical expedient to not measure or recognize Right-of-use assets or Lease liabilities for ~~the TiVo service is established based on stand-alone sales~~leases with a lease term of ~~the service~~12 months or less and ~~varies by the length of the service period. The stand-alone selling price of the DVR is determined based on the price~~lease expense for ~~which the Company would sell the DVR without any service commitment from the customer.~~

~~The transaction price allocated to the DVR~~these leases is recognized as revenue on delivery and the transaction price allocated to the TiVo service is recognized as revenue ratably over the service period. Subscription revenues from lifetime subscriptions are recognized ratably over the estimated useful life of the DVR associated with the subscription. The estimated useful life for a DVR depends on a number of assumptions, including, but not limited to, customer retention rates, the timing of new product introductions and historical experience. As of September 30, 2018, the Company recognizes revenue for lifetime subscriptions over a 66-month period. The Company periodically reassesses the estimated useful life of a DVR. When the actual useful life of the DVR materially differs from the Company's estimate, the estimated useful life of the DVR is adjusted, which could result in the recognition of revenue over a longer or shorter period of time.incurred.

Shipping and handling costs associated with outbound freight after control of a DVR has transferred to a customer are accounted for as a fulfillment cost and are included in Cost of hardware revenues, excluding depreciation and amortization of intangible assets as incurred.

Recent Accounting Pronouncements

Standards Recently Adopted

In ~~January 2017,~~February 2016, the Financial Accounting Standards Board ("FASB") ~~clarified the definition of~~issued a business. The clarified guidance provides a more defined framework to use in determining when a set of assets and activities constitute a business. The clarified definition was effective for the Company on January 1, 2018 and was applied using a prospective transition approach. Application of this guidance did not have an effect on the Condensed Consolidated Financial Statements.

In October 2016, the FASB amended its guidance on the tax effects of intra-entity transfers of assets other than inventory. The amended guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendment was effective for the Company on January 1, 2018 and was applied using a modified retrospective transition approach. Application of this guidance did not have an effect on the Condensed Consolidated Financial Statements.

In August 2016, the FASB issued clarifying guidance on the presentation of eight specific cash flow issues for which previous guidance was either unclear or not specific. The clarified guidance was effective for the Company on January 1, 2018 and was applied using a retrospective transition approach. Application of this guidance did not have an effect on the Condensed Consolidated Financial Statements.

In March 2016, the FASB provided guidance for the derecognition of prepaid stored-value product liabilities, such as gift cards. Pursuant to this guidance, among other criteria, prepaid stored-value product liabilities are eligible to be derecognized when the likelihood of redemption becomes remote. The guidance was effective for the Company on January 1, 2018 and was applied using a modified retrospective transition approach. On adoption, the Company recorded a cumulative effect adjustment, net of tax effects, of $2.2 million that reduced Accumulated deficit for prepaid stored-value product liabilities where the likelihood of redemption was deemed to be remote at the adoption date.

~~In May 2014, the FASB issued an amended~~new accounting standard for ~~revenue recognition.~~leases. The ~~core principle~~new lease accounting standard generally requires the recognition of operating and financing lease liabilities and corresponding right-of-use assets on the ~~amended revenue recognition guidance is for an entity to recognize revenue to depict the transfer~~statement of~~promisedgoods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in~~exchange for those goods or services. The amendments also require enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. In addition, the FASB amended its guidance related to the capitalization and amortization of the incremental costs of obtaining a contract with a customer. financial position. The Company adopted the ~~amended revenue and cost recognition guidance~~provisions of the new lease accounting standard on January 1, ~~2018~~2019 using the modified retrospective transition ~~approach.~~approach and certain practical expedients as described in Note 10. On adoption, the Company recognized the present value of its existing minimum lease payments as a $66.7 million Right-of-use asset and an $81.9 million Lease liability. The difference between the Right-of-use asset and the Lease liability on adoption primarily arises from previously recorded a cumulative effect adjustment, net of tax effects, that reduced Accumulated deficit by $27.9 million for the effects of the amended revenue recognition guidance and reduced Accumulated deficit by $1.3 million for the effects of capitalizing incremental costs to obtain contracts with customers. The significant differences giving risedeferred rent, which was effectively reclassified to the ~~cumulative effect adjustments are described in Note 5.~~Right-of-use asset on adoption. As a result, there was no impact on Accumulated deficit. Results for periods beginning after December 31, ~~2017~~2018 are presented ~~under~~in accordance with the ~~amended revenue and cost recognition guidance,~~new lease accounting standard, while prior period amounts were not restated and continue to be reported in accordance with the Company's previous ~~revenue~~lease accounting policies.

In March 2017, the FASB shortened the amortization period for certain investments in callable debt securities held at a premium to the earliest call date. Application of the shortened amortization period was effective for the Company beginning on January 1, 2019 on a modified retrospective basis. The application of the shortened amortization period did not have an effect on the Company's Condensed Consolidated Financial Statements.

In February 2018, the FASB issued guidance on the reclassification of certain income tax effects from accumulated other comprehensive income resulting from the Tax Cuts and ~~cost recognition policies.~~Jobs Act of 2017 (the "Tax Act of 2017"). Application of the reclassification guidance was effective for the Company beginning on January 1, 2019. On adoption, the Company made an accounting policy election to use the specific identification method to release income tax effects from Accumulated other comprehensive loss. The Company also made an accounting policy election not to reclassify the stranded tax effects of the Tax Act of 2017 from Accumulated other comprehensive loss to Accumulated deficit. The application of the reclassification guidance did not have a material effect on the Company's Condensed Consolidated Financial Statements.

Standards Pending Adoption

In August 2018, the FASB modified the requirements for capitalizing costs incurred to implement a hosting arrangement that is a service contract. The modified requirements were intended to align the cost capitalization requirements for hosting arrangements with the cost capitalization requirements for internal-use software. The modified guidance is effective for the Company beginning on January 1, 2020, with early adoption permitted. The guidance can be applied prospectively to all arrangements entered into or materially modified after the effective date or using a retrospective transition approach. The Company does not expect application of the modified requirements for capitalizing costs incurred to implement a hosting arrangement to have a material effect on its Condensed Consolidated Financial Statements.

In March 2017, the FASB shortened the amortization period for certain investments in callable debt securities held at a premium to the earliest call date. Application of the shortened amortization period is effective for the Company beginning on January 1, 2019 on a modified retrospective basis, with early application permitted. The Company does not expect application of the shortened amortization period to have a material effect on its Condensed Consolidated Financial Statements.

In June 2016, the FASB issued updated guidance that requires entities to use a current expected credit loss model to measure credit-related impairments for financial instruments held at amortized cost. The current expected credit loss model is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectability. Current expected credit losses, and subsequent adjustments, represent an estimate of lifetime expected credit losses that are recorded as an allowance deducted from the amortized cost of the financial instrument. The updated guidance also amends the other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments for credit-related losses through an allowance and eliminating the length of time a security has been in an unrealized loss position as a consideration in the determination of whether a credit loss exists. The updated guidance is effective for the Company beginning on January 1, 2020 and is effective using a modified retrospective transition approach for the provisions related to application of the current expected credit loss model to financial instruments and using a prospective transition approach for the provisions related to credit losses on available-for-sale debt

securities. Early application is permitted. The Company is evaluating the effect of application on its Condensed Consolidated Financial Statements.

In February 2016, the FASB issued a new accounting standard for leases. The new lease accounting standard generally requires the recognition of operating and financing lease liabilities and corresponding right-of-use assets on the statement of financial position. For operating leases, a lessee recognizes its total lease expense as an operating expense over the lease term. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. On transition, the difference between the right-of-use asset and lease liabilities, net of any previously recognized lease-related assets and liabilities and any resulting deferred tax impact, is recognized as an adjustment to retained earnings.

The new lease accounting standard is effective for the Company beginning on January 1, 2019 using a modified retrospective transition approach, with early application permitted. The Company is evaluating the effect of application on its Condensed Consolidated Financial Statements and expects to apply the package of practical expedients permitted under the transition guidance within the new lease accounting standard, which among other things, permits the historical lease classification to carryforward. The Company also expects to apply a practical expedient to combine lease and non-lease components within a lease and to apply the transition alternative to record the cumulative effect of adoption on the date of initial application (i.e., January 1, 2019). Adoption of the new lease accounting standard is expected to result in the recognition of the present value of the Company's existing minimum lease payments as lease liabilities and a corresponding right-of-use asset, which may be material to the Condensed Consolidated Balance Sheets. The new lease accounting standard is not expected to materially affect the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss or the Condensed Consolidated Statements of Cash Flows.

(2) ~~Acquisitions~~Discontinued Operations

~~TiVo Acquisition~~

On September 7, 2016, Rovi completed its acquisition of TiVo Solutions, a global leader in next-generation video technology and innovative cloud-based software-as-a-service solutions. TiVo Solutions' results of operations and cash flows have been included in the Condensed Consolidated Financial Statements for periods subsequent to September 7, 2016.

In ~~November 2016, holders of 9.1 million shares of TiVo Solutions common stock outstanding at~~ the TiVo Acquisition Date who did not vote to approve the TiVo Acquisition ("Dissenting Holders") filed a petition for appraisal pursuant to Section 262 of the Delaware General Corporation Law in the Court of Chancery of the State of Delaware (In re Appraisal of TiVo, Inc., C.A. No. 12909-CB (Del. Ch.)). On March 27, 2017, TiVo Corporation executed a settlement agreement with the Dissenting Holders to settle their claims for $117.0 million, which was paid in cash in April 2017. In connection with the settlement, in March 2017, the exchange agent in the TiVo Acquisition returned $25.1 million in cash related to the Dissenting Holders to TiVo Corporation. As the amount paid to Dissenting Holders resulted from a settlement other than a judgment from the Delaware Court of Chancery, a TiVo Acquisition litigation loss of $12.9 million was recognized in the Condensed Consolidated Statements of Operations for thethree and nine months ended September 30, ~~2017.~~

~~(3) Discontinued Operations~~

2019, the Company recognized a Loss from discontinued operations, net of tax, of $0.4 million and $0.4 million, respectively, as a result of costs incurred pursuant to certain indemnification obligations associated with previous business disposals. In the three and nine months ended September 30, 2018, the Company recognized Income from discontinued operations, net of tax, of $0.1 million and $3.7 million, respectively,

as a result of the expiration of certain indemnification obligations and the execution of settlement agreements during the period associated with previous business ~~disposals, partially offset by an increase in legal defense costs.~~disposals.

~~(4)~~(3) Financial Statement Details

Inventory

Components of Inventory ~~(in thousands):~~

September 30, 2018 December 31, 2017
Raw materials $ 1,042
$ 1,846
Finished goods 6,921
9,735
Inventory $ 7,963
$ 11,581

~~Property and equipment, net (in thousands):~~

September 30, 2018 December 31, 2017
Computer software and equipment $ 158,490
$ 150,098
Leasehold improvements 45,303
44,981
Furniture and fixtures 9,971
9,137
Property and equipment, gross 213,764
204,216
Less: Accumulated depreciation and amortization (163,075 ) (148,972 )
Property and equipment, net $ 50,689
$ 55,244

~~Accounts payable and accrued expenses (in thousands):~~

September 30, 2018 December 31, 2017
Accounts payable $ 10,828
$ 10,517
Accrued compensation and benefits 33,566
47,886
Other accrued liabilities 48,163
77,449
Accounts payable and accrued expenses $ 92,557
$ 135,852

~~(5) Revenues~~

~~Adoption of Amended Revenue and Cost Recognition Guidance~~

The Company adopted the provisions of the amended revenue recognition guidance described in Note 1 using the modified retrospective transition approach on January 1, 2018. As such, the amended revenue recognition guidance was applied to those contracts which were not completed as of December 31, 2017. Results for periods beginning after December 31, 2017 are presented under the amended revenue recognition guidance, while prior period amounts were not restated and continue to be reported in accordance with the previous revenue recognition guidance.

In addition, the Company adopted amended guidance related to the capitalization and amortization of incremental costs to obtain a contract with a customer and guidance for the de-recognition of prepaid stored-value product liabilities, such as gift cards, each as described in Note 1 using the modified retrospective transition approach on January 1, 2018.

~~The cumulative effect of these changes on the Condensed Consolidated Balance Sheets on adoption was as follows (in thousands):~~

Contracts with Customers Costs to Obtain Contracts with Customers De-recognition of Prepaid Stored Value Product Liabilities
December 31, 2017 January 1, 2018
Accounts receivable, net $ 180,768
$ 24,177
$ —
$ —
$ 204,945
Prepaid expenses and other current assets 40,719
(2,705 ) 525
—
38,539
Other long-term assets 65,673
(4,419 ) 819
—
62,073
Accounts payable and accrued expenses (135,852 ) —
—
2,155
(133,697 )
Unearned revenue (55,393 ) 11,208
—
—
(44,185 )
Deferred tax liabilities, net (50,356 ) (348 ) —
—
(50,704 )
Accumulated deficit 1,392,651
(27,913 ) (1,344 ) (2,155 ) 1,361,239

The most significant impact of the amended revenue recognition guidance relates to the accounting for software arrangements. Under prior industry-specific software revenue recognition guidance, when the Company concluded it did not have vendor-specific objective evidence ("VSOE") of fair value for the undelivered elements of an arrangement, revenue was deferred until the last element without VSOE was delivered. The amended revenue recognition guidance eliminated the concept of VSOE of fair value. The amended revenue recognition guidance requires an evaluation of whether the undelivered elements are distinct performance obligations and, therefore, should each be recognized separately when delivered. On adoption of the amended revenue recognition guidance, the Company accounted for the software and support elements of the TiVo Solutions international MSO agreements as two distinct performance obligations. These agreements contain minimum guarantees, and on adoption of the amended revenue recognition guidance, $34.4 million of these minimums were recorded as an increase in Accounts receivable, net and a reduction to Accumulated deficit as the software was delivered prior to the date of adoption.

The amended revenue recognition guidance also requires the Company to record revenue related to fixed-fee patent licensing agreements that do not provide the right to future patented technologies acquired by the Company during the term of the license when access to the existing patented technology is granted to the licensee. Under prior revenue recognition guidance, the Company recognized revenue from this type of fixed-fee license agreement on a straight-line basis over the term of the agreement. On adoption of the amended revenue recognition guidance, the Company recorded a $10.2 million reduction in Unearned revenue and Accumulated deficit for this type of fixed-fee license agreement.

The amended revenue recognition guidance includes specific guidance for contract modifications. Based on the nature of the modification, the revenue recognized for the contract may be updated on a cumulative catch-up basis on execution of the modification or updated prospectively as a result of the modification. For certain contract modifications, this accounting treatment differs from the accounting treatment in accordance with previous revenue recognition guidance.

Prior to the adoption of the amended revenue recognition guidance, the Company recognized revenue from per-unit royalty licenses with certain CE manufacturers and third party IPG providers in the period the licensee reported its sales to the Company, which was generally in the month or quarter after the underlying sales by the licensee occurred. On adoption of the amended revenue recognition guidance, revenue from per-unit royalty licenses is recognized in the period in which the licensee's sales are estimated to have occurred, limited to the amount of revenue that is not subject to a significant risk of reversal, which results in an adjustment to revenue when actual amounts are subsequently reported by the Company's licensees.

Pursuant to the amended cost capitalization guidance, incremental costs to obtain a contract with a customer are capitalized and amortized over a period of time commensurate with the expected period of benefit, which may exceed the contract term. Prior to the adoption of the amended cost capitalization guidance, the Company expensed incremental costs to obtain a contract with a customer as incurred.

~~The impact of adoption of the amended revenue and cost recognition guidance on the Condensed Consolidated Statements of Operations was~~ as follows (in thousands):

Three Months Ended September 30, 2018
As Reported As If Applying Prior Guidance
Effect of Change
Higher/(Lower)
Total Revenues, net $ 164,709
$ 170,868
$ (6,159 )
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets 40,749
41,512
(763 )
Selling, general and administrative 39,867
40,195
(328 )
Loss from continuing operations before income taxes (18,223 ) (13,155 ) (5,068 )
Income tax expense 4,769
5,143
(374 )
Loss from continuing operations, net of tax (22,992 ) (18,298 ) (4,694 )



	September 30, 2019		December 31, 2018
Raw materials	$	411	$	864
Finished goods	2,645		6,585
Inventory	$	3,056	$	7,449

Nine Months Ended September 30, 2018
As Reported As If Applying Prior Guidance
Effect of Change
Higher/(Lower)
Total Revenues, net $ 527,406
$ 543,871
$ (16,465 )
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets 126,547
128,458
(1,911 )
Selling, general and administrative 133,906
134,232
(326 )
Loss from continuing operations before income taxes (51,569 ) (37,341 ) (14,228 )
Income tax expense 13,305
14,460
(1,155 )
Loss from continuing operations, net of tax (64,874 ) (51,801 ) (13,073 )

Property and equipment, net

Components of Property and equipment, net were as follows (in thousands):



	September 30, 2019			December 31, 2018
Computer software and equipment	$	155,634		$	148,935
Leasehold improvements	52,389			47,431
Furniture and fixtures	10,317			9,494
Property and equipment, gross	218,340			205,860
Less: Accumulated depreciation and amortization	(167,979		)	(152,274		)
Property and equipment, net	$	50,361		$	53,586

Accounts payable and accrued expenses

Components of Accounts payable and accrued expenses were as follows (in thousands):



	September 30, 2019		December 31, 2018
Accounts payable	$	13,686	$	2,180
Accrued compensation and benefits	34,896		46,466
Other accrued liabilities	59,233		56,335
Accounts payable and accrued expenses	$	107,815	$	104,981

Supplemental cash flow information (in thousands):



	Nine Months Ended September 30,
	2019		2018
Significant noncash transactions
Patents acquired as part of a licensing agreement	$	7,086	$	—

~~Practical Expedients and Exemptions~~(4) Revenues

The Company applies a practical expedient to not perform an evaluation of whether a contract includes a significant financing component when the timing of revenue recognition differs from the timing of cash collection by one year or less.

The Company applies a practical expedient to expense costs to obtain a contract with a customer as incurred as a component of Selling, general and administrative expenses when the amortization period would have been one year or less.

The Company applies a practical expedient when disclosing revenue expected to be recognized from unsatisfied performance obligations to exclude contracts with customers with an original duration of less than one year, contracts for which revenue is recognized based on the amount which the Company has the right to invoice for services performed and amounts attributable to variable consideration arising from (i) a sales-based or usage-based royalty of an intellectual property license or (ii) when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.

Revenue Details

The following ~~tables depict~~information depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors by disaggregating revenue by ~~product offering (in Note 15),~~ significant customer, contract-type, geographic area and ~~geographic area. These tables include~~product offering (presented in Note 15). This information includes revenue recognized from contracts with customers and revenue from other sources, including out-of-license settlements. ~~As noted above, amounts for the three and nine months ended September 30, 2017 have not been adjusted to reflect adoption of the amended revenue recognition guidance.~~

Customers representing 10% or more of Total Revenues, net were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
AT&T Inc. ("AT&T")	11	%	11	%	11	%	10	%

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
AT&T Inc. ("AT&T") 11 % 14 % 10 % 14 %

Substantially all revenue from AT&T is reported in the Intellectual Property Licensing segment.

By segment, the pattern of revenue recognition was as follows (in thousands):

Three Months Ended September 30, 2018
Product Intellectual Property Licensing Total Revenues, net
Goods and services transferred at a point in time $ 22,093
$ 26,528
$ 48,621
Goods and services transferred over time 72,519
39,768
112,287
Out-of-license settlements —
3,801
3,801
Total Revenues, net $ 94,612
$ 70,097
$ 164,709

Nine Months Ended September 30, 2018
Product Intellectual Property Licensing Total Revenues, net
Goods and services transferred at a point in time $ 79,569
$ 81,977
$ 161,546
Goods and services transferred over time 224,682
125,212
349,894
Out-of-license settlements —
15,966
15,966
Total Revenues, net $ 304,251
$ 223,155
$ 527,406



	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
	Product		Intellectual Property Licensing		Total Revenues, net		Product		Intellectual Property Licensing		Total Revenues, net
Goods and services transferred at a point in time	$	17,616	$	31,062	$	48,678	$	22,093	$	26,528	$	48,621
Goods and services transferred over time	65,172		36,743		101,915		72,519		39,768		112,287
Out-of-license settlements	—		7,931		7,931		—		3,801		3,801
Total Revenues, net	$	82,788	$	75,736	$	158,524	$	94,612	$	70,097	$	164,709

~~Total Revenues, net~~



	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	Product		Intellectual Property Licensing		Total Revenues, net		Product		Intellectual Property Licensing		Total Revenues, net
Goods and services transferred at a point in time	$	55,963	$	89,493	$	145,456	$	79,569	$	81,977	$	161,546
Goods and services transferred over time	203,334		109,623		312,957		224,682		125,212		349,894
Out-of-license settlements	—		34,518		34,518		—		15,966		15,966
Total Revenues, net	$	259,297	$	233,634	$	492,931	$	304,251	$	223,155	$	527,406

Revenue by geographic area was as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
United States	$	112,325	$	115,312	$	327,614	$	351,423
Canada	13,380		9,797		55,927		30,173
United Kingdom	3,920		9,131		17,506		56,361
Rest of the world	28,899		30,469		91,884		89,449
Total Revenues, net	$	158,524	$	164,709	$	492,931	$	527,406

Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
United States $ 115,312
$ 351,423
United Kingdom 9,131
56,361
Rest of the world 40,266
119,622
Total Revenues, net $ 164,709
$ 527,406

Revenue by ~~geography~~geographic area is predominately based on the end user's location. Other than the ~~United States,~~U.S., no country accounted for more than 10% of ~~revenue~~Total Revenues, net for the three months ended September 30, 2019 and 2018. Other than the ~~United States~~U.S. and Canada, no country accounted for more than 10% of Total Revenues, net for the nine months ended September 30, 2019. Other than the U.S. and United Kingdom, no country accounted for more than 10% of ~~revenue~~Total Revenues, net for the nine months ended September 30, 2018.

Accounts receivable, net ~~(in thousands):~~

September 30, 2018 December 31, 2017
Accounts receivable, gross $ 176,499
$ 183,343
Less: Allowance for doubtful accounts (2,750 ) (2,575 )
Accounts receivable, net $ 173,749
$ 180,768

~~Customers representing 10% or more~~Components of Accounts receivable, net were as ~~follows.~~follows (in thousands):



	September 30, 2019			December 31, 2018
Accounts receivable, gross	$	186,828		$	155,708
Less: Allowance for doubtful accounts	(3,001		)	(2,842		)
Accounts receivable, net	$	183,827		$	152,866

September 30, 2018 December 31, 2017
AT&T 16 % 28 %
Virgin Media 11 % (a)

~~(a) Customer below~~As of September 30, 2019 and December 31, 2018, AT&T represented 25% and 18% of Accounts receivable, net, respectively. Other than AT&T, no customer accounted for more than 10% of Accounts receivable, net as of ~~the date presented.~~September 30, 2019 and December 31, 2018.

Contract Balances

Contract assets primarily consist of revenue recognized in excess of the amount billed to the customer, limited to net realizable value and deferred engineering costs for significant software customization or modification and set-up services to the extent deemed recoverable. Contract assets also include the incremental costs of obtaining a contract with a customer, principally sales commissions when the renewal commission is not commensurate with the initial commission. ~~Following adoption of the amended revenue recognition guidance, contract~~Contract assets were recorded in the Condensed Consolidated Balance Sheets as follows (in thousands):


	September 30, 2018		January 1, 2018		September 30, 2019		December 31, 2018
Accounts receivable, net	$	46,154	$	68,858	$	52,983	$	35,115
Prepaid expenses and other current assets	1,527		1,167		2,399		1,654
Other long-term assets	7,988		6,783		11,517		8,532
Total contract assets, net	$	55,669	$	76,808	$	66,899	$	45,301

NoNaN impairment losses were recognized with respect to contract assets for the three and nine months ended September 30, 2019 and 2018.

Contract liabilities are mainly comprised of unearned revenue related to consumer lifetime subscriptions for the TiVo service, ~~and~~ multi-period licensing or cloud-based services and other offerings for which the Company is paid in advance of when control of the promised good or service is transferred to the customer. Unearned revenue also includes amounts related to professional services to be performed in the future. For the three and nine months ended September 30, ~~2018,~~2019, the Company recognized ~~$10.3~~$9.6 million and ~~$33.3~~$34.0 million, respectively, of revenue that had been included in Unearned revenue as of December 31, ~~2017.~~2018.

As of September 30, ~~2018,~~2019, approximately ~~$818.6~~$691.9 millionof revenue is expected to be recognized from ~~remaining~~unsatisfied performance obligations that are primarily related to fixed-fee intellectual property and software-as-a-service agreements, which is expected to be recognized as follows: ~~7.2%~~9% in the remainder of ~~2018, 25.6% in~~ 2019, ~~18.5%~~27% in 2020, ~~13.0%~~18% in 2021, ~~9.5%~~13% in 2022, 12% in 2023 and ~~26.1%~~21% thereafter.

~~(6)~~(5) Investments

The amortized cost and fair value of cash, cash equivalents and marketable securities by significant investment category were as follows (in thousands):


	September 30, 2018									September 30, 2019
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash	$	45,530	$	—	$	—		$	45,530	$	42,208	$	—	$	—		$	42,208
Cash equivalents - Money market funds	104,125		—		—			104,125		99,247		—		—			99,247
Cash equivalents - Corporate debt securities										2,996		—		—			2,996
Cash and cash equivalents	$	149,655	$	—	$	—		$	149,655	$	144,451	$	—	$	—		$	144,451

Corporate debt securities	$	115,765	$	4	$	(420	)	$	115,349	$	62,080	$	67	$	(11	)	$	62,136
U.S. Treasuries / Agencies	117,298		—		(278		)	117,020		74,845		236		(23		)	75,058
Marketable securities	$	233,063	$	4	$	(698	)	$	232,369	$	136,925	$	303	$	(34	)	$	137,194
Cash, cash equivalents and marketable securities								$	382,024								$	281,645



	December 31, 2018
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash	$	40,125	$	—	$	—		$	40,125
Cash equivalents - Money market funds	121,830		—		—			121,830
Cash and cash equivalents	$	161,955	$	—	$	—		$	161,955

Corporate debt securities	$	114,159	$	1	$	(400	)	$	113,760
U.S. Treasuries / Agencies	118,497		70		(164		)	118,403
Marketable securities	$	232,656	$	71	$	(564	)	$	232,163
Cash, cash equivalents and marketable securities								$	394,118

December 31, 2017
Amortized Cost Unrealized
Gains Unrealized
Losses Fair Value
Cash $ 38,996
$ —
$ —
$ 38,996
Cash equivalents - Money market funds 89,969
—
—
89,969
Cash and cash equivalents $ 128,965
$ —
$ —
$ 128,965

Auction rate securities $ 10,800
$ —
$ (216 ) $ 10,584
Corporate debt securities 102,794
—
(397 ) 102,397
Foreign government obligations 2,249
—
(4 ) 2,245
U.S. Treasuries / Agencies 108,781
—
(430 ) 108,351
Marketable securities $ 224,624
$ —
$ (1,047 ) $ 223,577
Cash, cash equivalents and marketable securities $ 352,542

As of September 30, ~~2018,~~2019, the amortized cost and fair value of marketable securities, by contractual maturity, were as follows (in thousands):



	Amortized Cost		Fair Value
Due in less than 1 year	$	134,987	$	135,204
Due in 1-2 years	4,934		4,986
Total	$	139,921	$	140,190

Amortized Cost Fair Value
Due in less than 1 year $ 162,530
$ 162,073
Due in 1-2 years 70,533
70,296
Total $ 233,063
$ 232,369

As of September 30, ~~2018~~2019 and December 31, ~~2017, the Condensed Consolidated Balance Sheets~~2018, Other long-term assets include equity securities accounted for under the equity method with a carrying amount of ~~$1.7~~$3.4 million and ~~$1.1~~$2.2 million, respectively, and equity securities without a readily determinable fair value with a carrying amount of ~~$1.5~~$1.6 millionand $1.5 million, respectively. The carrying amount of the Company's equity securities without a readily determinable fair value is measured as cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical, or a similar, security of the same issuer. NoNaN impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized ~~for~~in the three and nine months ended September 30, ~~2018~~2019 and ~~2017.~~2018.

~~(7)~~(6) Fair Value Measurements

Fair Value Hierarchy

The Company uses valuation techniques that are based on observable and unobservable inputs to measure fair value. Observable inputs are developed using publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use. Fair value measurements are classified in a hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs. Assets and liabilities are classified in ~~the~~a fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety:

~~Level 1.~~ ~~Quoted prices in active markets for identical assets or liabilities.~~

~~Level 2.~~ Inputs other than Level 1 inputs that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or market-corroborated inputs.

~~Level 3.~~ ~~Unobservable inputs for the asset or liability.~~


•	Level 1. Quoted prices in active markets for identical assets or liabilities.


•	Level 2. Inputs other than Level 1 inputs that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or market-corroborated inputs.


•	Level 3. Unobservable inputs for the asset or liability.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. For the three and nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, there were no transfers between levels of the fair value hierarchy.

Recurring Fair Value Measurements

Assets and liabilities reported at fair value on a recurring basis in the Condensed Consolidated Balance Sheets were classified in the fair value hierarchy as follows (in thousands):



	September 30, 2019								December 31, 2018
	Total			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Total			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets
Cash and cash equivalents
Money market funds	$	99,247		$	99,247	$	—		$	121,830		$	121,830	$	—
Corporate debt securities	2,996			2,996		—
Short-term marketable securities
Corporate debt securities	62,136			—		62,136			90,753			—		90,753
U.S. Treasuries / Agencies	70,072			—		70,072			68,203			—		68,203
Prepaid expenses and other current assets
Interest rate swaps	—			—		—			173			—		173
Long-term marketable securities
Corporate debt securities	—			—		—			23,007			—		23,007
U.S. Treasuries / Agencies	4,986			—		4,986			50,200			—		50,200
Total Assets	$	239,437		$	102,243	$	137,194		$	354,166		$	121,830	$	232,336
Liabilities
Other long-term liabilities
Interest rate swaps	$	(7,447	)	$	—	$	(7,447	)	$	(3,012	)	$	—	$	(3,012	)
Total Liabilities	$	(7,447	)	$	—	$	(7,447	)	$	(3,012	)	$	—	$	(3,012	)

September 30, 2018
Total Quoted Prices in
Active Markets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets
Cash and cash equivalents
Money market funds $ 104,125
$ 104,125
$ —
$ —
Short-term marketable securities
Corporate debt securities 85,785
—
85,785
—
U.S. Treasuries / Agencies 76,288
—
76,288
—
Prepaid expenses and other current assets
Interest rate swaps 231
—
231
—
Long-term marketable securities
Corporate debt securities 29,564
—
29,564
—
U.S. Treasuries / Agencies 40,732
—
40,732
—
Other long-term assets
Interest rate swaps 440
—
440
—
Total Assets $ 337,165
$ 104,125
$ 233,040
$ —
Liabilities
Other long-term liabilities
Interest rate swaps $ (145 ) $ —
$ (145 ) $ —
Total Liabilities $ (145 ) $ —
$ (145 ) $ —

The Company's interest rate swaps are subject to master netting arrangements and have been presented on a net basis in the Condensed Consolidated Balance Sheets where applicable. As of September 30, 2018, interest rate swaps in an asset position with a fair value of $0.7 million that mature in 2021 were netted against interest rate swaps in a liability position with a fair value of $0.2 million~~that mature in 2021 in the Condensed Consolidated Balance Sheets and in the table above.~~

December 31, 2017
Total Quoted Prices in
Active Markets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Assets
Cash and cash equivalents
Money market funds $ 89,969
$ 89,969
$ —
$ —
Short-term marketable securities
Corporate debt securities 49,396
—
49,396
—
Foreign government obligations 2,245
—
2,245
—
U.S. Treasuries / Agencies 89,225
—
89,225
—
Long-term marketable securities

Auction rate securities 10,584
—
—
10,584
Corporate debt securities 53,001
—
53,001
—
U.S. Treasuries / Agencies 19,126
—
19,126
—
Total Assets $ 313,546
$ 89,969
$ 212,993
$ 10,584
Liabilities
Accounts payable and accrued expenses
Cubiware contingent consideration $ (2,234 ) $ —
$ —
$ (2,234 )
Other long-term liabilities
Interest rate swaps (9,735 ) —
(9,735 ) —
Total Liabilities $ (11,969 ) $ —
$ (9,735 ) $ (2,234 )

Rollforward of Level 3 Fair Value Measurements

Changes in the fair value of assets and liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands):



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	Cubiware Contingent Consideration			Auction Rate Securities			Cubiware Contingent Consideration
Balance at beginning of period	$	(3,599	)	$	10,584		$	(2,234	)
Sales	—			(10,715		)	—
Settlements	1,874			—			1,874
Transfers out (a)	1,700			—			1,700
Gain (loss) included in earnings	25			(85		)	(1,340		)
Unrealized loss reclassified on sale	—			216			—
Balance at end of period	$	—		$	—		$	—

Three Months Ended September 30,
2018 2017
Cubiware Contingent Consideration Auction Rate Securities Cubiware Contingent Consideration
Balance at beginning of period $ (3,599 ) $ 10,584
$ (5,715 )
Settlements 1,874
—
2,650
Transfers out (a) 1,700
—
—
Gain (loss) included in earnings 25
—
(386 )
Balance at end of period $ —
$ 10,584
$ (3,451 )

Nine Months Ended September 30,
2018 2017
Auction Rate Securities Cubiware Contingent Consideration Auction Rate Securities Cubiware Contingent Consideration
Balance at beginning of period $ 10,584
$ (2,234 ) $ 10,368
$ (5,273 )
Sales (10,715 ) —
—
—
Settlements —
1,874
—
2,650
Transfers out (a) —
1,700
—
—
Gain (loss) included in earnings (85 ) (1,340 ) —
(828 )
Unrealized loss reclassified on sale 216
—
—
—
Unrealized gains included in other comprehensive income —
—
216
—
Balance at end of period $ —
$ —
$ 10,584
$ (3,451 )


(a)	During the three and nine months ended September 30, 2018, $1.7 million related to the Cubiware contingent consideration was reclassified to a contingent liability that is not measured at fair value.

For the three and nine months ended September 30, 2018, the ~~Gain (loss)~~Loss included in earnings related to the Cubiware contingent consideration liability is included in Selling, general and administrative expense related to remeasurement of the liability as a $0.1 million ~~gain~~ and a $1.1 million loss, respectively, and in Interest expense related to accretion of the liability to future value of less than $0.1 million and $0.2 million, respectively. For the three and nine months ended September 30, 2017, the Gain (loss) included in earnings related to the Cubiware contingent consideration liability is included in Selling, general and administrative expense related to remeasurement of the liability as a $0.2 million and $0.3 millionloss, respectively, and in Interest expense related to accretion of the liability to future value of $0.1 million and ~~$0.5~~$0.2 million, respectively.

Nonrecurring Fair Value Measurements

As part of the quantitative interim goodwill impairment test performed as of September 30, 2019, the Product and Intellectual Property Licensing reporting units were measured at fair value, resulting in a Goodwill impairment charge of $137.5 million. The unobservable inputs used to estimate the fair value of the Product and Intellectual Property Licensing reporting units include projected revenue growth rates, future operating margins and risk-adjusted discount rates, and, accordingly, these measurements would be classified in Level 3 of the fair value hierarchy. The Goodwill impairment charge and the valuation techniques used to estimate reporting unit fair values are more fully described in Note 1 and Note 7.

Valuation Techniques

The fair value of marketable ~~securities, other than auction rate~~ securities is estimated using observable market-corroborated inputs, such as quoted prices in active markets for similar assets or independent pricing vendors, obtained from a third-party pricing service.

The fair value of contingent consideration liabilities related to acquisitions is estimated utilizing a probability-weighted discounted cash flow analysis based on the terms of the underlying purchase agreement. The significant unobservable inputs used in calculating the fair value of contingent consideration liabilities related to acquisitions include financial performance scenarios, the probability of achieving those scenarios and the risk-adjusted discount rate.

The fair value of interest rate swaps is estimated using a discounted cash flow analysis that considers the expected future cash flows of each interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the remaining period to maturity, and uses market-corroborated inputs, including forward interest rate curves and implied interest rate volatilities. The fair value of an interest rate swap is estimated by netting the discounted future fixed cash payments against the discounted expected variable cash receipts. The variable cash receipts are estimated based on an expectation of future interest rates derived from forward interest rate curves. The fair value of an interest rate swap also incorporates credit valuation adjustments to reflect the nonperformance risk of the Company and the respective counterparty. In adjusting the fair value of its interest rate swaps for the effect of nonperformance risk, the Company considers the effect of its master netting agreements.

Other Fair Value Disclosures

The carrying amount and fair value of debt issued or assumed by the Company were as follows (in thousands):



	September 30, 2019				December 31, 2018
	Carrying Amount		Fair Value (a)		Carrying Amount		Fair Value (a)
2020 Convertible Notes	$	289,284	$	290,870	$	326,640	$	316,538
2021 Convertible Notes	48		48		48		48
Term Loan Facility B	619,899		618,802		665,449		633,404
Total Long-term debt	$	909,231	$	909,720	$	992,137	$	949,990

September 30, 2018 December 31, 2017
Carrying Amount Fair Value (a) Carrying Amount Fair Value (a)
2020 Convertible Notes $ 322,849
$ 328,412
$ 311,766
$ 326,888
2021 Convertible Notes 48
48
48
48
Term Loan Facility B 666,904
668,574
671,281
679,722
Total Long-term debt $ 989,801
$ 997,034
$ 983,095
$ 1,006,658

(a)

The fair value of debt issued or assumed by the Company is estimated using quoted prices for the identical instrument in a market that is not active and considers interest rates currently available to companies of similar credit standing for similar terms and remaining maturities and considers the nonperformance risk of the Company. If reported at fair value in the Condensed Consolidated Balance Sheets, debt issued or assumed by the Company would be classified in Level 2 of the fair value hierarchy.

~~(8) Goodwill and~~(7) Intangible Assets, Net and Goodwill

Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands):



	September 30, 2019
	Gross		Accumulated Amortization			Net
Finite-lived intangible assets
Developed technology and patents	$	1,065,180	$	(833,081	)	$	232,099
Existing contracts and customer relationships	402,389		(210,887		)	191,502
Content databases and other	57,359		(52,103		)	5,256
Trademarks / Tradenames	8,300		(8,300		)	—
Total finite-lived intangible assets	1,533,228		(1,104,371		)	428,857
Indefinite-lived intangible assets
TiVo Tradename	14,000		—			14,000
Total intangible assets	$	1,547,228	$	(1,104,371	)	$	442,857



	December 31, 2018
	Gross		Accumulated Amortization			Net
Finite-lived intangible assets
Developed technology and patents	$	1,051,635	$	(765,221	)	$	286,414
Existing contracts and customer relationships	402,756		(195,752		)	207,004
Content databases and other	57,235		(50,883		)	6,352
Trademarks / Tradenames	8,300		(8,300		)	—
Total finite-lived intangible assets	1,519,926		(1,020,156		)	499,770
Indefinite-lived intangible assets
TiVo Tradename	14,000		—			14,000
Total intangible assets	$	1,533,926	$	(1,020,156	)	$	513,770

Patent Acquisitions

In the three and nine months ended September 30, 2019, the Company acquired patent portfolios for an aggregate cost of $7.1 million and $14.0 million, respectively. The patent portfolios acquired in 2019 were obtained for $7.1 million as consideration in a licensing agreement and for a $6.9 million cash payment. The Company accounted for the patent portfolios acquired as asset acquisitions and is amortizing the purchase prices over a weighted average period of nine years.

Estimated Amortization of Finite-Lived Intangible Assets

As of September 30, 2019, estimated amortization expense for finite-lived intangible assets was as follows (in thousands):



Remainder of 2019	$	28,132
2020	112,401
2021	69,631
2022	41,946
2023	24,845
Thereafter	151,902
Total	$	428,857

Goodwill

Goodwill allocated to the reportable segments and changes in the carrying amount of goodwill by reportable segment were as follows (in thousands):



	Product			Intellectual Property Licensing			Total
December 31, 2018	$	253,011		$	1,291,332		$	1,544,343
Impairment	(79,287		)	(58,166		)	(137,453		)
Foreign currency translation	97			—			97
September 30, 2019	$	173,821		$	1,233,166		$	1,406,987

Product Intellectual Property Licensing Total
December 31, 2017 $ 521,895
$ 1,291,332
$ 1,813,227
Foreign currency translation (44 ) —
(44 )
September 30, 2018 $ 521,851
$ 1,291,332
$ 1,813,183

Goodwill at each reporting unit is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. The process of evaluating goodwill for potential impairment is subjective and requires significant estimates, assumptions and judgments particularly related to the identification of reporting units, the assignment of assets and liabilities to reporting units and estimating the fair value of each reporting unit.

~~Intangible Assets, Net~~

~~Intangible assets, net consisted~~During September 2019, sufficient indicators of ~~the following (in thousands):~~

September 30, 2018
Gross Accumulated
Amortization Net
Finite-lived intangible assets
Developed technology and patents $ 1,034,085
$ (742,956 ) $ 291,129
Existing contracts and customer relationships 402,896
(190,692 ) 212,204
Content databases and other 57,157
(50,433 ) 6,724
Trademarks / Tradenames 8,300
(8,300 ) —
Total finite-lived intangible assets 1,502,438
(992,381 ) 510,057
Indefinite-lived intangible assets
TiVo Tradename 14,000
—
14,000
Total intangible assets $ 1,516,438
$ (992,381 ) $ 524,057

December 31, 2017
Gross Accumulated
Amortization Net
Finite-lived intangible assets
Developed technology and patents $ 1,034,458
$ (676,465 ) $ 357,993
Existing contracts and customer relationships 403,244
(139,289 ) 263,955
Content databases and other 57,053
(49,077 ) 7,976
Trademarks / Tradenames 8,300
(8,300 ) —
Total finite-lived intangible assets 1,503,055
(873,131 ) 629,924
Indefinite-lived intangible assets
TiVo Tradename 14,000
—
14,000
Total intangible assets $ 1,517,055
$ (873,131 ) $ 643,924

~~Patent Acquisition~~

~~In the nine months ended September 30, 2017, the Company purchased~~potential impairment were identified that management concluded it was more-likely-than-not that goodwill was impaired and a ~~portfolio of patents for $2.0 million in cash. The Company accounted for the patent portfolio purchase~~quantitative interim goodwill impairment test should be performed as ~~an asset acquisition and is amortizing the purchase price over a weighted average period of five years.~~

~~Future Amortization of Finite-Lived Intangible Assets~~

As of September 30, ~~2018, future estimated amortization expense~~2019 for ~~finite-lived intangible~~the Product and Intellectual Property Licensing reporting units. Indicators of potential impairment included a significant and sustained decline in the trading price of TiVo's common stock, as well as lower-than-previously forecast revenue and profitability levels for the Product reporting unit and downward revisions to this reporting unit's short- and long-term forecasts. The forecast revisions for the Product reporting unit were identified as part of TiVo's 2020 budgeting process and reflect lower expectations for its Platform Solutions products, including changes in both the market and business models internationally. The changes in such expectations related to revenue growth rates, current market trends, business mix, cost structure and other expectations about the anticipated short- and long-term operating results. As a result of the quantitative interim goodwill impairment test performed as of September 30, 2019, a Goodwill impairment charge of $137.5 million was recognized, of which $79.3 million related to the Product reporting unit and $58.2 millionrelated to the Intellectual Property Licensing reporting unit. The Goodwill impairment charge for the Intellectual Property Licensing reporting unit resulted from an increase in the discount rate used to estimate fair value due to the decline in the trading price of TiVo's common stock.

No goodwill impairment charges were recognized as a result of an interim goodwill impairment test during the first two quarters of 2019.

Prior to completing the quantitative interim goodwill impairment test, TiVo tested the recoverability of long-lived assets ~~was as follows (in thousands):~~other than goodwill assigned to the Product and Intellectual Property Licensing reporting units and concluded that such assets were not impaired.

Remainder of 2018 $ 27,763
2019 109,855
2020 109,109
2021 66,341
2022 38,602
Thereafter 158,387
Total $ 510,057

~~(9)~~(8) Restructuring and Asset Impairment Charges

Components of Restructuring and asset impairment charges were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Facility-related costs	$	99	$	3,034	$	387	$	4,244	$	158	$	99	$	591	$	387
Severance costs	2,822		220		5,606		4,260		953		2,822		4,923		5,606
Share-based payments	—		456		2,575		2,374		—		—		—		2,575
Contract termination costs	—		—		—		4
Asset impairment	—		—		—		6,741		875		—		961		—
Contract termination costs and other									9		—		9		—
Restructuring and asset impairment charges	$	2,921	$	3,710	$	8,568	$	17,623	$	1,995	$	2,921	$	6,484	$	8,568

Components of accrued restructuring costs were as follows (in thousands):


	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
Facility-related costs	$	459	$	693	$	—	$	264
Severance costs	3,337		584		2,179		3,996
Contract termination costs	—		37
Accrued restructuring costs	$	3,796	$	1,314	$	2,179	$	4,260

The Company expects a substantial portion of the accrued restructuring costs to be paid by the end of ~~2018.~~2019.

2019 Transformation Plan

In connection with the May 2019 announcement of its plan to separate its Product and Intellectual Property Licensing businesses, the Company initiated certain activities to transform its business operations in order to execute the separation (the "2019 Transformation Plan"). As a result of the 2019 Transformation Plan, the Company expects to reduce headcount, move certain positions to lower cost locations, rationalize facilities and legal entities and terminate certain leases and other contracts. The 2019 Transformation Plan resulted in restructuring charges of $0.7 million during the three and nine months ended September 30, 2019, substantially all of which related to severance costs.

The process of completing the Separation has been and is expected to continue to be time-consuming and involve significant costs and expenses. In addition to the restructuring costs associated with the 2019 Transformation Plan, the Company also recorded costs that do not qualify as restructuring expense related to the Separation of $9.5 million and $13.9 million during the three and nine months ended September 30, 2019, respectively. These costs were recorded in Selling, general and administrative costs and consist of employee-related costs, costs to establish certain stand-alone functions and information technology systems and other one-time transaction-related costs, including investment banking and consulting fees and other incremental costs directly associated with the Separation process.

Profit Improvement Plan

In February 2018, the Company announced its intention to explore strategic alternatives. In connection with exploring strategic alternatives, the Company initiated certain cost saving actions (the "Profit Improvement Plan"). As a result of the Profit Improvement Plan, the Company ~~expects to move~~moved certain positions to lower cost locations, ~~eliminate~~eliminated layers of management and ~~rationalize~~rationalized facilities resulting in severance costs and the termination of certain leases and other contracts. Restructuring activities ~~for~~related to the Profit Improvement Plan for the nine months ended September 30, ~~2018~~2019 were as follows (in thousands):



	Balance at Beginning of Period		Restructuring Expense		Cash Settlements			Non-Cash Settlements			Other			Balance at End of Period
Facility-related costs	$	—	$	591	$	—		$	(591	)	$	—		$	—
Severance costs	3,857		4,223		(6,203		)	—			(72		)	1,805
Asset impairment	—		961		—			(961		)	—			—
Total	$	3,857	$	5,775	$	(6,203	)	$	(1,552	)	$	(72	)	$	1,805

Balance at Beginning of Period Restructuring Expense Cash Settlements Non-Cash Settlements Other Balance at End of Period
Facility-related costs $ —
$ 47
$ (47 ) $ —
$ —
$ —
Severance costs —
5,478
(2,276 ) —
(11 ) 3,191
Share-based payments —
2,575
—
(2,575 ) —
—
Total $ —
$ 8,100
$ (2,323 ) $ (2,575 ) $ (11 ) $ 3,191

~~The Company expects to incur material restructuring costs in connection~~As a result of actions associated with the Profit Improvement Plan ~~through~~, Restructuring and asset impairment charges of $8.1 million, primarily for severance-related benefits, were recognized in the ~~middle~~nine months ended September 30, 2018.

The Profit Improvement Plan was substantially complete as of September 30, 2019.

~~TiVo Integration~~Previous Restructuring ~~Plan~~Plans

Following completion of the TiVo Acquisition, TiVo Corporation began implementing integration plans that were intended to realize operational synergies between Rovi and TiVo Solutions (the "TiVo Integration Restructuring Plan"). As a result of these integration plans, the Company eliminated duplicative positions resulting in severance costs and the termination of certain leases and other contracts. ~~Restructuring activities related to~~As a result of actions associated with the TiVo Integration Restructuring Plan ~~for~~, Restructuring and asset impairment charges of $0.4 million, primarily facility-related costs, were recognized in the nine months ended September 30, ~~2018 were as follows (in thousands):~~

Balance at Beginning of Period Restructuring Expense Cash Settlements Other Balance at End of Period
Facility-related costs $ 111
$ 280
$ (165 ) $ (39 ) $ 187
Severance costs 448
127
(564 ) 1
12
Total $ 559
$ 407
$ (729 ) $ (38 ) $ 199

~~As of September 30, 2018, the~~ 2018. The TiVo Integration Restructuring Plan ~~is substantially complete.~~ was completed as of December 31, 2018.

~~Legacy Rovi and TiVo Solutions Restructuring Plans~~

Prior to the TiVo Acquisition, Rovi and TiVo Solutions had each initiated restructuring plans. ~~As of September 30, 2018, the~~The Legacy Rovi Restructuring Plan and the Legacy TiVo Solutions Restructuring Plan ~~are complete. For the nine months ended September 30, 2018, Restructuring and asset impairment charges~~were completed as of $0.1 million were recognized in the Condensed Consolidated Statements of Operations related to these plans. As of September 30, 2018, accrued restructuring costs of $0.4 million are included in the Condensed Consolidated Balance Sheets related to the Legacy Rovi Restructuring Plan.December 31, 2018.

~~(10)~~(9) Debt and Interest Rate Swaps

A summary of debt issued by or assumed by the Company was as follows (dollars in thousands):



				September 30, 2019				December 31, 2018
	Stated Interest Rate	Issue Date	Maturity Date	Outstanding Principal		Carrying Amount		Outstanding Principal		Carrying Amount
2020 Convertible Notes	0.500%	March 4, 2015	March 1, 2020	$	295,000	$	289,284	$	345,000	$	326,640
2021 Convertible Notes	2.000%	September 22, 2014	October 1, 2021	48		48		48		48
Term Loan Facility B	Variable	July 2, 2014	July 2, 2021	621,912		619,899		668,500		665,449
Total Long-term debt				$	916,960	909,231		$	1,013,548	992,137
Less: Current portion of long-term debt						289,284				373,361
Long-term debt, less current portion						$	619,947			$	618,776

September 30, 2018 December 31, 2017
Stated Interest Rate Issue Date Maturity Date Outstanding Principal Carrying Amount Outstanding Principal Carrying Amount
2020 Convertible Notes 0.500% March 4, 2015 March 1, 2020 $ 345,000
$ 322,849
$ 345,000
$ 311,766
2021 Convertible Notes 2.000% September 22, 2014 October 1, 2021 48
48
48
48
Term Loan Facility B Variable July 2, 2014 July 2, 2021 670,250
666,904
675,500
671,281
Total Long-term debt $ 1,015,298
989,801
$ 1,020,548
983,095
Less: Current portion of long-term debt 7,000
7,000
Long-term debt, less current portion $ 982,801
$ 976,095

2020 Convertible Notes

Rovi issued $345.0 million in aggregate principal of 0.500% Convertible Senior Notes that mature March 1, 2020 (the ~~“2020~~“2020 Convertible ~~Notes”~~Notes”) at par pursuant to an Indenture dated March 4, 2015 (as supplemented, the "2015 Indenture"). The 2020 Convertible Notes were sold in a private placement and bear interest at an annual rate of 0.500% payable semi-annually in arrears on March 1 and September 1 of each year, commencing September 1, 2015. In connection with the TiVo Acquisition, TiVo Corporation and Rovi entered into a supplemental indenture under which TiVo Corporation became a guarantor of the 2020 Convertible Notes and the notes became convertible into TiVo Corporation common stock.

~~The~~ In June 2019, the Company repurchased $50.0 million of outstanding principal of the 2020 Convertible Notes for $49.4 million. The Company allocated $48.4 million of the repurchase price to the liability component and the remaining $1.0 million to the equity component of the 2020 Convertible Notes. The Company accounted for the repurchase as a partial debt extinguishment and recognized a Loss on debt extinguishment of $0.1 million during the three months ended June 30, 2019 from writing off the unamortized debt discount and issuance costs related to the repurchase.

The 2020 Convertible Notes were convertible at an initial conversion rate of 34.5968 shares of TiVo Corporation common stock per $1,000 of principal of notes, which was equivalent to an initial conversion price of $28.9044 per share of TiVo Corporation common stock. The conversion rate and conversion price are subject to adjustment pursuant to the 2015 Indenture, including as a result of dividends paid by TiVo Corporation. As of September 30, ~~2018,~~2019, the 2020 Convertible Notes are convertible at a conversion rate of ~~37.4422~~39.7348 shares of TiVo Corporation common stock per $1,000 principal of notes, which is equivalent to a conversion price of ~~$26.7078~~$25.1668 per share of TiVo Corporation common stock.

Holders may convert the 2020 Convertible Notes, prior to the close of business on the business day immediately preceding December 1, 2019, in multiples of $1,000 of principal under the following circumstances:

during any calendar quarter commencing after the calendar quarter ending on June 30, 2015 (and only during such calendar quarter), if the last reported sale price of TiVo Corporation's common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

~~during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 of principal of~~ ~~2020 Convertible Notes~~ ~~for each trading day was less than 98% of the product of the last reported sale price of TiVo Corporation’s common stock and the conversion rate on each such trading day; or~~


•	during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 of principal of 2020 Convertible Notes for each trading day was less than 98% of the product of the last reported sale price of TiVo Corporation’s common stock and the conversion rate on each such trading day; or

on the occurrence of specified corporate events.

On or after December 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert the 2020 Convertible Notes, in multiples of $1,000 of principal, at any time. In addition, during the 35-day trading period following a Merger Event, as defined in the 2015 Indenture, holders may convert the 2020 Convertible Notes, in multiples of $1,000 of principal.

On conversion, a holder will receive the conversion value of the 2020 Convertible Notes converted based on the conversion rate multiplied by the volume-weighted average price of TiVo Corporation’s common stock over a specified observation period. On conversion, Rovi will pay cash up to the aggregate principal of the 2020 Convertible Notes converted and deliver shares of TiVo Corporation’s common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal of the 2020 Convertible Notes being converted.

The conversion rate is subject to adjustment in certain events, including certain events that constitute a "Make-Whole Fundamental Change" (as defined in the 2015 Indenture). In addition, if Rovi undergoes a "Fundamental Change" (as defined in the 2015 Indenture) prior to March 1, 2020, holders may require Rovi to repurchase for cash all or a portion of the 2020 Convertible Notes at a repurchase price equal to 100% of the principal of the repurchased 2020 Convertible Notes, plus accrued and unpaid interest. The conversion rate is also subject to customary anti-dilution adjustments.

The 2020 Convertible Notes are not redeemable prior to maturity by Rovi and no sinking fund is provided. The 2020 Convertible Notes are unsecured and do not contain financial covenants or restrictions on the payment of dividends, the incurrence of indebtedness or the repurchase of other securities by Rovi. The 2015 Indenture includes customary terms and covenants, including certain events of default after which the 2020 Convertible Notes may be due and payable immediately.

TiVo Corporation has separately accounted for the liability and equity components of the 2020 Convertible ~~Notes.~~Notes. The initial carrying amount of the liability component was calculated by estimating the value of the 2020 Convertible Notes using TiVo Corporation’s estimated non-convertible borrowing rate of 4.75% at the time the instrument was issued. The carrying amount of the equity component, representing the value of the conversion option, was determined by deducting the liability component from the principal of the 2020 Convertible ~~Notes.~~Notes. The difference between the principal of the 2020 Convertible Notes and the liability component is considered a debt discount which is being amortized to interest expense using the effective interest method over the expected term of the 2020 Convertible ~~Notes.~~Notes. The equity component of the 2020 Convertible Notes was recorded as a component of Additional paid-in capital in the Condensed Consolidated Balance Sheets

and will not be remeasured as long as it continues to meet the conditions for equity classification. ~~Related to the 2020 Convertible Notes, the Condensed Consolidated Balance Sheets included the following (in thousands):~~

September 30, 2018 December 31, 2017
Liability component
Principal outstanding $ 345,000
$ 345,000
Less: Unamortized debt discount (19,622 ) (29,499 )
Less: Unamortized debt issuance costs (2,529 ) (3,735 )
Carrying amount $ 322,849
$ 311,766

Equity component $ 63,854
$ 63,854

~~Components of interest expense related to the 2020 Convertible Notes included in the Condensed Consolidated Statements of Operations were as follows (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Stated interest $ 431
$ 431
$ 1,294
$ 1,294
Amortization of debt discount 3,331
3,179
9,877
9,428
Amortization of debt issuance costs 412
374
1,206
1,093
Total interest expense $ 4,174
$ 3,984
$ 12,377
$ 11,815

Rovi incurred $9.3 million in transaction costs related to the issuance of the 2020 Convertible Notes which were allocated to liability and equity components based on the relative amounts calculated for the 2020 Convertible Notes at the date of issuance. Transaction costs of $7.6 million attributable to the liability component were recorded in Long-term debt, less current portion in the Condensed Consolidated Balance Sheets and are being amortized to interest expense using the effective interest method over the expected term of the 2020 Convertible ~~Notes. Transaction costs of $1.7 million attributable~~Notes.

Related to the ~~equity component were recorded as a component~~2020 Convertible Notes, the Condensed Consolidated Balance Sheets included the following (in thousands):



	September 30, 2019			December 31, 2018
Liability component
Principal outstanding	$	295,000		$	345,000
Less: Unamortized debt discount	(5,050		)	(16,253		)
Less: Unamortized debt issuance costs	(666		)	(2,107		)
Carrying amount	$	289,284		$	326,640

Equity component	$	62,858		$	63,854

Components of ~~Additional paid-in capital~~interest expense related to the 2020 Convertible Notes included in the Condensed Consolidated ~~Balance Sheets.~~Statements of Operations were as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Stated interest	$	369	$	431	$	1,225	$	1,294
Amortization of debt discount	2,983		3,331		9,791		9,877
Amortization of debt issuance costs	387		412		1,256		1,206
Total interest expense	$	3,739	$	4,174	$	12,272	$	12,377

Purchased Call Options and Sold Warrants related to the 2020 Convertible Notes

Concurrent with the issuance of the 2020 Convertible Notes in 2015, Rovi ~~paid $64.8 million to purchase~~purchased call options with respect to its common stock. The call options gave TiVo Corporation the right, but not the obligation, to purchase up to 11.9 million shares

of TiVo Corporation's common stock at an exercise price of $28.9044 per share, which corresponds to the initial conversion price of the 2020 Convertible Notes, and are exercisable by TiVo Corporation on conversion of the 2020 Convertible ~~Notes.~~Notes. The exercise price is subject to adjustment, including as a result of dividends paid by TiVo Corporation. As of September 30, ~~2018,~~2019, the call options give TiVo Corporation the right, but not the obligation, to purchase up to ~~12.9~~11.7 million shares of TiVo Corporation's common stock at an exercise price of ~~$26.7078~~$25.1668 per share. The call options are intended to reduce the potential dilution from conversion of the 2020 Convertible ~~Notes.~~Notes. The purchased call options are separate transactions from the 2020 Convertible Notes and holders of the 2020 Convertible Notes do not have any rights with respect to the purchased call options.

Concurrent with the issuance of the 2020 Convertible Notes in 2015, Rovi ~~received $31.3 million from the sale of~~sold warrants that provide the holder of the warrant the right, but not the obligation, to purchase up to 11.9 million shares of TiVo Corporation common stock at an exercise price of $40.1450 per share. The exercise price is subject to adjustment, including as a result of dividends paid by TiVo Corporation. As of September 30, ~~2018, 12.5~~2019, 13.0 million warrants were outstanding with an exercise price of ~~$37.0942~~$34.9541 per share. The warrants are exercisable beginning June 1, 2020 and can be settled in cash or shares at TiVo Corporation's election. The warrants were entered into to offset the cost of the purchased call options. The warrants are separate transactions from the 2020 Convertible Notes and holders of the 2020 Convertible Notes do not have any rights with respect to the warrants.

~~The amounts paid to purchase the call options and received to sell the warrants were recorded in Additional paid-in capital in the Condensed Consolidated Balance Sheets.~~

2021 Convertible Notes

TiVo Solutions issued $230.0 million in aggregate principal of 2.0% Convertible Senior Notes that mature October 1, 2021 (the ~~"2021~~"2021 Convertible ~~Notes"~~Notes") at par pursuant to an Indenture dated September 22, 2014 (as supplemented, "the 2014 Indenture"). The 2021 Convertible Notes bear interest at an annual rate of 2.0%, payable semi-annually in arrears on April 1 and October 1 of each year, commencing April 2015. On October 12, 2016, TiVo Solutions repaid $229.95 million of the par value of the ~~2021 Convertible Notes.~~

~~The~~ 2021 Convertible Notes.

The 2021 Convertible Notes were convertible at an initial conversion rate of 56.1073 shares of TiVo Solutions common stock per $1,000 principal of notes, which was equivalent to an initial conversion price of $17.8230 per share of TiVo Solutions common stock. Following the TiVo Acquisition, the 2021 Convertible Notes were convertible at a conversion rate of 21.6181 shares of TiVo Corporation common stock per $1,000 principal of notes and $154.30 per $1,000 principal of notes, which was equivalent to a conversion price of $39.12 per share of TiVo Corporation common stock. The conversion rate and conversion price are subject to adjustment pursuant to the 2014 Indenture, including as a result of dividends paid by TiVo Corporation. As of September 30, ~~2018,~~2019, the 2021 Convertible Notes are convertible at a conversion rate of ~~23.4025~~24.8196 shares of TiVo Corporation common stock per $1,000 principal of notes and $154.30 per $1,000 principal of notes, which is equivalent to a conversion price of ~~$36.1372~~$34.0738 per share of TiVo Corporation common stock.

TiVo Solutions can settle the 2021 Convertible Notes in cash, shares of common stock, or any combination thereof pursuant to the 2014 Indenture. Subject to certain exceptions, holders may require TiVo Solutions to repurchase, for cash, all or part of their 2021 Convertible Notes upon a “Fundamental Change” (as defined in the 2014 Indenture) at a price equal to 100% of the principal amount of the 2021 Convertible Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the “Fundamental Change Repurchase Date” (as defined in the 2014 Indenture). In addition, on a “Make-Whole Fundamental Change” (as defined in the 2014 Indenture) prior to the maturity date of the 2021 Convertible Notes, TiVo Solutions will, in some cases, increase the conversion rate for a holder that elects to convert its 2021 Convertible Notes in connection with such Make-Whole Fundamental Change.

Senior Secured Credit Facility

On July 2, 2014, Rovi Corporation, as parent guarantor, and ~~two~~2 of its wholly-owned subsidiaries, Rovi Solutions Corporation and Rovi Guides, Inc., as borrowers, and certain of its other subsidiaries, as subsidiary guarantors, entered into a Credit Agreement (the “Credit Agreement”). After the completion of the TiVo Acquisition, TiVo Corporation became a guarantor under the Credit Agreement. The Credit Agreement provided for a (i) five-year $125.0 million term loan A facility (“Term Loan Facility A”), (ii) seven-year $700.0 million term loan B facility (“Term Loan Facility B” and together with Term Loan Facility A, the “Term Loan Facility”) and (iii) five-year $175.0 million revolving credit facility (including a letter of credit sub-facility) (the "Revolving Facility” and together with the Term Loan Facility, the “Senior Secured Credit Facility”). In September 2015, Rovi made a voluntary principal prepayment to extinguish Term Loan Facility A and elected to terminate the Revolving Facility.

Prior to the refinancing described below, ~~loans~~Term Loan Facility B was amortizing in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount thereof, with any remaining balance payable on the final maturity date of Term Loan Facility B. Loans under Term Loan Facility B bore interest, at the Company's option, at a rate equal to either ~~LIBOR,~~the London Interbank Offered Rate ("LIBOR"), plus an applicable margin equal to 3.00% per annum (subject to a 0.75% LIBOR floor) or the prime lending rate, plus an applicable margin equal to 2.00% per annum.

On January 26, 2017, TiVo Corporation, as parent guarantor, two of its wholly-owned subsidiaries, Rovi Solutions Corporation and Rovi Guides, Inc., as borrowers, and certain of TiVo Corporation’s other subsidiaries, as subsidiary guarantors, entered into Refinancing Agreement No. 1 with respect to Term Loan Facility B. ~~The $682.5 million in proceeds from Refinancing Agreement No. 1 was used to repay existing loans under Term Loan Facility B in full.~~ The borrowing terms for Refinancing Agreement No. 1 are substantially similar to the borrowing terms of Term Loan Facility B. However, loans under Refinancing Agreement No. 1 bear interest, at the borrower's option, at a rate equal to either LIBOR, plus an applicable margin equal to 2.50% per annum (subject to a 0.75% LIBOR floor) or the prime lending rate, plus an applicable margin equal to 1.50% per annum. Refinancing Agreement No. 1 ~~requires quarterly principal payments of $1.75 million through June 2021, with any remaining balance payable in July 2021. Refinancing Agreement No. 1~~ is part of the Senior Secured Credit Facility.

The refinancing of Term Loan Facility B resulted in a Loss on debt extinguishment of $0.1 million and a Loss on debt modification of $0.9 million for the nine months ended September 30, 2017. Creditors in Term Loan Facility B that elected not to participate in Refinancing Agreement No. 1 were extinguished. Creditors in Term Loan Facility B that elected to participate in Refinancing Agreement No. 1 and for which the present value of future cash flows was not substantially different were accounted for as a debt modification.

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions. The Credit Agreement is secured by substantially all of the Company's assets. ~~The~~Annually, the Company may be required to make an additional principal payment on ~~the Term Loan Facility each February. This payment~~Refinancing Agreement No. 1, which is calculated as a percentage of the prior year's "Excess Cash Flow" as defined in the Credit Agreement. ~~No additional~~In February 2019, the Company made an Excess Cash Flow payment ~~was required~~of $46.6 million, which eliminated the remaining quarterly principal payments. The outstanding principal balance of Term Loan Facility B is due in July 2021.

The Company accounted for the Excess Cash Flow payment in February ~~2018.~~2019 as a partial debt extinguishment. During the three months ended March 31, 2019 the Company recognized a Loss on debt extinguishment of $0.2 million from writing off the unamortized debt discount and issuance costs related to the Excess Cash Flow payment.

~~Debt Maturities~~Expected Principal Payments

As of September 30, ~~2018,~~2019, aggregate expected principal payments on long-term debt, including the current portion of long-term debt, were as follows (in thousands):



2019 (a)	$	295,000
2020	—
2021	621,960
Total	$	916,960

Remainder of 2018 $ 1,750
2019 (a) 352,000
2020 7,000
2021 654,548
Total $ 1,015,298


(a)	While the 2020 Convertible Notes ~~are~~ is scheduled to mature on March 1, 2020, future principal payments are presented based on the date the 2020 Convertible Notes can be freely converted by holders, which is December 1, 2019. However, the 2020 Convertible Notes may be converted by holders prior to December 1, 2019 in certain circumstances.

Interest Rate Swaps

The Company issues long-term debt denominated in U.S. dollars based on market conditions at the time of financing and may enter into interest rate swaps to achieve a primarily fixed interest rate. Alternatively, the Company may choose not to enter into an interest rate swap or may terminate a previously executed interest rate swap if it believes a larger proportion of floating-rate debt would be beneficial. The Company has not designated any of its interest rate swaps as hedges for accounting purposes. The Company records interest rate swaps in the Condensed Consolidated Balance Sheets at fair value with changes in fair value recorded as ~~Gain (loss)~~(Loss) gain on interest rate swaps in the Condensed Consolidated Statements of Operations. Amounts are presented in the Condensed Consolidated Balance Sheets after considering the right of offset based on its master netting agreements. During the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company recorded ~~gains of~~a $0.4 million loss and a $1.0 million ~~and losses of $39.0 thousand,~~gain, respectively, from adjusting its interest rate swaps to fair value. During the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company recorded ~~gains of~~a $5.5 million loss and a $7.2 million ~~and losses of $1.4 million,~~gain, respectively, from adjusting its interest rate swaps to fair value.

Details of the Company's interest rate swaps as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows (dollars in thousands):



			Notional
Contract Inception	Contract Effective Date	Contract Maturity	September 30, 2019		December 31, 2018		Interest Rate Paid	Interest Rate Received
Senior Secured Credit Facility
June 2013	January 2016	March 2019	$	—	$	250,000	2.23%	One-month USD-LIBOR
September 2014	January 2016	July 2021	$	125,000	$	125,000	2.66%	One-month USD-LIBOR
September 2014	March 2017	July 2021	$	200,000	$	200,000	2.93%	One-month USD-LIBOR

(10) Leases

Adoption of New Lease Accounting Standard

The Company adopted the provisions of the new lease accounting standard described in Note 1 using the modified retrospective transition approach on January 1, 2019. As such, the new lease accounting standard was applied to contracts in effect as of December 31, 2018. Results for periods beginning after December 31, 2018 are presented in accordance with the new lease accounting standard, while prior period amounts were not restated and continue to be reported in accordance with the Company's previous lease accounting policies. On adoption, the Company recognized a $66.7 million Right-of-use asset and an $81.9 million Lease liability.

Practical Expedients and Exemptions

On adoption, the Company elected to apply the package of practical expedients permitted under the transition provisions of the new lease accounting standard, which among other things, allowed the Company to carryforward the historical lease classification. In addition, the Company elected to apply a practical expedient to combine the lease components and non-lease components into a single lease component. The Company also elected to apply a practical expedient to not measure or recognize right-of-use assets or lease liabilities for leases with a lease term of 12 months or less.

Lease Details

The Company has operating leases for corporate offices, data centers and certain equipment. As of September 30, 2019, the Company's leases have remaining lease terms of 3 months to 10 years and the Company has an option to terminate certain leases within the next 7 years. Additionally, certain leases include options to extend the lease term for up to 10 years. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company subleases certain real estate to third parties. The sublease portfolio consists of operating leases for previously exited office space. Certain subleases include variable payments for operating costs. The subleases are generally co-terminus with the head lease, or shorter. Subleases do not include any residual value guarantees or restrictions or covenants imposed by the leases.

The components of operating lease costs were as follows (in thousands):

Notional
Contract Inception Contract Effective Date Contract Maturity September 30, 2018 December 31, 2017 Interest Rate Paid Interest Rate Received
Senior Secured Credit Facility
June 2013 January 2016 March 2019 $ 250,000
$ 250,000
2.23% One-month USD-LIBOR
September 2014 January 2016 July 2021 $ 125,000
$ 125,000
2.66% One-month USD-LIBOR
September 2014 March 2017 July 2021 $ 200,000
$ 200,000
2.93% One-month USD-LIBOR



Classification	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Fixed lease cost	$	4,372		$	13,387
Variable lease cost	1,282			3,880
Short-term lease cost	47			379
Less: Sublease income	(2,382		)	(6,957		)
Total operating lease cost	$	3,319		$	10,689

Supplemental cash flow information related to leases was as follows (in thousands):



	Nine Months Ended September 30, 2019
Operating cash flows:
Cash paid for amounts included in the measurement of operating Lease liabilities	$	14,511
Non-cash activity:
Right-of-use assets obtained in exchange for operating Lease liabilities	$	7,574
Other adjustments to Right-of-use assets	$	(1,626	)

Supplemental balance sheet information related to operating leases was as follows (in thousands, except weighted average lease term and discount rate):



	September 30, 2019
Right-of-use assets	$	63,064

Lease liabilities - current	$	13,562
Lease liabilities - non current	65,650
Total Lease liabilities	$	79,212

Weighted average remaining lease term	6.0 years
Weighted average discount rate	6.6		%

Expected Lease Payments

As of September 30, 2019, aggregate expected lease payments were as follows (in thousands):



	Operating Lease Liabilities			Sublease Income			Net Operating Lease Payments
Remainder of 2019	$	3,862		$	(1,746	)	$	2,116
2020	19,024			(6,873		)	12,151
2021	17,047			(6,808		)	10,239
2022	13,970			(6,269		)	7,701
2023	11,977			(6,081		)	5,896
Thereafter	31,651			(13,470		)	18,181
Total lease payments	97,531			(41,247		)	56,284
Less: imputed interest	(18,319		)	—			(18,319		)
Total	$	79,212		$	(41,247	)	$	37,965

(11) ~~Commitments and~~ Contingencies

~~Purchase Commitments~~

During the normal course of business, the Company orders finished goods from a third party with advanced lead times that allow the third party to procure component supplies necessary to satisfy the Company’s purchase orders. A significant portion of the Company’s purchase commitments consist of firm, non-cancelable and unconditional purchase commitments. In certain instances, the Company has the option to cancel, reschedule or adjust its purchase commitments based on business needs prior to the purchase order becoming non-cancelable. As of September 30, 2018, the Company had total purchase

~~commitments for finished-goods inventory of $4.4 million, of which $0.7 million was accrued in the Condensed Consolidated Balance Sheets.~~

Indemnifications

In the normal course of business, the Company provides indemnifications of varying scopes and amounts to certain of its licensees against claims made by third parties arising out of the use and / or incorporation of the Company's products, intellectual property, services and / or technologies into the licensees' products and services. TiVo Solutions has also indemnified certain customers and business partners for, among other things, the licensing of its products, the sale of its ~~DVRs,~~digital video recorders ("DVRs"), and the provision of engineering and consulting services. The Company’s obligation under its indemnification agreements with customer and business partners would arise in the event a third party filed a claim against one of the parties that was covered by the Company’s indemnification. Pursuant to these agreements, the Company may indemnify the other party for certain losses suffered or incurred by the indemnified party in connection with various types of claims, which may include, without limitation, intellectual property infringement, advertising and consumer disclosure laws, certain tax liabilities, negligence and intentional acts in the performance of services and violations of laws.

In some cases, the Company may receive tenders of defense and indemnity arising from products, intellectual property services and / or technologies that are no longer provided by the Company due to having divested certain assets, but which were previously licensed or provided by the Company.

The term of the Company's indemnification obligations is generally perpetual. The Company's indemnification obligations are typically limited to the cumulative amount paid to the Company by the licensee under the license agreement; however, some license agreements, including those with the Company's largest ~~MSO~~multiple system operator and digital broadcast satellite providers, have larger limits or do not specify a limit on amounts that may be payable under the indemnity arrangements.

The Company cannot reasonably estimate the possible range of losses that may be incurred pursuant to its indemnification obligations, if any. Variables affecting any such assessment include, but are not limited to: the nature of the claim asserted; the relative merits of the claim; the financial ability of the party suing the indemnified party to engage in protracted litigation; the number of parties seeking indemnification; the nature and amount of damages claimed by the party suing the indemnified party; and the willingness of such party to engage in settlement negotiations. Due to the nature of the Company's potential indemnity liability, the Condensed Consolidated Financial Statements could be materially adversely affected in a particular period by one or more of these indemnities.

Under certain circumstances, TiVo Solutions may seek to recover some or all amounts paid to an indemnified party from its insurers. TiVo Solutions does not have any assets held either as collateral or by third parties that, on the occurrence of an event requiring it to indemnify a customer, ~~that~~ could be obtained and liquidated to recover all or a portion of the amounts paid pursuant to its indemnification obligations.

Legal Proceedings

The Company may be involved in various lawsuits, claims and proceedings, including intellectual property, commercial, securities and employment matters that arise in the normal course of business. The Company accrues a liability when management believes information available prior to the issuance of the financial statements indicates it is probable a loss has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Legal costs are expensed as incurred.

On June 15, 2011, TNS Media Research, LLC (d/b/a Kantar Media Audiences, or Kantar) brought a claim for declaratory judgment against TRA Global Inc. (which was acquired by TiVo Inc. in July 2012 and renamed TiVo Research and Analytics, Inc. or TiVo Research) in U.S. District Court alleging non-infringement of a TiVo Research patent, among other claims. TiVo Research responded by alleging affirmative defenses as well as counterclaims alleging infringement by Kantar of the TiVo Research patent at issue and one other patent. On February 22, 2016, the District Court granted Kantar's summary judgment motion on invalidity under Section 101 as to each of TiVo Research's asserted patent claims. On May 18, 2018, the District Court granted Kantar’s motion for attorneys' fees and expenses related to TiVo Research’s patent claims in this action. During the three months ended June 30, 2018, TiVo Research recorded a $4.5 million loss and agreed to transfer of ownership of the two patents at issue to Kantar as part of a settlement agreement. TiVo Research paid the settlement during the three and nine months ended September 30, 2018.

The Company believes it has recorded adequate provisions for any such ~~matters~~lawsuits, claims and proceedings and, as of September 30, ~~2018,~~2019, it was not reasonably possible that a material loss had been incurred in excess of the amounts recognized in the Condensed Consolidated Financial Statements. Based on its experience, the Company believes that damage amounts claimed in these matters are not meaningful indicators of potential liability. Some of the matters pending against the Company involve potential compensatory, punitive or treble damage claims or sanctions, that, if granted, could require the Company to pay damages or make other expenditures in amounts that could have a material adverse effect on its Condensed Consolidated Financial Statements. Given the inherent uncertainties of litigation, the ultimate outcome of the ongoing matters described herein cannot be predicted with certainty. While litigation is inherently unpredictable, the Company believes it has valid defenses with respect to the legal matters pending against it. Nevertheless, the Condensed Consolidated Financial Statements could be materially adversely affected in a particular period by the resolution of one or more of these contingencies.

(12) Stockholders' Equity

Earnings (Loss) Per Share

Basic earnings per share ("EPS") is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares and dilutive common share equivalents outstanding during the period, except for periods of a loss from continuing operations. In periods of a loss from continuing operations, no common share equivalents are included in Diluted EPS because their effect would be anti-dilutive.

The number of shares used to calculate Basic and Diluted EPS were as follows (in thousands):



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Weighted average shares used in computing basic per share amounts	126,081	123,459	125,160	122,756
Dilutive effect of equity-based compensation awards	—	—	—	—
Weighted average shares used in computing diluted per share amounts	126,081	123,459	125,160	122,756

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Weighted average shares used in computing basic per share amounts 123,459
120,935
122,756
119,994
Dilutive effect of equity-based compensation awards —
—
—
—
Weighted average shares used in computing diluted per share amounts 123,459
120,935
122,756
119,994

Weighted average potential shares excluded from the calculation of Diluted EPS as their effect would have been anti-dilutive were as follows (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended September 30,		Nine Months Ended September 30,
	2018	2017	2018	2017	2019	2018	2019	2018
Restricted awards	5,401	5,234	4,153	4,444	6,173	5,401	5,272	4,153
Stock options	1,907	2,544	2,238	3,004	596	1,907	885	2,238
2020 Convertible Notes (a)	12,918	12,294	12,918	12,294	11,722	12,918	12,881	12,918
2021 Convertible Notes (a)	1	1	1	1	1	1	1	1
Warrants related to 2020 Convertible Notes (a)	12,525	12,079	12,424	12,079	12,999	12,525	12,911	12,424
Weighted average potential shares excluded from the calculation of Diluted EPS	32,752	32,152	31,734	31,822	31,491	32,752	31,950	31,734


(a)	See Note 109 for additional details.

For the three months ended September 30, 2019 and 2018, ~~and 2017, 0.6~~1.2 million and ~~0.5~~0.6 million weighted average performance-based restricted awards, respectively, were excluded from the calculation of Diluted EPS as the performance metric had yet to be achieved. For the nine months ended September 30, 2019 and 2018, ~~and 2017, 0.9~~0.7 million and ~~0.5~~0.9 million weighted average performance-based restricted awards, respectively, were excluded from the calculation of Diluted EPS as the performance metric had yet to be achieved.

Effect of the 2020 Convertible Notes and related transactions on Diluted EPS

In periods when the Company reports income from continuing operations, the ~~potential~~ dilutive effect of additional shares of common stock that may be issued on conversion of the 2020 Convertible Notes are included in the calculation of Diluted EPS if the price of the Company’s common stock exceeds the conversion price. The 2020 Convertible Notes have no impact on Diluted EPS until the price of the Company's common stock exceeds the conversion price of ~~$26.7078~~$25.1668 per share because the principal of the 2020 Convertible Notes is required to be settled in cash. Based on the closing price of the Company's common stock of ~~$12.45~~$7.62 per share on September 30, ~~2018,~~2019, the if-converted value of the 2020 Convertible Notes was less than the outstanding principal.

The 2020 Convertible Notes would be dilutive if the Company’s common stock closed at or above ~~$26.7078~~$25.1668 per share. However, on conversion, no economic dilution is expected from the 2020 Convertible Notes as the exercise of call options purchased by the Company with respect to its common stock described in Note 109 is expected to eliminate any potential dilution from the 2020 Convertible Notes that would have otherwise occurred. The call options are always excluded from the calculation of Diluted EPS as they are anti-dilutive under the treasury stock method.

The warrants sold by the Company with respect to its common stock in connection with the 2020 Convertible Notes described in Note 109 have an effect on Diluted EPS when the Company’s share price exceeds the warrant’s strike price of ~~$37.0942~~$34.9541 per share. As the price of the Company’s common stock increases above the warrant strike price, additional dilution would occur.

~~Changes in Shareholders Equity~~

~~Changes in stockholders' equity for the three and nine months ended September 30, 2018 were as follows (in thousands):~~

Common stock Treasury stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders’ equity
Shares Amount Shares Amount
Balance as of June 30, 2018 124,528
$ 125
(1,557 ) $ (28,925 ) $ 3,257,093
$ (4,233 ) $ (1,399,526 ) $ 1,824,534
Net loss (22,849 ) (22,849 )
Other comprehensive income, net of tax (64 ) (64 )
Issuance of common stock under employee stock purchase plan 511
—
5,278
5,278
Issuance of restricted stock, net 590
1
—
1
Equity-based compensation 9,526
9,526
Dividends (22,282 ) (22,282 )
Withholding taxes related to net share settlement of restricted stock units (197 ) (2,570 ) (2,570 )
Balance as of September 30, 2018 125,629
$ 126
(1,754 ) $ (31,495 ) $ 3,249,615
$ (4,297 ) $ (1,422,375 ) $ 1,791,574

Common stock Treasury stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders’ equity
Shares Amount Shares Amount
Balance as of December 31, 2017 123,385
$ 123
(1,269 ) $ (24,740 ) $ 3,273,022
$ (2,738 ) $ (1,392,651 ) $ 1,853,016
Cumulative effect adjustment (a) 31,412
31,412
Net loss (61,136 ) (61,136 )
Other comprehensive income, net of tax (1,559 ) (1,559 )
Issuance of common stock under employee stock purchase plan 1,150
2
12,852
12,854
Issuance of restricted stock, net 1,094
1
—
1
Equity-based compensation 30,252
30,252
Dividends (66,511 ) (66,511 )
Withholding taxes related to net share settlement of restricted stock units (485 ) (6,755 ) (6,755 )
Balance as of September 30, 2018 125,629
$ 126
(1,754 ) $ (31,495 ) $ 3,249,615
$ (4,297 ) $ (1,422,375 ) $ 1,791,574

~~(a) See Note 1 and Note 5 for additional information.~~

Share Repurchase Program

On February 14, 2017, TiVo Corporation's Board of Directors approved an increase to the share repurchase program authorization to $150.0 million. The February 2017 authorization includes amounts which were outstanding under previously authorized share repurchase programs. During the three ~~and nine~~ months ended September 30, 2019 and 2018, ~~and 2017, no~~0 shares were repurchased under the share repurchase program. As of September 30, ~~2018,~~2019, the Company had $150.0 million of share repurchase authorization remaining.

The Company issues restricted stock and restricted stock units (collectively, "restricted awards") as part of the equity-based compensation plans described in Note 13. For the majority of restricted ~~stock units,~~awards, shares are withheld to satisfy required withholding taxes at the vesting date. Shares withheld to satisfy required withholding taxes in connection with the vesting of restricted awards are treated as common stock repurchases in the Condensed Consolidated Financial Statements because they reduce the number of shares that would have been issued on vesting. However, these withheld shares are not ~~considered~~included in common stock repurchases under the Company's authorized share repurchase plan. During the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company withheld ~~0.2~~0.3 million and ~~0.1~~0.2 million shares of common stock to satisfy ~~$2.6~~$2.3 million and ~~$1.5~~$2.6 million of required withholding taxes, respectively. During the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company withheld ~~0.5~~0.7 million and ~~0.7~~0.5 million shares of common stock to satisfy ~~$6.8~~$5.4 million and ~~$12.8~~$6.8 million of required withholding taxes, respectively.

Dividends

For the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company declared and paid dividends of ~~$0.18~~$0.08 and $0.18 per share, respectively, for aggregate cash payments of ~~$22.3~~$10.0 millionand ~~$21.9~~$22.3 million, respectively. For the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company declared and paid dividends of ~~$0.54~~$0.34 and $0.54 per share, respectively, for aggregate cash payments of $42.5 millionand $66.7 million, respectively.

In connection with the Separation, the Product and ~~$65.2 million, respectively.~~Intellectual Property Licensing businesses will evaluate the payment of dividends to shareholders in the future, if any. The capacity to pay dividends in the future depends on many factors, including their financial condition, results of operations, capital requirements, capital structure, industry practice and other business conditions that their respective Boards of Directors consider relevant. In addition, the agreements governing the Company's debt, or new debt that may be incurred in the future, may limit or prohibit the payment of dividends.

Section 382 Transfer Restrictions

On September 7, 2016, upon the effective time of the TiVo Acquisition, the Company’s certificate of incorporation was amended and restated to include certain transfer restrictions intended to preserve tax benefits related to the net operating loss carryforwards (“NOLs”) of the Company pursuant to Section 382 of Internal Revenue Code of 1986, as amended (the “Code”), that apply to transfers made by 5% stockholders, transferees related to a 5% stockholder, transferees acting in coordination with a 5% stockholder, or transfers that would result in a stockholder becoming a 5% stockholder. If the Company experiences an “ownership change,” as defined in Section 382 of the Code, its ability to fully utilize the NOLs on an annual basis will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of those benefits. These transfer restrictions are intended to act as a deterrent to any person (an “Acquiring Person”) acquiring (together with all affiliates and associates of such person) beneficial ownership of 5% or more of the Company's outstanding common stock within the meaning of Section 382 of the Code, without the approval

of the Company's Board of Directors. Such transfer restrictions will expire on the earlier of (i) the repeal of Section 382 or any successor statute if the Company’s Board of Directors determines that such restrictions are no longer necessary or desirable for the preservation of certain tax benefits, (ii) the beginning of a taxable year to which the Company’s Board of Directors determines that no tax benefits may be carried forward or (iii) the end of the day on September 7, 2019, three years from the effective time of the TiVo Acquisition when the Company’s certificate of incorporation was amended and restated to include certain transfer restrictions. The Company conducted a stockholder advisory vote with respect to the maintenance of such transfer restrictions in its certificate of incorporation at its 2017 Annual Meeting of Stockholders and the stockholders approved of such transfer restrictions. By operation of the amended and restated certificate of incorporation, the transfer restrictions expired on September 7, 2019 and a stockholder can become a 5% or greater stockholder without the approval of the Company’s Board of Directors.

(13) Equity-based Compensation

Restricted Awards and Stock Options

The Company grants equity-based compensation awards from the Rovi 2008 Equity Incentive Plan (the “Rovi 2008 Plan”). The Rovi 2008 Plan permits the grant of restricted awards, stock options and similar types of equity awards to employees, officers, directors and consultants of the Company. Restricted stock is considered outstanding at the time of ~~the~~ grant as holders are entitled to voting rights. Restricted awards are generally subject to a four-year graded vesting period. Stock options generally have vesting periods of four years with one quarter of the grant vesting on the first anniversary of the grant, followed by monthly vesting thereafter. Stock options generally have a contractual term of seven years. As of September 30, ~~2018,~~2019, the Company had ~~30.0~~36.4 million shares of common stock reserved and ~~10.8~~10.6 million shares of common stock available for issuance under the Rovi 2008 Plan.

On September 7, 2016, the Company assumed the TiVo Inc. Amended and Restated 2008 Equity Incentive Award Plan (the “TiVo 2008 Plan”). The Company amended and restated the TiVo 2008 Plan effective as of the closing of the TiVo Acquisition to be the TiVo Corporation Titan Equity Incentive Award Plan for purposes of awards granted following the TiVo Acquisition Date. ~~The TiVo 2008 Plan permits the grant of restricted awards, stock options and similar types of equity awards to employees, officers, directors and consultants of the Company.~~ Restricted stock is considered outstanding at the time of ~~the~~ grant as holders are entitled to voting rights. Restricted awards assumed from the TiVo 2008 Plan are generally subject to a three-year vesting period, with semiannual vesting. Restricted awards issued by the Company from the TiVo 2008 Plan are generally subject to a four-year graded vesting period. Stock options assumed from the TiVo 2008 Plan generally have a four-year vesting period with one quarter of the grant vesting on the first anniversary of the grant followed by monthly vesting thereafter. Stock options assumed from the TiVo 2008 Plan generally have a contractual term of seven years. As of September 30, ~~2018,~~2019, there were 3.9 million shares of common stock reserved for future issuance as outstanding awards vest under the TiVo 2008 Plan. The TiVo 2008 Plan expired in August 2018, and no0 further shares of common stock are available for future ~~grant under the TiVo 2008 Plan.~~grant.

The Company also grants performance-based restricted stock units to certain of its senior officers for three-year performance periods. Vesting in the performance-based restricted stock units is subject to a market condition, as well as a service condition. Depending on the level of achievement, the maximum number of shares that could be issued on vesting generally could be up to 200% of the target number of performance-based restricted stock units granted. For awards subject to a market vesting condition, the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period regardless of changes in the level of achievement of the market condition.

In June 2019, the Company granted 0.6 million performance-based restricted stock units to certain of its senior officers with vesting conditioned on completion of a change-in-control event as defined in the grant agreement, as well as a service condition. For these awards, the fair value per award is estimated as the price of the Company's common stock at the close of trading on the date of grant, less the present value of dividends expected to be paid during the vesting period. However, no compensation expense is recognized for these awards until the change-in-control event occurs, at which time the grant date fair value of $3.3 million, adjusted for any forfeitures, would be recognized as compensation expense.

Employee Stock Purchase Plan

The Company’s 2008 Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions. The ESPP consists of up to four consecutive six-month purchase periods within a twenty-four-month offering period. Employees purchase shares each purchase period at the lower of 85% of the market value of the Company’s common stock at either the beginning of the offering period or the end of the purchase period. As of September 30, ~~2018,~~2019, the Company had ~~4.7~~3.3 million shares of common stock reserved and ~~4.7~~3.3 million shares available for issuance under the ESPP.

Valuation Techniques and Assumptions

The Company's restricted awards are generally not eligible for dividend protection. Prior to and including February 14, 2017, the fair value of restricted awards subject to service conditions was estimated as the price of the Company's common stock at the close of trading on the date of grant. Subsequent to February 14, 2017, theThe fair value of restricted awards subject to service conditions is estimated as the price of the Company's common stock at the close of trading on the date of grant, less the present value of dividends expected to be paid during the vesting period.

~~A Monte Carlo simulation is used to estimate~~ Where a restricted stock award requires a post-vesting restriction on sale, the grant date fair value ~~of restricted awards subject~~is adjusted to ~~market conditions with~~reflect a liquidity discount based on the expected ~~volatility estimated using the historical volatility of the Company's common stock.~~post-vesting holding period.

The Company uses the Black-Scholes-Merton option-pricing formula to estimate the fair value of ~~stock options and~~ ESPP shares. The Black-Scholes-Merton option-pricing formula uses complex and subjective inputs, such as the expected volatility of the Company's common stock over the expected term of the grant and projected employee exercise behavior. Expected volatility is

estimated using a combination of historical volatility and implied volatility derived from publicly-traded options on the Company's common stock. The expected term is estimated by calculating the period the award is expected to be outstanding based on historical experience and the terms of the grant. The risk-free interest rate is estimated based on the yield onof U.S. Treasury zero-coupon bonds with remaining terms similar to the expected term at the grant date. For stock options and ESPP shares granted prior to and including February 14, 2017, the Company assumed an expected dividend yield of zero as it had not historically paid a dividend. For stock options and ESPP shares granted subsequent to February 14, 2017, theThe Company assumes a constant dividend yield commensurate with the dividend yield on the grant date.

Weighted-average assumptions used to estimate the fair value of equity-based compensation awards granted during the period were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Restricted stock units subject to market conditions:
Expected volatility	40.7	%	39.2	%	40.7	%	39.2	%
Expected term	2.5 years		2.5 years		2.5 years		2.5 years
Risk-free interest rate	1.8	%	2.6	%	1.8	%	2.6	%
Expected dividend yield	4.4	%	5.5	%	4.4	%	5.5	%
ESPP shares:
Expected volatility	46.7	%	44.3	%	49.2	%	43.3	%
Expected term	1.3 years		1.3 years		1.3 years		1.3 years
Risk-free interest rate	1.8	%	2.5	%	2.1	%	2.2	%
Expected dividend yield	3.9	%	6.1	%	5.1	%	5.6	%

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Restricted stock units subject to market conditions
Expected volatility 39.2 % 53.1 % 39.2 % 53.1 %
Expected term 2.5 years
2.5 years
2.5 years
2.5 years
Risk-free interest rate 2.6 % 1.5 % 2.6 % 1.5 %
Expected dividend yield 5.5 % 3.9 % 5.5 % 3.9 %
ESPP shares
Expected volatility 44.3 % 42.2 % 43.5 % 42.0 %
Expected term 1.3 years
1.3 years
1.3 years
1.3 years
Risk-free interest rate 2.5 % 1.3 % 2.2 % 1.1 %
Expected dividend yield 6.1 % 3.9 % 5.7 % 2.4 %

The number of awards expected to vest during the requisite service period is estimated at the time of grant using historical data and equity-based compensation is only recognized for awards for which the requisite service is expected to be rendered. Forfeiture estimates are revised during the requisite service period and the effect of changes in the number of awards expected to vest during the requisite service period is recognized on a cumulative catch-up basis in the period estimates are revised.

The weighted-average grant date fair value of equity-based awards (per award) and pre-tax equity-based compensation expense (in thousands) was as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Weighted average grant date fair value
Restricted awards	$	6.39	$	11.55	$	6.72	$	11.72
ESPP shares	$	3.80	$	3.67	$	3.62	$	3.99
Equity-based compensation
Pre-tax equity-based compensation, excluding amounts included in restructuring expense	$	5,148	$	9,471	$	22,459	$	28,226
Pre-tax equity-based compensation, included in restructuring expense	$	—	$	—	$	—	$	2,575

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Weighted average grant date fair value
Restricted awards $ 11.55
$ 17.05
$ 11.72
$ 17.48
ESPP shares $ 3.67
$ 5.78
$ 3.94
$ 5.70

Equity-based compensation
Pre-tax equity-based compensation, excluding amounts included in restructuring expense $ 9,471
$ 13,007
$ 28,226
$ 38,781
Pre-tax equity-based compensation, included in restructuring expense $ —
$ 456
$ 2,575
$ 2,374

As of September 30, ~~2018,~~2019, there was ~~$76.2~~$60.7 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested equity-based awards which is expected to be recognized over a remaining weighted average period of ~~2.5~~2.8 years. The unrecognized compensation cost, net of estimated forfeitures, excludes $3.3 million of unrecognized compensation cost related to performance-based restricted stock units with vesting conditioned on completion of a change-in-control event.

Equity-Based Compensation Award Activity

Activity related to the Company's restricted awards for the nine months ended September 30, ~~2018~~2019 was as follows:



	Restricted Awards (In Thousands)		Weighted-Average Grant Date Fair Value
Outstanding as of beginning of period	5,350		$	14.26
Granted	4,487		$	6.72
Vested	(1,815	)	$	14.45
Forfeited	(891	)	$	13.54
Outstanding as of end of period	7,131		$	9.56

Restricted Awards (In Thousands) Weighted-Average Grant Date Fair Value
Outstanding as of beginning of period 5,899
$ 17.78
Granted 3,339
$ 11.72
Vested (1,552 ) $ 20.41
Forfeited (2,135 ) $ 15.02
Outstanding as of end of period 5,551
$ 14.46

As of September 30, ~~2018, 5.4 million~~2019, unvested restricted ~~stock units were unvested, which includes 0.3~~awards include 1.2 million performance-based restricted stock units. ~~As of September 30, 2018, 0.2 million shares of restricted stock were unvested.~~

The aggregate fair value of restricted awards vested during the three months ended September 30, 2019 and 2018 ~~and 2017~~ was ~~$8.6~~$7.0 million and ~~$5.0~~$8.6 million, respectively. The aggregate fair value of restricted awards vested during the nine months ended September 30, 2019 and 2018 was $14.8 million and ~~2017 was~~ $21.5 million, ~~and $41.6 million,~~ respectively.

~~Activity related to the Company's stock options for the nine months ended September 30, 2018 was as follows:~~

Options (In Thousands) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value (In Thousands)
Outstanding as of beginning of period 2,368
$ 27.16

Forfeited and expired (497 ) $ 36.45

Outstanding as of end of period 1,871
$ 24.69
1.2 years $ —
Vested and expected to vest as of September 30, 2018 1,871
$ 24.69
1.2 years $ —
Exercisable as of September 30, 2018 1,825
$ 24.71
1.2 years $ —

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that option holders would have received had all option holders exercised their options at the end of the last trading day in the period. The aggregate intrinsic value is the difference between the closing price of the Company's common stock on the last trading day of the period and the exercise price of the stock option, multiplied by the number of in-the-money stock options.

The aggregate intrinsic value of stock options exercised is the difference between the market price of the Company's common stock at the time of exercise and the exercise price of the stock option multiplied by the number of stock options exercised. No stock options were exercised during the three and nine months ended September 30, 2018. The aggregate intrinsic value of stock options exercised during the three and nine months ended September 30, 2017 was less than $0.1 million and $2.0 million, respectively.

(14) Income Taxes

Due to the fact that the Company has significant net operating loss carryforwards and has recorded a valuation allowance against a significant portion of its deferred tax assets, foreign withholding taxes are the primary driver of Income tax expense.

Components of Income tax expense were as follows (in thousands):



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019			2018
Foreign withholding tax	$	3,518		$	3,566	$	14,737		$	10,635
Federal income tax	1,466			—		3,878			—
Foreign income tax	809			18		1,482			578
State income tax	(228		)	42		(501		)	221
Change in indefinite reinvestment assertion	—			—		—			1,221
Change in deferred tax liabilities	—			213		—			(277		)
Change in unrecognized tax benefits	395			62		426			59
Goodwill impairment	(4,041		)	—		(4,041		)	—
Transition Tax	—			868		—			868
Income tax expense	$	1,919		$	4,769	$	15,981		$	13,305

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Foreign withholding tax $ 3,566
$ 4,106
$ 10,635
$ 11,118
State income tax 42
(992 ) 221
143
Foreign income tax 18
252
578
996
Change in net deferred tax liabilities 213
691
(277 ) 1,372
Change in unrecognized tax benefits 62
(64 ) 59
(8 )
Transition Tax 868
—
868
—
Change in indefinite reinvestment assertion —
—
1,221
—
Release of deferred tax asset valuation allowance —
348
—
195
Income tax expense $ 4,769
$ 4,341
$ 13,305
$ 13,816

The Company believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from U.S. federal, state and foreign tax audits. The Company regularly assesses the potential outcomes of these audits in order to determine the appropriateness of its tax positions. Adjustments to accruals for unrecognized tax benefits are made to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular income tax audit. However, income tax audits are inherently unpredictable and there can be no assurance the Company will accurately predict the outcome of these audits. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously recognized, and therefore the resolution of one or more of these uncertainties in any particular period could have a material adverse impact on the Condensed Consolidated Financial Statements.

~~Tax Act of 2017~~

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act of 2017”) was signed into law. The Tax Act of 2017 enacted comprehensive tax reform that made broad and complex changes to the U.S. federal income tax code which affect 2017, including, but not limited to requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over eight years (the "Transition Tax"). The Tax Act of 2017 also establishes new tax laws which affect 2018 and later years, including, but not limited to, a reduction of the U.S. federal income tax rate from 35% to 21%, a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries and a new provision designed to tax global intangible low-taxed income (“GILTI”), a limitation of the deductibility of interest expense, a limitation of the deduction for newly generated net operating losses to 80% of current year taxable income and the elimination of net operating loss carrybacks.

On December 22, 2017, the SEC Staff issued guidance to address the application of U.S. GAAP in situations where a registrant does not have the necessary information to complete the accounting for certain effects of the Tax Act of 2017. As of September 30, 2018, the Company had not completed its accounting for the income tax effects of the Tax Act of 2017. Where the Company has made reasonable estimates of the effect, but for which the analysis is not yet complete, the Company has recorded provisional amounts based on information available as of September 30, 2018. During the three and nine months ended September 30, 2018, the provisional amounts recognized as of December 31, 2017 were adjusted as described below. Where the Company has not been able to make reasonable estimates of the effect the Tax Act of 2017, no amounts have been recognized and the Company has continued to account for those items based on the tax laws in effect immediately prior to enactment of the Tax Act of 2017. The items described below, including the provisional items, are subject to change as additional information becomes available, limited to a measurement period of one year from enactment of the Tax Act of 2017.

The Transition Tax on unrepatriated foreign earnings is a tax on previously untaxed accumulated and current earnings and profits (“E&P”) of the Company’s foreign subsidiaries. Based on the amount of post-1986 E&P of the Company's foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings, during the nine months ended September 30, 2018, the Company revised its estimate of the Transition Tax to $33.7 million. The Company expects to use$32.8 million of available tax credits to offset the majority of the Transition Tax. As of September 30, 2018, the Company estimates the Transition Tax for U.S. states that have enacted laws to conform with the Tax Act of 2017 to be less than $0.1 million, which is substantially offset by U.S. state net operating losses, resulting in no net estimated U.S. state Transition Tax. Accordingly, during the three and nine months ended September 30, 2018, the Company recognized $0.9 million of Transition Tax expense that is not expected to be offset by available tax credits. To complete its estimate of the Transition Tax, the Company must complete its calculation of the effects on U.S. states whose laws conform with the Tax Act of 2017.

The Tax Act of 2017 requires that certain income (i.e., GILTI) earned by foreign subsidiaries must be included currently in the gross income of the U.S. shareholder. Due to the complexity of the GILTI rules and the lack of clear guidance on federal and state application of the GILTI rules, as of September 30, 2018, the Company has not completed its analysis of the tax impacts of the GILTI. However, the Company has recorded provisional tax expense that is not material to the Company's financial statements for the three and nine months ended September 30, 2018. The tax effect of GILTI is fully offset by the Company’s net operating losses, resulting in no net U.S. federal income tax expense from GILTI. To complete its estimate of GILTI, the Company must complete its calculation of the effects on U.S. states whose laws conform with the Tax Act of 2017. Under U.S. GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a component of current income tax expense when incurred or to factor such amounts into the Company’s measurement of its deferred tax expense. The Company has made an accounting policy election to treat GILTI as a component of current income tax expense.

The Tax Act of 2017 created a minimum tax on corporations for payments to related foreign persons (referred to as the base erosion and anti-abuse tax ("BEAT")). Due to the complexity of the BEAT rules and the lack of clear guidance on federal and U.S. state application of the BEAT rules, including rules on the ability to use loss carryovers to offset BEAT liability, the Company has not completed its analysis of the effects of the BEAT as of September 30, 2018. During the three and nine months ended September 30, 2018, the Company provisionally estimated it has no BEAT liability.

As a result of the Tax Act of 2017, during the nine months ended September 30, 2018, the Company changed its assertion regarding the indefinite reinvestment of undistributed foreign earnings. In the year ended December 31, 2017, the Company accrued a Transition Tax liability for U.S. federal and certain U.S. state income taxes on its non-U.S. subsidiaries’ previously undistributed foreign earnings. The nature of the Transition Tax is that undistributed foreign earnings are now considered previously taxed income ("PTI") for U.S. federal income tax purposes. However, because the PTI was previously taxed, any repatriation of PTI is not subject to additional U.S. federal income tax. The Company determined that a distribution of PTI would be subject to tax, and provisionally recorded $1.2 million in foreign withholding taxes during the nine months ended September 30, 2018. The Company's revised assertion regarding indefinite reinvestment of undistributed earnings is that only undistributed earnings in excess of PTI are indefinitely reinvested. The Company previously asserted that all of its foreign undistributed earnings were indefinitely reinvested.

(15) Segment Information

Reportable segments are identified based on the Company's organizational structure and information reviewed by the Company’s chief operating decision maker ("CODM") to evaluate performance and allocate resources. The Company's operations are organized into ~~two~~2 reportable segments for financial reporting purposes: Product and Intellectual Property Licensing.

The Product segment consists primarily of licensing Company-developed UXuser experience products and services to multi-channel video service providers and CEconsumer electronics ("CE") manufacturers, ~~in-guide advertising, data analytics and~~ licensing the TiVo service and selling TiVo-enabled devices, licensing metadata and advanced search and recommendation and viewership data, as well as sponsored discovery and in-guide advertising. We group our Product segment into three verticals based on the products delivered to our customer: Platform Solutions; Software and Services; and Other. Platform Solutions includes licensing Company-developed UX products, the TiVo service and selling TiVo-enabled devices. ~~The Product segment also~~Software and Services includes licensing our metadata and advanced media and advertising solutions, including viewership data, sponsored discovery and in-guide advertising. Other includes legacy Analog Content Protection ("ACP"), VCR Plus+ and media recognition products.

The Intellectual Property Licensing segment consists primarily of licensing ~~the Company's~~our patent portfolio to U.S. and international pay TVtelevision ("TV") providers (directly and through their suppliers), mobile device manufacturers, CE manufacturers and ~~OTT~~over-the-top ("OTT") video providers. Our broad portfolio of licensable technology patents covers many aspects of content discovery, DVR, video-on-demand, OTT experiences, multi-screen functionality and personalization, as well as interactive applications and advertising. We group our Intellectual Property Licensing segment into three verticals based primarily on the business of our customer: US Pay TV Providers; CE Manufacturers; and New Media, International Pay TV Providers and Other. US Pay TV Providers includes direct and indirect licensing of traditional US Pay TV Providers regardless of the particular distribution technology (e.g., cable, satellite or the internet). CE Manufacturers includes the licensing of our patents to traditional CE manufacturers. New Media, International Pay TV Providers and Other includes licensing to international pay TV providers, virtual service providers, mobile device manufacturers and content and new media companies.

Segment results are derived from the Company's internal management reporting system. The accounting policies used to derive segment results are substantially the same as those used by the consolidated company. Intersegment revenues and expenses have been eliminated from segment financial information as transactions between reportable segments are excluded from the measure of segment profitability reviewed by the CODM. In addition, certain costs are not allocated to the segments as they are considered corporate costs. Corporate costs primarily include general and administrative costs such as corporate management, finance, legal and human resources. The CODM uses an Adjusted EBITDA (as defined below) measure to evaluate the performance of, and allocate resources to, the segments. Segment balance sheets are not used by the CODM to allocate resources or assess performance.

Segment results were as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Product
Platform Solutions	$	73,147		$	82,244		$	241,295		$	253,398		$	62,083		$	73,147		$	198,851		$	241,295
Software and Services	19,851			20,718			57,949			65,739			19,771			19,851			58,915			57,949
Other	1,614			628			5,007			3,859			934			1,614			1,531			5,007
Revenues, net	94,612			103,590			304,251			322,996			82,788			94,612			259,297			304,251
Adjusted Operating Expenses (1)	79,347			91,307			250,280			280,314			69,386			79,347			229,944			250,280
Adjusted EBITDA (2)	15,265			12,283			53,971			42,682			13,402			15,265			29,353			53,971
Intellectual Property Licensing
US Pay TV Providers	44,474			63,288			143,606			195,365			41,896			44,474			126,009			143,606
CE Manufacturers	8,859			15,479			26,754			38,296			15,580			8,859			31,928			26,754
New Media, International Pay TV Providers and Other	16,764			15,541			52,795			55,563			18,260			16,764			75,697			52,795
Revenues, net	70,097			94,308			223,155			289,224			75,736			70,097			233,634			223,155
Adjusted Operating Expenses (1)	23,461			24,243			73,790			69,247			25,659			23,461			68,825			73,790
Adjusted EBITDA (2)	46,636			70,065			149,365			219,977			50,077			46,636			164,809			149,365
Corporate
Adjusted Operating Expenses (1)	14,825			15,851			45,385			47,084			13,427			14,825			44,048			45,385
Adjusted EBITDA (2)	(14,825		)	(15,851		)	(45,385		)	(47,084		)	(13,427		)	(14,825		)	(44,048		)	(45,385		)
Consolidated
Total Revenues, net	164,709			197,898			527,406			612,220			158,524			164,709			492,931			527,406
Adjusted Operating Expenses (1)	117,633			131,401			369,455			396,645			108,472			117,633			342,817			369,455
Adjusted EBITDA (2)	47,076			66,497			157,951			215,575			50,052			47,076			150,114			157,951
Depreciation	5,338			5,015			16,252			15,869			5,314			5,338			16,005			16,252
Amortization of intangible assets	37,242			41,722			119,463			125,100			28,212			37,242			84,574			119,463
Restructuring and asset impairment charges	2,921			3,710			8,568			17,623			1,995			2,921			6,484			8,568
Goodwill impairment													137,453			—			137,453			—
Equity-based compensation	9,471			13,007			28,226			38,781			5,148			9,471			22,459			28,226
Separation and transformation costs													9,458			—			13,905			—
Transition and integration costs	(148		)	3,394			9,303			15,701			189			(148		)	1,342			9,303
Earnout amortization	—			958			1,494			2,875			—			—			—			1,494
CEO transition cash costs	—			—			(975		)	—			—			—			1,000			(975		)
Remeasurement of contingent consideration	(67		)	243			1,104			317			—			(67		)	—			1,104
Gain on settlement of acquired receivable	—			—			—			(2,537		)
Operating (loss) income	(7,681		)	(1,552		)	(25,484		)	1,846
Operating loss													(137,717		)	(7,681		)	(133,108		)	(25,484		)
Interest expense	(12,436		)	(10,990		)	(36,241		)	(31,827		)	(11,844		)	(12,436		)	(36,480		)	(36,241		)
Interest income and other, net	861			1,059			2,971			3,819			860			861			4,150			2,971
Gain (loss) on interest rate swaps	1,033			(39		)	7,185			(1,374		)
TiVo Acquisition litigation	—			(1,100		)	—			(14,006		)
(Loss) gain on interest rate swaps													(390		)	1,033			(5,475		)	7,185
Loss on debt extinguishment	—			—			—			(108		)	—			—			(300		)	—
Loss on debt modification	—			—			—			(929		)
Loss from continuing operations before income taxes	$	(18,223	)	$	(12,622	)	$	(51,569	)	$	(42,579	)	$	(149,091	)	$	(18,223	)	$	(171,213	)	$	(51,569	)

(1)

Adjusted Operating Expenses isare defined as operating expenses excluding Depreciation, Amortization of intangible assets, Restructuring and asset impairment charges, Goodwill impairment, Equity-based compensation, Separation and transformation costs, Transition and integration costs, retention earn-outs payable to former shareholders of acquired businesses, CEO transition cash costs and Remeasurement of contingent ~~consideration and Gain on settlement of acquired receivable.~~consideration.

(2)

Adjusted EBITDA is defined as operating ~~income~~loss excluding Depreciation, Amortization of intangible assets, Restructuring and asset impairment charges, Goodwill impairment, Equity-based compensation, ~~Transition~~Separation and integration costs, retention earn-outs payable to former shareholders of acquired businesses, CEO transition cash costs, Remeasurement of contingent consideration and Gain on settlement of acquired receivable.

transformation costs, Transition and integration costs, retention earn-outs payable to former shareholders of acquired businesses, CEO transition cash costs and Remeasurement of contingent consideration.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q for TiVo Corporation (the “Company,” “we” or “us”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including the discussion contained in Item 2., "Management’s Discussion and Analysis of Financial Condition and Results of Operations." We have based these forward-looking statements on our current expectations and projections about future events or future financial performance, which include implementing our business strategy, successfully integrating Rovi Corporation ("Rovi") and TiVo Inc. (renamed TiVo Solutions Inc. (“TiVo Solutions”)) following our acquisition of TiVo Solutions on September 7, 2016 (the "TiVo Acquisition"), realizing planned synergies and cost-savings associated with the TiVo Acquisition, future revenues to be recognized following adoption of the amended revenue recognition guidance, the expected impact of the Tax Act of 2017, the Company’s previously announced exploration of strategic alternatives and its related cost-saving and restructuring activities, developing and introducing new technologies, obtaining, maintaining and expanding market acceptance of the technologies we offer, successfully renewing intellectual property licenses with the major North American pay TV service providers, ~~and~~ competition in our ~~markets.~~markets and the impact of the separation of our Product and IP Licensing businesses into two independent companies.

In some cases, these forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “future,” “predict,” “potential,” “intend,” or “continue,” and similar expressions. These statements are based on the beliefs and assumptions of our management and on information currently available to our management. Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed or implied in such forward-looking statements. For a discussion of some of the factors that might cause such a difference, see the "Risk Factors" contained in Part II, Item 1A. of this Quarterly Report on Form 10-Q. Except as required by law, we specifically disclaim any obligation to update such forward-looking statements.

The following commentary should be read in conjunction with the Consolidated Financial Statements and related notes thereto contained in ~~Part II, Item 8. of~~ our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 and the Condensed Consolidated Financial Statements and related notes thereto contained in Part I, Item 1. of this Quarterly Report on Form 10-Q, which are incorporated by reference herein.

Executive Overview of Results

TiVo Corporation isprovides an intellectual property portfolio and products to help consumers enjoy watching their favorite entertainment. Our technologies enable an integrated entertainment experience, making entertainment content easy to find, watch and enjoy. Our product business serves up the best movies, video and shows from across live TV, on demand, streaming services and countless apps, helping people discover what to watch as they wish. For content creators and advertisers, our machine learning for personalized content recommendations, conversational voice solution and targeted advertising methodologies help deliver a passionate group of watchers to increase viewership and engagement across online video, TV and other entertainment viewing platforms. Our intellectual property business provides a global ~~leader in~~portfolio of thousands of patents that underlie this entertainment ~~technology and audience insights. From~~platform as well as across the ~~interactive program guide ("IPG") to~~broader video landscape. Explore the ~~digital video recorder ("DVR"), we provide innovative products and licensable technologies that enable the world’s leading media and~~next generation of entertainment ~~companies to deliver the ultimate entertainment experience and improve how people find content across a changing media landscape.~~at tivo.com, forward.tivo.com or follow us on Twitter @tivo or @tivoforbusiness.

Our operations are organized into two reportable segments for financial reporting purposes: Product and Intellectual Property Licensing. The Product segment consists primarily of licensing Company-developed user experience ("UX") products and services to multi-channel video service providers and consumer electronics ("CE") manufacturers, ~~in-guide advertising, analytics,~~ licensing the TiVo service, licensing metadata and selling TiVo-enabled devices. We group our Product segment into three verticals based on the products delivered to our customer: Platform Solutions; Software and Services; and Other. Platform Solutions includes licensing Company-developed UX products, the TiVo service and selling TiVo-enabled ~~devices. Software~~devices, licensing metadata and ~~Services includes licensing our metadata,~~ advanced search and recommendation and viewership data, ~~analytics products,~~ as well as sponsored discovery and in-guide advertising. ~~Other includes legacy Analog Content Protection ("ACP"), VCR Plus+ and media recognition products.~~

The Intellectual Property Licensing segment consists primarily of licensing our patent portfolio to U.S. and international pay television ("TV") providers (directly and through their suppliers), mobile device manufacturers, CE manufacturers and over-the-top ("OTT") video providers. Our broad portfolio of licensable technology patents covers many aspects of content discovery, ~~DVR,~~digital video recorders, video-on-demand, ~~(“VOD”),~~ OTT experiences, multi-screen functionality and personalization, as well as interactive applications and advertising.

Total Revenues, net for the three months ended September 30, 2019 decreased by 4% compared to the prior year primarily due to an $11.8 million decrease in Product revenues. The decrease in Product revenues was attributable to a $4.1 million decrease in consumer revenue, which was driven by subscriber erosion, an increase in the amortization period for product lifetime subscriptions and lower hardware sales. Also contributing to the decrease was a $3.2 million decline in revenue from nonrecurring engineering services to an international cable operator, a $1.8 million revenue reduction related to adjusted subscriber reporting from Latin American operators and the year-ago quarter benefiting from a $3.3 million Passport contract renewal that included guaranteed minimums. These revenue declines were partially offset by a $3.2 million increase in revenue

from an international cable operator exceeding its cumulative contractual minimums in 2019 and new agreements executed with Vodafone and Liberty Latin America during the quarter. Intellectual Property Licensing revenues increased $5.6 million due to a $4.1 million increase in catch-up payments intended to make us whole for the pre-license period of use. This was partially offset by a $2.8 million decrease in revenue from TiVo Solutions "Time Warp" agreements that were entered into with AT&T Inc. ("AT&T"), DirecTV, EchoStar Corporation ("EchoStar") and Verizon Communications, Inc. ("Verizon") prior to the TiVo Acquisition Date as a result of contract expirations.

For the three months ended September 30, 2019, we reduced Research and development and Selling, general and administrative compensation costs by $10.9 million, primarily as a result of benefits from our transformation and restructuring activities. We also realized a $9.0 million decrease in Amortization of intangible assets due to certain TiVo Solutions intangible assets reaching the end of their economic life. However, our Loss from continuing operations, net of tax was $151.0 million, or $1.20 per diluted share, compared to $23.0 million, or $0.19 per diluted share, in the prior year. The larger loss in the three months ended September 30, 2019 was primarily the result of a $137.5 million Goodwill impairment charge, $9.5 million of Separation and transformation costs incurred in the three months ended September 30, 2019 and the $6.2 million decrease in revenue described above.

Our intellectual property license with Comcast Corporation ("Comcast") expired on March 31, 2016. Our Product relationship with Comcast, primarily a metadata license, expired on September 30, 2017. The expiration of our intellectual property license with Comcast, as well as litigation initiated against Comcast, reduced revenues and increased litigation costs. While we anticipate Comcast will eventually execute a new intellectual property license, the length of time that Comcast is out of license prior to executing a new license is uncertain.

On May 9, 2019, we announced that our Board of Directors unanimously approved a plan to separate the Product and Intellectual Property Licensing businesses into separately traded public companies (the “Separation”). The Separation is expected to be completed through a dividend of newly issued shares of the common stock of a Company subsidiary that will hold the Product business (“ProductCo”). We intend that the Separation will be completed in a manner generally intended to qualify as tax-deferred to TiVo Corporation’s stockholders for U.S. federal income tax purposes. The Separation, targeted for completion by April 2020, is subject to certain conditions, including, among others, obtaining final approval from TiVo Corporation's Board of Directors, receipt of a favorable opinion and/or rulings with respect to the tax-free nature of the transaction for U.S. federal income tax purposes and the U.S. Securities and Exchange Commission declaring ProductCo's Registration Statement effective.

The process of completing the Separation and transformation has been and is expected to continue to be time-consuming and involve significant costs and expenses. During the nine months ended September 30, 2019, we incurred $13.9 million of Separation and transformation costs. The Separation and transformation costs are primarily Selling, general and administrative costs, consisting of employee-related costs, costs to establish certain stand-alone functions and information technology systems and other one-time transaction-related costs, including investment banking and consulting fees and other incremental costs directly associated with the Separation process. In addition, in connection with the May 2019 announcement of our plan to separate the Product and Intellectual Property Licensing businesses, we implemented a cost efficiency program to transform our business operations and to execute the Separation (the "2019 Transformation Plan"). As a result of the 2019 Transformation Plan, we expect to reduce headcount, move certain positions to lower cost locations, rationalize facilities and legal entities and terminate certain leases and other contracts. The 2019 Transformation Plan resulted in restructuring charges of $0.7 million during the nine months ended September 30, 2019, substantially all of which related to severance costs. We expect to spend up to an additional $35.0 million to complete the Separation and 2019 Transformation Plan.

Due to the loss of economies of scale and the need to establish stand-alone corporate functions for each company, the separation of TiVo Corporation into two independent companies is expected to result in total dis-synergies of approximately $25 million annually, primarily associated with the Intellectual Property Licensing business creating an independent patent innovation research organization and establishing stand-alone corporate functions such as finance, legal, information technology, real estate and human resources. As the Intellectual Property Licensing business involves a small portion of the customers and employees of the TiVo Corporation's business, the operational infrastructure and corporate functions will be separated from ProductCo and a new streamlined enterprise application and operational infrastructure will be established to manage the small portion of customers and employees that will remain with Intellectual Property Licensing business. As a result of the Separation and the smaller scale of ProductCo, the cost efficiency program is expected to more than offset the dis-synergies of the Separation.

Comparison of Three and Nine Months Ended September 30, 2019 and 2018

The condensed consolidated results of operations for the three and nine months ended September 30, 2019 and 2018 compared to the prior year were as follows (dollars in thousands):



	Three Months Ended September 30,
	2019			2018			Change $			Change %
Revenues, net:
Licensing, services and software	$	155,918		$	160,783		$	(4,865	)	(3	)%
Hardware	2,606			3,926			(1,320		)	(34	)%
Total Revenues, net	158,524			164,709			(6,185		)	(4	)%
Costs and expenses:
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets	39,263			40,749			(1,486		)	(4	)%
Cost of hardware revenues, excluding depreciation and amortization of intangible assets	4,289			4,220			69			2	%
Research and development	34,038			42,053			(8,015		)	(19	)%
Selling, general and administrative	45,677			39,867			5,810			15	%
Depreciation	5,314			5,338			(24		)	—	%
Amortization of intangible assets	28,212			37,242			(9,030		)	(24	)%
Restructuring and asset impairment charges	1,995			2,921			(926		)	(32	)%
Goodwill impairment	137,453			—			137,453			N/a
Total costs and expenses	296,241			172,390			123,851			72	%
Operating loss	(137,717		)	(7,681		)	(130,036		)	1,693	%
Interest expense	(11,844		)	(12,436		)	592			(5	)%
Interest income and other, net	860			861			(1		)	—	%
(Loss) gain on interest rate swaps	(390		)	1,033			(1,423		)	(138	)%
Loss from continuing operations before income taxes	(149,091		)	(18,223		)	(130,868		)	718	%
Income tax expense	1,919			4,769			(2,850		)	(60	)%
Loss from continuing operations, net of tax	(151,010		)	(22,992		)	(128,018		)	557	%
(Loss) Income from discontinued operations, net of tax	(379		)	143			(522		)	(365	)%
Net loss	$	(151,389	)	$	(22,849	)	$	(128,540	)	563	%



	Nine Months Ended September 30,
	2019			2018			Change $			Change %
Revenues, net:
Licensing, services and software	$	486,575		$	516,495		$	(29,920	)	(6	)%
Hardware	6,356			10,911			(4,555		)	(42	)%
Total Revenues, net	492,931			527,406			(34,475		)	(7	)%
Costs and expenses:
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets	114,482			126,547			(12,065		)	(10	)%
Cost of hardware revenues, excluding depreciation and amortization of intangible assets	14,150			14,260			(110		)	(1	)%
Research and development	113,621			133,894			(20,273		)	(15	)%
Selling, general and administrative	139,270			133,906			5,364			4	%
Depreciation	16,005			16,252			(247		)	(2	)%
Amortization of intangible assets	84,574			119,463			(34,889		)	(29	)%
Restructuring and asset impairment charges	6,484			8,568			(2,084		)	(24	)%
Goodwill impairment	137,453			—			137,453			N/a
Total costs and expenses	626,039			552,890			73,149			13	%
Operating loss	(133,108		)	(25,484		)	(107,624		)	422	%
Interest expense	(36,480		)	(36,241		)	(239		)	1	%
Interest income and other, net	4,150			2,971			1,179			40	%
(Loss) gain on interest rate swaps	(5,475		)	7,185			(12,660		)	(176	)%
Loss on debt extinguishment	(300		)	—			(300		)	N/a
Loss from continuing operations before income taxes	(171,213		)	(51,569		)	(119,644		)	232	%
Income tax expense	15,981			13,305			2,676			20	%
Loss from continuing operations, net of tax	(187,194		)	(64,874		)	(122,320		)	189	%
(Loss) Income from discontinued operations, net of tax	(379		)	3,738			(4,117		)	(110	)%
Net loss	$	(187,573	)	$	(61,136	)	$	(126,437	)	207	%

Total Revenues, net

For the three months ended September 30, 2019, Total Revenues, net decreased 4% compared to the prior year as Product revenues decreased $11.8 million and Intellectual Property Licensing revenues increased $5.6 million. Product generated 52% and 57% of Total Revenues, net for the three months ended September 30, 2019 and 2018, respectively.

For the nine months ended September 30, 2019, Total Revenues, net decreased 7% compared to the prior year as Product revenues decreased $45.0 million and Intellectual Property Licensing revenues increased $10.5 million. Product generated 53% and 58% of Total Revenues, net for the nine months ended September 30, 2019 and 2018, respectively.

For details on the changes in Total Revenues, net, see the discussion of our segment results below.

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

Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets, consists primarily of employee-related costs, patent prosecution, maintenance and litigation costs and an allocation of overhead and facilities costs, as well as service center and other expenses related to providing the TiVo service and our metadata offering.

For the three months ended September 30, 2019, Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets decreased 4% due to a $1.5 million decrease in non-recurring engineering costs and a $0.8 million decrease in compensation costs, as well as benefits from our transformation and restructuring activities. These benefits were partially offset by $1.5 million of impairment charges associated with a prepaid license that is not expected to be recoverable from the net direct revenue resulting from patent license agreements executed with new customers and a $0.5

million increase in patent litigation costs, which was primarily related to the timing of costs incurred in the ongoing Comcast litigation. We expect to continue to incur material expenses related to the Comcast litigation in the future.

For the nine months ended September 30, 2019, Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets decreased 10% primarily as a result of an $8.2 million decrease in patent litigation costs, which was primarily related to the timing of costs incurred in the ongoing Comcast litigation and benefits from our transformation and restructuring activities, including a $1.4 million decrease in non-recurring engineering costs, a $1.1 million decrease in costs to acquire data from third parties to support our metadata operations, a $1.0 million decrease in compensation costs. We expect to continue to incur material expenses related to the Comcast litigation in the future. The decrease in costs was partially offset by $2.6 million of impairment charges associated with a prepaid license that is not expected to be recoverable from the net direct revenue resulting from patent license agreements executed with new customers.

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

Cost of hardware revenues, excluding depreciation and amortization of intangible assets includes all product-related costs associated with TiVo-enabled devices, including manufacturing costs, employee-related costs, warranty costs and order fulfillment costs, as well as certain licensing costs and an allocation of overhead and facilities costs. Hardware is sold by the Company primarily as a means to generate revenue from the TiVo service. As a result, generating positive gross margins from hardware sales is not the primary goal of our hardware operations.

For the three and nine months ended September 30, 2019, Cost of hardware revenues, excluding depreciation and amortization of intangible assets benefited from the planned transition of our customers to deploying the TiVo service on third-party hardware. These benefits were partially offset by a $2.4 million inventory impairment during the nine months ended September 30, 2019 due to a reduced forecast for sales of refurbished units.

Research and development

Research and development expenses are comprised primarily of employee-related costs, consulting costs and an allocation of overhead and facilities costs.

For the three months ended September 30, 2019, Research and development expenses decreased 19% compared to the prior year primarily due to a $6.5 million decrease in compensation costs and other benefits from our transformation and restructuring activities.

For the nine months ended September 30, 2019, Research and development expenses decreased 15% compared to the prior year, primarily due to a $14.1 million decrease in compensation costs and a $4.6 million decrease in consulting costs as a result of benefits from our transformation and restructuring activities, as well as a $0.9 million decrease in Transition and integration costs associated with the TiVo Acquisition.

Selling, general and administrative

Selling expenses are comprised primarily of employee-related costs, including travel costs, advertising costs and an allocation of overhead and facilities costs. General and administrative expenses are comprised primarily of employee-related costs, including travel costs, corporate accounting, consulting, legal and tax fees and an allocation of overhead and facilities costs.

Selling, general and administrative expenses increased 15% during the three months ended September 30, 2019. The increase is primarily due to $9.5 million of Separation and transformation costs incurred during the three months ended September 30, 2019, partially offset by a $4.4 million decrease in compensation costs and other benefits from our transformation and restructuring activities.

Selling, general and administrative expenses increased 4% during the nine months ended September 30, 2019 as $13.9 million of Separation and transformation costs incurred during the nine months ended September 30, 2019 were partially offset by a $7.5 million decrease in Transition and integration costs associated with the TiVo Acquisition, which was primarily due to a $4.5 million loss associated with a legacy TiVo Solutions legal matter recorded in the second quarter of 2018 and a $1.8 million decrease in compensation costs and other benefits from our transformation and restructuring activities.

Amortization of intangible assets

The decrease in Amortization of intangible assets during the three and nine months ended September 30, 2019 was primarily due to certain intangible assets acquired as part of the TiVo Acquisition reaching the end of their economic life.

Restructuring and asset impairment charges

In connection with the May 2019 announcement of our plan to separate the Product and Intellectual Property Licensing businesses, we initiated certain activities to transform our business operations in order to execute the separation (the "2019 Transformation Plan"). As a result of the 2019 Transformation Plan, we expect to reduce headcount, move certain positions to lower cost locations, rationalize facilities and legal entities and terminate certain leases and other contracts. The 2019 Transformation Plan resulted in Restructuring charges of $0.7 million during the three and nine months ended September 30, 2019, substantially all of which related to severance costs.

In February 2018, we announced our intention to explore strategic alternatives. In connection with exploring strategic alternatives, we initiated certain cost saving actions (the "Profit Improvement Plan"). As a result of the Profit Improvement Plan, we moved certain positions to lower cost locations, eliminated layers of management and rationalized facilities, which resulted in severance costs and the termination of certain leases and other contracts, generating over $40 million in annualized cost savings. As a result of actions associated with the Profit Improvement Plan, Restructuring and asset impairment charges of $1.3 million, primarily related to an asset impairment associated exiting a lease, and $2.8 million, primarily for severance-related benefits, were recognized in the three months ended September 30, 2019 and 2018, respectively.Restructuring and asset impairment charges of $5.8 million and $8.1 million, primarily for severance-related benefits, were recognized in the nine months ended September 30, 2019 and 2018, respectively, as part of the Profit Improvement Plan.

Following completion of the TiVo Acquisition, integration plans were implemented which were intended to realize operational synergies between Rovi and TiVo Solutions (the "TiVo Integration Restructuring Plan"). As part of the TiVo Integration Restructuring Plan, we eliminated duplicative positions resulting in severance costs and terminated certain leases and other contracts, generating over $110 million in annualized cost synergies. As a result of actions associated with the TiVo Integration Restructuring Plan, Restructuring and asset impairment charges of $0.4 million, primarily facility-related costs, were recognized in the nine months ended September 30, 2018.

Goodwill impairment

As a result of the quantitative interim goodwill impairment test performed as of September 30, 2019, a Goodwill impairment charge of $137.5 million was recognized, of which $79.3 million related to the Product reporting unit and $58.2 million related to the Intellectual Property Licensing reporting unit. For further details about the Goodwill impairment charge, refer to Note 7 of the Condensed Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

Interest expense

Interest expense decreased by $0.6 million and increased by $0.2 million during the three and nine months ended September 30, 2019 primarily due to changes in the interest rate associated with Term Loan Facility B, which bears interest, at our election, at a rate equal to either London Interbank Offered Rate ("LIBOR"), plus an applicable margin equal to 2.50% per annum (subject to a 0.75% LIBOR floor) or the prime lending rate, plus an applicable margin equal to 1.50% per annum. The Interest expense was also affected by a reduction in outstanding debt due to the $46.6 million Excess Cash Flow principal payment on Term Loan Facility B made in February 2019 and the $50.0 million of 2020 Convertible Notes repurchased in June 2019.

Interest income and other, net

The change in Interest income and other, net during the three months ended September 30, 2019 reflects $0.3 million of beneficial movements in foreign currency exchange rates and a $0.1 million increase in income from an equity method investment, which were offset by a $0.5 million decrease in gains on the sale of investments. We expect interest income to decrease due to investment sales in 2019 to fund the $46.6 million Excess Cash Flow principal payment on Term Loan Facility B made in February 2019 and the $50.0 million of 2020 Convertible Notes repurchased in June 2019.

The increase in Interest income and other, net for the nine months ended September 30, 2019 was primarily due to a $1.4 million increase in interest income due to an increase in interest rates and a $0.6 million increase in income from an equity method investment, which was partially offset by a $0.5 million decrease in gains on the sale of investments and $0.3 million of adverse movements in foreign currency exchange rates.

(Loss) gain on interest rate swaps

We have not designated any of our interest rate swaps as hedges for accounting purposes. Therefore, changes in the fair value of our interest rate swaps are not offset by changes in the fair value of the related hedged item in our Condensed Consolidated Statements of Operations (see Note 9 to the Condensed Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q, which is incorporated by reference herein). We generally utilize interest rate swaps to convert the interest rate on a portion of our loans with a floating interest rate to a fixed interest rate. Under the terms of our interest rate swaps, we receive a floating rate of interest and pay a fixed rate of interest. When there is an increase in expected future LIBOR, we generally have gains when adjusting our interest rate swaps to fair value. When there is a decrease in expected future LIBOR, we generally have losses when adjusting our interest rate swaps to fair value.

Loss on debt extinguishment

In June 2019, the Company repurchased $50.0 million of outstanding principal on its 2020 Convertible Notes. The Company accounted for the repurchase as a partial debt extinguishment and recognized a Loss on debt extinguishment of $0.1 million in the nine months ended September 30, 2019.

Annually, the Company may be required to make an additional principal payment on Term Loan Facility B, which is calculated as a percentage of the prior year's "Excess Cash Flow" as defined in the Credit Agreement. In February 2019, the Company made an Excess Cash Flow payment of $46.6 million on Term Loan Facility B. The Company accounted for the Excess Cash Flow payment as a partial debt extinguishment and recognized a Loss on debt extinguishment of $0.2 million in the nine months ended September 30, 2019.

Income tax expense

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 are the primary driver of our Income tax expense.

We recorded Income tax expense for the three months ended September 30, 2019 of $1.9 million, which primarily consists of $3.5 million of Foreign withholding tax, $1.5 million of Federal income tax and $0.8 million of Foreign income tax, which was partially offset by a $4.0 million benefit from the Goodwill impairment charge recognized during the three months ended September 30, 2019. We recorded an Income tax expense for the three months ended September 30, 2018 of $4.8 million, which primarily consists of $3.6 million of Foreign withholding tax and a $0.9 million Transition Tax associated with the Tax Act of 2017.

We recorded Income tax expense for the nine months ended September 30, 2019 of $16.0 million, which primarily consists of $14.7 million of Foreign withholding tax, $3.9 million of Federal income tax and $1.5 million of Foreign income tax, which was partially offset by a $4.0 million a benefit from the Goodwill impairment charge recognized during the nine months ended September 30, 2019. We recorded an Income tax expense for the nine months ended September 30, 2018 of $13.3 million, which primarily consists of $10.6 million of Foreign withholding tax, $1.2 million of withholding taxes from a change in our assertion regarding the indefinite reinvestment of certain foreign earnings, a $0.9 million Transition Tax associated with the Tax Act of 2017 and $0.6 million of Foreign income tax, which was partially offset by a $1.0 million benefit to continuing operations from a gain on discontinued operations.

The year-over-year increase in Foreign withholding tax was due to a larger portion of license fees received in the nine months ended September 30, 2019 coming from licensees in countries subject to foreign withholding taxes.

(Loss) Income from discontinued operations, net of tax

In the three and nine months ended September 30, 2019, we recognized a Loss from discontinued operations, net of tax, of $0.4 million and $0.4 million, respectively, as a result of costs incurred pursuant to certain indemnification obligations associated with previous business disposals. In the three and nine months ended September 30, 2018, we recognized Income from discontinued operations, net of tax, of $0.1 million and $3.7 million, respectively, as a result of the expiration of certain

indemnification obligations and the execution of settlement agreements during the period associated with previous business disposals.

Segment Results

We report segment information in the same way management internally organizes the business for assessing performance and making decisions regarding the allocation of resources to the business units. The terms Adjusted Operating Expenses and Adjusted EBITDA in the following discussion use the definitions provided in Note 15 of the Condensed Consolidated Financial Statements included in Part I, Item 1. of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

Product

We group our Product segment into three verticals based on the products delivered to our customer: Platform Solutions; Software and Services; and Other. Platform Solutions includes licensing Company-developed UX products, the TiVo service and selling TiVo-enabled devices. Software and Services includes licensing our metadata and advanced media and advertising solutions, including viewership data, sponsored discovery and in-guide advertising. Other includes legacy Analog Content Protection ("ACP"), VCR Plus+ and media recognition products.

The Product segment's results of operations for the three and nine months ended September 30, 2019 and 2018 compared to the prior year were as follows (dollars in thousands):



	Three Months Ended September 30,
	2019			2018			Change $			Change %
Platform Solutions	$	62,083		$	73,147		$	(11,064	)	(15	)%
Software and Services	19,771			19,851			(80		)	—	%
Other	934			1,614			(680		)	(42	)%
Product Revenues	82,788			94,612			(11,824		)	(12	)%
Adjusted Operating Expenses	69,386			79,347			(9,961		)	(13	)%
Adjusted EBITDA	$	13,402		$	15,265		$	(1,863	)	(12	)%
Adjusted EBITDA Margin	16.2		%	16.1		%



	Nine Months Ended September 30,
	2019			2018			Change $			Change %
Platform Solutions	$	198,851		$	241,295		$	(42,444	)	(18	)%
Software and Services	58,915			57,949			966			2	%
Other	1,531			5,007			(3,476		)	(69	)%
Product Revenues	259,297			304,251			(44,954		)	(15	)%
Adjusted Operating Expenses	229,944			250,280			(20,336		)	(8	)%
Adjusted EBITDA	$	29,353		$	53,971		$	(24,618	)	(46	)%
Adjusted EBITDA Margin	11.3		%	17.7		%

For the three months ended September 30, 2019, the $11.1 million decrease in Platform Solutions revenue was primarily attributable to a $4.1 million decrease in consumer revenue, which was driven by subscriber erosion, an increase in the amortization period for product lifetime subscriptions and lower hardware sales. Also contributing to the decrease was a $3.2 million decline in revenue from nonrecurring engineering services to an international cable operator, a $1.8 million revenue reduction related to adjusted subscriber reporting from Latin American operators and the year-ago quarter benefiting from a $3.3 million Passport contract renewal that included guaranteed minimums. These revenue declines were partially offset by a $3.2 million increase in revenue from an international cable operator exceeding its cumulative contractual minimums in 2019.

For the nine months ended September 30, 2019, the $42.4 million decrease in Platform Solutions revenue was primarily attributable to a decrease of $33.6 million in revenue from an international cable operator that exercised a contractual option during the three months ended March 31, 2018 to purchase a fully paid license to its then-current version of the TiVo software and purchasing additional engineering services. In addition, revenue for the nine months ended September 30, 2019 decreased $12.6 million due to consumer subscriber erosion, an increase in the amortization period for product lifetime

subscriptions and lower hardware sales. These revenue declines were partially offset by a $7.8 million revenue increase for the nine months ended September 30, 2019 from an international software customer exceeding its contractual minimums in 2019.

For the three months ended September 30, 2019, Software and Services revenue was flat as a $0.9 million decrease in Personalized Content Discovery revenue, was offset by an $0.8 million increase in TV viewership data revenue. For the nine months ended September 30, 2019, the $1.0 million increase in Software and Services revenue was primarily the result of an $0.8 million increase in TV viewership data revenue.

For the three and nine months ended September 30, 2019, Other revenue primarily consists of ACP revenue, which is expected to decline in the future.

The 13% and 8% decreases in Product Adjusted Operating Expenses for the three and nine months ended September 30, 2019, respectively, were primarily due to reduced Research and development compensation and consulting costs. Product Adjusted Operating Expenses also decreased from the planned transition of our customers to deploying the TiVo service on third-party hardware and other benefits from our transformation and restructuring activities. A $2.4 million inventory impairment during the nine months ended September 30, 2019 due to a reduced forecast for sales of refurbished units partially offset these benefits.

Adjusted EBITDA Margin for the three months ended September 30, 2019 was flat as benefits from reduced Research and development compensation and consulting costs, benefits from our transformation and restructuring activities and a shift in business mix toward higher margin products due to the planned transition of our customers to deploying the TiVo service on third-party hardware were offset by the revenue changes described above. The decrease in Adjusted EBITDA Margin for the nine months ended September 30, 2019 reflect the revenue changes and inventory impairment described above, which were partially offset by benefits from reduced Research and development compensation and consulting costs, benefits from our transformation and restructuring activities and a shift in business mix toward higher margin products due to the planned transition of our customers to deploying the TiVo service on third-party hardware.

Intellectual Property Licensing

We group our Intellectual Property Licensing segment into three verticals based primarily on the business of our customer: US Pay TV Providers; CE Manufacturers; and New Media, International Pay TV Providers and Other. US Pay TV Providers includes direct and indirect licensing of traditional US Pay TV Providers regardless of the particular distribution technology (e.g., cable, satellite or the internet). CE Manufacturers includes the licensing of our patents to traditional CE manufacturers. New Media, International Pay TV Providers and Other includes licensing to international pay TV providers, virtual service providers, mobile device manufacturers and content and new media companies.

~~Total Revenues, net~~The Intellectual Property Licensing segment's results of operations for the three and nine months ended September 30, 2019 and 2018 ~~decreased by 17%~~ compared to the prior year ~~primarily~~were as follows (dollars in thousands):



	Three Months Ended September 30,
	2019			2018			Change $			Change %
US Pay TV Providers	$	41,896		$	44,474		$	(2,578	)	(6	)%
CE Manufacturers	15,580			8,859			6,721			76	%
New Media, International Pay TV Providers and Other	18,260			16,764			1,496			9	%
Intellectual Property Licensing Revenues	75,736			70,097			5,639			8	%
Adjusted Operating Expenses	25,659			23,461			2,198			9	%
Adjusted EBITDA	$	50,077		$	46,636		$	3,441		7	%
Adjusted EBITDA Margin	66.1		%	66.5		%



	Nine Months Ended September 30,
	2019			2018			Change $			Change %
US Pay TV Providers	$	126,009		$	143,606		$	(17,597	)	(12	)%
CE Manufacturers	31,928			26,754			5,174			19	%
New Media, International Pay TV Providers and Other	75,697			52,795			22,902			43	%
Intellectual Property Licensing Revenues	233,634			223,155			10,479			5	%
Adjusted Operating Expenses	68,825			73,790			(4,965		)	(7	)%
Adjusted EBITDA	$	164,809		$	149,365		$	15,444		10	%
Adjusted EBITDA Margin	70.5		%	66.9		%

For the three and nine months ended September 30, 2019, Intellectual Property Licensing revenue grew 8% and 5%, respectively, due to an increase in revenues from CE Manufacturers and New Media, International Pay TV Providers and Other, which was partially offset by a ~~result of a $21.1 million~~ decrease in revenue from US Pay TV Providers.

For the three and nine months ended September 30, 2019, the decrease in revenue from US Pay TV Providers was primarily due to decreases of $2.8 million and $20.1 million in the three and nine months ended September 30, 2019, respectively, in revenue from TiVo Solutions Time Warp agreements that were entered into with AT&T, DirecTV, EchoStar and Verizon prior to the TiVo Acquisition Date as a result of contract expirations and adopting the amended revenue recognition guidance on January 1, 2018, a $5.9 million decrease in Hardware revenue primarily resulting from a planned transition away from the hardware business, a $4.5 million decrease in revenue from two international multiple system operators ("MSO") software customers as a result of adopting the amended revenue recognition guidance and a $3.3 million decrease in catch-up payments intended to make us whole for the pre-license period of use. For additional details on the changes in Total Revenues, net, see the discussion of our segment results below.

Our Intellectual Property Licensing agreement with Comcast expired on March 31, 2016. Our Product relationship with Comcast, primarily a metadata license, expired on September 30, 2017. The expiration of our intellectual property license with Comcast, as well as litigation initiated against Comcast, has resulted in a reduction of revenue and an increase in litigation costs. While we anticipate Comcast will eventually execute a new intellectual property license, the length of time that Comcast is out of license prior to executing a new license is uncertain. The amount of revenue recognized in the reporting period in which a new license is executed is uncertain and depends on a variety of factors, including license terms such as duration, pricing, covered products and fields of use, and the duration of the out-of-license period. In addition, while litigation costs have increased, whether the litigation initiated against Comcast will cause total expenses to increase or decrease longer-term will be a function of several factors, including the length of time Comcast is out of license and the length of time we remain in litigation with Comcast.

For the three months ended September 30, 2018, our Loss from continuing operations, net of tax was $23.0 million, or $0.19 per diluted share, compared to $17.0 million, or $0.14 per diluted share, in the prior year. The larger loss was due to a $33.2 million decrease in revenue, which was partially offset by a $5.7 million decrease in Cost of hardware revenues, excluding depreciation and amortization of intangible assets primarily resulting from a planned transition away from the hardware business, a $6.8 million decrease in Research and development costs, a $7.6 million decrease in Selling, general and administrative expenses and a $4.5 million decrease in Amortization of intangible assets. The decrease in Research and development and Selling, general and administrative expenses reflect benefits from cost saving initiatives, including lower consulting and compensation costs.

~~Comparison of Three and Nine Months Ended September 30, 2018 and 2017~~

~~The condensed consolidated results of operations for the three and nine months ended September 30, 2018 compared to the prior year were as follows (dollars in thousands):~~

Three Months Ended September 30,
2018 2017 Change $ Change %
Revenues, net:
Licensing, services and software $ 160,783
$ 188,031
$ (27,248 ) (14 )%
Hardware 3,926
9,867
(5,941 ) (60 )%
Total Revenues, net 164,709
197,898
(33,189 ) (17 )%
Costs and expenses:
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets 40,749
42,811
(2,062 ) (5 )%
Cost of hardware revenues, excluding depreciation and amortization of intangible assets 4,220
9,889
(5,669 ) (57 )%
Research and development 42,053
48,872
(6,819 ) (14 )%
Selling, general and administrative 39,867
47,431
(7,564 ) (16 )%
Depreciation 5,338
5,015
323
6 %
Amortization of intangible assets 37,242
41,722
(4,480 ) (11 )%
Restructuring and asset impairment charges 2,921
3,710
(789 ) (21 )%
Total costs and expenses 172,390
199,450
(27,060 ) (14 )%
Operating loss (7,681 ) (1,552 ) (6,129 ) 395 %
Interest expense (12,436 ) (10,990 ) (1,446 ) 13 %
Interest income and other, net 861
1,059
(198 ) (19 )%
Gain (loss) on interest rate swaps 1,033
(39 ) 1,072
(2,749 )%
TiVo Acquisition litigation —
(1,100 ) 1,100
N/a
Loss from continuing operations before income taxes (18,223 ) (12,622 ) (5,601 ) 44 %
Income tax expense 4,769
4,341
428
10 %
Loss from continuing operations, net of tax (22,992 ) (16,963 ) (6,029 ) 36 %
Income from discontinued operations, net of tax 143
—
143
N/a
Net loss $ (22,849 ) $ (16,963 ) $ (5,886 ) 35 %

Nine Months Ended September 30,
2018 2017 Change $ Change %
Revenues, net:
Licensing, services and software $ 516,495
$ 577,545
$ (61,050 ) (11 )%
Hardware 10,911
34,675
(23,764 ) (69 )%
Total Revenues, net 527,406
612,220
(84,814 ) (14 )%
Costs and expenses:
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets 126,547
124,398
2,149
2 %
Cost of hardware revenues, excluding depreciation and amortization of intangible assets 14,260
35,877
(21,617 ) (60 )%
Research and development 133,894
144,386
(10,492 ) (7 )%
Selling, general and administrative 133,906
147,121
(13,215 ) (9 )%
Depreciation 16,252
15,869
383
2 %
Amortization of intangible assets 119,463
125,100
(5,637 ) (5 )%
Restructuring and asset impairment charges 8,568
17,623
(9,055 ) (51 )%
Total costs and expenses 552,890
610,374
(57,484 ) (9 )%
Operating (loss) income (25,484 ) 1,846
(27,330 ) (1,480 )%
Interest expense (36,241 ) (31,827 ) (4,414 ) 14 %
Interest income and other, net 2,971
3,819
(848 ) (22 )%
Gain (loss) on interest rate swaps 7,185
(1,374 ) 8,559
(623 )%
TiVo Acquisition litigation —
(14,006 ) 14,006
N/a
Loss on debt extinguishment —
(108 ) 108
N/a
Loss on debt modification —
(929 ) 929
N/a
Loss from continuing operations before income taxes (51,569 ) (42,579 ) (8,990 ) 21 %
Income tax expense 13,305
13,816
(511 ) (4 )%
Loss from continuing operations, net of tax (64,874 ) (56,395 ) (8,479 ) 15 %
Income from discontinued operations, net of tax 3,738
—
3,738
N/a
Net loss $ (61,136 ) $ (56,395 ) $ (4,741 ) 8 %

~~Total Revenues, net~~

For the three months ended September 30, 2018, Total Revenues, net decreased 17% compared to the prior year as Product revenues decreased $9.0 million and Intellectual Property Licensing revenue decreased $24.2 million. The adoption of the amended revenue recognition guidance on January 1, 2018 decreased revenue for the three months ended September 30, 2018 by $6.2 million compared to what revenue would have been under the prior revenue recognition guidance. Product generated 57.4% and 52.3% of Total Revenues, net for the three months ended September 30, 2018 and 2017, respectively.

For the nine months ended September 30, 2018, Total Revenues, net decreased 14% compared to the prior year as Product revenues decreased $18.7 million and Intellectual Property Licensing revenue decreased $66.1 million. The adoption of the amended revenue recognition guidance on January 1, 2018 decreased revenue for the nine months ended September 30, 2018 by $16.5 million compared to what revenue would have been under the prior revenue recognition guidance. Product generated 57.7% and 52.8% of Total Revenues, net for the nine months ended September 30, 2018 and 2017, respectively.

For details on the changes in Total Revenues, net, see the discussion of our segment results below. For the year ended December 31, 2018, we expect revenue to be approximately $20 million lower under the amended revenue recognition guidance than it would have been under the prior revenue recognition guidance.

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

For the three and nine months ended September 30, 2018, Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets decreased 5% and increased 2%, respectively. For the three months ended September 30, 2018, lower compensation costs and benefits from cost saving initiatives were partially offset by an increase in patent litigation costs of $1.1 million, which primarily related to the ongoing Comcast litigation. For the nine months ended September 30, 2018, an $11.2 million increase in patent litigation costs, primarily related to the ongoing Comcast litigation, was partially offset by benefits from cost saving initiatives, lower compensation costs and a $0.3 million decrease in Transition and integration costs associated with the TiVo Acquisition. We expect to continue to incur material expenses related to the Comcast litigation.

~~Cost of hardware revenues, excluding depreciation and amortization of intangible assets~~

For the three and nine months ended September 30, 2018, the decrease in Cost of hardware revenues, excluding depreciation and amortization of intangible assets was attributable to the planned transition away from the hardware business and a $1.0 million decrease in Transition and integration costs associated with the TiVo Acquisition.

~~Research and development~~

~~Research and development expenses are comprised primarily of employee-related costs, consulting costs and an allocation of overhead and facilities costs.~~

For the three months ended September 30, 2018, Research and development expenses decreased 14% compared to the prior year primarily due to a $3.6 million decrease in consulting costs, a $1.6 million decrease in facilities and information technology costs and a $0.7 million decrease in Transition and integration costs associated with the TiVo Acquisition.

For the nine months ended September 30, 2018, Research and development expenses decreased 7% compared to the prior year primarily due to a $10.2 million decrease in consulting costs, a $4.5 million decrease in facilities and information technology costs and a $2.0 million decrease in Transition and integration costs associated with the TiVo Acquisition, partially offset by a $5.7 million increase in compensation costs.

For the three and nine months ended September 30, 2018, certain contractors were converted to employees in India in connection with the ongoing Profit Improvement restructuring action described below. These contractor conversions reduce consulting costs and increase compensation costs.

~~Selling, general and administrative~~

The 16% decrease in Selling, general and administrative expenses during the three months ended September 30, 2018 was primarily due to a $3.6 million decrease in compensation costs, a $2.8 million decrease in Transition and integration costs associated with the TiVo Acquisition and benefits from cost saving initiatives.

The 9% decrease in Selling, general and administrative expenses during the nine months ended September 30, 2018 was primarily due to a $11.0 million decrease in compensation costs, including as a result of turnover among the senior executive staff including our former Chief Executive Officer, a $3.1 million decrease in Transition and integration costs associated with the TiVo Acquisition, a $2.3 million decrease in consulting costs and benefits from cost saving initiatives. These decreases were partially offset by a $2.5 million gain in the prior year from the settlement of an acquired receivable.

~~Amortization of intangible assets~~

The decrease in Amortization of intangible assets expenses during the three and nine months ended September 30, 2018 was primarily due to certain TiVo Solutions intangible assets becoming fully amortized during the three months ended September 30, 2018.

~~Restructuring and asset impairment charges~~

~~In February 2018, we announced our intention to explore strategic alternatives. In connection with exploring strategic alternatives, we initiated certain cost saving actions (the "Profit Improvement Plan"). As a result of the~~ ~~Profit Improvement Plan~~, we expect to move certain positions to lower cost locations, eliminate layers of management and rationalize facilities resulting in severance costs and the termination of certain leases and other contracts. In connection with the ~~Profit Improvement Plan, we expect to generate approximately $25 million in annualized cost savings and to incur material restructuring costs through the middle of 2019. As a result of actions associated with the~~ ~~Profit Improvement Plan, Restructuring charges of $2.8 million and $8.1 million, primarily for severance-related benefits, were recognized in the three and nine months ended September 30, 2018, respectively.~~

~~Following completion of the TiVo Acquisition, integration plans were implemented which were intended to realize operational synergies between Rovi and TiVo Solutions (the "TiVo Integration Restructuring Plan"). We eliminated duplicative positions resulting in severance costs and the termination of certain leases and other contracts as part of the integration activities. In connection with the~~ ~~TiVo Integration Restructuring Plan, we generated over $110 million in annualized cost synergies. As a result of actions associated with the~~ ~~TiVo Integration Restructuring Plan~~, Restructuring and asset impairment charges of $3.9 million were recognized in the three months ended September 30, 2017, and $0.4 million and $17.1 million were recognized in the nine months ended September 30, 2018 and 2017, respectively. No Restructuring and asset impairment charges were recognized for the ~~TiVo Integration Restructuring Plan~~ ~~in the three months ended September 30, 2018.~~

~~Interest expense~~

The $1.4 million and $4.4 million increase in Interest expense during the three and nine months ended September 30, 2018 was primarily due to an increase in interest rates associated with Term Loan Facility B, which bears interest, at our election, at a rate equal to either London Interbank Offering Rate ("LIBOR"), plus an applicable margin equal to 2.50% per annum (subject to a 0.75% LIBOR floor) or the prime lending rate, plus an applicable margin equal to 1.50% per annum.

~~Interest income and other, net~~

The $0.2 million decrease in Interest income and other, net during the three months ended September 30, 2018 was primarily due to $1.4 million in higher foreign currency losses, partially offset by a $0.6 million increase in interest income due to an increase in interest rates and interest earning assets and a $0.5 million gain from the sale of a strategic investment.

The $0.8 million decrease in Interest income and other, net during the nine months ended September 30, 2018 was primarily due to $2.6 million of lower gains from the sale of strategic investments and $0.2 million in higher foreign currency losses, partially offset by a $1.2 million increase in income from an equity method investment and a $1.2 million increase in interest income due to an increase in interest rates and interest earning assets.

~~Gain (loss) on interest rate swaps~~

We have not designated any of our interest rate swaps as hedges for accounting purposes. Therefore, changes in the fair value of our interest rate swaps are not offset by changes in the fair value of the related hedged item in our Condensed Consolidated Statements of Operations (see Note 10 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q which is incorporated by reference herein). We generally utilize interest rate swaps to convert the interest rate on a portion of our loans with a floating interest rate to a fixed interest rate. Under the terms of our interest rate swaps, we receive a floating rate of interest and pay a fixed rate of interest. When there is an increase in

expected future LIBOR, we generally have gains when adjusting our interest rate swaps to fair value. When there is a decrease in expected future LIBOR, we generally have losses when adjusting our interest rate swaps to fair value.

~~TiVo Acquisition litigation~~

On November 15, 2016, holders of 9.1 million shares of TiVo Solutions common stock outstanding at the TiVo Acquisition Date who did not vote to approve the TiVo Acquisition filed a petition for appraisal ("Dissenting Holders") in the Delaware Court of Chancery.

On March 27, 2017, TiVo Corporation agreed to settle the claims of the Dissenting Holders for $117.0 million, which was paid in cash in April 2017. As the amount paid to Dissenting Holders resulted from a settlement other than a judgment from the Delaware Court of Chancery, a TiVo Acquisition litigation loss of $12.9 million was recognized in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2017. The TiVo Acquisition litigation loss represents the settlement amount in excess of the amount due to the ~~Dissenting Holders as merger consideration.~~

~~Loss on debt extinguishment and Loss on debt modification~~

On January 26, 2017, TiVo Corporation, as parent guarantor, two of its wholly-owned subsidiaries, Rovi Solutions Corporation and Rovi Guides, Inc., as borrowers, and certain of TiVo Corporation’s other subsidiaries, as subsidiary guarantors, entered into Refinancing Agreement No. 1 with respect to Term Loan Facility B. The $682.5 million in proceeds from Refinancing Agreement No. 1 was used to repay existing loans under Term Loan Facility B in full. Creditors in Term Loan Facility B that elected not to participate in Refinancing Agreement No. 1 were extinguished, resulting in a Loss on debt extinguishment of $0.1 million for the nine months ended September 30, 2017. Creditors in Term Loan Facility B that elected to participate in Refinancing Agreement No. 1 and for which the present value of future cash flows was not substantially different were accounted for as a debt modification, resulting in a Loss on debt modification of $0.9 million for the nine months ended September 30, 2017.

~~Income tax expense~~

We recorded Income tax expense for the three months ended September 30, 2018 of $4.8 million, which primarily consists of $3.6 million of Foreign withholding tax and a $0.9 million Transition Tax associated with the Tax Act of 2017. We recorded Income tax expense for the three months ended September 30, 2017 of $4.3 million, which primarily consists of $4.1 million of Foreign withholding tax and $0.7 million from a Change in net deferred tax liabilities, partially offset by a $1.0 million benefit from State income tax.

We recorded Income tax expense for the nine months ended September 30, 2018 of $13.3 million, which primarily consists of $10.6 million of Foreign withholding tax, $1.2 million from a Change in indefinite reinvestment assertion regarding the indefinite reinvestment of certain foreign earnings, a $0.9 million Transition Tax associated with the Tax Act of 2017 and $0.6 million of Foreign income tax, partially offset by a $1.0 million benefit to continuing operations from a gain on discontinued operations. We recorded Income tax expense for the nine months ended September 30, 2017 of $13.8 million, which primarily consists of $11.1 million of Foreign withholding tax, $1.4 million from a Change in net deferred tax liabilities and $1.0 million of Foreign income tax.

~~The year-over-year decrease in foreign withholding taxes was due to a smaller portion of license fees received in 2018 coming from licensees in countries subject to foreign withholding taxes.~~

We have not completed our accounting for the effects of the Tax Act of 2017 which was signed into law on December 22, 2017. The Tax Act of 2017 enacted comprehensive tax reform that made broad and complex changes to the U.S. federal tax code as described in Note 14 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

~~Income from discontinued operations, net of tax~~

~~In the three and nine months ended September 30, 2018, we recognized Income from discontinued operations, net of tax of $0.1 million and $3.7 million, respectively, as a result of the~~ expiration of ~~certain indemnification obligations and~~these contracts by the ~~execution~~end of ~~settlement agreements during the period associated with previous business disposals, partially offset by an increase in legal defense costs.~~

~~Segment Results~~

We report segment information in the same way management internally organizes the business for assessing performance and making decisions regarding the allocation of resources to the business units. The terms Adjusted Operating Expenses and Adjusted EBITDA in the following discussion use the definitions provided in Note 15 of the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

~~Product~~

~~The Product segment's results of operations for the three and nine months ended September 30, 2018 compared to the prior year were as follows (dollars in thousands):~~

Three Months Ended September 30,
2018 2017 Change $ Change %
Platform Solutions $ 73,147
$ 82,244
$ (9,097 ) (11 )%
Software and Services 19,851
20,718
(867 ) (4 )%
Other 1,614
628
986
157 %
Product Revenues 94,612
103,590
(8,978 ) (9 )%
Adjusted Operating Expenses 79,347
91,307
(11,960 ) (13 )%
Adjusted EBITDA $ 15,265
$ 12,283
$ 2,982
24 %
Adjusted EBITDA Margin 16.1 % 11.9 %

Nine Months Ended September 30,
2018 2017 Change $ Change %
Platform Solutions $ 241,295
$ 253,398
$ (12,103 ) (5 )%
Software and Services 57,949
65,739
(7,790 ) (12 )%
Other 5,007
3,859
1,148
30 %
Product Revenues 304,251
322,996
(18,745 ) (6 )%
Adjusted Operating Expenses 250,280
280,314
(30,034 ) (11 )%
Adjusted EBITDA $ 53,971
$ 42,682
$ 11,289
26 %
Adjusted EBITDA Margin 17.7 % 13.2 %

For the three and nine months ended September 30, 2018, the $9.1 million and $12.1 million decrease in Platform Solutions revenue was primarily attributable to a decrease in hardware revenue due to a planned transition away from the hardware business. Platform Solutions revenue includes total hardware revenue of $3.9 million and $9.9 million for the three months ended September 30, 2018 and 2017, respectively, and $10.9 million and $34.7 million for the nine months ended September 30, 2018 and 2017, respectively. Hardware revenue is expected to continue to decline due to the planned transition away from the business and as MSO partners continue to shift to deploying the TiVo service on third-party hardware resulting in a decrease in the number of TiVo set-top boxes ("STBs") sold to MSO partners.

July 2018. In addition, ~~Platform Solutions~~ revenue from two international MSO software customers decreased by $4.5 million and $13.8 million for the three and nine months ended September 30, 2018, respectively, due to adopting the amended revenue recognition guidance on January 1, 2018. A reduction in revenue from these two international MSO customers is expected to continue for the remainder of 2018. These two international MSO software customer licenses included minimum guaranteed royalties, most of which were recorded as an adjustment to Accumulated deficit as part of the cumulative effect of adopting the amended revenue recognition guidance as we have separated the license and support into distinct performance obligations. Under the previous revenue recognition guidance, revenue from these transactions would have been recognized over the license term as we did not have vendor-specific objective evidence ("VSOE") of fair value of support. Under the amended revenue

~~recognition guidance, VSOE of fair value is no longer required, which results in revenue being recognized earlier than it would have been under the prior revenue recognition guidance.~~

The decrease in Platform Solutions revenue for the nine months ended September 30, 2018 was partially offset by a $22.8 million increase in revenue from an international MSO customer exercising a contractual option during the three months ended March 31, 2018 to purchase a fully paid license to its current version of the TiVo software and purchasing additional engineering services. Under the prior industry-specific software revenue recognition guidance, we would have recognized $1.9 million more and $19.9 million less in revenue for the three and nine months ended September 30, 2018, respectively, from this customer.

For the three months ended September 30, 2018, Software and Services revenue decreased $0.9 million primarily due to a $2.3 million decrease in advertising and analytics revenue and the expiration of our metadata license with Comcast on September 30, 2017. These decreases were partially offset by a $1.9 million increase in Personalized Content Discovery professional services revenue. For the nine months ended September 30, 2018, Software and Services revenue decreased $7.8 million as a result of a $5.2 million decrease in advertising and analytics revenue and a $4.1 million decrease in metadata revenue, which was primarily due to expiration of our metadata license with Comcast on September 30, 2017, partially offset by a $1.5 million increase in Personalized Content Discovery revenue.

~~For the three and nine months ended September 30, 2018, Other revenue is primarily derived from ACP sales, which is expected to decline in the future.~~

Product Adjusted Operating Expenses decreased 13% and 11% for the three and nine months ended September 30, 2018 compared to the prior year due to decreases of $5.7 million and $21.6 million, respectively, in Cost of hardware revenues as a result of the planned transition away from the hardware business and benefits from cost savings initiatives.

The increase in Adjusted EBITDA Margin for the three months ended September 30, 2018 primarily relates a shift in the Product business mix toward higher margin products as hardware becomes a smaller portion of the Product business as a result of the planned transition away from the hardware business and benefits from cost savings initiatives, partially offset by the effects of adopting the amended revenue recognition standard. The increase in Adjusted EBITDA Margin for the nine months ended September 30, 2018 includes a benefit from adopting the amended revenue recognition standard as a result of the fully paid software license discussed above, a shift in business mix toward higher margin products and benefits from cost savings initiatives.

~~Intellectual Property Licensing~~

~~The Intellectual Property Licensing segment's results of operations for the three and nine months ended September 30, 2018 compared to the prior year were as follows (dollars in thousands):~~

Three Months Ended September 30,
2018 2017 Change $ Change %
US Pay TV Providers $ 44,474
$ 63,288
$ (18,814 ) (30 )%
CE Manufacturers 8,859
15,479
(6,620 ) (43 )%
New Media, International Pay TV Providers and Other 16,764
15,541
1,223
8 %
Intellectual Property Licensing Revenues 70,097
94,308
(24,211 ) (26 )%
Adjusted Operating Expenses 23,461
24,243
(782 ) (3 )%
Adjusted EBITDA $ 46,636
$ 70,065
$ (23,429 ) (33 )%
Adjusted EBITDA Margin 66.5 % 74.3 %

Nine Months Ended September 30,
2018 2017 Change $ Change %
US Pay TV Providers $ 143,606
$ 195,365
$ (51,759 ) (26 )%
CE Manufacturers 26,754
38,296
(11,542 ) (30 )%
New Media, International Pay TV Providers and Other 52,795
55,563
(2,768 ) (5 )%
Intellectual Property Licensing Revenues 223,155
289,224
(66,069 ) (23 )%
Adjusted Operating Expenses 73,790
69,247
4,543
7 %
Adjusted EBITDA $ 149,365
$ 219,977
$ (70,612 ) (32 )%
Adjusted EBITDA Margin 66.9 % 76.1 %

For the three and nine months ended September 30, 2018, revenue from US Pay TV Providers decreased primarily due to decreases of $20.9 million and $51.2 million, respectively, in revenue from TiVo Solutions agreements entered into with AT&T, DirecTV, EchoStar and Verizon Communications, Inc. ("Verizon") prior to the TiVo Acquisition Date as a result of adopting the amended revenue recognition guidance on January 1, 2018 and contract expirations. Revenue from catch-up payments from US Pay TV Providers intended to make us whole for the pre-license period of use ~~increased revenue by $1.1 million and decreased revenue by $2.1 million~~ for the three and nine months ended September 30, ~~2018,~~2019 decreased by $0.3 million and $0.7 million, respectively.

~~Prior to the TiVo Acquisition Date, TiVo Solutions entered into agreements with AT&T, DirecTV, EchoStar and Verizon that expired by the end of July 2018. Revenue~~ These revenue declines from US Pay TV Providers ~~includes $2.8 million and $23.7 million for the three months ended September 30, 2018 and 2017, respectively,~~were partially offset by increases in revenue from ~~these agreements. Revenue from US Pay TV Providers includes $20.1 million and $71.3 million for the nine months ended September 30, 2018 and 2017, respectively, from these agreements. Consistent with~~ our expectations, to date, renewals of the TiVo Solutions intellectual property licenses have not been executed on terms consistent with TiVo Solutions' historical pricing, and we do not anticipate that the remaining agreements will be renewed on terms similar to their historical pricing.existing customers.

For the three and nine months ended September 30, ~~2018,~~2019, the ~~decrease~~increase in revenue from CE Manufacturers was ~~partially attributable to a customer being out-of-license. We anticipate this customer will eventually execute a new license. On occasion, we have licenses expire in a given period where~~primarily the ~~customer is licensed later in the year, which results in~~result of an increase of $6.5 million and $7.0 million, respectively, from catch-up payments ~~intended to make us whole for the out-of-license period. Revenue~~ from ~~catch-up payments~~CE Manufacturers intended to make us whole for the pre-license period of ~~use decreased~~use. These increases in revenue ~~from CE Manufacturers~~were partially offset by ~~$3.9 million and $4.1 million for the three and nine months ended September 30, 2018, respectively. Additionally,~~ a decrease in our licensees' market share, combined with continuing pressures on our licensees' business ~~models, has caused revenue from CE Manufacturers to decline.~~models. Such declines could continue unless we are able to successfully license new entrants to this market.

For the three and nine months ended September 30, ~~2018, the change in~~2019, New Media, International Pay TV Providers and Other reflects ~~growth~~an increase in revenue ~~from New Media~~compared to the prior period due to new licenses and ~~International Pay TV customers,~~contract amendments executed since the year ago period. This revenue increase for the three months ended September 30, 2019 was partially offset by a $2.1 million decrease ~~of $0.5 million~~ in revenue from catch-up payments intended to make us whole for the pre-license period of use. For the nine months ended September 30, ~~2018, the change in~~2019, New Media, International Pay TV Providers and Other reflects ~~a decrease~~an increase of ~~$5.3~~$12.3 million in revenue from catch-up payments intended to make us whole for the pre-license period of use, ~~partially offset by growth~~primarily related to expanding our license with Shaw Communications to include the TiVo Solutions patent portfolio and our first social media customer.

The 9% increase in ~~revenue from New Media and International Pay TV customers.~~

Intellectual Property Licensing Adjusted Operating Expenses ~~decreased 3% and increased 7% during the three and nine months ended September 30, 2018, respectively. For~~for the three months ended September 30, ~~2018,~~2019 reflects a $1.5 million impairment charge associated with a prepaid license that is not expected to be recoverable from the ~~decline in Adjusted Operating Expenses reflects benefits~~net direct revenue resulting from ~~cost savings initiatives, partially offset by~~patent license agreements executed with new customers and a ~~$1.1~~$0.5 million increase in patent litigation costs, which was primarily ~~relates~~related to the timing of costs incurred in ongoing ~~Comcast~~ litigation. ~~For~~The 7% decrease in Intellectual Property Licensing Adjusted Operating Expenses during the nine months ended September 30, ~~2018, the increase in Adjusted Operating Expenses~~2019 reflects an ~~$11.2~~$8.2 million ~~increase~~decrease in patent litigation costs, which was primarily ~~relates~~related to the timing of costs incurred in ongoing ~~Comcast litigation,~~litigation. This decrease in costs was partially offset by ~~benefits~~$2.6 million of impairment charges associated with a prepaid license that is not expected to be recoverable from ~~cost savings initiatives.~~the net direct revenue resulting from patent license agreements executed with new customers.

The decrease in Adjusted EBITDA Margin for the three ~~and nine~~ months ended September 30, ~~2018~~2019 is primarily the result of the $1.5 million impairment charge associated with a ~~decrease in Intellectual Property Licensing revenue~~prepaid license and an increase in patent litigation costs, which were partially offset by ~~benefits from cost savings initiatives.~~an increase in Intellectual Property Licensing revenue. The increase in Adjusted EBITDA Margin for the nine months ended September 30, 2019 is primarily the result of the decrease in patent litigation costs combined with an increase in Intellectual Property Licensing revenue, partially offset by $2.6 million of impairment charges associated with a prepaid license.

Corporate

~~Corporate~~

Corporate costs primarily include general and administrative costs such as corporate management, finance, legal and human resources.

Corporate costs for the three and nine months ended September 30, ~~2018~~2019 compared to the prior year were as follows (dollars in thousands):

Three Months Ended September 30,
2018 2017 Change $ Change %
Adjusted Operating Expenses $ 14,825
$ 15,851
$ (1,026 ) (6 )%



	Three Months Ended September 30,
	2019		2018		Change $			Change %
Adjusted Operating Expenses	$	13,427	$	14,825	$	(1,398	)	(9	)%

Nine Months Ended September 30,
2018 2017 Change $ Change %
Adjusted Operating Expenses $ 45,385
$ 47,084
$ (1,699 ) (4 )%



	Nine Months Ended September 30,
	2019		2018		Change $			Change %
Adjusted Operating Expenses	$	44,048	$	45,385	$	(1,337	)	(3	)%

For the three and nine months ended September 30, ~~2018,~~2019, the decrease in Corporate Adjusted Operating Expenses primarily reflects a ~~benefit~~decrease in compensation costs and other benefits from ~~cost savings initiatives.~~our transformation and restructuring activities.

Liquidity and Capital Resources

We finance our business primarily from operating cash flow. We believe our cash position remains strong and our cash, cash equivalents and marketable securities and anticipated operating cash flow, supplemented with access to capital markets as necessary, are generally sufficient to support our operating businesses, capital expenditures, restructuring activities, maturing debt, interest payments and income tax payments, in addition to investments in future growth opportunities ~~and payments for dividends and share repurchases~~ for at least the next twelve months. Our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions; however, our use of a variety of funding sources to meet our liquidity needs is designed to facilitate continued access to sufficient capital resources under such conditions. Based on current market and business conditions, if we were to refinance our existing debt, we anticipate our cost of borrowing would increase.

As of September 30, ~~2018,~~2019, we had ~~$149.7~~$144.5 million in Cash and cash equivalents, ~~$162.1~~$132.2 million in Short-term marketable securities and ~~$70.3~~$5.0 million in Long-term marketable securities. Our cash, cash equivalents and marketable securities are held in numerous locations around the world, with ~~$84.6~~$38.9 million held by our foreign subsidiaries as of September 30, ~~2018.~~2019. Due to our net operating loss carryforwards and the effects of the Tax Act of 2017, we could repatriate amounts to the U.S. with minimal income tax effects.

Sources and Uses of Cash

Cash flows for the nine months ended September 30, ~~2018~~2019 compared to the prior year were as follows (in thousands):

Nine Months Ended September 30,
2018 2017 Change $ Change %
Net cash provided by operating activities of continuing operations $ 113,735
$ 51,259
$ 62,476
122 %
Net cash used in investing activities (24,868 ) (88,206 ) 63,338
(72 )%
Net cash used in financing activities (67,712 ) (64,506 ) (3,206 ) 5 %
Effect of exchange rate changes on cash and cash equivalents (465 ) 1,613
(2,078 ) (129 )%
Net increase (decrease) in cash and cash equivalents $ 20,690
$ (99,840 ) $ 120,530
(121 )%



	Nine Months Ended September 30,
	2019			2018			Change $			Change %
Net cash provided by operating activities - Continuing operations	$	41,645		$	113,735		$	(72,090	)	(63	)%
Net cash provided by (used in) investing activities	73,986			(24,868		)	98,854			(398	)%
Net cash used in financing activities	(132,976		)	(67,712		)	(65,264		)	96	%
Net cash used in operating activities - Discontinued operations	(25		)	—			(25		)	N/a
Effect of exchange rate changes on cash and cash equivalents	(134		)	(465		)	331			(71	)%
Net (decrease) increase in cash and cash equivalents	$	(17,504	)	$	20,690		$	(38,194	)	(185	)%

~~Net cash provided by operating activities of continuing operations for~~For the nine months ended September 30, ~~2018 increased $62.5~~2019, operating cash flow decreased $72.1 million. The ~~increase~~decrease was primarily due to the timing of collections on Accounts receivable, net, ~~$45.3 million of cash used~~a decrease in 2017 to prepay a license and lower payments in 2018 for restructuring plans and corporate bonuses, partially offset by $7.4 million in payments related to TiVo Solutions' acquisition of Cubiware as performance milestones were achieved during the nine months ended September 30, 2018 and certain cash collections in advance of revenue being recognized ~~in 2017.~~and payments for Separation and transformation costs. We expect to make material cash payments for ~~restructuring actions in connection with the~~ ~~Profit Improvement Plan~~Separation and transformation costs through ~~the middle of 2019.~~2020. The availability of cash generated by our operations in the future could be

adversely affected by business

risks including, but not limited to, the Risk Factors described in Part II, Item 1A. of this Quarterly Report on Form 10-Q, which are incorporated by reference herein.

~~Net cash used in investing activities for~~For the nine months ended September 30, ~~2018 decreased $63.3~~2019, investing cash flow increased $98.9 million. Net proceeds from marketable security investment transactions ~~decreased~~increased by ~~$36.1~~$104.4 million compared to the prior year. The proceeds from the investment transactions were primarily used to repay debt during the nine months ended September 30, 2019. The decrease in capital expenditures for the nine months ended September 30, ~~2018~~2019 was primarily associated with infrastructure projects designed to integrate ~~the~~ TiVo ~~Acquisition~~Solutions in ~~2017.~~2018. We expect ~~2018~~2019 full year capital expenditures of approximately $20 million to $25 millionfor infrastructure projects designed to support anticipated growth in our business, ~~and~~ to strengthen our operations ~~infrastructure. We also expect elevated capital expenditures~~infrastructure and to ~~continue in 2019 as we complete~~prepare for the ~~facility rationalization portion~~Separation. Partially offsetting these cash flow benefits was $6.9 million of ~~our~~ ~~Profit Improvement Plan~~.cash paid to acquire patent portfolios during the nine months ended September 30, 2019.

~~Net~~Financing cash ~~used in investing activities~~flow for the nine months ended September 30, ~~2017 also~~2019 reflects ~~transactions related~~the repurchase of $50.0 million of outstanding principal of the Company's 2020 Convertible Notes for $49.4 million and a $46.6 million principal payment on Term Loan Facility B compared to ~~the Dissenting Holders in connection with the TiVo Acquisition. On November 15, 2016, holders~~$5.3 million of ~~9.1 million shares of TiVo Solutions common stock outstanding at the TiVo Acquisition Date who did not vote to approve the TiVo Acquisition filed a petition for appraisal~~principal payments in the Delaware Court of Chancery. On March 27, 2017, TiVo Corporation agreed to settle the claims of the Dissenting Holders for $117.0 million, which was paid in cash in April 2017. In connection with the settlement, in March 2017, the exchange agent in the TiVo Acquisition returned $25.1 million in cash related to the Dissenting Holders to TiVo Corporation. For additional details regarding the settlement with the Dissenting Holders, see Note 2 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

nine months ended September 30, 2018. Net cash used in financing activities for the nine months ended September 30, ~~2018 includes a decrease~~2019 reflects dividend payments of ~~$6.0~~$0.34 per share, resulting in aggregate cash payments of $42.5 million compared to dividend payments of $0.54 per share, resulting in ~~tax withholding~~aggregate cash payments ~~from the net share settlement~~ of ~~restricted awards, partially offset by a decrease in cash receipts of $9.5~~$66.7 million ~~from sales of stock through our employee stock purchase plan and the exercise of employee stock options. Net cash used in financing activities~~ for the nine months ended September 30, ~~2018~~2018.

In connection with the Separation, the Product and ~~2017 each reflect $5.3 million in principal payments on Term Loan Facility B. The nine months ended September 30, 2017 also includes~~Intellectual Property Licensing businesses will evaluate the ~~effect of refinancing Term Loan Facility B. For the nine months ended September 30, 2018 and 2017, dividends of $0.54 per share were declared resulting in an aggregate cash~~ payment of ~~$66.7 million~~dividends to shareholders in the future, if any. The capacity to pay dividends in the future depends on many factors, including their financial condition, results of operations, capital requirements, capital structure, industry practice and ~~$65.2 million, respectively.~~other business conditions that their respective Boards of Directors consider relevant. In addition, the agreements governing our debt, or new debt that may be incurred in the future, may limit or prohibit the payment of dividends.

On February 14, 2017, TiVo Corporation's Board of Directors approved an increase to the stock repurchase program authorization to $150.0 million, which remains available as of September 30, ~~2018.~~2019. The February 2017 authorization includes amounts which were outstanding under previously authorized share repurchase programs.

Capital Resources

The outstanding principal and carrying amount of debt we issued or assumed was as follows (in thousands):


	September 30, 2018				December 31, 2017				September 30, 2019				December 31, 2018
	Outstanding Principal		Carrying Amount		Outstanding Principal		Carrying Amount		Outstanding Principal		Carrying Amount		Outstanding Principal		Carrying Amount
2020 Convertible Notes	$	345,000	$	322,849	$	345,000	$	311,766	$	295,000	$	289,284	$	345,000	$	326,640
2021 Convertible Notes	48		48		48		48		48		48		48		48
Term Loan Facility B	670,250		666,904		675,500		671,281		621,912		619,899		668,500		665,449
Total	$	1,015,298	$	989,801	$	1,020,548	$	983,095	$	916,960	$	909,231	$	1,013,548	$	992,137

~~During the next twelve months, $7.0~~While $295.0 million of ~~outstanding principal~~2020 Convertible Notes is scheduled to ~~mature.~~ mature on March 1, 2020, the 2020 Convertible Notes can be freely converted by holders beginning December 1, 2019. The 2020 Convertible Notes may be converted by holders prior to December 1, 2019 in certain circumstances.

For more information on our borrowings, see Note 109 to the Condensed Consolidated Financial Statements included in Part I, Item 11. of this Quarterly Report on Form 10-Q, which is incorporated by reference herein. Our ability to make payments on and to refinance our indebtedness depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions. If our cash flows and capital resources are insufficient to service our debt obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. For additional information about liquidity risk, see the Risk Factors described in Part II, Item 1A. of this Quarterly Report on Form 10-Q, which are incorporated by reference herein.

2020 Convertible Notes

Rovi issued $345.0 million in aggregate principal of 0.500% Convertible Notes that mature on March 1, 2020 at par pursuant to an Indenture dated March 4, 2015 (the "2015 Indenture"). In June 2019, the Company repurchased $50.0 million of outstanding principal of the 2020 Convertible Notes.

are convertible at a conversion rate of ~~37.4422~~39.7348 shares of TiVo Corporation common stock per $1,000 principal of notes, which is equivalent to a conversion price of ~~$26.7078~~$25.1668 per share of TiVo Corporation common stock.

Holders may convert the 2020 Convertible Notes prior to the close of business on the business day immediately preceding December 1, 2019, in multiples of $1,000 of principal under the following circumstances:

during any calendar quarter commencing after the calendar quarter ending on June 30, 2015 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

~~during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 of principal of~~ ~~2020 Convertible Notes~~ ~~for each trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or~~


•	during the five business day period after any ten consecutive trading day period in which the trading price per $1,000 of principal of 2020 Convertible Notes for each trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or

on the occurrence of specified corporate events.

In addition, during the 35-day trading period following a Merger Event, as defined in the 2015 Indenture, holders may convert the 2020 Convertible Notes, in multiples of $1,000 of principal.

On conversion, a holder will receive the conversion value of the 2020 Convertible Notes converted based on the conversion rate multiplied by the volume-weighted average price of our common stock over a specified observation period. On conversion, Rovi will pay cash up to the aggregate principal of the 2020 Convertible Notes converted and deliver shares of our common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal of the 2020 Convertible Notes being converted.

The conversion rate is subject to adjustment in certain events, including certain events that constitute a "Make-Whole Fundamental Change" (as defined in the 2015 Indenture). In addition, if we undergo a "Fundamental Change" (as defined in the 2015 Indenture) prior to March 1, 2020, holders may require Rovi to repurchase for cash all or a portion of the 2020 Convertible Notes at a repurchase price equal to 100% of the principal of the repurchased 2020 Convertible Notes, plus accrued and unpaid interest. The conversion rate is also subject to customary anti-dilution adjustments.

2021 Convertible Notes

TiVo Solutions issued $230.0 million in aggregate principal of 2.0% Convertible Senior Notes that mature October 1, 2021 (the ~~"2021~~"2021 Convertible ~~Notes"~~Notes") at par pursuant to an Indenture dated September 22, 2014 ("the 2014 Indenture"). On October 12, 2016, TiVo Solutions repaid $229.95 million of the par value of the ~~2021 Convertible Notes.~~

~~The~~ 2021 Convertible Notes.

Fundamental Change” (as defined in the 2014 Indenture) prior to the maturity date of the 2021 Convertible Notes, TiVo Solutions will, in some cases, increase the conversion rate for a holder that elects to convert its 2021 Convertible Notes in connection with such Make-Whole Fundamental Change.

Senior Secured Credit Facility

On July 2, 2014, Rovi Corporation, as parent guarantor, and two of its wholly-owned subsidiaries, Rovi Solutions Corporation and Rovi Guides, Inc., as borrowers, and certain of its other subsidiaries, as subsidiary guarantors, entered into a Credit Agreement (the “Credit Agreement”). After the completion of the TiVo Acquisition, TiVo Corporation became a guarantor under the Credit Agreement. The Credit Agreement provided for a (i) five-year $125.0 million term loan A facility (the “Term Loan Facility A”), (ii) seven-year $700.0 million term loan B facility (the “Term Loan Facility B” and together with Term Loan Facility A, the “Term Loan Facility”) and (iii) five-year $175.0 million revolving credit facility (including a letter of credit sub-facility) (the "Revolving Facility” and together with the Term Loan Facility, the “Senior Secured Credit Facility”). In September 2015, Rovi made a voluntary principal prepayment to extinguish Term Loan Facility A and elected to terminate the Revolving Facility.

Prior to the refinancing described below, Term Loan Facility B was amortizing in equal quarterly installments in an aggregate annual amount equal to 1% of the original principal amount thereof, with any remaining balance payable on the final maturity date of Term Loan Facility B. ~~Prior to the refinancing described below, loans~~Loans under Term Loan Facility B bore interest, at our option, at a rate equal to either LIBOR, plus an applicable margin equal to 3.00% per annum (subject to a 0.75% LIBOR floor) or the prime lending rate, plus an applicable margin equal to 2.00% per annum.

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to us and our subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, dividends and other distributions. The Credit Agreement is secured by substantially all of the Company's assets. WeAnnually, we may be required to make an additional principal payment on Refinancing Agreement No. 1, ~~each February. This payment~~which is calculated as a percentage of the prior year's "Excess Cash Flow" as defined in the Credit Agreement. ~~No additional~~In February 2019, the Company made an Excess Cash Flow payment ~~was required~~of $46.6 million, which eliminated the remaining quarterly principal payments. The outstanding principal balance of Term Loan Facility B is due in ~~February 2018.~~July 2021.

Critical Accounting Policies and Estimates

The preparation of our Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying ~~notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~notes. Our estimates, assumptions and judgments are based on historical experience and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Making estimates, assumptions and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Management believes the estimates, assumptions and judgments employed and resulting ~~amounts~~balances reported in the Condensed Consolidated Financial Statements are reasonable; however, actual results could differ materially.

On January 1, 2017, we adopted an amended accounting standard for revenue recognition. For additional information, see Note 1 and Note 5 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which are incorporated by reference herein. Other than the adoption of the amended revenue recognition guidance,Except as disclosed below, there have been no significant changes to our critical accounting policies and estimates as compared to those disclosed in "Critical Accounting Policies and Estimates" in Part II, Item 77. of our Annual Report on Form 10-K, which is incorporated by reference herein.

Goodwill

Goodwill represents the excess of cost over fair value of the net assets of an acquired business. The recoverability of goodwill is assessed at the reporting unit level, which is either the operating segment or one level below. Goodwill is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate their carrying amount may not be recoverable.

Qualitative factors are first assessed to determine whether events or changes in circumstances indicate it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. Qualitative factors which could trigger an interim impairment review, include, but are not limited to a:

significant deterioration in general economic, industry or market conditions;

significant adverse development in cost factors;

significant deterioration in actual or expected financial performance or operating results;

significant adverse changes in legal factors or in the business climate, including adverse regulatory actions or assessments; and

significant sustained decrease in share price.

If, based on the qualitative assessment, it is considered more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then a quantitative impairment test is performed. In the quantitative impairment test, the fair value of each reporting unit is compared to its carrying amount. The fair value of the Product reporting unit and the Intellectual Property Licensing reporting unit is estimated using an income approach. Under the income approach, the fair value of a reporting unit is estimated based on the present value of estimated future cash flows and considers estimated revenue growth rates, future operating margins and risk-adjusted discount rates. The carrying amount of a reporting unit is determined by assigning the assets and liabilities, including goodwill and intangible assets, to the reporting unit. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the fair value of a reporting unit is less than its carrying amount, an impairment loss equal to the difference is recognized.

The process of evaluating goodwill for potential impairment is subjective and requires significant estimates, assumptions and judgments particularly related to the identification of reporting units, the assignment of assets and liabilities to reporting units and estimating the fair value of each reporting unit. Estimating the fair value of a reporting unit considers future revenue growth rates, operating margins, income tax rates and economic and market conditions, as well as risk-adjusted discount rates and the identification of appropriate market comparable data.

During September 2019, sufficient indicators of potential impairment were identified that management concluded it was more-likely-than-not that goodwill was impaired and a quantitative interim goodwill impairment test should be performed as of September 30, 2019 for the Product and Intellectual Property Licensing reporting units. Indicators of potential impairment included a significant and sustained decline in the trading price of TiVo's common stock, as well as lower-than-previously forecast revenue and profitability levels for the Product reporting unit and downward revisions to this reporting unit's short- and long-term forecasts. The forecast revisions for the Product reporting unit were identified as part of TiVo's 2020 budgeting process and reflect lower expectations for its Platform Solutions products, including changes in both the market and business models internationally.The changes in such expectations related to revenue growth rates, current market trends, business mix, cost structure and other expectations about the anticipated short- and long-term operating results. As a result of the quantitative interim goodwill impairment test performed as of September 30, 2019, a Goodwill impairment charge of $137.5 million was recognized, of which $79.3 million relates to the Product reporting unit and $58.2 million relates to the Intellectual Property Licensing reporting unit. The Goodwill impairment charge for the Intellectual Property Licensing reporting unit resulted from an increase in the discount rate used to estimate fair value due to the decline in the trading price of TiVo's common stock.

Following the recognition of the Goodwill impairment charge, the equity fair value of the Product reporting unit equaled its carrying amount of $461.2 million and the equity fair value of the Intellectual Property Licensing reporting unit equaled its carrying amount of $829.1 million, which is net of the Company's debt. A deterioration in conditions or circumstances similar to those described above may result in additional goodwill impairment charges for the Product or Intellectual Property Licensing reporting units in the future. In addition, if we fail to renew licenses, or renew licenses with materially different terms than those assumed, if there is an adverse outcome with respect to patent infringement claims we have asserted against Comcast, an impairment of goodwill for the Intellectual Property Licensing reporting unit could result, the effect of which could be material.

No goodwill impairment charges were recognized as a result of an interim or annual goodwill impairment test during the first two quarters of 2019.

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 ended December 31, ~~2017,~~2018, which is incorporated by reference herein.

~~Revenue Recognition~~

~~General~~

~~Revenue is recognized when control~~ Other than the repurchase of $50.0 million of outstanding principal of the ~~promised goods or services is transferred to a customer~~Company's 2020 Convertible Notes in ~~an amount that reflects~~June 2019, the ~~consideration we expect to receive~~$46.6 million principal payment on Term Loan Facility B in exchange for those goods or services, which may include various combinations of products and services which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

~~Arrangements with Multiple Performance Obligations~~

Some of our contracts with customers contain multiple performance obligations. For these contracts, the individual performance obligations are separately accounted for if they are distinct. In an arrangement with multiple performance obligations, the transaction price is allocated among the separate performance obligations on a relative stand-alone selling price basis. The determination of stand-alone selling price considers market conditions, the size and scope of the contract, customer and geographic information, and other factors. The allocation of transaction price among performance obligations in a contract may impact the amount and timing of revenue recognized in the Condensed Consolidated Statements of Operations during a given period.

~~Contract Modifications~~

Contracts may be modified due to changes in contract specifications or customer requirements. Contract modifications occur when the change in terms either creates new enforceable rights and obligations or changes existing enforceable rights and obligations. The effect of a contract modification for goods and services that are not distinct in the context of the contract on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis. Contract modifications that result in goods or services that are distinct from the previously existing contract are accounted for prospectively.

~~Variable Consideration~~

When a contract with a customer includes a variable transaction price, an estimate of the consideration to which we expect to be entitled to for transferring the promised goods or services is made at contract inception. Depending on the terms of the contract, variable consideration is estimated using either the expected value approach or the most likely value approach. Under either approach to estimating variable consideration, the estimate considers all information (historical, current and forecast) that is reasonably available at contract inception. The amount of variable consideration is estimated at contract inception and updated as additional information becomes available. The estimate of variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Subsequent changes in the transaction price resulting from changes in the estimate of variable consideration are allocated to the performance obligations in the contract on the same basis as at contract inception.

~~Significant Judgments~~

Significant judgment is required to determine the stand-alone selling price for each distinct performance obligation when an observable price is not available. In instances where stand-alone selling price is not directly observable, such as when we do not sell the good or service separately, the stand-alone selling price is determined using a range of inputs that includes market conditions and other observable inputs. More than one stand-alone selling price may exist for individual goods and services due to the stratification of those goods and services, considering attributes such as the size of the customer and geographic region.

Due to the nature of the work required to be performed on some performance obligations, significant judgment may be required to determine the transaction price. It is common for our license agreements to contain provisions that can either increase or decrease the transaction price. These variable amounts are generally estimated based on usage or the achievement of performance metrics. In addition to estimating variable consideration, significant judgment is necessary to identify forms of variable consideration, determine whether the variable consideration relates to a sales-based or usage-based royalty of intellectual propertyFebruary 2019 and the ~~determination~~$4.3 million paid in January 2019 in connection with an agreement executed in December 2018 to acquire a portfolio of ~~whether and when to include estimates of variable consideration in the transaction price.~~patents, our contractual obligations have not changed materially since December 31, 2018.

In contracts where we do not host the TiVo service and that include engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of software, we recognize revenue as progress toward completion occurs using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Significant judgment is required to estimate the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement.

~~Nature of goods and services~~

~~The following is a discussion of the principal activities from which we generate revenue.~~

~~Patent Licensing Agreements~~

We license our discovery patent portfolio to traditional pay TV providers, virtual service providers, OTT video providers, CE manufacturers and others. We license our patented technology portfolio under two revenue models: (i) fixed fee licenses and (ii) per-unit royalty licenses.

Our long-term fixed-fee license agreements provide 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 and is granted a license to ship an unlimited number of units 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 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 and in what geographies these units where shipped, the number of units expected to be shipped in the future and in what geographies these units are expected to be shipped, as well as the licensing rate we generally

receive for 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.

We recognize revenue from per-unit royalty licenses in the period in which the licensee's sales are estimated to have occurred, which results in an adjustment to revenue when actual sales are subsequently reported by the licensees, which is generally in the month or quarter following usage or shipment. We generally recognize revenue from per-unit royalty licenses on a per-subscriber per-month model for licenses with service providers and a per-unit shipped model for licenses with CE manufacturers.

~~Arrangements with Multiple System Operators for the TiVo Service~~

Our arrangements with multiple system operators ("MSOs") typically include software customization and set-up services, associated maintenance and support, limited training, post-contract support, TiVo-enabled digital video recorders ("DVRs"), non-DVR STBs and the TiVo service.

We have two types of arrangements with MSOs that include technology deployment and engineering services. In instances where we host the TiVo service, non-refundable payments received for customization and set-up services are deferred and recognized as revenue over the contractual term. The related cost of such services is capitalized to the extent it is deemed recoverable and amortized to cost of revenues over the same period as the related TiVo service revenue is recognized. We estimate the stand-alone selling prices for training, DVRs, non-DVR STBs and maintenance and support based on the price charged in stand-alone sales of the promised good or service. The stand-alone selling price for the TiVo service is determined considering the size of the MSO and expected volume of deployment, market conditions, competitive landscape, internal costs and total gross margin objectives. For a term license to the TiVo service, we receive license fees for the hosted TiVo service on either a per-subscriber per-month basis or a fixed fee. We recognize revenue from per-subscriber per-month licenses during the month the TiVo service is provided to the customer and recognizes revenue from fixed fee licenses ratably over the license period.

In arrangements where we do not host the TiVo service and that include engineering services that are essential to the functionality of the licensed technology or involve significant customization or modification of the software, we recognize revenue as progress toward completion is made using an input method based on the ratio of costs incurred to date to total estimated costs of the project. Project costs are primarily labor related to the specific activities required for the project. Costs related to general infrastructure or uncommitted platform development are not included in the project cost estimates and are expensed as incurred. Estimating project costs requires forecasting costs, tracking progress toward completion and projecting the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement, and revisions to estimates are recognized on a cumulative catch-up basis when the changed conditions become known. Provisions for losses are recorded when estimates indicate it is probable that a loss will be incurred for the contract. We generally recognize revenue from license fees for the TiVo service that it does not host on a per-subscriber per-month basis due to the recognition constraint on intellectual property usage-based royalties.

~~Subscription Services~~

Subscription services revenues primarily consist of fees to provide customers with access to one or more of our hosted products such as our i-Guide IPG, advanced search and recommendations, metadata and analytics products, including routine customer support. We generally receive per-subscriber per-month fees for our i-Guide IPG and search and recommendations service and revenue is recorded in the month the customer uses the service. We generally receive a monthly or quarterly fee from its metadata or analytics licenses for the right to use its metadata or access its analytics platform and to receive regular updates. Revenue from our metadata and analytics service is recognized ratably over the subscription period.

~~Passport Software~~

We license our Passport IPG software to pay TV providers in North and South America. We generally receive per-subscriber per-month fees for licenses to the Passport IPG software and support. Due to the usage-based royalty provisions of the revenue recognition guidance, revenue is generally recognized in the month the customer uses the software.

~~Advertising~~

We generate advertising revenue through our IPGs. Advertising revenue is recognized when the related advertisement is provided. Advertising revenue is recorded net of agency commissions and revenue shares with service providers and CE manufacturers.

~~TiVo-enabled DVRs and TiVo Service~~

We sell TiVo-enabled DVRs and the related service directly to customers through sales programs via the TiVo.com website and license the sale of TiVo-enabled DVRs through a limited number of retailers. For sales through the TiVo.com website, the customer receives a DVR and commits to either a minimum subscription period of one year or for the lifetime of the DVR. After the initial subscription period, customers have various pricing options when they renew their subscription. Customers have the right to return the DVR within 30 days of purchase. Customers have the right to cancel their subscription to the TiVo service within 30 days of subscription activation for a full refund. For licensed sales of TiVo-enabled DVRs through retailers, the customer commits to either a minimum subscription period of one year or for the lifetime of the DVR.

The stand-alone selling price for the TiVo service is established based on stand-alone sales of the service and varies by the length of the service period. The stand-alone selling price of the DVR is determined based on the price for which we would sell the DVR without any service commitment from the customer.

The transaction price allocated to the DVR is recognized as revenue on delivery and the transaction price allocated to the TiVo service is recognized as revenue ratably over the service period. Subscription revenues from lifetime subscriptions are recognized ratably over the estimated useful life of the DVR associated with the subscription. The estimated useful life for a DVR depends on a number of assumptions, including, but not limited to, customer retention rates, the timing of new product introductions and historical experience. As of September 30, 2018, we recognize revenue for lifetime subscriptions over a 66-month period. We periodically reassess the estimated useful life of a DVR. When the actual useful life of the DVR materially differs from our estimate, the estimated useful life of the DVR is adjusted, which could result in the recognition of revenue over a longer or shorter period of time.

~~Contractual Obligations~~

As a result of TiVo Solutions' acquisition of Cubiware, certain payments contingent on the occurrence of specified events may be payable. The contingent payments include guaranteed payments of $9.0 million provided certain key individuals remained employed through May 2018 and additional cash earn-outs (not to exceed $14.4 million in aggregate) payable through May 2018 contingent on the achievement of certain revenue and earnings before interest, depreciation, income taxes and amortization targets for each of the twelve month periods following the date of TiVo Solutions' acquisition of Cubiware. During the nine months ended September 30, 2018, $5.5 million was paid related to the guaranteed payments and $1.9 million was paid related to the additional earn-out. As of September 30, 2018, total payments of $5.2 million have been earned, but remain unpaid pending the resolution of a matter for which the selling shareholders have an indemnification obligation to TiVo Solutions.

In the normal course of business, we order finished goods inventory with advanced lead times from a third party that allow the third party to procure inventory based on our purchase orders. As a result of a manufacturing outsourcing agreement that became effective during the nine months ended September 30, 2018, our unconditional purchase obligations as of September 30, 2018 were reduced to $4.4 million.

For information about our ~~contractual obligations,~~off-balance sheet arrangements, see ~~"Contractual Obligations"~~"Off-Balance Sheet Arrangements" in Part II, Item 77. of our Annual Report on Form 10-K for the year ended December 31, ~~2017, which is incorporated by reference herein. Other than the items described above, our contractual obligations have not changed materially since December 31, 2017.~~

~~Off-Balance Sheet Arrangements~~

~~For information about our off-balance sheet arrangements, see "Off-Balance Sheet Arrangements" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2017,~~2018, which is incorporated by reference herein. Since December 31, ~~2017,~~2018, we have not engaged in any material off-balance sheet arrangements, including the use of structured

finance vehicles, special purpose entities or variable interest entities.

Recent Accounting Pronouncements

For a summary of applicable recent accounting pronouncements, see Note 1 to the Condensed Consolidated Financial Statements included in Part I, Item 11. of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we are exposed to market risks, including those related to changes in interest rates, foreign currency exchange rates and security prices that could affect our financial position, results of operations or cash flows. For quantitative and qualitative disclosures about market risk, see Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, which is incorporated reference herein. Our exposure to market risk has not changed materially since December 31, ~~2017.~~2018.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of management, including our ~~Interim~~ Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). In evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on their evaluation, our ~~Interim~~ Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

We believe there have been no changes to our internal controls over financial reporting during the quarter ended September 30, ~~2018,~~2019, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. ~~OTHER INFORMATION~~

ITEM 1. LEGAL PROCEEDINGS

Information with respect to this item is contained in Note 11 to the Condensed Consolidated Financial Statements included in Part I, Item 11. of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

ITEM 1A. RISK FACTORS

Management believes that there have been no significant changes to the risk factors associated with our business as compared to those disclosed in Part 1, Item 1A1A. of our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, which is incorporated by reference ~~herein.~~herein, other than as described below.

Our plan to separate into two independent, publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time, expense and management attention, any of which could negatively impact our businesses, financial condition, results of operations and prospects.

On May 9, 2019, we announced that our Board of Directors has unanimously approved a plan to separate our Product and IP Licensing businesses (the “Separation”). The Separation is expected to be completed through a dividend of newly issued shares of the common stock of a Company subsidiary that will hold the Product business (“ProductCo”). We currently intend that the Separation will be completed in a manner generally intended to qualify as tax-deferred to our stockholders for U.S. federal income tax purposes (the “Distribution”).

The Separation will be subject to customary closing conditions, including, among others, obtaining final approval from the TiVo Board of Directors, receipt of tax opinions, and the effectiveness of an applicable registration statement with the U.S. Securities and Exchange Commission.

Unanticipated developments, including difficulty in separating the assets and resources of our Product business from the rest of our assets and resources, changes to the competitive environment for the respective Product and IP Licensing businesses, possible delays in obtaining or failure to obtain tax opinions, an IRS ruling on the tax-deferred nature of the Distribution, regulatory or other approvals or clearances to approve or facilitate the Separation, including the Distribution, uncertainty in financial markets and other challenges in executing the Separation as planned, including addressing any impact of the Separation and the Distribution on our existing credit facilities and convertible notes, could delay or prevent the Distribution, or cause the Separation, including the Distribution, to occur on terms or conditions that are different or less favorable than expected.

We expect that the process of completing the Separation, including the Distribution, will be time-consuming and involve significant costs and expenses, which may be significantly higher than those currently anticipated and may not yield a discernible benefit if the Separation, including the Distribution, is not completed. Furthermore, the time and energy required of our senior management and other employees to plan and execute the Separation may lead to increased costs, negative effects on relationships with business partners, suppliers, and customers, and disruptions in operations, and may ultimately harm our businesses, financial condition and results of operations. We may also experience difficulty attracting, retaining and motivating employees during the pendency of the Separation, including the Distribution, which could also harm our businesses, financial condition, and results of operations.

If the Separation, including the Distribution, is completed, there is a further risk that the sum of the value of the two independent, publicly traded companies will be less than the value of the Company before the Separation. There is also a risk that we may not be able to achieve the full strategic, operational and financial benefits to us and our Product business that are anticipated to result from the Separation, including the Distribution, or that such benefits may be delayed or not occur at all.

This Quarterly Report on Form 10-Q does not constitute an offer to sell or a solicitation of an offer to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

We may choose to repurchase shares under our ongoing repurchase program when sufficient liquidity exists, the shares are trading at a discount relative to estimated intrinsic value and there are no alternative investment opportunities expected to generate a higher risk-adjusted return on investment.

The following table provides information about the Company's purchases of its common stock during the three months ended September 30, ~~2018~~2019 (in thousands, except per share amounts):

Period Total Number of Shares Purchased (1) Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 2018 —
$ —
— $ 150,000
August 2018 —
$ —
— $ 150,000
September 2018 —
$ —
— $ 150,000
Total —
$ —
—



Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 2019	—	$	—	—	$	150,000
August 2019	—	$	—	—	$	150,000
September 2019	—	$	—	—	$	150,000
Total	—	$	—	—


(1)	Excludes shares withheld to satisfy minimum statutory tax withholding requirements in connection with the net share settlement of restricted ~~stock units.~~awards on vesting. During the three months ended September 30, ~~2018,~~2019, we withheld ~~0.2~~0.3 million shares of common stock to satisfy ~~$2.6~~$2.3 million of required withholding taxes.


(2)	On February 14, 2017, TiVo Corporation's Board of Directors approved an increase to its common stock repurchase program authorization to $150.0 million. The February 2017 authorization includes amounts which were outstanding under previously authorized share repurchase programs.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Incorporated by Reference
Exhibit Number Exhibit Description Company Form+
Filing
Date

Exhibit
Number
Filed Herewith
10.01
Form of Notice of Restricted Stock Unit/Restricted Stock Unit Agreement pursuant to Rovi 2008 Equity Incentive Plan**
X
10.02
Form of Notice of Restricted Stock Unit/Restricted Stock Unit Agreement pursuant to TiVo Corporation Titan Equity Incentive Plan**
X
10.03
2018 Senior Executive Company Incentive Plan**
X
10.04
Offer letter to Raghavendra Rau dated July 23, 2018**
8-K July 27, 2018 10.1
10.05
Executive Severance and Arbitration Agreement with Raghavendra Rau dated July 23, 2018**
8-K July 27, 2018 10.2
31.01
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.02
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.01
Certification of Chief Executive Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002
*
32.02
Certification of Chief Financial Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002
*
101.INS XBRL Instance Document X
101.SCH XBRL Taxonomy Extension Schema Document X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB XBRL Taxonomy Extension Label Linkbase Document X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X



		Incorporated by Reference
Exhibit Number	Exhibit Description	Company Form	Filing Date	Exhibit Number	Filed Herewith
10.01**	Executive Severance Plan, as amended				X
31.01	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
31.02	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X
32.01	Certification of Chief Executive Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002				*
32.02	Certification of Chief Financial Officer pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002				*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document				X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document				X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document				X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document				X
101.SCH	Inline XBRL Taxonomy Extension Schema Document				X
104	Cover Page Interactive Data File				+


*	Furnished herewith.


**	Management contract or compensatory plan or arrangement.


+	Included in Interactive Data File covered by Exhibit 101.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



TIVO CORPORATION
Authorized Officer:
Date:	By:	/s/ ~~Raghavendra Rau~~David Shull
November 7, ~~2018~~2019		~~Raghavendra Rau~~David Shull
		~~Interim~~ President and Chief Executive Officer

Principal Financial Officer:
Date:	By:	/s/ Peter C. Halt
November 7, ~~2018~~2019		Peter C. Halt
		Chief Financial Officer

Principal Accounting Officer:
Date:	By:	/s/ Wesley Gutierrez
November 7, ~~2018~~2019		Wesley Gutierrez
		Chief Accounting Officer and Treasurer

6154



				Contracts with Customers			Costs to Obtain Contracts with Customers			De-recognition of Prepaid Stored Value Product Liabilities
	December 31, 2017			Contracts with Customers			Costs to Obtain Contracts with Customers			De-recognition of Prepaid Stored Value Product Liabilities			January 1, 2018
Accounts receivable, net	$	180,768		$	24,177		$	—		$	—		$	204,945
Prepaid expenses and other current assets	40,719			(2,705		)	525			—			38,539
Other long-term assets	65,673			(4,419		)	819			—			62,073
Accounts payable and accrued expenses	(135,852		)	—			—			2,155			(133,697		)
Unearned revenue	(55,393		)	11,208			—			—			(44,185		)
Deferred tax liabilities, net	(50,356		)	(348		)	—			—			(50,704		)
Accumulated deficit	1,392,651			(27,913		)	(1,344		)	(2,155		)	1,361,239



	Three Months Ended September 30, 2018
	As Reported			As If Applying Prior Guidance			Effect of Change Higher/(Lower)
Total Revenues, net	$	164,709		$	170,868		$	(6,159	)
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets	40,749			41,512			(763		)
Selling, general and administrative	39,867			40,195			(328		)
Loss from continuing operations before income taxes	(18,223		)	(13,155		)	(5,068		)
Income tax expense	4,769			5,143			(374		)
Loss from continuing operations, net of tax	(22,992		)	(18,298		)	(4,694		)



	September 30, 2018		December 31, 2017
AT&T	16	%	28	%
Virgin Media	11	%	(a)



Remainder of 2018	$	27,763
2019	109,855
2020	109,109
2021	66,341
2022	38,602
Thereafter	158,387
Total	$	510,057



Remainder of 2018	$	1,750
2019 (a)	352,000
2020	7,000
2021	654,548
Total	$	1,015,298



	Options (In Thousands)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (In Thousands)
Outstanding as of beginning of period	2,368		$	27.16
Forfeited and expired	(497	)	$	36.45
Outstanding as of end of period	1,871		$	24.69	1.2 years	$	—
Vested and expected to vest as of September 30, 2018	1,871		$	24.69	1.2 years	$	—
Exercisable as of September 30, 2018	1,825		$	24.71	1.2 years	$	—