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Section 1: 10-K (10-K)

Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________ 
FORM 10-K
(Mark One)
  x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018
or
  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 95002
(Address of principal executive offices, including zip code)
(408) 519-9100
(Registrant's telephone number, including area code)
_____________________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Exchange on Which Registered
Common Stock, $0.001 Par Value
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ   No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes o  No þ
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.    Yes  þ    No  o
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).    Yes  þ    No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
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 filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
 
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    No  þ
The aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant was approximately $1,629.8 million as of June 30, 2018, based on the closing price on the Nasdaq Global Select Market reported for such date. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose. The number of shares of the Registrant's Common Stock outstanding on February 20, 2019 was 124.8 million shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement related to the 2019 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days after December 31, 2018, are incorporated by reference into Part III of this Annual Report on Form 10-K.



Table of Contents


TIVO CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS

PART I.
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
 
PART II.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
 
PART III.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
 
PART IV.
ITEM 15.
ITEM 16.
 





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Forward-Looking Statements

This Annual Report on Form 10-K 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 7., "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, 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, competition in our markets and the impact of our previously announced review of strategic alternatives.

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 I, Item 1A. of this Annual Report on Form 10-K. Except as required by law, we specifically disclaim any obligation to update such forward-looking statements.

PART I.

ITEM 1. BUSINESS

Overview

TiVo Corporation ("TiVo") is a global leader in media and entertainment products that power consumer entertainment experiences and enable its customers to deepen and further monetize their audience relationships. We provide a broad set of cloud-based services, embedded software solutions and intellectual property that enable people to find and enjoy online video, television programming, movies and music entertainment. Our solutions include 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 services and our 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).

We offer our portfolio of products as both discrete component technologies for our customers to integrate into their internally developed solutions or as part of completely integrated modular solutions. Our integrated portfolio of software and cloud-based services 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") (e.g., Netflix, Amazon Video, Hulu, VUDU, YouTube and other digital-first brands) content into one intuitive user interface with simple universal search, discovery, viewing and recording to create a unified viewing experience.

We also offer advanced media and advertising solutions, including viewership data, sponsored discovery, audience insights and in-guide advertising, which enable advanced audience targeting for advertising through linear television, streamed content and other direct digital display and video platforms.

Our solutions are sold globally to cable, satellite and telecommunications pay TV service providers, virtual service providers, consumer electronics ("CE") manufacturers, content and new media companies and advertisers. In the United States, we also sell a suite of DVR and whole home media products and services directly to retail consumers.

Our products and innovations are protected by broad portfolios of licensable technology patents. These portfolios cover many aspects of content discovery, DVR, VOD and OTT experiences, multi-screen viewing, mobile device video experiences, entertainment personalization, voice interaction, social and interactive applications, data analytics solutions and advertising. We license our patent portfolios for use with linear broadcast television and, as the industry extends into new video services through internet technologies, for use with internet connected televisions, personal computers, video game consoles, media streaming and mobile devices. We believe that an ongoing marketplace transition toward mobile viewing and device

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proliferation present further opportunity to extend our patent licensing programs for new use cases and additional customer verticals.

We are industry pioneers having invented the IPG and the DVR. Today, we continue our strong focus on innovation with new advanced solutions for unified viewing of internet video and pay TV, cutting edge natural language voice-enabled technologies, entertainment personalization, audience management and viewership prediction solutions. Through our innovations, we have established broad industry relationships with the companies leading the next generation of digital entertainment. As the industry transforms to deliver more content over the internet, we are developing complementary products, services and intellectual property to address our customers' needs.

Industry Background

Fragmentation. The entertainment marketplace is transforming as content moves from traditional broadcast distribution methods to distribution and delivery over the internet. The consumer entertainment experience is increasingly distributed across multiple screens such as televisions, tablets, smartphones and personal computers, via virtual service providers and content and new media companies. The continued expansion of network bandwidth, the influx of connected devices and the increased availability of digital content, along with increased accessibility through mobile devices such as tablets and smartphones, are accelerating this overall industry shift and leading to changes in consumer behavior. Consumers are demanding higher quality personalized, interactive content experiences, where they can easily discover and access entertainment content across service providers and content libraries.

Home Media Complexity. Video content, such as movies and TV shows, continues to capture the majority of consumers' entertainment spending and viewing time. While many consumers have purchased large high definition televisions to maximize video enjoyment in the home, portable devices and services have made video content available to consumers outside the home. These portable devices and services must help identify what is available across linear broadcast television, DVR and VOD, as well as OTT services and digital-first content. For consumers, setting up the ideal home media environment is complex and requires integrating numerous devices, subscribing to multiple services (pay TV, internet and new media services) and often a deep understanding of media format compatibility. Simplifying the consumer experience in the home media ecosystem is critical to the successful evolution of the industry.

Pay TV Is Moving To The Internet. These portable devices and services, as well as new capabilities are impacting the full entertainment value chain, fueling new business models and increasing competition among existing market participants, while introducing new entrants. Distributors such as pay TV and virtual service providers, content and new media companies, retailers and others are seeking ways to strengthen their respective competitive advantages and increase their speed of innovation. Pay TV providers are engaged in a broad effort to enable subscribers to enjoy content where and when they want, on whatever device they choose, which we refer to as "TV Everywhere" ("TVE"). TVE is driving significant investment as service providers move from legacy distribution technologies to internet-based infrastructure for delivering pay TV services across broadband networks and wireless networks.

Content Producer and Distributor Business Models. Content producers are also exploring new forms of distribution and business models to protect and advance their position in the distribution value chain. Many content producers are trying direct-to-consumer business models, exploring new forms of content licensing and additional hybrid business models which combine both traditional pay TV with direct-to-consumer distribution through either subscription or ad-supported monetization. Content distributors are looking to better understand consumer engagement, improve their services and expand their ability to market their content and services. Many distributors are also investing in original content or developing digital first content to establish a more competitive position, retain subscribers and protect their business from future subscriber losses. Combined, these changes are resulting in an overall increase in industry competition between content producers and content distributors, as well as increasing the number of companies distributing premium video content directly to consumers.

Consumer Electronics Devices. Global economic trends and increased competition have challenged much of the traditional CE marketplace and consumption habits are evolving beyond the TV and set-top boxes ("STBs"), gaming consoles and media streaming devices to a broader set of video consumption devices such as tablets, smart phones and media streaming devices. Consumers are demanding access to media on all their devices that can connect to video services. This has evolved into an ecosystem of multi-device functionality that requires extensive software development, cloud infrastructure and ongoing maintenance and support for these devices throughout their usable life, leading to higher costs for a CE manufacturer years after the initial device is sold. Consumers are becoming more comfortable managing multiple consumption endpoints driving CE manufacturers to seek an ongoing revenue relationship with their customers; one that expands beyond selling the consumer a new device every few years. This leads to a demand for add-on services and advertising that allow the CE manufacturer to monetize and profit from the ongoing distribution or maintenance of entertainment content over the life of a device.

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Audiences and Engagement. As traditional media changes, the opportunities for advertisers are evolving as well. As television viewership has become more fragmented, advertisers are looking for new ways to reach audiences by managing consumer engagement across the many devices and applications in use. Additionally, the growth of digital online advertising has fundamentally changed the criteria advertisers use to evaluate advertising campaigns, adding metrics such as completion and guaranteed views. Consumption data, audience measurement and other analytics data and services that bridge a consumer's engagement across many devices and entertainment services are emerging as key capabilities required to capture advertising value across both pay TV and internet advertising. Virtually every major broadcast network has a significant program in place to enable analytics-driven advertising models.

Data Driven Economy. To enable this evolving advertising and media ecosystem, it is critical that advertisers, advertising agencies, broadcast networks and content producers and content distributors have broad access to granular census-level viewership data that can be anonymously matched with other information such as behavioral, demographic or purchase data. While much of the third-party data is available as a result of the relative maturity of the digital advertising ecosystem, this level of pay TV, OTT and digital first viewership data is still relatively scarce. Viewership data is a critical component required to identify, locate and market to specific audiences, as well as to enable effective cross-platform measurement and attribution.

Our Strategy

Television is rapidly evolving with proliferating content choices including traditional linear programming, VOD, TVE, OTT services and now digital-first and user-generated content. Further, consumers are accessing and subscribing to video content in new ways such as "skinny bundles" (which include smaller groups of channels) from incumbent pay TV service providers or through OTT services on tablets, smart televisions and streaming devices. This is leading to pressure on the content producers and content distribution business models and we believe we have created a best-in-class suite of products, advanced technologies and intellectual property that addresses the needs of consumers, pay TV service providers, virtual service providers, CE manufacturers, content and new media companies and the evolving advertising ecosystem.

Entertainment Discovery, Access and Recording. Finding content to watch or record and watch later remains the foundation of the entertainment experience. We believe new discovery experiences integrating advanced personalization, live, recorded and online video on multiple screens with social engagement and new forms of interaction such as voice commands, will continue to be an area of opportunity. We also believe that metadata, which contains detailed information about entertainment content and programming, data on consumer’s entertainment interests and media engagement history, along with predictive analytics to interpret and utilize the data will be important in enabling highly personalized content experiences both in pay TV and video services from virtual service providers, CE manufacturers and content and new media companies.

Audience Monetization and Insights. Shifts in the value chain are creating new ways for consumers to gain access to content and new business models are emerging to capture consumers’ entertainment engagement and resulting spend. Monetizing audiences through content and media experiences across television and OTT services accessed through different devices such as smart TVs, tablets, smartphones, personal computers, media streaming devices and video game consoles, has become a critical challenge for the industry. We are focused on ensuring consumer privacy while delivering solutions that utilize consumer media engagement data to help service providers, content producers and advertisers better understand consumer behavior and better target and measure audiences.

Build on Key Customer Relationships. We intend to grow our business by expanding on the technologies that we provide to existing customers and creating new customer product and licensing relationships as more companies add media entertainment to their digital lifestyle solutions. We continue to accelerate our customers' efforts to address the industry's expanding needs for entertainment discovery, access, recording and audience data. We will continue to expand relationships with customers in various industry and market segments, including:
Pay TV Service Providers: Cable, telecommunications and satellite television providers that aggregate and distribute content over their own networks.
Virtual Service Providers: Content distributors that aggregate and stream content, including linear television, over broadband networks.
CE Manufacturers: Producers of content access points such as smart televisions, Blu-ray and DVD players, DVRs, video game consoles, mobile devices, streaming media devices, digital STBs and other connected media devices.
Content Producers and New Media Companies: Creators and owners of video content for OTT content, media distribution, search, social network and online retail companies.
Advertisers: Marketers, brand advertisers, agencies and advertising technology providers.

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Retail End-Consumers: The entertainment consumer that aspires to create their own bundle of entertainment across available pay TV services, OTT, virtual service providers and new media.

Introduce New Products, Services and Technologies. We are developing additional technologies and solutions to meet the evolving needs of both traditional pay TV and internet distribution of entertainment from content owners and other aggregators. We are committed to expanding our technology base, to enhance our existing products and introduce additional products and services. Key areas of development include enabling our customer to transition to internet or streamed video delivery, powering natural language voice interactions, enabling personalized content discovery, monetizing audiences through sponsored promotions and delivering media engagement data to enable targeted advertising solutions. In addition to improving technologies in our current fields of operation, we intend to pursue emerging opportunities where we are positioned to drive growth in the business. This includes the impending launch of a platform to engage viewing audiences through a single unified content discovery experience across traditional TV and digital first content. This offering creates a guide for the streaming age by enabling content from the internet to be fully integrated with traditional TV and OTT services. We are enabling content producers, service providers and advertisers to promote and merchandize content in new ways. Central to this experience are streaming channels that bring video made for digital content, movies and a variety of internet video streams together in a single location that is easy to access across content platforms. This platform will let viewers access ad-supported free programming, a-la-carte purchases and subscription collections of their favorite internet-based content. Viewers will have access to categories like news, sports and entertainment and internet favorites from well-known content aggregators. TiVo will enable both our multichannel video programming distributor (“MVPD”) end-users and our retail customers to access all this content from TiVo Experience 4 with no applications to open. Content discovery will be seamless with an entertainment experience that is highly personalized for every viewer.

Expand and Protect our Intellectual Property Position. We have adopted a proactive patent and trademark strategy designed to protect and extend our technology and intellectual property. We have built, and will continue to add to, a large intellectual property patent portfolio. The licensing of our intellectual property patent portfolio is a significant part of our business. We believe that our future success partly depends on our ability to continue innovating for the evolving media consumption marketplace. We have patented functionality for many aspects of our solutions in the areas of content discovery, DVR, VOD, TVE, OTT, multi-screen, personalization, contextual search and recommendation and other interactive applications, data analytics and advertising. Our portfolio of internally developed innovation is also enhanced by patents acquired from other industry participants. While we historically have licensed our portfolio for use with linear broadcast television, the industry transition to internet platform technologies is enabling new video services for television inside and outside the home on a broad array of media consumption devices. We believe this transition presents new opportunities for us to expand the industries we serve and to license additional patent rights, which are essential and/or useful as enablers of advanced media devices and services.

Pursue Strategic Transactions. When appropriate, we seek to expand our technology portfolio, improve our capabilities and extend or grow our businesses by pursuing licensing arrangements, joint ventures, and strategic acquisitions of companies whose business, technologies or proprietary rights complement and advance our operational and strategic goals.

Product Segment

Our Product segment includes a suite of component technologies that can be integrated into any of our customer segments' internally developed platforms or deployed as an integrated TiVo solution for pay TV service providers. Our Product segment generated 58%, 51% and 46% of our Total Revenues, net for the years ended December 31, 2018, 2017 and 2016, respectively.

Platform Solutions

We currently offer our Platform Solutions products in North America, Europe, Latin America, Asia Pacific and most recently Africa. Globally, our Platform Solutions customers include Cequel Communications, LLC, Charter Communications, Inc. ("Charter"), Cogeco Inc. ("Cogeco"), Mediacom LLC, Virgin Media plc ("Virgin") and many others. As of December 31, 2018, 26 million pay TV and consumer households worldwide, including 14 million outside North America, are estimated to utilize our Platform Solutions. As of December 31, 2018, 7 million households were using the TiVo service. The number of worldwide pay TV and consumer households utilizing our Platform Solutions does not include households using Cubiware's middleware solutions.

TiVo Service Platform. The TiVo Service Platform is our most advanced fully-integrated cloud-based service that powers the TiVo Service client software that operates on STBs in consumer homes, as well as applications that operate on third party software platforms, such as iOS and Android, that power tablets, smartphones and mobile streaming devices. The solution

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supports multiple services and applications, such as linear TV programming, broadband OTT video content, digital music, photos and other media experiences. The cloud-based service manages interaction with the TiVo Service infrastructure, automatically connecting TiVo-enabled devices to provide program guide data, content recommendations, media promotion, advertising, broadband content and client software upgrades. We have enabled the TiVo Service client software to operate on STBs, such as those from ARRIS International plc ("ARRIS") and Technicolor SA, as well as, Android TV boxes and streamers from a variety of manufacturers, for deployment in MVPD networks. TiVo also enables a full suite of cloud-based internet-protocol television ("IPTV") solutions, including internet protocol ("IP") linear, IP VOD, start-over, catch-up and network DVR. We allow pay TV operators the flexibility to transition to IPTV while utilizing their current infrastructure to take advantage of IP video and OTT content. The TiVo solution allows the STB to operate as an ultra HD STB, multi-room client STB and an IP STB.

We also offer a direct-to-consumer retail TiVo Service in the United States, to consumers who purchase TiVo DVRs and companion TiVo Mini whole-home devices. The latest TiVo VOXTM integrates our full portfolio of products, including natural language voice search, personalized recommendations, rich metadata and our TiVo Experience 4 user interface for discovery and navigation across linear, over-the-air and OTT programing. MVPD’s typically pay engineering fees for deployment and customization plus a monthly per subscriber license fee or a one-time term license fee for our TiVo Service Platform. For our direct-to-consumer retail TiVo Service in the United States, consumers either pay us recurring service fees, or in some cases pay a one-time upfront fee for access to the TiVo Service for the life of the purchased TiVo DVR.

User Experience ("UX") Solutions. Our UX Solutions allow service providers to customize certain elements of the IPGs for their customers and to upgrade the programming features and services they offer. Our UX Solutions provide viewers with current and future program information and are compatible with service providers' subscription management, pay-per-view (“PPV”) and VOD services. We also offer operational support, professional services and content metadata. Our UX Solution also has the ability to include advertising. When advertising is included, we typically share a portion of the advertising revenue with the service provider. We currently offer UX Solutions marketed to service providers under the TiVo, iGuide and Passport brands in the U.S., Canada and Latin America. Service providers generally pay us a monthly per subscriber fee to license our UX Solutions.

We also offer UX Solutions to the CE industry under the G-GUIDE brand in Japan. We receive license fees for these solutions based on the number of units produced or shipped that incorporate our technology or utilize our patents. Our agreements with the major CE manufacturers generally allow them to ship an unlimited number of units incorporating our technology, provided they pay us a fixed fee. In addition, our joint venture with Dentsu Inc. and Tokyo News Service Limited, Interactive Program Guide Inc. (“IPG JV”), acts as the exclusive provider of program listings and advertising for our UX program guides in Japan, marketed under the G-Guide brand. We own 46% of the IPG JV and have certain contractual management rights. We retain the right to license and collect fees for other products, technology and intellectual property in Japan, regardless of whether the customer is an active customer of IPG JV.

CubiTV Solutions. We provide flexible middleware solutions targeted to pay TV service providers, whether cable, satellite, terrestrial and telecommunications operators, in developing and emerging markets who want to introduce advanced TV services to their networks. CubiTV and CubiGo give emerging market pay TV service providers the ability to cost-effectively deliver a wide range of interactive services along with a superior user experience to their subscribers. TiVo Lite is a more advanced middleware that offers the TiVo user interface integrated with our Personalized Content Discovery solution and the Cubiware cloud-based infrastructure. Our middleware runs on basic HD STBs and supports DVR functionality in hard-disk enabled STBs. Our CubiTV and TiVo Lite solutions enable multiscreen technology for pay TV service providers to cost-effectively deliver video-oriented services through CE devices, such as tablets, personal computers and smartphones. CubiTV and TiVo Lite middleware customers typically pay engineering integration fees plus a per device license fee.

Software and Services

Metadata. Our metadata products are a critical component of delivering an interactive entertainment experience. We offer comprehensive metadata covering television, sports, movies, digital-first, music, celebrities, books and video games. Our content library includes unique data on more than 19.7 million video programs, including theatrical, digital-first, DVD and Blu-ray releases, as well as thousands of celebrities. Our database also has information on more than 4.0 million music albums, 35.0 million songs, 12.5 million books, 129,000 video games, 144,000 active athletes and 159,000 sporting events. We develop our metadata through a technology platform that combines machine learning techniques and platform-mediated work with our proprietary and patented knowledge graph technology. This technology platform delivers content faster and at higher quality than traditional editorial models can offer. There are five levels within the metadata portfolio: basic metadata (such as artist or album); navigational metadata (such as relationships between actors and movies or television series); editorial metadata (such as actor biographies, television, movie or music reviews); enhanced metadata (such as weighted keywords and connections

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across all entities in our library) and real-time metadata (such as sports play-by-play and excitement scores). Our focus on quality, robustness and consistent international depth has made us a recognized leader in entertainment metadata services worldwide. Looking forward, we continue to expand our portfolio, recently launching new products that support new media efforts from content studios, TV broadcasters and automotive entertainment providers.

Our television and movie metadata includes information from 73 countries including the United States, countries in Latin America including Brazil, countries in Europe including Russia, Turkey and Poland, and countries in Asia including Hong Kong, India and Taiwan. We license several metadata and service offerings, including, but not limited to, schedules, listings and web content linking services. Customers typically pay us a monthly or quarterly fee for the rights to use the metadata, receive regular updates and integrate it into their own service. Our metadata can be sold stand-alone or as a complement to another TiVo product such as a UX Solution or search and recommendation solution. We deliver metadata using real-time APIs and as bulk data files depending on our customer’s requirements. Globally our metadata customers include leading companies such as Microsoft Corporation ("Microsoft") and Samsung Electronics Co. Ltd. ("Samsung").

Personalized Content Discovery and Natural Language Voice. Personalized Content Discovery with conversation services provides service providers, CE device manufacturers and application/service developers a way to enable their customers to quickly find, discover and access content across linear broadcast television, VOD, DVR and OTT sources. We process anonymous viewing information uploaded from STBs, digital media devices and consumer input for use in recommendations and personalization. The advanced algorithms of our technology understands the nature and relationship of content information and the context surrounding a user's behavior to deliver an advanced personalized content discovery experience. Results can be generated through traditional text entry, voice interaction or our content recommendations. Our natural language voice solution, when combined with our advanced search and recommendations technology, enables a conversational interaction between a viewer and their content experience. We have brought together advanced semantic and contextual technologies to enable powerful media centric voice interactivity. Combined with the expertise of our content editors and our comprehensive entertainment metadata, we deliver a powerful discovery solution. These technologies can be applied to pay TV, IPTV and video services from virtual service providers, content producers and CE manufacturers. Customers typically pay us a per subscriber or per device fee. Our search and recommendation solutions are widely deployed with many leading pay TV service providers including Charter and Verizon Communications, Inc. ("Verizon").

Advanced Media and Advertising. Our Advanced Media and Advertising solutions enable pay TV and virtual service providers, content and new media companies, and advertisers and their agencies to better understand and monetize consumer media engagement.

We provide advertisers with nationwide or regionally targeted advertising on our UX Solutions. Advertisers place ads in a variety of display formats, seamlessly incorporated into the user interface. Advertisements can trigger a variety of actions when selected via a remote control, including video advertisement playback, DVR recordings and direct response. Media and conventional advertisers are interested in the value proposition of utilizing display advertising in television interfaces to reach consumers with an interactive experience or guide them to related media content. Utilizing our Personalized Content Discovery platform, we also target content promotions as ‘paid search’ by directly including the sponsored content in user interface’s recommended content carousel. We work with service providers bundling their non-TiVo advertising inventory with our native inventory giving us a more significant national footprint.

Our TV Viewership Data platform is built on modern big data technologies and processes millions of households of TV viewership data with program airings data. Our platform enables us to partner with service providers to unlock the value of their return-path data, transforming raw return-path data into meaningful viewership information to inform advertising, promotion, and marketing initiatives. Utilizing our TV Viewership Data, MVPDs, broadcasters, content producers, advertising agencies and advertisers can activate subscriber’s TV viewership alone or in combination with third-party data sources using industry-leading data safe havens to target directly, or through third party viewer segments, promotions and advertising to monetize their subscriber customer base.

We also offer a software-as-a-service Audience Insights solution used by service providers to analyze the habits and preferences of TV subscribers, providing critical insights that can be utilized to increase operational efficiency, improve customer engagement, support carriage and bundling decisions, help mitigate churn and maximize average revenue per user. Integrated with our Personalized Content Discovery solutions, Audience Insights processes millions of households of TV viewership data, programming data, billing and customer attributes data, as well as third-party sources providing service providers deep analysis of their subscriber’s second-by-second engagement and consumption of content.


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Other

Analog Content Protection. Our legacy technology of analog video content security, commercially known as ACP, has been used to protect billions of videocassettes since 1985 and billions of DVDs since 1997. We license ACP directly to CE manufacturers and content producers, as well as semiconductor companies that supply the CE manufacturers. ACP can be licensed as a fixed annual fee, per unit royalty or, in some cases, as a one-time fee for a perpetual license.

Intellectual Property Licensing Segment

Our Intellectual Property Licensing segment generated 42%, 49% and 54% of our Total Revenues, net for the years ended December 31, 2018, 2017 and 2016, respectively.

Patent Portfolios. The foundation for our Intellectual Property Licensing segment is two expansive patent portfolios from Rovi and TiVo Solutions, which encompass approximately 4,200 issued and 1,500 pending patents. We have filed patent applications relating to thousands of inventions resulting from our research and development, including many critical aspects of the design, functionality and operation of TiVo products and services as well as technology that we may incorporate into future products and services. We continue to grow our patent portfolios in size and relevance through ongoing investment, targeted acquisitions and strategic management of the portfolios. We generate a substantial portion of our Intellectual Property Licensing revenue from our discovery patents, which represents 94% of our total patents. Over the last 10 years, our portfolio of U.S. discovery patents has more than doubled in total size; however, the number of issued patents in our patent portfolio has more than quadrupled. The scope and relevance of our discovery patent portfolios have also grown over this period, reflective of the increase in entertainment UX, DVR and mobile device media functionality. We believe that interactive video guidance technology is a necessary tool for television viewers facing an increasing amount of available content and an increasing number of digital television channels, VOD services and OTT services. The entertainment UX is evolving from a solution for linear television content to a UX for all the content consumers have access to across all of the devices they use. Our discovery patent portfolio includes important intellectual property coverage and protection for key features and functionality across guidance, search and recommendation, DVR, VOD, OTT, second screen offerings, mobile device media utilization and various interactive television applications. Our discovery portfolio's patents have expiration dates as late as 2038. We have extensive, ongoing innovation efforts in place to ensure the longevity of our patent portfolios so they continue to provide long-term protection across the key areas of our business and the media experience.

Protecting our Investment. From time-to-time, we engage in intellectual property litigation to protect our technology from infringement. We are currently involved in litigation against Comcast Corporation ("Comcast"), where we have alleged that Comcast is infringing our intellectual property. While litigation is never our preference and we prefer to reach a mutually agreeable commercial licensing arrangement, it is a necessary tool to effectively protect our technology investment.

Multiple Licensing Segments. Traditional pay TV service providers typically pay us a monthly per subscriber fee and have historically licensed our discovery patent portfolio for the television use case. We have extended our pay TV licensing program to cover virtual service providers, who deliver pay TV services over the internet at comparable rates to traditional pay TV. As mobile TV initiatives have also become more prevalent with service providers, we have established secondary licensing agreements to provide coverage and rights for the mobile TV use case. Online and OTT video service providers typically have paid us a flat fee to license our patents for a specified period of time. Our CE licensees typically pay us license fees based on the number of units produced or shipped that utilize our patents, for specified products, in defined territories. Our agreements with the major CE manufacturers generally allow them to ship an unlimited number of units utilizing our discovery patents, provided they pay us a fixed annual fee.

Major Licensees. Our major pay TV service provider and video distribution intellectual property licensees include Altice USA, Inc. (including Cablevision), AT&T, Inc. ("AT&T"), Charter, Cox Communications, Inc, Sky plc, Verizon and many others. We also have license agreements with third party IPG providers. Our CE intellectual property licensees include leading CE companies such as Panasonic Corporation and Samsung. As of December 31, 2018, 160 million pay TV subscribers worldwide are estimated to be receiving a licensed UX or IPG solution, including 88 million internationally.

Innovation and Development

TiVo Service Platform & Client Software. Over the past few years, the TiVo Service Platform and Client Software have undergone a significant refactoring. In addition to developing a new look and feel, our next generation TiVo Service Platform integrates all of our most advanced technologies and solutions, including advanced cross-platform conversational voice search, personalized recommendations, predictions and insights, extensive video metadata, robust data collection and new back office capabilities.

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TiVo Enabled Hardware Devices. We continue to advance the TiVo software to operate across a variety of hardware platforms. In 2018, we outsourced the manufacturing and future hardware designs to a strategic partner, including for the TiVo BOLT VOXTM DVRs and TiVo Mini VOXTM non-DVR STBs. The TiVo Service Platform software includes a modular front-end that allows the basic platform to be used by hardware manufacturers to build STBs that support digital and analog broadcast, cable, IPTV, OTT and VOD services. In addition, our cloud-based TiVo Service Platform allows our hardware partners' devices and the internet to connect with third-party consumer devices and services to enable existing and future functionality.

Personalization, Prediction and Voice. The ongoing investment in our Personalized Content Discovery platform enables us to provide some of the most advanced capabilities in media personalization, prediction and voice search. Built on a robust cloud architecture and widely deployed with Tier 1 pay TV and other providers, our solution is a leading technology in the market. We continue to expand this solution with innovations focused on new verticals such as, content promotion, internet video services and advertising.

Advanced Media and Advertising. We are leading the industry to use advanced technologies focused on television data to create efficiencies and value multipliers in the evolving television advertising ecosystem. Our TV data platform processes the raw TV viewership events from millions of STBs which our customers can anonymously match against billing, customer and a range of other third-party data. These capabilities can be used across a variety of advertising use cases in both traditional linear television and digital advertising for internet delivered content.

TiVo's Evolving Content Discovery Solutions. We are reimaging television to evolve the user experience to be the content discovery platform that breaks down the content silos and boundaries to create a truly unified media experience. We are integrating virtual channels of internet delivered video directly into the consumer's primary video consumption platform to provide universal search, discovery and consumption regardless of where the content originates. TiVo's UX will provide content producers with a platform for merchandising their content and allows consumers to build their own entertainment bundle to truly personalize their experience.

Supporting Operations

Operations and Technical Support. We have technical support and certification operations to support our products:
We provide training, technical support and integration services to pay TV service providers who license our products.
We operate the internet-based services required for our service offerings including data delivery, search, recommendation, advertising, device management and media recognition.
We provide broadcast delivery of television programming data and advertising to UXs on TVs and STBs in major European markets and in Japan. In North America, we deliver similar programming and advertising data via the internet.
We support our customers with porting and engineering services to ensure our IPGs and DVRs operate properly.
We provide customer care for UX and DVR customers to resolve data, advertising and consumer functional issues.

TiVo Service. We provide customer support through outsourced service providers as well as our internal customer service personnel for our direct-to-consumer retail TiVo Service in the United States. When our product is distributed through a pay TV service provider, the pay TV service provider is primarily responsible for customer support. We offer training, network operating center services and other assistance to these pay TV service providers. Our retail TiVo Service subscribers have access to an internet-based repository for technical information and troubleshooting techniques. Subscribers can also obtain support through other means such as the TiVo website, web forums, email and telephone support.

Seasonality. We generate a significant number of our new consumer subscriptions for the TiVo Service during and immediately after the Christmas holiday shopping season. We also incur increased sales and marketing costs in advance of the Christmas holiday shopping season.

Competition

There are a number of companies that produce and market advanced media solutions such as UXs, IPGs, DVRs, search, recommendation, natural language voice, metadata and advanced data and analytics in the various formats which compete, or we believe will compete, with our products and services over time. Principal competitive factors include brand recognition and awareness, product and service functionality, innovation, ease of use, personalization, content access and

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availability, mobility and pricing. While we are competitive across this range of factors, we believe our primary competitive differentiation comes from our ability to integrate all of our products to create unique value to our customers.

Platform Solutions: Our Platform Solutions face competition from companies such as Synamedia, MediaKind, Kudelski, SA, MobiTV, Inc., and Espial and from MSO internally developed solutions such as Comcast X1 and Liberty Global plc's Horizon Media, which have created competing products that provide user interface software for use on STBs and CE and mobile devices. Such companies may offer more economically attractive agreements to service providers and CE manufacturers by bundling multiple products together. Another common competitor we encounter is a customer who chooses to build its own IPG and DVR solution, under license with our intellectual property. We believe that we provide a strong alternative to “do-it-yourself,” as we have innovative, high-quality products ready to be implemented, with local and network DVR, integrated data distribution infrastructure and content, as well as third party services (such as VOD services). We differentiate our products by continuing to integrate our broad portfolio of products into a suite of solutions and services for our customers. We believe our solutions can speed our customers' time to market, can be deployed at a lower cost than internally built products and can be superior to “do-it-yourself” products. For those that choose to do it themselves, we have component products such as advanced search, recommendation, conversation and insights, Cubiware middleware products and our extensive metadata offerings providing them a full suite of services to power their next generation in-house built media experience.

TiVo Service. The TiVo Service competes in the U.S. against solutions sold directly by pay TV service providers and virtual service providers. These solutions often have similar feature sets, such as DVR capabilities, search and discovery, multi-room viewing, and TVE access for mobile devices. Some of these solutions are offered at lower prices, but in many cases, are bundled with other services provided by the operator and the price for the DVR and DVR service may not be apparent to the consumer. In addition, the DVRs are usually professionally installed and may appeal to consumers who do not wish to pro-actively select a DVR service. The TiVo Service also competes against products with on-demand OTT streaming capabilities offered by CE manufacturers. Though these devices do not offer the breadth of the TiVo service, they do offer alternative ways to access TVE and OTT content. For example, many CE manufacturers have television or DVD products that are internet-enabled and others have built dedicated devices for accessing video over the internet such as Apple TV, Amazon Fire TV, Google Chromecast and Roku. Similarly, companies such as DISH Network L.L.C (Sling TV), AT&T (DirecTV NOW), Microsoft Corporation ("Microsoft") and Sony Corporation have now enabled the digital delivery of video programming over the internet to video game consoles and other consumer devices.

Metadata. In metadata, we compete with other providers of entertainment-related content metadata such as Gracenote (a subsidiary of Nielsen Holdings plc) and Ericsson Group's Red Bee Media. While we do not believe that our competitors' metadata sets offer the same comprehensive breadth of focus on media exploration, discovery and management in as many regions of the world as we do, they present competition to our metadata business for each of their areas of focus.

TV Audience Data. We collect and analyze audience research data in an area where companies such as comScore, Inc. and Nielsen Holdings plc and other online data analytics companies compete for research spend from advertisers, advertising agencies and television networks. Other large companies are also focusing resources in this area including Comcast, Facebook, Inc. and Google (succeeded by Alphabet, Inc.). Many of our existing customers are investing in significant platforms to enable their businesses with these capabilities. We believe that there is a significant opportunity for us as an independent data and technology provider, with proprietary access to critical data assets associated with consumers' engagement with entertainment media.

Intellectual Property Rights, including Patents, Copyrights, Trademarks and Tradenames

We operate in an industry in which innovation, investment in new ideas and protection of our intellectual property rights are critical for success. We protect our innovations and inventions through a variety of means, including but not limited to applying for patent protection domestically and internationally.

As of December 31, 2018, we held approximately 1,600 U.S. patents and had approximately 600 U.S. patent applications pending. As of December 31, 2018, we also had approximately 2,600 foreign patents and approximately 900 foreign patent applications pending. Each of our issued patents expire at a different time based on the particular filing date of that respective patent, with expiration dates as late as 2038.

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We own or have rights to various copyrights, trademarks and trade names used in our business. These include, but are not limited to, TiVo, Rovi, Passport, Rovi Guides, G-GUIDE, iGuide and Cubiware. We have secured numerous foreign and domestic trademark registrations for our distinctive marks, including but not limited to registrations, for the marks “TiVo,” the TiVo logo, “Season Pass” and certain sound marks.

Many of our competitors and other companies and individuals have obtained, and may be expected to obtain in the future, patents that may directly or indirectly affect the products or services offered or under development by us. We offer no assurance that any enhancements developed by us would not be found to infringe patents that are currently held or may be issued to others. There can be no assurance that we are or will be aware of all patents that may pose a risk of infringement by our products and services. In addition, patent applications are generally confidential for a period of 18 months from the filing date, or until a patent is issued in some cases, so we cannot evaluate the extent to which certain products and services may be covered or asserted to be covered by claims contained in pending patent applications prior to their publication. In general, if one or more of our products or services were to infringe patents held by others, we may be required to stop developing or marketing the products or services, to obtain licenses to develop and market the products or services from the patent holders or to redesign the products or services in such a way as to avoid infringing the patent. This could affect our ability to compete in a particular market.

Legislative and Regulatory Actions

A number of government and legislative initiatives have been enacted to encourage development and implementation of technologies that protect the rights and intellectual property of the content owners. For example, the U.S. and other countries have adopted certain laws, including the Digital Millennium Copyright Act of 1998 ("DMCA"), and the European Copyright Directive, which are aimed at the prevention of piracy of content and the manufacture and sale of products that circumvent copy protection technologies, such as those covered by our patents.

Compatibility Between Cable Systems and CE Equipment

The Federal Communications Commission ("FCC") has been working for over a decade to implement a congressional mandate to create a competitive market for cable television STBs and other devices to access video programming on cable systems (“navigation devices”) and give consumers a choice in the devices used to access such programming, while still allowing the cable systems to have control over the secured access to their systems.

To meet its statutory obligation without compromising the security of video services, the FCC required cable systems to make available a security element (now known as a CableCARD) separate from the basic navigation device needed to access video program channels. In 2003, the FCC adopted regulations implementing an agreement between cable television system operators and CE manufacturers to facilitate the retail availability of so-called “plug and play” devices that utilize unidirectional CableCARDs, including digital televisions and other digital devices that enable subscribers to access cable television programming without the need for a STB (but without the ability for consumers to use interactive content). In 2013, the United States Court of Appeals for the District of Columbia Circuit struck down the FCC rules in a way that could have an impact on cable operators’ continued provision of CableCARDs to customers for use with third-party navigation devices. In December 2014, Congress passed the Satellite Television Extension and Localism Act Reauthorization ("STELAR"), which repealed an FCC requirement that cable operators employ separable security (i.e., CableCARDs) in the STBs they lease to their subscribers effective December 4, 2015. STELAR also directed the FCC to create a working group to find a successor standard to replace the CableCARD. The cable industry has continued to provide, and committed to Congress to provide, CableCARDs for third-party devices like those supplied by TiVo to requesting customers. We cannot predict the ultimate impact of any new technical equipment regulations on our business and operations. Although current FCC regulations no longer prohibit multi-channel video service providers from deploying navigation devices with combined security and non-security functions, further developments with respect to these issues could impact the availability and/or demand for “plug and play” devices, particularly bi-directional devices, and STBs, all of which could affect demand for UXs incorporated in STBs or CE devices.

General Government Regulation

We are subject to a number of foreign and domestic laws and regulations that affect companies that import or export software and technology, including encryption technology, such as the U.S. export control regulations as administered by the U.S. Department of Commerce.

We are also subject to a number of foreign and domestic laws that affect companies conducting business on the internet. In addition, because of the increasing popularity of the internet and the growth of online services, laws relating to user

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privacy, freedom of expression, content, advertising, accessibility, network neutrality, information security and intellectual property rights are being debated and considered for adoption by many countries throughout the world. Each jurisdiction may enact different standards, which could impact our ability to deliver data, services or other solutions through the internet.

We may be further subject to international laws associated with data protection, privacy and other aspects of our business in Europe and elsewhere, and the interpretation and application of data protection laws remains uncertain. In addition, because our services are accessible worldwide, foreign jurisdictions may claim that we are required to comply with their laws. Further, the application of existing laws regulating or requiring licenses for certain businesses of our advertisers can be unclear. The resulting regulation, if any, may alter our ability to target advertising or provide data about the end-users and/or customers and their behavior.

In the U.S., service providers have been subject to claims of defamation, libel, invasion of privacy and other data protection claims, torts, unlawful activity, copyright or trademark infringement, or other theories based on the nature and content of the materials searched and the ads posted or the content generated by users. In addition, several other federal laws could have an impact on our business. For example, the DMCA has provisions that limit, but do not eliminate, our liability for hosting or linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. The Children's Online Privacy Protection Act restricts the ability of service providers to collect information from minors, and the Protection of Children from Sexual Predators Act of 1998 requires service providers to report evidence of violations of federal child pornography laws under certain circumstances.

Employees

As of December 31, 2018, we had approximately 1,700 full-time employees, of which approximately 650 were based outside the U.S. None of our employees are covered by a collective bargaining agreement or are represented by a labor union. We have not experienced any organized work stoppages. We believe that our future success will depend in part on the continued service of our key employees and on our continued ability to hire and retain qualified personnel. We may not be able to retain our key employees and may not be successful in attracting and retaining sufficient numbers of qualified personnel to conduct our business in the future.

Information About Our Executive Officers

The names of our executive officers, their ages, positions and biographical summaries as of December 31, 2018 are shown below.
Name
Age
Position
Raghavendra Rau
69
Interim President and Chief Executive Officer
Peter Halt
58
Chief Financial Officer
Michael Hawkey
53
Senior Vice President and General Manager, User Experience
Matt Milne
51
Chief Revenue Officer
Arvin Patel
47
Executive Vice President and Chief Intellectual Property Officer
Pamela Sergeeff
46
Executive Vice President, General Counsel and Chief Compliance Officer

Raghavendra Rau. Mr. Rau has served as our Interim President and Chief Executive Officer since July 2018 and as a director of the Company since 2015. Prior to joining the Board, Mr. Rau served as Chief Executive Officer of SeaChange International Inc., a video software technology company, from November 2011 to October 2014 and was a member of its board from July 2010 until October 2014. Prior to his work at SeaChange International, Mr. Rau held a number of senior leadership positions with Motorola Inc. from 1992 to 2008, including Senior Vice President of Strategy and Business Development of the Networks & Enterprise business, Senior Vice President of the Mobile TV Solutions business, and Corporate Vice President of Marketing and Professional Services. Mr. Rau serves on the board of Quantum Corporation, a manufacturer of data storage devices, and served on the board of Aviat Networks, a wireless networking company, from November 2010 to January 2015. Mr. Rau holds a bachelor’s degree in engineering from the National Institute of Technology (Surathkal, India) and an MBA from the Indian Institute of Management (Ahmedabad, India).

Peter Halt. Mr. Halt has served as our Chief Financial Officer since May 2012. Mr. Halt joined the Company (then Rovi) in May 2008 in connection with the acquisition of Gemstar, and served as the Company’s Senior Vice President and Chief Accounting Officer from 2008 to 2012. Mr. Halt previously served as Senior Vice President, Finance and Chief Accounting Officer at Gemstar from March 2004 to May 2008. Mr. Halt holds a B.S. in Business from the University of Southern California.

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Michael Hawkey. Mr. Hawkey has served as our Senior Vice President and General Manager, User Experience since September 2015. Prior to joining the Company (then Rovi), Mr. Hawkey was Senior Vice President and General Manager for Sling Media, Inc., a former subsidiary of EchoStar Corporation, from 2012 to 2015. Prior to this role, Mr. Hawkey worked as Vice President of Marketing and Sales for EchoStar Technologies, a communications technology company. He has also held leadership positions at Advanced Digital Broadcast (ADB) Americas and STMicroelectronics. Mr. Hawkey holds a B.S. in Computer Engineering from Rose-Hulman Institute of Technology.

Matt Milne. Mr. Milne has served as our Chief Revenue Officer since January 2017. Mr. Milne joined the Company (then Rovi) in February 2011 and served as Senior Vice President, CE Sales from 2011 to 2012. Mr. Milne served as our Executive Vice President, Worldwide Sales and Marketing from January 2012 to May 2014 and as Senior Vice President responsible for Tier 1 Intellectual Property Licensing & Sales from May 2014 to April 2016. He served as SVP and GM of Intellectual Property and Licensing from April 2016 until his promotion to Chief Revenue Officer in January 2017. Prior to joining the Company, Mr. Milne held various sales, marketing and product leadership positions at DivX, MediaFLO USA (a wholly owned subsidiary of Qualcomm Incorporated), Viewsonic, Gateway, Inc., Cameo Technologies and Western Digital. Mr. Milne holds an MBA from California State Polytechnic University, Pomona and a B.A. in business from California State University, Fullerton.

Arvin Patel. Mr. Patel has served as our Executive Vice President and Chief Intellectual Property Officer since August 2017. Prior to joining the Company, Mr. Patel served as Chief Intellectual Property Officer at Technicolor S.A, a video technologies supplier, from August 2015 to June 2017. Mr. Patel previously served as Senior Vice President, Intellectual Property Licensing at Rovi from April 2011 to July 2015. Mr. Patel holds a B.A. in legal studies from the University of California, Berkeley, and a J.D. from the California Western School of Law.

Pamela Sergeeff. Ms. Sergeeff has served as our Executive Vice President and General Counsel since December 2013. Ms. Sergeeff also serves as the Company’s Chief Compliance Officer and Corporate Secretary. Ms. Sergeeff joined the Company (then Macrovision) in 2003 and has held various positions of increasing responsibility in the legal group, including serving as Senior Vice President and Associate General Counsel from 2011 to 2013 and as Vice President and Associate General Counsel from 2007 to 2011. Ms. Sergeeff holds a B.A. in Economics from the University of California, Los Angeles and a J.D. from the University of California, Berkeley. Ms. Sergeeff is a member of the California State bar.

Available Information

Our website is located at http://www.tivo.com. We make available free of charge on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or otherwise furnish it to, the Securities and Exchange Commission (the “SEC”). The reference to our website does not constitute incorporation by reference of the information contained on or hyperlinked from our website and should not be considered part of this document.


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ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth below. You should consider these risk factors together with other information contained or incorporated by reference in our filings with the SEC before investing in our securities. If any of the following risks are realized, our business, operating results, financial condition, cash flows and prospects could be materially and adversely affected, which in turn could adversely affect our ability to repay our outstanding convertible senior notes or other indebtedness. In those events, the price of our common stock could decline, and you could lose part or all of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.

Risks Related to Our Financial Position and Capital Needs

We have incurred and may continue to incur significant restructuring costs and may not realize our anticipated cost savings with respect to our restructuring initiatives.

We have incurred material restructuring costs in connection with integrating TiVo Solutions' operations with the operations of Rovi and other cost saving initiatives. These restructuring actions may not achieve the associated cost savings in a timely and efficient manner, and we may not fully realize the anticipated cost savings for a variety of reasons. Some of the risks include failure to obtain expected cost savings due to cost overruns. In addition, these restructuring plans are designed to reduce our fixed costs and our operating expenses, which have included, and may include in the future, the consolidation of office locations, elimination of redundant information systems, product integration and consolidation efforts and employee-related costs. These restructuring activities are likely to result in significant restructuring charges that may adversely affect our results of operations and cash flows in the periods in which such charges occur or payments are made. Additionally, actual costs related to such restructuring actions have in the past, and may in the future, exceed the amounts that we previously estimated. Further, if the expected cost saving benefits are not realized, our business may be harmed.

The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.

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. The Tax Act of 2017, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings, limitation of the deduction for newly generated net operating losses to 80% of post-2017 annual taxable income and elimination of net operating loss carrybacks, future taxation of payment from a U.S.-based taxpayer to related foreign entities, future taxation of certain classes of offshore earnings regardless of whether they are repatriated, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. In December 2018, the U.S. Department of Treasury published draft regulations regarding certain aspects of the Tax Act of 2017. It is uncertain if additional regulations will be issued or of the draft regulations will be finalized as proposed. In addition, certain states have not finalized their decisions regarding conformity with the Tax Act of 2017. As a result, the overall impact of the Tax Act of 2017 is uncertain and the Tax Act of 2017 could adversely affect our financial condition, results of operations or cash flows. See Note 14 to the Consolidated Financial Statements in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.

Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

We are subject to U.S federal and state tax and we are taxed in various international jurisdictions. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various jurisdictions where we operate. In preparing our financial statements, we estimate the amount of tax to accrue in each tax jurisdiction. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including from the passage of new tax laws, changes in the mix of our profitability from state to state and from country to country, the amount of payments from the company’s U.S. entities to related foreign entities, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities and changes in accounting for income taxes. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.


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Our ability to use net operating losses to offset future taxable income may be subject to limitations.

As of December 31, 2018, we had U.S. federal and state net operating losses of $1.0 billion and $1.1 billion, respectively. The federal and state net operating loss carryforwards will begin to expire, if not utilized, beginning in 2019. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the Tax Act of 2017, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform to the Tax Act of 2017. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.
 
Stock transfer restrictions in our certificate of incorporation may act as an anti-takeover device.

On September 7, 2016, upon the effective time of the merger with TiVo Solutions, our certificate of incorporation was amended and restated to include certain transfer restrictions intended to preserve our tax benefits pursuant to Section 382 of the Internal Revenue 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. Such transfer restrictions will expire on the earlier of (i) the repeal of Section 382 or any successor statute if our 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 our board of directors determines that no tax benefits may be carried forward (iii) the third anniversary of the merger with TiVo Solutions, or (iv) such other date as our board of directors shall fix in accordance with the certificate of incorporation.

The transfer restrictions described above could make it more difficult for a third party to acquire, or could discourage a third party from acquiring, a large block of our common stock. This may adversely affect the marketability of our common stock by discouraging existing or potential investors from acquiring our stock or additional shares of our stock. It is also possible that the transfer restrictions could delay or frustrate the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, or impede an attempt to acquire a significant or controlling interest in us, even if such events might be beneficial to us and our stockholders.

We have indebtedness which could adversely affect our financial position.
 
As of December 31, 2018, we had $1.0 billion of total debt outstanding, which includes $668.5 million under our Term Loan Facility B and $345.0 million under our 2020 Convertible Notes. Our Term Loan Facility B is guaranteed by us and certain of our domestic and foreign subsidiaries and is secured by substantially all of our, the subsidiary guarantors and the co-borrowers’ assets. Our indebtedness may:    
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;
limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;
require us to use a substantial portion of our cash flow from operations to make debt service payments;
limit our flexibility to plan for, or react to, changes in our business and industry;
place us at a competitive disadvantage compared to our less leveraged competitors; and
increase our vulnerability to the impact of adverse economic and industry conditions.
 
Our ability to meet our debt service obligations will depend on our future performance, which will be subject to financial, business, and other factors affecting its operations, many of which are beyond our control.

The elimination of the USD London Interbank Offered Rate ("LIBOR") could materially impact our interest expense.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee ("ARRC") has proposed that the Secured Overnight Financing Rate ("SOFR") is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on

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industry-wide transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. The Company’s Term Loan B and interest rate swaps are currently indexed to USD-LIBOR and are expected to be indexed to USD-LIBOR or its replacement in the future. To the extent the USD-LIBOR replacement results in higher interest rates, the Company’s interest expense on its Term Loan Facility could materially increase.

Covenants in our debt agreements restrict our business in many ways and if we do not effectively manage our covenants, our financial condition and results of operations could be adversely affected.
 
Our Term Loan Facility B contains various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:    
incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;     
issue redeemable preferred stock;     
pay dividends or distributions or redeem or repurchase capital stock;     
prepay, redeem or repurchase certain debt;     
make loans, investments and capital expenditures;     
enter into agreements that restrict distributions from our subsidiaries;     
sell assets and capital stock of our subsidiaries;     
enter into certain transactions with affiliates; and     
consolidate or merge with or into, or sell substantially all of our assets to, another person.
 
A breach of any of these covenants could result in a default under our Term Loan Facility B and/or our other indebtedness, which could in turn result in a substantial portion of our indebtedness becoming due prior to its scheduled maturity date. In such event, we may be unable to repay all of the amounts that would become due under our indebtedness. If we were unable to repay those amounts, the lenders under our Term Loan Facility B could proceed against the collateral granted to them to secure that indebtedness. In any case, if a significant portion of our debt was accelerated, we might be forced to seek bankruptcy protection.

We may not be able to generate sufficient cash to service our debt obligations.
 
Our ability to make payments on and to refinance our indebtedness will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness.
 
If our cash flows and capital resources are insufficient to fund our debt service 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. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our Term Loan Facility B restricts our ability to dispose of assets, use the proceeds from any disposition of assets and refinance our indebtedness. We may not be able to consummate those dispositions or to maximize the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.
 
In addition, borrowings under our Term Loan Facility B are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease.

Repayment of debt is dependent on cash flow generated by our subsidiaries and their respective subsidiaries.
 
Our subsidiaries, including Rovi Guides Inc., Rovi Solutions Corporation and TiVo Solutions Inc., own a significant portion of our assets and conduct substantially all of our operations. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event Rovi Corporation does not receive distributions from its subsidiaries, it may be unable to make required principal and interest payments on its debt obligations, including the 2020 Convertible Notes. Accordingly, repayment of Rovi Corporation's indebtedness depends, to a significant extent, on the generation of cash flow by its subsidiaries, including Rovi Guides, Inc. and Rovi Solutions Corporation, the senior secured position of their bank debt, and their ability to make cash available to Rovi Corporation, by dividend, debt repayment or otherwise. Because they are not guarantors or a co-issuer of the 2020 Convertible Notes, Rovi Corporation’s subsidiaries do not have any obligation to pay amounts due on those notes or to make funds available for that purpose. Conversely, the ability of Rovi Solutions Corporation and Rovi Guides, Inc. to repay their

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indebtedness under our Term Loan Facility B depends, in part, on the generation of cash flow by their respective subsidiaries. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Additionally, distributions from our non-U.S. subsidiaries may be subject to foreign withholding taxes and would be subject to U.S. federal and state income tax which could reduce the net cash available for principal and interest payments.

Our capital requirements and our business strategy could increase our expenses, cause us to change our growth and development plans, reduce or suspend our capital allocation activities, and cause us to incur more indebtedness.
 
If economic conditions or other risks and uncertainties in our future business cause a significant reduction in our cash flows from operations, we may reduce or suspend capital expenditures, growth and acquisition activity, implementation of our business strategy, dividend declarations or share repurchases. We and our subsidiaries may choose to incur additional indebtedness in the future to fund these activities, although our access to capital markets is not assured and we may not be able to incur additional indebtedness at a cost that is consistent with current borrowing rates. The terms of our debt do not prohibit us or our subsidiaries from incurring additional indebtedness, although such debt terms impose restrictions on our ability to do so. If we incur any additional indebtedness that ranks equally with existing indebtedness, the holders of that indebtedness will be entitled to share ratably with the holders of our existing debt obligations in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.

The nature of our business requires the application of complex accounting principles. Significant changes in U.S. generally accepted accounting principles (“GAAP”) could materially affect our financial position and results of operations.

From time to time the Financial Accounting Standards Board (the “FASB”) modifies the accounting standards applicable to our financial statements, which could materially affect our financial position or results of operations. For example, in February 2016, the FASB issued an amended accounting standard for leases, Accounting Standards Update No. 2016-02, Leases (“Topic 842”). On January 1, 2019 we adopted Topic 842 using the modified retrospective approach. As a result of adopting Topic 842, we expect to recognize the present value of our existing minimum lease payments as lease liabilities of approximately $80 million to $85 million and a corresponding right-of-use asset of approximately $65 million to $70 million. The adoption of Topic 842 is not expected to change the cash flows associated with our leases. See Note 1 to the Consolidated Financial Statements in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein, for additional information about the effect of adopting Topic 842.

We utilize non-GAAP reporting in our quarterly earnings press releases.
 
As part of our quarterly earnings press releases, we publish measures compiled in accordance with GAAP as well as non-GAAP financial measures along with a reconciliation between the GAAP and non-GAAP financial measures. The reconciling items adjust amounts reported in accordance with GAAP for certain items which are described in detail in each such quarterly earnings press release. We believe that our non-GAAP financial measures are meaningful to investors when analyzing our results of operations as this is how our business is managed. The market price of our stock may fluctuate based on future non-GAAP results if investors base their investment decisions on such non-GAAP financial measures. If we decide to alter or curtail the use of non-GAAP financial measures in our quarterly earnings press releases, the market price of our stock could be adversely affected if investors analyze our performance in a different manner.

Our investment portfolio is subject to risks which may cause losses and affect the liquidity of our investment portfolio.

Our investment portfolio includes various money market funds and marketable debt securities, such as corporate debt securities, U.S. Treasury and agency securities and foreign government obligations. Weakened financial markets have at times adversely impacted the general credit, liquidity, market prices and interest rates for these and other types of debt securities. Additionally, changes in monetary policy by the Federal Open Market Committee may cause a decrease in the purchasing power of the U.S. dollar and adversely affect our investment portfolio. Furthermore, if there is a default on or downgrade of the securities in our investment portfolio, our investment portfolio may be adversely impacted, requiring impairment charges that could adversely affect our financial position, results of operations or cash flows. The financial market and monetary risks associated with our investment portfolio may have a material adverse effect on our financial condition, liquidity, results of operations, or cash flows.


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Risks Related to Our Business and Industry

We are subject to risks and uncertainties related to our review of strategic alternatives.
 
In connection with our previously announced review of strategic alternatives, we have incurred expenses and our future results may be affected by the pursuit or consummation of any specific transaction or other strategic alternative resulting from the review.  There can be no assurance that this review will result in a specific transaction or other strategic alternative.  In addition, the pendency of the review exposes us to certain risks and uncertainties, including potential risks and uncertainties in retaining and attracting employees during the review process; the diversion of management’s time to the review; exposure to potential litigation in connection with the review process or any specific transaction or other strategic alternative resulting therefrom; and risks and uncertainties with respect to suppliers, customers and other business relationships, all of which could disrupt and negatively affect our business. Speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of the Company could cause our stock price to fluctuate significantly.  We can provide no assurance that any transaction or other strategic alternative we pursue will have a positive impact on our results of operations or financial condition.

If we fail to develop and timely deliver innovative technologies and services in response to changes in the technology and entertainment industries, our business could decline.
 
The markets for our products, services and technologies are characterized by rapid change and technological evolution. We will need to continue to expend considerable resources on research and development in the future in order to continue to design and deliver enduring, innovative entertainment products, services and technologies. Despite our efforts, we may not be able to develop timely and effectively market new products, technologies and services that adequately or competitively address the needs of the changing marketplace. In addition, we may not correctly identify new or changing market trends at an early enough stage to capitalize on market opportunities. At times, such changes can be dramatic, as were the shift from VHS videocassettes to DVDs for consumer playback of movies in homes and elsewhere and the transition from packaged media to internet distribution. Our future success depends to a great extent on our ability to develop and timely deliver innovative technologies that are widely adopted in response to changes in the technology and entertainment industries and that are compatible with the technologies, services or products introduced by other entertainment industry participants.
 
Despite our efforts and investments in developing new products, services and technologies:    
we may not receive significant revenue from our current research and development efforts for several years, if at all;
we cannot assure you that the level of funding and significant resources we are committing for investments in new products, services and technologies will be sufficient or result in successful new products, services or technologies;     
we cannot assure you that our newly developed products, services or technologies can be successfully protected as proprietary intellectual property rights or will not infringe the intellectual property rights of others;     
we cannot assure you that any new products or services that we develop will achieve market acceptance;     
our products, services and technologies may become obsolete due to rapid advancements in technology and changes in consumer preferences;    
we cannot assure you that revenue from new products, services or technologies will offset any decline in revenue from our products, services and technologies which may become obsolete; and     
our competitors and/or potential customers may develop products, services or technologies similar to those developed by us, resulting in a reduction in the potential demand for our newly developed products, services or technologies.
 
Our failure to successfully develop new and improved products, services and technologies, including as a result of any of the risks described above, may reduce our future growth and profitability and may adversely affect our business, results and financial condition.

Our business may be adversely affected by fluctuations in the number of cable television, telecommunications television, and digital broadcast satellite subscribers if the availability of OTT content services causes consumers to cancel their pay TV subscriptions.
 
For some of our technologies, we are paid a royalty based on the number of subscribers or set top-boxes our pay TV customers have. The ability to enjoy digital entertainment content downloaded or streamed over the internet has caused some consumers to elect to cancel their pay TV subscriptions. If our pay TV customers are unable to maintain their subscriber bases, the royalties they owe us may decline.

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Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements than we do, which could reduce demand for our products or services or render them obsolete and if competition increases or if we are unable to effectively compete with existing or new competitors, the result could be price reductions, fewer customers and loss of market share, any of which could result in less revenue and harm our business.

The advanced video solutions market is rapidly evolving, and our Platform Solutions face significant competition in the product and service offerings sold to service providers and to retail consumers. Moreover, the market for in-home entertainment is intensely competitive and subject to rapid technological change such as the growth and availability of content streamed over the internet. Our advanced video solutions compete with other CE products and home entertainment services (such as Roku, AppleTV, and Amazon FireTV) as well as products and service offerings built by other service providers or their suppliers for consumer spending. Many of these products and services have broad user bases, substantially greater brand recognition, market presence, distribution channels, advertising and marketing budgets and promotional activities as well as more strategic partners. We in turn rely on our service provider customers and retailers to help market and promote our advanced video solutions. As a result of this intense competition, we could incur increased research and development expenses and increased marketing and promotions costs that could adversely affect our business, including rendering certain of our advanced video solutions obsolete, in the future.

Our Platform Solutions also face competition from companies that produce and market program guides as well as television schedule information in a variety of formats, including passive and interactive on-screen electronic guide services, online listings, over the top applications, printed television guides in newspapers and weekly publications, and local cable television guides. Our Platform Solutions also compete against customers and potential customers who choose to build their own IPG, including both those who do and those who do not elect to license our patents.
 
The markets for the consumer hardware and software products sold by our customers are competitive and price sensitive. Licensing fees for our technologies, products and services, particularly in the physical media, CE and personal computer areas, may decline due to competitive pricing pressures and changing consumer demands. In addition, we may experience pricing pressures in other parts of our business. These trends could make it more difficult for us to increase or maintain our revenue and could adversely affect our operating results. To increase per unit royalties, we must continue to introduce new, highly functional versions of our technologies, products and services for which we can charge higher amounts. Any inability to introduce such technologies, products and services in the future or other declines in the amounts we can charge would also adversely affect our revenues.
 
Some of our current or future competitors may have significantly greater financial, technical, marketing and other resources than we do, may enjoy greater brand recognition than we do, or may have more experience or advantages than we have in the markets in which they compete. Further, many of the consumer hardware and software products that include our technologies also include technologies developed by our competitors. As a result, we must continue to invest significant resources in product development in order to enhance our technologies and our existing products and services and introduce new high-quality technologies, products and services to meet the wide variety of such competitive pressures. Our ability to generate revenues from our business will suffer if we fail to do so successfully.

We face competitive risks in the provision of an entertainment offering involving the distribution of digital content provided by third party application providers through broadband.

We have previously launched access in certain of our products and services to the entertainment offerings of Amazon Video, Netflix, Hulu Plus, VUDU, Pandora and others for the distribution of digital content directly to broadband-connected TiVo devices. Our offerings with Amazon Video, Netflix, Hulu Plus, Pandora and others typically involve no significant long-term commitments. We face competitive, technological, and business risks in our ongoing provision of an entertainment offering involving the distribution of digital content through broadband to consumer televisions with Amazon Video, Netflix and others, including the availability of premium and high-definition content, as well as the speed and quality of the delivery of such content to TiVo devices. For instance, we face increased competition from a growing number of broadband-enabled devices from providers such as Roku, AppleTV, Amazon Video, and Google that provide broadband delivered digital content directly to a consumer's television connected to such a device. Additionally, we face competition from online content providers and other PC software providers who deliver digital content directly to a consumer's personal computer, which in some cases may then be viewed on a consumer's television. If we are unable to provide a competitive entertainment offering with Amazon Video, Netflix, Hulu Plus, Pandora, and our other partners, on our own, or an equivalent offering with other third-parties, the attractiveness of the TiVo service to new subscribers would be harmed as consumers increasingly look for new ways to receive and view digital content and our ability to retain and attract subscribers would be harmed.

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Establishing and maintaining licensing relationships with companies are important to build and support a worldwide entertainment technology licensing ecosystem and to expand our business, and failure to do so could harm our business and prospects.
 
Our future success depends on our ability to establish and maintain licensing relationships with companies in related business fields, including:    
pay TV service providers;    
operators of entertainment content distributors, including PPV and VOD networks;     
CE, digital PPV/VOD set-top hardware manufacturers, DVD hardware manufacturers and personal computer manufacturers;     
semiconductor and equipment manufacturers;     
content rights holders;    
retailers and advertisers;    
DRM suppliers; and     
internet portals and other digital distribution companies.
 
Substantially all of our license agreements are non-exclusive, and therefore our licensees are free to enter into similar agreements with third parties, including our competitors. Our licensees may develop or pursue alternative technologies either on their own or in collaboration with others, including our competitors.
 
Some of our third-party license arrangements require that we license others' technologies and/or integrate our solutions with others. In addition, we rely on third parties to report usage and volume information to us. Delays, errors or omissions in this information could harm our business. If these third parties choose not to support integration efforts or delay the integration of our solutions, our business could be harmed.
 
If we fail to maintain and expand our relationships with a broad range of participants throughout the entertainment industry, including motion picture studios, broadcasters, pay TV service providers and CE manufacturers, our business and prospects could be materially harmed. Relationships have historically played an important role in the entertainment industries that we serve. If we fail to maintain and strengthen these relationships, these industry participants may not purchase and use our technologies, which could materially harm our business and prospects. In addition to directly providing a substantial portion of our revenue, these relationships are also critical to our ability to have our technologies adopted. Moreover, if we fail to maintain our relationships, or if we are not able to develop relationships in new markets in which we intend to compete in the future, including markets for new technologies and expanding geographic markets, our business, operating results and prospects could be materially and adversely affected. In addition, if major industry participants form strategic relationships that exclude us, our business and prospects could be materially adversely affected.

We are exposed to risks associated with our changing technology base through strategic acquisitions, investments, divestitures and discontinued businesses.

We have expanded our technology base in the past through strategic acquisitions of companies with complementary technologies or intellectual property and intend to do so in the future. Acquisitions hold special challenges in terms of successful integration of technologies, products, services and employees. We may not realize the anticipated benefits of these acquisitions or the benefits of any other acquisitions we have completed or may complete in the future, and we may not be able to incorporate any acquired services, products or technologies with our existing operations, or integrate personnel from the acquired businesses, in which case our business could be harmed.
 
Acquisitions, divestitures, discontinued businesses, and other strategic decisions involve numerous risks, including:    
problems integrating and divesting the operations, technologies, personnel, services or products over geographically disparate locations;     
unanticipated costs, taxes, litigation and other contingent liabilities;     
continued liability for discontinued businesses and pre-closing activities of divested businesses or certain post-closing liabilities which we may agree to assume as part of the transaction in which a particular business is divested;     
adverse effects on existing business relationships with suppliers and customers;     
cannibalization of revenue as customers may seek multi-product discounts;    
risks associated with entering into markets in which we have no, or limited, prior experience;     
incurrence of significant restructuring charges if acquired products or technologies are unsuccessful;     

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significant diversion of management's attention from our core business and diversion of key employees' time and resources;     
licensing, indemnity or other conflicts between existing businesses and acquired businesses;    
inability to retain key customers, distributors, suppliers, vendors and other business relations of the acquired business; and     
potential loss of our key employees or the key employees of an acquired organization or as a result of discontinued businesses.
 
Financing for future acquisitions may not be available on favorable terms, or at all. If we identify an appropriate acquisition candidate for any of our businesses, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition or integrate the acquired business, products, service offerings, technologies or employees into our existing business and operations. Future acquisitions and divestitures may not be well-received by the investment community, which may cause the value of our stock to fall. We cannot ensure that we will be able to identify or complete any acquisition, divestiture or discontinued business in the future. Further, the terms of our indebtedness constrains our ability to make and finance additional acquisitions or divestitures.
 
If we acquire businesses, new products, service offerings or technologies in the future, we may incur significant acquisition-related costs. In addition, we may recognize significant amounts of goodwill or intangible assets that would be subject to impairment testing, as well as amortization for finite-lived intangible assets. As a result of the quantitative interim goodwill impairment test performed as of December 31, 2018, a Goodwill impairment charge of $269.0 million was recognized related to the Product reporting unit during the year ended December 31, 2018. For further details about the Goodwill impairment charge, refer to Note 8 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein. In the future, we may be required to impair all or part of the goodwill or intangible assets which could harm our operating results.

If we consummate one or more significant future acquisitions in which the consideration consists of stock or other securities, our existing stockholders' ownership could be significantly diluted. If we were to proceed with one or more significant future acquisitions in which the consideration included cash, we could be required to use a substantial portion of our cash and investments. Acquisitions could also cause operating margins to fall depending on the businesses acquired.

Our strategic investments may involve joint development, joint marketing, or entry into new business ventures, or new technology licensing. Any joint development efforts may not result in the successful introduction of any new products or services by us or a third party, and any joint marketing efforts may not result in increased demand for our products or services. Further, any current or future strategic acquisitions and investments by us may not allow us to enter and compete effectively in new markets or enhance our business in our existing markets and we may have to impair the carrying amount of our investments.

Our success is heavily dependent on our proprietary technologies.
 
We believe that our future success will depend on our ability to continue to introduce proprietary solutions for digital content and technologies. We rely on a combination of patent, trademark, copyright and trade secret laws, nondisclosure and other contractual provisions, and technical measures to protect our intellectual property rights. Our patents, trademarks and copyrights may be challenged and invalidated or circumvented. Our patents may not be of sufficient scope or strength or be issued in all countries where products or services incorporating our technologies can be sold. We have filed applications to expand our patent claims and for improvement patents to extend the current periods of patent coverage. However, expiration of some of our patents may harm our business. If we are not successful in protecting our intellectual property, our business would be harmed.
 
Others may develop technologies that are similar or superior to our technologies, duplicate our technologies or design around our patents. Effective intellectual property protection may be unavailable or limited in some foreign countries. Despite efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise use aspects of processes and devices that we regard as proprietary. Policing unauthorized use of our proprietary information is difficult, and the steps we have taken may not prevent misappropriation of our technologies. Such competitive threats could harm our business.


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Our ability to maintain and enforce our trademark rights has a large impact on our ability to prevent third party infringement of our brand and technologies and if we are unable to maintain and strengthen our brands, our business could be harmed.
 
Maintaining and strengthening our brands is important to maintaining and expanding our business, as well as to our ability to enter into new markets for our technologies, products and services. If we fail to promote and maintain these brands successfully, our ability to sustain and expand our business and enter into new markets may suffer. Much of the promotion of our brand depends, among other things, on hardware device manufacturing companies and service providers displaying our trademarks on their products. If these companies choose for any reason not to display our trademarks on their products, or if these companies use our trademarks incorrectly or in an unauthorized manner, the strength of our brand may be diluted or our ability to maintain or increase our brand awareness may be harmed. We generally rely on enforcing our trademark rights to prevent unauthorized use of our brand and technologies. Our ability to prevent unauthorized uses of our brand and technologies would be negatively impacted if our trademark registrations were overturned in the jurisdictions where we do business. We also have trademark applications pending in a number of jurisdictions that may not ultimately be granted, or if granted, may be challenged or invalidated, in which case we would be unable to prevent unauthorized use of our brand and logo in such jurisdiction. We have not filed trademark registrations in all jurisdictions where our brand and logo are used.

We may not be able to join standards bodies, license technologies or integrate with platforms that are necessary or helpful to our product or services businesses because of the encumbrances that the proposed associated agreements place on our patents.
 
Standards bodies often require, as a condition of joining such bodies, that potential members license, agree to license, disclose or place other burdens on their patents. Similarly, technology licensors and platform operators often require that licensees cross license, or agree not to assert, their patents. In order to develop, provide or distribute certain products or services, we may find it necessary or helpful to join these standards bodies, license these technologies or contract with these platform operators. However, in order to do so, we might have to sign agreements under which we would have to license or agree not to assert patents without being able to collect royalties or for fees that we believe are less than those that we could otherwise collect. Similarly, these agreements could require us to disclose invention-related information that we would otherwise prefer to keep confidential. If we choose not to be part of standards bodies, to license certain technologies, or to contract with certain platform operators, our business could be harmed.

For our business to succeed, we need to attract and retain qualified employees and manage our employee base effectively.
 
Our success depends on our ability to hire and retain qualified employees and to manage our employee base effectively. Because of the specialized nature of our business, our future success will depend on our continuing ability to identify, attract, train and retain highly skilled managerial, technical, sales and marketing personnel, particularly as we enter new markets. Competition for people with the skills that we require is intense, particularly in the San Francisco Bay Area, where our headquarters are located, and the high cost of living in these areas makes our recruiting and compensation costs higher. Moreover, changes in our management or executive leadership team could lead to disruption of our business or distraction of our employees as the organization adapts to such management changes. Uncertainties with respect to the results of our publicly announced strategic alternatives review or the interim nature of our current CEO may also distract our employees and management team and lead to attrition of qualified employees, increasing our hiring and retention risks. If we are unable to hire and retain qualified employees, our business and operating results could be adversely affected.

Qualifying, certifying and supporting our technologies, products and services is time consuming and expensive.
 
We devote significant time and resources to qualify and support our software products on various personal computer, CE and mobile platforms, including operating systems from Apple Inc., Google and Microsoft. In addition, we maintain high-quality standards for products that incorporate our technologies and products through a quality control certification process. To the extent that any previously qualified, certified and/or supported platform or product is modified or upgraded, or we need to qualify, certify or support a new platform or product, we could be required to expend additional engineering time and resources, which could add significantly to our development expenses and adversely affect our operating results.


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Because many of our technologies, products and services are designed to comply with industry standards, to the extent we cannot distinguish our technologies, products and services from those sold by our competitors, our current distributors and customers may choose alternate technologies, products and services or choose to purchase them from multiple vendors.
 
We cannot provide any assurance that the industry standards for which we develop new technologies, products and services will allow us to compete effectively with companies possessing greater financial and technological resources than we have to market, promote and exploit sales opportunities as they arise in the future. Technologies, products and services that are designed to comply with standards may also be viewed as interchangeable commodities by certain customers. We may be unable to compete effectively if we cannot produce technologies, products and services more quickly or at lower cost than our competitors. Further, any new technologies, products and services developed may not be introduced in a timely manner or in advance of our competitors' comparable offerings and may not achieve the broad market acceptance necessary to generate significant revenues.

The success of certain of our solutions depends on the interoperability of our technologies with consumer hardware devices.
 
To be successful, we design certain of our solutions to interoperate effectively with a variety of consumer hardware devices, including personal computers, DVD players and recorders, Blu-ray players, digital still cameras, digital camcorders, portable media players, digital TVs, home media centers, set-top boxes, video game consoles, MP3 devices, multi-media storage devices, mobile tablets and smartphones. We depend on significant cooperation with manufacturers of these devices and the components integrated into these devices, as well as software providers that create the operating systems for such devices, to incorporate certain of our technologies into their product offerings and ensure consistent playback of encoded files. Currently, a limited number of devices are designed to support certain of our technologies. If we are unsuccessful in causing component manufacturers, device manufacturers and software providers to integrate certain of our technologies into their product offerings, those technologies may become less accessible to consumers, which would adversely affect our revenue potential.

We have made and expect to make significant investments in infrastructure which, if ineffective, may adversely affect our business results.
 
We have made and expect to make significant investments in infrastructure, tools, systems, technologies and content, including initiatives relating to digital asset and rights management, cloud-based systems and technologies and data warehouses, aimed to create, assist in the development or operation of, or enhance our ability to deliver innovative products and services across multiple media, digital and emerging platforms. These investments may ultimately cost more than is anticipated, their implementation may take longer than expected, we may need to utilize more than one vendor to remain cloud agnostic and they may not meaningfully contribute to or result in successful new or enhanced products, services or technologies.

If we fail to adequately manage our increasingly complex distribution agreements, including licensing, development, and engineering services, we could be subjected to unexpected delays in the deployment of TiVo's advanced television solutions, increased costs, possible penalties and adverse accounting and contractual consequences, including termination of such distribution arrangements. In any such event, our business would be harmed.
    
In connection with our deployment arrangements for TiVo, we engage in complex licensing, development, and engineering services arrangements with our marketing partners and distributors. These deployment agreements with television service providers usually provide for some or all of the following deliverables: software engineering services, solution integration services, hosting the TiVo Service, maintenance, and support. In general, these contracts are long-term and complex and often rely on the timely performance of such television service provider's third-party vendors that are outside TiVo's control. The engineering services and technology we agree to provide and/or develop may be essential to the functionality of the licensed software and delivered product or such software may involve significant customization and modification for each customer. We have experienced or may experience delays in delivery with television service providers including, for example, Com Hem Holdings AB and Virgin, as well as significant increases in expected costs of development and performance in certain instances in the past. Additional delays could lead to additional costs and adverse accounting treatments forcing us to recognize costs earlier than expected. If we are unable to deliver the contracted for technology, including specified customizations and modifications, and services in a timely manner or at all, then we could face penalties in the form of unreimbursed engineering development work, loss of subscriber or minimum financial commitments on the part of our partners or in extreme cases the early termination of such distribution agreements. In any such case our business would be harmed.


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In addition, when we enter into such deployment agreements with television service providers, we are typically required to make cost estimates based on historical experience and various other assumptions. These estimates are assessed continually during the term of the contract and revisions are reflected when the conditions become known. Using different cost estimates related to engineering services may produce materially different operating results, in addition to differences in timing and income statement classification of related expenses and revenues. An unfavorable change in estimates could result in a reduction of profit due to higher cost or the recording of a loss once such a loss becomes known to us that would be borne solely by us. We also recognize revenues for software engineering services using the percentage-of-completion method. We recognize revenue by measuring progress toward completion based on the ratio of costs incurred, principally labor, to total estimated costs of the project, an input method. If we are unable to properly measure and estimate our progress toward completion in such circumstances, we could incur unexpected additional costs, be required to recognize certain costs earlier than expected, or otherwise be required to delay recognition of revenues unexpectedly. A material inability to properly manage, estimate, and perform these development and engineering services for our television service provider customers could cause us to incur unexpected losses and reduce or even eliminate any profit from these arrangements, and in such a case our business would be harmed.

Our products and services could be susceptible to errors, defects, or unintended performance problems that could result in lost revenues, liability or delayed or limited market acceptance.

We develop and offer complex solutions, which we license and otherwise provide to customers. The performance of these solutions typically involves working with sophisticated software, computing and communications systems. Due to the complexity of these products and services, and despite our quality assurance testing, the products may contain undetected defects or errors that may affect the proper use or application of such products or services by the customer. Because certain of our products and services are embedded in digital content and other software, or rely on stable transmissions, our solutions' performance could unintentionally jeopardize our customers' product performance. Because customers rely on our products and services as used in their software and applications, defects or errors in our products or services may discourage customers from purchasing our products or services. These defects or errors could also result in product liability, service level agreement claims or warranty claims. Although we attempt to reduce the risk of losses resulting from these claims through warranty disclaimers and limitation of liability clauses in our agreements, these contractual provisions may not be enforceable in every instance. Any such defects, errors, or unintended performance problems in existing or new products or services, and any inability to meet customer expectations in a timely manner, could result in loss of revenue or market share, failure to achieve market acceptance, diversion of development resources, injury to our reputation, increased insurance costs and increased service costs, any of which could materially harm our business.

Business interruptions could adversely affect our future operating results.
 
The provision of certain of our products and services depends on the continuing operation of communications and transmission systems and mechanisms, including satellite, cable, wire, internet and over-the-air. These communication and transmission systems and mechanisms are subject to significant risks and any damage to or failure of these systems and mechanisms could result in an interruption of the provision of our products and services.
 
Several of our major business operations are subject to interruption by earthquake, fire, power shortages, terrorist attacks and other hostile acts, and other events beyond our control. The majority of our research and development activities, our corporate headquarters, our principal information technology systems, and other critical business operations are located near major seismic faults. Our operating results and financial condition could be materially harmed in the event of a major earthquake or other natural or man-made disaster that disrupts our business. The communications and transmission systems and mechanisms that we depend on are not fully redundant, and our disaster recovery planning cannot account for all eventualities.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could increase our operating costs and affect our ability to operate our business.
 
We have a complex business that is international in scope. Ensuring that we have adequate internal controls and procedures in place to help ensure that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We are continually in the process of documenting, reviewing and, if appropriate, improving our internal controls and procedures in connection with Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accountants on the effectiveness of our internal controls over financial reporting. If we or our independent registered public accountants identify areas for further attention or improvement, implementing any appropriate changes to our internal controls may require specific compliance training of our directors, officers and employees, entail substantial costs in order to modify our existing accounting systems and take a significant amount of time to complete.

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We have in the past identified, and may in the future identify, significant deficiencies in the design and operation of our internal controls, which have been or will in the future need to be remediated. Furthermore, our independent registered public accountants may interpret the Section 404 requirements and the related rules and regulations differently from how we interpret them, or our independent registered public accountants may not be satisfied with our internal control over financial reporting or with the level at which these controls are documented, operated or reviewed in the future. Finally, in the event we make a significant acquisition, or a series of smaller acquisitions, we may face significant challenges in implementing the required processes and procedures in the acquired operations. As a result, our independent registered public accountants may decline or be unable to report on the effectiveness of our internal controls over financial reporting or may issue a qualified report in the future. This could result in an adverse reaction in the financial markets due to investors' perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements.

We incur costs and demands on management as a result of complying with the laws and regulations affecting public companies, which could affect our operating results.
 
We have incurred, and expect to continue to incur, significant legal, accounting and other expenses associated with corporate governance and public company reporting requirements, including complying with the requirements of the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and Nasdaq. As long as the SEC requires the current level of compliance or more for public companies of our size, we expect these rules and regulations to require significant legal and accounting compliance costs and to make some activities time-consuming and costly. These rules and regulations may make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage than was previously available. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

If we fail to comply with the laws and regulations relating to the collection of sales tax and payment of income taxes in the various states and foreign jurisdictions in which we do business, we could be exposed to unexpected costs, expenses, penalties, and fees as a result of our noncompliance in which case our business could be harmed.

As our business grows and expands, we have started to do business in an increasing number of states nationally and foreign jurisdictions. By engaging in business activities in these states and foreign jurisdictions, we become subject to their various laws and regulations, including possible requirements to collect sales tax from our sales within those states and foreign jurisdictions and the payment of income taxes on revenue generated from activities in those states and foreign jurisdictions. The laws and regulations governing the collection of sales tax and payment of income taxes are numerous, complex, and vary among states and foreign jurisdictions. If we fail to comply with these laws and regulations requiring the collection of sales tax and payment of income taxes in one or more states and foreign jurisdictions where we do business, we could be subject to significant costs, expenses, penalties, and fees in which case our business would be harmed.

We generate a significant portion of our revenue from patent license agreements with a small number of major pay TV service providers which would lead to substantial revenue loss and possible litigation if not renewed.
 
We generate a significant amount of revenue from our contracts with AT&T and Charter. In September 2017, our contract with AT&T was extended to December 2025. In June 2016, we amended our license agreement with Charter to cover Time Warner Cable. Our contract with Comcast expired in March 2016 and we filed litigation against Comcast for patent infringement in April 2016. The expiration of our license with Comcast, as well as litigation initiated against Comcast, has resulted in a reduction of current revenue and an increase in litigation costs. The length of time that Comcast is out of license prior to executing a license or reaching a resolution is unknown. In addition, the amount of revenue recognized in the reporting period a license is executed or resolution is reached is uncertain and will depend on a variety of factors including terms such as duration, pricing, licensed products and fields of use, and the duration of the out-of-license period. In addition, while litigation costs may increase, 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. Furthermore, we cannot assure you that these license agreements with major pay TV service providers will not be terminated under certain circumstances. If that occurs and we are unable to replace the revenue associated with these agreements through similar or other business arrangements, our revenues and profit margins would decline and our business would be harmed.

Some software we provide may be subject to “open source” licenses, which may restrict how we use or distribute our software or require that we release the source code of certain products subject to those licenses.
 
Some of the products we support and some of our proprietary technologies incorporate open source software such as open source codecs that may be subject to the Lesser Gnu Public License or other open source licenses. The Lesser Gnu Public

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License and other open source licenses may require that source code subject to the license be released or made available to the public. Such open source licenses may mandate that software developed based on source code that is subject to the open source license, or combined in specific ways with such open source software, become subject to the open source license. We take steps to ensure that proprietary software we do not wish to disclose is not combined with, or does not incorporate, open source software in ways that would require such proprietary software to be subject to an open source license. However, few courts have interpreted the Lesser Gnu Public License or other open source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to some uncertainty. We often take steps to disclose source code for which disclosure is required under an open source license, but it is possible that we have or will make mistakes in doing so, which could negatively impact our brand or our adoption in the community, or could expose us to additional liability. In addition, we rely on multiple software programmers to design our proprietary products and technologies. Although we take steps to ensure that our programmers (both internal and outsourced) do not include open source software in products and technologies we intend to keep proprietary, we cannot be certain that open source software is not incorporated into products and technologies we intend to keep proprietary. In the event that portions of our proprietary technology are determined to be subject to an open source license, or are intentionally released under an open source license, we could be required to publicly release the relevant portions of our source code, which could reduce or eliminate our ability to commercialize our products and technologies. Also, in relying on multiple software programmers to design products and technologies that we intend, or ultimately end up releasing in the open source community, we may discover that one or multiple such programmers have included code or language that would be embarrassing to us, which could negatively impact our brand or our adoption in the community, or could expose us to additional liability. Such additional liability could include claims that result in litigation, require us to seek licenses from third-parties in order to keep offering our software, require us to re-engineer our software, require us to release proprietary source code, require us to provide indemnification or otherwise subject us to liability to a customer or supplier, or require us to discontinue the sale of a product in the event re-engineering cannot be accomplished in a timely manner, any of which could adversely affect our business.

Limitations on control of our IPG JV may adversely impact our operations in Japan.
 
We own 46% of our IPG JV with non-affiliated third parties holding the remaining interest. As a result of such arrangement, we may be unable to control the operations, strategies and financial decisions of the IPG JV, which could in turn result in limitations on our ability to implement strategies that we may favor, or to cause dividends or distributions to be paid. In addition, our ability to transfer our interests in the IPG JV may be limited under the joint venture arrangement.

Dependence on the cooperation of pay TV service providers, television broadcasters, hardware manufacturers, data providers and delivery mechanisms could adversely affect our revenues.
 
We rely on third party providers to deliver our metadata to some of the CE devices that include our UXs and IPGs. Further, our national data network provides customized and localized listings for pay TV and licensees of our data used in third party IPGs for pay TV. In addition, we purchase certain metadata from commercial vendors that we redistribute. The quality, accuracy and timeliness of that metadata may not continue to meet our standards or be acceptable to consumers. There can be no assurance that commercial vendors will distribute data to us without error or that the agreements that govern some of these relationships can be maintained on favorable economic terms. Technological changes may also impede the ability to distribute metadata. Our inability to renew these existing arrangements on terms that are favorable to us, or enter into alternative arrangements that allow us to effectively transmit our metadata to CE devices could have a material adverse effect on our CE IPG business.

We are dependent on third parties for metadata, third party images and content.
 
We distribute, as a revenue generating activity, metadata. In the future, we may not be able to obtain this content, or may not be able to obtain it on the same terms. Such a failure to obtain the content, or obtain it on the same terms, could damage the attractiveness of our metadata offerings to our customers, or could increase the costs associated with providing our metadata offerings, and could thus cause revenues or margins to decrease.

We depend on a limited number of third-parties to design, manufacture, distribute and supply hardware devices upon which the TiVo software and service operate. We may be unable to meet the software and service needs of our customers if these parties do not perform their obligations to TiVo or their MVPD customers.

The TiVo software and services operate on a number of hardware products, including DVR and non-DVR STBs, produced by third-party hardware companies. If we fail to effectively manage the integration of our software and services with our hardware partners' devices, we could suffer from product recalls, poorly performing product and higher than anticipated warranty costs. We have contracted for the design, manufacture and distribution of certain TiVo-branded DVRs and non-DVRs

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with a third-party partner. This third-party partner does not typically enter into long-term volume commitments with the major retail distributors. We currently rely on our TiVo-branded hardware partner's relationships with major retail distributors, including Best Buy, Amazon and others, for the distribution of TiVo-enabled DVRs and non-DVR products within the United States. If one or several major retail partners were to discontinue selling TiVo-enabled products, the volume of TiVo-enabled DVRs and non-DVRs sold to consumers could decrease, which could harm TiVo’s service business.

We depend on a third-party partner for the certain TiVo-branded hardware devices that are sold through the TiVo website. If this third-party partner fails to perform its obligations, we may be unable to find alternative suppliers or deliver our products and services sold through the TiVo website on time or with the features and functionality customers expect. In addition, because our third-party partner may be dependent on sole suppliers for key components and services, their ability to manufacture DVRs and and non-DVR STBs which run our software may be subject to concentrated risks of supply shortages (without immediately available alternatives) and exposure to unexpected cost increases in such sole supplied components. Additionally, certain features and functionalities of our TiVo service and DVRs are dependent on third party components and technologies. If TiVo or our third-party partner is unable to purchase or license such third-party components or technologies, we would be unable to offer certain related features and functionalities to our customers. In such a case, the desirability of our products to our customers could be reduced, thus harming our business.

TiVo also relies on third-parties to whom we outsource supply-chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics to provide cost-effective and efficient supply chain services. We 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 one or several of our third-party supply chain partners were to discontinue service to us, our ability to fulfill sales orders through the TiVo website and distribute inventory timely, cost effectively, or at all, may be delayed or prevented, which could harm our business. Any of these events could require us to undertake unforeseen additional responsibilities or devote additional resources to commercialize our TiVo service. Any of these outcomes could harm our ability to compete effectively and achieve increased market acceptance and brand recognition.

If our third-party partners are not successful, or experience delays, product shortages or other problems, the needs of our customers that use our TiVo service may not be met. In addition, as we are dependent on third-party hardware to operate our software and services, the loss of a hardware device relationship could require us to identify alternative sources of devices capable of running our software and services, which we may be unable to do or which could prove time-consuming and expensive.

In connection with our sales of TiVo-branded products through the TiVo website, we maintain an inventory of certain DVR and non-DVR products based on our demand forecast. Due to the seasonality in our business and the nature of long-lead time product development and manufacturing cycles, we make demand forecasts for these products well in advance of our peak selling periods. As such, we are subject to risks in managing the inventory needs of our business during the year, including estimating the appropriate quantity and mix of demand across our older and newer DVR and non-DVR products. If we were to overestimate demand for hardware products, we may have inventories in excess of currently forecasted demand which could require us to record a loss. However, if we were to underestimate demand for the TiVo-branded hardware products, we may end up with inventory shortages which could cause us to fail to meet actual customer demand. Should actual market conditions differ from our estimates, our future results of operations could be materially affected. Excess purchase commitments as a result of changes in our sales forecast may require us to record a loss.

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If cable operators were to cease supporting and providing CableCARDs to consumers or cable operators were to transmit television programs using technology that prevents our retail products from receiving and displaying television programs, the functionality of our current retail products would be severely limited, in which case our business would be harmed.
    
The FCC’s rules currently require the cable industry in the United States to provide access to digital high definition television signals to retail products by supplying separable security functionality to decrypt encrypted signals. Traditionally, cable operators have satisfied this separable security requirement by supplying CableCARD conditional access security cards. We rely on cable operators to supply CableCARDs for certain types of our DVRs to receive encrypted digital television signals without a cable operator supplied set-top box. With the limited exception of high definition over the air broadcast channels, our DVRs presently are limited to using CableCARDs to access digital cable, high definition, and premium cable channels (such as HBO) that are delivered in a linear fashion where all programs are broadcast to all subscribers all the time. Our retail cable products are unable to access the encrypted digital television signals of satellite providers such as DIRECTV and DISH Network L.L.C. ("DISH") as well as alternative television service providers such as AT&T U-verse and Google Fiber. And without CableCARDs, there presently is no alternative way for us to sell a retail cable product that works across cable systems nationwide. Furthermore, to the extent more pay TV customers obtain television service from satellite television providers and alternative television providers such as AT&T U-verse and Google Fiber, the desirability of our retail products and service will be harmed.

In December 2014, Congress passed the Satellite Television Extension and Localism Act Reauthorization ("STELAR"). Among other things, STELAR repealed an FCC requirement that cable operators employ separable security (i.e., CableCARDs) in the set-top boxes they lease to their subscribers effective December 4, 2015. STELAR did not address the FCC's requirement that cable operators provide separable security to retail devices and the cable industry has represented to Congress that it would continue to provide and support retail CableCARD devices in compliance with the separable security requirement. However, if operator-leased devices do not continue to rely on CableCARDs, the prices charged by operators to consumers whose devices continue to rely on CableCARDs could increase and support for retail CableCARD devices could deteriorate.

If cable operators were to cease supporting and providing CableCARDs to consumers without providing us with a commercially viable alternative method of accessing digital cable, high definition, and premium cable channels that works across cable systems nationwide, we would be unable to sell most of our current retail products, may be unable to create future retail products that receive pay TV programming, and our business would be harmed as the market for devices which only receive over the air broadcast television signals is significantly smaller than the current pay TV market. We cannot predict the impact of any new technical equipment regulations on our business and operations.

Certain cable operators are deploying switched digital video technologies to transmit television programs in an on-demand fashion (switched digital) only to subscribers who request to watch a particular program. Although cable operators are deploying a solution to enable our retail products to receive channels delivered with switched technologies (known as the “Tuning Adapter”), if this technology is not successful or is not accepted by our customers (due to cost, complexity, functionality, or other reasons), then the increased use of switched technologies and the continued inability of our products to receive switched cable programming without a Tuning Adapter may reduce the desirability and competitiveness of our products and services and adversely affect sales of our retail TiVo service subscriptions in which case our business would be harmed.

Similarly, if cable operators implement new technologies in the future to transmit television programming that do not allow programs to be received and displayed on our retail products, the desirability and competitiveness of our products and services will be adversely affected and impact the sales of our retail TiVo service products and services, in which case our business would be harmed.

We have limited control over existing and potential customers' and licensees' decisions to include our technology in their product and service offerings.
 
In general, we are dependent on our customers and licensees to incorporate our technology into their products and services. Although we have license agreements with many of these companies, many of these license agreements do not require any minimum purchase commitments, or are on a non-exclusive basis, or do not require incorporation of our technology in their products and services. If our customers were to determine that the benefits of our technology do not justify the cost of licensing the technology, then demand for our technology would decline. Furthermore, while we may be successful in having one or more industry standards-setting organizations require that our technology be used in order for a product to be compliant with the standards promulgated by such organizations, there is no guarantee that products associated with these standards will

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be successful in the market. Our licensees and other manufacturers might not utilize our technology in the future. If this were to occur, our business would be harmed.

The nature of some of our business relationships may restrict our ability to operate freely in the future and could be interpreted in a manner that adversely affects revenues, including from licensing, under those agreements.

                From time to time, we have engaged and may engage in the future in discussions with other parties concerning business relationships, which have included and may in the future include exclusivity provisions (such as geographic or product specific limitations), most favored customer limitations, and patent licensing arrangements. While we believe that such business relationships have historically enhanced our ability to finance and develop our business model or otherwise were justified by the terms of the particular relationship, the terms and conditions of such business relationships may place some restrictions on the operation of our business, including where we operate, who we work with, and what kinds of activities we may engage in, in the future. Additionally, some of our license agreements contain "most favored nation" clauses. These clauses typically provide that if we enter into an agreement with another licensee on more favorable terms, we must offer some of those terms to our existing licensees. We have entered into a number of license agreements with terms that differ in some respects from those contained in other agreements. These agreements may obligate us to provide different, more favorable, terms to licensees, which could, if applied, result in lower revenues or otherwise adversely affect our business, financial condition, results of operations. While we believe that we have appropriately complied with the most favored nation terms included in our license agreements, these contracts are complex and other parties could reach a different conclusion that, if correct, could have an adverse effect on our financial condition or results of operations.

We face significant risks to our business when we engage in the outsourcing of engineering work, including outsourcing of software work overseas, which, if not properly managed, could result in the loss of valuable intellectual property, increased costs due to inefficient and poor work product, and subject us to export control restrictions which could impede or prevent us from working with partners internationally, which could harm our business, including our financial results, reputation, and brand.

We have from time-to-time outsourced engineering work related to the design and development of the software in our products, typically to save money and gain access to additional engineering resources. We have worked, and expect to in the future work, with companies located in jurisdictions outside of the United States, including, but not limited to, Romania, India, Ukraine, and the United Kingdom. We have limited experience in the outsourcing of engineering and software development to third parties located internationally that operate under different laws and regulations than those in the United States. If we are unable to properly manage and oversee the outsourcing of this engineering and other work related to our products, we could suffer the loss of valuable intellectual property, or the loss of the ability to claim such intellectual property, including patents, trademarks, trade secrets, and copyrights. We could also be subjected to increased regulatory and other scrutiny related to export control restrictions which could impede or prevent us from working with international partners. Additionally, instead of saving money, we could incur significant additional costs as a result of inefficient or delayed engineering services or poor work product. As a result, our business would be harmed, including our financial results, reputation, and brand.

The markets for our targeted audience delivery and advertising platforms may not develop and we may fail in our ability to fully exploit these opportunities if these markets do not develop as we anticipate.
 
The market for targeted audience delivery platforms for the provision of data-driven, audience-based advertising analytics for advertisers, networks and agencies and interactive television advertising are at an early stage of development and we cannot assure you that we will succeed in our efforts to develop our targeted audience delivery and interactive advertising platforms as products widely accepted by our customers. In addition, with respect to our interactive advertising platform, pay TV service providers who have a patent license from us are not required to provide advertising or utilize our technology, although some have. Therefore, our ability to derive advertising revenues from our patent licensees also depends on the implementation of compatible interactive advertising technologies by such licensees.

Consolidation of the telecommunications, cable and satellite broadcasting industry could adversely affect existing agreements.
 
We have entered into agreements with a large number of pay TV service providers for the licensing or distribution of our technology, products and services. If consolidation of the telecommunications, cable and satellite broadcasting industry continues, some of these agreements may be affected by mergers, acquisitions or system swaps which could result in an adverse effect on the amount of revenue we receive under these types of agreements.


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A significant portion of our revenue is derived from international sales. Economic, political, regulatory and other risks associated with our international business or failure to manage our global operations effectively could have an adverse effect on our operating results.
 
As of December 31, 2018, we had two major locations (defined as a location with more than 50 employees) and employed approximately 650 employees outside the U.S. We face challenges inherent in efficiently managing employees over large geographic distances and across multiple office locations, including the need to implement appropriate systems, controls, policies, benefits and compliance programs. Our inability to successfully manage our global organization could have a material adverse effect on our business and results of operations.
 
We expect that international and export sales will continue to represent a substantial portion of our revenues for the foreseeable future. Our future growth will depend to a large extent on worldwide acceptance and deployment of our solutions.
 
To the extent that foreign governments impose restrictions on importation of programming, technology or components from the U.S., the demand for our solutions in these markets could diminish. In addition, the laws of some foreign countries may not protect our intellectual property rights to the same extent as do the laws of the U.S., which increases the risk of unauthorized use of our technologies. Such laws also may not be conducive to copyright protection of digital content, which may make our content protection technology less effective and reduce the demand for it.
 
Because we sell our products and services worldwide, our business is subject to the risks associated with conducting business internationally, including:    
foreign government regulation;     
changes in diplomatic and trade relationships;
changes in, or imposition of, foreign laws and regulatory requirements and the costs of complying with such laws (including consumer and data protection laws);     
changes in, or weakening of copyright and intellectual property (patent) laws;     
difficulty of effective enforcement of contractual provisions in local jurisdictions or difficulty in obtaining export licenses for certain technology;     
import and export restrictions and duties, including tariffs, quotas or taxes and other trade barriers and restrictions;
fluctuations in our effective income tax rate driven by changes in the pre-tax profits that we derive from international sources, as well as changes in tax laws in jurisdictions in which we have a presence;     
changes in a specific country's or region's political or economic condition, including changes resulting from the threat of terrorism;     
difficulty in staffing and managing foreign operations, including compliance with laws governing labor and employment; and     
fluctuations in foreign currency exchange rates.
 
Our business could be materially adversely affected if foreign markets do not continue to develop, if we do not receive additional orders to supply our technologies, products or services for use by international pay TV service providers, CE and STB manufacturers, PPV/VOD providers and others or if regulations governing our international businesses change. Any changes to the statutes or the regulations with respect to export of encryption technologies could require us to redesign our products or technologies or prevent us from selling our products and licensing our technologies internationally.

We face risks with respect to conducting business in China due to China's historically limited recognition and enforcement of intellectual property and contractual rights and because of certain political, economic and social uncertainties relating to China.
 
We have direct license relationships with many consumer hardware device manufacturers located in China and a number of the electronics companies that license our technologies utilize captive or third-party manufacturing facilities located in China. We expect consumer hardware device manufacturing in China to continue to increase due to its lower manufacturing cost structure as compared to other industrialized countries. As a result, we face additional risks in China, in large part due to China's historically limited recognition and enforcement of contractual and intellectual property rights. In particular, we have experienced, and expect to continue to experience, China-based consumer hardware device manufacturers underreporting or failing to report shipments of their products that incorporate our technologies, or incorporating our technologies or trademarks into their products without our authorization or without paying us licensing fees. We may also experience difficulty enforcing our intellectual property rights in China, where intellectual property rights are not as respected as they are in the U.S., Japan and Europe. Unauthorized use of our technologies and intellectual property rights by China-based consumer hardware device manufacturers may dilute or undermine the strength of our brands. If we cannot adequately monitor the use of our technologies

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by China-based consumer hardware device manufacturers, or enforce our intellectual property rights in China, our revenue could be adversely affected.

Our systems and networks are subject to cybersecurity and stability risks that could harm our business and reputation and expose us to litigation or liability.
 
Online business activities depend on the ability to store and transmit confidential information and licensed intellectual property securely on our systems, third party systems and over private, hybrid and public networks. Any compromise of our ability to store or transmit such information and data securely or reliably, and any costs associated with preventing or eliminating such problems, could harm our business. Storage and online transmissions are subject to a number of security and stability risks, including:    
our own or licensed encryption and authentication technology, or access or security procedures, may be compromised, breached or otherwise be insufficient to ensure the security of customer information or intellectual property;     
we could experience unauthorized access, computer viruses, system interference or destruction, “denial of service” attacks and other disruptive problems, whether intentional or accidental, that may inhibit or prevent access to our websites or use of our products and services, or cause customer information or other sensitive information to be disclosed to a perpetrator, others or the general public;     
someone could circumvent our security measures and misappropriate our, our business relations or customers' proprietary information or content or interrupt operations, or jeopardize our licensing arrangements, many of which are contingent on our sustaining appropriate security protections;     
our computer systems could fail and lead to service interruptions or downtime for television or other guidance systems, or websites, which may include e-commerce websites;     
we could inadvertently disclose customer information; or    
we may need to grow, reconfigure or relocate our data centers in response to changing business needs, which may be costly and lead to unplanned disruptions of service.
 
The occurrence of any of these or similar events could damage our business, hurt our ability to distribute products and services and collect revenue, threaten the proprietary or confidential nature of our technology, harm our reputation, increase the costs of our ongoing cybersecurity protections and enhancements, and expose us to litigation and other liabilities. Because some of our technologies and businesses are intended to inhibit use of or restrict access to our customers' intellectual property, we may become the target of hackers or other persons whose use of or access to our customers' intellectual property is affected by our technologies. Also, hackers may, for financial gain or other motives, seek to infiltrate or damage our systems, or obtain sensitive business information or customer information. We also may be exposed to customer claims, or other liability, in connection with any security breach or inadvertent disclosure. We may be required to expend significant capital or other resources to protect against the threat of security breaches, hacker attacks or system malfunctions or to alleviate problems caused by such breaches, attacks or failures.
 
Our product and service offerings rely on a variety of systems, networks and databases, many of which are maintained by us at our data centers or third-party data centers (e.g., cloud services). We do not have complete redundancy for all of our systems, and we do not maintain real-time back-up of our data, so in the event of significant system disruption, particularly during peak periods, we could experience loss of data processing capabilities, which could prevent us from providing our products and services to our customers for an uncertain amount of time, cause us to lose customers as a result of such breaches, and could harm our operating results through loss of revenue and increased costs to remediate such cybersecurity incidents. Notwithstanding our efforts to protect against “down time” for products and services, we do occasionally experience unplanned outages or technical difficulties. In order to provide products and services, we must protect the security of our systems, networks, databases and software.

We need to safeguard the security and privacy of our customers’ confidential data and remain in compliance with laws that govern such data, and any inability to do so may harm our reputation and brand and expose us to legal action.

Our products and services and back-end information technology systems can collect and allow us to store individual viewer and account preferences and other data our customers may consider confidential. To provide better consumer experiences and to operate effectively, and for our analytics business and other businesses, we collect certain information from users. Collection and use of such information may be subject to U.S. federal and state privacy and data collection laws and regulations, standards used by credit card companies applicable to merchants processing credit card details, and foreign laws such as the European Union's Data Protection Directive (which may be added to or amended by the General Data Protection Regulation or other regulations in the future). We may also be subject to third party privacy policies and permissions and obligations we owe to third parties, including, for example, those of pay TV service providers. We post our privacy policies

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concerning the collection, use and disclosure of user data, including interactions between client and server. Privacy concerns, however, could create uncertainty in the marketplace for digital video recording and for our products and services more generally. Any failure by us to comply with privacy policies or contractual obligations, any failure to comply with standards set by credit card companies relating to privacy or data collection, any failure to conform the privacy policy to changing aspects of our business or applicable law, or any existing or new legislation regarding privacy issues could impact our data collection efforts and subject us to fines, litigation or other liability.

In addition, the Children's Online Privacy Protection Act imposes civil and criminal penalties on persons collecting personal information from children under the age of 13. We do not knowingly distribute harmful materials to minors, direct our websites or services to children under the age of 13, or collect personal information from children under the age of 13. However, we are not able to control the ways in which consumers use our technology, and our technology may be used for purposes that violate this or other similar laws. The manner in which such laws may be interpreted and enforced cannot be fully determined, and future legislation could subject us to liability if we were deemed to be non-compliant.

Further, if our technological security measures are compromised, our customers may curtail or stop use of our products and services. Our products and services such as DVRs may contain the private information of our customers, and security breaches could expose us to a risk of loss of this information, which could result in potential liability and litigation. Like all services that connect with the internet, our service, including our website, is vulnerable to break-ins, attacks, attempts to overload our servers with denial-of-service or other attacks and similar disruptions from unauthorized use of our computer systems, any of which could lead to interruptions, delays, or shutdowns of our service, causing loss of critical data or the unauthorized disclosure or use of personally identifiable or other confidential information. If we experience compromises to our security that result in service and website performance or availability problems, the complete shutdown of our service or website, or the loss or unauthorized disclosure of confidential information, our customers may lose trust and confidence in us, and decrease or discontinue their use of our service. Further, outside parties may attempt to fraudulently induce employees to disclose sensitive information in order to gain access to our information or our customers' information. It is also possible that one of our employees could gain access to our information or our customer's information and use it in violation of our internal policies and procedures. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to proactively address these techniques or to implement adequate preventative measures from either external or internal threats. We may be required to make significant expenditures to protect against security breaches or to remedy problems caused by any breaches. Additionally, the laws governing such data are constantly changing and evolving and we must comply with these laws or our business, including our reputation, brand and financial results will be harmed. Failure to protect our information and our customer's information from external or internal threats could negatively impact our ability to attract new customers, cause existing customers to cancel their subscriptions, cause commercial partners to cease doing business with us, subject us to third-party lawsuits, regulatory fines or other actions or liabilities, thereby harming our business and operating results.

We and the third-party vendors we work with will need to remain compliant with the Payment Card Industry requirements for security and protection of customer credit card information and an inability to do so by us or our third-party vendors will adversely affect our business.

As a merchant who processes credit card payments from its customers, we are required to comply with the payment card industry requirements imposed on us for the protection and security of our customers' credit card information. If we are unable to successfully remain compliant with the payment card industry requirements imposed on us as a credit card merchant, our business would be harmed because we could be prevented in the future from transacting customer subscription payments by means of a credit card.

Risks Related to the Ownership of Our Common Stock

Our revenue and expense levels or rate of revenue and expense growth on a quarterly or annual basis may fluctuate, which may cause us to not be able to sustain our operating results, which may cause our common stock price to decline.
 
Our revenues and expenses could vary significantly in the future and period-to-period comparisons should not be relied on as indications of future performance. We may not be able to sustain our revenue or expense levels, or our rate of revenue or expense growth, on a quarterly or annual basis. In addition, we may be required to delay or extend recognition of revenue on more complex licensing arrangements as required under U.S. GAAP. Fluctuations in our operating results have in the past caused, and may in the future cause, the price of our common stock to decline.
 
Other factors that could affect our operating results include:    
the acceptance of our technologies by pay TV service providers and CE manufacturers and other customers;

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the timing and introduction of new services and features;    
expenses related to, and the financial impact of, possible acquisitions of other businesses and the integration of such businesses;
expenses related to, and the financial impact of, the dispositions of businesses, including post-closing indemnification obligations;     
the timing and ability of signing high-value licensing agreements during a specific period;     
the extent to which new content technologies or formats replace technologies to which our solutions are targeted;    
the pace at which our analog and older products sales decline compared to the pace at which our digital and new product revenues grow; and     
adverse changes in the level of economic activity in the U.S. or other major economies in which we do business as a result of the threat of terrorism, military actions taken by the U.S. or its allies, or generally weak and uncertain economic and industry conditions.
 
Seasonal trends may cause our quarterly operating results to fluctuate and our inability to forecast these trends may adversely affect the market price of our common stock.

Although predicting consumer demand for our products is very difficult, new consumer subscriptions for the TiVo Service have traditionally been higher during and immediately after the Christmas holiday shopping season than during other times of the year. If we are unable to accurately forecast and respond to consumer demand for our products, our reputation and brand will suffer and the market price of our common stock would likely fall.

The price of our common stock may be volatile.
 
The market price of our common stock has been, and in the future could be, significantly affected by factors such as:    
actual or anticipated fluctuations in operating results and dividends;     
announcements of renewal or termination of major contracts;    
announcements of technical innovations;     
new products, services or contracts;     
announcements by competitors or their customers;     
announcements by our customers;     
governmental regulatory and copyright action;     
developments with respect to patents or proprietary rights;     
announcements regarding acquisitions, divestitures or review of strategic alternatives;     
announcements regarding court cases, litigation or regulatory matters;     
changes in financial estimates or coverage by securities analysts;
changes in interest rates which affect the value of our investment portfolio or the rate of interest we pay on variable rate debt;     
changes in tax law or the interpretation of tax laws; and     
general market conditions.
 
Announcements by satellite television operators, cable television operators, major content providers or others regarding CE business or pay TV service provider combinations, evolving industry standards, consumer rights activists' “wins” in government regulations or the courts, motion picture production or distribution or other developments could cause the market price of our common stock to fluctuate.
 
There can be no assurance that our historic trading prices, or those of technology companies in general, will be sustained. In the past, following periods of volatility in the market price of a company's securities, some companies have been named in class action suits.
 
Further, economic uncertainty may adversely affect the global financial markets, which could cause the market price of our common stock to fluctuate.

Our Certificate of Incorporation, Bylaws and Delaware law could discourage a third-party from acquiring us and consequently decrease the market value of our common stock.
    
In the future, we could become the subject of an unsolicited attempted takeover of our Company. Although an unsolicited takeover could be in the best interests of our stockholders, certain provisions of Delaware law and our organizational documents could be impediments to such a takeover. We are subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, the statute prohibits a publicly held Delaware corporation

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from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. As discussed above, our certificate of incorporation was amended and restated to include stock transfer restrictions applicable to 5% or greater stockholders. Our amended and restated certificate of incorporation and amended and restated bylaws also require that any action required or permitted to be taken by our stockholders must be affected at a duly called annual or special meeting of the stockholders and may not be affected by a consent in writing. In addition, special meetings of our stockholders may be called only by a majority of the total number of authorized directors, the chairman of the board, our president or the holders of 20% or more of our common stock. These provisions of Delaware law, our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws could make it more difficult for us to be acquired by another company, even if our acquisition is in the best interests of our stockholders. Any delay or prevention of a change of control or change in management could cause the market price of our common stock to decline.

Legal and Regulatory Risks

Changes in, or interpretations of, tax rules and regulations, may adversely affect our effective tax rates.
 
We are subject to U.S. federal and state income taxes, as well as foreign income taxes. Our future effective tax rates could be unfavorably affected by changes in tax rates, tax laws or the interpretation of tax laws, by changes in the amount of pre-tax income derived from countries with high statutory income tax rates, or by changes in our deferred tax assets and liabilities, including changes in our ability to realize our deferred tax assets. Our effective income tax rate could be unfavorably affected by changes in the amount of sales to customers in countries with high withholding tax rates.
 
In addition, U.S. federal, U.S. state, and foreign tax jurisdictions may examine our income tax returns, including income tax returns of acquired companies and acquired tax attributes included therein. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. In making such assessments, we exercise judgment in estimating our provision for income taxes. While we believe our estimates are reasonable, we cannot assure you that the final determination from these examinations will not be materially different from that reflected in our historical income tax provisions and accruals. Any adverse outcome from these examinations may have a material adverse effect on our business and operating results.

We may need to use litigation to protect our intellectual property, which could be costly to our business.

We are currently engaged in litigation, and litigation may be necessary in the future, to enforce our patents and other intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. For example, we have initiated patent infringement litigation against Comcast and expect to incur significant expenses in connection with this patent infringement case. If we are unable to reach favorable license terms with Comcast or otherwise experience an adverse outcome in patent infringement lawsuits, our revenues could be adversely impacted and our ability to license our intellectual property on favorable terms to other third parties in the future, each of which would harm our business.
 
We, and many of our current and potential competitors, dedicate substantial resources to protection and enforcement of intellectual property rights. We believe that companies will continue to take steps to protect their technologies, including, but not limited to, seeking patent protection. Companies in the technology and content-related industries have frequently resorted to litigation regarding intellectual property rights. Disputes regarding the ownership of technologies and their associated rights are likely to arise in the future and we may be forced to litigate to determine the validity and scope of other parties' proprietary rights. Any such litigation is inherently risky, the outcome is uncertain, could be costly, could distract our management from focusing on operating our business, could delay recognition of revenue until a settlement or decision is ultimately reached, could result in the invalidation or adverse claims construction of patents, and might ultimately be unsuccessful. The existence and/or outcome of such litigation could harm our business.
 
Additionally, the relationships with our customers, suppliers and technology collaborators may be disrupted or terminated as a result of patent assertions that we may make against them, which could harm our business.
 
Finally, adverse legal rulings could result in the invalidation of our patents, the narrowing of the claims of our patents, or fostering of the perception by licensees or potential licensees that a judicial finding of their infringement is unlikely. Such results or perceptions could decrease the likelihood that licensees or potential licensees may be interested in licensing our patents, or could decrease the amounts of license fees that they are willing to pay, which could harm our business.


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We may be subject to intellectual property infringement claims or other litigation, which are costly to defend and could limit our ability to use certain technologies, result in the loss of significant rights, require us to alter our current product and business strategy and force us to cease operating our business, in which case our business would be harmed.

From time to time we receive claims and inquiries from third parties alleging that our internally developed technology, technology we have acquired or technology we license from third parties may infringe other third parties' proprietary rights (especially patents). Third parties have also asserted and most likely will continue to assert claims against us alleging infringement of copyrights, trademark rights or other proprietary rights relating to video or music content, or alleging unfair competition or violations of privacy rights. We have faced such claims in the past, we currently face such claims, and we expect to face similar claims in the future. Regardless of the merits of such claims, any disputes with third parties over intellectual property rights could materially and adversely impact our business, including by resulting in the diversion of management time and attention from our core business, the significant cost to defend ourselves against such claims or reducing the willingness of licensees to incorporate our technologies into their products or services. For example, many patents covering interactive television technologies have been granted but have not been commercialized. A number of companies in the advanced-television industry earn substantial profits from technology licensing, and the introduction of new technologies by us is likely to provoke lawsuits from such companies. A successful claim of infringement against us, our inability to obtain an acceptable license from the holder of the patent or other right, or our inability to design around an asserted patent or other right could cause our manufacturers to cease manufacturing products that incorporate our technologies, including devices that enable the TiVo service, our retailers to stop selling our products or us to cease providing our service, or all of the above, which would eliminate our ability to generate revenues.

Additionally, we have been asked by content owners to stop the display or hosting of copyrighted materials by our users or ourselves through our service offerings, including notices provided to us pursuant to the DMCA. We have and will promptly respond to legitimate takedown notices or complaints, including but not limited to those submitted pursuant to the DMCA, notifying us that we are providing unauthorized access to copyrighted content by removing such content and/or any links to such content from our services or products. Nevertheless, we cannot guarantee that our prompt removal of content, including removal pursuant to the provisions of the DMCA, will prevent disputes with content owners, that infringing content will not exist on our services, or that we will be able to resolve any disputes that may arise with content providers or users regarding such infringing content.

If any of these claims were to prevail, we could be forced to pay damages, comply with injunctions, or stop distributing our products or providing our services while we re-engineer them or seek licenses to necessary technology, which might not be available on reasonable terms or at all. We could also be subject to indemnification claims resulting from open source software violations or from infringement claims made against our customers, other companies with whom we have relationships or the current owners of businesses that we divested. Such indemnification claims could increase our defense costs and potential damages, in addition to forcing the Company to incur material additional expenses. For example, we have received notices and lawsuits from certain customers requesting indemnification in patent-related lawsuits. We evaluate the requests and assess whether we believe we are obligated to provide such indemnification to such customers on a case-by-case basis. Customers or other companies making such requests could become unwilling or hesitant to do business with us if we decline such requests. An adverse determination with respect to such requests or in any of these events described above could require us to change our business practices and have a material impact on our business and results of operations. Furthermore, these types of disputes can be asserted by our licensees or prospective licensees or by other third parties as part of negotiations with us or in private actions seeking monetary damages or injunctive relief. Any disputes with our licensees or potential licensees or other third parties could harm our reputation and expose us to additional costs and other liabilities.

Litigation could harm our business and result in:    
substantial expenditures for legal fees and costs to defend the Company and/or our customers;
substantial settlement, damage awards or related costs, including indemnification of customers and our required payment of royalties and/or licensing fees;
diversion of management and technical attention and resources to help defend the Company, including as part of pre-trial discovery;
either our customers discontinuing to use or ourselves discontinuing to sell infringing products or services;
our expending significant resources to develop and implement non-infringing technology;
our obtaining, or being required to obtain, licenses to infringed technology, which could be costly or unavailable;
an injunction forcing us to limit the functionality of our products and services, stop importing our products and services into certain markets, or cease operating our business altogether; and
delays in product delivery and new service introduction.


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We are involved in the business of powering the discovery and enjoyment of digital entertainment, including over the internet. There has been, and we believe that there will continue to be, an increasing level of litigation to determine the applicability of current laws to, and impact of new technologies on, the use and distribution of content over the internet and through new devices. As we develop products and services that protect, provide or enable the provision of content in such ways, the risk of litigation against us may increase.

We may be subject to legal liability for the provision of third-party products, services, content or advertising.
 
We periodically enter into arrangements to offer third-party products, services, content or advertising under our brands or in connection with our various products or service offerings. For example, we license or incorporate certain entertainment Metadata into our data offerings. Certain of these arrangements involve enabling the distribution of digital content owned by third parties, which may subject us to third party claims related to such products, services, content or advertising, including defamation, violation of privacy laws, misappropriation of publicity rights and infringement of intellectual property rights. We require users of our services to agree to terms of use that prohibit, among other things, the posting of content that violates third party intellectual property rights, or that is obscene, hateful or defamatory. We have implemented procedures to enforce such terms of use on certain of our services, including taking down content that violates our terms of use for which we have received notification, or that we are aware of, and/or blocking access by, or terminating the accounts of, users determined to be repeat violators of our terms of use. Despite these measures, we cannot guarantee that such unauthorized content will not exist on our services, that these procedures will reduce our liability with respect to such unauthorized third-party conduct or content, or that we will be able to resolve any disputes that may arise with content providers or users regarding such conduct or content. Our agreements with these parties may not adequately protect us from these potential liabilities. It is also possible that, if any information provided directly by us contains errors or is otherwise negligently provided to users, third parties could make claims against us, including, for example, claims for intellectual property infringement, publicity rights violations or defamation. Investigating and defending any of these types of claims is expensive, even if the claims do not result in liability. If any of these claims results in liability, we could be required to pay damages or other penalties, which could harm our business and our operating results.

Entertainment companies and other content owners may claim that some of the features of our TiVo DVRs or other products, such as our advertising products and features, and services violate copyright or trademark laws, which could force us to incur significant costs in defending such actions and affect our ability to market the TiVo service and the products that enable the TiVo service.

A past competitor's DVRs were the subject of several copyright infringement lawsuits by a number of major entertainment companies, including major television networks. These lawsuits alleged that the competitor's DVRs violate copyright laws by allowing users to skip commercials, delete recordings only when instructed and use the internet to send recorded materials to other users. Although we have not been the subject of such actions to date, TiVo-enabled DVRs have some similar features. Based on market or consumer pressures, we may decide in the future to add additional features that may be objectionable to entertainment companies. If similar actions are filed against us based on current or future features of our DVRs and non-DVR products, entertainment companies may seek injunctions to prevent us from including these features and/or damages. Such litigation can be costly, even if we prevail in the litigation, and may divert the efforts of our management. Furthermore, if we were ordered to remove features from our DVRs or other products and services, we may experience increased difficulty in marketing the TiVo service and related TiVo products and services and may suffer reduced revenues as a result.

New governmental regulations or new interpretation of existing laws, including legislative initiatives seeking to, or judicial or regulatory decisions that, weaken patent protection or copyright law, could cause legal uncertainties and result in harm to our business.
 
The standards that courts use to interpret patents are not always applied predictably or uniformly and may evolve, particularly as new technologies develop. For example, the Supreme Court of the United States has modified some legal standards applied by the U.S. Patent and Trademark Office in examination of U.S. patent applications, which may decrease the likelihood that we will be able to obtain patents and may increase the likelihood of challenges to patents we obtain or license.

For example, in 2014, the Supreme Court of the United States decided the Alice Corp v. CSL Bank International ("Alice") case. The Alice case generally addresses patentable subject matter, and specifically an exception to patentable subject matter for "abstract ideas." In the Alice case, the court provides some general interpretive guidance to be considered when determining whether patent claims are directed to patent-ineligible abstract ideas, along with a two-step test for determining patentable subject matter eligibility going-forward. Practically, the effects of the Alice decision are still being assessed by patent holders, attorneys, the United States Patent & Trademark Office and various courts, all of which are attempting to

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determine the appropriate analysis and boundaries of the Alice decision on other patents. In any event, the Alice decision will provide potential licensees and accused infringers of certain patents - including our patents - new arguments to challenge the validity of such patents, which could cause some delays or risk in pending or future patent negotiations or litigation.

Additionally, the Leahy-Smith America Invents Act (the "Leahy-Smith Act") includes a number of significant changes to the U.S. patent laws, such as, among other things, changing from a "first to invent" to a "first inventor to file" system, establishing new procedures for challenging patents and establishing different methods for invalidating patents. The U.S. Patent and Trademark Office is still in the process of implementing regulations relating to these changes, and the courts have yet to address many of the new provisions of the Leahy-Smith Act. Some of these changes or potential changes may not be advantageous to the Company, and it may become more difficult to obtain adequate patent protection or to enforce the Company's patents against third parties. While the Company cannot predict the impact of the Leahy-Smith Act at this time, these changes or potential changes could increase the costs and uncertainties surrounding the prosecution of the Company's patent applications and adversely affect the Company's ability to protect its intellectual property.

Consumer rights advocates and other constituencies also continuously challenge copyright law, notably the DMCA, through both legislative and judicial actions. Legal uncertainties surrounding the application of the DMCA may adversely affect our business. If copyright law is compromised, or devices that can circumvent our technology are permitted by law and become prevalent, this could result in reduced demand for our technologies, and our business would be harmed.
 
Many laws and regulations are pending and may be adopted in the U.S., individual states and local jurisdictions and other countries with respect to the internet. These laws may relate to many areas that impact our business, including intellectual property rights, digital rights management, copyright, property ownership, privacy, taxation, and the CE and television industry. These types of regulations are likely to differ between countries and other political and geographic divisions. Other countries and political organizations are likely to impose or favor more and different regulation than that which has been proposed in the U.S., thus furthering the complexity of regulations. In addition, state and local governments may impose regulations in addition to, inconsistent with, or stricter than federal regulations. Changes to or the interpretation of these laws could increase our costs, expose us to increased litigation risk, substantial defense costs and other liabilities or require us or our customers to change business practices. It is not possible to predict whether or when such legislation may be adopted, and the adoption of such laws or regulations and uncertainties associated with their validity, interpretation, applicability and enforcement, could materially and adversely affect our business. For example, legislation regarding customer privacy or copyright could be enacted or expanded in ways that apply to the TiVo service, which could adversely affect our business. Laws or regulations could be interpreted to prevent or limit access to some or all television signals by certain CE devices, or impose limits on the number of copies, the ability to transfer or move copies, or the length of time a consumer may retain copies of some or all types of television programming. New or existing copyright laws could be applied to restrict the capture of television programming, which would adversely affect our business. It is unknown whether existing laws and regulations will apply to the digital video recorder market.

In addition, the satellite transmission, cable and telecommunications industries are subject to pervasive federal regulation, including FCC licensing and other requirements, as well as extensive regulation by local and state authorities. The FCC could promulgate new regulations or interpret existing regulations in a manner that would cause us to incur significant compliance costs or force us to alter or eliminate certain features or functionality of our products or services, which may adversely affect our business. For example, the FCC could determine that certain of our products fail to comply with regulations concerning matters such as electrical interference, copy protection, digital tuners, or display of television programming based on rating systems. The FCC could also impose limits on the number of copies, the ability to transfer or move copies, the length of time a consumer may retain copies, or the ability to access some or all types of television programming. Furthermore, FCC regulations may affect cable television providers and other multi-channel video programming distributors ("MVPDs"), which are the primary customers for certain of our products and services. Although federal law no longer prohibits MVPDs (except DBS providers) from deploying navigation devices (e.g., set-top boxes) with combined security and non-security functions (the “integration ban”), further developments with respect to these issues or other related FCC action could impact the availability and/or demand for “plug and play” devices, including set-top boxes, all of which could affect demand for UXs incorporated in set-top boxes or CE devices and correspondingly affect our license fees; moreover, new regulations, or new interpretations of existing regulations, could reduce the desirability of our products and services, require us to make changes to our products or services, or increase our compliance costs.

It is difficult to anticipate the impact of current or future laws and regulations on our business. We may have significant expenses associated with staying appraised of and in compliance with local, state, federal, and international legislation and regulation of our business and in presenting the Company’s positions on proposed laws and regulations.


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We advertise, market, and sell our services directly to consumers; many of these activities are highly regulated by constantly evolving state and federal laws and regulations and violations of these laws and regulations could harm our business.

We engage in various advertising, marketing, and other promotional activities. For instance, in the past, we have offered gift subscriptions and mail-in-rebates to consumers, which are subject to state and federal laws and regulations. A constantly evolving network of state and federal laws is increasingly regulating these promotional activities. Additionally, we enter into subscription service contracts directly with consumers which govern both our provision of and the consumers' payment for the TiVo service. For example, consumers who activate new monthly subscriptions to the TiVo service may be required to commit to pay for the TiVo service for a minimum of one year or be subject to an early termination fee if they terminate prior to the expiration of their commitment period. If the terms of our subscription service contracts with consumers, such as our imposition of an early termination fee, or our previously offered rebate or gift subscription programs were to violate state or federal laws or regulations, we could be subject to suit, penalties, and/or negative publicity in which case our business would be harmed.

Legislation, laws or regulations relating to environmental issues may adversely impact our business in the future.

It is possible that future proposed environmental regulations on CE devices, such as DVRs and STBs, may regulate and increase the production, manufacture, use, and disposal costs incurred by us and our customers. For example, the Energy Independence and Security Act of 2007 directs the Department of Energy to prescribe labeling or other disclosure requirements for the energy use of standalone digital video recorder boxes. This and future energy regulations could potentially make it more costly for our third-party video hardware device partners to design, manufacture, and sell certain products to us, or to their retail or MVPD customers, thus harming the growth of our business.

Privacy concerns and laws, evolving regulation of television viewing behavior and cloud computing, cross-border data transfer restrictions and other domestic or foreign regulations may limit the use and adoption of our services and adversely affect our business.

Regulation related to the provision of services similar to those we provide through the internet is increasing, as federal, state and foreign governments continue to adopt new laws and regulations addressing data privacy and the collection, processing, storage and use of personal information, including television viewing data. In some cases, foreign data privacy laws and regulations, such as the European Union’s Data Protection Directive, and the country-specific laws and regulations that implement that directive, also govern the processing of personal information. Further, laws are increasingly aimed at the use of personal information for marketing purposes, such as the European Union’s e-Privacy Directive, and the country-specific regulations that implement that directive and the General Data Privacy Regulations which were effective in 2018. Such laws and regulations are subject to new and differing interpretations and may be inconsistent among jurisdictions. These and other requirements could reduce demand for our services or restrict our ability to store and process data or, in some cases, impact our ability to offer our services in certain locations or our customers' ability to deploy our solutions globally and/or transfer data outside certain jurisdictions. The costs of compliance with and other burdens imposed by laws, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, lead to significant fines, penalties or liabilities for noncompliance, or slow the pace at which we sign new operator customers outside the U.S., any of which could harm our business.

We are subject to the Foreign Corrupt Practices Act (“FCPA”) and similar anti-corruption and anti-bribery laws in the U.S. and other jurisdictions, and our failure to comply with such laws and regulations thereunder could result in penalties which could harm our reputation, business, and financial condition.

We are subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. The FCPA also requires companies to maintain adequate record-keeping and internal accounting practices to accurately reflect the transactions of the company. Under the FCPA, U.S. companies may be held liable for actions taken by their strategic or local partners or representatives. The FCPA and similar laws in other countries can impose civil and criminal penalties for violations.

If we do not properly implement practices and controls with respect to compliance with the FCPA and similar anti-corruption and anti-bribery laws in the U.S. and other jurisdictions, or if we fail to enforce those practices and controls properly, we may be subject to regulatory sanctions, including administrative costs related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on our business activities, all of which could harm our reputation, business and financial condition.


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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The following table lists our principal business locations as of December 31, 2018:
Location
 
Square Footage
 
Lease Expiration
 
Primary Use by Segment
San Jose, California
 
127,000
 
January 2027
 
Corporate; Intellectual Property; Product
Bangalore, India
 
91,000
 
September 2022
 
Product
Burbank, California
 
35,000
 
December 2021
 
Corporate; Intellectual Property; Product
Tulsa, Oklahoma
 
29,000
 
August 2021
 
Corporate; Product
Boston, Massachusetts
 
20,000
 
November 2021
 
Product
Warsaw, Poland
 
17,000
 
October 2026
 
Product
Golden, Colorado
 
15,000
 
July 2020
 
Product
Durham, North Carolina
 
12,000
 
November 2021
 
Product

We believe that our existing facilities are adequate to meet current requirements and that additional or substitute space will be available as needed to accommodate any expansion of operations.

ITEM 3. LEGAL PROCEEDINGS
    
Information with respect to this item is contained in Note 11 to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Holders

The common stock of TiVo Corporation is listed on the Nasdaq Global Select Market under the symbol "TIVO". Prior to September 7, 2016, (the "TiVo Acquisition Date"), Rovi's common stock was listed on the Nasdaq Global Select Market under the symbol "ROVI".

As of February 20, 2019, there were 588 holders of record of our common stock based on information furnished by American Stock Transfer & Trust Company, the transfer agent for our securities. The number of beneficial stockholders is substantially greater than the number of holders of record as a large portion of our common stock is held through brokerage firms.

Stock Performance Graph*

The following graph and table show a comparison of the cumulative total stockholder return of TiVo Corporation's common stock (and Rovi Corporation's common stock prior to the TiVo Acquisition Date) with the cumulative total return of the Nasdaq Composite Index (the “Nasdaq”), the S&P 500 Composite Index (the “S&P 500”) and the Russell 2000 Index (“Russell 2000”) from December 31, 2013 through December 31, 2018. The graph and table assume an initial investment of $100 in TiVo Corporation common stock and in each of the market indices on December 31, 2013, and further assumes the reinvestment of all dividends. The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of TiVo Corporation's common stock.

396886393_chart-4bc8acd4e06a2c13d1b.jpg

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December 31,
 
2013
 
2014
 
2015
 
2016
 
2017
 
2018
TiVo Corporation
100

 
115

 
85

 
106

 
82

 
53

Nasdaq
100

 
115

 
123

 
134

 
173

 
168

S&P 500
100

 
114

 
115

 
129

 
157

 
150

Russell 2000
100

 
105

 
100

 
122

 
139

 
124


*
The material in this section is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filing of TiVo Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.

Dividend Policy

We have a disciplined capital allocation process that considers a range of alternatives for the use of our free cash flow, including dividends. In 2017, we initiated a dividend, declaring and paying $0.18 per share each quarter, which has continued throughout 2018. Our dividend program and the payment of future dividends is subject to continued capital availability and our Board of Directors' continuing determination that the declaration of dividends is in the best interests of our stockholders.

Recent Sales of Unregistered Securities

None.

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 December 31, 2018 (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)
October 2018
 

 
$

 
 
 
$
150,000
 
November 2018
 

 
$

 
 
 
$
150,000
 
December 2018
 

 
$

 
 
 
$
150,000
 
Total
 

 
$

 
 
 
 

(1)
Excludes shares withheld to satisfy minimum statutory tax withholding requirements in connection with the net share settlement of restricted awards on vesting. During the three months ended December 31, 2018, we withheld 0.1 million shares of common stock to satisfy $0.6 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.

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ITEM 6. SELECTED FINANCIAL DATA

The tables below set forth selected financial data (in thousands, except per share amounts). The information is not necessarily indicative of results of future operations. The selected financial data is derived from, and should be read in conjunction with, Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in Part II, and the Consolidated Financial Statements and notes thereto included in Part IV, of this Annual Report on Form 10-K, which are incorporated by reference herein.
 
Year Ended December 31,
 
2018 (1)
 
2017
 
2016 (3)
 
2015
 
2014
Consolidated Statements of Operations Data:
 
 
 
 
 
 
 
 
 
Total Revenues, net
$
695,865

 
$
826,456

 
$
649,093

 
$
526,271

 
$
542,311

Restructuring and asset impairment charges
10,061

 
19,048

 
27,316

 
2,160

 
10,939

Goodwill impairment (2)
269,000

 

 

 

 

Operating (loss) income
(298,968
)
 
4,790

 
21,441

 
71,756

 
83,710

(Loss) income from continuing operations, net of tax
(353,063
)
 
(37,956
)
 
37,249

 
(4,292
)
 
(13,522
)
Income (loss) from discontinued operations, net of tax
3,715

 

 
(4,588
)
 

 
(56,222
)
Net (loss) income
(349,348
)
 
(37,956
)
 
32,661

 
(4,292
)
 
(69,744
)
 
 
 
 
 
 
 
 
 
 
Basic (loss) earnings per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(2.87
)
 
$
(0.32
)
 
$
0.40

 
$
(0.05
)
 
$
(0.15
)
Discontinued operations
0.03

 

 
(0.05
)
 

 
(0.61
)
Basic (loss) earnings per share
$
(2.84
)
 
$
(0.32
)
 
$
0.35

 
$
(0.05
)
 
$
(0.76
)
 
 
 
 
 
 
 
 
 
 
Diluted (loss) earnings per share:
 
 
 
 
 
 
 
 
 
Continuing operations
$
(2.87
)
 
$
(0.32
)
 
$
0.40

 
$
(0.05
)
 
$
(0.15
)
Discontinued operations
0.03

 

 
(0.05
)
 

 
(0.61
)
Diluted (loss) earnings per share
$
(2.84
)
 
$
(0.32
)
 
$
0.35

 
$
(0.05
)
 
$
(0.76
)
 
 
 
 
 
 
 
 
 
 
Dividends declared per share
$
0.72

 
$
0.72

 
$

 
$

 
$

 
December 31,
 
2018 (1)
 
2017
 
2016 (3)
 
2015
 
2014
Consolidated Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and marketable securities
$
394,118

 
$
352,542

 
$
438,640

 
$
324,269

 
$
469,020

Total assets
2,760,303

 
3,163,678

 
3,320,843

 
2,199,296

 
2,421,152

Long-term liabilities
742,948

 
1,112,417

 
1,128,611

 
1,075,512

 
910,906

Total stockholders’ equity
1,492,941

 
1,853,016

 
1,909,636

 
1,030,565

 
1,106,264


(1)
On January 1, 2018, new accounting standards were initially applied for revenue recognition, the capitalization and amortization of incremental costs to obtain a contract with a customer and the de-recognition of prepaid stored-value product liabilities, such as gift cards, each as described in Note 1 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein. As a result of adopting these new accounting standards, a cumulative effect adjustment, net of tax effects, was recorded that reduced Accumulated deficit by $31.4 million as of January 1, 2018.

(2)
As a result of the quantitative interim goodwill impairment test performed as of December 31, 2018, a Goodwill impairment charge of $269.0 million was recognized related to the Product reporting unit. For further details about the Goodwill impairment charge, refer to Note 8 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.


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(3)
On September 7, 2016, Rovi completed its acquisition of TiVo Solutions for $1.1 billion. The Consolidated Statements of Operations for the year ended December 31, 2016 reflect an $86.1 million benefit from a reduction in our deferred tax asset valuation allowance in connection with the TiVo Acquisition, which was partially offset by including TiVo Solutions' results for the period subsequent to the TiVo Acquisition Date, $40.0 million of Transaction, transition and integration costs associated with the TiVo Acquisition and $27.3 million in Restructuring and asset impairment charges. For further details about the TiVo Acquisition, refer to Note 2 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.


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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
The following commentary should be read in conjunction with the Consolidated Financial Statements and related notes thereto contained in Part IV of this Annual Report on Form 10-K. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 1A., "Risk Factors," included in Part I of this Annual Report on Form 10-K.

Executive Overview of Results

TiVo Corporation is a global leader in entertainment technology and audience insights. From the interactive program guide ("IPG") to the digital video recorder ("DVR"), we provide innovative products and licensable technologies that enable the world’s leading media and entertainment companies to deliver the ultimate entertainment experience and improve how people find content across a changing media landscape.

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, 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. 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 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, video-on-demand (“VOD”), 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.

Total Revenues, net for the year ended December 31, 2018 decreased by 16% compared to the prior year primarily as a result of a $77.0 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 and adopting the amended revenue recognition guidance on January 1, 2018, a $27.6 million decrease in Hardware revenue due to the planned transition of our multiple system operator ("MSO") partners and retail customers to deploying the TiVo service on third-party hardware, a $23.8 million decrease in catch-up payments intended to make us whole for the pre-license period of use and a $14.3 million decrease in revenue from an international multiple system MSO software customer as a result of adopting the amended revenue recognition guidance. These decreases were partially offset by a $22.7 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.

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

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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 year ended December 31, 2018, our Loss from continuing operations, net of tax was $353.1 million, or $2.87 per diluted share, compared to $38.0 million, or $0.32 per diluted share, in the prior year. The larger loss was due to a $269.0 million Goodwill impairment charge recognized in the year ended December 31, 2018, a $130.6 million decrease in revenue, a $26.6 million benefit from the Tax Act of 2017 that was recognized in 2017 and an $11.3 million increase in patent litigation costs, primarily related to the ongoing Comcast litigation. These items were partially offset by a total decrease of $41.1 million in Research and development and Selling, general and administrative expenses, a $27.2 million decrease in Cost of hardware revenues, excluding depreciation and amortization of intangible assets, primarily as a result of our planned transition of our MSO partners and retail customers to deploying the TiVo service on third-party hardware, a $19.3 million decrease in Amortization of intangible assets and a $14.0 million loss related to litigation associated with the TiVo Acquisition that was recognized in 2017. The decrease in Research and development and Selling, general and administrative expenses reflect benefits from lower compensation and consulting costs, a decrease in Transaction, transition and integration costs associated with the TiVo Acquisition and benefits from cost saving initiatives. The decrease in Amortization of intangible assets is due to certain TiVo Solutions intangible assets reaching the end of their economic life.

Comparison of Years Ended December 31, 2018 and 2017

The condensed consolidated results of operations for the year ended December 31, 2018 compared to the prior year were as follows (dollars in thousands):
 
Year Ended December 31,
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
Revenues, net:
 
 
 
 
 
 
 
Licensing, services and software
$
681,130

 
$
784,087

 
$
(102,957
)
 
(13
)%
Hardware
14,735

 
42,369

 
(27,634
)
 
(65
)%
Total Revenues, net
695,865

 
826,456

 
(130,591
)
 
(16
)%
Costs and expenses:
 
 
 
 
 
 
 
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets
169,149

 
167,712

 
1,437

 
1
 %
Cost of hardware revenues, excluding depreciation and amortization of intangible assets
19,491

 
46,699

 
(27,208
)
 
(58
)%
Research and development
177,285

 
194,382

 
(17,097
)
 
(9
)%
Selling, general and administrative
181,047

 
205,024

 
(23,977
)
 
(12
)%
Depreciation
21,464

 
22,144

 
(680
)
 
(3
)%
Amortization of intangible assets
147,336

 
166,657

 
(19,321
)
 
(12
)%
Restructuring and asset impairment charges
10,061

 
19,048

 
(8,987
)
 
(47
)%
Goodwill impairment
269,000

 

 
269,000

 
N/a

Total costs and expenses
994,833

 
821,666

 
173,167

 
21
 %
Operating (loss) income
(298,968
)
 
4,790

 
(303,758
)
 
(6,342
)%
Interest expense
(49,150
)
 
(42,756
)
 
(6,394
)
 
15
 %
Interest income and other, net
5,682

 
2,915

 
2,767

 
95
 %
Gain on interest rate swaps
3,425

 
1,859

 
1,566

 
84
 %
TiVo Acquisition litigation

 
(14,006
)
 
14,006

 
(100
)%
Loss on debt extinguishment

 
(108
)
 
108

 
(100
)%
Loss on debt modification

 
(929
)
 
929

 
(100
)%
Loss from continuing operations before income taxes
(339,011
)
 
(48,235
)
 
(290,776
)
 
603
 %
Income tax expense (benefit)
14,052

 
(10,279
)
 
24,331

 
(237
)%
Loss from continuing operations, net of tax
(353,063
)
 
(37,956
)
 
(315,107
)
 
830
 %
Income from discontinued operations, net of tax
3,715

 

 
3,715

 
N/a

Net loss
$
(349,348
)
 
$
(37,956
)
 
$
(311,392
)
 
820
 %

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Total Revenues, net

For the year ended December 31, 2018, Total Revenues, net decreased 16% compared to the prior year as Product revenues decreased $22.8 million and Intellectual Property Licensing revenue decreased $107.8 million. The adoption of the amended revenue recognition guidance on January 1, 2018 decreased revenue for the year ended December 31, 2018 by $17.3 million compared to what revenue would have been under the prior revenue recognition guidance. Product generated 58% and 51% of Total Revenues, net for the years ended December 31, 2018 and 2017, 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 year ended December 31, 2018, Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets increased 1%, as an $11.3 million increase in patent litigation costs, primarily related to the ongoing Comcast litigation, was largely offset by benefits from cost saving initiatives. We expect to continue to incur material expenses related to the Comcast litigation.

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 year ended December 31, 2018, Cost of hardware revenues, excluding depreciation and amortization of intangible assets decreased due primarily to the planned transition of our MSO partners and retail customers to deploying the TiVo service on third-party hardware and a $1.0 million decrease in Transaction, 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 year ended December 31, 2018, Research and development expenses decreased 9% compared to the prior year primarily due to a $12.5 million decrease in consulting costs and a $4.7 million decrease in facilities and information technology costs as a result of our ongoing cost reduction efforts, as well as a $2.9 million decrease in Transaction, transition and integration costs associated with the TiVo Acquisition, partially offset by a $3.4 million increase in compensation costs. The decease in consulting costs and the increase in compensation costs primarily related to the conversion of certain contractors to employees in India in connection with the ongoing Profit Improvement restructuring action described below.

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.


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Selling, general and administrative expenses decreased 12% during the year ended December 31, 2018 primarily due to a $19.7 million decrease in compensation costs, due in part from turnover among the senior executive staff, including our former Chief Executive Officer, a $2.5 million decrease in consulting costs and benefits from cost saving initiatives, partially offset by a $2.5 million gain in the prior year from the settlement of an acquired receivable. In addition, Transaction, transition and integration costs associated with the TiVo Acquisition decreased by $6.5 million. The decrease in Transaction, transition and integration costs for the year ended December 31, 2018 was reduced by a $4.5 million loss associated with a legacy TiVo Solutions legal settlement during the year ended December 31, 2018.

Amortization of intangible assets

The decrease in Amortization of intangible assets during the year ended December 31, 2018 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 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"), including moving certain positions to lower cost locations, eliminating layers of management and rationalizing facilities, which have resulted, or are expected to result, in severance costs and the termination of certain leases and other contracts. In connection with the Profit Improvement Plan, we expect to generate in excess of $30 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 $9.7 million, primarily for severance-related benefits, were recognized in the year ended December 31, 2018.

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 and $18.4 million were recognized for the years ended December 31, 2018 and 2017, respectively. Restructuring and asset impairment charges recognized in the year ended December 31, 2017 primarily related to termination and transition agreements executed with former TiVo Solutions' employees and an impairment charge of $6.7 million from vacating a leased facility.

Goodwill impairment

As a result of the quantitative interim goodwill impairment test performed as of December 31, 2018, a Goodwill impairment charge of $269.0 million was recognized related to the Product reporting unit. For further details about the Goodwill impairment charge, refer to Note 8 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.

Interest expense

Interest expense increased by $6.4 million during the year ended December 31, 2018 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 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.

Interest income and other, net

Interest income and other, net increased $2.8 million during the year ended December 31, 2018 primarily due to a $2.1 million increase in interest income due to an increase in interest rates and interest earning assets, a $1.4 million increase in income from an equity method investment, a $1.2 million other-than-temporary impairment loss on a strategic investment in 2017 and a $1.0 million decrease in losses due to movements in foreign currency rates, partially offset by a $2.5 million decrease from gains on the sale of strategic investments.
    
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 Consolidated Statements of Operations (see Note 10 to the Consolidated Financial Statements included in Part IV of this Annual Report on

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Form 10-K 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 Consolidated Statements of Operations for the year ended December 31, 2017. The TiVo Acquisition litigation loss represents the settlement amount in excess of the amount due to the Dissenting Holders as merger consideration.

In the year ended December 31, 2017, a $1.1 million loss was recognized related to a separate TiVo Acquisition litigation matter.

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 year ended December 31, 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 year ended December 31, 2017.

Income tax expense (benefit)

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 (benefit).

We recorded Income tax expense for the year ended December 31, 2018 of $14.1 million, which primarily consists of $14.5 million of Foreign withholding tax, $3.6 million of State income tax, $2.1 million of U.S. federal Base Erosion and Anti-Abuse Tax (a new tax resulting from the Tax Act of 2017) and $1.3 million of Foreign income tax, partially offset by the benefit of $7.2 million due to the Goodwill impairment charge recognized in December 2018. The Tax Act of 2017 was signed into law on December 22, 2017 and enacted comprehensive tax reform that made broad and complex changes to the U.S. federal tax code as described in Note 14 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.

We recorded an Income tax expense for the year ended December 31, 2017 of $10.3 million, which primarily consists of a $26.6 million benefit from the Tax Act of 2017. The benefit from the Tax Act of 2017 is primarily related to a revaluation of deferred tax liabilities on indefinite-lived intangible assets which were remeasured from 35% to the new enacted U.S. federal income tax rate of 21%. As these deferred tax liabilities are indefinite-lived, the timing of their realization is not known, and they may not be used as a source of income to reduce our deferred tax asset valuation allowance. Benefits from the Tax Act of 2017 were partially offset by $13.8 million of foreign withholding taxes and $1.9 million of foreign income taxes.

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


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Income from discontinued operations, net of tax

In the year ended December 31, 2018, we recognized Income from discontinued operations, net of tax of $3.7 million, 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.

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 Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.

Product

The Product segment's results of operations for the year ended December 31, 2018 compared to the prior year were as follows (dollars in thousands):

 
Year Ended December 31,
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
Platform Solutions
$
315,814

 
$
334,004

 
$
(18,190
)
 
(5
)%
Software and Services
76,249

 
84,964

 
(8,715
)
 
(10
)%
Other
8,667

 
4,548

 
4,119

 
91
 %
Product Revenues
400,730

 
423,516

 
(22,786
)
 
(5
)%
Adjusted Operating Expenses
333,720

 
377,107

 
(43,387
)
 
(12
)%
Adjusted EBITDA
$
67,010

 
$
46,409

 
$
20,601

 
44
 %
Adjusted EBITDA Margin
16.7
%
 
11.0
%
 
 
 
 

For the year ended December 31, 2018, the $18.2 million decrease in Platform Solutions revenue was primarily attributable to a decrease in hardware revenue as a result of the planned transition of our MSO partners and retail customers to deploying the TiVo service on third-party hardware, resulting in a decrease in the number of TiVo set-top boxes sold to MSO partners and retail consumers. Platform Solutions revenue includes total hardware revenue of $14.7 million and $42.4 million for the years ended December 31, 2018 and 2017, respectively. Hardware revenue is expected to continue to decline in the first half of 2019 due to the planned transition to deploying the TiVo service on third-party hardware.

In addition, Platform Solutions revenue from an international MSO software customer decreased by $14.3 million for the year ended December 31, 2018 due to adopting the amended revenue recognition guidance on January 1, 2018. This international MSO software customer's license 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 this transaction 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 year ended December 31, 2018 was partially offset by a $22.1 million increase in revenue from an international MSO customer primarily due to the exercise 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 $17.9 million less in revenue for the year ended December 31, 2018 from this customer.

For the year ended December 31, 2018, the $8.7 million decrease in Software and Services revenue was the result of a $6.6 million decrease in advertising and analytics revenue and a $3.6 million decrease in metadata revenue, which was due to expiration of our metadata license with Comcast on September 30, 2017 resulting in a $4.7 million decline in revenue, partially offset by a $1.5 million increase in Personalized Content Discovery revenue.


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For the year ended December 31, 2018, Other revenue primarily consists of ACP revenue, which is expected to decline in the future.

A 12% decrease in Product Adjusted Operating Expenses for the year ended December 31, 2018 was primarily due to a $27.2 million decrease in Cost of hardware revenues as a result of the planned transition of our MSO partners and retail customers to deploying the TiVo service on third-party hardware. Product Adjusted Operating Expenses for the year ended December 31, 2018 also benefited from cost savings initiatives, including a decrease in consulting costs as certain contractors were converted to employees in India in connection with the ongoing Profit Improvement restructuring action.

The increase in Adjusted EBITDA Margin for the year ended December 31, 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 due to the planned transition of our MSO partners and retail customers to deploying the TiVo service on third-party hardware and benefits from cost savings initiatives.

Intellectual Property Licensing

The Intellectual Property Licensing segment's results of operations for the year ended December 31, 2018 compared to the prior year were as follows (dollars in thousands):

 
Year Ended December 31,
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
US Pay TV Providers
$
185,954

 
$
278,973

 
$
(93,019
)
 
(33
)%
CE Manufacturers
35,644

 
51,219

 
(15,575
)
 
(30
)%
New Media, International Pay TV Providers and Other
73,537

 
72,748

 
789

 
1
 %
Intellectual Property Licensing Revenues
295,135

 
402,940

 
(107,805
)
 
(27
)%
Adjusted Operating Expenses
99,532

 
97,059

 
2,473

 
3
 %
Adjusted EBITDA
$
195,603

 
$
305,881

 
$
(110,278
)
 
(36
)%
Adjusted EBITDA Margin
66.3
%
 
75.9
%
 
 
 
 
    
For the year ended December 31, 2018, the decrease in revenue from US Pay TV Providers was primarily due to a decrease of $77.0 million in revenue from TiVo Solutions Time Warp agreements entered into with AT&T, DirecTV, EchoStar and Verizon prior to the TiVo Acquisition Date due to the expiration of these contracts by the end of July 2018 and adopting the amended revenue recognition guidance on January 1, 2018. Revenue from US Pay TV Providers includes $20.1 million and $97.1 million for the years ended December 31, 2018 and 2017, respectively, from these agreements. Revenue from catch-up payments from US Pay TV Providers intended to make us whole for the pre-license period of use also decreased by $19.2 million for the year ended December 31, 2018.

For the year ended December 31, 2018, the decrease 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 the customer is licensed later in the year, which results in catch-up payments intended to make us whole for the out-of-license period. Revenue from catch-up payments from CE Manufacturers intended to make us whole for the pre-license period of use also decreased by $5.0 million for the year ended December 31, 2018. 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. Such declines could continue unless we are able to successfully license new entrants to this market.

For the year ended December 31, 2018, the increase in New Media, International Pay TV Providers and Other reflects an increase in revenue from catch-up payments intended to make us whole for the pre-license period of use of $0.5 million and growth in revenue from New Media and International Pay TV customers.

The 3% increase in Intellectual Property Licensing Adjusted Operating Expenses during the year ended December 31, 2018 reflects an $11.3 million increase in patent litigation costs, which primarily relates to the ongoing Comcast litigation, partially offset by benefits from cost savings initiatives.


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The decrease in Adjusted EBITDA Margin for the year ended December 31, 2018 is primarily the result of a decrease in Intellectual Property Licensing revenue and an increase in patent litigation costs, partially offset by benefits from cost savings initiatives.

Corporate

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

Corporate costs for the year ended December 31, 2018 compared to the prior year were as follows (dollars in thousands):    
 
Year Ended December 31,
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
Adjusted Operating Expenses
$
62,521

 
$
62,148

 
$
373

 
1
%

For the year ended December 31, 2018, the increase in Corporate Adjusted Operating Expenses primarily reflects a $1.2 million increase in state and local franchise taxes and costs incurred in 2018 associated with the ongoing strategic alternatives review, partially offset by benefits from cost savings initiatives.
 

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Comparison of Year Ended December 31, 2017 and 2016

The consolidated results of operations for the year ended December 31, 2017 compared to the prior year were as follows (dollars in thousands):
 
Year Ended December 31,
 
 
 
 
 
2017
 
2016
 
Change $
 
Change %
Revenues, net:
 
 
 
 
 
 
 
Licensing, services and software
$
784,087

 
$
629,474

 
$
154,613

 
25
 %
Hardware
42,369

 
19,619

 
22,750

 
116
 %
Total Revenues, net
826,456

 
649,093

 
177,363

 
27
 %
Costs and expenses:
 
 
 
 
 
 
 
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets
167,712

 
139,666

 
28,046

 
20
 %
Cost of hardware revenues, excluding depreciation and amortization of intangible assets
46,699

 
19,056

 
27,643

 
145
 %
Research and development
194,382

 
125,172

 
69,210

 
55
 %
Selling, general and administrative
205,024

 
192,755

 
12,269

 
6
 %
Depreciation
22,144

 
18,698

 
3,446

 
18
 %
Amortization of intangible assets
166,657

 
104,989

 
61,668

 
59
 %
Restructuring and asset impairment charges
19,048

 
27,316

 
(8,268
)
 
(30
)%
Total costs and expenses
821,666

 
627,652

 
194,014

 
31
 %
Operating income
4,790

 
21,441

 
(16,651
)
 
(78
)%
Interest expense
(42,756
)
 
(43,681
)
 
925

 
(2
)%
Interest income and other, net
2,915

 
1,688

 
1,227

 
73
 %
Gain (loss) on interest rate swaps
1,859

 
(3,884
)
 
5,743

 
(148
)%
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
(48,235
)
 
(24,436
)
 
(23,799
)
 
97
 %
Income tax benefit
(10,279
)
 
(61,685
)
 
51,406

 
(83
)%
(Loss) income from continuing operations, net of tax
(37,956
)
 
37,249

 
(75,205
)
 
(202
)%
Loss from discontinued operations, net of tax

 
(4,588
)
 
4,588

 
(100
)%
Net (loss) income
$
(37,956
)
 
$
32,661

 
$
(70,617
)
 
(216
)%

Total Revenues, net

For the year ended December 31, 2017, Total Revenues, net increased 27% compared to the prior year as Product and Intellectual Property Licensing revenues increased $121.8 million and $55.5 million, respectively. These increases were primarily a result of the TiVo Acquisition. Product generated 51% and 46% of Total Revenues, net for the years ended December 31, 2017 and 2016, respectively.

For additional 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.

For the year ended December 31, 2017, Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets increased 20% compared to the prior year primarily as a result of the TiVo Acquisition, as

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including TiVo Solutions' results for the full period increased costs by $34.7 million. Other than the effects of including TiVo Solutions in the results for the full period, Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets decreased $6.7 million from the prior period due to a $9.8 million decrease in Transaction, transition and integration costs associated with the TiVo Acquisition and a $2.4 million decrease in compensation costs which were partially offset by a $5.4 million increase in patent litigation and maintenance costs which primarily relate to the ongoing Comcast litigation.

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 grow our Licensing, services and software revenues and, as a result, generating positive gross margins from hardware sales is not the primary goal of the hardware operations.

For the year ended December 31, 2017, the increase in Cost of hardware revenues, excluding depreciation and amortization of intangible assets was attributable to including TiVo Solutions' results for the full period which increased costs by $25.7 million and an increase in Transaction, transition and integration costs associated with the TiVo Acquisition of $1.0 million.

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 year ended December 31, 2017, Research and development expenses increased 55% compared to the prior year primarily as a result of the TiVo Acquisition, as including TiVo Solutions' results for the full period increased costs by $73.5 million. Other than the effects of including TiVo Solutions in the results for the full period, Research and development costs decreased $4.3 million primarily due to a $3.3 million decrease in compensation costs and benefits from cost saving initiatives, partially offset by a $0.7 million increase in Transaction, 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.
 
The 6% increase in Selling, general and administrative expenses during the year ended December 31, 2017 was primarily due to the TiVo Acquisition as including TiVo Solutions' results for the full period increased costs by $16.0 million. Other than the effects of including TiVo Solutions in the results for the full period, Selling, general and administrative costs decreased $3.8 million primarily as a result of an $11.5 million decrease in Transaction, transition and integration costs associated with the TiVo Acquisition and benefits from cost saving initiatives, partially offset by costs associated with the transition to a new Chief Executive Officer in 2017.

Depreciation and Amortization of intangible assets

For the year ended December 31, 2017, Depreciation and Amortization of intangible assets increased from the prior year due to the TiVo Acquisition as the inclusion of TiVo Solutions increased Depreciation by $7.1 million and increased Amortization of intangible assets by $63.4 million. Other than the effects of the TiVo Acquisition, Depreciation decreased by $3.7 million and Amortization of intangible assets decreased by $1.7 million.

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Restructuring and asset impairment charges

TiVo Integration Restructuring 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"). We eliminated duplicative positions resulting in severance costs and the termination of certain leases and other contracts as part of the integration plans. As a result of actions associated with the TiVo Integration Restructuring Plan, Restructuring and asset impairment charges of $18.4 million were recognized for the year ended December 31, 2017. Restructuring and asset impairment charges recognized in the year ended December 31, 2017 primarily related to termination and transition agreements executed with former TiVo Solutions' employees and an impairment charge of $6.7 million from vacating a leased facility. Restructuring and asset impairment charges of $24.9 million were recognized for the TiVo Integration Restructuring Plan for the year ended December 31, 2016, which primarily related to termination and transition agreements executed with former TiVo Solutions' employees.
    
Legacy Rovi Restructuring Plans

In the three months ended March 31, 2016, Rovi initiated certain facility rationalization activities (the "Legacy Rovi Restructuring Plans"), including relocating its corporate headquarters from Santa Clara, California to San Carlos, California and consolidating its Silicon Valley operations into the corporate headquarters, and eliminating a number of positions associated with a reorganization of the sales force structure, downsizing the global services workforce and eliminating certain general and administrative positions. As a result of changes in estimates related to sublease rental rates expected to be obtained for vacated facilities, Restructuring and asset impairment charges of $0.8 million and $2.4 million were recognized for the years ended December 31, 2017 and 2016, respectively, related to the Legacy Rovi Restructuring Plans.

Interest income and other, net

The $1.2 million increase in Interest income and other, net during the year ended December 31, 2017 was primarily due to a $3.1 million gain from the sale of strategic investments and a $0.7 million increase in interest income due to higher average investment balances and an increase in interest rates, partially offset by a $1.5 million increase in foreign currency losses and a $1.2 million other-than-temporary impairment loss on a strategic investment.    
    
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 Consolidated Statements of Operations (see Note 10 to the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, 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 generally 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 Consolidated Statements of Operations for the year ended December 31, 2017. The TiVo Acquisition litigation loss represents the settlement amount in excess of the amount due to the Dissenting Holders as merger consideration.

In the year ended December 31, 2017, a $1.1 million loss was recognized related to a separate TiVo Acquisition litigation matter.


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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 year ended December 31, 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 year ended December 31, 2017.

Income tax benefit

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 (benefit).

We recorded Income tax benefit for the year ended December 31, 2017 of $10.3 million, which primarily consists of a $26.6 million benefit from the Tax Act of 2017. The Tax Act of 2017 was signed into law on December 22, 2017 and enacted comprehensive tax reform that made broad and complex changes to the U.S. federal income tax code as described in Note 14 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein. The benefit from the Tax Act of 2017 is primarily related to a revaluation of deferred tax liabilities on indefinite-lived intangible assets which were remeasured from 35% to the new enacted U.S. federal income tax rate of 21%. As these deferred tax liabilities are indefinite-lived, the timing of their realization is not known, and they may not be used as a source of income to reduce our deferred tax asset valuation allowance. Benefits from the Tax Act of 2017 were partially offset by $13.8 million of foreign withholding taxes and $1.9 million of foreign income taxes.

We recorded Income tax benefit for the year ended December 31, 2016 of $61.7 million primarily due to an income tax benefit of $86.1 million due to a change in our deferred tax asset valuation allowance resulting from the TiVo Acquisition. In connection with the TiVo Acquisition, a deferred tax liability was recorded for finite-lived intangible assets as described in Note 2 of the Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein. These deferred tax liabilities are considered a source of future taxable income which allowed TiVo Corporation to reduce its pre-acquisition deferred tax asset valuation allowance. The change in the pre-acquisition deferred tax asset valuation allowance is a transaction recognized separate from the business combination and reduces income tax expense in the period of the business combination. Benefits from the deferred tax asset valuation allowance release were partially offset by $20.6 million of foreign withholding taxes.

The year-over-year decrease in foreign withholding taxes was due to a smaller portion of license fees received in 2017 coming from licensees in countries subject to foreign withholding taxes.

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 Consolidated Financial Statements included in Part IV of this Annual Report on Form 10-K, which is incorporated by reference herein.


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Product

The Product segment's results of operations for the year ended December 31, 2017 compared to the prior year were as follows (dollars in thousands):
 
Year Ended December 31,
 
 
 
 
 
2017
 
2016
 
Change $
 
Change %
Platform Solutions
$
334,004

 
$
205,395

 
$
128,609

 
63
 %
Software and Services
84,964

 
83,811

 
1,153

 
1
 %
Other
4,548

 
12,470

 
(7,922
)
 
(64
)%
Product Revenues
423,516

 
301,676

 
121,840

 
40
 %
Adjusted Operating Expenses
377,107

 
251,529

 
125,578

 
50
 %
Adjusted EBITDA
$
46,409

 
$
50,147

 
$
(3,738
)
 
(7
)%
Adjusted EBITDA Margin
11.0
%
 
16.6
%
 
 
 
 
    
For the year ended December 31, 2017, Product revenue increased 40% compared to the prior year as Platform Solutions and Software and Services revenues increased 63% and 1%, respectively, while Other revenues decreased 64%. These increases were primarily attributable to the TiVo Acquisition as including TiVo Solutions' results for the full period contributed $135.2 million and $8.8 million of the increase in Platform Solutions and Software and Services revenues, respectively. TiVo Solutions Product revenue includes $38.8 million of hardware sales for the year ended December 31, 2017. Other than the effects of including TiVo Solutions in the results for the full period, Platform Solutions revenue decreased $6.6 million primarily as a result of the renewal of an iGuide service provider contract at a lower rate. Other than the effects of including TiVo Solutions in the results for the full period, Software and Services revenue decreased $7.7 million as a result of a $6.3 million decline in metadata revenues which was primarily due to expiration of our metadata license with Comcast on September 30, 2017 resulting in a $3.0 million decline in revenue and the loss of $1.4 million in revenue from TiVo Solutions prior to the TiVo Acquisition Date. The $7.9 million decline in Other revenue was the result of a continued decline in ACP revenue.

Product Adjusted Operating Expenses increased 50% for the year ended December 31, 2017 compared to the prior year primarily as a result of the TiVo Acquisition as including TiVo Solutions' results for the full period increased costs by $127.0 million, partially offset by lower compensation costs and benefits from cost saving initiatives.

The decrease in Adjusted EBITDA Margin for the year ended December 31, 2017 relates to a change in Product business mix following the TiVo Acquisition toward lower margin hardware products.

Intellectual Property Licensing

The Intellectual Property Licensing segment's results of operations for the year ended December 31, 2017 compared to the prior year were as follows (dollars in thousands):
 
Year Ended December 31,
 
 
 
 
 
2017
 
2016
 
Change $
 
Change %
US Pay TV Providers
$
278,973

 
$
222,346

 
$
56,627

 
25
 %
CE Manufacturers
51,219

 
46,145

 
5,074

 
11
 %
New Media, International Pay TV Providers and Other
72,748

 
78,926

 
(6,178
)
 
(8
)%
Intellectual Property Licensing Revenues
402,940

 
347,417

 
55,523

 
16
 %
Adjusted Operating Expenses
97,059

 
79,820

 
17,239

 
22
 %
Adjusted EBITDA
$
305,881

 
$
267,597

 
$
38,284

 
14
 %
Adjusted EBITDA Margin
75.9
%
 
77.0
%
 
 
 
 

For the year ended December 31, 2017, Intellectual Property Licensing revenue increased 16% compared to the prior year due to a 25% increase in US Pay TV Providers revenue, an 11% increase in revenue from CE Manufacturers and an 8% decrease in New Media, International Pay TV Providers and Other revenue. Revenue from US Pay TV Providers increased primarily due to the TiVo Acquisition as including TiVo Solutions' results for the full period increased revenue by $69.3 million. US Pay TV Providers revenue from TiVo Solutions' includes $23.6 million and $23.3 million in revenue from catch-up payments intended to make us whole for the pre-license period of use for the years ended December 31, 2017 and 2016,

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respectively. Partially offsetting the benefit of the TiVo Acquisition on US Pay TV Providers revenue was the loss of $7.3 million of revenue from TiVo Solutions prior to the TiVo Acquisition Date and the expiration of the Comcast license on March 31, 2016.

The increase in CE Manufacturers revenue was primarily attributable to the TiVo Acquisition as including TiVo Solutions' results for the full period increased revenue by $7.5 million. CE Manufacturers revenue from TiVo Solutions reflects an increase of $5.8 million in revenue from catch-up payments intended to make us whole for the pre-license period of use for the year ended December 31, 2017. Other than the effects of the TiVo Acquisition, CE Manufacturers revenue decreased primarily due to a decrease in our licensees' market share, combined with continuing pressures on our licensees' business models, which has caused revenue from CE Manufacturers to decline. New Media, International Pay TV Providers and Other revenue decreased due to the expiration of certain customer licenses, a $1.0 million decrease in revenue from patent sales and a $0.9 million decrease in revenue from catch-up payments intended to make us whole for the pre-license period of use. These catch-up payments totaled $17.3 million and $18.2 million in revenue for the years ended December 31, 2017 and 2016, respectively.

As noted above, Intellectual Property Licensing revenue for the years ended December 31, 2017 and 2016 benefited from catch-up payments intended to make us whole for the pre-license period of use. While we regularly have catch-up revenues when we license new intellectual property customers, the years ended December 31, 2017 and 2016 also benefited from catch-up revenues associated with renewals of existing customers as we expanded our licensing relationship to include the TiVo Solutions intellectual property. 

Prior to the TiVo Acquisition Date, TiVo Solutions entered into agreements with AT&T, DirecTV, EchoStar and Verizon that expired by July 2018. Revenue from US Pay TV Providers includes $97.1 million and $29.6 million for the years ended December 31, 2017 and 2016, respectively, from these agreements.

Intellectual Property Licensing Adjusted Operating Expenses increased 22% during the year ended December 31, 2017 primarily as a result of the TiVo Acquisition, an increase of $5.4 million for patent litigation costs which primarily relate to the ongoing Comcast litigation, a $3.0 million increase in compensation costs and a $2.0 million increase in licensing costs.

The decrease in Adjusted EBITDA Margin for the year ended December 31, 2017 is primarily the result of the increase in patent litigation costs, partially offset by an increase in Intellectual Property Licensing revenue.

Corporate

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

Corporate costs for the year ended December 31, 2017 compared to the prior year were as follows (dollars in thousands):    
 
Year Ended December 31,
 
 
 
 
 
2017
 
2016
 
Change $
 
Change %
Adjusted Operating Expenses
$
62,148

 
$
56,673

 
$
5,475

 
10
%

For the year ended December 31, 2017, the increase in Corporate Adjusted Operating Expenses primarily reflects the effect of the TiVo Acquisition.

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.


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As of December 31, 2018, we had $162.0 million in Cash and cash equivalents, $159.0 million in Short-term marketable securities and $73.2 million in Long-term marketable securities. Our cash, cash equivalents and marketable securities are held in numerous locations around the world, with $81.6 million held by our foreign subsidiaries as of December 31, 2018. 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 year ended December 31, 2018 compared to the prior year were as follows (in thousands):
 
Year Ended December 31,
 
 
 
 
 
2018
 
2017
 
Change $
 
Change %
Net cash provided by operating activities of continuing operations
$
159,072

 
$
132,084

 
$
26,988

 
20
 %
Net cash used in investing activities
(32,598
)
 
(107,499
)
 
74,901

 
(70
)%
Net cash used in financing activities
(92,380
)
 
(90,319
)
 
(2,061
)
 
2
 %
Net cash used in operating activities of discontinued operations
(524
)
 

 
(524
)
 
N/A

Effect of exchange rate changes on cash and cash equivalents
(580
)
 
2,072

 
(2,652
)
 
(128
)%
Net increase (decrease) in cash and cash equivalents
$
32,990

 
$
(63,662
)
 
$
96,652

 
(152
)%

Net cash provided by operating activities of continuing operations for the year ended December 31, 2018 increased $27.0 million. The increase was primarily due to the timing of collections on Accounts receivable, net, $45.3 million of cash used in 2017 to prepay a license and lower payments in 2018 for restructuring plans and corporate bonuses, partially offset by certain cash collections in advance of revenue being recognized in 2017 and $7.4 million of higher payments related to TiVo Solutions' acquisition of Cubiware as performance milestones were achieved. We expect to make material cash payments for restructuring actions in connection with the Profit Improvement Plan through the middle of 2019. The availability of cash generated by our operations in the future could be adversel