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Section 1: 10-Q (10-Q)

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iso4217:USD xbrli:shares xbrli:pure iso4217:USD rovi:per_unit xbrli:shares rovi:subsidiary rovi:purchase_period rovi:segment
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________ 
FORM 10-Q
(Mark One)
  x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
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, California 95002
(Address of principal executive offices, including zip code)
(408) 519-9100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

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 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
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share
 
TIVO
 
The Nasdaq Stock Market LLC
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
(in thousands)
Outstanding as of
Class
April 30, 2019
Common Stock
124,949


Table of Contents


TIVO CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1.
 
 
 
 
 
 
ITEM 2.
ITEM 3.
ITEM 4.
 
PART II. OTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
 



1

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TIVO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)

March 31, 2019
 
December 31, 2018
ASSETS
(unaudited)


Current assets:



Cash and cash equivalents
$
113,182


$
161,955

Short-term marketable securities
158,739


158,956

Accounts receivable, net
156,470


152,866

Inventory
6,146

 
7,449

Prepaid expenses and other current assets
33,130


30,806

Total current assets
467,667

 
512,032

Long-term marketable securities
55,058


73,207

Property and equipment, net
51,301


53,586

Intangible assets, net
489,715


513,770

Goodwill
1,544,306


1,544,343

Right-of-use assets
65,419

 

Other long-term assets
63,152


63,365

Total assets
$
2,736,618

 
$
2,760,303





LIABILITIES AND STOCKHOLDERS’ EQUITY



Current liabilities:



Accounts payable and accrued expenses
$
104,206


$
104,981

Unearned revenue
49,899


46,072

Current portion of long-term debt
330,481


373,361

Total current liabilities
484,586

 
524,414

Unearned revenue, less current portion
52,906


54,495

Long-term debt, less current portion
619,396


618,776

Deferred tax liabilities, net
44,498


45,030

Long-term lease liabilities
66,927

 

Other long-term liabilities
10,275


24,647

Total liabilities
1,278,588

 
1,267,362

Contingencies (Note 11)





Stockholders' equity:



Preferred stock, $0.001 par value, 5,000 shares authorized; no shares issued or outstanding



Common stock, $0.001 par value, 250,000 shares authorized; 126,841 shares issued and 124,895 shares outstanding as of March 31, 2019; and 125,781 shares issued and 123,975 shares outstanding as of December 31, 2018
127


126

Treasury stock, 1,946 shares and 1,806 shares as of March 31, 2019 and December 31, 2018, respectively, at cost
(33,521
)

(32,124
)
Additional paid-in capital
3,232,310


3,239,395

Accumulated other comprehensive loss
(3,655
)

(3,869
)
Accumulated deficit
(1,737,231
)

(1,710,587
)
Total stockholders’ equity
1,458,030

 
1,492,941

Total liabilities and stockholders’ equity
$
2,736,618

 
$
2,760,303


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

2

Table of Contents


TIVO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
Three Months Ended March 31,
 
2019
 
2018
Revenues, net:
 
 
 
Licensing, services and software
$
156,161

 
$
186,158

Hardware
2,074

 
3,679

Total Revenues, net
158,235

 
189,837

Costs and expenses:
 
 
 
Cost of licensing, services and software revenues, excluding depreciation and amortization of intangible assets
39,433

 
43,215

Cost of hardware revenues, excluding depreciation and amortization of intangible assets
4,093

 
5,051

Research and development
41,381

 
48,430

Selling, general and administrative
45,993

 
51,082

Depreciation
5,364

 
5,141

Amortization of intangible assets
28,178

 
41,412

Restructuring and asset impairment charges
1,813

 
4,546

Total costs and expenses
166,255

 
198,877

Operating loss
(8,020
)
 
(9,040
)
Interest expense
(12,161
)
 
(11,634
)
Interest income and other, net
1,775

 
1,566

(Loss) gain on interest rate swaps
(1,721
)
 
4,311

Loss on debt extinguishment
(199
)
 

Loss from continuing operations before income taxes
(20,326
)
 
(14,797
)
Income tax expense
6,318

 
4,217

Loss from continuing operations, net of tax
(26,644
)
 
(19,014
)
Income from discontinued operations, net of tax

 
1,297

Net loss
$
(26,644
)
 
$
(17,717
)
 
 
 
 
Basic loss per share:
 
 
 
Continuing operations
$
(0.21
)
 
$
(0.16
)
Discontinued operations

 
0.01

Basic loss per share
$
(0.21
)
 
$
(0.15
)
Weighted average shares used in computing basic per share amounts
124,422

 
122,080

 
 
 
 
Diluted loss per share:
 
 
 
Continuing operations
$
(0.21
)
 
$
(0.16
)
Discontinued operations

 
0.01

Diluted loss per share
$
(0.21
)
 
$
(0.15
)
Weighted average shares used in computing diluted per share amounts
124,422

 
122,080

 
 
 
 
Dividends declared per share
$
0.18

 
$
0.18


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

3

Table of Contents

TIVO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 
Three Months Ended March 31,
 
2019
 
2018
Net loss
$
(26,644
)
 
$
(17,717
)
Other comprehensive income, net of tax:
 
 
 
Change in foreign currency translation adjustment
(287
)
 
1,109

Unrealized gains (losses) on marketable securities
 
 
 
Change in unrealized gains (losses) on marketable securities
501

 
(333
)
Less: Reclassification adjustment on sale

 
216

Other comprehensive income, net of tax
214

 
992

Comprehensive loss
$
(26,430
)
 
$
(16,725
)

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


4

Table of Contents

TIVO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

 
Common stock
Treasury stock
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
 
Shares
Amount
Shares
Amount
Balance as of December 31, 2017
123,385

$
123

(1,269
)
$
(24,740
)
$
3,273,022

$
(2,738
)
$
(1,392,651
)
$
1,853,016

Cumulative effect adjustment
 
 
 
 
 
 
31,412

31,412

Net loss
 
 
 
 
 
 
(17,717
)
(17,717
)
Other comprehensive income, net of tax
 
 
 
 
 
992

 
992

Issuance of common stock under employee stock purchase plan
639

1

 
 
7,574

 
 
7,575

Issuance of restricted stock, net
365


 
 

 
 

Equity-based compensation
 
 
 
 
13,634

 
 
13,634

Dividends
 
 
 
 
(22,111
)
 

(22,111
)
Withholding taxes related to net share settlement of restricted awards
 
 
(196
)
(2,894
)
 
 
 
(2,894
)
Balance as of March 31, 2018
124,389

$
124

(1,465
)
$
(27,634
)
$
3,272,119

$
(1,746
)
$
(1,378,956
)
$
1,863,907

 
Common stock
Treasury stock
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
 
Shares
Amount
Shares
Amount
Balance as of December 31, 2018
125,781

$
126

(1,806
)
$
(32,124
)
$
3,239,395

$
(3,869
)
$
(1,710,587
)
$
1,492,941

Net loss
 
 
 
 
 
 
(26,644
)
(26,644
)
Other comprehensive income, net of tax
 
 
 
 
 
214

 
214

Issuance of common stock under employee stock purchase plan
735

1

 
 
6,951

 
 
6,952

Issuance of restricted stock, net
325


 
 

 
 

Equity-based compensation
 
 
 
 
8,433

 
 
8,433

Dividends
 
 
 
 
(22,469
)
 
 
(22,469
)
Withholding taxes related to net share settlement of restricted awards
 
 
(140
)
(1,397
)
 
 
 
(1,397
)
Balance as of March 31, 2019
126,841

$
127

(1,946
)
$
(33,521
)
$
3,232,310

$
(3,655
)
$
(1,737,231
)
$
1,458,030


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

5

Table of Contents

TIVO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2019
 
2018
Operating activities:
 
 
 
Net loss
$
(26,644
)
 
$
(17,717
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Income from discontinued operations, net of tax

 
(1,297
)
Depreciation
5,364

 
5,141

Amortization of intangible assets
28,178

 
41,412

Amortization of convertible note discount and note issuance costs
4,007

 
3,813

Restructuring and asset impairment charges
1,813

 
4,546

Equity-based compensation
8,379

 
12,024

Change in fair value of interest rate swaps
4,646

 
(5,708
)
Loss on debt extinguishment
199

 

Deferred income taxes
(672
)
 
(119
)
Other operating, net
28

 
1,899

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(3,672
)
 
16,027

Inventory
1,303

 
(1,583
)
Prepaid expenses and other current assets and other long-term assets
(3,860
)
 
5,199

Right-of-use assets, net of lease liabilities
4,482

 

Accounts payable and accrued expenses and other long-term liabilities
(22,842
)
 
(24,306
)
Taxes payable
1,378

 
(2,951
)
Unearned revenue
2,238

 
(652
)
Net cash provided by operating activities
4,325

 
35,728

Investing activities:
 
 
 
Payments for purchase of short- and long-term marketable securities
(29,849
)
 
(36,091
)
Proceeds from sales or maturities of short- and long-term marketable securities
49,000

 
38,168

Payments for purchase of property and equipment
(4,305
)
 
(7,917
)
Payments for acquisition of patents
(4,250
)
 

Other investing, net
3

 
11

Net cash provided by (used in) investing activities
10,599

 
(5,829
)
Financing activities:
 
 
 
Principal payments on long-term debt
(46,588
)
 
(1,750
)
Payments for dividends
(22,544
)
 
(22,161
)
Payments for withholding taxes related to net settlement of restricted awards
(1,397
)
 
(2,894
)
Proceeds from employee stock purchase plan
6,952

 
7,574

Net cash used in financing activities
(63,577
)
 
(19,231
)
Effect of exchange rate changes on cash and cash equivalents
(120
)
 
661

Net (decrease) increase in cash and cash equivalents
(48,773
)
 
11,329

Cash and cash equivalents at beginning of period
161,955

 
128,965

Cash and cash equivalents at end of period
$
113,182

 
$
140,294


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


6

Table of Contents

TIVO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Description of Business

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

The Company 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. The Company provides a broad set of intellectual property, cloud-based services and set-top box ("STB") solutions that enable people to find and enjoy online video, television ("TV"), movies and music entertainment, including content discovery through device-embedded and cloud-based user experience ("UX"), including interactive program guides (“IPGs”), digital video recorders ("DVRs"), natural language voice and text search, cloud-based recommendations services and the Company's extensive entertainment metadata (i.e., descriptive information, promotional images or other content that describes or relates to television shows, videos, movies, sports, music, books, games or other entertainment content). The Company's integrated platform includes software and cloud-based services that provide an all-in-one approach for navigating a fragmented universe of content by seamlessly combining live, recorded, video-on-demand ("VOD") and over-the-top ("OTT") content into one intuitive user interface with simple universal search, discovery, viewing and recording, to create a unified viewing experience. The Company distributes its products through service provider relationships, integrated into third-party devices and directly to retail consumers. The Company also offers advanced media and advertising solutions, including viewership data, sponsored discovery and in-guide advertising, which enable advanced audience targeting and measurement in linear and OTT TV advertising. Solutions are sold globally to cable, satellite, consumer electronics ("CE"), entertainment, media and online distribution companies, and, in the United States, the Company sells a suite of DVR and whole home media products and services directly to retail consumers.
    
Basis of Presentation and Principles of Consolidation

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

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

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

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

Use of Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and the results of operations for the reporting period. On an ongoing basis,

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management evaluates its estimates, including those related to revenue recognition, long-lived asset impairment, including goodwill and intangible assets, equity-based compensation and income taxes. Actual results may differ from those estimates.

Right-of-Use Assets and Lease Liabilities

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

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

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

The Company has lease agreements that contain both lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) and non-lease components (e.g., common-area maintenance costs). The Company applies a practical expedient to combine lease components and non-lease components into a single lease component for recognition and measurement purposes.

Lease expense includes amortization of the Right-of-use assets and accretion of the Lease liabilities. Amortization of the Right-of-use assets is calculated as the periodic lease cost less accretion of the lease liability. The amortization period for Right-of-use assets is limited to the expected lease term. For operating leases, lease expense is recognized in the Condensed Consolidated Statements of Operations as an operating expense over the lease term on a straight-line basis. For financing leases, amortization of the Right-of-use asset is recognized as an operating expense in the Condensed Consolidated Statements of Operations over the lease term separately from accretion of the Lease liability.
    
The Company applies a practical expedient to not measure or recognize Right-of-use assets or Lease liabilities for leases with a lease term of 12 months or less and lease expense for these leases is recognized as incurred.

Recent Accounting Pronouncements

Standards Recently Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued a new accounting standard for leases. The new lease accounting standard generally requires the recognition of operating and financing lease liabilities and corresponding right-of-use assets on the statement of financial position. The Company adopted the provisions of the new lease accounting standard on January 1, 2019 using the modified retrospective transition approach and certain practical expedients as described in Note 10. On adoption, the Company recognized the present value of its existing minimum lease payments as a $66.7 million Right-of-use asset and an $81.9 million Lease liability. The difference between the Right-of-use asset and the Lease liability on adoption primarily arises from previously recorded deferred rent, which was effectively reclassified to the Right-of-use asset on adoption. As a result, there was no impact on Accumulated deficit. Results for periods beginning after December 31, 2018 are presented in accordance with the new lease accounting standard, while prior period amounts were not restated and continue to be reported in accordance with the Company's previous lease accounting policies.
    
In March 2017, the FASB shortened the amortization period for certain investments in callable debt securities held at a premium to the earliest call date. Application of the shortened amortization period was effective for the Company beginning on January 1, 2019 on a modified retrospective basis. The application of the shortened amortization period did not have a material effect on the Company's Condensed Consolidated Financial Statements

In February 2018, the FASB issued guidance on the reclassification of certain income tax effects from accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (the "Tax Act of 2017"). Application of the

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reclassification guidance was effective for the Company beginning on January 1, 2019. On adoption, the Company made an accounting policy election to use the specific identification method to release income tax effects from Accumulated other comprehensive loss. The Company also made an accounting policy election not to reclassify the stranded tax effects of the Tax Act of 2017 from Accumulated other comprehensive loss to Accumulated deficit. The application of the reclassification guidance did not have a material effect on the Company's Condensed Consolidated Financial Statements

Standards Pending Adoption

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

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

(2) Discontinued Operations

In the three months ended March 31, 2018, the Company recognized Income from discontinued operations, net of tax, of $1.3 million as a result of the expiration of an indemnification associated with a previous business disposal.

(3) Financial Statement Details

Inventory

Components of Inventory were as follows (in thousands):
 
March 31, 2019
 
December 31, 2018
Raw materials
$
797

 
$
864

Finished goods
5,349

 
6,585

Inventory
$
6,146

 
$
7,449



Property and equipment, net

Components of Property and equipment, net were as follows (in thousands):
 
March 31, 2019
 
December 31, 2018
Computer software and equipment
$
152,353

 
$
148,935

Leasehold improvements
46,977

 
47,431

Furniture and fixtures
9,513

 
9,494

Property and equipment, gross
208,843

 
205,860

Less: Accumulated depreciation and amortization
(157,542
)
 
(152,274
)
Property and equipment, net
$
51,301

 
$
53,586



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Accounts payable and accrued expenses

Components of Accounts payable and accrued expenses were as follows (in thousands):
 
March 31, 2019
 
December 31, 2018
Accounts payable
$
8,904

 
$
2,180

Accrued compensation and benefits
25,420

 
46,466

Other accrued liabilities
69,882

 
56,335

Accounts payable and accrued expenses
$
104,206

 
$
104,981


(4) Revenues

Revenue Details

The following information depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors by disaggregating revenue by product offering (presented in Note 15), significant customer, contract-type and geographic area. This information includes revenue recognized from contracts with customers and revenue from other sources, including out-of-license settlements.
    
Customers representing 10% or more of Total Revenues, net were as follows:
 
Three Months Ended March 31,
 
2019
 
2018
Virgin Media
(a)

 
16
%
AT&T Inc. ("AT&T")
11
%
 
10
%


(a) Customer below 10% of Total Revenues, net for the period.

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

By segment, the pattern of revenue recognition was as follows (in thousands):
 
Three Months Ended March 31, 2019
 
Product
 
Intellectual Property Licensing
 
Total Revenues, net
Goods and services transferred at a point in time
$
20,994

 
$
28,127

 
$
49,121

Goods and services transferred over time
70,309

 
36,701

 
107,010

Out-of-license settlements

 
2,104

 
2,104

Total Revenues, net
$
91,303

 
$
66,932

 
$
158,235


 
Three Months Ended March 31, 2018
 
Product
 
Intellectual Property Licensing
 
Total Revenues, net
Goods and services transferred at a point in time
$
36,802

 
$
28,119

 
$
64,921

Goods and services transferred over time
80,050

 
42,850

 
122,900

Out-of-license settlements

 
2,016

 
2,016

Total Revenues, net
$
116,852

 
$
72,985

 
$
189,837




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Revenue by geographic area was as follows (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
United States
$
107,838

 
$
118,935

United Kingdom
6,196

 
33,512

Rest of the world
44,201

 
37,390

Total Revenues, net
$
158,235

 
$
189,837



Revenue by geographic area is predominately based on the end user's location. Other than the U.S., no country accounted for more than 10% of Total Revenues, net for the three months ended March 31, 2019. Other than the U.S. and United Kingdom, no country accounted for more than 10% of Total Revenues, net for the three months ended March 31, 2018.

Accounts receivable, net

Components of Accounts receivable, net were as follows (in thousands):
 
March 31, 2019
 
December 31, 2018
Accounts receivable, gross
$
158,956

 
$
155,708

Less: Allowance for doubtful accounts
(2,486
)
 
(2,842
)
Accounts receivable, net
$
156,470

 
$
152,866



Customers representing 10% or more of Accounts receivable, net were as follows:
 
March 31, 2019
 
December 31, 2018
AT&T
11
%
 
18
%
Dish Network
10
%
 
(a)


(a) Customer below 10% of Accounts receivable, net for the period.

Contract Balances

Contract assets primarily consist of revenue recognized in excess of the amount billed to the customer, limited to net realizable value and deferred engineering costs for significant software customization or modification and set-up services to the extent deemed recoverable. Contract assets also include the incremental costs of obtaining a contract with a customer, principally sales commissions when the renewal commission is not commensurate with the initial commission. Contract assets were recorded in the Condensed Consolidated Balance Sheets as follows (in thousands):
 
March 31, 2019
 
December 31, 2018
Accounts receivable, net
$
45,069

 
$
35,115

Prepaid expenses and other current assets
1,958

 
1,654

Other long-term assets
10,124

 
8,532

Total contract assets, net
$
57,151

 
$
45,301


No impairment losses were recognized with respect to contract assets for the three months ended March 31, 2019 and 2018.

Contract liabilities are mainly comprised of unearned revenue related to consumer lifetime subscriptions for the TiVo service, multi-period licensing or cloud-based services and other offerings for which the Company is paid in advance of when control of the promised good or service is transferred to the customer. Unearned revenue also includes amounts related to professional services to be performed in the future. For the three months ended March 31, 2019, the Company recognized $14.0 million of revenue that had been included in Unearned revenue as of December 31, 2018.

As of March 31, 2019, approximately $765.2 million of revenue is expected to be recognized from unsatisfied performance obligations that are primarily related to fixed-fee intellectual property and software-as-a-service agreements, which is expected to be recognized as follows: 23% in the remainder of 2019, 22% in 2020, 15% in 2021, 11% in 2022, 10% in

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2023, and 19% thereafter.

(5) Investments

The amortized cost and fair value of cash, cash equivalents and marketable securities by significant investment category were as follows (in thousands):
 
March 31, 2019
 
Amortized Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
Cash
$
40,349

 
$

 
$

 
$
40,349

Cash equivalents - Money market funds
72,833

 

 

 
72,833

Cash and cash equivalents
$
113,182

 
$

 
$

 
$
113,182

 
 
 
 
 
 
 
 
Corporate debt securities
$
110,015

 
$
46

 
$
(102
)
 
$
109,959

U.S. Treasuries / Agencies
103,760

 
150

 
(72
)
 
103,838

Marketable securities
$
213,775

 
$
196

 
$
(174
)
 
$
213,797

Cash, cash equivalents and marketable securities
 
 
 
 
 
 
$
326,979

 
December 31, 2018
 
Amortized Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
Cash
$
40,125

 
$

 
$

 
$
40,125

Cash equivalents - Money market funds
121,830

 

 

 
121,830

Cash and cash equivalents
$
161,955

 
$

 
$

 
$
161,955

 
 
 
 
 
 
 
 
Corporate debt securities
$
114,159

 
$
1

 
$
(400
)
 
$
113,760

U.S. Treasuries / Agencies
118,497

 
70

 
(164
)
 
118,403

Marketable securities
$
232,656

 
$
71

 
$
(564
)
 
$
232,163

Cash, cash equivalents and marketable securities
 
 
 
 
 
 
$
394,118



As of March 31, 2019, the amortized cost and fair value of marketable securities, by contractual maturity, were as follows (in thousands): 
 
Amortized Cost
 
Fair Value
Due in less than 1 year
$
158,837

 
$
158,739

Due in 1-2 years
54,938

 
55,058

Total
$
213,775

 
$
213,797



As of March 31, 2019 and December 31, 2018, Other long-term assets include equity securities accounted for under the equity method with a carrying amount of $2.6 million and $2.2 million, respectively, and equity securities without a readily determinable fair value with a carrying amount of $1.5 million and $1.5 million, respectively. No impairments or adjustments to the carrying amount of the Company's equity securities without a readily determinable fair value were recognized in the three months ended March 31, 2019 and 2018.

(6) Fair Value Measurements

Fair Value Hierarchy

The Company uses valuation techniques that are based on observable and unobservable inputs to measure fair value. Observable inputs are developed using publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use. Fair value measurements are classified in a hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs. Assets and liabilities are classified in a fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety:
Level 1. Quoted prices in active markets for identical assets or liabilities.

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Level 2. Inputs other than Level 1 inputs that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or market-corroborated inputs.
Level 3. Unobservable inputs for the asset or liability.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. For the three months ended March 31, 2019 and 2018, there were no transfers between levels of the fair value hierarchy.

Recurring Fair Value Measurements

Assets and liabilities reported at fair value on a recurring basis in the Condensed Consolidated Balance Sheets were classified in the fair value hierarchy as follows (in thousands):
 
March 31, 2019
 
December 31, 2018
 
Total
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Total
 
Quoted Prices in
Active Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
72,833

 
$
72,833

 
$

 
$
121,830

 
$
121,830

 
$

Short-term marketable securities
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities
94,979

 

 
94,979

 
90,753

 

 
90,753

U.S. Treasuries / Agencies
63,761

 

 
63,761

 
68,203

 

 
68,203

Prepaid expenses and other current assets
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps

 

 

 
173

 

 
173

Long-term marketable securities
 
 
 
 
 
 
 
 

 

Corporate debt securities
14,980

 

 
14,980

 
23,007

 

 
23,007

U.S. Treasuries / Agencies
40,077

 

 
40,077

 
50,200

 

 
50,200

Total Assets
$
286,630

 
$
72,833

 
$
213,797

 
$
354,166

 
$
121,830

 
$
232,336

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Other long-term liabilities
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
(4,465
)
 
$

 
$
(4,465
)
 
$
(3,012
)
 
$

 
$
(3,012
)
Total Liabilities
$
(4,465
)
 
$

 
$
(4,465
)
 
$
(3,012
)
 
$

 
$
(3,012
)

Rollforward of Level 3 Fair Value Measurements

Changes in the fair value of assets and liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands): 
 
Three Months Ended March 31, 2018
 
Auction Rate Securities
 
Cubiware Contingent Consideration
Balance at beginning of period
$
10,584

 
$
(2,234
)
Sales
(10,715
)
 

Loss included in earnings
(85
)
 
(970
)
Unrealized loss reclassified on sale
216

 

Balance at end of period
$

 
$
(3,204
)


For the three months ended March 31, 2018, the Loss included in earnings related to the Cubiware contingent consideration liability is included in Selling, general and administrative expense related to remeasurement of the liability as a $0.9 million loss and in Interest expense related to accretion of the liability to future value of $0.1 million. During the year

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ended December 31, 2018, the Cubiware contingent consideration was reclassified to a contingent liability that is not measured at fair value.

Valuation Techniques

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

The fair value of interest rate swaps is estimated using a discounted cash flow analysis that considers the expected future cash flows of each interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the remaining period to maturity, and uses market-corroborated inputs, including forward interest rate curves and implied interest rate volatilities. The fair value of an interest rate swap is estimated by netting the discounted future fixed cash payments against the discounted expected variable cash receipts. The variable cash receipts are estimated based on an expectation of future interest rates derived from forward interest rate curves. The fair value of an interest rate swap also incorporates credit valuation adjustments to reflect the nonperformance risk of the Company and the respective counterparty. In adjusting the fair value of its interest rate swaps for the effect of nonperformance risk, the Company considers the effect of its master netting agreements.
Other Fair Value Disclosures
The carrying amount and fair value of debt issued or assumed by the Company were as follows (in thousands): 
 
March 31, 2019
 
December 31, 2018
 
Carrying Amount
 
Fair Value (a)
 
Carrying Amount
 
Fair Value (a)
2020 Convertible Notes
$
330,481

 
$
326,456

 
$
326,640

 
$
316,538

2021 Convertible Notes
48

 
48

 
48

 
48

Term Loan Facility B
619,348

 
607,142

 
665,449

 
633,404

Total Long-term debt
$
949,877

 
$
933,646

 
$
992,137

 
$
949,990



(a)
If reported at fair value in the Condensed Consolidated Balance Sheets, debt issued or assumed by the Company would be classified in Level 2 of the fair value hierarchy.

(7) Goodwill and Intangible Assets, Net

Goodwill

Goodwill allocated to the reportable segments and changes in the carrying amount of goodwill by reportable segment were as follows (in thousands):
 
Product
 
Intellectual Property Licensing
 
Total
December 31, 2018
$
253,011

 
$
1,291,332

 
$
1,544,343

Foreign currency translation
(37
)
 

 
(37
)
March 31, 2019
$
252,974

 
$
1,291,332

 
$
1,544,306



Goodwill at each reporting unit is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.


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Intangible Assets, Net

Intangible assets, net consisted of the following (in thousands): 
 
March 31, 2019
 
Gross
 
Accumulated
Amortization
 
Net
Finite-lived intangible assets
 
 
 
 
 
Developed technology and patents
$
1,055,755

 
$
(787,790
)
 
$
267,965

Existing contracts and customer relationships
402,633

 
(200,807
)
 
201,826

Content databases and other
57,257

 
(51,333
)
 
5,924

Trademarks / Tradenames
8,300

 
(8,300
)
 

Total finite-lived intangible assets
1,523,945