Xperi Holding Corporation Announces Second Quarter 2021 Results

Xperi Holding Corporation (Nasdaq: XPER) (the “Company”, “Xperi” or “we”) today announced financial results for the second quarter ended June 30, 2021.

“We delivered strong second quarter revenue and earnings driven by certain deals closing earlier than expected and some expenses shifting to later in the year, increasing our visibility to achieve our full year financial outlook,” said Jon Kirchner, chief executive officer of Xperi. “Importantly, we continue to make progress on each of our key initiatives in our IP and product segments, and we believe we are increasingly well positioned for growth in both segments.”

Second Quarter 2021 Financial Highlights:

  • Revenue of $222.3 million.
  • GAAP loss per share of $(0.01) and non-GAAP earnings per share of $0.61.
  • Cash Flow from Operations of $56.3 million.
  • Adjusted Free Cash Flow1 of $56.7 million.
  • Paid down $50.6 million in debt and repriced remaining debt to lower future borrowing costs.
  • Bought back $10 million of common stock.

Second Quarter 2021 Business and Recent Operating Highlights:

IP Licensing Business

  • Renewed and extended license agreement with Google.
  • Renewed and extended license agreement with Fox Corporation.
  • Renewed and extended license agreement with one of the leading Canadian Pay-TV operators.

Product Business

Consumer Experience business highlights:

  • Expanded TiVo Stream 4K footprint through additional retail distribution at Best Buy, Target and QVC.
  • YouTube TV and RCN distributed TiVo Stream 4Ks as part of their marketing efforts to select subscribers.
  • Expanded content on our TiVo+ ad-supported video service offering, which now includes 160 free ad-supported television (FAST) channels and over 100,000 advertising video on demand (AVOD) assets.

Connected Car business highlights:

  • Delivered HD Radio on 15 new 2021 car models in North America.
  • Engaged with 20 OEMs for DTS AutoStage and 14 OEMs for DTS AutoSense for launches in 2022 through 2026.
  • Launching DTS AutoSense in BMW vehicles later this summer.

Pay-TV business highlights:

  • Signed a license agreement with Hotwire Communications, one of the nation’s leading fiber optics telecommunications providers, for the TiVo IPTV platform.
  • Acquired MobiTV assets to broaden and further solidify TiVo’s position in the IPTV Pay-TV market.
  • Entered into new and more favorable agreements with nearly all MobiTV customers. These customers will benefit from continued investment in the platform and Xperi’s commitment to supporting operators with a broad portfolio of IPTV solutions.

Capital Allocation

During the quarter, the Company paid down $50.6 million in debt and repriced the remaining debt, extending the maturity and lowering future borrowing costs. In addition, the Company bought back $10 million of common stock.

On June 15, 2021, the Company paid $5.3 million to stockholders of record on May 25, 2021, for a quarterly cash dividend of $0.05 per share of common stock.

On July 26, 2021, the Board of Directors declared a dividend of $0.05 per share, payable on September 14, 2021, to stockholders of record on August 24, 2021.

Business Outlook

The Company is lowering its interest expense outlook to $39 million from $43 million and reaffirms the remainder of its full year outlook:

Category

FY 2021 GAAP Outlook

FY 2021 Non-GAAP Outlook

Revenue

$860M to $900M

$860M to $900M

COGS

$115M to $125M

$115M to $125M

Operating Expense excluding COGS*

$760M to $790M

$475M to $505M

Interest Expense

~ $39M

~ $39M

Other Income

~ $4M

~ $4M

Cash Tax (net of refunds)

$35M to $38M

$35M to $38M

Basic Shares Outstanding

105M

105M

Diluted Shares Outstanding

107M

112M

Operating Cash Flow

$180M to $220M

$180M to $220M

Adjusted Free Cash Flow1*

N/A

$185M to $225M

1 Adjusted Free Cash Flow is defined as Operating Cash Flow, less purchases of property and equipment, plus merger and integration, separation, and severance and retention costs.

*See tables for reconciliation of GAAP to non-GAAP differences.

Conference Call Information

The Company will hold its second quarter 2021 earnings conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Tuesday, August 3, 2021. To access the call in the U.S., please dial 800-430-8332, and for international callers, dial +1 323-289-6576. The conference ID is 2203829. All participants should dial in 15 minutes prior to the start of the conference call and can use the conference ID to access the call. The Company also suggests utilizing the webcast link to access the call at Q2 2021 Earnings Call Webcast.

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on the Company’s current expectations, estimates and projections about the Company’s financial results, forecasts, and business outlook, and anticipated growth in the Company’s business segments. In this context, forward-looking statements often address expected future business, financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “see,” “will,” “may,” “would,” “might,” “potentially,” “estimate,” “continue,” “expect,” “target,” similar expressions or the negatives of these words or other comparable terminology that convey uncertainty of future events or outcomes. All forward-looking statements by their nature address matters that involve risks and uncertainties, many of which are beyond our control, and are not guarantees of future results, such as statements about the anticipated benefits of the transaction. These and other forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to: challenges in integration of Xperi and TiVo operations after the merger, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenue, cost savings, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business strategies, and expansion and growth of the Company’s businesses; failure to realize the anticipated benefits of the recent merger with TiVo; the Company’s ability to implement its business strategy; pricing trends, including the Company’s ability to achieve economies of scale; the ability of the Company to retain and hire key personnel; potential adverse reactions or changes to business relationships resulting from the merger with TiVo; uncertainty as to the long-term value of the Company’s common stock; legislative, regulatory and economic developments affecting the Company’s business; general economic and market developments and conditions; failure to remediate the material weaknesses in our internal control over financial reporting; the evolving legal, regulatory and tax regimes under which the Company operates; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, and natural disasters; the extent to which the COVID-19 pandemic continues to have an adverse impact on our business, results of operations, and financial condition will depend on future developments, including measures taken in response to the pandemic, which are highly uncertain and cannot be predicted; the impact of semiconductor supply chain constraints on our customers; and any plans regarding a potential separation of the combined business. These risks, as well as other risks associated with the business, are more fully discussed in the Company’s filings with the U.S. Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K. While the list of factors presented here is, and the list of factors presented in the Company’s filings with the SEC are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on the Company’s consolidated financial condition, results of operations, liquidity or trading price of common stock. The Company does not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

About Xperi Holding Corporation

Xperi invents, develops, and delivers technologies that enable extraordinary experiences. Xperi technologies, delivered via its brands (DTS, HD Radio, IMAX Enhanced, Invensas, TiVo), and by its startup, Perceive, make entertainment more entertaining, and smart devices smarter. Xperi technologies are integrated into billions of consumer devices, media platforms, and semiconductors worldwide, driving increased value for partners, customers and consumers.

Xperi, DTS, IMAX Enhanced, Invensas, HD Radio, Perceive, TiVo and their respective logos are trademarks or registered trademarks of affiliated companies of Xperi Holding Corporation in the United States and other countries. All other company, brand and product names may be trademarks or registered trademarks of their respective companies.

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP), the Company’s earnings release contains non-GAAP financial measures adjusted for either one-time or ongoing non-cash acquired intangibles amortization charges; costs related to actual or planned business combinations including transaction fees, integration costs, severance, facility closures, and retention bonuses; separation costs; all forms of stock-based compensation; loss on debt extinguishment; expensed debt refinancing costs; realized and unrealized gains or losses on marketable equity securities and associated tax effects. Management believes that the non-GAAP measures used in this release provide investors with important perspectives into the Company’s ongoing business and financial performance, and provide a better understanding of our core operating results reflecting our normal business operations. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. Our use of non-GAAP financial measures has certain limitations in that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, such as non-GAAP Operating Expenses, do not have a standardized meaning. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We seek to compensate for the limitation of our non-GAAP presentation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable U.S. GAAP measures in the tables attached hereto. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures. All financial data is presented on a GAAP basis except where the Company indicates its presentation is on a non-GAAP basis.

Set forth below are reconciliations of the Company’s reported and forecasted GAAP to non-GAAP financial metrics.

– Tables Follow –

SOURCE: XPERI HOLDING CORP

XPER-E

XPERI HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended Six Months Ended
June 30,

2021
June 30,

2020
June 30,

2021
June 30,

2020
Revenue:
Licensing, services and software

$

218,112

 

$

135,996

 

$

436,517

 

$

253,483

 

Hardware

 

4,160

 

 

1,635

 

 

7,351

 

 

1,813

 

Total revenue

 

222,272

 

 

137,631

 

 

443,868

 

 

255,296

 

Operating expenses:
Cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets

 

22,418

 

 

8,252

 

 

43,832

 

 

9,792

 

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

 

4,466

 

 

1,428

 

 

11,182

 

 

1,472

 

Research, development and other related costs

 

54,408

 

 

38,227

 

 

109,603

 

 

66,833

 

Selling, general and administrative

 

67,668

 

 

68,195

 

 

135,128

 

 

104,802

 

Depreciation expense

 

5,514

 

 

3,333

 

 

11,198

 

 

5,062

 

Amortization expense

 

52,242

 

 

32,044

 

 

104,437

 

 

54,553

 

Litigation expense

 

2,302

 

 

3,871

 

 

4,835

 

 

5,974

 

Total operating expenses

 

209,018

 

 

155,350

 

 

420,215

 

 

248,488

 

Operating income (loss)

 

13,254

 

 

(17,719

)

 

23,653

 

 

6,808

 

Interest expense

 

(10,555

)

 

(6,958

)

 

(21,868

)

 

(11,209

)

Other income and expense, net

 

564

 

 

578

 

 

1,989

 

 

1,143

 

Loss on debt extinguishment

 

(8,012

)

 

(8,300

)

 

(8,012

)

 

(8,300

)

Loss before taxes

 

(4,749

)

 

(32,399

)

 

(4,238

)

 

(11,558

)

Benefit from income taxes

 

(2,876

)

 

(9,299

)

 

(6,891

)

 

(7,243

)

Net income (loss)

$

(1,873

)

$

(23,100

)

$

2,653

 

$

(4,315

)

Less: net loss attributable to noncontrolling interest

 

(755

)

 

(487

)

 

(1,516

)

 

(1,038

)

Net income (loss) attributable to the Company

$

(1,118

)

$

(22,613

)

$

4,169

 

$

(3,277

)

Income (loss) per share attributable to the Company:
Basic

$

(0.01

)

$

(0.33

)

$

0.04

 

$

(0.06

)

Diluted

$

(0.01

)

$

(0.33

)

$

0.04

 

$

(0.06

)

 
Weighted average number of shares used in per share

calculations-basic

 

104,906

 

 

69,160

 

 

104,923

 

 

59,462

 

Weighted average number of shares used in per share

calculations-diluted

 

104,906

 

 

69,160

 

 

107,667

 

 

59,462

 

 
XPERI HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
June 30, December 31,

 

2021

 

 

2020

 

ASSETS
Current assets:
Cash and cash equivalents

$

128,960

 

$

170,188

 

Available-for-sale debt securities

 

70,201

 

 

86,947

 

Accounts receivable, net

 

123,999

 

 

115,975

 

Unbilled contracts receivable, net

 

126,549

 

 

132,431

 

Other current assets

 

70,501

 

 

40,763

 

Total current assets

 

520,210

 

 

546,304

 

Long-term unbilled contracts receivable

 

6,152

 

 

6,761

 

Property and equipment, net

 

65,963

 

 

63,207

 

Operating lease right-of-use assets

 

75,520

 

 

80,226

 

Intangible assets, net

 

908,245

 

 

1,004,379

 

Goodwill

 

851,088

 

 

847,029

 

Other long-term assets

 

149,616

 

 

153,270

 

Total assets

$

2,576,794

 

$

2,701,176

 

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable

$

14,352

 

$

13,045

 

Accrued legal fees

 

2,756

 

 

5,783

 

Accrued liabilities

 

90,846

 

 

129,035

 

Current portion of long-term debt, net

 

36,028

 

 

43,689

 

Deferred revenue

 

35,908

 

 

33,119

 

Total current liabilities

 

179,890

 

 

224,671

 

Deferred revenue, less current portion

 

29,285

 

 

39,775

 

Long-term deferred tax liabilities

 

24,441

 

 

24,754

 

Long-term debt, net

 

747,469

 

 

795,661

 

Noncurrent operating lease liabilities

 

61,279

 

 

66,243

 

Other long-term liabilities

 

100,160

 

 

98,953

 

Total liabilities

 

1,142,524

 

 

1,250,057

 

Commitments and contingencies
Company stockholders’ equity:
Preferred stock

 

 

 

 

Common stock

 

112

 

 

110

 

Additional paid-in capital

 

1,303,768

 

 

1,268,471

 

Treasury stock at cost

 

(120,542

)

 

(77,218

)

Accumulated other comprehensive income

 

299

 

 

1,264

 

Retained earnings

 

257,905

 

 

264,250

 

Total Company stockholders’ equity

 

1,441,542

 

 

1,456,877

 

Noncontrolling interest

 

(7,272

)

 

(5,758

)

Total equity

 

1,434,270

 

 

1,451,119

 

Total liabilities and equity

$

2,576,794

 

$

2,701,176

 

 
XPERI HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Six Months Ended
June 30, 2021 June 30, 2020
Cash flows from operating activities:
Net income (loss)

$

2,653

 

$

(4,315

)

Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation of property and equipment

 

11,198

 

 

5,062

 

Amortization of intangible assets

 

104,437

 

 

54,553

 

Stock-based compensation expense

 

28,054

 

 

16,456

 

Deferred income taxes

 

(1,796

)

 

(28,933

)

Loss on debt extinguishment

 

8,012

 

 

8,300

 

Other

 

8,289

 

 

4,775

 

Changes in operating assets and liabilities:
Accounts receivable

 

(9,260

)

 

3,306

 

Unbilled contracts receivable

 

5,978

 

 

12,645

 

Other assets

 

(24,096

)

 

(9,675

)

Accounts payable

 

1,307

 

 

3,334

 

Accrued and other liabilities

 

(44,096

)

 

(5,199

)

Deferred revenue

 

(7,701

)

 

6,933

 

Net cash from operating activities

 

82,979

 

 

67,242

 

Cash flows from investing activities:
Purchases of property and equipment

 

(4,858

)

 

(1,892

)

Proceeds from sale of property and equipment

 

19

 

 

19

 

Net cash received (paid) for mergers and acquisitions

 

(17,400

)

 

117,424

 

Purchases of intangible assets

 

(92

)

 

(519

)

Purchases of short-term investments

 

(45,755

)

 

 

Proceeds from sales of investments

 

44,321

 

 

7,189

 

Proceeds from maturities of investments

 

17,550

 

 

13,502

 

Net cash from investing activities

 

(6,215

)

 

135,723

 

Cash flows from financing activities:
Dividend paid

 

(10,514

)

 

(20,153

)

Repayment of debt

 

(63,750

)

 

(344,000

)

Proceeds from debt, net of debt discount and issuance costs

 

(6,843

)

 

1,011,343

 

Repayment of assumed debt from merger transaction

 

 

 

(734,609

)

Proceeds from employee stock purchase program and exercise of stock options

 

7,247

 

 

4,765

 

Repurchases of common stock

 

(43,324

)

 

(20,943

)

Net cash from financing activities

 

(117,184

)

 

(103,597

)

Effect of exchange rate changes on cash and cash equivalents

 

(808

)

 

94

 

Net increase (decrease) in cash and cash equivalents

 

(41,228

)

 

99,462

 

Cash and cash equivalents at beginning of period

 

170,188

 

 

74,551

 

Cash and cash equivalents at end of period

$

128,960

 

$

174,013

 

Supplemental disclosure of cash flow information:
Interest paid

$

17,677

 

$

5,807

 

Income taxes paid, net of refunds

$

14,909

 

$

13,723

 

Stock issued in merger transaction

$

 

$

828,334

 

XPERI HOLDING CORPORATION
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share amounts)
(unaudited)
 
Net income attributable to the Company:
Three Months Ended
June 30, 2021
 
GAAP net loss attributable to the Company

$

(1,118

)

 
Adjustments to GAAP net loss attributable to the Company:
Stock-based compensation expense:
Cost of revenue

 

529

 

Research, development and other

 

4,809

 

Selling, general and administrative

 

9,497

 

Amortization expense

 

52,242

 

Merger and integration-related costs:
Transaction and other related costs recorded in selling, general and administrative

 

1,190

 

Severance and retention recorded in cost of licensing, services and software revenue, excluding depreciation and amortization of intangible assets

 

131

 

Severance and retention recorded in research, development and other

 

771

 

Severance and retention recorded in selling, general and administrative

 

914

 

Separation costs recorded in selling, general and administrative

 

1,900

 

Gain from lease restructuring recorded in selling, general and administrative

 

(156

)

Loss on debt extinguishment

 

8,012

 

Expensed debt refinancing costs

 

2,590

 

Cash taxes paid in excess of tax benefit recorded

 

(11,864

)

Non-GAAP net income attributable to the Company

$

69,447

 

 
 
Diluted earnings per share attributable to the Company:
Three Months Ended
June 30, 2021
 
GAAP diluted loss per share attributable to the Company

$

(0.01

)

 
Adjustments to GAAP diluted loss per share attributable to the Company:
Stock-based compensation expense

 

0.13

 

Amortization expense

 

0.46

 

Merger and integration-related costs

 

0.03

 

Separation costs

 

0.02

 

Gain from lease restructuring

 

(0.00

)

Loss on debt extinguishment

 

0.07

 

Expensed debt refinancing costs

 

0.02

 

Cash taxes paid in excess of tax benefit recorded

 

(0.11

)

Non-GAAP diluted earnings per share attributable to the Company

$

0.61

 

 
Weighted average number of shares used in per share
calculations excluding the effects of stock-based compensation - diluted

 

113,722

 

 
XPERI HOLDING CORPORATION
RECONCILIATION FROM OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW
(in thousands)
(unaudited)
 
Three Months Ended
June 30, 2021
 
Cash flow from operations

$

56,250

 

 
Adjustments to cash flow from operations:
Purchases of property & equipment

 

(3,086

)

Merger and integration costs

 

1,190

 

Separation-related costs

 

1,900

 

Severance costs

 

486

 

Adjusted free cash flow

$

56,740

 

XPERI HOLDING CORPORATION
RECONCILIATION FOR GUIDANCE ON
GAAP TO NON-GAAP OPERATING EXPENSE EXCLUDING COGS
(in millions)
(unaudited)
 
Twelve Months Ended
December 31, 2021
Low High
 
GAAP operating expense excluding COGS

$

760.0

 

$

790.0

 

Stock-based compensation -- R&D

 

(21.0

)

 

(21.0

)

Stock-based compensation -- SG&A

 

(33.0

)

 

(33.0

)

Merger, integration and separation-related expense -- R&D

 

(4.0

)

 

(4.0

)

Merger, integration and separation-related expense -- SG&A

 

(23.0

)

 

(23.0

)

Amortization expense

 

(204.0

)

 

(204.0

)

Total of non-GAAP adjustments

 

(285.0

)

 

(285.0

)

Non-GAAP operating expense excluding COGS

$

475.0

 

$

505.0

 

XPERI HOLDING CORPORATION
RECONCILIATION FOR GUIDANCE ON
OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW
(in millions)
(unaudited)
 
Twelve Months Ended
December 31, 2021
Low High
 
Cash flow from operations

$

180.0

 

$

220.0

 

 
Adjustments to cash flow from operations:
Purchases of property & equipment

 

(25.0

)

 

(25.0

)

Merger, integration and separation costs (1)

 

30.0

 

 

30.0

 

Adjusted free cash flow

$

185.0

 

$

225.0

 

 
(1) Includes severance costs and retention payments.

 

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