Company achieved significant milestones on
growth strategy
Tax free separation into two
companies expected in the fall
Xperi Holding Corporation (NASDAQ: XPER) (the “Company”, “Xperi”
or “we”) today announced financial results for the second quarter
ended June 30, 2022.
“We are excited with the progress we made against our strategic
initiatives across the business,” said Jon Kirchner, chief
executive officer of Xperi. “During the quarter, we signed key
license agreements in our IP business and appointed Paul Davis as
president of Adeia. In our Product business, we saw accelerating
engagement and design wins in automotive, signed our first TV
customer for TiVo OS, and further advanced our TV OS market
position with the acquisition of Vewd. With its leading European
media platform, Vewd gives Xperi access to an installed footprint
of approximately 15 million devices that can be enabled for
monetization and advances our growth strategy in the TV space as we
prepare for separation and operation as a stand-alone product
company.”
“Our IP business had a strong second quarter, highlighted by the
signing of a long-term renewal with a leading consumer electronics
and OTT service provider for both our media and semiconductor IP
portfolios. The transaction demonstrates the strength of our
combined IP business and the increasing relevance of our portfolio
beyond traditional Pay-TV” said Paul Davis, president of Adeia. “We
are also thrilled to have Keith Jones join as Adeia’s chief
financial officer. Keith’s industry knowledge, expertise, and
leadership are a great fit for Adeia. The expansion of the
management team and the strong business momentum in the first half
position Adeia well for the upcoming separation this fall.”
Second Quarter 2022 Financial Highlights:
- Revenue of $234.0 million for the quarter, increased 5%
compared to $222.3 million for the second quarter of 2021
- IP licensing revenue of $107.8 million
- Product revenue of $126.2 million
- GAAP earnings per share of ($0.05) and non-GAAP earnings per
share of $0.52
- Cash Flow from Operations was $40.8 million
Second Quarter 2022 Business and Recent Operating
Highlights:
IP Licensing Business
- Signed a significant long-term renewal with a leading consumer
electronics and OTT service provider
- Signed a technology license agreement with SkyWater Technology
for access to Adeia’s ZiBond® direct bonding and DBI® hybrid
bonding technology to enhance next generation devices for
commercial and government applications
- Appointed Paul Davis as president and Keith Jones as chief
financial officer of Adeia
Product Business
- Signed first TV OEM customer for TiVo OS, our embedded
operating system and media platform for SmartTVs, with expected
2023 product launch; confirms growth thesis for TiVo OS
- Acquired Vewd Software Holdings Limited, strengthening our
market position and core offering as a leading independent
streaming media platform
- Won a global program with a major European car manufacturer
across all vehicle platforms for our single camera OMS in-car
safety feature, expected to launch in 2025
- Resolved a longstanding contract dispute through a multi-year
agreement with a significant mobile imaging customer, reaffirming
the value of our imaging technology and favorably impacting revenue
in the quarter
- Renewed a multi-year license with TCL, expanding deployment of
DTS:X and IMAX Enhanced
- Grew IMAX Enhanced presence on Disney+ with the release of Dr.
Strange and the Multiverse in June; additional titles coming this
fall including Lightyear, the first IMAX Enhanced animated
film
Capital Allocation
On June 21, 2022, the Company distributed $5.2 million to
stockholders of record on May 31, 2022, for a quarterly cash
dividend of $0.05 per share of common stock.
On July 29, 2022, the Board of Directors declared a dividend of
$0.05 per share, payable on September 19, 2022, to stockholders of
record on August 29, 2022.
Financial Outlook
Primarily to reflect the recent acquisition of Vewd, the Company
is updating its full year 2022 outlook. Specifically, the Company
is increasing the low end of the revenue range, increasing
operating expenses, and lowering the high end of the operating cash
flow range. The Company is also adjusting its interest expense and
cash tax outlook. Updated guidance numbers are shown in the table
below.
Category
(in millions)
Prior GAAP
Outlook
Updated GAAP
Outlook
Prior Non-GAAP
Outlook
Updated
Non-GAAP Outlook
Revenue
$920 – 960
$930 – 960
$920 – 960
$930 – 960
Cost of revenue, excluding depreciation
and amortization of intangible assets
$120 – 130
$120 – 130
$120 – 130
$120 – 130
Adjusted Operating Expenses1
$725 – 755
$755 – 775
$490 – 520
$510 – 530
Total Operating Expenses2
$845 – 885
$875 – 905
$610 – 650
$630 – 660
Interest Expense
~ $36
~ $44
~ $36
~ $44
Other Income
~ $3
~ $3
~ $3
~ $3
Cash Tax
$33 – 35
$30 – 33
$33 – 35
$30 – 33
Basic Shares Outstanding
105
105
105
105
Diluted Shares Outstanding2
107
107
113
113
Operating Cash Flow
$210 – 240
$210 – 230
$210 – 240
$210 – 230
1
Defined as total operating expenses less
cost of revenue, excluding depreciation and amortization of
intangible assets. See tables for reconciliation of GAAP to
Non-GAAP differences.
2
See tables for reconciliation of GAAP to
Non-GAAP differences.
Change in Non-GAAP EPS Calculation
Beginning this quarter, to conform more closely with standard
practices for non-GAAP measures, the Company will no longer use
cash tax to calculate non-GAAP EPS. Instead, the Company will
adjust GAAP income tax to reflect the net direct and indirect
income tax effects of the various non-GAAP pretax adjustments.
Non-GAAP tax for the remainder of fiscal year 2022 is estimated to
be approximately 13% of non-GAAP profit before tax.
Conference Call Information
The Company will hold its second quarter 2022 earnings
conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on
Monday, August 8, 2022. To access the call in the U.S., please dial
888-394-8218, and for international callers, dial +1 646-828-8193.
The conference ID is 9128537. 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 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, business outlook, the anticipated business separation
timing, and the expected launch dates of TiVo OS and single camera
OMS in-car safety feature. 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. 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: 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; 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;
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; 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, including Russia’s
invasion of Ukraine, 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 supply chain constraints on our customers;
and the planned separation of the Company’s IP and Product
businesses. 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 (Adeia, DTS, HD Radio, IMAX Enhanced, 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, Adeia, DTS, IMAX Enhanced, 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 and
related 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.
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, 2022
June 30, 2021
June 30, 2022
June 30, 2021
Revenue
$
234,018
$
222,272
$
491,438
$
443,868
Operating expenses:
Cost of revenue, excluding depreciation
and amortization of intangible assets
27,074
26,884
54,771
55,014
Research, development and other related
costs
62,145
54,408
121,515
109,603
Selling, general and administrative
72,116
67,668
142,562
135,128
Depreciation expense
5,505
5,514
11,371
11,198
Amortization expense
39,166
52,242
78,485
104,437
Litigation expense
3,161
2,302
4,914
4,835
Total operating expenses
209,167
209,018
413,618
420,215
Operating income
24,851
13,254
77,820
23,653
Interest expense
(9,440
)
(10,555
)
(17,868
)
(21,868
)
Other income, net
254
564
1,221
1,989
Loss on debt extinguishment
—
(8,012
)
—
(8,012
)
Income (loss) before taxes
15,665
(4,749
)
61,173
(4,238
)
Provision for (benefit from) income
taxes
22,138
(2,876
)
43,670
(6,891
)
Net income (loss)
$
(6,473
)
$
(1,873
)
$
17,503
$
2,653
Less: net loss attributable to
noncontrolling interest
(848
)
(755
)
(1,816
)
(1,516
)
Net income (loss) attributable to the
Company
$
(5,625
)
$
(1,118
)
$
19,319
$
4,169
Income (loss) per share attributable to
the Company:
Basic
$
(0.05
)
$
(0.01
)
$
0.19
$
0.04
Diluted
$
(0.05
)
$
(0.01
)
$
0.18
$
0.04
Weighted average number of shares used in
per share calculations-basic
104,001
104,906
103,841
104,923
Weighted average number of shares used in
per share calculations-diluted
104,001
104,906
105,362
107,667
XPERI HOLDING
CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
(unaudited)
June 30,
December 31,
2022
2021
ASSETS
Current assets:
Cash and cash equivalents
$
275,319
$
201,121
Available-for-sale debt securities
10,495
60,534
Accounts receivable, net
128,979
143,683
Unbilled contracts receivable, net
121,704
77,677
Other current assets
41,258
36,459
Total current assets
577,755
519,474
Long-term unbilled contracts
receivable
43,021
4,107
Property and equipment, net
58,096
60,974
Operating lease right-of-use assets
62,149
68,498
Intangible assets, net
739,354
817,916
Goodwill
850,100
851,088
Other long-term assets
150,826
147,965
Total assets
$
2,481,301
$
2,470,022
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
14,679
$
7,811
Accrued liabilities
116,007
110,705
Current portion of long-term debt, net
36,210
36,095
Deferred revenue
44,003
35,136
Total current liabilities
210,899
189,747
Deferred revenue, less current portion
32,153
37,107
Long-term deferred tax liabilities
18,227
19,848
Long-term debt, net
711,259
729,392
Noncurrent operating lease liabilities
48,452
54,658
Other long-term liabilities
104,086
98,842
Total liabilities
1,125,076
1,129,594
Commitments and contingencies
Company stockholders’ equity:
Preferred stock
—
—
Common stock
116
113
Additional paid-in capital
1,380,814
1,340,480
Treasury stock at cost
(206,757
)
(178,022
)
Accumulated other comprehensive loss
(3,648
)
(752
)
Retained earnings
196,715
187,814
Total Company stockholders’ equity
1,367,240
1,349,633
Noncontrolling interest
(11,015
)
(9,205
)
Total equity
1,356,225
1,340,428
Total liabilities and equity
$
2,481,301
$
2,470,022
XPERI HOLDING
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30, 2022
June 30, 2021
Cash flows from operating
activities:
Net income
$
17,503
$
2,653
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation of property and equipment
11,371
11,198
Amortization of intangible assets
78,485
104,437
Stock-based compensation expense
32,284
28,054
Deferred income taxes
(1,641
)
(1,796
)
Loss on debt extinguishment
—
8,012
Other
3,148
8,289
Changes in operating assets and
liabilities:
Accounts receivable
14,820
(9,260
)
Unbilled contracts receivable
(82,767
)
5,978
Other assets
(1,291
)
(24,096
)
Accounts payable
6,868
1,307
Accrued and other liabilities
4,340
(44,096
)
Deferred revenue
3,913
(7,701
)
Net cash from operating activities
87,033
82,979
Cash flows from investing
activities:
Purchases of property and equipment
(8,870
)
(4,858
)
Proceeds from sale of property and
equipment
86
19
Net cash paid for acquisitions
—
(17,400
)
Purchases of intangible assets
(233
)
(92
)
Purchases of short-term investments
(4,490
)
(45,755
)
Proceeds from sales of investments
28,254
44,321
Proceeds from maturities of
investments
26,053
17,550
Net cash from investing activities
40,800
(6,215
)
Cash flows from financing
activities:
Dividends paid
(10,418
)
(10,514
)
Repayment of debt
(20,250
)
(63,750
)
Proceeds from debt, net of debt discount
and issuance costs
—
(6,843
)
Proceeds from employee stock purchase
program and exercise of stock options
8,059
7,247
Repurchases of common stock
(28,735
)
(43,324
)
Net cash from financing activities
(51,344
)
(117,184
)
Effect of exchange rate changes on cash
and cash equivalents
(2,291
)
(808
)
Net increase (decrease) in cash and cash
equivalents
74,198
(41,228
)
Cash and cash equivalents at beginning of
period
201,121
170,188
Cash and cash equivalents at end of
period
$
275,319
$
128,960
Supplemental disclosure of cash flow
information:
Interest paid
$
15,590
$
17,677
Income taxes paid, net of refunds
$
13,400
$
14,909
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, 2022
GAAP net loss attributable to the
Company
$
(5,625
)
Adjustments to GAAP net loss attributable
to the Company:
Stock-based compensation expense:
Cost of revenue
773
Research, development and other
6,074
Selling, general and administrative
8,634
Amortization expense
39,166
Merger and integration-related costs:
Transaction and other related costs
recorded in selling, general and administrative
1,873
Severance and retention recorded in cost
of revenue, excluding depreciation and amortization of intangible
assets
(38
)
Severance and retention recorded in
research, development and other
(178
)
Severance and retention recorded in
selling, general and administrative
(63
)
Separation costs recorded in selling,
general and administrative
3,032
Non-GAAP tax adjustment (1)
5,800
Non-GAAP net income attributable to the
Company
$
59,448
Diluted earnings per share attributable
to the Company:
Three Months Ended
June 30, 2022
GAAP diluted loss per share attributable
to the Company
$
(0.05
)
Adjustments to GAAP diluted loss per share
attributable to the Company:
Stock-based compensation expense
0.15
Amortization expense
0.38
Merger and integration-related costs
0.01
Separation costs
0.03
Difference in shares used in the
calculation
(0.05
)
Non-GAAP tax adjustment
0.05
Non-GAAP diluted earnings per share
attributable to the Company
0.52
GAAP weighted average number of
shares-diluted
104,001
Non-GAAP adjustment (2)
9,759
Non-GAAP weighted average number of
shares-diluted
113,760
(1)
The provision for income taxes is adjusted
to reflect the net direct and indirect income tax effects of the
various non-GAAP pretax adjustments.
(2)
The number of shares used in the diluted
per share calculations on a non-GAAP basis excludes the impact of
stock-based compensation expense expected to be incurred in future
periods and not yet recognized in the financial statements, which
would otherwise be assumed to be used to repurchase shares under
the GAAP treasury stock method.
XPERI HOLDING
CORPORATION
RECONCILIATION FOR GUIDANCE
ON
GAAP TO NON-GAAP ADJUSTED
OPERATING EXPENSES
(in millions)
(unaudited)
Twelve Months Ended
December 31, 2022
Low
High
GAAP adjusted operating expenses
$
755.0
$
775.0
Stock-based compensation -- R&D
(27.0
)
(27.0
)
Stock-based compensation -- SG&A
(40.0
)
(40.0
)
Merger, integration and separation-related
expense -- SG&A
(22.0
)
(22.0
)
Amortization expense
(156.0
)
(156.0
)
Total of non-GAAP adjustments
(245.0
)
(245.0
)
Non-GAAP adjusted operating expenses
$
510.0
$
530.0
XPERI HOLDING
CORPORATION
RECONCILIATION FOR GUIDANCE
ON
GAAP TO NON-GAAP TOTAL
OPERATING EXPENSES
(in millions)
(unaudited)
Twelve Months Ended
December 31, 2022
Low
High
GAAP total operating expenses
$
875.0
$
905.0
Stock-based compensation -- R&D
(27.0
)
(27.0
)
Stock-based compensation -- SG&A
(40.0
)
(40.0
)
Merger, integration and separation-related
expense -- SG&A
(22.0
)
(22.0
)
Amortization expense
(156.0
)
(156.0
)
Total of non-GAAP adjustments
(245.0
)
(245.0
)
Non-GAAP total operating expenses
$
630.0
$
660.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220808005708/en/
Xperi Investor Contact: Jill Koval, Arbor Advisory Group
+1 203-832-4449 ir@xperi.com
Media Contact: Amy Brennan, Senior Director, Corporate
Communications +1 949-518-6846 amy.brennan@xperi.com
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