Business Wire | Nov 9, 2020 04:06PM EST

Xperi Holding Corporation Announces Third Quarter 2020 Results

Nov. 09, 2020

SAN JOSE, Calif.--(BUSINESS WIRE)--Nov. 09, 2020--Xperi Holding Corporation (Nasdaq: XPER) (the "Company", "Xperi" or "we") today announced financial results for the third quarter ended September 30, 2020.

"We made significant progress on various strategic initiatives during the quarter and delivered financial results in line with our original second half expectations," said Jon Kirchner, chief executive officer of Xperi. "We are pleased to have successfully concluded a license with Comcast that further establishes the long term and recurring nature of our licensing programs within the media business. As a result of the license, we are raising our guidance for the second half of our fiscal year and are even more confident about our IP revenue outlook over the long term."

Third Quarter 2020 Financial Highlights:

* Revenue of $202.8 million. * Cash Flow from Operations of $62.2 million. * Adjusted Free Cash Flow1 of $66.4 million. * Bought back $35 million of common stock at an average price of $12.39. * Finished the quarter with $203 million in cash and investments.

The Comcast license agreement resolution occurred after the end of the third quarter and as a result will begin to be reflected in the Company's fourth quarter results.

Third Quarter 2020 Business and Recent Operating Highlights:

IP Licensing Business

* Earlier today, the Company announced a new license agreement with Comcast. * The Comcast license agreement extends into 2031 and reinforces the strength of the Company's IP patent portfolio and relevance to media consumption. * All outstanding litigation with Comcast has been settled.

Product Business

Consumer Experience business highlights:

* Expanded retail footprint for TiVo Stream 4K through Walmart, Walmart.com and Amazon. * Launched partner promotion and distribution with broadband operators for TiVo Stream 4K. * TiVo+ content expanded to include Pluto TV, Tubi, XUMO, and Locast and now delivers 144 core channels and up to 200 channels in major markets based on local availability. * IMAX Enhanced program expanded with the addition of Hisense TVs in China. * The Company's startup, Perceive, continued to see expanded interest from potential customers in the PC, mobile, and enterprise segments.

Connected Car business highlights:

* Delivered HD Radio on 14 new 2020 car models in North America. * Launched Connected Radio in the new Mercedes-Benz S-Class infotainment platform. * Added new features to the Company's occupancy monitoring solutions, which include advanced computer vision features that will further enhance child presence detection, occupant detection and passenger authentication.

Pay-TV business highlights:

* Liberty Latin America, Midco, MetroNet and RCN launched TiVo's next-generation IPTV platforms.

Capital Allocation

During the quarter, the Company bought back 2.8 million shares of its common stock at an average price of $12.39, for a total of $35 million.

On September 21, 2020, the Company paid $5.4 million to stockholders of record on August 31, 2020, for a quarterly cash dividend of $0.05 per share of common stock.

On October 28, 2020, the board of directors declared a dividend of $0.05 per share, payable on December 21, 2020, to stockholders of record on November 30, 2020.

Business Outlook

The Company's second half 2020 outlook is revised as follows:

Category New GAAP Outlook Prior GAAP Outlook

Revenue $625M to $645M $390M to $410M

COGS $73M to $76M $72M to $75M

Operating Expense excluding COGS $421M to $431M $380M to $395M

Interest Expense $26M to $27M $26M to $27M

Other Income ~ $3M ~ $2M

Cash Tax (net of refunds) $33M to $35M $20M to $22M

Basic Shares Outstanding 106M 109M

Diluted Shares Outstanding 106M 110M

Operating Cash Flow $330M to $350M $105M to $125M

Category

New Non-GAAP Outlook*

Prior Non-GAAP Outlook

Revenue

$625M to $645M

$390M to $410M

COGS

$73M to $76M

$72M to $75M

Operating Expense excluding COGS

$275M to $285M

$230M to $245M

Interest Expense

$26M to $27M

$26M to $27M

Other Income

~ $3M

~ $2M

Cash Tax (net of refunds)

$33M to $35M

$20M to $22M

Basic Shares Outstanding

106M

109M

Diluted Shares Outstanding

112M

113M

Adjusted Free Cash Flow1

$335M to $355M

$109M to $114M

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

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

Conference Call Information

The Company will hold its third quarter 2020 earnings conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Monday, November 9, 2020. To access the call in the U.S., please dial 800-309-1256, and for international callers, dial +1 323-347-3622. The conference ID is 737032. All participants should dial in at least 15 minutes prior to the start of the conference call. Due to the COVID-19 pandemic and a lower number of operators, wait times for the dial-in may be long and the Company suggests utilizing the webcast link to access the call at Q3 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, the expected benefits of the Comcast license agreement, and the long term IP revenue outlook. 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; 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, natural disasters, the outbreak of coronavirus (COVID-19) or similar outbreaks or pandemics, and their effects on economic and business environments in which the Company operates, as well as the Company's response to any of the aforementioned factors; 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; and any plans regarding a potential separation of the combined business. These risks, as well as other risks associated with the transaction, are more fully discussed in the Company's filings with the U.S. Securities and Exchange Commission ("SEC"), including the Company's Quarterly Report on Form 10-Q. 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; 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 -

Category New Non-GAAP Outlook* Prior Non-GAAP Outlook

Revenue $625M to $645M $390M to $410M

COGS $73M to $76M $72M to $75M

Operating Expense excluding COGS $275M to $285M $230M to $245M

Interest Expense $26M to $27M $26M to $27M

Other Income ~ $3M ~ $2M

Cash Tax (net of refunds) $33M to $35M $20M to $22M

Basic Shares Outstanding 106M 109M

Diluted Shares Outstanding 112M 113M

Adjusted Free Cash Flow^1 $335M to $355M $109M to $114M

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

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

Conference Call Information

The Company will hold its third quarter 2020 earnings conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Monday, November 9, 2020. To access the call in the U.S., please dial 800-309-1256, and for international callers, dial +1 323-347-3622. The conference ID is 737032. All participants should dial in at least 15 minutes prior to the start of the conference call. Due to the COVID-19 pandemic and a lower number of operators, wait times for the dial-in may be long and the Company suggests utilizing the webcast link to access the call at Q3 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, the expected benefits of the Comcast license agreement, and the long term IP revenue outlook. 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; 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, natural disasters, the outbreak of coronavirus (COVID-19) or similar outbreaks or pandemics, and their effects on economic and business environments in which the Company operates, as well as the Company's response to any of the aforementioned factors; 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; and any plans regarding a potential separation of the combined business. These risks, as well as other risks associated with the transaction, are more fully discussed in the Company's filings with the U.S. Securities and Exchange Commission ("SEC"), including the Company's Quarterly Report on Form 10-Q. 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; 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 -

XPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)(unaudited) Three Months Ended Nine Months Ended September September September September 30, 30, 30, 30, 2020 2019 2020 2019Revenue:Licensing, services and $ 195,319 $ 57,750 $ 448,802 $ 189,093 softwareHardware 7,478 117 9,291 456

Total revenue 202,797 57,867 458,093 189,549

Operating expenses:Cost of licensing, servicesand software revenue, 21,854 1,462 31,646 5,970 excluding depreciation andamortization of intangibleassetsCost of hardware revenue,excluding depreciation and 12,216 44 13,688 271 amortization of intangibleassetsResearch, development and 57,731 25,998 124,565 78,004 other related costsSelling, general and 63,785 27,588 168,586 84,120 administrativeDepreciation expense 6,753 1,629 11,815 5,056

Amortization expense 50,894 25,146 105,447 75,919

Litigation expense 8,527 1,527 14,501 4,049

Total operating expenses 221,760 83,394 470,248 253,389

Operating loss (18,963 ) (25,527 ) (12,155 ) (63,840 )

Interest expense (13,393 ) (5,506 ) (24,602 ) (18,390 )

Other income and expense, 2,305 429 3,448 7,537 netLoss on debt extinguishment - - (8,300 ) -

Loss before taxes (30,051 ) (30,604 ) (41,609 ) (74,693 )

Provision for (benefit 482 (14,583 ) (6,761 ) (27,080 )from) income taxesNet loss $ (30,533 ) $ (16,021 ) $ (34,848 ) $ (47,613 )

Less: net loss attributable (781 ) (407 ) (1,819 ) (1,095 )to noncontrolling interestNet loss attributable to $ (29,752 ) $ (15,614 ) $ (33,029 ) $ (46,518 )the CompanyLoss per share attributableto the Company:Basic $ (0.28 ) $ (0.32 ) $ (0.44 ) $ (0.95 )

Diluted $ (0.28 ) $ (0.32 ) $ (0.44 ) $ (0.95 )

Weighted average number of 107,499 49,459 75,441 49,036 shares used in per sharecalculations-basicWeighted average number of 107,499 49,459 75,441 49,036 shares used in per sharecalculations-dilutedXPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except for par value)(unaudited)September 30,2020December 31,2019ASSETSCurrent assets:Cash and cash equivalents$

115,725

$

74,551

Available-for-sale debt securities87,258

45,802

Equity securities-

1,124

Accounts receivable, net111,915

24,177

Unbilled contracts receivable164,138

121,826

Other current assets36,084

13,735

Total current assets515,120

281,215

Long-term unbilled contracts receivable15,083

26,672

Property and equipment, net65,432

32,877

Operating lease right-of-use assets84,230

17,786

Intangible assets, net1,005,522

232,275

Goodwill846,913

385,784

Other long-term assets136,395

71,336

Total assets$

2,668,695

$

1,047,945

LIABILITIES AND EQUITYCurrent liabilities:Accounts payable$

18,829

$

4,650

Accrued legal fees9,607

1,316

Accrued liabilities98,762

41,433

Deferred revenue37,045

720

Current portion of long-term debt, net43,704

-

Total current liabilities207,947

48,119

Deferred revenue, less current portion23,400

-

Long-term deferred tax liabilities29,751

29,735

Long-term debt, net956,530

334,679

Noncurrent operating lease liabilities69,463

13,414

Other long-term liabilities95,637

76,898

Total liabilities1,382,728

502,845

Commitments and contingenciesCompany stockholders' equity:Preferred stock-

-

Common stock: $0.001 par value; (2020: authorized 350,000 shares, issued 110,020 shares, outstanding 105,692 shares; 2019: authorized 150,000 shares, issued 63,622, outstanding 49,620 shares)

110

64

Additional paid-in capital1,255,856

768,284

Treasury stock at cost (2020: 4,328 shares; 2019: 14,002 shares)(55,920

)

(368,701

)

Accumulated other comprehensive income (loss)819

(53

)

Retained earnings89,709

148,317

Total Company stockholders' equity1,290,574

547,911

Noncontrolling interest(4,607

)

(2,811

)

Total equity1,285,967

545,100

Total liabilities and equity$

2,668,695

$

1,047,945

XPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except for par value)(unaudited) September 30, December 31, 2020 2019ASSETSCurrent assets:Cash and cash equivalents $ 115,725 $ 74,551

Available-for-sale debt securities 87,258 45,802

Equity securities - 1,124

Accounts receivable, net 111,915 24,177

Unbilled contracts receivable 164,138 121,826

Other current assets 36,084 13,735

Total current assets 515,120 281,215

Long-term unbilled contracts receivable 15,083 26,672

Property and equipment, net 65,432 32,877

Operating lease right-of-use assets 84,230 17,786

Intangible assets, net 1,005,522 232,275

Goodwill 846,913 385,784

Other long-term assets 136,395 71,336

Total assets $ 2,668,695 $ 1,047,945

LIABILITIES AND EQUITYCurrent liabilities:Accounts payable $ 18,829 $ 4,650

Accrued legal fees 9,607 1,316

Accrued liabilities 98,762 41,433

Deferred revenue 37,045 720

Current portion of long-term debt, net 43,704 -

Total current liabilities 207,947 48,119

Deferred revenue, less current portion 23,400 -

Long-term deferred tax liabilities 29,751 29,735

Long-term debt, net 956,530 334,679

Noncurrent operating lease liabilities 69,463 13,414

Other long-term liabilities 95,637 76,898

Total liabilities 1,382,728 502,845

Commitments and contingenciesCompany stockholders' equity:Preferred stock - -

Common stock: $0.001 par value; (2020: authorized350,000 shares, issued 110,020 shares,outstanding 105,692 shares; 2019: authorized 110 64 150,000 shares, issued 63,622, outstanding 49,620shares)

Additional paid-in capital 1,255,856 768,284

Treasury stock at cost (2020: 4,328 shares; 2019: (55,920 ) (368,701 )14,002 shares)Accumulated other comprehensive income (loss) 819 (53 )

Retained earnings 89,709 148,317

Total Company stockholders' equity 1,290,574 547,911

Noncontrolling interest (4,607 ) (2,811 )

Total equity 1,285,967 545,100

Total liabilities and equity $ 2,668,695 $ 1,047,945

XPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)Nine Months EndedSeptember 30, 2020September 30, 2019Cash flows from operating activities:Net loss$

(34,848

)

$

(47,613

)

Adjustments to reconcile net loss to net cash from operating activities:Depreciation of property and equipment11,815

5,056

Amortization of intangible assets105,447

75,919

Stock-based compensation expense26,614

22,832

Deferred income taxes(28,158

)

(43,101

)

Loss on debt extinguishment8,300

-

Other8,635

1,484

Changes in operating assets and liabilities:Accounts receivable14,982

9,202

Unbilled contracts receivable37,874

96,905

Other assets(21,793

)

2,726

Accounts payable921

626

Accrued and other liabilities(6,471

)

(17,402

)

Deferred revenue6,115

(2,420

)

Net cash from operating activities129,433

104,214

Cash flows from investing activities:Purchases of property and equipment(2,975

)

(7,956

)

Proceeds from sale of property and equipment-

55

Cash acquired in merger transaction117,424

-

Purchases of intangible assets(692

)

-

Purchases of short-term investments(68,093

)

(34,475

)

Proceeds from sales of investments7,189

6,833

Proceeds from maturities of investments19,683

22,490

Net cash from investing activities72,536

(13,053

)

Cash flows from financing activities:Dividend paid(25,579

)

(29,588

)

Proceeds from debt, net1,010,286

-

Repayment of debt(357,125

)

(100,000

)

Repayment of assumed debt from merger transaction(734,609

)

-

Contingent consideration payments after acquisition-

(1,200

)

Proceeds from exercise of stock options2

672

Proceeds from employee stock purchase program4,763

5,329

Repurchase of common stock(59,291

)

(4,282

)

Net cash from financing activities(161,553

)

(129,069

)

Effect of exchange rate changes on cash and cash equivalents758

-

Net increase (decrease) in cash and cash equivalents41,174

(37,908

)

Cash and cash equivalents at beginning of period74,551

113,625

Cash and cash equivalents at end of period$

115,725

$

75,717

Supplemental disclosure of cash flow information:Interest paid$

20,372

$

16,517

Income taxes paid, net of refunds$

30,647

$

12,374

Stock issued in merger transaction$

828,334

$

-

XPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited) Nine Months Ended September 30, September 30, 2020 2019Cash flows from operating activities:Net loss $ (34,848 ) $ (47,613 )

Adjustments to reconcile net loss to net cashfrom operating activities:Depreciation of property and equipment 11,815 5,056

Amortization of intangible assets 105,447 75,919

Stock-based compensation expense 26,614 22,832

Deferred income taxes (28,158 ) (43,101 )

Loss on debt extinguishment 8,300 -

Other 8,635 1,484

Changes in operating assets and liabilities:Accounts receivable 14,982 9,202

Unbilled contracts receivable 37,874 96,905

Other assets (21,793 ) 2,726

Accounts payable 921 626

Accrued and other liabilities (6,471 ) (17,402 )

Deferred revenue 6,115 (2,420 )

Net cash from operating activities 129,433 104,214

Cash flows from investing activities:Purchases of property and equipment (2,975 ) (7,956 )

Proceeds from sale of property and equipment - 55

Cash acquired in merger transaction 117,424 -

Purchases of intangible assets (692 ) -

Purchases of short-term investments (68,093 ) (34,475 )

Proceeds from sales of investments 7,189 6,833

Proceeds from maturities of investments 19,683 22,490

Net cash from investing activities 72,536 (13,053 )

Cash flows from financing activities:Dividend paid (25,579 ) (29,588 )

Proceeds from debt, net 1,010,286 -

Repayment of debt (357,125 ) (100,000 )

Repayment of assumed debt from merger transaction (734,609 ) -

Contingent consideration payments after - (1,200 )acquisitionProceeds from exercise of stock options 2 672

Proceeds from employee stock purchase program 4,763 5,329

Repurchase of common stock (59,291 ) (4,282 )

Net cash from financing activities (161,553 ) (129,069 )

Effect of exchange rate changes on cash and cash 758 - equivalentsNet increase (decrease) in cash and cash 41,174 (37,908 )equivalentsCash and cash equivalents at beginning of period 74,551 113,625

Cash and cash equivalents at end of period $ 115,725 $ 75,717

Supplemental disclosure of cash flow information:Interest paid $ 20,372 $ 16,517

Income taxes paid, net of refunds $ 30,647 $ 12,374

Stock issued in merger transaction $ 828,334 $ -

XPERI HOLDING CORPORATIONRECONCILIATION FROM OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW(in thousands)(unaudited)Three Months EndedSeptember 30, 2020Cash flow from operations (1)$

62,191

Adjustments to cash flow from operations:Purchases of property & equipment (2)(1,083

)

Severance and retention bonus1,917

Merger and integration costs1,187

Separation-related costs2,147

Adjusted free cash flow$

66,359

XPERI HOLDING CORPORATIONRECONCILIATION FROM OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW(in thousands)(unaudited) Three Months Ended September 30, 2020 Cash flow from operations (1) $ 62,191

Adjustments to cash flow from operations:Purchases of property & equipment (2) (1,083 )

Severance and retention bonus 1,917

Merger and integration costs 1,187

Separation-related costs 2,147

Adjusted free cash flow $ 66,359

(1)

derived from the difference between Q3 year-to-date operating cash flow of $129,433 and Q2 year-to-date operating cash flow of $67,242.(2)

derived from the difference between Q3 year-to-date purchases of property & equipment of $2,975 and Q2 year-to-date purchases of property & equipment of $1,892.(1) derived from the difference between Q3 year-to-date operating cash flow of $129,433 and Q2 year-to-date operating cash flow of $67,242.(2) derived from the difference between Q3 year-to-date purchases of property & equipment of $2,975 and Q2 year-to-date purchases of property & equipment of $1,892.XPERI HOLDING CORPORATIONRECONCILIATION FROM GAAP NET LOSS TO NON-GAAP NET INCOME(in thousands, except per share amounts)(unaudited)Three Months EndedSeptember 30, 2020GAAP net loss$

(30,533

)

Adjustments to GAAP net loss:Stock-based compensation expense:Cost of revenue258

Research, development and other3,580

Selling, general and administrative6,319

Amortization expense50,894

Merger and integration-related costs:Transaction and other related costs recorded in selling, general and administrative1,187

Severance and retention recorded to research, development and other1,117

Severance and retention recorded to selling, general and administrative2,474

Separation costs recorded in selling, general and administrative2,147

Lease impairment recorded in selling, general and administrative656

Cash taxes paid in excess of tax provision recorded(16,442

)

Non-GAAP net income$

21,657

Non-GAAP net income per share - diluted$

0.19

Weighted average number of shares used in per sharecalculations excluding the effects of stock-based compensation - diluted112,724

XPERI HOLDING CORPORATIONRECONCILIATION FROM GAAP NET LOSS TO NON-GAAP NET INCOME(in thousands, except per share amounts)(unaudited) Three Months Ended September 30, 2020 GAAP net loss $ (30,533 )

Adjustments to GAAP net loss:Stock-based compensation expense:Cost of revenue 258

Research, development and other 3,580

Selling, general and administrative 6,319

Amortization expense 50,894

Merger and integration-related costs:Transaction and other related costs recorded in selling, 1,187 general and administrativeSeverance and retention recorded to research, development and 1,117 otherSeverance and retention recorded to selling, general and 2,474 administrativeSeparation costs recorded in selling, general and 2,147 administrativeLease impairment recorded in selling, general and 656 administrativeCash taxes paid in excess of tax provision recorded (16,442 )

Non-GAAP net income $ 21,657

Non-GAAP net income per share - diluted $ 0.19

Weighted average number of shares used in per sharecalculations excluding the effects of stock-based compensation - 112,724 dilutedXPERI HOLDING CORPORATIONRECONCILIATION FOR GUIDANCE ONGAAP TO NON-GAAP OPERATING EXPENSE EXCLUDING COGS(in millions)(unaudited)Six Months EndedDecember 31, 2020LowHighGAAP operating expense excluding COGS$

421.0

$

431.0

Stock-based compensation -- R&D(12.0

)

(12.0

)

Stock-based compensation -- SG&A(14.0

)

(14.0

)

Merger, integration and separation-related expense -- R&D(2.0

)

(2.0

)

Merger, integration and separation-related expense -- SG&A(15.0

)

(15.0

)

Amortization expense(103.0

)

(103.0

)

Total of non-GAAP adjustments(146.0

)

(146.0

)

Non-GAAP operating expense excluding COGS$

275.0

$

285.0

XPERI HOLDING CORPORATIONRECONCILIATION FOR GUIDANCE ONGAAP TO NON-GAAP OPERATING EXPENSE EXCLUDING COGS(in millions)(unaudited) Six Months Ended December 31, 2020 Low High GAAP operating expense excluding COGS $ 421.0 $ 431.0

Stock-based compensation -- R&D (12.0 ) (12.0 )

Stock-based compensation -- SG&A (14.0 ) (14.0 )

Merger, integration and separation-related expense -- R (2.0 ) (2.0 )&DMerger, integration and separation-related expense -- (15.0 ) (15.0 )SG&AAmortization expense (103.0 ) (103.0 )

Total of non-GAAP adjustments (146.0 ) (146.0 )

Non-GAAP operating expense excluding COGS $ 275.0 $ 285.0

XPERI HOLDING CORPORATIONRECONCILIATION FOR GUIDANCE ONOPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW(in millions)(unaudited)Six Months EndedDecember 31, 2020LowHighCash flow from operations$

330.0

$

350.0

Adjustments to cash flow from operations:Purchases of property & equipment(12.0

)

(12.0

)

Merger, integration and separation costs17.0

17.0

Adjusted free cash flow$

335.0

$

355.0

XPER-E

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CONTACT: Xperi Investor Contact: Geri Weinfeld, Vice President of Investor Relations +1 818-436-1231 geri.weinfeld@xperi.com

CONTACT: Xperi Media Contacts: Lerin O'Neill, Director of Communications +1 408-562-8455 lerin.oneill@xperi.com