Business Wire | Feb 23, 2021 04:05PM EST

Xperi Holding Corporation Announces Fourth Quarter 2020 Results

Feb. 23, 2021

SAN JOSE, Calif.--(BUSINESS WIRE)--Feb. 23, 2021--Xperi Holding Corporation (Nasdaq: XPER) (the "Company", "Xperi" or "we") today announced financial results for the fourth quarter ended December 31, 2020.

"Last year was transformative for Xperi. We closed our merger with TiVo, made significant progress on integration, and were able to achieve $45 million in run rate synergies by year end. Additionally, we closed one of the largest IP licensing deals in the history of both companies, took important steps to increase profitability on the product side of the business, and announced significant new product offerings," said Jon Kirchner, chief executive officer of Xperi. "As we enter 2021, we continue to build our IP licensing business and product business, positioning them for improved long-term growth, stability, and profitability."

Fourth Quarter 2020 Financial Highlights:

* Revenue of $433.9 million. * Cash Flow from Operations of $298.2 million. * Adjusted Free Cash Flow1 of $296.8 million. * Paid down $163.1 million of corporate debt. * Bought back $20 million of common stock at an average price of $19.82.

Business and Recent Operating Highlights:

IP Licensing Business

* Announced a new license agreement with Comcast that extends into 2031. * Entered a license agreement with Canon for DBI hybrid bonding. * Renewed and extended licenses with Cox, TCL, and Sony in Q1 2021.

Product Business

Consumer Experience business highlights:

* Improved monetization in our consumer hardware business driven by higher user engagement on our content-first platform and an increased user base. * Expanded TiVo+ content from 26 to 145 linear channels and added tens of thousands of AVOD viewing hours. * Sony announced its BRAVIA CORE service, which will launch soon with the largest IMAX Enhanced movie collection to date. * Perceive won multiple innovation awards, including being named a CES 2021 Innovation Awards Honoree.

Connected Car business highlights:

* Delivered HD Radio on eight new car models in North America. * Branded Connected Radio as DTS AutoStage, adding additional features such as lyrics to the platform. * Branded in-cabin monitoring solutions as DTS AutoSense, which are available across four OEM providers including three light truck and bus suppliers in Asia and one major European passenger vehicle manufacturer coming to market later this year.

Pay-TV business highlights:

* Worked with partners to increase household deployments of TiVo IPTV in the United States and Latin America to help mitigate revenue declines in the business. * Added two new operator IPTV design wins.

Capital Allocation

On December 31, 2020, the Company paid down $150 million of debt, in addition to paying $13.1 million of scheduled debt amortization during the quarter.

During the quarter, the Company repurchased approximately 1 million shares of its common stock at an average price of $19.82 for a total of $20 million pursuant to a previously announced stock repurchase program.

On December 21, 2020, the Company paid $5.3 million to stockholders of record on November 30, 2020, for a quarterly cash dividend of $0.05 per share of common stock.

On February 3, 2021, the board of directors declared a dividend of $0.05 per share, payable on March 30, 2021, to stockholders of record on March 16, 2021.

Financial Outlook

The Company's full year 2021 outlook is as follows:

Category GAAP Outlook 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 ~ $43M ~ $43M

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 Flow^1* $185M to $225M $185M to $225M

*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 integration, separation, and severance and retention costs.

Conference Call InformationThe Company will hold its fourth quarter 2020 earnings conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Tuesday, February 23, 2021. To access the call in the U.S., please dial 800-437-2398, and for international callers, dial +1 323-289-6576. The conference ID is 5453588. 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 Q4 Earnings Call Webcast.

Safe Harbor StatementThis 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 our expectations for 2021, the development of our IP licensing and product businesses, and improved long-term growth, stability, and profitability. 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; 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 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 CorporationXperi 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 MeasuresIn 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.

XPER - E

XPERI HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)(unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2020 2019 2020 2019Revenue:Licensing, services $ $ 90,420 $ $ 279,513 and software 427,801 876,603

Hardware 6,126 98 15,417 554

90,518 Total Revenue 433,927 892,020 280,067

Operating expenses:Cost of licensing,services andsoftware revenue, excluding 25,634 2,158 57,280 8,129depreciation andamortization ofintangible assetsCost of hardwarerevenue, excluding depreciation and 7,389 61 21,077 331amortization ofintangible assetsResearch, 32,846 development and 70,589 195,154 110,850other related costsSelling, general and 33,550 administrative 76,770 245,356 117,671

Depreciation expense 6,103 1,665 17,918 6,721

24,027 Amortization expense 51,379 156,826 99,946

Litigation expense 6,281 1,079 20,782 5,127

Total operating 95,386 expenses 244,145 714,393 348,775

Operating income (4,868 ) )(loss) 189,782 177,627 (68,708

) (4,987 ) ) )Interest expense (13,271 (37,873 (23,377

Other income, net 1,007 1,491 4,455 9,028

Loss on debt - - (8,300 ) - extinguishmentIncome (loss) before (8,364 ) )taxes 177,518 135,909 (83,057

Provision for ) ) )(benefit from) (1,126 8,056 (7,887 (19,024income taxes (16,420 ) )Net income (loss) 178,644 143,796 (64,033

Less: Net lossattributable to (1,147 ) (408 ) (2,966 ) (1,503 )noncontrollinginterestNet income (loss) $ $ (16,012 ) $ $ (62,530 )attributable to the 179,791 146,762CompanyIncome (loss) pershare attributableto the Company: $ $ (0.32 ) $ $ (1.27 )Basic 1.70 1.77

$ $ (0.32 ) $ $ (1.27 )Diluted 1.68 1.75

Weighted average number of shares 105,498 49,566 82,840 49,120 used in per sharecalculations-basicWeighted average number of shares 106,907 49,566 83,856 49,120 used in per sharecalculations-dilutedXPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited)December 31,2020

2019

ASSETSCurrent assets:Cash and cash equivalents$

170,188

$

74,551

Available-for-sale debt securities86,947

45,802

Equity securities-

1,124

Accounts receivable115,975

24,177

Unbilled contracts receivable132,431

121,826

Other current assets40,763

13,735

Total current assets546,304

281,215

Long-term unbilled contracts receivable6,761

26,672

Property and equipment, net63,207

32,877

Operating lease right-of-use assets80,226

17,786

Intangible assets, net1,004,379

232,275

Goodwill847,029

385,784

Other long-term assets153,270

71,336

Total assets$

2,701,176

$

1,047,945

LIABILITIES AND EQUITYCurrent liabilities:Accounts payable$

13,045

$

4,650

Accrued legal fees5,783

1,316

Accrued liabilities129,035

41,433

Current portion of long-term debt43,689

-

Deferred revenue33,119

720

Total current liabilities224,671

48,119

Deferred revenue, less current portion39,775

-

Long-term deferred tax liabilities24,754

29,735

Long-term debt, net795,661

334,679

Noncurrent operating lease liabilities66,243

13,414

Other long-term liabilities98,953

76,898

Total liabilities1,250,057

502,845

Commitments and contingenciesCompany stockholders' equity:Preferred stock-

-

Common stock110

64

Additional paid-in capital1,268,471

768,284

Treasury stock at cost(77,218

)

(368,701

)

Accumulated other comprehensive income (loss)1,264

(53

)

Retained earnings264,250

148,317

Total Company stockholders' equity1,456,877

547,911

Noncontrolling interest(5,758

)

(2,811

)

Total equity1,451,119

545,100

Total liabilities and equity$

2,701,176

$

1,047,945

XPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited) December 31, 2020 2019

ASSETSCurrent assets:Cash and cash $ 170,188 $ 74,551 equivalentsAvailable-for-sale 45,802 debt securities 86,947

Equity securities - 1,124

Accounts 24,177 receivable 115,975

Unbilled contracts 121,826 receivable 132,431

Other current 13,735 assets 40,763

Total current 281,215 assets 546,304

Long-term unbilled 26,672 contracts 6,761receivableProperty and 32,877 equipment, net 63,207

Operating lease 17,786 right-of-use 80,226assetsIntangible assets, 1,004,379 232,275 net 385,784 Goodwill 847,029

Other long-term 71,336 assets 153,270

Total assets $ 2,701,176 $ 1,047,945

LIABILITIES ANDEQUITYCurrentliabilities:Accounts payable $ 13,045 $ 4,650

1,316 Accrued legal fees 5,783

Accrued 41,433 liabilities 129,035

Current portion of long-term debt 43,689 -

720 Deferred revenue 33,119

Total current 48,119 liabilities 224,671

Deferred revenue, - less current 39,775portionLong-term deferred 29,735 tax liabilities 24,754

Long-term debt, 334,679 net 795,661

Noncurrent 13,414 operating lease 66,243liabilitiesOther long-term 76,898 liabilities 98,953

Total liabilities 1,250,057 502,845

Commitments andcontingenciesCompanystockholders'equity:Preferred stock - -

Common stock 110 64

Additional paid-in 1,268,471 768,284 capitalTreasury stock at ) (368,701 )cost (77,218

Accumulated other (53 )comprehensive 1,264income (loss) 148,317 Retained earnings 264,250

Total Company 1,456,877 547,911 stockholders'equityNoncontrolling ) (2,811 )interest (5,758

Total equity 1,451,119 545,100

Total liabilities $ 2,701,176 $ 1,047,945 and equityXPERI HOLDING CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)Twelve Months EndedDecember 31,2020December 31,2019Cash flows from operating activities:Net income (loss)$

143,796

$

(64,033

)

Adjustments to reconcile net income (loss) to net cash from operating activities:Depreciation of property and equipment17,918

6,721

Amortization of intangible assets156,826

99,946

Stock-based compensation expense39,135

31,554

Deferred income tax(34,670

)

(38,611

)

Loss on debt extinguishment8,300

-

Other19,500

2,654

Changes in operating assets and liabilities, net of business acquisitions:Accounts receivable7,091

6,191

Unbilled contracts receivable, net76,262

130,359

Other assets(41,948

)

3,675

Accounts payable(4,863

)

1,886

Accrued and other liabilities21,692

(8,679

)

Deferred revenue18,564

(2,410

)

Net cash from operating activities427,603

169,253

Cash flows from investing activities:Purchases of property and equipment(7,379

)

(8,813

)

Proceeds from sale of property and equipment-

55

Net cash received (paid) for mergers and acquisitions117,424

-

Purchases of short-term investments(77,178

)

(40,008

)

Proceeds from sales of short-term investments11,225

6,833

Proceeds from maturities of short-term investments24,683

27,290

Purchases of intangible assets(50,935

)

(4,500

)

Net cash from investing activities17,840

(19,143

)

Cash flows from financing activities:Repayment of debt(520,250

)

(150,000

)

Repayment of assumed debt from merger transaction(734,609

)

-

Proceeds from debt, net1,010,286

-

Contingent consideration payments after acquisition-

(1,200

)

Dividend paid(30,829

)

(39,502

)

Proceeds from exercise of stock options91

695

Proceeds from employee stock purchase program4,764

5,329

Repurchases of common stock(80,589

)

(4,506

)

Net cash from financing activities(351,136

)

(189,184

)

Effect of exchange rate changes on cash and cash equivalents1,330

-

Net increase (decrease) in cash and cash equivalents95,637

(39,074

)

Cash and cash equivalents at beginning of period74,551

113,625

Cash and cash equivalents at end of period$

170,188

$

74,551

Supplemental disclosure of cash flow information:Interest paid$

31,240

$

20,891

Income taxes paid, net of refunds$

43,066

$

15,001

Stock issued in merger transaction$

828,334

$

-

XPERI HOLDING CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited) Twelve Months Ended December 31, December 31, 2020 2019Cash flowsfrom operatingactivities:Net income $ 143,796 $ (64,033 )(loss)Adjustments toreconcile netincome (loss)to net cashfrom operatingactivities:Depreciation 17,918 6,721 of propertyand equipmentAmortization 156,826 99,946 of intangibleassetsStock-based 39,135 31,554 compensationexpenseDeferred (34,670 ) (38,611 )income taxLoss on debt 8,300 - extinguishmentOther 19,500 2,654

Changes inoperatingassets andliabilities,net ofbusinessacquisitions:Accounts 6,191 receivable 7,091

Unbilledcontracts 76,262 130,359 receivable,netOther assets (41,948 ) 3,675

Accounts (4,863 ) 1,886 payableAccrued and 21,692 (8,679 )otherliabilitiesDeferred 18,564 (2,410 )revenueNet cash from 427,603 169,253 operatingactivitiesCash flowsfrom investingactivities:Purchases of (7,379 ) (8,813 )property andequipmentProceeds fromsale of - 55 property andequipmentNet cashreceived 117,424 - (paid) formergers andacquisitionsPurchases of (77,178 ) (40,008 )short-terminvestmentsProceeds fromsales of 11,225 6,833 short-terminvestmentsProceeds frommaturities of 24,683 27,290 short-terminvestmentsPurchases of (50,935 ) (4,500 )intangibleassetsNet cash from 17,840 (19,143 )investingactivitiesCash flowsfrom financingactivities:Repayment of (520,250 ) (150,000 )debtRepayment ofassumed debt (734,609 ) - from mergertransactionProceeds from 1,010,286 debt, net -

Contingentconsideration - (1,200 )payments afteracquisitionDividend paid (30,829 ) (39,502 )

Proceeds from 695 exercise of 91stock optionsProceeds from employee stock 4,764 5,329 purchaseprogramRepurchases of (80,589 ) (4,506 )common stockNet cash from (351,136 ) (189,184 )financingactivitiesEffect ofexchange rate - changes on 1,330cash and cashequivalentsNet increase(decrease) in 95,637 (39,074 )cash and cashequivalentsCash and cashequivalents at 74,551 113,625 beginning ofperiodCash and cash $ 170,188 $ 74,551 equivalents atend of periodSupplementaldisclosure ofcash flowinformation:Interest paid $ 31,240 $ 20,891

Income taxes $ 43,066 $ 15,001 paid, net ofrefundsStock issued $ 828,334 $ - in mergertransactionXPERI HOLDING CORPORATIONRECONCILIATION FROM OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW(in thousands)(unaudited)Three Months EndedDecember 31, 2020Cash flow from operations (1)$

298,170

Adjustments to cash flow from operations:Purchases of property & equipment (2)(4,404

)

Merger and integration costs319

Separation-related costs2,260

Severance costs468

Adjusted free cash flow$

296,813

XPERI HOLDING CORPORATIONRECONCILIATION FROM OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW (in thousands)(unaudited) Three Months Ended December 31, 2020 Cash flow from operations (1) $ 298,170

Adjustments to cash flow from operations:Purchases of property & equipment (2) (4,404 )

Merger and integration costs 319

Separation-related costs 2,260

Severance costs 468

Adjusted free cash flow $ 296,813

(1)

derived from the difference between Q4 year-to-date operating cash flow of $427,603 and Q3 year-to-date operating cash flow of $129,433.(2)

derived from the difference between Q4 year-to-date purchases of property & equipment of $7,379 and Q3 year-to-date purchases of property & equipment of $2,975.(1) derived from the difference between Q4 year-to-date operating cash flow of $427,603 and Q3 year-to-date operating cash flow of $129,433.(2) derived from the difference between Q4 year-to-date purchases of property & equipment of $7,379 and Q3 year-to-date purchases of property & equipment of $2,975.XPERI HOLDING CORPORATIONRECONCILIATION FOR GUIDANCE ONGAAP TO NON-GAAP OPERATING EXPENSE EXCLUDING COGS(in millions)(unaudited)Twelve Months EndedDecember 31, 2021LowHighGAAP operating expense excluding COGS$

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 CORPORATIONRECONCILIATION FOR GUIDANCE ONGAAP TO NON-GAAP OPERATING EXPENSE EXCLUDING COGS(in millions)(unaudited) Twelve Months Ended December 31, 2021 Low High GAAP operating $ $ expense excluding 760.0 790.0COGSStock-based ) )compensation -- R& (21.0 (21.0DStock-based ) )compensation -- SG (33.0 (33.0&AMerger, integration and (4.0 ) (4.0 )separation-relatedexpense -- R&DMerger, integration and (23.0 ) (23.0 )separation-relatedexpense -- SG&AAmortization ) )expense (204.0 (204.0

Total of non-GAAP ) )adjustments (285.0 (285.0

Non-GAAP operating $ $ expense excluding 475.0 505.0COGSXPERI HOLDING CORPORATIONRECONCILIATION FOR GUIDANCE ONOPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW(in millions)(unaudited)Twelve Months EndedDecember 31, 2021LowHighCash flow from operations$

180.0

$

220.0

Adjustments to cash flow from operations:Purchases of property & equipment(25.0

)

(25.0

)

Integration and separation related costs (1)30.0

30.0

Adjusted free cash flow$

185.0

$

225.0

(1) Includes severance and retention costs View source version on businesswire.com: https://www.businesswire.com/news/home/20210223006090/en/

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