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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39304

 

XPERI HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

84-4734590

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

3025 Orchard Parkway, San Jose, California

 

95134

(Address of Principal Executive Offices)

 

(Zip Code)

(408) 321-6000

(Registrant’s Telephone Number, Including Area Code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock (par value $0.001 per share)

XPER

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The number of shares outstanding of the registrant’s common stock as of April 25, 2022 was 103,950,742.

 

 


 

 

XPERI HOLDING CORPORATION

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

TABLE OF CONTENTS

 

 

 

 

Page

 

PART I

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2022 and 2021

 

3

 

Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2022 and 2021

 

4

 

Condensed Consolidated Balance Sheets – March 31, 2022 and December 31, 2021

 

5

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and 2021

 

6

 

Condensed Consolidated Statements of Equity – Three Months Ended March 31, 2022 and 2021

 

7

 

Notes to Condensed Consolidated Financial Statements

 

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

39

Item 4.

Controls and Procedures

 

40

 

 

 

 

 

PART II

 

 

Item 1.

Legal Proceedings

 

41

Item 1A.

Risk Factors

 

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

43

Item 3.

Defaults Upon Senior Securities

 

43

Item 4.

Mine Safety Disclosures

 

43

Item 5.

Other Information

 

43

Item 6.

Exhibits

 

44

 

 

 

 

Signatures

 

 

45

 

2


 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

XPERI HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2022

 

 

March 31,

2021

 

Revenue:

 

$

257,420

 

 

$

221,596

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenue, excluding depreciation and amortization of intangible assets

 

 

27,697

 

 

 

28,132

 

Research, development and other related costs

 

 

59,370

 

 

 

55,223

 

Selling, general and administrative

 

 

70,446

 

 

 

67,430

 

Depreciation expense

 

 

5,866

 

 

 

5,684

 

Amortization expense

 

 

39,319

 

 

 

52,195

 

Litigation expense

 

 

1,753

 

 

 

2,533

 

Total operating expenses

 

 

204,451

 

 

 

211,197

 

Operating income

 

 

52,969

 

 

 

10,399

 

Interest expense

 

 

(8,429

)

 

 

(11,313

)

Other income (expense), net

 

 

968

 

 

 

1,425

 

Income before taxes

 

 

45,508

 

 

 

511

 

Provision for (benefit from) income taxes

 

 

21,533

 

 

 

(4,015

)

Net income

 

 

23,975

 

 

 

4,526

 

Less: net loss attributable to noncontrolling interest

 

 

(968

)

 

 

(761

)

Net income attributable to the Company

 

$

24,943

 

 

$

5,287

 

Income per share attributable to the Company:

 

 

 

 

 

 

 

 

Basic

 

$

0.24

 

 

$

0.05

 

Diluted

 

$

0.24

 

 

$

0.05

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares used in per share

   calculations-basic

 

 

103,679

 

 

 

104,940

 

Weighted average number of shares used in per share

   calculations-diluted

 

 

105,332

 

 

 

107,776

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3


 

 

XPERI HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2022

 

 

March 31,

2021

 

Net income

 

$

23,975

 

 

$

4,526

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(892

)

 

 

(1,045

)

Net unrealized loss on available-for-sale

   debt securities

 

 

(122

)

 

 

(34

)

Other comprehensive loss, net of tax

 

 

(1,014

)

 

 

(1,079

)

Comprehensive income

 

 

22,961

 

 

 

3,447

 

Less: comprehensive loss attributable to noncontrolling interest

 

 

(968

)

 

 

(761

)

Comprehensive income attributable to the Company

 

$

23,929

 

 

$

4,208

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4


 

 

XPERI HOLDING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for par value)

(unaudited)

 

 

 

March 31,

2022

 

 

December 31,

2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

214,095

 

 

$

201,121

 

Available-for-sale debt securities

 

 

52,720

 

 

 

60,534

 

Accounts receivable, net of allowance for credit losses of $2,895 and $3,012, respectively

 

 

100,203

 

 

 

143,683

 

Unbilled contracts receivable, net

 

 

121,778

 

 

 

77,677

 

Other current assets

 

 

42,737

 

 

 

36,459

 

Total current assets

 

 

531,533

 

 

$

519,474

 

Long-term unbilled contracts receivable

 

 

43,112

 

 

 

4,107

 

Property and equipment, net

 

 

59,251

 

 

 

60,974

 

Operating lease right-of-use assets

 

 

65,513

 

 

 

68,498

 

Intangible assets, net

 

 

778,680

 

 

 

817,916

 

Goodwill

 

 

850,100

 

 

 

851,088

 

Other long-term assets

 

 

150,641

 

 

 

147,965

 

Total assets

 

$

2,478,830

 

 

$

2,470,022

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,835

 

 

$

7,811

 

Accrued liabilities

 

 

99,540

 

 

 

110,705

 

Current portion of long-term debt, net

 

 

36,152

 

 

 

36,095

 

Deferred revenue

 

 

48,913

 

 

 

35,136

 

Total current liabilities

 

 

196,440

 

 

$

189,747

 

Deferred revenue, less current portion

 

 

34,128

 

 

 

37,107

 

Long-term deferred tax liabilities

 

 

19,085

 

 

 

19,848

 

Long-term debt, net

 

 

720,333

 

 

 

729,392

 

Noncurrent operating lease liabilities

 

 

51,930

 

 

 

54,658

 

Other long-term liabilities

 

 

102,267

 

 

 

98,842

 

Total liabilities

 

 

1,124,183

 

 

$

1,129,594

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Company stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock: $0.001 par value; (2022: authorized 15,000 shares; 2021: authorized 15,000 shares; and no shares issued and outstanding)

 

 

 

 

 

Common stock: $0.001 par value; (2022: authorized 350,000 shares, issued 115,647 shares, outstanding 103,921 shares; 2021: authorized 350,000 shares, issued 113,460, outstanding 103,260 shares)

 

 

116

 

 

 

113

 

Additional paid-in capital

 

 

1,365,277

 

 

 

1,340,480

 

Treasury stock at cost (2022: 11,726 shares; 2021: 10,200 shares)

 

 

(206,350

)

 

 

(178,022

)

Accumulated other comprehensive loss

 

 

(1,766

)

 

 

(752

)

Retained earnings

 

 

207,539

 

 

 

187,814

 

Total Company stockholders’ equity

 

 

1,364,816

 

 

 

1,349,633

 

Noncontrolling interest

 

 

(10,169

)

 

 

(9,205

)

Total equity

 

 

1,354,647

 

 

 

1,340,428

 

Total liabilities and equity

 

$

2,478,830

 

 

$

2,470,022

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5


 

 

XPERI HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31, 2022

 

 

March 31, 2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

23,975

 

 

$

4,526

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

5,866

 

 

 

5,684

 

Amortization of intangible assets

 

 

39,319

 

 

 

52,195

 

Stock-based compensation expense

 

 

16,804

 

 

 

13,219

 

Deferred income taxes

 

 

(911

)

 

 

666

 

Other

 

 

1,984

 

 

 

3,217

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

43,698

 

 

 

(7,632

)

Unbilled contracts receivable

 

 

(82,995

)

 

 

2,295

 

Other assets

 

 

(8,806

)

 

 

(10,697

)

Accounts payable

 

 

4,024

 

 

 

11,429

 

Accrued and other liabilities

 

 

(7,483

)

 

 

(45,687

)

Deferred revenue

 

 

10,798

 

 

 

(2,486

)

Net cash from operating activities

 

 

46,273

 

 

 

26,729

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(4,289

)

 

 

(1,772

)

Proceeds from sale of property and equipment

 

 

 

 

 

5

 

Purchases of intangible assets

 

 

(180

)

 

 

(36

)

Purchases of short-term investments

 

 

(4,490

)

 

 

(42,505

)

Proceeds from sales of investments

 

 

2,000

 

 

 

16,921

 

Proceeds from maturities of investments

 

 

10,023

 

 

 

10,000

 

Net cash from investing activities

 

 

3,064

 

 

 

(17,387

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividends paid

 

 

(5,218

)

 

 

(5,264

)

Repayment of debt

 

 

(10,125

)

 

 

(13,125

)

Proceeds from employee stock purchase program and exercise of stock options

 

 

8,000

 

 

 

6,715

 

Repurchases of common stock

 

 

(28,328

)

 

 

(32,359

)

Net cash from financing activities

 

 

(35,671

)

 

 

(44,033

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(692

)

 

 

(738

)

Net increase (decrease) in cash and cash equivalents

 

 

12,974

 

 

 

(35,429

)

Cash and cash equivalents at beginning of period

 

 

201,121

 

 

 

170,188

 

Cash and cash equivalents at end of period

 

$

214,095

 

 

$

134,759

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

7,188

 

 

$

9,015

 

Income taxes paid, net of refunds

 

$

3,334

 

 

$

5,921

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6


 

 

XPERI HOLDING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

(unaudited)

 

 

 

Total Company Stockholders' Equity

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2022

 

Common Stock

 

 

Additional

Paid-In

 

 

Treasury Stock

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

Noncontrolling

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Loss

 

 

Earnings

 

 

Interest

 

 

Total Equity

 

Balance at January 1, 2022

 

 

103,260

 

 

$

113

 

 

$

1,340,480

 

 

 

10,200

 

 

$

(178,022

)

 

$

(752

)

 

$

187,814

 

 

$

(9,205

)

 

$

1,340,428

 

Issuance of subsidiary shares to noncontrolling interest

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,943

 

 

 

(968

)

 

 

23,975

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,014

)

 

 

 

 

 

 

 

 

(1,014

)

Cash dividends paid on common stock ($0.05 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,218

)

 

 

 

 

 

(5,218

)

Issuance of common stock in connection with exercise of stock options

 

 

1

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Issuance of common stock in connection with employee stock purchase plan

 

 

739

 

 

 

1

 

 

 

7,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,994

 

Issuance of restricted stock, net of shares canceled

 

 

1,609

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Repurchases of common stock, shares exchanged

 

 

(659

)

 

 

 

 

 

 

 

 

659

 

 

 

(11,068

)

 

 

 

 

 

 

 

 

 

 

 

(11,068

)

Shares exchanged and returned to assumed plans

 

 

 

 

 

 

 

 

 

 

 

(162

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchases of common stock

 

 

(1,029

)

 

 

 

 

 

 

 

 

1,029

 

 

 

(17,260

)

 

 

 

 

 

 

 

 

 

 

 

(17,260

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

16,804

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,804

 

Balance at March 31, 2022

 

 

103,921

 

 

$

116

 

 

$

1,365,277

 

 

 

11,726

 

 

$

(206,350

)

 

$

(1,766

)

 

$

207,539

 

 

$

(10,169

)

 

$

1,354,647

 

 

 

 

 

Total Company Stockholders' Equity

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

Common Stock

 

 

Additional

Paid-In

 

 

Treasury Stock

 

 

Accumulated

Other

Comprehensive

 

 

Retained

 

 

Noncontrolling

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Income (Loss)

 

 

Earnings

 

 

Interest

 

 

Total Equity

 

Balance at January 1, 2021

 

 

104,775

 

 

$

110

 

 

$

1,268,471

 

 

 

5,407

 

 

$

(77,218

)

 

$

1,264

 

 

$

264,250

 

 

$

(5,758

)

 

$

1,451,119

 

Issuance of subsidiary shares to noncontrolling interest

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,287

 

 

 

(761

)

 

 

4,526

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,079

)

 

 

 

 

 

 

 

 

(1,079

)

Cash dividends paid on common stock ($0.05 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,264

)

 

 

 

 

 

(5,264

)

Issuance of common stock in connection with exercise of stock options