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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 September 30, 2022

OR

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

Commission File Number: 001-41486

 

XPERI INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

83-4470363

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

2190 Gold Street, San Jose, California

 

95002

(Address of Principal Executive Offices)

 

(Zip Code)

(408) 519-9100

(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

New York Stock Exchange

 

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 October 31, 2022 was 42,023,632.

 

 


 

XPERI INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS

 

 

 

 

Page

 

PART I

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

Condensed Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2022 and 2021

 

3

 

Condensed Consolidated Statements of Comprehensive Loss – Three and Nine Months Ended September 30, 2022 and 2021

 

4

 

Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021

 

5

 

Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021

 

6

 

Condensed Consolidated Statements of Equity – Three and Nine Months Ended September 30, 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

 

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

39

Item 4.

Controls and Procedures

 

39

 

 

 

 

 

PART II

 

 

Item 1.

Legal Proceedings

 

40

Item 1A.

Risk Factors

 

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

Item 3.

Defaults Upon Senior Securities

 

40

Item 4.

Mine Safety Disclosures

 

41

Item 5.

Other Information

 

41

Item 6.

Exhibits

 

42

 

 

 

 

Signatures

 

 

43

 

2


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

XPERI INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,
2022

 

 

September 30,
2021

 

 

September 30,
2022

 

 

September 30,
2021

 

Revenue:

 

$

121,637

 

 

$

117,732

 

 

$

366,728

 

 

$

361,738

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue, excluding depreciation and amortization of intangible assets

 

 

31,403

 

 

 

32,301

 

 

 

85,689

 

 

 

87,983

 

Research and development

 

 

57,070

 

 

 

49,975

 

 

 

158,641

 

 

 

144,371

 

Selling, general and administrative

 

 

56,702

 

 

 

46,109

 

 

 

156,894

 

 

 

148,087

 

Depreciation expense

 

 

4,990

 

 

 

6,486

 

 

 

15,697

 

 

 

17,058

 

Amortization expense

 

 

16,613

 

 

 

27,829

 

 

 

46,166

 

 

 

83,266

 

Goodwill impairment

 

 

354,000

 

 

 

 

 

 

354,000

 

 

 

 

Total operating expenses

 

 

520,778

 

 

 

162,700

 

 

 

817,087

 

 

 

480,765

 

Operating loss

 

 

(399,141

)

 

 

(44,968

)

 

 

(450,359

)

 

 

(119,027

)

Other income (expense), net

 

 

(527

)

 

 

144

 

 

 

(301

)

 

 

512

 

Loss before taxes

 

 

(399,668

)

 

 

(44,824

)

 

 

(450,660

)

 

 

(118,515

)

Provision for income taxes

 

 

2,024

 

 

 

2,834

 

 

 

12,500

 

 

 

8,161

 

Net loss

 

 

(401,692

)

 

 

(47,658

)

 

$

(463,160

)

 

$

(126,676

)

Less: net loss attributable to noncontrolling interest

 

 

(890

)

 

 

(1,310

)

 

 

(2,706

)

 

 

(2,826

)

Net loss attributable to the Company

 

$

(400,802

)

 

$

(46,348

)

 

$

(460,454

)

 

$

(123,850

)

Loss per share attributable to the Company

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted loss per share

 

$

(9.54

)

 

$

(1.10

)

 

$

(10.96

)

 

$

(2.95

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Basic and Diluted shares outstanding

 

 

42,024

 

 

 

42,024

 

 

 

42,024

 

 

 

42,024

 

 

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

3


 

XPERI INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,
2022

 

 

September 30,
2021

 

 

September 30,
2022

 

 

September 30,
2021

 

Net loss

 

$

(401,692

)

 

$

(47,658

)

 

$

(463,160

)

 

$

(126,676

)

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

(914

)

 

 

(596

)

 

 

(4,363

)

 

 

(1,585

)

Comprehensive loss

 

 

(402,606

)

 

 

(48,254

)

 

 

(467,523

)

 

 

(128,261

)

Less: comprehensive loss attributable to noncontrolling interest

 

 

(890

)

 

 

(1,310

)

 

 

(2,706

)

 

 

(2,826

)

Comprehensive loss attributable to the Company

 

$

(401,716

)

 

$

(46,944

)

 

$

(464,817

)

 

$

(125,435

)

 

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

4


 

XPERI INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for par value)

(unaudited)

 

 

 

September 30,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

180,118

 

 

$

120,695

 

Accounts receivable, net

 

 

63,968

 

 

 

79,494

 

Unbilled contracts receivable, net

 

 

52,081

 

 

 

50,962

 

Other current assets

 

 

40,133

 

 

 

25,985

 

Total current assets

 

 

336,300

 

 

$

277,136

 

Long-term unbilled contracts receivable

 

 

4,418

 

 

 

3,825

 

Property and equipment, net

 

 

51,783

 

 

 

57,477

 

Operating lease right-of-use assets

 

 

56,062

 

 

 

61,758

 

Intangible assets, net

 

 

280,063

 

 

 

270,934

 

Goodwill

 

 

250,555

 

 

 

536,512

 

Other long-term assets

 

 

31,711

 

 

 

21,070

 

Total assets

 

$

1,010,892

 

 

$

1,228,712

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

18,735

 

 

$

7,362

 

Accrued liabilities

 

 

97,385

 

 

 

84,404

 

Deferred revenue

 

 

26,106

 

 

 

28,211

 

Total current liabilities

 

 

142,226

 

 

$

119,977

 

Deferred revenue, less current portion

 

 

19,079

 

 

 

23,663

 

Long-term deferred tax liabilities

 

 

21,374

 

 

 

14,428

 

Long-term debt, net

 

 

50,000

 

 

 

Noncurrent operating lease liabilities

 

 

41,743

 

 

 

49,017

 

Other long-term liabilities

 

 

5,307

 

 

 

5,670

 

Total liabilities

 

 

279,729

 

 

$

212,755

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Company stockholders’ equity:

 

 

 

 

 

 

Net Parent company investment

 

 

 

 

 

1,025,838

 

Preferred stock: $0.001 par value; 6,000 shares authorized; no shares issued and outstanding

 

 

 

 

 

Common stock: $0.001 par value; 140,000 shares authorized; 42,024 and no shares issued; 42,024 and no shares outstanding, respectively

 

 

42

 

 

 

Additional paid-in capital

 

 

1,121,297

 

 

 

Accumulated other comprehensive loss

 

 

(5,039

)

 

 

(676

)

Accumulated deficit

 

 

(371,805

)

 

 

Total Company stockholders’ equity

 

 

744,495

 

 

 

1,025,162

 

Noncontrolling interest

 

 

(13,332

)

 

 

(9,205

)

Total equity

 

 

731,163

 

 

 

1,015,957

 

Total liabilities and equity

 

$

1,010,892

 

 

$

1,228,712

 

 

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

5


 

XPERI INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30, 2022

 

 

September 30, 2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(463,160

)

 

$

(126,676

)

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

 

 

 

 

 

 

Depreciation of property and equipment

 

 

15,697

 

 

 

17,058

 

Amortization of intangible assets

 

 

46,166

 

 

 

83,266

 

Stock-based compensation expense

 

 

29,761

 

 

 

24,363

 

Goodwill impairment

 

 

354,000

 

 

 

 

Deferred income taxes

 

 

(451

)

 

 

3,459

 

Other

 

 

(146

)

 

 

2,601

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

18,990

 

 

 

13,401

 

Unbilled contracts receivable

 

 

623

 

 

 

2,274

 

Other assets

 

 

(14,884

)

 

 

6,255

 

Accounts payable

 

 

10,504

 

 

 

(1,419

)

Accrued and other liabilities

 

 

(824

)

 

 

(37,408

)

Deferred revenue

 

 

(7,609

)

 

 

(1,235

)

Net cash from operating activities

 

 

(11,333

)

 

 

(14,061

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(10,514

)

 

 

(14,788

)

Purchases of intangible assets

 

 

(110

)

 

 

(3,352

)

Net cash paid for acquisitions

 

 

(50,473

)

 

 

(12,400

)

Net cash from investing activities

 

 

(61,097

)

 

 

(30,540

)

Cash flows from financing activities:

 

 

 

 

 

 

Net proceeds from Parent capital contributions

 

 

83,235

 

 

 

 

Net transfers from Parent

 

 

52,802

 

 

 

63,188

 

Net cash from financing activities

 

 

136,037

 

 

 

63,188

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(4,184

)

 

 

2,803

 

Net increase in cash and cash equivalents

 

 

59,423

 

 

 

21,390

 

Cash and cash equivalents at beginning of period

 

 

120,695

 

 

 

85,624

 

Cash and cash equivalents at end of period

 

$

180,118

 

 

$

107,014

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Debt issued in connection with acquisition

 

$

50,000

 

 

$

 

Income taxes paid, net of refunds

 

$

9,460

 

 

$

8,559

 

 

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

6


 

XPERI INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

(unaudited)

 

Three Months Ended September 30, 2021 and 2022

 

Common Stock

 

 

Additional
Paid-In

 

 

Net Parent
Company

 

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

Noncontrolling

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Investment

 

 

 

Income (Loss)

 

 

Deficit

 

 

 

Interest

 

 

Total Equity

 

Balance at July 1, 2021

 

 

 

 

$

 

 

$

 

 

$

1,069,434

 

 

 

$

322

 

 

$

 

 

 

$

(7,272

)

 

$

1,062,484

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(46,348

)

 

 

 

 

 

 

 

 

 

 

(1,310

)

 

 

(47,658

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(596

)

 

 

 

 

 

 

 

 

 

(596

)

Issuance of equity to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

10

 

Net transfers from Parent

 

 

 

 

 

 

 

 

 

 

 

25,234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,234

 

Balance at September 30, 2021

 

 

 

 

$

 

 

$

 

 

$

1,048,320

 

 

 

$

(274

)

 

$

 

 

 

$

(8,572

)

 

$

1,039,474

 

Balance at July 1, 2022

 

 

 

 

$

 

 

$

 

 

$

1,029,487

 

 

 

$

(4,125

)

 

$

 

 

 

$

(11,015

)

 

$

1,014,347

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(28,997

)

 

 

 

 

 

 

(371,805

)

 

 

 

(890

)

 

 

(401,692

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(914

)

 

 

 

 

 

 

 

 

 

(914

)

Issuance of equity to noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,427

)

 

 

(