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Xperi Corporation Announces Second Quarter 2018 Results

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Xperi Corporation (NASDAQ:XPER) (the "Company" or "we") today announced
financial results for the second quarter ended June 30, 2018.

"During the second quarter, we continued to make progress on our
financial goals for the year and our long-term targets. We delivered
billings in line with our expectations and lower than expected operating
expenses which generated $34.6 million in operating cash flow. In
product licensing, we made significant progress around a number of
strategic initiatives, including the expected commercial launch of DTS
Connected Radio with a global automotive brand in 2019," said Jon
Kirchner, chief executive officer of Xperi. "On the IP licensing side,
several licensing discussions have progressed positively over the past
quarter, we have added new engagements to the pipeline, and we believe
we are well positioned to resolve at least one of our outstanding
licensing discussions prior to the end of the year."

Financial Highlights

($ and share count in millions)

        GAAP   Non-GAAP
          Q2 2018   Q2 2017   Q2 2018   Q2 2017
Billings 1         $100.7   $107.3   $100.7   $107.3
Total Operating Expense 2         $91.6   $97.0   $56.1   $56.8
Interest Expense 1         $6.2   $7.0   $6.2   $7.0
Other Income / (Expense) 2         $2.2   $0.2   $0.1   $0.2
Cash Tax Payments 1         $4.3   $4.2   $4.3   $4.2
                       
Diluted Shares Outstanding         49.1   49.5   51.9   52.4

1 Measures are the same for both the GAAP and Non-GAAP
presentation.

2 See tables for reconciliations.

             
Other Relevant Metrics       Q2 2018   Q2 2017
Operating Cash Flow       $34.6   $26.8
Cash, Cash Equivalents, S-T Investments and Restricted Cash       $95.3   $136.4
       

Stock Repurchase Program

During the second quarter of 2018, the Company repurchased approximately
726 thousand shares of common stock for an aggregate amount of $15.0
million. These purchases were executed under the Company's stock
repurchase program. As of June 30, 2018, the Company had approximately
$113 million remaining under its current repurchase program.

Dividends

On June 14, 2018, the Company paid $9.9 million to stockholders of
record on May 24, 2018, for the quarterly cash dividend of $0.20 per
share of common stock.

Additionally, on July 19, 2018, the Board of Directors approved the
quarterly dividend of $0.20 per share of common stock, payable on
September 6, 2018, to stockholders of record on August 16, 2018.

Financial Guidance

Consequent with the introduction of the new revenue accounting standard,
ASC 606, the Company announced it would begin using billings as a key
measure of business progress. As a result, the Company's outlook is now
based on billings rather than GAAP revenue. For additional information
regarding the Company's approach to guidance, please review the "ASC 606
Business Metrics and Guidance Approach" presentation given by the
Company on January 25, 2018, at http://investor.xperi.com/events.cfm.

             

Q3 2018

     

GAAP Outlook

 

Non-GAAP Outlook

Billings 1       $97M to 102M   $97M to 102M
Operating Expense       $94M to 96M   $59M to 61M

1 Measures are the same for both the GAAP and Non-GAAP
presentation.

 

The Company reiterates its 2018 financial guidance ranges as follows:

             

FY 2018

     

GAAP Outlook

 

Non-GAAP Outlook

Billings 1       $415M to 445M   $415M to 445M
Operating Expense       $394M to 412M   $245M to 263M
Cash Tax Payments 1       $16M to 20M   $16M to 20M
Fully Diluted Shares       50.5 million   52.5 million
Operating Cash Flow 1       $120M to 145M   $120M to 145M

1 Measures are the same for both the GAAP and Non-GAAP
presentation.

 

Conference Call Information

The Company will hold its second quarter 2018 earnings conference call
at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Wednesday, August 8,
2018. To access the call in the U.S., please dial +1 877-260-1479, and
for international callers dial +1 334-323-0522, approximately 15 minutes
prior to the start of the conference call. The conference ID is 4289553.
The conference call will also be broadcast live over the Internet at http://investor.xperi.com.

Safe Harbor Statement

This press release contains forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve risks
and uncertainties that could cause actual results to differ
significantly from those projected, particularly with respect to the
Company's financial results and guidance, the Connected Radio launch and
the timing of resolutions of outstanding IP licensing matters. Material
factors that may cause results to differ from the statements made
include the plans or operations relating to the businesses of the
Company; market or industry conditions; changes in patent laws,
regulation or enforcement, or other factors that might affect the
Company's ability to protect or realize the value of its intellectual
property; the expiration of license agreements and the cessation of
related royalty income; the failure, inability or refusal of licensees
to pay royalties; initiation, delays, setbacks or losses relating to the
Company's intellectual property or intellectual property litigations, or
invalidation or limitation of key patents; fluctuations in operating
results due to the timing of new license agreements and royalties, or
due to legal costs; the risk of a decline in demand for semiconductors
and products utilizing our audio and imaging technologies; failure by
the industry to use technologies covered by the Company's patents; the
expiration of the Company's patents; the Company's ability to
successfully complete and integrate acquisitions of businesses; the risk
of loss of, or decreases in production orders from, customers of
acquired businesses; financial and regulatory risks associated with the
international nature of the Company's businesses; failure of the
Company's products to achieve technological feasibility or
profitability; failure to successfully commercialize the Company's
products; changes in demand for the products of the Company's customers;
limited opportunities to license technologies due to high concentration
in applicable markets for such technologies; the impact of competing
technologies on the demand for the Company's technologies; pricing
trends, including the Company's ability to achieve economies of scale;
and other developments in the markets in which the Company operates, as
well as management's response to any of the aforementioned factors. You
are cautioned not to place undue reliance on the forward-looking
statements, which speak only as of the date of this release.

The foregoing review of important factors should not be construed as
exhaustive and should be read in conjunction with the other cautionary
statements that are included herein and elsewhere, including the Risk
Factors included in the Company's recent reports on Form 10-K and Form
10-Q and other documents of the Company on file with the Securities and
Exchange Commission (the "SEC"). The Company's SEC filings are available
publicly on the SEC's website at www.sec.gov.
Any forward-looking statements made or incorporated by reference herein
are qualified in their entirety by these cautionary statements, and
there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially
realized, that they will have the expected consequences to, or effects
on, the Company or its business or operations. Except to the extent
required by applicable law, the Company undertakes no obligation to
update publicly or revise any forward-looking statement, whether as a
result of new information, future developments or otherwise.

About Xperi Corporation

Xperi Corporation (NASDAQ:XPER) and its brands, DTS, FotoNation, HD
Radio, Invensas and Tessera, are dedicated to creating innovative
technology solutions that enable extraordinary experiences for people
around the world. Xperi's solutions are licensed by hundreds of leading
global partners and have shipped in billions of products in areas
including premium audio, broadcast, automotive, computational imaging,
computer vision, mobile computing and communications, memory, data
storage, and 3D semiconductor interconnect and packaging. For more
information, please call 408-321-6000 or visit www.xperi.com.

Xperi, DTS, Invensas, FotoNation, HD Radio, Tessera and their respective
logos are trademarks or registered trademarks of affiliated companies of
Xperi 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.

Billings

Billings reflect amounts in an accounting period invoiced to customers,
less any credits issued to or paid to customers, plus amounts due under
certain licensing-related contractual arrangements that may not be
subject to an invoice. Management evaluates the Company's financial
performance in part based on billings due to the close alignment between
billings and cash receipts from licensing activity, and believes
billings is an important metric to provide to readers of our financial
results. Billings may vary materially from revenue recorded under U.S.
GAAP.

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, acquired in-process research and development, all forms of
stock-based compensation, restructuring and other related exit costs.
Management believes that the non-GAAP measures used in this release
provide investors with important perspectives into the Company's ongoing
business performance. 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, and the financial
results calculated in accordance with GAAP and reconciliations to those
financial statements should be carefully evaluated. The non-GAAP
financial measures used by the Company may be calculated differently
from, and therefore may not be comparable to, similarly titled measures
used by other companies. 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 GAAP to
non-GAAP financial metrics.

XPER-E

 
XPERI CORPORATION
FINANCIAL INFORMATION SCHEDULE
 

COMPONENTS OF GAAP AND NON-GAAP OPERATING EXPENSE

(in thousands)
(unaudited)
   
Three Months Ended
June 30,
2018 2017
GAAP operating expense - components
Cost of revenue $ 2,080 $ 1,303
Research, development and other related costs 25,170 26,313
Selling, general and administrative 30,476 33,003
Amortization expense 27,199 28,151
Litigation expense   6,635     8,226  
Total operating expenses $ 91,560   $ 96,996  
 
Three Months Ended
June 30,
2018 2017
Non-GAAP operating expense - components
Cost of revenue $ 2,080 $ 1,303
Research, development and other related costs 21,808 21,916
Selling, general and administrative 25,588 25,362
Litigation expense   6,635     8,226  
Total operating expenses $ 56,111   $ 56,807  
 
 
 
XPERI CORPORATION
RECONCILIATION FROM GAAP TO NON-GAAP OPERATING EXPENSES
(in thousands)
(unaudited)
 
Three Months Ended
June 30,
2018 2017
 
GAAP operating expenses $ 91,560   $ 96,996  
 
Adjustments to non-GAAP operating expenses:
Stock-based compensation expense--R&D (3,344 ) (3,437 )
Stock-based compensation expense--SG&A (3,875 ) (5,087 )
Amortization expense (27,199 ) (28,151 )
Acquisition & related expense--R&D (18 ) (960 )
Acquisition & related expense-SG&A (1,013 ) (2,554 )
   
Non-GAAP operating expenses $ 56,111   $ 56,807  
 
 
 
XPERI CORPORATION
RECONCILIATION FROM GAAP TO NON-GAAP OTHER INCOME/(EXPENSE)
(in thousands)
(unaudited)
 
Three Months Ended
June 30,
2018 2017
 
GAAP other income/(expense) $ 2,229   $ 220  
Adjustments to non-GAAP other income/(expense):
Interest income from significant financing components under Topic 606 (2,148 ) -
Non-GAAP other income/(expense) $ 81   $ 220  
 
               
XPERI CORPORATION
RECONCILIATION FOR GUIDANCE ON
GAAP TO NON-GAAP OPERATING EXPENSE
(in millions)
(unaudited)
 
Three months ended Twelve months ended
September 30, 2018 December 31, 2018
Low High Low High
       
GAAP expense $ 94   $ 96   $ 394   $ 412  
 
Stock-based compensation--R&D (4 ) (4 ) (15 ) (15 )
Stock-based compensation--SG&A (4 ) (4 ) (22 ) (22 )
Acquisition & related expense - - (3 ) (3 )
Amortization   (27 )   (27 )   (109 )   (109 )
Total of non-GAAP adjustments   (35 )   (35 )   (149 )   (149 )
       
Non-GAAP expense $ 59   $ 61   $ 245   $ 263  
 

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