Xperi (XPER) - 2023 Q1 - Quarterly Report

PART I Financial Statements (unaudited) Xperi Inc.'s unaudited condensed consolidated financial statements for Q1 2023 detail operations, balance sheet, cash flows, and equity post-spin-off Condensed Consolidated Statements of Operations Xperi Inc. reported Q1 2023 revenue of $126.8 million, an operating loss of $33.6 million, and a net loss of $32.0 million or ($0.76) per share Condensed Consolidated Statements of Operations (Q1 2023 vs Q1 2022) | Financial Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Revenue | $126,839 | $118,888 | | Total operating expenses | $160,440 | $147,814 | | Operating loss | $(33,601) | $(28,926) | | Net loss attributable to the Company | $(32,000) | $(29,523) | | Net loss per share - basic and diluted | $(0.76) | $(0.70) | Condensed Consolidated Balance Sheets As of March 31, 2023, Xperi Inc. reported total assets of $687.2 million, total liabilities of $256.6 million, and stockholders' equity of $445.9 million Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $110,696 | $160,127 | | Total current assets | $297,356 | $332,264 | | Total assets | $687,211 | $736,911 | | Total current liabilities | $125,707 | $150,241 | | Long-term debt | $50,000 | $50,000 | | Total liabilities | $256,637 | $287,925 | | Total Company stockholders' equity | $445,934 | $463,418 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $43.1 million in Q1 2023, contributing to a $49.4 million net decrease in cash and equivalents, ending at $110.7 million Cash Flow Summary (Q1 2023 vs Q1 2022) | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(43,103) | $(18,364) | | Net cash used in investing activities | $(3,929) | $(4,365) | | Net cash (used in) provided by financing activities | $(2,917) | $25,754 | | Net (decrease) increase in cash and cash equivalents | $(49,431) | $2,640 | | Cash and cash equivalents at end of period | $110,696 | $123,335 | Notes to Condensed Consolidated Financial Statements Detailed notes explain Xperi Inc.'s spin-off, business segments, revenue recognition, Vewd acquisition, debt, stock-based compensation, and lease obligations - Xperi Inc. became an independent, publicly-traded company on October 1, 2022, following a spin-off from its former parent, Xperi Holding Corporation (now Adeia Inc.)[22] - The company operates in one reportable business segment, grouped into four market-based categories: Pay-TV, Consumer Electronics, Connected Car, and Media Platform[23] Revenue by Market (Q1 2023 vs Q1 2022) | Market | Q1 2023 Revenue (in thousands) | Q1 2022 Revenue (in thousands) | | :--- | :--- | :--- | | Pay-TV | $60,294 | $64,155 | | Consumer Electronics | $36,735 | $28,091 | | Connected Car | $20,548 | $19,719 | | Media Platform | $9,262 | $6,923 | | Total revenue | $126,839 | $118,888 | - In connection with the July 2022 acquisition of Vewd, the company issued a $50.0 million senior unsecured promissory note, which bears a 6.00% annual interest rate and matures on July 1, 2025[81][82] - The company recorded a $1.1 million impairment charge in Q1 2023 related to operating lease right-of-use assets and property due to the consolidation of its global real estate footprint[112] - Stock-based compensation expense increased to $16.0 million in Q1 2023 from $8.6 million in Q1 2022, primarily due to new awards and incremental costs from the spin-off[98][99] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial results, noting a 7% revenue increase to $126.8 million, higher operating loss, and a decrease in cash to $110.7 million due to operations Results of Operations Q1 2023 revenue grew 7% to $126.8 million, driven by Consumer Electronics, Media Platform, and Connected Car, while operating expenses increased due to Vewd acquisition and stock-based compensation - Q1 2023 revenue increased 7% YoY to $126.8 million, driven by growth in Consumer Electronics, Media Platform, and Connected Car, partially offset by declines in Pay-TV[142] - R&D expense increased by $4.7 million, primarily due to employees from the Vewd acquisition and higher stock-based compensation[146] - SG&A expenses increased by $7.9 million, mainly due to higher stock-based compensation and increased outside services and personnel costs[149] - A non-cash impairment charge of $1.1 million was recorded in Q1 2023 related to the consolidation of the company's real estate footprint following the spin-off[153] Liquidity and Capital Resources Cash and equivalents decreased by $49.4 million to $110.7 million in Q1 2023, primarily from operations, with $50.0 million in long-term debt maturing July 2025 Liquidity and Cash Flow Summary | Metric | As of/For the Three Months Ended March 31, 2023 (in thousands) | | :--- | :--- | | Cash and cash equivalents | $110,696 | | Net cash used in operating activities | $(43,103) | | Net cash used in investing activities | $(3,929) | | Net cash used in financing activities | $(2,917) | - The decrease in cash was primarily due to $43.1 million used in operations, $3.9 million in capital expenditures, and $2.9 million for withholding taxes on restricted awards[163] - The company has a $50.0 million senior unsecured promissory note outstanding with a 6.00% interest rate, maturing on July 1, 2025[169][170] - Management expects capital expenditures for 2023 to be between $15.0 million and $20.0 million[167] Quantitative and Qualitative Disclosures About Market Risk This section refers to the Annual Report on Form 10-K for market risk disclosures, noting no material changes since that filing - The company's disclosures about market risk have not materially changed from those presented in its Annual Report on Form 10-K[176] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[179] - There were no changes in internal control over financial reporting during the first quarter of 2023 that materially affected, or are reasonably likely to materially affect, these controls[181] PART II Legal Proceedings The company is involved in various legal proceedings, primarily intellectual property and licensing, which management does not expect to materially adversely affect financial position - The company is involved in legal proceedings as a normal part of its business, including enforcing patents and license agreements[183] - Management does not expect current legal matters to have a material adverse effect on the company's overall financial position or liquidity[183] Risk Factors No material changes were reported to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes were reported to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[184] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the current reporting period - Not applicable[185] Exhibits This section lists exhibits filed with the Form 10-Q, including agreements, corporate governance documents, equity award forms, and CEO/CFO certifications - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and forms of employee restricted stock unit award agreements (10.1, 10.2)[190]