Investor Presentation - Q2 2019
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Investor Presentation Q2 2019
Safe Harbor
This presentation 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 strategic vision, addressable market opportunities, growth strategy, licensing opportunities, initiatives, and the Company’s financial
results, guidance and outlook. 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; and other developments in the markets that 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
presentation.
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.
2 © 2019 Xperi
Xperi Today
Diversified Business
Delivering a Broad Suite of Technologies…
Audio Technology
Solutions
IP and Semiconductor and
Product Semiconductor Interconnect Packaging
Licensing Solutions Technology & Solutions
Imaging and Computer
Vision Solutions
Intellectual Property
Automotive Audio, Data, Licensing
and Digital Radio
Broadcast Solutions
4 © 2019 Xperi
Diversified Business
… to the World’s Biggest Brands Across the CE Space
Automotive Mobile Home
FaceSafe
Semiconductor
5 © 2019 Xperi
Attractive Licensing Model
Strong Cash Flow with Effective Capital Allocation
Investments Debt Repayment
• R&D • $100M reduction to
• Strategic Investments/ outstanding debt
Acquisitions
$447M Billings
Return to Shareholders
Dividends
• Paid $39M dividends
Stock Buybacks
• $41M buybacks
$135M OCF
Low Cap Ex and Cash Tax
• Cap Ex of approximately $3M
• Cash taxes of $24M
2018A
6 © 2019 Xperi
Expansive Footprint
All Major IC Providers and OEMs Under Contract
Solutions are Deployed on all Major ICs
$
Product and Technology Licensing to all Major CE OEMs
$
7 © 2019 Xperi
Broad Technology Portfolio
Delivering Best-in-Class Solutions Supported by IP
Select Product Licensing Solutions Diversified Patent Assets
Automotive
ICM Audio
25%
Mobile
FaceSafe Packaging
51%
Home
23% Imaging
6,000
5,000 1%
Semiconductor & IP Licensing Solutions* Machine Learning
4,000
DRAM / NAND 3,000
Patents DBI / DBI Ultra 2,000
Image Sensors 1,000
ZiBond DBI 00
Home MEMS
MEMS / RF
ZiBond DBI
Chart represents patent assets
*Semiconductor & IP Licensing Solutions are incorporated in various ICs sold into the automotive, mobile and home markets
8 © 2019 Xperi
Where Xperi is Heading…
Strategic Vision
Smarter Technology…
Intelligent
Integrated Immersive
On the Edge
…Enabling Extraordinary Experiences
10 © 2019 XperiWhere You Will Find Xperi
Smart Home/IoT
Advanced Security
Image Identification
Rear Seat Intelligent Speakers
Advanced Audio
Entertainment
Personalization Advanced
Imaging &
Audio Solutions Advanced
Home Theater
Smart Personalization
Appliances
Connected Radio
Future Cockpit
Data
Sound Analytics
Connectivity
Advanced Advanced Audio/Image
In-Cabin Monitoring Detection and Car
Solutions Security Solutions
11 © 2019 XperiProduct Licensing
Large Product Licensing Opportunities
Growth Strategy: Increased Penetration Through Innovation
Automotive Mobile Home
Auto-head units Smartphones TVs
Broadcast Tablets Blu-ray players
infrastructure PCs AVRs
In-Cabin Gaming headsets Soundbars
Monitoring
technology Drones Wireless speakers
Activity cameras Game consoles
AR/VR Set-top-boxes
TAM TAM TAM
~120M ~2.0B ~850M
units units units
*TAM: Total addressable market
Source: IHS, IDC, Parks Associates, Sensian Research and Xperi internal data
13 © 2019 XperiAutomotive
Auto-Head Units, In-Cabin Monitoring Solutions
Current Platform Recent Highlights
Global automotive ecosystem driven by • The 2020 Lincoln Corsair launched with
~30M Units HD Radio at the New York International
partnerships with all major IC, Tier 1,
Annually Auto Show
OEMs and Broadcasters
• Won two Best of Show Awards at Radio
Key Initiatives World and NAB, for HD Radio and
Connected Radio, respectively
• In addition to Denso, engaged with
ICM
several other tier-one infotainment
Increase HD Deploy Deliver In-Cabin suppliers to address a broader market
Radio Connected Monitoring and set of needs for in-cabin monitoring of
Penetration Radio Globally Solutions
the driver and other occupants in the car
1st commercial • Launched DTS audio decoding in Infinity
52% Leverage autos in Asia, extending our deployment
launch
penetration, infotainment of our DTS audio solutions in this market
scheduled
target ~65% footprint
for 2020
Vision
Deliver connected solutions that revolutionize the in-cabin
automotive experience
Source: IHS, IDC, Parks Associates, Sensian Research and Xperi internal data
14 © 2019 XperiMobile
Phones, Tablets, PCs, Accessories, Drones, Activity Cameras, AR/VR
Current Platform Recent Highlights
Global leader in advanced audio and • ASUS’s new high-end smartphone, the
~290M Units ZenFone 6 and LG’s Gram PC launched
image processing - partnered with all
Annually
major ICs & 5 of top 10 Mobile OEMs with DTS:X Ultra
• Logitech announced new headsets, the G
Key Initiatives Pro and Pro X, which offer its newest
technology Blue Vo!ce with DTS audio
Facial AR/VR enhancements
Recognition Glasses
• ASUS announced its second Republic of
Next-Gen Audio, Promote Promote IrisXR Gamers smartphone with DTS:X Ultra and
Imaging FaceSafe and Gaze
pre-orders for China alone exceeded 2
penetration Tracking
million units in less than 24 hours
Drive 3D Expand Continue to
imaging and smartphone and partner with key
DTS:X Ultra PC platform mobile and
solutions wins AR/VR players
Vision
Deliver integrated, intelligent, immersive, edge-based imaging and
audio solutions for all mobile devices
Source: IHS, IDC, Parks Associates, Sensian Research and Xperi internal data
15 © 2019 XperiHome
TVs, Wireless Speakers, Soundbars, Consoles, Blu-ray, etc.
Current Platform Recent Highlights
Global home ecosystem, driven by • Increased penetration of DTS:X, DTS:X
~200M Units Pro, Virtual:X and our newest solution
relationships with all major ICs, OEMs
Annually
and content providers Stereo Plus
• IMAX Enhanced Program expansion:
Key Initiatives
- Announced 12 consumer electronics
Smart CE
Devices
device brands now supporting IMAX
Enhanced program
Deliver DTS:X Leverage Sight/ Infuse Machine - Sony announced pricing and availability
and Virtual: X Sound Combo Learning for its new flagship MASTER Series
TVs, along with other new LCD and
OLED TV models
Increase Drive program Build
penetration from expansion intelligence and
soundbars to across TVs and personalization
AVRs & TVs soundbars in devices
Vision
Transform home
Transform entertainment
home through
entertainment integrated,
through intelligent,
integrated, intelligent,
audio, imagingaudio,
and wireless
imagingsolutions
and wireless solutions
Source: IHS, IDC, Parks Associates, Sensian Research and Xperi internal data
16 © 2019 XperiIP Licensing and Semiconductor Solutions
IP Licensing and Semiconductor Solutions
DRAM, NAND, RF, MEMS, Sensors, Other Semiconductor Opportunities
Current Platform Recent Highlights
Foundational semiconductor patents & • Expanded new IP license opportunity
technology, extensive track record of ~$450B Annual pipeline
successful licensing and enforcement Market
• Received very positive reception to the
launch of DBI Ultra technology which
Key Initiatives extends the foundational wafer-to-wafer
hybrid bonding platform to applications
requiring die-to-wafer stacking like DRAM
ZiBond DBI /
DBI Ultra
and High Bandwidth Memory
Transition Away Relicense Tech Transfer to • Invensas successfully completed an
from OSATs Memory Co’s Key Players evaluation with a key memory customer
NVIDIA litigation Settlement Engagements
filed, progress reached with in Memory,
with multiple Samsung Sensors and
pipeline December 2018 RF markets
opportunities
Vision
Maintain strong IP licensing cash flow to fuel growth in product
and technology business by delivering 3D interconnect solutions
that enable the industry to scale beyond Moore’s Law
Source: Gartner 2018
18 © 2019 XperiSummary
Second Quarter Actuals
Q2 2019 Actuals GAAP Non-GAAP*
Billings** $92.3M $92.3M
Operating Expense $83.4M $50.9M
Interest Expense** $6.2M $6.2M
Other Income $4.8M $0.9M
Cash Tax (net of refunds) $0.9M $0.9M
Diluted Shares Outstanding 49.3M 52.1M
*Non-GAAP reconciliations can be found in the appendix of this deck
**Measures are the same for both the GAAP and Non-GAAP presentation
20 © 2019 Xperi2019 Outlook
FY 2019 GAAP Revised Outlook Prior Outlook
Billings 1 $395M to 415M $395M to 415M
Operating Expense 2 $344M to 358M $357M to 372M
Interest Expense 1 ~$24M ~$26M
Other Income 2 ~$10.0M ~$8.7M
Cash Tax (net of refunds) 1 $16.5M to 20.5M $18.5M to 22.5M
Diluted Shares Outstanding 50.0M 50.0M
Operating Cash Flow 1 $135M to 155M $120M to 140M
FY 2019 Non-GAAP Revised Outlook Prior Outlook
Billings 1 $395M to 415M $395M to 415M
Operating Expense 2 $213M to 227M $225M to 240M
Interest Expense 1 ~$24M ~$26M
Other Income 2 ~$3.5M ~$1.5M
Cash Tax (net of refunds) 1 $16.5M to 20.5M $18.5M to 22.5M
Diluted Shares Outstanding 52.0M 52.0M
Operating Cash Flow 1 $135M to 155M $120M to 140M
1 Measures are the same for both the GAAP and Non-GAAP presentation.
2 See tables for reconciliations.
2019 outlook assumes amortization of $100M, SBC of $31M
21 © 2019 Xperi2019 Operating Expense Outlook Details
GAAP SBC Non-GAAP Outlook
Cost of Revenue $8M - $13M ---- $8M - $13M
R&D $110.5M - $113.5M $13.5M $97M - $100M
SG&A $118.5M - $121.5M $17.5M $101M - $104M
Litigation $7M - $10M ---- $7M - $10M
22 © 2019 XperiInvestment Highlights
Attractive Licensing Model Expansive Footprint
High margins, strong cash generation, Solutions licensed in more than 5 billion
foundation for growth in mobile, automotive consumer electronic devices and 100 billion
and semiconductor markets chips worldwide
Billings Visibility Innovative Talent
Solid visibility through stable ecosystems, ~700 employees, ~400 engineers, with history
broad customer relationships and multi-year of developing transformational technology
licenses
Globally Recognized Brands
Diversified Business A group of internationally recognized and
IC packaging and interconnect, audio, respected ingredient brands
imaging, connected radio technologies
Proven IP
Broad Technology Portfolio Proven, robust patent portfolio with
Serving broad end markets and diverse approximately 5,500 patent assets
customer base
23 © 2019 XperiAppendix
© 2019 Xperi
24Operating Cash Flow Trend
Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
Operating Cash Flow $34.6M $29.4M $66.5M $13.8M $55.1M
25 © 2019 XperiHistorical Billings by Market
Billings by Market Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019
Automotive $20.8M $23.5M $19.9M $21.6M $22.2M
Home $19.2M $22.0M $22.9M $26.7M $19.4M
Mobile $9.5M $8.4M $10.5M $6.9M $6.9M
Audit Recoveries / Other $1.5M $0.6M $1.0M $5.7M $0.4M
Total Product Licensing $51.0M $54.5M $54.3M $60.9M $48.9M
Total Semi/IP Licensing $49.7M $46.1M $87.4M $43.4M $43.4M
Total Billings $100.7M $100.6M $141.8M $104.3M $92.3M
26 © 2019 XperiNon-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP), this presentation 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, interest income from significant financing components under Topic 606, unrealized gains or losses on
marketable equity securities, 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.
27 © 2019 XperiReconciliation Tables
XPERI CORPORATION
RECONCILIATION FROM GAAP TO NON-GAAP OPERATING EXPENSES
(in thousands)
(unaudited)
Three Months Ended
June 30,
2019 2018
GAAP operating expenses $ 83,431 $ 91,560
Adjustments to non-GAAP operating expenses:
Stock-based compensation --R&D (3,146) (3,344)
Stock-based compensation --SG&A (4,075) (3,875)
Amortization expense (25,314) (27,199)
Acquisition & related expense--R&D — (18)
Acquisition & related expense--SG&A — (1,013)
Non-GAAP operating expenses $ 50,896 $ 56,111
XPERI CORPORATION
RECONCILIATION FROM GAAP TO NON-GAAP OTHER INCOME
(in thousands)
(unaudited)
Three Months Ended
June 30,
2019 2018
GAAP other income $ 4,806 $ 2,229
Adjustments to non-GAAP other income:
Interest income from significant financing components under Topic 606 (1,854) (2,148)
Unrealized gain on marketable equity securities (2,032) —
Non-GAAP other income $ 920 $ 81
28 © 2019 XperiComponents of GAAP and Non-GAAP OpEx
XPERI CORPORATION
FINANCIAL INFORMATION SCHEDULE
COMPONENTS OF GAAP AND NON-GAAP OPERATING EXPENSE
(in thousands)
(unaudited)
Three Months Ended
June 30,
2019 2018
GAAP operating expense - components
Cost of revenue $ 2,529 $ 2,080
Research, development and other related costs 25,704 25,170
Selling, general and administrative 28,653 30,476
Amortization expense 25,314 27,199
Litigation expense 1,231 6,635
Total operating expenses $ 83,431 $ 91,560
Three Months Ended
June 30,
2019 2018
Non-GAAP operating expense - components
Cost of revenue $ 2,529 $ 2,080
Research, development and other related costs 22,558 21,808
Selling, general and administrative 24,578 25,588
Litigation expense 1,231 6,635
Total operating expenses $ 50,896 $ 56,111
29 © 2019 XperiReconciliation Tables
XPERI CORPORATION
RECONCILIATION FOR GUIDANCE ON
GAAP TO NON-GAAP OPERATING EXPENSE
(in millions)
(unaudited)
Three months ended Twelve months ended
September 30, 2019 December 31, 2019
Low High Low High
GAAP expense $ 84.2 $ 87.2 $ 344.0 $ 358.0
Stock-based compensation--R&D (3.5) (3.5) (13.5) (13.5)
Stock-based compensation--SG&A (4.5) (4.5) (17.5) (17.5)
Amortization expense (25.2) (25.2) (100.0) (100.0)
Total of non-GAAP adjustments (33.2) (33.2) (131.0) (131.0)
Non-GAAP expense $ 51.0 $ 54.0 $ 213.0 $ 227.0
XPERI CORPORATION
RECONCILIATION FOR GUIDANCE ON
GAAP TO NON-GAAP OTHER INCOME
(in millions)
(unaudited)
Three months ended Twelve months ended
September 30, 2019 December 31, 2019
GAAP other income $ 2.3 $ 10.0
Adjustments to non-GAAP other income:
Interest income from significant financing components under Topic 606 (1.5) (6.5)
Non-GAAP other income $ 0.8 $ 3.5
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