Xperi Inc. Q3 FY2024 earnings call

• Streamlining business through multi-year cost transformation efforts, with divestitures of AutoSense and Perceive improving profitability.
• Q3 revenue was approximately $133 million, up 11% sequentially, 2% year-over-year, and 6% when adjusting for AutoSense divestiture.
• Non-GAAP adjusted operating expenses declined 18% or $18 million year-over-year due to cost optimization efforts, including headcount reduction.
• Adjusted EBITDA was $31.4 million, 24% of revenue, tripling from prior year.
• Key growth opportunities: connected TV advertising, in-cabin entertainment (DTS AutoStage), and TiVo video over broadband.
• Pay TV: Video-over-broadband surpassed 2.4 million subscriber households, signed 2 new operators. Connected Car: 2 new DTS AutoStage design wins, AutoStage in over 8 million vehicles. Consumer Electronics: Launched DTS Clear Dialogue.

Pay TV: Largest revenue category, up 35% year-over-year excluding divestiture, driven by a large multi-year classic guide minimum guarantee deal. IPTV growth continued double-digit revenue growth. Consumer Electronics: Down 38% year-over-year due to prior-year minimum guarantee agreements and lower royalty revenue from softness in end products like gaming consoles. Connected Car: Up 11% year-over-year primarily due to higher revenue from DTS AutoStage, but market weakness may impact per unit HD Radio business. Had 2 new DTS AutoStage design wins. Media Platform: Down 39% year-over-year due to prior-year minimum guarantee deals for core middleware products, but TiVo OS and Video over Broadband footprint expanding.

• Revised revenue range to $490 million to $505 million due to softness in consumer electronics and automotive.
• Adjusted EBITDA margin range increased to 14% to 16% due to cost optimization efforts.
• Full-year operating cash flow expected to be a $50 million to $60 million usage of cash.
• Anticipate ending the year with well over $100 million in cash on the balance sheet.

• Macro environment challenges: inflation, reduced discretionary spending, consumer electronics and global automotive issues.
• Partner delays impacting TiVo OS device shipments and monetization of TiVo media platform.
• Automotive market weakness affecting per unit HD Radio business.

Q: About TiVo OS device shipments and the 2 million unit goal by year-end.

A: Confident of hitting the 2 million mark by year-end, with visibility, though some time shifts due to partner delays, but seeing acceleration in Q4.

Q: Monetization on TiVo OS.

A: Monetization not material yet due to small footprint, but platform is embraced by partners, and data is being received from activated units.

Q: Delays in TiVo OS units, including North American entry.

A: Partner heading into production late November for U.S.-destined TVs, expecting presence by year-end, with partners in the U.S. in 2025, and units in Europe are activated with good customer reviews.

Q: Softness in the U.S. market, end demand vs decision cycles.

A: Soft demand in some areas like game consoles; automotive market weakening, but strategic progress continues with HD Radio additions in new models.

Q: Overhang in auto and consumer electronics, hitting TV OEM goal.

A: Got one TV OEM, working on pipeline, product getting strong reviews with little to no returns, and confident in building pipeline for 7 million units by 2025.

Q: Operating cash flow and accounts receivable.

A: Due to minimum guarantee deals, unusual items from divestitures, and lower revenue; accounts receivable strong with high-quality partners, and two-thirds of unbilled receivables expected to be billed in next 12 months.