Good day, everyone. Thank you for standing by, and welcome to the Xperi Fourth Quarter and Full Year 2024 Earnings Conference Call. During today's presentation, all parties will be in listen only mode. Following the presentation, the call will be open for the questions. I would now like to turn the call over to Catheryn Mallari from Xperi's Marketing and External Communications department. Catherine, please go ahead.

Good afternoon, and thank you for joining us as Xperi reports its fourth quarter and full year 2024 financial results. I'm filling in today for Mike Iburg, Xperi’s Head of Investor Relations, who is unable to be with us today. With me on today's call are Jon Kirchner, Chief Executive Officer and Robert Anderson, Chief Financial Officer. In addition to today's earnings release, there is an earnings presentation, which you can access along with this webcast on our Investor Relations website at investor.xperi.com. Before we begin, I would like to provide a few reminders. First, I would like to note that unless otherwise stated, all comparisons are to the same period in the prior year. Second, today's discussion contains forward-looking statements about our anticipated business and financial performance that are predictions, projections or other statements about future events, which are based on management's current expectations and beliefs and therefore subject to risks, uncertainties and changes in circumstances. For more information on the risks and uncertainties that could cause our actual results to differ materially from what we discuss today, please refer to the Risk Factors and MD&A sections in our SEC filings, including our most recent Form 10-K and 10-Q and our Form 10-K for the year ended December 31, 2024, to be filed with the SEC. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after this call. Third, we refer to certain non-GAAP financial measures, which are detailed in the earnings release and accompanied by reconciliations to their most directly comparable GAAP measures, which can be found in the Investor Relations section of our website. Lastly, a replay of this conference call will be available on our website shortly after the conclusion of this call. I will now turn the call over to Xperi's CEO, Jon Kirchner.

Thank you, Catherine, and thank you, everyone, for joining us on our fourth quarter and full-year 2024 earnings call. We closed the '24 fiscal year on a strong operational note, making significant strides in our independent media platform strategy across the media platform, pay TV and connected car markets. From a financial standpoint, we are pleased with the progress of our business transformation and its impact on profitability as we navigate a challenging market environment across our core business. Robert will walk you through the details in just a moment, but let me first touch on a few financial highlights. Revenue in the quarter was $122 million up 2% from the prior year after adjusting for the divestitures of AutoSense and Perceive. Adjusted EBITDA was $23 million for the quarter or 19% of revenue compared to $13 million in the prior year quarter. This growth continues to demonstrate the progress of our business transformation efforts, which for the full year yielded an adjusted EBITDA margin of 15%, more than doubling year over year. From a balance sheet perspective, we finished the year with $131 million of cash and equivalents, which we believe provides solid operating liquidity as we look ahead. Also, we recently completed the refinancing of our $50 million of outstanding debt due this July through a new three-year facility. Looking forward, we remain focused on our three growth solutions where we see strong potential and differentiation. These are Connected TV advertising, where we offer our TiVo One monetization platform that monetizes ad supported viewing, viewership data and homepage engagement across smart TVs powered by TiVo and TiVo Video over broadband devices. In cabin entertainment, where DTS AutoStage combines radio, Internet metadata and video to enhance the automotive experience, while enabling long-term monetization through licensing fees, upselling features, advertising…

Thanks, Jon. I'll be covering two main areas during this call. First, I'll go through the financial results for the quarter and the year, including commentary on the results. Second, I'll provide financial outlook and commentary for fiscal 2025. Beginning with the quarter's results, total revenue for the fourth quarter was $122 million down 11% from last year's $137 million but up 2% when adjusting for the AutoSense and perceived divestitures. PTV, our largest revenue category, was down 8% as strong growth in IPTV, which was up 35%, was more than offset by a decline in our core pay TV business, partly due to the timing of certain revenue in the prior year's fourth quarter. Consumer Electronics was up 2% when excluding the proceed and AutoSense divestitures. This growth was due in part to year over year strength in unit volumes for game consoles. Connected Car was up 9% as reported and up 42% when excluding the divested AutoSense business from the numbers. This significant underlying growth was due to certain minimum guarantee deals for the legacy audio technologies that were closed in the quarter, for which the company recognizes most of the revenue upfront. Media platform was down 15% due to a year over year decline in a large linear ad campaign buy from a repeat customer whose budgets changed due to market conditions as well as certain minimum guarantee deals associated with our middleware products in the prior year period. For the full year 2024, revenue was down 5% as reported, but essentially flat year over year when excluding the AutoSense divestiture. Looking at the year over year trends, in PayTV, we saw overall growth of 6% due to continued expansion in IPTV as expected, coupled with better than expected revenue in core pay TV from several multiyear…

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from the line of Jason Kreyer of Craig Hallum. Your line is now open.

Great. Thank you. This is Cal on for Jason. Maybe to start, good to see you guys hitting the sort of the footprint goals that you had laid out. So, I guess just looking ahead, how do you think about with TiVo OS in particular, how do you think about balancing adding new OEM partners versus growing more volume and getting more activated devices with your existing partners?

I think we certainly intend to do both, Cal. The first couple of quarters of experience with these partners is that they are getting good feedback on the units from a customer satisfaction and use perspective. And so, I think we will continue to work to expand, let's call it, share of production with our partners. But at the same time, we still have a pipeline of others that we are working with that have an interest in potentially joining the platform and I think that will be just incrementally positive as we look to ramp particularly over the next year or two to an even bigger and broader footprint.

Great. And then maybe to follow-up, just kind of looking at the TiVo One platform that you guys are talking about in the rollout, just kind of wanted to get some high-level thoughts on how you're thinking about ARPU, how you're thinking about the trends that you're seeing early on in North America versus Europe. And getting to that greater than $10 in ARPU figure, how much of that is dependent on scaling more North American devices that likely have a higher ARPU profile versus some of the European footprint that you already have in market?

Fair question. I think naturally it will be a combination of both. I think we start out the year at lower ARPU numbers and I think it will ramp through the year as we said looking to exit north of $10. I think one of the things to appreciate about the TiVo One ad platform is that it's a common platform and as we have begun to roll out that backbone onto our video broadband devices, you instantly have a U.S. footprint that is actually tied into the same network. So, a way to think about the universe of addressable units to drive ultimately ad monetization is it's a combination of TVs with TiVo OS, which at this point are heavily Europe centric, coupled with video over broadband based boxes connected TVs that are also powered by that TiVo One interface. And one of the things we know about our various video over broadband customers is that they watch naturally a lot of TV. So, there's going to be a fair amount of use. And I think it's the combination of those two things that actually allow us to not only have confidence as the footprint grows, but to be able to benefit from, let's call it, the more robust ad market in the U.S. Coupled with what is emerging and growing of course in Europe and different territories.

Great, thank you guys.

Thank you, Cal.

Your next question comes from the line of Stephen Frankel of Rosenblatt. Your line is now open.

Good afternoon. John, last quarter you spoke about some TiVo OS smart TVs that where the launches were delayed pushed into 2025 from the end of last year. Could you update us on your insights into the timing of those shipments now?

I think we have certainly made up some ground, Steve. Some of what we expected to happen, let's call it in late summer and early fall began to happen more robustly, right, as we approach the end of the year. And so, as we sit here today, I think we have got a fairly clear line of sight on a number of partners ramping up into the spring and of course starting here in the U.S. With Sharp, where they actually began some shipping to the U.S. in December, but those units effectively became available here in the U.S. in February.

Okay. And then appreciate the year-end growth or goals that set up some accelerated growth in 2026, but what's most important for us to watch as we go through the year? Is it that the ability for TiVo One to drive growth to the media platform business? Is that the critical variable of your success?

Absolutely. I think over the coming quarters, and it will there's no doubt it's back half weighted, but we'll see it start to emerge as well as I think you can begin to look at active users on the platform. Because it's the combination of how that number ultimately translates to viewership hours, which in turn takes you towards the monetization path and our ability over time to continue to work to optimize that. There is a fair amount of optimization that will occur even on an existing platform of $2 million over time as you are working things out to drive the most and best possible experience balanced with monetization. But I think those two things are continued footprint slash active user growth as well as beginning to see that monetization emerge I think are the key things, because I think it will demonstrate that it's taken a ton of work to get where we are with a footprint and an ecosystem etcetera that can begin to turn the crank on monetization and it will begin to show here as we work our way through the year.

Yes. Steve, maybe to put an additional point on that. We expect with active users as John described and the ARPU numbers that we have laid out, we expect each of those metrics to go sequentially quarter over quarter and our goal is to exit 2025 with more than 5 million active users and as we mentioned on the call, an average ARPU of over $10.

Great. And the IPTV base today, is this only being monetized in the traditional way with things like local ad breaks or are some of your customers using maybe other ad networks or other vendors to monetize these eyeballs today?

I would say only in more of a traditional context, Steve, and I think we've been able to and part of what we have designed with our video over broadband solutions is the notion that it would ultimately connect into a common ad platform that would give us more flexibility around streaming and homepage-based advertising. And so, I think as we're updating operators and units in the field that installation base in the U.S. is coming online and that allows us to begin to leverage the benefit of the TiVo One ad platform.

And is the rev share there between you and the operator similar to what you are doing with the TV manufacturer or do you have a different set of economics in this market?

I would say, I mean, certainly there are some differences, Steve. But I think big picture, they are not material as one thinks about our ability to generate meaningful amounts of U.S. based ARPU off these respective with these respective partners while obviously making it worth their while as well.

Okay. Thank you so much. I'll jump back into the queue.

Your next question comes from the line of Hamed Khorsand of BWS Financial. Your line is now open.

Hi. I was just wondering last time last earnings call your tone was about negative end markets and some not so great clarity. You don't have that commentary today. How much has the market changed for you? How much clarity you have now that your commentary is a lot much different?

Well, I think some of the uncertainty that existed before still existed. Let's just say it's more evenly distributed in terms of awareness, things like tariffs, some of the geopolitical macro stuff and how it impacts, I think there's still some question I'd say. But that being said, I think we've moderated our expectations as we've set guidance range as we think about '25. So, no need to continue to hammer on that recognizing it all exists. But I think as always, right, we learn a little more as we get through Q4 and we talk to our partners about plans for 2025. And as we have gotten not only more of that information, but I think we have made more progress. I think we have landed at least in a world of handicapping the risks as well as coming up with the guidance range and what we think is achievable. Obviously, we will see how things go in that uncertainty whether the environment further improves in ways that benefit our customers primarily because that's where the revenue is flowing from or if it just stays, let's call it, neutral to where it is today or gets worse, in which case we'll some of that we've accounted for as we think about the range of outcomes. And we'll take it one step at a time, but obviously, we're all trying to both understand and navigate as best we possibly can.

Okay. And then looking out to '25, these goal of adding two more TV OEMs or partners, how far along are you on those? Is that a possibility of becoming a source of new revenue or is that purely just the timing of adding new partners?

I think we are I think it's fair to say we've got a pipeline in various stages, some of which is pretty well advanced. And for the stuff that's more advanced, if it gets worked out, it's certainly conceivable that it would have some footprint impact in the course of the back half of '25. But again, the pipeline is more than just stuff that, let's call it, is towards the end of that funnel. We've got other discussions that are earlier stage. So, and stuff tends to move around as people see our progress. I think one of the things I can say quite definitively is we have both made and demonstrated significant progress now across a wide base of partners and that helps others have not only more confidence, but ultimately potentially look to us as a very viable and attractive alternative in the marketplace as they look to continue to build better business models and ultimately bring the best possible solution to their customers.

Okay. And then Robert, is 2025 going to be a free cash flow positive year and are you willing to provide any metrics around that?

Well, what we guided specifically on the call is slightly positive operating cash flow. I think if we finish at maybe the top end of our expectation or have a good year from a cash flow perspective, that could turn free cash flow positive, but I wasn't at the comfort level to guide that specifically.

Okay, thank you.

You’re welcome. Thanks, Hamed.

Your next question comes from the line of Matthew Galinko of Maxim Group. Your line is now open.

Hi, good afternoon. Thanks for taking my questions. Can you talk about maybe the steps to rollout TiVo One? Is there significant negotiation that has to happen with the existing OEMs? Or is there execution on pushing new software to the existing TVs? Just maybe talk operationally about what that entails?

Well, I would say, first, that it's something we have been working on now for quite a while with a vision of how to, if you will connect together various endpoint devices across home and car. So, the advent of the vision around the platform and how it could be used to address unique audiences for advertisers, I think has been quite thoughtful. I think that, of course, will continue to evolve like all software as we look to make it more robust and valuable. We are in the process in different ways of deploying it and depending on where, let's say smart TVs were in their original release point, you may have some TVs that went out before some of the updates were available for this and so they're being updated as we speak. And I think we have a lot of experience with working with our partners to get those updates done. And similarly, in some of the IPTV video over broadband areas, there are updates happening there as well to ensure that we can tie into the various aspects of the things we think that will be most valuable for consumers as well as what we're trying to do monetization wise. So, I would say it's fairly ordinary course in our world anyway of building software and ultimately getting it updated. Yes, there are requires action beyond just our own obviously working with partners, but I think we have a pretty well-defined process that's technically really robust on how to get it done across the different categories of products over time.

Got it. Thank you. And then can you -- do you have any maybe just updated thoughts on what the competitive environment is in media platform as you're looking to onboard new OEMs? What are you seeing?

Well, I think the environment remains quite competitive in part because the size of the prize is extremely valuable. And so, I don't think we're seeing any less competition. I think there are significant barriers of entry to new entrants. I think we have crossed those barriers, I think quite clearly at this point with a number of not only partners, but demonstrating the quality of the UX platform, search and discovery, all of the things that we brought to the game because of decades of experience in the business. So, I think the competitive landscape will continue to play out, but I think the combination of our product with our business model, which is about highlighting our customers' TV brands, allowing them to participate in the long tail of revenue, having a direct customer relationship, being content first and neutral from an independent media platform perspective. All those things will continue to resonate. So, does that mean it's easy? No, of course, it's very difficult. We're dealing with very large competitors. But I think the strategy that we laid out a few years ago, as well as our confidence that we ultimately could run this broader play is in fact working well. And I think the most exciting part of it for us is that you can't begin to see monetization revenue until you start to have footprint of the rest and we accomplished a lot in ‘24 and we'll begin to see that we'll turn in ‘25. And as the concentration, if you will, or the size of the installed active user base grows, I think it only creates more opportunity through that scaling and network effect. So more to -- obviously more to follow and observe about how the competitive landscape may evolve, but I think at the current time, I don't think we see a lot of difference.

Thank you.

That concludes our Q&A session. I will now turn the conference back over to Jon Kirchner for closing remarks.

Thanks, operator, and thanks everyone for joining today's call. We are excited about the growth potential for our independent media platform business across home and car over the longer term and are pleased with the improving profitability performance of our business as we navigate the current environment. I would like to thank our employees for their continued commitment to our business transformation and hard work toward realizing our strategic goals. We look forward to reviewing our Q1 results with you in May. And operator, this concludes today's call.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.