Good day, everyone. Thank you for standing by. Welcome to the Xperi Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Sam Levenson from Arbor Advisory Group. Sam, please go ahead.

Good afternoon, and thank you for joining us as Xperi reports its second quarter 2025 financial results. With me on today's call are Jon Kirchner, Chief Executive Officer; and Robert Andersen, Chief Financial Officer. In addition to today's earnings release, there is an earnings presentation on our Investor Relations website at investor.xperi.com. We encourage you to download the presentation and follow along with today's commentary. 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 for the year ended December 31, 2024, and our Form 10-Q for the quarter ended June 30, 2025, 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. Last, 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, Sam, and thank you, everyone, for joining us on our second quarter 2025 earnings call. Over this past quarter, we've been operating in an increasingly difficult environment, which has had an impact on our business. Nevertheless, we are excited about the significant progress we continue to make on our strategic initiatives that are critical to meeting our longer-term growth plans as exemplified by growth in our TiVo One monthly active users, Connected Car AutoStage footprint and IPTV subscriber households. I'll cover all of this in a little bit more detail in a moment. Let me first address the financial outlook update we made early last week. The combination of macro uncertainty, tariffs and a weakening consumer environment began to meaningfully impact our customers' decisions, production outlook and purchasing patterns in the latter part of the second quarter. The impact of these conditions is being felt broadly across our business as we look ahead to the remainder of 2025 and touches areas like slower-than-expected IPTV subscriber growth, softer second half automotive production volumes, weaker consumer electronics production and end market demand and a more challenging advertising market. Robert will provide additional color later on this call. I'll now provide a summary of our results for the quarter. For the quarter, we posted revenue of $106 million. Despite lower year-over- year revenue, our adjusted EBITDA rose 4% to $15 million or 14% of revenue due primarily to continued business transformation efforts and cost management. We continue to work on lowering our cost profile in support of long-term margin expansion. Our non- GAAP earnings per share was $0.11. We posted $10 million of operating cash flow in the quarter and recorded $5 million of positive free cash flow. Now as we turn to the bigger picture, we continue to make significant…

Thanks, Jon. As in past quarters, I'll be covering 2 main areas during this call. I'll first go through the financial results and provide commentary for the quarter. And second, I'll discuss our financial outlook. Let me begin with the quarter's revenue results. Total revenue for the second quarter was $106 million, a decrease of 11% from last year's $120 million and lower by 10% when adjusting for the Perceive divestiture. This year-over-year revenue decrease was primarily attributable to certain minimum guarantee arrangements recorded in the prior year period within Pay TV and Connected Car. As a reminder, in any given year, approximately 20% to 25% of our revenue across the business is categorized as point in time, most of which consists of minimum guarantee arrangements with our customers. While the revenue from these agreements is recognized during the period in which it is signed, many of these agreements regularly renew in a multiyear cycle and provide the benefit of long-term predictability, certainty and commitment to our technologies. When unit volumes under these agreements are exceeded, we recognize the overage revenue on a per unit basis in reported periods. Within the pay TV category, we recognized revenue of $50 million, a decrease of 18% from last year. This decrease was largely due to certain minimum guarantee revenue recognized last year relating to our Classic Guide product line and was partially mitigated by 24% revenue growth in our IPTV solutions as we saw continued subscriber year-over-year growth. Consumer Electronics revenue was $19 million, an increase of 23% when excluding the divestiture of -- excluding the divestiture of Perceive. While this growth was attributable to the signing of minimum guarantee renewals for our codec and audio solutions with certain large CE customers, other agreements expected to be concluded were not signed due…

[Operator Instructions] Your first question comes from the line of Jason Kreyer with Craig-Hallum.

Looking for just a little bit more clarity on the volatility or maybe kind of shortfall between Q2 and Q3. You gave some clarity on the consumer electronics side of things. Curious, those deals that didn't -- I guess, did these deals get signed? Did they get signed for just shorter duration? Or do you still expect these things to get signed? And then curious for any clarity outside of consumer electronics, like you had mentioned the ad market. And I'm just curious kind of what you're seeing there.

Sure. I can take that one, Jason. So what we saw in Q2 was a -- I think I would characterize it as some uncertainty in the near-term outlook from our customers, which have them, I think in the cases we saw, less likely to take longer-term deals or to kind of complete the deals we put in front of them. And so as to whether or not they actually get signed, it's TBD, but it was really just a delay. I think it's probably how I'd characterize it right now. As we look at the advertising market, I think we've seen that there has been a similar degree of uncertainty as one looks forward. So we kind of took that into consideration into our revised range that we provided. That help?

Yes, that helps. A follow-up, just sticking on the ad market. The long-term monetization plan, you've got a direct sales element right now. You also announced on the call, you've got some new partnerships. Just curious the balance between direct sales and these partners that you announced.

Jason, it's Jon. I think it's obviously going to be a combination of both. We've spent a lot of time working on building connectivity to programmatic infrastructure. But I think there's always going to be a certain amount of campaigns that are going to be sold direct, in part, based on the needs and the nature of things, home page ad unit selling, for example, versus some of your other programmatic ad units. But I think it's our intent I think -- and maybe building on your last question, recognizing that at a time when advertisers are pulling back or maybe looking in some cases for more efficient or lower cost solutions in a troubled environment and there's a move towards bigger ecosystems and we're still in the process of building scale, I think working with partners aggressively to help make sure that as our footprint comes online and our audiences can be targeted that we tap into partners as much as we can. I think that'll help in the near term kind of deal with or mitigate some of the environmental conditions. And over time, obviously, we'll be able to either make the choice to extend those agreements in bigger ways or as things normalize, we will adjust accordingly.

And your next question comes from the line of Hamed Khorsand with BWS Financial.

So first off, could you just talk about the dynamics of your ad platform and how you're expecting to grow that this year given that you're expecting unit volumes to decline? So wouldn't that actually have a negative impact on what you get on the platform?

There may be some mixing of different data facts there, Hamed. The -- we expect our monthly active user footprint to grow. And as we said, we think we're on track to hit 5 million or more monthly active users, which would be up from where we are at 3.7 million. And so we'll have more viewers and more active users through which to tap into advertising. I think part of what's happening behind the scenes is that user base or those MAUs are spread out over a wider geography. So we're also naturally working on underneath building more scale in key markets because it's that scale in those key markets that ultimately makes your platform more interesting and desirable to advertisers. And the other thing we're going to be doing is working, as we said just a second ago to Jason, with partners to make the inventory more available through our partners to ultimately see revenue growth. So there is a natural kind of buildup that happens in general as you're looking to optimize a monetization platform and you're trying to optimize viewing and merchandising of fast content for consumers through the interface. There's a lot of work that goes on for a long period of time. But I think the point is without footprint growth as a fundamental starting point, you can't -- it's very hard to grow meaningful amounts of revenue. Our footprint continues to be on a very strong trajectory. and we have more partners expanding what they're doing from a TV presence perspective in Europe and elsewhere. And as that footprint grows and we increasingly can kind of expose what our unique audience potentially offers to the advertising community, we ultimately will be able to not only better sell that but ultimately drive more monetization value.

Okay. And my other question was -- I didn't hear any commentary about stock buyback. At what point would you implement that strategy?

Well, we have authorization to do stock buybacks from our Board, and that's naturally a discussion we are having with the Board, particularly given where the stock is at present. So I think you can see us taking a very close look at that as part of our capital allocation strategy.

We have reached the end of our call today. I'd like now to turn the call over to CEO, Jon Kirchner.

Thank you, operator. I think it's fair to say that, no doubt, we are operating in an environment with a certain degree of uncertainty, which affects our industry and our customers and our competitors as well as ourselves. That said, I think we have a very clear strategy for growth, and we continue to make excellent progress toward achieving our 2025 goals, some of which we've already surpassed 6 months ahead of schedule. And in addition, as the results of our second quarter, I think, demonstrate, we've successfully mitigated revenue pressure, I think, with significant reductions in our cost base and strong cost management. So our view of the opportunity ahead of us is really unchanged. And over the back half of 2025, we remain confident in our ability to further build the strategic foundation for rising revenue and profitability as we get into '26. And I'd like to thank clearly our entire Xperi team for their focus and strong execution on our strategic objectives as we collectively strive to create shareholder value. Thank you for joining us today, and we look forward to keeping you apprised of our progress. Operator, this ends today's call.

That concludes today's call. Thank you all for joining. You may now disconnect. Everyone, have a great day.