Xperi Corp Aktie

Good day, everyone. Thank you for standing by. Welcome to the Xperi First Quarter 2026 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.

Yes. Thank you, Abby. Good afternoon, and thank you for joining us as Xperi reports its first quarter 2026 financial results. With me in today's call are Jon Kirchner, Chief Executive Officer; and Robert Anderson, Chief Financial Officer. In addition to today's earnings release, there's 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'd 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 the MD&A sections in our SEC filings, including our Form 10-K for the year ended December 31, 2025, and our Form 10-Q for the quarter ended March 31, 2026, 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.

And last, a replay of this conference call will be available on our website shortly after the conclusion of this call. I'll now turn the call over to Xperi's CEO, Jon Kirchner.

Thank you, Sam, and thank you, everyone, for joining us on our first quarter 2026 earnings call. Overall, the first quarter results are evidence of the success we're achieving in delivering on our financial objectives and the notable progress we've made in delivering on our monetization strategy that we outlined for the year.

Let me first provide an overview of the progress we made during the quarter against our key goals and priorities, progress that gives us confidence in our ability to monetize our growing platform. During the quarter, our TiVo One footprint grew to exceed 5.5 million monthly active users, and our AutoStage footprint grew to over 16 million vehicles globally.

In addition to footprint growth, both our product feature set and ecosystem expanded, and we continue to add advertising partners and sellers to the TiVo One platform. Taken together, this progress combined to help us accelerate advertising monetization, resulting in Media Platform revenue growth of 45% year-over-year.

We've also started to reap benefits from the strategic investments made over the past few years as evidenced by our results. Turning to our financial results for the quarter. I'm very pleased with the strong start to the year, which reflects both solid execution against our strategic plan and earlier-than-planned contract signings within CE and Connected Car. As I said, I'm particularly pleased with the progress we're making on driving monetization across our business. Given these results, we reaffirm the guidance we gave for the full year.

Let me now go through each of our four business areas, starting with Media Platform. We recorded $12 million of revenue for Media Platform in the quarter, reflecting year-over-year growth of 45%, primarily driven by growth in advertising monetization. We experienced progress through our direct sales programs as we continue to execute campaigns across our owned and operated inventory and also began to benefit from our new partnerships.

As noted earlier, our footprint also continued to grow as TiVo One monthly active users more than doubled year-over-year to 5.5 million. Just after the end of the quarter, we signed a multiyear partnership with Samba TV, a television technology company that offers real-time insights and audience analytics. Through this partnership, we're adding intelligence and measurement capabilities to TiVo One Connected TV inventory. This collaboration bolsters our TiVo ads business by enriching our connected TV advertising platform with Samba's industry-leading data and analytics, thereby improving ad targeting and campaign performance measurement.

The relationship expands TiVo's ad sales and measurement capabilities, and we believe positions the TiVo One ad platform as an even more valuable cross-screen advertising solution for advertisers and agencies seeking better CTV audience targeting and comprehensive campaign insights.

Average revenue per user for TiVo One was $7.10, a slight decrease from the fourth quarter as over the trailing 12 months, the number of average monthly users grew faster than monetization revenue. As advertising monetization revenue accelerates, we expect ARPU to advance toward double-digit dollars in the second half of 2026.

Moving to Connected Car. AutoStage footprint expanded over 45% year-over-year, reaching over 16 million vehicles across 13 automotive brands. Just after quarter end, we launched AutoStage Broadcast Portal, a subscription service that we believe delivers unprecedented visibility and insights into audience behavior and listening metrics across 300 U.S. radio markets.

In addition, we signed multiyear HD Radio renewal agreements and launched HD Radio in new models, including from Audi, Honda, Mercedes and Toyota. We also continue to advance our connected car road map, including advanced sound features and expanding services that are expected to support broadcaster and OEM partner advertising monetization.

Moving to our Pay TV business. As noted earlier, our IPTV subscriber base continued to grow, increasing 19% year-over-year to reach 3.28 million subscriber households at quarter end. During the quarter, we signed the first agreements for new service offerings such as programmatic dynamic ad insertion and our native digital rights management. In addition, we delivered an innovative 4K sports experience with multi-view capability to IPTV households for the Winter Olympics and Super Bowl.

We also expanded our set-top box partnership with Kaon and executed a multiyear discovery agreement with DirecTV.

Moving to our consumer electronics business. During the quarter, we renewed DTS decoder and post-processing contracts with leading TV brands, including Vizio, Xiaomi, TCL and a major U.S. retailer. We also entered into a multiyear partnership with Tencent Music, China's leading music platform for DTS:X encoding of its music catalog, offering immersive audio as a premium feature to Tencent/QQ Music subscribers.

Overall, these renewals and partnerships support our focus on expanding the adoption of our consumer audio technologies. As we put our 2026 goals in context, we made strong progress toward our objectives in the first quarter. Our monthly active users on the TiVo One platform continued to grow, reaching 5.5 million at quarter end, more than doubling from the same period last year. We remain confident in reaching our target of over 7 million monthly active users by year-end.

On the monetization front, Media Platform's 45% year-over-year revenue growth was driven primarily by growth in advertising monetization. As our ecosystem and advertiser engagement expands, we believe we have a clear plan to reach our goal of doubling revenue to over $80 million. Also, as monetization revenue from advertising and data sales continues to grow in line with our expectations, we expect the TiVo One annual revenue per user, or ARPU, to finish the year above $10.

Lastly, we've seen some very exciting progress on AutoStage, our connected car platform. While footprint continued to expand well past all of our original goals, we are now seeing clear demand among broadcasters and advertisers for the data coming off our platform. The first data license agreements are expected in the second quarter with more to follow, and we plan to commence advertising trials with partners in the U.S. and Europe later this year.

Overall, we remain very pleased with our start to 2026. Let me now turn the call over to Robert to discuss our financial results in more detail. Robert?

Thanks, Jon. Let me start by reviewing the revenue results for the quarter. Overall, revenue finished at $114 million, essentially flat year-over-year. Pay TV revenue decreased 8% as expected to finish at $46 million, driven by a decrease in core Pay TV from classic guides and end-of-life of legacy consumer products that was partially offset by growth from our IPTV solution.

Consumer Electronics recorded $18 million of revenue, a decrease of 19%, primarily due to nonrecurring revenue from minimum guarantee arrangements and audit settlements in the same period last year as well as memory-related challenges in certain end product categories.

Our Connected Car business grew 14% to $38 million due primarily to a multiyear minimum guarantee arrangement signed during the quarter. Lastly, Media Platform grew 45% to $12 million, driven primarily by growth in advertising monetization from a host of sources, including direct sold revenue, new partner revenue and a linear TV campaign spend.

Looking at overall financial results, our non-GAAP adjusted operating expense decreased 14% year-over-year due primarily to workforce reductions that have occurred over the past year as we have focused the business on our growth areas. We posted $25 million of adjusted EBITDA or 22% of revenue, an improvement of almost 8 percentage points over the prior year.

GAAP loss per share was $0.17 and non-GAAP earnings per share was $0.23. Turning to the balance sheet and statement of cash flow. We finished the first quarter of 2026 with $70 million of cash and cash equivalents. It is worth noting that in early April, we received the final $12 million payment related to the sale of Perceive to Amazon. As expected during our seasonally low first quarter, operating cash flow usage in the quarter was $18 million, an improvement of $4 million from the first quarter of 2025.

Cash usage in the quarter was primarily due to the payment of accrued compensation, which occurs in the first quarter of each year, along with $8 million of payments related to employee departures from the workforce reduction announced in November.

We had $23 million of free cash flow usage in the quarter, an improvement of $4 million from the same quarter last year. In terms of financial outlook for the year, we are reaffirming our annual guidance that was provided in February. As noted previously, our revenue range of $440 million to $470 million take into account our view of broader market risks across our business. In terms of revenue timing during the year, for Q1, we executed certain agreements earlier than we had planned, and we expect to see a similar trend in Q2.

Therefore, we now expect revenue for the first half and second half of the year to be relatively even as opposed to being slightly more back half weighted as previously projected.

Let me turn the call back over to Jon.

Thanks, Robert. To sum things up, we're very pleased with the results of the first quarter. Customers are engaging with us earlier in the year than anticipated, highlighting our relevance and growing momentum, which positions us for an even stronger start. Further, our results clearly demonstrate the progress we're making against our monetization strategy. That concludes our prepared remarks. Let's now open the call for questions. Operator?

[Operator Instructions] And our first question comes from the line of Jason Kreyer with Craig-Hallum Capital Group.

This is [ Thomas ] on for Jason. First, Jon, you called out in the PR that you guys are beginning to see an inflection point in monetization strategy. Can you sort of talk about what the drivers are that are catalyzing this inflection?

Well, I think a couple of things. First, we have worked for the last 2 years to begin to build a broad enough footprint to have the scale necessary to begin to attract advertisers and partners to our platform to reach unique audiences. And I think those efforts as we're now at 5.5 million MAUs is certainly a key part.

The second is that we have also worked in tandem to continue to build out and connect our TiVo One ad platform to the broader advertising ecosystem. And as that gets continually worked to, if you will, make sure all the plumbing is continually being optimized. I think that also enables more programmatic ad volume to flow.

And thirdly, as we are now making a bigger presence known and the uniqueness of some of what our platform offers in terms of audience engagement, that is driving advertiser interest. And through partnerships, we have more sellers out there beyond just our direct sales force. And I think all of which is kind of combining to really begin to drive this business, I think, quite positively, and it's why we expect this year to see Media Platform revenue doubled year-over-year. And so I think while there's still plenty of work, I'm very, very pleased with how this seems to be taking shape.

That's great. And maybe one follow-up. When we look at your operating expenses in Q1, does that sort of represent all the cost-cutting initiatives you put in place? Just kind of trying to determine if this is the right cost base to build off of for the remainder of the year as we sort of move forward?

Yes. Most of our work on the cost cutting is complete at this point. And I would warrant that Q1 is a good representation of the run rate for the remainder of the year.

And our next question comes from the line of Matthew Galinko with Maxim Group.

Maybe firstly, can you touch on how unit availability is today in the U.S. market and how kind of that user growth is shaping up between U.S. and Europe? And then I'll ask a follow-up.

Sure. So Matt, similar to what was the case last quarter, the majority of our TiVo One Connected devices are in Europe. I think on a relative basis, you're going to continue to see that grow faster than the U.S., the U.S. being a more competitive market, et cetera. We do expect, however, there to be more TV volume in the U.S. later this year. And we have both smart TVs and connected set-top boxes. There are operators that are -- the distinction is not important because they're all connected to our TiVo One ad platform. So this is all about managing the home screen and where content is being aggregated and ultimately being selected and the ability to advertise in stream and on homepage, et cetera, across these platforms.

So I would say you're probably looking at a balance, roughly 60% Europe, 40% U.S.

And just any thoughts on, I guess, the capital structure, particularly given the kind of the shift in pickup in the Media Platform business and the collection of the received payment. Does that change anything about your position towards debt on the balance sheet? Or how do you feel today?

Well I think we continue, like everyone, right, to be operating in an uncertain environment. I think nothing has fundamentally changed with our capital allocation policy. which is we carry a small amount of debt on the balance sheet. Obviously, we want to fund importantly, our growth initiatives as our first priority and then look to opportunistically return capital through buybacks as appropriate as you balance both the need for cash internally along with debt paydown and ultimately, that return of capital. So as we still -- as we sit here today on $80-some million in cash, I don't think our perspective broadly changes as we start to see more material growth as we go forward.

Obviously, it's a conversation that we and the Board have regularly. And to the extent that we want to dial up any element of that slightly more than another, certainly a matter of constant conversation.

[Operator Instructions] And our next question comes from the line of Hamed Khorsand with BWS Financial.

Could you just talk about -- you're making good advancement here on how many people are using your AutoStage, but why wouldn't that translate into higher Media Platform revenue for you right now?

Hamed, certainly, it ultimately will lead to more data and advertising-based monetization. But one of the things we have talked about is that in the course of this year, as we kind of exceeded the 10 million to, let's call it, 12 million units kind of mark that there'd be enough scale to attract both advertisers and people interested in that data more meaningfully. And so it's just simply a matter of timing. It's just where we are. You will, in fact, see, I think, a very, very valuable and interesting platform to both broadcasters and advertisers take shape where there's, we think, a meaningful amount of opportunity. And you'll kind of see it as we lean ahead with our first license -- data licenses happening in the broadcaster space likely this quarter.

And we have no further questions at this time. So I will now turn the conference back over to Mr. Jon Kirchner for closing remarks.

Thanks, operator. With a great start to the year, we can see momentum building in our business, and I'd like to personally thank our customers and partners. In addition, I appreciate the commitment of the entire Xperi team as we continue to deliver on our plans and strategies. We look forward to sharing further updates on our next quarterly conference call, and thank you, everyone, for joining today.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Good day, everyone. Thank you for standing by. Welcome to the Xperi Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Sam Levinson from Arbor Advisory Group. Sam, please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us as Xperi reports its fourth quarter and full year 2025 financial results. With me on today's call are John Kirchner, Chief Executive Officer; and Robert Anderson, Chief Financial Officer.

In addition to today's earnings release, there's an earnings presentation on our Investor Relations website at investor.experi.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 our 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 Form 10-K for the year ended December 31, 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 the 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'll now turn the call over to Xperi's CEO, Jon Kirchner.

Thank you, Sam, and thank you, everyone, for joining us on our fourth quarter and full year 2025 earnings call. As we finish the year, it seems an appropriate time to look at the investments made over the past few years. appreciate our recent progress in hitting key metrics that set the stage for future growth and discuss the next phase of focus for the business, substantive revenue increases through advertising and data monetization.

Let me first provide an overview of the progress we made during the quarter against this past year's goals. Progress that continues to give us confidence in our belief that we're reaching a key inflection point as a business. There are 3 key areas of progress over the past year. First, at the end of 2025, we reached 5.3 million monthly active users on our TiVo One Ad platform, surpassing the year's goal of $5 million and registering an increase of over 250% over the course of the year. As I've noted in the past, footprint growth is critical for us to reach larger scale in the U.S. and the larger European countries which in turn is expected to facilitate more effective monetization of our installed base.

Next, in the connected car market, our DTS AutoStage footprint also continued to grow, reaching over 14 million vehicles. 4% growth when compared to the prior year. We believe AutoStage is a unique platform, both in terms of scale and reach, and we are already seeing signs of the platform's value as we progress advertising and data monetization trials with ecosystem partners. And finally, in our Pay TV business, our video over broadband subscriber count grew 25% year-over-year to reach 3.25 million subscriber households. Subscription-based revenue from IPTV continues to build, which we believe will provide a balance within our Pay TV business as revenue from our older Pay TV products is expected to continue to decrease.

Thus, we expect the Pay TV business will level out over the next several years as our IPTV business continues to serve those customers that want a flexible IPTV streaming bundle in a modern, rich and compelling user interface. We also anticipate broadband households will provide additional streaming monetization opportunities. Turning to our summary financial results for the quarter. We recorded consolidated revenue of $117 million, a decrease of $6 million compared to last year as growth in media platform and connected car were more than offset by a combination of anticipated decrease in consumer electronics, driven by lower demand and memory cost and supply chain issues and Pay TV, which benefited from minimum guarantee arrangements recorded in 2024 that didn't occur in 2025.

During 2025, we proactively reduced non-GAAP adjusted operating expense lowering it by 13% compared to 2024. This change was primarily due to workforce reductions that were implemented over the past year. We achieved adjusted EBITDA of $22 million for the quarter, bringing the year's adjusted EBITDA to $77 million or 17% of revenue, which was at the high end of our outlook range for the year. We also recorded operating cash flow of $4 million in the quarter bringing operating cash flow close to neutral overall for the year. Let me now go through each of our 4 business areas, starting with Media platform.

As noted earlier, we reached a key milestone for our TiVo One Ad platform by hitting 5.3 million monthly active users at year-end, a remarkable achievement for both growth on the platform and acceptance of our TiVo operating system into the market. We continue to add new capabilities for the TiVo operating system, including the deployment of black nut cloud gaming and demonstrations of the operating system directly on high-end mini LED smart TVs, set-top boxes and sound bars. We also deployed a video-based homepage ad unit to provide advertisers with more ways to reach our audiences.

Within Media Platform, we achieved significant revenue growth in advertising when compared to a year ago, with average revenue per user for TVO One finishing the year at $7.80, down slightly from the prior quarter due to our user base growing faster than related monetization revenue. We expect ARPU to take a bit of time to normalize as both revenue and footprint growth are expected to accelerate on the platform. Advertising partnerships continue to be an important foundation for our goal of accelerating revenue growth and during the quarter, we entered into new agreements with Titan Ads, OpenGlass and Anoki, all well-known industry resellers of premium CTV inventory such as home screen video ads in the European and U.S. markets. We also launched FreeWheel as a new supply-side demand partner and began generating revenue through the partnership.

Our advertising business also saw progress through our direct sales efforts with home page ad campaigns executed for clients, including Hallmark Media, Freeform, NBC Universal and TNT. Moving to Connected Car. The momentum for DTS Auto Stage continued with the signing of Mercedes-Benz to launch DTS Auto Stage video service powered by TiVo. This win adds another major OEM launching on our connected car video platform, which we believe cements our position as a leading supplier of media platforms to automotive OEMs. We -- it's worth noting that Mercedes is the first car brand to offer all 4 of Xperi's connected car solutions, HD Radio, [ DTS:X ] immersive sound, Auto stage audio and video powered by TiVo.

As a leading brand that often sets direction for the automotive industry, we believe Mercedes support furthers momentum for our media platform and technology solutions. At year-end, Auto Stage had a footprint of over 14 million vehicles from many automotive brands. Also during the quarter, we added a significant number of radio broadcasters across the U.S., Europe, Australia, LatAm and Africa further expanding the global services connected to the Auto Stage platform. Our HD Radio solutions saw continued adoption with several new models from Toyota, Honda, Audi and others launching in the fourth quarter. We also signed a multiyear agreement with a large U.S.-based Tier 1 supplier that is expected to provide a cost-optimized HD Radio implementation over the next few years. which we believe will further propel the growth of HD Radio among major car brands.

Finally, we also signed a multiyear DTS audio deal with a large Asian Tier 1 supplier which is expected to secure our DTS to code in a number of future programs. Moving to our Pay TV business. As noted earlier, our IPTV subscriber base continued to grow, increasing by 25% year-over-year to hit 3.25 million subscriber households at year-end. For our managed IPTV service, we posted wins with Prism Fiber in Mid-tel in the U.S. and with Celerity in MOPC in Canada. We also continue to grow our broadband only wins, including new deals with Bluestream fiber, Buckeye Prism Fiber, mid-tail, Carnegie Hickory and Velocity.

During the quarter, we signed multiyear agreements with ClaroVTR for IPTV services in Latin America and with Frontier Communications in the U.S. for content discovery services. In addition, we signed a notable multiyear agreement for classic guides technology with Canadian-based telecom operator, Cogeco. Moving to our consumer electronics business. During the quarter, we continue to expand the IMAX Enhanced program with new product categories such as high-end earbuds. We also saw adoption of the program by Yamaha and the signing of a key renewal with Onkyo.

Now all major audio video receiver manufacturers are participating in the IMAX Enhanced program, which we believe reflects its position as the premium audio video solution in the marketplace. We also signed a decoder and post-processing renewal with Sound United, which owns premium brands like Denon and Marantz. Lastly, we signed a multiyear agreement with a leader in the PC space covering sound technologies for consumer products as well as extending audio technology penetration into its commercial products. In a few moments, I'll turn to a discussion of our pivot to audience monetization, advertising and growth -- but let me first turn the call over to Robert to discuss our financial results in more detail.

Robert?

Thanks, John. Let me start by reviewing revenue results for the quarter. Overall, revenue finished at $117 million, lower by 5% when compared to last year. As John noted earlier, we had 15% revenue growth in Media Platform due to significant growth in advertising revenue, along with 5% growth in connected car revenue from higher minimum guarantee arrangements that were completed during the quarter.

This growth was more than offset by a 21% decrease in consumer electronics revenue, driven by lower customer demand due to memory cost and supply chain issues, along with a 7% decrease in pay TV revenue from minimum guarantee arrangements recorded in the prior year and due to lower revenue from our end-of-life consumer DVR business. Looking at overall financial results. Our non-GAAP operating expense for the quarter improved by $10 million or 13% compared to the same quarter of 2024 and due primarily to proactive personnel reductions implemented over the course of 2025. We posted $22 million of adjusted EBITDA or 19% of revenue essentially in line with last year's numbers.

Non-GAAP diluted earnings per share was $0.24, lower than the prior year by $0.15 due primarily to lower non-GAAP tax expense in the fourth quarter of 2024. Turning to the full year results. We finished 2025 with revenue of $448 million. This was a 9% decrease compared to the prior year due to 2 primary areas. First, we saw a 21% decrease in pay TV revenue due to an expected reduction in core pay TV revenue from overall industry trends, a challenging comparison with a significant multiyear minimum guarantee agreement that we recorded in 2024 and and from the ongoing reduction in our consumer business as our DVR products have entered end of life. And second, our consumer electronics business decreased by 5% and compared to 2024 due to disruptions in unit volumes from memory supply issues as well as the comparable of revenue from the divested perceived business that was sold in late 2024. We -- our Connected Car business posted 12% year-over-year growth due to a higher volume of minimum guarantee arrangements where the revenue is required to be recorded upfront.

Our Media Platform business was essentially flat year-over-year as growth in advertising revenue was offset by expected decreases in both middleware licensing and revenue from our Stream 4K device. Turning to overall financial results for the year. Our non-GAAP adjusted operating expense of $274 million improved by $60 million or 18% and compared with the prior year due primarily to reductions in head count implemented during the year, the divestiture of perceive at the end of 2024 and the shifting of certain operating expenses to cost of revenue as newer products have begun generating revenue. We finished the year with adjusted EBITDA of $77 million or 17% of revenue, resulting in growth of 2 percentage points when compared to 2024.

Turning now to the balance sheet and statement of cash flow. We finished the fourth quarter of 2025 with $97 million of cash and cash equivalents, which was level with our balance from the third quarter of 2025. And we generated $4 million of operating cash flow in the quarter, which was $3 million higher than the same quarter in 2024. For the full year, our operating cash flow was $0.5 million usage right in the middle of our updated guidance range of neutral operating cash flow, plus or minus $10 million. Notably, achieving essentially neutral operating cash usage for 2025 and demonstrates a significant improvement over prior year, where our operating cash usage was $55 million.

We had $2 million of free cash flow usage in the quarter, let me now turn the call back over to John to cover our key operating metrics and objectives going forward.

Thanks, Robert. 5 years ago, when we began the journey to combine TiVo and Xperi, we recognize that the product business would need to go through a meaningful transformation, significantly changing cost structure and operating model as viewership shifted from traditional media to streaming. As we close out 2025, a few years into our journey as a stand-alone independent company. I'm pleased to report that many of our previously stated long-term goals have either been achieved or we have direct line of sight to accomplishment in the next 12 months.

This includes our goal of growing our MAU platform from the more than 5.3 million users towards our goal of at least $7 million, something we expect to surpass during 2026. We also set an initial goal of 4 smart TV partners, which has now been exceeded for a total of 10 which we believe validates the market need for an independent TiVo OS platform. In addition, we sought to grow our IPTV subscriber base to at least 3 million subscriber households, a goal that has now been surpassed. In Connected Car, we had previously set a long-term goal of building the Auto Stage platform footprint to at least 15 million vehicles.

By year-end, we had surpassed $14 million and we have line of sight to meeting and exceeding our goal of 15 million vehicles in 2026. With that scale, we expect to progress auto monetization trials with broadcast and OEM vehicle partners with the goal of enabling monetization based revenue growth to accelerate in 2027 and beyond. So as we made multiyear investments and seen tremendous progress in building the critical foundations for long-term for a long-term monetization business in both the home and the connected car, we feel confident in our belief that we've reached an inflection point in our business with increasing amounts of audience engagement across our home and connected car platforms as consumers watch video and listen to radio content.

We have the opportunity to connect advertisers with our unique audiences, providing enhanced targeting and data solutions. We believe that being the only independent omnimedia platform with scale that can deliver high-value TV home screen ad units, along with the opportunity to reach unique engaged audiences in the connected car is a combination that differentiates our media platform from others in the marketplace. This strategic positioning combined with our established presence in both programmatic and direct sold advertising markets with anticipated growing demand for premium ad inventory gives us confidence in our expectation of successfully selling our owned and operated ad inventory to drive meaningful monetization revenue growth.

We expect that during 2026, we'll see media platform revenue double and that growth will continue to build in 2027 as our footprint continues to scale, and we have more sellers working with our platform. We also expect that as footprint scales and ad sales ramp up, ARPU will normalize as a result, as we exit 2026, we expect ARPU to exceed $10 growing over time towards $20-plus driven by increased engagement and ad optimization. As we turn to 2026, let me provide a few business metrics we'll be using to gauge our progress this year. First, our goal is to grow our MAU footprint beyond $7 million. This, in turn, is expected to expand the opportunity for monetization downstream over the typical 5- to 7-year life of TV ownership.

Second, as we expand our selling efforts -- our goal is to double media platform revenue and exit the year with ARPU above $10, which will provide further evidence that we're selling ever more data and advertising across our media platforms. Third, with an installed base of over 14 million vehicles with DTS AutoStage, we expect to generate ads and data monetization revenue on the AutoStage footprint. Taken together, Achievement of these goals will provide further visibility to the growth potential and strategic value of our media platform business.

Let me now turn the call back to Robert to discuss our outlook for 2026.

Thanks, John. Before I provide our outlook for the year, I think it will be helpful to understand how the parts of our business are trending. As Jon discussed earlier, we expect Media Platform revenue to double relative to 2025 and reflecting our belief that we have reached the inflection point for advertising monetization. We believe this growth in addition to continued growth in our connected car business, will substantially offset anticipated decreases in our Pay TV and consumer electronics businesses in 2026.

Notably, we believe certain legacy Pay TV product lines are nearing the end of significant decreases and the business is expected to level out behind IPTV subscription growth over the next several years. Also, we expect our consumer electronics business to face challenging comparisons in 2026 due to a number of multiyear deals recorded in prior periods that will impact revenue in 2026 and but are expected to be recontracted in 2027.

Now to our outlook for 2026, we expect full year revenue to be in the range of $440 million to $470 million. This range reflects our expectation of doubling media platform revenue and takes into account our current view of broader market risks across our business, including memory and supply chain challenges, and other macro uncertainties. Consistent with the normal pattern of our business, we expect the year's revenue to be slightly weighted to the back half of the year. For adjusted EBITDA margin outlook, we expect a range of 17% to 19%, which reflects the benefit of expense reductions from 2025 and with the range corresponding to the width of our revenue guidance range.

Operating cash flow is expected to be between $15 million to $25 million. and capital expenditures to be between $15 million and $20 million, yielding positive free cash flow at the midpoint of these ranges. On other items, we expect non-GAAP tax expense to be approximately $20 million and our diluted share count to be between 48 million and 49 million shares. Also, from a GAAP-based perspective, we expect stock-based compensation expense for 2026 to be approximately $31 million, lower by 25% from the $41 million incurred in 2025.

Let me turn the call back over to Jon for final comments.

Thanks, Robert. As you can gather from our narrative on this call, we're pleased with the significant progress we've made on our key strategic objectives. We believe we are now at an inflection point for the growth of advertising revenue on our media platforms business. It's good to finally have some wind at our backs rather than facing consistent headwinds in our efforts to transform and reposition our business. That concludes our prepared remarks. Let's now open the call for questions. Operator?

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

Great. Appreciate it. So -- just a quick question on the Smart TV side. Curious what the mix of that is between European markets and domestic markets and how that's trending or how you expect that to trend over the course of this year?

Yes. Jason, Currently, the TiVo One installed base is basically roughly 60% in Europe, 40% in the U.S. And keep in mind that, that not only reflects TVs, but reflects IPTV boxes that are running the TiVo One Ad platform, which are predominantly in the U.S. I think over time, you'll see that mix start to change as we see a second TV OEM show up in the marketplace and here in the U.S.

But there's no question in the near term, it's going to be more European weighted.

And then you had a release earlier this year, you're launching home screen as on TiVo, that's been a pretty big driver for capturing incremental spend for a lot of platforms out there. Just curious if you can frame your expectations for contribution there.

I think it's an important part of how we think about the monetization opportunities on our platform in part because the home screen is -- represents maybe the most valuable piece of real estate as people begin to engage with content and jump from 1 piece of content to another. We've got a robust offering there from a home screen capability in terms of what the ad unit can do. And I think along with obviously in video ads, along with data monetization, all 3 of which kind of combine to form the basis of our expected revenue growth this year and really represents the revenue in the added monetization business.

For us, I think we feel like we're pretty well positioned. The reactions we've gotten to our home screen ad unit from partners is very strong.

And our next question comes from the line of Amit Khorsand with BWS Financial.

I'm just trying to get clarification on the ARPU for TVO 1, you said there was an acceleration in usage, but you only went up by 500,000 subscribers sequentially. In the prior quarter, you went up by $1.1 million, and you were able to achieve the ARPU -- a higher ARPU. So I'm just trying to understand why ARPU declined this time even though the growth was lower.

So Amit, you've got a couple of things that are going on in the revenue calculation, which I think we actually publish a definition of how you get there. There is -- remember, it's a lagging indicator over trailing quarters. So depending on how that average moves relative to how dollars are starting to appear on the platform, there's also some dollars that are covered in certain campaigns that get amortized across your footprint in that calculation. So depending on the relationship between the growth of footprint to the growth of revenue. That's why the ARPU metric will certainly move around at the beginning.

Over time, as you end up with a more normalized situation where there's more, let's call it, consistent growth on the platform, and there's obviously ever more the numerator of that calculation, continues to grow. I think our expectation that you'd see it more consistently be up and to the right, Robert.

And let me add in. I think for the denominator here for the average monthly active users. That number has -- the number has continued to increase pretty substantially. If you just look at MAU growth from Q3 to Q4, a sequential growth, so $4.8 million to $5.3 million. And over the course of the last year, it's grown from $1.5 million at the end of 2024 to $5.3 million at the end of 2025. So 50% growth. What we're finding is that our user base is growing faster than the attendant advertising associated with that base. It takes a little while for the new TVs to start to generate revenue.

So that might explain a little bit why you saw -- well, that does explain why you saw a slight decline in the ARPU down to $7.80 a at the end of the year, that's going to fluctuate a little bit just depending on the growth rates of the 2 pieces, the numerator and the denominator. Does that help, Amit.

That's helpful. And then the other question is, are you done with the cash expense side of the cost savings initiatives, the head count reduction that you were undertaking?

No. We'll have some costs in Q1 as well. We incurred some of the cash expense in Q3 and -- excuse me, Q4, but we'll have some in Q1 as well.

Okay. My last question was you were talking about monetizing the AutoStage platform, I'm assuming this year. Is it -- have you already started doing so? Or is there a time line as to when you expect to do so?

I think it will play out as you get more towards midyear, some of the beginnings of it. We are well engaged on a number of things. And I think the first part that we'll begin to see, Amit, is data-related monetization, more so than ad monetization because we're generating a lot of data from the platform that is of tremendous interest to advertisers and broadcasters and as I said, we're well into a number of conversations. And on the back of that is where you'll see the ads piece of that start to show up. There's continuing work there as well.

So in short, we've got a very, very unique platform that is quite large. And from a from a perspective of thinking about the radio industry with lack of real targetability, et cetera, et cetera, and even measurement still being, let's call it, data in its methodology we have a real-time system that gives a tremendous amount of information to people about what consumers are engaged with what content, et cetera, how trending is happening.

And all of that, I think, puts us in a pretty interesting position. And 1 other adjunct to that, of course, is more effective advertising is almost -- it's completely dependent on having ever better data. And 1 thing that's not lost on us as being 1 of the largest providers of contextual data around media assets, both music and video. It's part of the reason we think as you put all this together, we have a really unique opportunity to to provide unique solutions that are value-added across not only in 1 environment like the car, but across environments as you think about the home and the car.

[Operator Instructions] And our next question comes from the line of Matthew Galinko with Maxim Group.

Will there be a geographic bias to the connected car monetization as that starts coming in, I guess, midyear in '27.

I think, certainly, you'll see -- I would expect you to see it more North America-based initially. But some of the work we're doing is with folks outside the United States already as well. So I think you'll see a European element of that. and possibly further geographic expansion. It's broadly of interest to the industry at large across the globe.

Got it. And as we think about that $20 ARPU number, can you maybe talk about what you're seeing today that gives you confidence that we get there over time? And kind of what time frame are you thinking about getting to that number?

Well, I think what gives us confidence is there are robust markets and tremendous interest in better targeting solutions and premium CTV inventory. And I think being an independent provider plus having heavy using IPTV households that represents some unique audience is not typically part of the mix for many advertisers. We have the opportunity to, I think, optimize engagement on the platforms, which in turn, as the footprint continues to grow, those 2 things will drive higher ARPU where there's established markets for what we're trying to do. So -- and we're working as we talked about on this call, in particular, with a number of partners who have tons of experience, and in many ways, are making the market happen today with selling these ad products and connecting them with brands and advertisers who have an interest in reaching consumers.

So I think everything about it gives us confidence that provided. We continue to execute well and plug into the various ad markets, whether they be programmatic or with direct sellers, whether they be employed by us or employed by resellers that if we have the ad units and we have the audiences that continue to grow as we continue to optimize engagement that you will ratably continue to see ARPU grow -- the exact timing of getting from where we are today to north of $20, I think we're very interested in seeing how with more and more sellers coming online in the course of '26 and how all that plays out. that will give us a better sense of how and when we think we'll achieve that. But we know there's plenty of precedent for those kinds of numbers, we're a little bit different because our mix is Europe and the U.S., not just U.S. alone.

But the 1 thing I would tell you about Europe that may be notable is that there's even larger dislocation between where the ad dollars are in Europe, meaning far more ad dollars, roughly 75% of all your ad dollars in Europe are still connected to linear. Even though streaming viewing obviously, is a as an ever-growing percentage of total audience engagement. And so what does that mean? It means over the next few years, there's plenty of expectation that you're going to see more ad dollars aggressively move out of linear into streaming. And as that happened, the real estate -- as that happens, the real estate around home screen and streaming engaged audiences becomes more valuable, which in turn, will drive up the ARPU associated with that in Europe as well.

Got it. If I could just sneak 1 last question in. On consumer electronics business, I guess, how does the supply chain issue factor into 2026 outlook there? I think you mentioned a lower mix of minimum guarantees also impacting '26. But what is your expectation for supply chain and memory shortages?

Well, I think we know is impacting how people think about their product planning in terms of what manufacturing planning looks like what pricing looks like and in turn, what consumer demand ultimately looks like in the face of potentially more challenging pricing or availability. So I think we -- based on our conversations with analysts and with our industry customers, I think we're taking a cautious view of what that looks like. And remember, a good portion of our business is still unit based. So depending on how that plays out, that will ultimately determine what the CE revenue in total looks like. So I think we're sitting here cautiously just kind of watching carefully. We've also got people that are still grappling with an ever-shifting tariff environment. And what does that mean for their own supply chains and where do they want to be and that kind of thing, which has the impact sometimes of impacting how think about how people think about production plans or even their partners if they're producing with partners.

So I think all of that leads to some slight uncertainties that are factoring into how we think about CE.

And that concludes our question-and-answer session. I will now turn the call back over to Jon Kirchner for closing remarks.

Thanks, operator. We're pleased with the meaningful progress we made last year, and I want to thank the entire Xperi team for their continued focus and execution as we work to deliver long-term value for our shareholders. We look forward to sharing further updates with you on our first quarter call. And that concludes today's call. Thanks for joining, everybody.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Thank you for standing by. Welcome to the Xperi Third 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 third quarter 2025 financial results. With me on today's call are Jon Kirchner, our 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 September 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. And last, a replay of this conference call will be available on our website shortly after the conclusion of this call.

Now I'll turn the call over to Xperi's CEO, Jon Kirchner.

Thank you, Sam, and thank you, everyone, for joining us on our third quarter 2025 earnings call. For those new to our story, we're still learning about our business, I'll start this call with a brief overview of the company and our long-term goals. Xperi is a global software and services company that delivers products through our well-known brands, including TiVo, DTS and HD Radio. Our established and profitable core businesses, which include HD Radio, the digital radio standard in the United States, Pay TV program guides and audio licensing solutions in home and automotive have enabled us to build a strategic, connected and synergistic platform for media monetization. We believe media monetization represents a large and attractive market opportunity. And after investment over the past several years, our growth strategies as an independent media platform are reaching an inflection point.

To put that in perspective, it's important to recognize the progress we've made against the ambitious strategic goals we outlined a few years ago. Today, we have either accomplished or are on a path to realize each of our strategic goals, which collectively represent a pivot for our business and creates a platform that has significant potential to grow and create long-term value.

Now let me provide an overview of the progress we made during the quarter against this year's goals, progress that continues to give us confidence that we are reaching a key inflection point as a business. For media platform footprint, our most critical growth area, we are extremely pleased with the ongoing partner rollout of our TiVo One CTV advertising platform into the U.S. and European markets. We achieved 30% sequential growth to finish with 4.8 million monthly active users at quarter end. The continued growth of our footprint is instrumental for us to reach larger scale in the U.S. and the larger European countries as we work to expand monetization of the installed base. We also continue to engage new industry partners to help monetize our growing TiVo One user base.

In the connected car market, our platform footprint also continued to grow, reaching over 13 million vehicles installed with AutoStage at quarter end. Importantly, as we have now built meaningful scale, we have initiated collaboration with leading audio media companies to monetize this unique and highly valuable footprint. In our Pay TV business, our video over broadband subscriber count grew 32% year-over-year to reach 3.2 million subscriber households. We signed important renewals with customers during the quarter that validate the market commitment to our video over broadband technologies and services.

Turning to our summary financial results for the quarter. We recorded consolidated revenue of $112 million. As expected, revenue was lower than the prior year period, which had included a large minimum guarantee arrangement with Panasonic in our Pay TV business. In the consumer electronics and connected car markets, we achieved year-over-year growth as planned. Our non-GAAP adjusted operating expenses decreased approximately 20% as compared to the prior year. The decrease was due primarily to our continued focus on cost transformation and from the divestiture of the Perceive business in October of last year.

Our focus on cost transformation, investment alignment and improving profitability and cash flow generation has been an ongoing effort at the company. Concurrently with today's earnings release, we announced a workforce reduction of 250 employees spanning the entire business. For the third quarter, we posted $0.28 of non-GAAP earnings per share, achieved positive operating cash flow of $8 million and recorded our second consecutive quarter of positive free cash flow at $2 million.

Turning now to the Media Platform business. I noted earlier that we have reached 4.8 million monthly active users on the TiVo One platform, a key indicator for our business performance and one that continued to increase over the first month of the fourth quarter. Notably, more than 75% of this footprint is located in the U.S. and the 5 largest countries in Europe. Consumer and retailer feedback on TVs with the TiVo OS operating system continues to be very positive, and TiVo's powered by TiVo are available at a range of sizes and price points. For example, a number of recent retailer promotions in the U.K. have highlighted aggressive low pricing for TVs that feature TiVo OS, which we expect will further expand our footprint in that market.

Also, in addition to Sharp, a second brand partner is in production and expected to deliver TVs powered by TiVo to certain U.S. retailers before year-end. We expect U.S. distribution of smart TVs powered by TiVo to scale next year and represent national coverage by the second half of 2026. We are also pleased to announce our 10th TiVo OS TV partnership with the signing of a European brand for a leading Asia-based original device manufacturer. This further validates the strong OEM interest in our cost-effective built-for TV independent platform across a range of partners. We believe large OEMs without their own operating system, leading retail house brands and ODM producers all see unique value in being able to brand the experience, retain their first-party engagement data and participate in long-term monetization.

Given the significant progress we've made in establishing footprint for our TiVo One advertising platform across many brands, we believe now would be an appropriate time to start reporting another key performance indicator, average revenue per user for TiVo One or ARPU. Our definition for ARPU is consistent with industry practice, and we calculate it by dividing the trailing 4 quarters of monetization revenue within the Media Platform business by the average number of TiVo One monthly active users during that same period. Our monetization revenue includes all advertising and data monetization revenue from the TiVo One platform and from other parts of our media platform business.

Our calculated ARPU for TiVo One at the end of the quarter was $8.75, which is approaching the $10 goal we are working toward as we exit 2025 and a metric that over time, we expect to continue to grow to north of $20. ARPU growth is not expected to be linear as it is impacted by not only monetization revenue, but changes in our underlying footprint and in what quarters more unit growth comes online. To help further our goal of growing ARPU for TiVo One in the periods ahead, we recently signed multiple monetization partnerships, including agreements with Titan ads, a CTV industry leader across key EU markets; Kargo, a leading CTV ad reseller in the United States; and comScore, a U.S.-based media measurement leader.

Moving to Connected Car. We continue to grow our footprint for DTS AutoStage and had more than 13 million vehicles using this unique platform at quarter end, the vast majority of which are in North America. While this initial footprint is focused primarily on audio and data solutions, we also secured 2 new video-based AutoStage OEM programs in the quarter, one in Europe and one in Asia. Over the past 2 weeks, we announced and launched an updated version of the DTS AutoStage broadcaster portal, the world's first global in-car radio audience measurement platform. This gives radio broadcasters insights into listening patterns, allows stations to fine-tune programming in near real time and delivers advertisers accurate measurement of the audience engagement across 250 designated market areas.

This level of measurement has traditionally only been available on digital streaming platforms and enables radio stations to deliver higher value to advertisers. The technology and scale of the platform has been years in development. We have now initiated commercial discussions around measurement and data licensing with leading broadcasters and media companies to very strong interest across the industry. Separately, as AutoStage has reached significant scale, we also initiated collaboration with leading audio media companies in the U.S. and U.K. to launch targeted advertising trials on the platform.

We expect these ultimate partnerships will form the basis of additional revenue streams for advertising and data. In terms of HD Radio expansion, several new radio stations went on the air with HD Radio digital broadcasting. New vehicle models were launched by companies such as Audi, Hyundai, Tesla, Mercedes-Benz and Lexus during the quarter. Notably, we also signed a significant multiyear HD Radio contract with a large Asia-based Tier 1 supplier, which is expected to help HD Radio continue to grow with Japanese car brands.

Moving to our Pay TV business. In the third quarter, IPTV subscribers increased 32% year-over-year, reaching 3.2 million households. Revenue was up 18% year-over-year from a mix of subscriber growth in the U.S. and Latin America. We renewed the agreement with NCTC, the National Content and Technology Cooperative, covering over 70 operators in the U.S. This agreement guarantees IPTV subscriber commitments for 4 more years and encourages operators to launch and scale broadband TV.

During the quarter, we continued to see strong interest from video over broadband operators to extend their video offerings with new, more cost-effective OTT video service bundles. As a result, by quarter end, over 40 operators had committed to our TiVo broadband product and over 100,000 households had activated. We secured a multiyear renewal with Mitchell Seaforth Cable TV, or MSC, a key partnership that impacts multiple operators in Canada and which is expected to drive our continued subscriber growth there.

Lastly, at the beginning of October, we exited the DVR hardware business under the TiVo brand, closing one innovative and industry-changing chapter in the company's history. The TiVo brand will continue to empower consumers to find, watch and enjoy the content they love on innovative video over broadband and smart TV solutions. Let me next cover highlights in our consumer electronics business. During the quarter, we renewed a multiyear contract with Vestel to deploy DTS audio solutions across its TV brands. Vestel is the largest television manufacturer in Europe and an important customer and partner to Xperi given their volumes across many brands.

In our IMAX Enhanced initiative, a partnership with IMAX that brings the signature IMAX experience into the living room, we expanded our contract with Sony Pictures to release hundreds of additional titles in the IMAX Enhanced format, coupled with DTS:X immersive audio. These titles will be available for direct distribution through free ad-supporting streaming television. We believe providing free access to the IMAX Enhanced experience offers unique value for consumers and will help our program licensing partners further differentiate their IMAX Enhanced products. We also expanded the IMAX Enhanced program in the home projector category through new agreements with Optoma and Epson.

To wrap up what we've discussed today, our strategic progress is evident against the growth goals we set for the year. Within Media platform, we expect to finish the year above 5 million monthly active users on our TiVo One platform. Further, we've achieved our goal of signing 2 additional partners to reach a total of 10 TiVo OS partners. The ARPU that we announced today of $8.75 brings us closer to our year-end goal of $10. And importantly, we've made progress in securing advertising partnerships that we expect will enable us to monetize our expanding and valuable footprint. For Pay TV, we've had considerable success in activating TiVo One through updates in North America on video over broadband devices. This effort helps us build scale in the U.S. market to further our monetization efforts.

We also achieved our goal of over 3 million subscriber households in our IPTV footprint. Within Connected Car, we've surpassed 13 million vehicles with AutoStage and expect this large and unique footprint to continue growing as new cars enter the market. Also, we've started collaborations with leading audio media companies in the U.S. and the U.K. to launch targeted advertising trials on the AutoStage platform.

In summary, we're confident this strategic progress sets us up for long-term growth, improved profitability and increased cash flow.

Let me now turn the call over to Robert to discuss our financial results. Robert?

Thanks, Jon. I will start by reviewing the revenue results for the quarter. When excluding the impact of the Perceive divestiture, overall revenue was lower by $20 million compared to last year as expected due to a large multiyear minimum guarantee agreement with Panasonic recorded in the prior year period. Looking at each of our primary markets, Pay TV was lower than last year by $32 million or 39% due primarily to last year's Panasonic agreement. Excluding all minimum guarantee agreements from the prior year period, Pay TV would have decreased on a percentage basis in the high single digits, consistent with the overall market.

For IPTV, revenue grew approximately $4 million or 18% as subscribers continue to grow at a brisk pace, particularly in Latin America. For the consumer electronics market, excluding the impact of the Perceive divestiture, revenue grew by $3 million or 20% due to a higher level of new agreements this year, along with higher revenue on a per unit basis from audio technologies and game consoles. In Connected Car, revenue was up by $9 million or 36% due to a higher level of long-term arrangements in this year's number, including the significant Asia-based program that Jon mentioned earlier. Revenue in media platform was approximately flat on a year-over-year basis.

Turning to the income statement. Our year-over-year revenue increased by approximately $2 million, driven by higher costs related to long-term arrangements recorded in the quarter. Non-GAAP adjusted operating expense decreased by $16 million or approximately 20% primarily due to reduced personnel expense as a result of our ongoing business transformation efforts and also from last year's divestiture of Perceive at the beginning of the fourth quarter.

Our adjusted EBITDA was $23 million, a 21% adjusted EBITDA margin, down from last year's $31 million as our expense decrease was more than offset by the lower revenue year-over-year. Our non-GAAP earnings per share was $0.28 compared to the $0.51 we posted in the third quarter last year. From a balance sheet perspective, we finished the quarter with $97 million of cash and cash equivalents, up $2 million from last quarter due to the positive free cash flow of $2 million generated in the quarter. Notably, operating cash flow was approximately $8 million in the quarter, an increase of over $12 million from the same quarter last year due primarily to the absence this year of transaction costs related to the Perceive divestiture and other restructuring costs that occurred last year.

Turning now to our financial outlook. I'd like to cover 2 topics that are related to our outlook. First, minimum guarantee arrangements with customers; and second, the workforce reduction that we announced today. Beginning with minimum guarantee arrangements, which, for simplicity, I'll refer to as MGs. We enter into MGs with our customers to lock in certainty of value, ensure usage of the technology over multiple years and product cycles and to lower the company's service costs. As discussed on previous calls, the accounting standard for MGs creates difficult revenue comparisons on a quarterly basis since revenue is required to be recognized when the agreement is signed.

The amount of revenue is generally recorded as an unbilled receivable on the balance sheet and cash is collected over the term of the agreement. Arrangements average 3 years in length and cash is received when customers are billed quarterly over the duration. We have entered into MGs over many years for our audio technologies within consumer electronics and have more recently seen customer interest in MGs in Pay TV and Connected Car as they offer customers benefits in product planning, supply chain management and pricing. As a percentage of revenue, MGs comprised just over 20% of total revenue in 2024 and are expected to be in the low 20% range for 2025.

Importantly, these MGs are term-based arrangements that are typically renewed when the contract expires. For example, over the past 2 years, approximately 90% of the annualized dollar value of expiring contracts has been a -- MG contracts has been renewed. As such, we consider MG contracts to be ordinary course of business and reoccurring revenue. While MGs may cause comparability issues from one quarter to the next, we believe the locking in of key customers, revenue and predictable cash flows, all with a high probability of renewal has significant strategic value for our business.

Over the next 2 years, as our business continues to move toward greater monetization and advertising revenue, we expect MGs to decrease as a percentage of overall revenue. On the second topic, we announced concurrently with today's release that we are reducing our workforce by approximately 250 people across the company. This action will impact all business and functional areas and represents approximately 15% of our workforce. We view this as an important step to improve profitability and cash flow generation while enabling continued investment in our primary growth areas. We expect to incur a onetime expense of between $16 million to $18 million of restructuring and related charges, primarily for employee severance and related costs and substantially all of which will be completed by the end of the first half of 2026. We expect that these reductions once completed, will generate savings of $30 million to $35 million on an annualized basis. These expense reductions are intended to help offset an expected revenue mix shift as our media platform expands in 2026, which we expect will initially have higher cost of sales than other parts of our business.

Turning now to our outlook for 2025. We are reiterating our annual revenue guidance range of $440 million to $460 million and our adjusted EBITDA margin of 15% to 17%. While we expect to incur certain cash charges associated with the restructuring of our workforce, we also expect some cash savings in the quarter as employees depart. As such, we are not changing our outlook for operating cash flow, which is still expected to be neutral, plus or minus $10 million.

Looking ahead, while we are not providing 2026 guidance at this point, our preliminary view is broadly consistent with consensus estimates for next year. We plan to share a more formal outlook for 2026 when we report our fourth quarter results.

That concludes our prepared remarks. Let's now open up the call for questions. Operator?

[Operator Instructions] Your first question comes from the line of Matthew Galinko with Maxim Group.

Can you maybe touch on the pieces that drive the initially lower gross margin in the media platform business that scales. And sort of how long do you expect to kind of operate at a lower margin before you reach kind of your terminal or a mature margin?

Well, I think there's a couple of things going on. There is a semi-fixed cost of operating a platform as you start to grow that business. And so that will hit things harder initially. But as you build scale, your marginal advertising dollars will obviously come through at higher margin. There are also various deals that we have done pretty customarily that help us ensure there's plenty of content on the platform and whatnot and other market, what I'll call market incentives that as revenue starts to emerge within that business, some of those costs will be recognized.

So I think it's elements like that, but we have a very strong belief that over time, as you certainly build significantly more revenue scale that you should -- you will see margin acceleration in that business.

Got it. And I guess as a follow-up, as you begin to deliver targeted ads to automotive, do you expect a similar kind of individual fixed cost basis that you need to clear before contributing at a higher margin level? Or is that kind of all amortized through the same fixed costs as you do kind of on the traditional side?

I mean some of -- I would say it's more of the latter. It's kind of part and parcel to the platform we've been working on for some time. And I think the way to think about the opportunity there is that we are unlocking a level of measurement that currently does not exist in radio broadcast. And the interest around being able to run targeting and measurement in that space is very high. It's obviously a sizable business and has been for a long time. But what we've been able to do now is we've finished some of the platform development work, and we've also seen the scale get to the point where we can offer, I think, a very compelling solution to various partners, whether it be for data or for advertising, I think we are -- and this was part of the -- I think we're turning the corner into a really interesting next chapter as we look ahead over the next 12 to 24 months. And this is something that we've been working towards for some time, part of the broader vision, but it is great to see it coming together.

And the next question comes from the line of Steve Frankel with Rosenblatt.

Jon, congratulations on the progress and starting to scale the business. And maybe help me with a couple of numbers for starters, I appreciate the TiVo MAU progress, but maybe tell us where that was last year in the third and fourth quarters so we can gauge it going forward.

That's a good question. I don't have that exact number off the top of my head. Is your question from a geographic standpoint, Steve, or total MAUs.

Total MAUs.

Much, much smaller. It has grown significantly. So in the low millions.

Very low millions.

And what was -- you know what ARPU was last quarter. So the $875 million compares to what was the most recent data point that you gave out on that.

It's not one we have at our fingertips here, but I think it's fair to say that it would be probably pretty similar number. It just -- this happens when you do a 12-month look back when you're calculating the average revenue per user and your denominator actually ends up being pretty small. So we're looking at all of our monetization revenue as a business from both TiVo One and from other parts of our business.

And I think the expectation, Steve, is that as you start to see more monetization happening, particularly as you look into '26 and beyond, you'll start to see that number move northward. Although, as we said, it won't necessarily be linear because there's 2 things going on in that calculation, the speed or the speed at which stuff is coming online in any given quarter relative to various monetization-related deals you may be doing in any particular given quarter.

Okay. Let me take a different tack then. TiVo One is scaling up nicely. What is the critical mass you need to have meaningful ad revenue generated on that platform? Are we halfway there?

Let me kind of answer, I think, the bigger question, and then I'll maybe come back to another one. The answer is we expect to see material progress on the platform we have and based on the visibility that we have into '26 footprint growth, we expect that to occur in '26. So we feel very good about that. The question of how much do you need to have, generally speaking, scale is important to advertisers and the scale number is kind of different based on markets. So it's different for the U.K. than it is for Germany or the U.S. for that matter.

But that -- but one of the things that we are doing very proactively to address the fact that in places where scale may not fully exist immediately or even in the near term where people, let's call it, some advertisers might ideally want it, that is pursuing partnerships where people can bring other footprint in conjunction with our inventory and successfully sell it. And I think, as we've said, we've announced a number of partnerships that I think do 2 things. It helps provide some of that scale, obviously, helps get our inventory into various selling pipelines without having to take lots of extra time to build out those pipelines as well from an ad sales perspective. But I think more than anything, it speaks to the fact that there is real interest in the industry in our inventory and footprint. And as these partners who obviously deal in this space and have for some time are keen to engage with us to enter those partnerships and take it forward in conjunction with us.

So we're not outsourcing everything we're doing on the platform. It's we're finding strategic partners in different ways and places so that we can augment and accelerate the revenue growth efforts.

Okay. And then it seems very exciting that you're making progress with AutoStage and early discussions around monetizing that. Do you think that revenue becomes material kind of exiting 2026? Or we ought to think about 2027 when that platform is a monetization machine.

I think the trial, Steve, will play out through '26, and I certainly expect to see revenue off the platform in '26, but I think it's going to be more material in '27.

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

Could you just talk a little bit more about these minimum guarantees and how it's becoming -- you're saying it's going to be more than 20% of 2025 revenue. Is that because of the competitive necessity that you have to provide such deals?

I think there's multiple things going on, Hamed, and I think Robert touched on some of them in the script. You've got partners, in many cases, interested in trying to have very clear kind of windows on how they think about what their -- what technology they're including in their platforms. They obviously manage their supply chains also, in some cases, looking for greater certainty and not having to deal with potential renegotiations. And on the flip side, we are in a similar place where we look out, and there's certainly some uncertainty in the market in these spaces.

And to the extent that we can lock in our technology into various platforms for longer periods of time, lowers our service cost, gives us greater predictability. And I think the key point about them is that they're not one and done. They're just -- it's kind of -- it's a slightly different, more committed structure to our technology and our solutions -- the only thing that's different about it is the accounting standards require you to recognize the revenue a little bit differently than you would on a pure as-you-go type licensing reporting basis. So I think there's clear benefits on both sides and obviously, visibility on both sides being one of the key ones.

Was minimum guarantee a reason why the Connected Car revenue jumped this quarter?

Yes. We had a higher level of minimum guarantees this quarter than we had last year.

Okay. And my last question is, when would you see platform revenue stabilize? It seems like it's quite volatile quarter-over-quarter.

Can you define what you mean by platform?

Well, the media platform, sorry. The media revenue, yes.

Yes, I think as you start to see meaningful growth in '26, you'll see less volatility, which has to do with some of the existing, what I'll call, underlying parts of that number. So it will take on more stability over time as the number grows.

I think if I can add on there, given that we recognize our advertising and as we synonymously call it, monetization in media platform for the TiVo One growth that -- we expect that to be a grower next year and going forward.

And we have no further questions at this time. I would like to turn it back to Jon Kirchner for closing remarks.

Thanks, operator. We're pleased with the meaningful progress we've made in achieving nearly all of our 2025 strategic goals ahead of schedule. I want to thank the entire Xperi team for their continued focus and execution as we work to deliver long-term value for our shareholders. We look forward to sharing further updates on our year-end call. Thanks, everyone, for joining us today.

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.

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 progress on our strategic growth initiatives. As a reminder, we generally discuss our business in terms of growth solutions where we see strong potential for new revenue growth and core solutions, which encompass our more mature, long-standing product lines. Our growth solutions encompass 3 main areas: first, connected TV and streaming devices that support the TiVo One ad platform, where we monetize ad-supported viewing, viewership data and home page engagement across smart TVs powered by TiVo and TiVo video-over-broadband devices; second, in-cabin entertainment, where DTS AutoStage combines radio, rich metadata and video streaming services to enhance the automotive experience. We expect this solution to enable long-term revenue through a mix of license fees, upselling features, advertising and listener data. And third, IPTV, where we offer video over broadband on our industry-leading content-first streaming platform for our customers' IPTV linear video households as well as broadband-only households, where revenue is primarily generated by monthly subscriptions. Our progress in each of these growth areas is best measured against specific goals that we've set out for the year, and we believe we're on track to meet or exceed these goals in 2025.

Let me first provide more detail on our growth initiatives. First is the TiVo One ad platform, which we believe is the most significant potential to drive our overall long-term revenue growth trajectory. Over the past few years, we've built the TiVo One ad platform, a cross-screen advertising platform that connects smart TVs and IPTV set-top boxes powered by TiVo into a cross-screen ad platform for maximizing engagement and monetization on streaming devices. The TiVo One ad platform connects our unique audience of monthly active users through industry-leading supply-side platforms directly to ad buyers and demand-side platforms.

Our TiVo One ad platform strategy leverages the large and growing market for streaming content and advertising. To support this media platform monetization strategy, we launched TiVo OS for smart TVs in December of 2023. And today, we've signed 9 partners shipping over 80 television brands across 40 countries and through more than 30 major retailers. Consumer reviews of the TVs have been very strong, and we continue to take market share and build the scale necessary in key markets to attract more advertisers, add volume and ultimately drive more aggressive monetization growth.

We are increasingly winning in this competitive market by differentiating in a number of different ways: first, delivering a best-in-class TV operating system in a set-top box user interface and discovery experience; second, we are an independent OS provider that does not compete with our TV partners by making our own TVs; third, we share advertising revenue and data with our partners; fourth, we focus on our partners' branding throughout the experience, allowing our partners to retain brand visibility by shipping a co-branded experience that is powered by TiVo; and fifth, our technology enables a lower-cost hardware solution, which we believe, in many cases, is meaningfully lower than key competitors while still being highly performant and able to scale on a global basis.

Our goal for the TiVo One ad platform in 2025 has been to build an initial connected TV and video-over-broadband device footprint of 5 million monthly active users. As Q2 came to a close, we saw substantial progress toward building scale for the TiVo One ad platform. We now have 3.7 million monthly active users, putting us well on the way to achieving our 2025 goal. We also announced a total of 9 TiVo OS partners to date with just 1 more needed to hit our 2025 goal of 10 partners, which we expect will yield significant increases in footprint over time.

As our monthly active user footprint grows, we're beginning to recognize advertising revenue from our TiVo One ad platform with our year-end exit goal of reaching $10 of annual revenue per user still within our sights. We have recently expanded the selling of home page ad units to leading streaming services in Europe, and interest from potential advertising partners in our footprint and viewership data is growing. To further advertiser interest in our platform, we've recently signed key partnerships with Wurl, Kargo and FreeWheel that we expect will bring additional scale and benefits to advertisers and brands interested in targeting our growing and largely unexposed installed base.

Within the connected car category, we made significant progress expanding penetration of our DTS AutoStage solution by signing 2 new OEM programs and by launching in several new car models, including the BMW 5 Series, Kia EV9 and the Hyundai IONIQ 5 and IONIQ 9. We broadened the ecosystem for AutoStage by expanding the number of global broadcasters that support the platform and are now aggregating content from broadcasters in over 60 countries. Broadcasters are key partners in the longer-term AutoStage platform monetization strategy as they provide both metadata to enrich the user experience and ad placement slots that we expect will drive auto-based digital ad monetization over the long term.

On HD Radio, we signed a multiyear agreement with an integrated chip provider, and our footprint continued to grow with several new vehicle models launched with partners, including BMW, Honda, Hyundai and Volkswagen.

Turning to Pay TV. The operator market continues to evolve, and as such, we offer our customers several solutions as follows: first, our IPTV solutions. These solutions provide a full content lineup for operators whose customers are paying subscriptions for live linear content. With our content-forward user interface, this solution showcases bringing all video entertainment content together, including not only live linear but subscription video-on-demand, transactional video-on-demand and free ad-supported television from leading streaming partners. Second, broadband TV. Broadband TV is a subscription-based product like IPTV with the fundamental difference of being lower cost and offering a more limited lineup of channels. Lastly, TiVo Broadband. TiVo Broadband is effectively the same solution as broadband TV, except there are no subscription channels or fees.

We believe all of these household solutions enable a device footprint that has advertising and monetization opportunities for our monthly active users. Against this backdrop, our IPTV solutions in North America and Latin America continued strong growth of over 30% on a year-over-year basis, reaching an installed base of over 3 million subscriber households. Approximately half the installed base is in North America and the other half in Latin America. When accounting for both geographic and ASP mix within the markets and solutions, IPTV revenue growth was 24%. Additionally, we extended our relationships with key customers by signing significant multiyear renewals with Liberty Latin America and Cable One. And lastly, we executed international metadata agreements with Korea Telecom and Proximus in Europe.

In the consumer electronics market, we advanced our DTS sound-based technology solutions by signing key minimum guarantee contract renewal agreements during the quarter, with TPV Philips, TCL and Sony. We also entered into a separate renewal agreement with Sony for the inclusion of IMAX Enhanced technology in Sony's TVs, sound bars, receivers and projectors, which continues to bring best-in-class entertainment to consumers in the home.

We signed our first customer TV contract for our Clear Dialogue enhancement technology with a major TV OEM. Our Clear Dialogue solution leverages AI to give users control over improving the intelligibility of dialogue across all sources, a key pain point for consumers around the world who struggle to make out what people are saying when watching TV. Clear Dialogue has won multiple industry awards, and we spent the last 18 months porting the solution on to integrated chips, where we expect market availability in the first half of 2026.

Let me now summarize where we stand with respect to our 2025 exit goals. In Media Platform, we made substantial progress growing monthly active users utilizing the TiVo One ad platform to 3.7 million, and we've signed an additional smart TV partner, bringing the total to 9. In Pay TV, we've now exceeded our annual footprint goal of 3 million IPTV subscriber households while also beginning to deploy the TiVo One ad platform to certain operators in North America. In Connected Car, we've increased the number of vehicles with our DTS AutoStage solution to over 12 million.

Overall, we're encouraged by our progress toward meeting or exceeding these strategic goals by year-end 2025. We expect this strategic progress will, in turn, position us to generate more revenue and profitability growth over the long term.

With that, I'll turn the call over to Robert to discuss our financials. Robert?

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 to market uncertainty.

Connected Car revenue decreased by $6 million due to a lower amount of minimum guarantee agreements recorded in the quarter when compared to last year. Media Platform revenue was $12 million, 18% higher than last year due primarily to advertising revenue from a linear ad placement that was delayed from last quarter.

Looking at our income statement for the quarter, our year-over-year cost of revenue increased by almost $5 million, driven both -- by both revenue mix and from higher costs related to certain advertising revenue. Non-GAAP adjusted operating expense decreased by $19 million or 23%, primarily due to ongoing business transformation and cost management efforts that Jon mentioned earlier.

From a profitability perspective, our adjusted EBITDA was $15.2 million, up 4% from last year's $14.6 million or 2.2 basis points of margin as our revenue decrease was more than offset by the year-over-year expense reduction. Our non-GAAP earnings per share was $0.11 compared to $0.12 we posted in the second quarter of last year.

From a balance sheet perspective, we finished the quarter with $95 million in cash, up $7 million from last quarter. This increase was principally due to the $10 million of operating cash flow generated in the quarter, which was a $12 million improvement from the $2 million usage of operating cash flow that occurred last year.

With regard to our outlook, we expect a revenue range of $440 million to $460 million. Despite the limited direct impact from tariffs that we experienced in the first quarter, as the second quarter progressed, we noted significantly more uncertainty related to the macroeconomic environment. Customer concerns around visibility drove a reluctance to enter into certain agreements, and a weakening consumer environment was reflected in lower near-term forecast. We expect these conditions to persist for the balance of the year. As such, we are forecasting slower-than-expected IPTV subscriber growth, softer second half production volumes in automotive, weaker consumer electronics production and end market demand in certain product categories and a more challenging advertising market.

While our revenue outlook for the year has been reduced, we are encouraged by the progress of our business transformation efforts as we continue to focus on cost management, profitability and cash flow generation. We expect an adjusted EBITDA margin range of 15% to 17%. Operating cash flow is now expected to be neutral, plus or minus $10 million. Non-GAAP tax expense is still expected to be approximately $20 million, capital expenditures at approximately $20 million, and basic and fully diluted shares are still expected to be approximately $46 million.

That concludes our prepared remarks. Let's now open the call for -- operator?

[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.