Xperi Inc.

Good day ladies and gentlemen, thank you for standing by. Welcome to the X3 second quarter fiscal year 2021 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the call will be open for questions. In order to ask a question, please press star 1 on your telephone touchpad This call is being recorded today, Tuesday, August the 3rd, 2021. I would now like to turn the call over to Jerry Weinfeld, Vice President of Investor Relations for X3. Jerry, please go ahead.

Good afternoon, everyone. Thanks for joining us as we report our second quarter fiscal year 2021 financial results. With me on the call today are Jon Kirchner, CEO, and Robert Andersen, CFO. Also on the call is Samir Armali, President of IP Licensing, who will be available along with Jon and Robert to answer questions during the Q&A portion of the call. Before we begin, I would like to provide two reminders. First, today's discussion contains forward-looking statements 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. Please refer to the risk factors section in our SEC filings including our annual report on Form 10-K for more information on the risks and uncertainties that could cause our actual results to differ materially from what we discussed today. 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. Second, we refer to certain non-GAAP financial measures which exclude one-time or ongoing Non-cash acquired intangible amortization charges, costs related to actual or planned business combinations, including transaction fees, integration costs, severance, facility closures, and retention bonuses, separation costs, stock-based compensation, loss on debt extinguishment, expense debt refinancing costs, realized and unrealized gains or losses on marketable equity securities, and associated tax effects. We've provided reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the earnings release and on the investor relations section of our website. Lastly, all 2021 and year-over-year performance comparisons will be discussed as if Xperia and TiVo were combined for all periods. This approach will get the best view of progress on the overall business, and these numbers can be found in the Interactive Analyst Center on our investor relations website. will be available on our industrial relations website at www.experi.com. I'll now turn the call over to Jon Kirchner.

Thanks, Geri, and thanks, everyone, for joining us. We delivered a strong Q2 with revenue and earnings coming in above our expectations. The stronger-than-expected revenue was mostly driven by successfully signing certain deals earlier in the year than planned, increasing our visibility to achieve our full-year outlook. and despite a modest impact on our product business from semiconductor supply constraints, we remain on track to achieve our outlook for the year. Revenue was $222.3 million, down 4.7% year over year, mainly due to expected declines in semi-IP and our pay TV product business, partially offset by growth in media IP, connected car and consumer experience markets. During the quarter, we generated $56.3 million in operating cash flow and $56.7 million in adjusted free cash flow. We also paid down about $51 million of our debt, bought back $10 million of stock, and are on track with our capital allocation strategy of returning approximately 50% of our free cash flow to investors. At a high level, we made solid progress on the following initiatives during the quarter. Building on the baseline revenue for our IP business, particularly through expanded and renewed licenses in the OTT area. Increasing the footprint of available content for TiVo Stream and continued work on an integrated connected TV implementation. Engaging with key OEM partners on our AutoStage and AutoSense products while preparing for the launch of AutoSense with our first partner, BMW, later this summer. and expanding our IPTV platform with the MobyTV acquisition. Let me begin with a discussion of our IP licensing business. IP licensing revenue in Q2 was $101.8 million. Importantly, media IP revenue was up more than 40% year over year. This increase was driven by the step up from the Comcast license and the momentum we've had with renewals and expanded licenses in the first half of the year. As is typical, some of these deals include catch-up license fees recognized during the quarter. This increase was offset by expected declines in our semi-IP business as we worked to reposition that business for future growth. The decline of approximately $50 million in semi-IP revenue resulted in our overall IP revenue being down 15% year-over-year. On the OTT front, we continued to establish the relevance and value of our patent portfolio. First, during the quarter, we signed a long-term renewal of our patent license with Google, which provides continued broad coverage under our patent portfolios for their expanding businesses. Second, we also signed a multi-year renewal with Fox Corporation, which provides continued and expanded coverage under our patent portfolios. We're very pleased with the progress we're making in the OTT area, which is the largest of the strategic growth opportunities we've identified for the media IP business. Agreements like the ones we announced this last quarter illustrate that the fundamental innovations from our patent portfolios are relevant across all forms of video consumption, from linear to on-demand and from traditional TV platforms to online and mobile. While OTT services generally have a lower ARPU when compared to traditional pay TV, the scale of the overall OTT video market is significantly larger from a subscriber standpoint. and most consumers subscribe to multiple OTT services. As a result, OTT presents an increasingly important licensing opportunity for our media IP business. On the Canadian front, we successfully renewed and extended our patent license agreement with one of the leading Canadian pay TV operators during the quarter and continue to pursue the remaining unlicensed pay TV providers. We expect a decision from our initial round of litigation with those providers sometime later this year. Notably, we filed a second round of litigation against Videotron and, more recently, a second round of litigation against Bell Canada. We remain very confident in the relevance of our IP portfolio and our ability to ultimately achieve a market-based resolution in Canada, although predicting timing is always difficult. Since the merger closed last year, we have continued to improve the strong foundation of our IP business. as well as make important progress in the various strategic growth areas we've identified. Our progress this quarter gives us confidence that we will exceed our $350 million average annual baseline this year. Moreover, we continue to demonstrate the relevance and value of our IP across all aspects of the evolving video landscape. As evidence of this broad relevance, as we sit here today, More than $100 million of our annual IP revenue comes from outside of traditional US pay TV. We are confident that our IP licensing business is better positioned than ever, supported by long-term agreements that generate significant recurring cash flows well into the future. Moving on to our product business, total product revenue was $120.4 million, up 6% year-over-year on a combined company basis. Driven by growth in connected car and consumer experience, partially offset by declines in pay TV. In the consumer experience category, revenue was $46.9 million, up 12% year over year on a combined company basis. The increase in Q2 was mostly driven by TiVo Stream 4K device sales and related monetization, and a significant renewal on the audio side for TVs, soundbars, and receivers. The number of activated TiVo Stream 4Ks grew significantly quarter over quarter, driven by our growing retail distribution presence and creative marketing. This year, we've made great progress in achieving our retail distribution goals by expanding from Amazon and Walmart and adding Best Buy, Target, and QVC. Additionally, YouTube TV ran a campaign to select subscribers offering TiVo Stream 4K devices. On the content front, during the quarter, we signed agreements to integrate several new services, including signing an agreement to integrate AMC's SBOT properties, Acorn TV, All Black, Sundance Now, and Shudder on TiVo Stream 4K and the TiVo MBPD platform. In addition to the hundreds of entertainment apps on the Google Play Store, today we have over 20-plus streaming services fully integrated into the TiVo Stream 4K discovery experience, including Netflix, Disney Plus, Prime, HBO Max, Peacock, Paramount Plus, and Hulu. Moving to the connected car category, revenue was $19.5 million, up 53% year-over-year on a combined company basis, as we continue to see a return to strength in automotive sales, despite the impacts of semiconductor chip shortages. During the quarter, 15 new models launched with HV radio technology in North America. Additionally, we celebrated 15 years of HD radio in BMW cars, and notably, HD radio now comes standard in all BMW models in the U.S. BTS Autostage, our connected car media platform, is now live in 42 countries. We are engaged with 20 OEMs exploring launches in 22 through 25, and interest is strong among car companies and Tier 1s across Asia, Europe, and the U.S. For GTS AutoSense, our in-cabin monitoring platform, we are on target for the initial global launch of our occupancy monitoring system later this summer with BMW. And we continue to deploy our DMS solution in Asia in Fuso, Isuzu, and Eno trucks. Currently, we are engaged with 14 OEMs regarding launches in 2023 through 2026. Moving to our pay TV business, revenue is $54 million, down 9% year over year. do primarily to subscriber churn broadly consistent with industry trends. Consistent with our strategy to grow our higher value IPTV service to offset declines in our traditional service, during the quarter we closed the acquisition of MobyTV. This acquisition will help accelerate IPTV conversions and profitable revenue growth. The MobyTV assets expand our addressable market within segments such as broadband and fiber and homes with a high-value IPTV managed service offering from a proven and scalable platform. Post-close, we have successfully entered into new, more favorable agreements with nearly all MoviTV customers. These customers will benefit from continued investment in the platform and experience commitment to supporting operators with a broad portfolio of IPTV solutions. Additionally, Hotwire Communications, one of the nation's leading fiber optics telecommunications providers specializing in multifamily communities, signed a license agreement for the TiVo IPTV platform. Overall, we continue to see strong subscriber growth for our IPTV service, which once again grew close to 100% quarter over quarter. Lastly, our PERSYNC team continued to make progress in enabling customers to use our technology. Consistent with our plans, we've now provided early access to our development tools to select customers. We are also monitoring the semiconductor supply situation, changes in the marketplace, and potential impact on our customers' go-to-market plans. We continue to see keen interest from our customers in our products and solutions and for applications in diverse areas, such as security cameras, video conferencing, laptops, tablets, and wearables. With that, I'll turn the call over to Robert to discuss our financials. Robert?