Xperi Inc.

Good day, everyone. Thank you for standing by. Welcome to the Xperia fourth quarter and full year 2023 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. I would now like to turn the call over to Mike Iberg, Xperia head of investor relations. Please go ahead.

Thank you, John. Good afternoon and thank you for joining us as Xperia reports its fourth quarter and full year 2023 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 is an earnings presentation which you can access along with this webcast on our investor relations website at investor.xperia.com. Before we begin, I'd like to provide a few reminders. First, I would like to note that unless otherwise stated, all quarterly comparisons are to the same quarter in the prior year. In addition, the first three quarters of 2022 were calculated on a carve-out basis prior to Xperia's separation from Xperia Holding Corporation on October 1st of 2022. Xperia Holding Corporation is now known as Audia. As a result, All full-year comparisons will be to carve out financials in the prior year. Second, 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. For more information on the risks and uncertainties that could cause our actual results to differ materially from what we discussed today, Please refer to the Risk Factors and MD&A section of our SEC filings, including our most recent Form 10-K and 10-Q. 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 gap measures, which can be found in the investor relations section of our website. Lastly, a replay of this conference call will be available on our website shortly after the conclusion of this call. With that, I would now like to turn the call over to Xperia CEO John Kirchner.

Thank you, Mike, and thank you everyone for joining us on our fourth quarter and full year 2023 earnings call. We continued to make progress on both our strategic priorities and profitability during the quarter, while delivering solid financial results for the full year. I'll let Robert walk you through the details in just a moment, but let me first touch on a few financial highlights. Revenue in the quarter was $137 million, up 1% from the prior year. Adjusted EBITDA was $13.4 million for the quarter, or 10% of revenue, compared to $3.6 million in the prior year quarter. In addition to improved profitability, we had strong operating cash flow of $21 million in the quarter and ended the year at break-even for operating cash flow. These results represent a significant milestone for Xperia as we reach new quarterly highs for revenue, adjusted EBITDA, and adjusted EBITDA margin. This demonstrates the progress of our business transformation efforts and positions us well for the future. Consistent with the strategy outlined at our separation in the fall of 2022, and despite some economic and geopolitical uncertainties, we are pleased to have delivered on our goal of mid-single digit revenue growth and improved profitability in 2023. Before we talk about our strategy in 2024, let me take a moment to address the recently completed sale of AutoSense and the related imaging business. For years, we've been pursuing an opportunity inside the automotive cabin that leverages our deep imaging expertise, specifically driver and occupant monitoring. Our belief was that the market would meaningfully develop by 2025 and present an attractive margin and growth opportunity for Xperia. While we've been very successful at winning new customers, there have been two important changes over the past 18 months that have impacted the long-term opportunity for this business within Xperia. First, due to the growing importance of these products as critical safety systems, our OEM partners increased their expectations for the scope of support they wanted us to provide. This has resulted in a significantly increased cost structure that was hard to justify for a business that is not core to our long-term strategy. Second, the increasingly competitive environment has negatively impacted pricing compared to our original projections. As a result, the timeline for achieving attractive returns on our investment in this business was pushed out beyond what we had anticipated. Given more attractive opportunities and independent media platforms and related entertainment technologies that are consistent with our long-term strategy, we decided to sell the business. After a thorough sales process that began last spring, we ultimately reached an agreement with Toby AB, a publicly traded technology company based in Sweden with a long history of providing imaging technology solutions and a focused strategy in automotive safety. The proceeds from the transaction, which are a minimum of $43 million and up to $62 million, including earnouts, were structured to be paid out over time to align Toby's payments to Xperia with some of the expected cash flow Toby would generate from the business. As a result, the structure of the deal allows us to focus our attention and investment dollars on high growth, higher return entertainment solutions, while still participating in the future upside of the automotive safety market. Going forward, we're focused on three growth solutions where we see strong potential and differentiation. These are connected TV advertising, where we offer our TiVo operating system to power smart TVs and monetize ad-supported viewing. In-Cabin Entertainment, where DTS AutoStage combines broadcast radio, internet metadata, and video to enhance the automotive experience and drive long-term monetization. And TiVo Video Over Broadband, where we offer an industry-leading content-first streaming platform for our customers' IPTV linear video households, as well as broadband-only households. Each of these markets is growing rapidly and is expected to roughly double over the next five years. We continue to strengthen our position in each market and are increasingly well positioned to grow our revenue as these markets expand. We updated this slide to reflect the recent divestiture of AutoSense and provide an update on our progress through the end of 2023, with no change to our three-year targets. By the end of 2025, our goal is to have a footprint of at least 7 million active TVs running our TiVo OS, 2.8 million video over broadband subscribers, and 10 million cars with DTS Auto Stage. If we achieve these targets, we'll have 20 million monetizable endpoints with at least 10 million households and 10 million cars in which Xperia provides the core entertainment platform. Our progress in 2023 gives us increased confidence in our ability to achieve these targets exiting 2025. As we do so, we expect these three growth initiatives to generate over $310 million of revenue in 2026. Let me walk you through some of our recent achievements that reflect our progress. Within Media Platform, our TiVo OS value proposition continues to resonate with TV OEMs, which is underscored by our recently signed partnership with Skyworth, a top 10 global TV manufacturer, to integrate TiVo OS into their 2024 TV lineup. This brings the total number of TV OEMs integrating the TiVo operating system to five. with three of these being top 10 global TV manufacturers. Vestel is currently shipping smart TVs powered by TiVo into seven European countries, including the UK and Germany, with plans to continue expanding into additional countries throughout the balance of 2024 under more than a dozen brands such as JVC, Telefunken, and Vestel. Additionally, Sharp and Argos, a leading UK consumer electronics retailer, expect to have smart TVs powered by TiVo in retail stores this spring across Europe and the UK, with Argos launching TiVo's TVs powered by TiVo under their house brand, Bush. Overall, it was a great quarter of execution for our independent media platform strategy and for driving our long-term growth prospects. Our connected car business also saw continued positive momentum during the quarter, The highlight was BMW's rapid deployment of DTS Auto Stage video service, powered by TiVo, across select new cars in production and certain late model vehicles already on the road through an over-the-air update. BMW has also shared its intention to roll out Auto Stage video service to their MINI brand of vehicles in the future. In addition, we were awarded three new Auto Stage design wins in the quarter with major Asian and European automotive partners. Finally, when we reported Q4 2022 a year ago, we shared an estimate of the total dollar value of committed revenue for the connected car business unit. At the end of 2023, even considering the AutoSense divestiture, we are pleased to report that the current level of committed connected car business grew over 10% to greater than $300 million. Within the pay TV business, video over broadband, our IPTV solution, continues to make steady progress, generating $60 million in revenue in 2023. This is helping to offset the secular decline from our core pay TV solutions, which continue to decline at expected rates consistent with the broader market. For the full year of 2023, overall pay TV was down less than 2%, supported by the strong growth in video over broadband. Turning to consumer electronics, we signed several important multi-year IMAX enhanced license agreements with major consumer electronics manufacturers, including Hisense and Xgemi. In addition, we executed a new DTS-X decoder agreement with a major U.S. retailer for their house brand of certain consumer electronics products. We also signed a major renewal with Mossimo. a leading provider of audio equipment with brands such as Denon, Marantz, Definitive Technology, and Polk Audio. With regard to Perceive, we continue our development efforts to deliver Perceive technology to a big tech partner for future commercialization, while also advancing our efforts on large language model compression. Recognizing the magnitude of the opportunity with large language models and the need for continued investment, We have initiated a process to explore strategical alternatives for Perceive with the help of Centerview partners. We've accomplished a lot over the past year, but we recognize that we have more work to do. Before Robert walks you through our financial outlook for 2024, I want to provide a few business metrics we'll be using to gauge our progress this year. Within media platform, we want to see TVs powered by TiVo in all five major European countries. and in the US market by year end. In addition, I'm pushing the team to sign at least one new TV OEM this year. Our goal is to exit 2024 with six TV OEMs and an active TiVo OS footprint of 2 million sets. Within Pay TV, our goal is to deliver more than 10 additional TiVo broadband wins and exit 2024 with 2.4 million subscribers, up from the 1.9 million today. For connected car, I'm challenging the business to deliver three additional auto stage wins, with at least one including video, and exit 2024 with an installed base of 7 million vehicles. By delivering on these key growth initiatives, coupled with continued business transformation efforts, we expect improved profitability and cash flow in 2024. Further, we'll be much better positioned to accelerate revenue growth and operating leverage in 2025 and beyond. With that, I'll turn the call over to Robert to discuss our financials. Robert?