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XI

Xperi Inc. (XPER)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $132.9M, up ~2% YoY (up ~6% ex-AutoSense divestiture), with strong adjusted profitability: Non-GAAP operating income $24.5M and adjusted EBITDA $31.4M (23.7% margin) versus $9.3M (7.2%) a year ago; GAAP diluted EPS was ($0.37) and Non-GAAP EPS was $0.51 .
  • Guidance was mixed: FY24 revenue trimmed to $490–$505M (from $500–$530M) on CE/auto softness and TiVo OS monetization pushouts, but adjusted EBITDA margin raised to 14%–16% (from 12%–14%) on transformation-driven opex reductions .
  • Key execution positives: classic guide multi-year minimum guarantee (MG) in Pay TV drove sequential revenue step-up; IPTV surpassed 2.4M households; AutoStage deployed in 8M+ vehicles; TiVo OS footprint approaching 1M activated devices, with North America entry beginning around year-end .
  • Near-term headwinds: partner timing delays in TiVo OS shipments and emerging auto market weakness (risk to HD Radio per-unit volumes) defer monetization into 2025; operating cash flow now guided to a $50–$60M use in FY24 due to MG timing and one-time divestiture costs, though year-end cash expected “well over $100M” (Perceive cash proceeds) .
  • Consensus estimates: Wall Street (S&P Global) consensus could not be retrieved due to API limits; we cannot assess beat/miss versus S&P Global at this time (see Estimates Context).

What Went Well and What Went Wrong

  • What Went Well

    • Pay TV outperformance: +35% YoY in Q3 on a large multi-year classic guide MG deal recognized mostly upfront; IPTV continued double-digit YoY growth .
    • Cost transformation traction: non-GAAP adjusted opex down 18% YoY (~$18M), aided by ~100 headcount reduction and portfolio pruning; adjusted EBITDA margin raised for FY24 .
    • Strategic milestones: TiVo OS approaching 1M activated devices and tracking towards 2M by YE; AutoStage now in 8M+ vehicles; DTS Clear Dialogue AI feature launched with two Best of IFA awards. “Our TiVo OS Smart TV footprint is approaching one million units...on-track toward our year-end target of two million” — CEO Jon Kirchner .

  • What Went Wrong

    • Monetization delays: TiVo OS monetization expected in Q4 shifted largely into 2025 due to partner timing; current monetization is “not material” given small footprint .
    • Macro softness: CE royalties pressured (gaming consoles weak) and signs of auto market weakening may impact HD Radio volumes; Media Platform down 39% YoY on prior-year MG compares .
    • Cash flow headwind: FY24 operating cash flow now a $50–$60M use driven by MG cash timing and one-time divestiture/transformation costs, though year-end cash bolstered by Perceive proceeds .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($M)$130.4 $118.8 $119.6 $132.9
GAAP Operating Income (Loss) ($M)($31.1) ($32.3) ($21.9) ($18.6)
GAAP Net Income (Loss) attributable to the Company ($M)($41.4) ($13.1) ($30.3) ($16.8)
GAAP Diluted EPS ($)($0.96) ($0.29) ($0.67) ($0.37)
Non-GAAP Operating Income ($M)$4.3 ($0.9) $8.3 $24.5
Non-GAAP EPS ($)($0.08) ($0.05) $0.12 $0.51
Adjusted EBITDA ($M)$9.3 $5.4 $14.6 $31.4
Adjusted EBITDA Margin (%)7.2% 4.5% (calc from $5.4/$118.8) 12.2% (calc from $14.6/$119.6) 23.7%
  • YoY/Sequential context: Q3 revenue +~2% YoY to $132.9M; sequentially +11% vs Q2’s $119.6M; non-GAAP EPS improved to $0.51 from $0.12 in Q2 and ($0.08) in Q3’23 .
  • Non-GAAP adjustments Q3: stock-based comp $15.249M; amortization $10.934M; transaction/integration/restructuring $7.961M; severance/retention $9.184M; tax adjustment ($3.216M), bridging GAAP loss to non-GAAP net income $23.3M ($0.51/share) .

Segment performance (Q3 2024 YoY)

SegmentQ3 2024 YoY GrowthDrivers
Pay TV+35% Large multi-year classic guide MG recognized mostly upfront; IPTV growth
Consumer Electronics(38%) Lapped prior-year MGs; lower royalties, including weaker gaming consoles
Connected Car+11% Higher AutoStage revenue; note broader auto softness emerging
Media Platform(39%) Prior-year MGs in Middleware; confidence tied to TiVo OS/IPTV footprint growth

KPI trajectory

KPIQ1 2024Q2 2024Q3 2024Notes/Trend
Video-over-Broadband (IPTV) households>2.0M >2.25M >2.4M Sustained double-digit YoY growth
TiVo OS activated devicesN/D“Activations accelerating; on track for 2M YE” “Approaching 1M; tracking to 2M YE” Monetization limited until footprint scales
AutoStage deployed vehicles (global)>6M >7M >8M +1M+ QoQ in Q2; continued growth in Q3; video design win
AutoStage + HD Radio vehicles (NA)N/DN/D>5M Expanding NA footprint
Share repurchasesN/DN/D~1.1M shares; $10M at $8.92 avg Capital return amid perceived undervaluation

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$500M–$530M $490M–$505M Lowered
Adjusted EBITDA Margin (non-GAAP)FY 202412%–14% 14%–16% Raised
Operating Cash FlowFY 2024N/A($50M)–($60M) use Introduced/updated
Non-GAAP Tax ExpenseFY 2024~ $20M (implied prior; +$5M) ~ $25M Raised
Capital ExpendituresFY 2024~ $20M ~ $20M Maintained
Year-end CashFY 2024N/A“Well over $100M” Introduced
Basic / Diluted SharesFY 2024Prior estimate (not disclosed)~45M basic / ~46M diluted; reduced by ~1M/~2M vs prior Reduced

Drivers of guidance change: CE/auto softness vs earlier expectations; TiVo OS monetization shifting into 2025 due to partner timing; margin uplift from cost actions and portfolio focus; MG accounting pulls revenue forward with cash later .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3)Trend
TiVo OS rollout & monetizationQ1: EU/UK rollout; additional Japanese brand; retail availability (Argos/Bush); on track to scale footprint . Q2: 7th OS partner (Top 5 U.S. supplier) targeting U.S. spring 2025; activations accelerating, YE target 2M .Footprint “approaching 1M” and tracking to 2M YE; U.S. shipments begin around year-end; monetization “not material” yet; partner delays shift monetization into 2025 .Execution progress; monetization deferred; pipeline visibility intact.
Pay TV/IPTVQ1: IPTV >2.0M, expanding Broadband operators . Q2: IPTV >2.25M; +3 Broadband operators .IPTV >2.4M; MG classic guide deal boosts revenue, reduces core Pay TV decline rate .Positive scale and economics.
Connected Car (AutoStage/HD Radio)Q1: AutoStage >6M vehicles; HD Radio penetration rising; AutoStage Video in hundreds of thousands of cars . Q2: AutoStage >7M; multi-year DTS codec program; HD Radio across more OEMs .AutoStage >8M; video design win with Japanese OEM for 2025; early signs of auto market weakness may weigh on HD Radio volumes .Strategic growth with macro headwinds.
Cost transformationQ1: further expense reductions planned . Q2: improved profitability; adjusted EBITDA up .Non-GAAP opex down 18% YoY; headcount –~100; FY24 adj. EBITDA margin raised .Continued leverage.
AI/technology initiativesQ1/Q2: platform and monetization capabilities maturing; no specific AI feature highlighted.Launch of AI-driven DTS Clear Dialogue; two Best of IFA awards; cited as pipeline innovation .Emerging AI feature set.
Macro/marketQ1: revenue down YoY partially from divestiture . Q2: stable outlook; no change in FY guide .CE softness (gaming consoles); auto weakening vs expectations; TiVo OS partner timing shifts .Mixed/negative macro vs plan.

Management Commentary

  • Strategic focus: “With the Perceive transaction now closed, we are fully focused on entertainment-based solutions to grow our independent media platform and licensing businesses.” — CEO Jon Kirchner .
  • Execution/AI: “We recently launched our award-winning, AI-driven DTS Clear Dialogue solution… dialogue intelligibility.” — CEO .
  • Margin progress: “Our business transformation efforts have helped us drive operating leverage and deliver meaningful improvements in our profitability metrics.” — CEO .
  • Revenue mix dynamics: “Pay TV… up 35%… driven by a large multiyear classic guide minimum guarantee deal… recognized most of the revenue upfront… Pay TV also benefited from IPTV growth.” — CFO Robert Andersen .
  • Cost actions: “Non-GAAP adjusted operating expense… $82M, down 18%… largely due to the reduction of approximately 100 personnel… and divestitures.” — CFO .
  • Outlook mechanics: “Monetization revenue expected in the fourth quarter has largely shifted into 2025 due to partner delays…” — CFO .
  • Liquidity: “We expect to end the year with well over $100 million of cash… [and] plan to refinance most, if not all, of the $50 million of debt early next year.” — CFO .

Q&A Highlights

  • TiVo OS shipments and YE device target: Management remains “comfortable” hitting ~2M by YE; delays shifted from summer to later in year/early 2025 but activity is accelerating; existing 7 partners sufficient to reach 2025 goals .
  • Monetization ramp: Current monetization “not material” given footprint; scaling within each market is key to meaningful ad revenue bundling through 2025–2026 .
  • North America entry: U.S.-destined TVs expected around year-end with at least two partners in 2025; confidence in broadening footprint .
  • Macro softness: CE (including gaming consoles) and auto volumes weaker relative to earlier expectations; caution on HD Radio per-unit volumes despite strategic AutoStage progress .
  • Operating cash flow bridge: ~$30M MG timing (upfront revenue, cash over 2–3 years), ~$30M one-time divestiture/transformational cash costs (Perceive-related), and lower revenue; ~2/3 of $125M unbilled receivables expected to convert within 12 months .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) consensus for Q3’24 and prior quarters but were unable to due to daily API limits. As a result, we cannot present a definitive beat/miss versus S&P Global consensus at this time. If desired, we can refresh and add a “vs. consensus” table once access is restored.

Key Takeaways for Investors

  • Mix-driven upside with leverage: Q3 showcased the economic impact of MG structures (upfront revenue recognition) and cost transformation, delivering 23.7% adjusted EBITDA margin despite total revenue only modestly up YoY .
  • Medium-term thesis intact: TiVo OS footprint is building (approaching 1M devices), with U.S. launch beginning around YE; monetization should gain relevance as scale improves in 2025–2026 .
  • AutoStage growth vs auto macro risk: Strategic wins (video design win) and deployments (8M+ vehicles) continue, but broader auto volume weakness could pressure HD Radio per-unit volumes near term .
  • FY24 guide rebased for timing/softness, but margin guide raised: Revenue cut to $490–$505M while adj. EBITDA margin raised to 14%–16%, signaling confidence in structural profitability improvements .
  • Cash/timing considerations for traders: FY24 operating cash outflow ($50–$60M) reflects MG timing and one-time costs; expect “well over $100M” cash at YE, debt refinance plan underway for 2025 maturity .
  • Watch near-term catalysts: (1) Evidence of accelerating TiVo OS activations and early U.S. presence; (2) IPTV subscriber momentum and NCTC Broadband TV commercialization; (3) Additional AutoStage wins and any macro stabilization in auto/CE .