Good day, everyone. Thank you for standing by. Welcome to Xperi's Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Mike Iburg, Xperi Head of Investor Relations. Mike, please go ahead.

Thank you. Good afternoon, and thank you for joining us as Xperi reports its second quarter 2023 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, which you can access along with this webcast on our Investor Relations website at investor.xperi.com. Before we begin, I'd like to provide a few reminders. First, I would like to note that unless otherwise noted, all comparisons are to the same quarter in the prior year. In addition, the second quarter of 2022 was calculated on a carve-out basis prior to Xperi's separation from Xperi Holding Corporation on October 1, 2022. Xperi Holding Corporation is now known as Adeia. 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 they're 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 in our SEC filings, including our most recent Form 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 GAAP 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 at the conclusion of this call. I would now turn the call over to Xperi's CEO, Jon Kirchner.

Thank you, Mike, and thank you, everyone, for joining us on our second quarter 2023 earnings call. We're pleased to deliver another quarter of significant strategic progress and solid financial results. I'll let Robert walk you through the details in just a moment, but let me touch on revenue and growth rates. Revenue in the quarter was $127 million, up 1% from the prior year but as some of you may recall, last year's Q2 included a significant onetime benefit from a mobile imaging customer, impacting Consumer Electronics revenue. When excluding this benefit, year-over-year growth would have been in excess of 10% due to strong growth in Media Platform and Connected Car. Our first half revenue was consistent with the growth rate projections we discussed at our Investor Day last September, with Media Platform and Connected Car growing rapidly, Consumer Electronics showing modest growth and Pay TV down mid-single digits. The net result of our first half performance, coupled with initiatives underway is that we remain on track and expect to achieve our full year outlook. Lastly, we're pleased to see strategic momentum continue in key growth areas of our business, particularly in Media Platform and Connected car. Our efforts are focused on 4 key growth areas, and we're making significant progress in each. 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 our DTS AutoStage combines broadcast radio, Internet metadata and video to enhance the automotive experience. In cabin monitoring, where DTS AutoSense combines our imaging technology and machine learning to improve automotive safety, comfort and convenience and IPTV, where we offer our industry-leading content first video over broadband platform. Each of these markets is expected to expand rapidly over the next several years…

Thanks, Jon. As Mike mentioned earlier, unless otherwise noted, all comparisons are against the same quarter in the prior year. Total revenue for the second quarter was $127 million, up 1% from the prior year. Last year's Q2 included a significant revenue benefit from a mobile imaging customer. Excluding this onetime benefit, our Q2 year-over-year revenue growth would have been greater than 10%. Pay TV, our largest revenue category was down 4%, an improvement compared to the 6% decline we saw in Q1. Strong growth in IPTV during the quarter helped to mitigate declines in our core Pay TV product lines. Consumer Electronics was down 20%, primarily due to the onetime revenue event last year. Nonetheless, we saw solid traction in audio renewals during the quarter for both DTS and Play-Fi that helped to bolster the overall performance within Consumer Electronics. Connected Car was up 13%, primarily due to high HD unit volume -- HD Radio unit volume as car manufacturers increased production following several years of supply chain issues. As our customer programs advance, we also saw a doubling of the combined revenue for our AutoSense and AutoStage solutions. Media Platform was up 149% with more than half of this increase due to growth in monetization and the rest due to incremental revenue from the Vewd acquisition. I've included a slide on the first half in revenue results. And although I won't go through this in deep detail, our first half performance by business unit is broadly consistent with the expected growth rates we articulated at our Investor Day last year and has us well within the range of our full year revenue outlook. Our non-GAAP gross margin for the quarter was $97 million, or 76%, a decrease of approximately 300 basis points from last year, driven primarily by…

[Operator Instructions]. Your first question comes from Steven Frankel from Rosenblatt Securities.

Jon, can we just get a little more detail on last year's mobile imaging transaction. Was that an upfront payment? Was that a catch-up? Kind of how do you characterize -- how should I think about that anomaly?

It was the resolution of a contractual matter that dated back a few years prior, coupled with the execution of a go-forward license.

And then to focus on more important things going forward, it sounds like you made some good progress with TiVo OS and you talked about entering the North American market. Could you tell us whether that's from the new OEM or one that you had going in the quarter that now tells you they're going to North America?

I think we're going to end up with multiple players in North America next year, Steve. And I think that's all I really can say for competitive and strategic reasons.

And what are you learning on the monetization front from the Pay TV business that maybe helps you -- the way you're thinking about TiVo OS as it rolls out? Is it monetizing at this early stage? Where you think it should be?

Well, I think there's a couple of aspects as you think about long-term monetization and TiVo OS that are important. One is you need meaningful video service infrastructure that we have in spades serving up tens of millions of households through our -- the Pay TV business and IPTV. We also have quite a bit of history and experience in looking at data that's coming off these TVs through IPTV and our various software players that sit on various boxes in the field. And I think that will enable us to prepare various data segments that are of interest, and we know from direct experience to our advertising partners. So I think the back-end infrastructure that is essential to turning on the monetization engine and then obviously scaling it and accelerating it over time is really, I think, something we have been working on for some time and is really a reflection of the business we have. And the key issue for us is getting footprint out there, which I think as you see multiple players in the market in '24, that build will begin to ramp. And certainly, as we exit '24 and get into '25, we expect that monetization to be coming online at faster rates. And I think it positions us well to have a slice of this market that is both attractive and generates good long-term growth as well as very attractive margins over time.

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

So the first question I had was from the competitive landscape in Auto, what are you seeing in the form of AutoSense and are you losing any share competitively to anyone or how do you feel about winning more share and the timing of when all of this come into revenue for you?

Well, I think, Hamed, kind of responding in reverse order, I think it will build over time as our existing design wins find their way into various models across the customers we have. As we said, we have nearly 80 models that are now contracted to support our in-cabin monitoring technology. And I think we have some very unique technology and solutions. And as a result, I think we are routinely winning shoot-outs for broader OMS or in-cabin monitoring -- occupancy monitoring. There's a bunch of different terms that the industry uses around it. And so I think that the long-term prognosis for the business was good. And so I don't see us out there really losing business as a competitive matter, certainly, there are others in the space. There certainly are also some Tier 1s and Tier 2s that are working on potentially building solutions. But one of the unique things that we bring to the game is we bring decades of detailed imaging expertise through all the work that we've done around facial recognition and body posture that partially comes out of our substantial mobile imaging work for many, many years. And so we have a bedrock of both data as well as expertise in that space. And I think we've been working for a couple of years now to apply it to the car. And I think it is showing very well as we're in the competitive pitching process.

And then looking out into the second half, would the revenue breakdown looks almost similar to what the first half looked like? Are you expecting some sort of pickup in 1 of the 4 segments?

Well, I think when we look -- this is Robert, when we look at the revenue breakdown for the remainder of the year, we expect that the profile or rather the timing of the revenue in the year is actually pretty similar to last year. So if one was going to kind of forecast out the revenue for Q3 and Q4 in aggregate, I think it follows the pattern from Q3 and Q4 as a percentage basis. I think if you were raising last year by about 5% or 6% you'd get there. And in terms of that mix, I think that's what you were getting at, we've seen kind of continued progress along what we expected with strength in the Automotive, Connected car business as well as Media Platform and even for the remainder of the year probably contribution from Consumer Electronics.

And then one final question is regarding Sharp, is that purely for Europe? Or will that broaden out to other regions?

It starts initially in Europe, and I think we'll have more to say about broadening that relationship over time.

Your next question comes from Matthew Galinko from the Maxim Group.

Can we -- I think the idea of North American entry for TiVo OS maybe a little unexpected relative to maybe what you've signaled in the past. So I guess I'm curious what's changed in either the market or your positioning that the U.S. has become -- or North America has become more addressable than other regions?

Matt, I don't know that it necessarily has been any recent event. We've been in pipeline discussions for some time kind of globally with different partners. I think there is, however, a wide and growing recognition that for the brands who don't have the resources, perhaps to build their own, and we believe it's a substantial amount of TVs that exist in the North American and European markets that an independent media platform becomes really important and one that can provide the benefits that TiVo OS offers, and that is the brand's ability to own their customer to share the data to have a content-neutral platform that really is all about driving the best user experience and therefore, monetization and then ultimately participating in the back-end economics of the long tail of the TV. And I think that value proposition is something that has a lot of resonance. And I think some have been sitting on the sidelines kind of watching us further develop. But I think it's very clear now that we're coming to market with multiple players. And as we have more success, I think that -- and gives ever more confidence. And I think the quality of the solution that we're showing, I think, has also been instrumental in getting people comfortable that we've got a solution that will make it easy to find, watch and enjoy what consumers want and the higher the engagement with content, the higher the potential revenue monetization and sharing in partnership with these TV brands. So in short, I think it's what we expected. I think in some ways, maybe it's moving even more quickly than we expected, but we still have a lot of work to do, but we are very, very excited about the trajectory and where it will end up here in the next couple of years, completely consistent with what we more or less outlined last September in our Investor Day and likely ends up better sooner.

And then can you maybe touch on or expand on what a strategic partner might do for you and Perceive in terms of accelerating towards the LLM opportunity? Or yes, just can you cover that in a little bit more detail?

Sure. So as you look to the LLM market and the wide-scale deployment of these larger AI solutions. I think it's very clear, just given the size and scale of that opportunity that there's going to be a need for additional resources capabilities, perhaps distribution scale, financial resources and whatnot. If you're really going to tap in to maximizing the value of the technology. And I think it's -- that recognition that I think has made the conversation interesting with strategic partners. And as we're engaged in various conversations, I think there's a tremendous amount of interest in the fundamental challenge, which is if you want to bring the goodness to consumers and mass, how do you deal with the inherent scalability challenges of these massively large models. And I think Perceive is very much focused on advanced compression technology that can address that challenge and ultimately bring ever higher performance and much greater power efficiency to bear. And I think that is going to be essential to folks as one looks to scale this. So in short, I think it's a recognition that the market opportunity is vast. And we, as a technology player with part of the solution, likely will be best off as we work with a strategic partner or partners to bring that technology to market.

[Operator Instructions]. Your next question comes from Nick Zangler with Stephens.

Is there any way to -- well, congrats on the new relationships here, is there any way to size up, I guess, the 3 TV relationships that you have now just in totality or maybe relative to each other, or maybe said another way, did these relationships that you've cemented thus far gets you to that $7 million active account number that you have targeted for 2025? Or do you still feel that you might need a few more wins?

No. I think with what we have, I think what we laid out is certainly achievable. And I think we'll have more to say on this topic, Nick, as we get a couple of quarters down the way.

And then I did want to ask about the -- and sorry if you already discussed it, but the commentary within Media Platform that Sony is going to deploy a content browser, if we're talking Sony TV, my understanding was that the Google TV OS is exclusively utilized on Sony. So I'm just curious if you could flesh out what exactly is happening here? You mentioned another pathway to monetization. So just if you don't mind elaborating on that new relationship as well.

Sure. So Vewd as you'll recall, we acquired them last year, has a web content browser that is been deployed on various systems, including Android TVs. So it's the use of that in connection with their TVs. And I think it just is one more example of, let's call it, some of the value that we were able to gain through the Vewd acquisition.

This concludes the Q&A session. I'll now turn the call back over to the company for closing remarks.

Thanks, operator, and thank you, everyone, for joining today's call. We're excited about our continued strategic momentum and our solid operating performance. I'd like to thank our employees, customers and partners for helping us continue to achieve our objectives. And we look forward to reviewing our Q3 results with you in early November. This concludes today's call.

Ladies and gentlemen, thank you all for joining. You may now disconnect.