Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Xperi First Quarter 2024 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference to Mike Iburg, Head of Investor Relations. Mike, you may begin your conference.

Thanks, Krista. Good afternoon, and thank you for joining us as Xperi reports its first quarter 2024 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 stated, all quarterly comparisons are to the same quarter in the prior year. Second, today's discussions 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 our -- 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 the 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 will now turn the call over to Xperi's CEO, Jon Kirchner.

Thank you, Mike, and thank you, everyone, for joining us on our first quarter 2024 earnings call. We continue to advance our transformation in the first quarter, delivering solid financial results across our key growth areas and continuing to make progress on several strategic initiatives. I'll let Robert walk you through the details in just a moment, but let me first touch on a few financial highlights. During the quarter, we saw strong progress across our key growth areas. Growth in media platform, connected car and video over broadband helped to offset expected declines in our core consumer electronics and pay TV markets, resulting in Q1 revenue of $119 million. Revenue was down 6% from the prior year without adjusting for the recent AutoSense and imaging divestiture or 3% on an adjusted basis. Non-GAAP adjusted operating expenses declined 8% in the quarter mainly due to the divestiture and our ongoing cost optimization efforts. Looking forward, we expect further expense reductions in 2024 as we continue to optimize the organization. Adjusted EBITDA was over $5 million for the quarter or 5% of revenue. We remain focused on 3 key growth opportunities 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 or 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 broadband-only and IPTV linear households. Each of these markets is expected to roughly double over the next 5 to 7 years. We continue to strengthen our position in each market and believe we are increasingly well positioned to grow our revenue as these markets expand. As mentioned last…

Thanks, Jon. Before I go through the quarter's results, let me remind listeners that, as usual, all comparisons in my comments are to the same quarter in the prior year. Total revenue for the quarter was $119 million, down 6% from last year's reported revenue, approximately half of which was due to revenue from AutoSense and related imaging solutions in the prior year. With that in mind and in order to compare apples to apples, let me compare this quarter's revenue by market against last year's results, excluding the divestiture. Pay TV, our largest revenue category, was down 6% during the quarter, similar to Q1 of last year. This change was driven by expected declines in core Pay TV solutions, including the consumer DVR business as well as the timing of certain agreements. The decline was partially offset by growth in our video-over-broadband IPTV solutions, which continue to grow at strong double-digit rates. Consumer Electronics was down 21%, primarily due to a decline in the number of multiyear license renewals that occurred last year, which we noted in the guidance section of our last earnings call. Connected Car was up 23% due to significant growth from both our HD Radio and AutoStage solutions. Media Platform was up 25%, primarily due to strength in our TVOS middleware solutions. Our non-GAAP gross margin for the quarter was $90 million or 76%, a decrease of approximately 270 basis points from the prior year. This decline is primarily due to a different revenue mix compared to the prior year quarter. Non-GAAP adjusted operating expense for the quarter was $91 million, down 8% from the prior year, largely due to the recent divestiture and also from cost optimization as a result of our ongoing business transformation efforts. Non-GAAP tax in the quarter was $2 million.…

[Operator Instructions] Your first question comes from Hamed Khorsand with BWS Financial.

So the first question I had was, given the timing of landing your sixth TV brand, how does that look as far as active TVs? Would that count actually go up as your goal is concerned? And where do you sit as far as getting a seventh one maybe this year?

Hamed, I would say that we have an active pipeline that we continue to work with potential partners to join our ecosystem. So I would expect that, over time, there will be others. Timing, always a bit of an uncertain matter. But I think with the 6 that we have as well as what we're seeing in the market as people begin to expand distribution, I think we're comfortable that we're going to hit our 2 million target for the year. And certainly, the sixth brand, which will be coming to market relatively quickly will contribute to that.

Okay. And then could you just comment on the Pay TV? That revenue is declining at least faster than I was expecting. So why the degradation there as much as you've seen and you're not making up on the IPTV side?

Yes, Hamed, within Pay TV, if you recall, last year was also down 6% in Q1 and then ended the year down less than 2%. So I'd say from where we're sitting today, Pay TV appears to be on track. Over the course of the year, we expect the video over broadband will largely help to offset the declines within the core Pay TV business.

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

I think you touched on expecting a U.S. launch this year for TV or for a brand in the U.S. Can you maybe -- I know you mentioned timing of billing is challenging, but I assume there's a goal to get in before Q4. But can you kind of touch on how important it would be to get in kind of earlier in the year or kind of how seasonality would affect the kind of the ramp-up in households covered obviously contingent on timing within the year?

Well, obviously, it's our objective to work with the partners to have TVs in retail for the strong kind of holiday buying season. And as we get closer, we may have more to say about that exactly. I think one thing to understand is that even if those sets are in retail, the monetization begins to occur after they're sold and ultimately installed. So some of the monetization-related revenue we expect in the course of this year will be primarily coming from European installations that are happening earlier in the cycle, and then we expect to get the benefit of that cumulative and growing installed base as we go through all of '24 as we move into 2025 and monetization begins to further ramp.

Got it. And then my follow-up question is about HD Radio. I think you mentioned that AutoStage is pulling HD Radio kind of towards that higher penetration rate for North American auto. Can you maybe expand a little bit more on how strong of a pull is that from kind of the new technology deployment? Is it possible to drive into the mid-60% range? Or kind of what are we looking at over the next couple of years?

Well, I think we've said a number of years ago that we thought roughly mid-60s was a reasonable long-term target for HD Radio penetration. And I think what our partners are seeing is that our in-cabin entertainment platform, which combines HD Radio and AutoStage and now extends into video service, really does represent a best-in-class experience that most of our customers would love to extend to their customers and gives a chance to further differentiate the vehicle as people increasingly are making decisions about vehicle purchases once you get past brand and perhaps size. You're getting into what does the infotainment platform look like and feel like. And I think that differentiation has had a kind of a combined effect on some of the business we're doing with underlying HD Radio. But also keep in mind, AutoStage is not just a U.S. phenomenon, right? One of the great things about the platform is that it can run on top of any underlying radio system, including FM or DAB. So it's being deployed around the world today, and I think that gives us further long-term expansion and monetization opportunity as that footprint builds globally.

[Operator Instructions] That concludes our question-and-answer session. I will now turn it back to the Xperi team for closing remarks.

Thanks, operator, and thanks, everyone, for joining today's call. We are excited about our continued strategic momentum, and I'd like to thank our employees, customers and partners for helping us continue to achieve our objectives. We look forward to reviewing our Q2 results with you in August. Operator, this concludes today's call.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.