Xperi (XPER) - 2025 Q2 - Quarterly Report

Note About Forward-Looking Statements This report contains forward-looking statements subject to risks and uncertainties under the safe harbor provisions - This Quarterly Report contains forward-looking statements, identified by words like "expects," "anticipates," and "plans," which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[8] - Forward-looking statements are based on management's good faith judgment but are inherently subject to risks, uncertainties, and changes in conditions, as discussed in the "Risk Factors" section of the Form 10-K and other SEC filings[9] - Readers are cautioned not to place undue reliance on these statements and are urged to review the disclosures regarding risks and factors affecting the business[9] PART I – FINANCIAL INFORMATION This part presents the unaudited financial statements and management's discussion and analysis of financial condition Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period Condensed Consolidated Statements of Operations The company's revenue decreased while net loss improved for the three and six months ended June 30, 2025 | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $105,933 | $119,591 | $219,966 | $238,435 | | Operating Loss | $(11,133) | $(21,907) | $(27,573) | $(54,234) | | Net Loss | $(14,781) | $(30,631) | $(33,147) | $(44,002) | | Net Loss Attributable to the Company | $(14,781) | $(30,299) | $(33,147) | $(43,419) | | Net Loss Per Share (Basic & Diluted) | $(0.32) | $(0.67) | $(0.73) | $(0.97) | - Revenue decreased by 11% for the three months and 8% for the six months ended June 30, 2025, compared to the prior year[13] - Net loss attributable to the Company significantly improved, decreasing from $30.3 million to $14.8 million for the three months and from $43.4 million to $33.1 million for the six months ended June 30, 2025[13] Condensed Consolidated Statements of Comprehensive Loss Comprehensive loss was reduced due to a significant unrealized gain on cash flow hedges in the current period | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(14,781) | $(30,631) | $(33,147) | $(44,002) | | Unrealized gain (loss) on cash flow hedges | $2,295 | $(396) | $4,453 | $(1,187) | | Comprehensive Loss | $(12,475) | $(30,968) | $(28,649) | $(45,514) | | Comprehensive Loss Attributable to the Company | $(12,475) | $(30,636) | $(28,649) | $(44,931) | - The company reported a significant unrealized gain on cash flow hedges of $2.3 million for the three months and $4.5 million for the six months ended June 30, 2025, contrasting with losses in the prior year[15] Condensed Consolidated Balance Sheets Total assets and liabilities decreased as of June 30, 2025, driven by changes in cash and debt structure | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $95,148 | $130,564 | | Total Current Assets | $283,661 | $304,872 | | Total Assets | $629,220 | $667,760 | | Short-term Debt | $0 | $50,000 | | Long-term Debt | $40,000 | $0 | | Total Current Liabilities | $113,425 | $185,349 | | Total Liabilities | $209,393 | $238,683 | | Total Equity | $419,827 | $429,077 | - Cash and cash equivalents decreased by $35.4 million from December 31, 2024, to June 30, 2025[18] - Short-term debt of $50.0 million was repaid and replaced with $40.0 million in long-term debt (AR Facility), leading to a significant reduction in total current liabilities[18] Condensed Consolidated Statements of Cash Flows A net decrease in cash resulted from operating and financing activities, including debt restructuring | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(12,151) | $(51,921) | | Net Cash Used in Investing Activities | $(8,986) | $(8,443) | | Net Cash Used in Financing Activities | $(14,279) | $(1,601) | | Net Decrease in Cash and Cash Equivalents | $(35,416) | $(61,953) | | Cash and Cash Equivalents at End of Period | $95,148 | $92,481 | - Net cash used in operating activities significantly improved, decreasing from $51.9 million in 2024 to $12.2 million in 2025[20] - Financing activities for the six months ended June 30, 2025, included a $50.0 million repayment of short-term debt and $40.0 million in proceeds from long-term debt[20] Condensed Consolidated Statements of Equity Total equity decreased due to net loss, partially offset by stock-based compensation and hedging gains | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Equity (Jan 1, 2025 / Jan 1, 2024) | $429,077 | $387,135 | | Net Loss (Six Months) | $(33,147) | $(44,002) | | Stock-based Compensation (Six Months) | $22,429 | $30,060 | | Unrealized Gain (Loss) on Cash Flow Hedges (Six Months) | $4,453 | $(1,187) | | Total Equity (June 30, 2025 / June 30, 2024) | $419,827 | $370,080 | - Total equity decreased by $9.25 million from January 1, 2025, to June 30, 2025, primarily due to the net loss of $33.1 million, partially mitigated by $22.4 million in stock-based compensation and $4.45 million in unrealized gains on cash flow hedges[24] Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures for the condensed consolidated financial statements NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Xperi operates as a single-segment consumer and entertainment technology company under GAAP - Xperi Inc operates as a leading consumer and entertainment technology company, focusing on smart devices, connected cars, and entertainment experiences, with revenue categorized into Pay-TV, Consumer Electronics, Connected Car, and Media Platform[30] - The company's financial statements are prepared on a consolidated basis in accordance with GAAP, with all intercompany accounts and transactions eliminated[31] - Key accounting estimates include licensee royalty estimations, standalone selling price determination, fair value of notes receivable and deferred consideration from divestitures, assessment of useful lives and recoverability of assets, and recognition of income tax assets and liabilities[35] NOTE 2 – REVENUE Total revenue decreased due to declines in Pay-TV and Connected Car, partially offset by growth in other areas | Revenue Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Pay-TV | $49,937 | $60,752 | $99,801 | $117,558 | | Consumer Electronics | $18,763 | $17,164 | $41,561 | $43,292 | | Connected Car | $25,105 | $31,423 | $58,391 | $55,771 | | Media Platform | $12,128 | $10,252 | $20,213 | $21,814 | | Total Revenue | $105,933 | $119,591 | $219,966 | $238,435 | - Revenue is primarily derived from licensing technologies and solutions in Pay-TV, Consumer Electronics, Connected Car, and Media Platform categories[47] - Total revenue decreased by 11% for the three months and 8% for the six months ended June 30, 2025, primarily due to declines in Pay-TV and Connected Car revenue, partially offset by increases in Media Platform and Consumer Electronics[63] NOTE 3 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS This note details changes in key balance sheet accounts, including assets and accrued liabilities | Account (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Prepaid expenses and other current assets | $35,756 | $32,488 | | Property and equipment, net | $46,927 | $44,473 | | Accrued liabilities | $78,158 | $94,420 | - Capitalized internal-use software increased from $23.4 million at December 31, 2024, to $30.8 million at June 30, 2025[69] - Employee compensation and benefits within accrued liabilities decreased from $33.4 million to $21.5 million[70] NOTE 4 – FINANCIAL INSTRUMENTS The company uses foreign currency forward contracts to hedge cash flow exposure from currency fluctuations | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Fair value—foreign exchange contract assets, net | $2,595 | $0 | | Fair value—foreign exchange contract liabilities, net | $0 | $1,858 | | Net derivative assets (liabilities) | $2,595 | $(1,858) | - The company utilizes foreign currency forward contracts as cash flow hedges to mitigate variability in anticipated cash flows from local currency expenses[72][73] - Accumulated other comprehensive loss (AOCL) related to cash flow hedges shifted from a beginning balance of $(1.9 million) to an ending balance of $2.6 million for the six months ended June 30, 2025, reflecting a net current period other comprehensive gain of $4.5 million[76] NOTE 5 – FAIR VALUE This note outlines the company's fair value measurement practices and hierarchy for financial instruments | Financial Instrument (in thousands) | Carrying Amount (June 30, 2025) | Estimated Fair Value (June 30, 2025) | Carrying Amount (Dec 31, 2024) | Estimated Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | :--- | :--- | | Note receivable, noncurrent | $30,857 | $33,253 | $29,702 | $28,223 | | Deferred consideration from divestitures | $19,029 | $21,219 | $18,217 | $18,342 | | Senior unsecured promissory note | $0 | $0 | $50,000 | $50,000 | | AR Facility | $40,000 | $40,000 | $0 | $0 | - The company applies fair value measurement guidance, maximizing the use of observable inputs and minimizing unobservable inputs, classifying instruments into Level 1, Level 2, or Level 3[78][79][83] - The fair value of the note receivable and deferred consideration from divestitures are estimated using income and market approaches, classified within Level 2 of the fair value hierarchy[81] NOTE 6 – DIVESTITURES The company completed two divestitures to streamline its business and focus on entertainment markets - The Perceive Transaction, completed in October 2024, involved selling assets and liabilities of Perceive Corporation for $80.0 million in cash, including a $12.0 million holdback[84] - The AutoSense Divestiture, completed in January 2024, involved selling the in-cabin safety business for $44.3 million, comprising cash, a $27.7 million note receivable, and $15.0 million in deferred consideration (fair value $5.8 million)[89] - A pre-tax gain of $22.9 million was recognized upon the completion of the AutoSense Divestiture in 2024[92] NOTE 7 – INTANGIBLE ASSETS, NET The net carrying value of intangible assets decreased primarily due to amortization of finite-lived assets | Intangible Asset Category (in thousands) | Net Carrying Value (June 30, 2025) | Net Carrying Value (Dec 31, 2024) | | :--- | :--- | :--- | | Acquired patents | $10,490 | $11,594 | | Existing technology / content database | $20,304 | $25,871 | | Customer contracts and related relationships | $92,329 | $104,434 | | Trademarks/trade name | $332 | $415 | | TiVo tradename/trademarks (Indefinite-lived) | $21,400 | $21,400 | | Total Intangible Assets | $144,855 | $163,714 | - The total net carrying value of intangible assets decreased by $18.9 million from December 31, 2024, to June 30, 2025, primarily due to amortization of finite-lived assets[101][102] - Estimated future amortization expense for finite-lived intangible assets is projected to be $16.0 million for the remaining six months of 2025 and $31.5 million in 2026[102] NOTE 8 – DEBT AND RECEIVABLES SECURITIZATION The company established a new AR Facility and repaid its outstanding Vewd Promissory Note - Xperi established a $55.0 million AR Facility with PNC Bank in February 2025, secured by trade receivables, with interest accrued at monthly Term SOFR Rate plus 1.90%[103][105] - The company repaid the full $50.0 million outstanding principal of the Vewd Promissory Note in February 2025, using $40.0 million from the new AR Facility and cash on hand[110] - As of June 30, 2025, $40.0 million was borrowed under the AR Facility, and the company was in compliance with all debt covenants[107] NOTE 9 – NET LOSS PER SHARE Net loss per share improved year-over-year, with potentially dilutive securities excluded from calculations | Metric (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Loss Attributable to the Company | $(14,781) | $(30,299) | $(33,147) | $(43,419) | | Weighted-average shares (basic & diluted) | 45,846 | 45,331 | 45,313 | 44,926 | | Net Loss Per Share (basic & diluted) | $(0.32) | $(0.67) | $(0.73) | $(0.97) | - Net loss per share improved from $(0.67) to $(0.32) for the three months and from $(0.97) to $(0.73) for the six months ended June 30, 2025[112] - Potentially dilutive shares, totaling 7.5 million for 2025 and 8.1 million for 2024, were excluded from diluted EPS calculations because their effect would be anti-dilutive due to the net loss[113] NOTE 10 – STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION Stock-based compensation expense decreased due to lower RSU valuations and reduced headcount | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Stock-Based Compensation Expense | $10,327 | $15,303 | $22,429 | $30,060 | | RSUs | $8,266 | $11,160 | $18,138 | $20,345 | | PSUs | $1,954 | $2,775 | $2,994 | $7,029 | | ESPP | $107 | $1,368 | $1,297 | $2,686 | - As of June 30, 2025, approximately 4.7 million shares were reserved for future grants under the 2022 Equity Incentive Plan (EIP), and 2.1 million shares under the 2022 Employee Stock Purchase Plan (ESPP)[115][118] - Unrecognized stock-based compensation expense related to unvested equity awards totaled $51.9 million as of June 30, 2025, with a weighted-average recognition period of 1.9 years for RSUs and 2.0 years for PSUs[125] NOTE 11 – INCOME TAXES The company recorded income tax expenses despite pretax losses, primarily due to foreign taxes | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Loss before taxes | $(10,145) | $(21,365) | $(25,022) | $(30,464) | | Provision for income taxes | $4,636 | $9,266 | $8,125 | $13,538 | | Effective tax rate | (45.7)% | (43.4)% | (32.5)% | (44.4)% | - Income tax expense for both periods in 2025 and 2024 was primarily driven by foreign withholding taxes and foreign income taxes[126][127] - Gross unrecognized tax benefits were $15.3 million as of June 30, 2025, with $1.2 million affecting the effective tax rate if recognized[128] NOTE 12 – LEASES The company maintains various operating leases for facilities and equipment with stable total costs | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Lease Cost | $3,154 | $2,999 | $6,376 | $6,407 | - The company leases office and research facilities, data centers, and office equipment under operating leases, with terms extending through 2032[131] - As of June 30, 2025, the weighted-average remaining lease term for operating leases was 4.5 years, with a weighted-average discount rate of 6.7%[134] NOTE 13 – COMMITMENTS AND CONTINGENCIES The company has future purchase obligations and is involved in various legal proceedings - As of June 30, 2025, the company's total future unconditional purchase obligations amounted to approximately $128.3 million[135] - Xperi provides indemnifications to licensees, customers, business partners, officers, and directors, but has not recorded any material liability to date[136][137] - The company is involved in litigation matters and claims in the normal course of business, but management does not anticipate a material effect on its business or consolidated financial statements from the disposition of these matters[138][139] NOTE 14 - SEGMENT RELATED INFORMATION Xperi operates as a single operating and reportable segment with performance assessed on a consolidated basis | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $105,933 | $119,591 | $219,966 | $238,435 | | Consolidated Net Loss | $(14,781) | $(30,631) | $(33,147) | $(44,002) | - The company operates in one operating and reportable segment, with its Chief Executive Officer identified as the chief operating decision maker (CODM)[140] - The CODM assesses performance and allocates resources based on consolidated net income (loss) and total consolidated assets[140] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, condition, and operational results Business Overview Xperi is a leading consumer and entertainment technology company operating in a single reportable segment - Xperi Inc is a leading consumer and entertainment technology company, enhancing experiences across smart devices, connected cars, and entertainment platforms[144] - The company operates in a single reportable business segment, with revenue divided into Pay-TV, Consumer Electronics, Connected Car, and Media Platform[144] - Xperi has approximately 1,620 employees and over 35 years of operating experience, with headquarters in Silicon Valley and global operations[144] Divestitures Two significant divestitures were completed to streamline the business and focus on entertainment markets - The AutoSense in-cabin safety business was sold to Tobii AB in January 2024, streamlining Xperi's focus on entertainment markets[145] - Perceive Corporation, a subsidiary focused on edge inference hardware and software, was sold to Amazon.com Services LLC in October 2024 for $80.0 million, further concentrating Xperi on entertainment-based solutions[146] Macroeconomic Conditions Macroeconomic conditions have negatively impacted the company's revenue and operations - Macroeconomic conditions such as increased inflation, interest rates, and recessionary fears have adversely impacted Xperi's business and customers[147] - The changing macroeconomic environment created increased uncertainty for customers in Q2 2025, negatively impacting revenue and results of operations for the quarter[147] Results of Operations Revenue decreased but operating loss improved due to significant reductions in operating expenses Revenue Revenue decreased due to declines in Pay-TV and Connected Car, partially offset by growth in other segments | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $105,933 | $119,591 | $(13,658) | (11)% | | Pay-TV Revenue | $49,937 | $60,752 | $(10,815) | (18)% | | Connected Car Revenue | $25,105 | $31,423 | $(6,318) | (20)% | | Media Platform Revenue | $12,128 | $10,252 | $1,876 | 18% | | Consumer Electronics Revenue | $18,763 | $17,164 | $1,599 | 9% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $219,966 | $238,435 | $(18,469) | (8)% | | Pay-TV Revenue | $99,801 | $117,558 | $(17,757) | (15)% | | Connected Car Revenue | $58,391 | $55,771 | $2,620 | 5% | - The six-month revenue decrease was also impacted by the divestitures of AutoSense and Perceive[154] Operating Expenses Total operating expenses decreased significantly due to reductions in R&D and SG&A expenses Cost of Revenue, Excluding Depreciation and Amortization of Intangible Assets Cost of revenue increased due to higher costs associated with advertising revenue | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of Revenue | $33,549 | $28,953 | $4,596 | 16% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of Revenue | $63,148 | $58,709 | $4,439 | 8% | - The increase in cost of revenue was primarily due to higher costs related to advertising revenue, with some offset from the Perceive and AutoSense divestitures[158][159] Research and Development R&D expense decreased significantly, driven by divestitures and reduced employee headcount | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | R&D Expense | $29,783 | $45,123 | $(15,340) | (34)% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | R&D Expense | $69,332 | $95,562 | $(26,230) | (27)% | - Key drivers for the decrease include lower R&D spend from the Perceive and AutoSense divestitures, reductions in R&D employee headcount, and lower bonus expenses[161][162] Selling, General and Administrative SG&A expenses decreased due to reduced headcount, lower bonuses, and decreased stock-based compensation | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | SG&A Expense | $41,142 | $53,102 | $(11,960) | (23)% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | SG&A Expense | $89,840 | $109,455 | $(19,615) | (18)% | - The decrease in SG&A was primarily driven by reduced employee headcount, lower bonus expenses, decreased stock-based compensation, and certain one-time transaction costs[164][165] Stock-based Compensation Total stock-based compensation expense decreased due to lower RSU valuations and reduced headcount | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total SBC Expense | $10,327 | $15,303 | $(4,976) | $22,429 | $30,060 | $(7,631) | - The decrease in SBC expense was primarily driven by RSUs granted over time at lower valuations, lower expense for performance-based restricted stock units, and reduced employee headcount[166] Depreciation Expense Depreciation expense fluctuated due to capitalized software costs and fully depreciated assets | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Depreciation Expense | $3,448 | $3,278 | $170 | 5% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Depreciation Expense | $6,353 | $6,862 | $(509) | (7)% | - The increase in depreciation for the three-month period was primarily due to increased capitalized internal-use software costs over the past 12 months[167] Amortization Expense Amortization expense decreased as certain intangible assets became fully amortized | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Amortization Expense | $9,144 | $11,042 | $(1,898) | (17)% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Amortization Expense | $18,866 | $22,081 | $(3,215) | (15)% | - The decrease was primarily due to certain intangible assets becoming fully amortized over the past 12 months, though amortization expenses are expected to remain significant in future years[169][170] Interest and Other Income, Net Interest and other income increased significantly, driven by higher foreign currency transaction gains | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Interest and Other Income, Net | $1,747 | $1,290 | $457 | 35% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Interest and Other Income, Net | $4,042 | $2,332 | $1,710 | 73% | - The increase was principally due to higher foreign currency transaction gains[171][172] Interest Expense—Debt Interest expense on debt remained relatively constant compared to the prior year | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Interest Expense - Debt | $(759) | $(748) | $(11) | 1% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Interest Expense - Debt | $(1,491) | $(1,496) | $5 | (0)% | - The interest expense on debt remained constant across the comparable periods[173] Gain on Divestiture A pre-tax gain of $22.9 million was recognized from the AutoSense Divestiture in the prior year | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Gain on Divestiture | $0 | $22,934 | $(22,934) | (100)% | - A pre-tax gain of $22.9 million was recognized in the six months ended June 30, 2024, from the AutoSense Divestiture[174] - No divestitures occurred during the three and six months ended June 30, 2025[175] Provision for Income Taxes The company recorded income tax expenses despite pretax losses, primarily due to foreign taxes | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Provision for Income Taxes | $4,636 | $9,266 | $8,125 | $13,538 | | Effective Tax Rate | (45.7)% | (43.4)% | (32.5)% | (44.4)% | - Income tax expense for both periods in 2025 and 2024 was primarily related to foreign withholding taxes and foreign income taxes[176][177] - The company maintains valuation allowances on federal, certain state, and certain foreign deferred tax assets, as their recoverability is not considered more-likely-than-not[178] Liquidity and Capital Resources Cash decreased due to operations and debt repayment, but liquidity is expected to be sufficient Stock Repurchase Program The company has $80.0 million remaining under its stock repurchase program, with no repurchases in Q2 2025 - The Board authorized a $100.0 million stock repurchase program in April 2024[183] - As of June 30, 2025, approximately 2.2 million shares had been repurchased for $20.0 million, leaving $80.0 million available under the program[183] - No common stock was repurchased during the three and six months ended June 30, 2025[183] Cash Flows Cash decreased due to operating and financing activities, though operating cash flow improved significantly Cash Flows from Operating Activities Net cash used in operating activities improved significantly due to a reduced net loss | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(12,151) | $(51,921) | - The decrease in cash used in operating activities was primarily due to a lower net loss and reduced changes in operating assets and liabilities, partially offset by non-cash items like stock-based compensation and amortization[184][185][186] Cash Flows from Investing Activities Net cash used in investing activities remained stable, driven primarily by capital expenditures | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Used in Investing Activities | $(8,986) | $(8,443) | - Investing activities primarily involved capital expenditures, including capitalized internal-use software[187] Capital Expenditures Capital expenditures are expected to be approximately $20.0 million in 2025 - Capital expenditures primarily include purchases of computer hardware and software, capitalized internal-use software, and information systems[188] - Expected capital expenditures for 2025 are approximately $20.0 million, to be funded by existing cash and cash equivalents[188] Cash Flows from Financing Activities Net cash used in financing increased due to debt repayment partially offset by new loan proceeds | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Used in Financing Activities | $(14,279) | $(1,601) | - Key financing activities in 2025 included a $50.0 million repayment of the Vewd promissory note, $6.3 million in withholding taxes, $40.0 million in loan proceeds from the AR Facility, and $3.3 million from the ESPP[189] Long-Term Debt Financing The company repaid a $50.0 million note and borrowed $40.0 million under a new AR Facility - On February 21, 2025, Xperi fully repaid the $50.0 million Vewd senior unsecured promissory note[191] - Concurrently, the company borrowed $40.0 million under a new AR Facility with PNC, which matures on February 21, 2028, and has a variable interest rate[192][193] - The company was in compliance with all covenants under the AR Facility as of June 30, 2025[193] Liquidity Current cash and available borrowings are expected to provide sufficient liquidity for the next 12 months - Current cash and cash equivalents, along with the AR Facility, are expected to provide sufficient liquidity for at least the next 12 months[194] - Poor financial results, unanticipated expenses, or strategic investments could lead to additional financing requirements sooner than expected[195] - Access to capital markets may be constrained, and borrowing costs could increase under certain business and market conditions, including those driven by tariffs and economic uncertainties[195][196] Critical Accounting Estimates There were no significant changes in critical accounting estimates during the period - No significant changes occurred in critical accounting estimates during the six months ended June 30, 2025[197] Recent Accounting Pronouncements The company is currently evaluating the impact of recently issued accounting standards - The company is evaluating ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024[41] - Xperi is also evaluating ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,' effective for its 2027 annual financial statements[42] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is interest rate risk from its variable-rate AR Facility Interest Rate Risk The company is exposed to interest rate risk from its $40.0 million variable-rate debt - Xperi is exposed to changes in interest rates due to its $40.0 million outstanding indebtedness under the variable-rate AR Facility, which is based on the secured overnight financing rate (SOFR)[201] - A 1% increase in the applicable SOFR interest rate is estimated to result in an annual increase of approximately $0.4 million in interest expense[201] - Any significant increase in interest expense could negatively impact the company's results of operations and cash flows[201] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025 Evaluation of Controls and Procedures Management evaluated and concluded that disclosure controls and procedures were effective - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025[203] - Based on this evaluation, they concluded that the disclosure controls and procedures were effective at the reasonable assurance level[203] Change in Internal Control over Financial Reporting No material changes were made to internal control over financial reporting during the last fiscal quarter - No material changes in internal control over financial reporting occurred during the last fiscal quarter covered by this Quarterly Report on Form 10-Q[204] PART II - OTHER INFORMATION This part provides supplementary information on legal proceedings, risk factors, and other corporate matters Item 1. Legal Proceedings The company is involved in various legal proceedings that are not expected to have a material effect - Xperi is involved in legal proceedings related to enforcing license agreements, intellectual property rights, and defending against infringement claims[206] - Management does not anticipate a material effect on the company's results of operations, consolidated financial position, or liquidity from the disposition of these matters, despite considerable uncertainty[206] Item 1A. Risk Factors The company faces significant risks from macroeconomic uncertainties and international operations - Macroeconomic uncertainties, including increased inflation, interest rates, and recessionary fears, have adversely impacted Xperi's business, results of operations, and financial condition, as evidenced by negative impacts on Q2 2025 revenue[208] - A significant reduction in original entertainment content or advertising expenditures could materially adversely affect the Media Platform solutions and overall growth[210] - Xperi is exposed to risks from international operations, including compliance with complex laws, foreign currency fluctuations, trade policies (e.g, tariffs on imports from China), and geopolitical factors, which could strain global supply chains and reduce demand for products incorporating its technologies[211][212][213] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock during the three months ended June 30, 2025 - The company did not repurchase shares of its common stock during the three months ended June 30, 2025[218] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - This section is marked as 'Not applicable'[219] Item 4. Mine Safety Disclosures This item is not applicable to the company for the reporting period - This section is marked as 'Not applicable'[221] Item 5. Other Information No other information is reported, and no directors or officers modified trading arrangements - No other information is reported under sub-items (a) and (b)[222][224] - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[225] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including agreements and certifications - Exhibits include the Asset Purchase Agreement for Perceive Corporation, Amended and Restated Certificate of Incorporation and Bylaws, and various stock award agreements[227] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and 18 U.S.C Section 1350 are also included[227] - The filing also contains Inline XBRL Document Set for the condensed consolidated financial statements[227] SIGNATURES This section contains the official signatures authorizing the report's submission - The report is duly signed on behalf of Xperi Inc by Robert Andersen, Chief Financial Officer, on August 7, 2025[230][231]