Xperi Inc.

Previous wording

The following discussion and analysis is intended to promote understanding of our results of operations and financial condition and should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the fiscal year ended December 31, 2024 found in our Form 10-K filed by Xperi Inc. on February 27, 2025 (our “Form 10-K”).

Current wording

The following discussion and analysis is intended to promote understanding of our results of operations and financial condition and should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the fiscal year ended December 31, 2024 found in our Form 10-K filed by Xperi Inc. (“Xperi,” the “Company” “we,” “us,” “our,” and similar references) on February 27, 2025 (our “Form 10-K”).

Previous wording

In December 2023, we entered into a definitive agreement with Tobii AB (“Tobii”), an eye tracking and attention computing company, pursuant to which we agreed to sell our AutoSense in-cabin safety business and related imaging solutions (the “AutoSense Divestiture”). The AutoSense Divestiture was completed in January 2024 and has streamlined our business and further enhanced our focus on entertainment markets.

Current wording

In December 2023, we entered into a definitive agreement with Tobii AB, an eye tracking and attention computing company, pursuant to which we agreed to sell our AutoSense in-cabin safety business and related imaging solutions (the “AutoSense Divestiture”). The AutoSense Divestiture was completed in January 2024 and has streamlined our business and further enhanced our focus on entertainment markets.

Previous wording

In August 2024, we entered into an Asset Purchase Agreement with Amazon.com Services LLC to sell substantially all of the assets and certain liabilities of Perceive Corporation (later known as Xperi Pylon Corporation and subsequently dissolved in December 2024), a subsidiary focused on edge inference hardware and software technologies, for a gross amount of $80.0 million in cash, including a holdback of $12.0 million to be held for 18 months after the closing of the transaction (the “Perceive Transaction”) to secure our and Perceive Corporation’s indemnification obligations. The Perceive Transaction was completed in October 2024, allowing us to be fully focused on entertainment-based solutions to grow our independent media platform and licensing businesses.

Current wording

In August 2024, we entered into an Asset Purchase Agreement with Amazon.com Services LLC to sell substantially all of the assets and certain liabilities of Perceive Corporation (“Perceive”, later known as Xperi Pylon Corporation and subsequently dissolved in December 2024), a subsidiary focused on edge inference hardware and software technologies, for a gross amount of $80.0 million in cash, including a holdback of $12.0 million to be held for 18 months after the closing of the transaction (the “Perceive Transaction”) to secure our and Perceive’s indemnification obligations. The Perceive Transaction was completed in October 2024, allowing us to be fully focused on entertainment-based solutions to grow our independent media platform and licensing businesses.

Previous wording

The following table presents our historical operating results for the periods indicated as a percentage of revenue:

Current wording

The following table presents our operating results for the periods indicated as a percentage of revenue:

Previous wording

Comparison of the Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of the Three and Six Months Ended June 30, 2025 and 2024

Previous wording

Revenue decreased by $4.8 million, or 4%, for the three months ended March 31, 2025 compared to the same period in the prior year. The decrease was primarily attributable to decreases of $13.8 million in Pay-TV, Media Platform, and Consumer Electronics revenue, partially offset by an increase of $9.0 million in Connected Car revenue.

Current wording

Revenue decreased by $13.7 million, or 11%, for the three months ended June 30, 2025 compared to the same period in the prior year. The decrease was primarily attributable to decreases of $17.1 million in Pay-TV and Connected Car revenue, partially offset by a combined increase of $3.4 million in Media Platform and Consumer Electronics revenue.

Previous wording

Pay-TV revenue decreased by $6.9 million compared to the first quarter of 2024 due to declines in core guide products and consumer hardware and subscription revenue partially due to certain minimum guarantee (“MG”) revenue that occurred during the first quarter of 2024, which was partially offset by continued increases in IPTV solutions revenue. Our Media Platform revenue declined by $3.5 million due to reductions in middleware solutions revenue and advertising revenue associated with third-party advertising inventory. In addition, Consumer Electronics revenue decreased by $3.3 million driven by the absence of revenue in the first quarter of 2025 from the divestitures of both Perceive and imaging products related to AutoSense, and market-based softness of certain end products, partially offset by multi-year renewals. These decreases were partially offset by the increase in Connected Car revenue as a result of MG revenue from HD Radio partially offset by the impact of the AutoSense Divestiture.

Current wording

Pay-TV revenue decreased by $10.8 million compared to the second quarter of 2024 primarily due to declines in core guide products and consumer hardware and subscription revenue. This was partially due to higher minimum guarantee (“MG”) revenue that occurred during the second quarter of 2024, which was partially offset by growth in TiVo video-over-broadband (“IPTV”) solutions revenue. In addition, Connected Car revenue decreased by $6.3 million primarily attributable to certain MG revenue that occurred during the same period in the prior year, partially offset by continued increases in HD Radio and AutoStage revenue.

Previous wording

Cost of revenue, excluding depreciation and amortization of intangible assets, consists primarily of employee-related costs, royalties paid to third parties, hardware product-related costs, content and data costs, hosting fees, maintenance costs and an allocation of facilities costs, as well as service center and other expenses related to providing our offerings and non-recurring engineering (“NRE”) services.

Current wording

Cost of revenue, excluding depreciation and amortization of intangible assets, consists primarily of employee-related costs, royalties paid to third parties, hardware product-related costs, content and data costs, hosting fees, maintenance costs and an allocation of facilities costs, as well as service center and other expenses related to providing our offerings and non-recurring engineering services.

Previous wording

Cost of revenue, excluding depreciation and amortization of intangible assets, for the three months ended March 31, 2025 was $29.6 million, as compared to $29.8 million in the same period of the prior year, a decrease of $0.2 million, or 1%. This decrease was primarily attributable to lower costs resulting from the AutoSense Divestiture and the Perceive Transaction, both of which took place in 2024.

Current wording

Cost of revenue, excluding depreciation and amortization of intangible assets, for the six months ended June 30, 2025 was $63.1 million, as compared to $58.7 million in the same period of the prior year, an increase of $4.4 million, or 8%. This increase was primarily attributable to higher costs incurred in connection with advertising revenue, partially offset by lower costs resulting from the AutoSense Divestiture and the Perceive Transaction.

Previous wording

Research and development expense for the three months ended March 31, 2025 was $39.5 million, as compared to $50.4 million in the same period of the prior year, a decrease of $10.9 million, or 22%. The decrease was primarily driven by lower research and development spend in the AutoSense in-cabin safety business and related imaging solutions following the AutoSense Divestiture, lower expenses resulting from the Perceive Transaction as well as reductions in R&D employee headcount.

Current wording

Research and development expense for the six months ended June 30, 2025 was $69.3 million, as compared to $95.6 million in the same period of the prior year, a decrease of $26.3 million, or 27%. The decrease was primarily driven by lower R&D spend in the AutoSense in-cabin safety business and related imaging solutions following the AutoSense Divestiture, lower expenses resulting from the Perceive Transaction, reductions in R&D employee headcount and lower bonus expenses.

Previous wording

Selling, general and administrative expenses for the three months ended March 31, 2025 were $48.7 million, as compared to $56.4 million in the same period of the prior year, a decrease of $7.7 million, or 14%. The decrease was primarily attributable to reduced employee headcount as well as a decrease in SBC expense.

Current wording

Selling, general and administrative expenses for the three months ended June 30, 2025 were $41.1 million, as compared to $53.1 million in the same period of the prior year, a decrease of $12.0 million, or 23%. The decrease was primarily attributable to reduced employee headcount, lower bonus expenses and SBC expense, and certain one-time transaction costs.

Previous wording

The following table sets forth our SBC expense for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following table sets forth our SBC expense for the three and six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

We recognized SBC expense from restricted stock units and purchases made under our employee stock purchase plan (“ESPP”). The decrease of $2.7 million in SBC expense for the three months ended March 31, 2025, when compared to the same period of the prior year, was primarily driven by lower expense for performance-based restricted stock units and reduced employee headcount.

Current wording

We recognized SBC expense from restricted stock units (“RSUs”) and purchases made under our employee stock purchase plan (“ESPP”). The decreases of $5.0 million and $7.6 million in SBC expense for the three and six months ended June 30, 2025, respectively, when compared to the same periods of the prior year, was primarily driven by RSUs granted over time at lower valuations, lower expense for performance-based restricted stock units and reduced employee headcount.

Previous wording

We recognized depreciation expense for certain equipment, capitalized internal-use software, leasehold improvements, and buildings and improvements. Depreciation expense for the three months ended March 31, 2025 was $2.9 million, as compared to $3.6 million in the same period of the prior year, a decrease of $0.7 million, or 19%. The decrease was primarily due to certain fixed assets becoming fully depreciated over the past 12 months.

Current wording

We recognized depreciation expense for certain equipment, capitalized internal-use software, leasehold improvements, and buildings and improvements. Depreciation expense for the three months ended June 30, 2025 was $3.4 million, as compared to $3.3 million in the same period of the prior year, an increase of $0.2 million, or 5%. The increase was primarily driven by increased capitalized internal-use software costs over the past 12 months.

Previous wording

We recognized amortization expense for certain intangible assets we acquired in business combinations that are recognized separately from goodwill. Amortization expense for the three months ended March 31, 2025 was $9.7 million, as compared to $11.0 million in the same period of the prior year, a decrease of $1.3 million, or 12%. The decrease was primarily due to certain intangible assets becoming fully amortized over the past 12 months.

Current wording

We recognized amortization expense for certain intangible assets we acquired in business combinations that are recognized separately from goodwill. For the three and six months ended June 30, 2025, amortization expense decreased by $1.9 million and $3.2 million, or 17% and 15%, respectively, as compared to the same periods of the prior year. The decreases were primarily due to certain intangible assets becoming fully amortized over the past 12 months.

Previous wording

The interest expense on debt was $0.7 million in the three months ended March 31, 2025 and remained constant when compared to the same period in the prior year.

Current wording

The interest expense on our debt remained constant in the three and six months ended June 30, 2025, when compared to the same periods in the prior year.

Previous wording

As disclosed in Note 6—Divestituresof the Notes to the Condensed Consolidated Financial Statements (Unaudited), we completed the AutoSense Divestiture on January 31, 2024 and streamlined our business, further enhancing our focus on entertainment markets. Upon the completion of the AutoSense Divestiture, we recognized a pre-tax gain of $22.9 million during the three months ended March 31, 2024.

Current wording

As disclosed in Note 6—Divestituresof the Notes to the Condensed Consolidated Financial Statements (Unaudited), we completed the AutoSense Divestiture on January 31, 2024 and streamlined our business, further enhancing our focus on entertainment markets. Upon the completion of the AutoSense Divestiture, we recognized a pre-tax gain of $22.9 million during the six months ended June 30, 2024.

Previous wording

We did not have any divestitures during the three months ended March 31, 2025.

Current wording

We did not have any divestitures during the three and six months ended June 30, 2025.

Previous wording

For the three months ended March 31, 2025, we recorded an income tax expense of $3.5 million on a pretax loss of $14.9 million, which resulted in an effective tax rate of (23.5)%. The income tax expense for the three months ended March 31, 2025 was primarily related to foreign withholding taxes and foreign income taxes.

Current wording

For the three and six months ended June 30, 2025, we recorded an income tax expense of $4.6 million and $8.1 million on a pretax loss of $10.1 million and $25.0 million, respectively; which resulted in an effective tax rate of (45.7)% and (32.5)%, respectively. The income tax expense for the three and six months ended June 30, 2025 was primarily related to foreign withholding taxes and foreign income taxes.

Previous wording

For the three months ended March 31, 2024, we recorded an income tax expense of $4.3 million on a pretax loss of $9.1 million, which resulted in an effective tax rate of (47.0)%. The income tax expense for the three months ended March 31, 2024 was primarily related to foreign withholding taxes, foreign income taxes, U.S. federal income taxes, and state income taxes.

Current wording

For the three and six months ended June 30, 2024, we recorded an income tax expense of $9.3 million and $13.6 million on a pretax loss of $21.4 million and $30.5 million, respectively, which resulted in an effective tax rate of (43.4)% and (44.4)%, respectively. The income tax expense for the three and six months ended June 30, 2024 was primarily related to foreign withholding taxes, foreign income taxes, U.S. federal income taxes, and state income taxes.

Previous wording

Our primary liquidity and capital resources are our cash and cash equivalents on hand and borrowings under the AR Facility (defined below). Cash and cash equivalents were $88.0 million at March 31, 2025, a decrease of $42.6 million from $130.6 million at December 31, 2024. This decrease resulted primarily from cash used in operations of $22.3 million, $50.0 million in voluntary repayment of the Vewd Software Holdings Limited (“Vewd”) senior unsecured promissory note, $5.3 million in payments of withholding taxes on net share settlement of equity awards, and $4.2 million of capital expenditures, including capitalized internal-use software costs, partially offset by $40.0 million in loan proceeds borrowed under an accounts receivable securitization program (the “AR Facility”) with PNC Bank, National Association (“PNC”). For detailed information regarding the repayment of the Vewd debt and the AR Facility, refer to “Long-Term Debt Financing” below.

Current wording

Our primary liquidity and capital resources are our cash and cash equivalents and borrowings available under an accounts receivable securitization program (the “AR Facility”) with PNC Bank, National Association (“PNC”). Cash and cash equivalents were $95.1 million at June 30, 2025, a decrease of $35.5 million from $130.6 million at December 31, 2024. This decrease resulted primarily from cash used in operations of $12.2 million, $50.0 million in repayment of the Vewd Software Holdings Limited (“Vewd”) senior unsecured promissory note, $9.0 million of capital expenditures, including capitalized internal-use software costs, and $6.3 million in payments of withholding taxes on net share settlement of equity awards, partially offset by $3.3 million in proceeds from the issuance of common stock under our ESPP, and $40.0 million in loan proceeds borrowed under the AR Facility with PNC. For detailed information regarding the repayment of the Vewd debt and the AR Facility, refer to “Long-Term Debt Financing” below.

Previous wording

In April 2024, our Board of Directors (the “Board”) authorized the repurchase of up to $100.0 million of our common stock (the “Program”). Under the Program, we may make repurchases, from time to time, through open market purchases, block trades, privately negotiated transactions, accelerated share repurchase transactions, or other means. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases under the Program. As of March 31, 2025, we have repurchased a total of approximately 2.2 million shares of common stock, since inception of the Program, at an average price of $9.23 per share for a total cost of approximately $20.0 million. We did not repurchase any common stock during the three months ended March 31, 2025. As of March 31, 2025, the total remaining amount available for repurchase was $80.0 million. We may continue to execute authorized repurchases from time to time under the Program. There is no guarantee that such repurchases under the Program will enhance the value of our common stock.

Current wording

In April 2024, our Board of Directors (the “Board”) authorized the repurchase of up to $100.0 million of our common stock (the “Program”). Under the Program, we may make repurchases, from time to time, through open market purchases, block trades, privately negotiated transactions, accelerated share repurchase transactions, or other means. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases under the Program. As of June 30, 2025, we have repurchased a total of approximately 2.2 million shares of common stock, since inception of the Program, at an average price of $9.23 per share for a total cost of approximately $20.0 million. We did not repurchase any common stock during the three and six months ended June 30, 2025. As of June 30, 2025, the total remaining amount available for repurchase was $80.0 million. We may continue to execute authorized repurchases from time to time under the Program. There is no guarantee that such repurchases under the Program will enhance the value of our common stock.

Previous wording

Net cash used in operating activities was $22.3 million for the three months ended March 31, 2025, primarily due to our net loss of $18.4 million being further adjusted by $28.4 million of changes in operating assets and liabilities, including payment during the quarter of employee annual bonuses for 2024 performance, partially offset by non-cash items such as SBC expense of $12.1 million, amortization of intangible assets of $9.7 million, and depreciation expense of $2.9 million.

Current wording

Net cash used in operating activities was $12.2 million for the six months ended June 30, 2025, primarily due to our net loss of $33.1 million being further adjusted by $26.1 million of changes in operating assets and liabilities, including payment of employee annual bonuses for 2024 performance, partially offset by non-cash items such as SBC expense of $22.4 million, amortization of intangible assets of $18.9 million, and depreciation expense of $6.4 million.

Previous wording

Net cash used in operating activities was $49.8 million for the three months ended March 31, 2024, primarily due to our net loss of $13.4 million being further adjusted by $43.4 million of changes in operating assets and liabilities, including payment during the quarter of employee annual bonuses for 2023 performance, and $22.9 million of a non-cash gain recognized from the

Current wording

Net cash used in operating activities was $51.9 million for the six months ended June 30, 2024, primarily due to our net loss of $44.0 million being further adjusted by $42.2 million of changes in operating assets and liabilities, including payment of employee annual bonuses for 2023 performance, and $22.9 million of a non-cash gain recognized from the AutoSense

Previous wording

AutoSense Divestiture, partially offset by non-cash items such as SBC expense of $14.8 million, amortization of intangible assets of $11.0 million, and depreciation expense of $3.6 million.

Current wording

Divestiture, partially offset by non-cash items such as SBC expense of $30.1 million, amortization of intangible assets of $22.1 million, and depreciation expense of $6.9 million.

Previous wording

Net cash used in investing activities was $4.2 million and $4.7 million for three months ended March 31, 2025 and 2024, respectively, which was primarily related to capital expenditures, including capitalized internal-use software.

Current wording

Net cash used in investing activities was $9.0 million and $8.4 million for the six months ended June 30, 2025 and 2024, respectively, which was primarily related to capital expenditures, including capitalized internal-use software.

Previous wording

Our capital expenditures for property and equipment consist primarily of purchases of computer hardware and software, capitalized internal-use software, information systems, and production and test equipment. We expect capital expenditures in 2025 to be approximately $20.0 million. These expenditures are expected to be paid with existing cash and cash equivalents. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs.

Current wording

Our capital expenditures for property and equipment consist primarily of purchases of computer hardware and software, capitalized internal-use software, information systems, and production and test equipment. We expect capital expenditures in 2025 to be approximately $20.0 million. These expenditures are expected to be paid with existing cash and cash equivalents. Current expectations may not be realized, and plans may be revised following a reevaluation of our capital expenditure requirements.

Previous wording

Net cash used in financing activities was $16.1 million for the three months ended March 31, 2025, primarily due to $5.3 million in payment of withholding taxes related to net share settlement of equity awards, and the $50.0 million voluntary repayment of the Vewd senior unsecured promissory note, partially offset by $40.0 million in loan proceeds borrowed under the AR Facility with PNC.

Current wording

Net cash used in financing activities was $14.3 million for the six months ended June 30, 2025, primarily due to the $50.0 million voluntary repayment of the Vewd senior unsecured promissory note, and $6.3 million in payment of withholding taxes related to net share settlement of equity awards, partially offset by $40.0 million in loan proceeds borrowed under the AR Facility with PNC and $3.3 million in proceeds from the issuance of common stock under our ESPP.

Previous wording

Net cash used in financing activities was $4.7 million for the three months ended March 31, 2024, which reflected the payment of withholding taxes related to net share settlement of equity awards.

Current wording

Net cash used in financing activities was $1.6 million for the six months ended June 30, 2024, due to $5.9 million in payment of withholding taxes related to net share settlement of equity awards, partially offset by $4.3 million in proceeds from the issuance of common stock under our ESPP.

Previous wording

In connection with the acquisition of Vewd on July 1, 2022, we issued a senior unsecured promissory note (the “Promissory Note”) to the sellers of Vewd in the principal amount of $50.0 million, all of which was outstanding at December 31, 2024. Indebtedness outstanding under the Promissory Note bears an interest rate of 6.00% per annum, subject to certain potential adjustments. The Promissory Note was scheduled to mature on July 1, 2025. We may, at any time and on any one or more occasions, prepay all or any portion of the outstanding principal amount, plus accrued and unpaid interest, if any, under the Promissory Note without premium or penalty. On February 21, 2025, we voluntarily made a full principal payment of $50.0 million plus accrued interest by using a combination of cash on hand and a new long-term financing facility through the securitization of our accounts receivable as described below.

Current wording

In connection with the acquisition of Vewd on July 1, 2022, we issued a senior unsecured promissory note (the “Promissory Note”) to the sellers of Vewd in the principal amount of $50.0 million, all of which was outstanding at December 31, 2024. Indebtedness outstanding under the Promissory Note bore an interest rate of 6.00% per annum, subject to certain potential adjustments. The Promissory Note was scheduled to mature on July 1, 2025. We were permitted, at any time and on any one or more occasions, to prepay all or any portion of the outstanding principal amount, plus accrued and unpaid interest, if any, under the Promissory Note without premium or penalty. On February 21, 2025, we voluntarily made a full principal payment of $50.0 million plus accrued interest by using a combination of cash on hand and a new long-term financing facility through the securitization of our accounts receivable as described below.

Previous wording

On February 21, 2025, we and Xperi SPV LLC (“Xperi SPV”), a wholly-owned special purpose subsidiary, entered into a Receivables Financing Agreement (the “RFA”) with PNC, and PNC Capital Markets LLC, and a Sale and Contribution Agreement (the “SCA,” and, together with the RFA, the “RF Agreements”) among us, Xperi SPV and certain of our other wholly-owned subsidiaries to establish an accounts receivable securitization program (the “AR Facility”). Interest is payable on a monthly basis. The AR Facility is scheduled to terminate on February 21, 2028, unless terminated earlier pursuant to its terms. For a detailed description of the AR Facility, refer to Note 8—Debt and Receivables Securitization.

Current wording

On February 21, 2025, we and Xperi SPV LLC (“Xperi SPV”), a special purpose subsidiary, entered into a Receivables Financing Agreement (the “RFA”) with PNC, and PNC Capital Markets LLC, and a Sale and Contribution Agreement (together with the RFA, the “RF Agreements”) among us, Xperi SPV and certain of our other wholly-owned subsidiaries to establish the AR Facility. Interest is payable on a monthly basis. The AR Facility is scheduled to terminate on February 21, 2028, unless terminated earlier pursuant to its terms. For a detailed description of the AR Facility, refer to Note 8—Debt and Receivables Securitization.

Previous wording

Poor financial results, unanticipated expenses, unanticipated acquisitions of technologies or businesses or unanticipated strategic investments could give rise to additional financing requirements sooner than we expect. Equity or additional debt financing may not be available when needed or, if available, equity or debt financing may not be on terms satisfactory to us. Additionally, disruption and volatility in the global capital markets and economic uncertainties, including those driven by tariffs, could impact our capital resources and liquidity in the future.

Current wording

Poor financial results, unanticipated expenses, unanticipated acquisitions of technologies or businesses or unanticipated strategic investments could give rise to additional financing requirements sooner than we expect. Equity or additional debt financing may not be available when needed or, if available, equity or debt financing may not be on terms satisfactory to us. Additionally, disruption and volatility in the global capital markets and economic uncertainties, including those driven by tariffs, have impacted corporate and consumer confidence and could continue to impact our capital resources and liquidity in the future.

Previous wording

We may supplement our short-term liquidity needs with access to capital markets, if necessary, and strategic cost savings initiatives. Our access to capital markets may be constrained and our cost of borrowing may increase under certain business and market conditions, and our liquidity is subject to various risks including the risks identified in “Risk Factors” included in Part I, Item 1A of our Form 10-K.

Current wording

We may supplement our short-term liquidity needs with access to capital markets, if necessary, and strategic cost savings initiatives. Our access to capital markets may be constrained and our cost of borrowing may increase under certain business and market conditions, and our liquidity is subject to various risks including the risks identified in “Risk Factors” included in Part I, Item 1A of our Form 10-K and Part II, Item IA of this Quarterly Report.

Previous wording

During the three months ended March 31, 2025, there were no significant changes in our critical accounting estimates. For a discussion of our critical accounting estimates, see Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K.

Current wording

During the six months ended June 30, 2025, there were no significant changes in our critical accounting estimates. For a discussion of our critical accounting estimates, see Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K.