Xperi (XPER) Q3 2026 Earnings Call Transcript

DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Jon Kirchner
• Chief Financial Officer - Robert Andersen

TAKEAWAYS

• Revenue -- $114 million, representing a 2% increase year over year driven by growth in the media platform and pay TV segments.
• Media Platform Revenue -- $17 million, more than doubling year over year due to significant acceleration in advertising and related revenue.
• Advertising and Related Revenue -- $15 million, growing over 280% as a result of increased monthly active users and expanded advertising partnerships.
• TiVo One Monthly Active Users (MAUs) -- 6.8 million, an increase of 40% year over year reflecting expanded smart TV and video-over-broadband footprints.
• TiVo One ARPU -- $7.65, increasing 14% sequentially as the company scales its advertising capabilities and partner relationships.
• Connected Car Revenue -- $30 million, a 14% decrease year over year due to the timing of HD Radio minimum guarantee agreements signed in the prior year.
• Pay TV Revenue -- $53 million, up 7% year over year driven by classic guides and IPTV licensing growth.
• IPTV Revenue -- $26 million, growing 7% as adoption of video-over-broadband solutions continues to expand across North America.
• Consumer Electronics Revenue -- $14 million, declining 28% year over year reflecting higher levels of minimum guarantee revenue in the prior year period.
• Non-GAAP Adjusted Operating Expense -- $61 million, a 7% reduction year over year primarily due to workforce reductions and lower general and administrative spending.
• Non-GAAP Adjusted EBITDA -- $23 million, representing a 20.2% margin compared to 20.7% in the prior year period.
• Advertising and Related Gross Margin -- 31% for the third quarter, driving the year-to-date margin to a positive 5% as the platform scales.
• Operating Cash Flow -- $4 million, down from $7.5 million in the prior year due to the timing of specific cash collections.
• Annual Revenue Guidance -- $450 million to $462 million, narrowed from the previous range of $440 million to $470 million for the full fiscal year.
• Adjusted EBITDA Margin Guidance -- 19% to 21%, raised by 2 percentage points from previous expectations due to an improved spending profile.
• Annual Operating Cash Flow Guidance -- $20 million to $30 million, representing an increase of $5 million over the previous outlook range.
• Year-End MAU Outlook -- Above 7.5 million, exceeding the original annual goal of 7 million monthly active users.
• Year-End ARPU Outlook -- $8 to $10, representing approximately 90% of the company's current year goal at the midpoint.
• AutoStage Footprint -- 18 million vehicles, representing units shipped to date across 13 automotive brands globally.
• Broadcaster Portal Expansion -- 550 U.S. metro areas, up from 300 areas as the company scales its data monetization licensing with eight additional broadcasters.
• Capital Expenditures Outlook -- Approximately $25 million for the full year, focused on capitalized internal-use software.
• Non-GAAP Tax Expense Outlook -- Approximately $20 million, maintained from previous estimates for the full fiscal year.
• Share Count Guidance -- 48 million to 49 million basic and fully diluted shares expected for the year.
• Stock-Based Compensation Outlook -- Approximately $29 million for the full fiscal year.
• IPTV Subscriber Base -- 3.42 million households at quarter end, supporting the transition toward broadband-based video services.

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RISKS

• Kirchner noted, "worldwide memory prices continue to be challenging for the supply chain," indicating that these costs influence the design and engineering priorities for OEM partners.
• Andersen reported that non-GAAP cost of revenue increased by approximately $7 million year over year, reflecting a mix shift toward advertising and related revenue which carries lower gross margins than historical licensing.

SUMMARY

Xperi Inc. (NYSE:XPER) reported third quarter results highlighting the financial impact of its platform scaling efforts in the media and automotive sectors. Management indicated that the company is transitioning from a footprint-building phase to one focused on accelerating advertising monetization and data services. The strategic focus remains on expanding the independent smart television operating system through OEM partnerships and leveraging connected vehicle data to create new revenue streams. The company reported improved profitability expectations for the full year as it maintains cost discipline while reinvesting in growth initiatives.

• The company secured a strategic win with MediaMarktSaturn, the largest European consumer electronics retailer, to use TiVo OS for its private label brand, PEAQ.
• Management reported significant engineering progress in reducing memory requirements for 2K and 4K televisions, which Jon Kirchner stated could lead to "potentially saving BOM costs in the tens of dollars" for OEM partners.
• The company announced that Chief Financial Officer Robert Andersen will retire in 2027 as part of a planned leadership transition.
• Management is evaluating share repurchases, with Robert Andersen stating the board is "evaluating opportunities to leverage our previously approved share repurchase authorization to buy back stock in the months ahead."
• Xperi reported that its IPTV business reached an annual revenue run rate of just over $100 million over the last 12 months, effectively balancing declines in legacy pay TV product lines.
• The company has implemented an organization-wide AI program over the past nine months to improve operational speed, efficiency, and product innovation.

INDUSTRY GLOSSARY

• MAU: Monthly Active Users, defined as a unique device connecting to the TiVo service at least once in 30 days.
• ARPU: Average Revenue Per User, calculated by dividing advertising and related revenue by the average number of monthly active users.
• IPTV: Internet Protocol Television, a system where television services are delivered over the internet rather than traditional formats.
• ACR Data: Automatic Content Recognition data, technology used to identify content played on a media device to provide viewership insights.
• BOM Costs: Bill of Materials costs, the total cost of components required to manufacture a hardware product.
• DTS:X: An object-based audio codec intended to create multi-dimensional sound for home and automotive environments.
• Middleware: Software that acts as a bridge between an operating system and applications, particularly for media playback on connected devices.

Full Conference Call Transcript

Operator: Good day, everyone. Thank you for standing by. Welcome to the Xperi third quarter 2026 earnings conference call. During today's presentation, all parties will be in listen-only mode. Following the presentation, the call will be open for questions. I would now like to turn the call over to Sam Levenson from Arbor Advisory Group. Sam, please go ahead.

Sam Levenson: Good afternoon, and thank you for joining us as Xperi reports its third quarter 2026 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's an earnings presentation on our investor relations website at investor.xperi.com. We encourage you to download the presentation and follow along with today's commentary. Before we begin, I would like to provide a few reminders. First, I would like to note that unless otherwise stated, all comparisons are to the same period in the prior year.

Second, today's discussion contains forward-looking statements about our anticipated business and financial performance, as well as market and industry dynamics 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 what we discuss today, please refer to the risk factors and the MD&A sections in our SEC filings, including our Form 10-K for the year ended December 31, 2025, and our Form 10-Q for the quarter ended September 30, 2026, to be filed with the SEC.

Please note, 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. Last, a replay of this conference call will be available on our website shortly after the conclusion of this call. I'll now turn the call over to Xperi CEO, Jon Kirchner.

Jon Kirchner: Thank you, Sam, and thank you everyone for joining us on our third quarter 2026 earnings call. The third quarter results reflect continued execution against our strategic plan and meaningful progress in both scaling and monetizing our TiVo One ad platform. We delivered year-over-year revenue growth, maintained disciplined operating expense management, and generated positive operating cash flow while further expanding our audiences across the home and automotive markets. Most importantly, advertising and related revenue accelerated significantly, driving media platform revenue to double year-over-year as we broadened our capabilities, deepened advertiser engagement, and saw our scaled footprint begin to drive tangible financial results.

Before I get into more detail about our results, I would like to take a moment to share that today we announced that after 13 years of leading the company through tremendous change, Robert Andersen will be retiring from Xperi in 2027 as part of a planned transition. The timing of his transition will be based on when a successor is identified and onboarded. Robert will address this topic in his remarks. Now, turning to our financial results for the quarter, revenue increased 2% year-over-year to $114 million. GAAP operating expense, excluding cost of revenue, decreased 9%, while non-GAAP adjusted operating expense decreased by 7%.

We had a GAAP net loss of $5.2 million and non-GAAP adjusted EBITDA of $23 million, representing 20% of revenue. GAAP net loss per share was $0.11, non-GAAP earnings per share was $0.24, and operating cash flow was $4 million. Overall, these results reflect continued cost discipline and business transformation as we invest in our primary growth opportunities. Robert will review the results of the quarter in more detail in a few minutes, as well as walk you through our guidance updates that narrowed revenue and increased our adjusted EBITDA and operating cash flow outlook for the year. Let me now touch on each of our four business areas, starting with media platform.

TiVo One ad platform monthly active users reached 6.8 million at quarter end, an increase of 40% year-over-year. Within media platform, advertising and related revenue accelerated through the third quarter to reach approximately 280% year-over-year growth as we saw solid increases across ads and related revenue in both Europe and the U.S. On a year-to-date basis, advertising and related revenue grew 90% versus the prior year. As our direct sales and reseller network matures, we have realized substantive growth in our owned and operated homepage advertising unit, illustrating the effectiveness of the first impression seen on smart TVs.

We also expanded our data offering by adding ACR data to our first-party set-top box clickstream data in the U.S., further expanding the data and insights capabilities we can offer advertisers and partners in both the U.S. and the U.K. In addition to ongoing licensing and renewals in our viewership data business, we notably signed an extension of a multi-year agreement during the quarter. TiVo One ARPU was $7.65, up 14% sequentially, reflecting the progress we are making as our revenue grows and advertising capabilities and partner relationships scale. As a reminder, ARPU is a function of the relative rates of growth between ads and related revenue, the numerator in the calculation, and MAU footprint, the denominator in the calculation.

Against this background, we now expect our year-end MAU footprint to be above 7.5 million units. Given the timing of the additional footprint coming online, we now expect ARPU to be between $8 and $10 at year-end, with the midpoint at 90% of our current year goal. As a further example of how our footprint scaling efforts and independent platform position are yielding results, MediaMarktSaturn, the largest European consumer electronics retailer with over 1,000 retail locations, selected TiVo OS for its private label brand, PEAQ. This brings us to 11 OEM design wins and is expected to further strengthen our position as the leading independent smart TV operating system in Europe.

This is strategically important because leading retailers influence both consumer adoption and future OEM design decisions. In addition, Skyworth launched new product lines with TiVo OS under their Panasonic, Metz, and Coocaa brands in retail during the quarter. Element Smart TVs powered by TiVo became available through major U.S. online retailers. As worldwide memory prices continue to be challenging for the supply chain, we continued our efforts to strengthen our value proposition for TiVo OS by advancing significant engineering work to reduce memory requirements for both 2K and 4K televisions, which is expected to provide meaningful cost savings and greater design flexibility for our OEM partners. This is contributing to market share gains amongst our OEM partner base.

Moving to connected car, the AutoStage footprint further expanded, now reaching more than 18 million vehicles shipped to date across 13 automotive brands. This growing scale is getting significant industry attention, and we believe creates additional opportunities to monetize the platform through data, analytics, and advertising. During the quarter, the AutoStage Broadcaster Portal expanded from 300 to 550 U.S. metro areas, and we entered into data monetization license agreements with eight additional broadcasters. The portal provides broadcasters with detailed insight into listener behavior daily and helps them make more informed programming and advertising decisions. Revenue from this offering is advertising-related and thus is being reported within media platform.

We also signed a multi-year HD Radio program with a large Asian tier 1 supplier supporting multiple OEMs, and new HD Radio models launched across Hyundai, Kia, Volkswagen, Toyota, Honda, and Subaru. These wins continue to reinforce the strength of our unique position and competitive advantage in automotive entertainment, and the long-term opportunity it represents to build additional platform revenue streams from our installed footprint. Moving to our pay TV business, our global IPTV subscriber base reached 3.42 million households at quarter end. We extended multi-year video over broadband agreements with Hotwire and Armstrong that include expanded commercial commitments. We also added four new Canadian ISP customers, further expanding adoption of TiVo Video over Broadband in Canada.

We believe these wins demonstrate the continued relevance of our flexible video solutions as broadband operators seek cost-effective offerings that help improve customer retention and expand the value of their broadband relationships. Moving to our consumer electronics business, during the quarter, we continued to secure renewals and new agreements that expand the reach of our premium audio technologies. For example, we renewed a multi-year IMAX Enhanced agreement with TCL, extending DTS:X across a leading smart TV OEM. We also executed DTS:X agreements with Holatek for projectors and Trinnov for AV pre-amplifiers and processors, and signed an agreement with Evolution Digital for streaming devices.

Together, these arrangements broaden the presence of DTS:X across important home entertainment categories and reinforce the value of our solutions. Let me now cover the status of our 2026 goals. As I mentioned earlier, we expect TiVo One monthly active users to be above 7.5 million by year-end, well ahead of this year's goal of 7 million MAUs. Considering the expected timing of these new units coming online later in the quarter and the continuing development of the ad revenue pipeline, we now expect ARPU at December 31 to be between $8 and $10, or about 90% of our current year goal at the midpoint.

As a result of these factors, we now expect media platform revenue growth to be in the range of 60% year-over-year, inclusive of ads and related revenue growing more than 100%, and partially offset by a decrease in middleware licensing year-over-year. With regard to AutoStage, per our stated goal, we have begun generating advertising and related revenue from the AutoStage footprint through the continued expansion of the broadcaster portal. In aggregate, our progress building audience scale, growing advertising and related revenue, expanding additional monetization capabilities into automobiles, and continued customer adoption of our platform clearly demonstrates that we are building valuable strategic momentum within our business.

Let me now turn the call over to Robert to discuss our financial results in more detail. Robert?

Robert Andersen: Thanks, Jon. Let me start by reviewing the revenue results for the quarter. Overall, revenue finished at $114 million, an increase of 2% year-over-year. Media platform revenue more than doubled year-over-year to $17 million. This growth was driven by higher advertising and related revenue due to increases in monthly active users on the TiVo One ad platform, ad impressions delivered, expanded advertising partnerships, and enhancements to our advertising products and services. Additionally, we signed a new multi-year agreement for viewership data. These increases were partially offset by lower middleware revenue. Connected car revenue decreased 14% year-over-year to $30 million, due primarily to HD Radio minimum guarantee agreements that were signed in the prior year.

Pay TV revenue increased 7% year-over-year to $53 million, driven by classic guides, minimum guarantee arrangements, and continued IPTV licensing growth, partially offset by the expected decrease in core Pay TV product lines. IPTV revenue increased 7% to $26 million. Lastly, consumer electronics recorded $14 million of revenue, a decrease of 28% year-over-year, consistent with our expectations and reflecting higher level of minimum guarantee agreement revenue recorded in the prior year period. Given that year-over-year revenue differences are often due to changing levels and timing of minimum guarantee arrangements, it may be helpful to review why we enter into these arrangements.

Specifically, minimum guarantee arrangements ensure usage of our technology over multiple years of product cycles, lock in certainty of value, and create predictable cash flows. They are term-based contracts that have a high renewal rate, over 90%, and as such, we consider minimum guarantee agreements to be reoccurring revenue within the ordinary course of our business. Looking at revenue from the new categorization on our income statement, licensing and other revenue decreased 8% year-over-year to $99 million, while advertising and related revenue grew over 280% to $15 million. On a year-to-date basis, advertising and related revenue has grown 90% year-over-year.

Notably, the gross margin, excluding depreciation and amortization for the advertising and related category, was 31% in the quarter, making the year-to-date gross margin positive at 5%. Continued scaling of advertising and data offerings are expected to expand our advertising margins meaningfully over the next few years, as a significant portion of our media platform cost of revenue is fixed due to platform costs, and margins on variable costs are often 50% or more. Looking at overall financial results, our GAAP operating expenses, excluding cost of revenue, decreased 9% year-over-year. Non-GAAP adjusted operating expense decreased by approximately $5 million, or 7%, to $61 million, primarily due to workforce reductions and lower outside spending within G&A.

Non-GAAP cost of revenue increased by approximately $7 million year-over-year, primarily reflecting a mix shift towards advertising and related revenue, which has lower gross margins than our historical licensing business. We posted non-GAAP adjusted EBITDA of approximately $23 million, essentially flat year-over-year, representing 20% of revenue compared with 21% in the prior year period. Turning now to the balance sheet and statement of cash flow. We finished the third quarter of 2026 with $87 million of cash and cash equivalents, a decrease of approximately $4 million from the second quarter.

Operating cash flow was $4 million, a decrease of approximately $4 million from the third quarter of 2025, driven primarily by the timing of certain cash collections that are expected to occur in the fourth quarter, partially offset by lower operating expense spending. Free cash flow was a usage of approximately $3 million. As we work to more comprehensively frame our expectations for 2027, we continue to believe the company is deeply undervalued. As such, management and the board are evaluating opportunities to leverage our previously approved share repurchase authorization to buy back stock in the months ahead. Turning now to our financial outlook for 2026.

Given that we have only one quarter remaining in the year, we are updating the range on our annual revenue outlook to $450 million-$462 million, narrowing the range from our prior outlook of $440 million-$470 million. In addition, we are increasing our annual adjusted EBITDA margin outlook to a range of 19%-21%, up by two percentage points from our prior guidance. We are also increasing our annual operating cash flow outlook to a range of $20 million-$30 million, up by $5 million from our prior outlook range. Taken together with our expected capital spending outlook, our free cash flow outlook is now expected to be in the range of negative $5 million to positive $5 million.

All other outlook metrics remain unchanged. Lastly, as Jon mentioned earlier, we have agreed on a planned transition where I will retire from Xperi in 2027 once we have identified and onboarded my successor. I have been with Xperi for 13 years and have had the opportunity to help the company navigate acquisitions, divestitures, a merger of equals, a public company spin-out, and more recently, our increased focus on growth through media platforms. I am extremely proud of what we have accomplished and especially proud of the team we have built. Until the transition is complete, I will work closely with Jon and the board and with my successor to ensure continuity and a seamless handoff.

After the transition, I will remain available to the company as needed. Let me now turn the call back over to Jon for a few closing remarks before we go to Q&A.

Jon Kirchner: Thanks, Robert. As I mentioned earlier, I would like to thank you for being a trusted partner to me and an important leader through a period of significant transformation for Xperi. We are fortunate to have your continued leadership as we work to take the time necessary to ensure a smooth transition. Returning to our results, overall, the third quarter reflected strong execution against our strategic plan. We grew revenue, reduced operating expenses, and delivered non-GAAP adjusted EBITDA 20% of revenue, and generated positive operating cash flow. Notably, our platforms continued to scale and monetize. Media platform revenue more than doubled year-over-year as advertising and related revenue accelerated and achieved positive gross margins.

TiVo One monthly active users grew 40% to 6.8 million, and we now expect to finish the year above 7.5 million MAUs. In connected car, AutoStage is now shipped in more than 18 million vehicles to date, and the AutoStage Broadcaster Portal expanded to 550 U.S. metro areas. Our strategic positioning as an independent media platform is working in the market, as evidenced by our continued footprint expansion and the growing revenue now being generated by our platforms. As we continue to drive business transformation and efficiency, two years ago, we began a program to implement AI across the organization.

In the past nine months, we have begun to see accelerating benefits, including improving speed, efficiency, product innovation, and creating additional opportunities to further lower our operating cost structure. We will have more to share on this topic in February as we guide for 2027. For now, we are pleased to narrow our revenue guidance and to improve our adjusted EBITDA guidance range for the year, along with improvements in expected operating cash flow. Let us now turn the call over for questions. Operator?

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A. Your first question comes from the line of Jason Kreyer with Craig-Hallum. Jason, please go ahead.

Thomas Guyer: Hey, guys. This is Thomas on for Jason. We saw some encouraging growth in the first half of the year with connected car and a tough comp, obviously, this quarter. I know this is largely a product of the minimum guarantee deals you touched on, but can you speak to maybe what signs we can look for that might point to some more durability in the connected car business?

Jon Kirchner: Well, I think, let me start with a bigger picture, which is that we continue to both renew and expand penetration across our partner, our OEM automotive partner vehicles. HD Radio is currently running at about a 60% penetration rate on new cars in North America. While there is some revenue volatility around things like MG, I think MGs, that has more to do with ASC 606 treatment. The fact of the matter is that the HD Radio franchise is extremely strong.

I think another point of evidence around that is the continued growth in the AutoStage footprint, which they are unrelated in that AutoStage is relevant globally, but it is an indication that our partners are continuing to support and believe in the quality of what we are doing in the dash as far as aggregating content and offering next-generation radio experiences. It is that second part, through the growth of the 18 million now vehicles with AutoStage, that has tremendous upside as we think about where we can go to unlock brand-new value in the radio space that still is largely an untargeted.

If you will, a medium that has not changed from an advertising perspective in a very long time. It is far behind your current digital TV ad experience where things are targetable and measurable and attribution is possible. In short, I think things are going fantastically well in the automotive space for us, and it is more than durable. It is accelerating.

Thomas Guyer: That is helpful. Then maybe one more. You called out your goal of 7 million monthly active users by year end, and it looks like you are going to hit that goal and surpass it comfortably. What milestones come after that as far as next steps for TiVo One? Can you walk us through how you are thinking about as we enter 2027, what things we should be keying in on there in the coming quarters?

Jon Kirchner: Sure. I think what we expect to see is continued growth in the footprint for TiVo OS. We will obviously have more to say on how much we expect it to grow in the course of 2027, but whether it is exemplified by recent deals with people like MediaMarktSaturn or it is other customers broadening their penetration on their platforms due to the fact that we have done some very innovative work around reducing memory requirements on our platform. I think you should expect to see audience scaling continue from an ARPU perspective. That in turn sets us up for more ads and related revenue growth.

Another key thing to focus on is our ads and data revenue effectively continues to accelerate as the footprint matures, and we continue to deepen our relationships with advertisers, brands, and agencies. I think that is another key indicator. I think the nature of that revenue and how margins will continue to improve as we generate more scale, which allows us to cover what is a base of fixed platform cost. You'll see the variable margins obviously and the gross margins related to that business continue to scale positively. It is another thing to kind of keep an eye on.

Then within connected car, I think you are going to see us continue to expand broadcaster portal coverage, where we are going to have more customers. You are going to see us extend the platform from a data perspective into the ads and related revenue in a more meaningful way. That combination sets us up very uniquely, and this is important and I think not well understood, which is, what we have in the car is truly unique. We have a platform of scale of connected vehicles now in excess of 18 million. That number, by the way, will continue to grow pretty meaningfully over the next year or two.

That allows us to provide data that the industry has never had, and in a very granular and near real-time sense. I think that is something that has direct application and value for advertisers, and certainly people that are looking for that data and information to kind of take the $10 billion plus ad market in radio and basically bring it into the fully into the modern age with respect to targeting attribution and measurement.

Thomas Guyer: Appreciate it. Thank you for the perspective.

Operator: Your next question comes from the line of Steven Frankel with Rosenblatt. Steven, please go ahead.

Steven Frankel: Thank you. Good afternoon, and Robert, congratulations on the next chapter.

Robert Andersen: Thank you.

Steven Frankel: Jon, you are welcome. How should we think about the decay rate in the legacy ATV business? The numbers this quarter looked fine, was actually up a little bit. What is going on under the surface, and how quickly do you expect that to decay from these levels?

Jon Kirchner: Sure. What we said, Steven, is you are going to see a little bit of volatility through things like late in life MG agreements in some of the declining core segments of pay TV, which is what you saw this quarter. You saw revenue be up slightly on the basis of some classic guides-related MGs. We think that business completely, if you will, bottoms out to the point where we no longer see the decline of the old part of the pay TV business dragging on pay TV in total in the next 12 to 18 months.

The reason you are going to see that kind of all of a sudden flatten out or bottom out is because our IPTV business continues to grow meaningfully. Interestingly, our LTM on that business over the last 12 months revenue is just over $100 million, which is a goal we set back in 2022, was to generate and build an IPTV business of more than $100 million. Now what it's increasingly doing is beginning to balance out the decline. In short, I think you see that overhang decline bottom out here as we get into 2028.

With that, you'll see us continue to extend what we're doing within IPTV, even as the macro environment may continue to be under pressure, innovating in ways to drive more value out of the existing subscriber base there, which will drive not only more subscription revenue, but ultimately also because of those IPTV units are on our TiVo One ad platform, provide the opportunity for us to add additional monetization that will flow through our media platform business.

Steven Frankel: Okay, that's great. When we look at that advertising line, can we contribute the bulk of that to TiVo One, or there's still some of your traditional advertising business that flows through there at this point?

Robert Andersen: Yeah, this is Robert. There's still a portion of our legacy advertising business in there, but the bulk of the growth on that line is advertising, and it is off of TiVo One.

Steven Frankel: Okay. Great. That's all I have. Thank you.

Robert Andersen: Thank you, Steven.

Operator: Your next question comes from the line of Hamed Khorsand with BWS Financial. Hamed, please go ahead.

Hamed Khorsand: Hi. First off, could you just talk about your clarify a comment you made about AutoStage now getting noticed. Are you getting more inbounds? OEMs want to include AutoStage in their cars? Or if you could just enhance upon that, please.

Jon Kirchner: Well, I think, yes, we have a Hamed, we have a tremendous amount of industry interest. In fact, we have a product that kind of stands alone in the industry in terms of its feature set and the extent of the offering. The big thing for us is working with customers to try to identify as their products kind of turn over, as head units turn over in cars, just where we can intersect their product roadmaps with AutoStage.

But part of the excitement has to do with the fact that we can deliver not only a better experience for their customers, but unlock value that currently doesn't exist in the car with respect to a better, more personalized experience, targeted and measurable advertising, and the data that relates to that, of course, being very relevant to brands and agencies that have long looked at radio as a powerful medium because so many people touch it on a weekly basis. Radio is still the predominant entertainment medium in the car. However, it's largely been a medium that just could not offer the kind of direct targeting that a lot of the brands and today's advertisers really are looking for.

In short, we've got this unique opportunity with this platform, and 18 million units in a fairly short period of time, the last couple of years, is pretty significant. As I said, I think you're going to see that number continue to move northward quite aggressively as more partners not only come online, but expand the number of vehicles that they have AutoStage in. As that happens, the platform becomes even more interesting to the advertiser and brand universe because scale is so important in the U.S.

One simple example that we called out here today is we've expanded the broadcaster portal coverage to 550 U.S. metro areas, which means we have unique data and information in markets that are really not served by anybody else at scale, and certainly not served on the kind of timely basis that we're talking about, where data's available on a near-daily basis with respect to what's happening.

Hamed Khorsand: Okay. Could you also talk about your revenue guidance? It seems like the midpoint's going down $4 million from the prior guidance, but it seems your profitability and the quality is actually improving, that you have a chance for free cash flow this quarter. What's driving that? What is different this time around that wasn't three months ago?

Robert Andersen: Sure, I can take that one, Hamed. We changed our guidance range, or updated it rather, to $450 million-$462 million. If you look at the midpoint of that range, it's actually up $1 million from our prior guidance range. We obviously narrowed it this quarter for the year just because we're fundamentally guiding a shorter period of time. We're able to increase the EBITDA range by a couple of percentage points from our prior expectations, and really, that reflects an improved spending profile compared to our earlier estimates. That also translates into an improved cash flow outlook as we very carefully manage our receivables and our expenses over the remainder of the year.

Hamed Khorsand: Okay. Thank you.

Robert Andersen: Thank you, Hamed.

Operator: Your next question comes from Matthew Galinko with Maxim Group. Matthew, please go ahead.

Matthew Galinko: Hey, thanks for taking my question. Robert, it's been a pleasure working with you over the years.

Robert Andersen: Same here, Matt. It's been quite many years, in fact.

Matthew Galinko: Yeah. Jon, can you talk maybe about the impacts you're seeing to date on the memory efficiency campaign? You talked about it this quarter, I think you've talked about it in prior quarters, but are you seeing the technical gains that you were hoping for, and are you seeing an impact in your commercial conversations?

Jon Kirchner: Absolutely, Matt. I think at one of the recent big industry events, the IFA Consumer Electronics Show in Berlin in September, I think the client base was blown away at the ability for us to engineer our solution on a meaningfully smaller footprint to the tune of potentially saving BOM costs in the tens of dollars, depending on your unit volume. In short, I think it highlights two things. We have an absolutely world-class engineering team, and I think well-known and regarded in the industry for exactly that.

I think secondly, the decision we made quarters ago that this was going to be increasingly important as it looked like the broader memory market conditions were going to continue to be challenging for our customers, that taking the time and energy and investing the resources to address that issue squarely would lead to positive outcomes and the decision amongst our customers to give us either more share of production or, in some cases, people coming into the fold completely new, saying that this is a platform that makes more sense for them when they think about not only the performance of the product itself, but ultimately what the ultimate supply chain costs would be in part due to the memory footprint.

I think we have done tremendously well with that decision, and I think we'll see the benefits of it play out here over the next, certainly beginning of the next couple of quarters as you get into the production that kind of comes off people making decisions in the fall, but certainly, through the balance of 2027 and 2028. I think we, as always, right, we're learning as we're innovating and looking for additional ways that we can further improve either performance, speed, and/or reduce costs for our customers.

Matthew Galinko: Perfect. Thank you. Maybe as a follow-up, can you give us maybe your updated thoughts on competition in the media platform market? How has that changed as we've seen M&A in the space, and are you thinking about competition any differently today? Thanks.

Jon Kirchner: Sure. I would say what has remained the same is it remains a very hyper-competitive market. I think the reason it is so competitive is because the size of the prize is incredibly meaningful, and I think that is evidenced by a couple of exits you have seen or some transactions you have seen recently around platforms in the space. That being said, I think in Europe in particular, we are the leading independent platform, I think, in terms of the number of owned and operated MAUs that are in the market. We continue to see people lean our direction, even though, again, the deals are not necessarily always easy to win, and sometimes they take a while.

But at the end of the day, there is wide recognition of the quality of our product, the support people get, and ultimately the experience and the business model we have. I think we are going to continue to see that this is a high-attention space, and I think as we build further scale, drive ever more monetization, and as that monetization scale drives ever more margin, I think the asset that we have spent the last few years kind of building the foundation and now beginning to see that inflection point only becomes more valuable. I think one other observation is you are seeing retailers start to see retail media as being very, very interesting and important.

Obviously, Walmart and their decision in and around VIZIO is one example. But there are those parties all over the world thinking about what is the best way to reach consumers. That living room platform is very important. I think we remain highly convicted that as we build this out, that it only becomes a more attractive asset.

Matthew Galinko: Thank you.

Jon Kirchner: Thanks, Matt.

Operator: Your next question comes from the line of Maximus Alexander-Nino with Stonegate Capital Partners. Maximus, please go ahead.

Maximus Alexander-Nino: Hello. Good afternoon. I will be asking questions for Dave today. Wanted to start off with advertising revenue, saying it was essentially flat sequentially, but direct cost declined about $6 million. Curious just to hear about what is driving that improvement and how much of that should we expect to carry forward. Thank you.

Robert Andersen: The advertising and related revenue has continued to accelerate over the course of this year. I think it is notable that on a year-to-date basis, it has grown 90% year-over-year. So, year-to-date, year-over-year, 90% growth. We have indicated we believe that is going to be roughly 100% year-over-year growth when we finish the year. So that is our goal for the year. I think you will see that this part of the business continues to grow at a very strong rate. We will obviously give more guidance on the outlook for that at the end of the year. From a margin standpoint, we had a very strong improvement in the margin of that business.

It was 31% gross margin in the third quarter, and on a year-to-date basis, it turned positive, so that would be 5%. We expect that will also continue to expand since we have a degree of fixed costs in that structure, and as we continue to grow that business, the marginal dollars we generate will flow down through the gross margin statement.

Maximus Alexander-Nino: Great. Thank you. I wanted to follow up on media. I believe it was last quarter, you guys had mentioned that you guys were expecting roughly double this year, but during this call, you also noted your expectations are closer to 60%. What is the change in expectations there?

Robert Andersen: For that particular part of the business, we have a few components. Within media platform, we have advertising-related revenue, and also we have our legacy middleware platform. As we just mentioned, the advertising-related continues to grow at a very strong pace. It is not quite the torrid pace we were expecting over the course of the year. We were expecting a little bit higher pace, but that has come back some. We have also had a decline year-over-year in the middleware category because we had some minimum guarantee revenue last year, and also just per unit. When you see year-over-year, that is actually the primary factor.

If you strip that piece out, it really will double with the media, with the middleware in there, rather. That is expected to be about 60% for the year.

Maximus Alexander-Nino: Great. Thank you for answering my questions.

Operator: There are no further questions at this time. I will now turn the call back to Jon for closing remarks.

Jon Kirchner: Thanks, operator. I would like to thank our employees, partners, and customers for their continued commitment and support as we work to further accelerate growth and momentum in our business as a leading independent media platform provider in both the home and the car. We look forward to sharing further updates on our year-end conference call. Meanwhile, please note that we will be participating at the 15th Annual ROTH Technology Conference in New York on November 18, and at the Sidoti Virtual Investor Conference on December 10. Thanks, everybody, for joining today.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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