Xperi Inc.: Form 10-Q for the period ended Jun 30, 2025

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”).

Business Overview

We are a leading consumer and entertainment technology company. We believe we create extraordinary experiences at home and on the go for millions of consumers around the world, enabling our unique audiences to connect with content in a more intelligent, immersive, and personal way. Powering smart devices, connected cars, entertainment experiences and more, we bring together ecosystems designed to reach highly-engaged consumers, allowing us and our ecosystem partners to uncover significant new business opportunities, now and in the future. Our technologies are integrated into consumer devices and a variety of media platforms worldwide, driving increased value for our partners, customers, and consumers. We operate in one reportable business segment and group our revenue into four categories: Pay-TV, Consumer Electronics, Connected Car and Media Platform. Headquartered in Silicon Valley with operations around the world, we have approximately 1,620 employees and more than 35 years of operating experience.

Divestitures

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.

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.

Macroeconomic Conditions

Macroeconomic conditions, including increased inflation and interest rates, recessionary fears, financial and credit market fluctuations, changes in economic policy, reduced discretionary consumer and corporate spending, tariffs, and global supply chain disruptions have had, and may continue to have, an adverse impact on our business and our customers. For example, in the second quarter of 2025, the changing macroeconomic environment created increased uncertainty for our customers in the markets in which we operate, negatively impacting our revenue and results of operations for the quarter. While we intend to remain vigilant in monitoring the impacts of these circumstances on our business and adapt accordingly, the effects of these macroeconomic conditions on our business, results of operations, and financial condition remain uncertain.

Results of Operations

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

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

Revenue

We derive the majority of our revenue from licensing our technologies and solutions to customers. For our revenue recognition policy including descriptions of revenue-generating activities, refer to Note 2—Revenue of the Notes to the Condensed Consolidated Financial Statements (Unaudited).

(dollars in thousands)

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.

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.

These decreases were partially offset by an increase of $1.9 million in Media Platform revenue, driven by higher advertising revenue associated with third-party advertising inventory, which was partially offset by a reduction in middleware solutions revenue, and an increase of $1.6 million in Consumer Electronics revenue as a result of higher MG revenue, which was partially offset by the impact from the divestiture of Perceive.

(dollars in thousands)

Revenue decreased by $18.5 million, or 8%, for the six months ended June 30, 2025 compared to the same period in the prior year. The decrease was primarily due to the divestitures of AutoSense and Perceive as well as a decline of $17.8 million in Pay-TV revenue attributable to declines in core guide products and consumer hardware and subscription revenue partially due to higher MG revenue that occurred during the same period in the prior year, which was partially offset by continued growth in

IPTV solutions revenue. These decreases were partially offset by an increase of $2.6 million in Connected Car revenue primarily as a result of higher MG and licensing revenue from HD Radio.

Operating Expenses

(dollars in thousands)

(dollars in thousands)

Cost of Revenue, Excluding Depreciation and Amortization of Intangible Assets

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.

Cost of revenue, excluding depreciation and amortization of intangible assets, for the three months ended June 30, 2025 was $33.6 million, as compared to $29.0 million in the same period of the prior year, an increase of $4.6 million, or 16%. This increase was primarily attributable to higher costs incurred in connection with advertising revenue, partially offset by lower costs resulting from the Perceive Transaction.

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.

Research and Development

Research and development (“R&D”) costs consist primarily of employee-related costs, stock-based compensation (“SBC”) expense, engineering consulting expenses associated with new product and technology development, product commercialization, quality assurance and testing costs, as well as other costs related to patent applications and examinations, materials, supplies, and an allocation of facilities costs. Other than certain software development costs that are capitalized, all research and development costs are expensed as incurred.

Research and development expense for the three months ended June 30, 2025 was $29.8 million, as compared to $45.1 million in the same period of the prior year, a decrease of $15.3 million, or 34%. The decrease was primarily driven by lower R&D spend resulting from the Perceive Transaction, reductions in R&D employee headcount and lower bonus expenses.

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.

Selling, General and Administrative

Selling expenses consist primarily of compensation and related costs (including SBC expense) for sales and marketing personnel engaged in sales and licensee support, marketing programs, public relations, promotional materials, travel, and trade shows. General and administrative expenses consist primarily of compensation and related costs (including SBC expense) for management, information technology, finance and legal personnel, legal fees and related expenses, facilities costs, and professional services. Our general and administrative expenses, other than facilities-related expenses and fringe benefits, are not allocated to other expense line items.

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.

Selling, general and administrative expenses for the six months ended June 30, 2025 were $89.8 million, as compared to $109.5 million in the same period of the prior year, a decrease of $19.7 million, or 18%. The decrease was primarily attributable to reduced employee headcount, lower bonus expenses and SBC expense, and certain one-time transaction costs.

Stock-based Compensation

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

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.

Depreciation Expense

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.

Depreciation expense for the six months ended June 30, 2025 was $6.4 million, as compared to $6.9 million in the same period of the prior year, a decrease of $0.5 million, or 7%. The decrease was primarily due to certain fixed assets becoming fully depreciated, partially offset by an increase in depreciation related to internal-use software costs capitalized over the past 12 months.

Amortization Expense

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.

As a result of intangible assets we acquired in previous mergers and acquisitions, we anticipate that amortization expenses will continue to be a significant expense over the next several years. See Note 7—Intangible Assets, Net of the Notes to Condensed Consolidated Financial Statements (Unaudited) for additional detail.

Interest and Other Income, Net

(dollars in thousands)

Interest and other income, net, was higher in the three months ended June 30, 2025, as compared to the same period in the prior year, principally due to an increase in foreign currency transaction gains.

(dollars in thousands)

Interest and other income, net, was higher in the six months ended June 30, 2025, as compared to the same period in the prior year, principally due to an increase in foreign currency transaction gains.

Interest Expense—Debt

(dollars in thousands)

(dollars in thousands)

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.

Gain on Divestiture

(dollars in thousands)

As disclosed in Note 6—Divestitures of 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.

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

Provision for Income Taxes

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.

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.

The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such assessment, significant weight is given to evidence that can be objectively verified. After considering both positive and negative evidence to assess the recoverability of our net deferred tax assets, we determined that it was unlikely that our federal, certain state, and certain foreign deferred tax assets with valuation allowances will be realized. For jurisdictions that currently have valuation allowances, we intend to maintain valuation allowances until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. The exact timing and amount of the valuation allowance release depends on the level of profitability that we are able to achieve.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the U.S. The OBBBA contains a broad range of tax reform provisions affecting businesses. We are evaluating the full effects of the legislation on our estimated annual effective tax rate and cash tax position, but we expect that the legislation will likely not have a material impact on our financial statements.

Liquidity and Capital Resources

The following table presents selected financial information related to our liquidity and significant sources and uses of cash and cash equivalents as of and for the periods presented:

(dollars in thousands)

(1) The current ratio is a liquidity ratio that measures our ability to pay short-term obligations or those due within one year. The ratio is calculated by dividing current assets by current liabilities.

(in thousands)

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.

For information about our material cash requirements, see “Liquidity and Capital Resources” in Part II, Item 7 of our Form 10-K. Our cash requirements have not changed materially since December 31, 2024.

Stock Repurchase Program

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.

Cash Flows

Cash Flows from Operating Activities

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.

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

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.

Cash Flows from Investing Activities

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.

Capital Expenditures

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.

Cash Flows from Financing Activities

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.

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.

Long-Term Debt Financing

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.

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.

Upon entering into the RF Agreements on February 21, 2025, we borrowed $40.0 million under the AR Facility and selected the monthly Term SOFR Rate (as defined in the RFA). The RF Agreements contain various covenants that we believe are usual and customary. The interest payments on the AR Facility debt, exclusive of the debt issuance costs and related amortization, are expected to be approximately $2.6 million for the next 12 months and may vary with changes in interest rates. As of June 30, 2025, we were in compliance with the covenants under the RF Agreements. For more information on our AR Facility, see Note 8—Debt and Receivables Securitization.

Liquidity

We believe our current cash and cash equivalents, together with borrowings or availability under our AR Facility, will be sufficient to meet our needs for at least the next 12 months from the issuance date of the Condensed Consolidated Financial Statements included in this Quarterly Report. As we assess growth strategies, we may need to supplement our cash and cash equivalents with additional outside sources. As part of our liquidity strategy, we will continue to monitor our earnings and cash flow as well as our ability to access the capital markets as needed.

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.

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.

Critical Accounting Estimates

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.

Recent Accounting Pronouncements

See Note 1—Description of Business and Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements (Unaudited) included in this Quarterly Report for more information.

Except as set forth below, there were no material changes to our exposure to market risk since December 31, 2024. For a discussion of our market risk, see Part II, Item 7A—Quantitative and Qualitative Disclosures About Market Risk in our Form 10-K.

Interest Rate Risk

We are exposed to changes in interest rates related to our RFA. As of June 30, 2025, we had outstanding indebtedness in the amount of $40.0 million under the AR Facility that was subject to variable interest rates, based on the secured overnight financing rate (“SOFR”). Changes in economic conditions outside of our control could result in higher interest rates, thereby increasing our interest expense and reducing the funds available for capital investment, operations or other purposes. Assuming no change in our outstanding indebtedness, we estimate that a 1% increase in the applicable SOFR interest rate would result in an annual increase in our interest expense of approximately $0.4 million. Any significant increase in our interest expense could negatively impact our results of operations and cash flows. If the U.S. Federal Reserve raises its benchmark interest rate, any increases would likely impact the borrowing rate on our outstanding indebtedness, and increase our interest expense, comparably.

Evaluation of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of such period.

Change in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during the last fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there were no material changes to the risk factors previously disclosed in Part 1, Item 1A. of our Form 10-K.

Macroeconomic uncertainties have in the past and may continue to adversely impact our business, results of operations, and financial condition.

Macroeconomic uncertainties, including increased inflation and interest rates, recessionary fears, financial and credit market fluctuations, changes in economic policy, bank failures, labor disputes, tariffs, reduced discretionary consumer and corporate spending, and global supply chain constraints have in the past, and may continue to, adversely impact many aspects of our business. Our success depends, in part, on the level of discretionary consumer and corporate spending. Discretionary consumer and corporate spending is affected by many factors, including economic conditions affecting disposable consumer income and corporate spending, such as the rate of inflation, risk of recession, employment status, labor disputes, and interest and tax rates. In recent years, the economy has experienced unusually high inflation, increased perceived risk of recession, and higher interest rates, which has negatively impacted, and could continue to negatively impact consumer and corporate spending. For example, in the second quarter of 2025, macroeconomic uncertainties impacted our customers in the markets in which we operate and negatively impacted our revenue and results of operations for the quarter. A decrease in discretionary consumer and corporate spending, including as a result of recessionary fears or price increases stemming from the imposition of tariffs on foreign imports, could result, in particular, in a reduction in the production or the purchases of TVs, automobiles and consumer electronic devices, and a reduction in our licensing and monetization revenue. Similar to prior economic slowdowns and recessions, current macroeconomic conditions have resulted in, and may continue to result in, reduced consumer discretionary spending and reduced advertising expenditures by corporations. Any such conditions, including a reduction in entertainment promotional spending by media and content providers, have impacted, and could continue to significantly impact, our ability to generate revenue, and thus impact our business, financial condition and results of operations.

The extent to which macroeconomic uncertainties may continue to impact our operational and financial performance remains uncertain and will depend on many factors outside our control. These direct and indirect impacts have affected and may continue to negatively affect our business and operating results.

In addition, a significant reduction in the supply of original entertainment content, including as a result of macroeconomic factors or labor disputes (such as the 2023 strikes called by the Writers Guild of America and SAG-AFTRA), could in turn reduce the demand for advertising and media and entertainment promotional spending campaigns on our Media Platform solutions, and have a material adverse effect on our growth or negatively impact our results of operations.

We are exposed to the risks related to international sales and operations.

We derive a large portion of our total revenue from operations outside of the United States. Therefore, we face exposure to risks of operating in many foreign countries, including:

• difficulties and costs associated with complying with a wide variety of complex laws, treaties, regulations and compliance requirements;
• fluctuations in foreign currency exchange rates;
• restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to the United States;
• earnings and cash flows that may be subject to tax withholding requirements or the imposition of tariffs;
• political and economic instability, trade conflict and international hostilities;
• unexpected changes in political or regulatory environments;
• differing employment practices, labor compliance and costs associated with a global workforce;
• exchange controls or other restrictions;
• import and export restrictions and other trade barriers;
• difficulties in maintaining overseas subsidiaries and international operations; and
• difficulties in obtaining approval for significant transactions.

Any one or more of the above factors may adversely affect our international operations and could significantly affect our business, financial condition, results of operations and cash flows. For example, the United States has indicated a shift in its trade policy, including renegotiating or terminating existing trade agreements and leveraging tariffs. Starting in April 2025, the United States imposed additional tariffs on imports from China, announced reciprocal and sectorial tariffs on imports from other countries, and is expected to impose new reciprocal tariff rates on imports effective August 7, 2025. These additional tariffs or any future tariffs, as well as a government’s adoption of “buy national” policies or retaliation by another government against such tariffs or policies, have introduced significant uncertainty into the market and may strain global supply chain that we depend on, and may adversely affect the prices of and demand for the products that include our technologies, which could have a negative impact on the Company’s results of operations. Furthermore, a decrease in discretionary consumer and corporate spending, including as a result of price increases stemming from the imposition of tariffs on foreign imports, could result in a reduction in the purchases of TVs, automobiles and consumer electronic devices, and could cause an ensuing reduction in our monetization revenue.

Further, the results of our operations will be dependent to a large extent upon the global economy. Geopolitical factors such as terrorist activities, wars, foreign invasion or armed conflict, tariffs, trade disputes, local or global recessions, diplomatic or economic tensions (such as the tension between China and Taiwan), long-term environmental risks, climate change, or global health conditions that adversely affect the global economy may adversely affect our business, financial condition and results of operations.

Additionally, our business could be materially adversely affected if foreign markets do not continue to develop, if we do not receive additional orders to supply our technologies, products or services for use by international Pay-TV service providers, TV OEMs, automobile, CE and set-top-box manufacturers, PPV/VOD providers and others, or if regulations governing our international business change. Changes to the statutes or regulations with respect to export of encryption technologies could require us to redesign our products or technologies or prevent us from selling our products and licensing our technologies internationally.