By all accounts, the 2024 NAB Show in Las Vegas was largely successful for Xperi Inc., as its DTS AutoStage continues to gain momentum while its HD Radio and TiVo branded products also give the company growth opportunities it perhaps hasn’t seen in several quarters.
Rubric Capital feels otherwise, and seeks to replace half of Xperi’s independent board directors. Xperi on Wednesday addressed this “puzzling campaign” by firmly dismissing Rubric’s effort.
As the NAB Show concluded, San Jose, Calif.-based Xperi mailed definitive proxy materials to its stockholders in connection with its May 24 annual shareholders meeting.
Those who hold Xperi stock as of the close of business on March 28 can vote at the meeting.
The proxy card Xperi’s Board of Directors encourages all stockholders to use is colored blue, and it seeks a “FOR” vote for all five of Xperi’s nominees.
Rubric Capital disagrees, and Xperi highly questions their motives, noting that Rubric’s choices as board members are “individuals whose skills are not additive to those of Xperi’s current directors.”
Xperi added, “Despite the company’s extensive efforts to engage constructively with Rubric and listen to their input, Rubric has not identified any concerns that Xperi is not already addressing, nor has it provided any concrete recommendations on how to improve Xperi.”
Rubric Capital is a New York-based hedge fund founded by David Rosen. On January 22, Rubric nominated ex-Hinge Health SVP/Chief Marketing Officer Deborah Conrad and Tom Lacey, former CEO and director of Xperi’s predecessor company, Tessera Technologies Inc., for director seats.
On June 1, 2017, Xperi Corp. appointed President Jon Kirchner as its CEO, succeeding Lacey, who “informed the board of his desire to retire” as CEO of Xperi and from the Board of Directors, Xperi said at the time. Lacey remained with the company as an advisor through the end of 2017, with a focus on Xperi’s IP licensing business.
Interestingly, Xperi distributed via Business Wire a copy of its annual meeting of shareholders letter in full. In it, Xperi sends the message that it was under Kirchner that the company’s board and management continued to reposition the business, continuing a transformation that began with the 2016 acquisition of DTS. Then, in 2020, a merger with TiVo was seen, “which significantly enhanced the scale of the existing product and IP licensing businesses.”
Today, Xperi says, it is focused “on driving growth in our most attractive markets: connected TV advertising, streaming television and in-vehicle infotainment.” For 2024, it expects continued growth and margin expansion, “forecasting to approximately double our Adjusted EBITDA margin to between 12% to 14%, with a path to achieving 25% to 30% Adjusted EBITDA margins within the next few years.”
As such, Xperi concludes, “We have a more focused business model than ever before, and one that is well-positioned for sustainable, profitable growth.”
UNCLEAR MOTIVES, INVOLVING A FORMER LEADER
What is driving Rubric’s effort? That’s unclear to Xperi. However, it said in the shareholder letter that “what is clear is that Rubric is intent on electing its candidate, Mr. Lacey, to the Board.”
Xperi has engaged constructively with Rubric and has presented Rubric with two proposals that would achieve its aim of board change. The most recent proposal included the appointment of Conrad to an expanded board along with two new board-identified candidates who are experts in areas that are more relevant to our business, including advertising monetization, capital allocation, digital media and automotive technology. Rubric, however, “refuses to accept any resolution” that does not Lacey being appointed Chair of the Board.
“We do not believe Rubric’s proposal is in the best interests of stockholders,” Xperi concludes. “We know and respect Mr. Lacey. Some of us have even worked with him. But Mr. Lacey’s last involvement with Xperi was nearly seven years ago, when semiconductor IP licensing – Mr. Lacey’s area of expertise – was still an important part of our business. Today, that is no longer the case; Xperi’s business has changed dramatically, and Mr. Lacey’s background is no longer relevant to the Company’s present or its future. The primary businesses during Mr. Lacey’s tenure – Tessera and its subsidiaries Invensas, Ziptronix and FotoNation – are no longer part of our company. In our view, the election of Mr. Lacey and Rubric’s other nominee, Ms. Conrad, would take Xperi backwards and substantially weaken the board.”
As of 3:38pm Eastern on Thursday, Xperi shares were unchanged from Wednesday’s closing price of $9.58 — a year-to-date low that comes after reaching $12.06 on March 28, a year-to-date high.
