Rubric Capital Management Files Definitive Proxy Statement for Xperi Inc. 2024 Annual Meeting
Sends Letter to Stockholders Outlining Urgent Need for Change to Restore and Rebuild Value
Highlights Poor Operational Performance, Egregious Executive Compensation and Reckless Capital Allocation Under Incumbent Board
Urges Stockholders to Vote FOR Rubric’s Nominees
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XPER Share Price Performance (Source: Bloomberg)
Rubric also sent a letter to Xperi stockholders outlining the urgent need for change at the Company in order to reverse its history of underperformance and poor decisions under the incumbent Board and drive long-term stockholder value.
The full text of the letter follows:
Dear Fellow Stockholder:
At Xperi Inc.’s (“Xperi” or the “Company”) upcoming 2024 Annual Meeting of Stockholders, which is scheduled to be held on
RUBRIC IS ALIGNED WITH YOU AND HAS A PLAN FOR CHANGE
We invested in the Company due to its attractive portfolio of innovative enablement technologies and our firm belief in their significant monetization potential. Unfortunately, from our perspective, this potential has been squandered under the oversight of the current Board, and stockholders have paid the price.
We take no pleasure in publicly criticizing companies or directors and prefer to spend our time working collaboratively with the boards and management teams of our portfolio companies to help drive sustained value. We have taken this same constructive approach to our engagement with Xperi’s Board and management team across the duration of our investment. Unfortunately, in our view, this Board has shown that it is more focused on granting excessive compensation to executives than it is engaging with stockholders to improve the Company’s performance. Simply put, the direction of the Company is untenable, and we believe meaningful change is required in the boardroom to ensure stockholder value is not eroded further.
Rubric has a clear roadmap for change and value creation that benefits all stakeholders. We have identified two highly qualified, independent director candidates –
Vote for restoring and building value at Xperi. Please vote your enclosed WHITE proxy card TODAY for the election of
XPERI AND THE CURRENT BOARD HAVE A HISTORY OF UNDERPERFORMANCE
Underperformance has been idiomatic to Xperi throughout its life as a standalone company – and earlier. Since the completion of Xperi’s spin-off, the Company’s shares have materially underperformed any comparable benchmark, declining by approximately 28%. During this same period, the S&P Software Index (GICS: 451030) had a total return of approximately 74% and the Russell 3000 returned approximately 42%.1
See XPER Share Price Performance chart.
While this underperformance is alarming, the duration of measurement is too short to warrant censure on its own. Xperi’s former parent company, Xperi Holding Corporation (“Xperi Holding”) (n/k/a
Contrast this with the performance of Xperi’s predecessor company under Rubric director nominee
XPERI’S POOR MARGINS HAVE LED TO UNACCEPTABLE UNDERPERFORMANCE
Xperi’s margin performance has been similarly underwhelming when compared to peers, and points to an excessive expense structure that desperately needs to be addressed in order to unlock stockholder value.
The facts speak for themselves. Despite operating at a similar revenue scale to, and having higher gross margins than, its
Adjusted |
Adjusted |
|||||
Revenue ($MM) |
Gross Margin |
EBITDA Margin |
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Average ISS Peers |
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76% |
23% |
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Xperi |
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78% |
7% |
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Xperi vs ISS Peer Average |
2% |
-17% |
To put Xperi’s level of operational underperformance in context for stockholders, simply achieving peer margins (which are within the target ranges Xperi provided at its 2022 Analyst Day), and valued using a median 2024 peer group multiple of 11.0x EBITDA, Xperi would be worth approximately
XPERI’S BOARD SEEMINGLY REWARDS INSIDERS TO THE DISADVANTAGE OF STOCKHOLDERS
To make matters worse, Xperi has instituted a compensation program that seemingly rewards insiders to the disadvantage of stockholders. In 2023, the Company issued over 4.2 million RSUs to insiders (approximately 76% of which are not subject to any performance-based vesting), representing approximately 9% of the Company’s diluted share count, and recognized a stock-based compensation expense of approximately
To drive this point home, during 2023, Xperi’s former parent, Adeia, which has over twice as many shares outstanding and twice the market capitalization of Xperi, issued only 2.9 million RSUs, or approximately a 2.7% dilution, less than 33% of that experienced by Xperi stockholders.8 Adeia’s stock-based compensation expense was only roughly
Unsurprisingly, Xperi’s stock-based compensation expense is similarly bloated when compared to its ISS peer group.10
GAAP SBC Expense | GAAP SBC Expense | |||
as % of Revenue | as % of Market Cap | |||
Average ISS Peers |
9.6% |
2.98% |
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Xperi |
13.3% |
14.72% |
The fact that this Board deems such an unsustainable and misaligned compensation scheme appropriate, despite Xperi’s staggeringly poor returns, is, in our view, indefensible. It is for this reason that we are seeking to replace two of the three members of the Board’s Compensation Committee –
WE BELIEVE XPERI’S RECKLESS CAPITAL ALLOCATION HIGHLIGHTS THE BOARD’S POOR DECISION MAKING AND THREATENS THE PRESERVATION OF STOCKHOLDER VALUE
We have watched and grown increasingly concerned about the capital allocation decisions being made at Xperi. These concerns began when Xperi’s former parent disclosed the existence of its investment in
Moreover, in
These actions are, in our view, emblematic of the Board’s repeated poor decision making and capital mismanagement, which we fear are a grave threat to the preservation of stockholder value.
RUBRIC’S NOMINEES BRING THE EXPERIENCE AND OVERSIGHT REQUIRED IN XPERI’S BOARDROOM
It is apparent that Xperi’s Board as currently constituted cannot be trusted to effectively lead the Company forward and create value for stockholders. Accordingly, we have nominated two highly qualified, independent directors –
If elected, our nominees are committed to working alongside the incumbent directors to:
- Address the operational underperformance which has directly contributed to the Company’s declining stock price;
- Design a compensation plan that is aligned with stockholders and truly pays for performance; and
- Allocate capital in a more efficient and results-oriented manner.
With the right plan and right people in place, we are confident that Xperi can deliver meaningful long-term value to stockholders. We urge you to protect and enhance the value of your investment by voting for Rubric’s director nominees –
PLEASE VOTE YOUR WHITE PROXY CARD TODAY.
If you have any questions, require assistance in voting your WHITE universal proxy card, or need additional copies of Rubric’s proxy materials, please contact our proxy solicitor
Sincerely,
Managing Partner
Your Vote Is Important, No Matter How Many or How Few Shares You Own! |
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Please vote today by telephone, via the Internet or by signing, dating and returning the enclosed WHITE proxy card. Simply follow the easy instructions on the WHITE proxy card. |
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If you have questions about how to vote your shares, please contact: |
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Stockholders may call toll-free: (855) 305-0856 |
Banks and brokers call: (212) 297-0720 |
E-mail: info@okapipartners.com |
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1 Source: Bloomberg. Calculated as of
2 Source: Bloomberg. Calculated as of
3 Source: Bloomberg.
4 See ISS report published on
5 Source: Xperi Form 10-K, filed
6 Source: Rubric analysis with inputs from Bloomberg/VisibleAlpha. Calculated as of
7 Source: Xperi Form 10-K, filed
8 Source: Adeia Form 10-K, filed
9 Source: Adeia Form 10-K, filed
10 Source: Xperi Form 10-K, filed
11 Source: Xperi press release, dated
12 Source: Tobii year-end and quarterly reports. Enterprise value as of
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