Rubric Capital Management Issues Open Letter to Xperi Inc. Stockholders Regarding 2024 Annual Meeting Results
Rubric Capital Management, owning 9% of Xperi's common stock, issued an open letter addressing the preliminary results of Xperi's 2024 Annual Meeting. Disappointed by the results, Rubric highlighted that less than 50% of shares voted for the contested nominees, indicating stockholder dissatisfaction.
Rubric's engagement led to several commitments from Xperi's Board, including initiating a strategic alternatives process for Perceive, expanding the Board with new directors in 2024, and eliminating supermajority voting requirements.
Additionally, Xperi promised to achieve $500-$530 million in revenue and 12-14% EBITDA margins in 2024, reaffirm 3-5 year revenue CAGR of 12-15%, and execute a stock repurchase plan. Rubric emphasized the necessity for Xperi to follow through on these commitments.
Institutional Shareholder Services warned that failure to meet these promises could lead to increased activist interventions in the next annual meeting.
- Rubric Capital Management owns 9% of Xperi's common stock, indicating substantial investment and influence.
- Initiating a strategic alternatives process for Perceive, with potential value return to stockholders by summer 2024.
- Board expansion with new directors in 2024, potentially bringing fresh perspectives and improved governance.
- Eliminating supermajority voting requirements, enhancing stockholder rights.
- Promising revenue of $500-$530 million and 12-14% EBITDA margins for 2024.
- Reaffirming long-term revenue CAGR of 12-15% and adjusted EBITDA margins of 25-30%.
- Announcing a stock repurchase plan, indicating confidence in the company's valuation.
- Less than 50% of shares voted for contested nominees, reflecting significant stockholder dissatisfaction.
- Stock has dropped approximately 19% year-to-date, trading close to all-time low prices.
- Historical poor performance under current management raises doubts about future execution.
Insights
The open letter from Rubric Capital Management highlights several key points that can significantly impact Xperi Inc. and its stockholders. Firstly, the mention of initiating a strategic alternatives process for Perceive suggests potential divestitures or restructuring that could free up capital and possibly return proceeds to shareholders. This move could enhance shareholder value, particularly if Perceive has not been performing well. Investors should keep an eye on the timing of this process, as its expected conclusion by late summer 2024 will be a important period.
Another critical aspect is the expansion of the Board with new directors. This can bring in fresh perspectives and strategies that may positively influence the company's performance. Board composition changes often signal a shift towards more aggressive value creation efforts.
The letter emphasizes a commitment to strong financial targets for 2024, including a revenue promise of
The governance changes outlined in the letter indicate a significant shift in how Xperi Inc. may be managed moving forward. The decision to eliminate stockholder-unfriendly provisions, like supermajority voting requirements, can empower shareholders and lead to more democratic decision-making. This change is likely to be well-received by investors as it aligns more closely with shareholder interests and can improve corporate oversight.
The introduction of new directors to the Board is another notable governance change. New directors can bring diverse expertise and fresh insights, which can boost the company's strategic direction. It's also an implicit recognition that the current Board's composition may have been suboptimal, which could lead to better management practices and, ultimately, better company performance.
However, it remains to be seen how effectively these new governance measures will be implemented and whether they will result in tangible improvements. The mention of promises to stockholders regarding performance and capital allocation indicates a higher level of accountability moving forward.
From a market perspective, the commitments made by Xperi Inc. to achieve specific financial targets and execute a stock repurchase plan are moves designed to enhance investor confidence. The planned revenue and EBITDA margins for 2024, along with long-term guidance, suggest a strong growth trajectory. If Xperi can deliver on these promises, it may lead to a stock price rebound, especially considering the stock's current low prices.
The stock repurchase plan, depending on its scale and execution, could provide a significant boost to the stock price by reducing the number of shares outstanding and thus increasing earnings per share. It's also a signal of confidence from the management in the company's future prospects.
Investors should monitor the company's progress closely, particularly the execution of these strategic initiatives. The market's reaction will largely depend on Xperi's ability to follow through on its commitments.
Dear Fellow Stockholders,
While we are disappointed by the results of the Annual Meeting, it is clear that a large number of Xperi stockholders voted to express their dissatisfaction with the performance of the Company. Indeed, with only slightly more than
Further, we are pleased that as a result of Rubric’s active engagement with the Company, the Board and management have made – or committed to making – several important changes with respect to Xperi’s capital allocation and strategy, Board composition and stockholder rights, including:
- Initiating a strategic alternatives process for Perceive (with the prospect of returning any proceeds received to stockholders) – the conclusion of which is expected to occur by the end of summer 2024;
- Expanding the Board with much needed new directors in 2024; and
- Eliminating stockholder-unfriendly provisions, including supermajority voting requirements, in the Company’s Charter.
Additionally, the Board and management made a series of promises to stockholders regarding the Company’s performance and capital allocation over the course of our campaign, including:
-
Promising to achieve revenue of
$500 -$530 million -14% in 2024;
-
Reaffirming the promise to hit their 3-5 year revenue and EBITDA margin guidance, including a revenue CAGR from 2022 of 12
-15% and adjusted EBITDA margins of 25-30% ; and
-
Promising to execute upon their newly announced stock repurchase plan, when appropriate (and we hope that with the stock down over approximately
19% year-to-date and currently trading close to all-time low prices, the appropriate time is imminent).
It is now incumbent upon the Company to follow through on these commitments. We hope that Xperi’s management team, Board and stockholders remember these promises when evaluating the performance of the Company over the next year. As noted by Institutional Shareholder Services Inc., “If the company stumbles in any of these areas, shareholders may be more receptive to an activist intervention at the next annual meeting.” Blaming “seasoning” for Xperi’s poor performance since its spin-off, while ignoring the poor performance of Xperi’s predecessor company under this same cast of characters’ stewardship, is a flimsy excuse that only works once. Rubric will be here to hold the Company to account.
Thank you for your support.
Sincerely,
David Rosen
Managing Partner
Rubric Capital Management LP
View source version on businesswire.com: https://www.businesswire.com/news/home/20240528169165/en/
Media:
Jonathan Gasthalter/Sam Fisher
Gasthalter & Co.
(212) 257-4170
Investors:
Jason W. Alexander/Bruce H. Goldfarb
Okapi Partners LLC
(212) 297-0720
Source: Rubric Capital Management LP
FAQ
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