Slide 1: Accountability, Alignment, and Action at Xperi
ACCOUNTABILITY, ALIGNMENT, AND ACTION AT XPERI APRIL 2024
Slide 2: Legal Disclaimer
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Legal Disclaimer The materials contained herein (the “Materials”) represent the opinions of Rubric Capital Management LP and the other participants named in its proxy solicitation (collectively, “Rubric” or “we”) and are based on publicly available inform
Slide 3: Table of Contents
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Table of Contents 01 Introduction 06 Value Creation Framework Rubric’s Nominees are Highly Qualified and 02 Xperi’s Post-Spin Underperformance 07 Committed to Working for Stockholders 03 Capital Allocation Failure: AutoSense Sale to Tobii 08 Xperi Is Stru
Slide 4: Introduction
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 01 Introduction 4
Slide 5: Executive Summary
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Executive Summary Urgent change is needed to Rubric and our Nominees have a Rubric’s Nominees are best suited restore and rebuild value at Xperi clear action plan for Xperi that the to execute the action plan Company has ignored • Xperi shares have materi
Slide 6: Rubric Capital – Who We Are
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Rubric Capital – Who We Are • Rubric is a deep value investment manager focused on intrinsically undervalued businesses with strong fundamentals that are poised for inflection • We conduct extensive diligence on each investment and aim to work constructiv
Slide 7: What is Xperi?
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. What is Xperi? • Xperi is a consumer and entertainment technology company Share Price (as of 4/19/24) $9.62 Diluted Share Count 50.5 • Xperi’s technology is embedded in billions of devices through its M arket Capitalization $486 TiVo, DTS, HD Radio and IM
Slide 8: Xperi: A 30,000 Foot View
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi: A 30,000 Foot View 2023 Metrics REVENUE: G R O S S P R O F I T 1: $521 million, +3.7% YoY Growth $403 million, 77.2% Gross Margin $400M+ + in n A D J . E B I T D A 2: s Profit! Gross ADJ. EBITDA MARGIN: $34.7 million (including $70M in SBC) 6.7% GA
Slide 9: Rubric's History with Xperi
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Rubric’s History with Xperi Rubric has had regular meetings with Xperi’s management over the years (over 35 separate instances) to monitor its investment, with the most pertinent history listed below: • May 2017 – Met with new CEO Jon Kirchner to hear his
Slide 10: Activism is a last resort for Rubric: we don't do this lightly
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Activism is a last resort for Rubric: we don’t do this lightly 40 Despite holding meaningful positions in numerous public companies (as evidenced by 35 34 our 34 distinct 13G filings since inception), Rubric rarely employs activism as a strategy. 30 25 Th
Slide 11: Case study: Mereo BioPharma (MREO)
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Case study: Mereo BioPharma (MREO) • Mereo represents the only other time Rubric has nominated directors in its history • Resolved via cooperation agreement in October 2022, placing four new highly qualified directors on the board $4.50 400 $4.00 350 $3.5
Slide 12: Why We Are Choosing to Act Now
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Why We Are Choosing to Act Now Rubric has nominated two uniquely qualified candidates to Xperi’s Board after witnessing multiple actions by the current Board that undermine stockholder returns Rubric’s Reasons Rubric’s Solution 1. Significant underperform
Slide 13: Clear lapses in judgement by the current Board
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Our decision to seek Board improvement at Xperi is driven by clear lapses in judgement by the current Board Xperi Board Oversight Strategic Failures Operating Failures Compensation Failures • Sale of AutoSense/FotoNation • Revenue growth and margins have
Slide 14: Xperi Believes it is Addressing our Concerns. It is Not.
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi Believes it is Addressing our Concerns. It is Not. The Board has stated: “[t]o date, however, Rubric has not identified any concerns that we are not already addressing, nor has it provided any recommendations for how to improve Xperi.” Being Address
Slide 15: Xperi's Post-Spin Underperformance
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 02 Xperi’s Post-Spin Underperformance 15
Slide 16: Since the spin-off, Xperi stockholders have suffered vs. ISS peers and benchmarks
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Since the spin-off, Xperi stockholders have suffered vs. ISS peers and benchmarks $30 Pre-Spin Post-Spin $25 +64% $20 +33% $15 +10 $10 -36% $5 $0 1 XPER Peers³ Russell 3000 GICS 451030 Source: Bloomberg. Calculated as of April 19, 2024. 1Peer group (per I
Slide 17: Xperi EBITDA Margin Benchmarking
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi EBITDA Margin Benchmarking Xperi vs. ISS Peers Xperi vs. Company-Selected Peers 80% 40% 70% 35% 60% 30% 50% 25% 40% 20% 30% 15% 20% 10% 10% 5% 0% 0% DLB CRNC HLIT XPER BCOV VZIO ROKU -10% -20% Source: Last reported fiscal year, year-end and quarterl
Slide 18: Xperi has consistently failed to achieve targets
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi has consistently failed to achieve targets, which has led to significant declines in consensus expectations Revenue Growth Guidance EBITDA Margin Guidance 16.0% 30.0% 12.0% 20.0% 8.0% 10.0% 4.0% 0.0% 0.0% What Was Promised - What Was Realized - What
Slide 19: Capital Allocation Failure: AutoSense Sale to Tobii
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 03 Capital Allocation Failure: AutoSense Sale to Tobii 19
Slide 20: Sale of AutoSense/Imaging to Tobii Has Increased Risk for Xperi
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. The Board-Approved Sale of AutoSense/Imaging to Tobii has Increased Risk for Xperi Overview of AutoSense/Imaging Deal Xperi Now Faces Considerable Risks as a Creditor to Tobii x AutoSense is an occupancy monitoring safety platform, which x Tobii has a mar
Slide 21: Xperi Was Bullish on AutoSense in August 2023
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi Was Bullish on AutoSense in August 2023 During its Q2 2023 earnings call, Xperi was directly asked about the competitive position of AutoSense and highlighted the success it was having competitively Hamed Khorsand Jon E. Kirchner BWS Financial Inc.
Slide 22: In Xperi's Post-Mortem in February 2024, the Mask Fell
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. In Xperi’s Post-Mortem in February 2024, the Mask Fell Xperi announced the sale of AutoSense in Jon E. Kirchner December 2023, just President, CEO and Director of Xperi 4 months after talking “While we've been very successful at winning new customers, the
Slide 23: Tobii's Story to Investors is More Rosy
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Tobii’s Story to Investors is More Rosy If Tobii Is Right, What Did Xperi Give Up? Magdalena Rodell Andersson x 500 million SEK in 2028 = $48 million USD Executive VP and CFO of Tobii – AutoSense was reported to be generating ~$9 million in 20231 – Implie
Slide 24: Capital Allocation Question Mark: Perceive
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 04 Capital Allocation Question Mark: Perceive 24
Slide 25: Perceive: A Failure to Launch
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Perceive: A Failure to Launch March h 2020:: Xperi announces Perceive has exited “stealth mode” Overview of Perceive Augustt 2020:: Xperi announces progress on Perceive’s product, Ergo, and that it expects to see chips in the market in early 2021 • Percei
Slide 26: Analysts Value Perceive at Zero
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Analysts Value Perceive at Zero (but the implication is negative) (Prior to dropping coverage in February 2024) Xperi Price Target Methodology “$13 PT, reflecting a 9x EV/EBITDA multiple on “Our price target is based on an 8x our F24 adj. EBITDA estimate”
Slide 27: The Power and the Peril of Power Efficient Chips
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. The Power and the Peril of Power Efficient Chips While other tech companies are building AI Inference / Edge Compute capabilities, Xperi has failed to capitalize on the trend. Its own competitors are either thriving or running out of funding • The benchma
Slide 28: Lack of Transparency Has Created a Binary Outcome for Investors
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Lack of Transparency from Xperi has Created a Binary Outcome for Investors For investors, Perceive exists as the investment equivalent of Schrödinger’s Cat Perceive is an incredibly Perceive is a money pit valuable AI enablement technology • Perceive has
Slide 29: Announcement of Strategic Alternatives Elicited ZERO Market Reaction
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi’s Recent Announcement of Strategic Alternatives Elicited ZERO Market Reaction Xperi’s management and Board have done such a poor job elucidating the value of Perceive that announcing a process to sell it resulted in the stock going down $13.00 Xperi
Slide 30: Board Does Not Hold Management Accountable for Perceive Expenses
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. The Board Explicitly Does Not Hold Management Accountable for Perceive Expenses 2024 Proxy Disclosure “MBO Revenue was calculated as the Company's total revenue, excluding revenue of Perceive Corporation. MBO Non-GAAP Operating Profit was No incentive for
Slide 31: Our Director Slate Has Direct Experience Evaluating Novel Technology
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Our Director Slate Has Direct Experience Evaluating Novel Technology like Perceive, Many Current Directors Do Not We believe our Nominees are more equipped to evaluate Perceive and RUBRIC NOMINEES recommend a plan of action than existing directors: Darcy
Slide 32: Compensation is Excessive and Doesn't Align with Pay-for-Performance Standards
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Compensation is Excessive and Doesn’t Align 05 with Pay-for-Performance Standards 32
Slide 33: Compensation Scheme Is Unchanged Post-Spin
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Compensation Scheme Is Unchanged Post-Spin, Burdening Stockholders With Excessive Costs Market Capitalization CEO Total Compensation Stock-Based Compensation $2,500 $12 $80 $11 -11% $70 $10 $70 $10 +20% $2,000 $1,953 $60 $58 $8 $50 $1,500 -75% $6 $40 $1,0
Slide 34: CEO Compensation is Far Above Peers and Common Sense
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. CEO Compensation is Far Above Peers and Common Sense ISS Peers Company Identified Peers CEO Compensation CEO Compensation Includes one-time option $21 $25 grant, total comp <$1M in $20 prior 2 years $20 $11M one-time PSU $20 grant upon hiring 50% credit f
Slide 35: Stock-based Compensation is Dramatically Out of Sync with Peers
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Stock-based Compensation is Dramatically Out of Sync with Peers and Best Practices ISS Peers Company Identified Peers GAAP SBC Expense as % of Market Cap GAAP SBC Expense as % of Market Cap 16.0% 16.0% 14.0% 14.0% 12.0% 12.0% 10.0% 10.0% 8.0% 8.0% 6.0% 6.
Slide 36: Board Has Granted Insiders 11% of Initial Spin-Off Share Count
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. The Board Has Granted Insiders 11% of the Initial Spin-Off Share Count in 5 Quarters Since Spin-Off (above their rollover RSUs) RSUs Granted RSU Issuance / Starting Shares – Company Identified Peers (in thousands) 12% 6,000 10% 5,000 8% 1,025 6% 4,000 1,0
Slide 37: Adding Back Excessive SBC Makes Adjusted EBITDA Margins Look Better
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Adding Back Excessive Stock-Based Compensation Makes Adjusted EBITDA Margins Look Better 2022 2023 % Change Revenue $502 $521 +4% Adj. EBITDA Excluding SBC $19 $35 +78% EBITDA improvement in Stock-Based Comp $45 $70 +53% 2023 primarily driven by SBC add-b
Slide 38: Complete Lack of Pay-For-Performance
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Complete Lack of Pay-For-Performance CEO Compensation $9,046,650 $3,675,715 $10,080,391 $11,266,838 $9,895,399 $10,003,421 Per Company Proxy: 2018 2019 2020 2021 2022 2023 Jon Kirchner Becomes CEO Xperi / TiVo Announce Merger -65% TiVo Merger TSR Spin-Off
Slide 39: Compensation Failures Explained by Duration of Committee Service
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. We Believe These Compensation Failures Are Explained by the Duration of Service For Committee Members • Christopher Seams, David Habiger and Darcy Antonellis 12 have each spent 8+ years on the Board of Xperi and its predecessor companies (DTS, Inc. (“DTS”
Slide 40: Value Creation Framework
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 06 Value Creation Framework 40
Slide 41: Plan for Value Creation
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Plan for Value Creation Rubric and our nominees have a clear action plan for Xperi Restore Accountability Investors do not trust the Board to maximize stockholder returns • In Rubric’s estimation, based on market evidence, the current Board has lost credi
Slide 42: Pulling Value Creation Levers Could Result In Significant Upside
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Pulling Value Creation Levers Could Result In Significant Upside To Xperi Stockholders Restore Accountability Potential Operating Illustrative Value Impact Assumptions Improvement @ 7x Adj. EBITDA • There is currently a 1000bps gap between consensus and 2
Slide 43: Recent Employee Reviews Highlight The Opportunity for Change
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Recent Employee Reviews Highlight The Opportunity for Change at Xperi with Refreshed Board Source: Glassdoor. 43
Slide 44: Rubric's Nominees are Highly Qualified and Committed to Working for Stockholders
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Rubric’s Nominees are Highly Qualified and 07 Committed to Working for Stockholders 44
Slide 45: Replace Entrenched Directors with Nominees Who Can Create Value
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. We are Seeking to Replace Entrenched, Poorly Performing Directors with Nominees Who We Believe can Immediately Create Value Xperi Incumbents Rubric Nominees 3 Reasons Why Thomas Should Be Elected 3 Reasons Why Darcy Should Be Replaced 1. As former CEO of
Slide 46: Director Nominee - Thomas Lacey
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Director Nominee - Thomas Lacey Experienced change agent who has repeatedly demonstrated an ability to turn around underperforming technology companies – including Xperi’s predecessor x Prior CEO of Tessera/Xperi Corporation, brought in by Starboard Value
Slide 47: Thomas Lacey's Track Record at Tessera/Xperi
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Thomas Lacey’s Track Record at Tessera/Xperi Speaks For Itself Stock Performance Xperi Recurring Revenue ~67% total return1 14 $300 12 $250 $242 $244 10 Joined as $200 interim CEO 8 $150 $mm $150 6 $103 Left CEO $100 4 position 2 $50 Appointed CEO 0 $0 De
Slide 48: Lacey Case Study: DSP Group (DSPG)
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Lacey Case Study: DSP Group (DSPG) Value Creation Overview DSP Group Stock Performance 25 ~270% return x Thomas Lacey was appointed to the board pursuant to a cooperation agreement with Starboard Agreement to be x Starboard would subsequently run a contes
Slide 49: Lacey Case Study: International Rectifier (IRF)
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Lacey Case Study: International Rectifier (IRF) Value Creation Overview International Rectifier Stock Performance ~75% return x Recommended by CEO of Intel to join Board of Directors 50.00 45.00 x Company was in a challenging situation with the start of t
Slide 50: Lacey Has Direct Experience Addressing Common Problems in the Boardroom
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Lacey Has Direct Experience Confronting and Addressing Common Problems in the Boardroom Decades of Learned Experience Have Evolved in Maxims for Ailing Boards See other perspectives CEO, Chairman and Nominating & Governance Committee seek out active x At
Slide 51: Xperi's Comments About Thomas Lacey Contradict its Actions
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi’s Comments About Thomas Lacey Stand in Direct Contradiction to its Actions April 17, 2024 Press Release Xperi’s Own Proxy Disclosure: “Mr. Lacey’s background is no longer relevant to the “Mr. Kirchner reiterated the Board’s offer to engage Mr. Compa
Slide 52: Director Nominee - Deborah Conrad
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Director Nominee - Deborah Conrad Marketing expert capable of addressing the most pressing issues at Xperi: elucidating the value of Perceive and identifying tech-enabled market opportunities x Most recently Senior Vice President, Chief Marketing Officer
Slide 53: Conrad Case Studies: Mapping Novel Technology to Market Opportunity at Intel
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Conrad Case Studies: Mapping Novel Technology to Market Opportunity at Intel Led Launch and Market Adoption Of Itanium, Intel’s First Led Launch and Market Adoption of Atom, Intel’s Server, Data Center And Cloud Computing Chip Family Entrance into Mobile,
Slide 54: Conrad Case Studies: Product Partnerships and Margin Expansion at Intel
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Conrad Case Studies: Lucrative Product Partnerships and Margin Expansion at Intel Led First-Ever Partnership Between Intel and Apple Overhauled and Simplified Intel’s CPU Roadmap to Create Intel-Based Macs and Brand Strategy x Drove all Intel-based initia
Slide 55: Conrad Case Study: Category Creation at NovaSignal
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Conrad Case Study: Category Creation at NovaSignal Led Launch of New Medical Device and AI/Data Company and Platform x Developed all positioning, messaging, brand ID, collateral, website and demos for NovalSignal, an FDA-cleared robotic, AI-based ultrasou
Slide 56: Xperi has Mischaracterized our Candidates and Rubric's History
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi has Mischaracterized our Candidates, Their Skills, and Rubric’s History of Interaction “Rubric has not identified any “We do not believe they would bring any relevant expertise that is not already well- concerns that Xperi is not already represented
Slide 57: Xperi Has Demonstrated an Unwillingness to Take Action Unless Forced
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi has Demonstrated an Unwillingness to Take Action Unless Forced Board Composition Capital Allocation & Strategy Stockholder Rights Xperi did not reveal that it was Xperi only decided to run a Xperi is only now attempting planning to expand process to
Slide 58: Xperi's Attempts At Settlement Have Been Disingenuous
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi’s “Attempts” At Settlement Have Been Disingenuous “We have engaged constructively with Rubric and have presented Rubric with two proposals that would achieve its aim of Board change” Xperi Proxy Characterization Rubric Interpretation On February 26,
Slide 59: Xperi Is Structurally Stockholder Unfriendly
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 08 Xperi Is Structurally Stockholder Unfriendly 59
Slide 60: Governing Documents Contain Multiple Stockholder Unfriendly Provisions
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi’s Governing Documents Contain Multiple Stockholder Unfriendly Provisions Supermajority Vote to Amend Bylaws and No Action by Written Consent or Ability to Call Restrictive Charter Provisions Special Meetings • Prohibitively high supermajority 66-2/3
Slide 61: Conclusion
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 09 Conclusion 61
Slide 62: Xperi: A 30,000 Foot View, Revisited
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Xperi: A 30,000 Foot View, Revisited 2023 Metrics REVENUE: G R O S S P R O F I T 1: $521 million, +3.7% YoY Growth $403 million, 77.2% Gross Margin $400M+ + in n A D J . E B I T D A 2: s Profit! Gross ADJ. EBITDA MARGIN: $34.7 million (including $70M in S
Slide 63: Rubric is Committed to Unlocking the Value in Xperi
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Rubric is Committed to Unlocking the Value in Xperi • Rubric is taking action at Xperi, a company we have been stockholders of for almost the entire duration of our fund, because we believe the current Board has taken actions contrary to the best interest
Slide 64: Appendix
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. 10 Appendix 64
Slide 65: Deborah S. Conrad
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Deborah S. Conrad Deborah S. Conrad, age 62, most recently served as Senior Vice President, Chief Marketing Officer at Hinge Health, Inc., a healthcare technology company, from January 2023 to October 2023, and as Chief Marketing Officer at Vori Health In
Slide 66: Thomas A. Lacey
STRICTLY CONFIDENTIAL. NOT FOR DISTRIBUTION. Thomas A. Lacey Thomas A. Lacey, age 66, has served on the board of directors of Kandou Bus S.A., a semiconductor company which offers differentiated and fundamental interconnect technology, since September 2022. Mr. Lacey has also served as Chairman of t