Rubric Capital Management Issues Open Letter to Xperi Inc. Stockholders in Response to Company’s Highly Misleading Investor Presentation - Seite 2

Xperi makes the egregious claim that its dilution has been in-line with or below its peers. Only in the most dishonest sense is this true.

In 2023, Xperi’s GAAP diluted share count grew by 2.3%. Unfortunately for stockholders, when calculating diluted share count for a company with negative GAAP earnings – like Xperi in 2023 – GAAP accounting EXCLUDES stock options, restricted stock units and employee stock purchase plans. As such, basic and diluted share count are the same.

To put this in layman’s terms, Xperi is attempting to advance a false narrative regarding its dilution by hoping no one will notice the 53% increase in options, RSUs and other dilutive items. Without proper explanation in its presentation, Xperi makes a mockery of the term “fully diluted share count.”

Xperi’s Discussion of Executive Compensation Makes Creative Use of Timeframe

Xperi’s discussion of executive compensation once again attempts to mischaracterize the truth. When comparing Xperi’s Summary Compensation Table to CEO Jon Kirchner’s realized compensation in 2022 and 2023, the Company fails to account for the fact that Mr. Kirchner’s pay includes a cliff grant with a 3-year timeframe (2023-2025). As such, Mr. Kirchner is not yet able to realize this compensation. Therefore, of course his realized compensation will lag the Summary Compensation Table for the time being; that doesn’t mean the compensation isn’t likely to be realized.

Perceive Expense Characterization is Puzzling at Best

Perceive has existed for six years, and in each public disclosure Xperi has made regarding its annual investment in the business, investors have been given numbers that range from $17 to $25 million.

April 2020

Negative $17M in FCF in 2020E³

February 2021

“I think if you add it all together, you can figure it's in the kind of $20 million to $25 million range each year, or at least for 2021.” – Robert Andersen, Xperi CFO, February 23, 2021

September 2022

“Annual Investment of $20M” – 2022 Xperi Investor Day Presentation, September 22, 2022

However, Xperi claims in its presentation that its cumulative investment in Perceive is “significantly less than $100 million.” This means that the Company’s prior disclosures were either erroneous, to a level that beggars belief, or Xperi is once again misleading investors about the scale of its investment to mask its poor capital allocation.