Xperi Pinning Product Segment Hopes on Nascent TiVo Stream Ecosystem: CEO

Xperi sees growth opportunities from continued proliferation of entertainment content, changes in entertainment consumption trends and a broader move toward artificial intelligence at the edge, said CEO Jon Kirchner on the company’s Q2 earnings call Monday. It was Xperi's first call since combining with TiVo June 1 (see 2005070052).

Xperi plans to spin off the product business from the IP business in the next 12 months. Moving forward, it will measure the segment's business performance in three categories: consumer experience, connected car and pay-TV. Consumer experience includes audio, imaging, DVR hardware, streaming, metadata and monetization solutions from TiVo's portfolio. The category is 40%-45% of the combined company's Product revenue and expected to grow in 2020 “even with the headwinds of COVID-19,” said Kirchner.

A major focus is the $50 Stream 4K, which began shipping in May (see 2005060041), and is due to be embedded in TVs in late 2021 or early 2022, Kirchner said. Stream will eventually become a smart TV platform, “connecting content from all sources” and leveraging the companies’ search and discovery and monetization tools, “one of the merger-related revenue synergies we are most excited about,” he said.

Over the next few quarters, Xperi expects a “significant ramp” in volume for Stream 4K, enabling it to establish a footprint: “I think we'll then be in a position to perhaps talk more meaningfully about how the monetization picture looks,” Kirchner said. “With footprint, you can begin to monetize engagement, and that engagement has real value year-over-year.” Stream is “launching a new chapter in the TiVo history.”

Xperi considers the Stream footprint an “opening act in a broader move towards embedded applications and support for TVs directly,” enlarging the footprint for further monetization, Kirchner said. Also part of the product business, the Imax Enhanced ecosystem -- including audio decoders, TVs, sound bars and other home entertainment devices -- includes 28 device brands, six streaming services and three Hollywood studios, with more expected.

TiVo's pay-TV business, 45%-50% of combined revenue in the Product segment, includes TiVo guides, DVR, and end-to-end platform, comprising user interfaces and IPTV cloud service. TiVo wants to upgrade service offerings with over-the-top content additions that improve content discovery across content sources, Kirchner said. Churn in the quarter of pay-TV subscribers using TiVo was less than 2% vs. an industry pay-TV average of 4-5%, he said.

Connected car comprises 10%-15% of revenue in the Product category, which includes HD Radio, automotive connected media and in-cabin monitoring. The focus is on advancing the global in-cabin automotive experience through personalized, connected infotainment and safety solutions, with recurring revenue opportunities for Xperi, car manufacturers and content owners, Kirchner said.

Global automotive connected media includes connected radio and the TiVo Music library and preference engine. It enables an integrated audio entertainment platform with personalized discovery across local radio, digital music and podcasts. Also in the Connected Car category is Xperi’s in-cabin monitoring.

Combining the companies created one of the largest public IP licensing companies in the world, with a total company portfolio of more than 11,000 issued patents and pending applications, said Kirchner. Combined, they have more than $8 billion in licensing revenue over 20 years.

The company expects an estimated net impact from COVID-19 on combined businesses of less than 10% vs. guidance provided at the beginning of the year. Kirchner acknowledged "uncertainties" of impact on end markets. Revenue, including a month of TiVo operations, was $137.6 million. Second-half outlook is for revenue of $390 million-$410 million, it said. The stock closed 9.8% lower Tuesday at $15.17.