Xperi 'Cautious' on 2021 Revenue Outlook; TiVo Stream 4K TVs Seen for 2022

Combined Xperi-TiVo 2020 revenue grew 21% to $1.15 billion, which “far exceeded” expectations, said Xperi CEO Jon Kirchner on a Wednesday investor call. Q4 revenue was $427.8 million vs. $90.4 million in the 2019 quarter, before the TiVo deal, the company reported.

The company has a “cautious outlook” for 2021, said Chief Financial Officer Robert Andersen, with risk on a per-unit basis in the consumer segment. Revenue guidance for 2021 is $860 million-$900 million. Upside range would be around a “few percentage points,” Andersen said. To reach the higher end of guidance, Xperi would need new licensing deals and higher per-unit reports from customers, he said.

Though there has been some recovery in Xperi’s automotive business, chip shortages caused the company to take a conservative view of the segment. While cord cutting continues, IPTV deployments are increasing, “an offset” for the company, said Kirchner. It’s having some growth in game consoles and connected TV devices, including TiVo Stream 4K growth, he said.

TiVo Stream 4K isn’t likely to be embedded in TVs this year, said Kirchner. Xperi is working on the technical and business partnership aspects, he said. The company will continue to focus on sales of Stream 4K devices this year to build out a footprint while “working aggressively behind the scenes to set up for the real end game,” he said: “Getting our technology and our technology stack embedded on TVs as we get into '22 and beyond.”

Kirchner cited “clear interest in what we're doing from a search and recommendation and a user engagement perspective” with Stream TV from the advertiser and distribution platform sides. TiVo has the benefit of history, building “world-class [user experience] interfaces for pay-TV for a lot of years,” he noted. The company will couple that expertise with the infrastructure necessary to support the “tremendous” growth expected from the advertising-based VOD market. Strong over-the-top trends mean “there’s room for us to play,” he said. In the AVOD space, “if you go with an embedded TV stack, and you start to monetize that, the growth there could be very, very significant,” he said -- much larger than what "you might see out of the traditional CE or hardware business.”

Among Q4 highlights were a long-term licensing deal with Comcast through 2031, showing the “continued relevance and value of our media [intellectual property] portfolio well into the future,” Kirchner said. The deal brings Xperi’s average revenue baseline to $350 million, supporting its position "as one of the largest IP licensing companies in the world.” Xperi also renewed and extended licenses with Cox, TCL and Sony in Q1.

Xperi’s TiVo+ AVOD platform grew from 26 to 145 linear channels in 2020 and added “tens of thousands” of AVOD viewing hours. Kirchner cited 393% quarter-over-quarter growth in total viewership for the AVOD catalog. Xperi added to the Imax Enhanced ecosystem with Sony’s Bravia Core service, which is due to launch soon. Tencent and iQiyi are streaming Imax Enhanced titles in China, Kirchner said.

The executive identified several revenue opportunities beyond the $350 million baseline, including more penetration in OTT. The company has licensed the top 10 traditional U.S. pay-TV providers, about 70 million subscribers. He also sees a chance to license the traditional pay-TV market in Canada. Xperi expects a decision from an initial round of litigation with several Canadian pay-TV providers in Q2-Q3. It’s “uncertain” whether additional litigation will be necessary.

Growth in semiconductors may be “smaller than in years past” while the chip business goes through a “period of transition” as the market for Xperi’s more advanced technologies develops, Kirchner said. He was sanguine about the company’s hybrid bonding technology. Xperi signed a license agreement with Canon in Q4 for direct bond interconnect hybrid bonding.

The company delayed plans to separate the product and IP businesses to 2022, said Kirchner, citing impact from COVID-19 and the need for both businesses to be able to “stand on their own two feet” with “attractive growth stories.” He referenced “fairly complex systems work” that has to be right for the businesses to operate independently.

On the Perceive subsidiary, Kirchner said Xperi is working with partners to bring a smart security camera to market this year with “greater scalability in '22 and beyond.” Perceive is a “different way of doing neural networks,” he said. The hardware side of the chip is finished. Xperi is working with partners to make it easy to run algorithms they may be running in the cloud onto the chip platform. Applications for Perceive go beyond smart cameras, Kirchner said, citing the tens of billions of sensors in the world “delivering information and intelligence around everything from imaging to audio to thermal to other sorts of sensing.” Potential applications are wearables, consumer white goods, augmented reality and virtual reality devices, mobile phones, automotive, other CE products, and enterprise and industrial.