Xperi Eyes IPTV for Product Growth, as Separation of Businesses Looms

As it moves toward a fall separation of its intellectual property licensing and product businesses, Xperi’s focus on the product side is on driving adoption of higher value IPTV solutions to offset subscriber declines in its traditional electronic programming guide business, said CEO Jon Kirchner on a Q1 earnings call Monday.

Xperi plans to grow product business through advanced infotainment and in-cabin safety products in cars, by growing IPTV business in the U.S. and abroad, and establishing its TV operating system as a "leading platform" for Tier 2 TV makers, Kirchner said. Separating Xperi’s business into two stand-alone publicly traded companies will “reduce business complexity,” Kirchner said.

The Adeia IP licensing business will continue to grow its patent portfolios "in size and relevance" through investments focused primarily on internal innovations, as well as through targeted acquisitions, Kirchner said. At separation, Adeia will have 10,000 patent assets, about 85% homegrown, Kirchner said. In preparation for the separation, the company built a "media-focused R&D function" within Adeia that will "continue to innovate and support the long-term needs of the business."

On the product side, IPTV subscribers grew by double digits vs. Q1 2021, with pay-TV revenue advancing “slightly” year on year, Kirchner said. Xperi added NfinityLink Communications in the quarter. Pay TV was about 54% of product revenue, at $64 million, up slightly from Q1 2021 on growth in MobiTV, which Xperi bought last year, and new customer deployments that offset “continued churn” in legacy pay-TV subscribers, said Chief Financial Officer Robert Andersen.

In consumer electronics, the company renewed contracts with Skyworth and Best Buy for sound bars and TVs, and it expanded its license with TCL to include decoder post-processing and Play-Fi support in sound bars and TVs, Kirchner said. Q1 revenue was down $3 million to $28 million in the segment, for about a quarter of total product revenue, said Andersen.

Supply chain constraints resulted in a $3 million falloff in Connected Car revenue, which was 17% of total product revenue, Andersen said. The company expects the category to be flat year on year. Xperi is working with partners to mitigate shortages “that could impact key components that deliver with our technology and anticipate an improving situation in the back half of 2022 as the supply chain stabilizes.” Kirchner said.

Media Platform grew 19% year on year to $7 million, comprising 6% of total product revenue. Xperi expects the category to grow by double digits this year, driven by the TiVo Xtend connected TV advertising solution. The company advanced TiVo Stream ecosystem development across content partners, OEMs and chipset providers in Q1, Kirchner said.

In Q1, IP Licensing revenue grew by $40.5 million to $138.5 million, said the company. Product revenue fell 3.8% to $118.9 million on declines in CE and connected car. Total revenue in the quarter grew 16% to $257 million. Xperi maintained its full-year revenue outlook of $910 million-$950 million.