Q4 2019 Earnings Call
Good day, ladies and gentlemen, thank you for standing by welcome to the expiry fourth quarter fiscal year.
Earnings Conference call.
During today's presentation, all parties will be in listen only mode. Following the presentation Nicole will be open for questions.
This call is being recorded today.
As of the true they have for reaching 2020.
I'd like to turn call over to generate one field Vice president of Investor Relations for expertise.
Please go ahead.
Good afternoon, everyone. Thanks for joining us as we report our fourth quarter fiscal year 2019 financial results with me on the call today or John Christner CEO, Robert Anderson CFO before we begin I would like to provide to reminders first today's discussion contains forward looking statements that are predictions.
Projections or other statements about future events, which are based on management's current expectations and beliefs, and therefore subject to risks uncertainties and changes in circumstances. Please refer to the risk factor section in our FCC filings, including our most recent forms 10-K and thank you for more information on the risks.
I'm uncertainties that could cause our actual results could differ materially from what we discussed today.
Including but not limited to risks that sodium associated with the Tivo transaction, the development and launch of new products and any potential impact of the Corona virus. Please note that the company does not intend to update or all through these forward looking statements to reflect events or circumstances are rising after this call second.
We refer to certain non-GAAP financial measures, which exclude restructuring and other exit costs merger and acquisition related expenses acquired intangible asset amortization charges for acquired in process research and development stock based compensation expense interest income associated with the assay six so sick and realized and unrealized.
Andrew losses on equity Securities. We've provided reconciliations of these non-GAAP measures to the most directly comparable GAAP measures and the earnings release and on the Investor Relations section of our website. Finally experience I'm Tivo have launched the website, where you can find more information about the transaction, including our form S four and other.
Material a linked to this web site can be found on the home page of Experie Dotcom I'll now turn the call over to conquer sure. Thanks, Jerry Thanks, everyone for joining us.
Got to 19 was supposed to strategic the building you for spirit.
We generated record operating cash flow of $169 million significantly above our original outlook you pay down a $150 million in bed in the turned 40 million to shareholders through dividends.
We also accomplished several key milestones within each of our mortgage.
Starting with the product business in automotive, we signed our first license agreements for both connected radio and occupancy monitoring which was a growing opportunity for the company as a leader in entertainment and safety in the car.
In home, we increased penetration of VTS actually virtual action Tt's sound bars, and 80 yours.
We continue to expand the IMAX enhanced ecosystem now available for screening services 17 device manufacturers and unfortunately countries.
This positions us well for further penetration growth within the home entertainment market.
In mobile we advanced our leadership position in gaming.
Washer sound and bouncing continued to add PC mobile and gaming headset partners in that space.
As a key part of our growth opportunity in mobile.
And lastly.
Also incredibly excited to share with you for the first on the significant progress we've made on a new initiatives to develop an advanced machine learning hardware and software platform.
We'd expect that drive meaningful future growth and expand our business opportunity.
Will cover this later in the call.
No I T business, we recently announced that we've entered into a new IP license along with the technology transfer agreement SP. Thanks.
This is a major milestones and proof points of Dbi cultural bonding technologies and the memory Mark.
In addition to providing access to our broader semiconductor IP portfolio.
This agreement includes a technology transfer that Dbi Ultra initially focused on next generation memory solutions. This milestone is indicative of the relevance and important should dbi for an expanding range of high volume semiconductor products.
It should provide licensing grows over time.
And importantly in December we announced the strategic combination that people.
Which will combine two strong IP franchises and establish a larger and more robust product technology licensing business in the home automotive in mobile device markets.
Believe combining tivo, one experience and subsequently separating the I.P.I.P. and product businesses will create significant strategic and financial value for shareholders.
Let me explain why.
First of all IP licensing business, we have demonstrated an ability to conclude highly profitable in cash generative license agreements.
However, the subscale and episodic nature of this business just made investing into this business and related visibility children.
Through this transaction or IP business will be combine the two goes IP business, which operates a far more stable recurring licensing model greater visibility.
When combined among other benefits, resulting IP business will have far more scale more capacity for consistent investment greater diversification greater profitability and as a result, better prospects for long term cash flow generation than either of our respective IP businesses have today.
For example was disclosed in our proxy.
Without taking into account synergies the needs of our combined 2020 forecast for the IP business to generate $500 million in top line and $350 million and EBITDA.
On a standalone basis, this will be the largest public IP licensing company.
Second in the consumer electronics market scale is a strategic imperative to enable the and innovation investments and market position necessary to drive sustainable growth and long term profitability.
For the Tivo transaction, we accomplish exactly that.
Gained significant scale technology depth at a platform relevant to one of the largest challenges consumer space today.
Got a fine watch and enjoy entertainment.
As a result, a combined business will be able to leverage or significant TV licensing footprint.
And our leadership position in automotive infotainment to drive more rapid growth achievers platform.
In addition, the combination enables important new growth vectors for experience, including media Medidata content discovery can direct to consumer advertising.
As disclosed in our proxy without taking into account synergies amenable combined 2020 forecast for the product business, but generally $588 million in top line and $74 million EBITDA.
And we expect to recognize an excess of $125 million in revenue synergies by 2024.
The increase scale and breadth of our product business combination should provide greater growth at more attractive long term profitability.
So the combination of our businesses will yield significant revenue and cost synergies.
Resulting in a more efficient platform greater profitability and value for investors.
Management changes demonstrated ability to successfully manage M&A integration exceed target cost synergies and drives focus on key initiatives gives us confidence in our ability to produce significant value to the transaction.
In addition to the revenue synergies, we expect to recognize $50 million of expense synergies on an annualized basis and 2021.
Given each company's challenger being sub scale, and IP licensing and product licensing.
We believe that this combination and subsequent larger scale separation represents the best best path forward to maximize shareholder value.
From a financial perspective. This transaction is compelling when one looks at the numbers as prepared and outlined in the form S four or five today.
The combined topline is greater than $1 billion, even before considering the long term revenue synergies that can be achieved.
Combined adjusted EBITDA is well in excess of $400 million.
Additionally, it is worth noting that through our combination in subsequent separation.
We expect to substantially preserve the tax benefit from the approximately $900 million a mental wells currently on T. those balance sheet.
Given the tremendous profitability of the combined IP business, we expect to be able to utilize this asset to generate significant cash flows for the business.
If one assumes a blended U.S. tax rate of approximately 23% this tax asset translates to approximately $200 million and value alone.
Since the merger announcement, we made significant progress towards closing the transaction.
We have received HSR clearance one of the key conditions to closing.
We kicked off or integration planning efforts with a focus on combining our respective product and I P businesses, while keeping them internally suffer.
This will help facilitate their separation into two independent public companies with greater scale, each with a different and attractive investment profile.
We have now socialize the transaction with all employees and many of our partners and customers and the feedback has been very positive.
On the product side, some customers quickly understate, our vision around the larger stack a best in class technology, the moves up the value chain and extends from capture to discovery get playback.
We've had a number of request for meetings to discuss our long term product vision and Roadmaps and this reaffirms our confidence in our ability to recognize revenue synergies to grow our business.
In addition, separating the combined product business will enable the pursuit of a focused strategy without some of the volatility uncertainty and dis synergy presented by being connected to an IP licensing business.
Now I'd like to turn to a new initiative that I'm, particularly excited about.
Over the past two years, we've been investing in a confidential R&D project that combines our work on advanced machine learning with Expiries unique experience and imaging audio and semiconductor technologies.
The result is a successful development at the new hardware and software machine learning platform.
Based computing.
Initially targeted at the market for smart consumer electronics.
This market is comprised of billions of devices across all t. and home mobile and automotive applications.
This new platform enables us to provide advanced imaging and audio applications as well as a range of new applications that forget further utilized other types of sensing capabilities.
The platform addresses challenges associated with cloud computing, including the amount of data required to be transmitted and associated privacy applications by enabling advanced machine learning capabilities at the edge.
Importantly, this platform allows us to bring more complete solutions to customers migrating us further up the value chain, increasing both addressable market size and as piece.
This effort is run by our CTO Steve type.
To date has been funded by experience.
It has been structured as a spin yen and operated in the spirit of a startup to attack attract top talent.
The team has already working to lead customers in the home security space sampling chips and expects to ship production trips and software later this year.
We expect the first target market to be home cameras, where there is a growing awareness of privacy issues, creating a significant opportunity for edge based AI solutions that can process data without sending it to the cloud.
This is a large and growing market, where security monitoring products represent the vast majority of that kind of 12.4 billion dollar smartphone device market.
Additional market opportunities, including other smart home electronics, Wearables mobile enterprise industrial and automotive applications are expected to follow is connected devices continue to proliferate and increasingly require intelligence at the edge.
The team is such an incredible work to bring this product to market.
We are excited about the prospects for this new platform and expect to recognize billing contributions from this initiative late this year.
You have an incredibly strong customer interest we plan to focus more of our investment dollars on this initiative during 2020 to support commercialization and product rollout.
We look forward to sharing more details about this platform and its highly disruptive set of capabilities in the next few months.
On the I.P. side, Expiries R&D capability I P sourcing expertise deep litigation experience and successful track record in IP assertion will augment tivo strong media IP licensing platform and its track record of delivering recurring base of IP revenue.
Together, we believe the size and the diversification of the portfolio the quality and expertise or the team had a broader market Tim will lead to improved IP licensing outcomes greater generated greater cash flow generation and improved visibility over the long term.
As we move forward or focus will be on rapid integration and the realization of revenue and cost synergies to quickly realize the full potential of this transaction.
During our due diligence process, we extensively evaluated the potential to quickly and efficiently combined and then separate our respective IP and product businesses.
It is our intent to do so within 12 months of closing.
We are pleased by the progress we've made and we're confident in our ability to successfully execute on the strategy.
Entering 2020, we are focused on a limited set of key priorities across our business. These are as follows.
Closing, the Tivo transaction and executing our integration and synergy plans to drive shareholder value.
In automotive supporting the commercialization of connected radio winner in cabin monitoring solutions, both expected to launch in vehicles in the back half of 2020.
This kicks off an important growth cycle for the next three to five years.
In mobile building on our leadership position in gaming is gaming as a rapidly growing category.
In home further driving expansion of the IMAX enhance program, adding more content more streaming services are more devices to build a more valuable long term ecosystem.
Supporting our product business, we will continue development and commercialization of our new product excuse me, our new hardware and software machine learning platform for edge based computing, which provides a new and large growth factor.
And finally, an IP licensing building our portfolio advancing our pipeline of opportunities and accelerating the adoption of our invensas bonding technologies to drive a larger base of licensing opportunities.
With that I'll turn the call over the Robert to discuss our financials.
Thanks, John Let me start today with a few observations about planned merger Tivo.
I've personally like the deal from the start.
And that view solidified as being analyzed the benefits of the combination.
The two companies clearly complement each other and the product an IP licensing business segments.
Which will enable focus on each companys respective strengths.
We will achieve greater scale have better visibility.
And approve free cash flow through business optimization and focus.
Mothers complexity and combining the Companys I'm confident.
The integration teams, we have assigned can achieve our aggressive goals.
The ultimate goal is a growing business increased profitability in a separation of the product and I'd be segments.
We are providing a great deal of information today, both with the filing of the form S. Four.
And the reporting of earnings in 2020 outlooks from both companies.
This information should help investors a great deal in understanding the economics of the transaction.
And former basis for which the value the combined enterprise.
Let me the number that stands out most of the adjusted EBITDA for the combined business.
Which as John noted as well in excess of 400 million for 2020 and should grow over time.
Now moving to financial results.
Let me begin with reminder, that we'll be discussing billings today instead of revenue as we feel it's an important measure our financial progress.
Also given the significant timing differences in the could exist between revenue and billings on Expiries IP licensing business.
We intend to continue to report billings after the closing of the merger.
The only it's kind of being important measure and understanding of the company's cash flow generation.
Fillings in the fourth quarter for $126.7 million.
And for 141.8 million in the fourth quarter of 2018.
While we were down 11% from the same quarter last year to year over year decline was mainly driven by unexpected decline in our IP licensing business.
On the rollout off of Osats and 28 team. It was partially offset by a onetime license in 2019.
In Q4, the automotive market delivered $18.6 million and buildings.
Down 6% year over year. The decrease was primarily driven by some second half softness and automotive unit sales that impacted HD radio unit volumes.
We expect to see the softest continue in the first half of 2020.
Then following the launch of new programs in HD radio connected radio and and cabin monitoring we anticipate automotive to return to growth in the second half of the year.
According our confidence in the second half at CES, we demonstrated our connected radio solution running on platforms from major tier one radio suppliers, representing more than 50% of the worldwide car infotainment market.
This industry support enables automakers to more rapidly adopt our connected radio solution in the near term.
Similarly, we displayed demos of our best in class driver monitoring solution.
Hang on platforms, some key automotive suppliers, Nvidia NXP, Texas instruments and discount.
Platform availability is critical to driving near term adoption of our in cabin monitoring solution.
As expected billings on the mobile market declined year over year to $8.3 million.
Chris with 21% for Q4 2018 to the ongoing contract interpretation tissue with a T mobile customer.
We were unable to reach resolution with this customer.
Consequently filed arbitration last month to recover unpaid royalties.
We expect arbitration process to last 12 to 18 months.
We're very confident in our position.
And remain open to finding a mutually beneficial settlement.
As this matter progressive.
Our gaming business remains strong and finished up.
For the year at 18%.
During the quarter, we signed three important gaming contracts.
With leading PC gaming aliens and one with the gaming motherboard brand.
All three brands will be shipping product in the second half of this year and shows our solutions because of the enhanced an immersive sound experience that we bring to gaming customers.
For the whole market in Q4, we deliver $24.7 million up 8% year over year.
By strength in sound bars, and the timing of certain payments and Tvs.
During the quarter, we expanded the breadth and depth of our relationship with the vizio by further licensing details audio Kodaks and post processing technologies for Tvs and sound bars.
On the continent fraud IMAX enhanced is now available on for streaming platforms and 14 countries worldwide and the 17 device manufacturers.
Most recently I Ci joined as an IMAX to enhance the digital retailer in China with the launch expected later this year.
Moving to our IP licensing and semiconductor business.
Billings were $74.2 million down as expected, 15% and year over year as the roll off of certain OSAT customers and upfront payment on the new Samsung why since in Q4 2018.
The partially offset by a onetime billing for a new patent license agreement with the semiconductor company in Q4 2019.
During the quarter. We also continued to add to our pipeline of opportunities and progress certain IP licensing discussions as John noted earlier, we signed a new patent and technology license agreement with SK Hynix highlights the importance of our advanced bonding technologies and the memory market.
Total billings for the full year for $413.9 million down from 447.3 million last year.
The every year decline in billings, mainly occurred within our IP licensing business as we roll off the significant billing streams from TTR any amcor at the end of 2018 were partially offset by new IP arrangements with Samsung and others.
GAAP operating expense, including cost of revenue was $95.4 million.
Compared with 101 point Fourmillion for the fourth quarter of 2018.
Non-GAAP operating expense, including cost of revenue with $58 million.
Decline of $6.6 million compared with a fourth quarter of 2018.
This year over year spending decline was primarily due to lower litigation and SGN there.
Interest expense for the quarter was $5 million, and we paid $2.6 million and net cash taxes.
Moving to the balance sheet, we finished the year with $121.5 million in cash cash equivalents and investment.
Outstanding debt balance at year end was $344 million down 100, and a 15 million from the end of last year.
Operating cash flow for the fourth quarter of 2019 was $65 million down just slightly from the fourth quarter last year, Despite a $15.1 million decline in year over year billings.
The lower spending and lower cash taxes.
Moving to our outlook for Q1 2020.
For the first quarter 2020, we expect to billings between 100 and $104 million, which is almost flat to last year to start to roll off of my career at the end of 2019.
We expect non-GAAP operating expense to be between 57 and $60 million as Q1 is typically our highest expense quarter during the year.
Embedded in our non-GAAP expense is approximately $2 million of depreciation.
Expect interest expense and debt amortization of approximately $4.1 million.
Non-GAAP interest income of approximately <unk> point 8 million.
Cash tax at approximately 5.7 million.
Based compensation of approximately 8.4 million.
The amortization expense of 22.5 million.
And acquisition related costs of approximately 1 million.
Moving to our outlook for 2020.
The outlook are providing for the year does not take into account any impact from the pending transaction with T., though.
The combined company, we'll update its outlook post close.
For the full year 2020 on a standalone basis, we are expecting billings of between 400 and 420 million.
Yes for document we filed today contains various financial forecasts and scenarios.
It's worth noting that our guidance range as approximately 10% to 15% lower than the 2020 billings metrics referenced in the S. Four do the nature of our guidance approach, which includes risk and timing adjustment specific to providing annual guidance.
As a practice we don't include IP licensing deals in guidance unless we have a strong line of sight around timing of resolution and we adjust our guidance for product licensing deals that have risk around not shipping during the year.
We expect to 2028 non-GAAP operating expense again on a standalone basis, but essentially flat to 2019 as we prepare for the pending merger.
Depreciation expense for 2020 is expected to be approximately $8 million.
Compared to 2019, we expect an increase in cash taxes for about $7.8 billion, that's on a net basis.
Balanced by lower interest expense of about 7.4 million.
We expect the fully diluted non-GAAP share count of 52.3 million at the end of.
Yearend 2019 to increase by approximately 2.5 million shares prior to the deal closure.
Note that we are restricted from buying back shares prior to the close of the transaction.
Experiences not anticipate any change to the dividend policy prior to the merger with Ti Vo.
Notably experienced board will have the ability to declare a dividend at its April meeting.
On the completion of the transaction the new board will assess capital allocation strategy, including share buybacks dividends that paydown and investments in the business.
On upcoming earning calls the combined company will provide more detail on the operating metrics, we will use to track the business in terms of topline performance profitability and cash flow generation.
That concludes our prepared remarks, we'll now turn the call over to your questions.
Now I'd like to ask your question. Please signal by pressing star one of your telephone keypad. If you are using speakerphone. Please make sure you beat function is turned off color signals to return and.
Again press Star one pose the question cost for just a moment to allow everyone an opportune signal from question.
Alright, well take our first question from Eric Wold B. Riley. Please go ahead.
Thank you.
Good afternoon.
I guess.
Because of course, it gets was off so I'm kind of the non-GAAP EPS calculation true for Q4, Q1 is reassuring, but looking right way I know.
Gold mine p. into the fourth quarter over quarter and the guidance from Q1, It's a grant you won't see people to 66 cents, but some of that right.
Yeah, if one is using billings as the topline measure you calculate.
Earnings per share in a non-GAAP basis than that's correct. The dollar 19.
For Q4, and then I think 64 to 66 is a reasonable range for Q1.
Extra checking out here.
Thank you.
I agree with it but what I can I'm on the guidance for the billings for the year impressive to see.
Flattish billings guidance for the year, even with.
We along with Micron I guess, you're gonna uncertainty around that and I know you you mentioned that.
You don't include IP can be more billings assumptions remain what's your you fairly confident in our resolution that gets.
Did you can you explain maybe kind of whats in there that they fall into that confident part, which you can only be worth what didn't hand is going to get it seemed to kind of what the do believe <unk> number.
Sure I think gum IP is probably the main issue here.
We announced earlier this year that weve entered into a new arrangements SK hynix and that has an impact on 2020.
We also have some new IP licensing in the forecast for which we have high confidence.
So those are that's those are the two pieces. We also have some growth of course in the product licensing business for which we have confidence so all those factors get us to arrange for this year.
Okay and.
And then are you getting turns it should we assume that the high index deal we'd be a full year at the parent recently signed level versus a portion of your deal but won't portion of your the level.
That's a unfortunately I can't give you too much detail on the high next structure, just because it's subject to confidentiality but.
But it did absolutely has a positive impact on 2020.
Okay. That's helpful and then.
On the 225 million in.
And then Youve synergies by 2024 in the former goodness your home and auto <unk>.
She's seen that's deal.
Somewhat of a hockey stick as you go over that connects to the full year period or you know you can skew we'd get since into kind of the the ramp.
You see getting that number how how soon do you attribute you'd be searchinger all the numbers.
No I I think it a one to three year period, Eric you're certainly going to see meaningful progress towards that number as it relates to the home synergy opportunities because the product cycles are shorter.
Yeah, and TV in particular, I think automotive probably skews towards the latter enter that timeframe just based on you know how fast that market moves in when designs are locked down.
So I think that gives you a perspective I don't I don't think it's a heavily backend weighted I think you'll start to see things happen pretty quickly. It's one of the things. We've been primarily focused on is we're very excited about the.
Their respective customer and channel synergies and we certainly got plenty of interest.
Based on our announcement of the deal from customers, who really understand that trying to manage.
Content universe is very very difficult and having best in class technology to help you find watching enjoy entertainment.
Back in the rest is.
It's critically important to providing a positive user experience.
That's helpful. John Let me try and an object not read through the entire that's four yeah. There's clarify that that 125 buttons that you annualized number in the year 22 important so between Alabama correct.
That's correct yes.
There's there's time thank you.
Detail in the us for that you can find and better than that document.
We'll take you a little bit to result.
[laughter].
Perfect. Thank you guys.
Thank you here.
I'll take your next question from Mitch Steves at RBC capital markets. Please go ahead.
Hey, guys actually my question I wanted to focused on the end markets like break or do you guys gave a historically you guys provided some some kind of long term targets and looks like mobile. This is clearly declining welcome everyone to doing a lot better.
Turning where are you guys, who provide enough to where you guys think it's going to happen with your markets in terms of.
Her home and mobile and kind of walking us through what kind of what the growth rate should look like.
Yeah, I think you know we.
We sort of held off trying to get particularly long term guidance in terms of the markets themselves because they've been I think we've found to be quite unpredictable, particularly mobile.
And.
You know I think we still have a great deal of confidence in our automotive and home business and so I think we could get comfortable but I think mobile as just than the difficult one.
I think will you have to look at our forecast I think in totality and again there's a.
Avalanche or a ton of information available in the us for that sort of lays out a longer term view of the business itself, but not with the type of breakout you're looking for yeah, Mitch I would I would add maybe two or three things to that you know I think is do you think longer term there are some new technology and and opportunity.
Cycles coming in automotive show you know, we've previously said that being in a low double digits for automotive over over a period of time is something we think that's achievable.
Home given its maturity.
You know is probably more of a single digit you know grower.
But again, you know as you see new programs like IMAX and other other activities I think you'll see that skew.
More towards mid to upper single digits, depending on the period.
In the last point I'd make and is this is really important we talk today about it and machine learning initiative.
That's a whole different animal as that ramps up because you're talking about much larger ASP age for a combined hardware software solution that has application first in home and then later across a range of markets and obviously post combination with Tivo, we'll have a a much broader stack technology will be offering.
And into the home space, which will meaningfully potentially change.
You know, our thoughts and guidance around what what growth rates and opportunities look like.
Gotcha and then in terms of the operating expense I mean, it sounds like you guys have to increase that it gets exactly I couldn't hear R&D side as an issue there just trying to understand what.
Well what segment should go up and twice.
Yeah, we the comments on the call here I noted, we would work on keeping the expense level.
From 29 team to the extent that we make any investments they would be on the R&D side than primarily focused I think on on new initiatives, but.
Given that we're heading toward a merger makes sense for us to keep things level phenomena.
Okay understood. Thank you.
Right well take our next question from Richard Shannon of Craig Hallum. Please go ahead.
Hi, guys. Thanks for taking my questions as well I'm going to follow up on the Oh questions earlier on the 2020 outlook.
Part of my questions asked here about but bridging kind of high next year it sounds like you're I.
I think it's a kind of a net add or for this year and they didn't want to touch on some of the other puts and takes here and they had a couple of at least one license fee from the fourth quarter. One if you could give us any sense of scale of of how material. Those contributions could be this year and then a follow up on a couple of points as well.
Oh, well it is we announced with a transaction in the fourth quarter. It's a one time arrangement. So it's not going to have an impact going into 2020.
Okay.
And Robert I think in response to the last question you're talking to you you mentioned some other deals which you had good line of sight on as well I get that came or if they were in the IP and products side and if you can give us a sensitive linear other is there any real scale, there or they just want to.
If they get it will help and bridging between last year in your guidance for this year.
Yeah, the the increase.
For 2020, I think that you would that's going to have the most impact is on the IP licensing side. So again as I mentioned earlier it really is an impact from SK hynix.
And then.
New IP licensing for which we have very high confidence in this year and we are.
So we've learned over time to be very cautious about providing guidance that as is has too much risk in it. So we've de risked our guidance range as best we can.
Worth, noting also that we do have a growth in the product licensing business.
I really across all the categories and so that's that's another contributor the 2020.
Numbers.
Okay and my last question on that on the topic as to what degree as they're gonna be any noticeable contribution either from the.
Bonding technology, the intended monitoring and other new initiatives really haven't generated much today.
Hi.
I think bonding is actually represented really by SK Hynix deal. So we have I think some fairly significant contributions from that initiative.
And then in cabin monitoring we're expecting that to ship initially in the second half of the year.
And then I think the same could be said for a connected radio which also was also a second half ship. So we start to see the benefit from some of these longer term initiatives and the latter half of this year, which will set us up very nicely for future growth.
Okay. That's helpful. Thanks, maybe a two other quick question I'll jump at a line here its interesting that of your three big licensees in the IP side had its really difficult long process going to litigation with Samsung and it high next Pembina relations here well before the term of their deal expired, maybe John if you can.
I kind of help us understand what was a difference between these two and and the how do you expect to you know future IP license deals.
To go based on what you've seen between these two.
Well I think to a large extent it has a lot to do with surface dancing and where people are under business I think there's broad recognition that our hybrid bonding technology is.
You know kind of foundational and best in class to enable some of what people are trying to do and you know in memory and ultimately and and.
In treating stack that she's been so I think you can attribute a you know part of the discussion you know as it relates to some of the license that we both entered into and will.
To that interest and you know getting access to know how and IP that we have its that's really critical to making that happen.
And so I think depending on who the customer is in their respective Roadmaps I think in some cases, you know we're seeing a tremendously more interest and hybrid bonding certainly in places like memory and.
And you don't outside image sensors, whether it be RF or or elsewhere.
And we fully expect that to continue in places, where we're more talking about legacy IP or legacy technologies that are better known and understood on I think it you know it it may continue to be.
Something that that occasionally requires litigation and or fairly program contracted discussion before you get to.
Reasonable licensing you know outcomes.
Okay. Thank sure that protected John I'm going to ask one more question you jump at a line here.
In your prepared remarks, you talked about.
Your your thought process on the people acquisition and appreciate the detail there maybe if you can give us a sense of what you're hearing from investors. Since you announced this in late December and part of the reason why ask Jon as we've seen the stock prices from both participants in this central acquisition come down here in a reasonably good market, there's clearly some.
The difference between your views in what you're hearing from others. Maybe you could highlight a couple of things that you think are the biggest misperceptions the steel.
Well I think first and foremost I think there as it did it has been a big information gap around.
Just how the the businesses were expected to perform and I think you know part of the importance of today is that no. We've both been able to give 2020 guidance.
And then secondarily I think in the course of is one looks at the proxy.
And we.
Share information about how we go think about our respective businesses overtime I think one of the things that will show through that maybe isn't completely well understood.
He is.
Really the benefits of size and scale and profitability as further optimized in the under the IP business and product business and now we believe we can take these businesses to you know very successful outcomes is independent companies. So I think.
Perhaps the information gap had a lot to do I think.
You know naturally there there are concerns or maybe from one set of investors are another depending on who they are invested in you know about together business, but you know our belief after a ton of diligence and a lot of discussion as we think about the best way to shut up and create value for the respective IP business and the product.
Business is through this combination and I think because the information gets out there in a chance to talk now more specifically and openly about how we drive that value.
We believe that.
It'll be very value enhancing value, creating for a for all of our shareholders.
Okay, well, thanks for that perspective, and thank you for late in the SMB questions a tough for me.
Thanks, Richard Thank you.
It appears to be no further questions.
Now I'd like to turn conference Dr., John for any additional or closing remarks. Please go ahead.
Thanks, operator, and thanks, everyone for joining us on todays call.
We're excited about our progress on key initiatives across our business and most importantly about our pending transactions with tivo.
The business combination is highly complimentary addressed the strategic issues for both our product and IP businesses and sets the stage for significant value creation over time.
Forward to keeping you updated on our progress and look forward to an exciting and productive year ahead. This concludes todays call.
This now concludes todays call. Thank you for your participation you may now disconnect.
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