Q2 2020 Xperi Corp Earnings Call

[music].

Please standby.

Good day, ladies and gentlemen, thank you for standing by.

Welcome to the Expiries second quarter fiscal year 2020 earnings conference call. During today's presentation, all parties will be any listen only mode.

Following the presentation that called the open for questions to ask a question. Please saying what pressing star one at any time can be placed in the Q.

This call is being recorded Monday August 10th 2000, Tony.

I would now like turn the call over to Jay landfill, Vice President of Investor Relations for Experie Jay. Please go ahead.

Good afternoon, everyone. Thanks for joining us as we report our second quarter fiscal year 2020 financial results with me on the call today are John Kirchners, CEO and Robert Anderson CFO also on the call. It's in the air Armellino President of IP licensing who will be avail.

Well, along with John Robert to answer questions during the Q and a portion of the call.

Before we begin I'd 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 it.

The risk factor section in our SEC filings, including our most recent form 10-Q for more information on the risks and uncertainties that could cause our actual results to differ materially from what we discussed today, including but not limited to risks associated with the Tivo transaction, the development and launching new products and any.

Potential impact of the Corona virus. Please note that the company does not intend to update or alter these forward looking statements to reflect events or circumstances. The rising after this call.

Second we refer to certain non-GAAP financial measures, which exclude merger and acquisition related expenses integration and separation expenses acquired intangible asset amortization charges for acquired in process research and development stock based compensation expense realized gains or losses on equities.

Securities and gains or losses on debt extinguishment.

We have provided reconciliations of these non-GAAP measures the most directly comparable GAAP measures in the earnings release and on the Investor Relations section of our website. The recording of this conference call will be available on our Investor Relations website at Www Dot Experie Dotcom I'll now turn the call over to junction.

Thanks, Jerry and thanks, everyone for joining us.

Let me start by saying that this is an exciting time for a company. This is our first earnings call. Since we closed the merger between Experian Tivo then over the past few months, we've made tremendous progress toward unlocking the value of this transformative combination.

Including progress around our planned separation of the IP and product businesses.

These efforts involved working jointly to sell technology across our could one customer channels.

Advancing product roadmaps and leveraging our respective IP strange across the larger combine patent portfolio.

As part of these efforts, we're making significant progress towards executing on our forecasted expense synergies and remain highly confident in our ability to realize at least $50 million annualized cost synergies by the end of 21.

We also continue to successfully execute on our underlying business, including signing new licensing agreements in the IP and product businesses as well as making significant progress on outstanding litigation.

Well, it's still early in our transformation.

We've already validated many of the assumptions and benefits, we had expected going into the transaction.

And now have even greater conviction that the Experie Tivo combination will deliver significant long term value to our shareholders.

Together, we've added scale and diversification to our IP business.

We have an industry leading platform in our product business that enables us to deliver technology solutions in multiple end markets.

We believe we are well positioned to capitalize on the numerous growth opportunities ahead.

The key trends that involve the continued proliferation of entertainment content changes in the entertainment consumption trends at home in the car and on the go in a broader move towards artificial intelligence at the edge.

On the call today, I will share more detail about some of the opportunities we see for the new experience.

Cover some recent highlights and talk about our longer term roadmaps.

Robert will then walk you through how we plan to report going forward review the financials for the quarter.

But for the remainder of the year.

First award on Cobras 19.

I continue to be inspired by our employees and partners, who have diligently worked to keep our business operating at a high level. During these unprecedented times.

Covert 19 has added additional environmental stress to our processes and I want to thank our employees and partners for navigating so seamlessly and effectively around these disruptions.

Our primary focus continues to be ensuring the safety in wellbeing of our employees and thanks to their hard work, we continued to deliver innovative solutions for customers.

Well there are still some uncertainties around the impact of covert 19 on our end markets. We are encouraged that the estimated net impact on our combined business will be less than 10 per cent relative to the guidance provided at the beginning of the year.

Despite the impact of Cobot 19, we're highly confident in our business model and prospects over the near and longer term.

I'll now spent some time talking about our two business segments product and IP.

First in our product business.

The combination of Tivo and experience, we've gained significant scale and technology do.

Making our combined platform, even more relevant to one of the biggest consumer trends we see today.

The massive pollute proliferation of content, and how and where consumers are finding watching and enjoying entertainment.

We can now offer consumers are unique and seamless end to end entertainment experience from choice to consumption in the home in the car and on the go.

Additionally, through our combined solutions, we can offer Oems additional ways to monetize that consumption.

Moving forward, we will measure our business performance in the product segment in three categories consumer experience connected car and pay TV.

I'll walk through each of these categories key growth drivers and highlight some of the wins during Q2.

Our first category and product is consumer experience. This category includes all the audio imaging and ml based solutions for the home and mobile markets from Expiries portfolio, along with the DVR hardware streaming medidata and monetization solutions from T. those portfolio.

This category represents approximately 40% to 45% of our total combined company product revenue.

We expect it to grow this year, even with the headwinds of Cosan 19.

The key near term growth driver in this category is the Tivo stream solution.

During the quarter, we launched the stream for K product, which gives consumers one centralized place for searching browsing and creating watch lists across their favorite apps by integrating streaming video services and live TV.

It also includes the those content network Tivo, plus with more than 70 AD supported free channels.

Our primary focus right now for the Tivo stream is on expanding are installed footprint in customer engagement.

Which will fuel further fuel our monetization solutions our roadmap for footprint expansion includes three phases.

First phase as the stream for K hardware launch which occurred in May.

We're pleased to report that the stream for CAE is selling faster than any previous tivo hardware product.

The second phase of this footprint expansion will come from the launch of stream as an embedded search and discovery application for smart Tvs expected to arrive and products in late 2001 or early 2002.

In the third phase, we will deliver streams, a comprehensive smart TV platform.

Connecting content from all sources and leveraging our search and discovery of monetization tools to fully exploit the tivo content experience.

This is one of the merger related revenue synergies. We're most excited about as we unite the tivo stream product with experienced very strong OEM relationships and TV footprint.

Our teams have been working together on this roadmap and recognize the tremendous growth potential for an integrated solution.

Another growth driver in the near to midterm is IMAX enhanced.

Which brings a best in class entertainment experience to the home.

This program supports the continued penetration of our audio decoders and Tvs sound bars, and other home entertainment devices.

We now have 28 device brands six streaming services and three Hollywood Studios as part of the ecosystem.

And we expect to add more partners is entertainment consumption at home continues to increase.

In summary, we will not only be providing better ways to engage in consume content, but we will focus on enhancing the consumer experience through better audio and imaging presentation.

Our second category in product is the connected car, which represents approximately 10% to 15% of total combined revenue in the product segment.

This includes our HD radio automotive connected media and in cabin monitoring solutions.

Our focus here is on enhancing the in cabin automotive experience through highly personalized connected infotainment safety solutions for the global automotive market.

We are building an ecosystem that revolutionizes the in car entertainment experience for consumers and creates recurring revenue opportunities for Experie car manufacturers and content owners.

There are three primary growth drivers in this category.

The first growth driver is continued penetration of our HD radio technology, which is focused on entertainment and safety applications, including our digital broadcast in the North America, New HD channels and emergency alerts.

During the quarter HD radio launched on six New 2020 car models in North America.

While the auto market is being impacted by cobot 19 in the near term, we expect the category to return to growth next year.

The second major growth driver in the connected car category as our global automotive connected tedious solution, which includes connected radio coupled with the Tivo music library and preference engine.

This represents a global solution that enables a fully integrated audio entertainment platform with personalized discovery across local radio digital music and podcast.

Our third growth driver in the connected car categories are in cabin monitoring solutions, which includes both driver and occupancy monitoring solutions focused on the safety of drivers and passengers.

After securing a major European automaker when late last year, we continue to see customer interest in our solutions grow across major automakers in tier one suppliers.

We've also released the latest version of our occupancy monitoring system suite, which includes child see protection occupant detection motion detection and passenger authentication.

The third category and product is tivos pay TV business, which represents about 45% to 50% of total combined revenue in the product segment.

This category is comprised of Tivo is classic guides Tivo DVR and its next generation end to end platform, which consists of our latest user interface the user experience for and our IP TV cloud services.

As the trend towards cord cutting continues our focus in this category is on upgrading or service offerings with LTT content additions and enhancing our industry, leading personal content discovery solutions that make it easy to find watching enjoyed content across all content sources.

To that end during the quarter, we signed a new conversion agreement with a regional us cable television provider.

This now makes a total of 12 providers using this solution.

Importantly, this quarter churn of subscribers using our solutions was less than 2%.

Significantly lower than the pay TV industry average afford a 5%.

This is consistent with our own to end user research, which shows that households, with Tivos personalized discovery invoice are more engaged they watch more content insurance significantly less than other pay TV households.

As we think about the pay TV category over the long term longer term, we expected to remain an important contributor to overall revenue while experiencing a modest slow decline in the near to midterm.

However, it remains strategically important alongside our growing streaming footprint as it provides us with one of the largest video consumption consumer ecosystems.

This ecosystem gives us insight into consumer habits and allows us a unique window into the household to develop new and innovative solutions with delight, our customers and drive real value for OEM pay TV and content partners.

Lastly, with respect to a newer initiative with came out of stuff. This year. So majority owned subsidiary perceive continues with its groundbreaking progress on its new edge inference platform.

This platform Leverages, our deep experience in semiconductors, and novel research and efficient machine learning, while extending the value of our imaging and audio solutions in both existing and new markets.

Perceive launched in announced its ergo chip at the end of March to very strong market media and investor reception.

Ergo brings data center level machine learning to edge devices, allowing them to deliver the smart features consumers crave without the privacy concerns of today's cloud based solutions.

Advanced features like video and audio object detection face and voice recognition and even speech can be simultaneously enabled by ergo delighting customers, while safeguarding their privacy.

By using just tens of Milliwatts perceive is making low power edge devices, a lot smarter as well as more secure.

We remain actively engage with leading partners in the home security space and expect to see that ship the integrated into products shipping and early 21.

Moving onto the IP licensing business, where there are three key high level takeaways.

First combining our IP business positions us to be one of the largest public standalone IP licensing companies in the world.

With a total company portfolio of more than 11000 issued patents and pending applications.

We have a strong base of innovations that will help us continue to drive meaningful revenue and significant cash flow well into the future.

Second we have a well established track record of successfully licensing our IP.

Individually each of our media and semiconductor businesses were among the most successful licensing companies over the past few decades.

Combined we are even stronger.

Specifically or IP business as a generated in excess of $8 billion and licensing revenue over the past 20 years.

There are very few IP companies in the world that have achieved that level of licensing success.

Importantly, we generated consistent IP revenue through successfully licensing across technological and business evolution.

Across multiple industries and through numerous renewal cycles.

By strategically refreshing our patent portfolios through organic R&D and key acquisitions, we've been able to continually anticipate and meet the evolving needs of our customers and end markets.

Third one of the biggest benefits of the transaction is that we now have a more stable and diversified foundation for IP business going forward.

This is in contrast to the more episodic nature of experience historical semiconductor IP licensing business over the past five years.

We will no longer be disclosing billings as we believe revenue as a more appropriate metric for our combined larger business.

While the impact of this change in approach on the semi IP business may be significant over comparable periods as revenue will fluctuate meaningfully based on the pipeline and timing of new deals.

The combined IP business will be much less impacted.

For example, the current annual revenue for the media IP business alone is approximately $300 million.

This is similar to the average annual revenue generated by the core of this business over the last decade.

With many long term and significant fixed fee licenses in place we expect the media IP business to continue to be the strong foundation upon which we intend to build a larger and more successful IP platform and media semiconductors and beyond.

Within the IP business. We believe there are a number of meaningful vectors for growth each of which I'll walk you through in more detail.

First while we have extensive penetration in the North America pay TV market.

There are a number of significant opportunities remaining.

We currently have nearly all of the top traditional us pay TV providers under license and we continue to regularly review and expand these agreements.

For example in the last few months, we've already concluded two important license agreements in this space recently renewed and expanded our IP licensing agreement with horizon.

One of the top five us pay TV providers for its fire TV service.

We also recently announced the expansion and extension of our licensing relationship with Konsko, one of the leading suppliers to the North America pay TV market.

The largest unlicensed us pay TV providers Comcast.

On that front, we're very pleased to report that in our most recent ITC case, we received a favorable initial determination.

The judge ruled that Comcast X one platform infringes two of our key patents known as the five to eight and 855 fountains and recommended the issuance of a limited exclusion order and a cease and desist order.

The patents at issue in the order cover key and widely used innovations generally relating to multi room DVR and communication between multiple set top boxes using milka technology.

This is now our third favorable decision at the ITC against Comcast and we believe this decision is particularly important in the context of our ongoing dispute.

First this decision builds off the previous wins, we've had at the ITC. The first of which has already been upheld through all appeal options.

Second both of these patents have significant remaining terms the last of which extends through 2028.

Third the nature of the innovations covered by these patents are integral to today's pay TV systems.

These favorable decisions represent positive and key milestones in our ongoing litigation.

Our ultimate goal remains to ensure that we receive fair value for our and for our innovations through a commercial agreement with Comcast, allowing for the ongoing use of our patented technology just as we've done broadly with nearly all the other major us pay TV providers.

The latest initial determination is now subject to review by the commissioners at the ITC and a final determination is currently expected in late November.

In addition to Comcast in US. We're also focused on the remaining on license pay TV operators in Canada, which represent additional upside for IP business.

Our second growth opportunity is a new media.

Already have a well established licensing business outside of the traditional pay TV market with agreements in place with many of the leading the media providers, including companies that provide RTT and other related video streaming services.

These providers are becoming more prominent as content is increasingly consumed through their services.

We continue to pursue these opportunities and in Q2 completed a new agreement with another leading social media platform.

Our third such agreement in the social media space in the last year.

And our third growth opportunity in the semiconductor markets, our direct and hybrid bonding technologies and IP are gaining momentum, particularly in image sensors stack DRAM and Threed NAND applications.

This year, we've begun to see traction in this area with the signing of SK Hynix, the second largest memory manufacturer in the world.

In Q1.

In Q2, we announced the tower semiconductor a global leader in semiconductor foundry solutions also licensed or Zibond to deviate Dbi technologies for a range of applications.

These three growth opportunities represent a pipeline and the lower hundreds of millions of dollars in potential incremental annual revenue.

While the teams are actively pursuing each of these growth areas as is typical on the IP licensing business. The timeline for successfully conclude in each of these can be uncertain.

Overall, our IP business generates strong recurring cash flow and has significant revenue already contracted through 2025.

We believe the combination of experian Tivo as licensing platforms.

Brings beneficial scale stability and diversification that will lead to significant ongoing innovation and patent creation better licensing outcomes greater cash flow generation and improved visibility over the long term we.

We believe that the company is positioned well to expand and grow our IP licensing platform into new markets over time.

Lastly, I want to touch on the topic of capital allocation as a new combined business our priority remains continuing to invest efficiently for the long term growth of the business.

Our new Board recently reviewed the company's capital allocation policy and established a target to return approximately 50% of free cash flow to stockholders consistent with the company's history.

Additionally, the board determined to take a more balanced approach to capital allocation to provide greater flexibility and enhance our ability to drive shareholder value Robert will provide further details in the financial section.

Robert.

Thanks, John.

As noted earlier, we are pleased with the company's operating performance and financial results for the second quarter.

With that we'll be discussing in more detail our results highlight the resilience of our business model. During these unique in challenging times.

Going into the quarter's results, let me note that as a result of our combination with key though.

You are making some changes to the way, we measure and categorize our business performance.

First as John mentioned, the combined company will now focus on revenue as opposed to billings to describe the business performance.

While the impact of assay six so six will continue to cause lumpiness to revenue from the upfront recognition.

Hi, conductor based IP licensing deals.

Along the timing differences between revenue and operating cash flow.

On a relative basis. These differences are expected to be less meaningful for the combined company going forward.

Notably Tivos IP licensing business does not have the dynamics of Expiries legacy IP licensing business led to the previous use of billings as a business measure.

Our financial outlook, while also changed to providing revenue as opposed to billings.

Second we are making some changes to the expense categorization of the combined company.

Most notably both depreciation expense and litigation expense will be more visible as they are reported a separate line items on the income statement.

Previously experienced depreciation expense was embedded in both R&D and SDMA.

Hi, guys litigation expense was embedded in cost of goods sold.

Hey, guys can't related expense, which is primarily for patent applications and maintenance is being moved it from cost of goods sold mdna into R&D, consisting with experienced prior treatment.

These changes will impact expense category compare ability to our predecessor companies.

Let me now proceed to the financial results for the second quarter.

Legacy experienced second quarter billings for $93.4 million.

Above the high end of our guide at 85 to 90 million due to the timing and size of IP licensing royalty reports in the quarter.

Revenue for the second quarter, including one month of Tivo results was $137.6 million.

Including all three months of Tivo.

Adding back and $1.7 million impact to revenue from purchase accounting.

The combined revenue would have been 234.8 million.

Down 70% from the 251.3 million.

The Tivo and exterior reported in the second quarter of 29 team on a combined basis.

Our product business. When you include all three months of Tivo generated $114.7 million of revenue for the quarter.

Down 22% from 29 team.

In reflecting year over year unit declines in the connected car consumer experience and pay TV markets.

This decline is largely the result of covered nineteens impact to our end markets and as within our expectations. Since revenue reflects the activity within the second quarter as opposed to a quarter in arrears that occurred on a billings basis.

We expect these markets to recover the timing remains uncertain.

All righty business. When you include all three months of Tivo generated $118.5 million of revenues for the quarter.

This reflects a 13% increase over the prior year on a combined basis.

Primarily by the recent agreement with SK Hynix somewhat offset by a one time catch up payment for Tivo that occurred in the second quarter of 29 tier.

Our total operating expense for the quarter.

Which included one month of Tivo results.

As a $155.4 million on a GAAP basis.

82.7 million in on a non-GAAP basis.

Moving to the balance sheet, we finished the quarter was $200 million and cash cash equivalents and investments.

In connection with the closing of the merger on June Onest, we entered into a new term b loan facility.

Raise $1.5 billion.

Was used to pay down exactitude existing term b loans for Experie of 344 million.

And for Tivo of 700, some $35 million, including a prepayment penalty on T. those.

The new term loans at the tenor of five years and effective interest rate, including the amortization of debt issuance costs at approximately 4.8%.

We ended the quarter with a 108 million basic shares outstanding reflecting the share issuance associated with the merger.

Operating cash flow for the quarter was $34.6 million, excluding the two months of cash flows from tivo in the quarter.

On May 27.

Legacy exterior paid stock holders quarterly cash dividend of 20 cents per share of common stock.

As John noted earlier following the merger.

X areas New board reviewed the company's capital allocation policy has experienced tivo each had their own approaches to capital allocation.

The board established a target to return approximately 50% of free cash flow to stockholders consistent with historical levels.

The board also determine the taken more balanced approach to capital allocation, providing for increased stock buybacks and debt paydown relative to cash dividends.

On June 12, the board authorized authorized a stock repurchase program.

Fighting for the repurchase of up to $150 million of the company's common stock.

During the quarter the company repurchased 1.1 million shares of its common stock.

At an average crisis 13 92.

For a total of $15 million.

And on July 29 of the board declared a dividend its five cents per share payable on September 20 shirt.

Let me now provide some context for the remainder of the fiscal year.

These are the disruptions caused by coated 19.

Dynamics of our end markets remain uncertain at this time, both in terms of impact and duration.

For instance, our connected car market appears to be impacted in the 20% to 30% range for the year.

And also market research indicates TV unit shipments are expected to decline by approximately 5% the share.

Despite these uncertainties. We believe it is important to provide investors with the second half outlook for the newly combined company.

Based on the best information, we have at present.

As I mentioned earlier.

Thanks for would be guiding on revenue as opposed to going.

When transitioning from billings to revenue for legacy experience is important to understand the experience semiconductor IP licensing business is forecasted to have billings that are approximately $70 million higher than revenue in 2020.

Due to any impact to pay us see six six.

This differences due to fixed fee semiconductor IP agreements. The revenue was recognized in prior periods, but continues to be build in 2020.

For the second half of 2020.

We currently expect revenue to be between Threeninety confer $110 million.

Let me provide some context to the overall revenue outlook.

If one adds to 511 million of first half revenue from both companies.

Excluding any impact from purchase accounting.

Our annual revenue outlook on a fully combined basis is between 901 $921 million.

This translates to the combined outlook being approximately 8% to 10% below the guidance given by each company in February.

This difference is primarily attributable to market disruption from coated 19.

Since the original guidance ranges were provided before the business impact of the pandemic was widely understood.

When comparing this full year combined revenue outlook to the annual guidance, the Tivo and Experie each provided early this year.

One must first make a few adjustments in comparability.

For reference please see slide 22 in the Q2 2020 investor deck.

First.

In February Experie guided the 2020 year on billings rather than revenue.

The midpoint of $410 million Tivo guided on 2020 revenue at a midpoint of 670 million.

On a combined basis.

Billings and revenue this amounts to $1.08 billion.

This total must be reduced by $77 million to account for a guidance change in mix very billings to revenue of $70 million.

Purchase accounting adjustment of 7 million.

Yes on a comparable combined revenue basis, the original annual outlook at the midpoint, but it can just over $1 billion.

The remaining difference is due to the previously mentioned covered 19 impact.

We expect cost of goods sold for the second half to be between $70 million to $75 million an increase from the first half due primarily to the rollout of the stream for K product.

GAAP operating expense for the second half of the year is expected to be between 380 $395 million.

And a non-GAAP operating expenses are expected to be between 200 and clarity and $245 million.

Please refer to our earnings release for a reconciliation between GAAP and non-GAAP expenses.

We expect interest expense between 26 and 27 million.

Other income of approximately 2 million.

Cash taxes between 20 and $22 million.

Also excluding additional share repurchases, we expect our basic number of shares outstanding to be 109 million.

Fully diluted number of shares on a non-GAAP basis to be 113 million.

As we take a step back and think about the entire year.

Topline is now estimated to be 8% to 10%.

Down.

Against our combined pre kogut out.

Notably on a combined basis, when including the first five months of T., though.

So currently expect operating cash flow to be in the range of $220 million.

Excluding acquisition merger and separate relate separation related costs of approximately $50 million.

Combined capital expense is expected to be approximately $20 million for the year.

These expected results coupled with a very strong balance sheet, where we have approximately $200 million in cash and investments.

And thats well for the future.

That concludes our prepared remarks.

Now open the call to your questions.

Thank you he'd like to ask a question you're seeing more pressing star wondering your telephone keypad. If you are using a speaker phone. Please make sure that you'd be function is turned off to like your signal to reach our equipment a voice pump wonderful mine will indicate what's your line has been open.

That is star one if you'd like to ask a question.

And we'll take our first question from Eric Wold with.

The Riley. Please go ahead.

Thank you good afternoon.

A couple of questions I guess one.

You've reached the John you talked about the.

If you decision that came out.

Last week initial determination.

I know that all three of the disputes followed the ITC were initiated prior to.

The merger, but is there way to frame the importance.

To the industry.

In general the patents in the third as you versus being a first too I know Comcast found a way to kind of.

Work around the original patterns room features is that something thats that thats feasible here with with the patents cover in the third.

But they're growing.

Yes, maybe its past Eric sense, some areas here to have him address it since he's got the deep history.

Hi, Eric I think were as we mentioned very pleased with the I'd, we got in our third ITC case.

As you mentioned, we had success than the previous decision.

As we talked a little bit about the technology. These patents cover in the third I'd, we do think they're pretty integral to the pay television business.

You mentioned one of them covers hold ROE multi room DVR. The other one covers communication between set top boxes, using the Voca technology and I think if you looked at how the pay television systems of today's consumers are deployed on these are things that we think are not only particularly valuable, but particularly well deployed.

The system.

Thank you and then.

Prior to the merger wouldn't when people just down one company you're one of their.

Any key growth areas is coming from the does the stream for key product that was launching now do you kind of get your hands and it's a little bit you're going to work into the integration.

Help us understand how youre kind of taking about you're getting that part to stand down gain traction whats say no fairly competitive market.

And is that something you'll be reporting metrics for separately in terms of you described as revenue per subscriber or is that just can you baked into large category.

Fair questions I think first we're very pleased with how the hardware has been selling reprice that on an introductory basis that.

Just under $50 and.

I think we've gotten very very strong reviews from reviewers on the product.

Our content centric approach to.

How we organized content, we think is very consumer friendly and very unique.

I think over time.

That is over the next few quarters.

We expect there to be a pretty significant ramp and the and the volumes.

Pushing through to consumers and as we.

Establish that footprint further build it I think.

We will then be it a position to perhaps talk more meaningfully about how the monetization picture looks but what is important is that you know it is about footprint because with footprint you can begin to monetize engagement.

That engagement has real value year over year, and so I think we see the we see the stream.

Product as you know is really kind of launching a new chapter.

In the Tivo history, we also believe that with.

With.

Sometime in the knowledge and relationships that the experience legacy team have into TV space that this also serves as just an opening act in a broader move towards embedded.

Applications and support for TV is directly which will open up a much wider base of a footprint.

Glenn allows you to further monetize that user engagement and that broader audience successfully so.

In short I think we're very very pleased where we've we've got a lot going there and I think overtime. It will be able to talk more directly about some of the metrics in and around it.

Perfect and then just final question for me.

Robert over the the 72 to 112 million estimated to be making them back for the year.

How much of that was in the first half versus the second half.

I'd say, it's probably weighted more toward the second half from given that much of that that shutdown, particularly from automotive didn't occur until sort of late in the first quarter.

If you looked at overall, we went to its primarily in the second half, but I think we'll we'll probably see most of the debt.

In automotive during the second quarter, because things were shut down there that started to increase the manufacturing. So I would I'd say, it's weighted a little bit more to the second half but.

Not substantially.

Perfect. Thank you guys.

You're welcome to.

Thank you I hate to go next question from Richard Shannon with Craig Hallum.

Hi, guys. Thanks for taking my questions as well.

Maybe I'll follow up the last question by asking a slightly different way here in terms of the coke covert impact of 8% to 10% year I apologize if you've delineated. This in some way in the prepared remarks, but how much of this is coming from tivo versus the expiries side any way to delineate those.

And it's a good question.

I'm starting to try to look at the business on a combined basis, so I'm not necessarily thinking in those terms.

I think it given that the impact is is centered on.

Automotive in particular is a challenged area, which I mentioned in his remarks, that's that's a traditional experie legacy.

Business.

And then.

Just on consumer electronics, that's where we're also seeing some of the challenges. So I'd say, it's more weighted toward the legacy expiries side as opposed to Tivo.

I think both businesses have seen an impact.

From covered 19.

Okay that is helpful.

Let's see here I think you talked about its kind of a tactical question are you talked about some upside to expiries billings outcome versus your original guidance here I guess given the a the automotive difficulties here you just mentioned, what where was the upside from Missouri license that it came through billings or can you help me understand that upsides.

I'm not calling at an automotives.

Something that was unique in automotive I'm not.

Totally clear, what you're referring to Richard.

But I guess I guess, you're suggesting that the automotive is being impacted by Kobin, which makes sense here yet the expiries side had a upside to the double each region guidance I'm wondering what they keep them.

To that.

Hi, this might be this might be more on the IP side as opposed to on debt.

Products side.

Yeah I.

I think if we're talking about billings first revenue that's almost entirely within the difference for the year is almost entirely within IP theres very little difference in the product side.

So if we say.

The numbers I gave on the call where.

On the Expiries side Theres about a $70 million difference for billings are higher than revenue during 2020, and that's almost entirely due to IP.

For the semiconductor IP I should say.

Okay does that my follow up.

Answers a slightly different question I also had but maybe I'll follow up.

But later on that one just to clarify the look better.

Two more questions over the next one does related to the Tivo and I'm going up but you're the nomenclature using that kind of your content and media business a licensing some of the social media market. There you talked to us talk a little bit about that in the past.

Seems like very exciting area too should just be getting into how would you clarifier or think about the total markets you've been able to license so far and I know you kind of you that somewhat expansionary. So maybe you could describe how do you believe how you view that and then how much of that market of the license to date.

This is samir I'll take that I think as we mentioned.

We've got a well established licensing program outside the traditional pay TV business and if you think about that that probably has a couple of different components.

Theres the traditional LCT streaming and video streaming service company, but then you also have a number of social media companies, where video is as the primary thing that they're doing that is increasingly becoming more and more important to their services and I think what you've seen over the last year or so in the media life would be.

Side, as we've announced a number of agreements with some of the leading social media companies, We announced this last quarter our third in the last year and we didn't think thats a growing at an important area.

Okay. So there could you characterize that as you just kind of getting started in terms of licensing that potential or are we well underway. I mean I don't know how you are you think of three of them in the in that greater context.

I think generally where.

We think we're we've got a good base and the new media area, which includes social but we do see a fair amount of upside in that area relative to where we've had a longer more established program and the traditional pay TV space. We're pleased with the initial progress we've made by the excited about the upside we have as well.

Richard earlier initiatives maybe.

I would describe.

Okay.

That's helpful. John Thanks, My last question I'll jump out of line here.

The Tivo streams seems a very exciting initiative here and and I see the slides here I've been able to briefly absorb.

How should we think about.

Milestones for success as we go through phase two in phase three here is this agreements with smart TV vendors to get to embedded on there or what are the interim milestones should do you think about to judge your progress silver phase one phase two phase three here.

Those certainly will be the most visible once.

You know underneath the hood so to speak there will be efforts you know engineering importing.

The broader code said onto a different platforms that are relevant in the TV space, but that will certainly be less.

Likely less visible.

Sometimes those.

Agreements with chip vendors to become.

You know publicly known but but by and large we're already well into conversations with TV folks about or Roadmaps and I think as we said back in December.

As we articulated division for the combination.

Are we reached out to a number of our customers across our business and home and automotive and elsewhere and then we've got quite a quite a bit of positive feedback. So we are we're engaged in and around it and I think so stay tuned.

Okay fair enough to look forward to following up on that that's all my questions. Thank you.

Thank you.

Thank you we'll take our next question Mitch Steves with RBC capital markets.

Hi, guys. Thanks, taking my questions. So.

At the beginning to remarks, you kinda talks about how you're more excited about the Chivo deal and you believe that you're going to be on track or better with kind of a targets you have laid up or some of the internal target. You may have you maybe describe what where you're referring to there is that more revenue opportunities that cost savings just trying to understand your.

What speaking you guys more positive on the transaction now I've anywhere it before close.

Yeah, I think it's I think it's three things Mitch it is.

At our teams have come together and an incredibly positive and collaborative way.

Such that the extent of pre planning, we were able to get done before the transaction closed I would say is certainly above what youve normally expect for a transaction of this size and complexity, which is really enabled us to hit the ground running so first and foremost we had a whole bunch of metrics internally around integration steps and planning steps, we wanted to take an eye.

I think we have done extremely well against those internal measures.

Secondly from a revenue perspective, you know our.

Teams have come together you know one on day, one began selling his experience and began articulating broader roadmaps things like combining.

Mehta data.

Some of our automotive solutions. For example, you know are immediately you know.

Or immediately possible and so that we're very pleased with how well our or teams in the roadmaps of come together, which.

Is stimulating pretty significant conversations that I think overtime will bear out as contributing positively to the revenue synergies.

Targets, we have excuse me and then on the cost side. Similarly, we Oh, we came into the deal with.

With quite a bit of planning having been done such that we were able to start actually it on literally day you know the day after close.

And I think as we kind of look out to the end of the year.

You know, we're well on our way too to achieving you know many of the synergies that we are we talked about on an annualized basis I would argue with perhaps by.

Roughly year end will be you know more or less.

As basis, roughly 60% of the way you know two hours in our initial targets.

50 million put annualized synergies and we're continuing to work. So overall very pleased on all three men on all across all three different areas.

Got it ended the second what I had it just on the covert impact severance you've already got there in the slide I'm I'm worried a little bit less of what the number as a more worried about what exactly is causing the issue. So we for example of that 72 million. How much is you guys being forced to space out how much is.

So supply chain issues, just trying to understand what exactly is driving those costs. The weekend when I when the will start to open up a little bit more we can idea of what costs I will roll off as we get back to normal.

Yeah. This is Robert so.

You are familiar with experienced business, it's really a unit based.

Model, where we get paid for each unit that ships.

And so that the most dramatic impact as an automotive, which you talked about a little earlier, where.

We get paid as as a true HD radio technology in particular as the as the units shipped so may have a decline in volumes, that's where we're feeling it.

It's also the case and some of our end markets for home and mobile.

That's that's probably the at the main place there's.

Theres some impacts to kinda tivo side of the business less more on the product side than on the IP side.

So I think it when you take those in totality I'd say the way that's probably more on the legacy experie rather than.

Tivo per se, but where it's kind of feeling it across the end product markets.

Understood. Thank you.

Oh.

Thank you. Our final question comes from Matthew Galinko with Sidoti. Please go ahead.

Hey, Thanks for taking my questions.

I guess first one was on one we expect to start seeing.

And Kevin monitoring start.

Generate revenue for with I guess weather Cove it is.

I'm moving that out on in terms of your expectation on onstar interacting on revenue.

21 is that there's the short answer is when we expect to see some of the car model ship cobot hasn't had a.

You know a meaningful impact on some of the programs that but we've been working on you know over the past 12 18 months. So.

I do think you'll see it I.

I think you'll see it accelerate as you get out of 21 into 22 in you know and beyond but you'll see the first revenue at least as far as we understand the 21.

Okay, Great and then I guess similar question on for Steve You've got a self mode for a few months now how is the go to market then I guess and how it's been going from I guess demonstrations to try to generate commercial relationships there.

Well I would characterize the.

The broader discussions we've had since coming out of stealth is being super exciting very very intense with a number of players in different areas that touch on.

The need for potentially edge based solutions and that's you know with regard to security cameras as well as in other areas like.

PC and mobile as well as.

Other I or T application. So you know in short.

I would say the commercial interest and the discussions around that are going exceedingly well.

We've seen a little bit of movement, you know in and around the timing of some of these first home security real products, you know kind of slipping out of Q4 into Q1.

But in general as we look at a 21 you know what I think we feel very good about the progress, we're making and ultimately you're gonna see you know ergo the procedure show up on different products in that year and be accelerating probably towards the towards the back half.

[noise] count it alright, thank you.

Thanks, Matt.

Thank you and that does conclude today's conference.

I'd like to turn the conference back over to Mr. Kirschner for any additional closing remarks.

Thanks, operator, and thanks, everyone for joining todays call.

I couldn't be prouder of the team successful effort to close the transaction amidst a pandemic maintain important business momentum and preparing for an exciting future as we add scale and diversification to our IP and product platforms I.

I believe we're well positioned to deliver on our combined company revenue and cost synergies over time and very much the forward to updating you on our progress in the coming months. This concludes todays call.

Thank you and that does conclude todays conference call for your participation you may now disconnect.

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