Q3 2020 Xperi Holding Corp Earnings Call
Please stand by we're about.
Good day, ladies and gentlemen, thank you for standing by welcome to <unk>.
Third quarter fiscal year 2000, <unk> earnings conference call.
Today's presentation, all parties will be in listen only.
Following the presentation the call will be opened for questions. If you would like to join the question queue. Please press star one.
Thank you.
This call is being recorded today Monday November.
20.
I would now like to turn the call over to Gerry.
<unk> President of Investor Relations for Exterran. Please go ahead.
Good afternoon, everyone. Thanks for joining us as we report our third quarter fiscal year 2020 financial results.
Me on the call today are John Ford shirt, CEO, Robert Anderson CFO.
Also on the call, it's near our Levine President of IP licensing will be available on what John and Robert to answer questions very acuity portion of the call.
Before we begin I would like to provide you reminders first today's discussion contains forward looking statements that are predictions projections or other statements about future events that are based on management's current expectations and beliefs, and therefore are subject to risks uncertainties and changes in circumstances.
Please refer to the risk factor section in our FDIC filings, including our most recent form 10-Q for more information on the risks and uncertainties could cause our actual results to differ materially from what we discuss today.
Moving but not limited to risks associated with the Tivo transaction, the development and launch of new products and any potential impact of the krona virus. Please note that the company does not intend to update or alter the forward looking statements to reflect events or circumstances arising after this call.
Yes, we refer to certain non-GAAP financial measures, which exclude merger and acquisition related expenses integration and separation expenses.
Wired intangible asset amortization charges for acquired in process research and development stock based compensation expense realized gains or losses on equity securities gains or losses on debt extinguishment. We've provided reconciliations of these non-GAAP measures to the most directly comparable GAAP.
Measures in the earnings release and on the Investor Relations section of our website a recording of this conference call will be available on our Doctor Relations website at Www Dot exterior dotcom I'll now turn the call over to John Christner.
Thanks, Terry and thanks, everyone for joining us.
On the call today I'll provide a brief update on our integration progress walk you through our two business segments I put in product.
Let's turn it over to Robert to discuss our financials general improved outlook for the remainder of the year.
Before it begins I'd like to start with a brief word on Comcast.
By now you've likely seen the release that went out after the market today.
We have successfully concluded a long term watches and settled all outstanding litigation that Comcast one of the world's leading media and entertainment companies.
Just watch this underscores the relevance and value of our IP portfolio to all forms of video consumption and further establishes the long term and stable nature of our licensing programs within the media business.
And as a result of the license agreement you're.
We are raising our guidance for the remainder of the year.
This license agreement positively contributes to a higher expected annual revenue baseline for IP business of approximately $350 million starting in 2021.
We will provide more details on the license and what it means for Sperry later in this call.
For today's call all year over year comparisons will refer to past periods on a fully combined basis for experienced people.
Onto the quarter.
They are significant progress on various strategic initiatives during the quarter and delivered financial results in line with our original second half's expectations.
Revenue in Q3 was $202.8 million down 6.2% year over year.
Operating cash flow for the quarter was $62.2 billion up from 45.1 million last year.
Importantly, adjusted free cash flow was $66.4 million versus 46.5 million a year ago.
During the quarter, we bought back 2.8 million shares.
Average price of $12.39 or just over 2.5% of our shares outstanding.
Our employees continue to navigate through the ongoing pandemic extremely well.
I'm exceptionally proud of you experienced team for their commitment towards our overarching goal to better develop and deliver technologies that enable extraordinary experiences in the home all the gold in the car.
Or in markets are beginning to show signs of recovery and while we are assuming some improvement in Q4, we remain cautious on the pace of recovery in 2021.
We are now five months Mark since it's very merge with T., though.
We've made substantial progress executing on our integration plans as well as you expected Q revenue and cost synergies.
We have already completed a full scale organizational redesign.
Along with our major employee programs, including compensation benefits and training and completed the architecture at high level design requirements for an optimized set of business applications and infrastructure.
By the end of the third quarter, which is our first full quarter as a combined company. We've already realized on a run rate basis about two thirds of the 50 million of annualized synergies, we committed to achieve by the end of 2021.
We remain highly confident in our ability to meet the synergy targets, we outlined and we look forward to look for further efficiencies beyond those choices.
On the revenue synergy side, we are now augmenting Dts is connected radio product she goes better data and personalized content discovery.
And are in early discussions with TV Oems with regards to the Tivo stream implementation.
Moving to the IP licensing business.
I'd be licensing revenue in Q3 was $80.3 million down 9% year over year that's.
As expected the decline was due to lower semiconductor revenue.
To be clear the third quarter numbers will be discussion do not include any impact from our license agreement with Comcast that was announced today.
Does that agreement was completed after the end of the quarter.
Given the importance of this resolution to our go forward I P business I want to walk you through the license agreement and what we believe should be the key takeaways.
First it's a ground up resolved all of the outstanding disputes between the companies and underscores the relevance and value of our patent portfolio.
Second the terms of the agreement are consistent with our well established licensing program for the pay TV market.
The overall length of the agreement extends for a total of 15 years dating back to the expiration of our prior agreement with Comcast to early 2016.
Providing coverage through early 2031. This license agreement supports our core pay TV licensing program rather than through the next decade.
Oh, we're pleased to have resolved our dispute with Comcast. So soon after the completion of our merger.
This agreement underscores our commitment to successfully licensing the leading companies in our core markets.
Even if called flux and protracted litigation becomes necessary to protect the value of our IP and to achieve long term value for our shareholders.
Finally, concluding this agreement with Comcast illustrates our ability to execute key renewals with our largest customers because the video market continues to experience significant technological and business evolution.
Importantly, we believe that resolving Comcast will have a positive impact on our ability to reach successful licensing outcomes across our business going forward.
In summary for IP business is better positioned than ever supported by long term agreements with leading companies that generate significant recurring cash flows well into the future.
Moving to our product business.
Product revenue for the quarter was $122.5 million down 4.2% versus 127.9 billion last year.
As a reminder, we break out our product business down into three categories consumer experience connected card pay TV.
In the consumer experience category revenue was $49 million up 2% year over year.
The growth was driven by sales of the Tivo stream for K, which offset declines in other parts of the home business.
Regarding the Tivo stream for K during the quarter, we grew our retail presence through Walmart and Amazon as well as adding broadband partner distribution through RCM.
People plus costs and expanded to include Pluto TV tubing.
Zhou, though and locales and now delivers a 144 core channels that up to 200 channels in major markets based on local availability.
Today consumer engagement has been strong and the product is delivering industry, leading search and discovery metrics for consumer satisfaction in time from search to watch in concert.
On the IMAX enhance fraud, we continued to expand the ecosystem and the strong momentum in China.
Leading streaming services 10 set and I ci or expanding IMAX to enhance content offerings and Chinese TV manufacturer higher sense, just announced the first domestic IMAX enhance fourk OLED TV.
In addition, Phillips announced the first IMAX enhance soundbar, bringing the total number of brands and the ecosystem to 19.
As a reminder, key long term growth drivers in the consumer experience category include sales and penetration of Tivo stream and the monetization of that platform growth of our IMAX enhance program and the launch of perceives ergo chip and follow on ships and future products.
Moving to the connected car category.
Revenue was $18.5 million down 5.8% year over year.
As expected the decline was driven by lower car production year over year due to the impact of COVID-19.
On the HD radio front, the EPS you see approved all digital and broadcasting this.
This is significant in that it builds on the existing broadcast standard for our technology and further encourages receiver manufacturers to incorporate HD radio.
During the quarter HD radio launched in North America on 14, 2020 car models.
We are seeing signs that the automotive market is starting to recover.
We expect to see a recovery of or HD radio shipments in line with the market trends. The latest car sales projections released this month predict around the 9% recovery and 2021.
On the connected radio front, we reached a significant milestone this quarter with the official launch of connected radio with dogs are age you need.
Connected radio watched in the Mercedes Benz S class New state of the art Mercedes Benz and user experience multimedia system, which is redefining in dash radio listening experience.
Spectacular to roll the platform out more broadly across their product line. This.
This is the first of many Oems that we expect to implement our connected radio platform.
The team has developed and delivered the most advanced next generation radio platform for automotive manufacturers connected radios global platform is available in 24000 cities 48 countries and 14 languages with content sourced from 76000 radio stations, all aggregated curated and personal.
Wise to create a rich in vehicle radio listening experience for its users.
Importantly by 2025, according to recent market forecasts, we expect the total addressable market for our automotive connected media platform will reach approximately 75 million units worldwide.
Lastly for in cabin monitor and we remain on track to deliver the first occupant monitoring solution to a major European brand in the second half of 2021.
To capture the opportunity in this market. We continued to add new features to our own US which includes advanced computer vision features such as generic object detection and body and gesture analytics.
Our current addressable market is roughly half of the 100 million do hundred million new cars sold each year globally.
With a focus on those countries or regions that have been early adopters of improves safety standards, such as Japan, North America and Europe.
Moving to the last category in our product business or pay TV revenue was $55.6 million down 6% sequentially.
During the quarter certain customers, including Liberty Latin America, Newco Metro <unk>, and RCN launched Nexgen Ti Vo IP TV platforms.
Our new IP TV platform provides an upgraded user experience and greater monetization potential than previous older generation pay TV solutions. However.
However, due to COVID-19 related restrictions the pace of households conversion to IP TV has been slower than originally expected.
Lastly, in our pursuit of startup we continue to engage with our lead customers and the interest level is increasing across potential PC mobile and enterprise customers several of which are evaluating our platform.
The Ergo chip, we're seeing favorable media coverage during the quarter in September perceive CEO, Steve type presented ergo, what the embedded vision summit, where a session was among the highest rated and attended at the conference.
With that I'll turn the call over to Robert to discuss our financials.
Robert.
Thanks, John.
Let me begin with financial results for the third quarter.
As noted earlier in order to provide more meaningful comparisons.
In discussing both non-GAAP and cash based numbers are curious are presented on a fully combined basis for the merged companies.
[laughter] every third quarter revenue was $202.8 million.
Which is on track with our original second half 2020 guidance.
GAAP operating expenses, including the cost of goods sold.
With $221.8 million.
GAAP operating expenses is significantly higher than the third quarter of last year due.
Due to our merger with Ti Vo.
On a non-GAAP basis, our total operating expenses, including Cogs was $153.1 million.
Down from 164 million a year ago on a fully combined basis.
Cost of goods sold those $33.8 million and.
<unk> increased by 5.5 million year over year anyway.
Due to increased hardware expenses the rollout of the stream.
Tivo stream core check.
Excluding Cogs non-GAAP operating expenses for the quarter was $119.3 million.
Down by 16.5 million or 12% year over year.
Due to lower personnel expenses.
Reduced litigation cost.
And lower outside spend.
From a synergy perspective.
As of the end of the quarter, we'd already realized approximately two thirds of the targeted annualized savings.
$50 million.
It was targeted by the end of 2021.
So not all of those savings will be reflected in this year's financial results.
After taxes paid in the quarter were $16.9 million.
This quarters cash taxes unusually high since included $5.8 million of cheetos withholding and eat taxes. They were occurred prior to the merger you have paid in Q3.
Isn't that total cash tax number for the third quarter.
Non-GAAP earnings per share was 19 cents.
If one excludes the 5.8 million of cash tax related to prior period Tivo liabilities.
Non-GAAP earnings per share would have been 24 cents.
We ended the quarter with 107.
<unk> 5 million basic shares outstanding.
During the quarter, we bought back 2.8 million shares of common stock at an average price of $12.39.
For a total of $35 million.
<unk> for the quarter, we had a $100 million of share repurchase authorization remaining.
Moving to the balance sheet, we finished the quarter with $203 million in cash and investments.
$3 million from the second quarter.
Okay sounds $13.1 million of our debt during the quarter.
And expect to make the significant pay down on our debt that was the result of the Comcast license.
Operating cash flow for the quarter was $62.2 million.
45.1 million a year ago on a fully combined basis.
Due to reduced operating spend and lower interest expense.
Our adjusted free cash flow for the quarter was $66.4 million.
Adjusted free cash flow reflects operating cash flow.
Adjusted for $1.1 million of property plant and equipment and 5.3 million of merger and separation related costs.
During the quarter Expiries paid.
Cash dividend of five cents per share of common stock.
Let me now provide an update on your second half outlook.
And the second half of 2020, we now expect revenue to be between 625 and $645 million.
Importantly, with Comcast now resolved the new baseline rapidly to our IP business beginning in 2021 will increase to approximately $350 million for the year.
Compared to figures discussed on our second quarter call approximately $300 million career.
Notably we continue to believe there's meaningful upside for our IP business from the three areas. We discussed last quarter include.
Including increased penetration and new media No T T.
There are many on license traditional pay TV subscribers in North America.
A new semiconductor business.
We now expect costs of goods sold for the second half to be between 73 and $76 million.
GAAP operating expenses for the second half of the year is now expected to be between 421.
$431 million.
Non-GAAP operating expenses is expected to be between 270, fives and $285 million.
The expense increase from prior guidance is primarily due to true up for variable compensation expenses tools from an improved outlook in Europe.
Please refer to our earnings release for a reconciliation between GAAP and non-GAAP expenses.
We expect interest expense to remain between $26.7 million.
Other income to increase to approximately 3 million.
And cash taxes to move between.
33 from $35 million.
Also due to recent share buybacks and we now expect a basic share number of shares outstanding in the second half to be 106 million.
And fully diluted shares on a non-GAAP basis to be 112 million.
Using the Midpoints of the updated guidance ranges.
We expect non-GAAP earnings per share in the second half of the 2020 to be approximately $2.
Additionally, we expect to generate between 335 and $355 million of adjusted free cash flow in the second half.
Which includes payments to be received in the fourth quarter relating to prior periods covered in the Comcast agreement.
That includes concludes our prepared remarks, let's now open the call to your questions.
Thank you if you'd like to ask a question on today's call. Once again that is star one.
Telephone keypad.
Voice on the phone line will indicate what your line is open. Please state your name and company before posing your question.
Take our first question caller. Please go ahead.
I called <unk>.
Thank you Hey, Eric Wold from B. Riley Securities you guys. Your me now.
Yes, yes, yes sure perfect perfect. So I guess a couple of questions on the and on the guidance. So obviously, congrats on getting Comcast and its been a slog for a number of years I guess.
When you talk about the consistent baseline IC revenue going up from 300 million to 350 after that likely that side.
Should we assume that 50 million or increase is on a fixed basis or is there is there potential variability in that number around round does subscribers.
The the terms of the agreement itself are confidential, so I can't really describe that the structure and how it's going to occur going forward.
Oh, I'm I'm, Fred I, just can't get into the specifics of the contract I think.
The increase I think we'll give you a feel for what we're looking at on an annual.
Got it.
Basis, so the difference between the 303 shifty.
Okay, that's fair.
Got it sorry.
I was just going to say, Eric the only thing I'd add is just that the.
The license was you know I think concluded on a consistent terms with our broader newest pay TV licensing program.
Okay.
So with that with the new threats to their base is there is there anything I know you talk about this.
License, you're hoping otherwise in discussions and renewals are there any significant renewals in that 350 number over the next.
Call it two to three years.
Hi, I think I can take a pass at that which as you know we have renewals every year and we've been very successful in actually achieving those renewals. So certainly there is some degree of that.
I'm not aware of any significant licenses if need be.
So the new turn into a period of time you can imagine.
Got it and then just final one for me, obviously, along along with that license yeah.
Assuming there can be a significant amount of savings on litigation spend.
What is the current plan with that litigation saving or is it.
To be recycled into.
There pursuits, although litigation then or is that also going to represent a nice you'd I've used in addition to the the upward move in a in license revenue.
Yeah. It's it's always tricky tried to forecast a litigation spend but I think for the to the extent that we don't spend on litigation that will slow down so we're not going to use it elsewhere.
Very helpful. Thank you guys.
Okay.
And we'll go ahead and take our next.
Question caller. Please go ahead.
Hi, guys Richard Shannon here can you hear me.
Yes definitely Richard.
Okay getting used to this new conferencing platform I wasn't sure if that was offered [laughter] [laughter], let's see here, maybe a couple for forever.
Robert start with on the number side, you kind of give us a thought process for Oh, you pay TV run rate next year, how should we think about your opex run rates are as well and that time frame and then also I want to get a sense of what you think the tax rate is while it kind of got a thought or kind of an estimate what you're going to get in the fourth quarter, but I guess it like a run rate freeze.
Sure so.
So I think for Capex next year, you know, we're still working through our plan. So it's it's early for us to be giving any kind of guidance will go normally provide lunch February.
I think you can expect that our operating spend would be down year over year.
Primarily due to synergy work that we're working on.
Yes going into next year, and we'll obviously be looking for operational savings just as we can.
In terms of tax.
It's I'm, hoping to provide a non-GAAP tax rate as we guide out through next year I.
I think if we're looking at it from a cash tax basis, you can figure out roughly 25% if were talking on a non-GAAP basis.
Well the federal give me at least a feel for us, but I'll I'll give more specifics as we do a proper guide out in February.
Okay [laughter] sure enough, let me jump over to the Tivo stream for Kate for John here.
Kinda laid out your phases of how you're expecting commercialization and Oh it sounds like phase one is going well here I guess I'm curious about phase two here and you just described which is getting the embedded applications smart TV and I think everyone. Good a good basis of progress I think by the end of next year. If I remember correctly can you give us an update John after five months of of.
In combination with people about how that's going when would you get a better sense of visibility of how all that those goals are or are going.
Well I think you know given given the nature of how some of the planning cycles go you know I would expect us to be you know.
Into the second quarter of next year, you know before.
Before we could likely to have a much better visibility on what's going to happen in the back half of 21 in general I would say, we're having you know I think good productive discussions on you know not only the you know the technical issues of porting.
According to cold stack into the embedded space, but also talking about how we can and can basically drive a platform. It looks a little bit different you know in terms of the overall ecosystem than whats out there currently for Tivo for TV manufacturers.
And so overall I would say you know progress as positive you know clearly early innings of Mrs agencies.
Approach, but you know the good news is that our contract or content centric content first approach to.
So did you actually you know I think is is just you know not only best class of getting very you know very very good feedback and I think there's a lot of.
Like the EPS.
Her face you know on their TV is.
Okay Fair enough I look forward to Keytruda updates on that one John I guess my last question is on a perceived.
You mentioned that they couldn't your freshly prepared remarks about suits and Oh listen some good engagement with a few different ecosystem PC mobile and it can move the other one was and I guess I thought. This was was thought of as being one more centered around or at least having some level focus on security and you did mention that I'm not sure. If it's a change in no change Annapolis.
Occasion focus or kind of diversified direction diversification and expansion of that or how should we think about that and then also can you give us a little sense of what you mean by site feedback when do we see a good announcements of customers that are shipping as an example.
Yeah, I think I think you're going to see things at this point given given some slight part of product shifts even in the core you know home security space as being you know in the in the second half of 21.
I don't think the beef the discussion a PC or mobile or enterprise really represents a departure from the initial focus what is really represents is incredible interest in demand across some of these other industries, where people are looking at what we're doing in terms of bringing.
Advanced neural network computing to the edge and saying you know we have applications for that.
Where you can just basically deliver datacenter class you know algorithms at very very low power. So you know the marketplace demand is kind of driving you know our diversification and war or expansion of engaging with these customers.
And I think there's a lot of evaluation going on.
Fortunately you know very positively so we need to remain focused to ensure obviously that were successful in the space that we.
Set out to two initially bring the product to market in security I think we are doing that but I think the good news is is that we're saying you know more interest you know at a faster rate than perhaps wage even expect just as recently as three to five months ago.
[laughter], that's a I think that's all for me. Thank you guys.
Thanks Richard.
Well go ahead and.
<unk>.
<unk>.
Please go ahead.
Hey, Thanks for taking my question just wanted to clarify one of the comments you have made there. So the increasing guidance effectively is entirely the Comcast agreement I'm just trying to understand if that's correct. If you guys basically were in line with everything else, excluding what you announced today.
Fundamental yes. It. It's just we were in line for the second half. So the primary changes contrast.
Okay got it and then secondly in terms of the length of this agreement I know you guys can't disclose the exact arrangements, but historically if you had a very long term agreement like this it is how quickly do you have the opportunity the same or are they usually broken merger.
No the the.
The agreement provides for you know what initial payment to deal with some prior periods and payments to be made over the course of the entire agreement.
Okay, and then can you guys disclose how far this goes back.
Well I mean, it goes back to go back there.
Okay.
Sorry, it basically picks up the license where it it expired in 2016.
And runs all the way through early.
Early 2031.
So 2016 till now the initial okay perfect and then just last one.
Oh in terms of the cost of the unless you got about two thirds there now.
Now that you've seen kind of the operation is tied together do you think that that synergy target needs to be increase in terms of like the long term target meeting two or three years out to probably do better than 50 million or or am I reading too much into that.
Yeah, It's a I think we're very sorry.
Sorry go ahead go ahead.
I was just going to say <unk>.
We we're obviously confident in that and make good progress on the 50 million, but our internal targets or are more aggressive than not so we will I expect we'll get past that but I don't want to promise that just Oh, let John go.
Yeah, I was just going to add that I think you know as as the markets evolve and as our business strategy further evolves I think.
We're always looking for ways to deliver you know a more efficient.
You know and the result, and so you know I think there will naturally be some opportunities will evolve as well because of externalities. In addition to the good work that our teams are are doing but the key is that we you know, we obviously need to to focus our investments have places to drive long term growth and I think we're very very keen and focused on doing that.
Okay. One last one just related this you.
He has been making a lot more about it we expect it off of that so now it seems like you guys had a chance to pay down your dad I guess why is that the plan a lot about whats going out like what would you do with the.
The extra money to get it they can't get it seemed like quite a bit of cash flow.
Yeah. Good question as well I mentioned on the call its our plan to pay down debt with the proceeds that were getting during Q4.
Related to the the Comcast agreement that that would be our plan well, obviously keep an eye on.
Stock and continue to buy as appropriate, but as you know.
I would be focused on debt pay down.
Okay understood. Thank you.
And we'll go ahead and take our next question from.
Hi, My question with BW S. financial please go ahead.
Hi, So first off I just wanted to ask you about the industry in Fourq. So what's the strategy behind that on the retail front are you guys were talking about the Walmart Amazon and does that change your cost compositions for the product for their hard work.
General.
I think this is Robert that the retail channel doesn't.
By definition change our cost composition and it.
It's a good it's just what we view as another avenue for for getting the product out in a more meaningful way to consumers.
We make we may have deals I think we were able to do.
To work for our distributors, but primarily the cost of the product stays the same.
And then but I think the one.
Sorry, I was just going to just add one thing so obviously from a mix perspective.
You know given given the nature of that product and how its priced you know it will have an impact on aggregate gross margins.
That scales, but the long term strategy is to move into an embedded software stack you know to to really drive the ultimate monetization around the that footprint.
I'm sorry go ahead.
All right and then the other question I had was on the licensing side, what kind of focus are you putting on the international side or did you have the opportunity obviously is much larger than domestic at this point. So it's a full paying attention there or are you looking at other product lines instead of licensing.
Are you referring to I'm sorry <unk>.
I'm, referring to license I guess.
But besides that patent.
Patent licensing or you're talking about product or software license and I'm sorry, Michael on your question.
Well, that's what I'm trying to ask is where what's your strategy going forward now that you have Comcast.
Are you looking at from a licensing of the <unk>.
Toxins are you looking at it from a product standpoint.
Okay. So I'll ask all all that Samir to touch on the IP a part of it in effect and I think overall you know we operate in a in a global marketplace, there's product licensing opportunities that exist around the world for people to take our user experience software or enhancement solutions.
You know it and there's obviously a business trajectory unto itself that relates to entertainment as well as it relates to things like safety you know in car in home and mobile but.
And those broad basic verticals and so we we do today actively do lots of business outside the United States will we will continue to do and see that as a genuine growth opportunity and certainly in the pay TV space. There's people were licensing IP TV solutions to other pay TV solutions to win.
In Latin America, and Europe and elsewhere.
That doesn't obviate however, the the opportunity that exists for people that may wish to use our intellectual property. They need they have licenses in order to you know to build either their own products or to use third party products and so I'll turn it over some there that tend to talk about that.
Yeah. Similarly on the IP side as John said, there is a worldwide opportunity for us and we're very pleased to have resolved Comcast because that was certainly the largest outstanding opportunity for us in the U.S., but we've talked about some international opportunities that were pursuing in parallel including areas like Canada or that was done like the business already but there are a handful of.
Opportunity there that we'll continue to try to resolve so international is the purpose for us probably starting with Canada, and then moving on it than others as well.
Okay.
I was asking about us if there was one specific area that you're focusing on those is either going to be the product side or the.
I I P side.
I think it's going to be both of the companies that are businesses that are strong in both sides of different customers will walk you through the thought of solutions that would have or want to develop their own lives that they cannot be lots and so we really let the customer decide and then are able to address that opportunity there.
Perspective of what their choices.
Okay. Thank you.
All right and we'll go ahead and keep our next question from Matt.
[noise] class [noise] you had.
[noise] I'm sorry.
I think if you could just.
Hi, guys can you hear me.
Yes.
All right. Thank you. So my question is on a high sense China.
I think you mentioned that's.
So I'm actually enhance deals for I guess, the arkon in China, but I'm curious if the scope of Dawson extendable into the North American market or why it sort of limited.
You know, it's not it's not unusual for us to start with you know certain domestic markets if their foreign manufacturers.
In terms of working with them to get something in the local market IMAX is a very strong brand in China. So that would be logical that they look to do that I think naturally we're yeah. We're in discussions with folks about bring.
Bringing you know the IMAX program to their particular brands in other markets in North America or Europe.
So I think I think this is just easier stages in a process of a further development and market validation, sometimes also impacted by content sources that availability or that tends to two you know influence or when people are inclined to embed your technologies.
But we're very fortunate and very pleased with the support of tenants that might you need a major content providers in China, which gives you know obviously domestic Chinese TV.
TV manufacturers plenty of reason to to support the program.
Cost action I guess can you.
Maybe I guess the follow up on that and.
Any notable or you know.
No anything.
In terms of development than that the North American market for an accident and style in the last two quarters are you know in terms of.
Hi, <unk>, it's a five cents trying to you know maybe what are the milestones we should be looking for it does say that U.S. market develop a little bit more.
Well I think you know it.
As you're typically building ecosystems looking looking for for signs around content expansion.
I would say in the last.
Couple of quarters, we got some very productive discussions that should further bear out as we get to 21 on the content front.
And also from a you know manufacturer support you know perspective seeing more major TV brands you get in the game in support.
Of the program and.
And then you know the <unk>.
The other thing to keep keep an eye on is is don't overlook the importance of the peripheral market growth funding things like sound bars and speakers.
And Avi receivers ultimately contribute positively to building an ecosystem of product.
In support of the program. So you know we are we continue to work at I think feedback remains good.
Obviously in a cold environment, not everything is moving as fast as you'd like it to but you know there's there's no sign that I'm aware of that would indicate that it's going anywhere other than you know forward and positive as we look on to the to the next couple of years or next couple of years.
Got you all right and not one one final question on the IP licensing business you do have a.
One of the large DRAM content that I think continues to be lapsed you know in the portfolio. So I'm curious if you could say whether there.
Any discussions going on or you know just given you know of fish for still you know in place for a 2021 split between the product on the IP business, how you're thinking about addressing a that company. Thanks.
Sure so.
We as you know or or out of license.
With micron.
We've been very very pleased that the market receptivity and continued focus on.
On hybrid bonding you know in three D. related technologies.
Suffice it to say that I think is a you know as the trends continue not only a memory button in logic and many of the other Sammy verticals.
I think you're going to see more adoption of this technology and it's going to end up being a strong contributor over the next you.
You know a roughly five seven years.
That said, we continue to engage all of our customers both existing and former.
And naturally.
Well I'm sure you know from our prior experience.
Sometimes the discussions you know take awhile measure provided both plenty of technical information and considering.
How licenses should be optimal structure, but at this point.
We haven't guided to any micron related revenue you know as we think about and we've said you know today for 21 and they wouldn't guide until we had direct line of sight, just it's been consistent with the New York or exterior practice.
And with the VIP segment, so stay tuned we yeah. We'll update you further in February when we get there based on you know the the state of play at that point.
All right. Thank you.
And that concludes today's question and answer session I'd like to turn the call back over to today's presenters for any additional or closing remarks.
Sure. Thanks, operator, and thanks, everyone for joining today's call I'm incredibly proud of our team's ability to navigate through these unprecedented times, we've made significant progress on executing on our key long term growth drivers, including expanding our tivo stream for K footprint launching connected radio with Mercedes Benz and entering into a loss.
Long term license agreement with Comcast I look forward to meeting with many of you virtually over the coming months I've heard of this concludes todays call. Thank you.
Thank you once again this conclude today's conference. We do appreciate your participation you may now disconnect your phone lines.
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