Q3 2020 Xperi Corp Earnings Call
Please standby were about.
Good day, ladies and gentlemen, thank you for standing by welcome to <unk> third.
Fiscal year 2000, <unk> earnings conference call.
During todays presentation, all parties will be in listen only mode. Following the presentation. The call will be opened for questions. If you would like to join the question queue. Please press star one at any time.
Thank you.
This call is being recorded today Monday November nine.
20.
I would now like to turn the call over to Gerry watches.
Vice President of Investor Relations for Expiries. Please go ahead.
Good afternoon, everyone. Thank for joining us as we report our third quarter fiscal year 2020 financial results with me on the call today are John for Church CEO, Robert Anderson CFO also on the call. It's one year arm Lee President of IP licensing who will be available.
Along with John and Robert to answer questions. During its unique 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, which are based on management's current expectations and beliefs, and therefore are subject to risks uncertainties and changes in circumstances.
You can look forward to the Red Sox her 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 Crown 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 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 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 Investor Relations website at Www dot exterior dotcom.
I'll now turn the call over to John Christner.
Thanks, Jerry and thanks, everyone for joining us.
On the call today I'll provide a brief update on the integration progress walk you through our two business segments like Pete in product.
Turning it over to Robert to discuss our financials, you know improved outlook for the remainder of the year.
Before we begin though 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 or IP portfolio to all forms of video consumption in further establishes the long term and stable nature of our licensing programs within the media business.
As a result of the license agreement, we are raising our guidance for the remainder of the year. This.
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 Expiries 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.
We made significant progress on various strategic initiatives during the quarter and delivered financial results along with our original second half 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 at an 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, but I'm exceptionally proud of you experienced team for their commitment towards our overarching goal to invent develop and deliver technologies, which enable extraordinary experiences in the home on the go live in the car.
Or end markets are beginning to show signs of recovery and while we are assuming some improvement in Q4.
Remain cautious on the pace of recovery in 2021.
We are now five months Mark since it's very merged with Ti Vo.
We've made substantial progress executing on our integration plans as well as the expected Q revenue and cost synergies.
Already completed a full scale organizational redesign along their major employee programs, including compensation benefits and training and completed the architecture and 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 in annualized synergies, we committed to achieve by the end of 2021.
I remain highly confident in our ability to meet the synergy targets we outlined.
It looks closer look for further efficiencies beyond those choices.
Well 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, we will be discussing do not include any impact from our license agreement with Comcast that was announced today.
Does that agreement was concluded 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 disagreed up resolves 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 of early 2016.
Providing coverage through early 2031. This license agreement supports your core pay TV licensing program revenue 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.
EBITDA, it's 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 resolved in 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 total.
Total product revenue for the quarter was $122.5 million down 4.2% versus a 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, but.
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.
You go plus costs and expanded to include Pluto TV to be.
No and low cast the 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 front, we continue 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 for K OLED Tvs.
In addition, Philips 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 chips and future products.
Moving to the connected car category.
Revenue was $18.5 million down 5.8% year over year that's.
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 FCC approved all digital and broadcasting this.
This is significant in that it builds on the existing broadcast standards for our technology and further encourages receiver manufacturers to incorporate HD radio.
During the quarter HD radio launched in North America on 14, New 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 Daimler AG.
Connected radio launched 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.
We expect Tyler to roll that platform out more broadly across their product line.
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 to 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.
I was 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 and our product business, our pay TV revenue was $55.6 million down 6% sequentially.
During the quarter certain customers, including Liberty Latin America, Medco, Metronet, 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 perceived 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 receive favorable media coverage during the quarter in September perceive CEO, Steve Tyke presented ergo, what the embedded vision summit, where a session was among the highest rated and attended at the conference.
With that I will turn the call over to Robert to discuss our financials.
Robert.
Thanks, John.
He began with financial results for the third quarter.
As noted earlier in order to provide more meaningful comparisons.
When discussing both non-GAAP and cash.
Based numbers are periods 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 Guy.
GAAP operating expenses, including the cost of goods sold.
With $221.8 million.
GAAP operating expense is significantly higher than third quarter of last year.
You know our merger with Tivo.
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 was $33.8 million.
And increased by 5.5 million year over year due.
Due to increased hardware expense from the rollout of the stream.
Tivo stream core check.
Excluding Cogs non-GAAP operating expense for the quarter was $119.3 million.
Down by 16.5 million or 12% year over year.
Due to lower personnel expense.
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 of $50 million.
The 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 tax was unusually high since it included $5.8 million.
She goes with holding and eat taxes that were accrued prior to the merger you have paid in Q3.
Isn't that a 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 T. Rowe liabilities.
Non-GAAP earnings per share would have been 24 cents.
We ended the quarter with 107.
Point 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.
At the end of the quarter, we had $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.
Good day down $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 spend.
5.3 million of merger and separation related costs.
During the quarter Experie paid.
Cash dividend of five cents per share of common stock.
Let me now provide an update on our second half outlook.
For the second half of 2020, we now expect revenue to be between 625 and $645 million.
Importantly, with contracts now resolved the new baseline revenue for 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 is meaningful upside to our IP business from the three areas. We discussed last quarter include.
Including print increased penetration and new media and O T T.
There are many unlicensed traditional pay TV subscribers in North America.
The new semiconductor business.
We now expect cost of goods sold for the second half to be between 73 and $76 million.
GAAP operating expense for the second half of the year is now expected to be between 421 before.
$431 million.
Non-GAAP operating expense is expected to be between 270, fives and $285 million.
The expense increase from prior guidance is primarily due to a true up of variable compensation expense accruals from an improved outlook at year end.
Please refer to our earnings release for a reconciliation between GAAP and non-GAAP expenses.
We expect interest expense to remain between 26 and $27 million.
Other income to increase to approximately 3 million.
And cash taxes to move between.
33 $35 million.
Also due to recent share buybacks, 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.
The phone keypad.
Tom on the phone line will indicate what your line is open. Please state your name and company before posing your question.
Our first question caller. Please go ahead.
Hi color.
Thank you Hey, Eric Wold from B. Riley Securities you guys. Your me now.
Yes, yes, yes, Eric perfect perfect. So I guess a couple of questions on the on the guidance I, obviously, congrats on getting Comcast and its been a slog for 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 is on a fixed basis or is there is there potential variability in that number around.
Does subscribers.
On 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 afraid I, just can't get into the specifics of the contract I think you.
You know that 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 50.
Okay, that's fair.
[music].
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've talked about this this license you're hoping otherwise in discussions and renewals are there are there any significant renewals in that 350 number over the next call.
Call it two to three years.
Hi, I think I can take a pass at that which is 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 in a period of time to do that.
Got it and then just final one for me I would say.
Well 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 is it.
To be recycled into.
Other pursuits, and although litigation then or is that also going to represent a nice you would I be used in addition to the the upward move in a in license revenue.
Yeah, It's it's always tricky trying to forecast of litigations, and but I think for 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. Please go ahead.
Hi, guys Richard Shannon here can you hear me.
Yes, Jeff I think Richard.
Okay getting used to this new conferencing platform I wasn't sure if that was offered [laughter], let's see here, maybe a couple of EPS for forever.
Robert Sir what's 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 as well in that timeframe 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 enough to know, what's you're going to get in the fourth quarter, but I guess it like a run rate of all three.
Sure so.
So I think for Capex next year, you know, we're still working through our plan sucks. It's early for us to be giving any kind of guidance would go normally provide that in February.
I think you can expect that our operating spend would be down year over year.
Primarily this energy 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.
No 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 Jay for John here.
Kinda laid out your phases of how you're expecting commercialization and Ah Ah sound like phase one is going well here I guess I'm curious about phase two here you subscribed. This is getting the embedded applications smart TV and I think having a 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.
The 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.
We ended the second quarter of next year, you know Bob.
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 a 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 18 phase.
Approach, but you know the good news is that our contract or content centric content first approach to.
So do you actually you know what 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 oh like perhaps.
Interface, 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 thinking your freshly prepared remarks about suits and Ah you must have some good engagement with a few different ecosystem PC mobile and it can go 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 in EPS.
Application 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 ice 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 has really represents is incredible interest in demand across some of these others.
Mysteries, where people are looking at what we're doing in terms of bringing it.
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 we each have even expected 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>.
Mitch Steves with RBC.
Please go ahead.
Hey, Thanks for taking my question just wanted to clarify what are 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 is because 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 it probably doesn't work.
No the the bigger.
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.
Oh, Hey, maybe goes back that it goes back yeah.
Yeah good.
Sorry, it it basically picks up the license where is it a expired in 2016.
And runs all the way through early 2031.
So 2016 till now the initial okay perfect and then just last one.
In terms of the cost of the U.S., but you got to about two thirds there.
Now that you've seen kind of the operation is tied together do you think that that synergy target needs. The increase in terms of like the long term target meeting two three years out to probably do better than 59 or or am I reading too much into that.
Oh, it's a I think we're very sorry.
Sorry go ahead go ahead.
I was just going to say.
We we're obviously confident in that and make good progress on the 50 million, but our internal targets or a more aggressive or not so well I expect we'll get past that but I don't want to promise that just I'll, 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 Andrew result, and so you know I think there will naturally be some opportunities and 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 in high places to drive long term growth and I think we're very very keen and focused on doing that.
Okay. Then one last one just related this you.
He has been making a lot more money they have expected off of that sit out. It seems like you guys had a chance to pay down your dad I guess why is that the plan at a local what's your like for like what would you do with it.
The extra money, you're going to make it because it seems like quite a bit of cash.
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 it'll probably be focused on debt pay down.
Okay understood. Thank you.
And well go ahead and take our next question from having a question with VW.
Financial Please go ahead.
Hi, So first off I just wanted to ask you about the Tivo stream fourq to what's the strategy behind that on the retail front are you guys were talking about the Walmart Amazon and <unk>.
Does that change your cost compositions for the product and for the hardware in general.
I think this is Robert that the retail channel doesn't.
By definition change or cost composition and.
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.
So we make we may have deals I think we will.
The work there are distributors, but primarily the cost of the product stays the same.
And then but.
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 or is there.
That scales, but the long term strategy is to move into an embedded software stack.
You know 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 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, rising thing.
I'm, referring to license I guess.
But that patent.
Not in 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 that Samir to touch on the IP a part of it in a second 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 it relates to entertainment as well as it relates to things like safety you know in car in home and mobile that.
It was broad basic verticals.
And so we do today actively do lots of business outside of 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 in Latin America, and Europe and elsewhere.
That doesn't obviate however, the the opportunity that exists for people that may wish to use or intellectual property that need to have licenses in order to you know to bill either their own products or to use third party products and so I'll turn it over some period of time talking about that yeah.
Yeah. Similarly on the IP side as John said, there's a worldwide opportunity for us I'm very pleased to have resolved Comcast or 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 Little EPS Dawn like the business already but there are a handful of all.
Opportunity there that we'll continue to try to resolve so international is a focus for us probably starting with Canada, and then moving on to another it as well.
Okay, but.
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 the company's got the businesses that are strong in both I think different customers will walk you through the product solutions that would have or want to develop their own lives that they cannot be like and so we really let the customer decide and then are able to address that opportunity there.
Irrespective of what their choices.
Okay. Thank you.
All right and we'll go ahead and take our next question from Matt.
[laughter] class.
[noise] <unk> 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 you I think you mentioned that's so.
So I'm actually enhance deals for I guess, the arkon in China, but I'm curious if the scope of datsun expandable 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 a in terms of working with them to get something in the local market IMAX is a very strong brand in China. So it would be logical that they look to do that I think naturally. We're you know we're in discussions with folks about.
Bringing you know the IMAX program to their particular brands in other markets in North America or Europe. So.
So I think I think this is just easier stages in a process of a further development in market validation, sometimes also impacted by content sources that availability.
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 tense at night, you need a major content providers in China, which gives you know obviously domestic Chinese TV manufacturers plenty of reason to.
To support the program.
Gosh accent I guess can you I guess the follow up on that.
Any notable or you know.
No anything.
In terms of development and that the North American market for IMAX enhanced style in the last two quarters are you know in terms of.
Hi, <unk>.
Hi, guys I was trying to you know maybe what are the milestones we should be looking forward to see that U.S. market develop a little bit more.
Oh, I I think you know.
As you're typically building ecosystems looking looking for for signs around content expansion.
I would say in the last.
A couple of quarters, we've 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.
Oh for the program.
And then you know the.
The other thing to keep keep an eye on is is don't overlook the importance of the peripheral market growth I mean things like sound bars and speakers and.
Avi receivers ultimately contribute positively to building an ecosystem of product.
In support of the program so.
We are we continue to work at I think feedback remains good.
Obviously in a coated environment not everything is moving as fast as you like it too, 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 one final question on the IP licensing business you do have a one of the large DRAM content is 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 a fish for still you know in place for a 2021 split between the product on the IP business, how you're thinking about addressing on that company. Thanks.
Sure so.
We as you know or out of license with Micron, we've been very very pleased with the market.
<unk> activity and continued focus on.
On hybrid bonding you know in three D. related.
Technologies.
Suffice it to say that I think is Ah you know if the trends continue not only a memory button in logic and many of the other semi 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 know flea five seven years.
That said, we continue to engage all of our customers both existing and former.
And naturally.
I'm sure you know from our prior experience some.
Sometimes these discussions take a while measure providing both plenty of technical information and considering you know how licenses should be optimal structure, but at this point or 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 would.
Didn't guide until we have direct line of sight, just it's been consistent with the New York or exterior practice.
And within the I P 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.
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 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 long term.
And 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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