Q4 2021 Xperi Holding Corp Earnings Call
Please standby were about to begin.
Good day, everyone. Thank you for standing by and welcome to the experience fourth quarter and full year 2021 earnings conference call.
During todays presentation, all parties will be in a listen only mode.
Following the presentation to call will be open for questions.
To ask a question at that time, please signal by pressing star one on your telephone keypad.
If you are using a speaker phone you'll need to make sure that your mute function is turned off to allow you signaled to reach our equipment.
Once again that is star one if you'd like to ask a question.
Now I'd like to turn the call over to Jay Weinfeld, Vice President of Investor Relations for experience Jay. Please go ahead.
Good afternoon, everyone. Thanks for joining us as we report our fourth quarter and full year 2021 financial results with me on the call today are Jon Kirchner, CEO and Robert Andersen CFO . In addition today to today's earnings release. There is also an earnings presentation, which you can access along with it.
Webcast or on our IR website.
Four we began I would like to provide two reminders.
Today's discussion contains forward looking statements that are predictions projections or other statements about future events, which are based on management's current expectations and beliefs, and therefore subject to risks uncertainties and changes in circumstances. Please refer to the risk factors section in our SEC filings, including our.
Our annual report on Form 10-K for more information on the risks and uncertainties that could cause our actual results to differ materially from what we discuss today.
Please note that the company does not intend to update or alter these forward looking statements to reflect events or circumstances arising. After this call we refer to certain non-GAAP financial measures, which exclude one time or ongoing noncash acquired intangible amortization charges.
Related to actual our planned business combination, including transaction fees and integration costs that were in.
Any closure and retention bonuses separation costs stock based compensation loss on debt extinguishment expense debt refinancing costs and related tax effects. We provide a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the earnings release and on the <unk>.
Investor Relations section of our website.
The webcast of this conference call, which will be available on our Investor Relations website at Www Dot very dotcom and I'll turn the call over to Barry CEO Jon Kirchner.
Thanks, Jerry and thanks, everyone for joining us.
To start I'd like to thank the entire experience team for continuing to successfully deliver against our key strategic objectives. We set following our merger with Tivo nearly two years ago.
We've accomplished a lot since we closed the merger amidst what turned out to be just the early innings of a global pandemic.
I'm proud of how our team has been navigating the shifting pandemic challenges to position the company for success.
Importantly, this has included creating two scale businesses poised to Standalone and deliver strong returns for our shareholders for the IP licensing business, we have strengthened the core cash flow engine.
Begun to build a much larger and more diversified IP platform, one with enhanced visibility and sustainability around its revenue streams.
This past year, we continued to bolster the foundation of that business successfully completing license agreements with leading entertainment companies throughout the world, resulting in our announcement today of another step up in our average annual baseline revenue to $375 million.
Additionally, we continue to make progress towards reestablishing, our semi IP business as the industry moves to adopt hybrid bonding as is evidenced by the micron announcement today.
We also announced today that Samir <unk>, who has been running the IP business will depart Experian March 1st we came to this decision mutually with Samir as we evaluated our collective needs for a CEO candidate that can lead the IP business as a publicly traded company over the long term.
Thanks, Sameer for his contributions.
He has made and seen terrific progress under his leadership and his team have strengthened the foundation for the future of the IP business, which is sure to thrive as a standalone company.
Begun the search for an IP CEO and we're confident we'll find a leader who can build on the momentum generated over the last 18 months.
The meantime, under my oversight the strong IP executive team will continue to drive the business forward during this transition.
On the product side, while the pandemic and the associated supply chain disruptions continue to present. Some unique challenges. We are excited to see major steps taken in our business transformation and a return to growth on the horizon.
We have diligently pursued restructuring the business aligned with our strategic roadmap and are positioning the business for profitable growth as it emerges as an independent company.
Another core tenet in our merger was bringing together a tremendous base of technology to help accelerate our innovation engine and broadened our IP licensing opportunities in the IP business, we've taken important steps to expand the media R&D function to support the long term needs of the business.
On the product side, we are pleased with several exciting new innovations in the consumer electronics connected car and pay TV space.
Here are a few examples.
We're on track to deliver a unique streaming service offering with our Tivo stream OIS on Tvs within the next two years, which will accelerate user engagement based monetization revenue.
At CES, we demonstrated our mood based recommendation concept on a single operating platform.
Which uses emotion detection to drive music and other media recommendations and vehicles, creating more immersive and personalized next generation entertainment features leveraging our in cabin imaging and entertainment technologies.
In addition, we launched a single camera camera driver in occupancy monitoring solution, which keeps drivers passengers children and pets safe with lower Bom costs for car manufacturers.
We're one of the first companies to demonstrate this technology.
All this progress brings us closer to standing up two separate businesses better positioned and with significant scale.
Based on our separation progress on current business outlook, our intent is to separate the IP and product businesses. This fall.
As we approach the separation will share more specifics about the respective businesses, including key management strategic and capital allocation priorities financial profiles and transaction structure.
Additionally, we continue to view the forthcoming separation as a transformational event for both businesses, reducing complexity for investors and enabling two pure play platforms better positioned to grow and compete over the long term.
One final, but important update before we get into the business results earlier. This month, we launched our first ESG annual report.
ESG touches many aspects of our business from the relationships, we build to the vitality of our workforce and so the way we respond to challenges.
You can find this report on our website <unk>.
Environmental and social issues are not simple to solve and through thoughtful candid conversations with senior leaders and employees across our global workforce, we explored views on diversity inclusion equity in our environmental footprint and completed a robust analysis to identify and prioritize the ESG issues material to our company.
<unk>.
Exciting times are ahead as we continue our ESG journey.
With that let us now cover the progress of the IP business and its goals for 2022.
For those not following the webcast we're on slide four of the Investor deck.
IP revenue in Q4 was $89 $7 million.
As a reminder, in Q4 of 2020, we entered into a long term license with Comcast and received a large payment for prior periods, which creates some challenging year over year comparisons with the Comcast payments for prior periods excluded IP revenue was up almost 20% year over year.
For the full year IP revenue came in at $391 2 million significantly ahead of our previously announced $350 million average annual baseline.
As is typical our full year revenue reflects the execution of some agreements in 2021 that included catch up our upfront license fees that will not carryover into 2022.
As we begin 2022, we're very excited about the position of our IP business, which has now generated more than $9 billion over the past two decades illustrating the significant scale of longevity of that business more than $1 billion of that revenue has been generated in just the last two years highlighting that we are as relevant today as.
Ever.
Our strong execution in 2021 has enabled another step up in our average annual baseline revenue for 2022, moving up from 350 million to $375 million, driven by new and improved agreements with leading entertainment companies around the world.
As is typical with IP businesses. Each year, we will have a few key agreements that are up for renewal and the timing of those renewals may have some impact on our quarterly revenue trends. However, we're confident that we're well positioned to successfully complete those renewals within 22.
Therefore, they are included in the go forward average annual baseline.
Excluded from this baseline or any significant agreements that we expect to conclude with new customers as well as any revenue from agreements that reflect catch up or upfront fees or other revenue that isn't expected to recur under accounting rules such as the upfront revenue recognized from the recent agreement with Micron.
Turning now to some of our previously identified growth areas on slide five.
And semi IP, the multiyear micron license announced today is another significant milestone.
This most recent agreement is further validation of the relevance and value of our foundational portfolio and expertise in hybrid bonding.
Together with our previously announced agreements with other leading memory providers. We now have approximately 90% of the DRAM market and 55% of the NAND flash market under license while.
While the specific terms of the agreement are confidential. It is similar to the most recent deals we've concluded in this space adjusting for relevant market share differences.
With Micron now under license, we look forward to the opportunity to license the remaining memory players as well as new opportunities in logic, we were starting to see an increase in the announcements around the adoption and incorporation of hybrid bonding.
Turning to Canada, we continue to wait for a decision in our initial round of litigation.
This decision has taken longer than we expected. Although we do not believe there is anything that can or should be read into that longer timeframe.
We remain very confident in the relevance of our IP portfolio.
Our ability to ultimately achieve a market based resolution in Canada, although predicting timing is always difficult.
As a reminder, we also filed second rounds of litigation against Videotron, and Bell, Canada last year.
Finally in OTT, we continue to engage with a pipeline of opportunities that represents our largest long term growth driver.
Last year, we announced a number of key agreements in this category. We expect continued progress during 2022.
Moving to slide six.
Lastly, we continue to actively prepare for separation.
Today and another important step in that process I am pleased to announce our new brand for the IP licensing business audio.
Ideas are at the heart of an IP business and this notion is embedded in our new name, which also means to license in Greek as.
As such we believe Audi is the right brand for our IP business moving forward.
I'll be doing higher profile marketing around the brand as we get closer to separation, but in the interim you can learn more about audio and our IP business at our new website Www Dot a D E I a dot com.
Moving to the product business on slide seven.
Beginning this quarter, we've chosen to recast our product revenue categories to better align with how we are now managing the business internally and to provide investors with greater visibility into what is driving our business as we approach separation.
You can find the previous and revised category revenue history on our website under the interactive Analyst Center.
This slide shows the major shifts.
Total product revenue in Q4 was $124 $7 million down 7% from $133 $8 million a year ago.
Revenue was impacted by continued supply chain disruption across our business as well as some end market specific dynamics, which I'll cover in more detail shortly.
Turning to slide eight and our first product category pay TV.
Pay TV now includes discovery video meta data Tivo consumer linear TV subscribers and hardware.
Using this new breakdown Q4 revenue was $66 $1 million down 6% year over year.
Our long term focus in this market is driving adoption of our higher value IP television solutions, which are positioned to offset declines in our traditional guidance business.
While the consumer hardware and subscription businesses in decline.
We believe growth in IP, TV should mostly offset declines within the pay TV category.
We expect this category to be flat to slightly down in 2022, driven by declines in consumer subs and hardware discovery in our traditional guidance business, mostly offset by growth in IP TV.
During the quarter, we completed the integration of Ob TV now referred to as Tivo has managed to I P. T V service, notably.
Notably we are pleased with the progress we've made around IP TV.
As we continue to add new operators with our expanded product offerings. Our total IP TV subscribers grew organically more than five times year over year and double digits every quarter in 2021.
We also won several new IP TV customers, including Breeze line, formerly Atlantic broadband and helped customers such as Cincinnati Bell launch and begin scaling IP TV.
Turning to slide nine.
Our second category is consumer electronics, which includes Dts audio and imaging solutions in home and mobile and are perceived business. Using this new break down Q4 revenue was $24 $5 million down 13% year over year, driven by declines in our mobile business, which we expect to return to growth this year.
Additionally, in Q4, 2020, we signed about $3 million of multi year minimum guaranteed contracts that positively impacted that quarter due to revenue recognition rules.
During the quarter, we launched IMAX enhanced on LG sound bars, and best Ltvs. We also launched a streaming partnership with Disney plus with 13, Marvel Blockbusters, and Sony Pictures expanded their offerings to more than 160 unique IMAX enhanced titles and a total of 798 skus across multiple.
Land wishes.
In addition, <unk> was named a CES 2022 innovation awards honoree for two products.
<unk> play Fi home theater in the Smart home category and Dts play Fi apps for Android, Android TV, and I O S and the software and mobile App category.
Ah perceive subsidiary continued to make good progress on multiple fronts, our set of software tools and customer beta and we are supporting multiple design and prototyping efforts with customers to bring perceive enabled products to market.
Looking forward, we expect the consumer electronics category the category to grow this year through supply chain normalization in game consoles and growth in our play Fi wireless and mobile business.
Longer term, we expect additional growth to come from expansion of our IMAX enhanced ecosystem and perceive as we see the first products utilizing our technology come to market.
Moving to slide 10.
Our third category is connected car, which now includes music metadata. In addition to HD radio auto stage in auto sense youth.
Using this new break down Q4 revenue was $22 $4 million down 10% year over year.
Declines were driven by supply chain constraints, which we continue to monitor closely and are in line with IHS forecast.
We are working with our partners to try to mitigate shortages that could impact key components with our technology.
We anticipate an improving situation in the back half of 'twenty two is the supply chain stabilizes.
Given the complexity around forecasting this category with supply chain uncertainties at this point, we expect the category to be roughly flat in 2022.
A few important highlights from the quarter Toyota will now be offering HD radio across its entire next generation infotainment system.
Going forward nearly all new Toyota cars in the U S will have an HD radio as a standard feature.
In addition, 16 car companies had been testing auto stage in Europe , North America, and Asia today multiple partners, including two major Oems are in advanced stages of testing our solution.
With respect to our auto sense driver monitoring solution. Our team has reached an important industry milestone by achieving a spice certification also BMW was recently incorporated auto sensor occupancy monitoring and an additional car model and we continue to see progress in our customer pipeline for the technology.
Moving to slide 11.
On our fourth and final new category in the product business is media platform, which captures the tivo stream O S. The tivo stream for K monetization and TV viewership data revenue.
Revenue in Q4 was $11 $7 million up 15% versus last year, driven by sales of the Tivo stream for K and increases in advertising revenue.
In 2022, we expect double digit growth in this category, mostly driven by expansion in our advertising based monetization revenue.
This is our fastest growing category and we were focused on partnerships with TV Oems chipset partners and content providers to bring the first Tvs powered by Tivo stream of Wes in 2023 or 2024.
We expanded our partnerships to include Youtube TV and Youtube support for the Tivo stream O S integrating Youtube TV into the Tivo stream <unk> guide.
We continue to integrate content onto the platform and added discovery plus P. B S and send a life to Tivo stream <unk> and Tivo plus.
Tivo stream for K now covers all major streaming services.
On the monetization front, we're focused on expanding our capabilities within our AD technology stack and during the quarter. We released our video price based auction solution for our CTV AD inventory, resulting in increasing fill rates and C. P. EMS.
Lastly, tea Bose TV viewership data is captured in this category and was adopted by additional customers in the TV and digital advertising industry.
A trade desk or digital media buying platform built for the open internet.
As licensing Tivo as data to build audiences across the widest range of media channels to optimize the impact of advertising campaigns for its clients.
With that I'll turn the call over to Robert to discuss our financials Robert.
Thanks, John .
We begin by reviewing our fourth quarter and full year results for 2021 on slide 12.
Looking at the Big picture for 2021, our operational discipline helped drive earnings well above our outlook from the beginning of the year.
In particular, while our revenue was in the middle of our expectations for the year.
Spending was significantly below midpoint of guidance ranges.
Lower than planned numbers for litigation.
Spending within the IP business for personnel and outside services.
And the reduced spending in areas, such as travel and product costs.
The result was non-GAAP earnings per share of $2.03.
Roughly 17% higher than the $1 74 midpoint initially estimated at the beginning of the year.
Total revenue for the fourth quarter was $214 $4 million.
This was down from $433 9 million in the fourth quarter of 2020.
Primarily due to a large back attainment from Comcast agreement signed last year, which John noted earlier.
Revenue for the full year for 2021 was $877 $7 million.
Comparing to 2020 on a fully combined basis revenue was down $269 7 million for three primary reasons.
First the significant Comcast back payment.
Second we had some larger semi IP agreements, where the revenue was recognized upfront in the first half of 2020.
And third within consumer electronics, we recognize more upfront revenue from minimum guaranteed customer contracts in 2020 as compared to 2021.
Total of these three items was approximately 300 million more than the total year over year difference.
Also had year over year declines in traditional pay TV and consumer electronics.
More than offset by growth in IP TV connected car media platform and incremental IP licensing revenue.
non-GAAP operating expense for the quarter, including Cogs was $163 $6 million.
Down $9 3 million from a year ago, primarily due to lower compensation expense and lower litigation spending.
Q4 interest expense was $8 $6 million.
Other income was <unk> three.
$3 million of expense.
Cash taxes paid in the quarter were $8 $7 million.
Using the cash tax and non-GAAP fully diluted shares of $112.5 million non-GAAP earnings per share for Q4 was 30 cents.
Moving to the balance sheet, we finished the year with $261 $7 million in cash and investments.
We paid down $10 $1 million of our debt during the quarter to bring our year end debt balance down to $789 $7 million.
Operating cash flow for the quarter was $68 $9 million.
Our adjusted free cash flow for the quarter was $65 $3 million, which reflects operating cash flow adjusted for $5 $7 million with property plant and equipment spend.
And $2 1 million of merger and separation related costs.
Operating cash flow for the year was $234 $7 million.
During the quarter experienced paid a cash dividend of five cents per share of common stock.
And repurchased $25 $1 million of stock.
Moving to our outlook on slide 13.
For the full year 2022, we expect revenue to be between $910 million to $950 million.
The expected revenue growth from 'twenty to 'twenty, one is attributable to factors in both the IP and product business.
Growth in IP is mainly attributable to the micron deal for which a meaningful portion of the revenue just taken upfront under ASC 606.
Growth in the product business is expected in the consumer electronics category.
Driven by our mobile and wireless solutions and in the media platform category driven by increases in advertising revenue.
The guidance range does not include upside from settlement of any Canadian litigation.
A resolution of a contract dispute with a large mobile imaging customer.
At the moment, we expect revenue to be strongest in the first quarter due to the micron license.
With Q2 lower than the remaining quarters of the year.
We expect.
Cogs for the year to be between 120 and $130 million.
GAAP operating expense for the year is expected to be between 725 and $765 million and non-GAAP operating expense is expected to be between 490 and $520 million.
We expect expenses to gradually increase each quarter of the year. Please.
Please refer to our earnings release for a reconciliation between GAAP and non-GAAP expenses.
We expect interest expense on our variable rate debt to be approximately $36 million, which reflects some rate increases throughout the year.
Other income will be approximately $3 million and we expect cash taxes to be between 33 and $35 million.
Also we expect our basic number of shares to be $105 million controlling diluted shares and a non-GAAP basis to be $113 million.
Using the midpoint of the guidance ranges, we would expect non-GAAP earnings per share for the full year to be approximately $2.06.
Additionally, we expect to generate between 202 hundred $30 million of operating cash flow in 2022.
With regard to capital allocation, we're going to take a more flexible approach this year as we prepare to separate the businesses and the song.
This approach includes continuing to pay our quarterly dividend.
Scheduled debt amortization and opportunistically buying back shares as they work to balance the capitalization needs of each business at separation.
Moving to slide 14.
The purpose of this graphic is to provide a visual forecasted expense increases the expected year over year expense increase is primarily due to investments in key growth drivers.
The IP business the increases are shown in the first two items.
<unk> personnel and R&D programs to prepare for continued growth as a standalone business.
And estimating litigation expense and a more normalized range.
Expense increase is also attributable to a full year of expense from Dolby TV <unk>, which was acquired in mid 2021.
And for investment in areas, such as stream T. B O S in cabin monitoring.
Monitoring and systems infrastructure to support future growth.
That concludes our prepared remarks, we will now open the call to your questions.
Great.
Thank you and once again that is star one if you would like to ask a question.
We'll take our first question from Herman <unk> with Gws financial Please go ahead.
Just first off could you just talk about the micron license agreement and I understand you're recognizing the license payment upfront, but how about just as far as you know the ongoing license you would receive from the royalties.
When when would that kick in whats the timeline for that.
Yeah. Good question.
The financial terms of the license agreement itself are confidential, but what I can tell you is that due to ASC 606.
A meaningful amount of the revenue is recognized and is included in our updated 22 revenue guidance.
We expect additional revenue over.
Can be recognized in future periods.
Okay, and then what about your.
The car what is the timing of these 16 that are in trials, you've been talking a lot about in the past year about these are different manufacturers testing. It out so now you're providing a number is there a concise timeline is do you expect these models to be eventually approved and on the market.
We expect you know kind of acceleration of adoption as we get into 'twenty three 'twenty four 'twenty five timeframe, we don't.
Unfortunately don't have direct visibility into the exact timing of when certain things may happen, our customers don't necessarily provide that information.
It also depends on kind of what.
Head unit platforms Theyre using.
As well on what their timing and kind of cycling those through.
Maybe but but in short.
It's all part of a process that we've been on and I think we continue to see good traction and we believe that as expected as we move through the next couple of years, we will see increasing adoption and really start to see those solutions take flight.
And last question for me on the media platform side do you expect that that segment of the business to actually be a contributor to earnings.
I think if you're saying from a profitability standpoint.
Well, we don't we don't really break that segment's out from a operating profit standpoint. So.
Can't give you a crisp answer on that we do what I will tell you is we do expect it to grow and to contribute meaningfully going forward.
Yes, but I mean, you've been basically giving away those stream for K dongles right for 29 or $39 expecting you know users to go up. So you could you know get profits from are you reaching scale that.
As a contributing factor or are we still a year or two out before you're seeing anything of a contribution standpoint.
Yes, I think we are still <unk>.
Smaller scale, and where we're going with it given you know building out all the pieces of a long term monetization play, but here's what I can tell you is that the stream for K dongles.
Or are there an element of the broader strategy, but what we expect is that the embedded OS strategy will drive significantly more footprint.
And installation base that over time will not only support the investments we've made but ultimately yes will be.
An important part of growth and profitability as we look ahead a couple of years from now.
Okay. Thank you.
Yeah.
Thank you we'll take our next question from Richard Shannon with Craig Hallum.
Hi, guys. Thanks for taking my question as well.
I'll follow up on two of the prior questions here just quickly with Micron can you characterize the.
Term of the license how is it compared to other large memory licensees in the past.
I think we can say that it's a multiyear license agreement and.
Probably duration is not dissimilar than licenses in the past beyond that we really can't say much more.
Okay fair enough pulling up on the auto stage topic here.
John you answered in terms of timing of these these wins and it's obviously understandable not necessarily knowing that that.
Are these situations in which there are there is competition for the wins here or is it more down to kind of get dotting I's and crossing t's getting less testing done here.
It's more competitive who would you be competing against you.
There's really nobody that has a comparative compatible competitive solution.
There are there are certainly.
People in the market that have pieces of the feature offering in different places such as Europe for example, but I would characterize.
Our pipeline is having a mix of all of the above which is we have people that are much further along that are obviously spelt excuse me validating.
The the use of the system.
We have others that are more earlier stage and doing if you will comparable analyses or how does how do all these features play relative to maybe a slightly lighter offering.
But in general Directionally, we've been on this journey as you commonly are in automotive because of long product cycles and testing cycles et cetera.
But we are I think very very enthused with the continued progress we're making towards what we expect to be a significant contributor in both auto and auto stage as we look ahead over the next couple of years.
But the exact timing and the exact ramp ramp rate will in part depend on when people complete some of the work that they're doing and obviously give us further information.
Okay. So I guess you would characterize the environment as there's someone wants a more full featured solution. They would choose experience something more bare bones might be some someone else is that fair or is there.
More direct competition going on here.
Yes.
That's a fair characterization.
Okay fair enough.
Touch on tote and HD radio here, obviously, a nice win there with U S cars I can't recall.
Search for quickly, but who knows where they have been in toys and in international markets.
Maybe I guess, maybe understanding that as well as the overlap.
Of well, let me let me just start with that question.
So this is an HD radio related wins, so primarily North America focused.
And.
Toyota has been a valued customer for for some time although.
The the extent of their prior implementation was kind of your mid line.
You know an upper end vehicles I think this represents a decision recognizing.
The importance of HD radio in the in the broader infotainment suite.
And thus the decision to you know moving forward put it and put it in all the vehicles. So.
I think it's representative of the continued progress we continue to make with the HD radio ecosystem in North America.
And obviously it lays the foundation as well for follow on.
Next generation Entertainment features which kind of ties into what we're doing with auto stage than others, but we're certainly pleased and value the relationship Toyota significantly.
Okay. That's helpful.
Maybe jumping over to.
The numbers side here with our with the sales numbers for the year, John I mean, it may not have been able to catch all of the well I guess from both of you on your comments about how to think about the total revenue number of 90% to 90 50 for the year.
You gave us a new baseline for the IP business at $3 75.
I think what I heard was related to micron that there since there is some upfront here this isn't part of the baseline but in.
Implicit in the.
And this would be a number somewhat higher than $3 75 for the year did I understand that correctly.
That's correct yes.
Okay.
Obviously, you haven't given us a sense of what the how much that is here, but I guess, maybe just kind of try to delve into the other side of this being the product business.
Any way you could help us characterize I, probably not going to quantify that but can you characterize what level of growth we should see overall in products in this year.
Okay.
Yes.
Currently forecasting low single digit growth in the product area.
For the year.
Yeah.
I mean, I can I can lay out a little bit more in terms of the opportunities we see in terms of the growth that's helpful.
Let me go out and do that I think I was on the high end or is where we're seeing the growth we expect that.
As we.
Get out of some of the supply chain issues, we would expect improved per unit reports.
In consumer electronics.
Growth in IP TV services.
Higher ad monetization.
Within the media platforms and the favorable outcomes in the IP licensing.
For OTT.
Okay.
Okay Fair enough, maybe one or two last quick questions here John on the <unk>.
Spin off here you talked about the spinoff in the fall to what degree is this contingent upon.
Things like supply chain that are largely under your control and could that possibly slip if we get continued issues there and what are the risk do we have in terms of that timing.
Well I think we feel that operationally we are we are well on our way to clearly putting ourselves in a position to effect the separation and I think we've taken into account.
As we've looked at the product business and both its prospects and continued transformation in the course of 'twenty, two as well as 'twenty three and I think we feel.
Very good that we can execute the separation as we plan in the fall.
To the extent that there is some kind of a major.
<unk> seen out of left field.
Some event that dramatically changes the prospects for the product business in the near term, obviously, we would have to factor.
And as we think about it but as we sit here today with kind of a if you will a range of outcomes. We expect you know in the various markets as well as what we believe our visibility is into you know as we think about 'twenty three growth you know, which we are we could see some things that we're excited about we feel pretty good very good.
Confident that we will complete the separation as we indicated.
In the fall.
Okay, well fair enough, maybe just one last quick question I'll jump out of line here.
If you could repeat for me the definition or the assumptions built into the.
Kind of the IP business, specifically around renewables, what's built in there and then I think you kind of referred to certain a number of deals that youre, hoping to renew this year.
Mount to the renewables are those.
Similar to what we've seen in past years or how would you characterize the the scale of I guess revenue replacement or a renewal that's required this year.
Yeah, it's it's.
Think of being annual baseline average and so in some cases some years it'll be higher in some cases lower.
In the past that range is generally they are plus or minus 10%.
You know one of the factors that can impact that number.
Which set.
Set up at $3 75.
Is catch up or upfront fees.
As its typical some of the deals in quick catch up our upfront license fees that don't figure into our ongoing average annual baseline.
That helps answer your question.
Yes, I think that does.
I think that'll be all from me guys. Thank you very much.
Thank you, we'll now take our final question from Matthew <unk> with Maxim Group.
Hey, good afternoon, thanks for taking my questions.
I guess.
Looking at perceive a couple questions. There do you have an updated view on when the first products may come to market.
I think we said last our last call that we expected.
The first products within the next.
12 months to 18 months a couple of this.
This was.
Last fall I think as we sit here today, we've got various people in different stages of evaluation.
And so I think within the next 12 months I would I would.
They will see.
The first products come to market.
But I think it's it continues to be the case as we've just completed delivering.
Some customer beta tools that are allowing people to do a significant amount of further development and evaluation that it is.
Naturally going to depend on some of their time frames and how they pull through into various products, but.
We are completely.
Not only convinced.
That we have some very exciting technology, but the feedback we continue to get remains very strong. So obviously, we're doing everything we can to to help people along in their process.
And anxiously and excitedly of wheat.
The release of the first products. So others can can maybe get a better glimpse into what we've been working on now for you know for quite some time.
Thanks, That's helpful. And then can you I think you mentioned sort of being in beta with a software stack.
Developer kit could you talk about how close that is to being <unk>.
Police shred it.
To make it more of a sort of.
I dunno bigger go to market push if you will you know are we or close to that point, where it's you know.
Got you know polished or are you still kind of in the early stages of a beta and its going to take you know two more iterations to really.
Probably bring that to market.
We have.
We've been aggressively working on the tools I think as you know for the better part of the last year.
And I think as we sit here today.
We're very well on our way to in short order to being able to turn tools over to customers.
In ways that allow them to basically.
Utilize the platform without us having to do a tremendous amount of handholding.
And at the.
The core elements of those tools really provide customers what they need as they evaluate the platform. So.
In short.
As we had anticipated a while ago that work is coming to an end and I think it really sets up our ability to much more aggressively.
Go out and try to sell into the market.
But as I was saying earlier most importantly, we're focused on helping those that are already under evaluation and doing I think important work with our help.
To make sure that they can fully worked through and enable the platform in ways that can differentiate their products and get those first products to market. So we've got kind of a dual set of priorities going on one is obviously the completion of the tools in a broader sense, but the second is ensuring that the the things we have in motion.
Can we can ensure that they get over the finish line.
Got it okay.
Maybe just lastly for me is.
Your timeline to addressing the NAND players.
Hybrid bonding.
Well I think.
We continue to to obviously see trends that debt.
People are not only going to adopt hybrid bonding, but then it's going to be a key differentiating technology.
In memory is.
Well as in other areas.
Areas, such as logic and.
And more and so I think you can reasonably conclude that we know who all those players are.
And that we've entertained conversations and we will continue to and I think the good news about micron is it sends another important message to the rest of the industry that has not yet licensed.
That there is an element of confidence around the importance of the IP and ultimately you know the utilization of this technology to ensure long term competitiveness. So.
I can't give you a timeframe because it's always difficult.
To say when.
Licenses will conclude particularly the more technical evaluations that go on in the semi space, but what I can tell you is.
We're well on top of you know where the licensing opportunities exist and naturally looking to work.
Work to add value for our partners.
As best we can.
Great Alright, thank you.
Thank you and that does conclude today's question and answer session I'd like to turn the conference back over to Mr. Kirshner for any additional or closing remarks.
Thank you operator, and thanks, everyone for joining today's call.
<unk> had a strong start to 2022 and look forward to achieving many important milestones this year.
We look forward to keeping you updated on our progress in the coming months.
Thank you for joining today.
Thank you that does conclude today's conference. We thank you all for your participation and you may now disconnect.
Yes.
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