Good day, ladies and gentlemen. Thank you for standing by and welcome to the Xperi First Quarter Fiscal Year 2021 Earnings Conference Call. [Operator Instructions] Following the presentation, the call will be open for questions. This call is recorded today Tuesday, May 5, 2021. I would now like to turn the call over to Geri Weinfeld, Vice President of Investor Relations for Xperi. Geri, please go ahead.

Good afternoon, everyone. With me on the call today are Jon Kirchner, CEO; and Robert Andersen, CFO. Also on the call is Samir Armaly, President of IP Licensing, who will be available along with Jon and Robert to answer questions during the Q&A portion of the call. Before we begin, I’d like to provide two reminders. First, today’s discussion contains forward-looking statements that are predictions, projections or other statements about future events, which are based on management’s current expectations and beliefs and therefore subject to risks, uncertainties and changes in circumstances. Please refer to the risk factors section in our SEC filings, including our most recent Form 10-Q for more information on the risks and uncertainties that could cause our actual results to differ materially from what we discuss today, including, but not limited to, risks associated with the TiVo transaction, the development and launch of new products and any potential impacts of the coronavirus. 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. Second, we refer to certain non-GAAP financial measures, which exclude one-time or ongoing non-cash acquired intangibles, amortization charges, costs related to actual or planned business combinations including transaction fees, integration costs severance, facility closures and retention bonuses, separation cost, stock-based compensation, loss on debt extinguishment, realizing unrealized gains or losses on marketable equity securities and associated tax effects. We have 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. The recording of this conference call will be available on our Investor Relations website at www.xperi.com. I’ll now turn the call over to Jon Kirchner.

Thanks, Geri, and thanks, everyone, for joining us. Revenue was in line with our expectations $221.6 million. And our non-GAAP BPS was $0.59, representing a strong start to the year. We generated $26.7 million in operating cashflow of 124% versus Q1 last year on a fully combined basis and $29.7 million and adjusted free cash flow up 84% versus last year, we also bought back $25 million of stock during the quarter. Importantly, our board recently authorized an increase of a hundred million dollars to our existing stock repurchase plan underscoring, the competence we have in our cashflow outlook for the year and the long-term prospects for both our IP and product businesses, these results and the strategic progress we made in Q1, put us on track to meet the annual outlook we provided last quarter, as it relates to the global semiconductor supply chain issues or outlook reflects the most current information from customers and industry analysts. However, we'll continue to monitor this. As we move forward at a high level, we made solid progress on the following initiatives, building on the baseline revenue for our IP business and advancing opportunities in the various IP growth areas. We've identified increasing the footprint and available content for the TiVo stream, expanding IMAX, enhanced ecosystems, advancing discussions with key OEM partners for auto stage and auto sense products progressing the adoption of our IP TV self-install solution and further developing the platform tool set for customers of perceive. The purpose of these initiatives is to facilitate long-term growth while growth will not be linear. As we look out over the next four years through 2025, we expect these efforts to help drive caterers in the mid single digits to low teens for the product business, excluding any growth from proceed and…

Thanks, John, as previously noted in order to provide more meaningful comparisons and discussing both GAAP and non GAAP and cash-flow based numbers prior periods are presented on a fully combined basis for the merged companies. Let me begin with financial results for the quarter it's various first quarter revenue was $221.6 million, which is on track with our internal plan for the quarter and a strong start for the year on a non-gap basis. Our operating expense, excluding cogs with $113 million down $25.1 million or 18% year over year due to lower personnel expense, reduce litigation costs and lower outside spend non-gap cost of goods sold of $27.2 million was about $1 million lower than in 2020 as higher costs hardware products such as the stream 4k were more than offset by a change in TiVo. Is it expense allocation methodology in connection with the merger and reduced reduced personnel expense. Cash taxes paid in the quarter were $5.9 million. Using the total cash tax number for the first quarter, non-GAAP earnings per share was $0.59. We ended the quarter with 104.9 million basic shares outstanding. As Jon mentioned, during the quarter, we bought back 1.1 million shares of common stock for a total of $25 million. Since closing the merger, we have spent $95 million to repurchase 6 million of our shares, yielding an average repurchase price of $15.87. We plant to continue repurchasing shares, consistent with our balanced capital allocation strategy. Moving to the balance sheet, we finished the quarter with $237 million in cash and investments. We also paid down $13 million of that during the quarter. Operating cash flow for the quarter was $26.7 million up from $11.9 million a year-ago on a fully combined basis, these $68 million from reduced spending changes in…

Thank you. [Operator Instructions] And we'll take our first question today from Richard Shannon with Craig-Hallum.

Hi, guys, thanks for taking my questions here. A few things, I could ask about, Jon I think you mentioned this on the last call but maybe I'd love to get a little bit more thoughts here, either qualitative or even quantitative if you’re willing to talk about your IP baseline at $350 million here, with some potential upside that could be in the low hundreds of millions of dollars annually. You call that OTT, Canadian pay-TV and semi IP, if I've got that, right. Can you give us a sense of both timing of when this could happen, and I know that the pay-TV part of litigation dependent, isn't also maybe split up to the degree to which you have visibility on which ones could be bigger contributors to that ultimate upside in the low hundreds of millions that you mentioned?

Sure, so big picture, the timing of getting certain things resolved in the IP space is always uncertain. But we feel very good about the pipeline. And I'm going to ask Samir to specifically address some of your questions, because I think you have it every day, so Samir?

Certainly, I think we feel good, as Jon said about the pipeline, really in all three areas. We think each one individually will contribute meaningfully to that growth that we identified. We haven't really sized any of the opportunities individually beyond what we had said with respect to the Canadian litigations. As we've said, while Canada is a smaller number of subscribers than what we had in our recent Comcast revolution, in the aggregate because we have a different pricing mechanism with some of the smaller operators, we do believe that we resolve all the Canadian opportunities in the aggregate, it will be at large as the annual contribution that we received from Duluth and Comcast ultimately. So Canada at large but we’re very confident and excited about the other opportunities as well.

Okay, great. That's helpful. A question on pay-TV here. Obviously, understand the industry dynamics here, what you're exposed to here, but you're also talking about some improvements in your IPTV business, certainly get some great activations from the small base in the first quarter. What's your visibility and outlook going forward this year? And ultimately, when does that make that pay-TV business kind of flatten out or even start to improve?

I think it really depends on the pace of adoption, Richard, I think a lot of our customers put on hold certain IPTV deployment efforts when COVID hit in part because truck rolls were not possible. And I think we're coming out of that now in a very positive way. I think the good news is we have quite a bit of business already booked in that, that we're going to be looking to service. So I think we have broader visibility, that this is going to be an attractive market for us and we should be able to generate meaningful growth. I think the question we're still grappling with is just what is going to be the exact timing of adoption, not only among specific customers, but across our broader customer base. But I think exactly as you point out, the IPTV element will meaningfully reduce some of the decline you're seeing and provide an important offset. And I think secondly, a key point of differentiation is that the monetization prospects for IPTV are significantly greater than what we've perhaps seen traditionally, in our pay-TV business and I think that that bodes well also as an offset and a potential growth driver looking forward.

Okay, that's all for me. I'll ask one question and jump back in the queue here. Last quarter, I think you described AutoSense is having 20 designs, in your update today, I wonder if there's any way you can quantify that in any way. And then we think big picture about AutoSense within the context of your Connected Car segments here. When does this become a material number for you?

We've talked about the potential ramp of more advanced safety systems, accelerating as you get into the ’23, ‘24 timeframe. I think the level of activity amongst our automotive partners, both Tier-1s and OEMs in and around this area, I think continues. And I think we’re on schedule to see the first release from a customer leveraging our solution here in the back half of this year. So I think as we may be get more information about the exact timing of when we may see more models and more customers come to market, I think we'll be in a better position to give you visibility. But I think without a doubt, this trend will accelerate over the next five to seven years. We're in the very early innings now. And it's going to continue to grow just because there's safety standards that are impacting how people are thinking about this. There's natural, I think broader desires within the auto industry to make the driving experience safer. And I think people have realized that this technology is really ready for primetime, in many cases to materially advance the in-cabin experience.

Just a follow-up on, Jon, you seem to be implying these 20 designs, or whatever the number is today are mostly kind of ramping in ’23, ‘24 timeframe rather than the sounds like one or maybe slightly more than one ramping in the second half of the year? Is that a fair understanding of the kind of the timeframe for deployment?

I wouldn't necessarily paint it in that exact fashion. I think you'll start to see multiple models in the course of this year. And then I think the interesting question is, how does that acceleration begin to hit ‘22. But certainly, as you get out, into ‘23 and beyond, you'll see more and greater diversity amongst those offering our systems.

Okay, that's helpful perspective. I'll jump out of line. Thanks, Jon.

Our next question will come from Hamed Khorsand with BWS Financial.

Hi, thank you for taking the question. This is actually Wahid for Hamed. Just one quick question. The big news, the big topic everyone is talking about is supply constraints on ships. And I wondered if you could provide a color on how that is impacting you. But more importantly, how it's impacting your customers especially when you're talking about Connected Auto? Thank you.

Sure. So, I would say, feedback from our customer base, which keep in mind we're doing business with all automotive brands sold in the United States, and extensively around the world, it is a mixed bag, I think without a doubt, it will impact the, would have been the size of the global automotive recovery. But I think, so far we think while it'll trim the overall growth number, by a few percentage points, we have yet to see, at least from people we're doing more business with as opposed to less an indication that it's going to materially impact our business beyond what we've already factored in and thought about in our respective guidance range. But I think this is an evolving thing, and we’ll need to stay closely.

Okay, thank you.

[Operator Instructions] We'll hear from Matthew Galinko with Sidoti.

Hey, good afternoon. And my first question, I think you mentioned integration of IMAX Enhanced into a streaming service. Any additional detail or color you could provide around that today maybe region or reach of the streaming service, are we waiting until the back half to hear something?

I think I can share that that its initial relevance will be in North America, but not much more I can share as it relates to just because of customer confidentiality issues. But I do believe, as we said that it's a significant development in the further advancement of the IMAX Enhanced ecosystem. So stay tuned, and we'll certainly have more to say about it in the future launch.

Great, thanks. And then I guess similar question, you referenced customer win, second customer win I think and perceive given where you’re building out tool sets. Maybe how long at least from the work that you need to do, do you think it'll take to get a product to the shelf? Obviously, there's I guess stuff beyond your control, but what's the time to market there? And I guess what's the motivation for a customer moving today on something versus waiting a few months or until maybe the next iteration of the product? Thanks.

I think from a customer standpoint, anything right, once looking to differentiate their products in the competitive marketplace, I think our tools availability has been a constraint. We've talked about that in terms of the people's independent ability to easily incorporate our platform into their products. So we're addressing that and as those tools become available later this year, I think that will certainly open-up pipeline opportunities for customers to develop and ship product and of course in ’22 and certainly ever more so as you get into ’23. From the folks we've already been working with quite extensively, I would expect that you'll see product in the marketplace, by early next year, not before, we expect to see some chip shipments in the course of this year. But I think, one of the other elements of this, as you point out is we're now a smaller piece in a bigger puzzle, given all the components, people are looking to need to incorporate to build some of these products. So I think, that is clearly going to be a factor that isn’t within our control, we'll have to see where it goes. But in general, we feel great about pipeline expansion, we felt very, very good about the technical development, pretty much on schedule with what we have laid out. And we think the market opportunity to proceed remains incredibly large.

Got it. Thank you. And then last one for me is on your slide deck, it looks like your TiVo stream roadmap, going from a three step to a two step. And so I'm curious kind of what got cut out from that that process? What have you sort of learned along the way that changed your perception of strategy?

Sure, so originally as we approached the combination, we have done a lot of planning around kind of a three phase approach, starting with the Stream 4K product, which is a dongle that attaches to TVs, moving into an embedded application, where we’ll be let’s say the preferred user interface choice on a broader platform but originally around the notion that it would live on top of Android TV. And then thirdly, going all the way into a much deeper embedded solution, embedded OS where we're a bigger provider, where we're really the sole primary interface for the broader content search and discovery and engagement. What has changed is last fall, Google came out and said that they intend to go beyond their core OS level offering and really get into the UX business, and in so doing it eclipses one's ability to I think reasonably be an alternative that might otherwise live on their lower level platform. And so we've really jumped to from Phase 1 which is Stream 4K directly into working aggressively on getting our solutions embedded in TVs in a deeper level. So that's essentially what's happened, that work is ongoing and continues very well, continue to have partner discussions that I think are quite engaged around it. And we think we have a pretty unique solution that drives higher engagement, and therefore greater monetization for everybody involved in the ecosystem. And so at the end of the day, I think we feel very good about the ongoing efforts that get us into Phase 3, our efforts are really designed not only to accomplish that, but ideally to try to move that timeframe in as much as one can. So we can build larger footprints of devices and in turn drive engagement and monetization around that.

Great, thank you.

Our final question will be a follow-up from Richard Shannon with Craig-Hallum.

Hi guys, thanks for taking my follow-up. Jon on your last call, you talked about your product license business expecting it to be roughly flat this year. You've maintained your guidance for the year, is there still expectations that can be the case and then does that help you? And would it help us think about that product business having overall flattened out and maybe being flat next year and possibly growing? Is that a viewpoint that you support at this point?

I think we expect growth in our product and people, we look out beyond ’21, certainly in ’22, I think that the question that is, one that will get a better handle on as we go in towards the end of the year is just how much growth, we'll be able to do over in these businesses based on various things, we're working on and their state of play. So, in short, we’re tracking our plans for this year, I think very well execution, both in a direct economic way as well as in a strategic way, remains very, very strong. And I think we'll have a very good year. And as we look forward into ‘22, I think it'll be an interesting discussion, when that time comes, just watching and our outlook has changed with perspective relative rates of growth we achieve going to ’22.

Richard, maybe noting some of the growth rates that Jon mentioned in his comments. As we look out, over the next four years, we're expecting CAGRs in the mid-single-digits to low teens for the product business. Excluding any growth from Perceive and in the mid to high single digits for the IP business.

Okay, that is helpful. Last comment, or last question for me, just on the IP spin-out last call you talked about this being in first half ’22 as we get one quarter close for that. Just want to confirm that still the expected timeframe. And would expect to hear more definitive plans about that as something in the next quarter? Or is that more towards the end of the year? How should we -- what should we expect there?

Yes, to first half of next year and you'll hear more as you get deeper into fall.

Okay, great. That's all for me, guys. Thank you.

That will conclude today's question-and-answer session. I'll now turn the conference over to Jon Kirchner for any additional or closing remarks.

Thanks, operator and thanks, everyone for joining today's call. I want to thank our employees for their dedication towards executing on our strategy and operating plans. I look forward to providing updates over the coming months and hope to see many of you at the upcoming technology and media conferences, we’re presenting at including Needham, Baird and JPMorgan. Operator, this concludes today’s call. Thank you.

Thank you. This concludes today’s call. Thank you for your participation. You may now disconnect.