Welcome to the Xperi Holding Corporation Virtual Investor Day. Thank you for joining us. Today, we'll share some exciting news about the future, information about our pending spin transaction, and the strategies, objectives, and growth plans for Adeia and Xperi Inc. as we move forward as separate companies. During our discussions today, we'll be sharing certain forward-looking information about our expectations and plans. As such, I draw your attention to the safe harbor statement covering our presentations. Today, you'll hear from members of both Adeia and Xperi's executive management teams led by Paul Davis, CEO of Adeia, and myself as I continue on as the CEO of Xperi. Before diving into each individual company presentation, I wanna provide an overview of Xperi as we approach separation and offer some high-level details about the transaction. This information is intended to assist you as you delve into the specifics of each business.
After each of the company presentations, representatives from management will be available for a Q&A. Now, let's begin. The world of semiconductors, consumer electronics, and media delivery has changed significantly over the past 30 years. Huge advancements in computer power, bandwidth, and storage have driven significant progress in the availability, quality, and personalization of media content. Silos have dissolved, and more media is being consumed anywhere, anytime, and on any device than ever before. These huge shifts have led to substantial innovation and industry consolidation. Xperi Holding Corporation is the product of a strong legacy of innovation and industry consolidation around core technologies that power the media platforms of today's entertainment delivery and higher quality experiences.
Behind the legacy of innovation, Xperi has some of the industry's most well-known brands, deep and long-standing channel relationships, a wide and diverse base of business, and a breadth of world-class domain expertise that can only be assembled through decades of industry partnership. It's these core attributes and our role in well-established industry ecosystems that set the stage for innovation and growth through the next industry transition as we see the continued explosion in content consumption, the continued march toward OTT streaming and AVOD services, and a future that will be defined by ever more advanced semiconductors and AI. The collection of IP, assets, know-how, domain expertise, and industry credibility within Xperi is highly unique and creates significant strategic advantage. It's our intent to carry that forward within each of our IP and products and services businesses.
Our objective is to enhance long-term shareholder value through separation, creating two pure-play focused companies. This will reduce operational and strategic complexity, sharpen management focus, simplify capital allocation decisions, and improve talent acquisition and retention. Adeia will focus on continuing to grow one of the world's largest independent licensing platforms in the media and semiconductor space by innovating and growing its patent base and aggressively licensing its portfolio of over 9,500 patent assets. Adeia is very profitable and has long-term licenses that generate significant recurring cash flow. Xperi will continue to create software and services that deliver extraordinary experiences and, in particular, focus on growing its independent media platform business, riding the advanced technology curve in automotive infotainment and safety, and creating disruption in the AI space through edge-based computing. All are big growth opportunities, and today, we approach them with sizable scale and footprint.
With a business serving up 16 billion discovery queries every quarter, powering 30 million video households, and licensing 90 million cars and billions of consumer devices. With that as background, let's talk about separation details. The management teams of Adeia and Xperi are in place. Boards have been identified, and separation agreements have been finalized between the businesses. Currently, we're effectively operating independently. All remaining administrative items necessary for separation will finalize by the end of September. The transaction details are as follows: The product business is being spun off and will continue to utilize the Xperi name. Shares will be distributed on a tax-free basis, with shareholders receiving four shares of Xperi SpinCo common stock for every 10 shares they hold as of the record date.
Currently, we expect Xperi to spin with $175 million-$200 million in cash and $50 million in debt incurred in the recent Vewd acquisition. The remaining IP business will be renamed Adeia and will keep $75 million-$100 million in cash and the remaining outstanding Term Loan B balance of approximately $760 million. Adeia's executive team will be led by Paul Davis, CEO, and Keith Jones, CFO. I, along with the rest of the current leadership team, will continue with Xperi Inc. after separation. The realization of this strategic milestone is the result of years of effort to transform and better position two larger businesses for independence, to better capture growth in the next industry transition, and unlock meaningful shareholder value. Let's now turn to the specific company presentations.
Welcome to the Xperi Inc. Investor Day presentation. We're excited to have you with us as we believe we're at an exciting juncture in our company journey. Today, we'll discuss industry trends and business progress that outlines our path to significant growth and improved profitability over the next three plus years. This strategy has been at the core of our merger with TiVo, and we've accomplished a lot over the past two years.
Today, you're gonna hear from a number of our executives who are part of a long-tenured and highly capable management team, and you'll also hear from customers and industry analysts. Let me quickly introduce the team, so you'll be familiar with the topics of their presentation. Geir Skaaden, our Chief Products and Services Officer, Matt Milne, our Chief Revenue Officer, Steve Teig, the CEO of our startup, Perceive, Murali Dharan, President and COO of Perceive, and Robert Andersen, our CFO.
Collectively, our executive team has deep industry experience, many years of working together, and a common commitment and passion to seeing the business succeed in its next exciting chapter. At the conclusion of the presentation, these executives will be available to address your questions. Here is our agenda for the presentation. After I cover some top-level themes, Geir and Matt will discuss some mega trends that underlie our strategy for growth in media platforms. I will then discuss how we think about the core versus growth markets within our business. Next, we'll turn to the disruptive and independent opportunity for growth that is Perceive, where Steve and Murali will walk you through the technical and business premise behind it, its addressable market, competitive differentiation, and why we believe we can create significant value through the industry trend towards edge-based AI.
Lastly, Robert will discuss our financials and capital allocation before turning it back to me for a quick summary, and then we'll turn to Q&A. Xperi fundamentally exists to help create and deliver extraordinary entertainment experiences that are inherently more intelligent, immersive, and personal. At the core, we develop technology, software, and services, but all that innovation lives in service of our objective of extraordinary experiences. For 35 years, Xperi brands have delivered game-changing innovations in imaging, sound, and beyond. TiVo revolutionized TV with the first on-screen guide and commercially viable DVR. DTS and its master quality sound changed the motion picture experience forever with the release of Jurassic Park. With a Scientific and Technical Academy Award, multiple Emmy Awards, and countless accolades across the connected home and connected car, our brands continue to transform our digital entertainment experiences.
Around the world, millions of consumers rely on our best-in-class brands at home and on the go every moment of the day. Whether DTS, HD Radio, IMAX Enhanced, or TiVo, our brands are widely recognized for their groundbreaking innovations, providing our partners with real value through features and functionality that keep customers loyal, engaged, and immersed in entertainment. Perhaps most importantly, these brands set the stage for an accelerating media platform business where we're pursuing an engagement-based recurring advertising and data analytics revenue stream through the continued growth in streaming to smart TVs, IPTV, and connected cars. Driving our business forward after separation is an executive team with substantial tenure, cohesion, and tremendous capability. The entire team is strongly focused to drive the business forward into its next chapter of growth. Effective at the spin-off, our board will consist of five directors, four independent directors and me.
Notably, the board will have strong continuity as the board chair and all directors have served the company for the last few years. Overall, the deep media and technology experience of our go-forward board is well-aligned with our business strategy. Before we delve into the organization of our business and discuss opportunities for growth, I wanna share with you how we're creating extraordinary experiences at home and on the go for millions of consumers around the world.
At Xperi, we make the ordinary extraordinary. Your favorite products and services are smarter, more immersive, and more personal. With our brands powering the devices you use, the cars you drive, and the entertainment you enjoy. We're making your experience exceptional in every way, at home and on the go, elevating content and how you connect with it wherever you listen, watch, and play. With truly immersive audio that puts you in the center of the action, the clearest, brightest visuals and expanded picture for optimal viewing, and wireless audio throughout the home so you can catch every moment. We're pushing the limits of sight, sound, and beyond. In the connected car, with the arrival of autonomous vehicles, there is increasing demand for video and gaming on the road.
We're surrounding drivers and their passengers in high quality, personalized audio and video, just like at home, with crystal clear, subscription-free digital radio, including more stations featuring your favorite programs and artists. We're raising the bar on safety and comfort with AI-powered in-cabin sensing solutions and other innovations that are shaping the dashboard of the future. With our Pay-TV solutions, get to your shows, movies, sports, and more faster than ever. Our iconic content-first user experience is the one place for live, recorded, on-demand, and streaming TV with brilliant imagery and relevant personalized recommendations across all your entertainment. Search less and watch more on the device of your choice from your broadband or cable provider or popular retailers. We continue to bring entertainment together, making it easier to find, watch and enjoy what you love.
Finally, our media platform enables advertisers to reach highly engaged consumers wherever they watch. By accelerating content discovery, we're creating monetization opportunities across devices, including smart TVs and streamers. Our unique footprint includes millions of traditional linear TV households and anyone streaming from our ad-supported content network. Networks and studios grow audiences while consumer brands build incremental exposure to their campaigns over time. The world's leading brands turn to Xperi for extraordinary experiences at home, on the road, and on every screen.
I think you'll agree we have a lot to offer. Our business is currently organized into the four markets we primarily serve. Within these markets, some areas are growing meaningfully while others are leveling off. We think about these areas as core versus growth markets, and we'll discuss this in much greater detail. In Pay-TV, TiVo gets people to the entertainment they love faster than ever with an iconic user experience, brilliant imagery, personalized recommendations, and more. It's the one place for all of today's amazing content across live, recorded, on-demand, and streaming TV. In connected car, DTS and HD Radio are transforming the automotive experience with high-quality, personalized multimedia, crystal-clear subscription-free digital radio, and AI in-cabin sensing, vastly improving entertainment, safety, and comfort.
In consumer electronics, we continue to push the limits of sight and sound, where DTS and IMAX Enhanced deliver immersive cinematic entertainment experiences with heart-pounding audio and clearer, brighter images everywhere people listen, watch, and play. In Media Platform powered by TiVo, our Media Platform drives engagement, retention, and viewership and adds recurring revenue for smart TVs, streaming media players, and cable set-top boxes. Our end-to-end advertising solution bridges the gap between linear and streaming. Now let's turn it over to Geir to discuss some of the mega trends supporting our business strategy. Geir.
Thank you, Jon. Now let's explore how key trends are impacting the media ecosystem and how Xperi's solutions can be a catalyst to shape the next industry growth cycle. The market environment continues to signal high streaming and smart TV advertising growth, with CTV advertising spend expected to double from $16 billion to $32 billion by 2026. We see recent evidence from the behavior of consumers, content publishers, and advertisers that supports this accelerated growth outlook. Consumers are starting to show subscription fatigue as they now engage with close to nine streaming services per household. As a result, it's expected that most content owners will follow Netflix and make more high-quality ad-supported programming available without a subscription.
As more consumers shift their viewing habits from linear TV to ad-supported streaming, there is no question advertisers will have to follow and shift more of their ad spend from traditional TV to streaming. Today, there's a significant gap between viewership and ad spend on streaming. For the first half of this year, U.S. viewers spent more time engaged streaming than linear TV. Only 22% of advertisers' TV ad budgets are allocated to streaming today, which sets up a market dynamic that supports accelerated CTV advertising growth. This high-growth market dynamic is impacting all participants in the CTV ecosystem. Consumers today are faced with more content choices than ever before, to the point that they need unbiased, personalized guidance in making these choices across live TV and streaming.
Big tech platforms see the smart TVs and the CTV advertising opportunity as their next frontier to extend their walled garden ecosystems by turning consumer viewing habits into their next valuable data asset. Content services face a hyper-competitive environment as they battle for new viewer acquisition and audience retention. Smart TV OEMs are at an interesting crossroad. Their opportunity to shape the future TV experience has never been larger. At the same time, most of them have neither the scale nor the ability to develop their own global video service infrastructure. These dynamics create an opportunity for an independent streaming platform to better service consumer content and TV OEM needs. Let's hear from Michael Goodman, Director of Television and Media Strategies at Strategy Analytics, on how he's helping companies understand this transformation.
Hi, I'm Michael Goodman. I am Director of Television and Media Strategies at Strategy Analytics, a research and consulting firm. As many of you, if not all of you, are aware, technological innovation, broadband, 5G, connected TVs are transforming the production, distribution, consumption, monetization, meaning entertainment, movies, music, games, television. If I think about what are the mega trends that are impacting the ecosystem, probably the number one trend that we think about is the growth of smart TVs. That there's probably about 1 billion smart TVs in use globally today.
The most important thing to think about is the impact of the growth of the smart TVs is that there's a major battle brewing for control of the OSs. This is particularly relevant because he who controls the OS gets to decide what apps are going to be on the smart TV and also where in the interface they're going to be positioned. Some of the challenges as we get the smart TVs that we're seeing for TV OEMs is that the big tech, Apple, Roku, Microsoft, all are creating walled gardens that are commoditizing the smart TV market. The smart TV manufacturer wants to be able to participate in this market. They do not want to be commoditized and just be relegated to the margins that they're making on retail.
A lot of these TV OEMs, probably 40% of them, they lack the scale to be able to develop the content relationships necessary to be able to build their own proprietary platform. From the consumer's perspective, they simply want to easily find, watch, and enjoy the content that they want. They don't want to have to manage a whole bunch of services. There's a number of benefits that if I was a TV OEM that I would be looking for. Number one, I'm looking for an OS partner that will allow me to continue to own my own brand experience. Number two is I'm looking for a partner that I'll continue to retain the direct relationship with the customer throughout the lifecycle of my product. I think there's a real opportunity for Xperi here.
That Xperi, first of all, has a relationship with many consumer electronics companies based out of their years of TiVo experience. In addition, Xperi has the TiVo platform. It's an independent platform, and I think many of the TV OEMs are looking for that relationship with an independent OS that's counter to the big media companies out there. Instead of working with Google and strengthening Google with their Android product, this gives them an alternative. That TiVo has an existing 4K experience. They have a complete tech stack, a global video service infrastructure, and all of these things combined make the Powered by TiVo experience a viable alternative for TV OEMs out there. The other thing that's going to help is clearly the Vewd acquisition.
Vewd is going to help speed the deployment for the TiVo operating system for Stream OS on connected TVs and smart TVs. It's important to note, I think, that Vewd has some form of presence in about 70% of smart TVs, be it browser, app stores, complete turnkey OS. There's a preexisting relationship there, and that's going to help speed the deployment of Stream OS.
Michael clearly describes what are the opportunities, the obstacles, and probably most importantly, how ecosystem participants need to plan for the future. With the CTV growth expectation as a backdrop, the annual global production of smart TVs is growing in mid-single digits at a current level of about 185 million, with 100 million of that being shipped into high-value CTV ad markets such as Western Europe and North America. With the exception of leaders Samsung, LG, and a few others, today, smart TV OEMs have limited opportunity to shape their customer experience and participate in this CTV streaming growth cycle. In fact, 46% or more than 40 million smart TVs a year are shipped into Western Europe and North America by leading electronics manufacturers who lack the scale required to support the technology, content, and monetization requirements of a streaming media platform.
Big tech walled gardens offer an alternative, but they take complete control of the user experience, turn the TV customer data into their product, and influence retailers to commoditize smart TV display distribution to be based on size and price only. TV OEMs need to build a brand affinity from high-engagement devices such as smart TVs, as this brand affinity drive demand for their high-margin white goods businesses such as washing machines, dishwashers, and kitchen appliances. Finally, to effectively compete long term with competitors who operate their media platforms, smart TV OEMs need to find a path to participate in the long-term economics of the growing CTV ad market. We believe we can disrupt this market with our independent streaming platform.
With a platform that can deliver better viewing engagement with unbiased content-first user experience, where live hybrid TV and streaming services fully integrate in a personalized way that make it easy to find, watch, and enjoy content across siloed ecosystems. Unlike big tech platforms, we allow TV OEMs to brand the experience, retain customer ownership, and participate in the long-term CTV monetization throughout the five-year life cycle of TV ownership. In short, we're delivering a smart TV powered by TiVo, not a TiVo TV. At Xperi, we understand what it takes in terms of video service infrastructure, that is the capability to scale and have a best-in-class streaming media platform.
Since TiVo first integrated streaming media services and launched IPTV over three years ago to the TiVo Xperi merger, launch of the TiVo Xtend CTV monetization platform, and the recent acquisition of Vewd, we have methodically added components that puts us in position to service this market with a truly differentiated offering for smart TV OEMs while delighting consumers with a better TV experience. Today, we power the video services for more than 30 million households around the world. We have all the relevant content relationships. The TiVo+ network is active today with more than 160 ad-supported channels, and we understand media delivery to smart TV with hundreds of millions of connected TVs shipped on the Vewd middleware platform. We have global metadata coverage with over 50 million active personalized content discovery users that produce 16 billion discovery queries a quarter.
This gives us insight and context to ensure we deliver the best experience across live TV, hybrid broadcast, and streaming. For the end user, this will turn the chaos of exponential service growth into empowerment and delight. TiVo OS delivers universal unbiased discovery across all sources, live TV, hybrid broadcast and streaming, and presents content to the user in a personalized way to make it easy to find, watch, and enjoy the content they love. TiVo OS has been tested with TiVo IPTV and our TiVo Stream 4K streamer. We have strong proof of driving industry-leading engagement. Although we expect streaming to continue to grow its viewership share, we're still operating in a 50/50 environment where we expect consumers to retain strong affinity for live TV content such as sports, news, and local programming.
In developing our unbiased content-first discovery platform, we consistently find we can deliver AVOD FAST engagement 170% above industry standards by presenting an integrated, free, familiar, and frictionless experience personalized to the end user. Engagement drives viewership, and viewership is our platform for monetization. OEMs are taking notice of our differentiated offering. As a matter of fact, we just announced our first signed OEM with Vestel, the largest TV producer in Europe and one of the top three global TV producers under such brands as Toshiba, Hitachi, JVC, and Polaroid. We'll launch Powered by TiVo smart TVs as part of a multi-year, multi-country, multi-million unit agreement with the first Powered by TiVo TVs expected to ship in the first half of 2023. Now, let's hear from Vestel's VP of Product Management and Marketing, Baris Altinkaya, on why they chose Xperi as their partner.
The biggest trend in our industry is the increase in the number of the TV OS platforms available for consumers to choose. Just like all trends, this brings advantages and disadvantages. While it's now easier than ever to access great content, the standardization of the TV sets is becoming a big challenge. At Vestel, we are customer-focused and pride ourselves for our customization abilities. The second trend is the increase in the number of the streaming services. This is creating challenges when it comes to finding the content you want to watch. Consumers are expected to associate the titles they like with the streaming platforms, and this is where the challenge starts. Vestel is already turning these trends into opportunities. Let me explain how. Vestel manages about 150 brands. We describe ourselves as retailer of the retailers.
With the number of the brands we serve, we are uniquely positioned to understand the need of the customers, act quickly on new trends, and always deliver on their expectations. This makes us an accelerated business incubator. We pitch all projects to our customers, and with the amount of the feedback we receive, we are able to quickly bring the projects to perfection. We will partner to bring unique offer to market to our customers. Xperi and Vestel have a lot of common values. Both companies value their customers, are agile and willing to test new ideas. Together with Xperi, we will quickly implement and test new features and leverage potential of mega trends for the benefit of the consumers. The most critical attribute we are looking for is a customer-first approach. The second is the team.
The Xperi team is full of people who are truly focused on their customers, and together we will develop Europe's most wanted TV OS. We are excited about what we can do together so that consumers can find, watch, and enjoy the content they love.
Thank you, Baris, and we look forward to how together we can enhance the consumer experience, making it easier to find, watch, and enjoy the content they love. In closing, we fundamentally believe the smart TV market needs a neutral platform. Unlike existing platforms, we will allow user choice and control, enable subscriber acquisition and retention for content services, and provide recurring revenue for TV OEMs. We benefit from our leading IPTV platform. TiVo revolutionized TV with the original DVR and still leads in IPTV. We benefit from a long history of delivering flexible solutions to customers that simplify entertainment for consumers. Our award-winning user experience drives TV demand and viewership, leveraging strong content relationships to enable our content-first approach. TiVo redefines streaming to drive increased smart TV demand, audience viewership, and platform revenue. Our unique business model will power ecosystem adoption.
Based on decades of experience growing profitable CE and entertainment ecosystems, the TiVo business model is designed to better reward partner adoption than competing platform. Now let me hand it over to Matt Milne, our Chief Revenue Officer, who will offer more insight into our monetization platform and revenue growth expectations from our independent streaming platform. Matt?
Thank you, Geir. We have now outlined why we expect to take market share and be able to grow an active user footprint. Now let's turn to how we'll monetize that footprint. In 2020, we launched TiVo+, our own curated ad-supported content network. We've grown TiVo+ to include more than 160 channels across dozens of genres. Additionally, we offer over 100,000 free ad-supported video-on-demand assets covering popular film and television programs. We've developed partnerships with other free video applications such as Pluto, Freevee, and Tubi to bring the content to the platform. This content is all free and fully monetized. As audiences fragment across multiple platforms and content sources, it's difficult for advertisers to reach an over-the-top consumer on traditional cable and broadcast advertising.
Advertisers look to ad technologies and data to ensure they're reaching as much of their target audience through digital and traditional advertising approaches as possible. Let's hear from Alex Stone, SVP, Advanced Video & Agency Partnerships at Horizon Media. Horizon is the third-largest U.S. media agency, recognized as one of the world's 10 most innovative marketing and advertising companies.
I'm Alex Stone, the SVP of Advanced Video and Agency Partnerships at Horizon Media. The trends that we're really seeing in the streaming space have been ones that evolved as a result of the pandemic when consumption trends really changed for the viewers. They went from linear to a streaming world in which they're watching video on their favorite apps in the OTT and CTV environment. As a result, advertisers have played catch up in a pretty quick way in which they moved from a linear world to one of direct IO and quickly to a programmatic world in which inventory was bought and sold on the marketplace in the form of private marketplace buys or programmatic guarantees.
This really allowed advertisers to have more control over frequency and monitoring and management of that frequency, but also data management and the use of first-party data for more precise and better targeting. By not aligning to the trends that we are seeing here, you're at risk of really aging the audience in which you're reaching. Broadcast networks and companies that primarily work in the linear space, they will be more than happy to increase your audience size.
Instead of targeting an audience from 18 to 49, "Let's target 18+, and we could do your entire buy in linear." Well, what ends up occurring is you end up reaching an audience of 54+, because more often than not, those are the people, the consumers who are a little bit slower to move over to the streaming world in which the broad audiences are now flocking towards. You really need a holistic video strategy. It's no longer a TV strategy and a digital strategy and a social strategy. It really is one approach to video in which we are thinking about all screens being equal, right?
Now when you watch a video on your social platform, that video and the frequency of that video should really be viewed in the same regard as a video being seen on your flat screen in your living room. It's all about eyeballs and reach and understanding where those eyeballs are from a national perspective, and how am I going to manage that frequency holistically, and how am I going to make sure that the right audience segment or right target is being reached? When I look for partnership and I think about what a partner like TiVo could offer, I think about scale. I think about transparency in terms of understanding where that programming is being seen, whether it's device level, but more importantly, genre and content and broadcast network and actual programming. That's extremely important to me.
Of course, having the ability to utilize data, whether it's TiVo's first-party data or being able to onboard our advertisers' first-party data for more pristine targeting.
Thank you, Alex, and thank you for your business. Let's look at what we have done to address advertising. Since launching TiVo Stream 4K in 2020, we've built an end-to-end advertising stack for connected TV called TiVo Xtend. A key feature of our value proposition is the implementation of our first-party linear TV viewership data. This data is sourced from the passive capture of program and commercial tune-in from our nationwide and anonymized sample of consumers watching television on our DVR hardware, as well as our Pay-TV footprint. Whether our TV data is used on its own or combined with third-party data sets, we create target audience segments based on deterministic behavior to meet custom campaign objectives.
We activate the targeted campaign across over 200 premium free ad-supported television channels, including TiVo+, using our proprietary data to measure the campaign's incremental reach and performance against the marketer's goals. We optimize the campaign by incorporating results from those advanced metrics to drive greater performance. For example, we recently ran a connected TV campaign for CBS, where they wanted to promote a new reality show. We were able to use our proprietary first-party data to target reality TV viewers who are cable subscribers on connected TVs. This campaign was successful in delivering CBS 25% incremental reach beyond traditional broadcast and cable TV. The connected TV campaign also drove new viewers to the show more effectively than traditional cable TV advertising.
Turning to our business model for connected TV and our TiVo OS, this is all about signing new partners, driving growth in the active user footprint, ensuring our content is compelling, and trafficking advertising to the platform. Over two years, starting with the launch of TiVo Stream 4K, we've developed and optimized the platform, as well as delivered key metrics useful in predicting our expected growth. Looking at viewership engagement, CPMs, and fill rates, we're confident we'll be able to grow this segment of our business exponentially to over $140 million of revenue in three years. A very exciting growth opportunity. Now let's turn to our other independent streaming platforms. One platform targets broadband and Pay-TV operators under the TiVo brand, while another is enabling content to connected cars called DTS AutoStage. Broadband into the home continues to increase at an extremely fast pace.
Today, 82% of broadband usage in the home is for video consumption, where end users continue to demand increasingly more over-the-top content services. This proliferation makes finding the content you want to watch increasingly difficult. TiVo's brand promise is to bring all entertainment together to find, watch, and enjoy. Our user interface and personalized search and recommendations make it easy to access all this content without having to change the input or continually swap apps. Think about it. If you wanna watch an episode of The Lord of the Rings: The Rings of Power on Prime Video, you can link directly to that content from the TiVo user interface.
When you're done watching, simply push the TiVo button on the remote control, and you're back to a consolidation of other content you may wish to watch, like live sports or news from your local broadcast or Yellowstone from Paramount+. No more app switching. Users can seamlessly move from content to content as easy as channel changing. Our first signed and launched customer for TiVo's video over broadband IPTV service is RCN, now part of a larger company called Astound Broadband. Astound has approximately 1.5 million total customers, 400,000 of which are video subscribers in 11 states across the United States.
Hi, my name is Patrick Murphy. I'm the Chief Technology Officer of Astound Broadband, and we are the sixth-largest cable company in the United States. I think we are not uncommon to other companies that offer a video service. When addressing the streaming that's happening and the loss in video customers, we felt that we needed to have something that enabled a customer to go into an app and didn't get into what I call a walled garden, where they're stuck in that app. They can search content across multiple apps, whether that's Hulu or Prime or Netflix or Disney, and able to see where that content is so they can easily access it through the TiVo interface. We have a unique relationship with TiVo that dates back to 2010 when we became the first TiVo or MSO to offer TiVo to our customers.
We've seen that evolve over the years into a more sophisticated UI, one that enables customers to easily watch by simply looking across various sources, whether that's our own on-demand library or it's in apps or it's live programming, which is a major plus for our customers. With the advent of IPTV, we were one of the first to jump on board and work through process of that. New customers can pick up a remote control if they've never used a TiVo before, and it basically is intuitive on how they can navigate through the channels, navigate through various sources and be able to find the content they want. Voice control enables customers to find sources through hundreds and hundreds of channels very easily. It has really been a game changer when it comes to searching for content.
The integration also with Google Assistant enables customers to check weather, to look at what's playing at the local theaters, help their kids with their homework. It really is a major benefit. Again, TiVo has figured a way to tie all these different aspects together to help us serve our customers better.
Thank you, Pat, for your business and loyalty to TiVo. Our business model for video over broadband is straightforward: subscriber households, subscription fees, and advertising monetization. We recently reached a milestone of 1 million households across both North America and Latin America. This ramp is a result of both new customer wins taking market share from others, as well as conversions of existing lower ARPU cable households to higher revenue-bearing IPTV households. We monetize our product and service with subscription fees on a per subscriber per month basis, as well as advertising revenue from ad-supported content and in-guide advertising units. Depending on the territory and the type of service our customers choose, we can net up to $80 per household per year, with an average in 2022 expected to be $35 per household per year.
Now I'll turn to how Xperi is bringing the independent streaming platform to the connected car. First, whether because of government regulations or the desire to provide a better experience in the car, over 90% of new vehicles produced will be capable of a broadband connection. What will this experience be like in the car? Today, despite the availability of multiple application-based music services, radio, that's right, free radio still represents 70% of all music listening in the car. Why? It's easy to use, it requires no setup each time you get in the car, and it's free. Here is Adam Thomas, VP of Product from FORVIA, a partner of ours for over 20 years. FORVIA is the world's fifth-largest automotive technology company with $25 billion in revenue.
Hello, I'm Adam Thomas, Vice President of Product for Faurecia Clarion Electronics in the Americas region. The industry continues to be disrupted by the elements of CASE, Connected, Autonomous, Sharing, and Electrification. These elements will continue to drive the industry for years to come and will enable new use cases, user experiences, and even new business models for our industry. Many consumers still prefer to get their content by listening to local radio stations, so having a strong radio tuner continues to be important in the future. Implementing HD Radio reception technology costs just a fraction compared to years past, and it's an ideal pairing to our software-defined radios and remote tuner modules. One of Faurecia's primary strategic areas of focus is in cockpit of the future. We need key technology partners that share our vision. Xperi brings solutions that help us realize that vision.
DTS AutoStage is a feature to watch, and it's a prime example that Xperi continues to innovate. It's good to see the company leverage their experience in consumer and mobile electronics industries to bring new hybrid features to the automotive space that can really excite consumers. Xperi has been a long-term partner of FORVIA's, particularly with their HD Radio technology. HD Radio technology is ideal for the automotive environment. It enables our infotainment systems to provide significantly improved radio reception, sound quality, and a much richer user experience.
Thank you, Adam, and thank you for partnering with Xperi to deploy DTS AutoStage. Building on more than 20 years since the launch of Xperi's HD Radio platform, we have a significant market opportunity to capitalize on infotainment in the connected car. Xperi's award-winning DTS AutoStage brings the dash to life, upgrading from a simple radio experience to adding rich images of artists, radio station logos, and deep music metadata of content all delivered over IP. We'll be adding incremental features such as lyrics, voice search, and personalized recommendations. For model year 2021 onward, Mercedes-Benz deployed DTS AutoStage, and we expect several more car companies will be launching starting in Q4. The footprint we're building will be enabled for advertising on the user interface, where we can promote new artists, new album releases, and much more, as this display is valuable real estate to marketers.
Additionally, we're seeing growing interest from our customers for video services in the cabin. As we imagine the future evolution of in-vehicle entertainment, as autonomous vehicles become more of a reality, and as bandwidth continues to improve, we expect video services to be added to the platform. Having an upgradable, updatable footprint will be critical to rapidly capitalize on this emerging opportunity in the future. Our business model is based on licensing technology solutions in new cars shipped globally, upselling the install base on new features as they become available, and building advertising on top of the footprint over time with scale. Let's summarize our business model and growth expectations for the high-growth independent streaming platforms. First, combining TiVo OS with the balance of our monetization business, including licensing of our TV viewership data, advertising on our electronic program guides, as well as adding our recently acquired Vewd business.
The results are a business that currently generates about $45 million of revenue annually. With increasing active users, expanding engagement, and average revenue per user, we expect this business to more than triple to over $190 million annually in a three-year timeframe. Next, having exceeded 1 million paid subscriber households, our TiVo Video over Broadband independent media platform is currently generating approximately $40 million of revenue from subscriber fees and advertising. Over the next three years, we expect revenue to more than double to over $100 million due to growth in households as well as increases in average revenue per household. Lastly, we licensed the DTS AutoStage platform on a per-unit basis for specific features. Over time, we expect to license additional features and add monetization to the platform.
DTS AutoStage is a long-term play where revenue will grow to $10 million in three years with more substantial revenue in the five to seven-year range. In summary, we're expecting these growth areas to triple from $87 million to over $300 million in the next three years. This is over $200 million of new revenue growth for Xperi. Related and another high-growth area in connected cars is DTS AutoSense. As mobile devices and infotainment in the car become increasingly pervasive, driver and occupant distractions are a reality. We are seeing industry and regulatory bodies aim to reduce the number of accidents and associated casualties resulting from distracted or drowsy driving. As well as by leaving a child or pet behind in a hot car companies are building in technologies to solve these challenges that contribute to in-cabin safety.
Europe has mandated that all vehicles from model year 2024 will require driver monitoring. Other similar mandates and requirements are happening across the globe. In 2022, the market for camera-based driver monitoring systems is currently over $300 million, representing 7% of overall vehicle shipments, and is expected to grow significantly to over $2 billion by 2027. We've quickly established ourselves as a leader in this market. This is DTS AutoSense.
The award-winning DTS AutoSense in-cabin sensing driver and occupancy monitoring solution, deployed at the edge and privacy-centric, is improving safety and experience for all occupants. With autonomous vehicles evolving consumer expectations, our top minds are rapidly innovating to create the in-cabin experience of the future and redefine it as a sensational third space. Drive extraordinary with Xperi.
Ever since Denso selected our driver monitoring solution and started mass production in 2019, we've been awarded six OEM programs with more than 80 vehicle design wins. We're happy to share that the world's first DTS AutoSense occupancy monitoring solution is now shipping in BMW vehicles from Q4 2021. This is just the beginning. Given our strong imaging and sensing technology heritage, of which you'll hear more about later, we've been successful in building our relationships with car manufacturers to win more in-cabin monitoring business. Recently, we announced the availability of the industry's first combined occupancy monitoring and driver monitoring solution into a single camera. We're pleased to announce that not only have we won multiple awards in this area, we've also closed additional wins for model year 2025 with a major premium brand for full production broadly across multiple car lines worldwide.
Our pipeline is strong, and we expect more announcements soon. Whether it's our independent streaming platforms in smart TV, Pay-TV operators, cars, or related platforms of high growth in vehicle safety, our growth future is shaping up nicely. This would not be possible without our core products providing key technologies as well as significant profits to fund these investments. With that, I'll turn it over to Jon to review how these growth opportunities fit within our core businesses. Jon?
Thanks, Matt. As you can see, some very powerful and large trends underlie our future strategy and growth. Supporting these initiatives is a sizable, stable, and profitable core business. This core serves many benefits in addition to profit. It provides deep industry presence, credibility, brand awareness, and insights that power our growth prospects for the future. Our Pay-TV core business primarily consists of guides, consumer hardware and subscriptions, and discovery solutions, where we support 5 billion hours of viewing each year. Notably, IPTV, the real growth part of this market, only makes up 17% of the total business, underscoring the tremendous growth potential with key industry partners in the years ahead.
The consumer electronics business is a large, mature, and very profitable business where we've licensed billions of products, do business with every major brand in the space, and where we continue to innovate around core components of media delivery such as audio, imaging, and video. Many of our core customers here are also strategic to our media platform growth initiatives. Connected car is an exciting space with lots of new technology and growth potential. Underpinning this market is our long-standing and very profitable HD Radio franchise, which supports 2,400+ radio stations, has licensed 90 million cars, and where we do business with all 42 brands sold in the United States. HD Radio technology is also used in more than 30 countries around the world.
In total, our deep history and platform in the automotive space sets the stage for the long-term growth of our AutoStage and AutoSense initiatives, where today only 6% of our automotive revenue comes from these new programs. If you step back and put our core versus growth elements in perspective, we have a mature, diversified, and stable business from guides and enhancement technologies that generate significant profits and cash flows. This core business gives us incredible insight into advancing core technologies and services for our independent media platform growth initiative, where there's a large growing market, we have meaningful differentiation, and we have the capability to service at scale. Robert will talk about the numbers later in the presentation, but the top-level takeaway here is that the core is quite stable, provides profit for reinvestment, and provides the basis upon which we will drive significant future growth.
Now before we turn to our financial section, we'd like to spend some time on an independent opportunity for disruptive innovation and growth in the AI space. The origins of Perceive relate to some of the very insights you gain from having deep and well-established businesses and domain expertise across the device and semiconductor landscape. Xperi's extensive presence in billions of consumer devices has us deeply familiar with the challenges our customers face and the hurdles in technologically advancing the state-of-the-art. For example, one trend we began to see in imaging years ago was the increasing use of neural networks and early-stage machine learning to solve existing and new problems.
Our early experimentation and development confirmed a belief that machine learning was going to impact just about everything we do, particularly if it could be made accessible and powerful at the edge, where intelligence, quality, accuracy, privacy, latency, and cost could be optimized at the device to deliver ever more extraordinary experiences. In response to this opportunity, which is structured to be independent from the core strategic priorities of the media business, we chose to fund and incubate a startup to pursue our ideas where we could attract some of the industry's best talent and pursue our industry-changing goals. Let me now turn it over to Steve to tell you more about Perceive, its groundbreaking technology, and its progress to date. Steve?
Thanks, Jon. I'm Steve Teig, the Founder and CEO of Perceive, and with me is my business partner, Murali Dharan, who's President and COO. The whole purpose of Perceive is to upgrade the idea of sensing into perceiving, to enable gadgets of all sorts to understand what's going on around them, to recognize objects, sounds, and faces, to understand speech, gestures, and language, and to achieve all of this using the most accurate neural networks, the ones you see only in data centers today, but running anywhere, in battery-powered devices, in tablets, in cars, and so on. Why not just run on the cloud? Because by almost every measure, running in the cloud is more expensive, in delay, in energy, in money, and of course, in privacy and security. After all, no one wants video and audio from inside their house stored in someone else's data center.
Running at the edge is challenging. Because of the power and size constraints, the models used are crude, so your home security camera can recognize almost anything as a person. Looking at wearables and the metaverse, you don't wanna wear a heater on your face, and today's AI chips are too expensive and power-hungry for most consumer applications. We realized that to enable inference at the edge required a clean sheet of paper, rethinking how to approach the problem from a mathematical perspective. Deep learning seems to have forgotten that efficiency has been the driver of innovation in computing for the last hundred years, more computing per dollar and per watt. That's the essence of Moore's Law, advances in computer architecture, algorithms, and even theoretical computer science.
Weirdly, deep learning is going in exactly the opposite direction these days, using 1 million parameters five years ago, 1 billion parameters two years ago, and up to 1 trillion parameters today. The reason for this anti-efficiency is that as impressive as deep learning is, it is based largely on folklore, on empirical recipes rather than mathematical principles. We are changing that. Our Ergo chip is tiny, yet it can run large data center class neural networks at speed using only milliwatts of power rather than watts. It does not require external memory or external processing to run these networks either. No one else can do that today. We represent neural networks in a new way, and we designed Ergo specifically to take advantage of our more compact and more power-efficient representation. We're bringing more than silicon to the market.
In addition to our Ergo chips, we have developed Precipio, a software suite for training neural networks in a principled way, compressing them by 50x and often a 100x. We provide an SDK or software design kit with C- libraries that enable the rest of the customer system to talk to Ergo. Finally, we have a model zoo, a representative and growing collection of currently popular networks that we've ported to Ergo. We provide the source code for these models as well as our training recipes to simplify the customer's experience. To get a sense of how we compare to other offerings, take a look at this chart. It shows the performance and power efficiency of the major competitive edge AI chips using a popular benchmark, ResNet-50, a 25 million parameter network that can recognize 1,000 different kinds of objects in an image.
The y-axis measures speed in inferences per second, and the x-axis measures power efficiency as inferences per second per watt. There's a wide disparity of raw performance out there, three orders of magnitude, but the range of power efficiency is extremely narrow. The reason for this is that all of the other chips implement neural networks using the same underlying gadget, an array of matrix multipliers. Some are big, some are small. Some are analog, some are digital. Some use advanced manufacturing, some don't. They all do the same computations in fundamentally the same way. We don't. As a result, we are here. Our performance is about equivalent to that of NVIDIA's autonomous driving chip, so a lot of computing horsepower. Our power efficiency is unmatched, 50 x better than the NVIDIA chip and more than an order of magnitude better than anything else in the market.
We are not stopping here. Our roadmap for future chips will massively increase our performance from here while preserving and even advancing our unique power efficiency. Next, I'll turn it over to Murali to tell you a little more about Perceive and our market opportunity.
Thanks, Steve. In bringing our products to market, we're initially focusing on substantial segments that require high accuracy and significant compute performance at low power, so security cameras and video conferencing as well as laptops and XR. From there, we aim to expand into drones, smart home, and of course, in-cabin monitoring, particularly given Xperi's strength there. Each of these markets is substantial and growing at an attractive rate, and we're well-positioned to serve all of them. Currently, we expect the first Perceive-based products to enter the market in 2023. We have an extraordinary team of about 55 people innovating across the technology stack from machine learning to silicon and software. We've filed over 100 patents to date and about 35 have issued so far.
Xperi's continued investment in Perceive enables us to combine our breakthrough innovations with Xperi's wide array of complementary technologies and long-standing customer relationships to serve attractive growth markets. Steve, back to you.
Thanks, Murali. To sum up, Perceive represents a large disruptive opportunity for Xperi. We uniquely offer data center class AI for the edge and for power-constrained applications. We offer a platform for edge AI that combines our principled approach to deep learning with both chips and the software with which to program them. Our substantial technical advantages offer near-term business opportunities plus a large potential upside in a variety of growing markets as we look forward. Now let me turn it over to Robert for the financial highlights.
Thank you, Steve. I'm Robert Andersen, the CFO of Xperi. Let me tell you, I've seen a lot of change over the past eight years that I've been with the company, but I've never been more excited about the products we're introducing into the market. The impact they can have on our financial outlook. My goal in this section is to provide a financial profile of Xperi's product business as a standalone company, and to translate the market opportunities described by my colleagues into dollars and cents. First up, the company's financial profile. You've already heard that Xperi benefits from having an established core business developed over many years and diversified across a large customer base that provides the basis for investing in growth initiatives.
We're leveraging these core capabilities to deliver independent media platforms described in detail by both Geir and Matt that provide a pathway into large and growing markets. This growth in high-margin revenue, along with careful spend management, provides a solid recipe for accelerating profits and creating returns for shareholders. Let's look at 2021 to get a starting point on our financial profile. Using numbers we published in our Form- 10, we had revenue of just under $500 million and a gross margin of 74% and a profitability of $14 million, or about 3%. If you include additional costs required for a standalone business, that puts our profitability at right about break even.
Jon covered our four product categories, and within these, we have three primary revenue models, per subscriber fees for our Pay-TV customers, per unit fees for our customers in consumer electronics and connected car, and consumption-based monetization within media platform. In some instances, within consumer electronics and connected car, we have fixed fee or minimum guarantee arrangements, but these are not common. Overall, we're fortunate to have a high-margin business for the first three categories, and we expect media platform margins to improve from about 30% today towards 70% as that business grows. In short, we have a business model that can scale. I haven't been satisfied with our revenue growth over the past couple of years. True, the product business has faced headwinds, including supply chain disruptions in the consumer electronics and automotive markets.
We worked through the integration of two companies while still in the early stages of the pandemic. Yet, despite these challenges, we've still been willing to invest in the business for longer-term growth. As we look out over the next three to five years, we expect a significant shift in the growth profile with media platform leading the way. For Pay-TV, which is expected to be roughly flat over the next few years, the profile will gradually move toward growth as the market shifts towards our IPTV offerings. Consumer electronics is expected to be a single-digit grower, while connected car is expected to grow in the low to mid-teens, along with the continued rollout at long last of our solutions for connected media and in-cabin monitoring. I really like this next graphic because it brings together everything we've been talking about today into a single view.
Over time, we expect the growth portion of our business to dominate the revenue mix and to continue growing at a rate of about 50% per year. Meanwhile, our core business is expected to decline at about 5% per year. This mix shift yields a compound annual growth rate in the low- to mid-teens%, and in my view, that would be quite satisfactory. I should note these projections do not include Perceive, which, as Steve and Murali described earlier, is an additional opportunity for Xperi to create shareholder value. While it's important to grow, it's also important for that growth to be profitable. I expect 2022 to be in the break-even range similar to 2021.
Going forward, we expect to see profit improvement from three main things, reduced costs from the completion of business efficiency efforts, reduced spend on high-profile initiatives as they begin to yield returns, and operating leverage from growth in high-margin revenue. Putting these factors together, we're setting our Adjusted EBITDA target at 25%-30%, with timing to that goal primarily dependent on the speed of revenue growth. As we think about near-term outlook, we're expecting this year's revenue to be between $490 million and $510 million, which represents modest growth from last year and profitability at roughly break even. For next year, we're expecting mid-single-digit growth for revenue and an improved profitability of about 10% Adjusted EBITDA. We will, of course, have more to say about 2023 when we give guidance early next year.
As Jon noted earlier, prior to the separation, we expect the combined company to finish the quarter with $250 million-$300 million in cash and investments. Of that, $75 million-$100 million would stay with the remaining company, Adeia, and $175 million-$200 million would capitalize our product business, Xperi Inc. As for the debt, the term loan will stay with Adeia and the $50 million note for the Vewd acquisition will go with Xperi. Overall, each company will have sufficient capital to pursue respective business objectives. Lastly, looking at capital allocation, the product business will have a strong balance sheet of $125 million-$150 million in net cash at separation, which provides ample working capital for the business. Xperi will focus on growth through organic investments in innovation and opportunistic M&A to accelerate growth.
Let me now turn the meeting back to our CEO, Jon Kirchner.
As we wrap up the formal part of today's presentation, I wanna reiterate a few key points. First, there's a large and growing media platform opportunity in our business, one that we believe will provide $ hundreds of millions of revenue growth over the next three-plus years. Second, as our business continues to scale through the various growth initiatives, we will improve profitability and ultimately achieve our target of 30% EBITDA margin. Third, there's a major disruptive independent opportunity for AI at the edge, and we believe Perceive is uniquely positioned to serve that market and will create a lot of value over time. Taken together, these growth initiatives, along with our strong base of core revenue and profit, differentiated market position, deep domain expertise, broad channel relationships, world-class technology, and established brands, sets the stage for a very exciting new chapter for Xperi.
On behalf of the entire management team, it's been a pleasure to share our story and prospects with you today. We appreciate your interest in Xperi. We'll now turn to our Q&A session. Thank you.
Thank you for joining us for the live question and answer session at Xperi's 2022 Investor Day. The live question and answer session will be approximately 30 minutes, followed by a short break before we begin the audio presentation. For those of you joining us live stream, there is a form to post questions. These questions will alternate with those of our analysts. Now let's get started. Our first question comes to us from an analyst, Nicholas Zangler at Stephens. Nicholas? Maybe until we hear Nicholas.
Hey, guys.
Oh, there he is. Yes.
All right. There we go. Sorry about that. Great presentation, first off. You know, you guys stated that you could have four to five TV OEM partners within three years. Obviously, that's very exciting. I'm curious if you could talk just about how far along you are in discussions with other OEMs outside of Vestel. I'm also curious if that might include a U.S. launch as well. Would you also be willing just to provide any details on how you plan to share in the software economics with these TV OEM partners? Thanks.
Sure. Geir, do you wanna address that?
Yeah, sure. I think it's fair to say we're in active conversations with really all TV OEMs that do not have their own proprietary platform. Clearly we're very excited about the fact that Vestel, which is one of the largest independents, choosing to commit to our platform. As you think about going forward, we do expect to add additional OEMs over the next, I would say, 6-9 months. We certainly can't talk to that in any detail until those agreements are in place, but also that the OEMs are comfortable with announcing the fact that they're gonna be on our platform. Because they see it as a competitive information for themselves and how they compete with others.
Please be patient, but we certainly are very confident in the number we put forward in terms of penetration. Most importantly, we think that there's clear need for an independent platform that allows the OEM to brand the experience to retain customer ownership and to participate in the long-term economics. As to that participation, you know, we're not disclosing clearly any details, but what I think we can say is that it's meaningful when you think about the overall margin profile that a TV OEM gets from a TV sale and a customer relationship, that that's also very attractive for them.
It looks like we have a question from our audience. The question is: What is the rationale for the spin, and why do you believe separating will create value for shareholders?
I think you know, a couple of things that are really important. Number one, you know, by separating, we eliminate certain strategic and revenue dyssynergy because there are both strategies and tactics that sometimes live in conflict where you have product relationships and you have a desire to assert IP in the case of audio. I think secondly, by reducing complexity and simplifying the stories, it'll be easier for both management to focus on its key priorities, as well as for analysts in the street to deal with comparative valuations. Also believe that by simplifying the story, we will be able to attract more analyst coverage, broaden the investor base.
Lastly and importantly, as we think about the horizons of investments in the business, you know, I think we'll be better positioned separately to take things forward. In the process of that, it'll improve execution, which will drive more growth and profitability and ultimately result in meaningfully greater shareholder value.
Thank you, Jon. We have another question from another analyst. We have Matthew Galinko on the line from Maxim. Matthew?
Hi. Thank you for taking my question. This is on the Perceive opportunity. It sounds like the dev tools have come a long way in the last year. I think I heard you say that the models that were in the SDK are open source, but correct me if that's wrong. Can you talk about how the customer engagement has changed since maturing the software part of that stack? Because I know we've been talking about it pretty regularly for a while.
We have. Maybe ask Steve to touch on some of the technical aspects, and then maybe Murali can address the customer engagement.
Sure.
Sounds good. Thanks, Jon. Indeed, just as you say, the tools have improved enormously. At this point, it is a much more straightforward exercise to take even a very complicated, very large network or a combination of networks and be able to put them onto our chips. We have numerous customers working with both Perceive, our software, and also the SDK, building not just machine learned models, but also full systems from front to back, and building those applications on their own with only very limited support from us. Murali, how has that changed the picture?
Yeah, I think, you know, customers really wanna use the tremendous amount of data that they have collected, to train their models. With the tools now, they're able to do that, and they're able to see that they are able to put their production models on, our Ergo chips and see stunning results in terms of the low power and the performance that they're seeing on the chips. We're certainly very hopeful that we will see products from customers in 2023.
I think, you know, one thing I might add to, you know, your comments is, you know, there's a difference between doing testing, you know, and having the confidence to say, "I know this will work in my production environment, you know, and therefore I can more broadly deploy the product." I think we have closed that gap to where people can now see it, and not only know that it'll work on a test basis, but as they train their models ultimately, that you can be successful in deploying the product.
Thank you. Next up, we have a question from our audience. The question is, how will your strategy change as a standalone company?
You know, I think the strategy fundamentally really doesn't change. In part, because we have really spent the last two and a half years coming into the TiVo- Xperi merger, you know, with a very clear plan in place about how to both transform and improve both the IP and the product business. In so doing, you know, where we sit today is we are meaningfully further along that curve to where we can look ahead over the next three to five years and say, "We've got robust pipelines. We're gonna see meaningful growth. We've improved our market positions. We have improved the talent base on our teams." We've really set the stage, you know, for this next exciting chapter.
I think, you know, therein lies, you know, the good news, which is there's a lot of consistency in what we've been working towards and what we've been doing. It's not new and different as a function of the separation. It's just the continuation of the very things we've been trying to achieve.
It looks like we have Hamed Khorsand from BWS Financial on the line with a question. Hamed?
Hey, good morning. My question was on the TiVo OS that you were showing. It looks very much like TiVo Stream 4K. Could you just talk about how Vewd fits into the growth projections you're offering today? Is Vewd accelerating the rollout of the TiVo OS?
Yeah. Matt, maybe ask you to take that.
Yeah, I'll certainly start. Thank you for the question. Certainly our user experience is all about bringing content forward. This is about any form of content that a consumer wants to watch, whether it's a linear feed from an operator or over the air or content coming from a subscription video on demand service or a free ad-supported television service. Bringing all that entertainment together to make it very easy for a consumer quickly to get to the content they're looking for, consume it, and get back to another personalized recommendation. You're right to say that the user interface is very much similar in terms of that metaphor. What we found is that by doing that on a personalized basis, we can achieve actually far greater viewership than simple app switching.
That's really what the business model's about, is driving the footprint, making sure that we have users that are engaged in watching content and then monetizing that content. On the Vewd acquisition side, I think the clear activity here is about the core basis of technology that helps us enable a smart TV OS. Obviously, they're in tens of millions of units, smart TVs around the world. We believe it fundamentally accelerates and improves our probability as well as our efficiency to get these smart TV OSes to market. Geir, do you wanna add anything to that?
Yeah. I think there's a couple things from a TV OEM's perspective. One thing is when they think about their supply chain, making sure that they can have choice as it relates to chipsets, making sure that there's an efficient implementation, and also that the content onboarding is smooth and seamless. Vewd is, you know, has a leading application layer for content. They have the leading HTML5 browser. To Matt's point, the fact that we really enable content across linear TV, hybrid broadcast, as well as streaming. The hybrid broadcasting point is really important when you think about the international markets, and Vewd is a leader in terms of implementation and certification of hybrid broadcast standards in all markets. It gives us a global reach right out of the box.
In that sense, it accelerates our roadmap as well as creates a better experience overall.
Yeah.
Thank you. It looks like we have another question from our audience. The question reads, "As a new standalone company, which companies do you believe comprise your new comp set?
Robert?
I can take that one. I think there's probably no singular company that is appropriate. Because we're in several different markets. If you look at the different pieces that we are in, for consumer electronics, certainly Dolby is a great comparable. For the media platform business, Roku is, you know, right down the fairway. I think maybe other companies there are VIZIO or Brightcove would be decent comparables. For the automotive, you know, or the connected car piece, a really good comparable is Cerence, similar business model. Then on the Pay-TV side, I'd say Amdocs or Harmonic would be kind of decent comparables. If you look at the overall company, the best two comparables are Dolby and Roku.
Yes. Thank you. Next up we have, on the line, Richard Shannon from Craig-Hallum with a question. Richard.
Hi, great. Thanks. Probably two questions from me. The first one, the easy one. It wasn't clear to me whether there's any expectations for growth coming from Perceive into the kind of three to five-year model of 15% CAGR. Maybe I'll just stop there and just make sure that answered, and then I have a follow-up quickly.
Yeah, I can take that one. Perceive is, as we've said already, a very unique business. We haven't included that piece of the business in our longer-term growth objectives just because it is sort of outside the standard media platform play. Not included in our three to five year projections. Not because we don't believe there will be revenue, but just because it's difficult to project exactly what that's gonna be because it's such a significant opportunity, and also it's not necessarily down our primary fairway with the media platform growth.
Okay. Makes sense. Just wanna make sure. I couldn't tell from the presentation. I guess my follow-up here is, maybe for you, Robert, here. Trying to do some quick math here. I'm not sure if I got the numbers right here. If we look at that 15% growth over the next three years, and then getting to, I think, a 15% EBITDA margin, what does that say for OpEx growth here over time? You've obviously invested in the last few years. My math is right. It looks like fairly low growth here. Are we talking about a lot of leverage from an OpEx point of view across the business in that timeframe to get to that EBITDA margin?
Yeah, you're exactly right. EBITDA margin that we've indicated is that we're expecting to get out to 25%-30% EBITDA margin in the next three to five years. That growth, we really see that accelerating. We gave sort of mid-single digits for 2023, but that continues to accelerate and get you to that 12%-15% growth rate over three to five years. From an expense standpoint, we actually do see some synergies. Well, actually, I should say some efficiencies as we complete our cost transformation, so that is an impact in 2023. We're not figuring a lot of expense growth. It's just not required. We're already making the investments for the growth trajectory.
Yeah. I would add, Richard, that I think, you know, the pace of growth, and we, you know, kind of estimate that, you know, mid-teens CAGR as we look ahead over the next couple of years will be, you know, gated and/or accelerated really based on footprint growth. Which is, you know, depending on the number of TV OS customers we have and the pace of their deployments, you know, given that you can generate meaningful ARPU on a per installation basis, you know, there is tremendous, you know, upside and the extent of the growth will largely depend on how fast that deploys. We're obviously very excited about Vestel. We've got others in the pipeline that we're very excited about.
To the extent that they deploy as expected or faster than expected and we turn on the monetization engine, you know, it doesn't take a massive installation base to drive very large increments of growth. I think, you know, that's something we'll be tracking very, very closely as we look ahead.
That's right.
Thank you. Our next question is from the audience. It reads: Can you talk about the reason of keeping Perceive with the new Xperi as opposed to Adeia, and why is it better with the new Xperi?
Sure. I'll take that one. I think, you know, as we think about the unique opportunity that is Perceive, it is a software and chip platform that's very unique, and it is, we believe, largely going to be sold into, naturally the broader electronics market where the rest of Xperi's business lives. And there's a lot of expertise and opportunity to work together in ways that can really take advantage of the unique properties of Perceive. We can also naturally, you know, work our channel relationships and the depth of our domain expertise in a bunch of disciplines and think about how Perceive can completely change the game. Xperi is a more natural home, you know, in this phase of Perceive's growth and development.
I think long term, we've got tremendous confidence that Perceive ultimately will probably broaden its horizons beyond the business that Xperi is in today. At that point, you know, we'll naturally think about, you know, the primary opportunities and the different paths and alternatives to really maximize value for Perceive and ultimately for shareholders. You know, as opposed to it being in the IP context where Adeia is really more focused on innovating and licensing those ideas, Perceive is, you know, a software and chip platform that fits much nicer into the Xperi umbrella.
Just to add a comment there. One of the benefits of our developing Perceive within the Xperi context has been being able to combine the tremendous depth of video and audio expertise that pervades Xperi with the ML expertise that is part of Perceive. During the development of Perceive, that collaboration has been key.
Yeah. That's great. Great point. Yeah.
Thank you, Steve. It looks like we have another question from an analyst. Nicholas Zangler from Stephens is back on. Nicholas?
Yeah.
I'm curious on, I've got a few here, if you don't mind, but the first one I'll just start. You know, the ARPU of $20-$30 for the TiVo OS, I'm curious if that is net or gross, of any potential take from the OEM partner.
Geir?
Yeah. I think that the ARPU, I think what we're expecting is to meet kinda industry standards. When you think about the engagement and the viewership we're seeing in our platform, we're very confident that combined with our ad stack will deliver what I would expect to be industry standard numbers or better. I think when you think about the math you're seeing there, that is expected to be net math to us if you look at that slide. Clearly it will vary by geography, region, so there are multiple components, but the average that I would expect to be at what you'd consider as industry standard numbers.
Got it. That makes sense.
Yeah.
Can you just talk about your advertising revenue generation strategy for the TiVo OS? I'm just curious how you guys are set up there. Are you utilizing a direct sales team currently, or is advertising going to be primarily generated through programmatic means?
Sure.
Yeah.
Take that.
Yeah. Sure. Thank you. So today we're in market with both a direct sales team as well as programmatic. Over time, as we kinda see the footprint grow, we'll continue that approach. We think it's important to have a balanced approach. We think that's what our customers want as well. We've stood up a complete ad stack already. We're operating that today. Everything that you heard in the presentation from, you know, straight ad servers, the ability to bring in both our first party data set as well as third party data sets, the ability to do custom targeting to audiences, as well as to do measurement and optimization.
We'll continue to do that, but we're working with, you know, all the leading DSPs, leading SSPs today, so we're certainly also gonna transact and do transact today programmatically, and that's what delivers the ultimate ARPU that we've been talking about.
You know, I think, Matt, a key point, you know, in and around this, is that we're not sitting here today saying we're gonna go out and build that ad stack. You know, it's what we've been quietly doing as you think about the last two years and the fact that we already have businesses that are up, and we're monetizing it, and we're creating segments, and we're obviously monetizing them. We sit in a really, I think, very strong position. As we turn on more footprint through CTV, we can immediately turn on the monetization and basically run it, you know, run it through the system that we've already built that I think we're very, very pleased with.
Yep.
Yep.
Understood. I'll squeeze one more in, if I can. If you look at what a TV can be in the future, you know, it can really be the source of e-commerce transactions, just like the mobile operating system is today. You know, others like Roku and VIZIO, they've built payment options that they control. I'm curious if TiVo and Xperi have an equivalent of that Roku Pay, VIZIO Pay, and obviously, you know, given that, has any potential split in the economics there also been determined with TV OEM partners? Thanks.
Yeah. I would say, Geir, if I may, that, you know, nothing we've announced. Fair to say that, you know, we're thinking deeply about the future of TV and, you know, even though obviously there's a tremendous amount of activity in and around the, you know, the movement of ads out of linear, you know, TV and the opportunity to deploy them in CTV, we think much beyond that about the experience. That experience involves all kinds of things, including, you know, how you can further personalize, you know, that experience, where how you can learn more about the environment, so you bring in things like Perceive. You know, how you can think about as people engage around e-commerce.
There's a whole host of, you know, both thoughts and ideas where we can bring domain expertise to bear, and that'll partially be a function of the evolution of compute power on those TV platforms. It'll partially, you know, be a function of driving consumer acceptance and new features and new ways to do things. You know, but at the core, we believe very, very strongly that we've not only got a vision for today that will drive growth, but a much bigger vision where we really are uniquely positioned because if you look around the broader TV OS space, there are very few people that have the domain expertise that we do across a whole bunch of different disciplines, whether it be imaging and audio and UX, discovery, et cetera, et cetera. Look forward to good things to come.
Geir, anything you'd add?
Yeah. I think maybe an immediate point I would make is that, I think what we're seeing, we're here to empower the user with an unbiased search and discovery platform that really breaks down the silos. If you look at a lot of the other ones you mentioned, a lot of the search and discovery is essentially designed to keep you in their proprietary silo. We're building a platform that goes across, you know, linear TV, hybrid broadcast, and streaming, and we're delivering that in a content-first approach that's personalized to the user in an unbiased way. I think that's gonna make meaning.
Right off the bat, be meaningful innovation when you think about the user experience, where you can search for your content on your premise, not having to remember which app to go to or otherwise having to navigate through silos as they're trying to purposefully keep you within their walled garden. I think that, for the user, will represent something new and innovative right off the bat.
Let me just add one final thing to that point 'cause I think it's really important, which is it may be counterintuitive, but that by helping people get to the content they want faster. They actually consume more content. They spend more time engaged with their devices, which is in everybody's best interests, including content providers and the people running the various services. I think we have a vision that is really about just driving much deeper engagement, and as that engagement grows on a per day, per hour, you know, kind of basis, so will the monetization. I think we're aligning ourselves very well with that core thesis, and we believe that the same thing will ultimately apply in automotive, for example, as you see ever more entertainment consumed in cars.
Yeah.
Thank you, Nicholas, for your questions. Our next question comes from the audience. Given the lack of growth in the past few years, what do you believe your business will grow over the next three to five years, and in particular, profitability?
Yeah. We, I can take that one. You know, we've talked about growth being sort of 12%-15% over the next three to five years. We're confident in that growth because we've made the investments already and have the pipeline and the deal wins. You know, when you look at connected car, we've sold into BMW and Mercedes. You know, the VIZIO win, excuse me, the Vestel win is a huge one for our connected TV. We've also had some really great wins and pipeline in the IPTV business. We really feel confident about the growth going forward. That growth helps us leverage this very high-margin business to increase profitability.
We've given a target of 25%-30% on an Adjusted EBITDA basis, and that's just us leveraging the business and really getting the benefit of the growth over the next three to five years. We have a lot of confidence in that.
If I can add something on the core business. You know, the core business that's highly profitable. Many of the components that are part of the core business are essential for building these independent media platforms. If you look at underneath our Pay-TV business where you have search and recommendations, you have conversation search, you got metadata. Whether you look at our HD Radio business as a footprint towards getting into connected car independent media platforms or even the quest for quality and streaming with IMAX Enhanced and DTS:X in streaming services that make streaming just better as part of a independent media platform. You know, the core business, while as you say, is highly profitable.
Yeah.
It really is a foundation for the growth engine for the independent media platforms we outlined in the presentation.
Yeah. Well said.
Yeah. It looks like we are moving on to our last question, which will come from Hamed Khorsand from BWS Financial. Hamed?
I just had two questions. First off, a follow-up on the question that was just asked. What's the timing as of this growth that you're expecting over the three years? Should we expect a steady kind of increase in revenue, or is this going to all come at once in year two and three?
We have given an indication for next year of single-digit growth for 2023, but you can expect that growth to accelerate over time as these programs really kick in. Keep in mind, you've got this you know, streaming growth and this automotive growth that you know, kind of works its way in. We expect growth to accelerate, and again, that we've kind of indicated a three to five year timeframe for that growth.
Yeah. Robert, maybe I'd just add. You know, if you think about where we are on TiVo OS in particular, we expect first TVs in 2023 as they, you know, basically get turned on. You know, you'll have a full cycle of monetization in 2024. So I think it's fair to say that you'll see, you know, lower growth rates in 2023, but really setting the stage for much more aggressive growth rates as you get into 2024 and 2025. The exit rate in 2025 should be meaningfully higher than that CAGR average, you know, we're talking about over that three years, in part because, you know, as you're just turning on footprint and the whole engine is running, you get the benefit of that from TiVo OS.
Of course, you get the benefit of years of work in the automotive pipeline where people are finally, you know, shipping their various solutions in greater quantities across more models, et cetera.
Yeah.
My other question was, why is growth not higher despite annualizing the Vewd acquisition?
Go ahead, Robert.
Well, I think we've still as we look out over the next year or so, you know, we are moderating our projections just because, you know, there's still supply chain challenges. As we kinda come out of this period, you know, it will take a little while for some of those things to work out, particularly on kind of the high-end chips in places like game consoles where we don't expect that to moderate until well into next year. There's some challenges there. Again, as we look out, we have that visibility to the growth. Even though it's more moderate next year, having that backlog and having the design wins now gives us confidence in the growth over the next three to five years.
I might add that, you know, when you look at our connected TV and media platform segment of our business, that, as outlined in the presentation, is approximately $45 million today growing to over $190 million in that three-year timeframe, so a pretty substantial growth there. When combined with the rest of the independent streaming platforms, that whole business is right now under $100 million, projected to be over $300 million in that same period of time. That reflects both Vewd's existing business as well as the enablement of the TiVo OS platform business that we'll monetize through advertising monetization. I think it partially comes down to a core, you know, issue of as you sit here today in a bit of an uncertain environment where we've got inflationary and economic pressure, supply chain issues.
You know, we believe it's more credible to say we have more modest expectations going into next year, despite the fact that we have incredible confidence, as Matt says, around the pipeline and really where we're going. You know, this has been an effort that is the result of years of team, you know, hard work. I think we're finally, you know, turning the corner on where we can really see this, you know, come to fore as models hit the street in car. We continue to make progress in the core CE business. IPTV is ramping. Lastly, and most importantly, the independent media platform business begins to take shape and take flight, you know, as we get our first TV manufacturers on board in 2023.
Thank you, Hamed, for your questions. I will actually ask Jon to provide any final thoughts.
Sure. I would like to thank you for your time today. I think it's, you know, absolutely, an exciting time for us. I think we're going to create a lot of value, not only, you know, by the separation process and improving focus and reducing complexity and, you know, making it easier all the way around not only to run the business, but ultimately for investors to think about the business. I think more than that, you know, as we think about key trends that we're attached to, you know, this is the growth in content consumption, you know, particularly OTT and streaming. Growth in infotainment and automotive safety. These are big, long trends that we are uniquely positioned, we believe, to take a place and ultimately drive revenue growth.
In turn, that'll create a lot of shareholder value. You know, couldn't be more excited to take the next step of the journey. From here, you know, it's all about continued execution. Thank you for your time today. Jill.
Thank you. That concludes this live question and answer session. Please stay tuned. Adeia's presentation will begin in two minutes. Hello, everyone, and thank you for joining us. My name is Jill Koval, and it is my pleasure to welcome you to Adeia's first ever Virtual 2022 Investor Day. We have an exciting agenda. In a moment, you'll hear from Paul Davis, President and Chief Executive Officer of Adeia, who will provide a strategic overview of Adeia as a new standalone entity. Paul will highlight the key pillars that underpin the strength of Adeia's licensing model and its growth strategy, including updates about the IP portfolio and drivers of past and future success. Following Paul, you'll hear from Dr. Mark Kokes, Chief Licensing Officer and GM of Media.
Mark will discuss the pervasiveness of video adoption and how Adeia intends to capture this opportunity, given both the strength of the media patent portfolio and the robust underlying growth of its innovations. Dana Escobar, Chief Licensing Officer and GM of Semiconductor, will discuss how Adeia intends to be an essential partner to the semiconductor industry and capitalize on its leading hybrid bonding and advanced process node technologies. Keith Jones, Adeia's Chief Financial Officer, will discuss Adeia's financial value proposition, financial position at separation, long-term financial model, and its capital allocation and growth strategies, and how it all comes together in Adeia's long range plan. At the end of our speaker presentations, we will have a live question and answer session. All of the materials presented today will be available on the Adeia website shortly following the event. Now let's get started.
It is my pleasure to introduce you to Adeia.
Everything we do starts with a great idea that we turn into an innovation that shapes the way billions of people consume entertainment from how they explore it, to how they experience it, to how we enhance it, and the billions of consumer devices in an increasingly connected world. Adeia broadly licenses our patented technologies to advance entertainment everywhere. Yes, our name may be new, but our roots run deep with decades of continued innovation. While we are proud of where we have been, we are even more proud of where we are going. It all starts with ideas, and that's why ideas will always be at the heart of Adeia.
Good morning, and welcome everyone. I am Paul Davis, President and CEO of Adeia. I am thrilled to have the opportunity to introduce Adeia as a new standalone entity with a compelling and viable business model which leverages our strong business fundamentals to generate enhanced financial performance in the near and long term. Adeia's IP licensing platform provides access to innovations which allow our customers, which include many of the largest media, entertainment, consumer electronics, and semiconductor companies, to create their own best technology solutions and products. It all starts with great ideas. Our internal engineers and inventors have a singular focus, innovate in our target markets to create the most advanced, revolutionary, and forward-thinking solutions to the problems facing media and semiconductor companies. Our internal innovation engines for media and semi generate approximately 85% of our current overall patent portfolio.
Following separation, we will accelerate our internal innovation as we continue to further grow the size and relevance of our patent portfolios to enable and enhance next-generation shifts in technology and fuel the growth of our business. At Adeia, we are extremely fortunate to have a world-class team of licensing executives, industry leaders, engineers, and inventors who have exceptional track records and will drive our continued success. Let me introduce the Adeia leaders you'll be hearing from today. Dr. Mark Kokes, Adeia's Chief Licensing Officer and GM of our Media business, joined the company approximately one year ago. Mark has led three IP licensing organizations and has been instrumental in acquisition and IP licensing strategies. Mark is frequently commended by industry press as one of the most influential IP professionals in the world.
Dana Escobar, Adeia's Chief Licensing Officer and GM of our Semiconductor business, is a proven leader with over 25 years of experience in IP licensing. Dana has experience in all phases of IP licensing and monetization and has led numerous IP licensing programs. Dana joined the company almost two years ago after an impressive career at leading semiconductor and technology companies, including LSI Corporation, now Broadcom, Sharp, and GE. Keith Jones, Adeia's Chief Financial Officer, recently joined Adeia from Rambus, where he served in several key finance roles since 2018, and most recently as interim CFO. Prior to joining Rambus, Keith served as the worldwide Corporate Controller Vice President of Finance, and Principal Accounting Officer at ShoreTel. In addition, he served as CFO and Vice President of Finance at PDF Solutions and has also held senior leadership roles at other technology companies.
You will also hear from our CTO of Media, Serhad Doken, and our Vice President of 3D Portfolio and Technologies, Laura Mirkarimi, as they discuss innovation at Adeia. At Adeia, our focus is on innovation first. Approximately 85% of our portfolio is organically developed. We have world-class engineers whose primary goal is to invent the next great idea. Our engineers and inventors are able to focus on what is coming next in media and semiconductor technologies. They then work with our talented attorneys to convert those ideas into a powerful patent portfolio that covers fundamental aspects of the industries we cover. Adeia's diverse IP portfolio, at over 9,500 patent assets, has been a key contributor in our ability to renew and complete new license agreements with world-leading media, entertainment, consumer electronics, social media, and semiconductor companies.
Adeia's media portfolio covers fundamental aspects of the video experience across platforms, including how consumers search, record, stream, discover, and watch entertainment. As video continues to expand into all aspects of our life, we are well-positioned to benefit from this meta trend. You will hear more from Mark on this trend and how we plan to participate in it later on. Our semiconductor portfolio development is focused on hybrid bonding and advanced process nodes. We believe our industry-leading hybrid bonding portfolio, which we refer to as Direct Bond Interconnect or DBI, is a transformative and generational platform. Further, our advanced processing node portfolio covers fundamental aspects of semiconductor manufacturing, especially as the industry moves to smaller and smaller nodes. Dana will discuss these exciting opportunities for Adeia in more detail shortly. Our history and focus on innovation and portfolio development is widely recognized by the industries we serve.
We succeed as a result of our leading patent portfolios and through our understanding of our customers' needs in building long-term relationships. Our goal is always to reach market-based license agreements with all of our customers through deep technical and business engagements that demonstrate the value of our portfolios. The benefits of this approach are proven out with long-term license agreements and our ability to repeatedly renew and expand relationships which we believe benefit both us and our customers. This successful licensing model leads to best-in-class financial results with EBITDA margins in the mid-60s%.
This profitability will allow us to continue to invest for growth as we look to expand our patent portfolios through internal R&D and strategic acquisitions, as well as pay down debt and return capital to shareholders. Our near-term strategy is to extend our annual baseline revenue by securing new and expanded license deals in new media, such as additional OTT and social media companies, the unlicensed Canadian Pay-TV operators, and continuing to rebuild our semiconductor business. We will also look to continue to grow our patent portfolios. One of the primary benefits of the separation for Adeia is that we will be able to better focus our investments on our core business. To that end, we intend to grow the key asset in our business, our patent portfolios.
We have set an aggressive goal to grow our portfolio 10% year-over-year, and we'll focus this growth not only on media and semiconductors, but also adjacent markets. This investment in new technologies will pay long-term dividends as our customer base expands and existing customers continue to value our ever-growing portfolio. As we expand our patent portfolios, we will look to drive market adoption of these technologies through thought leadership, marketing, and collaboration with industry-leading companies. By accelerating market adoption of our innovations, we will position ourselves to further increase our annual baseline revenue as we execute new, improved, and expanded license agreements with our customers.
Our fundamental innovations shape the way millions of people explore and experience entertainment and enhance billions of devices in an increasingly connected world, from TVs to smartphones, regardless of location, from home to work to on-the-go, and in all types of entertainment experiences. From Pay-TV to OTT to social media and to the metaverse, managing content and connections in a way that is smart, immersive, and personal is precisely what our innovations do. Our innovations broadly cover all aspects of the entertainment experience. These include, among others, guidance, discovery, search, personalization, advertising, imaging, and content storage. Adeia licenses its patented media innovations for use with traditional linear television, both in North America and internationally, and increasingly in connection with OTT, Direct-To-Consumer, and social media services that provide access to entertainment inside and outside the home and on a broad array of devices.
We believe the continued growth of video consumption, the evolution of how consumers explore and experience video, and the need for content storage on high-performance computing present opportunities for us to continue to develop patentable innovations and expand the industries we serve. This ever-expanding growth of video consumption also drives the need for advanced high-performing semiconductors. As the boundaries of Moore's law continue to be pushed, Adeia's semiconductor business is focused on technologies that will enable the industry to continue to enhance performance that power the devices that we use to watch and enjoy entertainment. Adeia licenses its patented semiconductor innovations to leading semiconductor companies and partners with the industry to accelerate the adoption of these technologies.
Over the past 20 years, our combined licensing business has generated over $9 billion in revenue, and we have built an impressive annual revenue baseline of $375 million, driven by long-term contracts and a history of successful renewals. We will continue to grow this baseline through strategic investments and expanded opportunities as a result of being a standalone IP licensing company. We will also be able to pursue opportunities in new media that were previously not available as a combined company. Building off the strong baseline and our best-in-class EBITDA margins, we will look to increase the size and scope of our licensing model. We are well-positioned to do this because we have the right team, the right process, the right markets, and the right assets. Our licensing professionals have an incredible track record of building and expanding licensing programs.
Collectively, they have led licensing programs that have generated billions of dollars of revenue. At Adeia, we have also developed world-class processes from innovation to patent portfolio management to customer engagements. We excel at the nuts and bolts of IP licensing. We also target large and profitable markets to license our technologies. We have a deep understanding of the ecosystems in which we play and how to approach those opportunities to maximize value. Lastly, our portfolio of patented technologies in media and semiconductors is widely recognized for its breadth, quality, and strength. Our current assets, combined with our planned portfolio growth, will drive our future success and expansion of our leading licensing platform.
Putting it all together, we are well-positioned to capitalize on our best-in-class financial performance with a strong baseline revenue supported by stable recurring revenue and long-term contracts, near-term growth opportunities in new media, semiconductors, and Canada, and long-term expansion into adjacent markets. Importantly, you can measure our progress through the following key metrics that we will update you over time. One, increasing our annual baseline revenue to over $500 million in the next five years. Two, growing our patent portfolio at least 10% year-over-year, principally through organic R&D. Three, expanding the number and scope of new media and semiconductor license agreements. Four, growing the portfolio applicability and executing new license agreements in adjacent markets, including gaming, automotive, advertising, e-commerce, and streaming audio. We look forward to updating you on our progress towards achieving these goals.
Before we dive into more detail on the media and semiconductor businesses, let's first hear from two people that drive our innovation engines, Serhad Doken and Laura Mirkarimi.
Adeia has deep roots in two different markets, media and the semiconductor business. I focus on the media side. Adeia's media roots go back 40 years to the onset of the media industry.
I focus on Adeia's semiconductor research and development, which has a rich history about three decades long of bringing innovation to the semiconductor market. One example is chip-scale packaging. In our semiconductor business, we focus on inventing solutions that will enable the next generation of product enhancement for our licensees, such as a smaller, faster, denser interconnect for enhanced computation, data transfer rates, and thermal performance.
I have worked at both traditional product-focused companies and other research-focused companies like Adeia. At a product-focused company, you're working on a short-term cycle, maybe the next three to nine months. You're just trying to get a product out to market, make it work as quickly as possible. Here at Adeia, we take a broad and deep approach. We're trying to come up with what's going to impact not just a single product, but the entire industry by inventing solutions to industry's tough problems and thus unleashing new products and services. You have to look at it with an eye towards the future, and that's what's very appealing to me.
One of the areas we've been working on is a new technology that's so exciting because it's a platform technology. Our hybrid bonding, or to be more specific, our Direct Bond Interconnect, allows product-based semiconductor companies to innovate their product roadmaps for generations to come. The technology has been adopted by various segments of the semiconductor industry, including image sensors, memory, and high-performance compute applications. We see this trend continuing into new segments such as displays, RF modules, and artificial intelligence modules. Our innovation story begins by assembling many creative experts from a variety of specialties that come together to think beyond today's semiconductor devices. We create prototypes in the lab to realize our novel concepts. We test to the industry standards, and we publish that data to share the value and performance of the fundamental technology. We continue to develop our innovation roadmap by repeating this process.
We develop know-how and share that with our licensees through technology transfer programs. We're an extension of our customer's R&D team. We work with several of the top 10 semiconductor companies in the world who initiated a license and technology transfer after a functional demonstration program. With our hybrid bonding technology, we are working toward a holy grail of advanced packaging, bringing in an era of ubiquitous heterogeneous integration.
We put our inventions out to the public through papers, presentations, blogs, open source code, and our patents. Everybody can read and learn from that. The exciting thing is that our recent innovations in augmented reality will help merge the physical world with the digital world, seamlessly mixing the virtual and physical objects. I think a big seismic shift is happening right now. It's not visible to general public, but the infrastructure is getting built. In a couple of years, devices using our inventions will have a significant impact on how we communicate, how we advertise, how we engage, impacting the entire media industry. At Adeia, we're working to shape the way millions of people explore and experience entertainment and enhance billions of devices in an increasingly connected world.
Hello. My name is Dr. Mark Kokes, and I'm excited to be here. Today, I will speak with you about the strength of the Adeia Media patent portfolio and the robust underlying growth of its innovations. Adeia's success in the media vertical is a direct consequence of its fundamental IP as it relates to the proliferation of video technology and the subsequent pervasiveness of video in the modern world. This success is a testament to the strength and breadth of the Adeia Media portfolio and its applicability to solving problems faced by the greater media industry and adjacent industries benefiting from this mega trend.
The increasing importance of video to a broader set of products, services, and applications, as well as a broadening set of consumer electronic devices integrating video technology, continues to drive adoption of Adeia's intellectual property portfolio, which will continue to grow and benefit from this technology trend well into the future. This year alone, online videos are expected to make up more than 80% of all consumer internet traffic, 15 x higher than in just 2017. 78% of people watch online videos every week, and more than 55% view online videos every day. In fact, it's estimated that 1/3 of all online activity is spent watching video. Video continues to find its way into adjacent verticals for the benefit of advertising, personal security, healthcare, education, and many more applications.
For the past decade, Adeia has delivered a growing annuity stream as a result of the way the media sector continues to evolve. Essentially, Adeia is being pulled with that evolution as those companies comprising the sector choose to build their technology on a stack of fundamental IP that Adeia solely owns. Adeia innovations fundamentally change and expand the ways in which consumers experience video, both traditionally as well as in a fully immersive setting. From early recording technologies on VCRs to the first DVR launched by TiVo, or to the latest cloud-based solutions accessible from any device. Adeia provides consumers with the intellectual property necessary to enable their freedom to watch video at any time, on any device, in any location.
With the proliferation of devices, content choices, and entertainment experiences across the live, recorded, time-shifted, on-demand, and online video, and into immersive video experiences, Adeia is well-positioned to continue its ongoing innovation and licensing efforts in this area. Today, we already are a technology and IP provider to the metaverse through our video and social media IP assets. With $ billions continuing to be invested in this vertical, Adeia expects to continue to benefit from licensing into this emerging technology trend. Adeia has a long history of innovation across a diverse set of applications, all culminating in the aggregation of an IP portfolio that was specifically designed to meet the evolving needs of consumers. Adeia engineers solved real-world problems and built a substantial business, enabling others to do so within their own products and services. We're excited at the value we can unlock by being an independent company.
Adeia's fundamental innovations shape the way millions of people explore and experience entertainment and enhance billions of devices in an increasingly connected world. From TVs to smartphones, any place from home to work and on the go, and in all types of entertainment experiences from Pay-TV to OTT, helping the consumer manage content and connections in a way that is smart, immersive, and personal is precisely what our innovations do. Adeia represents the aggregation of numerous media brands from the global marketplace, each offering a fundamental set of technologies and solutions to the markets we serve. Our patented innovations broadly cover all aspects of the entertainment experience, including search and discovery of content, playback of on-demand video across multiple screens, personalization of video content, face identification and feature tracking, and numerous other relevant video and imaging use cases implemented around the world.
Adeia's IP is essential in enabling an individual to personalize her media experiences. This is a testament to the fact that many of Adeia's solutions have become ubiquitous across the industry. Here we provide an overview of a few of the key technologies and innovations of the media business and provide investors a window into the origins of our innovations. From the original TV Guide magazine in the 1950s to the introduction of on-screen electronic and interactive program guides, Adeia created the interface for television viewing. Adeia has continued to deliver innovative, award-winning ideas that help consumers navigate an increasingly complex universe of content. Finding content remains an important part of the entertainment experience.
Adeia believes new discovery experiences integrating advanced personalization specific to a person or a device and new forms of interaction, such as voice, will continue to be an area of ongoing innovation and new and improved entertainment offerings. Adeia innovations are at the center of how consumers explore what they want to watch and are a critical part of the user experience. Adeia leads innovation in content discovery, including universal search that spans live, recorded, on-demand, and streaming content sources. Personalized discovery that enables a wide variety of experiences, including recommendations, as well as predictive results of popular and trending content and conversational interfaces, which interpret voice commands and requests and support natural conversational dialogue and interaction with smart responses. Adeia innovations also include providing consumers the freedom to watch immersive video.
This includes multi-device experiences like when you start watching your favorite show on one device and then seamlessly transition to another device while on the go. Adeia innovations also allow for immersive entertainment experiences that are more engaging and gratifying than ever before with dynamic advertising, gaming opportunities, wagering, and shoppable videos seamlessly integrated into the content. Adeia's media IP business has a phenomenal backstory, one truly unique to our brand and across our industry. Adeia licenses its patented media innovations for use with traditional linear television, both in North America and internationally, and increasingly in connection with OTT, Direct-To-Consumer, and social media services that provide access to entertainment inside and outside the home on a broad array of devices.
In our core markets, Adeia enjoys a stable base of long-term agreements with an average term of over five years and a strong track record of timely renewals. We're not reliant on greenfield licensing programs to maintain our baseline revenue, but rather mature, steady-state programs that derive from many repeat name-brand licensees across easily identifiable patented technologies that have been validated with set royalty rates. Adeia's existing customers include multi-channel video programming distributors. These include cable, satellite, and telecommunications TV providers that aggregate and distribute linear content over their own networks, as well as TV providers that aggregate and stream linear content over broadband networks, OTT video service providers, social media, and other new media companies.
These include service providers that offer online services and devices which enable internet streaming and downloading of content directly to consumers through a variety of business models, and social media companies that increasingly rely on incorporate video as an integral part of their offerings. Consumer electronics manufacturers. These include producers of content access points such as smart TVs, streaming media devices, video game consoles, mobile devices, DVRs, and other connected media devices. We believe in the continued growth of video consumption, the evolution of how consumers explore and experience video, and the need for content storage and trusted distributed computing, all of which present new opportunities for us to develop patentable innovations and expand the industries we serve. Moreover, due to the proliferation of video-related technologies into adjacent verticals, corporate and consumer interests have grown to include an expanding set of use cases that are framed by Adeia's intellectual property.
These include the synchronization of real-time video content to a mobile device for sports betting, altering of consumer behaviors via targeted video advertisements, broadband distribution of long and short-form video for automotive and security applications, and both improved and scalable video quality for conducting electronic commerce across a range of devices. Adeia is in a unique position to capitalize on its existing portfolio of assets and introduce additional programs in these new market verticals to bring its innovative solutions and related IP to those markets through greenfield monetization programs. Adeia's superb tactical team and operational IP allows us to efficiently mine for and originate high-quality greenfield programs. The IP ecosystem remains dynamic, and Adeia's unique expertise and scale positions us to pursue inorganic opportunities where we can unlock value in existing portfolios.
The ongoing global realignment of IP assets could provide a strategic opportunity for Adeia to create additional revenue streams on top of our industry-leading monetization efforts. Adeia is a leading global IP licensing business with improved visibility, customer diversification, and scale. We expect to drive growth on the media side of the business by, one, extending the adoption of Adeia's innovations and licensing of its intellectual property across the broader entertainment industry and adjacent markets such as audio streaming, automotive, advertising, and gaming. Two, growing our patent portfolio in size and relevance through ongoing investments that are principally focused on internal innovation, targeted acquisitions, and strategic portfolio management. And three, utilizing our diversified IP portfolio to drive new and improved agreements with leading entertainment, consumer electronics, and social media companies. This growth will be supported by the three central pillars on which the Adeia media business is built.
Our markets are vast, and third parties continue to adopt our technologies. Our management team, platform, and dataset are unique and specifically tailored to monetize the assets that we own. We have a large supply of technology and targeted IP that are relevant to our skill set, which we believe we can acquire at good value going forward to continue to feed our machine. Adeia has a proven large growing market opportunity and platform with a unique team whose industry knowledge and expertise is able to efficiently manage and monetize its portfolio. The Adeia media IP portfolio numbers 6,800+ patents and applications and has a good mix of both issued patents and IP assets in development to support our ongoing media licensing business. The age of the portfolio is holding steady with an average of 10 years of active life per asset.
Few organizations have a true understanding of the depth of their IP assets, the historical record behind their patents and applications, as well as an understanding of their IP's importance to the market, true insight into how and where their IP is used and deployed. There exists only a small group of companies worldwide that can understand this insight and value, not to mention having an expert team, a unique dataset, and operational processes to capitalize on the assets they own. Adeia's expertise strategically positions the company to pursue additional markets and continue its growth trajectory. Adeia and its IP peers play a critical role in the global media technology ecosystem, one that allows transfer pricing between inventors and their inventions and developers and their users. Adeia is a well-organized and well-understood essential component of that ecosystem.
Now I'd like to turn the presentation over to my colleague, Dana Escobar, to provide you with an insight into Adeia's semiconductor IP.
Thank you, Mark. It's my pleasure to speak with you about our semiconductor business. Our goal is very straightforward. We work every day to be the industry's essential partner. We do this by taking on the tough technical challenges, solving them, and then sharing our solutions with our partners. We have a long history that goes back for decades. For most of that time, we focused on advanced packaging technology. However, we began to realize that one of the fundamental problems facing our industry is that Moore's law, which states that the number of transistors in an integrated circuit doubles every two years, is reaching its theoretical limits. If we wanted to continue to provide value to our partners and shareholders, then we had to turn our direction towards solutions that address that problem.
While more traditional advanced packaging will continue to be part of our DNA, we're now focused on promoting two emerging technologies which deal with the Moore's law issue, hybrid bonding and advanced process nodes. For today's discussion, I will define hybrid bonding as a permanent bond that combines a dielectric bond with an embedded metal to form interconnections. It's important because the solution to the Moore's law problem is to stack vertically, and the only technology which stacks at the required pitch is hybrid bonding. Our version is known as Direct Bond Interconnect or DBI. We believe this is a generational technology and are widely acknowledged as a leader in this field. Turning to advanced process nodes. First off, what is it? Simply put, semiconductor chips are often discussed in terms of nanometers. Traditionally, nanometers refer to the size of the transistors contained in each chip.
The smaller the transistors, the more you can put in and the more powerful it can become. Today, nanometer size refers to different process nodes and doesn't strictly denote transistor size, but rather improvements in the manufacturing process. Given the performance advantages, the industry is moving towards smaller nodes, and we're beginning to see products in the 7 nm and 5 nm range and expect them to get down to 2 nm and 3 nm in the near future. As they continue to get smaller, we believe that our patented processes will only increase in importance. As you can see, our pending patent applications reflect the emphasis we are placing on both hybrid bonding and advanced process node technologies. We anticipate that our portfolio will continue to grow and evolve in both areas through continued internal innovation and through strategic acquisitions. We are much more than patents.
We are also a technology incubator, and our hybrid bonding journey is a major success story. It began in 2015 with the acquisition of a company known as Ziptronix, which was an early pioneer in hybrid bonding. We took this technology to the next level by improving and refining the bonding process, enabling the supply chain, expanding our process offerings, marketing our technology at various technical conferences, and sharing our innovations with our partners through licensing. As a result, we're experiencing significant demand for our technology from major industry leaders. This year alone, we signed multi-year deals with Micron and SkyWater. Our success is due to our talented team of engineers who are passionate about this effort, many of whom hold advanced degrees. This team has hundreds of years of semiconductor experience and deep technical backgrounds.
In fact, if you search the Internet, you'll find a list of the most prolific inventors in history. There are currently 211 people on this list, and you have to have a minimum of 300 issued patents to qualify. On it, you'll see names like Thomas Edison and George Westinghouse. Now, you won't see Nikola Tesla. He doesn't have enough patents. You will find two of our current engineers, Doctors Bel Haba and Cyprian Uzoh. It's this kind of expertise that drives customers to us. Our customers include the providers of image sensors, RF components, memory, and logic devices, which are found in products ranging from CE devices such as smartphones, tablets, laptops, and gaming consoles, to automobiles and data centers. Demand for our technology has come in three waves.
It started with the image sensor and RF segments, which represented a $36 billion market opportunity. Quickly transitioned to the memory space, which expanded our addressable market by an additional $161 billion, and is now moving towards logic, adding another $150 billion market. Altogether, this is an approximate $350 billion addressable market. We see logic as a major growth opportunity, where our hybrid bonding technology, and specifically DBI Ultra, offers significantly enhanced performance at lower processing costs. It's also important to note that certain customers are only licensed under limited portions of our portfolio to limited products or for specific fields of use. The length of these agreements varies, as do royalty structures, and some include significant milestone-based payments. There's future opportunity for additional revenue even with current licensees.
We generate revenue by offering our customers two partnership options. First, they can choose to take a license under the portions of our patent portfolio which relate to their interests. Second, they can choose to engage in a technology transfer, which is structured to meet their specific needs and also includes a patent license. The option they select depends upon the technology involved and where they are in their journey. Our long-term semiconductor goal is to create an annual recurring revenue base in excess of $100 million. We'll do this by promoting our technology throughout the industry, teaching our trusted partners how to implement our solutions, increasing our number of partners, and continuing to offer them new and innovative solutions that address their challenges and expanding the size and scope of our patent portfolio.
Our long-term success is predicated on continued adoption of our hybrid bonding and advanced process node technologies, as well as key R&D efforts to enable expansion into additional high-growth markets. On a high level, our strategy entails, one, executing in our core markets. We believe our hybrid bonding technology is a generational platform which will be important for decades to come. Our goal is to expand our presence in each of the market sectors previously discussed and increase our IP revenue as those segments grow. Two, successfully renewing our relationships with our existing partners. Three, expanding our presence into adjacent technology and product areas such as AI, edge computing, RF modules, micro displays, and optical interconnect modules. Four, entering new growth markets. As you can see, we're extremely excited about the future of our semiconductor business and are eager to start our new chapter as Adeia.
Thank you for your time. I'll now turn our presentation over to Keith Jones, our Chief Financial Officer.
Thank you, Dana. Thank you everyone for joining us today. It is my pleasure to speak with you today about the exciting outlook for Adeia. While our name is new, it's built upon decades of innovation and financial success. Before we get into the numbers, let's discuss the underlying drivers that makes Adeia a unique and compelling value proposition. Our extensive patent portfolio is the foundation of our business. With over 9,500 patent assets, it reflects a history of being a pioneer in both the media and semiconductor industries. Over the years, we have successfully monetized these inventions through licensing of our technology to companies large and small, who in turn integrate them into their own product and service offerings. Over the course of the last 20 years, this has resulted in over $9 billion in revenue being generated from our IP portfolios.
Being a pioneer and a champion for innovation has long been our core objective, and we continue to invest in order to capitalize on future market trends and technology advancements. As Mark mentioned, there is a proliferation in the use of video. It is pervasive in our everyday lives and continues to expand into social media applications, the automobile, the metaverse, and beyond. We believe capitalizing on this continued adoption will be a key growth driver for our revenue expansion. We also have a long and very successful history in the semiconductor industry. As Dana outlined, the pace at which the semiconductor technology has been able to advance has slowed significantly relative to Moore's law. Our innovations allow for continuation of further advancements, which address the industry specific challenges in the march toward deeper submicron nodes.
Our financial model provides best-in-class operating results, producing significant operating margins and long-term cash flow generation. This is the engine of our focused capital allocation strategy that will drive long-term growth and maximize shareholder value. Looking forward, we are excited about the market opportunities that will be a catalyst for our future revenue growth. In looking at those growth opportunities, for media, the OTT market is rapidly growing, and we see tremendous opportunities to license our technologies to providers of those platforms. For traditional Pay-TV, there are several large Canadian operators which are not under license today. These unlicensed Canadian operators offer us a very favorable growth opportunity. In semiconductor, we see an industry trend of using our hybrid bonding technology for both memory and logic semiconductors.
We have seen great traction on the memory side with approximately 90% of the DRAM memory and 60% of the NAND memory manufacturers under license. While in the early stages, we are now starting to see greater adoption on the logic SOC side at the more advanced submicron nodes. In addition to these areas, our R&D investments will create further opportunities that will help drive our revenue growth as we develop solutions that will expand offerings to currently untapped adjacent markets using media and semiconductors. A very important metric for us is our baseline revenue. Baseline revenue is driven by the recurring nature of our licensing agreements that provide a predictable revenue stream. Currently, our baseline revenue is $375 million, which constitutes the majority of our total annual revenue.
Later, we will discuss how this baseline revenue is at the core of our operating leverage and provides strong long-term financial results for the company. As we mentioned earlier, emerging trends within media will offer significant revenue opportunities. This is a continuation of our dedication to innovation and finding solutions for emerging trends. Areas that will drive revenue in the future come from greenfield markets, including gaming and sports betting, ad tech, e-commerce, automotive, and audio streaming. All these areas are indicative of major shifts in how we interact in our daily lives as there is a greater introduction of video content in those offerings. Over time, we'll see a shift in our revenue mix as these new media sources will be an ever-increasing percentage of our overall revenue.
We continue to expect a decline in Pay-TV, which will be in line with the overall secular shift that has affected that industry. However, we anticipate that the growth in new media sources will more than offset such declines, resulting in growth in absolute dollars for our media IP portfolio. Now let's take a look at how our licensing business has performed recently. As you can see, for the trailing twelve months ending June 30, 2022, we recognized approximately $440 million in revenue. Looking at the chart, you will see some fluctuations from period to period that is indicative of both our licensing models and our revenue recognition practices, which I'll add a bit more color to. In general, we enter into multi-year license agreements. On average, our license agreements are more than 5 years.
This adds to the overall stability of the company, as well as being integral to the growth in the revenue baseline that I referred to earlier. Our revenue recognition is impacted by both the structure of our license agreements and whether the license is related to either our media or semiconductor portfolios. For example, fixed fee arrangements under our media IP licensing agreements are recognized on a straight-line basis over the licensing term. This is due to the implicit need to provide ongoing innovation to our license portfolio for the continued functional use of the underlying applications. In other words, because of future performance obligations, we recognize this revenue over the licensing term. By contrast, fixed fee or minimum guarantee amounts under semiconductor IP licensing agreements are recognized entirely in the period in which the agreements are executed because there are no future performance obligations for Adeia.
As a result of this revenue recognition treatment, there will be fluctuations from period to period, and in some cases, the revenue recognized will be ahead of the amounts billed to our customers. Per unit or per subscriber IP royalty licenses are recognized over time based on when the related sale or usage activities take place. Our license agreements tend to be quite large and by their nature, complex. As such, it can take extended periods of time to negotiate these agreements. A key objective to our overall growth is increasing the baseline revenue amount. That metric reflects overall gains we make in expanding our revenue profile. As you can see, we have been successful in growing this baseline over the past several years. Future growth in the overall revenue baseline will be driven by, one, continued success of renewing agreements.
We have been very successful in this area, renewing greater than 90% of our agreements. Two, increases in our licensing base from the growth factors and market opportunities within both the media and semiconductor roadmaps. Three, pursuing licensing structures that are more consistent with the economics of both parties through aligning revenue measurements and the expected cash flows. This revenue base creates a recurring revenue stream, which provides financial stability and underpins the leverage in our financial model. Our operating margins are impressive by any measure. Our ability to monetize our IP portfolio and successfully scale the business with a disciplined and focused operating structure provides us with operating margins in the mid-60s%. What I'd like to point out in this depiction is that the amounts presented reflect projected operating margins using our baseline revenue only.
This depiction does not fully capture the increased margins and leverage opportunity of our business as incremental revenue will have a dollar-for-dollar impact on our operating income. To expand into new markets and to drive revenue growth, we must continue to be innovators. As Paul mentioned, our goal is to increase our patent portfolio by 10% per year, principally driven by organic R&D. With that target, we are making investments in our future with focused R&D spending. This will be our long-term strategy. As such, we anticipate that our R&D spending will increase 10% each year. From an SG&A perspective, we see a more modest growth rate of approximately 3% year-over-year. This is reflective of disciplined expense management, as it will increase at a lower rate than our overall long-term revenue growth rates. Another component of our cost structure has been our litigation expense.
While it is the goal that we amicably reach agreeable terms that are in the best interest of the company and its shareholders, there will be occasions where litigation, as a last resort, will be required to achieve that objective. In 2021 and 2022, our litigation expense has been at a low point, but we anticipate the overall expense doubling in the short term back to a more normalized run rate. This expense will also fluctuate from period to period, depending on our activities. One of our key objectives is to have a focused capital allocation strategy that both drives innovation for future revenue growth and to maximize shareholder value. Our overall strategy can be summarized in four primary initiatives. One, organic investment. Two, strengthening our balance sheet. Three, return of capital to shareholders. Four, strategic acquisitions.
For organic investment, we are committed to expanding our IP portfolio through continued innovation. This will be a key objective which will drive future revenue growth. In strengthening our balance sheet, we will continue to prioritize reducing our overall debt that will remain with Adeia at the time of separation. I will talk about the characteristics of that debt a little later. The company has a long track record of returning capital to its shareholders. We plan to maintain the existing dividend practice which we are inheriting from Xperi, and we will continue to opportunistically buy back shares to reduce the outstanding float. M&A will be an important aspect of our growth strategy.
We'll be disciplined and focused in identifying opportunities, both big and small, that are adjacent to or complementary of our core offerings, focusing on those opportunities that will accelerate our development roadmap or that can add to our overall portfolio to drive incremental revenue growth. At the time of separation, Adeia will have between $75 million and $100 million in cash on the balance sheet, and we will assume the existing term loan balance, which is expected to be approximately $760 million. The term loan, which matures in 2028, is a variable interest rate loan at LIBOR plus 350 basis points. Per the terms of the loan, there are mandatory payments and excess cash flow provisions based on our debt leverage ratios. The timing of the payments can greatly impact our overall cash position.
As an example, we estimate that the annual excess cash payment due in Q1 2023 will be approximately $85 million based on our current forecast. While using a balanced approach with our other capital allocation objectives, we will look to accelerate paying down of our debt to reduce our overall leverage ratio and excess cash payment requirements. Additionally, we will explore financing alternatives in light of the market conditions. For our financial outlook on a standalone basis, for the full year 2022, we anticipate revenue will be between $425 million and $450 million. We anticipate total non-GAAP operating costs and expenses to be between $140 million and $150 million, resulting in a non-GAAP operating margin in the mid-60s%.
Long term, over the next five years, we expect revenue to increase by a CAGR of 6% from our full year 2021 amount of $391 million. As part of our long-term objective to continue our innovation strategies, we anticipate total non-GAAP costs and operating expenses to increase by a CAGR of 6%-8%. As a result, we see our long-term operating margins in the mid- to high-60s. As you can see, there are exciting opportunities that lay ahead that will drive our revenue growth story. Coupled with the leverage that our operating model provides, Adeia is a unique and compelling story. With that, let me now turn it back to Paul.
Thank you, Keith. We appreciate your time today, and we hope you're as excited about the prospects for Adeia as a standalone company as we are. In review, I provided an overview of our winning licensing model, which builds on developing long-term relationships, our proven track record of renewals, and our best-in-class financial results. Mark gave us insights into how the pervasiveness of video, coupled with the expansion of our licensing portfolio, will lead to revenue growth. Dana spoke to the exciting opportunities in the semiconductor market, which will allow us to address the compelling technology challenges facing the industry. Keith provided insights on the compelling value proposition of our financial model that provides significant leverage as we grow our business. We look forward to sharing our progress with you in the future.
On behalf of the entire management team, I would like to thank you for your interest in Adeia today, and we look forward to answering your questions.
Thank you for joining us for our live question and answer session at Adeia's 2022 Investor presentation. Our question and answer session will last 30 minutes. For those of you joining us livestream, there is a form to ask questions. Those questions will alternate between the questions from our analysts. To begin, our first question comes from analyst Richard Shannon at Craig-Hallum. Richard.
Great. Thank you, guys. Maybe two questions for me, a very simple one here just on the financials. I think you're talking about a goal of driving revenues to $500 million here, and using a 6% CAGR here. That would seem to get to that point within four to five years. Am I doing the math right, or is there other elements that would change that necessarily?
Sure, Richard. That's a great question, and certainly that's the goal that we've set out is $500 million over the next five years. I think what's important to recognize is that's our annual revenue baseline, which we're currently at $375 million for. We are focused on really growing that baseline. We think that's a really important metric for us. One thing to note, though, is that baseline might not always be a linear growth. You know, it will change over time. Some years we might see really significant growth given the nature of the deals that we do.
We have, you know, not a significant number of deals that we always get done in a year, but often they're really big, and that can really increase the revenue baseline as we go forward in a significant way. What you'll see as we get more confidence in that baseline and we have momentum to really move it up in a meaningful way, we'll do that and we'll report out on that. I know, Keith, would you add anything to that?
No, I think that's a really good summary. When you take a look at the numbers and the opportunity for us, it's just very exciting. You heard Mark talk about in terms of what are the opportunities from a new media and OTT and then with Dana and the semiconductor and kind of the reboot and the next generation, if you will. It really gives us real substance to grow that revenue. You were spot on your math, and that is our goal, right? Ultimately, we have the opportunities to grow. We're gonna execute on that and that $500 million number is really real. We have a great product line that will support that.
Thank you, Richard. Our second question is actually from the audience, and the audience asks: What is fundamentally different about how you will approach the market as a separate company, and how does that impact your growth prospects?
Sure. Thanks, Jill. You know, I think our strategy will largely be similar to what we are today. You know, we're gonna focus on really what we're core at, media and semiconductor business. We also have an opportunity to really invest in our business as well in a different way with more focus on growing our patent portfolios, for example. We've set a goal of 10% growth year-over-year, and we think that growth in our patent portfolio will really drive to revenue growth over the long term, especially as you think about, you know, adjacent markets in the media space, gaming, you know, sports gambling. You know, we've got AR/VR that Mark talked about, metaverse.
All of that stuff is really exciting for us as video expands and those opportunities are there, but we have to invest in the business in order to really focus on that. Our strategy will really focus on what's our core asset, and that's our patent portfolio. We think we can grow that 10% year-over-year based on, you know, what we've projected in terms of our expense run and everything else. We're excited about that opportunity.
Thank you. We have another analyst online with our second question. Hamed Khorsand with BWS Financial. Hamed?
Hi. My first question was gonna be, are some of the customers in different semiconductor markets unlicensed because they can bypass your patents or is it because you have yet to engage with them?
Sure. I'll start with this and then, you know, Dana, you can expand on it. You know, really as you think about, you know, Licensing takes time, right? You have engagements with various customers over time that, you know, we're at different aspects of the pipeline of where we're at, right? There's certain markets where we're also just seeing market adoption, right? We're especially in our hybrid bonding portfolio and in our advanced process node. Dana, you wanna expand on that aspect of it?
Yeah. Thank you. As far as the engagements are concerned, we are market-focused, okay? We do look at, for example, the image sensor market. We do look at the logic market. We do look at the memory market. I would say that we are actively engaged in discussions with all the major players in each of those spaces. As Paul alluded to, you know, we're talking about emerging technologies, and people are just at different points in their evaluation of our technology and what they wanna do as far as their roadmaps are concerned.
Thank you. We have another question from the audience. The audience asks: Having watched both the Xperi and Adeia presentations, it seems that a lot of Adeia's growth opportunities on the media side will involve seeking licenses from actual and potential Xperi partners and customers. Is that a fair assumption?
Jill, I don't think that's really a fair assumption, in the sense that, you know, we really are focused on different aspects of the market. I'll give Pay-TV as an example. Most of our Pay-TV customers are really the tier one, you know, Pay-TV customers that really have their own, you know, product offerings. And the Xperi product business is more focused on, customers that might need their products, right? And so there's that natural bifurcation there. And so we don't see a lot of overlap. Now, where there is, where we've had channel conflicts and one of the key benefits of the separation is allowing Adeia to really kind of expand into markets where there has been those channel conflicts, but they're not really customers of the Xperi product business per se.
We think that this separation really opens up opportunities rather than and takes away those conflicts far more than it would in the sense of it being an area where we continue to have overlap in our customers.
Thank you, Paul. Our next question comes to us from Nicholas Zangler at Stephens. Nicholas?
Yeah. Hey, guys. I was curious. I don't know if I missed it or not, but I was wondering how we should think about the revenue mix between, you know, IP revenue that serves the media segment versus the semiconductor segment. Is there a meaningful difference in the growth outlook, if you look at it the two separately?
Sure. Keith, you wanna handle this one?
No, great question. If you take a look at our revenue profile today, approximately 90+% of our revenue does come from media, and a little less than 10%, from semiconductor. Really, when you take a look at the depth and breadth of our pipeline, it really gives us very similar growth opportunities. Now, what's really exciting is when we get into new media sources, we talked about that being having a very accelerated growth rate that will more than exceed the declines that we're gonna have in Pay-TV. In totality, we see just a really great opportunity in the media side of things.
Then Dana, as he pointed out in his presentation, we're really excited about with the emerging technology on the semiconductor side of our goal is to ultimately get to $100 million in revenue. With that, those are just compelling and just very exciting opportunities. That mix really is gonna have a tremendous effect in bolstering our revenue.
Thank you for the question, Nicholas. Our next question is from the audience. Can you talk more about the motivation for the separation? Why will the two halves be worth more than the whole?
Sure. Great question, Jill. You know, I think one of the core, you know, focuses of the separation, we've been studying this for really years, is that, you know, both businesses are pretty distinct, right? In both their profit margins and growth prospects, and really there's the how we go about licensing even, right? By separating the two businesses, we'll be able to focus on really what's core to us and the investments that we wanna make in that business and that management focus will be able to accelerate our growth. On the Xperi side, you know, they're...
They'll be able to do something similar where their growth will not be measured in the same way as really the audio business will. We think this management focus will really be able to accelerate growth for both parts of the business, and I think that's really one of the fundamental reasons for this. We're super excited about this opportunity and going forward on the audio side, and I know my colleagues on the Xperi side feel the same way on their side of the business.
Thank you. Up next, we have Richard Shannon from Craig-Hallum with a question. Richard.
Hi. Great. If you don't mind, I'll ask two questions. First, I wanna follow up on the prior question about the split of revenues. I think, Keith, you said the answer was about 90% media and 10% semis. Given that you said similar growth rates in both those sectors, I would assume that the investment from an R&D perspective is gonna be largely that mix. Or do you see the inorganic part of the growth coming disproportionately from one or the other?
You know, in terms of allocating those resources, it really depends on some of the opportunities. We're making some deeper investments on new media to kind of get into some of the greenfields that we had talked about earlier. With the semiconductor, it's just kind of a layering effect, just to be ahead and really to assist that industry in terms of getting to the deeper technology and the next steps. In terms of allocation, I don't think it's directly proportional in that regard. It's really us seeking those new opportunities and where we see opportunities to grow and then making a really committed investment to capitalize on it.
Yeah. I would just add, Richard, that one of the things that is different is as Dana noted, is where we're trying to get into this next chapter of semi, right? There is some additional investment that we need there, especially in the hybrid bonding and advanced process node that to get to that $100 million revenue goal that we have. And then similarly on the media side, right, we've got a very established business for the most part of it, primarily in Pay-TV, but also in OTT, and we've had some success in social media as well. From there, we're really focused our R&D efforts as well as obviously keeping that part of the business going, but looking into those adjacent markets.
Those R&D dollars are gonna really be dependent on those growth aspects as well. It won't be that exact match from a revenue standpoint, if that makes sense.
Okay. That helps. Maybe my follow-on question primarily for Paul is one of the struggles with Xperi's stock in the old Tessera was visibility into the revenue stream here. Obviously, I like the fact you're gonna continue to communicate a baseline revenue-
Yep
Stream here. Ultimately, that visibility seems to be an issue with a lot of investors. Are you taking any sort of new point of a new approach to communicating or giving visibility to this? Or do you see more of a benefit here of an expanded and diversified portfolio across both semis and media that will kinda average out those large licensing opportunities that's created, you know, perceived risk from investors in the past?
Yeah, great question, Richard. You know, I think the real focus for us and why we feel really good about the baseline revenue is that media part of the business. It really creates a substantial portion of that. The pipeline opportunities are more diverse because of that. As semi continues to go into its next chapter there, we believe we can start building that up in a similar way that the media business has. As we look out and forecast, you know, from a revenue standpoint, we are gonna be focused on that annual, you know, revenue baseline. What gives Keith and I confidence in that number more than anything else is our track record of renewals, right?
We do long-term deals, you know, over five years on average, right? We have an incredible track record of renewals. We're in excess of 90%, you know, and we are. That is just driven by our constant innovation really in that media space. When you talk about visibility and our confidence in that visibility, it really is driven by those factors. It's very different than just having a semi business where really at that time, Richard, we had three or four kind of big customers, right? The diversity of our customer base was not nearly what it is now. I think that gives us the ability to kind of continue to communicate in a way that provides confidence in that baseline revenue and growing that baseline revenue.
We have opportunities beyond that as well. Keith, would you add anything to that?
No, I think those are all great points. I think one of the things that's really the beauty of our business is Paul talked about that we enter into long-term contracts. That $375 million, you know, in my mind, my perspective is a recurring revenue model. When we talk about visibility into the future and we talked about the operating margins that we have. Now, keep in mind that operating margin was just based off of the $375 million baseline. It's exciting because everything above that is really gonna be incremental contribution to us as a company. Now, as our businesses grow, we'll add to that revenue baseline.
Also in the semi side, one of the things that I talked about is just kind of working on the contract structures with our licensees where the economics are lined up. You know, we see volatility, particularly when we sign the Micron deal and you see a little bit of a peak. Ultimately, we think we can structure things in a way that is just much more consistent, and we're recognizing revenue that's gonna be commensurate with the economics of the deal over time. With that, it's very exciting. You know, we have visibility more than most, quite frankly.
Thank you for your questions. Up next, we have a question from the audience. The audience is asking, how much weight is the metaverse being given in identifying growth opportunities, and where does VR fit into the mix?
Mark, you wanna take this one?
Yeah, absolutely. Thank you for that. Yeah, so metaverse is just, you know, one of the many areas that we're innovating in. It is a very important area, to be perfectly honest. It is, you know, a testament to the fact of the proliferation of video technology, which is bringing us our portfolio along in that regard. It's an opportunity for us going forward for sure. With regard to augmented reality and virtual reality technology, again, we're already benefiting from that. We have a number of licenses in social media and imaging space that are applicable, and we see that continuing to move forward as well.
More importantly, you know, from an innovation engine perspective, we've built a strong team that are innovating readily in that space, and we look forward to benefit from those innovations in years to come.
Yeah. I think I would just add, Mark, you know, one of the things when we talk about that 10% portfolio growth, it's gonna be focused in these areas and other emerging markets, right?
Mm-hmm.
This is what our team is so good at, is identifying those emerging markets and innovating in those spaces. That's what our inventors and engineers are there to do. That's their sole focus, right? Is to think about those ideas and invent in that space what's coming. Obviously, metaverse is a big trend. We all hear about it, and we're excited about, you know, being able to invent in that space and help our customers down the line make their products better.
Thank you. Up next, we have on the phone Nicholas Zangler from Stephens with a question. Nicholas.
Yeah. Hey, guys. The audience stole my metaverse question, but I've got two more, if you don't mind.
Absolutely.
The first one, I'm curious, after the spin, is Xperi going to be a customer of Adeia? If so, I'm just curious, you know, what percentage of the revenues that would represent?
Yeah. Thanks, Nicholas, for that question. Yeah, Adeia, we've put into place agreements already, you know, as part of the separation. We filed them as part of the Form- 10, including a cross-business license agreement, where, broadly speaking, there's not, like, revenue coming in from the Xperi business. They're not a customer. We've already kind of taken care of that as part of the separation. So there's a license agreement. There was a split of patents. You know, there's a separation and distribution agreement. All of those things took into effect, you know, how do we separate. There's not expected to be any sort of meaningful revenue coming from the Xperi product business.
Got it. Then, you know, just in general, Adeia has historically served, you know, linear TV and new media TV. As the market continues to shift to CTV, if I were to think of this conversion as, you know, a linear TV viewer effectively becomes a CTV viewer, does this transition represent a meaningful benefit for Adeia? I guess said another way is the CTV environment significantly more lucrative for you than the traditional linear TV environment?
Yeah. I'll let Mark expand on this. Certainly, Adeia is focused on really, you know, how do we play in that transition, right? Now it's a different market with different, you know, ARPUs and the like, and so we have to take that into account. Certainly, our innovations have been focused on that transition, and we've had success in licensing in that space as well. Consumer electronics, social media have all been part of our licensing efforts and success, and we expect to continue to expand in that area. Mark, would you add anything to that?
I think that the connected TV space represents an opportunity for, you know, enhancements in our pricing models. More importantly, you know, creates an opportunity to bring in, you know, advertising-based revenues and such. Again, I think there's an upside in that regard.
Thank you. We have another audience question. The audience is asking: Can you elaborate on what you mean by rebuild of the semi business?
Yeah. Thank you. I know that in previous materials we've referred to it as rebuilding the semiconductor business. However, to be honest with you, I do not think of it that way. I think of it as writing our next chapter. If you know, go back to the presentation materials that we gave, I told you that historically we focused on advanced packaging technology, but as we looked around the industry, we realized that the fundamental challenge out there was the Moore's law issue, which is a very real issue. If we wanted to continue to be relevant and provide value to our shareholders and to our customers, we had to address technologies that dealt with that issue, which is why we talk about hybrid bonding and advanced process nodes.
From my perspective, it's about looking ahead to what's coming next, moving forward and advancing the industry.
Thank you, Dana. Our next question is another audience question, and the audience is asking: What is the historical return on capital for acquired patents, and what is the expected timeline of new patents to become revenue generators?
Great, great question, Jill, you know, or from the audience. Thank you, audience, for your wonderful questions today. You know, I think when we think about our portfolio and the way we license, we don't really break it up in terms of acquired patents and inorganic, you know, or organic patents that we develop internally, because we license on a portfolio-wide basis. Now, do we, you know, look for acquisitions that really can augment our portfolio? Absolutely. We're really good at that. That's one of our core competencies. 85% of our portfolio is developed internally, and we license that, you know, the entire portfolio or the entire media portfolio or the entire semi portfolio to our customers.
We really don't break it down in that, you know, per patent by patent basis because we're providing people with access to, you know, 6,000 patent assets or, you know, 2,700 patent assets on the semi side, right? Because we really license in that way, and that's how we think about it. You know, in terms of, you know, invention to monetization as well, you know, one of the things that's really important to our licensees and our customer base is the fact that we continue to innovate, right? Sometimes those early innovations are helpful in driving those discussions because we're able to say, you know, this is what we're focused on moving forward. This is how you'll be able to benefit from those early inventions as you take a long-term deal.
As you know, Keith mentioned, five plus year deals, sometimes even longer. You know, we're gonna be innovating during that entire time period of that license agreement. We're able to have those conversations. Certainly as if you're talking about the adoption cycle, right, on a patent and innovation, that can take time, right? That can, you know, an idea to getting to a patent to then having it in the marketplace can sometimes take, you know, upwards of 10 years, right? Or sometimes even longer. Our focus is on continuing to innovate in that space because we think that's gonna be valuable to our customers going forward, as we think about, you know, what's important to them.
Thank you. Our next question comes from the audience. Can you discuss Canadian Pay-TV opportunities and how this will drive baseline revenue?
Sure. You know, Canadian Pay-TV is one of the core areas that we've said is a growth potential for us. We currently have licensed a number of the Canadian Pay-TV operators, and we're really proud of that success. We've also had to unfortunately litigate against three of the operators that are out there. Litigation we always view as a last resort, but sometimes it's a necessary part of our business in terms of driving to get to an understanding between us and the other party of what the value of our portfolio is.
You know, when you look at that opportunity out there for those unlicensed Canadian Pay-TV operators, we think it's, you know, tens of millions of dollars annually, you know, over a period of time, right? You know, it'll take us, you know, some time to get there. It often does, but we still think the ultimate opportunity on a run rate basis is still very exciting for us.
Thank you. Our next question is also from the audience, and they are asking: What do you expect free cash flow to be in fiscal year 2022 and fiscal year 2023?
Well, great question. Once again, you know, you're picking up on the beauty of our business model in terms of the leverage. You know, fundamentally, you're gonna think about that, we generate in terms of the guidance, the midpoint is about $437 million in revenue. I talked about being 65% kind of operating margins, and fundamentally, that yields in the mid- to high-20s in terms of cash from operations. We do expect a similar profile in 2020 and 2023. We'll give a little bit more color on that. It is those numbers that we're talking about on those revenues, it's just absolutely tremendous. You know, with that ties back into our capital allocation strategy in terms of what we do with that.
Investing organically to grow our R&D, paying down the debt. It gives us a sizable opportunity to do that and pay down the debt sooner than the maturity date. Then also return of capital to shareholders through dividends and repurchase of stock. Last but not least, we're acquisitive. We will look to grow our portfolio, our revenue opportunities by seeking strategically smart opportunities that fit our business model.
Thank you, Keith. Our next question is also from the audience, and the audience is asking: How much time is left on your hybrid bonding and advanced process node technology patents?
Thank you for that question. I think there's a couple points I'd like to make with regard to that question. The first has to do with the life of the patent portfolio itself. For issued patents with hybrid bonding, our current assets extends well into the 2040s. For advanced process nodes, they extend into the 2030s. If you also go back to the prior to my presentation and look back at the slide on the patent applications, you will see that about 80% of our patent portfolio right now is directed towards those two technologies. There's considerable life left in the portfolios. The second point I wanna make here is we are more than patents, okay? We are also about know-how. People come to us and work with us because we help accelerate their technology roadmaps.
If you think about hybrid bonding, for example, it may take two, three, four, five years for them to actually adopt that technology and get it to work right. Many times, we can cut that down into half that amount of time, okay? It's a significant value proposition that we offer. It's not about, you know, so much. When you think about the value proposition, you know, they gain, right? Because they enter the market faster, and they also save money on the R&D process.
Thank you. Our last question is coming from the analyst Hamed Khorsand from BWS Financial. Hamid?
Thank you. My question was, could you just talk about your comfort level with your leverage ratio and, you know, the Wardy said it was acquisitive. I guess, what are you looking at from a target standpoint? Would it be something small or would you do something large? How would you know, go about balancing that with, you know, paying down debt?
No, great question. You know, paying down debt is really a big priority for us. Once again, the beauty and the leverage of our model is that we have significant cash flow. That will be a priority and once again, to pay it down sooner than the maturity date, as well as look for opportunities to refinance as the market conditions and pricing improves. In terms of M&A, there's a lot of opportunities out there. We'll look for things that are big, small, whole companies and pieces of companies as well. It's just a matter of really what that fits into our overall narrative and our opportunity to either accelerate our roadmap or drive incremental revenue from our base. Yeah.
Thank you. Now I would like to ask Paul for any final closing comments.
Thank you, Jill. On behalf of the entire management team, I wanna thank all of you for your interest and attendance today. It's been a pleasure being able to speak to all of you, and we look forward to updating you on our progress as we move forward. Thank you.
That concludes our live question and answer session, and that includes our presentation for the day. Please, as a reminder, feel free to visit the Investor Relations website to view a replay and download all of today's presentation materials. Thank you all.