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Adeia Announces First Quarter 2023 Financial Results

Adeia Inc.
Adeia Inc.

New deal wins drive strong financial performance

Paid down $94 million of debt since separation

SAN JOSE, Calif., May 08, 2023 (GLOBE NEWSWIRE) -- Adeia Inc. (Nasdaq: ADEA) (the “Company” or “Adeia”) today announced financial results for the first quarter ended March 31, 2023.

“The results of the first quarter demonstrate the strength of our business model, continued deal momentum and progress on our long-term growth strategy. During the quarter we signed eight deals, including two significant semiconductor agreements with Kioxia and Western Digital that further validate the significance of our hybrid bonding intellectual property portfolio. In addition to our deal flow, our ability to generate strong cash flows enabled us to pay down $94 million of debt since the separation of our product business,” said Paul E. Davis, chief executive officer of Adeia. “Looking forward to the rest of the year, we remain confident in our ability to continue to renew license agreements and sign new deals, grow our patent portfolios through ongoing investment in our innovation engine, and execute our capital allocation strategy.”

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First Quarter Financial Highlights

  • Revenue was $117.3 million, an increase of 14% from $103.3 million in the prior quarter

  • GAAP diluted earnings per share (EPS) of $0.26 and non-GAAP diluted EPS of $0.48

  • Net income was $29.0 million and adjusted EBITDA was $85.8 million

  • Cash flows from operations were $63.4 million

  • Paid down $83.6 million of debt

Business Highlights

  • Both Kioxia and Western Digital signed long-term agreements to license Adeia’s semiconductor patent portfolio, including our hybrid bonding patents

  • Verizon signed a multi-year extension of its license to Adeia’s media patent portfolio

  • Altice signed an early renewal extending its license which supports its Optimum services, including its cable TV and over-the-top (OTT) streaming services

  • Signed three Pay-TV renewals with customers in South Korea and Japan

Capital Allocation

During the quarter, the Company made $83.6 million in principal payments towards its term loan, bringing the outstanding balance to $665.6 million as of March 31, 2023.

On March 29, 2023, the Company distributed $5.3 million to stockholders of record on March 15, 2023, for a quarterly cash dividend of $0.05 per share of common stock.

On May 4, 2023, the Board of Directors declared a dividend of $0.05 per share of common stock, payable on June 20, 2023, to stockholders of record on May 30, 2023.

Financial Outlook

The Company is reiterating its prior full-year 2023 outlook:

Category
(in millions, except for tax rate)

 

2023
GAAP Outlook

 

2023
Non-GAAP Outlook

Revenue

 

$385.0 - 415.0

 

$385.0 - 415.0

Operating expenses(1)

 

$253.0 - 267.0

 

$135.0 - 145.0

Interest expense

 

$64.0 - 67.0

 

$64.0 - 67.0

Other income

 

$2.5 - 3.0

 

$2.5 - 3.0

Tax rate

 

23% - 25%

 

23%

Net income(2)

 

$52.5 - 64.0

 

$145.0 - 159.0

Adjusted EBITDA(2)

 

N/A

 

$252.3 - 272.3

Cash from operations

 

$185.0 - 215.0

 

$185.0 - 215.0

Diluted shares outstanding

 

116.0

 

116.0

(1) See tables for reconciliation of GAAP to Non-GAAP operating expenses

(2) See tables for reconciliation of GAAP net income to (i) non-GAAP net income and (ii) adjusted earnings before interest expense, income taxes, depreciation and amortization (adjusted EBITDA)

Conference Call Information

The Company will hold its first quarter 2023 earnings conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Monday, May 8, 2023. To access the call in the U.S., please dial +1 877-451-6152, and for international callers, dial +1 201-389-0879. All participants should dial in 15 minutes prior to the start of the conference call. The Company also suggests utilizing the webcast link to access the call at Q1 FY2023 Earnings Call Webcast.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on information available to the Company as of the date hereof, as well as the Company’s current expectations, assumptions, estimates and projections that involve risks and uncertainties. In this context, forward-looking statements often address expected future business, financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "could," "seek," "see," "will," "may," "would," "might," "potentially," "estimate," "continue," "expect," "target," similar expressions or the negatives of these words or other comparable terminology that convey uncertainty of future events or outcomes. All forward-looking statements by their nature address matters that involve risks and uncertainties, many of which are beyond the Company’s control, and are not guarantees of future results. These and other forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to: the Company’s ability to implement its business strategy; the Company’s ability to enter into new and renewal license agreements with customers on favorable terms; the Company’s ability to retain and hire key personnel; uncertainty as to the long-term value of the Company’s common stock; legislative, regulatory and economic developments affecting the Company’s business; general economic and market developments and conditions; the Company’s ability to grow and expand its patent portfolios; changes in technology and development of competing technology in the industries in which in which the Company operates; the evolving legal, regulatory and tax regimes under which the Company operates; unforeseen liabilities and expenses; risks associated with the Company’s indebtedness; the Company’s ability to achieve the intended benefits of, and its ability to recognize the anticipated tax treatment of, the recent spin-off of its product business; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, including Russia’s invasion of Ukraine, and natural disasters; and the extent to which the COVID-19 pandemic continues to have an adverse impact on the Company’s business, results of operations, and financial condition will depend on future developments, including measures taken in response to the pandemic, which are highly uncertain and cannot be predicted. These risks, as well as other risks associated with the business, are more fully discussed in the Company’s filings with the U.S. Securities and Exchange Commission ("SEC"), including the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. While the list of factors presented here is, and the list of factors presented in the Company’s filings with the SEC are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.

Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on the Company’s consolidated financial condition, results of operations, liquidity or trading price of common stock. The Company does not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

About Adeia Inc.

Adeia is a leading R&D and intellectual property (IP) licensing company that accelerates the adoption of innovative technologies in the media and semiconductor industries. Adeia’s fundamental innovations underpin technology solutions that are shaping and elevating the future of digital entertainment and electronics. Adeia’s IP portfolios power the connected devices that touch the lives of millions of people around the world every day as they live, work and play. For more, please visit www.adeia.com.

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP), the Company’s earnings release contains non-GAAP financial measures adjusted, where applicable, for either one-time or ongoing non-cash acquired intangibles amortization charges, costs related to actual or planned business combinations including transaction fees, integration costs, severance, facility closures, and retention bonuses, separation costs, all forms of stock-based compensation, loss on debt extinguishment, expensed debt refinancing costs, impairment of intangible assets, impact of certain foreign currency adjustments, discontinued operations and related tax effects. In addition, adjusted EBITDA adjusts for recurring charges of interest expense, income taxes, depreciation and amortization. Management believes that the non-GAAP measures used in this release provide investors with important perspectives into the Company’s ongoing business and financial performance and provide a better understanding of our core operating results reflecting our normal business operations. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. Our use of non-GAAP financial measures has certain limitations in that the non-GAAP financial measures we use may not be directly comparable to those reported by other companies. For example, the terms used in this press release, such as adjusted EBITDA, non-GAAP operating expenses, non-GAAP net income and non-GAAP diluted earnings per share (EPS) do not have a standardized meaning. Other companies may use the same or similarly named measures, but exclude different items, which may not provide investors with a comparable view of our performance in relation to other companies. We seek to compensate for the limitation of our non-GAAP presentation by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached hereto. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. All financial data is presented on a GAAP basis except where the Company indicates its presentation is on a non-GAAP basis.

Set forth below are reconciliations of the Company’s reported and forecasted GAAP to non-GAAP financial metrics.

Investor Contact:
Chris Chaney
Vice President, Investor Relations
IR@adeia.com

– Tables Follow –

SOURCE: ADEIA INC.
ADEA


ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,
2023

 

 

March 31,
2022

 

Revenue

 

$

117,307

 

 

$

138,532

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

13,011

 

 

 

9,650

 

Selling, general and administrative

 

 

22,862

 

 

 

33,824

 

Amortization expense

 

 

23,689

 

 

 

24,526

 

Litigation expense

 

 

2,622

 

 

 

1,078

 

Total operating expenses

 

 

62,184

 

 

 

69,078

 

Operating income from continuing operations

 

 

55,123

 

 

 

69,454

 

Interest expense

 

 

(15,938

)

 

 

(8,429

)

Other income and expense, net

 

 

1,620

 

 

 

337

 

Income from continuing operations before income taxes

 

 

40,805

 

 

 

61,362

 

Provision for income taxes

 

 

11,784

 

 

 

5,517

 

Net income from continuing operations

 

 

29,021

 

 

 

55,845

 

Net loss from discontinued operations, net of tax

 

 

 

 

 

(31,870

)

Net income

 

 

29,021

 

 

 

23,975

 

Less: Net loss attributable to non-controlling interest in discontinued operations

 

 

 

 

 

(968

)

Net income attributable to the Company

 

$

29,021

 

 

$

24,943

 

Income (loss) per share:

 

 

 

 

 

 

Basic

 

 

 

 

 

 

Continuing operations

 

$

0.27

 

 

$

0.54

 

Discontinued operations

 

 

 

 

 

(0.30

)

Net income (loss)

 

$

0.27

 

 

$

0.24

 

Diluted

 

 

 

 

 

 

Continuing operations

 

$

0.26

 

 

$

0.53

 

Discontinued operations

 

 

 

 

 

(0.29

)

Net income (loss)

 

$

0.26

 

 

$

0.24

 

Weighted average number of shares used in per share calculations-basic

 

 

105,585

 

 

 

103,679

 

Weighted average number of shares used in per share calculations-diluted

 

 

113,447

 

 

 

105,332

 


ADEIA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

82,429

 

 

$

114,555

 

Accounts receivable, net

 

 

36,933

 

 

 

58,480

 

Unbilled contracts receivable, net

 

 

77,948

 

 

 

73,754

 

Other current assets

 

 

11,493

 

 

 

11,924

 

Total current assets

 

 

208,803

 

 

 

258,713

 

Long-term unbilled contracts receivable

 

 

64,124

 

 

 

40,705

 

Property and equipment, net

 

 

4,556

 

 

 

4,550

 

Operating lease right-of-use assets

 

 

5,524

 

 

 

5,993

 

Intangible assets, net

 

 

408,787

 

 

 

432,476

 

Goodwill

 

 

313,660

 

 

 

313,660

 

Long-term income tax receivable

 

 

110,513

 

 

 

113,679

 

Other long-term assets

 

 

37,851

 

 

 

40,750

 

Total assets

 

$

1,153,818

 

 

$

1,210,526

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,079

 

 

$

8,546

 

Accrued liabilities

 

 

29,427

 

 

 

31,277

 

Current portion of long-term debt

 

 

36,344

 

 

 

109,813

 

Deferred revenue

 

 

28,708

 

 

 

17,076

 

Total current liabilities

 

 

98,558

 

 

 

166,712

 

Deferred revenue, less current portion

 

 

9,884

 

 

 

10,683

 

Long-term debt, net

 

 

610,594

 

 

 

619,580

 

Noncurrent operating lease liabilities

 

 

4,229

 

 

 

4,794

 

Long-term income tax payable

 

 

87,917

 

 

 

87,302

 

Other long-term liabilities

 

 

20,022

 

 

 

20,043

 

Total liabilities

 

 

831,204

 

 

 

909,114

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

 

119

 

 

 

117

 

Additional paid-in capital

 

 

635,001

 

 

 

636,266

 

Treasury stock at cost

 

 

(217,783

)

 

 

(211,223

)

Accumulated other comprehensive loss

 

 

(47

)

 

 

(51

)

Accumulated deficit

 

 

(94,676

)

 

 

(123,697

)

Total stockholders’ equity

 

 

322,614

 

 

 

301,412

 

Total liabilities and equity

 

$

1,153,818

 

 

$

1,210,526

 


ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

29,021

 

 

$

23,975

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

Depreciation of property and equipment

 

 

384

 

 

 

5,866

 

Amortization of intangible assets

 

 

23,689

 

 

 

39,319

 

Stock-based compensation expense

 

 

3,640

 

 

 

16,804

 

Deferred income tax

 

 

2,373

 

 

 

(911

)

Loss on debt extinguishment

 

 

1,170

 

 

 

1,123

 

Other

 

 

600

 

 

 

861

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

20,951

 

 

 

43,698

 

Unbilled contracts receivable

 

 

(27,612

)

 

 

(82,995

)

Other assets

 

 

4,592

 

 

 

(8,806

)

Accounts payable

 

 

(4,468

)

 

 

4,024

 

Accrued and other liabilities

 

 

(1,821

)

 

 

(7,483

)

Deferred revenue

 

 

10,833

 

 

 

10,798

 

Net cash from operating activities

 

 

63,352

 

 

 

46,273

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(390

)

 

 

(4,289

)

Purchases of intangible assets

 

 

 

 

 

(180

)

Purchases of short-term investments

 

 

 

 

 

(4,490

)

Proceeds from sales of investments

 

 

 

 

 

2,000

 

Proceeds from maturities of investments

 

 

 

 

 

10,023

 

Net cash from investing activities

 

 

(390

)

 

 

3,064

 

Cash flows from financing activities:

 

 

 

 

 

 

Dividends paid

 

 

(5,314

)

 

 

(5,218

)

Repayment of debt

 

 

(83,625

)

 

 

(10,125

)

Proceeds from employee stock purchase program and exercise of stock options

 

 

411

 

 

 

8,000

 

Repurchases of common stock

 

 

 

 

 

(17,260

)

Repurchases of common stock for tax withholdings on equity awards

 

 

(6,560

)

 

 

(11,068

)

Net cash from financing activities

 

 

(95,088

)

 

 

(35,671

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

(692

)

Net increase (decrease) in cash and cash equivalents

 

 

(32,126

)

 

 

12,974

 

Cash and cash equivalents at beginning of period

 

 

114,555

 

 

 

201,121

 

Cash and cash equivalents at end of period

 

$

82,429

 

 

$

214,095

 

Cash flows above are presented on a consolidated basis and therefore also include $135.0 million of cash and cash equivalents included in current assets of discontinued operations in the condensed consolidated balance sheet as of March 31, 2022.


ADEIA INC.

GAAP TO NON-GAAP RECONCILIATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

 

Net income

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

GAAP net income

 

$

29,021

 

 

 

 

 

Adjustments to GAAP net income:

 

 

 

Stock-based compensation expense:

 

 

 

Research and development

 

 

594

 

Selling, general and administrative

 

 

3,046

 

Amortization expense

 

 

23,689

 

Separation and other related costs recorded in selling, general and administrative (1)

 

 

3,002

 

Total operating expenses adjustments

 

 

30,331

 

Other income and expense, net

 

 

(302

)

Non-GAAP tax adjustment (2)

 

 

(4,508

)

Non-GAAP net income

 

$

54,542

 

 

 

 

 

Diluted income per share

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

GAAP diluted income per share

 

$

0.26

 

 

 

 

 

Adjustments to GAAP diluted income per share:

 

 

 

Stock-based compensation expense:

 

 

 

Research and development

 

 

 

Selling, general and administrative

 

 

0.03

 

Amortization expense

 

 

0.21

 

Separation and other related costs recorded in selling, general and administrative (1)

 

 

0.02

 

Total operating expenses adjustments

 

 

0.26

 

Other income and expense, net

 

 

 

Non-GAAP tax adjustment (2)

 

 

(0.04

)

Non-GAAP diluted income per share

 

$

0.48

 

(1) Represents separation and related costs that were incurred subsequent to the separation on October 1, 2022 that are accounted for in continuing operations including fees for financial advisory and other professional services, and expenses incurred on a transitional basis under a contract shared with Xperi Inc.

(2) The provision for income taxes is adjusted to reflect the net direct and indirect income tax effects of the various non-GAAP pretax adjustments


ADEIA INC.

GAAP NET INCOME TO

ADJUSTED EBITDA RECONCILIATION

(in thousands)

(unaudited)

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 2023

 

GAAP net income

 

$

29,021

 

 

 

 

 

Adjustments to GAAP net income:

 

 

 

Stock-based compensation expense:

 

 

 

Research and development

 

 

594

 

Selling, general and administrative

 

 

3,046

 

Separation and other related costs recorded in selling, general and administrative (1)

 

 

3,002

 

Amortization expense

 

 

23,689

 

Depreciation expense

 

 

384

 

Interest expense

 

 

15,938

 

Interest income

 

 

(1,620

)

Provision for income taxes

 

 

11,784

 

Adjusted EBITDA

 

$

85,838

 

(1) Represents separation and related costs that were incurred subsequent to the separation on October 1, 2022 that are accounted for in continuing operations including expenses incurred on a transitional basis under a contract shared with Xperi Inc.


ADEIA INC.

RECONCILIATION FOR GUIDANCE

ON OPERATING EXPENSES

(in millions)

(unaudited)

 

 

 

 

Year Ended

 

 

December 31, 2023

 

 

Low

 

High

 

GAAP operating expenses

$

253.0

 

$

267.0

 

Amortization expense

 

95.0

 

 

95.0

 

Stock-based compensation expense

 

14.0

 

 

16.0

 

Separation and related costs (1)

 

9.0

 

 

11.0

 

Total of non-GAAP adjustments

 

118.0

 

 

122.0

 

Non-GAAP operating expenses

$

135.0

 

$

145.0

 

(1) Represents separation and related costs that were incurred subsequent to the separation on October 1, 2022 that are accounted for in continuing operations including expenses incurred on a transitional basis under a contract shared with Xperi Inc.


ADEIA INC.

RECONCILIATION FOR GUIDANCE

ON NET INCOME

(in millions)

(unaudited)

 

 

Year Ended

 

 

December 31, 2023

 

 

Low

 

 

High

 

GAAP net income

$

52.5

 

 

$

64.0

 

Amortization expense

 

95.0

 

 

 

95.0

 

Stock-based compensation expense

 

14.0

 

 

 

16.0

 

Separation and related costs (1)

 

9.0

 

 

 

11.0

 

Total of non-GAAP operating expenses

 

118.0

 

 

 

122.0

 

Non-GAAP tax adjustment

 

(25.5

)

 

 

(27.0

)

Non-GAAP net income

$

145.0

 

 

$

159.0

 

(1) Represents separation and related costs that were incurred subsequent to the separation on October 1, 2022 that are accounted for in continuing operations including expenses incurred on a transitional basis under a contract shared with Xperi Inc.


ADEIA INC.

RECONCILIATION FOR GUIDANCE ON

ADJUSTED EBITDA

(in millions)

(unaudited)

 

 

Year Ended

 

 

December 31, 2023

 

 

Low

 

 

High

 

GAAP net income

$

52.5

 

 

$

64.0

 

Stock-based compensation expense

 

14.0

 

 

 

16.0

 

Separation and related costs (1)

 

9.0

 

 

 

11.0

 

Amortization expense

 

95.0

 

 

 

95.0

 

Depreciation expense

 

2.3

 

 

 

2.3

 

Interest expense

 

64.0

 

 

 

67.0

 

Other income

 

(2.5

)

 

 

(3.0

)

Income tax expense

 

18.0

 

 

 

20.0

 

Total of non-GAAP adjustments

 

199.8

 

 

 

208.3

 

Adjusted EBITDA

$

252.3

 

 

$

272.3

 

(1) Represents separation and related costs that were incurred subsequent to the separation on October 1, 2022 that are accounted for in continuing operations including expenses incurred on a transitional basis under a contract shared with Xperi Inc.