Adeia Announces Second Quarter 2023 Financial Results

Aug 07, 2023
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Achieved over $200 million of revenue for first half of 2023
Closed nine deals in the quarter
Paid down $114 million of debt since separation

SAN JOSE, Calif., Aug. 07, 2023 (GLOBE NEWSWIRE) --  Adeia Inc. (Nasdaq: ADEA) (the “Company” or “Adeia”) today announced financial results for the second quarter ending June 30, 2023.

“Our deal momentum continues, as we closed nine license agreements in the second quarter across a diverse group of pay-TV, OTT, consumer electronics and semiconductor customers in domestic and international markets, further validating the value of our growing intellectual property (IP) portfolio,” said Paul E. Davis, chief executive officer of Adeia. “After a strong first half of the year, we remain on track to achieve our goals for 2023 and we continue to make excellent progress towards our long-term strategic objectives.”

Second Quarter Financial Highlights

  • Revenue was $83.2 million compared to $117.3 million in the first quarter of 2023; total revenue for the first half of 2023 was $200.5 million compared to $246.3 million in the prior year
  • GAAP diluted earnings per share (EPS) of $0.01 and non-GAAP diluted EPS of $0.26
  • GAAP net income was $1.4 million and adjusted EBITDA was $51.7 million
  • Cash flows from operations were $28.7 million
  • Paid down $20.1 million on our term loan

Business Highlights

  • Cox Communications, a leading provider of broadband and pay-TV services in the U.S., signed a long-term extension of its license agreement for access to our media portfolio
  • DAZN, a leading OTT provider of global sports programming, signed a new multi-year license agreement for access to our media portfolio
  • Enseo, Freeview Australia, Massillon Cable, and TechniSat all renewed their media license agreements for multi-year terms. We also signed agreements with a U.S. pay-TV provider, a mobile/video provider in Japan and a U.S. semiconductor manufacturer
  • Remain on track to grow our patent portfolio 10% year-over-year, and now have an aggregate portfolio of over 10,000 patent assets
  • Expanded our Board with the addition of Adam Rymer, a well-respected executive with over 20 years of experience at the forefront of technology, media and entertainment

Capital Allocation

During the quarter, the Company made $20.1 million in principal payments toward its term loan, bringing the outstanding balance to $645.5 million as of June 30, 2023.

On June 20, 2023, the Company distributed $5.3 million to stockholders of record on May 30, 2023, for a quarterly cash dividend of $0.05 per share of common stock.

The Board of Directors declared a dividend of $0.05 per share, payable on September 18, 2023, to stockholders of record on August 28, 2023.

Financial Outlook

The Company is reiterating its prior full-year 2023 outlook, with adjustments to lower the expected diluted shares outstanding and widening the range for GAAP tax rate and GAAP net income:

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 20% - 35% 23%
Net income(2) $46.0 - 67.0 $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 114.0 114.0 

(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 second quarter 2023 earnings conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Monday, August 7, 2023. To access the call in the U.S., please dial +1 (888) 660-6411, and for international callers, dial +1 (929) 203-0849. 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 live call and the replay at Q2 2023 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  Six Months Ended 
  June 30,
2023
  June 30,
2022
  June 30,
2023
  June 30,
2022
 
Revenue $83,217  $107,815  $200,524  $246,347 
Operating expenses:            
Research and development  13,116   11,010   26,127   20,660 
Selling, general and administrative  26,394   34,836   49,256   68,660 
Amortization expense  23,650   24,406   47,339   48,932 
Litigation expense  2,334   2,842   4,956   3,920 
Total operating expenses  65,494   73,094   127,678   142,172 
Operating income from continuing operations  17,723   34,721   72,846   104,175 
Interest expense  (15,540)  (9,440)  (31,478)  (17,869)
Other income and expense, net  1,617   431   3,237   768 
Income from continuing operations before income taxes  3,800   25,712   44,605   87,074 
Provision for income taxes  2,381   10,552   14,165   16,069 
Net income from continuing operations  1,419   15,160   30,440   71,005 
Net loss from discontinued operations, net of tax     (21,633)     (53,502)
Net income (loss)  1,419   (6,473)  30,440   17,503 
Less: Net loss attributable to non-controlling interest in discontinued operations     (848)     (1,816)
Net income (loss) attributable to the Company $1,419  $(5,625) $30,440  $19,319 
Income (loss) per share:            
Basic            
Continuing operations $0.01  $0.15  $0.29  $0.68 
Discontinued operations     (0.20)     (0.50)
Net income (loss) $0.01  $(0.05) $0.29  $0.19 
Diluted            
Continuing operations $0.01  $0.14  $0.27  $0.67 
Discontinued operations     (0.20)     (0.49)
Net income (loss) $0.01  $(0.06) $0.27  $0.18 
Weighted average number of shares used in per share calculations-basic  106,464   104,001   106,027   103,841 
Weighted average number of shares used in per share calculations-diluted  112,775   105,160   113,105   105,362 


ADEIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

  June 30,  December 31, 
  2023  2022 
ASSETS      
Current assets:      
Cash and cash equivalents $60,470  $114,555 
Available-for-sale debt securities  23,841   
Accounts receivable, net  30,174   58,480 
Unbilled contracts receivable, net  74,941   73,754 
Other current assets  10,948   11,924 
Total current assets  200,374   258,713 
Long-term unbilled contracts receivable  64,986   40,705 
Property and equipment, net  5,013   4,550 
Operating lease right-of-use assets  5,048   5,993 
Intangible assets, net  385,232   432,476 
Goodwill  313,660   313,660 
Long-term income tax receivable  109,733   113,679 
Other long-term assets  38,561   40,750 
Total assets $1,122,607  $1,210,526 
LIABILITIES AND EQUITY      
Current liabilities:      
Accounts payable $15,534  $8,546 
Accrued liabilities  14,089   31,277 
Current portion of long-term debt  36,400   109,813 
Deferred revenue  20,088   17,076 
Total current liabilities  86,111   166,712 
Deferred revenue, less current portion  9,113   10,683 
Long-term debt, net  591,482   619,580 
Noncurrent operating lease liabilities  3,655   4,794 
Long-term income tax payable  88,768   87,302 
Other long-term liabilities  20,457   20,043 
Total liabilities  799,586   909,114 
Commitments and contingencies      
Stockholders’ equity:      
Preferred stock     
Common stock  119   117 
Additional paid-in capital  634,954   636,266 
Treasury stock at cost  (218,714)  (211,223)
Accumulated other comprehensive loss  (81)  (51)
Accumulated deficit  (93,257)  (123,697)
Total stockholders’ equity  323,021   301,412 
Total liabilities and equity $1,122,607  $1,210,526 


ADEIA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

  Six Months Ended 
  June 30, 2023  June 30, 2022 
Cash flows from operating activities:      
Net income $30,440  $17,503 
Adjustments to reconcile net income to net cash from operating activities:      
Depreciation of property and equipment  769   11,371 
Amortization of intangible assets  47,339   78,485 
Stock-based compensation expense  8,196   32,284 
Deferred income tax  1,501   (1,641)
Amortization of debt issuance costs  2,239   2,231 
Other  493   917 
Changes in operating assets and liabilities:      
Accounts receivable  27,708   14,820 
Unbilled contracts receivable  (25,467)  (82,767)
Other assets  6,868   (1,291)
Accounts payable  6,987   6,868 
Accrued and other liabilities  (16,447)  4,340 
Deferred revenue  1,442   3,913 
Net cash from operating activities  92,068   87,033 
Cash flows from investing activities:      
Purchases of property and equipment  (1,545)  (8,870)
Proceeds from sale of property and equipment     86 
Purchases of intangible assets  (95)  (233)
Purchases of short-term investments  (23,766)  (4,490)
Proceeds from sales of investments     28,254 
Proceeds from maturities of investments     26,053 
Net cash from investing activities  (25,406)  40,800 
Cash flows from financing activities:      
Dividends paid  (10,636)  (10,418)
Repayment of debt  (103,750)  (20,250)
Proceeds from employee stock purchase program and exercise of stock options  1,130   8,059 
Repurchases of common stock     (17,260)
Repurchases of common stock for tax withholdings on equity awards  (7,491)  (11,475)
Net cash from financing activities  (120,747)  (51,344)
Effect of exchange rate changes on cash and cash equivalents     (2,291)
Net increase (decrease) in cash and cash equivalents  (54,085)  74,198 
Cash and cash equivalents at beginning of period  114,555   201,121 
Cash and cash equivalents at end of period $60,470  $275,319 

Cash flows above are presented on a consolidated basis and therefore also include $144.8 million of cash and cash equivalents included in current assets of discontinued operations in the condensed consolidated balance sheet as of June 30, 2022.

ADEIA INC.
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share amounts)
(unaudited)

Net income      
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2023 
GAAP net income $1,419  $30,440 
       
Adjustments to GAAP net income:      
Stock-based compensation expense:      
Research and development  736   1,330 
Selling, general and administrative  3,820   6,866 
Amortization expense  23,650   47,339 
Separation and other related costs recorded in selling, general and administrative (1)  5,306   8,308 
Severance and retention costs recorded in selling, general and administrative  78   78 
Total operating expenses adjustments  33,590   63,921 
Other income and expense, net     (302)
Non-GAAP tax adjustment (2)  (6,218)  (10,726)
Non-GAAP net income $28,791  $83,333 
       
Diluted income per share      
  Three Months Ended  Six Months Ended 
  June 30, 2023  June 30, 2023 
GAAP diluted income per share $0.01  $0.27 
       
Adjustments to GAAP diluted income per share:      
Stock-based compensation expense:      
Research and development  0.01   0.01 
Selling, general and administrative  0.03   0.06 
Amortization expense  0.21   0.42 
Separation and other related costs recorded in selling, general and administrative (1)  0.05   0.07 
Severance and retention costs recorded in selling, general and administrative      
Total operating expenses adjustments  0.30   0.56 
Other income and expense, net      
Non-GAAP tax adjustment (2)  (0.05)  (0.09)
Non-GAAP diluted income per share $0.26  $0.74 

(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  Six Months Ended 
  June 30, 2023  June 30, 2023 
GAAP net income $1,419  $30,440 
       
Adjustments to GAAP net income:      
Stock-based compensation expense:      
Research and development  736   1,330 
Selling, general and administrative  3,820   6,866 
Separation and other related costs recorded in selling, general and administrative (1)  5,306   8,308 
Severance and retention costs recorded in selling, general and administrative  78   78 
Amortization expense  23,650   47,339 
Depreciation expense  385   769 
Interest expense  15,540   31,478 
Other income and expense, net  (1,617)  (3,237)
Provision for income taxes  2,381   14,165 
Adjusted EBITDA $51,698  $137,536 

(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$46.0  $67.0 
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 (19.0)  (30.0)
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$46.0  $67.0 
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 24.5   17.0 
Total of non-GAAP adjustments 206.3   205.3 
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.