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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39304

 

ADEIA INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

84-4734590

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

3025 Orchard Parkway, San Jose, California

 

95134

(Address of Principal Executive Offices)

 

(Zip Code)

(408) 473-2500

(Registrant’s Telephone Number, Including Area Code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock (par value $0.001 per share)

ADEA

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

The number of shares outstanding of the registrant’s common stock as of October 25, 2023 was 107,172,789.

 

 


 

ADEIA INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

 

 

 

 

Page

 

PART I

 

 

Item 1.

Financial Statements (unaudited)

 

3

 

Condensed Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2023 and 2022

 

3

 

Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and Nine Months Ended September 30, 2023 and 2022

 

4

 

Condensed Consolidated Balance Sheets – September 30, 2023 and December 31, 2022

 

5

 

Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2023 and 2022

 

6

 

Condensed Consolidated Statements of Equity – Three and Nine Months Ended September 30, 2023 and 2022

 

7

 

Notes to Condensed Consolidated Financial Statements

 

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

38

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

49

Item 4.

Controls and Procedures

 

49

 

 

 

 

 

PART II

 

 

Item 1.

Legal Proceedings

 

50

Item 1A.

Risk Factors

 

52

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

52

Item 3.

Defaults Upon Senior Securities

 

52

Item 4.

Mine Safety Disclosures

 

52

Item 5.

Other Information

 

52

Item 6.

Exhibits

 

53

 

 

 

 

Signatures

 

 

54

 

2


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,
2023

 

 

September 30,
2022

 

 

September 30,
2023

 

 

September 30,
2022

 

Revenue

 

$

101,397

 

 

$

89,297

 

 

$

301,921

 

 

$

335,644

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

13,768

 

 

 

11,534

 

 

 

39,895

 

 

 

32,194

 

Selling, general and administrative

 

 

21,921

 

 

 

34,770

 

 

 

71,177

 

 

 

103,430

 

Amortization expense

 

 

23,386

 

 

 

24,195

 

 

 

70,725

 

 

 

73,127

 

Litigation expense

 

 

2,205

 

 

 

3,156

 

 

 

7,161

 

 

 

7,076

 

Total operating expenses

 

 

61,280

 

 

 

73,655

 

 

 

188,958

 

 

 

215,827

 

Operating income from continuing operations

 

 

40,117

 

 

 

15,642

 

 

 

112,963

 

 

 

119,817

 

Interest expense

 

 

(15,659

)

 

 

(12,444

)

 

 

(47,137

)

 

 

(30,313

)

Other income and expense, net

 

 

1,486

 

 

 

860

 

 

 

4,723

 

 

 

1,628

 

Income from continuing operations before income taxes

 

 

25,944

 

 

 

4,058

 

 

 

70,549

 

 

 

91,132

 

Provision for income taxes

 

 

1,712

 

 

 

10,401

 

 

 

15,877

 

 

 

26,470

 

Net income (loss) from continuing operations

 

 

24,232

 

 

 

(6,343

)

 

 

54,672

 

 

 

64,662

 

Net loss from discontinued operations, net of tax

 

 

 

 

 

(383,476

)

 

 

 

 

 

(436,978

)

Net income (loss)

 

 

24,232

 

 

 

(389,819

)

 

 

54,672

 

 

 

(372,316

)

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

 

 

 

 

 

(890

)

 

 

 

 

 

(2,706

)

Net income (loss) attributable to the Company

 

$

24,232

 

 

$

(388,929

)

 

$

54,672

 

 

$

(369,610

)

Income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.23

 

 

$

(0.06

)

 

$

0.51

 

 

$

0.62

 

Discontinued operations

 

 

 

 

 

(3.66

)

 

 

 

 

 

(4.17

)

Net income (loss)

 

$

0.23

 

 

$

(3.72

)

 

$

0.51

 

 

$

(3.55

)

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.21

 

 

$

(0.06

)

 

$

0.48

 

 

$

0.61

 

Discontinued operations

 

 

 

 

 

(3.66

)

 

 

 

 

 

(4.11

)

Net income (loss)

 

$

0.21

 

 

$

(3.72

)

 

$

0.48

 

 

$

(3.50

)

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

 

 

106,902

 

 

 

104,510

 

 

 

106,322

 

 

 

104,066

 

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

 

 

112,929

 

 

 

104,510

 

 

 

112,765

 

 

 

105,620

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,
2023

 

 

September 30,
2022

 

 

September 30,
2023

 

 

September 30,
2022

 

Net income (loss)

 

$

24,232

 

 

$

(389,819

)

 

$

54,672

 

 

$

(372,316

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Change in foreign currency translation adjustment

 

 

 

 

 

(1,523

)

 

 

9

 

 

 

(4,441

)

Net unrealized gain (losses) on available-for-sale debt securities

 

 

12

 

 

 

42

 

 

 

(27

)

 

 

64

 

Other comprehensive income (loss), net of tax

 

 

12

 

 

 

(1,481

)

 

 

(18

)

 

 

(4,377

)

Comprehensive income (loss)

 

 

24,244

 

 

 

(391,300

)

 

 

54,654

 

 

 

(376,693

)

Less: Comprehensive loss attributable to noncontrolling interest

 

 

 

 

 

(890

)

 

 

 

 

 

(2,706

)

Comprehensive income (loss) attributable to the Company

 

$

24,244

 

 

$

(390,410

)

 

$

54,654

 

 

$

(373,987

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

ADEIA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for par value)

(unaudited)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

51,855

 

 

$

114,555

 

Marketable securities

 

 

30,245

 

 

 

Accounts receivable, net of allowance for credit losses of $1,463 and $713, respectively

 

 

44,191

 

 

 

58,480

 

Unbilled contracts receivable, net

 

 

83,343

 

 

 

73,754

 

Other current assets

 

 

10,150

 

 

 

11,924

 

Total current assets

 

 

219,784

 

 

 

258,713

 

Long-term unbilled contracts receivable

 

 

65,531

 

 

 

40,705

 

Property and equipment, net

 

 

5,437

 

 

 

4,550

 

Operating lease right-of-use assets

 

 

4,564

 

 

 

5,993

 

Intangible assets, net

 

 

367,146

 

 

 

432,476

 

Goodwill

 

 

313,660

 

 

 

313,660

 

Long-term income tax receivable

 

 

107,923

 

 

 

113,679

 

Other long-term assets

 

 

40,026

 

 

 

40,750

 

Total assets

 

$

1,124,071

 

 

$

1,210,526

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

10,136

 

 

$

8,546

 

Accrued liabilities

 

 

18,509

 

 

 

31,277

 

Current portion of long-term debt

 

 

36,988

 

 

 

109,813

 

Deferred revenue

 

 

16,279

 

 

 

17,076

 

Total current liabilities

 

 

81,912

 

 

 

166,712

 

Deferred revenue, less current portion

 

 

11,161

 

 

 

10,683

 

Long-term debt, net

 

 

576,781

 

 

 

619,580

 

Noncurrent operating lease liabilities

 

 

3,072

 

 

 

4,794

 

Long-term income tax payable

 

 

89,248

 

 

 

87,302

 

Other long-term liabilities

 

 

18,072

 

 

 

20,043

 

Total liabilities

 

 

780,246

 

 

 

909,114

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock: $0.001 par value; (2023: authorized 15,000 shares; 2022: authorized 15,000 shares and no shares issued and outstanding)

 

 

 

 

 

Common stock: $0.001 par value; (2023: authorized 350,000 shares, issued 120,359 shares, outstanding 107,096 shares; 2022: authorized 350,000 shares, issued 117,392 shares, outstanding 105,167 shares)

 

 

120

 

 

 

117

 

Additional paid-in capital

 

 

634,526

 

 

 

636,266

 

Treasury stock at cost (2023: 13,263 shares; 2022: 12,225 shares)

 

 

(221,727

)

 

 

(211,223

)

Accumulated other comprehensive loss

 

 

(69

)

 

 

(51

)

Accumulated deficit

 

 

(69,025

)

 

 

(123,697

)

Total stockholders’ equity

 

 

343,825

 

 

 

301,412

 

Total liabilities and equity

 

$

1,124,071

 

 

$

1,210,526

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

54,672

 

 

$

(372,316

)

Adjustments to reconcile net income (loss) to net cash from operating activities:

 

 

 

 

 

 

Depreciation of property and equipment

 

 

1,151

 

 

 

16,759

 

Amortization of intangible assets

 

 

70,725

 

 

 

119,293

 

Goodwill impairment

 

 

 

 

 

354,000

 

Stock-based compensation expense

 

 

13,070

 

 

 

49,283

 

Deferred income taxes

 

 

2

 

 

 

(1,761

)

Amortization of debt issuance costs

 

 

3,251

 

 

 

3,325

 

Other

 

 

107

 

 

 

987

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

13,728

 

 

 

40,075

 

Unbilled contracts receivable

 

 

(34,415

)

 

 

(89,636

)

Other assets

 

 

9,993

 

 

 

7,264

 

Accounts payable

 

 

265

 

 

 

16,606

 

Accrued and other liabilities

 

 

(14,515

)

 

 

2,508

 

Deferred revenue

 

 

(4,719

)

 

 

(4,345

)

Net cash from operating activities

 

 

113,315

 

 

 

142,042

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,936

)

 

 

(12,576

)

Proceeds from sale of property and equipment

 

 

 

 

 

86

 

Cash paid for acquisitions, net of cash acquired

 

 

 

 

 

(50,473

)

Purchases of intangible assets

 

 

(95

)

 

 

(290

)

Purchases of short-term investments

 

 

(33,598

)

 

 

(4,490

)

Proceeds from sales of investments

 

 

 

 

 

28,254

 

Proceeds from maturities of investments

 

 

3,800

 

 

 

35,176

 

Net cash from investing activities

 

 

(31,829

)

 

 

(4,313

)

Cash flows from financing activities:

 

 

 

 

 

 

Dividends paid

 

 

(15,979

)

 

 

(15,631

)

Repayment of debt

 

 

(118,875

)

 

 

(30,375

)

Proceeds from employee stock purchase program and exercise of stock options

 

 

1,172

 

 

 

14,252

 

Repurchases of common stock

 

 

 

 

 

(17,260

)

Repurchases of common stock for tax withholdings on equity awards

 

 

(10,504

)

 

 

(15,325

)

Net cash from financing activities

 

 

(144,186

)

 

 

(64,339

)

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

(3,419

)

Net increase (decrease) in cash and cash equivalents

 

 

(62,700

)

 

 

69,971

 

Cash and cash equivalents at beginning of period

 

 

114,555

 

 

 

201,121

 

Cash and cash equivalents at end of period

 

$

51,855

 

 

$

271,092

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Interest paid

 

$

43,507

 

 

$

26,797

 

Income taxes paid, net of refunds

 

$

3,431

 

 

$

22,389

 

Unpaid purchases of property and equipment at the end of the period

 

$

425

 

 

$

1,094

 

Unpaid purchases of intangible assets at the end of the period

 

$

900

 

 

$

 

Intangible assets acquired during the period

 

$

4,400

 

 

$

 

Debt acquired in a business acquisition

 

$

 

 

$

50,000

 

 

Cash flows above are presented on a consolidated basis and therefore also include $182.9 million of cash and cash equivalents included in current assets of discontinued operations in the condensed consolidated balance sheet as of September 30, 2022. Refer to “Note 7 – Discontinued Operations” for additional information related to cash flows from discontinued operations.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6


 

ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except per share amount)

(unaudited)

 

Three Months Ended September 30, 2023

 

Common Stock

 

 

Additional
Paid-In Capital

 

 

Treasury Stock

 

 

Accumulated
Other Comprehensive Income (Loss)

 

 

Accumulated
Deficit

 

 

Total
Stockholders' Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance at July 1, 2023

 

 

106,606

 

 

$

119

 

 

$

634,954

 

 

 

12,989

 

 

$

(218,714

)

 

$

(81

)

 

$

(93,257

)

 

$

323,021

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,232

 

 

 

24,232

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Cash dividends paid on common stock ($0.05 per share)

 

 

 

 

 

 

 

 

(5,343

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,343

)

Issuance of common stock in connection with exercise of stock options

 

 

4

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41

 

Issuance of restricted stock, net of shares canceled

 

 

760

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Withholding taxes related to net share settlement of restricted awards

 

 

(274

)

 

 

 

 

 

 

 

 

274

 

 

 

(3,013

)

 

 

 

 

 

 

 

 

(3,013

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,874

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,874

 

Balance at September 30, 2023

 

 

107,096

 

 

$

120

 

 

$

634,526

 

 

 

13,263

 

 

$

(221,727

)

 

$

(69

)

 

$

(69,025

)

 

$

343,825

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

 

Common Stock

 

 

Additional
Paid-In Capital

 

 

Treasury Stock

 

 

Accumulated
Other Comprehensive Loss

 

 

Accumulated
Deficit

 

 

Total
Stockholders' Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2023

 

 

105,167

 

 

$

117

 

 

$

636,266

 

 

 

12,225

 

 

$

(211,223

)

 

$

(51

)

 

$

(123,697

)

 

$

301,412

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54,672

 

 

 

54,672

 

Other comprehensive loss