SEC Filing | Adeia Inc.

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10-Q

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, 2022

☐ 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)

XPERI HOLDING CORPORATION

(Former name, former address and former fiscal year, if changed since last report)

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, 2022 was 105,059,079.

ADEIA INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS


		Page
	PART I
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Statements of Operations – Three and Nine Months Ended September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and Nine Months Ended September 30, 2022 and 2021	4
	Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021	5
	Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30 , 2022 and 2021	6
	Condensed Consolidated Statements of Equity – Three and Nine Months Ended September 30, 2022 and 2021	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	53
Item 4.	Controls and Procedures	53

	PART II
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
Item 6.	Exhibits	77

Signatures		78

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, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Revenue	$	210,941		$	219,379		$	702,379		$	663,247
Operating expenses:
Cost of revenue, excluding depreciation and amortization of intangible assets		31,554			32,549			86,324			87,564
Research, development and other related costs		68,366			58,766			189,881			168,369
Selling, general and administrative		83,958			62,627			226,519			197,754
Depreciation expense		5,388			6,796			16,759			17,994
Amortization expense		40,808			52,388			119,293			156,825
Litigation expense		3,083			2,327			7,998			7,162
Goodwill impairment		354,000			—			354,000			—
Total operating expenses		587,157			215,453			1,000,774			635,668
Operating income (loss)		(376,216	)		3,926			(298,395	)		27,579
Interest expense		(13,198	)		(8,532	)		(31,066	)		(30,400	)
Other income and expense, net		460			927			1,681			2,916
Loss on debt extinguishment		—			—			—			(8,012	)
Loss before taxes		(388,954	)		(3,679	)		(327,780	)		(7,917	)
Provision for income taxes		865			42,698			44,536			35,807
Net loss	$	(389,819	)	$	(46,377	)	$	(372,316	)	$	(43,724	)
Less: net loss attributable to noncontrolling interest		(890	)		(1,310	)		(2,706	)		(2,826	)
Net loss attributable to the Company	$	(388,929	)	$	(45,067	)	$	(369,610	)	$	(40,898	)
Loss per share attributable to the Company:
Basic	$	(3.72	)	$	(0.43	)	$	(3.55	)	$	(0.39	)
Diluted	$	(3.72	)	$	(0.43	)	$	(3.55	)	$	(0.39	)

Weighted average number of shares used in per share calculations-basic		104,510			104,849			104,066			104,898
Weighted average number of shares used in per share calculations-diluted		104,510			104,849			104,066			104,898

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

ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three Months Ended						Nine Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021
Net loss	$	(389,819	)	$	(46,377	)	$	(372,316	)	$	(43,724	)
Other comprehensive income (loss), net of tax:
Change in foreign currency translation adjustment		(1,523	)		(598	)		(4,441	)		(1,563	)
Net unrealized loss on available-for-sale debt securities		42			2			64			2
Other comprehensive loss, net of tax		(1,481	)		(596	)		(4,377	)		(1,561	)
Comprehensive loss		(391,300	)		(46,973	)		(376,693	)		(45,285	)
Less: comprehensive loss attributable to noncontrolling interest		(890	)		(1,310	)		(2,706	)		(2,826	)
Comprehensive loss attributable to the Company	$	(390,410	)	$	(45,663	)	$	(373,987	)	$	(42,459	)

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

ADEIA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for par value)

(unaudited)


	September 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	271,092		$	201,121
Available-for-sale debt securities		1,399			60,534
Accounts receivable, net of allowance for credit losses of $2,705 and $3,102, respectively		107,017			143,683
Unbilled contracts receivable, net		129,206			77,677
Other current assets		45,250			36,459
Total current assets		553,964			519,474
Long-term unbilled contracts receivable		44,715			4,107
Property and equipment, net		56,727			60,974
Operating lease right-of-use assets		62,691			68,498
Intangible assets, net		736,489			817,916
Goodwill, net		564,215			851,088
Other long-term assets		141,926			147,965
Total assets	$	2,160,727		$	2,470,022
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	25,286		$	7,811
Accrued liabilities		125,921			110,705
Current portion of long-term debt, net		36,267			36,095
Deferred revenue		37,921			35,136
Total current liabilities		225,395			189,747
Deferred revenue, less current portion		30,897			37,107
Long-term deferred tax liabilities		26,240			19,848
Long-term debt, net		752,170			729,392
Noncurrent operating lease liabilities		47,089			54,658
Other long-term liabilities		99,881			98,842
Total liabilities		1,181,672			1,129,594
Commitments and contingencies (Note 15)
Company stockholders’ equity:
Preferred stock: $0.001 par value; (2022: authorized 15,000 shares; 2021: authorized 15,000 shares; and no shares issued and outstanding)	—			—
Common stock: $0.001 par value; (2022: authorized 350,000 shares, issued 116,930 shares, outstanding 105,059 shares; 2021: authorized 350,000 shares, issued 113,460, outstanding 103,260 shares)		117			113
Additional paid-in capital		1,405,433			1,340,480
Treasury stock at cost (2022: 11,880 shares; 2021: 10,200 shares)		(210,607	)		(178,022	)
Accumulated other comprehensive loss		(5,129	)		(752	)
Retained earnings (accumulated deficit)		(197,427	)		187,814
Total Company stockholders’ equity		992,387			1,349,633
Noncontrolling interest		(13,332	)		(9,205	)
Total equity		979,055			1,340,428
Total liabilities and equity	$	2,160,727		$	2,470,022

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

ADEIA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended
	September 30, 2022			September 30, 2021
Cash flows from operating activities:
Net loss	$	(372,316	)	$	(43,724	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation of property and equipment		16,759			17,994
Amortization of intangible assets		119,293			156,825
Goodwill impairment		354,000			—
Stock-based compensation expense		49,283			42,468
Deferred income taxes		(1,761	)		(7,092	)
Loss on debt extinguishment		—			8,012
Patent assets received in lieu of cash		—			(8,787	)
Other		4,312			8,474
Changes in operating assets and liabilities:
Accounts receivable		40,075			(14,327	)
Unbilled contracts receivable		(89,636	)		30,708
Other assets		7,264			(3,956	)
Accounts payable		16,606			3,036
Accrued and other liabilities		2,508			(23,414	)
Deferred revenue		(4,345	)		(304	)
Net cash from operating activities		142,042			165,913
Cash flows from investing activities:
Purchases of property and equipment		(12,576	)		(8,298	)
Proceeds from sale of property and equipment		86			19
Cash paid for acquisitions, net of cash acquired		(50,473	)		(17,400	)
Purchases of intangible assets		(290	)		(119	)
Purchases of short-term investments		(4,490	)		(65,446	)
Proceeds from sales of investments		28,254			46,248
Proceeds from maturities of investments		35,176			33,436
Net cash from investing activities		(4,313	)		(11,560	)
Cash flows from financing activities:
Dividends paid		(15,631	)		(15,752	)
Repayment of debt		(30,375	)		(73,923	)
Debt refinancing costs		—			(6,843	)
Proceeds from employee stock purchase program and exercise of stock options		14,252			13,839
Repurchases of common stock		(32,585	)		(75,235	)
Net cash from financing activities		(64,339	)		(157,914	)
Effect of exchange rate changes on cash and cash equivalents		(3,419	)		(1,189	)
Net increase (decrease) in cash and cash equivalents		69,971			(4,750	)
Cash and cash equivalents at beginning of period		201,121			170,188
Cash and cash equivalents at end of period	$	271,092		$	165,438
Supplemental disclosure of cash flow information:
Interest paid	$	26,797		$	25,030
Income taxes paid, net of refunds	$	22,389		$	22,151
Debt acquired in a business acquisition	$	50,000		$	—

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

ADEIA INC.