Adeia Announces Third Quarter 2022 Results

Reiterates full year revenue guidance, narrows range


SAN JOSE, Calif., Nov. 09, 2022 (GLOBE NEWSWIRE) -- Adeia Inc. (Nasdaq: ADEA) (the “Company” or “Adeia”), formerly known as Xperi Holding Corporation, today announced financial results for the third quarter ending September 30, 2022. These third quarter financial results include both the intellectual property (IP) licensing business and the product business prior to separation on October 1, 2022.

“Our third quarter represents a significant milestone for Adeia as we successfully completed the spin-off of the product business and now stand as a newly independent, leading IP licensing company with a compelling business model which leverages our strong business fundamentals to generate enhanced financial performance in the near and long-term,” said Paul E. Davis, chief executive officer of Adeia. “We have built an incredible licensing platform with consistent and strong cash flows, and world-class innovation engines in both our Media and Semiconductor businesses. We want to wish the Xperi management team and all its employees all the best as they move forward on their journey as a stand-alone public company.”

Highlights

  • On a combined basis, total revenue for the third quarter was $210.9 million, a decline of 4% from $219.4 million in the same period last year
  • On a combined basis, total revenue for the nine months ending September 30, 2022, was $702.4 million, a 6% increase from $663.2 million in the same period last year
  • Total revenue for the IP business during the third quarter was $89.3 million, a decline of 12% from $101.6 million in the same period last year
  • Total revenue for the IP business for the nine months ending September 30, 2022, was $335.6 million, an increase of 11% from $301.5 million in the same period last year
  • Successfully completed the spin-off of the product business, positioning us well for long term growth as a leading independent IP licensing company
  • Signed a multi-year license renewal with Foxtel, Australia’s leading Pay-TV platform, further demonstrating our impressive track record of successful renewals
  • Signed a new multi-year deal with Philo, a leading entertainment focused TV streaming service, illustrating our IP's continued applicability and growth of our IP beyond traditional Pay-TV

Capital Allocation

On September 19, 2022, the Company distributed $5.2 million to stockholders of record on August 29, 2022, for a quarterly cash dividend of $0.05 per share of common stock.

On October 20, 2022, the Board of Directors declared a dividend of $0.05 per share, payable on December 21, 2022, to stockholders of record on November 30, 2022.

During the third quarter, we made a $10.1 million payment toward our outstanding term loan, bringing the outstanding balance to $759.4 million as of September 30, 2022.

Financial Outlook

The Company is reiterating its prior full-year 2022 stand-alone revenue guidance and narrowing the prior range of $425 - $450 million to $430 - $445 million.

Due to the unique dynamics of the product business spin-off coinciding with the end of the quarter, we will be providing guidance for Adeia’s fiscal fourth quarter of 2022 on a stand-alone basis. Moving forward, we intend to only provide annual guidance.

Category
(in millions, except for tax rate)
 Q4'22 GAAP
Outlook
 Q4'22 Non-GAAP
Outlook
Revenue $95 -- 110 $95 -- 110
Operating Expenses1 $70 -- 74 $35 -- 39
Interest Expense $15 -- 17 $15 -- 17
Other Income (Expense) ~ $0.5 ~ $0.5
Tax Rate (14)% 23%
Basic Shares Outstanding 106 106
Diluted Shares Outstanding 110 110

1See tables for reconciliation of GAAP to Non-GAAP differences.

Conference Call Information

The Company will hold its third quarter 2022 earnings conference call at 2:00 PM Pacific Time (5:00 PM Eastern Time) on Wednesday, November 9, 2022. To access the call in the U.S., please dial 877-451-6152, and for international callers, dial +1 201-389-0879. The conference ID is 13733251. All participants should dial in 15 minutes prior to the start of the conference call and can use the conference ID to access the call. The Company also suggests utilizing the webcast link to access the call at Q3 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 invents, develops and licenses fundamental innovations that shape the way millions of people explore and experience entertainment in an increasingly connected world. From TVs to smartphones, and across all types of entertainment experiences, Adeia’s technologies allow users to manage content and connections in a way that is smart, immersive and personal. For more information, please visit 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 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 goodwill, impact of certain unrealized foreign currency adjustments and related tax effects. 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 non-GAAP operating expenses, 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:
Jill Koval
 +1 203-832-4449
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  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 (benefit from) 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 
                 


ADEIA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
       
  September 30,  December 31, 
  2022  2021 
ASSETS      
Current assets:      
Cash and cash equivalents $271,092  $201,121 
Available-for-sale debt securities  1,399   60,534 
Accounts receivable, net  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      
Company stockholders’ equity:      
Preferred stock      
Common stock  117   113 
Additional paid-in capital  1,405,433   1,340,480 
Treasury stock at cost  (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 
         


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  $ 
         


ADEIA INC.
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share amounts)
(unaudited)
 
Net income attributable to the Company:   
  Three Months Ended 
  September 30, 2022 
GAAP net loss attributable to the Company $(388,929)
    
Adjustments to GAAP net loss attributable to the Company:   
Stock-based compensation expense:   
Cost of revenue  778 
Research, development and other  5,951 
Selling, general and administrative  10,269 
Amortization expense  40,808 
Goodwill impairment charge  354,000 
Merger and integration-related costs:   
Transaction and other related costs recorded in selling, general and administrative  3,971 
Severance and retention recorded in research, development and other  1,830 
Severance and retention recorded in selling, general and administrative  580 
Separation costs recorded in cost of revenue  356 
Separation costs recorded in research, development and other  1,847 
Separation costs recorded in selling, general and administrative  9,134 
Non-GAAP tax adjustment (1)  (5,081)
Non-GAAP net income attributable to the Company $35,514 
    
Diluted earnings per share attributable to the Company:   
  Three Months Ended 
  September 30, 2022 
    
GAAP diluted loss per share attributable to the Company $(3.72)
    
Adjustments to GAAP diluted loss per share attributable to the Company:   
Stock-based compensation expense  0.16 
Amortization expense  0.39 
Goodwill impairment charge  3.39 
Merger and integration-related costs  0.06 
Separation costs  0.11 
Difference in shares used in the calculation  (0.03)
Non-GAAP tax adjustment  (0.05)
Non-GAAP diluted earnings per share attributable to the Company  0.31 
    
GAAP weighted average number of shares-diluted  104,510 
Non-GAAP adjustment (2)  10,432 
Non-GAAP weighted average number of shares-diluted  114,942 

(1) The provision for income taxes is adjusted to reflect the net direct and indirect income tax effects of the various non-GAAP pretax adjustments.
(2) The number of shares used in the diluted per share calculations on a non-GAAP basis excludes the impact of stock-based compensation expense expected to be incurred in future periods and not yet recognized in the financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method.

 
ADEIA INC.
RECONCILIATION FOR GUIDANCE ON
GAAP TO NON-GAAP TOTAL OPERATING EXPENSES
(in millions)
(unaudited)
 
  Three Months Ended 
  December 31, 2022 
  Low  High 
GAAP operating expenses $70.0  $74.0 
Stock-based compensation expense  (3.0)  (3.0)
Merger, integration and separation-related expense -- SG&A  (8.0)  (8.0)
Amortization expense  (24.0)  (24.0)
Total of non-GAAP adjustments  (35.0)  (35.0)
Non-GAAP operating expenses $35.0  $39.0