Adeia Inc. Q3 FY2024 earnings call

• Filed patent infringement litigation against Disney regarding unauthorized use of IP. - Pipeline of new opportunities in OTT, semiconductor, and e-commerce strengthens; closed multiyear e-commerce license with Neiman Marcus. - Signed 7 deals in Q3, total 22 deals in 2024, with 6 renewals (renewal rate >90%). - Delivered revenue of $86.1M and EBITDA of $51.3M; reduced term loan balance by $12M. - Board increased share repurchase program authorization to up to $200M. - R&D expenses consistent, SG&A up due to personnel and sales support, litigation expense down due to timing, interest expense down due to debt repricing and repayments.

In the third quarter, Adeia delivered revenue of $86.1 million. Operating expenses were $35.3 million, with research and development expenses at $13.7 million, selling general and administrative expenses up $1.9 million, litigation expense down $1.6 million, interest expense down $540,000, and other income at $1.4 million. Adjusted EBITDA for the quarter was $51.3 million with a margin of 60%. The company ended the quarter with $89.2 million in cash, cash equivalents, and marketable securities, generated $14.3 million in cash from operations, and made $12 million in principal payments on debt, ending with a term loan balance of $537.1 million.

• Adjusted revenue guidance for 2024 to $370M-$400M due to potential deal slipping into 2025. - Operating expenses expected to be $144M-$148M. - Interest expense expected to be $52M-$53M. - Other income expected to be $5.5M-$6M. - Adjusted EBITDA margin approximately 62% for full year. - Capital expenditures expected to be ~$2M for full year. - Confident in achieving long-term goal of annual revenue over $500M with robust pipeline.

• Forward-looking statements subject to risks, uncertainties, and changes in circumstances as per SEC filings. - Litigation with Disney is a risk to protect IP, viewed as a last resort but crucial for shareholder value.

Q: Could you provide more details around the semiconductor license signed during the quarter?

A: Paul Davis said they can't get into too much detail due to confidentiality, but highlighted interest in hybrid bonding across various industries including flash memory, logic, and high-bandwidth memory.

Q: What are the trends in Pay-TV subscribers from customers' point of view?

A: Paul Davis said there are declines in traditional Pay-TV subscribers in the U.S. as expected, with growth in OTT virtual MVPD players to offset declines.

Q: Could you provide more details around the negotiation with Disney prior to filing infringement cases and sticking points?

A: Paul Davis said they can't get into specific details due to confidentiality, but mentioned lengthy discussions often lasting 18-24 months and at some point determining if a deal could be reached.

Q: What's the pipeline look like for tuck-in M&A opportunities now that capital allocation is more flexible?

A: Keith Jones said the strength in cash flow, stability in business, and repricing of debt provide flexibility, with plans to use capital for tuck-in M&A, debt repayment, and share repurchases in Q4.