Adeia Inc. Q4 FY2024 earnings call

• Fourth quarter was strong with revenue of $119.2 million, operating cash flow of $107.5 million, adjusted EBITDA of $80.3 million, and operating margin of 67%. Signed 10 license agreements including four new deals across OTT, consumer electronics, Pay-TV, e-commerce and semiconductors. • Made accelerated debt payments, reducing balance by $50 million to $487 million, initiated stock buyback program repurchasing $20 million of common stock, and closed $12 million in tuck-in IP acquisitions. • In media, new media revenue up 65% YOY, signed multiyear license with Amazon, renewed with Roku and Sharp. In semiconductor, signed technology transfer agreement with new customer for hybrid bonding technology. • Full-year 2024 saw 32 agreements signed, paid down $114.2 million of debt since separation, hybrid bonding was a key driver for semiconductor deals. • Initiated litigation against Disney for patent infringement in multiple jurisdictions. • R&D portfolios grew 12% in 2024, acquired five portfolios in 2024 including $12 million in fourth quarter for OTT and broadband connectivity IP.

In the fourth quarter, Adeia's revenue was $119.2 million. Full-year 2024 revenue was $376 million. The new media revenue increased 65% year-over-year in the fourth quarter. The semiconductor business signed a technology transfer agreement. In terms of revenue contribution, details weren't explicitly given for each segment's percentage contribution, but the media and semiconductor portfolios saw growth. Fourth quarter operating cash flow was $107.5 million, adjusted EBITDA was $80.3 million with an operating margin of 67%. Full-year operating margin was 62%, cash flows from operations were $212.5 million, and adjusted EBITDA was $234.3 million.

• 2025 revenue expected in the range of $390 million to $430 million. • Operating expenses expected to be in the range of $166 million to $174 million, with modest single-digit growth in R&D and SG&A. • Litigation expense expected to approximately double due to Disney litigation and ongoing Canadian Pay-TV operator litigation. • Interest expense expected in the range of $41 million to $43 million due to debt repricing. • Other income expected in the range of $4 million to $4.5 million. • Adjusted EBITDA margin expected to be approximately 59%. • Capital expenditures expected to be approximately $1 million for the full year.

• Legal risk from ongoing litigation against Disney and with Canadian Pay-TV operators, which could take several years and impact results. • Uncertainty in the timing and execution of semiconductor deals, as they are large and complex. • Debt-related risks, including the impact of interest rate changes and the need to manage debt levels while allocating capital for other purposes.

Q: Could you provide any more detail on what key assumptions will drive the low and the high end of the revenue guidance?

A: Our pipeline is strong, but deal timing and economics are important. The high end is based on executing at the velocity seen at the end of Q4 and further progress, while the low end is due to being patient and getting desired deal economics.

Q: So first off, could you just talk about the semiconductor transfer agreement?

A: It's a technology transfer agreement where we provide know-how and engineering hours to a customer focused on high performance imaging and detection systems for hybrid bonding. We get value from these types of deals.

Q: Is there any update as to how real possibility it is for you to get the semiconductor deal signed?

A: Deals are large and complex, take time. We're still engaged with the customer, optimistic about getting it done this year but there has been a pushout from last year.

Q: Can you talk a little bit more about the pipeline and maybe where those IP portfolios are coming from for the acquisitions?

A: Sourced from public and private companies, corporate development team does outreach, and brokers approach. Focused on OTT, semiconductor, and broadband connectivity areas to augment existing portfolios.

Q: How do you evaluate IP acquisitions against licensing opportunities?

A: Align with growth strategies in semiconductors, OTT, and media adjacent markets. Target specific areas where there are gaps in existing portfolios to accelerate growth opportunities.

Q: Do you have a target for debt ratios?

A: We've made progress in deleveraging, with year-over-year interest expense reduction. We focus on managing the balance sheet, with a comfortable debt level in mind while using cash flow for reinvestment and returning capital to shareholders.