Adeia Inc. Q2 FY2025 earnings call

• Second quarter results were in line with prior guidance, with $85.7 million in revenue and $23.1 million in cash from operations. Debt reduced by $11.1 million, total paydown since separation over $300 million.
• Introduced RapidCool, a revolutionary direct-to-chip liquid cooling technology for high-performance semiconductors, eliminating thermal interface materials and increasing heat dissipation efficiency.
• Signed 5 license agreements, including 3 with new customers in growth areas. Recurring revenue up, especially non-pay TV by 28%.
• Renewed agreements with existing customers, including a multiyear renewal with a domestic OTT streaming service and 2 with e-commerce customers (e.g., Warby Parker).
• Patent portfolio grew by 2% to over 13,000 assets in the second quarter, with first half growth over 6%.
• Strong cash generation supports capital allocation, including strategic tuck-in acquisitions, debt reduction, and shareholder returns via dividends and share repurchases.
• Named a Best Company to Work for by U.S. News and World Report for the second year in a row.

In the second quarter, Adeia delivered $85.7 million in revenue. Key segments included media (with OTT, e-commerce, pay TV) and semiconductor. Recurring revenue was up modestly year-over-year, with non-pay TV recurring revenue up 28%. The company signed 5 license agreements, including 4 in media and 1 in semiconductors, with 3 new customers in key growth areas like semiconductors and e-commerce.

• Reiterating full-year revenue guidance of $390 million to $430 million.
• Operating expenses expected to be in the range of $160 million to $166 million.
• Interest expense expected to be in the range of $40 million to $42 million.
• Other income expected to be in the range of $5.5 million to $6.5 million.
• Adjusted EBITDA margin expected to be approximately 60%.
• Non-GAAP tax rate expected to remain consistent at roughly 23% for the full year.
• Capital expenditures expected to be approximately $1 million for the full year.

• Forward-looking statements are subject to risks, uncertainties, and changes in circumstances. Actual results may differ materially from forward-looking statements. Refer to Risk Factors section in SEC filings for more information.

Q: On this OTT renewal, can you just talk about if the contract is structurally different than the previous one?

A: Sure, like most renewals, typically standard unless there's a change in circumstances; in this case, it was in line with the prior agreement.

Q: And then the new opportunities that you talked about earlier, could you talk about where they fit as far as are they e-commerce or are they OTT?

A: These are opportunities originally thought to be in 2026 and beyond, but due to team work, can be pulled into 2025. They are sizable and help achieve guidance range even without large semiconductor agreement closing this year.

Q: Maybe just to get quickly calibrated, I'm wondering if you could give us an idea about the recurring versus nonrecurring revenue and kind of the mix between media and semi?

A: A large portion of revenue this quarter was recurring. New customers' revenue impact will be more pronounced in future. Recurring revenue has stability from renewals and will step up with new deals.

Q: Maybe on the semi front, if the semi deal does not happen this year, could you parse that a little bit more?

A: Goal is to close the deal this year, but have multiple paths. If can't get there, prepared to take a different strategic path if needed.

Q: Drill down a little more on RapidCool. It does seem a very exciting technology. Do you see this as applications in the data center?

A: Currently targeting data centers, but road map creates potential for other applications. It's a direct-to-chip technology that can work with other cooling technologies.

Q: Congratulations on landing the STMicro. You said it was hybrid bonding. Is that related to chiplets?

A: It's a portfolio license to semiconductor portfolio, driven by hybrid bonding in semiconductor space, relevant to chiplets in logic space.

Q: I know you're not guiding to quarters, but can you give us a little bit of sense of how the back half might shape up in terms of balance?

A: Focus is on closing deals properly. There's momentum in business, and multiple options to achieve guidance range. Spending on SG&A tightened, but R&D will see slight modest growth as committed to innovation.