Adeia(US:ADEA)2023-11-06 21:10PART I - FINANCIAL INFORMATION Financial Statements (unaudited) Presents unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2023, including operations, balance sheets, cash flows, and equity, with accompanying notes Condensed Consolidated Statements of Operations Adeia reported Q3 2023 revenue of $101.4 million, up 13.6%, with net income of $24.2 million, while nine-month revenue decreased 10% to $301.9 million Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $101,397 | $89,297 | $301,921 | $335,644 | | Operating Income from Continuing Operations | $40,117 | $15,642 | $112,963 | $119,817 | | Net Income (Loss) from Continuing Operations | $24,232 | $(6,343) | $54,672 | $64,662 | | Diluted EPS from Continuing Operations | $0.21 | $(0.06) | $0.48 | $0.61 | Condensed Consolidated Balance Sheets Total assets decreased to $1.12 billion as of September 30, 2023, while total liabilities significantly reduced to $780.2 million, increasing stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $219,784 | $258,713 | | Total Assets | $1,124,071 | $1,210,526 | | Total Current Liabilities | $81,912 | $166,712 | | Long-term Debt, net | $576,781 | $619,580 | | Total Liabilities | $780,246 | $909,114 | | Total Stockholders' Equity | $343,825 | $301,412 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $113.3 million for the nine months ended September 30, 2023, with significant cash used in financing for debt and dividends Cash Flow Summary for Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $113,315 | $142,042 | | Net cash from investing activities | $(31,829) | $(4,313) | | Net cash from financing activities | $(144,186) | $(64,339) | | Net (decrease) increase in cash | $(62,700) | $69,971 | Notes to Condensed Consolidated Financial Statements Provides critical context to financial statements, detailing the Xperi Inc. spin-off, revenue disaggregation, debt obligations, and ongoing legal proceedings - On October 1, 2022, the company completed the separation of its product business into Xperi Inc., with Adeia now operating as a single IP Licensing segment and Xperi's historical results presented as discontinued operations2728 Revenue by Market Vertical (in thousands) | Vertical | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Media | $95,748 | $259,027 | | Semiconductor | $5,649 | $42,894 | | Total Revenue | $101,397 | $301,921 | - As of September 30, 2023, the outstanding balance on Refinanced Term B Loans was $630.4 million, with $118.9 million in principal payments made during the first nine months of 2023130135 - The company is engaged in ongoing patent infringement litigation against Videotron, Bell, and Telus in Canada, with appeals pending, and a new breach of contract lawsuit filed against Shaw in October 2023186187189 - On October 25, 2023, the Board declared a quarterly cash dividend of $0.05 per share of common stock197 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance as a standalone IP licensing entity, highlighting Q3 2023 revenue growth driven by Samsung, reduced operating expenses, and liquidity management Financial Highlights Comparison | Metric | Q3 2023 vs Q3 2022 | 9M 2023 vs 9M 2022 | | :--- | :--- | :--- | | Revenue | +14% to $101.4M | -10% to $301.9M | | Diluted EPS (Continuing Ops) | $0.21 (vs. -$0.06) | $0.48 (vs. $0.61) | | Net Income (Continuing Ops) | $24.2M (vs. -$6.3M) | $54.7M (vs. $64.7M) | - Q3 2023 revenue growth was primarily driven by a long-term renewal with Samsung, while the nine-month revenue decrease resulted from the non-recurrence of major 2022 deals217218 - Selling, General and Administrative (SG&A) expenses decreased 37% in Q3 and 31% in the first nine months of 2023, primarily due to the spin-off of the product business226228 - Interest expense increased 56% for the nine months ended September 30, 2023, driven by rising interest rates on variable-rate debt despite a lower debt balance232234 - Cash, cash equivalents, and short-term investments decreased from $114.6 million at year-end 2022 to $82.1 million at September 30, 2023, primarily due to debt repayments and dividend payments funded by operating cash flow243 Quantitative and Qualitative Disclosures About Market Risk Refers to the Annual Report on Form 10-K for market risk disclosures, noting no material changes during the quarter - There have been no material changes to the company's market risk disclosures from those presented in its Annual Report on Form 10-K261 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period264 - There were no material changes in internal control over financial reporting during the last fiscal quarter265 PART II - OTHER INFORMATION Legal Proceedings Outlines significant ongoing legal matters, including patent infringement lawsuits in Canada against Videotron, Bell, and Telus, and a new breach of contract suit against Shaw - The company is appealing a June 2022 court decision in its patent infringement case against Videotron, with a hearing scheduled for November 28, 2023, and another trial set for January 2025269270 - The company is appealing an October 2022 decision in its patent cases against Bell and Telus, with a hearing scheduled for November 29, 2023, and another trial set for April 2025271273274 - The patent infringement litigation against NVIDIA was settled, with all remaining claims dismissed on September 11, 2023276 - On October 2, 2023, Adeia filed a breach of contract complaint against Shaw for failure to pay royalties owed under a license agreement277 Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - There were no material changes to the risk factors disclosed in the company's 2022 Annual Report on Form 10-K279 Unregistered Sales of Equity Securities and Use of Proceeds This item is reported as not applicable for the period - Not applicable279 Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 trading plan or non-Rule 10b5-1 trading arrangement during Q3 2023 - During the three months ended September 30, 2023, no Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by any director or officer of the Company279