ADEA - Earnings call 3 2022 | Xperi Holding Corporation

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Operator

Good day, everyone. Thank you for standing by, and welcome to Adeia's Third Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Jill Koval of Adeia. Jill, please go ahead.

Jill Koval

Good afternoon, and thank you for joining us as Adeia reports its third quarter 2022 financial results. call Jones, Paul Chief the Officer; Chief on Keith and Financial me today Davis, are Executive With Officer.

webcast access In there addition with can is release, Investor the along an earnings website. to presentation, which today's on Adeia's earnings Relations you

like I provide a Before would few we to begin, reminders.

circumstances. or therefore, and based discussion current on contains projections expectations that subject future uncertainties about and are statements today's statements in events, And to management's changes risks, First, predictions, beliefs. forward-looking other which are

company more risks differ cause from Please For the filings, forward-looking Form our or our report XX-K does to annual actual Factors Form what today. statements quarterly including intend and XX-Q. could to on uncertainties that SEC call. Risk events after information and discuss in alter the our on results materially arising refer our update or our that section circumstances these to on report not to reflect the Please note we

to debt transaction measures, costs related non-GAAP refer facility of debt stock-based charges, or business planned compensation, Separation Second, financial actual effects. bonuses. assets, integration tax impairment expensed amortization loss one-time including costs retention related combination, which or non-cash extinguishment, closures severance, intangibles to refinancing we costs, certain costs, fees, ongoing acquired and intangible on exclude and

Paul our now the CEO, to reconciliations available at www.adeia.com. I recording these The be in on call IR provided turn Davis. release website earnings most call section website. the over measures non-GAAP conference of GAAP and of have Investor directly the We measures to will of Adeia's comparable the on will the this Relations

Paul Davis

best extend earnings IP a team business who of a Xperi everyone a its On Adeia wish welcome of as begin team want the partners all our licensing stand-alone accomplished. call to journey Board, success. years team as a traded they to separation to proud management the independent product you, Thank past leading big am from the thank make I diligently to few Jill. to own Xperi over and all very our what I our want you worked their our the to employees and the behalf company. I have I company. so management publicly also and Adeia's has want first public employees as

We have built semiconductor platform and world-class both businesses. media and an incredible engines innovation licensing our in

Our media cross-section cash profile diverse and flows license by with technology of recurring reflects strong driven long-term landscape. agreements and companies the financial a

more which about growth that cover will excited in shortly. also I of are the details opportunities us, We in are front

on As product a spinoff the business closed reminder, October X.

So product our results to inclusive prior the are third separation. financial quarter of business

today's on business. Adeia. on However, I more would the yesterday's comments call product refer of Xperi Keith listeners Inc.'s will and focus to commentary third We for quarter earnings replay

governance focused from separation These positioning included continued for time prepared policies for Day new Directors Adeia Adeia And implementing a business, product corporate we assembling processes, systems, in our basis first As new stand-alone for business. success long-term September. we our and vision on management efforts Xperi long-term and the the for Board Investor of as team presenting stand-alone and during practices. a a on

to continues everything accomplished we these business of has and work proud drive efforts, we well team am While the are on believe forward. positioned I the

of deals. separation, key While successfully a we preparing number for closed also

renewals. license the portfolios. which validating agreements, Adeia's deals Over both again relevance of we the strength X quarters, XX Once and and include last new IP continued executed nearly

in agreement entertainment The Philo, third new Australia's TV Adeia's and a growth service more quarter, intellectual multi-year in innovative and leading the new long-term focused how leading deal provider. demonstrates Pay Pay reach the with renewal around deal our a applicability streaming with continued a services. Similarly, signed use TV Foxtel, consumers providers During renewal Foxtel license and Philo ways. Pay streaming virtual world include demonstrates MVPD property with the TV to

the the done pushing quarter to a mentioned in committed we This most beneficial out remain the a fourth deals pushout in timing. before, deals for with have sometimes occurred to few Adeia, we third quarter. As getting the lead which to can

a third came million. As in $XX at the approximately result, revenue for quarter

range remains million our we year maintained multiple $XXX of we the Importantly, our million. to full dialog midpoint narrowed remain cadence in the confident have revenue year and guidance as have with the the for and of nature to Accordingly, the $XXX customers expectations positive.

business. opportunity of addition the I quarter, In some covering the want media to review spend for market the normal today the to time

noted is have objective for previously, revenue us. As annual growing a core baseline our we

of Our our of media several media and represent revenue of business represents growth business areas for important XX% baseline more us. aspects the than

media As provide it we the to believe current overall at is we look of breakdown our addressable a opportunity, helpful markets.

be market excess in U.S. TV, is First, to offsetting Pay and to remains a are with the billion Pay as future $XXX of overall revenue. which emerging continue was other markets, in markets very growth baseline U.S. TV in those us, industry market the TV declines will even The been still for XX% decline. represents adjacent of successful. in into XXXX our secular including significant contributor well us. which be Pay that the continue for we in have historically a We area roughly anticipate an

we an target in view the but Pay growth, the of fragmentation. OTT which of roughly which billion the will on given we this to market, TV area $XX XXXX billion same the given believe markets. focus market, more international as we international TV U.S. our reach already in of market modest Canada, a opportunity XXXX $XX was TV, level will this our is will the believe area international Pay in as penetration Pay significant continue Pay fragmentation remaining unlicensed of providers, we Thus, to efforts TV Outside grow. general. a Moving we don't was

early dialog of with key that translating potential other are still we financial our and into have in progressing market wins results. in While been with successful we to well, this penetrate starting licensees innings the some are

As of the opportunity of a today, significant for market remains much us.

in OTT forward, recent no will complex that channel business. the restricted more Moving approach following discussed note anticipate separation When we the longer in by established are important U.S. TV that to market product aggressively we look the from able we Since it at Pay rate we've the also the past. our have we what this we be per to be anticipate market, than is subscriber average we will less the market.

of household OTT given However, us. is significant average this number opportunity each subscribes to, a services for the

Next electronics. consumer is

CE mobile $XXX First, us, licensing for our the purposes continues for be baseline into of the from that with market. revenue area States. Consumer total with CE represents an market an the attractive for global market electronics and and ship providers of we the have CE us to visibility further XXXX penetration. excluded significant for provides strong growth, was especially opportunity volume The annual presentation, billion, this United in

market Lastly, in is attractive an XXXX and social media billion for market. growth us, was $XXX

success and We have continue of market will the in early opportunity to explosion media with believe the had video expand we platforms. social this on

actively streaming, into automotive, to large In expand sports and addition music and to these attractive markets, working gambling. gaming, ad tech, we already are

of Supporting further we will licensing on executives IP professionals. these markets engineers, team and team provide develop, investors, our opportunities. world-class these growth these and details opportunities is As additional

media Degrees, we to averages XXX. I our around the team. near Our expect term would grow that headcount to in currently This employees years XX stands to XXX and impressive at over highlight R&D like approximately Russell team of Charter, team Masters of XX% tier have companies, Qualcomm, all to inventors. top and the Snap including experience Amazon, a PhDs at are prolific name and Dolby, and Samsung few. Approximately they

our with top to business. It collaborates our separation is had the more organic labs internal with world combined Our engine. portfolios. patent R&D growth these academia disclosures producing than innovation around this team the also prior strong patent to to lead innovation team that invention enhance will we disclosures product is in Collectively, now in

on innovative we benefit the are truly a separate technology, now over the and drive product teams R&D priorities the the our term. separation disruptive there the business, alignment Xperi in and of without the that beginning to Another that portfolio and is navigate will our the and greater need realize strategic of of to is roadmaps value that long focus expected

semi our to business. Turning

focus sensors, and logic. RF X NAND end, to our continue We DRAM, in segments: front executing image market core semiconductor on

with emphasis technologies. on an engaging We and major remaining hybrid partnership of processing promoting of with actively are discussions unlicensed node bonding licensing the the our advanced companies in sectors adoption in these each and

also We hybrid Moore's and our our bonding proprietary advancing continued industry efforts technology the Law. to beyond promote

hybrid customers recognized events bonding of to and from these began world we COVID-XX are seen and past promotion based at and as over leadership in from recently as partners. pull year Our industry hybrid leader bonding has events, increased an feedback, increased a in At widely pandemic. the the our industry marketing, the significantly and customer emerge we've on the thought

new including of and internal for expertise significantly enhanced our experience also We a add next domain of and Head senior additions, business. semiconductor sales chapter semiconductor with our the drive executive of will a success These team decades hires Strategy. and new help key

I Before a want at over it to I provide turn to XXXX. look Keith, high-level

of reminder, a fourth As in next our on will we quarter year. provide earnings call XXXX February guidance

year-over-year. modest anticipate in we revenue decline First,

after for we the XXXX, in of Micron XXXX. revenue accounting quarter recognized growth from However, first impact in the of revenue anticipate our

portfolio from paying payments. business benefits full of model investments demonstrate as and dividend highly-profitable making first year our down through the a debt to quarterly patent stand-alone with company, primarily shareholders, returning our growth, capital our through our in IP in Second, we leverage will the our our accelerated

our initial and our progress that significant already and into to we We about engagement call progress progress sharing growth. will continue management to Keith? excited we accelerate has help Third, The markets applicability discuss streaming, beyond. With Keith adjacent process. efforts revenue in our expand our anticipate IP the our to portfolio is music have that, customer to will over as financials. team I'll in the entire XXXX begun turn

Keith Jones

Paul. you, Thank

X the As earlier, we and mentioned in on of businesses completed successfully October product IP thus our the separation a achieving history. tremendous milestone Paul

operating today XXth, our the the IP However, statements presented both as financial we reflect results release the in company. product still of September as for combined And businesses. a and were earnings

XX. more and the our the earnings counterparts Xth, for November the at earnings of a release to for the ending on the you and September results Inc. operating business of outlook results review financial Xperi refer product We business. replay provided comprehensive product on color future the call for quarter Additionally, the

today organization, focus non-GAAP GAAP of GAAP non-GAAP to While a today on and on historical the a have numbers. of deck combined provided Adeia, provided results business as income our statements also conversation aid basis. To our The Adeia a the stand-alone within for more we of deck. business, provide have results and of our discussion supplementally perspective the the earnings we earnings stand-alone reconciliations of historical provides will to

me for in recognition through significant results let the catch Revenue representing a The $XX.X license up a was fee decline was you of walk the our decrease third Now by million, quarter. operating XX% quarter. principally quarter. prior from the the prior driven

As a Paul has year, cover which guidance, in close subsequently moved is our were will we in reflected we this deals in mentioned remain fourth the which couple of third to quarter get We into the confident closed later that call. forecast. I the our earlier, will anticipated deals quarter there pipeline, these in

the media third our including the contribute baseline agreements several million amount. $XXX signed Foxtel. to agreements we of agreements These covering and with multi-year and During Philo semiconductor our both revenue portfolios, quarter, stability

operate a from Operating our $XXX,XXX I expenses operating spending expenses expenses, quarter. to only. period development or increase investment numbers portfolio. build further from $X.X discuss place income interest from primarily interest primarily prior and our to was term development X% X% million administrative third to million out was due expense the personnel referring we in increased will in the expenses on costs and higher loan the company. In Other $X.X to and innovation million, general increased with to which let's the administrative efforts related functions, on to support and the due prior rates as a million higher $XXX,XXX primarily engine. cash the put Now to were loan. to prior $XX.X up impact Selling, X% our or be our $XX.X continue quarter, stand-alone earned Research of quarter, interest associated primarily as non-GAAP and the due to our infrastructure

period. XX% tax for income non-GAAP Our was the rate

income primarily Our as taxes, taxes. of and domestic well as expense withholding Korean federal state consists tax

during As financial Investor we discussed leverage. provides our Day, model our operating significant

million, $XX.X for margin was quarter third the the expense for EBITDA our was EBITDA Specifically, of Depreciation an $XXX,XXX. quarter approximately reflecting XX%.

Now, sheet let a me post balance details Adeia provide separation. few for

marketable Following cash $XX.X the in separation, we securities. had cash, equivalents million and

per reflects common of stock. balance has which loan, term million. down the share on November cash a of $X.XX paying third the $XXX.X payment outstanding to quarter, Board December of paid Also record the approved a stockholders the we XXth. dividend retain we balance per of XXst a as $X.XX quarter. $XX.X Further, Additionally, This during million our of dividend of share during

to Now our guidance. turning

nature, Our patented vary, we tend by to execution our their license value quite look well economic and as quarter the our from revenue of inventions to achieve of licensing agreements provide, agreements quarter. commensurate that in and we complex to the timing can be ensure the return our to creating fluctuations large

stand-alone is only. our we we on full-year the a focused we such, the for evaluating performance XXXX. basis As providing most appropriate Thus, generally guidance will guidance an measure. be year believe be perspective full on on annual will providing Accordingly,

we'd we will give time providing for guidance like occasion, stand-alone However, as XXXX. on be particular are quarter also the reporting of QX first this the insight, to results, more will be fourth

fourth of For expect to revenue range $XXX to $XX XXXX, the of be quarter million. million we in the

We be $XX the expect range operating of to expenses $XX million in to million.

We to And approximately interest $XX $X.X to million. a to range million $XX expect income million. be we other be expect of expense in

full million $XXX year narrowing are $XXX to million. revenue our prior the For to range guidance we XXXX,

of We million. $XXX expenses be expect range to operating to a in million $XXX

We expect approximately expect and other million, to range in of $XX $XX be be million interest to we $X income the million. to expense

rate XX% and the We at expect both the for to quarter full consistent tax year. non-GAAP remain the fourth roughly

condensed higher due than a basis, our given a our and From reported overall credits. and greater utilization of of at stand-alone to on combined part mix Our relatively tax a in income rate largely certain tax operational are domestic-based CapEx is basis perspective, previously needs footprint. operating light, structure

fourth the for $XXX,XXX. In pleased CapEx is results. approximately expected with such, very to closing, As our quarter be I'm

markets growth. semiconductor that long-term media provide drive our in portfolios opportunities both Our and exceptional will

This are provides, both the positioned our expand making inorganic our operating investments With help and organic company we a have financial and consists balanced portfolio will model to grow well further adoption. allocation business. patent that leverage capital our to drive strategy our in of help

to in look loan balance against payments accelerated order strengthen we Additionally, our term sheet. make to our

hard process. of throughout committed Inc. Also, shareholders, and to and to dedication returning program. capital remain for all part our history of long thank of to like we continuing acknowledge our the I'd employees Xperi both all As and Inc. dividend their work Adeia this

set like the questions. to fulfilled successfully have We was call over years the several ago. And long-term to I'd with vision operator that, turn that forth the for Operator?

Operator

Zangler [Operator Instructions] Our first question comes from Stephens. of Nick

Nicholas Zangler

Yes.

in comparing think modest you're If decline I when at Micron the talked X% obviously So talking recall CAGR. you a Analyst a Day, you're about to revenue the about deal. XXXX, I

was and it I think 'XX from F through, was F starting going 'XX. that I believe but

so, my into as So an if curious just period, imply of revenue you And that would the that there's be? acceleration look XXXX XXXX acceleration past I'm what that the if getting in might right 'XX, driver there? math

Paul Davis

Paul. is Nick. This Hey, Yes.

period, a years, baseline The out growth was it. the expanding and that past question. see XXXX accelerating XXXX. it went we so that's number Thanks certainly XXXX think our dollar, often And be certainly CAGR of a about XXXX from revenue revenue from built and great X is high into as deals, I asking into for deals. and linear but But dollar bit. as high won't business XXXX small

period that see of can time. you step-ups during so And

Nicholas Zangler

in the guess, risk arrangement favorable I to that a a gauge well way Got at but likelihood that renewed on guess, just particular more up think arrangements year. number as you. nonrenewal size lastly And year, the I rates? the agreements and the there is just, is and also of of that for come to either is there each a then, -- renewal IP and about,

Paul Davis

kind I that's Nick, The wish an easy do volume is in to size. there of One great matters a answer. dollar point a we're vary was that our deals big shop. out question. truth small that thing

XX%. But chase history, doing. that a being that look has at we we've you successful some really with would impact. deals I greater So if we're point take what than to incredibly been all the It's of that is, our said,

you have we degree a have of a of XXX that follow profits about line is baseline revenue very high combination one It's our a So of It's what can signed today and sight I parallel at of when ] we things we those [ governments. think combination signing. good and talk

So adjust, confidence see from that risk we we profile, both we but growing the in ends and future. on great that renewing in have

Nicholas Zangler

And helpful. very -- then me. And for one it. Got last then

like you XQ, company if base revenue million and $XX recurring. stand-alone you're we're and used for between XX% But that getting your peak considered of trough. because to range obviously, guide. at look Yet a is Just the is the now obviously, way the you guide

there basically, that's like So or pretty the XX% close. right

considering estimate -- like between so much just your for wide. and that the put can So help are is you out the maybe considerations you explain Like base so what recurring, that range quarter? you why being is the peak of gap made do what revenue revenue when revenue trough theoretically

Paul Davis

like way we even that could report about be you on the back because shift Hey, our have the currently where that's And could score because some manage influence want general we need have negotiating contract from we antaciven annual large you we're And targets. could have those report once But we -- question basis There What there. we a that and again, quarter, when card we situation into business a deal ourselves in talked quarter-to-quarter. great to. really, commercial of some the think a how timing we how when related. tied that and terms previous an deals in the of I really about means though question. sizable the I is And what question frankly, your they're quite you deals. that,

the could put impact over and turn slip $XX of if or need Paul million get revenue if month best a up as will. something to license, on and begin, to that might that. that you said, And like the line have a And out they're we

pretty strong why to [indiscernible] take remains to you're had what looking the in So much about a that's at no is like, outlook. annual -- guidance at quarterly the going change first at the much that, back because difficult more looks and consistent measure gap reflective that and our in then very and talked just range. really that pipeline we on that's I And really look with question, it's what why seeing it's a us your Day our profile numbers. There's strong, basis

Nicholas Zangler

of it. kind your Got last there one, don't way to I but of of to recurring willing now and litigation of that But out potential like you trying if any everything. again, time, just agreements? to to company walk to said new walk where know. you I some companies potential of -- is kind or it, know last don't pending Is everything broken I you're if efforts agreement. that come through that know for is right I the the after chasing obviously, you don't going Are guys. now, willing sort last you've there all you're like guys the various are and list this -- that's a cost the you're obviously, expenses do through one. the

Paul Davis

guess Are in or Nick, you a just So to litigation sense? question I broader referring maybe a outstanding clarifying first.

Nicholas Zangler

where I'm have I you a determine on to, more and trying be agreement guess, to to trying near-term feet therefore reached time. just referring ground, there an any could the come are litigation. to I'm where outstanding resolution at like opportunities like

Paul Davis

Sure.

litigation our look all it our of you lists in XX-Q, If Nick, outstanding currently.

outstanding an we litigation that NVIDIA, really with that's Canada well. really it's that's currently So older still matter And outstanding. as that have then -- there's and

a the them. part. done without provide that. for right? majority We and -- done resort, a deals we're it's without very that's those get use so updates quarterly to our but you get basis I litigation you deals successful though litigation, should where on would last there's in think remind as litigation, not our is significant goal and and And I vast at obviously our XX-Q, the we'll that of look

portfolio. look as driver party the really And necessarily we a help litigation, up so in for it's value I validate that our because don't of at need I of It's success. we the third for -- our wouldn't kind when end to

Operator

The Hamed comes next question of Financial. from Khorsand

Hamed Khorsand

occurred QX you it just and essence about thought happen Could why talk in it why you the did of would not? the and pushout

Paul Davis

predict are sure done of Obviously, deal they make in time. we're basis a longer Sure. But Keith deals want on getting quarterly earlier, done and deals to get that we best the as mentioned QX. did we're we is the get business, hard done, to to trying period sizable a a one over because

but that discussions close weren't so out time. with parties going And we well, negotiations and to were the are the other just at ready them

go so And company value. better this decided we the was for longer-term to

mentioned see quarterly because and than we shifts time. that business annual an value is an time time is those on to from see you But rather earlier going that's on basis, this get time. a the how So that basis it, we can Keith on to annual because why guide from forward we'll and

Hamed Khorsand

Is the licensee? this existing with

Paul Davis

deal. There multiple There's wasn't just discussions. one

Hamed Khorsand

doesn't Okay. And what's you you not, do with what's just of this put And given these look then out certain negotiations, happen when each nature the bucket? into again, how and fluid event especially 'XX? so them into a business the

Paul Davis

it would the value discussions cycle we are where are having technical talking agreements, to basis they look on an from again, what is and the can we I we on that time But Well, say, look earlier in at deal time. at financial certainly the exchanging annual quarterly negotiation. fluctuations the an Are happen Sure. at of portfolio. say where draft stage I'd we we are the of terms, or we're

closely, that changed. we for fluctuations But very hasn't And a kind now our guide -- we're at out quarterly where good in feel very And at those look annual we of again, happen. as that on year, gauging can coming and monitor right the year. confident out we're so we and on closing

Hamed Khorsand

look about different capturing for markets question the in market you'll XX the that think you talking months? look does that end Is the My when like were you end funnel presentation slides, of 'XX? you last next a the out more Okay. there given what particular is be

Paul Davis

we We've the electronics. a U.S. to and markets media, success as large other attractive deals we've Pay-TV are have bit had those and continue Certainly, both But well. consumer OTT success in of also there. and of quite in areas. in social had

there's all -- So earlier even to Pay-TV, of So last our we as of months, across well. in Foxtel, We've signed have as the international with those. deals deals XX mentioned and continue announcement right? XX deals in the we

not there's So deal. one

look And each so there's as well. that mention, out as also everywhere. in opportunities we semi deals -- in we to market, have we Not

market -- that Those we're of we're today well. the making were on about but progress in good segments I So well. we part progressing also actively highlighted semi the the that media, business we as feel as

Operator

[Operator next Galinko the Instructions] question comes of Matthew Group. from Maxim

Matthew Galinko

opportunity? or I think how you the pace particularly graphical hyper the bonding, do capturing markets guess that to semi, the unlicensed going around in about opportunity of maybe

Paul Davis

the Yes. We're These deals a see. time. excited lot that we about getting call. of the -- as mentioned call, take we're opportunities on I There's obviously

average XX from to finish. Our is sales to cycle and months start XX

those And so periods discussions. a number with different at time we're various of

specific logic some Obviously, of kind unlicensed continue But the in that get look and expand the can't of the also of we're we're more pursuing. But customers. details business memory, as semi more pull I to market I into the and more to that have into play come pipeline as had market, certainly, its into see starting excited there, in seeing phase. opportunities next of to success we've and really at As continues there. we about in especially we a semi opportunities the NAND in lot actively

Matthew Galinko

I Thanks. you're think should modestly. in what we that I expect count I it. plans to guess, And they mentioned hit cadence market, the fourth between what is likely the head what is -- of to more able targeting? you're current terms cadence or the add XXXX? dynamics you the labor or of to quarter Got make get they And -- the in guess that higher tech terms and how throughout do in side

Paul Davis

I our where Yes, we expand team, hope especially unique a the we're I in certainly on trying mean, situation so. R&D to effort. think we're

and team that As about on, that we've XX% we've We've I some tremendous before, mentioned but the area target. given be growth expanded significantly, dynamics opportunity the do we on have that think that there'll we as we're already in seeing talked team. hires your got question be call, specifically I don't out really market the focused actively over not, there'll timing, of year. a answer we're to the And to looking but QX terms that hire globally. or in expand will spread are be we the in big it think

So slightly see do but the that of I the over front-loaded, it might course be out year. spread

Operator

Davis the reached the remarks. for of Ladies we have and I gentlemen, question-and-answer our end session. Mr. Paul will now turn call closing to over

Paul Davis

today's and Nashville. joining of Annual to you operator, forward I Investment next Conference you, you, at Keith the thank everyone, look and seeing call. Stephens for in Thank many week

on As for you in stand-alone we and call. forward basis on Goodbye. a path our out we XXXX, are excited the us business Thank joining our highly profitable growth model. close again about continued demonstrating

Operator

your lines. you and Thank and Thank today's this disconnect your participation, for teleconference. you. now concludes gentlemen, you Ladies may

Xperi Holding 9 Nov 222022 Q3 Earnings call transcript