Adeia Inc. Q1 FY2025 earnings call

• Paul Davis noted the company had $88 million in revenue and $57 million in cash from operations in Q1 2025, in line with expectations. - Ten license agreements were signed, including 4 new customers in key growth areas such as social media, OTT, and semiconductors. - Six renewals occurred in Q1, with 4 in pay TV and the rest in OTT and consumer electronics. - The total patent portfolio grew to over 12,750 patent assets, with organic R&D accounting for over 85% of assets, and acquisitions of IP portfolios in micro LEDs and imaging. - Strong cash generation enabled balanced capital allocation, including strategic acquisitions, deleveraging, and returning capital to shareholders. - Sandeep Vij was nominated to the board to replace Raghu Rau.

In the first quarter of 2025, Adeia generated $87.7 million in revenue. The revenue was driven by 10 license agreements across diverse end markets including OTT, semiconductor, social media, pay TV, and consumer electronics. Cash from operations amounted to $57.1 million. Recurring revenue for non-pay TV parts of the business saw a year-over-year increase of 25%.

• Reiterated full-year 2025 guidance: revenue is expected to be in the range of $390 million to $430 million. - Operating expenses are anticipated to be between $166 million and $174 million. - Interest expense is expected to be in the range of $41 million to $43 million. - Other income is projected to be between $4 million and $4.5 million. - Adjusted EBITDA margin is anticipated to be approximately 59%. - Capital expenditures are expected to be approximately $1 million for the full year.

• Forward-looking statements are subject to risks, uncertainties, and changes in circumstances as per SEC filings. - Macro-economic volatility could impact the business, though the business model is resilient due to contracted revenue and long average contract terms.

Q: Congratulations on landing all the new deals. What caught my interest the most is the new US Professional Sports League for online streaming. Is this a breakthrough that you might be able to get other sports leagues to sign up also?

A: We're really happy with the new deal execution. Getting four new deals done in a quarter is quite the achievement. The one that you mentioned, the US Professional Sports League, is one that we're certainly particularly proud of. It is an area that we've been focused on as many of these sports leagues have really added to the video content and interactive nature of their websites and their offerings generally. And so, yes, we do think this could lead to more. Now, we do categorize this within our OTT vertical because of the streaming nature of many of these services. But, yeah, we're very pleased by it and think it could be the first of several.

Q: Is there potential for turning that into a betting features also?

A: Yeah. As you know, Kevin, we certainly have sports gambling as part of our one of our verticals. That is something that we continue to explore. That adjacent market is a little further out than some of our others that are more near term, like e-commerce, ad tech, and automotive to a degree. But we certainly continue to explore and engage with a number of potential customers on sports gambling as well. And it could be an inroad, as you know.

Q: One other question on the micro LED and the imaging portfolio that you acquired. Do those currently have licenses attached to them?

A: No, they don't. We often are buying patent assets that don't come with an existing revenue stream, but that we see a really opportunity for us to take them on and add to our portfolio. With micro LED, we've included that in our semiconductor portfolio. What interesting to note there, Kevin, is that a lot of the micro LED supply chain and ecosystem will look, we believe, like the semiconductor industry and they're going to need to adopt semiconductor related technologies and processes. And so, we're excited about the synergies there and what that can mean in terms of adding new potential customers. And also, importantly on that one, as we think about new technologies and semiconductors for AI, as you think about silicon photonics and the like. And so, we think there's a lot of potential with that portfolio. It is a more mid to long-term opportunity for us, but one that we're very bullish about.

Q: First off on this semiconductor announcement you have, is that the big one you were expecting last year?

A: No, it's not, Hamed, as we noted on the call. That deal is still out there to be had. This was a smaller opportunity for us, but one that continues to show progress, especially in the adoption of hybrid bonding, which also drove this deal as well.

Q: As far as the OTT is concerned, where are you seeing the opportunities? Is it coming from the international market like the one you announced, or are there still viable options here in the domestic market?

A: As you know, we're currently in litigation with Disney. We also have another very large OTT opportunity that's out there that remains unlicensed that's domestic. And then we do have international opportunities as well. I would say the bulk of the opportunities are in the US and are domestic, but we do have international licensees today and are continuing to explore and get new deals done in the international market as well. But the larger revenue opportunities are here in the US for us.

Q: How big is the social media opportunity? I thought it was quite small for you in the past, so you've announced one. Is there any more you could announce?

A: When you look at our penetration in social media, we now have roughly 90% of the social media market licensed. So it is largely a licensed opportunity. Now, where we do have opportunities is in renewals that are coming up. New deals are harder to come by just because we have most of the market licensed. This was though a new customer that we licensed which we really happy to add them to the otherwise long list of social media companies that we have already under license. As we have talked about before, the social media opportunity will continue to expand, though, in terms of the use cases where video and imaging becomes more and more important to those companies. And so, we think there's some opportunity to continue to expand the revenue that we get from existing customers as well.