美国
证券交易委员会
华盛顿特区 20549
表单
(标记一个)
截至季度期
或
委员会档案编号：
(注册人的准确名称，如其章程所指定)
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（注册或组织的）提起诉讼的州或其他司法管辖区（如适用） 公司注册或组建) |
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(美国国税局雇主 识别号) |
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(主要执行办公室地址) |
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根据法案第12(b)节注册的证券：
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加速报告人 |
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非加速报告人 |
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小型报告公司 |
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新兴成长公司 |
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如果是新兴成长型公司，在选中复选标记的同时，如果公司已选择不使用根据证券交易法第13(a)条提供的任何新的或修订后的财务会计准则的延长过渡期来符合新的或修订后的财务会计准则，则表明该公司已选择不使用根据证券交易法第13(a)条提供的任何新的或修订后的财务会计准则的延长过渡期来符合新的或修订后的财务会计准则。☐
请在勾选符号上注明本公司是否为外壳公司（在证券交易法12b-2规定中定义）。是 ☐ 否
截至2024年10月25日，注册人的普通股流通股份数量 百万，注册人
ADEIA INC.
FORM 10-Q
截至2024年9月30日的季度期间
目录
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页 |
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项目1. |
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3 |
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3 |
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4 |
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5 |
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6 |
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合并简明权益报表 -截至2024年和2023年 三个月和九个月 九月30日 |
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7 |
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9 |
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项目2. |
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33 |
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项目3。 |
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43 |
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项目4。 |
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43 |
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项目1. |
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44 |
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项目1A。 |
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46 |
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项目2. |
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46 |
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项目3。 |
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46 |
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项目4。 |
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46 |
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第五项。 |
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46 |
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第六项。 |
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47 |
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48 |
2
第一部分 – 财务信息
项目1. 财务报表
ADEIA INC.
综合财务报表收入报表
(以千为单位，除每股金额外)
(未经审计)
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截至三个月 |
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截至九个月 |
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九月三十日 |
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九月三十日 |
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九月三十日 |
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九月三十日 |
营业收入 |
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$ |
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$ |
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$ |
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$ |
营业费用： |
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研究和开发 |
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销售、一般和行政 |
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摊销费用 |
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诉讼费用 |
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总营业费用 |
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营业收入 |
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利息支出 |
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其他收入和费用，净额 |
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债务清偿损失 |
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( |
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税前收入 |
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所得税准备（收益） |
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净利润 |
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$ |
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$ |
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$ |
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$ |
每股净利润: |
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基本 |
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$ |
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$ |
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$ |
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$ |
稀释 |
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$ |
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$ |
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$ |
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$ |
用于每股计算的加权平均股份数 |
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基本 |
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稀释 |
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附带的说明是这些未经审计的简明合并基本报表的一个不可或缺的部分。
3
ADEIA INC.
综合收益的浓缩合并财务报表综合收益
(以千为单位)
(未经审计)
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截至三个月 |
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截至九个月 |
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九月三十日 |
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九月三十日 |
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九月三十日 |
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九月三十日 |
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净利润 |
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$ |
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$ |
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$ |
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$ |
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其他综合收益(损失), 净额(税后): |
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外币翻译调整的变动 |
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可供出售债务证券的未实现收益（亏损） |
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( |
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其他综合收入（损失），扣除税后 |
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( |
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综合收益总额 |
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$ |
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$ |
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$ |
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$ |
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附带的说明是这些未经审计的简明合并基本报表的一个不可或缺的部分。
4
ADEIA INC.
C压缩合并资产负债表
(单位：千，除了面值以外)
(未经审计)
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九月三十日 |
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12月31日 |
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资产 |
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流动资产： |
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现金及现金等价物 |
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$ |
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$ |
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可售证券 |
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应收账款，扣除信用损失准备金$ |
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未开票合同应收账款，净额 |
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其他流动资产 |
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总流动资产 |
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长期未开票合同应收账款 |
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物业及设备（净额） |
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经营租赁使用权资产 |
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无形资产，净值 |
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商誉 |
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长期所得税应收款 |
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其他长期资产 |
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总资产 |
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$ |
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$ |
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负债和权益 |
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流动负债： |
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应付账款 |
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$ |
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$ |
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应计法律费用 |
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应计负债 |
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长期债务的流动部分 |
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递延收入 |
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总流动负债 |
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递延营业收入，减去流动部分 |
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长期负债，净额 |
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非流动经营租赁负债 |
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长期应交所得税 |
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其他长期负债 |
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总负债 |
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) |
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股东权益： |
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优先股: $ |
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普通股：$ |
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额外实收资本 |
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按成本计算的库藏股 (2024: |
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( |
) |
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( |
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累计其他综合损失 |
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( |
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累计亏损 |
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( |
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( |
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股东权益总额 |
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总负债及权益 |
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$ |
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$ |
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附带的说明是这些未经审计的简明合并基本报表的一个不可或缺的部分。
5
ADEIA INC.
综合现金流量表 现金流量
(以千为单位)
(未经审计)
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截至九个月 |
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2024年9月30日 |
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2023年9月30日 |
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经营活动产生的现金流： |
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净利润 |
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$ |
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$ |
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调整净利润与经营活动产生的现金净额之间的差异： |
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折旧 |
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无形资产摊销 |
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基于股票的补偿费用 |
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递延所得税 |
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( |
) |
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债务清偿损失 |
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债务发行成本的摊销 |
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其他 |
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( |
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经营资产和负债的变动： |
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应收账款 |
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( |
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未开票合同应收款 |
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( |
) |
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( |
) |
其他资产 |
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( |
) |
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应付账款 |
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( |
) |
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应计及其他负债 |
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( |
) |
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( |
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递延收入 |
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( |
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净现金来自于经营活动 |
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投资活动的现金流： |
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购买房产和设备 |
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( |
) |
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( |
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无形资产购置 |
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( |
) |
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( |
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购买期权 |
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( |
) |
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( |
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来自投资到期的收益 |
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投资活动产生的净现金 |
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( |
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( |
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融资活动产生的现金流: |
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分红派息 |
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( |
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( |
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偿还债务 |
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( |
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( |
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来自员工股票购买计划和行使期权的收益 |
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因股权奖励的税款扣缴而回购普通股 |
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( |
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( |
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融资活动的净现金 |
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( |
) |
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( |
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现金及现金等价物的净增加（减少） |
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( |
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期初的现金及现金等价物 |
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期末现金及现金等价物 |
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$ |
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$ |
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现金流信息的补充披露： |
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支付的利息 |
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$ |
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$ |
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所得税支付，扣除退款后的净额 |
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$ |
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$ |
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期末未支付的物业及设备采购 |
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$ |
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$ |
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附带的说明是这些未经审计的简明合并基本报表的一个不可或缺的部分。
6
ADEIA INC.
简化合并 权益报表
(以千为单位，除每股金额外)
(未经审计)
截至2024年9月30日的三个月 |
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普通股 |
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额外 |
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库存股 |
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累计 |
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累积 |
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总计 |
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股份 |
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金额 |
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股份 |
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金额 |
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截至2024年7月1日的余额 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
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净利润 |
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— |
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— |
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— |
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— |
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— |
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— |
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其他综合收益 |
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— |
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— |
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— |
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— |
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— |
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— |
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普通股的现金分红（$ |
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— |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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与行使期权相关的普通股发行 |
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— |
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— |
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— |
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— |
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— |
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与员工股票购买计划相关的普通股发行 |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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限制性股票的发行，净额为取消的股票 |
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— |
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— |
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— |
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— |
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— |
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与限制性奖励的净股票结算相关的扣税 |
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( |
) |
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— |
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— |
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( |
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— |
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— |
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( |
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基于股票的补偿费用 |
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— |
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— |
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— |
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— |
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— |
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— |
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截至2024年9月30日的余额 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
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截至2024年9月的九个月 |
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普通股 |
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额外 |
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库存股 |
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累计 |
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累积 |
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总计 |
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股份 |
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金额 |
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股份 |
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金额 |
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2024年1月1日的余额 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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净利润 |
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— |
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— |
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— |
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— |
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— |
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— |
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其他综合收益 |
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— |
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— |
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— |
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— |
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— |
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— |
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普通股的现金分红派息（$ |
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— |
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— |
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( |
) |
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— |
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因行使期权而发行普通股 |
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因员工股票购买计划而发行普通股 |
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限制性股票的发行，扣除已取消的股票 |
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与限制性奖励净股票结算相关的预扣税 |
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基于股票的补偿费用 |
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截至2024年9月30日的余额 |
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附带的说明是这些未经审计的简明合并基本报表的一个不可或缺的部分。
7
ADEIA INC.
浓缩合并权益报表
(以千为单位，除每股金额外)
(未经审计)
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公司股东权益总计 |
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普通股 |
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累计 |
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截至2023年9月30日的三个月 |
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股份 |
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截至2023年7月1日的余额 |
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净利润 |
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其他综合收益 |
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支付普通股的现金分红（$ |
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与行使期权有关的普通股发行 |
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限制性股票的发行，净额为已取消股份 |
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与限制性奖励的净股份结算相关的预扣税 |
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基于股票的补偿费用 |
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截至2023年9月30日的余额 |
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公司股东权益总额 |
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截至2023年9月30日的九个月 |
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2023年1月1日余额 |
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其他综合损失 |
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普通股的现金分红派息（$ |
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根据期权行使的普通股发行 |
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根据员工股票购买计划的普通股发行 |
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限制性股票的发行，扣除已注销的股票 |
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与限制性奖励的净股票结算相关的预扣税 |
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基于股票的补偿费用 |
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截至2023年9月30日的余额 |
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$ |
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( |
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附带的说明是这些未经审计的简明合并基本报表的一个不可或缺的部分。
8
ADEIA INC.
附注 C压缩合并基本报表
(未经审计)
注释 1 – 公司及报告基础
Adeia Inc.（“公司”）是一家特拉华州公司，是行业内最大的知识产权（“IP”）授权平台之一，拥有多样化的媒体和半导体IP组合，包含超过
在2022年10月1日，公司完成了之前宣布的产品业务分拆（“分拆”），将其业务分为一家独立的上市公司，Xperi Inc.（“Xperi Inc.”）。本次分拆是通过公司向截至2022年9月21日（“记录日期”）收盘时持有公司普通股的股东分配
此外，由于分离，公司在2022年第四季度改变了其经营结构，导致
附带的未经审计的简明合并基本报表是公司根据美国公认会计原则（“GAAP”）以及证券交易委员会（“SEC”）关于临时财务信息的适用规则和规定编制的。截至2023年12月31日的金额来源于公司年度审计的合并基本报表，这些报告包含在截止至2023年12月31日的年度报告Form 10-K中，并于2024年2月23日提交（“Form 10-K”）。这些简明合并基本报表应与截至2023年12月31日的年度审计合并基本报表及其附注一起阅读。
某些信息和脚注披露通常包括在根据美国GAAP编制的财务报表中，已根据这些规则和规定进行了简化或省略。在管理层看来，附带的未经审计的简明合并基本报表反映了必要的所有调整（包括正常的经常性调整），公正地陈述了公司截至所示期间的财务状况及其经营成果和现金流。截至2024年9月30日的三个月和九个月的经营结果不一定表明截至2024年12月31日的完整年度或任何未来期间可能预期的结果，公司对此不作任何表述。
注释 2 – 重要会计政策摘要
截至2024年9月30日的三个月和九个月期间，公司的重要会计政策没有重大变化，这与在10-K表格中描述的重要会计政策相比。
9
估计的使用
根据美国通用会计准则（U.S. GAAP）编制基本报表要求管理层做出估计和假设，这会影响基本报表及附注中报告的金额。需要管理层做出最重要、最具挑战性和主观判断的会计估计和假设包括识别合同中的履约义务、估计变量对价、在收到许可方的特许权使用费报告之前估计季度特许权使用费、确定单独销售价格，以及在多个履约义务的合同中分配对价、评估商誉的可回收性、评估其他无形资产和长期资产的使用寿命及可回收性、确认和计量当前及递延所得税资产和负债、评估未确认的税收利益以及因业务组合产生的购买会计等。公司实际经历的结果可能与管理层的估计有所不同。这些估计可能会随着新事件的发生和额外信息的获得而发生变化，并在合并基本报表中一旦知晓就被确认。
近期采用的会计准则
在2020年3月，FASB发布了ASU 2020-04，利率改革（第848主题）：便利利率改革对财务报告的影响（“ASU 2020-04”）。ASU 2020-04为将美国通用会计准则应用于合同、对冲关系和其他受利率改革影响的交易提供了可选的简化措施和例外情况，前提是符合某些标准。ASU 2020-04中的修订仅适用于引用伦敦银行间拆借利率（“LIBOR”）或因利率改革预计将被停止的其他参考利率的合同、对冲关系和其他交易。在2022年12月，FASB发布了ASU 2022-06，利率改革（第848主题）：第848主题的期限延迟（“），其中推迟了主题848的应用日期至2024年12月31日。在
尚未采用的最近发布的会计公告
在2023年11月，FASB发布了ASU 2023-07，分部报告（主题280）：可报告分部披露的改进（“ASU 2023-07”），要求公共实体在中期和年度基础上披露其可报告分部的重要费用和其他分部项目的信息。单一可报告分部的公共实体需要在中期和年度基础上应用ASU 2023-07的披露要求，并遵守ASC 280中现有的所有分部披露和调节要求。ASU 2023-07自2023年12月15日后开始的财政年度生效，并且在2024年12月15日后开始的财政年度内的中期也适用，允许提前采用。公司目前正在评估采用ASU 2023-07的影响。
在2023年12月，FASB发布了ASU 2023-09，所得税（主题740）：所得税披露的改进（“ASU 2023-09”），要求公共实体在年度基础上披露税率调节中的具体类别，以及按管辖区列示的所支付的所得税。ASU 2023-09自2024年12月15日后开始的财政年度生效，允许提前采用。公司目前正在评估采用ASU 2023-09的影响。
10
注释3 – 营业收入
收入确认
一般情况
当知识产权（"IP"）的控制权转移给客户时，收入确认的金额反映了公司预计在许可公司IP时应得的对价，其中可能包括一般可以区分并作为单独履约义务核算的各种IP权利和服务的组合。在外国扣缴税被公司的被许可方扣留的情况下，收入确认时不扣除直接由被许可方向当地税务机关支付的扣缴税。
公司的某些合同与客户的合同包含多项履约义务。对于这些合同，若单项履约义务是独立的，则单独进行核算。在包含多项履约义务的合同中，交易价格按相对单独销售价格的基础分配给各个履约义务。单独销售价格的确定考虑市场条件、合同的规模和范围、客户和地理信息以及其他因素。当可观察的价格不可用时，单独履约义务的单独销售价格基于调整后的市场评估方法，以估计客户在相关市场愿意为许可公司IP权利支付的价格。在合同中履约义务之间的交易价格分配可能影响在特定期间确认的营业收入的金额和时间。
当与客户的合同包含变量对价时，会在合同开始时以及每个后续报告期内对公司预计应得的转让承诺的IP权利或服务的对价进行估计，直到与变量对价相关的不确定性得以解决。通过考虑所有可用信息（历史、当前和预测）来估计变量对价，并在可以获得额外信息时进行更新。变量对价的估计包括在交易价格中，前提是在与变量对价相关的不确定性得以解决时，不显著逆转累计确认的营业收入是很可能的。当与变量对价相关的不确定性涉及由于法律合同争议而导致的潜在价格调整时，公司会根据情况选择最适当的预期值法或最可能金额法来估计变量对价，并考虑所有可用信息，包括历史数据和经验。估计与潜在未来价格调整相关的变量对价需要在评估可能的结果时做出重大判断。因变量对价估计的变动所导致的后续交易价格变动会按照合同成立时的相同基础分配给合同中的履约义务。
当变动对价以基于销售或使用的特许权使用费的形式交换IP许可时，营业收入在后续销售或使用发生时或与已分配部分或全部基于销售或使用的特许权使用费的履行义务已满足或部分满足时确认。
营业收入产生活动的描述
IP授权安排
公司将(i)其媒体专利组合（“媒体IP授权”）授权给多个频道的视频节目分发商、超高清视频服务提供商、消费电子制造商、社交媒体和其他新媒体公司，以及(ii)其半导体技术及相关专利组合（“半导体IP授权”）授权给存储器、逻辑、传感器、射频组件和代工公司。公司通常根据以下模型授权其IP组合：
11
按单位或按订阅用户数计费的媒体IP或半导体IP特许权授权
公司在许可方的销售或生产估计发生期确认按单位或按订阅用户数计费的IP特许权授权的营业收入，当许可方随后报告实际销售或生产时，会对营业收入进行调整，这通常是在使用或运输后的一个月或一个季度。估计客户的每月或每季度的特许权使用费在收到特许权报告之前，需要公司对预测趋势和增长率做出重大假设和判断，这将对公司每季度报告的营业收入产生实质性影响。
固定费用媒体IP特许权授权
公司的长期固定费用媒体IP特许权授权合同为客户提供在合同期间内对未来专利技术的权利，这些权利与合同开始时提供的专利技术高度相互依赖或高度相关。公司将这些权利视为一个单一的履约义务，营业收入在固定费用特许权授权合同的期限内按直线法确认。交易价格已考虑任何重大融资成分的影响，这些成分是使用借款人特定的、风险调整的利率计算的，相关的利息收入或费用是在有效利率基础上逐渐确认的。
固定费用或最低保障半导体IP特许权授权
公司进入固定费用或最低保障的半导体IP特许权授权合同，许可方支付固定费用以在许可期限内将公司的IP技术纳入许可方的产品。在最低保障合同中，固定费用部分对应于客户必须生产或支付的最低单位或金额，对于超出最低的任何单位或金额，收取额外的按单位计费费用。公司通常在许可期限开始时确认全额固定费用作为营业收入，当客户有权使用IP并开始从特许权中获益时，需要根据借款人特定的、风险调整的利率计算的任何重大融资成分的影响进行调整，相关的利息收入或费用在有效利率基础上逐渐确认。对于客户超过最低保障的合同，公司在认为客户已超过最低时，确认任何额外按单位费用的营业收入，并一旦客户报告实际使用情况，即对收入进行调整。
具有多个履行义务的IP授权合同
有时，公司会与多个履行义务的长期授权合同进行签订，这可能包括过去专利侵权索赔的和解或一个或多个未来的授权。在这些安排中，公司根据独立销售价格的相对价值，将交易价格分配给过去专利侵权索赔的和解和未来授权，这需要管理层进行重大判断。
在确定每项履行义务的独立销售价格时，公司会考虑过去和未来预测的订阅用户数、出货量和生产单位数量，以及公司通常从同类市场和地区的相似规模许可证持有者那里获得的每订阅用户或每单位的授权费率。
由于过去专利侵权索赔的和解一般在合同签署时满足，因此分配给过去专利侵权索赔和解的交易价格通常在合同生效的期间内被确认。分配给未来媒体IP授权的交易价格在授权期内按比例确认，而分配给未来半导体IP授权的交易价格则在合同签署时确认。
12
实用的便捷措施和豁免
公司采取实用的便捷措施，不对合同是否包含重大财务组成部分进行评估，当营业收入确认的时间与现金收款的时间不同步时，
公司采取实用的便捷措施，将获得客户合同的费用作为销售、一般和行政费用在发生时计入，前提是摊销期应为
公司在披露预计来自未满足的履约义务的收入时采取实用的便捷措施，排除原始持续时间少于的与客户的合同
营业收入详情
营业收入拆分
以下信息展示了营业收入和现金流的性质、金额、时间和不确定性是如何受到经济因素影响的，通过按类别、市场垂直和地理位置（在“附注 15 –）进行拆分。 部门和地理信息这些信息包括来自客户合同的营业收入和来自其他来源的收入，包括基于销售或使用的特许权使用费和与过去侵权相关的费用。
经常性和非经常性营业收入
经常性营业收入包括以下内容：(i) 对于固定费用的媒体知识产权许可协议，与现有和未来专利技术的使用权相关的收入，从协议执行所在的报告期开始，到协议结束为止，按直线法确认；以及 (ii) 对于每单位或每用户的媒体知识产权或半导体知识产权特许使用费协议，与基于销售或使用的特许使用费相关的收入，以换取知识产权的许可，按后续销售或使用发生的期间确认。
非经常性营业收入包括以下内容：(i) 对于固定费用或最低保证的半导体知识产权许可协议，与使用知识产权相关的固定费用或最低保证收入，在协议执行时确认；以及 (ii) 对于所有许可协议，与针对过去专利侵权或许可的赔偿相关的费用，在协议执行之前的报告期内，与每个赔偿金额相对应的收入，在协议执行时确认。
按经常性和非经常性性质分解的营业收入如下（以千为单位）：
|
|
截至三个月 |
|
|
截至九个月 |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
循环营业收入 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
非循环营业收入 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
总营业收入 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
13
Revenue by market vertical
Revenue disaggregated by market vertical was as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Media |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Semiconductor |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contract Balances
Contracts Assets
Contract assets primarily consist of unbilled contracts receivable that are expected to be received from customers in future periods, where the revenue recognized to date exceeds the amount billed. The amount of unbilled contracts receivable may not exceed their net realizable value and are classified as long-term assets if the payments are expected to be received more than one year from the reporting date. Contract assets also include the incremental costs of obtaining a contract with a customer, principally sales commissions when the renewal commission is not commensurate with the initial commission.
Contract assets were recorded in the Condensed Consolidated Balance Sheets as follows (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Unbilled contracts receivable |
|
$ |
|
|
$ |
|
||
Other current assets |
|
|
|
|
|
|
||
Long-term unbilled contracts receivable |
|
|
|
|
|
|
||
Other long-term assets |
|
|
|
|
|
|
||
Total contract assets |
|
$ |
|
|
$ |
|
||
Contract Liabilities
Contract liabilities are comprised of deferred revenue related to multi-period licensing arrangements for which the Company is paid in advance, while the underlying performance obligation is satisfied at a future date or over time.
Allowance for Credit Losses
The allowance for credit losses represents the Company’s best estimate of lifetime expected credit losses inherent in accounts receivable and unbilled contracts receivable. The Company’s long-term unbilled contracts receivable is derived from fixed-fee or minimum-guarantee Semiconductor IP licensing and is primarily comprised of contracts with large, well-capitalized companies. It is generally considered to be of high credit quality due to past collection history and the nature of the customers.
The allowance for credit losses at September 30, 2024 and December 31, 2023 was $
14
Additional Disclosures
The following table presents additional revenue and contract disclosures (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue recognized in the period from: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amounts included in deferred revenue at the beginning of the period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Performance obligations satisfied in previous periods (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1) Performance obligations satisfied in previous periods consist mainly of fees associated with releases for past patent infringement, settlements of litigation during the period, and revenue from past royalties owed pursuant to expired or terminated IP license agreements. For long-term and multi-year revenue contracts, the Company recorded revenue from the releases for past infringement during the three and nine months ended September 30, 2024 and 2023 and expects to record revenue from the prospective license in future periods.
Remaining revenue under contracts with performance obligations represents the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) under certain of the Company’s fixed fee arrangements (in thousands).
|
|
As of |
|
|
Revenue from contracts with performance obligations expected to be satisfied in: |
|
|
|
|
(remaining 3 months) |
|
$ |
|
|
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
Total |
|
$ |
|
|
NOTE 4 – COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
Other current assets consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Prepaid income taxes |
|
$ |
|
|
$ |
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other current assets |
|
$ |
|
|
$ |
|
||
15
Property and equipment, net, consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Equipment, furniture and other |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Other long-term assets consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Long-term deferred tax assets |
|
$ |
|
|
$ |
|
||
Other assets |
|
|
|
|
|
|
||
Total other long-term assets |
|
$ |
|
|
$ |
|
||
Accrued liabilities consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Employee compensation and benefits |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Current portion of guarantee (1) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Accrued income taxes |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
(1) Refer to “Note 14 – Commitments and Contingencies” for further detail on the nature of the guarantee.
Other long-term liabilities consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Long-term portion of guarantee (1) |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Total other long-term liabilities |
|
$ |
|
|
$ |
|
||
(1) Refer to “Note 14 – Commitments and Contingencies” for further detail on the nature of the guarantee.
16
NOTE 5 – FINANCIAL INSTRUMENTS
The Company has investments in debt securities, which include corporate bonds and notes, treasury and agency notes and bills, commercial paper, and in equity securities consisting of money market funds. The Company classifies its debt securities as available-for-sale (“AFS”), which are accounted for at fair value with credit related losses recognized as a provision for credit losses in its Consolidated Statements of Income and all non-credit related unrealized gains and losses recognized in accumulated other comprehensive income or loss on the Consolidated Balance Sheets. Under ASU 2016-01 (Topic 321), equity securities are measured at fair value with unrealized gains and losses recognized in other income and expense, net, in the Consolidated Statements of Income.
The following is a summary of marketable securities at September 30, 2024 and December 31, 2023 (in thousands):
|
|
September 30, 2024 |
|
|||||||||||||||||
|
|
Cost |
|
|
Gross |
|
|
Gross |
|
|
Allowance for Credit Losses |
|
|
Estimated |
|
|||||
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Corporate bonds and notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Treasury and agency notes and bills |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Reported in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
|
|
December 31, 2023 |
|
|||||||||||||||||
|
|
Cost |
|
|
Gross |
|
|
Gross |
|
|
Allowance for Credit Losses |
|
|
Estimated |
|
|||||
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Treasury and agency notes and bills |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Corporate bonds and notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Total debt securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total marketable securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Reported in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
17
At September 30, 2024 and December 31, 2023, the Company had $
Debt Securities
The gross realized gains and losses on sales of marketable debt securities were immaterial during the three and nine months ended September 30, 2024 and 2023. Unrealized losses on AFS debt securities were immaterial as of September 30, 2024 and December 31, 2023. The Company evaluated whether the decline in fair value has resulted from credit losses or other factors and concluded these amounts were related to temporary fluctuations in value of AFS securities and were due primarily to changes in interest rates and market conditions of the underlying securities. The Company did
The estimated fair value of AFS debt securities by contractual maturity at September 30, 2024 is shown below (in thousands). Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.
|
|
Amortized |
|
Estimated |
|
||
Due in one year or less |
|
$ |
|
$ |
|
||
Due in one to two years |
|
|
|
|
|
||
Due in two to three years |
|
|
|
|
|
||
Total |
|
$ |
|
$ |
|
||
NOTE 6 – FAIR VALUE
The Company follows the authoritative guidance for fair value measurement and the fair value option for financial assets and financial liabilities. The Company carries its financial instruments at fair value with the exception of its long-term debt. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:
Level 1 |
Quoted prices in active markets for identical assets. |
|
|
Level 2 |
Observable market-based inputs or unobservable inputs that are corroborated by market data. |
|
|
Level 3 |
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
When applying fair value principles in the valuation of assets, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company calculates the fair value of its Level 1 and Level 2 instruments based on the exchange traded price of similar or identical instruments, where available, or based on other observable inputs. There were no transfers into or out of Level 1 or Level 2 that occurred between December 31, 2023 and September 30, 2024.
18
The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of September 30, 2024 (in thousands):
|
|
Fair Value |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper - debt securities (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Treasury and agency notes and bills - debt securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds and notes - debt securities (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds - equity securities (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following sets forth the fair value, and classification within the hierarchy, of the Company’s assets required to be measured at fair value on a recurring basis as of December 31, 2023 (in thousands):
|
|
Fair Value |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper - debt securities (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Treasury and agency notes and bills - debt securities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds and notes - debt securities (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds - equity securities (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
19
Financial Instruments Not Recorded at Fair Value
The Company’s long-term debt is carried at amortized cost and is measured at fair value on a quarterly basis for disclosure purposes.
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
||||
2021 Refinanced Term Loan B (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
2024 Term Loan B (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total long-term debt, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1) Carrying amounts of long-term debt are net of unamortized debt discount and issuance costs of $
If reported at fair value in the Condensed Consolidated Balance Sheets, the Company’s debt would be classified within Level 2 of the fair value hierarchy. The fair value of the debt was estimated based on the quoted market prices for the same or similar issues.
NOTE 7 – GOODWILL AND IDENTIFIED INTANGIBLE ASSETS
Goodwill
The carrying value of goodwill at September 30, 2024 and December 31, 2023 was $
Identified Intangible Assets
Identified intangible assets consisted of the following (in thousands):
|
|
Average |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Life |
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Acquired patents / core technology |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Customer contracts and related relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Existing technology / content database |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Trademarks/trade name |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
20
As of September 30, 2024, the estimated future amortization expense of total finite-lived intangible assets was as follows (in thousands):
|
|
Amounts |
|
|
2024 (remaining 3 months) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
NOTE 8 – DEBT
The outstanding amounts of debt were as follows (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
2021 Refinanced Term Loan B |
|
|
|
|
$ |
|
||
2024 Term Loan B |
|
$ |
|
|
|
|
||
Unamortized debt discount and issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Less: current portion, net of debt discount and issuance costs |
|
|
( |
) |
|
|
( |
) |
Total long-term debt, net of current portion |
|
$ |
|
|
$ |
|
||
Term Loan B
On June 8, 2021, the Company entered into Amendment No. 1 (“Amendment No. 1”) to that certain Credit Agreement dated June 1, 2020 by and among the Company, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (the “2020 Credit Agreement”). The 2020 Credit Agreement initially provided for a
On May 30, 2023, the Company entered into Amendment No. 2 (“Amendment No. 2”) to the 2020 Credit Agreement, to replace the reference to LIBOR as the base rate with the reference to the Secured Overnight Financing Rate “SOFR” as administered by the Federal Reserve Bank of New York. The new reference rate was effective July 1, 2023.
On May 20, 2024, the Company entered into Amendment No. 3 (“Amendment No. 3”) to the 2020 Credit Agreement, which provided for, among other things, (i) a repricing of the 2020 Term Loan B Facility through a refinancing of the entire amount of the 2021 Refinanced Term Loan B with a new tranche of term loans (the “2024 Term Loan B”) in an aggregate principal amount of $
21
and (iv) a prepayment premium of
The obligations under the 2020 Credit Agreement, inclusive of any changes by Amendment No. 1, Amendment No. 2 and Amendment No. 3, continue to be guaranteed by the Company’s wholly-owned material domestic subsidiaries (collectively, the “Guarantors”) and continue to be secured by a lien on substantially all of the assets of the Company and the Guarantors.
The 2020 Credit Agreement, as amended, contains customary events of default, upon the occurrence of which, after any applicable cure period, the lenders will have the ability to accelerate all outstanding loans thereunder. The 2020 Credit Agreement, as amended, also contains customary representations and warranties and affirmative and negative covenants that, among other things and subject to certain exceptions, restrict the ability of the Company and its subsidiaries to create or incur certain liens, incur or guarantee additional indebtedness, merge or consolidate with other companies, transfer or sell assets and make restricted payments. The Separation did not require the Company to obtain any waivers under the 2020 Credit Agreement, and the Company completed the Separation in compliance with all of the covenants contained in the 2020 Credit Agreement. The 2020 Credit Agreement, as amended, requires the Company to maintain a total net leverage ratio of no greater than 3.00x in order access an annual basket from which to make restricted payments (such as dividend payments and share repurchases). The Company was in compliance with all requirements as of September 30, 2024. The 2020 Credit Agreement, as amended, also requires the Company to continue to make cash payments on an annual basis based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year. The cash payments are applied to the remaining principal balance due at final maturity.
Interest Expense and Expected Principal Payments
At September 30, 2024, the Company had $
As of September 30, 2024, future minimum principal payments for long-term debt, excluding any additional principal payment required by the excess cash flow provision, are summarized as follows (in thousands):
|
|
Amounts |
|
|
2024 (remaining 3 months) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total |
|
$ |
|
|
22
NOTE 9 – NET INCOME PER SHARE
The following table sets forth the computation of net income per share (in thousands, except per share amounts):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares of common stock outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Effect of dilutive securities associated with options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Effect of dilutive securities associated with restricted stock awards and units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Effect of dilutive securities associated with employee stock purchase program |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares - dilutive |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted net income per share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Anti-dilutive employee stock-based awards, excluded |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period, excluding any unvested restricted stock units that are subject to repurchase. Diluted net income per share is computed using the treasury stock method to calculate the weighted average number of shares of common stock and, if dilutive, potential common shares outstanding during the period. Potentially dilutive common shares include unvested restricted stock units and incremental common shares issuable upon the exercise of stock options, less shares repurchased from assumed proceeds. The assumed proceeds calculation includes actual proceeds to be received from the employee upon exercise and the average unrecognized stock compensation cost during the period.
NOTE 10 – STOCKHOLDERS’ EQUITY
Equity Incentive Plans
The 2020 EIP
On June 1, 2020, the Company adopted the 2020 Equity Incentive Plan (the “2020 EIP”). Under the 2020 EIP, the Company may grant equity-based awards to employees, non-employee directors, and consultants for services rendered to the Company (or any parent or subsidiary) in the form of stock options, stock awards, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and performance awards (or any combination thereof).
At the Company’s 2024 Annual Stockholders Meeting on May 9, 2024, the Company’s stockholders approved an amendment and restatement of the 2020 EIP, which provided for (i) an increase of the number of shares reserved for issuance by
23
awards (i.e. stock awards, restricted stock awards, restricted stock units, performance awards and dividend equivalents) prior to May 9, 2024 are counted against shares available for issuance on a
The 2020 EIP provides for option grants designed as either incentive stock options or non-statutory options. Options generally are granted with an exercise price not less than the value of the common stock on the grant date and have a term of
The vesting criteria for restricted stock awards and restricted stock units is generally the passage of time or meeting certain performance-based objectives, and continued employment through the vesting period, which is generally
Assumed Plans
On June 1, 2020, the Company assumed all then-outstanding stock options, awards, and shares available and reserved for issuance under all legacy Equity Incentive Plans of TiVo (collectively, the “Assumed Plans”). Stock options assumed from the Assumed Plans generally have vesting periods of
A summary of the stock option activity is presented below (in thousands, except per share amounts):
|
|
Options Outstanding |
|
|||||
|
|
Number of |
|
|
Weighted |
|
||
Balance at December 31, 2023 |
|
|
|
|
$ |
|
||
Options granted |
|
|
|
|
$ |
|
||
Options exercised |
|
|
( |
) |
|
$ |
|
|
Options canceled / forfeited / expired |
|
|
( |
) |
|
$ |
|
|
Balance at September 30, 2024 |
|
|
|
|
$ |
|
||
Vested and exercisable at September 30, 2024 |
|
|
|
|
$ |
|
||
24
Restricted Stock Awards
Information with respect to outstanding restricted stock units (including both time-based vesting and performance-based vesting) as of September 30, 2024 is as follows (in thousands, except per share amounts):
|
|
Restricted Stock Awards |
|
|||||||||||||
|
|
Number of |
|
|
Number of |
|
|
Total |
|
|
Weighted |
|
||||
Balance at December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Awards granted |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Awards vested / earned |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
$ |
|
||
Awards canceled / forfeited |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
Balance at September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Performance Awards
Performance awards may be granted to employees or consultants based upon, among other things, the contributions, responsibilities and other compensation of the particular employee or consultant. The value and the vesting of such performance awards are generally linked to one or more performance goals or certain market conditions determined by the Company, in each case on a specified date or dates or over any period or periods determined by the Company, and may range from
Employee Stock Purchase Plans
On June 1, 2020, the Company adopted the 2020 Employee Stock Purchase Plan (the “2020 ESPP”). The 2020 ESPP is implemented through consecutive overlapping 24-month offering periods, each of which is comprised of four six-month purchase periods. The first offering period commenced on September 1, 2020 and ended on August 31, 2022. Due to the Separation, the next offering period under the 2020 ESPP plan commenced on December 1, 2022. Each subsequent offering period under the 2020 ESPP will be twenty-four (
An eligible employee’s right to buy the Company’s common stock under the 2020 ESPP may not accrue at a rate in excess of $
At the 2022 Annual Stockholders Meeting on April 29, 2022, the Company’s stockholders approved an amendment to the 2020 ESPP and increased by
25
Modification of Equity Awards
In connection with the Separation and under the provisions of the existing plans described above, the Company’s outstanding stock options and equity awards were converted to units denominated in the equity of the Company, Xperi Inc., or both. The number of units and exercise prices of outstanding stock options and equity awards were converted based on the conversion ratios established in the Employee Matters Agreement that the Company entered into in connection with the Separation. The intent of the conversion ratios was to preserve the value of the awards immediately before and after the Separation. Upon the Separation, employees holding stock options and equity awards denominated in the Company’s pre-Separation stock received a number of otherwise-similar stock options and awards in post-Separation Company’s stock and/or Xperi Inc.’s stock based on the conversion ratios outlined for each group of employees. For purposes of the vesting of these equity awards, continued employment or service with the Company or with Xperi Inc. is treated as continued employment for purposes of both the Company’s and Xperi Inc.’s equity awards and the vesting terms of each converted grant remained unchanged. There were no changes to the plan terms described above with the exception that the price on the grant date, or October 1, 2022 was adjusted to exclude the value of Xperi Inc. based on the conversion ratios applied to other equity awards.
Dividends
Stockholders of the Company’s common stock are entitled to receive dividends when declared by the Company’s board of directors (the “Board”). During the periods ended September 30, 2024 and 2023, quarterly dividends declared were $
Stock Repurchase Programs
On June 12, 2020 the Board authorized a new stock repurchase program providing for the repurchase of up to $
There were
The Company accounts for stock repurchases using the cost method and records retirement of treasury stock as a reduction of the cumulative treasury stock paid-in capital balance. Once the cumulative balance is reduced to zero, any remaining difference resulting from the retirement of treasury stock is recorded as a reduction of retained earnings.
The Company issues restricted stock awards as part of the equity incentive plans described above. For the majority of restricted awards, shares are withheld to satisfy required withholding taxes at the vesting date. Shares withheld to satisfy required withholding taxes in connection with the vesting of restricted awards are treated as common stock repurchases in the Condensed Consolidated Financial Statements because they reduce the number of shares that would have been issued on vesting. However, these withheld shares are not included in common stock repurchases under the Company’s authorized share repurchase plan.
26
NOTE 11 – STOCK-BASED COMPENSATION EXPENSE
The effect of recording stock-based compensation (“SBC”) expense for the three and nine months ended September 30, 2024 and 2023 is as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
There were no options granted during the three and nine months ended September 30, 2024 and 2023.
The Company uses a Monte Carlo simulation to determine the grant date fair value of performance stock awards subject to market conditions, or market-based PSUs.
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Expected life (years) |
|
|
|
|
|
|
||
Risk-free interest rate |
|
|
% |
|
|
|||
Dividend yield |
|
|
% |
|
|
|||
Expected volatility |
|
|
% |
|
|
|||
Grants under the 2020 ESPP occur in June and December, as discussed in “Note 10 – Stockholders’ Equity”. The following assumptions were used to value the shares for these grants during the nine months ended September 30, 2024 and 2023:
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Expected life (years) |
|
|
|
|
|
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
Expected volatility |
|
|
% |
|
|
% |
||
NOTE 12 – INCOME TAXES
The Company’s income tax provision and effective tax rate for interim periods are based on its estimated annual effective tax rate adjusted for discrete items during the period. For the three and nine months ended September 30, 2024, the Company recorded income tax benefit of $(
27
NOTE 13 – LEASES
The Company leases office and research facilities and office equipment under operating leases which expire through
As most of the leases do not provide an implicit rate, the Company generally, for purposes of discounting lease payments, uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.
The components of operating lease costs were as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Fixed lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other information related to leases was as follows (in thousands, except lease term and discount rate):
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Weighted-average remaining lease term (years): |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
|
||
Weighted-average discount rate: |
|
|
|
|
|
|
||
Operating leases |
|
|
% |
|
|
% |
||
28
Future minimum lease payments and related lease liabilities as of September 30, 2024 were as follows (in thousands):
|
|
Operating Lease Payments (1) |
|
|
2024 (remaining 3 months) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Present value of lease liabilities: |
|
$ |
|
|
|
|
|
|
|
Less: current obligations under leases (accrued liabilities) |
|
|
|
|
Noncurrent operating lease liabilities |
|
$ |
|
|
(1) Future minimum lease payments exclude short-term leases as well as payments to landlords for variable common area maintenance, insurance and real estate taxes.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Purchase and Other Contractual Obligations
In the ordinary course of business, the Company enters into contractual agreements with third parties that include non-cancelable payment obligations, for which it is liable in future periods. These arrangements primarily include unconditional purchase obligations to service providers. As of September 30, 2024, the Company’s total future unconditional purchase obligations were approximately $
Guarantee
Prior to the Separation, Adeia Media LLC, a subsidiary of the Company (“Adeia Media”), and a subsidiary of Xperi Inc. (“Xperi Sub”) entered into an agreement (the “Specified Agreement”) with a third party pursuant to which Adeia Media guarantees the performance of Xperi Sub under the Specified Agreement, including its payment obligations to such third party. In connection with the Separation, Adeia Media and Xperi Sub entered into a separate cross business agreement (the “Cross Business Agreement”) effective as of October 1, 2022, under which Adeia Media agreed to make guarantee payments to Xperi Sub in amounts based on certain of its operating expenses and other minimum performance obligations under the Specified Agreement through 2031. Consequently, on October 1, 2022, the Company recognized a guarantee liability pursuant to ASC 460 “Guarantees” of $
As of September 30, 2024 and December 31, 2023, the balance of the guarantee liability was $
29
Indemnifications
In the normal course of business, the Company provides indemnifications of varying scopes and amounts to certain of its licensees, customers, and business partners against claims made by third parties arising from the use of the Company’s intellectual property, services or technologies. The Company cannot reasonably estimate the possible range of losses that may be incurred pursuant to its indemnification obligations, if any. Variables affecting any such assessment include, but are not limited to: the nature of the claim asserted; the relative merits of the claim; the financial ability of the party suing the indemnified party to engage in protracted litigation; the number of parties seeking indemnification; the nature and amount of damages claimed by the party suing the indemnified party; and the willingness of such party to engage in settlement negotiations. To date, no such claims have been filed against the Company and no liability has been recorded in the Company’s financial statements.
As permitted under Delaware law, the Company has agreements whereby it indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company believes, given the absence of any such payments in the Company’s history, and the estimated low probability of such payments in the future, that the estimated fair value of these indemnification agreements is immaterial. In addition, the Company has directors’ and officers’ liability insurance coverage that is intended to reduce its financial exposure and may enable the Company to recover any payments under the indemnification agreements, should they occur.
Contingencies
At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of losses is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.
Litigation related
On June 23, 2017, Adeia Guides Inc. (formerly known as Rovi Guides, Inc.) and Adeia Media Solutions Inc. (formerly known as TiVo Solutions Inc.) (together, “Adeia Media”) filed a patent infringement complaint against Videotron Ltd. and Videotron G.P. (together, “Videotron”) in Toronto, Canada, alleging infringement of six patents. On June 10, 2022, the Federal Court of Canada issued its decision in the case finding in favor of Videotron and its legacy “illico” platform. Specifically, the Court found invalid each of the asserted claims related to the four remaining patents involved in the case. In Canada, the prevailing party in patent litigation is entitled to reimbursement of certain of its costs and expenses. Accordingly, the Company paid $
On January 19, 2018, Adeia Media filed a patent infringement complaint against Bell Canada (and four of its affiliates) (collectively, “Bell”) in Toronto, Canada, alleging infringement of six patents. On February 2, 2018, Adeia Media filed a patent infringement complaint against Telus Corporation (and two of its affiliates) (collectively, “Telus”) in Toronto, Canada, alleging infringement of the same six patents. Bell 1 and Telus 1 (each as defined herein) were heard together for purposes of pre-trial and trial proceedings. On October 7, 2022, the Federal Court of Canada issued its decision in the two cases finding in favor of Bell and Telus and their respective IPTV services, Bell Fibe TV and Telus Optik TV. Specifically, the Court found invalid each of the asserted claims of the four remaining patents involved in the case. In Canada, the prevailing party in patent litigation is entitled to reimbursement of certain of its costs and expenses. Accordingly, the Company paid $
30
The Company is unable to predict the final outcome of other lawsuits, including other patent infringement lawsuits, to which it is a party and therefore cannot determine the likelihood of loss nor estimate a range of possible losses. An adverse decision in any of these proceedings could significantly harm the Company's business and consolidated financial position, results of operations or cash flows.
The Company and its subsidiaries are involved in litigation matters and claims in the normal course of business. In the past, the Company and its subsidiaries have litigated to enforce their respective patents and other intellectual property rights, to enforce the terms of license agreements, to protect trade secrets, and to defend the Company’s patents against claims of invalidity. The Company expects it or its subsidiaries will be involved in similar legal proceedings in the future, including proceedings regarding infringement of its patents, and proceedings to ensure proper and full payment of royalties by licensees under the terms of its license agreements.
NOTE 15 – SEGMENT AND GEOGRAPHIC INFORMATION
The Company has one reportable segment: Intellectual Property (“IP”) Licensing. Reportable segments are identified based on the Company’s organizational structure and information reviewed by the Company’s chief operating decision maker (“CODM”) to evaluate performance and allocate resources. The Company’s Chief Executive Officer is also the CODM as defined by the authoritative guidance on segment reporting.
A portion of the Company’s revenue is derived from licensees headquartered outside of the U.S., and it is expected that this revenue will continue to account for a portion of total revenue in future periods.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
U.S. |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Europe and Middle East |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
For the three months ended September 30, 2024 and 2023, there were
The following table sets forth revenue generated from customers which comprise 10% or more of total revenue for the periods indicated:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Customer A |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Customer B |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Customer C |
|
* |
|
|
|
% |
|
* |
|
|
* |
|
||||
Customer D |
|
* |
|
|
|
% |
|
* |
|
|
* |
|
||||
* denotes less than 10% of total revenue.
31
As of September 30, 2024, the Company had two customers representing
As of September 30, 2024 and December 31, 2023, property and equipment, net, was all located in the U.S.
NOTE 16 – SUBSEQUENT EVENTS
Declaration of Cash Dividends
On
32
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion is intended to promote understanding of the results of operations and financial condition and should be read in conjunction with our condensed consolidated financial statements and notes thereto, and with our audited financial statements and notes thereto for the year ended December 31, 2023 found in the Form 10-K filed by us on February 23, 2023 (the “Form 10-K”). This section of this Form 10-Q generally discusses quarter over quarter comparisons of 2024 against 2023.
This quarterly report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on information available to the Company as of the date hereof, as well as the Company’s current expectations, assumptions, estimates and projections that involve risks and uncertainties. In this context, forward-looking statements often address expected future business, financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “seek,” “see,” “will,” “may,” “would,” “might,” “potentially,” “estimate,” “continue,” “target,” similar expressions or the negatives of these words or other comparable terminology that convey uncertainty of future events or outcomes. All forward-looking statements by their nature address matters that involve risks and uncertainties, many of which are beyond the Company’s control, and are not guarantees of future results. Forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements. Important risk factors that may cause such a difference include, but are not limited to: the Company’s ability to implement its business strategy; the Company’s ability to enter into new and renewal license agreements with customers on favorable terms; the Company’s ability to retain and hire key personnel; uncertainty as to the long-term value of the Company’s common stock; legislative, regulatory and economic developments affecting the Company’s business; general economic and market developments and conditions; the Company’s ability to grow and expand its patent portfolios; changes in technology and development of new technology in the industries in which the Company operates; the evolving legal, regulatory and tax regimes under which the Company operates; unforeseen liabilities and expenses; risks associated with the Company’s indebtedness; the Company’s ability to achieve the intended benefits of, and its ability to recognize the tax treatment of, the spin-off of its product business; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, natural disasters and future outbreaks or pandemics, each of which may have an adverse impact on the Company’s business, results of operations, and financial condition.
Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks, uncertainties, and changes in condition, significance, value and effect, including those discussed under the heading “Risk Factors” hereof and other documents we file from time to time with the Securities and Exchange Commission (the “SEC”), such as our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from those expressed herein and in ways not readily foreseeable. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report and are based on information currently and reasonably known to us. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report, other than as required by law. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Business Overview
Adeia Inc. (formerly known as Xperi Holding Corporation) (“Adeia”, “we”) is a leading IP licensing platform in the consumer and entertainment space, with a diverse portfolio of media and semiconductor intellectual property and more than 11,750 patents and patent applications worldwide. In order to serve an increasingly connected world, we invent, develop, and license fundamental innovations that enhance billions of devices and shape the way millions of people explore and experience entertainment. Through our IP licensing business, we help enable extraordinary experiences at home and on the go for millions of consumers around the world, with IP that helps elevate content and improves how audiences connect with it in a way that is more intelligent, immersive and personal. Through providing the IP that helps to power smart devices, entertainment experiences and more, we have created a unified ecosystem that reaches highly-engaged consumers and uncovered new business opportunities.
33
On October 1, 2022, we completed the previously announced separation (“the Separation”) of its product business into an independent, publicly-traded company, Xperi Inc. (“Xperi Inc.”). The Separation was structured as a spin-off, which was achieved through Adeia’s distribution of 100 percent of the outstanding shares of Xperi Inc.’s common stock to holders of Adeia’s common stock as of the close of business on the record date of September 21, 2022 (the “Record Date”). Each Adeia stockholder of record received four shares of Xperi Inc. common stock for every ten shares of Adeia common stock that it held on the Record Date. Following the Separation, Adeia retains no ownership interest in Xperi Inc., which is now listed under the ticker symbol “XPER” on the New York Stock Exchange. Effective at the open of business on October 3, 2022, Adeia’s shares of common stock, par value $0.001 per share, began trading on the Nasdaq Global Select Market under the new ticker symbol “ADEA”.
Headquartered in Silicon Valley with more than 35 years of operating experience, we have approximately 144 employees, with substantially all of our employees located in the U.S.
Macroeconomic Conditions
Macroeconomic conditions due to inflation, geopolitical instability and global health events may have an adverse impact on our business. For example, such conditions may continue to cause volatility in the markets we serve, particularly the broad consumer electronics market. Impacts from adverse macroeconomic conditions may negatively impact our financial condition and results of operations, which could result in an impairment of our long-lived assets, including goodwill, and increased credit losses.
Reportable Segments
We operate and report in one segment: IP Licensing. We believe that this structure reflects our current operational and financial management and provides the best structure for us to focus on growth opportunities. Our Chief Executive Officer has been determined to be the Chief Operating Decision Maker (“CODM”) in consideration with the authoritative guidance on segment reporting.
We primarily license our innovations to leading companies in the broader media entertainment and semiconductor industries, and those companies developing new technologies that will help drive these industries forward. Licensing arrangements include access to one or more of our foundational patent portfolios and may also include access to some portions of our industry-leading technologies and know-how.
Financial Highlights
In evaluating our financial condition and operating performance, we primarily focus on revenue and cash flows from operations. For the three and nine months ended September 30, 2024, as compared to the same periods in 2023:
Three months ended September 30, 2024:
34
Nine months ended September 30, 2024:
Results of Operations
Revenue
We derive the majority of our revenue from the licensing of our intellectual property (“IP”) rights to customers. For our revenue recognition policy, including descriptions of revenue-generating activities, refer to “Note 3 – Revenue” of the Notes to Condensed Consolidated Financial Statements.
The following table presents our operating results for the periods indicated as a percentage of revenue:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Revenue |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
17 |
|
|
|
14 |
|
|
|
17 |
|
|
|
13 |
|
Selling, general and administrative |
|
|
31 |
|
|
|
22 |
|
|
|
29 |
|
|
|
24 |
|
Amortization expense |
|
|
16 |
|
|
|
23 |
|
|
|
22 |
|
|
|
23 |
|
Litigation expense |
|
|
3 |
|
|
|
2 |
|
|
|
4 |
|
|
|
2 |
|
Total operating expenses |
|
|
67 |
|
|
|
61 |
|
|
|
72 |
|
|
|
62 |
|
Operating income |
|
|
33 |
|
|
|
39 |
|
|
|
28 |
|
|
|
38 |
|
Interest expense |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
(16 |
) |
|
|
(16 |
) |
Other income and expense, net |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Loss on debt extinguishment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Income before income taxes |
|
|
20 |
|
|
|
26 |
|
|
|
14 |
|
|
|
24 |
|
Provision for (benefit from) income taxes |
|
|
(3 |
) |
|
|
2 |
|
|
|
2 |
|
|
|
5 |
|
Net income |
|
|
23 |
% |
|
|
24 |
% |
|
|
12 |
% |
|
|
19 |
% |
35
The following table sets forth our revenue for the three and nine months ended September 30, 2024 and 2023 (in thousands, except for percentages):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
||||||||
Revenue |
|
$ |
86,101 |
|
|
$ |
101,397 |
|
|
$ |
(15,296 |
) |
|
|
(15 |
)% |
|
$ |
256,856 |
|
|
$ |
301,921 |
|
|
$ |
(45,065 |
) |
|
|
(15 |
)% |
The decrease in revenue during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily attributable to the execution of the long-term renewal of a license agreement with Samsung, revenue from the settlement of litigation and revenue from updated royalty audit recovery from an existing customer relating to prior periods, each of which occurred in the third quarter of 2023.
Recurring revenues decreased slightly to $82.7 million during the three months ended September 30, 2024 from $83.6 million in the same period in 2023.
Non-recurring revenues for the three months ended September 30, 2024 and 2023 were $3.4 million and $17.8 million, respectively. The decrease of $14.4 million was primarily attributable to the recognition of revenue from periods prior to the execution of the long-term renewal of a license agreement with Samsung, revenue from the settlement of litigation and revenue from updated royalty audit recovery from an existing customer relating to prior periods, each of which occurred in the third quarter of 2023.
The decrease in revenue during the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily attributable to the execution of two long-term license agreements with Kioxia and Western Digital in the first quarter of 2023, recognition of revenue from periods prior to the execution of the long-term renewal of a license agreement with Samsung in the third quarter of 2023, and a decline in royalty revenue from certain Pay-TV customers, partially offset by a multi-year agreement with X Corp. for access to our media portfolio that occurred in the second quarter of 2024.
Recurring revenue for the nine months ended September 30, 2024 and 2023 were $249.8 million and $255.1 million, respectively. The decrease of $5.2 million was primarily attributable to a decrease in royalty revenue from certain Pay-TV customers.
Non-recurring revenues for the nine months ended September 30, 2024 and 2023 were $7.0 million and $46.8 million, respectively. The decrease of $39.8 million was primarily attributable to the execution of long-term license agreements with Kioxia and Western Digital in the first quarter of 2023 and revenue from periods prior to the execution of the long-term renewal of a license agreement with Samsung in the third quarter of 2023, partially offset by a settlement agreement and multi-year renewal with X Corp. for access to our media portfolio that occurred in the second quarter of 2024.
Research and Development (in thousands, except for percentages):
Research and development expense (“R&D expense”) consists primarily of personnel costs, stock-based compensation, outside engineering consulting expenses associated with new IP development, as well as costs related to patent applications and examinations, reverse engineering, materials, supplies and an allocation of facilities costs. All R&D expense is expensed as incurred. We intend to make a continued investment in our R&D efforts because we believe they are essential to grow our patent portfolios to maintain and improve our competitiveness.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Increase |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Increase |
|
|
% Change |
|
||||||||
Research and development |
|
$ |
14,825 |
|
|
$ |
13,768 |
|
|
$ |
1,057 |
|
|
|
8 |
% |
|
$ |
43,549 |
|
|
$ |
39,895 |
|
|
$ |
3,654 |
|
|
|
9 |
% |
36
The increase in R&D expense during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in patent prosecution, patent portfolio development costs and an increase in personnel related costs as a result of increased headcount.
The increase in R&D expense during the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in personnel costs as a result of increased headcount and an increase in patent portfolio development costs, partially offset by a decrease in professional services costs.
Selling, General and Administrative (in thousands, except for percentages):
Selling, general and administrative (“SG&A”) expenses consist primarily of personnel costs, sales commission, advertising, branding activities, stock-based compensation, professional services, facilities costs, and expenses related to our executive finance, human resource, legal, and information technology organizations.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Increase |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Increase |
|
|
% Change |
|
||||||||
Selling, general and administrative |
|
$ |
26,903 |
|
|
$ |
21,921 |
|
|
$ |
4,982 |
|
|
|
23 |
% |
|
$ |
75,549 |
|
|
$ |
71,177 |
|
|
$ |
4,372 |
|
|
|
6 |
% |
The increase in SG&A expense during the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in personnel related costs as a result of increased headcount and an increase in professional services costs.
The increase in SG&A expense during the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in personnel related costs as a result of increased headcount, an increase in professional services costs, an increase in certain administrative costs associated with the repricing of our credit facility in the second quarter of 2024, partially offset by decreases in separation costs that were incurred in 2023 but did not recur in 2024, lower insurance costs and recovery of certain bad debt expenses.
Amortization Expense (in thousands, except for percentages):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
||||||||
Amortization expense |
|
$ |
13,600 |
|
|
$ |
23,386 |
|
|
$ |
(9,786 |
) |
|
|
(42 |
)% |
|
$ |
56,787 |
|
|
$ |
70,725 |
|
|
$ |
(13,938 |
) |
|
|
(20 |
)% |
The decrease in amortization expense during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to certain intangible assets becoming fully amortized during 2024. The decrease was partially offset by an increase in amortization expense as a result of patents acquired in 2024.
Litigation Expense (in thousands, except for percentages):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Increase |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Increase |
|
|
% Change |
|
||||||||
Litigation expense |
|
$ |
2,652 |
|
|
$ |
2,205 |
|
|
$ |
447 |
|
|
|
20 |
% |
|
$ |
9,844 |
|
|
$ |
7,161 |
|
|
$ |
2,683 |
|
|
|
37 |
% |
The increase in litigation expense during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to increased activity in current litigation matters.
37
We expect that litigation expense will continue to be a significant portion of our operating expenses, as it is used to enforce and protect our IP and contract rights. Litigation expense may fluctuate between periods because of planned or ongoing litigation, as described in Part II, Item 1 – Legal Proceedings.
Interest Expense (in thousands, except for percentages):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
||||||||
Interest expense |
|
$ |
12,758 |
|
|
$ |
15,659 |
|
|
$ |
(2,901 |
) |
|
|
(19 |
)% |
|
$ |
40,229 |
|
|
$ |
47,137 |
|
|
$ |
(6,908 |
) |
|
|
(15 |
)% |
The decrease in interest expense during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to lower debt balance and lower interest rates on our variable interest rate debt due to the repricing of our Term Loan B during the second quarter of 2024.
We anticipate interest expense will continue to decrease in 2024, when compared to 2023, as a result of a full year of a lower debt balance, the reduction of the interest rate margin benefited from the repricing of our Term Loan B during the second quarter of 2024, and the Federal Reserve interest rate cut during the third quarter of 2024.
Other Income and Expense, Net (in thousands, except for percentages):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
||||||||
Other income and expense, net |
|
$ |
1,431 |
|
|
$ |
1,486 |
|
|
$ |
(55 |
) |
|
|
(4 |
)% |
|
$ |
4,259 |
|
|
$ |
4,723 |
|
|
$ |
(464 |
) |
|
|
(10 |
)% |
The decrease in other income and expense, net during the three and nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to a decrease in interest income from significant financing components from certain revenue contracts.
Loss on Debt Extinguishment
During the nine months ended September 30, 2024, we recognized $0.5 million associated with the repricing of our Term Loan B and there were no such costs in 2023. Refer to discussion below for further detail on the repricing of our Term Loan B.
Provision for Income Taxes
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
|
2024 |
|
|
2023 |
|
|
Decrease |
|
|
% Change |
|
||||||||
Provision for (benefit from) income taxes |
|
$ |
(2,520 |
) |
|
$ |
1,712 |
|
|
$ |
(4,232 |
) |
|
|
(247 |
)% |
|
$ |
6,109 |
|
|
$ |
15,877 |
|
|
$ |
(9,768 |
) |
|
|
(62 |
)% |
38
Our income tax provision for interim periods is based on the estimated annual effective tax rate adjusted for discrete items during the period. For the three months ended September 30, 2024, we recorded income tax benefit of $2.5 million on pretax income of $16.8 million, and for the nine months ended September 30, 2024, we recorded an income tax expense of $6.1 million on pretax income of $34.7 million, which resulted in effective tax rates of (14.9)% and 17.6%, respectively, for the three and nine months ended September 30, 2024. The decrease in income tax expense for the three months ended September 30, 2024, as compared to the same period in the prior year was primarily due to certain unrealized foreign exchange benefits associated with South Korea withholding tax refund claims. The decrease in income tax expense for the nine months ended September 30, 2024, as compared to the same period in the prior year was primarily due to certain unrealized foreign exchange benefits associated with South Korea withholding tax refund claims.
For the three months ended September 30, 2023, we recorded an income tax expense of $1.7 million on pretax income of $25.9 million, and for nine months ended September 30, 2023, we recorded an income tax expense of $15.9 million on pretax income of $70.5 million, which resulted in effective tax rates of 6.6% and 22.5%, respectively, for the three and nine months ended September 30, 2023.
The effective tax rate varies from the 21% U.S. federal tax rate primarily due to unrealized foreign exchange gain or loss on prior year South Korea withholding tax refund claims.
We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative. After considering the evidence to assess the recoverability of our net deferred tax assets, we concluded that it was more-likely-than-not that we would realize our federal and certain state deferred tax assets.
Liquidity and Capital Resources
The following table presents selected financial information related to our liquidity and significant sources and uses of cash and cash equivalents for the nine months ended September 30, 2024 and 2023.
|
|
As of |
|
|||||
(in thousands) |
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Cash and cash equivalents |
|
$ |
60,698 |
|
|
$ |
54,560 |
|
Marketable securities |
|
|
28,486 |
|
|
|
29,012 |
|
Total cash, cash equivalents and marketable securities |
|
$ |
89,184 |
|
|
$ |
83,572 |
|
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash from operating activities |
|
$ |
105,001 |
|
|
$ |
113,315 |
|
Net cash from investing activities |
|
$ |
(8,394 |
) |
|
$ |
(31,829 |
) |
Net cash from financing activities |
|
$ |
(90,469 |
) |
|
$ |
(144,186 |
) |
Our primary sources of liquidity and capital resources are our operating cash flows and our short-term investments in marketable securities. Cash, cash equivalents and marketable securities were $89.2 million at September 30, 2024, an increase of $5.6 million from $83.6 million at December 31, 2023. This increase primarily resulted from $105.0 million of cash generated from operations, and $1.5 million in proceeds from purchases through our employee stock purchase program and exercise of stock options, partially offset by $64.2 million in repayment of our long-term debt, $11.6 million in repurchases of common stock associated with tax withholdings on equity awards, $16.3 million in dividends paid, $1.3 million in purchases of property and equipment, and $8.5 million in purchases of intangible assets.
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The primary objectives of our investment activities are to preserve principal and to maintain liquidity, while at the same time capturing a market rate of return. To achieve these objectives, we maintain a diversified portfolio of securities including money market funds and debt securities such as corporate bonds and notes, municipal bonds and notes, commercial paper, treasury and agency notes and bills and certificates of deposit. Our marketable debt securities are classified as available-for-sale (“AFS”) with credit losses recognized as a credit loss expense and non-credit related unrealized gains and losses, net of tax, recorded in accumulated other comprehensive income or loss.
For information about our material cash requirements, see “Liquidity and Capital Resources” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. Other than the principal payments of $64.2 million made by us under the existing Term Loan B during the nine months ended September 30, 2024, our cash requirements have not materially changed since December 31, 2023.
We expect to continue to make additional payments on our existing debt from cash generated from operations. In addition to the cash requirements outlined above, we have returned cash to stockholders through both quarterly dividend payments and repurchases of our common stock under our stock repurchase plan.
Quarterly Dividends
In September 2024, we paid quarterly cash dividends of $0.05 per share of common stock. In October 2024, our board of directors (the “Board”) authorized payment of a quarterly cash dividend of $0.05 per share, to be paid in December 2024.
Stock Repurchase Plan
On June 12, 2020, our Board terminated a prior stock repurchase program and approved a new stock repurchase plan (the “Plan”), which provides for the repurchase of up to $150.0 million of our common stock dependent on market conditions, share price and other factors. No expiration has been specified for this Plan. On April 22, 2021, our Board authorized an additional $100.0 million of purchases under the Plan. The stock repurchases may be made from time to time, through solicited or unsolicited transactions in the open market, in privately negotiated transactions, or pursuant to a Rule 10b5-1 plan. Since the inception of the Plan, and through September 30, 2024, we have repurchased an aggregate of approximately 10.0 million shares of common stock at a total cost of $172.2 million at an average price of $17.24. As of September 30, 2024, the total remaining amount available for repurchase under the Plan was $77.8 million. We may continue to execute authorized repurchases from time to time under the Plan. The amount and timing of any repurchases under the Plan depend on a number of factors, including, but not limited to, the trading price, volume and availability of our common shares. There is no guarantee that such repurchases under the Plan will enhance the value of our common stock.
We believe that based on current levels of operations and anticipated growth, our cash from operations, together with cash and cash equivalents currently available, will be sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months and thereafter for the foreseeable future. Poor financial results, unanticipated expenses, unanticipated acquisitions of technologies or businesses, or unanticipated strategic investments could give rise to additional financing requirements sooner than we expect. There can be no assurance that equity or debt financing will be available when needed or, if available, that such financing will be on terms satisfactory to us. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness could result in increased debt service obligations and may include covenants that would restrict our operations.
Cash Flows from Operating Activities
Cash flows provided by operations were $105.0 million for the nine months ended September 30, 2024, were primarily due to our net income of $28.6 million being adjusted for non-cash items of amortization of intangible assets of $56.8 million, amortization of debt issuance costs of $2.4 million, stock-based compensation expense of $19.2 million, depreciation of property and equipment of $1.5 million and $(0.7) million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2023.
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Cash flows provided by operations were $113.3 million for the nine months ended September 30, 2023, primarily due to our net income of $54.7 million being adjusted for non-cash items of amortization of intangible assets of $70.7 million, amortization of debt issuance costs of $3.3 million and stock-based compensation expense of $13.1 million. These increases were partially offset by $29.6 million in changes in operating assets and liabilities including payment during the period of employee bonuses earned in 2022.
Cash Flows from Investing Activities
Net cash used in investing activities was $8.4 million for the nine months ended September 30, 2024, primarily related to purchases of short-term investments of $25.1 million, purchases of property and equipment of $1.3 million, purchases of intangible assets of $8.5 million, and proceeds from maturities of investments of $26.5 million.
Net cash used in investing activities was $31.8 million for the nine months ended September 30, 2023, primarily related to purchases of short-term investments of $33.6 million, capital expenditures of $1.9 million and proceeds from maturities of investments of $3.8 million.
Capital Expenditures
Our capital expenditures for property and equipment consist primarily of leasehold improvements, purchases of computer hardware and software, information systems, and semiconductor production and test equipment. During the nine months ended September 30, 2024 and 2023, we spent $1.3 million and $1.9 million on capital expenditures, respectively, and we expect capital expenditures in the remainder of 2024 to be approximately $1.0 million. Our capital expenditures for intangible assets consists primarily of acquired patents. During the nine months ended September 30, 2024, we spent $8.5 million on purchases of intangible assets. These expenditures are expected to be financed with cash from operations, existing cash and cash equivalents and short-term investments. There can be no assurance that current expectations will be realized, and plans are subject to change upon further review of our capital expenditure needs.
Cash Flows from Financing Activities
Net cash used in financing activities was $90.5 million for the nine months ended September 30, 2024 due to $64.2 million in repayment of indebtedness, $16.3 million in dividends paid, $11.6 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $1.5 million in proceeds from purchases through our employee stock purchase program and exercise of stock options.
Net cash used in financing activities was $144.2 million for the nine months ended September 30, 2023 due to $118.9 million in repayment of indebtedness, $16.0 million in dividends paid, $10.5 million in repurchases of common stock for tax withholdings on equity awards, partially offset by $1.1 million in proceeds from the issuance of common stock under our employee stock grant programs and employee stock purchase plans.
Long-term Debt
On June 8, 2021, we entered into Amendment No. 1 (“Amendment No. 1”) to that certain Credit Agreement dated June 1, 2020 by and among us, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (the “2020 Credit Agreement”). The 2020 Credit Agreement initially provided for a five-year senior secured term loan B facility in an aggregate principal amount of $1,050 million (the “2020 Term Loan B Facility”). Amendment No. 1 provided for, among other things, (i) a new tranche of term loans (the “2021 Refinanced Term Loan B”) in an aggregate principal amount of $810.0 million, (ii) a reduction of the interest rate margin applicable to such loans to (x) in the case of base rate loans, 2.50% per annum and (y) in the case of Eurodollar loans, LIBOR plus a margin of 3.50% per annum, (iii) a prepayment premium of 1.00% in connection with any repricing transaction with respect to the 2021 Refinanced Term Loan B within six months of the closing date of Amendment No. 1, (iv) an extension of the maturity to June 8, 2028, and (v) certain additional amendments, including amendments to provide us with additional flexibility under the covenant governing restricted payments.
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On May 30, 2023, we entered into Amendment No. 3 (“Amendment No. 2”) to the 2020 Credit Agreement to replace the reference to LIBOR as the base rate with the reference to the Secured Overnight Financing Rate “SOFR” as administered by the Federal Reserve Bank of New York.
On May 20, 2024, we entered into Amendment No. 3 (“Amendment No. 3”) to the 2020 Credit Agreement, which provided for, among other things, (i) a repricing of the 2020 Term Loan B Facility through a refinancing of the entire amount of the 2021 Refinanced Term Loan B with a new tranche of term loans (the “2024 Term Loan B”) in an aggregate principal amount of $561.1 million, (ii) a reduction of the interest rate margin applicable to such loans to (x) in the case of SOFR loans, SOFR plus a margin of 3.00% per annum and (y) in the case of base rate loans, 2.00% per annum, (iii) a reduction in the excess cash flow mandatory payment thresholds and (iv) a prepayment premium of 1.00% in connection with any repricing transaction with respect to the 2024 Term Loan B within six months of the closing date of Amendment No. 3. The 2024 Term Loan B will mature on June 8, 2028, the same date upon which the 2021 Refinanced Term Loan B matured prior to giving effect to Amendment No. 3.
At September 30, 2024, $537.1 million was outstanding under the term loan B facility with an interest rate, including unamortized debt discount and issuance costs of $12.7 million. Interest is payable monthly. Under the existing loan agreement, we have future minimum principal payments for our debt of $7.0 million in the remainder of 2024, $28.1 million each year from 2025 through 2027, with the remaining principal balance of $445.9 million due in 2028. After the Separation, we own the debt under the term loan B facility. Additionally, we paid $29.1 million during the nine months ended September 30, 2024, based on certain leverage ratios and our excess cash flow generated for the year ended December 31, 2023. We are obligated to continue to pay a portion of excess cash flows on an annual basis. The term loan B facility contains customary covenants, and as of September 30, 2024, we were in full compliance with such covenants. The 2020 Credit Agreement, as amended, also requires that we continue to make cash payments on an annual basis based on certain leverage ratios and excess cash flow generated for the immediately preceding fiscal year. The cash payments are applied to the remaining principal balance due at final maturity.
Critical Accounting Policies and Estimates
During the three and nine months ended September 30, 2024, there were no significant changes in our critical accounting policies and estimates. See “Note 2 – Summary of Significant Accounting Policies” of Notes to Condensed Consolidated Financial Statements for additional detail. For a discussion of our critical accounting policies and estimates, see Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K.
Recent Accounting Pronouncements
See “Note 2 – Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption.
42
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of our market risk, see Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K.
Item 4. Controls and Procedures
Attached as exhibits to this Form 10-Q are certifications of Adeia Inc.’s Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Exchange Act. This “Controls and Procedures” section includes information concerning the controls and controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.
Evaluation of Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the evaluation date). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of the evaluation date that our disclosure controls and procedures were effective to provide reasonable assurance that the information relating to Adeia Inc., including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to Adeia Inc.’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, during the last fiscal quarter covered by this Quarterly Report on Form 10-Q that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of our business, we are involved in legal proceedings. In the past, we have litigated to enforce our patents and other intellectual property rights (“IP”), to enforce the terms of license agreements, to protect trade secrets and to defend our patents against claims of invalidity. We expect to continue to be involved in similar legal proceedings in the future, including proceedings regarding infringement of our patents and proceedings to ensure proper and full payment of royalties by licensees under the terms of our license agreements.
We cannot predict the outcome of any of the proceedings described below, other than to the extent such proceedings have concluded. An adverse decision in any of these proceedings could significantly harm our business and our consolidated financial position, results of operations, and cash flows.
Patent Infringement Litigation
In the ordinary course of our business, we engage in litigation to protect our IP from infringement. While litigation is never our preference, and we prefer to reach mutually agreeable commercial licensing arrangements with third parties, it is sometimes a necessary step to effectively protect our investment in our IP. As a result of these lawsuits, defendants have often filed Inter Partes Review (“IPR”) petitions with the U.S. Patent Office’s Patent Trial and Appeal Board (and other similar post-grant proceedings outside of the U.S.) seeking to invalidate one or more of our patents. We are currently engaged in multiple lawsuits with several third parties.
Videotron Patent Infringement Litigation
On June 23, 2017, Adeia Guides Inc. (formerly known as Rovi Guides, Inc.) and Adeia Media Solutions Inc. (formerly known as TiVo Solutions Inc.) (together, “Adeia Media”) filed a patent infringement complaint against Videotron Ltd. and Videotron G.P. (together, “Videotron”) in Toronto, Canada, alleging infringement of six patents (“Videotron 1”). On June 10, 2022, the Federal Court of Canada issued its decision in the case finding in favor of Videotron and its legacy “illico” platform. Specifically, the Court found invalid each of the asserted claims related to the four remaining patents involved in the case. In Canada, the prevailing party in patent litigation is entitled to reimbursement of certain of its costs and expenses. Accordingly, we paid $2.5 million for expense reimbursement in the fourth quarter of 2022. On September 12, 2022, Adeia Media filed a notice of appeal with the Federal Court of Appeal of Canada appealing the decision of the Federal Court of Canada. On January 30, 2023, Adeia Media filed its opening memorandum of fact and law. Videotron filed its memorandum of fact and law on April 17, 2023. On November 28, 2023, the Federal Court of Appeal of Canada held a hearing on the appeal and took the matter under reserve. On August 6, 2024, the Federal Court of Appeal of Canada issued a judgment in the appeal in which it dismissed the appeal.
On May 21, 2021, Adeia Media filed a patent infringement complaint against Videotron in Toronto, Canada, alleging infringement of four patents (“Videotron 2”). On July 21, 2021, the Federal Court of Canada held a case management conference in Videotron 2, shortly before which Videotron filed a motion to strike various portions of the statement of claim. On March 22, 2022, the Court issued an order on Videotron’s motion to strike, dismissing the motion in its entirety. On April 1, 2022, Videotron filed an appeal of the Court’s order dismissing Videotron’s motion to strike. On June 30, 2022, the Court of Appeal issued its decision in Videotron’s appeal in which it ruled in Adeia Media’s favor and dismissed Videotron’s appeal. The trial is scheduled to start on January 20, 2025.
Bell and Telus Patent Infringement Litigation
On January 19, 2018, Adeia Media filed a patent infringement complaint against Bell Canada (and four of its affiliates) (collectively, “Bell”) in Toronto, Canada, alleging infringement of six patents (“Bell 1”). On February 2, 2018, Adeia Media filed a patent infringement complaint against Telus Corporation (and two of its affiliates) (collectively, “Telus”) in Toronto, Canada, alleging infringement of the same six patents (“Telus 1”). Bell 1 and Telus 1 were heard together for purposes of pre-trial and trial proceedings. On October 7, 2022, the Federal Court of Canada issued its decision in the two cases finding in favor of Bell and Telus and their respective IPTV services,
44
Bell Fibe TV and Telus Optik TV. Specifically, the Court found invalid each of the asserted claims of the four remaining patents involved in the case. In Canada, the prevailing party in patent litigation is entitled to reimbursement of certain of its costs and expenses. Accordingly, we paid $2.8 million for expense reimbursement in the second quarter of 2023. On November 7, 2022, Adeia Media filed a notice of appeal with the Federal Court of Appeal of Canada appealing the decision of the Federal Court of Canada. On June 2, 2023, Adeia Media filed its opening memorandum of fact and law. Bell and Telus filed a combined memorandum of fact and law on August 18, 2023. On November 29, 2023, the Federal Court of Appeal of Canada held a hearing on the appeal and took the matter under reserve. On August 6, 2024, the Federal Court of Appeal of Canada issued a judgment in the appeal in which it dismissed the appeal.
On July 27, 2021, Adeia Media filed a patent infringement complaint against Bell Canada and four of its affiliates, Telefonaktiebolaget L M Ericsson, Ericsson Canada Inc., and MK Systems USA Inc. and MK Mediatech Canada Inc. (collectively, “Defendants”) in Toronto, Canada, alleging infringement of four patents (“Bell 2”). The Defendants filed a motion to strike various portions of the statement of claim in Bell 2. On March 22, 2022, the Court issued an order on Defendants’ motion to strike, dismissing-in-part and granting-in-part. On April 1, 2022, the Defendants filed a Notice of Motion to Appeal the Court’s order on Defendants’ motion to strike. On June 30, 2022, the Court of Appeal issued its decision in Defendants' appeal in which it ruled in Adeia Media's favor and dismissed Defendants’ appeal. On September 30, 2022, Defendants filed a motion for bifurcation, asking the Federal Court of Canada to bifurcate the case into two phases: a first phase related to liability and injunction and second phase addressing damages if liability is found. The Court held a hearing on the motion for bifurcation on December 12, 2022. On February 15, 2023, the Court issued an order granting the motion for bifurcation in which the Court bifurcated the liability and injunction phase from the damages quantification phase of the case. Discovery in the case began in November 2022. The trial is scheduled to start on April 28, 2025.
Shaw Breach of Contract Litigation
On October 2, 2023, Adeia Guides Inc., Adeia Media Solutions Inc., and Adeia Media Holdings LLC (collectively, “Adeia Media”) filed a complaint against Shaw Cablesystems G.P. and Shaw Satellite G.P. (together “Shaw”) in the United States District Court for the Southern District of New York, alleging breach of contract by Shaw for failure to pay royalties owed to Adeia Media under the license agreement between the parties. On October 8, 2024, Shaw filed a motion to dismiss the complaint. On October 29, 2024, Adeia filed its response. Shaw’s motion to dismiss reply brief is due on November 12, 2024. The trial date has not been set.
Disney Patent Infringement Litigation
On November 7, 2024, Adeia Technologies, Inc., Adeia Guides Inc., and Adeia Media Holdings LLC filed a complaint against The Walt Disney Company, Disney Media and Entertainment Distribution LLC, Disney DTC LLC, Disney Streaming Services LLC, Disney Entertainment & Sports LLC, Disney Platform Distribution, Inc., BAMTech, LLC, Hulu, LLC, and ESPN, Inc. in the United States District Court for the District of Delaware, alleging infringement of six patents.
On November 7, 2024, Adeia Solutions LLC (“Adeia Solutions”) filed a complaint against The Walt Disney Company Benelux (BV), Disney Interactive Studios, Inc., and The Walt Disney Company Limited (collectively, “Disney Europe Defendants”) in the Regional Court of Munich, Germany, alleging infringement of one patent.
On November 7, 2024, Adeia Guides Inc. (“Adeia Guides”) filed a complaint against the Disney Europe Defendants in the Unified Patent Court (“UPC”) Munich Local Division, Germany, alleging infringement of one patent.
On November 7, 2024, Adeia Guides filed a complaint against the Disney Europe Defendants in the UPC The Hague Local Division, The Netherlands, alleging infringement of one patent.
On November 11, 2024, Adeia Guides filed a complaint against The Walt Disney Company (Brasil) LTDA in Rio de Janeiro State Court, Brazil, alleging infringement of four patents.
No case schedule has been set yet.
45
Item 1A. Risk Factors
There were no material changes to the risk factors previously disclosed in Part 1, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated by reference herein.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three and nine months ended September 30, 2024, there were
46
Item 6. Exhibits
Exhibit Number |
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Exhibit Title |
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4.1 |
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10.1 |
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31.1 |
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31.2 |
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32.1 |
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101.INS |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: November 12, 2024
ADEIA INC. |
||
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By: |
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/s/ Keith A. Jones |
|
|
Keith A. Jones Chief Financial Officer |
48