Adeia Inc.

Good day, everyone. Thank you for standing by. Welcome to Adia's first quarter 2023 earnings conference call. During today's presentations, all parties will be in a listen-only mode. Following the presentation, the call will be open for questions. I would now like to turn the call over to Chris Cheney, Vice President of Investor Relations for Adia. Chris, please go ahead.

Good afternoon, everyone. Thank you for joining us as we share with you details of our first quarter 2023 financial results. With me on the call today are Paul Davis, our president and CEO, and Keith Jones, our CFO. Paul will share with you some general observations regarding our first quarter, and then Keith will give further details on our financial results and guidance. We will then conclude with a question and answer period. In addition to today's earnings release, There is an earnings presentation which you can access along with the webcast in the IR portion of our website. Before turning the call over to Paul, I would like to provide a few reminders. First, today's discussion contains forward-looking statements that are predictions, projections, or other statements about future events which are based on management's current expectations and beliefs, and therefore subject to risks, uncertainties, and changes in circumstances. For more information on the risks and uncertainties that could cause our actual results to differ materially from what we discussed today, please refer to the risk factors section in our SEC filings, including our annual report on Form 10-K and our quarterly report on Form 10-Q. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after this call. To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP financial information on this call. We use non-GAAP financial measures internally to evaluate and manage our operations. We have therefore chosen to provide this information to enable you to perform comparisons of our operating results as we do internally. We have provided reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the earnings release, the earnings presentation, and on the investor relations section of our website. A recording of this conference call will be available on the investor relations website at adia.com. Now, I would like to turn the call over to our CEO, Paul Davis.

Thank you, Chris, and thank you, everyone, for joining us today. The first quarter of 2023 represented our second successful full quarter as an independent IP licensing company. We are making excellent progress towards our 2023 goals, and we delivered strong operational and financial results. We signed eight license agreements, highlighted by key new wins with Kioxa and Western Digital and our semiconductor business, and renewals completed ahead of plan with Verizon and Altice, in our media business. Our commitment to R&D is paying dividends with customers and is driving growth in our patent portfolios. Our investment in R&D helps in the near term with renewals like Verizon and Altice and new license agreements such as Keoksha and Western Digital. It will also be the basis of our long-term revenue growth as we continue to focus on our next generation innovations for the media and semiconductor industries. Our patent portfolios now number nearly 10,000 patent assets in aggregate, up from an approximately 9,750 in December. With the patent additions in the first quarter, we are on track to meeting our goal of 10% annual patent growth this year. As we anticipated, we had a strong first quarter. Revenue was $117 million. up 14% from the prior quarter, and adjusted EBITDA was approximately 86 million, up 10 million from the prior quarter. These excellent first quarter results position us well to achieve our annual outlook and again demonstrate our ability to monetize our robust IP portfolios with an increasing pipeline of opportunities. Our deal momentum remains strong. In the first quarter, we signed significant license agreements across both our semiconductor and media businesses. First, I would like to highlight the agreements we signed with two leading flash memory companies, Keoksha and Western Digital. These agreements will deliver significant value to us over time. These deals were structured in line with our new business model for our semiconductor business, and revenue will be recognized over the term of the agreements as opposed to prior deals in which much of the revenue was recognized upfront. These agreements are also an important validation of our semiconductor portfolio, and in particular, our transformative hybrid bonding technology. Hybrid bonding is a key enabler for memory producers, helping them solve issues related to the stacking of hundreds of memory cell layers together with logic on a single die. This capability is important to achieving higher memory density. Higher density means lower cost, and in the memory business, driving down cost is fundamental to success. With the addition of these two new customers, every major flash memory producer is a licensee of our hybrid bonding portfolio. Recently, Keoksha and Western Digital announced new 3D NAND products utilizing wafer bonding technologies, which we believe will begin ramping within the next 12 months. These announcements are significant proof points for the benefits of hybrid bonding to the memory market, and we believe they will lead to more memory products entering the market that use hybrid bonding, which will expand our future revenue opportunity. Moving forward, the next significant growth opportunity for us in our semiconductor business is in the logic market. We believe our hybrid bonding technology and advanced processing node portfolio will help solve challenges with the slowing of Moore's Law and will drive new license agreements for us in that market. AMD, Intel, and others have recently begun shipping or have announced products that use hybrid bonding. and we believe this trend will continue to accelerate. Turning to our media business, we signed six renewals in the quarter. The Verizon and Altice agreements are evidence of our continued success in PayTV, as both renewed their license agreements ahead of plan and for multi-year terms, confirming the value and longevity of our media IP portfolio. Other media license renewals in the quarter included a leading provider of set-top box middleware in the Korean pay TV market and a leading Japanese video on demand anime content creator. We also closed a renewal with a large Korean pay TV and telecom provider. While Audia may be new as an independent IP licensing company, our business model has proven to consistently generate impressive cash flows over the year and over $9.5 billion of IP licensing revenue recognized in the past two decades. Since the beginning of 2021 alone, we have closed over 70 license agreements with an aggregate total contract value of $1 billion. These 70 plus deals, our strong track record of renewals, and our pipeline of new opportunities provides us with confidence that we are well positioned to grow. Our resilient business model focused on a diversified base of long-term license agreements that often span multiple economic cycles helps insulate us from temporary swings in the economy or in a particular industry. Supporting our business is a broad diversification of customers across multiple verticals in the media and semiconductor industries. Our contracts average over five years in length. which drive long-term revenue streams and strong cash flow generation. Over the years, our focus on cultivating strong customer relationships has resulted in a number of significant customers renewing and expanding their licenses. These customers include the major North American pay TV operators and leading semiconductor and consumer electronics companies. Large, well-known multinationals such as Samsung, Sony and SK Hynix are among those who have renewed their licenses with us many times over the past 25 years. Other major domestic customers such as AT&T, Comcast, Dish, and Micron have renewed their licenses with us again and again over nearly 20 years. It is these long-term customer relationships that are the foundation of our business model. As we grow our business, our goal is to cultivate similar long-term relationships in other target markets. One of those target markets is OTT, which represents a significant growth opportunity for us. We believe this vertical alone can more than offset the anticipated subscriber declines in pay TV. Slide seven of our earnings deck depicts the estimated subscriber growth in OTT as compared to the decrease and Pay TV. Given our long-term contracts in Pay TV and track record of renewals, we expect Pay TV to continue to be a significant revenue contributor while we simultaneously grow our OTT business. It is also important to note that OTT is largely a greenfield opportunity for us today. Prior to separation, we are not able to fully pursue this opportunity due to channel conflicts. Since the separation, we have accelerated our efforts in OTT and engagements are at various stages. With roughly 10 times the number of OTT subscribers to pay TV, OTT represents a very large opportunity for us and we are focused on securing long-term deals with the major OTT providers that reflect the value of our robust patent portfolios. Given the size and growing and largely unlicensed OTT market, even with modest additional penetration into this vertical, we believe we will be able to more than offset the anticipated declines in pay TV. Before I turn the call over to Keith to further discuss our financials, I would like to briefly provide an update on our measures of success. Consistent with what we described before, we are focused on increasing our recurring revenue baseline, growing our patent portfolio, expanding the number and scope of our media and semiconductor license agreements, and making progress in adjacent verticals. I am very pleased with the progress we have made to date in each of these key areas. First, We are maintaining our annual baseline revenue at $375 million. Our deals with Keoksha and Western Digital will help contribute to future baseline revenue growth, as revenue from these deals is anticipated to ramp over time. In addition to these new deal wins, our future revenue growth will be primarily driven by opportunities in OTT, adjacent media markets, and the logic market for our semiconductor business. Turning to our portfolio growth, our patent portfolio development is primarily from our internal innovation engine and supplemented with targeted tuck-in acquisitions. With nearly 10,000 patent assets at the end of March, we are well on the way to hit our growth target for the year. Next, we continue to expand the number and scope of our license agreements, as evidenced this quarter by the new deals with Keokshin Western Digital and the six renewals completed in our media business. We believe our deal momentum will continue during the rest of the year, given our tremendous pipeline of opportunities. Lastly, we have continued to progress our efforts in breaking into adjacent verticals. These efforts remain at various stages and we continue to anticipate music streaming will be our first area of success. As a reminder, these adjacent verticals are entirely greenfield opportunities and will help drive future revenue growth. With that, let me turn the call over to Keith to cover our first quarter financial results and our guidance for 2023.