Adeia Inc. (NASDAQ: ADEA)

Sector: Technology Industry: Software - Application CIK: 0001803696
Market Cap 2.03 Bn
P/B 4.91
P/E 27.67
P/S 5.35
ROIC (Qtr) 6.88
Div Yield % 1.35
Rev 1y % (Qtr) 1.44
Total Debt (Qtr) 447.60 Mn
Debt/Equity (Qtr) 1.08

About

Adeia Inc., often recognized by its stock symbol ADEA, operates as an innovation incubator within the entertainment, media, consumer electronics, and semiconductor industries. They have dedicated several decades to investing in and developing advanced research and development to create market-leading technologies. This commitment has led to a robust intellectual property (IP) licensing platform, with a broad portfolio of media and semiconductor IP. Adeia's business model revolves around inventing, developing, and licensing fundamental innovations...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 205.55M provides robust 0.46x coverage of total debt 447.60M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 56.09M provide 2.67x coverage of short-term debt 20.99M, demonstrating strong liquidity position and minimal refinancing risk.
  • Robust free cash flow of 203.78M exceeds capital expenditure of 1.76M by 115.59x, indicating strong organic growth funding capability.
  • Strong operating cash flow of 205.55M provides 1.52x coverage of SG&A expenses 135.41M, showing efficient operational cost management.
  • Tangible assets of 490.91M provide exceptional 5.97x coverage of deferred revenue 82.29M, showing strong service capability backing.

Bear case

  • Operating cash flow of 205.55M barely covers its investment activities of (50M), with a coverage ratio of -4.11, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 205.55M provides thin coverage of dividend payments of (21.79M) with a -9.43 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (50M) provide weak support for R&D spending of 64.41M, which is -0.78x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating earnings of 129.66M show weak coverage of depreciation charges of 58.36M, with a 2.22 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 203.78M represents just -2.28x of debt issuance (89.28M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Geographical Breakdown of Revenue (2024)

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the Software - Application
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SAP Sap Se 288.31 Bn 34.60 6.72 10.73 Bn
2 CRM Salesforce, Inc. 248.32 Bn 34.38 6.16 11.14 Bn
3 SHOP Shopify Inc. 212.27 Bn 119.19 19.85 1.12 Bn
4 INTU Intuit Inc. 180.73 Bn 43.89 9.30 6.78 Bn
5 UBER Uber Technologies, Inc 178.38 Bn 10.72 3.60 12.19 Bn
6 NOW ServiceNow, Inc. 146.98 Bn 84.91 11.60 2.40 Bn
7 ADBE Adobe Inc. 144.48 Bn 20.77 6.23 6.64 Bn
8 ADP Automatic Data Processing Inc 108.20 Bn 26.16 5.18 9.77 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.25 2.65
EV to Cash from Ops. EV/CFO 11.70 13.37
EV to Debt EV to Debt 5.37 57.69
EV to EBIT EV/EBIT 18.54 19.12
EV to EBITDA EV/EBITDA 13.20 15.00
EV to Free Cash Flow [EV/FCF] EV/FCF 11.80 14.69
EV to Market Cap EV to Market Cap 1.18 -92.28
EV to Revenue EV/Rev 6.33 4.60
Price to Book Value [P/B] P/B 4.91 4.26
Price to Earnings [P/E] P/E 27.67 -136.90
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.37 -3.95
Dividend Payout Ratio % Div Payout % (Qtr) 29.90 4.25
Dividend per Basic Share Div per Share (Qtr) 0.20 0.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 10.74 2.52
Interest Coverage Int. cover (Qtr) 3.00 -52.32
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 44.03 -259.78
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -7.59 9,763.58
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 1.61
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 17.90 -263.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 3.39 56.46
EBIT Growth (1y) % EBIT 1y % (Qtr) 29.93 -225.15
EBT Growth (1y) % EBT 1y % (Qtr) 95.86 -86.10
EPS Growth (1y) % EPS 1y % (Qtr) 71.79 123.84
FCF Growth (1y) % FCF 1y % (Qtr) 44.23 -36.82
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 10.53 95.08
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.36 0.58
Cash Payout Ratio Cash Payout (Qtr) 0.11 0.02
Cash Ratio Cash Ratio (Qtr) 0.74 3.75
Current Ratio Curr Ratio (Qtr) 3.72 8.16
Debt to Equity Ratio Debt/Equity (Qtr) 1.08 0.17
Interest Cover Ratio Int Coverage (Qtr) 3.00 -52.32
Times Interest Earned Times Interest Earned (Qtr) 3.00 -52.32
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 49.50 -100.06
EBIT Margin % EBIT Margin % (Qtr) 34.13 -164.24
EBT Margin % EBT Margin % (Qtr) 22.75 -116.94
Gross Margin % Gross Margin % (Qtr) 100.00 58.20
Net Profit Margin % Net Margin % (Qtr) 19.30 -121.65