IDCC - Earnings call transcript Q1 2019

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Operator

Good day, and welcome to today's InterDigital's First Quarter 2019 Earnings Conference Call.

As a reminder, this call is being recorded, and it is now my pleasure to turn today's call over to Mr. Patrick Van de Wille. Please go ahead, sir.

Patrick Van de Wille

Thank you very much, Carey. welcome first and conference XXXX everyone, call. morning, to quarter InterDigital's earnings Good morning our CFO. Bill Kai me are With this Merritt, COO; Rich Oistamo, and President Brezski, our our CEO; and some Consistent quarter's the and open with then the call questions. call, offer company for last the quarter highlights we'll and about

hereof. to and need contemplated report statements risks of our expectations, subject cause our made risks that as only current whether are on we or to results forward-looking them, plans as of from and or of remind the and in March future forward-looking the this we and Securities begin set to Commission. make uncertainties that actual and from These for release regarding those and this Before future new call, revise could the any and materially differ events are statements forth other to And with except XX-Q time filed no information, obligation undertake guarantees XXXX, results events Form earnings filings not which in are quarter and otherwise. performance required Exchange statements. XX, result by to remarks, forward-looking I uncertainties our update of ended morning, law, time include and our a you we our by as in quarterly date will These events such beliefs,

Bill. XXXX the clicking of, Tracker Financial contain XXXX. Tracker, references Metrics included that for that GAAP the measures can are may Financial to our non-GAAP financial presentation financial comparable be quarter care home to of which accessed of says our today's Investors' addition, on directly page, link non-GAAP first turn over Metrics in taken measures. www.interdigital.com, With most call In QX to financial by I'll Reconciliations the these the measures on section

Bill Merritt

call on everyone morning. for joining this thank you Good us and the morning

press morning's solid this up careful quarter, saw release, As you good highlighted by and we revenue management. recurring a in delivered expense

evolution our Technicolor, the very largely the acquire strategic also of of significant, of company, Innovation transaction in the with our & step next France. Research unit integration to completing We moving logical continued Technicolor's and then but taking first

in close company number the we first half be strategic of on to innovation and reshaping a will deal execution. that devices, video with us market, year. the a IoT key been overlapping becomes then and that and company that complementary focused wireless point, expect years At markets, We discussing from this larger technologies, wireless, to three in much operating of connected a about single for electronics. of in complete, single company all massive two have substantial strength And consumer technology a devices, evolving the

me the Rich some three, give let priorities new program our licenses these, year, our I licensing details you levels. back for me Chinese and manage XXXX license to a of but our So patent new operational few sign under which highlights. and each new costs electronics to about are just will there let OEMs talk of on agreements, provide sign consumer

we these bring just are company the effort this of licensing executive involved, top deals the importance strategic our understand the priority, R&D appropriate, effort to our and OEM The we and team, government the management resources leveraging rights Chinese not engaged as Obviously, relations but remain initiatives, and the groups, our will across all where teams, deals. On companies is unlicensed to our our licensing signing closure. major with Board. our extreme

focus. tone in way at to epicenter. by negotiations IP that part our US I that Converting sits very As overall the IP around under trade mentioned are is where and tone remains before, the positive driven between the China value-driving the deals positive,

a with to are of this licensing we In Avanci, that positive On IoT the new are as the we're shop Avanci customers can valuable by will We member. patent IP for Avanci and cellular proving Porsche, results inventors success alike. platform single-stop licenses separate slowly be us year. time. very very a and is for significant but looking founding encouraged note, Audi surely, That over create April, value to report announced and

a a manufacturer very contribution taken set-top to electronics provided what the play, the solid a that had a restarted. meaningful successfully a box manufacturers. the and first with majority of On licensing with the program vast consumer quarter, and we TV shuttered engaged We set-top have box was successfully and restructuring revenue quarter also largely license

date encouraged we are deliver the expect of to value and We by year. course the the would to additional during response

continue we managing explain, will Rich as our make to on great progress Lastly, expenses.

have top mentioned greatest that to we journey, for simplest strategic check. holding the is in up move the line the our with us to drive in the expense way As line regard value to while

to just turn that With high Kai. me doing level call to way let view, We over the are our that. well on

Kai Oistamo

uncertainty importantly, that That while China. on those Thanks, optimistic operational negotiations, the our have agreement, the trade a I'd direct obvious the during will Bill review trade biggest an backdrop those an dashboard, is There our which quarter. everyone are that the for and we a bring us. trade said, certainly unlicensed property impact with companies, against main points both provide will protection of being and morning start engage and I'll and thanks of a element countries any don't, negotiations on of continue to to good some reach we between handset joining talks what's can intellectual centerpiece. US With be talks licensing. like don't with delay.

year of together mobile industry the for in very since quarter Mobile The Barcelona. quarter a business for also the comes Congress any is important first World the

was Our presence there successful most this respect. yet every year in our

happened their result video featuring spoke behind technology and backdrop demos government lot twice meetings. as including our completely and the edge and showed licensing, company. corporate research leading is scenes, with our and Technicolor event experts very technology any that some important ever. use stage, to able in teams demos, development for were relevant tremendous the our main Our conjunction many as relations And an A a also for R&I the exciting in accelerated

additional companies a and exactly R&D expanded year closes. that will research of our ago one Tirri Nokia role visibility Henry InterDigital quarter, As CTO of in integration efforts. the of and in and With his R&I our close by Technicolor transaction his Technicolor to expecting of patent the is footprint at is includes and once us one both a leading of and particularly part useful highlighted system by it efficiency to business. to that bring we Henry role finalizing a Technicolor areas and integration and well and close the team in largest is of implementation That very, acquisition is leading will world. we're a are experience R&I what acquisition, of the the the of at ideally the primary completion transactions, recently electronics in as almost business added tremendous the Labs expanded very very make second as integration that makes right HARMAN, long-term then of important focus Barcelona, background licensing of consumer new suited now, division. we transaction our the co-demonstrations Right second and and the That the now CTO to proceeding the to end second management those

are and we the we well portfolio. technologies pools price in On space, with of companies where at of in patent consumer those electronics mainly video involved involve are our discovery. as that exploratory combined many engaging stage many began as side, new meetings companies implement Like coding the

not expense a current of driver. Our control nonetheless can be with our big profit business, book licensing tight as is core while business, as coupled a and meaningful obviously handset

deals, some it goal ones, early Our some XXXX at XXXX, us us communicate which estimates as data-driven is with business. potential to market for in ability are even a give that business confident is tremendous of and complete a investors this stage, potential. to Even an to we very will small

Technicolor efforts business, integration work a of team InterDigital. of that, with and our on to expand turn I'll So to InterDigital R&I core it on the our exciting to Labs with their going the at there's completion and integrate pending over and lot With continuation Rich. plan, of acquisition efforts work business the our team of execution

Rich Brezski

careful delivered Thanks, included Kai. in control returned value a from as revenue, million We and continue first $X.X recurring a a revenue integration XXXX solid million, at electronics. cost and increase we quarter quarter our Recurring recurring contribution $XX XX% growth revenue with compared to QX consumer saw shareholders. to in XXXX to

business meaningful core consumer big as not show impact. beginning new obviously the While as is business, that these electronics to have a numbers our

that use investors. to for the goal market As some Kai XXXX the said, CE to our deals sign in and is business for size near-term data

license as a customer. side, On a with driven the contra to of charge the recognized revenue non-recurring the a by arrangement we long-term million $X.X restructuring

Moving on driven in able we costs. to little that to lower we're bring operating was costs, lower by a although anticipated than integration expenses

that with back property to par to run Excluding quarter, roughly and our continues the integration on we to and report be cost we're was the QX. happy Last costs, that about reported intellectual enforcement levels, I'm recurring to business case. XXXX

idea acquisition early As which division, might close of in. we will closer as Research hope as we move our costs of to QX, of Technicolor's better our see a to come the Innovation we and where QX provide

our plan cost reaffirm to exit that explained. post XXXX we've with acquisition reduce importantly, we previously XXXX do More want I as levels, in to such line

our since count $XXX back share almost of shares we year, our start common of under X XX buy to the million bringing million. stock, Finally, million outstanding the to another invested

one our million by close million more marked more in Looking bit period repurchased couple that Since announced acquisitions, an back than And investment significant mid-XXXX also years our of cash of shares two authorization roughly we closed $XX expect last common we've to time in and more million out a that and increased and management. in than have $XXX dividends important buyback have broadly, addition, we of stock. paid soon. another we and $XXX the

back of earning forward return recent shareholders. now our end to the it continue on we We stock Patrick. on buy especially, most since most turn over quarter I'll back behalf to investments look these and to

Patrick Van de Wille

Carey, Thanks for call very much. questions. open Rich. we can the if

Operator

Riley. will this questions. looks Eric for Wold with At Instructions] open like to I'd B the like floor time, you. question from [Operator Thank our first come It

Eric Wold

is, Is Thank the question recurring around guys. I million the know you, quarter. first to the to the deal understood morning sure I make signed the in from just want the revenue -- I quarter. CE in contribution good that comment $X.X I guess you

is just looks? that how want past sales that a a kind that going is of rate I to some run a understand or sure component, So, of forward, make-good make

Bill Merritt

Eric. Yeah,

that's number. recurring So a

include did So have past it in doesn't from note business. I'll we that sales, the contributions QX and

in year-over-year when we to obviously but sequentially, growth all comparison the not the acquisition. it's So didn't have period

based true period that during a period, that both it's And shipments extent the recurring are So, on then variable those to number you that also made product to happened estimates the up. there's period.

Eric Wold

Got What Avanci as in guide it. of sort to efforts us kind a Avanci on years? thinking of comfort the long-range confidence the And terms business, years versus that in then gave that you getting year of stand-alone around level kind around including couple next to signed, get we IoT that can where of path couple towards see kind or stand this in a deals numbers of you in you this ago that about update of well? need of do

Bill Merritt

Sure.

to contribute say that I'd business. are IoT couple overall of there So the there a pieces

noted of you an Avanci, one the and So component is important that. that's

with effect to people sign automotive start and So up. bit them have as they great we're see now manufacturers. We a now hoped this, steamroll having to little to that the indications more of a traction it's see seeing

explore. also So that the will nice of a it the you goal. overall aspects contributor as IoT going towards to was has know, other that be Avanci, market

a to There's and was we'd the company. that traction in so to the with what year. to in during And Separate licensing the of that. element the IoT and them of from that's like was there's by was now X the some combination pursued sort the pieces start there's of see another to layer, from that Sony, area course patent And piece that. piece, software a being middleware business

is a uptake So I think, of see market there, the oneMXM want what to further solution. we

is Chordant advocating So that. there out

a that that, I I supports of standard. customers. to just of of tell there and as is I of success a portfolio And that level they continue -- if business built in positive then the see there'll Chordant se year think of wouldn't patent sales well, expect the lot terms think we in space indications have adoption more beyond licensing that, engaging see continue revenues us if with we to going-forward and that be this but we solid, will that oneMXM from contribution and per portfolio. a more it the see the we've coming

it's So Avanci, element be most more will the -- growth. a market I'd some from part bit I of little and revenue say second that around indications, come think that's but mostly just would of Chordant, oneMXM. from

Eric Wold

then Chinese OEM on Okay. the And quick X kind of questions side.

in With of to that's sign all of not procedural dates? procedural nothing the value known kind there? still different, kind you looked improving on that you're of or would complaint by on would of since from speak, of Technicolor calendar the discussion initial Huawei? there was on in And looking but the the deals Huawei, the the filed part China discussions those in the of bucket, dates seeing mix? Technicolor OEMs inclusion to in XX-Q, benefit so known of And some same any any the handset I the then them kind the with, frame around

Bill Merritt

So to Huawei, handle -- second on give yet. the back one no dates one. there's procedural I'll first the I'll

it I'll the in to Technicolor's discussion. give terms So contribution Kai back -- to of overall and

Kai Oistamo

in very prevalent in handset is so of are of the single equally helpful and it And as technologies people China. potential it's important video and unlicensed any every any today, that smartphone negotiations, all is for important in for licensee

Operator

you. Thank

will question Dougherty Charlie next & from Our Company. with Anderson come

Charlie Anderson

taking morning. for my Good thanks Yeah, questions.

side, customers, million on of I us now. recurring you sounds of mentioned there's the in can sort can that devices So you're any terms revenue. unpack at I it maybe just think deal, wonder anything. the maybe sign, then wanted of you sort I $X signed electronics little right don't you types help be device started per think out to content a willing the you start roughly as know And us to help what if little consumer to bit bit I covering royalty of this there if you you'd call I like maybe or a a on of time.

of TAM sort a the got then you to, up could there to Just and follow-up. what I've build be know,

Rich Brezski

is this Charlie, Yeah, Rich.

market, just point, in market. there's, at handset really much note I'll So, it's the this that disaggregated more

So at bit I $X remarks, indicated would more it's get not set In indicated just some million. that But in the we driving certainly up to unpack time traction as large aggregate, it. once some plan, up. point my deals to this little Kai we and in it's still and a in more the market goalpost

Charlie Anderson

follow-up approach strong, I little a decade. Great. the least maybe buyback you're than then at why could for if you it bit obviously more I normal by wonder And just activity, on I there, I was you're maybe a aggressive on time And sort in going a the secondarily, did strongest then of to that? convertible buyback. color of of updated on think, with you're noticed any I color very count you kind debt, a a us give on on could bit the my any that? wonder us guys give coming if basically the maturity refinancing the thoughts incremental how approaching date how Thanks. up last you know

Rich Brezski

Sure.

picture activity, let certainly to shareholders trend the So at frames, Certainly the at buyback a the that's when question on to focus our have acquired I long-term say as certainly me and respect at because term. commented of different balance our of that shows period. you know bigger the in you start cash buyback. bigger and in second not some number we on XXXX near was With that paid at Technicolor we returning every ultimately licensing the look and buying convert. marker that business Look evaluate picture But at the, buybacks. reflected time small look capital you a always with through factors a us had. and to that led the on this the for point, we've cash levels to your

to thing the in know of appreciate we're balance we strength, sheet time. the it able only part from is aggressive there to time I'll certainly, You buybacks is be say why

we something always that we're looking that. that's continue to evaluate So at, will

Charlie Anderson

Right. if had a from any IP I wonder is sneak or between for your all And Qualcomm the in in recently Obviously deal side, to peers the perspective as if more I to read industry. Bill. signed just one could then landmark and Apple we pretty there through whether helpful that's on hurtful Thanks. the

Bill Merritt

So, I helpful. it's think

strong their some by them validated, is that case, I also a that yesterday in for that in anytime tailwind they indication it's it the Huawei. of as rest intellectual discussions gave comment think felt a the There property Qualcomm market. was with was

helpful well. that's So us to as

frankly that front. on I good So all think

Charlie Anderson

Thank you so Perfect. much.

Operator

Thank Instructions] with Galinko question Your National come Securities. next will you. [Operator Matthew from

Matthew Galinko

Thank you.

guess mentioned the So for split secondary revenue I might consumer change electronics the might that after have you I think the in Q, closes. deal

electronics consumer revenue subsequently that -- -- for QX? right revenue you existing deal you the this guess starting that's, the generating would split that signed Is you now a get I point? that would at change it with from prior acquisition, So guess, stream to to I revenue way about you're recurring think that agreements additional until

Rich Brezski

Yes.

up what call So electronic the think Matt, Technicolor. market, referring We've agreement to the to consumer estimated share what has original we of a the portion is which revenue net revenue which is in I -- that the acquisition. to with under really revenue share, us agreed been of you're cost by opened

if get that on of revenue of future description not in acquisition. some can we have that we At future. well. could but the it this in based level more once see as as we modified the today, be the that second point, can So close the it's detailed will we -- And provide relevant

Matthew Galinko

hands of How the get to a if done, color trade try dependent agreement external continue, all maybe you a within deals in blocker is now. is hostilities on sounds a on something us of existing for to sort of hands-on you? or get And done we control in culminate you to some it don't of China that like effort conflicts licensing China? or Can resolution then And sort your how trade kind going much you sort big are -- Okay. done in on fairly environment? give how project have be to get to if of of some

Kai Oistamo

getting marketplace, it a So as so hence, IP be in way in it my in the one I and But people deals would would helpful. is the signing remarks, said uncertainty in are remove done trade which the any blocker deals not current as well. environment that

Operator

Your will come Scott question Roth Capital. from Searle with next

Scott Searle

clean to Just of here a back things. up couple on

Looking you the the terms at charge, unit of fixed revenue kind out big the equation? contra customer? idea could impact wireless the run To of baseline of us that of what the some were models they side be help revenue forward, us How going normalize rate on of in should or going that give royalties? that per on

Rich Brezski

Yes.

So reflected for our revenue period. in recurring basically the Scott, that's

would So recurring with revenue associated the that. the recurring reflect impact

Scott Searle

going to that's just be Rich, going a so wait, clarify, to So forward? quarterly so $X.X million impact

Rich Brezski

That of was arrangement, for within recurring there from quarter -- impact. impact impact reflected recurring was the extent the the restructuring No. impact that No. nonrecurring onetime the is No. To our was revenue. a any the

Scott Searle

quarterly that been relationship and Okay. will like right. normalize be what had been was it's Is sounds then been though, a But terminated, you that it us to some that basis Right. going on what -- could idea, modified forward? give what

recurring So June I'm actual into going to at if impact what looking the quarter? is the revenue

Rich Brezski

Yes.

look first because you which the as that, well of first you the So everything what that as tell else. quarter show impact I that quarter, for recurring to is

on. license if reflected impact get now. to The better. In smaller terms the January the X essence, was extent as taken that there results. first trying what's to the there see, behind this the in can that quarter that's was say I'm been revenue it's know I has agreement from us in that basically and on. It's recurring impact can't into that in as a is impact the, impact was I to But if So important confidential one-time recurring recurring

Scott Searle

you. Got

just million that of. working clarify I rate revenue is off run Correct? to that to so charge, Rich, maybe out back normalized So be if $X.X contra-revenue the recurring

Rich Brezski

that Yeah, contra-revenue because non-recurring revenue. took charge, we to

$X.X it if broken million and is million. go metrics, So, $XX.X see out, to the you the is the you'll recurring non-recurring negative

more look know, can quarter, So, relevant this any recurring you the forward it's going okay, the revenue and number. necessarily relevant as non-recurring you that's to quarter, not going relevant know, you say, with the but is number at forward,

Scott Searle

you. Got

You in know helpful calibrating. that's

$X.X the look then the you Could On fourth patent you in this your Technicolor, some there in mentioned to like as us the quarter, that million reflected that share quarter of CE give relates back you relationship, said an and it as idea administration were costs? what well. to is revenue

Bill Merritt

fingertips, but haven't don't sequential increase the I there have it a it's respect at with to of sure the part the an contribution had what my but disclosed I net I Share to the business was. With definitely I it's almost, fourth increase want level from Rev we is, quarter-over-quarter. of a definitely So we there. to that if expenses of over not an respect that tell we estimated CE quarter. Share-to-date because say quarter question first Rev the I'm you it's can did, fourth the

Scott Searle

I would CE that Okay. is relationship unit a fixed revenue a royalty the presume arrangement. just line based And arrangement items per royalty kind fixed license fixed of or the on

Bill Merritt

CE Well, it's, there relationship. more is one than

Scott Searle

Okay.

Bill Merritt

be like the more variable, or fixed to they tend other yes, could they probably be business So variable.

Scott Searle

basically on cost on you Got think was just structure charges, December for following from the And the normalized quarter. the the OpEx you. that call said flattish up I front,

non-recurring Technicolor sequentially, costs million the up $X.X other and I admin of But SG&A ballpark fixed related clarify Just something in of up to and payback. kind there million there about the development royalty that that relationship assume there's was for sequentially, the integration? in are $X.X CE your wanted is to for patent rough because and items about charges

Bill Merritt

The we've of in think kind that XXXX. right. flat in things all of is metric. defined basically I what and And with total sum QX goes QX, the in Yes those therefore versus into so line past, that's

also that litigation not thing is I'll stage really the be cost and up pulled might be of other well that can something highlight of more of we our as is in. reflective out there The you down litigation because and didn't that's the base, that just mention move

Scott Searle

I And how number numbers unit pipeline, but you about to we thinking numbers, want of companies Got you. looking lastly, you're if metrics kind but qualitative, And of now. of us just how don't should with, you is I wondering there some just know of wondering that sort had you've of the qualitatively terms commit to engagement you're right that in Technicolor, know at on. kind early big if shake more that terms royalty in to months. and in just idea, some some starting trees, softer was good any pipeline already I XX level of the give over be could getting out pretty of results engaging there the next or that

Bill Merritt

So I would meetings indicators level the engagement. softer and think the of the number of just be

said within that consortium. the all participate we as There to meeting with that gives or So meetings of major in well, going the whole that industry as as with, example, group along. we're people an is that you those that TVs market particular manufacturers access on China

of level the me, is value box Set-top But piece observing I think the encouraging. activity, very piece value-add. is TV to piece a is there. just nice bigger

go there's this of indicated with year. will But we so that very happy bit on far, in we're price discovery script, what As a seeing. we're the

Operator

in I'm questions showing no queue further at this time. the

Patrick Van de Wille

being Annual you in our June. Thanks, Thanks us at everybody, and with joining touch for very we much, forward Terry. Meeting in today, again to look

Operator

today's concludes Thank you. gentlemen, Ladies this and teleconference.

You may disconnect. now

InterDigital (IDCC) 3 May 192019 Q1 Earnings call transcript