IDCC - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the Third Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Patrick Van de Wille. Please go ahead, sir.

Patrick Van de Wille

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

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

the financial the these can Metrics XXXX our measures. of In homepage quarter on included addition, financial accessed of tracker, our for QX are non-GAAP GAAP XXXX. to may clicking www.interdigital.com, metrics that by which Reconciliations directly side in to presentation financial comparable the measures Financial on Tracker homepage, on financial link today’s references contain right the measures says non-GAAP be most third

turn I’ll over care Bill. call With that to of, the taken

William Merritt

Thanks, Patrick.

and Google, can agreements quarter is provided, the we well ZTE from patent with on in the involving executing license new morning’s the press for its well as along everyone release subsequent both As this strategy. see as information company growth

is now strong drive expand core resource consumer strategy a into business, protection, to our by unit our that business licensing space. licensing broader terminal In the our nutshell, electronics HEVC patent and and enhanced

of flat levels. while, business holding the to the running XXXX essentially economic All cost the

Rich As is while Rich do, - Kai all to I’ll executing explain, add more are work highlights. just well few there and now a will fronts. certainly we on

Chinese Pretty First, willingness an the as across licensing of see particularly we in go meet. manufacturers terms prospective more space refused to see simply general, what customers, discussions into pricing. of continue manufacturers, when the growing all Instead, around days, overall centered we we our are frequent landscape much in gone to in discussions. manufacturers to dialogue the with with mostly engage now of stability is

is has with been aspects by we found of licensing in China as pricing our price the the unique surprisingly, the most some a challenging, of we but Not well. believe deal market, our completion history discussion formula evidenced have but responds Chinese the to that with also long of comports good ZTE,

it China, in sets litigations. benchmark current future discussions for also and future our for solid well bodes a this As foreign

provide provides Another licensee Google, other to was customer, which aspect wanted This whether companies, that discussions to with use of both the a highlight combine and efficient has subsequent solid and is licensor. benefits with in licensor approach a more sides benchmark both for also stores was approach number licensing we for or and use other to license the I and solution. with more of complete a

signed. to I to demonstrates intend think connections get have we we strong community, continue necessary leverage deals it within the also licensing connections the as to

of on now beginning of terms in capability technology have what briefly we the The just together gel. Next, R&D. is strength put

have them video but they are the to brought we occurs in before, the to technology teams, wireless collectively sing since work together and two work mentioned magic complementary two harmony. and I’ve individually, As amazingly the when not platforms, research

We're it's the to blending great teams single nice time, entering the getting year witness these it's now also the of creating and sports first point what's to and a being projects in defined in operating as we're of new watch, where that the unit. indicator the the The to technologies is are a come.

ahead to touch are of the of the Last, detail more ongoing if return the expense right is levels. economic a to we expenses our on here in business that Rich not on highlight goal but target, the cost will bit XXXX

leverage. the sure to our case. know, remains operating As business all all make the is that intend you We about

With Kai. that to let me over turn the call

Kai Oistamo

Thank our negotiations I viewed very a had move report were quarter we last to with that that mentioned you, licensing ahead. working ZTE, our we hard concluded we remain to of were Bill. while to is a in week, license happy market very a they which number a Last is go-forward license revenue, as Chinese an is perspectives, them having company, Chinese reference helpful. positive important reduced from so share, with customers given their point other ZTE teams smaller

overall as unique Bill the of Chinese aspects go-forward in as history mentioned, market. We well a solid benchmark captured for agreement discussions - with long reflects is that the rate as the it think our Also others. of the licensing,

in WiFi WiFi second - addition that that is we both a includes our addressed our the license HVEC a license with with signed cellular. course license that mobile and This agreement the portfolios, portfolio specifically reflects Technicolor video a first and it Further, and to of continue gratifying in we handset acquired develop. see of to that space from to very this the impact the is

we all, very, So this result. all solid very is a in think

time as a mentioned, this Google. signed with second also, license Bill We

licensing agreement of involved a a signed Importantly, platform Google was number licensors. that patent through

to in fair, is and finalized. rate, there move limited to insight were consider the pleased was both our frictionless own the result, While our which license way which essentially we we with

dominated this the mobile like the has additional SAP avenue that as complement for to approach indeed date. may Platforms licensing serve important to a licensing bilateral

as In efforts able been continued quarter, we've licensees face a our and to pending progress agreements, last to companies, the two of result. major meet majority with those the Beyond we with face continue. cellular other see unlicensed

we've told the the investors would to couple up in consumer market that of and community, us - term approach. for electronics a smaller On the we would to deals remains size sign like enable size the that near investment side, the that our

our their On wireless efforts, video. strong are research side, teams and continuing both in

a and beginning call XG efforts XG. some explore side, wireless first but or are September. the are to We research we in are what what with XG calling announced program flagship the partners currently BXG our Beyond On to research and beyond that, continues individually platforms others with XG beginning Finland and partnership

XG recognition. tremendous our gained have meanwhile We efforts

As Awards, the XG at has an has be prestigious is been of not XG-CORAL Innovation nominated a a Telecom in award, project the example, in InterDigital announced IBC the week. a CSI for will same which Award given Global winner where at The out Top the which project technical finalist for lead September. were was - Conference

side, technology compression, our standards other video that stepping fill, VR advanced shoes InterDigital the with in point the like of directly video visual and continues, standards. Technicolor VVC, cloud into work On to in efforts used

outside the also standards Our advanced recognition. solutions gaining strong are

leverage minutes enables which in of taken or is have example weeks XX that days for Digital great to previously the Technology, our Double digital even generate development would users digital A our and Show avatars Dumbo. technology That was IBC, Lion result King industry. premier was like in the a used and is video given feature in that at Best showcase and technology named movies for broadcast tremendous IBC custom

agreements So QX. delivered licensing already progress our new to summarize, in QX continued has and

results. both the efforts on We pursue research continue our and side, wireless deliver licensing tremendous our to to consumer electronics and continues

me that over hand Rich. With let to

Richard Brezski

Thanks, include the our results, ZTE license review the preliminary impact fourth of I’ll third new Kai. agreements a I highlights with which few communicate Today, Google. from will and quarter, the for and expectations quarter then

a range impact. Our at revenue from This XXXX negative license slightly quarter for of had late agreement, midpoint per expected. prior revenue the a of quarter estimate came true which of the up third a unit a we roughly included in

we associated in with licensee up forecasting we underlying with January ASC have next adoption sales in the the product occur, those correct quarter. of to more our which a rules It in estimate and quarter the sales XXX of quarter the in accounting revenue challenging. in As record will the makes reminder, the XXXX, license now true

there no time, obviously over difference. is Although

importantly, not these our top market penetration. true goals, increased through drivers gains are of ups significant More line which include

we few recently reported back come that some course, progress minutes. front, Of a and I’ll just on that in to

increases newly acquired expenses Our $X expected to litigation operating increase quarter, team a below the $XX on for of a video also Based came the full and having million research of expenses million. the on expectation. impact books we in in anticipated sequential and

for as costs, variance favorable our integration credits. was costs, increased of costs $X by XXXX fact, In well tax litigation recurring management This sequential increase ongoing research our just as and the estimates was lower careful driven lower million.

to on year. The important economic XXXX of the takeaway track end cost metric next bring by with completely back in is levels line our that we are ongoing

quarter, of the QX Google. agreements evaluate Looking new portion the and and accounting a fourth reports outstanding provide more will our have forward guidance received substantial to formal we after with further we royalty for ZTE

deals revenue non-recurring excluding on million. the to of of million expect to in expect revenue Based any of range million to million to $XX in total quarter, of $XX $XX balance quarter to and be to the the $XX signed $XX as nine million recurring million the know first the XXXX. revenue impact and $X that range rise always, the revenue related non-recurring million, revenue today the for Of new over be the $XX to non-recurring the of months fourth we of million what we $XX including may range, we range to of

resolution the around in through the materialize I some in with growth expect side, litigation, we disputes QX of expense are revised to following to outstanding see On of expense the Overall, QX. ZTE. we working anticipated expectations

aggressive our to like know, I’d typically stock status, you buyers comment buybacks. we think right. but Finally, are we've don't when We been as our on conditions on always stock briefly of touch

that out of the our two were agreements, However, stock license we the new of progress throughout repurchases locked meant quarter.

shares this repurchased on million X.X far $XX authorization. our so result, a As approximately we've million remains and year,

I'll back now turn Patrick. it to over

Patrick Van de Wille

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

Operator

Thank you. Wold, Riley. Eric [Operator B. question Instructions] First from comes

Eric Wold

expense are over. was which you it you is kind conserving just the was, will kind it it shifted from in And Is tax happened there Was questions, given in just significant that the you in Rich, obviously gave to the morning, quarter to one, - great now, guess Good is operating A guys. you. million $X few delta I guidance guess I October the of I see know what the already anything you but QX? a when this trying gave of estimates you Thank kind the the mean early base of from was credit? very the understand October, reduction?

William Merritt

why my Yeah, yeah, That's opening that Eric. address remarks, totally fair somewhat question. in tried I to

provide yeah, is So the course we towards of some But results. the in did guidance, telling end lag there the it's actually of quarter. really

at the So we anticipated to continue time think that as more had, at provide expense ongoing based best we there, even on as best, will that available the so I traction time. said maybe than I in management the end, the information

something came then a of that at there month lower the we'll is of lot billings There in litigation end the than of we and lot rely them month-to-month visibility with for see in a counsel and what check don't were we on outside basis period. estimated. the on - the because we really expense a to And kind have of that's

the of the So then just two quarterly operating they and we were in cycle. items, are there’s,

credits So expense. to as that offset well, which the some we things reviewing things so and and benefit forth was the around those increased typically are a and tax close, done estimates of are like quarter

Eric Wold

That credit quarterly was for in an tax was benefit just you QX? or benefit ongoing it

William Merritt

rate benefit, ongoing credit, but of increase catch-up a in that little an can bit the the estimate for have the you in effective year, rate instance it impact a for It's Yeah. quarter. the of of QX if the

So that's for was that QX. and expect what maybe part of around, do question we part your of the reason

one ZTE I I say going have think that we litigation on did hand, away.

some I to in on other but do hand, benefit, QX, a in that's expect of there that So at this expected was increase the point. QX see

Eric Wold

multiple how it years moved kind in And the the us building on, an significant beyond that guess, ZTE the with kind call of jives guess it. past how license has of understand that now to I just share, I is been fairly get - one now, as kind payments given their of kind cellular? that was Got of of to it and small getting a comes you kind just noted them of kind maybe the got you then that market a on plus beginning Chinese contributor of help catch-up past current the OEMs, outstanding of multi-year up continually payments patents ZTE comment, is, access

William Merritt

Sure.

where his getting position has a So declined. significant right past you a at an a almost and look sales customer that when sales of a situation in there, deal have amount you you like to in past ZTE, The the impediment market can done. fits have become

the is So of we've approach and it this, before this we way this had in pragmatic sort way.

we, a past, they be as we partial a past we a continue long-term in that and had customer. X-K, you you release customer situation away create full path, at as incentive the want as with idea not you and to a give then past for So down And an the to sales. in did we mentioned customer get long for this them chip release long-term the We want those sales. to give only is if be the to like

if go you and that path, - they then have don't down sales. full those to after So go past ability the

a get people board. to it's on to balancing we get interests try of that to -- So do

small China. manufacturers I we that we to construct benchmark deal the The able have or royalty positive. really the about think we're positive deal, negotiated and were the including mentioned is, say rates, everybody with I others respect very other so a is with very ZTE would the very is things to solid in for hard was big

HEVC an portfolio, well. It as was about think we added the from that acquisition and we very powerful reflected statement which is very contribution a - that solid

again not are smaller. their sales because while big So a driver revenue so much

are good benchmarks the us they're both deal and the very, think I structure - and rates the for apply really to the to in others.

Eric Wold

just million $XX to your preliminary going from to reported recurring Okay. kind Google million there? including Rich, be million then kind of you of quarter million me, and that recurring, of to $XX the that run with to sure comparable rate million, forward question for I for $XX a make and in QX, $XX assumes $XX would million kind And final $XX QX ZTE full guidance $XX of a understand, million the

Richard Brezski

looking just sheet I’m Yeah, for my on that.

revenue. one building, royalties. the also second, technology million $XX patent So, would yeah that’s the include would recurring But be revenue current the current solutions

basically but non-recurring. the everything it's So

Eric Wold

Okay.

to is million so million, So or to $XX million $XX comparable $XX million. $XX to million $XX more plus $XX million

Richard Brezski

Yeah.

Eric Wold

of that Okay. renewal? guess, ongoing of includes a assuming of full of deal - kind our I kind And quarter kind fixed BG ongoing from

Richard Brezski

Yeah.

deals in revenue. treat yeah new within typically the date irrespective signed what that again to So that we as period the treat for recurring cycle, deal that back we of gets which period quarterly we the we in signed quarter, quarter

Eric Wold

you, Thank guys. Perfect.

Richard Brezski

Thanks, Eric.

You got it.

Operator

next question Our Charlie from Company. Dougherty comes & Anderson,

Charles Anderson

backdrop, to the see geopolitical interesting licensees, to year that was taking it And bit I then see for we wanted given of China. a every of first the questions. Thanks Yeah. new someone on my Maybe out it's you happen. focus not little sign so sort

Bill, you a give I now? of more sort you wonder bit color why Now, could why if little on ZTE maybe so

if guys I future then this there to And give I of it's pertains you a like could and it approach as you you Google think little to took applicable you that feel mention, bit did licensees. us background wonder

lot you’ve go for maybe in what work and with if those you wondering that of the do, same could framework could Thanks. you China Google? with a fact together did that tie licensees got that with So to some

William Merritt

work look lot ZTE the obviously by think of I a company. of the was hard So, result

out continues very very focused reaching important, and property important. the intellectual to Trump were to be US we're also, by We was we Government, on

that I credit also lot play thing. they the factors think of stepped came good ZTE, But reflected into a there. So I with up think and they there's did right

work and as think - to it rate we analysts I were you there better. to and successful in conversations, I also, together. had things the think Charlie, all some think about we came of get about think I and talked and our tweaks so And those needed And and to had China structure it's I we make

out no therefore resources, what all those paid will for all deal TCL with customers, figure is discussions they well to other will or think or bode that hey, good just from with different we're than be and say, did Chinese able with and ZTE, you're it's I we know whoever, so what always a them, are Xiaomi people getting they talking ZTE, asking to good on what by when we And front.

is arrangement, other Google more that side where people of platform, something on this have the eVance CE and exposure get different together other we that began to partnering first I licensors pools type we the idea more think a explore with things. is together to of with

do they becoming portfolio. don't that really because what's for a portfolio, it a the that's get greater and licensee, the value at I that what's for you value it's to day. of basis how made into available it's can, package build friction of kind way to deals is think they the a the there don't on value less so whole, care so this the for the end gets allocated What's like and

be. that. makes we the future So, the leverage agreements an disposal at that approach our it's will done, to when more we to license frankly tools get definitely it have And better, sense do it the will in

Anyhow by their of intellectual company evaluate I'd a I to think deals. obviously property mentioned very ability Google, terms strong in

of, what should they've and the I by I very this stack strong a in think always statement them patents overall a on in like. of terms they look think think had is voice terms

think all good. I it's So,

Charles Anderson

on and whole then portfolio fee what it it And going Thanks. a Google on I be their side? then both would follow-up, as will just devices and are cover then deals your does end curious also deal fixed the to Great. cover those

William Merritt

Yes.

ZTE has and So was to no, fixed a sorry, is… I'm I'm sorry, say to I the there it Google, going element

Richard Brezski

was element has and a it a also going the I it variable. to has to ZTE say fixed Yes.

William Merritt

Yes, I'm think platforms respect to with royalty can't type fixed to be specific tend price, that platforms to But, they sorry not And tend be correct. platform. and more when deals. about you talk about with are about through we that's generally, deals done only pools this they running

Charles Anderson

Okay. end Bill? you speak of And Google to side, coverage can devices then on

William Merritt

we I actually if know that. don't disclosed

I XX-Q So, whatever actually be mean I'm I mean, XX-Q, say. this we in have in all sorry, we one in can the X-K would K, the on

Charles Anderson

Thanks much. enough. Fair so Okay.

Operator

question with Searle Scott Your comes from Capital. Roth next

Scott Searle

my morning. to getting of these was good credits Hey, Thanks ends just the of follow line. contra licensees for taking Hey, Rich on quickly cost Congrats want R&D question. the tax clarify that on how it in reflected being front, item, terms in third of just is I the up some across some to quarter? the goal correct up a

called you then And some I of the of the million in items, quarter? fourth to away want I think $X.X correct, the items, one-time out is fully that for normalizing just is one-time that terms go normalize OpEx in

Richard Brezski

credits, referring are we're the how start utilize credits, can Yeah, here to kinds those kind tax it that so the particular credits. largely as There to on goes tax different let's expense a contra of there. are treated and you

expected in increasing this So, benefit case reduces this tax the by expense. credits

expect in June integration Yeah, just cost acquisition We still that team is items. to items them from ongoing. is one-time continue the of still, of that closed one-time integration do and the certainly on the having to component some respect of a level we Technicolor With out. call research

Scott Searle

just fourth you. current the that. into We for overall all know of time? Got the at the adjusted will be up But OpEx magnitude sequentially don't quarter

Richard Brezski

my increase. that an to expectation see now, is overall Right

Scott Searle

Okay, then got And you. over. moving

sequentially on quick you follow-ups if royalty color bit guys of I down the was Just rich a other per unit in quarter. a on that. wondering provide could little couple was of

And and Google to was deferred big post quarter. quarter, ZTE in then up closed the the just clarify revenue I think

cycle So Is of correct? I'm larger assuming that customers. payment is your just normal that of the one

Richard Brezski

evenly so the through in payments see you'll that collected course think kind the speaks addresses flow forth, And in Yeah, and across all last we earlier I this I burn cash necessarily have of the we part so look detail we question. of of think and did it don't to, year, year quarter. cash quarters you if some collect other that your cash the

consumer units, unit history per lot the we're year the the our has We there the there in estimating. we're on probably legacy same seeing On a throughout of what the do business. electronics have side been per frankly as don't variability that and most we being

bit we're disadvantaged then So estimates forecast. ability there, to different we in couple our credit and gave little comparatively our true-ups. more that's of Perhaps, a seasonality caused a in to there's

out that's being probably So time. over for we I think will the where But that are smooth at. time

Scott Searle

if And for front, you. Google I I'm not Got then it, was it sure missed both and the on HEVC. just wireless

just you're approach, to, well in terms to on understand So as formal And going to it a I'm terms eVance how Rec in clarify of platform is the front going video actually of both. across work of is kind then how JV to Rev on the that front? trying just

William Merritt

Okay. I we've disclose. we think what On Google, can disclosed

question is second eVance. So, and the around

Scott Searle

I'm approach that, JV it No, like Google, a Google concerted with licensors. is, to terms that the established and it in you go is effort okay. the was potential has that sounds formal other sorry But been after used to approach

William Merritt

Yeah.

different do can So ways, you right. it

then a own separate pools corporate little its sometimes So have pool is actually, can you structure.

may a association You companies. of but platforms, an is of just be could have companies, it's association fixed which

doing can sort and traction is licensing others the, bilateral some model actually ad of in that go of sort static market, partnerships we for and in that a to very this getting hoc now You what have doing the see I been customer reasons flexibility the of a a we've gave. is approach what

be it individual, and lot avoid you them. can it just larger D, best to to because licensed the therefore - a benefits between of go nature it because approach with as E, they of and any create F a better, it's again of may companies and allocate at valuations So, it sometimes, is look can company B a it individual you way portfolios particular allows efficient, is flexible partnership more to individual already always C the licensee, folks sometimes A, well portfolio,

So But it's that think new it's a and use it can style one like I it's, I think often. like we others hopefully we do more of licensing.

Scott Searle

to some we to a terms catch-up the I that Got gears see you. but of just with how for lastly is, a clarify, ZTE negotiations like second, flexibility will payments sounds And you just the there of current in is shifting also there senses lot in want approach ZTE. quarter,

- starters catch-up for of in to terms paying be paid to payments all they're of going those the there catch So, in is period be will fourth an quarter extended is or of up? where somewhat

Richard Brezski

Yes.

say what expectations on specific revenue structure think can't payment I for the quarter. things I of on So be when will paid, in I'd non-recurring into guidance did some we provide there terms overall fourth details is, but get the the

of So, we at things, of have you revenue least on land. an side the where idea expect to

Scott Searle

that, with Got have you you. quantified In Rich? well. benefit litigation But as get reduced you also ZTE, a

Richard Brezski

figure the exactly terms part No, changes the the and in my front we of be being litigation expect out trying remarks of on to QX one that QX QX. more was important where of we're that is to

Scott Searle

lastly on that. comment the portfolio the video terms in of relative licensed curious both on as value, I'm of kind well kind you portfolio. could And you the if of on as mobile just ZTE,

of terms be electronics to areas wondering the versus expected Thanks. other royalty from is if If consumer component that domestic and there difference video exports? smartphones in there was is or any entailed

Kai Oistamo

with we them. So so -

if all, expect see the and not to than dominate on because relative on it it HEVC. important So insignificant that about wireless, but you wireless importance increase. from does we think way a forward, Clearly addition going part it's of first dominate

comment again, we we deal we and what more the of terms of the really in kind scope on have, what it what can't it cover. doesn't what said the then kind And than of scope, covers of

kind -- international the we then and And and the on commenting again the Chinese specifically domestic, both -- like but the can does of payments rate itself, cover rate we, on it sales. cover the on lastly,

Scott Searle

have one any I if could has of with Thanks. the maybe nice It just you've you disclosed And relationship? inbound sounds template like you. since dialogue he last. had or the ZTE, in a Got t changed flexibility said ZTE terms you

Kai Oistamo

it's I kind days. it's it mean a, early of week disclosed. little we bit of That's since a about

of So we it comment on multiple to to since have too be continue early then kind with will interactions that. companies, we had have but different actually

Scott Searle

you. Thank

William Merritt

are wanted Bill's for the discussing to past And past the emphasize I just was QX, expectations and sales comment Scott, I revenue limited. ZTE that we sales earlier when again release from just to wanted on know the

Scott Searle

Got Thank it. you.

William Merritt

Thanks, Scott.

Operator

Anja [Operators question instructions] Soderstrom Our comes [Sidoti Company] & next from

Anja Soderstrom

Hi, for taking my you question. everyone. Thank

William Merritt

Sure.

Anja Soderstrom

lot asked are a good questions already. a of - of lot So

to something going more And third that so the get I variable for just the some something was wanted it on lower or color to quarter, royalties specific that of for Taiwanese made licensee kind continue is that's quarter? the

William Merritt

on is as the larger in proportion changes well. over are think, There side. some consumer Taiwan the I Yeah, I electronics of the again as I year think the said before, variability

down the can probably, really saw say think little at all come that the you course over I year and of a that's point. I bit this

Anja Soderstrom

That was all you. Okay. me. Thank from

William Merritt

Thanks, Anja.

Operator

further time. queue We have in at questions no this the

Patrick Van de Wille

for us to joining you updating months. few this forward much, QX thanks everybody a with and Thanks Well, Travis. have again look quarter. good day. results We thank you a And very in

Operator

and Thank gentlemen. This you, ladies today's concludes teleconference.

You many now disconnect.

Patrick Van de Wille	Chief Communications Officer
William Merritt	President, Chief Executive Officer
Kai Oistamo	Chief Operating Officer
Richard Brezski	Chief Financial Officer
Eric Wold	B. Riley
Charlie Anderson	Dougherty & Company
Scott Searle	Roth Capital
Anja Soderstrom	Sidoti & Company

InterDigital (IDCC) 1 Nov 192019 Q3 Earnings call transcript