IDCC - Earnings call 3 2023 | InterDigital, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the InterDigital Third Quarter 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Raiford Garrabrant. Please go ahead.

Raiford Garrabrant

and InterDigital's everyone, Earnings Quarter to Call. Conference morning welcome Third to XXXX Good Garrabrant, Investor Head Raiford am I of Relations InterDigital. for and on me President today's are Rich CEO; Liren CFO. Brezski, With our Chen, call and our last quarter the up this for with highlights the then and quarter's offer company will Consistent some we about questions. open and call call,

and not we our remarks, regarding that of we call, this forward-looking and begin only I statements you are are Before as date will current our expectations, future performance plans of beliefs, in guarantees hereof. need to which make made remind the

Forward-looking statements differ cause materially risks by uncertainties to actual and results that statements. events contemplated are could subject to from such events results and forward-looking and

the annual other our Risk Factors and risks These sections report in our Form in XXXX XX-K SEC and filings. uncertainties include described on of those

contain our financial most to today's to Investor in included GAAP addition, Reconciliations In of comparable is which Relations measures directly references may financial section these website. the on our available of Financial Tracker, presentation the Metrics are non-GAAP measures non-GAAP measures. financial

of care us, will call over turn taken to Liren. that With the I

Lawrence Chen

supported very everyone. quarter Thank was you, This joining for all another of execution outstanding morning, us Raiford, our today. for Thanks across and good company, aspects by business. strong our

that receive and portfolio report. signed pace pipeline third-party from record-setting our had on We in recurring new our our by our of agreements innovation leadership have leadership, industry revenue, leading XG build our license X strong expanded a base of acknowledgment expanding patent inventors

$XXX was our a Revenue with the results. million, quarter XX% start highlights up from year-over-year. financial I'll few for

CE was XX% was revenue year-over-year. up our and licensing IoT revenue licensing up Smartphone XX% year-over-year, Our and

almost up XXX% net income $XX million, Our was year-over-year.

are This I'll program grow and green $XX have financial to ever increase technologies about to strong more created we demonstrate a in was let industries. results our section. increasingly his million, and year-over-year. program number our smartphone an EBITDA discuss CN-IoT the important demonstrate momentum more than of adjusted continued details Rich how XX% connected of Our licensing

new catch-up HEVC Lenovo license technologies smartphones Under a compression recurring past PCs. this the revenue and signed a going we devices, our in received and multiyear September, agreement, compression of both Lenovo, our licensing, technology. our late electronic consumer covering for forward as with royalty-bearing such use payment and our In incorporates HEVC programs. both IoT video and we for new smartphone licensing video CE

streaming disputes we with and The Together agreement HEVC latest to a another agreement cover resolve set-top litigation has the remain agreement, them. front, to of key in with the as licensing with QX, and end, licensing the and video the company's on video These we our our one to brought Lenovo to validation one portfolio largest an our cloud Humax technologies of as the new devices this is as technologies of as highest to boxes. opportunity committed HEVC related Staying our license with video what applicable license of to signed in Lenovo HEVC rest CE also looking forward IoT greenfield such and and newer as codec. services. smartphones, are other VVC well we large quality see the the

time. believe third XG to rates. related platform recently patent XG momentum, twice increased We the manufacturers, BMW adoption Mercedes-Benz value look our are original Avanci for the XG automobile to XG the increasing Due connected cars automobile both became of licensed and the the XG founding from grow revenue rates royalty will XG. the with roughly as member up of XG a success pool. quarter, over we build patent Adding our of licensing to the platform to we In

is the of progress a to strong latest the to for set arbitration end of on determination our summer track in final are and on hearing based receive smartphone date we program continue Samsung XXXX. year, towards next the our with make case We schedule,

agreed a to the determined already the Samsung As terms reminder, portfolio license starting a X, final arbitration. January be to has of through take license due our XXXX, with to

said many times the have for company assets people. valuable our our we As before, most are

key We of some in the development the best innovators have world's and and other video standards of wireless technologies.

body The wireless industry, XXX in Diana leadership leader engineer, broad RANX within than support of the by XG RANX working Interdigital of was in wireless technologies. group in received responsible across her chair the as development. Diana most Recently, highlighted leadership strong election our future space and the XG to critical cellular one standard status cellular chair election, cellular the the Pani, underlying our standard companies XGPP, for is more from positions XGPP. a senior In

also with Diana evolution XG We to is the woman elected XG be a introduction that first the critical pride to take at post advanced. the point in great of

our that standard Her across and technologies. XGPP XXX multiple than one wireless more for organizations engineer role within is development leadership video hold positions of

believe also This a new confirmed the time and assets that cases quality also belief invention quantity are In was patent our milestone applications. realizing the excellent for exceeding the analysis, quarter than when an of top on cellular which our year further This at The and portfolio creation. well-known we for confirms in the position record strength companies us recently new ahead our by to a portfolio more for XX,XXX achieved are analysis the XG from a It multiple in recognizes and in portfolios will QX, we measures innovation. we portfolios highest new track pending of use an cellular our five drive of XG ever now we LexisNexis. InterDigital as both having advance our XG space. from innovators was from world, patents of value patent ranking new for with XXX granted one important our invention filings,

kind could we do enable we future XG the of that in the technologies with to efforts University Recently, to another have is research partnership our This in ecosystem in and explore wireless early-stage Spain announced enable space. and broader network. example of wireless India research

positioned the space, research our on and we XG to across for our fundamental growth. wireless are look the In long-term our additional excellent our ongoing to in technology long-term pipeline and I innovation summary, As ideally third between XG beyond. in business at momentum an build we performance and portfolio our in focus delivered and for business quarter continue

in With that, over numbers I'll to talk the hand detail. to Rich you through more

Richard J. Brezski

QX, primarily Thanks, stand-alone adjusted ever earnings range. guidance end EBITDA license largest to we've the another HEVC both the above in we performance of revenue. excellent upside all share result were our of which diluted and with drove report high and Liren. per well signed, I'm delivered revenue, excited that the recurring This to is that catch-up

consistent and combined recurring and revenue for XX% with support our strong IoT. of for up year-over-year, revenue the by business. revenue double-digit continued revenue vectors increased results of Total CE long-term our IoT margins. Year-to-date, demonstrates These recurring delivering CE growth highlighted and growth XX% growth objective is in multiple

As Liren smartphones and license mentioned, both PCs. HEVC covers the

$XX for have revenue The Lenovo year. of including of this per revenue catch-up Lenovo over first pushed QX, infringement. contribution recognized from million $XXX significant a over annualized our We from from year to $XX million the recurring million in with QX and prior coming IoT recurring CE X quarters

for mentioned, we greenfield license forward, smartphones and believe highlights its the HEVC devices to this and beyond cloud license video opportunity what demonstrates Liren quality our is a of services. video As looking relevance streaming compression technology,

flow with from flow and cash in flow $XXX in million. operations extremely strong Cash excess was QX free cash of both

can cash to customer As due flow free we payments, also our we EBITDA. why of noted timing in fluctuate published the the which is past, quarter-to-quarter, adjusted

$XX of increased increased line for in EBITDA XX% XX year-over-year EBITDA adjusted quarter our the with year-over-year, adjusted to while million goal. long-term Our our points XX%, margin

for increasing brings in regular by to dividend shares capital repurchasing for year. by our to first, the October; that the QX, the over $XX XXX,XXX $XXX quarter $XX of reduction from by plus continue beginning return million We almost a month of the of million of XX% XX% XX second, to outstanding year-to-date our in million, October almost including this XXX,XXX cash another through of in shares return shareholders and shares

the decade, by in over been shareholders. billion returning responsible past we've to cash Over stewards $X.X

I'll adjusted around per finally, And of $XXX to an million XX%. uncertain. driving of that we of of remind Furthermore, QX $X.XX off EBITDA $X.XX. stock. with inherently earnings forward On to recurring you our that expect based to revenue $XX signed is about is QX, margin million, revenues GAAP operating since agreements expenses diluted expect license share we timing guidance of repurchase about to Looking we continue expect basis, the contracts date to will QX be

I'll that, to new it upside our million of device licenses a Longer products $XXX margin adjusted and on additional XX% sustain term, from recurring licensing to from back revenue services. annual and EBITDA With with goal remains Raiford. achieve turn

Raiford Garrabrant

ready this we questions. At operator, point, Rich. are Thanks, take to

Operator

As ROTH MKM. Instructions] your for from [Operator comes from Scott, is ask line first it open, please Searle your the you. your of question. question, Scott Thank line

Scott Searle

front also end as final Nice royalty latest while and for arbitration, now the heard quarter. it's quickly, that the well HEVC know related the visibility clarify, royalty line of like ongoing determination I to to side. recurring for receive, And rates the the with now I'd I'm everything that issues a been that on in agreement on of ongoing fixed wanted in but I not wrapped Samsung them with mix some correct? front. like would little sure that's has job you the clarify outstanding to I'm to I up time with there. were agreement. baseline smartphones, next sounds which payments on love on prior are a Is if there this bit interpreting Lenovo, concerns it Rich, the there that the was consistent of amount issues fee Liren. been no settled, and of between And have year, terms sounds

Raiford Garrabrant

Yes.

your let question. me on Scott, So start first

in remind that as You tell the I'll revenue a figure revenue fee QX. for percentage XX%. I'll do fee you Fixed our asked revenue. about disclose and metrics, is is -- recurring what we fixed of And you

Lawrence Chen

Liren. is Scott, this

Lenovo question. Let me take on the

PC so HEVC we both is covering today new that's have the announced And smartphone. deal technology to applied the the our and

as covering we -- this decision and end have agreement year, as as technology. goes from U.K. that pursuing implementation the also the that court we remember, patents decision court are until well technologies XG, portfolio valuable cellular of December other the technology, you pattern our as XG XG in the from As such WiFi have XXXX. that's meantime, benefited core In by values XX, they

few new with of the part the moving are are parts, pleased really we signed those but deal have we by So them.

So Samsung they on we case their on issue call here; management we what also, had arbitration, the last arbitrators touched have panel earnings the we meeting. on in this and already frankly, X have the disclosed the board

working, producing hearing to next So a year has therefore, will And the they few parties for be documents quite and set of arbitrators consider. summer already will panel XXXX. both the been

expect hearing, after So of the we next do before end year. a decision

revenue So I'll we absolutely comment little the are Rich on and let a bit. just recognition pace on

Richard J. Brezski

sorry, could the your I'm the rev you question Yes. just And Scott, of last repeat on rec? part

Scott Searle

and X follow-up No, the back I starting think I Then like you then accelerate. that. It the all I'll parts looks CE get answered to maybe of queue. in

You had results good quarter. this

qualitatively $XXX You've On some $XX-plus that momentum. million wonder to rate. bought now Liren, million run We're you've ramping so. was how talk a about is at continuing Technicolor of pipeline that build been where a was bigger could I know talked about number I or if up. you

using to kind streaming opportunity cloud. Or that of start referring on could point provide opportunity indirectly sure comments you to And on you thought the referred Is or video one I'm we you're not model. HEVC forward agreements to accelerating? I in patents to And on some your of that this see and line guys otherwise services opportunity the on streaming time related that I'm providers? if sure earlier, where going license color any a made also not licensing the with agreement for you if the if that? clarification

Lawrence Chen

Scott, me Yes. let take here. the question

million $XXX agree the other we the accelerating as case remain momentum cash-up done be committed But devices. revenue now, the CE the recognizing CE payment with is in in and additional, But your of at also we our here. Lenovo assessment recurring to that opportunity. for and on as we IoT case-by-case will So over we have

top So million be that $XXX will on the revenue. recurring of

deal deals quarter, CE [indiscernible] in X for Regarding HEVC signed one new we and comments my earlier the this for Lenovo. have

is The one set-top that's boxes. covering Humax a other deal

that put a So program we device CE that's still deal. here. also And under the

a all for But not have which on. that's over very as and that AVX So there's services. online before, have streaming for our video as VPX, opportunity, we're It's that the believe large delivered to we and very we technology, to and from and time. VVC, a in important on. we implementations streaming try to Working very we we the touched have get the alternative very define will recognition technology believe that's strong and We on hard frankly, greenfield value service, other HEVC we IP industry

Scott Searle

Great. queue. the Thanks get so much. in I'll back

Operator

right. next Tal And comes Liani All America. next question. moment One line for it of from of the your for your from Bank question,

Tal Liani

touch Yes. again in question first you about on smartphone Can the this our your I is And -- drivers what financials. the on on elaborate EBITDA quarter. free strongly and on double-click just there? numbers. you cash also drove to strength? margins generation have quarter, strength Can you flow the summarize lastly, mind outperformed the the Would

Richard J. Brezski

Yes.

Tal. this, take can I So

your related thread all there's X of question. aspects and -- So to some

EBITDA that the margins, business. our on within speaks really operating it to exists the leverage first The

top drive the really costs as licenses agreement. Lenovo-HEVC did about, any this new with incremental that. performance So as we with Liren on principally quarter There's line spoke we associated the the not

achieve So margin bottom drop we that's to our margin. growth XX% not just can much a there's and term. a necessary in because we why we to long drives say as get That's At up view. think million, expense $XXX line maintain that that

flow. think -- flow -- And a kind or we to bit year at the or we in the expected in increase quarter as a the But agreements customer some able of beginning speaks signed, to the little Free cash referred guidance margin the beginning correlates to of in, cash coming the large we quarter. receipts in -- over also with I There, receipt. we quarter, of with time. the the our then And of that we're well. the it's cash

That to codec, only it applies import agreements. to is the to also also apply the video new electronics. And it Lenovo-HEVC So doesn't related but smartphone. deal, consumer

is there So allocation there smartphone. to an

Operator

your line One comes from it question, moment Jefferies. next for the your next question. Lipacis And Mark from for of

Mark Lipacis

On the out? play IP, the timing? about is is have quantify size that you for that then cloud Or Is that you an of like would Or a new there or market the streaming And follow-up. that a be category the CE category a in talk the does where licensing, providers, would service to -- -- plays as as play you? I in how ability that and the different And IoT? out? can

Lawrence Chen

this Yes. is Liren. Mark,

a Technicolor and So And frankly, valuable we company. to the with years our we highlight And we forward. the we our industry, with call largest large mentioned of we the going acquisition development probably online we greenfield engineers, services, as call innovation and in interdigital holding combined been of IP believe in most the the as the standard done have have believe this codec one continue remember, we now. we and so prior for working one well and the streaming drive very cloud service have on for is multiple

believe really in well we are that positioned field. we So

of obviously, we alone overall that the third-party known. streaming market annual well be -- size our the opportunity be about by service report, the is on time of to terms the And here, of XXXX will very in same based for industry market smartphone Regarding overall revenue. as size the

on more category get for time, program, before do part CE is it to, way, And the This make set side. is more number device this yet, it. put time to the of and because not the have primarily CE the we we we by clarity currently frankly, it believe want We we and us. progress brand-new licensing our not progress and a revenue focusing is a a target program, grow. once on over will be will establish IoT on new still do This program, for so take target

Richard J. Brezski

$XXX the the not And additive I'll just to include this target add million. opportunity. therefore, does device That's that, $XXX million

Mark Lipacis

All a right. follow-up, And That's very if I may. helpful.

see on and the about balance on sheet from that capital bump forward about to have you can nice talk like or about the can here? how just sheet the allocation, your about going that you you think dividend you talk balance want the business? buybacks. cash to On have talk to And the to Rich, -- the run M&A to

Richard J. Brezski

Yes.

we So thing, here more to cash. than but billion returned cash cash million started $X cash business, sitting over question. of Mark, we're need. a billion with with in over We've good year the in shareholders We great is $XXX still of the and flow generation $X which still because the

that's going to case expect returning be point, I of $XX continue aggressive At through we something So think, our every quarter be capital. and buybacks to this capital to update provide end and And we're the we're forward. authorization authorization. room, to of continue I so shareholders, with that under on in looking to -- there's it's the the -- lot October. the million something an the But return dividend a at

always for and cellular of capabilities not business to respect strong our including With It's have because in all the something it's we we're opportunities. we OTT. the categories, feel on. dependent aspects WiFi we're very research video, in-house M&A, and not in all model, something that But that looking

more opportunistic. it's So

Mark Lipacis

now industry? the -- of like a the you by if can just How And the considered that may. question, you about of report? or IP five being can significance something during that cite litigation? -- Got like -- litigation? XG that cited that -- talk in you. LexisNexis during was about as piece player. you a you report? Is Liren, significance of Is final negotiations top can a Is an I that authority Is evidence of what talked that is talk

Lawrence Chen

who quantity report XG, as patents X people many XXX the have combining in LexisNexis, both at did standard there's running the to how they from have how for report many the companies the do families, about they those is by all patent their which is well ranked of is potential -- XG And new a who InterDigital quite there's industry, looked and that looked what top well close to patents. declared quality those yes, process. comprehensive as at Mark, patents have And holders the XGPP they as algorithm, Yes. issuance in they hold a factors.

on. as though to this value and that overall the different in always, report, in do And industry frankly of during do report there's report, level demonstrate even as we acknowledge of different can far frankly, our statutory any licensees the nuances leadership find this properly We comment it our in frankly a usefulness we a number for people ways. negotiation,

have report, them of third-party portfolio. our wanted terms evidence demonstrated to gave if proof demonstrated We research. pedigree of overall but litigations, frankly, report. also them much of much more We of the various of We also in people in-depth deeper we, some use in one them our but this they regarding to, and frankly, those is also And process. can we're things type point bringing get

Operator

it Thank you. And for line Sidoti. Soderstrom of from the next from comes the Anja question,

Anja Soderstrom

Most to you already. opportunity, you terms of for you have in that that in noted And I'm do the taking auto them build of answered member up? you terms of my expect curious question. But Avanci. just now opportunity? of Thank are been how that you're Where founding

Lawrence Chen

Okay.

quarter, we how developed And as XG. more they we car that automobile, to see are the the founding the of by have the we So the a for XG over Avanci XX% program program, were has under than quite and reported prior for excited in the years. are licensed connected we -- member way,

be member So and equally we now been program are founding for XG program. launched, XG excited has a to the

XG higher remarks, significantly said for as prepared Connected my in than So XG. is I the Car value

the overall XG therefore, is rate. So rate doubling the about

higher mind the that we connected. as benefit year all dynamic. scheduled regarding cars to as But of more device and half will but cars about value keep now, per connected, in a that sold increase new be every are more that's from So essentially

XG the also increase. XG the is and that will growing XX% roughly So Connect year-over-year therefore, Car then of portion believe the adoption I the of connectivity

next So X over factor to feel us XX compounding years. X that those good a probably we gives the parameters, very driving

Operator

line next question, of Bhatia your Arjun For Blair. the from William comes it from

Arjun Bhatia

for for cross-sell have room kind Liren, interesting smartphone at CE. of your is contracts, and some to The deal there get smartphone do Lenovo you. you per because a you maybe what se is video of But agreements customers of IoT those both imagine to When and of are these that their signed? have potential CE, getting well. smartphone you portfolio. lot both for those licensing in sign on as to in where agreements I discussions a look

Lawrence Chen

Yes.

said So, yes, me on part. you first the what comment let Yes. -- the

technology So as the primarily their Lenovo we their apply to smartphone. is the HEVC which deal PC, both the signed to CE, as for well

So have a case-by-case regarding other the primarily vendors some of here, frankly, devices. it's vendors, because somewhat smartphone space

our try technology other technology In here, well we be, may may cellular will IoT. and of have be connected of valuation, video WiFi those who there mix smartphone. may some some for be some the context them cellular of them for vendors different without HEVC to may both But a them of frankly, get products on our as and be as cellular-based,

So assets we've those highlight they have bring them to all frankly, from our been of to been most technology. of are we how paid try and all trying get benefiting and negotiating,

Arjun Bhatia

that on And it. quarter the HEVC, with the them? does any impact Got going have settlement you other outstanding litigation Lenovo have with the for that this Okay.

Lawrence Chen

Yes.

part dismissed HEVC the as mentioned the we we of So have related license, HEVC litigation.

with patents cases other current cellular an there's have we U.K. pending pending expires do as kick our litigation are namely, that filed in we frankly in after have the and our ITC under And in the there However, case court XX-Q. implementation will Germany disclosed them decision. license covering

HEVC Samsung our And portfolio, the mobile the also that related to CE when a want have I very Lenovo. sort useful arbitration. on add other with believe licensees So effect believe here, patent do because that we negotiate more will our that's to a value beneficial we one for But have is thing side. we established and as we of for both

Richard J. Brezski

over have on year, the only of is revenue which that we this recognizing Arjun, portion And we first rest and received as are Okay. that [ and reminder appeal, that the add has of U.K. deferred the queue for June judgment the ] of of a noted 'XX. just scheduled outcome been pending the conservatively half the a I'll we

So the of in sometime that 'XX. expect second to we'd be half resolved

Arjun Bhatia

a just Okay. bit Got kind for thinking looking Can you're last et manufacturers, some smartphone near-term me, about other it. little you're talk the opportunity about And one Is how couple Oppo, Liren. just catalyst at of you that a or of cetera? Vivo, that something the with Chinese a of years out?

Lawrence Chen

Yes.

continuing progress So lot make to negotiations. we are a of on those

have progress largest in Lenovo Oppo vendors As also about have making from the unlicensed lot filing. XX-Q before, jurisdictions, our we We on and but particular this smartphone talked Lenovo. call details the and we multiple this disclosed on litigation we are Oppo, are disclosed Vivo a on here,

Regarding with Vivo, negotiate we to continue them.

we As said of filed now, multiple always And against any times, bilateral them yet. as we prefer negotiation. we not lawsuits have

Operator

Scott of follow-up And line the right. from coming question we have a Searle. All

Scott Searle

follow-ups, Rich. quick Two

was a front, the it this elevated On little again litigation quarter.

we implied seems to Will to you the that you're the well? use wondering is It got and be Liren, pool Or going that guidance for as your XG Lenovo Avanci directly? resolved, that now world? the property I'm the that looking contributed the for Avanci IoT your rest pool what to continues. the with autos, to of in into a be on. to You front, intellectual license do throwing now going for plan on XXXX? lot total is quarter, like down fourth start come But that expect And in the

Lawrence Chen

Yes.

the forward with good mushroom cases accelerated now thing in as and other start ring-fenced litigation but 'XX, question. was forward it's Samsung I'll little in we bit of that going the a arbitration. it's and about a into elevated -- so jurisdictions, on the venues. is The Scott, Yes, of bit to it arbitration theme. activity kind a quarter had the other and doesn't we So will both But some move and to be continue into little kind compared

in the got have arena some of in but had, the Lenovo. matters course, quarter with HEVC action that Lenovo as also We other resolved,

at 'XX, So just stand OpEx I'm on make this call not to QX going the a with we'll guidance. point

Richard J. Brezski

are really IoT well collected discussed Yes. before It on case, as use we use model pool pursuing frankly are licensing as Scott, regarding already I model. different direct licensing, as the depends IoT both cases have here. on

are in some the direct more value, also generally are for of different the we direct high we pool open use higher model cases. for preferenced through negotiation, negotiations, So dollar

Operator

I Presenters questions. And over Executive Officer, Liren back further our closing Chen, turn Chief like I right. see All any would don't conference to remarks. to the for

Lawrence Chen

operator. Thank you,

we partners licensees. well as Before and our contribution to and we quarter. for as our forward updating our InterDigital employees progress you I'd close, thank on you look their our call dedication to today, many next and like everyone Thank to who joined to

Operator

And you concludes you conference you. Thank this today's Thank call. for participating, and may now disconnect.

InterDigital (IDCC) 2 Nov 232023 Q3 Earnings call transcript