InterDigital (IDCC) 4 Aug 222022 Q2 Earnings call transcript

Good morning, and thank you for standing by. Welcome to the Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. to Richard conference Lloyd. like first to now today, speaker would hand over the your I Please ahead. go

open Good company morning Lloyd, will call, to Liren Brezski, quarter the with XXXX our everyone about in offer Chen, and and welcome conference me for and questions. the with CEO; quarter I some to our call. CFO. President call highlights am and call Consistent up we Richard today's Communications then and and earnings Director the are InterDigital's Rich second quarter's last

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

subject and that by Forward-looking described include on and our report results to actual results materially uncertainties, Form quarterly on risks to contemplated in second and in Form XXXX Risk events sections risks XX-K, quarter and These cause uncertainties SEC and events XXXX filings. statements. XX-Q, other of could differ our from Factors our Annual those Report the forward-looking statements such are

care Relations measures comparable of measures. in today's references to Liren. the addition, contain non-GAAP I section With measures tracker, to turn of, to financial taken GAAP will on our directly financial Investor non-GAAP our of available In most financial the may measures these the included financial call presentation Reconciliations are is that over which website.

and of this entered strong the has built We And particularly QX, both into everyone. income revenue first XXXX second all make We the consumer and InterDigital's and devices into a our significantly and In rings revenue fee-bearing In increased progress quarter, Amazon's covering patents. In business. in increased year-over-year million. license $XXX the second net We made growth we continued addition on core strengthened half you, the revenue leadership saw to I'm parts of to our multi-year, Thank excellent total the quarter, to Amazon in and of our a balance of significant we electronic momentum team. good sequential non-inclusive, a basis. we sheet worldwide, continued XX% across year. year-over-year market. pleased, that outside smartphone we morning, major our Richard, with our the

R&D announcement joined translating a footprint was of recent to Rajesh world-class Dr. background years he Qualcomm, Corporate will keys spent InterDigital and ability the Rajesh a previously XX-fold of including improvement I'm also predecessor to than our $X.XX talent, share even more million and to our R&I while delivered the connectivity. we earnings that and innovator Rajesh our perfect to per leading from team XX has our that the new Along delighted critical you recent a talk with the at innovation. will of our value President he attract across the $XX doubling Head his drive Tirri. heights leadership some the lead that with our XXX of Rich has technology ambassador share. to build in in of a I'm record substantial per senior he cellular notable a financial a long-term as that cover where AI more performance adjusted the with technical and let success greater will and CTO. XG and research increase profitability range of one of application in Henry to to Dr. continue Pankaj has the as We technologies. and to through our been we with highlights patents His and a He detail, Vice joined He's quarter. our innovation. track EBITDA is roles. strong fit both in worldwide our drove patented confident Senior duration XG Starting I other breakthroughs in named has into and leadership I wireless, us

and Wi-Fi, our standard. opportunities from technologies [Technical Video. in technology more and AI research (ph) Difficulty] many key as opportunities. as a devices Our and as contributor have covers that product growth WiFi utilize Meanwhile, the in the CE core consumer that such short, that to innovation building multiple use We years, of growing existing array and valuable, In HEVC has position relationships new verticals drive formidable explore technologies, and horizontal to even our immersive we continue Video be as more both all overuse Smartphones built leading continue license both to strength VVC like experience we In pipeline, video learning. this recent Video excellent our of cellular, and technologies are IP in become horizontal market. our the machine across well them. these and

the of for foundation wireless awarding the senior second an prestigious also our portfolio SEPs IEEE, Engineers, the generational team wireless, the strong numbers to engineer cellular multi-mode for We work base define grow applications. quarter and has more second achieved superb mobile now our of than Key in incredibly In Electrical of XG this rest giving applications in patents our by of Benjamin This video connectivity of In for and have portfolio, now growth been and our enabled and him in XX,XXX in patents X,XXX which stand decade. his quarter, Institute impressive continue recognized at XG, engineers. Award. by Electronic Franklin one approximately device that us will

and his IEEE, recognized incredible intelligence artificial foundational recently that both learning a cases speed Staying Chairperson millimeter machine that and was Topic its Wi-Fi. Interest Specifically, as on which Group, for to technology in identifying is is contribution enables appointed XG's latency. use for another groundbreaking was wave, engineer he ultra-low InterDigital and of responsible the for exploring the

in research not our by -- the to digital research of with come. in new we technology. and innovation content experiences support especially such Institute many France's to being cutting firmly today's for areas I'm efforts not new for edge continue Inria, as June, innovations across innovation research SR announced leading proceed focused only partnership future, engineers to will devices, This define initiative the and new While to but this enable are would Metaverse. support shape will will in science that the we excited years technology and reap the innovation in and that only in the France on consumption implemented rewards media scientific connectivity explore technologies, also in

strength our technology. industries. closed manufacturer with and InterDigital's Zebra Technologies our innovation, innovation increasing used the covering licensing our devices to quarter, Amazon key value an believe applicability broad addition This foundational record manufacturing, us demonstrates portfolio XG, we Wi-Fi to new front, also patent XG the portfolio license patent In banking, and second of the renew track industry device our and in are and licensing ones. of the the Zebra's sign smartphones. deal On position healthcare, mentioned transportation, and in I earlier, agreement other of well retail, agreement agreements additional we and beyond our

in to licensing and market translates XG summary, -- are innovation on our our platform innovator In an with Ford. we We licensing the GM in to considerable also partner, essential XG licensing performance in an licensed our our new our this where I'm connected almost connected be with enjoy time see our quarter now to new and platform our significant the adding. foundational sector standard of into creating and agreements. is deals underlines innovation auto core Through in is newer pleased and progress opportunity patents. exciting with licensing half that markets strong helping signed area, cars innovation This technologies

I the from IP we portfolio, the upcoming continue earnings that last will in of the trial the of to forward against remain integration our our and strength FRAND in UK case. of Lenovo. terms High activity, reiterate In message my quality confident merits call, the look our technology, to our our from we Court decision of the And

positive the USPTO DOJ withdraw and want On the on of recent front, a our highlight SEP and policy policy XXXX is development. I to statement, remedy licensing FRNAD that

the the decision as predictable the moved and U.S. not that innovation balance more direction while here, are factors the third the we in and has in such dispute As value belief our all our but and/or arrive getting details confirmed into Court's policy SEC do the over announcement of guide making. license SEP should

report. The how our InterDigital, our we excel. With I At the and you our a to second read which believe details it not more only environmental to sustainability that passionately how maximize report insures year's we this ESG how mitigate to the Rich. our world, quarter we needs our governance program, best and to our also it annual website. employees social I'd building but turn saw impact, also progress be practices our we and will contributes second over can corporate help technology release better our encourage found sustainable on all footprint, with report, in of that, to strive

Liren. Thanks,

quarter XX% we of in year-over-year to recurring increases $XXX both profitability, revenue. significant quarter million, total As over grew basis. $XXX Liren XXXX noted, strong second delivered with on and a revenue another million and revenue We sequential including

revenue In the combined While of IoT driven the begun CE, from $XX large CE, and auto, second also and recurring the million revenue represent mobile have in to record agreements, part see in growth Xiaomi recurring XXXX, had we and have over we markets, levels. growth, total almost from a $XX quarter including our such markets. markets Both as basis. million IoT on a these meaningful auto,

first a from million from the recurring markets, half comparable in For period the of about recognized representing revenue increase these XXXX. we of XXXX, XX% $XX

from to these continued strong we report While committed such are driving we growth. to revenue remain pleased markets,

This our have that expenses capabilities while expenses, actions $XX operating first compensation, is XXXX a excluding our almost million. results. our believe the in we basis, base. to the net improved lowering litigation we have stock-based see an and we half cost and can on of Moving year management benefits have our reduced reinvestment savings we annualized we from ago, made the already by On cost you initiated

heading increases to our share were the structure Moving marked rising debt during on capital experience to by became two into we inflation debt we debt net primarily proceeds period Similar the to volatile and are prior dilution it purposes. as which our per allocation, an we the entered a rates. into at that convertible refinance our used clear price to our interest The financings, for $XXX. from quarter new decision option second new we from made

approximately $XX common and second, buyback buyback to two-thirds of million old to concurrently stock. of our First, our debt,

so the the At guidance million and our quarter, $XX to Looking between revenue. in is range million. come revenue contracts, revenue comprised entire we on $XXX based only to point third forward currently is existing expect recurring of this

additional to the operating an On of development side, in costs the and we investments expenses related to expense ongoing $XX range will $XX expect million to research and litigation in uptick million. drive proceedings,

Finally, the tax rate I'll we in be million expenses of expect turn and an to to non-operating over that, and $X effective to of interest other range Richard. million XX%. $X back of expenses With comprised to the in XX% it range

open Thank Thank Liren. Operator, now for the call questions. you, Rich. you, we can

Thank we'll you. Sidoti. a Instructions] Soderstrom, conduct Thank this ahead. you. session. question-and-answer go Please time, [Operator Anja At

Your is open. line

Thank you for questions, progress. good and on taking my congrats

Anja. Thanks,

your little the economic environments all at have Is situation? bit given and if geopolitical all among a the and affecting your about changed discussions? that talk you maybe at -- counterparts Can sentiments

Yeah. Liren. Hi. Anja, this is

revenue in situations geopolitical primarily revenues the of turmoil fairly then Eastern, has And couple particular, But sensitive. been our understand in years, current the I economic of contract. due by COVID. last to supported in it's part the in fixed So our partially

shielded not much the that are the So the we But they very near-term some impacted role are renewal negotiating, in of play may major from the currently and of contract by are downturns our issues. largely some a discussion. turmoil we been

So we positioned. well are

been the geopolitical we On player, watching very here, carefully. global global a side the very, are so we have environment

still a deals striking have record, many in continent. across in been demonstrating fair multiple And so strong very track far, different windows we

carefully. very So, but we watching are

operating And made. what already you. of by do you net have? as Thank mentioned, expenses re-investments million $XX you were of remaining Rich, the Okay. reduced reinvestments kind And

Yeah.

continue. to So, been that reinvesting R&I expect we've primarily in we and

For associated but litigation a R&I led guidance the provided the the the moment, from reinvestments uptick bit next stick we matters. where ongoing an I've for I'll mentioned also with by to little quarter,

So third uptick to is that the quarter? isolated

The guidance. a uptick relates Yeah. That QX. quarter to third on the sequential versus being on basis

That you. was Thank you. me. all from Okay. Thank

Thanks, Anja.

question next Bank Jonathan Our from from of comes Eisenson America.

Your open. is ahead. line Go

Hey, my -- guys. for Thanks for the taking questions. thanks

OpEx your on is, want The visibility given operating guidance, margins sequentially. any first have to to if touch thing you seem that I for implied the decline

And and deals? ask wanted on I also you would just Thanks. Apple there? any to then the So updates have if color appreciate any Samsung

Sure, Jonathan. first I'll part. take the

are between -- So given revenue the our we is we our and to revenue that The drive see the last I our that a a not road investing just long-term in years is referring in question, investments related make and close association research. such expense in we R&I there a today because was down given to period. would that to operating period fundamental

cost So it's we in use granted we we've on with business because it. margin technology not effectively not already gross that much When associated so license, have past. variable really that XXX% permission new we're there's the to invented

to future is R&I this related So in drive quarter. the not growth, really to third upcoming uptick

second question. let of part that Liren the part. answer answers that hopefully the So I'll

Jonathan. Hey, Yeah.

since obviously, Apple always focusing have -- Apple years represents has first very aware on Samsung Apple Galaxy I actually this iPhone. it very before is for is and with licensee very worth important and very our of long-term negotiation, relationship. Apple of those XXXX this shift contract us the And of they expires it's And QX been licensing year. that agreement of been with for and of the has XX relationship the Samsung And think really before been renewing licensee shipped expires more year, than very, the Samsung first everyone end phone. quite end reminding us, the QX our a and contract that while. to Samsung we For their our contract

has they so, become lot feel Samsung a Obviously, more be our premium frankly much how even confident So concentration relationship market advanced, a the through their on also device. worldwide multiple in pretty devices of in based renewals the with the the major negotiation worth technology been about such world -- both there a happening. and with negotiation. important has will a here long-term We video have And has noting much current content the on our that higher it's adoption consumed XG driver being Apple connected sales. of

will of high-end more So better our use these and make devices technology.

it's they have them have degree, we to much us from that for worthwhile to remind how benefited obviously developed. So, everything

Got you. it. Thank

Yeah.

you, Thank Okay. Jonathan.

Our Liani question from Bank next of from comes America. Tal

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have really good a had I I that. repeat question for you, to

BMA. So too far you get from today end

apologize stock. I questions are if because green So to I'm new my cover the

be this on will guiding and So, grew both last you're year be and you sequentially decline the in about XQ, I a you guiding million, will sequential basis get talk which right, Can you for if year-over-year Can -- And year, about it sequentially. you're down seasonality? a XX%. basis. year-over-year down for talk $XX

we talk fluctuations? of later what quarterly color guidance. drives you downs, Thanks. Can So these any expect ups explicit -- fluctuations about talk can seasonality there about drives is to and in if growth? these what kind what on, And we don't of even no on kind

a to it. Tal. things I'd Yeah. of happy address question, No, good I’m to. Couple point it's

amortize the regarding variable are lot or a royalties because if volume unit that this first, customers from of maybe and revenue in published a of associated the financial over the also year-to-date on we agreement where our quarter we you quarter. seasonality sometimes that line -- basis in term fixed is But our shipped There's reporting the We exceptions. can XX% that and those fee fixed total then price The website. where is show term agreements for comes the price on quantum coming and and percentage you seasonality. us of not a the straight our over with from revenue our revenue agreements. of the pay on metrics, per they revenue fixed there revenue, And find the typically they

than mobile on is that the really fee. So coming the the only means majority maybe of revenue of is from quarter-to-quarter. that's exist. total a subject definitely that to the seasonality side the a variable does And the towards therefore is that's stable less amount The any base fixed fixed that fee, small there majority XX%

that's consumer a -- small is to a electronics maybe be the but component. it's and side, little overall where more there tends bit more On variable seasonality, more

there prior technology, partner as changes? agreements. a our revenue some where when driving past some recurring licensing mentioned agreements use what's I Amazon well basis, and breakout think sales others, So into our of Ford, that this from also some of sales as On they're for these to through sequential catching signed then and these we and with the about basically new up you entering we is the quarter, GM past of

we some signed that's signing of And is last significant so third licenses is as bunch of year-over-year, the year, it's that there the that renewed the terms quarter Incidentally, well. Great $XX going we So is the quarter-to-quarter. all recurring amount therefore, to business. lot can And to kind you of is last of we there midpoint, a current that changes million. we by last quarter and variable recognize quarter to what of adding of on quarter down the a from Xiaomi. third in sales we're of year everybody from it's is, new Xiaomi, small past the clear try agreements. the And step all The that function the $XXX driven -- And example And of year, relatively And growth, if this what meaningful was. past we're aspect expired delineate, in impact then so a had again maybe it's customers be what roughly not them, number X% think that number. are then final had side. expectations around some of -- them, left at look million, about changes?

a of on that year-to-year decline. basis drives So that some

Got it.

the industry slowdown there, is is to majority you not, to a business the lot have devices, weakening? still different per weakening And the reported about coming look historical your of devices less say, being have And because than if make Qualcomm, to vast handset device portion your history? they and Everyone is a and Qorvo of selling what you at what happens with reported. know is rather of Now you I of hey, revenues. want we -- -- fixed market? and model or talking you they majority the revenues. What's it is renegotiate our we're the or when agreement smartphone that question variable revenues tied is customers back the weakening industry XX% what now what's market the Do revenue

Liren. This Yeah. is Hey, Tal.

mentioned that as us So that, of vendor means the same What contract of so vast Rich under is our license fee pay during the contract. fixed agreement amount earlier, those term dollar agreements. majority a a smartphone is the year-after-year

their owner mean, I our customer So contracts. all

we for play regardless And market would. do goes right. get next the does you come renegotiate So that paid the contract, when if down have up we dynamic to whether or in

see five of contract. or projection projections, frankly be. look try forward-looking years how those already next market and be trying So will also We factored worth long-term frankly but at that to noting to are negotiate. make volume certain It's we in, third-party for significant a if those have actually they factors amount the will it's lost longer in a much next to the share expectation the contract

numbers. driving higher downs ups market. So is smartphone long-term and the for noting XX% have more hopefully XX% us not but that coverage of market. of But importantly currently shorter-term roughly some tough the in will Tal exactly be the worth of we the factored

short a time over should a XX% that’s to to relationship resolve XX% vendors grow penetration. period we about we handful we of into be market able see of So relatively here, after

gaining actually in amount of coverage bigger think my driver market I more will So vendors the be losing opinion some much than and vendors certain short-term, share.

that timing market inject delays current What's Chinese these you aspect weakening, -- as to where this are I in currently getting it the not does of help extra vendors paying? are vendors signing understand? it In the And mostly much contract, is contract China missing vendors as contract? in environment get could the the the

Yeah.

very we to different Motorola is And million vendors Realme again brands, major is as large who is And than which Oppo, then Oppo, and a one, somewhat among for. including then ships three just brand, OnePlus player And up of vendors. purchase markets over So Vivo, which vendors, the main devices the but our is XXX smaller largest of vendor through Oppo, have three the a per third in the still identified being major Lenovo, they very, sign are U.S. year. number next the one

So are Oppo. litigation and currently, Lenovo we in with

decide to new. determination also much Our we are and On for decision lawsuit the yet patent a Oppo. all filed are so relatively series money patent those Lenovo global jurisdictions And much has now. we a but because progress December is support of I to -- don't infringing litigation worldwide InterDigital worse, Oppo, are court actually called is as UK, parts How -- year earlier, the for of with us major worldwide numerical mentioned them. against report consist And on case litigation we there are of portfolio the damages. in have in they brand our cases against a last our whereas part three the scope. that waiting of base court also how we rate is out will trial

of global they these are like, case sold and China, Vivo, majority the in a phones vast being, And the negotiations. three markets actually those of earlier of reason to are say weakening outside how China Oppo are significant. outside significant the question the are I'll but China. back their all and much somewhat vendors very Lenovo, vendors. about, actually we say The So we really Lenovo not to talking impact impact, have

say is here. on So basis determined I really it's would global everything a

aside, but almost in finance. history agreement. and you Qualcomm milestone is education your is last history. covering since settle court Qualcomm lose or the out negotiate What's loses the typically of it -- In in there court? of question, major a Once last to court, decides decisions you based it it's always on lawyer with 'XXs Qualcomm The the the following second, But in eventually. the do an someone a rarely became I win case, goes Is you it been or a court my milestone court negotiations? major the I've once always

Tal. Hey, Yeah.

frankly negotiated the So that majority settled the cases a that vast also. are frankly or of InterDigital's correct you're experience before trial, been has

-- deals like bilateral bilateral and get we we done the negotiations. So Qualcomm, prefer negotiation of through most do

So data XX just point Since here. the QX agreements to new a of beginning try here. give last up year, end signed we of have the to

frankly So a large breaking agreements that's be had year number. very record I'll XX last And we signing year. a last new

once a a that But fair through without agreement file was the very are negotiation, to side bilateral of lengthy signed where after term pay all are negotiation simply other other at refuse many to we do a those, lawsuits. have that those paying. vendors So vast while generally, majority in a

we history noting IP lawsuit But the time, filed up agreement it enforce by worth go litigations, terms. before do and that every it's sometimes under FRAND to gets single our get to those we the case in our decision, rights to it's patent hard InterDigital, license goes trial settled we So it's case for sometimes a through really trial frankly of right, to case. go when court and whenever end say, have we a

track quite our in So record this strong. is

it. so Got much. Thanks you. Great. Thank

is question ROTH. next our So go Instructions] [Operator Tal. ahead. Scott, Scott questions, with from your Searle for you Thank

open. with line Your

won't I on that renewed Rich, anything questions. apologize opening couple I'm taking recently willingness for to stuff the of with got morning. or there agreement? late, I good in be a the renewal in guys the so ability was But expiration probably Liren terms wondering some for is of and on rehash I monologue. read you to wondering Thanks in an if Samsung readthrough your before call Qualcomm. their of of the fronts. in covered I negotiate you Hey,

Yeah. Hey, Scott. Liren. This is

added I years continued same it. agreement, to news So read renewing have their did agreement, existing about the more they that seven Samsung

it's think great great also negotiation. know do how will Samsung, And I for our a sure Qualcomm. development deal a really impact it's for not for that I

as continue Samsung are I long-term sign, relationship licensees relationship. think earlier, mentioned I an their licensors our we an and seeing that but So, very we long-term license that's encouraging definitely or that with And and encouraging have sign. as

quarter. that, And some the front, that technical front. not of video CE on I on you've guess current to sure quantify as And been I'm part building good. momentum or contribution the you Okay, did

Now macroeconomic overhang before? will, things the an opportunity with the of were you progressing the the or changing if any that with kind as they in term is customers of dialog, the near discussion,

part quarter. IoT $XX Scott. I'll mentioned out CE, Hey, Yeah. of said but we question. the in that in the first take revenue that We total million the didn't of quarter Yeah. in we and break and combination, it of auto, contributed million $XX revenue recurring

total figure across and the for represent us. we're traction those markets that So records both recurring and pleased by

in the of opportunities? video any slowdown Got types what's standpoint, or smartphones of when you some the And there or at forward end terms other and discussions you. going is particularly display Liren on going impact a from of larger markets macroeconomic in TVs look

Yeah. agreement our not see are fixed Scott, we general, do an fee agreement. agreement But case-by-case existing I here, obviously, the basis. for impact to a in they mean, it's new because really license

premium to in our they competing are the in low and devices. than mid-tier know tier based all on guys of IP see, who impacted we and Samsung. the are player report near-term players on is some is the You Apple the major focus a And the

of agreements it's -- leading generically, those very signed. And some significant it's -- others, -- the past brand and as our to long-term it. agreements Scott, TVs there's on but TV the getting say Regarding to component we're frankly, And really the hard also. you're vendor sales deal focus probably aware, are

really factor. it's relevant, is impact not it's the deciding -- So necessarily near-term a but

I any monetization if it I'm I'd your comments in had so thoughts take not, can Liren if of terms we offline. and hear lastly, not that And other you video Thanks if front? could. you. Got much. on sure opportunities. love to

describing looking earlier Video for and provide and was services identify here. this I technology specifically, into many, our in other is, leading technology patent many different we are those of are decades layers leading Technicolor comment video past devices, we thing acquisition, increasingly of one really smartphones, didn't I We and future. of Scott. becoming Video frankly also we'll in layer some ourselves space and the hopefully the involved agree did We devices and the through benefiting actively from connected several updates we more Yeah. developer our combined space. with But brought many into technology holders one relevant

Thanks much. so Great.

Thanks, Scott.

I'd Scott. like to for remarks. to now you, call Chen Liren turn the Thank closing back

Yeah. Hey, thanks, everyone.

off, I to Thank support all for today another of their summer. our and for just rest hope for employees thank to continued you Before enjoys sign I quarter. all everyone outstanding and contribution joining like us the the we shareholders the their

Thank participation you the conference. for may program and your now in disconnect. today's you concludes This