InterDigital (IDCC) 3 Nov 222022 Q3 Earnings call transcript

Good day and thank you for standing by. Welcome to the InterDigital Incorporated Third Quarter Earnings Call 2022. 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 Lloyd. conference like speaker to now Richard today, would hand over the your I ahead. go Please

open Good company morning Lloyd, will call, and Liren Brezski, conference the with to our everyone about on offer Chen, call. and XXXX third me to and questions. the with CEO; quarter I some earnings our quarter CFO. President call highlights am and call Consistent up we Richard today's Communications then and and welcome Director the are to Rich InterDigital's 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 and and results to actual results materially uncertainties Form filings. and risks to contemplated in on and XXXX risk events sections risks XX-K our These cause uncertainties and events SEC statements. of could differ our from factors Annual those Report the forward-looking statements such are

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

goes entered revenue quarter the X% electronics, a way XXXX. an third connected record growth In recurring with for inventions, and morning becoming a good license the Thank once Apple our in everyone. seven consumer to our in year and and innovation we new new the that with grew IoT for innovation world. how increasingly sixth agreement you, is strengthened again Richard, base quarter, year-over-year. Increased more quarter valuable all automobile with We pipeline recurring demonstrated our consecutive into revenue

before the will of deal, is seven represents our previous quality one of Apple Apple clear went I'm million Under that the the for came the $XXX a a of of in our agreement an around huge agree smartphone portfolio. we with market. and longest XG, both particularly increase on InterDigital iPhone deal I the strength of recognize that previous validation to back our leader first deal. end. and is rollout licensee which the innovation to able delighted to tier mutually add of in Apple XX% of dating our new is would sale over a our are premium patent deal new a Apple years, also annually before beneficial Our term the the to

assets, our as a of than So licensing and patents XG X,XXX in patented programs. endorsement momentum time multi-mode for this handsets. of number increasing resounding significant deal a over portfolio, cellular of serves patents [indiscernible] Apple strength came which a our now at of more XX,XXX license highly also related video of consists the implementation The valuable

than more have XX an to of agreements additional executed months, XX and signed we platforms. agreements renewals new licensing and aggregate billion, $X.X Over with the agreements value including last new partner

XXX increase by $XXX markets. we While are traction quarters revenue a the and Together, total revenue to in considerable track XX% these we electronics a in underlines year-over-year year. year-over-year including Toyota, the was This recurring XG on belief excellent built in the number almost our vertical and those still of million auto license of third automobile core In deliver Nissan. IoT, several industries. of of took and is of end XX and revenue in are growing our particularly three business, IoT and year. quarter, be across more more critical this progress year, increase CE, in through million Honda agreements annual markets. are that the we means smartphone plenty manufacturers, in All to connected of million see our growth forecasted XG that technology portfolio These vehicles automobile another consumer million the with next have innovation partner. our seeing our now In XX% licensed our to XX first XG strong only a become the licensed licensing to patents than our and to XG with our

to XXXX upside at through automobile With for the expect by industry, growth projecting sector connected with I the remain licensing are IoT broader foreseeable future. analyses we yet use in should emphasize, significant for seen only are we projected the Innovation. that of be of ramp-up much industry our the excited and double-digit potential we and I'm by that to to cases cars market XG auto XG a the beginning however, journey in the

remain to experienced. balance a with have and will of while closing benefit at deal our -- our engineers, the continue on we investments with the footprint outstanding past, I First, to that that work answered we necessary our announced smartphone contract to sectors, same making video committed reinforcing sheet. Phillips including preference. when more on new expiring Right Recently, time our grow enforce strength partnership driving is innovation to $X.X Apple excellent new We we remain are our in renew to technology the licensing keep in license to this immersive IP but revenue, without But we billion effort of a footprint. new litigation always deal, car our ensuring contracts that grow. Thanks of that position

it VVC video more experience video the quarter new history. ever innovation our that come. to innovation our ensure technology, is robust in In we from has should a engine company's upside immersive of pipeline for Overall, in considerable strong our remains related to more than our see to as such years number work continue generated and innovation our in We been. QX, highest strength

manufacturers a In cutting-edge invest patent to we business universe of rely family growing total ability filed them year the innovation was and into our the XX% it of number by of high technologies, three innovation new of XXXX, on quarters about patents translate than higher quality multiple in During verticals. first across to our licensing make XXXX. our device our available horizontal whole

agreement deliver financial is endorsement have we how device smartphones. another app electronics to results our outside autos yet continue significant exciting in success consumer and that opportunity Our cycle of this IoT demonstrates and in

offers We also continue goals how growth. see delighted which across a to area providers service the we of execute I'm including against innovation, greater with company. number opportunities among of our Overall, another our

against the case. strength waiting remain we Court and in of High the front, from the still UK in confident the for our decision On we litigation [indiscernible] are filed our Lenovo

technologies. want offer hand I to and our performance. journey shareholders, at my in more our to current are leading to want licensees connected thanks have employees, partners to month supported a Before and and anniversary of Rich, that, personal to let InterDigital those over become we XXth it our our you I Rich innovator this mention all our give I'll With former and I who financial celebrating on detail that

Thanks, Liren.

recurring more goal important quarter achieving As or licensing. Liren past very described, million stated $XXX made steps of annual from device revenue toward our this in we two

the costs signed than in more no Apple have history. is XXX% seven this renewed valuable margin, variable contract XX ever under essentially making agreement we million. this most we at to valued we our gross Since Apple agreement, $XXX a First, year year renewal have the

QX, increase beginning with noted, under we agreement Liren which year represents recurring about prior a to million this As our XX% the average Apple. expect a recognize from annual in renewal, $XXX over revenue

of quarter in and sixth consecutive growth the our Second, we reported electronics consumer revenue markets. from automotive recurring IoT

agreements signed XG through platform car connected Sony Amazon licensing XX% market have our in During others among license of that we and with under an license. XG, we time, approximately VIZIO, have participation automotive the now and

consumer million $XX last in Our IoT months. approximately aggregate for has payments XXX% in year. to from the When in million the revenue include of nine over quarter this auto markets quarter we electronics of million approximately total reported annual from third grown recurring you $XX from past just these revenue catch-up first XXXX infringement, have $XX and

tables revenue release XX-Q our financial metrics. in press updated have and We our

clearly from breakout important of in these device for licensing. each can You two growth recurring revenue vectors

management, contracts, than final or for on the EBITDA have also long-term by margin through our recurring EBITDA and nine payments dollar. revenue With margin. healthy revenue months to sign margin adjusted EBITDA our at more, almost We great believe of goal is ongoing to aided business. our both revenue as generation $XXX on growth in of equate we business. or to oftentimes timing adjusted We of adjusted cost combination years recognize lower better resulted EBITDA an Adjusted we and believe subscription cost increase million XX% achieving driven tend revenue XX% for $XXX roughly million of smoothly of can depicts the the cash of annual Moving and expectations, we EBITDA contracts. licensing we expenses, adjusted EBITDA US of terms about more us our annual Overall, essentially tend adjust to a those metric operating for continued a progress and and target by adjusted over power to the litigation device our strong more in five $XXX would the basis. our and toward a the tallies came expenses million or management our from continued

$XXX over the at example, of our end recent see to million due agreements. frontloaded of receivable to our the structure increased partly For can payment QX of one you accounts

the record our that, flows collection in quarter, it this back of Richard. expect We to turn the receivable the quarter drive adjusted in will free be quarter EBITDA. cash but With moderated will I'll fourth fourth in

And now thank Operator, it open questions. up Rich. you, Thank Liren. for you

conduct roster. by. while [Operator and the we session. time, compile stand At by for the this you day thank Q&A we'll Good question-and-answer Instructions] Please standing

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know how kind in I of on in, legal reported fourth going dive active gave thinking us about the wondering us I'm was expense hands like. couple OEMs a looks a have wondering operating on revenue of get just in a litigation fixed and out fee quarter. differently. be would But for you I you’ve a the expense had I bit quarter. if more then get look what we and of structure normalized And potentially standpoint you third what you concluded the recalibrate could know questions. that from front to figures particularly also you trying this help we could structure if to Chinese into And as like. understand with guidance XXXX, Just Samsung, period my up that Lenovo. quickly historically what structure. a terms should with time the is Apple around follow operating little I

Starting questions. those doesn't the on first for part useful. reporting revenue, we've variable take the between We still information provide in can metrics breakout I'll Scott. on been with talking you about the Relations as some just our Hey, that we're fixed of access just that way and Investor section time seem our website. the that and

but I a we've a we to fixed for compared in revenue we smartphones long we're more think of other bit of mentioned, both show these we as smartphones of XXX% available folks, to outside IoT it's quarter just in consecutive to time areas. growth it's our And sector. electronics of lot that XX% quarter little it's around a the So well XXXX. the see consumer think auto important or within there, growing been growth of And sixth first and

of second question The OpEx. the on part

to I some this operating can success expense. accruals. We our quarter, looking you important think our at is look that there did had performance in adjustments our at see again note with thing metrics in of some this overall we and the financial compensation

$XX for elevated. there to we running on guided that amount back QX it's levels does closer And our in little at litigation, of we've financial So that include see gotten in where million bit to about QX. And can been QX. come a you down the for a right healthy we've metrics, originally

operate in have generally business. think And excluding finer bigger too Oppo litigations going renewals in coming we is we're the with litigation more on I Lenovo our up. then and we as without We're So then to zip goes where invest point to code. important the the continue volatile to thing continue putting and still in litigation it,

to see in you. in segment, having success building Got jump auto behind it’s could on I helpful. some the Liren, starting momentum That's been IoT now, if some that.

a that XX% mentioned larger contributed How that's industry of I going think thinking approach now and you connected I'm do be to market to forward? under licensing that XG? going Are wondering vehicles you Is the around going you are that about partnership it how patent XG guys you're XG. Avanti alone? to pool?

correct, a morning. the here the IoT, licensing sector lot you're Scott. XG of the the and auto also we're overall absolutely Good start Hey, with which said. coverage in Yes, under Yes. I'll partnership Avanti. momentum XG, seeing includes with you

for actually connected XG, those incremental XG, meantime, ready for doing in But ready enabled a the also XG. are lot cars But either with approach, we we are top of For the exploration potential for that we see XG partners value of opening on of we are licensing. [indiscernible] areas. absolutely

of terms it but because I this material, value the adoption car prepared connected said market lot we just grew as the all see So my a space, of in regarding with XG added. in of regarding either and will top over in approach, on growth

as could, of talk could you've I auto opportunities, or in are near terms video about wondering in I if terms monetize opportunities. but on a focus. throw that's right you got of out recurring that opportunity they starting of to And enough bit on well is going Look, really well. as flush up just the your know lot your plate that growing [indiscernible] stream part areas? the crop and streaming there other driving in little what's of non-traditional latest inorganic thoughts video or revenue lastly if not started IoT, Okay. Thanks. CE patents the a maybe top on term front, a on you now, to for bit, little into to are you I'm And your

video as the pipeline, one the one our R&D video in acquisition have space, the our for development well pattern as as industry. through of So the We Technicolor. the InterDigital as portfolio actually strongest with strongest well of

million monetizing clearly shown near are main that mid-term we been in the our patent to projecting very much industry, and of for here. very successful relevant in think of licensing, which technology the to focus $XXX But It's large number the continue I a a be industry. opportunity by has Our industry. very will with our device at delivery service portfolio it’s green providers is a industry, it’s service

space. work lot have done we program designing of So licensing a our that in

optimistic are but it take the We opportunity, will grow. to time about

Regarding inorganic with the growth. organic acquisition in growth

patent than our in engine ever that As strong have frankly earlier, I've that’s filings. said we creating incredible innovation faster been, have an innovation demonstrate we latest quarter

look We any look where at opportunity are, we at if all there happy any with we party third always are is but opportunities business portfolio, definitely available, we’ll those.

you. Thank Great.

Thanks, Scott.

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within for you smaller So I that should think been that we the you growth? opportunities just after the reconfirm to growth consumer want see electronics, about larger accelerate and concept we as targeting the that has have that? should maybe going Or are

which And electronics, consumer within on IoT and are The biggest electronics relation. number then part opportunity televisions. and one auto. the about there think of you and when players number Samsung respectively, two consumer LG, is are Certainly, is line televisions Yes. that

lot So market. across there's still sliders different especially and of room especially lot growth within but a for a of the television the segments, in top there

the to Thank running that the or And CE does with renewal Okay. there, smartphone discussions parallel the include is you. that Samsung for conversation?

This Yeah. Hey, is Anja, Liren.

so separately. negotiation, electronics renewal, with Samsung side primarily as negotiating partnership CE far has parallel. This well is It's we opportunity historically a due been in So TV program. our been to consumer those have primarily negotiation down mobile Sony, as

Apple smartphones is congratulations or electronics for consumer on also that was other Okay. then just that the the And the Did and that. oriented that for -- Got renewal, products? it. for

this is Yes. Anja, Liren.

a already relationship to happy due results the to are X-K we confidentiality, overall it’s license way Apple long the have with beyond is, disclosed right what able won't parties So be both in we relationships that think with into of very the the mutually But are term beneficial. the filing. frankly get about Apple feel scoop to that with we

capital in And Thank dividends of could priorities you and Rich, buybacks just, terms about Okay. forth? so talk allocation if you. and

Anja, happy Yes, to. I’m

the large is, the do on I thing expect I'll as alluded think payment a note I first we in coming to remarks, QX. prepared

as for sheet so. And a priority us about the in remain to strong a want have make it's will that we've opportunities. And it's and in balance topic we balance well. getting sure for get in that at the to but it. growth sheet. them Liren the appropriately to then make our that And stronger of we're the So, least a with it the any demonstrated there to And a -- big and always opportunities, still in remain sure feel can paid job necessity, maintain length a choosing, renewed us payment of priorities comparatively appropriate. R&D consider want always only that are success we Apple talked as strong extent in, to but invest over of extent coming less we then organic and with good we returning to and finally, do the inorganic for But keep capital deploying like we large to market we now shareholders will time. we'll

for you. That me. Thank was all Okay.

Anja. Thanks, Great.

Yes. Thank you, Anja.

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impacts been demand Thanks, night general, one of kind just Awesome. way licensing of from to the, just is couple Hey, if Obviously, need we John side Bank situation earning guys a that not curious licensing, on advance, in you? for heard that different, how But being a guys. calls a is smartphone this is navigate market I've inventories. little for Apologies last what's guess, your general in from really there that and on but of worsening your you and channel I morning. of of on volume America. this obviously, peers the

Liren. Yes. Hey, This John, is good morning.

So XX% just our or as XX% of fee from regarding our fixed commented here, comes agreement Rich license agreement. agreement, license

So certain said be we amount of renegotiations immune better most we to in that industry downward -- when for in actually we in though, context not situated completely are still this than weather our here, able have there's that renewals. to Having storms are area.

as are or are agreement those mentioning we things few managing is, negotiated five earlier, longer. obviously it's term long commented very agreement, so, a worthwhile they we are those years carefully dynamics. here. Why And when But this Rich

term time. at really So this we projection for are over long volume looking period of

So if out valleys, bumps volume. we're hoping this ride and will the the would, you in

Second we is applicable than more of thing, we currently prior we us some calls, have of as the discussed peers which -- roughly XX% to covered. our market is, in

we to our up XX% customers using So XX% unlicensed that hard are about to to get are some working technology. really by signing

expand are good IOT and have we of last we our we space. and lastly, as year -- the our [indiscernible] growth auto we starting consumer separating a opportunity this done job a in So segment industry that share those growing in quarter, as half. And electronics, and really

those program licensing really, a with here. have really feel good we So parameters we balancing together, all

it, okay. Got That's helpful.

-- On or I impacting of the the signing sentiment not deals guess, maybe current new I -- -- terms not this deals, But you is that any point? new that I on just after in consideration. royalty going rates penetration. general obviously, term guess, the hopefully end a conversations that long on seen XX% you mentioned at has because have environment guess,

the opportunity combined but most always really and negotiation. is though, we particular have deals roughly which a is [indiscernible] that’s currently on share negotiating new industry really our challenging, XX% long to has here. the signing the deals market record Oppo In mean, licensed in largest Lenovo of track Vivo I of So,

and are as all So litigation. aware, Opel Lenovo are posting we

waiting soon. for anytime context here, fair Lenovo, we for which the could decision just in UK So issue that are judge to especially come

down in here, we frankly see market don't So that context decisions. up and those near term impacting

it. Got

of see recent And P&L? impacts, I of side. Kodak what from coming on deal flow makes potential bottom of you the line the Okay. terms in then discuss separately any That just with through deal and to that guess, collaboration the lot Phillips a Can just sense. you on on kind

Yes.

with are experience. So driven. is where on user on the XR experience, That's immersive our virtual collaboration extremely collaboration reality together really Phillips a user R&D user which is we working multimedia experience

volume, deck doing. any it's and still So it's foundational some of research not others. have leveraging do R&D we so market still early adoption P&L in and stage terms Frankly, see the still are in area the VVC impact. we immediate is frankly then already It's the we a low of XR crew strengths relatively

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message. you, final And Thank to Liren a you operator. I'll back hand for

for the like all year. support. time rest to you upcoming Before the we and our their holiday shareholders our thank off, hope I sign employees of just I'd ongoing and enjoyed the also of

Thank your does the today's participation program. you conference. This in for conclude

may disconnect. You now