Q4 2023 InterDigital Inc Earnings Call
Yeah.
Operator: Good day, and thank you for standing by. Welcome to the InterDigital fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.
Good day, and thank you for standing by and welcome to the Interdigital fourth quarter.
2023 earnings conference call.
At this time all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you what your hand is for.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
You have been through an automated message advisor your habits right.
Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over today to your speaker, Raiford Garrabrant. Please go ahead.
To withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
I would now like to turn the conference over to your Speaker Raiford Garrabrant. Please go ahead.
Raiford Garrabrant: Good morning to everyone, and welcome to InterDigital's fourth quarter 2023 earnings conference call. I am Raiford Garrabrant, head of investor relations for InterDigital. With me on today's call are Liron Chen, our president and CEO, and Rich Brezski, our CFO. Consistent with prior year-end calls, we will offer some highlights about Q4 and fiscal year 2023 before opening up the call for questions. For additional details, you can access our early release and slide presentation that accompanied this call on our investor relations website. Before we begin our remarks, I need to remind you that in this call, we will make forward-looking statements regarding our current beliefs, plans, and expectations, which are not guarantees of future performance and are made only as of the date hereof.
Okay.
Good morning to everyone and welcome to enter Digital's fourth quarter 2023 earnings Conference call.
I am ready for Gary Brown head of Investor Relations for Interdigital.
With me on today's call earlier, and Chen, our president and CEO and rich Brzycki our CFO.
Consistent with prior year end calls, we will offer some highlights about Q4.
What are your 2023 before opening up the call for questions.
For additional details you can access our earnings release and slide presentation that accompany this call on our Investor Relations website.
Before we begin our remarks I need to remind you that in this call. We will make forward looking statements regarding our current beliefs plans and expectations, which are not guarantees of future performance and are made only as of the date hereof.
Raiford Garrabrant: Forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from results and events contemplated by such forward-looking statements. These risks and uncertainties include those described in the risk factor section of our 2023 annual report on Form 10-K and in our other SEC filings. In addition, today's presentation may contain references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the supplemental materials posted to the investor relations section of our website. With that taken care of, I will turn the call over to Larry. Thank you, Raiford. Good morning, everyone.
Forward looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from results in the best contemplated by such forward looking statements.
These risks and uncertainties include those described in the risk factors section of our 2023 annual report on Form 10-K and in our other SEC filings.
In addition, today's presentation may contain references to non-GAAP financial measures.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the supplemental materials posted to the Investor Relations section of our website.
Well, that's taken care of I'll turn the call over to Larry.
Thank you Robert.
Lawrence Chen: Thanks for joining us today. 2023 was another outstanding year for InterDigital. We made excellent progress across our business as we signed a new agreement and our smartphone and our consumer electronics and IoT programs, significantly increased our revenue and net income year over year, strengthened our innovation engine with a record number of new patent filings, and returned more capital to shareholders. Today, we will summarize our progress in Q4, our achievements throughout 2023, and why we feel we are really well positioned for further growth in 2024 and beyond. Revenue for the fourth quarter was $106 million, including recurring revenue of just over $103 million, and our adjusted EPUDA was 53 minutes.
Good morning, everyone. Thanks for joining us today.
2023.
Outstanding year for Interdigital.
Made excellent progress across our business.
We signed new agreement and our smartphone and our consumer electronics and our T programs.
Can easily increase our revenue and net income year over year.
Strengthened our innovation engine with a record number of new patent filings.
And return more capital to shareholders.
Today, well summarize our progress in Q4.
Achievements throughout 2023, and why we feel we're really well positioned for further growth in controlling four and beyond.
Revenue for fourth quarter was $106 million, including recurring revenue of just over $103 million.
Adjusted EBITDA was $53 million.
Lawrence Chen: In the quarter, we returned about 47 million to our shareholders and expanded our existing share repurchase authorization to a total of 300 million. Our status as a world-class innovator was again underlined in the fourth quarter as one of our senior wireless engineers was elected to the board of SEI. The European Standard Organization, which plays a key role in the development of cellular wireless technology.
In the quarter, we returned about $47 million to our shareholders and expanded our existing share repurchase authorization.
Total of $300 million.
Our status as a world class innovator.
Underlined in the fourth quarter at wildfire see Novartis engineers was elected to the board of Etsy.
European standard augmentation, which played a key role in the development of settled a wireless technology.
Lawrence Chen: Looking across the full year, Q4 kept an outstanding 12 months for the company. Our revenue for 2023 was $550 million, 20% year-over-year, and revenue from the smartphone licensing program increased by 32% year over year. Our recurring revenue increased to a record level of just over $408 million. As we drive growth in our top line, we see an even greater impact on our bottom line, as shown in our more than 80% year-over-year increase for our non-GAAP EPS. In addition, we returned almost $380 million to shareholders through dividends and share buyback. Rich will go through the numbers in more detail in his section.
Looking across the full year.
Q4 capped an outstanding 12 months for the company.
Our revenue for 2023 was $550 million.
20% year over year.
Revenue from the smartphone artisan program increased by 32% year over year.
Our recurring revenue increased to a record level of just over $408 million.
First we drive growth in our top line, we see even greater impact on our bottom line.
That's shown in our more than 80% year over year increase for our non-GAAP EPS.
In addition, we returned almost $380 million to shareholders through dividends and share buybacks.
Rich will go through the numbers in more detail in his section.
Lawrence Chen: First, our excellent financial performance indicates 2023 was full of highlights for the company. On the licensing side, we entered into eight new license agreements, including a cellular and HEVC license with Lenovo, a settler agreement with TCL, and two agreements with Panasonic. 2023 was also an exceptional year for our inventors and patent team, which created a record-setting number of inventions and new patent filings, up more than 70% year-over-year, taking our total patent portfolio past 30,000 grantee patents and applications. The quality of our innovation was again recognized as we were named one of the top five patent holders for 5G patents in terms of both quality and quantity by a leading third-party research company. We take pride in how our engineers are leading the evolution of technology globally.
Our excellent financial performance indicates 20, <unk> Street was full of highlights for the company.
On the licensing side, we entered into eight new license agreements, including Este Lauder on H E. B C license with Lenovo.
Our agreement with Tcl and two agreements with Panasonic.
2023 was also an exceptional year for inventors and patent.
Which create a record setting number of interventions.
New patent filings.
More than 70% year over year.
Taking our total patent portfolio.
<unk> thousand granted patents and applications.
But the quality offer innovation was again recognized.
We were named one of the top five patent holders for five G patterns in terms of both quality and quantity by leading third Party research company.
We take pride in how our engineers this evolution of technology globally.
Lawrence Chen: In addition to the recent IC election I noted above, several of our engineers won the election to senior leadership positions for wireless, radio, and AI standard development organizations. Across our research team, our engineers now hold more than 100 leadership positions in those organizations. In 2023, in our dispute with Lenovo, when our patents were tested in litigation, they were repeatedly found to be valid and infringed by courts in both UK and Germany, which is a clear indicator of the quality of our innovation. Right before the end of the year, we won a notable victory in our pursuit of fair competition for OPPO's use of our patented technology. Accordingly, Germany ruled that OPPO infringed our IP and that it should be excluded from the German market. The court ruled resoundingly in our favor, agreed that we conducted a licensing negotiation in a fair and reasonable manner, and, as other courts have regularly done, upheld the quality of patented innovation. The court's strong criticism of OPPO's behavior throughout our negotiations reflects why, from time to time, we have to enforce our pattern in litigation.
In addition to the recent election I noted above some or all of our engineers when the license to senior leadership positions for wireless radios and AI standard development organizations.
But across our research team.
Engineers now hold more than 100 leadership positions in those organizations.
In 2023 E. Our dispute with Lenovo with our patent what testing litigation Tivo repeatedly found to be about it any infringe by courts in both UK and Germany, which is a clear indicator of quality of our innovation.
Okay.
Okay.
Right before I end of the year, we bring on node Paul we are pursuing a fair compensation for all post use of our patented technology.
According Germany ruled that <unk> infringing, our IP and that it should be excluded from the German market.
So court route resoundingly in our favour agreed that be conducted licensing negotiation, yes, sir a reasonable manner.
And at the other course has rather down upheld the quality or a pattern the innovation.
The court strong criticism of opus behavior throughout our negotiation reflects why from time to time, we have to enforce our patents in the litigation.
Lawrence Chen: While we always prefer to sign new agreements through our amicable bilateral negotiations, we are firmly committed to defending the value of our IP through enforcement efforts if necessary. Our progress was recently recognized by Forbes, which ranked us as one of America's top 100 most successful mid-cap companies. While I'm particularly pleased by this recognition, we also firmly believe that there is still a considerable upside for us in multiple areas. Our business momentum continued into Q1 of 2024. In January, we announced a landmark agreement with Samsung, which licenses our digital TV and TV monitors to use our radio and Wi-Fi patterns and other patterns that are part of our joint licensing program with Sony. But Rich will explain in more detail.
While we always prefer to sign new agreements throughout amicable bilateral negotiations.
I am really committed to defending the value of our IP. So we can enforcement efforts if necessary.
Our progress was recently recognized by Forbes, which ranked us as wildfire America's top 100, most successful mid cap companies.
While I'm, particularly pleased by this recognition. We also firmly believe that there is still considerable upside for us in marked by areas.
Our business momentum continued into Q1 of 'twenty 'twenty four in January we announced a landmark agreement with Samsung.
<unk> licensed our digital TV, and TV monitors <unk> and Wi Fi patents.
Two patents that are part of our joint licensing program with Sony.
Rich will explain in more detail, we expect the agreement to have a considerable positive impact on our Q1 result.
Lawrence Chen: We expect the agreement to have a considerable positive impact on our Q1 results. Samsung is the largest manufacturer of TVs in the world, and this agreement reflects not only the strengths that we see on the CE side but also, more broadly, the value of video and wireless innovation. As previously discussed, our radio compression technology is important for devices, but it also essentially enables the entire distribution Platform of streaming and other quality services, which we continue to see as an attractive third pillar of growth along with the significant growth opportunity we have in smartphones and CE IoT programs. I also want to remind everyone that our new license with Samsung is separate from our license agreement with them for cellular devices, which we announced at the beginning of 2023, and it's The arbitration hearing is on track to be held this summer, with a final resolution expected by a note this year.
Sales are the largest manufacturer of TV in the world and this agreement reflects not only the strength that we see on the CE side, but also more broadly the body of video and wireless innovation.
As previously discussed.
Video compression technology is important for devices.
But he also essentially enables the entire distribution platform of streaming and other cloud services.
Which we continue to see attractive third pillar of growth along with the Signet gross opportunity we have in smartphones and see our T program.
I also want to remind everyone that our new license with Samsung is separate to our license agreement with them for cellular devices, which we announced at the beginning of 2023.
And it's now being finalized through arbitration.
The arbitration hearing is on track to be held this summer with a final resolution expected by end of this year.
Lawrence Chen: With our recent licensing success, we have signed more than 30 new agreements and renewals with an aggregate contract value of over $2.5 billion since early 2021. This gives us an incredibly strong platform from which to deliver further success and another very strong result in 2024. Looking ahead through this year, we have guided that our revenue will be between $620 million and $670 million for the full year, which reflects our pipeline for contractor revenue and projected growth through a new agreement. As we continue our journey to grow the company, we announced on Monday that we have appointed Ken Kashkhan as our new Chief Growth Officer. Kim was recently in charge of strategy and business development at a life science company, and before that, she led strategy in Qualcomm's licensing business.
With our recent licenses, we have signed more than 30, new agreements and renewals with an aggregate contract value of over coupon five beta.
Since early 2021.
This gave us an incredible strong platform from which to deliver further success and another very strong readout in 2024.
Okay.
Looking ahead through this year, we have guided that our revenue will be between $620 million and $617 million for the full year, which reflects our pipeline for contracted revenue and projected growth through new agreements.
Okay.
Thus, we continue our journey to grow the company, we announced on Monday that we have upon a pink Kush com.
Our new Chief growth Officer.
Kim was recently in charge of strategy and business development at a life Science company and before that led.
Strategy in Qualcomm's licensing business.
Lawrence Chen: He understands our space very well, and his recruitment underlines our status as a benchmark for top-level talent. Later this month, we will once again take part in Mobile World Congress in Barcelona, where we have several demonstrations of our innovation in wireless, radio, and AI. One of our senior video engineers will give a keynote presentation on the power of haptics to enhance immersive streaming.
Key understand our space very well and Heath recruitment underlines our status as a destination for top level talent.
Later this month, we will once again take part in mobile World Congress in Barcelona.
While we have several demonstrations of our innovation in wireless data and AI.
Whilst our senior video engineers will gave a keynote presentation on the power of haptics tweaking enhanced immersive streaming experience.
Lawrence Chen: On the wireless side, our demonstration will focus on integrated sensing and communication, a technology which will be a key pillar of 6G and where we are already a leader. On the video and AI side, we will showcase the latest VVC technology coupled with our energy-aware media solutions and AI expertise to stream high-quality video content while lowering energy usage. I hope to see you at our booth if you are attending Mobile World Congress. With that, I'll hand you over to Rich to talk you through our numbers in more detail. Thanks, Laren.
On the wireless side, our demonstration we are focused on integrating sensing and communications.
Our technology, which will be a key P&L 60, and we're already a leader.
On the radio and AI side, we will showcase the latest wave, we see technology cough.
With our energy of where our media solutions and AI expertise to the same high quality video content by lowering energy usage.
I hope to see you at our Booth, if you are attending mobile World Congress.
With that I'll hand, you over to rich to talk you through our numbers in more detail.
Thanks Lauren.
Richard J. Brezski: A year ago at this time, we mentioned that our strong execution throughout 2022 drove excellent financial results and put us in what we believed was the strongest position the company had ever been in. Now, after achieving 20% top-line growth. Significant Margin Expansion, and Licensing Momentum Beyond the Smartphone Market. We are excited to reiterate our belief that the company has never been, and that they are positioned to drive growth. Our final results for Q4 came in above our preliminary estimates, which we published last month. The improvement was driven primarily by a lower effective tax rate, as well as favorable royalty reports we received in the intervening period.
A year ago at this time, we mentioned that our strong execution throughout 2022 drove excellent financial results.
And put us in what we believed was the strongest position the company has ever been in.
Now after a cheesy achieving 20% topline growth.
The significant margin expansion and licensing momentum beyond the smartphone market.
We are excited to reiterate our belief that the company has never been.
Better positioned to drive growth.
Our final results for Q4 came in above our preliminary estimates, which we published last month.
The improvement was driven primarily by a lower effective tax rate as well as favorable warranty reports we received in the intervening period.
Richard J. Brezski: Building on Liran's comments, I'll highlight a few noteworthy items from our full year 2023 results that demonstrate success towards our objective of delivering consistent revenue growth combined with strong margins. Total revenue accelerated to $550 million, an increase of 20% year-over-year, resulting in a compounded annual growth rate of 15% over the past four years. Recurring revenue reached an all-time high of $408 million.
Building on <unk> comments I'll highlight a few noteworthy items from our full year 2023 results that demonstrate success towards our objective of delivering consistent revenue growth combined with strong margins.
Total revenue accelerated to $550 million, an increase of 20% year over year.
Resulting in a compounded annual growth rate of 15% over the past four years.
Recurring revenue reached an all time high of $408 million.
Richard J. Brezski: Our 2023 revenue included $81 million in CE and IoT revenue. This is more than triple our CE&IoT revenue from 2020 and represents a 19% compounded annual growth rate over the past four years. This success demonstrates our ability to grow revenue by capitalizing on the value our fundamental horizontal technologies bring to markets other than smartphones. Because of the financial leverage inherent in our model, adjusted EBITDA grew 36%, almost twice the rate of revenue growth to $345 million. As a result, our adjusted EBITDA margin continued to improve and rose by 7 points to an exceptional 63%. (Inaudible) We ended the year with roughly $1 billion in cash and $400 million of net cash. Cash flow continued to be robust, with $214 million of cash from operations and $169 million of free cash flow for the year.
Our 2023 revenue included $81 million of CE in Iot revenue.
This is more than triple our seating in Iot revenue from 2020 and represents a 19% compounded annual growth rate over the past four years.
This success demonstrates our ability to grow revenue by capitalizing on the value our fundamental horizontal technologies, bringing their markets other than smartphones.
Because of the financial leverage inherent in our model adjusted EBITDA grew 36%.
Almost twice the rate of revenue growth to $345 million.
As a result, our adjusted EBITDA margin continued to improve and rose by seven points to an exceptional 63%.
This represents a 22 point improvement over the past four years.
We ended the year with roughly a $1 billion in cash and $400 million of that cash.
Cash flow continued to be robust with $214 million of cash from operations and $169 million of free cash flow for the year.
Richard J. Brezski: These strong cash flows enabled us to return a record $379 million to shareholders in 2023. Most of this was through buybacks of nearly $340 million, and we also increased our dividend by 14%. After the increase to the share repurchase authorization in December 2023 and our repurchases through the first half of Q1'24, we have room to buy back another $285 million. Since we announced our first dividend in December 2010, we have returned nearly $1.8 billion to shareholders through buybacks and dividends. In that time, we have reduced our outstanding share count by more than 40%, from more than 45 million shares to fewer than 26 million shares.
These strong cash flows enabled us to return a record $379 million to shareholders in 2023.
Most of this was through buybacks of nearly $340 million and we also increased our dividend by 14%.
After the increase to the share repurchase authorization in December 2023.
And our repurchases through the first half of Q1, 'twenty four we have room to buyback another $285 million.
Since we announced our first dividend dividend in December 2010, we have returned nearly one $8 billion to shareholders through buybacks and dividends.
In that time, we have reduced our outstanding share count by more than 40%.
For more than 45 million shares to fewer than 26 million shares.
Richard J. Brezski: With all that we accomplished in 2023, the most important thing is that we built on our strong foundation and have carried that momentum into 2024. The Samsung TV agreement, Liran discussed, is a significant step toward reaching our goals in CE and IoT. On the strength of the Samsung TV deal, we expect Q1 revenue to be in the range of $245 to $255 million. This includes $152 to $160 million of ketchup sales and almost $22 million of recurring revenue, or more than $85 million on an annualized basis from CE and IoT. Our Q1 quarterly guidance does not include any new agreements or renewals we may sign between now and the end of the quarter. We expect Q1 operating expenses to be $149 million to $154 million, including revenue share expense from existing agreements of 66 to 69 million dollars, and an Adjusted EBITDA margin of about 50%, and non-GAAP diluted earnings per share of roughly $3 to $3.60.
With all that we accomplished in 2023. The most important thing is that we built on our strong foundation and have.
Carried that momentum into 2024.
The Samsung TV agreement Leering discussed is a significant step toward reaching our goals in CE in Iot.
On the strength of the Samsung TV deal. We expect Q1 revenue will be in the range of $245 million to $255 million.
This includes $152 million to $160 million of catch up sales.
And almost $22 million of recurring revenue or more than $85 million on an annualized basis from CE in Iot.
Our Q1 quarterly guidance does not include any new agreements or renewals, we may sign between now and the end of the quarter.
We expect Q1 operating expenses will be $149 million to $154 million incurred.
Including revenue share expense from existing agreements of $66 million to $69 million.
And adjusted EBITDA margin of about 50%.
And non-GAAP diluted earnings per shares of roughly $3 to $3 60.
Richard J. Brezski: Given the momentum in the business and the strong pipeline of opportunities, we feel it's an appropriate time to introduce full-year guidance in addition to our typical quarterly outlook for fiscal year 2024. We have guided total revenue in the range of $620 to $670 million. We expect an adjusted EBITDA margin of roughly 50% due to the revenue share associated with large catch-up revenue from recent CE licenses. With that, we expect non-GAAP diluted earnings per share of $7.45 to $8.76.
Given the momentum in the business and a strong pipeline of opportunities. We feel it's an appropriate time to introduce full year guidance. In addition to our typical quarterly outlook.
For fiscal year 2024.
We have guided to total revenue in the range of $620 million to $670 million.
We expect an adjusted EBITDA margin of roughly 50% due to the revenue share associated with large catch up revenue from recent CE licenses.
With that we expect non-GAAP diluted earnings per share of $7 45.
To $8 76.
Richard J. Brezski: Longer term, our goal remains to achieve and sustain a 60% adjusted EBITDA margin on $650 million of annual recurring revenue from device licenses, with upside from the Greenfield Opportunity in Video Streaming and Cloud Services. Before I conclude, I'd like to mention that we'll be attending three upcoming conferences. The Susquehanna Tech Conference in New York City on February 29th and the 36th Annual Roth Conference in Southern California on March 18th. Please check with the representatives at those firms if you would like to schedule a meeting.
Longer term our goal remains to achieve and sustain a 60% adjusted EBITDA margin on $650 million of annual recurring revenue from device licenses.
With upside from the Greenfield opportunity in video streaming and cloud services.
Before I conclude I'd like to mention that we'll be attending three upcountry upcoming conferences.
The Susquehanna Tech Conference in New York City on February 29th.
Sidoti <unk> virtual small cap conference on March 13th and 14th.
And the 30 <unk> annual Roth Conference in Southern California on March 18th.
Please check with your representatives that those firms if you would like to schedule a meeting.
Operator: [inaudible] Thanks, Rich. At this point, Lisa, we are ready to take questions. Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. Keep in mind that we ask that you ask one question and one follow-up. Also, wait for your name to be announced before you proceed.
With that I'll turn it back to Ray for.
Thanks Rich at this point, Lisa we are ready to take questions.
Yes.
Thank you.
Reminder, if you would like to ask a question. Please press star one on your telephone keep in mind that we ask that you ask one question and one follow up.
So I'll wait for your name to be announced before you proceed with your question.
Operator: One moment while we compile the Q&A roster. The first question that we have today is coming from Scott Searle of Roth MKM. Your line is open. Hey, good morning.
One moment, while we compile the Q&A roster.
The first question that we have today is coming from Scott Searle of Roth and K Ann Your line is open.
Scott Wallace Searle: Thanks for taking the questions. Hey, congrats guys on I guess the improving visibility to be able to give 2024 guidance well above what we thought. Thanks Scott. Maybe to start up front, you know, Liron, to dive in on the first quarter in plotting your guidance, recurring revenue takes a little bit of a step down related to, I believe, some expirations with Huawei and Lenovo, and yet for the year, you're looking for a relatively big number of, you know, $620,000, $670,000,000. I'm wondering if you could calibrate us, you know, through the course of the second to fourth quarters.
Hey, good morning, Thanks for taking the questions Hey, Congrats skies on I guess, the improving visibility to be able to give 2024 guidance well above what we were looking for.
Thanks, Rob you just start rod.
Learn to dive in on the first quarter implied in your guidance as recurring revenue takes a little bit of a step down.
Related to I believe some explorations with Huawei and Lenovo and yet for the year you are looking for a relatively big number of 602600 $70 million I'm wondering if you could calibrate us through the course of the second to fourth quarters. It sounds like you are clearly expecting some other either renewals or new contract wins.
Lawrence Chen: It sounds like you're clearly expecting some other renewals or new contract wins to come in there that presumably will have some catch-up payments along with it. You know, it seems like you're very comfortable that the Samsung arbitration is maybe going to be part of that. So I'm wondering if you could kind of calibrate us with your early thoughts in terms of what's in the first quarter and how we should be thinking about the remainder of it. Hey Scott, good morning.
To come in and that presumably will have some catch up payments along with it.
It seems like Youre very comfortable that the Samsung arbitration is maybe going to be part of that so I'm wondering if you could kind of calibrate us with your early thoughts in terms of what's in the first quarter and how we should be thinking about the remainder of 2024.
Yes, Hey, Scott good morning.
Lawrence Chen: Yes. So basically, if you look at how we acted in 2023, we were at a record high recurring revenue platform. As you pointed out, we have a couple of contracts expiring, but the main one is really a hobby agreement that we are currently in renegotiation. So it's not faking our Q1 number yet. Aside from Huawei or Scott, as you know, we have quite a few larger opportunities we are pursuing. The top of these is for OPPO and Weibo.
Yes, so basically if you look at how we act as a 2023, we were at record high recurring revenue platform.
As you pointed out we have a couple of contracts expiring, but the mainline is really part of the agreement, which we are currently in negotiation.
Not baking our cube that number yet.
Aside from Hollywood Scott as you know we have quite a few larger opportunity we are pursuing the top of DSA to really opine on label.
Lawrence Chen: Based on our deal momentum, based on, frankly, some of the enforcement effort here, including what you mentioned, the Samsung mobile arbitration, we feel very strong about the 2024 revenue opportunity. It's difficult, as always, to pinpoint the exact timing of the deals. And frankly, we are also, at this moment, not breaking down the catch-up payment versus the recurring portion. Needless to say, we are pursuing fair value for both the catch-up and going forward in every negotiation. And so, in combination, we feel very strong regarding where we are, and we are comfortable providing the annual guidance. And one thing I do want to mention is, you know, our Q1 number does not include any new agreement we may sign, and then we will provide quarterly updates going forward as we make progress on the next quarter as well as the annual number. Thank you, Anja.
Based on our deal momentum based on frankly someday enforcement effort here, including what you mentioned.
Mobile arbitration, we feel wary.
Strong about 2020 for revenue opportunity.
<unk> is always to pinpoint the exact timing of the deals.
Thank you. We are also at this moment not breaking down the catch up payment versus recurring portion.
Needless to say, we are pursuing fair value for both catch up and going forward rating a renegotiation.
And so in combination we feel very strong regarding where we are and we are comfortable providing the annual guidance.
One thing I do want to maintain in our Q1 number does not include any new agreement. We may sign and then we will provide quarterly opex going forward as we make progress on the next quarter as well as the annual numbers.
Scott Wallace Searle: Helpful. Maybe, Justin, as a follow-up, and I don't know if you'll be able to answer this, but is there a number that you're comfortable with exiting 2024, what that annualized recurring revenue will look like versus the $408 million that you posted in 2024? And I guess, you know, some of the newer opportunities, I'm kind of curious where guys like Honor and Transient kind of fit into the equation. Yes, Scott, as I said earlier, we currently do not provide the breakdown of the recurring versus catch-up, and I hope by another year, as we progress, we'll give you more insight. Regarding Owner and Tencent, if you look at the mobile side, the largest opportunity for us is OPPO, then next is Weibo, then the owners Huawei and Lenovo are frankly the next category. Tencent, as you are aware, currently is one of those vendors that a lot of focus from multiple licensors is on them, primarily historically because of their business model, they were sort of below the radar.
Gotcha helpful. Maybe just to follow up and I don't know if youll be able to answer this but is there a number that you're comfortable with exiting 2024, what that annualized recurring revenue will look like versus the $408 million that you posted in 2024 and I guess.
Some of the new newer opportunities.
Kind of curious where guys like honor and transient.
Into the equation. Thanks.
Yes, so Scott as I said earlier, we currently do not provide the breakdown of recurring versus catch up and I hope by another.
Another year as we progress, we'll give you more insight rigor.
Regarding all around 10%.
If you look at the mobile side, the largest opportunity for US is <unk>. The next its label than to own our <unk> and Lenovo fracking. The next category 10 centers, where it currently.
This allows those vendors that a lot of focus from multiple license source, our own them, primarily historically, because our business model.
Lawrence Chen: Now there's a lot of volume gains, so we are, frankly, together with some other major licensors, negotiating with them, and we hope over time to be able to add them as our valued licensors. Great, thank you. Thank you. One moment for the next question. And our next question will be coming from Jonathan Eisenson of Bank of America. Your line is open.
Below the radar now that a lot of volume gains. So we are banking together with some other major license source are negotiating with them and we hope over time to be able to add them as our licensee.
License fee.
Great. Thank you.
Thank you one moment for the next question.
And our next question will be coming from Jonathan <unk> of Bank of America. Your line is open.
Jonathan Eisenson: Hey, thanks, guys. So my first question is for Liran. How should we think about potential impacts or growth opportunities from AI on edge devices, obviously, handsets, and then also on some of the other devices that you guys also cover? Hey, John. Good morning.
Hey, Thanks, guys.
First question is for <unk>.
How should we think about potential impacts or growth opportunities from AI on the edge devices on obviously handsets and then also on some of the other.
Devices that you guys also cover.
Hey, John Good morning, all.
Lawrence Chen: We believe AI will be a very significant boost to our business. And the way we look at it here, there are actually multiple aspects of it. Number one, we believe AI will increase the value of our IP on a per unit basis. So it's more adoption of AI technology onto the device side, so we will have a higher value of IP on the per device side. The second thing is really quite a few market reports that say AI will be driving an increase in device sales in the next 12 months and going forward. So obviously, with increasing volume and increasing value, we think that's a very good dynamic for our renewal as well as signing up new customers. So that's the second piece.
We believe we will be a very significant boost to our business.
The way, we look at it here, there's actually multiple aspects for it now.
Number one is we believe AI will increase the value of our IP on a per unit base.
More adoption of AI technology onto the device side. So we will have a higher bar.
Body of IP on the part D life side.
Second thing is really quite a few market reports.
We are driving our increase of device sales.
In the next 12 months and going forward.
Obviously with increasing volume by increasing value, we think thats, a very good dynamic for our renewal as well as sign up new customers. So that's the second piece.
Lawrence Chen: And the last piece of AI growth in our story is that we have demonstrated our technology for AI combinations video is very valuable. If you notice, we have a press announcement this Monday regarding our collaboration with a leading streaming company where we are combining our video codec with AI for the streaming delivery service. So we believe over time, this will strengthen the third leg of our growth story, which I refer to as online streaming as well as cloud service. So having said all this, this opportunity, but fundamentally, though, it always translates into our strengths in AI technology. We believe we have some of the best engineers in the industry, and we frankly have quite a few leadership who are already in the AI standard space. So I'm quite bullish about that impact on us. Got it. That's very helpful. And then my follow up is for Rich.
And the last piece of the <unk> of our stories, we have demonstrated our technology for AI combinations <unk>, it's very valuable.
If you notice we have a press announcement this Monday regarding our collaboration.
As a gating step.
Gaming company, where we are combining our video codec with AI.
<unk> for the streaming delivery service. So we believe over time this will strengthen the third leg of our growth story, which I'll refer to adult online streaming as a cloud service so.
So having said all of this still opportunity by fundamentally though it always translate to our strengths in the AI technology.
Believe we have some of the best engineers in the industry and we frankly have quite a few neither seek we're already in the AI standard space.
So I bought yourself that impact to us.
Got it that's very helpful. And then my follow up is for rich.
Jonathan Eisenson: So, I mean, it kind of goes off one of the last questions, but diluted EPS guidance obviously suggests a pretty strong first quarter. And then if you look at kind of the full year, you may see a little bit weaker EPS growth throughout the year. Can you kind of just give some color there?
So I mean, it kind of goes off one of the.
We'll ask questions, but diluted EPS guidance, obviously suggests a pretty strong first quarter and then if you look at kind of the full year Macy.
A bit weaker EPS growth throughout the year can.
Can you kind of just give some color there and obviously there is potential upside is as you talked about.
Richard J. Brezski: And obviously, there is potential upside, as you talked about from other deals, but that's not baked into the guidance right now. So, kind of just how should we think about EPS growth throughout the year? Yeah, so our first quarter outlook is aided by, you know, new agreements, including the Samsung TV agreement that we signed in January, and included in that number is quite a bit of catch-up sales. So, therefore, that's a Q1 impact that doesn't repeat in Q2 through Q4.
Other geos, but that's not baked into the guidance right now so kind of just how should we think about the EPS growth throughout the year.
Yes, so our first quarter outlook is aided by.
New agreements, including the Samsung TV agreement that we signed in January.
And included in that number is quite a bit of catch up sales.
So therefore.
Q1 impact that doesn't repeat in Q2 through Q4.
Richard J. Brezski: In the Q2 to Q4 time period, we did factor in the potential for new growth into our outlook for it. Thank you. Great, thanks. Thank you. One moment for the next question. The next question will be coming from Anja Soderstrom of Sidoti. Your line is open.
In the Q2 to Q4 time period.
We did factor in the potential for new growth into our outlook.
Got it thank you.
Great. Thanks.
Thank you one moment for the next question.
Okay.
The next question will be coming from Andrea <unk> of <unk>.
Adobe Your line is open.
Anja Marie Theresa Soderstrom: Hi, and thank you for taking my question and congrats on the nice progress here. First of all, I just want to clarify that the full-year revenue guidance includes the cash out payments for the first quarter, but does it include any potential catch-up payments in the coming quarters as well, or is it just pure recurring revenue? Yeah, yeah.
Hi, and thank you for taking my question and congrats on the.
Nice progress here.
First of all I just wanted to.
Verify that the full year revenue guidance.
The catch up payments for the first quarter, but that's it.
Include in a potential catch up payments in the coming quarters as well or is it just pure.
Recurring revenue.
Richard J. Brezski: So Anja, it does include the catch-up payments that I just referenced for Q1. And then it also includes our expectations for new business over the balance of the year. But, as Lieran indicated, we're not detailing, you know, catch-up versus recurring revenue on that new business growth because, you know, there's a number of different opportunities that could come from, and they each present, you know, a different mix.
Yes, Sir.
It does include the catch up payments that I just referenced for Q1 and then it also includes our expectations for new business over the balance of the year as Larry indicated we're not detailing catch up versus recurring revenue on that new business growth.
Because.
There's a number of different opportunities that could come from and they each present a different mix.
Anja Marie Theresa Soderstrom: Okay, thank you. That was helpful. And then, you benefited from a lower tax rate this quarter, and how should we think about that going forward? Should we think, should that continue decreasing? Please study. Yeah, so a good question.
Okay. Thank you that was helpful and then.
You benefited from a lower tax rate this quarter and how should we think about that going forward should we think should contain decreasing RM.
Thanks, Steve.
Yes, so good question.
Richard J. Brezski: In this quarter, in particular, we had a positive tax adjustment related to a reversal of the valuation allowance. And that drove our rate for the year down to about 10%. If you look over the last three years, it's gone from like 27 to 22 to 10.
In this quarter in particular, we had a positive.
Tax adjustment related to reversal of the valuation allowance.
And that drove our rate for the year down to about 10%. If you look over the last three years, it's gone from like 27% to 22 to 10 over that entire period, it's about 16% which is.
Richard J. Brezski: Over that entire period, it's about 16%, which is pretty well in line with what we've been talking about for some time. As you know, the way we think of our long-term tax rate as being in the, you know, mid, you know, growing to the high teens. There's a step up in the city in two years, which is one of the tax benefits we enjoy. But overall, you know, we think that as the business becomes more profitable, the tax rate actually gets better because we're able to, you know, leverage some of the fixed impact elements of our tax base that don't grow with new revenue growth. Okay, thank you. In terms of the new hire, Ken Cascoon, what can we expect from him? What are you hoping he will accomplish, and why are you hiring a revenue growth officer now? Yeah, hi Anja, this is Lawrence.
Well in line with what we've been talking about for some time is the way, we think of our long term tax rate as being in.
Growing the high teens.
A step up in <unk> in two years, which is one of the.
Tax benefits we enjoy.
But overall, we think that as.
The business becomes more profitable the tax rate actually gets better.
We are able to.
Leverage some of the fixed impact elements of our of our tax base.
That don't grow with you with your revenue growth.
Okay. Thank you.
Sure.
In terms of then.
And then your higher Cam Kafka and hot.
Can we expect from him.
He will accomplish and why you're hiring revenue growth officer now.
Yes, Hi, this is Larry.
Lawrence Chen: Yeah, we hired Ken from a life science company where he was responsible for business development as well as strategy work. But before that, he was at Qualcomm for an extended period of time where he was an engineer, he was an inventor. But his last job was really in charge of strategy for Qualcomm's technology licensing business.
We hired came from.
A life Science company, where he was.
Responsible.
Business development as well as strategy work.
But before that he was out of Qualcomm for extended period of time.
Engineered the inventor, but his last job what's really he was in charge of strategy for Qualcomm technology licensing business.
Lawrence Chen: And so the reason we brought him in is that, as we are building for the long-term goals for the company, we really want to add more strength to our leadership team. And I think this hire, timing-wise, is very, very good. And also, it demonstrates that we as a company are able to attract some of the best talents in our industry to further add to our leadership team. Okay, thank you. That was all for me.
And so the reason we bring EMEA to US we are building for the long term growth for the company.
Really want to add more things to our leadership team and I think it is higher its timing wise, it's a very very good and also demonstrate the company able to attract some of the best talent in our industry to further add to our leadership team.
Yes.
Okay. Thank you that was all for me.
Anja Marie Theresa Soderstrom: Thank you. If you would like to ask a question, please press star one on your phone. Our next question will be coming from Chris Madison of William Blair. Your line is open. Hi, thank you. This is Chris on behalf of Arjun.
If he would like to ask a question. Please press star one on your telephone.
Our next question will be coming from Chris Madison.
William Blair Your line is open.
Hi. Thank you this is Chris on for origin.
Chris Madison: One quickly for me. I wanted to touch on, given the strong position the business is in today, how does this change the philosophy or approach to investments and capital allocation? Forwarded. Yeah, so as far as the approach is concerned, it really doesn't change it at all.
Just one quickly for me.
Wanted to touch on given the strong position the businesses in today, how does this change the philosophy or approach to investments and capital allocation.
Going forward in 2024.
Yes, so as far as the approach it it really doesn't change it at all I mean, our approach has always been.
Richard J. Brezski: I mean, our approach has always been, we feel it's important to keep a strong balance sheet, but we want to, you know, make investments where we see, you know, a substantial opportunity for return. And then, you know, we tend to, given our cash generation, have excess cash, and we want to return that to shareholders. And that's exactly what we've been focusing on for the last, well, for many years, but certainly over the last year or so.
We feel it's important to keep a strong balance sheet, but.
But we want to make investments, where we see substantial opportunity for return.
And then beyond that we tend to given our cash generation have excess cash and we want to return that to shareholders and that's exactly what we've been executing on for the last.
For many years, but certainly over the last year or so.
Chris Madison: Got it? Makes sense. Thank you. Thank you. There are no more questions in the queue, and I would like to turn the call back over to Lawrence Chen, CEO, for closing remarks. Please go ahead.
Got it makes sense. Thank you.
Thank you there are no more questions in the queue and I would like to turn the call back over to <unk> Chen CEO for closing remarks. Please go ahead.
Lawrence Chen: Yeah, thank you, Lisa. Before we close, I'd like to thank our employees for their dedication and contribution to InterDigital, as well as our many partners and licensees for an outstanding year in 2023. Thank you to everyone who joined the call today, and we look forward to updating you on our progress next call. Thank you for joining. Everyone may disconnect. Thanks for watching!
Yes Sanger Lisa.
Before we close I'd like to thank our employees for their dedication and contribution to interdigital.
Well as our many partners and licensees outstanding year in 2000 and phase III.
Thank you to everyone, who joined the call today, and we look forward to updating you on our progress next quarter.
Okay.
Thank you for joining everyone may disconnect.
Okay.
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Okay.
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