Q1 2024 InterDigital Inc Earnings Call
I ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand, just raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today wafer Gara.
Operator: for Garrabrant, Head of Investor Relations, please go ahead.
Brad had been Investor Relations. Please go ahead.
Raiford Garrabrant: Good morning to everyone, and welcome to InterDigital's first quarter 2024 earnings conference call. I am Raiford Garrabrant, Head of Investor Relations for InterDigital. With me on today's call are Liran Chen, our president and CEO, and Rich Brezski, our CFO.
Garrabrant: Good morning to everyone and welcome to the Interdigital first quarter 2024 earnings conference call.
Speaker Change: I am ready for Gary Brandt.
Raiford Garrabrant: That's the relations for interdigital.
Speaker Change: With me on today's call are layering Chen, our president and CEO and rich Bruski our CFO.
Raiford Garrabrant: Consistent with prior calls, we will offer some highlights about the quarter and the company and then open up the call for questions. For additional details, you can access our earnings 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.
Speaker Change: Cisco with prior calls we will offer some highlights about the quarter and the company and then open up the call for questions.
Raiford Garrabrant: For additional details you can access our earnings release and slide presentation that accompany this call on our Investor Relations website.
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 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 national 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 Lyric.
Raiford Garrabrant: 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.
Lyric: And are made only as of the date hereof.
Lyric: 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.
Lyric: 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.
Lyric: In addition, today's presentation may contain references to non-GAAP measures.
Lyric: 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.
Lyric: With that taken care of I will turn the call over to Larry.
Lyric: Thank you, Raiford. Good morning, everyone.
Lyric: Thank you Richard Good morning, everyone. Thank you for joining us today.
Lyric: Thank you for joining us today. On our last call, we provided annual guidance for 2024 revenue of between $620 million and $670 million. This guidance highlights the increasing momentum of our business and the multiple growth opportunities that we have identified and expect to achieve through the rest of the year. Today, I'm pleased to share that we have made significant headway in achieving our goal and reconfirm our 2024 annual guidance. Revenue for the first quarter was $264 million, up by 30% year-over-year and above the high end of our guidance.
Lyric: Our last call, we provided annual guidance for 'twenty to 'twenty four revenue.
Lyric: Between $620 million and $617 million.
Lyric: This guidance highlights the increasing momentum of our business and the multiple pad.
Lyric: Motto goes opportunity that we have identified and expect to achieve sort of the rest of the year.
Lyric: Today I'm pleased to share that we have made significant had been achieving our goal and we confirm our 2020 for annual guidance.
Lyric: Revenue for the first quarter were $264 million.
Lyric: By 30% year over year.
Lyric: And above the high end of our guidance.
Lyric: Our Q1 revenue was one of the highest in our history and an all-time high for our CE and LT licenses. Through the quarter, we have made great progress on multiple fronts of our business. We signed seven new license agreements. We enhanced our position as a leader in the application of AI in both wireless and video.
Lyric: Our Q1 revenue was one of the highest in our history.
Lyric: All time high for <unk> and <unk>.
Speaker Change: Thank you.
Lyric: Yeah.
Lyric: So the quarter, we have made great progress on multiple fronts of our business.
Lyric: We signed seven new license agreement.
Lyric: First our position as a leader in the application of AI in both wireless and video.
Lyric: And we received several positive court decisions, which we believe will help us to advance negotiations with certain unlicensed smartphone OEMs. We begin the quarter with a new landmark license with Samsung TV Business. The agreement covers patents, and our joint licensing program with Sony and InterDigital own patents across a range of video and Wi-Fi technologies. Samsung is a market leader in TV, and this agreement highlights both the value of video and Wi-Fi innovation and the growth we continue to build in the licensing of the consumer electronic sector.
Lyric: We see several positive court decisions, which we believe will help us to advance negotiations with certain unlicensed smartphone Oems.
Lyric: We began the quarter with a new landmark license with Samsung TV business.
Lyric: The agreement covers patents and our joint licensing program with Sony.
Lyric: And in the diesel one pattern across a range of redo and Wi Fi technologies.
Lyric: Samsung is a market leader in TV and this agreement highlights both severity or redo and Wi Fi innovation and of course, we continue to be out in license into consumer electronics sector.
Lyric: I want to emphasize that this new agreement is separate from the Samsung smartphone life. We announced at the start of 2023 that Samsung and InterDigital have agreed to renew the license for their Smart TV to our portfolio. The final term of the smartphone license includes how much cents on mass payouts are still the subject of an arbitration hearing, which is on track to be held this summer, with a final resolution expected by the end of this year.
Lyric: I want to emphasize that this new agreement is subject to the Samsung Smart smartphone license we are in.
Lyric: At the start of 'twenty, two 'twenty three that Samsung and Interdigital has agreed to renew the license for their smart EV to our portfolio.
Lyric: The final terms of the smartphone life is in crude how much stance on Moss payoffs are still the subject of an arbitration with Gary which is on track to be held this summer with a final resolution expected this year.
Lyric: The seven new agreements that we signed in the first quarter reflect the momentum we continue to see across all our licensing programs, and our students in consumer electronics and IoT, in particular. The revenue and recurring revenue in Q1 from our CE and IoT programs were both record highs.
Lyric: The seven year agreement that we signed in the first quarter reflect the momentum we continue to see across all our licensing programs.
Lyric: And our strengths in consumer electronic and Iot in particular.
Lyric: The revenue our recurring revenue in Q1 pharmacy, and Audi program were both record highs.
Lyric: With Samsung and other agreements that we closed in the quarter, we have increased the cumulative value of the contracts that we have signed over the last three years to almost $2.7 billion, giving us an incredible strong base from which to drive new long-term agreements and pursue additional growth opportunities. Staying on license, we are making significant progress in our effort to ensure that we receive fair compensation for our innovation from unlicensed smartphone OEMs.
Lyric: With Samsung and other agreements that will be closing in the quarter. We have increased the accumulated body of contract that we have signed over the last three years to almost two $7 billion.
Lyric: Give me what the incredible strong base from which to drive new long term agreements and pursue additional growth opportunities.
Lyric: Staying on license, we are making significant progress in our effort to ensure that we receive fair compensation for our innovation from unlicensed smartphone Oems.
Lyric: Earlier today, a German court issued a very positive decision for us in our dispute with Lenovo. The court ruled that Lenovo infringed one of our 4G and 5G standard essential patents, that InterDigital has acted in a friend manner, and that Lenovo is an unwitting licensee who engaged in holdout and should therefore be enjoined from the German market. The injunction means that Lenovo will be prohibited from selling 4G and 5G-compatible devices in Germany.
Lyric: Yeah.
Lyric: Earlier today.
Lyric: German court issued a very positive for us.
Lyric: Dispute with Lenovo.
Lyric: The court ruled that Lenovo infringed wildfire are 40, and 50 of standard essential patents.
Lyric: That interdigital has actually Brian manner.
Lyric: <unk> is our own waiting licensee.
Lyric: Engaged.
Lyric: And should therefore be enjoying in the German market.
Lyric: The injunction means that Lenovo will be prohibited from studying <unk> and five year compound with your assets in Germany.
Lyric: Also, as part of our dispute with OPPO, a German court also ruled that OPPO infringed InterDigital's 4G and 5G standard issuance of patents in suit, that InterDigital has acted in a friend manner, and that OPPO is an unwitting licensee. The court also awarded an injunction against Oprah. In India, in another trial against OPPO, we received yet another positive decision, but OPPO was ordered to pay royalties in the form of a security deposit to the court. The Indian court also heavily criticized and fined OPPO for delaying tactics during our negotiations and ordered that the trial be concluded before the end of the year.
Lyric: Also.
Lyric: Part of our dispute with <unk>, a German court also ruled that <unk> infringed interdigital supports the enterprise is done essential patents in suit.
Lyric: That interdigital has that been your friend manner.
Lyric: Okay.
Lyric: Long waiting licensee.
Lyric: Also awarding injunction against <unk>.
Lyric: In India, Yes, another trial against Oracle, we received yet another positive decision, but <unk> was ordered to pay royalties in the form of a security deposit to the court.
Lyric: The Indian Court also heavily criticized and find the Opal for delaying tactics you are on negotiations and order at the trial will be concluded before end of the year.
Lyric: We are encouraged by this recent development in our cases, and we believe we have built significant momentum in our negotiations with both companies. As I have said many times before, we always prefer to sign a long-term license through amicable negotiation. But we are ready to enforce our patent rights, if necessary. Our students as fundamental innovators in critical technology continue to underpin our program. Our research team has long been recognized as world leaders in the development of wireless and video technology, and increasingly, our leadership in AI is coming to the forefront.
Lyric: We are encouraged by these recent developments are cases.
Lyric: And we believe we have built significant momentum you are in negotiations with both companies.
Lyric: But as I said, many times before we always prefer to sign a long term license so amicable negotiations.
Lyric: We are ready to enforce our patent rights if necessary.
Lyric: Our strengths as a fundamental innovator in critical technology continue to underpin our progress.
Lyric: Our research team has long been recognized but the board meters in the development of wireless and video technology.
Lyric: Increasingly <unk> AI is coming to the forefront.
Lyric: In Q1, one of our senior engineers was appointed to head the AI and Machine Learning Standing Committee of IEEE. The Standard Development Organization, which leads the evolution of Wi-Fi. At this year's Mobile World Congress in Barcelona, we showcased two demonstrations that had AI at their heart. Wang was in partnership with Keysight, which used a neural network developed by our engineers to demonstrate the application of AI in a 6G network, and the second combined advanced video compression and AI to significantly reduce the energy consumption of streaming video while preserving picture quality.
Lyric: In Q1, while our senior engineers was appointed to head the AI and machine learning standing Committee of I T E.
Lyric: The standard development organization with deep the evolution of Wi Fi.
Lyric: And this years mobile World Congress in Barcelona, we showcased two demonstrations which has at their heart.
Lyric: <unk> in partnership with key sites, which used a newer network developed by our engineers to demonstrate the application of AI 60 network.
Lyric: And a second combined advanced video compression and AI to significantly reduce energy consumption of streaming video while preserving picture quality.
Lyric: Also at MWC, we demonstrated cutting-edge immersive video and haptic technology in a specific use case of esports and showed our increasing leadership in integrated sensing and communication and Emerging Technology, which will be a pillar of SICK. Our research success continues to be reflected in the development of a global patent portfolio. Recently, we were confirmed among the top 25 companies globally that filed the most new padding applications with the European Padding Office last year.
Lyric: Also at <unk>, we demonstrated cutting edge immersive redo and haptic technology.
Lyric: <unk> use case of esports and sold our increasing leadership in integrated sensing and communication.
Lyric: And emerging technology, which will be a pillar of <unk>.
Lyric: Yeah.
Lyric: Our research and such.
Lyric: <unk> continued to be reflected in the development of our global patent portfolio.
Lyric: Recently, we were confirmed among the top 25 companies globally.
Lyric: That followed the most new patent applications with European patent office last year.
Lyric: Our number of new applications filed with the EPO increased by 40% year-over-year, a clear indication of our success in translating our foundational innovation into patent assets. The strengths of innovation and the patent footprint give us an excellent platform to drive further growth in our existing licensing program and in Greenfield opportunities such as cloud-based radio services. And with our track record for delivering new license agreements with leading manufacturers such as Samsung, we believe we are in an excellent position to reach our financial target for the year. With that, I'll hand it over to Rich to talk you through the numbers in more detail.
Lyric: Our number of new applications filed with the Epo increased by 40% year over year.
Lyric: A clear indication of our success in translating our foundation of innovation into patent assets.
Rich: The strength already innovation and patent footprint key.
Lyric: Give us an excellent platform to drive further growth in our existing licensing program.
Rich: In Greenfield opportunity such as cloud based video services.
Rich: And with our track record for delivering new license agreements with leading manufacturer such as Samsung. We believe we are in excellent position to reach our financial targets for the year.
Lyric: With that I'll hand, it over to rich to target through the numbers in more details.
Rich: Thanks Lauren.
Richard J. Brezski: Q1 was another outstanding quarter for InterDigital as our strong revenue growth drove both non-GAAP EPS and adjusted EBITDA to the high end of our guidance range. This growth was powered by new licensing agreements. Most notably, Samsung TV. These results support our long-term objective of delivering consistent revenue growth combined with strong margins. Total revenue increased 30% year over year, with CE and IoT leading the way. Based on new licensing agreements reached in Q1, recurring revenue for CE and IoT reached an annualized run rate of almost $90 million, an increase of 57% year over year, and has roughly doubled over the last two years when combined with catch-up revenue of $160 million. CE and IOT total revenue for the quarter reached an all-time high of $183 million.
Rich: Q1 was another outstanding quarter for Interdigital as our strong revenue growth drove both non-GAAP EPS and adjusted EBITDA to the high end of our guidance range.
Richard J. Brezski: This growth was powered by new licensing agreements.
Richard J. Brezski: Most notably Samsung TV.
Richard J. Brezski: These results support our long term objectives of delivering consistent revenue growth combined with strong margins.
Richard J. Brezski: Okay.
Richard J. Brezski: Total revenue increased 30% year over year, we'll see an Iot leading the way.
Richard J. Brezski: Based on new licensing agreements reached in Q1.
Richard J. Brezski: Recurring revenue for CE, and Iot reached an annualized run rate of almost $90 million in.
Richard J. Brezski: An increase of 57% year over year and has roughly doubled over the last two years.
Richard J. Brezski: When combined with catch up revenue of $160 million.
Richard J. Brezski: <unk> total revenue for the quarter reached an all time high at $183 million.
Richard J. Brezski: This performance highlights our ability to deliver significant growth beyond the smartphone market, and adjusted EBITDA for the quarter of $130 million equates to an adjusted EBITDA margin close to 50%, consistent with our guidance. These results demonstrate the power of our business model. Our investments in fundamental technologies drive top-line growth, while the reuse of those technologies across multiple verticals delivers high margins and drives cash flow. Our strong performance in Q1 produced cash flow from operations of $51 million and free cash flow of $41 million.
Richard J. Brezski: This performance highlights our ability to deliver significant.
Richard J. Brezski: Growth beyond the smartphone market.
Richard J. Brezski: Our adjusted EBITDA for the quarter of $130 million.
Richard J. Brezski: Equates to an adjusted EBITDA margin close to 50%.
Richard J. Brezski: Consistent with our guidance.
Richard J. Brezski: These results demonstrate the power of our business model.
Richard J. Brezski: Our investments in fundamental technologies drive topline growth, while the reuse of those technologies across multiple verticals delivers high margins and drive cash flow.
Richard J. Brezski: Our strong performance in Q1 produced cash from operations of $51 million and free cash flow of $41 million.
Richard J. Brezski: This strong cash flow, combined with a cash balance of nearly $1 billion, supports our continued return of capital to shareholders. In Q1, we repurchased approximately 300,000 shares for $29 million. We repurchased another 200,000 shares in April for a year-to-date total of roughly half a million shares. Since we first paid our dividend in 2011, we have now returned approximately $1.8 billion to shareholders through share buybacks and dividends. In that time, we have reduced our outstanding share count by almost 45%, from more than 45 million shares to just over 25 million shares.
Richard J. Brezski: This strong cash flow combined with a cash balance of nearly $1 billion.
Richard J. Brezski: Supports our continued return of capital to shareholders.
Richard J. Brezski: In Q1, we repurchased approximately 300000 shares for $29 million.
Richard J. Brezski: We repurchased another 200000 shares in April for a year to date total of roughly half a million shares.
Richard J. Brezski: Since we first paid our dividend in 2011, we have now returned approximately one $8 billion to shareholders through share buybacks and dividends.
Richard J. Brezski: In that time, we've reduced our shares outstanding share count by almost 45% for more than 45 million shares to just over 25 million shares.
Richard J. Brezski: And with $246 million left on the current buyback authorization, we're not done yet. Looking forward to Q2, we expect recurring revenue will include $93 to $97 million of revenue from existing contracts, plus any amounts we recognize from any new agreements we may sign over the balance of the quarter. Based only on existing contracts, we expect an adjusted EBITDA margin of about 38% and non-GAAP diluted earnings per share of $0.70 to $0.80, and any additional agreements would be additive to those totals.
Richard J. Brezski: And with $246 million left on the current buyback authorization, we're not done yet.
Richard J. Brezski: Looking forward to Q2, we expect recurring revenue will include $93 million to $97 million of revenue from existing contracts.
Richard J. Brezski: Plus any amounts we recognize from any new agreements, we may sign over the balance of the quarter.
Richard J. Brezski: Based only on existing contracts, we expect an adjusted EBITDA margin of about 38% and non-GAAP diluted earnings per share of <unk> 70 to 80.
Richard J. Brezski: In addition, any additional agreements would be additive to those hurdles.
Richard J. Brezski: Our strong first quarter results have us on track to meet our full year 2024 targets, and we are reaffirming our prior guidance of revenue in the range of $620 to $670 million. We continue to expect an adjusted EBITDA margin of roughly 50% for the full year 2024, and non-GAAP diluted earnings per share of $7.45 to $8.76.
Richard J. Brezski: Our strong first quarter results have us on track to meet our full year 2024 targets.
Richard J. Brezski: And we are reaffirming our prior guidance of revenue in the range of $620 million to $670 million.
Richard J. Brezski: We continue to expect an adjusted EBITDA margin of roughly 50% for the full year 2024.
Richard J. Brezski: non-GAAP diluted earnings per share of $7 45 to $8 76.
Raiford Garrabrant: Before I conclude, I'd like to mention that we'll be attending four conferences over the remainder of the second quarter. The first is the Bank of America Global Tech Conference in San Francisco on June 4th. The William Blair Growth Stock Conference in Chicago on June 4th, the Ideas Investor Conference in New York on June 12, and the Roth 10th Annual London Conference on June 26 and 27. Please check with your representatives at those firms if you'd like to schedule a meeting. With that, I'll turn it back to Raiford.
Speaker Change: Before I conclude I'd like to mention that we'll be attending four conferences over the remainder of the second quarter.
Raiford Garrabrant: Bank of America Global Tech Conference in San Francisco on June 4th.
Raiford Garrabrant: William Blair growth stock conference in Chicago on June 4th.
Raiford Garrabrant: Ideas Investor Conference in New York on June 12.
Raiford Garrabrant: And the Roth 10th annual London Conference on June 26, and 27.
Raiford Garrabrant: Please check with your representatives that those firms if you'd like to schedule a meeting.
Raiford Garrabrant: With that I'll turn it back to raiford.
Raiford Garrabrant: Thanks, Rich. At this point, Operator, we are ready to take questions. Thank you.
Raiford Garrabrant: Thanks Rich at this point operator, we are ready to take questions.
Operator: Thank you. As a reminder, to ask a question, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit your questions to one and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Arjun Bhatia of William Blair.
Operator: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, we ask that you. Please limit your questions to one question and one follow up.
Operator: Please standby, while we compile the Q&A roster.
Operator: Our first question comes from Arjun Bhatia of William Blair.
Arjun Rohit Bhatia: All right. Thank you, guys.
Arjun Rohit Bhatia: Alright. Thank you guys appreciate you.
Arjun Rohit Bhatia: Appreciate you taking the question. To start, Liran, maybe a couple of questions on the Samsung side, more on the smartphone side, not necessarily on the TV side. But as you think about just going through arbitration here over the summer and looking at a potential outcome later this year, how should we think about maybe the range of outcomes that you're considering that could result from that arbitration? I mean, is there a possibility that prices are going up, and maybe how do you – or your royalty rate is going up, and how do you handicap that?
Arjun Rohit Bhatia: Taking the question.
Arjun Rohit Bhatia: To start with.
Arjun Rohit Bhatia: Maybe a couple of questions on the Samsung side.
Arjun Rohit Bhatia: More on the smartphone side not necessarily on the TV side, but as you think about just going through arbitration here over the summer and looking at a potential outcome. Later this year, how should we think about maybe the range of outcomes.
Arjun Rohit Bhatia: You're considering that could result.
Arjun Rohit Bhatia: From the arbitration I mean is there.
Arjun Rohit Bhatia: A possibility of that.
Arjun Rohit Bhatia: Prices are going up and maybe how do you.
Arjun Rohit Bhatia: We are a royalty rate is going up and how do you handicap that.
Arjun Rohit Bhatia: And then for Rich, same thing on the Samsung smartphone side. Can you just remind us how you're accounting for the license revenue in the recurring line from Samsung thus far, and, you know, might that be something that's contributing to the decline in smartphone recurring revenue? Thank you.
Arjun Rohit Bhatia: And then for rich the same thing on the Samsung smartphone side can you just remind us how you are.
Arjun Rohit Bhatia: Accounting for the license revenue and recurring and the recurring line from from Samsung Thus far.
Arjun Rohit Bhatia: Might that be something thats.
Arjun Rohit Bhatia: Contributing to the activity decline in smartphone recurring revenue. Thank you.
Lyric: Hey, good morning, Arjun. Thanks for the question. So on the Samsung smartphone arbitration, as we discussed in the prior call, Samsung has been a customer on the smartphone side for actually a long time, since 1995, and before they released the variable. The last contract was a 10-year agreement that covered, frankly, the previous generation technology and did not include, you know, very valuable assets like 5G and a lot of the advanced video technology we have done.
Arjun Rohit Bhatia: Okay.
Arjun Rohit Bhatia: Good morning <unk>.
Lyric: <unk>.
Lyric: So on the Samsung smartphone arbitration as we have discussed in the prior call.
Lyric: <unk> had been a customer for the smartphone side block for a long time since 1995 before the release of our Atlas.
Speaker Change: Got it.
Lyric: The lost contract was a 10 year agreement.
Lyric: Which powered frankly, the previous generation technology.
Lyric: And not including you know very valuable assets like <unk> and a lot of the advanced video technology, we have.
Lyric: So that agreement expired on December 31st, 2022, and both parties agreed through negotiations that they would renew the agreement without disruption and that we frankly couldn't get a price agreed upon in time, so we both agreed to do a binding arbitration that started January 1st, 2023, and we are frankly well into the process. The panel has been assembled, and the hearing has been confirmed for this summer, and will be decided before the end of the year, as projected.
Lyric: So that agreement expired December 31st off 2022, and both party has agreed so renegotiations that they will be new agreement without disruption and we frankly couldn't get it pricing agreed upon in time. So we post a grade to do a binding arbitration that starts January one.
Lyric: <unk> well into the process.
Lyric: <unk> has been assembled and Gary has been confirmed.
Lyric: The summer and what we decided to find out year is our current projection so.
Lyric: So regarding valuation, for multiple reasons, we feel very confident that the value of the portfolio has gone up, that Samsung has benefited more through the years compared to the time of the last agreement. But obviously, we still need to have the arbitration to go through to confirm our belief. And I'll hand it over to Rich to comment on the Revenue Recognition site.
Lyric: So regarding <unk>, we feel very confident that the value our portfolio has gone up Santa has benefited more.
Rich: Through the year as compared to the time of the loss agreement. So so that obviously, we still need to have the arbitration to go through to come from our belief.
Rich: And I'll.
Rich: Kind of over to rich to comment on the revenue recognition side.
Richard J. Brezski: Yeah, thanks, Larry. Yeah, on the REVREC, we've been recognizing revenue since the first quarter of last year at a level with the prior Samsung agreement, which is just shy of $80 million a year. That's what we believe is a conservative estimate. We have effectively a license in place with Samsung, and we're just estimating what the ultimate outcome will be on a conservative basis. But because of the conservative nature of the gap requirement, we're certainly hopeful that we'll have a positive true up when it's ultimately concluded.
Rich: Yes, Thanks, Larry.
Speaker Change: Yes on the Rev Rec.
Richard J. Brezski: Recognizing since the first quarter of last year.
Richard J. Brezski: Level with the prior Samsung agreement, which is just shy of $80 million a year.
Richard J. Brezski: That's what we believe is a conservative estimate.
Richard J. Brezski: We have a effectively a license in place with Samsung.
Richard J. Brezski: And we're just estimating what the ultimate outcome will be on a conservative basis.
Richard J. Brezski: But because of the conservative nature of the GAAP requirement.
Richard J. Brezski: We're certainly hopeful that we will have a positive true up.
Richard J. Brezski: When it's ultimately concluded.
Richard J. Brezski: And as to the question on the decline in recurring revenue, I presume you mean 23 going into 24. So, based on what I just said, it's not because of Samsung but rather the expiration of other agreements, most notably Huawei, which expired at the end of last year. And, of course, we're working to...
Speaker Change: And as to the question on the decline in recurring revenue I presume, you mean 23 going into 'twenty four.
Richard J. Brezski: Based on what I, just said, it's not because of Samsung, but rather exploration of other agreements, most notably Huawei, which expired at the end of last year.
Richard J. Brezski: Yes.
Speaker Change: Okay of course, we're working.
Arjun Rohit Bhatia: Yep, perfect. All right. Thank you. One more if I can. It was interesting to hear the injunction against Lenovo and Oppo. And I'm curious.
Richard J. Brezski: Renewed.
Speaker Change: Yes, perfect alright, thank you.
Arjun Rohit Bhatia: One more if I can is interesting to hear the injunction against one of our and I'm curious in.
Arjun Rohit Bhatia: In the past, Laryn, to the extent you have experience with these injunctions, how do you think they or how have they maybe changed the behavior of some of these manufacturers in the past? I mean, is it enough of an incentive to bring them to the negotiation table and say, hey, we want to strike a deal? How punitive can those injunctions be for these companies to get them to strike a deal with you?
Arjun Rohit Bhatia: In the past to the extent you have.
Arjun Rohit Bhatia: Experience of this injunction how do you think they or how have they may be changed behavior of some of these manufacturers in the past.
Arjun Rohit Bhatia: Is it enough of an incentive to bring them to the negotiation table I'm, sorry, Hey, we want to.
Arjun Rohit Bhatia: We want to strike a deal like how punitive.
Arjun Rohit Bhatia: Cambodia injunctions fee for those campaigns.
Arjun Rohit Bhatia: To get them to strike a deal with you.
Lyric: Yeah, hey, Arjun. As we announced in the separate press this morning, the court in Munich has issued a decision. In that decision, basically, the court decided that InterDigital has consistently acted in good faith under the final obligation at all times. The court also said Lenovo had systematically acted in holdout, and frankly, that was not in compliance with the firm's obligation. So as a result, the court has issued the injunction of a patent that's essential for both 4G and 5G, you know, and unless something happens, Lenovo will be prohibited from selling devices with those features in the German market.
Arjun Rohit Bhatia: Yes.
Lyric: As we announced separately priced this morning. According Munich has issued the decision.
Lyric: In that mutation basically the court decided that interdigital has consistently act in good faith and other fan obligation at all times.
Lyric: The court also Lenovo has systematically assay being hold out and frankly, it's noncompliant.
Lyric: <unk> obligation. So other readout of the court has issued the injunction of a pattern that's standard essential for both <unk> and <unk>.
Lyric: And unless something happens lienau will be.
Lyric: Prohibited from selling devices with those features in German market.
Lyric: Regarding, you know, how the company may behave, I don't want to speculate on Samsung, no, on Lenovo, how they will proceed from here. All I can say is, you know, Germany is obviously a very major market, and this injunction applies to a pretty wide range of devices, actually beyond just cell phones. So I hope with this decision that nobody will come back and, frankly, take a license and a fine and terms from us. And I'm definitely hopeful.
Lyric: Regarding how the company may behave I don't want to speculate on Samsung.
Lyric: Lenovo holiday will proceed from here.
Casey: Casey it's.
Lyric: Germany is obviously all of our major market.
Lyric: Are you seeing junction.
Lyric: Applied to a pretty wide range of devices alky beyond cellphones. So I hope with this decision that nobody will come back and Frankie.
Lyric: Take a license and that's fine and fair times from Us.
Lyric: Definitely helpful.
Operator: All right, perfect. I appreciate the color. Thank you. Thank you. One moment for the next question.
Speaker Change: Alright, perfect I appreciate the color. Thank you.
Operator: Thank you one moment for next question.
Anja Marie Theresa Soderstrom: And our next question comes from Anja Soderstrom of Sudoti. Your line is open.
Speaker Change: And our next question comes from <unk> <unk> of Sidoti Your line is open.
Anja Marie Theresa Soderstrom: Thank you for taking my question. Can you please, we talked about this in the past, but maybe go over again the different opportunities you have to reach your guidance for 2024?
Anja Marie Theresa Soderstrom: Okay. Thank you for taking my question can you just talked.
Anja Marie Theresa Soderstrom: Talk about this in the past or maybe go over again the different opportunities you have to reach your guidance for 2024.
Lyric: Yeah, hey, good morning. This is Lawrence.
Anja Marie Theresa Soderstrom: Yeah, Hey, good morning, this alert so.
Lyric: So we, we have multiple passes on the smartphone side. Just for example, we have the OPPO negotiation where we will, as Rich just mentioned here, Huawei has expired, and we are renewing a discussion with them. And then Lenovo was licensed through a UK court decision for the cellular side until the end of last year. Now they are unlicensed. As we announced this morning, we received court injunctions, and we hope to be able to sign a long-term agreement with them. So that's just on the smartphone side.
Lawrence: <unk> may have multiple passes on the smartphone side just for example, we have.
Lyric: <unk>.
Lyric: Utilization, where weibo reached.
Lyric: <unk> just mentioned here, probably has that expired, which we re renewal discussion with them.
Lyric: Then lenovo was licenses through the UK court decision for the cellular side until end of last year now the unlicensed as we announced this morning, but youll see coding junctions and we hope to be able to frac.
Lyric: On the CE side, as we mentioned in the prepared remarks, we signed with Samsung TV, which is the largest vendor in the TV space. We are working diligently on the next multiple layers of TV vendors, including LG, TCL, and Hisense. So on top of all the stuff here, we are also working on the sense of arbitration, and we expect that to be finished before the end of the year. And if we are able to get a favorable judgment beyond revenue recognition, there will be a positive, true upheaval.
Lyric: Frank has signed a long term agreement with them. So that just on the smartphone side on the CE side.
Lyric: <unk> mentioned in the prepared remark, we signed with Samsung Samsung TV, which is the largest window in television space.
Lyric: We're working diligently on the next quarterly yourself, all Kiwi vendors in cold allergy Tcl and <unk>.
Lyric: So on top of all of the staff here. We are also working on the Samsung arbitration and we expect that to be finished before the end of the year.
Lyric: If we are able to get a favorable judgment beyond the revenue recognition there will be a positive true up also.
Lyric: Okay, thank you. Let me turn to Huawei. How constructive were those discussions given that you fairly recently signed an agreement with them?
Lyric: Okay. Thank you and then talk to allow a.
Speaker Change: Constructed Orlando discussions given you fairly recently.
Lyric: And then.
Lyric: Yeah, our Huawei negotiation is proceeding according to plan, and our last agreement expired at the end of the year. And frankly, Huawei's business has, you know, gone through a certain amount of a period of ups and downs. So we are currently in negotiations with them, and we are hopeful that we will get a long-term deal done with them.
Lyric: Yes.
Lyric: Holly negotiations are proceeding according to plan.
Lyric: Our loss agreement by the end of the year I am.
Lyric: And frankly, what <unk> business has gone through a certain amount of a period of up and downs. So we are currently in negotiation with them and we are hopeful we will get a long term deal.
Anja Marie Theresa Soderstrom: Okay, thank you. That was all for me. Thank you. One moment for our next question.
Lyric: Okay.
Speaker Change: Okay. Thank you that's all for me.
Anja Marie Theresa Soderstrom: Thank you one moment for your next question.
Anja Marie Theresa Soderstrom: Yeah.
Anja Marie Theresa Soderstrom: Yeah.
Scott Wallace Searle: And our next question comes from Scott Searle of Roth MKM. Your line is open. Thank you.
Anja Marie Theresa Soderstrom: And our next question comes from Scott Searle of Roth and Cam. Your line is open hey, good.
Scott Wallace Searle: Hey, good morning. Thanks for taking the questions. I apologize in advance.
Scott Wallace Searle: Good morning, Thanks for taking the questions I apologize in advance I was on the call late so if you've already covered this but leering in regard to the Lenovo injunction what is the actual process and procedure. There in terms of how that's going to be implemented and are there additional costs associated with our I believe that there is an appeal period from their standpoint so.
Scott Wallace Searle: I was on the call late, so if you've already covered this, but Laryn, in regard to the Lenovo injunction, what is the actual process and procedure there in terms of how that's going to be implemented? And are there additional costs associated with it? I believe that there's an appeal period from their standpoint.
Scott Wallace Searle: So could you walk us through the milestones, the timeline, and the cost element?
Scott Wallace Searle: Can you walk us through the milestones the timeline and the cost element.
Lyric: Yes. Hey Scott. Good morning.
Laryn: Yes, Hi, Scott good morning.
Laryn: So we have.
Speaker Change: I am now starting you were on the call. When you are describing the earlier. So basically the court has decided that Lee has assay being friend manner consistently all the time. The Lenovo has systematic conduct a hold out and the non <unk> obligation and they are frankly, leading licensee. Thus are resolved the court has issued an injunction.
Lyric: So we have, I'm not certain you were on the call when we were describing this earlier. So basically, the court has decided that we have acted in a friendly manner consistently all the time. The Lenovo has systematically conducted a holdout, and they are not in front of an obligation, and they are frankly an unwitting licensee. As a result, the court has issued an injunction against them that covers devices with 4G and 5G features built in.
Lyric: Some of that covers devices with four key <unk> features build team.
Lyric: So there will be some procedural stuff which we are frankly working through, and our intention is to enforce this injunction as quickly as we can. And you're also correct; this is what they call a first incident decision, which is automatically appealable. So I don't want to speculate on Lenovo's legal strategy, but that's frankly up to them.
Lyric: So there won't be some procedure stop which we are working through and our intention is tweaking forces.
Lyric: Injunctions that as quickly as we can.
Lyric: You also crafted DCC what.
Lyric: They call first insulin decision.
Lyric: It's automatically appealable.
Lyric: So I don't want to spec at all levels.
Lyric: Legal strategy.
Lyric: That's frankly out to them.
Scott Wallace Searle: Gotcha, and Larry, just to quickly follow up on that front, you know, this is in Germany. Will that extend to the rest of the EU, or what is the plan there in terms of how you implement it across the pan-European marketplace?
Speaker Change: Got you and just to quickly follow up on that front.
Scott Wallace Searle: This is in Germany will that extend to the rest of the EU or what is the plan. There in terms of how you implement across the Pan European marketplace.
Lyric: Yeah, Scott, this is a case that's a German patent, and it's a German court. So the decision will be limited to the German market. As you know, Scott, we do have other cases, including our case in the ITC, in the US against them in different technology areas. But this particular decision is German only.
Larry: Yeah. Scott. This this is the case that this is our chairman Patton and Asa German court. So the decision will be.
Lyric: Limiters to the German market lets you all were scobie do have other cases, including our pacing ITC U S against them in different technology area. So, but these particular decision was Germany only.
Scott Wallace Searle: Gotcha. And two others if I could.
Scott: Gotcha and.
Scott Wallace Searle: You know, just the latest update in terms of video IP licensing into the streaming and services model. Are there any updated thoughts, timelines, in terms of how that's evolving and the impact on 24 and 25?
Speaker Change: Two others, if I could.
Speaker Change: Just the latest update in terms of.
Scott Wallace Searle: Video IP licensing into the streaming and services model are there any updated.
Scott Wallace Searle: Thoughts timelines in terms of how that's evolving.
Scott Wallace Searle: The impact in 'twenty, four and 'twenty five.
Lyric: Yeah, hey, Scott, we do view the video cloud service licensing as a very, very good greenfield opportunity. We are proceeding according to plan, which we believe has very valuable IP assets and, frankly, very strong technology leadership. Regarding direct financial impact, as of now, we are not projecting material impact to 2024. And if we have more updates, we will share with you our timeline.
Speaker Change: Yes, Hey, Scott, we do view the way to cloud service licensing.
Lyric: Very good Greenfield opportunity.
Lyric: We are proceeding according to plan, which we believe have very valuable IP assets, and frankly very strong technology leadership.
Lyric: Regarding.
Lyric: The financial impact, but also now we are not projecting mature impact to 2024.
Lyric: If we have more update we will share with you our timely.
Scott Wallace Searle: And lastly, if I could, you've maintained the guidance range for the year of 620 to 670. I'm wondering if some things have kind of moved around in terms of higher probability versus lower probability. I'm not sure if you can address it, but just kind of, I know there are multiple paths to get to that range if there are certain things that have materialized and that you've become a little bit more confident about
Scott: Got you and lastly, if I could you've maintained the guidance range for the year of 6670, <unk> I'm wondering if some things have kind of moved around in terms of higher probability versus lower probability I'm not sure. If you can address it but just kind of.
Scott Wallace Searle: I know there are multiple paths to get to that range. If there are certain things that have.
Scott Wallace Searle: Materialize and become a little bit more confident about.
Lyric: Yeah, hey Scott, as I said in my prepared remark, when we issued the guidance at the beginning of the year, we feel very strongly that our business momentum has increased, and we have identified multiple paths to reach that result. And now we have delivered a resounding strong quarter in Q1, you know, for both the top line as well as, you know, adjusted EBITDA and EPS, and especially in the record-breaking C&R key
Speaker Change: Yeah, Hey, Scott as I said in my prepared remarks.
Lyric: When we issued the guidance beginning of the year, we feel very strongly that our business momentum has increased.
Lyric: <unk> multiple pass through rates that readout.
Lyric: And now we have delivered.
Lyric: <unk> strong quarter in Q1.
Lyric: For both the top line.
Lyric: Adjusted EBITDA and EPS and.
Lyric: Especially in the record breaking CN, our key space. So we feel very good about where we are and we are on track to deliver the readout and as of now we are not either predict the rest of the quarter and we.
Lyric: So we feel very good about where we are, and we are on track to deliver the result. And as of now, you know, we are not trying to predict the rest of the quarter. And other than that, we feel very confident about our predicted delivery for the year.
Lyric: Other than we feel very confident about Italy or for the year.
Speaker Change: Great. Thank you.
Operator: Thank you. This concludes the question and answer session. At this time, I'd like to turn it back to Lauren Chen for closing remarks.
Lyric: Thank you. This concludes the question and answer session. At this time I would like to turn it back to Larry Chen for closing remarks.
Lyric: Thank you, operator. Before we close, I'd like to thank all our employees for their dedication and contribution to InterDigital, as well as our many partners and licensees for an outstanding start to 2024. Thanks to everyone who joined our call today, and we look forward to updating you on our progress next quarter.
Lawrence Chen: Thank you operator, before we close I'd like to thank our employees for their dedication and contribution between their digital but as well as our many partners our licensee for outstanding start to 2024.
Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Lyric: Thanks to everyone, who joined our call today, and we look forward to updating you on our progress next quarter.
Operator: This concludes today's conference call. Thank you for participating and you may now disconnect.
Operator: Okay.
Operator: [music].
Operator: [music].
Operator: Okay.
Operator: Okay.
Operator: [music].
Operator: Okay.
Operator: Okay.
Operator: Okay.
Operator: Okay.
Operator: [music].
Operator: Yes.
Operator: [music].
Operator: Okay.
Operator: Yes.
Operator: [music].
Operator: Okay.
Operator: [music].
Operator: So.