Q4 2024 InterDigital Inc Earnings Call
Your question. Please press Star one again, please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand, the conference over to your speaker today Raiford Garrabrant head of Investor Relations. Please go ahead.
Speaker Change: Thank you Michelle and good morning, everyone welcome to the Interdigital fourth quarter 2024 earnings Conference call.
Speaker Change: I'm ready for Gara, Brent head of Investor Relations for Interdigital with me on today's call are later on Chen, our president and CEO and rich Bressler our CFO.
Speaker Change: Consistent with prior calls we will offer some highlights about the quarter and the company and then open the call up for questions or additional details you can access our earnings release and slide presentation that accompany this call on our Investor Relations website.
Speaker Change: 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: Forward looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from the results in it that's contemplated by such forward looking statements.
Speaker Change: These risks and uncertainties include those described in the risk factors section of our 2024 annual report on Form 10-K, and our other SEC filings.
Speaker Change: 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.
Larry: Taken care of I will turn the call over to Larry.
Larry: Thank you Richard.
Larry: Good morning, everyone. Thanks for joining us today.
Larry: A year ago at this moment.
Larry: Shared our belief that interdigital has never been better positioned to drive.
Larry: Now sitting here 12 months later I'm delighted to share that.
Larry: 'twenty 'twenty four we delivered the best business readout in our history.
Larry: And since our technology, a more critical than ever.
Larry: Okay.
Larry: We can Ravi six trading dollars economic ladder every year. We believe we are just getting started.
Today, I'll recap the fourth quarter readout summarizing our highlight for the full year and provide more details on our gross cost through 2020 five and beyond.
Larry: Including a significant deal vitamin video service program.
Larry: Yeah.
Larry: In the fourth quarter, we delivered another outstanding performance, our revenue increased 140% year over year to $253 million.
Larry: Our adjusted EBITDA, and non-GAAP EPS, nearly quadrupled year over year.
Larry: So as we discussed in our last earnings call, we signed a new license agreement with <unk> last quarter.
Larry: However in the worldwide steel itself, Okay, we all meet at rampart devices.
Larry: We have now licensed award top four largest smartphone manufacturers and approximately 70% of annual smartphone shipment worldwide.
Larry: We also added to the momentum our smartphone program in the quarter. So RV newer agreement with a major Chinese technology companies DTE.
Larry: And with our announcement that'd be a bit entered into binding arbitration with lenovo to determine the final terms of a license and ended all litigation with them.
Larry: Looking at 'twenty 'twenty four overall.
Larry: It was another outstanding 12 months for the company.
Larry: Revenue for the year increased almost 60% to $869 million.
Larry: The highest annual revenue in the company's history.
Larry: Essentially increased momentum across all our programs and the new agreement with some of the worlds largest device makers.
Larry: We also delivered record level of adjusted EBITDA and EPS in 2024.
Larry: Rich will cover those financial results in more detail in his section.
Larry: Across our licensing programs, we closed 14, new agreements throughout the year.
Larry: In addition to our smartphone items with Oakland H E. B, you sign a new license with Google covering a range of devices as well as new license with leading TV manufacturers Samsung N P. P weak.
Larry: Consumer electronic and Iot program.
Larry: We have now close license agreement were small that 3.3 P M.
Larry: Since the start of 2021.
Larry: In 'twenty three for more than 30% our revenue for the year come from consumer electronic and Iot program.
These highlights are outside of BC beyond our smartphone program.
Larry: And reflects our video and wireless technology supports our expanding range of use cases.
Larry: Okay.
Larry: So as you may recall, we are you know binding arbitration to saddle. The final terms of our license with Samsung for mobile devices.
Larry: The party finished the last round up here last October.
Larry: Backing to have a final decision soon.
Larry: Other reminder, signs are already agreed to take it as a portfolio starting from January one of 2023.
Larry: And its binding arbitration to determine the final terms of the license.
Larry: Okay.
Larry: Our research teams are firing on all cylinders as we grew out either shaping the development of key tenders maintain our focus in quality offering innovation and breaking new ground in application of cutting edge technology, such as AI.
Larry: Yeah.
Larry: We have been working on the application of AI to wireless and video for years and already they're shaping the space was once again to the four throughout 2024.
Larry: In December <unk>.
Larry: Innovation award from fierce wireless for our outstanding innovation Novartis related AI.
Larry: Specifically the award was for AI empowered receiver design for 60 communication, we choose AI and machine learning to improve performance of a wireless network.
Larry: From AI to redo wireless and licensing.
Larry: Our industry leadership extends across the whole business.
Larry: We hold more than 100 dealership producing in standard organization.
Larry: While only three companies in the world.
Larry: My thoughts share position within three GPP.
Larry: The standard body that cellular standards.
Speaker Change: In licensing our chief licensing officer, Eva Hunker Roundtop was named among the 50, most influential people intellectual property by a leading IP publication.
Speaker Change: We continue to excel converting our research leadership into pattern.
Speaker Change: Building on what we firmly believe it's one of the strongest patent portfolio in our industry.
Speaker Change: In 2024, we made more than 5000, new patented bodies worldwide.
Speaker Change: With our global portfolio not over 33000 net adds.
Speaker Change: The space. However, you know which was once again confirmed.
Speaker Change: We were named one of them towards 100, most innovative company for certain cost out of the year by Lexisnexis.
We were also named him onto the worlds, leading patent holders in five key advanced video compression and Wi Fi is separate report from Linzess.
Speaker Change: Chris.
Speaker Change: Also in 2024, we all kind of a clear path to a significant increase our revenue and profit at our Investor day.
Speaker Change: Wherever you announce new target of more than $1 billion in annual recurring revenue.
Speaker Change: $600 million in adjusted.
Speaker Change: Adjusted EBITDA by 2030.
Speaker Change: Now turning to 2025.
Speaker Change: With a strong foundation to build on from last year.
Speaker Change: Our priority is to continue to execute our long term growth strategy.
Speaker Change: We believe our technology, it's more valuable.
Speaker Change: In the connected world.
Speaker Change: We lead the development of standardized technology that I implemented in billions of devices every year and we have a proven track record to convert our research and patent leadership into new license agreement.
Speaker Change: We plan to grow our business by focus on signing the remaining unlicensed smartphone vendors.
Speaker Change: By renewing our existing agreement at a higher level where appropriate.
Speaker Change: We will build on our considerable progress in our consumer electronic and Iot program.
Speaker Change: And we intend to make more progress in our greenfield opportunity in video services.
Speaker Change: Yeah.
Speaker Change: We feel strongly that our renewed has knowledge and European cell viability of video streaming industry.
Speaker Change: How can that support more efficient video compression improving quality, all pictures and enhance user experience.
Speaker Change: This week, we initiated a multi jurisdictional enforcement action against decent.
Speaker Change: Including Disney plus Hulu and ESPN plus.
Speaker Change: For the ongoing infringement of our intellectual property.
Speaker Change: These needs and read about <unk> $5 billion in streaming services revenue from over 250 million paying subscriber in FY 'twenty four.
Speaker Change: But in all our licensing programs, we expect so.
Speaker Change: The last majority of license agreement to be to an amicable negotiations.
Speaker Change: But we are always prepared to defend the variety offer innovation and our patent rights.
Speaker Change: We believe that the significant investment in fundamental research.
Speaker Change: The past several decades, so be compensated fairly.
Speaker Change: Which enable us to continue feedback in the next generation innovation that will benefit our customers and consumers worldwide in the future.
Speaker Change: Before I hand, it over to rich I hope to see many of you who can make it to mobile World Congress in March <unk>.
Rich Bressler: Please join us at our booth in Hull five to see the very latest scheme wireless radio and AI innovation.
Speaker Change: And with that I'll, let Rick talk you through the numbers in more detail.
Rick: Thanks Lauren.
Rick: As we noted in Q4, we delivered an outstanding finish to the year.
Rick: Total revenue of $253 million increased 140% year over year and was above our outlook of $239 million to $249 million driven primarily by new agreements that closed after the prior guidance.
Rick: Our Q4 revenue included catch up revenue of $136 million related to our fourth quarter license agreements with OPO Lenovo and GTA.
Rick: Our adjusted EBITDA for the quarter of $198 million.
Rick: Exceeded the top end of the outlook of $180 million to $190 million as the vast majority of the revenue upside flowed through and resulted in an adjusted EBITDA margin of 78%.
Rick: GAAP EPS for the quarter of $4 nine beat.
Rick: Beat our guidance non-GAAP EPS for the quarter of $5.15 came.
Rick: <unk> came in below our guidance due to greater dilution from the converts on account of our higher share price and lower than expected non-GAAP adjustments for Q4. However.
Rick: However for the full year, both GAAP EPS of $12 seven and.
Rick: And non-GAAP EPS of $14 97.
Rick: Came in at or above the high end of the range.
Rick: Meanwhile, cash generation for the quarter was exceptionally strong with cash from operations of 192 million and free cash flow of $169 million.
Rick: Building on <unk> comments.
Rick: Highlight a few noteworthy metrics from our full year 2024 results and provide additional perspective on how each item has improved over the last four years.
Rick: Altogether these metrics demonstrate our success in progressing towards our objective of delivering $1 billion plus in annual recurring revenue and $600 million plus of adjusted EBITDA by 2030.
Rick: Total revenue accelerated to 869 million, an increase of 58% year over year, resulting in a compound annual growth rate of 25% over the past four years.
Rick: Our 2024 revenue included $269 million of CE Iot revenue.
Rick: More than triple prior year levels.
Rick: This result, which includes our milestone agreement with Samsung T D.
Rick: Demonstrates our ability to grow revenue by capitalizing on the value of our family the foundational technologies bring to markets beyond smartphones.
Rick: Okay.
Rick: Adjusted EBITDA margin was very strong again in 2024 coming in at 63%.
Rick: Two point improvement over the past four years.
Rick: Over that same timeframe adjusted EBITDA has grown more than three five times.
Rick: We ended the year with almost $1 billion in cash, including net cash of over $500 million, which is up more than $100 million from last year.
Rick: Full year cash flow continued to be robust with $272 million of cash from operations and $213 million of free cash flow for the year.
Rick: In fact over the last four years, we've generated nearly three quarters of 1 billion in free cash flow.
Rick: These strong cash flows allowed us to return $110 million to shareholders through buybacks and dividends and $126 million to holders of our 24 notes upon their maturity last spring.
Rick: Over the last four years, we have returned the vast majority of our free cash flow to shareholders through share buybacks and dividends totaling $678 million.
Rick: In that time, we have reduced our outstanding share count by $5 1 million shares were 17% to 25 7 million shares at the end of 2024.
Rick: Turning to our outlook, we have guided to another very strong year in 2025.
Rick: With total revenue in the range of $660 million to $760 million.
Rick: Adjusted EBITDA of $400 million to $495 million.
Rick: And non-GAAP diluted earnings per share of $9 69.
Rick: To $12 92.
Rick: In addition, we expect to improve upon the strong free cash flow we delivered in 2024.
Rick: As we anticipate the resolution of an outstanding arbitration and continued success from our licensing efforts will drive double digit growth in free cash flow for 2025.
Rick: With that as a backdrop our board of directors approved a 33% increase in our dividend from <unk> 45 to <unk> 60 per share.
Rick: As a reminder, we began the year with $230 million remaining on our buyback authorization.
Rick: Between the increased dividend and our commitment to continued share buybacks. We expect to have another strong year of returning capital to shareholders in 2025.
Rick: Okay.
Rick: You will see in our financial metrics that we have also begun to present annualized recurring revenue.
Rick: This metric simply annualize the recurring revenue for a given quarter.
Rick: For example in Q4, we had $117 million of recurring revenue. So multiply that by four and you get $468 million of IRR, which is by far a record level.
Rick: Over the last four years, we have increased our IRR at a double digit growth rate from.
<unk> $314 million at the start of 2000 $21 million to $468 million at the end of 2024.
Rick: As we begin 2025, we do have a small step down due to 2020 for yearend explorations.
Rick: But we expect to drive renewals and agreements this year to close 2025 with double digit growth in IRR from the $468 million level at which we concluded 2024.
Raiford Garrabrant: Before I turn it back to raiford I want to reiterate that our quarterly guidance for Q1 'twenty. Five does not include the impact of any new agreements, where our arbitration results, we may sign or receive over the balance of the first quarter.
Raiford Garrabrant: This is because it is harder to predict the timing of new agreements and short windows.
Raiford Garrabrant: In contrast, our full year guidance includes contributions from both new agreements and arbitration results.
Raiford Garrabrant: As was the case last year, we believe we can achieve financial risk.
Raiford Garrabrant: Annual results within our full year guided range through different combinations of new agreements and arbitration results.
Richard: With that I'll turn it back to Richard.
Rich Bressler: Thanks, Rich before we move to Q&A I'd like to mention that we'll be attending a number of investor events in Q1.
Rich Bressler: The Roth conference in Dana point, California.
Rich Bressler: And the Sidoti conference, which is virtual ways.
Rich Bressler: Please reach out to your representatives at those firms if you'd like to schedule a meeting.
Speaker Change: Michelle we are now ready to take questions.
Speaker Change: Thank you 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.
Speaker Change: Ask that you please limit yourself to one question and one follow up before returning to the Q1 moment for our first question.
Speaker Change: Our first question is going to come from the line of Scott Searle with Roth Capital Partners. Your line is open. Please go ahead.
Scott Searle: Hey, good morning, Congrats on the quarter guys. Thanks for taking my questions.
Scott Searle: Just to dive in on the on the Disney Front I'm wondering if you could put some parameters around the timing of when you would expect this to progress and kind of the milestones. There also if you.
Scott Searle: Could address your engagement with other video streaming vendors and opportunities as they are ongoing within 2025 like kind of the level of engagement that you're seeing.
Scott Searle: Yes, Hi, good morning, Scott San for the question so regarding Disney.
Scott Searle: Oh, it's public knowledge in our legal filings.
Scott Searle: We haven't engaged his nipple more than twice half youre seeing bilateral negotiation and <unk>.
Scott Searle: You know we prefer to assign most of our deals through amicable discussions.
Scott Searle: But we have concluded after spending.
Scott Searle: Glenn half years negotiating enforcement if needed for these pretty good pace.
And as you probably know already enforcement with me starting in that case, we are fully committed to leading through the course of time.
Scott Searle: So the lawsuits.
Scott Searle: But in any other case is also we are always open for negotiations during the lawsuits. So it's difficult for me to predict precisely Paul on the losses May last as you probably know from our smartphone experience sometime it can be Friday quickly resolved and sometimes it takes multiple years to resolve.
Scott Searle: All of these cases I was hoping I could do not really know for sure how long this case will take.
Scott Searle: So regarding engagements other licensed.
Scott Searle: With other streaming service providers, so as we are.
Scott Searle: These guys before Investor day, we have engaged with almost all of the major players.
Scott Searle: And we are patient in damaged narrow body to them and we hope to make progress as always robot that renegotiation.
Speaker Change: Okay. Thanks, that's very helpful. Maybe maybe shifting to the annual guidance I know this is a very difficult one to pin down but could.
Speaker Change: Could you provide some color in terms of the range of outcomes, how youre thinking about it in terms of.
Speaker Change: Ketchup sales versus how we would be exiting the year from a recurring revenue standpoint, I know that there are probably multiple different ways to get there, but if you could kind of help us frame it a little bit and as part of that Rich's, we're looking to the first quarter and that recurring revenue guidance I think it's $1 12 to 116.
Speaker Change: I know there are some explorations this year I think in the K you talk about seven agreements for a total of 90 $192 million how much of that is layering into the first quarter recurring guidance.
Speaker Change: Yes, Hey, Scott, let me take on the majority of the opening opportunities and now I'll have reached adding on the details for the.
Speaker Change: Numbers.
Speaker Change: So if you look at our 'twenty to 'twenty five major opportunity here.
Speaker Change: You know, we Havent three major programs on the smartphone side with our momentum for signing Opel and frankly at DTE and others.
Speaker Change: They only have led to a handful of major opportunities we need to assign I am the largest lantus label as you're all aware then we need to.
Speaker Change: Essentially resolved.
Speaker Change: Owner and property claims and.
Speaker Change: Not necessarily in that order by the MBA engaging with all of them in parallel.
Speaker Change: On the consumer electronics our teeth.
Speaker Change: We have built a lot of momentum as Bruce has covered in his section, we see tremendous amount of growth in multiple verticals.
Speaker Change: But our priority number one is to frankly signing.
Speaker Change: Some of the largest TV makers as well as making progress.
Speaker Change: Different segmental vertical for our key.
Speaker Change: For the service industry as we already touched on here will be happy to not take back any material revenue for <unk> five starting point of our two engaging the major players and build a multiyear negotiating progress.
Speaker Change: And obviously, we already touched on the enforcement of this business.
Speaker Change: Yes, Scott I'll, just add to that.
Speaker Change: Comments I noted that we ended.
Speaker Change: 2024 was $468 million of IRR and.
Speaker Change: We're looking to through renewals and new agreements drive double digit growth in that <unk> number by the end of 2025.
Speaker Change: As to Q1.
Speaker Change: <unk> correctly that at the end.
Speaker Change: Over the course of 'twenty, five and I'll say typically agreements are calendar year basis, not always but typically.
Speaker Change: That we have $91 million of explorations and 25 again typically at the end of the year.
Speaker Change: So thats really not an impact in a couple of million dollars difference between recurring revenue in Q4 stepping down to Q1, that's really driven by 'twenty four explorations I think we noted we had 524 explorations totaling $17 million.
Speaker Change: That may have kind of shows you that that's the majority of that step down.
Speaker Change: Great very helpful and lastly, if I could just on the capital structure and the convert rich could you take us through.
Speaker Change: What you're factoring in for the first quarter and how that will progress in terms of interest expense the fully diluted share impact.
Speaker Change: And also how youre thinking about the capital structure in general I think when you first.
Speaker Change: Initiated a convert years ago. It was to be able to have a robust balance sheet to be able to litigate against.
Speaker Change: Potential customers like Disney now given that you've got 500 million of net cash.
Speaker Change: Is that a mechanism.
And an instrument that you guys need to have in the future going forward. Thanks.
Speaker Change: Sure. So let me take the first part of that question, then I'll get to the kind of structure as we see it going forward.
Speaker Change: In the first quarter.
Speaker Change: When we.
Speaker Change: We're in any quarter factoring in interest income and interest expense.
Speaker Change: We're not really looking at that much differently than than we have in recent quarters.
Speaker Change: We also as you alluded to we need to factor in any potential dilution from the convert or the related hedge there.
Speaker Change: That becomes a function of the stock price.
Speaker Change: Typically we're looking at what the stock prices around the time that we post that guidance.
Speaker Change: And I know Youre aware of this but for everybody's benefit.
Speaker Change: Our 10-K as in our Qs and.
Speaker Change: In the footnotes to our financial statements, we have a sensitivity table that shows how that dilution is.
Speaker Change: Impacted at different prices.
Speaker Change: Again, theres greater dilution on the convert itself, which we reduced through the hedge and on the far right column, you'll see the net dilution.
Speaker Change: From the from the warrants that we issued.
Speaker Change: As for the cap structure in general.
Speaker Change: Yes, we thought for more than 10 years have been.
Speaker Change: Rising converts to help bolster the balance sheet that enables us to.
Speaker Change: Go toe to toe with larger customers when necessary.
Speaker Change: If they if we need to enforce our rights, while being able to buy.
Speaker Change: Buyback stock and return capital to shareholders.
Speaker Change: Because we're just in a much different position then than even when we did the last convert in the spring of 'twenty two.
Speaker Change: We have more options available to us going forward not.
Speaker Change: Not to say, we make any predictions on what we'll do there I'm, just saying that we enjoy having more optionality in how we look at our cost structure.
Speaker Change: Okay, great. Thanks, so much ill get back in queue.
Speaker Change: Thank you great. Thanks, Scott.
Speaker Change: As we move on to our next question.
Speaker Change: Our next question comes from the line of Arjun Bhatia with William Blair. Your line is open. Please go ahead.
Arjun Bhatia: Perfect. Thank you guys I appreciate you taking the question here.
Speaker Change: Maybe I'll start first on the.
Arjun Bhatia: The streaming opportunity, it's good to see that.
Speaker Change: There is.
Speaker Change: Kind of a litigation and were somewhat far down the monetization path.
Speaker Change: Video technology.
Speaker Change: One question I have on that.
Speaker Change: For smartphones I think we all kind of understand.
Speaker Change: Oliver.
Speaker Change: Economics work right.
Speaker Change: Based on kind of unit.
Speaker Change: Smartphones sold what the royalty rate when we're looking at the streaming opportunity how should we think about kind of the underlying metric that.
Speaker Change: We should get grounded in for some sort of a royalty rate.
Speaker Change: With Disney for example, already mentioned 25 billion in streaming revenue and I think 250 million subscribers is it more on the per minutes streamed as the number of subscribers is that a revenue rate. How are you thinking you might monetize.
Speaker Change: The opportunity here.
Speaker Change: Hey, good morning. Thank you for your question. So on the streaming side here, we are honestly flexible in negotiating with our customers based on.
Speaker Change: What is the ride matrix to use if you look at fundamentally you'll be bringing settled very important technology that we believe underpin their services.
Speaker Change: It's both in driving their revenue forward as well as saving cost operating side in terms of storage power as well as coatings on Internet services here.
Speaker Change: So and by the way various different streaming services may have different business models. Some of them are subscription based something maybe advertisement sponsor based.
Speaker Change: So let me go poach them fundamentally we try to charge for very small at fair price for what we bring to the table that enable their services. So that can be subscription based where we will get a small percentage of the master subscription fee content mambo subscribers all of that can be authority a small percentage.
Speaker Change: The overall revenue we are.
Speaker Change: Okay for both arrangement.
Speaker Change: The overall size of the market and as we have discussed in our Investor day.
Speaker Change: We project based I'll start party data that by 2027, the streaming to see overall will be the same size of the smartphone industry.
Speaker Change: And as you all were on the smartphone side, which as you commented on we have damaged a lot of progress and frankly, we have shown solid readout in that industry.
We are projecting getting above $500 million in recurring revenue from smartphone by far the streaming services, even though we believe our technology is just as important to them.
Speaker Change: Just by having new because we believe we have to demonstrate our patients.
Speaker Change: And so therefore, we are in my opinion conservatively setting the target to be about $300 million.
Speaker Change: By 2030.
For that market to Easter to mature flowers overtime.
Speaker Change: Okay understood very helpful. Thanks.
Lynn.
Speaker Change: Wonder if I can.
Speaker Change: A follow up just on the recurring revenue outlook.
Speaker Change: Our 2025, it sounds like you're baking in.
Speaker Change: Some.
Speaker Change: Incremental upsell and maybe arbitration agreements.
Speaker Change: With.
Speaker Change: I mean, it's agreements in particular do you have kind of a sense of.
Speaker Change: The range of uplift that youre expecting from Samsung, which I think should be coming relatively soon like how should we benchmark the potential uplift that you could see there that's analysis in Q1 or Q2 here.
Arjun Bhatia: Yes, Hey, Arjun disciplined so I'll cover it for us if theres anything else, which might be what the timing. So on the recurring revenue side rich commented wheel.
Arjun Bhatia: <unk> grew our recurring revenue in 2025 by at least double digit growth.
Arjun Bhatia: But that's also not based on any single deal anything go outcome. So we have a number of opportunities we are pursuing and by the way a number of those opportunity carry both recurrent revenue as well as catch up payment. So so we really look at all of the opportunity Holistically and we frankly estimate.
Arjun Bhatia: I'll come for per case, that's what's the likelihood that they will be down. This year. So this is the same process. We took last year. So thats why we frankly added them up into a range of outcomes here.
Arjun Bhatia: Regarding to the Samsung arbitration outcome as I commented on earlier, we have spent substantial amount of effort to boost or the process already.
Arjun Bhatia: Match Pratt the loss sharing happened last October already.
Arjun Bhatia: At that time to arbitrate or told us they will take time to essentially make their dcs and riding their conclusion and due to the holiday season E&P thing. So basically they told us that they will be after new year.
Arjun Bhatia: So we are waiting for the outcome and as I commented earlier here that can be some but we don't know precisely what time.
Arjun Bhatia: Regarding the outcome with a range of we commented before our prior calls we believe strongly that nobody our portfolio has gone up substantially due to the lost contract and if you look at the most closely.
Arjun Bhatia: Comparable we believe we.
Arjun Bhatia: We should realize any update from the auto body, but this is for the arbitrator to decide and we are currently just waiting for the result.
Arjun Bhatia: Alright wonderful thank you.
Arjun Bhatia: Thank you and one moment as we move on to our next question.
Speaker Change: Our next question is going to come from the line of Kelly <unk> with Bank of America. Your line is open. Please go ahead.
Speaker Change: Kelly your line might be on mute.
Speaker Change: Can you hear me.
Speaker Change: We can now sir.
Speaker Change: Perfect. Thanks once again.
Speaker Change: Beating the numbers by significant amount and I don't think you ever reported a number that is even remotely close to your guidance. It's so hard to predict the numbers.
Speaker Change: So I wanted to focus on the recurring part and I have two questions.
Speaker Change: On the recurring you said that.
Speaker Change: <unk> should grow double digits is are the trends in revenues different than <unk>, meaning is there any deviation between revenue growth.
Speaker Change: <unk> growth and what could be the reasons for that.
Speaker Change: And the second question is you noted $70 million.
Speaker Change: Aspire, then 2024 and 91 million expected to expire in 2025.
Speaker Change: What happens with these explorations are they renewed before.
Speaker Change: Before renewed after how does it go with this explorations of recurring revenues.
Rich Bressler: Okay, Hey, Thanks, Tal this is rich.
Speaker Change: Let me <unk>.
Speaker Change: Start with the first question I think maybe later on will have a comment for a second question I may have a point to make there.
Speaker Change: So yes.
Speaker Change: I guess, the first point to emphasize.
Speaker Change: We issue quarterly guidance and I mentioned this in my prepared remarks again today.
Speaker Change: It's difficult for us over a short window to determine what the time period when exactly new agreement.
Speaker Change: Across the line.
Speaker Change: Our customers are already using our technology. So it's not like we know that they need to make a decision.
Speaker Change: Can.
Speaker Change: Produce their product and ship it on a certain deadlines theyre already using it and it's really been a function of when can we reach an agreement to them on a fair amount that they should pay us.
Speaker Change: As a consequence on our quarterly guidance, we typically are not.
Speaker Change: Not including the potential for new agreements.
Speaker Change: And therefore typically on a quarterly basis, if we sign a new agreement will come in higher.
Speaker Change: For the full year guidance.
We did initiate for the first time full year guidance last year in 2024.
Speaker Change: We thought that we came out with.
Speaker Change: A very strong number for 2024 and full year guidance, but frankly, we just had as we discussed on the call here, an outstanding year, and we are able to.
Speaker Change: Raise it and then beat that.
Speaker Change: So we're thrilled about the performance we delivered in 2004, and we're very happy to so I feel confident we can come out with strong numbers again for 'twenty five.
Speaker Change: So hopefully that helps as.
As far as recurring revenue versus total.
Speaker Change: Looking back I mentioned on my call over the last four years, we've had a double digit CAGR in total revenue.
Speaker Change: We have been signing new agreements and been getting ketchup sales along with it.
Speaker Change: Fortunately, we've also had a double digit CAGR over that time period.
Speaker Change: And I like to IRR, we've added it to our metrics one problem with recurring we sign although in the fourth quarter of 2024, and it contributes one quarter of recurring revenue, even though there's catch up sales associated with it. So I think if you look at 2000.
Speaker Change: 24 recurring revenue it's.
Speaker Change: It's not factoring that in if you look at the IRR, we close 2024 at $468 million, that's kind of a better measure in my mind of kind of.
Speaker Change: What we're earning on a recurring basis.
Speaker Change: I'll, let me start with our response to the second comment, Yes, Hey, Paul Good morning. Thank you for joining US here. So on the recurring versus some time, we have <unk> recently for contract here I mean, a number of white, it's absolutely normal to have certain amount of contract expiries each year.
Speaker Change: And frankly, because we have science system any agreement maybe have signed 14 agreement this year, our average contract length.
Speaker Change: Throughout the around five years, sometimes longer sometimes a disorder. So any given year, we will have a few contract expire so for last year to this year, we have $17 million at expiry issue. That's one seven so it's actually a relatively small number from last year to this year.
Speaker Change: So we our goal honestly is always hydro get them renewed before they expire.
Speaker Change: In some time.
Speaker Change: Exploration team.
Speaker Change: Thank you for another year of what's happened to be a holiday time that David had called for various different reasons to get them done in time. So it can be frankly put it over to the next year.
Speaker Change: For this year for 2025 at the end of this year I want to make sure you guys are aware, we do disclose the number I think 10-K filing we have about $791 million of exploration, primarily driven by our xiaomi contract that's helpful for renewal.
Speaker Change: This year.
Speaker Change: So I won't be able to comment on specific negotiations because they are covered.
Speaker Change: Nda's, but what we typically do towers for a major agreement, we start Ralph lean or six months to a year ahead of time be damage at the body or for technology issue within the doors for the portfolio as well as damage wisdom holiday have benefited more.
Speaker Change: These time comfort the time after the last contract.
Speaker Change: And then when it's appropriate.
Speaker Change: We have demonstrated through multiple contracts here, we all try to get a higher loading in the renewal if they have benefited more so thats a general practice call.
Speaker Change: And we have demonstrated in the last four or five years.
Speaker Change: Had a good track record of new large contract, including the largest contract for Apple before they expire and that's that's what we always target to do.
Speaker Change: So when you give the guidance for the year. This year do you assume that the $17 million that expired last year would be renewed this year do you do you assume.
Speaker Change: Renewal of the of the expired ones or is it excluded also from the numbers.
So Todd the way we do in your forecast.
Speaker Change: They looked at all of the opening opportunities.
Speaker Change: Including on site customers us broad renewables by the way we are now trying to <unk>.
Speaker Change: Target for replacing dollar for dollars, we're trying to renew that customer one by one when they come due and.
Speaker Change: You all were at how some of the customer gained market share over the years something may lose market share something may have a higher mix of <unk> devices. They may have gone up in terms of average selling prices. We've factored in all of those parameters. So therefore, we have not tried to replace every dollar from every customer, but we've got time to renew them.
Speaker Change: <unk> many benefits more we tried to get a higher valuation out of that new contract.
Speaker Change: Nominal Hollywood works, so far this year, when we gave the guidance call but.
Speaker Change: As I mentioned earlier, we try to look at all of the open opportunities.
Speaker Change: <unk> tried to obviously drive them to closure as much as we can but we also know sandoz agreement takes longer to renew with the others.
Speaker Change: First Tom customers frankly try to solve their Pos sales can be.
Speaker Change: Quite a complex negotiation so internally, we have science certain amount of probability I started them on a range of outcome for each of the cases and the total making ourselves what we call entirely multi path to get to the readout by targeting our rich.
Speaker Change: Yes.
Speaker Change: Okay. One last question geopolitics.
Speaker Change: A lot of your customers are coming from China, all the situation on the geopolitical tension between China and the U S.
Speaker Change: Do you expect it to have any impact on your contract elongate them or any other type of impact.
Speaker Change: Yeah, Hey, Todd that's a great question. So we all know the geopolitics as always.
Speaker Change: In the macro environment, we consider but there are several things to keep in mind.
Speaker Change: Number one our technologies global our technologies built into OLED standard that is frankly developed by industry associations. So that technology itself. It is not subject to any export license control and frankly, no not a single government, including you guys saw a tiny comments fully owned that.
Speaker Change: Standard so that's always open.
<unk>.
Speaker Change: The second one is really most of the open opportunity. We are trying to pursue are from large customers, who have international business, but our sales are driven by many different things and Frankie.
Speaker Change: Look at smartphone industry in particular, those large customer always value domestic industry as well as foreign market and they want it to be big anchor. So that is a healthy dynamic for us. The third one which is really important for me is I spent some substantial amount of time being frankly dcs.
Speaker Change: And at Brazos, and other capital, including Beijing, and other places here.
Speaker Change: For me and policymakers.
Speaker Change: Our business model is pro competition.
Speaker Change: Our business model, it's good for them. It's good for their countries. Good for consumers. It's good for the vendors who are benefiting some mendes Lee from our fundamental innovation. That's what enabled this window to kamin play leveraging what we have developed and becoming global competitor Rhapsody fast.
Speaker Change: So frankly, we have done a good job explaining opt in auto I would tell you would call at that hour.
Support.
Speaker Change: Different countries.
Speaker Change: Strong.
Speaker Change: Sure.
Speaker Change: Great. Thank you.
Speaker Change: Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone one moment for our next question.
Speaker Change: Our next question comes from the line of <unk> <unk> with Sidoti. Your line is open. Please go ahead.
Speaker Change: Alright, and thank you for taking my questions actually most of them have been directed already and congrats on the great performance here.
Speaker Change: When we went into 2024 at the end of the guidance you.
Speaker Change: You gave the guidance for the year and then <unk>.
Speaker Change: Seem like you gave a guidance that lessen a little bit modest they're going into the year with him.
Speaker Change: Makes sense about are you doing the same approach this year you think.
Speaker Change: So let me take the broader.
Rich Bressler: Broader question here I'll ask rich to two timing.
Speaker Change: If need to be so.
Speaker Change: As I explained earlier right. So we tried to take a holistic view of all the <unk> opportunities and.
Speaker Change: He saw opportunity essentially associated a likelihood of completions in the year as well as a range of possible <unk> patients and if it's a renewal we assign obviously started a mono <unk>.
Speaker Change: Current revenue.
Speaker Change: It's brand new signed customers here, we also have to estimate how much catch up here, maybe you can get from that deal.
Speaker Change: Frankly, the timing and the dollar amount.
Speaker Change: Hard to pin down later long lead time, right, but but we obviously wanted to be we now lead the peer input saw process generally at the beginning of the year, we do the FASB tend to come off the range.
Speaker Change: But larger deals happens throughout the year as we have demonstrated last year.
Speaker Change: If we have down more better faster, we'll provide guidance accordingly.
Speaker Change: The updated I'll give you the latest information that as a general approach we take.
Speaker Change: So I don't know if theres anything we just wanted to add no I think that covers it.
Speaker Change: Okay. Thank you and then just a follow up on the geopolitical.
Speaker Change: Environment here within your administration do you feel like.
Speaker Change: The sentiment has changed in any way with their your counterparts are.
Speaker Change: Yes, that's a great question.
Speaker Change: You look at the New administration for U S.
Speaker Change: Traditionally I think many of you guys are where the public is a stronger IP protection in general.
Speaker Change: Again, I'm not specifically, commenting on any specialty personal anything so we believe it's a generally a good thing for full IP licensing.
Speaker Change: But we are still at the beginning of the New administration and probably be historic has a close working relationship with.
Speaker Change: Both administrations in the last year.
Speaker Change: It's more so we continue to build those relationships, we demonstrate to them why our business is good for U S Y our technology leadership is important to U S technology leadership as well as in.
Speaker Change: The future of our country. So those are pretty well received and I expect strong support going forward.
Speaker Change: Okay.
Speaker Change: Okay. Thank you that was all for me.
Speaker Change: Thanks.
Speaker Change: Thank you and I would now like to hand, the conference back over to <unk> Chen for any further remarks.
Speaker Change: Yeah, Hey, thank you operator.
Speaker Change: Before we close I'd like to thank our employees for their dedication and contribution in their digital but as well as the many partners and licensees for a record year in 2024 I.
Speaker Change: I also thank you, everyone, who joined us today.
Speaker Change: We look forward to updating you on our progress next quarter.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect everyone have a great day.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].