Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- InterDigital Inc (IDCC, Financial) reported Q2 revenue of $223 million, exceeding the top end of their guidance.
- The company achieved a record first half revenue of $487 million and raised their full-year revenue guidance by $70 million to a new range of $690 million to $740 million.
- New licensing agreements with Google and Panasonic were secured, covering a range of devices and expanding their portfolio to include 5G assets.
- Significant litigation wins, including a UK Court of Appeal ruling that increased the licensing fee Lenovo must pay by more than $55 million.
- Strong cash flow and a cash balance of over $750 million support continued return of capital to shareholders, including share buybacks and dividends.
Negative Points
- The ongoing dispute with Lenovo remains unresolved for sales beyond 2023, and Lenovo is currently unlicensed for cellular patents.
- Potential delays in finalizing the monetary terms of the license with Samsung for mobile devices, with a decision expected by the end of the year.
- The expiration of the Huawei agreement in 2023 has not yet been renewed, impacting recurring revenue.
- The full process of the UK Court of Appeal ruling could extend further with a potential request to appeal to the UK Supreme Court, causing uncertainty.
- Despite strong performance, the full-year guidance implies a potential decline in recurring revenue, indicating challenges in maintaining consistent revenue growth.
Q & A Highlights
Q: Can you provide more detail on the application of your VVC patents for VR and AR use cases?
A: Our VVC portfolio, which includes the latest video codec, is applicable to XR, AR, and VR use cases. This includes our HEVC patents and core patents in wireless connectivity, such as cellular and Wi-Fi. The licensing approach will depend on whether the device makers are existing customers or new ones. We aim to get fair returns for our innovations while ensuring customers receive good value.
Q: What is the current status of your dispute with Lenovo regarding royalty rates and future agreements?
A: The UK Court of Appeal increased the lump sum royalty Lenovo must pay for cellular licenses through 2023. Lenovo is currently unlicensed for cellular patents in 2024, leading to an injunction in Germany. We aim to secure a forward-looking license that reflects the value of our portfolio, including HEVC, Wi-Fi, and other patents.
Q: Is there any remaining cash flow or catch-up revenue from the Lenovo contract expected in the future?
A: We collected the additional $55 million awarded by the UK Court of Appeal, along with reimbursement for litigation expenses. Future revenue recognition will depend on the final resolution of the appeal process, and our current accounting remains conservative.
Q: Does the new license agreement with Panasonic impact the third-quarter guidance?
A: Yes, the new license agreement with Panasonic is factored into our third-quarter guidance.
Q: The full-year guidance implies a decline in recurring revenue. Can you explain the factors involved?
A: The full-year guidance, increased by $70 million to a range of $690 million to $740 million, includes new business growth. The strong results in Q2 warranted this increase, and we expect continued momentum.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
