Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- InterDigital Inc (IDCC, Financial) delivered a strong third quarter with revenue, adjusted EBITDA, and EPS all exceeding the high end of their guidance range.
- The company signed a new license agreement with OPPO Group, covering worldwide sales of OPPO, Realme, and OnePlus branded mobile devices, which also led to the dismissal of all pending litigations between the parties.
- InterDigital Inc (IDCC) raised its 2024 annual guidance by $145 million at midpoint to $860 million, driven by accelerated business momentum and major deals.
- The company has licensed about 70% of smartphone devices globally, including agreements with top manufacturers like Samsung, Apple, and Xiaomi.
- InterDigital Inc (IDCC) continues to strengthen its patent portfolio, being ranked among the top five patent owners in Wi-Fi, 5G, and advanced video compression by LexisNexis.
Negative Points
- The expiration of the Huawei agreement at the end of 2023 contributed to a decrease in year-over-year total revenue for Q3.
- Despite the strong performance, the company still faces ongoing arbitration with Lenovo and Samsung, which could impact future revenue recognition.
- Litigation expenses remain a concern, although they were down this quarter, future costs are uncertain as the company continues to defend its patent portfolio.
- The company faces challenges in signing agreements with remaining major smartphone vendors like Huawei and Vivo, which could delay further revenue growth.
- InterDigital Inc (IDCC) acknowledges that the video services market is a large greenfield opportunity, but the timing of securing deals in this area remains uncertain.
Q & A Highlights
Q: Can you clarify the fourth quarter guidance, particularly regarding OPPO and Lenovo, and whether there is any Samsung revenue included?
A: Our Q4 guidance includes revenue from the new OPPO agreement and Lenovo arbitration. Similar to Samsung, Lenovo's terms will be set through arbitration, and we are booking revenue based on a conservative estimate. For Samsung, we expect the arbitration result soon after the end of the year, and we continue to recognize revenue conservatively until then.
Q: With the resolution of major litigation, how should we think about litigation expenses going forward into 2025?
A: While I won't comment on specific expense details, our current expectations for litigation expenses are included in our Q4 guidance.
Q: Could you outline the steps and milestones for the video services and streaming opportunity as we move into 2025?
A: Video services represent a significant opportunity for us. We have been engaging with major players and have a dedicated team working on this. While it's hard to predict exact timing, we are committed to negotiating fair value for our assets and are prepared to defend our patent portfolio if necessary.
Q: How do the recent OPPO and Lenovo deals impact future opportunities with other Chinese manufacturers like Huawei and Vivo?
A: Securing the OPPO deal is very positive, covering 70% of global smartphone sales with our existing agreements. This accelerates our momentum to engage with other vendors like Vivo, Honor, and Huawei, providing another benchmark for our portfolio's value.
Q: Regarding the OPPO agreement, how do its economics compare to other smartphone licensing agreements?
A: While specific terms are confidential, our Q4 ARR increase of $80 million provides some indication of the agreement's impact. This reflects a combination of multiple accounts, including OPPO.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
