InterDigital, Inc. Q1 FY2025 earnings call

• Reaffirmed 2025 annual guidance of revenue between $660 million and $760 million, with Q1 revenue, adjusted EBITDA, and non-GAAP EPS exceeding the high end of the guidance range.
• Secured new license agreements with Vivo (major smartphone manufacturer) and HP (world's largest PC manufacturer). With Vivo, now have seven of the top 10 largest smartphone vendors and almost 80% of the global smartphone market under license. With HP, licensed more than 50% of the PC market.
• Annualized recurring revenue reached an all-time record of over $0.5 billion, up 30% year-over-year. Revenue from the smartphone program more than doubled year-over-year.
• Increased dividend from $0.45 per share to $0.60 per share since Q3 last year. Returned $21 million to shareholders in Q1 through buybacks and dividends.
• Actively involved in 6G development, recognized as one of the world’s top 100 innovators by LexisNexis for the fourth year in a row. Showcased cutting-edge technology at Mobile Congress Trade Show.
• In binding arbitration with Samsung regarding mobile device license terms; hearings finished in October 2024, expecting final decision soon. Filed Disney litigation in early February, with court dates starting in Q4 2025 and expanding into early 2026.

In the first quarter, InterDigital's revenue was $211 million, with adjusted EBITDA nearly $160 million and non-GAAP EPS $4.21. Annualized recurring revenue (ARR) for Q1 2025 increased 30% year-over-year to a record $503 million. The smartphone program revenue more than doubled year-over-year. The consumer electronics and IoT licensing program saw a significant milestone with HP, licensing more than 50% of the PC market. Revenue contribution: Smartphone program's revenue more than doubled y-o-y, ARR at an all-time record of over $0.5 billion, with over 90% of revenue from long-term fixed-fee agreements.

• Reaffirmed 2025 annual revenue guidance of $660 million to $760 million.
• Q2 revenues expected to be $165 million to $175 million from existing contracts, including catch-up sales.
• Based on existing contracts, expected adjusted EBITDA margin of about 65% and non-GAAP diluted earnings per share of $2.67 to $2.90 for Q2.
• Full year 2025 expected adjusted EBITDA in the range of $400 million to $495 million with non-GAAP earnings per share of $9.69 to $12.92.

• Geopolitical environment and tariff situation could potentially impact business, though currently no visible impact.
• Uncertainty regarding the outcome of the binding arbitration with Samsung.
• Uncertainty around the Disney litigation timeline and its potential impact on the business.

Q: How is the macro geopolitical environment impacting discussions with customers?

A: So far, no impact seen. Our business involves foundational technology shared via open global standards and long-term fixed-fee licensing, not significantly affected by quarterly shipment fluctuations.

Q: Update on the Samsung arbitration?

A: Last hearing was in October 2024, arbitrator panel considering evidence and writing decision; no new updates as of now, but confident in merits of the case.

Q: Status of the Disney litigation?

A: Filed in early February, court dates start in Q4 2025 and expand into early 2026, with court dates being set promptly.

Q: Thoughts on the consumer IoT side, milestones for the rest of the year?

A: On consumer IoT, largest opportunity in smart TV; made progress with LG, TCL, SysON; HP agreement licenses over 50% of PC market; also making progress in Connected Car Program with new 5G car vendor agreements.

Q: Tax rate and convert impact on earnings?

A: Tax rate was low in Q1 due to stock-based comp and share price increase, projecting lower for the year. On convert, it matures in spring 2027, and we actively monitor capital structure but no immediate updates on conversion.