InterDigital, Inc. Q3 FY2025 earnings call

• Completed Samsung smartphone arbitration and signed 4 new license agreements, with annualized recurring revenue up 49% YOY to nearly $590 million.
• Appointed a new Chief Licensing Officer. A senior wireless engineer reelected to lead 6G development. Acquired an AI start-up for AI native video research.
• Recognized in Newsweek, Fortune, and Time Magazine rankings. Increased dividend by 17% to $0.70 per share and returned over $130 million to shareholders year-to-date.
• In Q3, closed renewals with Sharp, Seiko, and an EV charging company. Made progress in Disney video service enforcement with a Brazil preliminary injunction.

In Q3, InterDigital's annualized recurring revenue (ARR) increased 49% year-over-year to an all-time high of almost $590 million. The smartphone program saw ARR increase 65% year-over-year to $491 million in Q3, accounting for over $490 million of the $588 million ARR. The CE and IoT program had ARR of $97 million in Q3, also an all-time high. Revenue for the third quarter was $165 million, up 28% year-over-year. Adjusted EBITDA and non-GAAP EPS were up 62% and 56% respectively year-over-year.

• Q4 recurring revenue expected to include $144 million to $148 million from existing contracts, with full-year revenue from existing contracts expected to be $820 million to $824 million.
• Based on existing contracts, Q4 adjusted EBITDA margin expected at about 50% and non-GAAP diluted EPS at $1.38 to $1.63. Full-year adjusted EBITDA margin expected at 70% and non-GAAP diluted EPS at $14.57 to $14.83.
• Expects to meet or beat the midpoint of the increased full-year guidance issued last quarter, with revenue from new agreements over the quarter being additive.

• Uncertainties in litigation, as high-value litigation like the Disney case can be lengthy. Market conditions and uncertainties in economic environment could impact business. Risks described in the 2024 annual report on Form 10-K may affect actual results.

Q: Could you walk through biggest prospects in consumer IoT and the EV charging space?

A: In consumer IoT, largest opportunity in smart TVs with progress on licensing with top makers. EV charging is an interesting market with growing opportunities, including different technology aspects like Wi-Fi and cellular connectivity.

Q: Explain integration of Deep Render with video codec technology and other potential acquisitions?

A: Deep Render's native AI end-to-end technology speeds up AI capability for video research and aligns with next-gen video standard development. The company has a robust pipeline and is testing a wide net for M&A in areas like wireless, radio, AI, and adjacent areas with criteria like critical mass and competitive advantage.

Q: Update on Disney injunction next steps and impact on dialogues?

A: Brazil injunction is in effect with Disney appealing, and court gave Disney until November 30 to comply. There are over a dozen patent cases going to trial. The progress enhances position in negotiations though specific dialogues are under NDA.

Q: Other areas for M&A within existing technology IP focus points?

A: Testing a wide net in areas like wireless, radio, AI, and adjacent areas, looking for industry-leading teams and key research driving progress, with criteria including critical mass, competitive advantage, and financial capability to pursue bigger opportunities.