Earnings call transcript: InterDigital Q4 2024 beats forecasts, stock surges

InterDigital Inc. (NASDAQ:IDCC) delivered impressive earnings for the fourth quarter of 2024, significantly surpassing Wall Street expectations. The company reported earnings per share (EPS) of $5.15, far exceeding the forecasted $0.91. This substantial earnings beat was accompanied by actual revenue of $253 million, compared to an anticipated $244.24 million. Following the announcement, InterDigital’s stock soared by 16.5%, closing at $212.62, reflecting a $30.12 increase from the previous day. According to InvestingPro, the company maintains a "GREAT" financial health score of 3.18 out of 5, supported by strong profitability metrics and balance sheet strength.

Key Takeaways

• InterDigital’s Q4 2024 EPS of $5.15 beat expectations by a wide margin.
• Revenue increased by 140% year-over-year to $253 million.
• Stock price jumped 16.5% post-earnings announcement.
• Strong performance in patent licensing and innovation in AI technologies.
• Positive outlook with projected revenue growth in 2025.

Company Performance

InterDigital’s Q4 2024 results showcased a robust financial performance, driven by significant growth in its licensing agreements and technological innovations. The company’s revenue for the full year reached $869 million, marking a 58% increase from the previous year. InterDigital’s strategic focus on AI and wireless technologies has positioned it as a leader in the industry, contributing to its remarkable year-over-year growth.

Financial Highlights

• Q4 2024 Revenue: $253 million (140% YoY increase)
• Full Year 2024 Revenue: $869 million (58% YoY increase)
• Q4 Adjusted EBITDA: $198 million (78% margin)
• Free Cash Flow 2024: $213 million
• Cash Position: Nearly $1 billion, with net cash over $500 million

Earnings vs. Forecast

InterDigital’s actual EPS of $5.15 significantly exceeded the forecasted $0.91, resulting in a surprise percentage of approximately 466%. This marks a substantial outperformance compared to previous quarters, highlighting the company’s strong operational execution and strategic initiatives.

Market Reaction

The market responded positively to InterDigital’s earnings announcement, with the stock price increasing by 16.5% to $212.62, nearing its 52-week high of $212.74. This surge reflects investor confidence in the company’s ability to sustain its growth trajectory and capitalize on emerging market opportunities. InvestingPro data shows impressive momentum, with a 79.5% return over the past year and 33.5% gain in the last six months. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value, suggesting the market has efficiently priced in recent developments.

Outlook & Guidance

Looking ahead, InterDigital projects 2025 revenue between $660 million and $760 million, with an adjusted EBITDA range of $400 million to $495 million. The company also anticipates a non-GAAP EPS between $9.69 and $12.92, signaling continued growth and profitability. InterDigital aims to achieve double-digit growth in its Annualized Recurring Revenue (ARR) and has increased its dividend by 33% to $0.60 per share.

Executive Commentary

CEO Liren Chin stated, "We delivered the best business result in our history," emphasizing the company’s strong financial performance. Chin also highlighted the critical role of InterDigital’s technology in the global ecosystem, generating approximately $6 trillion in economic value annually.

Risks and Challenges

• Potential legal challenges, including ongoing arbitration with Samsung (KS:005930).
• Market competition in AI and wireless technology sectors.
• Economic uncertainties that could affect consumer electronics demand.
• Regulatory changes impacting patent licensing agreements.

Q&A

During the earnings call, analysts inquired about InterDigital’s ongoing enforcement action against Disney (NYSE:DIS) and its flexible approach to streaming service technology licensing. The company reaffirmed its commitment to expanding its smartphone and IoT licensing opportunities and anticipated a resolution to the Samsung arbitration soon.

InterDigital’s strong Q4 2024 performance and optimistic 2025 outlook position the company favorably in the technology sector, with continued innovation and strategic partnerships driving its growth. For a comprehensive analysis of InterDigital’s performance and future prospects, including detailed financial metrics, valuation models, and expert insights, explore the full Pro Research Report available exclusively on InvestingPro, covering this and 1,400+ other top US stocks.

Full transcript - InterDigital Inc (IDCC) Q4 2024:

Michelle, Conference Operator: Good day, and thank you for standing by. Welcome to the InterDigital Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer To ask questions during the session, you will need to press 11 on your telephone. You will then hear an automated message advising you your hand is raised.

To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Rayford Garabrant, Head of Investor Relations. Please go ahead.

Rayford Garabrant, Head of Investor Relations, InterDigital: Thank you, Michelle, and good morning, everyone. Welcome to InterDigital’s fourth quarter twenty twenty four earnings conference call. I am Raeford Garabrant, Head of Investor Relations for InterDigital. With me on today’s call are Liren Chin, our President and CEO and Rich Bresky, our CFO. Consistent with prior calls, we will offer some highlights about the quarter and the company and then open the call up for questions.

For additional details, you can access our earnings release and slide presentation that accompany this call on our Investor Relations website. 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. Forward looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from results and events contemplated by such forward looking statements. These risks and uncertainties include those described in the Risk Factors section of our 2024 Annual Report on Form 10 K and in our other SEC filings. 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. With that taken care of, I will turn the call over to Liran.

Liren Chin, President and CEO, InterDigital: Thank you, Rifert. Good morning, everyone. Thanks for joining us today. A year ago at this moment, I shared our belief that interdigital has never been better positioned to drive growth. Now sitting here twelve months later, I’m delighted to share that in 2024, we delivered the best business result in our history.

And since our technology are more critical than ever to an ecosystem generating roughly $6,000,000,000,000 in economic value every year, We believe we are just getting started. Today, I’ll recap the fourth quarter results, summarizing our highlight for the full year and provide more details on our growth path through 2025 and beyond, including a significant development in our video service program. In the fourth quarter, we delivered another outstanding performance. Our revenue increased 140% year over year to $253,000,000 while adjusted EBITDA and non GAAP EPS nearly quadrupled year over year. Those we discussed in our last earnings call, we signed a new license agreement with Oppo last quarter covering the worldwide sales of Oppo, Realme and OnePlus devices.

We have now licensed our top four largest smartphone manufacturers and approximately 70% of annual smartphone shipment worldwide. We also added to the momentum in our smartphone program in the quarter through our renewed agreement with a major Chinese technology company ZTE (HK:0763) and with our announcement that we have entered into binding arbitration with Lenovo to determine the final terms of our license and ended all delegations with them. Looking at 2024 overall, it was another outstanding twelve months for the company. Revenue for the year increased almost 60% to $869,000,000 the highest annual revenue in the company’s history. Thanks to increased momentum across all our licensing programs and the new agreement with some of the world’s largest device makers.

We also delivered record level adjusted EBITDA and EPS in 2024. Rich will cover those financial results in more detail in his section. Across our licensing programs, we closed 14 new agreements throughout the year. In addition to our smartphone license with OpenJD, we signed a new license with Google (NASDAQ:GOOGL) covering a range of devices as well as new license with leading TV manufacturers Samsung and TPV in our consumer electronics and IoT program. We have now closed license agreement worth more than $3,300,000,000 since the start of twenty twenty one.

In 2024, more than 30% of revenue for the year come from consumer electronics and IoT program. This highlights the upside we see beyond our smartphone program and reflects how our video and wireless technology supports an expanding range of use cases. So as you may recall, we are in a binding arbitration to settle the final terms of our license with Samsung for mobile devices. The party finished last round of hearing last October and we are expecting to have a final decision soon. As a reminder, Samsung already agreed to take a license to our portfolio starting from 01/01/2023 and this binding arbitration will determine the final terms of the license.

Our research teams are firing on all cylinders as we grew our leadership in the development of key standards, maintain our focus in quality of our innovation and breaking new ground in application of cutting edge technology such as AI. We have been working on the application of AI to wireless and video for years and our leadership in the space was once again to the fore throughout 2024. In December, we received an innovation award from Fierce Wireless for our outstanding innovation in wireless related AI. Specifically, the world was for AI empowered receiver design for six gs communication, which use AI and machine learning to improve performance of a wireless network. From AI to video, wireless and licensing, our industry leadership extends across the whole business.

We hold more than 100 leadership positions in standard organizations and we are one of only three companies in the world to hold multiple chair positions within 3GPP, the standard body that sets cellular standards. In licensing, our Chief Licensing Officer, Iva Hanka Ranta was named among 50 most influential people in intellectual property by leading IP publication. We continue to excel converting our research leadership into patent assets building on what we firmly believe is one of the strongest patent portfolio in our industry. In 2024, we made more than 5,000 new patent filings worldwide with our global portfolio now over 33,000 assets. The strength of innovation was once again confirmed as we were named one of the world’s one hundredth most innovative company for third concept year by LexusNexus.

We were also named among the world’s leading patent holders in five gs, advanced video compression and Wi Fi in separate reports from Lexus Nexus. Also in 2024, we also had a clear path to significant increase our revenue and profit at our Investor Day, where we announced new target of more than $1,000,000,000 in annual recurring revenue and $600,000,000 in adjusted EBITDA by 02/1930. Now turning to 2025, with a strong foundation to build on from last year, our priority is to continue to execute our long term growth strategy. We believe our technology is more valuable in an increasingly connected world. We lead the development of standardized technology that are 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.

We plan to grow our business by focus on signing the remaining unlicensed smartphone vendors and by renewing our existing agreement at a higher level when appropriate. We will build on our considerable progress in our consumer electronics and IoT program and we intend to make more progress in our greenfield opportunity in video services. We feel strongly that our video technology underpins the viability of video streaming industry helping to support more efficient video compression, improving quality of pictures and an enhanced user experience. This week we initiated a multi jurisdictional enforcement action against Disney, including Disney plus Hulu and ESPN plus for their ongoing infringement of our intellectual property. Disney generated about $25,000,000,000 in streaming services revenue from over $250,000,000 pay in subscriber in FY 2024.

But in all our licensing programs, we expect the vast majority of license agreement to be driven by amicable negotiations, but we are always prepared to defend the value of our innovation and our patent rights. We believe that the significant investment in fundamental research over the past several decades should be compensated fairly, which enable us to continue to invest in the next generation innovation that will benefit our customers and consumers worldwide in the future. Before I hand it over to Rich, I hope to see many of you who can make it to Mobile Congress in March. Please join us at our booth in Hall 5 to see the very latest in wireless, video and AI innovation. And with that, I’ll let Rick talk you through the numbers in more detail.

Rich Bresky, CFO, InterDigital: Thanks, Liren. As Liran noted, in Q4, we delivered an outstanding finish to the year. Total (EPA:TTEF) revenue of $253,000,000 increased 140% year over year and was above our outlook of $239,000,000 to $249,000,000 driven primarily by new agreements that closed after the prior guidance. Our Q4 revenue included catch up revenue of $136,000,000 dollars related to our fourth quarter license agreements with Oppo, Lenovo and ZTE. Our adjusted EBITDA for the quarter of $198,000,000 exceeded the top end of the outlook of $180,000,000 to $190,000,000 as the vast majority of the revenue upside flowed through and resulted in an adjusted EBITDA margin of 78%.

GAAP EPS for the quarter of $4.09 beat our guidance. Non GAAP EPS for the quarter of $5.15 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, for the full year, both GAAP EPS of $12.07 and non GAAP EPS of $14.97 came in at or above the high end of the range. Meanwhile, cash generation for the quarter was exceptionally strong with cash flow operations of $192,000,000 and free cash flow of $169,000,000 Building on Laren’s comments, I’ll highlight a few noteworthy metrics from our full year 2024 results and provide the additional perspective of how each item has improved over the last four years. Altogether, these metrics demonstrate our success in progressing towards our objective of delivering $1,000,000,000 plus in annual recurring revenue and $600,000,000 plus of adjusted EBITDA by 02/1930.

Total revenue accelerated to $869,000,000 an increase of 58% year over year, resulting in a compound annual growth rate of 25% over the past four years. Our 2024 revenue included $269,000,000 of CE IoT revenue, more than triple prior year levels. This result, which includes our milestone agreement with Samsung TV demonstrates our ability to grow revenue by capitalizing on the value of our the foundational technologies bring to markets beyond smartphones. Adjusted EBITDA margin was very strong again in 2024, coming in at 63%, a 20 improvement over the past four years. Over that same timeframe, adjusted EBITDA has grown more than 3.5 times.

We ended the year with almost $1,000,000,000 in cash, including net cash of over $500,000,000 which is up more than $100,000,000 from last year. Full year cash flow continued to be robust with $272,000,000 of cash from operations and $213,000,000 of free cash flow for the year. In fact, over the last four years, we have generated nearly three quarters of a billion in free cash flow. These strong cash flows allowed us to return $110,000,000 to shareholders through buybacks and dividends and $126,000,000 to holders of our 24 notes upon their maturity last spring. Over the last four years, we have returned the vast majority of our free cash flow to shareholders through share buybacks and dividends totaling $678,000,000 In that time, we have reduced our outstanding share count by 5,100,000.0 shares or 17% to 25,700,000.0 shares at the end of twenty twenty four.

Turning to our outlook, we have guided to another very strong year in 2025 with total revenue in the range of $660,000,000 to $760,000,000 adjusted EBITDA of $400,000,000 to $495,000,000 and non GAAP diluted earnings per share of $9.69 to $12.92 In addition, we expect to improve upon the strong free cash flow we delivered in 2024, 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. With that as a backdrop, our Board of Directors approved a 33% increase in our dividend from $0.45 to $0.6 per share. As a reminder, we begin the year with $230,000,000 remaining on our buyback authorization. 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. You will see in our financial metrics that we have also begun to present annualized recurring revenue.

This metric simply annualizes the recurring revenue for a given quarter. For example, in Q4, we had $117,000,000 of recurring revenue. So multiply that by four and you get $468,000,000 of ARR, which is by far a record level. Over the last four years, we have increased our ARR at a double digit growth rate from $314,000,000 at the start of 2021 to $468,000,000 at the end of twenty twenty four. As we begin 2025, we do have a small step down due to 2024 year end expirations, But we expect to drive renewals and agreements this year to close 2025 with double digit growth in ARR from the $468,000,000 level at which we concluded 2024.

Before I turn it back to Raiford, I want to reiterate that our quarterly guidance for Q1 twenty twenty five does not include the impact of any new agreements or arbitration results we may sign or receive over the balance of the first quarter. This is because it is harder to predict the timing of new agreements in short windows. In contrast, our full year guidance includes contributions from both new agreements and arbitration results. As was the case last year, we believe we can achieve financial results within our full year guided range through different combinations of new agreements and arbitration results. With that, I’ll turn it back to Rafford.

Rayford Garabrant, Head of Investor Relations, InterDigital: Thanks, Rich. Before we move to Q and A, I’d like to mention that we’ll be attending a number of investor events in Q1, including the ROTH Conference in Dana Point, California and the Sidoti Conference, which is virtual. Please reach out to your representatives at those firms if you’d like to schedule a meeting. Michelle, we are now ready to take questions.

Michelle, Conference Operator: Thank you. Our first question is going to come from the line of Scott Searle with ROTH Capital Partners (WA:CPAP). Your line is open. Please go ahead.

Scott Searle, Analyst, ROTH Capital Partners: Hey, good morning. Congrats on the quarter guys. Thanks for taking my questions. Thanks, David.

Tal Liani, Analyst, Bank of America: Let me

Scott Searle, Analyst, ROTH Capital Partners: just dive in 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 could address your engagement with other video streaming vendors and opportunities as they’re ongoing within 2025, like kind of the level of engagement that you’re seeing?

Liren Chin, President and CEO, InterDigital: Yes. Hi, good morning, Scott. Thanks for the question. So regarding Disney, it’s public now in our legal filings. We have engaged Disney for more than two point five years in bilateral negotiation.

And as you know, we prefer to sign most of our deals through amicable discussions. And but we have concluded after spending two point five years negotiating that enforcement is needed for this particular case. And as you probably know, our enforcement when we started filing the case, we are fully committed to mitigate through the course of the lawsuits. But in any other cases also we are always open for negotiation during the lawsuits. So it’s difficult for me to predict precisely how long the lawsuits may last.

As you probably know from our smartphone experience, sometime it can be fairly quickly resolved and sometime takes multiple years to resolve. So as of this case, as of now, back we do not really know for sure how long this case will take. So regarding engagement with other license with other streaming service providers, as we have discussed before in our Investor Day, we have engaged with almost all the major players and we are patient in damaging our value to them and we hope to make progress as always through bilateral negotiation.

Scott Searle, Analyst, ROTH Capital Partners: Okay, thanks. That’s very helpful. Maybe shifting to the annual guidance, I know this is a very difficult one to pin down, but could you provide some color in terms of the range of outcomes, how you’re thinking about it in terms of catch up 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, as we’re looking to the first quarter and that recurring revenue guidance, I think it’s $112,000,000 to $116,000,000 I know there are some expirations this year.

I think in the K, you talk about seven agreements for a total of $91,000,000 or $92,000,000 How much of that is layering into the first quarter recurring guidance?

Liren Chin, President and CEO, InterDigital: Yes. Hey Scott, let me take on the majority of the open opportunities and then I’ll have Rich adding on the details for the recurring revenue numbers. So if you look at our 2025 major opportunity here, there’s we have three major programs on the smartphone side with our momentum for signing OPPO and Frankie ZTE and others, we really only have less a handful of major opportunities we need to sign. I am the largest one as Weibo (NASDAQ:WB) as you are aware then we need to essentially resolve, honor and probably transcend, not necessarily in that order by the way we are engaging with auto domain in parallel. On the consumer electronics IoT side, we have built a lot of momentum as Rich has covered in T section.

We see tremendous amount of growth in multiple verticals, but our priority number one is to frankly signing some of the larger TV makers as well as making progress in different segments of vertical for IoT. For the service industry as we already touched on here, we actually do not expect any material revenue for 2025, but important for us to engage in the major players and build a multi year negotiating progress And obviously, we already touched on the enforcement with Disney.

Rich Bresky, CFO, InterDigital: Yes. And Scott, I’ll just add to that, that in my comments, I noted that we ended 2024 with $468,000,000 of ARR and we’re looking to through renewals and new agreements drive double digit growth in that ARR number by the end of twenty twenty five. As to Q1, you noted correctly that at the end or over the course of 2025, and I’ll say typically agreements are calendar year based, not always, but typically, that we have $91,000,000 of expirations in twenty twenty five million dollars again, typically at the end of the year. So that’s really not an impact in the couple million dollar difference between recurring revenue in Q4 stepping down to Q1. That’s really driven by $24,000,000 expirations.

I think we noted we had five twenty four expirations totaling $17,000,000 which that math kind of shows you that that’s the majority of that step down.

Arjun Bhatia, Analyst, William Blair: Great.

Scott Searle, Analyst, ROTH Capital Partners: Very helpful. And lastly, if I could, just on the capital structure and the convert. Rich, could you take us through what you’re factoring in for the first quarter and how that will progress in terms of interest expense, the fully diluted share impact? And and also how you’re thinking about the capital structure in general. I think when you first initiated a convert years ago, it was to be able to have a robust balance sheet to be able to litigate against potential customers like Disney.

Now given that you’ve got $500,000,000 of net cash, is that a mechanism and an instrument that you guys need to have in the future going forward? Thanks.

Rich Bresky, CFO, InterDigital: Sure. So let me take the first part of that question and then I’ll get to the kind of structure as we see it going forward. In the first quarter, when we were in any quarter factoring in interest income and interest expense, and we’re not really looking at that much differently than we have in recent quarters. We also, as you alluded to, need to factor in any potential dilution from the convert or the related hedge. There that becomes a function of the stock price.

Typically, we’re looking at what the stock price is around the time that we post that guidance. And I know you’re aware of this, but for everybody’s benefit in our 10 K as in our Qs in the footnotes to our financial statements. We have a sensitivity table that shows how that dilution is impacted at different prices. Again, there’s greater dilution on the convert itself, which we reduced through the hedge. And on the far right column, you’ll see the net dilution from the warrants that we issued.

As for the cap structure in general, yes, we’ve for more than ten years have been utilizing converts to help bolster the balance sheet that enables us to go toe to toe with larger customers when necessary, if we need to enforce our rights, while being able to buy back stock and return capital to shareholders. Because we’re just in a much different position than even when we did the last convert in the spring of twenty twenty two. I think we have more options available to us going forward, 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 cap structure.

Scott Searle, Analyst, ROTH Capital Partners: Great. Thanks so much. I’ll get back in queue.

Michelle, Conference Operator: Thank you.

Rich Bresky, CFO, InterDigital: Thanks, Scott.

Michelle, Conference Operator: One moment as we move on to our next question. Our next question comes from the line of Arjun Bhatia with William Blair. Your line is open. Please go ahead.

Arjun Bhatia, Analyst, William Blair: Perfect. Thank you guys. I appreciate you taking the question here. Maybe I want to start first on the streaming opportunity. It’s good to see that there is kind of litigation and we’re somewhat far down the monetization path of your video technology.

Lian, one question I have on this is, for smartphones, I think we all kind of understand how the economics work, right? It’s largely based on kind of units of smartphones sold with a royalty rate. When we’re looking at the streaming opportunity, how should we think about kind of the underlying metric that we should get grounded in for some sort of a royalty rate with Disney, for example, right, you mentioned $25,000,000,000 in streaming revenue and I think two fifty million subscribers. Is it more on the per minute stream? Is it the number of subscribers?

Is it a revenue rate? How are you thinking you might monetize this opportunity here?

Liren Chin, President and CEO, InterDigital: Arjun, good morning. Thank you for your question. So on the streaming side here, we are actually flexible in negotiating with our customers based on what is the right metrics to use. If you look at fundamentally, we bring a set of very important technology that we believe underpin their services. That’s both in driving their revenue forward as well as saving cost in the operating side in terms of storage, power, as well as cooling and Internet services here.

So and by the way, various different streaming services may have different business model, some of them are subscription based, some of them may be advertisement sponsor based. So when we go approach them, fundamentally we try to charge for a very small but 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 their monthly subscription fee times the amount of subscribers. All that can be a fairly small percentage of the overall revenue. We are actually open for both arrangement.

Regarding the overall size of the market and as we have discussed in our Investor Day and we project based on third party data that by 2027, the streaming industry overall will be the same size of the smartphone industry. And Arjun, as you all were on the smartphone side, which as you commented on, we have demonstrated a lot of progress and frankly we have shown a lot of solid results in that industry. We are projecting getting about $500,000,000 in recurring revenue from smartphone. But for the streaming services, even though we believe our technology is just as important to them, because it’s already been new, because we believe we have to demonstrate our patience. And so therefore we are in my opinion conservatively setting the target to be about $300,000,000 by 02/1930 for that market to essentially mature for us over time.

Arjun Bhatia, Analyst, William Blair: Okay. Understood. Very helpful. Thanks, Laren. Wondering if I can follow-up just on the recurring revenue outlook for 2025.

It sounds like you’re baking in some incremental upsell and maybe arbitration agreements. With some of these agreements in particular, do you have kind of a sense of the range of uplift that you’re expecting from Samsung, which I think should be coming relatively soon? Like how should we benchmark the potential uplift that you could see there, if that’s announced in Q1 or Q2 here?

Liren Chin, President and CEO, InterDigital: Yes. Hey, Arjun, this is Lauren. So I’ll cover it first if there’s anything else Rich might be able to chime in. So on the recurring revenue side, Rich commented we’ll target to grow our recurring revenue in 2025 by at least double digit growth. But that’s also not based on any single deal or any single outcome.

So we have a number of opportunities we are pursuing. And by the way, a number of those opportunities carry both recurring revenue as well as cash out payment. So we really look at all the opportunity holistically and we frankly estimate an outcome for per case as well as the likelihood that they will be down this year. So this is the same process we took last year. So that’s why we frankly add them up into a range of outcomes here.

Regarding the Samsung arbitration outcome, as I commented on earlier, we have spent substantial amount of effort to go through the process already. As a matter of fact the last hearing happened last October already. At that time the arbitrator told us they will take time to essentially make their decision writing their conclusion and due to the holiday season in between. So basically they told us that it will be after New Year. So we are waiting for the outcome.

And as I commented earlier here, that can be soon, but we don’t really know precisely what time. Regarding the outcome of the range, we commented before in our prior calls, we believe strongly that the value of our portfolio has gone up substantially due to the last contract. And if you look at the most closest comparable, we believe we should realizing the updating of the value, but this is for the arbitrator to decide and we are currently just waiting for the result.

Arjun Bhatia, Analyst, William Blair: All right, wonderful. Thank you.

Michelle, Conference Operator: Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Tal Liani with Bank of America. Your line is open. Please go ahead.

Tal, your line might be on mute.

Tal Liani, Analyst, Bank of America: Can you hear me?

Michelle, Conference Operator: We can now, sir.

Tal Liani, Analyst, Bank of America: Oh, perfect. Thanks. Once again, you’re bidding 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. So I want to focus on the recurring part and I have two questions.

On the recurring, you said that ARR should grow double digits. Are the trends in revenues different than ARR? Meaning, is there any deviation between revenue growth and ARR growth and what could be the reasons for that? And the second question is you noted $70,000,000 that expired in twenty twenty four million dollars and $91,000,000 expected to expire in 2025. What happens with these expirations?

Are they renewed before, renewed after? How does it go with this expirations of recurring revenues? Thanks.

Rich Bresky, CFO, InterDigital: Okay. Hey, thanks, Tal. This is Rich. Let me start with the first question. I think maybe Laren will have a comment for the second question and I may have an additional point to make there.

So yes, when we I guess the first point to emphasize, when we issue quarterly guidance and I mentioned this in my prepared remarks again today, it’s difficult for us over a short window to determine what the time period when exactly a new agreement will cross the line. Our customers are already using our technology. So it’s not like we know that they need to make a decision so they can produce their product and ship on a certain deadline. They’re already using it. And it’s really then a function of when can we reach an agreement to them on the fair amount that they should pay us.

So as a consequence on our quarterly guidance, we typically are not including the potential for new agreements. And therefore, typically on a quarterly basis, if we sign a new agreement, we’ll come in higher. For the full year guidance, we did initiate for the first time full year guidance last year in 2024. We thought that we came out with a very strong number for 2024 in full year guidance. But frankly, we just had, as we discussed on the call here, an outstanding year and we’re able to raise it and then beat that.

So we’re thrilled about the performance we delivered in ’24 and we’re very happy to feel confident we could come out with strong numbers again for 2025. So hopefully that helps. As far as recurring revenue versus total, looking back, I mentioned on my call over the last four years, we’ve had a double digit CAGR in total revenue, because we have been signing new agreements and been getting catch up sales along with it. Importantly, we’ve also had a double digit CAGR over that time period in ARR. And I like ARR, we’ve added it to our metrics.

One problem with recurring, we signed OVO in the fourth quarter of twenty twenty four 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 2024 recurring revenue, it’s not factoring that in. If you look at the ARR, where we close 2024 at $468,000,000 that’s kind of a better measure in my mind of kind of the what we’re earning on a recurring basis. So I’ll let Liran start with a response to the second comment.

Liren Chin, President and CEO, InterDigital: Yes. Hey, Tal, good morning. Thank you for joining us here. So on the recurring versus sometime we have expiration for contract here. I mean, number one, it’s absolutely normal to have certain amount of contract expires each year.

And frankly, because we have signed so many agreement, right, we have signed 14 agreement this year. Our average contract length is roughly around five years, sometimes it’s longer, sometimes it’s shorter. So on any given year, we will have a few contract expiry. So for last year to this year, we have $17,000,000 expiry that’s $17,000,000 So it’s actually a relatively small number from last year to this year. So we our goal honestly is always try to get them renewed before they expire.

And sometime those expirations can frankly force end of the year which happened to be holiday time that’s difficult for various different reasons to get them down in time. So it can be frankly put it over to the next year. For this year for 2025 at the end of this year, I want to make sure you guys are aware. We do disclose in our I think 10 K filing we have about $91,000,000 exploration, primarily driven by our Xiaomi (OTC:XIACF) contract that’s up for renewal at end of this year. So I won’t be able to comment on specific negotiation because they are covered by NDAs.

But what we typically do Tao is for major agreement, we start roughly six months to a year ahead of time. We demonstrate the value of our technology, show them the growth for the portfolio as well as demonstrate how they have benefited more at this time compared to the time of the last contract and then when it’s appropriate which we have demonstrated through multiple contracts here, we will try to get a higher value in the renewal if they have benefited more. So that’s the general practice, Tal and we have demonstrated in the last four or five years, we had a good track record of renewing large contract including the larger contract for Apple (NASDAQ:AAPL) before they expires. And that’s what we always target to

Tal Liani, Analyst, Bank of America: do. So when you give the guidance for the year this year, do you assume that the $17,000,000 that expired last year would be renewed this year? Do you assume renewal of the expired ones or is it excluded also from the numbers?

Liren Chin, President and CEO, InterDigital: So, Todd, the way we do New Year forecast is we actually look at all the open opportunities, including on-site customers as well renewals. By the way, we are not trying to target for replacing dollar for dollars. We are trying to renew the customer one by one when they come up due And that’s because you are aware of how some of the customer gain market share over the years, some of them may lose market share, some of them may have a higher mix of five gs devices, they may have gone up in terms of every selling prices. We factored in all those parameters. So therefore, we are not trying to replace every dollar from every customer, but we are trying to renew them and frankly when the benefits more, we try to get a higher valuation out of that new contract.

That’s normally how it works. So for this year, when we give the guidance, as I mentioned earlier, we try to look at all the opening opportunities and try to obviously drive them to closure as much as we can. But we also know some of those agreement takes longer to renew than others and some of the first time customers frankly try to solve their past sales can be a difficult and complex negotiation. So internally we assign certain amount of probability and certain amount of range of outcome for each of the cases. And then in total we give ourselves what we call internally multi pass to get to the result by targeting a range.

Tal Liani, Analyst, Bank of America: Okay. One last question. Geopolitics, a lot of your customers are coming from China, all the situation, all the geopolitical tension between China and The U. S, do you expect it to have an impact on your contracts, elongate them or any other type of impact?

Liren Chin, President and CEO, InterDigital: Yes. Hey, Todd, that’s a great question. So as we all know, geopolitics is always in the macro environment we consider, but there are several things to keep in mind. Number one, our technology is global. Our technology is built in the open standard that is frankly developed by industry associations.

So that technology itself is open. It’s not subject to any export license control and frankly not a single government including U. S. Or Chinese government really own that standard. So that’s always open.

That’s a starting point. The second one is really most of the open opportunity we are trying to pursue are from large customers who have international business, right. Their sales are driven by many different things. And frankly, if you 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 and good. So that’s a healthy dynamic for us.

The third one which is really important for me is I spent some of the substantial amount of time in frankly DCs and Brussels and other capital including Beijing and other places here informing policymakers why our business model is poor competition, why our business model is good for them, it’s good for their countries, good for the consumers, it’s good for the vendors who are benefiting tremendously from our fundamental innovation. That’s what enabled this vendor to come in, play, leveraging what we have developed and becoming global competitor rapidly fast. So frankly we have done good job explaining our opinion model. I’ll tell you, Tal, that our support across different countries is actually quite strong.

Tal Liani, Analyst, Bank of America: Great. Thank you.

Michelle, Conference Operator: Thank you. Our next question comes from the line of Anja Soderstrom with Sidoti. Your line is open. Please go ahead.

Anja Soderstrom, Analyst, Sidoti: Hi, and thank you for taking my questions. Actually, most of them have been directed already. And congrats on the great performance here. When we went into 2024, you gave the guidance or February yes, you gave the guidance for the year and it seemed like you gave a guidance that was a little bit modest to going into the year, which makes sense. But are you doing the same approach this year you think or?

Liren Chin, President and CEO, InterDigital: So let me take the broader question here. I’ll ask Rich to time in if need to be. So as I explained earlier, right, so we try to take a holistic view of all the open opportunities. And you saw opportunity, we essentially associate a likelihood of completion in the year as well as a range of possible valuations. And if it’s a renewal we assign obviously certain amount of recurring revenue.

If it’s brand new on-site customers here, we also have to estimate how much catch up payment we can get from that deal. And frankly, the timing and the dollar amount are hard to pin down with a long lead time, right. But we obviously wanted to give you enough visibility into it. So our process generally is beginning of the year, we do the best we can to come up the range. And then plus larger deals happen throughout the year as we have demonstrated last year.

And if we have done more or better or faster, we’ll provide guidance accordingly to either update it or give you the latest information. That’s a general approach we take. And so I don’t know if there’s anything we just wanted to add.

Rich Bresky, CFO, InterDigital: No, I think that covers it.

Anja Soderstrom, Analyst, Sidoti: Okay. And then just a follow-up on the geopolitical environment here within your administration. Do you feel like the sentiment has changed in any way with your counterparts or?

Liren Chin, President and CEO, InterDigital: Yes, that’s a great question, Anil. So if you look at the new administration for U. S, traditionally, I think many of you guys were, republicans are stronger in IP protection in general. And again, I’m not specifically commenting on on any specific personal or anything. So which we believe it’s a generally good thing for IP licensing.

But we are still at the beginning of the new administration and by the way, we historically have a close working relationship with both administrations in the last decades or more. So we continue to build this relationship. We demonstrate to them why our business is good for U. S, why our technology leadership is important to U. S.

Technology leadership as well as in the future of our country. So those are pretty well received and I expect strong support going forward.

Anja Soderstrom, Analyst, Sidoti: Okay. Thank you. That was all for me.

Michelle, Conference Operator: Thank you. And I would now like to hand the conference back over to Loren Chen for any further remarks.

Liren Chin, President and CEO, InterDigital: Yes. Hey, thank you, operator. Before we close, I’d like to thank our employees for their dedication and contribution to InterDigital as well as many partners and licensees for a record year in 2024. I also thank you everyone who joined us today and we look forward to updating you on our progress next quarter.

Michelle, Conference Operator: This concludes today’s conference call. Thank you for participating and you may now disconnect. Everyone have a great day.

Liren Chin, President and CEO, InterDigital: Thank you.

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