Transcript: InterDigital Q1 2026 Earnings Conference Call

InterDigital (NASDAQ:IDCC) reported first-quarter financial results on Thursday. The transcript from the company's first-quarter earnings call has been provided below. Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more. Access the full call at https://edge.media-server.com/mmc/p/kp4t3ci8 Summary InterDigital reported strong financial performance in Q1 2026, with revenue, adjusted EBITDA, and EPS exceeding guidance. Annualized recurring revenue reached $567 million, up 13% year-over-year. The company renewed its licensing agreement with Xiaomi, contributing to a record $492 million in smartphone ARR, and licensed eight of the top 10 global smartphone manufacturers. Strategically, InterDigital is advancing its leadership in 6G development, maintaining multiple chair positions in 3GPP, and expanding its research in haptic technology and energy-efficient video streaming. The company achieved legal victories, including injunctions against Disney for HEVC compression technology infringement, and launched enforcement actions against TCL and Hisense for patent infringements. InterDigital maintains a strong balance sheet, reduced debt by $88 million, and returned $26 million to shareholders, while expecting robust cash flow in Q2 from accounts receivable collections. Full Transcript OPERATOR Hello and thank you for standing by. My name is Mel and I will be your conference operator for today. At this time I would like to welcome everyone to the InterDigital first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on a telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Rayford Gybrandt, Vice President of Investor Relations. Sir, please go ahead. Rayford Garabrandt (Vice President of Investor Relations) Thank you, Mel and good morning everyone. Welcome to InterDigital's first quarter 2026 earnings conference call. Hi, I'm Rayford Garabrandt, VP of Investor Relations for InterDigital. With me on today's call are Learen Chen, our President and CEO, and Rich Breske, 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 2025 Annual Report on Form 10K 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 Liren. Liren Chen (Chief Operating Officer) Thank you. Rayford Good morning everyone. Thanks for joining us today. We have made a very strong start to 2026 with continued momentum across our licensing programs, our research and innovation pipeline, our standard development leadership and our patent portfolio growth. Revenue, adjusted EBITDA and EPS were all above the top in our guidance. Our annualized recurring revenue is now at $567 million up 13% year over year in license. We have a productive quarter with six new agreements. We renewed our agreement with Xiaomi through bilateral negotiation. Xiaomi is the world's third largest smartphone manufacturer behind Apple and Samsung. This renewal helped drive annualized recurring revenue in our smartphone program to a record $492 million. With the Xiaomi renewal, we now have eight of the top 10 global smartphone manufacturers under license, covering approximately 85% of the market. We also have the world top three smartphone vendors under license through the end of the decade. Our success in our smartphone program provide a strong base from which to drive additional growth in consumer electronics. At the start of the year we completed a new license with LG Electronics. LG is one of the top global TV manufacturers and the new agreement was reached through our joint TV licensing program with Sony. We also renewed our license agreement with Sony itself which is one of our long term licensees, added a new agreement with Buffalo Americas and new agreements with DTV Manufacturing related to our extensive video portfolio. All these deals were done through bilateral negotiations. Overall, the good old contract value of the agreement that we have signed since 2021 is about $4.7 billion in our video service program. We continue to make good progress. During the quarter we were awarded our fourth injunction against Disney by a German court which ruled that Disney infringe interdigital pattern relate to HEVC compression technology. We are also moving forward in our reinforcement action against smartphone manufacturer Tecent. In late March, a court in Brazil awarded us an injunction against Trinity after court ruled that transient infringed our 2.5G patent institute and that our licensing offer to Tecent was fair and reasonable. Combined with our decent case, this makes six out of six wins in our recent patent injunction proceedings. In Q1 we also launched multi jurisdictional enforcement action against TCL and Hisense, two of the world's largest TV manufacturers. As I mentioned before, we always prefer concluding license deals through bilateral negotiation and that most deals do get done this way. But we will vigorously pursue fair value for decades of investment in our research and defend the value of intellectual property which will allow us to continue to invest in the next generation of technology that benefits the whole industry and consumers worldwide in the future. Through our history when we enforce our IP we have a strong track record of ultimately reaching agreement that are fair for both parties. Our research engine and our leadership in global standard continue to be a major competitive advantage for us. During the quarter one of our top wireless engineers was re elected to a chair position within 3GPP, the standard body leading the development of 6G. We are already actually contributing to 6G technology research and as this election demonstrates, we are ideally positioned to lead in the development of 6G standard which is expected to route in 2029 with wide commercial deployment in 2030. With this re election, we remain one of the only three companies in the world to hold multiple chair positions within three gpp. Since the start of this year, seven of our engineers and standard leads have been re elected or appointed to new leadership position in standard related organization. From our total standard leadership role to more than 110 positions in the quarter, we also named our 2026 event of the year Sameer Ferdi who is a senior engineer in our wireless lab. Sameer is a key contributor to cellular standards and one of our most prolific inventors. Inventor of the Year is one of the most prestigious awards we make each year and it speaks to the culture of innovation, adding digital and how our success as a company is built on the work of our inventors and the quality of their research. The cellular wireless industry is moving towards 6G and our research team at the center of that transition. At Mobile Congress in March, 6G was at the heart of several demonstrations including the development of AI, native networks, new integrated sensing and communication and showcase of the world's first collaborative cellular and WI fi sensing demonstration using a prototype 6G architecture in our video research, we launched a haptic Excellence center in partnership with gaming technology company Razer. This initiative bring together interdigital expertise and in immersive media which research leadership in gaming and immersive hardware to advance haptic technology as a core component of the video experience. With haptic well established in gaming, we are now actively expanding it to new use cases. For example, at MobileCongress we partnered with Razer to demonstrate how haptic powered technology can make streaming TV shows and video at home and and even more immersive returns. With more than 4 billion haptic enabled devices already in use, this is an important area of research and we believe it's a significant opportunity for us. Staying with video we have developed a new energy efficient video streaming technology which expand our work in reducing the energy footprint of video driven devices and services. As video consumption grew across network and devices, making that delivery more energy efficient is a kind of impactful research that our team do so well. While we combine our foundational research across wireless, video and AI with our leadership in global standard, we believe the results speak for themselves in the quality and reach our Patent portfolio. In the latest European Patent Office ranking for patent application in 2025, we are ranked among the top five US companies alongside Qualcomm, Microsoft and Alphabet. Our portfolio is also consistently recognized as among the highest quality in the world. For fifth year in a row, we were included in LexisNexis Innovation Momentum, the global top 100 report which analyzes the company's patent portfolio according to the quality of their innovation. This ranking reflects the sustaining investment we make in our research and the discipline of our patent team in translating the research into a world class portfolio of IP assets. Before I finish, I want to highlight that we have recently been promoting to S&P Mid Cap Index in a clear reflection of the growth we have delivered in recent years. With that, I'll hand it over to Rich who will talk you through the quarter financial performance in more details. Rich Breske (Chief Financial Officer) Thanks Liren. I'm pleased to report that we delivered another strong quarter to start 2026 with revenue adjusted EBITDA, and EPS all above the high end of our guidance range. The upside was driven by new licenses signed during the quarter. Total revenue for the quarter was 205 million, above our guidance range of 194 to 200 million. Total revenue included 64 million of catch up revenue. Annualized recurring revenue or ARR for The quarter was 567 million, including a record 492 million of smartphone ARR. It is worth noting that our smartphone ARR is based in part on a guaranteed level of revenue under a hybrid agreement. Under this agreement there is a guaranteed fixed fee and additional royalties will become due if our customer shipments exceed a certain volume. Adjusted EBITDA, for the quarter was 112 million above our guidance range of 101 million to 110 million. Our adjusted EBITDA, margin of 54% was above the midpoint of our guidance. GAAP, diluted EPS for The quarter was $2.14 above our guidance range of $1.61 to $1.86. Non GAAP, EPS for the quarter was $2.57 above the midpoint of our guidance range of 239 to $2.68. Cash from operations was 16 million, even as cash due from new agreements drove a $139 million increase in accounts receivable. We expect collections of these new accounts receivables will drive strong cash flow in Q2. As Learen said, we have signed new agreements with total contract value of 4.7 billion over the last five years. This demonstrates the strength of our IP as a service model. The long term fixed fee nature of most of these agreements provides visibility into our business, supports ongoing investment in research and portfolio development, and helps us pursue further growth across our licensing programs. Consistent with our capital allocation priorities we continue to maintain a fortress balance sheet, invest for growth and return excess capital to shareholders. During the quarter we paid down 88 million of our debt and returned 26 million to shareholders. Even with these distributions, we ended the quarter with cash and short term investments in excess of 1 billion and after accounting for additional repurchases in April, we have 108 million remaining on our share repurchase authorization. We have a portion of our license agreements come up for renewal every year. End Our ability to renew many of those agreements and add new agreements in Q1 demonstrates the resilience of our model and the opportunity we see to drive additional ARR growth over time through renewals, new agreements and enforcement outcomes. Looking forward to Q2, we expect revenue from our existing contracts will be in the range of 139 million to 143 million, which is generally consistent with our Q1 ARR. Again, these revenue expectations are based only on existing contracts, so any new agreements and or enforcement action results over the balance of the quarter would add to these expectations. But based only on existing contracts, we expect adjusted EBITDA, of 67 million to 73 million or an adjusted EBITDA, margin of about 50%, diluted EPS of $0.80 to $0.97 and non-GAAP, diluted EPS of $1.41 to $1.60. We are maintaining our full year guidance at the levels we issued on our Q4 earnings call for full year guidance. We continue to think about our results through a multi path approach with different combinations of new agreements and enforcement outcomes that can deliver financial results within those ranges. With that, I'll turn it back to Riefer. Rayford Garabrandt (Vice President of Investor Relations) Thanks Rich. Before we move to Q&A, I'd like to mention that we'll be attending a number of Investor events in Q2, including the William Blair Growth Stock Conference in Chicago, the Needham Tech Conference in New York, the JPMorgan tech conference in Boston, and the Evercore TMT Conference in San Francisco. Please reach out to your representatives at those firms if you'd like to schedule a meeting now. We are ready to take questions. OPERATOR Thank you. At this time I would like to remind everyone in order to ask a question, press Star then the number one on the telephone keypad. That will be star one on the telephone keypad. We kindly ask participants to ask one question and one follow up and we will pause for just a moment to compile the Q and A roster. First question comes on the line of Arjun Bathia from William Blair. Your line is now open. You may ask your question. Liren Chen (Chief Operating Officer) Perfect. Thank you so much, Liren. Maybe if we can just start. I would love to get a little bit of the, you know, the like sort of a State of the Union on where we are in the streaming opportunity. We've seen sort of positive results in the litigation against Disney. But I'm curious sort of what all the injunctions mean for Disney. Have they had to alter their service? And if you could just maybe give us a sense of what your expected timeline is from here, that would be great. Yeah. Hey Arjun, Good morning. Regarding Disney, as you are aware, we filed a multi-jurisdictional injunction and patent litigation process February of last year. So roughly a year plus into it and so far we have five patents being decided by courts in Brazil and Germany and we win five out of five. And not only are patent found to be in fringe, the court had issued injunction against them in each of the cases. So regarding what Disney did to these Arjun Bathia (Equity Analyst) cases, it's a case-by-case basis. Some of them they claim they have work around it, some of them we are in the process of enforcing them and so it's hard to tell directly how everything will play out. It's also worth noting that we have at least half a dozen more patents coming to trial, including the cases we have in UPC that's coming in May and June and July of this year. So it's really coming up in the coming months. We also have cases in United States pending against them. So we feel very strong about where we are. And so far, obviously five out of five is an extraordinary win. Okay, perfect. That's helpful. Color and maybe going to the smartphone side, you have a long term target out there for 500 million in smartphone revenue from your ARR base. You're essentially there already. So where do we go from here? And it seems like there's obviously upside as the 6G cycle kicks in, but that's maybe still a few years away, as you pointed out. So what should we look out for in terms of catalysts or additional potential outcomes to watch for in the smartphone business through 26 and 27? Liren Chen (Chief Operating Officer) Yeah. Hey Arjun, also in my prepared remark, we have so far licensed eight of the top 10 smartphone vendors with ARR, about 492 million and about 85% of the market under license. As you pointed out, we are very close to our $500 million arrs. And so we do expect to license the remaining unlicensed customers. And frankly, once we license them, we will double check where we are. It's also important to know that not only we are very close to the IR target. But, but top three customers we have in the smartphone space which is frankly Apple, Samsung and Xiaomi, they are all licensed to end of the decade. So we really have multi year roundway with those major, major customer contracts. So we feel very strong about that program and we'll frankly provide periodic updates as we add in new customers. Arjun Bathia (Equity Analyst) I'll leave it there. Thank you so much. OPERATOR Thank you again. If anyone would like to ask a question, simply press Star one on your telephone keypad. That will be Star one on the telephone keypad to ask your question. Next question comes on the line of Anja Sahstram from Sidoti. Your line is now open. You may now ask your question. Hi and thank you for taking my question. I have some modeling question. In terms of the licensing expense, it went up quite a bit in the first quarter. How should we think about that? Rich Breske (Chief Financial Officer) Hey Anit. Yeah, the licensing expense did go up quite a bit in the first quarter. There was a significant amount of catch up revenue on the revenue line related to our new consumer electronics agreement with lg. And with that comes some corresponding rev share tied to that catch up revenue. So that was the primary driver. And if we're looking year over year, there was also some increase in our enforcement costs. Okay, thank you. And then also as you expand your licensing portfolio, how should we think about the fixed fee portion of your revenue? Yeah, so on that Anya, our experience thus far have been certainly in smartphone and also in consumer electronics. The largest customers tend to prefer fixed fee agreements. That's been our experience going forward as we look to grow in video services. Not sure exactly what form those contracts will take place, but we're going to make sure that we get the right value through whatever form. Anja Sahstram Okay, thank you, that was all for me. Thank you again. If anyone would like to ask a question, simply press star on the telephone keypad. Next question comes on the line. Scott Squirrel from Roth Capital, your line is now open. Scott Squirrel (Equity Analyst) Hey, good morning. Thanks for taking the questions. Hey, maybe just quickly on the renewals front, I think in the k was about 31 million of expiring contracts at the end of 25. I'm wondering where we are through the first quarter number of different deals, how much of that has been recovered at this point? I'm sure you're in negotiations with all of them. And second, to follow up on the earlier comment related to smartphones, most of your deals are fixed fees, but it seems like some of them have royalty based at minimums. I'm wondering given the headwinds that you're seeing from a memory standpoint in the marketplace really affecting I think the lower end of the marketplace. How much exposure do you have on that front to unit volume softening in 2026 versus the fixed fee deals which I think you have as part of all of your at least three larger customers that are constituting majority of the volume. Rich Breske (Chief Financial Officer) Yeah. So Scott, I'll take the first part of your question and then maybe Lirin will address the second. On the expirations for the end of 2025 we've renewed roughly 2/3 or maybe a little more than 2/3 of what's expired so far. And again Larry mentioned a key part of that was our renewal of Xiaomi, the third largest smartphone customer in the world. Liren Chen (Chief Operating Officer) Yeah hey Scott, regarding your second part of the question, as you are aware historically our largest customer tend to prefer fixed fee agreement. I think you are disclosure for prior quarter we have 94% of the revenue coming from fixed fee agreement. But it's also worth noting in Rich's prepared remark and Also in our 10Q filing we did mention a hybrid agreement that gave us guaranteed payment and with some upside for if the wallet exceeds certain threshold while we cannot identify which contract it was during confidentiality agreement. And this is a way for us to frankly deal with certain amount of market uncertainty as well as difficulty to project volume over a long period of time. So we feel that's fair to both party for us to capture certain amount of upside when the market rebound over time. Thank you. And if I could learn maybe to just follow up in terms of some other markets that you guys are thinking about. A Mobile World Congress, you continue to feature a lot of different technologies from haptics and sensing as it relates to 6G as well as AI. I'm wondering any kind of high level thoughts you have in terms of timeline and monetization opportunities within some of those markets. Thanks. Yeah, so 6G as I mentioned here, which is shared by some of our peer company in the industry, we expect 6G to be finalized standardized by 29 with smaller deployment also in 29 and we do see wide adoption of 6G in 2030 and frankly that adoption is projected to be pretty fast. So that's 6G. As I said in my prepared remark, we feel we are leading in 6G standard development. We identify a few things in the Mobile Congress demonstration, including the native AI integration of sensing as well as communications in those demonstration. Regarding other collaboration here, I think I highlighted a couple of things in my prepared remark. We were looking quite a bit in the hactic research and we also did a joint excellence in service Razer which is our leading gaming company. What we are trying to do with Razer is not only to enable Razer haptic devices for razor devices, but really to build this end to end gaming as well as entertainment experience including streaming video. And so we are really excited about this opportunity. We also feel we are one of the very few company who can combine the connectivity AI as radio experience and be able to introduce them into the standard process. It's also a major competitive advantage we have. So that's essentially my high level overview. But some of the use case, honestly speaking will take time to play out. Scott Squirrel (Equity Analyst) Thanks so much. OPERATOR Thank you. That will conclude our question and answer session and I will now turn the call over back to Liren Chen, our CEO. Liren Chen (Chief Operating Officer) Thank you Mel. I was appointed as CEO for InterDigital almost exactly five years ago. Since then we have strengthened, introduced the foundation driven growth across different business and built an even stronger pipeline of innovation for future growth. I'd like to take the opportunity to thank our employees for their continuing dedication and all their contributions to what has been a period of historic success of the company and for positioning the company to deliver even more shareholder values in the future. OPERATOR Thank you. Thank you ladies and gentlemen. That concludes today's call. Thank you all for joining. You may now disconnect. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.