InterDigital, Inc.

Welcome to InterDigital's fourth quarter 2024 earnings conference call. I am Rafer Garibrandt, head of investor relations for InterDigital. With me on today's call are Liren 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 factor 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 Lyric. Thank you, Rupert.

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 12 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 trillion in economic value every year, we believe we are just getting started. Today, I'll recap the fourth quarter result, 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 million, while adjusted EBITDA and non-GAAP EPS nearly quadrupled year-over-year. As we discussed in our last earning 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 the world's 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 renewal agreement with a major Chinese technology company, ZTE, and with our announcement that we have entered into binding arbitration with Lenovo to determine the final terms of our license and ended all dedications with them. Looking at 2024 overall, it was another outstanding 12 months for the company. Revenue for the year increased almost 60% to $869 million, 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 close 14 new agreements throughout the year. In addition to our smartphone license with OpenZTE, we signed a new license with Google, covering a range of devices, as well as new license with leading TV manufacturers, Samsung, NTPV in our consumer electronics and IoT program. We have now closed license agreement worth more than $3.3 billion since the start of 2021. 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. 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 January 1st of 2023. and this binding arbitration will determine the final terms of the license. Our research teams are firing on all cylinders as we grow 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 radio 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 outstanding innovation in wireless-related AI. Specifically, the award was for AI-empowered receiver design for 6G communication. We choose 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, Eva Honkaronta, was named among 50 most influential people in intellectual property by a 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 portfolios in our industry. In 2024, we made more than 5,000 new patent findings worldwide, with our global portfolio now over 33,000 assets. The strength of our innovation was once again confirmed as we were named one of the world's 100 most innovative company for third concept year by LexisNexis. We were also named among the world's leading patent holders in 5G, advanced video compression, and Wi-Fi in separate reports from LexisNexis. Also in 2024, we outlined a clear path to significantly increase our revenue and profit at our investor day, where we announced a new target of more than $1 billion in annual recurring revenue and $600 million in adjusted EBITDA by 2030. 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 technologies 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 agreements. We plan to grow our business by focusing 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 enhance user experience. This week, we initiated a multi-jurisdictional enforcement action against Disney, including Disney+, Hulu, and ESPN+, for their ongoing infringement of our intellectual property. Disney generated about $25 billion in streaming services revenue from over 250 million paying subscribers in FY24. But in all our licensing programs, we expect The vast majority of license agreements can 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 enables us to continue to invest in the next generation of 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 Rich talk you through the numbers in more detail.

Thanks, Liren. As Liren noted, in Q4, we delivered an outstanding finish to the year. Total revenue of $253 million increased 140% year-over-year and was above our outlook of $239 to $249 million, driven primarily by new agreements that closed after the prior guidance. Our 2-4 revenue included catch-up revenue of $136 million related to our fourth quarter license agreements with OPPO, Lenovo, and ZTE. Our adjusted EBITDA for the quarter of $198 million exceeded the top end of the outlook of $180 to $190 million, 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 million and free cash flow of $169 million. Building on Liren'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 billion-plus in annual recurring revenue and $600 million-plus of adjusted EBITDA by 2030. Total revenue accelerated to $869 million, 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 million of CEIOT 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 the foundational technologies bring to markets beyond smartphones. Adjusted EBITDA margin was very strong again in 2024, coming in at 63%, a 20-point improvement over the past four years. Over that same timeframe, adjusted EBITDA has grown more than three and a half times. We ended the year with almost $1 billion in cash, including net cash of over $500 million, which is up more than $100 million from last year. Four-year cash flow continued to be robust with $272 million of cash from operations and $213 million 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 million to shareholders through buybacks and dividends and $126 million 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 million. In that time, we have reduced our outstanding share count by 5.1 million shares, or 17%, to 25.7 million shares at the end of 2024. Turning to our outlook, we have guided to another very strong year in 2025 with total revenue in the range of $660 to $760 million, adjusted EBITDA of $400 to $495 million, 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 $0.60 per share. As a reminder, we begin the year with $230 million 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 million of recurring revenue. So multiply that by four, and you get $468 million 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 million at the start of 2021 to $468 million at the end of 2024. 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 million level at which we concluded 2024. Before I turn it back to Rayford, I want to reiterate that our quarterly guidance for Q125 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 the financial results within our four-year guided range through different combinations of new agreements and arbitration results. With that, I'll turn it back to Rayford.