InterDigital, Inc. (IDCC) August 2026 Conference Transcript

Good morning. Welcome to the Ideas Conference. I'm Sandy Martin. And next up, we've got InterDigital traded on the NASDAQ IDCC. And it's an $8.9 billion market cap company. And today we've got Rich Breske. And he is the chief financial officer. I'm going to hand it off to Rich.

Thank you, Sandy, and good morning, everybody. I'm here today with Rayford Garibrandt, our Vice President of Investor Relations. And Rayford and I like nothing more than to get out on the road and introduce Interdigital to anybody that hasn't heard of us or doesn't know the great work that our research team does. Before I start, I want to acknowledge the disclaimers. I'll add no value by reading them to you. So just know they're there and feel free to read them. In my presentation today, I'm going to introduce the company. I think it's really important to spend a moment to talk about the team, the leadership team for Interdigital, really driving a lot of success over the last number of years. I think it's important to dive into the foundational technology and research that we do. At its heart, Interdigital is a research company. We make money by patent licensing, but it all stems from our research engine. I definitely want to spend a moment talking about the accelerating business momentum as represented by our financial results, and then talk a little bit about our long-term strategy. So a couple of highlights from 2025. We had a great year, over $800 million of revenue, north of $15 per share, a non-GAAP EPS, 71% adjusted EBITDA margin, and over $1 billion of cash. And I'm happy to say we're delivering a great year so far in 2026 as a follow-up as well. So let me talk for a moment about the leadership team. Our CEO, let me start with him, Liren Chen. Liren joined Interdigital in 2021. Liren had spent the 25 years preceding that at Qualcomm, where he started out as an engineer, got an MBA, got a law degree, got involved in their patent portfolio and leading that, and then became one of the senior executives within QTL, which is the group within Qualcomm. That's somewhat of an analog to interdigital because that's where they do all the advanced research in wireless, cellular, video, AI, and then contribute that to various standards and license that and monetize it through licensing agreements. Just to the right of Rajesh, I won't go through the whole slide, but just to the right is Rajesh Pankash, who Liren recruited from Qualcomm. Rajesh was a senior vice president in charge of corporate research for Qualcomm. So all of their advanced research that Qualcomm used to contribute to the standards was led by Rajesh. So he was, just as Liren was, when our CEO position opened up a couple years ago. Liren was the perfect person to fill it. Rajesh is the perfect person to lead our research organization. And if you look, I'd noticed this morning as I was reviewing the slides, there's a great balance in the leadership team. On the left half of the slide, it's three of the four, including Liren and Rajesh, have come from Qualcomm or have joined Interdigital since Liren joined. And on the right half of the slide, myself included, are all folks that have been with InterDigital for, at this point, at least 10 years. I myself have been with InterDigital since 2003. I started back then as the corporate controller, and I've been CFO since 2012. But it's a great balance of, as I said, new folks and folks that have been with the company quite a long time, and I'm really proud of the results that I'll discuss in a moment. Before I do so, it's important to understand our business model. I've already said it starts with research. And on the left hand side, you see our research and innovation. That's that's where it starts. And then there's, you know, two parallel tracks. I'll start on the bottom track, which I call the technology track. We take our research in the fundamental technologies I'll discuss in a moment, but including, for instance, cellular, and we contribute that to the various standards in which we participate. So when you think of 5G, 5G is a standard, okay? And we, through the standards, share that technology with all the folks that are making your 5G devices, like Apple and Samsung, okay? They're the implementers. But that doesn't get us paid. That's how our technology makes it out into the marketplace and used by the implementers. On a parallel path, we have to protect the rights to our research and innovation through patent filings. We then need to negotiate licensing agreements to get fair compensation from the folks that implement our technology. And then when we get fair compensation, you see we reinvest that in research and keep that chain moving. The three key areas that we focus our research are wireless, video, and AI. We have a lab. We call it our labs or wireless lab or video lab or AI lab. Wireless is really where the company was started. It was founded all the way back in 1972 with the idea by the founder of wireless digital telephony. So digital wireless for the purpose not just of voice communications, but also supporting wireless transactions. So very forward-looking back in 1972, and we remain very forward-looking today. So for the first decades, the company was involved in groundbreaking research about wireless digital telephony. But frankly, had difficulty monetizing that through a number of different product models. So it wasn't until the 90s the company started. There was a developing 2G standard, which was the first digital wireless standard. 1G was analog. Nobody called it 1G. They just called it cell phones. And then they said, OK, now we have 2G, which was digital. And because of the decades of research, InterDigital at the time was in a great position to contribute technology. This is how you do it. This is how the standard should work. And there were others, Qualcomm and others participated in that process. But we had very fundamental technology that we contributed to the standard. And when I joined the company back in 2003, the bear case was, well, small company with great groundbreaking research, but now this is becoming a big market, and how will this small company ever survive the transition from 2G to 3G? Well not only did we survive the transition from 2G to 3G to 4G to 5G, but we've only gotten stronger as we've moved forward in time. There is an advantage when you work on 2G and you're now developing 3G and so on down the line because these devices are all backwards compatible. Okay, I have a iPhone, 5G iPhone. I'm not always on a 5G network. Okay, I'll get handed off from a 5G tower to a 4G tower. So how are you going to develop 5G if you don't understand 4G? How are you going to develop 3G if you didn't understand 2G, right? So that was one of the reasons that we've been able to be successful, aside from the fact that we have, you know, some of the best engineers in the world working on this stuff. And we also work on Wi-Fi, and that's been a legacy area for us as well. Video, we started our own internal programs maybe 15 or more years ago, but they were relatively small. It was enough, though, to recognize that video was going to be very important to our ecosystem. And in 2018 and 19, when we had the opportunity to acquire Technicolor's research team and their entire patent portfolio, we jumped at it and wound up acquiring most of their portfolio and most, if not all, of that research team. So we now have one of the leading organizations that addresses both wireless, video, and along with the video team, we had an AI lab that we picked up from Technicolor out in the Silicon Valley. So we're a leader in these very fundamental technologies that are only becoming more important in our lives as we move forward in time. Let me talk for a minute about video. One of the real exciting things going on with the company is we're moving from smartphone to consumer electronics and IoT, and now the latest vertical that we're addressing is streaming, because streaming, all the streaming models use our technology to deliver their video content to you. And let me explain why our technology is important. In an uncompressed format, a 4K movie like Wicked for Good is the example here, would be a massive amount of data. So much data that it would take days or weeks to download and stream that 4K film. Instead, we can do it in minutes because we compress through Interdigital's contributions to video standards. we compress that bitstream into a small fraction of the data requirement so you can more efficiently and faster transmit it over all mediums, including wireless networks. And just to visualize that, what we show here is a block diagram. And if you look in the uncompressed format, we blow up just one block, one small portion of one block to show you which some of the different codecs, how they work. So HEVC, instead of being 11,600 gigabytes, is just 14, okay? And that's what enables streaming high-definition, these video codecs, of which we are a key contributor to the standards. So I mentioned already standards and the importance of them, and it goes well beyond cellular, not necessarily for their digital, but it goes well beyond cellular and video. We have standards in all aspects of our lives. If we think about the power coming through the outlets, that's a standardized voltage. If we think about the light bulbs in the ceiling, if one goes out, you don't need to go and be brand specific. You get the right bulb and plug it in because that's a standard fitting, okay? Throughout our lives, we're dealing with standards, and they're very, very important when you with complex technology, because that's what enables you to go to the store and buy an iPhone or a Samsung Galaxy or a Lenovo phone, right? And they're all going to work together on a wireless network, whether it's Verizon or AT&T, whether the base station is Nokia or Ericsson. So it's a multi-manufacturer environment, the most complex communication system ever devised by mankind, and it all works together because of standards and because of the work that interdigital researchers have done to promote and solve the problems of these standards. We have very strong leadership in the standards. We participate in over 100 standards organizations, and this is just a visual representation of some of the key standards. You see on the top a number of the video standards, MPEG and JVET. On the bottom, 3GPP. Bottom left is the organization that sets the 5G standard. We're now working on 6G, which will be out in a couple of years. And then off to the right, designated by the light blue box, is some of the overlay with AI in both video and wireless standards. because, as I mentioned, we have an AI lab, not because we're doing large language models, but because we're using AI to help develop and solve the problems of the next generations of standards. And if we double-click on 3GPP, the group that is currently working on 6G, I mentioned that we've only gotten stronger as the years have gone by. Today, there are just three organizations, three companies that have more than one chair position among the roughly 15 key research groups of 3GPP. That includes China Mobile, Samsung, and Interdigital. So even if you look, you'll see Qualcomm's logo up there once, Ericsson is up there once, Nokia is up there once. This is not to say, you know, we're necessarily number one or better. We're one of the absolute leaders. We bring very important technology. We're recognized as such by having two chair positions. But it's not that we're successful because we have two chair positions. It's we have two chair positions because we're successful. We have a very strong research team, and this is just one of the ways that we're recognized. Another way we've been recognized is LexisNexis publishes for, I think, five years in a row now, the 100 most innovative companies in the world. And Interdigital has been listed among the 100 most innovative companies in the world for five years in a row. Pretty phenomenal when you think about the size of our organization. We're much smaller than every other company I've mentioned because we don't have that product business. Now, if you stripped out the product business, the chip development, the base stations, what have you, our research organization is much closer in size to these other large companies. But that's really all we do. We're very focused on the research. And that's one of our advantages. That's one of our strengths in the standards, because we're not there promoting our product roadmap. We're there promoting the very best technology to make the new standard better. And all that research drives a very large and valuable IP portfolio. You can see back in 2017, it was about 19,000 assets. Today, about 40,000 patent assets around the world. So this is the patent portfolio of a Fortune 100 company when you think about companies that have that level of IP. Let me talk for a moment about our accelerating business momentum. Over the last five years, we've signed more than 60 license agreements with total contract value in excess of roughly $5 billion. You see some of the logos up there. It's the largest tech companies in the world. I've already mentioned Apple and Samsung. We just recently announced an agreement with Amazon, Xiaomi, the number three handset manufacturer in the world, LG, you know, the list goes on and on. And over that time period, these agreements have driven tremendous growth in our ARR, our annualized recurring revenue, $356 million back in 2020, up to a rate of $626 million this last quarter, a new record for us. And our total revenue has grown as well, up more than two times or roughly two times since 2020. Our total revenue doesn't only include ARR, which is kind of like our recurring run rate, but it also includes catch-up sales. Because when we sign a new agreement, very often that company has been using our technology for years before we've signed that agreement. If you think back to that model, I mentioned there's two different tracks. There's the technology track where we share our technology through the standards with the implementers, but that's not what get us paid. So they sometimes will use our technology for years while we're negotiating on the top track, the business track, a fair rate in a patent license agreement. Once we finally reach that agreement, we get economics for their prior infringement. And we recognize that as one-time catch-up sales. So if you look at a year-to-year comparison or our total revenue overall, you'll sometimes see, for instance, 24 to 25, the total revenue came down a little bit, but our ARR grew, okay? That was just because we had a little more catch-up in 2024 than 2025. But if you kind of dissect that, you'll see that we're actually growing, okay? We're growing that ARR. And we're doing so with a lot of operating leverage, okay? And as a result, while our revenue has grown by two times, our adjusted EBITDA over the same period has grown by roughly four times, okay? Because we're able to kind of keep cost in control. The research investment that we're making today has very little to do with our revenue in 2026. Our research today is driving, you know, 6G adoption in 2030, right, and beyond, okay? OK, so as a result, when we add new agreements, there's really nothing there's there's no additional cost. They're using technology that we've developed years ago. We're now just granting permission. So with rare exceptions, it's a bottom line drop. And that's why you see the the adjusted EBITDA and margins up to 71 percent. That generates a lot of cash flow. So what do we do? We reinvested in the business. We want to make sure that we're, you know, investing in that research so we can drive revenue growth in 2030 and beyond. But we still have had a lot of additional cash that we've given back to shareholders through buybacks and dividends. So you can see that just in the last five years, we've reduced the outstanding share count by 16%. So double revenue, quadruple the earnings, buyback stock, and now our non-gap EPS is up 7x over that time period. So that's the financial model that we love, the result from the great work that our researchers and everybody in the organization has delivered. And it's been recognized. A number of things, I'll point out one. At the beginning of the year, Forbes had us listed as America's number one best mid-cap company. So a great article that talks a little bit about the company. I encourage you to read it. Let me talk for a moment about our long-term growth, and then I'd be happy to spend a few minutes answering whatever questions you have. So again, the technology and the areas that we invest are massive markets, very fundamental technology. We talk about wireless and video, and it's hard to imagine new technologies that are going to be important and massively adopted that are not in some way connected to wireless and video. So it's becoming even more important as we move forward in time. The three large markets that we address are smartphones, consumer electronics, and IoT, and we include auto as part of IoT, Internet of Things, and then streaming and cloud services, which I touched upon. But these are massive markets, and our technology is critically important to them. So just a little, just shy of two years ago, in September of 24, we had an investor day where we announced our long-range goal of a billion dollars of ARR by 2030. And if you look, we broke it across those three markets. That billion plus is made up of $500 million from smartphones. That was the area that I mentioned before is kind of our legacy market. So we didn't want to wait until 2030 to achieve that goal. We put a timeline of 2027 on it. And I'm proud to say that we're up to 491 just shy of the goal here in the middle of 2026. On consumer electronics, IoT, and auto, we set a goal of $200 million. That's up to $75 million. And then streaming and cloud services, we set a goal of $300 million plus. At the time, there was no revenue. We now have revenue. I mentioned we have an agreement with Amazon, and it's actually an agreement that gives them the right to use our technology in their streaming services and products. And we've agreed with Amazon that since we couldn't agree on the price, we're going to let a third-party arbitration panel determine what that price is. So we recognize revenue on an estimated basis until we get that result. If we kind of break down those markets, in smartphone, 85% of the more than 1 billion devices shipped around the world on an annual basis are licensed to our technology. Now, in truth, I'd argue 100% use our technology because they're all being built to conform to standards. So whether you're Verizon, AT&T, China Mobile, Orange, okay, you're only allowing standards-compliant devices on your network, which means you need to use our technology. It's not a choice. It's not, well, I'd rather, I'm going to pit InterDigital against Ericsson and pick between them. We actually both have key technology in the standard, along with Qualcomm and Nokia and others. So it's not a choice. You have to use our technology to build to the standard. So we're making very good progress there. Some of the key logos that make up the remaining 50%, 15% is Transgen, who we're in litigation with, as well as Huawei and HMD. If we look at consumer electronics, a large number of product segments within consumer electronics, just to pick two, PCs and tablets, about 60 percent licensed, and television. We got about 20 percent, and we're currently in litigation with TCL and Hisense, who represent another 30 percent. Samsung, who represents the larger part of the light blue 30 percent, is currently unlicensed to TVs. They just came off license at the end of last year, so we're working to get them renewed. If we look at automotive, you know, a lot of connected cars these days. Believe it or not, today, most of the connected cars are still 4G. There's long cycles and lead times in the automotive market. But that transition to 5G is happening. Most of the 4G market is licensed, the 4G connected car market, through our participation in a patent pool that Qualcomm and others also participate in and licensing the automotive manufacturers. The rate, the overall pull rate is roughly double for 5G, representing the importance of 5G over 4G, which is more infotainment. You know, 5G is looking forward, going to help operate the vehicle, right? Critical communication as opposed to just infotainment and so forth. So we get a higher rate there. And also you're seeing more and more connected cars ship every year. And then cellular IoT, you think about all the devices that increasingly are being connected a lot by Wi-Fi and more and more by cellular because of the advantages that cellular has in many use cases over Wi-Fi. So another very big, albeit fragmented, market for us. And then on the video side, I talked about streaming, got some representative logos. Our 300 million plus is based off of SVOD and AVOD. That's subscription video on demand. So if you think Amazon and Disney, Netflix, et cetera, as well as advertising video on demand. So more of the short form YouTube, Instagram reels, TikTok. Believe it or not, the AVOD market, the TAM there, is actually bigger than the SVOD market because of the massive amount of value those companies create from their advertising businesses off of those video services. But if we take a minute and compare the size, the overall TAM of SVOD and AVOD as a collective, it's larger than the smartphone market already today, okay, roughly half a trillion dollars. And it's growing much faster. So you can see that by 2030, it's projected to be, you know, roughly 800 million, excuse me, billion, 800 billion dollars. So just a massive, massive market. And then there's a lot of other content in cloud that's using, among other things, our video technology, including global pay TV, video conferencing, if we think about Zoom and Teams, cloud gaming. All of that is requiring video delivery that, again, needs to be in a compressed format to be viable. And I mentioned already that we return a lot of capital to shareholders. If we take a step back and think about capital allocation, we have a great business. We want to make sure we're investing in it. So that's a key priority. We're always looking at inorganic opportunities as well. We don't have a need because we have that research engine and we can drive a lot of growth just off of that research engine. But at the same time, that research capability helps us recognize good opportunities and vet them because we have that expertise. And that was one of the things that led to the Technicolor acquisition. We don't do a lot of M&A, but I think I'd argue that when we've done it, we have some very good success with it. So it's something we want to consider. We maintain a very strong balance sheet. I mentioned a billion dollars of cash. That's a lot of cash, but we're sometimes forced to enforce our rights against the largest companies in the world. We're in arbitration with Amazon. We're in litigation with Disney because they were, at least in the latter case, found to be unwilling to pay a fair rate for the use of our technology. So we want to make sure that we can collect that fair rate and it helps to have a strong balance sheet to do so. And even accounting for the first three items, we tend to have excess cash. And as I indicated, we've done a pretty good job in returning that to shareholders through buybacks and dividends. Um, so just to, uh, kind of close on the target financial model for 2030, I mentioned a billion dollars plus of ARR, uh, the 800 plus million of total revenue. I, I, I started on the first slide, uh, that's total revenue includes a lot of catch up. Uh, today, I think on another slide, I said our ARR is up to 626 million. So still, uh, a lot of room to grow through 2030, uh, a lot of opportunity to grow the bottom line because a lot of that is a bottom line drop given the operating leverage. And I'm assigning a 60% adjusted EBITDA margin to that target. So 600 million of adjusted EBITDA. Even when I presented that goal in September of 24, some people said, well, Rich, you guys are pretty much at 60% now. If you're adding a lot of 100% gross margin revenue, mathematically, it suggests that it should be higher. And I said, well, that's true. But if If we think back to our investment cycle, and I think back to the Technicolor acquisition, one of the reasons we were able to acquire that property and pay a relatively low price was because beyond the cost of the acquisition, we recognized there was going to be years of investment before we would generate profit. So I told, and if you go back and listen to the tape, I said, this is going to be dilutive. This is an investment, but we see big things ahead for the combination of video and wireless, and we see this as a worthwhile investment. We think it's absolutely played out that way. I don't want to foreclose the opportunity to make another great investment and therefore set that margin at a level where we can make investments so that when we hit a billion dollars in 2030, we can be talking about some larger revenue target at some future point um so we have a great uh world-class leadership team uh a lot of accelerating momentum in our business and in our financial results uh i think our technologies and our research have never been more valuable and uh we're very happy to have a clear strategy that we've done a pretty good job of executing on thus far so with that i'd be happy to take whatever questions you have yeah yeah i i would argue we've proved the case uh but that doesn't mean everybody's eager to pay um you know it's a maybe a little bit of function of the model where uh through the standards people get access to our technology not permission but access okay and they need to use it to ship their products so they're going to ship first pay later and it's a it's a matter then of and you don't have a forcing mechanism to say, well, you have to sign the new PO and pay me before I give you the component. They already, in effect, have that. So we have to negotiate with them. And we're talking about agreements that are sometimes over a billion dollars. So it's a lot of money. And it takes a long time to sometimes negotiate those agreements. Certainly too long sometimes. And we have to enforce our rights. But an important part, I always say there's three things that we're world-class at, right? One is research in these very fundamental technologies, okay? Absolutely world-class. Two is protecting our rights to those very important developments and research that we have through patent filings. And the third is being able to negotiate agreements with the largest companies in the world. The vast majority, 90 plus percent of that 60 agreements we signed, $5 billion of TCV, that's been through bilateral negotiation, not litigation. But when we have to enforce our rights, that's one of our capabilities as well at a world-class Yeah, so the question went to the length and structure of our patent license agreements. Particularly on the smartphone side, there is a high concentration. the top, you know, 10 smartphone makers in the world account for the vast majority of the shipments. So there's not like a law of large numbers here where like averages are necessarily important. But having said that, if you said typical, it'd probably be about five years or Apple and Samsung agreements, number one and number two are a bit longer than that. And that accounts in part for the sustainability and strength of their businesses and the predictability, that we know that they're going to, you know, be there. They know they're going to be there. And conversely, they know we're going to be there. And in effect, what they're doing, these large companies, they're not just licensing the patents that we have at the outset of an agreement. It's a subscription to our portfolio so they can freely prosecute their businesses and use, you know, the license technology as it changes and grows over the term of that license, which in those cases is, you know, in excess of five years. But I would say the most typical time period would maybe be five years. We typically don't do too much shorter than that because, as I mentioned, it's a high transaction cost, a long negotiation, potentially the need for enforcement. So we want to make sure that we're, you know, we have a reasonable term. And then as to the payment, I should note that 90-plus percent of our revenue comes from fixed-priced agreements. So what underlies that is some expectation about the unit volume over a period, right? But at the end of the day, we settle on how much they're going to pay for that subscription over five or whatever the term is. Um, so once we, uh, agree to that, um, the, the payment structure, you know, we can be flexible to a degree, uh, based on what our customers needs are. Um, you know, we're kind of focused on what's the net present value of that payment stream. Uh, sometimes we'll have, you know, equal quarterly payments over the course of the agreement. Sometimes it's equal annual payments. And therefore, if you look at our free cashflow, you know, we could have quarters where, you know, quarters of a year, we won't get any cash from one of our customers. And then the other quarter we'll get four quarters worth of cash from that customer. Okay. So you can see a little bit of lumpiness. And I like adjusted EBITDA, which correlates to free cash flow because it kind of smooths out some of that noise. But it could also be a little bit more upfront or what have you if that's what our customer wants. We'll try to, within reason, accommodate a payment schedule. Yeah. So competition, the question went to competition. It's maybe not your traditional Coke versus Pepsi. Okay. We compete first off for talent. Certainly the Nokia, Ericsson, Qualcomm's, you know, they're all doing research in similar areas. So we do compete. And these are, you know, again, world-class talent. You know, when we have an intern, they're not a four-year undergraduate degree. They're a PhD candidate, right? And that's a pipeline that they get their PhD. And sometimes we're competing with academia. Do you want to go and do advanced research in academia? Or do you want to come to Interdigital and do advanced research? And there's, you know, depending on the individual, they'll look at the pros and cons of each. But we have a pretty good package that we can offer those people. And then we can also offer competitive packages against the Nokias and Qualcomm's as well. You know, they may be bigger companies, but we're very focused on the kind of work that they're interested in doing. And that can be an advantage for us. As far as, you know, in the sales cycle, there isn't the opportunity to say, well, I don't want to use Interdigital's 5G. I'm going to use your competitor's 5G because once we're in the standard, they need to use it. So the competition is getting our technology into the standard. And it's a collaborative and competitive process. These standards are consensus-based organizations. The good news is, as you think about 6G, it's super complicated. There are many, many problems to solve. Liren says if you print out the 5G specification, it would, and stacked in, you know, 8.5 by 11 paper, it would go from the floor to the ceiling, okay? So there's hundreds, if not thousands, of problems to solve, and, you know, we're quite capable of, you know, having important contributions and innovations in each of the standards going forward. But there is a competition to make sure that you're in that mix. A lot of time.

Thank you.

All right. Thank you.