On December 15, 2016, IDCC and Apple executed a patent license agreement:
WILMINGTON, Del., Dec. 15, 2016 (GLOBE NEWSWIRE) -- InterDigital, Inc. (NASDAQ: IDCC), a mobile technology research and development company, today announced that the company and its patent licensing subsidiaries have entered into a patent license agreement with Apple Inc. The multi-year, royalty-bearing, worldwide and non-exclusive license agreement sets forth terms covering the sale by Apple of its products and services, including its cellular and wireless-enabled products.
On the same day, IDCC issued updated revenue guidance for Q4 2016 and the full year:
WILMINGTON, Del., Dec. 15, 2016 (GLOBE NEWSWIRE) -- InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and development company, today announced that it has updated its expectations for total fourth quarter 2016 revenue to be between $258 million and $268 million.
“After the expiration later this month of certain module license agreements that overlap with the target markets of the Avanci IoT licensing platform, we see our annual royalty platform as being in the range of $360 million to $380 million,” said Richard J. Brezski, CFO of InterDigital. “In addition to revenue guidance, we expect a sequential increase in operating expenses over third quarter 2016 of between $14 million and $16 million, approximately $11 million of which is related to adjustments to compensation accrual rates reflecting strong company financial performance. We do not believe these increased expenses reflect structural changes that will impact our long-term view of operating expenses.”
“Our focus during 2016 was to balance revenue growth with long-term revenue stability. Having long-term agreements now in place with the top three terminal unit manufacturers, we’ve achieved that goal,” commented William J. Merritt, President and CEO of InterDigital. “With that strong and stable platform in place, we’re well-positioned to drive towards our goals of $500 million to $600 million in annual recurring revenue from our core terminal unit licensing business and $75 million to $100 million from our IoT business.”
These updated revenue expectations are based on preliminary accounting results that are subject to review and finalization. In addition, this revenue guidance is based primarily on royalty reports received and license agreements signed to date, and does not include the potential impact of any new agreements that may be signed, or any arbitration or dispute resolutions that may occur, during the balance of fourth quarter 2016.
Today, IDCC announced Q4 revenue of $273.9 million, which was $5.9 million higher than the top end of the guidance; IDCC also announced earnings that beat street estimates (by between $.01 and $0.16, depending on which article you read). They issued revenue guidance for Q1 2017 of between $91 and $96 million. Based on the annual recurring revenue forecast on December 15 of $360-$380 million, quarterly revenue should fall at $90-$95 million if all revenue was based on fixed licenses. Apparently, the street expected Q1 2017 revenue of $113.7 million and sent the stock price tumbling.
Street expectations were based on IDCC's past history of a strong 1st quarter as a result of strong sales by per unit licensees in the Christmas quarter. Since licensing revenue is now derived more from fixed fee licenses, the Christmas effect is significantly muted. However, revenue for Q2 2017 will be significantly higher than the street has any right to expect.
This fact will sink in slowly, and the stock price will not only recover, but will scale new heights.
GO IDCC!
