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Thursday, November 02, 2023 4:04:12 PM
Impressive 3Q results strengthened by Lenovo agreement
Strong 3Q results with revenue growth of 20% YoY to $140mn outperforming Street's expectations of $100mn, driven by catch-up revenues from two new licensing agreements signed in the quarter, namely Lenovo and Humax. Gross and operating margins came in better than expected at 64%/38%, vs. Street's 61%/20%, respectively, supported by the revenue beat and solid cost efficiencies. This also drove EPS to impress at $1.72 and beat consensus estimates by $1.05. We reiterate our Buy rating and $105 PO, as we remain confident in the company's medium-term outlook and potential topline benefits from licensing agreements with Lenovo, Oppo and Vivo.
Robust handset growth supported by non-recurring revs
Recurring revenues from smartphones grew 19% YoY to $104mn and accounted for 74% of total revenues, down from 86% last quarter due to the larger catch-up payment from the Lenovo licensing agreement. Consumer Electronics (CE), Internet of Things (IoT), and Automotive revenues were also strong, up 30% YoY to $35mn, benefitting from solid growth of non-device royalties. Management also remains confident that the growth opportunity in CE, IoT/autos still has a long runway and is still only in the early stages. We also note InterDigital targets ~85% wireless penetration with Chinese vendors Lenovo, Oppo and Vivo, vs. only ~60% currently and 55% last quarter. Profitability and cash flow leverage were also strong with adjusted EBITDA margin of 60% and FCF margin of 215%, which benefitted from the timing of customer payments.
Solid 4Q guidance suggests NT outlook remains favorable
Management expects 4Q revenues to decline -10% YoY to $105mn, roughly in-line with Street expectations. While we have no way to accurately predict the timing of agreements and settlements, we note that catch-up payments on new deals have been a common part of revenues and profits in the past years and guidance may ultimately prove conservative. Operating margins and EPS guidance for the fourth quarter came out better-than-expected at 25%/75c, vs. consensus' 3%/70c. Management also believes adjusted EBITDA margin levels could remain above the 60% mark over the medium-term from solid topline growth coupled with limited expense growth. Lastly, we flag that InterDigital's agreement with Huawei is set to expire at the end of 2023, with on-going negotiations taking place and renewal likely sometime during 2024.
Recent IDCC News
- UK Court of Appeal rules in favor of InterDigital in dispute with Lenovo • GlobeNewswire Inc. • 07/12/2024 01:10:00 PM
- InterDigital Announces Convertibility of 3.50% Senior Convertible Notes Due 2027 • GlobeNewswire Inc. • 07/03/2024 08:00:00 AM
- InterDigital signs license agreement with Google • GlobeNewswire Inc. • 07/02/2024 08:00:00 AM
- Form 11-K - Annual report of employee stock purchase, savings and similar plans • Edgar (US Regulatory) • 06/20/2024 12:30:40 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/12/2024 08:10:56 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/12/2024 08:10:42 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/12/2024 08:10:29 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/11/2024 09:26:41 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/11/2024 08:51:28 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/11/2024 08:42:45 PM
- InterDigital and Philips to Showcase Volumetric Streaming Technologies Empowering Immersive Sports Experiences at AWE USA 2024 • GlobeNewswire Inc. • 06/11/2024 08:00:00 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 06/10/2024 08:30:24 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/10/2024 08:09:07 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/10/2024 08:06:53 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/10/2024 08:04:08 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/10/2024 08:01:44 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/07/2024 08:13:30 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/07/2024 08:10:01 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/07/2024 08:07:53 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/07/2024 08:06:54 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/07/2024 08:05:55 PM
- InterDigital Declares Regular Quarterly Cash Dividend • GlobeNewswire Inc. • 06/06/2024 08:30:00 PM
- InterDigital to Present at Upcoming Conferences • GlobeNewswire Inc. • 05/30/2024 12:30:00 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 05/06/2024 08:06:54 PM
- InterDigital Announces Financial Results for First Quarter 2024 • GlobeNewswire Inc. • 05/02/2024 12:30:08 PM
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