Q2 2024 Earnings Summary
- Strong Litigation Outcomes: Favorable rulings—including the U.K. Court of Appeal decision that increased Lenovo’s royalty award and mandated reimbursement of legal fees—support enhanced licensing terms and potential future revenue growth.
- Innovative Video Portfolio Expansion: The robust VVC and HEVC patent portfolio positions the company to capture emerging opportunities in AR/VR and XR devices, broadening its licensing base and long-term growth potential.
- New Licensing Deals Boosting Guidance: Recent agreements, such as the new Panasonic license already factored into Q3 guidance, demonstrate the company’s ability to secure high-value deals that support recurring revenue and margin expansion.
- Lenovo Licensing Uncertainty: The executives highlighted that while the favorable court ruling increased the past sales award, there is still no forward-looking license agreement in place with Lenovo for 2024, leaving recurring revenue from Lenovo subject to continued negotiation and potential delays.
- Reliance on One-time Legal Wins: A significant portion of the recent revenue gains resulted from one-time windfalls via litigation rulings (e.g., the increased royalty from Lenovo and legal expense reimbursements), which may not translate into sustainable recurring revenue.
- Recurring Revenue Vulnerability: Analysts noted that the raised full-year guidance implies an expected decline in recurring revenue, as seen with the expiration of agreements like with Huawei and ongoing negotiations for renewals, highlighting dependency risks in the recurring revenue stream.
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Lenovo Licensing
Q: What's Lenovo pricing and future revenue?
A: Management explained that they secured a decisive appeal win where the court increased Lenovo’s licensing fee by over $55 million for past sales, and while they have collected this amount and reimbursed legal fees, the current focus is on establishing a forward-looking license for 2024. Future revenue capture remains uncertain pending final resolution of related cases. -
XR Applications
Q: When will XR licensing agreements materialize?
A: Management noted that their robust portfolio in VVC and HEVC patents is well suited for XR/AR use cases, with negotiations likely involving both large and specialized device makers, though no specific timeline has been provided. -
Panasonic Guidance
Q: Is the Panasonic win included in Q3 guidance?
A: Management confirmed that the new Panasonic license agreement is already factored into the Q3 guidance, reflecting the company’s continued momentum.
Research analysts covering InterDigital.