All right. All right, everyone, we're gonna go get started. Thanks everyone for joining us. We have InterDigital CFO, Rich Brezski. Rich, thanks for being here.
Great to be here.
Appreciate it. Before we get started, just if you wanna see a full list of our disclosures, go to williamblair.com. So Rich is gonna give a presentation, but InterDigital, for those of you that don't know, it's a very fascinating company, very profitable. They have a very strong patent portfolio that Rich will walk through. And I think there's a lot of interesting catalysts on the horizon. So it's one certainly worth paying attention to. There is a really strong smartphone business. There's an emerging consumer electronics business that Rich will walk through. But I'm gonna hand it off to you, and then if there's time left, maybe we'll do some questions at the end.
Sounds good.
All right. Floor is yours.
Well, thank you for that introduction, Arjun. It's great to be here at the William Blair Growth Conference. I'm always appreciative of the opportunity to talk about InterDigital and tell our story. Go past the disclaimers. So why IDCC? We have a large market opportunity, first and foremost. Currently, our annualized recurring revenue is just shy of $400 million, but our target is $650 million, and we think we can get there in the relatively near term. Associated with that, as I'll talk about later, is a very high level of operating margin, roughly $400 million of adjusted EBITDA tied to $650 million revenue target. We've been around since 1972, so we have a long and deep history within our industry.
The company was founded with the idea of digital telephony, and we've been contributors to the 2G standards dating back to the 1990s. That's resulted in a lot of fundamental research and a large and diverse patent portfolio with roughly 30,000 or a little more than 30,000 assets, covering wireless, and video, as well as other areas. And recently, we've had very strong licensing momentum, with $2.7 billion in contracts signed in just the last 3 years. That's all led to very strong financial performance, which I'll go through at the end. You'll see that we've had double-digit revenue growth, exceptional margins, and very robust return on capital. So let me talk for a moment about our business model. It all starts with the research and innovation. Fundamentally, that's who we are.
From 1972 forward, we've been a forward-looking company, investing heavily in advanced research, initially in wireless, and more recently, through our acquisition of Technicolor and their research team in video as well. So we embark on our research. We contribute our innovations to standards. So, as you move down the left-hand side, we participate, as I'll talk about in a minute, in over 100 standards bodies. We share that technology through the standards process. It gets massive adoption and implemented by product manufacturers around the world. On a separate but parallel path, because the bottom is very much a technical track, is the top path, the business track.
So we have all these companies that are using our technologies in their products, so then we need to seek appropriate compensation from them, and we have a robust patent portfolio to protect our rights and a licensing team that seeks to get those agreements signed. I mentioned over five decades of wireless and video innovation. Over half of our company are engineers. 90% of those have advanced degrees, and 90% of our engineers are also inventors. So it's a very research-focused business, and it's not just garden-variety engineers. When we hire interns, they're not four-year undergraduates, they're PhD candidates. So we have a very senior and sophisticated workforce, and as a result, we're one of the most significant pure research companies in the world.
When you look at the management team, there's been a number of changes in the last couple of years that have helped propel some of this growth. Our CEO, Liren Chen, spent 25 years at Qualcomm, where he was most recently, SVP and Global Head of IP. At Qualcomm, Liren held just about every, role that's important in our value chain. He started out as an engineer and an inventor. He got an MBA. He got a law degree. He has an advanced degree in engineering, worked in the, IP portfolio, wound up leading it, was key in their efforts to, license, folks in China. So he was the perfect candidate when our, former CEO, Bill Merritt, retired 3 years ago. Eeva Hakoranta, similarly, has a, you know, fantastic background.
She was an SVP and Head of IP at Qualcomm... excuse me, at Nokia, and she joined us around the same time as Liren. Then, most recently, on the slide, Rajesh Pankaj, he actually led Qualcomm's corporate R&D group. So that's the group that was responsible for Qualcomm's fundamental innovations, which they contributed into the same cellular standards that we work with. I mentioned we have leadership positions across 100 standards bodies. I'll point out just a few that are especially significant. On the top left-hand side of the chart, you'll see that Diana Pani, RAN2 Chair of 3GPP. 3GPP stands for Third Generation Partnership Project. That was the name given to it as we all embarked on the 3G standard-...
20 years ago, but it's kept that name as we've evolved to 4G and 5G. Deanna was recently elected and became one of the most important chairs within that group. And she's now leading the group as we move forward to advance 5G and look forward to 6G. So we're not just a participant in these standards, we're truly a leader in them. I'll also mention, we have board members on ETSI, a little further to the right, ATIS and the Next G Alliance. That's Doug Castor. ATIS and Next G Alliance basically is saying the roadmap for North America's participation in 6G.
So while the 6G standard isn't yet meeting, they're not forming it yet, there's subgroups around the world, such as ATIS, that are working in advance of that, and we again are leading that. We have one of the standing committee chairs for IEEE in AI and ML. Artificial intelligence is one of our key research areas. It supports both our video and cellular research, and it is an important component for us as we go forward. And then finally, there's a number of MPEG and other standards bodies that we have leadership positions with on the video side. That's all led to us being recognized as a global leader in innovation.
For the 3rd year in a row, LexisNexis named InterDigital as one of the most, one hundred most innovative companies in the world. So of all the companies in the world, we're among the most innovative. This is not presented in a stack ranking, it's alphabetical, but just to give you a flavor, on the same sheet as us is Intel and Johnson & Johnson. I dare say that they're quite a bit bigger than our plus or minus 450 headcount. But that kinda shows you the, the impact that a small company can have when you excel, like our engineering team does. And that follows through, that innovation as we look at our patent filings. The European Patent Office recently ranked for 2023, its most active filers for the year. InterDigital ranked 25th in the world.
Here, we ranked just ahead of, again, Intel, by chance, but also Canon and Airbus. So that's the company we keep in terms of our innovation and ability to protect our IP through patent filings. And that's resulted, as I said before, in a diverse portfolio of more than 30,000 patent assets. You'll see that that's grown quite a bit in just the last number of years. Back in 2017, that figure was about 19,000 assets, about three-quarters of which were based in wireless. So we had a very deep wireless portfolio at that time. We were looking for opportunities to broaden our expertise, not just our patent holdings, but our research expertise. So, in 2018 and 2019, we acquired Technicolor's patent portfolio, as well as their entire research team.
So that led to the growth in the portfolio and broadening of our research efforts. So you can see that, and about half of our 30,000 assets are now wireless-based, with a quarter or so being video-based, and that's certainly an important part of our value proposition. And with the combined strength of those legacy organizations, our video and wireless patent portfolios rank among the very best in the world. So this ranking is a LexisNexis competitive impact ranking, which looks not only at the size of the portfolio, but the strength and quality of the portfolio. I'll tell you, we don't have the largest cellular portfolio, but pound for pound, we have some of the strongest patents in it. And that's measured by, among other things, forward citations and other ways that they look at it.
It's a proprietary rating system that they use, so I don't even know the full details of it, but it certainly rings true that we should be at or near the top. And on the video side, you see we're coming in at third there as well. And it's so important that these two technologies work together, because 80%-90% of all the data that's transmitted over cellular networks is video. So we're working at ways to make those pipes bigger, faster, stronger, smarter, and at the same time, compressing the data so it can more efficiently flow through them. And having competency in both of these related areas really gives us an advantage. It's important when you're engaging in research and monetizing that through licensing, that you have solid licensing principles.
For us, it's all rooted in transparency and fair practice. I would argue we have among the most transparent licensing practices and reporting of any company in our industry. We take our commitment to license on fair and reasonable terms very seriously. That helps us reach most of our license agreements through bilateral negotiation. So although sometimes we enter into litigation, and that gets a lot of airtime and discussion, the reality is, most of our agreements are just bilateral negotiation. Recently, we renewed Apple, that was October of 2022. It runs through 2029, close to $1 billion in value. It was renewed without a gap, without the need for litigation, okay? So it's important for us to make sure that we're making fair offers.
Of course, from time to time, if the other party is not going to accept those, we may need to enforce our rights, so we're always prepared to do so, but we much prefer to reach an amicable agreement. When we have had to enforce our rights, our patents have repeatedly been found to be valid, essential to the standard and infringed on by the other party. And this, again, is where standards can be so important because if you have a patent that's essential to a standard, the other party cannot design around that. You can't, if you're part of the 5G standard, this phone, any of these phones need to be compliant with that standard. AT&T and the other carriers would not put it on the network if it weren't.
So there are 1.2 billion devices, smartphones, shipped last year. Our technology was in all of them. Presently, we're collecting royalties on slightly more than half, but part of that growth opportunity is by, through the power of the standards and the power of our innovation, to, to get the folks that are using our technology to pay us for another 30%–35%, maybe 85% penetration, and we think that gets us to $500 million on smartphones alone. Overall, I mentioned the target is $650 million of ARR. So again, $500 million on smartphone, another $150 million on consumer electronics and IoT. That's a market that's been opened up to us, largely as a result of that Technicolor acquisition.
We certainly Wi-Fi and to some degree, cellular, reads on the CE and IoT market. But when you pair that with all the important video technology we acquired from Technicolor, who has a very rich history of technological innovation and video, that creates this, you know, robust market opportunity. And we've seen tremendous growth in CE and IoT over the last number of years. Most recently, we signed earlier this year, Samsung TV. It's worth noting Samsung Mobile has been a customer of ours since the 1990s. We had a very important agreement with Samsung TV, concluded just the first quarter of this year. So it's actually the fastest growing part of our business. But we look beyond that as well.
The $650 million I speak of is on devices only, and the $400 million of Adjusted EBITDA is tied to that. Beyond that, we recognize that our technology, that video technology in particular, is fundamental to a lot of the streamers and, and cloud and services. So, all the folks that are streaming SVOD, AVOD, it's, it's compressed video that's using some of our standardized technology, to be delivered to your phones, TVs, PCs, and tablets. Others are taking note of this as well. Nokia recently sued Amazon Prime. Broadcom has a suit with Netflix. So this is something that, is, is gaining, the attention of more parties. But as, as previously demonstrated, we're certainly one of the key patent holders here, and this is an opportunity for growth for us.
Getting back to the target and our progress towards it, $2.7 billion of recent contract value. Liren joined in 2021. It was soon after that we were able to conclude an agreement with Xiaomi, who's the number one smartphone maker at the time out of China. So that was very important to get further penetration in that market. In 2022, I already mentioned the Apple agreement, the largest agreement in our company's history, concluded without the need for litigation. In 2023, we agreed to a license with Samsung. We do have a third party setting the rate for that in an arbitration process, which is just fine for us. It's not a litigation. It doesn't have the same contentiousness of a litigation.
They acknowledge that, as they have for the last almost 30 years, continue to need a license to our technology. But they, the last agreement ran 10 years, so we're, we're just looking for what we feel is an appropriate and fair step-up. Based on, how that negotiation played out, we decided to let a third party set that rate. And then, in the first quarter of this year, I mentioned we signed Samsung TV, the number one TV, more, vendor in the world. And that's, all resulted in, tremendous revenue growth over the last 5 years, going from $319 million, in 2019. Our guide, which we last updated on May 2 for 2024, is $620 million-$670 million.
So at the midpoint, that would represent a little better than 2x doubling of revenue over that five-year time period. But what's more important than that is the operating leverage in our model. So here on the top left, you see that revenue growth with a 15% CAGR through 2023, but you see EPS go from $2 a share to $9 a share. Adjusted EBITDA, the margins expand from 41%-63%. And again, that $650 million of device revenue, before we even add the services, we think we can maintain 60%-ish margins or $400 million of adjusted EBITDA. So that all throws off a ton of cash flow, and we've been good stewards in returning that to our shareholders. One point eight billion dollars since 2011.
Over roughly the same time period, we've reduced our share count by about 40%. So we've been very active in the market, buying back stock. We do pay a dividend as well. All told, close to $400 million return of capital in 2023 alone. And then, I'll leave you with a couple of recent financial highlights from the first quarter, and then I'd be happy to take any questions. I'll just highlight that $263 million of revenue in Q1, that was aided by significant catch-up sales related to our Samsung agreement, the TV agreement. They had been unlicensed for a period of time. So when we sign a new agreement, oftentimes we're collecting economics for the prior infringement before they sign that agreement, and that contributed to the revenue in Q1.
We did return another $40 million of capital in Q1, and, as I mentioned before, signed the license agreement with Samsung, which was our most significant consumer electronics agreement ever. So we're pleased with the progress, but look forward to more progress to come.
Maybe one, if I can start, and then we'll open it up. But I think you mentioned you have about half of the smartphones, and that's a big business for you already. When you think about the other half, I think a good portion of what you don't have is the Chinese manufacturers, OPPO, VVivo. What... Where are we maybe just in the phase of either licensing negotiation for a licensing agreement, litigation with those smartphone manufacturers?
Yeah, so three of the key smartphone manufacturers to close the gap between a little more than 50% of the market under license and 85 ±, which we think gets us to $500 million, is, as Arjun mentioned, OPPO, Vivo, and Lenovo. OPPO and Lenovo are currently in litigation. We've. As I mentioned before, most of the time, we're able to sign agreements without the need for litigation. This is two examples where we've had to defend our intellectual property rights. We've had good success in those litigations.
In fact, last year in 2023, you'll see a lot of catch-up sales in Q1 because we successfully showed to a UK court that Lenovo had infringed our valid and essential IP, which was found that, you know, declared so by the courts, and that concluded an agreement that ran through 2023. We were able, as a result of showing that our patents were valid, essential, and infringed by Lenovo, move on a more accelerated basis now that they're again unlicensed in 2024. Recently won an injunction against them in Germany and also have other matters going in the UK and elsewhere around the world. Our goal is not to stop anybody from shipping product with our technology. Quite the opposite.
As I showed you on the original business model, we're developing technology, contributing it to the standards, and we appreciate the massive adoption that flows from that. All we want is fair compensation. We are obligated under our standards commitments to make fair and reasonable offers. There's not exactly a corollary obligation to accept them, but if a company fails to do so, under certain jurisdictions, you can enforce your rights, and sometimes that does include injunctions.
Yeah, go ahead.
Can I ask, why, why are you not receiving royalties off streaming?
Yeah. So it's a fairly new market, I think, for the industry. So it's a program that we recently launched, maybe a year or more ago. We've been in active discussions. We can't really get into the details of those. We haven't yet set a marker out in terms of... Like, I talked about 500 for smartphone, 150 for CE and IoT. We haven't yet set a similar marker for that market. What I can tell you is it's very large. The market size by a lot of industry estimates by 2027 is expected to be about $500 billion, which puts it roughly equal with the smartphone market. So, you know, there's no question in my mind that it's an important market.
Is it possible to say roughly what sort of percentage of the value of a smartphone is attributable to your licensing? I mean, how much does Xiaomi have to pay you as a percentage of their sales of the phone as well?
Yeah. So we actually I mentioned before our transparency and our licensing practices. So we do publish rates, and there are different discounts that customers can enjoy against those rates, based on certain factors. But in the end, a lot of our agreements tend to be fixed-priced agreements, so we're not licensing on a per-unit basis, where they report to us every quarter. There are some like that, but our larger agreements tend to be a fixed price over a period of time, and that gives us a certain level of certainty. So to put it in perspective, for about half of the market under license in 2023, or right now, with 1.2 billion a year, that's about 600 million units.
We're recognizing somewhere in the neighborhood of $300 million of revenue from smartphones on an annualized basis.
Yeah. Or, maybe one just for context. You're- you have 30,000 patents, but when you're signing a licensing agreement, is it specific group of patents? Is it the whole thing? Like, what does an agreement typically look like?
Yeah, you know, it's a very important question. Because we have 30,000 assets, and, you know, sometimes investors or others might confuse us with other patent licensing models, which are quite different. There are patent licensing models where folks acquire patents and assert them, try to collect royalty for a static portfolio, typically much smaller than 30,000 assets. That's not what we do. That's not who we are. What's fundamental to us is the research or homegrown research that developed these patents, but that is also ongoing. So, when a large company is signing a long-term license agreement with InterDigital-...
They're not only licensing the patents that exist today, it's more like a subscription to the technology that exists and will be relevant over the term of that agreement, but the new patents, the new innovation that will be generated and protected over that entire time period. So it, it tends not to revolve around, you know, very specific assets. Sometimes if you have to enforce your rights, just the way litigation is structured around the world, in the U.K. case, we brought five patents in suit. We have 30,000 patents, but the way you have to do it is you bring five. And in that case, we got through three of them. We all three were found to be valid, infringed, and essential to the standard. We never even had to get to the last two.
And another important part of it is when that happened in the UK, we then had a case with OPPO that followed, and we didn't have to go through the same technical trials, they're called, because we already proved those same patents were valid, infringed, essential to the standard. We know OPPO builds to the same standard that Lenovo does. That's the whole point of the standard. So it can make the showing the infringement across, you know, a broader swath of customers easier. Yeah?
Why did InterDigital choose to go with fixed price route on royalties instead of looking at them from ARM or...?
Yeah, yeah, it's a good question. So, we don't have religion about it. We're open to variable priced agreements. It so happens that the larger customers prefer fixed-priced agreements, and there's trade-offs, there's risk on both parties. You know, underlying that agreement is some idea of what they might sell over a period of time. If they outperform that, then that's maybe something that, you know, it's our risk. If they underperform it, it's their risk. You might think that the customer who has their own product roadmap and sales forecast would have the advantage in making that judgment, but over a long-term agreement for a reliable player, as an established player, as often as not, it cuts either way. There's been times our customers have overperformed and times they've underperformed.
So, the trade-off is a good one as long as we get fair compensation. It does give us a degree of certainty in our business.
All right, we are up on time, so we will leave it there. Rich, thank you so much. Thanks for-
Thank you.
Super helpful. For everyone else who has more questions, there will be a breakout upstairs, in Adler, so feel free to join us. Rich, will be there, so appreciate it.
Thank you, everybody.