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. Today we've got Rich Brezski, 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 Raiford Garrabrant, our Vice President of Investor Relations. Raiford 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 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. A couple of highlights from 2025. We had a great year. Over $800 million of revenue, north of $15 per share of non-GAAP EPS, 71% adjusted EBITDA margin, and over $1 billion of cash. I'm happy to say we're delivering a great year so far in 2026 as a follow-up as well. 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 Pankaj, who Liren recruited from Qualcomm. Rajesh was Senior Vice President in charge of corporate research for Qualcomm. All of their advanced research that Qualcomm used to contribute to the standards was led by Rajesh.
Just as when our CEO position opened up a couple of years ago, Liren was the perfect person to fill it. Rajesh is the perfect person to lead our research organization. If you look, I noticed this morning as I was reviewing the slides, there is a great balance in the leadership team. On the left half of the slide, three of the four, including Liren and Rajesh, have come from Qualcomm or have joined InterDigital since Liren joined. 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 have been CFO since 2012.
It is a great balance of, as I said, new folks and folks that have been with the company quite a long time, and I am really proud of the results that I will discuss in a moment. Before I do so, it is important to understand our business model. I have already said it starts with research, and on the left-hand side, you see our research and innovation. That is where it starts. Then there are two parallel tracks. I will start on the bottom track, which I call the technology track. We take our research in the fundamental technologies I will discuss in a moment, but including, for instance, cellular, and we contribute that to the various standards in which we participate.
When you think of 5G is a standard. We, through the standards, share that technology with all the folks that are making your 5G devices, like Apple and Samsung.
They are the implementers. That does not get us paid. That is 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. 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, our wireless lab, our video lab, our 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. Digital wireless for the purpose not just of voice communications, but also supporting wireless transactions. Very forward-looking back in 1972, and we remain very forward-looking today. 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. It was not 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. Then they said, "Okay, now we have 2G," which was digital. 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. There were others, Qualcomm and others participated in that process, but we had very fundamental technology that we contributed to the standard. 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, how will this small company ever survive the transition from 2G to 3G? Not only did we survive this 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 worked on 2G and you're now developing 3G and so on down the line because these devices are all backwards compatible. I have an iPhone, 5G iPhone. I'm not always on a 5G network.
I'll get handed off from a 5G tower to a 4G tower. 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? That was one of the reasons that we've been able to be successful, aside from the fact that we have some of the best engineers in the world working on this stuff. We also work in 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.
In 2018 and 2019, 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 of, if not all of that research team. 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. 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 all the streaming models use our technology to deliver their video content to you. 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 bit stream into a small fraction of the data requirement so you can more efficiently and faster transmit it over all mediums, including wireless networks.
Just to visualize that, what we show here is a block diagram. 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. HEVC, instead of being 11,600 GB, is just 14 GB. That's what enables streaming high definition, these video codecs, of which we are a key contributor to the standards. I mentioned already standards and the importance of them, and it goes well beyond cellular, not necessarily for InterDigital, 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. Throughout our lives, we're dealing with standards, and they're very, very important when you deal 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. 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. 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's 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. 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. Then off to the right, designated by the light blue box, is some of the overlay with AI in both video and wireless standards. 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. 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. 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 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. 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.
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 are much smaller than every other company I have mentioned because we do not have that product business. 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. That is really all we do. We are very focused on the research, and that is one of our advantages. That is one of our strengths in the standards because we are not there promoting our product roadmap. We are there promoting the very best technology to make the new standard better.
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. 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 have signed more than 60 license agreements with total contract value in excess of, or roughly $5 billion. You see some of the logos up there. It is the largest tech companies in the world. I have already mentioned Apple and Samsung. We just recently announced an agreement with Amazon, Xiaomi, the number three handset manufacturer in the world, LG. The list goes on and on. 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.
Our total revenue has grown as well, up more than 2x , or roughly 2x since 2020. Our total revenue does not 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 have signed that agreement. If you think back to that model I mentioned, there is two different tracks. There is the technology track where we share our technology through the standards with the implementers, but that is not what get us paid. So they sometimes will use our technology for years while we are negotiating on the top track, the business track, a fair rate and 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.
If you look at a year-to-year comparison or our total revenue overall, you will sometimes see, for instance, 2024 to 2025, the total revenue came down a little bit, but our ARR grew. That was just because we had a little more catch-up in 2024 than 2025. But if you dissect that, you will see that we are actually growing. We are growing that ARR. We are doing so with a lot of operating leverage. As a result, while our revenue has grown by 2x , our adjusted EBITDA over the same period has grown by roughly 2x . Because we are able to keep costs in control. The research investment that we are making today has very little to do with our revenue in 2026. Our research today is driving 6G adoption in 2030 and beyond. As a result, when we add new agreements, there is no additional cost.
They're using technology that we've developed years ago. We're now just granting permission. With rare exceptions, it's a bottom-line drop, and that's why you see the adjusted EBITDA and margins up to 71%. That generates a lot of cash flow. What do we do? We reinvest it in the business. We want to make sure that we're investing in that research so we can drive revenue growth in 2030 and beyond. We still have had a lot of additional cash that we've given back to shareholders through buybacks and dividends. You can see that just in the last five years, we've reduced the outstanding share count by 16%. Double revenue, quadruple the earnings, buyback stock, and now our non-GAAP EPS is up 7x over that time period.
That's the financial model that we love, the result from the great work that our researchers and everybody in the organization has delivered. 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. A great article that talks a little bit about the company. I'd 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. Again, the technology and the areas that we invest are massive markets, a 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.
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. We include auto as part of IoT, Internet of Things. Then streaming and cloud services, which I touched upon. These are massive markets, and our technology is critically important to them. Just shy of two years ago, in September of 2024, we had an investor day where we announced our long-range goal of $1 billion of ARR by 2030. 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. We didn't want to wait till 2030 to achieve that goal. We put a timeline of 2027 on it.
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. 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. 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. We recognize revenue on an estimated basis until we get that result.
If we 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 would argue 100% use our technology because they are all being built to conform to standards. So whether you are Verizon, AT&T, China Mobile, Orange, you are only allowing standards-compliant devices on your network, which means you need to use our technology. It is not a choice. It is not, "Well, I am 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 is not a choice. You have to use our technology to build to the standard. So we are making very good progress there.
Some of the key logos that make up the remaining 15% is Transsion, who we are 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% licensed, and television, we got about 20%. We are currently in litigation with TCL and Hisense, who represent another 30%. Samsung, who represents the larger part of the light blue 30%, is currently unlicensed to TVs. They just came off license at the end of last year, so we are working to get them renewed. If we look at automotive. A lot of connected cars these days. Believe it or not, today, most of the connected cars are still 4G. There are 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 overall pool rate is roughly double for 5G, representing the importance of 5G over 4G, which is more infotainment. 5G is looking forward, going to help operate the vehicle, right? Critical communication as opposed to just infotainment and so forth. We get a higher rate there, and also you are seeing more and more connected cars ship every year. 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.
On the video side, I talked about streaming, got some representative logos. Our 300 million-plus is based off of SVOD and AVOD. That is 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 is larger than the smartphone market already today. Roughly $500 billion , and it is growing much faster. So you can see that by 2030, it is projected to be roughly $800 billion. So just a massive market.
There is a lot of other content in cloud that is 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. I mentioned already that we have returned 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 are investing in it. That is a key priority. We are always looking at inorganic opportunities as well. We do not have a need because we have that research engine, and we can drive a lot of growth just off of that research engine.
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 do not do a lot of M&A, but I think I would argue that when we have done it, we have some very good success with it. It is something we want to consider. We maintain a very strong balance sheet. I mentioned $1 billion of cash. That is a lot of cash. We are sometimes forced to enforce our rights against the largest companies in the world. We are in arbitration with Amazon. We are 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.
We want to make sure that we can collect that fair rate, and it helps to have a strong balance sheet to do so. Even accounting for the first three items, we tend to have excess cash, and as I indicated, we have done a pretty good job in returning that to shareholders through buybacks and dividends. Just to close on the target financial model for 2030, I mentioned $1 billion plus of ARR, the $800+ million of total revenue. I started on the first slide. That is total revenue, includes a lot of catch-up. Today, I think on another slide I said our ARR is up to $626 million. So still a lot of room to grow through 2030. A lot of opportunity to grow the bottom line because a lot of that is a bottom-line drop, given the operating leverage.
I am assigning a 60% adjusted EBITDA margin to that target, so $600 million of adjusted EBITDA. Even when I presented that goal in September of 2024, some people said, "Well, Rich, you guys are pretty much at 60% now. If you are adding a lot of 100% gross margin revenue, mathematically it suggests that it should be higher." I said, "Well, that is true." But 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. I told, and if you go back and listen to the tape, I said, "This is going to be dilutive. This is an investment.
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 do not 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 $1 billion in 2030, we can be talking about some larger revenue target at some future point in time. We have a great world-class leadership team, a lot of accelerating momentum in our business and in our financial results. I think our technologies and our research have never been more valuable, and we are very happy to have a clear strategy that we have done a pretty good job of executing on thus far. With that, I would be happy to take whatever questions you have. Yeah.
Talk a little bit about how often the negotiations become more adversarial. I was a little bit surprised under the, I think it was the cellular slide, where you have 85% of people under license, and then you have a little sliver that you are in litigation with. If everybody is paying a license fee, how have you proved the case?
Yeah. I would argue we have proved the case, but that does not mean everybody is eager to pay. Maybe a little bit of function of the model where 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 are going to ship first, pay later. And you do not have a forcing mechanism to say, "Well, you have to sign the new PO and pay me before I give you the component." Okay? They already, in effect, have that. So we have to negotiate with them, and we are talking about agreements that are sometimes over $1 billion. So it is 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.
An important part, I always say there are three things that we are 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%+ of that 60 agreements we signed, $5 billion of TCV, that has been through bilateral negotiation, not litigation. But when we have to enforce our rights, that is one of our capabilities as well at a world-class level.
When you get an agreement from the ARR, how long do those last? Do they last through a product cycle by the enabling? Likewise, when you are successful in either negotiating or litigating, what kind of a payback period? If you win something for $1 billion, they are not just going to write you a check, I am assuming, right? It will be a payout over a certain amount of time. Can you kind of talk about how that works?
Yeah, 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 10 smartphone makers in the world account for the vast majority of the shipments. There is not law of large numbers here where averages are necessarily important. Having said that, if you said typical, it would probably be about five years. Our Apple and Samsung agreements, number one and number two, are a bit longer than that. That accounts in part for the sustainability and strength of their businesses, and the predictability that we know that they are going to be there, they know they are going to be there. Conversely, they know we are going to be there. In effect, what they are doing, these large companies, they are not just licensing the patents that we have at the outset of an agreement.
It is a subscription to our portfolio so they can freely prosecute their businesses and use the licensed technology as it changes and grows over the term of that license, which, in those cases, is in excess of five years. I would say the most typical time period would maybe be five years. We typically do not do too much shorter than that because, as I mentioned, it is a high transaction cost, a long negotiation, potentially the need for enforcement. We want to make sure that we have a reasonable term. As to the payment, I should note that 90%+ of our revenue comes from fixed-priced agreements. What underlies that is some expectation about the unit volume over a period, right?
At the end of the day, we settle on how much they are going to pay for that subscription over five or whatever the term is. Once we agree to that, the payment structure, we can be flexible to a degree based on what our customer's needs are. We are kind of focused on what is the net present value of that payment stream. Sometimes we will have equal quarterly payments over the course of the agreement. Sometimes it is equal annual payments. Therefore, if you look at our free cash flow, we could have quarters where three quarters of a year, we will not get any cash from one of our customers, and then the other quarter, we will get four quarters worth of cash from that customer, okay?
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.
Who's your major competition? Who's
Yeah. 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, Qualcomms, they're all doing research in similar areas. So we do compete, and these are, again, world-class talent. 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 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 Qualcomms as well.
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 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 problems to solve. Liren says if you print out the 5G specification and stacked them in 8.5 by 11 paper, it would go from the floor to the ceiling, okay?
There's hundreds, if not thousands, of problems to solve, and we're quite capable of 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.
We're out of time. Thank you.
All right. Thank you.