InterDigital, Inc. (IDCC) Earnings

Management highlights

### Core Business Milestones - Reached a patent license agreement framework with Amazon covering Amazon's devices and services including Prime Video, with all pending litigation resolved. Final terms will be determined via binding arbitration, expected to take 18 to 24 months. This marks a key milestone toward the company's target of $300 million+ ARR from streaming and cloud licensing by 2030. - Secured two successive infringement injunctions against Disney from the European Unified Patent Court (UPC) for HEVC video encoding patents. The injunctions apply across 11 major EU countries, with the court confirming patent validity, ruling Disney infringed, and noting InterDigital conducted negotiations fairly. The company is currently working to enforce these injunctions. - Signed two new IoT patent licenses: one with a leading fintech firm covering point-of-sale devices under cellular and Wi-Fi patents, and another post-quarter with Kaboom covering EV chargers under the same patent portfolios. ### Research and Standard Leadership - Maintains strong competitive advantage through high-quality R&D across wireless, video, and AI combined with global standard leadership. - A senior wireless engineer was elected vice chair of a key 3GPP working group for 6G development. InterDigital now holds over 100 3GPP leadership positions, and is one of only three global companies (and the only U.S. company) with multiple chair positions across 3GPP. ### Financial Performance Highlights - Q2 adjusted EBITDA came in at $184.1 million with a 71% margin, far exceeding prior guidance. GAAP diluted EPS was $3.40, and non-GAAP diluted EPS was $4.62, also well above guidance. - Generated $82.5 million in cash from operations and $66.6 million in free cash flow, in line with prior expectations tied to collections from Q1 new agreements. - Returned $41.1 million to shareholders in Q2: $23 million via share repurchases and $18 million via dividends. Ended the quarter with $1.1 billion in cash, cash equivalents, and short-term investments. ### External Recognition - Recognized by Business Insider as one of America's high-growth companies, highlighting the company's recent progress and ongoing momentum.

Guidance

- Full-year 2026 guidance was raised significantly, with total revenue now projected between $775 million and $845 million, an increase of $85 million at the midpoint from the prior guidance range of $675 million to $775 million. - Full-year 2026 adjusted EBITDA is guided between $469 million and $529 million, with non-GAAP diluted EPS projected between $10.85 and $12.81. - Q3 2026 revenue from existing contracts is expected to be between $154 million and $158 million, with any revenue from new agreements or enforcement outcomes additive to this range. - Q3 2026 adjusted EBITDA margin is projected at approximately 57%, with non-GAAP diluted EPS expected between $1.94 and $2.13. - Q3 2026 is expected to deliver another strong quarter of free cash flow driven by scheduled payments from existing agreements. - The company remains on track to hit its long-term target of $1 billion+ total ARR by 2030.

Segment performance

InterDigital reported total Q2 2026 revenue of $260.2 million, including $103.7 million of catch-up revenue. Annualized recurring revenue (ARR) reached a record $625.7 million, a 13% year-over-year increase. Segment performance is broken out as follows: - Smartphone segment: Revenue of $122.7 million, accounting for 47.2% of total Q2 revenue - CE, IoT, and auto segment: Revenue of $27.5 million, accounting for 10.6% of total Q2 revenue - Streaming and cloud services segment: Revenue of $110 million, accounting for 42.3% of total Q2 revenue

Risks & headwinds

- Final financial outcomes of the Amazon and prior Samsung/Lenovo arbitration processes are not guaranteed, and the final arbitration award may differ from the conservative revenue estimates recognized during the arbitration period. - Ongoing patent enforcement and litigation efforts against other parties, including Disney, result in higher operating expenses, specifically intellectual property enforcement costs. - Forward-looking statements around future performance, licensing outcomes, and arbitration timelines are inherently uncertain, and actual results may differ materially from current expectations due to unforeseen legal or market changes.

Analyst Q&A

• Q: What are the next steps for the Disney UPC injunctions, and is the $300 million+ 2030 ARR target for streaming and cloud now expanding beyond the baseline estimate? /

  A: InterDigital is currently in the court process to enforce the two recent UPC injunctions against Disney, which cover core HEVC video encoding patents the company views as high-value. Courts have repeatedly found patents valid and infringed, and InterDigital believes it is on track to reach a fair license agreement with Disney. The original $300 million+ target has always included upside; the company is executing well, but the opportunity will unfold over multiple years, so the focus remains on ongoing execution. (212 words)

• Q: How will enforcement costs trend in the second half of 2026, and how are negotiations progressing with other large streaming vendors? /

  A: Negotiations with other major streaming and cloud vendors are proceeding well, with the industry paying close attention to InterDigital's progress with Amazon and Disney. The Amazon arbitration process is expected to be more efficient than a multi-jurisdictional litigation campaign, which will help contain costs. However, multiple other enforcement actions are still ongoing, so enforcement expenses will not drop sharply in the near term. (119 words)

• Q: With the Amazon agreement and positive Disney court outcomes, will InterDigital increase litigation against other streaming services that have not agreed to license terms? /

  A: InterDigital still prefers to complete license agreements via bilateral negotiation, and takes a patient, balanced approach to all negotiations. While the Amazon deal and Disney injunctions are major milestones that have demonstrated the legitimacy of InterDigital's IP, there is no update to share on changes to broader litigation strategy at this time. (97 words)

• Q: What are InterDigital's current capital allocation priorities amid near-term debt maturities and variable share repurchase activity? /

  A: The top priority is continued investment in growth, followed by maintaining a strong fortress balance sheet to support ongoing enforcement actions against large companies, followed by returning excess capital to shareholders. Share repurchase timing and volume varies based on multiple factors, but the company has consistently returned capital over the long term. Early debt conversions driven by debt holders are expected to close in Q3, and InterDigital is supportive of removing this debt from its capital structure. (118 words)