InterDigital, Inc. Price & Performance (IDCC)

Thank you, Michelle, and good morning, everyone. Welcome to InterDigital's InterDigital quarter twenty twenty four earnings conference call. I am Rayfer Geribrandt, Head of Investor Relations for InterDigital. With me on today's call are Liron Chen, our President and CEO and Rich Bresky, our CFO. Consistent with prior calls, we will offer some highlights about the quarter, and the company and then open the call up for questions. For additional details, you can access our earnings release and slide presentation that accompany this call on our Investor Relations website. Before we begin our remarks, I need to remind you that in this call, we will make forward looking statements regarding our current beliefs, plans and expectations, which are not guarantees of future performance. And are made only as of the date hereof. Forward looking statements are subject to risks uncertainties that could cause actual results and events to differ materially from results and events contemplated by such forward looking statements. These risks and uncertainties include those described in the Risk Factors section of our 2024 Annual Report on Form 10 ks and in our other SEC filings. In addition, today's presentation may contain references to non GAAP financial measures. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP financial measures are included in the supplemental materials posted to the Investor Relations section of our website.

That taken care of, I will turn the call over to Larry.

Good morning, everyone. Thanks for joining us today. A year ago at this moment, I shared our belief that interdigital has never been better positioned to drive growth.

Now sitting here twelve months later, I'm delighted to share that in 2024, we delivered the best business result in our history.

And since our technology are more critical than ever, to an ecosystem generating roughly $6,000,000,000,000 in economic value every year, We believe we are just getting started. Today, I'll recap the fourth quarter results summarizing our highlights for the full year and provide more details on our growth path through 2025 and beyond. Including a significant development in our video service program. In the fourth quarter, we delivered another outstanding performance. Our revenue increased 140% year over year to $253,000,000 while adjusted EBITDA and non GAAP EPS nearly quadrupled year over year. Those we discussed in our last earnings call, we signed a new license agreement with Oco last quarter covering the worldwide sales of OPPO, Realme and OnePlus devices. We have now licensed the world top four largest smartphone manufacturers and approximately 70% of annual smartphone shipment worldwide. We also added to the momentum in our smartphone program in the quarter through our renewal agreement with a major Chinese technology company ZTE, and with our announcement we have entered into binding arbitration with Lenovo, to determine the final terms of our license and ended all litigations Looking at 2024 overall, it was another outstanding twelve months for the company.

Revenue for the year increased almost 60% to $869,000,000 the highest annual revenue in the company's history. Thanks to increased momentum across all our licensed programs, and the new agreement with some of the world's largest device makers.

We also delivered record level adjusted EBITDA and EPS in 2024. Rich will cover those financial results in more detail in his SECs. Across our licensing programs, we closed 14 new agreements throughout the year, In addition to our smartphone license with OpenZe TE, we signed a new license with Google covering a range of devices as well as new license with leading Q1 manufacturers Samsung, and TPV our consumer electronics and IoT program. We have now closed license agreement worth more than $3,300,000,000 since the start of 2021. In 2024, more than 30% of revenue for the year [indiscernible] This highlights the upside we see beyond our smartphone program and reflects our video and wireless technology supports our expanding range of use cases. As you may recall, we are in a binding arbitration to settle the final terms of our license with Samsung for mobile devices, The parties finished the last round of hearing last October and we are expecting to have a final decision soon. As a reminder, Sason already agreed to take a license our portfolio starting from 01/01/2023. And this binding arbitration will determine the final terms of the license. Our research teams are firing on all cylinders as we grew our leadership in the development of key standards maintain our focus in quality of our innovation and breaking new ground in application of cutting edge technology such as AI.

We have been working on the application of AI to wireless and video for years. And our leadership in the space once again to the fourth throughout 2024. In December, we received an innovation award from Fierce Wireless for outstanding innovation in wireless related AI. Specifically, the word was for AI empowered receiver design for six gs communication, We choose AI and machine learning to improve performance of a wireless network. From AI, to video, wireless and licensing, Our industry leadership extends across the whole business. We hold more than 100 leadership positions in standard organizations and we are one of only three companies in the world to hold multiple chair position within 3GPP standard body that sets cellular standards. In licensing, our Chief Licensing Officer, [indiscernible] was named among 50 most influential people intellectual property via leading IP publication. We continue to excel converting our research leadership into patent assets building on what we firmly believe is one of the strongest patent portfolio in our industry. In 2024, we made more than 5,000 new patent filings worldwide, With our global portfolio, now over 33,000 assets, strength of innovation was once again confirmed as we were named one of the world's 100 most innovative company for third concept year [indiscernible] We were also named among the world's leading patent holders in five gs, advanced video compression, and Wi Fi in separate reports [indiscernible] Also in 2024, we outlined a clear path to significant increase in revenue and profit at our Investor Day.

Where we announced new target of more than $1,000,000,000 in annual recurring revenue and $600,000,000 in adjusted EBITDA by 02/1930. Now turning to 2025. With a strong foundation to build on from last year, our priority is to continue to execute on our long term growth strategy. We believe our technology is more valuable in an increasingly connected world.

We lead the development of standardized technology that are implemented in billions of devices every year and we have a proven track record to convert our research and patent leadership into new license agreement. We plan to grow our business by focusing on signing the remaining unlicensed smartphone vendors and by renewing our existing agreement at a higher level when appropriate. We will build on our considerable progress in our consumer electronics and IoT program. And we intend to make more progress in our greenfield opportunity in video services. We feel strongly that our video technology underpins the viability of video streaming industry. Helping to support more efficient video compression, improving quality of pictures, and an enhanced user experience.

This week, we initiated a multi jurisdictional enforcement act against Disney including Disney plus Hulu and ESPN plus for their ongoing infringement of our intellectual property. [indiscernible] Disney generated about $25,000,000,000 in streaming services revenue from over two fifty million paying subscribers in FY 2024. But in all our licensing programs, we expect the vast majority of license agreement should be driven by amicable negotiations, But we are always prepared to defend the value of our innovation and our patent rights. We believe that the significant investment in fundamental research Over the past several decades, should be compensated fairly which enable us to continue to invest the next generation innovation will benefit our customers and consumers worldwide in the future. Before I hand it over to Rich, I hope to see many of you who can make it to Mobile Congress in March. Please join us at our booth in Hau5, to see the very latest in wireless, video and AI innovation. And with that, I'll let Brit talk you through the numbers in more detail. Thanks, Laron.

As Liren noted, in Q4, we delivered an outstanding finish to the year. Total revenue of $253,000,000 increased 140% year over year and was above our outlook of $239,000,000 to $249,000,000 driven primarily by new agreements that closed after the prior guidance. [indiscernible] Our Q4 revenue included catch up revenue $136,000,000 related to our fourth quarter license agreements with Oppo, Lenovo, [indiscernible] Our adjusted EBITDA for the quarter of $198,000,000 exceeded the top end of the outlook of $180,000,000 to $190,000,000 Upside flowed through and resulted in an adjusted EBITDA margin of 78%. GAAP EPS for the quarter of $4.09 beat our guidance.

Non GAAP EPS for the quarter of $5.15 came in below our guidance due to greater dilution from the converts on account of our higher share price and lower than expected non GAAP adjustments for Q4. However, for the full year, both GAAP EPS of $12.07 and non GAAP EPS of $14.97 came in at or above the high end of the range.

Meanwhile, cash generation for the quarter was exceptionally strong. With cash from operations of $192,000,000 dollars and free cash flow of 169,000,000 Building on Liren's comments, I'll highlight a few noteworthy metrics from our full year 2024 results. And provide the additional perspective of how each item has improved over the last four years.

Altogether, these metrics demonstrate our success in progressing towards our objective of delivering $1,000,000,000 plus in annual recurring revenue and $600,000,000 plus of adjusted EBITDA by 02/1930. Total revenue accelerated to $869,000,000 an increase of 58% year over year.

Resulting in a compound annual growth rate of 25%. Over the past four years.

Our 2024 revenue Included $269,000,000 of CE IoT revenue more than triple prior year levels. This result, which includes our milestone agreement with Samsung TV, demonstrates our ability to grow revenue by capitalizing on the value of our foundational technologies bring to markets beyond smartphones. Was very strong again in 2024 coming in at 63%.

A 20 improvement over the past four years.

Over that same timeframe, adjusted EBITDA has grown more than 3.5 times.

We ended the year with almost $1,000,000,000 in cash including net cash of over $500,000,000 which is up more than $100,000,000 from last year. [indiscernible] Full year cash flow continued to be robust with $272,000,000 of cash from operations and $213,000,000 of free cash flow for the year. In fact, over the last four years, we have generated nearly three quarters of a billion in free cash flow. These strong cash flows allowed us to return $110,000,000 to shareholders through buybacks and dividends, $126,000,000 to holders of our 24 notes upon their maturity last spring. Over the last forty years, we have returned the vast majority of our free cash flow to shareholders through share buybacks and dividends, totaling $678,000,000 In that time, we have reduced our outstanding share count by 5,100,000.0 shares or 17% to 25,700,000.0 shares at the end of twenty twenty four. Turning to our outlook. We have guided to another very strong year in 2025. With total revenue in the range of $660,000,000 to $760,000,000 adjusted EBITDA of $400,000,000 to $495,000,000 And non GAAP diluted earnings per share of $9.69 to $12.92 In addition, we expect to improve upon the strong free cash flow we delivered in 2024.

As we anticipate the resolution of an outstanding arbitration, and continued success from our licensing efforts, will drive double digit growth in free cash flow for 2025. With that as a backdrop, our Board of Directors approved a 33% increase in our dividend from $0.45 to $0.6 per share.

As a reminder, we begin the year with $230,000,000 remaining on our buyback authorization.

Between the increased dividend and our commitment to continued share buybacks, we expect to have another strong year of returning capital to shareholders in 2025. You will see in our financial metrics that we have also begun to present annualized recurring revenue.

This metric simply annualizes the recurring revenue for a given quarter.

For example, in Q4, had $117,000,000 of recurring revenue, So multiply that by four, and you get $468,000,000 of ARR.

Which is by far a record level. Over the last four years, we have increased our ARR at a double digit growth rate from $314,000,000 at the start of 2021 to $468,000,000 at the end of 2024. As we begin 2025, we do have a small step down due to twenty twenty four year end expirations, But we expect to drive renewals and agreements this year to close twenty twenty five with double digit growth in ARR from the $468,000,000 level at which we concluded 2024.

Before I turn it back to Rayford, I want to reiterate that our quarterly guidance for Q1 twenty twenty five does not include the impact of any new agreements arbitration results we may sign or receive over the balance of the first quarter. This is because it is harder to predict the timing of new agreements in short windows.

In contrast, our full year guidance includes contributions from both new agreements and arbitration results. As was the case last year, we believe we can achieve the financial results within our full year guided range Through different combinations, of new agreements and arbitration results.

With that, I'll turn it back to Richard.

Thanks, Rich. Before we move to Q and A, I'd like to mention that we'll be attending a number of investor events in Q1. Including the ROTH Conference in Dana Point, California, and the Sidoti Conference, which is virtual.

Please reach out to your representatives at those firms you'd like to schedule a meeting.

Michelle, we are now ready to take questions.

Our first question is going to come from the line of Scott Searle with ROTH Capital Partners. Your line is open. Please go ahead.

Hey, good morning. Congrats on the quarter guys. Thanks for taking my questions.

Lyron, maybe just to dive in on Disney front. I'm wondering if you could put some parameters around the timing of when you would expect this to progress and kind of the milestones there. Also, if you could address your engagement with other video streaming vendors and opportunities as they're ongoing within 2025, like the level of engagement that you're seeing?

Yes. Hi, good morning Scott. Thanks for the question. So regarding Disney, it's public now in our legal filings. We have engaged Disney for more than two point five years in bilateral negotiation. And as you know, we prefer to sign most of our deals through amicable discussions. And but we have concluded after spending two point five years negotiating that enforcement is needed for this particular case.

And as you probably know, in all our enforcement, when we started filing the case, we are fully committed to daily get through the course of the The lawsuits But in any other cases also, we are always open for negotiation during the lawsuits. So it's difficult for me to predict precisely how long the losses may last. As you probably know from our smartphone experience, sometimes it can be further quickly resolved and sometimes takes multiple year to resolve. So as of this case, as of now, we do not really know for sure how long this case will take. [indiscernible] with other streaming service providers, As we have discussed before in our Investor Day, we have engaged with almost all the major players and we are patient in demonstrating our value to them and we hope to make progress as always through bilateral negotiation. Okay.

That's very helpful. Maybe Maybe shifting to the annual guidance. I know this is a very difficult one to pin down. Could you provide some color in terms of the range of outcomes, how you're thinking about it? In terms of catch up sales versus how we would be exiting the year from a recurring revenue standpoint? I know that there are probably multiple different ways to get there, but if you could kind of help us frame it a little bit. And as part of that, Rich, as we're looking to the first quarter and that recurring revenue guidance, I think it's $112,000,000 to $116,000,000 I know there are some expirations this year. I think in the K you talked about seven agreements for a total of $91,000,000 or $92,000,000 How much of that is layering into the first quarter recurring guidance?

Yes. Hey, Scott, let me take on the majority of the opening opportunities and then I'll have Rich adding on the details for the recurring revenue numbers. So if you look at our 2025 major opportunity here, there's you know we have three major programs. On the smartphone side, with our momentum for signing [indiscernible] and Frank Yixi and others we really only have less than a handful of major opportunities we need to sign. The largest one is Weibo as you all aware, then we need to essentially resolve owner and probably transient not necessarily in that order, by the way, we are engaging with AutoZone in parallel. On the consumer electronic IoT side, we have built a lot of momentum as Rich has covered in T section. We see tremendous amount of growth in multiple verticals. But our priority number one is to frankly signing some of the larger TV makers as well as making progress in different segments of vertical. For IoT. For the service industry, as we already touched on here, we are happy to not take back any material revenue for 2025. But it's important for us to engage in the major players and build a multiyear negotiating [indiscernible] and obviously we already touched on the enforcement with Disney.

Yes. And Scott, I'll just add to that that in my comments, I noted that we ended 2024 with $48,000,000 of ARR.

And we're looking to through new renewals and new agreements drive double digit growth in that ARR number by the end of twenty twenty five.

As to Q1, you noted correctly that at the end or over the course of '25, And I'll say, typically agreements are calendar year based, not always, but typically.

That we have $91,000,000 of expirations in 2025. Again, typically at the end of the year.

So that's really not an impact in the couple million dollars difference between recurring revenue in Q4 stepping down to Q1. That's really driven by 24 expirations. I think we noted we had five twenty four expirations totaling $17,000,000 which that math kind of shows you that that's the majority of that step down. [indiscernible] And lastly, if I could, just on the capital structure and the convert, Rich, could you take us through what you're factoring in for the first quarter and how that will progress in terms of interest expense, the fully diluted share impact, [indiscernible] also how you're thinking about the capital structure in general. I think when you first initiated a convert years ago, it was to be able to have a robust balance sheet to be able to litigate against potential customers like Disney. Now given that you've got $500,000,000 of net cash, Is that a mechanism and an instrument that you guys need to have in the future going forward? Sure. So let me take the first part of that question and then I'll I'll get to the kind of structure as we see it going forward.

In the first quarter, when we were in any quarter factoring in interest income and interest expense. And we're not really looking at that much differently than than we have in recent quarters. We also, as you alluded to, need to factor in any potential dilution from the convert or the related hedge. There that becomes a function of the stock price Typically, we're looking at what the stock price is around the time that we post that guidance. And I know you're aware of this, but for everybody's benefit, in our 10 ks, as in our Qs, in the footnotes to our financial statements, we have a sensitivity table that shows how that dilution is impacted at different prices. Again, there's greater dilution on the convert itself, which we reduced through the hedge and on the far right column, you'll see the net dilution from the warrants that we issued. As for the cap structure in general, yes, we've for more than ten years have been utilizing converts to help bolster the balance sheet that enables us to go toe to toe with larger customers when necessary. If we need to enforce our rights while being able to buy back stock and return capital to shareholders.

Because we're just in a much different position than even when we did the last convert in the spring of twenty twenty two. I think we have more options available to us going forward. Not to say we make any predictions on what we'll do there. I'm just just saying that we enjoy having more optionality in how we look at our cap structure.

Great. Thanks so much. I'll get back in queue.

Thank you.

One moment as we move on to our next question. Our next question comes from the line of Arjun Battia with William Blair. Your line is open. Please go ahead.

Perfect.

Thank you guys. Appreciate you taking the question here.

Maybe I want to start first on the streaming opportunity as good to see that there is kind of litigation and we're somewhat far down the monetization path of your video technology. Liren, one question I have on this is, for smartphones, I think we all kind of understand how the economics work, right? It's largely based on kind of units of smartphones sold with a royalty rate. When we're looking at the streaming opportunity, how should we think about kind of the underlying metric that we should get grounded in for some sort of a rosy rate with Disney, for example, right? You mentioned $25,000,000,000 in streaming revenue and I think two fifty million subscribers. Is it more on the per minute stream? Is it the number of subscribers? Is it a revenue rate? How are you thinking you might monetize this opportunity here? Arjun, good morning. Thank you for your question. So on the streaming side here, we are actually flex on what is the right matrix to use. If you look at fundamentally, we bring a set of very important tech technology that we believe underpin their services. That's both in driving the revenue forward as well as saving cost.

On operating side. InterDigital storage, power as well as cooling and Internet services here. So and by the way, various different streaming services may have different business model. Some of them are subscription based, some of them may be advertisement sponsored based. So when we approach them, fundamentally, we try to charge for a very small but fair price for what we bring to the table that enable the services. So that can be subscription based where we will get a small percentage of their masses of [indiscernible] Subscribers all that can be a fairly small percentage of the overall revenue. We are happy open for both arrangement. Regarding the overall size of the market and as we have discussed in our Investor Day, and we project based on third party data that by 2027, the streaming industry overall will be the same size of the smartphone industry And Arjun as you are aware on the smartphone side, which as you commented on, we have demonstrated a lot of progress and frankly, we have shown a lot of solid results in that industry We are projecting getting about $500,000,000 in recurring revenue from smartphone. But for the streaming services, even though we believe our technology is just as important to them, because it's relatively new, because we believe we have to demonstrate our patients And so therefore, we are, in my opinion, concert with the setting the target to be about $300,000,000 by 02/1930.

For that market to essentially mature for us over time. Okay. Understood. Very helpful. Thanks, Laron.

Wondering if I can follow-up just on the recurring revenue outlook.

For 2025. It sounds like you're baking in some incremental up sell and maybe arbitration agreements with some of these agreements in the range of uplift that you're expecting from Samsung, which I think should be coming relatively soon? Like how should we benchmark the potential uplift that you could see there if that's announced in Q1 or Q2 here? Hey Arjun, this is Lauren. So I'll cover it first if there's anything else Rich might be able to chime in. On the recurring revenue side, Rich commented target to grow our recurring revenue in 2025 by at least double digit growth. But that's also not based on any single deal or any single outcome. So we have a number of opportunity we are pursuing And by the way, a number of those opportunities carry both recurring revenue as well as cash out payment. So we really look at all the opportunity holistically and we frankly estimate outcome for per case as well as the likelihood that they will be done this year. So this is the same process we took last year So that's why we frankly added them up into a range of outcomes here. Regarding the Samsung arbitration outcome, as I commented on earlier, we have spent substantial amount of effort to go through the process already.

As a matter of fact, the last hearing happened last October. Already. At that time, the arbitrator told us they will take time to essentially make their decision writing their conclusion and due to the holiday season in between, so basically they told us that it will be after New Year. So we are waiting for the outcome. And as I commented earlier here, that can be soon but we don't really know precisely what time Regarding the outcome of the range, we commented before in our prior calls, we believe strongly that the value of our portfolio has gone up substantially due to the last contract And if you look at the most closest comparable, we believe we we should realizing the uptick in the value. But this is for the armistice to decide and we are currently just waiting for the result.

All right. Wonderful. Thank you.

Thank you. And one moment as we move on to our next question.

Our next question is going to come from the line of Taliani with Bank of America. Your line is open. Please go ahead.

Can you hear me? We can now, sir.

Oh, perfect. Thanks. Once again, beating the numbers by significant amount and I don't think you ever reported a number that is even remotely close to your guidance It's so hard to predict the numbers So I want to focus on the recurring part and I have two questions. On the recurring, you said that ARR should grow double digits. Is are the trends in revenues different than ARR mean? Is there any deviation between revenue growth And ARR growth and what could be the reasons for that? And the second question is you noted $70,000,000 that are the tax expired in 2024 and 91,000,000 expected to expire in 2025.

What What happens with these expirations? Are they renewed before, renewed after? How does it go with this expiration? Of recurring revenues? Thanks. Okay. Hey, thanks, Tal. This is Rich.

Let me start with the first question. I think maybe Liren will have a comment for the second question and I may have an additional point to make there. So yes, when we I guess the first point to emphasize when we issue quarterly guidance and I mentioned this in my prepared remarks again today, It's difficult for us over a short window to determine what the time period when exactly a new agreement will cross the line. Our customers are already using our technology So it's not like we know that they need to make a decision so they can produce their product and ship on a certain deadline. They're already using it. And it's really then a function of when can we reach an agreement to them on the fair amount that they should pay us. So as a consequence on our quarterly guidance, we typically are not including the potential for new agreements.

And therefore, typically on a quarterly basis, if we sign a new agreement, we'll come in higher. For the full year guidance, we did initiate for the first time full year guidance last year in 2024. We thought that we came out with a very strong number for 2024 in full year guidance. But frankly, we just had, as we discussed on the call here, an outstanding year and we're able to raise it and then beat that. So we're thrilled about the performance we delivered in 2024 and we're very happy feel confident we can come out with strong numbers again for 2025. So hopefully that helps. As far as recurring revenue versus total, looking back, I mentioned on my call over the last four years, we've had a double digit CAGR in total revenue because we have been signing new agreements and been getting catch up sales along with it. Importantly, we've also had a double digit CAGR over that time period ARR. And I like ARR, we've added it to our metrics. One problem with recurring we signed Obo in the fourth quarter of twenty twenty four and it contributes one quarter of recurring revenue, even though there's catch up sales associated with it.

So I think if you look 2024 recurring revenue, it's not factoring that in. If you look at [indiscernible] 2024 at $468,000,000 that's kind of a better measure in my mind of kind of what we're earning on a recurring basis.

So I'll let Lear start with a response to the second comment. Yes. Hey, Tal, good morning. Thank you for joining us here. So on the recurring versus sometime we have expiration contract here. I mean number one, it's absolutely normal to have certain amount of contract expires each year. And frankly, because we have signed so many agreements, right? We have signed 14 agreements this year, Our average contract length is roughly around five years sometimes it's longer, sometimes it's shorter. So on any given year, we will have a few contract expire. So for last year to this year, we have $17,000,000 of expiration. That's $17,000,000 So it's actually a relatively small number from last year to this year. So we our goal honestly is always to get them renewed. Before they expire?

And sometimes those expiration can frankly fall. End of the year, which happened to be holiday time, that's difficult for various different reasons to get them down in time. So it can be played over to the next year. For this year, for 2025, at the end of this year, I want to make sure you guys are aware, we do disclose in our I think 10 ks filing. We have about $91,000,000 expiration, primarily driven by our Xiaomi contract that's up renewal end of this year.

So I won't be able to comment on specific negotiation because they are covered by NDAs. But what we typically do tell is for major agreement, we start roughly six months to a year ahead of time. We demonstrate the value of our technology, show them the growth for the portfolio. As well as demonstrate them how they have benefited more this time compared to time of the last contract. And then when it's appropriate, which we have demonstrated through multiple contracts here, we'll try to get a higher value in the renewal if they have benefited more. So that's the general practice call. And and we have demonstrated in the last four or five years we had a good track record of renewing large contracts including the largest contract for Apple before they expires.

And that's what we always target to do.

So when you give the guidance for the year this year, do you assume that the $17,000,000 that expired last year will be renewed this year? Do you Do you assume renewal of the expired ones or is it excluded also from the numbers? So Todd, the way we do New Year, forecast is we actually look at all the open opportunities. Including on-site customers as well renewals, By the way, we are not trying to target for replacing dollar for dollars. Are trying to renew the customer one by one. When they come up due And does that put you over to some of the customer gain market share over the years? Some of them may lose market share, some of them may have a higher mix of five gs devices. They may have gone up in terms of every setting prices. We factor in all those parameters. So therefore, we are not trying to replace every dollar from every customer, but we are trying to renew them And frankly, we need benefits more we try to get a higher valuation out of that new contract. That's normally how it works. So for this year, when we give the guidance call, as I mentioned earlier, we try to look at all the opening opportunities and try to obviously drive them to closure as much as we can.

But we also know some of those agreements takes longer to renew than others. And some of the first time customers, frankly, try to solve their past sales can be a difficult and complex negotiation. So internally, we assign certain amount of probability and certain amount of range of outcome for each of the cases. And then in total, we give ourselves what we call internally multi path to get to the result by targeting our range.

Okay. One last question. Geopolitics, a lot of your customers are coming from China, obviously, [indiscernible] do you expect it to have an impact on your contract, elongate them or any other type of impact?

Yes. Hey, Todd, that's a great question. So as we all know due politics is always in the macro environment we consider. But there's several things to keep in mind. Number one, our technology is global. Our technology is built in the open standard. That is frankly developed by industry associations So that technology itself is open. It's not subject to any export license [indiscernible] no not a single government, including U. S. Or Chinese government, truly own that standard. So that's always open. That's a starting point. The second one is really most of the open opportunity we are trying to pursue are from large customers who have international business. Right? Their sales are driven by many different things And frankly, you look at smartphone industry in particular, those large customer always value domestic industry as well as foreign market and they want it to be big and good. So that's a healthy dynamic for us. The third one, which is really important for me, is I spent some additional amount of time in front of me DCs And Brussels and other capital including Beijing and other places here.

Informing policymakers why our business model is poor competition. Why our business model is good for the it's good for their country, it's good for the consumers, it's good for the vendors. Who are benefiting tremendously.

From our fundamental innovation. That's what enabled this vendor to come in play leveraging what we have developed and becoming global competitor rapidly fast. So, and frankly, we have done a good job explaining our business model. And I'll tell you our support across different countries is actually quite strong.

Great. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Anya Soderstrom with Sidoti. Your line is open. Please go ahead.

Hi, and thank you for taking my question. Actually, most of them have been directed already. And congrats on the great performance here. When we went into 2024, you gave the guidance or February yes, you gave the guidance for the year and it seemed like you gave a guidance that was a little bit modest going in [indiscernible] makes sense. But are you doing the same approach this year, you think? Or So Anurag, let me take broader question here, I'll ask Rich to to timing if need to be. So as I explained earlier, right, so which try to take a holistic view of all the open opportunities. And I use our opportunity, we essentially associate likelihood of completion in the year as well as the range of possible valuations. And if it's a renewal, we assign obviously certain amount of recurring revenue If it's brand new, on-site customers here, we also have to estimate how much catch up payment we can get from that deal. And frankly, the timing and the dollar amount are hard to pin down with a long lead time. Right? But we obviously wanted to give enough visibility into it.

So our process generally is beginning of the year, we do the best we can to come up the range. And then, but larger deals happen throughout the year as we have demonstrated last year. And if we have done more or better or faster, we'll provide guidance accordingly to either update it or give you the latest information. That's a general approach we take. And so I don't know if there's anything Rich wanted to add.

No, I think that covers it.

Okay. Thank you. And then just a follow-up on the geopolitical environment here with the new administration. Do you feel like the sentiment has changed in any way with your counterparts? Or Yes, that's a good question, Anil. So if you look at the new administration for U. S, traditionally, as I think many of you guys aware, republicans are stronger in IP protection in general. And again, I'm not specifically commenting on any specific personal or anything. So which we believe it's a generally good thing for IP licensing, But we are still at the beginning of the new administration. And Parda will be historically have a close working relationship with both administrations in the last decades about more So we continue to build this relationship We demonstrate to them why our business is good for U. S. Why our technology leadership is important to US technology leadership as well as in the future of our country. Those are pretty well received. And I expect strong support going forward.

Okay. Thank you. That was all for me. Thank you. And I would now like to hand the conference back over to Loren Jin for any further remarks. Yes. Hey, thank you, operator.

Before we close, I'd like to thank our employees for their dedication. And contribution in the digital as well as many partners and licenses for a record year in 2024. I also thank you everyone who joined us today And we look forward to updating you on our progress next quarter.

Connect. Everyone have a great day.

Thank you.