InterDigital, Inc.

Good day, and welcome to the InterDigital Inc. Third Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Richard Lloyd. Please go ahead, sir.

Good morning to everyone, and welcome to InterDigital's Third Quarter 2021 Earnings Conference Call. I am Richard Lloyd, Communications Director, and with me in today's call are Liren Chen, our President and CEO, and Rich Breske, our CFO. Consistent with last quarter's call, we will offer some highlights about the quarter and the company, and then open the call up for questions. 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 and 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 sections of our 2020 annual report on Form 10-K and our third quarter 2021 quarterly report on Form 10-Q 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 our financial metrics tracker, which is available on the investor relations section of our website. With that taken care of, I will turn the call over to Liren.

Thank you, Richard. Good morning, everyone. and thank you for joining us today. This was a highly successful quarter for InterDigital, with revenue growing by 64% year-over-year to more than $140 million, driven by an excellent blend of strong reoccurring revenues and royalty payments for past sales. Our performance was fueled by licensing deals signed with several major device manufacturers, including a mobile license with Xiaomi, and a consumer electronic license with one of the top 10 global TV manufacturers. I will let Rich give you more details on the numbers, but I want to emphasize that this kind of result is only made possible when the business is closely aligned with our strategy goals and when we execute superbly across the company on our key initiatives. Since the beginning of 2020, We have signed 16 new agreements, including 10 so far in 2021. It's worth remembering that most of these deals have been signed during the COVID pandemic, when meetings with prospective licenses have taken place virtually. This is a remarkable achievement and demonstrates the adaptability, the expertise, and the tenacity of our whole team. Additionally, our use of video conferencing in those negotiations highlights the importance of the connectivity and video technologies we have created. During the third quarter, we closed our new license with Xiaomi, which has risen to become one of the top three smartphone manufacturers in the world in 2021. This agreement provides consistent, substantial, reoccurring revenue for years to come, and underscores the value of our cellular portfolio, particularly in 5G, as well as the importance of our patent coverage in video and Wi-Fi. In addition to the Xiaomi deal, we also signed a new license agreement with a top 10 global TV manufacturer and renewed our license agreement with Seco. Together, this agreement underlines both the quality and breadth of our research and our patent portfolio, It also points to our excellent recent progress in closing deals in the CE sector. Our performance highlights the strong momentum we continue to build and cement our status as a leading innovator in mobile and video technologies. With increasing adoption of 5G and video services, our technology has never been more important. There are still major manufacturers that continue to benefit from the innovation InterDigital has created, but have yet to pay a licensing fee like many of the peers. We remain actively engaged on multiple fronts with those manufacturers, and while we would prefer to reach agreement via commercial negotiations, we are prepared to enforce our IP rights when necessary should we be unable to come to an agreement with them. Our groundbreaking research is the foundation of everything we do, and our INI engineers are consistently recognized for the quality of their research and their leadership of the industry. Recently, one of our senior engineers was appointed as the chair of a key working group with European Tidy Communication Standards Institute. which is working on technology that could dramatically improve the use case for wireless connectivity. On the video side, the head of our visual standards team has been given the highest technical honor by the Advanced Television Standards Committee for his years of working on the cutting edge of video technology. Our work in Wi-Fi has also received further recognition with our research team being commended for their contributions in power saving technology, which significantly extends battery life, and also in high frequency Wi-Fi, which dramatically increases network speed. While we are always delighted to see inter-digital engineers receive well-deserved industry accolades, a highlight of research is how our I&I team contributes across the board to our world-class patent portfolio. More than 90% of our engineers are inventors, and almost 60% of our inventors have at least 10 patents. Despite the impact of the pandemic, we remain focused on developing key wireless and video technologies and are on pace to grow our contribution to the 5G standard by well over 50% year-over-year and the number of 5G invention disclosures by more than 30% year-over-year. In short, we believe our 5G story has never been more compelling. At InterDigital, we pride ourselves in being at the forefront of development of the next generation of innovation in connectivity, which is why I'm particularly pleased with some of the work we are doing in the early stages of 6G. For example, we are a founding member of the University of Texas at Austin 6G Research Center. Along with fellow founders, AT&T, NVIDIA, Qualcomm, and Samsung, we will work with the university in areas that will form the core of 6G, such as AI and machine learning, advanced sensing technologies, and more. In September, we also co-hosted the 6G Symposium Fall, a two-day workshop event that we held in partnership with Northeastern University and the NextG Alliance. The event attracted over 2,000 participants and brought together over 60 speakers from industry, government, academia, and beyond to discuss some of the priorities, opportunities, and challenges for 6G. On the litigation front, our new license agreement with Xiaomi means all pending cases between the parties will cease. We still have ongoing proceedings with Lenovo in the UK, US, and China. In August, we won a complete victory from the UK High Court in our first technical trial, which found our patent in suit to be valid, essential to 4G LTE standard, and in French by Lenovo. We are now preparing for our French trial in UK, which will take place in January of 2022, and will determine the terms that will be applicable to a worldwide license with Lenovo. Moving on to some internal changes at the company, as we first announced in June, we have taken steps in 2021 to restructure our research and innovation group with a focus in France. We recently expanded that effort to look at total cost structure of our G and AE functions, largely centered in the US. which will result in significant annual cost savings beginning in 2022. Additionally, as we announced two weeks ago, we appointed Josh Smith as our new Chief Legal Officer and Corporate Secretary. Josh was previously Deputy General Counsel at InterDigital, where he managed a wide range of matters, including public company reporting, corporate governance, M&A, employment, R&D collaboration agreements, and our ESG initiatives. After six years with InterDigital, he has in-depth understanding of the company and is a superb addition to our executive leadership team. Josh is taking over from Rick Granino, who is retiring after several years of excellent service as our Chief Legal Officer. Rick has agreed to stay on board as a strategic advisor until December to ensure a smooth transition, and I'd like to thank Rick for his contribution to InterDigital and to wish him well for his retirement. And with that, I will let Rich provide you with more details on our third quarter business performance.