InterDigital, Inc.

Good morning, and thank you for standing by. Welcome to the second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your phone. You'll then hear an automated message advising you that your hand is raised. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today. Richard Lloyd, please go ahead.

Good morning to everyone, and welcome to InterDigital's second quarter 2022 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 Bredsky, our CFO. Consistent with last quarter's calls, 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 risk 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 2021 annual report on Form 10-K, our second quarter 2022 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 measures 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, and good morning, everyone. In the second quarter, we continue to make excellent progress across all parts of the business. And I'm particularly pleased that the strong momentum we built in 2021 has continued into the first half of this year. In Q2, we significantly increased revenue and net income on both a sequential and year-over-year basis. We entered into a multi-year worldwide non-inclusive fee-bearing license with Amazon, covering a range of Amazon's consumer electronic devices and their individual patents. We made a major addition to our leadership team. We strengthened our balance sheet and we saw significant growth in revenue outside a core smartphone market. In the second quarter, our total revenue increased 42% year-over-year to $125 million. We also delivered a substantial improvement to our profitability, more than doubling our adjusted EBITDA to 78 million, and we drove a 14-fold increase in earnings per share to 69 cents per share. I will let Rich talk you through our financial performance in more detail while I cover some other notable highlights from the quarter. starting with the recent announcement that Dr. Rajesh Pankaj has joined InterDigital as our new CTO. Rajesh was previously a senior vice president and the head of corporate R&D at Qualcomm, where he spent 25 years in research and senior leadership roles. His background in cellular wireless, including both 4G and 5G, and the application of AI to connectivity, is a perfect fit with our technology footprint and with the long-term direction of our innovation. He's a named investor in 230 patents worldwide, and he has a strong track record of translating technical breakthroughs into patented innovation. I'm delighted that Rajesh has joined us, and I'm confident that he will lead our R&I team to even greater heights and will build on the leadership of his predecessor, Dr. Henry Terry. Along with our ability to attract world-class talent, one of the keys to our recent success has been the value that we continue to thrive as a leading innovator across a range of critical technologies. Our research on additional horizontal technologies like cellular, Wi-Fi, video, and AI and machine learning. We license the IP that covers these horizontal technologies across many verticals that utilize them. Smartphones use all of these technologies and continue to be our core market. Meanwhile, CE devices, as well as the growing array of IoT products, often use multiple technologies such as Wi-Fi and video. In short, we are in excellent position to drive growth from both existing relationships and new opportunities. In recent years, our strength in video has become even more valuable as we have built a formidable innovation pipeline, explored opportunities in building more immersive consumer experience, and continue as a leading contributor to both the HEVC and VVC video standards. We have also achieved impressive growth in our video portfolio, which now numbers approximately 7,000 patents and applications. In wireless, our portfolio of cellular SEPs for 5G multi-mode device continue to grow in the second quarter and now stand at more than 10,000 patents and applications, giving us an incredible strong base in a generation of mobile that will define connectivity for the rest of this decade. This foundation has been enabled by our team of superb engineers. In second quarter, the Institute of Electrical and Electronic Engineers, IEEE, recognized one of our senior wireless engineers for his work in 5G by awarding him a prestigious Benjamin Franklin Key Award. Specifically, he was recognized for his groundbreaking contribution to millimeter wave, which is a foundational technology that enables both 5G's incredible speed and its ultra-low latency. Staying on the IEEE, another inter-digital engineer was recently appointed as a chairperson of a topic interest group that is responsible for identifying and exploring use cases for artificial intelligence and machine learning in Wi-Fi. While we continue to reap the rewards for innovation being implemented in today's devices, many of our research efforts are firmly focused on the technology that will shape connectivity and content consumption in the years to come. I'm especially excited by the new partnership we announced in June with INRIA, France's leading institute for research in digital science and technology. This new innovation This new initiative will not only support innovations across France, but also enable engineers to pursue cutting-edge scientific research and to explore technologies that will define media currents in the future in areas such as XR and metaverse. On the licensing front, we believe strengths of our innovation, the increasing value of patent portfolio, and our licensing track record will position us to renew key agreements and sign new ones. In the second quarter, in addition to the Amazon deal I mentioned earlier, we also closed an additional agreement with industry device manufacturer Zebra Technology, covering our 4G, 5G, and Wi-Fi technology. Zebra's devices are used in retail, healthcare, banking, manufacturing, transportation, and other industries. This license agreement demonstrates the broad applicability of InterDigital's foundational innovation and our patent portfolio beyond smartphones. We also enjoy significant progress in licensing our innovation to auto sector with new deals signed with GM and Ford through our licensing platform partners. Almost half of the connected cars on the market are now licensed to our 3G and 4G standard essential patents. In summary, our licensing performance this quarter underlines the opportunity that we see in our core markets and in newer areas where our innovation is helping creating considerable value. This is an exciting time to be an innovator in connected technologies. and I'm pleased with how our strong foundational innovation translates into new licensing agreements. In terms of litigation activity, we continue to look forward to the upcoming decision from the UK High Court in our French trial against Lenovo. And I will reiterate my message from our last earning call that we remain confident in the strength of our technology, the quality of our IP portfolio, and the merits of our case. On the policy front, I want to highlight that the DOJ, NIS, and USPTO recent withdrawal of a 2019 policy statement on SCP licensing and FRAN remedy is a positive development. I will not get into all the details here, but the announcement has moved the HCC policy in US in a fair, balanced, and more predictable direction and confirmed our belief that while disputes over SEP licenses do arise, factors such as the value of the underlying innovation should guide the court's decision making. The second quarter also saw more progress in our ESG program with the release of our second annual corporate sustainability report. At InterDigital, We passionately believe that our technology contributes to building a better and more sustainable world. And this year's report details not only how we mitigate our environmental footprint, but also how we maximize our social impact, ensure our governance meets best practices, and how we strive to help our employees to excel. I will encourage you all to read the report which can be found on our website. With that, I'll turn it over to Rich.