InterDigital, Inc.

Good day, and thank you for standing by. Welcome to the InterDigital fourth quarter 2023 earnings conference 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over today to your speaker, Rayford Garabrant. Please go ahead.

Good morning to everyone, and welcome to InterDigital's fourth quarter 2023 earnings conference call. I am Rayford Garabrant, head of investor relations for InterDigital. With me on today's call are Liren Chen, our president and CEO, and Rich Breske, our CFO. Consistent with prior year-end calls, we will offer some highlights about Q4 and fiscal year 2023 before opening up the call 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 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 factor section of our 2023 annual report on Form 10-K 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. With that taken care of, I will turn the call over to Liren.

Thank you, Rupert. Good morning, everyone. Thanks for joining us today. 2023 was another outstanding year for InterDigital. We made excellent progress across our business as we signed new agreements and our smartphone and our consumer electronics and IoT programs, significantly increase our revenue and net income year over year, strengthen our innovation engine with a record number of new patent filings, and return more capital to shareholders. Today, we will summarize our progress in Q4, our achievements throughout 2023, and why we feel we are really well positioned for further growth in 2024 and beyond. Revenue for fourth quarter was $106 million, including recurring revenue of just over $103 million. And our adjusted EBITDA was $53 million. In the quarter, we returned about $47 million to our shareholders and expanded our existing share repurchase authorization to a total of $300 million. Our status as a world-class innovator was again underlined in the fourth quarter But one of our senior wireless engineers was elected to the board of ESEE, the European Standard Organization, which played a key role in the development of cellular wireless technology. Looking across the full year, Q4 kept an outstanding 12 months for the company. Our revenue for 2023 was $550 million, up 20% year over year. Revenue from the smartphone licensing program increased by 32% year over year. Our recurring revenue increased to a record level of just over $408 million. As we drive growth in our top line, we see an even greater impact on our bottom line, as shown in our more than 80% year over year increase for our non-GAAP EPS. In addition, we returned almost $380 million to shareholders through dividends and share buybacks. Rich will go through the numbers in more detail in his section. But our excellent financial performance indicates 2023 was full of highlights for the company. On the licensing side, we entered into eight new license agreements, including cellular and HEVC license with Lenovo, a cellular agreement with TCL, and two agreements with Panasonic. 2023 was also an exceptional year for our inventors and patent team, which created a record-setting number of inventions and new patent findings, up more than 70% year-over-year, taking our total patent portfolio past 30,000 granted patents and applications. But the quality of our innovation was again recognized as we were named one of the top five patent holders for 5G patents in terms of both quality and quantity by a leading third-party research company. We take pride in how our engineers lead the evolution of technology globally. In addition to the recent ISE election, I noted above, several of our engineers win the election to senior leadership positions for wireless, radio, and AI standard development organizations. Across our research team, our engineers now hold more than 100 leadership positions in those organizations. In 2023, in our dispute with Lenovo, when our patents were tested in litigation, they were repeatedly found to be valid and infringed by courts in both UK and Germany, which is a clear indicator of quality of our innovation. Right before end of the year, we win a notable victory in our pursuit of fair compensation for OPPO's use of our patented technology. A court in Germany ruled that OPPO infringed our IP and that it should be excluded from the German market. The court ruled resoundingly in our favor, agreed that we conduct a licensing negotiation in a fair and reasonable manner, and as other courts has regularly done, upheld the quality of patent innovation. The Court's strong criticism of OPWA's behavior throughout our negotiation reflects why, from time to time, we have to enforce our patent in litigation. While we always prefer to sign new agreements throughout amicable bilateral negotiations, we are firmly committed to defending the value of our IP through enforcement efforts if necessary. Our progress was recently recognized by Forbes, which ranked us as one of America's top 100 most successful mid-cap companies. While I'm particularly pleased by this recognition, we also firmly believe that there is still considerable upside for us in multiple areas. Our business momentum continued into Q1 of 2024. In January, we announced a landmark agreement with Samsung which licensed our digital TV and TV monitors to arrange our video and Wi-Fi patents, and to patents that are part of our joint licensing program with Sony. But Rich will explain in more detail. We expect the agreement to have a considerable positive impact on our Q1 result. Samsung is the largest manufacturer of TV in the world, and this agreement reflects not only the strengths that we see on the CE side, but also, more broadly, the value of video and wireless innovation. As previously discussed, our video compression technology is important for devices, but it also essentially enables the entire distribution platform of streaming and other cloud services, which we continue to see as an attractive third pillar of growth, along with the significant growth opportunity we have in smartphones and CE IoT programs. I also want to remind everyone that our new license with Samsung is separate to our license agreement with them for cellular devices, which we announced at the beginning of 2023. And it's now being finalized through arbitration. The arbitration hearing is on track to be held this summer with a final resolution expected by end of this year. With our recent licensing success, we have signed more than 30 new agreements and renewals with an aggregate contract value of over $2.5 billion since early 2021. This gave us an incredible strong platform from which to deliver further success and another very strong result in 2024. Looking ahead through this year, we have guided that our revenue will be between $620 million and $670 million for the full year. which reflects our pipeline for contracted revenue and projected growth through new agreements. As we continue our journey to grow the company, we announced on Monday that we have appointed Ken Kashkhan as our new chief growth officer. Ken was recently in charge of strategy and business development at a life science company, and before that, led strategy in Qualcomm's licensing business. He understands our space very well and his recruitment underlines our status as a destination for top-level talent. Later this month, we will once again take part in Mobile World Congress in Barcelona, where we have several demonstrations of our innovation in wireless, video, and AI. One of our senior video engineers will give a keynote presentation on the power of haptics to enhance immersive streaming experience. On the wireless side, our demonstration will focus on integrated sensing and communication, a technology which will be a key pillar of 6G and where we are already a leader. On the video and AI side, we will showcase the latest VVC technology, coupled with our energy-aware media solutions and AI expertise. to stream high-quality video content while lowering energy usage. I hope to see you at our booth if you are attending Mobile World Congress. With that, I'll hand you over to Rich to talk you through our numbers in more detail.