InterDigital, Inc.

Good morning, everyone, and thank you for standing by. My name is Gail, and I will be your operator for today. At this time, I would like to welcome each and every one of you to the InterDigital's fourth quarter, 225 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to answer a question, kindly press power on again. I will now turn the call over to Rayford Garabrant, Head of Investor Relations. Please go ahead.

Thank you, Gail, and good morning, everyone. Welcome to InterDigital's fourth quarter 2025 earnings conference call. I'm 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 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 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 2025 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 Leary.

Thank you, Reefer. Good morning, everyone. Thanks for joining us today. At the beginning of 2025, we set aggressive goals to grow our company, including building on the momentum of smartphone licensing program to drive revenue growth with a special focus on increasing annualized recurring revenue and margin expansion, building a strong licensing pipeline by advancing our video service licensing program, expanding our AI research capability and growing our standard leadership and patent portfolio at a critical stage in the development of 6G and the next generation video codecs. I'm pleased to say that we have exceeded our goals on all these fronts. We finished 2025 with a strong fourth quarter, delivering revenue and EPS above the high end of our outlook, built strong momentum across our licensing programs, completed a key acquisition to strengthen our AI research, and added new invention to our patent portfolio, reaching a new record-breaking high. This rounded off an excellent year, where revenue for the full year was $834 million, the second highest in our history. We increased our annual recurring revenue to $582 million, up 24% year over year. The adjusted EBITDA was $589 million, and our non-GAAP EPS was more than $15, both at all-time highs. Today, I'll focus on our progress throughout the year and why we believe we are well-positioned to drive shareholder value in 2026, which will then talk you through our fourth quarter financial performance and our 2026 outlook in more detail. In our smartphone program, we had a record-setting year in 2025. We completed Samsung's smartphone licensing contract that extended one of our longest customer relationships all the way to the end of 2013. We signed a new deal with two more top ten global smartphone vendors, Vivo and Honor. With these additions, we have now licensed eight of the top ten largest smartphone manufacturers, covering about 85% of the overall market. Our new agreement with Samsung is the most valuable license in our history, continuing our win-win relationship that stretches back to the 1990s. In 2025, we also renewed agreement with Sharp and Seiko. For the year, our smartphone revenue was just below $680 million, up 14% year-over-year to an all-time high. This strong momentum has continued into 2026, but we renewed our license with Xiaomi at the beginning of the year. We now have the three largest smartphone vendors, Apple, Samsung, and Xiaomi, licensed through the end of the decade, providing a strong foundation for the company to build on future organic goods. In our CE and IoT program, we continue to make good progress. In 2025, we signed a new agreement, HP, the world's largest PC manufacturer. We now have licensed about half of the global PC market. In the fourth quarter, we signed a CE device license agreement with a significant social media company covering our video coding and Wi-Fi patents. At the start of 2026, we complete a new license with LG Electronics, covering the company's digital TV and computer display monitors. LG is one of the top global TV manufacturers with strong sales in the premium part of the market. We are thrilled to add it to our CE licensing program. Including the latest deals, we have now licensed over 50 license agreements with a total contract value of more than $4.6 billion since 2021. We also continue to make good progress in our video service program and our focus on licensing some of the world's largest streaming platforms. We believe that this space continues to represent an excellent growth opportunity for us. Initially, our focus is on streaming services, but we also see opportunities in other video-driven platforms, where our innovation in areas like video compression, is central to the efficient processing and delivery of video content and to the consumer experience overall. At the beginning of 2025, we launched our enforcement campaign against Disney+, Hulu, and ESPN Plus streaming services. We received two preliminary injunctions in Brazil and two injunctions in Germany against Disney. And in the fourth quarter, we launched an enforcement proceedings against Amazon. These are important steps towards our goal of signing a long-term agreement with both companies. As I said many times before, we always prefer getting a license deal done through bilateral negotiation. But we will rigorously pursue fair value for years of investment in our research and deepen the value of our intellectual property. which allows us to continue to invest in the next generation of technology. And when we enforce our patent right, we have a strong track record of ultimately signing a license that's fair to both parties. The central role played in the connected world is only possible because we have built and continue to expand a research pipeline which provide us with a strong foundation of assets to license today and which ensure that we have a platform that drive growth cross-licensing program through 2030 and beyond. In 2025, we place particular emphasis in deepening our AI expertise and strengthening our leadership in developing AI-based solution for the next generation of standardized technologies. Through our standard contributions and our technology leadership, we drive much deeper use of AI to make network more efficient and reliable, to make video better quality and more energy efficient, and we lead in the development of advanced wireless network to better support the rapid growth use of AI across devices and services. Our recent acquisition of AI startup DeepRender, which we completely include for is a perfect example of how we strengthened our engineering team to lead research in AI and video compression in years to come. In our wireless research, we are already actively contributing to 6G standard development, which is due to be the first native AI wireless standard. With AI impacting wireless and video groups, the leadership positions that we hold in multiple standard groups become even more important. In 2025, one of our senior engineers was reelected chair of a key working group within 3GPP, the standard organization which is leading the development of 6G. We also hold multiple leadership positions in AI working group in several other standard organizations. The strength of our research and our expertise in building a world-class patent portfolio to protect our innovation are key drivers behind our business success. In 2025, our portfolio grew by 14% year-over-year and passed 38,000 granny patents and applications. Our portfolio is one of the largest across wireless, video, and AI, and more importantly, is also ranked as one of the highest quality in the world, according to several independent third-party reports. Through 2025, our success was recognized by multiple third parties, including by Newsweek, which named us one of America's greatest companies, by Fortune, which included us among America's fastest-growing companies, and by Time, which recognized us as one of America's growth leaders. More recently, another sign of our momentum, at the start of 2026, Forbes recognized us as the number one most successful mid-cap companies in America for 2026. In its analysis, Forbes looked at long-term performance and this award reflects our success in building a foundation for the future and delivering even greater shareholder value going forward. Before I hand it over to Rich, I want to let you know that next month we'll be back at Mobile Congress in Barcelona where we'll be demonstrating some of our cutting-edge technology, including how 6G will reshape connectivity, our innovation, our innovative application of AI, and how we're leading the development of more immersive video. We'll also present a demo alongside gaming technology pioneer Razer, continuing our track record of showcasing cutting-edge innovation alongside industry partners.