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 one one 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 Richard Brezski, 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 2021 annual report on Form 10-K, our second quarter 2022 quarterly report in 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 continued 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-exclusive fee-bearing license with Amazon, covering a range of Amazon's consumer electronic devices under InterDigital's patents. We made a major addition to our leadership team. We strengthened our balance sheet, and we saw significant growth in revenue outside our 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 show a 14-fold increase in earnings per share to $0.69 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 Corp 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 inventor 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 Tirri. 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 drive as a leading innovator across a range of critical technologies. Our research on additional horizontal technologies like cellular, Wi-Fi, radio, 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 a growing array of IoT products, often use multiple technologies such as Wi-Fi and radio. In short, we are in excellent position to drive growth from both existing relationships and new opportunities. In recent years, our strength in value has become even more valuable as we have built a formidable innovation pipeline. Explore opportunities in building more immersive consumer experience and continue as a leading contributor to both the HEVC and VVC video standard. 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 engineer for his work in 5G by awarding him the 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 InterDigital engineer was recently appointed as the 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 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 experience in the future, in areas such as XR and Metaverse. On the licensing front, we believe strength 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 Technologies, 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 partner. Almost half of the connected cars on the market are now licensed to our 3G and 4G standard essential patents. In summary, our licensing platform performance this quarter underlines the opportunity that we see in our core markets and in newer areas, where our innovation is helping create 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 FRAND trial against Lenovo. I will reiterate my message from our last earnings 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, NIST, and USPTO recent withdrawal of a 2019 policy statement on SEP licensing and FRAND remedy is a positive development. I will not get into all the details here, but the announcement has moved the SEP policy in U.S. in a fair, balanced, and more predictable direction, and confirmed our belief that while dispute over SEP license do arise, factors such as the value of the SEP innovation should guide the course of 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. 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 employee to excel. I would encourage you all to read the report, which can be found on our website. With that, I'll turn it over to Rich. Thanks, Liren. As Liren noted, we delivered another strong quarter with significant increases in revenue and profitability on both a sequential and year-over-year basis. We grew total revenue 42% over second quarter 2021 to $125 million, including $100 million of recurring revenue. While mobile agreements such as Xiaomi have driven a large part of our growth, we have also begun to see meaningful growth in the CE, auto, and IoT markets. In second quarter 2022, we had over $35 million in combined revenue from the CE, auto, and IoT markets, including almost $12 million on a recurring basis. Both the total and recurring revenue from these markets represent record levels. For the first half of 2022, we recognized about $23 million of recurring revenue from these markets, representing a 70% increase from the comparable period in 2021. While we are pleased to report such strong revenue from these markets, we remain committed to driving continued growth. Moving on to expenses. You can see the benefits from the cost management actions we initiated a year ago in our first half 2022 results. On an annualized basis, excluding litigation and stock-based compensation, we have reduced our operating expenses by almost $35 million. This savings is net of the reinvestment we have already made, and we believe that we have improved our capabilities while lowering our cost base. Moving on to capital allocation. We made the decision to refinance our convertible debt during the second quarter as it became clear we were heading into a volatile period marked by inflation and rising interest rates. Similar to our prior financings, we entered into an option structure that increases the per share price at which we experience dilution from our new debt to $106. The net proceeds from our new debt were primarily used for two purposes. First, to buy back approximately two-thirds of our old debt, and second, to concurrently buy back $75 million of our common stock. Looking forward to the third quarter, we currently expect revenue to come in between $96 million and $100 million. At this point, our revenue guidance is based only on existing contracts, so the entire range is comprised of recurring revenue. On the expense side, we expect additional investments in research and development and an uptick in litigation costs related to ongoing proceedings will drive operating expenses to the range of $76 million-$80 million. Finally, we expect non-operating expenses comprised of interest and other expenses to be in the range of $6 million-$8 million and an effective tax rate in the range of 25%-27%. With that, I'll turn it back over to Richard. Thank you, Rich. Thank you, Liren. Operator, we can now open the call for questions. Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you'll need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. Thank you. Anja Soderstrom, Sidoti, please go ahead. Your line's open. Okay. Thank you for taking my question and, congrats on good progress. Can you just- Thanks, Anja. Talk a little bit about, and maybe if at all the sentiments among your counterparts have changed given the economic environment and geopolitical situation? Is that affecting at all your discussions? Yeah. Hey, Anja, this is Liren. I understand the geopolitical situation, you know, in part of Asia in particular. It's very sensitive. The economy, you know, has been in turmoil in the last, you know, couple years, partially due to COVID. Our current revenue is primarily supported by our fixed revenue contract, so we are luckily very shielded from, you know, the near-term turmoil. Some of the downturn may play a role in our renewal discussion, but the major contract we are currently negotiating, they're not being that much impacted by some of the issues. We are well-positioned. On the geopolitical side here, you know, we are a global player, so we have been watching, you know, the global environment very, very carefully. So far, we have been, you know, demonstrating a very strong track record through striking further deals, you know, across multiple windows in many geographically different continents. But we are watching very carefully. Okay. Thank you. Rich, you mentioned the operating expenses were reduced by $35 million net of reinvestments already made. What kind of remaining reinvestments do you have? Yeah. We've been reinvesting primarily in R&I, and we expect that to continue. For the moment, I'll stick to the guidance I've provided for the next quarter, where we mention an uptick, you know, led by R&I reinvestments, but also a little bit from the litigation associated with ongoing matters. That uptick is isolated to that third quarter? Yeah. That relates to the third quarter guidance, you know, the uptick we're seeing on a sequential basis, versus Q2. Okay. Thank you. That was all for me. Thank you. Thanks, Anja. Our next question comes from Jonathan Eisenson from Bank of America. Your line is open. Go ahead. Hey, guys. Thanks for taking my question. The first thing I wanted to touch on is if you have any visibility for your OpEx guidance, given that the implied operating margin seemed to decline sequentially. I would appreciate any color there. Then I also just wanted to ask if you have any updates on the Apple and Samsung deals. Thanks. Sure, Jonathan. I'll take the first part. There's not a close association between our revenue in a given period and our operating expense in a given period. You know, the R&I that I was just referring to, related to the last question, that we are investing in today is to drive revenue that you know we would see years down the road because we make such long-term investments in fundamental research. It's not so much that you know we really have effectively a 100% gross margin on new business because there's no variable cost associated with it. When we license, we're granting permission to use technology that we've already invented in the past. This uptick in R&I is really to drive future growth, not related to the upcoming third quarter. Yeah. Hopefully that answers that part of the question. I'll let Liren answer the second part. Yeah. Hey, Jonathan. For the Apple-Samsung negotiation, obviously our relationship with Apple and Samsung are very, very important to us. We have been focusing on the renewing their contract for quite a while. As I think everyone's aware, the Apple contract expires end of Q3 of this year, and Samsung contract expires end of Q4 of this year. It's always worth reminding that, hey, those licensing agreement with us, it really represents very long-term relationship. Apple has been our licensee since 2007, before they shipped the very first iPhone. Samsung has been our licensee for actually more than 25 years before they shipped the very first Galaxy phone. Through the, you know, such a long-term relationship here, there have been multiple renewals happening. We feel confident about the current negotiation based on, you know, how much our technology has advanced. Frankly, they have become even more important with the connected world, with a lot of, you know, multimedia content being consumed on the device. Obviously, 5G adoption will be a pretty major driver in our negotiation. Also it's worth noting that both Apple and Samsung has a much higher concentration of the premium devices in, you know, their worldwide sales. Those devices actually make more and better use of our high-end technology. To that degree, you know, it's worthwhile obviously for us to remind them how much they have benefited from everything we have developed. Got it. Thank you. Yep. Okay. Thank you, Jonathan. Our next question comes from Tal Liani from Bank of America. Your line is open. Go ahead. Tal, your line is open. Perhaps that was an inadvertent hand raise. Okay, Tal, did you have a question? I'm sorry. I was on mute, and I was talking to myself. Oh. Can you hear me now? Of course. Thank you. I had really good question for you. I have to repeat that. Yeah. You get Get one for free. Yeah, you get two for one today from Bank of America. I apologize if my questions are green because I'm new to cover the stock. Last year, you grew sequentially in 3Q 63%. This year you're guiding for a decline both on the sequential basis and year-over-year basis. Can you talk about the seasonality? If I get it right, you're guiding for $98 million, which will be down year-over-year and will be down sequentially. Can you talk about seasonality, what drives these fluctuations in growth, and any color? Any color on kind of what to expect later on, even if we don't, you know, there's no explicit guidance, can we talk about kind of what drives ups and downs, these quarterly fluctuations? Thanks. Yeah. No, it's a good question, Tal, and happy to address it. A couple things I'd point to. The first regarding seasonality. There's not a lot of seasonality in our revenue because. You can find this on our financial metrics that we publish on our website. We show the percentage of revenue that comes from variable agreements, you know, per unit where customers are reporting the volume they shipped and the associated revenue or royalties they pay us for the quarter. And then also fixed fee revenue, where you know, there's a fixed price over the term of the agreement, and we typically amortize that total quantum over the term on a straight line basis with, you know, maybe some sometimes exceptions. 92% of our revenue in the quarter and year to date is coming from those fixed price agreements. Therefore, that's a really stable base, you know, quarter to quarter. There's only a small amount that's coming from the variable, you know, less than 10% that maybe is subject to any seasonality that does exist. The majority of the fixed fee, the majority of the total revenue is on the mobile side, that definitely leans towards, you know, the fixed fee. On the consumer electronics side, that's where it tends to be more variable, and maybe there is a little bit more seasonality, but overall a small component. What's driving some of these changes? On a sequential basis, we also break out, I'll mention recurring revenue from past sales. With some of the new agreements that we signed this quarter, when you think about Amazon and then through our licensing partner, GM and Ford, as well as others, there's some past sales where they're basically catching up for the use of our technology prior to entering into these agreements. We recognize that past amount, and we try to delineate it so it's clear to everybody, you know, what that impact on the quarter was. In the current quarter is, you know, roughly $25 million. The recurring number of $100 million, therefore, is kinda the what to think about going from quarter to quarter. You know, at the midpoint, you know, we're maybe down 2%. It's a relatively small number. That, you know, again, can be driven by expectations around the variable side. The final aspect to all this is, so what, you know, what are the meaningful changes? That's you know, if you look year-over-year, we had some licenses that expired last year, renewed a bunch of them, not all of them. Some customers had left the business. In terms of growth, it's the step function changes from adding, you know, significant new agreements. A great example of that is third quarter of last year when we signed Xiaomi. Incidentally, third quarter of last year, signing Xiaomi, there was a lot of past sales there as well. On a year-to-year basis, that drives some of that decline. Got it. Now, the industry is weakening. If you look at Qorvo and, you know, they what they reported, and Qualcomm what they reported, everyone is talking about slowdown of devices. Devices still make the majority, vast majority of your revenues. I know you have a different business model, with a lot of it being fixed revenue rather than per device revenues. The question is: What happens when the industry is weakening? What's the history? Do you have customers coming back to you and say, "Hey, we wanna renegotiate our historical agreement because now we're selling 15% less, or not?" Or, what's the variable portion of your revenues that is tied to the weakening handset market, smartphone market? Yeah. Hey, Tal. This is Liren. As Rich mentioned earlier, a vast majority of our smartphone license agreement is fixed fee agreement. What that means is under contract, those vendors pay us the same dollar amount year after year during the term of the contract. I mean, they all our customers honor their contracts, so we do get paid, you know, regardless whether the market, you know, goes up or down, if you would. That dynamic does come in play when we have to renegotiate for the next contract, right? If they have lost significant market share and those factors will be frankly factored in. It's worth noting that for the next contract we are trying to negotiate, it's also a long-term contract. We actually try to frankly look at third-party projections, try to, you know, both party make certain amount of, you know, forward-looking expectation projection to see in the next 5 years or longer how much the volume will be. Some of the shorter term, you know, up and downs will be hopefully factored in, but not exactly driving the long-term numbers. More importantly for us though, Tal, it's worth noting that we currently have roughly 55% coverage of the market, 50% a little bit higher of the smartphone market. We see, over, you know, a relatively short period of time after we resolve, you know, less than a handful of, you know, vendors' relationship here, we should be able to grow into about 80%-85% market penetration. I think gaining more vendors under coverage will actually be, in my opinion, a much bigger driver than the short term, you know, certain amount of vendors losing some market share. These missing vendors are mostly Chinese vendors as much as I understand. In the current environment where Chinese market is weakening, does it help you to get a contract? Could it inject delays in the contract, in signing the contract? What's the timing aspect of getting these extra vendors that are currently not paying? Yeah. Top three major vendors we have identified as our you know main vendors we need to sign up for. The largest one is Oppo, who amongst three brand Oppo, Realme and OnePlus, ships you know over 200 million devices per year. The next vendor is Vivo, which is somewhat smaller than Oppo, but still very, very large vendors. The third one, which is Lenovo, again, through the purchase of Motorola brand, they are a major player you know in a number of different markets, including U.S. Currently, we are in litigation with Lenovo and Oppo. Our Lenovo litigation is actually in year three now, and we are, as I mentioned earlier, waiting for a major court decision out of the UK, where the court will decide on global base how much our worldwide patent portfolio is worth. You know, their so-called FRAND rate determination case. That trial also consists of past damages. You know, how much money they supposed to owe us for all the past infringing of our patents against a worldwide scope. The Oppo, we are also in litigation with Oppo. InterDigital has filed a series of lawsuits last December in multiple jurisdictions against them. But you know, we don't have a progress to report yet because those cases are relatively new. Back to your earlier question to see, you know, how much the China weakening impact those negotiations. I would say they have somewhat impact, but not significant. The reason being, all the three vendors we are talking about, they are really global vendors. You know, like Lenovo and Oppo, and Vivo, they sell very significant market outside China. Actually, in the case of Lenovo, a vast majority of their phones are actually sold outside China. I'll say it's really everything is determined on the global basis here. Last question. You know, my education is in finance, but I became almost a lawyer covering Qualcomm with the history. In the Qualcomm case, it always goes to court, but in the last second, there is an agreement. Once someone loses a case, the court rarely decides. It's, I've been following Qualcomm since the nineties, and it's always settled out of court eventually. What's the history of your negotiations? Is it based on court decisions, or do you typically negotiate once you win a major milestone or you lose a major milestone in court? Yeah. Hey, Tal. You are correct that frankly, a vast majority of the cases, you know, are negotiated or settled before go to trial. That frankly has been InterDigital's experience also. We like Qualcomm, we prefer bilateral negotiation and most of the deals do get done through bilateral negotiation. Just try to give you a data point here. Since the beginning of last year, we have signed 16 new agreement, you know, up to the end of Q2 here. That's a very large number. We frankly had a record-breaking year last year signing, you know, 13 new agreement last year. A vast majority of those agreement was signed through bilateral negotiation, you know, without lawsuits. But once in a while, we do have to file lawsuits. Generally, those are after very lengthy negotiation, where the other side simply refuse to pay, you know, a fair term that many other vendors are paying. When we go for those litigations, sometimes the, frankly, case get settled before it goes to trial, and sometimes we do go to trial and get a court decision. It's hard to say. It's really case by case. It's worth noting that through the history of InterDigital, whenever we have filed lawsuit to enforce our patent right, our IP rights, every single time, we end up in a, in a license agreement, you know, under the FRAND terms. Our track record in this is actually quite strong. Got it. Great. Thank you. Thanks so much. Thank you for your questions, Tal. As a reminder, to ask a question, you'll just need to press star one one on your phone and then wait for your name to be announced. Okay, so our next question is from Scott Searle with Roth. Scott, go ahead. Your line is open. Hey, good morning. Thanks for taking the questions. Liren, Rich, I apologize, I got on the call late, so I won't rehash probably some of the stuff you covered in your opening monologue. I was wondering on a couple of fronts. You know, Samsung recently renewed with Qualcomm. I'm wondering if there's anything to be read in that in terms of read-through for you guys in their ability, willingness to negotiate before an expiration of a renewal agreement. Yeah. Hey, Scott, this is Liren. I did read the same news about Samsung renewing that agreement. You know, they have continued their existing agreement, added seven more years to it. I think it's a great development for Samsung. It's also a great development for Qualcomm. I do not really know for sure how that will impact our negotiation. We are definitely see that as an encouraging sign that licensees and licensors, you know, continue their long-term relationship. We, as I mentioned earlier, has very long-term relationship with Samsung, and I think that's an encouraging sign. Okay, good. On the technical front, I'm not sure, did you quantify CE or video contribution to the current quarter? I guess as part of that, you've been building some momentum on that front. Now with the macroeconomic overhang, if you will, is that changing the discussion, the dialogue, and opportunity with any of the customers in the near term, or are things kind of progressing as they were before? Yeah. Hey, Scott, I'll take the first part of that question. Yeah, we mentioned we didn't break it out, but in combination, we said that CE, auto, and IoT contributed $35 million of total revenue in the quarter and $12 million of recurring revenue in the quarter. We're, you know, pleased by the traction, you know, across those markets, and both that total and recurring figure represent records for us. Gotcha. Liren, is there any impact in terms of the discussions going forward when you look at what's going on from a macroeconomic standpoint, particularly some of the end markets and slowdown in TVs or smartphones or other larger video display types of opportunities? Yeah, Scott, I mean, obviously, in general, we do not see an impact to our existing agreement because they are fixed fee agreement. For the new license agreement here, it's really a case-by-case basis. You guys know our, you know, near-term focus is on Apple and Samsung. They are major player on the premium tier, and based on all the report we see, they are less impacted than some of the players who are competing in the low to mid-tier devices. Regarding the TVs and others, it's really, Scott, it's hard to see generically, but we are, as you probably are aware, focused on getting the, some of the leading brand TV, when their deal signed, and those agreements are long-term agreement also. Frankly, there's a fairly significant post-sales components to it. It's really the near-term impact. It's relevant, but it's not necessarily a deciding factor. Gotcha. Last, if I could, I'm not sure, Liren, if you had any comments in terms of other video monetization and opportunities. I'd love to hear your thoughts on that front. If not, we can take it offline. Thanks so much. Yeah, we didn't comment specifically, Scott, but one thing I was describing earlier is we combined with our Technicolor acquisition. We really built ourselves, you know, through the past several decades, actually, into one of the leading technology developer and frankly leading patent holders in video space. Video are increasingly becoming relevant, you know, for many, many devices, smartphones and many other connected devices here. We did identify, you know, there's different layers of technology involved and some of those services layer are also benefiting from our video technology, and we are actively looking into the space and we'll hopefully provide more updates in the future. Great. Thanks so much. Thanks, Scott. Okay, thank you, Scott. I'd now like to turn the call back to Liren Chen for closing remarks. Yeah. Hey, thanks, everyone. Before we sign off, I'd just like to thank all the shareholders for their continuing support and our employees for their contribution to another outstanding quarter. Thank you all for joining us today. I hope everyone enjoy the rest of the summer. Yes, thank you for your participation in today's conference. This concludes the program, and you may now disconnect.