All right. Welcome to the last session of day one at the RBC TIMT Conference. I'm supposed to remind everyone there's a cocktail reception after this. We are super excited to be joined by Liren Chen, President and CEO of InterDigital. Thank you so much for coming. Thank you for having me. I guess for those less familiar, you occupy a really unique role in the tech ecosystem. Can you just give us kind of an overview of InterDigital and where you fit into that broader tech landscape? Yeah, absolutely. InterDigital is a tech company. The company was founded a little bit more than 50 years ago. We invest in three pillars of research. That is wireless communication, which combines cellular and Wi-Fi in wireless. We do video research, end-to-end video delivery, primarily focused on video codec. Then we focus on AI research. Over our innovation, we hire some of the best engineers. We train them to be inventors, essentially solving the problem in the system that has never, ever been done before. We protect our invention by filing patents around them. Now, over the years, we built one of the largest, and in my opinion, one of the most valuable patent portfolios in the industry. By the way, it's growing. Every single day, on average, we get six new patents. That's including vacants. This innovation engine just keeps on adding value. That is only half the story. The other half is we send our best engineers to standard development organizations. We participate, and over time, we gain credibility. We lead them. In a sense, we lead the open standard creation. By doing so, we make sure we introduce our technology, demonstrating to our peer company why it is superior. It is faster, it is more reliable, it is more efficient. Therefore, getting a very large chunk of our technology being adopted to be the standard. Standard is open. Standard is available to everybody. Standard has a lot of economic benefit. I can go on and on. In the end, standard is how we share technology. Once our technology is in many, many millions and billions of devices, in hundreds of millions of downloads every single day, we try to license our patent that covers the technology. We get paid. We put the money back into R&D. We keep on driving the technology forward. We try to be leading the industry. In a lot of sense, we build a foundation of a number of different industries that people build on top of it. We solve the most difficult problem in the system. We keep on pushing technology forward. If I could just double-click on one of the things we were talking about from the engineers, it's such a unique job in the tech industry. I'm sure it's super exciting for the people that want to be solving problems. How do you—is there like a quota system? How do you judge these inventors and engineers within your company? That's a great question. We try to get them fairly early on. By getting them early on, I mean we drive very close partnerships with universities. We sponsor research. We build partnerships with universities. We work very closely with professors. By the way, we are a company with a relatively small size, but we actually operate 14 different sites in seven different countries. If you try to decide where you set up the centers, most of my R&D centers are almost inevitably very close to leading universities. I work from my office in Pennsylvania. Most of my office may see that particular size. It's engineers and inventors. We are literally eight miles away from UPenn. We hire some of the best people from—and we have research centers. I was talking to someone earlier today who is from Canada. We literally have a research center across the street from McGill University in Montreal. We built that site almost for 20 years. Now we attract and build best expertise. We have research centers in London, where we're driving 6G research. We also have our single largest site, believe it or not, it's in Rennes, France, where we do our codec research on this area. Needed one more thing I will add. Our AI research team is primarily based in the Bay Area, near Stanford and Berkeley. We recently acquired an AI research team that's based in London also. If you look at the common theme here, we attract the talent, but we don't just acquire them and do nothing with it. We have already one of the leading research teams in the industry. We train them to be inventors. We train them to solve the most difficult problem. We, frankly, work a very close collaboration system between inventors and patent attorneys to build a patent portfolio. Over a long period of time, we build a very successful rewarding system. We reward them not just for number, but for the quality of the invention. We measure different parameters. We build internal milestones to celebrate their achievement and to reward people accordingly, not just by money, but by prestige, by recognition. Let's talk a little bit more about that patent portfolio. Last year, you enlightened me with some foundational knowledge about this business, which was the difference between standard essential patents and implementation patents. For us that aren't in this world, could you just maybe give us a reminder of what the difference is and then what your portfolio is made up of? Yeah. That's a great question. First, I'll start. What is standard? Why do people need standard? The industry needs standard because you want to have compatibility. You want to have interoperability. Those two things are related, but they're not the same. Interoperability is what allows our iPhone to talk to our Android devices. They're able to talk because they speak the same language. That language in our industry, we call the early interface, if you would. It's standard. There's many different aspects for it. The way standard is everywhere. I look around the room, there's at least 10 different standards, from wireless communication to video to the power plug is a standard. The voltage is a standard, all kinds of things here. This is important. What we get into is really sophisticated standard with many different aspects of the technology spec. The reason our patent weight on the standard is not by accident, because we create the technology in the first place. We file patent to protect the technology, and we send the engineer to the standard body to demonstrate technology, convincing our peer company they are superior to the alternative, and therefore they get adopted to be part of the standard. The patent read on the technology as part of the standard. In our industry, we call them SEPs, standard essential patents. What that means is if you build a product implementing the standard, you need to use that technology that will infringe on our patent, our patent read on it. Therefore, we will license them. Back to your question, we have a very large patent portfolio. Our overall patent portfolio as of today is about 36,000 patents. Every day, we add half a dozen patents on top of it. Therefore, it's a very large portfolio. We literally have tens of thousands of patents that read on different standards. By the way, sometimes the same patent can read on multiple standards. Something you mentioned is so fundamentally important, they will apply to different alternatives of the standard in wireless communication, video codec, and others. We have tens of thousands of patents that read on different standards that people call them SEPs. We also have patents that cover important aspects of implementation. That's also super useful. Last year at Investor Day, you laid out this plan for $1 billion in recurring revenue by 2030. Yes. Could you walk us through just kind of the pieces of that plan and maybe the key assumptions to achieving it, and then what you've done or how you progressed towards it in 2025? Thank you. Last year in the Investor Day, which is almost exactly 14 months ago, we laid out a plan. We said, "We, as a company, we believe we can achieve a billion dollars in annualized recurring revenue by 2030." I'm very proud to say 14 months later, we have done really well. As a matter of fact, we are ahead of schedule. I'll break it down here. In the billion-dollar recurring revenue, one segment existing program is smartphone licensing, which we have done for multiple decades now. At the time of last year, when we presented here, our annualized recurring revenue from the end of 2023 is about $340 million, $340+. We said by 2027, we think we can grow it to be about $500 million. We just announced in the last quarter, our annualized recurring revenue for the smartphone is already $490 million. $490 is not $500, but it's really close. We have two more years to go. The reason we are able to achieve it is primarily through two growth factors. We are able to add new customers. We are able to convince people who have been using our technology for a long time to pay. Adding new customers to it. We are also able to achieve enhanced value in renewing some of the existing contracts. One of the larger contracts we have completed between last Investor Day as of today is we have completed Samsung arbitration for the smartphone licensing, which we announced a couple of quarters ago now. It was done in July of this year. In that contract, we are able to, through third-party arbitration process, keep in mind those are independent arbitrators who try to judge the value of our portfolio based on everything we have submitted to them. They have decided the new contract is worth $135 million per year times 8 years. It is literally more than $1 billion in contract value. In comparison, it is 68% higher than the prior agreement. That just reflects on how much more value we have created. That is in our smartphone. I am happy to say we are tracking really well, almost a couple of years ahead of schedule. On the other devices, last year, we said, "Hey, we are growing consumer electronic IoT devices. We are growing. It is a smaller program, but we are growing faster." I am happy to report we are also able to achieve growth. We are exiting last quarter at about $19 million. We are close to halfway there. I'll come back to another important factor. We also made concrete progress in our OTT licensing program. I think we discussed last year we have been licensing in that field for multiple years now. We presented the value proposition for our technology, which is the encoder side, which is in the cloud, how you compress content with codec. Frankly, combined, it's 1,000 times to 1 compared to uncompressed signal. We believe it's enormously valuable. It's valuable from cost savings on storage, power, and everything to go with it, cooling and internet abundance to higher value. People can sell higher resolution content, charge more money, support more customers. We also said, because we are a new program, we wanted to be, frankly, conservative in estimating the value. We also realized we do need to prove our worth of the IP sometime if people refuse to pay through enforcement, which we did. Initially, a multi-jurisdictional enforcement effort against Disney. That case was filed February of this year. It's about a dozen patents we are serving in four different jurisdictions. Those cases are coming to trial now. So far, there's three patents that have been decided on a preliminary base in court in Brazil and Germany. So far, we have won them three out of three. I mean, based on third-party court appointment expert in Brazil, our patent was found to be valid and infringed. The court actually issued a preliminary injunction against Disney. We just received a similar positive result in Germany. By the way, there's the rest of the patents that are coming to trial later this year, as well as first half of next year. I say we are very excited. We are tracking really well. I'd like to see the litigation proceeding according to our expectation. In the meantime, the overall market keeps on growing. Yeah. When we were sizing up the market last year, 14 months ago, the online streaming, the streaming video on-demand market was projected to be about the same size as the smartphone market by 2027. The latest report already has that overall size market exceeding the size of smartphones as of now. Because it's a large market, it's growing faster. We actually see a lot more people benefiting even more than what we projected. That's just an indication of power as a technology. It's also why we have strong belief in that field. Yeah. Maybe thinking of a few different things you said there. Last year when we spoke, you had just expanded your market share by adding Oppo. Yep. One, traditionally a more challenging market to break into in China. You've seen success there. I guess talking about, you mentioned the Disney trial, the strategies you take to address different companies, how much does it vary by geo or macro or politics? How much is it just kind of on a company-by-company basis in terms of how you go about enforcing your patents? Yeah. That is a great question. Let me try to break it down. There's a long one. You answered whatever seems like the best question out of what I said. No, it's perfect. Look, this time last year, we were building momentum in our smartphone licensing. We did license in Oppo. By the way, I was very transparent on our strategy. We said, "Hey, we are addressing our core market in smartphone primarily by size of opportunity. Just, hey, the vendor has the highest market share, having the highest end devices, sell more, going forward projection. We engage them in parallel, but we prioritize them." This time last year, we signed Oppo. I also told you that our strategy to sign Oppo, then engaging Vivo in parallel because those two companies are frankly connected at the top level, but you want to address a larger opportunity first. Since then, we have licensed Vivo. We also licensed another company called Honor. Honor is less known here, but Honor is a spin-out out of Huawei. When Huawei was under the U.S. sanction, and frankly, they spun out a very large part of the engineering team together with a sub-brand with their channels into a company called Honor. We were able to add them as a new customer because they are new through that process. We have done really well. The real question is really, hey, how do you deal with a bunch of other stuff? There is tariff, there is trade issues, among others. I like to explain that, number one, in the long term, nobody is completely immune to those macro-level dynamics. In the short to midterm, we are extraordinarily well set up. Here is the reason. Number one, we are licensing intangible IP assets. There are no physical goods that are shipping across the border that are subject to tariff on that issue. Number two, we are enabling an open standard that's global. We participate. Our business model evolves in adding technology into open standards that people in China, in the U.S., in India, in Europe, they all benefit from. That model itself is extraordinarily good for the ecosystem. I go to various different capitals of the world, explain to them why our business model benefits their domestic industry, which is absolutely true. The third one is near-term-wise, our revenue, it's different contracts. Largest contract we have are generally fixed fee agreements. Apple and Samsung agreements are a perfect example. In that context here, people, large vendors have committed with contracts to pay us for an extended period of time. They benefit so much. We have such a long history to them. Those relationships are very, very stable. Our Apple and Samsung contract is a perfect example. Apple is licensed until late 2028, and Samsung licensed until 2030. In that context here, their quarterly volume actually fluctuates, but our revenue source from those large customers is very stable. We have talked the last couple of years about how successful you have been throughout the mobile space and streaming and gaming becoming kind of these new emerging markets. You just laid out how large of a market you think streaming can be. Could you just talk about how these fit into your long-term growth plans and kind of the catalysts? I guess more and more, kind of how interrelated these two markets are starting to feel in a lot of ways. You're talking about streaming and gaming? Streaming and gaming. Because there is more overlap. There is a lot. So here's a beauty part of it's a beautiful part of our business. My CTO and I joke all the time to say, "We are actually not great at predicting the future regarding application layer. Neither do we need to be." We focus on solving the foundational layer of the system. We focus on how do we make wireless connectivity more reliable, more efficient with lower latency, with less package loss. And we also focus on video codec. How do we deliver end-to-end content more efficiently, more reliably, more feature-rich? And we also focus on getting AI with the whole system to make it more intelligent, more adapted to user needs every single day. Why this is beautiful? Because once you create them, then a lot of other people in the ecosystem will innovate on top of it. I mean, I was literally going through a two-day, and I demonstrated with my CTO last week. We were recalling on the days where 2G and 3G wireless communication was being developed in our prior company. All we focus on is building the wireless connectivity for data to be efficient and reliable. We did not anticipate services like Uber and others would build on top of it. That does not really matter to us. That is just because we are monetizing at the foundational layer through standards through IP licensing. We welcome all this other stuff. Back to your question. With streaming industry, as we have identified, it is obviously huge and successful. Would gaming industry be just as big or bigger over time? I would love it to happen. I would love for all the work products. I would love for the conference calls. I would love for all kinds of immersive user experiences. I would love for 3D video to take off. I would love for all kinds of devices and services to come up. I mean, the reality is our business model is based on everything wanted and needed to be wirelessly connected. We are also based on human beings' desires for more enriched user experience that's driven by video content. As long as those things continue to be true, I think we have incredible foundation we just keep on building. We will apply them over a long period of time into different verticals. We have been quite successful doing them. I feel like this relates into a few different ways that we've talked today. Talking about how GenAI is impacting both InterDigital, but the market from a broader standpoint. I kind of want to tweak this question based on our conversation. When you see transformational shifts like this, and there are new sets of standards being created all of a sudden, how much of a point of emphasis is that for you when there is a big moment of digital transformation to make sure that you're staying in this power or pull position that you've established in the market? Yeah. Look, we are a very major player in AI. And we have been doing AI research for multiple decades now. I explain in probably three different dimensions. Number one, we have been working on integrating AI, wireless, and video technology together for quite a while. I'll try to break it down. In the wireless field, if you look at the cellular development, we already defined what people call 5G advance, getting the second half of 5G. Our engineers are putting most of their effort working on 6G. One of the major pillars of 6G is integrating our AI natively into our system. It's basically pushing down the AI into the foundational layers of network connectivity. That's well underway. I'll come back to our standard leadership. We are working on that issue. Similarly, we are working on the integration of AI and video technology. Believe it or not, we have been working on that even longer. Video technology is enormously bandwidth-consuming. We have worked on multiple generational video codec, how do we compress the signal by primarily a delta of the frame of pictures. That is video going forward. There has been a new way to process the signal primarily based on object detection. If you recognize everything within a video frame, you can see, hey, there are cars and people and chairs and cloud and roof. You can process them differently. You can tell the other side, those are objects. Those are not just pixels. If you do them properly, you can reduce a lot of the bandwidth consumption and increase the quality at the highest level. That is a work that is really vibrant. We have been researching for a while. In the meantime, we are re-engineering the wireless system and the video system for AI as a user. That's super important. What people historically have done is to build those systems with human being as a customer. For example, wireless system. You assume people do more download than upload. You are saying, hey, people download content, checking emails, browsing websites. That is no longer true. AI syncs up so much data into the cloud, which is using the uplink. The next gen of technology for network needs to be re-architected to factor in AI, this edge AI with a cloud AI integration. That's a piece. The other really fascinating piece for us is the machine-use codec. All these years, we have been building a video system thinking there will be a person watching on the other side. Our whole system is designed to use as little bandwidth as possible to provide high quality. What is high quality? That means a person watching will say, "This is great. This is high resolution. This is enough frame per second." Human beings have limitations. Her eye can only detect certain frame. We can only process so many colors. If you take that constraint away, you'll see it's a machine that's going to process it. You all of a sudden can allocate the codec very differently. Why is it important? Because that's a critical use case for autonomous vehicle. If you're using video to drive the car, then the video camera that went processing that video signal and detecting objects, making the right decisions, you actually need to re-architect that. That is one pillar for it. We are also open-minded. We recently acquired a company called DeepRinder. That's a company that has very deep expertise. It's based in London. That's very well aligned with our innovation-driven culture. Has one of the best advanced developments for innovations. We have really acquired that company. Why do we acquire them for the expertise? We also try to incorporate their development into standard. One of the things that separates us from many other AI companies is most other AI companies building based on data, in fact, even based on open-source algorithms, but they are building a closed system for their services. Our business model, we create some technology. We put them into open standards so other people can access and build on top of it. Again, that's a similar playbook, but it's a different application use field. We have demonstrated on our website that our engineers are currently leading multiple AI standard branches. In IEEE, there's an AI machine learning work group. Our engineers are the chair for it. In 6G, there's AI study groups. Our engineers are just vice chair for it. There are roughly half a dozen AI standard teams we are already leading. We are just getting started. On top of everything, we are building one of the valuable IP portfolios. We have patents. We integrate them. By the way, we are also very open-minded. One of the things I was exploring even before this meeting with my CTO is how much GenAI is already creating video content. What's the output? When they're producing this video content, they are using codec, which is one of the major innovations we have created in combination. By the way, there's also a lot of things that are being developed called LVM, large video modeling. They're using the video to train the AI model. Those videos need to be decrypted before they can train them. When they decrypt them, they're using our video codec. There are a lot of those use cases. I'd love to see them. I hope they are incredibly successful. I hope many, many billions of value being created. Over time, we hope to get our fair share of the innovation. I was going to ask you about growth and margin. I feel like we spent a lot of time on growth. Thinking through levers for margin, is there a GenAI play there? Code assistance? Are you seeing more productivity from your developers? And kind of how do margins play out when there's probably some lag time between a patent being created and you guys being able to monetize that? Yes. On the downsides, yes. We are an early adopter for AI technology internally. Our play is honestly not for cost reduction, but really for improving both the output and the quality. Like many other companies, we are adopting some of the broader tools to improve our productivity of innovation, of the way we secure patents, the way we contribute in standard. We are, frankly, very open-minded. I mean, we recently have purchased one of the leading AI subscription tools for every employee. We protect them, making sure our confidential information is not being leaked into the cloud. Importantly, we are realizing not every single person has all the answer. One thing we try to do internally is to essentially what I call it moving people from zero to one, making sure everyone gets to use it, making sure people develop the best practice through the process. The real power for our company is always finding the interception point. It's finding the multi-technology application field, finding the interception of technology and IP and standard, finding the right licensing opportunity. We are very spectrum surface. I'm a huge believer in AI, in case it's not clear to you. By the way, I think it's enormously powerful. I'm really proud of the role we play. Yeah. I completely missed the time. Are there any questions from the audience here? Oh, fantastic. We only got about 50 seconds left. It would have had to be a quick one. What are you most excited about over the next three to five years in InterDigital? I can summarize in one sentence. The future is bright. We have great technology. We have a very solid strategy. We have a fantastic team. We have built a track record of executing. Our technology has never been so valuable. They are just being adopted even more and brighter in different fields. It is super exciting and perfect timing. We also have the best people who can invent things we have not really done before. It is super exciting. That is a great way to end this meeting and to end the first day of the tech conference. Thank you so much for taking the time. Thank you for joining us.