Conference Transcript - IDCC 2026-06-02

Tiziana Figliolia, Head of Investor Relations

Let's go ahead and get started. Liren, again thank you so much. I think you have a very fascinating story, a strong history of execution over the last, and innovation I'll say over the last at least five years that I've been covering you. So maybe I think you're going to give a brief background on the business and talk high level and then we can get into some Q&A. So maybe with

Liren Chen, CEO

that I will hand it off to you. Absolutely. Let me stand up here. We have a few slides here. I'll just go there before I trip over here. And my name is Lauren Lauren Chen, President CU for InterDigital. I have roughly half a dozen slides. I'll try to go over as quickly as I can and then we'll take a bunch of questions, okay? Alright, so disclaimers who we are, right? This is a one-pager summary of our company we're r d company we work on wireless ai and video codec we try to solve the most difficult problems and we build a pattern portfolio ip is our product then we license them license them to some of the largest vendor in the world which i'll show it to you and then once we collect the money from licensing we put it back into r d and we create the next generation codec and wireless technology and AI technology, but that's only half the story. The other half, which I'll explain to the next section, is our go-to-market strategy. I joined the company five years ago. Before that, I spent 25 years at Qualcomm, which is well-known for R&D research in wireless video and AI. Okay, very proud of what we are able to accomplish financially, but I'll go through the rest of the summary. So this is one picture for our business model. So I already explained the top level, focus on R&D, building patent portfolio, licensing But how do we make sure our patents are being used? How do we make sure our technology and billions and billions of devices, the secret lies in our leadership being standard? Standard is super important. Standard is everywhere. Standard is what gives you the interoperability and compatibility. capability. Standard is what allows an iPhone to be able to talk to Android devices, but that's just one example. We participate and lead in standard, so by leading the standard we are able to set the table, we are able to have a better chance of our technology become part of the open standard. When people are building product and services according to the standard, they are infringing our patent and they need a license for our IP. That's essentially the two cycles of innovation here and as i mentioned earlier we focus on the most difficult problem in wireless system wireless i mean primarily cellular wireless but we also are leading innovator in wi-fi and other wireless technology so in cellular that's 3g 4g 5g and going forward that'd be 6g in video codec that's algorithm and frankly the innovation we built end-to-end allows you to compress video signal a thousand times to one so you can send them with high quality without disruption with you know the quality and frankly latency that people expect. Increasingly we are driving AI innovation. AI it's really two side of AI research. We are applying AI to solve wireless and video problems. That's built-in native support for wireless system but we are also re-architecting wireless and video system to use AI as a use case because it's shaping the traffic differently and it's re-architecting machine codec that's separate from human codec. So combined we are one of the very few companies in the world that's able to write three different research and solving the best problem as we can. As I mentioned earlier, Our patent is our product, we do not make physical product, we don't make software or chips or devices, but we build the foundational technology that people need to build on top So we measure our progress by IP, by patent portfolio in general. We have one of the largest and most valuable patent portfolios in the world. When I joined the company a few years ago, we have less than 20,000 assets. Now, end of last year, we have 38,000 patents, and every single day we get seven new patents granted to us, every single day on average, that including weekends. So as of now, we have more than 40,000 assets already, and it's growing, and growing at increasing speed. This is the one chart, I call it four-panel chart. So what we do is we try to drive revenue, revenue coming, both recurring revenue as well catch up payment and we deploy capital aggressively in share buybacks and we increase dividend by deploying share buyback we are able to meaningful reducing our shares outstanding and by doing so we are able to grow EPS and also adjust EBITDA faster than we are able to grow revenue. And there's two more chart here so this is the progress we have made since I joined the company. I joined the company five years ago, coming from Qualcomm for 25 years. Since then we have licensed and renewed contract with some of the largest vendors in the world. I'm talking about Apple, Samsung, Lenovo, and you name it. We signed more than 50 agreement combined of $4.7 billion in contract license and some of those contracts are long-term contract. For example, our smartphone licensing program, we currently license Apple, Samsung, Xiaomi, which is number one, number two, number three smartphone vendors, all the way to end of this decade. So by having this long-term agreement give us a lot of stability, give us foreseeability of the business, and enable us to add on top of it to revenue growth over time. And I promise you this is the last slide, and so this This is laid out our long-term growth strategy all the way to 2030. Our brand and butter smartphone licensing and our midterm targets $500 million, we are actually achieving target ahead of schedule. As of this year, we're already at 490. This is for recurring revenue alone. And we are growing that with renewals, with next generation technology. But we are also growing other devices. Other devices, I mean TVs, laptops, connected cars we see anything that's wirelessly connected anything that has a camera has a display that capture and display videos almost by definition using our technology but that's not all our future for the companies in the cloud side because we innovate at system level end-to-end our technology apply on our device side but it also equally applied to the cloud space by cloud I I mean the streaming services, the work product, the entertainment, the gaming, sports, all kinds of different use cases. We build the cloud, we'll give us the next generation growth for the company for the next decade and beyond. So our revenue target for the cloud side is 300 billion plus by 2030. And we are achieving our goal, we are making good progress. So that's my summary presentation, and now I turn to Arjun.

Tiziana Figliolia, Head of Investor Relations

Yeah, if you want to take a seat. Maybe, I think the smartphone, smartphones is your biggest market right now. You kind of talked about you have Apple, Samsung, Xiaomi, the top three. And over the last several years, you've gotten a lot of the Chinese OEMs, Oppo, Vivo, so on, to sign on as well. I always think of interdigital as a growth business, but you have, I think, almost like 80% market share in the smartphone side. So how does the smartphone business sort of keep growing over the coming years? Because you've kind of already done so well there. So what are the growth vectors left there still?

Liren Chen, CEO

So very proud of what we're able to achieve. Our foundational technology driven by wireless Wi-Fi video codec applies to the smartphone industry. When I joined the company roughly five years ago, we had roughly 50% coverage of the device sold on the market under license. keeping in mind that 100% of the device sold on the market using our technology, our technology part of the standard. Through hard work, through negotiations, everything here, we are currently licensed eight of the top 10 vendors, right, about 85% of the market under license. But then when I joined the company, our recurring revenue piece for the smartphone piece is about $300 million. Now we are at $490, and midterm is $500 and more. So the way I see the smartphone growth is driven by three factors. The number one factor was try to license the vendor who have been using our technology, who have been not paying us. So adding them is the number one goal, which we have done a good job. We have added, frankly, half a dozen vendors. Pretty much all the major vendors are licensed. business. So that's first thing. The second order of business is growing those accounts over time. We do license our customers, generally speaking, through a long-term contract, roughly five years. But every five years we'll be renegotiating. If the vendor has gained market share, they have increased their volume, then in the next contract we will negotiate proportionally to how much they have been setting on the device going forward. That's the second piece safety gain volume. The third one is really, we are also increasing IP content per device. If you think about it, you know, 3G, 4G, 5G, going forward will be 6G. We are also adding more advanced codec. We are adding AI features to the phone. So in terms of valuation per device, we are able to demonstrate over time how it applies IP to the device at device, per device level is going up. So those are the three factors. So if you look at the first factor, it's really a addition you know increasing from 50 percent to 85 percent the second and the third one are multiplications if the vendor has gained volume and then the revenue per device should go up so by multiplying those two things here we're able to sustain and growing our revenue in the

Tiziana Figliolia, Head of Investor Relations

smartphone space okay and what what are your contracts you said typically five years what is the sort of the negotiation or the back and forth look like when you're doing a renewal you know with someone big you're able to bring up all these factors of look we've we've kind of grown our patent portfolio recovering more in your in your devices yeah how does that typically go yes so in the smartphone

Liren Chen, CEO

space most our contract once we sign them up our renewal renewal generally speaking is a little bit more straightforward than signing someone up for the first time, which we are able to do. During renewal, we would always present to them all the goods we have done in terms of our innovation since the last time they signed the contract. That can be three years ago, that can be five years ago. For some of the larger customers, that can be even longer. And so we will demonstrate the data we have created and going forward how they're enabling. And those contract negotiations are frankly very sophisticated. It sometimes takes multiple months and sometimes takes close to a year. So we generally started from a year before the expiration of the current contract to negotiate. But for the someone, if they have never licensed with us, we will also negotiate for the past infringement, what we call catch-up payment. You keep in mind our technology part of the open standard, they have been building on very often for multiple years, sometimes even longer. Some of the larger vendors have been setting infringing devices by very large volume. sometimes it can be hundreds of millions of devices. We have demonstrated our ability to collect for the past sales, and that sometime add up to be a fairly large amount. During the five years of being at InterDigital, we have collected, I think, over a billion dollars in past sales of the past infringement of our IP, so we try to do both.

Tiziana Figliolia, Head of Investor Relations

Okay, and I think that part is important just because, as folks might look at your financial model, there might be sort of spikes in revenue, and that is this catch-up payment that you're talking about. How far back do you, is there like a typical, in terms of a period of time, that you go back five years, you go back seven years, like how far back do you try to negotiate?

Liren Chen, CEO

Legally speaking, there have been case laws in different countries that you can all the way back to the beginning of their infringement. That's legally speaking, that's so-called under FRIEND principle. So friend means for a reasonable and non-discriminatory. But in reality, we are building recurring long-lasting customer relationship. Some of those long-term customers, frankly, having practical reasons in terms of their financial accruals, in terms of how much they have set aside. So we are demonstrating a certain amount of flexibility. But we have to strike a fairly careful balance. Because if we are being too flexible on the past sales, you have to create an incentive for people to keep on dragging along. In our industry, it's called holdout. And so we have to be able to be disciplined by collecting for part sales, yet considering the financial slash business reality for the other party. So we are striking that balance and try to find a fair settlement for both parties.

Tiziana Figliolia, Head of Investor Relations

And the next sort of big opportunity, at least in smartphones, is going to be 6G. That is right. And so how do you ensure that, you know, you are playing, you know, as important or more important a role in 6G innovation and the technologies that make up that standard relative to, you know, what you did in 5G and 4G before it? Like, what does the R&D engine look like? What is your role on the standards bodies? Like, how does that all come together to put you in a good position for this cycle?

Liren Chen, CEO

So I've been in the industry for 30 plus years. I joined Qualcomm, it was 2G, right, in the middle of the 90s. So in our industry, roughly speaking, every 10 years, there's an evolution, what I call the end to end plus 1G. The wireless industry, every generation of technology, is actually built on top of the previous one, but then they added more. And that's by design. It allows the wireless carrier, in particular, to get the return for their investment, both cap as aspects, and also allow the technology to be deployed seamlessly because every new generation technology cannot be deployed overnight. But you also want a new feature adding in because you want to entice consumers to keep on upgrading their devices, their services over time. So it's carefully designed, every generation build on top of each other adding new features. So inter-digital has been and wireless innovator since 1970s, believe it or not. So we were involved in building every generation of wireless technology. And so right now, our engineers are pretty much 100% dedicated to work on 6G. And 6G standard is scheduled to be finalized by 2029, with commercial deployment, large commercial deployment roughly by 2030. So what gave me confidence is driving from several factors. One is you have to make sure you have the best engineers working on foundational technology. We are not working on superficial stuff. We try to solve the most difficult problem in the system. And why? Because that's what allows us to create IP on top of it. We solve the most difficult problem that has never, ever been solved before. In order to do so, you need to have the best engineers working on real difficult problems. That's a starting point. Second thing is really we send our engineers to work in the standard development organization for decades now. Our engineers are widely respected. They have spent decades and decades building their company and personal reputation in those, what we call SDOs, standard development organization. And over time, we have built an impactable reputation that our peer company recognize. I'll give you one data point. As of today, 3GPP, which is the organization defining 5G and 6G have 15 different working groups, one of five. Inter-Digital have two chairs in the 15 chair. Keep in mind there's hundreds of companies trying to get involved. Everyone wanted to be there in the leadership role. We are the only company in the United States having multiple chairs, only one. Worldwide, there's only three companies having more than one chair. We are one of the three, and one of the only US as company leading those definitions. So by leading the standard creation, we have a better chance of demonstrating our technology, introducing our proposals, and by the way, have to convince our peers our technology is superior. By superior, I mean faster, more reliable, lower latency, all the rest of stuff. And we invest a lot in our IP. So the other really interesting part is when we license, at least on the device side, the device are multimode. That's when I raise my phone to see this is a 5G phone, but we have my phone so I can't really raise it. That's a 5G phone, and that 5G phone at the same time supports 3G and 4G. That's important. But by the time we're licensing 6G by end of the decade, we'll see this is a 6G phone, but it supports 4G and 5G at the same time. Why that's important? because the vendor has been paying a certain amount of valuation for the 4G, 5G technology, now I'm adding on top of it. I can demonstrate to you you are using more. That's just for the wireless piece. Keep in mind we're also innovating in Wi-Fi, we're also innovating in AI, we're innovating in the video codec, which video codec itself has this multiple generation adding on top of it at the same time. So we are able to consistently demonstrate my customers getting more every generation. So that's important aspects of our business.

Tiziana Figliolia, Head of Investor Relations

Very interesting. And then maybe let's switch gears a bit to sort of this new TAM you're going after, which is the streaming market. And you touched on it a little bit as a part of this broader cloud opportunity, but you're starting in streaming with sort of the video streaming players. Where are we in that opportunity? I think you have litigation ongoing with Disney and Amazon. So talk a little bit about where that litigation is and when investors should think revenue might flow in this market.

Liren Chen, CEO

Yeah, so first of all, I wanna explain why do we deserve to be paid, right? We are innovating at system level end-to-end. If you look at how you're building and consuming content, The decoding side is happening on the device. The encoding side happens in the cloud. Think about you're watching a Netflix streaming, you're watching Disney Plus or Hulu's, why not? So there's enormous amount of benefit to the cloud streaming provider. And our technology combined with other people's contribution allows the content to be compressed 1,000 times to one. literally a thousand times to win. So that generates enormous amount of savings, and that generates additional revenue opportunity for those vendors. They can sell HD content for more fees. They can give you real-time live sports and entertainment that otherwise the less advanced codec is not able to do. So if you look at the overall market, the streaming video on-demand market, both the advertisement base as well as the of subscription base, as of today, it's already the same size or bigger than the smartphone in terms of annual sales, which we consider that's our time, right? Roughly $500 billion per year in revenue, but it's growing at much faster speed and have a higher margin than the smartphone industry. So we actually believe our foundational technology, the importance to the streaming industry is just as much as the contribution I made to the cellular industry. But we know it's a brand new program, we know it's going to take longer to launch. So our target for revenue in that industry is $300 million or more by 2030. Even though we already achieved close to $500 million now to the smartphone industry. So we want to give ourselves a bit longer runway, we want to set a little bit lower target, but we are also recognizing that industry over time will become even bigger and bigger and better. So, therefore, we are launching, we launched that program, frankly, a year and a half ago, but our R&D goes back to decades. Our patent portfolio is built over this, you know, foundational R&D over decades, and we have been negotiating with Disney, frankly, for a while, for multiple years before we launched the enforcement, and our litigation against Disney was launched in February last And so far, by enforcement, I mean individual patent enforcement cases here. So far there are five patents being decided by courts in different countries, so far in Brazil and Germany. Out of the five patents being decided, we have win all of them, five out of five, our patent being found to be valid and infringed, and the court has ordered injunction, which is an order from the court to say you need to stop unless you get a license of this technology. So we are doing really well, and we have about half a dozen more or individual patent come into trial on the Disney case. The Amazon timelines are a bit different. Amazon actually sued us first because they have a small device license that covers all the way to end of last year, but they litigated against us in September of last year. So we frankly launched our counterattack in November. So November to, if you compare Amazon to Disney, there's roughly a nine to 10 months delay. So, so far the case against Amazon in terms of patent cases has not gone to trial yet. But we are confident about our technology and we feel our patents are really, really strong. So that's sort of the current situation.

Tiziana Figliolia, Head of Investor Relations

And your first, you know, if we're kind of thinking about who might be your first licensee in streaming, is it likely to be Amazon or Disney or could it be one of the other streaming providers? Like how do you think about, you know, negotiating with the others while these two, while this litigation with Disney and Amazon is going on?

Liren Chen, CEO

Yeah, we have been negotiating with all the major vendors, and just sort of take a step back here, right? Well, as a company, we always prefer to license through bilateral negotiation, always. And frankly, in our core field of smartphone and consumer electronic licensing, about 80 to 90% of our contract gets done by negotiation, okay, vast majority. field, both from the size of the contract, the dollar amount, and numbers. But in a brand new field, frankly, there's an interesting dynamic, because even though people recognize that they are using our technology and infringing our patents, sometimes vendors, even very large vendors, themselves, based on IP, doesn't want to pay or doesn't want to be the first to pay. And therefore, it creates some of the logjam that we feel in this case is needed for litigation to essentially enforce our right and to certain to be set a benchmark, right? So that's the effort we are in. But in the meantime, though, we are negotiating with all of them. It's hard for me to predict which one will be our first customer. But also it's important for us to set the right price. We are licensing a patent portfolio, and frankly, to a certain degree, in our industry there's a thing called comparable license, essentially how is your competitor paying for a very large portfolio itself has a certain amount of reference value. So we want to make sure we be careful regarding valuation. So I always tell my own board to say I can essentially be very confident about the value of our IP. we also as a company have an extraordinarily strong record by enforcing our IP, right? As a matter of fact, throughout history, every time we started getting into a multi-jurisdictional enforcement campaign, we always end up in a license. Every single time. But what I cannot completely control is the timing of this deal. Because it takes two parties to agree on the license. So all I can do is control the best. we can demonstrate the value enforcing our IP right over time and hopefully you know our customers over time recognize the value and we end up doing a deal that's vertical party but we are patient we are ready to demonstrate value over and over again and we have an impactable track record

Tiziana Figliolia, Head of Investor Relations

getting deals done and your point just on the first the first customer in this market you're sort of setting a precedent in terms of price and the value of your portfolio so you're you're kind being careful in terms of what you agree to i assume with the first deal yeah to a certain degree to a certain degree yeah and what um in this market like you know in smartphones we can sort of come up with a sort of a royalty rate on in terms of number of devices what does the monetization look like in the i know you don't have a deal yet but like how are you trying to structure or how should investors think about the structure of a streaming license agreement?

Liren Chen, CEO

Yeah, if you think about it right at the highest value at the highest level we are trying to get a very small slice of a very large revenue pie that's almost inherent of IP licensing model and but how do you get to that small slice what is the base for what you're asking for so there's actually multiple approach for it at the most fundamental level you try to do a bottom up you try to demonstrate what is the value of the IP that's enabling to them both in more profit more revenue or in cost saving right how much money they are saving by able to compress this content a thousand times to one and you do a number allocations on how much we deserve to be paid on the IP that's in general in practice when we sign the deals here if you look at the smartphone side, we can negotiate based on a percentage of the device times the volume, times every setting price. All you can base on forecast, right? Keep in mind our license is future-looking. So you base on a lot of forecasts from third party, you translate that into a certain amount of value, and you do an NPV calculation, you spread over the term of the contract. That's how what we've done in our smartphone program. A similar methodology can be done on the streaming side, and the reality is we are flexible. If a vendor wanted to say, look, I want to pay you certain dollars or cents per sub per year, and going forward, we're absolutely waiting to entertain. All of a vendor coming to say, you know what, here's all the numbers, let's do the forecast, do the discount, do the volume, everything here. I want to pay you a certain dollar a month. in whatever millions per year, and we're absolutely willing to do it also. And I like to see in the world of perfect information, those two things are the same. But obviously the world is not perfect, and information has its own risk up and down, so it evolves a certain amount of risk sharing. In the smartphone field, once you have achieved a certain amount of market share, we are 85%, they actually even sell. Someone will overperform, some will underperform. once you gain certain market share you get enough stability in how much you have a license that's the same and it has been proven to us over multiple decades so in this new field here we are willing to entertain both and we just want to be fair to both parties okay um and maybe just last one here

Tiziana Figliolia, Head of Investor Relations

before we wrap up um you have the 2030 target that you talked about yeah which is a billion dollars in revenue it includes 300 million from streaming you've pretty much hit your smartphone target yeah already what comes next like what you know if you're successful in streaming then what's what what are sort of some of the next potential you know technologies you could license and other IP that you have

Liren Chen, CEO

yeah the beauty for what we do is we build foundational layers you think of us as building the infrastructure for connectivity, immersive user experience, and intelligent user experience. So we actually do not have to specifically define what the future looks like as long as human being will always want to be connected, as long as we always wanted more rich user experience. For example, in the video space in the cloud, streaming video, you know, industry is just our starting point. There's already a number of other stuff in gaming, in live entertainment in AR, VR, in 3D content that we know our technology applies, we just wanted, frankly, market to grow into a very sizable opportunity for us in licensing. Talk about AI, right? I strongly believe AI over time, as people are deploying edge AI, physical AI with hyperscalers in the cloud, those interface over time will be standardized. Because standard, the powerful standard pushing for compatibility and interoperability wins every single time. Open system wins every single time if you look at human history. So therefore our AI assets over time will be enormously important and we will be usually look at those use cases that other people benefit from. So I'm very confident about the value and the 300 million plus in my opinion just a starting point for our cloud licensing opportunity over time I could believe will be bigger than the device side. The industry trend is very clear.

Tiziana Figliolia, Head of Investor Relations

The plus is very important. Yes. Okay, we'll leave it there Larian, thank you so much. Absolutely. And we have a breakout up in Burnham A for more Q&A. Thank you.