Patrick Van de Wille – Vice President, Communications & Investor Relations William Merritt – President and Chief Executive Officer Richard Brezski – Chief Financial Officer James Nolan – Executive Vice President – Solutions.

Charlie Anderson – Dougherty & Company LLC Tim Quillin – Stephens Inc. Eugene Fox – Cardinal Capital Management LLC Michael Cohen – MDC Financial Research.

Good day, and welcome to the InterDigital Third Quarter 2014 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Patrick Van de Wille. Please go ahead, sir..

Thank you very much. Good morning to, everyone, and welcome to InterDigital’s Third Quarter 2014 Earnings Conference Call. With me this morning are Bill Merritt, our President and CEO; and Rich Brezski, our CFO. Consistent with last quarter’s call, we’ll offer some highlights about the quarter and our outlook 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 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 set forth in our earnings release published this morning, and those detailed in our Annual Report on Form 10-K for the year ended December 31, 2013, and from time-to-time in our other filings with the Securities and Exchange Commission.

These forward-looking statements are made only as of the date hereof, and except as required by law, we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

In addition, today's presentation may contain references to free cash flow and pro forma operating expenses, which are non-GAAP financial measures.

Reconciliations of free cash flow to net cash used in operating activities and pro forma operating expenses to operating expenses, the most directly comparable GAAP financial measures are included in our third quarter financial metrics tracker, which can be accessed on our homepage www.interdigital.com, by clicking the link on the left side of the page that says view our Financial Metrics Tracker.

You can also find it under today's event in the Events and Presentations portion of the Investor Section of the website. This quarter's tracker also provides a snapshot of key financial metrics tracked back 10 quarters, allowing you to do a comparative examination of the similar quarter for the past three years.

With that, let me turn the call over to Bill..

Good morning, everyone. Thanks for joining us. My comments this quarter will be brief and as always, we will be happy to take questions. As you saw in the release this morning, we delivered a very, very strong quarter. In a nutshell, our top line is moving up, our expenses are remaining stable, and our litigations have been going better.

We've also returned substantial cash to shareholders, while still making important investments in the business.

Starting with the first item, our recurring revenue increased by 57% year-over-year, and we are now operating on a level that assuming all else remains the same, delivers approximately $300 million in recurring revenue off of about 50% of the wireless handset market. Our licensee base is large and our key licensees continue to generally perform well.

We also have the opportunity to license back remaining 50%, and are actively working on that. We expected our success there. We'll drive substantial increased revenue. The quarter also highlights our ability to engage in a much broader range of initiatives while holding our expenses flat.

Our litigation expense is also down compared to prior year, which is also a very positive trend. Now, let me go over the results in more detail. Suffice it to say, the quarter highlighted the tremendous strength and resilience of our core research and patent licensing business.

The ongoing success of that business will be driven by one of the leading licensing executives in the world Larry Shay, along with one of the world's true leaders in terms of long-term wireless research B. K. Yi. We are now in the middle of the worldwide effort ongoing around 5G, while all of our R&D sites are contributing.

Our newly formed office in London is leading the charge, as part of the various efforts and partnerships, in a part of the world that is rapidly emerging as a leader in outlining 5G.

As I mentioned above, we have also continued to make some new investments in technologies that we have incubated in our labs with those incremental investments targeting new revenue streams to complement the patent licensing business. We've spoken in the past about Smart Access Manager, which continues to see good market interest.

However, this quarter has shown how other technologies that grow from our research background could begin to have market impact.

wot.io the Internet of Things, commercial initiative that emerged from our development efforts has made a series of announcements regarding partnerships with companies that include AT&T, ARM, and most recently Kinoma, a unit of Marvell.

wot.io was also recently selected Best in Show at ARM's TechCon Conference, an amazing start for a very, very promising business. We're in the final stages of bringing other solutions in network services and content delivery to the market, again, based on our prior research.

In addition, some of our in-house teams are involved in other work that’s truly groundbreaking. For example, Millimeter Wave Technologies, which we've been working on for more than two years and which are at the heart of 5G.

From every aspect whether technological or financial, this is one of the most exciting times in InterDigital that I can truly recall in almost two decades with the company. Our licensing program also continues to roll along with no doubt – and no doubt, many of you saw the positive result we got in the U.S.

District Court for the District of Delaware earlier this week. That jury verdict was a great validation of InterDigital's significant contributions to the advancement of the cellular wireless industry. We are hopeful that the verdict will put us in a good position to work with ZTE and others to reach fair and reasonable license agreements.

Finally, in addition to building – we are working to build value to the licensing solutions and other areas. We're also working to return value to shareholders. In Q3 and continuing through October, we've been executing on our $300 million share buyback program, and we recently paid out our dividend, which has doubled since last year.

So to summarize, a great quarter in terms of revenue, cash flow, and value returned to shareholders, continued execution of our licensing initiatives, and a great pipeline of market focused technologies. With that, let me turn it over to Rich..

Thanks, Bill. We are very pleased with our financial results for the third quarter. Revenue came in a little better than we previously expected. Our operating expenses were down sequentially from second quarter and basically flat compared to 2013. We had almost $150 million in free cash flow.

We recognized a nice benefit by capturing research and development credits, and we have made significant strides under our repurchase program. Recurring revenue of over $73 million more or less was in line with the $300 million recurring revenue base we discussed on last quarter's call.

We also recognized $4.4 million of nonrecurring revenue, including $2 million from a small patent sale. We will provide guidance for fourth quarter revenue in the coming weeks.

For now, we are optimistic that strong sales from Apple will correlate with strong royalties from Pegatron; having said that, our conservative view anticipates softness from some of our smaller per-unit licensees.

Operating expenses came in at $62.3 million, after adjusting for litigation expense, compensation accruals, and other items, including an audit-related accrual of approximately $1 million related to payroll taxes. Our pro-forma operating expense of $35.7 million was down slightly from second quarter 2014.

You can find more information about our pro forma operating expense in our financial metrics document, which was posted to our website this morning. Looking ahead to fourth quarter, we currently anticipate an increase in litigation expense, but we still expect it to be below the higher levels we experienced in 2013 and the first quarter of this year.

During the quarter, we filed for a U.S. research and development credit for 2013 and also amended several prior year tax returns to take advantage of this credit. This resulted in a net tax benefit of nearly $6 million and drove the effective tax rate for the quarter down to about 4%. We expect to recognize additional U.S.

R&D tax benefits if and when Congress approves the R&D tax credit for 2014. Finally, as of yesterday, we repurchased approximately 3.2 million shares of stock since the end of the second quarter.

Taken together with the shares repurchased in June, we have now repurchased approximately 8% of all shares that were outstanding at the time the $300 million repurchase program was approved in June. In doing so, we have deployed $143 million of the authorization.

This is the latest example of our longstanding commitment to return capital to our shareholders and above all else to drive shareholder value. With that, I'll turn the call back over to Patrick..

Thanks very much, Rich. With that, I would like to open the call for questions..

Thank you. (Operator Instructions) We'll take our first question from Charlie Anderson with Dougherty & Company..

Good morning, and thanks for taking my questions.

Bill, I wondered if you could offer a little color commentary on the licensing pipeline, and maybe if you could speak to people who are in litigation versus who are not on litigation?.

Sure, so the pipeline is full, as you would expect it to be so the team is engaged with a large number of companies in that sort of remaining 50% of the market. I think anybody that is of significance we’re chatting with. If you look at who is in litigation with us, you’ve got obviously ZTE is in litigation and Microsoft is in litigation.

So certainly the success with ZTE this week was I think very, very important and hopefully helpful in driving a deal there. And I think it’s also important in terms of Microsoft as well, since it’s the same patents that are involved in the case that goes to the trail at the ITC in early next year.

So that’s I think a positive development as well, you’ve got Huawei, it’s right, so they’re not in litigation, they’re in arbitration and so they’re are not counted in our numbers now, but certainly once that arbitration completes itself, and we’ve got the payment terms figured out.

Then they’re going to contribute and that’s on a nice path to get there, meaning there is a defined path to get there and at the end you have a licensing agreement under which payments are made. And so that’s – that will be another nice bump in terms of our – the amount of market we have under license.

And then, I think the folks that are not in litigation, I mean, they observe what goes on with respect to both ZTE type of things and also the Huawei type events. And I think our continued success there will hopefully motivate some folks, some people don’t need as much motivation, some of them need a little bit more.

But, rolling I think, everything that we’ve done this year from getting the Samsung deal done, getting a strong litigation victory against ZTE, having your arbitration move forward with Huawei, all those things I think speak to our confidence in getting the remainder of that market under license..

Great. And as it relates to Apple they have a diversity of suppliers some of which you have under license, some you don’t, we sort of know how Pegatron works because you have been doing that for a little while now.

Help us understand, as the unit volume goes to some other places, I am thinking of Wistron in particular, how we should think about that impact for you to – is everything cleared there like it was with Pegatron, where do we stand there?.

So, the one uncertainty that existed when things went to Pegatron was the coverage of the Apple agreement itself, right? So the Apple agreement now it’s expired, so any uncertainty around that is – one was resolved through the arbitration and then in any event it goes away, because of the agreement itself going away.

So you don’t have that issue anymore it’s very clear, they produce products for Apple. And then – and they’re licensed – manufactures license by us, they owe us royalties for those arrangement. So we don’t have all of the Taiwanese manufactures under license. We’ve got a good number of them.

And so was Apple diversified the supply chain, they go to our licensees, generally that’s going to be a very positive thing for us, because in general those licenses tend to be per unit licenses. It means, it’ll capture the volume as it’s delivered. And so that’s, I think, a very positive trend from our perspective.

As we’ve always said, we remain open to a comprehensive resolution with Apple, and so I think – and I think we’re in a particularly strong position to hopefully get there and if you come on sort of the landscape that we have with license agreements with their suppliers, I think they’re strong, again I think the litigation success is a strong boost for us as well.

And with also having complete a deal with Samsung, I think gives us additional credibility in that discussion with Apple..

Great. And then two housekeeping ones for me with Rich, I think tax rate would have been in the low 40s if not for the tax credit.

Should we think about that as the run rate with no R&D tax credits, and then something maybe in the high 30s, mid 30s if tax credit get renewed by Congress? How should we think about tax rate? And then, the second housekeeping was your trajectory about the amortization, I guess, it’s been up the last couple of quarters, where should we think about that going and sort of resolving itself?.

.

And then, that the final item, there is about 1% that relates to our minority interest in Convida. So if you adjusted for all those items you back down to about 35%. I appreciate there is a lot of moving parts in there, but they’re kind of the major components that are driving that rate.

Moving on to the amortization, we – the patent amortization has been going up for a couple of reasons. We have been a little more active in straight patent acquisitions over the last couple of years. We of course continue to add to our portfolio to our organic research and development, so it typically goes up for that reason alone.

And then, we had the two deals back in the second quarter, where we added to our patent portfolio in the context of licensing agreements.

So I think there for the most parts that’s fully reflected in our third quarter amortization, but as we move forward additional acquisitions ticks and there are some that would increase that, any divestitures would help to offset that..

Great. That’s it for me. Thanks so much..

Thanks, Charlie..

(Operator Instructions) Our next question comes from Tim Quillin with Stephens Incorporated..

Hi, good morning..

Good morning..

Good morning..

Could you just talk about the factors or the licensees, that drove that quarter-over-quarter increase in per-unit royalties from roughly $34 million to $38 million?.

Yes.

Okay, so if you are looking at – you’re talking about sequential?.

Sequential, that’s right. And it looks like on a sequential basis maybe Pegatron was down, but overall that was up.

So I don’t know if there was new licensees or if that reflected some of that share shift from Pegatron to Wistron or what exactly drove that quarter-over-quarter increase?.

Sure. So we had a little bit of stronger quarter from some of our Japanese licensees that drove a portion of that. And then, outside of that it was a couple of smaller items. So it’s kind of hard to parse them out in any descriptive way in a call given confidentiality concerns.

I get remark in my script that we anticipate in a – at least a conservative view some potential softness, that would be coming off of this quarter where we’re not sure just yet if some of those items where one-time increases or if they represent a higher run rate..

Tim Quillin – Stephens Inc.:.

:.

Yes. So our royalties from Pegatron since they’re a per unit licensee will be sending us a report this quarter, which becomes our fourth quarter revenue and that report details shipment from Pegatron in third quarter..

Right..

So because the iPhone launch was in, I forgot exactly when it was, but mid-September. We certainly would expect to see some contribution there related to that launch. I think Pegatron at beginning of their quarter had projected 20% to 30% increase from their non-computing segment. I appreciate there is other things in there.

But, certainly at the time we believe that Apple, the anticipation of the iPhone 6 launch would be a contributing factor there. I think if you look at there, Pegatron provides monthly revenue information for the entire business side, I want to see, it came down a little bit less than 15%.

But that that includes probably some decline in the Computing segment. So it’s hard to say exactly where they are at, but it is fair to say that, we're expecting a stronger quarter from Pegatron as a result of the iPhone 6 launch.

As far as, the softness and how much that takes away from that, it’s hard for us to say at this point, but we'll provide clarity in another week or two when we get those reports in..

Okay.

Would you still say that the – overall, licensing revenue excluding past sales is kind of roughly in the ballpark of where you would expect it to be without new licensees?.

Yes, again, we were – if you look at the recurring revenue metric, which is one that I kind of feels is very important. We came in at $73 million, given the importance of Pegatron and cyclicality of iPhone cycles, you would expect that this – our third quarter, which is the second sales for Pegatron would probably be the low point.

So to be close to that $300 million recurring revenue base in our third quarter, I think is a very strong result, because I would expect it to be higher in other quarters..

Right, right, that make sense. And then in terms of the expense structure, I know, we talked about, and I think, you’ve seen that the litigation expense start to come down.

But as we look forward to 2015, or just kind of generally, would you expect other expense items to come down as well, or would you expect kind of the run rates in development and SG&A, your other expenses to stay relatively static in any savings you see, or year-over-year declines would really be unique to the decrease in patent litigation costs?.

I think, I don’t want to provide any long-term expense guidance here other than to say that, there are the pro forma operating expense metric, because I think is a pretty good one, because it backs out some of the one-time items or things like fringe, which have their cyclicality. And we're pretty flat over second quarter, Q1 was a low point.

I think where we're at, I'm pretty comfortable with. It’s going to move around quarter-to-quarter, but I'm pretty comfortable with the levels we're at today..

Okay. Very good. Thank you..

Thanks, Tim..

We'll take our next question from Eugene Fox with Cardinal Capital Management..

Rich, as it relates to the fixed fee number, it looks like it was down about $5 million sequentially, do I have that right, and can you help us a little bit there?.

Fixed fee was $33.4 million, down from $38.3 million, that’s right..

Any sense for what would it cause that to decrease?.

Well, one factor would certainly be the expiration of the Apple agreement, which was the seven-year agreement, right..

Got it. Okay, that’s fine. That’s what I need..

Okay, no problem..

Second, share repurchase, where do we stand on the existing authorization? And any color you have in terms of how you are thinking about executing on it?.

Yes, so at this point, we've executed on about a half of the $300 million authorization. I think in total – in my comments I said that, we repurchased about 8% of the shares that were outstanding prior to the initiation of the authorization. So we're very pleased with our progress, we think that strong progress in little more than four months.

And that’s where we're at. We still believe that InterDigital is a good value for us, so that’s where we're at..

Okay.

Just two more quick ones, Bill, can you sort of update us on the – what, sort of what the litigation calendar looks like for the next couple of months?.

Sure. So couple of things, we'll have the oral argument in, I think, it’s November at the Federal Circuit with respect to the 800 like the case coming out of the ITC, so that’s an important argument for us on a couple of perspectives.

So it’s a little hard to say exactly when they would issue a decision, can be anywhere from two months to 12 months, or more. Hopefully, we – it’s quick, and we get – we continue to be very confident about our position in that case. The early next year you’ve got a couple of different things going on.

You’ve got ITC case, Huawei arbitration hearing and you've got, I think, the follow on case – the Nokia case in Delaware is also scheduled for that – by March of next year. So it’s a pretty busy first part of next year.

And then beyond that nothing big is popping into mind, as it seems we’ve actually been, the number of cases we have and the number of actions going on kind of shrunken down, and that’s becoming noticeable in terms of reducing litigation costs.

So I think we've got the cases that are important as we're going, and we are very focused on those, and I think in really good position, and hopefully with some good success there, continue to feed the licensing programs..

Bill, as it relates to the ZTE decision again in Delaware, how do you see that impacting the 868 appeals?.

So, it has no binding effect, right. I think it’s – it gets out into the World Trade. And so, I think, it has a nice effect in terms of showing that we have a very, very solid position.

And if you look at the, what happened with the claim construction in that case, on the issue that the ITC went against this on, Judge Andrews at the – in the Delaware Court ruled from the bench in our favor on that claim construction item, finding it very straightforward.

And so, I think that that and then, obviously that was – then the jury obviously went in our favor on overall in that case. So I think, each case has its own legal standards, and as I said some things will be precedent and other thing move.

But certainly, I think the positive decision, signs of very, very positive light on the company, and that’s always a good thing regardless of where your next litigation would be..

Bill, that – I guess, (inaudible) ramp ups are in both of the patents or in both cases, and is it the case that the appellate court that will hear ZTE's appeal in Delaware would be the same court that we would hearing the ITC appeal?.

William Merritt:.

:.

Okay..

They not always precise in relationships, but certainly a win for us is – it’s going to be positive for us in a variety of ways..

Okay. Last question from me. Huawei arbitration is what is really the subject the arbitration is at all of their sales globally, or all of their sales outside of China? And that was my last question. Thank you..

So the arbitration itself is dealing with the rates for the non-China sales. The structure of the resolution we have with them talks to how you get in the entire agreement done with them. So and I think, again, that arbitration is certainly a process that we're very comfortable with.

We've always had good success in arbitration, I think, because we take very, very well reason, well-grounded positions, we don’t overreach, and I think our history of licensing will be very powerful in that arbitration.

So, the result of that arbitration and then the overall settlement with Huawei ultimately leads to a resolution of a license for all of their sales..

Perfect. Thanks. Congratulations, gentlemen..

Thanks..

We’ll take our next question from Michael Cohen with MDC Financial Research..

Yes. Thank you, Bill. It was great to see you and Mr. Nolan down in Delaware, and congratulations on the win..

Great. Thank you..

Michael Cohen – MDC Financial Research:.

,:.

I think it’s running a little bit behind our original schedule, but not a whole lot behind that. And I think we’ve got probably some pretty good details in the queue around that so the – which I think we filed – which we filed, we’ll be able to see precisely what’s going on there.

But generally, the parties had agreed back in, I guess, December of 13 to an expedited process. It certainly has been expedited, it’s moving quickly, it’s just a little bit behind, where we wanted to be, but that's fine..

So would you expect maybe a resolution in the first quarter of 2015, or do you have a guess at which quarter it might fall in?.

I would certainly say first-half of next year, and I think it depends on how quickly the panel gets its decision out, and that panel is given targets to typically giving – in arbitration the panel typically has a target to get things done by. But that can slip sometimes, because the parties will let the panel slip it a little bit for good reason.

So it’s hard to say it’s going to happen exactly on a day, but I think first-half is probably a reasonable expectation..

Okay.

My next question is how we should think about Apple in general in terms of, what percentage of their overall business are you roughly getting through subcontractors versus if you were able to get a deal with Apple directly?.

Yes, that’s a detail that we can't disclose, but we can tell you that Pegatron and Wistron are under license, so you can certainly get some information from industry analysts and others and so on what their volumes are in total, and maybe back into a relative neighborhood of what contribution they’re making to the Apple supply chain..

Okay.

In terms of strategy of where you would rather license – would you rather license through, getting all their subcontractors, or would you prefer to get Apple directly?.

I think ultimately on the right terms we would prefer to have Apple. I think it – we have very good relationships with underling subcontractors. I think it’s difficult to get them all in place, because they change from time-to-time.

And so there is a result of not having them all and some shifting in the supply chain puts a little bit instability into the revenue line. So if you think about the type of deal we've done with Samsung, long-term deal on fair terms, I think that that would be our presence.

But we’re in a very good position right now in terms of collecting money from the Apple ecosystem, so we can be patience in terms of putting together that right relationship..

Okay. My final question is, if you could share any thoughts on LG and possible strategy that bring them to the table. You have them in the investigation and then they got out.

It seems like you’ve got a lot of pressure on Nokia and other participants, but it seems like LG doesn’t have as much incentive to come to the table quick, what can you possibly do there?.

Right. If you look at it from a litigation standpoint, you’re right in part, I mean, we do have – it still have the companion case in Delaware against LG. So that one was not in this list, it stayed right now, but that will list at some point as that case finishes up. So from a litigation standpoint, we have things in place if we need to do that.

Generally, as you know with us, we tend to be pretty patience. And I think with respect to LG, they are certainly the right sized licensee when we think about cooperation type things and so I think this only type of thing.

So I would rather use those as the incentives in the short-term to see if we can construct the relationship around things like that, I think, we've got a lot to bring to the table, I think they do too. And I think if those things don’t work out then we're left with the other approaches.

But I think it’s a – and much rather go down to caret [ph] path right now with them, as a way to resolve things. And I think, I highlighted in my presentation, there is a lot of interesting technology development going on at the company right now that would be think of interest to them. And we do have B. K.

who’s ex-LG on our staff, so from a relationship standpoint, I think, we can leverage that as well..

Okay. Thank you, and good luck in getting that other 50%..

Okay, thanks..

That concludes today’s question-and-answer session. Mr. Van de Wille, at this time, I will turn the conference back to you for any additional or closing remarks..

All right. Thank you very much, Travis, and thank you, everybody, for joining us on the call today. We look forward to the next quarter. Thanks very much..

That concludes today’s presentation. Thank you for your participation..