Patrick Van de Wille - Vice President, Communications and Investor Relations Bill Merritt - President and Chief Executive Officer Rich Brezski - Chief Financial Officer.

James Berkley - Barclays Charlie Anderson - Dougherty & Company.

Good day and welcome to the InterDigital Second Quarter 2015 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, Taylor and welcome everybody.

Before we begin our remarks, I need to remind you that during 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 detailed in our Annual Report on Form 10-K for the year ended December 31, 2014, our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2015 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 non-GAAP financial measures, such as free cash flow, pro forma operating expenses, and non-GAAP net income.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our second quarter 2015 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, Financial Metrics Tracker for Q2 2015.

And with that, let me turn it over to Bill Merritt, CEO..

Thanks, Patrick and good morning to everyone. Given that it’s late July in the beach or mountains maybe beaconing many of you, I am going to keep this very brief today.

As you saw up in this morning’s release, we delivered yet another solid quarter with strong earnings, cash flow and profits indeed at the highest level while other licensing businesses are struggling we continue to turn in one successful quarter after another. For example, this was our second consecutive $100 million plus revenue quarter.

And as we have noted in some prior discussions, we believe our royalty platform for licensing is now at $400 million per year. Episodic revenue from pat sales and patent sales would come on top of this and we still have 50% of the handset and terminal market left to license.

Our consistent record of success speaks volumes to the strong nature of our business, a business that is quite simple in concept, drive innovation and create a great deal of important technology, which is then used pervasively across the biggest market in the world. Of course simple in concept does not mean simple in execution.

Like any business, it requires hard work and we have done and continued to do that work very successfully. During our last quarterly call and more recently in investor conferences, we have spoken about the fabric of our R&D based licensing business. This quarter is a great testament how pieces of that clock come together.

The fact that we conduct our own research is no small part of it. This quarter in a month and in its month, you saw a steady stream of research announcements from the company. These included joining the Korea-based 5G forum to our office in Seoul and some updates from our 5G focus work through InterDigital Europe in London.

Yesterday, we announced the world’s first demo of IP transmission via information-centric networking over a software-defined network implementation as part of the POINT project in Europe.

It’s a mouthful, but it’s worth noting that the information-centric networking, or ICN and software-defined networks, or SDNs are key elements of the network in the future.

It’s also worth noting that this is InterDigital’s fourth announcement or the world’s first in the past four years, well I mean, although world’s first in spectrum use, IoT implementation and 5G backhaul demonstration.

More broadly, the Intellectual Property Owners Association also recently put out its listing of the most prolific innovators based on U.S. patent grants. And once again, we rank in the top 200 and among companies that Bloomberg places in our industry segment, we made the top 10. Strength and innovation is what drives the company.

However, close second is how we conduct our licensing and this quarter you saw how that program whenever tested comes out shining.

For example, two FTC commissioners submitted comments in our IPC proceeding with Microsoft, supporting our views regarding the appropriate standards the IPC should use to assess FRAND licensing efforts and the lack of evidence of patents hold up in the industry.

They noted with favor, for example, the use of arbitration as a potential means for settling license terms as we have done with Huawei. Speaking of Huawei, we also recently concluded our FRAND rate-setting arbitration with them.

Although we cannot comment on the contents of the award, we have petitioned to have the arbitral award confirmed by the court and Huawei has thought to set the award aside. These recent developments come on top of a long history of conducting licensing in a fair and reasonable manner.

And by being fair, we have found ourselves achieving leadership positions within the standard size. I would also say our reputation has been valuable in Washington as we have lobbied hard for correct patent reform. Much of what has been proposed in DC has been improper reform.

I think our significant efforts in Washington combined with our reputation for fairness and acknowledgment of the importance of research is one of the reasons that the current reform effort has slowed as members of Congress has taken our message to heart.

So, in a world where patents can be short-changed in the company that licensed them [indiscernible], we have emerged as the clear example of a company that does it right.

And that is our plan going forward and it will remain very simple in concept, continue to drive innovation, continue to work hard in the standards bodies, continue to be fair and flexible in licensing, and as a result continue to deliver significant value to shareholders. With that, let me turn over to Rich..

Thanks, Bill. We reported very strong second quarter revenue and diluted EPS of nearly $119 million and $0.89, respectively. Of that revenue, more than $91 million was recurring revenue, an increase of 23% compared to the similar period last year. We also continue to work towards growth of our licensing business and careful expense management.

The quarter brings our recurring revenue for the first half of 2015 to just over $200 million. Given that I would like to briefly discuss some of the other metrics we feel are important.

One thing that we talk about on occasion is what we have previously called our recurring revenue base, which we currently place an annualized rate of about $400 million. To avoid confusion we will refer to it going forward as our royalty platform.

While our reported recurring revenue and our royalty platform are certainly related, I want to emphasize that our royalty platform is not a reported number nor is it simply annualized recurring revenue based on any one time period.

Our royalty platform is simply a rough estimate by management of the approximate size of our ongoing licensing program over a 12 month period given all the information we have about our licensees at that time. We will continue to provide revenue guidance on a quarterly basis as has been our practice.

A figure like the royalty platform is simply a number that helps us gauge the overall health and growth of the licensing business over more than a single quarter and track progress towards our goals. At $400 million, our royalty platform has roughly doubled in the last 15 months. Importantly it is based on a little less than one half of the market.

All in all, we believe our success in growing our royalty platform over the last 15 months shows good progress towards our goal of reaching a royalty platform of $500 million to $600 million from terminal unit licensing. The other metric I commonly refer to is a non-GAAP measure we call pro forma operating expense.

In Q1 this measure dropped below $34 million, but has increased in Q2 to $38 million. As I noted last quarter I don’t read too much in the quarter-to-quarter changes, but prefer to look at longer term trends. We had a couple of projects that happen to fall in Q2 and impacted this metric.

At the same time I want to acknowledge there is an element of sustained increase from the levels we experienced in 2014. All in all, I view the 6% year-over-year increase in second quarter pro forma operating expense as being pretty modest in comparison to the 23% increase in recurring revenue we reported over the same period.

Nonetheless, we remain committed to maximizing the leverage in our operating model and cost management will continue to be a high priority. Moving on to capital management, we repurchased about 20 million of our stock during the quarter and increase the $300 million authorization to $400 million.

Having invested approximately $224 million in repurchases since the initial authorization in June of 2014, we now have approximately $176 million remaining under the increased authorization. In summary, financially we had another great quarter and we will continue to pursue revenue growth while carefully managing expenses.

With that, let me turn it back over to Patrick..

Thanks very much Rich. And Taylor we are now ready to take some questions..

Thank you. [Operator Instructions] And we will take our first question from Darrin Peller with Barclays..

Hi, this is James Berkley for Darrin Peller. Thank you very much for taking my questions and congratulations on the quarter..

Thank you..

Thanks James..

Just two questions for you guys kind of related I will start with the first. If you can just touch on the progress you are seeing around the development and deployment of 5G, the timeline for Asia versus the U.S. and why they may differ.

And then finally your positioning from a standard standpoint and ability to kind of be a first mover so to speak from an R&D perspective there as well?.

Sure. So I would say that 5G is the efforts around the world are ramping up. I would say that we are very well positioned in what will be some key areas for 5G development.

And so Europe is very – pushing very hard to sort of regain a position of prominence and I think our InterDigital Europe efforts have been very strong in terms of getting involved in some very key projects in Europe. I know we put out the series of leases with respect to those projects. So we are very positioned in terms of how we are doing in Europe.

We recently opened the office in Korea. Again I think that will also be a very important to market in terms of 5G development. And we are seeing a good success early on from that group there, it’s a new group. But we are I think very well positioned within that market as well.

And I think overall with respect to 5G, the interesting thing that’s going on is you have got a lot of existing plumbing out there and the trick is going into 5G is how you are going to weave new technology and new structures into that existing structure and having been involved in the standards for as long as we have been.

We are on particularly well-suited to do that weaving process. I would also say that within – other component of 5G is IEEE, obviously work going on there as well. I think we have a strong position there based upon the fact that one IEEE is bringing into its solutions much of the technology that was previously deployed on the cellular side.

We have some leadership positions within the IEEE as well. So overall I am very happy with where we are in 5G development..

Darrin let me – this is Pat.

Let me just also point your attention and the attention of others to the fact that we released yesterday an operator survey that was done by the Telecom Industry Association on the topic of 5G, where they surveyed people who look at operators around the world on what their expectations are technologically and in terms of timeline for 5G, that’s available on the homepage of our website..

Thanks guys. I was actually referring to that survey. And I was trying to get the question there, just the timeline like Asia for example and Europe versus the U.S. and the differences, is it fair to say to say that’s just due to the different structures and the different technologies that may be required maybe a little bit harder in the U.S.

or may take a little longer..

There could be different drivers, right. And so the example in – I will use Japan as an example, right. So there is – they have got the Olympics in 2020. And so one of the things they are going to want to do from just PR standpoint is drive 5G deployment of some sense in Japan and use the Olympics as basically a platform for doing that.

So there are things like that, they can drive deployment. There is actually a couple of those things around the world, where there is sort of – it’s event driven. I think it can be driven as well we have seen in the past capacity needs, right, can drive it as well.

So because this 5G comes with new spectrum and that’s what you really need at the end of the day to deliver the services then you are going to want to deploy the 5G technology faster than otherwise because you want to get access to that spectrum. So, there is a bunch of factors that can impact the pace of 5G deployment around the world.

And I think what we are seeing is definitely an increasing level of activity, because I think people are now – there are viewing 5G as this is not just an enhancement to the existing networks. There is a big need among first – both from a capacity standpoint, there is also a big need from an M2M standpoint.

There is lot of re-architecting of the network that has to take place that deliver IoT services, M2M services, so depending upon the appetite for those services in particular regions of the world that can also drive deployments. The net effect though is that the worldwide standards begin to move pretty rapidly..

Thanks. Yes. It sounds like there is a lot of runway over the next couple years there.

And then just my second part of that question, if you could just speak to China and intellectual property as I understand there is a growing respect for IP in China, how do you see that developing and tie that into what you just saw with Huawei and others near-term and then longer term while touching on 5G within Asia in particular?.

Yes. Look, I think as I have mentioned before I think that certainly we have seen – while there has always been challenges or some challenges within China, we also see other things in China in terms of how they, for example the – how the patent office in China runs, very, very strong patent office in terms of the quality of what you get out of that.

So, the NDRC’s review of Qualcomm, which I think evidenced recognition and respect for intellectual property, notwithstanding the other combat [ph], they were not thrilled, but the general intellectual property respected there.

I think you watched the companies like Huawei and DTE continue to be very strong filers of patents, if you look at the IPO 300 we mentioned this morning, they are going to be very high up on that list. I think frankly every developed economy in the world is based upon a strong patent system.

It is the one thing you could look at that’s universal across all developed economies. So, I think that we have become more, while I think licensing within China as with that in other markets always requires to sort of adapt our programs to a degree.

I think that we feel a little better about how that market will play out for us over time in terms of licensing market. And I feel better about it today than I would have felt about it two years ago for sure.

I think part of that is our own learning and movement of us as a company, but I think also I think that’s reflective of what’s happening within China as well..

Thanks a lot..

[Operator Instructions] And we will take our next question from Charlie Anderson with Dougherty & Company..

Great, thanks so much for taking my questions.

I was wondering about sort of Huawei timing, I was going through the 10-Q here and it sounds like there are some actions?.

Charlie, I am sorry, you have been cutting out..

Can you hear me now?.

Yes..

Sorry. So, my question was around Huawei, it looked in the 10-Q that you guys asked for confirmation of the award in New York and then they asked for enrollment in Paris.

I wonder is that just procedural, how should we think about how that will impact timing of payment, timing of final award as it relates to Huawei?.

Sure. So, I’d say it’s not – it hasn’t been uncommon for us at all to move to enforce awards, in fact people seek to set aside awards. It’s – I don’t want to say it’s a perfunctory step, but it happens pretty often, many times you are just sort of protecting jurisdiction.

As you know from prior conversations with you Charlie, arbitration awards are very, very difficult to set aside. The standard for review is such that absent fraud or something like that. It’s very difficult to undo what a good arbitration panel has done.

So, I don’t really see the procedural jockeying that’s going on now is affecting the substance of the award. I mean, obviously we can never guarantee anything, but having been down this path and many arbitrations not particularly worry about that.

I think the fact that they are objecting to the award and moving to enforce it provides an environment for negotiations with them and certainly that’s what we would like to do with them, because all these opportunities create an atmosphere where you can put in place agreements that maybe more valuable to both parties.

And so I think we have got the right circumstances in place today to work with that. So, at this point, we are pleased and as we always are we will be just patient and kind of work our way through it..

Could you give us any context build for how we should think about timing or final payment or up payment?.

Well, it’s ultimately payment driven by the other parties and people can make all sorts of decisions around that. The decisions obviously come with consequences and so that can affect timing as well.

So, beyond that, look I don’t think my sense to Charlie is we are not in the first inning of a ballgame here, we are pretty far down into the later innings.

And so I think with what we have done so far and I think generally the strength of our program and other factors, I would be hopeful that we can get something done in the shorter term, no guarantees, but so far I would say things are moving in a positive direction..

Great, thank you so much for that color.

So, now that you are sort of through most of that process, then I wonder what your view is on the arbitration process and do you have increased appetite to do more of these, what about counterparties, are they interested in arbitration, kind of where is that in the context of all tools that are at everybody’s disposal?.

Yes. Well, look, I think we have been – we were among the first, if not the first to kind of go down this path. I think we always believe that was a reasonable way to resolve disputes of this type. Our view hasn’t changed at all. In fact, it’s read to our briefing at the ITC.

We think the arbitration can be really useful, not only as a way for the parties to resolve these disputes, but also useful to the ITC as a tool, because one of the things we have urged the ITC is you don’t have to spend a lot of time figuring out if people are willing or unwilling or what a rate should be if one party is willing to engage in basically an unbounded arbitration, unbounded meeting, we are not putting any limitations on the rates.

We just want to have the fair panel determinant. What could be more fair and what could evidence more a willing license or I think it can be really – I think arbitration can be really useful or offers of arbitration can be really useful in that context too. So, you have seen other companies evolve in this arbitration.

So, I think it’s becoming – I don’t want to say it’s a common place, but certainly there is more of these now.

And I think it becomes difficult for a perspective licensee to not want to arbitrate, because I have always said, what’s the reason you don’t want to arbitrate? What’s the reason you don’t want to engage in a fair process? Well, the only answer to that is because we want to engage in an unfair process and that’s not playing well in DC these days.

And I think also one of the reasons why, while the ITC case has got its – there is lots of issues remaining I think on the FRAND side, I think the fact that we have gotten FTC commissioners do in fact come in on our side suggests that our approach to this is spot on..

Thank you so much for that..

And we have no further questions. And I would now like to turn the conference back over to Mr. Patrick Van de Wille for additional or closing remarks..

Thank you, Taylor. Thanks everybody for joining us today. Just a reminder, we mentioned it earlier on the call, but there is a number of whitepapers on our website regarding some of the technologies that we are interested in. One is 5G.

There is other whitepapers on things like LTE shared access that you should feel free to go to the website and download. Also on the website on the homepage on the left, you can follow the links to our Financial Metrics Tracker, which tracks our chief financial metrics back 10 quarters. Thanks for joining us today. Have a great summer..

And this concludes today’s conference. Thank you for your participation. You may now disconnect..