Good day, and welcome to the InterDigital Inc. Second Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Tiziana Figliolia. Please go ahead Ma'am.

Thank you, Anna. Good morning to everyone, and welcome to InterDigital's second quarter 2021 earnings conference call. I'm Tiziana Figliolia, Vice President of Finance and Investor Relations. And with me in today's call are Liren Chen, our President and CEO; and Rich Brezski, our CFO. Consistent with last quarter's call, we will offer some highlights about the quarter and the company. And then open up the call for questions. Before we begin our remarks, I need to remind you that in this call, we will make forward-looking statements regarding our current beliefs, plans and expectations, which are not guarantees of future performance and are made only as of the date hereof. Forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ materially from results and events contemplated by such forward-looking statements. These risk and uncertainties include those described in the Risk Factors section of our 2020 Annual Report on Form 10-K and in our second quarter 2021 quarterly report on Form 10-Q and in other SEC filings. In addition, today's presentation may contain references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our financial metrics tracker, which is available on the Investor Relations section of our website. With that taken care of, I will turn the call over to Liren.

Thank you Tiziana. Good morning, everyone and thank you for joining our call today. I hope everyone is safe and healthy. In terms of our financial performance, our second quarter revenue and expenses were in line with our expectations. I will let Rich speak through the financials in more detail later. On today's call, I would like to focus on key areas where InterDigital continued to strength and momentum, namely, our licensing, our technology leadership, our patent portfolio, and our overall execution. These are all exemplified by our new long-term agreement with Xiaomi, which we announced earlier this week. Xiaomi is a public traded China based vendor with almost 150 million smartphone shipped in 2020. They are consistently one of the leading handset vendors worldwide, including in China, India, and other emerging market. They are also holding double digit and growing market share in Europe. The agreement with Xiaomi recognizing the depth and breadth of InterDigital's patent portfolio across several key technologies related to cellular wireless, including 3G, 4G, and 5G, WiFi, and HEVC video technology. It also adds one of the world's leading smartphone manufacturers to our current list of approximately 80 companies, including Apple, Huawei, Samsung and Sony that have taken licenses to InterDigital's extensive patent portfolio. I'm particularly delighted that by adding Xiaomi and working consistently with an industry leader, we now licensed our patented technology to more than 800 million handsets around the world this year alone, about approximately 55% of the worldwide smartphone market. As part of the agreement InterDigital and Xiaomi has agreed to terminate all pending litigations and other legal proceedings. And we look forward to enhancing the collaborations between the two companies. On the litigation front in the past several months, we have seen some excellent outcomes that demonstrate both our ability…

Thanks Liren. As Lauren mentioned, our Q2 results were more or less in line with our expectations. Specifically the $88 million of revenue we reported, which did not include our Q3 Xiaomi agreement, came in at the high end of our expectations. Meanwhile, Q2 operating expenses at $91 million were at the lower end of our expectations. Our total revenue and expense were each driven to the favorable end of the respective ranges by recurring revenue of $78 million and restructuring and one-time charges of $15 million. A contributing factor to the lower than expected restructuring and one-time charges was timing. As we first indicated in our June expense guidance, we expect additional charges related to our restructuring in the second half of the year, with a specific timing dependent on meeting the criteria for when we can account for such charges. Meanwhile, our estimated annualized expense savings from the restructuring remains roughly $15 million. We expect to begin to realize a portion of that savings sometime in the fourth quarter of this year. Looking forward to Q3, we expect our financial results to benefit from our long-term fixed price agreement with Xiaomi, including the expected recognition of two quarters worth of non-recurring revenue in Q3. In addition, we expect to recognize a level of recurring revenue that would put our revenue platform at roughly $360 million. I'll remind everyone that when I refer to our revenue platform, I'm analyzing the recurring revenue for a given period. In this case, the Q3 revenue platform is a preliminary estimate that accounts for the Xiaomi license and for the loss of a relatively small amount of recurring technology solutions revenue in connection with our ongoing restructuring. We will provide additional details around our expectations for Q3 revenue expense, including any adjustment to compensation accruals, and any expected restructuring charges in one or more releases later this quarter. Finally, moving on to capital allocation. Between January 1 of this year and August 3, we've reduced our outstanding share count by another 300,000 shares through the repurchase of $20 million of our common stock. With that, I'll turn it back over to Tiziana.

Thank you Rich. Thank you Liren. And we will now open the call for questions.

Hey, guys, congrats on getting Xiaomi signed. Rich I actually wanted to start with you on OpEx. So I know you don't guide OpEx specifically. But I guess I'm curious sort of we take out the one-time impacts that we saw, and then sort of exclude some of those restructuring charges, sort of how should we be modeling OpEx just from a sort of directional standpoint from here?

Yes, well, certainly I start with what you said, taking out the one-time impacts. If you look at our financial metrics, which we published on our website, today, there's a total of roughly $15 million driven by the $13 million of restructuring charges. So that would obviously be the first thing. The second thing that I always talk about is when you're comparing period to period is looking at it with and without litigation, because litigation is always going to move around depending on what's going on and how the cases are evolving. So, as far as more specific guidance from that, that's kind of a baseline, as far as more specific guidance, we will provide that later to the extent that we think there's an important things to consider from a trend perspective. And certainly in the second half of this year, we expect additional restructuring. How much if any, is in Q3 versus Q4, as I said is a bit dependent on timing. So that'll definitely be something we want to make clear as it becomes more clear to us with new information.

Got it. That's helpful. And then just back to the Xiaomi deal. I guess I'm just curious, I wonder to what degree is that deal maybe an example of how some of the other deals you've done looked like in the past? Or was there anything that you felt that was unique about this deal that I guess was different than the ones that you've done in the past?

Hey Derek, this is Liren. So if you look at the Xiaomi deal, we just completed earlier this week, is very much consistent with the past deal we have done. It's a long-term deal, it covers worldwide device sales. And if I had to outline a few other things here is it covers our cellular technology, our WiFi technology, as well as our ACVC standard essential patents.

Yes, I'll just add, Derek, that, as Liren said, it's a long-term deal, I mentioned in my script that, we expect in Q3 to recognize two quarters of non-recurring revenue in Q3 associated for it, and in total expected to run five years.

Perfect, thanks guys.

[Operator Instructions] And it appears there are no further telephone questions. I'd like to turn the conference back over to our presenters for any additional or closing remarks.

Thank you, Anna. Liren, do you have any final remarks?

Yes, I just want to say, thank you to all the employees for their dedication and keeping executing during a very challenging time. I look forward to leading the company to further success in the future. I also want hope everyone stay healthy as we continue to navigate through the pandemic. Thank you.

Thanks Liren and thanks to everybody for joining us today. We look forward to giving you an update next quarter.

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.