InterDigital, Inc. (IDCC)

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Start Time: 10:05

End Time: 10:52

InterDigital, Inc.(IDCC)

Q4 2013 Earnings Conference Call

February 20, 2014 10:00 AM ET


Patrick Van de Wille – Vice President-Communications & Investor Relations

William J. Merritt – President and Chief Executive Officer

Richard J. Brezski –Chief Financial Officer


Timothy J. Quillin – Stephens, Inc.

Charlie Lowell Anderson – Dougherty & Co. LLC

Eugene Fox – Cardinal Capital Management

Bill Nascovitz – Heartland Fund



Good day. And welcome to the InterDigital, Fourth Quarter Earnings Conference 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.

Patrick Van de Wille

Thank you, Justin. Good morning, everyone and welcome to InterDigital’s fourth quarter 2013 earnings conference call. With me this morning are Bill Merritt, our President and CEO and Rich Brezski, our CFO. Consistent with the last quarter’s call, we’ll offer some highlights about the quarter and our outlook and we’ll 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 details from time to time and 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.

Before I turn the call over to Bill, I’d like to note that this quarter we are starting a new practice at InterDigital like any company, we have a number of moving parts, so they make it a little easier for investors we'd release a tracking schedule of our major financial metrics. The schedule is available under the events tab of the investors section of the website. Near the link where you will obtain login information for the conference call. It’s also available on the investors section if you click on fundamentals and then quarterly results near the top. So please feel free to have a look.

And with that let me turn the call over to Bill.

William J. Merritt

Thank you, Patrick, and good morning, everyone. As you can see this morning, we delivered another solid quarter with a close out 2013, with fourth quarter revenue of approximately $100 million bringing our 2013 total to $325.4 million. That coupled with free cash flow of $179.5 million of testimony for the strength and resiliency of the business. Rich will do a detailed breakdown of those results in a few moment, but I like do as offer a recap of 2013 and provide some updates on various aspects of the business.

So 2013 was a year of ups and downs. The most significant disappointment related to lack of progress we experienced at the ITC in enforcing our patents. Thankfully as I will explain below, we now appear to be moving forward again.

And the other ITC investigation against Nokia, while we started the year on a high note with the case being finally remanded from the Federal Circuit to the ITC the case then sack without apparent action for over a year, thankfully just last week, the commission finally remanded the case to ALJ Essex for further preceding and doing so the ITC confirm that it would follow the Federal Circuit’s claim construction. The commission also filed for InterDigital on several other ways indeed the remanded order we believe, it’s highly favorable to the company.

The ALJ will now determine the schedule for the case and we are thrilled to see the case moving toward a positive revolution. We were also disappointed in the ITC decision in the 800 investigation. While we prevailed on almost every issue, three claim construction issues did not go in our favor, including ones where we believed the federal circuit has already ruled and where the ITC was obligated to follow that rule.

We are appealing that decision, we believe our appeal was strong. Notwithstanding that loss, our things began to move more in our favor at year end as we agreed to arbitrate the trends having license to our central patents, using an expedited arbitration that will result in an agreement both slightly before the end of 2014. That’s a great result for us since our strong licensing track record and our very reasonable approach to licensing typically bears quite well in arbitration as we saw in 2013 when the company prevailed in all three of its major arbitrations.

We also saw our eight investigation move forward and go to trial last week. Importantly while we always believe the case to be strong, since it included the exact same patents as where the subject of the federal circuit appeal. That belief was bolstered last week when the commission issued its remand order in the 613 investigation. That decision affirming that the ITC will follow the federal circuits opinion, and otherwise favorably disposing of the other claim construction issues is usable in the 868 case, further enhancing what we believe is already a very strong position.

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