Slide 1: InterDigital Investor Day 2016
InterDigital Investor Day 2016 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 2: Forward-looking Statements
Forward-‐looking Statements • This presentation contains forward-‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding InterDigital, Inc.’s current beliefs, plans and expectatio
Slide 3: Investor Day Agenda
Investor Day Agenda Introduction Rich Brezski – CFO Core Business • Larry Shay – Senior Executive VP, Future Wireless • Bob DiFazio – VP, InterDigital Labs IoT Business • Jim Nolan – Executive VP, IoT Solutions External Investments • Scott McQuilkin – Senior Executive VP, Innovation Bill Merritt – C
Slide 4: Rich Brezski, CFO
Rich Brezski CFO © 2016 InterDigital, Inc. All Rights Reserved.
Slide 5: Growing Recurring Revenues, Careful Expense Control
Growing Recurring Revenues, Careful Expense Control $400 2016: $178M in $350 recurring revenues $300 through Q2, $258-‐ $250 263M expected $200 through Q3* $150 Our track record of increasing $100 revenues while maintaining $50 pro forma operating expense at a relatively flat level $0 2012 2013 201
Slide 6: Moderate Penetration – Outsized Gains
Moderate Penetration – Outsized Gains 3G/4G Handset Shipments (in millions) 2,000 In a market expected to 1,600 see continued moderate 1,200 growth, an additional 25% 800 of market penetration 400 would double the number -‐ of handsets and terminal 40% MARKET 2016 2020 units licensed IN 2015 -‐ 65
Slide 7: New Horizons – New Opportunity
New Horizons – New Opportunity IoT Connected Devices -‐ New Shipments Cellular IoT Shipments (in millions) (in millions) 10,000 2,500 …while additional 9,000 8,000 2,000 opportunities 7,000 Military & Aerospace beckon… all 6,000 Medical 1,500 addressable using Industrial 5,000 Consumer 1,000 our ex
Slide 8: Continued Efforts to Return Value to Shareholders
Continued Efforts to Return Value to Shareholders Return of Capital $250.0 Since 2012, the company has returned $200.0 $83.1 a total of $664.5M in $23.7 capital to shareholders $150.0 through a combination $28.9 of buybacks, regular $100.0 $152.7 $152.6 $20.9 dividends and a special $50.0 $12.4 $96.
Slide 9: Strong Performance of Our Buyback Program
Strong Performance of Our Buyback Program $60.00 2.500 • Since 2012 we’ve paid $50.00 2.000 $495.5 million to buy back our own stock Shares Repurchased (M's) $40.00 • That “portfolio” would now Average Price 1.500 $30.00 be valued at just under $1B 1.000 $20.00 • Our program’s Buyback ROI is $10.00
Slide 10: Reconciliation of Pro Forma Operating Expense to Total Operating Expense
Reconciliation of Pro Forma Operating Expense to Total Operating Expense 10 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 11: Thank You!
Thank You! © 2016 InterDigital, Inc. All Rights Reserved.
Slide 12: InterDigital Future Wireless Business Unit
InterDigital Future Wireless Business Unit Patent Licensing and Research and Development Larry Shay © 2016 InterDigital, Inc. All Rights Reserved.
Slide 13: Patent Licensing
Patent Licensing © 2016 InterDigital, Inc. All Rights Reserved.
Slide 14: One Portfolio, Driving Two Market Opportunities
One Portfolio, Driving Two Market Opportunities CONSUMER CONNECTED DEVICES THINGS 14 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 15: New Licensees Added to a Strong Base, with Opportunities that Remain
New Licensees Added to a Strong Base, with Opportunities that Remain SOME INCLUDING RESEARCH …AND AN EXCITING PLATFORM NEW AND RENEWED LICENSES… COLLABORATION… FOR NEW MARKETS LAYERED ONTO A STRONG EXISTING BASE All third party trademarks, service marks and/or tradenames used herein are the property
Slide 16: Avanci Patent Licensing Platform
Avanci Patent Licensing Platform • Avanci – separate entity formed to aggregate 2G/3G/4G standard essential patents for IoT connectivity patent licensing programs • Initial licensing programs: manufacturers of vehicles and smart meters • Announced initial licensors: InterDigital, Ericsson, Qualcomm,
Slide 17: Avanci Benefits to InterDigital
Avanci Benefits to InterDigital • Avanci initial licensing programs seek to license some end-‐user products that are not addressed by InterDigital’s current licensing activities • Recognition of InterDigital’s contributions to wireless industry, and provides an opportunity to receive a fair return
Slide 18: Portfolio at a Glance
Portfolio at a Glance* ~20,000 Patents and Applications OVERALL LIVE PORTFOLIO Worldwide Pending US, ~ 1,200 • US: approx. 2,200 issued patents, Granted US, ~ 2,200 approx. 1,200 pending applications • NON-‐US: approx. 11,500 issued patents, Granted Non-‐US, ~ 11,500 approx. 4,800 pending applicat
Slide 19: Maintaining a Robust U.S. Portfolio
Maintaining a Robust U.S. Portfolio US PORTFOLIO (SNAPSHOT BY YEAR) YTD 19 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 20: Maintaining a Robust International Portfolio
Maintaining a Robust International Portfolio NON-‐US PORTFOLIO (SNAPSHOT BY YEAR) YTD 20 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 21: Continued Strength in Innovation
Continued Strength in Innovation ANNUAL WORLDWIDE FIRST-‐FILED NON-‐ PROVISIONAL APPLICATIONS YTD 21 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 22: LTE: a Growing Presence in a Key Technology
LTE: a Growing Presence in a Key Technology Cumulative Number of InterDigital U.S. Patents & Applications 1800 Disclosed to ETSI for LTE* 1600 1400 1200 1000 800 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 * The data in the table reflects the U.S. (i) patents, (ii) non-‐provisional p
Slide 23: Ongoing Leadership in Key Technologies
Ongoing Leadership in Key Technologies • 3G: InterDigital accounted for approximately 10% of the patents and patent applications judged likely to be essential to WCDMA – the third-‐highest share out of more than 40 companies (May 2015) • 4G: InterDigital accounted for approximately 10% of the paten
Slide 24: InterDigital Labs: Responding to Market Need
InterDigital Labs: Responding to Market Need 2016*: A Diversified Approach to 4G, 5G and Future Growth Drivers of 2009: Expanding the 4G Apps & Services, Video and IoT presence Charts show invention activity within InterDigital R&D focus areas for each respective year and include activities that hav
Slide 25: Research and Development, Bob DiFazio
Research and Development Bob DiFazio © 2016 InterDigital, Inc. All Rights Reserved.
Slide 26: 5G is an opportunity
5G is an opportunity … for new wireless services, new business models, and new businesses … for significant technology innovation at the leading edge of a ten-‐year cycle This plays into InterDigital’s strength with a world class engineering staff and track record in international wireless standard
Slide 27: InterDigital – Present Since the Early Days of Digital Cellular
InterDigital – Present Since the Early Days of Digital Cellular 2G Narrowband Era 3G Broadband Era (for the few) 4G (for the masses) 2012+ From 9.6 kbps to 1 Gbps LTE-‐A Amazing when you stop and think about it… LTE* 100,000x HSPA+ vs. HSPA 1990+ GSM WCDMA Phase 1 GSM-‐EDGE 9.6 kbps GSM Phase 1 Do
Slide 28: Outdoor & Indoor Use Cases Drive the Need for 5G
Outdoor & Indoor Use Cases Drive the Need for 5G High Traffic Volume, Low Latency, Massive Connectivity – Required by all but vary by use case SHOPPING MALL DENSE URBAN INFO SOCIETY REALTIME REMOTE COMPUTING OPEN AIR FESTIVAL Internet of Things (IoT) 28 © 2016 InterDigital, Inc. All rights reserved.
Slide 29: 5G Use Cases and Key Requirements Overview
5G Use Cases and Key Requirements Overview Key challenge for 5G design: support for different services having diverging requirements Enhanced Mobile Broadband (eMBB) § Peak data rates: 20 Gbps (DL) and 10 Gbps (UL) § Peak spectral efficiency: 30bps/Hz (DL) and 15bps/Hz (UL) Massive Machine Type §
Slide 30: 3GPP RAN Standardization Timeline
3GPP RAN Standardization Timeline Phased approach enables early deployment of Phase 1 in 2020 and Phase 2 in 2022+ 2015 2016 2017 2018 2019 2020 Phase 1 Phase 2 Today Specifications Specifications LTE Release 13 LTE Release 15 LTE Advanced-‐Pro + LTE Release 14 LTE Release 16 NB-‐IoT Evolution IMT
Slide 31: Wi-Fi Timeline: A Key Component of 5G
Wi-‐Fi Timeline: A Key Component of 5G Wi-‐Fi is the most heavily used data service 802.11ad 6757 Mbps and is in nearly every mobile device @60 GHz 802.11ay • Expect tighter integration in the 5G era -‐ Heterogeneous networking via 3GPP standards 802.11ax 802.11ac -‐ 5G activities in IEEE 6933 M
Slide 32: 5G Timeline: Early Commercial Trials and Rollouts
5G Timeline: Early Commercial Trials and Rollouts Looking back at what happened with 4G, will early rollouts be 5G or 4.75G? 32 © 2016 InterDigital, Inc. All rights reserved.
Slide 33: Thank You!
Thank You! © 2016 InterDigital, Inc. All Rights Reserved.
Slide 34: InterDigital's IoT Solutions, Jim Nolan
InterDigital's IoT Solutions Jim Nolan © 2016 InterDigital, Inc. All Rights Reserved.
Slide 35: Where We Play in the IoT Ecosystem
Where We Play in the IoT Ecosystem IoT Connectivity and IoT SW & Services ANALYTICS and APPLICATION Middleware & data mgmt., Data Management Services / network & cloud mgmt. are NETWORK and CLOUD MANAGEMENT Analytics / Middleware projected to be $3B & $8B Enabling Technology IoT markets by 2021 (Ber
Slide 36: Where We Play in the IoT Ecosystem: oneMPOWER
Where We Play in the IoT Ecosystem IoT Connectivity and IoT SW & Services ANALYTICS and APPLICATION oneMPOWERTM -‐ a oneM2M standards-‐based IoT services platform NETWORK and CLOUD MANAGEMENT • Future-‐proofs deployments • SW in sensors, devices, gateways and servers • Interworks with many other
Slide 37: Where We Play in the IoT Ecosystem: IoT Operating Environment
Where We Play in the IoT Ecosystem IoT Connectivity and IoT SW & Services ANALYTICS and APPLICATION Unique IoT operating environment that: • Enables public/private cloud as-‐ a-‐service solutions NETWORK and CLOUD MANAGEMENT • Easy/rapid integration of 3rd party value added sources • Agile – rapid
Slide 38: Why InterDigital IoT Solutions?
Why InterDigital IoT Solutions? Standards-‐based solutions Most IoT companies provide only Many IoT companies are either enable: global scale, reuse across a few HW or SW ingredients for unproven startups or are only market segments, lower cost of individual market segments. marginally profitable.
Slide 39: Offering IoT Platforms Extensible Across Multiple Verticals
OFFERING IOT PLATFORMS THAT ARE EXTENSIBLE ACROSS MULTIPLE VERTICALS TARGETING SMART CITIES, TRANSPORTATION, INDUSTRIAL/ENTERPRISE AUTOMATION… Smart Cities Transportation Industrial Data and device management, Data aggregation, storage, Data and device management, storage, and predictive analytics a
Slide 40: A Transportation Solution
A Transportation Solution oneTRANSPORT • Unique “Data Service Broker” business model enabled by oneMPOWERTM and powered by wot.ioTM • Reduces capital expenditures and provides quality-‐of-‐life improvements for local, regional, and national government agencies 40 © 2016 InterDigital, Inc. All Righ
Slide 41: IoT Solutions Key Milestones & Signposts
IoT Solutions Key Milestones & Signposts Customer Pipeline Revenue Ramp Up Visibility into Revenue Development Customer/Partner Channel Partnerships Give Acquisition Aligned Roadmap with Visibility to Revenue Customers/partners Scales Revenue 1H’16 2H’16 1H’17 2H’17 1H’18 41 © 2016 InterDigital, Inc
Slide 42: Award-winning IoT Solutions
Award-‐winning IoT Solutions …and yesterday 2015 ABI Research Hot Tech Innovator 2016 Global IoT Platform 2015 IoT Nexus Competitive Strategy Innovation & Power Players Leadership and Innovators Shortlist – 2016 World Communication Best IoT Product at ARM 2016 Awards TechCon 2014 MarketsandMarkets
Slide 43: Thank You!
Thank You! © 2016 InterDigital, Inc. All Rights Reserved.
Slide 44: External Investment Activities, Scott McQuilkin
External Investment Activities Scott McQuilkin © 2016 InterDigital, Inc. All rights reserved.
Slide 45: Investments Support The Core Business
Investments Support The Core Business • External investments drive core business value by leveraging and expanding our innovation capabilities and creating new market opportunities • Focusing on mobile devices, next-‐gen wireless networks, video over wireless, and IoT – areas that… • Are valuable t
Slide 46: Innovation Partners: Expanding Our Reach
Innovation Partners: Expanding Our Reach • Small, dedicated internal team • Single purpose: Drive core business value through external innovation • Building curated network of prolific inventors, research labs, universities • Focus to date has been on developing new technical capabilities • Highly a
Slide 47: Prolific Inventors, with Substantial Expertise
Prolific Inventors, with Substantial Expertise • Deep expertise in a specific technology • Exclusive inventing in defined fields • US, Europe, Asia • Track record of 100 to >600 invention disclosures in patent applications • PhDs with major university affiliations • Backgrounds at major industry pla
Slide 48: Harnessing Capabilities of Elite Research Labs
Harnessing Capabilities of Elite Research Labs Institute of Human Machine Cognition -‐ SouthWest Research VTT Technical Research Institute -‐ Texas Florida Centre of Finland IMA/ZLW/IFU Lab -‐ Germany 48
Slide 49: InterDigital's Venture Fund: NexStar Partners
InterDigital’s Venture Fund: NexStar Partners • Strategically aligned: Technology and market scope of investments is aligned with InterDigital’s technology and market interests • Financially motivated: Structured and managed to make money through successful venture investing; led by experienced VC p
Slide 50: Commercial Startups: XCellAir
Commercial Startups: XCellAirTM • Early-‐stage company with a cloud-‐based SaaS business model that enables operators to provision, monitor and optimize carrier managed Wi-‐Fi networks • Target customer is cable operators like Comcast, Charter/TWC, Cablevision/Altice, Videotron, Liberty Global, a
Slide 51: Thank You!
Thank You! © 2016 InterDigital, Inc. All Rights Reserved.
Slide 52: Bill Merritt
Bill Merritt © 2016 InterDigital, Inc. All Rights Reserved.
Slide 53: We Proved that a New, Simple, Innovative Business Could Create Tremendous Value
We Proved that a New, Simple, Innovative Business Could Create Tremendous Value KNOWLEDGE AND VISION RESEARCH AND DEVELOPMENT STANDARDS PARTICIPATION MOBILE HANDSETS 53 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 54: And That Value Would Grow, as the Market Expanded
And That Value Would Grow, as the Market Expanded KNOWLEDGE AND VISION RESEARCH AND DEVELOPMENT STANDARDS PARTICIPATION MOBILE HANDSETS, TABLETS, OTHER DEVICES 54 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 55: Now, We're Extending That Model
Now, We’re Extending That Model KNOWLEDGE AND VISION INTERNAL R&D EXTERNAL R&D STANDARDS HORIZONTAL PARTICIPATION SOLUTIONS TRANSPORT MOBILE DEVICES NEW MARKETS SENSORS IOT SMART AR/VR CITIES VEHICLES 55 © 2016 InterDigital, Inc. All Rights Reserved.
Slide 56: The Result: Expanded Revenue Opportunities – With Outsized Profit Potential
The Result: Expanded Revenue Opportunities – With Outsized Profit Potential HANDSETS & CONNECTED ASSUMING THE SAME OPERATING COST BASIS AS TODAY DEVICES A $100M increase in …could drive a A $441M Business in 2015 revenue… ~50% increase in operating income INTERNET OF THINGS Our Goal: A $75-‐$100M B
Slide 57: Q&A
Q&A © 2016 InterDigital, Inc. All Rights Reserved.