Ladies and gentlemen, thank you for standing by. Good day, [Audio Gap] to the InterDigital Incorporated Second Quarter 2018 Earnings Conference Call. Today's [Audio Gap] is being recorded..

For opening remarks and introduction, I would like to turn the call over to Mr. Patrick Van de Wille. Please go ahead, sir. .

Thank you, Paula. Good morning, everyone, and welcome to InterDigital's Second Quarter 2018 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 the company, and then open the call up for questions..

To begin our remarks, I need to remind you that in this call, we will make forward-looking statements regarding our current [Audio Gap] 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 [Audio Gap] contemplated by such forward-looking statements.

These risks and uncertainties include those set forth in our earnings [Audio Gap] published this morning as well as those detailed in our annual report on Form 10-K for the year ended December 31, 2017, our first quarter 2018 Form 10-Q and from [Audio Gap] 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 [Audio Gap], 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 [Audio Gap] to non-GAAP [Audio Gap] 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 [Audio Gap] GAAP [Audio Gap] measures are included in our second quarter 2018 [Audio Gap] which will be posted shortly in our homepage, www.interdigital.com, by clicking on the link on the left side of the homepage that says Financial Metrics Tracker for Q2 2018..

With that taken care of, I'll turn the call over to Bill. .

Good morning, everyone, and thank you for joining us on the call today. The company issued 2 press releases this week. One was our earnings [Audio Gap] this morning detailing yet another strong quarter financially by the company.

The other release was on Tuesday of this week and announced the close of our [Audio Gap] transaction, which we believe will make us even stronger as a company. Let me [Audio Gap] financial [Audio Gap] quickly and then do a brief strategic update [Audio Gap] around the exciting new opportunities at Technicolor..

So our total second quarter revenue was approximately $70 million [Audio Gap] like the first [Audio Gap] benefited from our strong base of licensees, [Audio Gap] contributions from new agreements signed in the quarter, including a renewed license agreement with Fujitsu.

It was very encouraging [Audio Gap] second straight quarter with new agreements being signed and also to see other licensing discussions moving forward. The licensing team is definitely making some strong stride..

The expense side was also very encouraging with our strong focus on expense discipline and appreciation of the value of our operating leverage continuing to pay off. And while the Technicolor [Audio Gap] will bring expenses along with significant upside opportunity, we've already taken actions on the individual [Audio Gap] those expenses.

Thus we remain [Audio Gap] Technicolor being essentially an expense [Audio Gap] and highly accretive [Audio Gap] in the long run..

From a strategic perspective, [Audio Gap] with where we are positioned. Our long-standing strength in wireless research continues to drive enormous value for the company.

In that regard, we are very encouraged by our engagement in 5G [Audio Gap] the first release of 5G is now officially complete with InterDigital making significant contributions to that development effort.

We also continue to [Audio Gap] contributions from [Audio Gap] one that I would describe [Audio Gap] market aware technology purists, which is [Audio Gap] cooperation and support..

[Audio Gap] drive the adoption of our [Audio Gap] the InterDigital brand as a wireless technology powerhouse. In fact, this week, one of [Audio Gap] that we helped lead, Flame, was shortlisted for the prestigious Cable and Satellite International awards in the 5G category, a great achievement..

That [Audio Gap] position is ultimately is very important as it is crucial for the success [Audio Gap] the licensing business and will also help us expand in [Audio Gap] wireless enabled market.

For example, wireless technology [Audio Gap] critically important, new -- in the new autonomous vehicle space where the speed [Audio Gap] capacity and reliability of wireless networks will be key. Through its involvement in various standards bodies, InterDigital is playing a [Audio Gap] driving innovation behind these critical new networks.

[Audio Gap] will help drive a brand new licensing effort within this new market [Audio Gap]..

Our wireless technology competence [Audio Gap] join a new and extremely important [Audio Gap] video. Next to wireless, video [Audio Gap] and mobile devices in terms [Audio Gap].

This is supported by the fact that video traffic is [Audio Gap] largest data stream flowing through and from mobile devices, and that is expected to continue to grow substantially. In fact, the Flame project I mentioned is a 5G project focused around video delivery..

Indeed, without the constant connectivity afforded by wireless [Audio Gap] the streaming experience delivered by the combination of wireless and video technologies, it would not be a smartphone industry [Audio Gap]..

With our acquisition of the Technicolor patent licensing business now complete, InterDigital now has a pioneering and market-leading position in both of these key technologies, a position that we believe [Audio Gap] even greater value from our mobile licensing business, but also give us the critical mass to drive a new and valuable licensing program in consumer electronics.

Like our mobile program, this program will be backed by world-class R&D, combining the R&D capabilities of InterDigital Labs with those of Technicolor. That combination of capability has the ability to drive incredible innovation and we fully intend to let those [Audio Gap]..

This new and broader opportunity for the company becomes even more [Audio Gap] the management team at the company. [Audio Gap] very significant hires with [Audio Gap] joining us as CTO, and Eric Cohen [Audio Gap] joining us [Audio Gap]. Both [Audio Gap] are very well versed in wireless.

Equally important, they also possess other areas of expertise that are key to the growth [Audio Gap] acquired an incredible range of technology expertise through his years as CTO at Nokia and HARMAN, and Eric having acquired similarly a broad market knowledge during his years at Dolby.

They have been with us [Audio Gap] I can already see how they will positively drive this organization..

In [Audio Gap] good place and with a strong financial [Audio Gap] a tremendous opportunity to drive even greater value through our [Audio Gap]. The added strength of the Technicolor assets, [Audio Gap] incredible management team to rely on [Audio Gap] we are going to go [ positive ] do even better..

With that [Audio Gap] over to Rich. .

Thanks, Bill. I'll [Audio Gap] to a few highlights from our strong [Audio Gap] quarter financial performance, as well as a few comments [Audio Gap] of Technicolor's patent licensing business. In second quarter, we reported a sequential increase [Audio Gap] under ASC 606.

And for the purposes of an apples-to-apples comparison, a year-over-year [Audio Gap] recurring revenue under ASC 605. Each of these increases is relatively small [Audio Gap] positive nonetheless. While the recurring [Audio Gap] sequentially, our operating expenses for second quarter were down on both a sequential and year-over-year basis.

This is as a result of continued expense management with an emphasis on clearing some room for our recently completed Technicolor acquisition..

Our effective tax rate for the quarter was 9.8% [Audio Gap] we reported a year-to-date tax benefit of nearly $4 million. We still expect [Audio Gap] benefit position for full year 2018, and we continue to view our long-term effective tax rate in the range of 14% to 15%.

As Bill mentioned, we were very excited to announce we closed our acquisition of Technicolor's patent licensing business earlier this week.

Integrating the acquired portfolio along with the related team and operations is an immediate focus for us along with the related goal of expanding our [Audio Gap] base both in the cellular terminal unit space and the consumer electronics market..

As I previously discussed, we plan for the acquisition to have a minimal impact to our cash operating investment after a transitional period.

Later this quarter, we will provide some more detail on our expectations for the impact to the transitional period including [Audio Gap] around our third quarter financial performance, which will include roughly 2 months of the Technicolor business as well [Audio Gap] integration expenses.

[Audio Gap] will also remind you that we picked up only minimal revenue [Audio Gap] contracts as the real opportunity lies within our ability to deliver more value to our core market on a combined basis as [Audio Gap] enter into the consumer electronics market..

With that, I'll turn it back over to Patrick. .

Thanks [Audio Gap] open the call for questions. .

[Operator Instructions] And our first question will come from Charlie Anderson with Dougherty & Company. .

Bill, I wonder maybe it's kind of just [Audio Gap] environment as you see it today, and I'm also kind of curious specifically on ZTE given what was -- what's been [Audio Gap] in the first half of the year with the shipping ban, how that impacted [Audio Gap] now that they're back, has anything changed.

And then also in Technicolor, what sort of been the response you've been getting in terms of bringing that [Audio Gap] response to the rate increase you guys sort of elaborated on the last call?.

Yes, so I think the [Audio Gap] licensing environment continues to improve. Certainly, we went through a difficult period over the last number of years, [Audio Gap] that has turned around dramatically under the new leadership at the [Audio Gap] and at the patent office. So those are all very positive developments I think.

Around the world in terms of [Audio Gap] anything as sort of the discussions around [Audio Gap] patents and [Audio Gap] I think that [Audio Gap] generally are pretty balanced. Of course, [Audio Gap] come out in the U.S. and the U.K. They are little bit of a mixed bag in terms of that we [Audio Gap] that we don't.

But they're all I think very [Audio Gap] for us at the end of the day. I think it continues to be a business [Audio Gap] is really important. I think [Audio Gap] a very strong broad portfolio and now that's been [Audio Gap] acquisition puts us in a good [Audio Gap] on a go-forward basis.

So overall [Audio Gap] pretty happy with the overall [Audio Gap] in terms of ZTE and sort of the general [Audio Gap] U.S.-China relations, I think certainly that was a pretty big hiccup there with ZTE when they got essentially taking on business. They're back.

And so we continue to have discussions with them, but that obviously was a big distraction for them for a while. Overall, I think we're [Audio Gap] discussions [Audio Gap] license, but we continue to have [Audio Gap] dialogue with folks.

What they [Audio Gap] earned over the last number of years that a higher [Audio Gap] of day-to-day engagement in China probably makes sense for us. So we're thinking about some things along those lines to kind of step up our level of activity over there, just so we're there on a more consistent basis. So [Audio Gap] I think I covered all of them.

Your third question was Technicolor, [Audio Gap] are responding. Generally very favorably in terms [Audio Gap] not going to respond favorably that [Audio Gap] increase our royalties, but they'll respond favorably to the fact [Audio Gap] it's a more comprehensive package that [Audio Gap] flexibility that we have.

Things like [Audio Gap] Technicolor research organization as a way to kind of bridge gaps in discussions is a very positive tool for us. So [Audio Gap] it's given us more tools in our [Audio Gap] use that phrase fairly frequently [Audio Gap] that's going to be really helpful in the long run. .

[Audio Gap] had a question on OpEx. So litigation expenses have been running a little ahead of last year.

I wonder what may be was the underlying driver there? And should we think about litigation expenses running a little bit higher than we had seen the year prior or a couple of years prior for any particular reason?.

Yes, Charlie. So [Audio Gap] to try and project what our litigation expenses will be because it can change so quickly, and it's all so much dependent on the timing of cases. It's currently running a little bit higher as you said, but I don't know that I would read too much into [Audio Gap] the other. .

[Operator Instructions] Moving on, we'll go to Eric Wold with B. Riley. .

A couple of questions, I guess. One follow up on Technicolor.

Can you talk about the value that the Technicolor acquisition brings to the existing handset licensees and kind of the ability you see to kind of drive incremental value out of those licensees? And then as well what the negotiations that are still on tap? Is there a large user kind of usage of Technicolor [ patents ] within those outstanding licensees such that it can help your standing[Audio Gap] business?.

Yes, so in terms of the [Audio Gap] perspectives, right. So the first [Audio Gap] is, you think about a customer that's just the handset [Audio Gap], right.

What we're now able to talk with that customer about is not only our wireless portfolio and our own video portfolio or Wi-Fi portfolio, but also now the very significant video encoding portfolio from Technicolor, which just gets utilized on [Audio Gap] on handsets.

And so that gives us more material in that discussions and support for our rate [Audio Gap] as we've talked about a modest increase in our rates of around 10 [Audio Gap]. So that's one sort of straight up benefit.

Second is you have customers that both handsets as well as [Audio Gap] products that we normally didn't have dialog around in a [Audio Gap] discussion. [Audio Gap] example, a customer that would make both handsets [Audio Gap] set-top boxes.

We now can have a pretty robust discussion around set-top boxes because that's [Audio Gap] the areas of innovation that Technicolor [Audio Gap] involved in, they have a set-top box business.

And so you have both the [Audio Gap] level of [Audio Gap] that you have in the [Audio Gap] mobile devices, but [Audio Gap] have a whole another part of their business [Audio Gap] you're talking about. And as I mentioned in my response [Audio Gap], the more things you have to talk about, the more ability and [Audio Gap] you have to get a deal done.

So and then, obviously, there is the third [Audio Gap] type of customer who is not a mobile customer [Audio Gap] box manufacturer. And [Audio Gap] folks we haven't had any discussions with before and now we will [Audio Gap] an active dialog with them as well.

So you have a variety of ways that this will benefit the company, not only in its core programs, but in these new programs as well. .

And how do you think about the ease at which those discussions [Audio Gap] got kind of [Audio Gap] existing licensee under your wireless technology versus someone who is not, maybe easy to go back to the one [Audio Gap] you're a good customer of ours, we've [Audio Gap] just making it amending kind of rolled in there? Or is that a relevant and this just becomes another [Audio Gap] separately regardless of how strong your relationship is at the start?.

I think -- look, I think the way we would approach it is sort of from a pragmatic standpoint. So there is a couple of ways we could go back to an existing licensee, right.

So if you had somebody that had say a year left on their license or 2 years left on their license, we may not rush back with this portfolio [Audio Gap] until it's time, and then we'll just talk about everything at once.

The reason you do that is to some extent you don't want to [Audio Gap] lots of other things you don't want to be constantly going back on different portfolios, right? [Audio Gap] so that's an existing customer. If an existing customer's contract has got 5 years left on it, we certainly would go back and talk about these things.

I think our -- the fact that these are existing customers and we [Audio Gap] been able to reach a deal with them means we have existing relationship [Audio Gap] those companies, and that always makes those discussions easier than it [Audio Gap] from scratch [Audio Gap] work with folks.

So [Audio Gap] sure we will get pushed back [Audio Gap] the business [Audio Gap], but I think one of the things we really like about the Technicolor portfolio is 2 things. It is a very, very strong portfolio for one with great pedigree, but it continues to be backed by the Technicolor research organization.

So this is not us [Audio Gap] go and come in and it's a static portfolio and just [Audio Gap] acquired a new innovation stream for the company and [Audio Gap] and you get a different level of response to that. .

Perfect. And then last question from me.

Where are you on the 5G roadmap? When do you expect needing to kind of go back to existing licensees and kind of amend them to include 5G where necessary? And when can that -- when can 5G start becoming an incremental driver to license revenues?.

So I think the 5G technology is already a [Audio Gap] all the current discussions that we're having with licensees, because within any reasonable license [Audio Gap] products will begin to be shipped. So that's happening [Audio Gap] new agreements or renewals.

In terms of other [Audio Gap] that go on for a while where there wouldn't otherwise be an [Audio Gap] some of those may already capture 5G.

If they don't, I'd sort of characterize it the same way as I did the video depending on time, how much [Audio Gap] is left, we may or may not go back immediately to [Audio Gap] after [Audio Gap] for the renewal [Audio Gap] because you're not going to have any meaningful [Audio Gap] units for a number of years.

So [Audio Gap] there will be a lot of shipments that would leave the warehouse on license. So but again, I think the value of [Audio Gap] is already starting to be [Audio Gap] we're having with new licensees and with renewal having [Audio Gap]. .

And we'll move to our next question that will come from Scott Searle with ROTH Capital. .

Bill, just to follow up on [Audio Gap] I think going into and preparing [Audio Gap] were looking to take the OpEx down, which we've seen over [Audio Gap] to in effect to make it OpEx neutral when that came onboard.

Just wanted to clarify in terms of, I guess, for Rich then, where OpEx will look in the September and December quarter once you get a full quarter contribution from Technicolor? And then also just in terms of that sales cycle and [Audio Gap] I think you've talked about 10%.

Is the potential [Audio Gap] over a 3- to 5-year period? When do you expect some of the initial contribution from that to start to materialize? Is it [Audio Gap] months out, is it 18-plus months out? Give us some idea on that front. And then I had a follow up on IoT. .

Scott, it's Rich. Let me start off with the expense portion of that question. So long term and I talked about a metric on the last quarter's call, which gets you to a kind of cash investment number and we were adjusting there for, among other things, patent amortization as well as the capitalized patent cost to manage the portfolio.

And we view that as being relatively flat in the long term, but I think I did describe a transitional period. I think the term I -- the tenor I said was 12 to 18 months. I'm probably a little bit less concerned on whether it's 12 to 18 months or 24 months, but that we get there. And that's certainly the plan.

In the interim and looking at the upcoming quarter without getting overly [Audio Gap], we're going to have expenses associated [Audio Gap] closing the transaction. We'll have integration expense [Audio Gap] time.

We're going to have the -- from an [Audio Gap] perspective, albeit non-cash, increased amortization associated with patent and other assets that come on, but probably largely patent assets that come on to the balance sheet.

And then, in addition of course, there is the elevated expenses at least initially associated with the larger portfolio and operating that. And over the long term, through portfolio management, through some of the efforts we've already [Audio Gap], we see that coming down along the lines of what I described.

And we'll provide some more detail as we get a little further out in the quarter. And we [Audio Gap] we don't want to communicate too [Audio Gap] maturely. .

Got you.

And Rich, just as a reminder, how many employees came over with the acquisition?.

I don't have the exact number offhand. I don't know if Patrick or Bill does, but I would say it was in the neighborhood of 85 I believe. .

Okay, all right. And then maybe moving over to the IoT front, I guess a couple of different vectors. Just [Audio Gap] expectations in general for [Audio Gap] dialog that you have going on there on multiple fronts? And then, as part of that, you've got the attack from a [Audio Gap] standpoint.

What you're seeing in terms of interest level engagement for that? As well as any updates that might be going on with Avanci and licensing into areas like vehicles and/or [Audio Gap]?.

Yes. So in terms of IoT as of we've talked [Audio Gap] 2 opportunities for the company. First is on the connection [Audio Gap] naturally through Avanci. [Audio Gap] they continue to [Audio Gap] their way through the automotive market, that's where they're focused today.

We continue -- they needed to do a level of education with the automobile manufacturers because they haven't typically dealt with licensing. It's usually been dealt with at the tier 1 supplier level.

But as discussions have actually gone well and the education process has gone well, they've executed it, one of them with BMW, and we're moving through some other opportunities. So that continues to be a very positive [Audio Gap] where we think to go after the [Audio Gap].

From a connections standpoint, on the [Audio Gap] call it the upper layer technologies and that's really [Audio Gap] important business for the company. That's as you know, 2 pieces, it's both a patent licensing piece and a software piece. So I'd say we're very encouraged [Audio Gap] this year in terms of [Audio Gap] market interest in oneM2M.

I think we have a very strong technology, but [Audio Gap] would not see why the [Audio Gap], and that's a risk at any time you develop [indiscernible].

[Audio Gap] out of the woods yet, but certainly [Audio Gap] indicators we have had this year have been very positive in terms of RFPs from operators and some from [Audio Gap] and a number of other things that is certainly within the cellular operator community. It appears to be gaining traction.

So that's good news for us from both the software perspective. But even perhaps equally important from a long-term perspective from the portfolio. Certainly with the [Audio Gap] we're engaged with a number of operators out there.

[Audio Gap] looking at getting in license agreements with them around the software and having [Audio Gap] revenue this year and certainly next [Audio Gap]. It's -- I'd look at it as the revenue opportunity [Audio Gap], but what may be more important [Audio Gap] is that [Audio Gap] drives [Audio Gap] bigger [Audio Gap].

Then [Audio Gap] a lot of [Audio Gap] life into that pattern portfolio. So all good. There I know we'll have a [Audio Gap] Investor Day in December. [Audio Gap] and we'll be able to give some more highlights [Audio Gap] working on that. We'll move a [Audio Gap] take the market at that point. .

And moving on, we'll go to Matthew Galinko with National Securities. .

I guess it sounds like your focus is on the Technicolor integration for the balance of the year.

I guess I'm just wondering, do you still have a pretty nice pile of cash on the balance sheet, other opportunities [Audio Gap] opportunities or just how do you think about the M&A environment at this point?.

So [Audio Gap]. I think we're -- we will be very, very focused on the Technicolor integration. There is a huge amount of value that [Audio Gap] created there. We want to make sure that we [Audio Gap] manage the cost side well. [Audio Gap] coach the customer well, so there's a lot to do there and there is a [Audio Gap] just had a lot of opportunity.

That [Audio Gap], we have a very [Audio Gap] corp dev team, and they continue to explore opportunities out there. There are a number of things that do pop up from time to time. And so we're going to keep our eye [Audio Gap]. And I'd sort of put it like this.

If there are opportunities that come up that are not time sensitive and a lot of [Audio Gap] not that we would probably push them down the path a little bit just to give us time to get our Technicolor integration done correctly.

There could be ones that may be more time sensitive and you won't have that luxury, but we have, as I said, a strong team here at the company, we could multitask if we need to. Because I do think that going back to one of the earlier comments I made today, scale is really, really [Audio Gap] in this business.

And to the extent we can [Audio Gap] additional assets that will increase [Audio Gap] customer and increase the number of tools we have with customers [Audio Gap], that will be really, really useful.

But as always, we're going to be very disciplined, very pragmatic, and to the extent we can avoid sort of dual tasking here for a while, we're going to [Audio gap] and make sure we get the Technicolor being done right. .

Got it. Thanks. And if I could just follow up on that one.

Just as you talk about [Audio gap] here licensing platform and kind of portfolio, in terms of tuck-ins or do you think of stuff particularly within wireless? Do you think of within kind of something to expand your base in consumer electronics? Or do you think of adding it or just the [ lag ] factor and a dollar that really shift down to the opportunity?.

So I think you start with the [Audio Gap] of objectives, right. But then which of those objectives you get to execute on will be driven by what's actionable, right. So I think about it in terms of 3 [Audio Gap]. So certainly within mobile, more assets within mobile will be very interesting to us.

[Audio gap] What we like of course is assets that are [Audio Gap] R&D and where there is a synergy with [Audio Gap] already so as an example, there's tremendous synergy between wireless and [Audio Gap] there's synergy in how the technologies get [Audio Gap]. But there's also synergies in how they're developed.

I mean it's a lot of [Audio Gap] work and that's something we're very good at. So I wouldn't say it's any technology on the mobile side, but probably ones that you would see some synergies with where we're at today, right. We do have a new opportunity for acquisitions now within consumer electronics.

Meaning, things that before didn't touch on mobile, we really weren't interested in. Now we may be because it's going to strengthen the consumer electronics space for us. So that could be a new area of interest for us. A third area [Audio Gap] for us is automotive. [Audio Gap] we can kind of think about the automobile as the next smartphone.

There is a huge amount of innovation going on there and a huge, huge amount of opportunity within that space and [Audio Gap] we certainly can participate there today from a wireless perspective. While very important it's -- there is other very large technology pockets within automotive that we could think about.

Again, we would want to make sure that there is some synergy to [Audio Gap] do today. So I think those are kind of the 3 markets we'd look at. Again but the answer to your question is ultimately what you do is do the things that become actionable.

We may want to do something on the mobile side [Audio Gap] consumer electronics is the first one that pops. Then again, I kind of take it back to where I started the question. We're very disciplined around M&A. We make sure that there is a really strong strategic rationale and strategic [Audio Gap].

And as I said to the [Audio Gap] possible, I want to make sure that we keep the organization [Audio Gap] on our priorities and so if we could [Audio Gap] M&A and not lose an opportunity, we'll probably do that. [Audio Gap] can then we can manage it, and we will do [Audio Gap] I certainly have some preferences. .

And next we'll go to Eugene Fox with Cardinal Capital Management. .

I may have missed this, but could you comment on all of the -- any impact of the tariff dispute [Audio Gap] your business as it relates to IP? And [Audio Gap] extent to that has any bearing on your Huawei renewal? Any commentary there?.

Yes. I said that there is some level of impact and it kind of comes in 2 perspective. One, certainly just in terms of the U.S.-China relationship, so certainly what went on with ZTE, [Audio Gap] distracted ZTE for a period of time and that was an impact on us, but longer term that worked its way out.

The tariffs and [Audio Gap] that government may put on [Audio Gap] G transfers. For one [Audio Gap] since we're dealing with standard essential pack [Audio Gap] they've already [Audio Gap] I don't believe that that [Audio Gap] technology gets hung up in any tariffs or restrictions.

What can get affected though is some of the other work that [Audio Gap] Chinese licensee. We haven't [Audio Gap] we have to just [Audio Gap] through some of the tools that we use in license discussions.

So I think we're doing fine and we haven't really had any impact on the discussions that we've had with folks, but it's just something else we have to consider [Audio Gap] move forward. We were pretty engaged in Washington. We have a facility down there [Audio Gap] the importance of variety of regulations on the company.

So we're pretty [Audio Gap] of those developments, and so I'd say we've [Audio Gap] to towards this the various [Audio Gap] fairly well so far. I think that we will continue [Audio Gap]. But it is -- I guess it's become something else we have [Audio Gap] which we didn't have to manage before. .

Bill, any comments on the Huawei renewal?.

So Huawei represents one of those customers [Audio Gap] not only where we have the opportunity to talk to them about [Audio Gap] wireless, but now video technology on their handsets, so they have a [Audio Gap] their business as well that will [Audio Gap] negotiation. So we're engaged with them.

As you would [Audio Gap] your typical [Audio Gap] of meetings with them. [Audio Gap] that are always going to be discussions involving significant economics [Audio Gap]. They're always challenged. But we've [Audio Gap] much I think, where we are [Audio Gap] compared to where we were 3 years or 4 years ago.

There's some level of engagement between the 2 companies. I think there's a different level between the 2 companies, there is definite personal [Audio Gap].

Yes, it's [Audio Gap] license is [Audio Gap] it's going to be a -- it will [Audio Gap] but I believe that we are [Audio Gap] better positioned this time [Audio Gap] will have time to get it done on a reasonable value and a reasonable timetable. .

And moving on, we'll go to Jim [Audio Gap] with Permit Capital. .

This is John Broderick at Permit Capital. Just [Audio Gap] question about capital allocation.

To the extent that you don't see any -- that the right M&A opportunity doesn't present itself, is there any chance you'd up size the buyback? It looks like you [Audio Gap] maybe a $150 million or so [Audio Gap] current buyback, but you've got over [Audio Gap] cash [Audio Gap] sheet, and your stock [Audio Gap] hasn't done it [Audio Gap] meaningful in the last 18 months, [Audio Gap] sideways.

Just curious how you think about that?.

Yes. So we actually topped up the buyback with $100 million additional authorization I believe last fall. And we've executed a relatively small amount against that. But that again, as I think we say every quarter, that's always a topic of conversation at our board meetings. We also [Audio Gap] increased our dividends.

So we have been a little more conservative in those areas over the last 12 to 24 months, while we've considered some M&A opportunities. But certainly if we don't have better use for the cash, we're going to make sure it makes its way to its shareholders. .

And that concludes our question and answer session. I'll turn it back to our presenters for any additional or closing comments. .

Thank you [Audio Gap] for asking questions and for joining us today on the call. I think there may have been some audio issues for some folks and I apologize for that and we're looking into it. If you have any questions, feel [Audio Gap] myself, Patrick Van de Wille of Investor Relations.

If you go to the Investors page of our website, you can get my contact info. Thanks very much and have a good quarter. .

And that does conclude today's conference. We'd like to thank everyone for their participation. You may now disconnect..