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InterDigital Inc (IDCC 0.25%)
Q2 2018 Earnings Conference Call
Aug. 2, 2018, 10:00 a.m. ET
Editor's note: InterDigital experienced a significant amount of technical difficulty related to their audio. We've noted "(Technical Difficulty)" in places where audio was missing.
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by. Good day and welcome to the InterDigital Incorporated Second Quarter 2018 Earnings Conference Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Patrick Van de Wille. Please go ahead, sir.
Patrick Van de Wille -- Chief Communications Officer
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.
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 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 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 (ph) of these non-GAAP financial measures to the most directly comparable (ph) GAAP financial measures are included in our second quarter 2018 Financial Metrics Tracker, which will be posted shortly on 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. And with that taken care of, I'll turn the call over to Bill.
Bill Merritt -- President & CEO
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 release 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 Technicolor transaction, which we believe will make us even stronger as a company. (Technical Difficulty) financial results quickly and then to a brief strategic update around the exciting new opportunities at Technicolor.
So our total second quarter revenue was approximately (Technical Difficulty) benefited from our strong base of (Technical Difficulty) contributions from new agreements signed in the quarter including (Technical Difficulty) license agreement with Fujitsu. It was very encouraging (Technical Difficulty) 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 strides.
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 transaction will bring expenses along with significant upside opportunity, we've already taken actions on the individual (Technical Difficulty) to accommodate those expenses. Thus we remain (Technical Difficulty) Technicolor being essentially an expense-neutral and highly accertive (Technical Difficulty) in the long run.
From a strategic (Technical Difficulty) happy 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 (Technical Difficulty) the first release of 5G is now officially complete with InterDigital making significant contributions to that development effort. We also continue (Technical Difficulty) contributions from somewhat of a unique position, one that I would (Technical Difficulty) market aware technology purists, which is (Technical Difficulty) to reach out to us for cooperation and support. (Technical Difficulty) drive the adoption of our technologies and also drive the value of the InterDigital brand as a wireless technology powerhouse. In fact, this week, one of our European projects that we helped lead, Flame was shortlisted for the prestigious Cable and Satellite International awards in the 5G category, a great achievement.
(Technical Difficulty) ultimately is very important as it is crucial to the success of the licensing business and will also help us expand (Technical Difficulty) wireless enabled market. For example, wireless technology is critically important (Technical Difficulty) in the new autonomous vehicle space where the (Technical Difficulty) capacity and reliability of wireless networks will be key. Through its involvement in various standards bodies, InterDigital (Technical Difficulty) driving innovation behind these critical new networks. (Technical Difficulty) will help drive a brand new licensing effort (Technical Difficulty).
Our wireless technology competence is also being (Technical Difficulty) new and extremely important capabilities, (Technical Difficulty) next to wireless video maybe the next (Technical Difficulty) mobile devices in terms of driving the consumer experience. This is supported by the fact that video traffic is (Technical Difficulty) largest data stream flowing through and from mobile devices and that is expected to (Technical Difficulty) 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 and the streaming experience delivered by the combination of wireless and video technologies, it would not be a smartphone industry today.
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 can not only drive 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 (Technical Difficulty).
This (ph) new and broader opportunity for the company becomes even more valuable as we enhance the management team at the company. In the second quarter, we announced 2 very significant hires (Technical Difficulty) Tirri joining us as CTO and (Technical Difficulty) joining us as Head of Corporate Development. (Technical Difficulty) very well versed in wireless. Equally important, they also possess other areas of expertise that are key to (Technical Difficulty) with Dr. Tirri having 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 now for a number of months and I can already see how they will positively drive this organization.
In sum, we're in a really good place and with a strong financial (Technical Difficulty) a tremendous opportunity to drive even greater value through our (Technical Difficulty), the added strength of the Technicolor assets, (Technical Difficulty) management team to rely on (Technical Difficulty) do even better. With that, (Technical Difficulty) to Rich.
Richard Brezski -- Chief Financial Officer
(Technical Difficulty) I'll limit my commentary today (Technical Difficulty) highlights from our strong second quarter financial performance as well as a few comments on our recent acquisition of Technicolor's patent licensing business. In second quarter, we reported a sequential increase in recurring revenue under ASC 606 and for the purposes of an apples-to-apples comparison (Technical Difficulty) a year-over-year increase in recurring revenue (Technical Difficulty) ASC 605. Each of these (Technical Difficulty) is relatively small, but positive (Technical Difficulty). While the recurring revenue was up sequentially, our operating expenses for second quarter were down on both sequential and year-over-year basis. This is (Technical Difficulty) of continued expense management with an emphasis (Technical Difficulty) for our recently completed Technicolor acquisition.
Our effective tax rate for the quarter was 9.8% and we reported a year-to-date tax benefit of nearly $4 million. We still expect to be in a net 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 customer 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 expectations around our third quarter financial performance, which will include roughly 2 months of the Technicolor business as well as related integration expenses. I will also remind you that we picked up only minimal revenue from the acquired contracts as the real opportunity lies within our ability to deliver more value to our core market on a combined basis as well as to successfully enter into the consumer electronics market. With that, I'll turn it back over to Patrick.
Patrick Van de Wille -- Chief Communications Officer
Thanks very much, Rich, and Paula, we'll open the call for questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions) And our first question will come from Charlie Anderson with Dougherty & Company.
Charlie Anderson -- Dougherty & Company -- Analyst
Yes, thanks for taking my questions. Bill, I wonder if maybe just kind of describe the licensing environment as you see it today and I'm also kind of curious specifically on ZTE given what was -- what's been (Technical Difficulty) in the first half of the year with the shipping ban, how has that impacted (Technical Difficulty) now that they're back (Technical Difficulty), you know, has anything changed? And then also (Technical Difficulty) the response you've been getting in terms of bringing that in (Technical Difficulty) response to the rate increase you guys (Technical Difficulty) last call? Thanks.
Bill Merritt -- President & CEO
Yes, so I think the overall licensing environment continues to improve. Certainly, we went through a difficult period over the last (Technical Difficulty) that has turned around (Technical Difficulty) under the new leadership at (Technical Difficulty) and at the patent office. So those are very positive developments I think. Around the world in terms of (Technical Difficulty) generally are pretty balanced (Technical Difficulty) come out in the US and the UK, they are a little bit of a mixed bag in terms of (Technical Difficulty) for us at the end of the day, I think (Technical Difficulty) it continues to be a (Technical Difficulty) is really important. I think having a very strong broad portfolio and now that's been complemented by the Technicolor acquisition puts us in a good place on a go-forward basis. So overall, pretty happy with the overall environment. So in terms of ZTE and sort of the general US/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 (Technical Difficulty) the pace of discussions (Technical Difficulty), we continue to have (Technical Difficulty) earned over the last number of years that a high (Technical Difficulty) of day-to-day engagement in China probably makes sense for us. So we are 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, I think I covered all of them.
Your third question was Technicolor, i.e. how people are responding, generally very favorably in terms of -- not going to respond favorably that (Technical Difficulty) increase our royalties, but they'll respond favorably to the fact it's a more comprehensive package that (Technical Difficulty) flexibility that we have. Things like (Technical Difficulty) Technicolor research organization as a way to kind of bridge gaps in discussions is a very positive tool for us. So it's given us more tools in our toolbox. I use that phrase fairly frequently and I think that's going to be really helpful in the long run.
Charlie Anderson -- Dougherty & Company -- Analyst
I just had a question on OpEx. So litigation expenses have been running a little ahead of last year. I wonder what maybe 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? Thanks.
Bill Merritt -- President & CEO
Yes, Charlie. So I'm always reticent to try and project what our litigation expenses will be because it can change so quickly and it's also 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 that one way or the other.
Charlie Anderson -- Dougherty & Company -- Analyst
Okay, fair enough. Thanks so much.
Operator
(Operator Instructions) We do (Technical Difficulty) Eric Wold with B. Riley.
Eric Wold -- B. Riley -- Analyst
Thanks guys and good morning. A couple of questions, I guess 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 with the negotiations that are still on tap, is there a large user kind of usage of Technicolor patents (ph) within those outstanding licensees such that it can help your (Technical Difficulty).
Bill Merritt -- President & CEO
Yes, so in terms of the (Technical Difficulty) two perspectives, right. So one is (ph) you think about a customer that's (Technical Difficulty) manufacturer, right. What we're now able to talk with that customer about is not only our wireless portfolio and our own video portfolio and Wi-Fi portfolio, but also now the very significant video encoding (ph) portfolio from Technicolor, which gets utilized on handsets and so that gives us more material in those discussions and (Technical Difficulty) as we've talked about a modest increase in our rates (Technical Difficulty) that's one sort of straight up benefit (Technical Difficulty) you have customers that do both handsets as well as other products that we normally didn't have dialog around in a license discussion (Technical Difficulty) example of a customer that would make both handsets and (ph) set-top boxes.
We now can have a pretty robust discussion around set-top boxes because that's one of the areas of innovation that Technicolor is involved in (ph), they have a set-top box business. So you have both the added level of (Technical Difficulty) that you have (Technical Difficulty) mobile devices, but now you have whole another part (Technical Difficulty) and as I mentioned in my (Technical Difficulty) you have to talk about the more (Technical Difficulty) and ability you have to get a deal done. And then, obviously there's the third (Technical Difficulty) or third type of customer who is not a mobile customer (Technical Difficulty) set-top box manufacturer (Technical Difficulty) we haven't had any discussions with before (Technical Difficulty) 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.
Eric Wold -- B. Riley -- Analyst
And how do you think about the ease at which those discussions go? If you've got kind of one who's an existing licensee under your wireless technology versus someone who is not, maybe easy to go back to the ones that (Technical Difficulty) hey, you're a good customer of ours, (Technical Difficulty) we've got these new patents, let's make an (Technical Difficulty) kind of rolled in there or is that irrelevant and this should becomes (ph) another kind of battle separately regardless of how strong your relationship is at the start?
Bill Merritt -- President & CEO
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 two years left on their license, we may not rush back with this portfolio, we may just kind of wait 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 (Technical Difficulty) lots of other things you don't want to be constantly going back (Technical Difficulty) as an existing customer -- if an existing customer's contract has got five years left on it, we certainly would go back and talk about these things.
I think the fact that these are existing customers and we have been able to reach a deal with them means we have existing (Technical Difficulty) those companies and that always makes those discussions easier (Technical Difficulty). I'm sure we will get pushed back (Technical Difficulty) but I think one of the things we really like about the Technicolor portfolio is two things. It is a very, very strong portfolio for one with a great pedigree, but it continues to be backed by the Technicolor research organization. So this is not us having acquired a portfolio and come in and it's a static portfolio and just look at (Technical Difficulty). We've acquired a new innovation stream for the company that we're dealing with. And so, I think -- and you get a different level of response to (ph) that .
Eric Wold -- B. Riley -- Analyst
Perfect and then last question for 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 (Technical Difficulty) where necessary and when can that -- when can (Technical Difficulty) becoming an incremental driver to (Technical Difficulty)?
Bill Merritt -- President & CEO
(Technical Difficulty) technology is already a topic of all the current discussions that we're having with licensees because within any reasonable license period 5G products will begin to be shipped. So that's happening (Technical Difficulty) new agreements or renewals. In terms of (Technical Difficulty) that go on for a while where there wouldn't otherwise be (Technical Difficulty) 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 how much time is left, we may or may not go back immediately after 5G just may wait for the (Technical Difficulty) in part because you're not going to have any meaningful shipments of 5G units for a number of years. So (Technical Difficulty) there will be a lot of shipments that would leave the warehouse on (ph) license, but again, I think the value (Technical Difficulty) we're having with new licensees and with (Technical Difficulty).
Operator
And we'll move to our next question that will come from Scott Searle with ROTH Capital.
Scott Searle -- ROTH Capital Partners LLC -- Analyst
Hey, good morning. Thanks for taking my questions. Hey, Bill, just to follow up on (Technical Difficulty) I think going into and preparing for the (Technical Difficulty) you guys were looking to take the OpEx down, which we've seen over the (Technical Difficulty) quarters 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 of contribution from Technicolor? And then also just in terms of that sales cycle and timeline (Technical Difficulty) you've talked about 10% (Technical Difficulty) over a three to five year period, when do (Technical Difficulty) initial contribution from that to start (Technical Difficulty) months out, is it 18 plus months out, give us some idea on that front? And then I had a follow-up on IoT?
Richard Brezski -- Chief Financial Officer
Hey, 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 (Technical Difficulty) to manage the portfolio and we view that as being relatively (ph) flat in the long-term, but I think I did (Technical Difficulty) 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 (Technical Difficulty) 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 (Technical Difficulty) on this call, we're going to have expenses associating with closing the transaction, we'll have integration expenses that will continue for some time. We're going to have the -- from an OpEx 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 taken, 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 (Technical Difficulty) and we -- as those numbers (Technical Difficulty) we don't want to communicate too much prematurely.
Scott Searle -- ROTH Capital Partners LLC -- Analyst
Got you and Rich, just as a reminder, how many employees came over with the acquisition?
Richard Brezski -- Chief Financial Officer
I don't have the exact number off hand. I don't know if Patrick or Bill does, but I would say it was in the neighborhood of 85 I believe.
Scott Searle -- ROTH Capital Partners LLC -- Analyst
Okay, all right. And then maybe moving over to the IoT front, I guess a couple of different vectors, just if you could talk (Technical Difficulty) expectations in general for (Technical Difficulty) dialog that you have going on there on multiple fronts? And then as part of that, you've got the (Technical Difficulty) from a 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 meters? Thank you.
Bill Merritt -- President & CEO
So in terms of IoT, we've talked about before, there's really (Technical Difficulty) two opportunities for the company; first is on the connection side naturally through Avanci (Technical Difficulty) they continue to (Technical Difficulty) the automotive market, that's where they're focused (Technical Difficulty) we continue it -- 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 way we think to go after the IoT market. From a connections standpoint, on the -- call it the upper layer technologies and that's really the Chordant (ph) business for the company, that's, as you know, two pieces, it's both a patent licensing piece and a software piece. So I'd say, we're very encouraged over the course of this year in terms of the market interest in oneM2M. I think we have (Technical Difficulty) would not see why (Technical Difficulty) and that's a risk any time you develop (inaudible). I wouldn't say we're out of the woods yet, but certainly the indicators we have had this year have been very positive in terms of RFPs from operators and some deployments 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 (Technical Difficulty) we're engaged with a number of operators out there, we're looking at (Technical Difficulty) license agreements with them around the software and (Technical Difficulty) contribute to revenue this year and certainly next year. I'd look at it as the revenue opportunity (Technical Difficulty), but what may be more (Technical Difficulty) if that effort drives the (Technical Difficulty) substantial amount of life into that patent portfolio. So all good there. I know (Technical Difficulty) Investor Day in December (Technical Difficulty) and we'll be able to give some more highlights (Technical Difficulty) market at that point.
Scott Searle -- ROTH Capital Partners LLC -- Analyst
Great, thank you.
Operator
And moving on, we'll go to Matthew Galinko with National Securities.
Matthew Galinko -- National Securities Corporation -- Analyst
Hey, good afternoon, good morning, thank you for taking my questions. I guess it sounds like your focus is on the Technicolor integration for the balance of the year. I guess I'm just wondering (Technical Difficulty) pretty nice pile of cash on the balance sheet (Technical Difficulty) opportunities (Technical Difficulty) evaluating opportunities or just how do you think about the M&A environment at this point?
Bill Merritt -- President & CEO
So, you're right. I think we're -- we will be very, very focused on the Technicolor integration. There is a huge amount of value that (Technical Difficulty) created there. We want to make sure that we (Technical Difficulty) manage the cost side well, (Technical Difficulty) the customer well, so there's a lot to do there and there's (Technical Difficulty) a lot of opportunity. That said, we have a very strong corp dev team and they continue to explore opportunities out there. A number of things that do pop up from time (Technical Difficulty) and so we're going to keep (Technical Difficulty) 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 times they're 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 maybe are 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 some of the earlier comments I made today, scale is really, really (Technical Difficulty) in this business and to the extent we can (Technical Difficulty) additional assets that will increase (Technical Difficulty) the customer, increase the number of tools we have with customers (Technical Difficulty) 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 (Technical Difficulty) and make sure we get the Technicolor thing done right.
Matthew Galinko -- National Securities Corporation -- Analyst
Got it. Thanks. And if I could just (Technical Difficulty) that one. Just (Technical Difficulty) you're 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 a third (Technical Difficulty) the opportunity?
Bill Merritt -- President & CEO
So I think you start with a set 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 (Technical Difficulty). So certainly within mobile, more assets within mobile will be (Technical Difficulty) very interesting to us. What we like of course is assets that are backed by R&D and where there is a synergy, that's what we do already, so as an example, there's tremendous synergy between wireless and video. There's synergy in how the technology (Technical Difficulty) but there's also synergies in how they're developed, I mean, it's a lot of (Technical Difficulty) work and that's -- it's not (ph) 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.
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 for us is automotive. (Technical Difficulty) I think about the automobile as the next smartphone. There is a huge amount of (Technical Difficulty) going on there and a huge amount of opportunity within that space and so, we certainly can participate there today from a wireless perspective, but that's -- while very important, there's 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 what we do today. So I think those are kind of the three markets we'd look at, but the answer to your question is ultimately what you (Technical Difficulty) do the things that become actionable. We may want to do something on the mobile side (Technical Difficulty) consumer electronics is the first one the that pops, (Technical Difficulty) but again, 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 (Technical Difficulty) and as I said to the extent possible (ph) I want to make sure that we keep the organization (Technical Difficulty) and so if we could (Technical Difficulty) M&A and not lose an opportunity, we'll probably do that (Technical Difficulty) we can manage it (Technical Difficulty) but I certainly have some preferences.
Matthew Galinko -- National Securities Corporation -- Analyst
Got it, all right, thank you.
Operator
And next we'll go to (Technical Difficulty) Capital Management.
Unidentified Participant -- -- Analyst
I may have missed this, but could you comment on all of the -- any impact of the tariffs (Technical Difficulty) for your business as it relates to IP and (Technical Difficulty) extent that, that has any bearing on your Huawei renewal (ph) commentary there?
Bill Merritt -- President & CEO
Sure, I think there is some level of impact and it kind of comes in two (Technical Difficulty) one, certainly just in terms of the US/China relationship. So certainly what went on with ZTE, (Technical Difficulty) 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 whatever restrictions that the government may put on 5G (ph) transfers, on one hand, since we're dealing with standard (Technical Difficulty) they've already -- technology is already (Technical Difficulty) we don't believe that type of technology gets hung up in any tariffs or restrictions. What can get affected though is some of the other work that we may want to do with the Chinese licensee. We haven't -- I mentioned earlier (ph) on the call, we have to (Technical Difficulty) through some of the tools that we use in license discussions (Technical Difficulty) 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 as we move forward. We're pretty engaged in Washington. We have a facility down there because of the importance of a variety of regulations on the company. So we're pretty -- we've kept pretty abreast of those developments and so, I'd say, we've managed through these (Technical Difficulty) fairly well so far. I think that we will continue (Technical Difficulty) but I guess it's become something else we have (Technical Difficulty) which we didn't have to manage before.
Unidentified Participant -- -- Analyst
Bill, any comments on the Huawei renewal?
Bill Merritt -- President & CEO
So Huawei represents one of those customers that not only where we have the opportunity to talk to them about not just wireless, but now video technology on their handsets, but they have other parts of their business as well that (Technical Difficulty). So we're engaged with them (Technical Difficulty) as you would expect there would be (Technical Difficulty) meetings with them. Obviously, (Technical Difficulty) those are always going to be discussions involving significant economics (Technical Difficulty) it is always a challenge, but we've (Technical Difficulty) much I think (Technical Difficulty) three years ago or four years ago (Technical Difficulty) some level of engagement between the two companies. I think there's a difference (Technical Difficulty) between the two companies. (Technical Difficulty) but I believe that we're in a much better position this time -- we'll have time to get it done on a reasonable value and a reasonable timetable.
Operator
And moving to Jim (Technical Difficulty).
Unidentified Participant -- -- Analyst
Hi, this is John (Technical Difficulty) at Permit Capital. I just a question about capital allocation, to the extent that you will 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 (Technical Difficulty) maybe $150 million or so (Technical Difficulty) buyback, but you've got over $1 billion in cash and your stock price really hasn't done (Technical Difficulty) meaningful in the last 18 months, just kind of moved sideways. Just curious how you think about that?
Bill Merritt -- President & CEO
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 (Technical Difficulty) a topic of conversation at our Board meetings. We also, not too long ago, 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.
Operator
And that concludes our question-and-answer session. I'll turn it back to our presenters for any additional or closing comments.
Patrick Van de Wille -- Chief Communications Officer
Thank you, Paula. Thanks everybody 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 do apologize for that and we are looking into it. If you have any questions, feel free to reach out to 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.
Operator
And that does conclude today's conference. We'd like to thank everyone for their participation. You may now disconnect.
Duration: 40 minutes
Call participants:
Patrick Van de Wille -- Chief Communications Officer
Bill Merritt -- President & CEO
Richard Brezski -- Chief Financial Officer
Charlie Anderson -- Dougherty & Company -- Analyst
Eric Wold -- B. Riley -- Analyst
Scott Searle -- ROTH Capital Partners LLC -- Analyst
Matthew Galinko -- National Securities Corporation -- Analyst
Unidentified Participant -- -- Analyst
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