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InterDigital Inc (NASDAQ:IDCC)
Q2 2020 Earnings Call
Aug 6, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the InterDigital, Inc. Second Quarter 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the call over to Patrick Van de Wille. Please go ahead, sir.

Patrick Van de Wille -- Executive Vice President, Chief Communications Officer

Thanks very much. Good morning everyone and welcome to InterDigital's second quarter 2020 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 and our Annual Report on Form 10-K for the year ended December 31st, 2019, 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. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our second quarter 2020 financial metrics tracker, which can be accessed 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 2020.

Finally, with COVID-19 the participants on this call are all in different locations, some of which are experiencing significant weather events. If there's a weather related technical issue during the call, I'll just ask everyone to be patient while we exercise a fallback option.

And with that taken care of, I will turn the call over to Bill.

William J. Merritt -- President and Chief Executive Officer

Thanks, Patrick. Good morning everyone and thank you for joining us on the call this morning. Appreciate the world continues to be going through a crazy period. I hope all of you are well and finding some time to relax this summer.

With that in mind, I was going to keep my remarks fairly brief today touching on the status of our licensing business, a quick update on litigation and then closing with some remarks around the Company's operations in light of the continuing pandemic.

As for the business we've proven once again how resilient our business model is, growing revenues by 15% during what is arguably one of the more difficult global periods in recent memory. While that revenue increase was driven part by our renewed agreement with Huawei, we've also signed over a half dozen new agreements in the last three quarters, all of which are beginning to contribute to revenue. We also signed a small new CE agreement early this quarter that will contribute to third quarter revenue. Licensing is all about momentum and we certainly have a good amount of that now.

In addition to that licensing success, we also continued to move the ball down the field with other potential licensees on both the mobile and CE side. All that speaks to how well our now larger and more diverse licensing business is operating and gives us confidence that we can deliver on the revenue goals we articulated for the different licensing programs.

Of course, we occasionally do have the customer that simply refuses to negotiate in good faith and it's the case with Xiaomi. Despite years of effort by InterDigital, Xiaomi has failed to take the licensing issue seriously. This type of behavior never ceases to amaze me. Xiaomi's success in the cellular handset market was never happened, but for cellular standards. It is to make no upfront investment in the development of wireless technology, it was all provided to them as part of the worldwide cellular standards process, an incredible process that eliminates barriers to entry and enhances competition benefiting product manufacturers and consumers alike. Essentially billions of dollars of research are made available to brand new market entrants, allowing them to quickly scale up production and become a market force. And that is exactly what Xiaomi did and they have profited enormously. The only thing asked of them is that they pay a fair price for the billions of dollars of technologies to which they have been provided access and Xiaomi has failed to do so.

Hence we made the decision to bring a patent infringement lawsuit against Xiaomi, India, which we filed last week. Of note, we actually filed two patent actions in India. The first is based on cellular inventions created by InterDigital. The second lawsuit is based on the video coding technologies developed by our R&I team, which we acquired as part of the technical transaction. The suit demonstrates the broader reach of the Company's innovations and the value that we believe we are due for the use of our inventions.

Among other things, the lawsuit seeks injunctions against Xiaomi's sales of handsets in India, which is a significant market for them. Of course, we continue to be willing to enter into a license agreement with Xiaomi on fair, reasonable and non-discriminatory terms. We will also be willing to arbitrate the terms of the license, which is something we offer to all prospective licensees. What we're not willing to do is have Xiaomi use our technology without appropriate compensation.

And as we said before, litigation tends to be the last option for us which we pursue only when other options are exhausted. That said, litigation can be effective as our recent agreements with ZTE and Huawei followed the filing of litigation. Indeed, every company that we have ever litigated against has ultimately signed a license with us. We expect Xiaomi and Lenovo will do the same.

Next, let me touch quickly on the overall operations of the Company in this period. As is evident from the financial results, we continue to operate well. The company remains in a remote work mode and will remain so at least until the fall. Depending upon the status of the pandemic at that point, we will reopen the offices, consistent with all safety best practices for doing so. But we'll maintain the remote work option for all of our employees for the foreseeable future. Our employees have been highly productive working from home and we also have been very effective at recruiting new talent and leading them into the employee populations. So we don't see the need to rush back to the office. That said, we have a set of employees that have preferred office environment. So we are looking for the best way to balance these differentials. [Phonetic] So as I said, I thought I'd keep in short, we've had a great first half of the year and we're looking to repeat that success in the second part of the year.

With that let me turn the call over to Rich, our CFO, for a discussion of the financial results.

Richard J. Brezski -- Executive Vice President, Chief Financial Officer

Thanks, Bill. We delivered strong top line growth in Q2, bringing us in at the top end of our ranges for both total and recurring revenue. This growth was driven by new agreements, including our recent patent license agreement with Huawei. As noted in our 10-Q, as well as in the financial metrics published to our website this morning, Huawei made up approximately 30% of our total revenue in Q2, including contributions to both recurring and non-recurring revenue. The contributions from these new agreements were partly offset by our estimate for a sequential decline in per unit royalties of about 20% from Q1 to Q2. This represents our best estimate for the impact of the current health and economic climate on our customers' Q2 sales of royalty-bearing products. As is always the case, we will true up our royalty estimates next quarter when we receive the related royalty reports.

Our Q2 operating expenses increased $1 million from Q1. This increase was driven by an expected $2 million charge to step up compensation accruals based on newly signed patent license agreements and a $2 million increase in litigation expense both of which were offset by one-time and other cost reductions from Q1 2020. The increase in litigation expense reflects the increased activities in our disputes with Lenovo and our recently filed patent infringement case against Xiaomi in India. We currently anticipate our Q3 operating expense could increase in the $2 million to $4 million range driven by additional litigation expense and revenue sharing within our CE portfolio.

Let me now take a moment to discuss our cash flow in some detail. Recently I received a number of questions about our cash flow and how it relates to our revenue in a given period. We reported free cash flow of $60 million in Q2. This is a $95 million increase over the $35 million cash outflow we recruited in Q1. Many of you that follow us will recognize that such quarter-to-quarter variation is not unusual.

Over 90% of our revenue comes from fixed priced agreements. Such agreements typically have prescribed payment schedules. Some agreements call for quarterly or annual payments to be spread evenly over the term of an agreement. Others might include an uneven payment schedule that, for example, may be front-loaded to a degree. Ultimately these payment schedules result in a timing difference between when we recognize revenue and when we collect the related cash payments. To the extent the payments are front loaded, we recognize a deferred revenue liability. That liability is then reduced as we recognize revenue over the balance of the agreement. The sequential increase in cash flow from Q1 to Q2 was driven in part from the collection of approximately $100 million under agreements signed over the last three quarters. These payments cover the $20 million of non-recurring revenue as well as the recurring revenue we recognized from these customers in Q2. It also represents a partial payment toward the royalties due over the remaining terms of these agreements. This is a big reason why we also see deferred revenue and long-term deferred revenue collectively increase by $50 million from Q1. In fact, you can look at the total deferred revenue balance of $280 million as the total amount of cash we have collected to date related to future periods under signed agreements.

As a final comment on this topic, we sometimes accept non-financial consideration as a component of the consideration due to us under patent license agreements. Overall, this is a very small percentage, averaging just 5% of our total revenue over the last three years. All of this illustrates why recurring revenue is such an important measure for our business and why the free cash flow generated or used in any given quarter must be taken in context.

Finally, moving on to taxes, our recent agreements helped drive a level of profitability sufficient to somewhat normalize our effective tax rate coming in at about 20% for the quarter and 27% year to date. With continued success in expanding our revenue platform, we still expect our long-term tax rate to be roughly 15% until about 2026 when we expect it to increase to about 18% based on prescribed changes in the pass due. [Phonetic]

I'll now turn it back over to Patrick.

Patrick Van de Wille -- Executive Vice President, Chief Communications Officer

Thank you, Rich. Thank you, Bill. And Travis we can now open the call up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Ian Zaffino, Oppenheimer.

Ian Zaffino -- Oppenheimer & Co. Inc. -- Analyst

Hi. Thank you very much. Quite interesting [Phonetic] to see you guys are going after the patent enforcement pretty aggressively. Can you maybe give us color on some of the other ones that are not paying right now? Are those kind of close to litigation or are you presently just in negotiations? And what should we expect as far as the remaining ones? Thanks.

William J. Merritt -- President and Chief Executive Officer

Sure. So, Ian, we are -- just before I get to your question, let me just thank you and the firm for initiating coverage on the company. We obviously appreciate that and we welcome you to the first call as an analyst for the company.

Ian Zaffino -- Oppenheimer & Co. Inc. -- Analyst

Thank you.

William J. Merritt -- President and Chief Executive Officer

In terms of patent enforcement, I guess on one end there is a breaking point with customers sometimes that we just say that we exhausted all options and we move ahead to litigation as we did with Xiaomi. The other customers we have legal engagements with, they vary obviously between customers. If there is a lot of thought that goes into why we bring litigation at particular times that's obviously related to the company against whom we seek litigation, but there could be other strategic reasons as well. So whether we will commence additional litigation either against the current folks with whom we are in litigation with or new litigations, we take into account a lot of factors in making that decision. It's not something we do lightly. I always hope that we can secure the agreements without resorting to litigation. This is a cost litigation. And if you can avoid that cost that's a good thing. But also at some point you have to make sure that you get people on the paying side of the ledger. So let's see how it all plays out.

The current litigations I think are -- I think they are well established, meaning we've got good patents in these cases. I think we'll have good schedules to move forward on. They are also just part of a larger discussion with any licensee. So with Xiaomi it's not going to be just all about a litigation. We obviously would continue to engage with them in other ways and to seek to reach an amicable result if we -- if that's possible, something that's our desire.

Ian Zaffino -- Oppenheimer & Co. Inc. -- Analyst

I agree. Thanks for that color. And just have a follow-up. You guys are sitting with a lot of kind of net cash even after [Indecipherable] above and beyond what you need to run the business. So what are you thinking here as far as capital returns? You've typically bought back a lot of stock in the past. Where are your heads now, what are you thinking as far as buybacks? I know you've hit the [Phonetic] dividend, but specifically on buybacks. Thanks.

Richard J. Brezski -- Executive Vice President, Chief Financial Officer

Yeah, Ian, I'll be happy to take that. So, yeah, you're exactly right that we have a very strong history of returning capital to shareholders both through dividends and especially through buybacks. I think it's more than $600 million over the last five years or so, including almost $200 million last year.

Unlike a lot of companies in the current environment, we really value cash right now given the overall uncertainty that exists in the broader market, but also for us the potential for opportunities to invest in a way that could drive the most shareholder -- the most value for our shareholders. So that's kind of our current posture right now. But this continues to be a topic, as I always say it is, every time we get together with the Board.

Ian Zaffino -- Oppenheimer & Co. Inc. -- Analyst

Great. Thank you very much.

William J. Merritt -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Eric Wold, B. Riley.

Eric Wold -- B. Riley & Co -- Analyst

Thank you. Good morning, guys. A couple of questions. I guess, one, Bill, can you maybe -- if you could just talk about the rationale of filing the suit against Xiaomi in India. I know you mentioned it's a big market for them. Just trying to get a sense of the benefit of that market versus the US and the UK to go toward a global license. Do the Indian courts going to share the same stance toward global licenses that the UK courts do?

William J. Merritt -- President and Chief Executive Officer

Yeah, I think the Indian courts -- as you mentioned, it's -- obviously it's a big market for them and the purpose of litigation is really for the other side to take this issue seriously. And so bringing a litigation [Indecipherable] a very important venue for someone, I think achieves that result.

The Indian courts have -- there is some opportunity early on in the cases with respect to preliminary injunctions, as well as others sort of bonding and escrowing requirements that also would achieve the same result, would just make the other side think seriously about continuing to willfully infringe the patents that we have. I think the court has been -- so far it's -- a lot of these patent [Phonetic] related matters in many courts are new. But so far the Indian courts seem to deal with them in a fair way and that's really all we want. We don't need the playing field tilted in our favor. We just need a playing field that's level and the Indian courts seem to be doing a good job over there.

And despite the pandemic issues around the world, the Indian courts on these particular matters have moved them along at reasonable speed. So for all those reasons it seems like a really good choice and that also shows, I think, the fact that the portfolio is diverse, not only technologically but geographically that we can bring actions in different countries as need be. So, yeah, a lot of other factors, but I think those are important ones.

Eric Wold -- B. Riley & Co -- Analyst

Not that I want to necessarily get into your litigation strategy on a public call like this, but I mean is there -- I know your focus is always a global license. Would you ever stray from that? If there is a market that's large enough for a single entity you'd be OK getting a single country license if it's going to hurt some or if you did that does that kind of throw a wrench into the works of the other global license you actually have around pricing and whatnot?

William J. Merritt -- President and Chief Executive Officer

Yeah. Yeah, I think it's a slippery slope. If you think about mobile devices, what's the nature of a mobile device, right, it's designed in one country, parts are sourced from another country, it's manufactured in a third country, it's sold in a fourth country and then used in -- for the other countries. So the whole concept of a license just covers one country is -- it's a difficult -- [Indecipherable] not saying, it's impossible. But we've always taken the view that worldwide license makes the absolute [Indecipherable] the other approaches don't really have a strong rationale for them. So I think it's a slippery slope and that's why we've always been very adamant.

As all else equal all other patent holders [Indecipherable]. It's all about a worldwide license. If you think about the standards themselves the standards don't enable sales in a country. The whole nature of the standard is that it enables sales worldwide. So having enabled sales worldwide, the license should follow.

Eric Wold -- B. Riley & Co -- Analyst

That makes sense. And last question for me. On the CE side, I guess you previously signed a set top boxes license, a TV license. I guess first question is what end market was the CE license you mentioned signed in Q2? And then how should we think about the smaller licensees providing a tailwind toward larger licensees? I know you're talking about these kind of providing some level of pricing framework as you talk to the bigger entities. Do the bigger entities consider these smaller deals as relatable and providing framework or do they think of them as more irrelevant smaller deals and a larger entity will provide more of the framework needed?

William J. Merritt -- President and Chief Executive Officer

Yeah. So I'll go to the last question first. I think every deal becomes important for two reasons, right. They contribute to revenue which is great. Second is, when you go to a customer, an unlicensed customer, they do provide validation because sometimes even though deals may be smaller, the companies that sign the deal are big and therefore they don't give away significant sums of money for no reason, right. And you can use those as benchmarks in negotiations with other people.

The third piece is very important too, because when you go to litigation, all of those agreements become important, right. Actually a litigation is the idea of very significant volume discounts. There is some limit on that. And so I think that they are important for all those reasons. They give us price validation, patent validation, they give us usable material litigation. And -- so I think it's -- I think in that context and as I mentioned in the script, momentum in licensing [Indecipherable] is really important and -- because people see others signing. There is this -- you get this wind at your back and it's really helpful. So I'll let Rick handle the other questions that you asked in terms of value contribution and then I just wanted to handle that strategic point.

Richard J. Brezski -- Executive Vice President, Chief Financial Officer

Yeah. And Eric I guess you kind of framed it correctly in your question. We had some good success with some smaller licensees on the CE side. But in terms of the traction they provide, it's just what Bill was saying, it's traction for the business. It's -- they are smaller, so on a recurring basis anyway, it has some nice recurring -- I'm sorry, nonrecurring contributions from some of the new deals. But on a recurring basis, it hasn't moved the needle in a dramatic fashion. I generally discuss that of the $150 million kind of top line goal we have for that business, we're roughly 10% of the way there. That kind of ebbs and flows quarter-to-quarter because it is more per unit in nature. So it's going to depend on our underlying customer sales.

To put that into perspective, in the current quarter when we are estimating a lower level of per unit royalty also had some true-ups that come through that reduced the CE revenue for the current quarter. We're actually trending below that 10% line. So it's going to move around. These haven't changed license today, [Phonetic] but they do set us up for more deals and further traction and eventually that begins to pile up.

Eric Wold -- B. Riley & Co -- Analyst

And will it be a market for those newest one?

William J. Merritt -- President and Chief Executive Officer

For that most recent deals, I believe it was television.

Eric Wold -- B. Riley & Co -- Analyst

Great. Thank you, guys.

William J. Merritt -- President and Chief Executive Officer

Thanks, Eric.

Operator

Our next question comes from Charlie Anderson, Colliers Securities.

Charlie Anderson -- Colliers Securities -- Analyst

Yeah, thanks for taking my questions and congrats on a great quarter. So I wanted to start with opex. Rich, I wonder if you could maybe just provide a little bit of extra context. I think you alluded to a $2 million to $4 million bump, I think I heard that right, that was sequentially. I know there was a performance-based comp increase embedded in Q2, $3 million or so. So am I thinking about this right that it's actually coming naturally a $6 million move up and I know there was a revenue share component there. I wonder maybe you could speak to that one directly too in terms of how much of the lift is related to that. And then I've got a follow-up.

William J. Merritt -- President and Chief Executive Officer

Yeah. So at this point Charlie there's not too much more I can add. I mean, as you know, we typically don't provide a lot in terms of expense guidance. But when we have a movement or a charge that we anticipate we will try to provide a heads up on that. We of course have been doing a little bit more than traditionally given the Technicolor acquisitions and kind of the impact that have in the P&L.

But again, litigation is definitely a factor there with the Lenovo case kind of going and picking up a little bit of momentum as well as now having a new case which obviously was just recently filed. So, there is typically going to be some run up prior to filing the case. So it's not as if it's not in Q2 at all, but not to the level that we'd expect it to be in Q3. So that's definitely a component, probably the biggest component of it. And then there is -- there are some smaller nonrecurring items that swing things as well.

Charlie Anderson -- Colliers Securities -- Analyst

Okay, great. And then Bill, just thinking big picture about the ability to get the rest of China under license. Obviously great progress with Huawei and ZTE. But I'm sort of just curious from your perspective is there anything over the course of the next year you see as maybe an external factor whether it'd be 5G phone launches or whatnot that could maybe cause some of those negotiations to quicken the pace relative to normal? Thanks.

William J. Merritt -- President and Chief Executive Officer

Yeah, I mean I think that there are a lot of factors like -- there's obviously the things that we can do, right. So bringing litigation or even a frac [Phonetic] of litigation is helpful. I think one of the benefits of now having filed a number of lawsuits, be it Huawei, Lenovo and now Xiaomi, it's pretty clear the Company is ready, willing and able to protect its IP. And that's sends a pretty strong message to people. So I'd say that's one.

Second, I'm not sure that this 5G launch or things like that is a driver. But one external driver on the legal side has been a development in Germany, which has been -- which is a great development for actually I think for the industry. And basically what it is is the establishment of a framework which says that if you are a customer and you're using a generation and you fail to negotiate in good faith with the patent holder, that you may not be able to remedy that later, like to wait until they see it you're actually infringing and then make an offer. There may be a more draconian penalty for having negotiated in bad faith, just like there can be draconian penalties on the other side if as a patent holder you negotiate in bad faith. [Indecipherable] that could have a significant impact in just causing people to be reasonable and [Indecipherable] people are reasonable, guess what, deals get done. So I actually thought it was a really well thought-out structure that the German courts have come up with.

So I think that can be an external force in function. I think -- other than that I think as I mentioned before, if we can get to the finish line with Xiaomi or Lenovo in part assisted by the litigation, I think that -- then the other customers start to become outliers. And on the -- with the heightened focus by Trump administration, frankly a lot of people on India's respect -- I am sorry, China's respect for IP being outlier is not where you want them to be. So I think that like we should do there is -- we have a lot of irons in the fire. So there's things we can do ourselves at [Phonetic] external policies that we could influence, there are other policies that get developed that we can simply highlight to our customers and I think hit that hole. And then at the end of the day it's also our ability to be fair and reasonable in our negotiations, offer a variety of structures for deals to get things done. So, I feel good, and that's where we are and hopefully that means we drive a few more across the finish line.

Charlie Anderson -- Colliers Securities -- Analyst

Okay. Great. Thank you so much for all the color. Appreciate it.

Operator

Our next question comes from Scott Searle, ROTH Capital.

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Hey. Good morning. Good afternoon. Thanks for taking my questions. Hey, Rich, just quickly, I'm not sure if I missed this, but did you give a number for video or Technicolor in the quarter? And I have a couple of follow-ups on the India and China.

Richard J. Brezski -- Executive Vice President, Chief Financial Officer

When you say a number, you mean revenue?

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Yes. Yeah.

Richard J. Brezski -- Executive Vice President, Chief Financial Officer

Yeah. Yeah, yeah, Scott, I mentioned that we were -- that we've been kind of operating at, call it, roughly $15 million annualized. And that even with new deals we're trending a little bit below that this last quarter and that's based on really two things. We had a couple of true-ups that came through related to our estimates for Q1 that were booked in Q1 and then the actual reports come through in Q2. So that suppressed things a little bit. And then in addition, the CE business is largely per unit at this point. And as I mentioned, we're anticipating included in our numbers an estimate for lower per unit royalties in the quarter.

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Great. Perfect. And on the India front, could you give us a better idea of what the timing is of the Indian legal process in terms of injunction and otherwise and what we can expect in terms of the cadence of the litigation?

William J. Merritt -- President and Chief Executive Officer

Yeah, I think we will have -- there is some disclosure in the Q around the case. Generally it moves, I'd say a little quicker on the front end and James, I think that occur in the front-end or things like preliminary injunction request and also to the extent that the new money put out for an eventual maybe escrow. Those things happen sooner.

I think after that when we get into the meat of the case, I think like my sense is -- and we obviously have a very skilled counsel in that area and our internal folks [Indecipherable] that this is somewhat new for the Company. My sense is that it's a little -- it kind of has the same level of lack of predictability as other courts do. But it's -- I think it's the front-end process that exists, that -- again I think the purpose of all of this is to get the company, Xiaomi to just take this issue seriously. And I think that is hopefully achieved early on in the process.

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

So Bill just to follow up on that point, is there a timeline or a date associated with the injunction because that seems like it's the real trigger point here to get them to the table and start to engage. Is that something that would be decided upon this year?

William J. Merritt -- President and Chief Executive Officer

So my -- I don't know, I have to go back and look at the disclosure that we put out. And I mean obviously it's developing sort of as we speak. So that's an item we can follow up on. So I think the important part is it is relatively quick from my understanding.

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Got you.

William J. Merritt -- President and Chief Executive Officer

And we're only halfway through the year, so that I think with that -- I think that's a good thing.

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Fair enough. And then to transition over to some of the larger China-based OEMs in particular Vivo and Oppo, you've seen Huawei get a lot more aggressive within the domestic market, given the limitations of using certain android features internationally. It's translated to a pretty meaningful increase in share, I think from the first quarter to the second quarter. So I'm wondering if that -- the licensing agreement with Huawei in combination and even throwing Xiaomi litigation in India on top of it, how is that changing the tone or the cadence and the pace of engagement with Vivo and Oppo, particularly given now it seems like they're shifting more of their attention on the export front?

William J. Merritt -- President and Chief Executive Officer

Yeah. So -- look, I think you are right. I mean, Huawei has -- is focused on that domestic growth market for the reasons that you gave. And as the result of that, others are getting pushed out a little bit, so then they've got to decide where to go to grow their businesses and they are going to the places you'd expect which is the places Huawei cannot go.

So they were in India, one, Huawei has actually ever been very strong in India, they were in Europe and to some extent they were in the US. Historically as companies have moved into regions where IP enforcement is more predictable and more stronger that they do need to take the licensing issues more seriously. There is other things that occur within those jurisdictions as well beyond just sort of the court systems. But there is regulatory pressure that can be brought to bear.

I'll give an example. Back in end of 2018, there was a provision -- or '19, there was a provision put into the national defense act that comes out of the US once a year, specifically with meeting an IP. And so -- and that created some level of pressure on ZTE. So right now these companies focus on the international markets more, so subject to both regulatory and judicial things in a more significant way and that helps. So, again I feel like the level of engagement is good and obviously when we don't feel it's good, the company has not been shy about bringing the appropriate lawsuits.

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Great. And lastly, just maybe a quick update on IoT and Avanti [Phonetic], what you're seeing on that front. I know it's early stage and it's been taking a little bit longer, but it seems like there the COVID environment, constant connectivity, the ability to efficiently optimize etc. devices that are connected, it seems like it's gaining more momentum, whether it's an auto and otherwise. So just kind of wondering if there are any thoughts or updates as we're going into 2021, does that become a little more measurable in terms of the results. Thanks.

William J. Merritt -- President and Chief Executive Officer

So I think you're right, I think that while the IoT market hasn't accelerated the way I think people would have thought, and I think some of that was hyped, the direction is certainly correct. And so there is obviously -- there was always this need for connectivity -- constant connectivity act. I think what you're seeing in the pandemic is sort of making that even more apparent that this constant connectivity is really important.

I think the Avanti [Indecipherable] platform, yeah, it had a nice measured success, it's really going to get licensors on board. There has been some litigation in Europe that they're working their way through. I feel like everything is in good position there. I think that their approacah is one that very much embraced by a lot of people because ultimately I don't think people want this continuing angst filled environment around licensing on such a critical technology. And I'll take -- and I'll take you back to that German -- recent German decision. I think that's underlying in some ways that decision, which is, this is not good. All of these cases end up in court. It's consuming a lot of court resources. There should be rational -- there should be a rational result here.

And simply putting in place a structure that forces people to be reasonable, I can get you there. So we'll see to some extent, I think there's two pieces here. One is how quickly do the cars themselves roll off the line with that constant connectivity booked it. And then how effective is RC and licensing it. Very confident with where Avanti is and I think the other part is just, it's going to happen, it's just happened a little slower.

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Great. Thank you.

Operator

Our next question comes from Michael Cohen, MDC Financial Research.

Michael Cohen -- InterDigital, Inc. -- MDC Financial Research

Yeah, hi. Bill, thanks and congratulations on the quarter. I was wondering if you could share the names of some parties that are not fully license that you would like to have under license other than Lenovo and Xiaomi?

William J. Merritt -- President and Chief Executive Officer

Yes, mostly the Chinese manufacturers, so it's Oppo, it's Vivo, it's TCL and the other ones that we are in litigation with or Lenovo and Xiaomi. I think if you look at -- there is a smatter -- I don't think I'm missing any of the major Chinese companies, but everyone is rather big. The beauty of the cellular market is and the cellular standards is people could become major players in a relatively short period of time. There are smaller players outside of China. But I'd say most of them are relatively small. So I think that -- the ones I gave you are pretty much the drivers that get us to -- up to our desired revenue platform.

Michael Cohen -- InterDigital, Inc. -- MDC Financial Research

And we saw the US Government Department of Justice file a statement of interest in Qualcomm's case. And now we've seen it file them in your case and Lenovo. I was wondering do you have any comments on that?

William J. Merritt -- President and Chief Executive Officer

Yeah, I think this particular department of justice has taken an interest in making sure that particularly antitrust laws are not abused in a sense that they're not applied in circumstances that they were not intended to be applied in, because to the extent you start to stretch a law beyond its original purpose it starts to lose its effect. And so -- Makan Delrahim heads up this particular position within DoJ. He has been an advocate of making sure that there is discipline around the use of antitrust provision and that's why they filed the statement.

In our case, basically I think claiming that the claims -- antitrust claims that are above the case are not well founded. And so we're happy to see that support. We think it makes a lot of sense. I think that ultimately when we look at these disputes on file [Phonetic], they are actually very straightforward disputes, it's a contract dispute. We've undertaken the obligation to [Indecipherable] reasonable and non-discriminatory terms. And the other side has an obligation negotiating in good faith to get to that end as well.

And if there is a disagreement on that, it's a -- essentially it's breach of contracting. So I think it's been -- lots of other things have been tried to be applied into it to make it more complicated, more costly. It takes a lot of things to make the licensing more difficult. And I think what you are seeing is hopefully a simplification of the issue, right. So again we're very happy to see that support from the DoJ.

Operator

There are no further questions in the queue at this time.

Patrick Van de Wille -- Executive Vice President, Chief Communications Officer

Thank you. Well thank you very much, Travis, and thank you -- thanks for joining our call this quarter. We look forward to giving you an update in the next quarter. Thanks everyone.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Patrick Van de Wille -- Executive Vice President, Chief Communications Officer

William J. Merritt -- President and Chief Executive Officer

Richard J. Brezski -- Executive Vice President, Chief Financial Officer

Ian Zaffino -- Oppenheimer & Co. Inc. -- Analyst

Eric Wold -- B. Riley & Co -- Analyst

Charlie Anderson -- Colliers Securities -- Analyst

Scott Searle -- ROTH Capital Partners, LLC -- Analyst

Michael Cohen -- InterDigital, Inc. -- MDC Financial Research

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