InterDigital Inc (IDCC) Q4 2020 Earnings Call Transcript

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InterDigital Inc (IDCC 0.74%)
Q4 2020 Earnings Call
Feb 19, 2021, 10:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the InterDigital Incorporated Fourth Quarter 2020 Earnings Call. [Operator Instructions]

And at this time, I would like to turn the conference over to Tiziana Figliolia. Please go ahead.

Tiziana Figliolia -- Vice President, Finance

Thank you. Good morning and welcome to InterDigital's earnings conference call for fourth quarter and full year 2020. I am Tiziana Figliolia, Vice President of Finance and Investor Relations and with me in today's meeting are Bill Merritt, our President and CEO; and Rich Brezski, our CFO. Consistent with last quarter's call, we will 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 31, 2020, 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 compared -- directly comparable GAAP financial measures are included in our fourth quarter 2020 financial metrics tracker, which can be accessed on our homepage www.interdigital.com, by going to the Investors section of the website, and clicking the link that says Financial Metrics Tracker for Q4 2020. Finally, with the pandemic still a concern, the participants in this call are all in separate locations. If there is a technical issue during the call, I will just ask everyone to be patient, while we exercise a call back option.

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

William J. Merritt -- President and Chief Executive Officer

Thank you. Tiziana. Good morning to everyone and thank you for joining us on the call this morning. Similar to past calls in these difficult times, I hope all of you are staying well. As you saw in the press release issued this morning, the company delivered both an excellent quarter and frankly a fantastic year, while managing our way through the COVID crisis. I'm also pleased to announce that we have signed in the first quarter of 2021, a license agreement with Humax, a South Korean manufacturer of set-top boxes, DVRs and other consumer electronics. So our consumer electronics business continues to progress nicely.

This is our Q1 -- Q4 earnings call, so let me recap the year 2020 and then talk about our objectives for 2021. So you got to read more specifically about the goals we set for ourselves in 2020 in our proxy, but in a nutshell, they were to drive revenue, drive other deals down the playing field and get them closer to completion, continue to innovate, and continue the positive evolution of the company in terms of talent and processes and then COVID hit.

In a reflection of the strength of the organization the company was nonetheless able to deliver on and in some instances exceed our goals, while also managing our way through the pandemic. On revenue generation this is our best revenue year since 2017, signed six new deals, including of the renewal with Huawei. We also moved a number of deals down the field positioning us in 2021 with negotiations that are significantly matured and our position to close.

We also commenced litigation against other companies where negotiations had not matured, and where we believe litigation was appropriate. In addition, we continue to be a thought leader in the licensing industry, as demonstrated by the company's industry leading efforts to provide transparency into our rate structure and patent. Finally, in some cases we drove regulatory and legal change that dramatically improved the licensing environment.

On innovation, we had another standout year despite our engineers and scientists working remotely, and the standard organizations we contribute our innovation to themselves working remotely. Oddly enough, because our research team is already collaborated across our R&D sites, the transition to a remote work environment went pretty smooth, as the teams were already well equipped and versed in engaging via Teams View and other platforms. The result was great innovation, great contributions to standards and more of the advanced thinking the company is known for.

On the people and process side, we've got some fantastic talent into the organization demonstrated to ourselves and to the world how attractive we are as a company, how much people believe in the opportunity we have ahead, and how enjoyable and intellectually challenging to work at InterDigital can be. Indeed we're relatively small company we have an outsized opportunity to drive groundbreaking innovation, be a thought leader on licensing, driving new legislation and invent new ways of working.

We captured much of that when we rolled about the updated vision for the company, which is inventing the technologies that make life balance. In the combination of our innovation in the key spaces of wireless and video, and our unique business model of making that technology available to all we have helped to untap the world from wires, we moved the constraints of geography and bring the world joy, of friendship, knowledge, music, and beauty to anybody anywhere. We're really proud of what we do.

We're also very proud of how we responded as a team to the pandemic, and we roll into 2021 even stronger and ready to deliver on several key goals for the year. The first will be continued revenue growth. As I mentioned earlier, we have moved deals down the field in 2020, now it's time to push them over the goal line led by uniquely qualified licensing team. And while it's always difficult to say when and what time, our objective is to drive new meaningful deals on both the wireless and the consumer electronics side as we just did with Humax.

A comment on Humax. For those who do not follow the set-top box market, Humax is about the number 5 or 6 set-top box manufacturer in the world in terms of worldwide sales. Concluding a deal with them is notable in its own way, both of the completion of this agreement -- with the completion of this hat agreement, we now have signed benchmark agreements in three key areas of our consumer electronics licensing plan. Those would be digital TVs, with consumer IDR, set-top boxes for non-HEVC patents, it's related to Humax represents. And then the third deal specifically around HEVC only. With these three deals along with overall we have concluded, since we acquired the business in Technicolor, we continue to be confident in reaching the revenue goals we have set for the consumer electronics program.

Moving onto our other 2021 objectives, we continue to drive wireless and video innovations to be measured by our contributions to worldwide standards, patent filings, publications and other thought leadership. Of importance to our research team will be 6G, 5G certainly will do its job in creating a flexible network that can handle a wide variety of use cases from shopping to web browsing to connecting billions of machines to supporting self-driving cars.

Part of 6G mission will be to make all of that happen faster using less power in a less reactive and more predictive way. This will mean inventing and adapting solutions that push more process into the edge, drive higher and dramatically faster compute power and that lead in artificial intelligence and machine learning, and those are the types of innovation at which we excel.

2021 will also be a year of higher focus on sustainability. The company has historically done many good things on environmental, social and egovernance front, we just did nearly top speed for them. That said, the rude awakening of tri-fecta of the pandemic, the black live matters protest and the capital via Bake Field, that is really, really important, not only to lead by example and be more vocal about what we do, but also to do more to drive a more vibrant and sustainable world. So that is what we intend to do.

In terms of technology, that means creating innovation that helps reduce the carbon footprint of wireless technology, or that help drive the adoption of our technologies in to industries where that technology can reduce the need for truck rolls, travel, and other energy-intensive activities. In terms of our company, it means driving greater diversity from the top to the bottom of the organization, getting back to our community and rethinking the future of work to better balance people's need to build, drive and connect. It helps when you can do all of that from a position of strength. Thanks to the effort of our team in 2020. That is where we are and it's the same team that is poised to deliver great things in 2021 and beyond.

With that, let me turn it over to Rich.

Richard J. Brezski -- EVP, Chief Financial Officer

Thanks, Bill. As Bill said, we delivered tremendous results in 2020 with an increase of nearly $40 million in recurring revenue. I would like to take a moment to emphasize once again the importance of operating leverage in our business model, since it is exemplified by our 2020 results. While our top-line increased $40 million or 13%, our operating expenses increased just 8%. Better still, when you adjust for litigation expense and a full year from our expanded research team, the year-over-year increase in operating expense was less than 3%.

As a result, our 13% increase in the top line drove a 46% increase in operating income. This is the great result for 2020, but more importantly, it is a clear demonstration of how valuable our operating leverage is during periods of growth. Of course, we recognize that we need to continue to drive top-line growth to fully take advantage of this leverage.

As Bill noted, in addition to enforcing our intellectual property rights against Xiaomi and Lenovo, we made progress in 2020 toward license agreements with both additional mobile handset and consumer electronic manufacturers. We believe we have made fair offers across the board and we are pleased to see growing worldwide recognition that manufacturers have a responsibility to pay fair royalties. We believe this sets us up to drive resolutions to new and meaningful license agreements in 2021, and/or support compelling arguments where counterparties have failed to negotiate responsibly.

We continue to believe that between just mobile and consumer electronics, in the long-term we can deliver roughly $300 million of additional recurring revenue on top of our 2020 run rate. Better yet, we believe we can achieve this top line, while targeting inflationary level growth in operating expenses that is outside of sharing roughly one-third of our $150 million consumer electronics revenue target with partners. We believe our 2020 results support our ability to deliver on this target.

Moving on, we delivered over $120 million of free cash flow in 2020, an increase of $70 million, which more than doubles 2019 levels. As is typically the case, our intra-period cash flow was a bit choppy with use of cash in the first quarter and strong free cash flow over the balance of the year, in particular, the second and third quarters. Also typical for our business, a portion of the 2020 receipts related to future periods. We ended the year with total cash and short-term investment balance of $926 million. This represented a small increase over the prior year-end despite a $138 million in debt repayment and dividend payments.

Looking forward, we believe our sizable cash balance puts us in a strong position to continue enforcement of our patents and to make organic investments, all while considering inorganic investments and share repurchases in 2021. To remove any chance to miscommunication, such considerations are normal course and will be made with the same careful focus we have employed in the past. Finally, we will provide our expectations for Q1 revenue in a few weeks after we have received our final Q4 royalty reports.

Tiziana Figliolia -- Vice President, Finance

Thank you, Rich. And thank you, Bill. And we will now open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Eric Wold with B. Riley Securities.

Eric Wold -- B. Riley Securities Inc. -- Analyst

Thank you. Good morning, guys. A couple of questions. I guess one, Bill, maybe give us a sense, you talked about a lot of negotiations you've been having kind of progressed to the point where you think they're close to closing and others did not, you resorted to litigation, I guess, maybe give us a sense of what is the difference between the two? I mean, what gives you the confidence that something is close to potentially closing versus not kind of what are those signals and kind of -- maybe kind of what's been the hit rate of negotiations that have hit that point before?

William J. Merritt -- President and Chief Executive Officer

Yes. So look, it's obviously something that come from years of doing this, right? I think the simplest thing is movement. So you can have a considerable gap between the parties, but there can be movement like they could be inching closer to each other. And so that's something that you're just going to allow to play out and see where it land. So movement I think is very important. I think -- second is, if there is not movement, the question is can you figure out why. And sometimes, there could be a really legitimate business movement where you understand where the other side is at, and it's not -- they're not really positioning themselves for litigation, but they're going through a period of time in their business when movement is not something they can do. So there's a bit of patience that comes into that.

Third is, sometime you feel like the other side, they actually be positioning things for litigation and while you don't want things to be a race to the courthouse, there is some value would be reversed sometime, so you kind of sense that. Hardly enough you have customers that will actually outright invite litigation because it's how they can raise the profile of the negotiation within their company. And so you think about that. Probably other reasons too, but those are what that come to mind.

Eric Wold -- B. Riley Securities Inc. -- Analyst

Okay, it's fair. And then on the CE business, you talked about the kind of the benchmark licensing deals you've done within digital TVs, set-top boxes, HEVC, do you think that business is now with those benchmark deals is at a point where it can hit an inflection in terms of getting a major deal across the line to get you closer toward that $150 million revenue target or they are more benchmark deals that need to be done within those spaces?

William J. Merritt -- President and Chief Executive Officer

I don't think we need anymore benchmarks, right? So it is valuable to have deals done with reasonable size companies that have good IT teams and things like that. So if and when you need to litigate against a larger player, those agreements become very important in terms of any group set, Eric. So I think we're in good shape, we've covered I'd say the main products and the main technologies. We've done it with really solid companies. So I think we're in a good spot with benchmarks.

As I mentioned in my call, I think this is -- and I've mentioned to other in the conversation we had that we really want to move the needle on consumer electronics this year. Humax is a good deal. There -- even though the set-top box market itself is not a big market, they are really a big player in that market. So I think we're very well positioned.

Eric Wold -- B. Riley Securities Inc. -- Analyst

Okay. And just final question from me, I know you typically do not guide to litigation spend though you're seeing kind of the IP enforcement costs kind of move from $18 million-ish in '18, $26 million-ish in '19, $29 million last year, kind of moving -- ticking higher, how should we think about that trajectory this year with everything you know at this point? And when would you expect that to start trending lower?

Richard J. Brezski -- EVP, Chief Financial Officer

Yeah, I'll take that Eric. It's something I would say, litigation is an investment for us. It's something that we prefer not to do, but if the situation cost work, we're certainly not afraid to do it. And I'm not saying we're totally in friendship with the cost, but it's an investment that time and time again has paid off for us. So while we have seen some uptick over the last couple of years, we also saw us resolve deals with ZTE and Huawei that were under litigation, not more than 18 months ago.

So as for the rest of the year, we will have to see how things play out here, but we are kind of more or less around the levels that we're at. They're going to ebb and flow, it's really hard to predict very far down the road, where they might go because of course you could resolve these things or new fronts could open. So I mean a bit of an unsatisfying answer, but I think the real message I want to convey is, if we feel like we need to make the investment, we are going to make it.

Eric Wold -- B. Riley Securities Inc. -- Analyst

Got it. Thanks, Rich. Thanks, Bill.

William J. Merritt -- President and Chief Executive Officer

Thanks, Eric.

Operator

We'll take our next question from Derek Soderberg with Colliers Securities.

Derek Soderberg -- Colliers Securities, LLC -- Analyst

Hi, everyone. Thanks for taking my questions. Bill, I wanted to start with deal renewals. I mean it sounds like the confidence there. There is definitely some confidence there. I'm wondering, is there a lot of potential growth in the deal size as those customers renew? I guess, I'm wondering if these renewals in Apple and Samsung will likely include patents maybe related to Technicolor? And then I have a follow-up.

William J. Merritt -- President and Chief Executive Officer

Sure. So on growth, I think growth for us is going to come in the short-term, mostly from new deals, right. So things like the Humax today, we are in litigation with folks like Xiaomi and Lenovo, they will all be new customers. I think that's a pretty big driver of growth. When you think about renewals, you have a little bit of a mix bag into your question with respect to Apple and Samsung, absolutely the technology that we've acquired and developed since the last deal with those folks will be front and center in a new negotiation with them. So that's great.

On other renewals, so as an example, LG, they're -- I think as people are aware they've signaled that they're going to have a strategic options process under way for their handset business, which has really declined over the last couple of years. So we are in conversation with them and a renewal there would be at a lower value than the prior because the business is at a lower value. So -- but other than that I think as I said, the major revenue growth for the company is going to come from signing people that have never been licensees before. And then the renewals will be in some cases, if their business has declined, it will be at lower level, but for people whose businesses are better or even the same, we bring more to the table in the next negotiation.

Derek Soderberg -- Colliers Securities, LLC -- Analyst

Got it. And then as my follow-up, I think you guys have some good visibility into the Biden administration, now that we're starting to see some more policies come out, executive actions taken and such. How has your view evolved on the new administration so far? And maybe as it relates to the FTC, and their views on patent rules or anything related to that, how might that impact new deals or resigning existing ones? Thanks.

William J. Merritt -- President and Chief Executive Officer

Sure. So yeah, I think there is three aspects of the administration that we would be focused on. One is their approach to China. Second would be their approach to IP generally. And I think third would be other things like tax and other stuff I'll let Rich handle the last one. I'll do the first two.

So on China, what we've seen and I am sure many of you have seen this too, for example, I think with the Secretary of State designate when he testified, he actually agreed with the Trump's objective in China. I think the approach will be different. I think it's going to be more of a coordinated approach with Europeans, in partnership with European with respect to China, but I think the ultimate objective is the same. And so that's a good thing. And as you may have seen there was recent legislation proposed in Congress, actually proposed by Republicans to provide additional tools for security royalties from Chinese companies shipping into the United States under and using standard essential patents. So hopefully that legislation move forward.

There is also the strong the patents act, which we're very supportive of, i mean, we believe the administration would be as well. And so I think that speaks generally to their support of IP. I think that we have all come to recognize that the prior narratives used by tech against patents was a false narrative and that it's really important to have a strong patent system and I think that that's generally Biden's administration is going to be I believe supportive of that. As mentioned before center approvals from Delaware is a very, very strong in support of patent office and obviously a friend of the president and the administration.

So I'll let Rich handle the other tax matters.

Richard J. Brezski -- EVP, Chief Financial Officer

Yes, thanks, Bill. And welcome Eric -- Derek glad to have you on the call. On the tax side really nothing dramatically changed since our -- we most recently expressed our views there. See a number of at least in the short term moderating factors, whether it's the composition of the Senate, concerns about the impact of the pandemic on the economy and mid-terms. So we're not anticipating anything in the short-term, but it's obviously something that we're going to watch pretty closely to see how it develops over the longer term.

Derek Soderberg -- Colliers Securities, LLC -- Analyst

Great, thank you so much. Our next question comes from Scott Searle with Roth Capital.

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

Hey, good morning. Thanks for taking my questions. Nice job in a difficult operating environment, guys. I hope you your families and your teams are all healthy and safe. Hey, maybe quickly to...

William J. Merritt -- President and Chief Executive Officer

Thanks, Scott.

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

Maybe quickly to...

Richard J. Brezski -- EVP, Chief Financial Officer

Thanks, Scott.

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

Maybe quickly to follow up on some of the litigation questions, could you just give us a quick update, Bill, in terms of where we are in terms of both Xiaomi in India and Lenovo in the U.K. The next steps over the next couple of months if we're tracking, what that earlier timeline currently look like?

And then I guess the follow-up on Eric's earlier question. In your language in the script, you referenced players that were misbehaving to kind of push to the litigation route. So should we read anything into that in terms of players that you -- or OEMs, that you're not currently litigating with that they are much closer along in the process, i.e. Vivo, Oppo some of the other Chinese manufacturers, or don't read into that?

William J. Merritt -- President and Chief Executive Officer

So there is a pretty robust description of litigation in the 10-K. So I'll -- referring to that for the details -- to give you sort of a high-level view of where things are at. So with respect to Lenovo, there is a series of cases involving them, the U.K. case, the U.S. Delaware base case, and then there's cases going on in China. I think that the leading case there is the U.K. case, I think from a timing standpoint, it's the most mature. We have a trial starting in March. To recall that case the way the U.K. system works is, there is a number of technical trials. Those are basically patent infringement and validity trials and then sort of stuck in the middle of the technical trials is the FRAND determination, and that is scheduled for early 2020 -- '22.

So I think that that -- those cases are pretty well developed and we feel good about the technical cases and we feel good about the infringement trials and the beauty of the U.K. system is that there is that opportunity to get the worldwide license and resolve the matter completely.

With Xiaomi, again, set of litigations around revolve India, China, those places, the -- both the China and the India cases have moved slower than one would have anticipated. It's hard to say exactly why, there is always -- courts are operating remotely so there always the impact of COVID, but there's other -- there's the uncertainty of litigation as well. So I'd say, not quite as mature as the Lenovo litigation, but obviously, there is a lot going on there and litigation will also generally provide an opportunity for the parties to talk. It's an expensive one people to talk, but they do talk.

On your question of if somebody is not in litigation, does it mean that if the parties ourselves [Phonetic]. Not necessarily back to the answer I gave to Eric, on why we bring litigation from time to time. It could be that the parties remain far apart, but that there is movement. And so you want to let that play out, without drawing a line in the sand. As long as we are seeing movement, there is no reason not to continue to engage with the customer in a positive way.

So it could be that a deal is still a ways off in time because it will take them while to close the gap, but it does not make sense in that case to bring litigation. So I wouldn't necessarily read into who has been -- who is exceeding, who we not in terms of who's close to the deal as who is not.

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

Got you. And lastly if I could, on the variable royalty front was up a little bit this quarter. Are you starting to see them to pickup as it relates to video and or IoT? I was wondering, if you could give us a quick update in terms of where video came in in the quarter, and where Avanci is at current time? Thanks.

Richard J. Brezski -- EVP, Chief Financial Officer

Yeah. So I think some of that pick-up is just a reflection of the pandemic in the economy and maybe even a little bit of seasonality. Again, we have comparatively fewer licensees there, but more on the variable side. So we'll gain more and more understanding of these markets and the trends as we sign more deals and move forward. Right now, you're going to have one or two licenses have order or coming unexpectedly high that leads to a true up and cause you to increase your estimates going forward.

So I think that will probably settle down over time. But definitely part of it was a level of -- again, we have to, in most quarters estimate the royalties for the quarter without really being involved in the supply chain. So we're not in a great position at least compared to anybody else to make those estimates. We have to look at history and current factors and then they get trued up when we get to reports in the following quarter. And that true up will obviously influence our estimate for that quarter.

So what we've seen in the second half of the year is, things were a little bit better than maybe we would have expected during the pandemic. So there were positive true ups, kind of ongoing recurring basis we're still running roughly in the same levels that we've been talking about on the CE side in the neighborhood of 10% of that goal, we'll look forward to some help from Humax in Q1.

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

Great, thank you.

Operator

We'll take our next question from Ian Zaffino with Oppenheimer.

Mark -- Oppenheimer -- Analyst

Hey, good morning guys. This is Mark on for Ian. Thanks for taking our question. So I guess on -- just a quick follow-up on the prior question on litigation. It seems like there are some new case filed in Germany with Xiaomi. Can you guys just give a -- provide a little bit more details there? Is this something more meaningful or how should we sort of interpret this going forward? Thanks.

William J. Merritt -- President and Chief Executive Officer

Sure. So again, the discussions in the K, but to -- not surprising in litigation sometimes these things spread out to various jurisdictions. The reasons for that can be different. So it could be that you're securing certain moves from the judge to sort of thought what may be going on in China, and I think that's the area of the law that we've been pushing is also seeing Ericsson and others push that as well, that kind of take what was a very aggressive stance by the Chinese on trying to almost claim exclusive jurisdiction on these matters and having courts around the world push back on that.

And it can also -- there's other purposes for litigation, but not getting it Xiaomi or anyone else, specifically, it could be that you want to start another front of pure out this plain and simple patent litigation. So I -- it's a little bit of a chess game that goes on in the litigation, and I'd say that this is just another chess move.

Mark -- Oppenheimer -- Analyst

Okay, that's great, thanks for that. And then I guess like -- just another one. On the LG contract, I know there has been news that they're looking to hype their smartphone space, how have the conversation with them go and have you guys engaged or sort of on -- maybe like anything on the CE side with LG that you guys could provide? Thanks.

William J. Merritt -- President and Chief Executive Officer

Sure. So, LG has been a customer of ours for quite some time. And you're correct, there is two different areas where we can have conversations with LG and do have conversations with them. One is on mobile, where they have been a customer for us. The new one is on the CE, particularly around their televisions. Yeah, on their mobile side, these are people that we've developed relationships with, and they're very straightforward. And as I mentioned I think also Eric or somebody else earlier in the call, sometimes there are just practical situations confronting someone. That you need to respect doesn't mean there's not an opportunity to license, there absolutely is, because as the business gets sold it needs -- we would want the buyer to have a license. If the business gets shut down, there's going to be sales during the stub period that we would want to cover.

So there's a lot of really good reasons to continue to engage with them and secure renewal on the correct terms. But I think you just have to also respect where people are at in their life, and if they are very focused on trying to figure out what to do with the business, you need to give them a little space to do that.

Mark -- Oppenheimer -- Analyst

Okay. Sure, that's helpful. And then just finally a quick one. I know it's hard to gauge on the long term the -- sort of the operating expense side, but any sort of like sense of moving parts going to 1Q '21 for the operating expenses, whether it's litigation or patent management? Anything that would be very helpful. Thank you.

Richard J. Brezski -- EVP, Chief Financial Officer

Yeah, the only thing that I'll highlight there is the last two years since we acquired Technicolor's patent portfolio, we've had a robust effort to bring those costs in line. We feel like we've done a very good job with that, had a little bit of a charge associated with some of the activities toward the end of that initial process. But patent management is an ongoing effort. We have a very large portfolio and like any company with large portfolio we have to stay on top of it, and make sure that we're directing our resources to the best assets. So that's an ongoing effort.

We now have a full year under our belt, will be a full calendar year with the research team. So we see expenses being a little bit more stable and maybe they have been over the last two years. And again as I said, one of the things that we come back to again and again is our appreciation for the operating leverage that exists in the model. That was a theme in my prepared remarks today.

When you're in periods of growth and you can drive that top-line without really having meaningful movement on the operating expense line, it has a tremendous impact on bottom line results. So that's what we're focused on continuing.

Mark -- Oppenheimer -- Analyst

Okay, great. Thank you guys very much.

Operator

And we will take our next question from Anja Soderstrom with Sidoti.

Anja Soderstrom -- Sidoti & Company, LLC -- Analyst

Hi, everyone. Thank you for taking my question. It's been a lot of good questions asked and good discussion already, but as you have now sort of incorporated Technicolor fully, what do you see in terms of M&A and where you could head in that direction, and what you see in the market?

William J. Merritt -- President and Chief Executive Officer

Sure. So, yeah, as Rich mentioned in his script, I think we were in a good position to pursue M&A if we wanted to. So in terms of what we would be interested in, I think it's -- a couple of things that would be I think fairly obvious. So in the consumer electronics business we have today I think is strong, includes a wide variety of patents from broadcast standards, to Wi-Fi, to HEVC, to product specific implementations, and we have R&D obviously behind that creating new innovation. But I think that there is opportunity to further strengthen that in a way.

So I'll give an example. So Wi-Fi portfolio that don't come on the market all that often, but when they do they are interesting to us because they would cut across all of our programs. And so that's an example of the technology that would be -- and portfolio that would be interesting to us and it's also very synergistic with the R&D that we already do. Beyond that I think additional investment in video, particularly standard based patents would be interesting, again because it cuts across all of our licensing program. So-and from time to time that stuff becomes available.

So I think we look at things that are going to be widely applicable or broadly applicable across our programs because that's the best way of ensuring that we're going to drive the right return from the deployment of that capital. In terms of the opportunities, it's interesting we -- there was a little bit of a rush at the beginning of the pandemic, and actually, from our standpoint these the things that we were interested it kind of slowed down, but now we've seen more of a pickup in a variety of opportunities that come through.

The opportunities kind of fall into two categories. One would be simply portfolio and those are interesting to us because it -- again they can get quickly deployed into our business. From time to time these operating companies as well if there is nothing interesting to kick the tires. But I'd say it has been a little bit of a pickup, over the last quarter or so in terms of M&A opportunities.

Anja Soderstrom -- Sidoti & Company, LLC -- Analyst

Okay, that sounds exciting. Thank you very much. That was all from me.

William J. Merritt -- President and Chief Executive Officer

Great. Thank you.

Operator

And at this time, I'm showing no further questions.

Tiziana Figliolia -- Vice President, Finance

Thank you, Casey, and thank you for joining us today. This concludes our call and we look forward to giving you an update next quarter.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Tiziana Figliolia -- Vice President, Finance

William J. Merritt -- President and Chief Executive Officer

Richard J. Brezski -- EVP, Chief Financial Officer

Eric Wold -- B. Riley Securities Inc. -- Analyst

Derek Soderberg -- Colliers Securities, LLC -- Analyst

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

Mark -- Oppenheimer -- Analyst

Anja Soderstrom -- Sidoti & Company, LLC -- Analyst

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