InterDigital Inc

NASDAQ:IDCC

Earnings Call Transcript 2022-Q2

[Operator]

Good morning, and thank you for standing by. Welcome to the Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Richard Lloyd. Please go ahead.

[Richard Lloyd, Communications Director]

Good morning to everyone and welcome to InterDigital's second quarter 2022 earnings conference call. I am Richard Lloyd, Communications Director and with me in today's call are Liren Chen, 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 made only as of the date hereof. Forward-looking statements 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 described in the Risk Factors sections of our 2021 Annual Report on Form 10-K, our second quarter 2022 quarterly report on Form 10-Q, and in our other SEC filings. 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 financial measures tracker, which is available on the Investor Relations section of our website.

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

[Liren Chen, President & CEO]

Thank you, Richard, and good morning, everyone. In the second quarter, we continued to make excellent progress across all parts of the business. And I'm particularly pleased, that the strong momentum we built in 2021 has continued into the first half of this year. In Q2, we significantly increased revenue and net income on both a sequential and year-over-year basis. We entered into a multi-year, worldwide, non-inclusive, fee-bearing license with Amazon covering our rings of Amazon's consumer electronic devices and our InterDigital's patents.

We made a major addition to our leadership team. We strengthened our balance sheet and we saw significant growth in revenue outside of the core smartphone market. In the second quarter, our total revenue increased 42% year-over-year to $125 million. We also delivered a substantial improvement to our profitability more than doubling our adjusted EBITDA to $78 million and we drove a 14-fold increase in earnings per share to $0.69 per share. I will let Rich talk you through our financial performance in more detail, while I cover some other notable highlights from the quarter.

Starting with the recent announcement that Dr. Rajesh Pankaj has joined InterDigital as our new CTO. Rajesh was previously a Senior Vice President and the Head of Corporate R&D at Qualcomm, where he spent 25 years in research and senior leadership roles. His background in cellular wireless, including both 4G and 5G and the application of AI to connectivity. He is a perfect fit with our technology footprint and with the long-term duration of our innovation. He's named ambassador in 230 patents worldwide and he has a strong track record of translating technical breakthroughs into patented innovation.

I'm delighted that Rajesh has joined us and I'm confident that he will lead our R&I team to even greater heights and will build the leadership of his predecessor Dr. Henry Tirri. Along with our ability to attract world-class talent, one of the keys to our recent success has been the value that we continue to drive as a leading innovator across a range of critical technologies. Our research [Technical Difficulty] horizontal technologies, like cellular, Wi-Fi, Video and AI and machine learning. We license the IP that covers this horizontal technology across many verticals that utilize them.

Smartphones use all of these technologies and continue to be our core market. Meanwhile, CE devices as well as the growing array (ph) of our key product overuse multiple technologies such as WiFi and Video. In short, we are in excellent position to drive growth from both existing relationships and new opportunities.

In recent years, our strength in Video has become even more valuable, that we have built our formidable innovation pipeline, explore opportunities in building more immersive consumer experience and continue as a leading contributor to both the HEVC and VVC video standard. We have also achieved impressive growth in our video portfolio, which now numbers approximately 7,000 patents and applications.

In wireless, our portfolio of cellular SEPs for 5G multi-mode device continue to grow in the second quarter and now stand at more than 10,000 patents and applications giving us an incredibly strong base in generational mobile that will define connectivity for the rest of this decade. This foundation has been enabled by our team of superb engineers.

In second quarter, the Institute of Electrical and Electronic Engineers, IEEE, recognized one of our senior wireless engineer for his work in 5G, by awarding him the prestigious Benjamin Franklin Key Award. Specifically, he was recognized for his groundbreaking contribution to millimeter wave, which is a foundational technology that enables both 5G's incredible speed and its ultra-low latency.

Staying on the IEEE, another InterDigital engineer was recently appointed as the Chairperson of Topic Interest Group, that is responsible for identifying and exploring use cases for artificial intelligence and machine learning in Wi-Fi. While we continue to reap the rewards for innovation being implemented in today's devices, many of our research efforts are firmly focused on the technology that will shape connectivity and content consumption in the years to come.

I'm especially excited by the new partnership we announced in June, with Inria, France's leading Institute for research in digital science and technology. This new innovation will not only support innovation -- this new initiative will not only support innovations across France but also enable engineers to proceed cutting edge scientific research and to explore technologies, that would define media experiences in the future, in areas such as SR and Metaverse.

On the licensing front, we believe strength of our innovation, the increasing value of our patent portfolio and our licensing track record well position us to renew key agreements and sign new ones. In the second quarter, in addition to the Amazon deal I mentioned earlier, we also closed an additional agreement with industry device manufacturer Zebra Technologies covering our 4G, 5G and Wi-Fi technology.

Zebra's devices are used in retail, healthcare, banking, manufacturing, and transportation, and other industries. This license agreement demonstrates the broad applicability of InterDigital's foundational innovation and our patent portfolio beyond smartphones. We also enjoy significant progress in licensing our innovation to auto sector with new deals signed with GM and Ford. Through our licensing platform partner, almost half of the connected cars on the market are now licensed to our 3G and 4G standard essential patents.

In summary, our licensing platform -- performance this quarter underlines opportunity that we see in our core markets and in newer area, where our innovation is helping creating considerable adding. This is an exciting time to be an innovator in connected technologies and I'm pleased with our strong foundational innovation translates into new licensing agreements.

In terms of the integration activity, we continue to look forward to the upcoming decision from the UK High Court in our FRAND trial against Lenovo. And I will reiterate my message from our last earnings call, that we remain confident in the strength of our technology, the quality of our IP portfolio, and the merits of our case.

On the policy front, I want to highlight that the DOJ and USPTO recent withdraw of our 2019 policy statement, on SEP licensing and FRNAD remedy is a positive development. As we are not getting into all the details here, but the announcement has moved the SEC policy in U.S. in our third balance and more predictable direction and confirmed our belief that while dispute over SEP license do arrive factors such as the value of the and/or innovation should guide the Court's decision making.

The second quarter also saw progress in our ESG program, with the release of our second annual corporate sustainability report. At InterDigital, we passionately believe that our technology contributes to building a better and more sustainable world, and this year's report details not only how we mitigate our environmental footprint, but also how we maximize our social impact, it insures our governance needs best practices and how we strive to help our employees to excel. I'd encourage you all to read the report, which can be found on our website.

With that, I will turn it over to Rich.

[Richard Brezski, CFO]

Thanks, Liren. As Liren noted, we delivered another strong quarter with significant increases in revenue and profitability, on both a sequential and year-over-year basis. We grew total revenue 42% over second quarter 2021 to $125 million, including $100 million of recurring revenue. While mobile agreements, such as Xiaomi have driven a large part of our growth, we have also begun to see meaningful growth in the CE, auto, and IoT markets.

In second quarter 2022, we had over $35 million in combined revenue from the CE, auto, and IoT markets, including almost $12 million on a recurring basis. Both the total and recurring revenue from these markets represent record levels. For the first half of 2022, we recognized about $23 million of recurring revenue from these markets, representing a 70% increase from the comparable period in 2021. While we are pleased to report such strong revenue from these markets, we remain committed to driving continued growth.

Moving on to expenses, you can see the benefits from the cost management actions we initiated a year ago, in our first half 2022 results. On an annualized basis, excluding litigation and stock-based compensation, we have reduced our operating expenses by almost $35 million. This savings is net of the reinvestment we have already made and we believe that we have improved our capabilities while lowering our cost base.

Moving on to capital allocation, we made the decision to refinance our convertible debt during the second quarter as it became clear we are heading into a volatile period marked by inflation and rising interest rates. Similar to our prior financings, we entered into an option structure that increases the per share price at which we experience dilution from our new debt to $106.

The net proceeds from our new debt were primarily used for two purposes. First, to buyback approximately two-thirds of our old debt, and second, to concurrently buyback $75 million of our common stock. Looking forward to the third quarter, we currently expect revenue to come in between $96 million and $100 million. At this point our revenue guidance is based only on existing contracts, so the entire range is comprised of recurring revenue.

On the expense side, we expect additional investments in research and development and an uptick in litigation costs related to ongoing proceedings, will drive operating expenses to the range of $76 million to $80 million. Finally, we expect non-operating expenses comprised of interest and other expenses to be in the range of $6 million to $8 million and an effective tax rate in the range of 25% to 27%.

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

[Richard Lloyd, Communications Director]

Thank you, Rich. Thank you, Liren. Operator, we can now open the call for questions.

[Operator]

Thank you. At this time, we'll conduct a question-and-answer session. [Operator Instructions] Thank you. Anja Soderstrom, Sidoti. Please go ahead. Your line is open.

[Anja Soderstrom, Sidoti & Company]

Thank you for taking my questions, and congrats on good progress.

[Liren Chen, President & CEO]

Thanks, Anja.

[Anja Soderstrom, Sidoti & Company]

Can you talk a little bit about -- and maybe if at all the sentiments among your counterparts have changed given the economic environments and geopolitical situation? Is that affecting at all your discussions?

[Liren Chen, President & CEO]

Yeah. Hi. Anja, this is Liren. So I understand the geopolitical situations in part of Eastern, in particular, it's fairly sensitive. And then the economic has been in turmoil in the last couple of years, partially due to COVID. But our current revenues primarily supported by our fixed revenue contract. So we are largely very shielded from the near-term turmoil and some of the downturns may play a role in our renewal discussion. But the major contract we are currently negotiating, they are not been that much impacted by some of the issues. So we are well positioned.

On the geopolitical side here, we are a global player, so we have been watching the global environment very, very carefully. And so far, we have been demonstrating a very strong track record, still striking fair deals in across multiple windows in many different continent. So, but we are watching very carefully.

[Anja Soderstrom, Sidoti & Company]

Okay. Thank you. And Rich, as you mentioned, the operating expenses were reduced by $75 million net of re-investments already made. And what kind of remaining reinvestments do you have?

[Richard Brezski, CFO]

Yeah. So, we've been reinvesting primarily in R&I and we expect that to continue. For the moment, I'll stick to the guidance I've provided for the next quarter, where we mentioned an uptick led by R&I reinvestments but also a little bit from the litigation associated with ongoing matters.

[Anja Soderstrom, Sidoti & Company]

So that uptick is isolated to the third quarter?

[Richard Brezski, CFO]

Yeah. That relates to the third quarter guidance. The uptick on being on a sequential basis versus Q2.

[Anja Soderstrom, Sidoti & Company]

Okay. Thank you. That was all from me. Thank you.

[Richard Brezski, CFO]

Thanks, Anja.

[Operator]

Our next question comes from Jonathan Eisenson from Bank of America. Your line is open. Go ahead.

[Jonathan Eisenson, Bank of America]

Hey, guys. Thanks for the -- thanks for taking my questions. The first thing I want to touch on is, if you have any visibility for your OpEx guidance, given that the implied operating margins seem to decline sequentially. So would appreciate any color there? And then I also just wanted to ask if you have any updates on the Apple and Samsung deals? Thanks.

[Richard Brezski, CFO]

Sure, Jonathan. I'll take the first part. So our -- there is not a close association between our revenue in a given period and our operating expense in a given period. The R&I that I was just referring to related to the last question, that we are investing in today is to drive revenue that we would see years down the road because we make such long-term investments and fundamental research.

So it's not so much that we really have effectively 100% gross margin on new business because there's not variable cost associated with it. When we license, we're granted permission to use technology that we've already invented in the past. So this uptick in R&I is really to drive future growth, not related to the upcoming third quarter. So hopefully that answers that part of the question. I'll let Liren answer the second part.

[Liren Chen, President & CEO]

Yeah. Hey, Jonathan. For the Apple and Samsung negotiation, obviously, our relationship with Apple and Samsung is very, very important to us and we have been focusing on the -- renewing their contract for quite a while. And I think everyone is aware that Apple contract expires end of Q3 of this year, and Samsung contract expires end of Q4 of this year. And it's always worth reminding that those licensing agreement with us, it really represents very long-term relationship.

Apple has been our licensee since 2007 before the shift of the very first iPhone. And Samsung has been our licensee for actually more than 25 years before they shipped the very first Galaxy phone. So through -- so, such a long-term relationship here there has been multiple renewals happening. We feel confident about the current negotiation based on how much our technology has advanced, frankly they have become even more important with the connected world with a lot of market video content being consumed on the device.

Obviously, the 5G adoption will be a pretty major driver in our negotiation. And also it's worth noting that both Apple and Samsung has a much higher concentration of the premium devices in their worldwide sales. So these devices will make more and better use of our high-end technology. So, to that degree, it's worthwhile obviously for us to remind them how much they have benefited from everything we have developed.

[Jonathan Eisenson, Bank of America]

Got it. Thank you.

[Liren Chen, President & CEO]

Yeah.

[Operator]

Okay. Thank you, Jonathan. Our next question comes from Tal Liani from Bank of America. Your line is open. Go ahead. Tal, your line is open.

[Richard Brezski, CFO]

Perhaps, that was an inadvertent hand raise.

[Operator]

Okay. Tal, did you have a question?

[Tal Liani, Bank of America]

I'm sorry, I was on mute and I was talking to myself. So, can you hear me now?

[Operator]

That's fine. Thank you.

[Tal Liani, Bank of America]

I had a really good question for you, I have to repeat that. So you get too far end today from BMA. So I apologize if my questions are green because I'm new to cover the stock. So, last year you grew sequentially in 3Q, 63%. And this year, you're guiding for a decline both on a sequential basis and year-over-year basis. Can you talk about the seasonality?

Can you talk about -- if I get it right, you're guiding for $98 million, which will be down year-over-year and will be down sequentially. So can you talk about seasonality what drives these fluctuations in growth? And any color on kind of what to expect later on, even if we don't -- there is no explicit guidance. Can we talk about kind of what drives ups and downs, these quarterly fluctuations? Thanks.

[Richard Brezski, CFO]

Yeah. No, it's a good question, Tal. I’m happy to address it. Couple of things I'd point to. The first, regarding seasonality. There's not a lot of seasonality in our revenue because if you -- and you can find this on our financial metrics, that we published on our website. We show the percentage of revenue that comes from variable agreements per unit where customers are reporting the volume they shipped and the associated revenue or royalties they pay us for the quarter.

And then also fixed fee revenue, where there is a fixed price over the term of the agreement and we typically amortize that total quantum over the term on a straight line basis with maybe sometimes exceptions. But 92% of our revenue in the quarter and year-to-date is coming from those fixed price agreements. So therefore that's a really stable base quarter-to-quarter.

And there is only a small amount that's coming from the variable less than 10% that maybe is subject to any seasonality that does exist. The majority of the fixed fee, the majority of the total revenue is on the mobile side that definitely means towards the fixed fee. On the consumer electronics side, that's where it's more -- tends to be more variable and maybe there is a little bit more seasonality, but overall a small component.

So what's driving some of these changes? On a sequential basis, we also breakout I mentioned recurring revenue from past sales and with some of the new agreements that we signed this quarter, when you think about Amazon and then through our licensing partner GM and Ford, as well as others, there is some past sales where they're basically catching up for the use of our technology, prior to entering into these agreements.

So we recognize that past amount and we try to delineate, so it's clear to everybody what that impact on the quarter was. And in the current quarter is roughly $25 million. The recurring number of $100 million, therefore, is kind of -- what to think about going from quarter-to-quarter. And at the midpoint, we're maybe down 2% it's a relatively small number. And that again can be driven by expectations around the variable side.

And then the final aspect of all this is, so what are the meaningful changes? And that's -- if you look year-over-year, we had some licenses that expired last year, renewed a bunch of them, not all of them, some customers had left the business. And then in terms of growth, it's the step function changes from adding significant new agreements. Great example of that is third quarter of last year we signed Xiaomi. Incidentally, third quarter last year, we're signing Xiaomi, there is a lot of past sales there as well. So on a year-to-year basis that drives some of that decline.

[Tal Liani, Bank of America]

Got it. Now the industry is weakening if you look at Qorvo and what they reported and Qualcomm, what they reported. Everyone is talking about slowdown of devices, devices still make the majority -- vast majority of your revenues. And I know you have a different business model with a lot of it being fixed revenue rather than per device revenues.

And the question is what happens when the industry is weakening? What's the history? Do you have customers coming back to you and say, hey, we want to renegotiate our historical agreement because now we're selling 15% less or not, or is there, what's the variable portion of your revenues that is tied to the weakening handset market -- smartphone market?

[Liren Chen, President & CEO]

Yeah. Hey, Tal. This is Liren. So as Rich mentioned earlier, so a vast majority of our smartphone license agreement is a fixed fee agreements. What that means is that, under contract those vendor pay us the same dollar amount year-after-year during the term of the contract. So I mean, all our customer owner their contracts. So we do get paid regardless whether the market goes up or down if you would. And that dynamic does come in play when we have to renegotiate for the next contract, right.

So if they have lost a significant market share and those factors will be frankly factored in, but it's worth noting that for the next contract we are trying to negotiate. It's also a long-term contract. We actually try to frankly look at third-party projections, those already make certain amount of forward-looking expectation projection to see in the next five years or longer how much the volume will be. So some of the shorter-term ups and downs will be hopefully factored in but not exactly driving the long-term numbers.

But more importantly for us tough Tal is worth noting that we currently have roughly 55% coverage of the market. 50% higher of the smartphone market. So we see over a relatively short period of time after we resolve that’s a handful of vendors relationship here, we should be able to grow into about 80% to 85% market penetration. So I think gaining more vendors and coverage will actually be in my opinion much bigger driver than the short-term, certain amount of vendors losing some market share.

[Tal Liani, Bank of America]

And these missing vendors are mostly Chinese vendors as much as I understand? In the current environment where China market is weakening, does it help you to get the contract, could it inject delays in the contract -- in signing the contract? What's the timing aspect of getting this extra vendors that are currently not paying?

[Liren Chen, President & CEO]

Yeah. So just three major vendors, we have identified as our main vendors being to sign up for. And the largest one is Oppo, who among three brands, Oppo, Realme and OnePlus ships over 200 million devices per year. And then the next vendor is Vivo, which is somewhat smaller than Oppo, but still very, very large vendors. And then the third one, which is Lenovo, again through the purchase of Motorola brand, they are a major player in a number of different markets including the U.S.

So currently, we are in litigation with Lenovo and Oppo. Our Lenovo litigation is actually in year three now. And we are -- as I mentioned earlier, we are waiting for major court decision out of the UK, whereas the court will decide on a global base how much our worldwide patent portfolio is worse, there is so called brand rate determination case and that trial also consist of part damages. How much money they support to us for all the parts infringing of our patent against the worldwide scope.

On Oppo, we are also in litigation with Oppo. InterDigital has filed a series of lawsuit last December numerical jurisdictions against them. And -- but we don't have a progress to report yet because those cases are relatively new. So back to the earlier question to say how much the China weakening impact those negotiations. I'll say we have somewhat impact, but not significant. The reason being, all of the three vendors we are talking about, they are really global vendors. And like, Lenovo and Oppo and Vivo, these are very significant markets outside China, actually in the case of Lenovo, a vast majority of their phones are actually sold outside China. So I would say it's really everything is determined on a global basis here.

[Tal Liani, Bank of America]

The last question, my education is in finance. But I became almost a lawyer covering Qualcomm with the history. In the Qualcomm case, it always goes to court, but in the last second, there is an agreement. Once someone loses aside, the court rarely decides it's -- I've been following Qualcomm since the '90s and it always settle out of court eventually. What's the history of your negotiations? Is it based on court decisions or do you typically negotiate once you win a major milestone or you lose a major milestone in court?

[Liren Chen, President & CEO]

Yeah. Hey, Tal. So you're correct that frankly a vast majority of the cases are negotiated or settled before the trial, that frankly has been InterDigital's experience also. So we -- like Qualcomm, we prefer bilateral negotiation and most of the deals do get done through bilateral negotiations. So just try to give a data point here. Since the beginning of last year, we have signed 16 new agreements up to the end of Q2 here. So that's a very large number. And I'll be frankly we had a record breaking last year signing 30 new agreements last year. So a vast majority of that agreement was signed through bilateral negotiation, without lawsuits.

But once in a while we do have to file all those, generally, those are after a very lengthy negotiation where at the other side simply refuse to pay a fair term that many other vendors are paying. So when we go for those litigations, sometimes frankly case gets settled before it goes to trial and sometimes we do go to trial and get a court decision, it's hard to say, it's really case by case. But it's worth noting that through the history of InterDigital, whenever we have filed lawsuit to enforce our patent right, our IP rights every single time, we end up in a license agreement under the FRAND terms. So our track record in this is quite strong.

[Tal Liani, Bank of America]

Got it. Great. Thank you. Thanks so much.

[Operator]

Thank you for your questions, Tal. [Operator Instructions] So our next question is from Scott Searle with ROTH. Scott, go ahead. Your line with open.

[Scott Searle, ROTH Capital Partners]

Hey, good morning. Thanks for taking the questions. Liren and Rich, I apologize I got on the call late, so I won't rehash probably some of the stuff you covered in your opening monologue. But I was wondering on a couple of fronts. Samsung recently renewed with Qualcomm. I'm wondering if there is anything to be read in that in terms of readthrough for you guys in their ability or willingness to negotiate before an expiration of the renewal agreement?

[Liren Chen, President & CEO]

Yeah. Hey, Scott. This is Liren. So I did read the same news about Samsung renewing that agreement, they have continued their existing agreement, added seven more years to it. I think it's a great development for Samsung, it's also a great deal for Qualcomm. And I do not really know for sure how that will impact our negotiation. So, but we are definitely seeing that as an encouraging sign, that licensees and license or licensors continue their our long-term relationship. And as I mentioned earlier, we have very long-term relationship with Samsung and I think that's an encouraging sign.

[Scott Searle, ROTH Capital Partners]

Okay, good. And on the technical front, I'm not sure did you quantify CE or video contribution to the current quarter. And I guess as part of that, you've been building some momentum on that front. Now with the macroeconomic overhang if you will, is that changing the discussion, the dialog, an opportunity with any of the customers in the near term or things kind of progressing as they were before?

[Richard Brezski, CFO]

Yeah. Hey, Scott. I'll take the first part of that question. Yeah. We mentioned we didn't break it out but in combination, we said that CE, auto, and IoT contributed $35 million of total revenue in the quarter and $12 million of recurring revenue in the quarter. So we're pleased by the traction across those markets and both that total and recurring figure represent records for us.

[Scott Searle, ROTH Capital Partners]

Got you. And Liren is there any impact in terms of the discussions going forward when you look at what's going on from a macroeconomic standpoint, particularly some of the end markets and slowdown in TVs or smartphones or other larger video display types of opportunities?

[Liren Chen, President & CEO]

Yeah. Scott, I mean, obviously, in general, we do not see an impact to our existing agreement because they are fixed fee agreement. But for the new license agreement here, it's really a case-by-case basis. You guys know our near-term focus is on Apple and Samsung. And they are a major player in the premium tier and based on all the report we see, the IP is impacted than some of the players who are competing in the low to mid-tier devices.

Regarding the TVs and others, it's really -- Scott, it's hard to say generically, but we're -- as you're probably aware, our focus on getting the -- some of the leading brand TV vendor deal signed. And those agreements are long-term agreements also. And frankly, there's very significant past sales component to it. So it's really -- the near-term impact is relevant, but it's not necessarily a deciding factor.

[Scott Searle, ROTH Capital Partners]

Got you. And lastly, if I could. I'm not sure Liren if you had any comments in terms of other video monetization and opportunities. I'd love to hear your thoughts on that front? if not, we can take it offline. Thanks so much.

[Liren Chen, President & CEO]

Yeah. We didn't comment specifically, Scott. But one thing I was describing earlier is, we combined with our Technicolor acquisition, we really brought ourselves through the past several decades I agree into one of the leading technology developer and frankly leading patent holders in video space. Video increasingly becoming relevant for many, many devices, smartphones, and many other connected devices here. We did identify different layers of technology involved and some of those services layer are also benefiting from our Video technology and we are actively looking into this space and we'll hopefully provide more updates in the future.

[Scott Searle, ROTH Capital Partners]

Great. Thanks so much.

[Richard Brezski, CFO]

Thanks, Scott.

[Operator]

Thank you, Scott. I'd now like to turn the call back to Liren Chen for closing remarks.

[Liren Chen, President & CEO]

Yeah. Hey, thanks, everyone. Before we sign off, I just like to thank all the shareholders for their continued support and our employees for their contribution to another outstanding quarter. Thank you all for joining us today and I hope everyone enjoys the rest of the summer.

[Operator]

Thank you for your participation in today's conference. This concludes the program and you may now disconnect.