InterDigital Inc

NASDAQ:IDCC

Earnings Call Transcript 2019-Q3

[Operator]

Good day, and welcome to the Third Quarter 2019 Earnings Conference 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, Chief Communications Officer]

Thank you very much, Travis. Good morning, everyone. And welcome to InterDigital's third quarter 2019 earnings conference call. With me this morning are Bill Merritt, our President and CEO; Kai Oistamo, our COO; 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 31, 2018, and from time to time, in 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 third quarter 2019 financial metrics tracker, which can be accessed on our homepage, www.interdigital.com, by clicking on the link on the right side of the homepage that says Financial Metrics Tracker for Q3 2019.

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

[William Merritt, President, Chief Executive Officer]

Thanks, Patrick. As everyone can see from this morning’s press release for the quarter as well as the subsequent information we provided, involving new patent license agreements with both ZTE and Google, the company is well along in executing on its growth strategy.

In a nutshell, that strategy is to drive our core terminal unit licensing business, now enhanced by our strong HEVC patent and resource protection, and expand our licensing business into the broader consumer electronics space.

All the while, holding the economic cost of running the business essentially flat to 2017 levels. As Rich - Kai and Rich will explain, while there is certainly more work to do, we are now executing well on all fronts. I’ll add just a few highlights.

First, as we go into licensing landscape in general, we continue to see growing stability across the space in terms of an overall willingness of manufacturers to engage in discussions. Pretty much gone are the days, when manufacturers, particularly Chinese manufacturers simply refused to meet. Instead, what we see now is more frequent discussions with all of our prospective customers, with the dialogue centered mostly around pricing.

Not surprisingly, the price discussion in China has been the most challenging, but is evidenced by the completion of our deal with ZTE, we believe we have found a good pricing formula that responds to some unique aspects of the Chinese market, but also comports with our long history of licensing as well. As this bodes well for our future discussions in China, it also sets a solid foreign benchmark for current and future litigations.

Another aspect of the licensing I wanted to highlight was the approach we use with Google, which was to combine with a number of other license stores and provide a more complete solution. This approach has benefits for both licensor and customer, and that is more efficient and also provides a solid benchmark for both sides to use in subsequent discussions with other companies, whether licensee or licensor.

I think it also demonstrates the strong connections we have within the licensing community, connections we intend to continue to leverage as necessary to get deals signed.

Next, just briefly on R&D. The strength of what we have put together in terms of technology capability is now beginning the gel. As I’ve mentioned before, we brought together the two research teams, not to have them work individually, but to work collectively since the two technology platforms, wireless and video are amazingly complementary and the magic occurs when they sing in harmony.

We're now entering the point in the year where the new projects are being defined and it's the first time, we're getting to witness the teams operating as a single unit. The blending of these technologies in the sports that it's creating is great to watch, and also a nice indicator of what's to come.

Last, Rich will touch on expenses in more detail but the highlight here is that we are right on target, if not a bit ahead of our goal to return the ongoing economic cost of the business to the 2017 expense levels. As you all know, our business is all about the operating leverage. We intend to make sure that remains the case.

With that let me turn the call over to Kai.

[Kai Oistamo, Chief Operating Officer]

Thank you, Bill. I mentioned last quarter that our licensing teams were working very hard to move our negotiations ahead. Last week, we were happy to report that we had concluded a license with ZTE, which we viewed is a very positive from a number of perspectives, while go-forward license with ZTE is smaller in revenue, given their reduced market share, they remain an important Chinese company, so having them as a reference point to other Chinese customers is helpful.

Also the rate captured in overall agreement reflects as Bill mentioned, our long history of licensing, as well as the unique aspects of the Chinese market. We think that the - it is a solid benchmark for go-forward discussions with others.

Further, the agreement includes a license to both our WiFi and our HVEC portfolios, in addition with the cellular. This is a second license we signed with that - that specifically addressed this WiFi and of course it is very gratifying to see a first license in the mobile handset space that reflects the impact of video portfolio that we acquired from Technicolor and continue to develop. So all in all, we think this is a very, very solid result.

We also, as Bill mentioned, signed a second license this time with Google. Importantly, Google agreement was signed through a patent licensing platform that involved a number of licensors. While our insight there is limited to our own result, we were pleased to move with both the rate, which we consider fair, and essentially frictionless way in which the license was finalized.

Platforms like this may indeed serve as a important additional avenue for licensing to complement the bilateral approach that has dominated the mobile SAP licensing to date.

Beyond those two agreements, our efforts with other pending cellular licensees continue. In the last quarter, we've been able to meet face to face with the majority of major unlicensed companies, and we see continued progress as a result.

On the consumer electronics side, we've told investors that we would like to sign a couple of smaller deals in the near term that would enable us to size the - size up the market for the investment community, and that remains our approach.

On research side, our teams are continuing their strong efforts, both in wireless and video. On the wireless side, 5G research continues but beyond that, we are currently beginning our first efforts individually and with research platforms and partners to explore what some are calling Beyond 5G or B5G and what others are beginning to call 6G. We announced the partnership with a Finland 6G flagship program in September.

We meanwhile our 5G efforts have gained tremendous recognition. As an example, the 5G-CORAL project where InterDigital is a technical lead has not - has been nominated for a prestigious Global Telecom award, the winner of which will be announced in a week. The same project was finalist for Top 5G Innovation Award at the CSI Awards, which were given out at the IBC Conference in September.

On the video side, our work in advanced video standards continues, with InterDigital stepping directly into the shoes of that Technicolor used to fill, in efforts like VVC, point cloud compression, VR and other visual technology standards. Our advanced solutions outside the standards are also gaining strong recognition.

A great example of our digital is our Digital Double Technology, which enables users to generate digital avatars in 30 minutes that previously would have taken days or even weeks for custom development and leverage the technology that was used in feature movies like Lion King and Dumbo. That technology was named Best in Show at IBC, a tremendous result given IBC is the premier showcase for video and broadcast industry.

So to summarize, our Q3 licensing progress continued and has already delivered new agreements in Q4. We continue to pursue our licensing efforts on both the wireless and consumer electronics side, and our research continues to deliver tremendous results.

With that let me hand over to Rich.

[Richard Brezski, Chief Financial Officer]

Thanks, Kai. Today, I’ll review a few highlights from our third quarter results, and then I will communicate preliminary expectations for the fourth quarter, which include the impact of the new license agreements with ZTE and Google.

Our revenue for third quarter 2019 came in at roughly the midpoint of the range we expected. This included a late true up of a prior quarter estimate of revenue from a per unit license agreement, which had a slightly negative impact.

As a reminder, with the adoption of the ASC 606 accounting rules in January 2018, we now have to estimate the revenue we will record associated with our licensee sales of underlying license product in the quarter in which those sales occur, and true up in the next quarter. It makes correct forecasting in the quarter more challenging. Although over time, there is obviously no difference.

More importantly, these true ups are not drivers of our top line goals, which include significant gains through increased market penetration. Of course, we recently reported some progress on that front, and I’ll come back to that in just a few minutes.

Our expenses also came in below expectation. Based on anticipated increases and litigation and the impact of having the newly acquired video research team on the books for a full quarter, we expected a sequential increase in operating expenses of $8 million to $10 million.

In fact, the sequential increase was just $2 million. This favorable variance was driven by our ongoing careful management of recurring costs, as well as lower litigation costs, lower integration costs and increased estimates for our 2019 research tax credits. The important takeaway is that we are completely on track to bring our ongoing economic cost metric back in line with 2017 levels by the end of next year.

Looking forward to fourth quarter, we will provide more formal guidance after we have received a substantial portion of the outstanding Q3 royalty reports and further evaluate the accounting for our new agreements with ZTE and Google.

Based on what we know today and as always, excluding the impact of any new deals that may be signed over the balance of the quarter, we expect total revenue for fourth quarter to rise to the range of $83 million to $95 million including recurring revenue in the range of $74 million to $78 million, and non-recurring revenue in the range of $10 million to $18 million. Of the non-recurring revenue range, we expect $8 million to $11 million of the non-recurring revenue to be related to the first nine months of 2019.

On the expense side, we are working through revised expectations around litigation, following the resolution of outstanding disputes with ZTE. Overall, I expect to see some of the expense growth we anticipated in Q3 to materialize in Q4.

Finally, I’d like to briefly touch on stock buybacks. We typically don't comment on our status, but as you know, we've always been aggressive buyers of our stock when we think conditions are right.

However, the progress of our two new license agreements, meant that we were locked out of stock repurchases throughout the quarter. As a result, so far this year, we've repurchased 2.5 million shares and remains approximately $97 million on our authorization.

I'll now turn it back over to Patrick.

[Patrick Van de Wille, Chief Communications Officer]

Thanks very much, Rich. Travis, if we can open the call for questions.

[Operator]

Thank you. [Operator Instructions] First question comes from Eric Wold, B. Riley.

[Eric Wold, B. Riley]

Thank you. Good morning, guys. A few questions, I guess one, Rich, just trying to understand the - kind of what happened from when you gave the operating expense guidance in early October to now, I mean the $8 million delta is obviously great but very significant given the quarter was already over. Was it just you know you are conserving the estimates you gave in October, was it the tax credit? And I guess it was, is there anything that kind of shifted in the Q4? Is this kind of the base from which you will see a reduction?

[William Merritt, President, Chief Executive Officer]

Yeah, yeah, totally fair question. That's why I tried to address that somewhat in my opening remarks, Eric. So yeah, we did provide guidance, it's really towards the end of the quarter. But of course there is some lag in actually telling the results. So as best, at the time based on the best available information that we had, I think that in the end, as I said ongoing expense management will continue to provide traction there, maybe even more so than we anticipated at the time.

There is - the litigation expense came in lower than we estimated. And that's really something we don't have a lot of visibility to on a month-to-month basis because we rely on a lot of outside counsel there and then we'll kind of check in with them at the end of the month and see what the billings were for that period.

So they were two of the items, and then there’s, we are just operating in the quarterly cycle. So things like reviewing tax credits and so forth are things that are typically done around the quarter close, and we increased those estimates as well, which was a benefit and offset to some of the expense.

[Eric Wold, B. Riley]

That tax credit benefit was an ongoing quarterly benefit for you or was it just in Q3?

[William Merritt, President, Chief Executive Officer]

Yeah. It's an ongoing benefit, but if you for instance in Q3 increase the estimate of the rate of that credit, the effective rate for the year, it can have a little bit of a catch-up impact in the quarter. So that's maybe part of the reason that and part of your question was around, what do we expect for Q4.

I did say I think that on one hand, we have ZTE litigation going away. So that's a benefit, but on the other hand, there was some of that expected increase in Q3, I do expect to see in Q4 at this point.

[Eric Wold, B. Riley]

Got it. And then kind of - kind of on the ZTE comment, I guess in the past one that you noted was the outstanding Chinese OEMs, getting them license has been kind of the multi-year that got a significant past payments and just kind of continually building up as it is, you kind of moved on, I guess, maybe help us understand how it comes to beginning of the call that ZTE is a fairly small contributor now, given their current market share, how that jives with kind of multiple years of catch-up payments plus now get an access to patents beyond just cellular?

[William Merritt, President, Chief Executive Officer]

Sure. So when you look at a situation like ZTE, where you have a significant amount of past sales right and you have a customer that fits in there, his position in the market has declined. The past sales can almost become an impediment to getting a deal done.

So we've had this before and the way we approach it is sort of in this, this pragmatic way. So we, as we mentioned in the 8-K, we did not give a full release for past sales. We only give a partial release and the idea is with situation like this we had in the past, if you want to get the customer to be a long-term customer and you want to create an incentive for them to be a long-term customer. And as long as they continue down that path, then you chip away at those past sales.

So - and if they don't go down that path, then you have the full ability to go after those past sales. So it's a balancing of interests that we try to do to get -- to get people on board. I think the other was very positive. The things that we're very positive about the deal is, I would say everybody big or small negotiated very hard with respect to the royalty rates, and so the deal, we were able to construct with ZTE is we have mentioned is a really solid benchmark for others including manufacturers in China.

It was very solid and that we reflected an added contribution from the HEVC portfolio, which we think is very - a powerful statement about that acquisition as well. So again while not a big revenue driver because their sales are so much smaller. I think both the structure and the - and the rates in the deal are very, they're really good benchmarks for us to apply to others.

[Eric Wold, B. Riley]

Okay. And then just final question from me, Rich, make sure I understand, your kind of preliminary guidance for Q4, $83 million to $95 million, including $74 million to $78 million of recurring, the $74 million to $78 million recurring that would be comparable to the $68 million you reported for Q3 and that kind of assumes a kind of a full quarter going forward run rate with ZTE and Google in there?

[Richard Brezski, Chief Financial Officer]

Yeah, I’m just looking for my sheet on that. So, yeah that’s building, one second, the $68 million would be the current patent royalties. But recurring revenue would also include the current technology solutions revenue. So it's basically everything but the non-recurring.

[Eric Wold, B. Riley]

Okay. So $74 million to $78 million is more comparable to $68 million or plus $67 million, so $70 million to $71 million.

[Richard Brezski, Chief Financial Officer]

Yeah.

[Eric Wold, B. Riley]

Okay. And that includes a full quarter of kind of ongoing - kind of I guess, assuming our fixed deal kind of ongoing from BG renewal?

[Richard Brezski, Chief Financial Officer]

Yeah. So yeah typically in the period in which we signed new deals irrespective of what date within that period for that quarter, we signed the deal we treat again gets back to the quarterly cycle, we treat that quarter as recurring revenue.

[Eric Wold, B. Riley]

Perfect. Thank you, guys.

[Richard Brezski, Chief Financial Officer]

Thanks, Eric. You got it.

[Operator]

Our next question comes from Charlie Anderson, Dougherty & Company.

[Charles Anderson]

Yeah. Thanks for taking my questions. Maybe I wanted to focus a little bit first on the new licensees, so it's not every year we see you sign someone out of China. And then given the geopolitical backdrop, it was sort of interesting to see that happen. Now, so I wonder if you maybe Bill, you could give a little bit more color on sort of why ZTE why now?

And then as it pertains to Google this approach that you guys took I wonder if you could give us a little bit of background there and I think you did mention, you feel like it's applicable to future licensees.

So wondering if maybe you could tie that together with the fact that you’ve got a lot in China to go do, and could that same framework work for some of those licensees with what you did with Google? Thanks.

[William Merritt, President, Chief Executive Officer]

So, look I think ZTE was the result of obviously a lot of hard work by the company. We also, we're reaching out to the US Government, we were focused by Trump on intellectual property was very important, and continues to be very important. So I think there's a lot of factors that came into play there. But I think also reflected good credit with ZTE, they stepped up and they did the right thing.

And also, as we talked about and Charlie, you and I had and analysts had the conversations, we needed to think about our rate structure in China and make some tweaks to get it to work better. And I think we were successful there and I think it's - so I think all of those things came together.

And I think they all bode well for other discussions with Chinese customers, it's always good when you're talking with Xiaomi or TCL or whoever, to say, hey, we just did a deal with ZTE, and people will be able to figure out what those resources, and therefore they will know what we're asking from them, is no different than what we are getting paid by ZTE, so all good on that front.

Google is a different type of arrangement, I think this idea of partnering together with other licensors is something that we began to explore more first with the eVance platform, we have more exposure to that on the CE side where people get together and pools other things.

I think it's becoming a way to do deals on a less friction build basis because there is a greater package that's made available to the licensee, and so they can, so you don't get into what's the value for this portfolio. What's that value for that portfolio, it's kind of like what's the value for the whole, and they don't really care how it gets allocated at the end of the day.

So, it's definitely an approach that we will leverage in the future when it makes sense to do that. And frankly the more tools we have at our disposal to get license agreements done, the better, it will be.

Anyhow I think I'd mentioned by Google, obviously a very strong company in terms of their ability to evaluate intellectual property deals. I think they've always had a very strong voice on patents and I think this is a statement by them in terms of, in terms of what they think the overall stack should look like. So, I think it's all good.

[Charles Anderson]

Great. And then just as a follow-up, are both those deals going to be fixed fee and then I would also curious on the Google deal does it cover your whole portfolio and then what end devices will it cover on their side? Thanks.

[William Merritt, President, Chief Executive Officer]

Yes. So the ZTE has a fixed element to it and Google, no, I'm sorry, I'm sorry, I was going to say there is…

[Richard Brezski, Chief Financial Officer]

I was going to say the ZTE has a fixed element to it and it also has a variable. Yes.

[William Merritt, President, Chief Executive Officer]

Yes, I'm sorry that's correct. And generally, with respect to deals that are done with through platforms we can't talk about specific about this platform. But, when you think about pools and platforms they tend not to be fixed price, they only tend more to be running royalty type deals.

[Charles Anderson]

Okay. And then can you speak to coverage of end devices on Google side, Bill?

[William Merritt, President, Chief Executive Officer]

I don't know if we actually disclosed that. So, whatever we have in the K, I'm sorry, in the 8-K I mean, I mean in 10-Q, actually 10-Q on this one would be all we can say.

[Charles Anderson]

Okay. Fair enough. Thanks so much.

[Operator]

Your next question comes from Scott Searle with Roth Capital.

[Scott Searle, Roth Capital]

Hey, good morning. Thanks for taking my question. Congrats on getting some of these licensees across the goal line. Hey, Rich just to quickly follow up on some of the cost front, I just want to clarify the tax credits ends up being a contra R&D item, is that correct in terms of how it was reflected in the third quarter?

And then I just want to normalize some of the one-time items, I think you called out $6.2 million in one-time items, is that correct, is that fully go away in terms of normalizing the OpEx for the fourth quarter?

[Richard Brezski, Chief Financial Officer]

Yeah, so on the tax credits, let's start there. There are different kinds of tax credits, the particular kind that we're referring to here are treated as a contra expense and it largely goes to how you can utilize those credits. So, in this case this benefit by increasing the expected tax credits reduces expense.

With respect to the one-time items. Yeah, we call them out. We do expect some level of one-time items to continue still, certainly a component of that is integration cost and having just closed on the acquisition of the research team from Technicolor in June that integration is still ongoing.

[Scott Searle, Roth Capital]

Got you. But overall OpEx will be up sequentially into the fourth quarter adjusted for all of that. We just don't know the magnitude at the current time?

[Richard Brezski, Chief Financial Officer]

Right now, my expectation is that to see an overall increase.

[Scott Searle, Roth Capital]

Okay, got you. And then moving over. Just a couple of other quick follow-ups rich on per unit royalty was down sequentially in the quarter. I was wondering if you guys could provide a little bit of color on that.

And then just to clarify deferred revenue was up big in the quarter, I think Google and ZTE closed post the quarter. So I'm assuming that is just the normal payment cycle of one of your larger customers. Is that correct?

[Richard Brezski, Chief Financial Officer]

Yeah, I think if you look through the cash flow detail and so forth, you'll see that we did have some payments collected in the quarter. And of course we burn cash in other quarters earlier this year and it all kind of speaks to, we don't necessarily collect cash evenly across the year, so that addresses I think the last part of your question.

On the per units, what we're seeing probably the most variability there throughout the year has been on the consumer electronics side and frankly a lot of that being per unit we're estimating. We don't have the same history there as we do in our legacy business.

So we're comparatively disadvantaged in our ability to forecast. Perhaps, there's a little bit more seasonality there, then we gave credit to in our estimates and that's caused a couple of different true-ups. So I think that will probably smooth out over time. But for the time being that's where we are at.

[Scott Searle, Roth Capital]

Got you. And then just on the Google front, I'm not sure if I missed it, was it both for wireless and HEVC. So on the video front as well across both. And then just to clarify in terms of the platform kind of eVance approach, is it actually a formal JV in terms of how you're going to, I'm just trying to understand how Rev Rec is going to work on that front?

[William Merritt, President, Chief Executive Officer]

Okay. On Google, I think we've disclosed what we can disclose. So, and the second question is around eVance.

[Scott Searle, Roth Capital]

No, I'm sorry in terms and approach it was Google the approach to Google, sounds like you used the concerted effort with other potential licensors. But that is, is it a formal JV that has been established to go after that, okay.

[William Merritt, President, Chief Executive Officer]

Yeah. So you can do it different ways, right. So you can have pools then sometimes a pool is actually, its own little separate corporate structure. You could have platforms, which is may just be an association of companies, but it's a fixed association of companies.

You can have sort of ad hoc partnerships that go to a customer and the, what we've been doing and what we see others doing now is that this flexibility in licensing approach of a sort of a very static bilateral model is actually getting some traction in the market, for the reasons I gave. So, sometimes, it's always more efficient, sometimes it allows folks to avoid again individual, allocate individual valuations of individual portfolios because you just look at it as a larger portfolio, it can - it can create a lot of benefits and the flexible nature of it is better, because you go to any particular licensee, well they may already be licensed with company A, B and C and therefore a partnership between companies D, E, F is the best way to approach them. So I do think it's, it's a new style of licensing. But I think it's one that we like others like and hopefully we can use it more often.

[Scott Searle, Roth Capital]

Got you. And lastly just shifting gears to ZTE for a second, I just want to clarify, sounds like there is, there is some catch-up payments that we will see in the current quarter, but also senses a lot of flexibility in terms of how you approach the negotiations with ZTE.

So, for starters is - will all of those catch-up payments to be paid in the fourth quarter or is there going to be somewhat of an extended period in terms of where they're paying catch up?

[Richard Brezski, Chief Financial Officer]

Yes. So I think what I'd say there is, we can't get into the details on the specific payment structure in terms of when things will be paid, but I did provide some guidance on overall non-recurring revenue expectations for the fourth quarter. So, at least on the revenue side of things, you have an idea of where we expect to land.

[Scott Searle, Roth Capital]

Got you. But you also get a benefit as well. In reduced litigation with ZTE, have you quantified that, Rich?

[Richard Brezski, Chief Financial Officer]

No, that was part of my remarks in terms of the Q4 that we're trying to figure out exactly where we expect to be on the litigation front is being one of the more important changes Q3 and Q4.

[Scott Searle, Roth Capital]

And just lastly on ZTE, you licensed both on the mobile portfolio as well as the video portfolio. I'm kind of kind of curious in terms of the relative value, if you could comment on that.

If there is video expected to be entailed from smartphones or is that other consumer electronics areas and wondering if there was any difference in terms of the royalty component domestic versus exports? Thanks.

[Kai Oistamo, Chief Operating Officer]

So we - so with them. So first of all, the part on relative importance on wireless, because if you see wireless does dominate than we expect it to dominate going forward, but it's a important addition and think about it that way from HEVC. Clearly not insignificant increase.

And then in terms of the scope, again, we can't really kind of comment more than what we have, what we said on the scope of the deal kind of what it covers and what it doesn't cover.

And then lastly, on the kind of the rate and we, we can -- again commenting specifically on the -- on the rate itself, but it does cover like the payments cover both domestic, Chinese and international sales.

[Scott Searle, Roth Capital]

Got you. And just maybe if I could one last. It sounds like you said a nice template in terms of the flexibility with ZTE, have you had any inbound or has t he dialogue changed since you've disclosed the ZTE relationship? Thanks.

[Kai Oistamo, Chief Operating Officer]

That's early days. I mean it's kind of a, it's about it little bit of a week since we disclosed. So we continue to have since then we have had multiple kind of interactions with different companies, but it will be too early to actually comment on that.

[Scott Searle, Roth Capital]

Thank you.

[William Merritt, President, Chief Executive Officer]

And Scott, I just wanted to know when we are discussing the past sales and the revenue expectations for Q4, I just wanted to again emphasize Bill's comment from earlier that the ZTE release on past sales was limited.

[Scott Searle, Roth Capital]

Got it. Thank you.

[William Merritt, President, Chief Executive Officer]

Thanks, Scott.

[Operator]

[Operators instructions] Our next question comes from Anja Soderstrom [Sidoti & Company]

[Anja Soderstrom, Sidoti & Company]

Hi, everyone. Thank you for taking my question.

[William Merritt, President, Chief Executive Officer]

Sure.

[Anja Soderstrom, Sidoti & Company]

So a lot of - a lot of good questions are asked already. And so I just wanted to get some more color on the Taiwanese licensee that kind of made variable royalties lower for the third quarter, is that something that's going to continue or it was something specific for the quarter?

[William Merritt, President, Chief Executive Officer]

Yeah, I think, again as I said before, I think the larger proportion of the changes over the year are on the consumer electronics side. There is some variability in Taiwan as well. I think probably, you saw that come down a little bit over the course of the year and that's really all I can say at this point.

[Anja Soderstrom, Sidoti & Company]

Okay. Thank you. That was all from me.

[William Merritt, President, Chief Executive Officer]

Thanks, Anja.

[Operator]

We have no further questions in the queue at this time.

[Patrick Van de Wille, Chief Communications Officer]

Well, thank you very much, Travis. And thanks everybody for joining us this quarter. We look forward to updating you again with Q4 results in a few months. Thanks and have a good day.

[Operator]

Thank you, ladies and gentlemen. This concludes today's teleconference. You many now disconnect.