Hello, everyone. Thanks for joining Needham & Company's 27th Annual Growth Conference. My name is Shawn Milne, and I'm part of the semiconductor team here at Needham & Company. It's my pleasure to introduce InterDigital. InterDigital is a technology company focused on wireless communications. Joining me from the company is President and CEO Liren Chen. Liren will take us through a 30-minute presentation followed by a short Q&A. Liren, thank you.
Thank you. Good afternoon. Welcome. I know it's the end- of- the- day session. Appreciate it for those who are here. And if you are online, I welcome you to listen to us. As an extra bonus, I'll finish my slides a few minutes earlier. So I won't take 30 minutes, I promise. All right, disclaimer. So here's what I intend to go through. I want to go through our company introduction. I want to give you a high-level overview of our team, both at exec level as well as the leadership level, the next-level leadership. I'll explain to you the key areas of technology we are working on, how they are relevant to really important industries, and that gives us the opportunity to drive our business. I'll give you the journey since I joined the company four years ago. I'll describe what we have built over time.
And more importantly, I want to explain to you our long-term growth strategy. By long-term, I mean until the end of 2030. All right? Let's dive into it. So, who we are? InterDigital is a technology company. The company was founded in 1972. We were involved in building the very first wireless system in the United States. And we focus on foundational research in wireless, video, and AI, which I'll spend more time explaining. Through the past, we have built a really strong team, both at exec level as well as at various different working group levels. And we have built a very large and, more importantly, highly valuable patent portfolio. As of today, we have more than 32,000 patents and patent applications. And we have built customer relationships with some of the largest players in different industries.
And since I joined the company, we have signed more than 40 license agreements with over $3 billion of contract value already. And then the business momentum is growing. But overall, we are really proud in how we enable the ecosystem. If you look at the bigger economic impact, we literally talk about $5.7 trillion of economic impact each year. Okay? On the financial outlook side, I won't go through all the numbers. I just wanted to show that this is based on our latest guidance for our 2024 financial year, which we'll provide the numbers in our next earnings call next month. As you can see, tremendous growth, a lot of margin and profitability and revenue growth, and cash position all across the board. Right, here's the team. I'm not going to go through all the names. We have me.
We have Richard, our CFO, Raiford, our head of IR. But all our resumes are on our website. What I want to emphasize is each one of us has brought decades of experience coming to the company. Some of the most advanced companies in our industry. And more importantly, we work really well as a team. Collaborative, hold each other accountable, and we are able to execute across the board. All right, let's talk about our business model. I very often get asked a question to see, "Okay, you guys are IP licensors. How do you differentiate yourself from other people?" Right? So I always start to say we are an R&D company. We spend a lot of money in solving the most difficult problem in the system. By system, I mean wireless system. I mean video system.
And we try to lead the industry at least three to five years ahead of time. And by solving those problems, we build a very large patent portfolio. And then over time, we license them through people who implement our technology in their product. But that's only half the story. The other half of the story that's underappreciated by many other people, even for people who know us, who buy our shares, is our leadership in the standard process. And I'll explain to you why standard is important. With standard, it's a way of us going to market with our technology. Right? But before I get into standard, let's first talk about technology. We invest in three buckets of technology. That's wireless. That's video. That's AI. By wireless, I mean cellular wireless. That's also Wi-Fi, local area network, as well as cellular, obviously, with multiple generations over multiple decades.
For video codec, we primarily focus on video codec, which is an encoding and decoding protocol people use to compress and decompress signal for reasons I'll explain at a later slide, but increasingly, we are putting more effort into the immersive video experience. That's a 3D user experience. That's how they combine sensing technology with display, how they integrate feedbacks in various different haptic and others into the video codec, okay, and AI, obviously, every CEO will tell you they are an AI company, but what differentiates us is we have been working in this field for multiple decades. We are not competing at the application layer. We are not even competing at the service layer.
What we are doing is we are looking to apply AI to solve some of the most fundamental issues in wireless and video and finding the common block that we can share through standard process by adding the intersection of those three key technologies together. All right? Let's get to it here. Let me see why is mobile and video so interesting. Okay? This is live data together with projection. And I have to look it up to see what EB even means. Exabyte, it's basically one million TBs, one terabyte is 1,000 GB, which is obviously so this is an enormous amount of data. And clearly, it has been shown exponential growth through the whole industry. And one thing we have learned, I've been in the industry for 30 years now. It's people's demand for bandwidth. Consumers' desire to have more rich experience is never-ending.
Just when you think you built enough pipe, people will fill it with all kinds of stuff that we may know today and we may not know that's coming along the pipe. Okay? This is compression. Compression is super important. I'm showing you with visual of a 4K movie that's 130 minutes long. I'm showing you in this block without compression, this will be more than 11 TBs. Okay? With various different generations of technology on the right-hand side, they map into a sub-block on the bottom right-hand side. There's five different codecs that we, as a company, have created the building block, and we help them creating. Each new generation codec is incrementally more efficient in giving you the same quality of user experience with less bandwidth, or giving you a more richer user experience with the same bandwidth.
So if you combine everything, our latest generation technology is able to take 11 plus TBs into 9 GBs. That's more than 1,000x to 1 compression. This is what allows a consumer to be able to download your Netflix and other things on your iPad within minutes before your airplane takes off. Without compression, that downloading process will take three days. Okay? All right, let's talk about standard. First of all, why do you need standard? Right? Standard is giving you compatibility. Standard gives you economy of scale. And standard is what levels the playing field for a lot of companies who want to get into the field. But for consumers, it helps you to have the same phone goes everywhere that works. Okay?
For implementers, which are equipment makers and device makers, they lower the entry, give you the economy of scale, give you compatibility, giving you one large way to make one phone that can instead of 10 different phones for different markets. But for equipment makers and operators, it allows you to roll out different generations of services, technologies over a period of time, allowing you to get your money returned through a period of time. But what it means for us? Okay? Number one, we drive standard. We don't just participate. We lead them. Okay? Because our engineers are super good. We are believing our business model is compatible to it. And we are not going to take technology and hoard it ourselves because we want to share them. And we are only successful if our technology is being deployed.
For a relatively small company, that's the most effective way for us to get our technology into billions and billions of devices per year. Okay? We have a very strong reputation through collaboration with partners and universities and others. I want to keep my promise of finishing on time. So those are some of our engineers who are leading standard development. Those are real people. Those are our engineers. We highlight some of them. Okay? We, as a company, currently lead more than 100 leadership roles in different standard organizations. We highlight the standard side for cellular wireless and IEEE, which is Wi-Fi. We highlight some of the video technology in very different organizations. What's really interesting, which is a little bit hard to tell, is all those technologies started converging. There's actually four of those subgroup people here in there.
They are actually AI and machine learning subgroups within wireless or video that we are leading. This is yet another proof point. Those three pillars of technology, they are converging. Some of them is obvious to see. AI, machine learning, standing committee. We are the chair. Right? And there's multiple of them, by the way. And then you see there's NNVC. That's Neural Network Video Codec. That's another branch of AI video coding. So we are leading a lot of the creation. All right? And it's just not me saying we're leading. And there's a party like LexisNexis to do innovation assessment for all the companies in the world. Three years in a row, we are ranked as top 100 most innovative companies for any company in the world. And so we are proud of our accomplishment. Here's our patents. Okay?
So, 2017, I'll explain why 2017 was the latest year. We have essentially nearly doubled our patent portfolio size. But they're not the same patent, by the way. We add new things to it. And not only have we doubled the size, but we also diversified the technology that's in our portfolio. So historically, 2017, we are largely a wireless company which occupies more than three-quarters of our portfolio. In the latest year, wireless portion is about half the portfolio. And we added video as we added others through organic growth as well as acquisition. We acquired a very large portfolio from Technicolor, which is a pioneer in the video technology for many years, including the very first color movie being made through a Technicolor camera. And that, more importantly, we acquired that engineering team. So we consider them part of our team. And we co-develop the next- generation technology.
So that, which I'll explain later slides, unlocks a lot of opportunity for us on the business side. Okay? But for those of us who are in the patent-like IP and technology business, each patent is different. That's by definition. And equally important or more important than quantity is the quality of the patent. It's the value of the patent. So how do we measure value? I believe we have some of the most valuable, strongest patents in our industry. But this is, again, measured by third parties like LexisNexis, who has an indexing system where they measure the value portfolio by how fundamental they are, which are technologies they apply to, and how many countries you have patents that cover those important markets. And I'm really proud to say we rank high. This is not just a subset of companies.
This is any company with sizable assets in those categories, and we are one of the very few companies. There's actually only three companies in the world who rank top five in all these three areas, and we are one of the three. Okay? Just think about it. This is enormous strength in this area. This is among any company in the world. All right? Now, let's talk about business, so far, I've explained to you we have really good engineers. We work on very important technology. We build a patent portfolio that's highly valuable that we drive the standard creation so our technology becomes part of the open standard, but in the end, though, we are a publicly traded company. We have to seek fair return for our shareholders so we can build a sustainable business.
So in the last four years since I joined the company, we have signed more than 40 new agreements. Some of them are renewal. Some of them are brand new. Okay? Combined, the contracted dollars for this agreement are $3.1 billion. Okay? And most of them are multi-year agreements. We only signed a few sizables in terms of, hey, largest Chinese customer, largest contract in our history, Apple renewals, brand new IoT contract, internal things, consumer electronics, largest smartphone TV vendors. The list goes on and on. Obviously, we are just identifying a few. But that demonstrates companies largest in the industry with enormous amount of sophistication, with a lot of ability to negotiate and drive hard bargains, recognizing what we bring to the table that's really helpful for their business. All right? And this is what we internally call a four-panel chart.
It's a creation for our CFO and IR and other people. We are really proud. What we're putting is we demonstrate the revenue growth in the last four years. We put the CAGR, which is 24%. But the value for our business is our business offers very much operating leverage. We invest in fundamental R&D. We build the IP. When we do licensing, new customers we sign practically give us a 100% gross margin . Builders, keep in mind our technology is part of the standard. They are already using it. It's already in their product. We don't have to implement new features for them. We keep on investing in the next-gen technology for the future. So therefore, as much as we have more than doubled our revenue, our EPS and our adjusted EBITDA has gone up even higher. Okay? Those are the numbers we present.
And then we are really proud of how much actual cash we have returned to the shareholders through share buybacks as well as dividend on the bottom side. Okay? We can go through all the details offline if you are interested. But that's past. Okay? I fully recognize we want to build more value over time. We want to demonstrate long-term growth. So let's talk about growth here. First, let's talk about the value we bring. And as I explained, some of the technology we create are super valuable to everything we do. And I'm describing a wireless ecosystem we do here. And hopefully, without explanation, everyone in the world practically has a cell phone. Right? That's developed world as well as emerging industry. As of today, this is third-party data, by the way. We cited the source at GSMA, which is very reputable industry association.
It's $5.7 trillion per year economic impact. It's hard to wrap our arm around that number. What that number means? If this were a separate country, this would be the third largest economy in the world, only behind the U.S. and China. This is bigger than Japan, bigger than Germany in terms of economic value per year. Right? It's obviously a huge number, and its projected growth. Right? In our technology, we work on wireless, cellular, and Wi-Fi. We work on video technology. We work on AI. But then we apply them to different vertical industries. Our biggest licensing opportunity has been and continues to be smartphones. But we are no longer just about smartphones. We also license in other devices, consumer electronics, IoT, and including connected cars. We also identified and have been actively working for multiple years into the greenfield opportunity in the cloud. Okay?
It's actually easy to explain why the technology applies. I'll demonstrate the opportunity for us. On the different columns here, we identified the size of the market. We identified the future growth of the market. We identified how many key players we need to engage. Hopefully, over time, sustain and build them as our customers. All right, let's talk about dollars. We currently add more than $400 million in recurring revenue. Again, we provide all the financial metrics on our website. We add a catch-up payment, which is they pay us for the past use of our technology. We believe over time, we can grow our total revenue on recurring portion by the end of the decade to be $1 billion or more driven by these three factors.
First off, we will tell you, by the way, the recurring portion is a 2023 number because we haven't released our 2024 number yet, which will come out next month. Smartphones, we are at $347. We believe we will grow that into 2027 to $500. Our consumer electronics, a year before, was $60. And we believe we can get them to $200 million by the end of the decade. But then really interesting on the cloud space, we currently don't have revenue on. And we believe that's a sizable opportunity for us. Our target is to get that revenue to about $300 million plus by the end of the decade. Okay? All right, let's talk about smartphones here. This is where we have a lot of track record. We have built a lot of momentum.
And we have increased our market from a little bit more than 50% when I joined the company to 70% paying customers, in terms of keeping in mind 100% of the phones are using our technology. So our goal is to capture. Well, capture is convincing the other 25% of the customers to pay us for technology already using. And they translate into four customers on the light blue side. All right? And then on the right-hand side, those are well over a dozen customers with huge names like Apple and Samsung and Oppo and Xiaomi paying us as of today. Okay? And then on the consumer electronics side, this is actually multiple categories. Those are PCs. Those are tablets. Those are TVs. Again, we use similar color marking on what's under license, what's a new opportunity, and what are things we are working on.
Again, various different progress. But if you look at Our History, this is a segment that we have grown at a much faster pace than smartphones overall percentage-wise, even though it's a smaller part of our business from absolute dollar amount. All right? And by the way, there's connected cars, which is what we define as IoT devices. There's 4G. There's 5G going to. There will be value penetration increase. But there will be higher output, if you will, higher value per car as people adopt into the next-gen technology. Right? And then on the IoT side, we identify some of the market we are focused on, point of sale, smart meters, and others, which are technology at the core. So collect all of them. From today to the end of the decade, we will target. We are on track to generate $200 million recurring revenue as we go.
But let's talk about cloud. First of all, I get asked the question quite a bit, you see, why do you think you have an opportunity in the cloud? So I always start with technology. Keep in mind our video codec technology applies to both ends of the pipe. When you are receiving content on your iPad or your PC, that signal is being compressed. But where did the compression happen? It happens in the cloud. When you are shooting a movie, a TikTok, or whatever, YouTube, or you are uploading to the cloud, the compression happens on our device. But the content gets reformatted. People call it transcoding in the cloud. They decompress them, tailor them, reformat them, distribute them. So both ends of the pipe happen. And those are, by and large, technology we have contributed to that's super valuable to that service. Okay?
If you look at some of the verticals here, SVOD, it just means subscription-based video on demand. AVOD, it means advertising-based video on demand. At the end of the day, those services are built on technology that we have made huge contribution to through us and the Technicolor team over a long period of time. I think it's fair to say, as I demonstrate to you, the compression ratio in reduction of traffic is really important for the economy of those services. Allow them to sell higher resolution services, higher price. Allow them to reduce operating costs tremendously. Storage, power, internet, everything. Right? When you are reducing so much more. That business, that industry collectively, by 2027, will be $500 billion in annual sales. It's growing faster.
$500 billion is the same revenue as today's smartphone market, which we have demonstrated we are able to generate $300 million-$400 million, and on the path to $500 million. So why don't we not put $500 million as a target for the cloud? Because we know it's a new industry. We know we have to prove ourselves. We know it takes a bit of time for licensing. I'm going to emphasize technology has been created. Our reputation, combined with Technicolor, is well-known. IP is already there. But licensing takes time. Okay? So therefore, we give ourselves runway. We added preliminary $300 million revenue target for the first two verticals in the cloud. And then there's other area. Hopefully, you guys are recognizing they are dependent on video services and where the video codec is an integral part of it. All right? So let's put it together here.
If you combine them, as 2023 is our last full-year number, we will, again, announce our 2024 numbers. I'm looking at the recurring portion. Think about recurring as a subscription. As people sign up for long-term, they will pay us for value of IP over a multi-year contract. We, in order to deliver $1 billion by the end of the decade, are looking at roughly a 14% CAGR on that overall growth. Okay? And let's talk about capital allocation. Again, Richard's here. He's our CFO. He can take more questions offline. But we overall maintain a very robust balance sheet because we do want to demonstrate financial strength when we negotiate with generally a company much larger than we are. So that's our starting point. Second thing is really we do make very strategic investment in our capability to innovate. That's our engineering team.
That's our IP portfolio. And we have consistently invested 50% of our recurring revenue into it. Again, I'll come back on returning and catch up a little bit more. But we are providing a lot of extra capital that we can look at for inorganic growth. But our bar is very high. We want to justify why do we acquire by either demonstrating it can give us a faster path to revenue for what we already laid out, or it will give us new open opportunity for new areas that we can get into. And largely, as I demonstrated in the earlier slide, we have returned a lot of cash to shareholders through share buybacks. And we have reduced our share outstanding by a very large margin. We restricted the detail. And we have increased our dividends steadily over the years. All right. So now try to put it together.
Assuming by now everyone is convinced we will deliver $1 billion by the end of the decade. I know you guys will watch us over the years. Hopefully, follow us. What does it mean? It means we will grow our revenue by 14%. We will deliver a very healthy margin. We will be able to justify a very high adjusted EBITDA recurring. We will keep on driving the value forward. But then now let's tie everything together here. In the meantime, though, we will, as we sign new customers, as we have demonstrated multiple times in the last few years, we will capture this catch-up payment adding on top of the dollar amount. Okay? This is my last slide. I promise you I'll finish a bit ahead of time. What we have covered here is we have covered a world-class team.
We are building a lot of momentum in our business. We have demonstrated our technology is applicable to a very large addressable market, and we hope to keep on generating more value to the shareholders and to our employee base. That's everything I have. All right? Yeah. Time for Q&A?
Absolutely.
I can start off first. Please.
Thanks for this. Can you talk about the competitors and the competitive landscape? And then maybe your differentiation. It sounds like IP and compliance is a huge one, but anything else?
Absolutely. So first of all, let me talk about competition. We do have competitors in multiple different levels, but we also collaborate very broadly. In terms of competing, we compete with other people for talent. And we wanted to have the brightest mind in fundamental research in IP and licensing. And we have done a very good job at attracting people who have a lot of depth in this area, including some of the folks in the room here together with me. And we also compete with other people in standard process and try to demonstrate to people our technology solution is better. It's faster. It's more efficient. It gives you more reliability. But interesting enough, that's at the same time a fairly collaborative process. In the end, standard process is consensus-driven. And people do want to, in the end, agree on a common standard that works for everybody.
So there's actually more collaboration than competition in the standard process as long as engineers truly try to come up with a solution that's based on the merit of technology. And then regarding the IP side, interesting enough, the technology we sell, if you would, is unique every single one. Because the very definition of a patent means the patent office you need to convince them what you have created is brand new. So by its nature, if a patent's valid, it's being used, they are different all of them. So what I'm licensing, we are not the only licensor in our industry. But what we are licensing is different than any other people's patent portfolio. And they are all needed together to enable the ecosystem. And our patents read on technology that's essential for the standard that they have to use.
So in that degree, we are not competing against each other. We are just adding different pieces for the whole system that together, they make it work. And let me add one more thing here. You said, what differentiates us? We are fundamental technology developer. We build the stuff in our business model. But what separates us from many other sort of patent license source, if you will, is the longevity of our program. It's the fact that we put more than 50% of recurring revenue back into R&D and IP creation. And the one thing I didn't touch on, which I think I should add here, is most of our employees are engineers. And 90% of those engineers are inventors. That's 90, 90%. In most other companies, the inventor percentage of overall engineering is a single digit. It's 1%, 3%, those type of numbers.
So we have the highest level of concentration of inventors. And that we are really good at sharing our technology through standard process. Go ahead.
I have a question. The first thing is, you mentioned those number two, number three, number four, number five. Can you give us those names? See who your competition really is.
Yeah. What I was referring to is the smartphone player vendors by their market share measured by volume. The vendor who has the highest volume shipment in phone in the recent years is Samsung. Number two is Apple. Number three as of now is Xiaomi. Number four is Oppo.
Oppo?
Yeah, Oppo. Right? By the way, this demo slide is shared on our website. If you go to the pie chart, you will see all those names. Yeah.
Very helpful. But those people are not patent licensors. Are they?
They are licensees.
I know.
Yeah.
Their primary business is selling hardware.
Yeah. I think that's fair. Some of the vendors sell more than hardware. But by and large, on the smartphone side, they are a hardware-driven company.
Now, your technology is patented. Is your software also covered by copyright?
That's a good question. We create software, prototype software in our own lab. We use them. We do not license our software to other people to use.
Oh, you don't? We don't. We license our patents that read on the open standard to other people.
Do you have a follow-up on that company question? The slides were really good. You showed how you basically have 70% market share, and you listed all your customers and you listed another group of customers, like Transsion, some other guys. And that's who you're trying to capture. So are they using internal solutions to not use your company? What are they using?
Yeah. Look, I mean, it's important to know that our technology is part of the standard. It's in 3G, 4G, 5G cellular standard. It's in Wi-Fi standard. It's in video codec standard. So there's really no credible argument to say they are not using our technology. Unless you can say, "Oh, my cell phone doesn't support cellular standard." Then what is a cell phone? Right? I mean, so those arguments are fairly obvious. So what we tend to go through in licensing is really about the value. It's about how much money they need to pay us. And I can talk to you offline about each vendor and to the degree that I can comment. Because most of the discussion is covered by confidential negotiations.
But it's a process that we use every time through a lengthy process demonstrated to them that, "Hey, this is how much you are using. This is our evidence of use. This is how much the standard we have created, helped create." And by the way, sometimes, because we are a publicly traded company, we have a lot of publicly available data on financial performance that we can point to say, "Hey, by and large, this is how a lot of your peers are paying us." So therefore, in all fairness, you should pay a fair price. Because if you keep on not paying us, even though you are using it, you are generating a lot of billions of value for it, it's not fair to us. Because that makes our business harder and harder to sustain. And it's not fair to other paying customers.
Because that gives you an unfair cost advantage in that process. So most of our deal gets done. As I said earlier, 40-some agreements we have signed since I joined the company. The vast majority of them gets done through bilateral negotiation. And once in a while, we have to, frankly, file enforcement effort to defend our business. And those are the exceptions. But it's important that we are able to do it. And when we do it, we always end up in a license agreement in the end.
What drove the strong revenue growth here? It looked like on the chart there's some sort of catch-up payment.
Yes. Yes. So I'm not commenting on the whole year yet because we haven't announced the whole year. But we have provided guidance, updated our guidance in our Q3 numbers. So let's sort of talk about that snapshot here. We have a very strong year, driven by growth in both recurring revenue as well as catch-up payment. And we have a lot of strengths in our core market in smartphones, which we will provide more insight. But our biggest thing on the smartphone side is signing Oppo, which is a very large customer for the first time. And we made a certain amount of directional comments in Q3. We'll provide more guidance as we wrap up the year. But we also had a Q1 of 2024 last year. And we signed Samsung TV, which is the largest CE consumer electronic deal in Q1.
And then, as I said earlier, we don't enforce our right from litigation perspective that frequently. But when we do, we deliver a very good result, which came in from the Lenovo litigation. It's a lengthy litigation with a lot of nuances. But we are able to get multiple wins through court order that give us strong revenue from that account. So it's multiple things. And then we signed a number of smaller deals that add up. So it's not one thing, but it's really core strengths across the board in different programs.
Can you talk about you mentioned that deal with Samsung and what it was for a TV? Can you talk about how that agreement worked? Is it a fixed licensing agreement? Or is it how many TVs does that model sell?
Yeah. I apologize. I can't specifically comment on individual deals because they are covered by confidential agreement. But what I can explain to you is we are actually open to negotiate for different ways to structure the deal. Some of the vendors prefer what they call fixed fee agreement. Basically to say, "Hey, I pay you a certain dollar amount every year, year after year." It's almost like all you can eat program. Try to put it loosely. Some of the people prefer pay-as-you-go, where they will say, "Hey, I pay you a percentage of my sales, depending on how much I sell, depending on the price I sell." Then we do essentially sort of accounting as a good program, pay-as-you-go program. But as a licensor, I'm willing to offer both. I always like to see in the world of perfect information, they are the same.
If you know exactly how their volume will go through in the future, how much the mix, how much the price, I mean, it's just calculation of math. Right? It's straightforward. But obviously, the world is imperfect. Obviously, you don't have numbers that can precisely predict the future. So what it evolved, it's a risk shifting. It's basically to say, we look at future. We license for multi-year contract in the future. We look at third-party forecasts. We look at multiple sources of the data. And very often, our licensees, our customers have their own internal projections. And we go through those numbers. We build a deal that's reasonable to both parties. And there's a risk involved in that, how you structure it. If they outperform the forecast in terms of volume and projections, then in the end, financially, they are better off.
But there's always some chance that they may not be performing as they forecasted. So therefore, there's risk involved. And by the way, part of the risk we are using is also judging how long the credit contract we structure. Because even fixed dollar amount at the tail end of the renewal, you try to introduce a new market condition. Volume increase. New technology. Our content increase in what's in our phone in terms of what we bring to the table. And that's an opportunity for us to reset it if they have gained more value.
What's the hurdle to the cloud approach? My understanding, for a streaming device, there's compression on the phone. And I can see how you're getting paid for that. And then on the other side of the pipeline, like you mentioned, there's compression happening in the data center. Something like that. So that's already happening. So how could you kind of get into that market when it's already happening so they don't understand?
Yeah. Okay. What you describe, it's close but not precisely correct. I'm not criticizing. I'm just explaining. Right? So in the cloud, they are already using it. It's in the standard. And the standard is openly accessible to vendors who want to build stuff according to the standard. But just because it's open doesn't mean it's free. What it means is they are currently infringing our patent without paying us for those use cases. And we are in the process of explaining to them, convincing them how much they are benefiting, explaining to them all the benefits they're getting, and hopefully, over time, convincing them to take a license. Okay? This is a lengthy process. Because what we explained, it's complex. It's the benefit from. And in a very large business, we are asking for a very small percentage of the overall benefit they're enjoying, but it still adds up.
Right? So in that context here, this is similar to a lot of the large smartphone negotiations we are doing. And sometimes those negotiations take a lengthy period of time. And so that's essentially the dynamic we are going through. Okay?
No more questions.
All right, so I want to thank you all for spending time with me here. I enjoyed the discussion, and Rich and I and Raiford will hang around a little bit, and again, appreciate the participations, and hopefully, you enjoy the rest of the conference.