InterDigital Inc. (IDCC), the technology licensing company run by CEO William Merritt, posted a 22.4% increase in second quarter 2016 net income, driven by a $23.1 million discrete net tax benefit and lower costs that made up for much lower revenue.

Wilmington, Delaware-based InterDigital’s net income rose to $39.9 million, or $1.14 a share, from $32.6 million, or 89 cents a share. Earnings adjusted for pretax gains were 48 cents. Based on the adjusted earnings the company beat the average analyst estimate of 31 cents.

Revenue fell to $75.9 million from $118.6 million. Current royalty revenue fell to $73.6 million from $89.4 million. Past patent royalties fell to $1.28 million from $27.26 million. The company was expected to produce revenue of $76.6 million, according to the average analyst estimate.

In second quarter 2016, the company had cash flow from operating activities of $191.4 million and free cash flow of $182.5 million, compared with $25.3 million and $17 million, respectively, in second quarter 2015.

The company attributed the increases to cash collected under an arbitration award and related patent license agreement. The company said the amounts collected have been included in deferred revenue, as all criteria for revenue recognition have not yet been met. It expects to recognize the related revenue from these payments, including both a recurring and past sales component, in the third quarter 2016.

“While recurring revenue declined from first quarter, that decline was driven by expected seasonality in phone sales and has no impact on our confidence in our ability to drive the annual royalty platform for our core terminal unit licensing business to between $500 and $600 million,” Merritt said in a statement.

Merritt said InterDigital “continued our strong work around expenses this quarter, taking some significant steps to lower our tax burden and drive higher profitability.”

He also noted that InterDigital’s “engineers and scientists continued to drive substantial new innovation at the company, including making numerous contributions into the developing 5G standard. InterDigital was among the leaders in driving 3G and 4G innovation and we are working to drive a similar position for the company in 5G, where the opportunity to innovate is substantial and the technology needs are right in our wheelhouse.”

Operating expenses fell to $52.8 million from $60 million. Patent administration and licensing expenses fell to $28.2 million from $31.2 million. Development costs fell to $14.6 million from

$18.3 million. Selling, general and administrative costs fell to $9.9 million from $10.4 million.

The company attributed the decrease in operating expenses of $7.1 million in part to a $4.5 million decrease in intellectual property enforcement and non-patent litigation. In addition, the company said consulting services, commercial initiatives and personnel-related costs collectively decreased $5.7 million. These decreases were partially offset by a $2.9 million increase in performance-based compensation and depreciation and amortization.