InterDigital, Inc. (Nasdaq:IDCC), a mobile technology research and
development company, today announced results for the fourth quarter
and full year ended December 31, 2014.
Fourth Quarter 2014 Financial
Highlights
- Total revenue was $86.1 million, compared to $99.7 million in
fourth quarter 2013. Revenue for fourth quarter 2013 included $38.1
million of past sales revenue. Recurring revenue was $85.1 million,
consisting of current patent royalties and current technology
solutions revenue, representing an increase of 38% compared to
$61.6 million in fourth quarter 2013.
- Fourth quarter 2014 operating expenses were $60.8 million,
compared to $61.7 million in fourth quarter 2013. Intellectual
property enforcement expenses were $14.5 million, a 22% decrease
compared to $18.6 million in fourth quarter 2013.
- Net income1 was $13.8 million, or $0.36 per diluted share,
compared to net income of $14.5 million, or $0.35 per diluted
share, in fourth quarter 2013.
- In fourth quarter 2014, the company generated $43.5 million of
free cash flow2 compared to $14.9 million used in fourth quarter
2013. Ending cash and short-term investments totaled $703.9
million. The increase in the company's free cash flow was primarily
attributable to the new license agreements entered into during
second quarter 2014.
- During fourth quarter 2014, the company repurchased 1.6 million
shares of common stock for $64.6 million. In addition, from January
1, 2015 through February 18, 2015, the company repurchased
approximately 48 thousand additional shares at a cost of $2.2
million. Since initiating the $300 million stock repurchase program
in June 2014, the company has repurchased a total of 3.6 million
shares for $154.8 million
Full Year 2014 Financial Highlights
- Total revenue was $415.8 million, a 28% increase compared to
$325.4 million in 2013. This year-over-year increase in total
revenue was primarily attributable to the $88.8 million increase in
current patent royalties as a result of new patent license
agreements signed in second quarter 2014 and increased shipments by
certain of our licensees.
- Recurring revenue was $288.8 million, representing an increase
of 46% compared to $198.3 million in 2013.
- 2014 operating expenses were $246.9 million, compared to $240.6
million in 2013. Intellectual property enforcement expenses were
$52.1 million, a 31% decrease compared to $75.0 million in
2013.
- Net income1 was $104.3 million, or $2.62 per diluted share,
compared to net income of $38.2 million, or $0.92 per diluted
share, in 2013.
- In 2014, the company generated $203.0 million of free cash
flow2 compared to $179.5 million in 2013.
- During 2014, the company repurchased 3.6 million shares of
common stock for $152.6 million.
"The fourth quarter of 2014 capped a remarkable year that saw
dramatic increases in our recurring revenues and net income,
cementing our position as a mobile technology leader. We also saw
continued research success that positions us strongly in future
technologies," said William J. Merritt, President and CEO of
InterDigital. "Our success in driving the top line was matched by
our efforts to maintain flat expenses while driving a broader range
of technology research than ever before. Our results for 2014
underscore the strength and scalability of our business model."
Additional Financial Highlights for Fourth Quarter
2014
- The slight decrease in fourth quarter 2014 operating expenses
compared to fourth quarter 2013 was primarily due to $4.1 million
decrease in intellectual property enforcement expenses, driven by
lower costs related to the company's USITC proceedings and related
actions. This and other decreases were partially offset by a $2.5
million increase in patent amortization primarily related to growth
in our patent portfolio, and various other smaller increases.
- Companies that accounted for ten percent or more of fourth
quarter 2014 total revenue were Pegatron Corporation (28%), Samsung
Electronics Co., Ltd. (20%) and Sony Corporation of America
(12%).
- The company's fourth quarter effective tax rate was
approximately 36 percent as compared to 43 percent during fourth
quarter 2013, based on the statutory federal tax rate net of
discrete federal and state taxes. The decrease in the effective tax
rate between fourth quarter 2014 and fourth quarter 2013 is driven
by the impact of lower state tax expenses resulting, in part, from
the company's income tax mix between patent licensing royalties and
technology solutions revenue.
Additional Financial Highlights for Full Year
2014
- The increase in 2014 operating expenses compared to 2013 was
primarily due to a $13.4 million increase in performance-based
incentive compensation and an $8.5 million increase in depreciation
and amortization related to growth in our patent portfolio. These
and other increases were partially offset by a $22.9 million
decrease in intellectual property enforcement expenses, primarily
due to lower costs related to the company's USITC proceedings and
licensee related actions.
- Companies that accounted for ten percent or more of 2014 total
revenue were Samsung (33%) and Pegatron (18%).
- The increase in the company's free cash flow was primarily
attributable to cash payments received in 2014 attributable to the
new license agreements entered into during second quarter
2014.
- The company's 2014 effective tax rate was approximately 34
percent as compared to 42 percent during 2013, based on the
statutory federal tax rate net of discrete federal and state taxes.
The decrease in the effective tax rate between 2014 and 2013 is
driven by the impact of lower state tax expenses resulting, in
part, from the company's income tax mix between patent licensing
royalties and technology solutions revenue. Additionally, net
benefits recorded in 2014 attributable to research and development
tax credits contributed to the decrease in the effective rate.
Near-Term Outlook
"We expect that sales volumes of our per-unit licensees in
fourth quarter 2014 will drive our first quarter 2015 total revenue
to a range of between $107 million and $110 million, comprised
entirely of recurring revenue," said Richard J. Brezski, Chief
Financial Officer. "This expected sequential quarterly increase is
based on the same set of licensees and is driven, in part, by
second half 2014 product introductions that saw tremendous market
success but also introduce a cyclical element to our first quarter
guidance. Consistent with our practice, this revenue guidance is
based on royalty reports received to date, and does not include the
potential impact of any new patent license, technology solutions or
patent sale agreements that may be signed, or any arbitration or
dispute resolutions that may occur, during the balance of first
quarter 2015."
Conference Call Information
InterDigital will host a conference call on Thursday, February
19, 2015 at 10:00 a.m. Eastern Time to discuss its fourth quarter
2014 financial performance and other company matters. For a live
Internet webcast of the conference call, visit www.interdigital.com
and click on the link to the Live Webcast under the Events section
on the homepage. The company encourages participants to take
advantage of the Internet option.
For telephone access to the conference, call (888) 802-2225
within the United States or (913) 312-1254 from outside the United
States. Please call by 9:50 a.m. ET on February 19 and ask the
operator for the InterDigital Financial Call.
An Internet replay of the conference call will be available on
InterDigital's website in the Investors section. In addition, a
telephone replay will be available from 1:00 p.m. ET February 19
through 1:00 p.m. ET February 24. To access the recorded replay,
call (888) 203-1112 or (719) 457-0820 and use the replay code
9689685.
About InterDigital®
InterDigital develops wireless technologies that are at the core
of mobile devices, networks, and services worldwide. We solve many
of the industry's most critical and complex technical challenges,
inventing solutions for more efficient broadband networks and a
richer multimedia experience years ahead of market deployment.
InterDigital has licenses and strategic relationships with many of
the world's leading wireless companies. Founded in 1972,
InterDigital is listed on NASDAQ and is included in the S&P
MidCap 400® index.
InterDigital is a registered trademark of InterDigital,
Inc.
For more information, visit the InterDigital website:
www.interdigital.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended. Such statements include information regarding our
current beliefs, plans and expectations, including, without
limitation, our current expectations with respect to the company's
first quarter 2015 revenue. Words such as "believe," "anticipate,"
"estimate," "expect," "project," "intend," "plan," "forecast," and
variations of any such words or similar expressions are intended to
identify such forward-looking statements.
Forward-looking statements are subject to risks and
uncertainties. Actual outcomes could differ materially from those
expressed in or anticipated by such forward-looking statements due
to a variety of factors, including, without limitation, those
identified in this press release, as well as the following: (i)
unanticipated delays, difficulties or acceleration in the execution
of patent license agreements; (ii) our ability to leverage our
strategic relationships and secure new patent license agreements on
acceptable terms; (iii) our ability to enter into sales and/or
licensing partnering arrangements for certain of our patent assets;
(iv) our ability to enter into partnerships with leading inventors
and research organizations and identify and acquire technology and
patent portfolios that align with InterDigital's roadmap; (v) our
ability to commercialize the company's technologies and enter into
customer agreements; (vi) the failure of the markets for the
company's current or new technologies to materialize to the extent
or at the rate that we expect; (vii) unexpected delays or
difficulties related to the development of the company's
technologies; (viii) changes in the market share and sales
performance of our primary licensees, delays in product shipments
of our licensees, delays in the timely receipt and final reviews of
quarterly royalty reports from our licensees, delays in payments
from our licensees and related matters; (ix) amounts of royalties
payable following routine audits, if any, and the timely receipt of
such amounts during first quarter 2015; (x) the resolution of
current legal proceedings, including any awards or judgments
relating to such proceedings, additional legal proceedings, changes
in the schedules or costs associated with legal proceedings or
adverse rulings in such legal proceedings; (xi) changes or
inaccuracies in market projections; and (xii) changes in the
company's business strategy.
We undertake no duty to update publicly any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as may be required by applicable law, regulation
or other competent legal authority.
Footnotes
1 Throughout this press release, net income (loss) and diluted
earnings per share are attributable to InterDigital, Inc. (e.g.,
after adjustments for noncontrolling interests), unless otherwise
stated.
2 Free cash flow is a supplemental non-GAAP financial
measure that InterDigital believes is helpful in evaluating the
company's ability to invest in its business, make strategic
acquisitions and fund share repurchases, among other things. A
limitation of the utility of free cash flow as a measure of
financial performance is that it does not represent the total
increase or decrease in the company's cash balance for the period.
InterDigital defines "free cash flow" as net cash provided by
operating activities less purchases of property and equipment,
technology licenses and investments in patents. InterDigital's
computation of free cash flow might not be comparable to free cash
flow reported by other companies. The presentation of this
financial information, which is not prepared under any
comprehensive set of accounting rules or principles, is not
intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with
generally accepted accounting principles ("GAAP"). A detailed
reconciliation of free cash flow to net cash provided by operating
activities, the most directly comparable GAAP financial measure, is
provided at the end of this press release.
|
|
|
|
|
SUMMARY CONSOLIDATED
STATEMENTS OF OPERATIONS |
(dollars in thousands except
per share data) |
(unaudited) |
|
|
|
|
|
|
For the Three
Months Ended December 31, |
For the Year
Ended December 31, |
|
2014 |
2013 |
2014 |
2013 |
REVENUES: |
|
|
|
|
Per-unit royalty revenue |
$ 49,220 |
$ 40,994 |
$ 157,250 |
$ 122,709 |
Fixed fee amortized royalty
revenue |
33,358 |
16,917 |
121,903 |
67,658 |
Current patent royalties |
82,578 |
57,911 |
279,153 |
190,367 |
Past patent royalties |
1,050 |
36,388 |
124,236 |
73,808 |
Total patent licensing
royalties |
83,628 |
94,299 |
403,389 |
264,175 |
Patent sales |
-- |
-- |
1,999 |
-- |
Current technology solutions
revenue |
2,493 |
3,719 |
9,633 |
7,960 |
Past technology solutions
revenue |
-- |
1,665 |
800 |
53,226 |
|
$ 86,121 |
$ 99,683 |
$ 415,821 |
$ 325,361 |
OPERATING EXPENSES: |
|
|
|
|
Patent administration and
licensing |
34,919 |
36,212 |
133,808 |
143,037 |
Development |
17,440 |
18,491 |
75,300 |
64,729 |
Selling, general and
administrative |
8,474 |
7,000 |
37,753 |
31,295 |
Repositioning |
-- |
-- |
-- |
1,544 |
|
60,833 |
61,703 |
246,861 |
240,605 |
Income from operations |
25,288 |
37,980 |
168,960 |
84,756 |
|
|
|
|
|
OTHER EXPENSE (NET) |
(4,699) |
(13,706) |
(15,432) |
(23,237) |
|
|
|
|
|
Income before income taxes |
20,589 |
24,274 |
153,528 |
61,519 |
|
|
|
|
|
INCOME TAX PROVISION |
(7,361) |
(10,404) |
(52,108) |
(25,836) |
|
|
|
|
|
NET INCOME |
$ 13,228 |
$ 13,870 |
$ 101,420 |
$ 35,683 |
|
|
|
|
|
Net loss attributable to
noncontrolling interest |
(562) |
(666) |
(2,922) |
(2,482) |
NET INCOME ATTRIBUTABLE TO INTERDIGITAL,
INC. |
$ 13,790 |
$ 14,536 |
$ 104,342 |
$ 38,165 |
|
|
|
|
|
NET INCOME PER COMMON SHARE — BASIC |
$ 0.37 |
$ 0.35 |
$ 2.65 |
$ 0.93 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING — BASIC |
37,207 |
40,977 |
39,420 |
41,115 |
NET INCOME PER COMMON SHARE — DILUTED |
$ 0.36 |
$ 0.35 |
$ 2.62 |
$ 0.92 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING — DILUTED |
37,873 |
41,298 |
39,879 |
41,424 |
CASH DIVIDENDS DECLARED PER COMMON SHARE |
$ 0.20 |
$ 0.10 |
$ 0.70 |
$ 0.40 |
Note: Certain reclassifications have been made to prior period
amounts to conform to the current period presentation.
|
|
|
|
|
SUMMARY CONSOLIDATED
CASH FLOWS |
(dollars in thousands) |
(unaudited) |
|
|
|
|
|
|
For the Three
Months Ended December 31, |
For the Year
Ended December 31, |
|
2014 |
2013 |
2014 |
2013 |
Income before income taxes |
$ 20,589 |
$ 24,274 |
$ 153,528 |
$ 61,519 |
Taxes paid |
(28,836) |
(21,625) |
(114,876) |
(24,961) |
Non-cash expenses |
19,779 |
30,982 |
72,324 |
80,771 |
Increase in deferred
revenue |
2,013 |
22,654 |
272,885 |
209,930 |
Deferred revenue
recognized |
(43,989) |
(38,827) |
(163,139) |
(174,014) |
Increase (decrease) in
operating working capital, deferred charges and other |
86,428 |
(18,003) |
21,291 |
64,930 |
Capital spending and
capitalized patent costs |
(12,506) |
(14,379) |
(39,027) |
(38,648) |
FREE CASH FLOW |
43,478 |
(14,924) |
202,986 |
179,527 |
|
|
|
|
|
Tax benefit from share-based
compensation |
(1,218) |
52 |
-- |
815 |
Acquisition of patents |
-- |
(12,000) |
(26,300) |
(25,013) |
Long-term investments |
-- |
445 |
-- |
-- |
Proceeds from noncontrolling
interests |
1,276 |
1,276 |
5,101 |
7,652 |
Dividends paid |
(7,609) |
(4,121) |
(23,729) |
(12,354) |
Share repurchases |
(64,603) |
(29,134) |
(152,625) |
(29,134) |
Net proceeds from exercise of
stock options |
33 |
298 |
402 |
1,032 |
Unrealized loss on short-term
investments |
(121) |
(283) |
(358) |
(1,353) |
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS |
$ (28,764) |
$ (58,391) |
$ 5,477 |
$ 121,172 |
|
|
|
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(dollars in thousands) |
(unaudited) |
|
|
|
|
December 31,
2014 |
December 31,
2013 |
ASSETS |
|
|
Cash & short-term
investments |
$ 703,928 |
$ 698,451 |
Accounts receivable (net) |
51,702 |
92,830 |
Current deferred tax
assets |
54,019 |
26,197 |
Other current assets |
33,530 |
40,036 |
Property & equipment and patents
(net) |
278,086 |
215,906 |
Other long-term assets (net) |
73,326 |
39,763 |
TOTAL ASSETS |
$ 1,194,591 |
$ 1,113,183 |
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
Accounts payable, accrued
liabilities, taxes payable & dividends payable |
$ 80,474 |
$ 66,262 |
Current deferred revenue |
124,695 |
60,176 |
Long-term deferred revenue |
293,342 |
243,864 |
Long-term debt & other
long-term liabilities |
220,403 |
209,061 |
TOTAL LIABILITIES |
718,914 |
579,363 |
TOTAL INTERDIGITAL, INC. SHAREHOLDERS'
EQUITY |
468,328 |
528,650 |
Noncontrolling interest |
7,349 |
5,170 |
TOTAL EQUITY |
475,677 |
533,820 |
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY |
$ 1,194,591 |
$ 1,113,183 |
|
|
|
|
|
RECONCILIATION OF FREE
CASH FLOW TO NET CASH |
PROVIDED BY OPERATING
ACTIVITIES |
|
|
|
|
|
In the summary consolidated cash
flows and throughout this release, the company refers to free cash
flow. The table below presents a reconciliation of this
non-GAAP financial measure to net cash provided by operating
activities, the most directly comparable GAAP financial
measure. |
|
|
|
|
|
|
For the Three
Months Ended December 31, |
For the Year
Ended December 31, |
|
2014 |
2013 |
2014 |
2013 |
Net cash provided (used) by operating
activities |
$ 55,984 |
$ (545) |
$ 242,013 |
$ 218,175 |
Purchases of property, equipment, &
technology licenses |
(3,899) |
(1,859) |
(7,095) |
(4,591) |
Capitalized patent costs |
(8,607) |
(12,520) |
(31,932) |
(34,057) |
Free cash flow |
$ 43,478 |
$ (14,924) |
$ 202,986 |
$ 179,527 |
CONTACT: InterDigital, Inc.:
Patrick Van de Wille
patrick.vandewille@interdigital.com
+1 (858) 210-4814
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