InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and
development company, today announced results for the fourth quarter
and full year ended December 31, 2016.
Fourth Quarter 2016 Financial Highlights
- Fourth quarter 2016 total revenue was $273.9 million, compared
to $112.1 million in fourth quarter 2015. The $161.8 million
increase in total revenue was primarily attributable to a license
agreement signed during the quarter. Primarily as a result of
that agreement, past patent royalties totaled $180.3 million.
- Fourth quarter 2016 recurring revenue was $93.6 million,
consisting of current patent royalties and current technology
solutions revenue, and was relatively flat compared to fourth
quarter 2015.
- Operating expenses were $64.7 million, a 10% increase compared
to $58.8 million in fourth quarter 2015, primarily attributable to
higher incentive-based performance compensation and patent
amortization, and due diligence costs. Intellectual property
enforcement expenses were $3.5 million, a 30% decrease compared to
$5.1 million in fourth quarter 2015.
- Net income1 was $136.5 million, or $3.85 per diluted share,
compared to $33.0 million, or $0.92 per diluted share, in fourth
quarter 2015.
Full Year 2016 Financial Highlights
- Full year 2016 total revenue was $665.9 million compared to
$441.4 million in 2015, a 51% increase. This reflected an increase
in past sales from $68.7 million in 2015 to $309.7 million in 2016,
offset by slightly lower recurring revenue in 2016.
- Recurring revenue was $356.2 million in 2016, representing a
decrease of 4% compared to $372.8 million in 2015. The
decrease was primarily attributable to lower per-unit royalty
revenue.
- 2016 operating expenses were $228.5 million, compared to $232.9
million in 2015. Intellectual property enforcement and
non-patent litigation expenses were $16.5 million, a 49% decrease
compared to $32.7 million in 2015.
- Net income was $309.0 million, or $8.78 per diluted share,
compared to net income of $119.2 million, or $3.27 per diluted
share, in 2015.
- During 2016, the company recorded $430.8 million of cash
provided by operating activities, compared to $114.5 million in
2015. The company generated $392.2 million and $81.0 million
of free cash flow2 in 2016 and 2015, respectively. These
increases were primarily the result of new patent license
agreements.
“2016 was a tremendous year for the company, reflecting the
strength of our research contributions as well as the leverage and
power of the research-based licensing business model,” said William
J. Merritt, President and CEO of InterDigital. “In addition to our
successes in helping to define 5G and future Internet of Things
technologies on the research side, our licensing efforts drove
substantial cash flow while we were able to slightly reduce overall
expenses on a year-over-year basis.”
Additional Financial Highlights for Fourth Quarter
2016
- In fourth quarter 2016, the company recorded $233.3 million of
cash provided by operating activities, compared to $86.8 million in
2015. The company generated $222.5 million and $79.2 million
of free cash flow in fourth quarter 2016 and fourth quarter 2015,
respectively. These increases were primarily the result of
new patent license agreements.
- During fourth quarter 2016, the company acquired Hillcrest
Laboratories, Inc., a pioneer in sensor processing technology, for
approximately $48.0 million in cash, net of $0.4 million cash
acquired.
- The company's fourth quarter 2016 effective tax rate was
approximately 34.0% compared to 31.1% during fourth quarter 2015
based on the statutory federal tax rate net of discrete federal and
state taxes.
- Ending cash and short-term investments totaled $952.8
million.
Additional Financial Highlights for Full Year
2016
- The $4.3 million decrease in operating expenses was primarily
attributable to the $16.1 million decrease in intellectual property
enforcement and non-patent litigation and a $5.7 million decrease
in commercial initiatives expense. These decreases were
partially offset by a $9.3 million increase in
performance-based compensation, driven by increased accrual rates
as a result of new patent license agreements signed during
2016. Additionally, depreciation and amortization increased
$4.8 million due to the growth of our patent portfolio.
- During 2016, the company repurchased 1.3 million shares of
common stock for $64.7 million.
- The company's 2016 effective tax rate was approximately 27.7%
as compared to 35.7% in 2015, based on the statutory federal tax
rate net of discrete federal and state taxes. The decrease in
the effective tax rate was primarily attributable to the net
benefit of including a domestic production activities deduction for
the current year and the benefit recorded for amending prior
returns to claim the deduction, neither of which were included in
the prior year.
Near-Term Outlook:
InterDigital currently expects that sales volumes of the
company's per-unit licensees in fourth quarter 2016 and the new
agreements signed during 2016 will drive first quarter 2017 total
revenue to a range of between $91 million and $96 million,
comprised entirely of recurring revenue. 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 2017.
Conference Call Information
InterDigital will host a conference call on Thursday, February
23, 2017 at 10:00 a.m. Eastern Time to discuss its fourth quarter
2016 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 on the Investors page. The company encourages
participants to take advantage of the Internet option.
For telephone access to the conference, call (877) 795-3638
within the United States or +1 719 325-4908 from outside the United
States. Please call by 9:50 a.m. ET on February 23 and give the
operator conference ID number 1701762.
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 23
through 1:00 p.m. ET February 28. To access the recorded replay,
call (888) 203-1112 or +1 719 457-0820 and use the replay code
1701762.
About InterDigital®
InterDigital develops mobile technologies that are at the core
of 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 2017 revenue. Words such as "believe,"
"anticipate," "estimate," "expect," "project," "intend," "plan,"
"forecast," "goal," 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 2017; (x)
the resolution of current legal or regulatory proceedings,
including any awards or judgments relating to such proceedings,
additional legal or regulatory proceedings, changes in the
schedules or costs associated with legal or regulatory proceedings
or adverse rulings in such legal or regulatory 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 ("EPS") 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
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
INCOME |
(dollars in thousands except per share data) |
(unaudited) |
|
|
|
|
|
For the Three Months Ended December
31, |
|
For the Twelve Months Ended December
31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
REVENUES: |
|
|
|
|
|
|
|
Per-unit
royalty revenue |
$ |
14,031 |
|
|
$ |
59,566 |
|
|
$ |
168,050 |
|
|
$ |
234,836 |
|
Fixed fee
amortized royalty revenue |
73,678 |
|
|
31,718 |
|
|
177,614 |
|
|
131,837 |
|
Current
patent royalties |
87,709 |
|
|
91,284 |
|
|
345,664 |
|
|
366,673 |
|
Past
patent royalties |
180,280 |
|
|
16,720 |
|
|
309,696 |
|
|
65,814 |
|
Total
patent licensing royalties |
267,989 |
|
|
108,004 |
|
|
655,360 |
|
|
432,487 |
|
Current
technology solutions revenue |
5,879 |
|
|
1,326 |
|
|
10,494 |
|
|
6,096 |
|
Past
technology solutions revenue |
— |
|
|
2,768 |
|
|
— |
|
|
2,852 |
|
|
$ |
273,868 |
|
|
$ |
112,098 |
|
|
$ |
665,854 |
|
|
$ |
441,435 |
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
Patent
administration and licensing |
31,943 |
|
|
29,201 |
|
|
113,544 |
|
|
120,401 |
|
Development |
18,295 |
|
|
19,767 |
|
|
68,733 |
|
|
72,702 |
|
Selling,
general and administrative |
14,481 |
|
|
9,790 |
|
|
46,271 |
|
|
39,783 |
|
|
64,719 |
|
|
58,758 |
|
|
228,548 |
|
|
232,886 |
|
|
|
|
|
|
|
|
|
Income
from operations |
209,149 |
|
|
53,340 |
|
|
437,306 |
|
|
208,549 |
|
|
|
|
|
|
|
|
|
OTHER EXPENSE
(NET) |
(3,394 |
) |
|
(6,444 |
) |
|
(15,035 |
) |
|
(27,534 |
) |
Income
before income taxes |
205,755 |
|
|
46,896 |
|
|
422,271 |
|
|
181,015 |
|
INCOME TAX
PROVISION |
(69,978 |
) |
|
(14,577 |
) |
|
(116,791 |
) |
|
(64,621 |
) |
NET
INCOME |
$ |
135,777 |
|
|
$ |
32,319 |
|
|
$ |
305,480 |
|
|
$ |
116,394 |
|
Net loss
attributable to noncontrolling interest |
(693 |
) |
|
(719 |
) |
|
(3,521 |
) |
|
(2,831 |
) |
NET INCOME ATTRIBUTABLE
TO INTERDIGITAL, INC. |
$ |
136,470 |
|
|
$ |
33,038 |
|
|
$ |
309,001 |
|
|
$ |
119,225 |
|
NET INCOME PER COMMON
SHARE — BASIC |
$ |
3.98 |
|
|
$ |
0.93 |
|
|
$ |
8.95 |
|
|
$ |
3.31 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — BASIC |
34,286 |
|
|
35,429 |
|
|
34,526 |
|
|
36,048 |
|
NET INCOME PER COMMON
SHARE — DILUTED |
$ |
3.85 |
|
|
$ |
0.92 |
|
|
$ |
8.78 |
|
|
$ |
3.27 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — DILUTED |
35,487 |
|
|
35,887 |
|
|
35,189 |
|
|
36,463 |
|
CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.30 |
|
|
$ |
0.20 |
|
|
$ |
1.00 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMMARY CONSOLIDATED CASH FLOWS |
(dollars in thousands) |
(unaudited) |
|
|
For the Three Months Ended December
31, |
|
For the Twelve Months Ended December
31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Income before income
taxes |
205,755 |
|
|
$ |
46,896 |
|
|
$ |
422,271 |
|
|
$ |
181,015 |
|
Taxes paid |
(50,009 |
) |
|
(41,947 |
) |
|
(108,635 |
) |
|
(85,780 |
) |
Non-cash expenses |
23,316 |
|
|
23,986 |
|
|
89,845 |
|
|
83,999 |
|
Increase in deferred
revenue |
202,912 |
|
|
22,910 |
|
|
527,034 |
|
|
113,962 |
|
Deferred revenue
recognized |
(79,209 |
) |
|
(37,396 |
) |
|
(321,313 |
) |
|
(163,354 |
) |
(Decrease) increase in
operating working capital, deferred charges and other |
(69,483 |
) |
|
72,328 |
|
|
(178,424 |
) |
|
(15,343 |
) |
Capital spending and
capitalized patent costs |
(10,789 |
) |
|
(7,625 |
) |
|
(38,540 |
) |
|
(33,466 |
) |
FREE CASH FLOW |
222,493 |
|
|
79,152 |
|
|
392,238 |
|
|
81,033 |
|
|
|
|
|
|
|
|
|
Tax benefit from
share-based compensation |
625 |
|
|
331 |
|
|
625 |
|
|
2,457 |
|
Payments on long-term
debt |
— |
|
|
— |
|
|
(230,000 |
) |
|
— |
|
Acquisition of
patents |
(100 |
) |
|
— |
|
|
(4,900 |
) |
|
(20,000 |
) |
Long term
investments |
— |
|
|
(6,029 |
) |
|
(2,000 |
) |
|
(12,623 |
) |
Proceeds from
noncontrolling interests |
6,804 |
|
|
6,808 |
|
|
6,804 |
|
|
9,358 |
|
Dividends paid |
(10,286 |
) |
|
(7,093 |
) |
|
(31,135 |
) |
|
(28,937 |
) |
Share repurchases |
— |
|
|
(7,358 |
) |
|
(64,685 |
) |
|
(96,410 |
) |
Proceeds from other
financing activities |
— |
|
|
— |
|
|
— |
|
|
4,500 |
|
Acquisition of
business, net of cash acquired |
(48,000 |
) |
|
— |
|
|
(48,000 |
) |
|
— |
|
Proceeds from issuance
of senior convertible notes |
— |
|
|
— |
|
|
— |
|
|
316,000 |
|
Purchase of convertible
bond hedge |
— |
|
|
— |
|
|
— |
|
|
(59,376 |
) |
Proceeds from issuance
of warrants |
— |
|
|
— |
|
|
— |
|
|
42,881 |
|
Payment of debt
issuance costs |
|
— |
|
|
— |
|
|
— |
|
|
(9,403 |
) |
Net proceeds from
exercise of stock options |
183 |
|
|
17 |
|
|
485 |
|
|
46 |
|
Unrealized (loss) gain
on short-term investments |
(507 |
) |
|
436 |
|
|
(379 |
) |
|
254 |
|
NET INCREASE IN CASH
AND SHORT-TERM INVESTMENTS |
$ |
171,212 |
|
|
$ |
66,264 |
|
|
$ |
19,053 |
|
|
$ |
229,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(dollars in thousands) |
(unaudited) |
|
|
DECEMBER 31, 2016 |
|
DECEMBER 31, 2015 |
ASSETS |
|
|
|
|
|
|
Cash
& short-term investments |
$ |
952,761 |
|
$ |
933,708 |
|
Accounts
receivable |
228,464 |
|
53,868 |
|
Other
current assets |
39,894 |
|
23,391 |
|
Property &
equipment and patents (net) |
323,394 |
|
289,727 |
|
Other long-term assets
(net) |
183,340 |
|
173,791 |
|
TOTAL ASSETS |
$ |
1,727,853 |
|
$ |
1,474,485 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current
portion of long-term debt |
$ |
— |
|
$ |
227,174 |
|
Accounts
payable, accrued liabilities, taxes payable & dividends
payable |
65,288 |
|
66,570 |
|
Current
deferred revenue, including customer advances |
360,192 |
|
106,229 |
|
Long-term
deferred revenue |
261,013 |
|
289,039 |
|
Long-term
debt & other long-term liabilities |
286,992 |
|
263,578 |
|
TOTAL LIABILITIES |
973,485 |
|
952,590 |
|
TOTAL INTERDIGITAL,
INC. SHAREHOLDERS' EQUITY |
739,709 |
|
510,519 |
|
Noncontrolling
interest |
14,659 |
|
11,376 |
|
TOTAL EQUITY |
754,368 |
|
521,895 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,727,853 |
|
$ |
1,474,485 |
|
RECONCILIATION OF FREE CASH FLOW TO NET
CASHPROVIDED 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 Twelve Months Ended December
31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net cash provided by
operating activities |
|
|
233,282 |
|
$ |
86,777 |
|
$ |
430,778 |
|
$ |
114,499 |
Purchases of property,
equipment, & technology licenses |
|
(2,405) |
|
|
(1,865) |
|
(5,882) |
|
(3,700) |
|
Capitalized patent
costs |
|
(8,384) |
|
|
(5,760) |
|
(32,658) |
|
(29,766) |
|
Free cash flow |
|
$ |
222,493 |
|
$ |
79,152 |
|
$ |
392,238 |
|
$ |
81,033 |
|
CONTACT:
InterDigital, Inc.:
Patrick Van de Wille
patrick.vandewille@interdigital.com
+1 (858) 210-4814
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