InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and
development company, today announced results for the first quarter
ended March 31, 2017.
First Quarter 2017 Financial Highlights
- First quarter 2017 total revenue was $94.5 million, compared to
$107.8 million in first quarter 2016. The decrease was
primarily attributable to the elimination of seasonality related to
Apple shipments as a result of the fixed-fee agreement signed in
fourth quarter 2016. That seasonality, driven by new product
launches, had previously resulted in higher per-unit revenue in
first quarter. The decrease in first quarter total revenue was
partially offset by revenue from our fixed-fee agreement with
Huawei, signed in third quarter 2016.
- First quarter 2017 operating expenses of $60.6 million were
relatively flat compared to $59.4 million in first quarter
2016.
- Net income1 was $33.8 million, or $0.93 per diluted share,
compared to $28.1 million, or $0.79 per diluted share, in first
quarter 2016. This increase was driven by a discrete first
quarter 2017 tax benefit associated with vesting of stock-based
compensation.
- In first quarter 2017, the company recorded $25.9 million of
cash used by operating activities, compared to cash generated of
$19.6 million in first quarter 2016. The company used $33.9
million and generated $10.0 million of free cash flow2 in first
quarter 2017 and first quarter 2016, respectively. These
decreases in cash generated were primarily due to the timing of
cash receipts under new fixed-fee agreements. Ending cash and
short-term investments totaled $886.1 million.
“Our licensing success in 2016 has resulted in very strong and
stable revenues that provide the company with a platform for
continued growth,” said William J. Merritt, President and CEO of
InterDigital. “With a significant proportion of the cellular market
left to license, our position in the Avanci IoT licensing platform,
and strong technologies to market in both IoT and sensor
technology, InterDigital is focused on growing our business while
maintaining strong expense discipline.”
Additional Financial Highlights for First Quarter
2017
- The slight increase in operating expenses was primarily
attributable to a $2.6 million increase in costs associated with
commercial initiatives and a $1.7 million increase in depreciation
and amortization, both primarily due to the acquisition of
Hillcrest Labs during fourth quarter 2016. These increases
were partially offset by a decrease in performance-based incentive
compensation and personnel-related costs, primarily due to the
recognition in first quarter 2016 of a $4.9 million non-recurring
charge related to an increase to accrual rates associated with our
long-term performance-based compensation plans and the recognition
of a severance charge.
- The company's first quarter 2017 effective tax rate was a
benefit of 5.2% compared to a provision of 34.1% during first
quarter 2016 based on the statutory federal tax rate net of
discrete federal and state taxes. The effective tax rate was
favorably impacted by our current year adoption of Accounting
Standard Update 2016-09, “Improvements to Employee Share-Based
Payment Accounting.” As a result, we recorded discrete benefits of
$11.8 million for excess tax benefits related to share-based
compensation. The effective rate would have been a provision of
32.6% not including these discrete benefits.
Conference Call Information
InterDigital will host a conference call on Thursday, April 27,
2017 at 10:00 a.m. Eastern Time to discuss its first quarter 2017
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 (800) 211-3767
within the United States or +1 719 325-2341 from outside the United
States. Please call by 9:50 a.m. ET on April 27 and give the
operator conference ID number 3262776.
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 April 27
through 1:00 p.m. ET May 2. To access the recorded replay, call
(888) 203-1112 or +1 719 457-0820 and use the replay code
3262776.
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 belief that our strong and stable revenues provide
the company with a platform for continued growth and our plans to
focus on growing our business while maintaining strong expense
discipline. 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 and products 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 and
products; (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) 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; (x) changes or
inaccuracies in market projections; and (xi) 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 March
31, |
|
2017 |
|
2016 |
REVENUES: |
|
|
|
Per-unit
royalty revenue |
$ |
15,859 |
|
|
$ |
73,689 |
|
Fixed fee
amortized royalty revenue |
73,367 |
|
|
29,098 |
|
Current
patent royalties |
89,226 |
|
|
102,787 |
|
Past
patent royalties |
— |
|
|
4,167 |
|
Total
patent licensing royalties |
89,226 |
|
|
106,954 |
|
Current
technology solutions revenue |
5,304 |
|
|
810 |
|
|
$ |
94,530 |
|
|
$ |
107,764 |
|
|
|
|
|
OPERATING
EXPENSES: |
|
|
|
Patent
administration and licensing |
29,407 |
|
|
27,167 |
|
Development |
18,521 |
|
|
20,269 |
|
Selling,
general and administrative |
12,634 |
|
|
11,972 |
|
|
60,562 |
|
|
59,408 |
|
|
|
|
|
Income
from operations |
33,968 |
|
|
48,356 |
|
|
|
|
|
OTHER EXPENSE
(NET) |
(2,814 |
) |
|
(7,137 |
) |
Income
before income taxes |
31,154 |
|
|
41,219 |
|
INCOME TAX BENEFIT
(PROVISION) |
1,624 |
|
|
(14,068 |
) |
NET
INCOME |
$ |
32,778 |
|
|
$ |
27,151 |
|
Net loss
attributable to noncontrolling interest |
(978 |
) |
|
(920 |
) |
NET INCOME ATTRIBUTABLE
TO INTERDIGITAL, INC. |
$ |
33,756 |
|
|
$ |
28,071 |
|
NET INCOME PER COMMON
SHARE — BASIC |
$ |
0.98 |
|
|
$ |
0.80 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — BASIC |
34,370 |
|
|
35,045 |
|
NET INCOME PER COMMON
SHARE — DILUTED |
$ |
0.93 |
|
|
$ |
0.79 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — DILUTED |
36,220 |
|
|
35,377 |
|
CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.30 |
|
|
$ |
0.20 |
|
SUMMARY CONSOLIDATED CASH FLOWS |
(dollars in thousands) |
(unaudited) |
|
|
For the Three Months Ended March
31, |
|
2017 |
|
2016 |
Income before income
taxes |
$ |
31,154 |
|
|
$ |
41,219 |
|
Taxes paid |
(2,990 |
) |
|
(14,423 |
) |
Non-cash expenses |
23,046 |
|
|
25,385 |
|
Increase in deferred
revenue |
185,000 |
|
|
80,440 |
|
Deferred revenue
recognized |
(78,921 |
) |
|
(34,594 |
) |
(Decrease) increase in
operating working capital, deferred charges and other |
(183,144 |
) |
|
(78,389 |
) |
Capital spending and
capitalized patent costs |
(8,055 |
) |
|
(9,656 |
) |
FREE CASH FLOW |
(33,910 |
) |
|
9,982 |
|
|
|
|
|
Payments on long-term
debt |
— |
|
|
(230,000 |
) |
Long-term
investments |
(501 |
) |
|
— |
|
Acquisition of
patents |
— |
|
|
(4,500 |
) |
Dividends paid |
(10,292 |
) |
|
(7,068 |
) |
Taxes withheld upon
vesting of restricted stock units |
(21,955 |
) |
|
(3,405 |
) |
Share repurchases |
— |
|
|
(40,399 |
) |
Net proceeds from
exercise of stock options |
82 |
|
|
— |
|
Unrealized (loss) gain
on short-term investments |
(45 |
) |
|
376 |
|
NET DECREASE IN CASH
AND SHORT-TERM INVESTMENTS |
$ |
(66,621 |
) |
|
$ |
(275,014 |
) |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(dollars in thousands) |
(unaudited) |
|
|
MARCH 31, 2017 |
|
DECEMBER 31, 2016 |
ASSETS |
|
|
|
Cash
& short-term investments |
$ |
886,140 |
|
|
$ |
952,761 |
|
Accounts
receivable |
402,533 |
|
|
228,464 |
|
Other
current assets |
53,562 |
|
|
39,894 |
|
Property &
equipment and patents (net) |
318,108 |
|
|
323,394 |
|
Other long-term assets
(net) |
205,045 |
|
|
183,340 |
|
TOTAL ASSETS |
$ |
1,865,388 |
|
|
$ |
1,727,853 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Accounts
payable, accrued liabilities, taxes payable & dividends
payable |
$ |
86,341 |
|
|
$ |
65,288 |
|
Current
deferred revenue, including customer advances |
328,324 |
|
|
360,192 |
|
Long-term
deferred revenue |
398,960 |
|
|
261,013 |
|
Long-term
debt & other long-term liabilities |
291,622 |
|
|
286,992 |
|
TOTAL LIABILITIES |
1,105,247 |
|
|
973,485 |
|
TOTAL INTERDIGITAL,
INC. SHAREHOLDERS' EQUITY |
746,460 |
|
|
739,709 |
|
Noncontrolling
interest |
13,681 |
|
|
14,659 |
|
TOTAL EQUITY |
760,141 |
|
|
754,368 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,865,388 |
|
|
$ |
1,727,853 |
|
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 March
31, |
|
|
2017 |
|
2016 |
Net cash (used in)
provided by operating activities |
|
$ |
(25,855 |
) |
|
$ |
19,638 |
|
Purchases of property,
equipment, & technology licenses |
|
(268 |
) |
|
(1,594 |
) |
Capitalized patent
costs |
|
(7,787 |
) |
|
(8,062 |
) |
Free cash flow |
|
$ |
(33,910 |
) |
|
$ |
9,982 |
|
CONTACT:
InterDigital, Inc.:
Patrick Van de Wille
patrick.vandewille@interdigital.com
+1 (858) 210-4814
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