InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and
development company, today announced results for the second quarter
ended June 30, 2017.
Second Quarter 2017 Financial
Highlights
- Second quarter 2017 total revenue was $135.8 million, compared
to $75.9 million in second quarter 2016. The increase in
total revenue includes past patent royalties related to a
settlement agreement and release of claims with Microsoft during
second quarter 2017.
- Recurring revenue grew 18% to $87.9 million, compared to $74.6
million in 2016, primarily driven by an increase in fixed-fee
revenue due to new agreements entered into in second half
2016. Recurring revenue consists of current patent royalties
and current technology solutions revenue.
- Second quarter 2017 operating expenses were $54.8 million,
compared to $52.8 million in second quarter 2016. The slight
increase in operating expenses was driven by the operations of
Hillcrest Labs, acquired during fourth quarter
2016.
- Net income1 was $52.5 million, or $1.46 per diluted share,
compared to $40.0 million, or $1.14 per diluted share, in second
quarter 2016.
"The growth of our recurring revenue coupled with
the careful management of our expenses, even including added costs
related to Hillcrest Labs, underscores the strength of our business
model,” said William J. Merritt, President and CEO of InterDigital.
“With a strong revenue platform anchored in long-term agreements
with key licensees, InterDigital is ideally positioned to increase
our market share and drive additional shareholder value."
Additional Financial Highlights for Second
Quarter 2017
- The increase in operating expenses included a $2.1
million increase in costs associated with commercial
initiatives, primarily Hillcrest Labs, as well as a $1.7 million
increase in consulting services, primarily related to spending on
development projects, as well as corporate initiatives including
the implementation of a new enterprise resource planning
system. These increases were partially offset by a $2.5
million decrease in intellectual property enforcement and
non-patent litigation.
- The company's second quarter 2017 effective tax rate was a
provision of 34.4% compared to a benefit of 74.4% during second
quarter 2016. The change in effective tax rate was primarily
attributable to the discrete impact of refund claims made during
second quarter 2016.
- In second quarter 2017, the company recorded $19.4 million of
cash provided by operating activities, compared to $191.4 million
in second quarter 2016. The company used $10.1 million of
free cash flow2 in second quarter 2017, compared to $182.4 million
of free cash flow generated in second quarter 2016. These
changes were primarily due to the timing of cash receipts under new
fixed-fee agreements. Ending cash and short-term investments
totaled $885.4 million.
Conference Call Information
InterDigital will host a conference call on
Thursday, July 27, 2017 at 10:00 a.m. Eastern Time to discuss its
second 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 (888)
204-4610 within the United States or +1 (719) 325-2191 from outside
the United States. Please call by 9:50 a.m. ET on July 27 and give
the operator conference ID number 2029923.
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
July 27 through 1:00 p.m. ET August 1. To access the recorded
replay, call (888) 203-1112 or +1 (719) 457-0820 and use the replay
code 2029923.
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 we are ideally
positioned to increase our market share and drive additional
shareholder value. 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 June
30, |
|
For the Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
REVENUES: |
|
|
|
|
|
|
|
Per-unit
royalty revenue |
$ |
11,398 |
|
|
$ |
44,525 |
|
|
$ |
27,257 |
|
|
$ |
118,214 |
|
Fixed fee
amortized royalty revenue |
73,063 |
|
|
29,098 |
|
|
146,430 |
|
|
58,196 |
|
Current
patent royalties |
84,461 |
|
|
73,623 |
|
|
173,687 |
|
|
176,410 |
|
Past
patent royalties |
47,860 |
|
|
1,277 |
|
|
47,860 |
|
|
5,444 |
|
Total
patent licensing royalties |
132,321 |
|
|
74,900 |
|
|
221,547 |
|
|
181,854 |
|
Current
technology solutions revenue |
3,458 |
|
|
1,015 |
|
|
8,762 |
|
|
1,825 |
|
|
$ |
135,779 |
|
|
$ |
75,915 |
|
|
$ |
230,309 |
|
|
$ |
183,679 |
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
Patent
administration and licensing |
25,479 |
|
|
28,285 |
|
|
54,886 |
|
|
55,452 |
|
Development |
17,783 |
|
|
14,609 |
|
|
36,304 |
|
|
34,878 |
|
Selling,
general and administrative |
11,569 |
|
|
9,938 |
|
|
24,203 |
|
|
21,910 |
|
|
54,831 |
|
|
52,832 |
|
|
115,393 |
|
|
112,240 |
|
|
|
|
|
|
|
|
|
Income
from operations |
80,948 |
|
|
23,083 |
|
|
114,916 |
|
|
71,439 |
|
|
|
|
|
|
|
|
|
OTHER EXPENSE
(NET) |
(2,330 |
) |
|
(706 |
) |
|
(5,144 |
) |
|
(7,843 |
) |
Income
before income taxes |
78,618 |
|
|
22,377 |
|
|
109,772 |
|
|
63,596 |
|
INCOME TAX (PROVISION)
BENEFIT |
(27,074 |
) |
|
16,652 |
|
|
(25,450 |
) |
|
2,584 |
|
NET
INCOME |
$ |
51,544 |
|
|
$ |
39,029 |
|
|
$ |
84,322 |
|
|
$ |
66,180 |
|
Net loss
attributable to noncontrolling interest |
(955 |
) |
|
(965 |
) |
|
(1,933 |
) |
|
(1,885 |
) |
NET INCOME ATTRIBUTABLE
TO INTERDIGITAL, INC. |
$ |
52,499 |
|
|
$ |
39,994 |
|
|
$ |
86,255 |
|
|
$ |
68,065 |
|
NET INCOME PER COMMON
SHARE — BASIC |
$ |
1.51 |
|
|
$ |
1.16 |
|
|
$ |
2.50 |
|
|
$ |
1.96 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — BASIC |
34,686 |
|
|
34,499 |
|
|
34,528 |
|
|
34,772 |
|
NET INCOME PER COMMON
SHARE — DILUTED |
$ |
1.46 |
|
|
$ |
1.14 |
|
|
$ |
2.39 |
|
|
$ |
1.94 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — DILUTED |
35,902 |
|
|
34,945 |
|
|
36,103 |
|
|
35,161 |
|
CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.30 |
|
|
$ |
0.20 |
|
|
$ |
0.60 |
|
|
$ |
0.40 |
|
SUMMARY CONSOLIDATED CASH FLOWS |
(dollars in thousands) |
(unaudited) |
|
|
For the Three Months Ended June
30, |
|
For the Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Income before income
taxes |
$ |
78,618 |
|
|
$ |
22,377 |
|
|
$ |
109,772 |
|
|
$ |
63,596 |
|
Taxes paid |
(11,120 |
) |
|
(37,862 |
) |
|
(14,110 |
) |
|
(52,285 |
) |
Non-cash expenses |
21,645 |
|
|
20,096 |
|
|
44,691 |
|
|
45,481 |
|
Increase in deferred
revenue |
2,777 |
|
|
201,730 |
|
|
187,777 |
|
|
282,170 |
|
Deferred revenue
recognized |
(76,816 |
) |
|
(34,829 |
) |
|
(155,737 |
) |
|
(69,423 |
) |
Increase (decrease) in
operating working capital, deferred charges and other |
4,343 |
|
|
19,842 |
|
|
(178,801 |
) |
|
(58,547 |
) |
Capital spending and
capitalized patent costs |
(9,321 |
) |
|
(8,978 |
) |
|
(17,376 |
) |
|
(18,634 |
) |
FREE CASH FLOW |
10,126 |
|
|
182,376 |
|
|
(23,784 |
) |
|
192,358 |
|
|
|
|
|
|
|
|
|
Payments on long-term
debt |
— |
|
|
— |
|
|
— |
|
|
(230,000 |
) |
Long-term
investments |
(200 |
) |
|
(2,000 |
) |
|
(701 |
) |
|
(2,000 |
) |
Acquisition of
patents |
— |
|
|
— |
|
|
— |
|
|
(4,500 |
) |
Dividends paid |
(10,402 |
) |
|
(6,923 |
) |
|
(20,694 |
) |
|
(13,991 |
) |
Taxes withheld upon
vesting of restricted stock units |
(235 |
) |
|
80 |
|
|
(22,190 |
) |
|
(3,325 |
) |
Share repurchases |
— |
|
|
(18,596 |
) |
|
— |
|
|
(58,995 |
) |
Net proceeds from
exercise of stock options |
— |
|
|
228 |
|
|
82 |
|
|
228 |
|
Unrealized (loss) gain
on short-term investments |
(42 |
) |
|
39 |
|
|
(87 |
) |
|
415 |
|
NET (DECREASE) INCREASE
IN CASH AND SHORT-TERM INVESTMENTS |
$ |
(753 |
) |
|
$ |
155,204 |
|
|
$ |
(67,374 |
) |
|
$ |
(119,810 |
) |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(dollars in thousands) |
(unaudited) |
|
|
JUNE 30, 2017 |
|
DECEMBER 31, 2016 |
ASSETS |
|
|
|
Cash
& short-term investments |
$ |
885,387 |
|
|
$ |
952,761 |
|
Accounts
receivable (net) |
399,044 |
|
|
228,464 |
|
Other
current assets |
51,590 |
|
|
39,894 |
|
Property &
equipment and patents (net) |
313,271 |
|
|
323,394 |
|
Other long-term assets
(net) |
189,607 |
|
|
183,340 |
|
TOTAL ASSETS |
$ |
1,838,899 |
|
|
$ |
1,727,853 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Accounts
payable, accrued liabilities, taxes payable & dividends
payable |
$ |
84,802 |
|
|
$ |
65,288 |
|
Current
deferred revenue |
294,876 |
|
|
360,192 |
|
Long-term
deferred revenue |
358,369 |
|
|
261,013 |
|
Long-term
debt & other long-term liabilities |
295,196 |
|
|
286,992 |
|
TOTAL LIABILITIES |
1,033,243 |
|
|
973,485 |
|
TOTAL INTERDIGITAL,
INC. SHAREHOLDERS' EQUITY |
792,930 |
|
|
739,709 |
|
Noncontrolling
interest |
12,726 |
|
|
14,659 |
|
TOTAL EQUITY |
805,656 |
|
|
754,368 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,838,899 |
|
|
$ |
1,727,853 |
|
RECONCILIATION OF FREE CASH FLOW TO NET
CASHPROVIDED BY (USED IN) 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 June
30, |
|
For the Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net cash provided by
(used in) operating activities |
|
$ |
19,447 |
|
|
$ |
191,354 |
|
|
$ |
(6,408 |
) |
|
$ |
210,992 |
|
Purchases of property,
equipment, & technology licenses |
|
(557 |
) |
|
(672 |
) |
|
(825 |
) |
|
(2,266 |
) |
Capitalized patent
costs |
|
(8,764 |
) |
|
(8,306 |
) |
|
(16,551 |
) |
|
(16,368 |
) |
Free cash flow |
|
$ |
10,126 |
|
|
$ |
182,376 |
|
|
$ |
(23,784 |
) |
|
$ |
192,358 |
|
CONTACT:
InterDigital, Inc.:
Patrick Van de Wille
patrick.vandewille@interdigital.com
+1 (858) 210-4814
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