InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and
development company, today announced results for the third quarter
ended September 30, 2017.
Third Quarter 2017 Financial Highlights
- Recurring revenue grew 5% to $88.5 million, compared to $84.3
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.
- Third quarter 2017 total revenue was $97.3 million, compared to
$208.3 million in third quarter 2016. Third quarter 2016
included $124.0 million of past patent royalties, as compared to
$8.8 million in third quarter 2017.
- Third quarter 2017 operating expenses were $56.5 million,
compared to $51.6 million in third quarter 2016. The increase
in operating expenses was primarily due to a $2.7 million increase
in costs associated with commercial initiatives and a $1.3 million
increase in depreciation and amortization, both of which were
primarily attributable to the acquisition of Hillcrest Labs during
fourth quarter 2016.
- Fixed-fee amortized royalties constituted 88% of company's
current patent royalties in third quarter 2017, compared to 56% in
third quarter 2016.
- Net income1 was $35.5 million, or $1.00 per diluted share,
compared to $104.5 million, or $2.99 per diluted share, in third
quarter 2016.
“This quarter’s results highlight the tremendous stability of
our business, emphasizing our company’s continued efforts to manage
for the long term,” said William J. Merritt, President and CEO of
InterDigital. “The strong visibility over our revenues and future
cash flows, given our high fixed-fee revenue contribution and
long-term agreements, put us once again in a position to return
value to shareholders with last month's announcement of our third
dividend increase in the past four years.”
Additional Highlights
- The company's third quarter 2017 effective tax rate was 10.2%
compared to 32.3% during third quarter 2016. The change in
effective tax rate was attributable to a discrete benefit of $9.1
million primarily related to the reversal of a previously recorded
tax reserve.
- In third quarter 2017, the company recorded $104.7 million of
cash provided by operating activities, compared to $10.1 million of
cash used in third quarter 2016. The company generated $94.9
million of free cash flow2 in third quarter 2017, compared to $19.2
million of free cash flow used in third quarter 2016. These
changes were primarily due to the timing of cash receipts under
fixed-fee agreements. Ending cash and short-term investments
totaled $967.2 million.
- On September 14, 2017, the company announced an increase in its
quarterly cash dividend from $0.30 to $0.35 per share ($1.40 per
share on an annual basis), as well as a $100 million increase to
its existing stock repurchase program.
- On October 24, 2017, InterDigital received notice of a
favorable decision from the Taiwan Fair Trade Commission, stating
that the Commission did not find that InterDigital had violated
Taiwan’s Fair Trade Act and has closed the investigation that was
initiated in 2013.
Conference Call Information
InterDigital will host a conference call on Thursday, October
26, 2017 at 10:00 a.m. Eastern Time to discuss its third 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 (877) 830-2636
within the United States or +1 (785) 424-1802 from outside the
United States. Please call by 9:50 a.m. ET on October 26 and give
the operator conference ID number 6767363.
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 October 26
through 1:00 p.m. ET October 31. To access the recorded replay,
call (888) 203-1112 or +1 (719) 457-0820 and use the replay code
6767363.
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 visibility with respect to revenues and future cash
flows. 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 September
30, |
|
For the Nine Months Ended September
30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| REVENUES: |
|
|
|
|
|
|
|
| Per-unit
royalty revenue |
$ |
10,081 |
|
|
$ |
35,804 |
|
|
$ |
37,338 |
|
|
$ |
154,018 |
|
| Fixed fee
amortized royalty revenue |
73,653 |
|
|
45,740 |
|
|
220,083 |
|
|
103,936 |
|
| Current
patent royalties |
83,734 |
|
|
81,544 |
|
|
257,421 |
|
|
257,954 |
|
| Past
patent royalties |
8,832 |
|
|
123,973 |
|
|
56,692 |
|
|
129,417 |
|
| Total
patent licensing royalties |
92,566 |
|
|
205,517 |
|
|
314,113 |
|
|
387,371 |
|
| Current
technology solutions revenue |
4,759 |
|
|
2,790 |
|
|
13,521 |
|
|
4,615 |
|
|
|
$ |
97,325 |
|
|
$ |
208,307 |
|
|
$ |
327,634 |
|
|
$ |
391,986 |
|
|
|
|
|
|
|
|
|
|
| OPERATING
EXPENSES: |
|
|
|
|
|
|
|
| Patent
administration and licensing |
28,673 |
|
|
26,149 |
|
|
83,559 |
|
|
81,601 |
|
|
Development |
15,924 |
|
|
15,560 |
|
|
52,228 |
|
|
50,438 |
|
| Selling,
general and administrative |
11,853 |
|
|
9,880 |
|
|
36,056 |
|
|
31,790 |
|
| |
56,450 |
|
|
51,589 |
|
|
171,843 |
|
|
163,829 |
|
|
|
|
|
|
|
|
|
|
| Income
from operations |
40,875 |
|
|
156,718 |
|
|
155,791 |
|
|
228,157 |
|
| |
|
|
|
|
|
|
|
| OTHER EXPENSE
(NET) |
(2,187 |
) |
|
(3,798 |
) |
|
(7,331 |
) |
|
(11,641 |
) |
| Income
before income taxes |
38,688 |
|
|
152,920 |
|
|
148,460 |
|
|
216,516 |
|
| INCOME TAX
PROVISION |
(3,963 |
) |
|
(49,397 |
) |
|
(29,413 |
) |
|
(46,813 |
) |
| NET
INCOME |
$ |
34,725 |
|
|
$ |
103,523 |
|
|
$ |
119,047 |
|
|
$ |
169,703 |
|
| Net loss
attributable to noncontrolling interest |
(811 |
) |
|
(943 |
) |
|
(2,744 |
) |
|
(2,828 |
) |
| NET INCOME ATTRIBUTABLE
TO INTERDIGITAL, INC. |
$ |
35,536 |
|
|
$ |
104,466 |
|
|
$ |
121,791 |
|
|
$ |
172,531 |
|
| NET INCOME PER COMMON
SHARE — BASIC |
$ |
1.02 |
|
|
$ |
3.05 |
|
|
$ |
3.52 |
|
|
$ |
4.99 |
|
| WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — BASIC |
34,709 |
|
|
34,280 |
|
|
34,589 |
|
|
34,607 |
|
| NET INCOME PER COMMON
SHARE — DILUTED |
$ |
1.00 |
|
|
$ |
2.99 |
|
|
$ |
3.40 |
|
|
$ |
4.92 |
|
| WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — DILUTED |
35,388 |
|
|
34,953 |
|
|
35,865 |
|
|
35,091 |
|
| CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.35 |
|
|
$ |
0.30 |
|
|
$ |
0.95 |
|
|
$ |
0.70 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| SUMMARY CONSOLIDATED CASH FLOWS |
| (dollars in thousands) |
| (unaudited) |
| |
|
|
For the Three Months Ended September
30, |
|
For the Nine Months Ended September
30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| Income before income
taxes |
$ |
38,688 |
|
|
$ |
152,920 |
|
|
$ |
148,460 |
|
|
$ |
216,516 |
|
| Taxes paid |
(15,063 |
) |
|
(6,341 |
) |
|
(29,173 |
) |
|
(58,626 |
) |
| Non-cash expenses |
21,772 |
|
|
21,048 |
|
|
66,463 |
|
|
66,529 |
|
| Increase in deferred
revenue |
142,610 |
|
|
41,952 |
|
|
330,387 |
|
|
324,122 |
|
| Deferred revenue
recognized |
(84,594 |
) |
|
(172,681 |
) |
|
(240,331 |
) |
|
(242,104 |
) |
| Increase (decrease) in
operating working capital, deferred charges and other |
1,336 |
|
|
(47,026 |
) |
|
(177,465 |
) |
|
(105,573 |
) |
| Capital spending and
capitalized patent costs |
(9,872 |
) |
|
(9,117 |
) |
|
(27,248 |
) |
|
(27,751 |
) |
| FREE CASH FLOW |
94,877 |
|
|
(19,245 |
) |
|
71,093 |
|
|
173,113 |
|
| |
|
|
|
|
|
|
|
| Payments on long-term
debt |
— |
|
|
— |
|
|
— |
|
|
(230,000 |
) |
| Long-term
investments |
(2,500 |
) |
|
— |
|
|
(3,201 |
) |
|
(2,000 |
) |
| Acquisition of
patents |
— |
|
|
(300 |
) |
|
— |
|
|
(4,800 |
) |
| Dividends paid |
(10,413 |
) |
|
(6,858 |
) |
|
(31,107 |
) |
|
(20,849 |
) |
| Taxes withheld upon
vesting of restricted stock units |
(46 |
) |
|
(43 |
) |
|
(22,236 |
) |
|
(3,368 |
) |
| Share repurchases |
— |
|
|
(5,690 |
) |
|
— |
|
|
(64,685 |
) |
| Net proceeds from
exercise of stock options |
— |
|
|
74 |
|
|
82 |
|
|
302 |
|
| Unrealized (loss) gain
on short-term investments |
(93 |
) |
|
(287 |
) |
|
(180 |
) |
|
128 |
|
| NET (DECREASE) INCREASE
IN CASH AND SHORT-TERM INVESTMENTS |
$ |
81,825 |
|
|
$ |
(32,349 |
) |
|
$ |
14,451 |
|
|
$ |
(152,159 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| CONDENSED CONSOLIDATED BALANCE
SHEETS |
| (dollars in thousands) |
| (unaudited) |
| |
|
|
SEPTEMBER 30, 2017 |
|
DECEMBER 31, 2016 |
|
ASSETS |
|
|
|
| Cash
& short-term investments |
$ |
967,212 |
|
|
$ |
952,761 |
|
| Accounts
receivable (net) |
400,126 |
|
|
228,464 |
|
| Other
current assets |
52,966 |
|
|
39,894 |
|
| Property &
equipment and patents (net) |
321,359 |
|
|
323,394 |
|
| Other long-term assets
(net) |
194,459 |
|
|
183,340 |
|
| TOTAL ASSETS |
$ |
1,936,122 |
|
|
$ |
1,727,853 |
|
| |
|
|
|
| LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
| Accounts
payable, accrued liabilities, taxes payable & dividends
payable |
$ |
89,427 |
|
|
$ |
65,288 |
|
| Current
deferred revenue |
351,012 |
|
|
360,192 |
|
| Long-term
deferred revenue |
373,049 |
|
|
261,013 |
|
| Long-term
debt & other long-term liabilities |
290,618 |
|
|
286,992 |
|
| TOTAL LIABILITIES |
1,104,106 |
|
|
973,485 |
|
| TOTAL INTERDIGITAL,
INC. SHAREHOLDERS' EQUITY |
820,101 |
|
|
739,709 |
|
| Noncontrolling
interest |
11,915 |
|
|
14,659 |
|
| TOTAL EQUITY |
832,016 |
|
|
754,368 |
|
| TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,936,122 |
|
|
$ |
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 September
30, |
|
For the Nine Months Ended September
30, |
| |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| Net cash provided by
(used in) operating activities |
|
$ |
104,749 |
|
|
$ |
(10,128 |
) |
|
$ |
98,341 |
|
|
$ |
200,864 |
|
| Purchases of property,
equipment, & technology licenses |
|
(117 |
) |
|
(1,211 |
) |
|
(942 |
) |
|
(3,477 |
) |
| Capitalized patent
costs |
|
(9,755 |
) |
|
(7,906 |
) |
|
(26,306 |
) |
|
(24,274 |
) |
| Free cash flow |
|
$ |
94,877 |
|
|
$ |
(19,245 |
) |
|
$ |
71,093 |
|
|
$ |
173,113 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| CONTACT: |
InterDigital,
Inc.: |
| |
Patrick Van de
Wille |
| |
patrick.vandewille@interdigital.com |
| |
+1 (858)
210-4814 |
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