InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology
research and development company, today announced results for the
third quarter ended September 30, 2019.
Third Quarter 2019 Financial Highlights
- Third quarter 2019 recurring revenue was $72.1 million,
compared to recurring revenue of $75.0 million in third quarter
2018. This decrease was driven by lower royalties from one of
our Taiwanese licensees.
- Third quarter 2019 operating expenses were $68.7 million,
compared to $62.2 million in third quarter 2018. The increase
was primarily driven by $15.8 million in costs related to the
acquisition of Technicolor SA's (Euronext Paris:TCH) (OTCQX:TCLRY)
patent licensing business and Research and Innovation (R&I)
research and development organization. Of those, $6.2 million
were either transaction, integration or amortization expenses.
- Third quarter 2019 net income1 was $2.2 million, or $0.07 per
diluted share compared to net income1 of $21.8 million, or $0.61
per diluted share, in third quarter 2018.
“In third quarter we were successful at holding expenses
below our expectations, and we remain completely on track to bring
our expenses to the levels we saw prior to the acquisition of the
Technicolor licensing business and the expansion of our R&D
footprint,” said William J. Merritt, President and CEO of
InterDigital. “Those efforts came together with redoubled licensing
efforts that resulted in new successes in fourth quarter,
highlighting the strength and operating leverage of our business
model.”
Additional Highlights
- In third quarter 2019, the company recorded $125.5 million of
cash provided by operating activities, compared to $170.4 million
of cash provided by operating activities in third quarter
2018. The company generated $117.0 million of free cash flow2
in third quarter 2019, compared to $160.7 million of free cash flow
generated in third quarter 2018. Free cash flow is driven by
the timing of cash collections under fixed-fee agreements.
Ending cash and short-term investments as of September 30, 2019
totaled $0.9 billion.
- In third quarter 2019, the company recognized a tax benefit of
$0.2 million compared to a tax benefit of $21.1 million in third
quarter 2018.
- Other Income (Expense), net in third quarter 2019 included $8.5
million to record the gain resulting from the sale of the company's
Hillcrest Laboratories product business to a subsidiary of CEVA,
Inc. As part of the transaction, the company retained
substantially all of the Hillcrest patent assets that it acquired
in 2016. This gain was partially offset by the recognition of
a $3.3 million loss resulting from a partial impairment of one of
the company's long-term investments.
- Shortly after third quarter 2019, the company added two new
patent licensees, ZTE Corporation and Google.
Conference Call Information
InterDigital will host a conference call on Thursday, October
31, 2019 at 10:00 a.m. Eastern Time to discuss its third quarter
2019 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) 353-6461
within the United States and Canada or +1 (334) 323-0501 from
outside the United States and Canada. Please call by 9:50 a.m. ET
on October 31st and give the operator conference ID number
8941056.
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 31st
through 1:00 p.m. ET November 5th. To access the recorded replay,
call +1 (888) 203-1112 or +1 (719) 457-0820 and use the replay code
8941056.
About InterDigital®
InterDigital develops mobile and video 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, better video delivery, and richer multimedia experiences
years ahead of market deployment. InterDigital has licenses
and strategic relationships with many of the world's leading
technology 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 the acquisition of the Technicolor
patent licensing business provides the company with a significant
potential benefit. Words such as "believe," "anticipate,"
"estimate," "expect," "project," "intend," "plan," "forecast,"
"goal," "see," 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 our interpretations of, and assumptions
and calculations with respect to the impact on the company of, the
Tax Reform Act, as well as further guidance that may be issued
regarding the Tax Reform Act; (ix) difficulties or delays in
integrating the Technicolor patent licensing business; (x) failure
to accurately forecast the long-term value and costs of the
Technicolor business or of certain assets acquired in the
transaction; (xi) 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; (xii) changes or inaccuracies in market projections;
and (xiii) 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
used in 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, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| REVENUES: |
|
|
|
|
|
|
|
|
Variable patent royalty revenue |
$ |
4,683 |
|
|
$ |
13,645 |
|
|
$ |
22,557 |
|
|
$ |
26,322 |
|
|
Fixed-fee royalty revenue |
63,736 |
|
|
60,272 |
|
|
190,345 |
|
|
178,207 |
|
|
Current patent royalties |
68,419 |
|
|
73,917 |
|
|
212,902 |
|
|
204,529 |
|
|
Non-current patent royalties |
(370 |
) |
|
128 |
|
|
(4,908 |
) |
|
25,489 |
|
|
Total patent royalties |
68,049 |
|
|
74,045 |
|
|
207,994 |
|
|
230,018 |
|
|
Patent sales |
750 |
|
|
— |
|
|
975 |
|
|
— |
|
|
Current technology solutions revenue |
3,724 |
|
|
1,034 |
|
|
7,794 |
|
|
2,060 |
|
|
|
$ |
72,523 |
|
|
$ |
75,079 |
|
|
$ |
216,763 |
|
|
$ |
232,078 |
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Patent administration and licensing |
34,772 |
|
|
32,077 |
|
|
108,196 |
|
|
85,480 |
|
|
Development |
20,506 |
|
|
17,276 |
|
|
56,028 |
|
|
49,279 |
|
|
Selling, general and administrative |
13,471 |
|
|
12,806 |
|
|
40,000 |
|
|
38,569 |
|
| |
68,749 |
|
|
62,159 |
|
|
204,224 |
|
|
173,328 |
|
|
Income from operations |
3,774 |
|
|
12,920 |
|
|
12,539 |
|
|
58,750 |
|
| INTEREST EXPENSE |
(10,920 |
) |
|
(9,039 |
) |
|
(30,305 |
) |
|
(27,242 |
) |
| OTHER INCOME (NET) |
7,803 |
|
|
(4,914 |
) |
|
23,772 |
|
|
2,106 |
|
|
Income (loss) before income taxes |
657 |
|
|
(1,033 |
) |
|
6,006 |
|
|
33,614 |
|
| INCOME TAX BENEFIT
(PROVISION) |
178 |
|
|
21,143 |
|
|
(3,007 |
) |
|
25,001 |
|
|
NET INCOME |
$ |
835 |
|
|
$ |
20,110 |
|
|
$ |
2,999 |
|
|
$ |
58,615 |
|
|
Net loss attributable to noncontrolling interest |
(1,399 |
) |
|
(1,642 |
) |
|
(4,175 |
) |
|
(4,333 |
) |
| NET INCOME ATTRIBUTABLE TO
INTERDIGITAL, INC. |
$ |
2,234 |
|
|
$ |
21,752 |
|
|
$ |
7,174 |
|
|
$ |
62,948 |
|
| NET INCOME PER COMMON SHARE —
BASIC |
$ |
0.07 |
|
|
$ |
0.63 |
|
|
$ |
0.23 |
|
|
$ |
1.81 |
|
| WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — BASIC |
31,130 |
|
|
34,651 |
|
|
31,757 |
|
|
34,687 |
|
| NET INCOME PER COMMON SHARE —
DILUTED |
$ |
0.07 |
|
|
$ |
0.61 |
|
|
$ |
0.22 |
|
|
$ |
1.77 |
|
| WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — DILUTED |
31,308 |
|
|
35,607 |
|
|
32,010 |
|
|
35,614 |
|
| CASH DIVIDENDS DECLARED PER
COMMON SHARE |
$ |
0.35 |
|
|
$ |
0.35 |
|
|
$ |
1.05 |
|
|
$ |
1.05 |
|
Note: Certain revisions have been made to prior
period amounts.
SUMMARY CONSOLIDATED CASH
FLOWS(dollars in thousands)(unaudited)
| |
FOR THE THREE MONTHS ENDED SEPTEMBER 30, |
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| Income (loss) before income
taxes |
$ |
657 |
|
|
$ |
(1,033 |
) |
|
$ |
6,006 |
|
|
$ |
33,614 |
|
| Taxes paid |
(6,713 |
) |
|
(13,660 |
) |
|
(16,483 |
) |
|
(24,459 |
) |
| Non-cash expenses |
29,524 |
|
|
32,163 |
|
|
86,139 |
|
|
70,959 |
|
| Change in deferred
revenue |
63,629 |
|
|
36,989 |
|
|
875 |
|
|
9,822 |
|
| Increase (decrease) in
operating working capital, deferred charges and other |
38,402 |
|
|
115,926 |
|
|
(4,561 |
) |
|
86,681 |
|
| Capital spending and
capitalized patent costs |
(8,483 |
) |
|
(9,678 |
) |
|
(29,185 |
) |
|
(25,727 |
) |
| FREE CASH FLOW |
117,016 |
|
|
160,707 |
|
|
42,791 |
|
|
150,890 |
|
| |
|
|
|
|
|
|
|
| Long-term investments |
— |
|
|
(436 |
) |
|
— |
|
|
(6,686 |
) |
| Acquisition of business, net
of cash required |
— |
|
|
(142,985 |
) |
|
— |
|
|
(142,985 |
) |
| Acquisition of patents |
— |
|
|
— |
|
|
— |
|
|
(2,250 |
) |
| Proceeds from sale of
business |
10,000 |
|
|
— |
|
|
10,000 |
|
|
— |
|
| Proceeds from noncontrolling
interest |
— |
|
|
— |
|
|
10,333 |
|
|
— |
|
| Dividends paid |
(10,894 |
) |
|
(12,153 |
) |
|
(33,683 |
) |
|
(36,472 |
) |
| Taxes withheld upon vesting of
restricted stock units |
(179 |
) |
|
(91 |
) |
|
(4,316 |
) |
|
(8,479 |
) |
| Payments on long-term
debt |
— |
|
|
— |
|
|
(221,091 |
) |
|
— |
|
| Proceeds from issuance of
convertible senior notes |
— |
|
|
— |
|
|
400,000 |
|
|
— |
|
| Purchase of convertible bond
hedge |
— |
|
|
— |
|
|
(72,000 |
) |
|
— |
|
| Payment for warrant
unwind |
— |
|
|
— |
|
|
(4,184 |
) |
|
— |
|
| Prepayment penalty on
long-term debt |
— |
|
|
— |
|
|
(10,763 |
) |
|
— |
|
| Proceeds from hedge
unwind |
— |
|
|
— |
|
|
9,038 |
|
|
— |
|
| Proceeds from issuance of
warrants |
— |
|
|
— |
|
|
47,600 |
|
|
— |
|
| Payments of debt issuance
costs |
(1,075 |
) |
|
— |
|
|
(8,375 |
) |
|
— |
|
| Share repurchases |
— |
|
|
(34,336 |
) |
|
(171,269 |
) |
|
(43,508 |
) |
| Net proceeds from exercise of
stock options |
— |
|
|
2,432 |
|
|
2 |
|
|
6,362 |
|
| Unrealized gain (loss) on
short-term investments |
440 |
|
|
593 |
|
|
4,392 |
|
|
(575 |
) |
| NET INCREASE (DECREASE) IN
CASH, RESTRICTED CASH AND SHORT-TERM INVESTMENTS |
$ |
115,308 |
|
|
$ |
(26,269 |
) |
|
$ |
(1,525 |
) |
|
$ |
(83,703 |
) |
CONDENSED CONSOLIDATED BALANCE
SHEETS(dollars in thousands)(unaudited)
| |
SEPTEMBER 30, 2019 |
|
DECEMBER 31, 2018 |
| ASSETS |
|
|
|
|
Cash & short-term investments |
$ |
947,623 |
|
|
$ |
945,780 |
|
|
Accounts receivable (net) |
23,355 |
|
|
35,032 |
|
|
Other current assets |
51,545 |
|
|
43,438 |
|
| Property & equipment and
patents (net) |
458,975 |
|
|
464,618 |
|
| Other long-term assets
(net) |
146,804 |
|
|
137,690 |
|
| TOTAL ASSETS |
$ |
1,628,302 |
|
|
$ |
1,626,558 |
|
| |
|
|
|
| LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current portion of long-term debt |
$ |
93,131 |
|
|
$ |
— |
|
|
Accounts payable, accrued liabilities, taxes payable &
dividends payable |
69,735 |
|
|
67,723 |
|
|
Current deferred revenue |
171,433 |
|
|
111,672 |
|
|
Long-term deferred revenue |
107,498 |
|
|
157,634 |
|
|
Long-term debt & other long-term liabilities |
383,206 |
|
|
351,516 |
|
| TOTAL LIABILITIES |
825,003 |
|
|
688,545 |
|
| TOTAL INTERDIGITAL, INC.
SHAREHOLDERS' EQUITY |
782,106 |
|
|
936,729 |
|
| Noncontrolling interest |
21,193 |
|
|
1,284 |
|
| TOTAL EQUITY |
803,299 |
|
|
938,013 |
|
| TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,628,302 |
|
|
$ |
1,626,558 |
|
Note: Certain revisions have been made to prior
period amounts.
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, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| Net cash provided by operating
activities |
$ |
125,499 |
|
|
$ |
170,385 |
|
|
$ |
71,976 |
|
|
$ |
176,617 |
|
| Purchases of property,
equipment, & technology licenses |
(200 |
) |
|
(340 |
) |
|
(3,062 |
) |
|
(1,882 |
) |
| Capitalized patent costs |
(8,283 |
) |
|
(9,338 |
) |
|
(26,123 |
) |
|
(23,845 |
) |
| Free cash flow |
$ |
117,016 |
|
|
$ |
160,707 |
|
|
$ |
42,791 |
|
|
$ |
150,890 |
|
| CONTACT: |
InterDigital, Inc.: |
| |
Patrick Van de Wille |
| |
patrick.vandewille@interdigital.com |
| |
+1 (858) 210-4814 |
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