InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology
research and development company, today announced results for the
fourth quarter and full year ended December 31, 2019.
Fourth Quarter 2019 Financial Highlights
- Fourth quarter 2019 total revenue was $102.2 million, compared
to $75.3 million in fourth quarter 2018. Fourth quarter 2019
recurring revenue was $77.5 million, compared to $73.7 million in
fourth quarter 2018. This increase was driven by new agreements
signed in fourth quarter 2019. Additionally, fourth quarter
2019 included $24.7 million of past sales, which was primarily
attributable to new deals signed in the quarter.
- Fourth quarter 2019 operating expenses were $76.9 million,
compared to $71.5 million in fourth quarter 2018. The
increase was primarily driven by $7.0 million in intellectual
property enforcement and non-patent litigation costs. The
additional costs associated with our May 2019 acquisition of
Technicolor's R&I division were mostly offset in fourth quarter
2019 by cost savings initiatives.
- Fourth quarter 2019 net income1 was $13.8 million, or $0.44 per
diluted share compared to net income1 of $2.1 million, or $0.06 per
diluted share, in fourth quarter 2018.
- In fourth quarter 2019, the company recorded $17.5 million of
cash provided by operating activities, compared to $29.8 million of
cash used in operating activities in fourth quarter 2018. The
company generated $8.7 million of free cash flow2 in fourth quarter
2019, compared to free cash flow used of $38.7 million in fourth
quarter 2018. The increase was primarily driven by timing of
collections under fixed-fee agreements. Ending cash and short-term
investments totaled $924.7 million.
- From October 1, 2019 through December 31, 2019, the company
repurchased 0.4 million shares of common stock under its stock
repurchase program for a total cost of approximately $25.0
million. $71.8 million remains available for repurchase
subsequent to the increase to the buyback authorization in May
2019.
“In fourth quarter we signed new wireless licenses agreements
with key players like Google and ZTE, providing solid revenue
growth for our core business and also serving as additional
validation of our rate structure highlighted in our transparency
effort launched in first quarter 2020,” said William J. Merritt,
President and CEO of InterDigital. “In the same quarter, we
also signed a new license on the consumer electronics side.
That success, combined with ongoing licensing discussions with
other consumer electronics customers, allowed us to target the
annual licensing potential of our new consumer electronics business
at $150 million in 3 to 5 years. With the combined revenue
opportunity of our wireless and consumer electronics licensing
platforms reaching $650 million, our focus as we enter 2020 is
firmly on driving revenue growth while maintaining the operating
leverage of the business by meeting our expense targets.”
Full Year 2019 Financial Highlights
- Full year 2019 recurring revenue was $298.2 million, compared
to $280.3 million for full year 2018. This increase was
attributable to new licensing agreements and engineering services
agreements signed during the year.
- Full year 2019 operating expenses were $281.1 million, compared
to $244.8 million in 2018, an increase of $36.3 million. Of
this increase, $29.1 million resulted from the company's
Technicolor acquisitions, including a $9.8 million increase in
patent amortization and a $6.3 million increase in revenue sharing
costs. The remaining $7.2 million increase in operating
expenses was almost entirely driven by increased intellectual
property enforcement and non-patent litigation costs.
- Net income1 was $20.9 million, or $0.66 per diluted share,
compared to $65.0 million, or $1.84 per diluted share, in full year
2018.
- In full year 2019, the company recorded $89.4 million of cash
provided by operating activities, compared to $146.8 million
provided by operating activities for full year 2018. The
company generated $51.4 million of free cash flow2 in full year
2019, compared to $112.1 million for full year 2018. The
decrease in cash provided by operating activities was primarily
driven by the timing of cash collections under fixed fee
agreements, as well as higher cash operating expenses driven by the
Technicolor acquisitions.
Near-Term Outlook
The company expects total first quarter 2020 revenue to be
between $73 million and $75 million, comprised almost entirely of
recurring revenue.
This revenue guidance 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
2020.
Conference Call Information
InterDigital will host a conference call on Thursday, February
20, 2020 at 10:00 a.m. Eastern Time to discuss its fourth quarter
and full year 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 +1 (800) 353-6461
within the United States or +1 (334) 323-0501 from outside the
United States. Please call by 9:50 a.m. ET on February
20th and give the operator conference ID number 6761771.
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
20th through 1:00 p.m. ET February 25th. To access the
recorded replay, call +1 (888) 203-1112 or +1 (719) 457-0820 and
use the replay code 6761771.
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 current expectations with respect to the company’s
first quarter 2020 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 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) failure to accurately forecast
the long-term value and costs of the Technicolor patent licensing
business or of certain assets acquired in the transactions; (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 MonthsEnded December 31, |
|
For the Twelve MonthsEnded December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
REVENUES: |
|
|
|
|
|
|
|
Variable patent royalty revenue |
$ |
7,871 |
|
|
$ |
10,062 |
|
|
$ |
30,428 |
|
|
$ |
36,384 |
|
Fixed-fee royalty revenue |
66,876 |
|
|
61,140 |
|
|
257,221 |
|
|
239,347 |
|
Current patent royalties |
74,747 |
|
|
71,202 |
|
|
287,649 |
|
|
275,731 |
|
Non-current patent royalties |
24,690 |
|
|
840 |
|
|
19,782 |
|
|
26,329 |
|
Total patent royalties |
99,437 |
|
|
72,042 |
|
|
307,431 |
|
|
302,060 |
|
Patent sales |
— |
|
|
750 |
|
|
975 |
|
|
750 |
|
Current technology solutions revenue |
2,724 |
|
|
2,534 |
|
|
10,518 |
|
|
4,594 |
|
|
$ |
102,161 |
|
|
$ |
75,326 |
|
|
$ |
318,924 |
|
|
$ |
307,404 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
Patent administration and licensing |
46,744 |
|
|
38,601 |
|
|
154,940 |
|
|
124,081 |
|
Development |
18,832 |
|
|
20,419 |
|
|
74,860 |
|
|
69,698 |
|
Selling, general and administrative |
11,289 |
|
|
12,461 |
|
|
51,289 |
|
|
51,030 |
|
|
76,865 |
|
|
71,481 |
|
|
281,089 |
|
|
244,809 |
|
Income from operations |
25,296 |
|
|
3,845 |
|
|
37,835 |
|
|
62,595 |
|
INTEREST EXPENSE |
(10,650 |
) |
|
(8,714 |
) |
|
(40,955 |
) |
|
(35,956 |
) |
OTHER INCOME (EXPENSE), NET |
5,290 |
|
|
3,313 |
|
|
29,062 |
|
|
5,419 |
|
Income (loss) before income taxes |
19,936 |
|
|
(1,556 |
) |
|
25,942 |
|
|
32,058 |
|
INCOME TAX BENEFIT (PROVISION) |
(7,984 |
) |
|
2,416 |
|
|
(10,991 |
) |
|
27,417 |
|
NET INCOME |
$ |
11,952 |
|
|
$ |
860 |
|
|
$ |
14,951 |
|
|
$ |
59,475 |
|
Net loss attributable to noncontrolling interest |
(1,802 |
) |
|
(1,223 |
) |
|
(5,977 |
) |
|
(5,556 |
) |
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. |
$ |
13,754 |
|
|
$ |
2,083 |
|
|
$ |
20,928 |
|
|
$ |
65,031 |
|
NET INCOME PER COMMON SHARE — BASIC |
$ |
0.44 |
|
|
$ |
0.06 |
|
|
$ |
0.66 |
|
|
$ |
1.89 |
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC |
30,919 |
|
|
33,909 |
|
|
31,546 |
|
|
34,491 |
|
NET INCOME PER COMMON SHARE — DILUTED |
$ |
0.44 |
|
|
$ |
0.06 |
|
|
$ |
0.66 |
|
|
$ |
1.84 |
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED |
31,118 |
|
|
34,390 |
|
|
31,785 |
|
|
35,307 |
|
CASH DIVIDENDS DECLARED PER COMMON SHARE |
$ |
0.35 |
|
|
$ |
0.35 |
|
|
$ |
1.40 |
|
|
$ |
1.40 |
|
|
Note: Certain
reclassifications have been made to prior period amounts to conform
to the current period presentation. |
|
|
SUMMARY CONSOLIDATED CASH FLOWS(dollars in
thousands)(unaudited) |
|
|
|
|
|
For the Three MonthsEnded December 31, |
|
For the Twelve MonthsEnded December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Income (loss) before income taxes |
$ |
19,936 |
|
|
$ |
(1,556 |
) |
|
$ |
25,942 |
|
|
$ |
32,058 |
|
Taxes paid |
(7,746 |
) |
|
(9,445 |
) |
|
(24,229 |
) |
|
(33,904 |
) |
Non-cash expenses |
26,896 |
|
|
28,007 |
|
|
113,035 |
|
|
90,590 |
|
Change in deferred
revenue |
(8,624 |
) |
|
(2,856 |
) |
|
(7,749 |
) |
|
6,966 |
|
Increase (decrease) in
operating working capital, deferred charges and other |
(13,005 |
) |
|
(43,975 |
) |
|
(17,566 |
) |
|
51,082 |
|
Capital spending and
capitalized patent costs |
(8,805 |
) |
|
(8,918 |
) |
|
(37,990 |
) |
|
(34,645 |
) |
FREE CASH FLOW |
8,652 |
|
|
(38,743 |
) |
|
51,443 |
|
|
112,147 |
|
|
|
|
|
|
|
|
|
Long-term investments |
(350 |
) |
|
— |
|
|
(350 |
) |
|
(6,686 |
) |
Proceeds from non-controlling
interests |
5,333 |
|
|
— |
|
|
15,666 |
|
|
— |
|
Acquisition of patents |
— |
|
|
— |
|
|
— |
|
|
(2,250 |
) |
Acquisition of business, net
of cash acquired |
— |
|
|
— |
|
|
— |
|
|
(142,985 |
) |
Proceeds from sale of
business |
— |
|
|
— |
|
|
10,000 |
|
|
— |
|
Dividends paid |
(10,897 |
) |
|
(11,996 |
) |
|
(44,580 |
) |
|
(48,468 |
) |
Taxes withheld upon vesting of
restricted stock units |
(52 |
) |
|
(328 |
) |
|
(4,368 |
) |
|
(8,807 |
) |
Share repurchases |
(25,000 |
) |
|
(66,997 |
) |
|
(196,269 |
) |
|
(110,505 |
) |
Net proceeds from exercise of
stock options |
— |
|
|
361 |
|
|
2 |
|
|
6,723 |
|
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 |
— |
|
|
— |
|
|
(8,375 |
) |
|
— |
|
Unrealized gain (loss) on
short-term investments |
684 |
|
|
2,868 |
|
|
5,076 |
|
|
2,293 |
|
NET INCREASE (DECREASE) IN
CASH, RESTRICTED CASH AND SHORT-TERM INVESTMENTS |
$ |
(21,630 |
) |
|
$ |
(114,835 |
) |
|
$ |
(23,155 |
) |
|
$ |
(198,538 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS(dollars in
thousands)(unaudited) |
|
|
|
|
|
DECEMBER 31, 2019 |
|
DECEMBER 31, 2018 |
ASSETS |
|
|
|
Cash & short-term investments |
$ |
924,695 |
|
|
$ |
945,780 |
|
Accounts receivable (net) |
28,272 |
|
|
35,032 |
|
Other current assets |
63,365 |
|
|
43,438 |
|
Property & equipment and
patents (net) |
446,556 |
|
|
464,618 |
|
Other long-term assets
(net) |
149,194 |
|
|
137,690 |
|
TOTAL ASSETS |
$ |
1,612,082 |
|
|
$ |
1,626,558 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current portion of long-term debt |
$ |
94,170 |
|
|
$ |
— |
|
Accounts payable, accrued liabilities, taxes payable &
dividends payable |
64,734 |
|
|
67,723 |
|
Current deferred revenue |
146,654 |
|
|
111,672 |
|
Long-term deferred revenue |
123,653 |
|
|
157,634 |
|
Long-term debt & other long-term liabilities |
396,590 |
|
|
351,516 |
|
TOTAL LIABILITIES |
825,801 |
|
|
688,545 |
|
TOTAL INTERDIGITAL, INC.
SHAREHOLDERS' EQUITY |
761,557 |
|
|
936,729 |
|
Noncontrolling interest |
24,724 |
|
|
1,284 |
|
TOTAL EQUITY |
786,281 |
|
|
938,013 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,612,082 |
|
|
$ |
1,626,558 |
|
|
|
|
|
|
|
|
|
|
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 (used in) operating activities, the most directly
comparable GAAP financial measure. |
|
|
|
For the
Three MonthsEnded December 31, |
|
For the
Twelve MonthsEnded December 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net cash provided by (used in) operating activities |
|
$ |
17,457 |
|
|
$ |
(29,825 |
) |
|
$ |
89,433 |
|
|
$ |
146,792 |
|
Purchases of property,
equipment, & technology licenses |
|
(1,447 |
) |
|
(694 |
) |
|
(4,509 |
) |
|
(2,576 |
) |
Capitalized patent costs |
|
(7,358 |
) |
|
(8,224 |
) |
|
(33,481 |
) |
|
(32,069 |
) |
Free cash flow |
|
$ |
8,652 |
|
|
$ |
(38,743 |
) |
|
$ |
51,443 |
|
|
$ |
112,147 |
|
CONTACT: |
InterDigital, Inc.: |
|
Patrick Van de Wille |
|
patrick.vandewille@interdigital.com |
|
+1 (858) 210-4814 |
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