InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology
research and development company, today announced results for the
third quarter ended September 30, 2020.
Third Quarter 2020 Financial Highlights
- Third quarter 2020 recurring revenue was $87.0 million,
compared to recurring revenue of $72.1 million in third quarter
2019, a 21% year-over-year increase. This increase was driven
by eight new patent license agreements signed over the last twelve
months, including Huawei and ZTE. Third quarter 2020 total revenue
was $87.5 million, compared to $72.5 million in third quarter
2019.
- Third quarter 2020 operating expenses were $72.1 million,
compared to $68.7 million in third quarter 2019 and $0.5 million
lower than in second quarter 2020.
- Third quarter 2020 operating income was $15.4 million, compared
to $3.8 million in third quarter 2019.
- Third quarter 2020 tax provision includes discrete benefits of
$18.5 million, which primarily relates to the expected amendment of
a prior year tax return and the reversal of a tax reserve.
- Third quarter 2020 net income1 was $23.8 million, or $0.76 per
diluted share, compared to net income of $2.2 million, or $0.07 per
diluted share, in third quarter 2019.
“While continuing to prioritize the safety of our employees,
we’ve also executed effectively this quarter, driving strong
results and highlighting the resilience of our recession resistant
business,” noted William J. Merritt, President and CEO of
InterDigital. “Our performance reflects the incredible operating
leverage in our model, which saw a 21% increase in recurring
revenue drive a fourfold increase in year-over-year operating
income. Going forward, we remain focused on pursuing agreements
with remaining unlicensed handset companies and expanding our
consumer electronics licensing business.”
Additional Highlights
- In third quarter 2020, the company recorded $101.3 million of
cash provided by operating activities, compared to $125.5 million
in third quarter 2019.
- The company generated $85.4 million of free cash flow2 in third
quarter 2020, compared to $117.0 million of free cash flow in third
quarter 2019.
- In each period, free cash flow was largely driven by cash
receipts from existing patent license agreements, a portion of
which relates to future periods. Ending cash and short-term
investments as of September 30, 2020 totaled $919.4
million.
In light of the ongoing pandemic, the company will remain in a
virtual work environment at least through the end of 2020. The
company will continue to follow the guidance provided by relevant
public health authorities and take a cautious approach to reopening
its facilities in 2021.
Conference Call Information
InterDigital will host a conference call on Thursday, November
5, 2020 at 10:00 a.m. ET to discuss its third quarter 2020
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, dial +1 (800)
367-2403 within the United States and Canada or +1 (334) 777-6978
from outside the United States and Canada. Please call by 9:50 a.m.
ET on November 5th and give the operator conference ID number
7531214.
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 November 5th
through 1:00 p.m. ET November 10th. To access the recorded replay,
dial +1 (888) 203-1112 or +1 (719) 457-0820 and use the replay code
7531214.
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 we will continue to be able to execute
strongly on our business during the ongoing COVID-19
pandemic. 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 accelerations
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 our roadmap; (v) our ability to commercialize our
technologies and enter into customer agreements; (vi) the failure
of the markets for our 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 our
technologies and products; (viii) changes in our interpretations
of, and assumptions and calculations with respect to the impact on
us 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;
(xiii) the potential effects that the ongoing COVID-19 pandemic
and/or corresponding macroeconomic uncertainty could have on our
financial position, results of operations and cash flows; and (xiv)
changes in our 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 THREEMONTHS ENDEDSEPTEMBER 30, |
|
FOR THE NINEMONTHS ENDEDSEPTEMBER 30, |
| |
2020 |
|
2019 |
|
2020 |
|
2019 |
| REVENUES: |
|
|
|
|
|
|
|
|
Variable patent royalty revenue |
$ |
7,377 |
|
|
|
$ |
4,683 |
|
|
|
$ |
17,920 |
|
|
|
$ |
22,557 |
|
|
|
Fixed-fee royalty revenue |
77,338 |
|
|
|
63,736 |
|
|
|
221,023 |
|
|
|
190,345 |
|
|
|
Current patent royalties |
84,715 |
|
|
|
68,419 |
|
|
|
238,943 |
|
|
|
212,902 |
|
|
|
Non-current patent royalties |
507 |
|
|
|
(370 |
) |
|
|
20,461 |
|
|
|
(4,908 |
) |
|
|
Total patent royalties |
85,222 |
|
|
|
68,049 |
|
|
|
259,404 |
|
|
|
207,994 |
|
|
|
Current technology solutions revenue |
2,271 |
|
|
|
3,724 |
|
|
|
8,797 |
|
|
|
7,794 |
|
|
|
Patent sales |
— |
|
|
|
750 |
|
|
|
— |
|
|
|
975 |
|
|
| |
$ |
87,493 |
|
|
|
$ |
72,523 |
|
|
|
$ |
268,201 |
|
|
|
$ |
216,763 |
|
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Patent administration and licensing |
40,364 |
|
|
|
34,772 |
|
|
|
119,167 |
|
|
|
108,196 |
|
|
|
Development |
20,845 |
|
|
|
20,506 |
|
|
|
61,755 |
|
|
|
56,028 |
|
|
|
Selling, general and administrative |
10,854 |
|
|
|
13,471 |
|
|
|
35,251 |
|
|
|
40,000 |
|
|
| |
72,063 |
|
|
|
68,749 |
|
|
|
216,173 |
|
|
|
204,224 |
|
|
|
Income from operations |
15,430 |
|
|
|
3,774 |
|
|
|
52,028 |
|
|
|
12,539 |
|
|
| INTEREST EXPENSE |
(10,365 |
) |
|
|
(10,920 |
) |
|
|
(30,881 |
) |
|
|
(30,305 |
) |
|
| OTHER INCOME, NET |
3,994 |
|
|
|
7,803 |
|
|
|
13,806 |
|
|
|
23,772 |
|
|
|
Income before income taxes |
9,059 |
|
|
|
657 |
|
|
|
34,953 |
|
|
|
6,006 |
|
|
| INCOME TAX BENEFIT
(PROVISION) |
12,843 |
|
|
|
178 |
|
|
|
5,879 |
|
|
|
(3,007 |
) |
|
|
NET INCOME |
$ |
21,902 |
|
|
|
$ |
835 |
|
|
|
$ |
40,832 |
|
|
|
$ |
2,999 |
|
|
|
Net loss attributable to noncontrolling interest |
(1,882 |
) |
|
|
(1,399 |
) |
|
|
(5,319 |
) |
|
|
(4,175 |
) |
|
| NET INCOME ATTRIBUTABLE TO
INTERDIGITAL, INC. |
$ |
23,784 |
|
|
|
$ |
2,234 |
|
|
|
$ |
46,151 |
|
|
|
$ |
7,174 |
|
|
| NET INCOME PER COMMON SHARE —
BASIC |
$ |
0.77 |
|
|
|
$ |
0.07 |
|
|
|
$ |
1.50 |
|
|
|
$ |
0.23 |
|
|
| WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — BASIC |
30,804 |
|
|
|
31,130 |
|
|
|
30,762 |
|
|
|
31,757 |
|
|
| NET INCOME PER COMMON SHARE —
DILUTED |
$ |
0.76 |
|
|
|
$ |
0.07 |
|
|
|
$ |
1.49 |
|
|
|
$ |
0.22 |
|
|
| WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — DILUTED |
31,119 |
|
|
|
31,308 |
|
|
|
31,029 |
|
|
|
32,010 |
|
|
| CASH DIVIDENDS DECLARED PER
COMMON SHARE |
$ |
0.35 |
|
|
|
$ |
0.35 |
|
|
|
$ |
1.05 |
|
|
|
$ |
1.05 |
|
|
SUMMARY CONSOLIDATED CASH
FLOWS(dollars in thousands)(unaudited)
| |
FOR THE THREEMONTHS ENDEDSEPTEMBER 30, |
|
FOR THE NINEMONTHS ENDEDSEPTEMBER 30, |
| |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Income before income taxes |
$ |
9,059 |
|
|
|
$ |
657 |
|
|
|
$ |
34,953 |
|
|
|
$ |
6,006 |
|
|
| Taxes paid |
(4,423 |
) |
|
|
(6,713 |
) |
|
|
(18,211 |
) |
|
|
(16,483 |
) |
|
| Non-cash expenses |
26,481 |
|
|
|
29,524 |
|
|
|
76,627 |
|
|
|
86,139 |
|
|
| Change in deferred
revenue |
75,749 |
|
|
|
63,629 |
|
|
|
53,066 |
|
|
|
875 |
|
|
| Increase (decrease) in
operating working capital, deferred charges and other |
(5,524 |
) |
|
|
38,402 |
|
|
|
(2,223 |
) |
|
|
(4,561 |
) |
|
| Capital spending and
capitalized patent costs |
(15,981 |
) |
|
|
(8,483 |
) |
|
|
(33,601 |
) |
|
|
(29,185 |
) |
|
| FREE CASH FLOW |
85,361 |
|
|
|
117,016 |
|
|
|
110,611 |
|
|
|
42,791 |
|
|
| |
|
|
|
|
|
|
|
| Net proceeds from change in
long-term investments |
4,260 |
|
|
|
— |
|
|
|
4,260 |
|
|
|
— |
|
|
| Proceeds from sale of
business |
— |
|
|
|
10,000 |
|
|
|
— |
|
|
|
10,000 |
|
|
| Proceeds from noncontrolling
interest |
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,333 |
|
|
| Dividends paid |
(10,781 |
) |
|
|
(10,894 |
) |
|
|
(32,290 |
) |
|
|
(33,683 |
) |
|
| Taxes withheld upon vesting of
restricted stock units |
(55 |
) |
|
|
(179 |
) |
|
|
(1,535 |
) |
|
|
(4,316 |
) |
|
| Payments on long-term
debt |
— |
|
|
|
— |
|
|
|
(94,909 |
) |
|
|
(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 |
) |
|
| Repurchase of common
stock |
— |
|
|
|
— |
|
|
|
(349 |
) |
|
|
(171,269 |
) |
|
| Net proceeds from exercise of
stock options |
— |
|
|
|
— |
|
|
|
1,792 |
|
|
|
2 |
|
|
| Unrealized gain on short-term
investments |
(152 |
) |
|
|
440 |
|
|
|
983 |
|
|
|
4,392 |
|
|
| NET INCREASE (DECREASE) IN
CASH, RESTRICTED CASH AND SHORT-TERM INVESTMENTS |
$ |
78,633 |
|
|
|
$ |
115,308 |
|
|
|
$ |
(11,437 |
) |
|
|
$ |
(1,525 |
) |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS(dollars in thousands)(unaudited)
| |
SEPTEMBER 30, 2020 |
|
DECEMBER 31, 2019 |
| ASSETS |
|
|
|
|
Cash & short-term investments |
$ |
919,383 |
|
|
$ |
924,695 |
|
| Accounts receivable (net) |
28,282 |
|
|
28,272 |
|
| Prepaid and other current
assets |
84,292 |
|
|
63,365 |
|
| Property & equipment and
patents (net) |
453,790 |
|
|
446,556 |
|
| Other long-term assets
(net) |
154,747 |
|
|
149,194 |
|
| TOTAL ASSETS |
$ |
1,640,494 |
|
|
$ |
1,612,082 |
|
| |
|
|
|
| LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current portion of long-term debt |
$ |
— |
|
|
$ |
94,170 |
|
|
Accounts payable, accrued liabilities, taxes payable &
dividends payable |
69,326 |
|
|
64,734 |
|
|
Current deferred revenue |
248,086 |
|
|
146,654 |
|
|
Long-term deferred revenue |
108,587 |
|
|
123,653 |
|
|
Long-term debt & other long-term liabilities |
411,819 |
|
|
396,590 |
|
| TOTAL LIABILITIES |
837,818 |
|
|
825,801 |
|
| TOTAL INTERDIGITAL, INC.
SHAREHOLDERS' EQUITY |
783,271 |
|
|
761,557 |
|
| Noncontrolling interest |
19,405 |
|
|
24,724 |
|
| TOTAL EQUITY |
802,676 |
|
|
786,281 |
|
| TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,640,494 |
|
|
$ |
1,612,082 |
|
RECONCILIATION OF FREE CASH FLOW TO NET
CASH PROVIDED 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 THREEMONTHS ENDEDSEPTEMBER 30, |
|
FOR THE NINEMONTHS ENDEDSEPTEMBER 30, |
| |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Net cash provided by operating activities |
$ |
101,342 |
|
|
|
$ |
125,499 |
|
|
|
$ |
144,212 |
|
|
|
$ |
71,976 |
|
|
| Purchases of property,
equipment, & technology licenses |
(6,104 |
) |
|
|
(200 |
) |
|
|
(9,875 |
) |
|
|
(3,062 |
) |
|
| Capitalized patent costs |
(9,877 |
) |
|
|
(8,283 |
) |
|
|
(23,726 |
) |
|
|
(26,123 |
) |
|
| Free cash flow |
$ |
85,361 |
|
|
|
$ |
117,016 |
|
|
|
$ |
110,611 |
|
|
|
$ |
42,791 |
|
|
| CONTACT: |
InterDigital, Inc. |
| |
Tiziana Figliolia |
| |
Email:
tiziana.figliolia@interdigital.com |
| |
+1 (302) 300-1857 |
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