InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology
research and development company, today announced results for the
quarter ended September 30, 2022.
“We significantly strengthened our business by renewing our
license with Apple through 2029,” said Liren Chen, CEO and
President of InterDigital. “In addition, new agreements drove our
sixth consecutive quarter of recurring revenue growth in the
consumer electronics and IoT/automotive markets. All together, we
have signed sixteen agreements over the last eighteen months with a
total estimated contract value of more than $1.5 billion. I look
forward to building on this foundation as we pursue significant
growth opportunities in licensing both devices and services.”
Third Quarter 2022 Financial Highlights
- Total revenue, which includes both
recurring and non-recurring revenue, of $114.8 million decreased
20% from $143.5 million in third quarter 2021 primarily due to
$50.1 million of non-recurring revenues in third quarter 2021.
- Recurring revenue increased 8% to
$101.0 million, compared to recurring revenue of $93.4 million in
third quarter 2021. The company increased recurring revenue in both
its smartphone (up 4%) and CE, IoT/Auto markets (up 60%).
- Operating expenses were $82.9
million, compared to $106.7 million in third quarter 2021. The
decrease was primarily driven by a $21.3 million reduction of
non-recurring costs from restructuring activities, revenue share
costs and a reduction in performance-based compensation.
- Income from operations was $31.8
million compared to $36.8 million in third quarter 2021.
- Net income1 was $22.2 million, or
$0.74 per diluted share, compared to $26.2 million, or $0.83
per diluted share, in third quarter 2021.
- Adjusted EBITDA2 was $56.4 million compared to $78.3 million in
third quarter 2021, primarily driven by $50.1 million of
non-recurring revenue in third quarter 2021.
Near Term Outlook
The company expects recurring revenue for fourth quarter to be
between $98 and $102 million. This revenue guidance covers existing
agreements, including the company’s recent renewal of its license
agreement with Apple, and does not include the potential impact of
any additional new agreements that may be signed during the balance
of fourth quarter 2022.
The company expects fourth quarter operating expenses will be in
the range of $76 to $79 million. In addition, the company expects
non-operating expenses, comprised of interest expense and other
income (expense), will be in the range of $4 to $6 million and the
effective tax rate will be in the range of 21% to 24%.
Conference Call Information
InterDigital will host a conference call on Thursday, November
3, 2022 at 10:00 a.m. ET to discuss its third quarter 2022
financial performance and other company matters.
For a live Internet webcast of the conference call, visit
www.interdigital.com and click on the “Webcast” link on the
Investors page. The company encourages participants to take
advantage of the Internet option.
For telephone access to the conference call, visit
www.interdigital.com and click on the “Dial In Registration” link
on the Investors page. Registration is necessary to obtain a dial
in phone number and PIN to join.
An Internet replay of the conference call will be available on
InterDigital’s website under Events in the Investor’s section. The
replay will be available for one year.
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.
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,” “could,” "would,"
"should," "if," "may," "might," "future," "target," "trend," "seek
to," "will continue," "predict," "likely," "in the event," and
variations of any such words or similar expressions are intended to
identify such forward-looking statements.
Forward-looking statements are made on the basis of management’s
current views and assumptions and are not guarantees of future
performance. Forward-looking statements are inherently subject to
risks and uncertainties that could cause actual results, and actual
events that occur, to differ materially from results contemplated
by the forward-looking statements. These risks and uncertainties
include, but are not limited to: (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 2017 Tax Cuts and Jobs Act, as well as
further guidance that may be issued regarding such act; (ix) risks
related to the potential impact of new accounting standards on our
financial position, results of operations or cash flows; (x)
failure to accurately forecast the impact of our restructuring
activities on our financial statements and our business; (xi) the
resolution of current legal proceedings, including any awards or
judgments relating to such proceedings, additional legal or
regulatory proceedings, changes in the schedules or costs
associated with legal proceedings or adverse rulings in such
proceedings; (xii) the timing and impact of potential
administrative and legislative matters; (xiii) changes or
inaccuracies in market projections; (xiv) our ability to obtain
liquidity though debt and equity financings; (xv) the potential
effects that the ongoing COVID-19 pandemic and/or general economic
or other conditions could have on our financial position, results
of operations and cash flows; and (xvi) changes in our business
strategy.
We undertake no duty to revise or update publicly any
forward-looking statement for any reason, except as otherwise
required by law.
Footnotes
1 Throughout this
press release, net income and diluted earnings per share (“EPS”)
are attributable to InterDigital, Inc. (e.g., after adjustments for
non-controlling interests), unless otherwise stated.
2 Adjusted EBITDA
is a supplemental non-GAAP financial measure that InterDigital
believes provides investors with important insight into the
company's ongoing business performance. InterDigital defines
Adjusted EBITDA as net income attributable to InterDigital, Inc.
plus net loss attributable to non-controlling interest, income tax
(provision) benefit, other income (expense) & interest expense,
depreciation and amortization, share-based compensation, and other
items. Other items may include restructuring costs, impairment
charges and other non-recurring items. InterDigital’s computation
of Adjusted EBITDA might not be comparable to Adjusted EBITDA
reported by other companies. The presentation of Adjusted EBITDA,
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 reconciliation of Adjusted
EBITDA to net income attributable to InterDigital, Inc., the most
directly comparable GAAP financial measure, is provided below.
3 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 used in operating activities less purchases of property
and equipment and capitalized patent costs. InterDigital’s
computation of free cash flow might not be comparable to free cash
flow reported by other companies. The presentation of free cash
flow, 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 reconciliation of free
cash flow to net cash used in operating activities, the most
directly comparable GAAP financial measure, is provided below.
SUMMARY CONSOLIDATED STATEMENTS OF
INCOME(in thousands except per share data)(unaudited)
| |
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| REVENUES: |
|
|
|
|
|
|
|
|
Recurring revenues: |
|
|
|
|
|
|
|
|
Smartphone |
$ |
87,467 |
|
|
$ |
84,143 |
|
|
$ |
262,908 |
|
|
$ |
223,701 |
|
|
CE, IoT/Auto |
|
13,579 |
|
|
|
8,498 |
|
|
|
36,455 |
|
|
|
21,951 |
|
|
Other |
|
— |
|
|
|
747 |
|
|
|
911 |
|
|
|
4,467 |
|
|
Total recurring revenues |
|
101,046 |
|
|
|
93,388 |
|
|
|
300,274 |
|
|
|
250,119 |
|
|
Non-recurring revenues |
|
13,718 |
|
|
|
50,108 |
|
|
|
40,465 |
|
|
|
63,475 |
|
|
Total revenues |
$ |
114,764 |
|
|
$ |
143,496 |
|
|
$ |
340,739 |
|
|
$ |
313,594 |
|
| |
|
|
|
|
|
|
|
| OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Patent administration and licensing |
|
46,720 |
|
|
|
56,150 |
|
|
|
134,232 |
|
|
|
133,694 |
|
|
Development |
|
21,789 |
|
|
|
22,546 |
|
|
|
56,487 |
|
|
|
66,999 |
|
|
Selling, general and administrative |
|
14,418 |
|
|
|
20,978 |
|
|
|
34,818 |
|
|
|
46,994 |
|
|
Restructuring activities |
|
— |
|
|
|
7,045 |
|
|
|
3,280 |
|
|
|
20,290 |
|
|
Total Operating expenses |
|
82,927 |
|
|
|
106,719 |
|
|
|
228,817 |
|
|
|
267,977 |
|
| |
|
|
|
|
|
|
|
|
Income from operations |
|
31,837 |
|
|
|
36,777 |
|
|
|
111,922 |
|
|
|
45,617 |
|
| |
|
|
|
|
|
|
|
| INTEREST EXPENSE |
|
(7,659 |
) |
|
|
(5,773 |
) |
|
|
(19,446 |
) |
|
|
(19,429 |
) |
| OTHER INCOME (EXPENSE),
NET |
|
912 |
|
|
|
(1,537 |
) |
|
|
(15,109 |
) |
|
|
2,226 |
|
|
Income before income taxes |
|
25,090 |
|
|
|
29,467 |
|
|
|
77,367 |
|
|
|
28,414 |
|
| INCOME TAX PROVISION |
|
(3,323 |
) |
|
|
(4,253 |
) |
|
|
(17,312 |
) |
|
|
(6,039 |
) |
| NET INCOME |
$ |
21,767 |
|
|
$ |
25,214 |
|
|
$ |
60,055 |
|
|
$ |
22,375 |
|
|
Net loss attributable to noncontrolling interest |
|
(455 |
) |
|
|
(1,014 |
) |
|
|
(1,230 |
) |
|
|
(11,042 |
) |
| NET INCOME ATTRIBUTABLE TO
INTERDIGITAL, INC. |
$ |
22,222 |
|
|
$ |
26,228 |
|
|
$ |
61,285 |
|
|
$ |
33,417 |
|
| NET INCOME PER COMMON SHARE —
BASIC |
$ |
0.75 |
|
|
$ |
0.85 |
|
|
$ |
2.03 |
|
|
$ |
1.09 |
|
| WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — BASIC |
|
29,659 |
|
|
|
30,737 |
|
|
|
30,255 |
|
|
|
30,792 |
|
| NET INCOME PER COMMON SHARE —
DILUTED |
$ |
0.74 |
|
|
$ |
0.83 |
|
|
$ |
2.00 |
|
|
$ |
1.07 |
|
| WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — DILUTED |
|
29,940 |
|
|
|
31,431 |
|
|
|
30,638 |
|
|
|
31,272 |
|
| CASH DIVIDENDS DECLARED PER
COMMON SHARE |
$ |
0.35 |
|
|
$ |
0.35 |
|
|
$ |
1.05 |
|
|
$ |
1.05 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMMARY CONSOLIDATED CASH
FLOWS(in thousands)(unaudited)
| |
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| Income before income
taxes |
$ |
25,090 |
|
|
$ |
29,467 |
|
|
$ |
77,367 |
|
|
$ |
28,415 |
|
| Taxes paid |
|
(222 |
) |
|
|
(5,042 |
) |
|
|
(4,585 |
) |
|
|
(9,835 |
) |
| Non-cash expenses |
|
25,243 |
|
|
|
35,882 |
|
|
|
90,313 |
|
|
|
95,272 |
|
| Change in deferred
revenue |
|
274,034 |
|
|
|
150,703 |
|
|
|
146,334 |
|
|
|
64,044 |
|
| Change in operating working
capital, deferred charges and other |
|
(342,874 |
) |
|
|
(114,746 |
) |
|
|
(379,898 |
) |
|
|
(118,733 |
) |
| Purchases of property and
equipment and capitalized patent costs |
|
(9,054 |
) |
|
|
(8,857 |
) |
|
|
(31,139 |
) |
|
|
(30,022 |
) |
| FREE CASH FLOW 3 |
|
(27,783 |
) |
|
|
87,407 |
|
|
|
(101,608 |
) |
|
|
29,141 |
|
| |
|
|
|
|
|
|
|
| Net proceeds from debt
refinancing |
|
(796 |
) |
|
|
— |
|
|
|
139,193 |
|
|
|
— |
|
| Repurchase of common
stock |
|
— |
|
|
|
(11,859 |
) |
|
|
(74,445 |
) |
|
|
(23,000 |
) |
| Dividends paid |
|
(10,380 |
) |
|
|
(10,794 |
) |
|
|
(31,924 |
) |
|
|
(32,319 |
) |
| Other |
|
(552 |
) |
|
|
708 |
|
|
|
(7,028 |
) |
|
|
(1,471 |
) |
| NET (DECREASE) INCREASE IN
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM
INVESTMENTS |
$ |
(39,511 |
) |
|
$ |
65,462 |
|
|
$ |
(75,812 |
) |
|
$ |
(27,649 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMMARY CONSOLIDATED BALANCE
SHEETS(in thousands)(unaudited)
| |
SEPTEMBER 30, 2022 |
|
DECEMBER 31, 2021 |
| ASSETS |
|
|
|
|
Cash, cash equivalents and short-term investments |
$ |
863,423 |
|
$ |
941,627 |
| Accounts receivable, net |
|
403,043 |
|
|
31,113 |
| Prepaid and other current
assets |
|
86,028 |
|
|
77,545 |
| Property & equipment and
patents, net |
|
373,795 |
|
|
376,962 |
| Other long-term assets,
net |
|
201,926 |
|
|
200,909 |
| TOTAL ASSETS |
$ |
1,928,215 |
|
$ |
1,628,156 |
| LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Accounts payable, accrued liabilities, taxes payable &
dividends payable |
$ |
79,480 |
|
$ |
79,888 |
|
Current deferred revenue |
|
210,981 |
|
|
291,673 |
|
Long-term deferred revenue |
|
276,589 |
|
|
19,463 |
|
Long-term debt & other long-term liabilities |
|
659,370 |
|
|
484,215 |
| TOTAL LIABILITIES |
|
1,226,420 |
|
|
875,239 |
| TOTAL INTERDIGITAL, INC.
SHAREHOLDERS' EQUITY |
|
695,775 |
|
|
745,239 |
| Noncontrolling interest |
|
6,020 |
|
|
7,678 |
| TOTAL EQUITY |
|
701,795 |
|
|
752,917 |
| TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,928,215 |
|
$ |
1,628,156 |
| |
|
|
|
|
|
RECONCILIATION OF NON-GAAP
MEASURES
The table below presents a reconciliation of Adjusted EBITDA to
net income attributable to InterDigital, Inc., the most directly
comparable GAAP financial measure (in thousands):
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| Net income
attributable to InterDigital, Inc. |
$ |
22,222 |
|
|
$ |
26,228 |
|
|
$ |
61,285 |
|
|
$ |
33,417 |
|
|
Net loss attributable to non-controlling interest |
|
(455 |
) |
|
|
(1,014 |
) |
|
|
(1,230 |
) |
|
|
(11,042 |
) |
|
Income tax provision |
|
3,323 |
|
|
|
4,253 |
|
|
|
17,312 |
|
|
|
6,039 |
|
|
Other income (expense) & interest expense |
|
6,747 |
|
|
|
7,310 |
|
|
|
34,555 |
|
|
|
17,203 |
|
|
Depreciation and amortization |
|
18,713 |
|
|
|
19,421 |
|
|
|
59,149 |
|
|
|
58,971 |
|
|
Share-based compensation |
|
5,846 |
|
|
|
15,082 |
|
|
|
15,209 |
|
|
|
21,010 |
|
|
Other items(a) |
|
— |
|
|
|
7,045 |
|
|
|
3,280 |
|
|
|
22,290 |
|
| Adjusted
EBITDA2 |
$ |
56,396 |
|
|
$ |
78,325 |
|
|
$ |
189,560 |
|
|
$ |
147,888 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Other items in the above table includes $7.0 million
of restructuring costs during the three months ended September 30,
2021 and restructuring costs of $3.3 million and $20.3 million
during the nine months ended September 30, 2022 and 2021,
respectively. The nine months ended September 30, 2021 also
includes $2.0 million of additional non-recurring
personnel-related costs expenses related to new employee
agreements.
The table below presents a reconciliation of free cash flow to
net cash (used in) provided by operating activities, the most
directly comparable GAAP financial measure (in thousands):
| |
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
| Net cash (used in) provided by
operating activities |
$ |
(18,729 |
) |
|
$ |
96,264 |
|
|
$ |
(70,469 |
) |
|
$ |
59,163 |
|
| Purchases of property and
equipment |
|
(110 |
) |
|
|
(940 |
) |
|
|
(872 |
) |
|
|
(1,877 |
) |
| Capitalized patent costs |
|
(8,944 |
) |
|
|
(7,917 |
) |
|
|
(30,267 |
) |
|
|
(28,145 |
) |
| Free cash flow3 |
$ |
(27,783 |
) |
|
$ |
87,407 |
|
|
$ |
(101,608 |
) |
|
$ |
29,141 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT: |
InterDigital, Inc. |
| |
Email:
investor.relations@interdigital.com |
| |
+1 (302) 300-1857 |
| |
|
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