InterDigital, Inc. (NASDAQ:IDCC), a mobile and video
technology research and development company, today announced
results for the quarter ended June 30, 2022.
“Our success in executing across all parts of the business
helped us to again deliver an excellent financial performance in
the second quarter as we saw outstanding growth in revenue and net
income driven by several new license agreements,” said Liren Chen,
President and CEO of InterDigital. “While we continue to see
considerable upside in our core smartphone market, our recent track
record demonstrates our success in converting opportunities outside
of the smartphone space into new revenue.”
Second Quarter 2022 Financial Highlights
- Total revenue of $124.7 million
increased 42% from $87.7 million in second quarter 2021. Recurring
revenue was $100.1 million, compared to recurring revenue of $78.1
million in second quarter 2021. The year-over-year increase was
driven by new patent license agreements, including two agreements
signed in second quarter 2022. Second quarter 2022 revenue included
record levels of combined revenue from the consumer electronics,
automotive, and IoT markets.
- Operating expenses were $74.8
million, compared to $90.9 million in second quarter 2021. The
majority of this decrease was driven by the benefits realized from
restructuring actions the company initiated in 2021.
- Income from operations was $49.9
million as compared to an operating loss of $3.1 million in second
quarter 2021.
- Net income1 was $21.1 million, or
$0.69 per diluted share, compared to net income of
$1.6 million, or $0.05 per diluted share, in second quarter
2021. Second quarter 2022 net income was impacted by a one-time
$11.2 million refinancing charge.
- Adjusted EBITDA2 increased 119% to
$77.8 million compared to $35.6 million in second quarter
2021.
- The company repurchased 1.2 million
shares of its common stock for $74.4 million in connection with a
refinancing of its convertible debt.
Near Term Outlook
The company expects recurring revenue for third quarter to be
between $96 and $100 million. This revenue guidance covers existing
agreements and does not include the potential impact of any
additional new patent licenses, technology solutions or patent sale
agreements that may be signed, or any arbitration or dispute
resolutions that may occur, during the balance of third quarter
2022.
The company expects third quarter operating expenses will be in
the range of $76 to $80 million. In addition, the company expects
non-operating expenses, comprised of interest expense and other
income (expense), will be in the range of $6 to $8 million and the
effective tax rate will be in the range of 25% to 27%.
Conference Call Information
InterDigital will host a conference call on Thursday, August 4,
2022 at 10:00 a.m. ET to discuss its second 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 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, visit
www.interdigital.com and click on “Dial In Registration” 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 June 30, |
|
For the Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
REVENUES: |
|
|
|
|
|
|
|
Variable patent royalty revenue |
$ |
7,673 |
|
|
$ |
7,323 |
|
|
$ |
16,718 |
|
|
$ |
14,419 |
|
Fixed-fee royalty revenue |
|
91,756 |
|
|
|
69,296 |
|
|
|
181,599 |
|
|
|
138,592 |
|
Current patent royalties |
|
99,429 |
|
|
|
76,619 |
|
|
|
198,317 |
|
|
|
153,011 |
|
Non-current patent royalties |
|
24,556 |
|
|
|
9,586 |
|
|
|
26,747 |
|
|
|
13,367 |
|
Total patent royalties |
|
123,985 |
|
|
|
86,205 |
|
|
|
225,064 |
|
|
|
166,378 |
|
Current technology solutions revenue |
|
672 |
|
|
|
1,530 |
|
|
|
911 |
|
|
|
3,720 |
|
Total Revenue |
$ |
124,657 |
|
|
$ |
87,735 |
|
|
$ |
225,975 |
|
|
$ |
170,098 |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
Patent administration and licensing |
|
45,417 |
|
|
|
40,970 |
|
|
|
87,512 |
|
|
|
77,544 |
|
Development |
|
17,086 |
|
|
|
21,870 |
|
|
|
34,698 |
|
|
|
44,453 |
|
Selling, general and administrative |
|
9,516 |
|
|
|
14,799 |
|
|
|
20,400 |
|
|
|
26,016 |
|
Restructuring activities |
|
2,738 |
|
|
|
13,245 |
|
|
|
3,280 |
|
|
|
13,245 |
|
Total Operating expenses |
|
74,757 |
|
|
|
90,884 |
|
|
|
145,890 |
|
|
|
161,258 |
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
49,900 |
|
|
|
(3,149 |
) |
|
|
80,085 |
|
|
|
8,840 |
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
(6,272 |
) |
|
|
(6,666 |
) |
|
|
(11,787 |
) |
|
|
(13,656 |
) |
OTHER (EXPENSE) INCOME,
NET |
|
(15,016 |
) |
|
|
3,039 |
|
|
|
(16,021 |
) |
|
|
3,763 |
|
Income before income taxes |
|
28,612 |
|
|
|
(6,776 |
) |
|
|
52,277 |
|
|
|
(1,053 |
) |
INCOME TAX PROVISION |
|
(8,028 |
) |
|
|
(21 |
) |
|
|
(13,989 |
) |
|
|
(1,786 |
) |
NET INCOME |
$ |
20,584 |
|
|
$ |
(6,797 |
) |
|
$ |
38,288 |
|
|
$ |
(2,839 |
) |
Net loss attributable to noncontrolling interest |
|
(485 |
) |
|
|
(8,415 |
) |
|
|
(775 |
) |
|
|
(10,028 |
) |
NET INCOME ATTRIBUTABLE TO
INTERDIGITAL, INC. |
$ |
21,069 |
|
|
$ |
1,618 |
|
|
$ |
39,063 |
|
|
$ |
7,189 |
|
NET INCOME PER COMMON SHARE —
BASIC |
$ |
0.69 |
|
|
$ |
0.05 |
|
|
$ |
1.28 |
|
|
$ |
0.23 |
|
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — BASIC |
|
30,413 |
|
|
|
30,804 |
|
|
|
30,557 |
|
|
|
30,820 |
|
NET INCOME PER COMMON SHARE —
DILUTED |
$ |
0.69 |
|
|
$ |
0.05 |
|
|
$ |
1.26 |
|
|
$ |
0.23 |
|
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING — DILUTED |
|
30,710 |
|
|
|
31,189 |
|
|
|
30,992 |
|
|
|
31,192 |
|
CASH DIVIDENDS DECLARED PER
COMMON SHARE |
$ |
0.35 |
|
|
$ |
0.35 |
|
|
$ |
0.70 |
|
|
$ |
0.70 |
|
SUMMARY CONSOLIDATED CASH
FLOWS(in thousands)(unaudited)
|
For the Three Months Ended June 30, |
|
For the Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Income before income
taxes |
$ |
28,612 |
|
|
$ |
(6,776 |
) |
|
$ |
52,277 |
|
|
$ |
(1,053 |
) |
Taxes paid |
|
(1,014 |
) |
|
|
(465 |
) |
|
|
(4,363 |
) |
|
|
(4,793 |
) |
Non-cash expenses |
|
38,904 |
|
|
|
35,557 |
|
|
|
65,070 |
|
|
|
59,390 |
|
Change in deferred
revenue |
|
(76,959 |
) |
|
|
(63,230 |
) |
|
|
(127,700 |
) |
|
|
(86,659 |
) |
Change in operating working
capital, deferred charges and other |
|
(23,311 |
) |
|
|
7,655 |
|
|
|
(37,024 |
) |
|
|
(3,986 |
) |
Purchases of property and
equipment and capitalized patent costs |
|
(11,876 |
) |
|
|
(11,176 |
) |
|
|
(22,085 |
) |
|
|
(21,165 |
) |
FREE CASH FLOW3 |
|
(45,644 |
) |
|
|
(38,435 |
) |
|
|
(73,825 |
) |
|
|
(58,266 |
) |
|
|
|
|
|
|
|
|
Long-term investments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,091 |
) |
Proceeds from issuance of
convertible senior notes |
|
460,000 |
|
|
|
— |
|
|
|
460,000 |
|
|
|
— |
|
Purchase of convertible bond
hedge |
|
(80,500 |
) |
|
|
— |
|
|
|
(80,500 |
) |
|
|
— |
|
Proceeds from issuance of
warrants |
|
43,700 |
|
|
|
— |
|
|
|
43,700 |
|
|
|
— |
|
Payments on long-term
debt |
|
(282,499 |
) |
|
|
— |
|
|
|
(282,499 |
) |
|
|
— |
|
Proceeds from hedge
unwind |
|
11,851 |
|
|
|
— |
|
|
|
11,851 |
|
|
|
— |
|
Payment for warrant
unwind |
|
(3,837 |
) |
|
|
— |
|
|
|
(3,837 |
) |
|
|
— |
|
Payments of debt issuance
costs |
|
(8,726 |
) |
|
|
— |
|
|
|
(8,726 |
) |
|
|
— |
|
Repurchase of common
stock |
|
(74,445 |
) |
|
|
(5,391 |
) |
|
|
(74,445 |
) |
|
|
(11,141 |
) |
Net proceeds from exercise of
stock options |
|
— |
|
|
|
3,632 |
|
|
|
1,226 |
|
|
|
4,369 |
|
Non-controlling interest
contribution |
|
— |
|
|
|
— |
|
|
|
1,500 |
|
|
|
— |
|
Non-controlling interest
distribution |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,109 |
) |
Taxes withheld upon restricted
stock unit vestings |
|
(707 |
) |
|
|
(711 |
) |
|
|
(5,733 |
) |
|
|
(3,673 |
) |
Dividends paid |
|
(10,803 |
) |
|
|
(10,739 |
) |
|
|
(21,544 |
) |
|
|
(21,525 |
) |
Unrealized loss on short-term
investments |
|
(2,139 |
) |
|
|
(115 |
) |
|
|
(3,469 |
) |
|
|
(675 |
) |
NET INCREASE (DECREASE) IN
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM
INVESTMENTS |
$ |
6,251 |
|
|
$ |
(51,759 |
) |
|
$ |
(36,301 |
) |
|
$ |
(93,111 |
) |
SUMMARY CONSOLIDATED BALANCE
SHEETS(in thousands)(unaudited)
|
JUNE 30, 2022 |
|
DECEMBER 31, 2021 |
ASSETS |
|
|
|
Cash, cash equivalents and short-term investments |
$ |
900,609 |
|
$ |
941,627 |
Accounts receivable, net |
|
48,801 |
|
|
31,113 |
Prepaid and other current
assets |
|
86,393 |
|
|
77,545 |
Property & equipment and
patents, net |
|
382,948 |
|
|
376,962 |
Other long-term assets,
net |
|
198,744 |
|
|
200,909 |
TOTAL ASSETS |
$ |
1,617,495 |
|
$ |
1,628,156 |
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Accounts payable, accrued liabilities, taxes payable &
dividends payable |
$ |
64,490 |
|
$ |
79,888 |
Current deferred revenue |
|
168,461 |
|
|
291,673 |
Long-term deferred revenue |
|
45,075 |
|
|
19,463 |
Long-term debt & other long-term liabilities |
|
654,225 |
|
|
484,215 |
TOTAL LIABILITIES |
|
932,251 |
|
|
875,239 |
TOTAL INTERDIGITAL, INC.
SHAREHOLDERS' EQUITY |
|
678,769 |
|
|
745,239 |
Noncontrolling interest |
|
6,475 |
|
|
7,678 |
TOTAL EQUITY |
|
685,244 |
|
|
752,917 |
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,617,495 |
|
$ |
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 June 30, |
|
For the Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net Income
attributable to InterDigital, Inc. |
$ |
21,069 |
|
|
$ |
1,618 |
|
|
$ |
39,063 |
|
|
$ |
7,189 |
|
Net loss attributable to non-controlling interest |
|
(485 |
) |
|
|
(8,415 |
) |
|
|
(775 |
) |
|
|
(10,028 |
) |
Income tax provision |
|
8,028 |
|
|
|
21 |
|
|
|
13,989 |
|
|
|
1,786 |
|
Other income (expense) & interest expense |
|
21,288 |
|
|
|
3,627 |
|
|
|
27,808 |
|
|
|
9,893 |
|
Depreciation and amortization |
|
21,154 |
|
|
|
19,689 |
|
|
|
40,436 |
|
|
|
39,550 |
|
Share-based compensation |
|
3,977 |
|
|
|
3,775 |
|
|
|
9,363 |
|
|
|
5,928 |
|
Other items(a) |
|
2,738 |
|
|
|
15,245 |
|
|
|
3,280 |
|
|
|
15,245 |
|
Adjusted
EBITDA |
$ |
77,769 |
|
|
$ |
35,560 |
|
|
$ |
133,164 |
|
|
$ |
69,563 |
|
(a) Other items in the above table includes $2.7
million and $3.3 million of restructuring costs during the three
and six months ended June 30, 2022, respectively, and $13.2 million
of restructuring costs and $2.0 million of additional
non-recurring personnel-related costs expenses related to new
employee agreements during both the three and six months ended June
30, 2021. |
The table below presents a reconciliation of free cash flow to
net cash used in operating activities, the most directly comparable
GAAP financial measure (in thousands):
|
For the Three Months Ended June 30, |
|
For the Six Months Ended June 30, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net cash used in operating
activities |
$ |
(33,768 |
) |
|
$ |
(27,259 |
) |
|
$ |
(51,740 |
) |
|
$ |
(37,101 |
) |
Purchases of property and
equipment |
|
(425 |
) |
|
|
(550 |
) |
|
|
(762 |
) |
|
|
(937 |
) |
Capitalized patent costs |
|
(11,451 |
) |
|
|
(10,626 |
) |
|
|
(21,323 |
) |
|
|
(20,228 |
) |
Free cash flow3 |
$ |
(45,644 |
) |
|
$ |
(38,435 |
) |
|
$ |
(73,825 |
) |
|
$ |
(58,266 |
) |
CONTACT: |
|
InterDigital, Inc. |
|
|
Email:
investor.relations@interdigital.com |
|
|
+1 (302) 300-1857 |
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