16% Year-over-year Growth in Recurring
Revenue Underscores Early Impact of Technicolor
Acquisition
InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and
development company, today announced results for the first quarter
ended March 31, 2019.
First Quarter 2019 Financial Highlights
- First quarter 2019 recurring revenue was $74.2 million, a 16%
increase compared to recurring revenue of $64.1 million
in first quarter 2018. InterDigital recorded a $5.5 million
net charge that was recorded as a contra to non-recurring revenue
in first quarter 2019, driven by the restructuring of an existing
license agreement with a long-term customer.
- First quarter 2019 operating expenses were $68.8 million,
compared to $57.3 million in first quarter 2018. The increase
in operating expenses was primarily driven by $12.1 million in
costs related to the acquisition of Technicolor SA's patent
licensing business and the pending acquisition of Technicolor's
R&I team. Of those, $7.1 million were either transaction,
integration or amortization expenses.
- First quarter 2019 net loss1 was $2.8 million, or $0.09 per
diluted share compared to net income1 $30.2 million, or $0.85 per
diluted share, in first quarter 2018.
- From January 1, 2019 through March 31, 2019, the company
repurchased 1.6 million shares of common stock under its stock
repurchase program for a total cost of $109.0 million.
Additionally, from April 1, 2019 through April 30, 2019, we
repurchased an additional 0.3 million shares for a total cost of
$21.7 million. $37.4 million remains available for repurchase
subject to the increase to the buyback authorization in December
2018.
- In first quarter 2019, the company recorded $30.8 million of
cash used in operating activities, compared to $0.6 million in
first quarter 2018. The company used $40.8 million of free
cash flow2 in first quarter 2019, compared to $9.0 million of free
cash flow used in first quarter 2018. These decreases were
primarily driven by the timing of cash collections under fixed-fee
agreements. Ending cash and short-term investments totaled
$0.8 billion.
- In first quarter 2019, the company recognized a tax benefit of
$1.8 million, for an effective tax rate of 29.9%. This is
compared to a tax benefit of $4.9 million and an effective tax rate
benefit of 20.6% during first quarter 2018.
“Our growth in recurring revenue as well as the start of
meaningful contribution from the consumer electronics business
underscores the tremendous growth potential of the new, more
diversified InterDigital that we’ve built over the past year,” said
William J. Merritt, President and CEO of InterDigital. “That
growth, combined with the careful cost control that we continue to
exhibit and that has been a hallmark of our company for many years,
sets the stage for a significant increase in profitability and
shareholder value.”
Conference Call Information
InterDigital will host a conference call on Thursday, May 2,
2019 at 10:00 a.m. Eastern Time to discuss its first 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 (877) 260-1479
within the United States and Canada or +1 (334) 323-0522 from
outside the United States and Canada. Please call by 9:50 a.m. ET
on May 2nd and give the operator conference ID number 8316028.
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 May
2nd through 1:00 p.m. ET May 8th. To access the recorded
replay, call +1 (888) 203-1112 or +1 (719) 457-0820 and use the
replay code 8316028.
About InterDigital®
InterDigital develops mobile 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 and a
richer multimedia experience years ahead of market
deployment. InterDigital has licenses and strategic
relationships with many of the world's leading wireless
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 MARCH 31, |
|
2019 |
|
2018 |
REVENUES: |
|
|
|
Variable
patent royalty revenue |
$ |
9,280 |
|
|
$ |
6,083 |
|
Fixed-fee
royalty revenue |
62,873 |
|
|
57,671 |
|
Current
patent royalties |
72,153 |
|
|
63,754 |
|
Non-current patent royalties |
(5,775 |
) |
|
23,344 |
|
Total
patent royalties |
66,378 |
|
|
87,098 |
|
Patent
sales |
225 |
|
|
— |
|
Current
technology solutions revenue |
2,028 |
|
|
346 |
|
|
$ |
68,631 |
|
|
$ |
87,444 |
|
OPERATING
EXPENSES: |
|
|
|
Patent
administration and licensing |
36,071 |
|
|
26,916 |
|
Development |
18,495 |
|
|
16,174 |
|
Selling,
general and administrative |
14,215 |
|
|
14,204 |
|
|
68,781 |
|
|
57,294 |
|
Income (loss) from operations |
(150 |
) |
|
30,150 |
|
OTHER EXPENSE
(NET) |
(5,863 |
) |
|
(6,336 |
) |
Income
(loss) before income taxes |
(6,013 |
) |
|
23,814 |
|
INCOME TAX BENEFIT |
1,799 |
|
|
4,915 |
|
NET
INCOME (LOSS) |
$ |
(4,214 |
) |
|
$ |
28,729 |
|
Net loss
attributable to noncontrolling interest |
(1,411 |
) |
|
(1,501 |
) |
NET INCOME (LOSS)
ATTRIBUTABLE TO INTERDIGITAL, INC. |
$ |
(2,803 |
) |
|
$ |
30,230 |
|
NET INCOME (LOSS) PER
COMMON SHARE — BASIC |
$ |
(0.09 |
) |
|
$ |
0.87 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — BASIC |
32,611 |
|
|
34,641 |
|
NET INCOME (LOSS) PER
COMMON SHARE — DILUTED |
$ |
(0.09 |
) |
|
$ |
0.85 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — DILUTED |
32,611 |
|
|
35,606 |
|
CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.35 |
|
|
$ |
0.35 |
|
Note: Certain revisions have been made to prior
period amounts.
SUMMARY CONSOLIDATED CASH
FLOWS(dollars in thousands)(unaudited)
|
FOR THE THREE MONTHS ENDED MARCH
31, |
|
2019 |
|
2018 |
Income (loss) before
income taxes |
$ |
(6,013 |
) |
|
$ |
23,814 |
|
Taxes paid |
(3,196 |
) |
|
(8,053 |
) |
Non-cash expenses |
25,402 |
|
|
18,895 |
|
Change in deferred
revenue |
(43,423 |
) |
|
(45,292 |
) |
Increase (decrease) in
operating working capital, deferred charges and other |
(3,551 |
) |
|
10,041 |
|
Capital spending and
capitalized patent costs |
(10,065 |
) |
|
(8,434 |
) |
FREE CASH FLOW |
(40,846 |
) |
|
(9,029 |
) |
|
|
|
|
Long-term
investments |
— |
|
|
(4,250 |
) |
Proceeds from
noncontrolling interest |
10,333 |
|
|
— |
|
Dividends paid |
(11,629 |
) |
|
(12,155 |
) |
Taxes withheld upon
vesting of restricted stock units |
(4,097 |
) |
|
(8,277 |
) |
Share repurchases |
(108,986 |
) |
|
(6,024 |
) |
Net proceeds from
exercise of stock options |
2 |
|
|
— |
|
Unrealized gain (loss)
on short-term investments |
2,183 |
|
|
(1,643 |
) |
NET DECREASE IN CASH,
RESTRICTED CASH AND SHORT-TERM INVESTMENTS |
$ |
(153,040 |
) |
|
$ |
(41,378 |
) |
CONDENSED CONSOLIDATED BALANCE
SHEETS(dollars in thousands)(unaudited)
|
MARCH 31, 2019 |
|
DECEMBER 31, 2018 |
ASSETS |
|
|
|
Cash
& short-term investments |
$ |
793,045 |
|
|
$ |
945,780 |
|
Accounts
receivable (net) |
33,322 |
|
|
35,032 |
|
Other
current assets |
49,579 |
|
|
43,438 |
|
Property &
equipment and patents (net) |
457,297 |
|
|
464,618 |
|
Other long-term assets
(net) |
146,508 |
|
|
137,690 |
|
TOTAL ASSETS |
$ |
1,479,751 |
|
|
$ |
1,626,558 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current
portion of long-term debt |
$ |
302,514 |
|
|
$ |
— |
|
Accounts
payable, accrued liabilities, taxes payable & dividends
payable |
60,823 |
|
|
67,723 |
|
Current
deferred revenue |
84,816 |
|
|
111,672 |
|
Long-term
deferred revenue |
138,567 |
|
|
157,634 |
|
Long-term
debt & other long-term liabilities |
67,518 |
|
|
351,516 |
|
TOTAL LIABILITIES |
654,238 |
|
|
688,545 |
|
TOTAL INTERDIGITAL,
INC. SHAREHOLDERS' EQUITY |
812,806 |
|
|
936,729 |
|
Noncontrolling
interest |
12,707 |
|
|
1,284 |
|
TOTAL EQUITY |
825,513 |
|
|
938,013 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,479,751 |
|
|
$ |
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 used in operating activities, the most directly
comparable GAAP financial measure.
|
FOR THE
THREE MONTHS ENDED MARCH 31, |
|
2019 |
|
2018 |
Net cash used in
operating activities |
$ |
(30,781 |
) |
|
$ |
(595 |
) |
Purchases of property,
equipment, & technology licenses |
(1,584 |
) |
|
(399 |
) |
Capitalized patent
costs |
(8,481 |
) |
|
(8,035 |
) |
Free cash flow |
$ |
(40,846 |
) |
|
$ |
(9,029 |
) |
CONTACT: |
InterDigital,
Inc.: |
|
Patrick Van de
Wille |
|
patrick.vandewille@interdigital.com |
|
+1 (858) 210-4814 |
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