InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and
development company, today announced results for the third quarter
ended September 30, 2015.
Third Quarter 2015 Financial
Highlights
- Third quarter 2015 recurring revenue was $78.6 million,
consisting of current patent royalties and current technology
solutions revenue, representing an increase of 7% compared to
recurring revenue of $73.2 million in third quarter 2014.
This increase in recurring revenue was primarily attributable to a
16% increase in per-unit royalties, driven by increased shipments
by Pegatron Corporation ("Pegatron") and our other Taiwan-based
licensees.
- Total revenue was $100.4 million, compared to $77.6 million in
third quarter 2014. Third quarter 2015 total revenue included $21.8
million of past sales.
- Third quarter 2015 operating expenses were $55.0 million,
compared to $62.3 million in third quarter 2014. This 12%
decrease in operating expenses was primarily driven by a $4.9
million decrease in intellectual property enforcement and a $1.4
million decrease in consulting services. These and other
decreases were partially offset by a $0.9 million increase in
commercial initiatives expenses related to IoT and next generation
network technologies.
- Net income1 was $24.5 million, or $0.68 per diluted share,
compared to net income of $13.5 million, or $0.34 per diluted
share, in third quarter 2014.
“The ongoing market strength of our licensees continues to drive
recurring revenue growth, even as we work to expand our licensee
base," said William J. Merritt, President and CEO of
InterDigital. "That growth, coupled with our careful expense
management, highlights the tremendous operating leverage of our
business, which positions us very strongly as revenues expand."
Additional Financial Highlights for Third Quarter
2015
- In third quarter 2015, the company used $7.7 million of free
cash flow.2 This compares to $147.8 million of positive free
cash flow in third quarter 2014, primarily attributable to the
higher cash receipts from the patent license agreement with Samsung
Electronics Company, Ltd. (“Samsung”) signed during 2014.
Ending cash and short-term investments totaled $867.4 million.
- During third quarter 2015, the company repurchased 0.4 million
shares of common stock for $18.5 million. In addition,
from October 1, 2015 through October 29, 2015, the
company repurchased an additional 147,000 shares at a cost of $7.4
million. Since initiating our current $400 million stock
repurchase program in June 2014, the company has repurchased a
total of 5.4 million shares for $249.0 million, representing
approximately 15% of the company's shares outstanding at the time
the program was authorized.
- Companies that accounted for ten percent or more of third
quarter 2015 total revenue were Sony Corporation of America (32%),
Pegatron (23%), and Samsung (17%).
- The company's third quarter 2015 effective tax rate was
approximately 36.2% as compared to 3.8% during third quarter 2014,
based on the statutory federal tax rate net of discrete federal and
state taxes. The third quarter 2014 effective tax rate
benefited from the inclusion of a $5.7 million discrete net benefit
from available U.S. federal research and development tax
credits.
Conference Call Information
InterDigital will host a conference call on Friday,
October 30, 2015 at 10:00 a.m. Eastern Time to discuss its
third quarter 2015 financial performance and other company
matters. A live Internet webcast of the conference call will
be available at www.interdigital.com, under "Events and
Presentations" in the Investors Section. The company
encourages participants to take advantage of the Internet
option.
For telephone access to the conference, call (888) 802-2225
within the United States or (913) 312-1254 from outside the United
States. Please call by 9:50 a.m. ET on October 30 and
give the operator Conference ID number 371670.
An Internet replay of the conference call will be available on
InterDigital's website in the Investors section, under "Events and
Presentations." In addition, a telephone replay will be
available from 1:00 p.m. ET October 30 through 1:00 p.m. ET
November 4. To access the recorded replay, call (888)
203-1112 or (719) 457-0820 and use the replay code 371670.
About InterDigital®
InterDigital develops wireless technologies that are at the core
of mobile 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 plans to work to expand our licensee base.
Words such as "believe," “anticipate,” “estimate,” “expect,”
“project,” “intend,” “plan,” “forecast,” 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 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; (viii) changes in the
market share and sales performance of our primary licensees, delays
in product shipments of our licensees, delays in the timely receipt
and final reviews of quarterly royalty reports from our licensees,
delays in payments from our licensees and related matters; (ix) the
resolution of current legal proceedings, including any awards or
judgments relating to such proceedings, additional legal
proceedings, changes in the schedules or costs associated with
legal proceedings or adverse rulings in such legal proceedings; (x)
changes or inaccuracies in market projections; and (xi) 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
OPERATIONS |
(dollars in thousands except per share data) |
(unaudited) |
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
REVENUES: |
|
|
|
|
|
|
|
Per-unit
royalty revenue |
$ |
43,698 |
|
|
$ |
37,626 |
|
|
$ |
175,270 |
|
|
$ |
108,030 |
|
Fixed fee
amortized royalty revenue |
33,373 |
|
|
33,359 |
|
|
100,119 |
|
|
88,545 |
|
Current
patent royalties |
77,071 |
|
|
70,985 |
|
|
275,389 |
|
|
196,575 |
|
Past
patent royalties |
21,817 |
|
|
2,414 |
|
|
49,094 |
|
|
123,186 |
|
Total
patent licensing royalties |
98,888 |
|
|
73,399 |
|
|
324,483 |
|
|
319,761 |
|
Patent
sales |
— |
|
|
1,999 |
|
|
— |
|
|
1,999 |
|
Past
technology solutions revenue |
— |
|
|
— |
|
|
84 |
|
|
800 |
|
Current
technology solutions revenue |
1,520 |
|
|
2,224 |
|
|
4,770 |
|
|
7,140 |
|
|
$ |
100,408 |
|
|
$ |
77,622 |
|
|
$ |
329,337 |
|
|
$ |
329,700 |
|
|
|
|
|
OPERATING
EXPENSES: |
|
|
|
|
|
|
|
Patent
administration and licensing |
28,363 |
|
|
33,923 |
|
|
91,200 |
|
|
98,889 |
|
Development |
16,618 |
|
|
19,072 |
|
|
52,935 |
|
|
57,860 |
|
Selling,
general and administrative |
10,040 |
|
|
9,286 |
|
|
29,993 |
|
|
29,279 |
|
|
|
|
55,021 |
|
|
62,281 |
|
|
174,128 |
|
|
186,028 |
|
Income
from operations |
45,387 |
|
|
15,341 |
|
|
155,209 |
|
|
143,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE
(NET) |
(8,108 |
) |
|
(3,167 |
) |
|
(21,090 |
) |
|
(10,733 |
) |
Income
before income taxes |
37,279 |
|
|
12,174 |
|
|
134,119 |
|
|
132,939 |
|
INCOME TAX (PROVISION)
BENEFIT |
(13,491 |
) |
|
461 |
|
|
(50,044 |
) |
|
(44,747 |
) |
NET
INCOME |
$ |
23,788 |
|
|
$ |
12,635 |
|
|
$ |
84,075 |
|
|
$ |
88,192 |
|
Net loss
attributable to noncontrolling interest |
(732 |
) |
|
(877 |
) |
|
(2,112 |
) |
|
(2,360 |
) |
NET INCOME ATTRIBUTABLE
TO INTERDIGITAL, INC. |
$ |
24,520 |
|
|
$ |
13,512 |
|
|
$ |
86,187 |
|
|
$ |
90,552 |
|
NET INCOME PER COMMON
SHARE — BASIC |
$ |
0.68 |
|
|
$ |
0.34 |
|
|
$ |
2.38 |
|
|
$ |
2.25 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — BASIC |
35,798 |
|
|
39,620 |
|
|
36,257 |
|
|
40,166 |
|
NET INCOME PER COMMON
SHARE — DILUTED |
$ |
0.68 |
|
|
$ |
0.34 |
|
|
$ |
2.35 |
|
|
$ |
2.23 |
|
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING — DILUTED |
36,205 |
|
|
40,191 |
|
|
36,658 |
|
|
40,556 |
|
CASH DIVIDENDS DECLARED
PER COMMON SHARE |
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.60 |
|
|
$ |
0.50 |
|
|
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 Months Ended September
30, |
|
For the Nine Months Ended September
30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Income
before income taxes |
$ |
37,279 |
|
|
$ |
12,174 |
|
|
$ |
134,119 |
|
|
$ |
132,939 |
|
Taxes
paid |
(7,069 |
) |
|
(63,168 |
) |
|
(43,833 |
) |
|
(85,991 |
) |
Non-cash
expenses |
20,991 |
|
|
19,367 |
|
|
60,013 |
|
|
52,545 |
|
Increase
in deferred revenue |
276 |
|
|
14,013 |
|
|
91,052 |
|
|
270,872 |
|
Deferred
revenue recognized |
(39,936 |
) |
|
(44,814 |
) |
|
(125,958 |
) |
|
(119,150 |
) |
(Decrease) increase in operating working capital, deferred charges
and other |
(10,885 |
) |
|
218,176 |
|
|
(87,671 |
) |
|
(65,186 |
) |
Capital
spending and capitalized patent costs |
(8,321 |
) |
|
(7,943 |
) |
|
(25,841 |
) |
|
(26,521 |
) |
FREE CASH
FLOW |
(7,665 |
) |
|
147,805 |
|
|
1,881 |
|
|
159,508 |
|
|
|
|
|
|
|
|
|
Tax
benefit from share-based compensation |
(38 |
) |
|
22 |
|
|
2,126 |
|
|
1,218 |
|
Acquisition of patents |
— |
|
|
(1,025 |
) |
|
(20,000 |
) |
|
(26,300 |
) |
Purchase
of long-term investments |
(6,594 |
) |
|
— |
|
|
(6,594 |
) |
|
— |
|
Proceeds
from noncontrolling interests |
— |
|
|
1,275 |
|
|
2,550 |
|
|
3,825 |
|
Dividends
paid |
(7,179 |
) |
|
(8,032 |
) |
|
(21,844 |
) |
|
(16,120 |
) |
Share
repurchases |
(18,480 |
) |
|
(79,568 |
) |
|
(89,052 |
) |
|
(88,022 |
) |
Proceeds
from other financing activities |
— |
|
|
— |
|
|
4,500 |
|
|
— |
|
Proceeds
from issuance of convertible senior notes |
— |
|
|
— |
|
|
316,000 |
|
|
— |
|
Purchase
of convertible bond hedge |
— |
|
|
— |
|
|
(59,376 |
) |
|
— |
|
Proceeds
from issuance of warrants |
— |
|
|
— |
|
|
42,881 |
|
|
— |
|
Payment
of debt issuance costs |
— |
|
|
— |
|
(9,403 |
) |
|
— |
|
Net
proceeds from exercise of stock options |
3 |
|
|
16 |
|
|
29 |
|
|
369 |
|
Unrealized loss on short-term investments |
(198 |
) |
|
(703 |
) |
|
(182 |
) |
|
(237 |
) |
NET (DECREASE) INCREASE
IN CASH AND SHORT-TERM INVESTMENTS |
$ |
(40,151 |
) |
|
$ |
59,790 |
|
|
$ |
163,516 |
|
|
$ |
34,241 |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(dollars in thousands) |
(unaudited) |
|
|
SEPTEMBER 30, 2015 |
|
DECEMBER 31, 2014 |
ASSETS |
|
|
|
Cash
& short-term investments |
$ |
867,444 |
|
|
$ |
703,928 |
|
Accounts
receivable (net) |
116,079 |
|
|
51,702 |
|
Current
deferred tax assets |
68,873 |
|
|
54,019 |
|
Other
current assets |
33,884 |
|
|
32,227 |
|
Property &
equipment and patents (net) |
289,490 |
|
|
278,086 |
|
Other long-term assets
(net) |
72,922 |
|
|
73,000 |
|
TOTAL ASSETS |
$ |
1,448,692 |
|
|
$ |
1,192,962 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current
portion of long-term debt |
$ |
224,348 |
|
|
$ |
— |
|
Accounts
payable, accrued liabilities, taxes payable & dividends
payable |
65,882 |
|
|
80,474 |
|
Current
deferred revenue |
116,352 |
|
|
124,695 |
|
Long-term
deferred revenue |
290,100 |
|
|
293,342 |
|
Long-term
debt & other long-term liabilities |
260,400 |
|
|
218,774 |
|
TOTAL LIABILITIES |
957,082 |
|
|
717,285 |
|
TOTAL INTERDIGITAL,
INC. SHAREHOLDERS' EQUITY |
486,323 |
|
|
468,328 |
|
Noncontrolling
interest |
5,287 |
|
|
7,349 |
|
TOTAL EQUITY |
491,610 |
|
|
475,677 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
1,448,692 |
|
|
$ |
1,192,962 |
|
RECONCILIATION OF FREE CASH FLOW TO NET
CASHPROVIDED 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 Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Net cash provided by
operating activities |
|
$ |
656 |
|
|
$ |
155,748 |
|
|
$ |
27,722 |
|
|
$ |
186,029 |
|
Purchases of property,
equipment, & technology licenses |
|
(506 |
) |
|
(1,730 |
) |
|
(1,835 |
) |
|
(3,196 |
) |
Capitalized patent
costs |
|
(7,815 |
) |
|
(6,213 |
) |
|
(24,006 |
) |
|
(23,325 |
) |
Free cash flow |
|
$ |
(7,665 |
) |
|
$ |
147,805 |
|
|
$ |
1,881 |
|
|
$ |
159,508 |
|
CONTACT:
InterDigital, Inc.:
Patrick Van de Wille
patrick.vandewille@interdigital.com
+1 (858) 210-4814
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