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InterDigital Announces Financial Results for Second Quarter 2018

WILMINGTON, Del., Aug. 02, 2018 (GLOBE NEWSWIRE) -- InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and development company, today announced results for the second quarter ended June 30, 2018.

Effective January 1, 2018, the company adopted a new revenue recognition standard ("ASC 606"), which impacted the company’s recognition of revenue from certain of its fixed-fee and per-unit license agreements.  The company adopted ASC 606 using the modified retrospective method, which means that the total amount of revenue reported for second quarter 2017 has not been restated in the current financial statements.  In the interest of comparability during the transition year to ASC 606, the company has provided revenue, net income and earnings per share information in accordance with both ASC 606 and revenue recognition rules in effect prior to the adoption of ASC 606 (“ASC 605”).

Second Quarter 2018 Financial Highlights

“Our continued licensing efforts, including new agreements in the second quarter, saw growth in recurring revenue coupled with careful expense discipline and another excellent quarter,” said William J. Merritt, President and CEO. “With the expansion of our patent portfolio, our continued strong participation in 5G, and the expansion of wireless into new markets, we see new opportunities and a platform for continued growth.”

Additional Highlights

Conference Call Information

InterDigital will host a conference call on Thursday, August 2, 2018 at 10:00 a.m. Eastern Time to discuss its second quarter 2018 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 (888) 224-1005 within the United States or +1 (323) 794-2551 from outside the United States.  Please call by 9:50 a.m. ET on August 2nd and give the operator conference ID number 9287523.

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 August 2 through 1:00 p.m. ET August 7. To access the recorded replay, call (888) 203-1112 or +1 (719) 457-0820 and use the replay code 9287523.

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, (i) our current expectations with respect to our effective tax rate for 2018 and our long-term tax rate; and (ii) our belief that the expansion of our patent portfolio, our continued strong participation in 5G, and the expansion of wireless into new markets will provide new opportunities and a platform for continued growth.  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) 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; (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 INCOME
(dollars in thousands except per share data)
(unaudited)

 For the Three Months Ended June 30,
 2018 2017
 As Reported ASC 606 Adjustment ASC 605* As Reported (ASC 605)
REVENUES:       
Variable patent royalty revenue$6,594  $782  $7,376  $11,398 
Fixed-fee royalty revenue60,264  19,261  79,525  73,063 
Current patent royalties66,858  20,043  86,901  84,461 
Non-current patent royalties2,017    2,017  47,860 
Total patent royalties68,875  20,043  88,918  132,321 
Current technology solutions revenue680  1,051  1,731  3,458 
 $69,555  $21,094  $90,649  $135,779 
OPERATING EXPENSES:       
Patent administration and licensing26,487    26,487  23,232 
Development15,829    15,829  19,098 
Selling, general and administrative11,559    11,559  12,501 
 53,875    53,875  54,831 
Income from operations15,680  21,094  36,774  80,948 
OTHER EXPENSE (NET)(4,847) 4,335  (512) (2,330)
Income before income taxes10,833  25,429  36,262  78,618 
INCOME TAX EXPENSE(1,057) (2,908) (3,965) (27,074)
NET INCOME$9,776  $22,521  $32,297  $51,544 
Net loss attributable to noncontrolling interest(930)   (930) (955)
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.$10,706  $22,521  $33,227  $52,499 
NET INCOME PER COMMON SHARE — BASIC$0.31  $0.65  $0.96  $1.51 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC34,769    34,769  34,686 
NET INCOME PER COMMON SHARE — DILUTED$0.30  $0.63  $0.93  $1.46 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED35,631    35,631  35,902 
CASH DIVIDENDS DECLARED PER COMMON SHARE$0.35  $  $0.35  $0.30 


 For the Six Months Ended June 30,
 2018 2017
 As Reported ASC 606 Adjustment ASC 605* As Reported (ASC 605)
REVENUES:       
Variable patent royalty revenue$12,677  $4,776  $17,453  $27,257 
Fixed-fee royalty revenue117,935  39,772  157,707  146,430 
Current patent royalties130,612  44,548  175,160  173,687 
Non-current patent royalties25,361  (10,000) 15,361  47,860 
Total patent royalties155,973  34,548  190,521  221,547 
Current technology solutions revenue1,026  4,035  5,061  8,762 
 $156,999  $38,583  $195,582  $230,309 
OPERATING EXPENSES:       
Patent administration and licensing53,403    53,403  50,112 
Development32,003    32,003  38,879 
Selling, general and administrative25,763    25,763  26,402 
 111,169    111,169  115,393 
Income from operations45,830  38,583  84,413  114,916 
OTHER EXPENSE (NET)(11,183) 9,011  (2,172) (5,144)
Income before income taxes34,647  47,594  82,241  109,772 
INCOME TAX BENEFIT (EXPENSE)3,858  (8,931) (5,073) (25,450)
NET INCOME$38,505  $38,663  $77,168  $84,322 
Net loss attributable to noncontrolling interest(2,126)   (2,126) (1,933)
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.$40,631  $38,663  $79,294  $86,255 
NET INCOME PER COMMON SHARE — BASIC$1.17  $1.11  $2.28  $2.50 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC34,705    34,705  34,528 
NET INCOME PER COMMON SHARE — DILUTED$1.14  $1.09  $2.23  $2.39 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED35,619    35,619  36,103 
CASH DIVIDENDS DECLARED PER COMMON SHARE$0.70  $  $0.70  $0.60 

Note: Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

*In the interest of comparability during the transition year to ASC 606, the company has provided its Summary Consolidated Statements of Income for the three and six months ended June 30, 2018 in accordance with both ASC 606 and previous accounting literature, ASC 605. The tables above also show the adjustments made to reconcile the ASC 605 presentation to ASC 606.  The company believes this additional information is vital during the transition year to allow readers of its financial statements to compare financial results from the preceding financial year given the absence of restatement of the prior period.  The ASC 605 information should be considered in addition to, not as a substitute for, nor superior to or in isolation from, the financial information prepared in accordance with ASC 606.

SUMMARY CONSOLIDATED CASH FLOWS
(dollars in thousands)
(unaudited)

 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2018 2017 2018 2017
Income before income taxes$10,833  $78,618  $34,647  $109,772 
Taxes paid(2,746) (11,120) (10,799) (14,110)
Non-cash expenses19,901  21,645  38,796  44,691 
Change in deferred revenue18,125  (74,039) (27,167) 32,040 
Increase (decrease) in operating working capital, deferred charges and other(39,286) 4,343  (29,245) (178,801)
Capital spending and capitalized patent costs(7,615) (9,321) (16,049) (17,376)
FREE CASH FLOW(788) 10,126  (9,817) (23,784)
        
Long-term investments(2,000) (200) (6,250) (701)
Dividends paid(12,164) (10,402) (24,319) (20,694)
Acquisition of patents(2,250)   (2,250)  
Taxes withheld upon vesting of restricted stock units(111) (235) (8,388) (22,190)
Share repurchases(3,148)   (9,172)  
Net proceeds from exercise of stock options3,930    3,930  82 
Unrealized gain (loss) on short-term investments475  (42) (1,168) (87)
NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS$(16,056) $(753) $(57,434) $(67,374)


CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)

 JUNE 30,
 2018
 DECEMBER 31, 2017
ASSETS   
Cash & short-term investments$1,100,561  $1,157,995 
Accounts receivable (net)77,988  216,293 
Other current assets21,970  21,506 
Property & equipment and patents (net)327,162  336,081 
Other long-term assets (net)91,969  122,545 
TOTAL ASSETS$1,619,650  $1,854,420 
    
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Accounts payable, accrued liabilities, taxes payable & dividends payable$51,520  $69,299 
Current deferred revenue76,777  307,142 
Long-term deferred revenue153,296  309,671 
Long-term debt & other long-term liabilities301,833  295,160 
TOTAL LIABILITIES583,426  981,272 
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY1,020,469  855,267 
Noncontrolling interest15,755  17,881 
TOTAL EQUITY1,036,224  873,148 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$1,619,650  $1,854,420 


RECONCILIATION OF FREE CASH FLOW TO NET CASH
PROVIDED 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 provided by (used in) operating activities, the most directly comparable GAAP financial measure.

 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2018 2017 2018 2017
Net cash provided by (used in) operating activities$6,827  $19,447  $6,232  $(6,408)
Purchases of property, equipment, & technology licenses(1,143) (557) (1,542) (825)
Capitalized patent costs(6,472) (8,764) (14,507) (16,551)
Free cash flow$(788) $10,126  $(9,817) $(23,784)


CONTACT:InterDigital, Inc.:
 Patrick Van de Wille
  Email Contact 
  +1 (858) 210-4814

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