Pennsylvania | 1-33579 | 23-1882087 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
200 Bellevue Parkway, Suite 300, Wilmington, DE | 19809 |
(Address of Principal Executive Offices) | (Zip Code) |
Item 2.02. | Results of Operations and Financial Condition. |
99.1 | InterDigital, Inc. press release dated August 2, 2016. |
INTERDIGITAL, INC. |
By: /s/ Jannie K. Lau |
Jannie K. Lau |
Executive Vice President, |
General Counsel and Secretary |
• | Second quarter 2016 total revenue was $75.9 million, compared to $118.6 million in second quarter 2015. Second quarter 2015 included $27.3 million of past patent royalties. |
• | Second quarter 2016 recurring revenue was $74.6 million, consisting of current patent royalties and current technology solutions revenue, compared to $91.2 million in second quarter 2015. This decrease in recurring revenue was primarily attributable to seasonality in shipments by certain of our licensees. |
• | Second quarter 2016 operating expenses were $52.8 million, compared to $60.0 million in second quarter 2015. Intellectual property enforcement expenses were $5.1 million, a 47% decrease compared to $9.7 million in second quarter 2015. |
• | The company recognized a $23.1 million discrete net tax benefit in second quarter 2016, related to refund claims for prior year domestic production activities deductions. |
• | Net income1 was $40.0 million, or $1.14 per diluted share, compared to $32.6 million, or $0.89 per diluted share, in second quarter 2015. |
• | In second quarter 2016, the company had cash flow from operating activities of $191.4 million and free cash flow2 of $182.5 million, compared to $25.3 million and $17.0 million, respectively, in second quarter 2015. These increases are primarily attributable to cash collected under an arbitration award and related patent license agreement. The amounts collected have been included in deferred revenue, as all criteria for revenue recognition have not yet been met. The company will recognize the related revenue from these payments, including both a recurring and past sales component, in the period in which it believes the revenue to be fixed or determinable. The company currently expects to reach that conclusion, and recognize the related revenue, in third quarter 2016. |
• | Ending cash and short-term investments totaled $813.9 million. |
• | The decrease in operating expenses of $7.1 million was primarily attributable to a $4.5 million decrease in intellectual property enforcement and non-patent litigation. Additionally, consulting services, commercial initiatives and personnel-related costs collectively decreased $5.7 million. These decreases were partially offset by a $2.9 million increase in performance-based compensation and depreciation and amortization. |
• | During second quarter 2016, the company repurchased 0.3 million shares of common stock for $18.6 million. From July 1, 2016 through July 29, 2016, the company repurchased an additional 0.1 million shares at a cost of $5.7 million, bringing the total number of shares repurchased under the company's current $400 million stock repurchase program to 6.7 million shares at a cost of $313.7 million. |
• | The company's second quarter 2016 effective tax rate was a benefit of approximately 74.4% as compared to a provision of 37.1% during second quarter 2015. The change in our effective tax rate was primarily attributable to the discrete impact of the refund claims discussed above, as well as the ongoing benefit from current year domestic production activities deductions. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
REVENUES: | |||||||||||||||
Per-unit royalty revenue | $ | 44,525 | $ | 55,989 | $ | 118,214 | $ | 131,572 | |||||||
Fixed fee amortized royalty revenue | 29,098 | 33,373 | 58,196 | 66,746 | |||||||||||
Current patent royalties | 73,623 | 89,362 | 176,410 | 198,318 | |||||||||||
Past patent royalties | 1,277 | 27,260 | 5,444 | 27,277 | |||||||||||
Total patent licensing royalties | 74,900 | 116,622 | 181,854 | 225,595 | |||||||||||
Current technology solutions revenue | 1,015 | 1,845 | 1,825 | 3,250 | |||||||||||
Past technology solutions revenue | — | 84 | — | 84 | |||||||||||
$ | 75,915 | $ | 118,551 | $ | 183,679 | $ | 228,929 | ||||||||
OPERATING EXPENSES: | |||||||||||||||
Patent administration and licensing | 28,285 | 31,212 | 55,452 | 62,837 | |||||||||||
Development | 14,609 | 18,326 | 34,878 | 36,317 | |||||||||||
Selling, general and administrative | 9,938 | 10,435 | 21,910 | 19,953 | |||||||||||
52,832 | 59,973 | 112,240 | 119,107 | ||||||||||||
Income from operations | 23,083 | 58,578 | 71,439 | 109,822 | |||||||||||
OTHER EXPENSE (NET) | (706 | ) | (7,746 | ) | (7,843 | ) | (12,982 | ) | |||||||
Income before income taxes | 22,377 | 50,832 | 63,596 | 96,840 | |||||||||||
INCOME TAX BENEFIT (PROVISION) | 16,652 | (18,877 | ) | 2,584 | (36,553 | ) | |||||||||
NET INCOME | $ | 39,029 | $ | 31,955 | $ | 66,180 | $ | 60,287 | |||||||
Net loss attributable to noncontrolling interest | (965 | ) | (647 | ) | (1,885 | ) | (1,380 | ) | |||||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. | $ | 39,994 | $ | 32,602 | $ | 68,065 | $ | 61,667 | |||||||
NET INCOME PER COMMON SHARE — BASIC | $ | 1.16 | $ | 0.91 | $ | 1.96 | $ | 1.69 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | 34,499 | 36,022 | 34,772 | 36,486 | |||||||||||
NET INCOME PER COMMON SHARE — DILUTED | $ | 1.14 | $ | 0.89 | $ | 1.94 | $ | 1.67 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED | 34,945 | 36,442 | 35,161 | 36,883 | |||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.40 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Income before income taxes | $ | 22,377 | $ | 50,832 | $ | 63,596 | $ | 96,840 | |||||||
Taxes paid | (37,862 | ) | (24,050 | ) | (52,285 | ) | (36,764 | ) | |||||||
Non-cash expenses | 20,096 | 20,763 | 45,481 | 39,022 | |||||||||||
Increase in deferred revenue | 201,730 | 18,273 | 282,170 | 90,776 | |||||||||||
Deferred revenue recognized | (34,829 | ) | (41,865 | ) | (69,423 | ) | (86,022 | ) | |||||||
Increase (decrease) in operating working capital, deferred charges and other | 19,922 | 1,342 | (61,872 | ) | (76,786 | ) | |||||||||
Capital spending and capitalized patent costs | (8,978 | ) | (8,255 | ) | (18,634 | ) | (17,520 | ) | |||||||
FREE CASH FLOW | 182,456 | 17,040 | 189,033 | 9,546 | |||||||||||
Tax benefit from share-based compensation | — | 624 | — | 2,163 | |||||||||||
Payments on long-term debt | — | — | (230,000 | ) | — | ||||||||||
Acquisition of patents | — | — | (4,500 | ) | (20,000 | ) | |||||||||
Long term investments | (2,000 | ) | — | (2,000 | ) | — | |||||||||
Proceeds from noncontrolling interests | — | 1,276 | — | 2,551 | |||||||||||
Dividends paid | (6,923 | ) | (7,232 | ) | (13,991 | ) | (14,665 | ) | |||||||
Share repurchases | (18,596 | ) | (19,841 | ) | (58,995 | ) | (70,572 | ) | |||||||
Proceeds from other financing activities | — | 4,500 | — | 4,500 | |||||||||||
Proceeds from issuance of senior convertible 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 | 228 | 26 | 228 | 26 | |||||||||||
Unrealized gain on short-term investments | 39 | 21 | 415 | 16 | |||||||||||
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS | $ | 155,204 | $ | (3,586 | ) | $ | (119,810 | ) | $ | 203,667 |
JUNE 30, 2016 | DECEMBER 31, 2015 | ||||||
ASSETS | |||||||
Cash & short-term investments | $ | 813,898 | $ | 933,708 | |||
Accounts receivable | 104,181 | 53,868 | |||||
Other current assets | 48,402 | 23,391 | |||||
Property & equipment and patents (net) | 286,434 | 289,727 | |||||
Other long-term assets (net) | 216,796 | 173,791 | |||||
TOTAL ASSETS | $ | 1,469,711 | $ | 1,474,485 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current portion of long-term debt | $ | — | $ | 227,174 | |||
Accounts payable, accrued liabilities, taxes payable & dividends payable | 62,035 | 66,570 | |||||
Current deferred revenue, including customer advances | 309,340 | 106,229 | |||||
Long-term deferred revenue | 298,675 | 289,039 | |||||
Long-term debt & other long-term liabilities | 276,503 | 263,578 | |||||
TOTAL LIABILITIES | 946,553 | 952,590 | |||||
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY | 513,667 | 510,519 | |||||
Noncontrolling interest | 9,491 | 11,376 | |||||
TOTAL EQUITY | 523,158 | 521,895 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,469,711 | $ | 1,474,485 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net cash provided by operating activities | $ | 191,434 | $ | 25,295 | $ | 207,667 | $ | 27,066 | ||||||||
Purchases of property, equipment, & technology licenses | (672 | ) | (491 | ) | (2,266 | ) | (1,329 | ) | ||||||||
Capitalized patent costs | (8,306 | ) | (7,764 | ) | (16,368 | ) | (16,191 | ) | ||||||||
Free cash flow | $ | 182,456 | $ | 17,040 | $ | 189,033 | $ | 9,546 |
CONTACT: | InterDigital, Inc.: |
Patrick Van de Wille | |
patrick.vandewille@interdigital.com | |
+1 (858) 210-4814 |