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 February 23, 2017. |
INTERDIGITAL, INC. |
By: /s/ Jannie K. Lau |
Jannie K. Lau |
Executive Vice President, |
General Counsel and Secretary |
• | Fourth quarter 2016 total revenue was $273.9 million, compared to $112.1 million in fourth quarter 2015. The $161.8 million increase in total revenue was primarily attributable to a license agreement signed during the quarter. Primarily as a result of that agreement, past patent royalties totaled $180.3 million. |
• | Fourth quarter 2016 recurring revenue was $93.6 million, consisting of current patent royalties and current technology solutions revenue, and was relatively flat compared to fourth quarter 2015. |
• | Operating expenses were $64.7 million, a 10% increase compared to $58.8 million in fourth quarter 2015, primarily attributable to higher incentive-based performance compensation and patent amortization, and due diligence costs. Intellectual property enforcement expenses were $3.5 million, a 30% decrease compared to $5.1 million in fourth quarter 2015. |
• | Net income1 was $136.5 million, or $3.85 per diluted share, compared to $33.0 million, or $0.92 per diluted share, in fourth quarter 2015. |
• | Full year 2016 total revenue was $665.9 million compared to $441.4 million in 2015, a 51% increase. This reflected an increase in past sales from $68.7 million in 2015 to $309.7 million in 2016, offset by slightly lower recurring revenue in 2016. |
• | Recurring revenue was $356.2 million in 2016, representing a decrease of 4% compared to $372.8 million in 2015. The decrease was primarily attributable to lower per-unit royalty revenue. |
• | 2016 operating expenses were $228.5 million, compared to $232.9 million in 2015. Intellectual property enforcement and non-patent litigation expenses were $16.5 million, a 49% decrease compared to $32.7 million in 2015. |
• | Net income was $309.0 million, or $8.78 per diluted share, compared to net income of $119.2 million, or $3.27 per diluted share, in 2015. |
• | During 2016, the company recorded $430.8 million of cash provided by operating activities, compared to $114.5 million in 2015. The company generated $392.2 million and $81.0 million of free cash flow2 in 2016 and 2015, respectively. These increases were primarily the result of new patent license agreements. |
• | In fourth quarter 2016, the company recorded $233.3 million of cash provided by operating activities, compared to $86.8 million in 2015. The company generated $222.5 million and $79.2 million of free cash flow in fourth quarter 2016 and fourth quarter 2015, respectively. These increases were primarily the result of new patent license agreements. |
• | During fourth quarter 2016, the company acquired Hillcrest Laboratories, Inc., a pioneer in sensor processing technology, for approximately $48.0 million in cash, net of $0.4 million cash acquired. |
• | The company's fourth quarter 2016 effective tax rate was approximately 34.0% compared to 31.1% during fourth quarter 2015 based on the statutory federal tax rate net of discrete federal and state taxes. |
• | Ending cash and short-term investments totaled $952.8 million. |
• | The $4.3 million decrease in operating expenses was primarily attributable to the $16.1 million decrease in intellectual property enforcement and non-patent litigation and a $5.7 million decrease in commercial initiatives expense. These decreases were partially offset by a $9.3 million increase in performance-based compensation, driven by increased accrual rates as a result of new patent license agreements signed during 2016. Additionally, depreciation and amortization increased $4.8 million due to the growth of our patent portfolio. |
• | During 2016, the company repurchased 1.3 million shares of common stock for $64.7 million. |
• | The company's 2016 effective tax rate was approximately 27.7% as compared to 35.7% in 2015, based on the statutory federal tax rate net of discrete federal and state taxes. The decrease in the effective tax rate was primarily attributable to the net benefit of including a domestic production activities deduction for the current year and the benefit recorded for amending prior returns to claim the deduction, neither of which were included in the prior year. |
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
REVENUES: | |||||||||||||||
Per-unit royalty revenue | $ | 14,031 | $ | 59,566 | $ | 168,050 | $ | 234,836 | |||||||
Fixed fee amortized royalty revenue | 73,678 | 31,718 | 177,614 | 131,837 | |||||||||||
Current patent royalties | 87,709 | 91,284 | 345,664 | 366,673 | |||||||||||
Past patent royalties | 180,280 | 16,720 | 309,696 | 65,814 | |||||||||||
Total patent licensing royalties | 267,989 | 108,004 | 655,360 | 432,487 | |||||||||||
Current technology solutions revenue | 5,879 | 1,326 | 10,494 | 6,096 | |||||||||||
Past technology solutions revenue | — | 2,768 | — | 2,852 | |||||||||||
$ | 273,868 | $ | 112,098 | $ | 665,854 | $ | 441,435 | ||||||||
OPERATING EXPENSES: | |||||||||||||||
Patent administration and licensing | 31,943 | 29,201 | 113,544 | 120,401 | |||||||||||
Development | 18,295 | 19,767 | 68,733 | 72,702 | |||||||||||
Selling, general and administrative | 14,481 | 9,790 | 46,271 | 39,783 | |||||||||||
64,719 | 58,758 | 228,548 | 232,886 | ||||||||||||
Income from operations | 209,149 | 53,340 | 437,306 | 208,549 | |||||||||||
OTHER EXPENSE (NET) | (3,394 | ) | (6,444 | ) | (15,035 | ) | (27,534 | ) | |||||||
Income before income taxes | 205,755 | 46,896 | 422,271 | 181,015 | |||||||||||
INCOME TAX PROVISION | (69,978 | ) | (14,577 | ) | (116,791 | ) | (64,621 | ) | |||||||
NET INCOME | $ | 135,777 | $ | 32,319 | $ | 305,480 | $ | 116,394 | |||||||
Net loss attributable to noncontrolling interest | (693 | ) | (719 | ) | (3,521 | ) | (2,831 | ) | |||||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. | $ | 136,470 | $ | 33,038 | $ | 309,001 | $ | 119,225 | |||||||
NET INCOME PER COMMON SHARE — BASIC | $ | 3.98 | $ | 0.93 | $ | 8.95 | $ | 3.31 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | 34,286 | 35,429 | 34,526 | 36,048 | |||||||||||
NET INCOME PER COMMON SHARE — DILUTED | $ | 3.85 | $ | 0.92 | $ | 8.78 | $ | 3.27 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED | 35,487 | 35,887 | 35,189 | 36,463 | |||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.30 | $ | 0.20 | $ | 1.00 | $ | 0.80 |
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Income before income taxes | 205,755 | $ | 46,896 | $ | 422,271 | $ | 181,015 | ||||||||
Taxes paid | (50,009 | ) | (41,947 | ) | (108,635 | ) | (85,780 | ) | |||||||
Non-cash expenses | 23,316 | 23,986 | 89,845 | 83,999 | |||||||||||
Increase in deferred revenue | 202,912 | 22,910 | 527,034 | 113,962 | |||||||||||
Deferred revenue recognized | (79,209 | ) | (37,396 | ) | (321,313 | ) | (163,354 | ) | |||||||
(Decrease) increase in operating working capital, deferred charges and other | (69,483 | ) | 72,328 | (178,424 | ) | (15,343 | ) | ||||||||
Capital spending and capitalized patent costs | (10,789 | ) | (7,625 | ) | (38,540 | ) | (33,466 | ) | |||||||
FREE CASH FLOW | 222,493 | 79,152 | 392,238 | 81,033 | |||||||||||
Tax benefit from share-based compensation | 625 | 331 | 625 | 2,457 | |||||||||||
Payments on long-term debt | — | — | (230,000 | ) | — | ||||||||||
Acquisition of patents | (100 | ) | — | (4,900 | ) | (20,000 | ) | ||||||||
Long term investments | — | (6,029 | ) | (2,000 | ) | (12,623 | ) | ||||||||
Proceeds from noncontrolling interests | 6,804 | 6,808 | 6,804 | 9,358 | |||||||||||
Dividends paid | (10,286 | ) | (7,093 | ) | (31,135 | ) | (28,937 | ) | |||||||
Share repurchases | — | (7,358 | ) | (64,685 | ) | (96,410 | ) | ||||||||
Proceeds from other financing activities | — | — | — | 4,500 | |||||||||||
Acquisition of business, net of cash acquired | (48,000 | ) | — | (48,000 | ) | — | |||||||||
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 | 183 | 17 | 485 | 46 | |||||||||||
Unrealized (loss) gain on short-term investments | (507 | ) | 436 | (379 | ) | 254 | |||||||||
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS | $ | 171,212 | $ | 66,264 | $ | 19,053 | $ | 229,780 |
DECEMBER 31, 2016 | DECEMBER 31, 2015 | ||||||
ASSETS | |||||||
Cash & short-term investments | $ | 952,761 | $ | 933,708 | |||
Accounts receivable | 228,464 | 53,868 | |||||
Other current assets | 39,894 | 23,391 | |||||
Property & equipment and patents (net) | 323,394 | 289,727 | |||||
Other long-term assets (net) | 183,340 | 173,791 | |||||
TOTAL ASSETS | $ | 1,727,853 | $ | 1,474,485 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current portion of long-term debt | $ | — | $ | 227,174 | |||
Accounts payable, accrued liabilities, taxes payable & dividends payable | 65,288 | 66,570 | |||||
Current deferred revenue, including customer advances | 360,192 | 106,229 | |||||
Long-term deferred revenue | 261,013 | 289,039 | |||||
Long-term debt & other long-term liabilities | 286,992 | 263,578 | |||||
TOTAL LIABILITIES | 973,485 | 952,590 | |||||
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY | 739,709 | 510,519 | |||||
Noncontrolling interest | 14,659 | 11,376 | |||||
TOTAL EQUITY | 754,368 | 521,895 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,727,853 | $ | 1,474,485 |
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net cash provided by operating activities | $ | 233,282 | $ | 86,777 | $ | 430,778 | $ | 114,499 | ||||||||
Purchases of property, equipment, & technology licenses | (2,405 | ) | (1,865 | ) | (5,882 | ) | (3,700 | ) | ||||||||
Capitalized patent costs | (8,384 | ) | (5,760 | ) | (32,658 | ) | (29,766 | ) | ||||||||
Free cash flow | $ | 222,493 | $ | 79,152 | $ | 392,238 | $ | 81,033 |
CONTACT: | InterDigital, Inc.: |
Patrick Van de Wille | |
patrick.vandewille@interdigital.com | |
+1 (858) 210-4814 |