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 July 27, 2017. |
INTERDIGITAL, INC. |
By: /s/ Jannie K. Lau |
Jannie K. Lau |
Executive Vice President, |
General Counsel and Secretary |
• | Second quarter 2017 total revenue was $135.8 million, compared to $75.9 million in second quarter 2016. The increase in total revenue includes past patent royalties related to a settlement agreement and release of claims with Microsoft during second quarter 2017. |
• | Recurring revenue grew 18% to $87.9 million, compared to $74.6 million in 2016, primarily driven by an increase in fixed-fee revenue due to new agreements entered into in second half 2016. Recurring revenue consists of current patent royalties and current technology solutions revenue. |
• | Second quarter 2017 operating expenses were $54.8 million, compared to $52.8 million in second quarter 2016. The slight increase in operating expenses was driven by the operations of Hillcrest Labs, acquired during fourth quarter 2016. |
• | Net income1 was $52.5 million, or $1.46 per diluted share, compared to $40.0 million, or $1.14 per diluted share, in second quarter 2016. |
• | The increase in operating expenses included a $2.1 million increase in costs associated with commercial initiatives, primarily Hillcrest Labs, as well as a $1.7 million increase in consulting services, primarily related to spending on development projects, as well as corporate initiatives including the implementation of a new enterprise resource planning system. These increases were partially offset by a $2.5 million decrease in intellectual property enforcement and non-patent litigation. |
• | The company's second quarter 2017 effective tax rate was a provision of 34.4% compared to a benefit of 74.4% during second quarter 2016. The change in effective tax rate was primarily attributable to the discrete impact of refund claims made during second quarter 2016. |
• | In second quarter 2017, the company recorded $19.4 million of cash provided by operating activities, compared to $191.4 million in second quarter 2016. The company used $10.1 million of free cash flow2 in second quarter 2017, compared to $182.4 million of free cash flow generated in second quarter 2016. These changes were primarily due to the timing of cash receipts under new fixed-fee agreements. Ending cash and short-term investments totaled $885.4 million. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
REVENUES: | |||||||||||||||
Per-unit royalty revenue | $ | 11,398 | $ | 44,525 | $ | 27,257 | $ | 118,214 | |||||||
Fixed fee amortized royalty revenue | 73,063 | 29,098 | 146,430 | 58,196 | |||||||||||
Current patent royalties | 84,461 | 73,623 | 173,687 | 176,410 | |||||||||||
Past patent royalties | 47,860 | 1,277 | 47,860 | 5,444 | |||||||||||
Total patent licensing royalties | 132,321 | 74,900 | 221,547 | 181,854 | |||||||||||
Current technology solutions revenue | 3,458 | 1,015 | 8,762 | 1,825 | |||||||||||
$ | 135,779 | $ | 75,915 | $ | 230,309 | $ | 183,679 | ||||||||
OPERATING EXPENSES: | |||||||||||||||
Patent administration and licensing | 25,479 | 28,285 | 54,886 | 55,452 | |||||||||||
Development | 17,783 | 14,609 | 36,304 | 34,878 | |||||||||||
Selling, general and administrative | 11,569 | 9,938 | 24,203 | 21,910 | |||||||||||
54,831 | 52,832 | 115,393 | 112,240 | ||||||||||||
Income from operations | 80,948 | 23,083 | 114,916 | 71,439 | |||||||||||
OTHER EXPENSE (NET) | (2,330 | ) | (706 | ) | (5,144 | ) | (7,843 | ) | |||||||
Income before income taxes | 78,618 | 22,377 | 109,772 | 63,596 | |||||||||||
INCOME TAX (PROVISION) BENEFIT | (27,074 | ) | 16,652 | (25,450 | ) | 2,584 | |||||||||
NET INCOME | $ | 51,544 | $ | 39,029 | $ | 84,322 | $ | 66,180 | |||||||
Net loss attributable to noncontrolling interest | (955 | ) | (965 | ) | (1,933 | ) | (1,885 | ) | |||||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. | $ | 52,499 | $ | 39,994 | $ | 86,255 | $ | 68,065 | |||||||
NET INCOME PER COMMON SHARE — BASIC | $ | 1.51 | $ | 1.16 | $ | 2.50 | $ | 1.96 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | 34,686 | 34,499 | 34,528 | 34,772 | |||||||||||
NET INCOME PER COMMON SHARE — DILUTED | $ | 1.46 | $ | 1.14 | $ | 2.39 | $ | 1.94 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED | 35,902 | 34,945 | 36,103 | 35,161 | |||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.30 | $ | 0.20 | $ | 0.60 | $ | 0.40 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income before income taxes | $ | 78,618 | $ | 22,377 | $ | 109,772 | $ | 63,596 | |||||||
Taxes paid | (11,120 | ) | (37,862 | ) | (14,110 | ) | (52,285 | ) | |||||||
Non-cash expenses | 21,645 | 20,096 | 44,691 | 45,481 | |||||||||||
Increase in deferred revenue | 2,777 | 201,730 | 187,777 | 282,170 | |||||||||||
Deferred revenue recognized | (76,816 | ) | (34,829 | ) | (155,737 | ) | (69,423 | ) | |||||||
Increase (decrease) in operating working capital, deferred charges and other | 4,343 | 19,842 | (178,801 | ) | (58,547 | ) | |||||||||
Capital spending and capitalized patent costs | (9,321 | ) | (8,978 | ) | (17,376 | ) | (18,634 | ) | |||||||
FREE CASH FLOW | 10,126 | 182,376 | (23,784 | ) | 192,358 | ||||||||||
Payments on long-term debt | — | — | — | (230,000 | ) | ||||||||||
Long-term investments | (200 | ) | (2,000 | ) | (701 | ) | (2,000 | ) | |||||||
Acquisition of patents | — | — | — | (4,500 | ) | ||||||||||
Dividends paid | (10,402 | ) | (6,923 | ) | (20,694 | ) | (13,991 | ) | |||||||
Taxes withheld upon vesting of restricted stock units | (235 | ) | 80 | (22,190 | ) | (3,325 | ) | ||||||||
Share repurchases | — | (18,596 | ) | — | (58,995 | ) | |||||||||
Net proceeds from exercise of stock options | — | 228 | 82 | 228 | |||||||||||
Unrealized (loss) gain on short-term investments | (42 | ) | 39 | (87 | ) | 415 | |||||||||
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS | $ | (753 | ) | $ | 155,204 | $ | (67,374 | ) | $ | (119,810 | ) |
JUNE 30, 2017 | DECEMBER 31, 2016 | ||||||
ASSETS | |||||||
Cash & short-term investments | $ | 885,387 | $ | 952,761 | |||
Accounts receivable (net) | 399,044 | 228,464 | |||||
Other current assets | 51,590 | 39,894 | |||||
Property & equipment and patents (net) | 313,271 | 323,394 | |||||
Other long-term assets (net) | 189,607 | 183,340 | |||||
TOTAL ASSETS | $ | 1,838,899 | $ | 1,727,853 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Accounts payable, accrued liabilities, taxes payable & dividends payable | $ | 84,802 | $ | 65,288 | |||
Current deferred revenue | 294,876 | 360,192 | |||||
Long-term deferred revenue | 358,369 | 261,013 | |||||
Long-term debt & other long-term liabilities | 295,196 | 286,992 | |||||
TOTAL LIABILITIES | 1,033,243 | 973,485 | |||||
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY | 792,930 | 739,709 | |||||
Noncontrolling interest | 12,726 | 14,659 | |||||
TOTAL EQUITY | 805,656 | 754,368 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,838,899 | $ | 1,727,853 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net cash provided by (used in) operating activities | $ | 19,447 | $ | 191,354 | $ | (6,408 | ) | $ | 210,992 | |||||||
Purchases of property, equipment, & technology licenses | (557 | ) | (672 | ) | (825 | ) | (2,266 | ) | ||||||||
Capitalized patent costs | (8,764 | ) | (8,306 | ) | (16,551 | ) | (16,368 | ) | ||||||||
Free cash flow | $ | 10,126 | $ | 182,376 | $ | (23,784 | ) | $ | 192,358 |
CONTACT: | InterDigital, Inc.: |
Patrick Van de Wille | |
patrick.vandewille@interdigital.com | |
+1 (858) 210-4814 |