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. |
INTERDIGITAL, INC. |
By: /s/ Jannie K. Lau |
Jannie K. Lau |
Executive Vice President, |
General Counsel and Secretary |
• | Recurring revenue grew 5% to $88.5 million, compared to $84.3 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. |
• | Third quarter 2017 total revenue was $97.3 million, compared to $208.3 million in third quarter 2016. Third quarter 2016 included $124.0 million of past patent royalties, as compared to $8.8 million in third quarter 2017. |
• | Third quarter 2017 operating expenses were $56.5 million, compared to $51.6 million in third quarter 2016. The increase in operating expenses was primarily due to a $2.7 million increase in costs associated with commercial initiatives and a $1.3 million increase in depreciation and amortization, both of which were primarily attributable to the acquisition of Hillcrest Labs during fourth quarter 2016. |
• | Fixed-fee amortized royalties constituted 88% of company's current patent royalties in third quarter 2017, compared to 56% in third quarter 2016. |
• | Net income1 was $35.5 million, or $1.00 per diluted share, compared to $104.5 million, or $2.99 per diluted share, in third quarter 2016. |
• | The company's third quarter 2017 effective tax rate was 10.2% compared to 32.3% during third quarter 2016. The change in effective tax rate was attributable to a discrete benefit of $9.1 million primarily related to the reversal of a previously recorded tax reserve. |
• | In third quarter 2017, the company recorded $104.7 million of cash provided by operating activities, compared to $10.1 million of cash used in third quarter 2016. The company generated $94.9 million of free cash flow2 in third quarter 2017, compared to $19.2 million of free cash flow used in third quarter 2016. These changes were primarily due to the timing of cash receipts under fixed-fee agreements. Ending cash and short-term investments totaled $967.2 million. |
• | On September 14, 2017, the company announced an increase in its quarterly cash dividend from $0.30 to $0.35 per share ($1.40 per share on an annual basis), as well as a $100 million increase to its existing stock repurchase program. |
• | On October 24, 2017, InterDigital received notice of a favorable decision from the Taiwan Fair Trade Commission, stating that the Commission did not find that InterDigital had violated Taiwan’s Fair Trade Act and has closed the investigation that was initiated in 2013. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
REVENUES: | |||||||||||||||
Per-unit royalty revenue | $ | 10,081 | $ | 35,804 | $ | 37,338 | $ | 154,018 | |||||||
Fixed fee amortized royalty revenue | 73,653 | 45,740 | 220,083 | 103,936 | |||||||||||
Current patent royalties | 83,734 | 81,544 | 257,421 | 257,954 | |||||||||||
Past patent royalties | 8,832 | 123,973 | 56,692 | 129,417 | |||||||||||
Total patent licensing royalties | 92,566 | 205,517 | 314,113 | 387,371 | |||||||||||
Current technology solutions revenue | 4,759 | 2,790 | 13,521 | 4,615 | |||||||||||
$ | 97,325 | $ | 208,307 | $ | 327,634 | $ | 391,986 | ||||||||
OPERATING EXPENSES: | |||||||||||||||
Patent administration and licensing | 28,673 | 26,149 | 83,559 | 81,601 | |||||||||||
Development | 15,924 | 15,560 | 52,228 | 50,438 | |||||||||||
Selling, general and administrative | 11,853 | 9,880 | 36,056 | 31,790 | |||||||||||
56,450 | 51,589 | 171,843 | 163,829 | ||||||||||||
Income from operations | 40,875 | 156,718 | 155,791 | 228,157 | |||||||||||
OTHER EXPENSE (NET) | (2,187 | ) | (3,798 | ) | (7,331 | ) | (11,641 | ) | |||||||
Income before income taxes | 38,688 | 152,920 | 148,460 | 216,516 | |||||||||||
INCOME TAX PROVISION | (3,963 | ) | (49,397 | ) | (29,413 | ) | (46,813 | ) | |||||||
NET INCOME | $ | 34,725 | $ | 103,523 | $ | 119,047 | $ | 169,703 | |||||||
Net loss attributable to noncontrolling interest | (811 | ) | (943 | ) | (2,744 | ) | (2,828 | ) | |||||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. | $ | 35,536 | $ | 104,466 | $ | 121,791 | $ | 172,531 | |||||||
NET INCOME PER COMMON SHARE — BASIC | $ | 1.02 | $ | 3.05 | $ | 3.52 | $ | 4.99 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | 34,709 | 34,280 | 34,589 | 34,607 | |||||||||||
NET INCOME PER COMMON SHARE — DILUTED | $ | 1.00 | $ | 2.99 | $ | 3.40 | $ | 4.92 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED | 35,388 | 34,953 | 35,865 | 35,091 | |||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.35 | $ | 0.30 | $ | 0.95 | $ | 0.70 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income before income taxes | $ | 38,688 | $ | 152,920 | $ | 148,460 | $ | 216,516 | |||||||
Taxes paid | (15,063 | ) | (6,341 | ) | (29,173 | ) | (58,626 | ) | |||||||
Non-cash expenses | 21,772 | 21,048 | 66,463 | 66,529 | |||||||||||
Increase in deferred revenue | 142,610 | 41,952 | 330,387 | 324,122 | |||||||||||
Deferred revenue recognized | (84,594 | ) | (172,681 | ) | (240,331 | ) | (242,104 | ) | |||||||
Increase (decrease) in operating working capital, deferred charges and other | 1,336 | (47,026 | ) | (177,465 | ) | (105,573 | ) | ||||||||
Capital spending and capitalized patent costs | (9,872 | ) | (9,117 | ) | (27,248 | ) | (27,751 | ) | |||||||
FREE CASH FLOW | 94,877 | (19,245 | ) | 71,093 | 173,113 | ||||||||||
Payments on long-term debt | — | — | — | (230,000 | ) | ||||||||||
Long-term investments | (2,500 | ) | — | (3,201 | ) | (2,000 | ) | ||||||||
Acquisition of patents | — | (300 | ) | — | (4,800 | ) | |||||||||
Dividends paid | (10,413 | ) | (6,858 | ) | (31,107 | ) | (20,849 | ) | |||||||
Taxes withheld upon vesting of restricted stock units | (46 | ) | (43 | ) | (22,236 | ) | (3,368 | ) | |||||||
Share repurchases | — | (5,690 | ) | — | (64,685 | ) | |||||||||
Net proceeds from exercise of stock options | — | 74 | 82 | 302 | |||||||||||
Unrealized (loss) gain on short-term investments | (93 | ) | (287 | ) | (180 | ) | 128 | ||||||||
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS | $ | 81,825 | $ | (32,349 | ) | $ | 14,451 | $ | (152,159 | ) |
SEPTEMBER 30, 2017 | DECEMBER 31, 2016 | ||||||
ASSETS | |||||||
Cash & short-term investments | $ | 967,212 | $ | 952,761 | |||
Accounts receivable (net) | 400,126 | 228,464 | |||||
Other current assets | 52,966 | 39,894 | |||||
Property & equipment and patents (net) | 321,359 | 323,394 | |||||
Other long-term assets (net) | 194,459 | 183,340 | |||||
TOTAL ASSETS | $ | 1,936,122 | $ | 1,727,853 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Accounts payable, accrued liabilities, taxes payable & dividends payable | $ | 89,427 | $ | 65,288 | |||
Current deferred revenue | 351,012 | 360,192 | |||||
Long-term deferred revenue | 373,049 | 261,013 | |||||
Long-term debt & other long-term liabilities | 290,618 | 286,992 | |||||
TOTAL LIABILITIES | 1,104,106 | 973,485 | |||||
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY | 820,101 | 739,709 | |||||
Noncontrolling interest | 11,915 | 14,659 | |||||
TOTAL EQUITY | 832,016 | 754,368 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,936,122 | $ | 1,727,853 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net cash provided by (used in) operating activities | $ | 104,749 | $ | (10,128 | ) | $ | 98,341 | $ | 200,864 | |||||||
Purchases of property, equipment, & technology licenses | (117 | ) | (1,211 | ) | (942 | ) | (3,477 | ) | ||||||||
Capitalized patent costs | (9,755 | ) | (7,906 | ) | (26,306 | ) | (24,274 | ) | ||||||||
Free cash flow | $ | 94,877 | $ | (19,245 | ) | $ | 71,093 | $ | 173,113 |
CONTACT: | InterDigital, Inc.: |
Patrick Van de Wille | |
patrick.vandewille@interdigital.com | |
+1 (858) 210-4814 |