InterDigital, Inc. : InterDigital Announces First Quarter 2012 Financial Results
04/25/2012| 04:05pm US/Eastern
Recommend:
0
Company Signs Five New or Expanded License Agreements
Year-to-Date, all Covering LTE Technologies
InterDigital, Inc. (NASDAQ: IDCC) today announced results for the first
quarter ended March 31, 2012.
Highlights for first quarter 2012:
Revenue of $69.3 million
Net income of $10.9 million, or $0.24 per diluted share
Ending cash and short-term investments totaling $616.0 million
William J. Merritt, InterDigital's President and Chief Executive
Officer, commented, "We started 2012 with solid momentum in licensing by
signing five new or expanded license agreements, all of which include
coverage of LTE wireless technologies. We continue to drive the
licensing pipeline with other prospective licensees and press forward
with our ITC litigation against Nokia, LG, Huawei and ZTE as well. Based
on the strength of our patent portfolio and licensing program, we remain
confident in our ability to grow our revenue consistent with our
strategic plan."
"We also maintain our belief in the adoption of the technologies that we
have developed over the last five years," continued Merritt. "At the
Mobile World Congress, our vision of a 'network of networks' closely
aligned with the industry's vision of how to address network, device and
content challenges. This bodes well for additional licensing
opportunities for the company, as we believe the inventions we create
today will drive tomorrow's mobile devices, networks, and services
worldwide."
First Quarter 2012 Summary
Revenue in first quarter 2012 totaled $69.3 million, a 12 percent
decrease from $78.5 million in first quarter 2011. Patent licensing
royalties of $68.6 million in first quarter 2012 declined $8.4 million,
or 11 percent, from $77.0 million in first quarter 2011. Per-unit
royalties were $34.4 million in first quarter 2012, a decrease of $5.1
million, or 13 percent, from $39.5 million in first quarter 2011,
primarily due to lower royalties from a decline in sales by the
company's Japanese per-unit licensees. Fixed fee royalty revenue totaled
$33.7 million in first quarter 2012, a decline of $1.5 million, or 4
percent, over $35.2 million in first quarter 2011. Past sales of $0.5
million in first quarter 2012 related to a new patent license agreement
signed during the quarter. Additionally, technology solutions revenue
decreased to $0.7 million in first quarter 2012 from $1.5 million in
first quarter 2011, primarily due to lower royalties recognized in
connection with the company's SlimChip modem IP business. As of
March 31, 2012, the company has deferred $33.1 million, including $3.4
million in first quarter 2012, of disputed SlimChip modem IP royalties
pending the outcome of an ongoing arbitration. Licensees that accounted
for ten percent or more of first quarter 2012 total revenue were Samsung
Electronics Co., Ltd. ("Samsung") (37 percent), Research in Motion
Limited ("RIM") (17 percent) and HTC Corporation ("HTC") (11 percent).
The company's first quarter 2012 net income was $10.9 million, or $0.24
per diluted share, a decrease of 53 percent from $23.3 million, or $0.51
per diluted share, in first quarter 2011 due to lower revenue and higher
intellectual property enforcement and non-patent litigation costs.
First quarter 2012 operating expenses were $49.9 million, an increase of
$8.8 million from $41.1 million in first quarter 2011. This increase was
primarily due to increases in intellectual property enforcement and
non-patent litigation costs ($12.3 million in first quarter 2012 versus
$4.1 million in first quarter 2011), primarily due to costs associated
with the ITC patent infringement proceeding initiated in second half
2011. Not including intellectual property enforcement and non-patent
litigation costs, operating expenses increased $0.6 million or 1.4
percent.
First quarter 2012 net other expense of $2.7 million increased $1.8
million from $0.9 million in first quarter 2011. The increase primarily
resulted from the recognition of $3.7 million of interest expense
associated with the company's 2.50% Senior Convertible Notes due 2016
issued on April 4, 2011. First quarter 2011 included $1.3 million of
expense associated with investment impairments. In each period, the
above-noted expenses were partially offset by interest income, which
increased slightly in first quarter 2012 due to higher cash balances.
The company's first quarter 2012 effective tax rate was approximately 34
percent, compared to 36 percent for first quarter 2011. The decrease in
the effective tax rate was primarily driven by recognition of a tax
benefit in first quarter 2012 and non-deductible investment impairment
charges recognized in first quarter 2011.
In first quarter 2012, the company used $34.9 million in free cash flow1
compared to $12.8 million used in first quarter 2011. This
decrease in free cash flow is primarily related to lower cash receipts
in first quarter 2012. Additionally, during first quarter 2012, the
company returned capital to shareholders in the form of $25.3 million in
share repurchases and a $4.6 million dividend payment.
"We are pleased with the momentum of our licensing program and expect
positive revenue contributions from our five recently signed agreements
and any new agreements moving forward," commented Scott McQuilkin, Chief
Financial Officer. "Opportunities remain robust, and we continue to use
the strength of our balance sheet to pursue opportunities of strategic
interest as well as return capital to our shareholders. As of April
25th, we have repurchased approximately $75 million in shares under our
$100 million share repurchase authorization, and we have maintained our
regular quarterly dividends. In addition, we are actively marketing a
modest portion of our large patent portfolio to interested parties. We
will provide an update of our revenue expectations for second quarter
2012 after we receive and review the applicable patent license and
product sales royalty reports."
Conference Call Information
InterDigital® will host a conference call on Wednesday, April
25, 2012 at 6:00 p.m. Eastern Time to discuss its first quarter 2012
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 homepage. The company
encourages participants to take advantage of the Internet option.
For telephone access to the conference, call (888) 802-2225 within the
U.S. or (913) 312-1254 from outside the U.S. Please call by 5:50 p.m. ET
on April 25 and ask the operator for the InterDigital Financial Call.
An Internet replay of the conference call will be available on
InterDigital's web site in the Investor Relations section. In addition,
a telephone replay will be available from 9:00 p.m. ET April 25 through
9:00 a.m. ET April 30. To access the recorded replay, call (888)
203-1112 or (719) 457-0820 and use the replay code 7935044.
About InterDigital
InterDigital develops fundamental wireless technologies that are at the
core of mobile 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.
InterDigital is a registered trademark of InterDigital, Inc.
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
plans to continue to drive our licensing pipeline and press forward with
our ITC litigation against Nokia, LG, Huawei and ZTE; (ii) our continued
confidence in our ability to grow our revenue consistent with our
strategic plan, based on the strength of our patent portfolio and
licensing program; (iii) our continued belief in the adoption of the
technologies that we have developed over the last five years; (iv) our
belief that the close alignment of our vision of a network of networks
with the industry's vision at Mobile World Congress bodes well for
additional licensing opportunities for the company; (v) our belief that
the inventions we create today will drive tomorrow's mobile devices,
networks and services worldwide; (vi) our expectation of positive
revenue contributions from our five recently signed agreements and any
new agreements moving forward; (vii) our belief that opportunities
remain robust; (viii) our intention to continue to actively market a
modest portion of our large patent portfolio to interested parties and
(ix) our plans to provide an update of our revenue expectations for
second quarter 2012 after we receive and review the applicable patent
license and product sales royalty reports. Words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "forecast," "will,"
"continue to," 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) changes in the market share and sales
performance of our primary licensees, delays in product shipments of our
licensees and timely receipt and final reviews of quarterly royalty
reports from our licensees and related matters; (v) the failure of the
markets for our technologies to materialize to the extent or at the rate
that we expect; (vi) the resolution of current legal proceedings,
including any awards or judgments relating to such proceedings,
additional legal proceedings, changes in the schedules or costs
associated with legal proceedings or adverse rulings in such legal
proceedings; and (vii) changes or inaccuracies in market projections. 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
1Free 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 generally accepted accounting principles
("GAAP"). A detailed reconciliation of free cash flow to net cash used
in operating activities, the most directly comparable GAAP financial
measure, is provided at the end of this press release.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
(dollars in thousands except per share data)
(unaudited)
Three Months Ended March 31,
2012
2011
REVENUES:
Per-unit royalty revenue
$
34,446
$
39,450
Fixed fee amortized royalty revenue
33,681
35,201
Past sales
455
2,311
Technology solutions revenue
723
1,496
Total Revenue
69,305
78,458
OPERATING EXPENSES:
Patent administration and licensing
23,228
15,948
Development
17,489
17,424
Selling, general and administrative
9,183
7,780
49,900
41,152
Income from operations
19,405
37,306
OTHER EXPENSE
(2,734
)
(942
)
Income before income taxes
16,671
36,364
INCOME TAX PROVISION
(5,741
)
(13,025
)
NET INCOME
$
10,930
$
23,339
NET INCOME PER COMMON SHARE -- BASIC
$
0.24
$
0.52
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING -- BASIC
45,401
45,306
NET INCOME PER COMMON SHARE -- DILUTED
$
0.24
$
0.51
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING -- DILUTED
45,946
45,872
CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.10
$
0.10
SUMMARY CONSOLIDATED STATEMENTS OF CASH
FLOWS
(dollars in thousands)
(unaudited)
Three Months Ended March 31,
2012
2011
Net Income before income taxes
$
16,671
$
36,364
Taxes paid
(906
)
(3,048
)
Non-cash expenses
10,084
8,819
Increase in deferred revenue
17,718
17,338
Deferred revenue recognized
(56,865
)
(61,610
)
(Decrease) in operating working capital, deferred charges and other
(12,407
)
(3,070
)
Capital spending and patent additions
(9,158
)
(7,602
)
FREE CASH FLOW
(34,863
)
(12,809
)
Tax benefit from share-based compensation
1,468
564
Payments on long-term debt, including capital leases
In the summary consolidated statements of 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 used in operating activities, the most directly comparable GAAP
financial measure.
Three Months Ended
March 31,
2012
2011
Net cash used in operating activities
$
(25,705
)
$
(5,207
)
Purchases of property, equipment, & technology licenses
Recommend:
