KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--
InterDigital, Inc. (NASDAQ:IDCC) today announced results for the first
quarter ended March 31, 2009.
Highlights for first quarter 2009:
-- Revenue of $70.6 million, an increase of 26 percent over first quarter
2008;
-- Pro forma net income of $15.4 million, or $0.34 per diluted share,
excluding repositioning charge, compared to net income of $7.3 million,
or $0.15 per diluted share, in first quarter 2008;
-- Reported GAAP net loss of $8.7 million, or $0.20 per diluted share,
which includes a repositioning charge of $37.1 million;
-- Free cash flow1 of $43.1 million; and
-- Ending cash and short-term investments totaling $185.9 million.
In addition, InterDigital(R) provided the following guidance
for second quarter 2009:
-- Recurring revenues from existing agreements in the range of $72.0
million to $75.0 million, an increase of $1.4 million to $4.4 million
over first quarter 2009; and
-- Development expense for second quarter 2009 in the range of $14.0
million to $15.0 million, a decrease of approximately $13 million (or
nearly 50 percent) compared to the $27.6 million reported in first
quarter 2009.
William J. Merritt, InterDigital's President and Chief Executive
Officer, commented, "The first quarter of 2009 represented a very solid
start to the year. The contribution of our new 2G/3G agreement with
Samsung has enhanced our top line, earnings and free cash flow. This
strong financial position will allow us to continue to pursue bringing
new technologies to market and to enhance shareholder value through
share repurchases as we have done in the past. Excluding the
repositioning charge, our profitability and free cash flow continue to
be very strong, reflecting the strength of our licensing programs and
our focus on managing costs appropriately."
"Looking ahead, our recent decision to realign our business focus will
drive higher levels of profitability and further enhance our position as
a key innovator in a segment that is playing an ever broadening role in
the lives of consumers, " continued Mr. Merritt. "Advanced research and
development has always been a core competency of InterDigital, and the
increasing needs of users present a tremendous opportunity for us to
create the solutions that will make true wireless ubiquity a reality."
First Quarter Summary
Pro forma net income, excluding the repositioning charge, totaled $15.4
million, or $0.34 per diluted share, in first quarter 2009, compared to
net income of $7.3 million, or $0.15 per diluted share, in first quarter
2008. Including the repositioning charge, the company reported a loss of
$8.7 million, or $0.20 per share, in first quarter 2009.
Total revenue in first quarter 2009 increased to $70.6 million from
$56.0 million in first quarter 2008, primarily the result of the license
agreement signed in January 2009 with Samsung, which contributed $21.4
million in patent license royalty revenue to first quarter 2009. This
increase was partially offset by a net decline in per-unit licensees'
royalties due to difficult market conditions and the loss of
approximately $1.5 million of revenue from a licensee who exited the
handset business. Technology solution revenue of $1.3 million decreased
compared to $2.2 million reported in first quarter 2008. Licensees that
accounted for ten percent or more of the $70.6 million of patent license
royalty and technology solutions revenue were Samsung (30%), LG (20%)
and Sharp (11%).
Excluding a $37.1 million repositioning charge in first quarter 2009,
operating expenses increased $2.1 million to $47.2 million in first
quarter 2009. The increase is primarily attributable to a $4.4 million
year-over-year increase in development expense associated with
interoperability testing and precertification of our SlimChip(TM)
modem platforms. This increase is partially offset by a $4.3 million
decrease in patent arbitration and litigation expense, including an
$11.2 million decrease in these costs offset by a $6.9 million insurance
reimbursement recognized in first quarter 2008. Additionally, first
quarter 2008 included a credit of $1.2 million associated with a
reduction of a previously established arbitration and contingency
obligation.
Net interest and investment income for first quarter 2009 totaled $0.8
million, an increase over $0.4 million in first quarter 2008. First
quarter 2008 included a $0.7 million investment write-down. The increase
also reflected a $0.6 million credit to adjust accrued interest in
connection with the company's 2009 settlement of litigation with
Federal, partly offset by lower rates of return in first quarter 2009
compared to 2008.
The company's first quarter 2009 effective tax rate was approximately 33
percent. This effective rate is expected to rise to approximately 35
percent over the remainder of 2009. The company's income tax provision
in first quarter 2008 reflected a 35 percent effective tax rate.
Repositioning
On March 30, 2009, the company announced a repositioning that includes
the expansion of the technology development and licensing business, the
cessation of further product development of the SlimChip modem
technology, and efforts to monetize the technology investment through IP
licensing and technology sales. In connection with the repositioning,
the company incurred a charge of $37.1 million during first quarter
2009. Of this amount, approximately $30.6 million represents non-cash
asset impairments that relate to assets used in the product and product
development, including $21.2 million of acquired intangible assets and
$9.4 million of property, equipment and other assets.
In addition, the repositioning resulted in a reduction in force of
approximately 100 employees across the company's three locations, the
majority of which were terminated effective April 3, 2009. Approximately
$6.5 million of the repositioning charge represents cash charges
associated with severance and contract termination costs.
Near-Term Outlook
Scott McQuilkin, Chief Financial Officer, commented, "In second quarter
2009, we expect to report recurring revenues from existing agreements in
the range of $72.0 million to $75.0 million, an increase of $1.4 million
to $4.4 million over first quarter 2009. The expected increase over
first quarter 2009 levels reflects the recognition of a full quarter of
revenue under our new patent license agreement with Samsung and an
expected 60 percent to 80 percent increase in our technology solutions
revenue resulting from increased royalties from our SlimChip IP, offset
by a decrease in per-unit royalties from existing licensees in the range
of 5 percent to 10 percent. This range does not include any potential
impact from new agreements that might be signed during second quarter
2009 or additional royalties identified in regularly conducted audits."
"In addition, in March 2009, we announced our intention to expand
certain technology development and licensing activities and to realign
our SlimChip business to pursue IP licensing and technology sales,"
continued Mr. McQuilkin. "With the repositioning of the product business
largely in place, we expect our development expense for second quarter
2009 to decrease to a range of $14.0 million to $15.0 million compared
to the $27.6 million reported in first quarter 2009. These expenses
might increase modestly in the long term as we identify new areas of
technology development to pursue. In addition, we currently estimate
that we will incur additional repositioning costs of approximately $1.0
million to $2.0 million in second quarter 2009, but the timing and
amount of the additional charge will be dependent upon our process to
wind-down activities related to our SlimChip product development."
About InterDigital
InterDigital designs, develops and provides advanced wireless
technologies and products that drive voice and data communications.
InterDigital is a leading contributor to the global wireless standards
and holds a strong portfolio of patented technologies, which it licenses
to manufacturers of 2G, 2.5G, 3G, and 802 products worldwide.
InterDigital is a registered trademark and SlimChip is a trademark of
InterDigital, Inc.
For more information, visit: www.interdigital.com
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 the information under the heading
"Near-Term Outlook" and other information regarding our current beliefs,
plans and expectations, including, without limitation: (i) the company's
second quarter 2009 recurring revenue; (ii) increases in recurring
patent license royalties; (iii) the company's development expense in
second quarter 2009 and beyond; (iv) the timing and amount of our
remaining repositioning costs; and (v) our estimated second quarter 2009
effective book tax rate. Words such as "approximately," "continue to,"
"could," "estimate," "expect," "intention," "potential," "might," "will"
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) changes in the market share and
sales performance of our primary licensees, delays in product shipments
of our licensees and any delay in receipt of quarterly royalty reports
from our licensees; (ii) unanticipated development expenses and the
timing of such expenses; (iii) the final resolution of contract
terminations in connection with the repositioning of our SlimChip
product business; (iv) changes to the number of employees severed or
assets retained in connection with the repositioning of our SlimChip
product business; (v) timely receipt and final reviews of licensee
royalty reports and related matters; and (vi) changes in our
expectations of the amount and composition of full-year taxable income,
Congressional approval of the 2009 U.S. federal research and
experimental credit, changes in foreign and domestic tax laws or
treatises or changes in our tax planning strategies. 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.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
(unaudited)
For the Three Months Ended
March 31,
2009 2008
REVENUES $ 70,561 $ 56,027
OPERATING EXPENSES:
Sales and marketing 2,310 2,388
General and administrative 6,553 5,675
Patents administration and licensing 10,844 15,051
Development 27,554 23,202
Repositioning 37,063 -
Arbitration and litigation contingencies - (1,200 )
84,324 45,116
(Loss) income from operations (13,763 ) 10,911
OTHER INCOME:
Interest and investment income, net 829 438
(Loss) income before income taxes (12,934 ) 11,349
INCOME TAX BENEFIT (PROVISION) 4,248 (4,032 )
NET (LOSS) INCOME APPLICABLE TO COMMON SHAREHOLDERS $ (8,686 ) $ 7,317
NET (LOSS) INCOME PER COMMON SHARE - BASIC $ (0.20 ) $ 0.16
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 43,501 46,426
- BASIC
NET (LOSS) INCOME PER COMMON SHARE - DILUTED $ (0.20 ) $ 0.15
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 43,501 47,201
- DILUTED
SUMMARY CASH FLOW
(Dollars in thousands)
(unaudited)
For the Three Months Ended
March 31,
2009 2008
Net (loss) income before income taxes $ (12,934 ) $ 11,349
Taxes paid (16,500 ) (15,675 )
Depreciation, amortization, share based 41,486 9,112
compensation, and asset impairment
Increase in deferred revenue 300,000 30,465
Deferred revenue recognized (52,819 ) (30,284 )
Increase in operating working capital, deferred (208,202 ) 81,377
charges and other
Capital spending, technology licensing & patent (7,906 ) (8,644 )
additions
FREE CASH FLOW 43,125 77,700
Tax benefit from share-based compensation 652 370
Debt decrease (338 ) (365 )
Repurchase of common stock - (16,105 )
Proceeds from exercise of stock options 873 748
Unrealized (loss) gain on short term investments (72 ) 330
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS $ 44,240 $ 62,678
SUMMARY CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(unaudited)
March 31, 2009 December 31, 2008
Assets
Cash & short-term investments $ 185,900 $ 141,660
Accounts receivable 224,713 33,892
Current deferred tax assets 70,355 49,002
Other current assets 15,370 16,467
Property & equipment and Patents (net) 117,645 123,782
Long-term deferred tax assets and non-current 49,620 40,965
assets
TOTAL ASSETS $ 663,603 $ 405,768
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 1,628 $ 1,608
Accounts payable & accrued liabilities 61,660 46,283
Current deferred revenue 177,748 78,646
Long-term deferred revenue 329,135 181,056
Long-term debt & long-term liabilities 11,278 10,515
TOTAL LIABILITIES 581,449 318,108
SHAREHOLDERS' EQUITY 82,154 87,660
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 663,603 $ 405,768
The following pro forma statements of financial results exclude the
expense associated with the repositioning charge and the related tax
benefit. The company has provided these pro forma figures here and
elsewhere in this press release. Management regards the repositioning
charge and related tax benefit as a non-recurring item not indicative of
operating results for the period and believes that investors might share
this viewpoint.
PRO FORMA SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands except per share data)
(unaudited)
For the Three Months Ended
March 31, 2009
Actual Adjustments Pro Forma
REVENUES $ 70,561 $ 70,561
OPERATING EXPENSES:
Sales and marketing 2,310 2,310
General and administrative 6,553 6,553
Patents administration and licensing 10,844 10,844
Development 27,554 27,554
Repositioning 37,063 (37,063 ) -
Arbitration and litigation contingencies - -
84,324 (37,063 ) 47,261
(Loss) income from operations (13,763 ) 37,063 23,300
OTHER INCOME:
Interest and investment income, net 829 829
(Loss) income before income taxes (12,934 ) 37,063 24,129
INCOME TAX BENEFIT (PROVISION) 4,248 (13,009 ) (8,761 )
NET (LOSS) INCOME APPLICABLE TO COMMON $ (8,686 ) $ 24,054 $ 15,368
SHAREHOLDERS
NET (LOSS) INCOME PER COMMON SHARE - BASIC $ (0.20 ) $ 0.35
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 43,501 43,501
OUTSTANDING - BASIC
NET (LOSS) INCOME PER COMMON SHARE - $ (0.20 ) $ 0.34
DILUTED
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 43,501 44,460
OUTSTANDING - DILUTED
This press release includes a summary cash flow statement that results
in change in both the company's cash and short-term investment balances.
In the summary cash flow statement and throughout this press release, we
refer to free cash flow. The table below presents a reconciliation of
this non-GAAP line item to net cash provided by operating activities,
the most directly comparable GAAP financial measure.
For the Three Months Ended
March 31,
2009 2008
Net cash provided by operating activities $ 51,031 $ 86,344
Purchases of property, equipment, & technology (1,588 ) (1,229 )
licenses
Patent additions (6,318 ) (7,415 )
Free cash flow $ 43,125 $ 77,700
1 Free 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 operating cash
flow less purchases of property and equipment, technology licenses,
investments in patents and unrealized (loss) gain on short-term
investments. InterDigital's computation of free cash flow may 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 GAAP results is provided at the end of this press release.
Source: InterDigital, Inc.
Contact: InterDigital, Inc.
Media Contact:
Jack Indekeu
+1 610-878-7800
jack.indekeu@interdigital.com
or
Investor Contact:
Janet Point
+1 610-878-7800
janet.point@interdigital.com