KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--
InterDigital, Inc. (NASDAQ:IDCC) today announced results for the fourth
quarter and twelve months ended December 31, 2008.
Fourth Quarter 2008 Highlights:
-- Revenue of $58.7 million, including $51.4 million of recurring revenue
-- Net income of $3.8 million, or $0.09 per share
Full Year 2008 Highlights:
-- Revenue of $228.5 million, including $219.1 million of recurring revenue
-- Net income of $26.2 million, or $0.57 per diluted share
-- Free cash flow1 of $45.0 million
-- Repurchase of 3.8 million shares of common stock for $81.5 million
-- Ending cash and short-term investments totaling $141.7 million, or $3.08
per diluted share
William J. Merritt, President and Chief Executive Officer, stated,
"During 2008, we delivered solid financial results and achieved a number
of important milestones. We closed four new patent license agreements
including a significant 2G and 3G license agreement with Samsung, one of
the world's leading brands, which will deliver $400 million in cash over
the next 18 months. As of the end of 2008, nearly 50% of all 3G handsets
shipped worldwide are under license with InterDigital."
"In addition, we made excellent progress on our technology development,
both in support of our SlimChip(TM) family of mobile broadband modem
solutions and in the generation of new innovative wireless solutions
that help shape the wireless industry of the future. With regard to the
latter, at the Mobile World Congress in Barcelona, we demonstrated our
Media Independent Handover technology with support of British Telecom,
showing seamless handover between live 3G and WiFi networks for both
data and voice using commercially available handsets and servers adapted
with our MIH solutions."
"In 2008 we delivered on our promise of securing a high return on our
investments that we have made over the past few years. As a result, we
entered 2009 in the strongest financial position in our company's
history. We intend to leverage that strength by making additional
investments both organically and through external acquisitions in
technology development and future products that will drive additional
shareholder value," concluded Mr. Merritt.
Fourth Quarter Summary
The company's net income of $3.8 million, or $0.09 per fully diluted
share, in fourth quarter 2008 posted an increase compared to fourth
quarter 2007's net loss of $2.0 million or $0.04 per share.
Total revenue in fourth quarter 2008 increased to $58.7 million from
$54.9 million in fourth quarter 2007. This increase resulted from a $4.1
million increase in technology solutions revenue and a $3.8 million
increase in past infringement. These increases were partly offset by a
$4.0 million decrease in recurring patent license royalties, which was
driven by declining royalties from the company's Japanese licensees.
Fourth quarter 2008 revenue included $46.3 million of recurring patent
license royalties, $5.1 million of technology solution sales and $7.3
million primarily associated with a non-refundable prepayment made in a
prior period by a licensee that subsequently exited the handset
business. Licensees that accounted for 10 percent or more of the $51.4
million of recurring patent license royalties and technology solution
sales were LG (28%), Sharp Corporation of Japan (14%) and NEC
Corporation of Japan (10%).
Fourth quarter 2008 operating expenses of $53.9 million decreased from
$57.6 million in fourth quarter 2007. Fourth quarter 2007 included $7.8
million accrued expense associated with arbitration and litigation
contingencies. Patent administration and licensing expenses declined
$8.2 million year over year due to a lower level of arbitration and
litigation activity. Development expenses increased $8.0 million, most
of which related to a companywide charge of $9.4 million in fourth
quarter 2008 to adjust the accrual rate on a long-term performance based
cash incentive.
Net interest and investment income was $0.6 million in fourth quarter
2008, a decrease of $1.3 million from fourth quarter 2007 due to both
lower investment balances and lower investment yields.
The company's fourth quarter 2008 tax expense consisted of the statutory
federal tax rate plus an adjustment to record a research and development
credit for 2008 following the U.S. government's renewal of this credit.
The company's fourth quarter 2007 tax expense consisted of the statutory
federal tax rate plus an adjustment to increase the estimated value of
2007 research and development tax credits. The adjustments to the
company's 2008 and 2007 research and development credits are based on
the preliminary results of related tax studies and the 2007 amount
updates a prior estimate for the credit.
Twelve Months Summary
Net income for the full year 2008 was $26.2 million, or $0.57 per
diluted share. For the full year 2007, net income was $20.0 million, or
$0.40 per diluted share.
For full year 2008, total revenues were $228.5 million compared to
$234.2 million in 2007. Recurring patent licensing revenues decreased
$9.0 million to $207.1 million due to the absence of recurring 2G
revenue from Sony Ericsson, along with the softening market in Japan.
These decreases were partly offset by a $14.2 million increase from all
other new and existing licenses. Technology solutions revenue increased
to $12.0 million from $3.4 million in 2007 due to increased royalties
and license fees from the company's SlimChip modem IP.
Operating expenses were $191.9 million in 2008, a decrease of $19.3
million over 2007. This decrease is primarily related to a $28.3 million
decrease in litigation and arbitration contingencies that were first
accrued in 2007. Other operating expenses increased $9.0 million, driven
by a companywide charge of $9.4 million in fourth quarter 2008 to adjust
the accrual rate on a long-term performance based cash incentive.
Net interest and investment income was $3.4 million in 2008, a decrease
of $5.5 million from 2007, due to both lower investment balances and
lower investment yields.
The company's full year tax expense for both 2008 and 2007 consisted of
the statutory federal tax rate plus book-tax permanent differences
related to the company's research and development credits.
In 2008, the company generated $45.0 million of free cash flow. This
free cash flow was driven by $85.8 million cash flows from operations,
which includes patent license receipts from LG, net of source
withholding taxes, totaling $79.3 million, partially offset by estimated
federal tax payments and investments in product and patent related
initiatives. During 2008, the company utilized free cash flow and
existing cash balances to repurchase 3.8 million common shares at a cost
of $81.5 million.
First Quarter 2009 Outlook
Scott McQuilkin, Chief Financial Officer, commented, "In first quarter
2009, we expect to report recurring revenues from existing agreements in
the range of $69 million to $71 million. The expected increase of nearly
$20 million over fourth quarter 2008 levels reflects the recognition of
2 1/2 months of revenue under a new patent license agreement with Samsung
signed in January 2009, partly offset by the loss of $1.1 million of
fixed revenue amortization from a licensee who exited the handset
business. This range does not include any potential impact from
additional new agreements that may be signed during first quarter 2009
or additional royalties identified in audits regularly conducted by us."
"In addition, in late 2008, we noted that while we were pleased with the
progress of our modem product solutions, we understood the need to
evaluate a number of strategic options for that business given the
rapidly evolving landscape in the baseband market," added Mr. McQuilkin.
"We have had substantive discussions with a number of companies with
respect to building scale as well as selling the business. While we have
not made a determination, we are moving quickly to reach a final
decision."
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.
Additionally, the company offers a family of SlimChip(TM) high performance
mobile broadband modem solutions, consisting of Baseband ICs, Embedded
Modules, Modem IP and Reference Platforms. InterDigital's differentiated
technology and product solutions deliver time to market, performance and
cost benefits.
For more information, visit the InterDigital website: www.interdigital.com.
Safe Harbor Statement
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
"First Quarter 2009 Outlook" and other information regarding our current
beliefs, plans and expectations, including, but not limited to,
statements with respect to: (i) first quarter 2009 revenue guidance and
(ii) the financial impact of the Samsung agreement, (iii) investments by
the company in internal resources and external acquisitions, (iv) the
effect of further commoditization of the baseband market and (v) the
timing of a final decision with respect to the strategic direction of
our product business. Words such as "projects," "could," "expect,"
"potential," and "may" or similar expressions are intended to identify
such forward-looking statements.
These forward-looking statements are based on management's current
expectations, estimates, forecasts and projections about the company and
are subject to risks and uncertainties that could cause actual results
and events to differ materially from those stated in the forward-looking
statements. These risks and uncertainties include, but are not limited
to, 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 timely
receipt and final reviews of quarterly royalty reports from our
licensees and related matters, (ii) the failure of either the company or
Samsung to observe the covenants under their license agreement for any
reason, (iii) the failure of Samsung to make any agreed upon payment in
the time and manner specified in their license agreement, (iv)
unexpected deterioration of the company's financial position, (v)
unanticipated developments in the baseband market and (vi) unanticipated
delays, difficulties or other developments in our discussions with
potential counterparties or other factors affecting our final decision
with respect to our product business. Risks and uncertainties that could
cause the company's actual results to differ from those set forth in any
forward-looking statement are discussed in more detail under "Risk
Factors," "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the company's Annual
Report on Form 10-K for the year ended December 31, 2007, as well as
similar disclosures in the company's subsequent Securities and Exchange
Commission filings. Forward-looking statements contained in this press
release are made only as of the date hereof, and the company undertakes
no obligation to update or revise the forward-looking statements,
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.
1 InterDigital defines "free cash flow" as operating cash
flow less purchases of property equipment and technology licenses, and
patent additions. A detailed reconciliation of free cash flow to GAAP
results is provided at the end of this press release.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
For the Periods Ended December 31
(Dollars in thousands except per share data)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
REVENUES $ 58,677 $ 54,860 $ 228,469 $ 234,232
OPERATING EXPENSES:
Sales and marketing 2,869 2,045 9,161 7,828
General and 9,698 6,144 26,576 24,210
administrative
Patents administration 10,088 18,310 58,885 67,587
and licensing
Development 31,287 23,323 101,254 87,141
Arbitration and
litigation - 7,800 (3,940 ) 24,412
contingencies
53,942 57,622 191,936 211,178
Income (Loss) from 4,735 (2,762 ) 36,533 23,054
operations
NET INTEREST & OTHER 643 1,949 3,429 8,949
INVESTMENT INCOME
Income (Loss) before 5,378 (813 ) 39,962 32,003
income taxes
INCOME TAX PROVISION (1,549 ) (1,163 ) (13,755 ) (11,999 )
NET INCOME (LOSS)
APPLICABLE TO COMMON $ 3,829 $ (1,976 ) $ 26,207 $ 20,004
SHAREHOLDERS
NET INCOME (LOSS) PER $ 0.09 $ (0.04 ) $ 0.58 $ 0.42
COMMON SHARE - BASIC
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 43,243 47,206 44,928 47,766
OUTSTANDING - BASIC
NET INCOME (LOSS) PER $ 0.09 $ (0.04 ) $ 0.57 $ 0.40
COMMON SHARE - DILUTED
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 44,341 47,206 45,964 49,489
OUTSTANDING - DILUTED
SUMMARY CASH FLOW
For the Periods Ended December 31
(Dollars in thousands)
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Net income (loss) $ 5,378 $ (813 ) $ 39,962 $ 32,003
before income taxes
Taxes paid (7,436 ) - (23,125 ) (16,099 )
Depreciation,
amortization,
share-based 8,577 9,247 34,697 31,810
compensation and
investment write-down
Increase in deferred (944 ) 33,833 84,207 191,436
revenue
Deferred revenue (35,793 ) (31,348 ) (127,949 ) (119,596 )
recognized
Increase (decrease) in
operating working 10,234 8,192 78,019 33,173
capital, deferred
charges and other
Capital spending,
technology licensing & (12,248 ) (13,944 ) (40,825 ) (62,118 )
patent additions
FREE CASH FLOW (32,232 ) 5,167 44,986 90,609
Long-term investments - - (651 ) (5,000 )
Tax benefit from stock 510 80 1,502 5,123
options
Debt decrease (67 ) (94 ) (1,589 ) (1,247 )
Repurchase of common (15,098 ) (17,762 ) (82,331 ) (183,118 )
stock
Proceeds from exercise 482 105 2,182 6,472
of stock options
Unrealized gain on 399 147 94 663
short-term investments
NET (DECREASE) INCREASE
IN CASH AND SHORT-TERM $ (46,006 ) $ (12,357 ) $ (35,807 ) $ (86,498 )
INVESTMENTS
CONDENSED BALANCE SHEET
(Dollars in thousands)
December 31, 2008 December 31, 2007
Assets
Cash & short-term investments $ 141,660 $ 177,467
Accounts receivable 33,892 130,880
Current deferred tax assets 49,002 43,734
Other current assets 16,467 19,332
Property & equipment and Patents (net) 123,782 111,686
Long-term deferred tax assets and 40,965 51,786
non-current assets
TOTAL ASSETS $ 405,768 $ 534,885
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 1,608 $ 1,311
Accounts payable & accrued liabilities 46,283 76,974
Current deferred revenue 78,646 78,899
Long-term deferred revenue 181,056 224,545
Long-term debt & long-term liabilities 10,515 16,089
TOTAL LIABILITIES 318,108 397,818
SHAREHOLDERS' EQUITY 87,660 137,067
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 405,768 $ 534,885
The company's short-term investments are comprised of high quality
credit instruments including U.S. government agency instruments and
corporate bonds. Management views these instruments to be near
equivalents to cash and believes that investors may share this viewpoint.
This release includes a summary cash flow statement that results in the
change in both the company's cash and short-term investment balances.
One of the subtotals in the summary cash flow statement is free cash
flow. The table below presents a reconciliation of this non-GAAP line
item to net cash provided by operating activities.
For the Three Months Ended For the Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
Net cash (used)
provided by operating $ (19,984 ) $ 19,111 $ 85,811 $ 152,727
activities
Purchases of property,
equipment, & technology (4,777 ) (5,945 ) (12,608 ) (38,266 )
licenses
Patent additions (7,471 ) (7,999 ) (28,217 ) (23,852 )
Free cash flow $ (32,232 ) $ 5,167 $ 44,986 $ 90,609
InterDigital is a registered trademark and SlimChip is a trademark of
InterDigital, Inc.
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