KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--
InterDigital, Inc. (NASDAQ:IDCC) today announced financial and operating
results for the second quarter ended June 30, 2009. Highlights for
second quarter 2009 include:
-- Revenue of $74.9 million, an increase of 28 percent over second quarter
2008;
-- Operating expenses of $34.7 million, a 32 percent decrease from second
quarter 2008;
-- Net income of $26.4 million, or $0.59 per diluted share, more than four
times greater than second quarter 2008;
-- Ending cash and short-term investments of $216.6 million; and
-- Repurchase of $14.7 million, or 0.6 million shares, of common stock
through June 30, 2009.
"We are pleased to announce a very strong second quarter, marked by
strong earnings and positive cash flow," commented William J. Merritt,
President and Chief Executive Officer. "Our results clearly demonstrate
that our licensing efforts continue to drive significant value.
Additionally, our first quarter realignment, which refocused our
business on our core research and development and licensing activities,
contributed to a significant improvement in profitability in the second
quarter. All these efforts should continue to produce substantial
benefits to our shareholders both in the short and long term."
Second Quarter Summary
The company's second quarter 2009 net income totaled $26.4 million or
$0.59 per diluted share, more than four times greater than the company's
net income of $5.9 million, or $0.13 per diluted share for the
comparable quarter 2008. This year-over-year increase was driven by
revenue contributions from a new patent license agreement with Samsung
signed in January 2009 as well as reduced operating expenses resulting
from the company's repositioning plan announced in first quarter 2009.
Revenues totaled $74.9 million in second quarter 2009, a 28 percent
increase over the $58.7 million reported in second quarter 2008. Patent
licensing royalties of $72.7 million in second quarter 2009 posted a 29
percent increase over $56.2 million in second quarter 2008, due to the
addition of $25.7 million in fixed-fee amortized royalty revenue from a
patent license agreement with Samsung signed in first quarter 2009, $2.3
million in royalties for past sales, partly offset by a $10.4 million
decrease in per-unit royalty revenue related to industry-wide declines
in handset sales for comparable first quarter sales. Despite this
overall decline in per unit royalties, certain licensees with
concentrations in the smartphone market reported increased sales for the
reporting period. Technology solutions revenue of $2.2 million in second
quarter 2009 decreased 12 percent from $2.5 million in second quarter
2008. The decrease is primarily attributable to engineering service fees
earned in second quarter 2008 that did not recur in second quarter 2009,
offset by an increase in royalties earned on InterDigital's SlimChip(TM)
modem IP. In second quarter 2009, 53 percent of total revenue of $74.9
million was attributable to companies that individually accounted for 10
percent or more of this amount, Samsung (34 percent) and LG (19 percent).
Second quarter 2009 operating expenses of $34.7 million decreased $16.2
million, or 32 percent, compared to second quarter 2008. The decrease
was due primarily to the company's repositioning announced on March 30,
2009, which decreased development expenses by $9.0 million, or 41
percent year-over-year, from $22.2 million in second quarter 2008 to
$13.2 million in second quarter 2009. In addition, patent administration
and licensing expenses declined significantly from $21.4 million in
second quarter 2008 to $15.6 million in second quarter 2009, a decrease
of $5.9 million, or 27 percent. This year-over-year reduction was driven
largely by the resolution of the company's various disputes with Samsung
and the third quarter 2008 resolution of the Nokia U.K. patent
litigations. On a sequential basis, development expenses declined $13.6
million, or 51 percent, from first quarter 2009, reflecting the results
of the company's repositioning efforts.
Net interest and investment income of $0.6 million in second quarter
2009 decreased $0.6 million from second quarter 2008 because of lower
rates of return and lower investment balances.
The company's second quarter 2009 effective tax rate was approximately
35%, level with second quarter 2008.
During second quarter 2009, the company generated $43.4 million of free
cash flow1, compared to $19.9 million of free cash flow in
second quarter 2008. The increase of $23.5 million was driven by a
higher level of cash receipts in from the company's patent licensees and
a lower level of cash outlays.
Six Months Summary
The company's first half 2009 net income totaled $17.8 million, or $0.39
per diluted share, a 35 percent increase from the company's net income
of $13.2 million, or $0.28 per diluted share, for the comparable period
in 2008. This year-over-year increase was driven by revenue
contributions from a new patent license agreement with Samsung signed in
January 2009 as well as reduced operating expenses resulting from the
company's repositioning plan announced in first quarter 2009.
Pro forma net income for first half 2009, which excludes a $37.0 million
repositioning charge, totaled $41.8 million, or $0.93 per diluted share,
reflecting an increase of $28.6 million, more than three times the
reported first half 2008 net income of $13.2 million, or $0.28 per
diluted share.
Revenues of $145.5 million in first half 2009 grew $30.8 million, or 27
percent, compared to $114.7 million in first half 2008. Patent licensing
royalties were $142.1 million in first half 2009, up from $110.1 million
in first half 2008. The increase in patent licensing royalties was
primarily related to a $46.4 million increase in fixed-fee amortized
royalty revenue driven by the company's patent license agreement with
Samsung. This increase was partly offset by a $15.9 million decrease in
per-unit royalty revenue relating to an overall decrease in industry
handset sales.
Excluding a $37.0 million repositioning charge in 2009, pro forma
operating expenses of $82.1 million in first half 2009 decreased 15
percent, or $13.9 million, from $96.0 million in first half 2008, driven
primarily by a $10.1 million decrease in net litigation and arbitration
expenses and a lower level of development expenses.
Net interest and investment income of $1.5 million in first half 2009
decreased $0.2 million from $1.7 million in first half 2008 due
primarily to lower rates of return.
The company's first half 2009 effective tax rate was approximately 36%.
In first half 2008, the company's effective tax rate was approximately
35%.
During first half 2009, the company generated $86.5 million of free cash
flow, compared to $97.6 million of free cash flow in first half 2008.
The decrease of $11.1 million, or 11 percent, was driven by a $28.5
million reduction in cash receipts from license agreements, due
primarily to the aforementioned reduction in current royalty revenue and
the timing of prepayments, offset by lower cash operating expenses. The
higher level of cash receipts in first half 2008 was partly offset by a
$23.0 million payment to post a bond for the Federal Insurance Company
arbitration award.
Scott McQuilkin, Chief Financial Officer, commented, "We posted a very
strong quarter, with an increase in royalty revenue combining with a
decrease in our core operating expenses to drive greatly improved
profitability. Our second quarter 2009 development expenses were
slightly lower than our guidance, reflecting the positive impact of a
Canadian research and development credit and lower than expected
consulting services as we transitioned our full development efforts to
our core business. Our selling, general and administrative expenses also
benefited from a $1.0 million credit associated with the reversal of an
allowance for an uncollectible receivable. As is our practice, we will
provide an update on our expectation for third quarter 2009 revenue
after we receive and review the applicable royalty reports.
Nevertheless, I am pleased to note that we received our second $100.0
million installment from Samsung in July."
Due to the repositioning announced on March 30, 2009, the company
reclassified its income statement presentation to better align its
operating expense classifications with its ongoing activities. The
company eliminated the General and administrative and Sales
and marketing classifications within operating expenses and created
the Selling, general and administrative classification. All costs
previously reported under General and administrative have been
reclassified to Selling, general and administrative, while Sales
and marketing costs have been reclassified between Selling,
general and administrative and Patent administration and licensing.
Additionally, the company reclassified portions of its Development
costs to Patent administration and licensing.
Conference Call Information
InterDigital(R) will host a conference call on Wednesday, July
29, 2009 at 10:00 a.m. Eastern Time to discuss its second quarter 2009
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 9:50 a.m. ET
on July 29 and ask the operator for the InterDigital Financial Call.
An Internet replay of the conference call will be available for 30 days
on InterDigital's web site in the Investor Relations section. In
addition, a telephone replay will be available from 1:00 p.m. ETJuly 29
through 1:00 p.m. ETAugust 3. To access the recorded replay, call (888)
203-1112 or (719) 457-0820 and use the replay code 4896432.
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 information regarding our current
beliefs, plans and expectations, including, without limitation, with
respect to: (i) the benefits to shareholders from the company's
licensing and realignment efforts and (ii) third quarter 2009 revenue
guidance. Words such as "should continue to," "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, but not limited to, 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 licensing agreements on acceptable terms; (iii)
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; and (iv) 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. We undertake no duty to update publicly any 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.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
For the Periods Ended June 30
(Dollars in thousands except per share data)
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2009 2008 2009 2008
REVENUES $ 74,928 $ 58,706 $ 145,489 $ 114,733
OPERATING EXPENSES:
Selling, general and 5,987 7,202 14,241 14,692
administrative
Patent administration and 15,580 21,442 27,717 37,525
licensing
Development 13,226 22,223 40,096 44,966
Repositioning (93 ) - 36,970 -
Arbitration and litigation - - - (1,200 )
contingencies
34,700 50,867 119,024 95,983
Income from operations 40,228 7,839 26,465 18,750
NET INTEREST & OTHER 625 1,231 1,454 1,669
INVESTMENT INCOME
Income before income taxes 40,853 9,070 27,919 20,419
INCOME TAX (PROVISION) (14,408 ) (3,218 ) (10,160 ) (7,250 )
NET INCOME $ 26,445 $ 5,852 $ 17,759 $ 13,169
NET INCOME PER COMMON $ 0.60 $ 0.13 $ 0.40 $ 0.28
SHARE - BASIC
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 43,479 45,358 43,490 45,892
- BASIC
NET INCOME PER COMMON $ 0.59 $ 0.13 $ 0.39 $ 0.28
SHARE - DILUTED
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 44,313 46,264 44,387 46,733
- DILUTED
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Income before income $ 40,853 $ 9,070 $ 27,919 $ 20,419
taxes
Taxes paid (4,000 ) (14 ) (20,500 ) (15,689 )
Depreciation,
amortization, share based 7,181 8,216 48,667 17,328
compensation & asset
impairment
Increase in deferred 85,014 51,999 385,014 82,464
revenue
Deferred revenue (58,207 ) (28,341 ) (111,026 ) (58,625 )
recognized
(Decrease) increase in
operating working (18,582 ) (9,771 ) (226,784 ) 71,606
capital, deferred charges
and other
Capital spending & patent (8,887 ) (11,247 ) (16,793 ) (19,891 )
additions
FREE CASH FLOW 43,372 19,912 86,497 97,612
Long-term investment - (651 ) - (651 )
Tax benefit from - 128 652 498
share-based compensation
Debt decrease (1,125 ) (814 ) (1,463 ) (1,179 )
Repurchase of common (14,001 ) (20,475 ) (14,001 ) (36,580 )
stock
Proceeds from exercise of 2,368 208 3,241 956
stock options
Unrealized gain (loss) on 126 (257 ) 54 73
short term investments
NET INCREASE (DECREASE)
IN CASH AND SHORT-TERM $ 30,740 $ (1,949 ) $ 74,980 $ 60,729
INVESTMENTS
SUMMARY CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(unaudited)
June 30, 2009 December 31, 2008
Assets
Cash & short-term investments $ 216,640 $ 141,660
Accounts receivable, less allowance of $2,000 244,510 33,892
& $3,000
Current deferred tax assets 69,297 49,002
Other current assets 13,068 16,467
Property & equipment and Patents (net) 119,989 123,782
Long-term deferred tax assets and non-current 39,581 40,965
assets (net)
TOTAL ASSETS $ 703,085 $ 405,768
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 580 $ 1,608
Accounts payable, accrued liabilities & taxes 57,922 46,283
payable
Current deferred revenue 177,296 78,646
Long-term deferred revenue 356,394 181,056
Long-term debt & long-term liabilities 12,375 10,515
TOTAL LIABILITIES 604,567 318,108
SHAREHOLDERS' EQUITY 98,518 87,660
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 703,085 $ 405,768
PRO FORMA SUMMARY CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share data)
(unaudited)
For the Six Months Ended
June 30, 2009
Actual Adjustments Pro Forma
REVENUES $ 145,489 $ 145,489
OPERATING EXPENSES:
Selling, general and administrative 14,241 14,241
Patent administration and licensing 27,717 27,717
Development 40,096 40,096
Repositioning 36,970 (36,970 ) -
119,024 (36,970 ) 82,054
Income from operations 26,465 36,970 63,435
NET INTEREST & OTHER INVESTMENT INCOME 1,454 - 1,454
Income before income taxes 27,919 36,970 64,889
INCOME TAX (PROVISION) (10,160 ) (12,976 ) (23,136 )
NET INCOME $ 17,759 $ 23,994 $ 41,753
NET INCOME PER COMMON SHARE - BASIC $ 0.40 $ 0.94
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 43,490 43,490
OUTSTANDING - BASIC
NET INCOME PER COMMON SHARE - DILUTED $ 0.39 $ 0.93
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 44,387 44,387
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, the company refers 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 For the Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Net cash provided by $ 52,259 $ 31,159 $ 103,290 $ 117,503
operating activities
Purchases of property,
equipment, & technology (1,399 ) (3,054 ) (2,987 ) (4,283 )
licenses
Patent additions (7,488 ) (8,193 ) (13,806 ) (15,608 )
Free cash flow $ 43,372 $ 19,912 $ 86,497 $ 97,612
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 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 GAAP results is provided at the end of this press release.
Source: InterDigital, Inc.
Contact: InterDigital
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