Delivers Strong Revenue Growth, Profitability and Free Cash Flow
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--
InterDigital, Inc. (NASDAQ: IDCC) today announced results for the first
quarter ended March 31, 2010.
Highlights for first quarter 2010:
-- Revenue of $116.2 million (which includes $35.7 million related to past
sales from a new license agreement and a royalty audit), a 65 percent
increase over first quarter 2009;
-- Net income of $48.8 million, or $1.09 per diluted share, versus first
quarter 2009 pro forma net income1of $15.4 million, or $0.34 per diluted
share, excluding a repositioning charge of $37.1 million;
-- Free cash flow2 of $65.4 million; and
-- Ending cash and short-term investments totaling $482.4 million.
William J. Merritt, InterDigital's President and Chief Executive
Officer, commented, "We are off to a great start in 2010. Strategically,
we continue to see confirmation of our future technology direction.
Indeed, our vision of a highly intelligent "network of networks,"
seamlessly connecting people and things across any network, is being
echoed by leaders throughout the industry. This bodes well for future
licensing opportunities for the company, as the inventions we create
today will drive tomorrow's mobile devices, networks, and services
worldwide."
"We also delivered impressive financial results," continued Mr. Merritt.
"We expanded our base of patent licensees and secured another design win
for our multimode SlimChip(TM) modem core with Beceem Communications, a
leading supplier of WiMax semiconductor solutions, for integration into
their multimode 4G chips. These new agreements provide added validation
of our 3G technology and patent portfolio and will also contribute to
revenue in the coming quarters."
First Quarter Summary
Net income for first quarter 2010 totaled $48.8 million, or $1.09 per
diluted share, more than triple first quarter 2009 pro forma net income
of $15.4 million, or $0.34 per diluted share. In first quarter 2009, the
company reported a loss of $8.7 million, or $0.20 per share, which
included a repositioning charge of $37.1 million related to the
company's cessation of further ASIC development of the company's
SlimChip modem. This year-over-year increase in net income was driven by
revenue contributions from several new patent license agreements as well
as reduced operating expenses resulting from the company's 2009
repositioning.
Total revenue in first quarter 2010 of $116.2 million, increased 65
percent from $70.6 million reported in first quarter 2009. This increase
was driven by the recognition of $35.7 million of royalties from past
sales resulting from the recently signed Casio agreement and the
resolution of a routine audit with an existing licensee. The remaining
increase was primarily attributable to new license agreements signed
subsequent to first quarter 2009 with Casio, Pantech, Cinterion, and
Enfora and a full quarter of revenue from the patent license agreement
with Samsung signed during first quarter 2009. Technology solutions
revenue in first quarter 2010 of $2.4 million increased 85 percent from
$1.3 million in first quarter 2009 due to an increase in customers'
product sales containing the company's SlimChip modem core platform.
Licensees that accounted for ten percent or more of the $116.2 million
of total revenue were Casio (25 percent), Samsung (22 percent), and LG
(12 percent).
First quarter 2010 operating expenses of $41.5 million decreased $5.7
million, or 12 percent, from the $47.2 million (excluding a $37.1
million repositioning charge) in first quarter 2009. The decrease was
driven by a $10.7 million year-over-year decrease in development expense
related to the repositioning partly offset by a $5.7 million increase in
patent administration and licensing expense which included an increase
of $3.9 million for arbitration and litigation expenses. Total operating
expenses in first quarter 2010 included a charge of $0.9 million to
increase the accrual rate for a long-term performance cash incentive
program based on revised expectations for a higher payout driven by
increased positive operating cash flow. This charge relates to the first
two years of the three-year performance period ending December 31, 2010.
Net interest and investment income for first quarter 2010 totaled $0.6
million, a $0.2 million decrease from $0.8 million in first quarter
2009. The decrease was primarily due to lower rates of return on the
company's investments.
The company's first quarter 2010 effective tax rate was approximately 35
percent, compared to an effective tax rate in first quarter 2009 of
approximately 33 percent.
In first quarter 2010, the company generated $65.4 million of free cash
flow compared to $43.1 million in first quarter 2009. This free cash
flow was driven primarily by receipt of the third of four installments
of $100.0 million from Samsung. This and other cash receipts were
partially offset by cash-based operating expenses, foreign withholding
taxes paid, and capital investments in the company's development and
patent-related initiatives.
Near-Term Outlook
Scott McQuilkin, Chief Financial Officer, commented, "We are pleased
with the continued momentum in our licensing program. We expect
contributions from our newly added customers and will provide an update
on our revenue expectations for second quarter 2010 after we receive and
review the applicable patent license and product sales royalty reports."
"Regarding the sequential increase in operating expenses from fourth
quarter 2009, approximately $6 million of that increase relates to
increases in arbitration and litigation expenses, an adjustment to the
company's long-term compensation accrual and seasonal increases in the
first part of the year," continued Mr. McQuilkin. "For second quarter
2010, a portion of the seasonal increases in expenses will recur. Given
the opportunity to further generate near term revenues from our SlimChip
modem core platform, we expect to see a moderate increase in development
expense in second quarter 2010, but this increase will be offset by
associated revenues. Expenses for arbitration and litigation will be
driven by the level of activity in those areas."
Due to the repositioning announced in March 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. InterDigital will
provide an update on the company's revenue expectations for second
quarter 2010 upon receipt and review of applicable patent license and
product sales royalty reports.
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 partnerships with many of the world's leading companies.
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 impact of
our agreements with Casio, Beceem and other customers and (ii) second
quarter 2010 revenue guidance. Words such as "future," "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) 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 and technology solutions 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 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,
2010 2009
REVENUES $ 116,187 $ 70,561
OPERATING EXPENSES:
Selling, general and administrative 7,519 8,254
Patent administration and licensing 17,823 12,137
Development 16,164 26,870
Repositioning - 37,063
41,506 84,324
Income (loss) from operations 74,681 (13,763 )
OTHER INCOME:
Interest and investment income, net 600 829
Income (loss) before income taxes 75,281 (12,934 )
INCOME TAX (PROVISION) BENEFIT (26,454 ) 4,248
NET INCOME (LOSS) $ 48,827 $ (8,686 )
NET INCOME (LOSS) PER COMMON SHARE - BASIC $ 1.11 $ (0.20 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 43,614 43,501
- BASIC
NET INCOME (LOSS) PER COMMON SHARE - DILUTED $ 1.09 $ (0.20 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 44,237 43,501
- DILUTED
SUMMARY CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(unaudited)
March 31, 2010 December 31, 2009
Assets
Cash & short-term investments $ 482,388 $ 409,806
Accounts receivable, less allowance of $1,500 148,809 212,905
Current deferred tax assets 49,714 68,500
Other current assets 13,792 11,111
Property & equipment and Patents (net) 131,368 129,569
Other long-term assets (net) 100,020 73,894
TOTAL ASSETS $ 926,091 $ 905,785
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 300 $ 584
Accounts payable, accrued liabilities & taxes 77,649 58,567
payable
Current deferred revenue 181,441 193,409
Long-term deferred revenue 434,030 474,844
Long-term debt & long-term liabilities 5,504 8,844
TOTAL LIABILITIES 698,924 736,248
SHAREHOLDERS' EQUITY 227,167 169,537
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 926,091 $ 905,785
SUMMARY CASH FLOW
(Dollars in thousands)
(unaudited)
For the Three Months Ended
March 31,
2010 2009
Income (loss) before income taxes $ 75,281 $ (12,934 )
Taxes paid (16,500 ) (16,500 )
Depreciation, amortization, share-based 6,924 41,486
compensation, & asset impairment
Increase in deferred revenue 8,575 300,000
Deferred revenue recognized (61,357 ) (52,819 )
Increase (Decrease) in operating working capital, 59,779 (208,202 )
deferred charges and other
Capital spending, technology licensing & patent (7,297 ) (7,906 )
additions
FREE CASH FLOW 65,405 43,125
Tax benefit from share-based compensation 982 652
Debt decrease (354 ) (338 )
Proceeds from exercise of stock options 6,595 873
Unrealized (loss) on short term investments (46 ) (72 )
NET INCREASE IN CASH
AND SHORT-TERM INVESTMENTS $ 72,582 $ 44,240
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,
2010 2009
Net cash provided by operating activities $ 72,702 $ 51,031
Purchases of property, equipment, & technology (442 ) (1,588 )
licenses
Patent additions (6,855 ) (6,318 )
Free cash flow $ 65,405 $ 43,125
In the following pro forma summary consolidated statement of operations
and throughout this press release, we refer to "pro forma net income."
The table below presents a reconciliation of this non-GAAP line item to
net income, the most directly comparable GAAP financial measure. 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, 2010 March 31, 2009
Actual Actual Adj. Pro Forma
REVENUES $ 116,187 $ 70,561 - $ 70,561
OPERATING EXPENSES:
Selling, general and 7,519 8,254 - 8,254
administrative
Patent administration and 17,823 12,137 - 12,137
licensing
Development 16,164 26,870 - 26,870
Repositioning - 37,063 (37,063 ) -
41,506 84,324 (37,063 ) 47,261
Income (loss) from 74,681 (13,763 ) 37,063 23,300
operations
OTHER INCOME:
Interest and investment 600 829 - 829
income, net
Income (loss) before 75,281 (12,934 ) 37,063 24,129
income taxes
INCOME TAX (PROVISION) (26,454 ) 4,248 (13,009 ) (8,761 )
BENEFIT
NET INCOME (LOSS) $ 48,827 $ (8,686 ) $ 24,054 $ 15,368
NET INCOME (LOSS) PER $ 1.11 $ (0.20 ) $ 0.35
COMMON SHARE - BASIC
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 43,614 43,501 43,501
- BASIC
NET INCOME (LOSS) PER $ 1.09 $ (0.20 ) $ 0.34
COMMON SHARE - DILUTED
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 44,237 43,501 44,460
- DILUTED
1 Pro forma net income is a supplemental non-GAAP financial
measure that InterDigital believes is helpful in evaluating the
company's operating results relative to first quarter 2009. A limitation
of the utility of pro forma net income as a measure of financial
performance is that it does not represent the company's total operating
expenses for the period. For purposes of this press release,
InterDigital defines "pro forma net income" as net income excluding the
expense associated with the repositioning charge and the related tax
benefit, both non-recurring items in first quarter 2009. InterDigital's
computation of pro forma net income might not be comparable to pro forma
net income 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 pro forma net income to GAAP
results is provided at the end of this press release.
2 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 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 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