InterDigital Announces Financial Results for Third Quarter 2022

Company Release - 11/3/2022
Apple renewal contributes to InterDigital’s $1.5B in value of contracts signed over last eighteen months

WILMINGTON, Del., Nov. 03, 2022 (GLOBE NEWSWIRE) -- InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology research and development company, today announced results for the quarter ended September 30, 2022.

“We significantly strengthened our business by renewing our license with Apple through 2029,” said Liren Chen, CEO and President of InterDigital. “In addition, new agreements drove our sixth consecutive quarter of recurring revenue growth in the consumer electronics and IoT/automotive markets. All together, we have signed sixteen agreements over the last eighteen months with a total estimated contract value of more than $1.5 billion. I look forward to building on this foundation as we pursue significant growth opportunities in licensing both devices and services.”

Third Quarter 2022 Financial Highlights

  • Total revenue, which includes both recurring and non-recurring revenue, of $114.8 million decreased 20% from $143.5 million in third quarter 2021 primarily due to $50.1 million of non-recurring revenues in third quarter 2021.
  • Recurring revenue increased 8% to $101.0 million, compared to recurring revenue of $93.4 million in third quarter 2021. The company increased recurring revenue in both its smartphone (up 4%) and CE, IoT/Auto markets (up 60%).
  • Operating expenses were $82.9 million, compared to $106.7 million in third quarter 2021. The decrease was primarily driven by a $21.3 million reduction of non-recurring costs from restructuring activities, revenue share costs and a reduction in performance-based compensation.
  • Income from operations was $31.8 million compared to $36.8 million in third quarter 2021.
  • Net income1 was $22.2 million, or $0.74 per diluted share, compared to $26.2 million, or $0.83 per diluted share, in third quarter 2021.
  • Adjusted EBITDA2 was $56.4 million compared to $78.3 million in third quarter 2021, primarily driven by $50.1 million of non-recurring revenue in third quarter 2021.

Near Term Outlook

The company expects recurring revenue for fourth quarter to be between $98 and $102 million. This revenue guidance covers existing agreements, including the company’s recent renewal of its license agreement with Apple, and does not include the potential impact of any additional new agreements that may be signed during the balance of fourth quarter 2022.

The company expects fourth quarter operating expenses will be in the range of $76 to $79 million. In addition, the company expects non-operating expenses, comprised of interest expense and other income (expense), will be in the range of $4 to $6 million and the effective tax rate will be in the range of 21% to 24%.

Conference Call Information

InterDigital will host a conference call on Thursday, November 3, 2022 at 10:00 a.m. ET to discuss its third quarter 2022 financial performance and other company matters.

For a live Internet webcast of the conference call, visit www.interdigital.com and click on the “Webcast” link on the Investors page. The company encourages participants to take advantage of the Internet option.

For telephone access to the conference call, visit www.interdigital.com and click on the “Dial In Registration” link on the Investors page. Registration is necessary to obtain a dial in phone number and PIN to join.

An Internet replay of the conference call will be available on InterDigital’s website under Events in the Investor’s section. The replay will be available for one year.

About InterDigital ®

InterDigital develops mobile and video technologies that are at the core of 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, better video delivery, and richer multimedia experiences years ahead of market deployment. InterDigital has licenses and strategic relationships with many of the world’s leading technology companies. Founded in 1972, InterDigital is listed on Nasdaq.

InterDigital is a registered trademark of InterDigital, Inc.

For more information, visit the InterDigital website: www.interdigital.com.

Forward-Looking Statements

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, our belief that we will continue to be able to execute strongly on our business during the ongoing COVID-19 pandemic. Words such as “believe,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” “goal,” “could,” "would," "should," "if," "may," "might," "future," "target," "trend," "seek to," "will continue," "predict," "likely," "in the event," and variations of any such words or similar expressions are intended to identify such forward-looking statements.

Forward-looking statements are made on the basis of management’s current views and assumptions and are not guarantees of future performance. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results, and actual events that occur, to differ materially from results contemplated by the forward-looking statements. These risks and uncertainties include, but are not limited to: (i) unanticipated delays, difficulties or accelerations 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) our ability to enter into partnerships with leading inventors and research organizations and identify and acquire technology and patent portfolios that align with our roadmap; (v) our ability to commercialize our technologies and enter into customer agreements; (vi) the failure of the markets for our current or new technologies and products to materialize to the extent or at the rate that we expect; (vii) unexpected delays or difficulties related to the development of our technologies and products; (viii) changes in our interpretations of, and assumptions and calculations with respect to the impact on us of, the 2017 Tax Cuts and Jobs Act, as well as further guidance that may be issued regarding such act; (ix) risks related to the potential impact of new accounting standards on our financial position, results of operations or cash flows; (x) failure to accurately forecast the impact of our restructuring activities on our financial statements and our business; (xi) the resolution of current legal proceedings, including any awards or judgments relating to such proceedings, additional legal or regulatory proceedings, changes in the schedules or costs associated with legal proceedings or adverse rulings in such proceedings; (xii) the timing and impact of potential administrative and legislative matters; (xiii) changes or inaccuracies in market projections; (xiv) our ability to obtain liquidity though debt and equity financings; (xv) the potential effects that the ongoing COVID-19 pandemic and/or general economic or other conditions could have on our financial position, results of operations and cash flows; and (xvi) changes in our business strategy.

We undertake no duty to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

Footnotes

1        Throughout this press release, net income and diluted earnings per share (“EPS”) are attributable to InterDigital, Inc. (e.g., after adjustments for non-controlling interests), unless otherwise stated.

2        Adjusted EBITDA is a supplemental non-GAAP financial measure that InterDigital believes provides investors with important insight into the company's ongoing business performance. InterDigital defines Adjusted EBITDA as net income attributable to InterDigital, Inc. plus net loss attributable to non-controlling interest, income tax (provision) benefit, other income (expense) & interest expense, depreciation and amortization, share-based compensation, and other items. Other items may include restructuring costs, impairment charges and other non-recurring items. InterDigital’s computation of Adjusted EBITDA might not be comparable to Adjusted EBITDA reported by other companies. The presentation of Adjusted EBITDA, 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 reconciliation of Adjusted EBITDA to net income attributable to InterDigital, Inc., the most directly comparable GAAP financial measure, is provided below.

3        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 net cash used in operating activities less purchases of property and equipment and capitalized patent costs. InterDigital’s computation of free cash flow might not be comparable to free cash flow reported by other companies. The presentation of free cash flow, 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 reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP financial measure, is provided below.

SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(unaudited)

  For the Three Months Ended September 30,   For the Nine Months Ended September 30,
    2022       2021       2022       2021  
REVENUES:              
Recurring revenues:              
Smartphone $ 87,467     $ 84,143     $ 262,908     $ 223,701  
CE, IoT/Auto   13,579       8,498       36,455       21,951  
Other         747       911       4,467  
Total recurring revenues   101,046       93,388       300,274       250,119  
Non-recurring revenues   13,718       50,108       40,465       63,475  
Total revenues $ 114,764     $ 143,496     $ 340,739     $ 313,594  
               
OPERATING EXPENSES:              
Patent administration and licensing   46,720       56,150       134,232       133,694  
Development   21,789       22,546       56,487       66,999  
Selling, general and administrative   14,418       20,978       34,818       46,994  
Restructuring activities         7,045       3,280       20,290  
Total Operating expenses   82,927       106,719       228,817       267,977  
               
Income from operations   31,837       36,777       111,922       45,617  
               
INTEREST EXPENSE   (7,659 )     (5,773 )     (19,446 )     (19,429 )
OTHER INCOME (EXPENSE), NET   912       (1,537 )     (15,109 )     2,226  
Income before income taxes   25,090       29,467       77,367       28,414  
INCOME TAX PROVISION   (3,323 )     (4,253 )     (17,312 )     (6,039 )
NET INCOME $ 21,767     $ 25,214     $ 60,055     $ 22,375  
Net loss attributable to noncontrolling interest   (455 )     (1,014 )     (1,230 )     (11,042 )
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. $ 22,222     $ 26,228     $ 61,285     $ 33,417  
NET INCOME PER COMMON SHARE — BASIC $ 0.75     $ 0.85     $ 2.03     $ 1.09  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC   29,659       30,737       30,255       30,792  
NET INCOME PER COMMON SHARE — DILUTED $ 0.74     $ 0.83     $ 2.00     $ 1.07  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED   29,940       31,431       30,638       31,272  
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.35     $ 0.35     $ 1.05     $ 1.05  
                               

SUMMARY CONSOLIDATED CASH FLOWS
(in thousands)
(unaudited)

  For the Three Months Ended September 30,   For the Nine Months Ended September 30,
    2022       2021       2022       2021  
Income before income taxes $ 25,090     $ 29,467     $ 77,367     $ 28,415  
Taxes paid   (222 )     (5,042 )     (4,585 )     (9,835 )
Non-cash expenses   25,243       35,882       90,313       95,272  
Change in deferred revenue   274,034       150,703       146,334       64,044  
Change in operating working capital, deferred charges and other   (342,874 )     (114,746 )     (379,898 )     (118,733 )
Purchases of property and equipment and capitalized patent costs   (9,054 )     (8,857 )     (31,139 )     (30,022 )
FREE CASH FLOW 3   (27,783 )     87,407       (101,608 )     29,141  
               
Net proceeds from debt refinancing   (796 )           139,193        
Repurchase of common stock         (11,859 )     (74,445 )     (23,000 )
Dividends paid   (10,380 )     (10,794 )     (31,924 )     (32,319 )
Other   (552 )     708       (7,028 )     (1,471 )
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS $ (39,511 )   $ 65,462     $ (75,812 )   $ (27,649 )
                               

SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

  SEPTEMBER 30, 2022   DECEMBER 31, 2021
ASSETS      
Cash, cash equivalents and short-term investments $         863,423           $         941,627        
Accounts receivable, net           403,043                     31,113        
Prepaid and other current assets           86,028                     77,545        
Property & equipment and patents, net           373,795                     376,962        
Other long-term assets, net           201,926                     200,909        
TOTAL ASSETS $         1,928,215           $         1,628,156        
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Accounts payable, accrued liabilities, taxes payable & dividends payable $         79,480           $         79,888        
Current deferred revenue           210,981                     291,673        
Long-term deferred revenue           276,589                     19,463        
Long-term debt & other long-term liabilities           659,370                     484,215        
TOTAL LIABILITIES           1,226,420                     875,239        
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY           695,775                     745,239        
Noncontrolling interest           6,020                     7,678        
TOTAL EQUITY           701,795                     752,917        
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $         1,928,215           $         1,628,156        
           

RECONCILIATION OF NON-GAAP MEASURES

The table below presents a reconciliation of Adjusted EBITDA to net income attributable to InterDigital, Inc., the most directly comparable GAAP financial measure (in thousands):

  For the Three Months Ended September 30,   For the Nine Months Ended September 30,
    2022       2021       2022       2021  
Net income attributable to InterDigital, Inc. $ 22,222     $ 26,228     $ 61,285     $ 33,417  
Net loss attributable to non-controlling interest   (455 )     (1,014 )     (1,230 )     (11,042 )
Income tax provision   3,323       4,253       17,312       6,039  
Other income (expense) & interest expense   6,747       7,310       34,555       17,203  
Depreciation and amortization   18,713       19,421       59,149       58,971  
Share-based compensation   5,846       15,082       15,209       21,010  
Other items(a)         7,045       3,280       22,290  
Adjusted EBITDA 2 $ 56,396     $ 78,325     $ 189,560     $ 147,888  
                               

(a)  Other items in the above table includes $7.0 million of restructuring costs during the three months ended September 30, 2021 and restructuring costs of $3.3 million and $20.3 million during the nine months ended September 30, 2022 and 2021, respectively. The nine months ended September 30, 2021 also includes $2.0 million of additional non-recurring personnel-related costs expenses related to new employee agreements.

The table below presents a reconciliation of free cash flow to net cash (used in) provided by operating activities, the most directly comparable GAAP financial measure (in thousands):

  For the Three Months Ended September 30,   For the Nine Months Ended September 30,
    2022       2021       2022       2021  
Net cash (used in) provided by operating activities $ (18,729 )   $ 96,264     $ (70,469 )   $ 59,163  
Purchases of property and equipment   (110 )     (940 )     (872 )     (1,877 )
Capitalized patent costs   (8,944 )     (7,917 )     (30,267 )     (28,145 )
Free cash flow3 $ (27,783 )   $ 87,407     $ (101,608 )   $ 29,141  
                               

 

CONTACT: InterDigital, Inc.
  Email: investor.relations@interdigital.com
  +1 (302) 300-1857
   

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Source: InterDigital, Inc.