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Section 1: 8-K (8-K - 3.31.19 EARNINGS)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (Date of earliest event reported): May 2, 2019
______________

InterDigital, Inc.
(Exact name of registrant as specified in charter)

Pennsylvania
1-33579
82-4936666

(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)

200 Bellevue Parkway, Suite 300, Wilmington, DE
19809
(Address of Principal Executive Offices)
(Zip Code)

Registrant's telephone number, including area code: 302-281-3600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

q    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
q    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
q    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
q    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company q
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. q





Item 2.02.
Results of Operations and Financial Condition.

On May 2, 2019, InterDigital, Inc. issued a press release announcing its results of operations and financial condition for the first quarter ended March 31, 2019. A copy of the press release is attached hereto as Exhibit 99.1.

InterDigital, Inc. does not intend for this Item 2.02 or Exhibit 99.1 to be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or to be incorporated by reference into filings under the Securities Act of 1933, as amended.

Item 9.01.    Financial Statements and Exhibits.

(d)    Exhibits.

99.1






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



    
INTERDIGITAL, INC.
 
 
By: /s/ Jannie K. Lau
Jannie K. Lau
Chief Legal Officer, General
Counsel and Corporate Secretary


Date: May 2, 2019




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Section 2: EX-99.1 (EXHIBIT 99.1 - PRESS RELEASE)

Exhibit


INTERDIGITAL ANNOUNCES FINANCIAL RESULTS FOR FIRST QUARTER 2019

16% Year-over-year Growth in Recurring Revenue Underscores Early Impact of Technicolor Acquisition

WILMINGTON, DE. - May 2, 2019 - InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and development company, today announced results for the first quarter ended March 31, 2019.
First Quarter 2019 Financial Highlights

First quarter 2019 recurring revenue was $74.2 million, a 16% increase compared to recurring revenue of $64.1 million in first quarter 2018. InterDigital recorded a $5.5 million net charge that was recorded as a contra to non-recurring revenue in first quarter 2019, driven by the restructuring of an existing license agreement with a long-term customer.
First quarter 2019 operating expenses were $68.8 million, compared to $57.3 million in first quarter 2018. The increase in operating expenses was primarily driven by $12.1 million in costs related to the acquisition of Technicolor SA's patent licensing business and the pending acquisition of Technicolor's R&I team. Of those, $7.1 million were either transaction, integration or amortization expenses.
First quarter 2019 net loss1 was $2.8 million, or $0.09 per diluted share compared to net income1 $30.2 million, or $0.85 per diluted share, in first quarter 2018.
From January 1, 2019 through March 31, 2019, the company repurchased 1.6 million shares of common stock under its stock repurchase program for a total cost of $109.0 million. Additionally, from April 1, 2019 through April 30, 2019, we repurchased an additional 0.3 million shares for a total cost of $21.7 million. $37.4 million remains available for repurchase subject to the increase to the buyback authorization in December 2018.
In first quarter 2019, the company recorded $30.8 million of cash used in operating activities, compared to $0.6 million in first quarter 2018. The company used $40.8 million of free cash flow2 in first quarter 2019, compared to $9.0 million of free cash flow used in first quarter 2018. These decreases were primarily driven by the timing of cash collections under fixed-fee agreements. Ending cash and short-term investments totaled $0.8 billion.
In first quarter 2019, the company recognized a tax benefit of $1.8 million, for an effective tax rate of 29.9%. This is compared to a tax benefit of $4.9 million and an effective tax rate benefit of 20.6% during first quarter 2018.

“Our growth in recurring revenue as well as the start of meaningful contribution from the consumer electronics business underscores the tremendous growth potential of the new, more diversified InterDigital that we’ve built over the past year,” said William J. Merritt, President and CEO of InterDigital. “That growth, combined with the careful cost control that we continue to exhibit and that has been a hallmark of our company for many years, sets the stage for a significant increase in profitability and shareholder value.”





Conference Call Information
InterDigital will host a conference call on Thursday, May 2, 2019 at 10:00 a.m. Eastern Time to discuss its first quarter 2019 financial 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 Investors page. The company encourages participants to take advantage of the Internet option.
For telephone access to the conference, call (877) 260-1479 within the United States and Canada or +1 (334) 323-0522 from outside the United States and Canada. Please call by 9:50 a.m. ET on May 2nd and give the operator conference ID number 8316028.
An Internet replay of the conference call will be available on InterDigital's website in the Investors section. In addition, a telephone replay will be available from 1:00 p.m. ET May 2nd through 1:00 p.m. ET May 8th. To access the recorded replay, call +1 (888) 203-1112 or +1 (719) 457-0820 and use the replay code 8316028.
About InterDigital®
InterDigital develops mobile 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 and a richer multimedia experience years ahead of market deployment. InterDigital has licenses and strategic relationships with many of the world's leading wireless companies. Founded in 1972, InterDigital is listed on NASDAQ and is included in the S&P MidCap 400® index.
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 the acquisition of the Technicolor patent licensing business provides the company with a significant potential benefit. Words such as "believe," "anticipate," "estimate," "expect," "project," "intend," "plan," "forecast," "goal," "see," and variations of any such words 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 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 InterDigital's roadmap; (v) our ability to commercialize the company's technologies and enter into customer agreements; (vi) the failure of the markets for the company's 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 the company's technologies and products; (viii) changes in our interpretations of, and assumptions and calculations with respect to the impact on the company of, the Tax Reform Act, as well as further guidance that may be issued regarding the Tax Reform Act; (ix) difficulties or delays in integrating the Technicolor patent licensing business; (x) failure to accurately forecast the long-term value and costs of the Technicolor business or of certain assets acquired in the transaction; (xi) the resolution of current legal or regulatory proceedings, including any awards or judgments relating to such proceedings, additional legal or regulatory proceedings, changes in the schedules or costs associated with legal or regulatory proceedings or adverse rulings in such legal or regulatory proceedings; (xii) changes or inaccuracies in market projections; and (xiii) changes in the company's business strategy.





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.
Footnotes
1    Throughout this press release, net income (loss) and diluted earnings per share ("EPS") are attributable to InterDigital, Inc. (e.g., after adjustments for noncontrolling interests), unless otherwise stated.
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 net cash provided by operating activities 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 net cash used in operating activities, the most directly comparable GAAP financial measure, is provided at the end of this press release.






SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
(unaudited)
 
FOR THE THREE MONTHS ENDED MARCH 31,
 
2019
 
2018
REVENUES:
 
 
 
Variable patent royalty revenue
$
9,280

 
$
6,083

Fixed-fee royalty revenue
62,873

 
57,671

Current patent royalties
72,153

 
63,754

Non-current patent royalties
(5,775
)
 
23,344

Total patent royalties
66,378

 
87,098

Patent sales
225

 

Current technology solutions revenue
2,028

 
346

 
$
68,631

 
$
87,444

OPERATING EXPENSES:
 
 
 

Patent administration and licensing
36,071

 
26,916

Development
18,495

 
16,174

Selling, general and administrative
14,215

 
14,204

 
68,781

 
57,294

Income (loss) from operations
(150
)
 
30,150

OTHER EXPENSE (NET)
(5,863
)
 
(6,336
)
Income (loss) before income taxes
(6,013
)
 
23,814

INCOME TAX BENEFIT
1,799

 
4,915

NET INCOME (LOSS)
$
(4,214
)
 
$
28,729

Net loss attributable to noncontrolling interest
(1,411
)
 
(1,501
)
NET INCOME (LOSS) ATTRIBUTABLE TO INTERDIGITAL, INC.
$
(2,803
)
 
$
30,230

NET INCOME (LOSS) PER COMMON SHARE — BASIC
$
(0.09
)
 
$
0.87

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC
32,611

 
34,641

NET INCOME (LOSS) PER COMMON SHARE — DILUTED
$
(0.09
)
 
$
0.85

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED
32,611

 
35,606

CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.35

 
$
0.35


Note: Certain revisions have been made to prior period amounts.







SUMMARY CONSOLIDATED CASH FLOWS
(dollars in thousands)
(unaudited)
 
FOR THE THREE MONTHS ENDED MARCH 31,
 
2019
 
2018
Income (loss) before income taxes
$
(6,013
)
 
$
23,814

Taxes paid
(3,196
)
 
(8,053
)
Non-cash expenses
25,402

 
18,895

Change in deferred revenue
(43,423
)
 
(45,292
)
Increase (decrease) in operating working capital, deferred charges and other
(3,551
)
 
10,041

Capital spending and capitalized patent costs
(10,065
)
 
(8,434
)
FREE CASH FLOW
(40,846
)
 
(9,029
)
 
 
 
 
Long-term investments

 
(4,250
)
Proceeds from noncontrolling interest
10,333

 

Dividends paid
(11,629
)
 
(12,155
)
Taxes withheld upon vesting of restricted stock units
(4,097
)
 
(8,277
)
Share repurchases
(108,986
)
 
(6,024
)
Net proceeds from exercise of stock options
2

 

Unrealized gain (loss) on short-term investments
2,183

 
(1,643
)
NET DECREASE IN CASH, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
$
(153,040
)
 
$
(41,378
)






CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
 
MARCH 31,
2019
 
DECEMBER 31, 2018
ASSETS
 

 
 

Cash & short-term investments
$
793,045

 
$
945,780

Accounts receivable (net)
33,322

 
35,032

Other current assets
49,579

 
43,438

Property & equipment and patents (net)
457,297

 
464,618

Other long-term assets (net)
146,508

 
137,690

TOTAL ASSETS
$
1,479,751

 
$
1,626,558

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current portion of long-term debt
$
302,514

 
$

Accounts payable, accrued liabilities, taxes payable & dividends payable
60,823

 
67,723

Current deferred revenue
84,816

 
111,672

Long-term deferred revenue
138,567

 
157,634

Long-term debt & other long-term liabilities
67,518

 
351,516

TOTAL LIABILITIES
654,238

 
688,545

TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY
812,806

 
936,729

Noncontrolling interest
12,707

 
1,284

TOTAL EQUITY
825,513

 
938,013

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
1,479,751

 
$
1,626,558



Note: Certain revisions have been made to prior period amounts.







RECONCILIATION OF FREE CASH FLOW TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES

In the summary consolidated cash flows and throughout this release, the company refers to free cash flow. The table below presents a reconciliation of this non-GAAP financial measure to net cash used in operating activities, the most directly comparable GAAP financial measure.

 
FOR THE THREE MONTHS ENDED MARCH 31,
 
2019
 
2018
Net cash used in operating activities
$
(30,781
)
 
$
(595
)
Purchases of property, equipment, & technology licenses
(1,584
)
 
(399
)
Capitalized patent costs
(8,481
)
 
(8,035
)
Free cash flow
$
(40,846
)
 
$
(9,029
)






CONTACT:
InterDigital, Inc.:
 
Patrick Van de Wille
 
 
 +1 (858) 210-4814



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