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Section 1: 8-K (8-K)

Document
false0001405495 0001405495 2019-08-01 2019-08-01




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): August 1, 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 19809-3727
(Address of principal executive offices, Zip code)

302-281-3600
Registrant's telephone number, including area code
Not Applicable
Former Name or Former Address, if Changed Since Last Report
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:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $0.01 per share
 
IDCC
 
NASDAQ Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company 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 
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. 





Item 2.02.
Results of Operations and Financial Condition.

On August 1, 2019, InterDigital, Inc. issued a press release announcing its results of operations and financial condition for the fiscal quarter ended June 30, 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
 
 
101.INS
Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
 
 
101.SCH
Schema Document
 
 
101.CAL
Calculation Linkbase Document
 
 
101.DEF
Definition Linkbase Document
 
 
101.LAB
Labels Linkbase Document
 
 
101.PRE
Presentation Linkbase Document





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: August 1, 2019




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


INTERDIGITAL ANNOUNCES FINANCIAL RESULTS FOR SECOND QUARTER 2019

New wireless licensing and expansion of business to consumer electronics drive 10% year-over-year growth in recurring revenue

WILMINGTON, DE. - August 1, 2019 - InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology research and development company, today announced results for the second quarter ended June 30, 2019.
Second Quarter 2019 Financial Highlights

Second quarter 2019 recurring revenue was $74.4 million, a 10% increase compared to recurring revenue of $67.5 million in second quarter 2018. The increase reflects the contribution of InterDigital's new consumer electronic licensing program, as well as revenue from agreements signed in the second half of 2018 in the company's mobile device licensing program.
Second quarter 2019 operating expenses were $66.7 million, compared to $53.9 million in second quarter 2018. The increase was primarily driven by $13.2 million in costs related to the acquisition of Technicolor SA's (Euronext Paris:TCH) (OTCQX:TCLRY) patent licensing business and Research and Innovation (R&I) research and development organization. Of those, $5.9 million were either transaction, integration or amortization expenses.
Second quarter 2019 net income1 was $7.7 million, or $0.24 per diluted share compared to net income1 $11.0 million, or $0.31 per diluted share, in second quarter 2018.
From January 1, 2019 through June 30, 2019, the company repurchased 2.5 million shares of common stock under its stock repurchase program for a total cost of $171.3 million, $19.6 million of which is attributable to the repurchase by the company of its common stock in connection with the issuance of the 2024 Notes (as defined below). $96.8 million remains available for repurchase subject to the increase to the buyback authorization in May 2019.
In second quarter 2019, the company recorded $22.7 million of cash used in operating activities, compared to $6.8 million of cash provided in second quarter 2018. The company used $33.4 million of free cash flow2 in second quarter 2019, compared to $0.8 million of free cash flow used in second quarter 2018. These decreases were primarily driven by the timing of cash collections under fixed-fee agreements. Ending cash and short-term investments as of June 30, 2019 totaled $0.8 billion.
In second quarter 2019, the company recognized a tax provision of $5.0 million compared to a tax provision of $1.1 million in second quarter 2018.
“With the completion of the acquisition of Technicolor’s R&I team, InterDigital now has fully integrated research-driven businesses in two of today’s most exciting technology segments, and has become one of the largest pure research and licensing businesses in the world,” said William J. Merritt, President and CEO of InterDigital. “That research and our patent portfolio are perfectly aligned with today’s converged devices and advanced services, and represent what we see as a powerful, significantly de-risked platform for growth going forward.”
Additional Highlights

On June 3, 2019, the company completed a private offering of $400 million in aggregate principal amount of 2.00% Senior Convertible Notes due 2024 (the “2024 Notes”). The net proceeds from the offering were approximately $391.6 million after deducting the initial purchasers’ fees and estimated offering expenses. A portion of the net proceeds from the issuance of the 2024 Notes were used to repurchase $221.1 million in aggregate principal amount of the company’s existing 1.50% senior convertible notes due 2020, and to repurchase $19.6 million in shares of the company’s common stock.





On May 31, 2019, the company completed its acquisition of the R&I research and development organization of Technicolor. The acquisition made the company one of the largest long-term R&D and licensing companies in the world, with approximately 340 engineers worldwide.
Other Income in second quarter 2019 included $8.7 million to record the net impact of a gain resulting from our purchase of Technicolor’s R&I organization and a loss on extinguishment of debt related to our May 2019 repurchase of a portion of our convertible notes.
On July 19, 2019, the company completed the sale of its Hillcrest Laboratories, Inc. business to a subsidiary of CEVA, Inc. As part of the transaction, InterDigital retained substantially all of the patent assets that it acquired in 2016.






Conference Call Information
InterDigital will host a conference call on Thursday, August 1, 2019 at 10:00 a.m. Eastern Time to discuss its second 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 (800) 239-9838 within the United States and Canada or +1 (323) 794-2551 from outside the United States and Canada. Please call by 9:50 a.m. ET on August 1st and give the operator conference ID number 1006593.
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 August 1st through 1:00 p.m. ET August 8th. To access the recorded replay, call +1 (888) 203-1112 or +1 (719) 457-0820 and use the replay code 1006593.
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 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 JUNE 30,
 
FOR THE SIX MONTHS ENDED JUNE 30,
 
2019
 
2018
 
2019
 
2018
REVENUES:
 
 
 
 
 
 
 
Variable patent royalty revenue
$
8,594

 
$
6,594

 
$
17,874

 
$
12,677

Fixed-fee royalty revenue
63,736

 
60,264

 
126,609

 
117,935

Current patent royalties
72,330

 
66,858

 
144,483

 
130,612

Non-current patent royalties
1,237

 
2,017

 
(4,538
)
 
25,361

Total patent royalties
73,567

 
68,875

 
139,945

 
155,973

Patent sales

 

 
225

 

Current technology solutions revenue
2,042

 
680

 
4,070

 
1,026

 
$
75,609

 
$
69,555

 
$
144,240

 
$
156,999

OPERATING EXPENSES:
 
 
 

 
 
 
 

Patent administration and licensing
37,353

 
26,487

 
73,424

 
53,403

Development
17,027

 
15,829

 
35,522

 
32,003

Selling, general and administrative
12,314

 
11,559

 
26,529

 
25,763

 
66,694

 
53,875

 
135,475

 
111,169

Income from operations
8,915

 
15,680

 
8,765

 
45,830

INTEREST EXPENSE
(9,907
)
 
(8,960
)
 
(19,385
)
 
(18,203
)
OTHER INCOME (NET)
12,354

 
4,113

 
15,969

 
7,020

Income before income taxes
11,362

 
10,833

 
5,349

 
34,647

INCOME TAX BENEFIT (PROVISION)
(4,984
)
 
(1,057
)
 
(3,185
)
 
3,858

NET INCOME
$
6,378

 
$
9,776

 
$
2,164

 
$
38,505

Net loss attributable to noncontrolling interest
(1,365
)
 
(1,190
)
 
(2,776
)
 
(2,691
)
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.
$
7,743

 
$
10,966

 
$
4,940

 
$
41,196

NET INCOME PER COMMON SHARE — BASIC
$
0.25

 
$
0.32

 
$
0.15

 
$
1.19

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC
31,547

 
34,769

 
32,076

 
34,705

NET INCOME PER COMMON SHARE — DILUTED
$
0.24

 
$
0.31

 
$
0.15

 
$
1.16

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED
31,776

 
35,631

 
32,366

 
35,619

CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.35

 
$
0.35

 
$
0.70

 
$
0.70


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







SUMMARY CONSOLIDATED CASH FLOWS
(dollars in thousands)
(unaudited)
 
FOR THE THREE MONTHS ENDED JUNE 30,
 
FOR THE SIX MONTHS ENDED JUNE 30,
 
2019
 
2018
 
2019
 
2018
Income before income taxes
$
11,362

 
$
10,833

 
$
5,349

 
$
34,647

Taxes paid
(6,574
)
 
(2,746
)
 
(9,770
)
 
(10,799
)
Non-cash expenses
25,725

 
19,901

 
51,127

 
38,796

Change in deferred revenue
(19,331
)
 
18,125

 
(62,754
)
 
(27,167
)
Increase (decrease) in operating working capital, deferred charges and other
(33,924
)
 
(39,286
)
 
(37,475
)
 
(29,245
)
Capital spending and capitalized patent costs
(10,637
)
 
(7,615
)
 
(20,702
)
 
(16,049
)
FREE CASH FLOW
(33,379
)
 
(788
)
 
(74,225
)
 
(9,817
)
 
 
 
 
 
 
 
 
Long-term investments

 
(2,000
)
 

 
(6,250
)
Acquisition of patents

 
(2,250
)
 

 
(2,250
)
Proceeds from noncontrolling interest

 

 
10,333

 

Dividends paid
(11,160
)
 
(12,164
)
 
(22,789
)
 
(24,319
)
Taxes withheld upon vesting of restricted stock units
(40
)
 
(111
)
 
(4,137
)
 
(8,388
)
Payments on long-term debt
(221,091
)
 

 
(221,091
)
 

Proceeds from issuance of convertible senior notes
400,000

 

 
400,000

 

Purchase of convertible bond hedge
(72,000
)
 

 
(72,000
)
 

Payment for warrant unwind
(4,184
)
 

 
(4,184
)
 

Prepayment penalty on long-term debt
(10,763
)
 

 
(10,763
)
 

Proceeds from hedge unwind
9,038

 

 
9,038

 

Proceeds from issuance of warrants
47,600

 

 
47,600

 

Payments of debt issuance costs
(7,300
)
 

 
(7,300
)
 

Share repurchases
(62,283
)
 
(3,148
)
 
(171,269
)
 
(9,172
)
Net proceeds from exercise of stock options

 
3,930

 
2

 
3,930

Unrealized gain (loss) on short-term investments
1,769

 
475

 
3,952

 
(1,168
)
NET INCREASE (DECREASE) IN CASH, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
$
36,207

 
$
(16,056
)
 
$
(116,833
)
 
$
(57,434
)






CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
 
JUNE 30,
2019
 
DECEMBER 31, 2018
ASSETS
 

 
 

Cash & short-term investments
$
831,159

 
$
945,780

Accounts receivable (net)
57,183

 
35,032

Other current assets
52,656

 
43,438

Property & equipment and patents (net)
449,468

 
464,618

Other long-term assets (net)
154,600

 
137,690

TOTAL ASSETS
$
1,545,066

 
$
1,626,558

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current portion of long-term debt
$
91,954

 
$

Accounts payable, accrued liabilities, taxes payable & dividends payable
68,369

 
67,723

Current deferred revenue
82,575

 
111,672

Long-term deferred revenue
121,477

 
157,634

Long-term debt & other long-term liabilities
380,451

 
351,516

TOTAL LIABILITIES
744,826

 
688,545

TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY
788,898

 
936,729

Noncontrolling interest
11,342

 
1,284

TOTAL EQUITY
800,240

 
938,013

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
1,545,066

 
$
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 JUNE 30,
 
FOR THE SIX MONTHS ENDED JUNE 30,
 
2019
 
2018
 
2019
 
2018
Net cash provided by (used in) operating activities
$
(22,742
)
 
$
6,827

 
$
(53,523
)
 
$
6,232

Purchases of property, equipment, & technology licenses
(1,278
)
 
(1,143
)
 
(2,862
)
 
(1,542
)
Capitalized patent costs
(9,359
)
 
(6,472
)
 
(17,840
)
 
(14,507
)
Free cash flow
$
(33,379
)
 
$
(788
)
 
$
(74,225
)
 
$
(9,817
)






CONTACT:
InterDigital, Inc.:
 
Patrick Van de Wille
 
patrick.vandewille@interdigital.com
 
 +1 (858) 210-4814
    


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