Pennsylvania | 1-33579 | 23-1882087 |
(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) |
Item 2.02. | Results of Operations and Financial Condition. |
99.1 | InterDigital, Inc. press release dated July 30, 2015. |
INTERDIGITAL, INC. |
By: /s/ Jannie K. Lau |
Jannie K. Lau |
Executive Vice President, |
General Counsel and Secretary |
• | Second quarter 2015 recurring revenue was $91.2 million, consisting of current patent royalties and current technology solutions revenue, representing an increase of 23% compared to recurring revenue of $74.3 million in second quarter 2014. This increase in recurring revenue is primarily attributable to an increase in per-unit royalties related to an increase in shipments by Pegatron and our other Taiwan-based licensees. |
• | Total revenue was $118.6 million, compared to $194.2 million in second quarter 2014. Second quarter 2014 benefited from past patent royalties of $119.9 million, primarily related to new patent license agreements signed during that quarter, including with Samsung Electronics Co., Ltd. (“Samsung”). Second quarter 2015 included $27.3 million of past patent royalties as a result of the previously announced settlement with Arima Communications Corporation (“Arima”). |
• | Second quarter 2015 operating expenses were $60.0 million, compared to $65.9 million in second quarter 2014. The decrease was driven primarily by a $10.8 million decrease in performance-based incentive compensation. |
• | Net income1 was $32.6 million, or $0.89 per diluted share, compared to net income of $78.9 million, or $1.93 per diluted share, in second quarter 2014. |
• | In second quarter 2015, the company generated $17.0 million of free cash flow3 compared to $23.7 million generated in second quarter 2014. Ending cash and short-term investments totaled $907.6 million. |
• | During second quarter 2015, the company repurchased 0.4 million shares of common stock for $19.8 million. In addition, from July 1, 2015 through July 29, 2015, the company repurchased an additional 12,000 shares at a cost of $0.7 million. In June 2015, the company's Board of Directors authorized a $100 million increase to the current stock repurchase program, bringing it to $400 million. Since initiating this stock repurchase program in June 2014, the company has repurchased a total of 4.9 million shares for $223.9 million, representing approximately 14% of the company's shares outstanding at the time the program was authorized. |
• | The $5.9 million decrease in operating expenses was primarily due to the $10.8 million decrease in performance-based incentive compensation. The higher performance-based incentive compensation in second quarter 2014 was primarily related to increased accrual rates as a result of new license agreements signed during that quarter. The decrease in operating expenses was partially offset by a $2.5 million increase in commercial initiatives expense, which was primarily attributable to research and development activities to commercialize our IoT and next generation networks technologies. |
• | Companies that accounted for ten percent or more of second quarter 2015 total revenue were Pegatron Corporation (30%), Arima Communications Corporation (23%) and Samsung Electronics Co., Ltd. (15%). |
• | The company's second quarter effective tax rate was approximately 37.1% as compared to 37.4% during second quarter 2014, based on the statutory federal tax rate net of discrete federal and state taxes. |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
REVENUES: | |||||||||||||||
Per-unit royalty revenue | $ | 55,989 | $ | 33,916 | $ | 131,572 | $ | 70,404 | |||||||
Fixed fee amortized royalty revenue | 33,373 | 38,250 | 66,746 | 55,186 | |||||||||||
Current patent royalties | 89,362 | 72,166 | 198,318 | 125,590 | |||||||||||
Past patent royalties | 27,260 | 119,922 | 27,277 | 120,772 | |||||||||||
Total patent licensing royalties | 116,622 | 192,088 | 225,595 | 246,362 | |||||||||||
Current technology solutions revenue | 1,845 | 2,146 | 3,250 | 4,916 | |||||||||||
Past technology solutions revenue | 84 | — | 84 | 800 | |||||||||||
$ | 118,551 | $ | 194,234 | $ | 228,929 | $ | 252,078 | ||||||||
OPERATING EXPENSES: | |||||||||||||||
Patent administration and licensing | 31,212 | 31,272 | 62,837 | 64,966 | |||||||||||
Development | 18,326 | 22,901 | 36,317 | 38,788 | |||||||||||
Selling, general and administrative | 10,435 | 11,689 | 19,953 | 19,993 | |||||||||||
59,973 | 65,862 | 119,107 | 123,747 | ||||||||||||
Income from operations | 58,578 | 128,372 | 109,822 | 128,331 | |||||||||||
OTHER EXPENSE (NET) | (7,746 | ) | (3,602 | ) | (12,982 | ) | (7,566 | ) | |||||||
Income before income taxes | 50,832 | 124,770 | 96,840 | 120,765 | |||||||||||
INCOME TAX PROVISION | (18,877 | ) | (46,658 | ) | (36,553 | ) | (45,208 | ) | |||||||
NET INCOME | $ | 31,955 | $ | 78,112 | $ | 60,287 | $ | 75,557 | |||||||
Net loss attributable to noncontrolling interest | (647 | ) | (789 | ) | (1,380 | ) | (1,483 | ) | |||||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. | $ | 32,602 | $ | 78,901 | $ | 61,667 | $ | 77,040 | |||||||
NET INCOME PER COMMON SHARE — BASIC | $ | 0.91 | $ | 1.95 | $ | 1.69 | $ | 1.90 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | 36,022 | 40,443 | 36,486 | 40,444 | |||||||||||
NET INCOME PER COMMON SHARE — DILUTED | $ | 0.89 | $ | 1.93 | $ | 1.67 | $ | 1.90 | |||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED | 36,442 | 40,822 | 36,883 | 40,643 | |||||||||||
CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.30 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Income before income taxes | $ | 50,832 | $ | 124,770 | $ | 96,840 | $ | 120,765 | |||||||
Taxes paid | (24,050 | ) | (12,424 | ) | (36,764 | ) | (22,823 | ) | |||||||
Non-cash expenses | 20,763 | 19,213 | 39,022 | 33,178 | |||||||||||
Increase in deferred revenue | 18,273 | 242,361 | 90,776 | 256,859 | |||||||||||
Deferred revenue recognized | (41,865 | ) | (47,701 | ) | (86,022 | ) | (74,336 | ) | |||||||
Increase (decrease) in operating working capital, deferred charges and other | 1,342 | (293,079 | ) | (76,786 | ) | (283,362 | ) | ||||||||
Capital spending and capitalized patent costs | (8,255 | ) | (9,475 | ) | (17,520 | ) | (18,578 | ) | |||||||
FREE CASH FLOW | 17,040 | 23,665 | 9,546 | 11,703 | |||||||||||
Tax benefit from share-based compensation | 624 | 66 | 2,163 | 1,196 | |||||||||||
Acquisition of patents | — | (25,275 | ) | (20,000 | ) | (25,275 | ) | ||||||||
Proceeds from noncontrolling interests | 1,276 | 1,275 | 2,551 | 2,550 | |||||||||||
Dividends paid | (7,232 | ) | (4,045 | ) | (14,665 | ) | (8,088 | ) | |||||||
Share repurchases | (19,841 | ) | (8,454 | ) | (70,572 | ) | (8,454 | ) | |||||||
Proceeds from other financing activities | 4,500 | — | 4,500 | — | |||||||||||
Proceeds from issuance of convertible senior notes | — | — | 316,000 | — | |||||||||||
Purchase of convertible bond hedge | — | — | (59,376 | ) | — | ||||||||||
Proceeds from issuance of warrants | — | — | 42,881 | — | |||||||||||
Payment of debt issuance costs | — | — | (9,403 | ) | — | ||||||||||
Net proceeds from exercise of stock options | 26 | 10 | 26 | 353 | |||||||||||
Unrealized loss on short-term investments | 21 | 1,067 | 16 | 466 | |||||||||||
NET (DECREASE) INCREASE IN CASH AND SHORT-TERM INVESTMENTS | $ | (3,586 | ) | $ | (11,691 | ) | $ | 203,667 | $ | (25,549 | ) |
JUNE 30, 2015 | DECEMBER 31, 2014 | ||||||
ASSETS | |||||||
Cash & short-term investments | $ | 907,595 | $ | 703,928 | |||
Accounts receivable (net) | 108,717 | 51,702 | |||||
Current deferred tax assets | 68,409 | 54,019 | |||||
Other current assets | 32,473 | 32,227 | |||||
Property & equipment and patents (net) | 271,183 | 278,086 | |||||
Other long-term assets (net) | 72,745 | 73,000 | |||||
TOTAL ASSETS | $ | 1,461,122 | $ | 1,192,962 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current portion of long-term debt | $ | 221,607 | $ | — | |||
Accounts payable, accrued liabilities, taxes payable & dividends payable | 66,548 | 80,474 | |||||
Current deferred revenue | 110,198 | 124,695 | |||||
Long-term deferred revenue | 312,592 | 293,342 | |||||
Long-term debt & other long-term liabilities | 257,346 | 218,774 | |||||
TOTAL LIABILITIES | 968,291 | 717,285 | |||||
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY | 484,311 | 468,328 | |||||
Noncontrolling interest | 8,520 | 7,349 | |||||
TOTAL EQUITY | 492,831 | 475,677 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,461,122 | $ | 1,192,962 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net cash provided by operating activities | $ | 25,295 | $ | 33,140 | $ | 27,066 | $ | 30,281 | ||||||||
Purchases of property, equipment, & technology licenses | (491 | ) | (246 | ) | (1,329 | ) | (1,466 | ) | ||||||||
Capitalized patent costs | (7,764 | ) | (9,229 | ) | (16,191 | ) | (17,112 | ) | ||||||||
Free cash flow | $ | 17,040 | $ | 23,665 | $ | 9,546 | $ | 11,703 |
CONTACT: | InterDigital, Inc.: |
Patrick Van de Wille | |
patrick.vandewille@interdigital.com | |
+1 (858) 210-4814 |