InterDigital Announces First Quarter 2013 Financial Results

InterDigital Announces First Quarter 2013 Financial Results

     Strong Free Cash Flow, Driven by New and Renewed License Agreements
            Company Files to Confirm $30 Million Arbitration Award

WILMINGTON, Del., April 25, 2013 (GLOBE NEWSWIRE) -- InterDigital, Inc.
(Nasdaq:IDCC), a wireless research and development company, today announced
results for the first quarter ended March 31, 2013.

Highlights for first quarter 2013:

  *Revenue of $47.4 million;
  *Net loss of $12.3 million, or $0.30 per diluted share;
  *Ending cash and short-term investments totaling $635.8 million; and
  *Free cash flow^1 of $70.9 million.

"The quarter came in as we expected. The business continues to deliver strong
free cash flow, but revenue was affected by the expiration of the 2009 Samsung
patent license agreement, though that roll-off was partially offset by the new
license agreement with Sony," stated William J. Merritt, President and Chief
Executive Officer. "In addition, although it did not impact our first quarter
financial results, we recently filed to confirm a $30 million award from an
international arbitration tribunal related to one of our patent license
agreements. We remain committed to delivering strong financial results for the
full year, as reflected by the level of patent enforcement activity in the
quarter, as well as other key initiatives taken during the quarter."

"Notable moves to start the year included: patent acquisitions totaling
approximately 800 patents and patent applications in areas that broaden some
existing areas of research; making a strategic investment in BIO-key related
to security technology; commencing field trials with a number of major
operators involving our Smart Access Manager solution; and successfully
presenting at major industry events, where we unveiled some significant
advances in video streaming, spectrum management and machine-to-machine
technology, among others. We also announced four new or expanded license
agreements on terms that are positive for our long-term licensing goals, and
further strengthened our executive team to execute on our expanded business
strategy. We're confident these moves position us extremely well going
forward," added Mr. Merritt.

First Quarter 2013 Summary

Revenue in first quarter 2013 totaled $47.4 million, compared to $69.3 million
in first quarter 2012. This $21.9 million decrease in total revenue was
primarily attributable to a $16.8 million decrease in fixed-fee amortized
royalty revenue, the majority of which was due to the expiration of the 3G
portion of our patent license agreement with Samsung at the end of 2012, which
was partially offset by the addition of fixed-fee amortized royalty revenue
from the Sony patent license agreement signed in fourth quarter 2012. Per-unit
royalty revenue decreased $5.1 million, which was due to lower shipments by
BlackBerry and the company's Japanese per-unit licensees.

The company's first quarter 2013 net loss was $12.3 million, or $0.30 per
diluted share, a decrease from net income of $10.9 million, or $0.24 per
diluted share, in first quarter 2012, primarily due to lower revenue as
discussed above, higher intellectual property enforcement costs and a non-cash
investment impairment of $6.7 million ($3.7 million net of tax). Not including
this non-cash impairment, net loss would have been $8.6 million, or $0.21 per
diluted share.

First quarter revenue and operating expenses, not including intellectual
property enforcement costs and repositioning charges, were in line with the
expectations the company communicated on its February 20, 2013 earnings
conference call. Intellectual property enforcement costs increased to $20.7
million, primarily due to the high level of activity surrounding the company's
USITC actions, the related federal court actions and several licensee
arbitrations.

"The first quarter results and our subsequent arbitration award are examples
of the timing differences that sometimes exist between when significant events
occur, when we receive cash and when we recognize revenue. We reported a $12.3
million loss for the quarter, driven in part by the non-cash impairment, but
we generated almost $71 million of free cash flow in the period," noted
Richard J. Brezski, Chief Financial Officer. "Additionally, we were the
beneficiary of a $30 million arbitration award associated with a patent
license agreement, but we will defer revenue recognition until collectability
is reasonably assured."

"In addition, we are still awaiting a decision in a separate arbitration
involving one of our technology solutions agreements, and will continue to
defer recognition of related revenue until an award in that arbitration is
determined. As of March 31, 2013, we have deferred $48 million, nearly all of
which has been collected," added Mr. Brezski.

First quarter 2013 operating expenses totaled $62.4 million, an increase of
$12.5 million from $49.9 million in first quarter 2012. This increase was
driven by an $8.4 million increase in intellectual property enforcement and
non-patent litigation costs, a $1.8 million increase in patent amortization, a
$1.7 million increase in consulting services and $1.5 million of repositioning
costs associated with the company's 2012 voluntary early retirement program
("VERP"). These and other increases were partially offset by decreases in
long-term compensation and personnel-related costs totaling $1.4 million.
First quarter 2013 intellectual property enforcement costs were $20.7 million
as compared to $12.3 million in first quarter 2012, primarily due to costs
associated with the USITC actions and various arbitrations with our existing
licensees. The increase in patent amortization is primarily attributable to
patent acquisitions made within the last year. Consulting services increased
to support research and development projects initiated in the last twelve
months and patent administration and licensing efforts. The $1.4 million
decrease in long-term compensation and personnel-related costs was primarily
due to lower personnel levels as a result of the VERP initiated in third
quarter 2012, along with lower accrual rates on performance compensation
during 2013.

First quarter 2013 other expense of $9.5 million increased $6.8 million from
$2.7 million in first quarter 2012. The change between periods primarily
resulted from the recognition of an investment impairment during first quarter
2013.

The company's first quarter 2013 effective tax rate was approximately 47
percent, as compared to 34 percent in first quarter 2012. The increase
resulted from a discrete first quarter 2013 reversal of a valuation allowance
against certain deferred tax assets and the impact of additional forecasted
state tax expense on the annualized effective tax rate in 2013. First quarter
2012 includes a $1.5 million after-tax benefit related to interest income on a
tax refund.

In first quarter 2013, the company generated $70.9 million of free cash flow
compared to cash used of $33.9 million in first quarter 2012. This increase is
primarily attributed to higher cash receipts in first quarter 2013, including
the receipt of prepayments from licensees.

Conference Call Information

InterDigital will host a conference call on Thursday, April 25, 2013 at 10:00
a.m. Eastern Time to discuss its first quarter 2013 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 under the
Events section on the homepage. The company encourages participants to take
advantage of the Internet option.

For telephone access to the conference, call (800) 533-7954 within the United
States or (785) 830-1924 from outside the United States. Please call by 9:50
a.m. ET on April 25 and ask the operator for the InterDigital Financial Call.

An Internet replay of the conference call will be available on InterDigital's
web site in the Investor Relations section. In addition, a telephone replay
will be available from 1:00 p.m. ET April 25 through 1:00 p.m. ET April 30. To
access the recorded replay, call (888) 203-1112 or (719) 457-0820 and use the
replay code 2606375.

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 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: (i) our commitment to delivering
strong financial results for the full year and (ii) our belief that the moves
made to start the year position us extremely well going forward. Words such as
"anticipate," "estimate," "expect," "project," "intend," "plan," "forecast,"
"will," "continue to," 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) the ability of our
Innovations Group 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) the ability of our
Solutions Group 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 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; (viii) 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; (ix) 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; (x)
changes or inaccuracies in market projections; and (xi) 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.

Footnote

^1 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 generally accepted accounting principles ("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 OPERATIONS
(dollars in thousands except per share data)
(unaudited)
                                                            
                                         FOR THE THREE MONTHS ENDED MARCH 31,
                                         2013                2012
REVENUES:                                                    
Per-unit royalty revenue                  $ 29,314            $ 34,446
Fixed fee amortized royalty revenue       16,910              33,681
Past sales                                687                 455
Technology solutions revenue              452                 723
                                         47,363              69,305
                                                            
OPERATING EXPENSES:                                          
Patent administration and licensing       36,875              23,228
Development                               16,146              17,489
Selling, general and administrative       7,842               9,183
Repositioning                             1,544               —
                                         62,407              49,900
                                                            
(Loss) income from operations             (15,044)            19,405
                                                            
OTHER EXPENSE                             (9,480)             (2,734)
                                                            
(Loss) income before income taxes         (24,524)            16,671
                                                            
INCOME TAX BENEFIT (PROVISION)            11,621              (5,741)
                                                            
NET (LOSS) INCOME                         $ (12,903)          $ 10,930
Net (Loss) Income attributable to         (634)               —
noncontrolling interest
NET (LOSS) INCOME ATTRIBUTABLE TO         $ (12,269)          $ 10,930
INTERDIGITAL, INC.
NET (LOSS) INCOME PER COMMON SHARE —      $ (0.30)            $ 0.24
BASIC
WEIGHTED AVERAGE NUMBER OF COMMON SHARES  41,138              45,401
OUTSTANDING — BASIC
NET (LOSS) INCOME PER COMMON SHARE —      $ (0.30)            $ 0.24
DILUTED
WEIGHTED AVERAGE NUMBER OF COMMON SHARES  41,138              45,946
OUTSTANDING — DILUTED
CASH DIVIDENDS DECLARED PER COMMON SHARE  $ 0.10              $ 0.10
                                                            

                                      

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
                                                           
                                         FOR THE THREE MONTHS ENDED MARCH 31,
                                         2013               2012
Net (loss) income before income taxes     $ (24,524)         $ 16,671
Taxes paid                                (1,813)            (906)
Non-cash expenses                         22,525             10,084
Increase in deferred revenue              11,569             17,718
Deferred revenue recognized               (25,472)           (56,865)
Increase (decrease) in operating working  93,953             (12,407)
capital, deferred charges and other
Capital spending and capitalized patent   (5,352)            (8,158)
costs
FREE CASH FLOW                            70,886             (33,863)
                                                           
Tax benefit from share-based compensation 140                1,468
                                                           
Payments on long-term debt, including     —                  (77)
capital leases
                                                           
Acquisition of patents                    (12,500)           (1,000)
Long-term investments                     (445)              —
Dividends paid                            —                  (4,570)
Share repurchases                         —                  (25,325)
Net proceeds from exercise of stock       209                240
options
Unrealized gain on short-term investments 239                1,135
                                                           
NET INCREASE (DECREASE) IN CASH AND       $ 58,529           $ (61,992)
SHORT-TERM INVESTMENTS
                                                           



CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
                                                                
                                                     March 31,   December 31,
                                                     2013        2012
ASSETS                                                           
Cash & short-term investments                         $ 635,808   $ 577,279
Accounts receivable (net)                             51,512      169,874
Current deferred tax assets                           43,155      36,997
Other current assets                                  31,039      30,197
Property & equipment and patents (net)                198,460     185,381
Other long-term assets (net)                          54,713      56,881
                                                                
TOTAL ASSETS                                          $ 1,014,687 $ 1,056,609
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY                             
Accounts payable, accrued liabilities, taxes payable  $ 52,389    $ 66,608
& dividends payable
Current deferred revenue                              111,949     106,305
Long-term deferred revenue                            142,276     161,820
Long-term debt & other long-term liabilities          202,425     203,171
TOTAL LIABILITIES                                     509,039     537,904
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY         506,282     518,705
Noncontrolling interest                               (634)       —
TOTAL EQUITY                                          505,648     518,705
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY            $ 1,014,687 $ 1,056,609
                                                                
                                                                

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

In the summary consolidated statements of 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 provided by /
(used in) operating activities, the most directly comparable GAAP financial
measure.

                                      

                                         FOR THE THREE MONTHS ENDED MARCH 31,
                                         2013              2012
Net cash provided by (used in) operating  $ 76,238          $ (25,705)
activities
Purchases of property, equipment, &       (429)             (531)
technology licenses
Capitalized patent costs                  (4,923)           (7,627)
Free cash flow                            $ 70,886          $ (33,863)

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

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