InterDigital Announces Third Quarter 2013 Financial Results

InterDigital Announces Third Quarter 2013 Financial Results

Success in Arbitrations Drives Revenue of $110.6 Million, Net Income of $26.7
Million

WILMINGTON, Del., Oct. 31, 2013 (GLOBE NEWSWIRE) -- InterDigital, Inc.
(Nasdaq:IDCC), a wireless research and development company, today announced
results for the third quarter ended September 30, 2013.

Third Quarter 2013 Financial Highlights:

  *Revenue of $110.6 million;
  *Net income of $26.7 million, or $0.64 per diluted share; and
  *Ending cash and short-term investments totaling $756.8 million at
    September 30, 2013.

"The quarter and year-to-date results reflect the strength of InterDigital's
overall business," commented William J. Merritt, President and Chief Executive
Officer of InterDigital. "Our patent and technology licensing revenue was
strong, reflecting our base of core licensees, our ability to add or extend
licensees and our ability to successfully arbitrate disputes with licensees
when they arise.Our arbitration successes lifted the quarterly results and
are also expected to drive solid incremental revenue in coming quarters.We
also demonstrated the depth of the InterDigital patent portfolio as well as
our creativity in monetizing patents with the launch of Signal Trust for
Wireless Innovation, which will work to secure licenses within the very large
cellular infrastructure market.Further, we continue to see significant
interest in the technologies being developed in our Labs and Solutions groups,
and are excited about the technologies being incubated in our new Innovation
Partners ecosystem.Indeed, our pipeline of innovation has never been more
diverse, with our patent filings closely in line with past years, but at an
overall lower research and development cost."

Third Quarter 2013 Summary

Revenue in third quarter 2013 totaled $110.6 million, including $51.6 million
in connection with a third quarter arbitration award related to one of the
company's technology solutions agreements and $12.5 million in past sales
primarily related to Pegatron shipments from July 1, 2012 through March 31,
2013.Revenue for third quarter 2012 was $434.0 million, which included $58.4
million of patent licensing revenue and $375.0 million from the company's
patent sale to Intel Corporation.The company's third quarter 2013 net income
was $26.7 million, or $0.64 per diluted share, compared to net income of
$235.7 million, or $5.56 per diluted share, in third quarter 2012.

Fixed-fee amortized royalty revenue decreased $16.9 million year-over-year
primarily due to the expiration of the 3G portion of the company's 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
increased $2.7 million due to the inclusion of certain products as a result of
the company's second quarter Pegatron arbitration award.Companies that
accounted for ten percent or more of the $110.6 million of third quarter 2013
total revenue were Intel Mobile Communications GmbH (49%) and Pegatron
Corporation (14%).

Third quarter 2013 operating expenses totaled $61.5 million, compared to $70.8
million in third quarter 2012.This change included a $15.6 million decrease
in cost of patent sale, primarily related to the company's third quarter 2012
patent sale to Intel Corporation, and a $1.6 million decrease in
personnel-related costs, primarily due to lower personnel levels as a result
of the voluntary early retirement plan ("VERP") initiated in third quarter
2012.These and other decreases were partially offset by a $3.3 million
increase in long-term compensation, a $1.9 million increase in patent
amortization and a $0.6 million increase in intellectual property enforcement
and non-patent litigation costs.The increase in long-term compensation was
driven by a third quarter 2013 charge of $4.3 million to increase certain
accrual rates following the positive impact of the recently resolved
arbitrations on the company's financial results.The increase in patent
amortization was driven by recent patent acquisitions.The increase in
intellectual property enforcement and non-patent litigation costs ($18.6
million in third quarter 2013 compared to $18.0 million in third quarter 2012)
was due to the higher level of activity surrounding the company's USITC
actions.

Third quarter 2013 other expense was $3.0 million, an increase of $0.3 million
compared to $2.7 million of other expense in third quarter 2012.The change
between periods primarily resulted from lower returns on the company's
investment balances duringthird quarter 2013as compared tothird quarter
2012.

The company's third quarter 2013 effective tax rate was approximately 43.5
percent based on the statutory federal tax rate net of discrete federal and
state taxes, as compared to 34.6 percent in third quarter 2012 based on the
statutory federal tax rate net of discrete foreign taxes.The increase in the
effective tax rate resulted from the impact of additional forecasted state tax
expense, resulting, in part, from the company's income mix related to the
increase in technology solutions revenue, on the annualized effective tax rate
in 2013.

In third quarter 2013, the company used $9.4 million of free cash flow
compared to $335.9 million generated in third quarter 2012.This change in
free cash flow primarily resulted from the third quarter 2012 receipt of
$375.0 million from Intel Corporation and was partially offset by an increase
in patent licensing cash receipts, primarily related to the resolution of the
Pegatron arbitration.

First Nine Months 2013 Summary

Revenue in first nine months 2013 totaled $225.7 million, including $51.6
million in connection with the third quarter arbitration award related to one
of the company's technology solutions agreements and $37.4 million in past
sales primarily as a result of the second quarter 2013 Pegatron arbitration
award.Revenue for the comparable period in 2012 was $575.2 million, which
included $189.3 million of patent royalties and $375 million from the
company's patent sale to Intel Corporation.The company's first nine months
2013 net income was $23.6 million, or $0.57 per diluted share, compared to net
income of $256.3 million, or $5.81 per diluted share, in first nine months
2012.

Fixed-fee amortized royalty revenue decreased $50.5 million year-over-year due
to the expiration of the 3G portion of the company's 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 $3.8 million
due to lower shipments from our Japanese per-unit licensees and one of our
licensees with concentrations in the smartphone market.Companies that
accounted for ten percent or more of the $225.7 million of first nine months
2013 total revenue were Intel Mobile Communications GmbH (24%), Pegatron
Corporation (18%), Sony Corporation of America (13%) and Blackberry (10%).

First nine months 2013 operating expenses totaled $178.9 million, compared to
$175.0 million in first nine months 2012.This change includes a $12.9 million
increase in intellectual property enforcement and non-patent litigation costs,
a $5.6 million increase in patent amortization and a $3.3 million increase in
patent maintenance and patent evaluation.The increase in intellectual
property enforcement and non-patent litigation costs ($56.8 million in first
nine months 2013 versus $44.0 million in first nine months 2012) was due to
the higher level of activity surrounding the company's USITC actions.The
increase in patent amortization was driven by recent patent acquisitions.The
increase in patent maintenance and patent evaluation was primarily related to
due diligence associated with both patent acquisition and patent sale
opportunities.These and other increases were partially offset by a $16.5
million decrease in cost of patent sales, primarily related to the patent sale
to Intel Corporation, and a $5.4 million decrease in long-term compensation
and personnel-related costs, primarily due to lower accrual rates in 2013 for
the company's incentive compensation plans and lower personnel levels as a
result of the VERP initiated in third quarter 2012.

First nine months 2013 other expense of $9.5 million increased from $8.0
million in first nine months 2012.The increase primarily resulted from the
recognition of a $6.7 million investment impairment during first nine months
2013, partially offset by an increase in investment income that primarily
resulted from interest income associated with the Pegatron arbitration award
received in first nine months 2013.

In first nine months 2013, the company's effective tax rate was approximately
41.4 percent based on the statutory federal tax rate net of discrete federal
and state taxes.During first nine months 2012, the company's effective tax
rate was approximately 34.7 percent based on the statutory federal tax rate
net of discrete foreign taxes.The increase in the effective tax rate resulted
from the impact of additional forecasted state tax expense, resulting, in
part, from the company's income mix related to the increase in technology
solutions revenue, on the annualized effective tax rate in 2013 and was
partially offset by a discrete first quarter 2013 reversal of a valuation
allowance against certain deferred tax assets.

In first nine months 2013, the company generated $194.5 million in free cash
flow compared to $278.7 million in first nine months 2012.This decrease is
primarily attributable to the receipt of patent sales revenue totaling $375
million during third quarter 2012, partially offset by prepayment receipts
totaling $242.4 million.

Near Term Outlook

"We are pleased with the arbitration awards we have received so far in 2013,"
said Richard J. Brezski, Chief Financial Officer."Year to date, these awards
have collectively contributed approximately $90 million of revenue.More
importantly, we expect these arbitration outcomes will result in additional
past sales revenue and recurring revenue in future quarters.Specifically, we
expect to recognize approximately $27 million of past sales revenue in fourth
quarter 2013 as a result of the interplay between awards received under two
separate customer arbitrations.We will provide a more complete update of our
revenue expectations for fourth quarter 2013 after we receive and review the
applicable patent license and product sales royalty reports."

Conference Call Information

InterDigital will host a conference call on Thursday, October 31, 2013 at
10:00 a.m. Eastern Time to discuss its third 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 (888) 726-2458 within the United
States or (913) 312-1483 from outside the United States.Please call by 9:50
a.m. ET on October 31 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 Investors section.In addition, a telephone replay will be
available from 1:00 p.m. ET October 31 through 1:00 p.m. ET November 05.To
access the recorded replay, call (888) 203-1112 or (719) 457-0820 and use the
replay code 9107181.

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 expectation that our
recent arbitration successes will drive solid incremental revenue and result
in additional past sales revenue and recurring revenue in future quarters,
(ii) our expectation that we will recognize approximately $27 million of past
sales revenue in fourth quarter 2013 as a result of the interplay between
awards received under two separate customer arbitrations, (iii) our plans to
provide a more complete update of our revenue expectations for fourth quarter
2013 after we receive and review the applicable patent license and product
sales royalty reports and (iv) our belief that Signal Trust for Wireless
Innovation will secure licenses within the very large cellular infrastructure
market.Words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "forecast," "will," "continue to," "work 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; (xi) changes in the company's
business strategy; (xii) the ability of the Signal Trust for Wireless
Innovation to enter into patent license agreements and the timing and terms of
any such agreements; and (xiii) the exercise by the company of any of its
retained rights with respect to the patent assets transferred to the Signal
Trust for Wireless Innovation.

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/(used in)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 provided by / (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 FOR THE NINE MONTHS ENDED
                          SEPTEMBER 30,              SEPTEMBER 30,
                         2013          2012         2013         2012
REVENUES:                                                      
Per-unit royalty revenue  $26,349     $23,639    $81,715    $85,515
Fixed fee amortized       16,915        33,764       50,741       101,209
royalty revenue
Past sales                12,491        981          37,420       2,586
Patent sales              —             375,000      —            384,000
Technology solutions      54,868        626          55,802       1,876
revenue
                         110,623       434,010      225,678      575,186
                                                              
OPERATING EXPENSES:                                            
Patent administration and 36,786        45,551       106,825      94,979
licensing
Development               15,772        16,375       45,395       51,041
Selling, general and      8,937         8,865        25,138       28,968
administrative
Repositioning             —             —            1,544        —
                         61,495        70,791       178,902      174,988
                                                              
Income from operations    49,128        363,219      46,776       400,198
                                                              
OTHER EXPENSE             (2,950)       (2,708)      (9,531)      (7,926)
                                                              
Income before income      46,178        360,511      37,245       392,272
taxes
                                                              
INCOME TAX PROVISION      (20,068)      (124,842)    (15,432)     (136,000)
                                                              
NET INCOME                $26,110     $235,669   $21,813    $256,272
Net loss attributable to  (550)         —            (1,816)      —
noncontrolling interest
NET INCOME ATTRIBUTABLE   $26,660     $235,669   $23,629    $256,272
TO INTERDIGITAL, INC.
NET INCOME PER COMMON     $0.65       $5.61      $0.57      $5.86
SHARE — BASIC
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES          41,185        42,024       41,162       43,761
OUTSTANDING — BASIC
NET INCOME PER COMMON     $0.64       $5.56      $0.57      $5.81
SHARE — DILUTED
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES          41,448        42,353       41,467       44,072
OUTSTANDING — DILUTED
CASH DIVIDENDS DECLARED   $0.10       $0.10      $0.30      $0.30
PER COMMON SHARE
                                                              
                                                              
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
                                                              
                                                  
                         FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
                          SEPTEMBER 30,              SEPTEMBER 30,
                         2013          2012         2013         2012
Net income before income  $46,178     $360,511   $37,245    $392,272
taxes
Taxes paid                (247)         (5,122)      (3,331)      (7,874)
Non-cash expenses         14,327        21,074       49,789       41,310
Increase in deferred      20,923        4,650        187,276      29,220
revenue
Deferred revenue          (82,664)      (48,028)     (135,187)    (155,344)
recognized
Increase (decrease) in
operating working         453           8,667        82,928       838
capital, deferred charges
and other
Capital spending and      (8,354)       (5,867)      (24,269)     (21,762)
capitalized patent costs
FREE CASH FLOW            (9,384)       335,885      194,451      278,660
                                                              
Tax benefit from          80            (84)         763          1,506
share-based compensation
Payments on long-term
debt, including capital   —             —            —            (180)
leases
                                                              
Acquisition of patents    —             (750)        (13,013)     (13,750)
Long-term investments     —             —            (445)        —
Proceeds from             1,275         —            6,376        —
noncontrolling interests
Dividends paid            (4,118)       (4,348)      (8,233)      (13,388)
Share repurchases         —             (74,949)     —            (152,694)
Net proceeds from         93            123          734          713
exercise of stock options
Unrealized (loss) gain on (896)         1,331        (1,070)      2,466
short-term investments
NET INCREASE (DECREASE)
IN CASH AND SHORT-TERM    $(12,950)    $257,208   $179,563   $103,333
INVESTMENTS



CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
                                                                
                                                   September 30, December 31,
                                                    2013          2012
ASSETS                                                          
Cash & short-term investments                      $756,842    $577,279
Accounts receivable (net)                          67,392        169,874
Current deferred tax assets                        24,541        36,997
Other current assets                               30,519        30,197
Property & equipment and patents (net)             202,757       185,381
Other long-term assets (net)                       47,534        56,881
TOTAL ASSETS                                       $1,129,585   $1,056,609
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY                            
Accounts payable, accrued liabilities, taxes        $55,322     $66,608
payable & dividends payable
Current deferred revenue                           71,225        106,305
Long-term deferred revenue                         248,989       161,820
Long-term debt & other long-term liabilities       206,725       203,171
TOTAL LIABILITIES                                  582,261       537,904
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY      542,764       518,705
Noncontrolling interest                            4,560         —
TOTAL EQUITY                                       547,324       518,705
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY         $1,129,585   $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  FOR THE NINE MONTHS ENDED
                         SEPTEMBER 30,               SEPTEMBER 30,
                        2013          2012          2013         2012
Net cash provided by
(used in) operating      $(1,030)     $ 341,752    $ 218,720   $ 300,422
activities
                                                              
Purchases of property,
equipment, & technology  (1,552)       (949)         (2,732)      (1,979)
licenses
Capitalized patent costs (6,802)       (4,918)       (21,537)     (19,783)
Free cash flow           $(9,384)     $ 335,885    $ 194,451   $ 278,660

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

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