InterDigital Announces Fourth Quarter 2013 Financial Results

InterDigital Announces Fourth Quarter 2013 Financial Results

Successful Execution of Licensing Program Drives Full Year Revenue of $325.4
Million, Net Income of $38.2 Million

WILMINGTON, Del., Feb. 20, 2014 (GLOBE NEWSWIRE) -- InterDigital, Inc.
(Nasdaq:IDCC), a wireless research and development company, today announced
results for the fourth quarter and full year ended December 31, 2013.

Fourth Quarter 2013 Financial Highlights:

  *Revenue of $99.7 million;
  *Net income^1 of $14.5 million, or $0.35 per diluted share; and
  *Ending cash and short-term investments totaling $698.5 million at December
    31, 2013.

Full Year 2013 Financial Highlights:

  *Revenue of $325.4 million;
  *Net income of $38.2 million, or $0.92 per diluted share; and
  *Free cash flow^2 of $179.5 million.

"2013 was, by and large, a successful year for the company. While we weren't
able to announce the completion of major licensing milestones, we did execute
strongly on various other aspects of our business, delivering strong free cash
flow and profitability and demonstrating the strength and versatility of the
business. These successes, including the Huawei arbitration agreement and our
various arbitration wins, put us in a position to deliver additional value in
2014. This year begins with an expected resolution with Huawei in 2014,
developments at the ITC that we view as very positive, and a structure in
place for licensing the considerable infrastructure portfolio we developed,
leading us to be hopeful that 2014 will be another strong year," said William
J. Merritt, President and CEO of InterDigital.

Fourth Quarter 2013 Summary

Revenue in fourth quarter 2013 totaled $99.7 million, including $63.3 million
of royalty and technology solutions revenue (including $1.7 million of past
technology solutions revenue) and $36.4 million in past patent royalties
primarily related to Pegatron Corporation. This is an increase in total
revenue of $11.8 million compared to total revenue for fourth quarter 2012 of
$87.9 million, which included $64.2 million of royalty and technology
solutions revenue and $23.7 million of past patent royalties primarily
attributable to the Sony patent license agreement we signed in December 2012.
The company's fourth quarter 2013 net income was $14.5 million, or $0.35 per
diluted share, compared to net income of $15.5 million, or $0.38 per diluted
share, in fourth quarter 2012.

Total revenue increased $11.8 million, or 13%, compared to fourth quarter
2012, driven by increases to: past patent royalties of $12.7 million, per-unit
royalties of $11.2 million and technology solutions revenue of $4.7 million.
The increases to past patent royalties and per-unit royalties were primarily
due to royalties received for certain additional products as result of the
Pegatron and Apple arbitration awards. Additionally, the technology solutions
revenue increase was a result of the third quarter arbitration award related
to one of the company's technology solutions agreements.These increases were
partially offset by a $16.8 million decrease in fixed-fee royalty revenue year
over year driven mainly by the expiration of the 3G portion of the company's
patent license agreement with Samsung at the end of 2012, partially offset by
the addition of the Sony patent license agreement in fourth quarter
2012.Companies that accounted for ten percent or more of fourth quarter 2013
total revenue were Pegatron ($56.9 million, or 57%, of which $35.6 million was
past patent royalties) and Sony Corporation of America ($10.0 million or 10%).

Fourth quarter 2013 operating expenses totaled $61.7 million, compared to
$69.0 million in fourth quarter 2012, a decrease mainly attributable to a
$12.5 million repositioning charge incurred in fourth quarter 2012 associated
with the company's voluntary early retirement program ("VERP").This decrease
was partially offset by increases to intellectual property enforcement and
patent amortization, among other items.Intellectual property enforcement
costs increased $2.2 million primarily due to the company's USITC actions, and
patent amortization increased $1.4 million driven by recent patent
acquisitions.

Fourth quarter 2013 other expense was $13.7 million, compared to $2.5 million
in fourth quarter 2012, primarily driven by the recognition of a $15.1 million
investment impairment during fourth quarter 2013.

The company's fourth quarter 2013 effective tax rate was approximately 42.9
percent based on the statutory federal tax rate net of discrete federal and
state taxes, as compared to 5.1 percent in fourth 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 state tax expense,
resulting, in part, from the company's income mix related to the increase in
technology solutions revenue, on the effective tax rate in 2013.The fourth
quarter 2012 tax rate included a$4.5 millionbenefit related to the reversal
of a valuation allowance against certain deferred tax assets.

In fourth quarter 2013, the company used $14.9 million of free cash flow
compared to $133.0 million used in fourth quarter 2012.This change in free
cash flow primarily resulted from a decrease in cash payments related to taxes
as a result of the estimated tax payments made in fourth quarter 2012 related
to the patent sale to Intel Corporation.

Full Year 2013 Summary

The company's full year 2013 revenue totaled $325.4 million, including $251.6
million of royalty and technology solutions revenue (including $53.3 million
of past technology solutions revenue) and $73.8 million of past patent
royalties primarily as a result of arbitration awards received during the
year.Revenue for 2012 was $663.1 million, which included: $384.0 million of
patent sales revenue, primarily from the company's patent sale to Intel;
$252.8 million of royalty and technology solutions revenue; and $26.2 million
of past patent royalties primarily attributableto the Sony patent license
agreement.The company's full year 2013 net income was $38.2 million, or $0.92
per diluted share, compared to net income of $271.8 million, or $6.26 per
diluted share, in full year 2012. 

Total revenue decreased $337.7 million as compared to full year 2012, driven
mainly by a $384.0 million decrease in patent sales and a $67.4 million
decrease in fixed-fee amortized royalty revenue.These decreases were
partially offset by increases to: technology solutions revenue of $58.7
million, past patent royalties of $47.6 million and per-unit royalty revenue
of $7.4 million.The technology solutions revenue increase was as a result of
the third quarter arbitration award related to one of the company's technology
solutions agreements.Past patent royalties increased due to success in
arbitrations in 2013.Per-unit royalty revenue increased primarily due to
royalties received for certain additional products as a result of the Pegatron
and Apple arbitration awards.Fixed-fee amortized royalty revenue decreased
$67.4 million year over year due to the expiration of the 3G portion of the
Samsung agreement at the end of 2012, partially offset by the addition of the
Sony patent license agreement signed in fourth quarter 2012.Companies that
accounted for ten percent or more of full year 2013 total revenue were
Pegatron ($96.4 million, or 30%, of which $71.4 million was past patent
royalties), Intel Mobile Communications GmbH ($59.3 million or, 18%, of which
$53.3 million was past technology solutions revenue) and Sony Corporation of
America ($40.0 million or 12%).

Full year 2013 operating expenses totaled $240.6 million, compared to $244.0
million in full year 2012.Full year 2012 expenses included $16.7 million of
costs associated with the company's patent sale to Intel in 2012.Other
decreases compared to 2012 include repositioning charge ($11.0 million
decrease), personnel-related costs ($4.7 million decrease) and long-term
compensation expense ($1.1 million decrease), all of which are primarily a
result of the VERP.These year-over-year decreases were partially offset by a
$14.9 million increase in intellectual property enforcement and non-patent
litigation costs, a $7.0 million increase in patent amortization, a $4.1
million increase in patent maintenance and patent evaluation and a $2.5
million increase in consulting services.The increases in intellectual
property enforcement and non-patent litigation costs and patent amortization
are discussed above.The increase in patent maintenance and patent evaluation
was primarily related to due diligence associated with both patent acquisition
and patent sale opportunities.The increase in consulting services resulted
from the transition from internal labor to outsourced, in part as a result of
the VERP.

Full year 2013 other expense of $23.2 million increased from $10.4 million in
full year 2012.The increase primarily resulted from the recognition of a
$21.7 million investment impairment during 2013, partially offset by an
increase in interest income as result of interest paid to the company pursuant
to arbitration awards.

The company's full year 2013 effective tax rate was approximately 42.0 percent
based on the statutory federal tax rate net of discrete federal and state
taxes.The company's full year 2012 effective tax rate was approximately 33.5
percent based on the statutory federal tax rate net of discrete foreign
taxes.The increase in the effective tax rate was driven by additional state
tax expense, resulting, in part, from the company's income mix related to the
increase in technology solutions revenue in 2013, partially offset by a
discrete first quarter 2013 reversal of a valuation allowance against certain
deferred tax assets.The full year 2012 effective rate included$6.7
millionof benefits related to the reversal of a valuation allowance against
deferred tax assets.

In 2013, the company generated $179.5 million in free cash flow compared to
$145.7 million generated in 2012.This increase is primarily attributable to
the receipt of both prepayments from existing licensees and payments related
to the resolution of the Pegatron arbitration.

Near Term Outlook

"We expect our solid base of current royalties from existing licensees to
continue in first quarter 2014, driving expected first quarter 2014 total
revenue to a range of $54 million to $59 million, comprisedentirely of
recurring revenue," said Richard J. Brezski, Chief Financial Officer. "This
revenue guidance is based on royalty reports received to date, and does not
include the potential impact of any new patent license, technology solutions
or patent sale agreements that may be signed, or any arbitration or dispute
resolutions that may occur, during the balance of first quarter 2014."

Conference Call Information

InterDigital will host a conference call on Thursday, February 20, 2014 at
10:00 a.m. Eastern Time to discuss its 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) 768-6570 within the United
States or (785) 830-1942 from outside the United States.Please call by 9:50
a.m. ET on February 20 and ask the operator for the InterDigital Financial
Call.

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 February 20 through 1:00 p.m. ET February 25.To
access the recorded replay, call (888) 203-1112 or (719) 457-0820 and use the
replay code 7820520.

About InterDigital^®

InterDigital develops 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 belief that our 2013
successes, including the Huawei arbitration agreement and various arbitration
wins, put us in a position to deliver additional value in 2014, (ii) our
expectation that we will reach a resolution with Huawei in 2014, (iii) our
hope that 2014 will be another strong year, (iv) our expectation that our
solid base of current royalties from existing licensees will continue in first
quarter 2014 and (v) our expectations regarding first quarter 2014
revenue.Words such as "anticipate," "estimate," "expect," "project,"
"intend," "plan," "forecast," "will," "continue to," "work to," "hope" 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) 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, delays in the timely receipt and final reviews of quarterly royalty
reports from our licensees, delays in payments 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) the terms of the final Huawei
arbitration procedures and any subsequent changes thereto; and (xii) 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 and diluted earnings per share
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/(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 Year Ended
                              December 31,               December 31,
                             2013          2012         2013       2012
REVENUES:                                                        
Per-unit royalty revenue      $40,994     $29,821    $122,709 $115,295
Fixed fee amortized royalty   16,917        33,764       67,658     135,056
revenue
Past patent royalties         36,388        23,652       73,808     26,238
Patent sales                  —             —            —          384,000
Technology solutions revenue  5,384         640          61,186     2,474
                             99,683        87,877       325,361    663,063
                                                                
OPERATING EXPENSES:                                              
Patent administration and     36,212        31,305       143,037    126,284
licensing
Development                   17,935        16,821       63,330     67,862
Selling, general and          7,556         8,383        32,694     37,351
administrative
Repositioning                 —             12,536       1,544      12,536
                             61,703        69,045       240,605    244,033
                                                                
Income from operations        37,980        18,832       84,756     419,030
                                                                
OTHER EXPENSE (NET)           (13,706)      (2,470)      (23,237)   (10,396)
Income before income taxes    24,274        16,362       61,519     408,634
INCOME TAX PROVISION          (10,404)      (830)        (25,836)   (136,830)
NET INCOME                    $13,870     $15,532    $35,683  $271,804
Net loss attributable to      $(666)      $ —          $(2,482) $ —
noncontrolling interest
NET INCOME ATTRIBUTABLE TO    $14,536     $15,532    $38,165  $271,804
INTERDIGITAL, INC.
NET INCOME PER COMMON SHARE — $0.35       $0.38      $0.93    $6.31
BASIC
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING —   40,977        40,981       41,115     43,070
BASIC
NET INCOME PER COMMON SHARE — $0.35       $0.38      $0.92    $6.26
DILUTED
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING —   41,298        41,339       41,424     43,396
DILUTED
CASH DIVIDENDS DECLARED PER   $0.10       $1.60      $0.40    $1.90
COMMON SHARE


SUMMARY CONSOLIDATED CASH FLOWS
(dollars in thousands)
(unaudited)
                                                              
                             FOR THE THREE MONTHS     FOR THE YEAR ENDED
                              ENDED DECEMBER 31,       DECEMBER 31,
                             2013        2012         2013       2012
Income before income taxes    $24,274   $16,362    $61,519  $408,634
Taxes paid                    (21,625)    (108,997)    (24,961)   (116,871)
Non-cash expenses             30,982      11,252       80,771     52,562
Increase in deferred revenue  22,654      145,384      209,930    174,604
Deferred revenue recognized   (38,827)    (68,075)     (174,014)  (223,419)
(Decrease) increase in
operating working capital,    (18,003)    (118,740)    64,930     (117,902)
deferred charges and other
Capital spending and          (14,379)    (10,176)     (38,648)   (31,938)
capitalized patent costs
FREE CASH FLOW                (14,924)    (132,990)    179,527    145,670
                                                              
Tax benefit from share-based  52          (608)        815        898
compensation
Payments on long-term debt,   —           —            —          (180)
including capital leases
Acquisition of patents        (12,000)    (1,700)      (25,013)   (15,450)
Long-term investments         445         —            —          —
Proceeds from noncontrolling  1,276       —            7,652      —
interests
Dividends paid                (4,121)     (69,689)     (12,354)   (83,077)
Share repurchases             (29,134)    —            (29,134)   (152,694)
Net proceeds from exercise of 298         1,398        1,032      2,111
stock options
Unrealized (loss) gain on     (283)       (459)        (1,353)    2,007
short-term investments
NET (DECREASE) INCREASE IN
CASH AND SHORT-TERM           $(58,391) $(204,048) $121,172 $(100,715)
INVESTMENTS


CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
                                                                
                                                    December 31, December 31,
                                                    2013         2012
ASSETS                                                           
Cash & short-term investments                        $698,451   $577,279
Accounts receivable (net)                            92,830       169,874
Current deferred tax assets                          26,197       36,997
Other current assets                                 40,036       30,197
Property & equipment and patents (net)               215,906      185,381
Other long-term assets (net)                         39,763       56,881
TOTAL ASSETS                                         $1,113,183 $1,056,609
                                                                
LIABILITIES AND SHAREHOLDERS' EQUITY                             
Accounts payable, accrued liabilities, taxes payable $66,262    $66,608
& dividends payable
Current deferred revenue                             60,176       106,305
Long-term deferred revenue                           243,864      161,820
Long-term debt & other long-term liabilities         209,061      203,171
TOTAL LIABILITIES                                    579,363      537,904
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY        528,650      518,705
Noncontrolling interest                              5,170        —
TOTAL EQUITY                                         533,820      518,705
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $1,113,183 $1,056,609


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 provided by / (used in) operating
activities, the most directly comparable GAAP financial measure.
                                                              
                                                              
                    FOR THE THREE MONTHS           FOR THE YEAR ENDED
                     ENDED DECEMBER 31,             DECEMBER 31,
                    2013           2012            2013          2012
Net cash provided by
(used in) operating  $(545)       $(122,814)    $218,175    $177,608
activities
Purchases of
property, equipment, (1,859)        (1,642)         (4,591)       (3,621)
& technology
licenses
Capitalized patent   (12,520)       (8,534)         (34,057)      (28,317)
costs
Free cash flow       $(14,924)    $(132,990)    $179,527    $145,670

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

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