Continued business success drives high margins and fuels return of capital to shareholders
WILMINGTON, Del., Aug. 03, 2023 (GLOBE NEWSWIRE) -- InterDigital, Inc. ( IDCC), a mobile and video technology research and development company, today announced results for the quarter ended June 30, 2023.
"This was another strong quarter for the business where we added to our recent momentum," commented Liren Chen, President and CEO, InterDigital. "The UK High Court increased the Lenovo license to $184.9 million, which bolstered our cash balance to approximately $1 billion. Our financial strength, combined with our innovation leadership, puts us in a strong position to build on our recent progress and deliver considerable value to our shareholders."
Second Quarter 2023 Financial Highlights, as compared to Second Quarter 2022:
GAAP
- Total revenue was $101.6 million. This was 19% lower due to catch-up revenues that were recognized in second quarter 2022 from two previously announced license agreements.
- Recurring revenue was $99.1 million and decreased 1%.
- Operating expenses were $78.2 million and increased 5% due primarily to higher research and portfolio development costs.
- Non-operating income1 was $2.2 million, as compared to non-operating expense1 of $21.3 million, driven primarily by our 2022 debt refinancing.
- Net income2 was $21.8 million and increased 3%; net income2 margin was 21%.
- Diluted earnings per share was $0.79 and increased 14%.
- During second quarter 2023, we repurchased $42.5 million, or 0.5 million shares, under our share repurchase program.
Non-GAAP
- Adjusted EBITDA3 was $53.6 million and decreased 31% due to lower catch-up revenues noted above; Adjusted EBITDA margin3 was 53%.
- Non-GAAP net income4 was $35.6 million and decreased 11%.
- Non-GAAP diluted earnings per share4 was $1.30 and was flat.
Near Term Outlook
The table below presents guidance of the Company's expectations for third quarter 2023. The revenue range covers existing licenses and does not include any new agreements we may sign over the balance of the third quarter.
| Q3 2023 | |
| Revenue | $97M - $100M |
| Operating expenses | $78M - $81M |
| Net income2 | $17M - $20M |
| Adjusted EBITDA3 | $47M- $50M |
| Diluted earnings per share | $0.60 - $0.70 |
| Weighted-average diluted shares(a) | 28.2M |
| Non-GAAP diluted earnings per share4 | $1.10 - $1.20 |
| Non-GAAP weighted-average diluted shares4 (a) | 27.0M |
(a) Based on share repurchases through July 31, 2023, excluding any additional repurchases that may occur during the remainder of third quarter 2023.
Conference Call Information
InterDigital will host a conference call on Thursday, August 3, 2023 at 10:00 a.m. ET to discuss its second quarter 2023 financial performance and other company matters.
For a live Internet webcast of the conference call, visit www.interdigital.com and click on the “Webcast” link on the Investors page. The company encourages participants to take advantage of the Internet option.
For telephone access to the conference call, visit www.interdigital.com and click on the “Dial In Registration” link on the Investors page. Registration is necessary to obtain a dial in phone number and PIN to join.
An Internet replay of the conference call will be available on InterDigital’s website under Events in the Investors section. The replay will be available for one year.
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 technology companies. Founded in 1972, InterDigital is listed on Nasdaq.
InterDigital is a registered trademark of InterDigital, Inc.
For more information, visit the InterDigital website: www.interdigital.com.
For additional financial measures, refer to our second quarter 2023 Form 10-Q and the financial metrics tracker, which are available on the Investor Relations section of our website.
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 we will continue to be able to execute strongly on our business during the ongoing COVID-19 pandemic. Words such as “believe,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” “goal,” “could,” "would," "should," "if," "may," "might," "future," "target," "trend," "seek to," "will continue," "predict," "likely," "in the event," and variations of any such words or similar expressions are intended to identify such forward-looking statements.
Forward-looking statements are made on the basis of management’s current views and assumptions and are not guarantees of future performance. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results, and actual events that occur, to differ materially from results contemplated by the forward-looking statements. These risks and uncertainties include, but are not limited to: (i) unanticipated delays, difficulties or accelerations 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 our roadmap; (v) our ability to commercialize our technologies and enter into customer agreements; (vi) the failure of the markets for our 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 our technologies; (viii) changes in our interpretations of, and assumptions and calculations with respect to the impact on us of, the 2017 Tax Cuts and Jobs Act, as well as further guidance that may be issued regarding such act; (ix) risks related to the potential impact of new accounting standards on our financial position, results of operations or cash flows; (x) failure to accurately forecast the impact of our restructuring activities on our financial statements and our business; (xi) the resolution of current legal proceedings, including any awards or judgments relating to such proceedings, additional or related legal proceedings, including appeals, changes in the schedules or costs associated with such proceedings or adverse rulings; (xii) the timing and impact of potential administrative and legislative matters; (xiii) changes or inaccuracies in market projections; (xiv) our ability to obtain liquidity though debt and equity financings; (xv) the potential effects that macroeconomic uncertainty could have on our financial position, results of operations and cash flows; (xvi) changes in our business strategy; (vii) changes or inaccuracies in our expectations with respect to royalty payments by our customers and (xviii) risks related to our assumptions and application of relevant accounting standards, including with respect to revenue recognition.
We undertake no duty to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.
Footnotes
1 Non-operating income and Non-operating expense are defined as interest expense plus other income (expense), net.
2 Throughout this press release, net income and diluted earnings per share (“EPS”) are attributable to InterDigital, Inc. (e.g., after adjustments for non-controlling interests), unless otherwise stated.
3 Adjusted EBITDA and Adjusted EBITDA margin are supplemental non-GAAP financial measures that InterDigital believes provide investors with important insight into the Company's ongoing business performance. InterDigital defines Adjusted EBITDA as net income attributable to InterDigital Inc. plus net loss attributable to non-controlling interest, income tax (provision) benefit, other income (expense) & interest expense, depreciation and amortization, share-based compensation, and other items. Other items include restructuring costs, impairment charges and other non-recurring items. Adjusted EBITDA margin is Adjusted EBITDA over total revenues. These non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. A detailed reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure is provided below.
4 Non-GAAP net income, Non-GAAP diluted earnings per share, and Non-GAAP weighted-average diluted shares are supplemental non-GAAP financial measures that InterDigital believes provides investors with important insight into the Company's ongoing business performance. InterDigital defines Non-GAAP net income as net income attributable to InterDigital, Inc. plus share-based compensation, acquisition related amortization, depreciation and amortization, restructuring costs, impairment charges and one-time adjustments, losses on extinguishments of long-term debt, the related income tax effect of the preceding items, and adjustments to income taxes. Non-GAAP diluted earnings per share is defined as Non-GAAP net income divided by Non-GAAP weighted average number of common shares outstanding — diluted, which adjusts the weighted average number of common shares outstanding for the dilutive effect of the Convertible Notes, offset by our hedging arrangements. InterDigital’s computation of these non-GAAP financial measures might not be comparable to similarly named measures reported by other companies. The presentation of these financial measures, which are 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 reconciliation of each of these metrics to its most directly comparable GAAP financial measure is provided below.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME(in thousands except per share data)
(unaudited) For the Three Months Ended June 30, For the Six Months Ended June 30, 2023 2022 2023 2022REVENUES: Recurring revenues: Smartphone$85,075 $87,484 $172,506 $175,182 CE, IoT/Auto 13,432 11,945 27,518 23,135 Other 566 672 622 911 Total recurring revenues 99,073 100,101 200,646 199,228 Catch-up revenues 2,518 24,556 103,318 26,747 Total revenues 101,591 124,657 303,964 225,975 OPERATING EXPENSES: Research and portfolio development 49,878 45,177 99,307 89,354 Licensing 16,644 17,326 38,012 32,856 General and administrative 11,693 9,516 24,008 20,400 Restructuring activities — 2,738 — 3,280 Total Operating expenses 78,215 74,757 161,327 145,890 Income from operations 23,376 49,900 142,637 80,085 INTEREST EXPENSE (12,141) (6,272) (24,228) (11,787)OTHER INCOME (EXPENSE), NET 14,387 (15,016) 27,578 (16,021)Income before income taxes 25,622 28,612 145,987 52,277 INCOME TAX PROVISION (4,329) (8,028) (21,174) (13,989)NET INCOME$21,293 $20,584 124,813 38,288 Net loss attributable to noncontrolling interest (490) (485) (2,229) (775)NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.$21,783 $21,069 127,042 39,063 NET INCOME PER COMMON SHARE — BASIC$0.81 $0.69 4.58 1.28 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC 26,768 30,413 27,754 30,557 NET INCOME PER COMMON SHARE — DILUTED$0.79 $0.69 4.46 1.26 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED 27,655 30,710 28,494 30,992 CASH DIVIDENDS DECLARED PER COMMON SHARE$0.35 $0.35 $0.70 $0.70
(in thousands)
(unaudited) For the Three Months Ended June 30, For the Six Months Ended June 30, 2023 2022 2023 2022CASH FLOWS FROM OPERATING ACTIVITIES: Net income$21,293 $20,584 $124,813 $38,288 Non-cash adjustments (28,279) (30,697) (32,283) (52,780)Working capital changes (38,454) (23,655) (165,822) (37,248)Net cash used in operating activities (45,440) (33,768) (73,292) (51,740)CASH FLOWS FROM INVESTING ACTIVITIES: Net (purchases) sales of short-term investments (40,046) 46,989 (46,028) 164,800 Capitalized patent costs and purchases of property and equipment (13,036) (11,876) (21,517) (22,085)Net cash (used in) provided by investing activities (53,082) 35,113 (67,545) 142,715 CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from debt refinancing — 139,989 (100) 139,989 Repurchase of common stock (42,489) (74,445) (245,870) (74,445)Dividends paid (9,449) (10,803) (19,833) (21,544)Other (1,378) (707) (5,649) (3,007)Net cash (used in) provided by financing activities (53,316) 54,034 (271,452) 40,993 NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (151,838) 55,379 (412,289) 131,968 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 442,710 789,813 703,161 713,224 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD$290,872 $845,192 $290,872 $845,192
(in thousands)
(unaudited) JUNE 30, 2023 DECEMBER 31, 2022ASSETS Cash, cash equivalents and short-term investments$840,723 $1,201,777 Accounts receivable 236,794 53,182 Prepaid and other current assets 114,630 89,716 Property & equipment and patents, net 348,673 365,337 Other long-term assets, net 219,359 190,093 TOTAL ASSETS$1,760,179 $1,900,105 LIABILITIES AND SHAREHOLDERS’ EQUITY Current portion of long-term debt$125,628 $— Accounts payable, accrued liabilities, taxes payable & dividends payable 148,226 82,287 Current deferred revenue 172,650 189,059 Long-term deferred revenue 172,582 237,580 Long-term debt & other long-term liabilities 540,737 660,666 TOTAL LIABILITIES 1,159,823 1,169,592 TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY 595,217 724,895 Noncontrolling interest 5,139 5,618 TOTAL EQUITY 600,356 730,513 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$1,760,179 $1,900,105
RECONCILIATION OF NON-GAAP MEASURES
The table below presents a reconciliation of Adjusted EBITDA to net income attributable to InterDigital, Inc., the most directly comparable GAAP financial measure (in thousands, except Q3 Outlook):
For the Three Months Ended June 30, For the Six Months Ended June 30, Q3 Outlook(in millions) 2023 2022 2023 2022 2023Net income attributable to InterDigital, Inc.$21,783 $21,069 $127,042 $39,063 $17 - $20Net loss attributable to non-controlling interest (490) (485) (2,229) (775) (1)Income tax provision 4,329 8,028 21,174 13,989 3Other income (expense), net & interest expense (2,246) 21,288 (3,350) 27,808 (2)Depreciation and amortization 19,645 21,154 39,171 40,436 20Share-based compensation 8,740 3,977 16,530 9,363 10Other items(a) 1,800 2,738 10,037 3,280 —Adjusted EBITDA3$53,561 $77,769 $208,375 $133,164 $47 - $50
(a) Other items in the above table includes $1.8 million and $7.5 million of one-time charges for net litigation fee reimbursement during the three and six months ended June 30, 2023, respectively. The six months ended June 30, 2023 also includes a $2.5 million one-time impairment on our patents held for sale. Additionally, Other items includes $2.7 million and $3.3 million of restructuring costs during the three and six months ended June 30, 2022, respectively.
The table below presents a reconciliation of Non-GAAP net income to net income attributable to InterDigital, Inc., the most directly comparable GAAP financial measure (in thousands, except Q3 Outlook):
For the Three Months Ended June 30, For the Six Months Ended June 30, Q3 Outlook(in millions) 2023 2022 2023 2022 2023Net income attributable to InterDigital, Inc.$21,783 $21,069 $127,042 $39,063 $17 - $20Share-based compensation 8,740 3,977 16,530 9,363 10Acquisition related amortization 10,262 10,820 20,530 20,906 10Other operating items(a) 1,800 2,738 10,037 3,280 —Other non-operating items(b) (3,100) 9,590 (3,258) 9,590 (4)Related income tax and noncontrolling interest effect of above items (3,717) (5,696) (10,456) (9,059) (3)Adjustments to income taxes (136) (2,475) (1,178) (2,313) —Non-GAAP net income4$35,632 $40,023 $159,247 $70,830 $30 - $33 Weighted average dilutive shares - GAAP 27,655 30,710 28,494 30,992 28.2Less: Dilutive impact of the Convertible Notes 255 — 128 — 1.2Weighted average dilutive shares - Non-GAAP4 27,400 30,710 28,366 30,992 27.0 Non-GAAP net income per diluted share4$1.30 $1.30 $5.61 $2.29 $1.10 - $1.20
(a) Other operating items in the above table includes $1.8 million and $7.5 million one-time charges for net litigation fee reimbursement during the three and six months ended June 30, 2023, respectively. The six months ended June 30, 2023 also includes a $2.5 million one-time impairment on our patents held for sale. Additionally, Other operating items includes $2.7 million and $3.3 million of restructuring costs during the three and six months ended June 30, 2022, respectively.
(b) Other non-operating items includes $3.1 million and $3.3 million of gains from fair value changes of our long-term strategic investments during the three and six months ended June 30, 2023, respectively. Other non-operating items for the three and six months ended June 30, 2022 includes a $11.2 million loss on extinguishment of long-term debt, partially offset by a $1.6 million gain from fair value changes of our long-term strategic investments.
