8-K
InterDigital, Inc. (IDCC)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 4, 2021
______________
INTERDIGITAL, INC.
(Exact name of Registrant as Specified in Charter)
| Pennsylvania | 1-33579 | 82-4936666 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
200 Bellevue Parkway, Suite 300
Wilmington, DE 19809-3727
(Address of principal executive offices, Zip code)
302-281-3600
Registrant's telephone number, including area code
Not Applicable
Former Name or Former Address, if Changed Since Last Report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange<br>on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | IDCC | NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On November 4, 2021, InterDigital, Inc. issued a press release announcing its results of operations and financial condition for the fiscal quarter ended September 30, 2021. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this report, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | InterDigital, Inc. press release dated November 4, 2021 |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INTERDIGITAL, INC. |
|---|
| By: /s/ Joshua D. Schmidt |
| Joshua D. Schmidt |
| Chief Legal Officer and |
| Corporate Secretary |
Date: November 4, 2021
Document
INTERDIGITAL ANNOUNCES FINANCIAL RESULTS FOR THIRD QUARTER 2021
New license agreements drive 64% revenue increase and 138% increase in operating income
WILMINGTON, DE. - November 4, 2021 - InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology research and development company, today announced results for the quarter ended September 30, 2021.
Third Quarter 2021 Financial Highlights
•Total revenue of $143.5 million increased 64% from $87.5 million in third quarter 2020. Recurring revenue was $93.4 million, compared to recurring revenue of $87.0 million in third quarter 2020. The increase in both total and recurring revenue was primarily driven by additional revenues from ten new patent license agreements signed in the last twelve months, including agreements with Xiaomi and a top ten global TV manufacturer signed in third quarter 2021. These increases were partially offset by a reduction in recurring revenue due to a handset manufacturer exiting the business in the past year, as previously disclosed.
•Operating expenses were $106.7 million, compared to $72.1 million in third quarter 2020. The increase was primarily driven by $26.1 million of non-recurring costs associated with the Company’s ongoing restructuring efforts, performance-based compensation, and revenue share related to the above-noted patent license agreement with a top ten global TV manufacturer.
•Income from operations increased to $36.8 million, compared to $15.4 million in third quarter 2020.
•Net income1 was $26.2 million, or $0.83 per diluted share, compared to net income of $23.8 million, or $0.76 per diluted share, in third quarter 2020.
“In this quarter we’ve continued to build on our business momentum by expanding our customer base in the mobile and consumer electronic spaces. The wireless connectivity and video technologies we develop have never been more important,” said CEO Liren Chen. “We believe we are well positioned for future growth and are prepared to ensure that the value of our patent portfolio is recognized by those who benefit from our innovations.”
Additional Highlights
•The company generated $96.3 million cash provided by operating activities, compared to $101.3 million in third quarter 2020, and $87.4 million of free cash flow2, compared to $85.4 million in third quarter 2020. These changes were primarily driven by timing of collections under fixed-fee agreements. Cash and cash equivalents, restricted cash and short-term investments totaled $903.2 million on September 30, 2021.
•The company repurchased $11.9 million, or 0.2 million shares, during third quarter 2021.
Fourth Quarter Outlook
•The company expects fourth quarter revenue to be between $98 million and $105 million, including approximately $97 million to $100 million of recurring revenue.
•Additionally, the company expects operating expenses to be between $85 million and $88 million, including restructuring charges of approximately $5 million to $6 million.
Conference Call Information
InterDigital will host a conference call on Thursday, November 4th, 2021 at 10:00 a.m. ET to discuss its third quarter 2021 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 on the Investors page. The company encourages participants to take advantage of the Internet option.
For telephone access to the conference call, dial (800) 353-6461 within the United States or +1 (334) 323-0501 from outside the United States. Please call by 9:50 a.m. ET on November 4th and give the operator conference ID number 5681111.
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 on November 4th through 1:00 p.m. ET on November 9th. To access the recorded replay, call (888) 203-1112 or +1 (719) 457-0820 and use the replay code 5681111.
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.
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 and products to materialize to the extent or at the rate that we expect; (vii) unexpected delays or difficulties related to the development of our technologies and products; (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 legal or regulatory proceedings, changes in the schedules or costs associated with legal proceedings or adverse rulings in such proceedings; (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 the ongoing COVID-19 pandemic and/or corresponding macroeconomic uncertainty could have on our financial position, results of operations and cash flows; and (xvi) changes in our business strategy.
We undertake no duty to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.
Footnotes
1 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.
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 used in operating activities less purchases of property and equipment and capitalized patent costs. InterDigital’s computation of free cash flow might not be comparable to free cash flow reported by other companies. The presentation of free cash flow, 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 GAAP. A 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 INCOME
(in thousands except per share data)
(unaudited)
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, | FOR THE NINE MONTHS ENDED SEPTEMBER 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| REVENUES: | ||||||||
| Variable patent royalty revenue | $ | 8,346 | $ | 7,377 | $ | 22,765 | $ | 17,920 |
| Fixed-fee royalty revenue | 84,295 | 77,338 | 222,887 | 221,023 | ||||
| Current patent royalties | 92,641 | 84,715 | 245,652 | 238,943 | ||||
| Non-current patent royalties | 50,108 | 507 | 63,475 | 20,461 | ||||
| Total patent royalties | 142,749 | 85,222 | 309,127 | 259,404 | ||||
| Current technology solutions revenue | 747 | 2,271 | 4,467 | 8,797 | ||||
| Total Revenue | $ | 143,496 | $ | 87,493 | $ | 313,594 | $ | 268,201 |
| OPERATING EXPENSES: | ||||||||
| Patent administration and licensing | 56,150 | 40,364 | 133,694 | 119,167 | ||||
| Development | 22,546 | 20,845 | 66,999 | 61,755 | ||||
| Selling, general and administrative | 20,978 | 10,854 | 46,994 | 35,251 | ||||
| Restructuring activities | 7,045 | — | 20,290 | — | ||||
| Total Operating expenses | 106,719 | 72,063 | 267,977 | 216,173 | ||||
| Income from operations | 36,777 | 15,430 | 45,617 | 52,028 | ||||
| INTEREST EXPENSE | (5,773) | (10,365) | (19,429) | (30,881) | ||||
| OTHER (EXPENSE) INCOME, NET | (1,537) | 3,994 | 2,226 | 13,806 | ||||
| Income before income taxes | 29,467 | 9,059 | 28,414 | 34,953 | ||||
| INCOME TAX (PROVISION) BENEFIT | (4,253) | 12,843 | (6,039) | 5,879 | ||||
| NET INCOME | $ | 25,214 | $ | 21,902 | $ | 22,375 | $ | 40,832 |
| Net loss attributable to noncontrolling interest | (1,014) | (1,882) | (11,042) | (5,319) | ||||
| NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. | $ | 26,228 | $ | 23,784 | $ | 33,417 | $ | 46,151 |
| NET INCOME PER COMMON SHARE — BASIC | $ | 0.85 | $ | 0.77 | $ | 1.09 | $ | 1.50 |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | 30,737 | 30,804 | 30,792 | 30,762 | ||||
| NET INCOME PER COMMON SHARE — DILUTED | $ | 0.83 | $ | 0.76 | $ | 1.07 | $ | 1.49 |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED | 31,431 | 31,119 | 31,272 | 31,029 | ||||
| CASH DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.35 | $ | 0.35 | $ | 1.05 | $ | 1.05 |
SUMMARY CONSOLIDATED CASH FLOWS
(in thousands)
(unaudited)
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, | FOR THE NINE MONTHS ENDED SEPTEMBER 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Income before income taxes | $ | 29,467 | $ | 9,059 | $ | 28,414 | $ | 34,953 |
| Taxes paid | (5,042) | (4,423) | (9,835) | (18,211) | ||||
| Non-cash expenses | 35,882 | 26,481 | 95,272 | 76,627 | ||||
| Change in deferred revenue | 150,703 | 75,749 | 64,044 | 53,066 | ||||
| Increase in operating working capital, deferred charges and other | (114,746) | (5,524) | (118,732) | (2,223) | ||||
| Purchases of property and equipment and capitalized patent costs | (8,857) | (15,981) | (30,022) | (33,601) | ||||
| FREE CASH FLOW 2 | 87,407 | 85,361 | 29,141 | 110,611 | ||||
| Long-term investments | — | 4,260 | (1,091) | 4,260 | ||||
| Non-controlling interest distribution | — | — | (1,109) | — | ||||
| Dividends paid | (10,794) | (10,781) | (32,319) | (32,290) | ||||
| Taxes withheld upon restricted stock unit vestings | (74) | (55) | (3,747) | (1,535) | ||||
| Payments on long-term debt | — | — | — | (94,909) | ||||
| Repurchase of common stock | (11,859) | — | (23,000) | (349) | ||||
| Net proceeds from exercise of stock options | 1,516 | — | 5,885 | 1,792 | ||||
| Unrealized gain (loss) on short-term investments | (734) | (152) | (1,409) | 983 | ||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS | $ | 65,462 | $ | 78,633 | $ | (27,649) | $ | (11,437) |
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| SEPTEMBER 30, 2021 | DECEMBER 31, 2020 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Cash, cash equivalents and short-term investments | $ | 900,806 | $ | 926,647 |
| Accounts receivable, net | 141,657 | 16,008 | ||
| Prepaid and other current assets | 80,304 | 59,894 | ||
| Property & equipment and patents, net | 386,039 | 434,973 | ||
| Other long-term assets, net | 191,806 | 178,753 | ||
| TOTAL ASSETS | $ | 1,700,612 | $ | 1,616,275 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| Accounts payable, accrued liabilities, taxes payable & dividends payable | $ | 92,654 | $ | 75,827 |
| Current deferred revenue | 325,375 | 219,935 | ||
| Long-term deferred revenue | 66,673 | 108,069 | ||
| Long-term debt & other long-term liabilities | 480,593 | 415,878 | ||
| TOTAL LIABILITIES | 965,295 | 819,709 | ||
| TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY | 724,271 | 773,369 | ||
| Noncontrolling interest | 11,046 | 23,197 | ||
| TOTAL EQUITY | 735,317 | 796,566 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,700,612 | $ | 1,616,275 |
RECONCILIATION OF FREE CASH FLOW TO NET CASH
PROVIDED BY 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 operating activities, the most directly comparable GAAP financial measure (in thousands):
| FOR THE THREE MONTHS ENDED SEPTEMBER 30, | FOR THE NINE MONTHS ENDED SEPTEMBER 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Net cash provided by operating activities | $ | 96,264 | $ | 101,342 | $ | 59,163 | $ | 144,212 |
| Purchases of property and equipment | (940) | (6,104) | (1,877) | (9,875) | ||||
| Capitalized patent costs | (7,917) | (9,877) | (28,145) | (23,726) | ||||
| Free cash flow | $ | 87,407 | $ | 85,361 | $ | 29,141 | $ | 110,611 |
| CONTACT: | InterDigital, Inc. | |||||||
| --- | --- | |||||||
| Email: investor.relations@interdigital.com | ||||||||
| +1 (302) 300-1857 |