InterDigital Reports Fourth Quarter and Full Year 2020 Financial Results

Rhea-AI Summary

InterDigital, Inc. (NASDAQ:IDCC) reported strong fourth-quarter and full-year financial results for 2020, highlighting a 13% year-over-year revenue growth. Fourth-quarter recurring revenue increased to $89.1 million, a 15% rise from 2019, thanks to new patent licensing agreements. Despite total revenue decreasing to $90.8 million, the company achieved an operating income of $3.1 million, though it faced a net loss of $1.4 million. For the full year, net income rose by 114% to $44.8 million, with earnings per share increasing 118% to $1.44. Free cash flow also grew significantly, reaching $121.1 million.

Positive

• 13% year-over-year revenue growth
• Recurring revenue increased by 15% to $89.1 million in Q4
• Operating income rose by 46% year-over-year to $55.2 million
• Net income increased by 114% to $44.8 million for the full year
• Earnings per share increased by 118% to $1.44
• Free cash flow for the full year reached $121.1 million

Negative

• Total revenue for Q4 declined to $90.8 million from $102.2 million in Q4 2019
• Net loss of $1.4 million in Q4 compared to a net income of $13.8 million in Q4 2019
• Operating expenses rose to $87.7 million, partly due to one-time charges

13% year-over-year revenue growth drives 118% increase in earnings per share

WILMINGTON, Del., Feb. 18, 2021 (GLOBE NEWSWIRE) -- InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology research and development company, today announced results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Financial Highlights

• Recurring revenue was $89.1 million, compared to $77.5 million in fourth quarter 2019, a 15% year-over-year increase, which was driven by six new patent license agreements signed during 2020. Total revenue was $90.8 million, compared to $102.2 million in fourth quarter 2019, which is attributable to past sales from deals signed in fourth quarter 2019.
• Operating expenses were $87.7 million, compared to $76.9 million in fourth quarter 2019, due to one-time charges of approximately $10.0 million, primarily related to a non-cash charge for on-going patent portfolio management.
• Operating income was $3.1 million, compared to $25.3 million in fourth quarter 2019.
• Net loss¹ was $1.4 million, or $(0.04) per diluted share compared to net income¹ of $13.8 million, or $0.44 per diluted share, in fourth quarter 2019.
• The company recorded $19.3 million of cash provided by operating activities, compared to $17.5 million in the same quarter last year.
• The company generated $10.4 million of free cash flow in fourth quarter 2020, compared to free cash flow² of $8.7 million generated in fourth quarter 2019. The increase was primarily driven by timing of collections under fixed-fee agreements. Ending cash and short-term investments totaled $926.6 million.

Full Year 2020 Financial Highlights

• Recurring revenue was $336.8 million, compared to $298.2 million for full year 2019, a 13% year-over-year increase. This increase was driven by new licensing activity. Total revenue was $359.0 million, compared to $318.9 million for full year 2019, a 13% year-over-year increase.
• Operating expenses were $303.8 million, compared to $281.1 million for full year 2019. Full year 2020 operating expenses included one-time charges incurred in initiatives designed to drive ongoing cost savings.
• Operating income was $55.2 million, compared to $37.8 million in full year 2019, a 46% increase year- over- year.
• The current year tax benefit was driven by discrete benefits of $20.9 million that primarily relate to the expected amendment of a prior year tax return, as well as the reversal of a tax reserve.
• Net income¹ was $44.8 million compared to $20.9 million, an increase of 114% year-over-year. Earnings per share was $1.44 per diluted share compared to $0.66 per diluted share, an increase of 118% year-over-year.
• The company recorded $163.5 million of cash provided by operating activities, compared to $89.4 million provided by operating activities for full year 2019. The company generated $121.1 million of free cash flow² in full year 2020, compared to $51.4 million for full year 2019. In each period, free cash flow was largely driven by cash receipts from patent license agreements, a portion of which relates to future periods.

“Despite uncertain macroeconomic conditions, we successfully executed on our strategy and signed numerous license agreements, which delivered very strong year-over-year growth for revenue and earnings, noted William J. Merritt, President and CEO of InterDigital. “We enter 2021 with strong licensing momentum and remain confident in our long-term opportunities as we diligently pursue agreements with remaining unlicensed companies in the handset and consumer electronics business.”

“Our performance continues to show the incredible operating leverage in our model, which saw a 13% increase year-over-year in total revenue drive a 46% increase in year-over-year operating income, and a 118% year-over-year increase in earnings per share,” said Richard Brezski, CFO of InterDigital.

Conference Call Information

InterDigital will host a conference call on Thursday, February 18^th, 2021 at 10:00 a.m. ET to discuss its fourth quarter and full year 2020 financial performance and other company matters.

For a live Internet webcast of the conference call, visit http://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 +1 (800) 367-2403 within the United States and Canada or +1 (334) 777-6978 from outside the United States. Please call by 9:50 a.m. ET on February 18^th and give the operator conference ID number 5906102.

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 18^th through 1:00 p.m. ET February 23^rd. To access the recorded replay call, dial +1 (888) 203-1112 or +1 (719) 457-0820 and use the replay code 5906102.

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 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, 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,” “see,” 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 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 Tax Reform Act, as well as further guidance that may be issued regarding the Tax Reform Act; (ix) failure to accurately forecast the long-term value and costs of the Technicolor business or of certain assets acquired in the transaction; (x) the resolution of current legal or regulatory proceedings, including any awards or judgments relating to such proceedings, additional legal or regulatory proceedings, changes in the schedules or costs associated with legal or regulatory proceedings or adverse rulings in such legal or regulatory proceedings; (xi) changes or inaccuracies in market projections; (xii) 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 (xiii) changes in our 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 (loss) 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 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 GAAP. A detailed reconciliation of free cash flow to net cash provided by 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 December 31,								For the Twelve Months Ended December 31,
	2020				2019				2020				2019
REVENUES:
Variable patent royalty revenue	$	8,667			$	7,871			$	26,587			$	30,428
Fixed-fee royalty revenue	77,438				66,876				298,461				257,221
Current patent royalties	86,105				74,747				325,048				287,649
Non-current patent royalties	1,121				24,690				21,582				19,782
Total patent royalties	87,226				99,437				346,630				307,431
Patent sales	600				—				600				975
Current technology solutions revenue	2,964				2,724				11,761				10,518
	$	90,790			$	102,161			$	358,991			$	318,924
OPERATING EXPENSES:
Patent administration and licensing	51,011				46,744				170,178				154,940
Development	22,891				18,832				84,646				74,860
Selling, general and administrative	13,748				11,289				48,999				51,289
	87,650				76,865				303,823				281,089
Income from operations	3,140				25,296				55,168				37,835
INTEREST EXPENSE	(9,918		)		(10,650		)		(40,799		)		(40,955		)
OTHER INCOME, NET	3,118				5,290				16,924				29,062
Income (loss) before income taxes	(3,660		)		19,936				31,293				25,942
INCOME TAX PROVISION (BENEFIT)	769				(7,984		)		6,648				(10,991		)
NET INCOME (LOSS)	$	(2,891	)		$	11,952			$	37,941			$	14,951
Net loss attributable to noncontrolling interest	(1,541		)		(1,802		)		(6,860		)		(5,977		)
NET INCOME (LOSS) ATTRIBUTABLE TO INTERDIGITAL, INC.	$	(1,350	)		$	13,754			$	44,801			$	20,928
NET INCOME (LOSS) PER COMMON SHARE — BASIC	$	(0.04	)		$	0.44			$	1.46			$	0.66
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC	30,808				30,919				30,776				31,546
NET INCOME (LOSS) PER COMMON SHARE — DILUTED	$	(0.04	)		$	0.44			$	1.44			$	0.66
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED	30,808				31,118				31,058				31,785
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.35			$	0.35			$	1.40			$	1.40

SUMMARY CONSOLIDATED CASH FLOWS
(dollars in thousands)
(unaudited)

	For the Three Months Ended December 31,								For the Twelve Months Ended December 31,
	2020				2019				2020				2019
Income (loss) before income taxes	$	(3,660	)		$	19,936			$	31,293			$	25,942
Taxes paid	(8,022		)		(7,746		)		(26,233		)		(24,229		)
Non-cash expenses	34,900				26,896				111,527				113,035
Change in deferred revenue	(28,669		)		(8,624		)		24,397				(7,749		)
Increase (decrease) in operating working capital, deferred charges and other	24,706				(13,005		)		22,483				(17,566		)
Capital spending and capitalized patent costs	(8,807		)		(8,805		)		(42,408		)		(37,990		)
FREE CASH FLOW	10,448				8,652				121,059				51,443
Net proceeds from change in long-term investments	25				(350		)		4,285				(350		)
Proceeds from noncontrolling interests	5,333				5,333				5,333				15,666
Proceeds from sale of business	910				—				910				10,000
Dividends paid	(10,782		)		(10,897		)		(43,072		)		(44,580		)
Taxes withheld upon vesting of restricted stock units	(216		)		(52		)		(1,751		)		(4,368		)
Repurchase of common stock	—				(25,000		)		(349		)		(196,269		)
Net proceeds from exercise of stock options	100				—				1,892				2
Payments on long-term debt	—				—				(94,909		)		(221,091		)
Proceeds from issuance of convertible senior notes	—				—				—				400,000
Purchase of convertible bond hedge	—				—				—				(72,000		)
Payment for warrant unwind	—				—				—				(4,184		)
Prepayment penalty on long-term debt	—				—				—				(10,763		)
Proceeds from hedge unwind	—				—				—				9,038
Proceeds from issuance of warrants	—				—				—				47,600
Payments of debt issuance costs	—				—				—				(8,375		)
Unrealized gain on short-term investments	153				684				1,136				5,076
NET INCREASE (DECREASE) IN CASH, RESTRICTED CASH AND SHORT-TERM INVESTMENTS	$	5,971			$	(21,630	)		$	(5,466	)		$	(23,155	)

CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)

	DECEMBER 31, 2020				DECEMBER 31, 2019
ASSETS
Cash & short-term investments	$	926,647			$	924,695
Accounts receivable (net)	16,008				28,272
Other current assets	84,224				63,365
Property & equipment and patents (net)	434,973				446,556
Other long-term assets (net)	154,423				149,194
TOTAL ASSETS	$	1,616,275			$	1,612,082
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of long-term debt	$	—			$	94,170
Accounts payable, accrued liabilities, taxes payable & dividends payable	75,827				64,734
Current deferred revenue	219,935				146,654
Long-term deferred revenue	108,069				123,653
Long-term debt & other long-term liabilities	415,878				396,590
TOTAL LIABILITIES	819,709				825,801
TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY	773,369				761,557
Noncontrolling interest	23,197				24,724
TOTAL EQUITY	796,566				786,281
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,616,275			$	1,612,082

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 operating activities, the most directly comparable GAAP financial measure.

		For the Three Months Ended December 31,								For the Twelve Months Ended December 31,
		2020				2019				2020				2019
Net cash provided by operating activities		$	19,255			$	17,457			$	163,467			$	89,433
Purchases of property, equipment, & technology licenses		(1,918		)		(1,447		)		(11,793		)		(4,509		)
Capitalized patent costs		(6,889		)		(7,358		)		(30,615		)		(33,481		)
Free cash flow		$	10,448			$	8,652			$	121,059			$	51,443

CONTACT:	InterDigital, Inc.:
	Tiziana Figliolia
	tiziana.figliolia@interdigital.com
	+1 (302) 300-1857

FAQ

What were InterDigital's Q4 2020 earnings results for IDCC?

InterDigital reported a net loss of $1.4 million, or $(0.04) per diluted share, with total revenue at $90.8 million.

How much did InterDigital's net income increase in 2020?

InterDigital's net income increased by 114% year-over-year to $44.8 million.

What was the free cash flow generated by InterDigital in 2020?

InterDigital generated $121.1 million in free cash flow for the full year 2020.

What drove the revenue growth for InterDigital in 2020?

The revenue growth was driven by new patent licensing activities, with recurring revenue increasing by 13% year-over-year.

When will InterDigital discuss its financial performance in a conference call?

InterDigital will host a conference call on February 18th, 2021, at 10:00 a.m. ET to discuss its financial performance.