InterDigital Inc (IDCC)

[FISH21049]

InterDigital Announces Financial Results for Second Quarter 2018
5% Sequential Increase in Recurring Revenue, Continued Expense Control and New Tax Rate Drive Solid Quarter
Company Release - 8/2/2018 8:30 AM ET
WILMINGTON, Del., Aug. 02, 2018 (GLOBE NEWSWIRE) -- InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and development company, today announced results for the second quarter ended June 30, 2018.

Effective January 1, 2018, the company adopted a new revenue recognition standard ("ASC 606"), which impacted the company’s recognition of revenue from certain of its fixed-fee and per-unit license agreements. The company adopted ASC 606 using the modified retrospective method, which means that the total amount of revenue reported for second quarter 2017 has not been restated in the current financial statements. In the interest of comparability during the transition year to ASC 606, the company has provided revenue, net income and earnings per share information in accordance with both ASC 606 and revenue recognition rules in effect prior to the adoption of ASC 606 (“ASC 605”).

Second Quarter 2018 Financial Highlights

Second quarter 2018 recurring revenue was $67.5 million, a 5% sequential increase compared to first quarter 2018. Under ASC 605, recurring revenue for second quarter 2018 would have been $88.6 million, compared to $87.9 million in second quarter 2017, primarily driven by new fixed-fee agreements signed during 2018.

Second quarter 2018 operating expenses decreased by $1.0 million to $53.9 million, compared to $54.8 million in second quarter 2017. Operating expenses were not affected by the adoption of ASC 606.

The second quarter 2018 effective tax rate was 9.8%, based on the statutory federal tax rate net of discrete federal and state taxes. The effective tax rate for second quarter 2018 was favorably impacted by provisions contained within the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act"). This is compared to an effective tax rate of 34.4% based on the statutory federal tax rate net of discrete federal and state taxes during second quarter 2017.

Second quarter 2018 net income1 was $10.7 million, or $0.30 per diluted share. Under ASC 605, net income for second quarter 2018 would have been $33.2 million, or $0.93 per diluted share, compared to $52.5 million, or $1.46 per diluted share, in second quarter 2017.

In second quarter 2018, the company recorded $6.8 million of cash provided by operating activities, compared to $19.4 million in second quarter 2017. The company used $0.8 million of free cash flow2 in second quarter 2018, compared to generating $10.1 million in second quarter 2017. These changes were primarily due to the timing of cash receipts under fixed-fee agreements. Ending cash and short-term investments totaled $1.1 billion.
“Our continued licensing efforts, including new agreements in the second quarter, saw growth in recurring revenue coupled with careful expense discipline and another excellent quarter,” said William J. Merritt, President and CEO. “With the expansion of our patent portfolio, our continued strong participation in 5G, and the expansion of wireless into new markets, we see new opportunities and a platform for continued growth.”

Additional Highlights

The current period tax benefit was driven by:

the decrease in the U.S. corporate tax rate from 35% to 21% and the imposition of a 13.125% tax rate on income that qualifies as Foreign Derived Intangible Income ("FDII") under the Tax Reform Act; and

timing differences between the recognition of book and tax revenue that magnify the FDII impact in the current period.

The company expects to report a negative effective tax rate for the full year, but expects its long-term tax rate will be in the range of approximately 14% to 15%. The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including timing differences between the recognition of book and tax revenue, the level of pre-tax income or loss, the foreign vs. domestic classification of the company’s customers, and any discrete items that may occur. The company further notes that its tax positions could be altered by pending IRS regulations that could clarify certain provisions of the Tax Reform Act.

From January 1, 2018 through July 31, 2018, the company has repurchased 0.2 million shares of common stock under its stock repurchase program for a total cost of $16.0 million.

On July 31, 2018, we announced that we had completed the acquisition of the patent licensing business of Technicolor, a worldwide technology leader in the media and entertainment sector.
Conference Call Information

InterDigital will host a conference call on Thursday, August 2, 2018 at 10:00 a.m. Eastern Time to discuss its second quarter 2018 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 [phone] within the United States or [phone] from outside the United States. Please call by 9:50 a.m. ET on August 2nd and give the operator conference ID number 9287523.

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 August 2 through 1:00 p.m. ET August 7. To access the recorded replay, call [phone] or [phone] and use the replay code 9287523.