InterDigital Announces Strong First Quarter Financial Results; 90% Growth in
Recurring Patent Licensing
Revenue Drives Profitable Results
Business Editors/High-Tech Writers
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--May 10, 2004--InterDigital
Communications Corporation (Nasdaq:IDCC), a leading architect,
designer and provider of wireless technology and product platforms,
today announced revenues of $33.0 million and net income of $5.8
million, or $0.10 per share (diluted), for its first quarter ended
March 31, 2004. In addition, InterDigital reported its cash and
short-term investment position grew to $125.4 million at March 31,
2004, up $19.4 million over year-end 2003.
Howard Goldberg, President and Chief Executive Officer, stated, "I
am very pleased with our first quarter 2004 results. It's evident that
we have built a quality recurring royalty revenue stream that
continues to grow. Our cash position is extremely strong, providing us
significant flexibility to pursue attractive opportunities. Further,
we expect to expand our licensee base throughout the remainder of
2004. We also continue to invest in the development of technology
solutions that have strong intellectual property generation potential
while creating product options aligned with market and customer
needs."
First Quarter Summary
Revenues in first quarter 2004 were $33.0 million compared to
$37.3 million in first quarter 2003. Recurring patent license
royalties for first quarter 2004 of $32.4 million increased $15.4
million, or 90%, when compared to first quarter 2003. First quarter
2003 revenue consisted of $17.0 million of recurring patent license
royalties and $20.3 million of non-recurring revenue associated with
Sony Ericsson's pre-2003 handset sales. The increase in recurring
royalties was primarily driven by growth in royalties from NEC
Corporation of Japan (NEC), Sharp and Sony Ericsson. NEC's royalties
increased $11.4 million, a portion of which related to 3G handset
shipments that were delayed from calendar fourth quarter 2003 to
calendar first quarter 2004.
The Company reported net income of $5.8 million, or $0.10 per
share (diluted), for first quarter 2004, compared to net income of
$26.7 million, or $0.45 per share (diluted) in first quarter 2003.
Results for first quarter 2003 included the benefit of $30.8 million
(pre-tax) of non-recurring items related to Sony Ericsson's pre-2003
handset sales and the settlement of litigation with Ericsson. Absent
these items, the Company would have reported a net loss of $3.6
million, or $0.07 per share.
Operating expenses of $24.9 million in first quarter 2004
increased 26% over first quarter 2003 and 9% over fourth quarter 2003,
in line with previous Company guidance. The increase in operating
expenses over first quarter 2003 was due, in large part, to additional
personnel and facilities costs related to a 2003 asset acquisition and
other increases associated with annual wage inflation, patent
licensing costs and public entity costs. Tax expense increased in
first quarter 2004 due to a higher level of royalty revenue subject to
non-U.S. withholding tax.
Howard Goldberg added, "We continue to focus appropriate internal
and external resources toward the resolution of arbitrations with
Nokia and Samsung and litigation with Lucent. In the Samsung matter,
the arbitration panel has been selected and we expect the parties will
begin the discovery portion of the arbitration process in the near
future. We remain confident in our positions in these matters."
2004 Outlook
Rich Fagan, Chief Financial Officer commented, "Assuming our key
licensees continue to perform well, we expect recurring royalties from
our existing licensees to be in the range of $27 million to $30
million per quarter over the remainder of 2004. We also expect to
conclude additional patent license agreements during 2004 which should
be accretive. Excluding repositioning charges and any higher-than
planned patent enforcement costs, we expect that second quarter 2004
operating expenses will increase 4%-6% over first quarter 2004 levels
as expenses from a recently implemented long-term incentive program
are offset in part by cost savings from repositioning activities. We
currently expect that our operating expenses for the third and fourth
quarters of 2004 will not exceed the levels anticipated for second
quarter 2004. We also continue to expect to be cash flow positive for
the full year 2004."
About InterDigital
InterDigital architects, designs and provides advanced wireless
technologies and products that drive voice and data communications.
The Company offers technology and product solutions for mainstream
wireless applications that deliver cost and time-to-market advantages
for its customers. InterDigital has a strong portfolio of patented
technologies covering 2G, 2.5G and 3G standards, which it licenses
worldwide. For more information, please visit InterDigital's web site:
www.interdigital.com. InterDigital is a registered trademark of
InterDigital Communications Corporation. All other trademarks are the
property of their respective owners.
This press release contains forward-looking statements regarding,
among other things, our current beliefs, plans, and expectations as
to: (i) our ability to expand our licensee base throughout 2004; (ii)
our planned investment in development of technology with strong
intellectual property potential and ability to create product options;
(iii) the Nokia and Samsung arbitrations and Lucent litigation; (iv)
the amount and timing of recurring royalties; (v) our ability to
conclude additional patent licenses in 2004; and, (vi) our cash flow
and operating expenses. Words such as "expect", "continue",
"projections", "anticipate", "forward", 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
forward-looking statements due to a variety of factors in addition to
those specifically identified above including, but not limited to: (i)
unanticipated changes in the schedule or costs associated with the
Nokia and Samsung arbitrations or Lucent litigation; (ii) delays in
concluding additional license agreements; (iii) changes in the market
share and sales performance of our primary licensees, delays in
product shipments of our licensees, inaccuracy of market projections;
(iv) the market relevance of our technologies; changes in technology
preferences of strategic partners or consumers; the availability or
development of substitute or competitive technologies; our ability to
leverage our existing and enter into additional strategic
relationships, and (v) and other factors listed in the Company's most
recently filed Forms 10-K and Form 10-Q We undertake no duty to
publicly update any forward-looking statements, whether as a result of
new information, future events or otherwise.
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SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------
For the Periods Ended March 31
(Dollars in thousands except per share data)
(unaudited)
For the Three Months
Ended
March 31,
---------------------
2004 2003
---------- ----------
REVENUES: $ 33,016 $ 37,324
---------- ----------
OPERATING EXPENSES:
Sales and marketing 1,614 1,210
General and administrative 5,390 4,117
Patents administration and licensing 5,000 3,139
Development 12,914 11,388
---------- ----------
24,918 19,854
---------- ----------
Income from operations 8,098 17,470
OTHER INCOME - 10,580
NET INTEREST INCOME 428 419
---------- ----------
Income before income taxes 8,526 28,469
INCOME TAX PROVISION (2,692) (1,742)
---------- ----------
Net income 5,834 26,727
PREFERRED STOCK DIVIDENDS (34) (34)
---------- ----------
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 5,800 $ 26,693
========== ==========
NET INCOME PER COMMON SHARE - BASIC $0.11 $0.49
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC 55,146 54,604
========== ==========
NET INCOME PER COMMON SHARE - DILUTED $0.10 $0.45
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - DILUTED 59,745 58,666
========== ==========
SUMMARY CASH FLOW
-----------------
(Dollars in thousands)
(unaudited)
For the Three Months
Ended
March 31,
---------------------
2004 2003
---------- ----------
Net income before pref. stock dividends $5,834 $26,727
Depreciation & amortization 2,671 2,604
Increase in deferred revenue 22,784 32,236
Deferred revenue recognized (12,709) (10,964)
Increase in operating working capital,
deferred charges and other (2,487) (49,325)
Capital spending & patent additions (3,096) (1,649)
---------- ----------
CASH FLOW BEFORE FINANCING
ACTIVITIES AND ASSET ACQUISITION 12,997 (371)
Debt decrease & preferred dividends (50) (47)
Net stock issued 6,492 7,434
---------- ----------
NET INCREASE IN CASH
AND SHORT-TERM INVESTMENTS $ 19,439 $ 7,016
========== ==========
Certain prior period amounts have been reclassified to conform to the
2004 presentation.
CONDENSED BALANCE SHEETS
------------------------
(Dollars in thousands)
(unaudited)
March 31, Dec. 31,
2004 2003
---------- ----------
Assets
------
Cash & short-term investments $125,366 $105,927
Accounts receivable 36,342 37,839
Other current assets 8,025 8,628
Property & equipment (net) 11,213 12,137
Patents (net) & other non-current assets 44,992 40,634
---------- ----------
TOTAL ASSETS $225,938 $205,165
========== ==========
Liabilities and Shareholders' Equity
------------------------------------
Current portion of long-term debt $186 $193
Accounts payable & accrued liabilities 12,454 16,236
Foreign & domestic taxes payable 2,817 1,259
Deferred revenue 96,668 86,595
Long-term debt & long-term liabilities 3,354 3,397
---------- ----------
TOTAL LIABILITIES 115,479 107,680
SHAREHOLDERS' EQUITY 110,459 97,485
---------- ----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $225,938 $205,165
========== ==========
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--30--SF/ph*
CONTACT: InterDigital Communications Corporation
Media: Dawn Goldstein, 610-878-7800
e-mail: dawn.goldstein@interdigital.com
or
Investor: Janet Point, 610-878-7800
e-mail: janet.point@interdigital.com
