Exhibit 99.1
InterDigital Announces First Quarter 2007 Financial Results
Strong Profitability and Cash Flow in Quarter
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--May 8, 2007--InterDigital
Communications Corporation (NASDAQ:IDCC) today announced results for
first quarter ended March 31, 2007. Highlights for the first quarter
include:
-- Revenue of $67.8 million, including $58.5 million of recurring
revenue
-- Net income of $17.7 million, or $0.34 per diluted share
-- Free cash flow(1) of $93.3 million
-- Repurchase of 4.5 million shares of the company's common stock
for $147.6 million
William J. Merritt, President and Chief Executive Officer, stated,
"First quarter 2007 was another good quarter for InterDigital.
Recurring royalties from our core base of existing licensees were
strong, growing significantly both sequentially and on a comparable
quarter basis. We also drove substantial additional earnings through
incremental royalties identified in a routine audit. Further, we
continued to protect our intellectual property, as evidenced by the
actions brought against Samsung in April 2007. We continue to have
dialogue with unlicensed manufacturers and remain focused on growing
our base of 3G licensees."
"Our product programs also progressed very well," continued Mr.
Merritt. "We are on target to have a dual-mode 2G/3G HSDPA/HSUPA modem
ASIC available in engineering samples by late summer 2007, making
InterDigital one of only a few companies in the world with commercial
terminal unit ASIC products with functioning HSDPA and HSUPA
technologies."
In addition, in April 2007, the company completed its $350 million
share repurchase program. That program began in March 2006 with the
Board of Directors authorization of $100 million in repurchases which
expanded to $200 million in May 2006 and $350 million in December
2006. Over the course of the program, the company repurchased 11.3
million shares, or approximately 20 percent of the shares outstanding.
Since 2003, InterDigital has expended $436 million repurchasing 16.3
million of its shares.
First Quarter Summary
Revenue in first quarter 2007 increased to $67.8 million from
$51.6 million in first quarter 2006. First quarter 2007 revenue
included $58.5 million of recurring patent license royalties and
technology solution sales as well as $9.3 million associated with
prior period sales of Sony Ericsson's covered 2G products identified
in a routine audit. Recurring patent license royalties in first
quarter 2007 increased 16 percent to $57.5 million from $49.6 million
in first quarter 2006. This increase was due largely to higher 2G
royalties from Sony Ericsson, 3G royalties from Panasonic, and a full
quarter's amortization of patent licensing revenue related to an
agreement with LG. Technology solution revenue decreased to $1.0
million in first quarter 2007 from $2.0 million in first quarter 2006
due to the completion of deliverables under an agreement with General
Dynamics and the timing of milestone achievements under a development
agreement with NXP. Licensees that accounted for 10 percent or more of
the $58.5 million of recurring patent license royalties and technology
solution sales were LG (24 percent), Sharp Corporation of Japan (18
percent), NEC Corporation of Japan (16 percent), and Sony Ericsson (15
percent).
The company's net income in first quarter 2007 increased to $17.7
million, or $0.34 per diluted share, from $12.9 million, or $0.23 per
diluted share, in first quarter 2006. This improvement in net income
was driven by higher revenues offset, in part, by increased operating
expenses.
First quarter 2007 operating expenses of $43.6 million increased
33 percent when compared to first quarter 2006. This increase
primarily resulted from higher costs related to (i) the company's
acceleration of planned expenditures associated with the development
and fabrication of its dual mode 2G/3G ASIC and related PC card
reference platform (ii) overlapping incentive compensation plans as
well as normal inflation and vacation accruals, and, (iii) increased
patent litigation and arbitration activity. Patent litigation and
arbitration expenses increased to $5.5 million, net of a $1.7 million
insurance recovery, in first quarter 2007 from $3.8 million in first
quarter 2006.
Net interest and investment income of $2.6 million in first
quarter 2007 increased $1.1 million over first quarter 2006 due mainly
to higher investment balances in first quarter 2007.
The company's first quarter 2007 effective tax rate was
approximately 34 percent, which takes into account estimated future
tax credits related to 2007 research and development activity. In
first quarter 2006, the company's tax expense included amounts related
to both U.S. statutory federal taxes and foreign withholding tax
payments made in prior years resulting in an effective rate of
approximately 36%.
During first quarter 2007, the company generated $93.3 million of
free cash flow due largely to the receipt of a $95 million payment
from LG related to its patent license agreement.
Near-Term Outlook
Richard J. Fagan, Chief Financial Officer commented, "Consistent
with the company's practice, revenue guidance for second quarter 2007
will be provided following the receipt and review of applicable
royalty reports. Notwithstanding that fact, the reports we have
received to date (which include all of our major licensees) reflect a
trend of strong sales.
"We currently anticipate that second quarter 2007 operating
expense growth, excluding patent arbitration/litigation costs, will
slow to roughly one third of that experienced between the most recent
two quarters," added Mr. Fagan. "Beyond second quarter 2007, we
anticipate that the quarterly level of expense for product programs
should level off for the remainder of the year, as we will have
reached the level of capability needed to pursue the fabless business.
Further increases in costs would likely be customer specific
acquisition costs that would also be accompanied by revenue.
"Further, we also currently expect that our patent arbitration and
litigation expenses in second quarter 2007 will be above the $7.2
million (excluding an insurance recovery) experienced in first quarter
2007," continued Mr. Fagan. "The actual level of expense will depend
on the level of activity we experience during the quarter including
any activities associated with newly filed cases involving Samsung in
the U.S. District Court and the U.S. International Trade Commission.
Lastly, our book tax rate throughout the balance of 2007 will be
dependent upon our estimates of the relative proportions of our full
year profitability and level of investment tax credits in 2007, but is
currently estimated to be a 34 percentage effective rate."
About InterDigital
InterDigital Communications Corporation designs, develops and
provides advanced wireless technologies and products that drive voice
and data communications. InterDigital is a leading contributor to the
global wireless standards and holds a strong portfolio of patented
technologies which it licenses to manufacturers of 2G, 2.5G, 3G and
802 products worldwide. Additionally, the Company offers baseband
product solutions and protocol software for 3G multimode terminals and
converged devices. InterDigital's differentiated technology and
product solutions deliver time-to-market, performance and cost
benefits. For more information, please visit InterDigital's web site:
www.interdigital.com.
This press release contains forward-looking statements regarding
our current beliefs, plans, and expectations with respect to: (i)
growing our base of 3G licensees: (ii) our schedule for the delivery
of engineering samples of our dual mode 2G/3G ASIC: (iii) the
competitive advantage of our dual mode ASIC: (iv) second quarter 2007
revenue guidance: (v) second quarter 2007 operating expenses excluding
patent arbitration/litigation expense: (vi) second quarter 2007 patent
arbitration/litigation expense; and (vii) our estimated 2007 book tax
rate. Words such as "will," "expect," "anticipate" "continue to,"
"forecast," "likely," "estimate," "on target" 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, but not limited to, those identified in this press
release as well as the following: (i) unanticipated delays,
difficulties or acceleration in the execution of patent license
agreements; (ii) our ability to leverage our strategic relationships
and secure new relationships on acceptable terms; (iii) changes in the
market share and sales performance of our primary licensees, delays in
product shipments of our licensees, and any delay in receipt of
quarterly royalty reports from our licensees; (iv) unanticipated
product development expenses and the timing of such expenses; (v)
unanticipated difficulties or delays in the production or delivery of
our ASIC engineering samples; (vi) changes in the technology
preferences, needs, availability and pricing of competitive
technologies and product offerings; (vii) timely receipt and final
reviews of licensee royalty reports and related matters; (viii) the
resolution of current legal proceedings, including any awards or
judgments relating to such proceedings, additional legal proceedings,
changes in the schedules or costs associated with legal proceedings,
or adverse rulings in such legal proceedings; and, (ix) changes in our
expectations of the amount and composition of full-year taxable
income, changes in the amount of our 2007 U.S. federal research and
experimental credit, changes in foreign and domestic tax laws or
treatises, or changes in our tax planning strategies. We undertake no
duty to publicly update any forward-looking statements, 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.
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,
------------------------------
2007 2006
------------------------------
REVENUES $ 67,818 $ 51,606
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OPERATING EXPENSES:
Sales and marketing 2,096 1,824
General and administrative 6,544 5,021
Patents administration and licensing 13,205 9,982
Development 21,784 16,010
--------------- --------------
43,629 32,837
--------------- --------------
Income from operations 24,189 18,769
NET INTEREST & OTHER INVESTMENT INCOME 2,633 1,508
--------------- --------------
Income before income taxes 26,822 20,277
INCOME TAX PROVISION (9,153) (7,338)
--------------- --------------
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 17,669 $ 12,939
=============== ==============
NET INCOME PER COMMON SHARE - BASIC $ 0.35 $ 0.24
=============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC 49,782 54,785
=============== ==============
NET INCOME PER COMMON SHARE - DILUTED $ 0.34 $ 0.23
=============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - DILUTED 51,880 56,884
=============== ==============
SUMMARY CASH FLOW
For the Periods Ended March 31
(Dollars in thousands)
(unaudited)
- ----------------------------------------------------------------------
For the Three Months Ended
March 31,
------------------------------
2007 2006
------------------------------
Income before income taxes $ 26,822 $ 20,277
Taxes paid (15,675) (15,675)
Depreciation & amortization 7,177 4,671
Increase in deferred revenue 104,088 225,528
Deferred revenue recognized (31,107) (29,908)
Increase (decrease) in operating working
capital, deferred charges and other 14,289 (118,347)
Capital spending, technology licensing &
patent additions (12,278) (7,778)
--------------- --------------
FREE CASH FLOW 93,316 78,768
Long-term investment (5,000) -
Tax benefit from share-based
compensation 2,425 3,212
Debt decrease (92) (84)
Repurchase of common stock (143,926) -
Proceeds from exercise of stock options 2,099 9,386
Unrealized gain on short term
investments 31 49
--------------- --------------
NET (DECREASE) INCREASE IN CASH AND
SHORT-TERM INVESTMENTS $ (51,147) $ 91,331
=============== ==============
CONDENSED BALANCE SHEET
- ----------------------------------------------------------------------
(Dollars in thousands)
(unaudited)
March 31, 2007 December 31, 2006
--------------- -----------------
Assets
- -------------------------------------
Cash & short-term investments $ 212,819 $ 263,966
Accounts receivable 110,994 131,852
Current deferred tax assets 45,438 43,520
Other current assets 13,045 14,464
Property & equipment and Patents
(net) 95,026 87,178
Long-term deferred tax assets and
non-current assets 31,171 23,096
--------------- -----------------
TOTAL ASSETS $ 508,493 $ 564,076
=============== =================
Liabilities and Shareholders' Equity
- -------------------------------------
Current portion of long-term debt $ 332 $ 369
Accounts payable & accrued
liabilities 41,548 50,150
Current deferred revenue 67,538 70,709
Long-term deferred revenue 237,047 160,895
Long-term debt & long-term
liabilities 12,957 6,477
--------------- -----------------
TOTAL LIABILITIES 359,422 288,600
SHAREHOLDERS' EQUITY 149,071(2) 275,476
--------------- -----------------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $ 508,493 $ 564,076
=============== =================
The company's short-term investments are comprised of high quality
credit instruments including U.S. Government agency instruments and
corporate bonds. Management views these instruments to be near
equivalents to cash and believes that investors may share this
viewpoint.
This release includes a summary cash flow statement that results
in the change in both the company's cash and short-term investment
balances. One of the subtotals in the summary cash flow statement is
free cash flow. The table below presents a reconciliation of this
non-GAAP line item to net cash provided by operating activities.
For the Three Months Ended
March 31,
------------------------------
2007 2006
------------------------------
Net cash provided by operating
activities $105,594 $86,546
Purchases of property, equipment, &
technology licenses (7,112) (3,249)
Patent additions (5,166) (4,529)
--------------- --------------
Free cash flow $93,316 $78,768
=============== ==============
(1) InterDigital defines "free cash flow" as operating cash flow
less purchases of property and equipment and investments in patents. A
detailed reconciliation of free cash flow to GAAP results is provided
at the end of this news release.
(2) InterDigital adopted FASB Interpretation No. 48 (FIN 48) on
January 1, 2007. Upon adoption, a $2.1 million reserve for uncertain
tax positions was established. Consistent with FIN 48, the beginning
balance of retained earnings was reduced by the $2.1 million increase
in reserves.
InterDigital is a registered trademark of InterDigital
Communications Corporation.
CONTACT: InterDigital Communications Corporation
Media Contact:
Jack Indekeu, 610-878-7800
e-mail: jack.indekeu@interdigital.com
or
Investor Contact:
Janet Point, 610-878-7800
e-mail: janet.point@interdigital.com