Exhibit 99.1
InterDigital Announces Second Quarter 2007 Financial Results
Pro forma Net Income of $6.6 Million, or $0.13 Per Share
Diluted for Second Quarter 2007
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--Aug. 8, 2007--InterDigital,
Inc. (NASDAQ:IDCC) today announced financial and operating results for
second quarter ended June 30, 2007. Highlights for second quarter
include:
-- Revenue of $55.0 million, including $53.2 million of recurring
revenue
-- Pro forma(1) net income of $6.6 million, or $0.13 per share
(diluted) for second quarter 2007, excluding a $16.6 million
non-recurring expense relating to the arbitral award arising
from the company's arbitration with Federal Insurance Company
-- U.S. GAAP net loss of $4.4 million, or $0.09 per share
-- Cash and short-term investment position of $191.6 million
"For the second quarter, InterDigital posted another strong
quarter," commented William J. Merritt, President and Chief Executive
Officer. "We recorded solid recurring revenue and profit (excluding
the one-time charge for the award in the Federal arbitration) and our
product programs are moving forward as planned. We are on track to
have our dual-mode 2G/3G HSDPA/HSUPA modem ASIC available in
engineering samples by early fall 2007, making InterDigital one of
only a few companies in the world with commercial terminal unit ASIC
products with functioning HSDPA/HSUPA technologies."
"We continue to have dialogue with unlicensed manufacturers and
remain focused on growing our base of 3G licensees and, if necessary,
vigorously defending our intellectual property as demonstrated by our
recent ITC action against Nokia," added Mr. Merritt.
Second Quarter Summary
The company's second quarter 2007 pro forma(1) net income totaled
$6.6 million, or $0.13 per share (diluted), excluding a $16.6 million
charge relating to an award in the arbitration with Federal and
related tax effects. On a U.S. GAAP basis, the company reported net
loss of $4.4 million, or $0.09 per share, in second quarter 2007
compared to net income of $170.4 million, or $2.98 per share
(diluted), in second quarter 2006. Second quarter 2006 net income
included approximately $154.1 million, or $2.69 per share (diluted)
related to the resolution of patent licensing matters with Nokia and
Panasonic.
Revenues in second quarter 2007 were $55.0 million compared to
$296.6 million in second quarter 2006. Second quarter 2006 revenues
included $240.0 million related to the Nokia and Panasonic matters.
Recurring patent licensing royalties in second quarter 2007 were $52.6
million, compared to $54.9 million in second quarter 2006. The decline
in recurring patent licensing royalties was driven by the absence of
recurring 2G royalties from Sony Ericsson and Ericsson, partly offset
by a $3.4 million increase in recurring royalties from other
licensees. Technology solution revenue decreased to $0.6 million in
second quarter 2007 compared to $1.7 million in second quarter 2006,
due primarily to reduced activity under a development agreement with
NXP that is nearing completion. Licensees that accounted for 10% or
more of the $53.2 million of recurring patent license royalties and
technology solution sales were LG (27%), Sharp Corporation of Japan
(21%) and NEC Corporation of Japan (18%).
Second quarter 2007 operating expenses of $63.9 million increased
$27.9 million compared to second quarter 2006. The increase was
primarily due to (i) a non-recurring $16.6 million charge relating to
the Federal arbitration award, (ii) an increase in litigation and
arbitration expenses, (iii) increased patent portfolio amortization,
management and maintenance costs and (iv) increased investment in the
development of the dual mode terminal unit ASIC. Excluding the charge
associated with the Federal arbitration award, second quarter 2007
operating expenses totaled $47.3 million, compared to $43.6 million in
first quarter 2007. The increase in second quarter 2007 operating
expense over first quarter 2007 was due to higher litigation and
arbitration expenses (which totaled $9.9 million), partially offset by
a slight decrease in other operating expenses.
Net interest and investment income of $2.3 million in second
quarter 2007 decreased $1.6 million from second quarter 2006 due
primarily to lower investment balances in second quarter 2007
following the completion of the company's $350 million share
repurchase program.
The company's second quarter 2007 tax provision reflected a tax
benefit of $2.2 million compared to tax expense of $94.2 million in
second quarter 2006. The second quarter 2007 effective tax rate was
approximately 33%, including the effect of estimated future tax
credits related to 2007 research and development activity. In second
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%.
Six Months Summary
Pro forma net income for first half 2007 (which excludes a $16.6
million charge relating to an award in the arbitration with Federal
and related tax effects) totaled $24.2 million or $0.48 per share
(diluted). U.S. GAAP net income for first half 2007 totaled $13.3
million, or $0.26 per share (diluted) compared to $183.3 million, or
$3.20 per share (diluted) in first half 2006. Of the first half 2006
net income, approximately $154.1 million, or $2.69 per share (diluted)
related to the resolution of patent licensing matters with Nokia and
Panasonic.
Revenues were $122.8 million in first half 2007, compared to
$348.2 million in first half 2006. First half 2006 revenues included
$240.0 million of non-recurring revenue related to the Nokia and
Panasonic matters. First half 2007 revenues included $11.2 million of
non-recurring revenue associated with prior period sales of Sony
Ericsson's covered 2G products identified in a routine audit.
Recurring patent license royalties were $110.0 million in first half
2007, up from $104.5 million in first half 2006.
During first half 2007, the company generated $90.8 million of
free cash flow(2), compared to $288.8 million free cash flow in first
half 2006. Free cash flow in first half of 2006 included $253.0
million related to the resolution of patent licensing matters with
Nokia and $95.0 million related to a new patent license agreement with
LG. First half 2007 free cash flow was driven by a patent license
payment from LG totaling $95.0 million, offset in part by (i) $16.0
million of federal and foreign withholding tax payments, (ii)
litigation and arbitration costs, (iii) patent related costs and (iv)
investments in product development initiatives.
First half 2007 operating expenses of $107.5 million increased
$38.7 million from first half 2006 due primarily to (i) a $16.6
million charge relating to the Federal arbitration, (ii) a $7.6
million increase in litigation and arbitration expenses, (iii)
increased patent portfolio amortization, management and maintenance
costs and, (iv) higher investments in product development initiatives.
Net interest and investment income of $4.9 million in first half
2007 decreased slightly from $5.4 million in first half 2006 due
primarily to lower investment balances.
The company's first half 2007 tax expense was $7.0 million,
compared with first half 2006 tax expense of $101.6 million. The first
half 2007 effective tax rate was approximately 34%, including the
effect of estimated future tax credits related to 2007 research and
development activity. In second half 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%.
Expected Trends
Scott McQuilkin, Chief Financial Officer, commented, "Based on the
sales reports we have thus far, we expect solid recurring royalties in
the third quarter 2007 from our diverse base of licensees as the sales
of 3G products by our licensees continue to grow. As is our practice,
we will provide an update on our expectation for third quarter 2007
revenue shortly, after we receive and review the applicable royalty
reports and update our forecasts on anticipated revenue from work
associated with technology solution agreements."
"Our operating expenses, excluding patent arbitration or
litigation costs, in second quarter were slightly lower than we had
expected given a shift in the timing of some expenses related to our
ASIC program," added Mr. McQuilkin. "We now expect to incur those
expenses in third quarter, contributing to an increase in the 5 to 10
percent range over comparable second quarter 2007 operating expense
and subsequently leveling out for the balance of the year. We believe
that patent arbitration and litigation costs will continue to increase
over the remainder of the year, although the actual level will be
dependent on the amount of activity associated with these matters.
Lastly, our book tax rate for the second half of the year will be
dependent upon the relative proportions of our full year profitability
and investment tax credits in 2007, but is expected to approximate
34%."
About InterDigital
InterDigital 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) third quarter 2007
revenue guidance: (v) third and fourth quarter 2007 operating expenses
excluding patent arbitration/litigation expense: (vi) third and fourth
quarter 2007 patent arbitration/litigation expense; (vii) our
estimated book tax rate for the second half of 2007; and (viii) our
third quarter recurring royalties. Words such as "will," "expect," "on
track," "update," "anticipate," "continue to," "forecast," "estimate,"
"approximate," 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 patent licensing and technology solution agreements on
acceptable terms; (iii) changes in the market share and sales
performance of our primary licensees, delays in product shipments of
our licensees, and timely receipt and final reviews of quarterly
royalty reports from our licensees and related matters; (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) 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, (viii) 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.
(1) Pro forma figures have been prepared to illustrate the
exclusion of the impact of the expense relating to the Federal
Insurance arbitration. Refer to the pro forma income statement at the
end of this release for further disclosures surrounding the company's
presentation of pro forma net income and earnings per share.
(2) 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.
SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------
For the Periods Ended June 30
(Dollars in thousands except per share data)
(unaudited)
For the Three For the Six Months
Months Ended Ended
June 30, June 30,
------------------ --------------------
2007 2006 2007 2006
-------- --------- --------- ----------
REVENUES $55,006 $296,617 $122,824 $ 348,223
-------- --------- --------- ----------
OPERATING EXPENSES:
Sales and marketing 1,879 1,561 3,975 3,385
General and administrative 6,126 5,695 12,670 10,716
Patents administration and
licensing 18,075 12,804 31,280 22,786
Development 21,193 15,887 42,977 31,897
Arbitration award 16,612 -- 16,612 --
-------- --------- --------- ----------
63,885 35,947 107,514 68,784
-------- --------- --------- ----------
(Loss) income from
operations (8,879) 260,670 15,310 279,439
NET INTEREST & OTHER
INVESTMENT INCOME 2,272 3,914 4,905 5,422
-------- --------- --------- ----------
(Loss) income before income
taxes (6,607) 264,584 20,215 284,861
INCOME TAX BENEFIT (PROVISION) 2,201 (94,221) (6,952) (101,559)
-------- --------- --------- ----------
NET (LOSS) INCOME APPLICABLE
TO COMMON
SHAREHOLDERS $(4,406) $170,363 $ 13,263 $ 183,302
======== ========= ========= ==========
NET (LOSS) INCOME PER COMMON
SHARE - BASIC $ (0.09) $ 3.13 $ 0.27 $ 3.36
======== ========= ========= ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
BASIC 46,957 54,397 48,362 54,590
======== ========= ========= ==========
NET (LOSS) INCOME PER COMMON
SHARE - DILUTED $ (0.09) $ 2.98 $ 0.26 $ 3.20
======== ========= ========= ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
DILUTED 46,957 57,128 50,379 57,358
======== ========= ========= ==========
SUMMARY CASH FLOW
For the Periods Ended June 30
(Dollars in thousands)
(unaudited)
- ----------------------------------------------------------------------
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
-------------------- ---------------------
2007 2006 2007 2006
--------- ---------- ---------- ----------
Net (Loss) income before
income taxes $ (6,607) $ 264,584 $ 20,215 $ 284,861
Taxes Paid (309) (35,813) (15,984) (51,488)
Depreciation & amortization 7,296 4,951 14,473 9,622
Increase in deferred
revenue 12,428 60,687 116,516 286,215
Deferred revenue recognized (27,078) (71,028) (58,185) (100,936)
Increase (decrease) in
operating working capital,
deferred charges and other 29,579 (6,707) 43,868 (125,054)
Capital spending & patent
additions (17,788) (6,678) (30,066) (14,456)
--------- ---------- ---------- ----------
FREE CASH FLOW (2,479) 209,996 90,837 288,764
Asset acquisition -- -- (5,000) --
Tax benefit from stock
options 905 11,105 3,330 14,317
Debt decrease (92) (88) (184) (172)
Repurchase of common stock (21,430) (100,067) (165,356) (100,067)
Proceeds from exercise of
stock options 1,642 18,930 3,741 28,316
Unrealized gain (loss) on
short term investments 268 (72) 299 (23)
--------- ---------- ---------- ----------
NET (DECREASE) INCREASE
IN CASH AND SHORT-TERM
INVESTMENTS $(21,186) $ 139,804 $ (72,333) $ 231,135
========= ========== ========== ==========
CONDENSED BALANCE SHEET
- ----------------------------------------------------------------------
(Dollars in thousands)
(unaudited)
June 30, December 31,
2007 2006
---------- ------------
Assets
- ----------------------------------------------
Cash & short-term investments $ 191,633 $ 263,966
Accounts receivable 105,511 131,852
Current deferred tax assets 52,558 43,520
Other current assets 16,348 14,464
Property & equipment and Patents (net) 101,276 87,178
Long-term deferred tax assets and non-current
assets 39,894 23,096
---------- ------------
TOTAL ASSETS $ 507,220 $ 564,076
========== ============
Liabilities and Shareholders' Equity
- ----------------------------------------------
Current portion of long-term debt $ 295 $ 369
Accounts payable & accrued liabilities 63,339 50,150
Current deferred revenue 74,941 70,709
Long-term deferred revenue 214,994 160,895
Long-term debt & long-term liabilities 14,516 6,477
---------- ------------
TOTAL LIABILITIES 368,085 288,600
SHAREHOLDERS' EQUITY 139,135 275,476
---------- ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 507,220 $ 564,076
========== ============
The following Pro Forma statements of financial results exclude
the expense associated with the Federal arbitration award and related
tax expense items. The company has provided these pro forma figures
here and elsewhere in this press release. Management regards the
arbitration award as a non-recurring item not indicative of operating
results for the period and believes that investors may share this
viewpoint.
PRO FORMA SUMMARY CONSOLIDATED STATEMENT OF OPERATIONS
For the Periods Ended June 30
(Dollars in thousands except per share data)
(unaudited)
- ----------------------------------------------------------------------
For the Three Months Ended
June 30, 2007
-------------------------------
Pro
Actual Adjustments Forma
---------- ----------- --------
REVENUES $ 55,006 $55,006
---------- --------
OPERATING EXPENSES:
Sales and marketing 1,879 1,879
General and administrative 6,126 6,126
Patents administration and
licensing 18,075 18,075
Development 21,193 21,193
Arbitration award 16,612 (16,612) --
---------- ----------- --------
63,885 (16,612) 47,273
---------- ----------- --------
(Loss) income from operations (8,879) 16,612 7,733
NET INTEREST & OTHER INVESTMENT
INCOME 2,272 2,272
---------- --------
(Loss) income before income taxes (6,607) 16,612 10,005
INCOME TAX BENEFIT (PROVISION) 2,201 (5,648) (3,447)
---------- ----------- --------
NET (LOSS) INCOME APPLICABLE TO
COMMON SHAREHOLDERS $ (4,406) 10,964 $ 6,558
========== =========== ========
NET (LOSS) INCOME PER COMMON SHARE -
BASIC $ (0.09) $0.14
========== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING -BASIC 46,957 46,957
========== ========
NET (LOSS) INCOME PER COMMON SHARE -
DILUTED $ (0.09) $0.13
========== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - DILUTED 46,957 48,908
========== ========
For the Six Months Ended
June 30, 2007
-------------------------------
Actual Adjustments Pro Forma
--------- ----------- ---------
REVENUES $122,824 $122,824
--------- ---------
OPERATING EXPENSES:
Sales and marketing 3,975 3,975
General and administrative 12,670 12,670
Patents administration and licensing 31,280 31,280
Development 42,977 42,977
Arbitration award 16,612 (16,612) --
--------- ----------- ---------
107,514 (16,612) 90,902
--------- ----------- ---------
(Loss) income from operations 15,310 16,612 31,922
NET INTEREST & OTHER INVESTMENT INCOME 4,905 4,905
--------- ---------
(Loss) income before income taxes 20,215 16,612 36,827
INCOME TAX BENEFIT (PROVISION) (6,952) (5,648) (12,600)
--------- ----------- ---------
NET (LOSS) INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 13,263 10,964 $ 24,227
========= =========== =========
NET (LOSS) INCOME PER COMMON SHARE -
BASIC $0.27 $ 0.50
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING -BASIC 48,362 48,362
========= =========
NET (LOSS) INCOME PER COMMON SHARE -
DILUTED $0.26 $ 0.48
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - DILUTED 50,379 50,379
========= =========
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 our 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 For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
2007 2006 2007 2006
---------- --------- --------- ---------
Net cash provided by
operating activities $ 15,309 $216,674 $120,903 $303,220
Purchases of property,
equipment & technology
licenses (11,514) (1,235) (18,626) (4,484)
Patent additions (6,274) (5,443) (11,440) (9,972)
---------- --------- --------- ---------
Free cash flow $ (2,479) $209,996 $ 90,837 $288,764
========== ========= ========= =========
InterDigital is a registered trademark of InterDigital, Inc.
CONTACT: InterDigital, Inc.
Media Contact:
Jack Indekeu, +1 (610) 878-7800
jack.indekeu@interdigital.com
or
Investor Contact:
Janet Point, +1 (610) 878-7800
janet.point@interdigital.com