InterDigital, Inc. (NASDAQ:IDCC), a mobile technology research and development company, today announced results for the third quarter ended September 30, 2016.
Third Quarter 2016 Financial Highlights
Third quarter 2016 total revenue was $208.3 million, compared to $100.4 million in third quarter 2015. The $107.9 million increase in total revenue was primarily attributable to a new patent license agreement signed during the quarter. Primarily as a result of that agreement, past patent royalties totaled $124.0 million, an increase of $102.2 million compared to the same quarter last year.
Third quarter 2016 recurring revenue was $84.3 million, consisting of current patent royalties and current technology solutions revenue, a 7% increase compared to $78.6 million in third quarter 2015. This increase in recurring revenue was primarily due to an increase in fixed-fee amortized royalty revenue, partially offset by a decrease in per-unit royalty revenue resulting from decreased shipments by the company’s Taiwan-based licensees.
Third quarter 2016 operating expenses were $51.6 million, a 6% decrease compared to $55.0 million in third quarter 2015. Intellectual property enforcement expenses were $3.6 million, a 45% decrease compared to $6.4 million in third quarter 2015.
Net income was $104.5 million, or $2.99 per diluted share, compared to $24.5 million, or $0.68 per diluted share, in third quarter 2015.
Ending cash and short-term investments totaled $781.5 million.
“This is the fifth year in a row that the continued expansion and careful management of our licensing and technology solutions programs has generated significant past sales revenue, and in three of the last four years those revenues exceeded $100 million,” said William J. Merritt, President and CEO of InterDigital. “We are continually working to expand our base of licensees, resulting in additional opportunities to build on that going forward. Moreover, this quarter and in four of the last five quarters, we reported reduced operating expenses year-over-year, highlighting our continued careful expense management and the operating leverage in our business.”
Additional Financial Highlights for Third Quarter 2016
In second quarter 2017, the company expects to recognize additional past patent royalties associated with a patent transfer in connection with the new patent license agreement signed in third quarter 2016.
In third quarter 2016, the company recorded $10.2 million of cash used in operating activities, compared to $0.7 million of cash provided by operating activities in third quarter 2015. The company used $19.3 millionand $7.7 million of free cash flow in third quarter 2016 and third quarter 2015, respectively. The changes between periods are attributable to the timing of cash receipts.
During third quarter 2016, the company repurchased 0.1 million shares of common stock for $5.7 million, bringing the total number of shares repurchased under the company’s current $400 million stock repurchase program to 6.7 million shares at a cost of $313.7 million.
The company’s third quarter 2016 effective tax rate was approximately 32.3% compared to 36.2% during third quarter 2015. The change in the company’s effective tax rate was primarily attributable to the inclusion of an estimated deduction for domestic production activities and an estimated U.S. federal research and development tax credit in the company’s third quarter 2016 effective tax rate, neither of which were included in the prior year period.
Conference Call Information
InterDigital will host a conference call on Thursday, October 27, 2016 at 10:00 a.m. Eastern Time to discuss its third quarter 2016 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 (800) 524-8850 within the United States or +1 416 204-9702 from outside the United States. Please call by 9:50 a.m. ET on October 27 and give the operator conference ID number 5675537.
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 October 27 through 1:00 p.m. ET November 1. To access the recorded replay, call (888) 203-1112 or +1 719 457-0820 and use the replay code 5675537.
About InterDigital®
InterDigital develops mobile technologies that are at the core of devices, networks, and services worldwide. We solve many of the industries most critical and complex technical challenges, inventing solutions for more efficient broadband networks and a richer multimedia experience years ahead of market deployment. InterDigital has licenses and strategic relationships with many of the world’s leading wireless companies. Founded in 1972, InterDigital is listed on NASDAQ and is included in the S&P MidCap 400® index.