Document
false0001405495 0001405495 2020-08-06 2020-08-06




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): August 6, 2020
______________

INTERDIGITAL, INC.
(Exact name of Registrant as Specified in Charter)
Pennsylvania
1-33579
82-4936666
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
200 Bellevue Parkway, Suite 300
Wilmington, DE 19809-3727
(Address of principal executive offices, Zip code)

302-281-3600
Registrant's telephone number, including area code
Not Applicable
Former Name or Former Address, if Changed Since Last Report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, par value $0.01 per share
 
IDCC
 
NASDAQ Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 





Item 2.02.
Results of Operations and Financial Condition.

On August 6, 2020, InterDigital, Inc. issued a press release announcing its results of operations and financial condition for the fiscal quarter ended June 30, 2020. A copy of the press release is attached hereto as Exhibit 99.1.

The information in this report, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.


Item 9.01.    Financial Statements and Exhibits.

(d)    Exhibits.

99.1
 
 
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



    
INTERDIGITAL, INC.
 
 
By: /s/ Richard L. Gulino
Richard L. Gulino
Chief Legal Officer, General
Counsel and Corporate Secretary


Date: August 6, 2020




Exhibit


INTERDIGITAL ANNOUNCES FINANCIAL RESULTS FOR SECOND QUARTER 2020
New licensing drives 15% year-over-year increase in recurring revenue
WILMINGTON, DE. - August 6, 2020 - InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology research and development company, today announced results for the second quarter ended June 30, 2020.
Second Quarter 2020 Financial Highlights
Second quarter 2020 recurring revenue was $85.2 million, compared to recurring revenue of $74.4 million in second quarter 2019, a 15% increase. This increase was driven by new patent license agreements signed over the last twelve months, including with Huawei and ZTE. Second quarter 2020 total revenue was $104.5 million, compared to $75.6 million in second quarter 2019. The increase was primarily driven by the signing of a new fixed-fee patent license agreement with Huawei in second quarter 2020.
Second quarter 2020 operating expenses were $72.6 million, compared to $66.7 million in second quarter 2019. Second quarter 2020 included one-time charges of approximately $2.9 million primarily related to increased performance-based compensation. Intellectual property enforcement costs of $6.9 million, an increase of $2.4 million compared to second quarter 2019, driven by litigations with Lenovo and Xiaomi that we initiated in second half 2019 and July 2020, respectively.
Second quarter 2020 net income1 was $22.3 million, or $0.72 per diluted share compared to net income of $7.7 million, or $0.24 per diluted share, in second quarter 2019.
“Delivering double-digit revenue growth in a quarter marked by a global pandemic clearly has demonstrated the incredible strength and stability of our business and our ability to execute. That resilience, backed by a strong balance sheet, allows us to remain focused on our long-term strategic priorities and combined opportunities in wireless and consumer electronics licensing,” said William J. Merritt, President and CEO of InterDigital. “In light of the pandemic, our focus also remains on the well-being of our employees and the safety of our communities, whom we have supported through the donation of PPEs, as well as monetary donations.”
Additional Highlights
In second quarter 2020, the company recorded $69.8 million of cash provided by operating activities, compared to $22.7 million of cash used in operating activities in second quarter 2019. The company generated $60.0 million of free cash flow2 in second quarter 2020, compared to $33.4 million of free cash flow used in second quarter 2019. The increase in free cash flow was largely driven by cash receipts from recently signed patent license agreements, a portion of which relates to future periods. Ending cash and short-term investments as of June 30, 2020 totaled $839.2 million.
In second quarter 2020, the company recognized a tax expense of $5.1 million compared to $5.0 million in second quarter 2019.
Considering the pandemic, currently the company remains in a virtual work environment, with no significant impact on research, licensing, or other activities. Given that limited impact and based on public authority guidance, the company is taking a cautious approach to reopening its facilities, with partial test re-openings planned during the third quarter.





Conference Call Information
InterDigital will host a conference call on Thursday, August 6, 2020 at 10:00 a.m. Eastern Time to discuss its second quarter 2020 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 +1 (800) 353-6461 within the United States and Canada or +1 (334) 323-0501 from outside the United States and Canada. Please call by 9:50 a.m. ET on August 6th and give the operator conference ID number 4507742.
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 6th through 1:00 p.m. ET August 11th. To access the recorded replay, call +1 (888) 203-1112 or +1 (719) 457-0820 and use the replay code 4507742.
About InterDigital®
InterDigital develops mobile and video technologies that are at the core of devices, networks, and services worldwide. We solve many of the industry’s most critical and complex technical challenges, inventing solutions for more efficient broadband networks, better video delivery, and richer multimedia experiences years ahead of market deployment. InterDigital has licenses and strategic relationships with many of the world’s leading technology companies. Founded in 1972, InterDigital is listed on NASDAQ and is included in the S&P MidCap 400® index.
InterDigital is a registered trademark of InterDigital, Inc.
For more information, visit the InterDigital website: www.interdigital.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  Such statements include information regarding our current beliefs, plans and expectations, including, without limitation, our belief that we will continue to be able to remain focused on our long-term strategic priorities during the ongoing COVID-19 pandemic.  Words such as as “believe,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” “goal,” “see,” and variations of any such words 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, without limitation, 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 license agreements on acceptable terms; (iii) our ability to enter into sales and/or licensing partnering arrangements for certain of our patent assets; (iv) our ability to enter into partnerships with leading inventors and research organizations and identify and acquire technology and patent portfolios that align with our roadmap; (v) our ability to commercialize the company’s technologies and enter into customer agreements; (vi) the failure of the markets for the company’s current or new technologies and products to materialize to the extent or at the rate that we expect; (vii) unexpected delays or difficulties related to the development of the company’s technologies and products; (viii) changes in our interpretations of, and assumptions and calculations with respect to the impact on the company of, the Tax Reform Act, as well as further guidance that may be issued regarding the Tax Reform Act; (ix) difficulties or delays in integrating the Technicolor patent licensing business; (x) failure to accurately forecast the long-term value and costs of the Technicolor business or of certain assets acquired in the transaction; (xi) the resolution of current legal or regulatory proceedings, including any awards or judgments relating to such proceedings, additional legal or regulatory proceedings, changes in the schedules or costs associated with legal or regulatory proceedings or adverse rulings in such legal or regulatory proceedings; (xii) changes or inaccuracies in market projections; (xiii) the potential effects that the ongoing COVID-19 pandemic could have on our financial position, results of operations and cash flows; and (xiv) changes in the company’s business strategy. 





We undertake no duty to update publicly any forward-looking statement, 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. 

Footnotes
1    Throughout this press release, net income (loss) and diluted earnings per share (“EPS”) are attributable to InterDigital, Inc. (e.g., after adjustments for noncontrolling interests), unless otherwise stated.
2    Free cash flow is a supplemental non-GAAP financial measure that InterDigital believes is helpful in evaluating the company’s ability to invest in its business, make strategic acquisitions and fund share repurchases, among other things. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company’s cash balance for the period. InterDigital defines “free cash flow” as net cash provided by operating activities less purchases of property and equipment, technology licenses and investments in patents. InterDigital’s computation of free cash flow might not be comparable to free cash flow reported by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. A detailed reconciliation of free cash flow to net cash used in operating activities, the most directly comparable GAAP financial measure, is provided at the end of this press release.






SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share data)
(unaudited)
 
FOR THE THREE MONTHS ENDED JUNE 30,
 
FOR THE SIX MONTHS ENDED JUNE 30,
 
2020
 
2019
 
2020
 
2019
REVENUES:
 
 
 
 
 
 
 
Variable patent royalty revenue
$
4,597

 
$
8,594

 
$
10,543

 
$
17,874

Fixed-fee royalty revenue
77,338

 
63,736

 
143,685

 
126,609

Current patent royalties
81,935

 
72,330

 
154,228

 
144,483

Non-current patent royalties
19,249

 
1,237

 
19,954

 
(4,538
)
Total patent royalties
101,184

 
73,567

 
174,182

 
139,945

Patent sales

 

 

 
225

Current technology solutions revenue
3,314

 
2,042

 
6,526

 
4,070

 
$
104,498

 
$
75,609

 
$
180,708

 
$
144,240

OPERATING EXPENSES:
 
 
 

 
 
 
 

Patent administration and licensing
38,695

 
37,353

 
78,803

 
73,424

Development
22,092

 
17,027

 
40,910

 
35,522

Selling, general and administrative
11,794

 
12,314

 
24,397

 
26,529

 
72,581

 
66,694

 
144,110

 
135,475

Income from operations
31,917

 
8,915

 
36,598

 
8,765

INTEREST EXPENSE
(9,971
)
 
(9,907
)
 
(20,516
)
 
(19,385
)
OTHER INCOME, NET
3,789

 
12,354

 
9,812

 
15,969

Income before income taxes
25,735

 
11,362

 
25,894

 
5,349

INCOME TAX PROVISION
(5,144
)
 
(4,984
)
 
(6,964
)
 
(3,185
)
NET INCOME
$
20,591

 
$
6,378

 
$
18,930

 
$
2,164

Net loss attributable to noncontrolling interest
(1,660
)
 
(1,365
)
 
(3,437
)
 
(2,776
)
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.
$
22,251

 
$
7,743

 
$
22,367

 
$
4,940

NET INCOME PER COMMON SHARE — BASIC
$
0.72

 
$
0.25

 
$
0.73

 
$
0.15

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC
30,757

 
31,547

 
30,740

 
32,076

NET INCOME PER COMMON SHARE — DILUTED
$
0.72

 
$
0.24

 
$
0.72

 
$
0.15

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED
31,045

 
31,776

 
30,982

 
32,366

CASH DIVIDENDS DECLARED PER COMMON SHARE
$
0.35

 
$
0.35

 
$
0.70

 
$
0.70











SUMMARY CONSOLIDATED CASH FLOWS
(dollars in thousands)
(unaudited)
 
FOR THE THREE MONTHS ENDED JUNE 30,
 
FOR THE SIX MONTHS ENDED JUNE 30,
 
2020
 
2019
 
2020
 
2019
Income before income taxes
$
25,735

 
$
11,362

 
$
25,894

 
$
5,349

Taxes paid
(11,560
)
 
(6,574
)
 
(13,788
)
 
(9,770
)
Non-cash expenses
29,847

 
31,213

 
50,146

 
56,615

Change in deferred revenue
16,829

 
(19,331
)
 
(22,683
)
 
(62,754
)
Increase (decrease) in operating working capital, deferred charges and other
8,904

 
(39,412
)
 
3,301

 
(42,963
)
Capital spending and capitalized patent costs
(9,761
)
 
(10,637
)
 
(17,620
)
 
(20,702
)
FREE CASH FLOW
59,994

 
(33,379
)
 
25,250

 
(74,225
)
 
 
 
 
 
 
 
 
Proceeds from noncontrolling interest

 

 

 
10,333

Dividends paid
(10,762
)
 
(11,160
)
 
(21,509
)
 
(22,789
)
Taxes withheld upon vesting of restricted stock units
(755
)
 
(40
)
 
(1,480
)
 
(4,137
)
Payments on long-term debt

 
(221,091
)
 
(94,909
)
 
(221,091
)
Proceeds from issuance of convertible senior notes

 
400,000

 

 
400,000

Purchase of convertible bond hedge

 
(72,000
)
 

 
(72,000
)
Payment for warrant unwind

 
(4,184
)
 

 
(4,184
)
Prepayment penalty on long-term debt

 
(10,763
)
 

 
(10,763
)
Proceeds from hedge unwind

 
9,038

 

 
9,038

Proceeds from issuance of warrants

 
47,600

 

 
47,600

Payments of debt issuance costs

 
(7,300
)
 

 
(7,300
)
Repurchase of common stock

 
(62,283
)
 
(349
)
 
(171,269
)
Net proceeds from exercise of stock options
1,014

 

 
1,792

 
2

Unrealized gain (loss) on short-term investments
1,909

 
1,769

 
1,135

 
3,952

NET INCREASE (DECREASE) IN CASH, RESTRICTED CASH AND SHORT-TERM INVESTMENTS
$
51,400

 
$
36,207

 
$
(90,070
)
 
$
(116,833
)






CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
 
JUNE 30,
2020
 
DECEMBER 31, 2019
ASSETS
 

 
 

Cash & short-term investments
$
839,245

 
$
924,695

Accounts receivable (net)
19,380

 
28,272

Other current assets
62,387

 
63,365

Property & equipment and patents (net)
459,112

 
446,556

Other long-term assets (net)
158,641

 
149,194

TOTAL ASSETS
$
1,538,765

 
$
1,612,082

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current portion of long-term debt
$

 
$
94,170

Accounts payable, accrued liabilities, taxes payable & dividends payable
62,402

 
64,734

Current deferred revenue
141,528

 
146,654

Long-term deferred revenue
139,396

 
123,653

Long-term debt & other long-term liabilities
404,733

 
396,590

TOTAL LIABILITIES
748,059

 
825,801

TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY
769,419

 
761,557

Noncontrolling interest
21,287

 
24,724

TOTAL EQUITY
790,706

 
786,281

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
1,538,765

 
$
1,612,082










RECONCILIATION OF FREE CASH FLOW TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES

In the summary consolidated cash flows and throughout this release, the company refers to free cash flow. The table below presents a reconciliation of this non-GAAP financial measure to net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure.

 
FOR THE THREE MONTHS ENDED JUNE 30,
 
FOR THE SIX MONTHS ENDED JUNE 30,
 
2020
 
2019
 
2020
 
2019
Net cash provided by (used in) operating activities
$
69,755

 
$
(22,742
)
 
$
42,870

 
$
(53,523
)
Purchases of property, equipment, & technology licenses
(2,168
)
 
(1,278
)
 
(3,771
)
 
(2,862
)
Capitalized patent costs
(7,593
)
 
(9,359
)
 
(13,849
)
 
(17,840
)
Free cash flow
$
59,994

 
$
(33,379
)
 
$
25,250

 
$
(74,225
)






CONTACT:
InterDigital, Inc.:
 
Patrick Van de Wille
 
patrick.vandewille@interdigital.com
 
 +1 (302) 300-1857
    


v3.20.2
Cover
Aug. 06, 2020
Cover page.  
Document Type 8-K
Document Period End Date Aug. 06, 2020
Entity Registrant Name INTERDIGITAL, INC.
Entity Central Index Key 0001405495
Amendment Flag false
Entity Incorporation, State or Country Code PA
Entity File Number 1-33579
Entity Tax Identification Number 82-4936666
Entity Address, Address Line One 200 Bellevue Parkway
Entity Address, Address Line Two Suite 300
Entity Address, City or Town Wilmington
Entity Address, State or Province DE
Entity Address, Postal Zip Code 19809-3727
City Area Code 302
Local Phone Number 281-3600
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, par value $0.01 per share
Trading Symbol IDCC
Security Exchange Name NASDAQ
Entity Emerging Growth Company false