GlobeNewswire Inc | Feb 18, 2021 08:30AM EST

February 18, 2021

WILMINGTON, Del., Feb. 18, 2021 (GLOBE NEWSWIRE) -- InterDigital, Inc. (NASDAQ:IDCC), a mobile and video technology research and development company, today announced results for the fourth quarter and full year ended December31, 2020.

Fourth Quarter 2020 Financial Highlights

-- Recurring revenue was $89.1 million, compared to $77.5 million in fourth quarter 2019, a 15% year-over-year increase, which was driven by six new patent license agreements signed during 2020. Total revenue was $90.8 million, compared to $102.2 million in fourth quarter 2019, which is attributable to past sales from deals signed in fourth quarter 2019. -- Operating expenses were $87.7 million, compared to $76.9 million in fourth quarter 2019, due to one-time charges of approximately $10.0 million, primarily related to a non-cash charge for on-going patent portfolio management. -- Operating income was $3.1 million, compared to $25.3 million in fourth quarter 2019. -- Net loss1 was $1.4 million, or $(0.04) per diluted share compared to net income1 of $13.8 million, or $0.44 per diluted share, in fourth quarter 2019. -- The company recorded $19.3 million of cash provided by operating activities, compared to $17.5 million in the same quarter last year. -- The company generated $10.4 million of free cash flow in fourth quarter 2020, compared to free cash flow2 of $8.7 million generated in fourth quarter 2019. The increase was primarily driven by timing of collections under fixed-fee agreements. Ending cash and short-term investments totaled $926.6 million.

Full Year 2020 Financial Highlights

-- Recurring revenue was $336.8 million, compared to $298.2 million for full year 2019, a 13% year-over-year increase. This increase was driven by new licensing activity. Total revenue was $359.0 million, compared to $318.9 million for full year 2019, a 13% year-over-year increase. -- Operating expenses were $303.8 million, compared to $281.1 million for full year 2019. Full year 2020 operating expenses included one-time charges incurred in initiatives designed to drive ongoing cost savings. -- Operating income was $55.2 million, compared to $37.8 million in full year 2019, a 46% increase year- over- year. -- The current year tax benefit was driven by discrete benefits of $20.9 million that primarily relate to the expected amendment of a prior year tax return, as well as the reversal of a tax reserve. -- Net income1 was $44.8 million compared to $20.9 million, an increase of 114% year-over-year. Earnings per share was $1.44 per diluted share compared to $0.66 per diluted share, an increase of 118% year-over-year. -- The company recorded $163.5 million of cash provided by operating activities, compared to $89.4 million provided by operating activities for full year 2019. The company generated $121.1 million of free cash flow2 in full year 2020, compared to $51.4 million for full year 2019. In each period, free cash flow was largely driven by cash receipts from patent license agreements, a portion of which relates to future periods.

Despite uncertain macroeconomic conditions, we successfully executed on our strategy and signed numerous license agreements, which delivered very strong year-over-year growth for revenue and earnings, noted William J. Merritt, President and CEO of InterDigital. We enter 2021 with strong licensing momentum and remain confident in our long-term opportunities as we diligently pursue agreements with remaining unlicensed companies in the handset and consumer electronics business.

Our performance continues to show the incredible operating leverage in our model, which saw a 13% increase year-over-year in total revenue drive a 46% increase in year-over-year operating income, and a 118% year-over-year increase in earnings per share, said Richard Brezski, CFO of InterDigital.

Conference Call Information

InterDigital will host a conference call on Thursday, February 18th, 2021 at 10:00 a.m. ET to discuss its fourth quarter and full year 2020 financial performance and other company matters.

For a live Internet webcast of the conference call, visit http://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, dial +1 (800) 367-2403 within the United States and Canada or +1 (334) 777-6978 from outside the United States. Please call by 9:50 a.m. ET on February 18th and give the operator conference ID number 5906102.

An Internet replay of the conference call will be available on InterDigitals website in the Investors section. In addition, a telephone replay will be available from 1:00 p.m. ET February 18ththrough 1:00 p.m. ET February 23rd. To access the recorded replay call, dial +1 (888) 203-1112 or +1 (719) 457-0820 and use the replay code 5906102.

About InterDigital

InterDigital develops mobile and video technologies that are at the core of devices, networks, and services worldwide. We solve many of the industrys 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 worlds leading technology companies. Founded in 1972, InterDigital is listed on NASDAQ and is included in the S&P MidCap 400index.

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 execute strongly on our business during the ongoing COVID-19 pandemic. Words such 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 accelerations 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 our technologies and enter into customer agreements; (vi) the failure of the markets for our 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 our technologies and products; (viii) changes in our interpretations of, and assumptions and calculations with respect to the impact on us of, the Tax Reform Act, as well as further guidance that may be issued regarding the Tax Reform Act; (ix) failure to accurately forecast the long-term value and costs of the Technicolor business or of certain assets acquired in the transaction; (x) 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; (xi) changes or inaccuracies in market projections; (xii) the potential effects that the ongoing COVID-19 pandemic and/or corresponding macroeconomic uncertainty could have on our financial position, results of operations and cash flows; and (xiii) changes in our 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

1Throughout this press release, net income (loss) and diluted earnings per share (EPS) are attributable to InterDigital, Inc. (e.g., after adjustments for non-controlling interests), unless otherwise stated.

2Free cash flow is a supplemental non-GAAP financial measure that InterDigital believes is helpful in evaluating the companys 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 companys 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. InterDigitals 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 provided by 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 For the Twelve Months Ended December 31, Ended December 31, 2020 2019 2020 2019REVENUES: Variable patent royalty $ 8,667 $ 7,871 $ 26,587 $ 30,428 revenueFixed-fee royalty revenue 77,438 66,876 298,461 257,221 Current patent royalties 86,105 74,747 325,048 287,649 Non-current patent royalties 1,121 24,690 21,582 19,782 Total patent royalties 87,226 99,437 346,630 307,431 Patent sales 600 ? 600 975 Current technology solutions 2,964 2,724 11,761 10,518 revenue $ 90,790 $ 102,161 $ 358,991 $ 318,924 OPERATING EXPENSES: Patent administration and 51,011 46,744 170,178 154,940 licensingDevelopment 22,891 18,832 84,646 74,860 Selling, general and 13,748 11,289 48,999 51,289 administrative 87,650 76,865 303,823 281,089 Income from operations 3,140 25,296 55,168 37,835 INTEREST EXPENSE (9,918 ) (10,650 ) (40,799 ) (40,955 )OTHER INCOME, NET 3,118 5,290 16,924 29,062 Income (loss) before income (3,660 ) 19,936 31,293 25,942 taxesINCOME TAX PROVISION (BENEFIT) 769 (7,984 ) 6,648 (10,991 )NET INCOME (LOSS) $ (2,891 ) $ 11,952 $ 37,941 $ 14,951 Net loss attributable to (1,541 ) (1,802 ) (6,860 ) (5,977 )noncontrolling interestNET INCOME (LOSS) ATTRIBUTABLE $ (1,350 ) $ 13,754 $ 44,801 $ 20,928 TO INTERDIGITAL, INC.NET INCOME (LOSS) PER COMMON $ (0.04 ) $ 0.44 $ 1.46 $ 0.66 SHARE ? BASICWEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING ? 30,808 30,919 30,776 31,546 BASICNET INCOME (LOSS) PER COMMON $ (0.04 ) $ 0.44 $ 1.44 $ 0.66 SHARE ? DILUTEDWEIGHTED AVERAGE NUMBER OFCOMMON SHARES OUTSTANDING ? 30,808 31,118 31,058 31,785 DILUTEDCASH DIVIDENDS DECLARED PER $ 0.35 $ 0.35 $ 1.40 $ 1.40 COMMON SHARE

SUMMARY CONSOLIDATED CASH FLOWS(dollars in thousands)(unaudited)

For the Three Months For the Twelve Months Ended December 31, Ended December 31, 2020 2019 2020 2019Income (loss) before income $ (3,660 ) $ 19,936 $ 31,293 $ 25,942 taxesTaxes paid (8,022 ) (7,746 ) (26,233 ) (24,229 )Non-cash expenses 34,900 26,896 111,527 113,035 Change in deferred revenue (28,669 ) (8,624 ) 24,397 (7,749 )Increase (decrease) inoperating working capital, 24,706 (13,005 ) 22,483 (17,566 )deferred charges and otherCapital spending and (8,807 ) (8,805 ) (42,408 ) (37,990 )capitalized patent costsFREE CASH FLOW 10,448 8,652 121,059 51,443 Net proceeds from change in 25 (350 ) 4,285 (350 )long-term investmentsProceeds from 5,333 5,333 5,333 15,666 noncontrolling interestsProceeds from sale of 910 ? 910 10,000 businessDividends paid (10,782 ) (10,897 ) (43,072 ) (44,580 )Taxes withheld upon vesting (216 ) (52 ) (1,751 ) (4,368 )of restricted stock unitsRepurchase of common stock ? (25,000 ) (349 ) (196,269 )Net proceeds from exercise 100 ? 1,892 2 of stock optionsPayments on long-term debt ? ? (94,909 ) (221,091 )Proceeds from issuance of ? ? ? 400,000 convertible senior notesPurchase of convertible ? ? ? (72,000 )bond hedgePayment for warrant unwind ? ? ? (4,184 )Prepayment penalty on ? ? ? (10,763 )long-term debtProceeds from hedge unwind ? ? ? 9,038 Proceeds from issuance of ? ? ? 47,600 warrantsPayments of debt issuance ? ? ? (8,375 )costsUnrealized gain on 153 684 1,136 5,076 short-term investmentsNET INCREASE (DECREASE) INCASH, RESTRICTED CASH AND $ 5,971 $ (21,630 ) $ (5,466 ) $ (23,155 )SHORT-TERM INVESTMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS(dollars in thousands)(unaudited)

DECEMBER 31, DECEMBER 31, 2020 2019ASSETS Cash & short-term investments $ 926,647 $ 924,695 Accounts receivable (net) 16,008 28,272 Other current assets 84,224 63,365 Property & equipment and patents (net) 434,973 446,556 Other long-term assets (net) 154,423 149,194 TOTAL ASSETS $ 1,616,275 $ 1,612,082 LIABILITIES AND SHAREHOLDERS? EQUITY Current portion of long-term debt $ ? $ 94,170 Accounts payable, accrued liabilities, taxes 75,827 64,734 payable & dividends payableCurrent deferred revenue 219,935 146,654 Long-term deferred revenue 108,069 123,653 Long-term debt & other long-term liabilities 415,878 396,590 TOTAL LIABILITIES 819,709 825,801 TOTAL INTERDIGITAL, INC. SHAREHOLDERS' EQUITY 773,369 761,557 Noncontrolling interest 23,197 24,724 TOTAL EQUITY 796,566 786,281 TOTAL LIABILITIES AND SHAREHOLDERS? EQUITY $ 1,616,275 $ 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 operating activities, the most directly comparable GAAP financial measure.

For the Three Months Ended For the Twelve Months Ended December 31, December 31, 2020 2019 2020 2019Net cash providedby operating $ 19,255 $ 17,457 $ 163,467 $ 89,433 activitiesPurchases ofproperty,equipment, & (1,918 ) (1,447 ) (11,793 ) (4,509 )technologylicensesCapitalized patent (6,889 ) (7,358 ) (30,615 ) (33,481 )costsFree cash flow $ 10,448 $ 8,652 $ 121,059 $ 51,443

CONTACT: InterDigital, Inc.: Tiziana Figliolia tiziana.figliolia@interdigital.com +1 (302) 300-1857