InterDigital Announces Financial Results for Third Quarter 2024

Company Release - 10/31/2024

Download the PDF version PDF Format (opens in new window)

Company delivers Q3 results above the top end of outlook and raises FY 2024 guidance

WILMINGTON, Del., Oct. 31, 2024 (GLOBE NEWSWIRE) -- InterDigital, Inc. (Nasdaq: IDCC), a mobile, video, and AI technology research and development company, today announced results for the quarter ended September 30, 2024.

"In the third quarter we delivered revenues of about $129 million, exceeding the top end of our guidance, driven by a strong performance from our consumer electronics and IoT licensing program," commented InterDigital CEO and President Liren Chen. "In addition, at the start of the fourth quarter, we announced a new license agreement with OPPO Group, a top smartphone vendor, and a binding arbitration agreement with Lenovo. Given the increasing momentum across the business, we are raising the midpoint of our 2024 full-year revenue guidance by $145 million to $860 million."

Third Quarter2024 Financial Highlights, as compared to Third Quarter2023:

		Three Months Ended September 30,
(in millions, except per share data)			2024				2023			Change
GAAP Results:
Revenues (a)		$128.7		$140.1		(8)%
Operating Expenses		$89.3		$86.5		3%
Net income 1		$34.2		$47.9		(29)%
Net income 1 margin		27%		34%		(7) ppt
Diluted EPS 1		$1.14		$1.72		(34)%
Non-GAAP Results:
Adjusted EBITDA 2		$64.8		$83.5		(22)%
Adjusted EBITDA margin 2		50%		60%		(10) ppt
Non-GAAP Net income 3		$44.9		$57.7		(22)%
Non-GAAP EPS 3		$1.63		$2.13		(23)%
Additional Information:
Revenue by type:
Recurring revenues		$98.6		$104.5		(6)%
Catch-up revenues		$30.0		$35.6		(16)%
Revenue by program:
Smartphone		$87.4		$104.3		(16)%
CE, IoT/Auto		$40.6		$35.4		15%
Other		$0.6		$0.4		41%
(a) Decrease is primarily driven by lower catch-up revenues in Q3'24 and the expiration of the Huawei agreement at the end of 2023.

Return of Capital to Shareholders

(in millions, except per share data)		Share Repurchases		Dividends Declared		Total Return of Capital
	Shares		Value		Per Share		Value
Third quarter 2024		<0.1		$3.1		$0.45		$11.4		$14.5

Convertibility of 2027 Notes

Pursuant to the terms of the Indenture governing InterDigital's 3.50% Senior Convertible Notes due 2027 (the "Notes"), the Notes are convertible during its calendar quarter ending December 31, 2024. The current conversion rate of the Notes is 12.9041 shares of InterDigital's Common Stock per $1,000 principal amount of the Notes.

Upon the conversion of any Notes, InterDigital will pay cash up to the aggregate principal amount of the Notes to be converted, and will pay cash, shares of its Common Stock or a combination of cash and shares of its Common Stock for any conversion obligation in excess of the aggregate principal amount being converted, if any, at InterDigital's election, as set forth in the Indenture governing the Notes.

At the time InterDigital issued the Notes, InterDigital entered into call spread transactions that together were designed to have the economic effect of reducing the net number of shares that will be issued in the event of conversion of the Notes by, in effect, increasing the conversion price of the Notes from InterDigital's economic standpoint from $77.49 to $106.31. Refer to Footnote 5 of the Financial Statements from InterDigital's Form 10-Q for the quarter ended September 30, 2024 for more information.

Near Term Outlook

The Company raised its full year 2024 outlook and provided an initial outlook for fourth quarter 2024 in the table below. The outlook for both fourth quarter 2024 and full year 2024 is based on existing agreements only, and any new agreements that might be reached over the balance of the fourth quarter would be additive.

				Full Year 2024
(in millions, except per share data)		Q4 2024		Current		Prior
Revenue		$239 - $249		$855 - $865		$690 - $740
Adjusted EBITDA 2		$180 - $190		$533 - $543		$378 - $416
Diluted EPS 1		$3.72 - $3.98		$11.63 - $11.90		$7.17 - $8.32
Non-GAAP EPS 3		$5.42 - $5.70		$14.69 - $14.99		$9.70 - $10.95

Conference Call Information

InterDigital will host a conference call on Thursday, October 31, 2024 at 10:00 a.m. ET to discuss its third quarter 2024 financial performance and other company matters.

For a live Internet webcast of the conference call, visit www.interdigital.com and click on the "Webcast" link on the Investors page. The company encourages participants to take advantage of the Internet option.

For telephone access to the conference call, visit www.interdigital.com and click on the "Dial In Registration" link on the Investors page. Registration is necessary to obtain a dial in phone number and PIN to join.

An Internet replay of the conference call will be available on InterDigital's website under Events in the Investors section. The replay will be available for one year.

About InterDigital^®

InterDigital is a global research and development company focused primarily on wireless, video, artificial intelligence ("AI"), and related technologies. We design and develop foundational technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services. We license our innovations worldwide to companies providing such products and services, including makers of wireless communications devices, consumer electronics, IoT devices, cars and other motor vehicles, and providers of cloud-based services such as video streaming. As a leader in wireless technology, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G and today's most advanced Wi-Fi technologies. We are also a leader in video processing and video encoding/decoding technology, with a significant AI research effort that intersects with both wireless and video technologies. Founded in 1972, InterDigital is listed on Nasdaq.

InterDigital is a registered trademark of InterDigital, Inc.

For more information, visit the InterDigital website: www.interdigital.com.

For additional financial measures, refer to our third quarter 2024 Form 10-Q and the financial metrics tracker, which are available on the Investor Relations section of our website.

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. Words such as "believe," "anticipate," "estimate," "expect," "project," "intend," "plan," "forecast," "goal," "could," "would," "should," "if," "may," "might," "future," "target," "trend," "seek to," "will continue," "predict," "likely," "in the event," and variations of any such words or similar expressions are intended to identify such forward-looking statements.

Forward-looking statements are made on the basis of management's current views and assumptions and are not guarantees of future performance. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results, and actual events that occur, to differ materially from results contemplated by the forward-looking statements. These risks and uncertainties include, but are not limited to: (i) unanticipated delays, difficulties or accelerations in the execution of patent license agreements; (ii) the resolution of current legal proceedings, including any awards or judgments relating to such proceedings, additional or related legal proceedings, including appeals, changes in the schedules or costs associated with such proceedings or adverse rulings; (iii) our ability to leverage our strategic relationships and secure new patent license agreements on acceptable terms; (iv) our ability to enter into sales and/or licensing partnering arrangements for certain of our patent assets; (v) our ability to expand our revenue opportunities by entering into licensing arrangements with video streaming and other cloud-based service providers; (vi) our ability to enter into partnerships with leading inventors and research organizations; (vii) our ability to identify and pursue strategic acquisitions of technology and patent portfolios and other strategic growth opportunities; (viii) our ability to commercialize our technologies and enter into customer agreements; (ix) the failure of the markets for our current or new technologies to materialize to the extent or at the rate that we expect; (x) our continued ability to develop new technologies and secure new patents, including the risk of unexpected delays or difficulties related to the development of our technologies; (xi) risks associated with our capital allocation strategies, including risks associated with our planned dividend payments and share repurchases; (xii) changes in our interpretations of, and assumptions and calculations with respect to the impact on us of, the 2017 Tax Cuts and Jobs Act, as well as further guidance that may be issued regarding such act; (xiii) risks related to the potential impact of new accounting standards on our financial position, results of operations or cash flows; (xiv) failure to accurately forecast the impact of our restructuring activities on our financial statements and our business; (xv) the timing and impact of potential regulatory, administrative and legislative matters; (xvi) changes or inaccuracies in market projections; (xvii) our ability to obtain liquidity though debt and equity financings; (xviii) the potential effects that macroeconomic uncertainty could have on our financial position, results of operations and cash flows; (xix) impacts from acts of terrorism, war or political or civil unrest, or any responses thereto, in the United States or elsewhere; (xx) changes in our business strategy; (xxi) changes or inaccuracies in our expectations with respect to royalty payments by our customers and (xxii) risks related to our assumptions and application of relevant accounting standards, including with respect to revenue recognition.

We undertake no duty to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

Footnotes

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

2 Adjusted EBITDA and Adjusted EBITDA margin are supplemental non-GAAP financial measures that InterDigital believes provide investors with important insight into the Company's ongoing business performance. InterDigital defines Adjusted EBITDA as net income attributable to InterDigital Inc. plus net loss attributable to non-controlling interest, income tax (provision) benefit, other income (expense) & interest expense, depreciation and amortization, share-based compensation, and other items. Other items include restructuring costs, impairment charges and other non-recurring items. Adjusted EBITDA margin is Adjusted EBITDA over total revenues. These non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The presentation of these financial measures, which are 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 reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure is provided below.

3 Non-GAAP net income, Non-GAAP EPS, and Non-GAAP weighted-average diluted shares are supplemental non-GAAP financial measures that InterDigital believes provides investors with important insight into the Company's ongoing business performance. InterDigital defines Non-GAAP net income as net income attributable to InterDigital, Inc. plus share-based compensation, acquisition related amortization, depreciation and amortization, restructuring costs, impairment charges and one-time adjustments, losses on extinguishments of long-term debt, the related income tax effect of the preceding items, and adjustments to income taxes. Non-GAAP EPS is defined as Non-GAAP net income divided by Non-GAAP weighted average diluted shares, which adjusts the weighted average number of common shares outstanding for the dilutive effect of the Company's convertible notes, offset by our hedging arrangements. InterDigital's computation of these non-GAAP financial measures might not be comparable to similarly named measures reported by other companies. The presentation of these financial measures, which are 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 reconciliation of each of these metrics to its most directly comparable GAAP financial measure is provided below.

SUMMARY CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share data) (unaudited)
		Three Months Ended September 30,		Nine Months Ended September 30,
			2024				2023				2024				2023
Revenues		$	128,679			$	140,106			$	615,714			$	444,070
Operating expenses:
Research and portfolio development			48,331				50,253				147,851				149,560
Licensing			27,467				21,522				149,212				59,534
General and administrative			13,539				14,678				41,665				38,686
Total operating expenses			89,337				86,453				338,728				247,780
Income from operations			39,342				53,653				276,986				196,290
Interest expense			(10,681	)			(12,683	)			(34,086	)			(36,911	)
Other income, net			12,554				14,725				33,483				42,303
Income before income taxes			41,215				55,695				276,383				201,682
Income tax provision			(7,025	)			(8,541	)			(50,877	)			(29,715	)
Net income		$	34,190			$	47,154			$	225,506			$	171,967
Net loss attributable to noncontrolling interest			-				(787	)			-				(3,016	)
Net income attributable to InterDigital, Inc.		$	34,190			$	47,941			$	225,506			$	174,983
Net income per common share - Basic		$	1.36			$	1.82			$	8.92			$	6.42
Weighted average number of common shares outstanding - Basic			25,149				26,285				25,286				27,259
Net income per common share - Diluted		$	1.14			$	1.72			$	7.84			$	6.19
Weighted average number of common shares outstanding - Diluted			30,034				27,812				28,759				28,261
Cash dividends declared per common share		$	0.45			$	0.40			$	1.25			$	1.10

SUMMARY CONSOLIDATED CASH FLOWS (in thousands) (unaudited)
		Three Months Ended September 30,		Nine Months Ended September 30,
			2024				2023				2024				2023
Cash flows from operating activities:
Net income		$	34,190			$	47,154			$	225,506			$	171,967
Non-cash adjustments			64,268				99,994				86,433				67,711
Working capital changes			(20,827	)			163,462				(232,445	)			(2,360	)
Net cash provided by operating activities			77,631				310,610				79,494				237,318
Cash flows from investing activities:
Net sales (purchases) of short-term investments			54,306				2,322				173,208				(43,706	)
Capitalized patent costs and purchases of property and equipment			(12,836	)			(9,642	)			(35,434	)			(31,159	)
Long-term investments			382				567				1,576				567
Net cash provided by (used in) investing activities			41,852				(6,753	)			139,350				(74,298	)
Cash flows from financing activities:
Payments on long-term debt			-				-				(139,069	)			-
Repurchase of common stock			(3,056	)			(56,858	)			(66,726	)			(302,728	)
Dividends paid			(10,052	)			(9,273	)			(30,425	)			(29,106	)
Other			(4,590	)			(2,886	)			(14,805	)			(8,635	)
Net cash used in financing activities			(17,698	)			(69,017	)			(251,025	)			(340,469	)
Net increase (decrease) in cash, cash equivalents and restricted cash			101,785				234,840				(32,181	)			(177,449	)
Cash, cash equivalents and restricted cash, beginning of period			308,995				290,872				442,961				703,161
Cash, cash equivalents and restricted cash, end of period		$	410,780			$	525,712			$	410,780			$	525,712

SUMMARY CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
		SEPTEMBER 30, 2024		DECEMBER 31, 2023
Assets
Cash, cash equivalents and short-term investments		$	813,210		$	1,006,356
Accounts receivable			212,420			117,292
Prepaid and other current assets			128,106			43,976
Property & equipment and patents, net			310,439			324,567
Other long-term assets, net			261,175			278,623
Total assets		$	1,725,350		$	1,770,814
Liabilities and Shareholders' equity
Current portion of long-term debt		$	454,250		$	578,752
Current deferred revenue			156,885			153,597
Other current liabilities			100,636			148,779
Long-term deferred revenue			216,665			223,866
Long-term debt & other long-term liabilities			74,377			84,271
Total liabilities			1,002,813			1,189,265
Total shareholders' equity			722,537			581,549
Total liabilities and shareholders' equity		$	1,725,350		$	1,770,814

RECONCILIATION OF NON-GAAP MEASURES

The following tables present InterDigital's GAAP financial measures reconciled to the non-GAAP financial measures included in this release for the third quarter and year-to-date periods ended September 30, 2024 and 2023:

		Three Months Ended September 30,		Nine Months Ended September 30,
		(in thousands)		(in thousands)
			2024				2023				2024				2023
Net income attributable to InterDigital, Inc.		$	34,190			$	47,941			$	225,506			$	174,983
Net loss attributable to non-controlling interest			-				(787	)			-				(3,016	)
Income tax provision			7,025				8,541				50,877				29,715
Other income, net & interest expense			(1,873	)			(2,042	)			603				(5,392	)
Depreciation and amortization			17,549				19,527				52,165				58,698
Share-based compensation			9,081				10,335				28,122				26,865
Other items (a)			(1,161	)			-				(4,361	)			10,037
Adjusted EBITDA 2		$	64,811			$	83,515			$	352,912			$	291,890

		Three Months Ended September 30,		Nine Months Ended September 30,
		(in thousands, except for per share data)		(in thousands, except for per share data)
			2024				2023				2024				2023
Net income attributable to InterDigital, Inc.		$	34,190			$	47,941			$	225,506			$	174,983
Share-based compensation			9,081				10,335				28,122				26,865
Acquisition related amortization			8,282				10,262				25,027				30,792
Other operating items (a)			(1,161	)			-				(4,361	)			10,037
Other non-operating items (b)			(262	)			(6,112	)			(1,788	)			(9,370	)
Related income tax and noncontrolling interest effect of above items			(3,347	)			(3,042	)			(9,870	)			(13,498	)
Adjustments to income taxes			(1,861	)			(1,706	)			(4,270	)			(2,884	)
Non-GAAP net income 3		$	44,922			$	57,678			$	258,366			$	216,925
Weighted average dilutive shares - GAAP			30,034				27,812				28,759				28,261
Less: Dilutive impact of the Convertible Notes			2,439				743				2,084				333
Weighted average dilutive shares - Non-GAAP 3			27,595				27,069				26,675				27,928
Diluted EPS 1		$	1.14			$	1.72			$	7.84			$	6.19
Non-GAAP EPS 3		$	1.63			$	2.13			$	9.69			$	7.77
(a) Other items in the above tables include one-time contra-expenses of $1.2 million and $4.4 million related to litigation fee reimbursements during the three and nine months ended September 30, 2024, respectively. The nine months ended September 30, 2023 includes $7.5 million of one-time charges for net litigation fee reimbursements and a $2.5 million one-time impairment on our patents held for sale.
(b) Other non-operating items includes net (gains) or losses from observable price changes of our long-term strategic investments.

The following tables present a reconciliation between GAAP and non-GAAP versions of the estimated financial measures for the fourth quarter of fiscal 2024 and full year fiscal 2024 included in this release:

		Outlook
		(in millions)
				Full Year 2024
		Q4 2024		Current		Prior
Net income attributable to InterDigital, Inc.		$118 - $126		$343 - $351		$205 - $238
Income tax provision		24 - 26		75 - 77		55 - 60
Other income, net & interest expense		1		2		7
Depreciation and amortization		18		70		73
Share-based compensation		19		47		42
Other items (a)		-		(4)		(4)
Adjusted EBITDA 2		$180 - $190		$533 - $543		$378 - $416

		Outlook
		(in millions, except for per share data)
				Full Year
		Q4 2024		Current		Prior
Net income attributable to InterDigital, Inc.		$118 - $126		$343 - $351		$205 - $238
Share-based compensation		19		47		42
Acquisition related amortization		33		33		33
Other operating items (a)		-		(4)		(4)
Other non-operating items (b)		(2)		(2)		(2)
Related income tax and noncontrolling interest effect of above items		(11)		(16)		(14)
Adjustments to income taxes		(2)		(2)		(2)
Non-GAAP net income 3		$155 - $163		$399 - $407		$258 - $291
Weighted average dilutive shares - GAAP		31.6		29.5		28.6
Less: Dilutive impact of the Convertible Notes		3.0		2.3		2.0
Weighted average dilutive shares - Non-GAAP 3		28.6		27.2		26.6
Diluted EPS 1		$3.72 - $3.98		$11.63 - $11.90		$7.17 - $8.32
Non-GAAP EPS 3		$5.42 - $5.70		$14.69 - $14.99		$9.70 - $10.95
(a) Other items in the above tables includes contra-expenses related to a litigation fee reimbursement.
(b) Other non-operating items includes net (gains) or losses from observable price changes of our long-term strategic investments.

	CONTACT:	InterDigital, Inc.
		Email: [email protected]
		+1 (302) 300-1857

Source: InterDigital, Inc.