InterDigital Announces First Quarter 2009 Financial Results

KING OF PRUSSIA, Pa. — (BUSINESS WIRE) — May 6, 2009 InterDigital, Inc. (NASDAQ: IDCC) today announced results for the first quarter ended March 31, 2009.

Highlights for first quarter 2009:

  • Revenue of $70.6 million, an increase of 26 percent over first quarter 2008;
  • Pro forma net income of $15.4 million, or $0.34 per diluted share, excluding repositioning charge, compared to net income of $7.3 million, or $0.15 per diluted share, in first quarter 2008;
  • Reported GAAP net loss of $8.7 million, or $0.20 per diluted share, which includes a repositioning charge of $37.1 million;
  • Free cash flow1 of $43.1 million; and
  • Ending cash and short-term investments totaling $185.9 million.

In addition, InterDigital® provided the following guidance for second quarter 2009:

  • Recurring revenues from existing agreements in the range of $72.0 million to $75.0 million, an increase of $1.4 million to $4.4 million over first quarter 2009; and
  • Development expense for second quarter 2009 in the range of $14.0 million to $15.0 million, a decrease of approximately $13 million (or nearly 50 percent) compared to the $27.6 million reported in first quarter 2009.

William J. Merritt, InterDigital’s President and Chief Executive Officer, commented, “The first quarter of 2009 represented a very solid start to the year. The contribution of our new 2G/3G agreement with Samsung has enhanced our top line, earnings and free cash flow. This strong financial position will allow us to continue to pursue bringing new technologies to market and to enhance shareholder value through share repurchases as we have done in the past. Excluding the repositioning charge, our profitability and free cash flow continue to be very strong, reflecting the strength of our licensing programs and our focus on managing costs appropriately.”

“Looking ahead, our recent decision to realign our business focus will drive higher levels of profitability and further enhance our position as a key innovator in a segment that is playing an ever broadening role in the lives of consumers, ” continued Mr. Merritt. “Advanced research and development has always been a core competency of InterDigital, and the increasing needs of users present a tremendous opportunity for us to create the solutions that will make true wireless ubiquity a reality.”

First Quarter Summary

Pro forma net income, excluding the repositioning charge, totaled $15.4 million, or $0.34 per diluted share, in first quarter 2009, compared to net income of $7.3 million, or $0.15 per diluted share, in first quarter 2008. Including the repositioning charge, the company reported a loss of $8.7 million, or $0.20 per share, in first quarter 2009.

Total revenue in first quarter 2009 increased to $70.6 million from $56.0 million in first quarter 2008, primarily the result of the license agreement signed in January 2009 with Samsung, which contributed $21.4 million in patent license royalty revenue to first quarter 2009. This increase was partially offset by a net decline in per-unit licensees’ royalties due to difficult market conditions and the loss of approximately $1.5 million of revenue from a licensee who exited the handset business. Technology solution revenue of $1.3 million decreased compared to $2.2 million reported in first quarter 2008. Licensees that accounted for ten percent or more of the $70.6 million of patent license royalty and technology solutions revenue were Samsung (30%), LG (20%) and Sharp (11%).

Excluding a $37.1 million repositioning charge in first quarter 2009, operating expenses increased $2.1 million to $47.2 million in first quarter 2009. The increase is primarily attributable to a $4.4 million year-over-year increase in development expense associated with interoperability testing and precertification of our SlimChip modem platforms. This increase is partially offset by a $4.3 million decrease in patent arbitration and litigation expense, including an $11.2 million decrease in these costs offset by a $6.9 million insurance reimbursement recognized in first quarter 2008. Additionally, first quarter 2008 included a credit of $1.2 million associated with a reduction of a previously established arbitration and contingency obligation.

Net interest and investment income for first quarter 2009 totaled $0.8 million, an increase over $0.4 million in first quarter 2008. First quarter 2008 included a $0.7 million investment write-down. The increase also reflected a $0.6 million credit to adjust accrued interest in connection with the company’s 2009 settlement of litigation with Federal, partly offset by lower rates of return in first quarter 2009 compared to 2008.

The company’s first quarter 2009 effective tax rate was approximately 33 percent. This effective rate is expected to rise to approximately 35 percent over the remainder of 2009. The company’s income tax provision in first quarter 2008 reflected a 35 percent effective tax rate.

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