InterDigital Announces First Quarter 2010 Financial Results

Delivers Strong Revenue Growth, Profitability and Free Cash Flow

KING OF PRUSSIA, Pa. — (BUSINESS WIRE) — April 28, 2010 — InterDigital, Inc. (NASDAQ: IDCC) today announced results for the first quarter ended March 31, 2010.

Highlights for first quarter 2010:

  • Revenue of $116.2 million (which includes $35.7 million related to past sales from a new license agreement and a royalty audit), a 65 percent increase over first quarter 2009;
  • Net income of $48.8 million, or $1.09 per diluted share, versus first quarter 2009 pro forma net income1 of $15.4 million, or $0.34 per diluted share, excluding a repositioning charge of $37.1 million;
  • Free cash flow2 of $65.4 million; and
  • Ending cash and short-term investments totaling $482.4 million.

William J. Merritt, InterDigital’s President and Chief Executive Officer, commented, “We are off to a great start in 2010. Strategically, we continue to see confirmation of our future technology direction. Indeed, our vision of a highly intelligent “network of networks,” seamlessly connecting people and things across any network, is being echoed by leaders throughout the industry. This bodes well for future licensing opportunities for the company, as the inventions we create today will drive tomorrow’s mobile devices, networks, and services worldwide.”

“We also delivered impressive financial results,” continued Mr. Merritt. “We expanded our base of patent licensees and secured another design win for our multimode SlimChip™ modem core with Beceem Communications, a leading supplier of WiMax semiconductor solutions, for integration into their multimode 4G chips. These new agreements provide added validation of our 3G technology and patent portfolio and will also contribute to revenue in the coming quarters.”

First Quarter Summary

Net income for first quarter 2010 totaled $48.8 million, or $1.09 per diluted share, more than triple first quarter 2009 pro forma net income of $15.4 million, or $0.34 per diluted share. In first quarter 2009, the company reported a loss of $8.7 million, or $0.20 per share, which included a repositioning charge of $37.1 million related to the company’s cessation of further ASIC development of the company's SlimChip modem. This year-over-year increase in net income was driven by revenue contributions from several new patent license agreements as well as reduced operating expenses resulting from the company’s 2009 repositioning.

Total revenue in first quarter 2010 of $116.2 million, increased 65 percent from $70.6 million reported in first quarter 2009. This increase was driven by the recognition of $35.7 million of royalties from past sales resulting from the recently signed Casio agreement and the resolution of a routine audit with an existing licensee. The remaining increase was primarily attributable to new license agreements signed subsequent to first quarter 2009 with Casio, Pantech, Cinterion, and Enfora and a full quarter of revenue from the patent license agreement with Samsung signed during first quarter 2009. Technology solutions revenue in first quarter 2010 of $2.4 million increased 85 percent from $1.3 million in first quarter 2009 due to an increase in customers’ product sales containing the company’s SlimChip modem core platform. Licensees that accounted for ten percent or more of the $116.2 million of total revenue were Casio (25 percent), Samsung (22 percent), and LG (12 percent).

First quarter 2010 operating expenses of $41.5 million decreased $5.7 million, or 12 percent, from the $47.2 million (excluding a $37.1 million repositioning charge) in first quarter 2009. The decrease was driven by a $10.7 million year-over-year decrease in development expense related to the repositioning partly offset by a $5.7 million increase in patent administration and licensing expense which included an increase of $3.9 million for arbitration and litigation expenses. Total operating expenses in first quarter 2010 included a charge of $0.9 million to increase the accrual rate for a long-term performance cash incentive program based on revised expectations for a higher payout driven by increased positive operating cash flow. This charge relates to the first two years of the three-year performance period ending December 31, 2010.

Net interest and investment income for first quarter 2010 totaled $0.6 million, a $0.2 million decrease from $0.8 million in first quarter 2009. The decrease was primarily due to lower rates of return on the company’s investments.

The company’s first quarter 2010 effective tax rate was approximately 35 percent, compared to an effective tax rate in first quarter 2009 of approximately 33 percent.

In first quarter 2010, the company generated $65.4 million of free cash flow compared to $43.1 million in first quarter 2009. This free cash flow was driven primarily by receipt of the third of four installments of $100.0 million from Samsung. This and other cash receipts were partially offset by cash-based operating expenses, foreign withholding taxes paid, and capital investments in the company’s development and patent-related initiatives.

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