InterDigital Third Quarter Earnings Disappoint

- October 31st, 2019

As licensing fees from a major client slumped, operating costs accelerated and net income contracted almost tenfold.

InterDigital (NASDAQ:IDCC), a mobile technology company announced a drop in revenues in its third quarter earnings, as figures dropped from US$72.1 million from US$75 million in the third quarter of 2018. This coincided with declining cash balances despite selling subsidiary Hillcrest Laboratories for US$8.5 million to a CEVA (NASDAQ:CEVA) subsidiary during the quarter.

As quoted in the press release:

“In third quarter we were successful at holding expenses below our expectations, and we remain completely on track to bring our expenses to the levels we saw prior to the acquisition of the Technicolor licensing business and the expansion of our R&D footprint,” said William J. Merritt, President and CEO of InterDigital. “Those efforts came together with redoubled licensing efforts that resulted in new successes in fourth quarter, highlighting the strength and operating leverage of our business model.”

Additional Highlights

  • In third quarter 2019, the company recorded $125.5 million of cash provided by operating activities, compared to $170.4 million of cash provided by operating activities in third quarter 2018.  The company generated $117.0 million of free cash flowin third quarter 2019, compared to $160.7 million of free cash flow generated in third quarter 2018.  Free cash flow is driven by the timing of cash collections under fixed-fee agreements.  Ending cash and short-term investments as of September 30, 2019 totaled $0.9 billion.

  • In third quarter 2019, the company recognized a tax benefit of $0.2 million compared to a tax benefit of $21.1 million in third quarter 2018.

  • Other Income (Expense), net in third quarter 2019 included $8.5 million to record the gain resulting from the sale of the company’s Hillcrest Laboratories product business to a subsidiary of CEVA, Inc.  As part of the transaction, the company retained substantially all of the Hillcrest patent assets that it acquired in 2016.  This gain was partially offset by the recognition of a $3.3 million loss resulting from a partial impairment of one of the company’s long-term investments.

  • Shortly after third quarter 2019, the company added two new patent licensees, ZTE Corporation and Google.

Click here to read the full press release.

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