KING OF PRUSSIA, Pa. — (BUSINESS WIRE) — July 25, 2012 — InterDigital, Inc. (NASDAQ: IDCC) today announced results for the second quarter ended June 30, 2012.
Highlights for second quarter 2012:
- Revenue of $71.9 million
- Net income of $9.7 million, or $0.22 per diluted share
- Ending cash and short-term investments totaling $524.1 million
"Earlier this year, we broadened our strategy to include the monetization, through sales, licensing partnerships and other means, of those portions of our patent portfolio that are not necessary to drive our core handset licensing business," commented William J. Merritt, InterDigital's President and Chief Executive Officer. "During the second quarter, we made significant strides on executing that strategy, including the sale of two patent portfolios for a combined total of $384 million. Given the breadth, depth and increasing scale of the InterDigital patent portfolio, we have been able to identify an additional 3,000 patents and applications that we believe we can monetize outside of our main handset licensing program. We are currently having dialog with a number of parties and are targeting signing additional agreements."
"We also continued to press forward on our licensing strategy,” continued Merritt. “During the quarter, we made significant investment in the enforcement action currently pending at the ITC involving Nokia, Huawei and ZTE. We continue to believe we have a very strong case and that the strength of our position will result in reasonable license agreements with these parties. We also continue to work with other prospective licensees and believe we have the opportunity close additional agreements this year as we drive towards our goal of achieving $800 million in sustainable annual revenue in the next three to five years."
"Given the initial success of our patent monetization strategy and the value we believe can be created through our future licensing success, we recently announced that our Board of Directors has authorized the expansion of our share repurchase program to $200 million," added Merritt. "I am pleased to note that between mid-June and July 23rd, we have repurchased approximately $24 million under that authorization bringing our total year to date repurchase activity under this and prior authorizations to nearly $100 million. Furthermore, the added financial strength generated as a result of the pending sale of patents to Intel will enable us to pursue our licensing efforts even more aggressively, while also continuing the development of new inventions that will drive the future of wireless."
Second Quarter 2012 Summary
Revenue in second quarter 2012 totaled $71.9 million, a 3 percent increase from $69.9 million in second quarter 2011. This increase in total revenue was primarily attributable to a $9.0 million patent sale. Patent licensing royalties of $62.4 million in second quarter 2012 declined $6.2 million, or 9 percent, from $68.6 million in second quarter 2011, primarily due to a $7.6 million decrease in per-unit royalty revenue. The decrease in per-unit royalty revenue resulted primarily from lower sales by Research in Motion Limited ("RIM") and HTC Corporation ("HTC"). Additionally, technology solutions revenue decreased to $0.5 million in second quarter 2012 from $1.3 million in second quarter 2011, primarily due to lower royalties recognized in connection with the company's SlimChip modem IP business. As of June 30, 2012, the company has deferred $36.5 million, including $3.4 million in second quarter 2012, of disputed SlimChip modem IP royalties pending the outcome of an ongoing arbitration. Companies that accounted for ten percent or more of second quarter 2012 total revenue were Samsung Electronics Co., Ltd. (“Samsung”) (36 percent), Nufront Mobile Communications Technology Co. Ltd. (13 percent) and RIM (12 percent).
The company's second quarter 2012 net income was $9.7 million, or $0.22 per diluted share, a decrease of 44 percent from $17.2 million, or $0.37 per diluted share, in second quarter 2011, primarily due to higher intellectual property enforcement and non-patent litigation costs.
Second quarter 2012 operating expenses totaled $54.3 million, an
increase of $14.2 million from $40.1 million in second quarter 2011.
This increase was primarily due to increases in intellectual property
enforcement and non-patent litigation costs ($13.8 million in second
quarter 2012 versus $4.9 million in second quarter 2011), relating
primarily to costs associated with the ITC patent infringement
proceeding initiated in second half 2011. Additionally, long-term
compensation costs, personnel-related costs, cost of patent sales and
patent amortization contributed $5.0 million to the operating expense
increase. Long-term compensation increased $2.0 million driven by a $3.0
million charge to increase the company's accrual rate on one performance
cycle and comparatively lower accrual rates on the remaining two
performance cycles. Personnel-related costs increased $1.7 million
primarily due to higher personnel levels, merit increases and an
increase to a research and development subsidy recognized in second
quarter 2011. The company recognized $0.7 million of expense during
second quarter 2012 to write down the remaining net book value of the
patents sold in the quarter. Patent amortization increased $0.6 million
due to increases in the number of patent applications filed in recent