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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2018
|
o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
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PENNSYLVANIA
(State or Other Jurisdiction of
Incorporation or Organization)
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82-4936666
(I.R.S. Employer
Identification No.)
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Large accelerated filer
R
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
|
|
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Smaller reporting company
o
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Emerging growth company
o
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Common Stock, par value $0.01 per share
|
34,746,191
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Title of Class
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Outstanding at April 24, 2018
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PAGES
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2
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EX-10.1
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EX-10.2
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EX-31.1
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EX-31.2
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EX-32.1
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EX-32.2
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EX-101 INSTANCE DOCUMENT
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EX-101 SCHEMA DOCUMENT
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EX-101 CALCULATION LINKBASE DOCUMENT
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EX-101 LABELS LINKBASE DOCUMENT
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EX-101 PRESENTATION LINKBASE DOCUMENT
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FOR THE THREE MONTHS ENDED MARCH 31,
|
||||||
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2018
|
|
2017
|
||||
REVENUES:
|
|
|
|
||||
Patent licensing royalties
|
$
|
87,098
|
|
|
$
|
89,226
|
|
Technology solutions
|
346
|
|
|
5,304
|
|
||
|
87,444
|
|
|
94,530
|
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||
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||||
OPERATING EXPENSES:
|
|
|
|
||||
Patent administration and licensing
|
26,916
|
|
|
26,880
|
|
||
Development
|
16,174
|
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|
19,781
|
|
||
Selling, general and administrative
|
14,204
|
|
|
13,901
|
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||
|
57,294
|
|
|
60,562
|
|
||
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|
|
|
||||
Income from operations
|
30,150
|
|
|
33,968
|
|
||
|
|
|
|
||||
OTHER EXPENSE (NET)
|
(6,336
|
)
|
|
(2,814
|
)
|
||
Income before income taxes
|
23,814
|
|
|
31,154
|
|
||
INCOME TAX BENEFIT
|
4,915
|
|
|
1,624
|
|
||
NET INCOME
|
$
|
28,729
|
|
|
$
|
32,778
|
|
Net loss attributable to noncontrolling interest
|
(1,196
|
)
|
|
(978
|
)
|
||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.
|
$
|
29,925
|
|
|
$
|
33,756
|
|
NET INCOME PER COMMON SHARE — BASIC
|
$
|
0.86
|
|
|
$
|
0.98
|
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC
|
34,641
|
|
|
34,370
|
|
||
NET INCOME PER COMMON SHARE — DILUTED
|
$
|
0.84
|
|
|
$
|
0.93
|
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED
|
35,606
|
|
|
36,220
|
|
||
CASH DIVIDENDS DECLARED PER COMMON SHARE
|
$
|
0.35
|
|
|
$
|
0.30
|
|
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FOR THE THREE MONTHS ENDED MARCH 31,
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||||||
|
2018
|
|
2017
|
||||
Net income
|
$
|
28,729
|
|
|
$
|
32,778
|
|
Unrealized (loss) gain on investments, net of tax
|
(1,747
|
)
|
|
(45
|
)
|
||
Comprehensive income
|
$
|
26,982
|
|
|
$
|
32,733
|
|
Comprehensive loss attributable to noncontrolling interest
|
(1,196
|
)
|
|
(978
|
)
|
||
Total comprehensive income attributable to InterDigital, Inc.
|
$
|
28,178
|
|
|
$
|
33,711
|
|
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FOR THE THREE MONTHS ENDED MARCH 31,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
28,729
|
|
|
$
|
32,778
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
14,699
|
|
|
14,528
|
|
||
Amortization of deferred financing costs and accretion of debt discount
|
3,380
|
|
|
3,201
|
|
||
Deferred revenue recognized
|
(53,121
|
)
|
|
(78,921
|
)
|
||
Increase in deferred revenue
|
7,829
|
|
|
185,000
|
|
||
Deferred income taxes
|
(5,551
|
)
|
|
(21,444
|
)
|
||
Share-based compensation
|
816
|
|
|
5,317
|
|
||
Other
|
(4
|
)
|
|
1
|
|
||
(Increase) decrease in assets:
|
|
|
|
||||
Receivables
|
24,396
|
|
|
(174,069
|
)
|
||
Deferred charges and other assets
|
(9,100
|
)
|
|
(13,486
|
)
|
||
Increase (decrease) in liabilities:
|
|
|
|
||||
Accounts payable
|
1,083
|
|
|
2,516
|
|
||
Accrued compensation and other expenses
|
(7,781
|
)
|
|
(9,805
|
)
|
||
Accrued taxes payable and other tax contingencies
|
(5,970
|
)
|
|
28,529
|
|
||
Net cash (used in) operating activities
|
(595
|
)
|
|
(25,855
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of short-term investments
|
(94,134
|
)
|
|
(429,941
|
)
|
||
Sales of short-term investments
|
118,336
|
|
|
231,516
|
|
||
Purchases of property and equipment
|
(399
|
)
|
|
(268
|
)
|
||
Capitalized patent costs
|
(8,035
|
)
|
|
(7,787
|
)
|
||
Acquisition of patents
|
—
|
|
|
—
|
|
||
Long-term investments
|
(4,250
|
)
|
|
(501
|
)
|
||
Net cash provided by (used in) investing activities
|
11,518
|
|
|
(206,981
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from exercise of stock options
|
—
|
|
|
82
|
|
||
Dividends paid
|
(12,155
|
)
|
|
(10,292
|
)
|
||
Taxes withheld upon restricted stock unit vestings
|
(8,277
|
)
|
|
(21,955
|
)
|
||
Repurchase of common stock
|
(6,024
|
)
|
|
—
|
|
||
Net cash (used in) financing activities
|
(26,456
|
)
|
|
(32,165
|
)
|
||
NET (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(15,533
|
)
|
|
(265,001
|
)
|
||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
433,014
|
|
|
404,074
|
|
||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
417,481
|
|
|
$
|
139,073
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
||||
Interest paid
|
2,370
|
|
|
2,370
|
|
||
Income taxes paid, including foreign withholding taxes
|
8,053
|
|
|
2,990
|
|
||
Non-cash investing and financing activities:
|
|
|
|
||||
Dividend payable
|
12,164
|
|
|
10,404
|
|
||
Accrued capitalized patent costs, property and equipment, and acquisition of patents
|
(2,286
|
)
|
|
(1,128
|
)
|
|
December 31, 2017
|
|
Static Fixed-Fee Agreements
|
Static Prepayments
|
Elimination of Quarter-Lag Reporting
|
Significant Financing Component
|
Related Tax Effects and Other Balance Sheet Impact
|
|
Total Adjustments
|
|
January 1, 2018
|
||||||||||||||||
Accounts Receivable
|
$
|
216,293
|
|
|
$
|
6,000
|
|
$
|
—
|
|
$
|
10,948
|
|
$
|
—
|
|
$
|
(171,727
|
)
|
|
$
|
(154,779
|
)
|
|
$
|
61,514
|
|
Deferred Tax Assets
|
84,582
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(52,199
|
)
|
|
(52,199
|
)
|
|
32,383
|
|
||||||||
Taxes Payable
|
(14,881
|
)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
8,655
|
|
|
8,655
|
|
|
(6,226
|
)
|
||||||||
Deferred Revenue
|
(616,813
|
)
|
|
99,466
|
|
85,146
|
|
—
|
|
3,235
|
|
171,727
|
|
|
359,574
|
|
|
(257,239
|
)
|
||||||||
Retained Earnings
|
(1,249,091
|
)
|
|
(105,466
|
)
|
(85,146
|
)
|
(10,948
|
)
|
(3,235
|
)
|
43,544
|
|
|
(161,251
|
)
|
|
(1,410,342
|
)
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Increase/(Decrease)
|
|||||||||
Variable patent royalty revenue
|
$
|
6,083
|
|
|
$
|
15,859
|
|
|
$
|
(9,776
|
)
|
|
(62
|
)%
|
Fixed-fee royalty revenue
|
57,671
|
|
|
73,367
|
|
|
(15,696
|
)
|
|
(21
|
)%
|
|||
Current patent royalties
a
|
63,754
|
|
|
89,226
|
|
|
(25,472
|
)
|
|
(29
|
)%
|
|||
Non-current patent royalties
b
|
23,344
|
|
|
—
|
|
|
23,344
|
|
|
—
|
%
|
|||
Total patent royalties
|
87,098
|
|
|
89,226
|
|
|
(2,128
|
)
|
|
(2
|
)%
|
|||
Current technology solutions revenue
a
|
346
|
|
|
5,304
|
|
|
(4,958
|
)
|
|
(93
|
)%
|
|||
Total revenue
|
$
|
87,444
|
|
|
$
|
94,530
|
|
|
$
|
(7,086
|
)
|
|
(7
|
)%
|
b.
|
Non-current patent royalties for the three months ended March 31, 2018 consist of past patent royalties and royalties from static agreements. For the three months ended March 31, 2017, non-current patent royalties consist of past patent royalties.
|
|
For the Three Months Ended March 31,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
As Reported ASC 606
|
|
Adjustment
|
|
ASC 605
|
|
As Reported (ASC 605)
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Variable patent royalty revenue
|
$
|
6,083
|
|
|
$
|
3,994
|
|
|
$
|
10,077
|
|
|
$
|
15,859
|
|
Fixed-fee royalty revenue
|
57,671
|
|
|
20,511
|
|
|
78,182
|
|
|
73,367
|
|
||||
Current patent royalties
|
63,754
|
|
|
24,505
|
|
|
88,259
|
|
|
89,226
|
|
||||
Non-current patent royalties
|
23,344
|
|
|
(10,000
|
)
|
|
13,344
|
|
|
—
|
|
||||
Total patent royalties
|
87,098
|
|
|
14,505
|
|
|
101,603
|
|
|
89,226
|
|
||||
Current technology solutions revenue
|
346
|
|
|
2,984
|
|
|
3,330
|
|
|
5,304
|
|
||||
|
$
|
87,444
|
|
|
$
|
17,489
|
|
|
$
|
104,933
|
|
|
$
|
94,530
|
|
OPERATING EXPENSES:
|
57,294
|
|
|
—
|
|
|
57,294
|
|
|
60,562
|
|
||||
Income from operations
|
30,150
|
|
|
17,489
|
|
|
47,639
|
|
|
33,968
|
|
||||
OTHER EXPENSE (NET)
|
(6,336
|
)
|
|
4,676
|
|
|
(1,660
|
)
|
|
(2,814
|
)
|
||||
Income before income taxes
|
23,814
|
|
|
22,165
|
|
|
45,979
|
|
|
31,154
|
|
||||
INCOME TAX BENEFIT (EXPENSE)
|
4,915
|
|
|
(6,023
|
)
|
|
(1,108
|
)
|
|
1,624
|
|
||||
NET INCOME
|
$
|
28,729
|
|
|
$
|
16,142
|
|
|
$
|
44,871
|
|
|
$
|
32,778
|
|
Net loss attributable to noncontrolling interest
|
(1,196
|
)
|
|
—
|
|
|
(1,196
|
)
|
|
(978
|
)
|
||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.
|
$
|
29,925
|
|
|
$
|
16,142
|
|
|
$
|
46,067
|
|
|
$
|
33,756
|
|
NET INCOME PER COMMON SHARE — BASIC
|
$
|
0.86
|
|
|
$
|
0.47
|
|
|
$
|
1.33
|
|
|
$
|
0.98
|
|
NET INCOME PER COMMON SHARE — DILUTED
|
$
|
0.84
|
|
|
$
|
0.45
|
|
|
$
|
1.29
|
|
|
$
|
0.93
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
As Reported ASC 606
|
|
Adjustment
|
|
ASC 605
|
|
As Reported (ASC 605)
|
||||||||
Accounts Receivable, net
|
$
|
66,789
|
|
|
$
|
177,532
|
|
|
$
|
244,321
|
|
|
$
|
216,293
|
|
Deferred Tax Assets
|
37,934
|
|
|
54,014
|
|
|
91,948
|
|
|
84,582
|
|
||||
Other Non-current Assets
|
47,664
|
|
|
(5,500
|
)
|
|
42,164
|
|
|
37,963
|
|
||||
Taxes Payable
|
(256
|
)
|
|
(16,493
|
)
|
|
(16,749
|
)
|
|
(14,881
|
)
|
||||
Deferred Revenue
|
(241,618
|
)
|
|
(354,662
|
)
|
|
(596,280
|
)
|
|
(616,813
|
)
|
||||
Retained Earnings
|
(1,428,437
|
)
|
|
145,109
|
|
|
(1,283,328
|
)
|
|
(1,249,091
|
)
|
|
Revenue
|
||
Remainder 2018
|
$
|
173,014
|
|
2019
|
230,685
|
|
|
2020
|
230,685
|
|
|
2021
|
169,039
|
|
|
2022
|
85,228
|
|
|
For the Three Months Ended March 31,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income applicable to InterDigital, Inc.
|
$
|
29,925
|
|
|
$
|
29,925
|
|
|
$
|
33,756
|
|
|
$
|
33,756
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding: Basic
|
34,641
|
|
|
34,641
|
|
|
34,370
|
|
|
34,370
|
|
||||
Dilutive effect of stock options, RSUs, convertible securities and warrants
|
|
|
965
|
|
|
|
|
1,850
|
|
||||||
Weighted-average shares outstanding: Diluted
|
|
|
35,606
|
|
|
|
|
36,220
|
|
||||||
Earnings Per Share:
|
|
|
|
|
|
|
|
||||||||
Net income: Basic
|
$
|
0.86
|
|
|
$
|
0.86
|
|
|
$
|
0.98
|
|
|
$
|
0.98
|
|
Dilutive effect of stock options, RSUs, convertible securities and warrants
|
|
|
(0.02
|
)
|
|
|
|
(0.05
|
)
|
||||||
Net income: Diluted
|
|
|
$
|
0.84
|
|
|
|
|
$
|
0.93
|
|
|
For the Three Months Ended March 31,
|
||||
|
2018
|
|
2017
|
||
Restricted stock units and stock options
|
25
|
|
|
29
|
|
Convertible securities
|
—
|
|
|
—
|
|
Warrants
|
4,403
|
|
|
—
|
|
Total
|
4,428
|
|
|
29
|
|
4.
|
LITIGATION AND LEGAL PROCEEDINGS
|
1.
|
Whenever InterDigital engages with a Chinese Manufacturer to license InterDigital’s patent portfolio for 2G, 3G and 4G wireless mobile standards, InterDigital will offer such Chinese Manufacturer the option of taking a worldwide portfolio license of only its standards-essential wireless patents, and comply with F/RAND principles when negotiating and entering into such licensing agreements with Chinese Manufacturers.
|
2.
|
As part of its licensing offer, InterDigital will not require that a Chinese Manufacturer agree to a royalty-free, reciprocal cross-license of such Chinese Manufacturer's similarly categorized standards-essential wireless patents.
|
3.
|
Prior to commencing any action against a Chinese Manufacturer in which InterDigital may seek exclusionary or injunctive relief for the infringement of any of its wireless standards-essential patents, InterDigital will offer such Chinese Manufacturer the option to enter into expedited binding arbitration under fair and reasonable procedures to resolve the royalty rate and other terms of a worldwide license under InterDigital's wireless standards-essential patents. If the Chinese Manufacturer accepts InterDigital's binding arbitration offer or otherwise enters into an agreement with InterDigital on a binding arbitration mechanism, InterDigital will, in accordance with the terms of the arbitration agreement and patent license agreement, refrain from seeking exclusionary or injunctive relief against such company.
|
|
For the Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Balance beginning of period, December 31
|
$
|
855,267
|
|
|
$
|
739,709
|
|
Cumulative effect of change in accounting principle
|
161,251
|
|
|
—
|
|
||
Net income attributable to InterDigital, Inc.
|
29,925
|
|
|
33,756
|
|
||
Unrealized (loss) gain on investments, net
|
(1,747
|
)
|
|
(45
|
)
|
||
Cash dividends declared
|
(12,164
|
)
|
|
(10,404
|
)
|
||
Repurchase of common stock
|
(6,024
|
)
|
|
—
|
|
||
Exercise of common stock options
|
—
|
|
|
82
|
|
||
Taxes withheld upon vesting of restricted stock units
|
(8,277
|
)
|
|
(21,955
|
)
|
||
Share-based compensation
|
816
|
|
|
5,317
|
|
||
Total InterDigital, Inc. shareholders’ equity end of period
|
$
|
1,019,047
|
|
|
$
|
746,460
|
|
Noncontrolling Interest Balance beginning of period, December 31
|
17,881
|
|
|
14,659
|
|
||
Net loss attributable to noncontrolling interest
|
(1,196
|
)
|
|
(978
|
)
|
||
Noncontrolling interest
|
16,685
|
|
|
13,681
|
|
||
Total Equity end of period
|
$
|
1,035,732
|
|
|
$
|
760,141
|
|
2018
|
Per Share
|
|
Total
|
|
Cumulative by Fiscal Year
|
||||||
First quarter
|
$
|
0.35
|
|
|
$
|
12,164
|
|
|
$
|
12,164
|
|
|
$
|
0.35
|
|
|
$
|
12,164
|
|
|
|
||
|
|
|
|
|
|
||||||
2017
|
Per Share
|
|
Total
|
|
Cumulative by Fiscal Year
|
||||||
First quarter
|
$
|
0.30
|
|
|
$
|
10,404
|
|
|
$
|
10,404
|
|
Second quarter
|
0.30
|
|
|
10,413
|
|
|
20,817
|
|
|||
Third quarter
|
0.35
|
|
|
12,149
|
|
|
32,966
|
|
|||
Fourth quarter
|
0.35
|
|
|
12,156
|
|
|
45,122
|
|
|||
|
$
|
1.30
|
|
|
$
|
45,122
|
|
|
|
|
Fair Value as of March 31, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market and demand accounts (a)
|
$
|
237,032
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
237,032
|
|
Commercial paper (b)
|
—
|
|
|
138,279
|
|
|
—
|
|
|
138,279
|
|
||||
U.S. government securities (b)
|
—
|
|
|
540,214
|
|
|
—
|
|
|
540,214
|
|
||||
Corporate bonds, asset backed and other securities
|
—
|
|
|
201,092
|
|
|
—
|
|
|
201,092
|
|
||||
|
$
|
237,032
|
|
|
$
|
879,585
|
|
|
$
|
—
|
|
|
$
|
1,116,617
|
|
(a)
|
Included within cash and cash equivalents.
|
(b)
|
Includes
$100.6 million
of commercial paper and
$79.8 million
of U.S. government securities that are included within cash and cash equivalents.
|
|
Fair Value as of December 31, 2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market and demand accounts (a)
|
$
|
417,348
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
417,348
|
|
Commercial paper (b)
|
—
|
|
|
66,132
|
|
|
—
|
|
|
66,132
|
|
||||
U.S. government securities
|
—
|
|
|
511,032
|
|
|
—
|
|
|
511,032
|
|
||||
Corporate bonds, asset backed and other securities
|
—
|
|
|
163,483
|
|
|
—
|
|
|
163,483
|
|
||||
|
$
|
417,348
|
|
|
$
|
740,647
|
|
|
$
|
—
|
|
|
$
|
1,157,995
|
|
(a)
|
Included within cash and cash equivalents.
|
(b)
|
Includes
$15.7 million
of commercial paper that is included within cash and cash equivalents.
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
Principal
Amount
|
|
Carrying
Value
|
|
Fair
Value
|
|
Principal
Amount
|
|
Carrying
Value |
|
Fair
Value
|
||||||||||||
Total Long-Term Debt
|
$
|
316,000
|
|
|
$
|
288,506
|
|
|
$
|
367,154
|
|
|
$
|
316,000
|
|
|
$
|
285,126
|
|
|
$
|
377,029
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Principal
|
$
|
316,000
|
|
|
$
|
316,000
|
|
Less:
|
|
|
|
||||
Unamortized interest discount
|
(24,830
|
)
|
|
(27,863
|
)
|
||
Deferred financing costs
|
(2,664
|
)
|
|
(3,011
|
)
|
||
Net carrying amount of 2020 Notes
|
$
|
288,506
|
|
|
$
|
285,126
|
|
|
For the Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Contractual coupon interest
|
$
|
1,185
|
|
|
$
|
1,185
|
|
Accretion of debt discount
|
3,033
|
|
|
2,854
|
|
||
Amortization of deferred financing costs
|
347
|
|
|
347
|
|
||
Total
|
$
|
4,565
|
|
|
$
|
4,386
|
|
•
|
$20.0 million of non-current patent royalties primarily attributable to new patent license agreements signed during the quarter;
|
•
|
the recognition of discrete tax benefits totaling
$3.4 million
related to share-based compensation and our sale of a commercial initiative; and
|
•
|
as discussed above, assuming we had not adopted ASC 606, we would have recognized
$17.5 million
of additional revenue and
$4.7 million
less interest expense, which after taxes would have resulted in
$16.1 million
of additional net income.
|
|
March 31, 2018
|
|
December 31, 2017
|
|
Increase /
(Decrease)
|
||||||
Cash and cash equivalents
|
$
|
417,481
|
|
|
$
|
433,014
|
|
|
$
|
(15,533
|
)
|
Short-term investments
|
699,136
|
|
|
724,981
|
|
|
(25,845
|
)
|
|||
Total cash and cash equivalents and short-term investments
|
$
|
1,116,617
|
|
|
$
|
1,157,995
|
|
|
$
|
(41,378
|
)
|
|
For the Three Months Ended March 31,
|
||||||||||
|
2018
|
|
2017
|
|
Increase /
(Decrease)
|
||||||
Net cash used in operating activities
|
$
|
(595
|
)
|
|
$
|
(25,855
|
)
|
|
$
|
25,260
|
|
|
For the Three Months Ended March 31,
|
||||||||||
|
2018
|
|
2017
|
|
Increase / (Decrease)
|
||||||
Cash Receipts:
|
|
|
|
|
|
||||||
Patent royalties
|
$
|
50,930
|
|
|
$
|
20,823
|
|
|
$
|
30,107
|
|
Technology solutions
|
5,912
|
|
|
6,368
|
|
|
(456
|
)
|
|||
Total cash receipts
|
$
|
56,842
|
|
|
$
|
27,191
|
|
|
$
|
29,651
|
|
|
|
|
|
|
|
||||||
Cash Outflows:
|
|
|
|
|
|
||||||
Cash operating expenses
a
|
41,779
|
|
|
40,717
|
|
|
1,062
|
|
|||
Income taxes paid
b
|
8,053
|
|
|
2,990
|
|
|
5,063
|
|
|||
Total cash outflows
|
49,832
|
|
|
43,707
|
|
|
6,125
|
|
|||
|
|
|
|
|
|
||||||
Other working capital adjustments
|
(7,605
|
)
|
|
(9,339
|
)
|
|
1,734
|
|
|||
|
|
|
|
|
|
||||||
Cash flows used in operating activities
|
$
|
(595
|
)
|
|
$
|
(25,855
|
)
|
|
$
|
25,260
|
|
|
March 31,
2018 |
|
December 31, 2017
|
|
Increase / (Decrease)
|
||||||
Current assets
|
$
|
1,208,398
|
|
|
$
|
1,395,794
|
|
|
$
|
(187,396
|
)
|
Less
: current liabilities
|
126,190
|
|
|
376,441
|
|
|
(250,251
|
)
|
|||
Working capital
|
1,082,208
|
|
|
1,019,353
|
|
|
62,855
|
|
|||
Subtract:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
417,481
|
|
|
433,014
|
|
|
(15,533
|
)
|
|||
Short-term investments
|
699,136
|
|
|
724,981
|
|
|
(25,845
|
)
|
|||
Add:
|
|
|
|
|
|
||||||
Current deferred revenue
|
75,652
|
|
|
307,142
|
|
|
(231,490
|
)
|
|||
Adjusted working capital
|
$
|
41,243
|
|
|
$
|
168,500
|
|
|
$
|
(127,257
|
)
|
Market Price Per Share
|
Shares Issuable Upon Conversion of Convertible Notes
|
Shares Issuable Upon Exercise of Warrants
|
Total Treasury Stock Method Incremental Shares
|
Shares Deliverable to InterDigital upon Settlement of the Hedge Agreements
|
Incremental Shares Issuable
(a)
|
|
(Shares in thousands)
|
||||
$75
|
191
|
—
|
191
|
(191)
|
—
|
$80
|
455
|
—
|
455
|
(455)
|
—
|
$85
|
687
|
—
|
687
|
(687)
|
—
|
$90
|
894
|
114
|
1,008
|
(894)
|
114
|
$95
|
1,078
|
339
|
1,417
|
(1,078)
|
339
|
$100
|
1,245
|
543
|
1,788
|
(1,245)
|
543
|
$105
|
1,395
|
727
|
2,122
|
(1,395)
|
727
|
$110
|
1,532
|
894
|
2,426
|
(1,532)
|
894
|
$115
|
1,657
|
1,046
|
2,703
|
(1,657)
|
1,046
|
$120
|
1,771
|
1,186
|
2,957
|
(1,771)
|
1,186
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|
Components of
Increase/(Decrease)
|
|||||||||||||||||
|
2018
|
|
2017
|
|
Total Increase/(Decrease)
|
|
Due to ASC 606
|
Operational
|
Total
|
|||||||||||||||
Variable patent royalty revenue
|
$
|
6,083
|
|
|
$
|
15,859
|
|
|
$
|
(9,776
|
)
|
|
(62
|
)%
|
|
$
|
(3,994
|
)
|
$
|
(5,782
|
)
|
$
|
(9,776
|
)
|
Fixed-fee royalty revenue
|
57,671
|
|
|
73,367
|
|
|
(15,696
|
)
|
|
(21
|
)%
|
|
(20,511
|
)
|
4,815
|
|
(15,696
|
)
|
||||||
Current patent royalties (a)
|
63,754
|
|
|
89,226
|
|
|
(25,472
|
)
|
|
(29
|
)%
|
|
(24,505
|
)
|
(967
|
)
|
(25,472
|
)
|
||||||
Non-current patent royalties (b)
|
23,344
|
|
|
—
|
|
|
23,344
|
|
|
—
|
%
|
|
10,000
|
|
13,344
|
|
23,344
|
|
||||||
Total patent royalties
|
87,098
|
|
|
89,226
|
|
|
(2,128
|
)
|
|
(2
|
)%
|
|
(14,505
|
)
|
12,377
|
|
(2,128
|
)
|
||||||
Current technology solutions revenue (a)
|
346
|
|
|
5,304
|
|
|
(4,958
|
)
|
|
(93
|
)%
|
|
(2,984
|
)
|
(1,974
|
)
|
(4,958
|
)
|
||||||
Total revenue
|
$
|
87,444
|
|
|
$
|
94,530
|
|
|
$
|
(7,086
|
)
|
|
(7
|
)%
|
|
$
|
(17,489
|
)
|
$
|
10,403
|
|
$
|
(7,086
|
)
|
|
For the Three Months Ended March 31,
|
||
|
2018
|
|
2017
|
Apple
|
32%
|
|
30%
|
Samsung
|
22%
|
|
18%
|
Kyocera
|
11%
|
|
<10%
|
Customer of Signal Trust
|
11%
|
|
—%
|
Huawei
|
—%
|
|
18%
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Increase/(Decrease)
|
|||||||||
Patent administration and licensing
|
$
|
26,916
|
|
|
$
|
26,880
|
|
|
$
|
36
|
|
|
—
|
%
|
Development
|
16,174
|
|
|
19,781
|
|
|
(3,607
|
)
|
|
(18
|
)%
|
|||
Selling, general and administrative
|
14,204
|
|
|
13,901
|
|
|
303
|
|
|
2
|
%
|
|||
Total operating expenses
|
$
|
57,294
|
|
|
$
|
60,562
|
|
|
$
|
(3,268
|
)
|
|
(5
|
)%
|
|
Increase/
(Decrease)
|
||
Performance-based incentive compensation
|
$
|
(3,031
|
)
|
Commercial initiatives
|
(2,035
|
)
|
|
Patent maintenance
|
(1,202
|
)
|
|
Other
|
137
|
|
|
Consulting services
|
1,395
|
|
|
Intellectual property enforcement and non-patent litigation
|
1,468
|
|
|
Total increase in operating expenses
|
$
|
(3,268
|
)
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
Interest expense
|
$
|
(9,243
|
)
|
|
$
|
(4,386
|
)
|
|
$
|
(4,857
|
)
|
|
(111
|
)%
|
Other
|
(16
|
)
|
|
(217
|
)
|
|
201
|
|
|
93
|
%
|
|||
Interest and investment income
|
2,923
|
|
|
1,789
|
|
|
1,134
|
|
|
63
|
%
|
|||
|
$
|
(6,336
|
)
|
|
$
|
(2,814
|
)
|
|
$
|
(3,522
|
)
|
|
(125
|
)%
|
•
|
Our expectations regarding the potential effects of new accounting standards, including the new revenue recognition guidance, on our financial position, results of operations or cash flows;
|
•
|
Our expectation that the amortization of fixed-fee royalty payments will reduce our
March 31, 2018
deferred revenue balance over the next twelve months;
|
•
|
Our expectations with respect to revenue to be recognized based on contracts signed and committed Dynamic Fixed-Fee Agreement payments as of March 31, 2018;
|
•
|
Our expectations and estimations regarding the income tax effects, and the impact on the Company, of the Tax Reform Act, including our forecasted net benefit related to our income qualifying as FDII;
|
•
|
The timing, outcome and impact of, and plans, expectations and beliefs with respect to, our various litigation, arbitration, regulatory and administrative matters;
|
•
|
Our belief that we have the ability to obtain additional liquidity through debt and equity financings;
|
•
|
Our belief that our available sources of funds will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program and dividend program for the next twelve months as well as the Technicolor asset acquisition; and
|
•
|
Our expectation that we will continue to pay dividends comparable to our quarterly
$0.35
per share cash dividend in the future.
|
•
|
we will have incurred and may continue to incur costs relating to the proposed transaction, many of which are payable by us whether or not the proposed transaction is completed;
|
•
|
matters relating to the proposed transaction (including integration planning) require substantial commitments of time and resources by our management team and numerous others throughout our organization, which could otherwise have been devoted to other opportunities; and
|
•
|
the failure to consummate the proposed transaction may result in negative publicity and a negative perception of us in the investment community.
|
Period
|
Total Number of Shares (or Units) Purchased (1)
|
|
Average Price Paid Per Share (or Unit)
|
|
Total Number of Shares (or Units) Purchases as Part of Publicly Announced Plans or Programs (2)
|
|
Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs (3)
|
||||||
January 1, 2018 - January 31, 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
178,578,011
|
|
February 1, 2018 - February 28, 2018
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
178,578,011
|
|
March 1, 2018 - March 31, 2018
|
84,147
|
|
|
$
|
71.58
|
|
|
84,147
|
|
|
$
|
172,553,135
|
|
Total
|
84,147
|
|
|
$
|
71.58
|
|
|
84,147
|
|
|
$
|
172,553,135
|
|
Exhibit
Number
|
|
Exhibit Description
|
*2.1
|
|
|
|
|
|
*4.1
|
|
|
|
|
|
*4.2
|
|
|
|
|
|
*4.3
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
101
|
|
The following financial information from InterDigital, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed with the Securities and Exchange Commission on April 26, 2018, formatted in eXtensible Business Reporting Language:
|
|
|
|
|
|
(i) Condensed Consolidated Balance Sheets at March 31, 2018 and December 31, 2017, (ii) Condensed Consolidated Statements of Income for the three months ended March 31, 2018 and 2017, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2018 and 2017, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 and (v) Notes to Condensed Consolidated Financial Statements.
|
*
|
|
Incorporated by reference to the filing indicated.
|
†
|
|
Management contract or compensatory plan or arrangement.
|
**
|
|
This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that InterDigital, Inc. specifically incorporates it by reference.
|
|
INTERDIGITAL, INC.
|
|
|
|
|
Date: April 26, 2018
|
/s/ WILLIAM J. MERRITT
|
|
|
William J. Merritt
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
Date: April 26, 2018
|
/s/ RICHARD J. BREZSKI
|
|
|
Richard J. Brezski
|
|
|
Chief Financial Officer
|
|
(b)
|
Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel;
|
(c)
|
Executive understands the terms and consequences of this Agreement and of the releases it contains; and
|
(b)
|
Executive cannot sign the Supplemental Release before the end of the Transition Period;
|
(c)
|
Executive has been represented in the preparation, negotiation, and execution of this Supplemental Release by legal counsel of Executive’s own choice or has elected not to retain legal counsel;
|
(d)
|
Executive understands the terms and consequences of this Supplemental Release and of the releases it contains; and
|
(b)
|
Executive has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Executive’s own choice or has elected not to retain legal counsel;
|
(c)
|
Executive understands the terms and consequences of this Agreement and of the releases it contains; and
|
(b)
|
Executive cannot sign the Supplemental Release before the end of the Transition Period;
|
(c)
|
Executive has been represented in the preparation, negotiation, and execution of this Supplemental Release by legal counsel of Executive’s own choice or has elected not to retain legal counsel;
|
(d)
|
Executive understands the terms and consequences of this Supplemental Release and of the releases it contains; and
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of InterDigital, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: April 26, 2018
|
/s/ William J. Merritt
|
|
|
William J. Merritt
|
|
|
President and Chief Executive Officer
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of InterDigital, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: April 26, 2018
|
/s/ Richard J. Brezski
|
|
|
Richard J. Brezski
|
|
|
Chief Financial Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: April 26, 2018
|
/s/ William J. Merritt
|
|
|
William J. Merritt
|
|
|
President and Chief Executive Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: April 26, 2018
|
/s/ Richard J. Brezski
|
|
|
Richard J. Brezski
|
|
|
Chief Financial Officer
|
|