|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the quarterly period ended September 30, 2018
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the transition period from
to
|
PENNSYLVANIA
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
82-4936666
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
R
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
Emerging growth company
o
|
|
Common Stock, par value $0.01 per share
|
33,842,244
|
Title of Class
|
Outstanding at October 30, 2018
|
|
|
|
|
PAGES
|
|
|
|
|
|
|
EX-10.3
|
|
EX-10.4
|
|
EX-10.5
|
|
EX-10.6
|
|
EX-10.7
|
|
EX-31.1
|
|
EX-31.2
|
|
EX-32.1
|
|
EX-32.2
|
|
EX-101 INSTANCE DOCUMENT
|
|
EX-101 SCHEMA DOCUMENT
|
|
EX-101 CALCULATION LINKBASE DOCUMENT
|
|
EX-101 LABELS LINKBASE DOCUMENT
|
|
EX-101 PRESENTATION LINKBASE DOCUMENT
|
|
|
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
|
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Patent licensing royalties
|
$
|
74,045
|
|
|
$
|
92,566
|
|
|
$
|
230,018
|
|
|
$
|
314,113
|
|
Technology solutions
|
1,034
|
|
|
4,759
|
|
|
2,060
|
|
|
13,521
|
|
||||
|
75,079
|
|
|
97,325
|
|
|
232,078
|
|
|
327,634
|
|
||||
|
|
|
|
|
|
|
|
||||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Patent administration and licensing
|
32,077
|
|
|
26,517
|
|
|
85,480
|
|
|
76,629
|
|
||||
Development
|
17,276
|
|
|
17,293
|
|
|
49,279
|
|
|
56,172
|
|
||||
Selling, general and administrative
|
12,806
|
|
|
12,640
|
|
|
38,569
|
|
|
39,042
|
|
||||
|
62,159
|
|
|
56,450
|
|
|
173,328
|
|
|
171,843
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from operations
|
12,920
|
|
|
40,875
|
|
|
58,750
|
|
|
155,791
|
|
||||
|
|
|
|
|
|
|
|
||||||||
OTHER EXPENSE (NET)
|
(13,953
|
)
|
|
(2,187
|
)
|
|
(25,136
|
)
|
|
(7,331
|
)
|
||||
Income (loss) before income taxes
|
(1,033
|
)
|
|
38,688
|
|
|
33,614
|
|
|
148,460
|
|
||||
INCOME TAX BENEFIT (PROVISION)
|
21,143
|
|
|
(3,963
|
)
|
|
25,001
|
|
|
(29,413
|
)
|
||||
NET INCOME
|
$
|
20,110
|
|
|
$
|
34,725
|
|
|
$
|
58,615
|
|
|
$
|
119,047
|
|
Net loss attributable to noncontrolling interest
|
(1,297
|
)
|
|
(811
|
)
|
|
(3,423
|
)
|
|
(2,744
|
)
|
||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.
|
$
|
21,407
|
|
|
$
|
35,536
|
|
|
$
|
62,038
|
|
|
$
|
121,791
|
|
NET INCOME PER COMMON SHARE — BASIC
|
$
|
0.62
|
|
|
$
|
1.02
|
|
|
$
|
1.79
|
|
|
$
|
3.52
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC
|
34,651
|
|
|
34,709
|
|
|
34,687
|
|
|
34,589
|
|
||||
NET INCOME PER COMMON SHARE — DILUTED
|
$
|
0.60
|
|
|
$
|
1.00
|
|
|
$
|
1.74
|
|
|
$
|
3.40
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED
|
35,607
|
|
|
35,388
|
|
|
35,614
|
|
|
35,865
|
|
||||
CASH DIVIDENDS DECLARED PER COMMON SHARE
|
$
|
0.35
|
|
|
$
|
0.35
|
|
|
$
|
1.05
|
|
|
$
|
0.95
|
|
|
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
|
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income
|
$
|
20,110
|
|
|
$
|
34,725
|
|
|
$
|
58,615
|
|
|
$
|
119,047
|
|
Unrealized (loss) gain on investments, net of tax
|
467
|
|
|
(94
|
)
|
|
(904
|
)
|
|
(181
|
)
|
||||
Comprehensive income
|
$
|
20,577
|
|
|
$
|
34,631
|
|
|
$
|
57,711
|
|
|
$
|
118,866
|
|
Comprehensive loss attributable to noncontrolling interest
|
(1,297
|
)
|
|
(811
|
)
|
|
(3,423
|
)
|
|
(2,744
|
)
|
||||
Total comprehensive income attributable to InterDigital, Inc.
|
$
|
21,874
|
|
|
$
|
35,442
|
|
|
$
|
61,134
|
|
|
$
|
121,610
|
|
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
|
||||||
|
2018
|
|
2017
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income
|
$
|
58,615
|
|
|
$
|
119,047
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
47,024
|
|
|
42,809
|
|
||
Non-cash interest expense
|
10,684
|
|
|
9,753
|
|
||
Change in deferred revenue
|
9,822
|
|
|
90,056
|
|
||
Deferred income taxes
|
(27,673
|
)
|
|
(7,853
|
)
|
||
Share-based compensation
|
4,875
|
|
|
13,901
|
|
||
Loss on disposal of assets
|
8,176
|
|
|
—
|
|
||
Other
|
198
|
|
|
(4
|
)
|
||
(Increase) decrease in assets:
|
|
|
|
||||
Receivables
|
36,861
|
|
|
(171,662
|
)
|
||
Deferred charges and other assets
|
(63,783
|
)
|
|
(13,316
|
)
|
||
Increase (decrease) in liabilities:
|
|
|
|
||||
Accounts payable
|
5,640
|
|
|
(3,198
|
)
|
||
Accrued compensation and other expenses
|
(5,618
|
)
|
|
(1,798
|
)
|
||
Accrued taxes payable and other tax contingencies
|
91,796
|
|
|
20,606
|
|
||
Net cash provided by operating activities
|
176,617
|
|
|
98,341
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of short-term investments
|
(142,562
|
)
|
|
(813,267
|
)
|
||
Sales of short-term investments
|
317,447
|
|
|
678,119
|
|
||
Purchases of property and equipment
|
(1,882
|
)
|
|
(942
|
)
|
||
Capitalized patent costs
|
(23,845
|
)
|
|
(26,306
|
)
|
||
Acquisition of patents
|
(2,250
|
)
|
|
—
|
|
||
Acquisition of business, net of cash acquired
|
(142,985
|
)
|
|
—
|
|
||
Long-term investments
|
(6,686
|
)
|
|
(3,201
|
)
|
||
Net cash used in investing activities
|
(2,763
|
)
|
|
(165,597
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net proceeds from exercise of stock options
|
6,362
|
|
|
82
|
|
||
Dividends paid
|
(36,472
|
)
|
|
(31,107
|
)
|
||
Taxes withheld upon restricted stock unit vestings
|
(8,479
|
)
|
|
(22,236
|
)
|
||
Repurchase of common stock
|
(43,508
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
(82,097
|
)
|
|
(53,261
|
)
|
||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
91,757
|
|
|
(120,517
|
)
|
||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD
|
433,014
|
|
|
404,074
|
|
||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
|
$
|
524,771
|
|
|
$
|
283,557
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
||||
Interest paid
|
4,740
|
|
|
4,740
|
|
||
Income taxes paid, including foreign withholding taxes
|
24,459
|
|
|
29,173
|
|
||
Non-cash investing and financing activities:
|
|
|
|
||||
Dividend payable
|
11,996
|
|
|
12,149
|
|
||
Non-cash acquisition of patents
|
—
|
|
|
12,800
|
|
||
Accrued capitalized patent costs, property and equipment, and acquisition of patents
|
(1,513
|
)
|
|
(548
|
)
|
|
December 31, 2017
|
|
Static Fixed-Fee Agreements
|
Static Prepayments
|
Elimination of Quarter-Lag Reporting
|
Significant Financing Component
|
Related Tax Effects and Other Balance Sheet Impacts
|
|
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 September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Increase/(Decrease)
|
|||||||||
Variable patent royalty revenue
|
$
|
13,645
|
|
|
$
|
10,081
|
|
|
$
|
3,564
|
|
|
35
|
%
|
Fixed-fee royalty revenue
|
60,272
|
|
|
73,653
|
|
|
(13,381
|
)
|
|
(18
|
)%
|
|||
Current patent royalties
a
|
73,917
|
|
|
83,734
|
|
|
(9,817
|
)
|
|
(12
|
)%
|
|||
Non-current patent royalties
b
|
128
|
|
|
8,832
|
|
|
(8,704
|
)
|
|
(99
|
)%
|
|||
Total patent royalties
|
74,045
|
|
|
92,566
|
|
|
(18,521
|
)
|
|
(20
|
)%
|
|||
Current technology solutions revenue
a
|
1,034
|
|
|
4,759
|
|
|
(3,725
|
)
|
|
(78
|
)%
|
|||
Total revenue
|
$
|
75,079
|
|
|
$
|
97,325
|
|
|
$
|
(22,246
|
)
|
|
(23
|
)%
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Increase/(Decrease)
|
|||||||||
Variable patent royalty revenue
|
$
|
26,322
|
|
|
$
|
37,338
|
|
|
$
|
(11,016
|
)
|
|
(30
|
)%
|
Fixed-fee royalty revenue
|
178,207
|
|
|
220,083
|
|
|
(41,876
|
)
|
|
(19
|
)%
|
|||
Current patent royalties
a
|
204,529
|
|
|
257,421
|
|
|
(52,892
|
)
|
|
(21
|
)%
|
|||
Non-current patent royalties
b
|
25,489
|
|
|
56,692
|
|
|
(31,203
|
)
|
|
(55
|
)%
|
|||
Total patent royalties
|
230,018
|
|
|
314,113
|
|
|
(84,095
|
)
|
|
(27
|
)%
|
|||
Current technology solutions revenue
a
|
2,060
|
|
|
13,521
|
|
|
(11,461
|
)
|
|
(85
|
)%
|
|||
Total revenue
|
$
|
232,078
|
|
|
$
|
327,634
|
|
|
$
|
(95,556
|
)
|
|
(29
|
)%
|
b.
|
Non-current patent royalties for the three and nine months ended September 30, 2018 consist of past patent royalties and royalties from static agreements. For the three and nine months ended September 30, 2017, non-current patent royalties consist of past patent royalties.
|
|
For the Three Months Ended September 30,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
As Reported ASC 606
|
|
Adjustment
|
|
ASC 605
|
|
As Reported (ASC 605)
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Variable patent royalty revenue
|
$
|
13,645
|
|
|
$
|
(5,242
|
)
|
|
$
|
8,403
|
|
|
$
|
10,081
|
|
Fixed-fee royalty revenue
|
60,272
|
|
|
20,309
|
|
|
80,581
|
|
|
73,653
|
|
||||
Current patent royalties
|
73,917
|
|
|
15,067
|
|
|
88,984
|
|
|
83,734
|
|
||||
Non-current patent royalties
|
128
|
|
|
—
|
|
|
128
|
|
|
8,832
|
|
||||
Total patent royalties
|
74,045
|
|
|
15,067
|
|
|
89,112
|
|
|
92,566
|
|
||||
Current technology solutions revenue
|
1,034
|
|
|
1,197
|
|
|
2,231
|
|
|
4,759
|
|
||||
|
$
|
75,079
|
|
|
$
|
16,264
|
|
|
$
|
91,343
|
|
|
$
|
97,325
|
|
OPERATING EXPENSES:
|
62,159
|
|
|
—
|
|
|
62,159
|
|
|
56,450
|
|
||||
Income from operations
|
12,920
|
|
|
16,264
|
|
|
29,184
|
|
|
40,875
|
|
||||
OTHER EXPENSE (NET)
|
(13,953
|
)
|
|
3,993
|
|
|
(9,960
|
)
|
|
(2,187
|
)
|
||||
Income before income taxes
|
(1,033
|
)
|
|
20,257
|
|
|
19,224
|
|
|
38,688
|
|
||||
INCOME TAX BENEFIT (EXPENSE)
|
21,143
|
|
|
(6,676
|
)
|
|
14,467
|
|
|
(3,963
|
)
|
||||
NET INCOME
|
$
|
20,110
|
|
|
$
|
13,581
|
|
|
$
|
33,691
|
|
|
$
|
34,725
|
|
Net loss attributable to noncontrolling interest
|
(1,297
|
)
|
|
—
|
|
|
(1,297
|
)
|
|
(811
|
)
|
||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.
|
$
|
21,407
|
|
|
$
|
13,581
|
|
|
$
|
34,988
|
|
|
$
|
35,536
|
|
NET INCOME PER COMMON SHARE — BASIC
|
$
|
0.62
|
|
|
$
|
0.39
|
|
|
$
|
1.01
|
|
|
$
|
1.02
|
|
NET INCOME PER COMMON SHARE — DILUTED
|
$
|
0.60
|
|
|
$
|
0.38
|
|
|
$
|
0.98
|
|
|
$
|
1.00
|
|
|
For the Nine Months Ended September 30,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
As Reported ASC 606
|
|
Adjustment
|
|
ASC 605
|
|
As Reported (ASC 605)
|
||||||||
REVENUES:
|
|
|
|
|
|
|
|
||||||||
Variable patent royalty revenue
|
$
|
26,322
|
|
|
$
|
(466
|
)
|
|
$
|
25,856
|
|
|
$
|
37,338
|
|
Fixed-fee royalty revenue
|
178,207
|
|
|
60,081
|
|
|
238,288
|
|
|
220,083
|
|
||||
Current patent royalties
|
204,529
|
|
|
59,615
|
|
|
264,144
|
|
|
257,421
|
|
||||
Non-current patent royalties
|
25,489
|
|
|
(10,000
|
)
|
|
15,489
|
|
|
56,692
|
|
||||
Total patent royalties
|
230,018
|
|
|
49,615
|
|
|
279,633
|
|
|
314,113
|
|
||||
Current technology solutions revenue
|
2,060
|
|
|
5,232
|
|
|
7,292
|
|
|
13,521
|
|
||||
|
$
|
232,078
|
|
|
$
|
54,847
|
|
|
$
|
286,925
|
|
|
$
|
327,634
|
|
OPERATING EXPENSES:
|
173,328
|
|
|
—
|
|
|
173,328
|
|
|
171,843
|
|
||||
Income from operations
|
58,750
|
|
|
54,847
|
|
|
113,597
|
|
|
155,791
|
|
||||
OTHER EXPENSE (NET)
|
(25,136
|
)
|
|
13,004
|
|
|
(12,132
|
)
|
|
(7,331
|
)
|
||||
Income before income taxes
|
33,614
|
|
|
67,851
|
|
|
101,465
|
|
|
148,460
|
|
||||
INCOME TAX BENEFIT (EXPENSE)
|
25,001
|
|
|
(15,607
|
)
|
|
9,394
|
|
|
(29,413
|
)
|
||||
NET INCOME
|
$
|
58,615
|
|
|
$
|
52,244
|
|
|
$
|
110,859
|
|
|
$
|
119,047
|
|
Net loss attributable to noncontrolling interest
|
(3,423
|
)
|
|
—
|
|
|
(3,423
|
)
|
|
(2,744
|
)
|
||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.
|
$
|
62,038
|
|
|
$
|
52,244
|
|
|
$
|
114,282
|
|
|
$
|
121,791
|
|
NET INCOME PER COMMON SHARE — BASIC
|
$
|
1.79
|
|
|
$
|
1.50
|
|
|
$
|
3.29
|
|
|
$
|
3.52
|
|
NET INCOME PER COMMON SHARE — DILUTED
|
$
|
1.74
|
|
|
$
|
1.47
|
|
|
$
|
3.21
|
|
|
$
|
3.40
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||
|
As Reported ASC 606
|
|
Adjustment
|
|
ASC 605
|
|
As Reported (ASC 605)
|
||||||||
Accounts Receivable, net
|
$
|
29,769
|
|
|
$
|
206,079
|
|
|
$
|
235,848
|
|
|
$
|
216,293
|
|
Deferred Tax Assets
|
60,056
|
|
|
46,098
|
|
|
106,154
|
|
|
84,582
|
|
||||
Other Non-current Assets
|
63,877
|
|
|
(5,500
|
)
|
|
58,377
|
|
|
37,963
|
|
||||
Taxes Payable
|
(98,022
|
)
|
|
(16,438
|
)
|
|
(114,460
|
)
|
|
(14,881
|
)
|
||||
Deferred Revenue
|
(269,662
|
)
|
|
(341,816
|
)
|
|
(611,478
|
)
|
|
(616,813
|
)
|
||||
Retained Earnings
|
(1,436,171
|
)
|
|
111,577
|
|
|
(1,324,594
|
)
|
|
(1,249,091
|
)
|
|
Revenue
|
||
Remainder 2018
|
$
|
60,272
|
|
2019
|
237,339
|
|
|
2020
|
236,089
|
|
|
2021
|
169,039
|
|
|
2022
|
85,228
|
|
|
For the Three Months Ended September 30,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income applicable to InterDigital, Inc.
|
$
|
21,407
|
|
|
$
|
21,407
|
|
|
$
|
35,536
|
|
|
$
|
35,536
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding: Basic
|
34,651
|
|
|
34,651
|
|
|
34,709
|
|
|
34,709
|
|
||||
Dilutive effect of stock options, RSUs, convertible securities and warrants
|
|
|
956
|
|
|
|
|
679
|
|
||||||
Weighted-average shares outstanding: Diluted
|
|
|
35,607
|
|
|
|
|
35,388
|
|
||||||
Earnings Per Share:
|
|
|
|
|
|
|
|
||||||||
Net income: Basic
|
$
|
0.62
|
|
|
$
|
0.62
|
|
|
$
|
1.02
|
|
|
$
|
1.02
|
|
Dilutive effect of stock options, RSUs, convertible securities and warrants
|
|
|
(0.02
|
)
|
|
|
|
(0.02
|
)
|
||||||
Net income: Diluted
|
|
|
$
|
0.60
|
|
|
|
|
$
|
1.00
|
|
|
For the Nine Months Ended September 30,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income applicable to InterDigital, Inc.
|
$
|
62,038
|
|
|
$
|
62,038
|
|
|
$
|
121,791
|
|
|
$
|
121,791
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding: Basic
|
34,687
|
|
|
34,687
|
|
|
34,589
|
|
|
34,589
|
|
||||
Dilutive effect of stock options, RSUs, convertible securities and warrants
|
|
|
927
|
|
|
|
|
1,276
|
|
||||||
Weighted-average shares outstanding: Diluted
|
|
|
35,614
|
|
|
|
|
35,865
|
|
||||||
Earnings Per Share:
|
|
|
|
|
|
|
|
||||||||
Net income: Basic
|
$
|
1.79
|
|
|
$
|
1.79
|
|
|
$
|
3.52
|
|
|
$
|
3.52
|
|
Dilutive effect of stock options, RSUs, convertible securities and warrants
|
|
|
(0.05
|
)
|
|
|
|
(0.12
|
)
|
||||||
Net income: Diluted
|
|
|
$
|
1.74
|
|
|
|
|
$
|
3.40
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Restricted stock units and stock options
|
78
|
|
|
25
|
|
|
44
|
|
|
18
|
|
Convertible securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Warrants
|
4,405
|
|
|
4,386
|
|
|
4,404
|
|
|
—
|
|
Total
|
4,483
|
|
|
4,411
|
|
|
4,448
|
|
|
18
|
|
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 Nine Months Ended September 30,
|
||||||
|
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.
|
62,038
|
|
|
121,791
|
|
||
Unrealized (loss) gain on investments, net
|
(904
|
)
|
|
(181
|
)
|
||
Cash dividends declared
|
(36,312
|
)
|
|
(32,966
|
)
|
||
Repurchase of common stock
|
(43,508
|
)
|
|
—
|
|
||
Exercise of common stock options
|
6,362
|
|
|
82
|
|
||
Taxes withheld upon vesting of restricted stock units
|
(8,478
|
)
|
|
(22,235
|
)
|
||
Share-based compensation
|
4,875
|
|
|
13,901
|
|
||
Total InterDigital, Inc. shareholders’ equity end of period
|
$
|
1,000,591
|
|
|
$
|
820,101
|
|
Noncontrolling Interest Balance beginning of period, December 31
|
17,881
|
|
|
14,659
|
|
||
Net loss attributable to noncontrolling interest
|
(3,423
|
)
|
|
(2,744
|
)
|
||
Noncontrolling interest
|
14,458
|
|
|
11,915
|
|
||
Total Equity end of period
|
$
|
1,015,049
|
|
|
$
|
832,016
|
|
2018
|
Per Share
|
|
Total
|
|
Cumulative by Fiscal Year
|
||||||
First quarter
|
$
|
0.35
|
|
|
$
|
12,124
|
|
|
$
|
12,124
|
|
Second quarter
|
$
|
0.35
|
|
|
$
|
12,192
|
|
|
$
|
24,316
|
|
Third quarter
|
0.35
|
|
|
11,996
|
|
|
36,312
|
|
|||
|
$
|
1.05
|
|
|
$
|
36,312
|
|
|
|
||
|
|
|
|
|
|
||||||
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 September 30, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money market and demand accounts (a)
|
$
|
415,614
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
415,614
|
|
Commercial paper (b)
|
—
|
|
|
131,987
|
|
|
—
|
|
|
131,987
|
|
||||
U.S. government securities
|
—
|
|
|
328,440
|
|
|
—
|
|
|
328,440
|
|
||||
Corporate bonds, asset backed and other securities
|
—
|
|
|
198,251
|
|
|
—
|
|
|
198,251
|
|
||||
Total
|
$
|
415,614
|
|
|
$
|
658,678
|
|
|
$
|
—
|
|
|
$
|
1,074,292
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration resulting from the Technicolor Acquisition
|
—
|
|
|
—
|
|
|
18,616
|
|
|
$
|
18,616
|
|
|||
Long-term debt resulting from the Technicolor Acquisition
|
—
|
|
|
—
|
|
|
18,107
|
|
|
$
|
18,107
|
|
|||
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
36,723
|
|
|
$
|
36,723
|
|
|
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)
|
Primarily included within cash and cash equivalents.
|
(b)
|
Includes
$109.2 million
and
$15.7 million
of commercial paper that is included within cash and cash equivalents as of September 30, 2018 and December 31, 2017, respectively.
|
Significant Unobservable Input
|
Ranges
|
Discount rate for revenue
|
14.5%
|
Projected term of arrangement
|
2018 - 2030
|
Level 3 Fair Value Measurements
|
|
|
|
|
|
|
||
|
|
|
Contingent Consideration Liability
|
|
|
Technicolor Acquisition
Long-term Debt
|
||
Balance as of December 31, 2017
|
|
$
|
—
|
|
|
$
|
—
|
|
Technicolor Acquisition - July 30, 2018
|
|
|
18,616
|
|
|
|
17,717
|
|
Reduction for payments
|
|
|
—
|
|
|
|
—
|
|
Interest expense accretion
|
|
|
—
|
|
|
|
390
|
|
Changes in fair value recognized in the condensed consolidated statements of income
|
|
|
—
|
|
|
|
—
|
|
Balance as of September 30, 2018
|
|
$
|
18,616
|
|
|
$
|
18,107
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||||||||||
|
Principal
Amount
|
|
Carrying
Value
|
|
Fair
Value
|
|
Principal
Amount
|
|
Carrying
Value |
|
Fair
Value
|
||||||||||||
Total Senior Convertible Long-Term Debt
|
$
|
316,000
|
|
|
$
|
295,420
|
|
|
$
|
371,300
|
|
|
$
|
316,000
|
|
|
$
|
285,126
|
|
|
$
|
377,029
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Principal
|
$
|
316,000
|
|
|
$
|
316,000
|
|
Less:
|
|
|
|
||||
Unamortized interest discount
|
(18,611
|
)
|
|
(27,863
|
)
|
||
Deferred financing costs
|
(1,969
|
)
|
|
(3,011
|
)
|
||
Net carrying amount of 2020 Notes
|
$
|
295,420
|
|
|
$
|
285,126
|
|
|
For the Three Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Contractual coupon interest
|
$
|
1,185
|
|
|
$
|
1,185
|
|
Accretion of debt discount
|
3,124
|
|
|
2,947
|
|
||
Amortization of deferred financing costs
|
347
|
|
|
348
|
|
||
Total
|
$
|
4,656
|
|
|
$
|
4,480
|
|
|
For the Nine Months Ended September 30,
|
||||||
|
2018
|
|
2017
|
||||
Contractual coupon interest
|
$
|
3,555
|
|
|
$
|
3,555
|
|
Accretion of debt discount
|
9,252
|
|
|
8,710
|
|
||
Amortization of deferred financing costs
|
1,042
|
|
|
1,043
|
|
||
Total
|
$
|
13,849
|
|
|
$
|
13,308
|
|
|
|
As of
July 30, 2018
|
|
|
Cash
|
$
|
158,898
|
|
|
Contingent consideration liability
|
|
18,616
|
|
|
|
$
|
177,514
|
|
`
|
Less: Transaction-related receivable
|
|
(20,200
|
)
|
|
Net fair value of consideration transferred
|
$
|
157,314
|
|
|
|
|
|
|
|
Allocation:
|
|
|
Estimated useful life (Years)
|
|
Net tangible assets and liabilities:
|
|
|
|
|
Restricted cash
|
$
|
15,913
|
|
|
Other current assets
|
|
5,600
|
|
|
Other non-current assets
|
|
3,116
|
|
|
Current liabilities
|
|
(6,219
|
)
|
|
Long-term debt
|
|
(17,717
|
)
|
|
Other long-term liabilities
|
|
(3,767
|
)
|
|
Total net tangible assets and liabilities
|
$
|
(3,074
|
)
|
|
|
|
|
|
|
Identified intangible assets:
|
|
|
|
|
Patents
(1)
|
$
|
154,000
|
|
9 - 10
|
Goodwill
(2)
|
|
6,388
|
|
|
Total identified intangible assets
|
$
|
160,388
|
|
|
|
|
|
|
|
Total fair value of consideration transferred
|
$
|
157,314
|
|
|
Goodwill balance as of December 31, 2017
|
|
$
|
16,033
|
|
Technicolor Acquisition
|
|
|
6,388
|
|
Goodwill balance as of September 30, 2018
|
|
$
|
22,421
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||
|
September 30,
|
|
September 30,
|
||||||||||
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
Actual revenue
|
$
|
75,079
|
|
$
|
97,325
|
|
|
$
|
232,078
|
|
$
|
327,634
|
|
Supplemental pro forma revenue
|
$
|
76,034
|
|
$
|
100,391
|
|
|
$
|
238,761
|
|
$
|
335,229
|
|
|
|
|
|
|
|
|
|
|
|
||||
Actual earnings
|
$
|
21,407
|
|
$
|
35,536
|
|
|
$
|
62,038
|
|
$
|
121,791
|
|
Supplemental pro forma earnings
|
$
|
22,539
|
|
$
|
29,621
|
|
|
$
|
54,404
|
|
$
|
97,303
|
|
|
|
|
|
|
|
|
|
|
|
||||
Actual diluted earnings per share
|
$
|
0.60
|
|
$
|
1.00
|
|
|
$
|
1.74
|
|
$
|
3.40
|
|
Supplemental pro forma diluted earnings per share
|
$
|
0.63
|
|
$
|
0.84
|
|
|
$
|
1.53
|
|
$
|
2.71
|
|
|
September 30,
|
|
December 31,
|
||||||||||||
|
2018
|
|
|
2017
|
|
2017
|
|
2016
|
|||||||
Cash and cash equivalents
|
$
|
508,829
|
|
|
$
|
283,557
|
|
|
$
|
433,014
|
|
|
$
|
404,074
|
|
Restricted cash included within prepaid and other current assets
|
|
15,942
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total cash, cash equivalents and restricted cash
|
$
|
524,771
|
|
|
$
|
283,557
|
|
|
$
|
433,014
|
|
|
$
|
404,074
|
|
•
|
discrete net benefits of $14.7 million primarily related to an anticipated refund that the Company expects to receive from amending tax returns for tax years covered by the Competent Authority Proceeding discussed in Note 2, “
Income Taxes
,” in the
Notes to Condensed Consolidated Financial Statements
included in Part I, Item 1 of this Quarterly Report on Form 10-Q;
|
•
|
an aggregate $8.4 million loss recognized during third quarter 2018 related to the sale of our entire ownership interest in one of our strategic investments and the impairment of a separate strategic investment;
|
•
|
$5.4 million
of transaction and integration costs related to the Technicolor Acquisition; and
|
•
|
as discussed above, assuming we had not adopted ASC 606, we would have recognized
$16.3 million
of additional revenue and
$4.0 million
less interest expense in
third quarter 2018
, which after taxes would have resulted in
$13.6 million
of additional net income for the
three months ended September 30,
2018. For the
nine months ended September 30,
2018, we would have recognized
$54.8 million
of additional revenue and
$13.0 million
less interest expense, which after taxes would have resulted in
$52.2 million
of additional net income.
|
|
September 30, 2018
|
|
December 31, 2017
|
|
Increase /
(Decrease)
|
||||||
Cash and cash equivalents
|
$
|
508,829
|
|
|
$
|
433,014
|
|
|
$
|
75,815
|
|
Restricted cash included within prepaid and other current assets
|
15,942
|
|
|
—
|
|
|
15,942
|
|
|||
Short-term investments
|
549,521
|
|
|
724,981
|
|
|
(175,460
|
)
|
|||
Total cash, cash equivalents, restricted cash and short-term investments
|
$
|
1,074,292
|
|
|
$
|
1,157,995
|
|
|
$
|
(83,703
|
)
|
|
For the Nine Months Ended September 30,
|
||||||||||
|
2018
|
|
2017
|
|
Increase /
(Decrease)
|
||||||
Net cash provided by operating activities
|
$
|
176,617
|
|
|
$
|
98,341
|
|
|
$
|
78,276
|
|
|
For the Nine Months Ended September 30,
|
||||||||||
|
2018
|
|
2017
|
|
Increase / (Decrease)
|
||||||
Cash Receipts:
|
|
|
|
|
|
||||||
Patent royalties
|
$
|
252,783
|
|
|
$
|
229,785
|
|
|
$
|
22,998
|
|
Technology solutions
|
9,306
|
|
|
14,325
|
|
|
(5,019
|
)
|
|||
Total cash receipts
|
$
|
262,089
|
|
|
$
|
244,110
|
|
|
$
|
17,979
|
|
|
|
|
|
|
|
||||||
Cash Outflows:
|
|
|
|
|
|
||||||
Cash operating expenses
a
|
121,429
|
|
|
115,133
|
|
|
6,296
|
|
|||
Income taxes paid
b
|
24,459
|
|
|
29,173
|
|
|
(4,714
|
)
|
|||
Total cash outflows
|
145,888
|
|
|
144,306
|
|
|
1,582
|
|
|||
|
|
|
|
|
|
||||||
Other working capital adjustments
|
60,416
|
|
|
(1,463
|
)
|
|
61,879
|
|
|||
|
|
|
|
|
|
||||||
Cash flows provided by (used in) operating activities
|
$
|
176,617
|
|
|
$
|
98,341
|
|
|
$
|
78,276
|
|
|
September 30,
2018 |
|
December 31, 2017
|
|
Increase / (Decrease)
|
||||||
Current assets
|
$
|
1,190,912
|
|
|
$
|
1,395,794
|
|
|
$
|
(204,882
|
)
|
Less
: current liabilities
|
293,552
|
|
|
376,441
|
|
|
(82,889
|
)
|
|||
Working capital
|
897,360
|
|
|
1,019,353
|
|
|
(121,993
|
)
|
|||
Subtract:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
508,829
|
|
|
433,014
|
|
|
75,815
|
|
|||
Short-term investments
|
549,521
|
|
|
724,981
|
|
|
(175,460
|
)
|
|||
Add:
|
|
|
|
|
|
||||||
Current deferred revenue
|
134,197
|
|
|
307,142
|
|
|
(172,945
|
)
|
|||
Adjusted working capital
|
$
|
(26,793
|
)
|
|
$
|
168,500
|
|
|
$
|
(195,293
|
)
|
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 September 30,
|
|
|
|
|
|
Components of
Increase/(Decrease)
|
|||||||||||||||||
|
2018
|
|
2017
|
|
Total Increase/(Decrease)
|
|
Due to ASC 606
|
Operational
|
Total
|
|||||||||||||||
Variable patent royalty revenue
|
$
|
13,645
|
|
|
$
|
10,081
|
|
|
$
|
3,564
|
|
|
35
|
%
|
|
$
|
5,242
|
|
$
|
(1,678
|
)
|
$
|
3,564
|
|
Fixed-fee royalty revenue
|
60,272
|
|
|
73,653
|
|
|
(13,381
|
)
|
|
(18
|
)%
|
|
(20,309
|
)
|
6,928
|
|
(13,381
|
)
|
||||||
Current patent royalties (a)
|
73,917
|
|
|
83,734
|
|
|
(9,817
|
)
|
|
(12
|
)%
|
|
(15,067
|
)
|
5,250
|
|
(9,817
|
)
|
||||||
Non-current patent royalties (b)
|
128
|
|
|
8,832
|
|
|
(8,704
|
)
|
|
(99
|
)%
|
|
—
|
|
(8,704
|
)
|
(8,704
|
)
|
||||||
Total patent royalties
|
74,045
|
|
|
92,566
|
|
|
(18,521
|
)
|
|
(20
|
)%
|
|
(15,067
|
)
|
(3,454
|
)
|
(18,521
|
)
|
||||||
Current technology solutions revenue (a)
|
1,034
|
|
|
4,759
|
|
|
(3,725
|
)
|
|
(78
|
)%
|
|
(1,197
|
)
|
(2,528
|
)
|
(3,725
|
)
|
||||||
Total revenue
|
$
|
75,079
|
|
|
$
|
97,325
|
|
|
$
|
(22,246
|
)
|
|
(23
|
)%
|
|
$
|
(16,264
|
)
|
$
|
(5,982
|
)
|
$
|
(22,246
|
)
|
(a)
|
Recurring revenues consist of current patent royalties, inclusive of Dynamic Fixed-Fee Agreement royalties, and current technology solutions revenue.
|
(b)
|
Non-current patent royalties for the three months ended
September 30, 2018
consist of past patent royalties and royalties from static agreements. For the three months ended
September 30, 2017
, non-current patent royalties consist of past patent royalties.
|
|
For the Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Increase/(Decrease)
|
|||||||||
Patent administration and licensing
|
$
|
32,077
|
|
|
$
|
26,517
|
|
|
$
|
5,560
|
|
|
21
|
%
|
Development
|
17,276
|
|
|
17,293
|
|
|
(17
|
)
|
|
—
|
%
|
|||
Selling, general and administrative
|
12,806
|
|
|
12,640
|
|
|
166
|
|
|
1
|
%
|
|||
Total operating expenses
|
$
|
62,159
|
|
|
$
|
56,450
|
|
|
$
|
5,709
|
|
|
10
|
%
|
|
Increase/
(Decrease)
|
||
Technicolor Acquisition-related costs
|
$
|
11,540
|
|
Other
|
(1,204
|
)
|
|
Consulting services
|
(1,852
|
)
|
|
Performance-based incentive compensation
|
(1,484
|
)
|
|
Personnel-related costs
|
(1,291
|
)
|
|
Total increase in operating expenses
|
$
|
5,709
|
|
|
For the Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
Interest expense
|
$
|
(9,039
|
)
|
|
$
|
(4,480
|
)
|
|
$
|
(4,559
|
)
|
|
(102
|
)%
|
Other
|
(8,654
|
)
|
|
130
|
|
|
(8,784
|
)
|
|
6,757
|
%
|
|||
Interest and investment income
|
3,740
|
|
|
2,163
|
|
|
1,577
|
|
|
73
|
%
|
|||
|
$
|
(13,953
|
)
|
|
$
|
(2,187
|
)
|
|
$
|
(11,766
|
)
|
|
(538
|
)%
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
|
Components of
Increase/(Decrease)
|
|||||||||||||||||
|
2018
|
|
2017
|
|
Total Increase/(Decrease)
|
|
Due to ASC 606
|
Operational
|
Total
|
|||||||||||||||
Variable patent royalty revenue
|
$
|
26,322
|
|
|
$
|
37,338
|
|
|
$
|
(11,016
|
)
|
|
(30
|
)%
|
|
$
|
466
|
|
$
|
(11,482
|
)
|
$
|
(11,016
|
)
|
Fixed-fee royalty revenue
|
178,207
|
|
|
220,083
|
|
|
(41,876
|
)
|
|
(19
|
)%
|
|
(60,081
|
)
|
18,205
|
|
(41,876
|
)
|
||||||
Current patent royalties (a)
|
204,529
|
|
|
257,421
|
|
|
(52,892
|
)
|
|
(21
|
)%
|
|
(59,615
|
)
|
6,723
|
|
(52,892
|
)
|
||||||
Non-current patent royalties (b)
|
25,489
|
|
|
56,692
|
|
|
(31,203
|
)
|
|
(55
|
)%
|
|
10,000
|
|
(41,203
|
)
|
(31,203
|
)
|
||||||
Total patent royalties
|
230,018
|
|
|
314,113
|
|
|
(84,095
|
)
|
|
(27
|
)%
|
|
(49,615
|
)
|
(34,480
|
)
|
(84,095
|
)
|
||||||
Current technology solutions revenue (a)
|
2,060
|
|
|
13,521
|
|
|
(11,461
|
)
|
|
(85
|
)%
|
|
(5,232
|
)
|
(6,229
|
)
|
(11,461
|
)
|
||||||
Total revenue
|
$
|
232,078
|
|
|
$
|
327,634
|
|
|
$
|
(95,556
|
)
|
|
(29
|
)%
|
|
$
|
(54,847
|
)
|
$
|
(40,709
|
)
|
$
|
(95,556
|
)
|
(a)
|
Recurring revenues consist of current patent royalties, inclusive of Dynamic Fixed-Fee Agreement royalties, and current technology solutions revenue.
|
(b)
|
Non-current patent royalties for the nine months ended
September 30, 2018
consist of past patent royalties and royalties from static agreements. For the nine months ended
September 30, 2017
, non-current patent royalties consist of past patent royalties.
|
|
For the Nine Months Ended September 30,
|
|
|
|||||||||||
|
2018
|
|
2017
|
|
Increase/(Decrease)
|
|||||||||
Patent administration and licensing
|
$
|
85,480
|
|
|
$
|
76,629
|
|
|
$
|
8,851
|
|
|
12
|
%
|
Development
|
49,279
|
|
|
56,172
|
|
|
(6,893
|
)
|
|
(12
|
)%
|
|||
Selling, general and administrative
|
38,569
|
|
|
39,042
|
|
|
(473
|
)
|
|
(1
|
)%
|
|||
Total operating expenses
|
$
|
173,328
|
|
|
$
|
171,843
|
|
|
$
|
1,485
|
|
|
1
|
%
|
|
Increase/(Decrease)
|
||
Technicolor Acquisition-related costs
|
$
|
15,261
|
|
Intellectual property enforcement and non-patent litigation
|
4,227
|
|
|
Depreciation and amortization
|
1,598
|
|
|
Performance-based incentive compensation
|
(6,781
|
)
|
|
Consulting services
|
(4,789
|
)
|
|
Personnel-related costs
|
(3,817
|
)
|
|
Commercial initiatives
|
(1,701
|
)
|
|
Patent maintenance
|
(1,438
|
)
|
|
Other
|
(1,075
|
)
|
|
Total increase in operating expenses
|
$
|
1,485
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
Interest expense
|
$
|
(27,242
|
)
|
|
$
|
(13,308
|
)
|
|
$
|
(13,934
|
)
|
|
(105
|
)%
|
Other
|
(8,907
|
)
|
|
26
|
|
|
(8,933
|
)
|
|
(34,358
|
)%
|
|||
Interest and investment income
|
11,013
|
|
|
5,951
|
|
|
5,062
|
|
|
85
|
%
|
|||
|
$
|
(25,136
|
)
|
|
$
|
(7,331
|
)
|
|
$
|
(17,805
|
)
|
|
(243
|
)%
|
•
|
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 dynamic fixed-fee royalty payments will reduce our
September 30, 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 September 30, 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;
|
•
|
Our expectations with respect to anticipated tax refunds to be received from amending certain tax returns;
|
•
|
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 expectations with respect to the impact of the Technicolor Acquisition on our financial statements and our business;
|
•
|
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; and
|
•
|
Our expectation that we will continue to pay dividends comparable to our quarterly
$0.35
per share cash dividend in the future.
|
•
|
failure of the acquisition to materially increase the value of our core handset licensing business by not increasing the royalty amount we would otherwise derive on each handset, not accelerating the pace of licensing, or not allowing us to avoid litigation to protect our intellectual property;
|
•
|
unexpected costs and strain on our resources and potential distraction of management arising from our attempts at integrating the businesses;
|
•
|
difficulties integrating the patent portfolios and related portfolio management systems of the businesses, or migrating the portfolios to a new patent management system, and the risk that the patent assets could be negatively impacted;
|
•
|
failure to continue to develop and expand our portfolio of video technology patent assets;
|
•
|
failure to develop a successful business plan and licensing program related to consumer electronics;
|
•
|
difficulties integrating the personnel of the Technicolor business into our operations, organization, and human resources programs, and the risk that we could lose key employees;
|
•
|
challenges associated with managing a geographically remote business;
|
•
|
failure to accurately forecast the long-term value and costs of the Technicolor business or of certain assets acquired in the transaction;
|
•
|
liabilities that are not covered by, or exceed the coverage under, the indemnification or other provisions of the acquisition-related agreements; and
|
•
|
patent validity, infringement or enforcement issues not uncovered during our diligence process.
|
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)
|
||||||
July 1, 2018 - July 31, 2018
|
83,900
|
|
|
$
|
81.54
|
|
|
83,900
|
|
|
$
|
162,562,816
|
|
August 1, 2018 - August 31, 2018
|
153,799
|
|
|
$
|
81.37
|
|
|
153,799
|
|
|
$
|
150,044,482
|
|
September 1, 2018 - September 30, 2018
|
186,517
|
|
|
$
|
80.26
|
|
|
186,517
|
|
|
$
|
135,070,343
|
|
Total
|
424,216
|
|
|
$
|
80.92
|
|
|
424,216
|
|
|
$
|
135,070,343
|
|
Exhibit
Number
|
|
Exhibit Description
|
10.1*
|
|
|
|
|
|
10.2*
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
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 September 30, 2018, filed with the Securities and Exchange Commission on November 1, 2018, formatted in eXtensible Business Reporting Language:
|
|
|
|
|
|
(i) Condensed Consolidated Balance Sheets at September 30, 2018 and December 31, 2017, (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and 2017, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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: November 1, 2018
|
/s/ WILLIAM J. MERRITT
|
|
|
William J. Merritt
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
Date: November 1, 2018
|
/s/ RICHARD J. BREZSKI
|
|
|
Richard J. Brezski
|
|
|
Chief Financial Officer
|
|
Vesting Schedule:
|
The Award vests on ________________________________, if at all, subject to Participant continuing to be a Service Provider through such date, provided that the Award may vest earlier pursuant to the Standard Terms and Conditions (the date on which all or a portion of the Award vests, the “Vesting Date”).
|
Pro-rated Vesting:
|
If Participant’s employment is terminated by the Company or any Parent, Subsidiary, or Affiliate of the Company (as applicable, the “Employer”) without Cause or by reason of Participant’s death or Disability, the Award will become cumulatively vested as to a prorated portion, subject to Participant’s execution of a release of claims in favor of the Company within 60 days following termination of employment, except that no release is required for a termination of Participant’s employment due to death or Disability. Such pro-rata portion will be determined by multiplying the total number of Restricted Stock Units by the fraction equal to the number of days during the period beginning on the Grant Date and ending on the original Vesting Date (the “Restricted Period”) for which Participant was employed by the Employer divided by the total number of days during the Restricted Period.
|
Accelerated Vesting:
|
If Participant’s employment is terminated within 1 year following a Change in Control, either by the Employer other than for Cause, death, or Disability or by Participant for Good Reason, 100% of the then-unvested portion of the Award will vest upon termination, subject to
|
Vesting Schedule:
|
The Award vests ___________________________________, if at all, subject to Participant continuing to be a Service Provider through such date and the achievement, as certified by the Compensation Committee of the Board, of the performance goals and parameters set forth in the Standard Terms and Conditions and
Exhibit A
attached thereto, provided that the Award may vest earlier pursuant to the Standard Terms and Conditions (the date on which all or a portion of the Award vests, the “Vesting Date”).
|
Pro-rated Vesting:
|
If Participant’s employment is terminated by the Company or any Parent, Subsidiary, or Affiliate of the Company (as applicable, the “Employer”) without Cause or by reason of Participant’s death or Disability, in each case, after the second anniversary of the Grant Date, the Award will be eligible to vest as to a prorated portion, subject to Participant’s execution of a release of claims in favor of the Company within 60 days following termination of employment, except that no release is required for a termination of Participant’s employment due to death or Disability. Such pro-rata portion will be determined by multiplying the number of Restricted Stock Units that would have otherwise become vested according to the performance goals and parameters set forth in the Standard Terms and Conditions and
Exhibit A
attached thereto (based on actual performance over the performance period), if any, by the fraction equal to the number of days during the period beginning on the Grant Date and ending on the Vesting Date (the “Restricted Period”) for which Participant was employed by the Employer divided by the total number of days during the Restricted Period.
|
Accelerated Vesting:
|
If Participant’s employment is terminated within 1 year following a Change in Control, either by the Employer other than for Cause, death, or Disability or by Participant for Good Reason, 100% of the then-unvested portion of the Award will vest upon termination, subject to Participant’s execution of a release of claims in favor of the Company within 60 days following termination of employment.
|
Vesting Schedule:
|
The Option vests as follows, subject to Participant continuing to be a Service Provider through each vesting date, provided that the Option may vest earlier pursuant to the Standard Terms and Conditions.
|
Vest Date
|
Number of Options Vesting
|
___________________________________
|
___________________________________
|
___________________________________
|
___________________________________
|
___________________________________
|
___________________________________
|
Pro-rated Vesting:
|
If Participant’s employment is terminated by the Company or any Parent, Subsidiary, or Affiliate of the Company (as applicable, the “Employer”) without Cause or by reason of Participant’s death or Disability, the Option will vest as to a prorated portion, subject to Participant’s execution of a release of claims in favor of the Company within 60 days following termination of employment, except that no release is required for a termination of Participant’s employment due to death or Disability. Such pro-rata portion will be determined by multiplying the total number of shares subject to the then-unvested portion of the Option by the fraction equal to the number of days during the period beginning on the later of the Grant Date or the most recent vesting date and ending on the third anniversary of the Grant Date (the “Restricted Period”) for which Participant was employed by the Employer divided by the total number of days during the Restricted Period.
|
Accelerated Vesting:
|
If Participant’s employment is terminated within 1 year following a Change in Control, either by the Employer other than for Cause, death, or Disability or by Participant for Good Reason, 100% of the then‑unvested portion of the Option will vest upon termination, subject to Participant’s execution of a release of claims in favor of the Company within 60 days following termination of employment.
|
Termination Period:
|
This Option will be exercisable for 6 months after Participant ceases to be a Service Provider for any reason other than termination of Participant’s Service Provider status for Cause, unless such termination is due to Participant’s death or Disability, in which case this Option will be exercisable for 12 months after Participant ceases to be a Service Provider; provided, however, that if Participant dies during such 6-month post-termination exercise period, the Option may be exercised following Participant’s death for 12 months after Participant’s death. If Participant’s Service Provider status is terminated by the Company for Cause, the entire Option, whether or not then vested and exercisable, will be immediately forfeited and canceled as of the date of such termination. Notwithstanding the foregoing sentence, in no event may this Option be exercised after the Expiration Date listed above and may be subject to earlier termination as provided in Section 16(c) of the Plan.
|
•
|
Equity Vesting:
As provided in the applicable Plan and the Equity Award Agreements.
|
•
|
Salary Severance:
Your percentage of Base Salary will be 250%, payable in equal installments over 30 months in accordance with the Company’s regular payroll procedures.
|
•
|
Bonus Severance:
None.
|
•
|
COBRA Payment:
18 months.
|
•
|
Outplacement Services
: Yes.
|
•
|
Equity Vesting:
As provided in the applicable Plan and the Equity Award Agreements.
|
•
|
Salary Severance:
Your percentage of Base Salary will be 300%, payable in lump-sum.
|
•
|
Bonus Severance:
100% of your target bonus under Company’s short-term incentive plan, payable in lump-sum.
|
•
|
COBRA Payment:
24 months.
|
•
|
Outplacement Services
: No.
|
•
|
Equity Vesting:
As provided in the applicable Plan and the Equity Award Agreements.
|
•
|
Salary Severance:
Your percentage of Base Salary will be 150%, payable in equal installments over 18 months in accordance with the Company’s regular payroll procedures.
|
•
|
Bonus Severance:
None.
|
•
|
COBRA Payment:
12 months.
|
•
|
Outplacement Services
: Yes.
|
•
|
Equity Vesting:
As provided in the applicable Plan and the Equity Award Agreements.
|
•
|
Salary Severance:
Your percentage of Base Salary will be 200%, payable in lump-sum.
|
•
|
Bonus Severance:
100% of your target bonus under Company’s short-term incentive plan, payable in lump-sum.
|
•
|
COBRA Payment:
24 months.
|
•
|
Outplacement Services
: No.
|
•
|
1/3 granted in time-based Restricted Stock Units (“RSUs”)
|
•
|
1/3 granted in performance-based RSUs
|
•
|
1/3 granted in performanc-based options
|
•
|
Verification of your right to work in the United States, as demonstrated by your completion of the I-9 form upon hire and your submission of acceptable documentation (as noted on the I-9 form) verifying your identity and work authorization within three days of starting employment.
|
•
|
Your completion of the attached
Export Control Questionnaire
and, if required by law, InterDigital’s obtaining an export license prior to your start of employment. US export control laws require InterDigital to obtain an export license prior to providing controlled technologies to certain foreign nationals. As an employee of InterDigital, you may have access to controlled technologies. The attached Exports Controls Questionnaire contains questions that will allow us to assess your country of chargeability for export control screening purposes only. If an export license is required prior to your employment at InterDigital, we will let you know immediately. The decision whether or not to file and/or pursue an export license is at InterDigital’s sole discretion.
|
•
|
Your execution of our
Non-Disclosure and Assignment of Ideas Agreement (“NDAIA”)
. During your employment with InterDigital, you will have access to confidential and proprietary information, therefore, in order to have access to such information, you are required to sign our NDAIA. A copy of the NDAIA is enclosed for your review.
|
•
|
Your acknowledgment of InterDigital’s
Code of Ethics
. A copy of the Code of Ethics is enclosed for your review.
|
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: November 1, 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: November 1, 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: November 1, 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: November 1, 2018
|
/s/ Richard J. Brezski
|
|
|
Richard J. Brezski
|
|
|
Chief Financial Officer
|
|