Expansion of Customer Relationships Drives Strong Revenue Growth and Profitability
KING OF PRUSSIA, Pa. — (BUSINESS WIRE) — July 28, 2010 — InterDigital, Inc. (NASDAQ: IDCC) today announced results for the second quarter ended June 30, 2010.
Highlights for second quarter 2010:
William J. Merritt, InterDigital’s President and Chief Executive Officer, commented, “We continue to show strong growth in revenues and profitability in the second quarter, driven by new customer agreements and continued strong sales by our customers. Our addition of Capital Semiconductor as a customer for our SlimChip™ core reinforces the strength of this market-ready technology, and opens the possibility of new revenue streams.”
“We expect to continue our strong financial performance as we further expand our base of customers. In particular, we are focusing on expanding our customer base for LTE technology. We have made significant contributions to the worldwide standards bodies in several key areas of LTE technology, including power control, bandwidth on-demand, interference reduction and higher data throughput. These areas are central to the user experience and key to unlocking the potential of wireless communications,” continued Mr. Merritt. “With our pioneering wireless technologies, InterDigital continues to be a leader in building innovative solutions, benefiting users, device manufacturers and operators worldwide.”
Second Quarter Summary
Net income for second quarter 2010 totaled $35.0 million, or $0.78 per diluted share, an increase of 32 percent over second quarter 2009 net income of $26.4 million, or $0.59 per diluted share. Contributions from several new customers including Casio Hitachi Mobile Communications (“CHMC”), Pantech, Cinterion, Enfora, Beceem, and Capital Semiconductor (“CapiSemi”) as well as higher sales by nearly all of our existing per-unit licensees drove higher profitability in the quarter.
Total revenue in second quarter 2010 of $91.2 million, increased 22 percent from $74.9 million reported in second quarter 2009. Patent licensing royalties of $85.1 million increased $12.4 million, or 17 percent, over $72.7 million in second quarter 2009 driven by new agreements signed subsequent to second quarter 2009, the renewal of a patent license agreement in second quarter 2010, which contributed to both per-unit royalties and past sales, and higher sales by nearly all of our existing per-unit licensees. Technology solutions revenue in second quarter 2010 of $6.1 million more than doubled from $2.2 million in second quarter 2009 due to contributions from customers added during first half 2010, Beceem and CapiSemi, as well as customer sales of products containing the company’s SlimChip modem core platform. Customers that accounted for ten percent or more of the $91.2 million of second quarter 2010 total revenue were Samsung (28 percent) and LG Electronics (16 percent).
Second quarter 2010 operating expenses of $38.1 million increased by $3.4 million, or 10 percent, over $34.7 million reported in second quarter 2009. Total operating expenses in second quarter 2010 included a cumulative charge of $0.9 million to increase the accrual rate for a performance-based cash incentive under the company’s long-term compensation program (“LTCP”). The expectation for an increased payout under the LTCP relates to the addition of new revenue-producing agreements signed in second quarter 2010, and the charge covers the first two and one-quarter years of the three-year performance period ending December 31, 2010. In addition, expenses rose $4.1 million as a result of sublicense fees and other non-personnel expenses to support the technology transfer under the new agreements entered into during first half 2010, new research and development projects initiated in the last twelve months and an increase in costs associated with due diligence related to potential patent acquisition opportunities. These and other increases were offset by the lower level of intellectual property enforcement activity ($2.4 million in second quarter 2010 versus $5.6 million in second quarter 2009).
Net interest and investment income for second quarter 2010 totaled $0.9 million, an increase of 42 percent from $0.6 million in second quarter 2009. The increase was primarily due to higher investment balances in second quarter 2010 as compared to second quarter 2009.
The company’s second quarter 2010 effective tax rate was approximately 35 percent, level with second quarter 2009.
Six Months Summary
The company’s first half 2010 net income totaled $83.8 million, or $1.87
per diluted share, more than double first half 2009 pro forma net income1
of $41.8 million, or $0.93 per diluted share. The first half 2009 pro
forma results do not include a $37.0 million repositioning charge
incurred in first half 2009. This year-over-year increase in net income
was driven by revenue contributions from several new customers added
subsequent to second quarter 2009. On a GAAP-reported basis, first half
2009 net income totaled $17.8 million, or $0.39 per diluted share.