Note: EPS may not be comparable due to the company adopting a new revenue recognition standard (ASC 606)

InterDigital (NASDAQ: IDCC) reported Q1 EPS of $0.84, $0.60 better than the analyst estimate of $0.24. Revenue for the quarter came in at $87.44 million versus the consensus estimate of $69.69 million.

First Quarter 2018 Financial Highlights

• First quarter 2018 recurring revenue was $64.1 million. Under ASC 605, recurring revenue for first quarter 2018 would have been $91.6 million, compared to $94.5 million in 2017, primarily driven by the expiration of a technology solutions agreement. Recurring revenue consists of current patent royalties and current technology solutions revenue.
• First quarter 2018 total revenue was $87.4 million. Under ASC 605, total revenue for first quarter 2018 would have been $104.9 million, compared to $94.5 million in first quarter 2017.
• First quarter 2018 operating expenses decreased by $3.3 million to $57.3 million, compared to $60.6 million in first quarter 2017. Operating expenses were not affected by the adoption of ASC 606.
• First quarter 2018 includes a tax benefit of $4.9 million, for an effective tax rate benefit of 20.6%, compared to a tax benefit of $1.6 million, for an effective tax rate benefit of 5.2%, in first quarter 2017. The current period benefit was driven by:
  • the decrease in the U.S. corporate tax rate from 35% to 21% and the imposition of a 13.125% tax rate on income that qualifies as Foreign Derived Intangible Income ("FDII"), under the Tax Cuts and Jobs Act, effective January 1, 2018;
  • timing differences between the recognition of book and tax revenue that magnify the FDII impact in the current period; and
  • discrete tax benefits associated with the sale of a small commercial initiative and stock-based compensation.
• The company expects to report a negative effective tax rate for the full year, but expects its long-term tax rate will be in the range of approximately 14% to 15%. The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including timing differences between the recognition of book and tax revenue, the level of pre-tax income or loss, the foreign vs. domestic classification of the company’s customers, and any discrete items that may occur. The company further notes that its tax positions could be altered by pending IRS regulations that could clarify certain provisions of the Tax Cuts and Jobs Act.
• First quarter 2018 net income1 was $29.9 million, or $0.84 per diluted share. Under ASC 605, net income for first quarter 2018 would have been $46.1 million, or $1.29 per diluted share, compared to $33.8 million, or $0.93 per diluted share, in first quarter 2017.
• In first quarter 2018, the company recorded $0.6 million of cash used in operating activities, compared to $25.9 million of cash used in first quarter 2017. The company used $9.0 million of free cash flow2 in first quarter 2018, compared to $33.9 million of free cash flow used in first quarter 2017. These changes were primarily due to the timing of cash receipts under fixed-fee agreements. Ending cash and short-term investments totaled $1.1 billion.

For earnings history and earnings-related data on InterDigital (IDCC) click here.