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InterDigital's (IDCC) Q1 Earnings Beat on Higher Revenues

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InterDigital, Inc. (IDCC - Free Report) reported solid first-quarter 2020 results, wherein both top and bottom lines surpassed the respective Zacks Consensus Estimate. Higher revenues generated from new licensing avenues highlighted the operating leverage of the company’s business model and reflected the strength of its licensing business.

Net Income

The company reported break-even earnings in the quarter against a net loss of $2.8 million or a loss of 9 cents per share in the year-ago quarter. The significant year-over-year improvement was largely attributable to higher revenues. The bottom line surpassed the consensus mark by 9 cents.

InterDigital Inc Price, Consensus and EPS Surprise

 

InterDigital Inc Price, Consensus and EPS Surprise

InterDigital Inc price-consensus-eps-surprise-chart | InterDigital Inc Quote

Revenues

The wireless R&D company’s revenues totaled $76.2 million, up from $68.6 million in the year-earlier quarter. The top line surpassed the Zacks Consensus Estimate of $75 million. The increase was primarily due to new license agreements signed in the quarter.

Recurring revenues during the reported quarter were $75.5 million compared with $74.2 million a year ago. While revenues from patent royalties came in at $73 million, the same from current technology solutions totaled $3.2 million.

Other Details

Total operating expenses were $71.5 million, up from $68.8 million in the prior-year quarter due to intellectual property enforcement and non-patent litigation costs. Operating income was $4.7 million against operating loss of $0.2 million a year ago.

Cash Flow and Liquidity

During the first quarter, InterDigital utilized $26.9 million of cash for operating activities compared with cash utilization of $30.8 million in the year-ago quarter. As of Mar 31, 2020, the company had $780.9 million in cash and short-term investments along with $398.8 million of long-term debt and other liabilities.

Outlook

With solid licensing agreements with leading consumer electronics customers in the reported quarter, InterDigital is eyeing a healthy licensing business despite the coronavirus-induced pandemonium. The company remains relatively immune to the adverse economic effects of the virus outbreak as fixed priced agreements make up for more than 90% of revenues.

InterDigital remains poised to gain from growth opportunities from 5G rollout. For second-quarter 2020, the company expects revenues in the range of $97-$105 million owing to new licensing agreements inked with Huawei.

Zacks Rank & Other Stocks to Consider

InterDigital currently sports a Zacks Rank #1 (Strong Buy).

Some other favorably-ranked stocks in the broader industry are Ericsson (ERIC - Free Report) , Airgain, Inc. (AIRG - Free Report) and PCTEL Inc (PCTI - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ericsson has a long-term earnings growth expectation of 25.9%.

Airgain delivered a positive earnings surprise of 87.5%, on average, in the trailing four quarters.

PCTEL delivered a positive earnings surprise of 108.9%, on average, in the trailing four quarters.

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