Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $1,730,267,697$2,515,255,990 as of June 30, 2020.2023.

InterDigital, Inc. ("InterDigital") is a global research and development company that licenses its innovations to the globalfocused primarily on wireless, video, artificial intelligence ("AI"), and consumer electronics industries.related technologies. We design and develop advancedfoundational technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services. SinceWe license our foundinginnovations worldwide to companies providing such products and services, including makers of wireless communications devices, consumer electronics, IoT devices, cars and other motor vehicles and providers of cloud-based services such as video streaming. As a leader in 1972,wireless technology, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G and today, solutions that we believe will shape the world beyond 5G. With the acquisition of the patent licensing business of visual technology industry leader Technicolor SA ("Technicolor") in 2018 (the "Technicolor Patent Acquisition"), followed by the acquisition of their Research & Innovation unit in 2019 (the "R&I Acquisition" and, together with the Technicolor Patent Acquisition, the "Technicolor Acquisitions"), wetoday's most advanced Wi-Fi technologies. We are nowalso a leader in video processing and video encoding/decoding and display technology, with a significant Artificial Intelligence ("AI")AI research effort that intersects with both wireless and visualvideo technologies.

InterDigital is one of the largest pure research &and development and licensing companies in the world, with one of the most significant patent portfolios in theof fundamental wireless and video industries.technologies. As of December 31, 2020,2023, InterDigital's wholly owned subsidiaries held a portfolio of approximately 28,000more than 30,000 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to the wirelesscommunications and consumer electronics industries.entertainment products and services. Our portfolio includes numerous patents and patent applications that we believe are or may be essential to existing standards, or may become essential to future standards, established by many Standards Development Organizations ("SDOs"), including cellular and other wireless communications and video. We have contributed technology standards. Thoseto wireless standards includeincluding the 3G, 4G, and 5G cellular standards and the IEEE 802 suite of standards. We have contributed technology to video standards as well as patents and patent applications that we believe are or may become essential to 5G standards that currently exist and as they continue to develop. Our video technology portfolio includes patents and applications relating toincluding standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.

Our wireless portfolio has largely been built through internal development, supplemented by joint development projects with other companies, and select acquisitions of patents and companies. Products incorporating our patented inventions in wireless include: mobile devices, such as cellular phones, tablets, notebook computers and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; components, dongles and modules for wireless devices; and Internet of Things ("IoT") devices and software platforms. Our video technology portfolio largely representscombines patents and applications that InterDigital obtained through the acquisitions of the patent licensing business and research and innovation unit of visual technology industry leader Technicolor Patent Acquisition, supplementedSA and patents and applications created by internal development. Our patented inventions in video are incorporatedhave been implemented in a rangewide variety of products, including smartphones, other wireless communication devices and services, including cellular phones, notebook computers,infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles. In addition, our patented inventions have been implemented in a wide variety of services, such as video streaming and other consumer electronics.cloud-based services.

InterDigital derives revenues primarily from patent licensing with contributions from patent sales, product sales, technology solutions licensingour patented innovations. In 2023 and sales and engineering services. In 2020,2022, our total revenues were $359.0$549.6 million including recurring revenues of $336.8and $457.8 million, which consisted of current patent royalties and current technology solutions revenue. In 2019, our total revenues were $318.9 million, which consisted of recurring revenues of $298.2 million.respectively. Additional information about our revenues, profits and assets, as well as additional financial data, is provided in the Selected Financial Data in Part II, Item 6, and in the Consolidated Financial Statements and accompanying Notes in Part II, Item 8, of this Form 10-K.

To execute our strategy, we intend to:

InterDigital operates a diversified research and development operation, InterDigital Research & Innovation ("InterDigital R&I").    InterDigital R&I was created through the combination of InterDigital’s research team with Technicolor's R&I team that was acquired in the R&I Acquisition.    

We have a long history of developing cellular technologies, including those related to CDMA and TDMA and more recently, OFDM/OFDMA and MIMO. Many of our inventions are being used in all 2G, 3G, 4G and 5G wireless networks and mobile terminal devices. We also continue to be engaged in development efforts to build and enhance our 3GPP (as defined herein) technology portfolio in areasthe current and future generations including 5G, NR, Beyond 5G (B5G), Extended Reality (XR) over wireless,Advanced and cellular IoT. Further, we continue to develop additional technologies in response to existing or perceived challenges of connected devices in the expanding terminal markets.6G. The horizontal technologies we develop are essential forto support a variety of use cases across several vertical market segments that use connected devices such as automobiles and autonomous vehicles, wearables, smart factories and smart homes, robots, drones and many other connected consumer electronic products.products including mobile phones and tablets. We are developing evolutionary and revolutionary solutions that enable connectivity in both licensed and unlicensed spectrum, terrestrial and non-terrestrial networks to provide ubiquitous coverage, across a large range of frequencies up to the terahertz (THz) wave bands.

Our wireless research and development activities focus on solutions that apply to cellular wireless standards, including 3G, 4G and 5G technologies (sometimes referred to as "3GPP") and other wireless market segments. Segments outside of 3GPP primarily fall within the scope of the IEEE 802 IETF and ETSIIETF standards. We continue to grow a portfolio of technology related to Wi-Fi, Internet Standards, and Edge Computing, that includes, for example, improvements to the IEEE 802.11 PHY and MAC to increase peak data rates (802.11be - Extremely High Throughput), cloud gaming, security, and terminal mobility for edge and fog computing services.

The majority of our business, fairness and flexibility of our approach, and our willingness to work with licensees. In furtherance of this objective, in January 2020, we made publicly available our rates, portfolio data and licensing policies with regard to mobile handsets, potentially setting a new industry standard for transparency in licensing.

In third quarter 2016, InterDigital joined Avanci, the industry’s first marketplace for the licensing of cellular standards-essential technology for the IoT. The licensing platform brings together somemany of InterDigital’s peers in standards-essential technology leadership, and makes 2G, 3G, 4G, and 5G standards-essential patents available to IoT players in specific product segments with one flat-rate license. The Avanci licensing programs in specific product segments for the IoT industry will provide access to the entire applicable standards-essential wireless patent portfolios held by all of the platform participants, as well as any additions to their portfolios during the term of the license. Since December 2017, Avanci has announcedprimarily focused on the automotive market, and has signed patent license agreements with BMW Group, Audi, and Porsche, the Volkswagen, Group Companies and Volvo Cars.Cars, among others, collectively representing over 80% of annual connected car shipments.

The primary markets for our wireless and video technologies are the smartphone, consumer electronics, IoT/Automotive, and Video Services markets. The smartphone market, with an estimated 1.2 billion units shipped worldwide in 2023, is driven by several large, global brands. The market was relatively flat in 2023 due to a licensing program covering VP9broad economic slowdown in China and AV1 video coding formats, which we have agreedeconomic challenges globally, but smartphone sales began to join as a licensor.

In 2012, we formedaddition to smartphones there is a joint venturelarge universe of other consumer electronic devices and ecosystems, with Sony called Convida Wireless. The joint venture combined InterDigital's advanced M2M research capabilities with Sony's consumer electronics expertise with the purposea mix of driving new research in IoT communicationsmature and other connectivity areas. This joint venture was renewed in 2015 with its focus expanded to include advanced researchemerging, as well as consolidated and development into 5G and future wireless technologies, and further renewed in 2018 and is scheduled to expire at the end of 2021. As of December 31, 2020, Convida Wireless owned 2,100 patents and patent applications worldwide, which expire at different times ranging from 2021 through 2040.

IoT/Automotive is an important and relatively new market that is expected to result in a significant increase in the number of connected devices worldwide and unlock new business capabilities. AccordingTotal global cellular IoT device shipments are expected to Transforma Research, at the end of 2019, there were 7.7 billion active IoT devices, a figure which will grow to 25.4 billion in 2030, a compound annual growth rate (CAGR) of 11%. Public networks, which are dominated by cellular networks, will grow from 1.2 billion connectionsapproximately 400 million in 2023 to 6.0 billionapproximately 700 million by 2027. Automobiles represent a significant opportunity within the IoT market, with approximately 50 million connected vehicles shipped in 2030,2023, which is expected to grow significantly in the future.

Video Services, a rapidly growing market, share from 16% to 23%.

To achieve economies of scale and support interoperability among different participants, many wireless and consumer electronics products for the wireless industry have typically been designed to operate in accordance with certain industry standards. IndustryWireless industry standards are formal requirements and guidelines for engineers, designers, manufacturers and service providers that regulate and define the use of the radio frequency spectrum in conjunction with providing detailed specifications for wireless communications products. A primary goal of the standards is to ensure interoperability of products marketed by multiple companies. A large number of international and regionalNew wireless SDOs, including the ITU, ETSI, TIA (USA), IEEE, ATIS (USA), TTA (Korea), ARIB (Japan) and ANSI, have responsibility for the development and administration of wireless communications standards. New standards are typically adopted with each new generation of products, are often compatible with previous generations and are defined to ensure equipment interoperability and regulatory compliance. The consumer electronics industry also implements many of the same standards, including standards related to Wi-Fi and increasingly, cellular technologies, as well as a broad range of video coding standards that are governed by regionalenable the efficient transmission and global SDOs.rendering of video content.

SDOs, which facilitate and govern the development of standards, typically ask participating companies to declare formally whether they believe they hold patents or patent applications essential or potentially essential to a particular standard and whether they are willing to license those patents on either a royalty-bearing basis on fair, reasonable and nondiscriminatory terms or on a royalty-free basis. To manufacture, have made, sell, offer to sell or use such products on a non-infringing basis, a manufacturer or other entity doing so must firstneeds to obtain a license from the holder of essential patent rights. The SDOs do notneither have enforcement authority against entities that fail to obtain required licenses, nor do they have the ability to protect the intellectual property rights of holders of essential patents.

InterDigital often publicly characterizes aspects of its business, including license agreements and development projects, as pertaining to industry standardized technologies such as, for example, 3G, 4G, 5G, Wi-Fi, HEVC, and HEVC.VVC. In doing this, we generally rely on the positions of the applicable SDOs in defining the relevant standards. However, the definitions may evolve or change over time, including after we have characterized certain transactions.

During first quarter 2020,In 2023, we signed a multi-year, worldwide, non-exclusive, royalty bearing license with Lenovo, covering InterDigital’s HEVC patents (the "Lenovo HEVC PLA"). The new license resolved all related HEVC litigation at the time. We also entered into a multi-year, worldwide, non-exclusive, royalty bearing patent license agreement with Fairphone B.V. (“Fairphone”). The agreement covers Fairphone’s saleTCL Communication Technology Holdings, Ltd. covering InterDigital’s portfolio of its 3G and 4G handsets.patents.

In 2016,2022, we entered intorenewed a multi-year, royalty-bearing, worldwide and non-exclusive patent license agreement with Apple (the “Apple PLA”). The agreement sets forth terms covering the sale by Apple of its products and services, including, but not limited to, its 3G, 4G, and future generation5G cellular and wireless-enabled products. The Apple PLA provided Apple the right to terminate certain rights and obligations under the license for the period after September 30, 2021, but has the potential to provide a license to Apple for a total of up to six years. Apple did not elect to terminate such rights and obligations, and the period for such election has expired. Accordingly, the term of the Apple PLA ends onextends through September 30, 2022. During 2020, we recognized a total of $111.7 million of revenue associated with the Apple PLA under ASC 606.2029.

In 2014,2022, we entered into aagreed to renew our patent license agreement with Samsung (the “Samsung PLA”). The royalty-bearingand enter into binding arbitration to determine the final terms of the license, including the amount payable by Samsung under the new agreement. In 2023, we began recognizing revenue for Samsung at a conservative level consistent with the revenue we recognized from our patent license agreement sets forth terms covering the sale by Samsung of 3G, 4G and certain future generation wireless products. The Samsung PLA provided Samsung the right to terminate certain rights and obligations under the license for the period after 2017 but had the potential to provide a license to Samsung for a total of ten years, including 2013. Samsung did not elect to terminate such rights and obligations, and the period for such election has expired. Accordingly, the term of the Samsung PLA endsthat expired on December 31, 2022. During 2020,We believe that it is likely the arbitration award will exceed the conservative estimate and require a true-up at that time. We expect resolution in late 2024.

In 2021, we recognizedentered into a total of $78.3 million of revenue associatedmulti-year, worldwide, non-exclusive, royalty bearing license with the Samsung PLAXiaomi. The license covers Xiaomi’s cellular-enabled mobile devices under ASC 606.

From time to time, if we believe a party is required to license our patents in order to manufacture, use and/or sell certain products and such party refuses to do so, we may agree with such party to have royalty rates, or other terms, set by third party adjudicators (such as arbitrators) or, in certain circumstances, we may institute legal action against them. Enforcing our intellectual property through this mechanismlegal action is an important alternative to bilateral negotiations with respect to licensees who engage in the pernicious practice of "holdout". More recently,In recent years, courts in various jurisdictions have started to addressaddressed “holdout” behavior, by granting injunctions against unwilling licensees who would then no longer benefit from a rightrecognizing that fair, reasonable and non-discriminatory ("FRAND") obligations are bilateral and failure of implementers to act in a FRAND license.manner can result in certain penalties. We welcome this development as it incentivizes potential licensees to negotiate in a timely and reasonable fashion or risk losing their rightas well as providing a necessary balance to a FRAND royalty. negotiations.

Enforcement through this mechanismof our patent portfolio has typically taken the form of a patent infringement lawsuit or an administrative proceeding, such as a Section 337 proceeding before the U.S. International Trade Commission ("USITC" or the "Commission"). In a patent infringement lawsuit, we would typically seek damages for past infringement, and/or an injunction against future infringement.infringement, declaratory judgment and/or other relief. In a USITC proceeding, we would seek an exclusion order to bar infringing goods from entry into the United States, as well as a cease and desist order to bar further sales of infringing goods that have already been imported into the United States. Parties may bring administrative and/or judicial challenges to the validity, enforceability, essentiality and/or applicability of our patents to their products or seek to petition a court to establish a rate and/or terms for a license to our patents. Parties may also allege that our efforts to enter into a license with that party do not comply with any obligations we may have in connection with our participation in standards-setting organizations, and therefore that we are not entitled to the relief that we seek. For example, a party may allege that we have not complied with an obligation to offer (or be prepared to offer) a license to that party for patents that are or may become standards-essential patents ("SEPs") on fair, reasonable and non-discriminatory ("FRAND")FRAND terms and conditions, and may also file antitrust claims or regulatory complaints on that or other bases, and may seek damages or other relief based on such claims. In addition, a party might file a declaratory judgment action to seek a court's declaration that our patents are invalid, unenforceable, not infringed by the other party's products or are not SEPs. Our response to such a declaratory judgment action may include claims of infringement. When we include claims of infringement in a patent infringement lawsuit, a favorable ruling for the Company can result in the payment of monetary damages for past patent royalties,manufacture, use and/or sale of the patented invention, the setting of terms and conditions for a royalty for future sales orlicense, issuance by the court of an injunction enjoining the infringer from manufacturing, using and/or selling the infringing product.

We and our licensees, in the normal course of business, may have disagreements as to the rights and obligations of the parties under applicable agreements. For example, we could have a disagreement with a licensee as to the amount of reported sales and royalties. Our patent license agreements typically provide for audit rights as well as private confidential arbitration as the mechanism for resolving disputes and we may attempt to resolve such disputes in arbitration.with our licensees. In arbitration, licensees may seek to assert various claims, defenses, or counterclaims, such as claims based on waiver, promissory estoppel, breach of contract, fraudulent inducement to contract, antitrust, and unfair competition. Arbitration proceedings can be resolved through an award rendered by the arbitrators or by settlement between the parties. Parties to arbitration might have the right to have the award reviewed in a court of competent jurisdiction. However,jurisdiction; however, based on public policy favoring the use of arbitration, it is generally difficult to have arbitration awards vacated or modified. The party securing an arbitration award may seek to have that award confirmed as a judgment through an enforcement proceeding. The purpose of such a proceeding is to secure a judgment that can be used for, if need be, seizing assets of the other party.

In addition, arbitration may be a particularly effective means for resolving disputes with prospective licensees concerning the appropriate FRAND terms and conditions for license agreements that include SEPs, particularly where negotiations have otherwise reached an impasse. Binding arbitration to resolve the terms and conditions of a worldwide FRAND license to our relevant portfolio of SEPs is an efficient and cost-effective mechanism, as it allows the parties to avoid piecemeal litigation in multiple jurisdictions and ensures that an enforceable patent license agreement that is consistent with FRAND commitments will be in place at the end of the arbitration process. 

With respect to our technology development activities and resulting commercialization efforts, we face competition from companies, including in-house development teams at other wireless and video technology companies, consumer electronics device companies, semiconductor companies, and wireless operators, video streaming and cloud service companies, and other technology providers, developing other and similar technologies that are competitive with our products and solutionstechnologies that we may market or set forth into the standards-setting arena.

Due to the exclusionary nature of patent rights, we do not compete, in a traditional sense, with other patent holders for patent licensing relationships or sale transactions. Other patent holders do not have the same rights to the inventions and technologies encompassed by our patent portfolio. In any device, or piece of equipment, or service that contains intellectual property, the manufacturer or implementer may need to obtain licenses from multiple holders of intellectual property. In licensing our patent portfolio, we compete with other patent holders for a share of the royalties that certain licensees may argue to be the total royalty that is supported by a certain productproducts or products,services, which they may argue face practical limitations. We believe that licenses under a number of our patents are required to manufacture and sell 3G, 4G, 5G and other wireless products, as well as other consumer electronics devices.devices, and to implement certain technology services. However, numerous companies also claim that they hold patents that are or may be essential or may become essential to standards-based technology deployed on wireless products, and other consumer electronics devices.devices or services. To the extent that multiple parties all seek royalties on the same product or service, the manufacturers could claim to have difficulty in meeting the financial requirements of each patent holder. In the past, certain manufacturers have sought antitrust exemptions to act collectively on a voluntary basis. In addition, certain manufacturers have sought to limit aggregate licensing fees or rates for SEPs. Similarly, potential purchasers

InterDigital ranks among the industry leaders for ETSI-disclosed patents and applications as potentially essential to 5G standards. 5G technology is designed to efficiently use energy throughout its ecosystem and will play a significant role in promoting and attaining sustainability goals. We have published white papers exploring how 5G and the emerging IoT ecosystem might shape sustainability efforts for the ICT industry. While the proliferation of connected devices can drive increases in energy consumption, innovative solutions can mitigate these outcomes to help lower our carbon footprint and engage more sustainably. In fact, one of our patents often amass patent portfoliosreports found that by 2030, IoT deployment and its subsequent disruption of various industries is projected to save more than eight times the energy it consumes – which could help to save up to 230 billion cubic meters of water and eliminate up to one gigaton of CO2 emissions. Additionally, 5G technology has significant potential societal benefits, including promoting productivity-led economic growth, increasing medical diagnostic capabilities, creating more sustainable cities and communities, improving remote education, and reducing inequalities in education and income. We believe that the benefits to be derived from 5G are substantial and will be felt throughout society.

As of December 31, 2020,2023, we had 514approximately 450 employees worldwide, 271 of whom approximately 230 were based outside of the U.S. NoneU.S, and nearly all of our employees based in the United States are unionized or subject to collective bargaining agreements, however, ourwhom were full-time. Our employees based in France are represented by works councils and subject to collective bargaining agreements. None of our employees based in other geographic locationsthe United States or Canada are unionized or subject to collective bargaining agreements. We consider ourManagement believes that its relations with our employees and works councils are strong and healthy.

Our compensation program is rooted in market competitive base salaries and incentives that reward contributions that advance the Company’s strategy and mission. We provide a total compensation package that is targeted to be good. The health and safety of our workforce is fundamental tocompetitive with the success of our business. In order to protect the health and safety of our employees and their families, our entire worldwide workforce has worked remotely during the COVID-19 pandemic and will continue to do so well into 2021. As a research, development and licensing company, our business activities have continued to operate with minimal interruption even as our employees worked remotely. As a result, we learned that some workmarkets in which we previously thought required facecompete for talent, while allowing individual pay to face interaction, could progress remotelyvary equitably based on performance, skills and going forward, we will be re-thinking the necessity of some travel. However, we understandexperience. Our total rewards plans include base salary, short- and value face-to-face interactionslong-term incentives, healthcare benefits, retirement savings plans, physical and do not expect to continue operating in a fully virtual environment indefinitely; we are workingon achieving a balance. As our success, in part, depends upon our ability to attract, motivatemental well-being programs, hybrid-work schedules, monetary and retain the best and brightest researchers, we believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packagessocial recognition in each of our locations around the globe. In addition to comprehensive health benefits, depending on location, employees may also enjoy subsidized fitness programs, commuter benefits, wellness incentives, tuition reimbursement opportunities and professional development opportunities among other benefits. We routinely review our total rewards programs to ensure they are competitive, allowing us to recruit and retain the diverse talent we need to be successful.

We continue to invest in tools, resourcesprocesses to help the organization assess and opportunitiesdevelop talent, including a formalized annual performance evaluation program, an annual critical skills and potential analysis, and succession planning for impactful trainingthe organization’s most critical and tailored developmentsenior roles. All employees receive an annual performance review. We conducted an engagement survey in 2023 that provided direct insight and guidance from our employees on what our strengths in building an innovative and inclusive culture are, and how we can continue to provide all employees with an opportunitybe a winning team.

We believe that our workplace culture, values, and competitive employee compensation are critical to developmaintaining low levels of attrition, thereby enabling us to attract and grow. Throughout 2021, we will beretain talent. For the year ended December 31, 2023, our voluntary attrition percentage was less than 3%.

We participate in the highly competitive process to evolve and revolutionize communication, video, and AI technologies through our participation in worldwide SDOs. We require a highly educated and specialized workforce and maintaining a diverse, equitable and inclusive workforce is critical to our ability to succeed in the global marketplace. Since its launch in 2022, our employee-led DE&I Taskforce has focused on understandingsupporting the execution of InterDigital’s DE&I strategy.

In 2023, we designed and launched our strengthsDE&I mission under the four pillars of TEAM - Talent, Empowerment, Amplify, Membership. Within our pillar of Talent, our talent acquisition and opportunitiestalent development teams evaluated and developing a thoughtfulevolved their processes to optimize results for diversity and inclusion strategy, givenwith our commitmenthiring, onboarding, and employee development. This resulted in participation in diversity and outreach events, supporting production of internal company media with inclusive material, and the development of a plan to launch our DE&I LinkedIn Life page, which is intended to create visibility and connection to our DE&I journey for external constituents. We empowered our workforce through education and launched a mandatory company-wide training on DE&I to create understanding of this initiative, the benefits, and the tools to create inclusive and equitable environments. Work under the Amplify pillar focused on socializing and creating awareness of our purpose with the execution of our company DE&I branding and a company-wide townhall dedicated to providing an understanding of the taskforce's work, and insight into future actions. As part of the Membership pillar, we established our first model for Employee Resource Groups (ERG) at InterDigital to promote employee-led groups to encourage inclusion, belonging, and camaraderie for shared interests, characteristics, experiences, or causes. Through this Membership strategy, InterDigital committed to the creation of a global Women's Network ERG, which we plan to launch in 2024 and which is designed to offer women and their allies career development opportunities within InterDigital free from obstacles.

All of our targeted 2023 achievements occurred in addition to our foundational efforts to provide opportunity to employees from historically underrepresented groups and maintain policies that support a strong DE&I environment. We have continually provided leaders from historically underrepresented groups the opportunity to attend targeted world-class external development programs that speak to the unique experiences these employees can face in the workplace while investing in their continued growth both personally and professionally. We have also continued to maintain the core principles of our culture of inclusion are reflected in the mandatory all-employee training programs we offer on our policies against harassment and discrimination of any kind.

The diversity in our workforce is clear given that our approximately 450 person workforce originates from over sixty countries. Still, with approximately 72% male employees and 28% female employees, we recognize that there is more to be done. Our 2024 efforts will take the next step to enhance the community experience for our diverse workforce and to create better opportunities to attract a diverse workforce in the long-term with the aim to provide an inclusive environment where employees are encouraged to utilize their unique experiences and inclusive workplace.backgrounds when collaborating to develop new technologies. We will continue our journey this year with the formal launch of our Women’s Network ERG, the growth of that global community, and the actions we take for all employees to support an environment that enables women, alongside their allies, to do their greatest work and be the greatest version of themselves. Our DE&I Taskforce will continue to expand our actions within the TEAM pillars and support this journey. We believe this investment will continue to better our workplace inclusion and will eventually contribute to the scientific community.

The ultimate predecessor company of InterDigital, Inc. was incorporated in 1972 under the laws of the Commonwealth of Pennsylvania and conducted its initial public offering in November 1981. Our headquarters are located in Wilmington, Delaware, USA. Our research and development activities are conducted primarily in facilities located in Conshohocken, Pennsylvania, USA; London, United Kingdom; Montreal, Canada; New York, New York, USA; Los Altos, California, USA; and Rennes, France. We are also a party to leases for several smaller research and/or office spaces, including in Berlin, Germany; Brussels, Belgium; HicksvilleEspoo, Finland; Indianapolis, Indiana, USA; Melville, New York, USA; Indianapolis, Indiana, USA; Paris, France; Princeton, New Jersey, USA;France, and Shanghai,Beijing, China. In addition, we own a townhousean administrative office space in Washington, District of Columbia, USA, that houses administrative office space.USA.

To the extent that our patent royalty rates for our patent license agreements are determined through arbitration or other third party adjudications or regulatory or court proceedings rather than through bilateral negotiations, because such proceedings are inherently unpredictable and uncertain and there are currently few precedents for such determinations, it is possible that royalty rates may be lower than our historical rates, and thiscomparable rates. This could also have a negative impact on royalties we are able to obtain from future licensees, which may have an adverse effect on our revenue and cash flow. Prospective customers may delay, and in some cases have delayed, negotiations on the basis of an adverse decision. In addition, to the extent that other terms and conditions for our patent license agreements are determined through such means, such terms and conditions could be less favorable than our historical terms and conditions, which may have an adverse effect on our licensing business.

While some companies seek licenses before they commence manufacturing and/or selling devices or services that use our patented inventions, most do not. Consequently, we approach companies and seek to establish license agreements for using our inventions. We expend significant time and effort identifying users and potential users of our inventions and negotiating license agreements with companies that may be reluctant to take licenses. However, if we believe that a third party implementer is requiredunwilling to take a license to our patentson reasonable terms or in order to manufacture, sell, offer for sale, importa reasonable time frame, or use products,at all, we have in the past commenced, and may in the future commence, legal or administrative actionactions against thesuch third party if they refuseparties to enter into a license agreement with us.enforce our intellectual property rights. In turn, we have faced, and couldexpect to continue to face, counterclaims and other legal proceedings that challenge the essential nature of our patents, or that claim that our patents are invalid, unenforceable or not infringed. Litigation adversaries have and may continue to allege that we have not complied with certain commitments to standards-setting organizations and therefore that we are not entitled to the relief that we seek. For example, Lenovo has alleged, and other parties may allege,have alleged that we have not complied with an obligation to offer a license to a party on FRAND terms and conditions,conditions. Parties have also filed, and may alsoin the future file, antitrust claims, unfair competition claims or regulatory complaints on that or other bases, and may seek damages and other relief based on such claims. Litigation adversaries have also filed against us, and other third parties may in the future file, validity challenges such as inter partes proceedings in the USPTO or the China National Intellectual Property Administration, which can lead to delays of our patent infringement actions as well as potential findings of invalidity. Such parties may also seek to obtain a determination that our patents are not infringed, are not essential or are unenforceable.

Potential changes to certain U.S. and international patent laws, rules and regulations may occur in the future, some or all of which may affect our research and development investments, patent prosecution costs, the scope of future patent coverage we secure, the number of forums in which we can seek to enforce our patents, the remedies that we may be entitled to in patent litigation, and attorneys’ fees or other remedies that could be sought against us, and may require us to reevaluate and modify our research and development activities and patent prosecution, licensing and enforcement strategies. Similarly,For example, the State Administration for Market Regulation in China regularly reviews its policies related to intellectual property and antitrust laws, and any such review could result in ambiguous standards and/or create a worse position for patent holders like us. Additionally, the European Commission (“EC”) has initiated a review of the EU’s IP policies as they relate to SEPs and FRAND. This review is currently being discussed and debated inside the European Parliament and the European Council and any change to the legal or regulatory landscape as a result of this review could impact our ability to negotiate license agreements on favorable terms or at all, while also limiting our potential legal remedies and materially impacting our business. Further, legislation designed to reduce the value of SEPs and alter the U.S. patent system, including legislation designed to reduce the jurisdiction and remedial authority of the USITC, has periodically been introduced in Congress.

Any potential changes in the law, the IPR policies of standards bodies or other developments that reduce the number ofavailable forums available or the typetypes of relief available in such forums (such as injunctive relief), restrict permissible licensing practices (such as our ability to license on a worldwide portfolio basis) or that otherwise cause us to seek alternative forums (such as arbitration or state court), would make it more difficult for us to enforce our patents, whether in adversarial proceedings or in negotiations. Because we have historically depended on the availability of certain forms of legal process to enforce our patents and obtain fair and adequate compensation for our investments in research and development and the unauthorized use of our intellectual property, developments that undermine our ability to do so could have a negative impact on future licensing efforts.

Rulings in our legal proceedings, as well as those of third parties, may affect our strategies for patent prosecution, licensing and royalty rate setting and enforcement. For example, in recent years,the past, the USITC and U.S. courts, including the U.S. Supreme Court, and the U.S. Court of Appeals for the Federal Circuit, have taken some actions that have been viewed as unfavorable to patentees, including us. Decisions that occur in the U.S. or in international forums may change the law applicable to various patent law issues, such as, for example, patentability, validity, claim construction, patent exhaustion, patent misuse, permissible licensing practices, available forums, and remedies such as damages and injunctive relief, in ways that are detrimental to the ability of patentees to enforce patents and obtain suitable relief.

We continue to monitor and evaluate our strategies for prosecution, licensing and enforcement with regard to these developments; however, any resulting change in such strategies may have an adverse impact on our business and financial condition.

We earn a significant amount of our abilityrevenues from a limited number of licensees or customers, and we expect that a significant portion of our revenues will continue to enter into newcome from a limited number of licensees or customers for the foreseeable future. For example, in 2023, Apple, Samsung, Lenovo, and Xiaomi each comprised 10% or more of our consolidated revenues. Further, because of the limited number of licensees and potential licensees, any opportunistic behavior during license negotiations by a company or companies using our technology could create large exposure for us. In the event that we are unable to renew one or more of such license agreements could cause our revenue and cash flow to decline.

We face competition from companies developing other and similar technologies that are competitive with our technologies, including in the standards-setting arena. Due to decline.competition, our technologies may not find a viable commercial marketplace or, where applicable, be adopted by the relevant standards. In particular, increasing participation within standards-setting organizations has contributed to greater competition for influence within such organizations and for ultimately setting standards. In addition, in licensing our patent portfolio, we may compete with other companies, many of whom also claim to hold SEPs, for a share of the royalties that certain licensees may argue to be the total royalty that is supported by a certain product or products. In any device or piece of equipment that contains intellectual property, the manufacturer may need to obtain a license from multiple holders of intellectual property. To the extent that multiple parties all seek royalties on the same product, the manufacturers could claim to have difficulty in meeting the financial requirements of each patent holder.

We invest significant resources in the development of advanced technology and related solutions. However, certain of our inventions that we believe will be employed in current and future products, including 4G, 5G, HEVC, VVC and others, are the subject of patent applications where no patent has been issued to us yet by the relevant patent issuing authorities. There is no assurance that these applications will issue as patents, either at all or with claims that would be required by products in the market currently or in the future. Our investments may not be recoverable or may not result in meaningful revenue if a sufficient number of our technologies are not patented andand/or adopted by the relevant standards or if products based on the technologies in which we invest are not widely deployed. Competing technologies could reduce the opportunities for the adoption or deployment of technologies we develop. In addition, it is possible that in certain technology areas, such as in the IoT space, the adoption of proprietary systems could compete with or replace standards-based technology. It is also possible in certain technology areas, such as video coding and the IoT, that open source and/or purportedly royalty-free solutions such as AV1, VP-9 and OCF could compete with or replace proprietary standards-based technology. If the technologies in which we invest do not become patented, or are not adopted by the relevant standards, or are not adopted by and deployed in the mainstream markets, at all or at the rate or within time periods that we expect, or in the case of open source solutions, do not infringe our technology, our business, financial condition and operating results could be adversely affected.

ManySome third parties have challenged, and we expect will continue to challenge, the infringement, validity and enforceability of certain of our license agreementspatents. In some instances, certain of our patent claims could be substantially narrowed or declared invalid, unenforceable, not essential or not infringed. For example, in limited cases, certain of our patents have fixed terms. Although we endeavorbeen held invalid by courts in proceedings initiated by counterparties to renew license agreements with fixed terms priorour litigation proceedings. We cannot ensure that the validity and enforceability of our patents will be maintained or that our patents will be determined to be applicable to any particular product or standard. Moreover, third parties could attempt to circumvent certain of our patents through design changes. Any significant adverse findings as to the expiration of the license agreements, due to various factors, including the technology and business needs and competitive positionsvalidity, infringement, enforceability or scope of our patents and/or any successful design-around of our patents could result in the loss of patent licensing revenue from existing licensees, through termination or modification of agreements or otherwise, and could substantially impair our ability to secure new patent licensing arrangements, either at times, reluctanceall or on thebeneficial terms.

As part of our licenseesbusiness strategy, we regularly seek to participate in renewal discussions,expand our revenue opportunities both organically and inorganically. For example, we are currently seeking to expand our licensing activities beyond device-based licensing revenue to certain video and cloud-based service providers. The market for licensing video and cloud-based services is not as developed as device-based licensing programs. As a result, video and cloud-based service providers do not have a significant volume of comparable agreements against which to compare our offers and may use this as a reason to delay our negotiations with such providers. Additionally, our pricing models may not reflect the demand for our value of our technologies. Accordingly, we may not be able to renegotiate theenter into license agreements with these providers on acceptable terms beforethat are favorable to us, or afterat all.

We also seek to expand our business opportunities through targeted acquisitions, research partnerships, joint ventures and licensing platforms. We face intense competition within our industry and otherwise for acquisitions of high-quality businesses, technologies and assets. As such, even if we are able to identify an acquisition target that we would like to acquire, we may not be able to complete the expiration of the license agreement,acquisition on commercially reasonable terms, or at all. If there iswe are not able to consummate any of these inorganic growth opportunities on a delay in renegotiating and renewing a license agreement prior to its expiration, there could be a gap inreasonable time during which we may be unable to recognize revenue from that licensee or we may be forced to renegotiate and renew the license agreementframe, on terms that are more favorableattractive to such licensee,us or at all, we may not be able to grow our business in line with our expectations and as such, our business, financial condition and operating results could be harmed.

A decline in economic conditions, such as a result,recession, economic downturn or inflationary conditions in the U.S. or elsewhere could adversely affect our business. In particular, inflation has accelerated in the U.S. and globally. A majority of our revenue and cash flow could be materially adversely affected. In addition, if we fail to renegotiate and renew ouris derived from patent license agreements at all,that provide for fixed payments that were negotiated before the recent rise in inflation. An inflationary environment can increase our cost of labor, as well as our other operating costs, without a corresponding increase in our revenue, which may have a material adverse impact on our operating results and cash flow could be materially adversely affected.financial condition.

Domestic and foreign antitrust authorities have increasedregularly review their scrutiny ofpolicies with respect to the use of SEPs, including the enforcement of such patents against competitors and others. Such scrutiny has alreadyin the past resulted in enforcement actions against Qualcomm and other licensing companies, and could lead to additional investigations of, or enforcement actions against, us. Such inquiries and/or enforcement actions could impact the availability of injunctive and monetary relief, which may adversely affect our strategies for patent prosecution, licensing and enforcement and increase our costs of operation. Such inquiries and/or enforcement actions could also result in monetary fines, penalties or other remedies or sanctions that could adversely affect our business and financial condition.

We have in the past and may in the future acquire companies, businesses, technology and/or intellectual property, and enter into joint ventures or other strategic transactions. Acquisitions or other strategic transactions may increase our costs, including but not limited to accounting and legal fees, and may not generate financial returns or result in increased adoption or continued use of our technologies or of any technologies we may acquire.

The integration of acquired companies or businesses may result in significant challenges, including, among others: successfully integrating new employees, technology and/or products; consolidating research and development operations; minimizing the diversion of management’s attention from ongoing business matters; and consolidating corporate and administrative infrastructures. As a result, we may be unable to accomplish the integration smoothly or successfully. In addition, we cannot be certain that the integration of acquired companies, businesses, technology and/or intellectual property with our business will result in the realization of the full benefits that we anticipate will be realized from such acquisitions. Our plans to integrate and/or expand upon research and development programs and technologies obtained through acquisitions may result in products or technologies that are not adopted by the market, or the market may adopt solutions competitive to our products or technologies.

A portion of our licensing revenues is dependent on sales by our licensees that are outside our control and that could be negatively affected by a variety of factors, including global, regional and/or country-specific economic conditions and/or public health concerns, (e.g., the current coronavirus outbreak), country-specific natural disasters impacting licensee manufacturing and sales, demand and buying patterns of end users, which are often driven by replacement and innovation cycles, the service life of products incorporating our technologies, competition for our licensees' products, supply chain disruptions, and any decline in the sale prices our licensees receive for their covered products. In addition, our operating results also could be affected by general economic and other conditions that cause a downturn in the market for the licensees of our products or technologies. Our revenue and cash flow also could be affected by (i) the unwillingness of any licensee to satisfy all of their royalty obligations on the terms or within the timeframe we expect, (ii) a decline in the financial condition or market position of any licensee or (iii) the failure of sales to meet market forecasts due to global or regional economic conditions, political instability, natural disasters, competitive technologies, lower demand or otherwise. It is also difficult to predict the timing, nature and amount of licensing revenue associated with past infringement (including as a result of the unwillingness of our licensees to compensate us for such past infringement) and new licenses, strategic relationships and the resolution of legal proceedings. The foregoing factors are difficult to forecast and could adversely affect both our quarterly and annual operating results and financial condition.

In addition, some of our patent license agreements provide for upfront fixed payments or prepayments that cover our licensees' future sales for a specified period and reduce future cash receipts from those licensees. As a result, our cash flow has historically fluctuated from period to period. Depending upon the payment structure of any new patent license agreements into which we may enter, such cash flow fluctuations may continue in the future.

We own an evolving portfolio of issued and pending patents related to 3G, 4G and 5G cellular technologies and non-cellular technologies including video coding technologies, and our patent portfolio licensing program for future-generation wireless standards or video coding standards may not be as successful in generating licensing income as our current licensing programs. Although we continue to participate in worldwide standards bodies and contribute our intellectual property to future-generation wireless and video coding standards, including standards that will define 5G, our technologies might not be adopted by the relevant standards. In addition, we may not be as successful in the licensing of future-generation products as we have been in licensing products deploying existing wireless and video coding standards, or we may not achieve a level of royalty revenues on such products that is comparable to that which we have historically received on products deploying existing wireless and video coding standards. Furthermore, if there is a delay in the standardization and/or deployment of 5G or future video coding standards, our business and revenue could be negatively impacted.

The licenses that we grant under our patent license agreements typically only cover products designed to operate in accordance with specified technologies and that were manufactured or deployed or anticipated to be manufactured or deployed at the time of entry into the agreement. Also, we have patent license agreements with licensees that now offer for sale types of products that were not sold by such licensees at the time the patent license agreements were entered into and, thus, are not licensed by us. We do not derive patent licensing revenue from the sale of products by our licensees that are not covered by a patent license agreement. In order to grant a patent license for any such products, we will need to extend or modify our patent license agreements or enter into new license agreements with such licensees, and we may not be able to do so on terms acceptable to us or at all. Further, such extensions, modifications or new license agreements may adversely affect our revenue on the sale of products covered by the license prior to any extension, modification or new license.

As part ofCompetition for top talent is substantial. In order to be successful, we must attract, develop, and retain employees. Implementing our business strategy werequires specialized engineering and other technical talent, and these skills are seekingin high demand among our competitors. The market for employees in our industry is extremely competitive, and competitors for talent, particularly engineering talent, increasingly attempt to expandhire, and to varying degrees have been successful in hiring, our revenue opportunities throughemployees or employment candidates. Further, the continued development, commercialization and licensing of technology projects, including in the video coding and IoT spaces. Commercial success depends on many factors, including the demand for the technology, the highly competitive markets for our technology products, regulatory issues associated with such technology products, and effective marketing and licensing or product sales. Our technology development and acquisition activities may experience delays, or the markets for our technology solutions may fail to materialize to the extent or at the rate we expect, if at all, each of which could reduce our opportunities for technology sales and licensing. In addition, there could be fewer applications for our technology and products than we expect, and/or our offerings may require robust ecosystems of customers and service providers that may fail to materialize. Technology markets also could be affected by general economic conditions, customer buying patterns, timeliness of equipment development, and theincreased availability of capital for, and the high cost of, infrastructure improvements. Additionally, investing in technology development is costly and may require structural changes to the organization that could require additional costs, including without limitation legal and accounting fees. Furthermore, delays or failures to enter into additional partnering relationships to facilitate technology development efforts and secure support for our technologies or delays or failures to enter into technology licensing agreements to secure integration of additional functionality could impair our ability to introduce into the market portions of our technology and resulting products, cause us to miss critical market windows, or decrease our ability to remain competitive. In the event that any of these risks materialize, our long-term business, financial condition and operating results may be materially adversely affected.

TheAs we saw with the COVID-19 pandemic, has createdany such event can create significant worldwide uncertainty, volatility and economic disruption. The extent to which COVID-19 and any other potential future public health crises, pandemics or similar events willcould adversely impact our business, financial condition and results of operations is dependent upon numerous factors, many of which are highly uncertain, rapidly changing and uncontrollable. These factors include, but are not limited to: (i) the duration and scope of the pandemic;pandemic or other event; (ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic or other event, including travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on our customers, including those that are presently unlicensed, and other business partners; (iv) the impact on U.S. and global economies and the timing and rate of economic recovery; (v) potential adverse effects on the financial markets and access to capital; (vi) potential goodwill or other impairment charges; (vii) increased cybersecurity risks as a result of pervasive remote working conditions; (viii) our ability to effectively carry out our operations due to any adverse impacts on the health and safety of our employees and their families; (ix) the ability of our customers to timely satisfy their payment obligations to us; and (x) fluctuations in global shipments of handsets and consumer electronics devices. Furthermore, as a result

A significant portion of our licensees, potential licensees and customers are international, and our licensees, potential licensees and customers sell their products to markets throughout the world. In addition, in recent years, we have expanded, and we may continue to expand, our international operations, opening offices in China, France, the United Kingdom, Belgium and Germany.Finland. Accordingly, we are subject to the risks and uncertainties of operating internationallyinternationally. Our international operations could exacerbate the other risk factors we have identified, and we could be affected by a variety of uncontrollable and changing factors, including, but not limited to: difficulty in protecting our intellectual property in foreign jurisdictions; enforcing contractual commitments in foreign jurisdictions or against foreign corporations; government regulations, tariffs and other applicable trade barriers; biased enforcement of foreign laws and regulations to promote industrial or economic policies at our expense; retaliatory practices by foreign actors; currency control regulations; export license requirements and restrictions on the use of technology; social, economic and political instability; costly, time consuming and changing regulatory regimes; natural disasters, acts of terrorism, widespread illness and war; potentially adverse tax consequences; general delays in remittance of and difficulties collecting non-U.S. payments; foreign labor regulations; anti-corruption laws; public health issues; and difficulty in staffing and managing operations remotely. Managing operations and complying with relevant laws and regulations in China may be particularly complex, costly and time-consuming. We also are subject to risks specific to the individual countries in which we and our licensees, potential licensees and customers do business.

In addition, adverse movements in currency exchange rates may negatively affect our business due to a number of situations, including the following:

We face competitionThere is an increasing focus from companies developinginvestors, customers and employees as well as other stakeholders concerning ESG matters. Current and prospective investors are increasingly utilizing ESG data to inform their decisions including investment and voting using a multitude of evolving score and rating frameworks. Additionally public interest and legislative pressure related to public companies' ESG practices continue to grow. If our ESG practices fail to meet the expectations of any of our stakeholders’ evolving standards, our reputation, brand and employee retention may be negatively impacted. If we do not adapt our strategy or similar technologies.

Our success depends, in part, on our ability to define and keep pace with changes in industry standards, technological developments and varying customer requirements. Changes in industry standards and needs could adversely affect the development of, and demand for, our technology, rendering our technology currently under development obsolete and unmarketable. The patents and applications comprising our portfolio have fixed terms, and, if we fail to anticipate or respond adequately to these changes through the development or acquisition of new patentable inventions, patents or other technology, we could miss a critical market opportunity, reducing or eliminating our ability to capitalize on our patents, technology solutions or both.

The legal doctrines of patent exhaustion and consolidation in the wireless communications industryimplied license may be subject to different judicial interpretations. Our commercialization or licensing of certain technologies and/or our M&A activities could potentially lead to patent exhaustion or implied license issues that could adversely affect our business.

Certain of our technology and our suppliers’ technology may contain or may be derived from “open source” software, which, under certain open source licenses, may offer accessibility to a portion of a product’s source code and may expose related intellectual property to adverse licensing conditions. Licensing of such technology may impose certain obligations on us if we were to distribute derivative works of the open source software. For example, these obligations may require us to make source code for derivative works available or license such derivative works under a particular type of license that is different from what we customarily use to license our technology. While we believe we have taken appropriate steps and employ adequate controls to protect our intellectual property rights, our use of open source software presents risks that, if we inappropriately use open source software, we may be required to re-engineer our technology, discontinue the sale of our technology, release the source code of our proprietary technology to the public at no cost or take other remedial actions, which could adversely affect our business, operating results and financial condition. There is a risk that open source licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions, which could adversely affect our business, operating results and financial condition. In addition, developing open source products, while adequately protecting the intellectual property rights upon which our licensing business depends, may prove burdensome and time-consuming under certain circumstances, thereby placing us at a competitive disadvantage.

The United States government enacted tax reform in 2017 and continues to provide regulatory guidance related to tax reform provisions, and state authorities continue to provide guidance around the application of tax reform provisions, that in each case, could impact future effective tax rates favorably or unfavorably. The United States government could enact further tax reform legislation, which could adversely impact our tax rate. The international tax environment also continues to change as a result of both coordinated efforts by governments and unilateral measures designed by individual countries, which could ultimately have an adverse effect on the taxation of international businesses such as ours. Accordingly, our tax rate could be adversely affected by several factors, many of which are outside of our control, including: changing tax laws, regulations and interpretations thereof; changes in tax rates; and assessments and any related tax, interest or penalties. If we are deemed to owe additional taxes, our business, financial condition, and results of operations could be adversely affected.

Our growth is partially dependent upon the increased use of wireless communications services and cellular handsets that utilize our technology. In order to provide wireless communications services, wireless operators must obtain rights to use specific radio frequencies. The allocation of frequencies is regulated in the United States and other countries throughout the world, and limited spectrum space is allocated to wireless communications services. Industry growth may be affected by the amount of capital required to obtain licenses to use new frequencies, deploy wireless networks to offer voice and data services, expand wireless networks to grow voice and data services and obtain new subscribers. The significant cost of licenses, wireless networks and subscriber additions may slow the growth of the industry if wireless operators are unable to obtain or service the additional capital necessary to implement or expand advanced wireless networks. Growth in the number of cellular handsets may slow as the number of people worldwide without a cellular handset declines. In addition, if the cost of cellular handsets increases, customers may be less likely to replace their existing devices with new devices. The growth of our business could be adversely affected if either of these events occur.

From time to time, we intend to make strategic decisions about our patent portfolio, whether through a formal portfolio review or opportunistic dispositions. Cost savings expectations of any portfolio review are forward-looking in nature.

The standard terms of our per-unit license agreements require our licensees to document the sale of licensed products and report this data to us on a quarterly basis. Although our standard license terms give us the right to audit books and records of our licensees to verify this information, audits can be expensive, time consuming, incomplete and subject to dispute. From time to time, we audit certain of our licensees to verify independently the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we cannot give assurances that these audits will be numerous enough and/sufficient or effective to that end.

We may experience technical, financial, resource or other difficulties or delays related to the further development of our technologies. Delays may have adverse financial effects and may allow competitors with comparable technology offerings to gain an advantage over us in the marketplace or in the standards setting arena. There can be no assurance that we will continue to have adequate staffing or that our development efforts will ultimately be successful. Moreover, certain of our technologies have not been fully tested infor commercial use, and it is possible that they may not perform as expected. In such cases, our business, financial condition and operating results could be adversely affected, and our ability to secure new licensees and other business opportunities could be diminished.

Successful exploitation of our technology solutions is partially dependent on the establishment and success of relationships with equipment producers and other industry participants. Delays or failure to enter into licensing or other relationships to facilitate technology development efforts or delays or failure to enter into technology licensing agreements to secure integration of additional functionality could impair our ability to introduce into the market portions of our technology and resulting products, cause us to miss critical market windows or impair our ability to remain competitive.

Attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated. These attempts, which in some cases could be related to industrial or other espionage, include covertly introducing malware to computers and networks and impersonating authorized users, among others. We seek to detect and investigate all security incidents and to prevent their recurrence, but, in some cases, we might be unaware of an incident or its magnitude and effects. While we have not identified any material incidents of unauthorized access to date, the theft, unauthorized use or publication of our intellectual property and/or confidential business or personal information (whether through a breach of our own systems or the breach of a system of a third party that provides services to us) could harm our competitive or negotiating positions, reduce the value of our investment in research and development and other strategic initiatives, compromise our patent enforcement strategies or outlook, damage our reputation or otherwise adversely affect our business. In addition, to the extent that any future security breach results in inappropriate disclosure of our employees’, licensees’, or customers’ confidential and /or personal information, we may incur liability or additional costs to remedy any damages caused by such breach.

We alsomay be affected by existing and proposed laws and regulations, as well as government policies and practices related to cybersecurity, privacy and data protection. For example, the European General Data Protection Regulation ("GDPR") adopted by, the European Commission became effective in May 2018,United Kingdom’s GDPR, the California Consumer Privacy Act of 2018 (the "CCPA") adopted byand the California State Legislature became effectivePrivacy Rights Act of 2020 impose obligations on companies such as ours regarding the handling of personal data. Additionally, in January 2020, and2021, China adopted a new cybersecurity law as of June 2017.the Personal Information Protection Law (“PIPL”), which, together China’s existing cyber and data securities regulations, have required and will continue to require significant investment and resources to ensure compliance. Complying with the GDPR, the CCPAthese and other existingprivacy and emerging and changing requirementscybersecurity regulations could cause us to incur substantial costs or require us to change our business practices. Non-compliance could result in monetary penalties or significant legal liability.

Our current dividend policy contemplates the payment of a regular quarterly cash dividend of $0.35$0.40 per share on our outstanding common stock. We expect to continue to pay quarterly cash dividends on our common stock at the rate set forth in our current dividend policy. However, the dividend policy and the payment and timing of future cash dividends under the policy are subject to the final determination each quarter by our Board of Directors that (i) the dividend will be made in compliance with laws applicable to the declaration and payment of cash dividends, including Section 1551(b) of the Pennsylvania Business Corporation Law, and (ii) the policy remains in our best interests, which determination will be based on a number of factors, including our earnings, financial condition, capital resources and capital requirements, alternative uses of capital, restrictions imposed by any existing debt, economic conditions and other factors considered relevant by the Board of Directors. Given these considerations, our Board of Directors may increase or decrease the amount of the dividend at any time and may also decide to vary the timing of or suspend or discontinue the payment of dividends in the future. Any decrease in the amount of the dividend, or suspension or discontinuance of payment of a dividend, could cause our stock price to decline.

The trading market for our common stock repurchase programs maywill depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not resulthave any control over these analysts. If securities or industry analysts stop their coverage of us or additional securities and industry analysts fail to cover us in a positive returnthe future, the trading price for our common stock would be negatively impacted. If any analyst or analysts who cover us downgrade our common stock, changes their opinion of capital to shareholders.

Any of the above-listed factors could have an adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the 2024 Notes.

In connection with each offeringthe offerings of the 2024 Notes and the 2027 Notes, we entered into convertible note hedge transactions with certain financial institutions (the “option counterparties”) and sold warrants to the respective option counterparties. These transactions will be accounted for as an adjustment to our shareholders’ equity. The convertible note hedge transactions are expected to reduce the potential equity dilution upon any conversion of the 2024 Notes.notes. The warrants will have a dilutive effect on our earnings per share to the extent that the market price of our common stock exceeds the applicable strike price of the warrants on any expiration date of the warrants.

In addition, the respective option counterparties (and/or their affiliates) may modify their respective hedge positions from time to time (including during any observation period related to a conversion of the 2024 Notes)notes) by entering into or unwinding various derivative transactions with respect to our common stock and/or by purchasing or selling our common stock in open market transactions and/or privately negotiated transactions.

The potential effect, if any, of any of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the market price of our common stock.

The respective option counterparties are financial institutions or affiliates of financial institutions, and we will be subject to the risk that such option counterparties may default under the respective convertible note hedge transactions. Our exposure to the credit risk of the option counterparties is not secured by any collateral. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the applicable convertible note hedge transactions. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in our common stock market price and in volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and dilution with respect to our common stock. We can provide no assurance as to the financial stability or viability of the option counterparties.

Certain provisions of the 2024 Notes and the 2027 Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change under the respective 2024 Notes,indentures, holders of the 2024 Notesnotes will have the right, at their option, to require us to repurchase all of their applicable 2024 Notesnotes or any portion of the principal amount of such 2024 Notesnotes at a price of 100% of the principal amount of the 2024 Notesnotes being repurchased, plus accrued and unpaid interest. We may also be required to issue additional shares upon conversion in the event of certain fundamental change transactions. These provisions could limit the price that some investors might be willing to pay in the future for shares of our common stock.

The following discussion should be read in conjunction with the Selected Financial Data, the Consolidated Financial Statements and the Notes thereto contained in this Form 10-K. The following section generally discusses our financial condition and results of operations for our fiscal year ended December 31, 2023 compared to our fiscal year ended December 31, 2022. A discussion regarding our financial condition and results of operations for December 31, 2022 compared to our fiscal year ended December 31, 2021 can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2023.

Throughout the following discussion and elsewhere in this Form 10-K, we refer to “recurring revenues” and “non-current patent royalties.“catch-up revenues.” For allvariable and dynamic fixed-fee license agreements, “catch-up revenues” primarily represents revenue associated with reporting periods presented, recurring revenues are comprisedprior to the execution of “current patent royalties” and “current technology solutionsthe license agreement, while “recurring revenue” represents revenue”  while "non-current patent royalties" are comprised associated with reporting periods beginning with the execution of past sales royalties andthe license agreement. For static fixed-fee agreement royalties.license agreements, we typically classify the associated revenue as catch-up revenues.

InterDigital, Inc. ("InterDigital") is a global research and development company that licenses its innovations to the globalfocused primarily on wireless, video, artificial intelligence ("AI"), and consumer electronics industries.related technologies. We design and develop advancedfoundational technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services. SinceWe license our foundinginnovations worldwide to companies providing such products and services, including makers of wireless communications devices, consumer electronics, IoT devices, cars and other motor vehicles and providers of cloud-based services such as video streaming. As a leader in 1972,wireless technology, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G and today, solutions that we believe will shape the world beyond 5G. With the acquisition of the patent licensing business of visual technology industry leader Technicolor SA ("Technicolor") in 2018 (the "Technicolor Patent Acquisition"), followed by the acquisition of their Research & Innovation unit in 2019 (the "R&I Acquisition" and, together with the Technicolor Patent Acquisition, the "Technicolor Acquisitions"), wetoday's most advanced Wi-Fi technologies. We are nowalso a leader in video processing and video encoding/decoding and display technology, with a significant Artificial Intelligence ("AI")AI research effort that intersects with both wireless and visualvideo technologies.

InterDigital is one of the largest pure research &and development and licensing companies in the world, with one of the most significant patent portfolios in theof fundamental wireless and video industries.technologies. As of December 31, 2020,2023, InterDigital's wholly owned subsidiaries held a portfolio of approximately 28,000more than 30,000 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to the wirelesscommunications and consumer electronics industries.entertainment products and services. Our portfolio includes numerous patents and patent applications that we believe are or may be essential to existing standards, or may become essential to future standards, established by many Standards Development Organizations ("SDOs"), including cellular and other wireless communications and video. We have contributed technology standards. Thoseto wireless standards includeincluding the 3G, 4G, and 5G cellular standards and the IEEE 802 suite of standards. We have contributed technology to video standards as well as patents and patent applications that we believe are or may become essential to 5G standards that currently exist and as they continue to develop. Our video technology portfolio includes patents and applications relating toincluding standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.

Our wireless portfolio has largely been built through internal development, supplemented by joint development projects with other companies, and select acquisitions of patents and companies. Products incorporating our patented inventions in wireless include: mobile devices, such as cellular phones, tablets, notebook computers and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; components, dongles and modules for wireless devices; and Internet of Things ("IoT") devices and software platforms. Our video technology portfolio largely representscombines patents and applications that InterDigital obtained through the acquisitions of the patent licensing business and research and innovation unit of visual technology industry leader Technicolor Patent Acquisition, supplementedSA and patents and applications created by internal development. Our patented inventions in video are incorporatedhave been implemented in a rangewide variety of products, including smartphones, other wireless communication devices and services, including cellular phones, notebook computers,infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles. In addition, our patented inventions have been implemented in a wide variety of services, such as video streaming and other consumer electronics.cloud-based services.     

In 2020, 2019,2023, 2022, and 2018,2021, our total revenues were $359.0$549.6 million, $318.9$457.8 million, and $307.4$425.4 million, respectively. Our recurring revenues in 2020, 20192023, 2022 and 20182021 were $336.8$408.4 million, $298.2$403.9 million, and $280.3$351.7 million, respectively. In 2020, 2019,2023, 2022, and 2018,2021, we recognized $21.6$141.2 million, $19.8$53.9 million and $26.3$73.7 million, respectively, of non-current patent royaltiescatch-up revenues as more fully discussed below. In 2020,2023, fixed-fee royalties accounted for approximately 89% of our recurring revenues. These fixed-fee revenues are not affected by the related licensees’ success in the market or the general economic climate. The majority of the remaining portion of our recurring revenue was variable in nature due to the per-unit structure of the related license agreements.

During first quarter 2020,In 2023, we signed a multi-year, worldwide, non-exclusive, royalty bearing license with Lenovo, covering InterDigital’s HEVC patents (the "Lenovo HEVC PLA"). The new license resolved all related HEVC litigation at the time. We also entered into a multi-year, worldwide, non-exclusive, royalty bearing patent license agreement with Fairphone B.V. (“Fairphone”). The agreement covers Fairphone’s saleTCL Communication Technology Holdings, Ltd. covering InterDigital’s portfolio of its 3G and 4G handsets.patents.

In January 2024, we signed a new patent license agreement with Blu Products, Inc. (“Blu”).Samsung Electronics. The agreement covers Blu’s sale of its 3G, 4Glicenses Samsung’s digital TVs and 5G handsets,computer display monitors under InterDigital's joint licensing program with Sony and includes licenses to key technologies including the use of Wi-FiATSC 3.0, as well as licenses under InterDigital’s patents including HEVC, VVC and HEVC in those products.

Our patent license agreements with sevena number of licensees that expired during 2020, including LG. Collectively, all seven agreements accounted for $38.0 million, or approximately 11% of our recurring revenue in 2020, including LG who contributed $31.8 million, or approximately 9%, of our recurring revenue in 2020. Inbetween January 2021, it was reported that LG confirmed that it is considering exiting the smartphone market.

Seven of our revenue generating patent license agreements were scheduled to expire during 2021.2024, of which two agreements were renewed during 2023. Collectively, all sixthe five expiring agreements expiring in 2021not yet renewed accounted for $30.3$17.6 million, or approximately 9%4%, of our recurring revenuerevenues in 2020.2023.

We are actively working to renew these agreements on terms consistent with the licensees' current productrespective market positions and utilization and market position.of our technology.

If we believe a party is required to license our patents in order to manufacture, use and/or sell certain products or services and such party refuses to do so, we typically offer such party to have royalty rates, or other terms, set by third party adjudicators (such as arbitrators). If the party refuses that offer and we believe they are unwilling to agree to a patent license on a fair, reasonable and non-discriminatory basis, we may have no other viable recourse but to institute legal action against them to enforce our patent rights. This legal action has typically taken the form of a patent infringement lawsuit or an administrative proceeding. In addition, we and our licensees, in the normal course of business, might seek to resolve disagreements as to the rights and obligations of the parties under the applicable license agreement through arbitration or litigation. Such legal actions ultimately may be decided by the presiding court, third party adjudicator, or a negotiated resolution between the parties.

In 2020,2023, our intellectual property enforcement costs increased to $28.6$48.8 million, from $25.4$44.4 million and $17.6$34.3 million in 20192022 and 2018,2021, respectively. These costs represented 17%61% of our total patent administration and licensing costs of $170.2$79.4 million in 2020.2023. Intellectual property enforcement costs will vary depending upon activity levels, and it is likely they will continue to be a significant expense for us in the future.

AsWe have been actively monitoring the impact of December 31, 2020, we had $0.9 billion of cash, restricted cash and short-term investments and up to an additional $227.8 million of payments due under signed agreements, including $16.0 million recorded in accounts receivable which includes estimates related to our fourth quarter 2020 variable patent royalty revenue. A portion of our cash and short-term investments include fixed royalty payments we have received related to revenue we will recordthe current macroeconomic environment in the future. As a result, our future cash receipts from existing licenses subject to fixed patent royalties will be lower than if the royalty payments were structured to coincide with the underlying sales. During 2020, we recorded $377.8 million of cash receipts related to patent licensingU.S. and technology solutions agreements as follows (in thousands):

When comparing our 20202023 financial results against the financial results of other periods, the following items should be taken into consideration:

During 2020, 20192023, 2022 and 2018, our patent licensing royalties were derived from patent license agreements ("PLAs") with 76, 692021, approximately 3%, 4% and 66 independent licensees, respectively. We recognized revenue from five, four and three PLAs in 2020, 2019 and 2018, respectively, for which patents generally comprised less than forty-percent of the total consideration paid or due to us under those agreements. In addition, during 2020, 2019 and 2018, we recognized revenue from one PLA that was executed in 2014 in connection with a patent purchase agreement ("PPA") with the licensee. Total cash paid to our licensee under this PPA is approximately 56% of the total cash due to us under this licensee's PLA. During 2020, 2019 and 2018, approximately 7%, 6% and 3%5%, respectively, of our total revenue was based on the estimated fair value of the patents in the above transactions.

The impact that a five-percent change in the estimated aggregate value of the patents acquired would have had on 20202023 revenue, patent amortization and pre-tax income is summarized in the following table (in thousands).:

We use a variety of compensation programs to attract, retain and motivate our employees, and to align employee compensation more closely with company performance. These programs include, but are not limited to, short-term incentives tied to performance goals, cash awards to inventors for filed patent applications and patent issuances, and long-term incentives in the form of stock option awards, time-based restricted stock unit (“RSU”) awards, performance-based RSU awards and cash awards, noting equity awards are granted pursuant to the terms and conditions of our Equity Plans (as defined within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K). Our long-term incentives, including equity awards, typically include annual equity andor cash award grants with three to five year vesting periods; as a result, in any one year, we are typically accounting for at least three active cycles.

We account for compensation costs associated with share-based compensation based on the fair value of the instruments issued. The estimated value of stock options includes assumptions around expected life, stock volatility and dividends. TheFor stock options considered to be “plain vanilla” options, the Company estimates the expected life of our stock option awards isterm based on the simplified method as prescribed by Staff Accounting Bulletin Topic 14. The simplified method was used because the Company does not believe it has sufficient historical exercise data to provide a reasonable basis for the expected term of its grants. In all periods, our policy has been to set the value of RSUs and restricted stock awards equal to the value of our underlying common stock on the date of measurement. For grants with graded vesting, we amortize the associated unrecognized compensation cost using an accelerated method. For grants that cliff vest, we amortize the associated unrecognized compensation cost on a straight-line basis over their vesting term. For awards containing performance conditions, we recognize compensation expense ratably over the vesting period when it is probable that the stated performance targets will be achieved and record cumulative adjustments in the period in which estimates change.

In the event of canceled awards, we adjust compensation expense recognized to date as they occur. Tax windfalls and shortfalls related to the tax effects of employee share-based compensation are included in our tax provision. On the consolidated statements of cash flows, tax windfalls and shortfalls related to employee share-based compensation awards are included within operating activities and cash paid to tax authorities for shares withheld are included within financing activities. The inclusion of windfalls and shortfalls in the tax provision could increase our earnings volatility between periods. Tax windfalls and shortfalls related to share-based compensation was windfalls of $3.1 million and $0.8 million for the years ended 2020, 20192023 and 2018 were $0.2 million, $0.2 million2021, respectively, and $1.8 million, respectively.shortfalls for the year ended 2022 of $0.4 million.

The below table summarizes our supplemental compensation expense for 2020, 20192023, 2022 and 2018,2021, in thousands:

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of income in the period in which the change was enacted. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if management has determined that it is more likely than not that such assets will not be realized.

In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. We are subject to examinations by the U.S. IRS and other taxing jurisdictions on various tax matters, including challenges to various positions we assert in our filings. In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have a material adverse effect on our consolidated financial condition or results of operations.

The financial statement recognition of the benefit for an uncertain tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable tax authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50 percent likely of being realized upon ultimate settlement. In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have a material adverse effect on our consolidated financial condition or results of operations.

Between 2014 and 2020,2023, we paid approximately $134.3$138.1 million in foreign taxes to foreign governments that have tax treaties with the U.S., for which we have claimed foreign tax credits against our U.S. tax obligations, and for which the tax treaty procedures are still open. It is possible that as a result of tax treaty procedures, the U.S. government may reach an agreement with the related foreign governments that will result in a partial refund of foreign taxes paid with a related reduction in our foreign tax credits. Due to foreign currency fluctuations, any such agreement could result in foreign currency gain or loss. If the matter had been resolved as of December 31, 2023, we would have recognized a loss up to $13.8 million based on exchange rates and prior competent authority resolutions.

On November 8, 2019, the Company received notification that its request for competent authority pertaining to Article 25 (Mutual Agreement Procedure) of the United States-Republic of Finland Income Tax Convention had been reviewed by the IRS and an agreement has been reached (the “Finland Competent Authority Proceeding”). As a result of this agreement, the Company does not anticipate any tax consequences.

Legal Proceedings

Our primary sources of liquidity are cash, cash equivalents and short-term investments, as well as cash generated from operations. We believe we have the ability to obtain additional liquidity through debt and equity financings. From time to time, we may engage in a variety of transactions to augment our liquidity position as our business dictates and to take advantage of favorable interest rate environments or other market conditions, including the incurrence or issuance of debt and the refinancing or restructuring of existing debt. Based on our past performance and current expectations, we believe our available sources of funds, including cash, cash equivalents and short-term investments and cash generated from our operations, will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program, and dividend program, forand other contractual obligations discussed below in both the short-term over the next twelve months, and the long-term beyond twelve months.

As of December 31, 20202023 and December 31, 2019,2022, we had the following amounts of cash, cash equivalents, restricted cash, and short-term investments (in thousands):

The net decrease in cash, cash equivalents, restricted cash, and short-term investments was attributable to cash used in financing activities of $132.9$388.8 million and cash used in investing activities of $46.5 million, excluding sales and purchases of short-term investments, of $37.2 million. These uses were partially offset by cash provided by operating activities of $163.5$213.7 million. Cash used in financing activities primarily related to repayment of our 2020 Notes, and dividend payments. Cash used in investing activities, excluding sales and purchases of short-term investments, primarily related to capital investments for patents and fixed assets. Refer to the sections below for further discussion of these items.

We generated the following cash flows from our operating activities in 20202023 and 20192022 (in thousands):

Net cash used in investing activities in 20202023 was $310.0$85.2 million, a $578.3$229.5 million change from $268.3$314.7 million net cash provided by investing activities in 2019.2022. During 2020,2023, we purchased $272.8$38.7 million of short-term marketable securities, net of sales, and received net proceedscapitalized $44.6 million of $4.3 million from our long-term strategic investments.patent costs and property and equipment purchases. During 2019,2022, we sold $296.6purchased $272.0 million of short-term marketable securities, net of purchasessales, and also received initial proceedscapitalized $42.8 million of $10.0 million related to the sale of our Hillcrest product business.patent costs and property and equipment purchases.

Net cash used in financing activities for 20202023 was $132.9$388.8 million, a $43.5$407.4 million change from net cash used inprovided by financing activities of $89.3$18.6 million in 2019.2022. This change was primarily attributable to a $265.3 million increase in share repurchases in 2023 compared to 2022, of which $203.4 million was related to the Company's modified "Dutch auction" tender offer in 2023. The change was also due to net proceeds of $140.2$138.9 million from the debt refinancing (net of related expenses) and $15.7 million proceeds from non-controlling interests received in 2019. These activities were partially offset by a reduction of $195.9 million in share repurchases, a $94.9 million payment on long-term debt related to the repayment of our 2020 Notes, and $5.3 million of proceeds from non-controlling interests received in 2020.2022.

Our combined short-term and long-term deferred revenue balance at December 31, 20202023 was approximately $328.0$377.5 million, an increasea decrease of $57.7$49.2 million from December 31, 2019.2022. Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the December 31, 20202023 deferred revenue balance of $328.0 million by $192.1$153.6 million over the next twelve months.

Our Convertible2027 and 2024 Notes, which for purposes of this discussion are also referred to as the "Convertible Notes", are included in the dilutive earnings per share calculation using the treasury stockif-converted method. Under the treasuryif-converted method, we must assume that conversion of convertible securities occurs at the beginning of the reporting period. The Convertible Notes are convertible into cash up to the aggregate principal amount of the Convertible Notes to be converted and any remaining obligation may be settled in cash, shares of the Company’s common stock method,or a combination thereof. As the principal amount must be paid in cash and only the conversion spread is settled in shares, we only include the net number of incremental shares that would be issued upon conversion. We must calculate the number of shares of our common stock issuable under the terms of the 2024Convertible Notes (as defined herein) based on the average market price of our common stock during the applicable reporting period and include that number in the total diluted shares figure for the period.

At the time we issued the 2024Convertible Notes, we entered into the 2027 Call Spread Transactions and 2024 Call Spread Transactions (defined in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K). The 2024 Call Spread Transactionsthat together were designed to have the economic effect of reducing the net number of shares that will be issued in excess of the principal amount of converted Notes in the event of conversion of the 2024Convertible Notes if the market price per share of our common stock is greater than the strike price of the 2024 Note Hedge Transactions by, in effect, increasing the conversion price of the 2024Convertible Notes from our economic standpoint. However, under GAAP, since the impact of the 2027 Note Hedge Transactions and 2024 Note Hedge Transactions (the(together, the "Note Hedge Transactions") is anti-dilutive, we exclude from the calculation of fully diluted shares the number of shares of our common stock that we would receive from the counterparties to these agreements upon settlement.

During periods in which the average market price of our common stock is above the applicable conversion price of the Convertible Notes ($77.49 per share for the 2027 Notes and $81.29 per share for the 2024 Notes ($81.29 per share as of December 31, 2020)2023) or above the weighted average strike price of the warrants ($109.43106.35 per share for the 2027 Warrant Transactions and $109.43 per share for the 2024 Warrant Transactions as of December 31, 2020)2023), the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted earnings per share. As a result, in periods where the average market price of our common stock is above the conversion price or strike price, as applicable, under the treasury stockif-converted method, we calculate the number of shares issuable under the terms of the 2024Convertible Notes and the warrants based on the average market price of the stock during the period, and include that number in the total diluted shares outstanding for the period.