~~Table of Contents~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-33579

INTERDIGITAL, INC.

(Exact Name of Registrant as Specified in Its Charter)


Pennsylvania						82-4936666
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

200 Bellevue Parkway, Suite 300, Wilmington, DE 19809-3727

(Address of Principal Executive Offices and Zip Code)

(302) 281-3600

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	IDCC	Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Common Stock, par value $0.01 per share			~~29,657,244~~26,407,096
Title of Class			Outstanding at August ~~2, 2022~~1, 2023

INDEX



			PAGES
Part I — Financial Information:			3
Item 1 Financial Statements (unaudited):			3
Condensed Consolidated Balance Sheets — June 3 0 , ~~2022~~2023 and December 31, ~~2021~~2022			3
Condensed Consolidated Statements of Income — Three and ~~Six~~S i x Months Ended June 3 0 , ~~2022~~2023 and ~~2021~~2022			4
Condensed Consolidated Statements of Comprehensive Income — Three and Six Months Ended June 3 0 , ~~2022~~2023 and ~~2021~~2022			5
Condensed Consolidated Statements of Shareholders' Equity — Three and Six Months Ended June ~~30,~~ 3 0 , 2023 and 2022 ~~and 2021~~			6
Condensed Consolidated Statements of Cash Flows — ~~Six~~S ix Months Ended June 3 0 , ~~2022~~2023 and ~~2021~~2022			8
Notes to Condensed Consolidated Financial Statements			9
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			2524
Item 3 Quantitative and Qualitative Disclosures About Market Risk			3837
Item 4 Controls and Procedures			3937
Part II — Other Information:			4038
Item 1 Legal Proceedings			4038
Item 1A Risk Factors			4038
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			4139
Item 4 Mine Safety Disclosures			4139
Item 5 Other Information			39
Item 6 Exhibits			4240
SIGNATURES			4341

InterDigital® is a registered trademark of InterDigital, Inc. All other trademarks, service marks and/or trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

Table of ~~Content~~sContents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)


		JUNE 30, 2022		DECEMBER 31, 2021			JUNE 30, 2023		DECEMBER 31, 2022
ASSETS	ASSETS					ASSETS
CURRENT ASSETS:	CURRENT ASSETS:					CURRENT ASSETS:
Cash and cash equivalents	Cash and cash equivalents	$	833,533	$	706,282	Cash and cash equivalents	$	277,599	$	693,479
Short-term investments	Short-term investments	67,076		235,345		Short-term investments	563,124		508,298
Accounts receivable, less allowances of $0 and $322		48,801		31,113
Accounts receivable						Accounts receivable	236,794		53,182
Prepaid and other current assets	Prepaid and other current assets	86,393		77,545		Prepaid and other current assets	114,630		89,716
Total current assets	Total current assets	1,035,803		1,050,285		Total current assets	1,192,147		1,344,675
PROPERTY AND EQUIPMENT, NET	PROPERTY AND EQUIPMENT, NET	11,261		13,377		PROPERTY AND EQUIPMENT, NET	11,683		11,338
PATENTS, NET	PATENTS, NET	371,687		363,585		PATENTS, NET	336,990		353,999
DEFERRED TAX ASSETS	DEFERRED TAX ASSETS	103,047		98,408		DEFERRED TAX ASSETS	94,278		94,373
OTHER NON-CURRENT ASSETS, NET	OTHER NON-CURRENT ASSETS, NET	95,697		102,501		OTHER NON-CURRENT ASSETS, NET	125,081		95,720
Total non-current assets	Total non-current assets	581,692		577,871		Total non-current assets	568,032		555,430
TOTAL ASSETS	TOTAL ASSETS	$	1,617,495	$	1,628,156	TOTAL ASSETS	$	1,760,179	$	1,900,105
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:	CURRENT LIABILITIES:					CURRENT LIABILITIES:

Current portion of long-term debt						Current portion of long-term debt	$	125,628	$	—
Accounts payable	Accounts payable	$	9,222	$	7,155	Accounts payable	8,313		9,997
Accrued compensation and related expenses	Accrued compensation and related expenses	20,215		32,638		Accrued compensation and related expenses	22,315		38,400
Deferred revenue	Deferred revenue	168,461		291,673		Deferred revenue	172,650		189,059

Dividends payable	Dividends payable	10,380		10,741		Dividends payable	9,273		10,384
Other accrued expenses	Other accrued expenses	24,673		29,354		Other accrued expenses	108,325		23,506
Total current liabilities	Total current liabilities	232,951		371,561		Total current liabilities	446,504		271,346
LONG-TERM DEBT	LONG-TERM DEBT	604,245		422,745		LONG-TERM DEBT	483,917		607,066
LONG-TERM DEFERRED REVENUE	LONG-TERM DEFERRED REVENUE	45,075		19,463		LONG-TERM DEFERRED REVENUE	172,582		237,580
OTHER LONG-TERM LIABILITIES	OTHER LONG-TERM LIABILITIES	49,980		61,470		OTHER LONG-TERM LIABILITIES	56,820		53,600
TOTAL LIABILITIES	TOTAL LIABILITIES	932,251		875,239		TOTAL LIABILITIES	1,159,823		1,169,592
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES	0		0		COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:	SHAREHOLDERS’ EQUITY:					SHAREHOLDERS’ EQUITY:
Preferred Stock, $0.10 par value, 14,399 shares authorized, 0 shares issued and outstanding	Preferred Stock, $0.10 par value, 14,399 shares authorized, 0 shares issued and outstanding	—		—		Preferred Stock, $0.10 par value, 14,399 shares authorized, 0 shares issued and outstanding	—		—
Common Stock, $0.01 par value, 100,000 shares authorized, 71,912 and 71,720 shares issued and 29,657 and 30,689 shares outstanding		719		717
Common Stock, $0.01 par value, 100,000 shares authorized, 69,372 and 71,923 shares issued and 26,569 and 29,668 shares outstanding						Common Stock, $0.01 par value, 100,000 shares authorized, 69,372 and 71,923 shares issued and 26,569 and 29,668 shares outstanding	693		719
Additional paid-in capital	Additional paid-in capital	704,370		713,599		Additional paid-in capital	726,852		717,102
Retained earnings	Retained earnings	1,458,674		1,441,105		Retained earnings	1,396,393		1,492,046
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(938)		(571)		Accumulated other comprehensive loss	(2,176)		(916)
		2,162,825		2,154,850			2,121,762		2,208,951
Treasury stock, 42,255 and 41,031 shares of common stock held at cost		1,484,056		1,409,611
Treasury stock, 42,803 and 42,255 shares of common stock held at cost						Treasury stock, 42,803 and 42,255 shares of common stock held at cost	1,526,545		1,484,056
Total InterDigital, Inc. shareholders’ equity	Total InterDigital, Inc. shareholders’ equity	678,769		745,239		Total InterDigital, Inc. shareholders’ equity	595,217		724,895
Noncontrolling interest	Noncontrolling interest	6,475		7,678		Noncontrolling interest	5,139		5,618
Total equity	Total equity	685,244		752,917		Total equity	600,356		730,513
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,617,495	$	1,628,156	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,760,179	$	1,900,105

The accompanying notes are an integral part of these statements.

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INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

For the Three Months Ended June 30, For the Six Months Ended June 30,
2022 2021 2022 2021
REVENUES:
Patent licensing royalties $ 123,985 $ 86,205 $ 225,064 $ 166,378
Technology solutions 672 1,530 911 3,720
Total Revenue 124,657 87,735 225,975 170,098
OPERATING EXPENSES:
Patent administration and licensing 45,417 40,970 87,512 77,544
Development 17,086 21,870 34,698 44,453
Selling, general and administrative 9,516 14,799 20,400 26,016
Restructuring activities 2,738 13,245 3,280 13,245
Total Operating expenses 74,757 90,884 145,890 161,258
Income (loss) from operations 49,900 (3,149) 80,085 8,840
INTEREST EXPENSE (6,272) (6,666) (11,787) (13,656)
OTHER (EXPENSE) INCOME, NET (15,016) 3,039 (16,021) 3,763
Income (loss) before income taxes 28,612 (6,776) 52,277 (1,053)
INCOME TAX PROVISION (8,028) (21) (13,989) (1,786)
NET INCOME (LOSS) $ 20,584 $ (6,797) $ 38,288 $ (2,839)
Net loss attributable to noncontrolling interest (485) (8,415) (775) (10,028)
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. $ 21,069 $ 1,618 $ 39,063 $ 7,189
NET INCOME PER COMMON SHARE — BASIC $ 0.69 $ 0.05 $ 1.28 $ 0.23
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC 30,413 30,804 30,557 30,820
NET INCOME PER COMMON SHARE — DILUTED $ 0.69 $ 0.05 $ 1.26 $ 0.23
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED 30,710 31,189 30,992 31,192


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
REVENUES	$	101,591	$	124,657	$	303,964	$	225,975






Research and portfolio development	49,878		45,177		99,307		89,354
Licensing	16,644		17,326		38,012		32,856
General and administrative	11,693		9,516		24,008		20,400
Restructuring activities	—		2,738		—		3,280
Total Operating expenses	78,215		74,757		161,327		145,890

Income from operations	23,376		49,900		142,637		80,085

INTEREST EXPENSE	(12,141)		(6,272)		(24,228)		(11,787)
OTHER INCOME (EXPENSE), NET	14,387		(15,016)		27,578		(16,021)
Income before income taxes	25,622		28,612		145,987		52,277
INCOME TAX PROVISION	(4,329)		(8,028)		(21,174)		(13,989)
NET INCOME	$	21,293	$	20,584	$	124,813	$	38,288
Net loss attributable to noncontrolling interest	(490)		(485)		(2,229)		(775)
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.	$	21,783	$	21,069	$	127,042	$	39,063
NET INCOME PER COMMON SHARE — BASIC	$	0.81	$	0.69	$	4.58	$	1.28
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC	26,768		30,413		27,754		30,557
NET INCOME PER COMMON SHARE — DILUTED	$	0.79	$	0.69	$	4.46	$	1.26
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED	27,655		30,710		28,494		30,992

The accompanying notes are an integral part of these statements.

Table of ~~Content~~sContents

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


		For the Three Months Ended June 30,				For the Six Months Ended June 30,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income (loss)		$	20,584	$	(6,797)	$	38,288	$	(2,839)
Net income										Net income	$	21,293	$	20,584	$	124,813	$	38,288
Unrealized loss on investments, net of tax	Unrealized loss on investments, net of tax	(57)		(69)		(367)		(139)		Unrealized loss on investments, net of tax	(1,839)		(57)		(1,260)		(367)
Comprehensive income (loss)		$	20,527	$	(6,866)	$	37,921	$	(2,978)
Comprehensive income										Comprehensive income	$	19,454	$	20,527	$	123,553	$	37,921
Comprehensive loss attributable to noncontrolling interest	Comprehensive loss attributable to noncontrolling interest	(485)		(8,415)		(775)		(10,028)		Comprehensive loss attributable to noncontrolling interest	(490)		(485)		(2,229)		(775)
Total comprehensive income attributable to InterDigital, Inc.	Total comprehensive income attributable to InterDigital, Inc.	$	21,012	$	1,549	$	38,696	$	7,050	Total comprehensive income attributable to InterDigital, Inc.	$	19,944	$	21,012	$	125,782	$	38,696

The accompanying notes are an integral part of these statements.

Table of ~~Content~~sContents

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands, except per share data)

(unaudited)


																								Common Stock							Additional Paid-In Capital		Retained Earnings				Accumulated Other Comprehensive Loss				Treasury Stock						Non-Controlling Interest				Total Shareholders' Equity
		Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Loss		Treasury Stock				Non-Controlling Interest		Total Shareholders' Equity				Shares			Amount								Shares						Amount
		Shares	Amount								Shares			Amount
BALANCE, DECEMBER 31, 2020		71,389	$	714			$	738,481				$	1,413,969	$	(184)	40,573						$	(1,379,611)		$	23,197			$	796,566
Adjustment to Retained Earnings related to adoption of ASU 2020-06		—	—		(55,349)				15,587			—		—		—		—		(39,762)
BALANCE, DECEMBER 31, 2021																						BALANCE, DECEMBER 31, 2021		71,720			$	717			$	713,599			$	1,441,105			$	(571)		41,031			$	(1,409,611)			$	7,678			$	752,917
Net income attributable to InterDigital, Inc.	Net income attributable to InterDigital, Inc.	—	—		—				5,571			—		—		—		—		5,571		Net income attributable to InterDigital, Inc.		—			—				—		17,994				—				—		—				—				17,994
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—	—		—				—			—		—		—		(1,613)		(1,613)		Net loss attributable to noncontrolling interest		—			—				—		—				—				—		—				(290)				(290)
Noncontrolling interest distribution	Noncontrolling interest distribution	—	—		—				—			—		—		—		(1,109)		(1,109)		Noncontrolling interest distribution		—			—				—		—				—				—		—				(1,928)				(1,928)
Noncontrolling interest contributions																						Noncontrolling interest contributions		—			—				—		—				—				—		—				1,500				1,500
Net change in unrealized loss on short-term investments	Net change in unrealized loss on short-term investments	—	—		—				—			(70)		—		—		—		(70)		Net change in unrealized loss on short-term investments		—			—				—		—				(310)				—		—				—				(310)
Dividends declared ($0.35 per share)	Dividends declared ($0.35 per share)	—	—		210				(10,976)			—		—		—		—		(10,766)		Dividends declared ($0.35 per share)		—			—				158		(10,961)				—				—		—				—				(10,803)
Exercise of common stock options	Exercise of common stock options	32	—		737				—			—		—		—		—		737		Exercise of common stock options		24			—				1,226		—				—				—		—				—				1,226
Issuance of common stock, net	Issuance of common stock, net	55	—		(2,962)				—			—		—		—		—		(2,962)		Issuance of common stock, net		139			1				(5,027)		—				—				—		—				—				(5,026)
Amortization of unearned compensation	Amortization of unearned compensation	—	—		2,153				—			—		—		—		—		2,153		Amortization of unearned compensation		—			—				5,386		—				—				—		—				—				5,386
Repurchase of common stock		—	—		—				—			—		91		(5,750)		—		(5,750)
BALANCE, MARCH 31, 2021		71,476	$	714	$	683,270			$	1,424,151		$	(254)	40,664		$	(1,385,361)	$	20,475	$	742,995

BALANCE, MARCH 31, 2022																						BALANCE, MARCH 31, 2022		71,883			$	718			$	715,342	$	1,448,138			$	(881)			41,031		$	(1,409,611)			$	6,960			$	760,666
Net income attributable to InterDigital, Inc.	Net income attributable to InterDigital, Inc.	—	—		—				1,618			—		—		—		—		1,618		Net income attributable to InterDigital, Inc.		—			—				—		21,069				—				—		—				—				21,069
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—	—		—				—			—		—		—		(8,415)		(8,415)		Net loss attributable to noncontrolling interest		—			—				—		—				—				—		—				(485)				(485)
Net change in unrealized loss on short-term investments	Net change in unrealized loss on short-term investments	—	—		—				—			(69)		—		—		—		(69)		Net change in unrealized loss on short-term investments		—			—				—		—				(57)				—		—				—				(57)
Dividends declared ($0.35 per share)	Dividends declared ($0.35 per share)	—	—		158				(10,925)			—		—		—		—		(10,767)		Dividends declared ($0.35 per share)		—			—				153		(10,533)				—				—		—				—				(10,380)
Exercise of common stock options		71	1		3,631				—			—		—		—		—		3,632

Issuance of common stock, net	Issuance of common stock, net	41	—		(711)				—			—		—		—		—		(711)		Issuance of common stock, net		29			1				(708)		—				—				—		—				—				(707)
Amortization of unearned compensation	Amortization of unearned compensation	—	—		3,775				—			—		—		—		—		3,775		Amortization of unearned compensation		—			—				3,977		—				—				—		—				—				3,977
Repurchase of common stock	Repurchase of common stock	—	—		—				—			—		82		(5,391)		—		(5,391)		Repurchase of common stock		—			—				—		—				—				1,224		(74,445)				—				(74,445)
BALANCE, JUNE 30, 2021		71,588	$	715	$	690,123			$	1,414,844		$	(323)	40,746		$	(1,390,752)	$	12,060	$	726,667
Net convertible note hedge transactions, net of tax																						Net convertible note hedge transactions, net of tax		—			—				(54,257)		—				—				—		—				—				(54,257)
Net warrant transactions																						Net warrant transactions		—			—				39,863		—				—				—		—				—				39,863
BALANCE, JUNE 30, 2022																						BALANCE, JUNE 30, 2022		71,912			$	719			$	704,370	$	1,458,674			$	(938)			42,255		$	(1,484,056)			$	6,475			$	685,244

Table of ~~Content~~sContents


																								Common Stock							Additional Paid-In Capital		Retained Earnings				Accumulated Other Comprehensive Loss				Treasury Stock						Non-Controlling Interest				Total Shareholders' Equity
		Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Loss		Treasury Stock				Non-Controlling Interest		Total Shareholders' Equity				Shares			Amount								Shares						Amount
		Shares	Amount								Shares			Amount
BALANCE, DECEMBER 31, 2021		71,720	$	717			$	713,599				$	1,441,105	$	(571)	41,031						$	(1,409,611)		$	7,678			$	752,917
BALANCE, DECEMBER 31, 2022																						BALANCE, DECEMBER 31, 2022		71,923			$	719			$	717,102			$	1,492,046			$	(916)		42,255			$	(1,484,056)			$	5,618			$	730,513
Net income attributable to InterDigital, Inc.	Net income attributable to InterDigital, Inc.	—	—		—				17,994			—		—		—		—		17,994		Net income attributable to InterDigital, Inc.		—			—				—		105,259				—				—		—				—				105,259
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—	—		—				—			—		—		—		(290)		(290)		Net loss attributable to noncontrolling interest		—			—				—		—				—				—		—				(1,739)				(1,739)
Noncontrolling interest distribution		—	—		—				—			—		—		—		(1,928)		(1,928)
Noncontrolling interest contribution		—	—		—				—			—		—		—		1,500		1,500
Net change in unrealized loss on short-term investments		—	—		—				—			(310)		—		—		—		(310)
Dividends declared ($0.35 per share)		—	—		158				(10,961)			—		—		—		—		(10,803)
Exercise of common stock options		24	—		1,226				—			—		—		—		—		1,226
Issuance of common stock, net		139	1		(5,027)				—			—		—		—		—		(5,026)
Amortization of unearned compensation		—	—		5,386				—			—		—		—		—		5,386

BALANCE, MARCH 31, 2022		71,883	$	718	$	715,342			$	1,448,138		$	(881)	41,031		$	(1,409,611)	$	6,960	$	760,666
Net income attributable to InterDigital, Inc.		—	—		—				21,069			—		—		—		—		21,069
Net loss attributable to noncontrolling interest		—	—		—				—			—		—		—		(485)		(485)
Noncontrolling interest contributions																						Noncontrolling interest contributions		—			—				—		—				—				—		—				1,750				1,750
Net change in unrealized loss on short-term investments	Net change in unrealized loss on short-term investments	—	—		—				—			(57)		—		—		—		(57)		Net change in unrealized loss on short-term investments		—			—				—		—				579				—		—				—				579
Dividends declared ($0.35 per share)	Dividends declared ($0.35 per share)	—	—		153				(10,533)			—		—		—		—		(10,380)		Dividends declared ($0.35 per share)		—			—				259		(9,708)				—				—		—				—				(9,449)
Exercise of common stock options	Exercise of common stock options	—	—		—				—			—		—		—		—		—		Exercise of common stock options		13			—				687		—				—				—		—				—				687
Issuance of common stock, net	Issuance of common stock, net	29	1		(708)				—			—		—		—		—		(707)		Issuance of common stock, net		132			1				(6,709)		—				—				—		—				—				(6,708)
Amortization of unearned compensation	Amortization of unearned compensation	—	—		3,977				—			—		—		—		—		3,977		Amortization of unearned compensation		—			—				7,790		—				—				—		—				—				7,790
Repurchase of common stock	Repurchase of common stock	—	—		—				—			—		1,224		(74,445)		—		(74,445)		Repurchase of common stock		(2,739)			(27)				—		(203,354)				—				—		—				—				(203,381)
Net convertible note hedge transactions, net of tax		—	—		(54,257)				—			—		—		—		—		(54,257)
Net warrant transactions		—	—		39,863				—			—		—		—		—		39,863
BALANCE, JUNE 30, 2022		71,912	$	719	$	704,370			$	1,458,674		$	(938)	42,255		$	(1,484,056)	$	6,475	$	685,244
BALANCE, MARCH 31, 2023																						BALANCE, MARCH 31, 2023		69,329			$	693			$	719,129	$	1,384,243			$	(337)			42,255		$	(1,484,056)			$	5,629			$	625,301
Net income attributable to InterDigital, Inc.																						Net income attributable to InterDigital, Inc.		—			—				—		21,783				—				—		—				—				21,783
Net loss attributable to noncontrolling interest																						Net loss attributable to noncontrolling interest		—			—				—		—				—				—		—				(490)				(490)

Net change in unrealized loss on short-term investments																						Net change in unrealized loss on short-term investments		—			—				—		—				(1,839)				—		—				—				(1,839)
Dividends declared ($0.35 per share)																						Dividends declared ($0.35 per share)		—			—				360		(9,633)				—				—		—				—				(9,273)
Exercise of common stock options																						Exercise of common stock options		1			—				12		—				—				—		—				—				12
Issuance of common stock, net																						Issuance of common stock, net		42			—				(1,389)		—				—				—		—				—				(1,389)
Amortization of unearned compensation																						Amortization of unearned compensation		—			—				8,740		—				—				—		—				—				8,740
Repurchase of common stock																						Repurchase of common stock		—			—				—		—				—				548		(42,489)				—				(42,489)
BALANCE, JUNE 30, 2023																						BALANCE, JUNE 30, 2023		69,372			$	693			$	726,852	$	1,396,393			$	(2,176)			42,803		$	(1,526,545)			$	5,139			$	600,356

The accompanying notes are an integral part of these statements.

Table of ~~Content~~sContents

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		For the Six Months Ended June 30,					For the Six Months Ended June 30,
		2022		2021			2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	38,288	$	(2,839)	Net income	$	124,813	$	38,288
Adjustments to reconcile net income to net cash used in operating activities:	Adjustments to reconcile net income to net cash used in operating activities:					Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	40,436		39,550		Depreciation and amortization	39,171		40,436
Non-cash interest expense, net		3,058		3,861
Non-cash interest (income) expense, net						Non-cash interest (income) expense, net	(6,330)		3,058
Non-cash change in fair-value	Non-cash change in fair-value	(1,404)		(949)		Non-cash change in fair-value	(3,258)		(1,404)

Change in deferred revenue	Change in deferred revenue	(127,700)		(86,659)		Change in deferred revenue	(81,407)		(127,700)
Loss on extinguishment of debt	Loss on extinguishment of debt	11,190		—		Loss on extinguishment of debt	—		11,190
Deferred income taxes	Deferred income taxes	9,850		(2,409)		Deferred income taxes	430		9,850

Share-based compensation	Share-based compensation	9,363		5,928		Share-based compensation	16,530		9,363

Impairment of assets	Impairment of assets	2,427		11,000		Impairment of assets	2,500		2,427

(Increase) Decrease in assets
Other						Other	81		—
(Increase) decrease in assets:						(Increase) decrease in assets:
Receivables	Receivables	(17,688)		4,006		Receivables	(183,612)		(17,688)
Deferred charges and other assets	Deferred charges and other assets	1,434		(6,384)		Deferred charges and other assets	(51,818)		1,434
Increase (Decrease) increase in liabilities:
(Decrease) increase in liabilities:						(Decrease) increase in liabilities:
Accounts payable	Accounts payable	5,701		(375)		Accounts payable	(955)		5,701
Accrued compensation and other expenses	Accrued compensation and other expenses	(26,695)		(1,831)		Accrued compensation and other expenses	70,563		(26,695)

Net cash used in operating activities	Net cash used in operating activities	(51,740)		(37,101)		Net cash used in operating activities	(73,292)		(51,740)
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments	Purchases of short-term investments	(1,929)		(327,426)		Purchases of short-term investments	(531,556)		(1,929)
Sales of short-term investments	Sales of short-term investments	166,729		354,165		Sales of short-term investments	485,528		166,729
Purchases of property and equipment	Purchases of property and equipment	(762)		(937)		Purchases of property and equipment	(2,603)		(762)

Capitalized patent costs	Capitalized patent costs	(21,323)		(20,228)		Capitalized patent costs	(18,914)		(21,323)

Long-term investments		—		(1,091)
Net cash provided by investing activities		142,715		4,483

Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(67,545)		142,715
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible senior notes	Proceeds from issuance of convertible senior notes	460,000		—		Proceeds from issuance of convertible senior notes	—		460,000
Purchase of convertible bond hedge	Purchase of convertible bond hedge	(80,500)		—		Purchase of convertible bond hedge	—		(80,500)
Proceeds from issuance of warrants	Proceeds from issuance of warrants	43,700		—		Proceeds from issuance of warrants	—		43,700
Payments on long-term debt	Payments on long-term debt	(282,499)		—		Payments on long-term debt	—		(282,499)

Proceeds from hedge unwind	Proceeds from hedge unwind	11,851		—		Proceeds from hedge unwind	—		11,851
Payment for warrant unwind	Payment for warrant unwind	(3,837)		—		Payment for warrant unwind	—		(3,837)
Payments of debt issuance costs	Payments of debt issuance costs	(8,726)		—		Payments of debt issuance costs	(100)		(8,726)
Repurchase of common stock	Repurchase of common stock	(74,445)		(11,141)		Repurchase of common stock	(245,870)		(74,445)
Net proceeds from exercise of stock options	Net proceeds from exercise of stock options	1,226		4,369		Net proceeds from exercise of stock options	699		1,226
Non-controlling interest contribution	Non-controlling interest contribution	1,500		—		Non-controlling interest contribution	1,750		1,500
Non-controlling interest distribution		—		(1,109)

Taxes withheld upon restricted stock unit vestings	Taxes withheld upon restricted stock unit vestings	(5,733)		(3,673)		Taxes withheld upon restricted stock unit vestings	(8,098)		(5,733)
Dividends paid	Dividends paid	(21,544)		(21,525)		Dividends paid	(19,833)		(21,544)
Net cash provided by (used in) financing activities		40,993		(33,079)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		131,968		(65,697)
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(271,452)		40,993
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH						NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(412,289)		131,968
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	713,224		477,663		CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	703,161		713,224
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	845,192	$	411,966	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	290,872	$	845,192

Refer to Note 1, "Basis of Presentation," for additional supplemental cash flow information. Additionally, refer to Note 6, "Cash, Concentration of Credit Risk and Fair Value of Financial Instruments" for a reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets.

The accompanying notes are an integral part of these statements.

Table of ~~Content~~sContents

INTERDIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~2023

(unaudited)

1. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited, condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of InterDigital, Inc. (individually and/or collectively with its subsidiaries referred to as “InterDigital,” the “Company,” “we,” “us” or “our,” unless otherwise indicated) as of June 30, ~~2022,~~2023, the results of our operations for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 and our cash flows for the six months ended June 30, ~~2022~~2023 and ~~2021.~~2022. The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, do not include all of the detailed schedules, information and notes necessary to state fairly the financial condition, results of operations and cash flows in conformity with United States generally accepted accounting principles (“GAAP”). The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP for year-end financial statements. Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 (our ~~“2021~~“2022 Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”) on February ~~17, 2022.~~15, 2023. Definitions of capitalized terms not defined herein appear within our ~~2021~~2022 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. We have 1one reportable segment.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

InterDigital has analyzed the impact of the ongoing Coronavirus pandemic (“COVID-19”) on its financial statements as of June 30, 2022. InterDigital has determined that the changes to its significant judgments and estimates as a result of COVID-19 did not have a material impact on its financial statements. The potential impact of COVID-19 will continue to be analyzed going forward.

Change in Accounting Policies

There have been no material changes or updates to our existing accounting policies from the disclosures included in our ~~2021~~2022 Form 10-K, except as indicated below in "New Accounting Guidance".

~~Prior Periods' Financial Statement Revision~~

As previously disclosed in our 2021 Form 10-K filed with the SEC on February 17, 2022, during the fourth quarter of 2021, we determined that in our first quarter 2021 adoption of ASU 2020-06, Accounting for Convertible Debt, we incorrectly accounted for the adoption by increasing debt and decreasing retained earnings by $50.2 million, which resulted in a $10.4 million understatement of deferred taxes, $65.8 million understatement of retained earnings and $55.4 million overstatement of additional paid-in capital as of March 31, 2021. While we concluded that this error did not result in our previously issued 2021 interim financial statements being materially misstated, we have corrected the misstatement by revising the accompanying Condensed Consolidated Statement of Shareholder’s Equity as of and for the three and six months ended March 31, 2021 and June 30, 2021, respectively. We will prospectively revise our previously issued financial statements as of and for the interim period ended September 30, 2021 in connection with our third quarter 2022 quarterly filing on Form 10-Q. The accompanying annual footnotes have also been adjusted to reflect such correction.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

During 2022, the Company made reclassifications between the operating expenses lines on the consolidated income statement in order to more clearly reflect the Company’s investments to create and protect the value of our innovations. The Company grouped research and portfolio related costs within the line "Research and portfolio development", previously referred to as "Development", which resulted in reclassifying certain portfolio related costs out of the "Licensing" line, previously referred to as "Patent administration and licensing", and into "Research and portfolio development." The impact of this reclassification was $28.1 million and $54.7 million for the three and six months ended June 30, 2022, respectively. Additionally, the previous "Selling, general, and administrative" line is now referred to as "General and administrative".

During 2022, we updated our disaggregated revenue disclosures to provide information to enable investors to better understand the composition of revenue from contracts with customers. As a result, variable patent royalty revenue and fixed-fee royalty revenue was combined and disaggregated into the Smartphone and CE, IoT/Auto groupings. Additionally, the Other category includes current technology solutions revenues and catch-up revenues is comprised of past patent royalties and revenues from static agreements. We believe this better reflects both our current revenue sources and our growth opportunities across these vertical markets.

Table of ~~Content~~sContents

Supplemental Cash Flow Information

The following table presents additional supplemental cash flow information for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		For the Six Months Ended June 30,					Six months ended June 30,
SUPPLEMENTAL CASH FLOW INFORMATION:	SUPPLEMENTAL CASH FLOW INFORMATION:	2022		2021		SUPPLEMENTAL CASH FLOW INFORMATION:	2023		2022
Interest paid	Interest paid	$	3,938	$	4,000	Interest paid	$	9,312	$	3,938
Income taxes paid, including foreign withholding taxes	Income taxes paid, including foreign withholding taxes	4,363		4,793		Income taxes paid, including foreign withholding taxes	21,132		4,363
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Dividend payable	Dividend payable	10,380		10,794		Dividend payable	9,273		10,380
Accrued debt issuance costs	Accrued debt issuance costs	1,233		—		Accrued debt issuance costs	—		1,233
Right-of-use assets obtained in exchange of operating lease liabilities	Right-of-use assets obtained in exchange of operating lease liabilities	417		—		Right-of-use assets obtained in exchange of operating lease liabilities	93		417
Non-cash acquisition of patents	Non-cash acquisition of patents	30,100		—		Non-cash acquisition of patents	—		30,100
Non-cash distribution of patents	Non-cash distribution of patents	1,928		—		Non-cash distribution of patents	—		1,928
Accrued capitalized patent costs and property and equipment purchases	Accrued capitalized patent costs and property and equipment purchases	3,634		3,561		Accrued capitalized patent costs and property and equipment purchases	729		3,634

Unsettled repurchase of common stock						Unsettled repurchase of common stock	1,998		—

New Accounting Guidance

~~Accounting Standards Update: Issuer’s Accounting for Certain Modifications~~No new accounting pronouncement issued or ~~Exchanges~~effective during first half of ~~Freestanding Equity Classified Written Call Options~~

~~In May 2021, the FASB issued ASU No. 2021-04. The amendments in this ASU are intended~~2023 has or is expected to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options, including warrants, that remain equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, with early adoption allowed. We adopted this guidance as of January 1, 2022 and the adoption did not have a material impact on our condensed consolidated interim financial statements.

Table of ~~Content~~sContents

2. REVENUE

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Three months ended June 30,
2022 2021 Increase/(Decrease)
Variable patent royalty revenue $ 7,673 $ 7,323 $ 350 5 %
Fixed-fee royalty revenue 91,756 69,296 22,460 32 %
Current patent royalties a
99,429 76,619 22,810 30 %
Non-current patent royalties b
24,556 9,586 14,970 156 %
Total patent royalties 123,985 86,205 37,780 44 %
Current technology solutions revenue a
672 1,530 (858) (56) %
Total revenue $ 124,657 $ 87,735 $ 36,922 42 %


	Three months ended June 30,
	2023		2022		Total Increase/(Decrease)
Recurring revenues:
Smartphone	$	85,075	$	87,484	$	(2,409)	(3)	%
CE, IoT/Auto	13,432		11,945		1,487		12	%
Other	566		672		(106)		(16)	%
Total recurring revenues	99,073		100,101		(1,028)		(1)	%
Catch-up revenues a	2,518		24,556		(22,038)		(90)	%
Total revenues	$	101,591	$	124,657	$	(23,066)	(19)	%

Six months ended June 30,
2022 2021 Increase/(Decrease)
Variable patent royalty revenue $ 16,718 $ 14,419 $ 2,299 16 %
Fixed-fee royalty revenue 181,599 138,592 43,007 31 %
Current patent royalties a
198,317 153,011 45,306 30 %
Non-current patent royalties b
26,747 13,367 13,380 100 %
Total patent royalties 225,064 166,378 58,686 35 %
Current technology solutions revenue a
911 3,720 (2,809) (76) %
Total revenue $ 225,975 $ 170,098 $ 55,877 33 %



	Six months ended June 30,
	2023		2022		Total Increase/(Decrease)
Recurring revenues:
Smartphone	$	172,506	$	175,182	$	(2,676)	(2)	%
CE, IoT/Auto	27,518		23,135		4,383		19	%
Other	622		911		(289)		(32)	%
Total recurring revenues	200,646		199,228		1,418		1	%
Catch-up revenues a	103,318		26,747		76,571		286	%
Total revenues	$	303,964	$	225,975	$	77,989	35	%

~~a. Recurring~~(a) Catch-up revenues are comprised of ~~current patent royalties, inclusive of dynamic fixed-fee royalty payments, and current technology solutions revenue from the tables above.~~

~~b. Non-recurring revenues are comprised of non-current patent royalties, which include~~ past patent royalties and ~~royalties~~revenues from static ~~agreements, as well as patent sales from the tables above.~~agreements.

During the six months ended June 30, ~~2022,~~2023, we recognized ~~$164.0~~$102.4 million of revenue that had been included in deferred revenue as of the beginning of the period. As of June 30, ~~2022,~~2023, we had contract assets of ~~$24.5~~$35.1 million and ~~$7.8~~$39.1 million included within "Accounts receivable" and "Other non-current assets, net" in the condensed consolidated balance sheet, respectively. As of December 31, ~~2021,~~2022, we had contract assets of ~~$18.9~~$32.9 million and ~~$8.3~~$2.5 million included within "Accounts receivable" and "Other non-current assets, net" in the condensed consolidated balance sheet, respectively.

Contracted Revenue

Based on contracts signed and committed as of June 30, ~~2022,~~2023, we expect to recognize the following revenue from dynamic fixed-fee royalty payments over the term of such contracts (in thousands):


		Revenue			Revenue (a)
Remainder of 2022		$	148,513
2023		129,365
Remainder of 2023				Remainder of 2023	$	178,651
2024	2024	80,951		2024	297,037
2025	2025	68,573		2025	284,283
2026 and thereafter		5,181
2026				2026	215,618
2027				2027	213,257
2028 and Thereafter				2028 and Thereafter	472,696
Total Revenue	Total Revenue	$	432,583	Total Revenue	$	1,661,542

(a) This table includes our estimated revenue related to Samsung and Lenovo. In accordance with ASC 606, these estimates are limited to the amount of revenue we expect to recognize only to the extent it is probable that a subsequent change in the estimate would not result in a significant revenue reversal.

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3. INCOME TAXES

In the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company had an estimated annual effective tax rate of ~~26.8%~~14.5% and ~~(169.6)%~~26.8%, respectively. The change in effective tax rate is due to an increase in the amount of Foreign Derived Intangible Income deduction benefit available to the Company due to higher taxable income inclusive of timing differences between the recognition of book and tax revenue. Additionally, the effective tax rate in both periods was impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit. Excluding this valuation allowance, our effective tax rate for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 would have been ~~23.2%~~13.0% and ~~104.3%~~23.2%, respectively. During ~~both~~ the six months ended June 30, ~~2022 and 2021,~~2023 the Company recorded a discrete net benefit of ~~$2.2~~$1.2 million ~~and $0.6 million, respectively,~~ primarily related to share-based compensation. The prior period included a net discrete tax expense of $2.3 million related to the extinguishment of long-term debt ~~and share-based compensation.~~recognized during second quarter of 2022.

The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including timing differences between the recognition of book and tax revenue, the level of pre-tax income or loss, the foreign vs. domestic classification of the Company’s customers, and any discrete items that may occur.

During the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the Company paid approximately ~~$3.5~~$6.0 million and ~~$4.0~~$3.5 million, respectively, in foreign source creditable withholding tax.

4. NET INCOME PER SHARE

Basic Earnings Per Share ("EPS") is calculated by dividing net income or loss available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if options or other securities with features that could result in the issuance of common stock were exercised or converted to common stock or resulting from the unvested outstanding restricted stock units ("RSUs"). The following tables reconcile the numerator and the denominator of the basic and diluted net income per share computation (in thousands, except for per share data):

Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Net income applicable to InterDigital, Inc. $ 21,069 $ 1,618 $ 39,063 $ 7,189
Weighted-average shares outstanding:
Basic 30,413 30,804 30,557 30,820
Dilutive effect of stock options, RSUs, convertible securities and warrants 297 385 435 372
Diluted 30,710 31,189 30,992 31,192
Earnings per share:
Basic $ 0.69 $ 0.05 $ 1.28 $ 0.23
Dilutive effect of stock options, RSUs, convertible securities and warrants — — (0.02) —
Diluted $ 0.69 $ 0.05 $ 1.26 $ 0.23

~~Table of Content~~s


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Net income applicable to InterDigital, Inc.	$	21,783	$	21,069	$	127,042	$	39,063
Weighted-average shares outstanding:
Basic	26,768		30,413		27,754		30,557
Dilutive effect of stock options, RSUs, convertible securities and warrants	887		297		740		435
Diluted	27,655		30,710		28,494		30,992
Earnings per share:
Basic	$	0.81	$	0.69	$	4.58	$	1.28
Dilutive effect of stock options, RSUs, convertible securities and warrants	(0.02)		—		(0.12)		(0.02)
Diluted	$	0.79	$	0.69	$	4.46	$	1.26

Shares of common stock issuable upon the exercise or conversion of certain securities have been excluded from our computation of EPS because the strike price or conversion rate, as applicable, of such securities was greater than the average market price of our common stock and, as a result, the effect of such exercise or conversion would have been anti-dilutive. Set forth below are the securities and the weighted average number of shares of common stock underlying such securities that were excluded from our computation of EPS for the periods presented (in thousands):


		Three months ended June 30,		Six months ended June 30,			Three months ended June 30,		Six months ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Restricted stock units and stock options	Restricted stock units and stock options	529	30	471	205	Restricted stock units and stock options	4	529	212	471

Warrants	Warrants	5,880	4,921	5,400	4,921	Warrants	7,488	5,880	7,488	5,400
Total	Total	6,409	4,951	5,871	5,126	Total	7,492	6,409	7,700	5,871

Table of Contents

Convertible Notes and Warrants

Refer to Note 7, "Obligations," for information about the Company's convertible notes and warrants and related conversion and strike prices. During periods in which the average market price of the Company's common stock is above the applicable conversion price of the Company's convertible notes, or above the strike price of the Company's outstanding warrants, the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted EPS. As a result, in periods where the average market price of the Company's common stock is above the conversion price or strike price, as applicable, under the if-converted method, the Company calculates the number of shares issuable under the terms of the convertible notes and the warrants based on the average market price of the stock during the period, and includes that number in the total diluted shares outstanding for the period.

5. LITIGATION AND LEGAL PROCEEDINGS

ARBITRATIONS AND COURT PROCEEDINGS

~~Lenovo~~Lenovo

UK ~~Proceeding~~Proceedings

On August 27, 2019, the Company and certain of its subsidiaries filed a claim in the UK High Court against Lenovo Group Limited and certain of its subsidiaries. The claim, as amended, alleges infringement of five of the Company's patents relating to 3G and/or 4G/LTE standards: European Patent (UK) Nos. 2,363,008; 2,421,318; 2,485,558; 2,557,714; and 3,355,537. The Company ~~is seeking,~~sought, among other relief, injunctive relief to prevent further infringement of the asserted ~~patents.~~patents or, in the alternative, a determination of the terms of a FRAND license.

The UK High Court held case management conferences on October 6, 2020, and December 16, 2020, a disclosure hearing on January 19, 2021, and pre-trial review hearings for the first trial on January 28, 2021, and February 8, 2021. At those hearings, the UK High Court entered a schedule for the technical and non-technical FRAND proceedings. Two technical trials were scheduled for March 2021 and June 2021, and the non-technical FRAND trial was scheduled for January 2022. There are three additional technical trials scheduled for the remaining patents following the FRAND trial. The first and second technical trials were completed, and onOn July 29, 2021, the UK High Court issued its decision regarding the first technical trial finding European Patent (UK) No. 2,485,558 valid, infringed, and essential to Release 8 of LTE. Lenovo appealed this decision, and on January 19, 2023, the UK Court of Appeal upheld the UK High Court’s findings that Lenovo is ~~appealing this decision.~~infringing on InterDigital’s valid and essential patent. On January 6, 2022, the UK High Court issued its decision regarding the second technical trial finding European Patent (UK) No. 3,355,537 invalid, but essential and infringed but for the finding of invalidity. ~~On June 10, 2022,~~The Company appealed this decision as legally erroneous, and on February 9, 2023, the ~~Company sought permission from the~~UK Court of Appeal toallowed the appeal, finding that Lenovo is infringing on InterDigital’s valid and essential patent. On January 31, 2023, the ~~second technical trial~~UK High Court issued its decision ~~as legally erroneous. The FRAND trial commenced on January 11, 2022 and concluded on February 11, 2022. The~~regarding the third technical trial ~~commenced~~finding European Patent (UK) No. 2,421,318 valid, essential, and infringed. On March 7, 2023, the UK High Court issued an order staying all deadlines with respect to the fourth and fifth technical trials. On March 16, 2023, the UK High Court issued its order regarding judgement in the trial to determine how much Lenovo must pay for a license to the Company's portfolio of cellular assets, awarding the Company a lump sum of $138.7 million for such license through December 31, 2023. A form of order hearing took place in May 2023 regarding the license terms, interest, costs, and permission to appeal. On June 27, 2023, the court issued an order awarding the Company an additional $46.2 million, thus increasing the total award to $184.9 million, which was paid on ~~May 10, 2022~~July 11, 2023. The court also found that the Company should pay a portion of Lenovo’s costs and ~~concluded~~granted both parties permission to appeal on ~~May 18, 2022.~~certain grounds. The ~~fourth technical trial is scheduled to commence on October 3, 2022 and expected to be completed by October 17, 2022.~~judge has not yet determined the amount of Lenovo’s costs the Company must pay.

District of Delaware Patent ~~Proceeding~~Proceedings

On August 28, 2019, the Company and certain of its subsidiaries filed a complaint in the United States District Court for the District of Delaware (the ~~“Delaware~~"Delaware District ~~Court”~~Court") against Lenovo Holding Company, Inc. and certain of its subsidiaries alleging that Lenovo infringes eight of ~~InterDigital’s~~the Company's U.S. patents-U.S. Patent Nos. 8,085,665; 8,199,726; 8,427,954; 8,619,747; 8,675,612; 8,797,873; 9,203,580; and 9,456,449-by making, using, offering for sale, and/or selling Lenovo wireless devices with 3G and/or 4G LTE capabilities. As relief, InterDigital is seeking: (a) a declaration that ~~InterDigital~~the Company is not in breach of its relevant FRAND commitments with respect to Lenovo; (b) to the extent Lenovo does not agree to negotiate a worldwide patent license, does not agree to enter into binding international arbitration to set the terms of a FRAND license, and does not agree to be bound by the ~~FRAND~~ terms to be set by the UK High Court in the separately filed UK proceedings described above, an injunction prohibiting Lenovo from continued infringement; (c) damages, including enhanced damages for willful infringement and supplemental damages; and (d) attorneys’ fees and costs.

~~Table of Content~~s

On September 16, 2020, the Delaware District Court entered a schedule for the case, setting a patent jury trial.On March 8, 2021, the Delaware District Court held a claim construction hearing, and the court issued its order on May 10, 2021, construing various disputed terms. On March 24, 2021, the Delaware District Court consolidated the antitrust proceeding discussed below with this patent proceeding. Trial for the consolidated proceedings ~~is scheduled for~~was rescheduled from March 6, 2023 to July 10, 2023, and once again to December 4, 2023. On April 25, 2022, the parties filed a stipulation to stay only the claims relating to U.S. Patent No. 8,199,726. The stipulation was granted. On January 13, 2023, Lenovo filed a motion to sever and stay the Company’s patent infringement claims, requesting that its Sherman Act and breach of FRAND claims proceed to trial. On June 30, 2023, the parties submitted an update to the Court requesting that the case be stayed, and on July 18, 2023 the court ordered that the case be stayed pending all appeals in the UK proceedings.

Table of Contents

District of Delaware Antitrust ~~Proceeding~~Proceedings

On April 9, 2020, Lenovo (United States) Inc. and Motorola Mobility LLC filed a complaint in the Delaware District Court against the Company and certain of its subsidiaries. The complaint alleges that the Company defendants have violated Sections 1 and 2 of the Sherman Act in connection with, among other things, their licensing of 3G and 4G standards essential patents ("SEPs"). The complaint further alleges that the Company defendants have violated their commitment to the ETSI with respect to the licensing of 3G and 4G SEPs on FRAND terms and conditions. The complaint seeks, among other things (i) rulings that the Company defendants have violated Sections 1 and 2 of the Sherman Act and are liable for breach of their ETSI FRAND commitments, (ii) a judgment that the plaintiffs are entitled to a license with respect to the Company's 3G and 4G SEPs on FRAND terms and conditions, and (iii) injunctions against any demand for allegedly excessive royalties or enforcement of the Company defendants' 3G and 4G U.S. SEPs against the plaintiffs or their customers via patent infringement proceedings.

On June 22, 2020, the Company filed a motion to dismiss Lenovo's Sherman Act claims with prejudice, and to dismiss Lenovo's breach of contract claim with leave to re-file as a counterclaim in the Company's legal proceeding against Lenovo in the Delaware District Court discussed above. ~~Oral argument on the Company's motion to dismiss was held on October 27, 2020.~~

On March 24, 2021, the Delaware District Court ruled on the Company’s motion to dismiss.The Delaware District Court dismissed the Sherman Act Section 1 claim without prejudice, denied the motion to dismiss the Sherman Act Section 2 claim, and consolidated the Section 2 and breach of contract claims with Company’s Delaware patent proceeding discussed above. Accordingly, these claims have stayed pending all appeals in the UK proceedings.

China Proceedings

On April 10, 2020, Lenovo (Beijing) Ltd. and certain of its affiliates filed a complaint against the Company and certain of its subsidiaries in the Beijing Intellectual Property Court (the “Beijing IP Court”) seeking a determination of the FRAND royalty rates payable for the Company's Chinese 3G, 4G and 5G SEPs. On February 20, 2021, the Company filed an application challenging the jurisdiction of the Beijing IP Court to take up Lenovo’s complaint. On November 15, 2021, the Beijing IP Court denied the jurisdictional challenge, and the Company filed an appeal with the Supreme People’s Court of the People’s Republic of China ~~(SPC)~~(the “SPC”) on December 14, 2021. ~~The~~That appeal ~~remains pending.~~was denied by the SPC on September 5, 2022, and the case was sent back to the Beijing IP Court. On November 9, 2022, the Company filed a petition to stay the case. On June 12, 2023, the Beijing IP Court decided not to dismiss or stay the case at this time.

On November 26, 2021, the Company was informed that Lenovo had purportedly filed an additional complaint against the Company in the Wuhan Intermediate People’s Court (the “Wuhan Court”) seeking a determination of a global FRAND royalty rate for the period from 2024 to 2029 for the Company’s 3G, 4G, and 5G SEPs. On April 16, 2022, the Company filed an application challenging, among other things, process of service and the jurisdiction of the Wuhan Court. ~~That~~The application remains pending.

Germany Proceedings

On March 25, 2022, March 28, 2022, and April 6, 2022, the Company and certain of its subsidiaries filed patent infringement claims in the Munich and Mannheim Regional Courts against Lenovo and certain of its affiliates, alleging infringement of European Patent Nos. 2,449,782; 2,452,498; 3,624,447 and 3,267,684 relating to HEVC standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. The Mannheim Regional Court held a hearing on April 21, 2023 regarding European Patent No. 3,267,684. The Mannheim Regional Court held a hearing regarding European Patent No. 3,624,447 on May 2, 2023. On May 17, 2023, based on the parties’ agreement, the court ordered a pause in the proceedings regarding European Patent No. 3,624,447. The Munich Regional Court has scheduled hearings regarding European Patent Nos. 2,449,782 and 2,452,498 for September 14, 2023 and June 20, 2024, respectively.

Oppo, OnePlus and realme

UK ~~Proceeding~~Proceedings

On December 20, 2021, the Company filed a patent infringement claim in the UK High Court against Guangdong Oppo Mobile Telecommunications Corp., Ltd. (“Oppo”) and certain of its affiliates, OnePlus Technology (Shenzhen) Co., Ltd. (“OnePlus”) and certain of its affiliates, and realme Mobile Telecommunications (Shenzhen) Co., Ltd. (“realme”) and certain of its affiliates, alleging infringement of European Patent (UK) Nos. 2,127,420; 2,421,318; 2,485,558; and 3,355,537 relating to cellular 3G, 4G/LTE or 5G standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents.

On January 19, 2022, Oppo filed a jurisdictional challenge with the UK High Court which ~~is scheduled for~~the parties have agreed to adjourn pending the outcome of Oppo’s jurisdiction challenge before the UK Supreme Court in a ~~two-day hearing starting October 25, 2022.~~case involving Nokia. On December 8, 2022, the Company received confirmation that Oppo had dropped its jurisdictional challenge with the UK High Court.

Table of ~~Content~~sContents

On March 24, 2023, the parties agreed to stay all technical trials on the basis that European Patent No. 2,485,558 is valid and essential based on the result of Technical Trial A in the Lenovo UK proceedings. The willingness trial is expected to commence on October 23, 2023. The rate determination trial is scheduled to commence on February 26, 2024.

India ~~Proceeding~~Proceedings

On December 20, 2021 and December 22, 2021, the Company and certain of its subsidiaries filed patent infringement claims in the Delhi High Court in New Delhi, India against Oppo and certain of its affiliates, OnePlus and certain of its affiliates, and realme Mobile Telecommunication (India) Private Limited, alleging infringement of Indian Patent Nos. 262910, 295912, 313036, 320182, 319673, 242248, 299448, and 308108 relating to cellular 3G, 4G/LTE, and/or 5G, and HEVC standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents.

Germany ~~Proceeding~~Proceedings

On December 20, 2021, a subsidiary of the Company filed three patent infringement claims, two in the Munich Regional Court and one in the Mannheim Regional Court, against Oppo and certain of its affiliates, OnePlus and certain of its affiliates, and realme and certain of its affiliates, alleging infringement of European Patent Nos. 2,485,558; 2,127,420; and 2,421,318 relating to cellular 3G, 4G/LTE and/or 5G standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. The Munich Regional Court ~~has scheduled hearings for November 17, 2022, and~~held a hearing on December 14, ~~2022.~~2022 regarding European Patent No. 2,421,318, with a second hearing scheduled for October 18, 2023. The ~~Mannheim~~Munich Regional Court held a hearing on March 2, 2023 regarding European Patent No. 2,127,420, with a second hearing scheduled for September 15, 2023. The Munich Regional Court has also scheduled a hearing for ~~December 16, 2022.~~September 19, 2023 on European Patent No. 2,485,558.

China ~~Proceeding~~Proceedings

On January 19, 2022, the Company was informed that Oppo had purportedly filed a complaint against the Company in the Guangzhou Intellectual Property Court (the “Guangzhou IP Court”) seeking a determination of a global FRAND royalty rate for the Company’s 3G, 4G, 5G, 802.11 and HEVC SEPs. On May 20, 2022, the Company filed an application challenging, among other things, process of service and the jurisdiction of the Guangzhou IP Court. ~~That application remains~~On January 12, 2023, the Guangzhou IP Court denied the application. On February 28, 2023, the Company filed an appeal to the decision, which is still pending.

Spain ~~Proceeding~~Proceedings

On March 1, 2022, a subsidiary of the Company filed patent infringement claims in the Barcelona Commercial Courts against Oppo and certain of its affiliates, OnePlus and certain of its affiliates, and realme and certain of its affiliates. The Company filed its amended complaint on April 25, 2022, alleging infringement of European Patent Nos. 3,355,537; 2,485,558; 2,421,318; and 2,557,715 relating to cellular 3G, 4G/LTE and/or 5G standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents.

Samsung

The Company reached an agreement with Samsung Electronics Co. Ltd. (“Samsung”) to enter into binding arbitration to determine the final terms of a renewed patent license agreement to certain of the Company’s patents, which will be effective from January 1, 2023. The Company and Samsung have also agreed not to initiate certain claims against the other during the arbitration. On March 31, 2023, the Company filed a request for arbitration with the International Chamber of Commerce.

On July 21, 2023, the International Chamber of Commerce confirmed the full tribunal for the arbitration, and the first case management conference is scheduled for August 3, 2023.

OTHER

We are party to certain other disputes and legal actions in the ordinary course of business, including arbitrations and legal proceedings with licensees regarding the terms of their agreements and the negotiation ~~thereof.~~thereof. We do not currently believe that these matters, even if adversely adjudicated or settled, would have a material adverse effect on our financial condition, results of operations or cash flows. None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of June 30, ~~2022.~~2023, except as noted above.

Table of Contents

6. CASH, CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash currently consists of money market and demand accounts. The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of June 30, ~~2022,~~2023, December 31, ~~2021~~2022 and June 30, ~~2021~~2022 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):


		June 30,		December 31,		June 30,
		2022		2021		2021			June 30, 2023		December 31, 2022		June 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	833,533	$	706,282	$	410,144	Cash and cash equivalents	$	277,599	$	693,479	$	833,533
Restricted cash included within prepaid and other current assets	Restricted cash included within prepaid and other current assets	10,578		5,861		741		Restricted cash included within prepaid and other current assets	13,273		9,682		10,578
Restricted cash included within other non-current assets	Restricted cash included within other non-current assets	1,081		1,081		1,081		Restricted cash included within other non-current assets	—		—		1,081
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	845,192	$	713,224	$	411,966	Total cash, cash equivalents and restricted cash	$	290,872	$	703,161	$	845,192

Concentration of Credit Risk and Fair Value of Financial Instruments

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents, short-term investments, and accounts receivable. We place our cash equivalents and short-term investments only in highly rated financial instruments, ~~and in~~such as United States government instruments.

~~Table of Content~~s

Our accounts receivable and contract assets are derived principally from patent license and technology solutions agreements. ~~As of June 30, 2022 three~~Four licensees comprised ~~84%~~94% and ~~as of December 31, 2021 four licensees comprised 66%~~76% of our net accounts receivable ~~balance.~~balance as of June 30, 2023 and December 31, 2022, respectively. We perform ongoing credit evaluations of our licensees, who generally include large, multinational, wireless telecommunications equipment manufacturers. We believe that the book values of our financial instruments approximate their fair values.

Fair Value Measurements

We use various valuation techniques and assumptions when measuring the fair value of our assets and liabilities. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. This guidance established a hierarchy that prioritizes fair value measurements based on the types of input used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below:

Level 1 Inputs — Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets.

Level 2 Inputs — Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data, including market interest rate curves, referenced credit spreads and pre-payment rates.

Level 3 Inputs — Level 3 includes financial instruments for which fair value is derived from valuation techniques including pricing models and discounted cash flow models in which one or more significant inputs are unobservable, including the Company’s own assumptions. The pricing models incorporate transaction details such as contractual terms, maturity and, in certain instances, timing and amount of future cash flows, as well as assumptions related to liquidity and credit valuation adjustments of marketplace participants.

Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. We use quoted market prices for similar assets to estimate the fair value of our Level 2 investments.

Table of ~~Content~~sContents

Recurring Fair Value Measurements

Our financial assets are generally included within short-term investments on our condensed consolidated balance sheets, unless otherwise indicated. Our financial assets and liabilities that are accounted for at fair value on a recurring basis are presented in the tables below as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		Fair Value as of June 30, 2022									Fair Value as of June 30, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Money market and demand accounts (a)	Money market and demand accounts (a)	$	845,192	$	—	$	—	$	845,192	Money market and demand accounts (a)	$	260,578	$	—	$	—	$	260,578
Commercial paper (b)	Commercial paper (b)	—		9,993		—		9,993		Commercial paper (b)	—		209,796		—		209,796
U.S. government securities(c)	U.S. government securities(c)	—		43,188		—		43,188		U.S. government securities(c)	—		233,435		—		233,435
Corporate bonds, asset backed and other securities(d)	Corporate bonds, asset backed and other securities(d)	—		13,895		—		13,895		Corporate bonds, asset backed and other securities(d)	—		148,189		—		148,189
Total	Total	$	845,192	$	67,076	$	—	$	912,268	Total	$	260,578	$	591,420	$	—	$	851,998


		Fair Value as of December 31, 2021									Fair Value as of December 31, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Money market and demand accounts (a)	Money market and demand accounts (a)	$	705,725	$	—	$	—	$	705,725	Money market and demand accounts (a)	$	643,825	$	—	$	—	$	643,825
Commercial paper(b)	Commercial paper(b)	—		158,452		—		158,452		Commercial paper (b)	—		209,956		—		209,956
U.S. government securities(c)	U.S. government securities(c)	—		51,301		—		51,301		U.S. government securities(c)	—		243,840		—		243,840
Corporate bonds, asset backed and other securities(d)	Corporate bonds, asset backed and other securities(d)	—		33,091		—		33,091		Corporate bonds, asset backed and other securities(d)	—		113,838		—		113,838
Total	Total	$	705,725	$	242,844	$	—	$	948,569	Total	$	643,825	$	567,634	$	—	$	1,211,459

(a)Primarily included within cash and cash equivalents.

(b)As of June 30, ~~2022~~2023 and December 31, ~~2021, $0.0~~2022, $1.6 million and ~~$7.5~~$26.7 million ~~respectively,~~ of commercial paper was included within cash and cash ~~equivalents.~~equivalents, respectively.

(c)As of June 30, 2023 and December 31, 2022, $17.2 million and $15.7 million of U.S. government securities was included within cash and cash equivalents, respectively.

(d)As of June 30, 2023 and December 31, 2022, $9.5 million and $16.9 million of corporate bonds, asset backed and other securities was included within cash and cash equivalents, respectively.

Non-Recurring Fair Value Measurements

~~Investments in Other Entities~~Patents

During ~~the second~~first quarter ~~2022 and 2021,~~2023, we ~~recognized $1.6~~incurred a one-time impairment of $2.5 million ~~and $1.0 million, respectively, of gains resulting from observable price changes of~~on our ~~long-term strategic investments, which were included within “Other (expense) income, net” in the condensed consolidated statement of income.~~

~~Patents~~

During second quarter 2021, a non-controlled subsidiary that we consolidate for financial statement purposes approved a plan to sell certain patent assets, which were classified as held-for sale. These patents held for ~~sale are recorded at fair value on June 30, 2022 and are included within "Prepaid and other current assets" in the condensed consolidated balance sheet.~~sale. We determined the fair value based upon evaluation of market ~~conditions and recognized an $11.0 million patent impairment during the second quarter 2021.~~conditions.

During fourth quarter 2021, we renewed our multi-year, worldwide, non-exclusive patent license agreement with Sony Corporation of America ("Sony"). A portion of the consideration for the agreement was in the form of patents, which we received in March 2022. We have determined the fair value of the patents for determining the transaction price for revenue recognition purposes, which was estimated to be $30.1 million utilizing the income and market approaches. The value is amortized as a non-cash expense over the patents' estimated useful lives.

Investment in Other Entities

During second quarter 2023, we recognized a $3.1 million gain resulting from fair value changes of one of our long-term strategic investments, which was included within “Other income (expense), net” in the condensed consolidated statement of income.

During second quarter 2022, we recognized a $1.6 million gain resulting from observable price changes of our long-term strategic investments, which were included within “Other income (expense), net” in the condensed consolidated statement of income.

Table of ~~Content~~sContents

Fair Value of Long-Term Debt

Convertible Notes

The principal amount, carrying value and related estimated fair value of the Company's Convertible Notes reported ~~in the condensed consolidated balance sheets~~ as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was as follows (in thousands). The aggregate fair value of the principal amount of the Convertible Notes is a Level 2 fair value measurement.


		June 30, 2022						December 31, 2021							June 30, 2023						December 31, 2022
		Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value			Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
2027 Senior Convertible Long-Term Debt	2027 Senior Convertible Long-Term Debt	$	460,000	$	450,183	$	467,452	$	—	$	—	$	—	2027 Senior Convertible Long-Term Debt	$	460,000	$	451,929	$	619,252	$	460,000	$	451,062	$	441,485
2024 Senior Convertible Long-Term Debt	2024 Senior Convertible Long-Term Debt	$	126,174	$	125,065	$	123,259	$	400,000	$	395,632	$	437,760	2024 Senior Convertible Long-Term Debt	$	126,174	$	125,628	$	154,096	$	126,174	$	125,342	$	119,941

Technicolor Patent Acquisition Long-term Debt

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported ~~in the condensed consolidated balance sheets~~ as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was as follows (in thousands). The aggregate fair value of the Technicolor Patent Acquisition long-term debt is a Level 3 fair value measurement.

June 30, 2022 December 31, 2021
Carrying
Value Fair
Value Carrying
Value Fair
Value
Technicolor Patent Acquisition Long-Term Debt $ 28,997 $ 28,103 $ 27,113 $ 28,569


	June 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Technicolor Patent Acquisition Long-Term Debt	$	31,988	$	29,291	$	30,662	$	28,048

7. OBLIGATIONS

2027 Notes, and Related Note Hedge and Warrant Transactions

On May 27, 2022, we issued $460.0 million in aggregate principal amount of 3.50% Senior Convertible Notes due 2027 (the "2027 Notes"). The net proceeds from the issuance of the 2027 Notes, after deducting the initial purchasers' transaction fees and offering expenses, were approximately $450.0 million. The 2027 Notes bear interest at a rate of 3.50% per year, payable in cash on June 1 and December 1 of each year, commencing on December 1, 2022, and mature on June 1, 2027, unless earlier redeemed, converted or repurchased.

The 2027 Notes will be convertible into cash up to the aggregate principal amount of the notes to be converted and in respect of the remainder, if any, of the Company’s obligation in excess of the aggregate principal amount of the notes being converted, pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, at an initial conversion rate of 12.9041 shares of Common Stock per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $77.49 per share). The conversion rate, and thus the conversion price, may be adjusted under certain circumstances, including in connection with conversions made following fundamental changes and under other circumstances as set forth in the indenture governing the 2027 Notes.

~~Table of Content~~s

Prior to 5:00 p.m., New York City time, on the business day immediately preceding March 1, 2027, the notes will be convertible only under the following circumstances: (1) on any date during any calendar quarter (and only during such calendar quarter) beginning after September 30, 2022 if the closing sale price of the Common Stock was more than 130% of the applicable conversion price on each applicable trading day for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter; (2) if the Company distributes to all or substantially all holders of the Common Stock any rights, options or warrants (other than in connection with a stockholder rights plan prior to separation of such rights from the shares of the Common Stock) entitling them to purchase, for a period of 45 calendar days or less from the issuance date for such distribution, shares of Common Stock at a price per share less than the average closing sale price for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the declaration date for such distribution; (3) if the Company distributes to all or substantially all holders of the Common Stock any cash or other assets, debt securities or rights to purchase the Company’s securities (other than pursuant to a rights plan), which distribution has a per share value exceeding 10% of the closing sale price of the Common Stock on the trading day immediately preceding the declaration date for such distribution; (4) if the Company engages in certain corporate transactions as described in the indenture governing the 2027 Notes; (5) if the Company calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; (6) during a specified period if a fundamental change (as defined in the indenture governing the 2027 Notes) occurs; or (7) during the 5 consecutive business day period following any 5 consecutive trading day period in which the trading price for the notes for each day during such 5 trading day period was less than 98% of the closing sale price of the Common Stock multiplied by the applicable conversion rate on each such trading day. Commencing on March 1, 2027, the notes will be convertible in multiples of $1,000 principal amount, at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date of the notes.

The Company may not redeem the notes prior to June 5, 2025. The Company may redeem for cash all or any portion of the notes, at the Company’s option, on or after June 5, 2025, if the last reported sale price of the Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on and including the trading day preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but excluding the redemption date.

If a fundamental change (as defined in the indenture governing the 2027 Notes) occurs, holders may require the Company to purchase all or a portion of their Notes for cash at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The 2027 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with any of the Company’s current and any future senior unsecured indebtedness, including its 2.00% ~~senior convertible notes~~Senior Convertible Notes due 2024 (the “2024 Notes” and together with the 2027 Notes, the "Convertible Notes"). The 2027 Notes are effectively subordinated to all of the Company’s future secured indebtedness to the extent of the value of the related collateral, and the 2027 Notes are structurally subordinated to indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries.

On May 24 and May 25, 2022, in connection with the offering of the 2027 Notes, we entered into convertible note hedge transactions ~~(collectively, the “2027 Note Hedge Transactions”)~~ that cover, subject to customary anti-dilution adjustments, approximately 5.9 million shares of common stock, in the aggregate, at a strike price that initially corresponds to the initial conversion price of the 2027 Notes, subject to adjustment, and are exercisable upon any conversion of the 2027 Notes. ~~The aggregate cost of the 2027 Note Hedge Transactions was $80.5 million.~~

Also on May 24 and May 25, 2022, we ~~also~~ entered into privately negotiated warrant transactions, ~~(collectively, the “2027 Warrant Transactions” and, together with the 2027 Note Hedge Transactions, the “2027 Call Spread Transactions”),~~ whereby we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 5.9 million shares of common stock at an initial strike price of $106.37 per share, subject to adjustment. As consideration for the 2027 Warrant Transactions, we received aggregate proceeds of $43.7 million. The net cost of the 2027 Call Spread Transactions was $36.8 million, which was funded out of the net proceeds from the offering of the 2027 Notes.

~~Accounting Treatment of the 2027 Notes and Related Convertible Note Hedge and Warrant Transactions~~

~~The 2027 Call Spread Transactions were classified as equity and the 2027 Notes were classified as long-term debt. The effective interest rate is approximately 4.02%.~~

In connection with the above-noted transactions, the Company incurred approximately $10.0 million of directly related costs, which were capitalized as deferred financing costs and as a reduction of long-term debt. These costs are being amortized as interest expense over the term of the debt using the effective interest method.

1918

Table of ~~Content~~sContents

2024 Notes, and Related Note Hedge and Warrant Transactions

On June 3, 2019, we issued $400.0 million in aggregate principal amount of 2024 Notes. The net proceeds from the issuance of the 2024 Notes, after deducting the initial purchasers' transaction fees and offering expenses, were approximately $391.6 million. The 2024 Notes ~~(i)~~ bear interest at a rate of 2.00% per year, payable in cash on June 1 and December 1 of each year, commencing on December 1, 2019, and ~~(ii)~~ mature on June 1, 2024, unless earlier redeemed, converted or repurchased. ~~The effective interest rate of the 2024 Notes is 2.46%.~~

The 2024 Notes are convertible into cash and shares of our common stock, orwith a ~~combination thereof, at~~specified dollar amount of $1,000 per $1,000 principal amount of 2024 Notes and any remaining amounts in shares of our ~~election,~~common stock, at an initial conversion rate of 12.3018 shares of our common stock per $1,000 principal amount of 2024 Notes (which is equivalent to an initial conversion price of approximately $81.29 per share), as adjusted pursuant to the terms of the indenture governing the 2024 Notes. The conversion rate of the 2024 Notes, and thus the conversion price, may be adjusted in certain circumstances, including in connection with a conversion of the 2024 Notes made following certain fundamental changes and under other circumstances set forth in the indenture governing the 2024 Notes. As of December 31, 2020, we made the irrevocable election to settle all conversions of the 2024 Notes through combination settlements of cash and shares of our common stock, with a specified dollar amount of $1,000 per $1,000 principal amount of 2024 Notes and any remaining amounts in shares of our common stock..

The 2024 Notes are senior unsecured obligations of the Company and rank equally in right of payment with any of our current and any future senior unsecured indebtedness. The 2024 Notes are effectively subordinated to all of our future secured indebtedness to the extent of the value of the related collateral, and the 2024 Notes are structurally subordinated to indebtedness and other liabilities, including trade payables, of our subsidiaries.

On May 29 and May 31, 2019, in connection with the offering of the 2024 Notes, we entered into convertible note hedge transactions (collectively, the "2024 Note Hedge Transactions") that cover, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock, in the aggregate, at a strike price that initially corresponds to the initial conversion price of the 2024 Notes, subject to adjustment, and are exercisable upon any conversion of the 2024 Notes. On May 29 and May 31, 2019, we also entered into privately negotiated warrant transactions (collectively, the "2024 Warrant Transactions" and, together with the 2024 Note Hedge Transactions, the "2024 Call Spread Transactions"), whereby we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock at an initial strike price of approximately $109.43 per share, subject to adjustment.

During second quarter 2022, the Company repurchased $273.8 million in aggregate principal amount of the 2024 Notes in privately negotiated transactions concurrently with the offering of the 2027 Notes. We specifically negotiated the repurchase of the 2024 Notes with investors who concurrently purchased the 2027 Notes, such that their purchase of the 2027 Notes funded our repurchase of the 2024 Notes. As a result of the partial repurchase of the 2024 Notes, $126.2 million in aggregate principal amount of the 2024 Notes remained outstanding as of June 30, ~~2022.~~2023. Additionally, in connection with the partial repurchase of the 2024 Notes, the Company entered into partial unwind agreements that amend the terms of the 2024 Note Hedge Transactions to reduce the number of options corresponding to the principal amount of the repurchased 2024 Notes. The unwind agreements also ~~reduce~~reduced the number of warrants exercisable under the 2024 Warrant Transactions. ~~As a result of the partial unwind transactions, approximately~~Approximately 1.6 million shares of common stock in the aggregate were covered under each of the 2024 Note Hedge Transactions and the 2024 Warrant Transactions as of June 30, ~~2022.~~2023. As of June 30, ~~2022,~~2023, the warrants under the 2024 Warrant Transactions had a strike price of approximately $109.43 per share, as adjusted. Proceeds received from the unwind of the 2024 Note Hedge Transactions were $11.9 million, and consideration paid for the unwind of the 2024 Warrant Transactions was $3.8 million, resulting in net proceeds received of $8.0 million for the combined unwind transactions.

Because the concurrent redemption of the 2024 Notes and a portion of issuance of the 2027 Notes were executed with the same investors, we evaluated the transaction as a debt restructuring, on a creditor by creditor basis. The accounting conclusion was based on whether the exchange was a contemporaneous exchange of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor and if it was determined to have substantially different terms. All creditors involved in the repurchase transaction also purchased 2027 Notes in approximately the same or greater amount as the 2024 Notes principal repurchased. Additionally, the repurchase of the 2024 Notes and issuance of the 2027 Notes were deemed to have substantially different terms on the basis that the fair value of the conversion feature increased by more than 10% of the carrying value of the 2024 Notes, and therefore, the repurchase of the 2024 Notes was accounted for as a debt extinguishment. We recognized a $11.2 million loss on extinguishment of debt during second quarter 2022 in connection with this repurchase, which is included within "Other (expense) income, net" in the condensed consolidated statement of income. The loss on extinguishment represents the difference between the fair value of consideration paid to reacquire the 2024 Notes and the carrying amount of the debt, including any unamortized debt issuance costs attributable to the 2024 Notes redeemed. The remaining unamortized debt issuance costs of $1.2 million will continue to be amortized throughout the remaining life of the 2024 Notes.

~~Table of Content~~s

The following table reflects the carrying value of our Convertible Notes long-term debt as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

June 30, 2022 December 31, 2021
2027 Notes 2024 Notes Total 2024 Notes
Principal $ 460,000 $ 126,174 $ 586,174 $ 400,000
Less:
Deferred financing costs (9,817) (1,109) (10,926) (4,368)
Net carrying amount of the Convertible Notes $ 450,183 $ 125,065 $ 575,248 $ 395,632


	June 30, 2023		December 31, 2022
3.50% Senior Convertible Notes due 2027	$	460,000	$	460,000
2.00% Senior Convertible Notes due 2024	126,174		126,174

Less: Deferred financing costs	(8,617)		(9,770)
Net carrying amount of the Convertible Notes	577,557		576,404
Less: Current portion of long-term debt	(125,628)		—
Long-term net carrying amount of the Convertible Notes	$	451,929	$	576,404

The following table presents the amount of interest cost recognized, which is included within "Interest ~~Expense"~~expense" in our condensed consolidated statements of income, for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 relating to the contractual interest coupon and the amortization of deferred financing costs of the Convertible Notes (in thousands):


		Three months ended June 30,									Three months ended June 30,
		2022						2021			2023						2022
		2027 Notes		2024 Notes		Total		2024 Notes			2027 Notes		2024 Notes		Total		2027 Notes		2024 Notes		Total
Contractual coupon interest	Contractual coupon interest	$	1,476	$	1,498	$	2,974	$	2,000	Contractual coupon interest	$	4,025	$	631	$	4,656	$	1,476	$	1,498	$	2,974
Amortization of deferred financing costs	Amortization of deferred financing costs	142		318		460		402		Amortization of deferred financing costs	436		144		580		142		318		460
Total	Total	$	1,618	$	1,816	$	3,434	$	2,402	Total	$	4,461	$	775	$	5,236	$	1,618	$	1,816	$	3,434

Six months ended June 30,
2022 2021
2027 Notes 2024 Notes Total 2024 Notes
Contractual coupon interest $ 1,476 $ 3,498 $ 4,974 $ 4,000
Amortization of deferred financing costs 142 742 884 800
Total $ 1,618 $ 4,240 $ 5,858 $ 4,800

Table of Contents



	Six months ended June 30,
	2023						2022
	2027 Notes		2024 Notes		Total		2027 Notes		2024 Notes		Total
Contractual coupon interest	$	8,050	$	1,262	$	9,312	$	1,476	$	3,498	$	4,974
Amortization of deferred financing costs	867		286		1,153		142		742		884
Total	$	8,917	$	1,548	$	10,465	$	1,618	$	4,240	$	5,858

Technicolor Patent Acquisition Long-Term Debt

On July 30, 2018, we completed our acquisition of the patent licensing business of Technicolor SA ("Technicolor"), a worldwide technology leader in the media and entertainment sector (the "Technicolor Patent Acquisition"). In conjunction with the Technicolor Patent Acquisition, we assumed Technicolor’s rights and obligations under a joint licensing program with Sony relating to digital televisions and standalone computer display monitors, which commenced in 2015 and is referred to as the "Madison Arrangement." An affiliate of CPPIB Credit Investments Inc. ("CPPIB Credit"), a wholly owned subsidiary of Canada Pension Plan Investment Board, is a third-party investor in the Madison Arrangement. CPPIB Credit has made certain payments to Technicolor and Sony and has agreed to contribute cash to fund certain capital reserve obligations under the arrangement in exchange for a percentage of future revenues, specifically through September 11, 2030 in regard to the Technicolor patents.

Upon our assumption of Technicolor’s rights and obligations under the Madison Arrangement, our relationship with CPPIB Credit meets the criteria in ASC 470-10-25 - Sales of Future Revenues or Various Other Measures of Income ("ASC 470"), which relates to cash received from an investor in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent, or contractual right for a defined period. Under this guidance, we recognized the fair value of our contingent obligation to CPPIB Credit, as of the acquisition date, as long-term debt in our condensed consolidated balance sheet. This initial fair value measurement was based on the perspective of a market participant and included significant unobservable inputs which are classified as Level 3 inputs within the fair value hierarchy. The fair value of the long-term debt as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 is disclosed within Note 6, "Cash, Concentration of Credit Risk and Fair Value of Financial Instruments." Our repayment obligations are contingent upon future royalty revenues generated from the Madison Arrangement and there are no minimum or maximum payments under the arrangement.

~~Table of Content~~s

Under ASC 470, amounts recorded as debt are amortized under the interest method. At each reporting period, we will review the discounted expected future cash flows over the life of the obligation. The Company made an accounting policy election to utilize the catch-up method when there is a change in the estimated future cash flows, whereby we will adjust the carrying amount of the debt to the present value of the revised estimated future cash flows, discounted at the original effective interest rate, with a corresponding adjustment recognized as interest expense within “Interest Expense” in the condensed consolidated statements of income. The effective interest rate as of the acquisition date was approximately 14.5%. This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt as of the acquisition date and is used to compute the amount of interest to be recognized each period based on the estimated life of the future revenue streams. During the three and six months ended June 30, ~~2022,~~2023, we recognized $1.0 million and ~~$1.9~~$1.3 million, respectively, of interest expense related to this debt, compared to ~~$0.8~~$1.0 million and ~~$1.6~~$1.9 million during the three and six months ended June 30, ~~2021,~~2022, respectively. This was included within “Interest Expense” in the condensed consolidated statements of income. Any future payments made to CPPIB Credit, or additional proceeds received from CPPIB Credit, will decrease or increase the long-term debt balance accordingly.

Technicolor Contingent Consideration

As part of the Technicolor Patent Acquisition, we entered into a revenue-sharing arrangement with Technicolor that created a contingent consideration liability. Under the revenue-sharing arrangement, Technicolor receives 42.5% of future cash receipts from new licensing efforts from the Madison Arrangement only, subject to certain conditions and hurdles. As of June 30, ~~2022,~~2023, the contingent consideration liability from the revenue-sharing arrangement was deemed not probable and is therefore not reflected within the consolidated financial statements.

Table of Contents

8. VARIABLE INTEREST ENTITIES

As further discussed below, we are the primary beneficiary of 3one variable interest ~~entities.~~entity. As of June 30, ~~2022,~~2023, the ~~combined~~ book ~~values~~value of the assets and liabilities associated with ~~these~~this variable interest ~~entities~~entity included in our condensed consolidated balance sheet were ~~$19.7~~$12.9 million and ~~$0.5~~$0.6 million, respectively. Assets included ~~$6.5~~$4.0 million of cash and cash equivalents, $0.1 million of prepaid and other current assets, and $8.8 million of patents, net. As of December 31, 2022, the book value of the assets and liabilities associated with this variable interest entity included in our condensed consolidated balance sheet were $17.5 million and $1.8 million, respectively. Assets included $4.4 million of cash and cash equivalents, $4.0 million of accounts receivable and prepaid and other current assets, and $9.1 million of patents, net. As of December 31, 2021, the combined book values of the assets and liabilities associated with these variable interest entities included in our condensed consolidated balance sheet were $27.1 million and $2.5 million, respectively. Assets included $5.1 million of cash and cash equivalents, $4.0 million of accounts receivable and prepaid and other current assets, and $18.0 million of patents, net.

Convida Wireless

Convida Wireless was launched in 2013 and most recently renewed in 2021 to combine Sony's consumer electronics expertise with our pioneering IoT expertise to drive IoT communications and connectivity. Based on the terms of the agreement, the parties will contribute funding and resources for additional research and platform development, which we will perform.

Convida Wireless is a variable interest entity. Based on our provision of research and platform development services to Convida Wireless, we have determined that we remain the primary beneficiary for accounting purposes and will continue to consolidate Convida Wireless. For the three and six months ended June 30, ~~2022,~~2023, we allocated approximately $0.5 million and ~~$0.8~~$2.2 million, respectively, of Convida Wireless's net loss to noncontrolling interests held by other parties and for the three and six months ended June 30, ~~2021, we allocated $6.2 million and $7.7 million, respectively.~~

~~Chordant~~

On January 31, 2019, we launched the Company’s Chordant™ business as a standalone company. Chordant is a variable interest entity, and we have determined that we are the primary beneficiary for accounting purposes and consolidate Chordant. For each of the three and six months ended June 30, 2022, we allocated ~~$0.0 million of Chordant's net loss to noncontrolling interests held by other parties, and for the three and six months ended June 30, 2021, we allocated $2.2~~approximately $0.5 million and ~~$2.3~~$0.8 million, respectively. ~~Chordant ceased operations during 2021.~~

~~Signal Trust for Wireless Innovation~~

During 2013, we announced the establishment of the Signal Trust for Wireless Innovation (the “Trust”), the goal of which was to monetize a patent portfolio primarily related to 3G and LTE cellular infrastructure. During fourth quarter 2021, the Trust was fully dissolved and all remaining assets were transferred to us as majority beneficiary.

The Trust was accounted for as a variable interest entity. Based on the terms of the trust agreement, we determined that we were the primary beneficiary for accounting purposes and included the Trust in our consolidated financial statements up to the date of dissolution.

~~Table of Content~~s

9. OTHER INCOME (EXPENSE) ~~INCOME,~~, NET

The amounts included in "Other income (expense) ~~income,~~, net" in the condensed consolidated statements of income for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands):


		Three months ended June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Interest and investment income	Interest and investment income	$	297	$	446	$	506	$	999	Interest and investment income	$	10,254	$	297	$	21,934	$	506

Loss on extinguishment of long-term debt	Loss on extinguishment of long-term debt	(11,190)		—		(11,190)		—		Loss on extinguishment of long-term debt	—		(11,190)		—		(11,190)
Other	Other	(4,123)		2,593		(5,337)		2,764		Other	4,133		(4,123)		5,644		(5,337)
Other (expense) income, net		$	(15,016)	$	3,039	$	(16,021)	$	3,763
Other income (expense), net										Other income (expense), net	$	14,387	$	(15,016)	$	27,578	$	(16,021)

The ~~change~~changes in Other income (expense) ~~income,~~, net for the three and six months ended June 30, 2023 and 2022 ~~and 2021 was $18.1~~were $29.4 million and ~~$19.8~~$43.6 million, respectively. The changes between both the three ~~months ended June 30, 2022~~ and ~~2021 and the~~ six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were primarily due to the $11.2 million loss on extinguishment of the 2024 Notes in second quarter 2022, as described further in Note 7, "~~Obligations~~""Obligations", and an increase in interest and investment income primarily due to aincreased short-term investments made by the Company and market conditions driving higher yields on our short-term investments.

The changes in Other was primarily due to foreign currency translation ~~loss in the three and six months ended June 30, 2022~~ arising from euro translation of our foreign ~~subsidiaries.~~

~~Additionally, Other included gains resulting from observable price changes~~subsidiaries and fair value adjustments of our long-term strategic investments, which were $1.6 million recognized in second quarter 2022 and $1.0 million recognized in second quarter 2021, and a $1.9 million gain on a contract termination recognized in first quarter 2021.investments.

10. OTHER ASSETS AND LIABILITIES

The amounts included in "Prepaid and other current assets" in the consolidated balance sheet as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Tax receivables	Tax receivables	$	63,183	$	57,127	Tax receivables	$	79,801	$	64,117
Restricted cash	Restricted cash	10,578		5,861		Restricted cash	13,273		9,682
Prepaid assets	Prepaid assets	6,085		5,479		Prepaid assets	10,386		9,044
Patents held for sale	Patents held for sale	4,000		4,000		Patents held for sale	—		4,000

Other current assets	Other current assets	2,547		5,078		Other current assets	11,170		2,873
Total Prepaid and other current assets	Total Prepaid and other current assets	$	86,393	$	77,545	Total Prepaid and other current assets	$	114,630	$	89,716

Table of Contents

The amounts included in "Other non-current assets, net" in the consolidated balance sheet as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows (in thousands):


		June 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Contract asset						Contract asset	$	39,147	$	2,544
Tax receivables	Tax receivables	$	24,654	$	30,026	Tax receivables	24,320		29,370
Goodwill						Goodwill	22,421		22,421
Long-term investments	Long-term investments	22,684		21,280		Long-term investments	19,579		19,593
Goodwill		22,421		22,421
Right-of-use assets	Right-of-use assets	14,692		17,851		Right-of-use assets	16,914		18,034
Other non-current assets	Other non-current assets	11,246		10,923		Other non-current assets	2,700		3,758
Total Other non-current assets, net	Total Other non-current assets, net	$	95,697	$	102,501	Total Other non-current assets, net	$	125,081	$	95,720

The amounts included in "Other accrued expenses" in the consolidated balance sheet as of June 30, 2023 and December 31, 2022 were as follows (in thousands):


	June 30, 2023		December 31, 2022
Customer deposit	$	76,100	$	—
Accrued legal fees	22,248		12,230


Other accrued expenses	9,977		11,276
Total Other accrued expenses	$	108,325	$	23,506

The amounts included in "Other long-term liabilities" in the consolidated balance sheet as of June 30, 2023 and December 31, 2022 were as follows (in thousands):


	June 30, 2023		December 31, 2022
Operating lease liabilities	$	18,792	$	19,923

Deferred compensation liabilities	17,352		14,078
Other long-term liabilities	20,676		19,599
Total Other long-term liabilities	$	56,820	$	53,600

11. RESTRUCTURING ACTIVITIES

During second quarter 2021, the Company ~~began the process of a strategic review and~~ undertook certain actions in order to increase focus on core technologies and markets.

On June 10, 2021, the Company announced that, as a result of a strategic review of its research and innovation priorities, it commenced the process of a collective economic layoff in which it proposed a reduction in force of its research and innovation unit. All notices of termination have been issued to the impacted employees.

~~Table of Content~~s

During 2021, Chordant ceased operations. The Company implemented a reduction in workforce action in second quarter 2021.

Additionally, in June 2021, a non-controlled subsidiary that we consolidate for financial statement purposes approved a plan to sell certain patents. The proceeds from the sale of these patents ~~will contribute~~contributed to funding the non-controlled subsidiary's operations. These assets were evaluated as a separate asset group and reclassified as assets held for sale. We determined the fair value based upon evaluation of market conditions. The patents held for sale are included within "~~Prepaid and other current assets" in the consolidated balance sheet.~~

In October 2021, we expanded our restructuring efforts to include general and administrative functions largely centered in the U.S., which resulted in a further reduction in force as well as cuts to our non-labor expenses. These employees were provided notification of termination during fourth quarter 2021.

~~As part of the Company’s ongoing evaluation of its flexible work policy and the impact of returning to the office, the~~The Company ~~has evaluated its current office space footprint and its expected needs going forward. As the result of~~does not anticipate further restructuring costs at this evaluation, during the second quarter 2022, we recognized a $2.4 million impairment, comprised of $0.4 million of property and equipment and $2.0 million of right of use assets, related to the abandonment of portions of three of our leased properties, which was included within “Restructuring activities” in the condensed consolidated statement of income.

~~Restructuring~~time, however these charges are estimated based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts incurred for such activities may differ from amounts initially estimated. ~~The Company may also incur additional costs not currently contemplated due to events that may occur as a result~~

Table of ~~or that are associated with, the reduction in force or other restructuring activities.~~Contents

As of June 30, 2023 and December 31, 2022, the Company's restructuring liability was ~~$8.8~~$1.2 million ~~of which $0.6~~and $4.5 million, ~~was included in "Accounts payable", $0.9 million was included in "Accrued compensation~~respectively, and ~~related expenses", and $7.3 million was~~is included in "Other accrued expenses~~" on our condensed consolidated balance sheet. As of December 31, 2021, the Company's restructuring liability was $18.3 million, of which $12.5 million was included in "Other accrued expenses" and $5.8 million was included in "Other long-term liabilities~~" on our condensed consolidated balance sheet. The following table presents the change in our restructuring liability during the period (in thousands):



Balance as of December 31, ~~2021~~2022	$	~~18,281~~4,495
~~Accrual~~	~~542~~
Cash payments	~~(4,519)~~(1,487)
Other	4252
Balance as of March 31, ~~2022~~2023	$		~~14,346~~3,060
~~Accrual~~	~~310~~
Cash payments	~~(5,199)~~(1,903)
Other	~~(639)~~2
Balance as of June 30, ~~2022~~2023	$	~~8,818~~1,159

The restructuring expenses included in "Restructuring activities" in the condensed consolidated statements of income for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 were as follows (in thousands):


		Three months ended June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Asset impairment	Asset impairment	$	2,427	$	11,000	$	2,427	$	11,000	Asset impairment	$	—	$	2,427	$	—	$	2,427
Severance and other benefits	Severance and other benefits	(221)		11,086		305		11,086		Severance and other benefits	—		(221)		—		305
Outside services and other associated costs	Outside services and other associated costs	532		1,199		548		1,199		Outside services and other associated costs	—		532		—		548
Reimbursement arrangements		—		(10,040)		—		(10,040)

Total	Total	$	2,738	$	13,245	$	3,280	$	13,245	Total	$	—	$	2,738	$	—	$	3,280

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

The following discussion should be read in conjunction with the unaudited, condensed consolidated financial statements and notes thereto contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, in addition to our ~~2021~~2022 Form 10-K, other reports filed with the SEC and the Statement Pursuant to the Private Securities Litigation Reform Act of 1995 — Forward-Looking Statements below.

Throughout the following discussion and elsewhere in this Form 10-Q, we refer to ~~“recurring revenues” and “non-recurring~~“catch-up revenues.” ~~Recurring~~Catch-up revenues are comprised of ~~“current patent royalties” and “current technology solutions revenue.” Non-recurring revenues are comprised of “non-current patent royalties,” which include~~ past patent royalties and ~~royalties~~revenues from static ~~agreements,~~agreements. Previously we referred to catch-up revenues as ~~well as “patent sales.”~~non-recurring revenues.

~~2027 Senior Convertible Notes~~Lenovo Proceedings

On ~~May~~June 27, ~~2022,~~2023, we ~~issued~~were awarded an additional $46.2 million by the ~~$460.0 million aggregate principal 2027 Notes. The net proceeds from~~UK High Court in our case against Lenovo, increasing the ~~offering were approximately $450.0 million after deducting~~total Lenovo must pay for a patent license through 2023 to $184.9 million. We received the initial purchasers' fees and estimated offering expenses. Additionally, on May 24 and May 25, 2022, in connection with the offering of the 2027 Notes, we entered into the 2027 Call Spread Transactions.

~~The net proceeds from the issuance of the 2027 Notes, after deducting fees and offering expenses, were used~~cash payment for the ~~following: (i) $282.5~~full $184.9 million ~~was used to repurchase $273.8 million in aggregate principal amount of~~on July 11, 2023. The Company will defer recognizing any additional catch-up revenue until the 2024 Notes in privately negotiated transactions concurrently with the offering of the 2027 Notes (ii) $74.4 million was used to repurchase shares of common stock at $60.78 per share, the closing price of the stock on May 24, 2022; and (iii) $36.8 million, in addition to the proceeds from the 2027 Warrant Transactions, was used to fund the cost of the 2027 Call Spread Transactions.

The 2027 Notes will be convertible into cash up to the aggregate principal amount of the notes to be converted and in respect of the remainder, if any, of the Company’s obligation in excess of the aggregate principal amount of the notes being converted, pay or deliver, as the case may be, cash, shares of the Company’s common stock (“Common Stock”) or a combination thereof, at the Company’s election, at an initial conversion rate of 12.9041 shares of Common Stock per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $77.49 per share).

~~Refer to~~appeal process progresses. See Note 7,5, “~~Obligations~~Litigation and Legal Proceedings,” into the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further ~~discussion of~~information regarding the ~~2027 Notes and related 2027 Call Spread Transactions.~~Lenovo proceedings.

Share ~~Repurchase Program~~Repurchases

~~On May 6, 2022, the Board of Directors authorized a $100.0~~During second quarter 2023, we repurchased 0.5 million ~~increase to the Company’s existing~~shares for $42.5 million under our share repurchase program (the "2014 Repurchase Program"), bringing the total authorized amount of the 2014 Repurchase Program to $800.0 million. In connection with the issuance of the 2027 Notes, in May 2022 we repurchased 1.2and an additional 0.2 million shares for $15.4 million during the period July 1, 2023 to July 31, 2023.

As of ~~our common stock for $74.4~~July 31, 2023, there was $142.8 million remaining under the share repurchase ~~program.~~authorization, which we plan to utilize to periodically repurchase additional common shares.

Cash & Short-term Investments

As of June 30, ~~2022,~~2023, we had ~~$912.3~~$854.0 million of cash, ~~cash equivalents,~~ restricted cash and short-term investments and an additional ~~$242.8 million~~$1.5 billion of cash payments due under contracted fixed price agreements, ~~including $26.0~~which includes our conservative estimates of the minimum cash receipts that we expect to receive under patent license agreement with Samsung, $184.9 million ~~recorded~~due from Lenovo which was collected early in ~~our $48.8~~third quarter 2023, and $29.5 million of accounts receivable ~~balance. The remaining accounts receivable is primarily related to variable patent royalty revenue.~~due under fixed-fee contracts from other customers.

~~Over 90%~~89% of our recurring revenue comes from ~~fixed price agreements.~~fixed-fee royalties. Such agreements often have prescribed payment schedules that are uneven and sometimes front-loaded, resulting in timing differences between when we collect the cash payments and recognize the related revenue. As a result, our cash receipts due in 2022 from existing agreements are expected to be lower than revenue to be recognized in 2022 from such agreements as noted in the deferred revenue amortization table below.

~~Table of Content~~s

The following table reconciles the timing differences between cash receipts and recognized revenue during the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, including the resulting operating cash flow (in thousands):


		Three months ended June 30,				Six months ended June 30,					Three months ended June 30,				Six months ended June 30,
Cash vs. Non-cash revenue:	Cash vs. Non-cash revenue:	2022		2021		2022		2021		Cash vs. Non-cash revenue:	2023		2022		2023		2022
Fixed fee cash receipts (a)	Fixed fee cash receipts (a)	$	3,339	$	3,050	$	47,142	$	50,362	Fixed fee cash receipts (a)	$	9,406	$	3,339	$	34,075	$	47,142
Other cash receipts (b)	Other cash receipts (b)	16,620		17,808		25,212		28,484		Other cash receipts (b)	11,160		16,620		31,132		25,212
Change in deferred revenue	Change in deferred revenue	76,959		63,230		127,700		86,659		Change in deferred revenue	38,641		76,959		81,407		127,700
Change in receivables	Change in receivables	25,163		(499)		17,688		(4,006)		Change in receivables	92,756		25,163		183,612		17,688
Other(c)	Other(c)	2,576		4,146		8,233		8,599		Other(c)	(50,372)		2,576		(26,262)		8,233
Total Revenue	Total Revenue	$	124,657	$	87,735	$	225,975	$	170,098	Total Revenue	$	101,591	$	124,657	$	303,964	$	225,975
Net cash used in operating activities	Net cash used in operating activities	$	(33,768)	$	(27,259)	$	(51,740)	$	(37,101)	Net cash used in operating activities	$	(45,440)	$	(33,768)	$	(73,292)	$	(51,740)

(a) Fixed fee cash receipts are comprised of cash receipts from Dynamic Fixed-Fee Agreement royalties, including the associated ~~past~~catch-up patent ~~royalties~~royalties.

(b) Other cash receipts are primarily comprised of cash receipts related to our variable patent royalty revenue ~~including the~~and catch-up revenues.

(c) The changes in other are primarily driven by customer deposits partially offset by long-term contract assets associated ~~past patent royalties, current technology solutions~~with revenue ~~royalties from static agreements, and patent sales.~~estimates.

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When we collect payments on a front-loaded basis, we recognize a deferred revenue liability equal to the cash received and accounts receivable recorded ~~which~~that relate to revenue expected to be recognized in future periods. That liability is then reduced as we recognize revenue over the balance of the agreement. The following table shows the projected amortization of our current and ~~long term~~long-term deferred revenue as of June 30, ~~2022~~2023 (in thousands):


		Deferred Revenue			Deferred Revenue (a)
Remainder of 2022		$	137,683
2023		60,979
Remainder of 2023				Remainder of 2023	$	107,837
2024	2024	7,738		2024	125,467
2025	2025	1,956		2025	106,224
2026 and thereafter		5,180
2026				2026	1,011
2027				2027	1,076
2028 and Thereafter				2028 and Thereafter	3,617
Total Revenue	Total Revenue	$	213,536	Total Revenue	$	345,232

(a) This table includes our estimated amortization of deferred revenue related to Lenovo. In accordance with ASC 606, these estimates are limited to the amount of revenue we expect to recognize only to the extent it is probable that a subsequent change in the estimate would not result in a significant revenue reversal.

Revenue

Second quarter 2023 total revenues of $101.6 million, which includes both recurring and catch-up revenues, decreased 19% from second quarter 2022 primarily due to catch-up revenues recognized from two new agreements and connected automobile license agreements signed during second quarter 2022. Second quarter 2023 recurring ~~revenue was $100.1~~revenues were $99.1 million, compared to recurring ~~revenue~~revenues of ~~$78.1~~$100.1 million in second quarter ~~2021,~~2022, a ~~28%~~1% year-over-year ~~increase, primarily driven by two new patent license agreements.~~decrease. In second quarter ~~2022,~~2023, revenues (in descending order) from Apple, Samsung, ~~Amazon,~~Xiaomi, and ~~Xiaomi~~Huawei each comprised 10% or more of our consolidated revenues. Refer to "Results of Operations --Second Quarter ~~2022~~2023 Compared to Second Quarter ~~2021~~2022" for further discussion of our ~~2022~~2023 revenue.

~~Restructuring Activities~~

On June 10, 2021, we announced that, as a result of a strategic review of our research and innovation priorities, we commenced the process of a collective economic layoff in which we proposed a reduction in force of our research and innovation unit. Additionally, in October 2021, we expanded our restructuring efforts to include general and administrative functions largely centered in the U.S. All impacted employees have been provided notification of termination.

As part of the Company’s ongoing evaluation of its flexible work policy and the impact of returning to the office, the Company has evaluated its current office space footprint and its expected needs going forward. As the result of this evaluation, during the second quarter 2022, we recognized a $2.4 million impairment, comprised of $0.4 million of property and equipment and $2.0 million of right of use assets, related to the abandonment of portions of three of our leased properties, which was included within “~~Restructuring activities” in the condensed consolidated statement of income.~~

The Company does not anticipate further significant restructuring charges, however these charges are estimated based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts incurred for such activities may differ from amounts initially estimated.

~~Table of Content~~s

~~Impact of COVID-19 Pandemic~~

The COVID-19 pandemic continues to significantly impact the United States and the rest of the world. Though the COVID-19 pandemic and the measures taken to reduce its transmission, such as the imposition of social distancing and orders to work-from-home and shelter-in-place, have altered our business environment and overall working conditions, we continue to believe that our strategic strengths, including talent, our strong balance sheet, stable revenue base, and the strength of our patent portfolio, will allow us to weather a rapidly changing marketplace.

While the environment in which we conduct our business and our overall working conditions have changed as a result of the COVID-19 pandemic, we experienced a limited impact on our operations and financial position during second quarter 2022. Fixed-fee royalties accounted for 89% of our recurring revenues in fiscal year 2021. These fixed-fee revenues are not directly affected by our related licensees’ success in the market or the general economic climate. To that end, in second quarter 2022, we did not experience a significant impact on our contracted revenue due to COVID-19. Meanwhile, we have taken steps to protect the health and safety of our employees and their families, with the majority of our workforce continuing to work remotely or on a hybrid basis. We returned to in-person work as of April 2022 and all of our locations are open. Despite any remote working conditions, our business activities have continued to operate with minimal interruption, and we expect them to continue to operate efficiently. Although we have resumed work-related travel, a portion of our licensing negotiations, investor presentations and participation in standards organizations and industry events have been virtually. Between March 12, 2020, when we began to work almost entirely remotely, and June 30, 2022, we successfully concluded twenty-one new patent license agreements that we estimate will result in revenues exceeding $620.0 million over their respective lives. Our financial position remains strong, we believe we have sufficient access to capital if needed, and we remain committed to our efforts around cost discipline.

Impact of Inflation and ~~Market~~Other Macroeconomic Factors

We have been actively monitoring the impact of the current macroeconomic environment in the U.S. and globally characterized by ~~increasing~~ inflation, supply chain issues, rising interest rates, labor shortages, and the potential for a recession. These market factors, as well as the impacts of the Russia and Ukraine conflict, have not had a material impact on our business to date. However, if these conditions continue or worsen, they could have an adverse effect on our operating results and our financial condition.

See the section titled “Risk Factors” in the 2022 Form 10-K.

Comparability of Financial Results

When comparing second quarter ~~2022~~2023 financial results against other periods, the following items should be taken into consideration:

•Our second quarter ~~2022 revenue includes $24.6~~2023 revenues include $2.5 million of ~~non-recurring revenue~~catch-up revenues primarily related to two new patent license agreements signed in second quarter ~~2022.~~2023.

•In second quarter ~~2022,~~2023, we ~~repurchased approximately $273.8~~accrued a $1.8 million ~~in aggregate principal amount of our 2024~~one-time charge for a net litigation fee reimbursement associated with the Lenovo proceedings. See Note 5, “Litigation and Legal Proceedings,” to the Notes ~~which resulted in the recognition of a $11.2 million loss on the extinguishment of debt, which was included within “Other (expense) income, net” in the condensed consolidated statement of income. For more information on this transaction, refer~~ to ~~Note 7, "Obligations", within the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~

•In second quarter 2022, we recognized $2.7 million of restructuring expenses, primarily related to aligning our facilities with our current needs. These costs resulted from our restructuring activities as described in Note 11, "~~Restructuring Activities", within the notes to condensed consolidated financial statements~~Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q ~~and are included within “Restructuring activities” in~~for further information regarding the ~~condensed consolidated statement of income.~~Lenovo proceedings.

•InDuring second quarter ~~2022,~~2023, we recognized a ~~$1.6~~$3.1 million gain resulting from ~~observable price~~fair value changes of one of our long-term strategic investments, which was included within ““O~~Other~~ther income (expense) ~~income,~~, net” in the condensed consolidated statement of income.

~~Table of Content~~s

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 2, "Summary of Significant Accounting Policies and New Accounting Guidance", in the notes to consolidated financial statements included in our ~~2021~~2022 Form 10-K. A discussion of our critical accounting policies, and the estimates related to them, are included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2021~~2022 Form 10-K. There have been no material changes to our existing critical accounting policies from the disclosures included in our ~~2021~~2022 Form 10-K. In addition, we have analyzed the impact of COVID-19 on our financial statements as of June 30, 2022, and we have determined that the changes to our significant judgments and estimates did not have a material impact on our financial statements. Refer to Note 1, “Basis of Presentation,” in the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for updates related to new accounting pronouncements and changes in accounting policies.

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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

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, dividend program, and other contractual obligations discussed below in both the short-term over the next twelve months, and the long-term beyond twelve months.

Cash, cash equivalents, restricted cash and short-term investments

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had the following amounts of cash and cash equivalents, restricted cash and short-term investments (in thousands):


		June 30, 2022		December 31, 2021		Increase / (Decrease)			June 30, 2023		December 31, 2022		Increase /(Decrease)
Cash and cash equivalents	Cash and cash equivalents	$	833,533	$	706,282	$	127,251	Cash and cash equivalents	$	277,599	$	693,479	$	(415,880)
Restricted cash included within prepaid and other current assets	Restricted cash included within prepaid and other current assets	10,578		5,861		4,717		Restricted cash included within prepaid and other current assets	13,273		9,682		3,591
Restricted cash included within other non-current assets		1,081		1,081		—

Short-term investments	Short-term investments	67,076		235,345		(168,269)		Short-term investments	563,124		508,298		54,826
Total cash, cash equivalents, restricted cash and short-term investments	Total cash, cash equivalents, restricted cash and short-term investments	$	912,268	$	948,569	$	(36,301)	Total cash, cash equivalents, restricted cash and short-term investments	$	853,996	$	1,211,459	$	(357,463)

The net decrease in cash, cash equivalents, restricted cash and short-term investments was ~~primarily~~ attributable to cash used in financing activities of $271.5 million, cash used in operating activities of ~~$51.7~~$73.3 million, and cash used in investing activities of ~~$22.1~~$21.5 million, excluding sales and purchases of short-term ~~investments, partially offset by cash provided by financing activities of $41.0 million, primarily consisting of net proceeds from the debt refinancing.~~investments. Refer to the sections below for further discussion of these items.

Cash flows ~~used in~~from operating activities

Cash flows used in operating activities in the first half ~~2022~~2023 and ~~2021~~2022 (in thousands) were as follows:

Six months ended June 30,
2022 2021 Change
Net cash used in operating activities $ (51,740) $ (37,101) $ (14,639)


	Six months ended June 30,
	2023		2022		Change
Net cash used in operating activities	$	(73,292)	$	(51,740)	$	(21,552)

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Our cash flows used in operating activities are principally ~~derived from cash receipts from patent license and technology solutions agreements, offset~~driven by cash operating expenses and income tax ~~payments.~~payments, offset by cash receipts from patent license agreements. The ~~$14.6~~$21.6 million change in net cash used in operating activities was primarily driven by ~~non-cash revenue, partially offset by lower~~a federal tax payment paid in first half 2023, an increase in cash operating expenses ~~benefiting from~~and lower cash receipts due to the ~~cost-savings actions taken~~timing of cash receipts related to existing patent license agreements. For more information on the change in ~~2021.~~operating expenses refer to "Results of Operations --Second Quarter 2023 Compared to Second Quarter 2022" below. The table below sets forth the significant items comprising our cash flows ~~provided by~~used in operating activities during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Six months ended June 30,							Six months ended June 30,
		2022		2021		Change			2023		2022		Change
Cash Receipts:
Patent royalties		$	72,066	$	75,435	$	(3,369)
Technology solutions		288		3,412		(3,124)
Total cash receipts		72,354		78,847		(6,493)
Total Cash Receipts								Total Cash Receipts	$	65,207	$	72,354	$	(7,147)

Cash Outflows:	Cash Outflows:							Cash Outflows:
Cash operating expenses a	Cash operating expenses a	93,664		105,729		(12,065)		Cash operating expenses a	103,045		93,664		9,381
Income taxes paid b	Income taxes paid b	4,363		4,793		(430)		Income taxes paid b	21,132		4,363		16,769
Total cash outflows	Total cash outflows	98,027		110,522		(12,495)		Total cash outflows	124,177		98,027		26,150

Other working capital adjustments	Other working capital adjustments	(26,067)		(5,426)		(20,641)		Other working capital adjustments	(14,322)		(26,067)		11,745

Cash flows used in operating activities	Cash flows used in operating activities	$	(51,740)	$	(37,101)	$	(14,639)	Cash flows used in operating activities	$	(73,292)	$	(51,740)	$	(21,552)

(a) Cash operating expenses include operating expenses less depreciation and disposals of fixed assets, amortization of patents, non-cash compensation and non-cash ~~changes in fair value.~~impairment charges.

(b) Income taxes paid include foreign withholding taxes.

Cash flows from investing and financing activities

Net cash used in investing activities for first half 2023 was $67.5 million, a $210.3 million change from $142.7 million of net cash provided by investing activities ~~for the~~in first half ~~2022 was $142.7 million, a $138.2 million change from $4.5 million in the~~2022. During first half ~~2021.~~2023, we purchased $46.0 million of short-term marketable securities, net of sales, and capitalized $21.5 million of patent costs and property and equipment purchases. During ~~the~~ first half 2022, we sold $164.8 million of short-term marketable securities, net of purchases, and we capitalized $22.1 million of patent costs and property ~~plant~~ and equipment purchases. During the first half 2021, we sold $26.7 million of short-term marketable securities, net of purchases, we capitalized $21.2 million of patent costs and property plant and equipment purchases, and invested $1.1 million in a new strategic investment.

Net ~~cash provided by financing activities for the first half 2022 was $41.0 million, a change of $74.1 million from $33.1 million net~~ cash used in financing activities for first half 2023 was $271.5 million, a change of $312.4 million from net cash provided by financing activities of $41.0 million the first half ~~2021.~~2022. This change was primarily attributable to a $171.4 million increase in share repurchases in first half 2023 compared to first half 2022, of which $203.4 million was related to the Company's modified "Dutch auction" tender offer in first quarter 2023. The change was also due to net proceeds of $140.0 million from the debt refinancing ~~partially offset by a $63.3 million increase in share repurchases.~~during first half 2022.

Other

Our combined short-term and long-term deferred revenue balance as of June 30, ~~2022~~2023 was approximately ~~$213.5~~$345.2 million, a net decrease of ~~$97.6~~$81.4 million from December 31, ~~2021.~~2022. This decrease in deferred revenue was primarily ~~attributable~~due to amortization of deferred revenue recognized in the period, partially offset by cash receipts ~~and non-cash patent acquisitions from previously disclosed~~on existing patent license agreements.

Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the June 30, ~~2022~~2023 deferred revenue balance of ~~$213.5~~$345.2 million by ~~$168.5~~$172.7 million over the next twelve months.

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Convertible Notes

See Note 7, “Obligations” to the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for definitions of capitalized terms below.

Our 2027 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 if-converted method. Under the if-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~~converted. Any remaining obligation of the 2027 Notes may be settled in cash, shares of the Company’s common stock or a combination ~~thereof.~~thereof and any remaining obligation of the 2024 Notes is settled in shares of our common stock. 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 Convertible Notes 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 Convertible Notes, we entered into the 2027 Call Spread Transactions and 2024 Call Spread Transactions that together were designed to have the economic effect of reducing the net number of shares that will be issued in the event of conversion of the Convertible Notes by, in effect, increasing the conversion price of the Convertible Notes from our economic standpoint. However, under GAAP, since the impact of the 2027 Note Hedge Transactions and 2024 Note Hedge Transactions (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 as of June 30, ~~2022)~~2023) or above the strike price of the warrants ($106.37 per share for the 2027 Warrant Transactions and $109.43 per share for the 2024 Warrant Transactions as of June 30, ~~2022)~~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 if-converted method, we calculate the number of shares issuable under the terms of the Convertible 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.

Under the if-converted method, changes in the price per share of our common stock can have a significant impact on the number of shares that we must include in the fully diluted earnings per share calculation. As described in Note 7, "Obligations," 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 in cash, shares of the Company’s common stock or a combination ~~thereof.~~thereof ("net share settlement"). Assuming net share settlement upon conversion, the following tables illustrate how, based on the $460.0 million aggregate principal amount of the 2027 Notes and the $126.2 million aggregate principal amount of the 2024 Notes outstanding as of June 30, ~~2022,~~2023, and the approximately 5.9 million warrants related to the 2027 Notes and the 1.6 million warrants remaining related to the 2024 Notes, outstanding as of the same date, changes in our stock price would affect (i) the number of shares issuable upon conversion of the Convertible Notes, (ii) the number of shares issuable upon exercise of the warrants subject to the 2027 Warrant Transactions and 2024 Warrant Transactions (together, the "Warrant Transactions"), (iii) the number of additional shares deemed outstanding with respect to the Convertible Notes, after applying the if-converted method, for purposes of calculating diluted earnings per share ("Total If-Converted Method Incremental Shares"), (iv) the number of shares of our common stock deliverable to us upon settlement of the Note Hedge Transactions and (v) the number of shares issuable upon concurrent conversion of the Convertible Notes, exercise of the warrants subject to the Warrant Transactions, and settlement of the Note Hedge Transactions:

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2027 Notes
Market Price Per Share	Shares Issuable Upon Conversion of the 2027 Notes	Shares Issuable Upon Exercise of the 2027 Warrant Transactions	Total If-Converted Method Incremental Shares	Shares Deliverable to InterDigital upon Settlement of the 2027 Note Hedge Transactions	Incremental Shares Issuable (a)
	(Shares in thousands)
$80	186	—	186	(186)	—
$85	524	—	524	(524)	—
$90	825	—	825	(825)	—
$95	1,094	—	1,094	(1,094)	—
$100	1,336	—	1,336	(1,336)	—
$105	1,555	—	1,555	(1,555)	—
$110	1,754	196	1,950	(1,754)	196
$115	1,936	445	2,381	(1,936)	445
$120	2,103	674	2,777	(2,103)	674
$125	2,256	885	3,141	(2,256)	885


2024 Notes
Market Price Per Share	Shares Issuable Upon Conversion of the 2024 Notes	Shares Issuable Upon Exercise of the 2024 Warrant Transactions	Total If-Converted Method Incremental Shares	Shares Deliverable to InterDigital upon Settlement of the 2024 Note Hedge Transactions	Incremental Shares Issuable (a)
	(Shares in thousands)
$85	68	—	68	(68)	—
$90	150	—	150	(150)	—
$95	224	—	224	(224)	—
$100	290	—	290	(290)	—
$105	351	—	351	(351)	—
$110	405	8	413	(405)	8
$115	455	75	530	(455)	75
$120	501	137	638	(501)	137
$125	543	193	736	(543)	193
$130	582	246	828	(582)	246

(a) Represents incremental shares issuable upon concurrent conversion of convertible notes, exercise of warrants and settlement of the hedge agreements.

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RESULTS OF OPERATIONS

Second Quarter ~~2022~~2023 Compared to Second Quarter ~~2021~~2022

Revenues

The following table compares second quarter ~~2022~~2023 revenues to second quarter ~~2021~~2022 revenues (in thousands):

Three months ended June 30,
2022 2021 Total Increase/(Decrease)
Variable patent royalty revenue $ 7,673 $ 7,323 $ 350 5 %
Fixed-fee royalty revenue 91,756 69,296 22,460 32 %
Current patent royalties a
99,429 76,619 22,810 30 %
Non-current patent royalties b
24,556 9,586 14,970 156 %
Total patent royalties 123,985 86,205 37,780 44 %
Current technology solutions revenue a
672 1,530 (858) (56) %
Total revenue $ 124,657 $ 87,735 $ 36,922 42 %


	Three months ended June 30,
	2023		2022		Increase/(Decrease)
Recurring revenues:
Smartphone	$	85,075	$	87,484	$	(2,409)	(3)	%
CE, IoT/Auto	13,432		11,945		1,487		12	%
Other	566		672		(106)		(16)	%
Total recurring revenues	99,073		100,101		(1,028)		(1)	%
Catch-up revenues a	2,518		24,556		(22,038)		(90)	%
Total revenues	$	101,591	$	124,657	$	(23,066)	(19)	%

~~a. Recurring~~(a) Catch-up revenues are comprised of ~~current patent royalties, inclusive of dynamic fixed-fee royalty payments, and current technology solutions revenue from the table above.~~

~~The increase in~~Total revenues of $101.6 million, which includes both ~~total~~recurring and ~~recurring revenue was~~catch-up revenues, decreased $23.1 million primarily ~~driven by previously disclosed new~~due to catch-up revenues related to two previously-announced patent license agreements and connected automobile license agreements recognized in second quarter 2022, compared to catch-up revenues recognized on two ~~new~~patent license agreements signed in second quarter ~~2022, as well as~~2023. Recurring revenues ~~from connected automobile license agreements with GM and Ford Motor Company through a licensing platform. These increases~~ were ~~partially offset by a decrease in technology solutions revenues from a contract that was terminated in the first half of 2021. Non-recurring revenue in~~flat compared to second quarter ~~2021 primarily related to a static fixed-fee patent licensing agreement signed in second quarter 2021.~~2022.

In second quarter 2023 and 2022, 78% and ~~second quarter 2021,~~ 70% ~~and 79%~~, respectively, of our total revenue ~~respectively,~~ was attributable to licensees that individually accounted for 10% or more of our total revenue. In second quarter ~~2022~~2023 and ~~second quarter 2021,~~2022, the following licensees accounted for 10% or more of our total revenue:


		Three months ended June 30,			Three months ended June 30,
		2022	2021		2023	2022
Customer A	Customer A	28%	32%	Customer A	33%	28%
Customer B	Customer B	16%	22%	Customer B	19%	16%
Customer C	Customer C	14%	—%	Customer C	15%	12%
Customer D	Customer D	12%	—%	Customer D	11%	<10%
Customer E	Customer E	<10%	13%	Customer E	<10%	14%
Customer F		<10%	12%

Operating Expenses

The following table summarizes the changes in operating expenses between second quarter ~~2022~~2023 and second quarter ~~2021~~2022 by category (in thousands):

Three months ended June 30,
2022 2021 Increase/(Decrease)
Patent administration and licensing $ 45,417 $ 40,970 $ 4,447 11 %
Development 17,086 21,870 (4,784) (22) %
Selling, general and administrative 9,516 14,799 (5,283) (36) %
Restructuring activities 2,738 13,245 (10,507) 100 %
Total operating expenses $ 74,757 $ 90,884 $ (16,127) (18) %


	Three months ended June 30,
	2023		2022		Increase/(Decrease)
Research and portfolio development	$	49,878	$	45,177	$	4,701	10	%
Licensing	16,644		17,326		(682)		(4)	%
General and administrative	11,693		9,516		2,177		23	%
Restructuring activities	—		2,738		(2,738)		(100)	%
Total Operating expenses	$	78,215	$	74,757	$	3,458	5	%

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Operating expenses ~~decreased~~increased to $78.2 million in second quarter 2023 from $74.8 million in second quarter ~~2022 from $90.9~~2022. The $3.5 million ~~in second quarter 2021. The $16.1 million decrease~~increase in total operating expenses was primarily due to changes in the following items (in thousands):


	Increase/(Decrease)
~~Restructuring activities~~Share-based compensation	$	~~(10,507)~~4,756
~~Personnel-related costs~~Fair value changes of deferred compensation liability	~~(9,204)~~2,676
One-time net litigation fee reimbursement	1,800
Intellectual property enforcement and non-patent litigation	~~3,392~~ (3,778)
~~Revenue share and commissions~~Restructuring activities	~~1,157~~ (2,738)
Other	~~(965)~~742
Total ~~decrease~~increase in operating expenses	$	~~(16,127)~~3,458

The ~~$16.1~~$3.5 million ~~decrease~~increase in operating expenses was primarily due to a ~~$10.5~~$4.8 million ~~reduction~~increase in ~~non-recurring charges, substantially related~~share-based compensation costs driven by both higher accrual rates and higher award levels to ~~the company's previously announced restructuring plans,~~non-executive employees and a ~~$9.2~~$2.7 million ~~decrease in personnel-related costs primarily driven by cost-savings actions taken in 2021. These decreases were partially~~increase from fair value changes of our deferred compensation liability, which was offset by ~~$3.4~~a related gain recorded within "Other income (expense), net" on the investments that we hold under this plan. Additionally, second quarter 2023 included a one-time $1.8 million ~~of additional intellectual property enforcement costs~~net litigation fee reimbursement related to the Lenovo ~~and Oppo litigations and $1.2 million of additional revenue share and commissions costs due to the new licensing successes.~~proceedings.

~~Patent Administration and Licensing Expense:~~ The $4.4 million increase in patent administration and licensing expense was primarily due to the above noted increase in intellectual property enforcement costs, as well as an increase in patent amortization expense. These increases were partially offset by a $3.8 million decrease in ~~personnel-related costs.~~intellectual property enforcement costs driven by decreased costs from the Lenovo proceedings and a $2.7 million decrease in non-recurring restructuring activities recognized in second quarter 2022.

Research and portfolio development expense: The $4.7 million increase in research and portfolio development expense was primarily driven by the above-noted increases in share-based compensation and fair value changes of our deferred compensation liability.

~~Development Expense:~~Licensing expense: ~~Development~~Licensing expense ~~decreased $4.8 million primarily due~~was relatively flat as compared to ~~the above noted~~second quarter 2022. The decrease in ~~personnel-related~~intellectual property enforcement costs ~~as well as a decrease~~was offset primarily by the above-noted increases in ~~consulting costs.~~share-based compensation and fair value changes of our deferred compensation liability.

~~Selling,~~ General and ~~Administrative Expense:~~administrative expense: ~~Selling, general~~General and administrative expense ~~decreased $5.3~~increased $2.2 million, primarily ~~due to~~driven by the ~~above noted decrease~~above-noted increases in ~~personnel-related costs.~~share-based compensation and fair value changes of our deferred compensation liability.

Restructuring ~~Activities:~~activities: Restructuring expenses associated with our overall restructuring plan decreased due to the plan ~~commencing~~being substantially complete in 2022.

Non-Operating Income (Expense), net

The following table compares second quarter 2023 non-operating income (expense), net to second quarter 2022 non-operating income (expense), net (in thousands):


	Three months ended June 30,
	2023		2022		Increase/(Decrease)
Interest expense	$	(12,141)	$	(6,272)	$	(5,869)	(94)	%
Interest and investment income	10,254		297		9,957		3,353	%

Loss on extinguishment of long-term debt	—		(11,190)		11,190		(100)	%
Other	4,133		(4,123)		8,256		(200)	%
Total non-operating income (expense), net	$	2,246	$	(21,288)	$	23,534	111	%

Interest expense increased primarily due to significant financing expense resulting from a previously announced patent license agreement and additional interest on the ~~initial accrual being recorded~~2027 Notes issued during second quarter ~~2021. For more information~~2022. Also in second quarter 2022, there was a $11.2 million loss on extinguishment of the ~~restructuring activities, refer to~~2024 Notes, as described further Note ~~11,~~7, "~~Restructuring Activities~~Obligations" within the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~Non-Operating Expense~~

The ~~following table compares second quarter 2022 non-operating expense to second quarter 2021 non-operating expense (in thousands):~~

Three months ended June 30,
2022 2021 Increase/(Decrease)
Interest expense $ (6,272) $ (6,666) $ 394 6 %
Interest and investment income 297 446 (149) (33) %
Loss on extinguishment of long-term debt (11,190) — (11,190) — %
Other (expense) income, net (4,123) 2,593 (6,716) (259) %
Total non-operating expense $ (21,288) $ (3,627) $ (17,661) (487) %

~~The $17.7~~$10.0 million ~~change~~increase in ~~non-operating expenses between the second quarter 2022~~interest and ~~2021~~investment income was primarily due to increased short-term investments made by the ~~$11.2~~Company and market conditions driving higher yields the short-term investments. The change in Other was primarily due to fair value adjustments of our investments resulting in a $3.9 million net gain in 2023, compared to a $0.3 million net loss ~~on extinguishment of the 2024 Notes, as described further~~ in ~~Note 7, "Obligations~~",2022 and due to a foreign currency translation ~~loss of $3.6 million in the second quarter 2022~~net gain arising from euro translation of our foreign subsidiaries ~~compared to a foreign currency translation gain~~ of ~~$1.1~~$0.4 million in second quarter ~~2021.~~

~~Additionally, in both periods we recognized gains resulting from observable price changes of our long-term strategic investments, which were $1.6~~2023, compared to a $3.6 million ~~recognized~~net loss in second quarter ~~2022 and $1.0 million recognized in second quarter 2021.~~2022.

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Income taxes

In second quarter ~~2022~~2023 and ~~2021,~~2022, based on the statutory federal tax rate net of discrete federal and state taxes, we had an effective tax rate of ~~28.1%~~16.9% and ~~(0.3)%~~28.1%, respectively. The change in effective tax rate is due to an increase in the amount of Foreign Derived Intangible Income deduction benefit available to the Company due to an increase in taxable income for the timing difference between the recognition of book and tax revenue. The effective tax rate in both periods was impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit, as well as by the foreign-derived intangible income deduction and non-deductible compensation. ~~In the second quarter 2022, the Company recorded a net discrete tax expense of $2.3 million related to the extinguishment of long-term debt recognized during second quarter 2022.~~ Excluding this valuation allowance, our second quarter ~~2022~~2023 and ~~2021~~2022 effective tax rate would have been ~~24.9%~~9.6% and ~~26.3%~~24.9%, respectively.

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First Half ~~2022~~2023 Compared to First Half ~~2021~~2022

Revenues

The following table compares first half ~~2022~~2023 revenues to first half ~~2021~~2022 revenues (in thousands):

Six months ended June 30,
2022 2021 Total Increase/(Decrease)
Variable patent royalty revenue $ 16,718 $ 14,419 $ 2,299 16 %
Fixed-fee royalty revenue 181,599 138,592 43,007 31 %
Current patent royalties a
198,317 153,011 45,306 30 %
Non-current patent royalties b
26,747 13,367 13,380 100 %
Total patent royalties 225,064 166,378 58,686 35 %
Current technology solutions revenue a
911 3,720 (2,809) (76) %
Total revenue $ 225,975 $ 170,098 $ 55,877 33 %


	Six months ended June 30,
	2023		2022		Total Increase/(Decrease)
Recurring revenues:
Smartphone	$	172,506	$	175,182	$	(2,676)	(2)	%
CE, IoT/Auto	27,518		23,135		4,383		19	%
Other	622		911		(289)		(32)	%
Total recurring revenues	200,646		199,228		1,418		1	%
Catch-up revenues a	103,318		26,747		76,571		286	%
Total revenues	$	303,964	$	225,975	$	77,989	35	%

(a) ~~Recurring~~Catch-up revenues are comprised of ~~current patent royalties, inclusive of dynamic fixed-fee royalty payments, and current technology solutions revenue from the table above.~~

~~(b) Non-recurring revenues are comprised of non-current patent royalties, which include~~ past patent royalties and ~~royalties~~revenues from static ~~agreements, as well as patent sales~~agreements.

Total revenues of $304.0 million, which includes both recurring and catch-up revenues, increased 35% from ~~the table above.~~

The increase in both total and recurring revenue was primarily driven by previously disclosed new patent license agreements, two additional new agreements signed in second quarter 2022, as well as revenues from connected automobile license agreements with GM and Ford Motor Company through a licensing platform. These increases were partially offset by a decrease in technology solutions revenues from a contract that was terminated$226.0 million in the first ~~half~~six months of ~~2021 and a decrease in recurring~~2022 primarily due to catch-up revenues from ~~a previously disclosed expired patent license agreement. Non-recurring revenue~~the Lenovo proceedings recognized in first quarter 2023. Recurring revenues were flat compared to first half ~~2021 primarily related two patent licensing agreement signed in second quarter 2021.~~2022.

In first half ~~2022~~2023 and first half ~~2021,~~2022, 69% and 71% ~~and 69%~~ of our total revenue, respectively, was attributable to companies that individually accounted for 10% or more of our total revenue. In first half ~~2022~~2023 and first half ~~2021,~~2022, the following companies accounted for 10% or more of our total revenue:


		Six months ended June 30,			Six months ended June 30,
		2022	2021		2023	2022
Customer A	Customer A	31%	33%	Customer A	22%	31%
Customer B	Customer B	17%	23%	Customer B	13%	17%
Customer C				Customer C	<10%	13%
Customer D	Customer D	13%	—%	Customer D	<10%	10%
Customer E		10%	13%

Customer F				Customer F	34%	—%

Operating Expenses

The following table summarizes the changes in operating expenses between first half ~~2022~~2023 and first half ~~2021~~2022 by category (in thousands):

Six months ended June 30,
2022 2021 Increase/(Decrease)
Patent administration and licensing $ 87,512 $ 77,544 $ 9,968 13 %
Development 34,698 44,453 (9,755) (22) %
Selling, general and administrative 20,400 26,016 (5,616) (22) %
Restructuring activities 3,280 13,245 (9,965) 100 %
Total operating expenses $ 145,890 $ 161,258 $ (15,368) (10) %


	Six months ended June 30,
	2023		2022		Increase/(Decrease)
Research and portfolio development	$	99,307	$	89,354	$	9,953	11	%
Licensing	38,012		32,856		5,156		16	%
General and administrative	24,008		20,400		3,608		18	%
Restructuring activities	—		3,280		(3,280)		(100)	%
Total Operating expenses	$	161,327	$	145,890	$	15,437	11	%

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Operating expenses ~~decreased 10%~~increased 11% to $161.3 million in first half 2023 from $145.9 million in first half ~~2022 from $161.3 million in first half 2021.~~2022. The $15.4 million ~~decrease~~increase in total operating expenses was primarily due to changes in the following items (in thousands):


	Increase/(Decrease)
~~Personnel-related costs~~One-time net litigation fee reimbursement	$	~~(14,051)~~
~~Restructuring activities~~	~~(9,966)~~7,537
~~Consulting costs~~Share-based compensation	~~(3,640)~~7,152
Fair value changes of deferred compensation liability	4,238
Patent impairment	2,500
Intellectual property enforcement and non-patent litigation	~~7,711~~ (6,247)
~~Share-based compensation~~Restructuring activities	~~3,440~~
~~Revenue share and commissions~~	~~1,770~~ (3,279)
Other	~~(632)~~3,536
Total ~~decrease~~increase in operating expenses	$	~~(15,368)~~15,437

The $15.4 million ~~decrease~~increase in operating expenses was primarily due to ~~the company's previously announced restructuring plan, which drove the $10.0~~a $7.2 million ~~decrease~~increase in ~~one-time restructuring expenses. These cost-savings actions taken in 2021 also drove a $14.1 million decrease in personnel-related~~share-based compensation costs driven by both higher accrual rates and higher award levels to non-executive employees and a ~~$3.6~~$4.2 million ~~decrease in consulting costs. These decreases were partially~~increase from fair value changes of our deferred compensation liability, which was offset by ~~$7.7~~a related gain recorded within "Other income (expense), net" on the investments that we hold under the plan. Additionally, first half 2023 included one-time items, including a $7.5 million ~~of additional intellectual property enforcement costs~~net litigation fee reimbursement related to the Lenovo proceedings and ~~Oppo litigations. Additionally, share-based compensation costs increased $3.4~~a $2.5 million ~~and revenue share and commissions costs increased $1.8 million both driven by licensing successes.~~patent impairment on our patents held for sale.

~~Patent Administration and Licensing Expense:~~ The $10.0 million increase in patent administration and licensing expense primarily resulted from the above noted increases in intellectual property enforcement costs, revenue share costs, and share-based compensation, as well as an increase in patent amortization. These increases were partially offset by a $6.2 million decrease in ~~personnel-related costs.~~intellectual property enforcement costs driven by decreased costs from the Lenovo proceedings and a $3.3 million decrease in non-recurring restructuring activities recognized in first half 2022.

Research and portfolio development expense: The $10.0 million increase in research and portfolio development expense primarily resulted from the above-noted increases in share-based compensation, fair value changes of our deferred compensation liability, and patent impairment.

~~Development Expense:~~Licensing expense: ~~Development~~Licensing expense ~~decreased~~increased by ~~$9.8~~$5.2 million primarily resulting from the above-noted ~~decreases~~one-time litigation fee reimbursement and increases in ~~personnel-related costs and consulting costs,~~share-based compensation, partially offset by the ~~above-noted increase~~decrease in ~~share-based compensation.~~intellectual property enforcement costs.

~~Selling,~~ General and ~~Administrative Expense:~~administrative expense: The ~~$5.6~~$3.6 million ~~decrease~~increase in ~~selling,~~ general and administrative expense was primarily ~~resulted from the above-noted decreases in personnel-related costs and consulting costs, partially offset~~driven by the above-noted ~~increase~~increases in share-based ~~compensation.~~compensation and fair value changes of our deferred compensation liability.

Restructuring ~~Activities:~~activities: Restructuring expenses associated with our overall restructuring plan decreased due to the plan ~~commencing~~being substantially complete in 2022.

Non-Operating Income (Expense), net

The following table compares first half 2023 non-operating income (expense), net to first half 2022 non-operating income (expense), net:


	Six months ended June 30,
	2023		2022		Increase/(Decrease)
Interest expense	$	(24,228)	$	(11,787)	$	(12,441)	(106)	%
Interest and investment income	21,934		506		21,428		4,235	%
Loss on extinguishment of long-term debt	—		(11,190)		11,190		(100)	%
Other	5,644		(5,337)		10,981		206	%
Total non-operating income (expense), net	$	3,350	$	(27,808)	$	31,158	112	%

~~Non-Operating Expense~~

Table of Contents

The ~~following table compares first half 2022 non-operating expense to first half 2021 non-operating expense (in thousands):~~

Six months ended June 30,
2022 2021 Increase/(Decrease)
Interest expense $ (11,787) $ (13,656) $ 1,869 14 %
Interest and investment income 506 999 (493) (49) %
Loss on extinguishment of long-term debt (11,190) — (11,190) — %
Other income, net (5,337) 2,764 (8,101) 293 %
Total non-operating expense $ (27,808) $ (9,893) $ (17,915) (181) %

~~The $17.9~~$21.4 million ~~change~~increase in ~~non-operating expenses between the first half 2022~~interest and ~~first half 2021~~investment income was primarily due to increased short-term investments made by the ~~$11.2~~Company and market conditions driving higher yields the short-term investments. The change in Other was primarily due to fair value adjustments of our investments resulting in a $4.9 million net gain in first half 2023, compared to a $1.1 million net loss ~~on extinguishment of the 2024 Notes, as described further~~ in ~~Note 7, "Obligations~~",first half 2022 and due to a foreign currency translation ~~loss of $4.0 million in the first half 2022~~net gain arising from euro translation of our foreign subsidiaries ~~compared to a foreign currency translation loss~~ of ~~$0.8~~$1.5 million in first half ~~2021.~~

~~Table of Content~~s

~~Additionally, we recognized~~2023, compared to a ~~$1.9~~$4.0 million ~~gain on a contract termination~~net loss in first half 2021 and in both periods we recognized gains resulting from observable price changes of our long-term strategic investments, which were $1.6 million recognized in first half 2022 and $1.0 million recognized in first half 2021.2022.

Income taxes

In first half ~~2022~~2023 and ~~2021,~~2022, we had an effective tax rate of ~~26.8%~~14.5% and ~~(169.6)%~~26.8%, respectively. The change in effective tax rate is due to an increase in the amount of Foreign Derived Intangible Income deduction benefit available to the Company due to higher taxable income inclusive of timing difference between the recognition of book and tax revenue. Additionally, the effective tax rate in both periods was ~~driven~~impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit, as well as by the foreign-derived intangible income deduction and non-deductible compensation. Excluding this valuation allowance, our ~~first half~~six months ended June 30, 2023 and 2022 ~~and 2021~~ effective tax rate would have been ~~23.2%~~13.0% and ~~104.3%~~23.2%, respectively. In the ~~first half 2022 and 2021,~~six months ended June 30, 2023 we recorded a net discrete tax benefit of ~~$2.2~~$1.2 million ~~and $0.6 million, respectively,~~ primarily related to share-based compensation. The prior period included a net discrete tax expense of $2.3 million related to the extinguishment of ~~long-debt.~~long-term debt recognized during second quarter of 2022.

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STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 — FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include certain information in regarding our current beliefs, plans and expectations, including, without limitation, the matters set forth below. Words such as "believe," “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” "goal," "could," "would," "should," "if," "may," "might," "future," "target," "trend," "seek to," "will continue," "predict," "likely," "in the event," and variations of any such words or similar expressions contained herein are intended to identify such forward-looking statements. Forward-looking statements are made on the basis of management’s current views and assumptions and are not guarantees of future performance. Although the forward-looking statements in this Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements concerning our business, results of operations and financial condition are inherently subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, the risks and uncertainties described in Part I, Item 1A of our ~~2021~~2022 Form 10-K and the risks and uncertainties set forth below:

•unanticipated delays, difficulties or accelerations in the execution of patent license agreements;

•our ability to leverage our strategic relationships and secure new patent license agreements on acceptable terms;

•our ability to enter into sales and/or licensing partnering arrangements for certain of our patent assets;

•our ability to enter into partnerships with leading inventors and research organizations and identify and acquire technology and patent portfolios that align with our roadmap;

•our ability to commercialize our technologies and enter into customer agreements;

•the failure of the markets for our current or new technologies to materialize to the extent or at the rate that we expect;

•unexpected delays or difficulties related to the development of our technologies;

•changes in our interpretations of, and assumptions and calculations with respect to the impact on us of, the 2017 Tax Cuts and Jobs Act, as well as further guidance that may be issued regarding such act;

•risks related to the potential impact of new accounting standards on our financial position, results of operations or cash flows;

•failure to accurately forecast the impact of our restructuring activities on our financial statements and our business;

•the resolution of current legal proceedings, including any awards or judgments relating to such proceedings, additional or related legal proceedings, including appeals, changes in the schedules or costs associated with ~~legal~~such proceedings or adverse ~~rulings in such proceedings;~~rulings;

•the timing and impact of potential administrative and legislative matters;

•changes or inaccuracies in market projections;

•our ability to obtain liquidity through debt and equity financings;

•the potential effects that ~~the ongoing COVID-19 pandemic and/or general economic or other conditions~~macroeconomic uncertainty could have on our financial position, results of operations and cash ~~flows; and~~flows

•changes in our business ~~strategy.~~strategy;

•changes or inaccuracies in our expectations with respect to royalty payments by our customers; and

•risks related to our assumptions and application of relevant accounting standards, including with respect to revenue recognition.

You should carefully consider these factors before making any investment decision with respect to our common stock. These factors, individually or in the aggregate, may cause our actual results to differ materially from our expected and historical results. You should understand that it is not possible to predict or identify all such factors. In addition, you should not place undue reliance on the forward-looking statements contained herein, which are made only as of the date of this Form 10-Q. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

Table of Contents

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in quantitative and qualitative market risk from the disclosures included in our ~~2021~~2022 Form 10-K.

~~Table of Content~~s

Item 4. CONTROLS AND PROCEDURES.

The Company’s principal executive officer and principal financial officer, with the assistance of other members of management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2022,~~2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of ~~Content~~sContents

PART II — OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

See Note 5, “Litigation and Legal Proceedings,” to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of legal proceedings, which is incorporated herein by reference.

Item 1A. RISK FACTORS.

Reference is made to Part I, Item 1A, “Risk Factors” included in our ~~2021~~2022 Form 10-K for information concerning risk factors, which should be read in conjunction with the factors set forth in the Statement Pursuant to the Private Securities Litigation Reform Act of 1995 -- Forward-Looking Statements in Part I, Item 2 of this Quarterly Report on Form 10-Q. Except as set forth below, there have been no material changes with respect to the risk factors disclosed in our ~~2021~~2022 Form 10-K. You should carefully consider such factors, which could materially affect our business, financial condition or future results. The risks described in this Quarterly Report on Form 10-Q and in the ~~2021~~2022 Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

~~Rising inflation~~We face risks from doing business and maintaining offices in international markets.

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, Belgium and Finland. Accordingly, we are subject to the risks and uncertainties of operating internationally. 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:

•If the effective price of products sold by our licensees were to increase as a result ~~in increased costs~~ of ~~operations~~

~~Inflation has accelerated~~fluctuations in the ~~U.S. and globally. A majority~~exchange rate of the relevant currencies, demand for the products could fall, which in turn would reduce our royalty revenues.

•Assets or liabilities of our revenue is derived from patent license agreements 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, whichconsolidated subsidiaries may ~~have a material adverse impact on our operating results and financial condition.~~

Potential patent and litigation reform legislation, potential USPTO and international patent rule changes, potential legislation affecting mechanisms for patent enforcement and available remedies, and potential changesbe subject to the ~~intellectual property rights (“IPR”) policies~~effects of worldwide standards bodies, as well as rulings in legal proceedings, may affect our investments in research and development and our strategies for patent prosecution, licensing and enforcement and could have a material adverse effect on our licensing business as well as our business as a whole.

~~Potential changes to certain U.S. and international patent laws, rules and regulations may occur in the future, some or all of~~currency fluctuations, which may affect our ~~research~~reported earnings.

•Certain of our operating and ~~development investments,~~investing costs, such as foreign patent prosecution, are based in foreign currencies. If these costs ~~the scope of future patent coverage we secure, the number of forums~~are not subject to foreign exchange hedging transactions, strengthening currency values 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~~selected regions 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. For example, the State Administration for Market Regulation in China requested comments on June 27, 2022 on its draft Provisions on the Prohibition of the Abuse of Intellectual Property Rights to Exclude or Restrict Competition. If adopted as drafted, among other things, the provisions might create an ambiguous standard for a violation of Chinese antitrust laws where a patent holder seeks to enforce its patents “improperly”. The European Commission has also initiated a process to review the EU’s IP policies, in particular as they relate to SEPs and FRAND. Any change as it relates to these matters could impact our ability to negotiate license agreements on favorable terms or at all, limit our potential legal remedies and materially impact our business. Further, 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 of forums available or the type 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~~adversely affect our ~~strategies for patent prosecution, licensing~~near-term operating expenses, investment costs and ~~enforcement. For example,~~cash flows. In addition, continued strengthening of currency values in ~~recent years, the USITC~~selected regions over an extended period of time could adversely affect our future operating expenses, investment costs 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 of our rights with regard to these developments; however, any resulting change in such strategies may have an adverse impact on our business and financial condition.cash flows.

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~~We may not be able to attract and retain qualified employees~~.

Competition for top talent is substantial and increasing. In order to be successful, we must attract, develop, and retain employees. Implementing our business strategy requires specialized engineering and other technical talent, and these skills are in 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 hire, and to varying degrees have been successful in hiring, our employees or employment candidates. Further, the increased availability of remote working arrangements, largely driven by the COVID-19 pandemic, has expanded the pool of companies that can compete for our employees and employment candidates. A number of such competitors for talent are significantly larger than us and may be able to offer compensation, benefits or work arrangements perceived as more desirable than what we are able to offer. Wage inflation driven by the current inflationary economic environment could make it even more difficult to attract and retain talent. If we are unable to recruit, retain, and motivate our employees, then we may not be able to innovate, execute on our strategy and grow our business as planned.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

The following table provides information regarding the Company’s purchases of its common stock during second quarter ~~2022.~~2023.

Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (3)
April 1, 2022 - April 30, 2022 — $ — — $ 41,464,736
May 1, 2022 - May 31, 2022 1,224,832 $ 60.78 1,224,832 $ 67,019,447
June 1, 2022 - June 30, 2022 — $ — — $ 67,019,447
Total 1,224,832 $ 60.78 1,224,832 $ 67,019,447


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (3)
April 1, 2023 - April 30, 2023	301,350	$	72.05	301,350	$	178,345,644
May 1, 2023 - May 31, 2023	108,406	$	69.38	108,406	$	170,822,486
June 1, 2023 - June 30, 2023	137,899	$	91.31	137,899	$	158,227,500
Total	547,655	$	76.37	547,655

(1) Total number of shares purchased during each period reflects share purchase transactions that were completed (i.e., settled) during the period indicated.

(2) Shares were purchased pursuant to the ~~2014~~Company’s share repurchase program (the “Share Repurchase ~~Program,~~Program”), $300 million of which was authorized by the Company’s Board of Directors in June 2014, with an additional $100 million authorized by the Company’s Board of Directors in each of June 2015, September 2017, December 2018, May 2019, and May 2022, ~~respectively.~~respectively, and an additional $333 million in December 2022. The ~~2014~~Share Repurchase Program has no expiration date. ~~The Company may repurchase shares under the 2014 Repurchase Program through open market purchases, pre-arranged trading plans, or privately negotiated purchases.~~

(3) Amounts shown in this column reflect the amounts remaining under the ~~2014~~Share Repurchase ~~Program.~~Program at the end of the period.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

Item 5. OTHER INFORMATION.

During second quarter 2023, the following Section 16 officers adopted, modified or terminated “Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K of the Exchange Act):

Action

Date

Trading Arrangement

Maximum Shares to be Sold*

Expiration Date

Rule 10b5-1

Non-Rule 10b5-1

Rajesh Pankaj

Adopt

May 12, 2023

5,850

May 31, 2024

Joshua Schmidt

Adopt

May 24, 2023

2,954

May 24, 2024

Eeva Hakoranta

Adopt

June 20, 2023

8,168

April 12, 2024

* With respect to grants that have not yet vested, assumes shares withheld for tax purposes consistent with the individual’s tax rate. With respect to milestone awards, assumes no milestones are achieved prior to the expiration of the trading plan.

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Item 6. EXHIBITS.

The following is a list of exhibits filed with this Quarterly Report on Form 10-Q:


Exhibit Number						Exhibit Description
~~3.1~~						~~Amended and Restated Bylaws of InterDigital Inc. (Exhibit 3.1 to InterDigital's Form 8-K dated July 13, 2022)~~
~~4.1~~						~~Indenture, dated May 27, 2022, between InterDigital, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.1 to InterDigital's Form 8-K dated May 24, 2022).~~
~~4.2~~						~~Form of 3.50% Senior Convertible Note due 2027 (included in Exhibit 4.1).~~
~~10.1~~						~~Purchase Agreement, dated May 24, 2022, between InterDigital, Inc. and BofA Securities Inc. and Jefferies LLC, as representatives of the several initial purchasers named in Schedule I attached thereto~~ ~~(Exhibit 10.1 to InterDigital's Form 8-K dated May 24, 2022)~~.
~~10.2~~						~~Form of Convertible Note Hedge Transaction Confirmation(Exhibit 10.~~2 ~~to InterDigital's Form 8-K dated May 24, 2022)~~.
~~10.3~~						~~Form of Warrant Transaction Confirmation(Exhibit 10.~~3 ~~to InterDigital's Form 8-K dated May 24, 2022)~~.
~~10.4~~						~~Form of Unwind Agreement(Exhibit 10.~~4 ~~to InterDigital's Form 8-K dated May 24, 2022)~~.
~~10.5~~						~~Offer Letter~~ ~~between InterDigital, Inc. and Rajesh Pankaj dated June 1~~6 ~~, 2022.~~
31.1						Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2						Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1+						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2+						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS						Inline Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline Schema Document
101.CAL						Inline Calculation Linkbase Document
101.DEF						Inline Definition Linkbase Document
101.LAB						Inline Labels Linkbase Document
101.PRE						Inline Presentation Linkbase Document
104						Inline Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)


+						This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that InterDigital, Inc. specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			INTERDIGITAL, INC.

Date: August ~~4, 2022~~3, 2023			/s/ LIREN CHEN
			Liren Chen
			President and Chief Executive Officer


Date: August ~~4, 2022~~3, 2023			/s/ RICHARD J. BREZSKI
			Richard J. Brezski
			Chief Financial Officer

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