InterDigital Inc

Previous wording

During the first quarter 2024, we returned $39.2 million to shareholders, including $10.2 million, or $0.40 per share, of cash dividends declared and $29.0 million through the repurchase of 0.3 million shares of common stock.

Current wording

During the second quarter 2024, we returned $45.2 million to shareholders, including $10.1 million, or $0.40 per share, of cash dividends declared and $35.1 million through the repurchase of 0.3 million shares of common stock.

Previous wording

During the period April 1, 2024 to April 30, 2024, we repurchased an additional 0.2 million shares for $21.1 million, bringing the year to date total to approximately 0.5 million shares of common stock repurchased. As of April 30, 2024, there was $246.3 million remaining under the share repurchase authorization, which we plan to utilize to periodically repurchase additional common shares. See Part II, Item II -Unregistered Sales of Equity Securities and Use of Proceeds—Issuer Purchases of Equity Securities of this Quarterly Report on Form 10-Q.

Current wording

As of July 31, 2024, there was $232.6 million remaining under the share repurchase authorization, which we plan to utilize to periodically repurchase additional common shares. See Part II, Item II -Unregistered Sales of Equity Securities and Use of Proceeds—Issuer Purchases of Equity Securities of this Quarterly Report on Form 10-Q.

Previous wording

As of March 31, 2024, we had $1.0 billion of cash, restricted cash and short-term investments and an additional $1.2 billion of cash payments due under contracted fixed price agreements, which includes our conservative estimates of the minimum cash receipts that we expect to receive under the wireless patent license agreement with Samsung.

Current wording

As of June 30, 2024, we had $769.6 million of cash, restricted cash and short-term investments and nearly $1.3 billion of cash payments due under contracted fixed price agreements, which includes our conservative estimates of the minimum cash receipts that we expect to receive under the wireless patent license agreement with Samsung.

Previous wording

87% of our recurring revenue comes from 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.

Current wording

88% of our recurring revenue comes from 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.

Previous wording

The following table reconciles the timing differences between cash receipts and recognized revenue during the three months ended March 31, 2024 and 2023, including the resulting operating cash flow (in thousands):

Current wording

The following table reconciles the timing differences between cash receipts and recognized revenue during the three and six months ended June 30, 2024 and 2023, including the resulting operating cash flow (in thousands):

Previous wording

Total revenues of $263.5 million, which includes both recurring and catch-up revenues, increased 30% compared to first quarter 2023 primarily due to catch-up revenues from the Samsung TV agreement recognized in first quarter 2024. First quarter 2024 recurring revenues were $96.9 million, compared to recurring revenues of $101.6 million in first quarter 2023, a 5% year-over-year decrease. In first quarter 2024, revenues (in descending order) from Samsung and Apple each comprised 10% or more of our consolidated revenues. Refer to "Results of Operations --First Quarter 2024 Compared to First Quarter 2023" for further discussion of our 2024 revenue.

Current wording

Total revenues of $223.5 million, which includes both recurring and catch-up revenues, increased 120% compared to second quarter 2023 primarily due to catch-up revenues resulting from the Lenovo UK proceedings and the Google patent license agreement signed in second quarter 2024. Second quarter 2024 recurring revenues were $95.9 million, compared to recurring revenues of $99.1 million in second quarter 2023. In second quarter 2024, revenues (in descending order) from Lenovo, Apple, and Samsung each comprised 10% or more of our consolidated revenues. Refer to "Results of Operations --Second Quarter 2024 Compared to Second Quarter 2023" for further discussion of our 2024 revenue.

Previous wording

When comparing first quarter 2024 financial results against other periods, the following items should be taken into consideration:

Current wording

When comparing second quarter 2024 financial results against other periods, the following items should be taken into consideration:

Previous wording

•Our first quarter 2024 revenues include $166.7 million of catch-up revenues primarily related to the Samsung TV agreement signed in first quarter 2024.

Current wording

•Our second quarter 2024 revenues include $127.6 million of catch-up revenues primarily related to the Lenovo UK proceedings and the Google agreement signed in second quarter 2024.

Previous wording

•During first quarter 2024, we recognized a $0.7 million net loss resulting from observable price changes of our long-term strategic investment, which was included within “Other income, net” in the condensed consolidated statement of income.

Current wording

•During second quarter 2024, we recognized a $2.2 million gain resulting from fair value changes of one of our long-term strategic investments, which was included within “Other income, net” in the condensed consolidated statement of income.

Previous wording

The net decrease in cash, cash equivalents, restricted cash and short-term investments was attributable to cash used in financing activities of $49.3 million and cash used in investing activities of $7.8 million, excluding sales and purchases of short-term investments, partially offset by cash provided by operating activities of $50.8 million. Refer to the sections below for further discussion of these items.

Current wording

The net decrease in cash, cash equivalents, restricted cash and short-term investments was attributable to cash used in financing activities of $233.3 million and cash used in investing activities of $21.4 million, excluding sales and purchases of short-term investments, partially offset by cash provided by operating activities of $1.9 million. Refer to the sections below for further discussion of these items.

Previous wording

Cash flows provided by (used in) operating activities in the first quarter 2024 and 2023 (in thousands) were as follows:

Current wording

Cash flows provided by (used in) operating activities in the first half 2024 and 2023 (in thousands) were as follows:

Previous wording

Our cash flows provided by (used in) operating activities are principally derived from cash receipts from patent license agreements, offset by cash operating expenses and income tax payments. The $78.6 million change in net cash provided by (used in) operating activities was driven by higher cash receipts primarily due to new patent license agreements signed in first quarter 2024 and due timing of cash receipts related to existing patent license agreements, partially offset by increased cash operating expenses primarily due to increased revenue share costs from new patent license agreements. The table below sets forth the significant items comprising our cash flows provided by (used in) operating activities during the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

Our cash flows provided by (used in) operating activities are principally derived from cash receipts from patent license agreements, offset by cash operating expenses and income tax payments. The $75.2 million change in net cash provided by (used in) operating activities was driven by higher cash receipts primarily due to new patent license agreements signed in first half 2024 and due timing of cash receipts related to existing patent license agreements, partially offset by increased cash operating expenses primarily due to increased revenue share costs from new patent license agreements. 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, 2024 and 2023 (in thousands):

Previous wording

(a) Cash operating expenses include operating expenses less depreciation and disposals of fixed assets, amortization of patents, and non-cash compensation. Includes revenue share costs of $69.0 million and $1.1 million in first quarter 2024 and 2023, respectively.

Current wording

(a) Cash operating expenses include operating expenses less depreciation and disposals of fixed assets, amortization of patents, and non-cash compensation. Amount includes revenue share costs of $71.7 million and $1.5 million in first half 2024 and 2023, respectively.

Previous wording

Net cash provided by investing activities for first quarter 2024 was $16.8 million, a $31.2 million change from $14.5 million of net cash used in investing activities in first quarter 2023. During first quarter 2024, we sold $24.6 million of short-term marketable securities, net of purchases, and capitalized $9.4 million of patent costs and property and equipment purchases. During first quarter 2023, we purchased $6.0 million of short-term marketable securities, net of sales, and capitalized $8.5 million of patent costs and property and equipment purchases.

Current wording

Net cash provided by investing activities for first half 2024 was $97.5 million, a $165.0 million change from $67.5 million of net cash used in investing activities in first half 2023. During first half 2024, we sold $118.9 million of short-term marketable securities, net of purchases, and capitalized $22.6 million of patent costs and property and equipment purchases. During first half 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.

Previous wording

Net cash used in financing activities for first quarter 2024 was $49.3 million, a change of $168.8 million from $218.1 million the first quarter 2023. This change was primarily attributable to a $174.5 million decrease in share repurchases, of which $203.4 million was related to the Company's modified "Dutch auction" tender offer in first quarter 2023.

Current wording

Net cash used in financing activities for first half 2024 was $233.3 million, a change of $38.1 million from $271.5 million the first half 2023. This change was primarily attributable to a $182.2 million decrease in share repurchases, of which $203.4 million was related to the Company's modified "Dutch auction" tender offer in first quarter 2023. This change was partially offset by $139.1 million of payments on our long-term debt, of which $126.2 million was related to the maturity of the 2024 Notes.

Previous wording

Our combined short-term and long-term deferred revenue balance as of March 31, 2024 was approximately $349.9 million, a net decrease of $27.5 million from December 31, 2023. This decrease in deferred revenue was primarily due to amortization of deferred revenue recognized in the period, partially offset by cash receipts on existing patent license agreements.

Current wording

Our combined short-term and long-term deferred revenue balance as of June 30, 2024 was approximately $323.1 million, a net decrease of $54.4 million from December 31, 2023. This decrease in deferred revenue was primarily due to amortization of deferred revenue recognized in the period, partially offset by cash receipts on new and existing patent license agreements.

Previous wording

Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the March 31, 2024 deferred revenue balance of $349.9 million by $156.0 million over the next twelve months.

Current wording

Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the June 30, 2024 deferred revenue balance of $323.1 million by $156.8 million over the next twelve months.

Previous wording

Commencing on March 1, 2024, the 2024 Notes became convertible 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 2024 Notes. Additionally, from the period April 1, 2024 through June 30, 2024, the holders of the 2027 Notes have the right, but not the obligation, to convert any portion of the principal amount of the 2027 Notes.

Current wording

From the period January 1, 2024 through September 30, 2024, the holders of the 2027 Notes have the right, but not the obligation, to convert any portion of the principal amount of the 2027 Notes.

Previous wording

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. Any remaining obligation of the 2027 Notes may be settled in cash, shares of the Company’s common stock or a combination 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.

Current wording

Our 2027 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 2027 Notes are convertible into cash up to the aggregate principal amount to be converted. Any remaining obligation of the 2027 Notes may be settled in cash, shares of the Company’s common stock or a combination thereof. As the principal amount must be paid in cash and only the conversion spread is settled in shares, we only include the net number of incremental shares that would be issued upon conversion. We must calculate the number of shares of our common stock issuable under the terms of the 2027 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.

Previous wording

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.

Current wording

At the time we issued the 2027 Notes, we entered into the 2027 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 2027 Notes by, in effect, increasing the conversion price of the 2027 Notes from our economic standpoint. However, under GAAP, since the impact of the 2027 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.

Previous wording

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 March 31, 2024) or above the strike price of the warrants (weighted average of $106.31 per share for the 2027 Warrant Transactions and $109.43 per share for the 2024 Warrant Transactions as of March 31, 2024), 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.

Current wording

During periods in which the average market price of our common stock is above the applicable conversion price of the 2027 Notes (initial conversion price of approximately $77.49 per share), or above the strike price of the warrants (weighted average strike price of $106.31 per share), 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 2027 Notes and the 2027 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.

Previous wording

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 5, "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 ("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 March 31, 2024, 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 (in thousands):

Current wording

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 5, "Obligations," the 2027 Notes are convertible into cash up to the aggregate principal amount to be converted and any remaining obligation may be settled in cash, shares of the Company’s common stock or a combination 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 outstanding as of June 30, 2024, and the approximately 5.9 million warrants related to the 2027 Notes changes in our stock price would affect (i) the number of shares issuable upon conversion of the 2027 Notes, (ii) the number of shares issuable upon exercise of the warrants subject to the 2027 Warrant Transactions, (iii) the number of additional shares deemed outstanding with respect to the 2027 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 2027 Hedge Transactions and (v) the number of shares issuable upon concurrent conversion of the 2027 Notes, exercise of the warrants subject to the 2027 Warrant Transactions, and settlement of the 2027 Hedge Transactions (in thousands):

Previous wording

The following table compares first quarter 2024 revenues to first quarter 2023 revenues (in thousands):

Current wording

The following table compares second quarter 2024 revenues to second quarter 2023 revenues (in thousands):

Previous wording

In first quarter 2024 and 2023, 84% and 67%, respectively, of our total revenue was attributable to licensees that individually accounted for 10% or more of our total revenue. In first quarter 2024 and 2023, the following licensees accounted for 10% or more of our total revenue:

Current wording

In second quarter 2024 and 2023, 80% and 78%, respectively, of our total revenue was attributable to licensees that individually accounted for 10% or more of our total revenue. In second quarter 2024 and 2023, the following licensees accounted for 10% or more of our total revenue:

Previous wording

The following table summarizes the changes in operating expenses between first quarter 2024 and first quarter 2023 by category (in thousands):

Current wording

The following table summarizes the changes in operating expenses between second quarter 2024 and second quarter 2023 by category (in thousands):

Previous wording

Operating expenses increased to $159.8 million in first quarter 2024 from $83.1 million in first quarter 2023. The $76.7 million increase in total operating expenses was primarily due to changes in the following items (in thousands):

Current wording

Operating expenses increased to $89.6 million in second quarter 2024 from $78.2 million in second quarter 2023. The $11.4 million increase in total operating expenses was primarily due to changes in the following items (in thousands):

Previous wording

Research and portfolio development expense: Research and portfolio development expense were flat compared to first quarter 2023.

Current wording

Research and portfolio development expense: Research and portfolio development expenses were flat compared to second quarter 2023.

Previous wording

Licensing expense: Licensing expense increased $75.2 million primarily driven by the above-noted increased revenue share costs and intellectual property enforcement costs, partially offset by the one-time net litigation fee reimbursement.

Current wording

Licensing expense: Licensing expense increased $8.5 million primarily driven by the above-noted increased intellectual property enforcement costs and revenue share costs, partially offset by the one-time net litigation fee reimbursement.

Previous wording

General and administrative expense: General and administrative expense increased $1.5 million primarily due to the above-noted increased performance-based compensation costs.

Current wording

General and administrative expense: General and administrative expense increased by $2.6 million primarily due to the increased performance-based compensation costs.

Previous wording

Interest expense and interest and investment income were flat compared to first quarter 2023. The change in Other (expense) income, net was primarily due to a foreign currency translation net loss arising from translation of our foreign subsidiaries of $2.4 million in first quarter 2024, compared to a $0.7 million net gain in first quarter 2023.

Current wording

Interest expense and interest and investment income were flat compared to second quarter 2023. The change in Other income, net was primarily due to a foreign currency translation net loss arising from translation of our foreign subsidiaries of $0.9 million in second quarter 2024, compared to a $0.4 million net gain in second quarter 2023 and due to fair value adjustments of our investments resulting in a $2.9 million net gain in second quarter 2024, compared to a $3.9 million net gain in second quarter 2023.

Previous wording

In first quarter 2024 and 2023, based on the statutory federal tax rate net of discrete federal and state taxes, we had an effective tax rate of 19.2% and 14.0%, respectively. The change in effective tax rate is due to a decrease in the amount of Foreign Derived Intangible Income deduction benefit available to the Company. In addition, the Company is subject to an increase in the Global Intangible Low-Tax Income inclusion derived from the increase in French revenue. The effective tax rate in the period ending March 31, 2023, was impacted by losses in certain jurisdictions where the Company recorded a valuation allowance against the related tax benefit. Excluding this valuation allowance, our effective tax rate for the three months ended March 31, 2023 would have been 13.8% respectively.

Current wording

In second quarter 2024 and 2023, based on the statutory federal tax rate net of discrete federal and state taxes, we had an effective tax rate of 18.2% and 16.9%, respectively. The change in effective tax rate is due to a decrease in the amount of Foreign Derived Intangible Income deduction benefit available to the Company. In addition, the Company is subject to an increase in the Global Intangible Low-Tax Income inclusion derived from the increase in revenue in certain foreign jurisdictions. The effective tax rate in the three months ended June 30, 2023 was impacted by losses in certain jurisdictions where the Company recorded a valuation allowance against the related tax benefit. Excluding this valuation allowance, our effective tax rate for the three months ended June 30, 2023 would have been 9.6%.

Previous wording

Total revenues of $263.5 million, which includes both recurring and catch-up revenues, increased 30% from first quarter 2023 primarily due to catch-up revenues from the Samsung TV agreement signed in first quarter 2024, partially offset by catch-up revenues related to the Lenovo proceedings recognized in first quarter 2023.

Current wording

Total revenues of $487.0 million, which includes both recurring and catch-up revenues, increased 60% from the first half 2023 primarily due to catch-up revenues from the Lenovo UK proceedings and eight other patent license agreements signed in first half 2024, partially offset by catch-up revenues related to the Lenovo UK proceedings and two previously announced agreements recognized in second quarter 2023.

Previous wording

The $76.7 million increase in operating expenses was driven by a $67.9 million increase in revenue share costs primarily related to the Samsung TV agreement and a $3.4 million increase in performance-based compensation due to higher accrual rates driven by licensing successes. Additionally, intellectual property enforcement costs increased $11.5 million due to costs associated with the Lenovo and Oppo proceedings and the Samsung arbitration. These increases were partially offset by one-time items recognized in first quarter 2023, including a $5.6 million net litigation fee reimbursement and a $2.5 million patent impairment on our patents held for sale.

Current wording

The $88.1 million increase in operating expenses was driven by a $70.2 million increase in revenue share costs primarily related to the Samsung TV agreement and a $7.4 million increase in performance-based compensation due to higher accrual rates driven by licensing successes. Additionally, intellectual property enforcement costs increased $22.5 million due to costs associated with the Lenovo and Oppo proceedings and the Samsung arbitration. These increases were partially offset by a change in the net litigation reimbursement accrual related to the Lenovo proceedings of $3.2 million contra expense in first half 2024 compared to $7.5 million of expense in the first half 2023.

Previous wording

The following table compares first quarter 2024 non-operating expense, net to first quarter 2023 non-operating income, net (in thousands):

Current wording

The following table compares first half 2024 non-operating expense, net to first half 2023 non-operating income, net (in thousands):

Previous wording

•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;

Current wording

•our ability to enter into partnerships with leading inventors and research organizations;

Previous wording

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

Current wording

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