InterDigital Inc

Previous 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.

Current wording

During the third quarter 2024, we returned $14.5 million to shareholders, including $11.4 million, or $0.45 per share, of cash dividends declared and $3.1 million through the repurchase of shares of common stock. Additionally, we announced an increase to the quarterly cash dividend from $0.40 to $0.45 per share, beginning with the dividend paid in fourth quarter 2024.

Previous 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.

Current wording

As of October 31, 2024, there was $229.5 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 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.

Current wording

As of September 30, 2024, we had $822.9 million of cash, restricted cash, and short-term investments and over $1.1 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

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):

Current wording

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

Previous 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.

Current wording

Total revenues of $128.7 million, which includes both recurring and catch-up revenues, decreased 8% compared to third quarter 2023 primarily due to catch-up revenues from the Lenovo HEVC agreement recognized in third quarter 2023, partially offset by revenues recognized from new agreements and the resolution of litigation. Third quarter 2024 recurring revenues were $98.6 million, compared to recurring revenues of $104.5 million in third quarter 2023. In third quarter 2024, revenues (in descending order) from Apple, Samsung, TPV, Lenovo, and Xiaomi each comprised 10% or more of our consolidated revenues. Refer to "Results of Operations --Third Quarter 2024 Compared to Third Quarter 2023" for further discussion of our 2024 revenue.

Previous wording

We have been actively monitoring the impact of the current macroeconomic environment in the U.S. and globally characterized by 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 Ukraine-Russia and Middle East conflicts, 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.

Current wording

We have been actively monitoring the impact of the current macroeconomic environment in the U.S. and globally characterized by inflation, supply chain issues, high interest rates, labor shortages, and the potential for a recession. These market factors, as well as the impacts of the Ukraine-Russia and Middle East conflicts, 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.

Previous wording

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

Current wording

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

Previous 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.

Current wording

•Our third quarter 2024 revenues include $30.0 million of catch-up revenues primarily related to new agreements and the resolution of litigation.

Previous wording

•During second quarter 2024, we accrued a $3.2 million one-time contra expense for a net litigation fee reimbursement associated with the Lenovo proceedings. See Note 6, “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 further information regarding the Lenovo proceedings.

Current wording

•During third quarter 2024, we recorded a $1.2 million one-time contra expense for a net litigation fee reimbursement. See Note 6, “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 further information regarding the litigation proceedings.

Previous 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.

Current wording

The net decrease in cash, cash equivalents, restricted cash, and short-term investments was attributable to cash used in financing activities of $251.0 million and cash used in investing activities of $33.9 million, excluding sales and purchases of short-term investments, partially offset by cash provided by operating activities of $79.5 million. Refer to the sections below for further discussion of these items.

Previous wording

Cash flows provided by (used in) operating activities

Current wording

Cash flows provided by operating activities

Previous wording

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

Current wording

Cash flows provided by operating activities in the first nine months 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 $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):

Current wording

Our cash flows provided by operating activities are principally derived from cash receipts from patent license agreements, offset by cash operating expenses and income tax payments. The $157.8 million change in net cash provided by operating activities was driven by increased cash operating expenses primarily due to increased revenue share costs from new patent license agreements and lower cash receipts primarily due to cash receipts from new agreements signed in both periods and timing of cash receipts from existing patent license agreements. The table below sets forth the significant items comprising our cash flows provided by operating activities during the nine months ended September 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. Amount includes revenue share costs of $71.7 million and $1.5 million in first half 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 $78.7 million and $2.4 million in first nine months 2024 and 2023, respectively.

Previous 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.

Current wording

Net cash provided by investing activities for first nine months 2024 was $139.4 million, a $213.6 million change from $74.3 million of net cash used in investing activities in first nine months 2023. During first nine months 2024, we sold $173.2 million of short-term marketable securities, net of purchases, and capitalized $35.4 million of patent costs and property and equipment purchases. During first nine months 2023, we purchased $43.7 million of short-term marketable securities, net of sales, and capitalized $31.2 million of patent costs and property and equipment purchases.

Previous 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.

Current wording

Net cash used in financing activities for first nine months 2024 was $251.0 million, a change of $89.4 million from $340.5 million the first nine months 2023. This change was primarily attributable to a $236.0 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 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.

Current wording

Our combined short-term and long-term deferred revenue balance as of September 30, 2024 was approximately $373.6 million, a net decrease of $3.9 million from December 31, 2023. This decrease in deferred revenue was primarily due 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 June 30, 2024 deferred revenue balance of $323.1 million by $156.8 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 September 30, 2024 deferred revenue balance of $373.6 million by $156.9 million over the next twelve months.

Previous wording

On June 1, 2024, the 2024 Notes matured, and we repaid $126.2 million in aggregate principal in cash and issued 0.3 million common shares to settle the remaining obligation. This issuance was effectively offset by our receipt of 0.3 million shares from the settlement of the 2024 Note Hedge Transactions.

Current wording

The 2024 Notes matured on June 1, 2024 resulting in 0.3 million of common shares being issued. This issuance was effectively offset by the settlement of the 2024 Note Hedge Transactions resulting in zero net shares being issued on June 1, 2024.

Previous wording

The 2024 Notes matured on June 1, 2024 resulting in 0.3 million of common shares being issued. This issuance was effectively offset by the settlement of the 2024 Note Hedge Transactions resulting in zero net shares being issued on June 1, 2024. Under the 2024 Warrant Transactions, we are required to issue up to 1.6 million shares of common stock at an initial strike price of approximately $109.43 per share. These warrants remain outstanding and will settle, on a net-share basis, during the period September 3, 2024 through December 17, 2024.

Current wording

A portion of the 2024 Warrant Transactions settled during third quarter 2024 resulting in the issuance of 0.1 million shares related to the 2024 Warrant Transactions. As of September 30, 2024, 1.1 million warrants at an initial strike price of approximately $109.43 per share, subject to adjustment, remain outstanding and will settle during the period October 1, 2024 to December 17, 2024 on a net-share basis.

Previous 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.

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 Warrant Transactions 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 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):

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 September 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 Note 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 Note Hedge Transactions (in thousands):

Previous wording

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

Current wording

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

Previous wording

Total revenues of $223.5 million, which includes both recurring and catch-up revenues, increased 120% from second quarter 2023 primarily due to catch-up revenues from the Lenovo UK proceedings and the Google agreement signed in second quarter 2024.

Current wording

Total revenues of $128.7 million, which includes both recurring and catch-up revenues, decreased 8% from third quarter 2023 primarily due to catch-up revenues from the Lenovo HEVC agreement recognized in third quarter 2023, partially offset by revenues recognized from new agreements and the resolution of litigation.

Previous wording

Recurring revenues were relatively flat decreasing 3% to $95.9 million, as increased CE, IoT/Auto revenue mostly offset the 2023 expiration of Huawei and other agreements.

Current wording

Recurring revenues decreased 6% to $98.6 million primarily due to the 2023 expiration of Huawei and other agreements, which were partially offset by increased CE, IoT/Auto revenues.

Previous 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:

Current wording

In third quarter 2024 and 2023, 83% and 78%, respectively, of our total revenue was attributable to licensees that individually accounted for 10% or more of our total revenue. In third 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 second quarter 2024 and second quarter 2023 by category (in thousands):

Current wording

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

Previous 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):

Current wording

Operating expenses increased to $89.3 million in third quarter 2024 from $86.5 million in third quarter 2023. The $2.9 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 expenses were flat compared to second quarter 2023.

Current wording

Research and portfolio development expense: Research and portfolio development decreased $1.9 million primarily due to the above-noted decrease in performance-based compensation, as well as a decrease in patent amortization.

Previous 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.

Current wording

Licensing expense: Licensing expense increased $5.9 million primarily driven by the above-noted revenue share costs, partially offset by the one-time net litigation fee reimbursement.

Previous wording

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

Current wording

General and administrative expense: General and administrative expense decreased by $1.1 million primarily due to the above-noted decreased performance-based compensation costs.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Non-operating income, net was relatively flat with decreased interest expense mostly offsetting the decreased interest and investment income that is based on lower investment balances compared to third quarter 2023. The change in Other income, net was primarily due to a foreign currency translation net gain arising from translation of our foreign subsidiaries of $2.8 million in third quarter 2024, compared to a $2.2 million net loss in third quarter 2023 and due to fair value adjustments of our investments resulting in a $1.1 million net gain in third quarter 2024, compared to a $5.6 million net gain in third quarter 2023.

Previous 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%.

Current wording

In third 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 17.0% and 15.3%, 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 September 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 September 30, 2023 would have been 14.4%.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Total revenues of $615.7 million, which includes both recurring and catch-up revenues, increased 39% from the first nine months 2023 primarily due to catch-up revenues recognized from both new agreements and the resolution of litigation, partially offset by catch-up revenues related to the Lenovo UK proceedings and other previously announced agreements recognized in first nine months ended 2023.

Previous wording

Recurring revenues decreased 4% to $192.8 million, compared to $200.6 million in first half 2023, with increased CE, IoT/Auto revenue mostly offsetting the 2023 expiration of Huawei and other agreements.

Current wording

Recurring revenues decreased 4% to $291.4 million, compared to $305.1 million in first nine months 2023, with increased CE, IoT/Auto revenue mostly offsetting the 2023 expiration of Huawei and other agreements.

Previous wording

In first half 2024 and 2023, 82% 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 2024 and 2023, the following companies accounted for 10% or more of our total revenue:

Current wording

In first nine months 2024 and 2023, 77% and 79% of our total revenue, respectively, was attributable to companies that individually accounted for 10% or more of our total revenue. In first nine months 2024 and 2023, the following companies accounted for 10% or more of our total revenue:

Previous wording

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

Current wording

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

Previous wording

Operating expenses increased 55% to $249.4 million in first half 2024 from $161.3 million in first half 2023. The $88.1 million increase in total operating expenses was primarily due to changes in the following items (in thousands):

Current wording

Operating expenses increased 37% to $338.7 million in first nine months 2024 from $247.8 million in first nine months 2023. The $90.9 million increase in total operating expenses was primarily due to changes in the following items (in thousands):